This might not be an original assertion among the hoodie’d tech-bros of Silicon Valley who venerate him or the venture capitalists who have grown fat off his enterprise, but it has to be said:
My favorite billionaire is Elon Musk.
The 45-year-old South African visionary’s list of achievements is inspiring (see: SpaceX and Tesla), but his yet unachieved list of goals is a study in breathtaking madness.
High-speed “hyperloop” transit? We should see a test track for the hyperloop by 2018. Cheap, efficient, and storable solar energy? Musk has a plan to create house roofs made entirely of solar panels. Colonizing Mars? Musk has outlined SpaceX’s plan for colonizing Mars and making us “a truly multi-planetary species.”
Musk brings to the conversation a vision of changing how we get around, how we power what gets us around, and where we live. In so doing, he is working to address some of the most important challenges facing our species.
One, obviously, is climate change. New energy technologies and reductions in barriers to the diffusion of nuclear energy could obviate the need to burn as many fossil fuels. We have vast, vast stores of oil and coal reserves that we might end up leaving in the ground not because of government directives but because we come up with superior alternatives, and Musk is leading the vanguard in the fight to make fossil fuels irrelevant.
Musk’s plan to colonize Mars is related to his vision for energy. By broadening our portfolio of home worlds—currently inefficiently small at one—he is striving not only for energy sustainability, but for human sustainability. Putting all your eggs in one basket is pretty bad financial advice, and having only one planet is probably inefficient for a species that wants to ensure its continued survival.
Musk nonetheless takes a lot of flak from the left, right, and center for the degree to which his enterprises rely on government subsidies. This criticism is legitimate, and it’s an interesting study in the differences between the freer and more prosperous world toward which we are working and the imperfect-but-vastly-better-than-five-hundred-years-ago world we actually inhabit.
Subsidies, special tax breaks, loan guarantees, and other government handouts are bad policy, but they are unavoidable facts about doing business in the 21st century. Entrepreneurs in the rent-seeking society face a prisoner’s dilemma. They would all be better off if they agreed to eschew subsidies and other government goodies, but if you know all your competitors are going to refrain from seeking subsidies, then you have an incentive to seek subsidies in order to gain an upper hand. If you know all your competitors are going to seek subsidies, you have an incentive to seek subsidies lest you be forced out of the market by a privileged competitor. As Ryan Hagemann of the Niskanen Center puts it:
“Musk’s real competition isn’t other firms vying for dominance in a market defined by free enterprise and competition. It’s other firms vying for dominance in an industry heavily polluted by government regulations, cronyist handouts, and political favoritism.””]
Elon Musk isn’t the problem. The incentives he faces are the problem. As inefficient as subsidies are, subsidizing Tesla and SpaceX is probably less inefficient than subsidizing other ventures. Given that my tax bill is unavoidable and given that governments are going to spend the money on something, I would rather them spend the money helping Elon Musk build a factory in Nevada, a Hyperloop from Los Angeles to San Francisco, and a mass-transit system to Mars than many of the other things governments do.
Of course, “Subsidizing Tesla and SpaceX is better than buying tanks and bombs” is hardly an endorsement of the rent-seeking society or an apology for the subsidizers and the subsidized. It is, rather, a recognition of the difficult political reality we face. It’s a mistake to attribute all of Elon Musk’s success to laissez-faire, innovation-advancing capitalism. It’s also a mistake to dismiss him as a heretic or hypocrite because he is responding to powerful incentives.
The long history of capitalism shows that we could do a whole lot better, and it shows that innovation doesn’t need subsidy in order to flourish. The long history of how governments spend money shows that we could do a whole lot worse than subsidies for revolutionary technology companies.