Since I’m on the topic of Max Weber, religion and technology already, here’s a half-developed theory of Elon Musk that I’ve been nurturing for a while. I’ve trotted it out informally at a couple of meetings, and I’m not completely convinced it is right, but it’s prima facie plausible, and I’ve gotten some entertainment from it. My argument is that Musk is doing such a terrible job as Twitter CEO because he is a cult leader trying to manage a church hierarchy. Relatedly – one of SV’s culture problems right now is that it has a lot of cult leaders who hate the dull routinization of everyday life, and desperately want to return to the age of charisma.
The underlying idea is straightforward, and is stolen directly from Max Weber – see this handy Weber on religion listicle for the background. Weber thinks that many of the stresses and strains of religion come from the vexed relationship between the prophet and the priest.
Prophets look to found religions, or radically reform them, root and branch. They rely on charismatic authority. They inspire the belief that they have a divine mandate. Prophets are something more than human, so that some spiritual quality infuses every word and every action. To judge them as you judge ordinary human beings is to commit a category error. Prophets inspire cults – groups of zealous followers who commit themselves, body and soul to the cause. Prophets who are good, lucky, or both can reshape the world.
The problem with prophecy is that ecstatic cults don’t scale. If you want your divine revelation to do more than rage through the population like a rapid viral contagion and die out just as quickly, you need all the dull stuff. Organization. Rules. All the excitement – the arbitrariness; the sense that reality itself is yielding to your will – drains into abstruse theological debates, fights over who gets the bishopric, and endless, arid arguments over how best to raise the tithes that the organization needs to survive.
Weber calls this the “routinization of charisma.” Religion becomes a matter not for prophets, but priests – specialized administrators of the divine, who are less about ripping up rule books than writing and enforcing them. Prophets unsurprisingly, hate this transformation into mundanity.
If you’ve followed Silicon Valley at all over the last two decades, you barely need to read the rest of this article. The parallels between founders and prophets are very obvious, as are the cultish aspects of Silicon Valley itself. It really does have the flavor of a millenarian religion, with all the fervor, reforming zeal and hagiomachy you could ask for. Not just snake-oil, but quarrelsome snake handlers.
This in turn helps explain (a) why Musk is doing such a terrible job, and (b) why he appeared to have so much initial support from other Silicon Valley founders, as well as venture capital evangelists.
Looked at objectively, Musk was very good at the prophet stuff for a long time. Inspiring belief in his unique, quasi-divine genius? Check. Getting Stakhanovite levels of effort from his devoted cadre of higher servants? Check. Inducing others to believe that his arbitrary shifts in policy were the product of inspiration rather than peevish frenzy? Check. Inspiring adulation from millions of adoring followers? Check. In fairness, this may not have been all. There are a lot of would-be prophets and few succeed. I have heard from SV funders that he was far better than most of his peers at thinking through the necessary steps to achieve his goals.
But prophecy only goes so far, even when it is well executed. Good prophets know how to inspire the zeal of the faithful. They don’t necessarily have the social and political nous to deal with unbelievers, or to reach grudging but necessary accommodations with them. Often, indeed, disagreement is treated as being tantamount to heresy. Nor are prophets good at working with routines, which are antithetical both to their self image and their style of operation.
And that helps us understand why Musk has been such a disaster for Twitter. He does not deal well with people who don’t worship him. As prophets do, he takes everything personally, and has no particular understanding, nor inclination to understand, the institutionalized forms through which big industrial societies sublimate disagreement and conflict. When government agencies tell him he can’t say random shit as CEO that affects the trade price, he doesn’t want to hear it. When a government lawyer rejects his divine authority by deposing him as though he were a normal CEO, he later tries to get the lawyer fired, threatening to stop working with the law firm that employs him, and delivers on his threat. When Twitter’s rules prevent Musk retaliating against this or that enemy of the moment, the rules are changed by fiat.
The creation of routine; the maintenance of expectations; the building of steady and predictable relationships. All these things are antithetical to his operating style. But they are part of the ordinary process of doing business, and of managing a vast operation that has vast numbers of users, most of whom don’t belong to his cult (characteristically, he gets the algorithms rejiggered so that they are repeatedly exposed to his divine effulgence, whether they want it or not). Most of the advertisers that Twitter has relied on are businesses run by priests. They want orderliness. But Musk keeps on doubling down on his divine authority to do what seems good to him right now. He is a prophet, and that is what prophets do.
Furthermore – my theory goes – this is one part of the explanation for why so many of his fellow founders cheered Musk on. They too are disillusioned prophets. Once, they believed that software would eat the world. They’d ride their sandworms from the desert through the shield to their own glory and the despair of their enemies, smash everything up, and create a galactic empire of inspiration and awesomeness. Instead, they found themselves managing self-ramifying and self-perpetuating empires of bureaucracy, submerged beneath memos and trivial decisions, and worst of all, dealing with fucking HR and surly and subordinate employees who didn’t share their values, nor seem nearly as worshipful as they ought to be.
There is a lot more to Silicon Valley workplace politics than this, but I would guess that these kinds of resentments among leaders play a fairly significant role. What they are now doing isn’t what they thought they were signing up for.
So when Musk swoops in, buys a big company that is notoriously badly managed, and promises to cut away the bureaucracy, make the big necessary decisions, and show the world what a real Silicon Valley CEO looks like, is it any wonder that his fellow founders, and their hangers-on and financiers were cheering? Rip out the routinization, and let all that raw charismatic magnificence do its thing, just like they thought it would when they were in their twenties.
Of course, it turns out that propheting is a terrible business model at scale. Weber indeed suggests that there is something fundamentally immature about those can’t accept the complexities of a routinized world and deal with them. The story of Twitter’s aging boy-king (and he does, somehow, seem creepily boyish beneath the wrinkles), is in part one of the inadequacies of the cult-leadership style when you are trying to run a big complex public facing company. You can’t just ignore routine, and minister to the cult. You need to keep a lot of non-worshippers happy too.
{ 50 comments }
some lurker 05.06.23 at 3:48 pm
One messianic prophet/founder not mentioned above — Steve Jobs — might have figured this out, that he needed a Tim Cook to handle all that. Hard to imagine that someone as mercurial as Jobs had the humility to see that he needed counterpart/foil but one wonders if Tesla or Twitter will last as long as Apple (30+ years and counting).
Doug Henwood 05.06.23 at 4:12 pm
This analysis (which is very good!) reminds me of the Occupy left: all about the ecstatic moment and the foretaste of utopia, but no agenda or organization, and in fact hostile to those things as messing with the magic.
JPL 05.06.23 at 7:48 pm
George Sarton’s distinction between “enthusiasts” and “job-holders” in the history of science is a response to what seems to be a similar phenomenon in that field. (He concluded that it takes all kinds to make a world.)
Toomas_Hendrik Ilves 05.06.23 at 8:02 pm
I too thought of Steve Jobs. Apple will soon be 50 in fact but early on, after the Apple priesthood realized it couldn’t do without its deposed prophet, hired the prophet back and buckled down under the prophet to be only the priesthood and allow the prophet to be himself. Jobs of course realized he needed his priests in order to be THE prophet and let his priesthood do their work.
Musk wants it all. It can’t work.
steven t johnson 05.06.23 at 8:03 pm
Prophet vs. priest? Where are the witch doctors or the confessors/spiritual counselors/gurus? Julius Caesar as pontifex maximus was literally a priest at the head of hierarchy but if ever there was a charismatic founder it was him. Temples operating as banks or archives for wills may have a certain routinization but it is entirely unclear how religious charisma is to be construed as the other end of the financial spectrum.
I’ generally uncertain of the value of Weber. Admittedly it’s hard to pin down the ethic and the spirit enough to even attempt to assess any hypothetical connections, but without being a Popperian of any sort, that’s not necessarily a recommendation. (Barring a commitment to independent causal powers of “ideas” somewhere, some time.)
Quasiprophetic or quasicultic or quasireligous or however you want to say it, it seems to me that phenomena such as Bill W. and AA; the whole Amway cult; Mary Kay; the James Dobson Focus on the Family empire; John Hagee (who is literally selling prophecy by the way) and CUFI…the premise that charismatic founders have trouble establishing functional organizations seems to need some clarification.
Hagiography of businessmen is not at all a new thing. In my youth one of the first biographies I read was of J.C. Penny (mercifully vanished from memory save for the fact of its one-time existence.) Both hagiographies and demonologies of businessmen, like Rockefeller and Morgan and the Commodore and the original Wolf of Wall Street (Jay Gould if I remember correctly,) as well as the anticipations of technophilia in the figures of Carnegie and Westinghouse and Tesla and Edison (who conquered Mars!)
Insofar as there really is a spiritual malaise in Silicon Valley, could it be, so to speak, seeing a cloud no bigger than a man’s hand in the sky
Jason Lefkowitz 05.06.23 at 8:15 pm
Your theory reminds me of a similar one the tech columnist Robert X. Cringely floated in his book on the early days of Silicon Valley, Accidental Empires. His model was that every successful tech company evolves through three types of people over its lifecycle: commandos, infantry, and police.
Founders are commandos. They hate routine and love novelty and adventure. They’re constantly looking for the next New Thing, and when they think they’ve found it, they’re willing to run huge risks to pursue it — risks that are wildly disproportionate to the likely rewards, because unlike most people, they like risk. They get off on it. It provides a frisson that everyday life sorely lacks. Commandos are never happier than when they’re swimming towards some uncharted, unproven market with a Bowie knife clenched between their teeth.
Commandos are very good at spotting opportunities, and occasionally one defies the odds and actually turns them into something real. But once a beachhead has been established the next step is breaking out and exploiting it, and that’s the point where the commandos lose interest. What used to be a daring mission behind enemy lines with huge risks and huge rewards is now a game of inches, of stacking one small advance on top of another as long as you can. Commandos find all that excruciatingly dull.
Successful tech companies deal with this by sidelining the commando founders — either by promoting them to some meaningless “institutional visionary” role, or if the company is really lucky, simply watching the commando run off to chase some new shiny object — and replacing him and his people with what Cringely called infantry.
Infantry people are grunts. Their job is to exploit the opportunity the commando created to the maximum degree possible. They do this by boring but reliable iteration on the original ideas. Product lines get regularized. Release schedules are created. The normal appurtenances of corporate life — vice presidents, cubicle farms, HR departments — appear. Infantry are not unwilling to take risks, but they don’t live for them the way commandos do. They want their risks to be, above all, reasonable.
But eventually the infantry have exploited the breakthrough as far as it can possibly be exploited. Every potential customer has been won; every market niche has been filled. At this point, the infantry start to lose interest the way the commandos did. The ambitious corporate infantryman wants to climb the ladder, and needs those reasonable risks to do that. As the company reaches maturity, opportunities to jump up a few rungs become fewer and fewer.
So the infantry start to leave, and are replaced by Cringely’s third type, police. Unlike commandos and infantry, police aren’t soldiers at all. They’re not interested in growing the company, even slowly and cautiously like infantry do. What they’re interested in is stability. The mature-company inertia that alienates the infantry attracts the police, who see their job not as expanding the company but defending it. Their desire is to keep the machine the commandos and infantry built running smoothly, and, if necessary, to protect its turf from outside interference. They are out to eliminate risk, not to create or exploit it. And so the company that started out as a bold innovator becomes stagnant, wringing profits out of ideas that were new 30 years ago for as long as circumstances permit.
Where I would differ from Cringely is that he posits this cycle as a sort of corporate suicide drive, whereas I would say it’s just the circle of life. The company attracts the kind of people who fit into its circumstances. It loses some romance when the commandos depart, but the commandos have to depart, because their methods simply do not work beyond a certain point. As you say, they don’t scale. And what’s the point of throwing infantry at a battlefield when there’s no new ground to be won there?
Elon Musk strikes me as a quintessential Cringely commando. He loves starting new things, he loves taking big risks, he loves making sweeping decisions. He is utterly confident that he is always right, all evidence to the contrary notwithstanding. What he’s demonstrating at Twitter is the folly of trying to run a mature company — a company at a point in its lifecycle where its circumstances call for police — with commando methods. They generate a lot of noise and heat, which to the commando feels like progress. But to everyone else it just looks like chaos, because that’s all it is.
Ebenezer Scrooge 05.06.23 at 9:54 pm
Brilliant post, which raises a question in my mind. What, if any, is the distinction between followers of prophets and the flocks of priests? Are the former frustrated prophets themselves? Risk aversion? Depth of engagement with the cult?
I’m also thinking of Brigham Young, who seemed to fulfill both roles pretty well.
David Singerman 05.07.23 at 12:16 am
There was a cool-looking book a few years back called The Terrorist’s Dilemma, about the tension between charismatic founders and bureaucracy in organizations like Al Qaeda. As I recall, Al Qaeda basically had to develop an HR department including health insurance forms and all that. In that case, the dilemma was also between the secrecy, isolation, and autonomy that terrorist groups need their cells to have, and the normal imperatives of strategy and planning.
Alex SL 05.07.23 at 1:32 am
Yes, it seems quite obvious that he is a cult leader, and he is mostly buying into companies and claiming that he invented what those companies do, while over-promising and under-delivering along the way.
What puzzles me is why he is a successful cult leader. Why is anybody following him, falling for it?
I get the just world fallacy and the desperate need to believe in the fairness of our economy, okay. If our system isn’t merit-based, what of my moderate level of wealth and success? Where is my self-worth if that is all based on 50% luck and 50% privilege (which is also a form of luck)? How do I feel superior to and do not share my fortune with the homeless person at the corner, if my and their status aren’t deserved? And, well, a billionaire has been rewarded most handsomely of all in our system, so for the system to make sense, he MUST deserve his reward, or the entire system is all brought into question, including my own rewards. So, I must defend his deserts against all criticism with clever come-backs like, “how many billion-dollar companies have you built” or “you only get to criticise him once you have designed your own rocket” or “you say you don’t like him, yet you are still here on Twitter, how curious”.
Fine, that gets you defending billionaires and their power as such, as it would in the past have produced monarchists. But being that much of a cult-follower of him, specifically? Maybe it is just me that I don’t even find him charismatic, but don’t his followers ever realise that he has been saying for >10 years that his self-driving cars would be safe within the year? That he has been saying for >10 years that he would put a man on Mars within 5-10 years? That his Boring tunnels are not a marvelous new idea, but just subways, only orders of magnitude less efficient and less safe? Surely there are alternative cults and cult leaders that make more sense?
Just about the only idea I have is that the stupider or more incoherent the belief, the better it serves as a a public demonstration of faithful allegiance to the cult, like having to publicly affirm the trinity did of old. In that sense, having to defend as a genius a cult leader who is oh so very publicly over-promising and under-delivering year after year may actually be a bonus, because anybody who is publicly willing to go to bat for one such as him has demonstrated they will swallow anything?
But really I don’t get it.
Tim Worstall 05.07.23 at 3:31 pm
A lot of truth to the base idea here. And yet:
“So when Musk swoops in, buys a big company that is notoriously badly managed, and promises to cut away the bureaucracy, make the big necessary decisions, and show the world what a real Silicon Valley CEO looks like,”
What failure? The necessity for a company is to make a profit. Twitter wasn’t. At least as far as the gossip goes it now does. Lower revenues, yes, but hugely lower costs at the same time. If – that is if – success for a corporation is profit then Musk might indeed be doing rather well.
His habit of trying this, oh, that doesn’t work, we’ll do something else, impresses me. It’s what markets as a whole do better than any other system, explores that space of what can be done and the interactions with what people want done faster than any other system. Simply because the free in free market means people are able to enter the market with whatever nonsense comes to mind. Some of it sticks.
Whether it’ll all work out in the end, well – but I’d very strongly suggest that it’s too early to write off Twitter as a viable corporation. Don’t forget, if Twitter as was wasn’t viable as an economic organisation – ie, sufficiently profitable to continue to be funded – then Twitter as was wasn’t one of those things that could continue to be done.
My one and only business interaction with Musk also impressed me. I was perhaps one of half a dozen people who could have answered the question he had back then (“Will scandium make my rockets lighter?” “No, it’ll make them easier to weld though” – there’s another commenter around here whose father worked on the Buran shuttle programme, I was working with some of the metallurgists from that) and he did manage to track me down. That does impress me, the lengths he went to get a technical answer.
This though has great importance:
“The problem with prophecy is that ecstatic cults don’t scale. If you want your divine revelation to do more than rage through the population like a rapid viral contagion and die out just as quickly, you need all the dull stuff. Organization. Rules. All the excitement – the arbitrariness; the sense that reality itself is yielding to your will – drains into abstruse theological debates, fights over who gets the bishopric, and endless, arid arguments over how best to raise the tithes that the organization needs to survive.”
A lovely – and also true – explanation of why so many political campaigns to root out some evil or other succeed in creating the legislation but fail to solve the problem. C N Parkinson wrote a book on the point I believe…….
Michael Cain 05.07.23 at 3:59 pm
Once, they believed that software would eat the world.
Not to put too fine a point on it, but software did eat the world. Now we’re all just looking to steal market from some other software.
David 05.07.23 at 7:20 pm
Seems to apply well to Elizabeth Holmes (she had the charisma and spell-bindingness),
but the day-to-day running of Theranos, not so much.
David 05.07.23 at 7:25 pm
And if Ramesh (Sunny) Balwani had been more of a priest, perhaps both now wouldn’t be either in jail or facing a jail term.
Fake it till you make it, indeed.
Alex SL 05.07.23 at 10:39 pm
Tim Worstall,
Not sure if you are aware, but AFAIK Musk loaded up a gigantic pile of debt to buy Twitter and has to service that. Even if he cuts costs to zero, he needs more revenue to break even than a social media network will ever realistically make. Apart from that purely financial angle, his cuts to technical support and moderation have lead to bugginess and outages noticed on a weekly basis by anybody except the deepest cultists, and to a rise in spam bots and reinstatement of, ahem, ‘problematic’ accounts that is likely to drive away more advertisers and users as time goes by.
So, unless I am missing something big, there is no way that he has achieved profitability, and it is really unclear how what he is doing can ever become a success. The only possible answers to the question why he is doing what he is doing appear to be:
(1) He thought he could pull off a stunt but was then forced to make good on his offer to buy the company, which he didn’t actually ever intend to go through with. I understand he is on the record confirming this option, but given the discrepancy between so many of his other pronouncements and reality, that doesn’t necessarily clinch it.
(2) He is being paid by a shadowy interest group to destroy Twitter. Bit conspiracy-minded for my taste, and one would like to think there are easier ways of doing that than blowing up billions in Tesla valuation, like buying Twitter at half the price he paid and then simply shutting it down.
(3) He actually believes (!) that Twitter was run by a leftist cabal trying to censor well-meaning conservatives to push an agenda, as opposed to business people who realised that spam, hate and abuse drive users and advertisers away until only a cesspit of trolls is left with nobody to troll. And he actually believes (!) that he is making things better, and that that is such an important mission that it is worth to lose a few tens of billions over that. Evidence for this would be his own tweets and decisions, but to be quite clear, if this is what it is, then it is also proof positive that he isn’t a genius, to put it mildly.
His habit of trying this, oh, that doesn’t work, we’ll do something else, impresses me. It’s what markets as a whole do better than any other system, explores that space of what can be done and the interactions with what people want done faster than any other system. Simply because the free in free market means people are able to enter the market with whatever nonsense comes to mind. Some of it sticks.
To paraphrase from a previous thread, yes, that is why every large company is internally run as a free market, because randomly trying stuff, most of which is so obviously flawed that hundreds of people warned him against it before it was implemented and inevitably and predictably failed, in very publicly embarrassing ways that damage the company brand, is vastly superior to having policies and decisions guided by expertise and experience. /s, as should be clear.
To be more serious, you are confusing a market with many small companies with a large organisation. Yes, a market may work (to a degree) at the level of five local taxi companies competing with each other. But the salient analogy here is a single taxi driver always ignoring his passengers’ instructions, insulting them, and driving randomly into the opposing lane or onto the curb.
And even that is a poor analogy, because a social media network is close to a natural monopoly due to the importance of critical mass and the network effect. The concepts of market and competition hardly applies, because switching to a competing network is a rare and difficult process. (Which is also why the troll argument of “you criticise Musk, yet here you are” is so ludicrous. If all the roads were sold to Scrooge McDuck tomorrow I would still have to use them whenever I needed to travel by road.)
Robespiere 05.08.23 at 3:25 am
Luckily he just owns a couple businesses and not, say, Cambodia or a camp in Guyana.
Neville Morley 05.08.23 at 8:40 am
Gratuitous ancient history pedantry, which I won’t develop unless anyone actually wants me to: Weberian model really doesn’t work for Roman religion, as he himself acknowledged; Caesarism is potentially good model for understanding Musk et al – indeed, in at least some cases it seems to be a deliberate imitation – but the charismatic authority there isn’t that of the prophet but the warrior.
Tim Worstall 05.08.23 at 10:39 am
@14, re profitability:
“Last October, we projected that Twitter’s 2023 ad revenues would reach $4.74 billion worldwide. Since Elon Musk’s takeover, we’ve cut our projection by nearly $2 billion, to just $2.98 billion,”
That’s one estimate out there. Operating costs used to be c. $5 billion and he’s cut head count by 80%. Of course, head count’s not the only cost there but say – a guess! – that staff costs were $250k a head, probably an underestimate. That’s about $2 billion off costs. Reduce other costs somewhat but probably not as much, say another $1 billion off? Room there to be paying off $1 billion a year in debt still.
I wouldn’t vouch for any of those numbers but Twitter was grossly, grossly, overstaffed. There really have been costs that could come out there.
“To paraphrase from a previous thread, yes, that is why every large company is internally run as a free market, because randomly trying stuff,”
The CEO as the central dictator trying stuff out isn’t quite that now, is it?
Trader Joe 05.08.23 at 1:56 pm
An interesting thesis
The thing is Musk has been a prophet on EVs. He had an idea of what they could be and how they could work before there was any such thing as fast chargers.
To a lesser extent he has also been a prophet about how to monetize rock launches and space technology.
(His involvement in Paypal was less prophetic and while it provided him his initial fortune, it worked almost despite him not because of him).
He has constantly shown every propensity to think he can solve every problem because he’s a bit smarter and a bit more clever. Recall when those boys were trapped in a cave in Thailand (or wherever it was) and he dropped everything to design a way to help take them out even when Tesla was on the brink of failing. That’s a person who is so used to be told he’s right and smart he cannot comprehend otherwise.
Maybe at the end it comes down to staying in one’s lane. Some prophets might part the seas, others might turn water into wine, but being certain one can do both is an error even for a well intentioned prophet.
Scott P. 05.08.23 at 1:59 pm
Julius Caesar as pontifex maximus was literally a priest at the head of hierarchy but if ever there was a charismatic founder it was him.
I think this gets Caesar all wrong. He had no particular desire to reshape the Roman state. He wasn’t motivated by a vision of utopia. He was far too pragmatic for that. I don’t think he fits the prophet/priest dichotomy at all. Caesar, along with many other fast-risers like Napoleon, would need to form a separate category — maybe something like the opportunist — if you wanted to try and stretch the analogy.
steven t johnson 05.08.23 at 3:25 pm
Neville Morley@16 I did not know Weber explicitly acknowledged his views on religion did not fit Roman religion. But it appears the Weberian notion that “spirit” and “ethic,” and such chatter, what you might call psychology of religion, is regarded as fitting everyone with a mind, hence available to usefully analyze Elon Musk at Twitter. This is something like Weber declaring he is not a Weberian?
Scott P.@19 Nor do I think Caesar fits the prophet/priest dichotomy borrowed from Weber. I brought up the example as evidence relying on Weber might be wrong-footing the whole analysis.
As to whether Caesar didn’t want to reshape the Roman state, I can only say, dictator-for-life was a fundamental reshaping, for one thing. For another, in his role as pontifex maximus Caesar also presided over calendar reform (today’s Gregorian calendar was initiated in 1582 but Julius’ calendar hung on until the twentieth century.) The careful use of holidays to manipulate political events was a significant practice and doing away with it was a re-structuring of Roman society. Also, the collegia, if I recall, were outright banned by Caesar. These religiously-organized self-help congregations probably did shade in some cases into the gangs showed on the old HBO series Rome. But banning them is yet another re=structuring of Roman society.
It is generally held by the way that Sulla wished to make Caesar flamen dialis, a priest whose duties would have practically speaking barred him from political life. (If I recall, a taboo on seeing dead bodies would have prevented a military career.) Julius Caesar was young but as a nephew of Marius and a son-in-law of Cinna (usually forgotten but once a very important popularis vying with the boni for control of Rome) his flesh promised Bad Things for Sulla’s reactionary program. [Yes, popularis is the ultimate origin of “populist” while “boni”—the Good—has been part of ruling class vanity long before and long after the Roman Republic fell.]
And even more by the way, I think Sulla never gets the credit for showing the world what true conservatism, the conservatism defined by powerful action, looks like.
J, not that one 05.08.23 at 4:02 pm
To build on Neville Morley’s comment, why would prophet and priest be the only models for charisma? Maybe the real distinction between the before and after its routinization isn’t how they think of themselves, but how they deal with other people? Many people would like to steamroll everyone else into submission, but only a few have the ability and opportunity (including a charismatic connection to those other people) to succeed at it. Many people would like their own beliefs (and their special skill in interpreting their belief system), to be the basis for the whole community, so “laying down the law” suffices, but only in certain circumstances is that really the case.
(I’d question whether the transition out of the charismatic phase is most characterized by the power of HR but that’s a different question.)
I haven’t followed Musk enough to know what other CEOs think of him, but I see a frequent pattern where anything that seems new is opportunistically glommed upon as a vehicle for whatever someone wants to have happen. People who are unhappy with Twitter claim Musk will fix everything they’re unhappy with, executives who want more power claim he’ll create a new model that will extend to them as well, etc.
J, not that one 05.08.23 at 4:06 pm
Also, it occurs to me, Weber’s formulation assumes religion is optional, and if you believe divine ecstasy is 100% certain to get everyone on the correct page (as many seem to who blame “woke liberals” for “corrupting” everyone you disagree with), you’ll probably dismiss all that as misguided.
bekabot 05.08.23 at 4:08 pm
“Julius Caesar as pontifex maximus was literally a priest at the head of hierarchy but if ever there was a charismatic founder it was him.”
If ever there was a charismatic founder it was him. But the moment his empire needed to administered more than it needed to be added to, the moment it needed to be consolidated more than it needed anything else, he was assassinated and (after a few years of warlord do-si-do) his nephew Octavian (Augustus) took over. And if ever there was a pattern bureaucrat and born systematizer, it was Augustus.
Alex SL 05.08.23 at 10:44 pm
Tim Worstall,
As you wrote, there are large error bars around all these numbers, but a quick google found an estimate that he is up for 1.5B in annual interest payments, although I understand that only 13B debt have been loaded directly onto Twitter itself. Honestly, I have no idea how this works or why this kind of leveraged buyout isn’t illegal, but unless that is completely off or I misunderstand your calculations, your 1B profit that Twitter would have had debt-free therefore gets him -0.5B actual profit per year. And I am curious to see your ad revenue numbers confirmed given that anecdotally I see the same few ads over and over, and a good chunk of them are irrelevant-to-me Musk companies like Starlink, which I do not remember seeing before he took over. No doubt there is still ad revenue, but 60% of what they had would IMO be a surprisingly good result given his behaviour, and subscriptions are always going to be a drop in the ocean.
Regarding overstaffing, I have no detailed insights into the company structure, but he seems to operate on the tech bro misunderstanding of social media networks that you only need a few coders working through the night, and everybody else is chaff. Like, the people who maintain your relationships with advertisers, securing your cash flow. The people who moderate and ban, so that well-meaning users have a good experience and don’t leave. The people who ensure you are following policy and the law, so that the EU doesn’t come knocking about user data protection etc, and certain other regimes don’t outright ban you. Or the people who ensure that you don’t constantly have bugs and glitches, like the failure of threads to display properly that we have seen the last two days or so.
I mean, if I were extremely clueless, I could make the same argument for my area. Why do we need anybody except scientists to do research? Everybody else is overstaffing! And then one day I wonder where to get IT support, or why my institutional server has been hacked, or need a legal opinion on a contract, or help with hiring somebody, or wonder why I have to personally deal with the broken light fixtures, and then I get us shut down for failing to follow some safety regulations I didn’t know existed.
There is much ruin in a large company, however, so it may take some time yet for all the problems to compound, for a viable competitor to appear, and for Twitter to dwindle away, and all along the way the cultists can say that it hasn’t collapsed yet, so the critics are wrong and unhinged. Kind of reminds me of global warming actually. Bangladesh and Florida aren’t under the ocean YET, so clearly nothing bad can ever happen, and it is all made up!
The CEO as the central dictator trying stuff out isn’t quite that now, is it?
I have absolutely no clue how to read this, sorry. You were arguing at #10 that him exercising his dictator-level control over the company (meaning, there is no market internally) to step onto one rake after the other while most users have yet to find a viable competitor with similar network effects and functionality (meaning, there is no functional market externally) is a great example of the benefits of the free market.
William S. Berry 05.09.23 at 5:09 am
There’s a comma missing after “religion”.
You’re a very smart fellow, Henry, but you’ll never get to Oxford* that way!
*Assuming you were trying, obviously. If not, well, never mind!
TM 05.09.23 at 7:29 am
Worstall: “His habit of trying this, oh, that doesn’t work, we’ll do something else, impresses me. It’s what markets as a whole do better than any other system, explores that space of what can be done and the interactions with what people want done faster than any other system.”
It is fascinating how self-described “free market libertarians” always end up admiring dictatorial methods. I wonder what work the “It’s what markets as a whole do better than any other system” is supposed to be doing here. The point of markets is supposedly that there is a feedback mechanism that allows for self-correction – which is precisely what Musk’s CEO dictatorship is lacking. When a CEO dictator is given control over a monopoly (or something close to it) as in the case of Twitter – or for that matter a “too big to fail” bank as in the case of CS – it’s always the public that ultimately has to pay for the bad decisions.
Tim Worstall 05.09.23 at 9:26 am
“I have absolutely no clue how to read this, sorry.”
A standard economic view is that companies are islands of central planning which set sail on the sea of the marketplace. It’s the system as the whole which is the market, not the individual unit. Therefore one unit, one corporation, trying this and that at the behest of the dictator of that unit is still consistent with the benefit of the system, which is that all possibilities get explored quickly. For the individual unit it’s more risky – will they hit upon something that works before the endless disruption kills them? Hmm, dunno.
” but a quick google found an estimate that he is up for 1.5B in annual interest payments, although I understand that only 13B debt have been loaded directly onto Twitter itself.”
I also don’t know the details but $1.5 b annually on a $13 b debt load looks reasonable enough. Not in the sense of whether Twitter can carry it, but in the sense that interest plus capital repayment over some likely time period could well be about that for that sort of capital sum.
“Honestly, I have no idea how this works or why this kind of leveraged buyout isn’t illegal,”
What? Why should it be? The previous Twitter shareholders had something that was of value to them. Someone offered them some money for it. Why should they care how that money is structured – after they’ve received theirs that is. Banning a leveraged buyout would be – economically – like banning selling your house to someone who has taken out a mortgage secured upon it to finance the purchase. To make it absolutely the same say selling your house to a buy to let investor who is using the income stream from the rent to secure the loan to pay you for the house.
Why should that be illegal?
“Honestly, I have no idea how this works or why this kind of leveraged buyout isn’t illegal, but unless that is completely off or I misunderstand your calculations, your 1B profit that Twitter would have had debt-free therefore gets him -0.5B actual profit per year.”
Well, yes, but there’s one more number. Twitter was losing $500 million a year before the takeover too.
Alex SL 05.09.23 at 10:20 pm
Tim Worstall,
Seconding what TM wrote regarding the wisdom of letting company dictators run things to the ground so that their employees, their communities, pensioners, and customers get hurt. Double so when running a quasi-monopoly where there aren’t even the very limited benefits that a market would otherwise provide. This is the kind of stuff that seems normal in our society now, and desirable to your ideology, but seems like a bizarre thing to do once you take a step back and think through whether outcomes are likely to be beneficial to people and society as a whole.
The principles of free market thinking are kind of sound when applied to a neat theoretical market of dozens of startups (at least if the founders and their employees have a strong safety net to fall back onto when failing), but they are just twee when applied to the real existing economy of large companies, often ‘too big to fail’ or systematically important to other stakeholders, that are run dictatorially by CEOs, often ones that have no stake in the sustainability of the company and thus think entirely short-term because they will have a different job in five years anyway, or just plain incompetent or psychopathic.
I think we are talking past each other. The general consensus out there seems to be that there is no possibility of capital repayment because revenue won’t even suffice for the interest alone. He may not be an investment genius, sorry. But at least he is an engineering genius who designs all the rockets and cars all by himself, right?
I don’t blame the previous Twitter owners. The two issues are, first, something of structural importance being privately owned in the first place, and, second, the legality of the kind of leveraged buyout where a company that is perhaps just about plodding along with some profitable quarters and some red ones gets burdened with debt so that it is forever unprofitable without brutal cuts, staff misery, and service degradation that were otherwise completely unnecessary and not the fault of any of its employees. I understand this did a number on the town where I went to high school when it happened to one of its two main employers, although I had moved away by then, so only heard about it from former classmates.
Kenneth Schulz 05.09.23 at 11:25 pm
Oh, that it were so.
At the large manufacturing corporations at which I worked, quite a few possibilities were never explored, while too much time and money was spent pursuing others beyond any hope of worthwhile return.
J-D 05.10.23 at 1:39 am
… not necessarily a reliable source of insight.
TM 05.11.23 at 9:09 am
As an aside: Regarding Musk’s Twitter, apart from the debt service there is also a significant regulatory risk that Musk has provoked by his recklessness, which may result in significant fines. E. g. Twitter must adhere to data protection laws and antidefamation laws. Musk has acted as if he can simply ignore these laws, in part out of spite but also because compliance requires resources and isn’t cheap. Noncompliance however is even more expensive.
E. g. https://www.politico.eu/article/elon-musk-twitter-privacy-helen-dixon-eu-privacy-enforcer-puts-on-notice-as-twitter-melts-down/, https://www.n-tv.de/panorama/Twitter-muss-falsche-Tweets-selbstaendig-loeschen-article23784405.html
Trader Joe 05.11.23 at 1:21 pm
@28
“something of structural importance being privately owned in the first place”
This is a massive reach. There is absolutely Zero of structural importance about Twitter. If it ceased to exist tomorrow the world would be slightly better and apart from the unfortunate employees, not a soul would be harmed. The loan write-offs would sting for about a quarter, but there wouldn’t be the slightest bit of economic damage either.
There are a minimum of 20 apps that do all or most of what Twitter does – some have features that are better, some worse. Some lack network benefits, some have too much noise. In no possible definition is Twitter a structural monopoly.
anon/portly 05.11.23 at 5:13 pm
TM (currently 26): “When a CEO dictator is given control over a monopoly (or something close to it) as in the case of Twitter – or for that matter a “too big to fail” bank as in the case of CS – it’s always the public that ultimately has to pay for the bad decisions.”
But is Musk really any more of a “dictator” than the previous owners? Of Twitter or of any other social media company? And wasn’t Twitter brought into existence by some capitalist organization? In some alternative socialist utopia would we have had something exactly like Twitter?
What is the policy that will ensure that firms only make good decisions?
And I can understand thinking of Twitter as somewhat monopolistic, but only in the very short run?
And what price is the public paying, or will pay? Right now, one can still Tweet and read Tweets to one’s heart’s content. And if Twitter closes down, is the public better off or worse off? Half the people on Twitter seem to think it’s a “hell site.” People get hounded off it all the time. Noah Smith has made the point that he doesn’t really care about Musk much, what he hates is that Twitter’s previous owners embraced a business model that involved profiting off of making people angry and unhappy.
After having avoided social media pretty much completely, about three years ago I started reading Twitter – reading it. I like reading (not “following”) certain accounts, and being able to access certain blog-like corners of Twitter where the idiots mostly don’t go – it’s fun. It works well for someone like me, but I know other people for whom it seems the existence of Twitter has been distinctly a negative thing.
If Twitter goes away and is replaced by something else (maybe multiple Twitters, as Smith has suggested, as maybe Bluesky and Mastodon portend), I think I’d guess that would be a good thing. Now if Musk would or could just buy Facebook and kill that too, he’d be a true hero. (There’s a Kickstarter or Go Fund Me idea).
Alex SL 05.15.23 at 7:18 am
Okay, so today I woke up to the news that the famous Free Speech Absolutist who was going to make Twitter all about Free Speech, in contrast to the leftist censors who ran it before, has clarified,
“by free speech I simply mean that which matches the law; I am against censorship that goes far beyond the law; if people want less free speech, they will ask government to pass laws to that effect; therefore, going beyond the law is contrary to the will of the people.”
Also, apparently, anybody who finds censoring opposition parties at the behest of an authoritarian government problematic has had their brain fall out, or something.
That clinches it, right? Any reasonable person would at the very latest now conclude that he is making it up as he goes along and should not be taken seriously on anything ever. But no, according to his sycophants, we have always been at war with Eastasia: what are you talking about, those were always the realities of business, he is doing exactly what he should do.
That is what makes this a cult. The incoherence is the point; without it, it would be too easy to be one of his followers. Publicly defending him as the heroic champion of free speech who will save the internet AND for being opportunistic and protective of his profits, now that demonstrates allegiance!
Alex SL 05.15.23 at 8:03 am
Just after I pressed Submit, I saw #32 and #33. I expected comments to this effect, but from somebody else!
The broader point to make is that this is a broader point. It is not necessarily only about Twitter, it is also about, say, electricity and water infrastructure being privately owned and run only for rent extraction while they slowly deteriorate, or public transport, schools, and hospitals being run for profit, or even something like more and more large corporations and governments at all levels outsourcing all their digital infrastructure and data storage to two gigantic multinational companies who we are just, like, trusting with all that despite them being in the business of profit-making (but oh dear we can’t have or youths use a social media network from China, that would be dangerous!) and who we hope won’t suddenly need a bailout one day because we now can’t do anything without their products and who we hope won’t suddenly decide to pull the plug on a function of their software suite that seems trivial or a loss-maker to their new CEO but that is actually being used by all our civil servants and corporate admins on a daily basis.
And, just to drive that point home once more, in these cases there isn’t actually any serious competition, just vendor lock-in, so the only advantage of having private enterprise (the market) doesn’t exist, and all get is the massive downsides of private enterprise, rent extraction at the cost of everybody else and influence-taking. Our current economy is to a great degree a massive funnel pointing from the tax payer to private shareholders. Well, that and property bubbles.
The narrower point is that, yes, even if it isn’t important to you, specifically, Twitter is structurally important to certain academic and journalistic communities. It is our primary social media network, where we post and learn about job vacancies, published papers, grant opportunities, or other miscellaneous academic news, and live-tweet conferences and workshops.
Of course, if you gave us a new network with equivalent functionality*, we could move to it. Like, all thousands upon thousands of us, in complete lock-step, as if we were a single hive mind, finding all the people we are following right now on Twitter again to instantly copy over our network. Right, that seems doable (end sarcasm). This discussion has shades of “if you don’t like it here, why don’t you just move to another country” in how flippantly that is said and how difficult pulling it off is in practice. And, of course, shades of, “well, I don’t use buses and trains myself, so I don’t see why we need public transport, it just breeds dependency; simply buy yourself a car like I did”.
*) Note that Mastodon, for example, doesn’t even have quotes and provides no information whatsoever on how many people have actually seen your ‘toot’, which to the clueless may seem like an attention-addiction thing but is actually kind of important if you need to know if your postdoc advertisement has likely reached a critical number of people who currently supervise third-year PhD students.
John Q 05.15.23 at 8:23 am
Twitter only added view count last December, after the rise of Mastodon, and the numbers aren’t credible. https://www.reddit.com/r/WhitePeopleTwitter/comments/10y6dep/more_evidence_that_twitter_view_counts_are/
Doug M. 05.15.23 at 10:12 am
Twitter isn’t a utility, or even close. It’s important to a lot of people, especially academics and journalists, and it serves a lot of useful functions. But if it shut down tomorrow, the world would keep rolling.
That said, it’s not an ordinary free-market business either, where consumers can just stroll frictionlessly to the next shop down the street. There is a legitimate public interest in having something /like/ Twitter, and there are nontrivial costs to switching to another network.
TM 05.15.23 at 1:02 pm
33: “But is Musk really any more of a “dictator” than the previous owners?””
Yes definitely. What is particluar about the Musk regime is that he has started by firing many of the workers with actual expertise in running the business, that reportedly he dismisses and marginalizes critical voices within (unless he fires them), that he openly disregards regulatory requirements, that he’s impervious to advice that doesn’t align with his preferences, and that he as CEO intervenes in often entirely arbitrary manner in day to day operative decisions including which accounts to block or unblock, decisions which the former owners had tried (not always successfully but they tried) to handle in a consistent manner based on publicly known rules and procedures.
Of course many big corporations are structured in a way that allows CEOs to act as dictators (corporate boards are mostly just another form of grift) – and often escape responsibility when they screw up. As a reminder, it was our resident free market libertarian friend Worstall who started the “Musk as dictator” thread and I mainly commented to point out the incoherence in his “free markets are great and therefore dictatorship is great” argument.
Dave 05.15.23 at 2:02 pm
I’d say he’s a cult member playing cult leader managing a church hierarchy. Why Elon is extra bumbling.
Alex SL 05.15.23 at 10:18 pm
John Q,
Public page views under every tweet in the timeline, yes, but unless I am misremembering quite badly, I was always able to check views of my own tweets under my profile if I expanded them individually. The latter is all that is needed.
Doug M.,
So, it isn’t a “utility” then, but what I mean is the rest of what you wrote. And, to be fair, if the water supply of New York disappeared, the world would also keep rolling. Except for the life of New Yorkers, and that would be the point of concern even if I am not one myself.
Doug M. 05.16.23 at 7:17 am
Alex @40
Weak analogy; NYC has had a water supply since 1670, but Twitter has only existed since 2006 and didn’t reach a significant size (~ 100 million users) until 2011.
Here, I’ll counter my own argument: just because something is a recent development doesn’t mean it isn’t very important right now. Smartphones aren’t much older than Twitter, but try living without one of those.
Counter-counter argument: social media in general may be as important as smartphones, but social media has been in flux since day one. MySpace, Friendster, Ping, VK, Google Buzz, Orkut, QZone, Hi5… hell, I’m old enough to remember when we used Usenet for this sort of thing. If Twitter dies or becomes unusable, something else will eventually take up that space. Yes, “eventually” is doing some lifting there, but the point still holds.
Losing Twitter would not be like losing smartphones generally, but more like losing iPhones: very painful and unpleasant for a small group, a nuisance and a PITA for a larger group, disruptive for millions of people, but just not that big a deal in the great scheme of things.
Doug M. 05.16.23 at 7:23 am
TM @38,
As you note, lots and lots of CEOs are dictators. The problem with Musk is that he’s an incompetent and destructive dictator. He’s Pol Pot or Idi Amin, not Lee Kuan Yew.
Unfortunately, Musk has literally no check on him at this point. He has no shareholders to answer to. He can fly Twitter into the ground.
Doug M. 05.16.23 at 7:44 am
Final thought: back @10, Tim Worstall claimed that “gossip” says that Twitter is profitable again.
This is obvious nonsense. Ad revenue has collapsed and it isn’t coming back. Advertisers have other options. They’re put off by Musk’s unpredictability and they don’t really want their ads sitting next to animal torture videos — those have come back in a big way — and posts by Nazis. Also, Musk fired most of the ad sales team! Allegedly he’s tried to hire some of them back since; good luck with that.
(Mind, massive job cuts weren’t Musk’s dumbest move. That was firing most of Twitter’s subcontractors, including the subs that ran moderation. There are buildings full of people in places like Colombia and the Philippines, whose job it is to endlessly scan social media and remove horrific stuff like animal torture, child abuse, 2 girls one cup, and the like. Those people work for subcontractors. Now there’s nobody doing that. Which is why one of the most watched videos on Twitter this month was allegedly something so nasty I’m not going to type it here; it involved a kitten and I’ll leave it at that. But it’s literally turning Twitter into something you keep your kids away from.
Anyway: we know that Twitter hasn’t returned to profitability because if it had, Musk would be crowing it from the rooftops. He’d probably be claiming profitability if he was anywhere within creative-accounting striking distance of it. He isn’t, which means Twitter is still very deep in the red.
Here’s a hard fact that somehow nobody has mentioned yet. Fidelity Investments has already written off about $11 billion of the money they loaned to Musk to buy Twitter. That’s out of about $20 billion. So Fidelity has formally, publicly stated that they don’t believe that debt will ever be worth more than 45 cents on the dollar. That’s not a rumor; it’s from Fidelity’s first quarter securities filing. It happened weeks ago.
Finally, as to Twitter being “bloated”, this is one of those constructed facts that everyone seems to be repeating. Twitter had around 7,500 employees. That doesn’t actually seem like a lot for a company with $4.5 billion in revenue! Twitter clearly had problems, but it’s not clear that overstaffing was one of them. But somehow everyone, Musk fan and Musk phobe alike, just accepted that “lots of people needed to be fired” as a hard starting point.
Trader Joe 05.16.23 at 3:27 pm
So many of the comments seem to expect instant change resulting from Musk’s actions, that’s simply not the way any business works. You tear down, you make changes, you rebuild – its basically the same in every industry and it takes time. Rare for a a turnaround to work in less than 1 year. About 3 years is most common.
I don’t know if he will be successful or not, but it has barely been more than 6 months since he took over. He’s definitely spent that time tearing things down that weren’t working (agreed worse now than then, but it wasn’t all unicorns and roses before). Time will tell if his change will take and make a better place in the long-run.
He just hired a woman who is well known in advertising, I’d be shocked if she didn’t deliver some beneift.
Beyond that its not like he has no skin in the game. He has the better part of $25 billion reasons to at least get the business stable. Even to him, its not pocked change – both money and reputation are firmly on the line.
@43 Fido had to write down the loan since the related business doesn’t have positive cash flows. This has no bearing on their confidence in ultimate receipt, its an accounting test specified by the Financial Accounting Standards Board, its not a judgement call its simply math.
Alex SL 05.17.23 at 9:20 am
Treating this like some kind of mystery process that we mere mortals have to wait a few years to resolve is not that distant from “you can’t criticise him if you haven’t managed billion dollar businesses yourself”.
Because the question of expertise is asymmetric: I am not a car mechanic either, so I am not qualified to fix your car, and I may not be able to tell which of two competent mechanics is the better. But if a mechanic stands in front of a burning wreck claiming that he fixed my car I can still judge his performance and extrapolate to his level of competence (or honesty) more broadly.
As Doug M. wrote, Twitter is that burning wreck. There is no way that it is profitable, most advertisers have left, I can see with my own eyes how buggy and glitchy it is getting, and entire user communities are unhappy and just waiting for a viable alternative to achieve critical mass.
The best case scenario here is that instead of imploding, one day Twitter will be sold on for pennies on the dollar to more competent management and continue to plod along much diminished, because by then half the users are right-wing trolls and the other half are crypto scam bots.
Doug M. 05.18.23 at 10:31 am
Trader Joe @44
“Fido had to write down the loan since the related business doesn’t have positive cash flows… its an accounting test specified by the Financial Accounting Standards Board”
Hm: cite for this? IANA an accountant, but I never heard that FASB required you to write off half a loan after six months simply because the borrower didn’t have positive cash flow.
“He just hired a woman who is well known in advertising, I’d be shocked if she didn’t deliver some beneift”
She’s the CEO, but he’s still the owner. And his commitment to “free speech” remains unchanged as far as we can see. That means more Nazi stuff, more trolls, more doxxing, more bots, more Russian and other spam, and more animal torture videos. All of which advertisers just hate, hate, hate.
Since pretty much all Twitter’s revenue comes from advertising, that’s a problem.
Doug M. 05.18.23 at 10:33 am
Also, Musk is doubling down that he’ll be able to turn Twitter into “X, the app for everything”
Alex SL @45
“because by then half the users are right-wing trolls and the other half are crypto scam bots.”
We actually have a bunch of extant models for the failure modes of social media! Sometimes they stagger on in vastly degraded form (Usenet). Sometimes they transmute into something that’s no longer a social network (Myspace). And sometimes they’re mercy-killed (Friendster, Orkut, Dubsmash, Google Buzz, Google+, Periscope).
Twitter is a bit different IMO in that it is (1) kind of addictive for some people in a way that, say, Facebook isn’t, and (2) has a very large user base and (3) has a very strong brand, and (4) over the last decade, it has built up a great deal of engagement and goodwill. So it’ll be harder to kill. But everything we’ve seen so far, without exception, has been bad and destructive and trending towards its long-term demise.
Doug M. 05.18.23 at 10:45 am
Two other things that nobody has mentioned.
(1) Musk now says he’ll be working to transform Twitter into “X, the app for everything”. I see no way that can end badly! Watch out, Metaverse.
(2) Musk also has announced that he’ll let Twitter users charge viewers for content, both on a per-article basis and by subscription.
The obvious question is “will this be used for porn”. If yes, then a huge chunk of Twitter turns into a a low-rent OnlyFans. That’s a potential money making model, sure. But it’ll be competing with… well, OnlyFans, and a bunch of other well established sites. Also advertisers don’t generally like sharing space with porn or links to porn.
If no porn, then… uh, why would anyone do this? If you’re famous, there are far easier ways to monetize celebrity. If you think your wisdom and insights are such that people will pay good money, there are a crapton of sites that will let you put your musings behind a paywall, starting with Substack.
Musk says Twitter will offer this service free for one year, presumably hoping this will let Twitter buy market share. So, let’s check back in a year and see how that’s working out.
Dragon-King Wangchuck 05.18.23 at 7:40 pm
Here’s my overly simplistic take on it. It’s easy to delegate rocket science or large scale battery manufacturing scale-up or even geotechnical tunnel engineering. Those are highly technical and very niche. You can get away with “being a genius” even if you have limited understanding of that stuff even if it is literally what your company is doing as its core business. Which means that he can get away with letting competent people do the work and confine himself to high minded “future-of-humanity” type stuff like accusing people he doesn’t like of pedophilia. With good enough people, those companies can continue to succeed despite Musk.
But Twitter moderation? What accounts should get signal boosted? How to describe public media in the most discrediting way possible? Of course he has opinions on those things. He cannot let Twitter succeed despite himself because this is stuff he feels that he should be meddling in. Add in the massive layoffs and resignations, meaning that many of the people who could have made things less broken are gone – well it’s actually surprising that it hasn’t completely broken down yet.
Trader Joe 05.19.23 at 11:21 am
@46 ” IANA an accountant, but I never heard that FASB required you to write off half a loan after six months simply because the borrower didn’t have positive cash flow.”
Fidelity isn’t a bank, they are an investor. Accordingly, they are required to mark-to-market their assets every quarter. For publicly traded securities they would use readily available market prices (level I assets). For assets which don’t have quoted market prices they are obliged to infer market prices from comparable publicly traded securities (level II assets) or if there are no comparable securities they are to estimate a value based upon discounted cash flow models (level III assets).
Fidelity has chosen to treat this as a level III asset and since cash flows are currently negative and likely to be so for at least the intermediate future, whatever cash flow model they constructed was going to be at a discount to the face value of the debt.
You can read all about it and how to do it in FAS 157 (readily available to a quick Google search including dozens of short synopses).
I do such analyses for a living and while they are not terribly difficult to do there is more art than science (i.e. you can get just about any number you want with the right assumptions). For example I myself wouldn’t have looked to a level III designation until the bonds had been out at least a year – Fidelity no doubt has their own particular policies given the hundreds of thousands of positions they own. I’d probably mark to 50-60% of par at about the 1 year juncture, Fido has been more conservative.
I don’t really take exception to your back-of-the envelope math that suggests a possible zero value. I would only assert two things 1) 6 or so months isn’t a lot of time to evaluate the ultimate success and 2) a mark-down is just a mark down, it doesn’t mean as much as you think.
Comments on this entry are closed.