It has been fashionable to criticize Elon Musk as lacking the qualities of a true entrepreneur, or not being a genuine free market capitalist. His primary transgression: his companies have taken advantage of government subsidies.
Before considering whether or not these criticisms are fair or justified, or even terribly relevant, it might be a good idea to examine Musk’s body of work. Because so far, 20 years in, this 48 year old immigrant from South Africa arguably is the greatest American industrialist of the 21st century.
Musk’s early work, back in the 1990s, focused on software and online financial services, including PayPal. The sale of his stakes in these companies made Musk wealthy, but what he’s done since then is what secures his place in history.
Tesla, Musk’s best known affiliation, has brought electric cars into the mainstream. It’s easy to forget the risk Tesla’s founders, Martin Eberhard and Marc Tarpenning, endured back in 2003 when they first bundled laptop batteries into a storage package capable of powering an electric sports car. Recognizing the potential, Musk invested millions in the company and eventually took over as CEO.
Today, 17 years later, Tesla is valued at $151 billion. In 2019 Tesla reported sales of $26 billion and an operating cash flow of $2.6 billion. Its “levered free cash flow” in 2019 (surplus cash after paying interest on debt) was $1.6 billion. According to investors, for whom economic data is paramount, Tesla is the most valuable American car maker of all time.
Elon Musk has accelerated global adoption of all-electric vehicles by making them increasingly affordable and earning unprecedented consumer satisfaction. Critics of what Tesla has accomplished are invited to drive one. But Tesla’s accomplishments go beyond just manufacturing popular electric vehicles.
In Nevada, Tesla has built the largest battery manufacturing plant in the world. This single factory now produces half the global output of electric car batteries. The Tesla Gigafactory also produces the “Powerwall,” a stationary battery that allows homeowners to store surplus electricity.
There are a lot of reasons to remain skeptical regarding renewable energy. But massive investment in battery technology by companies like Tesla has paid off. Solar-battery power plants are now able to deliver continuous electricity at a wholesale price of four cents per kilowatt-hour, and make a profit.
Tesla has also developed a network of charging stations around the nation. If you aren’t driving a Tesla, you might not realize how ubiquitous charging stations have become. Typically installed in the outer reaches of shopping center parking lots, a Tesla driver can see with one tap on the vehicle’s control screen not only where the nearest charging stations are located, but also how many slots are vacant.
All-electric cars are not yet for everyone. But with recharge times down to 30 minutes, and range topping 300 miles, they are looking better every year. They require far less maintenance than gas-powered vehicles, and are becoming more competitive on price every day. Tesla is not just building cars, it is fundamentally transforming our transportation infrastructure.
With all the attention Tesla gets, it’s easy to forget about Space X. But Musk’s accomplishments with this company are even more impressive. Founded in 2002 by Musk, SpaceX is the “first private company to launch and return a spacecraft from Earth orbit and the first to dock a spacecraft with the International Space Station.” The engineering innovations pioneered by Space X are revolutionary, including fully reusable rockets. Vertical landings of booster rockets, after many failed attempts, are now becoming routine.
Before Space X came on the scene, in the late 20th century, the Space Shuttle could deliver payload into low earth orbit at a cost of over $25,000 per kilogram. For a while, the early Space X boosters competed with NASA’s mature Atlas V booster, with costs dropping below $10,000 per kilogram on these unmanned systems. But in 2017 Space X pulled ahead, way ahead, with the Falcon 9 booster profitably delivering cargo into space at a cost of under $2,000 per kilogram, and in 2020 the Falcon Heavy has brought the price under $1,000 per kilogram.
In just a few years, and compared to the best NASA could do, Space X has dropped the price of getting into space by an order of magnitude. And in a few days, American astronauts are going to blast into outer space on an American rocket, built by Space X, for the first time since the Shuttle was retired. How is this not historic?
Musk’s projects extend well beyond electric cars and electric batteries, or paving the way to the colonization of the solar system. His Boring Company aspires to revolutionize tunneling technology by achieving the benchmarks stated on their FAQ page: “(1) Triple the power output of the tunnel boring machine’s cutting unit, (2) Continuously tunnel instead of alternating between boring and installing supporting walls, (3) Automate the tunnel boring machine, eliminating most human operators, (4) Go electric, and (5) Engage in tunneling R&D.” And why not? If you can innovate above the earth, you can innovate beneath the earth.
In describing the Boring Company, Musk said, “the construction industry is one of the only sectors in our economy that has not improved its productivity in the last 50 years.” He’s right. The world needs more innovators who are not only able to envision how new technologies can coalesce to transform the world, but who also have the guts to do something with their ideas.
When people criticize Elon Musk, what are they trying to prove? Do they think that his companies aren’t part of a modern industrial revolution that rivals the great breakthroughs ushered in during the great age of steel and steam, or during this ongoing digital revolution? Do they think the railroads that opened up a continent weren’t subsidized? Do they think the internet, providing the backbone of a communications revolution, was not subsidized?
More to the point, does anyone think that if the total value of the subsidies awarded Space X were instead invested in NASA, it would still be possible to launch a payload into space for under $1,000 per kilogram?
Another reason Musk attracts criticism is his eccentric personality. Examples abound. Enigmatic tweets. Selling flamethrowers. Smoking pot (after California legalized it) during an interview. Naming his sixth son X Æ A-Xii! Fair enough. But what about other great American industrialists, equally creative, equally driven, equally eccentric? What about Thomas Edison, J. Paul Getty, Henry Ford, or Howard Hughes? Heck, what about Steve Jobs?
Maybe being eccentric is just a part of being brilliant, driven, creative, and willing to take extraordinary risks. Shall we shame all these great, and very eccentric Americans? If so, Musk’s critics may get in line behind every nihilistic Luddite and socialist pack animal determined to undermine everything and everyone that made America great.
Which brings us to a final criticism of Musk, that he is a “socialist.” Evidence for this is thin. It is primarily based on the idea that if you accept government subsidies, you are not a true capitalist. But Musk expressed his version of socialism very accurately in one of his tweets, writing “By the way, I am actually a socialist. Just not the kind that shifts resources from most productive to least productive, pretending to do good, while actually causing harm. True socialism seeks greatest good for all.”
While this is a tweet guaranteed to make libertarian heads explode, it appeals to common sense. Government, by definition, is to some degree socialist. The only thing separating a mixed-capitalist economy and a full-blown socialist economy is the degree to which the government controls the economy. The middle of Musk’s sentence is controversial, but not because it’s too socialist. It is because it exposes the uncomfortable choice that governments have to make. Shall they yield to the populist demands of demagogic Democrats, and spend government revenue on the “least productive, pretending to do good, while actually causing harm,” or shall government revenue instead be invested in public/private partnerships that secure technological preeminence and economic security, benefiting everyone?
A libertarian would emphatically argue neither, and this reflects an absurd naïveté for several reasons. First, other nations have no compunction about exporting subsidized products, thus making it impossible for American manufacturers to compete. When this happens in critical industries, from steel to pharmaceuticals, eventually our nation loses its independence. That’s reason enough to subsidize strategic industries. But there are more.
When libertarians argue against government spending in all sectors, they get strong support from the Left to stop spending on industry and infrastructure. This splits the Right, which then lacks the strength to prevent spending shifting to welfare entitlements at the expense of spending on industry and infrastructure. When the anti-socialist politicians are divided, the socialists win.
Shaming Elon Musk is easy, but it isn’t accurate. It’s based on half-baked libertarian theories that don’t work in the real world. As for accusing Elon Musk of not being a “conservative,” what does that even mean? “Conservatives” stood by for decades as American business exported jobs and imported unskilled laborers, killing jobs and wages. Anyone concerned about America’s future in this grim world should be utterly indifferent about being called a “conservative.”
Ultimately, how history judges Elon Musk may come down to forces beyond his control. What is going to happen between the United States and China? If there is a new cold war, how will Musk manage his overseas investments, his supply chain, his factories in Berlin and Beijing? Like many industrialists in the 21st century, he may soon face difficult decisions. But to-date, Elon Musk has played a vital role in maintaining American industrial leadership. He deserves better than cheap shots.