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Is Elon Musk SpaceX's Biggest Liability

Tesla CEO Elon Musk listens as President-elect Donald Trump speaks during a meeting with technology industry leaders at Trump Tower in New York. (AP Photo/Evan Vucci, File)

Elon Musk, the billionaire entrepreneur and founder of the aerospace powerhouse SpaceX, is a fascinating case study in leadership. While brilliant, diligent, and hardworking, Musk’s admirable qualities are often outweighed by his troublesome personality quirks. Self-admittedly impulsive and narcissistic—a dangerously potent combo—Musk is his own greatest adversary. His visionary guidance is, without a doubt, an enormous asset, but his increasingly dubious behavior, coupled with his anti-authority streak, make him SpaceX’s riskiest liability.

In the past, Musk’s disdain for authority has served him well. In 2014, Musk’s SpaceX took the federal government head-on, suing them for monopolizing the aerospace industry. Ultimately, SpaceX won the ability to compete for national security launch contracts and revolutionized space launches in the process. Indeed, Musk’s tendency to resist the edicts of authority figures is what first made SpaceX a major player in the aerospace industry. But recently, Musk’s iconoclastic behavior is becoming less of a feature and more of a bug.

Musk’s growing volatility has been well-documented as of late. His now-infamous marijuana-infused interview with Joe Rogan caused a stir for all the wrong reasons, prompting the Air Force to look into potential punitive action. Musk’s tweets have become progressively more unhinged, causing him legal trouble. And his decision to protest NASA’s flagship Lucy contract, which wasn’t offered to him, raised the eyebrows of many and drew ire from critics.

Now, Musk’s aberrant behavior may be costing SpaceX the ability to land important government contracts. In October 2018, SpaceX was left out of the first phase of the Air Force’s Launch Service Agreement (LSA). The LSA is a critical space program that will allow the United States to develop space launch vehicles tailored to America’s national security requirements. Contractors must provide solid reliability as well as a steady hand to ensure success. Musk, however, is too unpredictable to be thoroughly trusted with such a delicate process. And his distaste for authority doesn’t mix well with military contracts. In short, SpaceX wasn’t the right fit for this role.

While certainly a frustrating setback for Musk, the Air Force’s selection is no reason to cause a fuss. Contractors fail to make the cut all the time, for various reasons. The government must select contractors best situated for the task at hand. Many times prior, SpaceX has served as the go-to contractor. But for the first phase of the LSA, the Air Force decided otherwise, just as NASA did with the Lucy mission.

Notably, SpaceX still can compete in the all-important second phase of the LSA. But rather than take his lumps and press onward, Musk—always a counter-puncher—made the rash decision to fight the Air Force’s selection. In doing so, Musk placed SpaceX’s reputation at risk.

Musk attempted to supersede the Air Force’s authority by reportedly lobbying Congress to call for an independent review of the military’s space launch procurement strategy. That’s an incredibly dangerous strategy. Undoubtedly, Congressional interference will slow down the LSA process and politicize it. Neither bode well for the United States’ national security. What’s more, SpaceX’s lobbying threatens to weaken the entire selection process standards, placing America’s future space launch payloads at unnecessary risk. In either case, the blame for those consequences lies solely with SpaceX.

But Elon’s poor choices don’t stop with SpaceX. Musk’s impetuousness has also taken a serious toll on his other business venture, Tesla. In mid-March 2019, the SEC announced that Elon Musk was in “blatant violation” of the securities fraud settlement that the two parties reached the previous year. At the heart of the issue were the allegations of fraud brought by the SEC over Musk’s purported attempts to take Tesla private. As a part of the settlement reached between the two parties, all of Musk’s public communications regarding Tesla needed to be preapproved by a lawyer to ensure accountability. Needless to say, it didn’t take long for Musk to violate the agreement.

Under similar circumstances, most CEOs wouldn’t do anything to jeopardize their tenuous settlement with the SEC. And they certainly wouldn’t flaunt their utter contempt for the commission. But Musk did exactly that. On February 19, Musk tweeted a reportedly unvetted statement about Tesla’s production estimates, violating the terms of the settlement. Not long after, the SEC filed to hold the billionaire CEO in contempt for breaking their contract. Meanwhile, Musk proclaimed that the SEC was making an “unconstitutional power grab” by holding him accountable for his tweets.

Musk’s foolhardy behavior often ends up costing Tesla stockholders severely. In fact, Tesla stocks dropped significantly after the SEC moved to hold him in contempt. And when it comes to SpaceX, Musk’s reckless decision to sabotage the Air Force’s selection methods will likely backfire. SpaceX is effectively ostracizing itself from the rest of the space launch community. The aerospace industry is less apt to engage with SpaceX, given the company’s proclivity toward undermining national security to serve its own interests. In both cases, Musk’s leadership is becoming an increasingly serious liability. Perhaps it’s possible that Musk’s companies are better off without him.

 

Joe Messina is host of the nationally syndicated talk show, “The Real Side with Joe Messina.” Find out more at therealside.com.