Are they going to be like everyone else and reorganize as a "bank?"
No Tesla Bailout
by Patrick Ruffini | December 1, 2008 at 7:28 AM
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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