Elon Musk: Visionary or Rent-Seeker?

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 &quot;we don&#x27;t pay as well as Google or Facebook, but you&#x27;ll learn so much more because you&#x27;ll be part of a small team&quot;.<p>I wasn&#x27;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.<p>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&#x27;s the average tax payer or the average Tesla employee.

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.<p>Aside from that discussion, it&#x27;s hard to really argue that Musk&#x27;s technology isn&#x27;t disruptive and he&#x27;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.

This seems like a bit of unfair muck-raking. I take his point about federal loans&#x2F;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&#x27;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&#x27;s not rent-seeking, it&#x27;s smart, and it only lowers the risk of a still very risky enterprise (or three of them).<p>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&#x27;ll give him a pass.

I tuned out of this article as soon as I saw the name &quot;Craig Pirrong.&quot; I&#x27;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.<p><a href="http://blog.themistrading.com/the-best-research-money-can-buy/" rel="nofollow">http:&#x2F;&#x2F;blog.themistrading.com&#x2F;the-best-research-money-can-bu...</a><p><a href="http://blog.themistrading.com/the-profane-professor-who-loves-the-hft/" rel="nofollow">http:&#x2F;&#x2F;blog.themistrading.com&#x2F;the-profane-professor-who-love...</a><p>Anyway - reading anything in Bloomberg about &quot;rent-seeking&quot; or monopolies is the definition of irony IMHO. Always the other guys taking advantage, right?

Why is it hypocritical to recieve federal investment, only to decide it isn&#x27;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)?<p>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&#x27;s the case, the vast majority of people living in any free country are hypocritical, too.

Can&#x27;t it be both? The guy has an impressive depth to him. He worked on a payment system <i>and</i> space exploration. Produced a movie and brought to market electric cars people actually like.<p>What&#x27;s a little rent-seeking on the side?

The article (or rather the one it references) makes the argument that:<p>&gt; &quot;...almost all of Musk’s companies rely in some form on government subsidies or tax breaks.&quot;<p>Wouldn&#x27;t that also be true of many (if not most) US companies, given our rather labyrinthine tax code?

I&#x27;m not sure this author even gets to the point of showing, by his own definition, that Musk is a rent-seeker.<p>He establishes a broad definition of &quot;rent-seeking&quot; early in the article as this:<p><i>...income from government-enforced monopolies, such as patents, copyrights or government projects...</i><p>Then he details how some of Musk&#x27;s businesses have benefited from the government, but fails to actually establish how any of those benefits translate into a &quot;government-enforced monopoly&quot;.

Why couldn&#x27;t you be both visionary AND rent-seeker? I mean, isn&#x27;t that the whole point of capitalism?

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.

I&#x27;m against all sorts of taxes and tax breaks. It works both ways, though.<p>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.<p>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.<p>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&#x27;s hardly rent seeking.

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.

I should maybe add to this discussion...why is it Musk&#x27;s fault for taking advantage of money the government offered him?<p>That&#x27;s like getting mad at the person your significant other cheated on you with, instead of getting mad at the person who cheated.<p>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.

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&#x27;d say it&#x27;s at least a chink in his visionary armor, if nothing else.<p>Doesn&#x27;t make him a monster, but, like most men of vast wealth, at least somewhat of a hypocrite.

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.<p>This feels like incentive programs are doing exactly what they&#x27;re designed for. Author should spend a couple of minutes investigating economic concepts of externalities as justification for taxation and subsidies.<p>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.

Why does it have to be either&#x2F;or? Musk is pushing technology to new heights ... has anyone else managed to create a profitable private space company?<p>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&#x27;t they? And I&#x27;ll bet the taxpayers would pay more if NASA had built the same program!<p>I&#x27;m not saying Tesla and SunCity aren&#x27;t reliant on subsidies, but why can&#x27;t you complain about other electric cars and hybrids as well ... the government subsidies are an attempt to help the environment right?<p>So I finished the article and decided it&#x27;s a hate-piece. There&#x27;s not enough logic to let their conclusions hold up even if the facts are true.

Half of the argument in the parent article is a shoddy attempt to make it appear Musk&#x27;s sole intent for business with a city in Texas is to squeeze money from the poor inhabitants. This is ludicrous.<p>Also where is the source for Musk stating loans are bad?

&quot;Rent-seeking&quot; 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&#x27;s actually creating wealth.

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?

&gt; 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.<p>From the linked Forbes article. How does this comparison even begin to make sense? Comparing a car manufacturer to two ad companies?<p>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.

Muck-raking for sure.<p>Using SpaceX as an example of &quot;rent-seeking&quot; because they won a government contract and are doing things 100x cheaper than NASA?<p>There&#x27;s a big difference between taking people&#x27;s money, and being the chosen one when money is being offered.<p>His strategy is called &quot;risk mitigation&quot;. Every entrepreneur and successful innovator needs it and kudos to Musk for being great at it.

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 &quot;rent-seeker&quot;. if that where the case he would have gone for traditional corrupt industries, such as big oil.

Or?