No Tesla Bailout

Jason Calacanis is my favorite tech pundit. He's also a model for the kind of libertarian / creative class / Web 2.0 voter Republicans should be capturing -- a staunch defender of the free market, an opponent of bailouts, but also pro-gay marriage. (We disagree on the last part -- I think a perfectly reasonable libertarian position is that the people have a right to defend themselves against extra-constitutional interventions from the judiciary.) I'm not sure which way Calacanis voted, but I think that social issues combined with the GOP's surrender of its free market brand probably pushed him to Obama. If economic issues can eclipse cultural issues in the public mind as they already do in the work of government, I'm hopeful that we'll see an influx of Calacanis Republicans.

All of this is lead-in to state that it's incredibly disappointing to see Calacanis defend a bailout -- excuse me, "loan" -- for the Silicon Valley-based electric car-maker Tesla, of which he's an early enthusiast and owner. Essentially, his position seems to boil to down to: free market in principle, but not when my people are being bailed out.

There's no doubt in my mind that Tesla is the future of the American auto industry and the kind of free market, environmentally-friendly success story the right should be championing. Tesla is currently marketing higher-margin electric sportscars to the elite with the hope of producing a $30,000 sedan in a few years that runs purely on electricity.

However, Calacanis's interlocutor Randall Stross is right that the optics of this just stink -- bailing out a niche car manufacturer for the richest of the rich. If the $400 million loan goes through, expect Tesla to become Washington's favorite whipping boy, with campaign ads about how we provided bailout money to protect the investments of rich people who could afford to plop down $100,000+ on an experimental vehicle. Again, I say this because I believe this is an undeserved and entirely avoidable fate for Tesla, which has a very interesting business model.

I worry particularly about government picking winners in emerging industries and stifling innovation among the very people who should be able to succeed on their own. Tesla could be the future, but there is also the chance that it's ahead of its time in that the refueling infrastructure just isn't there yet. And other competitors may yet emerge. By picking a winner, government would short-circuit needed competition in this key market.

It was not exactly unforeseen that Tesla would need to raise gobs of startup capital for R&D, and do so potentially in a down economy. If Tesla is a good bet, and I agree it's a far better bet than that 15th Twitter clone that got venture money, then it should be able to attract venture capital / private equity investment. Look at the explosion in green-tech VC investment, which will probably be the booming industry of the next decade.

Those who made the worst-case slippery-slope argument against the bailout have been proven exactly right. First it was the banks -- which you could kind of justify based on their role in providing liquidity to the overall economy. Next it was specific industries -- autos. Now, it's niche manufacturers. Next, watch for a bailout of other politically correct industries, like green energy firms.

Back to my original riff: will economic concerns be enough to bring people like Calacanis "back" into the party (assuming he was in it to begin with) -- or will the temptation to grab my piece of the bailout pie be too great? (Not that Republicans aren't doing this too.)

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Bail us out of our dependence on foreign oil

 

Greed is fruitful for a season then it comes back and plows the greedy down. Their sense of entitlement blows me away. I think we best be getting on with the promise of making America energy independent.This past year and the record gas prices played a huge part in our economic meltdown and seriously damaged our society.We keep planning to spend BILLIONS on bailouts and stimulus plans.Bail us out of our dependence on foreign oil. Make electric plug in car technology more affordable. It cost the equivalent of 60 cents a gallon to drive an electric plug in car. The electric could be generated from wind or solar. Get with it! Utilize free sources such as wind and solar. Stop throwing away money on things that don't work. Invest in America and it's energy independence. Create cheap clean energy, create millions of badly needed green collar jobs. Put America back to work. It is a win-win situation. We have to become more proactive citizens, educate ourselves and demand our elected officials move this country forward into the era of energy independence. Jeff Wilson's new book The Manhattan Project of 2009 Energy Independence NOW outlines a plan for America to wean itself off oil. We need a plan and we need it now! www.themanhattanprojectof2009.com
 
 
 

 

"very interesting business model" does NOT

include R&D firms. They just exist to lose money and get bought out when they come up with something good.

looking forward to your solution to the commercial paper crisis.

Our interest rate is less than one percent right now, for christ's sakes!

And you want to point out that someone is getting bailed out?

SOLUTIONS FIRST.

Then we can talk gov't stupidity.

As for me, I'll stick to sensible gov't regulations of financial players, and a committment on the people's side as well as gov't to utterly decapitate any corporation deemed "too big to fail"

But that's later. for now, free money.

Do you own a lemonade stand? Have you applied to be a bank holding company?

no bailout

Tesla doesn't need a bailout.  The company needs to re-invent its business model.  The design of the battery in their sports vehicle is still unsustainable, with a very short life-cycle.  More innovation is needed, as Patrick states, in the form of R&D.  

But there's no reason the government should provide that money; in fact, doing so may crowd out private VC dollars.

Tesla still has a long way to go before reaching anything close to mass-production or widespread diffusion of its product.  No bailout!

so you're okay with our entire r&d business in this country

burning alive?

what do you expect our country to do, if we flush all of our researchers to china and india and Israel?

Do you not understand the crisis in Commercial Paper at all????
 

THERE ARE NO VC DOLLARS (people are too worried to invest). It was all bullshit from the beginning, and now deflation is upon us.

Actually...

 

Some background:

1. I wanted to vote for McCain as I think he is--or at least was--a great, independent voice in Washington. However, he lost me when he adopted the techniques of George Bush--the same ones used against him in 2004 by Bush. He sealed the deal by selecting Palin as his vide president.

I'm big fan of  intelligence and I think if you were to give a straight up intelligence test to me and Palin I would crush her. I've also traveled to at least 20 different countries that she probably couldn't find on a map--let alone to have visited.... and I'm just a 38 year old guy who's never spent a day in politics. I'd like to have a vice president who has qualifications that CRUSH my own!!! I think many folks who are libertarian or conservative republicans feel the same way.

The concept of not putting the smartest, most qualified folks into office is the republican party's biggest challenge. This concept of the "everyman in office" is nonsense... we should have super-humans in office if we can find them. 

So, i did vote for Obama because I think is much smarter, and a better manager and selector of talent, than McCain. Look at the way Obama is building his team: brilliant folks who disagree!??! I love it!!!! Debate, intelligence... in the white house!?!?! Really? 

2. I'd rather the government stay out of business as much as possible. Sure, regulation of stock offerings, monopolistic practices and deceptive advertising need to be regulated, but free markets are clearly the best solution. No one can argue against the success for the free market. 

However, we are talking about a $25b loan program to get us through two huge problems here--not a gift. Those two problems: global warming and dependence on foreign oil are NOT going to be solved by the free market. If they are solved by the free market it will probably come at the cost of protracted wars in the middle east and an environmental crisis on a global scale. Do you want to solve these problems with the death of millions--possibly billions--of people? I'd rather spare them and invest as a group.   

As a society we get to pick the big problems we solve together. We did this with Hitler, various diseases and education. 

3. Do I think the big three automakers deserve a bailout? No. I think they have had their chances and should be let go. We should put these loans towards the next generation of car companies. At the very least we should offer these funds equally to the new and the old players and let them fight it out on a balanced battlefield. 

rock on... jcal

 

With all due respect

how many times can you use the word "crush"?

By the way, once you remove the academic pedigree please let me know what you found so "superhuman" about Mr. Obama? Yes, he ran an effective political campaign. So did both Bushes.  Besides that, he accomplished exactly what for the people of Chicago?

Picking Mrs. Clinton as Secretary of State proves only one thing to me. President-elect Obama is a devotee of Michael Corleone.

As for the much maligned Mrs. Palin, perhaps she has not visited many foreign countries. Then again, many rather successful Americans make a huge difference in the lives of their fellow citizens within their own state. By your standards, the contestants in The Amazing Race ought to be filing for the NH primary. 

As for the free markets' inability to solve certain problems, maybe we ought to give it a fair chance to try before quitting on it and signing aboard the S.S. Socialist. 

free markets are inherently unstable phenomena

big business hates the concept of a free market, as it would mean that any shmu could come along and challenge them.

Very unpredictable, that.

They'd much rather have a monopoly, and wield their money to buy out competitors -- which is fundamentally bad for the consumer, as good ideas get buried (see Creative)

Now against all bailouts

I was for the bailout -- before I was against it.  I feared that the US and the world needed the financial system pretty much the way it was, with $60 tr in derivatives of uncertain value.

But the new house construction industry has tanked, and some 500-600 000 folks have lost their jobs.  Probably that many banking/finance jobs need to disappear, as well.

Today, there are too many banks.  I strongly agree with 'most economists' that the the bad banks should be allowed to fail, and the good banks saved.  How do we know which is which?  If they're asking for a bailout, they're a bad bank, or bad company, or a bad homebuyer.

Pre-packaged chapter 11 or chapter 7 bankruptcies for the Big Banks, with Fed loan support to all banks that do NOT have CDS & other derivative exposure threatening their Tier 1 capital. 

Pre-pack chapter 11 for GM, too -- with investors wiped out.  Prepare a way for the UAW pension & health debts to become equity in the new GM.

If the economy needs a bailout, print $1 000 for every taxpayer, every month, until deflation ends.  Not a loan, not a tax. Fiat money. Let the American consumer choose to buy (good), save (good), or pay down debt (good) -- and let the taxpayers choose, thru the 'democratic' market purchases, who the future winners are.

 

Jason, we should have super-humans in office if we can find them.

This is a very dangerous thought. Gov't is force, and those who seek office essentially want to use that force.  There is little evidence that smarter folk have more common sense than merely above average folk.  There is quite some evidence that smarter folk are always smart enough to lie to themselves so as to believe their own rationalizations.

(Was it the real Sarah Palin or SNL Tina Fey that you followed?)

I followed the real Sarah Palin

and vengeful is a mild word to describe her.

Those who would point to overreach of power should look no further than Palin, whose entire Republican establishment in her state hates her.

umm... so you want to blast all of our banks to kingdom come?

There isn't a large bank without CDS exposure right now

FDIC has been bankrupt for a while, and it's chairwoman continues to suggest illegal roles for it.