Elon Musk, the ultimate entrepreneur in a Crony Capitalist system? Sweet subsidies!

Posted on June 10, 2014 by

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Elon Musk is truly a brilliant entrepreneur; initial c0-founder of Paypal, visionary founder of SpaceX and now Tesla motor cars.  I met Mr. Musk back in my Air Force days as a launch officer at Vandenberg AFB; my squadron was involved in small launch and we greatly wanted SpaceX to succeed, since costs of large launch were hideous.  When DARPA asked if we could help Elon navigate the Army range requirements at Kwajalein for his first launch, I sent one of my sharpest lieutenants out to help make it a success.  Nevertheless, I was always concerned about Mr. Musk–while he liked to talk about how bad the existing process was because of AF bureaucracy (to a large degree true!) and how private enterprise could revolutionize the launch business, I found quite a bit of hypocrisy:  his initial launch pad modifications were at least in part paid for by a congressional add ($1.3M if I recall correctly).  Further, although he talked about commercial space, all his big contracts he has subsequently pursued have been with NASA and he wants to be part of EELV (Air Force) competition in the future.  Not that this is bad, but this is not privatizing space in the way I think of it.  When I was an Air Force liaison to the Senate and House Armed services, I visited SpaceX several times with members of Congress–Mr. Musk has continually courted congressional support of his launch business.  He outmaneuvered the larger combined United Launch Alliance by the classic presentation of his utopia against their reality.  Whether the long term cost structure of his rockets will be as low as he initially proposed remains to be seen.

Further, his car company, Tesla, makes the bulk of its money not by revenues from car sales but through the sale of emissions permits.  Tesla also receives large subsidies from the U.S. and U.K. for sales of its automobiles.  The irony is found here in this CNBC video:

http://video.cnbc.com/gallery/?video=3000282570

The reporter asks whether Tesla is dependent upon subsidies, and Mr. Musk replies that the subsidies are modest, and not really relevant to the long-term success of its car.  So here is my question:

Why should our grandchildren have to pay back the money we are borrowing from the Chinese, so Mr. Musk can make cars that only millionaires can afford, when he doesn’t even need the subsidies for his business to be successful?

It’s clear that Mr. Musk is an excellent entrepreneur in a crony capitalist age, where political support drives increased capital allocation and profitability.  Note:  don’t take this post to denigrate the products Mr. Musk’s companies produce.  I can personally attest to the quality of the personnel he hired at SpaceX (I know several of them) and both his rocket program and automobiles are continually pushing the technology edge.  The critique is based on his communicating this as capitalism, while the truth is that it is Crony Capitalism at its finest.

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Posted in: Crony Capitalism