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Balancing the books<\/h3>\n
I don’t believe there’s vistas of unexploited value in Twitter just waiting to be unlocked by Musk.<\/p>\n
Twitter just doesn’t make as much money as it needs to. From the New York Times: [NYT<\/i><\/a>]<\/p>\n Last year, Twitter\u2019s interest expense was about $50 million. With the new debt taken on in the deal, that will now balloon to about $1 billion a year. Yet the company\u2019s operations last year generated about $630 million in cash flow to meet its financial obligations.<\/p><\/blockquote>\n Twitter\u2019s 2021 advertising revenue was $4.5 billion. Compare Google\u2019s $209 billion in ad revenue. [Barron\u2019s<\/i><\/a>]<\/p>\n Can Twitter squeeze more money from advertisers? Not by going the way Musk wants to.<\/p>\n Big-brand advertisers are centrists, and so are their target markets. They want a mass audience of reasonably normal people who are comfortable being there. Neither the advertisers nor their desired audience want weird, disturbing or horrible content.<\/p>\n Musk, however, wants a “free speech” site.<\/p>\n The term \u201cfree speech\u201d should<\/i> mean so much more than \u201cgibbering racists and bigots.\u201d Unfortunately, this is 2022, and there\u2019s one very loud group of swivel-eyed loons using these words to mean their assumed right to scream spittle into your face.<\/p>\n Others have written how there just isn\u2019t the market for the sort of right-wing \u201cfree speech\u201d site that Musk and his advisors Peter Thiel and David O. Sacks want. This sort of site has been tried, over and over \u2014 Parler, Gettr, Truth Social. These sites only ever attract a small core of fringe nutcases, who drive away any non-nutcases. Even Gab eventually had to put in content moderation. [The Verge<\/i><\/a>]<\/p>\n Major brands are already jumping ship from Twitter as fast as possible. Musk tried to reassure the brands that “free speech” wouldn’t mean odious nutters, and they don’t believe him. Some brands are departing loudly, and others are just quietly fading into the bushes. Sarah Personette, Twitter\u2019s chief commercial officer, resigned on Tuesday. She was the main liaison to the big brands. Musk will need a replacement who can reassure the brands. [Twitter<\/i><\/a>; <\/i>FT<\/i><\/a>, paywalled<\/i>]<\/p>\n Musk, Thiel and Sacks are telling their paying customers \u2014 the advertisers \u2014 that they\u2019re wrong. That\u2019s not going to work. They\u2019re pushing a piece of string.<\/p>\n Twitter can\u2019t work as a money-making business the way Thiel and Sacks have talked Musk into trying to run it. If Thiel wants this, he\u2019ll need to fund it himself, substantially, as an influence loss-leader.<\/p>\n Musk\u2019s great idea to save money at Twitter is to get as many staff to leave as possible, and fire a lot of the rest. Venture capitalist Jason Calacanis, who is now helping Musk at Twitter, suggested various forms of constructive dismissal<\/a> that should go down really badly with labour boards in California and New York \u2014 let alone outside the US \u2014 and are now on the public record. [TechCrunch<\/i><\/a>; <\/i>redacted discovery<\/i><\/a>, PDF<\/i>]<\/p>\n Firing everyone might work if all your employees are completely interchangeable, and it doesn\u2019t really matter who is in a particular job. It\u2019s a less great idea if you have particular people who remember how a large, complicated and legacy-filled proprietary system works, and who didn\u2019t jump ship any time in the previous six months.<\/p>\n Employees were shaky about Twitter between April and October, but at least the management were relatively normal. Since Musk arrived, his new team isn’t telling workers anything. They’ve had to scour tweets and rumour message boards to find out what the heck is going on. Key employees are jumping or being pushed. [Washington Post<\/i><\/a>]<\/p>\n Management by tweet is how you get a site that just breaks one day, and nobody who remains knows how to fix.<\/p>\n I don\u2019t think Musk wants Twitter to disappear. I do think he\u2019s going to get that unless someone can slap some sense into him.<\/p>\n Musk has overleveraged Tesla’s already-inflated stock price to buy Twitter, and even that didn\u2019t give him enough money.<\/p>\n If Tesla stock goes down, Musk is in a lot of trouble \u2014 he set himself up in what’s effectively death spiral financing, where you need to throw in more stock to compensate for the stock dropping in price, which then causes the stock to drop in price.<\/p>\n Musk’s highly leveraged deal also leaves Twitter without sufficient profit to even service the debt Musk ran up to buy it.<\/p>\n This leaves Musk in a position where he might have to ask his co-owners for more money \u2014 at which point they will expect much more influence.<\/p>\n Crypto remains heavily dependent on Twitter.<\/p>\n The Binance crypto exchange put $500 million toward the purchase of Twitter \u2014 a bit over a 1% share. Note that this cost them $500 million in actual money, not cryptos.<\/p>\n It’s not clear what direct effect Binance expects this to give them on what happens on Twitter, but I think it’s safe to say they expect the effect to be greater than zero. Perhaps Changpeng Zhao hopes being in with Twitter can be leveraged into wider influence. He\u2019s already suggested being on the Twitter board, if there ever is one. [Benzinga<\/i><\/a>]<\/p>\n Crypto Twitter is really pretty free for speech. There isn\u2019t much limit on talking about or pumping your cryptos.<\/p>\n The crypto scammers are a plague. Musk already finds crypto spammers personally annoying; it\u2019s possible he could have a word with someone from the relevant department who he hasn\u2019t fired yet.<\/p>\n Twitter founder Jack Dorsey already tried to put crypto-based tipping into the Twitter Tip Jar feature,<\/a> at least on iOS. I’ve never even heard of anyone using the Tip Jar \u2014 but Twitter is big, perhaps it works somewhere.<\/p>\n There was some idiot hopium-addled mumbling that Musk might run Twitter from a DAO. Twitter is never going to be governed meaningfully by a DAO. Musk is the proprietor, leading Twitter to a glorious new future. He\u2019s taking advice from his venture capital buddies, but he is absolutely not letting anyone other than himself have the final say.<\/p>\n If Musk is talking up cryptocurrency, then you should keep in mind that Musk says a lot of things.<\/p>\n The people Musk went into the Twitter deal with very much like one thing about cryptocurrency: the promise of a private currency for rich guys to swing their cash around as they please, without such dire threats to human liberty as taxes, capital controls or regulatory oversight. Musk, Thiel and Dorsey (who is also advising Musk) are very<\/i> into this promise of cryptocurrency.<\/p>\n I wrote about this in Foreign Policy<\/a> when Facebook\u2019s Libra was launched in June 2019, and again in Libra Shrugged<\/i><\/a> chapter 5. I should really have broken it out as its own chapter \u2014 I\u2019ve come to think that a private currency for rich guys to use out of sight of governments was always the real point of Libra. Or what sold it to the Facebook board, anyway. (Thiel was on the Facebook board at the time.)<\/p>\n I don’t believe cryptocurrency can deliver on this promise of the sort of private money that rich guys want. When Facebook tried with Libra, it was rejected instantly by every regulator in the world. The regulators are still writing new rules to stop any such thing happening again.<\/p>\nDoing less with less<\/h3>\n
Death spiral financing<\/h3>\n
Yes, but what about crypto?<\/h3>\n
Liberty for me and my money<\/h3>\n
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