THE BLOG

Elon Musk Is Even Smarter Than We Thought

06/14/2014 02:49 pm ET | Updated Aug 15, 2014
Getty

It's an Elon Musk world, and we're just living in it.

This week, Musk announced that Tesla would yank all of its patents and open up their technology to whomever so desires it. Musk even went so far as to announce via Tesla's blog that they "will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology." Bold move for anybody. Especially bold move for an electric car company on the brink of building a $4-5 billion lithium-ion battery gigafactory.

To be clear, declaring a noble refrain from suing over what is now apparently open source technology is a monumental shift in the tech industry -- a sector that can get ugly and expensive when it comes to patent litigation.

Alex Tabarrok rightly predicts this announcement will probably be the center of academic discussions for years to come. And any good economist would pat Musk on the back for finally heeding the almost universal advice on the massive costs and minimal benefits that accompany the patent system.

Musk, a man often lumped into the category of "libertarian" in part thanks to the company he keeps, says Tesla is doing this for the good of the industry. And this move certainly speaks to his, ahem, patented belief in free market principles.

But let's not forget: Tesla once sued Top Gear for libel when Jeremy Clarkson famously trashed the Tesla during a track test. When the brakes "broke," according to the show, Tesla dismissed it as simply a vacuum pump that had failed. The brakes weren't broken! 'Tis only a flesh wound!

Um.

This somehow led Musk to conclude that Clarkson is anti-American for hating on Tesla and its literal electric innovation, which is another fun rabbit hole to go down, but back to why this matters: For a company so particular about how its technology is represented, I can't be the only one surprised at Tesla's gracious announcement.

So before we bow down to a seemingly fearless and altruistic pioneer of electric vehicles and libertarianism, it's important to point out the ongoing contradictions with Musk and markets.

Musk tweetedthat he got rich off of PayPal and Zip2 "w zero govt anything." But if you can remember, Musk got a lot of flack when Tesla took a near $500 million loan from the Department of Energy and then boasted of paying it off early while forgetting to mention that if it hadn't, default was inevitable at the end of 2013.

It's worth noting that, no, this does not make Tesla worse than Solyndra since the feds didn't ask for "venture capital-style compensation in return." Frankly, I'm glad that the U.S. government didn't demand ownership in Tesla, seeing as how they're not the best business owners. But either way, the point still stands that it's easy for Musk to pat himself on the back for doing something in which the alternative was abundantly worse.

Tesla also received $34 million in tax breaks from California (a notoriously awful business tax climate) for building a factory in Fremont. California is no doubt a state that needs broad, sweeping reform, but taking a tax carve-out is not very libertarian. And worse yet, Tesla is now flaunting its gigafactory in front of four, but really five, states. Musk announced the multibillion dollar and 6,500-job creating battery factory would be built in Nevada, New Mexico, Texas or Arizona.

Quick to panic, California responded frantically with a proposal that offers Tesla "financial incentives" along with an unhooking of the regulatory gate that keeps the permitting process line for environmental companies in the Golden State cruelly and unusually long.

Musk specifically noted California's regulatory environment as a reason Tesla would set its sights elsewhere. But seeing as the company is headquartered in Palo Alto as well, it would make sense to house the gigafactory there. It's too early to tell what will happen, but with a practically blank check from the California government, I think it's safe to say Musk knows what he's doing. And demanding special regulatory treatment is about as crony as it gets.

So is Musk a true libertarian? No. Does it matter? Not really. Regardless of his actual intentions, Tesla provides endless examples of overbearing regulation and how its inability to keep up with innovation means that innovation has the power to slip out of the ever-tightening governmental noose.

Tesla isn't perfect, but it makes perfect libertarian fodder. The patent announcement is one to follow closely to see how the electric car market develops as a result. But one thing is certain: Musk is no libertarian. He's just damn good at playing the game.