Wednesday 22nd November 2017

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Elon Musk: the experts speak

Big talk breeds big skepticism about the viability of his plans and the secret of his success

by Greg Klein

It was probably inevitable that so much controversy would surround a serial visionary like Elon Musk. There’s even controversy about whether he is in fact a visionary. With such polarized responses to this celebrity entrepreneur, both camps obviously can’t be right. So will one side make its mark in history as laughably wrong, maybe in a future anthology of famously faulty forecasts like The Experts Speak?

With the subtitle The Definitive Compendium of Authoritative Misinformation, this 1998 book by Christopher Cerf and Victor Navasky compared some past commentators’ over-confidence with the reality of events. Like bad stock market calls, for example. Of course they’re pretty much an affliction of death-and-taxes certainty, but Cerf and Navasky dug up some especially fantastic claims—such as a Yale economics prof asserting that “stocks have reached what looks like a permanently high plateau.” That was one week before the sell-off began on Black Thursday, 1929.

Pop culture, too, has had its misunderstandings: “We don’t like their sound,” complained a Decca executive. “Groups of guitars are on their way out.” Such was the record company’s 1962 rejection of the Beatles.

Big talk breeds big skepticism about the viability of his plans and the secret of his success

Musk: Techno-visionary, super salesman or rent-seeker?
(Photo: Phil Stafford/Shutterstock.com)

Ah, and then there’s technology: “This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication,” grumbled an 1876 memo from the Western Union Company. “The device is inherently of no value to us.”

Also lacking foresight was this 1977 declaration from the president of Digital Equipment Corp: “There is no reason for any individual to have a computer in their home.”

Musk, of course, inspires no end of positive prognostications on topics not limited to commodity demand, electric vehicles, power storage, Hyperloop travel, space transport-tourism-colonization, networking brains to computers and no doubt whatever lights up his own relentless brain next week. But what about his detractors?

“Musk’s genius is primarily in the subsidy-seeking realm,” argued Lawrence Solomon in the Financial Post last week. “By 2015, U.S. governments alone had given his companies US$5 billion through direct grants, tax breaks, cut-rate loans, cashable environmental credits, tax credits and rebates to buyers of his products. Counting subsidies from Canada and Europe, the government bankroll could be double that. Counting indirect subsidies—such as electric-vehicle-friendly infrastructure—the subsidies soar ever higher.”

Much of Solomon’s intel has been reported previously, for example in the Los Angeles Times and the Australian. The latter characterized Musk as a “super salesman or a rent-seeker.”

Ouch. Will that be Musk’s lasting legacy? Or have these detractors set themselves up for expert status of the ironic kind? Time will tell.

Solomon’s not the only Financial Post skeptic. Carrying on about “just how pathetic things look right now for electric cars,” Kevin Libin reports North American and European numbers of subversive tendencies. “Going by the ballyhoo, you’d think EVs were an unstoppable juggernaut. But it’s one that has yet to even get started.”

Referring to a report that France intends to stop the sale of gas- and diesel-burning vehicles by 2040, Libin responds that there’s no way to predict how technology and automobile use will evolve over that period. “Imagine making rules for today’s internet back in 1994.” No doubt the experts had a lot to say about that too, 23 years ago.

This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.—An 1876 memo from
the Western Union Company

“Still, the electric-vehicle hype not only continues unabated, it gets bigger and louder every day,” Libin concludes. “If some car company figures out how to harness it, we’d finally have a real automotive revolution on our hands.”

Of course Musk has much more on his mind than EVs. But if the EV revolution fails to happen, or if Tesla fails to play a prominent role, investor disappointment might crash and burn his other soaring plans.

So far the company has been raising money through “a combination of equity offerings and convertible bonds, which eventually convert into shares,” Reuters states. “In March, Tesla raised [US]$1.4 billion through a convertible debt offering.” Last week the company resorted to a junk bond offer in hopes of raising another US$1.5 billion.

“Tesla has yet to make an annual profit and its stock is a favourite among short-sellers, who continue to bet Tesla will fall short of its shareholders’ high hopes,” added Reuters. Short-sellers experience the accuracy of their predictions much more quickly than did Cerf and Navasky’s seers. Tesla stock’s currently up about 47% year-to-date.

Even so, if Musk’s critics are right he could turn out to be one of history’s most prolific purveyors of authoritative misinformation. Otherwise his detractors could take up an entire chapter in a future sequel to The Experts Speak.

But Musk-watching, like following stock and commodity markets, calls for a sometimes unhealthy preoccupation with guessing what will be. Maybe that sequel would be better titled The Experts Won’t Shut Up.


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