One of the best pieces of advice that I have received as an entrepreneur is that you can’t worry about the change falling out of your pocket while you are racing to build your business. One entrepreneur taking that advice, maybe to a fault, is Elon Musk. He’s attempting to dramatically shift the automotive industry, transportation system, and even space travel.
However, Musk is also now fighting legal battles on several fronts. He may be held in contempt of court for his recent behavior, facing trouble from a recent inspector general investigation announcement, and security concerns have even crept into the narrative recently.
So, the question is this: Does he lose all of the change in his pockets before he gets to the finish line? We will see, but it is a race that I am watching closely.
In 2018, after Musk released tweets musing about taking Tesla private, he settled with the SEC and agreed to seek approval before posting anything else that would materially affect Tesla. Reason being, Musk’s seemingly innocuous Twitter claims were substantially affecting Tesla’s stock price. According to the SEC, such unsubstantiated assertions may, in fact, constitute fraud. Worse, the Tesla CEO has a history of making inflationary proclamations over Twitter. In July 2017, Musk stated that his company would likely be making 20,000 Model 3s per month by December. Tesla then was forced to reduce that estimation by 50 percent.
In the age of Twitter, and given Musk’s proclivity toward social media engagement, that SEC deal proved impossible for the Tesla CEO to keep. He broke the agreement this February with a tweet discussing Tesla’s delivery times. Now, Musk is being forced to plead his case to a judge. If he is held in contempt, then he could be forced to relinquish his title as the CEO of Tesla.
It is unclear what that would mean for Tesla. After all, Musk seems better at starting his businesses than keeping the day-to-day operations going. Still, losing his title would be a shot to Musk’s ego at a time when he believes he is the only one that can keep Tesla above water.
In addition to the contempt charge, the Pentagon’s inspector general recently opened up an investigation in SpaceX, Musk’s other business venture. The report doesn’t get very specific, but it appears like the inspector general is on the hunt for cronyism:
However, they could also be looking at quality control issues. SpaceX has lost three payloads in four years, whereas its competitor hasn’t had a single incident in 12 years over 124 launches.
If the IG is looking at cronyism, I think that Musk and his companies will make it through the investigation. I have written about the crony tactics that he uses before, but almost all companies of his size use them. Musk’s crony tactics seem to be more run of the mill hard-fought politics and negotiating instead of back-room bribes. On the other hand, if the IG is looking at the quality issues, then everything that Musk has worked for could be for naught.
Watching a rocket land on a barge is like watching science fiction. But without the military contracts, the economics of space is almost impossible (right now). In the beginning, there are growing pains, and unfortunately in the space business, those growing pains are expensive!
At the end of the day, I want Musk to succeed. It is fun to watch someone transform an industry that everyone said couldn’t be changed. Musk is attempting to change three at the same time. But it looks like it’s going to be more of a race between his business troubles and his technology if he is going to succeed.
Charles Sauer (@CharlesSauer) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is president of the Market Institute and previously worked on Capitol Hill, for a governor, and for an academic think tank.
