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Tesla fires!


Paul Kedrosky writes:

Curious if you’ve looked at the current debate about Tesla fires, statistically speaking. Lots of arm-waving about true/sample proportions, sample sizes, normal approximations, etc.

Would love to see a blog post if it intrigues you at all.

I hadn’t heard about this at all! I mean, sure, I’d heard of Tesla, this is an electric car being built by some eccentric billionaire. But I didn’t know they were catching on fire! At this point I was curious so I followed the link.

It was an interesting discussion to read, partly because some of the commenters were so open about their financial interests; for example,

i felt like now is a good time to share some of my insights, specifically regarding the tesla fires. i know many people won’t like to hear what i have to say. and i don’t have a longer term holding in tesla any more, although sometimes i day-trade tesla from the long or short side. tesla has been kind to me, both as an investor and model s owner. so although i have been very tempted to short tesla the past months, i just can’t bring myself to establish a meaningful short against the company that has been so good to me as a customer and investor. who knows, maybe i will lose my sentimentality and return to being the cold-blooded capitalist i usually am.

I love the idea that someone thinks that day trading is “being a cold-blooded capitalist,” but that’s another story. . . . What’s unusual in this discussion is how openly people are stating their financial and emotional interests here.

After reading some of the thread and googling a bit, I don’t think I have much to add that goes beyond this news article and this one by Kevin Bullis. We’re talking about a rare event: specifically, a car catching on fire after a collision. In which case it seems like the overwhelming risk comes from the crash, not the possibility of fire.

What interests me the most about all this is that it ultimately seems not so much like a discussion of added risks (which, everyone seems to agree, are tiny, to the extent that they exist at all) but rather more of a meta-discussion about risk perception. The argument is not that the Tesla car is dangerous but rather that it will be perceived as dangerous, thus dropping its inflated stock price etc. It’s an argument and a meta-argument at the same time.

P.S. I was in a car that caught on fire once! It was a Subaru, I think. We were on the highway outside Baltimore and noticed that some other drivers were pointing at our car as they zoomed past. After pulling over, we noticed smoke coming from under the hood. It turned out we’d forgotten to put the cap back on after filling the oil tank, and there was a small fire burning on the surface of the oil. We waited for the fire to go out and then drove slowly to a gas station.


  1. jonathan says:

    I tend to expect a random cluster of bad luck.

    These things are tough. I remember when I was a kid my dad perking up over a report about the number of deaths from a rare leukemia. As I remember, the number was like 6. That concept of clusters then became over the next few decades the focus of much litigation and a lot of really bad science and, to be on point, a rather astounding misconception about the nature of reality; it was assumed reality would be smooth when of course it isn’t. If reality were smooth, we wouldn’t exist. I attribute much of my interest in that particular line of thinking to my dad’s reaction to a news report in the early 1970′s. Weird.

    But it mattered when people started talking incoherently about the risks of power lines or dozens of other things. It’s sensible to err on the side of caution – and thus ban cyclamates – but most really bad things are obvious. DDT was obvious. The effect of phosphates was pretty darned obvious. We get confused when we fail to recognize that less obvious should (in a Bayesian sense) mean less really bad. We also attribute remote causes as being proximate and all sorts of other basic errors, but …

  2. Corey says:

    “I love the idea that someone thinks that day trading is “being a cold-blooded capitalist,” but that’s another story…”

    I think you misunderstood the quote. A “meaningful short position” is not the same as day-trading. Day-traded positions are closed out on a daily basis; profits are made via speculation and/or market-making. A “meaningful” position is a long-term position; a meaningful short position involves borrowing stock from a broker for a set period, selling it on the open market, thereby increasing supply and consequently driving the price down. Of course a short position has to be closed out at some point, reversing all of the transactions; what makes the position “meaningful” is that the person who takes it expects the price of the stock to fall at the point at which the position is closed out (so that s/he has sold high and bought low); when the position is opened, that expectation is communicated to the market.

    • Entsophy says:

      That could be Corey, but he easily could have meant “meaningful” in the sense of “meaningful proportion of my wealth” which typically wouldn’t be enough affect the stock price.

      Also, there’s no law saying “day traders” have to close all positions at the end of the day. They’re just traders and are willing in practice to hold positions any length of time they feel would make for a good trade.

  3. Mark Palko says:

    “What interests me the most about all this is that it ultimately seems not so much like a discussion of added risks (which, everyone seems to agree, are tiny, to the extent that they exist at all) but rather more of a meta-discussion about risk perception.”

    Since much of this seems to be driven by the financial press driving focusing on the stock, perhaps this is just the way we would expect coverage of a Keynesian beauty contest to go.

  4. Chris G says:

    Tesla: A Pinto for the 21st Century.

  5. Econ says:

    Learn a bit more about Elon Musk. Your implicit comparison (via the link) is both unflattering as well as misinformed.

  6. me says:

    short and long holders are probably the internet’s most pathetic commentators, because they truly believe commentating can move the markets

  7. Eyal says:

    You are aware that you linked to John Mcafee as the eccentric billionaire? The CEO and founder of Tesla is Elon Musk, also involved in PayPal and SpaceX (they send payloadsto space for NASA). He is a brilliant entrepreneur, with repeated successes.

    And that’s all you know about Tesla? I am from Israel, and I always knew Israel was closer to the West coast than NYC is (the locations on the globe notwithstanding) – but I didn’t know it was THAT much closer :).

  8. Eyal says:

    I think the person asking you the question wanted to know of Tesla cars tend to catch fire more than the internal combustion cars. Tesla claims that they don’t – I don’t know what the truth is.

    • Andrew says:

      Yes, as I wrote above, I would refer you to the news articles by Kevin Bullis, which tell the story and have further links. I don’t think I had anything to add on the specific issue of the risk of fire, but, as I wrote above, this seems like a pretty minor issue considering that the issue is fires after crashes, and crashes themselves can be pretty dangerous already.

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