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Corrupt Values Will Eventually Implode Silicon Valley

The opinions expressed by columnists are their own and do not necessarily represent the views of
AP Photo/Seth Wenig, File

Silicon Valley is a fraud.

Over time, companies like Uber and Elon Musk’s ventures ultimately end in imploding unicorn valuations once markets see through the smoke and mirrors.

The massive losses and ridiculous valuations at Uber, Tesla, and SpaceX stem from their CEOs and their corrupt values, all based entirely on hype and grandiose publicity stunts – but never execution and product.

Uber is not only illustrative of this truism but serves as a canary in the coal mine for Elon Musk.

The App That Roared… Then Squeaked

Uber roared onto the scene with breakneck speed under the brash and bull-in-a-china-shop approach of founder and former CEO, Travis Kalanick.

He dropped Uber into every city he could, regulations be damned, and gobbled up market share. The word “disruption” entered the lexicon, the media ate up the hype, and Uber raised billions in capital.

Unicorn valuations followed, and then the tide turned, as it always does in these situations. Kalanick got too loud, too arrogant, and thought he was invincible.

Until he wasn’t.

Uber went public, and the world saw that its business model was actually a complete failure. Uber made a lot of revenue, but it also spent a fortune. It generated billions of dollars in losses.

The price wars with Lyft will never abate. Many former champions of Uber now wonder if the company will ever be profitable.

It all stems from the corrupt values of the company itself, starting with both the former and current CEOs. One look at the 49 scandals under Kalanick illustrates company values under his tenure.

New Uber CEO Dara Khosrowshahi seems to think that it’s fine to forgive the government of Saudi Arabia for murdering journalist Jamal Khashoggi.

Somehow, Uber still hasn’t figured out how to protect riders from psychotic drivers who haven’t been properly vetted.

Elon Musk: A Modern-Day P.T. Barnum

There’s an old maxim: “Fool me once, shame on you. Fool me twice, shame on me.” Silicon Valley loves to play tricks on investing and media fools, which is why Elon Musk is still plying his trade. P.T. Barnum would love this guy! He’s worse than Kalanick!

Almost every word out of Elon Musk’s mouth, or contained in a tweet, is gibberish – and yet everyone continues to fall for his shtick.

Like Kalanick, the media and investors hang Musk’s every word, even when those words are bizarre. Musk has no compunction—calling a Thai rescue worker a “pedo guy,” smoking weed on podcasts, misleading investors by faking news of a take-private offer that didn’t exist, babbling about flying cars, and repeatedly overpromising and under-delivering.

Why It Matters

Does it really matter?   Who cares what Musk or Kalanick say?

It does matter. It’s a distraction from the business. It creates controversy and scrutiny. It deters investors. It attracts governmental regulatory attention. It’s difficult enough to operate a business successfully, and dancing around like a clown doesn’t help.

Yet, as mentioned, what it really does is demonstrate Silicon Valley’s corrupt values.Those values can only lead to disaster.

At least one can argue that Kalanick’s act was supported by the fact that millions of people used Uber.

In Musk’s case, however, the distraction is intentional and insidious. Everything he does is designed to distract investors and the media from the lousy financials and execution at Tesla and SpaceX, not to mention the endless safety problems.

Tesla has not only lost billions of dollars but has only managed five profitable quarters. Even when deliveries hit quarterly projections, Tesla still loses money. Meanwhile, over and over again, Tesla’s execution has proven to be a joke. Earlier this year, Musk was literally rolling cars off the assembly line held together by electrical tape.

Don’t even get me started on the fraud of the SolarCity buyout.

SpaceX is nothing more than a government-subsidized fireworks display. Oh sure, crazy Wall Street analysts can value the thing at $30 billion, but where it SpaceX without the government to offer it lucrative contracts?

SpaceX is not a defense firm with a diversified business and multiple customers. It has no viability outside of what the US government throws its way, and Musk knows this. That’s why he complains when he doesn’t get his way. So why would any investor put money towards SpaceX, and why does the government continue to fund its ventures?

How does this all end? 

We are already seeing Uber crashing back to reality.

Its once-lofty valuation of $84 billion has fallen to $45 billion – with the stock just off its lowest price. It will not be able to sustain this valuation much longer. Lawsuits, new regulations in California, and increasing pressure from major cities like New York only add to the fact that Uber is just an overpriced commodity.

Kalanick himself has thrown in the towel on Uber, having sold 20 percent of his 100 million share stake for some $550 million.

As for Musk, the only question isn’t if the SEC or DOJ will come down on him, but when. At some point, Tesla will likely be acquired by a legitimate car manufacturer for a few billion dollars.  SpaceX’s best hope for survival is some sweetheart back-room deal with the US government.

The fish always stinks from the head. In Silicon Valley, that means we’re going to need a bigger boat.

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