SCREAMS CALLING FOR ELON MUSK TO FAIL ARE (MOSTLY) FROM THOSE WHO DON’T WANT TWITTER BE A BALANCED PLATFORM IN THE FIRST PLACE.
Buying a Company and Then Optimizing it Happens Every Day
Fact: Elon Musk is a billionaire who bought a company and is implementing a bold and, yes, messy plan to make it more valuable in the future.
Fact: Despite what shrieking headlines would hope you believe; this is NOT an uncommon or unusual situation.
Fact: We can swap “Elon Musk” with Carl Icahn or the name of any buyout or PE firm such as Carlyle, Blackstone or Bain.
In this case, Twitter is a very visible, and fully weaponized, social media communications platform that one side of the political spectrum wants to control via intimidation, ahem, just as they do other platforms (most of the time). The extraordinary diatribe you hear is not merely a response to a messy corporate reorg. There’s a volume-on-10 subtext in there that is all about drowning-out/cancelling the (any) opposing view.
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Let me set that aside for a moment and simply and look at what Elon Musk actually did at a basic business level:
Step 1: Musk believed, and stated publicly, that the company he bought was bloated with operating expenses. That it, excess employees and spending on projects and programs managed by those employees. In response, he planned and executed a massive layoff. Along the way, there were a few moments where they realized, “oh, wait, we want to keep that individual” and those individuals stayed if they wanted to.
Step 2: Following the layoff, Musk, an entrepreneur with multiple billion $ successes to his name (PayPal, Boring Company, Tesla/Solar City, SpaceX/Starlink and Neuralink) sends a message to the team: we are building “Twitter 2.0” and everyone is expected work like it’s a true startup. This means long hours racing against the clock to stay ahead of their own financial constraints and competitors who see opportunity in Twitter’s situation. Some employees, a lot of them in fact, didn’t like that and resigned. In effect these individuals were saying they would rather work for the more established, corporate form of Twitter featuring regular hours at a laid-back pace and generous a work from home policy, and a list of other cushy perquisites. Choosing to leave is the right of any employee and they exercised it.
Biz Doc’s Take: The above 2 steps are normal and happen every day below the waterline, without daily analysis in every single business AND regular news media outlet. As with the true size of an iceberg, or why our wife or girlfriend is upset, we just don’t see it. I am not surprised the regular news media was surprised and went off on Musk. I am surprised that certain business media has been so disingenuous in their coverage and commentary because they see this same situation play out every day as Private Equity firms buy companies and take them private.
Step 1 takes place all the time. Company “X” gets bought, the new owners implement some layoffs, bring in some new executives, and announce a refined vision. A few years later the buyers hope a more valuable version of the company emerges. This is happening at Twitter in the most visible public square of all time. Is Musk perfectly correct about the number of individuals that were laid off? Of course not, and accuracy isn’t the point. Going lean and reducing cash burn is the point. Since Twitter is no longer a publicly traded company, Musk has the luxury of taking this step without having to watch the stock price fluctuate, announce earnings reports, provide guidance to analysts covering the stock and watch what he says orTweets at every moment of the day (remember the “funding secured” Tweet about Tesla?).
Step 2 is not understood by individuals who work 9-5 jobs that do not require startup-levels of time commitment. A career step with a startup is not for the faint of heart as startups are not usually profitable for years, fail more than they succeed, and hang by an incredibly stressful thread as cash burns between uncertain capital raises. Startups are a young person’s game – before marriage and having kids complicates schedules and demands lower levels of career risk. I’ve given messages about working long hours and I’ve received those blunt messages as well. The world keeps spinning and competitors are coming! To many on the outside, it’s a shocking and undesirable picture of “a job,” but this is how the sausage is made in a startup… or massive restart owned and driven hard by a visionary billionaire.
You may be asking. what about the mess we see in the media? We see a bunch of changes ($8 blue check validation) or reports of slow servers and technology not working. Isn’t Musk is facing doom? No. There are those who laugh and make snarky headlines out of this misfortune and HOPE for his doom. To those of us who have built products and companies, however, these inconveniences and annoyances have names: bugs, data points, real-time feedback, optimization opportunities or “damn long weekends from hell.” All the foregoing is not only accepted, its expected by entrepreneurs and eagerly used to make products even better. Idea: perhaps we all should watch Musk for a moment and see how this plays out. Musk’s progress inside Twitter will not be impeded on media coverage. Did it happen at Tesla? Nope. Here’s a quick case study: Remember the battery fires, delayed deliveries, safety recalls, autopilot glitches? Tesla did not die, it got better. Today the Model S Plaid is a well-sorted 4-door luxury EV that recently set the record for 0-60 acceleration at 1.98 seconds. Yep, your Mom driving her $120K Tesla Plaid just edged the $750K Ferrari SPF90 Stradale on her left (2.0 seconds) and embarrassed the $4.0M Lambo Veneno on her right (2.8 seconds). Tesla’s success has influenced every other auto manufacturer on Earth and regardless of which EV you buy, no one can say Tesla ‘s market presence did not make your car better. With 1,498 Supercharger stations in the US today, and Tesla talking partnerships with other manufacturers, you will likely have the opportunity to recharge whatever EV you buy at a Tesla “gas station.”
I personally believe and envision a similar storyline will play out at Twitter: There will be more headlines predicting doom amidst introductions of new features, some replete with teething pains, and a peppering of controversies. In the middle of all of this there will be a march toward improvement, and eventually an IPO. I don’t ask that you believe me. I do ask that you objectively look at history and stop throwing shoes at your TV.
To wrap up my broader point about Tesla, I summarize the public facts this way: Musk (1) trimmed what he saw as fat and (2) boldly drew a line to ensure everyone who stays at Twitter is committed to his mission to get to Twitter 2.0. That’s it. All else is commentary opinion and diatribe.
It this messier organizationally than Musk envisioned? Maybe. But is it unexpected? Hell no. When he walked-in with a sink in his hands, the message “let that sink in” indicated he knew the fuse was lit.
Is it messier in the media than Musk thought it would be? I don’t think so. He is quite used to it and trolls the media, pundits and politicians with the best of them (Recall the tweet to Bernie Sanders: “I keep forgetting you are still alive”).
Does all of the public messiness matter in the long run? Not really. Twitter is not going to die and there are many banks and sovereign funds who are all too happy eager to make multi-billion $ bets on Musk’s track record. Further, my sense is those individuals who stay at Twitter and commit themselves to Twitter 2.0 are likely going to get equity/options which will payoff when Twitter re-emerges in the future as a public company. Let’s see how the new investors and those employees feel on that day – my bet: they will be “proud and paid.”
Many of you asked me to “give my take” and unpack situations as I do on my Case Studies. What do you think of this approach to that request? - Thank YOU for reading.