I've been calling for the failure of Tesla for a very long time, but this has gone on so long now that even I've given up. But now that their bonds are getting hit Mr S. and I started having a serious conversation about them.
Tesla has grown to have a very large footprint. They have a ton of real estate in the Valley. And if they were to fail, I'm not sure that people really comprehend the knock on affect this would have. All the supporting companies would also get hit. Last night Mr S. and I started talking about that.
When Tesla was small the economy was in recession and as they grew - the Valley really kind of grew around them to build infrastructure for the company. Maps. Sensors. All sorts of things. When NUMMI failed at that site - it really hit Fremont hard. But if Tesla were to fail it would hit the entire Valley hard. And you know what they say....as the Valley goes so does the rest of the States.
And while I am a Trump supporter - I would be lit if he bailed out Tesla. Tesla would not even exist if it weren't for the taxpayer. And frankly, I'm not okay with that. I also recognize that there would be a lot of houses that would go into foreclosure. A lot of the smaller car players would struggle and probably get popped out. So yeah. Tesla is now big enough that I'm praying for them not to fail. But I keep looking at those interest rates and wonder how long people can buy 100,000 dollar cars. And I think that because during the recession I brought a ridiculously expensive car that I could have never have afforded if say the interest rates are what they are now. So I look at all those Teslas on the road and try to figure out what the pain point is.
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Trump's going to let Tesla burn hard.
ReplyDeleteTrump also doesn't really give a crap about "the Valley" because he doesn't see the people there as his supporters. Trump sees Facebook, Google, and plenty of other "too big to fail" companies as his enemies, not his people.
It's also tempting from the perspective of "the Valley" to believe that the local economy has anything to do with the economy of other areas, but that's not the case.
I'm pretty sure the people here who will be moaning about a Tesla collapse will be misguided investors, both individual and institutional, and that the institutional losers will mostly be insurance companies. We have enough Latin American money flowing through here that we generally don't give a crap what happens in the Bay Area Communist Republic.
Back in The People's Republic of Austin, the people there now tend to go for the idea that Silicon Valley is "indispensable", but that's actually an effect rather than a fundamental economic relationship. The fact is that Silicon Valley has become an economic predator, and Silicon Valley's ongoing relationship with IT labor has been a story of collusion involving the biggest players, including Apple, Facebook, and Google.
Silicon Valley's biggest players work to drain the IT talent pool so their projects can get built, but more importantly so everyone else's projects can't get built. The funding cycles are mostly incestuous, often involving people who "break away" from the biggest players only to wind up their companies by having them bought out by some of the same.
So Trump can and will let Tesla burn brightly, especially if there's a chance that it will hurt his enemies in Silicon Valley. There might be a calculated gamble behind letting Silicon Valley implode a bit in order to help the economies of other regions, especially those with competing tech sectors.
For what it's worth, the current climate of increasing tariffs probably means that there will eventually be new chip fabs in the US, but I don't see why they'd be built in or near Silicon Valley. There won't be any new Fairchilds or National Semiconductors getting started in Silicon Valley. Instead it will be old chip businesses that will decide it's cheaper to build a new chip fab with tax credits and benefits in some state like South Carolina.
That worked out pretty well for Boeing and BMW, so why couldn't it work for Hynix or Broadcom? (Also for what it's worth, I've been to Spartanburg, South Carolina -- you could wind up in worse places, like Stockton, California.)
You could be right. I know everyone fancies themselves as the new Silicon Valley or whatever. I've been trying my whole life to figure out the magic ingredient that makes places one thing or another. I'm still skeptical of their success because tech literary bleeds off pretty quick. Even out here in the burbs. I think of the Valley as basically tree rings. San Fransisco being the center and then it goes out from there. if it were so easy to make a new Silicon Valley we would have had more success out here in the burbs. The talent pool is all basically living out here anyway. It just not as easy as it sounds. I'm not saying there won't be other tech hubs. Dell started in Texas.
ReplyDeleteWe don't care if new chip plants are built here or not. We simply don't really have the land anyway. Intel has been sitting on a dead chip plant in Nevada since the recession. That didn't cause anyone to think anything. The fear that chip plants are going to be built elsewhere doesn't matter.
So.... if Ford went out do you think Trump would bail them out? Because I think Teslas market cap is bigger than Fords now isn't it? Making I'm making shit up. So I guess I think there at least some chance that he will. If that plant goes, it's probably roughly 10,000 jobs. HERE
There are actually more people working there now than during the peak GM days. Every time I drive by there the parking lot is madmax full. There are a lot of companies that exist only because of Teslas sensors.
The reason why those guys keep letting themselves get bought up by those apex predators is because the government allowed them to get too powerful and they have the sharpest elbows on the block. They will cut a bitch and make it so no one can get a foothold. Wasn't it dropbox that was told by Steve Jobs that he would destroy them? I mean, that is the nature of business - but when you have a government that is stifling economic growth at the same time allowing a select few to become ridiculously powerful. You get an environment like this.
Is "too big to fail" was a good thing?
ReplyDeleteHello She Said and Capital of Texas Refugee,
ReplyDeleteTrump has been through a few bankruptcies. My guess is he would let Tesla deal with it themselves, go through bankruptcy. Congress though, may consider a bailout. If Tesla declares, are you and Mr S OK?
Jeff
That actually is a good point. I would hope that he would let bankruptcy rules prevail instead of using the government as a backstop. but Elon is sort of tape wormed into the government already.
ReplyDeleteI ~think~ we will be okay. You can never be overly confident in Silicon Valley though. I think people aren't really aware how many feeder companies in the valley support Tesla. Some very big companies by market share. So we do have some exposure, but we've both worked for startups and have been laid off before. So you just do the best you can. It wasn't until last week that I really felt they might go. So I'm still assessing.
Elon Musk is quite the character, he had his staff delete the Facebook accounts for Tesla and FakeX!
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