Musk in contempt?

The SEC wants to slam Elon Musk with contempt over a thirteen word tweet. Musk has taken to Twitter to both vaunt his company and castigate the SEC. He’s under an existing SEC settlement that requires company oversight of his communications. Musk’s brief tweet on Feb. 19 that stoked the ire of the SEC said: “Tesla made 0 cars in 2011, but will make around 500k in 2019.” The SEC swooped in, charging that Musk hadn’t received preapproval for the tweet and convinced Musk had misled the public.

The SEC’s overzealous attempt to wield the contempt power is disturbing. Especially given Musk’s vocal and mocking disdain for the SEC, the regulator’s attempted coup over the content of his tweets raises serious First Amendment concerns. Here, it seems the 500K estimate was not precise, but Musk went on to clarify on his Twitter feed, and he didn’t conjure the number from the ether. At worst, it was incomplete information. Welcome to Twitter. I just can’t quite stomach the fact that a regulator is out there lurking, ready to pounce on any linguistic imprecision in a forum where brevity is the name of the game. Obviously, Musk’s statements have an impact on the market, but investors are sophisticated actors who should be expected to do their homework. The SEC’s paternalistic and aggressive monitoring of Twitter feeds should raise our hackles.

AI: Bootleggers and Baptists Edition

“Elon Musk Is Wrong about Artificial Intelligence and the Precautionary Principle” – Reason.com via @nuzzel

(disclaimer: I haven’t dug any deeper than reading the above linked article.)

Apparently Elon Musk is afraid of the potential downsides of artificial intelligence enough to declare it “a rare case where we should be proactive in regulation instead of reactive. By the time we are reactive in AI regulation, it is too late.”

Like literally everything else, AI does have downsides. And, like anything that touches so many areas of our lives, those downsides could be significant (even catastrophic). But the most likely outcome of regulating AI is that people already investing in that space (i.e. Elon Musk) would set the rules of competition in the biggest markets. (A more insidious possible outcome is that those who would use AI for bad would be left alone.) To me this looks like a classic Bootleggers and Baptists story.

Elon Musk on the Heroic Journey for a Fantastic Future

In ‘The Entrepreneur on the Heroic Journey’ (1997), Dwight Lee and Candace Allen write that entrepreneurs are heroic figures of society whose accomplishments are worth celebrating. Elon Musk is certainly an entrepreneur whose ingenuity and drive to create a fantastic future are admirable. In our current times when it seems fashionable to castigate entrepreneurs and those who have earned a fortune, it is nonetheless hard to read Ashlee Vance’s biography of Elon Musk and not to be in awe of his accomplishments. Elon Musk perfectly matches Lee and Allen’s description of our modern day heroes: individuals who shape society by serving the people and adding value to society through their entrepreneurial activities.

According to Lee and Allen, a hero travels through three stages.

1. The first stage of the modern entrepreneurial hero is a venturing away from the world of accepted norms. The hero asserts “There is a better way, and I will find it!” Deviating from familiar social norms and customs, he travels into unknown territory while risking failure and loss for some greater purpose or idea. That is exactly what Elon Musk did several times in his life. First, as a teenager when he dropped out of the University of Pretoria to leave South Africa for Canada. For someone who has an early inclination toward computers and technology – Musk had taught himself the BASIC programming language at the age of 9-10 and created homemade explosives and rockets – South Africa was like a prison. Although he did not know back then what exactly he wanted to achieve in Canada, his curiosity and intrinsic desire to leave an everlasting impact on the world led him to the United States. His daydreams at Queen’s University and the University of Pennsylvania usually led him to the conclusion that the Internet, the Renewable Energy, and the Space industries were the areas where he could make a huge impact. Back then, Musk already vowed to pursue projects in all three. This was in 1994 when few could’ve predicted the many ways in which the Internet would change people’s lives, when the last successful American automobile startup (Chrysler) was dates back to 1925, and when the American aerospace industry was dominated by only Boeing and Lockheed Martin. A vow like this was surely considered super-crazy. Musk pushed himself, characterized by energy, vision and bold determination into the unknown.

2. In the second stage, the entrepreneurial hero sacrifices himself for a vision or dream he has, putting his own comfort at stake. The two Internet companies he founded were Zip2, the Web’s first yellow pages, and X.com that would eventually merge with Confinity to form PayPal. The second stage of the entrepreneurial hero is his overcoming of hardships and challenges. With just $28,000 invested in Zip2, Musk seemed to never leave the office and slept on a beanbag next to his desk. He would take showers at the YMCA and when Heilman, an early Zip2 employee, would come into the office at 7:30 or 8:00 AM he would give him a kick so Musk would wake up and get back to work. Musk’s slavish devotion to the success of his startups is best expressed when he told a VC investor, “My mentality is that of a samurai. I would rather commit seppuku than fail.” (Vance, 2015, p. 72)

Zip2 would eventually be taken over by Compaq Computer for $307 million and would earn Musk $22 million for his 7% stake in the company.

Musk’s second start-up was X.com which was an initial attempt to create an online bank. During his internship at the Bank of Nova Scotia, he found out that “bankers are rich and dumb” (p. 83) and that this provided a massive opportunity to disrupt the industry. Realizing that money is nothing but an entry in a database, Musk thought that he could enter the industry with relatively little investment. This could however not be any further from the truth. The regulatory issues they were facing seemed insurmountable and several of the early employees of X.com soon left the company after believing that Musk’s vision to disrupt the banking industry is unrealistic. One other X.com employee said, “There were a million laws in place to block something like X.com from happening, but Musk didn’t care” (p. 92). Despite such issues, Musk held on and secured a banking license, FDIC insurance and formed a partnership with Barclays.

Musk had also faced many other misfortunes in the two companies that he founded soon after he left X.com: Tesla and SpaceX. In 2008, he was almost broke while divorcing his first wife – fearing he had been wasting almost all of his $180 million he earned from the sales of PayPal to eBay. SpaceX had just enough money for its fourth Falcon 1 launch, and possibly the last launch of SpaceX. Tesla had still not delivered on its promise to produce its Roadster and needed a government loan at a time when other automobile and financial corporations were also struggling. In Musk’s words: “I remember waking up the Sunday before Christmas in 2008, and thinking to myself, ‘Man, I never thought I was someone who could be capable of a nervous breakdown.’ I felt this is the closest I’ve ever come, because it seemed… pretty dark.”

3. In the third stage, the heroic entrepreneur returns to the community with his product, service, or new process. Having been just days or weeks away from bankruptcy for both Tesla and SpaceX, Musk had eventually survived and created the first successful car company since Chrysler in 1925 and was now competing with Boeing, Lockheed Martin, the Russians and the Chinese in the aerospace industry. Tesla has since delivered the Roadster, the Model S, X and is planning to deliver the Model E which will have a starting price of $35,000 by late 2017. Tesla is on its way to alter the automobile industry. SpaceX had produced rockets that can return back safely on earth which significantly lowers the costs of sending rockets into space. Elon Musk’s reward for increasing benefits to society are his profits and his wealth that he could only have accumulated when people value his products enough that they are willing buy them.

Looking at the many accomplishments of Musk and how he has served the public with his products, I believe that he can truly be considered a modern hero. The greatest contribution I think is that he has given people hope and renewed faith in what technology can do for mankind.

References
Allen, C., & Lee, D.R. The Entrepreneur on a Heroic Journey, 1997
Vance, A. Elon Musk: Tesla, SpaceX, and teh Quest for a Fantastic Future, 2015