The famous person success of Elon Musk, the world’s richest man, with a fortune now estimated at $246 billion, poses fairly a puzzle. How can somebody whose wealth and fame relaxation on progressive applied sciences—electrical vehicles and rocket launches—be such a doofus? By no means thoughts his cursing at advertisers, getting excessive on a podcast, fostering white supremacists or difficult one other peculiar wealthy man to fistfights, the globe’s most well-known know-how mogul has spent a lot of the previous two years blowing $44 billion on Twitter (now X) solely to drive it into the bottom.
And but this similar character stays vital to Ukraine’s protection in opposition to Russia, U.S. nationwide safety house launches and the American automotive trade’s hopes of withstanding a flood of low-cost Chinese language electrical autos. His Dragon capsule will retrieve astronauts stranded on the Worldwide House Station by his doddering house competitor, Boeing, NASA introduced in August. This similar genius crudely proposed impregnating the pop star Taylor Swift, in entrance of hundreds of thousands of individuals, following the second presidential debate in September. Once more, how can somebody be so important, so wealthy and, on the similar time, such a dingbat?
A have a look at historical past and economics means that Musk, now age 53, received his fortune from a “second-mover” benefit, well-known in innovation scholarship. With regulation, advertising and marketing and primary rules established, a savvy second comer—assume Fb trampling MySpace or Google crushing Yahoo—can take over a burgeoning trade with a sensible innovation pitched at a ripe second. Musk additionally loved an excessive amount of success, in any other case often known as handouts from Uncle Sam and fewer astute opponents.
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Right here’s the way it occurred: By 2002, when he was solely 31, Musk had gone from promoting his stake in on-line cities information Zip2 for $22 million to cashing out from the fee app PayPal for $175.5 million, minting himself as simply one other Silicon Valley wealthy man. He subsequent made his two finest investments, an preliminary $6.35-million stake in Tesla, the electrical car (EV) maker, in 2004 and a reported $100-million funding in SpaceX, the reusable rocket firm that he based in 2002.
By doing so, he took his investments into two intimidating, established industries with histories of innovation: vehicles and rockets. For the reason that finish of World Conflict II, economist David Mowery first famous, the U.S. innovation system had rested on three legs: sturdy antitrust guidelines that made new innovations the aggressive enviornment for companies; liberal licensing and patent guidelines for progressive start-up corporations getting into that enviornment; and regular authorities and protection spending that seeded their new discoveries.
By the flip of the twenty first century, nonetheless, the primary leg of that progressive triangle grew to become wobbly after the auto and rocket industries underwent mergers and consolidations. Fiat acquired Chrysler in 2009. And three years prior, Lockheed Martin and Boeing fashioned the United Launch Alliance (ULA) to launch costly rockets, a three way partnership green-lit by antitrust regulators asleep for the reason that Reagan administration. In an period of “shareholder” capitalism, these behemoths aimed to remodel short-term earnings into Wall Road–pleasing numbers quite than investing in improvements for the long run.
Usually these innovations had been already at hand, resting on the shelf. Electrical vehicles, for instance, weren’t a brand new know-how in 2006 when Tesla unveiled its prototype Tesla Roadster. The Roadster was the brainchild of engineers Martin Eberhard and Marc Tarpenning, who had co-founded the corporate three years earlier.
“Musk invented neither the electrical vehicle nor the Tesla electrical car,” famous George Mason College’s Camilla Bosanquet in a 2023 historic assessment. “It appears absurd to should say this, however the success of Tesla autos up to now decade appears to have obscured these details.”
Within the U.S., electrical autos date to 1890, and the know-how was widespread on U.S. roads till Henry Ford’s cheaper Mannequin T, operating on gasoline, wiped them out within the 1910s. They languished for many years thereafter, even within the oil embargo period of the Seventies. The auto trade as a substitute turned to greater and heavier SUVs and pickups operating on fuel engines.
The indicators of a turning level for electrical vehicles got here within the Nineteen Nineties with the introduction of hybrid half-electric autos, such because the Toyota Prius, and Normal Motors’ (GM’s) rollout of the beloved EV1 electrical automotive. (The Prius notably packed a nickel-metal hydride battery pioneered in U.S. Division of Power analysis.)
GM chief govt Rick Wagoner, a Wall Road–oriented MBA and never an engineer, later acknowledged axing the EV1 program was his largest mistake. His 2002 determination to not pursue EVs, made together with different automakers promoting fuel guzzlers, left the sector open for Tesla’s founders, impressed by the recognition of the EV1, to promote a $100,000 sports activities automotive that accelerated like a lot pricier wheels.
However what actually made Tesla a hit was a $465-million mortgage, since repaid, from the DOE to the agency in 2010. Whereas some critics have complained, this authorities largesse is one among Mowery’s three legs of U.S. progressive success. It’s why aluminum is reasonable, oil is reasonable and corn is reasonable.
Reusable rockets had been likewise not a brand new know-how in 2006, when SpaceX made its first Falcon 1 launch. Greater than a decade earlier, NASA had pioneered the DC-X reusable rocket, which landed upright. The DC-X was constructed by the McDonnell Douglas Company (now a part of Boeing), however the aerospace trade by no means capitalized on the know-how till Musk began SpaceX. It’s price noting that SpaceX solely survived due to a $396-million 2006 contract from NASA, extra authorities help.
Musk has credited the DC-X with paving the way in which to reusable rockets, a know-how now sought by Europe and China. However for now, the underside line with SpaceX is that its rockets are cheaper as a result of they’re reusable.
In hindsight, Musk owes his massive success to having complacent opponents too myopic to innovate or progressive rivals too small to draw the federal funding that saved Tesla and SpaceX. (A smaller reusable rocket competitor, Kistler Aerospace, went bust in 2005, after SpaceX protested its receipt of such largesse.) Proof comes from his failures in photo voltaic roofs, in digging tunnels and in social media, industries the place helpful improvements aren’t left mendacity round. Musk’s bid to money in on space-based communications with Starlink—a know-how that value Motorola a $5-billion fortune within the Nineteen Nineties and failed regardless of the profitable launch of a 66-satellite constellation—now appears to be like like one other late-mover success story made potential via authorities funding and seeding from earlier analysis.
The key of Musk’s success, then, is that coming in second is typically the easiest way to return in first. Beginning as a rich narcissist who’s conceited sufficient to leap into locations the place others had failed has additionally (generally) helped. Competitors is coming, nonetheless, and antitrust guidelines are shifting. With these two legs of his personal progressive success wobbling, Musk’s erratic decision-making might not be sufficient to maintain his imaginative and prescient of the long run—and his firms—aloft.
That is an opinion and evaluation article, and the views expressed by the writer or authors aren’t essentially these of Scientific American.
