Streetwise Professor

From 2013-2016 or so I gained some notoriety as a critic of Elon Musk. Some of my posts were quoted or discussed in mainstream publications, I was interviewed on Bloomberg News, . . . and Elon blocked me on Twitter!

One of my criticisms was that Musk’s real business genius was in rent seeking. All of his businesses, especially during that era, relied heavily on various forms of government subsidy. Further, he was quite expert at getting very favorable treatment for location businesses, e.g., his Boca Chica launch area for SpaceX. Indeed, this continues to today: recently some other rent seekers–wind farm developers–sued Texas because it cut off tax breaks to them, but not to Tesla.

My other main criticism was that Musk repeatedly overpromised and underdelivered. Anybody remember the vaunted Solar Roof? Anybody actually seen one? Recall all the (unrealized) hype about a coast-to-coast charging network. Model introduction dates. Production targets. The actual implementation of the “hyperloop” is the merest shadow of what Musk teased the world with.

The most egregious example was the Solar City merger, which was touted as some great new business model that would exploit wonderful economies of scope between rooftop solar, home battery storage, and electric vehicles. I called bullshit at the time, and bullshit it has proven to be.

My explanation of the real reason for the Solar City deal was that its bankruptcy would put a huge dent in his reputation as a business genius and innovator, and that he had to conceal the wretched financial condition of the company in the Tesla balance sheet. It’s pretty clear that I was right: Solar City is basically in wind down mode.

In the light of experience, it is pretty clear to me that in all of these promises and claims, Elon was playing pretend and extend. Keep dazzling investors with future prospect so they would continue to shovel money in today, in the hope that eventually Tesla would be sufficiently profitable to survive without hype.

And it that respect, you have to say that Musk’s strategy was wise, predicated on dishonesty as it was. Tesla did start producing large quantities of vehicles in multiple factories around the world. Tesla stock eventually soared to stratospheric values–although the past year has been sobering indeed. In fact, the past week has been sobering, with the stock falling almost 20 percent: it is off almost exactly 2/3rds in the past year.

Although the most optimistic projections of Tesla’s prospects have been dashed, it is clearly a going concern and will continue to be one–especially with the help of government tailwinds. In that sense, Elon’s strategy of overpromising was a canny play.

I was always more critical of Tesla than SpaceX, and indeed, the space company has proved to be a standout, especially as compared to its peer group, especially the execrable Boeing.

But now Tesla and SpaceX are basically background noise in the Musk saga. Now it’s all about Twitter, all the time.

I think it’s fair to say that his bid for Twitter illustrates his mercurial nature, and it is pretty clear that he regretted it soon after making it. He tried to wriggle out of his commitment, but seeing the legal writing on the Delaware Chancery Court wall he sucked it up and bought the company.

And once he bought it, he showed incredible will and fortitude to transform the company. In part this was a business necessity. He obviously overpaid, and had to make the company, if not profitable, at least not a huge cash suck. So he whacked more than half the employees.

These firings unleashed a torrent of shrieks, and dire predictions of the utter collapse of the company.

But the platform continues to perform with no apparent technological problems, despite these alarming prognostications. This strongly suggests that the company was massively bloated, and that most of the employees did not contribute to its output and profitability.

I think that this is a characteristic of the tech sector generally–not just Twitter. I hope to write a post on that subject soon.

More remarkably, Musk is giving every indication of having a serious commitment to free speech, and to opposing government interference in public debate. Especially the kind of underhanded interference that had long been suspected by “conspiracy theorists”–and which even the limited releases of “Twitter Files” has demonstrated to be true.

Remember that the phrases “conspiracy theory” and “conspiracy theorists” were born in the 1960s as part of government efforts (especially the CIA) to discredit any question of government operations, and especially the operations of the intelligence community. The FBI’s reference to conspiracy theories/theorists in its response to the Twitter Files confirms and validates that the old playbook is still in use.

Moreover, Musk has revealed the extent to which old Twitter was dedicated to silencing and obstructing those whom its leftist management and employees disliked (hated, actually) even without government prompting: like John Cleese’s character in the Argument Clinic sketch, they were censoring on their own time. Further, he has taken steps to reverse that, although there are still reasons for concern.

I see no reason to revise my criticisms of Musk’s earlier conduct in light of these current developments. I think the judgments were well founded, and I have not seen any evidence that would require a reevaluation. That said, I am quite pleased with–and pleasantly surprised by–his actions regarding Twitter.

Yet, given his mercurial nature, and the intense competing demands on his time–especially given that Tesla is no facing serious headwinds and investors are clearly disturbed by his Twitter distraction–it remains to be seen whether this good start will be maintained and indeed broadened. On the one hand, he has a direct economic interest in making Twitter a viable economic enterprise, and it is likely that a more open platform will advance that objective. On the other, Musk’s revolution has sparked a massive counter-revolution among journalists in particular, but also among governments. The EU has been particularly mafia-like in the nice-little-business-you-got-here-shame-if-anything-happened-to-it sense, threatening severe consequences if Twitter does not adopt “moderation” (i.e., censorship) policies in line with the EU’s statist preferences. The Biden administration has not been quite so direct as the EU, but it has made threatening noises too. Several senators have also been making threats.

Meaning that the old “you can’t do anything to Twitter because it’s a private company” bromide that was common in the old Twitter days when it was censoring those the left didn’t like has become completely non-operative in the Musk Twitter days when he is promising to eliminate censorship. Elon will have to wage a war against governments around the world in order to advance his apparently completely sincere and principled free speech agenda.

Whether he can or will do that remains to be seen. Governments can make his principles very, very expensive, and therefore Elon may have to make the choice between his economic interests and his pro-freedom principles. We don’t know what value Elon places on those principles, or the costs that governments will impose on him if he attempts to act on them. The ultimate outcome, therefore, is very much in doubt.

I was never pulling for Elon to fail with Tesla or other pre-Twitter endeavors: I was criticizing the means he employed to achieve success. I am pulling for him to succeed at Twitter, and given what and who he is fighting against, I hope that he adopts the all’s fair approach that he has employed so often in the past.