Elon Musk’s Tunnel to Nowhere

los-angeles-freewaysElon Musk is tired of Los Angeles traffic, so, he says, he’s going to build his own tunnel. The fact that anyone takes this statement seriously points up what’s wrong with the relationship between tech entrepreneurs and civic planners. Cities have problems, but the solutions require gradual fixes. The right approach isn’t radical revolt; it’s small-c conservatism.

Fifteen years ago, Musk made his fortune selling the PayPal money-transfer platform to eBay. He’s now busy with several other ventures. His Tesla electric-car company has plowed billions of investor dollars and government clean-energy tax credits into battery and automated-driving technology, contributing to the advancement of each. His SolarCity solar-panel manufacturing experiment in Buffalo, New York, on the other hand, depends entirely on a $750 million subsidy from Empire State taxpayers. Tesla and SolarCity merged last year. Musk’s commercial-space venture, SpaceX, suffered a severe setback last year when one of its rockets exploded, destroying a $200 million Facebook satellite.

That’s life as an entrepreneur. You win some; more often you lose some. Investors should be smart enough to know the risks. Musk’s tunnel project, though, isn’t a matter of experimenting with investor and taxpayer money. Instead, if taken literally, it’s civic anarchy. In December, Musk tweeted: “Traffic is driving me nuts. Am going to build a tunnel boring machine and just start digging . … I am actually going to do this.” Last week, he reported, “Exciting progress on the tunnel front. Plan to start digging in a month or so.” He said that he’d start near his office in Hawthorne, a city in Los Angeles County. Wired.com has reported that Musk is already experimenting on his company’s own property.

Whether you’re a billionaire, a Twitter crank, or both, there are several good reasons why you can’t build your own tunnel beneath broader Los Angeles. Musk may be trying to point out the idiocy of laws and regulations that make it hard to build infrastructure, but he’s actually doing the opposite: reminding us why we adopted our laws and regulations in the first place. Building a tunnel disrupts traffic above it. Who would be responsible for the years-long traffic diversions? Tunnels require entrance-and-exit points. If Musk plans a tunnel for cars, not trains, how would smaller surface roads handle all the traffic going into and coming out of a fast-moving underground thoroughfare? If he plans a tunnel for trains, where will people enter and exit above ground, and how will the city keep all these new pedestrians safe from traffic? What if Musk miscalculates his tunnel’s ability to withstand an earthquake, as his staff miscalculated the safety of his rocket? It’s OK to blow up your own (and your customers’) equipment. It’s not OK to take the same risks with a city.

Extra road capacity often attracts more drivers. Despite the recent widening of L.A.’s 405 freeway, “congestion is as bad — even worse — during the busiest rush hours,” the New York Times reported last month. The way to reduce road congestion in the long term is to do what Los Angeles has been doing for nearly 30 years: build subways and light rail. Musk himself tweeted recently that Los Angeles’s subway is “lame, but getting better.”

Finally, if Musk can build a tunnel from his office to wherever he wants to go, why couldn’t every Angeleno with some money and an ego try the same? We live in a democracy, and democratic processes — particularly local ones — are important. Los Angeles residents may want a new tunnel built, or they may not. They may prefer a different tunnel to the one Musk proposes. They may prefer to live more densely than they do already, meaning more rail, or less densely, meaning more road construction. But the people do — and should — have a say.

USA Today reporter Nathan Bomey took Musk’s tunnel tweets seriously, noting that the entrepreneur is “one of the few people who is just rich, powerful and inventive enough to actually do something about the legendary traffic congestion in Los Angeles.” This is misplaced enthusiasm. Elon Musk may be a dreamer, but surely he realizes tunneling beneath Los Angeles without permission would get him arrested — and rightly so.

Tech entrepreneurs would do better to help improve government rather than bypass it. It takes too long, and is too expensive, to build any kind of infrastructure. City planners and private-sector contractors could benefit from outside review of their work processes; automating repetitive construction work, for example, could cut costs. Unfortunately, the tech industry hasn’t shown much expertise at this in the past. Tech billionaire Michael Bloomberg was a good mayor, but he didn’t cut New York City’s personnel costs during his tenure; in fact, such costs grew significantly. Nor did he make the city operate more efficiently or build its large-scale physical infrastructure more efficiently.

Running a tech business is not the same as running a government, and it never will be. Depending on a single heroic billionaire to rescue you from the result of city-planning decisions made by millions of people over many years is the wrong way to go about basic governance.

Tesla: 1st Profit in Years, Thanks to California Climate Credits

telsa-elon-muskTesla Motors Inc. (TSLA: NASDAQ) reported this week that revenue nearly doubled in the latest quarter. The all-electric car company reported its first quarterly profit in over three years, thanks to cashing in $139 million of California tax credits that are meant to help combat climate change.

The company reported net income of $21.9 million, or 14 cents per share, for the third quarter ended Sept. 30, the first positive net earnings since the winter quarter of 2013. The profit came despite Wall Street analysts expecting a $0.56 loss. The profit compared to a loss of $229.9 million, or $1.78 per share, for the same quarter last year.

Total revenue more than doubled, to $2.3 billion, and the company’s capital spending came in dramatically below what analysts had expected as Tesla ramped up its infrastructure to begin producing its $35,000 mass-market Model 3 sedan.

Chief Executive Elon Musk stunned analysts on the company’s earnings call by commenting that despite moving from a production plan to produce 90,000 vehicles this year to 500,000 vehicles in 2018, the company’s current plan “does not require any capital raise for the Model 3 at all.”

Breitbart News reported in June that despite Tesla never meeting any of its unit production targets in the last five years, CEO Elon Musk told shareholders that through the magic of “physics-first-principles” he would revolutionize auto industry efficiency by “factors of 10 or even 100 times” to improve production profitability by 1,100 percent. Six weeks later, Tesla reported a nasty loss, and Musk was scorned by the financial press.

Tesla had planned capital spending of $2.25 billion this year. But with only $800 million spent in the first three quarters, Musk expects $1.8 billion in capital expenditure this year.

All this good operating news comes during a quarter when Tesla was hammered by the external environment. The company has been battered by reports of a growing number of injuries, and the death of a Model S driver using Autopilot, the company’s semi-autonomous driving system. Musk is also trying to have Tesla shareholders acquire debt-laden SolarCity (SCTY.O), which he and a number of family members control.

Consumer Reports on October 20 trashed Tesla vehicles in the magazine’s annual review. Although the all-electric Model S sedan earned the equivalent of 84 miles-to-the-gallon in energy consumption, and high marks for driving dynamics, the company was blasted by 1,400 mostly terrible responses from owners that took part in the magazine’s Annual Reliability Survey. The only established brands that Tesla beat were Dodge, Chrysler, Fiat, and Ram.

Some analysts scoffed at Tesla for being profitable due to $139 million proceeds from sales of California zero emission vehicle tax credits. But rival automakers are buying the credits, and essentially taxing their own California customers to avoid selling electric cars.

Tesla stated that at September 30, the company had $3.08 billion in cash and equivalents, compared with $3.25 billion at the end of the second quarter. That was $250 million better than Breitbart News had expected the company to report.

Tesla’s shares initially spiked up by over 6.2 percent on the company’s profit release. But by mid-day trading on October 27, the stock had given back most of that gain.

This piece was originally published by Breitbart.com/California

Tesla Planning Aggressive California Expansion

teslaHigh-flying clean-energy industrialist Elon Musk has doubled down on his production plans in California. Tesla, his auto company, “took a major step toward its ambitious goal of one day building 1 million cars a year by seeking to double the size of its Fremont, Calif., assembly plant,” the Los Angeles Times reported. “Under a long-term zoning proposal submitted to Fremont’s Planning Commission, the electric car maker wants to eventually add 4.6 million square feet of space to its factory’s existing 4.5 million square feet.”

Musk “told analysts this spring that the Palo Alto-based automaker hopes to ramp up annual production to 500,000 vehicles in 2018 and build 1 million vehicles by the end of 2020,” the paper added. “The 2018 goal alone is nearly a tenfold increase from the 50,580 vehicles that Tesla produced last year in Fremont. The automaker has forecast this year’s deliveries at 80,000 to 90,000. Quality problems and production delays plagued the plant early this year and threatened sales plans. But the company said last week that those problems are behind it and that it expects to come close to its forecast for 2016.”

Broad deals

Musk has not hesitated to link up with government resources and opportunities in order to advance his business interests. This month, he aligned SpaceX closely to take advantage of President Obama’s call to use private industry to help bring Americans to Mars. “Within the next two years, private companies will for the first time send astronauts to the International Space Station,” Obama announced. “One of those private companies tasked with ferrying astronauts to the ISS and who will essentially return human spaceflight to American soil in late 2018 is SpaceX,” the Observer noted.

And last month, Musk inked a deal to change the way California backstops its energy needs. “Tesla Motors Inc. will supply 20 megawatts (80 megawatt-hours) of energy storage to Southern California Edison as part of a wider effort to prevent blackouts by replacing fossil-fuel electricity generation with lithium-ion batteries,” Bloomberg reported. “Tesla’s contribution is enough to power about 2,500 homes for a full day, the company said in a blog post on Thursday. But the real significance of the deal is the speed with which lithium-ion battery packs are being deployed,” the site added — “months not years.”

Outracing critics

As Musk has accelerated his increasingly ambitious plans, however, he has attracted a greater share of criticism toward the mechanics of his business operations. “The pressure is now on Tesla for a smooth launch of the relatively affordable Model 3. A quality product pumped out at low cost and high volume is essential to meeting the ambitious goals of the company and its investors, auto analysts say, whereas long delays could threaten the company’s reputation — and survival,” according to the Times.

Meanwhile, wariness has centered separately around SolarCity, a startup run by family members. “The Tesla-SolarCity deal looks so bad on paper that many investors worry it’s simply a bailout of SolarCity, which Musk co-founded and continues to chair,” the MIT Technology Review noted. “While SolarCity dominates the market for leasing, installing, and maintaining solar panels for residences and businesses, it’s racked up more than $2 billion in losses over the past five years. “

“Its business model requires it to raise huge amounts of capital to cover the up-front costs of providing panels for no money down to consumers on multiyear contracts. Since its inception, the company has accumulated more than $3 billion in debt against just $1.5 billion in revenue. Now it is having a harder time convincing people to lend it money.”

What’s more, Musk has had to contend with a rebellion among his own shareholders. “As of earlier this week, seven Tesla stockholders have filed lawsuits against Elon Musk over the proposed acquisition of SolarCity and alleged Musk was in breach of his fiduciary duties for not disclosing the proposed merger properly. Some of these stockholders are asking the judge for an injunction to prevent the merger from going through,” Recode reported. But the two companies have announced the merger is going ahead anyway. “The companies have set the date for their respective shareholders to vote on the $2.6 billion all-stock transaction for Nov. 17.”

This piece was originally published by CalWatchdog.com