Paul Krugman explains why Tesla is like Bitcoin

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NY Times economist Paul Krugman hammers Elon Musk’s reputation as a genius and points out that Tesla has none of the qualities that would make it a long-term player in the electric car market. It remains to be seen how long Musk can build a reputation built on the backs of fanboys and very little legitimate evidence of his excellent leadership or intellect, but time is running out for Tesla.

New York Times:

In short, the production of electric vehicles simply does not resemble a network externality activity. In fact, do you know what it does? Twitter, a platform that many of us still use because so many other people use it. But Twitter usage is apparently hard to monetize, not to mention that Musk seems determined to find out just how degraded the user experience will be to break its network externalities and drive away customers.

Which brings us back to the question of why Tesla was worth so much. The answer, as far as I can tell, is that investors fell in love with a story about a brilliant, cool innovator, despite the lack of a good argument for how that guy, even though he really was that he seemed to be, could found a long-running slot machine.

And as I said, there is a parallel here with Bitcoin. Despite years of effort, no one has yet managed to find a serious use for cryptocurrency other than money laundering. But prices have skyrocketed nonetheless and are still backed by a hardcore group of true believers. Surely something similar happened with Tesla, even though the company makes useful things.

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