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As a politically right-leaning person, I have an instinctive aversion to the state intervening in the process of the market and was convinced Tesla would end up

As a politically right-leaning person, I have an instinctive aversion to the state intervening in the process of the market and was convinced Tesla would end up along with Solyndra, Fisker, 123 etc in the pile of failures. I will also say that I was clearly wrong in my prediction, and Tesla has been a great success (I guess the virtue of having political opinions but not political office is that one can actually admit they were wrong and change their mind). I will state a view that (sadly) may very well be heresy on both sides of the political aisle: the success of Tesla is not a blanket validation of government intervention in green industry any more than the failure of, say, Solyndra is a blanket indictment of it. Politics aside, I'd like to ask the question: why was the Tesla investment successful where others were not? Was there any pre-investment indicator that Tesla was more likely to succeed? Did it have something that others didn't?

sally888 13y ago
How do you define success? The intention of the program was to make electric cars for the general public. Tesla so far has sold luxury cars to the rich.
- enraged_camel 13y ago
  No, the intention of the program was to give Tesla (or any other company that qualified for the program) a competitive advantage against incumbents. It definitely succeeded in doing that. In fact, it was so successful Tesla paid back the loans early. Ten years from now when people look back they will definitely say that the government played a critical role in Tesla's success. And that's a very good thing.
  - sally888 13y ago
    "a competitive advantage against incumbents" Where did the DOE say this?
    - SuperChihuahua 13y ago
      I believe they said "to accelerate the production of fuel-efficient vehicles for mainstream Americans and reduce the nation's dependency on oil."
r00fus 13y ago
Perhaps the Solyndra failure was not indicative of the field? Looks like the DOE success rating is pretty damn good (98%): http://www.greentechmedia.com/articles/read/fact-checking-governor-romneys-debate-numbers-on-renewables-and-loans http://www.greentechmedia.com/articles/read/fact-checking-go... So in this case, Tesla is one of the many many successes. The others you don't hear about because they're not suddenly disrupting consumer-facing businesses like car companies.
- sally888 13y ago
  That's misleading. 98% aren't "successes". 98% of the funds haven't been written off. That's relatively easy to do so when a large bulk of your loans are invested into large Fortune 500 companies with billions in assets. http://energy.gov/articles/moniz-tesla-repayment-shows-strength-energy-department-s-overall-loan-portfolio http://energy.gov/articles/moniz-tesla-repayment-shows-stren...
enraged_camel 13y ago
>>I will state a view that (sadly) may very well be heresy on both sides of the political aisle: the success of Tesla is not a blanket validation of government intervention in green industry any more than the failure of, say, Solyndra is a blanket indictment of it. I don't know why you think it would be heretical to say this. Government intervention in and of itself is neither good nor bad. It can be used well, and it can be used badly. But at the end of the day, it is just a tool. In the case of emerging technology players going up against incumbents, the government should absolutely intervene and help the newcomers. In the case of established markets such as agriculture, the government should stay the fuck away and refuse to subsidize anything. I mean, seriously... when it comes to spending taxpayer money, the thought process should be purely pragmatic. We should think about the result we want to achieve, and then determine whether we need government intervention to achieve it.
- sally888 13y ago
  "the government should absolutely intervene and help the newcomers" Where do you draw the line on this? Should all newcomers be subsidized? Every YC startup that wants to enter the automobile sector should be federally subsidized? What about newcomers in other industries like healthcare, banking, and mining? Should those be subsidized too?
  - stcredzero 13y ago
    > Where do you draw the line on this? In the right place. EDIT: HN really can't take a joke. Sigh
    - tokipin 13y ago
      i just got a flash of genius. what if instead of just up and down vote arrows, there were also left and right vote arrows, where each vote would move the post one pixel to the left/right (you would no longer be able to vote up/down). this would lead to awesome positioning wars, or even races to see which post could first cross the right edge of a 1080p monitor
  - 13y ago
erikpukinskis 13y ago
> Was there any pre-investment indicator There were several: * The business argument for electric cars has been there for a long time. It's obvious to anyone who looks at it that there's an efficiency to using electricity instead of gasoline, as evidenced now by Tesla's incredibly low cost-per-mile. That of course doesn't explain Fisker.... * Many of us started believing in Tesla almost immediately after hearing the 3-part business plan: Build a ridiculously fast, desireable sports car (which they did, and brought it to market long before the DOE loan), then build a luxury car, then build a mass market car. I had a sense Tesla would do well with this plan, for the same reason I think Square will do well where others will fail: You need more than a viable destination, you also need a viable stepping stone at every point between zero and profitability. Tesla always had this plan. It was a good one. It's proving itself to be a good one. * Did I mention they already had built, brought to market, and made real revenue off a car? You can't say that about Fisker. * Musk had a track record as a successful CEO.
- SuperChihuahua 13y ago
  Elon himself gave an explanation to why Fisker failed: "Fisker thinks the most important thing in the world is design, so he outsourced the engineering and manufacturing. But the fact is that's the crux of the problem. And he's outsourcing to people who don't know how to solve the problem. So he came up with a product – it's a mediocre product at a high price. It looks good. Particularly from the side it looks good. I don't love the front. It looks too much like a caricature of a Mexican Bandito, the grille. The car looks very big, it's bigger than the Model S, but it has no trunk space and it's cramped inside, particularly in the rear seats. The mark of a good design is something that has great aesthetics and great functionality."
stcredzero 13y ago
> As a politically right-leaning person, I have an instinctive aversion to the state intervening in the process of the market Petroleum and defense? Wall Street? Pork, regulatory capture, and lobbying are part and parcel of American business practice now. Government finagled with business, which does the same to government. I suspect that you dislike as much of that as I do.
newnewnew 13y ago
I find I have a better model of the world when I go past the modern right into the old right, such as Carlyle[1]: "the meaning of all reform-movement, electing and electioneering, of popular agitation, parliamentary eloquence, and all political effort whatsoever, is that you may get the ten Ablest Men in England put to preside over your ten principal departments of affairs. " Government isn't bad because it is government. Government is bad when it sets up systems with incentives built in to keep good men away, and to hamper the few that choose to join it anyway. In this case, the stopped clock of government told its daily truth - it picked a winner. [1] If Carlyle is too dense for you, Moldbug is his modern prophet
tokipin 13y ago
that there is risk is a given. everyone knows that, including the government. that some companies in which this particular program invested failed and some succeeded is an utterly mundane detail
cromwellian 13y ago
There is no formula for success. You are on Y-Combinator, built on the notion of spreading risk around through diversification. The DoE actually has a better record than most venture capitalists and angels, but in reality, you need a pile of failures to get a success. Failure is the engine of success, and the demand from the right that the government not do anything that might fail actually acts to increase government failure and expense, by making agencies so risk-averse that they spend way way more money on analysis and over engineering to avoid failures. That's one reason why SpaceX can beat NASA military contractors because they design and test to try to reduce failure to zero. If you care about small, effective, cheap government, it would be paradoxically better IMHO, to let the government dole out cash like a VC with the expectation of 40 failures for every 1 mammoth success. What I don't get is, people on the right never complain about all of the government failures on military spending. X-Ray lasers, planes and tanks that don't work, crazy and kooky DARPA projects. Hundreds of billions are flushed down the toilet, trillions if you look at the disaster that is the F-35/JSF, and here they are whining about Solyndra. Isn't the huge military industrial complex a ginormous distortion of the market? Why is it so much more terrible for the government to fund early stage industry (which is relatively cheap), but perfectly ok to give huge incentives to oil companies in taxes, regulations, military and state department support, or to spend hundreds of billions on weapon systems that never get deployed or used? I wonder if it has has more to do with cultural conservatism than fiscal conservatism. The kind of George Will "Fossil fuel Cars are American/Apple Pie, and Trains, electric cars, are squishy European stuff" feeling. Green energy = hippies, latte sipping coastal elites, not real 'mericans who drive gas guzzling SUVs across the plains.
- ams6110 13y ago
  people on the right never complain about all of the government failures on military spending. X-Ray lasers, planes and tanks that don't work, crazy and kooky DARPA projects Crazy and kooky DARPA projects... like the internet? Joking aside, some people on the right do complain, especially those with libertarian leanings. You are correct that mainstream politicians (in both parties) do not, they are in bed with these industries and you will never see anything but occasional feigned outrage over something absurd and irrelevant like a $300 toilet seat. I actually think the question is, would Tesla have succeeded anyway? I think the answer is yes. The people buying them now are not people who could not afford them absent the tax incentives. Musk did all the right things, he was an established success story to start with, he started his company in California, home of large numbers of wealthy environmentally concerned people who will overlook practicality if they can make a fashion statement. On the other hand you don't see very many middle class people who can afford a Tesla even with the tax breaks, or whose needs in a car match what a Tesla offers. Investments in companies like Solyndra failed because those companies would have failed anyway, they either had a bad business plan or were trying to enter markets that didn't really exist.

sally888 13y ago

How do you define success? The intention of the program was to make electric cars for the general public. Tesla so far has sold luxury cars to the rich.

enraged_camel 13y ago
No, the intention of the program was to give Tesla (or any other company that qualified for the program) a competitive advantage against incumbents. It definitely succeeded in doing that. In fact, it was so successful Tesla paid back the loans early. Ten years from now when people look back they will definitely say that the government played a critical role in Tesla's success. And that's a very good thing.
- sally888 13y ago
  "a competitive advantage against incumbents" Where did the DOE say this?
  - SuperChihuahua 13y ago
    I believe they said "to accelerate the production of fuel-efficient vehicles for mainstream Americans and reduce the nation's dependency on oil."

r00fus 13y ago

Perhaps the Solyndra failure was not indicative of the field? Looks like the DOE success rating is pretty damn good (98%): http://www.greentechmedia.com/articles/read/fact-checking-governor-romneys-debate-numbers-on-renewables-and-loans http://www.greentechmedia.com/articles/read/fact-checking-go... So in this case, Tesla is one of the many many successes. The others you don't hear about because they're not suddenly disrupting consumer-facing businesses like car companies.

sally888 13y ago
That's misleading. 98% aren't "successes". 98% of the funds haven't been written off. That's relatively easy to do so when a large bulk of your loans are invested into large Fortune 500 companies with billions in assets. http://energy.gov/articles/moniz-tesla-repayment-shows-strength-energy-department-s-overall-loan-portfolio http://energy.gov/articles/moniz-tesla-repayment-shows-stren...

enraged_camel 13y ago

>>I will state a view that (sadly) may very well be heresy on both sides of the political aisle: the success of Tesla is not a blanket validation of government intervention in green industry any more than the failure of, say, Solyndra is a blanket indictment of it. I don't know why you think it would be heretical to say this. Government intervention in and of itself is neither good nor bad. It can be used well, and it can be used badly. But at the end of the day, it is just a tool. In the case of emerging technology players going up against incumbents, the government should absolutely intervene and help the newcomers. In the case of established markets such as agriculture, the government should stay the fuck away and refuse to subsidize anything. I mean, seriously... when it comes to spending taxpayer money, the thought process should be purely pragmatic. We should think about the result we want to achieve, and then determine whether we need government intervention to achieve it.

sally888 13y ago
"the government should absolutely intervene and help the newcomers" Where do you draw the line on this? Should all newcomers be subsidized? Every YC startup that wants to enter the automobile sector should be federally subsidized? What about newcomers in other industries like healthcare, banking, and mining? Should those be subsidized too?
- stcredzero 13y ago
  > Where do you draw the line on this? In the right place. EDIT: HN really can't take a joke. Sigh
  - tokipin 13y ago
    i just got a flash of genius. what if instead of just up and down vote arrows, there were also left and right vote arrows, where each vote would move the post one pixel to the left/right (you would no longer be able to vote up/down). this would lead to awesome positioning wars, or even races to see which post could first cross the right edge of a 1080p monitor
- 13y ago

erikpukinskis 13y ago

> Was there any pre-investment indicator There were several: * The business argument for electric cars has been there for a long time. It's obvious to anyone who looks at it that there's an efficiency to using electricity instead of gasoline, as evidenced now by Tesla's incredibly low cost-per-mile. That of course doesn't explain Fisker.... * Many of us started believing in Tesla almost immediately after hearing the 3-part business plan: Build a ridiculously fast, desireable sports car (which they did, and brought it to market long before the DOE loan), then build a luxury car, then build a mass market car. I had a sense Tesla would do well with this plan, for the same reason I think Square will do well where others will fail: You need more than a viable destination, you also need a viable stepping stone at every point between zero and profitability. Tesla always had this plan. It was a good one. It's proving itself to be a good one. * Did I mention they already had built, brought to market, and made real revenue off a car? You can't say that about Fisker. * Musk had a track record as a successful CEO.

SuperChihuahua 13y ago
Elon himself gave an explanation to why Fisker failed: "Fisker thinks the most important thing in the world is design, so he outsourced the engineering and manufacturing. But the fact is that's the crux of the problem. And he's outsourcing to people who don't know how to solve the problem. So he came up with a product – it's a mediocre product at a high price. It looks good. Particularly from the side it looks good. I don't love the front. It looks too much like a caricature of a Mexican Bandito, the grille. The car looks very big, it's bigger than the Model S, but it has no trunk space and it's cramped inside, particularly in the rear seats. The mark of a good design is something that has great aesthetics and great functionality."

stcredzero 13y ago

> As a politically right-leaning person, I have an instinctive aversion to the state intervening in the process of the market Petroleum and defense? Wall Street? Pork, regulatory capture, and lobbying are part and parcel of American business practice now. Government finagled with business, which does the same to government. I suspect that you dislike as much of that as I do.

newnewnew 13y ago

I find I have a better model of the world when I go past the modern right into the old right, such as Carlyle[1]: "the meaning of all reform-movement, electing and electioneering, of popular agitation, parliamentary eloquence, and all political effort whatsoever, is that you may get the ten Ablest Men in England put to preside over your ten principal departments of affairs. " Government isn't bad because it is government. Government is bad when it sets up systems with incentives built in to keep good men away, and to hamper the few that choose to join it anyway. In this case, the stopped clock of government told its daily truth - it picked a winner. [1] If Carlyle is too dense for you, Moldbug is his modern prophet

tokipin 13y ago

that there is risk is a given. everyone knows that, including the government. that some companies in which this particular program invested failed and some succeeded is an utterly mundane detail

cromwellian 13y ago

There is no formula for success. You are on Y-Combinator, built on the notion of spreading risk around through diversification. The DoE actually has a better record than most venture capitalists and angels, but in reality, you need a pile of failures to get a success. Failure is the engine of success, and the demand from the right that the government not do anything that might fail actually acts to increase government failure and expense, by making agencies so risk-averse that they spend way way more money on analysis and over engineering to avoid failures. That's one reason why SpaceX can beat NASA military contractors because they design and test to try to reduce failure to zero. If you care about small, effective, cheap government, it would be paradoxically better IMHO, to let the government dole out cash like a VC with the expectation of 40 failures for every 1 mammoth success. What I don't get is, people on the right never complain about all of the government failures on military spending. X-Ray lasers, planes and tanks that don't work, crazy and kooky DARPA projects. Hundreds of billions are flushed down the toilet, trillions if you look at the disaster that is the F-35/JSF, and here they are whining about Solyndra. Isn't the huge military industrial complex a ginormous distortion of the market? Why is it so much more terrible for the government to fund early stage industry (which is relatively cheap), but perfectly ok to give huge incentives to oil companies in taxes, regulations, military and state department support, or to spend hundreds of billions on weapon systems that never get deployed or used? I wonder if it has has more to do with cultural conservatism than fiscal conservatism. The kind of George Will "Fossil fuel Cars are American/Apple Pie, and Trains, electric cars, are squishy European stuff" feeling. Green energy = hippies, latte sipping coastal elites, not real 'mericans who drive gas guzzling SUVs across the plains.

ams6110 13y ago
people on the right never complain about all of the government failures on military spending. X-Ray lasers, planes and tanks that don't work, crazy and kooky DARPA projects Crazy and kooky DARPA projects... like the internet? Joking aside, some people on the right do complain, especially those with libertarian leanings. You are correct that mainstream politicians (in both parties) do not, they are in bed with these industries and you will never see anything but occasional feigned outrage over something absurd and irrelevant like a $300 toilet seat. I actually think the question is, would Tesla have succeeded anyway? I think the answer is yes. The people buying them now are not people who could not afford them absent the tax incentives. Musk did all the right things, he was an established success story to start with, he started his company in California, home of large numbers of wealthy environmentally concerned people who will overlook practicality if they can make a fashion statement. On the other hand you don't see very many middle class people who can afford a Tesla even with the tax breaks, or whose needs in a car match what a Tesla offers. Investments in companies like Solyndra failed because those companies would have failed anyway, they either had a bad business plan or were trying to enter markets that didn't really exist.