Over the years, some folks have heard me talk negatively about Elon Musk as a businessman, in that I agree with my friend at CBS that Tesla is most likely not a viable business beyond a niche provider of luxury cars. I believe that’s true, but it may be too small of a frame to properly appreciate the man.
One of the benefits of capitalism, according to Renee Girard, is that it channels the aggressive energies of the ambitious into productive rather than violent enterprises. Some entrepreneurs are merchants, happy to scratch out a comfortable lifestyle in a relatively small niche. Others are more like ancient warlords, who seek the glory and power of becoming a billionaire, and would rather attempt and fail than choose a safe, profitable, but modest niche. But the system we have is not quite capitalism. It is capitalism joined at the hip to a money printing machine that slows the process of creative destruction for favored constituencies of the Federal Reserve. Traditional entrepreneurship at scale, that of seeking to make a profit by serving customers, is discouraged in an economy plagued by bubbles driven by lower than natural interest rates.
Elon, as an older member of Generation X, was fated to spend the prime of his life under such a system. He exited college just before the maximum frothiness of the Internet bubble. In founding X.com and its eventual merger with PayPal, the incentives clearly presented to an entrepreneur were bubble incentives. In a bubble, in any sufficiently large, non-niche opportunity, such as Internet payments, it is nearly impossible to operate a business to generate a profit. There is too much investor money chasing the dream, and so the only way to get rich or die tryin’ is to grow top-line sales at a loss, paint a fantasy-based “path to profitability,” then sell the thing at precisely the right moment to either the public or an incumbent facing the same bubble pressures.
That is exactly what Elon and the other members of the “PayPal mafia” did in 2002, selling their payments platform (still unprofitable) to eBay, making billions in the process. A smart guy, he internalized the lessons of that experience - in an irrational economic environment propped up by money printing, the great man must adapt himself to the cards being dealt. Bubbles are not random, but follow social trends and narratives that midwits with Monopoly money (many such cases) can buy into and see as obvious prognostications of the “future.” He accurately read the tea leaves regarding the emerging global warming scam and invested $6.5 million in Tesla in 2004. Al Gore’s An Inconvenient Truth premiered in 2006 and took the narrative mainstream.
The genius of Tesla was giving rich people a way to buy a status good while clothing themselves in the self-righteousness of reducing their carbon footprint. It’s no accident that the first product was an impractical roadster, a “toy” for rich guys to show that a) I can afford an extra car that just putters around town and b) I’m better than you because it’s electric. Renee Girard would be impressed, as his mimetic theory explains that, post-Christianity, it became less acceptable to display power and wealth directly as pagan societies did. In the post-Christian world, everyone must at least pretend to higher motives, yet Christianity did not change human nature except for the elect and then only partially after a long process of sanctification, so there is always a bull market for hypocrisy. This is not every Tesla customer (many today are Elon fans and like the technological aspects of the car), but it probably explains their earliest customers in California, and Elon’s recent political expressions are taking the shine off the brand for the Lefties who were his original customer base.
As Tesla grew, Musk developed his skills of hype, always overpromising and underdelivering on the future capability of the cars. Yet, he was, at times, an honest liar. He would openly tell people the stock was overvalued, yet it continued to soar to make him Earth’s richest man on paper, in a company that has never made a cumulative profit or returned a cent to investors. He learned the lesson of Paypal and catapulted himself to the top of the semi-capitalist bubble machine.
It was at this point that Musk launched his bid to acquire Twitter, at an inflated price, and more clearly revealed that his motives are greatness, not wealth for its own sake. That Musk was allowed to do this by the authorities is even more shocking - media properties are generally reserved for the ideological allies of the regime. The most entertaining idea I’ve read as to why is that Musk must have already acquired the necessary power to scare them off from any interference. The Starlink network represents the world’s largest network of satellites, and these satellites have little engines on them to help them remain in geosynchronous orbit. If Musk wished, it’s possible a single command from his phone could move these satellites such that they would disrupt Washington’s ability to detect an incoming nuclear attack, or cause other chaos at his whim. He may, as the most colorful theory suggests, already have a “dead man’s switch” designed to ensure his personal safety and operational freedom from the regime.
After acquiring Twitter, he now has access to the unencrypted private messages, going back over a decade, of people who would seek to oppose him, and if there’s anything we’ve learned, people get very stupid in the pseudo-anonymity of Internet services. According to the Twitter Terms of Service, which do not distinguish between tweets or DM’s, any “Content” posted to the service is subject to a “worldwide, non-exclusive, royalty-free license (with the right to sublicense) to use, copy, reproduce, process, adapt, modify, publish, transmit, display and distribute such Content in any and all media or distribution methods now known or later developed.” That license is now the private property of Elon Musk. Hard power to acquire Twitter now gives him soft power sufficient to make him untouchable.
I think the primary motive for Musk in acquiring Twitter was despair over one of his children falling victim to the “woke mind virus” as Musk described it. I believe he saw himself as sacrificing his wealth to make the world a better place, to ensuring that at least one major online platform remained a haven for free speech and open intellectual debate. Yet to ascribe pure motives to an entrepreneur such as Musk would be to oversimplify the situation, and arguably diminish the man’s genius.
On a recent podcast, I heard a Silicon Valley-connected host explain that the most successful entrepreneurs he knew were all petty criminals in high school. Entrepreneurship, it turns out, requires a precisely tuned level of sociopathy - not so much to get in real trouble, but enough to be willing to break the rules, for there is some truth to the French proverb that “behind every great fortune is a great crime.” Our bubble economy rewards greater levels of sociopathy, certainly, than the previous economic regime. Musk’s contempt for the relatively toothless SEC and then his brinksmanship over Twitter’s acquisition shows his instinct for testing the actual boundaries versus those stated.
There’s a rather simple personality test administered in corporate circles that divides people into three personalities - Lions, Foxes, and Saint Bernards. Lions are natural leaders and Saint Bernards are natural followers and both thrive in established organizations, swallowing the party line due to a psychological need for certainty. Foxes are neither natural leaders nor followers, but enjoy mocking the gullibility of both while pursuing their own agenda. Foxes are the most prominent personality among entrepreneurs. The most successful entrepreneurs, however, are foxes who can imitate lions when necessary, but always have mixed motives internally.
In acquiring Twitter, Musk serves himself as well as others. It gave him an excuse to sell Tesla stock at its most extreme valuations without spooking the market. It gave him control over arguably the world’s most politically important platform, augmenting wealth with power, and not the ham-fisted power of mere propaganda, but the ability to silently shape the narrative through an invisible algorithm, and a blackmail file J. Edgar Hoover would envy. And it arguably made him wealthier on a cash basis.
Tesla’s fundamental problem is that human material progress has always been subject to the economic-physical law of increasing energy density. Man has always moved from less dense energy sources - like wood - to more dense energy sources, culminating in petroleum and, eventually, nuclear fission. Electric cars are a step backwards, as a $17,000, 1800 lb. Tesla battery at 75 kilowatt-hours holds less energy than a $40, 35 lb. 5-gallon propane tank people use to grill steaks at home (135 kWh); combustion engines are, admittedly, about 1/3 as mechanically efficient as electric, but even adjusting for this the power density gap in both energy stored per dollar and per pound is extreme.
It’s interesting that of the companies in Musk’s portfolio, only the one going against the energy density law is available for sale to the public, while those that obey it - SpaceX and Twitter - are privately owned. SpaceX burns petroleum to go to space more cheaply and competently than NASA, and its Starlink network may long-term be the best business Musk has ever created, taking billions in profit from the hated land-based cell phone and Internet provider monopolies. Twitter, now also private, is in the best business in the world, trading bandwidth and CPU cycles for ad dollars (that Twitter was never profitable is a testament to its mismanagement).
His actions after acquiring Twitter are the stuff of Randian entrepreneurial fantasy. My wife once had a business professor who had started and sold several successful businesses and his maxim was (paraphrasing), “I always sell once it gets big enough to require a Human Resources Department, because then it’s not fun anymore.” Entrepreneurs are all about moving fast without heed to arbitrary rules, and nothing kills that buzz like a dour HR apparatchik spreading fear and uncertainty over every little action taken in a business. And it’s even worse today, with HR being the embassy of wokeness against most entrepreneurs’ libertarian-aristocratic tendencies.
But Musk - glorious Musk - he goes into a large business like Twitter and just starts firing these annoying people who don’t do any real work - like he owns the place! - trimming it down to the essential core of engineers and salespeople, ignoring the threat of lawsuits and regulations and rules of the economic parasites that hold back progress and profits. He operates completely outside of their fake moral paradigm, feeling no guilt for violating the sanctity of their victim narratives, coldly calculating that the legal costs, whatever they may be, are a small price to pay for exercising sweet, intoxicating power like an owner, and demonstrating for the world that the hangers-on who compose emails, make presentations, pontificate about stupid social trends in meetings, and “prioritize” projects without technical understanding of them, and other do-nothing jobs are completely unnecessary - a con! - to the entrepreneurial core value proposition of engineering great products and selling/servicing them to customers.
Personally, Musk is an interesting contradiction: he is the ultimate alpha nerd. On the one hand, he is a throwback to the moguls of old, and operates with a refreshing lack of hypocrisy. He has ten children because he thinks highly of himself and his genetics, and famously directs his engineers to modify the algorithm to better amplify his tweets. Poor Jeff Bezos buys the much-inferior asset of The Washington Post and, despite his own moderate to conservative views, is too timid to clean house and lets his own newspaper promote a woke anti-capitalist narrative. What would John D. Rockefeller think of such a creature, to passively sign the paychecks of scribblers who bite the hand that feeds them? Or Mark Zuckerberg, who let his woke wife harangue him into giving away all of his money in his 30s for bloated philanthropy make-work projects and then puts her maiden name first on the masthead of the foundation? No wonder the guy wants to escape into the Metaverse. They don’t make moguls like they used to!
On the other hand, Musk is a classic engineer nerd. A Tesla skeptic friend says he makes cars for dorks who think coolness is measured by gadgetry on an objective quantitative scale. Who cares if a Tesla is faster than a Ferrari by a few tenths of second? The Ferrari does it with more style, with the roar and struggle of a literal burning fire. But hey, unlike the Ferrari, it can make fart noises and play video games, beloved features that tell you a lot about Tesla’s customer base. There are more and more rich nerds out there, and Musk is a genius at marketing to this group, who idolize him.
Nerds like Musk are often semi-autistic, and I see a trend among the older, Gen X tech cohort. They move from an initial libertarian political instinct, to conventional moderate liberalism, perhaps to fit in. But as they age and have more time to analyze and digest human nature, they are becoming more conservative, even authoritarian, in outlook. Peter Thiel has said that democracy is unsuitable to a free society - if we can’t elect a Ron Paul, we must crown one. I’ve seen the same evolution in thinkers like Paul Andreessen and Paul Graham. The writings of Curtis Yarvin have been enormously influential in helping this group parse why mass democracy is unsuitable, in the long-term, to a society friendly to high achievement. Nerds, not intuitively understanding human nature, are naive and need time to digest and process to produce a coherent theory of social relations to compensate for their lack of intuition. But once a coherent theory is in place, reversing the trend becomes the type of interesting engineering problem these nerds live to solve. Musk’s acquisition of Twitter to save the marketplace of ideas was a first step in pursuing a solution.
It’s possible that only Generation X nerds can save us, as Aaron Renn explains. A smaller and quiet generation between the larger Baby Boom and Millennial cohorts, and delayed in their advance by Boomers who have hung on way too long, leadership may be thrust upon them as the only generation cynical enough to see through woke nonsense, and do what is necessary to remove it before it irreparably breaks the country. To paraphrase Kipling, the Left may “count the date” that Gen X nerds “learned to hate.”
Ron DeSantis, 44, is personally kind of a quiet guy who’d rather nerd out on policy details than shake hands and kiss babies. But it was his digesting the data, and that innate Gen X distrust of decrepit, overconfident, way-past-primetime Boomer authorities like Anthony Fauci, that made him comfortable taking the very early stand against Covid restrictions that launched him into the spotlight. And Trump Fatigue on both sides of the party divide might just launch him into the White House: a competent, introverted ideological operator, not unlike Barack Obama, but this time much more aligned with the majority of the country.
Interesting analysis and probably quite accurate even ten months later. It is funny that I am reading this the day after DeSantis dropped out considering the last paragraph.