The reasons for Musk’s takeover have been widely debated. The financial decision to purchase the company has been hailed as ludicrous by the market. After the announcement of the acquisition, Tesla stock tanked by 125 billion causing Musk to lose $39 billion of his net worth and after nearly a year, the stock has still not recovered.
This has led many to believe Musk’s own claims that Twitter was purchased in order to create an ‘inclusive arena for free speech’. Despite the obtuse irony of free speech being a purchasable commodity (costing a mere $44 billion), Musk has made it his mission to limit the regulations of speech on the platform. This has included unbanning highly controversial figures such as Donald Trump whose use of the platform played a major role in inciting insurrection on the US Capital on January 6th 2021; as well as Andrew Tate who was banned for suggesting rape victims ‘bear some responsibility’.
These changes have left advertisers uneasy with companies such as Audi and Pfizer pulling adverts over concerns with the new approach to moderation. The hesitation of advertisers is a major threat to Twitter with 90% of the platform’s revenue coming from advertisements. Despite this, Musk’s loyal supporters have hailed the weakened moderations as a step in the right direction for free expression on the platform.
Following Musk's Twitter announcement Tesla stocks tanked by 125 billion lowering his net worth by $39 billion
Since taking over the social media giant, Musk has engaged in a major shakeup the of company. In November Musk began a series of major lay-offs, taking the company's staff of 7500 to just over 2000. This involved culling major departments with insider reports showing that the entirety of the company’s human rights team as well as the machine learning and algorithmic ethics teams were sacked.
The quick-fire cuts came with little remorse; employees often found out they had been laid off by being unable to log into their computer or by simple email. This ruthlessness has come under heavy criticism from former employees with some raising concerns that the lack of staff would lead to failures in moderation and the overall running of the platform.
However, Musk has followed a strong trend of tech companies trimming the fat. Companies such as Meta laying off 11,000 jobs to try and control expenses. Many have argued that tech companies have been complacent in managing costs and allowing for ineffectual departments which have done little but soak up cash.
Big Tech has been able to get away with this due to historic high growth levels and lack of competition but with new tech giants like Tik Tok threatening the industry as well as rising economic pressures. The squeeze is well and truly on for Big Tech.
Some have suggested these cuts could work for Twitter with Musk himself claiming Twitter could reach positive cash flow by the second quarter. But the gunslinging approach to cost-cutting has left some current and former employees perplexed. Some have raised concerns that the company is opening itself to costly litigations down the line. “Elon would say ‘Let them sue’, it was a constant refrain,” said one former senior staffer who was let go in the latest round of cuts. Twitter is already facing a lawsuit from its San Francisco landlord for not paying rent and is expected to have to deal with major class action lawsuits from former employees who haven’t received their full severance packages. One former senior staffer claimed “It’s smoke and mirrors. [Musk] is doing all this deferring of eventual costs – so he can do the victory lap.”
Does this all mean that Twitter is doomed to fail? Not quite. When Musk purchased the company he claimed he was doing so not to make money, but as his moral duty to “try and help humanity”. His mission to create a “digital town square, where a wide range of beliefs can be debated in a healthy manner” has certainly not yet been achieved with the Twitter debate being just as rancid as before the takeover, if not significantly worse.
Alongside this Twitter’s financial woes have left pundits sceptical as to Musk’s ability to make it profitable again. But Musk has had this accusation thrown at him many times before. Tesla for years was considered doomed to fail, perhaps correctly, but in spite of this has become the leading electric vehicle company on the planet. So to write off Twitter this early is unwise.
The best description of Twitter’s current state is summed up by Charlie Munger’s opinion on Musk’s other firm Tesla, “My thoughts are two. I would never buy it, and I would never sell it short,”
