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Reminder: I’m on with Heather Cox Richardson this afternoon at 3:00 p.m. EDT to talk about how conservatism got here. Come hang with us. We’ll post the replay on the site too.
Also for our friends in Canada, we added a second live show with Sarah, Tim and Sam to the schedule. Tickets are on sale now for our bonus Bulwark Live Q&A Matinee show on Saturday, September 27, here.
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1. Oh, Elon
Elon Musk. Remember that guy? Since he crashed out of government service, claimed that Donald Trump was in the Epstein files, and promised to start a new political party to destroy the GOP, he’s been super busy presiding over a failing car company.
But because capitalism is all about meritocracy, the board of Tesla isn’t going to fire Elon. Oh no. They’re looking to give him a raise. Tesla is poised to give Musk a $1 trillion pay package because they believe it will incentivize him to stop being terrible at his job.¹
Is that the way things work at your office? You go AWOL, do a bunch of stuff that tanks the business, and your bosses say, “Would you stop screwing up if we pay you more?”
But this isn’t about fairness. It’s about how concentrated wealth warps market efficiency.
Last Friday Elon spent $1 billion of his dollars to buy more Tesla stock. This purchase was announced on Monday, at which point TSLA share price went way up.
First, look at how the fact of Musk’s wealth impacts the market. He spent $1 billion and within a few hours the value of the shares he purchased increased by $17 billion because his chip stack is so enormous that the market responds to it. Musk’s wealth is of sufficient mass that it exerts an observable gravitational force on the entire market.
Second, look at how Musk’s wealth breaks the link between reality and value. Tesla total sales have declined by 13 percent worldwide this year at a moment when EV sales everywhere are increasing rapidly. Tesla is being overtaken in the EV space by BYD. The Tesla brand is on life support and Musk continues to pursue the political activities that maimed the brand. Its AI product is trash and the results of its self-driving experiment are mixed, at best.
In a normal market, a company’s decision to retain a CEO whose recent results are so catastrophically bad would be taken as a negative signal. And giving that CEO a raise equivalent to the entire present market-cap of the company? The market would think that was insane.
But because of Musk’s wealth, the market ignores objective performance data from the business and reacts instead to the company’s proximity to Musk’s money. This makes a kind of sense, actually: The market believes that (1) Musk’s wealth creates value for TSLA’s stock price that could not be replicated by any other CEO; and (2) This value is much greater than the value of selling more cars.²
In other words: TSLA is a $1 trillion company if it sells 1.9 million vehicles a year with Musk as CEO, but might only be a $50 billion company if it sold 4.5 million vehicles a year with, say, Satya Nadella as CEO.³
Let’s be clear about this: The reason the market believes this is not because Musk is some singular genius, like Tony Stark. It’s because the market sees Musk’s titanic private wealth as a store of immense value for whatever company he owns.
Which brings us to the big question: Is the market right about that? ...
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