Why Elon Musk Bought Twitter
On Monday, Elon Musk bought Twitter for forty-four billion dollars. Musk, the C.E.O. of Tesla and the richest man on earth, plans to take the social-media company private, and has said that he wants Twitter to adhere more closely to the principles of free speech, which, in a statement, Musk called “the bedrock of a functioning democracy.” (In the same statement, he described Twitter as the “digital town square where matters vital to the future of humanity are debated.”) Musk himself is a frequent tweeter, and it is assumed that he will continue to use the platform, and potentially reinstate the account of former President Donald Trump. He is also thought to be less likely to ban people for violations of the platform’s policies, which themselves may change.
To talk about Musk and what the future holds for his newest acquisition, I spoke by phone with Matt Levine, a Bloomberg Opinion columnist who has been comprehensively reporting on and analyzing this story over the past month in his newsletter. During our conversation, which has been edited for length and clarity, we discussed how Musk has used Twitter to further his business interests, how he views freedom of speech, and why Twitter’s influence has long surpassed its financial value.
Why do you think Elon Musk is buying Twitter?
I assume it’s because he has some genuine set of political and social beliefs about how Twitter should be run, and he feels like it isn’t being run that way. I also think that he gets a lot of pleasure and utility out of tweeting and wants it to be optimized for his use. The value of his company is enhanced by his being a very strange public figure on Twitter, and so he clearly sees a lot of value in tweeting, and probably wants to own that for himself.
It’s not immediately obvious why Tesla is valued as highly as it is. So how much do you connect Tesla’s worth to Elon Musk as a person and the way he orients himself toward the world, especially on Twitter?
Tesla is a company, a relatively small car company, that makes good high-end electric cars, right? And the stock-market value of Tesla, which makes Elon Musk the richest person in the world, comes from a lot of extreme optimism about Tesla’s future ability to make more cars and become the dominant player in car-making as cars become more electric. Also, he’s just, like, a sort of futurist visionary—he’s building tunnels that he seems to think will be the future of transportation. He’s sending rockets into space. And so the value of these companies in the market is largely derived from expectations around how much money they’ll make in the future, as opposed to how much money they’ve made in the past. And those expectations are probably helped by having a charismatic, noisy founder who makes a lot of jokes online and is sort of a science-fiction character himself, and portrays himself as a science-fiction character, and who appeals to people who like that by making jokes.
Tesla’s an expensive company to run. It’s not like a social-media company, where you rent some space from some servers and type some code. You have to build big factories to build cars. And, historically, Tesla has needed a lot of money to run itself, and Tesla has been able to sell millions of dollars of stock to new shareholders, to some extent bypassing the way Wall Street usually works, and not finding big institutions to sell stock through banks but, rather, going out to the market and selling stock to individual shareholders who are big fans of Elon Musk. So his public persona has helped him raise money to build a big company that does real things, and has also kept the valuation of that company really high because people like it and like him, and trust in his vision for the future because he is an accessible character to them in a way that a lot of other C.E.O.s are not.
None of that translates in any direct way to the idea that owning Twitter will make that more valuable. At least it doesn’t to me. It’s not obvious to me how, if he bought Twitter, he would then be better able to get his message out, or better able to tell a story in a way that is good for Tesla and good for his economic interests. But it’s not obvious that it wouldn’t be. And he’s a really smart guy. One possible way to tell this story is that Twitter doesn’t make that much money compared to Facebook and other social-media companies. It’s not that big a company in terms of market cap. He might say, “Look, I get so much value out of this direct access to the public.” Owning that direct access to the public—owning that thing that creates so much value for Elon Musk and Tesla—it has to be valuable somehow, whether it’s by increasing the value that it creates for Tesla, or whether it’s by finding a way to monetize the value that it creates for sports stars and celebrities and Donald Trump and lots of other people. You know, Donald Trump’s tweets back when he was on Twitter could create billions or trillions of dollars’ worth of market moves, right? And Twitter never made a lot of money off of that. It’s not obvious how the company would, but if you’re sitting on top of a thing that can create that much value, surely, if you’re really smart then you can extract some value out of it.
In terms of the way that you described him using Twitter for his business image and business interests, is he sui generis, or do you see this more widely now?
I think it’s hard to imitate him, but I think people are, and I think that the classic example in the last five years or so has been the rise of meme stocks: companies like AMC and GameStop got very high market valuations and raised a lot of money through social media, popularity, and game memes. Adam Aron is the C.E.O. of AMC, and he’s this Harvard Business School graduate, a guy who’s worked at traditional corporate jobs. And he’s really embraced the meme-stock stuff, and does a lot of weird stuff on social media because his fans on Reddit and Twitter really like that and it seems to be good for the stock. And he’s pretty self-conscious about saying he works for retail meme investors now, and he’s going to do things that appeal to them.
I think there was this longtime perception that, if you were a high-powered corporate person, you could only get in trouble on Twitter and you should write bland things that are vetted by lawyers. And I think people are recognizing that Elon Musk has created a lot of value for his companies by being unhinged on Twitter. And I think there are imitators, and I think we’re kind of early in the game. There will be more imitators. And that applies to politics. It’s the obvious counterpart, where people have realized that you can make a lot of hay politically by being a poster.
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In a column earlier this month, you wrote, “Look, this all makes complete sense, obvious, intuitive, simple sense. If you are the richest person in the world, and annoying, and you constantly play a computer game, and you get a lot of enjoyment and sense of identity from that game, maybe a little addicted, then at some point you might have some suggestions for improvements in the game.” At one level, this is a more personal account of his desire to buy Twitter. And then there is the more financial, or business, account, which you have just explained. But, at the same time, it almost seems like it’s impossible to disaggregate those two things, unless you think that all of his behavior is some elaborate performance or something, which I don’t think anyone really believes.
I think that’s right. I mean, it’s possible that in his mind they are disaggregated, right, and I’m wrong about one of them. But what’s Tesla? At some level, I think he genuinely believes that he is doing something good for the world by electrifying cars and by getting rid of the internal-combustion engine. And I also think that he does enjoy making a lot of money and being rich from his Tesla stake.
Deep analysis: He likes money.
You could say I’m wrong. I mean, he doesn’t spend money on the type of luxuries that a lot of others do. I don’t know what motivates him. I don’t think it’s obvious that Tesla is either a pure moneymaking enterprise or a pure humanitarian enterprise. And I think that’s probably true of most of his enterprises, where he enjoys the personal challenges, like solving puzzles, and he enjoys being a rich, successful businessman, and he enjoys thinking that he’s doing something good for humanity. And I think that Twitter fits all of those things, too.
Is there anything we can tell from his S.E.C. filings or other statements about what his plans are for Twitter?
I can tell nothing. He talked at the ted conference about it. He said things like he wants more free speech, he wants to not permanently ban people, he wants less dependence on advertising because he thinks that is bad for free speech—which it is, by the way. I think that, if you unmoderate Twitter, you’re going to turn off advertisers. If you don’t care about advertisers, then you can have a more unmoderated Twitter. Things like that. Musk just tweeted that he wants his worst critics to remain on Twitter, because that’s what free speech means. I think a lot of people are worried that he’s going to ban his critics.
From a corporate-finance perspective, the idea is that you buy Twitter and then it’ll be a private company and he’ll just control it. So he doesn’t need to present a business plan to, for instance, the board of directors of Twitter or the shareholders of Twitter. He can just say the business line: you take the cash and go away, and then it’s my company to control. So he said some things. They’re not binding on him. If he owns the company, he owns the company, and he can kind of do what he wants.
On the other hand, he is getting money from outsiders: he’s getting money from banks, and potentially from equity partners. And so, presumably, he has some business plan for that, where he’s saying, “This is how I’m going to make money with Twitter.” He’s made noises about subscriptions.
His conception of free speech seems broadly in line with what’s become a more right-wing or conservative approach to speech issues, which essentially argues that social-media companies should not be banning people for things that are considered inappropriate or hate speech or whatever else. Is that your reading of his take on free speech, or is he saying something more interesting?
I haven’t heard anything interesting. I think that he has some history of being a troll on Twitter and of being kind of abusive. I think that his view of what is acceptable behavior on Twitter is that he would turn the dial a little lower, or higher, or whatever. He would turn the dial a little differently from how Twitter’s current management has turned it. He might have some interesting plan, but I haven’t heard it yet. He wants a little bit less moderation and a little bit more of a free-for-all.
This seems like an issue for tech companies generally, but how does that manifest itself with a company that is international? Obviously, Twitter exists in lots of countries that have fewer free-speech protections than we do, and often governments ask social-media companies to crack down on speech that they don’t like. Do you have a sense of how Twitter has dealt with those issues generally and how he might differ?
I think everyone’s had a hard time dealing with those issues. My impression is that, although Elon must operate internationally, his context for the buzzword “free speech” is largely American. But, if he then owns Twitter and the government in China wants to get the direct messages of dissidents in exchange for approving a factory for Tesla, he’s going to be facing pressures on him that are different from the pressures on a car company—pressures that are about speech and politics and user data. And I don’t know that he has better answers for those pressures than the not particularly glorious history of existing public social-media companies.
Musk has had some run-ins with the S.E.C. already. What can you tell us generally about his approach to the S.E.C.? And do you think the government will weigh in in any way on this attempt to buy Twitter?
His approach to the S.E.C. is, as he said publicly, that he does not respect the S.E.C. He’s called them bastards. He’s had a real bizarre set of confrontations with them, where he recklessly tweets stuff and the S.E.C. reviews it with a fine-tooth comb and tries to catch him saying things that aren’t true. And this all grew out of when he, in 2018, said that he was considering taking Tesla private, and that he had funding secured. And he just didn’t. He’s saying now that he did, but he just didn’t. And the S.E.C. thought that was misleading, which it was. So they sued him. They eventually settled for a relatively small amount of money. It was like twenty million dollars, which is nothing for him. [Musk also had to step down as chairman of the company.]
Since then, there’s been a lot of bickering about that settlement. He’s a smart guy who doesn’t seem to talk to lawyers before he does stuff. Can the S.E.C. stop this takeover? I don’t think so. I think that, from a securities-law perspective, the S.E.C. is in the business of protecting investors and letting them take this deal if the deal is agreed upon, and that is the right thing for the S.E.C. to do. I don’t know if anyone else in the government could stop this. If you’re thinking from first principles, and if you believe that Twitter is, in some sense, the town square, as Elon Musk has called it, then you might be nervous about a whimsical billionaire taking it private, right? You might say, “Oh, we should have some restrictions on not letting you ban your enemies or whatever.” You could imagine a government, somewhere in the world, saying, “You know, we should regulate it the way we used to with television stations, where you have some sort of duty of balance or whatever.” But the actual regulatory apparatus around social media in the U.S. doesn’t really do that. So I think that if he buys it and does whatever he wants with it, that’s no concern to U.S. regulators. I’m less clear what the European situation is. They do like to meddle a little more.
They just passed these new restrictions in Europe around social media. And it did seem as if, over the past year or two, there’s been this broad, at least rhetorical, consensus from both parties in the U.S. that social media is problematic and needs to be regulated more. However, in terms of this actually happening, it just seems quite far away.
I think that, in the U.S., no one wants to give up an advantage on social media. So you don’t want a regulation that would hinder your side from doing something. And I think there’s just a general inability to do ambitious regulation in modern American gridlock politics.
To take a step back, what have you made of Twitter as a company over the last fifteen years? I know it’s not the size of some other social-media companies, but I think everyone feels that it’s had an enormous impact on the world in some way.
My impression is that the stereotype is basically correct. The impact does not translate into the kind of dollar value that other social-media companies get. Selling ads on Instagram is pretty easy, because you’re looking at pretty pictures of stuff that you think is nice, and then they show you a picture of something else that they think you might think is nice. And then you go buy it, right? The Instagram advertising model is very straightforward. The Facebook advertising model is: We know everything about you, so we know you’re looking to buy a car. So here’s a car ad or whatever. For Twitter’s advertising model, they don’t know much about you. The stereotype is you’re there to fight and make weird jokes and troll people. The use case of Twitter is just not as advertising-friendly as the other big social-media companies. And so, on the one hand, it plausibly has a bigger impact on the world because you are there to have political debates. And, on the other hand, it’s harder to monetize.
So here’s this thing that’s had a huge impact on the world, and it’s had a huge impact on the guy who wants to buy it, turning him into the richest person in the world, and yet it’s never lived up to that as a business. If I were the richest person in the world, that would seem like an appealing business opportunity.
I think that’s right. It’s not obvious that every product that is influential for the world should be able to capture all that value for its shareholders. But, you know, maybe Elon Musk can find better ways to capture that value. I mean, he’s talking about subscriptions, right?
Yeah. What do you think about that?
It doesn’t strike me as a wildly brilliant way to capture that value. Maybe.
It seems like, if it worked monetarily, it would have some downsides in terms of this influence that we’re talking about.
Oh, yeah. I would agree. I don’t know how serious he is. I don’t think his plan for Twitter is to turn it into a subscription-only service, but what do I know? He’s not the first person to notice that this is a hugely influential product with a somewhat lacklustre business. I think it’s a genuinely hard problem—but, you know, he built rockets and stuff. He might be looking for another hard problem to tackle.
