Many praise Elon Musk as the greatest innovator of an age. Tesla Motors is redefining the auto industry and making the world a better place. That’s the progressive narrative, at least.
In reality, Musk had a single success when he launched PayPal before he figured out one of the most exploitable methodologies for making money the world has ever seen. He promises innovation and gets the government to give him money. While SpaceX is deemed profitable (even though it doesn’t actually sell anything) Tesla Motors has a long way to go.
Recent Numbers
Celebrations abound for fans of the company as it turned a profit for the third quarter of 2016. This represents only the second quarter in the company’s history that a profit has been earned. The three-month report showed a net gain of $21.88 million dollars.
Now, you might be thinking that number looks small for a company that sells cars. You don’t yet realize how small it really is. The average quarterly net income for Tesla is $-281 million. That’s right, the other quarters of 2016, Tesla lost ten times as much money as they posted in their lonely profit.
Another little tidbit is even more grim. The posted profit includes $139 million in subsidized clean car credits as income. Without it, even their profitable quarter actually lost the company well over $100 million.
Anyone who doesn’t know more about Tesla might wonder how they’ve stayed in business for over a decade while throwing money away so rapidly. The answer is remarkably simple: the company is heavily subsidized.
To Musk’s credit, he found a way to sustain his biggest failure. He sells California clean car credits to other manufacturers. Those credits, combined with hundreds of millions of dollars in federal credits and loans on top of a regimented sale of stock has been able to keep the business open so far.
That said, trouble may be brewing for the company. Tesla has yet to find a way to sell goods for a profit, and if a congressionally backed Trump administration makes any of the moves everyone expects, Tesla will be among a large number of companies that might take a big hit. Without the government picking up the outrageous bills, there is no way for the company to persist, and they will absolutely miss their previous projections of actually earning an income by 2020.
Tesla as an Example
Picking on Tesla seems unnecessary. They’ve been running their scheme for 13 years. No one is exactly surprised by the numbers at this point. Tesla, really, is an example of politics. Elon Musk and his company have attained incredible status among progressives and environmentalists, who often promote Musk as a modern savior.
This is pretty much the pinnacle of the dangerous mentality running so rampant on the left these days. Reverence is thrown only at ideas and concepts that sound nice, rather than honestly reviewing the facts of a situation.
Tesla Motors has done nothing to help the environment and is largely a financial drain on the state of California and the U.S. as a whole. Still, pulling the plug on this failed experiment can and will be met with vitriol.
The problem extends much farther. Socialism has resurged anew, once again condemning the word “profit” as the most heinous blasphemy. The left wants to double down on Obama methodologies that completely failed. Solar roads, attacks on fracking, bans on wood stoves in Alaska and an abusive demonization of the oil industry are just a few prominent examples of this complete attack on logic and results-oriented policy.
It’s a frustrating situation because the truth is unbearably logical. The companies that succeed are the ones that can sustainably solve problems. The socialist attack on this idea forget an important lesson: profitability is a measure of sustainability, not a measure of exploitation.
Making Smart Financial Choices
Before this turns into a wholesale rant, let’s bring it into focus. The administration is changing, and with it American economics. Betting on money-losing science projects will become increasingly dangerous.
If you want to make smart investments, at least for the next four years, you can go back to trusting basic principles. You can steer your investments towards companies that have shown a history of turning profits, and if you’re really feeling crazy, you can aim for companies that are historically increasing their margins.
On a less financial note, it will never stop being important to arm yourself against illogical rhetoric. It has endured for centuries, and not even the many hopes and promises of a Trump Era will change it. If America can continue the recent political trend, though, then the people can stay strong against these dangerous ideals and continue to push for policy and economics that actually have a future.
Regards,
Ethan Warrick
Editor
Wealth Authority
