July 23, 2020 - 7:00am

Another day, another downbeat article about the electric car company, Tesla. This one is in The Telegraph entitled ‘Is Tesla’s green investment bubble about to burst?’

A year ago, the headlines were about the company on the verge of running out of money (supposedly). Now, the issue is that, after three consecutive quarters of profit, investors have been pushing up the share price from”$185 last May” to “new highs of $1,643 this week.”

Too good to be true? Well, that’s the tone of the piece:

It doesn’t take a sceptic to blanche at the heights the Tesla valuation has reached in recent weeks. The speed and scale of the climb has raised fears of a bubble, especially as younger, inexperienced investors bought the shares at their highest heights.
- Olivia Rutgard, The Telegraph

As the authors point out, Tesla is a “green company, but also a manufacturing company and a technology company” — and thus at the intersection of three important investment markets. So, is its market valuation just a function of being ideally placed to soak up the world’s excess capital?

To some extent, perhaps. But, if so, the real problem here isn’t Tesla, but that there aren’t more Teslas — i.e. companies that gobble up spare cash at one end and produce innovation at the other.

If there were, then there’d be enough productive investments for the world’s savings to go into. Interest rates would turn properly positive again, there’d be an end to funny-money schemes like QE and the return of enthusiasm for the future. Instead, we’ve had a decade or more of cheap credit pumped into property speculation, share buybacks and other forms of financial engineering.

These are the bubbles we really need to worry about — not investor enthusiasm for green technology, which is one of the few sectors in which we see actual engineering changing the world for the better. With enough choices, the market will correct any over-enthusiasm for particular stocks.

But is The Telegraph piece right to say that Tesla faces growing competition as other manufacturers enter the market for electric vehicles? Yes it is, but that is how capitalism is meant to work!

Pioneering entrepreneurs like Elon Musk, the CEO of Tesla, may individually triumph or come-to-grief. But either way, they collectively create new industries to the benefit of workers and consumers.

We should celebrate these mavericks. Some of them may fly too close to the sun, but their mistakes do less harm than the fat cats who grow rich by exploiting dominant positions instead of taking risks.

Peter Franklin is Associate Editor of UnHerd. He was previously a policy advisor and speechwriter on environmental and social issues.