Tesla, iPad Socialism and the Return of the Future

by Aaron Bastani

24 January 2016

Over the last year much has been made of the role of technology in the realisation of a left future, but if ‘iPad socialism’ is to become more than a slogan, the UK could do worse than to look for inspiration across the Atlantic, says Aaron Bastani in this week’s NovaraWire Long Read.

Elon Musk, the South African-born co-founder and CEO of SpaceX and Tesla, is an engineer and entrepreneur whose personal fortune stands at more than $11bn, making him one of the wealthiest people in the United States. In an age where most wealth – on both sides of the Atlantic – is accumulated in finance and real estate, the source of Musk’s money is a throwback: things that move really quickly, specifically cars and rockets.

Of the two companies it is SpaceX, an aerospace manufacturer and provider of space transport services, which is reputed to be closer to Musk’s heart. That fondness has meant the company remains – nearly 15 years after it began – privately owned. Founded in 2002, the stated intention of the company is to create (in a cost effective way) the necessary technologies to enable the colonisation of Mars by humankind. Indeed, the ambition to go to Mars is so integral to the DNA of SpaceX, that as one enters its headquarters in Hawthorne, California, one can observe two images of the red planet. The first depicts it as it currently is; blood orange with ice caps, and the other after terraforming, with an environment not dissimilar to Earth’s at present: presumably the second home of our species.

Upward momentum.

The achievements of SpaceX in the last 15 years would count as momentous for a country, let alone a company. In 2008 it built the first privately-funded, liquid-propellant rocket – Falcon 1 – to reach orbit; two years later in 2010 it become the first private company to successfully launch, orbit and recover a spacecraft, Dragon. In 2012 it became the first company to send a spacecraft, (again Dragon) to the International Space Station; and late last year, on 21 December, SpaceX successfully returned a first stage booster rocket back to the ground at Cape Canaveral, the first time an orbit-capable rocket had ever done this. In many ways that triumph was SpaceX’s most impressive yet. Such rockets, hugely expensive pieces of technology, have traditionally been sacrificed in order to propel a smaller, second-stage rocket, along with a capsule, into space. By creating a rocket capable of returning to earth through automated landing, SpaceX has built a first-stage rocket that is reusable, thus potentially reducing the cost of one of the biggest overheads in the space industry. While SpaceX has achieved a number of space firsts for a private company, the events of December were the first time it had done something ahead of any national space programme.

Reusable rockets are a necessary technology for low-cost space exploration and, if Musk has his way, colonisation. Later this year the company is expected to release details of its ‘Mars Colonial Transporter’ project, a program intended to design and build a spaceflight system of reusable rocket engines, launch vehicles and space capsules to transport humans to Mars before safely returning to Earth. The success of SpaceX in the last decade, and the emergence of a now-thriving private space services sector, means that humans are probably closer to becoming a multi-planet species than you thought.

Against the shareholder model.

That SpaceX, now valued at around $12bn, remains a private company with Musk as its largest shareholder, is no accident. Musk has repeatedly made clear why it is yet to go public: he just doesn’t trust shareholder models to see the bigger picture. In 2013 he spoke of how any prospective IPO (initial public offering) would only transpire after the Mars Colonial Transporter was flying regularly. Last year he confirmed that commitment by stating that SpaceX would be private for at least another decade saying: “I just don’t want (SpaceX) to be controlled by some private equity firm that would milk it for near-term revenue.” That the greatest industrial visionary of the 21st century so far has no confidence in shareholder capitalism is quite the indictment.

For Musk to have achieved what he has with SpaceX alone would be hugely impressive. It would make him a billionaire many times over and the arch-disruptor in an industry which, after the end of the Cold War, had lost its way. And yet, remarkably, Musk hasn’t just overseen the genesis and expansion of SpaceX in the last 15 years, but has been at the heart of an even bigger company too, one that he didn’t found but of which he has been the CEO since 2008: the electric car manufacturer Tesla Motors.

Unlike SpaceX, Tesla has been a publicly listed company since 2010, although more out of necessity than preference for Musk. In itself that listing represented a significant moment for the US car industry in the post-war period, with Tesla being the first American car maker to go public since the Ford Motor Company in 1956. While the scale of Tesla’s ambitions might not be quite as grand as those of SpaceX, it is, in nearly every other way, a bigger company. It employs far more people – 12,000 at the time of writing – and has a market capitalisation of over $25bn, more than half that of the much older incumbents of Detroit – Ford and General Motors – and twice the value of privately-owned SpaceX.

To grow where no man has grown before.

While Tesla’s Model S was the best-selling luxury car in the United States in 2015, it is the forthcoming Model 3 which could well make the company bigger than its rivals in Motor City. Set to be revealed this March at the Geneva Motor Show, production of the Model 3 will begin in 2017, with a projected entry price of around $35k. If the company is to have a single moment akin to that of the iMac for Apple in 1998, the Model 3 will likely be it. Even the heavyweights of the US car industry are alert to the possibility, with Sergio Marchionne – the Italian-born CEO of Fiat Chrysler – recently saying it would be “idiotic” for automotive manufacturers to compete against Silicon Valley. Forthcoming change in consumer demand towards electric cars, led by Tesla, could well turn many industry incumbents into little more than widget and app manufacturers, a vision which the Financial Times recently described as “Armageddon for the car industry.” Making cars will, increasingly, be about computing and storing renewable energy, two things which few of the major car makers excel in.

The integral position of Musk to Tesla is often compared to that of Steve Jobs to Apple. Indeed one of the biggest concerns for Tesla shareholders is just how long Musk can persist with his promethean work ethic, continuing to run both companies as CEO. While Tesla’s market value, at present, is only one-tenth that of Apple’s, it is not entirely impossible that Tesla, rather than the Cupertino-based giant, could become the world’s first trillion dollar company. While that might appear unlikely right now, and would require an increase in the value of the company by some forty times, it’s also clear that the company could very soon have a large chunk not only of the global car market, but in energy storage technology too, a market that will massively grow as developed economies, particularly the US, transition from hydrocarbons to solar.

A well-timed crisis.

Given Musk’s record as founder of two companies that disrupted their respective industries to an almost fantastical extent, it’s unsurprising that director Jon Favreau wanted Robert Downey Jr to model the character of Tony Stark, aka Iron Man, on the South African-born industrialist. Musk returned the favour by enjoying a brief cameo in Iron Man 2, where he pitches the production of an electric jet to Stark shortly before the billionaire playboy competes in the Monaco Grand Prix. There is even said to be a replica Iron Man suit at the SpaceX headquarters, a gift from Favreau to Musk.

But while the zeitgeist behind the Iron Man franchise is one of individual genius and national exceptionalism, imitative of a certain strand of anarcho-capitalist ideology that sits easily alongside the USA of Emerson and Benjamin Franklin, the real story of SpaceX and Tesla Motors could not be more different. While Musk is a visionary with astonishing self-belief and an even more astonishing work ethic, his fate – along with that of the two companies of which he is CEO – is intimately tied up with US industrial policy since the global financial crisis of 2008. Simply put, had federal government made different decisions over the last decade, it is likely that Musk would be just another Silicon Valley geek whose reach, ultimately, exceeded his grasp.

So what were those choices? Well, in the case of SpaceX it came in the decision by Nasa to award the company some pretty impressive contracts, and all before it had proved its own in-house technology. In August 2006, four years into the life of the company and without any of its now historic successes under its belt, the American space agency announced that SpaceX had won a ‘Commercial Orbital Transportation Services’ contract to demonstrate cargo delivery to the International Space Station (ISS) with a possible option for crew transport in the future. The explicit intention of that contract was to provide seed money for SpaceX to develop new booster rockets, with Nasa awarding $278m to develop the now operational Falcon 9 launch vehicle. Two years later, in December 2008, SpaceX, along with Orbital Sciences Corporation, won a ‘Commercial Resupply Services’ contract, with the SpaceX deal coming in at $1.6bn, the fee covering at least 12 missions to carry supplies and cargo to and from the ISS.

While SpaceX clients have diversified in recent years, and now include the US Air Force as well as Saudi Arabia and Hispasat, SpaceX’s world-leading technology would likely never have happened without the capital that the early Nasa contracts provided. Musk has been clear, repeatedly, that private investors lack the foresight to oversee the growth of a company like SpaceX. The evidence appears to be that when it came to federal government however the opposite proved to be the case. Simply put, the success of SpaceX is a direct result of a US federal agency, Nasa, ‘picking a winner’. Musk’s life story might sound like an Ayn Rand novella, but his space-faring ambitions would be impossible without the US taxpayer.

While SpaceX’s business model was built on public contracts and a loss of confidence within Nasa towards the end of the Space Shuttle era, Tesla was a direct beneficiary of the 2008 crisis and a more active industrial policy – specifically in relation to car manufacture – that followed in its wake.

Public funds, private enterprise.

In material terms, this meant a $465m low-interest loan from the US Department of Energy in April 2010 to “accelerate the production of affordable, fuel-efficient electric vehicles.” That loan was part of the Advanced Technology Vehicles Manufacturing Loan Program (ATVMLP) – $25bn worth of direct loans funded by Congress in late 2008 to provide capital to the US automotive industry in producing fuel-efficient and electric vehicles. The funds that went specifically to Tesla allowed it to initiate production of the Model S as well as build a $100m powertrain manufacturing plant. Such progress gave the company’s management sufficient confidence to go to IPO on the NASDAQ several months later on 29 June. After the events of April, investing in Tesla was a much safer bet for investors; they were buying stock in a company that was not only launching a new mass market vehicle, but that also enjoyed the confidence of federal government.

For a while the benefits of the ATVLMP – along with various post-crash industrial policies – were mixed. In the 2012 presidential race Republican candidate Mitt Romney referred to Tesla, along with Fisker Automotive, as ‘losers’. Fast forward to May 2013 and Tesla became the first recipient of the programme to pay back its loan, with interest, in its entirety. Ten years ahead of schedule.

While it is rarely commented upon, industrial policy in the UK and US began to diverge significantly after the summer of 2008, more so after the arrival of the Coalition government after May 2010. The US under Barack Obama became increasingly active, particularly around renewables, while under the Coalition – and now the Conservatives – British industrial policy remains defined by its absence.

Over five years later, the nadir of idiocy probably remains the unelected Peter Mandelson as Secretary of State for Business, Innovation and Skills in the last Gordon Brown cabinet. Mandelson saw no problem when RBS, a bank which had been effectively nationalised, lent money to Kraft to buy Cadbury, which proceeded to lay off British workers and relocate management and purchasing activities to its European headquarters in low-tax Switzerland. The British taxpayer was fronting the bill for loans to cut jobs and reduce the country’s tax base. In spite of that, however, one did sense that Labour under Brown was clutching at something with the formation of the Strategic Investment Fund in the 2009 budget, with the UK government not only imitating elements of the US Troubled Asset Relief Program, but the ATVLMP too. The only difference being, as with all things the Brits copy off of their ‘New World’ cousins, it was decidedly less ambitious.

Despite their talk of a ‘March of the Makers’, the Tory-led coalition was quick to axe not only the Strategic Investment Fund, but also the Regional Development Agencies (RDA) and Grants for Business Investment. While the new government did set up the regional growth fund to substitute for all three, attendant with that was much less funding with £1.4bn allocated over three years, one third of the £1.4bn a year Labour invested through the RDAs alone. When it came to the crunch and making capital available for the industries of the future the US went big and the UK went home. Without federal assistance Musk is honest that Tesla would have gone to the wall in 2010, if it had been a British-based company it almost certainly would have. Are British policy-makers aware of that? I wouldn’t hold my breath. But its certainly something the opposition should be crowing about.

2015: the year the future came back?

In the years immediately following the crisis of 2008 numerous jeremiads were written about the end of the future. It’s a central theme in Bifo Berardi’s After the Future, published in 2011, as well as Mark Fisher’s Capitalist Realism: Is There No Alternative?, published two years earlier in 2009. That is not to say the idea of ‘no future’ is new. It is also the title of Lee Edelman’s 2004 book Queer Theory and the Death Drive, and is a leitmotif of punk and grunge from the Sex Pistols through to Nirvana.

And yet, if nothing else, the crisis of 2008 compounded the idea of no credible future beyond capitalism, because, despite the near-collapse of the financial system and Britain and the US being hours away from cash not coming out of ATMs, startlingly little changed in its aftermath. Such a zeitgeist, of ideological inertia and a broken economy, is evident not only in marginal theory, but even in recent Hollywood blockbusters such as the Hunger Games and Elysium, with the latter, to paraphrase Slavoj Žižek, offering a world where the rich living on a gigantic, terraformed space station orbiting the Earth, is more likely than the end of capitalism. There are of course forerunners to such films: the original Robocop released in 1987, whose ‘Omnicorporation’ sounds curiously similar to present day outsourcing giants such as Sodexo, Serco and Capita. The notable exceptions, in terms of mainstream contemporary dystopias, are the Matrix and Terminator franchises. Here, however, capitalism is finished because humanity is superseded by artificial intelligence. Thus the two – human civilisation and the continuation of capitalism – remain intimately linked.

And yet in 2015 one began to see exceptions to the idea of no future, exceptions which – more than irrelevant aberrations – genuinely seemed to offer the beginnings of something new. In politics that was embodied in the electoral rise of Ada Colau as mayor of Barcelona, along with the success of Podemos and Syriza, despite subsequent capitulation to the Troika by the latter. One could also argue it was evident in the entirely unexpected ascent of both Jeremy Corbyn and Bernie Sanders. Meanwhile in culture, The Martian, which like Elysium starred Matt Damon, gave science a central stage rarely seen in Hollywood blockbusters. While the plot was outlandish, the film offered a Hollywood analogue to the spacefaring ambitions of Musk and SpaceX.

At the level of theory the task of ‘inventing the future’ is explicitly addressed by Nick Srnicek and Alex Williams in their book of the same name. Broad in scope and outstanding in execution, its aim is to not only define a 21st century genre of socialism but even chart the political map by which its advocates might get there. PostCapitalism: A Guide to Our Future by Channel 4 News’s Paul Mason, is an equally important book because, while it lacks the strategic strength of Inventing the Future, it is significant to have a mainstream journalist of such standing making the claims that Mason does, drawing praise and high sales in the process rather then ridicule. Again, both books have their antecedents, the influence of Mariana Mazzucato’s The Entrepreneurial State, published in 2013, is notable in both works, as is Yochai Benkler’s masterful The Wealth of Networks, published in 2006.

But what do they say that is so special? Well, when I interviewed Yanis Varoufakis late last year he said something which caught the spirit imminent in both books, and, indeed, in an emerging post-capitalist left which understands today’s digital technologies as partly constitutive of moving to a new mode of production in the not-too-distant-future:

“What comes after [capitalism] certainly is going to be determined by technological change; that’s Marx…now we have the second and third machine ages and they are disrupting capitalism big time…so very soon the corporation as we know it will be obsolete, independently of what the left does. The big question is, given that we are going to have massive technological changes and a brilliant increase in productivity, is this going to lead us towards a world in which we humans are masters of the machines we have created or vice versa? That will depend on the class struggle and politics…until and unless the left manages to combine its ideology of collective action and collective values, with a programme for embracing the disruptive, decentralising new technologies…and bring the two things together, then we have a dystopia facing us. If the left manages to organise itself in order to play a very significant role in fashioning the technological future and the social relations of production, then we have a chance.”

For me those words captured something that I felt had been bubbling for much of 2015: a compelling left vision of the future – one, indeed, more at ease with AI, synthetic biology and additive manufacturing than free market capitalism as it stands. One that offers a different story, not only to the working class of the Global South, but the whizzkids of Silicon Valley too.

iPad socialism, Corbo-Futurism and a left future.

In Mazzucato’s Entrepreneurial State there is a wonderful picture showing the importance of various state agencies in the development of the technologies behind the iPod, iPhone and iPad; the US Department of Defense’s DARPA in relation to Siri, the internet and the microprocessor; the Department of Energy with lithium-ion batteries; Europe’s CERN and the development of HTTP and HTML. At odds to the beguiling story of Steve Jobs as an industrial visionary, all of this technology was funded by the US taxpayer. That Apple was able to meld it into some of the world’s favourite products is why it is now one of the most valuable companies in the world. Just like with Tesla and SpaceX, the funding behind nearly all of our most beloved technology is, you guessed it, the state.

That is not to diminish the achievements of Musk, or even Jobs, as well as the thousands of highly talented people who have worked at Tesla, SpaceX and Apple, but it should be enough to dispel any misunderstanding that the state needs to ‘get out of the way’ for disruptive technologies to exist. Jet travel, the internet, the iPhone – and now mass-market electric cars and commercial space exploration – would be impossible without the state pursuing an active industrial policy (in the case of the US since the Second World War this has been primarily through defence research).

Britain in 2016 has neither the military Keynesianism of the US, attendant as that is with impressive scientific research and innovation, nor the civilian-led research and development spending of much of the rest of Europe and East Asia. Indeed in terms of investment in research and development, the UK currently languishes at 19th in the OECD’s rankings. That the Tories think such a figure is good enough to motor British exports and a ‘march of the makers’ is beyond absurd. The industrial policy of TINA (There is No Alternative) can only create economies with inferior technology.

The history of capitalism, particularly before the Second World War, is littered with ‘heroic’ individuals like Elon Musk: Benjamin Franklin, Henry Ford and Henry Bessemer to name three. While it’s true that people like them propelled capitalism into new fields of endeavour – looking at long-term innovation over short-term returns – almost always, particularly after the second industrial revolution, it was nation-states, through levels of capital investment only possible through general taxation, which underpinned innovation and progress.

Whether your take on the history of capitalism, and where it goes next, is shaped by Smith, Marx or Schumpeter, what is undeniable is that neither Tesla Motors nor SpaceX would be here today without the US Federal government. If that isn’t sufficient argument for Labour to advance a different kind of industrial policy to the Tories, one of sustainability as well as social justice, technology at the service of humankind rather than profit, then I don’t know what is. You never know, Britain might even end up with something a whole lot cooler than SpaceX.

Photo: Nasa/JSC/Flickr

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