JAMES PETHOKOUKIS: Imagine an America with steep billionaire taxes — and without Amazon, Pixar, SpaceX, and Tesla: I shudder at the thought! And you should, too!
I think my concerns are reasonable. Take the case of the Biden administration’s version of “He-Who-Must-Not-Be-Named” — or named only rarely — Elon Musk. Remember, he’s not just an uberbillionaire with dodgy Twitter behavior. He’s also an immigrant who both resurrected the American space industry and grew an electric auto company that makes him, as his Time magazine Person of the Year profile puts it, “arguably the biggest private contributor to the fight against climate change.”
But would SpaceX and Tesla — combined value of an estimated $1.2 trillion — exist in a world of sharply higher investment taxes and a fat new levy on wealth? Maybe not. At least not both of them.
University of Chicago economist Steven Kaplan has run the numbers. To begin: Musk was one of the “PayPal Mafia,” the founders and early employees of the financial technology company. When PayPal was bought by eBay in 2002, Musk, the largest shareholder, walked away with $250 million before taxes, leaving him with $180 million after taxes.
What did Musk do with that cash? Well, he didn’t buy some monstrous Bel-Air mansion or pricey Picasso painting. Instead, he started SpaceX in 2002, putting in $100 million, and Tesla in 2003, putting in $80 million. Musk: “I thought the probability of success was so low that I provided all of the money. All of the money just came from me personally. I didn’t want to ask people, other investors for money if I thought we were going to die because I thought we were.”
Of course, it’s hardly been a smooth ride getting from there to here. In 2008, during the Global Financial Crisis, both companies almost went bankrupt. Musk calls it “definitely the worst year of my life.” Tesla closed a financing round on Christmas Eve 2008. “It was the last hour of the last day that it was possible,” he recalled in 2015. “Even then, we only narrowly survived.”
SpaceX was touch-and-go too. No committee would have taken these risks, and most corporations are run by committee. Committees, generally, are engines for mediocrity. Tycoons are not.
In the 1960s it was possible to imagine government space programs taking us out into the solar system, but those programs quickly failed to live up to their initial promise. And today’s NASA is a sad shadow of the Apollo era-NASA, both in terms of accomplishment, and in terms of spirit.
But while NASA flounders, Bezos’ Blue Origin flies. Planetary Resources is moving toward asteroid mining. And Musk’s SpaceX is racking up huge progress as well. These companies don’t operate by committee, but by having someone at the top with vision.
Tycoons have their downsides: Their successes can breed hubris, and their fantastic wealth often produces envy. But with so much of both government and industry seemingly ossified via interminable meetings and PowerPoint presentations, it’s nice to see someone shake things up. Sometimes, you need a few tycoons.
Or as Pethokoukis writes:
And for my readers who might like to still sock it to the billionaires, one final point: According to estimates by Nobel laureate economist William Nordhaus, innovators captured only 2 percent of the value they created between 1948 and 2001. He found that “only a miniscule fraction of the social returns from technological advances” accrued to innovators and concluded that “most of the benefits of technological change are passed on to consumers.” I would guess an update analysis would be similar. Indeed, I wrote last April about how most of the value created by Bezos and Amazon doesn’t go to Bezos.
A 2019 Economist piece speculated that an understanding of Nordhaus’s point is why “billionaires are tolerated even by countries with impeccable social-democratic credentials: Sweden and Norway have more billionaires per person than America does.” If only more American policymakers possessed similar insight.
Well, if insight were productive of graft, they’d have it in spades.