The Musk Special: Government-Privilege Two Ways

elon-musk-launched-a-tweetstorm-defending-his-position-as-a-trump-adviserWhen I was at Stanford University in Silicon Valley earning a JD-MBA (not a fun place for a principle-based libertarian, at least not at the time), there was no end to techie business or law school students who would argue with me that governments needed to fund research for the betterment of society. (The most definitive example I recall was that we would never have had Teflon if it weren’t for NASA–I have since learned, that might not be true, and in any case, we should be so lucky!)

My response to the government-as-science-benefactor argument was threefold: it’s not the role of government to invest in technology – a corruptible bureaucracy cannot be expected to have the judgment, objectivity or integrity to pick and choose where to invest; the government does not have the right to steal money from taxpayers (Taxation is Theft!) and transfer it to researchers; and private enterprise reacts to the information inherent in prices of goods and labor and knows best where to invest for labor-saving or production-increasing innovation and will do so as-needed on a per company basis, as labor gets scarce or demand outstrips supply but not before. (For non-economical investments commercial enterprise won’t make, charities and foundations are good for trillions).

These days, however, my argument is much more cynical, but much more painfully obvious to both left and right. I realize that the government is not simply misguided and inefficient, it’s been captured. Not only have regulations long been used to control and suppress competition to the benefit of incumbents who already have the power, money and influence to affect policies, research (through universities and the Department of Defense, for example) as well as direct subsidies are used to benefit big business by creating such tech as voice-to-text or driverless vehicle sensors that would never have been invented in the give-and-take of a marginal cost of capital v marginal cost of labor world of economic liberty.

Government-promoted technologies are passed on, one way or another, to government-connected big companies (or individuals) at a price below the actual start-to-finish cost (per force as these are investments private enterprise chose not to make) and at the same time create abrupt, systemic unemployment by injecting labor-saving technologies into industries that are not experiencing organic labor shortages (though perhaps labor costs are rising). Lest labor catches on and rebels, these cronies are insulated by the welfare state which pays off a large portion of the population to accept being shut out of the workforce–and big business gets to blame the workers themselves for their own unemployment by pointing to their “demands” for an unsustainable minimum wage, which is an obvious set-up in my opinion. In other words, taxpayer-funded research subsidies help big business lower cost of production by subsidizing capital over labor, while taxpayer-funded welfare, unemployment benefits and food stamps keep the able-bodied unemployed from thinking too hard about what’s going on. Fascism at the top, socialism at the bottom–not good for that shrinking class of wage and salary earners who pay a grossly disproportionate amount of the taxes.

Examples of some of these phenomena have popped up recently in articles I’ve read about Tesla founder Elon Musk, which demonstrate the power of regulations and subsidies to anoint–and sustain–the billionaire du jour.

The first articles demonstrate how Tesla Inc. would not be the money-maker for Musk that it has been without governments around the world subsidizing electric vehicles.

Tesla Sales Fall to Zero in Hong Kong After Tax Break Is Slashed
New registrations of company’s vehicles dropped to zero from 2,939

Tesla Inc.’s sales in Hong Kong came to a standstill after authorities slashed a tax break for electric vehicles on April 1, demonstrating how sensitive the company’s performance can be to government incentive programs.

And here in the States…

California Considers a $3 Billion Electric-Car Push
Lawmakers consider $3 billion in rebates to help meet state rules for cuts to greenhouse gas emissions

California lawmakers are considering $3 billion worth of rebates for buyers of electric cars in an effort to power an industry that relies heavily on public subsidies….

A $5,000 tax credit in Georgia helped the state become the second-largest electric vehicles market in the U.S. after California until the state tax credit was eliminated in July 2015, according to Edmunds, a website that tracks automotive sales. After the change, sales in Georgia fell to 2% of all U.S. electric vehicles sold in 2016 from 17% in 2014, according to the site. Georgia sales of Tesla, luxury electric vehicles that typically sell for about $100,000, initially fell but bounced back, according to Edmunds.

Even the “market forces” are a result of policy:

Industry analysts estimate that rising costs of developing combustion engines that meet ever-stricter emissions regulations could make some electric models more affordable as soon as 2025….

(For a more thorough discussion of many of these themes, see my article, The Ubërmorphosis is Nigh. My thinking has evolved a little bit on this subject, however, as I think Google has now decided to gut Über, scavenge it and make more with a next-gen company, pushing out an unsubmissive Kalanick in the meantime.)

The last article shows how Musk would like to use the power of regulation (which he clearly intends to shape) to keep his competitors at bay.

Elon Musk Lays Out Worst-Case Scenario for AI Threat
Powerful technology will threaten all human jobs, could even spark a war, Tesla CEO says

Elon Musk warned a gathering of U.S. governors that they need to be concerned about the potential dangers from the rise of artificial intelligence and called for the creation of a regulatory body to guide development of the powerful technology….

Mr. Musk has been vocal about his concerns about AI and helped create OpenAI, a nonprofit research group that aims for the safe development of the technology. He suggested to the governors that a regulatory agency needs to be formed to begin gaining insight into fast-moving AI development, followed by putting regulations into place.

“Right now the government doesn’t even have insight,” he said. “Once there is awareness people will be extremely afraid, as they should be.”…

“For sure the companies doing AI—most of them, not mine—will squawk and say this is really going to stop innovation,” Mr. Musk said. But he said he doubted that such a move would cause companies to leave the U.S.

(BTW stopping innovation is a primary strategy of an influential but slow-moving player.)

By scaring the crap out of people as to the power of AI, Musk promotes his own interest by setting up a tightly controlled industry in which he will play the dominant and protected role, and he gins up investor interest in this powerful tool of his. His exhortations might be overblown, however. On the same day as that article appeared in The Wall Street Journal, this article appeared in

Robotic Hogwash! Artificial Intelligence Will Not Take Over Wall Street
For all the hype, applying AI to investment still has a few serious problems

Update: See my follow-on article, Very Clever, Mr. Musk