Tech billionaires like Bill Gates and Elon Musk are often geniuses. With visions of the future, and backed by immense wealth not seen since 19th century robber barons, men like Musk and Gates have the ability to manifest their idealised evolved society. The problem is when men with IQs over 150 disagree on what the future holds and how technologies could fundamentally shape human civilisation, the rancor can be dire as evidenced by their recent twitter feud.
Since retiring from day-to-day leadership of Microsoft, the Seattle-based technopreneur turned full time philanthropist devotes a lot of money and mental energy into solving some of the most pressing fundamental problems of our time – from developing clean water access for the impoverished, to deploying coronavirus vaccines quickly and safely. Bill and wife, Melinda, have been a force for good through their charitable foundation.
Gates often blogs about technology and social issues at Gates Notes. Editorials can range from touching missives about his dearly departed father to most recently an op-ed titled “How do we move around in a zero-carbon world?” . Gates highlighted that though the covid-catalysed economic slowdown reduced global emissions by around 8%, it was ultimately unsustainable given the high economic costs. The pandemic has cost the lives of more than 600,000 people, and put tens of millions are out of work. But the worst metric of measure, is how little a dent we put into our global emissions despite paying such a great cost.
“The loss of life and economic misery caused by this pandemic are on par with what will happen regularly if we do not eliminate the world’s carbon emissions.”
Though transportation contributes only 16% of global emissions, a small percentage when compared with power consumption for our industrial needs and modern connected lifestyles, it is by far still a crucial element of our capitalist economy. Gates writes that even though car traffic was half of what it used to be in April 2019 and air traffic virtually came to a halt as countries locked down to flatten the curve, the costs of economic decimation were devastating. Yet he states, “The loss of life and economic misery caused by this pandemic are on par with what will happen regularly if we do not eliminate the world’s carbon emissions.”
He maps out a scenario that within the next 40 years, projected increases in global temperatures would raise global mortality rates to the same level of Covid-related deaths we are currently experiencing: 14 deaths per 100,000; and that by the end of this century, climate change could be responsible for 73 extra deaths per 100,000 people if emissions remain at current levels. In other words, by 2060, climate change could be just as deadly as COVID-19, and by 2100 it could be five times as deadly.
Both Musk and Gates actually agree that Electrification is one solution to climate change
“Tesla, if you had to name one company that’s helped drive that, it’s them,” – Bill Gates during an interview with Marques Brownlee for Talking Tech and 2020
If anything, the pandemic spurred economic lockdown showed that even with negligible flying and limited driving, we don’t make enough of a dent in our emissions; we also realised that when people are forced to stay home, capitalism grinds to a literal standstill. For many sectors, our ability to travel, consume and move goods from manufactures to markets, is the lifeblood of the economy. For now, the relative low cost of fossil fuels like gasoline and diesel compared to clean alternatives makes it productive for some of the world’s poorer developing economies in sub-Saharan Africa to export produce, goods and services.
If electric vehicles (EV) progresses according to Moore’s Law; an observation of historical computing trends named for Gordon Moore, the co-founder of Intel, we can expect the speed and capability of our technology to double every couple of years, and while costing less; Gates writes that the cost of batteries for Electric vehicles have dropped 85% since 2010, and so while they still contribute to the bulk of costs of an electric vehicle, making them more expensive than internal combustion engine (ICE) cars, other market factors like increased competition and the pace of new battery developments will continue to make electric cars cheaper and better with one important caveat – even though electric consumer sedans have become more affordable since the early 2000s, the backbone of many national economies still depend on long range transportation like 18-wheelers, cargo ships, and passenger jets. Could it be that what evoked Musk’s ire was that Gates didn’t believe Tesla could solve the issue of long range electric transport?
He has no clue
— Elon Musk (@elonmusk) September 12, 2020
On 14 February, Gates sat down with YouTuber Marques Brownlee to talk tech and 2020: he had praised Tesla for pioneering electric vehicles and Musk for catapulting the idea of electrification into mainstream consciousness but he added that he had gotten a Porsche Taycan instead of a Tesla and while Brownlee tried to steer the conversation towards the Tesla 3, one supposes the ego-damage was already done.
“I just got a Porsche Taycan.” – Gates
Porsche vs. Tesla: Who Wins?
The EV market is small but dominates a tremendous of amount of mindshare for its relative size: While Electric car makers like Tesla have projected market penetration rates of 10-20% since 2010, the truth is, electric vehicles are for the early-adopting affluent, adding up to 2% market share – but it’s a telling statistic because while cars like Tesla and the Porsche Taycan should be for everyone, they aren’t priced to sell for everyone.
Tesla introduced the world to its Model 3 in March 2016, and though it received deposits for 373,000 vehicles, the company still lost $283 million in the first quarter, selling 14,810 vehicles. Losses since have continued to mount while promises to deliver enough vehicles to meet demand have fallen short for years. In a 2018 interview with Bloomberg Business week, Musk admitted that he had been sleeping under his desk as he tried to move the company out of production hell, “I was wearing the same clothes for five days. My credibility, the credibility of the whole team is at stake,” he said. Musk had promised 200,000 Model 3s by end 2017 but he ended up making slightly less than 2,700 that year. Making matters worse, Tesla was $10 billion in debt and suffered a credit downgrade. “Insanity,” said Max Warburton, an analyst with Sanford C. Bernstein & Co on Musk’s outsized vision. Even as Tesla became the most shorted US stock, the upside for Musk was enormous: if the Model 3 meets its projections, Musk would remake a trillion dollar industry in his image and reduce more carbon emissions than any other person in the world.
There’s a reason why electric cars like Tesla aren’t priced for everyone. Top engineers have to work together on a cross-spectrum of specialised fields – batteries, design, chassis, interiors, drive systems, safety and thermodynamics; even harder still is that a low cost electric car designed to maximise range means making decisions to increase range which in turn typically increases costs – like the irony of using lightweight four piston monoblock caliper brakes typically reserved for premium cars. Then of course, there are other “impossible” design elements that Tesla Design Chief Franz von Holzhausen has to figure out like designing a car interior that doesn’t have a traditional dashboard – in short, electric cars require new ways about thinking about aesthetics, cost and performance.
“I don’t want any holes,” recalls von Holzhausen as he describes Musk’s design brief for air ventilation to Bloomberg journalist Tom Randall. Designer Peter Blade and engineer Joseph Mardall then conceptualised a recessed gap across the width of the car, hidden by a strip of wood and Mardall pointed out – this approach would mean the entire ventilation system would have to be redesigned. Today, the heating, ventilation and air conditioning (HVAC) system Blades and Mardall pioneered would form the foundation for another Musk venture – systems for Space X rockets, eventually home use and in March earlier this year, the irrepressible genius offered to turn this expertise into the creation of ventilators for hospitals battling shortages due to the covid-19 pandemic. To create electric cars of such complexity, it would take time to achieve the scales of mass production and cost efficiencies currently enjoyed by ICE vehicles. Make no mistake, EVs are the future but currently, they’re a luxury only the wealthy can enjoy. Does it mean you can’t make money on EVs if there’s no critical mass market of consumers? No.
An entry level Taycan would costs more than an entry level Panamera, which already costs as much as a top of the line Tesla Model S, the Taycan electric car still became Porsche’s best-selling car in Europe, destroying the sales of the Panamera in September. In the US, Porsche’s All-Electric Taycan began outselling the country’s most popular 911 model in third quarter 2020. Driven by epic, attention grabbing feuds between behemoth billionaires and faced with a future of increasingly stringent fuel-economy and emissions regulations, EVs help with overall fleet compliance, enabling continued sales of big-ticket petrol cars while corporations continue to funnel resources into the inevitable shift away from fossil fuels. Who wins? Everyone.
Porsche still sells gas powered vehicles, how does Musk make money? What does it mean for our electric future if EV makers can’t survive?
In July 2020, Tesla reported finally a profit of $104 million.
The company benefited from a new factory near Shanghai that began production late last year, allowing Tesla to avoid the tariffs China imposes on imported vehicles while making its cars more affordable to the world’s largest market for electric vehicles. Tesla’s profit was also made possible by the sales of $428 million in emissions credits to other automakers. These Regulatory Zero Emissions Vehicle (ZEV) Credits are sold to other automakers who need them to meet regulatory standards.
Currently applicable to 12 states in the US, each automobile manufacturer’s annual sales must comprise some ratio of zero-emission vehicles and because Tesla only makes electric vehicles, Musk has ZEV credits in abundance. He then sells ZEV credits to other automakers and this extra income comes at no additional costs to Tesla.
Originating in California in 1990, there’s significant upside for Tesla since only 12 of 50 states currently have a ZEV credits program. Should more states adopt the program, Musk is then able to sell more of these credits. Furthermore, according to TechCrunch, 92% of those credits are set to expire at the end of 2021 if they’re not used and since more than half of the current balance is held by three manufacturers, and the availability of these or future credits is inherently uncertain, suggesting a run on ZEV credits in the future. Recent filings show that GM and Fiat Chrysler have bought zero-emissions vehicle credits from Tesla. (Perhaps it rubbed Musk the wrong way that Gates only name-dropped GM in his blog and not Tesla)
Tesla has raked close to $2 billion in revenue since 2010 when it started selling emissions credits to automakers that needed to offset sales of polluting vehicles but as traditional ICE automobile makers are shifting towards ZEVs and hybrids, they will eventually be able to comply with the ZEV program without having to buy additional ZEV credits from Tesla.
It’s difficult to write off Musk as raving lunatic when he’s often misunderstood (only 5 points separate his 155 IQ to Gate’s 160). After all, he was mocked in 2002 when the then 31 year old software entrepreneur with no background in aerospace founded Space X. Today, Musk launches more rockets a year than any other company.
Our true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world’s factories every day
— Elon Musk (@elonmusk) January 31, 2019
And of course, media like us have often criticised or made light of his “gaffes” as with the Tesla Cybertruck’s contentious design and it’s broken bulletproof windows, but truth is – his antics have gotten him free publicity and media airtime, so much so that he recently closed his PR department. A twitter feud with between two of the top 10 smartest people in the world is simply good business, after all, Musk himself admits, his competition is ICE cars, not other small makers of EVs.