
Elon Musk: Visionary or Rent-Seeker? - pierrealexandre
http://www.bloombergview.com/articles/2014-02-28/elon-musk-visionary-or-rent-seeker
======
luu
When I interviewed with Tesla, before the technical phone screen, there was an
HR phone screen that consisted, mostly, of an HR person trying to sell me on
the company with statements like "we don't pay as well as Google or Facebook,
but you'll learn so much more because you'll be part of a small team".

I wasn't convinced that I should take a below market salary so that someone
who was (at the time) worth almost $10B could make another billion.

Musk is a visionary, in a number of ways. He has an impressive ability to come
up with great ideas, and an impressive ability extract rents from people much
poorer than he is, whether that's the average tax payer or the average Tesla
employee.

~~~
jzwinck
Something similar happened to me with SpaceX. I went through all the technical
interviews and had a chat with Elon. He convinced me in about three minutes
that he and SpaceX were the real deal (this was in 2007). Later, HR said I'd
have to take a substantial pay cut (didn't say how much), would I be
interested? It became a second behavioral interview where I was being tested
on whether I would be a loyal employee for low pay because space is awesome.

~~~
cma
Or because lots of people want to work on space, so you were facing
competition from others who would take a salary cut.

~~~
TDL
Lots of people may want to "work on space", but many (most) can't. This isn't
unskilled labor we are talking about here.

~~~
runako
Honest question: of the folks who have the necessary skills, aren't many of
them working in low-paying academic jobs?

From the outside, it seems like moving to SpaceX would give them an
opportunity to put ideas into practice while making more money than the
average post-doc.

------
bsbechtel
However you may view him, I highly doubt Musk was in the room lobbying for
programs that provide government funding to his companies when lawmakers
decided to fund these programs. These programs are the product of popular will
wanting to move towards green energy and cut funding on space exploration.
Musk just happened to be the guy who was in the right place at the right time
to take advantage of such programs, and do it better than anyone else
(cough...Fisker Automotive). Maybe rent opportunist would be a better word
than rent seeker.

Aside from that discussion, it's hard to really argue that Musk's technology
isn't disruptive and he's not a brilliant innovator. His super charger network
is enabling electric vehicles in a way the major automakers could never
imagine, and he did it for pennies compared to the financial resources the
major automakers have. SpaceX is doing the same thing.

~~~
minimax
_Musk heeded the advice. On March 8, he appeared at a hearing before Pitts’s
committee, which oversees spending, at the Capitol in Austin. Oliveira and a
SpaceX lobbyist appeared with him.

“Any support Texas can offer would be helpful,” Musk said at the hearing.
While Texas was the leading candidate, “We are absolutely looking at other
locations.”_

[http://www.bloomberg.com/news/2014-02-12/states-competing-
fo...](http://www.bloomberg.com/news/2014-02-12/states-competing-for-spacex-
by-offering-financial-breaks.html)

He was clearly out there playing states against each other when looking at
launch sites for SpaceX. Though to be fair, it feels like every big company in
America is doing something like this when they want to expand.

------
Aqueous
This seems like a bit of unfair muck-raking. I take his point about federal
loans/investment, but as far as I know Musk still thinks tax credits to
promote alternative energy are a good idea. When he stops receiving those and
then claims they were a bad idea, maybe I'll believe you more. Until then, as
far as I can tell he is just ingeniously taking advantage of the numerous
government programs to promote good commercial behavior to enable these
technologies that might never come about otherwise. that's not rent-seeking,
it's smart, and it only lowers the risk of a still very risky enterprise (or
three of them).

The bottom line is that what Musk is doing has the potential for massive
benefits, and we will all be the beneficiaries of this. as long as how he gets
there is within the spirit of the rules, i'll give him a pass.

~~~
lhc-
I would tend to agree. I mean, the point of those government programs is to
encourage private investment in clean energy technology. I would say that Musk
is basically the prime example of what the programs are designed to support. I
would be willing to tolerate some amount of rent-seeking behavior if its in
the interest of funding exactly the research we want funded anyway.

------
lmg643
I tuned out of this article as soon as I saw the name "Craig Pirrong." I've
heard about him before in the financial sector - kind of a scummy, academic-
for-hire. The kind of guy who gets really mad when you ask him about his paid
consulting positions and whether it might affect his objectivity.

[http://blog.themistrading.com/the-best-research-money-can-
bu...](http://blog.themistrading.com/the-best-research-money-can-buy/)

[http://blog.themistrading.com/the-profane-professor-who-
love...](http://blog.themistrading.com/the-profane-professor-who-loves-the-
hft/)

Anyway - reading anything in Bloomberg about "rent-seeking" or monopolies is
the definition of irony IMHO. Always the other guys taking advantage, right?

~~~
Sniperfish
Bloomberg's research, news, and opinion columns do not always slavishly toe
the mothership's line.

When the parent is that large and diverse I imagine just expressing an opinion
has a high chance of hypocrisy.

------
dirktheman
Why is it hypocritical to recieve federal investment, only to decide it isn't
for you, after which you pay them back? And why is it hypocritical to have the
government as your main client for an entirely different company (SpaceX)?

Barry Ritholtz (the author of the piece) is also the author of Bailout Nation,
a book about the financial crisis that I really enjoyed reading. To project
his feelings about investment bankers on Elon Musk is taking it one step too
far, in my opinion. Calling him hypocritical for criticizing the government
while receiving tax breaks? If that's the case, the vast majority of people
living in any free country are hypocritical, too.

~~~
kd0amg
_Why is it hypocritical to recieve federal investment, only to decide it isn
't for you_

The article seems to be suggesting Musk decided government loans to promote
alternative energy was a bad idea in general, not that it was just a bad idea
for Tesla to take such a loan. The article doesn't say whether he's made any
actual statement to that effect though.

------
spindritf
Can't it be both? The guy has an impressive depth to him. He worked on a
payment system _and_ space exploration. Produced a movie and brought to market
electric cars people actually like.

What's a little rent-seeking on the side?

~~~
Fuxy
I would argue Apple after Steve Jobs's death is more of a rent seeker then
Tesla with Elon Musk.

You don't hear anything but lawsuits from Apple these days and no innovation
at all.

At least Musk is still pushing the envelope.

~~~
zimpenfish
I'm not sure I'd class the first 64bit mobile phone + OS (months ahead of any
competition) as "no innovation".

~~~
vincentkriek
It's evolution and not revolution. They aren't bringing new amazing tech, they
are improving the tech they have already.

~~~
rimantas
So which did not exist before Musk, electric cars of rockets?

~~~
Fuxy
Are you saying there were no phones with a touch screen before apple?

There's a difference between doing thing and doing things right and going the
extra mile and putting in the effort to polish it up making it use friendly
and developer friendly by having good documentation.

Electric car existed before Tesla but nowhere as good as the Tesla, rockets
existed before SpaceX but they were extremely expensive and mostly funded by
taxpayer money touch screen phone existed before Apple but they were awful.

So what's your point?

------
jofer
The article (or rather the one it references) makes the argument that:

> "...almost all of Musk’s companies rely in some form on government subsidies
> or tax breaks."

Wouldn't that also be true of many (if not most) US companies, given our
rather labyrinthine tax code?

~~~
naterator
You don't even need to look at tax code. Just consider the fact that many
people who work for places like Walmart also get Food Stamps and Medicaid.
Many US corporations would not be be profitable (or at least structured the
same way) were it not for the government footing the bill at some point along
the chain.

~~~
TDL
"many people who work for places like Walmart also get Food Stamps and
Medicaid."

How does this benefit Walmart? If Walmart did hire those people would they
magically not need government assistance? This has to be one of silliest
criticisms of Walmart around. Food stamps, Medicaid, and other government
assistance program are not subsidies to employers.

~~~
redblacktree
Sure they are, in an indirect way. This doesn't mean that I want to eliminate
food aid and medical care for poorer folks, but it does mean that Wal*Mart
doesn't have to pay these folks enough to live on. Perhaps if we can raise the
federal minimum wage, we'll be able to cut back some of these programs and get
the companies benefiting from these employees' work to compensate them fairly
for it.

~~~
adventured
A few serious questions.

What's your theory on why those employees are not being compensated fairly for
their labor? What is preventing them from taking other higher paying jobs that
better reward their talents? If their labor is being significantly
undervalued, it implies they should be able to seek better employment.

What is fair compensation for those jobs? What decides that? Who decides that?

------
ejdyksen
I'm not sure this author even gets to the point of showing, by his own
definition, that Musk is a rent-seeker.

He establishes a broad definition of "rent-seeking" early in the article as
this:

 _...income from government-enforced monopolies, such as patents, copyrights
or government projects..._

Then he details how some of Musk's businesses have benefited from the
government, but fails to actually establish how any of those benefits
translate into a "government-enforced monopoly".

~~~
cma
Emitting cars don't normally pay anything to emit pollution, but with the
zero-emmissions subsidy, they do. But the author treats zev credits as
something that just comes out of nowhere.

------
rapht
Why couldn't you be both visionary AND rent-seeker? I mean, isn't that the
whole point of capitalism?

~~~
collyw
I don't think rent seeking is the "point in capitalism", but a side effect.
You never hear proponents argue that capitalism is good _because_ of rent
seeking, though usually the same people actively exploit it in this way.

------
fab13n
Past a certain level of ambition--e.g. when you want to redefine
transportation, energy production or interplanetary colonization--you cannot
avoid mingling with governments. Doing so on friendly terms, and if possible
gathering a bit of cash on your way, is the sane way to do it.

------
LanceH
I'm against all sorts of taxes and tax breaks. It works both ways, though.

While some may call me hypocritical for accepting a write-off that I oppose,
at the same time I pay the taxes that I disagree with. This makes me (and
Musk) law abiding.

The government has loans for certain types of activity. He took the loans
because they were the lowest cost for the capital. It is possible to take
those loans and be against them at the same time.

The real problem is that the government is giving out loans that are
practically unsecured, usually to connected individuals. Musk actually has a
car company producing cars. Yes, he could have sought private financing, but
the government underbid that financing and he took government loans. It's
hardly rent seeking.

------
michaelwww
Public money is not always socialism. Tax payers are customers and investors.
Majority rules and the majority in California want to invest in companies that
help towards the goal of clean energy and air. The minority can grumble about
socialism and the superiority of private capital, but they hurt their case
when they also advocate the abolition of the EPA and the clean air and water
act. The voters of California have rejected their arguments. Elon Musk is an
amazing person and the people of California do well to support his efforts.

------
bsbechtel
I should maybe add to this discussion...why is it Musk's fault for taking
advantage of money the government offered him?

That's like getting mad at the person your significant other cheated on you
with, instead of getting mad at the person who cheated.

The government should be the one at fault here if people are unhappy about the
money Musk is making off of them, they are the ones who chose to pay him.

------
irishloop
If true, the notion that Musk suddenly started whistling an anti-government
loan in energy efficiency shortly after paying back his own loans... well, I'd
say it's at least a chink in his visionary armor, if nothing else.

Doesn't make him a monster, but, like most men of vast wealth, at least
somewhat of a hypocrite.

------
Sniperfish
The government wishes to spur innovation in certain directions because it
feels investment in those areas is lacking - presumably based on analysis of
potential benefit of successful development in that area (eg. alternative
energy, electric cars, commercial space travel). The incumbents in those
sectors do not act to meet these perceived gaps. An upstart outsider comes in
with aim of disrupting those industries.

This feels like incentive programs are doing exactly what they're designed
for. Author should spend a couple of minutes investigating economic concepts
of externalities as justification for taxation and subsidies.

The comment re. hypocrisy of opposing something a grant program you were a
recipient of is a different matter from rent seeking, and yes without context
(which I do not have) it sounds pretty bad form.

------
smoyer
Why does it have to be either/or? Musk is pushing technology to new heights
... has anyone else managed to create a profitable private space company?

If the government is too incompetent to supply the space station that they own
(part of) and they can hire someone to do it, why shouldn't they? And I'll bet
the taxpayers would pay more if NASA had built the same program!

I'm not saying Tesla and SunCity aren't reliant on subsidies, but why can't
you complain about other electric cars and hybrids as well ... the government
subsidies are an attempt to help the environment right?

So I finished the article and decided it's a hate-piece. There's not enough
logic to let their conclusions hold up even if the facts are true.

------
xtc
Half of the argument in the parent article is a shoddy attempt to make it
appear Musk's sole intent for business with a city in Texas is to squeeze
money from the poor inhabitants. This is ludicrous.

Also where is the source for Musk stating loans are bad?

------
applecore
"Rent-seeking" is specifically a scheme to get rich without creating wealth.
Mr. Musk is a huge beneficiary of low-interest federal loans and government-
support programs, but at least he's actually creating wealth.

------
geori
Surprise, surprise! A successful businessman seizes opportunities and is a
tough negotiator. Were some of you expecting Space-X and Tesla to function as
a non-profit?

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Jtsummers
> But is TSLA another Google, or just another DoubleClick? DCLK zoomed from $2
> to $200 without ever showing a profit, something Tesla has yet to do with
> its cars. It then famously crashed.

From the linked Forbes article. How does this comparison even begin to make
sense? Comparing a car manufacturer to two ad companies?

EDIT: Checked the publication date on that Forbes article, May 2013. So trying
to support a thesis about via an article now a year out of date.

------
aik
Muck-raking for sure.

Using SpaceX as an example of "rent-seeking" because they won a government
contract and are doing things 100x cheaper than NASA?

There's a big difference between taking people's money, and being the chosen
one when money is being offered.

His strategy is called "risk mitigation". Every entrepreneur and successful
innovator needs it and kudos to Musk for being great at it.

------
bachback
this is so absurd. Musk chose the most difficult industries, and both SpaceX
and Telsa were 5 minutes away from bankruptcy in 2008. and yet he is "rent-
seeker". if that where the case he would have gone for traditional corrupt
industries, such as big oil.

------
carsongross
Or?

