I love when I find thought provoking articles.

I was thinking about the concept of innovators (Steve Jobs, Jeff Bezos, and the Google Boys come to mind) versus those who would manipulate governments for their own benefits in the absence of innovation.

Which led me to this article from the Streetwise Professor about Elon Musk:

The Rent Seeker, Posing as Visionary

I still am working out the details. It is a fascinating concept, one with many shades of gray — but it very much has gotten me thinking . . .

Category: Regulation, Technology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

15 Responses to “Rent Seekers vs Innovators”

  1. NoKidding says:

    Wow, that’s an awesome read. Thanks.

  2. rd says:

    currently, alternative energy is similar to the railroads in the mid-1800s. The people who get there first can get large government benefits that can turn into cash cows for a long time. It takes skill and daring to get the ball started but there is so much real estate that becomes occupied once it is successful that the rents could flow in for quite a while.

    In the case of the railroads, they were awarded large tracts of land adjacent to their rail lines that became the foundation for numerous business ventures that generated as much or more cash flow as their rail lines. As a result, they could dominate the economies and politics of the new areas that their railroads serviced for decades.

  3. RW says:

    The article raises an important point but the comments make it clear it is probably not an either/or proposition; i.e., some of the same skills dedicated rent seekers use are likely required to successfully innovate, at least when attempting scale-up.

    As something of a consquentialist I tend to focus on outcome(s) as well as intent and, based on what I know of Musk — which admittedly isn’t much since I don’t follow him or invest in his business — he seems to have produced something of value w/o preventing others from entering so I’d certainly place him closer to the innovator part of the rent-seeker/innovator spectrum than I would a bankster or a patent troll.

  4. [...] Barry Ritholtz has a post today about Elon Musk, referencing another post.  It seems that the business activities of Musk have been identified as rent-seeking, to small and large degrees.  The original author finds it upsetting that Musk’s enthusiastic backers identify him as a visionary of new technologies while in fact he is often a rent seeker (while citing Rockefeller as a more postive example of a visionary???  Maybe visionary in monopoly building).  Ritholtz finds this thought provoking. [...]

  5. gman says:

    Bezos built a company with razor thin margins by not having to pay sales tax.

  6. RW says:

    Point/Counter Point

    More Evidence That You Can’t Lure Entrepreneurs With Tax Cuts

    Cutting state taxes to attract entrepreneurs is likely futile at best and self-defeating at worst, a new survey of founders of some of the country’s fastest-growing companies suggests.

  7. jj2me says:

    As a car guy (but not one who shops in the same dealerships as Barry), I remember the initial Tesla venture as one of chutzpah, thinking they could bring Silicon Valley computing to the antiquated car business and run away with the spoils. Then they ran into like, real engineering difficulties of yaw and fuel flow and such. Learning the hard truth, that there were actually difficult, non-digital problems they had to solve, they went out and hired some automotive engineers.

    So I’ve never been awed by Musk.

  8. unormal says:

    We chose the economic system that worships rent-seeking achievement, and makes no other way of life particularly possible, it’s a) achive rent-payments b) work till you die. So, frankly, it’s a false dichotomy.

    Every innovator/creator dreams of achieving 0-work rent payments for his work so he can actually focus on making cool stuff instead. So Elon is taking the exact route any intelligent creature would take in our system. Really almost the only one that makes any sense: Make as much rent as possible as quickly as possible via the most expedient and cynical means possible, then hopefully do fun stuff if you haven’t crushed your own soul in the process.

  9. kaleberg says:

    Most entrepreneurs rely on big government subsidies. Look at Samuel FB Morse, hack government artists and inventor of the telegraph. Look at Eli Whitney scamming Congress with his interchangeable parts concept. Look at the railroads, the steel industry, mining, agriculture, pharmaceuticals, computers, steam ships, computers, airlines, aircraft manufacturers, the automobile companies, all the road users,internet start ups and so on. Usually, the big visions, the ones that span generations are government driven, so, of course, the visionary innovators are reliant on government handouts. The question is whether they use the handouts to build something new and grow it, or do they just seek to collect rent on it like our heavily subsidized and increasingly inefficient financial industry.

    • I cannot agree that MOST entrepreneurs rely on government subsidies. Let’s not confuse opportunities where the government may have had a hand in — i.e., Darpa and interent — with Rent seeking.

      We can cherry pick a few historical figures, but that is not what MOST start ups, small business and innovators do!

  10. Mike.R says:

    I think your “Corporate Welfare Queen” label is more applicable to these kind of companies than Walmart and McDonald’s. These companies are why Mitt Romney’s famous 47% comment is a huge understatement.

  11. icantdance says:

    this judgement seems shockingly off for BR (cant speak for rest of yalls ;) help me understand this cynicism.

    I remain in his professional rapture:
    Engineer (gates) + designer (jobs) + visionary (branson) = musk

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