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For the same reason that Musk needed a huge, free government loan to get Tesla off the ground: without the government, he'd be less rich.

LekkoscPiwa 13y ago
Or maybe - just maybe - without the Government he would have to spend more time and effort to persuade private investors and companies to help him. I think by choosing the Government he choose the path of the least resistance. I don't blame him, just saying, that for the rich getting the money from the Government might be much easier than getting it from the markets. Which would be just another example of why the Government should stay away from the economy.
pbreit 13y ago
The government loan was hardly free. Not only did it incur interest, there was an equity component that nearly kicked in had Tesla not had sufficient funds to pay off the loan early.
- thrownaway2424 13y ago
  Right. If Tesla failed, the people own a worthless company. If it succeeds, Musk retains his stake in a valuable company. Compare what would have happened if Tesla needed to raise $500m from private investment at the start. Musk would have been diluted up front.
  - LockeWatts 13y ago
    You're still missing the part where it incurred interest, so it wasn't free in the least.
    - thrownaway2424 13y ago
      Musk put $40m into Tesla and his stake is worth billions. The people put $465m into Tesla and their stake is worth nothing, after making a paltry $12m in interest. In addition, while Tesla was paying the government 3% on that loan, they were paying Musk 10% on his loans, in effect shoveling government money directly into Musk's account. This is a classic example of socializing the risk while privatizing the profits. Yes, Musk is a smart guy with plenty of great ideas and good execution. But he's also plenty good at funneling government money to himself.
      - deleted 13y ago
        [deleted]
      - magicalist 13y ago
        No, it's a very visible example of socializing the risk while privatizing the profits. It's pretty small potatoes compared to the normal contract guarantees to even, say, companies doing highway maintenance, and let's not get into the "socialization" of science funding. Where are our guaranteed ROIs on NSF grants? The government makes these investments all the time. In fact, usually the (barely implicit) goal of government funding is to also encourage job and wealth growth. $12 million isn't much of a return, but even revenue neutral is a win for the average government investment. And, like the tax breaks to encourage people to buy the very cars the government was helping pay to produce, the idea is to help kickstart an industry that might not have the differential to self-start, but has the potential to eventually be self sustaining and bring outsize benefits compared to the investment. Basically the same reason we fund basic science research as well. And again, this is highly selective outrage. You can disagree with the whole category of government-sponsored industry, but you have a bit of an uphill battle there. Meanwhile, there are far more "classic" examples all around, not to mention the two other major car companies that together received nearly 16x what Tesla received and have so far not exactly put in a great showing for the industry-creating change that money was supposed to help fund.
      - krichman 13y ago
        Sounds like he took advantage of an ignorant government. I'd do the same. So did Wall Street, but we got less back from that one.
        mikeyouse 13y ago
        Why was the government ignorant? They had a loan program to kick-start electric vehicles. One of their loans was largely responsible for the existence of Tesla and its ensuing success. The loan was paid back. Should the government have been more profit-maximizing? Do we want civil servants taking large equity stakes in private companies? We fund research (both directly and through the university system) all the time with the understanding that the net benefits to society outweigh the direct costs of the programs.

LekkoscPiwa 13y ago

Or maybe - just maybe - without the Government he would have to spend more time and effort to persuade private investors and companies to help him. I think by choosing the Government he choose the path of the least resistance. I don't blame him, just saying, that for the rich getting the money from the Government might be much easier than getting it from the markets. Which would be just another example of why the Government should stay away from the economy.

pbreit 13y ago

The government loan was hardly free. Not only did it incur interest, there was an equity component that nearly kicked in had Tesla not had sufficient funds to pay off the loan early.

thrownaway2424 13y ago
Right. If Tesla failed, the people own a worthless company. If it succeeds, Musk retains his stake in a valuable company. Compare what would have happened if Tesla needed to raise $500m from private investment at the start. Musk would have been diluted up front.
- LockeWatts 13y ago
  You're still missing the part where it incurred interest, so it wasn't free in the least.
  - thrownaway2424 13y ago
    Musk put $40m into Tesla and his stake is worth billions. The people put $465m into Tesla and their stake is worth nothing, after making a paltry $12m in interest. In addition, while Tesla was paying the government 3% on that loan, they were paying Musk 10% on his loans, in effect shoveling government money directly into Musk's account. This is a classic example of socializing the risk while privatizing the profits. Yes, Musk is a smart guy with plenty of great ideas and good execution. But he's also plenty good at funneling government money to himself.
    - deleted 13y ago
      [deleted]
    - magicalist 13y ago
      No, it's a very visible example of socializing the risk while privatizing the profits. It's pretty small potatoes compared to the normal contract guarantees to even, say, companies doing highway maintenance, and let's not get into the "socialization" of science funding. Where are our guaranteed ROIs on NSF grants? The government makes these investments all the time. In fact, usually the (barely implicit) goal of government funding is to also encourage job and wealth growth. $12 million isn't much of a return, but even revenue neutral is a win for the average government investment. And, like the tax breaks to encourage people to buy the very cars the government was helping pay to produce, the idea is to help kickstart an industry that might not have the differential to self-start, but has the potential to eventually be self sustaining and bring outsize benefits compared to the investment. Basically the same reason we fund basic science research as well. And again, this is highly selective outrage. You can disagree with the whole category of government-sponsored industry, but you have a bit of an uphill battle there. Meanwhile, there are far more "classic" examples all around, not to mention the two other major car companies that together received nearly 16x what Tesla received and have so far not exactly put in a great showing for the industry-creating change that money was supposed to help fund.
    - krichman 13y ago
      Sounds like he took advantage of an ignorant government. I'd do the same. So did Wall Street, but we got less back from that one.
      - mikeyouse 13y ago
        Why was the government ignorant? They had a loan program to kick-start electric vehicles. One of their loans was largely responsible for the existence of Tesla and its ensuing success. The loan was paid back. Should the government have been more profit-maximizing? Do we want civil servants taking large equity stakes in private companies? We fund research (both directly and through the university system) all the time with the understanding that the net benefits to society outweigh the direct costs of the programs.