At Tesla and SpaceX, Elon Musk was dumb with great vision. On Twitter, he’s just an idiot.
Elon Musk has a very tried and true book of doing business – he’s used it for years to build companies from Tesla to SpaceX. Unfortunately for him, it’s not a model that can turn Twitter into a profitable business. It’s something that will kill the social media company.
Here’s Musk’s playbook: Enter a field with very little competition. Pretend that your new company will solve a huge global problem or achieve a seemingly impossible goal. Raising money from an enthusiastic group of true believers and keeping them at bay with flashy, half-baked product ideas. It sucks billions from the government. Pay less, undervalue, and burn out your employees. repeats.
Twitter is the antithesis of Elon Musk’s company. He is an influential but small player in a field dominated by giant, well-funded competitors. The government is more likely to put clamps on Twitter than to award it some unexpected contracts. And Twitter employees have options: They can leave and work for companies that treat them better than Musk ever could.
But perhaps more importantly, many people believe that Twitter — and Musk’s ownership of the company — is part of a global media problem, rather than a larger solution. Without a major world-changing promise to abandon his sophomore-year-old product ideas and erratic management, Musk’s acquisition of Twitter is doomed to fail.
Elon is trying to play the same rules of the game
Musk’s acquisition of Twitter sent a lot of shock to Pearl Bear, but if you’ve been paying attention to his business over the past decade, his brutal slash-and-burn approach isn’t surprising.
Take, for example, his harsh treatment of Twitter employees. To be sure, the stories coming out of the company’s San Francisco headquarters are ugly: thousands of workers being fired days before Thanksgiving, grueling work schedules that have left remaining employees sleeping in the office, and a general culture of fear and mistrust. His disrespect for his employees is annoying, but in all of his business ventures, Musk has proven to be a miserable boss. Tesla and SpaceX are known for their hardworking workplace cultures. SpaceX agreed to pay employees $4 million in 2016 as part of a settlement after they sued the company for failing to provide time off and adequate wages. Tesla factory workers have been intimidated by the company for trying to unionize, and as part of the union crackdown, workers at its California factory said in 2017 they were paid less than their union counterparts. Tesla has for years been under fire for safety violations at its factories, and has already been hit with lawsuits over its treatment of construction workers at its new plant in Texas. And of course, there’s the racism that Musk has refused to do anything about. A judge ruled in 2021 that Tesla must pay $137 million to a black man who was subjected to racial taunts while working as an elevator operator at the company’s factory in Fremont, California.
This chaotic management belies the goals Musk claims his companies are capable of achieving. For now, Musk is making big promises about what the future of Twitter will look like to get people on the platform: amazing video tools, 4,000-character tweets, a bunch of premium features, and an end to pesky bots. This kind of impressive product line is also standard for any Tesla presentation led by Musk. In 2019, he promised that the company would have “more than a million robo-taxis on the road” by next year. So far, Tesla has none. More than two years after receiving the initial orders, believers are still waiting for their e-trucks. Even products that are already materializing, like the Tesla Model 3, arrive years behind schedule. While it was being built, employees complained to me that Tesla’s lack of planning and testing in building the Model 3 line resulted in neglect and defects on the road.
In 2016, Musk used a bogus product launch to convince Tesla shareholders to take over SolarCity — a solar company that was led at the time by Musk’s cousin. Musk, his brother, and SpaceX were heavily invested in Solar City and were about to take it upon themselves as the once fast-growing company went bankrupt. In ensuing lawsuits, emails revealed that Musk staged a flashy launch of a solar roof tile product that didn’t exist, misleading Tesla shareholders about SolarCity’s prospects to convince them to take over the company and absorb its losses. SolarCity has been a headache for Musk and Tesla shareholders.
At earlier stops in his career, Musk’s theatrics punishing employees and urging producer pay have been successful. Customers seemed satisfied with what he gave them, and he was able to keep enough workers to eventually build cars, install solar panels, or launch his rockets into space. This made him, until recently, the richest man in the world. But with Twitter, that same behavior is already costing him. The social media company has key differences from his other properties that turn Musk’s strategies against him.
Come ye all believers ye
At the heart of every Musk company is a world-changing promise – they sell the idea that their products and services are saving humanity from some intractable problem, whether it’s a climate crisis or traffic. But Musk’s promises follow religion – he was sent to save us from our earthly sins of waste and pollution – more than science. Think about it for a bit and the idea that a luxury sports car can save us from global warming or that the answer to poisoning the Earth is to get everyone to Mars, but that’s not the point. The point of all these myths is to turn investors, employees, and customers into evangelists.
This is how Musk manages to keep employees at bay despite miserable conditions: They’re made to feel like they’re saving the world. You can see how this won’t work the same way on Twitter. Its employees have joined a company with values very different from Musk’s so-called “tyranny of free speech.” They’re used to a pre-“hardcore” culture where they can have personal days (the horror!) instead of sitting through night meetings or succumbing to the CEO’s random whims. And if they want to stay in the industry, they have options: The broader job market remains strong, and as my colleague Aki Ito reports, many laid-off tech workers have no problem finding new jobs, and some are earning higher salaries than their previous stations. . Even at Tesla — where he was most relentless about myth-making — this grueling pace led to unusually high employee turnover, especially for employees who had to deal with Musk regularly. A former senior staffer told me that the cultural shift when Musk took over at Tesla was like when Voldemort’s Death Eaters took over the halls of Hogwarts. Don’t be surprised if more Twitter employees head to the exits.
For Musk, having a mission is key, because having a mission attracts money. It allows him to deal with governments that are more than willing to outsource their intractable problems. Despite his complaints about government subsidies, Musk’s companies are counting on them. A Los Angeles Times review in 2015 revealed that he had secured over $4 billion in government funding at that point. Since then, Tesla has received billions in government-created regulatory credits from combustion engine companies, more than $1 billion in tax breaks and grants to build more factories in Nevada and New York, contracts worth billions to SpaceX, and even a payroll benefit from the pandemic stimulus law. Even his most popular ideas drained government funds. According to a Wall Street Journal investigation, The Boring Company, Musk’s tunnel-based solution for urban traffic, is trying to collect government subsidies across the country (and in Canada) despite only building one tunnel, in Las Vegas.
Selling the dream is what has turned Tesla stock into a star since it went public. People bought Tesla to be part of Musk’s mission. It didn’t matter that the company only became profitable last year, or that it had an unreliable lineup of cars, or that more well-known automakers were about to catch up with their technology. Any journalist or investor who questioned Musk or his assignment then – as now – was subject to bullying and harassment. Evangelicals, believers, have made Tesla the most valuable auto company in the world (for now) based on how Musk said it would change the future. Call me sarcastic, but I don’t see that happening on Twitter. Musk may claim that he bought the company in the name of freedom of speech all he wanted, but unlike his other ventures, he simply doesn’t have enough people — be it the media, his customers, employees, or users — who he believes.
no time to waste
Musk’s company is usually the first, and sometimes the only, company in a given market. Tesla has, for most of its existence, been the most attractive choice for high-end electric vehicles. SpaceX has little competition when it comes to delivering payloads into space. Doing business in an area without competitors (and with generous investors) creates room for testing new technologies, and sometimes failing at them. Musk tried to create a car factory without human workers, and ended up wasting billions of dollars in useless robots when it didn’t work (just as industry experts told him it wouldn’t work). To make up for lost time and space, Tesla ended up setting up a human-run manufacturing line in a tent outside its California factory.
There won’t be much time for these monkeys on Twitter. I probably don’t need to tell you that it’s not at the top of the social media click rank. The company — which gets more than 90% of its revenue from advertising — has been squeezed by big rivals like Facebook and Google and pushed by newer, hotter platforms like TikTok. In other words, advertisers don’t need Twitter if they want to reach people. Revenue is shrinking, but Twitter still has to pay $1.3 billion in debt annually for its leveraged buyout. Twitter has never made $1.3 billion a year, and Musk has never run a company in that position. In the past, he’s had time — and money from investors — to burn. Even with all these advantages, Tesla nearly went bankrupt in 2018.
Musk’s house has never survived an economic downturn. Tesla and SpaceX both rode decade-long economic boom cycles with interest rates set at zero to get a foothold today. Now that the economy is starting to slow down, debt is becoming more expensive, and money is becoming scarcer. To pay Twitter’s bills, Musk will likely sell some of his most liquid assets – Tesla shares. The stock has fallen by half this year, and the growth prospects for tech stocks are getting worse next year as the Fed continues to raise interest rates. Demand is weakening in China, which is a huge market for Tesla, and the company’s brand is taking a hit as a result of all of Musk’s actions on social media. To deal with these headwinds, any competent CEO needs to have a plan. Based on his recent quarterly investor calls — the ones in which he’s supposed to talk about plans to make more money — Musk doesn’t have one.
There is no pivot where Musk suddenly gets serious and starts behaving like a normal CEO. The frantic, ruthless, thought-from-the-hell boss you see on Twitter is the one people are really getting in Musk’s world. It has always been this way. Somehow, during a bull market, in a decade when technology was on top of the world and he was the king of it – this approach worked. Now you won’t.
Lynette Lopez is a senior correspondent for Insider.
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