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In this episode, Chelsea dives into the problems with Elon Musk, and everything his ultra-high net worth allows him to get away with. Click here to check out our members-only bonus video about how billionaires like Musk scam America on their taxes:


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Hey, guys.

It's Chelsea from The Financial Diet. And before we get started, thanks to Fabulous for sponsoring this episode of TFD.

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And before we dive into the River Styx of BS that is Elon Musk's career history, if you want to learn more about how the rich get away with not paying their fair share of taxes and still somehow get celebrated for it, last month's bonus video from members only is all about how rich people get around paying their fair share of taxes and how we can potentially change that in the future. To watch the video, click the link in our description. And if you're not already a member of The Society at TFD, just click that Join button or follow the prompt on the video link and join our society at the $4.99 a month tier.

And today, I'm excited to be doing a long-awaited, much needed, in my opinion, deep dive on one individual who is pretty relevant in most people's news feeds today about the possibility of whether or not he's going to become the new owner of Twitter and what that will mean for both the experience on Twitter and its larger impacts on society and democracy but who irrespective of his potentially buying another social media platform. Because if Mark Zuckerberg taught us nothing else is that it's really great for society when one weird billionaire owns the major arteries of free speech and information distribution. I think this person necessitates his own video because he doesn't just typify the genre of super wealthy, ruling oligarch class that we currently have.

With our current levels of wealth inequality in this country being basically unseen since the Gilded Age, he also represents what I feel is our incredibly strange cultural relationship to these figures as opposed to other times in history because, while I don't doubt that there were some Vanderbilt and Rockefeller stans living in the tenement buildings back in the Gilded Age, it's pretty fair to say that the overall relationship that society had toward those massive cultural figures was, at the time, not super positive. And it was in many ways just that very wealth inequality and righteous indignation at the ruling class, most of which was inherited, which led to the massive labor movements we saw in the early 20th century. And we are starting to see a similar labor revival pointedly against figures like Jeff Bezos at Amazon with the new Amazon Labor Union or Howard Schultz of Starbucks with the rapidly unionizing Starbucks cafes around the country.

It does seem like we are starting to understand that people being this rich and having so much control and essentially being treated as God kings is not super healthy for a democracy. But this person we're diving in today doesn't just continue to be able to fail upwards in terms of business and finances, he also has surprisingly resilient perception as a boy wonder, genius, inventor, scientist, second coming of Nikola Tesla that really isn't borne out by his actual CV. And also, he has just the worst stans.

Truly, if you're out here simping for a billionaire, get it together. Now who am I talking about? We're, of course, talking about the Prince of PayPal, the Tesla Tyrant, the second most divorced man in space after Jeff Bezos, the aptly once crowned by Azealia Banks Apartheid Clyde, father of 17 kids and counting-- that's an exaggeration, but not by a ton-- the one and only Elon Musk.

Now whether or not Musk is going to become the new owner of Twitter may be making him newsworthy in this very moment. But ultimately, the fact that he's even in that position, by many metrics the richest man in the world, and regarded as someone who should be the new arbiter of cultural communication standards despite basically no qualifications for that job, is kind of the least of our worries. Overall, Elon Musk represents not just the fact that, once you have a certain amount of money in our current economy, it's basically impossible to fail.

He also represents how good PR is able to overcome basically anything else. And depending on the circles you run in online, you may feel like you are overwhelmed with information about how many times that man has messed up, like viral listicles about the worst things he's ever said; or big failures like the 1.5 million Teslas that have been recalled this year alone; or the former employee suing for racial discrimination practices; or the hundreds of Tesla workers contracting COVID; or the Teslas catching on fire; or the major public sexual harassment scandals or environmental damage of his various companies; or the abject failure that has been the work of the Boring Company to present; or his constant wading into subjects for which he is absolutely not an expert, like COVID, which he famously proclaimed would be over by April 2020; or gendered pronouns, which is rich coming from a man whose 75th son is just named a bunch of keyboard mashing; or him claiming that things like his famous underground tunnels with the Boring Company would be immune to surface weather conditions, resulting in many people inundating him with pictures of flooded subways; or his libelous exchanges that most people would get fired for, like when he called one of the rescuers of the 2018 Thai tunnel operation a pedophile. If you're aware of these things, it can seem absolutely mind boggling that not only does Musk keep getting new chances but that he's beloved by so many of his stans and even just normal people who don't pay really close attention to what he's doing.

But it cannot be overstated that we have created an economy and a relationship to extreme wealth that makes it almost impossible to fail once you've achieved a certain level of success. It's reminding me of that famous fact that, if Donald Trump hadn't just tried a bunch of his business [BLEEP] over the years and had just invested his initial inheritance in well-diversified, low fee index funds, he'd actually be better off today than he is. Wealth begets wealth.

Fame begets fame. And in the case of Elon Musk, the perception of success begets opportunities for more success. And yes, there is the rich, white, male factor when it comes to Elon.

Because although it would be lazy to say that that's the entire reason he's been given so many chances, it's not totally untrue. After all, history is filled with well-documented bounce backs for rich white guys for well-documented monstrosity. Sean Penn has had more than 25 years of documented assault charges as well as accusations of intimate partner violence.

But during that time has also starred in many blockbuster movies and won Oscars. And while we're on the subject of Oscars, I guess Will Smith probably shouldn't have slapped Chris Rock. But the fact that Roman Polanski was convicted for the rape of a 13-year-old, that's no biggie.

And everyone from Bill Clinton to Louis CK to Mel Gibson are all people with credible allegations of serious wrongdoing who have managed to either fully skate by or to forge comebacks for themselves after their alleged cancellations. We talk a lot about cancel culture in this society. But outside of rare cases-- and no surprise many of the most notable ones like Colin Kaepernick-- are for people who are not white guys.

It is very rare to see a person who once they've past a certain level of success has actually seen all of their wealth, privilege, and, in many cases, fame even materially diminished by accusations or outright convictions of wrongdoing. Basically, if something isn't sending you to jail you're going to be doing more comedy shows within the next few months. And you add to that the immense wealth of someone like Musk, and you're basically Teflon.

And to be more specific, Musk's net worth of $252 billion is more than 3,360 times more than that of Bill Clinton's estimated net worth. So we're talking about serious insulation from any kind of consequences even when compared to a former president. But his race and gender and social class are just not enough to explain his particular level of resilience and good PR.

So what is it that makes Musk so immune to his own failures? And I actually think it's probably largely a result of the fact that his failures exist in a completely different stratosphere than how we're used to thinking. And when it comes to our inability to conceptualize the numbers and scale that we're actually talking about here, this is one of the primary reasons that we have a really difficult time being as disgusted and outraged as we truly should be about things like rampant wealth inequality because, for example, there is no shortage of content out there demonstrating just how incomprehensible $1 billion actually is.

In one 2011 paper, Michael Norton and Dan Ariely argued that we so rarely see wealth represented in a visual scale, which is why Americans consistently underestimate the value of the super rich. And in the 2014 article, "How to comprehend incomprehensibly large numbers", George Dvorsky argues that there are actually cognitive barriers to recognizing or contextualizing that $1 billion is 1,000 times bigger than 1 million and what that actually means. So already even having $1 billion means someone is worth far more-- 1,000 times more-- than most Americans will ever earn in their lifetime.

Now you have to multiply that by about 252, and you're getting to the current net worth of Elon Musk, which you then also have to put in the context of his trajectory. In just 2015, Musk was reportedly worth $13.3 billion, which is roughly the current GDP of Bhutan, Fiji, and Barbados put together so still obviously an enormous amount of money. But in just seven years, that net worth has increased to $252 billion.

And if you want to compare that to a country, that is roughly the same size as the GDP of Portugal. So let it sink in for a second that Musk could if he wanted to buy all of Portugal and turn it into a free speech haven. But also, that means that in seven years alone Musk's net worth increased by 1,794% and compare that to the average American.

In 2015, according to the US Census Bureau, the median American net worth was $88,050. If they'd followed Musk's trajectory, they would now have a net worth of $1,580,233. The most recent Federal Reserve data, however, shows that the median American net worth as of 2019 was only $121,670, meaning that the gains that the average American has made in terms of their net worth in the same amount of time is infinitesimally smaller than what Musk has been able to do.

When we start to think of these numbers in any kind of context, it is inevitable that we will come to the right conclusion that absolutely no one individual should have the same economic power as the entire nation of Portugal. But this is where the tech pros will often jump in and point to the fact that just because Musk has $250 billion doesn't mean it's all liquid, meaning obviously that it's tied up in things like the value of the shares of ownership he has in things like Tesla and, therefore, couldn't just be used to spend however he wants. But no one is talking about whether Musk is going to swipe his debit card and be declined at CVS buying gum.

Net worth applies to what you own and what you control. And when still fewer than half of US millennials own a home and 41% of millennials reportedly have less than $15,000 in personal savings, it is safe to say that Elon Musk has access to a lot more financial power than you or any of your friends, most likely, more than all of you put together. And just because that money isn't liquid doesn't mean the value of his assets can't be leveraged to do things like, for example, possibly buy Twitter.

So the completely different and, in many ways, incomprehensible scale that Musk is operating on means that even very fundamental concepts like risk and failure are existing in two completely different universes for an average American and for someone like Elon Musk. For the average millennial, a big risk might be considered buying a fixer upper home that you're not sure you can make enough money off of to offset the cost of repairing or quitting a job to go freelance. And even if you were looking to be an entrepreneur like Elon, we're talking about an infinitesimally smaller scale.

Point of Sale Nation estimated in 2021 that if one were to open a retail store, while expenses differ from city to city, you should expect to spend about $100,000 in your first year of business. Now say you do that for a year and you fail, assuming you're one of those median level Americans with a net worth of about $120,000, you have just lost about 82% of what you're worth. Contrast that with Elon Musk.

On April 21st of this year, Tesla's stock shrunk by $125 million, which resulted in Musk's personal net worth going down by about $30 million. Sounds like a lot, right? Except that considering his net worth of $252 billion, that $30 million represents just 0.012 of his total net worth.

If you're one of those median Americans, that's the equivalent of you losing $14.60. And in the context of Twitter, if he were to take over Twitter and it were to go dormant tomorrow-- highly unlikely-- he would have only lost 17% of his net worth. For that median American with a net worth of $120,000, that's like losing 20 grand.

It would probably sting for a while, but you'd be OK. In fact, Elon Musk is at a point where his risks should no longer even be viewed at through the prism of individuals or really even human beings. The risks that he's taking and the people and organizations for whom they have implications should be looked at as corporate decision making or even on par with governmental decision making because, when we talk about corporate level or governmental level decision making, you have to take into account many people besides yourself.

Elon Musk's net worth may be barely dented by one of his companies seeing its stock plummet. But all of the retail investors who have significant amounts of their wealth tied up in that stock or the many employees of that company who might be laid off overnight because of falling short in an earnings call are way more impacted by Elon Musk's decision than he is himself. This is also reflected in the flippancy with which he'll tweet about things that greatly influence stock prices, something the SEC has rightfully come after him before but something that perfectly illustrates the level of power imbalance we feel comfortable giving to one man.

When we look back at things like the age of monarchy in Europe, it can be really difficult to understand how people would be OK with a system in which a bunch of dynastic, unqualified, and, quite frankly, not genetically sending their best freaks and powdered wigs were able to rule over an entire continent with unquestioned authority. How could anyone have supported monarchy? And it's not a perfect comparison, but I do think a stroll around the absolute hero worship that people like Elon Musk receives from average everyday people who, in many cases, can barely afford to pay their bills, let alone build wealth at even one billionth the scale that he is, gives you an idea of how people can get in their heads that certain people are just better than us and deserve to be able to crush us under their wheels.

Because while it's easy to think that Elon Musk is pretty reviled if you spend your social media time on places like Twitter where he is very frequently and satisfyingly getting his [BLEEP] handed to him. Switch the tab over to LinkedIn or even dive into his own mentions, and you'll see the extent to which people are just absolutely caping for that guy. And no matter how abhorrent some of his views or how wrong they are quickly proven to be, almost everything will be written off as nobody's right 100% of the time, or he's just a provocateur.

Now people have always looked up to millionaires, billionaires, and entrepreneurs. But the advent of social media and stan culture and the increase in the number of billionaires and most of their individual net worths over time have kicked entrepreneur hero worship into hyperdrive. In a 2018 column, entrepreneur, consultant, and writer Anna Johansson wrote about the rising hero worship of entrepreneurs and how it has real-world consequences on average everyday people.

How people who become fans of entrepreneurs often fall victim to survivorship bias because most visible entrepreneurs are the few who made it as opposed to the many who fail. Johansson's article also goes on to talk about how this hero worship makes people justify bad behavior and perpetuates the myth of meritocracy, which, as we've covered many times on this channel, is completely disproven when you look at America's overall low social mobility for a developed country, as well as the fact that most people who become extremely wealthy were born into some level of wealth. And especially with the complete collapse of expertise in the light of things like fake news and public health misinformation, when we already have hero worship over a public figure over maybe their limited success in a specific area, if there's even that, we tend to view a lot of what they do or say as being innovative or worth listening to even if it's completely removed from their area of expertise.

For example, Elon Musk is currently positioning himself as the potential savior of free speech. But absolutely nothing in his professional history would give an indication that he's qualified to be that arbiter. And, more importantly, with how aggressive he has been about stamping out possible unionization in his companies, anyone who's interested in labor rights would be pretty concerned that someone who claims to be so pro free speech is so thoroughly against it when that speech has to do with organizing for better working conditions.

And that's only the tip of the iceberg of subjects that he has been completely unqualified to weigh into yet does. Because once you get that genius moniker, which, in many cases for Musk, was absolutely sealed with the immense popularity of the Iron Man figure, which was ostensibly based on Elon Musk, it can be incredibly hard to lose that air of genius. And even the most dubious stories will be used to further boost its legitimacy.

For example, part of Musk's origin story that a lot of fans point to is that Musk developed an interest in computers when he was just 10 years old because he loved video games. And through that interest, he learned to code and by age 12 coded the PC game Blastar and sold the code for $500. Now while this can be framed as though 10-year-old Musk was a scrappy wonder kid ahead of his time, it ignores that expressing an interest in computers and coding as young as 12 is not actually that rare.

Sure, in the early '80s, kid-friendly coding was not as ubiquitous as it is now. But BASIC, the language in which Musk coded his first game, was an extremely popular coding language. And there were, in fact, campaigns encouraging kids all around the world to use BASIC.

Now does that mean he wasn't smart? No. But there is a difference between a smart kid and a successful kid.

Plenty of kids can and have learned to code, especially languages like BASIC, and would never approach even a fraction of the success that Musk had. I'm not here to make this about my famously 6 foot 4 husband again. But fun fact is that my husband went to engineering school-- an elite engineering school-- and he had a textbook on one of the coding languages.

And he was like, this textbook is poorly written, so he completely rewrote the textbook for free in his spare time, gave it to his professor. And he was like I'm using this instead. They since adopted that textbook and use it in school.

He was 20 years old. Now, is my husband Elon Musk? No.

He still has all his hair. One thing we can't take away from Musk, though, I mean, that's some amazing hair transplant work. That man should be on a billboard like off a freeway in LA.

Some amazing stuff. But why is it that Musk could just doing normal nerd [BLEEP] when he was a kid suddenly becomes part of his hero worship? It's probably to do with what kind of kid Elon Musk was and, again, one of the reasons why it's been basically impossible for him to financially fail and even stranger that people tend to frame him as this bootstrap entrepreneur because Elon's father Errol Musk described the family in Elon's early years as, "having so much money at times, we couldn't close our safe." That's a quote.

In the mid-80s, Errol Musk spent 40,000 pounds to become a part-owner of a Zambian emerald mine. Elon Musk has said on Twitter that his father, quote, "never owned an emerald mine". However, public accounts, including quotes from Errol Musk himself, state that he did indeed own half the mine shares.

Fast forward to Musk's adult years-- again, you'll probably see some thinkfluencer inspiration porn infographic about how when he was 23 after founding Zip2 Musk and his brother slept in their rented office and showered at the Y because they couldn't afford their own apartments and that they'd paid for college all themselves. However, he has been very inconsistent when recounting how much help he actually received because, in a 2017 interview with Rolling Stone, Musk said that his father tried to take credit for his success including being an early investor for Zip2. Musk said this was irrelevant and bragged about how he paid for college by himself and that the funding was raised from, quote, "a small group of random angel investors in Silicon Valley".

However, just two years later, he confirmed on Twitter that his father did, in fact, provide $20,000 of funding in a later round. And it's easy to see how Musk has worked overtime to perpetuate his self-made man myth because it's precisely the thing that he and billionaires like Jeff Bezos rely on because it's frankly sexier than saying that they achieved what they did due primarily to luck and exploitation. Elon and Kimball Musk did do some great work on Zips2 landing accounts for the New York Times and Chicago Tribune.

But they also managed to sell that company for $307 million in cash after four years with Elon getting $22 million for his 7% share. But from there, he went on to found payments company, which eventually merged with Paypal's then parent company Cofinity to avoid competition. And here's another great example of getting rewarded for failure.

Even after being ousted from his leadership position by the board and replaced with Peter Thiel, Musk still managed to reap huge monetary benefits from the sale of PayPal to eBay. He received $175.8 million as its largest shareholder. And about $100 million of that would be what Musk used to start SpaceX.

Now was Musk smart to ensure that he held adequate share in the company? Yes. And did this ensure that he benefited monetarily from its sale even after he was no longer in a leadership position?

Also, yes. But when you already have the capital to make such investments, once again, you reduce the risk, which we talked about earlier, that something as silly as getting fired will result in financial ruin. Now this could easily be turned into a folksy tale.

And it has on the internet about how poor Elon was fired because he and Peter Thiel disagreed on Microsoft versus Unix. But look at him now. But ensuring that you remain a shareholder in the company you founded isn't some dramatic revenge scheme, it's just how business works.

And after, you see a long pattern of Elon Musk's wealth building exponentially because he's been able to get in on the ground floor. For example, he invested $6.5 million in Tesla in 2006, just 3.7% of his payout from the PayPal sale. And last year, the company brought in $53.8 billion in revenue.

And by the way, despite the widely celebrated drop in Tesla's stock price last week-- as of market close on April 29, it was valued $870.76 per share, representing an 11% drop over five days-- it's actually fluctuated all year, has been lower several times this calendar year, and is still up nearly 30% year over year. Elon's long-term success with companies has essentially been the old adage of buy low, sell high but at a quantity that most people cannot begin to personally comprehend. In boring terms, founding a company, earning money when you sell it four years later, putting that money into a new company, and earning more when that company sells is fairly normal for an entrepreneur.

But earning $5.5 million from Zip2, putting that into and receiving $175.8 million from the sale of PayPal is not something that most entrepreneurs can identify with. Essentially, his story is a fairly normal business story working with really abnormal numbers. And the sheer scale of his wealth and the fact that so much wealth, even if just placed in boring [BLEEP] index funds will continue to beget unbelievable amounts of additional wealth makes it so that even many of his abject failures like we discussed at the beginning don't even make a dent into his overall net worth and his mythos.

It is important that we have at minimum a critical relationship with extreme wealth accumulation in our society because we have ample data to show that the more extreme wealth inequality becomes, the worse it is for our entire democracy. But specifically, in the case of Elon Musk, it is worth asking ourselves why so many of us are so quick to protect, defend, and even mythologize for someone whose wealth in large part was made the old-fashioned way-- being born wealthy, getting pretty lucky, and then just continuing to let your money work for you in various ways. It's not to say Elon Musk isn't smart or didn't have many good ideas.

But treating him as some kind of God King who deserves to be making massive decisions for things like free speech and democracy or has any right drilling weird [BLEEP] mole rat tunnels under the city of Los Angeles for no apparent reason is just not something we need to be doing. Billionaires like Elon Musk have immense PR teams that work around the clock to ensure that the cultural narrative around him is a good one. We don't need to be helping him for free.

As always, guys, thank you for watching. And don't forget to hit the Subscribe button and to come back every Monday, Tuesday, and Thursday for new and awesome videos. Bye.