What a close look at Tesla can tell us about Twitter’s chances under Musk
Twitter looks like it’s in turmoil – but isn’t that exactly how Tesla went supernova?
BEHIND THE HEADLINES
WILL TWITTER THRIVE UNDER ELON MUSK? ASK TESLA
Can Tesla’s history tell us anything about Twitter’s future? Plainly, a car maker and a social media platform are wildly different businesses. But Elon Musk didn’t buy Twitter unaided. A bunch of other, very savvy investors looked at the hundreds of billions of dollars of equity he created at Tesla and decided he has a chance of doing the same at Twitter.
A consortium of banks led by Morgan Stanley loaned him (or more precisely loaned Twitter, which now has to service the debt) around $13bn to complete the deal, and investors including Oracle founder Larry Ellison, Saudi Prince Alwaleed bin Talal and cryptocurrency exchange Binance have all taken equity stakes.
MUSK HIMSELF IS NOW VERY DIFFERENT TO THE GUY WHO SAVED TESLA IN 2008
They might just be taking a perfectly reasonable punt on the world’s richest man doing it again, or they might see something in how Elon built Tesla that tells them he can rebuild Twitter.
Many in the car industry still regard Elon as a faintly lunatic outsider. But he’s been CEO of Tesla since 2008, longer than any of his peers at the major car companies. In that time he has massively accelerated the development and adoption of electric cars, and built his vast fortune in an industry which generally provides pedestrian returns. He might be a lunatic, but he’s our lunatic now.
So after years of Elon-watching, can we in the car industry predict how things might go at Twitter? Possibly, and it’s not all good. The root of Elon’s success at both Tesla and SpaceX has been his ability to bulldoze through engineering obstacles thought insurmountable by the incumbents with a combination of genius, willpower and a disregard for the human frailty of his employees. At Tesla he produced cars with performance and range it took years for the established makers to match. He began building them at scale (arguably just as hard a task) and largely solved the range issue for Tesla owners by building a charging infrastructure. At SpaceX he decimated the cost-per-kilo of getting into orbit. And he has similarly radical plans for the underperforming Twitter, replacing its current reliance on advertising with a new financial ecosystem within which users can monetise the content they create, send payments to each other and even do their banking, with Twitter taking a tiny cut each time.
It’s a fine plan, but the Tesla experience makes us question whether Elon’s the right person to execute it. His successes to date have largely been ground-up engineering projects, staffed by people who knew what they were getting into when they signed up but who still frequently got ejected anyway.
Twitter is very different.
Musk inherited a staff of around 7400 with a particular, pre-existing corporate culture, a user base of around 240 million (minus the bots) and a bunch of advertisers who currently provide 90 per cent of revenue. Elon is, famously, not a people person. His relationship with Tesla’s original founders Martin Eberhardt and Mark Tarpenning ended quickly, with lawsuits, and since then everything’s been done Elon’s way. There are definitely shades of that in his early actions at Twitter. His attempt to impose his vision and a Tesla- like work ethic on Twitter’s staff and his disparagement of advertising have not gone well. The mass sackings and walk-outs and the pausing of major ad deals don’t yet pose an existential risk to Twitter, but they make its short- to medium-term future look rocky. Elon’s vision of a deeper and more financial Twitter ecosystem will take years to build, even at his work rate.
He’s been here before, of course, fighting to keep Tesla going in the midst of the financial crisis, when it had all of the development costs of a big car manufacturer but none of the revenue.
If he could save Tesla then, there’s still a good chance he can save Twitter now. The difference is that this crisis is at least partly of his own making, and the ‘cult of Elon’ which once (not unreasonably) put complete faith in his abilities and drove Tesla’s bonkers valuation seems to be losing some of its appeal.
The banks which provided the financing would usually have sold that debt on, but are reported to have been unable to do so without taking a huge loss, potential buyers having priced in the outside chance of Twitter going bust.
Tesla’s share price has cratered to a two-year low since the takeover, and while there are other, more concrete factors at work here – including recalls, quality concerns and the threat from Covid to its plant in China – at least some of this decline is down to sentiment; either the feeling that Musk will be distracted from Tesla by Twitter, or that his mishandling of a deal he tried to get out of and a less than stellar start as owner mean his halo is slipping.
Tesla’s history suggests Musk can fix Twitter too. But it’s a very different business, and Musk himself very different to the guy who saved Tesla in 2008. He is unimaginably wealthy now, seemingly as concerned with entertaining us as saving our world or opening new ones for us to inhabit, and perhaps a little further along the Howard Hughes mad-tycoon trajectory. And anyway, to Elon, how things have been done in the past is of absolutely no relevance to how he'll do them in future.
Tesla vs Twitter: the stats
Utterly different? Yes. But both need to pay the rent…
HOW MANY CUSTOMERS?
TESLA: It’s been all growth since 2012. By the end of 2020 total sales had topped a million; since then, it’s been selling 900k+ cars a year
TWITTER: 240 million users, between them sending around 200 billion tweets a year
HOW MANY WORKERS?
TESLA: Six manufacturing plants in three countries (China, US, Germany), plus retail and aftersales staff, add up to more than 90,000 employees
TWITTER: At the end of 2021, 7400+ staff. Now, around half that. Tomorrow, who knows…?
HOW MUCH MONEY?
TESLA: In 2021, it made $5.51bn profit on revenues of around $54bn; both trends appear to be rising healthily
TWITTER: Lost $221m in 2021. Sounds bad? That was an improvement on 2020’s $1.14bn loss, on revenue of $5.1bn
Amid all the noise around Twitter, Musk’s silent sports car is imminent