SpaceX embodies the best of capitalism

In dark times, be grateful for those reaching for the stars

Alys Denby is the Opinion and Features Editor at CityAM

I made £360 from SpaceX. It’s nothing compared to the $767.1bn Elon Musk made, becoming the world’s first trillionaire following the biggest stock market debut in history. But I was thrilled.

I’m what the City dismissively calls a passive investor. This was my first proper punt. Colleagues at City AM now jokingly call me a “star stock picker”. But I sold up far too early. SpaceX shares peaked around 50 per cent above their floatation price on the second day of trading but have since fallen back down. It was an astonishing performance, but one, as my participation as a total trading amateur proves, that was very easy to predict.

Elon Musk’s politics appal many. Rumours that he survives on a diet of ketamine and wishes to father an army of children to repopulate the Earth in case of apocalypse certainly raise doubts about his character. Yet he remains catnip to investors. SpaceX isn’t even a profitable company, yet it achieved an initial market capitalisation $2.4 trillion.

That’s not because of Starlink satellites - the only money-making part of the business - but because people genuinely believe Elon Musk when he says he will build a colony on Mars. They are willing to put their own money behind it. It should be said that many of these aren’t Wall Street geniuses but tech bro cultists who love Musk’s tweets. The recent price correction is an indication that some of their excitement is dying down.

SpaceX is almost certainly over-valued. Analysts at Morningstar say the company is worth half what the market thinks, citing doubts about the prospects of Grok and warning that its future depends on unproven technologies. Lindsay Stewart, Morningstar’s director of institutional content, also cautioned about governance – code for saying Musk is an untrustworthy lunatic. SpaceX listed with a dual class share system, which means that Musk and a few other founders carry much more powerful voting rights than other shareholders. “In one scenario… Musk could sell 51 per cent of his total stake in SpaceX, worth as much as $445 billion at the company’s targeted valuation, or $195 billion at Morningstar’s analysts’ estimate, and still retain control of the company alongside the other Class B shareholders,” said Stewart.

This is all transparently correct – and alarming. But who cares. Rockets! Everyone who piled into this IPO disregarded the spreadsheets and turned their eyes to the heavens. And isn’t that the beauty of capitalism?

A market is the best mechanism we have for collecting ideas. Those ideas can be right or wrong because they are products of fallible people. In the SpaceX IPO, we see the ambition, hubris, the greed but also the dreams of thousands of individuals. It is humanity in the form of a price – contested, imperfect and hopeful about the future.

Photo by SpaceX on Unsplash

Sceptics will say that it is possible, and indeed likely, that lots of SpaceX investors will lose a lot of money. That will be a consequence of their free choices. The Left will also argue that there is something morally dubious about the inequality resulting from the generation of such vast quantities of wealth. That distaste is based on the fallacy that billionaires only get rich at the expense of others. But if you’re reading this, you probably already know that prosperity is not a zero-sum game.

As Rainer Zitelmann has demonstrated, while the world’s rich have been getting richer, the proportion of people living in absolute poverty has also fallen, largely thanks to capitalist reforms in former socialist countries. Margaret Thatcher put it best: socialists “would rather the poor were poorer provided the rich were less rich”. That is a moral sleight of hand.

SpaceX hasn’t just enriched Musk and other already wealthy founders – it’s also made plutocrats of blue collar engineers who were paid bonuses in shares. More than 4,400 current and former SpaceX employees are thought to have become multi-millionaires following this IPO. And you’ll never convince me that there was anything immoral about my making £360.

Future generations who remain stuck on planet Earth may look back on SpaceX as the 21st century’s tulip fever. Dutch merchants of the 17th century are held up for ridicule for gambling their fortunes on bulbs. But don’t forget that what was really being traded was the bright, chalice-shaped charms of a flower. The mania eventually collapsed. But for a brief moment, thousands of people convinced themselves that something so delicate and extraordinary was worth the world.

SpaceX investors are not just buying a balance sheet, but a vision of reusable rockets, walking on Mars and becoming a multi-planetary species. It may prove impossible, but markets have always reflected our aspirations as much as our calculations. What people speculate on tells us something about what they hope to be. And in these dark times, we should be thankful that some are still reaching for the stars.

What we’re reading

1. I am the resurrection... Over at ConservativeHome, our own Callum Price has argued that Andy Burnham’s proposals for shifting power out of Westminster amount to delegation, not devolution, with local areas still carrying out centrally-determined policies. Real devolution should involve providing genuine fiscal and political independence. But growth depends less on where decisions are made than the quality of the decisions themselves. Put good policy before creating more regional structures.

2. …and I am the life. Sticking with Burnham, The Spectator’s Ross Clark suggests that the new Makerfield MP’s ‘cost of living populism’ is politically attractive but economically unsustainable. With polls suggesting Labour’s electoral fortunes would revive if they pursued policies like rent controls and water renationalisation, Clark argues these policies are only popular because voters are not being presented with their costs, with these proposed expensive interventions lacking the required funding.

3. Top Marx. According to Chris Cutrone at Compact, many classical Marxists (boo, hiss, etc) regard the American Revolution as a progressive historical event. Marx, Engels, Lenin and other ‘top’ adherents of that chilling crewed viewed the Revolution as a “bourgeois revolution” that overthrew the monarch, expanded civil liberties and created the political conditions for capitalism, and thus socialism, to develop. Their latter-day successors tend to dismiss the United States as inherently reactionary.

4. Bill of Rights. Of course, with America celebrating its 250th birthday today, there is no better time to revisit our Director General’s seminal work on how Britain was the birthplace of the political freedoms now associated with the English-speaking world. How We Invented Freedom and Why It Matters was a seminal text in the political development of many young liberals – it turned your author into an ardent Whig, at least for a little while – and Daniel Hannan’s arguments remain just as sound today.

5. America the beautiful. Yet as much fun as it is to remind our Yankee chums just where their freedoms first stemmed from, it feels churlish to sully their day of celebration too much. J.D.Tuccille of Reason argues that the 250th anniversary should be celebrated not simply as the birth of a nation, but as a reaffirmation of the ideal of individual liberty. Liberty is fragile, but surveys suggest most Americans still value it. For all her faults, she remains the last best hope on Earth.