Tesla is the first successful American car company since Chrysler, which was founded in 1925. It completely revolutionized the automobile industry, forcing other car companies to shift their strategy to acknowledge the appeal of electric cars as a wonderful driving experience and as a status symbol for the liberal elite, who not only get to drive a beautiful car but who also get to feel virtuous while doing so. Tesla’s market cap is greater than Ford’s and almost as large as GM’s despite hemorrhaging cash and a lack of profit because the vision Elon Musk paints about its future is so captivating: the car’s eventual autonomous capabilities, the factory’s use of automation to rapidly scale manufacturing, the company’s strategy of building luxury cars to prove a concept and generate profit so that they can build cheaper mass-distribution cars, and of course, the company’s mission to stave off global warming. But the company has also had a history of labor violations which, I propose, stem from Musk’s penchant for over-promising and from moral licensing.
Move Fast and Break Things
Silicon Valley’s ethos is probably best summarized by Mark Zuckerberg’s famous quote “move fast and break things.” He may no longer subscribe to his own quote now that Facebook is out of its hyper-growth stage, but companies still in that stage, like Tesla, certainly still do. In F18 Q1, Tesla increased car production by 40% over the previous quarter, but was still almost 500 units under the Q1 target of 2,500 Model 3 cars, and it’s still aiming for 5,000 units per week by the end of Q2. Musk has a history of over-promising in order to push himself and his employees to the limit to try to meet those ludicrous goals. Moving fast and breaking things at software companies might lead to stressed out, sleep-deprived engineers, which is unfortunate but not disastrous. At a manufacturing company like Tesla, however, it can result in an unsafe work environment with a culture of downplaying and misreporting injuries.
Reveal, in a collaboration with KQED, did an investigation into the working conditions in the Tesla factory and found that although Tesla claims it brought down its injury rate significantly in 2017 to match the industry average, it was actually failing to report some serious injuries, allowing a better-than-reality injury rate to be reflected. Some serious injuries were labeled as only requiring First Aid whereas other work injuries were labeled as “personal medical” cases that wouldn’t be counted on Tesla’s injury report. In an article published a month later, Reveal found that Tesla added 13 injuries to its 2017 certified, legally mandated report despite emphasizing emphatically in the previous article that it was very confident in the injury rates reported and even stooping to accuse Reveal of being an “extremist organization” that was “creat[ing] a calculated disinformation campaign against Tesla.” Even more concerning is that all of those 13 injuries added were from the last few months of 2017 and Tesla hadn’t added any injuries from before September 2017. Why’s it so concerning? Because those injuries were added right after the California Occupational Safety and Health Administration opened an investigation into Tesla, and since the agency “can’t cite an employer more than six months after the injury should have been recorded,” Tesla only has to cover its tracks for the last few months, indicating with extremely high likelihood, that although there are injuries that should be added from the early months of 2017, Tesla won’t add them even though doing would more accurately reflect actual injury rates. This should dispel us of the notion that Tesla “records injuries accurately and cares deeply about the safety of its workers” (quote from Tesla in first Reveal article).
The safety issues and inaccurate injury reporting at Tesla stem directly from Musk’s lofty promises. The culture of a company is shaped by its leaders and since Musk has been Tesla’s CEO for almost 10 years and has been a key leader for even longer, he’s obviously had an enormous impact in creating the culture and hiring the type of managers that will preserve that culture. So, is it really a surprise that Musk, known for being a hard-driving taskmaster who pushes both himself and his employees to the limit, is in charge of a company that does the same? The onerous burdens thrust upon front-line employees and the inaccurate, possibly fraudulent, injury reporting are a byproduct of the Herculean goals Musk imposes on himself and his leaders, goals that are then cascaded down the org chart.
A recent Freakonomics episode talked about corporate social responsibility (CSR) and how firms that advertise a job see a 33% increase in application rates when they emphasize their CSR compared to when they don’t mention it; workers also supposedly work 10 to 25% harder when they believe in the company’s CSR compared to when they don’t, driven by women. The episode transcript didn’t link to those studies, so I wasn’t able to dig deeper, but the studies conform with my priors that firms with genuine CSR like Patagonia or Tesla will be able to attract more workers and will have better motivated workers. 90% of Global Fortune 250 companies publish annual CSR reports, but there’s a difference between companies like Pfizer and Coca-Cola (not sure if they publish CSR reports but just an example) that cynically publish CSR reports and companies like Patagonia and Tesla that live and breathe their corporate-social mission. So, my intuition is that even though a large majority of large corporations publish CSR reports, they won’t benefit from the two CSR effects mentioned earlier, but companies like Tesla will.
The Guardian reported a year ago of workers complaining about the same issues mentioned earlier, but even those workers expressed enthusiasm for Tesla’s world-changing mission. It’s clear that many of Tesla’s employees are motivated by its laudable mission and it’s no surprise that they’re willing to work diligently for the company. The Freaknomics episode mentioned earlier is actually centered around moral licensing, the effect that when we do good in one act, we become less concerned with doing bad in another; we use the good we did earlier to justify the bad. A basic example would be using your earlier 5-mile run to justify the pint of ice cream you’re about to inhale now. The study cited in the episode comes from List and Momeni. The study had over 3,000 participants from Mechanical Turk who were divided into 6 groups. The most conclusive result found was that an appeal to CSR made the workers more likely to cheat in their task; workers were not only more likely to cheat, but would also cheat with more intensity (though that finding is on less firm ground than the previous finding). Therefore, the workers on MTurk were using the appeal to CSR to justify the cheating in their work.
I propose that managers at Tesla are similarly using moral licensing to justify the subpar working conditions at the factory and inaccurate reporting of injury rates. The employees are so concerned with ensuring Tesla’s success and doing good in the world that they start to rationalize the corners they cut. The serious injury starts to look less serious. The on-the-job injury probably originated off the work. Temp workers don’t count as actual workers do they? Now, I could be wrong and the managers in charge of worker safety might have done a utilitarian calculation and found that it’s actually better for the world if they fudge the numbers a little, but I think it’s much more likely that the combination of pressure from their superiors and moral licensing convince them of their justification for the small cheating.
This isn’t meant as a slight, and is honestly probably more of a compliment, but if there’s anyone that actually did the utilitarian calculus and decided it’s better for the world if the numbers are fudged a little, it’d be Elon Musk. I remember reading Ashlee Vance’s biography of Musk and being astonished by Musk: his first-principles, long-term thinking, his calculated risk-taking to do the things to benefit society that no one else will do, and above all his determination and grit in working as painstakingly as is needed to succeed. I admire him greatly, and I realize that what makes him so great and what causes the poor work conditions may originate from the same place. But, I don’t think my admiration of him and my criticism of things that he and his companies should rightly be criticized for are mutually exclusive. It makes logical sense to me that I can still admire Tesla as a company, but hope and want for it to do better in certain aspects. It’s such a cliché, but it’s important to remember that even the people you admire have flaws and to not be blind to those flaws. I also understand that Tesla is still in a precarious position as it keeps racking up unprofitable quarters and that there must be immense pressure on Musk, but I don’t think that, or his praiseworthy mission should detract from appropriate criticism. And, as a huge fan of his, I find Musk’s seeming inability to distinguish appropriate criticism from malicious vitriol to be disheartening.