Tesla is ready to crash and burn. Let it.
The defenders of Silicon Valley are fond of pointing to the many benefits that America’s tech sector has conjured, seemingly from thin air, and to the great virtues of those who run these modern day titans of industry. We all benefit from the rise of the iPhone, or of Google search results, or of YouTube, or of Facebook’s unprecedented ability to connect the world, the argument runs, and besides, the people who gave us these innovations are brilliant, pioneering, free-thinking, public-spirited geniuses only interested in making the world a better place.
All of this is debatable in some form or another. However, for our purposes, let’s presume these points are true. If they are correct that Americans have all benefited astronomically from the innovation and success of Big Tech (and certainly, at least some benefit is inarguable), then must it not also follow that Americans will suffer if Big Tech fails? Moreover, even if Big Tech’s leaders do possess the many virtues listed above, isn’t there a rather important one missing, especially for people engaging in some of the most high risk navigation of uncharted territory? Like, say, humility?
As it happens, these questions are not merely hypothetical. According to a report from Hybrid Cars, Elon Musk’s mammoth car company, Tesla, may end up a liability not just to its investors, but potentially to taxpayers as well. In fact, according to Morgan Stanley, Tesla may already be “too big to fail” because of its more than 37,000 workers, estimated to rise to 50,000 over the next two years. Couple this with the fact that Tesla has yet to turn a profit and, in fact, consistently operates in the red, and add in the fact that the goals that CEO Elon Musk has set for the company no longer look realistic, and you have the recipe for a potential bailout-inducing disaster down the line.
If such a series of events were to occur, it would constitute a crushing financial and political fall from grace for a sector of the economy that has, until now, not constituted an obvious burden on the goodwill of taxpayers. The almost axiomatic idea in Washington that Silicon Valley is guaranteed to profit, and that innovators like Musk will never produce a stinker of a project, would be shoved by the wayside immediately. In entertainment terms, seeing a company like Tesla go belly-up at the expense of the taxpayers would be a disillusioning experience on par with the animation studio Pixar’s production of Cars 2.
And speaking of failures involving cars, let’s talk about Tesla for a second. Not the nitty gritty of the company, but the concept behind it, at least since its acquisition by Musk in 2008: What could have given Musk, or any Silicon Valley billionaire, the idea that expertise in software engineering somehow made them natural fits to enter a market dominated by traditional manufacturing and revolutionize it? Hacking apps is one thing; hacking actual metal and wheels is another. A wiser, or humbler man, might have at least gotten on the board of a traditional car company before buying a struggling one and trying to not only revamp it, but also disrupt all his competitors.
But, because the “disruption” craze was all the rage back when Musk brought Tesla back into the market, everyone leaped on the brand without really thinking about it. But making cars that people want is a much more complicated, and much less easily hackable enterprise than manipulating lines of code. So, for that matter, is building satellites, or sending humans into space. Yet Musk has not only tried to do all of these, but often talked the federal government into subsidizing such wild experiments.
Which is why the warning that Tesla may now be “too big to fail” is so alarming. For Elon Musk to go from the man who put a car in the asteroid belt to being the creator of Solyndra-for-cars would probably be satisfying to his competitors and to his critics, but the ultimate reality is that it would prove a test for how impregnable tech companies’ hold on Washington’s purse strings really is. “Too big to fail” is the archetypal slogan of the swamp that President Trump pledged to drain. If Tesla is getting there, we might consider that rather than being “too big to fail,” it’s just too big. As are most of the tech giants. For the sake of showing that Icarus-esque arrogance cannot count on a blank check from Washington, it is imperative that if Tesla fails, D.C. must let its business model crash to earth unassisted.
Maurizio Pesce/Creative Commons