The SolarCity combo is absolutely brilliant. The chattering class and peanut gallery bet against Musk on Tesla and Space X as well, and there will always be naysayers to quote in the press for bold moves like this.

The combo makes perfect sense for exactly the reasons Musk outlines in "Part Deux" of his strategy for Tesla and in the publicly disclosed rationale for this deal. If you're a long-term investor, which is rightfully the only sort of investor that Musk really cares about (at least for now, when he has the power and support to fend off activists and the like), this makes absolute sense and is a great bet.

As for governance... let's not forget the NetSuite deal involving Oracle and Ellison on both sides that just happened. This sort of thing isn't exactly unheard of, and the key question is not whether conflict exists, but whether the deal makes real business sense on both sides despite the conflict. Also recall that this was fully and properly disclosed before the deal was finalized, and that Musk got sign off from independent shareholders on both sides, even among those that were initially skeptical of the combination. One can't really do anything more than Tesla and SolarCity did here.

Also, one shouldn't be surprised that Musk had a conflict of interest here. Much as VCs sometimes rightfully say "no conflict, no interest"... part of the reason you invest in a market or begin a company is because you have a thesis about the space or the market overall. If you're taking multiple bets in that space, even if they start at different vectors, there's a chance they will collide or make sense to combine over time. For the same reason, one shouldn't be overwhelmingly surprised if in 10 years it ends up making sense to combine Space X with Tesla and Solar City as well. I don't see an explicit rationale for that today at all, but it's easy to see the possibility of a rationale existing in the future, depending on how things evolve. No one should be acting gobsmacked or thinking the SolarCity+Tesla combo is somehow a nonsensical, self-dealing arrangement.

The one thing I wish Musk would have done in addition here, or that I hope he'll do shortly following this combo, is introduce even greater provisions for his ongoing control. My biggest fear with Tesla is that it grows large enough to attract activist investors that are highly levered so as to have disproportionate impact and seek to exploit the stock. Musk may, at some point (at least temporarily) lose the halo effect, and that'll leave him and Tesla vulnerable to provocative moves form investors that do not align with long-term shareholder value, but rather seek to optimize shorter-term outcomes. So, if anything, I'm directly against the calls from people that are questioning governance here. I would prefer Tesla shareholders agree to cede more control to Musk and that the company limit executive liability. Most companies absolutely should not have these sorts of provisions, because most CEOs are not worthy of that sort of trust. But in Musk's case, the boldness of vision, correctness of long-term thinking, and overall trustworthiness in shareholder value creation and protection have been proven for long enough that I'd be more than willing to see this happen and actually actively hope for it.