Blind Ambition
Tesla
If you’re a person with opinions about Elon Musk, you probably fall into one of three camps - he’s either a world-changing genius who’s single-handedly revolutionized spaceflight and electric vehicles, a racist, brain-poisoned charlatan who can only capitalize the ideas of others, or some annoying-but-necessary combination of those things. A common defense of Musk is that while he is clearly an odious human being, he has dragged an entrenched auto industry kicking and screaming into a greener future. However, the way in which he’s done so is far more Netflix than Henry Ford (though he shares other traits with the erstwhile inventor.)
Tesla has largely functioned as a hype business that also builds cars. For years, people bought Teslas because they shared Elon’s belief in a greener, cooler, more technological future. They liked his poorly-built cars with big screens and lots of icons. They didn’t care if Tesla pushed software updates that cut their driving range or charged them for features advertised as standard. It was worth it to be a part of Musk’s imagined green future.
For a long time, Tesla’s primary driver of revenue and profits was its ability to sell tax credits, keeping its unprofitable car business afloat. Once the company began its aggressive expansion strategy and shifted focus to delivering millions of cars, however, it faced additional scrutiny around Musk’s wild claims. Tesla has, for a long time, said its cars can drive hundreds of miles on a single charge. That is, well, a lie:
Tesla was fined earlier this year by South Korean regulators who found the cars delivered as little as half their advertised range in cold weather. Another recent study found that three Tesla models averaged 26% below their advertised ranges.
Tesla has been dinged by regulators repeatedly for overstating range:
The U.S. Environmental Protection Agency (EPA) has required Tesla since the 2020 model year to reduce the range estimates the automaker wanted to advertise for six of its vehicles by an average of 3%.
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The projected range for one vehicle, the 2021 Model Y Long Range AWD (all-wheel drive), dropped by 5.15%.
The company’s cars consistently underperform their big brand competitors, which makes sense when you learn the company designed its software to lie to Tesla drivers:
The company decided about a decade ago, for marketing purposes, to write algorithms for its range meter that would show drivers “rosy” projections for the distance it could travel on a full battery, according to a person familiar with an early design of the software for its in-dash readouts.
Then, when the battery fell below 50% of its maximum charge, the algorithm would show drivers more realistic projections for their remaining driving range, this person said. To prevent drivers from getting stranded as their predicted range started declining more quickly, Teslas were designed with a “safety buffer,” allowing about 15 miles (24 km) of additional range even after the dash readout showed an empty battery, the source said.
The directive to present the optimistic range estimates came from Tesla Chief Executive Elon Musk, this person said.
Right yes, this is not marketing, despite the people Reuters interviews who chalk Tesla’s range problems up to ‘aggressive’ estimates. This is fraud. When your car is displaying range tens or hundreds of miles beyond what it can actually achieve, on purpose, that is fraud!
The deception doesn’t end at the car’s dashboard, the company recently set up large networks of ‘technicians’ to snuff out customer complaints:
As sales grew, so did demand for service appointments. The wait for an available booking was sometimes a month, according to one of the sources familiar with the diversion team’s operations.
Tesla created a ‘Diversion Team’ in Las Vegas specifically to deal with range complaints, whose primary objective was to cancel as many customer appointments as possible:
A supervisor had purchased the metallophone – a xylophone with metal keys – that employees struck to celebrate appointment cancellations, according to the people familiar with the office’s operations.
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If the remote diagnostics found anything else wrong with the vehicle that was not related to driving range, advisors were instructed not to tell the customer, one of the sources said. Managers told them to close the cases.
Tesla also updated its phone app so that any customer who complained about range could no longer book service appointments, one of the sources said. Instead, they could request that someone from Tesla contact them. It often took several days before owners were contacted because of the large backlog of range complaints, the source said.
They employed tactics straight out late night infomercial call centers: closing cases if a customer didn’t pick up a call, telling customers the issue was their driving, keeping them in endless support loops until they gave up. The problem with selling a million cars with fabricated driving range numbers is some percentage of those people will call in, upset their car is getting as little as half the advertised range. You could update your marketing, or find ways to satisfy customer complaints, if you were a normal company. Or, if you’re Tesla, you could provide an app, offer appointments months away, and use boiler room aggression to stifle dissent.
Tesla’s tactics, like pretty much every Musk business, are reprehensible and would tarnish any company not run by an impossibly rich techno-genius. The more systemic problem Musk’s wild lies have created is now every EV company is chasing long range vehicles, when they’re completely unnecessary for the vast majority of trips:
Because Americans only drive 40 miles a day on average, and because 95 percent of car trips are 30 miles or less, the range figures Tesla has normalized are wildly overkill and exacerbate battery supply chain issues that are only just starting to bite.
The reality is that Battery EVs need not replace gasoline-powered cars for long trips, because no amount of super-fast supercharging will be apples to apples. What Musk has done is create the fiction you can buy an EV that will go four hundred miles, even though his cars can’t. Now every manufacturer is racing to keep up, sticking giant batteries in heavy cars that will ruin our roads, in pursuit of one man’s fiction. A quirk of modern capitalism is that companies fixate on a successful upstart - Netflix, Tesla - and rush to copy its model, without asking whether the underlying product is something anyone actually needs.
Starlink
We’ve talked before about Elon’s other company putting thousands of satellites in low-Earth orbit, much to the consternation of astronomers. But, like Tesla, Elon’s propensity for securing massive sums from the government has allowed SpaceX to launch an absolute ton of satellites in the last couple years:
Since 2019, Mr. Musk has sent SpaceX rockets into space nearly every week that deliver dozens of sofa-size satellites into orbit. The satellites communicate with terminals on Earth, so they can beam high-speed internet to nearly every corner of the planet. Today, more than 4,500 Starlink satellites are in the skies, accounting for more than 50 percent of all active satellites.
Fifty percent of all the active satellites in Earth orbit belong to the dude whose primary hobby is platforming racists, child porn, and hard right conspiracy theorists on the chat app he bought for $44 billion dollars. And sure, SpaceX is a large company with smart employees run by a competent aerospace executive, but like any of Elon’s companies he has an alarmingly hands-on role in many important decisions, especially when it pertains to his burgeoning satellite network.
Musk made headlines for cutting off Ukraine’s access to the Starlink terminals he’d provided, despite the US government paying his company over $400 million in fees, which were more than 33 times the cost of a standard unit. It was only a matter of time until Musk added ‘war profiteer’ to his long list of titles.
It is an incredible achievement that SpaceX has been able to launch thousands of satellites into orbit, but to what end? The service claims it has a million and a half subscribers, a number any Internet provider would find unsustainable. The goal of providing low-cost service to rural and inaccessible areas is admirable, sure, but allowing one very unstable man to do this to the night sky in pursuit of a space monopoly might be unwise:
Starlink’s most lucrative customers are foreign governments, defense companies, and the like. The best case scenario, the most financially viable for Musk and SpaceX, is they become the de-facto provider of satellite services to most of the world’s militaries. Which is pretty terrifying to think about, when you take into account how Musk has inserted himself repeatedly into the conflict, musing that Ukraine should simply let Russia annex a bunch of their land as part of a ‘peace deal’.
Some countries are starting to take the implications of one billionaire controlling the skies seriously - China and the EU are funding their own satellite networks which, again, are just going to pollute the skies even more, setting aside whether Musk achieves his goal of expanding Starlink’s network ten times over. Our very dumb, very light polluted future is tens of thousands of sofa-sized satellites smashing into one another as everyone tries to out-surveil each other.
Speaking of, we haven’t touched on what Starlink’s ubiquity would mean for surveillance of civilians. Musk has joked (?) he has access to more ‘real-time global economic data’ than anyone, because his company can pinpoint where all its Starlink terminals are at any given time. Do you want the guy who erects giant Fuck You installations on top of buildings he doesn’t own knowing where you are at all times?
SpaceX followed the Elon plan - convert exciting tech ideas into government subsidies to build cool tech which he can then use to pursue commercial market dominance. The problem with Starlink, like Tesla, is he’s done it in a way that may irreversibly warp the market and make life worse for everyone.
Accounting
We talk a lot about companies with ridiculous valuations, seemingly divorced from their underlying finances. Many of these companies take advantage of market hype to enrich founders and investors while engaging in all sorts of questionable corporate behavior. But, in theory, public companies are audited. Right? Right??
Accounting firms have a critical role in verifying the finances of the companies they audit so that those clients can rely on and publish accurate snapshots of their businesses. Lately, a startlingly high number of those audits are filled with errors and other flaws, according to a report released by a congressional watchdog on Monday.
Come ON. Maybe it’s no surprise since auditors enjoy cheating on their exams. The Public Company Accounting Oversight Board was created in 2002 following the collapse of Arthur Andersen after the Enron scandal. The idea was to conduct occasional oversight surveys to make sure accounting firms were doing their jobs properly. How’s that going?
A whopping third of all audits conducted by U.S. global accounting firms in 2022, including the Big Four, contained errors, according to the report by the PCAOB.
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This increase in errors may not just be a product of sloppy work by auditors, though: The mistakes have likely been there for years, and are only being uncovered at a higher rate now because they tend to be found during economic instability.
Stepping back briefly, it is true that US public companies are required by law to issue an exhausting number of reports and disclosures. There are quarterly financial reports, which often cause moves in markets. There are financial projections which, if you’re someone other than Elon Musk, people pay attention to. There are stock disclosures if executives buy or sell things, regulatory disclosures if inquiries and investigations happen, etc. The list is long and very boring.
These disclosure and reporting rules are in place, ostensibly, to protect investors. We fuckin love our investors in this country, and they must all be protected from erroneous information informing their investment decisions (most erroneously the belief they should trade equities in the first place.) Endless armies of accountants and lawyers earn profligate salaries making sure thousands of public companies dot the i’s and cross the t’s except they apparently also suck at doing that:
Out of all the 710 audits that PCAOB reviewed in 2022, 40% contained errors, up six percentage points from 2021. There was an uptick in failures to execute the “basic audit steps sufficiently,” PCAOB found, such as the use of non-credible data to support the conclusions.
How the eff are they making so many mistakes? It will probably not surprise you to learn that the firms themselves are a mess, often without the basic controls and procedures their public clients are required by law to have in place:
Some firms lack any quality control system, or even a monitoring procedure to check that workers adhere to professional standards in their accounting and auditing, according to the report. And some firms that do have inspection procedures aren’t performing them, the report added.
Another problem with the world of financial audits is there are only four major firms to choose from. There used to be five until, you know, the events leading up to 2002. So you have to choose one of the Big Four, to make sure your investors have a neat and tidy financial report every three months, but those Big Four are being run more like one of Elon Musk’s companies than yours is! Shit!
What can we do? I have no idea - I’m not an accountant, I can barely use QuickBooks. The institutional rot within the accounting industry is not new, but it is getting worse as these types of procedural errors become easier to spot. It is wild that people continue to defend public markets as efficient when more than a third of the data filed in the thousands of yearly financial disclosures is flawed or outright wrong. If only someone could figure out how to use the billions sloshing around to hire a few good accountants.
Mr. Beast
I don’t think (?) we’ve ever talked about James Donaldson aka ‘Mr. Beast’, a wildly popular YouTube influencer whose main schtick is doing crazy things with his sponsors’ money. Setting aside the staged philanthropy and what it says about our society, Mr. Beast has spent the last few years expanding his empire like any good entreprefluencer. He’s got merch, he’s got snack foods which his fans are happy to help tidy up on store shelves, and he’s got a burger line.
That is to say, Donaldson partnered with a ghost kitchen company in 2020 to launch a line of Mr. Beast Burgers, which received press as a ‘viral phenomenon’ at the time because when you’ve got a hundred million teenage fans, burgers are low hanging fruit.
However! Donaldson is now suing Virtual Dining, the company responsible for putting patties in buns, claiming the quality sucks:
Mr. Beast and his legal team allege in the suit that Virtual Dining Concepts wasn’t concerned about quality issues or angry fans but instead was focused on rapidly expanding its company and using Mr. Beast Burgers as a way to pitch the idea to other famous actors and celebrities. Since the Beast Burger deal, Virtual Dining Concepts has created similar branded ghost kitchen offerings for NASCAR and Mariah Carey.
Mariah Carey has a ghost kitchen line? What? Sadly, Donaldson is learning the lesson many celebrities have over the years, that ghost kitchens generally suck, they put out subpar products, and the overall experience is not a substitute for dining or a positive brand interaction.
What ghost kitchen operators and brand managers fail to understand about the celebrity ghost kitchen concept is that dining is not simply about slapping food into wax paper and delivering at scale. People eat out because they enjoy food, and seek a good eating experience. Stuffing a couple faceless line cooks into a portable trailer in a deserted parking lot is not an experience a sustainable number of customers will want to pay a premium for. How many more billions will investors pour into reinventing the food truck in worse, more exploitative ways? Stay tuned!
L&I
Two of my friends have the unfortunate distinction of making the local paper this week, if you want to read about how unbelievably broken Philly’s home and building inspection system is. We often discuss the ways local governments fail their citizens, and a dearth of qualified inspectors in a major metro means people end up living in unsafe, unhealthy homes, which is pretty shitty, especially if it’s happening to people you know.
Short Cons
NBC News - “The last of three men convicted in a “We Build the Wall” fundraising fraud scheme was sentenced to more than five years in prison Tuesday, federal prosecutors said.”
Insider - “There's an obscure theory doing the rounds in Silicon Valley as it quickly becomes the new ideological hobby of tech's power players. It's called effective accelerationism.”
Reuters - “Injectable versions of some widely-used cancer drugs including Johnson & Johnson's blockbuster multiple myeloma treatment Darzalex are likely to be excluded from new U.S. government price negotiations for years, drugmakers told Reuters, protecting billions in revenue.”
Atlantic - “As tech giants face mounting antitrust scrutiny and try to navigate the development of generative AI technology, the most powerful companies in Silicon Valley are attempting to signal their open-web bona fides.”
WaPo - “Dedicated viewers of Fox News are probably familiar with Lear Capital, a Los Angeles company that sells gold and silver coins. In recent years, the company’s ads have been a constant presence on Fox airwaves, warning viewers to protect their retirement savings from a looming “pension crisis” and “dollar collapse.””
ProPublica - “Tax data obtained by ProPublica provides a glimpse of what congressional investigators would find if Crow were to open his books to them. Crow’s voyages with Thomas, the data shows, contributed to a nice side benefit: They helped reduce Crow’s tax bill.”
NPR - “Rubalcaba, who makes the SAG-AFTRA union rate of $187 a day as a background actor, said she did not give permission for her digital replica to ever be used in the background of any scenes.”
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