Skip To Content

Tulips to Tesla

Scott Galloway@profgalloway

Published on October 9, 2020

2-min read

Every decade, there’s at least one financial crisis somewhere in the world. When asked what a recession was, Jamie Dimon responded, “Something that happens every 5-7 years.” It’s been 11. One of the many strange things about a crisis is that the country of origin (this time, China) is usually not the one that gets hit the hardest. Similar to when your kid gets his first C. Yeah, it’s rough on him, but the household devolves into arguments around parenting, with an older brother who must endure new rules implemented as a function of his delinquent sibling. But I digress.

Financial crises have many causes, but generally they boil down to a few key elements:

  • easy money
  • poor regulation
  • consensual hallucination that the market always goes up

The crisis is preceded by a cocaine-fueled party, where everything and everyone looks and is great. The party creates an asset bubble — a wave of optimism that lifts prices well above levels warranted by fundamentals — ending in a crash. The first documented asset bubble was the Dutch tulip mania in 1636, when speculation drove the value of the rarest tulips to six times the average salary at the time. 

Story stocks are the new tulips, and Robinhood is the E*Trade of our age. 

Story stocks and Robinhood have more in common than you’d think. If you want to know what Tesla’s stock will do tomorrow, just look at how many Robinhood accounts were opened today.

The dot-com bubble of the late 90s was another once-in-a-generation, tulip-type mania. I would know, as I was at ground zero. I remember thinking in 2001, after being run over by the dot-bomb crash, all I need is one more bubble … I’ll be so much smarter. So, the music and drugs are different, but things are feeling eerily similar. What to do? It makes for a fascinating original scripted program on Apple TV+. (It. Could. Happen…) Or a decent 12-minute YouTube. Continue to video

Life is so rich, 

P.S. Spoke to Eric Schmidt, former Google exec chair and CEO. He is bullish on AI for biology. And registration for Brand Strategy Sprint closes on Tuesday at 9pm ET. Sign up to join the last cohort of the year. 

Updated: An earlier version of this post included an error in the Tesla Share Price vs. Robinhood Users chart. The post has been updated to reflect the accurate version.



  1. K-man says:

    Fast forward to Dec 1. with the S&P forced marriage that results in one side of the aisle hating the forthcoming union with the other side of the aisle…. The folks running the sanatorium made the rules and what the heck, it’s not their money – just widows and orphans money.

  2. Bill Lee says:

    Too many trolls talking about their online riches. Please clean this up!

  3. Warren Beth says:

    I heard you mention the idea (i’m sure plenty of people have said this, but i mentioned in your comments a bit ago) of old people not being allowed to serve in public office past a certain age, but to flesh it out some here’s the whole idea: you cannot vote or serve public office if you are within 15 years of the average life expectancy. This is because your beliefs at that point are too set in stone and you are nearing (already in?) cognitive decline, and most importantly your concerns are already accounted for by those that proceed you (which unfortunately, this same theory is not applicable to children which is why we will never get universal childcare). Let’s get this movement going! Warren Buffett is the exception. Perhaps all Warren B’s.

  4. Samson Narokobi says:

    If you think tesla is another Dutch tulip case without understanding the disruption it has already begun then you are sadly lost. Even the Dot com crash was when Amazon ran up had a crash and now dominates. Value investors live in the past, even Buffett moves forward with half his portfolio in Apple and Amazon… let’s check back here in 2 years, tesla will be top5 by market cap.

    • Manjinder Singh Chouhan says:

      I couldn’t agree more. Here in Germany almost all companies are now following same business model as Tesla . VW, Daimler and almost everyday it’s making disruption. It could feel dramatic during transition but market shows great positivity in mobility. Regards MSC

  5. Wendi Weiss Cooper-Maronati says:

    Loved the episode with Eric. Voice First / AI is truly the way – it has its challenges now with consumer adoption, but if you are a creative marketer who understands how to blend “all” mediums and leverage them, including the new – it’s a great place to hedge your creative bet, but don’t expect serious ROI, that will come. Unlike 1999 (I was there as I’m 65) and that bubble, Voice Marketing / AI will not burst.

  6. Ben says:

    Few problems…why look at TTM when forward EV/S is the more relevant metric for improving outlook…who cares about Robinhood, they are followers and not big enough to move the needle.

  7. Soroush says:

    Looking at the chart it seems like the recent stock value increases happened before the number of Robinhood holders. How do you infer the former is an effect of the latter and not the other way?

  8. gam says:

    Wow, talk about simplistic and illogical at the same time. What are you a professor of? Not a good reflection on you or your educational institution.

  9. Kevin Stolworthy says:

    How do we know the statistics coming out of China are accurate?

  10. stuntman says:

    And just noticed the inconsistent scaling on the right hand axis of the RH / Tesla chart. Really disappointing stuff Prof G. Intentionally misleading and a slap in the face of the academic integrity upon which you’ve built your public persona.

  11. stuntman says:

    Prof G – love you, but struggle to see why you continue to see Tesla as a bubble, especially after you make sure a coherent and prophetic argument in “The Four” as to if / how Tesla could become a $1tn+ company. It’s checking literally all of the requisite boxes you list in the book. Also — the above charts are misleading. The EV / TTM Sales is meaningless — Tesla is high-growth and should be compared on forward multiples — EV / NTM Sales or FY23 Sales. You should know this. And the RH users vs. Tesla relationship breaks down after Aug 2020, which seems to be the arbitrary point when you end the time series. I agree its valuation is rich, but will be supported in 2-3 years pending execution by Musk & Co., which has been increasingly strong as of late.

  12. john says:

    TSLA is tough and I completely understand why there’s so much difference in perspective-so I’m actually not in the bull or bear camp right now-and yeah there’s little doubt at this point that Mr Musk is highly intelligent and successful; and trying to bet against the equity has mostly been chaotic and loss producing at best-even with good discipline and risk management. But to be clear as a long-term student of the market what happened in June and July with these story stocks was insane panic buying that made no sense to me-and then AFTER we figured out that the snake was eating it’s own tail-with respect to the liquidity and the derivative markets on these story stocks-and that’s only what we see-as it’s possible to have OTC derivative positions-both long and short-between institutions- I think what the professor is saying is that there’s nothing wrong with risk management-and I think his message is timely because the quants have taken care of themselves and plugged the holes-so if nothing else as individuals-at least starting in September-the returns have gone down significantly-and the risk has increased substantially-at least that’s what I experience- So, at least for me now, it’s no longer about being right or wrong-it’s all about limiting my risk-

  13. Sean K says:

    Maybe ask Eric Schmidt to recount how many times Google was written off as an overvalued hype stock on its way to being a trillion dollar company. During the dot com bubble there was and then there was Amazon. I bet a lot of people sold Amazon based on the logic that this bubble will end. I put my money on the guy sending people to Mars, but you keep typing…

  14. John says:

    Thanks Scott for making an argument against Tesla. I agree with you, the company can be the first mover, the most technologically advanced, equipped with the best software and so on but people often forget the other side of the coin. For EVs to be viable you need infrastructure, innovation in generating clean energy (otherwise EVs are just as dirty as big old carmakers) and it needs to be affordable. Today $100 spent by the company results in a big fat 1$ lost for shareholders that is what they are paying for at the end of the day.

  15. JB says:

    I agree – the bubbles recur, and evolve. But Scott, come on – so do the drugs. Seems it’s less coke now and more mdma. I know where your nose is – the price of the drug is very high (distance of free fall) and the pain of the withdrawal is very high (breadth of crash and time to recovery) – but we’ve all gotten so cozy with the process it’s just a friendly raver now. Plus, insane valuations on 1 tech-based company do not alone portend the post-binge (though you and all on this line will be correct some day!). Tesla is Musk and Musk is a network of innovation engines. Because of that Musk companies will accrue value like Amazon for another decade.

  16. No mercy says:

    Hi, I am Scott Galloway, a.k.a. TSLA the clueless

  17. Mark says:

    If Tesla has a four year lead in batteries and other aspects of electric car technology and history shows us that is insurmountable technologically then Tesla will grow into its market cap over time. Also the rate of change of automation implementation may have been spurred by Covid. The massive printing of money devalues it so all assets like stocks and real estate are being revalued in terms of cheapening dollars. The so called tulips are being valued in worthless currency. So thinks are working as they should!

  18. Eric says:

    I really appreciate when you talk about marketing, where I can see all your professionalism, creativity, and vision. On politics, you are very behind, but I understand it is not your sweet spot. Just a suggestion though. Enjoy your rich life.

  19. Doug Mazell says:

    Congrats for getting PR – congrats on writing the story – but how often do I have hear about tulips? You can use that anymore – 2000 references says that comparison is over – anyway – first – for you – for your family I would buy as much Tesla stock now at these levels as you can and be prepared to hold the stock for ten years for a 10x to 50x increase in your money. Use a Roth IRA – no tax on your windfall. With that out of the way let’s talk about this insane guy – Elon – who is not motivated by profit – he just want to save humanity from itself – you know you can get sainthood from the Catholic Church if you can prove two miracles- I think Elon has about 10 so far – ah St. Elon. His manufacturing is light years ahead – his cars are light years ahead – his batteries are now Magnitudes of light years ahead and he building his 5th and 6th factories. When Elon started Tesla – the first thing he did was hire an army of programmers – that’s just one of the reasons he is so far ahead – he can alter production on an assembly line in two months – not two years like legacy auto makers and he sells every car he makes. People want these Tesla’s – they are like driving a rocket ship – I bet BMW is getting crushed – all the model 3 and Model Y buyers use to buy BMW. There is absolutely no comparison. My 2016 S came with 220 mile range – one morning I woke up and it now had a 285 range. The value of my car went up in value. The over the air updates are just more insanity. I have even started on autonomous driving, energy storage for homes and cites or the ability to plug in my car and have the energy in my batteries generate money from the utility companies. Bla bla bla – sorry – but buy some shares for your kids and use the money to buy them a flying Tesla when they turn 20.

    • C.H. says:

      Spot on! 🙂 Automakers (American, Japanese and German) are ~10-12 years behind Tesla as far as electric technology. They may never catch up. The primary reason is Tesla’s lead in software. Albeit, an inferior software that is Android based. Ugh!

    • CR says:

      Nothing special about Tesla cars now. Market will be flooded with EL sedans, built by companies that make gross margin from manufacturing rather than selling tax preferences. With their own EL cars, other countries will be protecting their auto manufacturing employment base. We see that now in EU, with Tesla sales off the cliff. Nice cars, Tesla. But, unprofitable. BMW, MB, GM, VW are.

  20. Cy says:

    Big dog hatin’ on Tesla. Stop. I just got one. It rocks. I paid for it online, didn’t have to go to a dealership (bought the stock for that reason alone!), it got dropped off at my house, low emissions (some, cause I charge it at home), fun af to drive, tech is amazing (Balinese like Donald Fagan’s Kamakiri), collision avoidance AI is impressive (hope I never use it), looks great, sound system slaps, and to paraphrase E. Musk: the stock might be a little overpriced now but it will be worth more in 5 years. The psychic payoff is a combination of virtue signaling and the ladies at the Smoothie King drive through love it…

  21. Jim says:

    His first C? Seriously, do you even read what you write? Please tell me you are not one of those baby boomer parents who insist on absolute grade perfection so the kid can get into a college worshipped by other baby boomers. Are there any individuals left or is everyone being turned into “College Loaf”, one step above pickle loaf?

  22. Tayeb says:

    The world will be dominated by two sets of monopolies (one for China and one for the RoW), NetFlix will dominate culture, AMZN commerce, and each of the FANGMANT will have its castle guarded by an impenetrable moat. Tesla can dominate the most important fields: mobility, space and energy. Only the moat matters, valuation comes later.

  23. Scott says:

    The correlation was inverse pre-January. Doesn’t that throw out any argument of correlation or causation? Hard to imagine that Gen Y’ers who can’t afford stock commissions or full shares are throwing off the market.

  24. EV Data Science says:

    You may not know this Scott, but correlation does not mean causation.

  25. Conor says:

    It cracks me up that investors value Toyota at about 16 kilobucks per car sold and Tesla at 1.6 megabucks per car sold.

  26. Christopher Li says:

    The conclusion from the “Number of Robinhood users holding Tesla vs Tesla Share price” graph is a little farfetched. Between March and September of 2020, while the number of TSLA robinhood shareholders increased by 33% to their pre-covid highs, the price of tesla increased ~400% or ~150% over it’s precovid high. There must be other significant factors in TSLA share price beyond the # of Robinhood shareholders, I’m sure there is also a causal relationship in the reverse of an increase in share price increasing the number of Robinhood shareholders.

    • Oliver A says:

      Your comment makes sense. What do you think could be the other factors?

    • geo says:

      Gotto question the source. First of all, there’s no such thing as Robinhoodtrack. There’s, but that data has been stale since early August, because Robinhood started hiding their API (probably selling it to hedge funds).

  27. Sam says:

    The video gives the broader perspective and the basis for the blog post. I agree with the overall message of the video to be cautious about a bubble. However this particular blog post has a much narrower view point that current stock price of Tesla can only be explained by a bubble. PEG which is forward looking is probably a better metric for comparing growth companies compared to EV/Sales which is backward looking and more favorable for value companies. Tesla PEG ratio (5 year expected) is better than Amazon. Growth companies have a higher risk profile, so invest only what you can afford to loose. If you do not believe in the growth story, short the stock so that you have skin in the game.

  28. RAP77 says:

    Another one on TSLA, join the crowd, probably wrong again. Maybe it will go down, maybe not so much. There’s a lot more to it than selling cars. And you’re quoting Jamie Dimon? BTW, despite comments here, this is not 2000.

  29. Benjamin Frank says:

    TelAdoc – if it’s not too late to fix the typo (not teledoc). Great nm/nm this week 🙂

  30. Saad says:

    Good post thanks for sharing! Finally someone not afraid to call it as it is, the downfall is gonna be hard… Hello inflated Tesla, Palantir etc… and btw the Germans are coming! Time to short!

  31. karl schmieder says:

    It’s about time you get someone to talk about biology. Schmidt has been a great proponent (and investor) for synthetic biology.

  32. Tyler Moore says:

    Your cocaine analogy is spot on…. Loved it! I recruited SW talent during the first bubble…crashing in 911….and then crashing a Boxter… long story..but a good one…

  33. Jeff B says:

    Diversify. And if you run out of places to put money, pay off your mortgage before it’s too late.

  34. Randy says:

    Great article and reminder about cycles. Maybe a follow on about the Gurus who lead the investors to slaughter. Lots in 2000, every tech writer and Stock Broker was suddenly an expert in optical physics.

  35. J. W. Penland says:

    Pleased to see you finally link the ‘story’ stocks to tulips. They have looked that way to me for a while. Combine the Robinhood effect you describe with the Fed keeping asset prices up with stimulus, I ask myself how can asset prices not be over-inflated? It will be interesting to see how long the exuberance lasts and what will trigger the correction. I don’t think it is a bad time to have some dry powder.

  36. PAul says:

    Looks like you still can’t get yourself to understand what is happening. Unfortunately. You won’t post this comment, like you did with the previous one when I tried to tell you that you are wrong in your assessment. It seems to me you really struggle to comprehend what Tesla will mean for the humanity and maybe you should just stop making a fool out of yourself. The future Scott will look back and won’t believe how stupid you were on this subject. Take care, and stick to what you know, you are great at that.

    • Mark says:

      Try and justify a market cap of 400B for selling 1/20 the cars that Toyota sells. Oooh, this time is different, right?

    • William Bichan says:


    • Randy says:

      Telsa’s contribution to humanity is like Jim Jones’ contribution to religion.

    • Jae says:

      You never provided your take on what’s happening. Care to share? Also, what does Tesla mean for humanity in your opinion?

    • PAul says:

      @William Bichan I apologize if I hurt his feelings. I’m sure he’ll get over it by 2030. Enjoy the ride!

  37. Michael Leffler says:

    Let’s talk about Tesla the tech company, not Tesla the car company, and see how this plays out.

    • Randy says:

      Telsa the tech company? Not much unique tech. Just ANOTHER guy trying to sell solar panels and flamethrowers. Other than the rocket, it is all just low margin brutally competitive stuff. Cars? They cannot make money with a decade lead on a $100K car, WITH government money at their back. How will they survive with real competition?

Join the 500,000 who subscribe

To resist is futile … new content every Friday.