Tesla, Inc. Common Stock

The market does a great job of pricing in first-order effects. But there is often money to be made (or risks to be avoided) in connecting the dots to the second-order effects. Walk with me.

Let's say Tesla is successful in creating autonomous vehicles. What are the first-order effects?

=> People don't have to spend time driving
=> Tesla stock goes up
=> You are inspired to add your own first-order effect in the comments⬇

Ok but what are the _second order effects? Y_ou know, the things that will happen that busy people don't have time to think about.

Housing prices will plummet.

_("What? Why?")_

Here's the logic:

Your car spends 95% of it's time sitting in a parking spot doing nothing.

If Tesla is successful in developing a self-driving car, vehicle ownership will look very different. Most cars on the road will be autonomous taxis. They will drop off a passenger and immediately drive away to pick someone else up. _Vehicle utilization rates will go up._

_**Cars being used more means parking spots will be used less.**_

That means there will be less need for land for parking. Currently it is estimated that [14% of all the land in LA is dedicated to parking](https://www.bloomberg.com/news/articles/2015-12-03/how-parking-conquered-los-angeles-in-14-facts-maps-and-figures#:~:text=Roughly%2014%20percent%20of%20L.A.%20County's%20incorporated%20land%20is%20tied%20to%20parking). When cars no longer need that land, the land can be repurposed for other uses.

What is the highest and best use for land?

Housing.

More housing supply means lower housing prices.

You heard it here first: **autonomous vehicles = more affordable housing.**

Or if you want to state it differently: There is a risk that housing prices will collapse late this decade as society reorganizes to accommodate the second-order effects of self-driving vehicles.

If you're new to the Commonstock community- one thing I love about this corner of the internet is the _Thoughtful Pushback._ So have at it- let me know why I'm wrong in the comments :)
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Harvard published a great paper about it a few years ago, predicting a billion dollar shift in housing from town to far suburbs as commute won’t be an issue anymore

Now that’s one big second order effect! Let me throw out a theory- a sizable chunk of the new housing would be apartments or condos, rather than full scale houses. My thinking is that the biggest parking lots are not in residential areas, so the most sensible replacement for the parking lots would be the type of housing you already see downtown- high rise apartment buildings. So if you looking to buy a home, maybe prices won’t drop as much as expected? Not sure, just a question 

Josh Worden

I’ve tried to consider what would happen to the suburban driveway if we no longer need them to store our cars -- Presumably we would see a wave of repurposing existing garages & reconsidering what the optimal landscape design looks like 


[https://pcon.blog/2019/06/19/driveways-garages-in-a-world-of-autonomous-cars/](https://pcon.blog/2019/06/19/driveways-garages-in-a-world-of-autonomous-cars/)

Pat Connolly

The 14 facts, maps, and figures that explain how 14 percent of Los Angeles County ended up devoted to car storage.

https://www.bloomberg.com/news/articles/2015-12-03/how-parking-conquered-los-angeles-in-14-facts-maps-and-figures#:~:text=Roughly%2014%20percent%20of%20L.A.%20County's%20incorporated%20land%20is%20tied%20to%20parking

How Parking Conquered Los Angeles, in 14 Facts, Maps, and Figures

Second Order Effects of Autonomous Vehicles

Tesla being down 8% after battery day is better for you and me than Snowflake being up 105% on the day of it's IPO.

Big hype events like the IPOs of Snowflake, Unity, Jfrog, etc. are massive days where a ton of money is made. But who is making the money? The big guys.

Retail investors like us are shut out because the big institutions get privileged access to the shares early.

We get to hear about the huge gains, but most retail investors were't allowed to buy shares until after Snowflake was significantly overvalued. Boo.

Battery day was great because it “underwealmed” Wall St. institutional investors. There was no money to be made right now. They wanted to see a new battery today. Instead, Musk gave them a plan for how they are going to scale the new battery in three years time.

Three years is not exciting to big Wall Street firms. They don’t have the patience for that. And so Tesla shares have fallen over 13% the last two days.

But it’s exactly this dynamic that gives retail investors one of the only advantages we have over big Wall Street firms: patience.

Tesla is a very good bet on a company that will be a big part of the world’s transportation industry in the future. Retail investors can participate in that bet now. And days like today when things are selling off are a good time to get in at a reasonable price.

I say “reasonable” with a grain of salt. Share are up 400% this year. But the point is the best, most innovative companies will always be expensive (they’re the best, why shouldn’t they be?), so moments when the market is disappointed are good times to get in.

Most other times the hype will add a lot more risk to the stock. Buying in when there are little breathers is a great way to manage risk as best you can.

Nathan Worden

Great memo @nathanworden, followed your lead

David McDonough

Should be a fun ride, with all kinds of twists and turns. Good thing Teslas are good on the race track :D

Tesla is up 83% since this this trade about a year ago 📈

New position in TSLA

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