
The House Always Wins - jasondc
http://www.teslamotors.com/blog/house-always-wins
======
swagasaurus-rex
The responses Elon has previously written to criticisms have been very concise
and convincing. This article isn't too far off the mark, but I do feel his
frustration for the petty politics he deals with shows through the article.

Is it even necessary for him to respond to petty accusations such as the
inflated claims that he's masterminding Nevada's politics? Wouldn't it benefit
him more to let the nay-sayers nay say?

~~~
eridius
I agree. In the past the responses have always been to things that actually
seem worth responding to (though there's plenty of disagreement about specific
responses). In this case, I haven't seen any of these negative articles, so
anecdotally, it seems perhaps not widely-reported enough to be worth a public
blog post.

Furthermore, while I think describing why the deal is a good idea is
reasonable, that whole lead-off with "haha they're gamblers, you think Tesla
could pull a fast one on them?" is kind of strange. It's basically an appeal
to authority, where the "authority" is people who oversee the gambling
industry, and the claim is that because casinos are really good at not being
tricked, then their overseers (i.e. the Nevada legislature) must be even
better. Except it doesn't work like that, the casinos are not gambling with
the state, or trying to pull a fast one on the state at all. And the Nevada
legislature doesn't directly oversee the casinos anyway; they simply tax them.
It's the Nevada Gaming Commission that does the actual regulation of the
casinos.

Basically, that second paragraph is just a combination of multiple rhetorical
fallacies intended to imply that it's preposterous to claim that Tesla could
ever get the Nevada legislature to agree to a bad deal. And for any readers
who recognize this, it only serves to weaken the rest of the blog post. If
that entire paragraph (and the single word "Moreover" from the start of the
next paragraph) were to be deleted from the post, the post would make just as
much sense and would have a stronger, more focused point. And it would also
make Elon look better by virtue of being willing to just state the facts and
let them speak for themselves.

~~~
EGreg
I think Elon Musk chooses a narrative for each post that supports the
overarching image of Tesla and also couches the points he is going to make for
public consumption. One major component of that is presenting an image to
organize everything else around. "The House Always Wins" is a powerful one.
Rhetoric involves more than just logos but also pathos and ethos.

------
Afforess
Called it, 2.5 months ago. Most of HN said I was wrong.

 _If the 1.25B tax break causes a net gain in tax receipts due to the
expansion of the economy, then the deal is a net positive for everyone, job-
seekers, Nevada, and Tesla.

No one loses when the economic pie gets bigger. Economics is not zero-sum._

[https://news.ycombinator.com/item?id=8271914](https://news.ycombinator.com/item?id=8271914)

~~~
reitzensteinm
I find this post crass.

gph's reply to you was reasonable, and you made no counter. It's a pretty
obviously a difference of opinion (and politics), and reasonable points were
made in either direction.

So now two months later, you paint a picture wherein you've been vindicated -
using the proof that Elon Musk says that the deal Elon Musk made is good for
everyone.

What was he going to say; the ink's dry on our signatures now, Nevada, so I
can admit I totally screwed you over and there's nothing you can do about it?
Come on.

Maybe you are right, maybe not, but no new information has come to light since
the last discussion, and claiming victory based on a press release is
intellectually dishonest.

~~~
Afforess
As a general rule I don't participate in HN arguments, which is why I didn't
reply to GPH. There is nothing I could have really added to the discussion and
it would have simply devolved into a shouting match over which economic pet
theories were HN's favorite. I am not really interested in shouting the
loudest, it's a poor way to win arguments.

I am replying to you, because there is something I can add. My explanation of
why I avoid replies. Take it as you want.

------
ginko
> Our automotive plant in California has been in operation for over 60 years
> with no foreseeable end in sight.

How can this be? Tesla Motors was founded in 2003. Did they take over the
plant from some other manufacturer?

~~~
pacofvf
the plant was previously owned by General Motors and Toyota

~~~
mikeyouse
More info for the curious:

The joint GM / Toyota project started in 1984:
[http://en.wikipedia.org/wiki/NUMMI](http://en.wikipedia.org/wiki/NUMMI)

And the GM Fremont Assembly plant opened in 1962:

[http://en.wikipedia.org/wiki/Fremont_Assembly](http://en.wikipedia.org/wiki/Fremont_Assembly)

------
venomsnake
Are the contracts open to the public? Between Tesla and Nevada?

------
foobarqux
I don't know if the benefits were too large but Musk spends the entire article
refuting something else: that the deal would be net negative to Nevada.

If I paid $1 for something and today's market price is $10 then I got a bad
deal if I sell it for $5, even though I made a profit.

~~~
JoshTriplett
> If I paid $1 for something and today's market price is $10 then I got a bad
> deal if I sell it for $5, even though I made a profit.

That depends on the circumstances. If you paid $1 for something, and someone
else went in on the deal with you for 50% of the revenue if it went up but
100% of the loss if it failed, then selling it for $5 for you and $5 for the
person shouldering the risk is not a bad deal for you at all.

~~~
foobarqux
It was a simple example used to illustrate that there are obvious situations
where you get a bad deal even though you profit. You can also create other
examples that do different things and aren't germane to that point.

------
trhway
what is wrong with such deals is that one needs to be big (and/or extremely
politically connected) to get one. I.e. the game is tilted. I mean why a small
shop should pay higher taxes than a big one? How is that good for
economy/society?

~~~
Florin_Andrei
> _why a small shop should pay higher taxes than a big one?_

As long as money will buy political power, the little guy will always lose
this game.

Get money out of politics if you want to change anything. Separation of Money
and State.

~~~
smsm42
You can not get money of politics if major part of politics is deciding who
gets billions of money. If Nevada has power of taxation (and thus of tax
breaks) and somebody comes and says "give me 1bn of tax breaks for next 20
years and I'll put $lots_of_money of new taxable income in your state budget,
and that wouldn't cost you anything to current budget" their voice would be
heard by Nevada politicians much louder than a voice of somebody whose yearly
revenue doesn't break into six figures. As long as the politicians have their
hands in the economy (and they do quite a lot) it would be negligent for them
not to listen to major economic movers. It's their (budget) money that are on
stake, of course they'd listen.

------
JamesBarney
I had never read much Elon Musk before but I am incredibly impressed with his
Elon Musk's eloquent Elon Musk is. This deal is undoubtedly good for Nevada.
These tax incentives always seem to me to be a zero sum game. They benefit
large corporations who have the ability to negotiate with states at the
expense of smaller corporations who do not have that ability. In essence they
cause small corporations, or individuals to subsidize large corporations.

------
lbradstreet
These deals are net positive for Nevada (tax breaks don't really hurt them
that much if they wouldn't have gotten the facility anyway), and net negative
for the US overall (revenue wise, at least). If nobody engaged in these kinds
of deals then Tesla would surely pay more tax.

I don't blame Nevada for engaging in it, and I think they probably won
overall.

Other factors (cheap land, regulatory, etc) almost definitely came into play
but nobody is really complaining about those.

~~~
smsm42
It's hard to say if Tesla paid more tax, as Tesla might not build the factory
at all, or could build it in other country. The thing is there's nothing
sacred in current level of taxation, so I personally consider tax breaks the
least evil form of subsidizing, especially if the tax is not a purpose tax for
shared resource (e.g., if there's a property tax to finance common school and
somebody uses the school but doesn't pay the tax, all others pay more) but a
tax break on indefinite further earnings which may not have happened without
the tax break. Yes, it looks like crony capitalism and sometimes it is, but if
the opportunity cost is low (i.e., nothing really was being built there
otherwise) then I don't see why Nevada shouldn't do it.

------
yc1010
Seems to me like their competition must have been busy trying to smear them,
it is much easier to smear someone than clear ones name.

------
wittekm
I realize this is off topic, but I take serious issue with the statement that
"Nevada is the entertainment capital of the world."

~~~
bhauer
What would you say is the entertainment capital of the world? I live in Los
Angeles, and at one time in the past I would have associated this city with
entertainment. But it's been many years since our business climate was
especially amenable to film and television production; now much of what we
used to do here is done out of state, in Canada, or overseas.

~~~
porsupah
I suppose it depends on how you'd even define something like that -
headquarters, production, shooting, effects.. it's all so distributed now.
Consider SohoNet's reach, as a network provider that specialises in high
capacity connections to studios, effects houses, et al:

[http://www.sohonet.com/our-global-reach/](http://www.sohonet.com/our-global-
reach/)

That said, I'd wager you could ask people around the world, and they'd still
say "Hollywood", though plenty of folk are, I'd imagine, aware of Vancouver's
popularity for doubling as many US cities, Pinewood Studios, and WETA.

------
mempko
Bullshit. There are always externalities in these deals. Since I do not know
the details, I can.not say. But what about things like pollusion and waste.
These are negatives to the people of nevada that are most likely not accounted
for. Also work olace hazards ir worse damage, explosions, etc.

Also what about surrounding infrastructure like roads, sewage, etc. Who is
paying for that?

~~~
sfeng
Your argument is that all deals governments make are bad, this is a deal, so
it must be bad?

~~~
phkahler
I would argue that they are. States competing on deals like this is bad. If no
state gave an incentive, they'd have to pick one at full price anyway. Also,
if the deal is good with Tesla, why not give similar deals to every company
that wants to put up a building? In the end states will just forego corporate
taxes altogether and get all their revenue from the people. Is that bad? I'd
have to think harder before answering that, but I'm inclined to say yes.
Corporations don't retire, people do. People need to be able to get of the
monetary treadmill, but companies don't.

~~~
smsm42
>> If no state gave an incentive, they'd have to pick one at full price anyway

Or build it in another country and people could scream at them for being
unpatriotic.

>> Also, if the deal is good with Tesla, why not give similar deals to every
company that wants to put up a building?

You are arguing for lower taxes. This is a noble goal, but much harder to
achieve than such deal. As Bismarck said, politics is the art of the possible.
It's not ideal, but given current situation it's also not the worst outcome.

>> In the end states will just forego corporate taxes altogether and get all
their revenue from the people.

Corporate taxes are about 10% of budget income, despite US corporate tax rates
being one of the highest in the world. So it's neither unprecedented not
unimaginable to have lower corporate tax rates. As for the people,
corporations are ultimately owned by people, so it's still tax on people, just
certain kind of people - doing business in the US. Every dollar taken as
corporate tax is not paid as dividend, not invested in hiring another worker,
not spent on buying supplies or services. So ultimately it's people all the
way down.

~~~
phkahler
>> Every dollar taken as corporate tax is not paid as dividend, not invested
in hiring another worker, not spent on buying supplies or services.

Sure it is, just not spent by the corporation. The government will spend it -
they can't seem to help themselves. The only thing taxes change is who gets to
control where the money goes.

One can just as easily say "tax corporate revenue" and not paychecks, since
it's allegedly circular with money going back and forth between people and
companies (people all the way down). I'm not advocating this of course, but
we're living in a time when your assertions about profit going to hiring,
supplies, and services are clearly false. It happens, but it's certainly not a
given.

~~~
smsm42
We were talking about the revenues - the idea was that all tax revenue
ultimately comes "from people", every economic decision affects people -
because people are the only willful agents in the economy, there's nobody
else.

>>> The only thing taxes change is who gets to control where the money goes.

Not entirely. The government usually proves to have quite inefficient with how
it spends revenues. Sometimes it is necessary - i.e., feeding the destitute
produces no money, but has a humanitarian value. Sometimes, it is not - like
spending billions on bridges to nowhere and crony projects that collapse the
minute government financing is withdrawn. So we also have to consider the
destruction of value that the government involvement usually brings about. Of
course, corporations can destroy value too - but usually can't survive for
very long once they started to do it unless they manage to stop. For the
government, it has to be extraordinarily destructive to collapse, for a
company, the bar is much lower.

>>> your assertions about profit going to hiring, supplies, and services are
clearly false. It happens, but it's certainly not a given.

Err, I'm not sure where your "clearly false" comes from. Is it clear to you
that corporations do not spend money on hiring, supplies and services? How
they then manage to have people show up to work and suppliers to give them
supplies and services, if they don't pay for it? Also, if some fairyland
corporation ever managed to pull off such impossible trick, it still wouldn't
change a thing, as that would only mean entire revenue goes to the corporation
owners - i.e., again, "people".

