Space is a frontier too far. Elon Musk’s best bet is to come back down to earth

US Outlook

Andrew Dewson
Saturday 04 July 2015 01:46 BST
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Elon Musk with a SpaceX rocket. Will his gamble on commercial space transport pay off?
Elon Musk with a SpaceX rocket. Will his gamble on commercial space transport pay off?

Will Elon Musk, the billionaire chief executive of SpaceX and Tesla, end up a real-life Iron Man? Or as Nearly Man, a not-quite-so-super hero?

Whatever he turns out to be, he is probably glad the week is over – 18 consecutive incident-free rocket launches and $7bn (£4.5bn) worth of orders in the pipeline at SpaceX came to a very abrupt and spectacular end on Sunday. Just two minutes into its ascent from Cape Canaveral, an unmanned rocket called Falcon 9 exploded, turning it and its cargo into confetti.

It was not the first rocket that SpaceX –Space Exploration Technology, to give it its proper name – has lost, and probably won’t be the last. It was, however, its first loss during a commercial flight. Although SpaceX’s $60m per-flight price tag is cheap by industry standards, it’s not the sort of thing you can just brush off, so no wonder business is on hold. The company expects flights to resume “within a year”, leaving potential customers looking for other, more expensive, space-delivery alternatives.

All of which leaves me sceptical, again, over the long-term future of commercial space transport, and even more so over the potential for affordable space tourism. For the former to be a solid, profitable business, and for the latter to exist in any recognisable shape, SpaceX needs 1,800 flights without incident, not 18.

Mr Musk’s week ended on a higher note as his other business, the electric car and battery company Tesla, reported sales figures for the second quarter of 2015. At least these were decent enough: more than 50 per cent higher than the same period last year and marginally ahead of forecasts.

However, as brilliant a car as many reviewers believe it to be, the Tesla Model S is not going to sell half a million units a year any time soon, and certainly not in five years’ time, as bullishly predicted by Mr Musk. Not at $75,000 a pop.

Tesla has an SUV coming out at the end of this year and an affordable car in the works. What does “affordable” mean to Elon Musk? He has been a billionaire since his mid-twenties, when he was one of the founders of PayPal, so it is likely that pretty much everyone with whom he hangs about can afford to drop $75,000 on a car.

Mr Musk is the kind of person everyone in business should be rooting for – an innovator, fearless and inspirational boss, and a thinker who goes far beyond your typical business school automaton. However, his best hope for long-lasting financial success may lie in his home batteries, if he can make them cheaper.

So his superhero status comes down to space rockets, expensive cars or batteries. I’m afraid my money is on the batteries.

Donald Trump for President? He’s debunked his own myth

Speaking of comic book heroes, they all need a villain, and so I am thrilled by Donald Trump’s entry into the Republican presidential primary field. That he could not only be taken seriously but perform well among voters (a poll last week put him second) gives some perspective on the true weakness of the Republican field. He is the living, breathing ID of the clueless, boorish right-wing boss or neighbour we’ve all had.

That he is a good businessman is not up for debate. He isn’t. He is one of the few people to have managed to bankrupt a casino. If he hadn’t been born with a very large silver spoon in his mouth, he would probably be running a scam on a street corner. Hopefully he is doing that in some parallel universe.

Mr Trump’s reputation is as overblown as his hair and has hopefully been damaged beyond repair by the racist statements he made when announcing his run for the presidency. His comments left partners fighting for the exit. Univision, the Spanish-language broadcaster, was the first to tell him “you’re fired” after he referred to Mexican immigrants as “drug smugglers” and “rapists”. NBC, the TV broadcaster behind the US version of The Apprentice, in which he starred, has bolted. As has the department store Macy’s. Pretty much everyone he does business with is now “reconsidering”, as are potential guests at his hotel chain after a credit-card security breach.

Does any of that really matter to him? It will cost him money, many millions, but it keeps him in the headlines. With luck, though, his latest bout of repulsive stupidity will be enough finally to rid anyone of the notion that he is a good businessman.

At last the regulator has sharpened its claws

Sometimes it takes a new law to make you realise just how daft the old one was.

The Securities and Exchange Commission, the body that regulates American financial markets, has proposed an expansion of rules allowing businesses to reclaim bonuses paid to executives following the restatement of company earnings.

Make fraudsters repay their ill-gotten gains? How novel.

Assuming that the new rule is passed, companies will be forced to expand “clawback” to include lesser executives. As of right now, clawback only affect chief executives and chief financial officers, although many companies have more stringent policies in place than they are obliged to.

Even so, the strangest part about the proposed rule change is that this was not addressed adequately enough in the first place. So in theory, companies could quietly restate earnings that are, say, 10 per cent lower than originally claimed, without executives having to repay a penny of their compensation, which was linked to those numbers in the first place.

It’s almost like a bank mistakenly putting the decimal point in the wrong place on your statement and then being cool with you spending it all.

You would assume that companies re-stating lower earnings is an irregular occurrence – well, not so. SEC-regulated companies were forced to restate earnings 831 times in 2014, and nearly half of those instances resulted in lower earnings.

The danger is that chief executives will use the new rules to lessen their own responsibility. However, consumers and investors will benefit from even greater emphasis on posting the correct results every time.

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