 Good day, fellow investors. Tesla has been the most famous notorious stock on YouTube over the last weeks. And therefore, I'm here with Yao Kai today, and we're going to try to put realistic, probabilistic perspective on the company. Yao Kai, who is a notorious short on Tesla and has been making a lot of money in the last month, so I will force him to be the bull on Tesla, so really that we are eliminating any cognitive biases from the investment. I will be the bear, and I will try to counter his ideas, his bullish thesis, and then at the end, we'll try to put a realistic, probabilistic investment scenario, counting in both the bull and the bear thesis. Hi Yao Kai. Hi, my name is Yao Kai, and I love Tesla. That's good. All right, so as we said, there has been a lot of talk on YouTube, especially on the channel, the financial education. He is also very positive on Tesla, but I think we should go here back to Canaan with his book, Thinking Fast and Thinking Slow, where there are two systems that attach, affect our minds. System one, that the thinking that seeks a coherent story above all else, and often leads us to jump to conclusion. So it seeks to quickly create a coherent plausible story, an explanation for what is happening, and it really affects our pattern matching assumptions. And this is what you have to be very careful when it's investing, and especially when it comes to investing in companies or stocks like Tesla, which are all about stories in first place. So let's start with Yao Kai, and let's discuss the bull thesis, what is so positive. And we have seen this slide from the financial education talking about Maxwell insurance, and all the things that are going on for Tesla, and how can that be approached from a bullish perspective. So I'll pass the word to you, Yao Kai, and you can start with the first bullish topics. Okay, sure. So first bullish topic is EV is going to take over the world. EV is cleaner to use, drives faster, less maintenance, you don't go to the gas station, it's cheaper. So EV is going to replace all passenger cars for transportation, like internal combustion engine will go to zero. And Tesla, being the market leader in that space, would capture, I don't know, I'm making up some numbers. You have to say will, not would, you're a bull. Tesla will, yes Tesla will capture as much market share as they have now was in the future in terms of EVs, but EV is going to be the entire car market, so they will capture 35% of all the entire planet's auto sales. So entire planet auto sales, we have 18 million sales in the US, I think we are to 90 million cars over the world, 30% of that would be 30 million cars. So let's say 30% cars, 30 million cars a year, and they would maintain their margin at 25%, however they define it, but 25% margin. And the average selling price is going to be at, I don't know, let's say 50,000. So that's 10,000 per car times 40 million cars. So that's a lot of money. So that's 30 billion in gross margin, every gross profit every year. So in such a positive scenario, 40 billion in gross profit, let's say there are some costs, marketing, distribution, 10 billion in profits, just from the cars. If I attach a normal car maker valuation of five, that's a 50 billion market cap. So how much profit do I make on Tesla if that happens? Well, back then, back in a 300 zero, because they were 50 billion. Okay, now they are lower. They're lower, so they're at 50 billion, they were like 350. And this will probably happen in 2035, if it happens. Let's say I'm very bullish, so 2025 it will happen. 2025, all the cars that are bought will be EV, so that's six years from now. Okay, so even if that happens and everything goes well, then we are at a return on investment of two to three percent per year in six years. But that's not the only thing Tesla is good at. They're also good at self-driving. So they would be the first ever robo-taxi provider, and that would happen in 2020. But the two stories seem to conflict each other, because once you have these robo-taxis, people won't buy cars. So either way, I'm thinking both of what happened, because I'm a Tesla bull. Okay, so when you buy your robo-car, you are saying you are buying a car, and then you're renting it out to everyone who wants to go. It drives automatically. Tesla is going to do the whole thing themselves. They will be the owner of the robo-cars, and that's what they said in their lease program, because their Model 3 lease program said that you are not allowed to buy the car after the lease expires. Tesla would keep them for robo-cars, for robo-taxi. So it seems like the plan is Tesla will use its own cars for the robo-taxi. They will manage all that themselves. Okay, so you're not allowed to buy the car, which means it will be a lot of capital intensivity for Tesla? Where are they going to find the money to finance that? It will be the free cash flow coming from selling the cars to everyone else in the world, and simultaneously they will need the Tesla to take them around in robo-taxies. Okay, and the global taxi market at the moment is $100 billion a year. We know that because somebody published a study on it somewhere. I read it somewhere, but Tesla would capture all of that by 2025. But when Tesla does that, the prices of going around will go much lower. But according to Ark Invest's Kathy Wood, they would do $1 per mile, which is the same as what it is now. But that will happen. So you would get $100 billion in revenue from robo-taxi by 2025. And everybody will drive a Tesla taxi. At the same time. And other Hyundai, nobody will ever enter into a Hyundai taxi. No, no, no. They will all get destroyed because they don't know how to do self-driving. Either Waymo or Cruz, they all did it wrong because they rely on LiDAR and LiDAR is just a failure. You cannot do it. You have to use vision and vision only. Well, with a couple of radars. Vision and radar. That's the only thing you use. Nothing else. Okay, okay. And let me go on that as a bear. So I think what is very important, what could be a really catalyst for Tesla, and I will turn things around a little bit, is the data collection. I see this autonomous car driving into space. And I think that Captain Kirk from USS Enterprise, could you really use the data for his warp ignition development system? How much is that data worth? It's worth a lot of money. So Tesla has been driven more than 1 billion miles, or 2 billion miles. And this is actually a real bull case because for the way they're doing, everybody else is doing self-driving. You don't write rules. You feed this neural net data. Neural nets are basically like really dumb babies. You tell them enough examples, they kind of figure out what should happen and when. And you don't really know how a baby's brain works. The only way you can teach them is by showing them more examples. You don't tell them, oh, I is singular and is a subject, therefore, the next verb should be whatever. You tell them, I speak. He speaks. We spoke, whatever. And then they pick up that pattern. And neural nets are the same. And the problem with feeding data is a lot of times you feed them repetitive data and after they've already mastered the idea. So if you keep telling a baby, I speak, I speak, I speak, after the baby knows how to say I speak, it's kind of useless. You need to now stimulate him to say they spoke. And then he will find, oh, I'm wrong. I'm not supposed to say I speak when I see these people, when I'm trying to say these people spoke, I have to say I spoke. But I don't really exactly know when that cutoff is until you feed me more data. So I tell you, I tell the baby more, they spoke, they spoke, they spoke, given a particular scenario. And then eventually they pick it up. So the Tesla's advantage that they have real world data on all kinds of scenarios where you have road construction, you have rabbits running around in roads, you have old lady crossing streets, or people fighting in the middle of the street. Something like that you can't even dream of, but it will happen in the real world. And given enough miles, you will see them. And they have a good system to collect similar images, similar footages from the entire fleet. They'll be like, okay, I see we're getting it wrong. We think it's a, it's a trash bag in the middle of the road, but turns out to be two people fighting in the middle of the road. And I should really stop. But the shadow motor or whatever they call it says we should keep driving and just go through them. But the human actually stopped. So that's a place where you're like, okay, my prediction is wrong. So now they can, they have a system to say all the cars, tell me when you see things that are either similar to trash bag in the middle or two people fighting in the middle of the road and send me those images. I'm going to tell you what, when this is right. So that and what, what's the value on that? So we have the taxes, a hundred billion plus 40, what was it, 10 billion in profits? Because without this realistic, this is part of their hundred billion taxi because, okay, so it's already in the price in a hundred billion tax. Yeah. Cause if a hundred billion revenue in a taxi, because in order to have that tax, you have for self driving and this thing is their enabler. So for them to have self driving, they need this thing. So it's already accounted for. But if I'm a bit, a real bull, I would say that thing is worth one mile, well, 50, 56 cents each mile because that's how much IRS values you and presumably everybody else can just drive two billion miles as well. So one billion dollars, 1.2. All right. So IRS says 56 cents per mile. So presumably I can buy the same thing and do the same thing. Okay, I can. 56 cents per mile here in the neighborhood. Well, the depreciation for the car, for the car. And then you need somebody to drive it. So let's say when Uber charge gives you, I don't know, two dollars a mile. So let's say that's two dollars on top of the car, but Uber also, that's already inside the car's depreciation is already there. So two dollars per mile, four billion dollars. That's in the States. And if you go to Europe here, all inclusive is 24 cents per kilometer. That's 30 cents per mile, 45. But let's say that we're going to hire someone to just drive it around. Taxi, not taxi rate, but Uber rate, right? We can just hire someone to keep driving and do nothing in their entire existence. And you can pay them, I don't know, one point something euros a mile, probably. That's a good salary, 60 euros per hour. Yeah. So let's say that, then you got two billion, two billion miles, and that's your four billion in valuation. That's in addition, that's regardless of this is the enabling thing for the hundred billion, but just I'm counting it again. And then we have the insurance business. How are you bullish on that? So the insurance Tesla is in a unique position to most effectively price insurance policies where they can be cheaper and yet to make a profit. So you're not you're not convincing enough, you have to try harder. There is a real nugget of truth in there. But the thing is, for insurance companies, what they really want to know is how you drive and how good the driver you are. So that would determine your probability of getting into a accident. And that determines their probability of right, right, right. So Tesla is saying that with autonomous driving, there will be no crashes. So there is no need for insurance. But you know, people still have Teslas, even in autonomous worlds, and they still need to make their five billion or 10 billion net margin from selling cars to people that no longer need to drive them. So if there is less crashes, the premiums will go down, there will be less money in insurance, the margins will go down. So practically, we should short the insurance business. That's what I would have said. But I'm a bear. I'm sorry, I'm a bull. This is a fraud and slip. Damn it. Good. Good. So we are on the insurance. I don't see value. You'll see how many billions on insurance. Well, let's say we're gonna, they're gonna take over the entire entire U.S. insurance business. I don't know how big this thing is for the world, probably double that. So you got Allstate, which is selling at what? They're selling at 30 billion. So Allstate is probably like 15%. So another, I don't know, 300 billion for the entire world's insurance company business. They get 30% of that. So that's 90 billion. Yes. So that's 90 billion. Okay. In value for the insurance business, if all the other things are going as planned, 2025. So really the insurance... Well, this one it will take longer than 2025 because the insurance, well, I'm not supposed to say this, but this one will take longer because insurance business don't churn as fast. So people don't churn as fast. So but everybody will be buying a Tesla. So yes, it will. Oh, yeah, that's true. Everybody's buying a Tesla with a Tesla insurance. Okay. So yes. Okay. But that's about, that's just the market for the new car sold, not the entire market. So yes, it will take much, much longer. All right. What else do we have? We have Tesla semi production in 2020, Giga factory, Model Y, Giga production, demand is quite solid and he would go private and more capitalizing, capital influences. So what about Tesla trucks and why and everything? So trucks, they're selling the class A trucks, right? So they typically get, in US each month, you sell about 20,000 of these things across cycle, that is. You got cycle peak, obviously, you got more of these class A. That's actually a good leading indicator. I was watching this stuff because class A trucks are the thing that moves stuff around, which measures economic activity and they actually slowed down this year, significantly compared to 17. But anyways, say Tesla captures all that, well, that's actually, that's actually hard. They only drive 500 miles, I think. So it doesn't, it doesn't work. So all the slightly shorter whole ones. Okay. So let's say half of that. Okay. Half of that. So 10,000 of these per month. So that's 100,000 per year. 100,000 per year and then I don't know how much they can make on it. Each one is probably, I don't know, a million. Yeah, something like that. But in terms of real profits, probably slightly less. Let's say they get a 100,000. Let's say 100,000 times 100,000. Right. So we're looking at 100,000 times 100,000. So that's 10,000 million. That's 10 billion. 10 billion. Yeah. 10 billion in profits. In profits, that's also 2025. No, because it doesn't, it takes longer for a truck to retire because they're only releasing it in 2020 or 2022. I forgot when they said it. The trucks don't get replaced until they run out. Right. Okay. So no, not yet there. Yeah. Yeah. But okay. So let's say a future valuation would be 10 billion 100 or 50 to 100 billion. So that's discounted to now 2025. Let's say a value of 20, 30 billion. Something like that. All right. And then we have still the Model Y. Oh, dammit, the Model Y. My gut tells me Model Y is going to take market away from Model 3, but I'm a bull. So it's going to just create new demand. But the Model Y is, let's say, but the thing is this already accounted for. We already counted the 30% of the entire world's sales to be at large. And then what we didn't account in is the solar industry and the batteries. Oh, God. I was looking at a solar, the battery chart, and it was very funny. There was a chart that shows a new growth engine and you see the energy storage growth. The energy thing actually going down. So like the title says new growth engine or something. And the thing goes like that. But I don't know how to value them that because they're so small in terms of revenue. So I never looked into them. I'm a bad bull. I don't know the story. So they are not going to have Tesla battery packs in every house, the tiles on every house and charging energy. And well, you should look at what's going on with the Buffalo Gigafactory. Even for a bull, it's hard to attach a valuation to those because they're shrinking. They're shrinking by all the evidence. They're shrinking. So what we can say it's practically impossible for them to compete on a global level with all the TV developments. And when it comes to mass manufacturing, who can compete against Chinese manufacturers? If you think about like car parts, a lot of them are made in China because they're standardized and simple to make and almost all the solar panels are made in China. But doesn't Tesla have the best battery technology and everything? Okay, here's a bull case. Tesla have the best, like they have the best battery pack, best engine, best motor. All that is legitimately the best in class at the moment. So nobody managed to reliably keep 7,000 or however many cells in good health simultaneously. They did that. And to a very good success, but again, not all the time is good because something just blew up in Shanghai if you haven't been paying attention. There's a Tesla that just self ignited in three seconds and there was an explosion and then a bunch of cars got burnt. That's from the batteries. So even Tesla can't keep it extremely well managed. That's why everybody else is using pouch or prismatic. These are much simpler to manage. They do have some drawbacks as their energy density is slightly lower than Tesla's because there's no metal constraining these things. They are actually soft. So, but they're much easier to manage. And Tesla's motor at the moment is lighter, probably cheaper to manufacture and higher efficiency and higher power output than every other motor in existence that are in cars. But yeah, you save two kilos. You're not in a racetrack. You save two kilos. It's probably easier for me to lose two kilos than for them to produce a motor that weighs two kilos less. And efficiency is something that's very important. It makes you drive longer, which is a pain point for all the EVs. But everything else, higher output, I mean, if you're in, if you're an old man with lots of money driving a Tesla, you probably don't really want to go zero to 60 in three seconds. Your back will hurt. I tested it and your blood goes in the wrong part of the head. You basically feel like you're going the wrong way. So that one, I don't really ascribe too much value to, but they do have meaningful advantage over all the competitors when it comes to the track. There is always time and with time, all the competitors will go after them and try to get. Oh, we already accounted for this in their 30 percent, 30 percent, you know, entire world car industry thing. All right. So let's, let's finish this with evaluation. So you are the bull and you said we have 100 billion for the cab business. Yes. Let's put 100 billion for the car business. Okay. That's 200 billion. What else do we have? Well, we have the insurance, which is another hundred billion, a hundred billion. That's 300 billion. Okay. And then I think that's about it. The rest, I can't really ascribe any, any 300 billion. Do we have any delusion coming up to that or they are, will be already making everything from cash flow? They will need, they will need cash infusion for sure. As Elon Musk said. Yeah. He even said it himself, whatever Musk said is truth. Yes. Yes. Okay. So we are then at the delusion. So let's say that there will be over the years as they invest in everything. And plus there are his shares that. Oh yeah. He has a huge, yeah. Huge bonus. So when everything of that happens, we are at 300 billion of valuation in 2025 on the double, the double amount of stocks, let's say. Yes. Okay. So we would say the market cap is now 40 billion. We double it to 80 billion. So Tesla could be a triple. If everything goes well, could be a triple by 2025. Yes. So then the stock would be 150. Triple from 150. Yeah. 150, 160. Yeah. Billions. Yeah. Yeah. Yeah. Yeah. Okay. So that's the bull case and bearish case. I would say that simply the debt overwhelms them. There is a small recession. The production is delayed. Investors lose patience. The debt covenants are breached. You have an asset sale. Nobody wants to buy it on a fire sale and goes down to book value of $20, $30 per share. Yeah. I would say on my evaluation, this thing would go to $20. My was $32. So I'm not a positive, the new, even as a bear. I think it's $20 because this thing's book value is like $25 and you need to discount for all the chaotic stuff they do. So $20. All right. So we had enough. And the thing is, the thing is like, yeah, there's all the castle in the sky, but what are the chances that they can actually deliver that? Right? It's like, so let's say, let's be positive and let's say 10%. That 10%. Okay. Let's be even more positive. 20%. 20% on a triple and 80% on $20 per share. Yeah. Because there is no in between here. It's either a win or a lose. So investors should know and we can conclude it here that if you're investing on Tesla now, you are betting on a 10%, 20% chance of a triple in a stock and an 80% chance of a total loss. And what about the final positive from financial education channels that Tesla stock, there is always a snapback after a decline? I don't know. It could. I mean, it doesn't change the long-term thesis. I don't really trade around positions. So it doesn't really matter to me. He prides himself being a long-term investor. So whatever snapback doesn't really matter, shouldn't. All right. Perhaps it will be another snap stock or not. We will see. All right. So this was a little bit longer video, but I think it really is very important even if we make it a little bit entertaining. But I see so many people chasing this stock like that they did chase cryptocurrencies a year ago and whatever is the normal usual Fed. And that's something people have to be very, very careful. We have made our statements here and we will see whether history will tell, whether we are right or wrong. Remember, I'm the ultimate Tesla bull. Yes. All right. And that will be used against you whenever possible. In the courts of public judgment. Yes. All right. Thank you, investors. Looking forward to your comments, but please keep them entertaining as we did. Oh, God.