
In an era when capitalism is increasingly getting a dirty name for its contributions in creating spiraling inequality and facilitating the destruction of the environment, the story of Elon Musk is a refreshing reminder of what capitalism and capitalists, can be.
First, though, just who is this man Musk?
Born in Pretoria, South Africa in 1971 to a Canadian mother and a South African father, Musk was apparently something of a prodigy who taught himself how to program at an early age and by the age of 12 had sold his first code to a computer game company. He subsequently moved to Canada at the age of 17 and by 1992 immigrated to the United States.
Once in the U.S. he attended the University of Pennsylvania and earned two bachelor’s degrees — the first from the Wharton School of Business and the second from the university’s physics program. He then furthered his education at Stanford University, enrolling in its graduate physics program in order to pursue a PhD in Applied Physics. His stay at Stanford was short though, because after only two days he left the program in order to enter into the dizzying, entrepreneurial world of Silicon Valley.
From there the sky was the limit. Musk quickly founded a company called Zip2, a web-based city guide tailor-made for newspapers, with his brother that was bought by Compaq in 1999 for $307 million in cash and $34 million in stock options. While most men would have quit while they were ahead, serial entrepreneur Musk used the $22 million he received from the sale of Zip2 to cofound X.com—an online payment system.
X.com subsequently merged with another company — Confinity — that had as a subsidiary the now-ubiquitous PayPal. Dumping X.com for PayPal, Musk and his compatriots at Confinity grew the brand and improved the service making it, by 2002, an attractive acquisition for Ebay. The sale resulted in PayPal being acquired by eBay for $1.5 billion in stock, of which $165 million was given to Musk.
Having survived the Tech bust at the end of the century and having tested himself in the hypercompetitive world Silicon Valley capitalism, Musk then turned to what would become his true passion – space and renewable energy. Amazingly, he founded not just another company, but a whole string of them dedicated to the larger mission of bettering humanity and the word. Even more amazing was that he did all of this while competing against huge, vested interests that were dominant in industries not known for Silicon Valley-style innovation.
The first company he created was SpaceX, which was founded in 2002 and dedicated to dramatically lowering the cost of launching payloads into orbit. Since then the company developed the first privately funded, liquid-fueled rocket to reach orbit; became the first private company to successfully launch, orbit and recover a spacecraft; was the first private company to send a spacecraft to the International Space Station; and last, but not least, became the first private firm to send a satellite into geosynchronous orbit.
What’s more, SpaceX has won NASA contracts to supply the ISS and given the firm the opportunity to develop a crewed vehicle for the space agency – shoring up the company’s growing portfolio of private industry and non-U.S. government clients who wish to use the company’s Falcon launch systems to loft satellites into orbit. Combined with a planned crewed version of the company’s Dragon capsule – which will sit atop Falcon rockets – SpaceX intends to have manned space-flight capability by 2015. That will be a major development that Musk will need in order to achieve his goal of helping to create a permanent human presence on the planet Mars.
Many people might be exhausted just by SpaceX alone, but Musk is also the man behind Tesla Motors, the car company slowly, but seemingly surely, bringing fully-electric cars to American consumers. Its signature product, the Tesla Roadster, was a high-end attempt to capture the imagination of wealthy taste-makers that succeeded in sparking broader interest in the company’s subsequent, less expensive (though still costly) products – Models S and X. In turn, this is being used to build buzz about Tesla’s highly-anticipated Model E—theorized to be a first attempt at a Holy Grail electric car that may finally match a fully electric drive train with mass-market appeal.
Then, finally, there is Solar City and Hyperloop. The latter, founded in 2006, introduced an innovative business model to the residential and commercial solar power market that emphasized consumer leases rather than outright purchase—dramatically lowering the cost to installing solar panels on private homes and retailers. In 2011 it was the biggest installer of roof-top solar systems in the country, and the second-largest in 2013. Given the exploding pace of the U.S. solar market, which has grown 418% since 2010, SolarCity is and will continue to be a pivotal player in the fight against man-made global warming.
Hyperloop, the latest of Musk’s gambits, is perhaps his most far out – which says a lot given Musk is sending things and very soon people into space. Here, Musk intends to build a high-speed transportation system using existing technology, but a theorized process, to cut down travel time between Los Angeles and San Francisco to just 30 minutes—a shorter time than it takes commercial airliners.
Considering all of this, Musk, is perhaps the epitome of what capitalism is supposed to be. While not exactly a rags-to-riches story – Musk came from the comfortable middle and professional classes much as fellow tech-titan Bill Gates and Steve Jobs did – he nonetheless is not a scion of plutocratic elites who earned their money the old fashion way by inheriting it. He is, like many of America’s great entrepreneurs, a man who was in the right place, at the right time, with the right knowledge, the right connections, and the right vision to turn an idea into world or potentially world-changing inventions or business.
What makes Musk an icon, however, is how he is so unlike the plutocrats on Wall Street who gain vast wealth through manipulating mere paper or the likes of oil and mining companies that merely extract naturally-occurring resources for processes and products invented and introduced a long time ago. Musk is instead on the cutting edge of creating something new and different. He is not trying to corner an existing market, as so many folks claiming to be capitalists today, are trying to do. Rather he is inventing entirely new markets that will benefit not just himself but, if he is successful, the entire world, too.
This naturally makes his type of capitalism – entrepreneurial, risk-taking, hyper-competitive, and unbelievably risky – a far cry from the capitalism practiced throughout much of the rest of the economy, and you see it in how his competitors protect their turf. Car dealers in several states, for instance, have used their political influence to block the legal sale of Tesla automobiles because Musk and Tesla decided to sell cars directly to the public rather than through parasitic middle men. Utilities, frightened by the explosion of rooftop solar, are now trying to impose taxes on consumers who adopt systems of the type sold, leased, and installed by SolarCity. Finally, SpaceX and Musk are using the battering ram of lawsuits to force an end to the cozy system of lucrative, no-bid contracts for corporate behemoths and military-industrial complex welfare queens Lockheed Martin and Boeing that have kept Musk’s Falcons from lofting U.S. military satellites in space.
Therefore the battle between Musk and his rivals is about far more than just businessmen squabbling over profits—it cuts to the heart of what kind of capitalism we want to see succeed and thrive in the coming century. One kind, documented at length in the blockbuster new book by Thomas Piketty, demonstrates clearly how an unchecked, monopolistic capitalism of the type practiced by the entrenched interests Musk is now battling, leads inevitably to highly unequal, politically unstable polities where politics and economics becomes dominated by an undeserving ultra-wealthy who inherit and monopolize rather than innovate and create. Indeed, we are now seeing exactly that kind of capitalism taking over the country we used to call America.
What’s more, this system of monopolistic capitalism doesn’t even produce growth because instead of creating new markets and industries, monopoly capitalism and its legions of financiers and corporate managers live, like Soviet bureaucrats, off monopoly profits – or economic rents, to use the technical term used by economists – created through their smashing of competitors like Musk. Instead of growing the pie, monopoly capitalism concentrates on cutting as big a piece as possible for itself and in so doing shrinks the total size available for all.
In the battle to define what capitalism means in this unfolding century, the public must understand the difference between entrepreneurial capitalism represented by Musk and the monopoly capitalism represented by his competitors. Musk’s variety is by no means perfect – it too produces inequality while the creative destruction it produces can undermine the economic way of life for whole communities – but it is clearly superior to the alternative variety which not only produces bad effects but also produces all too few good ones, as well.
The trick for us going forward is to figure out how to minimize the negative effects of Musk’s entrepreneurial capitalism while simultaneously preventing the practitioners of monopoly capitalism from crushing him. Government will play a crucial role that, but making it work effectively is a tremendously difficult balancing act that our system here in America seems increasingly incapable of doing. That’s because it takes not just smart, driven people like Musk to make things like SpaceX happen—it also takes a bright and savvy polity that knows how to nimbly fine-tune policy so as to maximize the opportunities for and benefits from entrepreneurial capitalism for everyone, not just connected plutocrats. Too bad we don’t have one.