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Taxpayer Subsidies Helped Tesla Motors, So Why Does Elon Musk Slam Them?

Silicon Valley has always relied on the government to jump-start innovative businesses—no matter how much it clings to the go-it-alone narrative.

Growing up in South Africa, Musk, then known as "Muskrat," was a scrawny kid who spent a lot of time reading sci-fi and fantasy—Verne, Tolkien, Heinlein, and (according to his mother) the entire Encyclopaedia Britannica. He developed an obsession with computers, despite being told by his electrical engineer father that they'd never amount to anything more than toys. In 1982, at the age of 11, he sold his first piece of software, a video game called Blastar, to a computer magazine for $500.

Musk and his college roommate put themselves through college by hosting epic parties: "It was really a hands-on business experience."

Just after high school, Musk moved in with Canadian relatives to avoid mandatory service in the South African Defense Force. ("Suppressing black people just didn't seem like a really good way to spend time," he told author Michael Belfiore.) By then, he was already dreaming of moving to the United States, a land he associated with inventors, explorers, and free thinkers. After attending Ontario's Queen's University, he transferred as a junior to the University of Pennsylvania.

What happened next was like a plotline from Revenge of the Nerds. Assigned a lousy dorm room, Musk and his roommate, Adeo Ressi, moved into a five-bedroom house and converted it into a party venue complete with DJs, bouncers, and security guards. Their bashes became so popular, Ressi told me, that he and Musk took over an entire three-story apartment building the following year. Musk didn't drink, but they made enough off kegs and Jell-O shots to put themselves through college. "It was really a hands-on business experience," Ressi says, albeit one that came with "some additional strains and stresses…Nobody ever got hurt or anything, but there might be a fight."

When they weren't hosting keggers, the two friends would talk about science, math, and the transformative power of the internet. "Elon's engineering mind is second to none," Ressi says, to the point where it dominated everything else. As a member of the college environmental club, Ressi tried to get Musk interested in ecological politics: "I would say that we talked about it a lot, but it was not a subject that was of particular interest to Elon." At the end of college, according to Ressi, Musk landed a Silicon Valley internship designing smart bombs for a defense contractor. Friends ribbed him for selling out, but he "never looked at building bombs as an inherently bad thing," Ressi explains. "He looked at the engineering challenges of building bombs as inherently interesting."

Musk later enrolled in a physics graduate program at Stanford, but dropped out after just a few days. He and his brother, Kimbal, launched the web-hosting platform Zip2, which they ran out of their Palo Alto apartment for a time; they sold it in 1999 for $307 million. Musk then cofounded, a financial services and email-payment firm that merged with a startup called Confinity the following year. The new company was christened PayPal.

PayPal's executive suite included several alumni of the Stanford Review, the conservative campus magazine that Peter Thiel, Confinity's founder, had edited as an undergraduate. Thiel later wrote that he wanted to create "a new world currency, free from all government control and dilution—the end of monetary sovereignty, as it were." He and other PayPal execs have gone on to support a wide range of libertarian and conservative causes: Former counsel Rod Martin tried to start a conservative version of, and former VP Eric Jackson founded the book-publishing arm of the conservative WorldNetDaily, which released the children's tale Help! Mom! There Are Liberals Under My Bed.

"Elon is now looking at it from the point of view of a winner, and he doesn't want to see other people win because they get government money."

It's unclear to what extent working alongside Thiel and the others colored the political views of Musk, who declined to be interviewed for this story. He has described himself as a libertarian (Ressi calls him a "hyper-pragmatist") and has doled out $200,000 over the past four years to both Democrats and Republicans. "Elon is now looking at it from the point of view of a winner, and he doesn't want to see other people win because they get government money," speculates Motavalli, who interviewed Musk for High Voltage, his 2011 book about the electric vehicle industry.* "I do think there is a tendency of people, once they have succeeded, to want to pull the ladder up after them."

In 2005, three years after selling PayPal to eBay for $1.5 billion, Musk and Thiel bankrolled Thank You for Smoking, a movie produced by former PayPal exec David Sacks, another Stanford Review alum. The satirical film, which follows a sleazy lobbyist's battle against anti-smoking campaigns, also subtly delivers Big Tobacco's favorite libertarian talking point: that smoking is a matter of personal choice. Musk has tweeted about funding a sequel of sorts on the topic of climate. Unlike the free-market disciples at, say, the Heritage Foundation, he and other Silicon Valley libertarians tend not to deny man-made climate change. But their preferred solution is predictably market-based: Tax carbon emissions and let capitalism sort out the rest.

Of course, Musk's embrace of a carbon tax and rejection of subsidies even as he benefits from them may also serve as a rebranding effort. "A lot of these guys got neoclassical economics training, where they came to believe that there is a free market, and that it's separate from the government," says author Michael Shellenberger, who advocates market-based solutions to environmental problems. "In the case of Musk, it is hard not to read that as a kind of defensiveness. And I think there is a business reason for it. They are dealing with a lot of investors for whom subsidies are not the basis for a long-term viable business, and they often want to exaggerate the speed with which they are going to be able to become independent."

"Electric cars, solar panels, these are good things, and there are good reasons why the public should be supporting them," Shellenberger continues. "We would all be better off if these entrepreneurs were a bit more grateful, a bit more humble. And I think that would help to tell a better story. We have this amazing engine of economic growth in Silicon Valley, and it depended heavily, if not entirely, upon 30 to 40 years of government support."

*Correction: The original version of this article, which ran in our September/October print issue, misnamed the book for which Motavalli interviewed Musk.

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