Elon Musk Settles SEC Fraud Charges - <AUTHOR> https://www.sec.gov/news/press-release/2018-226 <comment><USER2> This really doesn't change the status quo at Tesla at all.

We can armchair quarterback the company all day long about whether Musk is replaceable or not, but short of folks that have direct experience within the company we don't _really_ know. What we can say with some confidence is that if Musk were _really_ removed in any meaningful way the market would crush them utterly within hours. The shareholders want Stark Industries, not some near-insolvent car company with severe production shortfalls and a teetering runway.

<comment><USER3> Professor Aswath Damodaran gave his thoughts on this topic at Nordic Business Forum. (IIRC disclaimer here) He said that he sees some parallels to Steve Jobs, who once almost destroyed Apple and then later saved it - the difference being that on the second time he had Tim Cook. If Musk can find (or if he already has - I have no idea of Tesla management) his own "Tim Cook", then the future of Tesla looks much brighter.

For me this makes sense and I've seen it also elsewhere. The person with lots of energy and ideas may not be the best person to execute things in a corporate context.

<comment><USER4> As humans, we tend to see patterns wether they're there or not. Jobs and Musk are different people running different types of companies in different eras. There are probably only a small number of people who really understand how Jobs made or Musk makes business critical decisions day in and day out and I'd wager on the opposite that they probably do things fairly differently even if in the outside we see similarities (passion, vision, etc.)

<comment><USER5> Eh. Yes, we can only use known information and especially with little info, the patterns we perceive won't always be perfect. But applying those labels seems to have enormous value anyway. Reddit recently likes to compare Musk to Trump. And while i disagree with that comparison on most aspects, it did help me realize their social media usage patterns are a lot more similar than I'd like. Of cause this particular comparison got a lot harder to do, now, since the US seems to hold a CEO & Chairman to higher standards...

</comment></comment></comment></comment><comment><USER6> Honest question: Does it really matter if he loses the chairman role? Or even if he lost the CEO role? If he was busted down to VP of Engineering he would still be a major shareholder and everyone would did what he said right? He just wouldn't have any "official" corporate leader responsibilities (quarterly calls, etc). Or am I totally wrong?

<comment><USER7> He will still be the most powerful single person at Tesla, but this at least opens the door for him to not be the most powerful entity at Tesla. There is no way of knowing when or even if the Tesla board will start saying no to Musk, but this at least makes it possible for them in the future. That is a good thing in my opinion.

In fact, I think a Tesla shareholder should be pretty happy with this settlement. The $20m fine at a time when Tesla is already running low of cash is certainly tough news, but every other part of this settlement is probably good news for the company's long term health. It is also obviously a lot better than some of the punishments people were talking about earlier this week.

<comment><USER8> Musk is covering the fine to Tesla by buying $20M of Tesla stock. [https://www.nytimes.com/2018/09/29/business/tesla-musk- sec-s...](https://www.nytimes.com/2018/09/29/business/tesla-musk-sec- settlement.html)

<comment><USER9> I dont see how that's covering if he's still getting $20m of tesla stock

<comment><USER10> Assuming he is buying newly-issued shares from Tesla, then the money goes directly into their treasury. So, the company will have $20MM more in cash than it did the day before.

<comment><USER11> He is still getting something out of that transaction. That's like saying buying food at a restaurant is a donation.

<comment><USER12> I'm no finance person, lawyer, or anything like that. But I suspect that he can't just give Tesla money and it has to be in exchange for something, such as stock.

</comment></comment></comment></comment></comment></comment></comment><comment><USER13> This is good news for nerds who believe tech can be used for more than developing advertising platforms.

Everyone anywhere near Elon should do one thing: encourage him to get the hell off Twitter. Social media is bad for everyone, but it seems worse for certain personality types.

Please Elon, quit twitter. Even for a year.

<comment><USER14> Twitter seems more like a symptom than a root cause here.

<comment><USER15> I once heard that root causes are almost never fixable, so pretty often the best that can be done is a few levels up.

The root cause of anything is probably something like mortality, human frailty, the laws of physics. We are very far from fixing any of those.

Twitter on the other hand can be changed, and probably some people on this very site work at Twitter and can (and should!) make socially responsible changes. It's not the root cause of anything but it has plenty of influence.

<comment><USER13> This is an incredible insight. Thank you so much for sharing it.

</comment></comment></comment></comment><comment><USER16> A bit anticlimactic. The only reason the SEC brought charges publicly was because Musk refused the _first_ settlement offer (with similar conditions) anyways.

<comment><USER17> well it turned into a classic no admit no deny settlement

this is a much better settlement and easier to swallow.

if he had to admit it then the criminal charge would have been emboldened. unfortunately the settlement itself can still be used as ammunition, but it is contains no admission (or denial) of guilt.

<comment><USER18> The proposal they previously rejected had an offer of no admission of guilt as well.[1] It's a very slightly worse settlement now, the apparent duration that he is barred from the chairmanship was increased by a year.

Most likely Musk wanted the optics of declaring himself innocent, rejecting the offer and feigning a fight. I'd be surprised if everyone around him have not been encouraging him to settle, the downside risk was far too great vs the modest settlement pain.

[1] [https://www.cnbc.com/2018/09/28/teslas-musk-pulled-plug- on-s...](https://www.cnbc.com/2018/09/28/teslas-musk-pulled-plug-on- settlement-with-sec-at-last-minute.html)

<comment><USER19> I've been wondering if he didn't settle because he wanted to gauge the reaction to fighting it out. Like you, I bet there was a lot of pressure put on by stakeholders to negotiate a settlement once it became public.

</comment></comment></comment></comment><comment><USER20> At the last Tesla shareholder meeting five months ago, some investors wanted Musk to give up the chairman post (while remaining CEO of course) but he refused: [https://www.google.com/amp/s/www.apnews.com/amp/386447de1b8a...](https://www.google.com/amp/s/www.apnews.com/amp/386447de1b8a45f0a8ed8b95224479cf)

Would have saved $40M cash and billions in shareholder value if he'd taken the hint then. Nobody should think themselves that irreplaceable.

<comment><USER21> If he wasn't chairman, they couldn't have taken that away from him in the settlement, so he might have suffered a different punishment.

<comment><USER20> My train of thought was that Musk probably wouldn't have ended up tweeting "funding secured" in a situation where he'd be accountable to an external chairman of the board. A bit of governance might have been useful these past months.

<comment><USER22> Exactly. It wouldn't have been his place to negotiate, not without chairman approval, and certainly not by himself. There would have been an adult in the room.

</comment></comment></comment></comment><comment><USER23> As a fan (not shareholder, unfortunately) of Tesla, this is great news. When I think of Elon Musk I sometimes think of the movie version of Patton. Hopefully this gets him to settle down on a bit of the drama, and focus on making Tesla succeed and getting SpaceX to Mars...

<comment><USER24> Honest question - what's the rationale of being a fan of a CEO? I can understand being a fan of an actor, a sports professional, but a CEO? I sincerely don't get it.

<comment><USER25> I am a pretty big fan of Elon, I'll explain how I think about it. To me, it's not about being a CEO, it is about rooting for a visionary. I want Elon, and his missions via various business ventures, to succeed. The success of an actor, athlete, etc will have zero inpact on me personally. Some of the things Elon and team are trying to accomplish, could materially change my life, as well as many others. It feels much more real, more connected to me. Yes, maybe his methods/antics are silly at times, but he's human, and trying really difficult things that may improve the world (subjectively). Why wouldn't you want to be a fan of the things he is doing?

<comment><USER24> Fair enough.

> Some of the things Elon and team are trying to accomplish, could materially > change my life

Like what specifically?

> Why wouldn't you want to be a fan of the things he is doing?

I guess I could be a fan of _what_ he is doing, but not _how_ he is doing it. A few reasons:

\- Concentration of wealth to him personally at the expense of my tax dollars (just look at how much of Tesla has been subsidized by the government)

\- Tesla is questionably a sustainable company. I think Musk is a visionary from a product/market perspective, but his operating capabilities are questionable.

\- You don't need cheerleaders for a more sustainable environment, you need paying customers of environmentally friendly products/services and operators who are fiscally responsible to deliver those goods. I would be cheering like you if he spent more time figuring out how to make his supply chain sustainable and less time touting himself on twitter and attacking his perceived enemies.

\- He's demonstrated that he believes he is above the law (SEC) and above respectful discourse ("pedo" comments). Certainly not the type of leader I want my future kids to follow.

I grew up watching Michael Jordan and was a huge fan of what MJ did for the game of basketball. As I grew older, I learned he has a huge gambling problem (that got him into a lot of trouble), he regularly bullied players (teammates and friendly opponents) and is generally not a likable person.

In other words, the end doesn't justify the means for me.

<comment><USER25> > Like what specifically?

Owning an electric vehicle. I'm currently starting a house remodel, if I could afford the solar roof, I would get one. I still may get the power wall as an energy backup. The price points of these are all high, but the assumption is that as the tech and supply improve, the price drops.

> Concentration of wealth to him personally at the expense of my tax dollars

Agree Elon has accumulated a lot of wealth but he also invests a lot of his wealth into businesses and takes risks with his money. Capitalism rewards people with more wealth if they are good at what they do, I don't mind that. I also don't think he hoards it in the same way as other billionaires. RE Subsidies - other energy companies also receive large subsidies. I may not agree with subsidizing these companies but I prefer to subsidize clean energy ventures vs coal.

> Tesla is questionably a sustainable company.

We should all find out in the next year or two, will be fun to watch.

> I think Musk is a visionary from a product/market perspective, but his > operating capabilities are questionable.

If first part is true, does second part matter? Not to me.

> You don't need cheerleaders for a more sustainable environment, you need > paying customers of environmentally friendly products/services and operators > who are fiscally responsible to deliver those goods. I would be cheering > like you if he spent more time figuring out how to make his supply chain > sustainable and less time touting himself on twitter and attacking his > perceived enemies.

Totally agree with you on this part.

> I grew up watching Michael Jordan and was a huge fan of what MJ did for the > game of basketball. As I grew older, I learned he has a huge gambling > problem (that got him into a lot of trouble), he regularly bullied players > (teammates and friendly opponents) and is generally not a likable person.

Good points. I think Elon should give his teams more credit and I've read stories he can be an asshole- I'm not a supporter of the Steve Jobs bullying mindset and believe you can succeed while being nice. Maybe this is one of his biggest areas for improvement. But I've also seen a lot of interviews where Elon seems sensitive, kind of misunderstood and like he _really_ cares about doing a good job and doing the right thing. He's definitely not perfect and I think people expect him to be which has got to be tough.

<comment><USER24> Thanks for the thoughtful reply!

</comment></comment></comment></comment></comment></comment><comment><USER26> Elon Musk and Tesla are still facing:

\- A DOJ criminal enquiry into the same 420 tweet

\- A whistleblower suit about misrepresentation of its rate of vehicle and battery production

\- Another whistleblower suit about covering up a large theft and a narcotics ring

\- A class action over racism

\- Complaints about union busting

\- A defamation suit over pedo accusations

\- Investor class actions over the Musk family bailout acquisition of Solar City

And probably lots more that we don't yet know about.

That so many people in tech are holding this stock and are even proud of the company is shocking to me. Sustainability can only be pushed forward with sustainable finances and the Tesla balance sheet is a horror show.

Tesla will file for bankruptcy protection in 2019.

<comment> mellow-lake-day >Tesla will file for bankruptcy protection in 2019.

We've been hearing this bankruptcy thing every year without fail since the company was founded 15 years ago. This doesn't mean the company won't go bankrupt but that they are more resilient than given credit for.

>And probably lots more that we don't yet know about.

Those court cases you listed are daily life for big companies. Intel has been tied in a court case with the EU since 2001. Google just settled a court case. Google is also facing a bunch of other court cases. Tesla gets the spotlight but look around.

<comment><USER27> _This doesn 't mean the company won't go bankrupt but that they are more resilient than given credit for._

The Bloomberg Model 3 counter registered a sharp dip, so the risk is real, but my take is that it doesn't matter.

There is an unprecedented amount of decent EV models coming up for model year 2019. This goal has been achieved and I believe Tesla's stock always reflected the rate at which we were getting there, not the company's long-term viability.

<comment><USER28> The Bloomberg model 3 counter was using r/teslamotors as a source of VINs. When the ramp up was happening people were registering VINs all the time but now the sub has lost interest in VINs so the numbers are dropping.

<comment><USER26> It uses VINs registered by Tesla themselves now, weighted with a few other factors according to @tsrandall on Twitter.

</comment></comment></comment></comment></comment><comment><USER29> I traded in an 8 year old POS and bought the model 3 yesterday. Elon and his team are headed in the right direction regardless of this drama.

<comment><USER30> If you took delivery yesterday, do mind if I ask what configuration and when it was you put down the $2,500?

<comment><USER31> Put $2,500 down at end of July and received my MSM Dual Motor yesterday.

<comment><USER8> Wow, I thought they were still working through the early deposits.

<comment><USER32> Deposits are global, deliveries are US and Canada only.

</comment></comment></comment></comment></comment><comment><USER33> Good settlement for Musk and Tesla. They should have added a review of his tweets by the board or someone. I suspect he'll get in trouble again by sending something stupid.

Seems to me that Twitter has become a quick way to create or destroy your career.

One tweet, $40 mil...

<comment><USER34> The SEC press release reported that the settlement requires that Tesla put in place additional controls and procedures to oversee Musk's communications. That seems likely to include controls over his Tweets.

<comment><USER33> Good point, that's going to help him and Tesla a lot. All his tweeting was distracting from the good things they are doing.

</comment></comment></comment><comment><USER35> Irony is he will probably burn more shorts with this announcement than he did with the initial set of tweets... and the SEC helped him do it this time around!

<comment><USER36> Related question regarding burning the shorts. The SEC said the $40 million in fines would go to aggrieved investors in a court approved process. But the people who were hurt the most by Musk's initial tweet were short sellers with stop loss orders. But I don't think they would classify as "investors", considering they profit when TSLA goes down.

Does anyone know how this process works, or do you think short sellers would have a claim to some of that $40 million?

<comment><USER37> I don't think so.

The biggest burns are the people who bought in at $370 thinking that Elon Musk would be selling the company at $420.

Shorts may have gotten margin called, but the stock was skyrocketing on the news. Everyone who bought stocks during the tweet in question is basically able to sue for damages.

</comment></comment></comment><comment><USER38> I seriously wonder if Musk thought this up to catch people short over the weekend, by leaking that he didn't want to settle on Friday and then settling over the weekend.

As long as he got his "friends and family board" he probably will do what he has been doing. I doubt 2 new directors will be able to control him.

<comment><USER39> If it was his plan to tank the stock 14% on Friday, thinking it would pop back up and beyond Monday to hurt the shorts he's been smoking far too much.

After hours trading is only up .5% from close, Friday morning it was already down like 12% when the market opened.

<comment><USER36> > After hours trading is only up .5% from close

That number was calculated as of 8PM Friday. It doesn't include the impact of this news.

<comment><USER39> Thank you, don't know how I spaced that.

</comment></comment></comment></comment><comment><USER40> What does stepping down as chairman but not CEO entail practically?

<comment><USER41> He's lost control of the board.

Which means they have the ability to remove him as CEO.

</comment></comment><comment><USER42> That was quick. Probably for the best, given the obvious trouble overwork has been causing him.

Interesting to note specifically the point about controls on his Twitter account that could've prevented this.

<comment><USER41> The problems with Musk are far more than just his overwork. There's a lot to work on.

There's been persistent rumours of serious drug use. His outbursts are erratic and unhinged ie. calling a diver a paedophile on multiple occasions. His private life is extraordinary for a CEO to say the least. He clearly lacks self control ie Twitter and Joe Rogen show. And his I'm the victim attitude towards short sellers, media etc is pretty unparalleled.

I suspect that losing the Chairman position is the last step before being removed as CEO.

<comment><USER43> All of this is from last 6-12 months. Let's not forget what public opinion was without the news cycle telling us what to think.

I am not saying his public statements were bad. Just trying to put some perspective. Also, smoking marijuana is ok and legal. He took a puff and all of a sudden he is a drug addict. WTF!?

Just watch his interview Salman Khan (Khan academy) or look up his accomplishments.

<comment><USER44> > Also, smoking marijuana is ok and legal.

It is illegal on a federal level. And as someone who runs a company with multi-billion-dollar National Defense contracts, which are almost certainly contingent on him holding a security clearance, it shows an incredible lack of judgement to consume marijuana publicly.

<comment><USER45> > It is legal on a federal level.

You mean to say illegal.

<comment><USER44> Yes, thank you. Updated.

</comment></comment></comment></comment></comment></comment><comment><USER46> Perhaps this will result in some 'adult supervision' at Tesla.

I'm skeptical however.

</comment><comment><USER47> Imagine being the Tesla board or his lawyer. Just yesterday he made a stand that he would never settle and here we are.

I'm assuming over the past 24-48 hours it's been a full court press of everyone trying to talk some sense into Elon. Glad they succeeded!

<comment><USER48> I follow this stuff pretty closely and I haven't seen any mention of him making a stand and saying he'd never settle. All I've seen is an article referring to "sources" that said he or his team rejected a specific settlement. Can you point me to your source for the claim that he'd never settle?

<comment><USER47> _Musk reportedly refused to sign the deal at the last minute because he felt he would not be truthful to himself and wouldn 't have been able to live with the idea he'd agreed to accept a settlement and any associated blemish._

[https://www.autoblog.com/2018/09/28/elon-musk-walked- settlem...](https://www.autoblog.com/2018/09/28/elon-musk-walked-settlement- sec/)

<comment><USER48> Ok, so this is an article referring to some other reporting, which was somehow sourced itself. Suffice to say that factoid should come with significant uncertainty attached.

</comment></comment></comment></comment><comment><USER49> So Musk is stepping down as chairman of the board at Tesla, but one thing this doesn't really address is whether he'll remain as CEO. I presume that decision will be made by the new (larger) board of directors?

<comment><USER48> you never know, the expanded board might actually be suicidal and choose to kill the goose that lays the golden eggs. I don't think they're that deranged, but you never know.

<comment><USER41> Tesla doesn't need Musk right now.

They need a serious executive from a former car company who has experience in quiet, deliberate execution. Lots of companies are making cars without anywhere near the same levels of fanfare.

<comment><USER50> I disagree. Musk is the face of the company and the brand. Consumers will be less interested if he's ousted against his will and no longer involved. Tesla might not die, but I don't think they'd be as successful without him.

<comment><USER41> Pretty sure consumers would be happier about having a car that is available to buy and doesn't have major quality issues.

<comment><USER51> I disagree. Musk as CEO drove Tesla, against every estimate I've seen or heard of, to be profitable. Prior to musk, the cars didn't exist... So they were unavailable to buy. And I don't see how changing him out will fix quality issues, other than having a future CEO halt innovation in favor of bug hunting... Which would be the start of a quick end for Tesla. They are built on innovation.

<comment><USER41> Musk is a great startup CEO. But what Tesla needs now is an enterprise CEO.

And you can be an enterprise CEO and still innovate as a company eg. Apple, Microsoft, Mercedes-Benz.

<comment><USER52> > Musk is a great startup CEO. But what Tesla needs now is an enterprise CEO.

I guess that's the new meme about Musk now, but I see no reason to believe it. Plenty of startup CEOs have done well after their companies became enterprises. Larry Ellison and Bill Gates and Jeff Bezos are obvious examples. So is Steve Jobs, who came back to Apple after a decade of absence and rebuilt the company.

<comment><USER53> Some have, but what are the numbers on that? Do more handle the switch ok (not even great, but in the "The company isn't going to tank" sense), or do more have problems and need to be replaced, if only for a while?

</comment></comment></comment></comment></comment></comment></comment></comment></comment><comment><USER54> This seems like a definite plus for all involved.

The Board and Chair set the overall strategy, while the CEO executes. In the next few years, the strategy is already clear -- execute on the Model 3, Model S & Roadster upgrades, Tucks, and solar products. The board should just be a background process for a while, while the pressure is on the CEO. By the time he gets his 'Chairman License' back, it may be time to update strategy.

Meanwhile, the SEC notches a "win", the investors can go back to their regularly scheduled short-long bickering, and Elon can focus more on delivering.

</comment><comment><USER55> Can he remain on the board as a regular board member? It only says he's stepping down as (and forbidden for three years from being) chair.

<comment><USER56> I would assume yes, but he wouldn't be eligible for either of the two new independent board seats and can't keep the chairman's seat, so for him to remain on the board would require one of the existing board members to give up their seat to him.

<comment><USER57> Not if an existing board member becomes chairman.

</comment></comment></comment><comment><USER58> Anyone know the difference between the proposed settlement he turned down and the one he accepted? I'm very curious!

<comment><USER59> [https://www.nytimes.com/2018/09/28/business/elon-musk- tesla-...](https://www.nytimes.com/2018/09/28/business/elon-musk-tesla-sec- deal.html)

 _The plan, as it was negotiated by lawyers, was for Mr. Musk to step down as chairman of Tesla within 45 days and not resume that post for two years. The company, also a party to the proposed agreement, would add two new directors to its board. Mr. Musk and the company would pay tens of millions of dollars in fines, according to the people, who requested anonymity because they were not authorized to speak publicly._

</comment></comment><comment><USER60> > Musk and Tesla will each pay a separate $20 million penalty. The $40 million > in penalties will be distributed to harmed investors under a court-approved > process.

Well, the stock has done somersaults in all directions since then (benefiting both longs and shorts.) I wonder who would be eligible for part of this payout.

<comment><USER61> yeah, The SEC charge probably harmed as many investors

<comment><USER62> There are some crimes that are so blatant, public and obvious that the regulators _have_ to punish you, as any other option would make it look like the regulators were so ineffectual and weak there were effectively no rules.

<comment><USER63> Filing public charges requesting his removal as CEO even though they weren't seeking that in the settlement seems like a calculated move to maximize the impact to the share price and thereby force a quick settlement. It was evidently effective, but it was a hell of an expensive way to win if you're measuring winning in terms of protecting investors. Anyone who got stop loss'd out of their shares has a right to be displeased.

<comment><USER62>
      it was a hell of an expensive way to win
      if you're measuring winning in terms of
      protecting investors.

Not at all. The SEC is thinking not in terms of this one crime, but in terms of the hundred CEOs who will feel tempted to commit securities fraud in the future, and the hundreds of thousands of investors who will fear such fraud.

Will they think "Remember Elon Musk, he got his ass kicked at high cost to himself and his investors, nobody does it" or will they think "Remember Elon Musk, he did this and got away scot free, everyone does it" ?

That's the choice facing the SEC, and for obvious reasons they chose the former.

<comment><USER63> > Not at all. The SEC is thinking not in terms of this one crime, but in terms > of the hundred CEOs who will feel tempted to commit securities fraud in the > future, and the hundreds of thousands of investors who will fear such fraud.

The deterrence argument can be used to justify anything. Why don't we behead the entire families of petty thieves? Think of the millions of other thieves who would be deterred.

It's a false dichotomy. The choices aren't "scott free" or "nuclear option" \-- if their case was as strong as is being assumed, all they would have had to do is ask for what they got in the settlement and then get that in the proceeding. It wouldn't even remove the incentive to settle because that still allows them to avoid a determination of guilt.

They could also have just given the settlement negotiations more time before making a public charge to begin with. Give the other side's lawyers a chance to explain things to their client for a while first.

</comment></comment></comment></comment></comment></comment><comment><USER64> So SpaceX isn't going public any time soon.

<comment><USER65> Musk has said publicly that he doesn't want SpaceX to be public because short term market interests and pressures will likely override his goal of getting to Mars. In truth he doesn't want Tesla to be public either, but it was the only way to get the needed capital.

</comment></comment><comment><USER66> This is a pretty mild punishment compared to the sorts of things the SEC has the power to do, like getting Musk banned for life from any executive position in any company, forcing him to get rid of all his ownership in Tesla, and fining him many billions of dollars.

That the SEC settled so quickly and for so little makes me think they believed they couldn't get any more to stand up in court. I assume that Musk refused a more harsh earlier settlement because he was aware of this. So he played chicken with the SEC, and the SEC backed down.

It would be really good, though, if Musk learned a lesson from all this and decided to be more responsible in his communications.

<comment><USER67> That's a weird narrative you are saying. SEC settled quickly and little because this is not a "bad" security fraud. There's little reason to punish him harshly since he probably doesn't have malicious intent. The punishment has to fit the crime after all. No reason for the SEC to destroy a person and company over a tweet. They have to have some punishments though because the fraud was too obvious.

The Thursday's failed settlement was slightly better that this one too. SEC's case is likely to hold up in court because Musk's recklessness was too obvious but the court's punishment would probably be similar to the settlement.

<comment><USER66> You are just saying what I said but in different words.

</comment></comment></comment><comment><USER68> I don't know much about the America's law system, but I heard DOJ is still investigating. Does this settlement would affect the DOJ? How does the DOJ isvestigation differs from the SEC's case?

<comment><USER69> The biggest difference is the burden of proof. A civil case requires a preponderance of evidence. A criminal case is beyond a reasonable doubt. The difference is absolutely enormous. There aren't going to be criminal charges.

</comment></comment><comment><USER70> I wonder if the SEC will disclose the persons that end up receiving compensation for the $40M to be distributed amongst "harmed" investors? My hope is that sophisticated investors are excluded from the compensated group as they know how to manage and leverage risk where as the retail investor does not. The retail investor is the one who would have been harmed in this instance.

</comment><comment> village-idiot Settling was clearly intelligent. My only fear now is that he'll tweet something dumb in the near future and get the SEC hammer dropped on him.

</comment><comment><USER71> Wow ok this is a pretty good outcome for TSLA and Elon.

</comment><comment><USER72> Side question: Will this change see the adoption of traditional marketing and advertising tactics by Tesla? To date, it seems that word-of-mouth and hype generated by an enigmatic (charismatic to some) CEO were sufficient to spread rumors and excitement to all reaches.

Without that social media hype process, are Tesla commercials in our near future?

</comment><comment><USER73> Is this the most expensive tweet in the world?

<comment><USER74> no, Kylie's Snapchat tweets were almost certainly more expensive (for $SNAP)

<comment><USER75> The news of the SEC investigation seems to be the cause behind the stock's recent drop from $307/share to $270/share, though; if I'm doing the math right, that 12% translates to ~$6.3B worth of value. Kylie Jenner's tweet "only" erased $1.3B of stock value. So, I think Elon has her beat.

That still doesn't seem to be enough to be the most expensive tweet, though. That honor seems to be this tweet[1], where a finance firm "Selerity" tweeted Twitter's missed earnings report prior to Twitter really announcing it, costing Twitter ~25% or $8B. (The earnings report was uploaded early to the investor relation's page on Nasdaq, apparently, and it showed that Twitter missed its earnings.)

[1]: [https://www.bbc.com/news/technology-32511932](https://www.bbc.com/news/technology-32511932)

<comment><USER45> Selerity tweeted content that was already posted on Twitter's IR site. That $8B was likely to evaporate the following day anyway. (Weather forecasters who predict a hurricane don't cause the billions in hurricane losses either.)

Social media gaffes of the "optional" variety (Kylie, Elon, Roseanne) are a different category IMO.

</comment></comment></comment></comment><comment><USER76> He hated taking this company public, I don't think it's warming him to the idea of public markets.

</comment><comment><USER77> it was he's plan all along (this + weed stuff). He couldn't just quit tesla and they just made him chairman for the next 25 years. Not this solves all of hes problems. He can finally focus on spacex

</comment><comment><USER78> But he'll still be CEO?

<comment><USER79> Yes. Just not chairman and no control over board.

</comment></comment><comment><USER80> I assume the SEC's settlement with Musk is supposed to be punitive in some way.

Can someone much smarter than me explain how Musk buying 20 million dollars of Tesla stock is punitive?

</comment><comment><USER81> What will Elon Musk do next?

The media must be chomping at the bit!

Will he reign himself in, or will the circus continue?

</comment><comment><USER82> Is there any way that we could receive similar settlement compensations from the President of the US for his morning tweets? I personally lost a few thousands of dollars due to the sudden stock/cryptocurrency market crash as a result of his tweets in the past few months this year...

</comment><comment><USER83> > The $40 million in penalties will be distributed to harmed investors under a > court-approved process.

Does that mean the people who got their shorts called? That is kind-of the opposite of being an investor. It would be odd if Tesla would have to look after their best interest.

</comment><comment><USER84> Title should include that he settled For (4) $20 million. Haha.

</comment><comment><USER85> Maybe OT but, how would the 40m likely be used by the SEC?

<comment><USER86> The article says:

> The $40 million in penalties will be distributed to harmed investors under a > court-approved process.

</comment></comment><comment><USER87> Well, that escalated (and got resolved) quickly.

</comment><comment><USER88> That whole thing with the 'going private' was just a tantrum to hurt all the shorts. It worked in the short term, if you were patient you got rewarded.

<comment><USER89> Shorting is not merely a matter of patience. Some people use barrier products, or can't face margin calls.

</comment></comment><comment><USER90> Elizabeth Holmes also settled with the SEC, for what it's worth. DoJ investigation ongoing...

</comment><comment><USER91> A $40 Million Tweet. Is it not a Guinness World Record yet?

</comment><comment><USER92> The crazy things that love causes one to do.

</comment><comment><USER93> did he plan this?

</comment><comment><USER52> There was never any chance Musk would have been banned from running public companies. If the SEC had wanted that, they never would have offered a settlement in the first place. They were just playing hardball to get a deal.

There was too much hysteria in the coverage of, and reaction to, this whole affair.

<comment><USER94> Musk is agreeing to step down as chairman of the board (while staying CEO) and Tesla is appointing two new independent directors. It's a significant curtailing of his power over Tesla. How was the coverage overplayed?

<comment><USER95> The psychodrama Musk causes is far more interesting than anything Musk does. The guy is just a widget maker but his name is enough to summon outraged hordes all desperate for his failure. This kind of naked ressentiment is something that, until recently, you didn't see in the West. The other side of structural inequality is probably this basic need to see the wealthy and powerful suffer, particularly those who have the pretense to declare themselves do gooders.

> Musk is agreeing to step down as chairman of the board (while staying CEO) > and Tesla is appointing two new independent directors. It's a significant > curtailing of his power over Tesla. How was the coverage overplayed?

The obsession with Musk is way overplayed at this point. The idea that people care about Tesla at all is laughable. At this point it's all about the desire to see their betters brought low.

<comment><USER96> I agree with your comments about the naked interest in seeing him fail, but disagree with the cause. I think the people who want him to fail are more linked to supporting the status quo, in car companies, gas production, hating the idea of evs helping to reduce greenhouse gasses, stock shorters of Tesla, who are often some of those things. My dad fits in this camp. I haven't come across this from people who are jealous of rich people or concerned about income inequality. I see these rabid anti Tesla people are mostly rich, conservatives.

</comment></comment></comment></comment><comment><USER43> I think this is the best outcome we can have (although there might be other lawsuits from the short sellers).

Elon will learn a hard lesson, there will be a committee and procedures to control his communication channels. He will still be CEO and the spirit of Tesla will be unharmed in the long run.

As much as I see myself as an objective person, Elon is genuine in his passion and his vision. Derailing him to jail time or prison would be a net loss for humanity, however objectively and legally inconsistent it may be.

Edit: The news cycle and PR things have a very short term memory. Just a year ago, people were praising him for his style and overall he was considered an extraordinary leader, CEO and a visionary.

<comment><USER97> > _Derailing him to jail time or prison would be a net loss for humanity, > however objectively and legally inconsistent it may be._

I hate this perspective. As a member of humanity, I want everyone to face equal justice, no matter how pivotal to a particular project or movement they may be. There will always be more visionaries.

Anything else will eventually and inevitably lead to violence.

<comment><USER98> I'm not particularly a fan of Musk, but the purported objective of SEC enforcement is to protect investors. If (as I read a day or two ago) the stock plunged on news of enforcement, then it's reasonable to question whether punishing him makes sense. Are the stockholders really better off with less (or no) Musk? Maybe, but does the SEC know better than the market? In any case, I'm not sure how or if "equal justice" is relevant.

<comment><USER99> The SEC isn't there to simply "protect investors". Your implication is the investors worth protecting are those with long positions. What about the shorts?

The SEC are there to protect the integrity of the market. Things like fraudulent information, insider trading, etc are corrosive to the mechanisms which a well functioning market requires.

<comment><USER98> "Your implication is the investors worth protecting are those with long positions"

Maybe there should be a bias towards those who benefit from the continuing viability of the company and maybe not.

But in this case, I suggest it's moot just because the damage to longs appeared to be significantly greater than the damage to shorts and it doesn't counterbalance anyway.

The penalties seem arbitrary to me. Transferring several million (or billion) dollars around as they are doing doesn't seem to rectify in any way the purported injustice to shorts. The whole episode drove down the stock quite a bit, so longs have suffered a lot, shorts have suffered somewhat, and the government collected a commission. Nobody has had wrongs rectified, and it's unknown whether prying Musk away from Tesla is a net gain.

Personally, I was neither long nor short TSLA at the time of the tweet, and I don't think short sellers are inherently illegitimate. However, I think the existence of a public company generally serves a social purpose and long investors are not quite symmetric with short investors. If, in general, there is a dispute where you can apply long investors' concept of fairness, or you can apply short investors' concept of fairness, it kind of makes sense that what damages the company less is probably the right answer, barring something like Theranos that shouldn't exist at all.

</comment></comment></comment></comment></comment><comment><USER100> > The SEC also today charged Tesla with failing to have required disclosure > controls and procedures relating to Musk's tweets

It's almost like the current administration should also have these!

<comment><USER101> A. The presidency isn't a publicly traded company.

B. Obvious joke about "but it's for sale like it is" :)

C. Anyone still arguing about Trump Tweets is being obtuse the bias in media. He found a loophole to get his message out, I don't agree with the content usually but can't fault him for the workaround.

<comment><USER102> He didn't find a loophole to get his message out. He's the President of the United States. He can call a press conference and everyone will report on his message across the country. There's no need for a loophole. The complaint is that he's communicating irresponsibly in a way that needlessly hurts others.

<comment><USER103> Since at least the early 2000s, and certainly throughout the Bush and Obama administrations, the media has felt perfectly free to basically ignore any Presidential press conference they didn't think was interesting. You were doing good if the media passed on a few soundbites or put a story about it (in their words, with their framing) on the front page.

Twitter, for better or worse, gives you direct access to normal people. I'm no fan of Musk, but I'm inclined to believe that if our financial (and in the example, political) system is so fragile that tweets can blow it all to hell, we have a serious problem and system collapse is inevitable.

<comment><USER102> No one is complaining about the tweets that aren't interesting. Obama tweeted too.

</comment></comment></comment></comment></comment><comment><USER104> Ouch 20million for a drunken tweet

<comment><USER105> Elon is worth $20b [1]. $20m is 0.1% of his net worth. That's like a $1000 fine for someone who has "only" $1m. I have quite a bit less than $1m and a $1000 fine, while not nothing, would make me cranky for a week or a two but have almost no material impact on my life.

<comment><USER41> You can't make these statements. Net worth is not the same as liquid assets.

Most of his net worth is likely tied up in stock. Which he can't exactly sell.

<comment><USER106> He can take out a loan. It's easy, he has all those stocks to leverage against.

<comment><USER107> What interest rates do rich people like him get? Is the concept of charging interest still valid at that level or is it all bartering of favours?

<comment><USER108> I couldn't tell you what interest rate he's likely to pay but in general in this situation, there is interest. Whoever lends him the money has their own cost of funds and admin costs to cover at a minimum, even if they view repayment as close to zero risk because the collateral is very good.

</comment></comment></comment></comment></comment></comment><comment><USER109> Richard S. Fuld Jr. and Lloyd Blankfein played significant part of causing US households to lose 14 trillion dollars. There were zero consequences. Musk caused a blip in the value of a tiny 45B market cap company and is crucified for it. Smthng.

<comment><USER90> > _There were zero consequences._

Excuse me? Fuld was canned and his equity was wiped out. In what way was Musk "crucified"? Seems to me he got off easy.

<comment><USER110> The use of the word "crucified" probably speaks volumes about how some see Musk.

</comment></comment></comment><comment><USER111> Damn, Sweet 40mil extortion by SEC

<comment><USER112> Could you please stop posting unsubstantive comments to Hacker News?

</comment></comment><comment><USER113> EDIT: Nevermind, just saw that he'll remain CEO.

</comment><comment><USER114> The only reason why they attacked him is this twitt : "Who do you think _owns_ the press? Hello." Even a billionaire can't say that without retaliation.

</comment><comment><USER115> Elon games the system. Puts his brother in the cosmetic role of board chairman, pays $2500 (in regular folk equivalence) and appoints two faux independent directors.

light slap on the wrist, a gentle speedbump, back to same.

Basically a speeding ticket.

<comment><USER116> _Basically a speeding ticket._

Which is really all that was needed anyway. The whole idea of forcing him out as CEO, issuing a ban on being a CEO/Director of a public company, etc., was pure over-reach from the beginning.

</comment></comment><comment><USER117> This is infuriating. Now if the SEC can go after the bankers that destroyed the world economy that would be great... Seriously this doesn't make any sense. The SEC was definitely conspiring to take power away from Elon..this was their only goal

</comment><comment><USER118> He's lucky. If he were a small time person he would be in jail by now. SEC only goes after low hanging fruit, so you know that this was an easy case for them. Musk deserves it for his stupidity but SEC isn't any protector of the masses by any means.

</comment><comment><USER119> I'm not disputing the SEC decision about Musk, but why is his once-off and inadvertent market manipulation more illegal than their consistent and deliberate manipulation? Wrap Elon over the knuckles, sure, but what happens to do people with that as their job description?

</comment><comment><USER120> Following Tesla is like watching a train wreck in slow motion.

The next few steps are painfully obvious. I hate to watch.

The board can now officially outvote Elon, so the first bond that defaults will result in Tesla getting sold to BMW or Mercedes (or ?). I predict this will happen within 24 months.

And no.... I don't hold a short position. I actually do want the home team to win.

<comment><USER121> lmfao

</comment></comment><comment><USER122> If anyone wants to profit off this - buy TSLA calls!!! 290 strike price.

<comment><USER122> 48 hours later , $310 share price. Thanks for the downvotes, just made a quick $10K.

</comment></comment><comment><USER123> The most expensive joint in history. Literally one tweet while (I'm guessing) he was baked cost $40MM, his chairmanship and two new board seats.

From the SEC complaint: "...he rounded the price up to $420 because he had recently learned about the number's significance in marijuana culture and thought his girlfriend "would find it funny"..."

The two of them were probably giggling their asses off as he posted it.

<comment><USER124> 0% chance he recently learned about the significance of 420. Maybe he did use this number because of it, but the assertion that he was high and that this happened because he was high is just speculative.

<comment><USER123> Yup, that's what I said. Guessing.

</comment></comment></comment><comment><USER125> Stepping down as chairman is much less of a punishment than stepping down as CEO. Looks like the SEC blinked.

<comment><USER125> To those downvoting, he didn't accept the previous deal, presumably this one is more to his liking. What other explanation is there besides the SEC giving ground?

<comment><USER126> This deal is strictly worse than the one he refused. Fines doubled from 10M to 20M, chairman ban increased from two years to three, new communication review process (not in the original deal), and they still have to install two new board members.

<comment><USER125> Are you joking? A 10m fine vs 20m is totally immaterial to a billionaire. 3 years is longer than 2 but it's clear giving up CEO was unacceptable to him.

<comment><USER126> You speculated that this deal was more to his liking than the previous one. I was just pointing out how absurd that statement was given that this deal is worse than the other one in every respect.

<comment><USER127> > this deal is worse than the other one in every respect.

Is it? I thought the other settlement included Musk not being able to lead companies for two years:

[https://www.marketwatch.com/story/elon-musk-rolling-the- dice...](https://www.marketwatch.com/story/elon-musk-rolling-the-dice-and- buying-time-by-turning-down-sec-settlement-2018-09-28)

<comment><USER59> According to [https://www.nytimes.com/2018/09/28/business/elon-musk- tesla-...](https://www.nytimes.com/2018/09/28/business/elon-musk-tesla-sec- deal.html) the original terms were

 _The plan, as it was negotiated by lawyers, was for Mr. Musk to step down as chairman of Tesla within 45 days and not resume that post for two years. The company, also a party to the proposed agreement, would add two new directors to its board. Mr. Musk and the company would pay tens of millions of dollars in fines, according to the people, who requested anonymity because they were not authorized to speak publicly._

In other words, it's the exact same deal presented before with some of the penalties increased. There's no other way to explain it than Musk rejected the real and then realized he messed up when the SEC started with the lawsuit.

</comment></comment></comment></comment></comment></comment></comment><comment><USER128> It's unfortunate that so many comments below are so stuck on how egoistic Elon is. As if they themselves are ego-less. I work in a 4000 people company with great culture. But even then egos are only skin deep and easily surfaced. Humans are not machines. Egos and emotions are the norm. Just look at yourself.

</comment><comment><USER129> This settlement will massively strengthen the civil litigation brought against Musk, by several of the many investors he hurt with his tweet.

See for instance : [https://www.cnbc.com/2018/09/06/short-seller-andrew-left- fil...](https://www.cnbc.com/2018/09/06/short-seller-andrew-left-files-class- action-lawsuit-against-tesla-and-elon-musk.html)

The Musk death spiral continues...

<comment><USER130> Their cases were already incredibly strong, given the nature of the tweet and his Twitter account's status as an official corporate mouthpiece for five years. From a purely legal perspective the no contest nature of this settlement doesn't do much to weaken or strengthen their case, but It also doesn't matter because their cases are already ridiculously strong. Musk is still in trouble, but a death spiral is too strong a word (unless the DOJ brings charges), he could still pull up. If he backs off the Twitter and keeps his head down, he'll recover.

Tesla though, is in a real death spiral with their debt.

[https://www.investopedia.com/terms/d/deathspiral.asp](https://www.investopedia.com/terms/d/deathspiral.asp)

That's going to be muuuuuch harder to correct, given that they're going to have sell a load of discounted stock just to keep afloat in 2019.

</comment></comment><comment><USER131> This is going to burn a lot of shorts come monday.

If you guys want a good chuckle at how wrong so many on HN were two days ago.

[https://news.ycombinator.com/item?id=18088099](https://news.ycombinator.com/item?id=18088099)

When it comes to musk and even facebook/google/etc, there is a toxic mix of journalists' hate and a targeted campaign by other groups ( I don't know whether it is short sellers or whatever ). It's ridiculous the amount of absurd hate musk got for a simple tweet. Some even claimed he might go to jail for it.

<comment><USER47> I'd say most HN comments were right on.

When it first happened many on HN said "it's not a big deal", "the SEC won't care", "they can't prove anything" and "they won't ask him to step down as chairman".

And yet here we are.

<comment><USER131> > I'd say most HN comments were right on.

What were they right about?

> When it first happened many on HN said "it's not a big deal", "the SEC won't > care",

But you just said most HN comments were right?

> "they can't prove anything" and "they won't ask him to step down as > chairman".

Can you show me one comment that even talked about chairman?

> And yet here we are.

Yes here we are. Nothings changed. Musk/TSLA got a tiny fine. Gave up his chairman which doesn't really matter since he is the largest shareholder.

Right now shorts are burning. Hopefully you aren't one.

</comment></comment></comment><comment><USER132> "The proceeds will be distributed to harmed investors".

Tesla is a speculative investment, and it is largely one of backing Musk, an unpredictable but seemingly brilliant engineer come businessman.

I'd much rather see the $40m distributed to people who really need the money, ie the homeless etc.

I'd imagine $30m of this $40m will go straight back to investment banks. Hardly a group who "need" the money.

Edit: downvoted, wtf?

<comment><USER133> In what way is he a brilliant engineer? He's not designing the cars and the rockets. He helped make PayPal over 20 years ago.

<comment><USER134> Musk doesn't solve the design problems, but (a la Jobs), he does tell the "real engineers" what problems to solve.

Here's an interview with Tom Mueller, the SpaceX lead propulsion engineer since inception, about (among other things) working with Elon. Note particularly the discussion of "face shutoff", which is an approach to sequencing engine startup which Musk insisted on over Mueller's initial objections, because Mueller thought it would be too hard to make it work in an engine the size of the Merlin. They ultimately did, after blowing up a lot of test hardware. The result was a simpler, lighter, more reliable engine -- which they wouldn't have had if Musk hadn't insisted they try, over Mueller's objections.

[https://zlsadesign.com/post/tom-mueller- interview-2017-05-02...](https://zlsadesign.com/post/tom-mueller- interview-2017-05-02-transcription/)

</comment></comment></comment><comment><USER135> Raise your hand if you've read Atlas Shrugged. Now, raise your hand if you're read in on administrative law (i.e. Basically, any of the 200+ Fed agencies can make up rules, at will. I know, it's obsured). Well, Administrative Laws (made up rules) are enforced as black letter "law," including asset forfeiture and imprisonment (Worse, 70+ Fed agencies are armed and many have SWAT Teams).

It saddens me to see how many of you assume, apparently w/o question, that buerocrates at the SEC could and should, at will, use their made up rules to excommunicate or jail the founder and leader of a ground breaking companies.

You say "but, justice is blind." However, enforcement is targeted. Plus, the people I know believe in Elon (No, we're not on a first name basis, the name "Elon" is iconic and doesn't require a last name.) and not Tesla as a company. Without the key innovators and producers, most tech companies would be worthless.

Now, wouldn't it be delightful to watch Elon sell his stake and exit Tesla entirely, just to prove a point? Surely, in a short period of time, even w/ their new golden boy CEO, Tesla would fold; ala Apple Computer, Inc. W/o Steve Jobs. All the short positions could finally win (yea!). After which, Elon could buy back Tesla and take it private. With acts like Sarbanes Oxley and Dodd-Frank, who would want to run a public company?

If you disagree, go found and operate a few successful businesses. Report back in a decade.</comment>


First Public Release of NewsFeeder - <AUTHOR> https://www.newsfeeder.io/
Me and my co-founder are excited to show the world initial version of NewsFeeder which we worked for the last few months.
NewsFeeder wants to enable small teams to have a dead simple approach on updating users with product updates and get immediate feedback while increase user engagement.
I would appreciate any questions or feedback you have. Feel free to send me a PM. <comment><USER2> 1\. This might get more attention if you submitted it as a "Show HN" article. See the "show" link at the top of the page for more information.

2\. You write "Feel free to send me a PM", but your contact information is not shown in your profile. Note that the "email" field in your user profile is only visible to site administrators. If you want others to see it, you also need to have it in the "about" box.</comment>


Sergey Brin spotted with Robert Scoble wearing prototype Google glasses  - <AUTHOR> http://news.cnet.com/8301-11386_3-57410312-76/prototype-google-glasses-spotted-in-the-wild/

<comment><USER2> They look different than the ones in the original video. A little bit bulkier but still pretty cool. I wonder why he didn't let Scobble wear the glasses.</comment>


Ask HN: It's deduction day: Do you practice Effective Altruism? - <AUTHOR> Given that this is the last day to get a tax deduction (US) for 2019, I was wondering how many people follow the practice of 'effective altruism', i.e., giving to charities "that save or improve lives the most per dollar" in the words of GiveWell. https://www.givewell.org/
I've donated through GiveWell for some years now (no affiliation other than as a donor to their recommended charities). I have been very impressed by the rigor of their analysis, and generally let them decide how to allocate the money. As an added bonus, the receivers don't get my contact info so they can't waste the money I give them mailing me requests for more money.
What's your take? <comment><USER2> Big fan of Effective Altruism. Even if you don't have money to give there are plenty of things you can do to make a better world - ex. 80,000 Hours ([https://80000hours.org/job-board/](https://80000hours.org/job-board/)) has a ton of info on going into high impact careers as well as a job board with some interesting opportunities.</comment>


Interesting comments on Disqus - <AUTHOR> http://www.centernetworks.com/disqus-comment-system

<comment><USER2> "Let's Discuss Disqus"

So _that's_ how you say it...</comment>


Some voters are sick of companies like Amazon paying no corporate tax - <AUTHOR> https://www.nytimes.com/2019/04/29/us/politics/democrats-taxes-2020.html <comment><USER3> The article is reluctant to mention the reason why they got those tax rebates, and focuses on the way people feel about it. This seems like bad journalism.

According to CNBC, "Amazon's low tax bill mainly stemmed from the Republican tax cuts of 2017, carryforward losses from years when the company was not profitable, tax credits for massive investments in R&D and stock-based employee compensation." [https://www.cnbc.com/amp/2019/04/03/why-amazon-paid- no-feder...](https://www.cnbc.com/amp/2019/04/03/why-amazon-paid-no-federal- income-tax.html)

These are the actual things we should be talking about.

<comment><USER4> > carryforward losses from years when the company was not profitable

yes, this definitely should be talked about. Why can't people's income be carried forward like this as well?

If i made a lot of money one year, why can't i claim away taxes from years that i didn't make income (such that my tax bracket is lower)?

<comment><USER5> Not making money is not the same as making losses. You can carry forwards losses you've made on investments.

<comment><USER6> > Not making money is not the same as making losses.

I have rent and bills to pay regardless of whether I'm making money, that is the definition of making a loss.

<comment><USER7> "I have rent and bills to pay regardless of whether I'm making money, that is the definition of making a loss."

That is not a loss. That is an exchange of value; you pay $100 for your heating bill and receive $100 of heating.

A _loss_ is when you have some value, and it disappears, and you have no compensating value. Buying a stock at $100 and selling it at $50 is a transaction in which you have less money at the end than you had at the beginning, _and_ where you also had no compensating value exchange

Normal taxpayers do have rights to do things like carry forward losses in many circumstances. Business do get to be not taxed on _expenses_ , but there are conditions on that. You can tell there are conditions on that because you can't just form an LLC and declare all your expenses to be losses, because you won't meet the conditions for your expenses to be losses. Note that that is the source of the problem, "form an LLC" is something you can totally do very easily, it's the failure for your personal expenses to qualify that is the problem.

While it might be emotionally satisfying to tax businesses on expenses, it's not hard to think about it a bit and realize why letting taxpayers deduct all their expenses, or trying to tax businesses on their expenses even when they didn't make a profit, are both not great ideas. (Think about the incentives created. Taxpayers don't need any more incentives to spend all their money on "expenses" as it is, if you've seen the credit card debt statistics.)

<comment><USER4> A company paying a cost of $50 to produce widgets for 1 year (and don't sell any that year), then selling all the widgets on the 2nd year for a profit of $100, can claim that they made a loss of $50 in the previous year, and therefore only have $50 that's taxable.

A person who works for 1 year for $100 income, then stops working the 2nd year (and live off their income from the 1st year), must pay their taxes at the $100 rate. If they are allowed the same 'carry forward' as a corp, they should pay at the tax rate of $50 for both years, rather than at $100 for the first year, and $0 at the 2nd year. And yet, this isn't allowed for a person. Of course, you could claim that the gov't can't tell that the first $100 is supposed to be 'averaged out' in the future. So would the situation be any different if you lived off savings for the first year, and replenished them in the 2nd year? I don't think this is any different.

<comment><USER8> Sorry that is not how it works - basic tenets of accounting (matching revenues and costs) those widgets would sit on the balance sheet and no loss would be recognized in year 1 and just profit in year 2

<comment><USER9> >those widgets would sit on the balance sheet and no loss would be recognized in year 1 and just profit in year 2

Unless of course the company manufacturing the widgets (A) sells them to a wholly owned subsidiary (B) for a loss...then A can take the deduction.

<comment><USER8> Who would then make an even bigger profit, for no tax savings

<comment><USER9> you do know that this is a well known tax avoidance strategy right? The profits would be later used to offset the losses carried forward by the parent.

Are you an accountant/CPA or attorney?

<comment><USER8> Perhaps you could pencil out this well known tax avoidance strategy (unless you are really talking about time value of money, jurisdictional arbitrage, or some dodgy maneuver that wouldn't stand up to an audit)

<comment><USER9> I take it you are neither accountant/CPA nor attorney who regularly deals with these tax matters.

In lieu of penciling you a tax treatise, you may Google "wholly owned subsidiary tax strategies". While there are no shortage of tax benefits, inevitably one of the elementary examples you find towards the top will be segregation of manufacturing and sales entities. Unfortunately you likely will not find much on more nuanced situations for example Wholly owned IC-Discs or LOB for wholly owned foreign entities (in many instances those situations can result in 0% US withholding and tax rates)

</comment></comment></comment></comment></comment></comment></comment></comment></comment></comment></comment></comment><comment><USER10> The intellectual dishonesty of this from allegedly smart people continues to astound me. Amazon has little-to-no taxes mainly because they have such low taxable income in the first place because they spend so much in R&D and other things. They're actually creating jobs and new businesses rather than showing massive profits and paying a ton in taxes. I have no doubt they take advantage of perfectly legal tax code items like accelerated depreciation, just like millions of other companies. At the end of the day, people of a certain mindset just want to take other peoples' money and the more of it they have they more desperately people believe they don't deserve to have it.

<comment><USER11> Can you prove that all the other businesses that didn't survive, either online or shops weren't has much jobs than the one Amazon provide?

Also, all the taxes that they don't pay needs to be paid by others. For each optimizations done by those companies, it's as much money that needs to be paid by others as each country runs on a budget that is mainly based on taxes. Them not paying taxes as a direct impact on taxes that needs to be paid by the one who pay taxes as well as the quality of service and infrastructure of a country. Infrastructure they uses a lot by the way, like roads to deliver their goods for example.

<comment><USER12> It's hard to compare to other businesses because amazon cannot capitalize R&D. If they spend $1bn on software dev and Tesla spends the same amount on a factory, Amazon's ebitda is down $1bn and Tesla's is only down ~$100M.

<comment><USER13> [https://www.thetaxadviser.com/issues/2016/may/deductibility-...](https://www.thetaxadviser.com/issues/2016/may/deductibility- of-some-computer-software-development-and-implementation-costs.html)

Says software is capitalized over 3-5yrs. The difference is that software dev costs usually grow smoothly year over year but gigafactory launches are spiky

</comment></comment></comment></comment><comment><USER14> > carryforward losses from years when the company was not profitable

The idea of carrying forward losses _in general_ is sound, but I'm beginning to wonder if there should be an exception. If the loss is intentional, using investment instead of profit to drive growth, I'm not so sure those losses deserve to be carried forward. Probably an unpopular opinion here on HN, but I think denying reductions in those cases would be beneficial not only in terms of tax revenue from the larger companies but also in terms of reducing the VC- fueled ""unicorn or bust" mentality among the smaller ones.

<comment><USER15> Agree that these companies are using the tax code to write off losses that they are intentionally incurring in order to achieve a lower cost point than their (profitable) competitors. This is a very predatory practice that should be ended. Companies should compete in the marketplace. Having tax payers foot the bill for some companies disruption gambit makes no sense.

<comment><USER16> Any new company, including a mom&pop restaurant or whatever, will have startup costs that established companies do not (e.g. buying equipment, training people, etc). How do you propose to distinguish those from these "predatory" losses? Or should those losses not be carried over either?

<comment><USER14> That's a really good question, and - contrary to HN tradition - I'm not even going to pretend I have a complete answer. Some cases are easy, for example a lot of non-tech startups are funded by loans rather than equity exchanges. Other cases are surely harder, but I think clear lines can and should be drawn.

The key IMO is that the company should be paying tax _somewhere_ along the line. Right now VC is a double gift - it provides funds to grow, and the corresponding expenditures magically turn into "losses" that erase future tax. Besides its effect on government revenue, it also gives VC-funded companies an unfair advantage (as though they didn't have enough) over competitors who are being taxed more for having the audacity to grow organically.

<comment><USER16> The effects on government revenue seem more complex than that. For example, if a customer of a startup spends $8 instead of $12 thanks to VC subsidization, those $4 remaining in their pocket will be spent somewhere else, and the IRS will get to tax _that_ expense too.

</comment></comment></comment></comment></comment><comment><USER17> Taxing _profits_ (as opposed to revenue, value add, capital gains..) is the ultimate quixotic temptation for politicians.

On paper, it is a fantastic tax. Google, Apple, FB, Amazon... all the new economy winners are very _profit_ able, 20% - 30% margins & fast growth are _expected_ (and priced into market caps).

They're so profitable that money is just piling up, atm. They can't usefully invest it all. This means you can tax their profits without affecting the real economy. There's nothing google is doing that it couldn't do if they had to pay $10bn (25%-30%) as a tax on profits.

OTOH, unprofitable companies (eg Tesla), would have trouble paying extra taxes. It'd need to come out of investments in production capacity, R&D, etc. They wouldn't have to pay.

Corporate income tax is just a sensible idea, on the face of it. Unprofitable? Don't pay. Profitable? Pay. Minimum economic disruption.

But in practice... across many times and places... it's proved very hard to make a corporate tax scheme work.

Tax policy complexity. Accounting complexity. Multiple jurisdictions. The looping cascade of company ownership, partial ownership, contractual relationships, making up the legal "structure" of a google or amazon.

It all adds up to a reality wherein politicans cannot make a law that says 25% tax.. and have that mean something similar to what it sounds like.

This is a pill very few politicans or voters can swallow. Of course we can! We're legislators. We make laws. We have police, and tax authorities. Google finance said google made $40.42bn. The rate is 25%. Gives us $10.1bn.

Empirically, they generally can't. Changing things to enable corporate tax would require _massive_ , difficult legal/bureaucratic reforms. You would need to consider insanely difficult changes, like heavy handed restrictions on a company's ability to own other companies, and the types of legal entities that can own legal entities. You'd need new accounting standards. The bureaucratic guts of the economic machine.

<comment><USER18> _We make laws. We have police, and tax authorities. Google finance said google made $40.42bn. The rate is 25%. Gives us $10.1bn._

Your post is very insightful. The only thing I'd add is that when you have a $10 billion tax bill that you can afford to pay $5 billion to attorneys and accountants to avoid it.

That's the crux of the problem to me. No matter what scheme the government can come up with to tax it, the numbers are so large that it is in the company's interest and ability to find loopholes. That's why we end up with sophisticated shell companies shuffling money around in tax havens that are perfectly legal but don't make sense outside of tax avoidance schemes.

<comment><USER17> _when you have a $10 billion tax bill that you can afford to pay $5 billion to attorneys and accountants to avoid it._

I personally think this is overstated as a root cause. Giant corporations have the same lawyer budget to spend avoiding payroll taxes or GSTs/VATs, but it doesn't make that kind of difference. That's because salaries, sales and value adds are, in practical terms, objective truths. The law & accounting standards define them, locate them to a jurisdiction and that definition is defensible. A transaction either is or isn't a salary, or a sale.

Profit otoh, is subjective. Expenses can be expressed as investments, retained earnings can be expressed as growth. Most importantly, profit doesn't have an objective location.

</comment></comment></comment><comment><USER19> Voters are sick of it because of a general misunderstanding of corporate taxes, and sensationalized headlines are just making it worse.

<comment><USER20> I must admit that my knowledge is lacking in this area. Can someone offer a high-level explanation to one of the people who don't understand corporate taxes in the US?

As far as my understanding goes, the bulk of taxes are paid on profit (to be more precise, operating income), and not revenue. As far as I understand, big companies do everything possible to make it seem like they are not profitable from an accounting perspective. As an example, this might mean that they'd pay some subsidiary in Ireland, where corporation taxes are smaller. What am I missing?

<comment><USER21> You're missing that Amazon is reinvesting, not hiding profit.

<comment><USER22> "Margrethe Vestager, the EU commissioner in charge of competition, said Luxembourg's "illegal tax advantages to Amazon" had allowed almost three- quarters of the company's profits to go untaxed, allowing it to pay four times less tax than local rivals."

[https://www.theguardian.com/technology/2017/oct/04/amazon- eu...](https://www.theguardian.com/technology/2017/oct/04/amazon-eu-tax-irish- government-apple)

<comment><USER21> That is in EU, we're talking about the USA corporation.

<comment><USER14> The fact that they're not so neatly distinguishable is very much at the heart of the problem. One of the main ways companies avoid tax is by making it appear that their revenue, profits, and (to a lesser extent) costs are somewhere other than where they really are. Amazon in the US is very much aware of the tax implications of hiring or locating assets in the EU, whether legitimately or as a pure dodge, and depends on the difference.

</comment></comment></comment></comment></comment></comment><comment><USER23> Surprised to see a headline from the NYT that uses weasel words ("some voters"? well some voters are also uneducated, so what?), which even Wikipedia has rules against. That being said, why does it matter if Amazon is not paying taxes itself if it is creating many jobs, with a good percentage of them being high paying, and who end up paying income taxes anyway? Not to mention taxes that Amazon pays for those employees to begin with.

</comment><comment><USER24> Really have to start taxing over revenues. It's long due.

<comment><USER3> They do. Sales tax.

<comment><USER25> One could argue that the consumers are the ones paying this too. Sales tax is almost always passed onto the consumer in the form of raised prices.

<comment><USER26> One could argue that consumers are the ones paying every tax.

<comment><USER27> Sure. But what is taxed does steer society. Imagine only taxing on pollution (so not on wages/sales/home ownership).

Currently we tax on wages/ sales/ home ownership and not on Amazon an little on pollution. Look around to see the result.

<comment><USER26> I don't get your point. Are you suggesting that Amazon alone should pay a tax on revenue (steering business to its competitors and reducing consumption slightly), that every company should pay a tax on revenue (steering business from more expensive and less vertically-integreated competitors to Amazon, but reducing overall consumption) or something else entirely?

<comment><USER27> Im saying all tax is paid by consumers in the end. But what is being taxed is still interesting.

I'm suggesting Amazon is currently doing what it does because of taxation law. It simply complies/optimizes. Profit taxed? Dont make profit. Pollution free, dont worry about pollution.

</comment></comment></comment></comment></comment></comment></comment><comment><USER28> > One of the benefits of taxation is taking it and using it for the collective > good

Which is true no matter if the tax rate is 1% or 75%

> He could be taxed at 99.9 percent and still have millions left over

I realize this is hyperbole but do realize that no 99.9% tax would be complied with

> tax on every dollar over $100 million in profits they earn anywhere in the > world

oh the American hubris, so lost in the goal of catering to their constituents that they think this institution has a valid claim on assets, and income. Lets take a cut of everyone's productivity IN A MORE FAIR WAY _crowd cheers_.

But alas, the US rule of law makes it secure for you to do business and these corporations benefit from this society and use its services - but thats also true whether the tax is 1% of 75%, so it isn't really an argument

> article shows graphs about tax rebates

Article doesn't talk about how the corporations used tax rebates at all. It talks about the outcome of paying no tax, talks about all these proposals, and none of the proposals talk about tax rebates. Even the most ambitious proposal here would probably not effect how these corporations operate. Are people - <USER2> dare say - stupid? Is this a mass reading comprehension issue?

It is interesting that people who can simply read can play tax games like this for another 100 years before anyone catches on.

</comment><comment><USER29> Amazon paid no _income_ tax. Amazon paid a shitton in taxes, and will continue to do so.

It is probably the case that profitable companies pay too little in tax, but articles like this are misleading as hell.

</comment><comment><USER30> subchapter S (and other pass through) corporations pay no corporate income tax at all. this is the majority of small businesses.

Corporations ultimately distribute their profits to actual people. Those people will pay tax on that income.

It isnt automatically obvious that corporations should pay any taxes on income (or revenue) until it is distributed to actual people (shareholders and employees). We tax the profit of larger corporations because we can and because we need the tax dollars, not because there is some moral imperative to do it.

</comment><comment><USER31> It doesn't matter if corporations pay taxes because the money just flows to people who own equity in or work for those corporations, and they pay taxes.

<comment><USER32> It would be OK if corporations didn't pay taxes.

BUT there's more to the story.

Not only do they not pay taxes, they also enjoy absurd political power through lobbyists and through being able to pump huge sums of money into politics thanks to the Citizen's United decision.

There is simply too much power in the hands of the corporations. I mean, Amazon literally had dozens of city governments falling over themselves to give up enormous tax goodies and red carpet roll out all for the weak promise of 50000 jobs and an HQ2.

</comment></comment><comment><USER33> Am I to believe Bezos and his investors will simply take the hit of paying taxes, or will that expense get passed to consumers?

<comment><USER34> Smaller companies pay their taxes and set their prices at a level where they can afford that. If Amazon are forced to compete fairly on efficiency/quality/... rather than on tax avoidance, that's a good thing for customers in the long run (and of course collecting tax to be spent on public services is good for citizens immediately).

<comment><USER33> That makes sense, thank you.

</comment></comment></comment><comment><USER35> We means test access to the social safety net programs for the poor.

We can means test access to tax loopholes as well.

</comment><comment><USER36> High revenue low profit is good. Surely Apple are a better target?

</comment><comment><USER37> This comes up all the time. The issue is not the companies. The issue is the loopholes that their highly paid tax accountants are taking advantage of. Change the law not attack the company for acting in the best interest of its shareholders.

<comment><USER38> And how did we end up with those loopholes?

<comment><USER37> Repeat after me: elected officials are our representatives. If you don't like them either by how they vote or the bribes I mean donations they receive then make your voice known by getting involved, voting, or donating to causes and people you do support.

A flat tax is an idea. It has come up from time to time and failed. There are lobbyists on both sides and both are evil in their own ways.

In the end the elected officials pass laws. Companies pay tax under those laws. The laws have loopholes and those same companies use them.

The. Companies. Are. Not. To. Blame. For. Saving. On. Their. Taxes. Legally. Even if it is a bit unethical while being profitable.

</comment></comment></comment><comment><USER39> > some

I'd call that a success.

</comment><comment><USER40> To be fair, why companies should be paying tax at all? Companies are taking all the risk, employees aren't.

</comment><comment><USER41> >the list of those paying zero roughly doubled last year as a result of provisions in President Trump's 2017 tax bill

The gripes seem to largely a political issue which I guess is down to the voters as to who they vote in.

</comment><comment><USER42> > Colin Robertson wonders why he pays federal taxes on the $18,000 a year he > makes cleaning carpets, while the tech giant Amazon got a tax rebate.

Who cares about what Colin Robertson thinks?

<comment><USER43> There's also no way that he doesn't get a massive refund at the end of the year based on his salary.

<comment><USER29> Yes, if he's married filing jointly the standard deduction is $24k. Meaning he pays zero taxes. If he's unmarried his standard deduction is still most of his salary (~$12k), and the remaining amount would fall into the 10% tax bracket. But he would qualify for tax credits with income that low. Also very likely social services and safety nets. His effective income tax rate should be negative.

Reading these comments, it's apparent most people have no idea how this shit works. I thought here of all places, I wouldn't see people falling into the "I don't understand how progressive tax brackets work" trap.</comment></comment></comment>


Lessons on a Better Way to Learn - <AUTHOR> https://get21stnight.com/lessons-on-a-better-way-to-learn/ <comment><AUTHOR> Submission statement:

Submission statements aren't required here, but I like the practice, and I feel like most people just skip to checking the comments anyway.

This (long) essay was inspired by a couple of things. First, I recently created an app that I believe works better than Anki for a lot of use cases. That's a bold statement, so I wanted to back it up by explaining why I created it and how it fits into a learning process.

Second, I recently saw a post on Medium from someone who attempted to learn the med school curriculum just through their Anki decks (which, if you don't know, are incredibly extensive). It didn't work out that well, and they seemed surprised. It made me realize that there are a lot of misconceptions about spaced repetition and its limitations. More broadly, there are a lot of misconceptions about learning in general, which, as a test-prep tutor, is something I deal with every day.

There's a lot I cover in the essay, including why the attempt to learn the med school curriculum through their Anki decks didn't work. Basically, med school covers both content (facts) and processes (skills). Only content can go into Anki, so it's already impossible to learn processes just by Anki.

More importantly, spaced repetition works great for sticking facts in your mind, but you place a tremendous cognitive burden on yourself by just learning facts without a framework. It's like reading a word one letter at a time. Similarly, there's no guarantee that those facts will ever cohere into an understanding, especially if you're coming from zero knowledge about the subject.

That's why even though med students love Anki, they also very strongly recommend textbooks and problem sets to do well on Step 1 (the massive exam they all worry about). In fact, they have an acronym, UFAP, which is their recommended materials list (UWorld, First Aid, Pathoma).

Anyhow, apologies for the length of the essay, but there was a lot I wanted to put in there. I hope you all enjoy!</comment>


All variables in Java must be final - <AUTHOR> http://codemonkeyism.com/all-variables-in-java-must-be-final/ <comment><USER2> ... and all methods must be static with no side effects. Additionally, use functors to simulate crippled closures and you have a broken FP paradigm embedded in you cup of Java.

<comment><USER3> ... and ridicule the article/Java, instead of acknowledging that it rightly argues that the average Java program benefits from less occasions for mutability.

<comment><USER4> It might rightly argue that. But java suffers from being too verbose and not flexible enough. Now someone proposes to add another keyword to 99% of declarations to make java act in a similar to what some other languages do by default. Maybe you should just use another language if state (i.e. the standard way of programming in java) bothers you that much?

<comment><USER3>
      Maybe you should just use another language [..]

Believe me, I'm trying :)

</comment></comment></comment></comment><comment><USER5> Except newbie programmers should keep in mind that final is not simply synonymous with immutability.

      final ArrayList x = new ArrayList(); // x is final, so it can't be reassigned
      x.add( "foo" ); // but we can still modify its contents

<comment><USER6> The java.util.Collections class has several methods for making collection objects immutable. I use those whenever possible. Of course that only prevents changes to the collection, it doesn't prevent changes to individual collection elements.

[http://java.sun.com/javase/6/docs/api/java/util/Collections....](http://java.sun.com/javase/6/docs/api/java/util/Collections.html)

<comment><USER7> It's worth noting that this doesn't actually provide an immutable collection, it provides an immutable view of an existing one. If some other code has a reference to the underlying collection it can still be mutated. However this works well for the common case where you have a method which creates a local collection and returns the immutable view - in that case the collection is effectively immutable.

</comment></comment></comment><comment><USER8> It's a poor substitute for C++'s const though - at least that lets you reason about the state of an object. Java's final keyword just stops you reassigning a reference - how many times do you inadvertently do that?

<comment><USER9> The point here is that if final functioned like const, you wouldn't be able to advocate 'using it everywhere' like he is.

</comment></comment><comment><USER7> This article fails to mention the main benefit of final - it gives you much stricter guarantees for concurrency under the Java Memory Model. If you create an immutable object and the fields are final, you can immediately pass the object to another thread without synchronisation - this is not safe if the fields are not final but are otherwise immutable.

For this reason we enforce that all object member fields must be final if possible, but we don't enforce it for local variables or method parameters. There are benefits to be had by doing that as well but IMO the benefit outweighs the return (and our IDE, IntelliJ, warns us if we reuse a local variable or method parameter).

</comment><comment><USER10> Want to succeed? Try failing...

SCNR...

Seriously, though, I've come to think of Java as "fear driven development".

<comment><USER3> Someone advocates less mutability and instead of applauding that, you start scoffing Java. Is Lisp a fearful language?

<comment><USER10> It's not really the mutability I don't like about Java anymore. I don't have enough experience with immutability, except for doing some Project Euler problems in Erlang. There I kind of hit a wall trying to compute primes efficiently (the seave was not possible with immutable lists).

</comment></comment></comment><comment><USER11> The very first code snippet is NOT valid Java and yet the author claims decades of programming experience (about page). He also seems to have very recently discovered the side-effects of imperative programming.

</comment><comment><USER12> I'll agree that all variables _should_ be final. However, you're applying a functional constraint (that most functional languages provide workarounds for) to an imperative language. I just don't feel it's reasonable to expect a java programmer to obey rules that languages like ocaml don't even enforce 100%.

</comment><comment><USER13> This is a great philosophy, but I'd hesitate to say "all" variables; sometimes it just doesn't work out.

ex, in class definition:

      final int foo;

In constructor:

      try {
        foo = 1;
      } catch ( Exception e ) {
        foo = 2;
      }

<comment><USER14> If your try{} catch{} blocks were expressions, not statements, you could write

      foo = try { 1 } catch(Exception e) { 2 }

much like the foo = bool ? 1 : 2 ternary if statement, versus the if() {} else {} clauses.

<comment><USER13> Wow, never knew one could do that.

<comment><USER6> You can't do that. It would require a language change, to make try/catch blocks expressions.

<comment><USER15> You can sort of do this in Groovy.

      def val = {try { 1 } catch(ex) { 2 }}.call()
      assert(1 == val)

</comment></comment></comment></comment></comment><comment><USER16> The final keyword in Java is great. It's probably the only design decision I think Java really got right compared to C# (sealed, readonly, const? bleh)

</comment><comment><USER3> As argued in, for instance, Hardcore Java[1], 'final' should definitely have been the default for variables in Java. My Eclipse 'on save' actions include making every possible local variable, parameter and field final. If I'm reading the code and one of them is not final, I know it requires some extra attention.

[1] <http://oreilly.com/catalog/9780596005689>

<comment><USER17> What is wrong with loops?

<comment><USER3> :). I didn't mean it like that. I meant that when I'm reading code, I know to pay extra attention when something is not final. There will always be non- final variables around, for instance 'previousItem' to track the previous item through a loop. Added some words to the parent to clarify.

</comment></comment></comment><comment><USER18> What about loop variables? Want to re-allocate them at each step?

<comment><USER19> Yes, please!

Signed, foldl</comment></comment>


Device pulls water from dry air, powered only by the sun - <AUTHOR> https://phys.org/news/2017-04-device-air-powered-sun.html <comment><USER2> Thunderf00t video in 3... 2... 1...

<comment><USER3> "This is a major breakthrough in the long-standing challenge of harvesting water from the air at low humidity"

It's not practical at high humity (with some exceptions) this is a bit warning sign.

</comment></comment><comment><USER4> I hope we live to see this thing producible for $2. Even if it works half as well, this would be a miracle device for the developing world.

Does anybody know the synthesization cost for MOFs? Wikipedia says "MOFs and zeolites are produced almost exclusively by hydrothermal or solvothermal techniques, where crystals are slowly grown from a hot solution." which sounds $expensive$.

</comment><comment><USER5> This is a "windtrap" right out of _Dune_. I'm curious how much the MOF costs, though.

</comment><comment><USER6> (Applauds headline author for avoiding use of "Moisture Vaporator")</comment>