Streetwise Professor

June 2, 2015

Hey Elon-Put *OUR* Money Where Your Big Fat Mouth Is

Filed under: Climate Change,Economics,Politics,Regulation — The Professor @ 7:12 pm

In one of my periodic Quixotic moments, I tilted at the Cult of Elon Musk. First, I argued that he or someone manipulated the prices of Tesla and Solar City stocks: I stand by that analysis. Second, I argued that the supposed visionary’s true genius was for feeding lustily at the taxpayer teat.

It is a testament to my great influence that the Cult of Musk has grown only larger in the two years since I made a run at him. But maybe the spell is breaking. For the LA Times just ran a long article detailing just how much his fortune was picked from our pockets. According to the LAT, Musk companies have raked in $4.9 billion in various subsidies and tax breaks, give or take.

That’s 10 figures, people.

That’s bad enough. What’s worse is Musk’s “defense.” It is a farrago of intellectual dishonesty, logical fallacies, condescension, and arrogance.

Musk only replied to the LAT after repeated inquiries, but it is good that the paper persisted. Musk’s rationalizations have to be seen to be believed.

For one thing, he says he doesn’t really need the subsidies:

“If I cared about subsidies, I would have entered the oil and gas industry,” said Musk.

. . . .

“Tesla could be profitable right now if we went into low-growth mode and we just served premium buyers,” he said. “The reason we are not profitable is because we are making massive investments to create an affordable long-range electric car.”

We are making massive investments? What do you mean by “we”, paleface?

So fine. You don’t care about subsidies. You don’t need them.

Then put your money-excuse me, our money-where your big fat mouth is and don’t cash the checks.

The rest of Musk’s defense consists of various incarnations of N wrongs make a right (or, put differently, other people suck at the government teat, why shouldn’t I?):

Musk said the subsidies for Tesla and SolarCity are “a pittance” compared with government support of the oil and gas industry.

“What is remarkable about my companies is that they have been successful despite having such a tiny incentive from the government relative to our competitors,” Musk told The Times.

. . . .

Tesla, Musk said, competes with a mature auto industry that has seen massive federal bailouts for General Motors and Chrysler.

“Tesla and Ford are the only American auto companies not to have gone bankrupt,” Musk said.

SolarCity, he said, is in a nascent industry that must fight entrenched oil and gas interests that have myriad subsidies.

Throwing good money after bad is not good public policy.

Musk cites numerous junk studies to support his case. Some of these are studies of the alleged economic benefits arising from investments in his battery plants, etc. I guarantee, all such studies are garbage based on mythical multipliers and crypto-Keynesian mumbo jumbo. Others are studies of the alleged subsidies of other industries, notably the energy industry. Even taking the numbers at face value, the subsidies of fossil fuels are a pittance on a per BTU or megawatt basis compared to those for renewables. Further, fossil fuels are also heavily taxed directly and indirectly, including by substantial geopolitical and expropriation risks. The study that cites the environmental costs of fossil fuels is particularly susceptible to abuse. And to quote Sonicharm, of the blog Rhymes With Cars and Girls-also not a Musk fan!-all large calculations are wrong.

Elon Musk is a rent seeker masquerading as a visionary. If he is one-tenth the innovator and genius his fawning fans believe him to be he wouldn’t need any subsidies. We should give him the chance to prove it.

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14 Comments »

  1. “The reason we are not profitable is because we are making massive investments to create an affordable long-range electric car.”

    it’s not that we are bad, our performance criteria are Different !

    “Tesla and Ford are the only American auto companies not to have gone bankrupt,” Musk said.

    Then it’s ok to compare Tesla with the automotive industry.

    Comment by Simon Jacques — June 3, 2015 @ 12:02 am

  2. Like the earth rare minerals, Tesla seems to have a lot debt, forward value, gov interventions priced-into it and a very good marketing. Very speculative.

    Comment by Simon Jacques — June 3, 2015 @ 12:28 am

  3. […] is heavily subsidized.  I haven’t looked at one single green energy company that can make a profit without government subsidies.  That means every single taxpayer is on the hook. Your money is being redistributed to Tesla and […]

    Pingback by Electric Cars Aren’t Green; But Subsidies are Greening Someone’s Pocket Points and Figures — June 3, 2015 @ 8:34 am

  4. SWP…Apropos Musk’s belated reply: the next time you read or hear about ‘oil and gas subsidies’, please ask for specifics. I’d like to know what subsidies, and the amounts, they receive which are unique to them. The only tax issues I know that apply to oil and gas apply to all U.S. manufacturing firms. And as a counter, mention that Exxon itself pays over $4,000.00 per second in taxes on its earnings, besides collecting all that tax for federal and state governments.
    The clock is ticking on Musk, and I suspect that his big battery gambit is his Waterloo.

    Comment by Richard Whitney — June 3, 2015 @ 6:47 pm

  5. Normally when people start ranting about subsidies in the oil and gas industry it transpires that they’re lumping in the subsidies handed out to state companies in places like Venezuela, Iran, Saudi Arabia, and Russia.

    Comment by Tim Newman — June 3, 2015 @ 10:50 pm

  6. Musk, noun: An odoriferous animal secretion. Skunk, perhaps?

    Comment by eric — June 3, 2015 @ 11:37 pm

  7. The Tesla wall-mounted battery was discussed at length over at Tim Worstall’s, with the conclusion that it was a load of bollocks.

    Comment by Tim Newman — June 4, 2015 @ 12:42 am

  8. O/T: interesting article about the killing of Osama Bin Laden, and how Obama screwed up and pissed everybody off:
    http://www.lrb.co.uk/v37/n10/seymour-m-hersh/the-killing-of-osama-bin-laden

    Comment by Green as Grass — June 4, 2015 @ 11:10 am

  9. so says the man who’s lived off he ‘subsidized teat’ his entire career… At least there is some attempted / and proven innovation from these subsidies. I think the only things higher subsidies to education have gotten us are higher tuition prices and fatter pensions for the ivory tower kingsmen.

    Comment by cidiel — June 5, 2015 @ 12:30 pm

  10. @cidiel-Whatever. If you had a clue, you’d realize that even at public universities, at least the ones I have been at, business schools don’t get subsidized. They subsidize the rest of the university. Have for years.

    Always amused to see the Elon Tiger Beat Fan Club weigh in. Always good for a laugh to see the idiots who have fallen for a grifter.

    The ProfessorComment by The Professor — June 5, 2015 @ 6:22 pm

  11. I cannot stand listening to this idiots presentations. He pauses and kind of chuckles under his breath raising my expectations he will follow with something humorous or novel or profound. He always disappoints and follows with just more drivel leaving me to wonder why in the Hell did he stop and chuckle to himself. I just can’t take it.

    His new crusade against AI is complete BS. He expects to suddenly find the ghost in the machine?

    Comment by pahoben — June 6, 2015 @ 5:19 am

  12. @pahoben-He’s chuckling because he’s thinking to himself: “I can’t believe these idiots eat this shit up. I’m going to say something really insipid now and they will treat it like a revelation. Suckers!”

    The ProfessorComment by The Professor — June 6, 2015 @ 4:54 pm

  13. SpaceX is a genuine accomplishment and probably saves the taxpayers money. Tesla and the rest are blights on the economy; Tesla, humorously, is a worse blight because they actually designed a very nice car that people want (when subsidized) so that lots are sold and we have high payouts. If the Gen III ever approaches the sales figures Musk has tossed around, the taxpayers will end up spending $5-10B per year on subsidies for them under current policy, which I think will likely lead to political resistance.

    Comment by srp — June 6, 2015 @ 11:07 pm

  14. @srp
    NASA has provided most of the funds for SpaceX and who knows how much other support. It is reasonable to see SpaceX as a front/shell company for NASA so that safety/procurement/etc rules that apply to NASA can be sidestepped by SpaceX. If DC starts promulgating regulations for these operations similar to the FAA for normal aviation then SpaceX costs will skyrocket (no pun intended). They have been at every one of NASA’s teats they could find from the start. Elon personally only has a small amount of money invested as a percentage of total funding.

    Comment by pahoben — June 8, 2015 @ 10:55 am

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