Nobel Laureate Paul Krugman Says Tesla And Bitcoin Have A Lot In Common

Krugman said investors fell in love with the perception of a "brilliant and cool" innovator.

"It’s hard to see what would give Tesla a long-term lock on the electric vehicle business," Krugman said.

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Paul Krugman, the American Nobel Prize-winning economist, has said that the electric car-manufacturerTesla has more in common with Bitcoin than people think. Elaborating on his point, he said Tesla sales have been dependent on the narrative that CEO Elon Musk is a "cool guy." He further added that the price of Bitcoin is "being sustained by a hard-core group of true believers." In 2008, Krugman was awarded the Sveriges Riksbank Prize in Economic Science in Memory of Alfred Nobel for his analytical perspective on trade patterns and the location of economic activity.

According to a report by Bitcoin.com, Krugman compared Tesla and Bitcoin in an opinion piece published in The New York Times this week. He said, "Tesla and Bitcoin may have more in common than you think."

The economist went on to explain that big firms such as Apple, Microsoft, and Amazon have maintained their dominant position in the industry as they all "benefit from strong network externalities — loosely speaking, everyone uses their products because everyone else uses their products." However, he commented, "It’s hard to see what would give Tesla a long-term lock on the electric vehicle business."

Not just that, he also wondered where were the powerful network externalities in the electric vehicle business. Adding to this, he said, "Electric vehicle production just doesn’t look like a network externality business."

Among multiple other points about Tesla, he said, "It’s hard to explain the huge valuation the market put on Tesla before the [price] drop or even its current value."

Krugman explained the reasons for Tesla's enormous worth. He said, "Investors fell in love with a storyline about a brilliant, cool innovator, despite the absence of a good argument about how this guy, even if he really was who he appeared to be, could found a long-lived money machine." Tesla's sales and success have largely depended on the perception that Musk is a "cool guy."

He also compared the electric car manufacturing company with the world's first cryptocurrency, Bitcoin. While drawing a comparison between the two, he said, "Despite years of effort, nobody has yet managed to find any serious use for cryptocurrency other than money laundering. But prices nonetheless soared on the hype, and are still being sustained by a hard-core group of true believers."

He stated that both these entities have something similar. However, Tesla makes some useful things.

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