I learned about the “Greater Fool Theory” in the 1980s from a prominent commercial real estate executive in Dallas when I was reporter for the Toronto Star covering the pricey acquisitions Canadian developers were making in that Texas city. The “Greater Fool Theory” is a Wall Street maxim which holds that one can make money buying overvalued assets because there’s always a greater fool (most often retail investors) willing to pay more. Local Dallas real executives viewed the Canadian developers as suckers and coined the term, “The Greater Canadian Theory.”
There are some who would argue the run-up in Tesla’s stock is a textbook example of the Greater Fool Theory.
Elon Musk possibly doesn’t know the theory by name, but he exploits it on a seemingly daily basis on Twitter. Despite his prominence and his undeniable genius, Musk routinely spews out ideas and comments on the social media site without any meaningful thought or reflection, knowing that his die-hard following of 81 million Twitter bros and other hangers on will embrace his musings as more examples of his brilliance. Being perceived as an oracle on matters far beyond his knowledge and expertise allows Musk to distract from his recklessness and shameless hypocrisy.
Musk, who recently acquired a 9.2 percent stake in Twitter, on Saturday asked his following to vote on his idea to convert Twitter’s San Francisco headquarters into a homeless center “since no one shows up anyway.” Twitter allows its employees to work from home, regardless of where they live in the world.
It’s telling that for all Musk’s smarts, the best homeless solution he’s come up with is to herd them into institutional shelters. Out of sight, out of mind. When I lived in San Francisco, the No. 1 beef from tech denizens was having to encounter homeless persons. Little matter than some of San Francisco’s homelessness was caused by technology disruptions.
Still, Musk’s feigned concern for the homeless is laudable, so here’s how he can use his Twitter influence to make an even more valuable contribution.
San Francisco in 2010 gave Twitter sweetheart tax breaks amounting to tens of millions of dollars to locate its headquarters in a gritty area known as the Tenderloin district. At the time, San Francisco’s mayor was Ed Lee, who never met a developer whose ideas he didn’t like. Lee and San Francisco’s city council believed that if Twitter located in the downtrodden area, other businesses would follow.
That didn’t happen, and from what I’ve read, the Tenderloin remains as depressed as ever, possibly more so. Twitter’s tax breaks expired in 2019, and months later former CEO Jack Dorsey did an about face on San Francisco.
“Our concentration in San Francisco is not serving us any longer and we will strike to be a far more distributed workforce,” Dorsey said on a conference call. “We have to build a company that’s not entirely dependent on San Francisco.”
In 2019, Dorsey’s successful Square payments processing company sued San Francisco, arguing that San Francisco’s taxes were “unconstitutional” and claiming it was owed a $1.27 million refund.
Such is the loyalty of tech companies and their executives, who talk a good game about wanting to make the world a better place but rarely put words into action. Salesforce CEO and billionaire Marc Benioff is another example.
As reported by Peter Goodman in “Davos Man,” a book I highly recommend, Benioff and Salesforce in 2018 collectively committed $7 million toward a successful 2018 campaign for a local ballot measure levying new taxes on San Francisco companies like his to curb homelessness. That same year Salesforce recorded more than $13 billion in revenues while paying zero in federal taxes.
If Musk is genuinely concerned about the homeless and wants to do right by San Francisco, he should use his influence and demand that Twitter make the city whole on the misguided tax breaks it foolishly showered on the company. Benefitting from tax breaks is something Musk knows quite a bit about because they were critical to Tesla’s success and helped make him one of the world’s richest people.
Musk, like Dorsey, hasn’t shown much thanks to taxpayers on whose backs they helped build their respective companies.
According to a ProPublica report, Elon Musk only paid $70,000 in federal income taxes between 2015 and 2017, and he did not pay anything in 2018. He reportedly lives off loans tied to his stock options, allowing him to circumvent paying any taxes on the lucrative salary he deserves. If GM’s Mary Barra is deserving of a base salary of $2 million running a moribund company getting its butt kicked by Tesla, Musk easily warrants a multiple far greater than that.
Musk owes a great debt to California and its residents because the Golden State is his biggest market, and the state has showered Tesla with lucrative task breaks. Loyalty isn’t one of Musk’s strong suits; he relocated Tesla’s headquarters to Texas. The relocation hasn’t hurt Tesla’s sales, nor have allegations that Tesla’s factory in the Bay area was a hotbed of vile racism.
What’s clear is that Musk can do and say whatever he pleases, without any pushback or accountability. He declared himself an advocate of free speech, yet he has embraced the Communist Chinese government whose suppression of free speech is how Jin Xinping, keeps his hold on power and remains leader for life. Bloomberg reported last December that Tesla asked the Communist government to use its censorship powers to silence Tesla critics on social media, but few picked up on the story.
Musk flouts U.S. securities laws with abandon, and there’s been no public outrage. He likely saved millions acquiring his 9.2 percent Twitter stake by ignoring a rule requiring an investor to publicly disclose acquiring a 5 percent interest in a public company. By ignoring the rule, Musk acquired an additional 4 percent interest in Twitter without paying a significant premium on the invariable run-up of Twitter’s stock had he disclosed his 5 percent holding. If the Washington Post is correct, Musk will get off with a SEC wrist slap , validating that he is correct in declaring why he has “no respect” for the securities agency.
After disclosing his interest in Twitter, Musk initially sought a seat on the company’s board. Then he reversed himself, although he maintained in a filing that “he might engage with the social-media company on a range of issues “without limitation.” It seems obvious that Musk acquired his shares without any strategic plan about what he hoped to accomplish.
It’s all a game to Musk, and the Twittersphere is happy to play along. Musk cultivated this bohemian image that he lives in a modest home near the Mexican border, but the Wall Street Journal reported he spends most of his time at an Austin mansion owned by a friend and that Musk is looking to buy a palace of his own.
Musk on an earnings conference call a year ago last January said that he was “highly confident” a Tesla would “be able to drive itself with reliability in excess of human this year.” Chris “CJ” Moore, previously Tesla’s director of Autopilot, wrote in a leaked memo that Musk’s claim didn’t match “engineering reality.” In March 2020, Musk predicted that there was “close to zero” chance of new covid cases surfacing beyond the following month.
Though Musk has no regard for U.S. regulatory agencies or for America’s elected officials (he called President Biden a “damp sock puppet”), he is a corporate choir boy in China. Musk has previously hailed China’s leaders and praised the work ethic of the Chinese, while calling Americans “entitled” and “complacent.” When China’s regulators slapped Tesla for the poor quality of its vehicles, the company obediently promised to do better.
Musk is in bed with China, helping the country develop its electric vehicle expertise and superiority. Some Washington lawmakers are uneasy about these connections. Musk isn’t particularly popular with the Chinese public, yet he’s uncritically celebrated in America. Given Xi Jinping’s stated goal of China achieving world supremacy and that he regards Musk as “a technology utopian with no political allegiance to any country,” that should be cause for great U.S. public concern and inquiry.
Fortunately for Musk, Twitter has so dumbed down U.S. discourse and thought that he can easily distract his acolytes as to why and how he’s getting obscenely richer while millions or Americans are getting obscenely poorer.
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