A Mental Duel with Musk

Elon Musk does not need an introduction.  Being the most consequential entrepreneur of the 21st century, he literally transforms everything that he touches from automobiles to space, and solar energy. While most people go about their day doing menial work, he is busy changing the world and saving humanity by making homo sapiens a multiplanetary species and smashing the internal combustion engine.

He started doing all of this as an immigrant, having moved to the US in the early 1990s and becoming an American citizen in 2002, the year he founded SpaceX.  Now he is the first and only person in history with a net worth approaching half a trillion. His is a quintessential American story, which earns him even more respect, at least from me.  In short, if Batman exists, his name is Elon Musk not Bruce Wayne.

His record of turning dreams into reality has earned him a reputation as an Übermensch who can take on any challenge.  Indeed, being a man of many talents, he frequently weighs in on global fertility rates, transgender rights, censorship, economics, and more.  His tweets immediately receive an aura of a user’s guide to running a business or a country.

Myself a huge fan of Elon I nevertheless find direct extrapolations from business to government problematic.  While his entrepreneurial feats are undisputed, many of his claims outside the corporate realm need to be checked.  To get my points across but unable to meet, I engage with him in an imaginary discussion.  Inside my head I usually win.  Below are a couple topics that I think he gets wrong.

First, deriding the role of government as a force for innovation and growth he recently compared North Korea, where the state controls 100% of the economy, and South Korea where the scope of government is close to 40%.  The former is starving, while the latter is prospering.  Chronic deficits in East Germany versus abundance in West Germany also came up as evidence of government inefficiency.

The take-away from such comparisons seems to be that the government is the problem and the less have it the better, which Reagan would approve.  Such statements also offer a taste of Musk’s medicine for American bureaucracy.  Previously he cut 80% of staff at X which would be his panacea for governments around the world.  Gutting the government is his formula to unleash dynamism.

Not so fast, Elon.  What about elephants in the room?  China’s dirigiste economy is second largest and between 1979 and 2018 sustained the fastest expansion in history with an average annual growth rate of 9.5%.  Last year the country grew by a formidable 5%.  Moreover, it was in bureaucratic China that Musk managed to set up a gigafactory in a record 168 days.

At the other end of the spectrum government is almost nowhere to be seen in Yemen, Sudan, or Somalia, but neither is prosperity.

In reality government intervention is not static but rather ebbs and flows.  In the post-World War 2 period state-led development was instrumental for structural transformation in Japan, South Korea, Singapore, and Taiwan.  Afterwards, the role of government subsided.  What is really happening is fluctuation of state intervention through stages of development, i.e. the later the timing of development, the more important is the role of the state in creating and steering markets.

What moves the needle is the vector of government thrust not the presence or absence of government per se.  For example, instead of evaporating the byzantine Chinese bureaucracy under Deng metamorphosed into a champion of free markets in 1979. An era of unprecedented growth followed.  Let that sink in, Elon.

Second, in the chorus of MAGA hardliners who sing a song of a blanket curb on alien invasion, Musk is a dissenting voice.  Hawkish on unvetted border crossings, he is more than a dove on foreign brainiacs entering the country legally.  Figuratively, he wants to separate wheat from the chaff, to quote the Bible.  In his own words he is after the top ~0.1% of global engineering talent.

Musk’s pragmaticism stems from being a naturalized tech founder who understands brain gain. Indeed, the evidence that high-skill immigration is good for America is ubiquitous.  Five out of eight most valuable US companies are headed by foreign-born CEOs.  Immigrants are also more likely to be entrepreneurial and inventive.

However, the quality of legal immigrants is only half the answer.  The American economy, with one of the highest growth rates among industrialized nations, cannot fill jobs.  A labor shortage is estimated at 1.2 million.  A geriatric population aggravates the problem.  Against these facts, a group of foreign nerds will not compensate for vacancies in other sectors.  Tech street and main street can both benefit from access to the international workforce.  It does not take a rocket scientist to understand that.