16 gauge wire is too small for 40 amps! I'd go with 12 gauge but 14 gauge would be okay. Here's the resistances in milliohms per foot:
12ga - 1.6
13ga - 2.0
14ga - 2.5
15ga - 3.2
16ga - 4.0
If you have a three inch lead from the battery to the ESC and three inches from the ESC to the motor you have a total of a foot of wire. A foot of 16ga will drop .16 volts at 40 amps but more importantly will dissipate 6.4 watts, that's enough to heat the wiring.
12ga would be .064V and 2.6W, 14ga would be .1V and 4W. The 12ga would weigh .32oz and the 16ga, .12oz.
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