Will Elon really buy Twitter? 🦉
Wisdom Letter #137
So Elon has been raising hell on Twitter over the last 2 weeks.
But before I get to him, I have a quick update for you.
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Now, let’s talk about Elon.
So a couple of weeks back Elon Musk bought a 9% stake in Twitter. He became the largest shareholder of the company.
And started running polls like these:
Lol, there are deeper issues at Twitter than the edit button.
Issues like suppression of speech and the control of the public narrative.
Elon strongly feels that Twitter is the town square of the world, and the current executive team isn’t doing enough to uphold the spirit of free speech.
For a while, he even considered building a Twitter competitor himself:
Elon Musk @elonmuskFree speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?
But that will be a herculean task.
There have been numerous attempts to compete with Twitter and all have failed.
For better or for worse, Twitter is the best we’ve got in the name of a global town square.
Side note: If you still think it’s just a silly app to pick fights with random people, you need to read an essay I wrote last year:
Now, back to Elon:
Twitter’s executive team was smart in that they immediately offered Elon a seat on the board:
If you sense a hostile investor, bring him on your side by offering him a board seat.
Smart move Parag 👏
But there’s a regulation that prevents board members from owning more than 15% of the company.
Of course, once Elon realized this, he backed away.
He wants affirmative changes to the product, not a seat on the board and a 15% ownership cap.
3 days after this Elon made an official offer to buy Twitter.
Read highlights of the texts he sent to the company executives:
Some people will call this a hostile takeover.
The price Elon is offering is 54% higher than the market price. He wants to buy back all the shares from the market and take the company private.
That is the only way to make any changes to the product. Which might be true.
Because when even slight product changes start impacting investor sentiment, it becomes hard to innovate on a product.
But can he really take the company private?
Can he really buy Twitter?
More importantly, should he?
Not if the board members have their way.
Twitter’s board members can deploy a “poison pill” regulation. A poison pill is designed to prevent takeover attempts by devaluing the company’s own shares.
Basically, Twitter’s share price and valuation will fall, which will lead to the value of Elon’s stake falling as well.
This is a good thread about the Poison Pill and how it was used by Netflix back in 2012:
Elon has threatened to sell his 9% stake if the board doesn’t let him buy the company.
This sell-off can also lead to a massive fall in Twitter’s share price, and a major loss of value for the current shareholders.
It’s interesting to note that Twitter’s board members themselves don’t hold a lot of Twitter stock.
They don’t stand to lose financially if the stock price falls.
This is what Elon says:
This is the real conversation we should be having:
Whose interest do we care about here?
Is this merely a financial transaction?
1 person buying a company?
Then we should only care about shareholders, and find out ways to make sure that they get the most gains from their shares.
In that case, this is a fair deal and the board has to agree to it.
But is it really a financial issue?
Or is it about the interest of humanity?
Of protecting free speech and democracy?
As Elon himself said, Twitter is the world’s town square and it must uphold free speech.
The same argument can be used against him.
Why should the world trust Elon with its town square?
Just because he’s a cool billionaire?
Does it really make sense for a company like Twitter to be private?
In control of 1 person?
That’s what the board members have to decide.
Yes, control of the narrative and protecting free speech are major issues, but the best way to deal with them is to have more driven people on the board and in executive positions.
Not to entrust 1 person with all the responsibility.
A line from The Dark Knight comes to mind:
“The last man entrusted with the responsibility of protecting Rome during times of war, was named Ceaser, and he never gave up that power”
Is Elon the protector we are giving away too much power to by allowing a takeover like this?
These are hard questions and I don’t have the answer to them.
Sure Elon will open-source Twitter’s algorithm. And that’s great.
But the challenge here isn’t the algorithm, the challenge is the people on the platform.
It’s damn hard to run a social network.
Don’t listen to me, listen to this guy.
Yishan was the CEO of Reddit. Some great nuances and stories of trauma here 👇
Elon needs to realize he is not dealing with machines and robots anymore.
If he runs Twitter, he will be dealing with real people.
Real people with complex emotions and insecurities. Which can lead to online hate.
Real people with vested interests. Which can lead to misinformation campaigns.
Real people with sensitive minds. Which can lead to suicide and self-harm.
Is he ready to take on the mantle of managing the global conversation?
He open-sourced Tesla’s patents, and that allowed others to innovate, awesome move 👏
But if he open-sources Twitter’s algorithm people will use that information to drive their own agenda.
It’s not the same 🤷
To somebody like Elon, Twitter’s problems can look like engineering problems, and he can build engineering solutions for them.
But in reality, these are societal problems, and I’m not sure he is equipped to solve societal problems.
That’s it for today.
This is an important story and we will closely keep an eye on it. Will share updates over the next few weeks.
Do watch Elon’s Ted interview from a few days back, the conversation about Twitter starts at around the 11-minute mark:
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