Tim Cook says he cares about climate change. “The time for inaction has passed,” he said four long years ago at a U.N. climate summit. Yet, Apple has made no meaningful investments in consumer product development in this area.1 Certainly, Apple is committed to reducing its environmental footprint, for example, shifting its facilities to renewable energy. However, Apple mitigating its own impact won’t matter to the big picture if civilization remains addicted to fossil fuel.2 Transitioning the world to sustainable energy and transportation is the crux of the matter.

Helping to take Tesla private – or acquiring Tesla outright, if that is even possible at this juncture, or perhaps merging with Tesla if an acquisition is unviable – would put Apple’s money where Tim’s mouth is, and return a massive upside for Apple’s shareholders. Tesla is on track to grow from a $60 billion to a $500 billion market cap (or much more) over the next decade. Adding $500 billion to Apple’s market cap would be a win of unprecedented dimensions.3

Apple ended 2017 sitting on nearly $300 billion in cash, a mind-boggling sum. That number will continue to grow as Apple reaps windfall profits.

Over the past five years, Apple has been squandering its fortune on a stock buyback program that creates nothing of value. Apple spent $87 billion on this program between 2013 and 2015 alone. Apple’s share price has risen dramatically since the start of the program. But what breakthrough products or services were created? How did this unfathomable cash incineration benefit the world, Apple’s low-paid workers in its supply chain, or position Apple for the future?

More promising is Cook’s recent announcement to invest $312 billion into the US economy over the next five years.4 Although we don’t yet know what products, services, or jobs this investment represents, it’s the perfect jumping off point to help take Tesla private, acquire the company, or merge.

Musk has already stated that all shareholders will have the opportunity to retain their shares if Tesla goes private, so Apple being one of the key funders – in addition to, or better yet, instead of Saudi Arabia – would be phenomenal. The Saudis have a massive conflict of interest: ensuring they squeeze every last dollar out of petroleum. Apple has no such conflicts. If Apple pursues a merger or acquisition, existing Tesla shareholders would become shareholders in a public Apple Tesla. This could arguably be a much better setup than a private Tesla, given that there would be no obstacles to any retail investor, anytime, buying or selling shares. Apple Tesla shareholders would have the benefit of reliable revenue on the Apple side and growth potential on the Tesla side. In short, Apple Tesla shareholders would gain more liquidity and a desirable mix of security plus growth in their investment.

Even if Apple were to retire Tesla’s $9.5 BN in long-term debt, $80 BN to take-private, acquire, or merge with a debt-free Tesla would be a steal. This investment would cost Apple less than what it spent re-purchasing and retiring its shares over a two-year period.

Apple should set up the following basic management structure:

  • Musk runs Apple’s Tesla division/partner
  • Cook cuts Musk a mostly blank check to rapidly acquire the factories and hire the workforce necessary to build and scale the Tesla Semi, the Model Y, additional Model 3 capacity, the Pickup, the Compact, Solar Roof, utility-scale solar/storage, and any other projects Musk wants to work on.
  • The only basic requirement is that the Tesla division hits profitability within the next five to seven years, timeframe re-negotiable based on revenue growth. Simply, while Tesla is massively scaling revenues, profits are deferred so long as there’s a clear path to profitability once the product line is mature and agreed-upon scale targets are achieved.

Anyone who looks at Apple’s culture and skeptically asks whether it would fit well with Tesla’s is right to do so. Apple is a mature company running a tight ship. Tesla in spirit and culture is more like the original Macintosh project with the pirate flag than today’s Apple. Tim shouldn’t try to micromanage Musk, or send Jony Ive to oversee Franz von Holzhausen. Either could be a disaster.

The one personnel change, or addition, Tim should make is to assist Musk in hiring a COO. Musk needs a Tim Cook, circa 1998, in the way that Steve Jobs needed Tim Cook at that time. Cook should find a younger version of himself and send that person to report to Musk and help Tesla get the trains, I mean the manufacturing lines, to run on time.

This could, and should, end up looking a lot like Disney’s acquisition of Pixar. That was one of the most successful acquisitions in history, and massively benefitted both companies. Jobs made most of his fortune on Disney equity. An ironclad point of the acquisition negotiation was assurance that Pixar would operate mostly autonomously. The Disney/Pixar structure is a model for how Apple’s acquisition of Tesla should look. Here’s how Craig Good described the atmosphere at Pixar, post-deal:

I changed “Thank you for calling Pixar Animation Studios” into that same announcement but starting out with Mickey Mouse’s voice chuckling, “Hi, everybody!” I heard that a lot of people at Disney were getting a kick out of phoning up to hear it over the next few days.

I soon got a call from Ed Catmull’s assistant asking me to remove it. Ed’s reason was the best ever: “We want Pixar to stay Pixar.”

And, to an astonishing extent, that’s exactly what happened.

Tesla needs to stay Tesla.

Back to the premise, I suppose I haven’t conclusively demonstrated why, from Tim Cook’s perspective, Apple should make a bid for Tesla. Tesla will most likely succeed at massive scale on its own, without Apple. And if Tesla does, then Apple doesn’t really need to make an impact on the world’s transition to sustainable energy and transportation, because Tesla will have won its revolution. Tim Cook will be able to sleep at night knowing that the Big Problem was solved, even if he and Apple didn’t play a meaningful role in solving it.

However, Tesla’s success – at massive scale – isn’t guaranteed. Every time Tesla grows, there’s a risk that something unexpected will go wrong. Tesla will be growing for a long time to come, at ridiculous rates of 40-70% per year. Apple’s involvement would ensure Tesla has near-unlimited resources to grow, execute, and scale.

In short, Apple buying or assisting Tesla in a go-private would be lights out and game over for the internal combustion engine and fossil fuel industries. Apple, and Cook, would be the backers guaranteeing the sustainable energy victory that is necessary, without which civilization will collapse5. And the collapse of civilization would be bad for iPhone sales. Sea level rise, and the flooding of most coastal cities, would be bad news for Apple, too.

Other than helping Tesla succeed, massively increasing Apple’s market cap, and saving civilization, why else should Cook acquire Tesla? Simply, Tesla’s product line fits beautifully with Apple’s. There are many reasons so many people call the Model 3 the ‘iPhone of Cars.’ It’s a leapfrog product. It’s the reinvention of the car. It’s going to decimate and obsolete existing cars, the way the iPhone relegated Blackberry, Palm, and Nokia to tech museums. And, virtually everyone who rides in a Model 3 recognizes that “Holy s*&t, this is the car Apple would have built if Apple had built a car.”

Apple spent a few years trying to build a car. From the outside, Project Titan appears to have been a beautifully disastrous failure for Apple. A bold experiment, and a risk worth taking, it reportedly resulted in mass layoffs and a reduction from building hardware and software to working on only self-driving software.6

“People who are really serious about software should make their own hardware,” Steve Jobs said while introducing the iPhone in 2007, quoting Alan Kay. There are many implications of this statement, one being, if all you’re doing is making software when you should be making hardware, you aren’t serious. You’re a joke. Apple, currently, isn’t serious about cars. If Apple had a viable EV program today, investing in Tesla might make less sense than competing with Tesla. But Apple has no EV hardware, and on its current path is unlikely to ever have EV hardware.

Who thinks different today? Elon Musk, and Tesla. Acquiring Tesla would be Tim Cook’s think different moment. This mega-dent in the Universe would set Apple on a course to help save civilization.

  1. Seemingly; Apple is great at secrecy, so who knows what it’s developing behind closed doors.↩︎
  2. And by the way, Apple’s products are still delivered on fossil fuel burning trucks.↩︎
  3. Apple’s current market cap is $1TN. Assume that Apple will double to $2TN over the next decade, which is a reasonable estimate based on revenue growth of its existing business plus inflation. The Tesla part of the business would add $500BN, for a total of $2.5 TN. The Tesla division would represent 20% of Apple in 2028. Put another way, acquiring Tesla would be like acquiring a business the value of the entire existing iPhone business, which roughly represents $530 BN of Apple’s existing $1 TN market cap, based on its 53% share of Apple’s revenues.  These numbers are conservative. Tesla could be a multi-Trillion dollar company if it becomes the global leader in transportation and energy. Given that energy and transportation are larger industries, combined, than smartphones, tablets, and computers, eventually Tesla’s market cap could exceed Apple’s.↩︎
  4. The total is $350BN, of which $38BN is repatriation taxes.↩︎
  5. Civilization may collapse anyway. The transition is necessary, but it may not be sufficient. Other factors are beyond the scope of this writing.↩︎
  6. Post-acquisition of Tesla, Apple should send the rump of Project Titan – those engineers and the software of value that remain – over to its new Tesla division. Also, self-driving software may be cool, but on its own will have no impact on climate change or ending the world’s addiction to fossil fuel.↩︎