How Tesla’s Elon Musk became the master of fake business

[Gone_Fishin]

Lawrence Solomon: How Tesla’s Elon Musk became the master of fake business


Musk’s genius is primarily in the subsidy-seeking realm. By 2015, U.S. governments alone had given his companies US$5 billion through direct grants, tax breaks, cut-rate loans, tax credits and rebates


The fastest-growing industries over the last two decades have been fake industries, those that thrive despite having few customers willing to buy their products except at fire-sale prices. The fake industries all have the same angel investors — governments — and the same promoter touting their wares — again governments. These fake industries, the brainchild of subsidy entrepreneurs, also tend to be dazzlers, the better to wow their politician backers and the stock market speculators betting on cash flows of government subsidies.

Today’s fake-industry leader is Tesla, the electric car developed by subsidy entrepreneur Elon Musk, who also heads SolarCity and SpaceX, other government darlings. Musk’s genius is primarily in the subsidy-seeking realm — 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.

snip

Speculators who bet on Musk’s ability to continue to get government backing have been well rewarded — Tesla’s stock value has skyrocketed, so much so that its market valuation topped that of BMW this year. Tesla stock is now valued at US$801,000 per car sold in 2016, compared to $26,000 per BMW sold and $5,000 per GM car sold.

That inflated stock value rests entirely on government subsidies, as seen by what happened last year when Denmark decided to reduce its subsidies. In 2015, Tesla sold 2,738 cars in Denmark; in 2016, after the government said it would be phasing out subsidies, Tesla sold 176 cars, a drop of 94 per cent. Tesla’s car crash was even more pronounced in Hong Kong. After the government there cut its tax break on April 1, Tesla sales plunged from 2,939 in March to zero in April and five in May

The Tesla, in effect, is a beautifully engineered toy for the conspicuous-consumption market, accessible to millionaires but beyond the reach of the commercial market. Neither it nor most other electric vehicles have any place in a competitive, free-market environment. As an indication of how economically injurious these playthings are to society on the whole, the U.K.’s National Grid estimated that Britain would need to increase its peak generating capacity by 50 per cent to meet the government’s plans for electric vehicles, the equivalent of building 10 new nuclear plants.

The driver of the electric-vehicle industry — government fixation on global warming — has spurred even larger fake industries, led by wind turbines and solar photovoltaic cells. Neither they nor the many other anti-carbon inventions such as carbon sequestration plants are in any business sense “real.” The global renewable-energy industry, having squandered trillions of dollars building economically unjustifiable infrastructure, represents the greatest loss of wealth in the history of commerce.

snip

Fake industries prey on government’s weakness, like Charlie Brown with that football, to never let constant failure stop it from trying to pick winners. An Elon Musk predecessor, Malcolm Bricklin, in the 1970s convinced New Brunswick’s premier to back a sports car with gull-winged doors for export to the U.S. It went bankrupt after producing 2,900 cars. In the 1980s, Philip Sprung, a Calgary subsidy entrepreneur, convinced Newfoundland’s premier to grow cucumbers in a greenhouse for export to the U.S. Two years and $22 million later, it too went bankrupt. In the 1990s, Ballard Power Systems convinced governments to back hydrogen fuel-cell technology. Its stock, which topped US$120 per share in the year 2000 amid hype that it would revolutionize transportation, is now under $3.

Subsidy entrepreneurs like the Musks of the world — often self-deluded true believers — should be distinguished from the Bernie Madoffs, who are fakes within real industries, and who prey primarily and illegally on private investors. The Musks are fakes in fake industries who prey primarily on taxpayers, a time-honoured practice that remains legal.

http://business.financialpost.com/opini ... e-business

[Queen K]

Lawrence Solomon: How Tesla’s Elon Musk became the master of fake business


Musk’s genius is primarily in the subsidy-seeking realm. By 2015, U.S. governments alone had given his companies US$5 billion through direct grants, tax breaks, cut-rate loans, tax credits and rebates


The fastest-growing industries over the last two decades have been fake industries, those that thrive despite having few customers willing to buy their products except at fire-sale prices. The fake industries all have the same angel investors — governments — and the same promoter touting their wares — again governments. These fake industries, the brainchild of subsidy entrepreneurs, also tend to be dazzlers, the better to wow their politician backers and the stock market speculators betting on cash flows of government subsidies.

Today’s fake-industry leader is Tesla, the electric car developed by subsidy entrepreneur Elon Musk, who also heads SolarCity and SpaceX, other government darlings. Musk’s genius is primarily in the subsidy-seeking realm — 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.

snip

Speculators who bet on Musk’s ability to continue to get government backing have been well rewarded — Tesla’s stock value has skyrocketed, so much so that its market valuation topped that of BMW this year. Tesla stock is now valued at US$801,000 per car sold in 2016, compared to $26,000 per BMW sold and $5,000 per GM car sold.

That inflated stock value rests entirely on government subsidies, as seen by what happened last year when Denmark decided to reduce its subsidies. In 2015, Tesla sold 2,738 cars in Denmark; in 2016, after the government said it would be phasing out subsidies, Tesla sold 176 cars, a drop of 94 per cent. Tesla’s car crash was even more pronounced in Hong Kong. After the government there cut its tax break on April 1, Tesla sales plunged from 2,939 in March to zero in April and five in May

The Tesla, in effect, is a beautifully engineered toy for the conspicuous-consumption market, accessible to millionaires but beyond the reach of the commercial market. Neither it nor most other electric vehicles have any place in a competitive, free-market environment. As an indication of how economically injurious these playthings are to society on the whole, the U.K.’s National Grid estimated that Britain would need to increase its peak generating capacity by 50 per cent to meet the government’s plans for electric vehicles, the equivalent of building 10 new nuclear plants.

The driver of the electric-vehicle industry — government fixation on global warming — has spurred even larger fake industries, led by wind turbines and solar photovoltaic cells. Neither they nor the many other anti-carbon inventions such as carbon sequestration plants are in any business sense “real.” The global renewable-energy industry, having squandered trillions of dollars building economically unjustifiable infrastructure, represents the greatest loss of wealth in the history of commerce.

snip

Fake industries prey on government’s weakness, like Charlie Brown with that football, to never let constant failure stop it from trying to pick winners. An Elon Musk predecessor, Malcolm Bricklin, in the 1970s convinced New Brunswick’s premier to back a sports car with gull-winged doors for export to the U.S. It went bankrupt after producing 2,900 cars. In the 1980s, Philip Sprung, a Calgary subsidy entrepreneur, convinced Newfoundland’s premier to grow cucumbers in a greenhouse for export to the U.S. Two years and $22 million later, it too went bankrupt. In the 1990s, Ballard Power Systems convinced governments to back hydrogen fuel-cell technology. Its stock, which topped US$120 per share in the year 2000 amid hype that it would revolutionize transportation, is now under $3.

Subsidy entrepreneurs like the Musks of the world — often self-deluded true believers — should be distinguished from the Bernie Madoffs, who are fakes within real industries, and who prey primarily and illegally on private investors. The Musks are fakes in fake industries who prey primarily on taxpayers, a time-honoured practice that remains legal.

http://business.financialpost.com/opini ... e-business

Isn't this the same type of business deal that Petronas was going to be getting to operate in British Columbia? Grants, cuts and other deals to sweeten the business pot?

https://www.desmog.ca/2017/03/27/b-c-li ... ors-report
The report, Hydro Bill Madness: The BC Government Goes For Broke With Your Money, lays out the impact of tax breaks, subsidies and reduced electricity rates negotiated by industry.

“Power subsidies to even just two or three of the proposed LNG plants could amount to hundreds of millions of dollars per year,” reads a press release accompanying the report.


I could add: every giant corporation like Tesla is gaining more financial clout than most small countries. They've become emboldened by the knowledge that governments are pressed to deliver economic conditions and are demanding more and more from our governments. Sometimes to the detriment to the very economy they hope to do business in.

Why is Elon Musks' Telsa company different from Petronas, besides the obvious?

If their product won't sell without subsidies, they will have to re-imagine or re-think their products and costs.

[neilsimon]

While it may make sense for subsidies where the industry brought in will significantly enhance the lives of the tax paying consumers or spur much greater economic growth (e.g. lots of countries used subsidies to roll out electrification to rural areas, resulting in improved lives and economic activity), they make little sense when all they are doing is buying business intended to enrich the lives and pockets of others who are not paying the taxes.

LNG is a wholly Malaysian state owned company. When we subsidise them, we are giving money to Malaysia. It only makes sense to do so if the return to us is particularly great in terms of taxes or product, and since the LNG was for export, that only leaves taxes. I doubt that Petronas were going to be paying particularly high tax rates, so we were essentially buying their business. That's generally a very bad business practice.

As for Tesla, personally, I'm glad that they are developing the technology they develop, but I wish that these vehicles were being bought on technical merit. There is little reason to believe that a Tesla will, over a 10 year lifetime, be more environmentally friendly than a more conventional vehicle, unless it is being powered by a particularly green source of electricity. Additionally, their poor range, excessive weight, and high cost (esp. when not subsidised) all result in a vehicle which really isn't an improvement over an equivalent Mercedes, Lexus, etc. Unfortunately, as the car industry is often lead not by technical innovation but rather by fashion, we find ourselves moving prematurely to electric vehicles, with significant consequences being ignored all in the name of appearing to be green.

[Queen K]

Note that I did not argue for Tesla per se, but rather made observations regarding the The Great Subsidy Game that is corporate driven. Getting more and more and more out of governments to provide jobs in a World where jobs can go almost anywhere.

Gone_Fishin''s post would have us believe Elon Musk's Telsa is somehow unique.

I'm pointing out that it is not. Not by a long shot.

Electric cars, as environmentally questionable as any vehicle I've ever driven as they are, have one value to the customer. The customer can now harvest solar and turn it into feul, at the home.

This can not be done with any other mode of transportation that I am aware of.

[Jlabute]

It's pretty easy to pick up $50 million here or there in clean energy grants. This is an Acton couple who defrauded the government.

https://www.bostonglobe.com/metro/2017/08/10/acton-couple-charged-with-defrauding-treasury-million-energy-grants/MOof8xt3QgxJFFYcqA0beO/story.html

[Rwede]

Isn't this the same type of business deal that Petronas was going to be getting to operate in British Columbia? Grants, cuts and other deals to sweeten the business pot?

Not even close. Petronas would have actually been PAYING the BC government billions in royalties.

"Would have" being the key phrase - the NDP made sure that project was scuttled.

Musk has sucked governments dry. One need only look at the complete failure of his business model when subsidies are curtailed. Sales go to zero. It's unsustainable.

[Queen K]

Hence the challenge I threw out earlier and you're the only one who took me up on it.

[neilsimon]

Isn't this the same type of business deal that Petronas was going to be getting to operate in British Columbia? Grants, cuts and other deals to sweeten the business pot?

Not even close. Petronas would have actually been PAYING the BC government billions in royalties. []

"Would have" being the key phrase - the NDP made sure that project was scuttled.

Musk has sucked governments dry. One need only look at the complete failure of his business model when subsidies are curtailed. Sales go to zero. It's unsustainable.

It seems hard to get actual net figures, after all subsidies are taken into account. For instance, the subsidising of energy costs could hugely eat into the royalties, basically consuming about half of it. That is assuming that the reduced rate of royalties was sustained to the completion of the project. They were already halved from 7% to 3.5% and it is highly likely that Petronas would have needed even greater reduction to be profitable. This is one of those ventures where allowing for further shifts in international prices would almost certainly have required trimming of costs for Petronas to continue and that would have almost certainly come at our cost.

Since this project would have done little to benefit Canadian consumers, added far less to our coffers than much more modest projects and caused significant ecological harm, I stand by my assertion that we were already buying their business and if we are going to go down that route, there are better kinds of business to buy.

[hobbyguy]

Actually, the whole deal with Petronas and PNW is much more complicated than that.

Part of the need for "deals" with the BC government is spawned out of the number of jurisdictions that must be satisfied in BC.

IF we look at what we would colloquially call a "nation" it would look something like this: https://en.wikipedia.org/wiki/First_Nations#/media/File:Langs_N.Amer.png - which would give us about 10 distinct nation-like regions in BC.

If we look at today, we have 198 First Nations in BC. The average size of a First Nation in BC is 783 people.

It is what it is.

So PNW LNG had to negotiate with many entities to make the project work, basically all the way from Ft. St. John to Prince Rupert. Each of those entities required consultation and agreements - which include both up front money and revenue sharing agreements. There is "x" amount of pie, and so each time an agreement is reached with those myriad entities, the original deal with BC government must be adjusted to keep the proposal viable.

Thus in the case of PNW LNG, it was not the total revenues to the people of BC that was being adjusted, but a case of who gets what.

That is entirely different from the "subsidy mining" that various corporate groups and sharp operators engage in.

Subsidy mining begins with the promotion of an industry or business concept that is not economically viable. Lobby groups are set up (there are entire divisions of PR firms devoted to that) to promote what seems on the surface to be a good concept (the basis of all cons). Ideally, those lobby groups incarnate themselves as what appear to be "citizens groups" with a concern about a legitimate issue. If a cultural fad or meme can be created (and the big PR firms are very good at that) then sufficient numbers of people can be conned and the seed of political power is planted. Where successful, political pressure is created, and politicians while "mining for votes" will take up the "cause" and become committed to the original con.

Generally, the easiest way out for politicians seeking to mollify their voters in these matters is then to subsidize (tax breaks and direct subsidies) and enable the con. Over time, the various justifications that politicians use for the subsidies etc. come back to bite them, and so they start "adjusting" the apparent reality to suit the false narrative. Eventually, it collapses of its own weight, the timing only dependent on the number of politicians that are "invested" in promoting the con.

A simple example of a con promoted in this way is the Gas Marketer con in BC. Political pressure was created by a "lobby group" to provide "competition" in natural gas distribution. Politicians enabled, some folks signed up for lengthy supply contracts - and very few (if any) actually saw any benefit from those supply contracts.

More complex is the wind energy con. It is very complex, in that wind energy in the right context and circumstances, and done properly can be a benefit. The con trick lies in those complexities. Wind energy on its own, just the generation, is only part of the cost picture.

A wind turbine standing in a field is essentially useless unless the wind blows. The wind doesn't always blow when you want electricity. At the base level, for an off grid cabin, one would add storage - batteries - so that power would be available when it is needed. But oops, in order not to fry the battery, now I need a charge controller. Done, but oops, now I have a 12 volt battery charged and I need 110 volt power - so I add an inverter. Great! Now I have 110 volt power in the small shed I built to house the battery, charge controller and inverter. But I need it 200 ft away in my cabin (I put the small turbine that far away because it is noisy). Now I need to buy cable, insulators etc. and install a transmission line from my wind facility to my cabin. Done! Well not quite, the battery won't last, and won't last very long at all, if I don't maintain it - and I really should have a spare battery available just in case. So when all is said and done, I have more cost in all the other stuff, and more ongoing costs like replacement batteries and repairing the transmission cable when branches fall on it, than the wind turbine itself.

In the large scale wind energy con, the wind energy provider essentially just builds the wind turbine standing in the field, then all those costs get magically transferred to the public. So I can say "my cost of wind power production is only "y"", when in fact, the total cost of wind electricity delivered to where it is needed is more like 2 x "y" - or more.

To make the con seem more viable, the wind industry always refers to its "installed capacity". Yup, they installed wind turbine capacity of "q" - sounds great, but they absolutely never refer in public to their "capacity factor". Just "lookee here, we installed a 1.5 megawatt turbine". In fact, the average "capacity factor" in Germany is just 17.5% - so that 1.5 megawatt turbine will only actually produce .26 megawatts in Germany. Making that clear are the figures out of China, where 8.6% of China's installed generating capacity is wind power - but that wind power only generated 3.3% of the electricity used.

All of that points to wind power actually being much, much more expensive than what is advertised to the public. Is it really? Well, lets look at Denmark, the "kings of wind power". Their electricity costs are 4 times what we pay (- and Denmark still uses coal and natural gas for 37% of their power, but wind dominates).

However, if we look at the "blogosphere" and environmental lobby industry heavily represented there - they promote the idea that wind is cheaper - when it clearly isn't. Those same "groups" constantly tout "installed capacity" numbers and "we are falling behind" and in recent years have heavily promoted "the green economy".

Now that "green economy" argument is brilliant. Jurisdictions that fell for the wind con now had something else to tout and work on. Politicians don't like to admit that they have been conned - nobody does. "Green jobs" and the "Green economy" are a lovely new twist to get them out of the jam of explaining high electricity costs to voters. Well gee, guess there better be lots of "green jobs". How do we get those? Well, you can do what Ontario did, and subsidize plants to make wind turbines - and presto - you have "green jobs" - until as happened in Ontario, you are forced to remove the subsidies (those ugly icky budget thingies!) - and then the "green jobs" go "poof" as the plant closes. Well, that's not great, so how else can a self respecting politician diaper his butt? The usual way - when all else fails, lie, lie some more, and lie again. Politician in charge drops in at whatever agency produces the numbers, and orders the agency to "expand" their definition of "green jobs" - oh, that guy painted a bridge green, that must be a "green job" etc. Now the politician goes to his voters, some of whom are angry because the industry they worked in shut down due to high electricity costs, and says, "But look, we have created a ton of green jobs, lookeee here, the bureau of statistics says we now have a bazillion green jobs".

In the middle of that mess comes a sharp guy like Elon Musk. He sees the fashion trend and says "I can exploit that". He builds an electric car, makes it flashy (never mind hardly anyone can afford it) and sells shares in his company. "Oooh, that's the technology of the future says the fashionista and the fad follower" - and they buy shares and drive the price through the roof! Never mind that the company has never made a dime of profit - and Elon is a happy guy sitting at the top of that Ponzi scheme pyramid. But what to? How to keep the scheme running? Well, partly by greasing a few palms and getting subsidies for his cars.

Well Elon is a lot of things, and being a really sharp operator is one of them. He looks at the wind con. He sees that the con is fraying because there isn't any storage capacity (remember our little battery for the cabin's wind turbine?). So Elon takes some of the Ponzi money and builds a big battery factory! Ah, perfectly positioned to milk the next stage of the wind con. Elon sells batteries to governments that are so deeply embedded in the wind con that they have no choice. More money for Elon! Yeehaa! And well, while we're at it says Elon, lets tap into the folks that got sucked into the solar scam (also big subsidies there!) and sell them batteries! Batteries, sounds dumb and old fashioned. Aha! Says Elon, we'll call them "powerwalls", not batteries, heck, people know batteries don't last forever, but a "powerwall" - well that's different.

And so there we have a picture of sharp operator, Elon Musk, who saw a fashion trend, somebody else's Ponzi scheme and a way in for Elon Musk to create his own Ponzi pyramid with him at the top. Brilliant! Have to give Elon credit where it is due.

[Omnitheo]

Pretty sure Boeing still reigns as the master of government subsidized business. Sure Tesla's on the list, but so are a dozen other companies which took years of investment capital to deliver on their innovations and breakthroughs.

Also why is this in the Canada forum?

[hobbyguy]

There are traceable subsidies, which you see as direct tax cuts and direct government loans guarantees, and then there are the ones that don't show on the books. We SEE the subsidies given to Bombardier.

Wind electricity generation subsides as we see them in Canada:

- direct subsidies to build and operate turbine manufacturing plants, including tax cuts, and direct cash. That we see every day as readily visible.
- the public and the grid system providing energy storage for wind generation - which means that ratepayers/governments both directly and indirectly pay for the failure of the industry to build that part of the infrastructure. That really doesn't become visible until wind (and other forms of non synchronous generation) reach a threshold of capacity proportion where they start to destabilize the grid. Where that destabilization becomes apparent, there are huge public costs - which then get transferred back to taxpayers and ratepayers. Costs like the hundreds of millions that South Australia is having to fork out for interlink transmission lines to bring in energy from other jurisdictions (mostly coal fired) and even down to city level where Los Angeles is building a 100 megawatt battery facility so the city doesn't brown out.
- guaranteed IPP rates like we have in BC. Produce as much as you can when you can (even if there is no demand) and you get the same price and guaranteed take. That means BC Hydro, and you as a ratepayer are paying peak rates (retail) for electricity off peak, which BC Hydro sells at a loss, and must recover in the rates charged to you.
- those guaranteed rates and takes mean that there is little or no off peak demand for synchronous producers like nuclear, hydro, natural gas - and so they must shut down during off peak times - which drives up their peak demand costs because they have to restart, as well as lowering their overall sales which means they need higher rates to survive - which you pay. Coal plants are hardest hit with this as they are most inefficient on start up and shut down (which why they are closing for economic reasons - despite low coal prices). Natural gas plants have the same issues, but not as badly, and so are able to survive until it gets really bad - as it did in Australia, when natural gas plants are being shuttered - even though the country is desperate for the synchronous power they produce.
- there is also a human subsidy with economic impacts as well when we talk about wind power. Urban users demanding "green" energy are not the ones that have to put up with noisy and ugly wind turbines - rural residents are. There is "wind turbine syndrome" that is poo-poohed by the industry and governments, but there is some evidence that it might not be psychosomatic. There is also the "hit" that rural dwellers, many of whom live in the country for the views and peace, take on their real estate values.

Why is all this relevant and in the Canada forum? Well, we have a new government in BC that is touting "green jobs" and talking about wind power instead of site C - repeating the Ontario debacle. We have a government in Alberta that is talking up wind power - and the "green economy" talk is rampant among them.

[Queen K]

I like what Swiss Solar is doing and we're headed South to Burrowing Owl to take a look. I also want to sample the vinos.

Private company, I have no idea if subsidies are involved to get the solar panels installed but we're going to look at them and ask a few questions.

[Smurf]

I'm willing to bet we are helping pay for them somehow.

1) Subsidizing the installation.
2) Buying any extra power at a ridiculously high rate and probably when we don't need it. But no matter when we buy it it will be at a higher rate that can be produced by our own hydro, hopefully site C so it would cost us the rate payers.

Governments are hoping we buy into all of this because we are cutting down on demand and won't need projects like site C. What they are not telling us is how much more it will cost us in the end and that we are truly not helping the environment that much if at all when all things are considered. I truly would like to see proof that they are doing it on their own and not getting money from the taxpayer in some form or another. I would give them gold stars but they are in it for profit and I can't see it.

I know no facts, just betting because of everything that is going on these days.

[The Green Barbarian]

Look at the massive fraud of Solyndra, which really stank because it was all Obama's buddies who stole the cash. And the liberal left media just looked the other way, which is not surprising.

[Queen K]

https://www.castanet.net/edition/news-s ... htm#204761

Somehow solar roof tiles are being installed in the Okanagan and there seems to be more going on in solar installations.


From The Edge:

"He noted that when he started installing solar arrays in 2010 the price was about $7 a watt. Now, it’s dropped down to about $3.

In an area with as much sunlight as the Okanagan Valley, that affordability means solar energy is starting to catch on in a big way.

Terratek Systems owner Landon Aldridge says Kelowna and the Central Okanagan are some of the best places to implement solar, due to an abundance of sun, and some of the highest electricity rates in the province."