Monday, November 27, 2017

Is Elon Musk building our future with somebody else's money?

Has Elon Musk found a way to pay for a public good with private dollars? That is the very interesting question columnist Jon Evans asks in his Tech Crunch piece "In praise of Tesla's bankruptcy." The article follows, below ...

Jim Chanos summarized all of the reasons why nicely: “If you wouldn’t be short a multi-billion-dollar loss-making enterprise in a cyclical business, with a leveraged balance sheet, questionable accounting, every executive leaving, run by a CEO with a questionable relationship with the truth, what would you be short? It sort of ticks all the boxes.” A lot of people think bankruptcy looms in Tesla’s future. Of course, Tesla bears have been saying this for years, and they’ve consistently been wrong — but this time, are they right?
Maybe; maybe not. Either way, a far more interesting question, if (like me) you have no financial interest in the business’s success or failure, is: does it matter?
I’m entirely serious. We tend to assume that a company’s purpose is to make money for its shareholders, or at least “not go bankrupt,” because money is how we measure success. And this is in fact true of most companies. But it is not true of Tesla. “When a measure becomes a target, it ceases to be a good measure,” and this is as true of money as it is of any other measure. The purpose of Tesla is not to make money; it is to pioneer fleets of smart mass-market electric cars, and the infrastructure to support them, and battery technology which is not limited to cars. Making money is ancillary.
And whether or not they are making money, they are succeeding at their purpose. They are building the world’s largest factory — in fact, the world’s largest building; it’s still under construction, but parts of it are already up and running. They all but own the luxury electric car market, and are on course to dominate the mass market as well, while also manufacturing power packs.
I’m sure Elon Musk would like to do this while turning a sweet profit. Which is of course also, technically, his fiduciary duty. But if he fails to do so, is that really so tragic? For those of us who aren’t shareholders or bondholders, I mean. (Don’t you worry about Elon, he won’t be missing any meals.)
Maybe it wasn’t even possible to do so — in which case Musk will have used the capital markets to essentially subsidize Tesla with free money. (And, interestingly, open-source the resulting patents.) In which case, you know what, more power to him for managing to fund a loss-making investment in what is not so much a car company as it is infrastructure for our shared future.
After all, even if Tesla stock goes to zero, and its bonds default to pennies-on-the-dollar, its factories and software repositories and human capital will all be there, and no Chapter 11 court or committee will be blind to the fact that they’re worth far more as a coherent unit than they would be as separate assets. The analogy I like to draw is that of the Channel Tunnel, which was privately dug and built, and a complete financial debacle for its investors — “a wonderful thing from which we’ve all benefited, apart from the people who paid for it to be built who lost substantially all their money.”
That quote may yet apply to Tesla. Does it sound unfair to stockholders and bondholders? Not at all: this is capitalism in action, you pays your money and you takes your chances. But if you’re not a stockholder, and not a bondholder, maybe don’t worry so much about headlines screaming about Tesla’s financial unviability. This time, for once, the rest of us win either way.

Wednesday, November 22, 2017

Charles Manson and The White Album

When one of Charles Manson's acolytes scrawled "Healter [sic] Skelter" in blood on the refrigerator in the Los Angeles home of the LaBiancas in August of 1969, he dragged the Beatles into one of the most notorious acts of violence of that very violent decade. With Manson's death in prison this week, some 48 years later, I listened to  The White Album again, not to relive Manson's psychopathology, but to revisit an album that was played constantly in my youth.

The many many songs ...

Why Don't We Do It In the Road, Julia, Everybody's Got Something to Hide Except for Me and My Monkey, Yer Blues, Honey Pie ... 

all of them and more brought the memories flooding back, mostly about growing up, its sense of loss combined with its ever-expanding sense of freedom.

That Charles Manson's death should have sparked this chain reaction of reminiscence for me is strange but not unknowable. It is probably understandable too. He in his own terrifying way is inextricably linked with that album too. As long as people remember the 1960s in a personal way, they will remember that simple fact. 

A commentator added the other day, "the world is a better place with him gone." About that I have no doubt.

Friday, November 3, 2017

A week of anniversaries

October 25, 1917
The Bolsheviks march their forces against the Kerensky government in Petrograd, Russia (current day St. Petersburg) signaling the start of the Russian Revolution. That was 100 years ago.

October 29, 1692
Judge Stephen Sewell declares that the courts of Oyer and Terminer are disbanded, indicating that there will be no more trials in Salem, Massachusetts for people considered to be witches. That was 325 years ago.

October 31, 1517
A German monk named Martin Luther tacks his 95 theses upon the church door in the small town of Wittenberg, and the Protestant Reformation is born. That was 500 years ago.

November 2, 1917
British Foreign Secretary Arthur Balfour writes to Lord Rothschild expressing that "His Majesty's Government view with favor the establishment in Palestine of a national home for the Jewish people." That was 100 years ago.