Perhaps Twitter is becoming the golden example of how not to run a business?
Elon basically started with the Private Equity leveraged buyout playbook - borrow money to buy a business, then assign that business the debt used to buy it.
But it’s unclear how he’s going to do part 2, which is to either suck enough value out of it to recoup the purchase price before it fails completely, or turn it around and make it more valuable than when he bought it.
Right now Twitter needs to drastically increase its revenue and decrease its expenses just to service the new debt load. Hence Elon firing everyone and trying to charge more for every little thing.
It’s amazing that Twitter was more or less self-sustaining prior to this, and now it’s not.
He's proven himself thin skinned, egotistical, and capricious, and is easy to provoke into vindictive & retributive actions even if not in his best interests.
I think a big part of why he bought twitter was a sense of grievance, basically that the wrong people were getting positive attention, that people were being mean to and making fun of him and his friends & allies. He wanted to restructure the mechanics and incentives of the platform to better support the people and outcomes he values.
I'm not sure whether he succeeded by these terms either, it's still too early to tell I think. But I do think it's an important factor in evaluating whether he succeeded in what he set out to do when buying twitter.
And from that perspective "make it good or (let it) die trying" may be an acceptable compromise. He doesn't get the musk-adoration platform he wants, but at least there is no longer the musk-ridicule platform he perceived it to be.
The board called his bluff and said "sold!", then Musk spent a great deal of time and effort trying to wiggle out of the deal. He failed, and now he's stuck with it.
Everything he's doing now is trying to minimize the amount of financial damage this debacle will cause him.
It's true though that if it loses a bucket of money and he never wanted it in the first place he might not consider it as successful as I'm guessing. We can't know his mind, but thinking of it in this way explains a lot of his behavior around twitter that is difficult or impossible to explain from a pure financial standpoint, so I'm going to stick with it for now.
In any case, I suspect that the GP comment by giraffe_lady, explains why he was interested in Twitter at all -- why bothering trying to get leverage over the board.
Or, if he wants to eventually become the President of the US, then that's an alternative explanation (of why he cared)?
That would require a constitutional amendment in order for him to be eligible. He’s revealed himself to be pretty dumb, but even I give him enough credit to not be so stupid as to think he will one day he President.
There's very little doubt in my mind. The bot thing was always just rhetorical. he didn't suddenly "discover" something he wasn't already well aware of.
Yes. This has been covered widely and was a key reason he had to follow through with the purchase. The bot thing was an attempt to get out of buying Twitter, not something he actually believed. You need to realize that he's like Trump: lying is kind of beside the point. He'll say whatever he thinks will get him what he wants, which ultimately public adulation, however hollow that is.
He didn't just "pitch" it, he made a buyout offer with all the attendant SEC filings. Not the sort of thing you can accidentally do with a slip of the tongue!
Is this really a good assumption for a guy who has started so many successful companies?
The only companies he actually founded was SpaceX, and Boring if that even counts.
Plus it's not at all clear how much credit he should get for the companies he invested in, aside from being a good fundraiser and hype man. There are plenty of stories about employees having to manage him to avoid him stepping on critical work.
And you don't have to understand contract law to start a company (or in the majority of Musk's cases, invest in an existing company), that's what lawyers are for.
If your name is Elon Musk, you may convince yourself you can walk away unscathed, or with only a slap on the wrist (see the many SEC encounters).
He's got a business idea for Twitter, which is to turn it into "X", the everything app he originally wanted Paypal to be 20yrs ago. Basically a US version of WeChat.
But it will be a steep climb from here, with a skeleton engineering crew that needs to both maintain current Twitter and build new X, and the debt service draining money and constraining hiring.
I do think there are long term-issues with laying off that many employees, but clearly the "if you fire all these engineers the service is going to collapse and stop working" doomsaying was unfounded.
[0] https://www.vanityfair.com/news/2023/03/big-tech-layoffs-202...
The way this pans out is that in the short term, nothing much happens except deadlines start to get pushed out. As time goes on everything becomes more and more dysfunctional. All progress grinds to a halt; simply treading water created by ongoing churn and operational needs ends up becoming impossible. Next the business tries to get more and more out of the remaining staff until they get fed up with it and leave. Shortly before the wheels really come off, legal and compliance issues will suddenly start ballooning. That's where we are now. Nobody wants to work on these kind of projects -- they do nothing for your career and nobody will celebrate your work -- but they are not optional. Elon seems to have decided simply not to comply with laws he dislikes in regulatory environments where he thinks he can get away with it. This can work for a while, but companies with no internal governance and that regularly flout laws can don't tend to last for too long without making painful changes. Let's see how it turns out. Given the reported state of the company it sounds like he has about a year to figure it out.
Despite all the firings, Twitter's financials are worst than pre-acquisition. How comes? Advertisers pulling out. Why? Firing abuse and content moderation teams meant there was a lot more unsavory spam on the platform and advertisers didn't want any of it near their brand. Remember the Twitter Blue two days of spam?
Not only that, but it's been leaked that Twitter is trying hard to recruit some laid-off employees with huge comp packages. Without a lot of success.
Advertising revenue for Meta and Google has also tanked to the tune of 30-50% of their stock value, so it's disingenuous to link Twitter's ad revenue woes directly to any increase in spam (which is in and of itself an unsourced claim).
[0] https://www.businessinsider.com/twitter-lost-half-top-advert...
[1] https://www.vox.com/recode/2022/11/4/23438917/twitter-verifi...
Unless targeting has wildly changed, that doesn’t seem to be the case (have things “settled down”, even?) None of the major brands that I used to get ads from regularly are hitting me with ads at all now, and most of the ads I see are for the same type of places I was seeing just after the major backouts.
No comment on the other half.
Just reading Trump and Musk's tweets will tell you plenty with zero bias. And indeed, this is how you can tell that Trump is legitimately a fool and Musk is simultaneously whimsical and stubborn.
This does not mean there isn't also an extra bit of anti-Musk/Trump stuff piled on top (in Musk's case the stuff about him inheriting an Emerald mine and lying about his child dying in his arms and in Trump's case the stuff about him being a big anti-LGBT guy).
> This does not mean there isn't also an extra bit of anti-Musk/Trump stuff piled on top (in Musk's case the stuff about him inheriting an Emerald mine and lying about his child dying in his arms
I guess you're implying the emerald mine stuff is false? Or are you saying it's not a big deal? And re: the child dying in his arms, the media is quoting his wife, who said he's lying. Are they to just ignore a story like that?
On the rest:
He did not inherit an Emerald mine and no reliable source has alleged he did, nor that his father even owned any part in the mine after the 90s, nor are there any reliable sources stating that Musk's father monetarily helped him in business other than a $28k loan he paid back. Heck, they even failed at doing a quick Google to figure out how much a pocket full of uncut emeralds actually goes for (a few hundred dollaras). And yet he's often portrayed as a trust fund kid who was given millions and never worked a day in his life.
On the child dying, neither his wife nor he lied: https://twitter.com/justinemusk/status/1595539044217552896
The baby death rattled in her arms but he felt the last heartbeat.
When journalists dislike you they will knowingly propagate misleading distortions and myths and will never correct inaccuracies that went against you or promote facts that are in your favour.
[1] https://communities-dominate.blogs.com/brands/2011/08/coinin...
[2] https://www.macrotrends.net/stocks/charts/NOK/nokia/market-c...
Or worse, imagine if Twitter continues to plummet as we currently see it, then business schools decide to write history as if it were a success story anyways.
[edit] he actually said ‘total crap’ and lost £500m.
Twitter is unique in that it was acquired for US$ 44B when it was a business that lost huge amounts of money consistently for years, and the owner intended it to have it run old school style, as in making a profit, but also doing so in such short notice that he dismantled entire branches of the company wholesale.
Obviously for people relying on pre-existing services and rates from Twitter, it sucks.
But the root problem is that Twitter had not been a sustainable business for a long, long time. One has to wonder how did they even subsist for so long and how much institutional money, not just VC/investor money, and who knows what sort of government/agencies pay-to-play deals made it even possible because the sort of money they cashed in during the only few years they've even been profitable seems absurdly high and they have never replicated that under normal circumstances.
With the ad model struggling and institutional ads sort of in retreat, the entire sector is struggling.
You are also 100% correct. As revenues fell at snap just like twitter, and easy money has dried up at all VCs creating a completely different market environment. Just look at stocks of small cap tech companies too, which Twitter was.
The only extra nuance to add is that without fines Twitter was actually profitable before musk bought it, but in the current market environment it certainly wouldn’t be even without musks leadership.
But of course blaming musk is what gets upvotes.
Twitter generated $5 billion revenue in 2021, a 35% increase on 2020 figures and a significant improvement on the 8% and 13% increase the two years before.
Cut backs were needed, as advertising revenue would have been significantly down this year, given the economic down turn. However, there was no need to gut the company to make it profitable.
I mean, you are both claiming cuts were needed and they’re too much. So how much was right? How do you know? You’d do a better job than the people who have access to the numbers? That’s a fairly arrogant position
Twitter seems to have a serious cultural problem at the moment, and that is generally a lot harder to fix than to rehire when the growth curve inverses.
I am sure Musk had to cut by 50%, if only because Twitter's interest payments are now significant. However, that does bring significant challenges.
Edit: my suspicion is that Elon expected the Twitter board to rebuff him, and he'd walk away calling them names for the rest of his days - and then the market dropped, removing resistance from the board (if any existed). This was capped off with Delaware courts showing every sign of muscular oversight of contract law, with Twitter reveling at the chance of embarrassing Musk and people in his orbit and getting bought off at a now-overpriced amount. It was a perfect storm.
The GP misspelt “bought” as “bough.” I thought a pun would be a fun way to point that out. I was wrong.
FYI: I chuckled a after reading your follow-up comment.
https://i.imgur.com/Gea8HRr.png
clearly Twitter was way, way too fat when it managed to lose US$1B with record revenue
which I'm not saying it means you should just close down core branches of the service, of course
perhaps Musk wasn't ready for the amounts of money Twitter required to be made profitable under a reasonable timeline
Twitter could have easily be turned into a profitable business by cutting 15%, rather than 50% of staff.
There was a need and it was going to happen anyway. Clearly slashing headcount earlier even without Elon, would have easily made it even more profitable.
Their mistake was that they didn't do it earlier enough. It just took Elon to do it for them. 7K headcount wasn't sustainable regardless and a 50% - 60% cut in staff makes sense for Twitter.
In any case, from my perspective Twitter didn't really make serious mistakes. They got $44B for the company despite its issues.
The value in Twitter is its network effect, social inertia and integrations in hundreds of thousands of websites, blogs, apps and APIs with 220M+ daily active users still using it every day.
Recreating that from scratch makes absolutely no sense. There is no serious alternative to Twitter and it is better to buy it instead of building it all over again.
> In any case, from my perspective Twitter didn't really make serious mistakes.
Twitter clearly over-hired like the rest of the tech companies and was wasting millions a day. It is either the mounting costs would get them in the end or someone else would reverse that downward trend to insolvency.
Drastic action was the appropriate method to stem the losses.
Twitter has only made a profit in 2 out of the last 11 years
https://www.wolframalpha.com/input?i=twitter+profits+per+yea...
Musk has been very upfront that Twitter is bleeding money (hence why he is firing so many people), it's not simply that a healthy profit margin is being reinvested.
That means that Elon Musk's Twitter Buyout costs $1.3 Billion/year _ON TOP_ of all the other costs of Twitter.
If Twitter was "barely profitable" in 2021, they're now $Billion+ short / year. That has nothing to do with "old Twitter" decisions, and 100% to do with how Elon Musk structured the buyout.
Presumably, you're supposed to assume that Musk knows what he's doing and that he has a plan to make $1.3 Billion in profits (to break even on the loan) and then go beyond (to make profit on his $44 Billion investment). But... I'm honestly not seeing it.
The downturn in early 2022 hit them badly. They were losing money again when Elon bought them (one of the reasons he tried to pull out of the deal)
Admittedly the way he structured his buy out made it worse by adding more debt.
[1] https://www.consultantsmind.com/2018/03/04/choosing-stocks/
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I wonder how he rates his own perfomance.
Twitter on the other hand, is a company dealing with sociological/societal challenges, being that it's a social network. That takes an entirely different kind of skill set to do well as a CEO for.
Either way, he's essentially abdicated his CEO role at both companies, and his chaotic management style is on full display now, which confirms the Tesla and SpaceX reports. But why did Tesla and SpaceX thrive where Twitter is failing? Because the former companies grew up to create processes that contain Musk; whereas Twitter was bought outright, so his blast radius is unlimited there. Twitter has no Musk immune response.
At SpaceX when Musk suggests X, where X is... I dunno, an really dumb idea that no one would ever want, the people at SpaceX know how to redirect Musk until he drops it, or they know how to shape it into a good idea. At Twitter, they have no idea how to do this, and so Musk always gets his way, every time. All the people with the skills to turn bad ideas into good ones have left, all the people who tried to manage Musk were fired, so now he's left to his whims. And it shows.
If anything, Musk has proven how ceremonial the CEO role is. He has the title CEO of at least 4 companies, and claims 80 hours per week is a full time role. So at best CEO is a part time job.
I think the thing about CEO is that you can delegate not just the things you probably shouldn't personally be doing, but also the things you should.
I'd believe that some CEOs have a real job, but it's pretty clear that a lot have delegated it away to nearly nothing.
Also, he can't be effective at 3 of the companies since he's not physically in the office at each. It's impossible to do a good job while remote, as we all know.
[0] https://twitter.com/TwitterDev/status/1641222782594990080
As for brand-focused advertisers, I can see parallels to 2017's "YouTube Adpocalypse" in which advertisers paused their spending due to their ads being displayed before videos containing offensive content. They recovered from it by demonitizing offensive content. Twitter will have to address "brand safety" concerns, however,
[0] https://www.wsj.com/articles/have-the-ads-in-your-twitter-fe...
Could it happen? Certainly. Will it happen the way he says it will? Probably not.
My company advertises on Twitter, because they gave us an 80% discount to keep advertising on Twitter after we started shifting more spend to other sites last fall. We haven't actually paid Twitter yet; they keep sending emails but we figured we'd just pull an Elon and wait until they actually got serious about collecting. It helps that our account reps keep getting laid off.
Notably, Elon Musk contradicted that interview a number of times internally, noting that Twitter is still deeply in the red. So he was either lying in that interview or he was lying to his minority investors.
That's supposedly what tech people root for, but because its Elon Musk, who eschews many of the shibboleths of the Left, people criticise Twitter as a proxy for his political views.
... if he didn't start by putting $12.5 billions of debt on the balance sheet after the buyout.
Which means that Twitter has to pay $1 billion of interest each year which it didn't have to do before that hostile takeover.
How many people would need to buy Twitter Blue to offset the interest alone? ~~125 million users which is about a third of its whole active user base~~ 10 million which is about 3% of their active user base (I can't do maths, thanks supermatt, luckily I'm good looking and can program).
In a way, this is Elon buying a newspaper like rich people always did to influence politics, except that he is buying a modern version of a newspaper.
Musk bought twitter because it is and was an integral part in social media campaigns for the last few elections. Targeted ads on twitter can reach journalists and politicians, their timelines "for you" controlled by Elon's and they might not even understand that they are being nudged by the content shown in the app. Heck, just by unbanning Trump and allowing MFA Russia on the app, he is moving the Overton window a bit.
The proof is in the pudding as they say. How many million people now see Elon Musks personal twitter posts, that did not see them before he bought twitter?
I say that in the most polite way possible: you Americans have a lot of internal issues you need to sort out, and quickly. You're polluting the rest of the world with your party politics.
I sometimes hear people conflating "the left" and "liberals" when... the left is here opposed to liberalism. Because liberalism means economic liberalism. And the local economic liberals are socially conservative. While the left is economically illiberal, and socially progressive. And our centrists are probably the closest thing we have to the US left, but since they are mostly allied with the right opposing them makes no sense.
But the actual, real reality is that 80%+ of people can't be measured in such a one-dimensional way. People have more nuance than that, and to get even a remotely accurate sense of where someone is politically requires a multipolar yardstick.
We see this from all sides from the liberals and the conservatives. What's ironic is both sides see the other side as doing it not them!
Originally from 1964 https://harpers.org/archive/1964/11/the-paranoid-style-in-am... https://news.ycombinator.com/item?id=24964931
e.g Applied selectively to 2022: https://blogs.lse.ac.uk/usappblog/2022/01/26/how-the-paranoi...
This has been a thing in the US since before we were the US. The south vs. north and urban vs. rural divide has deeply affected the entire fabric of the US down to the 3/5ths compromise in the Constitution to placate the southern states to ratify the Constitution in the first place.
Don't forget that time in the 1860's when literally half the country tried to leave as well. This is nothing new, it's just that the rest of the world can see it in real time nowadays (and much more of them speak English) when that was not possible previously unless you were a real international policy wonk.
I'd argue Musk himself has fallen prey to this partisan politics - it is really hard to support a large part of his tweets these days. He seems to have fallen into some strange mental quagmire with the failure of his twitter buyout, and his ego is not letting him accept any other reason for it than partisan sabotage.
But the way he is portrayed in the aggregate here and on reddit is even worse. He is either a genius beyond any criticism, or a complete fool, was always a fool and twitter is now exposing that.
We can't simply accept any middle ground, which is that he is likely a flawed human being who did some pretty amazing things once upon a time. If anything I hope we can steer him back to moonshot ideas, because he had a talent for it.
TBH it seems clear to me that he is a closeted libertarian who can't safely express his views in full without alienating huge segments of his mostly-red autoworker base or his mostly-blue techworker base.
It's a difficult tightrope to walk in the current ongoing partisan culture brawl.
However, it's important to note that there has been a genuine and very significant polarization of actual American politics over the past ~30-40 years—the seeds were planted with the Reagan presidency, and then Newt Gingrich in the early '90s started pushing the idea that political wins were more important than governing.
It's also important to note that this has been driven primarily by the rapid rush of the Republican Party to the right, from a conservative party with some fairly serious problems with racism, but a willingness to compromise and an understanding of governance, to a radical reactionary party refusing to censure or otherwise rein in the parts of it that are, in some cases, openly and explicitly embracing (christo-)fascism and Nazism, and advocating for outright violence against marginalized people.
I could not agree more. It's just hard to see how to move toward this goal.
First? No. There have been many attempts at this. The ActivityPub fediverse is the first with any prospect of competing with the VC-funded model. Thousands of servers, all but a few funded entirely by the millions of people who use them.
It's already self-sustaining. Twitter's new era is starting out billions in debt with its advertising base gone and flailing attempts to find some way to even cover the debt service.
Won't be first. There was app.net [1]. Gained traction at first and i had nice dialogues with good people, but died out pretty fast.
If I pay for a social network, I want quality content and API access. Twitter wouldn't be the first platform I would pay for.
Some probably do, but a whole lot don't. Musk was heavily criticized well before people were aware of his political views, for reasons that have nothing whatsoever to do with his political views.
https://www.wsj.com/articles/twitter-offers-new-equity-grant...
The company has lost over half its value in just 5 months.
Even as bad as the stock market was last year, very few companies lost 50%+ of their value.
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There's a lot of other decisions that are very strange coming out of Tesla, such as the removal of RADAR and Ultrasonic Sensors. Does Elon Musk really believe he can compete against next-generation companies when he's removing sensors from his cars?
Radar is back by the way, with an increased resolution that makes it more useful in highways where overhead signs false positive as a collision risk on the old sensor.
The ultrasonic sensors IMO were basically worthless. Initial analysis of the new v4 FSD hardware indicates they are adding more cameras - including bumper cameras to cover blind spots that previously would have relied on ultrasonics.
It doesn’t seem like HW4 can be retrofit like HW3 was, so it will be very interesting how that all plays out!
https://www.teslarati.com/tesla-hardware-4-hd-radar-first-lo...
https://mobile.twitter.com/greentheonly/status/1625905220432...
There is a huge difference between 55% drop that Mr Musk has experienced with Twitter, and the 30% drop you're talking about.
EDIT: > from March to June of last year
That seems like a weird comparison? An apples-to-apples benchmark would be the Nasdaq 100 from November last year (when Musk finished buying Twitter) to March this year.
Note that Twitter has a $13 Billion loan with $1.3 Billion/year in interest payments in a rising interest rate economy while VC banks like SIVB are failing. That means to buy Twitter at $20B valuation, the VC firm would need to spend $33 Billion. ($20 B valuation + $13 Billion loan)
I honestly don't see this company having enough runway to even reach the $1.3 Billion/year interest payment, let alone the rest of it's liabilities or costs.
This Twitter saga is more like his PayPal days when he sent the company into a nosedive with bad management.
Hardly golden examples of how to run business.
I'm not saying Elon is doing a good job, all signs point to the opposite. He probably though so too when he announced to step down from CEO (though that has yet to happen). But if he was doing a good job, it would also be really hard to tell in this phase. I don't think we are far enough into this to draw any good conclusions.
Losing nearly half of revenue in only a few months, adding crippling debt payments, stiffing employees on their severance, refusing to pay rent and other services, plus countless other debacles make it clear this is a dysfunctional company. Network effects and resilient architecture can keep a company humming along for some time despite incompetent management, but those resources will get depleted and they are hard to regain.