I don't think rent seeking is the "point in capitalism", but a side effect. You never hear proponents argue that capitalism is good because of rent seeking, though usually the same people actively exploit it in this way.
You don't even need to look at tax code. Just consider the fact that many people who work for places like Walmart also get Food Stamps and Medicaid. Many US corporations would not be be profitable (or at least structured the same way) were it not for the government footing the bill at some point along the chain.
"many people who work for places like Walmart also get Food Stamps and Medicaid."
How does this benefit Walmart? If Walmart did hire those people would they magically not need government assistance? This has to be one of silliest criticisms of Walmart around. Food stamps, Medicaid, and other government assistance program are not subsidies to employers.
Sure they are, in an indirect way. This doesn't mean that I want to eliminate food aid and medical care for poorer folks, but it does mean that Wal*Mart doesn't have to pay these folks enough to live on. Perhaps if we can raise the federal minimum wage, we'll be able to cut back some of these programs and get the companies benefiting from these employees' work to compensate them fairly for it.
What's your theory on why those employees are not being compensated fairly for their labor? What is preventing them from taking other higher paying jobs that better reward their talents? If their labor is being significantly undervalued, it implies they should be able to seek better employment.
What is fair compensation for those jobs? What decides that? Who decides that?
Can't it be both? The guy has an impressive depth to him. He worked on a payment system and space exploration. Produced a movie and brought to market electric cars people actually like.
Very interesting spin on Musk. I don't view the space venture as rent seeking. Someone has to supply the government... Now if he pays lobbyists (does he?) then it's rent seeking.
The auto industry is much murkier, because Detroit gets a lot of subsidies too, so you have to subsidize the competition.
It's pushing the technological envelope by applying existing tech. One could argue that Grasshopper is the same sort of thing. DC-X and the Lunar Lander already implemented hovering by tail-sitting on rocket thrust. Musk is just applying the tech.
Are you saying there were no phones with a touch screen before apple?
There's a difference between doing thing and doing things right and going the extra mile and putting in the effort to polish it up making it use friendly and developer friendly by having good documentation.
Electric car existed before Tesla but nowhere as good as the Tesla, rockets existed before SpaceX but they were extremely expensive and mostly funded by taxpayer money touch screen phone existed before Apple but they were awful.
He may well be a rent-seeker but the other ones are not doing electrical cars or space devices, they're funding their summer house, or investing in traditional (let's not compete with ourselves) companies.
However you may view him, I highly doubt Musk was in the room lobbying for programs that provide government funding to his companies when lawmakers decided to fund these programs. These programs are the product of popular will wanting to move towards green energy and cut funding on space exploration. Musk just happened to be the guy who was in the right place at the right time to take advantage of such programs, and do it better than anyone else (cough...Fisker Automotive). Maybe rent opportunist would be a better word than rent seeker.
Aside from that discussion, it's hard to really argue that Musk's technology isn't disruptive and he's not a brilliant innovator. His super charger network is enabling electric vehicles in a way the major automakers could never imagine, and he did it for pennies compared to the financial resources the major automakers have. SpaceX is doing the same thing.
Musk heeded the advice. On March 8, he appeared at a hearing before Pitts’s committee, which oversees spending, at the Capitol in Austin. Oliveira and a SpaceX lobbyist appeared with him.
“Any support Texas can offer would be helpful,” Musk said at the hearing. While Texas was the leading candidate, “We are absolutely looking at other locations.”
He was clearly out there playing states against each other when looking at launch sites for SpaceX. Though to be fair, it feels like every big company in America is doing something like this when they want to expand.
If true, the notion that Musk suddenly started whistling an anti-government loan in energy efficiency shortly after paying back his own loans... well, I'd say it's at least a chink in his visionary armor, if nothing else.
Doesn't make him a monster, but, like most men of vast wealth, at least somewhat of a hypocrite.
When I interviewed with Tesla, before the technical phone screen, there was an HR phone screen that consisted, mostly, of an HR person trying to sell me on the company with statements like "we don't pay as well as Google or Facebook, but you'll learn so much more because you'll be part of a small team".
I wasn't convinced that I should take a below market salary so that someone who was (at the time) worth almost $10B could make another billion.
Musk is a visionary, in a number of ways. He has an impressive ability to come up with great ideas, and an impressive ability extract rents from people much poorer than he is, whether that's the average tax payer or the average Tesla employee.
I really love how you phrased that. You didn't take anything from obvious talents of Elon Musk, yet, as someone inspired by him, you can't do yourself wrong as well.
Something similar happened to me with SpaceX. I went through all the technical interviews and had a chat with Elon. He convinced me in about three minutes that he and SpaceX were the real deal (this was in 2007). Later, HR said I'd have to take a substantial pay cut (didn't say how much), would I be interested? It became a second behavioral interview where I was being tested on whether I would be a loyal employee for low pay because space is awesome.
Not many people want to work on legacy insurace company backend systems, but those who do aren't necessarily unskilled labor. Many of them would rather work on space and would accept a pay cut to do so.
Honest question: of the folks who have the necessary skills, aren't many of them working in low-paying academic jobs?
From the outside, it seems like moving to SpaceX would give them an opportunity to put ideas into practice while making more money than the average post-doc.
Would've loved the opportunity to turn the question around on Musk and ask if he'd be willing to part with a small pittance to compensate fairly and get a good employee at the same time.
I faced the same decision and decided to go with SpaceX. Going from a job I didn't enjoy to one I love was worth the lower salary. I think 'compensate fairly' is exactly what SpaceX did. They were getting great employees for $X. It didn't matter that I was getting paid $1.2X at my last job or that Google was paying $1.3X. I wasn't drafted, I didn't have to take the SpaceX offer. If SpaceX couldn't get good candidates at $X they would make bigger offers. It doesn't make sense for a business to pay more for an employee than it needs to. I don't pay my pool cleaner extra just because I can afford it.
In my mind, Google is $X and SpaceX would be $.76X. Why is passion a trade-off for compensation? Why did you allow yourself to be taken advantage of, and thus drive down the cost of labor? People like you are the reason wages have flatlined over the past 2 decades.
Please don't transfer your sense of victimization on to me. I wasn't forced to do anything and I surely wasn't taken advantage of. I left a good job to come to this one because my career is more to me than just the money.
<rant>
This is simple supply and demand. It really isn't that hard. There are more people wanting to work at SpaceX than SpaceX needs, so that drives the price down. It would be as stupid for SpaceX to pay $X for an engineer that will take $.76X as it would for them to pay $100 for a box of pens that Staples sells for $20. Google can get away with it because they are so profitable. Overspending on employees helps them keep employees and attract new candidates. Really, who has a passion to optimize YouTube load times? Google overcompensates to generate passion for working at Google. SpaceX doesn't need to generate that kind of company passion because working in spaceflight is the passion. Not that company passion doesn't exist, it just doesn't require overcompensation.
Forget about companies and employees. Let's say you have a house and want to add a pool. If you think it will cost about $20k and the first quote is for $18k, do you tell the guy you want to pay him extra? Do you tell him he's letting himself be taken advantage of and that he's why the local pool builders can't raise their prices? What if your favorite builder wants $22k? Are you are horrible person if you negotiate him down to $20k?
And since this is Hacker News, let's not forget about all those suckers working for FREE on Open Source. How responsible are they for programmer wages not being higher? How many of us didn't get jobs writing commercial Unix, web servers, browsers, etc.
If YOU don't want to work for less than $X, then that is your decision. Don't apply to SpaceX. They aren't promising one salary and then shorting you on your paycheck. You get an offer and you take it or leave it.
House of Cards does not fact check, and plays fast and loose appropriating real world names and applying fictional attributes to them. It is obnoxious and frankly it is harmful.
The claimed harm is probably that viewers will be inclined to take it as fact (and then public opinion, voting habits, etc. form according to that distortion).
I mostly sympathize with your statement. But, I also don't think it is a moral offense to offer an offer that can and may be rejected (I assume it was).
I didn't see any mention of moral offense in his statement, but nonetheless there is nothing wrong with making a lowball offer if someone is willing to accept it.
Working on electric cars and clean energy is generally more satisfying than working on Facebook ads that add paid-for visibility to friends' likes to trick you into thinking there are product trends etc.
Just because it's more satisfying does that mean that those in control of the company should get an even more disproportionately large amount of the profits/wealth?
Surely this argument should then count for Elon Musk too and he should be happy to disperse the profits amongst the workers without making such a large amount for the [other] shareholders and himself. Sorry I should probably have generalised this para. as I don't really know enough about the earnings of Musk's businesses to know if he only took a regular wage and dispersed profits evenly or not (I'm guessing it would have been big news if he had though).
He could pay the same rates as deceptive web advertising companies and use a lottery system to give out the jobs (which have heavy demand at that salary and job-satisfaction level).
Or he could hire 1.5X as many people at the lower rates that they will gladly accept and get to space faster.
My question is - was stock part of the compensation offer? In retrospect, getting paid in TSLA stock a while back versus cash would have been a big winner.
I'm not sure this author even gets to the point of showing, by his own definition, that Musk is a rent-seeker.
He establishes a broad definition of "rent-seeking" early in the article as this:
...income from government-enforced monopolies, such as patents, copyrights or government projects...
Then he details how some of Musk's businesses have benefited from the government, but fails to actually establish how any of those benefits translate into a "government-enforced monopoly".
Emitting cars don't normally pay anything to emit pollution, but with the zero-emmissions subsidy, they do. But the author treats zev credits as something that just comes out of nowhere.
Why is it hypocritical to recieve federal investment, only to decide it isn't for you, after which you pay them back? And why is it hypocritical to have the government as your main client for an entirely different company (SpaceX)?
Barry Ritholtz (the author of the piece) is also the author of Bailout Nation, a book about the financial crisis that I really enjoyed reading. To project his feelings about investment bankers on Elon Musk is taking it one step too far, in my opinion. Calling him hypocritical for criticizing the government while receiving tax breaks? If that's the case, the vast majority of people living in any free country are hypocritical, too.
Why is it hypocritical to recieve federal investment, only to decide it isn't for you
The article seems to be suggesting Musk decided government loans to promote alternative energy was a bad idea in general, not that it was just a bad idea for Tesla to take such a loan. The article doesn't say whether he's made any actual statement to that effect though.
The government wishes to spur innovation in certain directions because it feels investment in those areas is lacking - presumably based on analysis of potential benefit of successful development in that area (eg. alternative energy, electric cars, commercial space travel). The incumbents in those sectors do not act to meet these perceived gaps. An upstart outsider comes in with aim of disrupting those industries.
This feels like incentive programs are doing exactly what they're designed for. Author should spend a couple of minutes investigating economic concepts of externalities as justification for taxation and subsidies.
The comment re. hypocrisy of opposing something a grant program you were a recipient of is a different matter from rent seeking, and yes without context (which I do not have) it sounds pretty bad form.
This seems like a bit of unfair muck-raking. I take his point about federal loans/investment, but as far as I know Musk still thinks tax credits to promote alternative energy are a good idea. When he stops receiving those and then claims they were a bad idea, maybe I'll believe you more. Until then, as far as I can tell he is just ingeniously taking advantage of the numerous government programs to promote good commercial behavior to enable these technologies that might never come about otherwise. that's not rent-seeking, it's smart, and it only lowers the risk of a still very risky enterprise (or three of them).
The bottom line is that what Musk is doing has the potential for massive benefits, and we will all be the beneficiaries of this. as long as how he gets there is within the spirit of the rules, i'll give him a pass.
I would tend to agree. I mean, the point of those government programs is to encourage private investment in clean energy technology. I would say that Musk is basically the prime example of what the programs are designed to support. I would be willing to tolerate some amount of rent-seeking behavior if its in the interest of funding exactly the research we want funded anyway.
> But is TSLA another Google, or just another DoubleClick? DCLK zoomed from $2 to $200 without ever showing a profit, something Tesla has yet to do with its cars. It then famously crashed.
From the linked Forbes article. How does this comparison even begin to make sense? Comparing a car manufacturer to two ad companies?
EDIT: Checked the publication date on that Forbes article, May 2013. So trying to support a thesis about via an article now a year out of date.
I tuned out of this article as soon as I saw the name "Craig Pirrong." I've heard about him before in the financial sector - kind of a scummy, academic-for-hire. The kind of guy who gets really mad when you ask him about his paid consulting positions and whether it might affect his objectivity.
Anyway - reading anything in Bloomberg about "rent-seeking" or monopolies is the definition of irony IMHO. Always the other guys taking advantage, right?
"Rent-seeking" is specifically a scheme to get rich without creating wealth. Mr. Musk is a huge beneficiary of low-interest federal loans and government-support programs, but at least he's actually creating wealth.
Public money is not always socialism. Tax payers are customers and investors. Majority rules and the majority in California want to invest in companies that help towards the goal of clean energy and air. The minority can grumble about socialism and the superiority of private capital, but they hurt their case when they also advocate the abolition of the EPA and the clean air and water act. The voters of California have rejected their arguments. Elon Musk is an amazing person and the people of California do well to support his efforts.
I should maybe add to this discussion...why is it Musk's fault for taking advantage of money the government offered him?
That's like getting mad at the person your significant other cheated on you with, instead of getting mad at the person who cheated.
The government should be the one at fault here if people are unhappy about the money Musk is making off of them, they are the ones who chose to pay him.
this is so absurd. Musk chose the most difficult industries, and both SpaceX and Telsa were 5 minutes away from bankruptcy in 2008. and yet he is "rent-seeker". if that where the case he would have gone for traditional corrupt industries, such as big oil.
Why does it have to be either/or? Musk is pushing technology to new heights ... has anyone else managed to create a profitable private space company?
If the government is too incompetent to supply the space station that they own (part of) and they can hire someone to do it, why shouldn't they? And I'll bet the taxpayers would pay more if NASA had built the same program!
I'm not saying Tesla and SunCity aren't reliant on subsidies, but why can't you complain about other electric cars and hybrids as well ... the government subsidies are an attempt to help the environment right?
So I finished the article and decided it's a hate-piece. There's not enough logic to let their conclusions hold up even if the facts are true.
Half of the argument in the parent article is a shoddy attempt to make it appear Musk's sole intent for business with a city in Texas is to squeeze money from the poor inhabitants. This is ludicrous.
Also where is the source for Musk stating loans are bad?
Surprise, surprise! A successful businessman seizes opportunities and is a tough negotiator. Were some of you expecting Space-X and Tesla to function as a non-profit?
I'm against all sorts of taxes and tax breaks. It works both ways, though.
While some may call me hypocritical for accepting a write-off that I oppose, at the same time I pay the taxes that I disagree with. This makes me (and Musk) law abiding.
The government has loans for certain types of activity. He took the loans because they were the lowest cost for the capital. It is possible to take those loans and be against them at the same time.
The real problem is that the government is giving out loans that are practically unsecured, usually to connected individuals. Musk actually has a car company producing cars. Yes, he could have sought private financing, but the government underbid that financing and he took government loans. It's hardly rent seeking.
Past a certain level of ambition--e.g. when you want to redefine transportation, energy production or interplanetary colonization--you cannot avoid mingling with governments. Doing so on friendly terms, and if possible gathering a bit of cash on your way, is the sane way to do it.
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