According to The Economist, Tesla shareholders approved Elon Musk’s new compensation package on November 6th that could grant him up to $1 trillion in Tesla shares over ten years. The deal requires Musk to increase Tesla’s market capitalization from $1.4 trillion today to $8.5 trillion to receive the full amount. More than 75% of shareholders backed the package after Musk threatened he “might not bother” if he didn’t get his inducement. The vote reveals how dependent Tesla considers itself on its CEO, mentioning Musk by name 25 times in its latest annual report. Similar superstar dependencies exist at Meta, which warns about Mark Zuckerberg’s risky hobbies, and Berkshire Hathaway, which faces questions about its future as 95-year-old Warren Buffett prepares to retire.
The Superstar Dependency Problem
Here’s the thing – this isn’t just about celebrity CEOs anymore. Across knowledge-intensive industries, companies are becoming dangerously dependent on an ever-shrinking group of hyper-talented individuals. Alphabet, Amazon, Oracle, and Palantir all list key engineering or technical personnel as material to their continued success. Basically, we’re seeing a massive concentration of moneymaking power in very few hands. When those superstars stick around, it’s fantastic for business. But when they leave? Catastrophic.
The Immense Cost of Losing Talent
The numbers here are staggering. A 2020 study found that companies whose CEOs suddenly wound up in hospital saw profitability and investments suffer significantly. When Bill “Bond King” Gross was poached in September 2014, Allianz’s share price immediately dropped 6%. But it’s not just about stock prices – the departure of a superstar researcher causes their collaborators to publish 5-8% fewer high-impact papers long-term. In fields like biotech or AI, that difference could be measured in billions.
When One Exit Becomes Many
And here’s where it gets really scary – superstars rarely jump ship alone. Sometimes one exit triggers an unwitting exodus, like when two elite American law firms collapsed within a month in 2008 due to partner flight. Other times, the defection is coordinated. Mustafa Suleyman, Alexandr Wang, and Varun Mohan didn’t just leave their companies – they took entire engineering teams with them to Microsoft, Meta, and Google respectively. The startups they left behind? They’re now relying on licensing deals with the very tech giants that poached their talent. That’s not exactly a recipe for explosive growth.
The Uninsurable Risk
So what can companies actually do about this? Not much, it turns out. Firms can take out key-person insurance for hospitalization or death, but these policies typically pay out up to ten times the employee’s salary. For someone like Musk? Forget about it – he’s essentially uninsurable. And there’s no coverage for people quitting. With jurisdictions like California banning non-compete agreements, businesses’ only real option is to bid up salaries to astronomical levels. Musk’s $1 trillion package looks obscene today, but tomorrow it might just be table stakes. The real question is: when does this superstar economy become unsustainable for everyone else?
