Coyote Blog

My family often jokes about my obsessive behavior vis a vis Tesla and Elon Musk (on the off chance you are unaware of my thoughts, the most recent are here).  My daughter texted me last night that "Wealthy millennials seem to love Elon."  And that is true.  My answer to her is the title of this post, "People who express opinions outside of their domain seldom have really looked into it much."

Of course, I am not in any way arguing for some sort of strong credentialism wherein people should not express opinions outside of their domain.  God forbid, I would have to shut down this blog.  But I am saying that just because someone is really smart and successful at A does not necessarily mean their opinion on B is worth squat.  As always, as a consumer of opinions, caveat emptor should always be the watchwords.

The first time I really encountered this phenomenon (outside of obvious examples such as the political and economic opinions of Hollywood celebrities) was related to climate change.  I don't see them as often today, but for a while it used to be very common for letters to circulate in support of climate change science signed by hundreds or thousands of scientists.

The list of signatures was always impressive, but when you looked into it, there was a problem:  few if any of the folks who signed had spent any time really looking at the details of climate science -- they were busy happily studying subatomic particles or looking for dark energy in space.  It turned out most of them had fallen for the climate alarmist marketing ploy that opposition to catastrophic man-made global warming theory was by people who were anti-science.  And thus by signing the letter they weren't saying they had looked into it all and confirmed the science looked good to them, they were merely saying they supported science.

When some of them looked into the details of climate science later, they were appalled.  Many have reached the same general conclusions that I have, that CO2 is certainly causing some warming but the magnitude of that warming or in particular the magnitude and direction of its knock on effects like floods or droughts or tornadoes, is far from settled science.

So it is often the case that people who show strong support for ideas or people outside of their domain do so for reasons other than having made use of their expertise and experience to take a deep dive into the issues.  Theranos is a great example from the business world.  Elizabeth Holmes convinced a bunch of men (and they were mostly all men -- women seemed to have more immunity to her BS) who were extraordinarily successful in their own domains (George Schultz, the Murdochs, Henry Kissinger,  Larry Ellison) to become passionate believers in her vision.  Which is fine, it was a lovely vision.   But they spent zero time testing whether she could really do it, and worse, refused to countenance any reality checks about problems Theranos was facing because Holmes convinced them that critics were just bad-intentioned people representing nefarious interests who wanted her vision to fail.

Which now brings us to Tesla and Elon Musk.  I used to love Elon like everyone else.  I still think that having four or five billionaires in a space race against each other is finally the world I thought I was going to get growing up reading Heinlein.  The Tesla Model S was probably one of the most revolutionary cars of the last 50 years.  But he lost me when he committed outright fraud in the Solar City - Tesla deal and since then have only become more skeptical about he and Tesla.

I sort of laugh when folks tell me that really smart successful rich people believe in Tesla.  You mean like James Murdoch, on the board of Tesla and who also was lost his entire investment in Theranos?  Or like Larry Ellison, an adviser and fan of Elizabeth Holmes who invested $1 billion in Tesla just 6 months ago and has already lost 40% of it?   The window on this is probably closing, but over the last 10 years if you wanted to get Silicon Valley investors to throw a lot of money at you, find a traditional bricks and mortar business and devise a story in which you take that industry and convert its economics to that of the networked software world (see:  Uber, WeWork, Tesla, and even Theranos is some of its strategic pivots).

Or how about true millennials and Elon Musk?  Name a wealthy millennial supporter of Elon Musk and Tesla and I can bet you any amount of money they have not looked at Tesla's balance sheet or cash flow or the details of its global demand trends.  They have not thought about its dealership strategy or manufacturing strategy and the cash flow implications of these.  They just like what Elon says.  It sounds big and visionary.  They buy into Elon's formulation that he is saving the environment and everyone opposed to him is in a cabal with big oil (ignoring the fact that Elon routinely uses his Gulfstream VI to commute distances less than 60 miles).  So saying that rich millenials adore Elon is effectively saying that they want to be associated with the same things Elon says he is for -- the environment and space travel et al.

Elon Musk is Ferdinand DeLesseps.  He is PT Barnum.  He is Elizabeth Holmes.   He is the pied piper.   He is fabulous at spinning visions and making them sound science-y.  But he is not Tony Stark.  There is a phenomenon with Elon Musk that everyone thinks he is brilliant until they hear him speak about something about which they have domain knowledge, and then they realize he is full of sh*t.  For example, no one who knows anything about transportation or physics or basic engineering has thought his Boring Company and Hyperloop make any sense at all.  His ideas would have been great cover stories for Popular Mechanics in the 1970's, wowing 13-year-old boys like me with pictures of mile-long cargo blimps and flying RV's.  He is like a Marvel movie that spouts science that is just believable-enough sounding that it moves the plot along but does not stand up to any scrutiny.

All of this would be harmless if he was not running a public company.  I don't really care about the rich folks who were duped by Elizabeth Holmes, but hundreds of thousands of small millenial investors who have totally bought into the Elon hype are literally putting their last dollar into Tesla, and sometimes borrowing more.  Tesla shorts often laugh at these folks on Twitter, calling them "bagholders," but it is a tragedy.  Unless Tesla finds a sugar daddy sucker, and the odds of that are getting longer, I think it is going to end badly for many of these investors

As a disclosure, I have been short Tesla via puts for a while now.  It you really want to understand Elon, the best book I can recommend is The Path Between The Seas about the building of the Panama Canal.  First, it is a great book you should read no matter what.  And second, Ferdinand DeLesseps is the best analog I can find for Musk.

Frankly, I do not know how folks like Mark Perry and Don Boudreaux do it.  They are able to keep going, day after day, year after year, refuting the same stupid anti-trade arguments over and over again.  I don't have the patience or endurance.  Long-time readers will remember I used to spend a lot of time on climate.  But the debate never went anywhere.  It was like Groundhog Day.  At some point I just thought "I've said what I have to say, and now I am done"  (though I actually do have a climate update in the works).

Anyway, Trump has put tariffs on Mexican and Canadian steel and aluminum and is poised to do so for European products soon, a tax that will ultimately be paid by every American consumer.  Sigh.  This is just so economically ignorant it is hard to take it seriously, yet here it is.  In the name of 150,000 or so US steelworkers and a bare handful of obviously politically well-connected corporations, we are going to raise prices on essential raw materials that are consumed in one way or another by a huge number of American businesses and hundreds of millions of US consumers.   Two or three years ago when US manufacturers are moving oversees for lower raw material costs, you will know why.

Republicans are really supposed to know better on this sort of thing, which to me is just proof #12,465 that our political parties represent tribal rather than consistent ideological differences.  Republicans have twisted themselves in so many knots trying to support Trump while knowing better on tariffs that some have actually brought back a version of madman theory.

I am not entirely sure of the intellectual and historical origins of madman theory, but I have always ascribed it to Nixon and Kissinger.

President Richard Nixon and his national security adviser Henry Kissinger believed they could compel "the other side" to back down during crises in the Middle East and Vietnam by "push[ing] so many chips into the pot" that Nixon would seem 'crazy' enough to "go much further," according to newly declassified documents published today by the National Security Archive.

The documents include a 1972 Kissinger memorandum of conversation published today for the first time in which Kissinger explains to Defense Department official Gardner Tucker that Nixon's strategy was to make "the other side ... think we might be 'crazy' and might really go much further" — Nixon's Madman Theory notion of intimidating adversaries such as North Vietnam and the Soviet Union to bend them to Washington's will in diplomatic negotiations

Speaking of Kissinger, the new Conservative explanation of Trump trade (and foreign) policy also includes an element of old-time brinksmanship.  I remember reading something in college from Kissinger, which I can't find now so maybe I have it wrong, but I would paraphrase it as, "it is very dangerous to go to the brink over an issue, but one can never make progress without going to the brink."

Some Conservatives are now arguing that Trump's protectionism is "good" protectionism because it is an opening move in a bargaining game where the US can make headway and perhaps get better rules all around.  As such, Trump's seeming irrationality and willingness to ignore basic economics is a feature, not a bug, supporting the madman model of negotiation.

Ugh.  This might perhaps all be reasonable strategy in a zero-sum game such as, say, negotiating shares of the assets in a bankruptcy settlement (something Trump is actually super experienced at).  Trade, though, is not a zero-sum game.  By definition, trades that are executed voluntarily have to help both parties, or else they would not be agreed to.  As such, anything that reduces the amount of trade between people in two countries is guaranteed to be a net loss for BOTH groups of people.  There are no winners.

Several readers have asked for my comment.  This is what I posted over at Climate Skeptic:

This
morning I was all fired up to write something petty, like "Al Gore now
has made the same contributions to peace as have previous winners
Yassir Arafat and Henry Kissinger."  Later, I considered a long and
drawn out post on the inaccuracies of "An Inconvinient Truth", but I
really have already done that in long form here and in short form here.
In truth, the Peace prize process has for years been about a group of
leftish statists making a statement, and often it has been about
tweaking the US, rather than a dispassionate analysis of true
contributions to peace made with the benefit of some historic distance
(as is done with the scientific prizes).  Further, most folks I argue
with don't really care about the specific inacuracies in Gore's movie,
their response typically being something in the "fake but accurate"
line of reasoning.

So instead I will say what I told a reader by email a few hours
ago.  I tend to be optimistic about the world, and believe that we are
approaching a high water mark (so to speak) for the climate
catastrophists, where we will look back and see their influence peak
and start unwinding under the presure of science and the reality of the
enormous cost to abate CO2.  Gore's Peace prize, in the same year as
his Oscar and that global warming music festival no one can even
remember the name of 3 months later, feels to me like it may be that
high water mark.   The Peace Prize certainly was the high water mark
for Jimmy Carter's credibility, not to mention that of Henry Kissinger
and a myriad of others.  Think of it this way -- if the guys who made
the peace prize decisions were investors, and you knew what they were
investing in, you would sell short.  Seriously, just look at the
group.  Well, they just invested in Al Gore.

Update:  One thing many commenters have not pointed
out is that Al Gore is really manuevering the US and China and India
(and the rest of the developping world) into a position that, if he has
his way, conflict is going to occur over who gets to grow and develop,
and who does not.  CO2 catastrophism has the ablility to be the single
most destabalizing issue of the 21st century. This is peace?