Look it has been a weird few years. In February 2021, during meme-stock mania, we had the Elon Markets Hypothesis, the idea that “the way finance works now is that things are valuable not based on their cash flows but on their proximity to Elon Musk”:
Musk is the richest person in the world, and in a dynamic, fun, traveling-to-Mars sort of way. It makes sense that his pronouncements have a certain religious character, that his tweets can endow arbitrary objects with mana. If the richest person in the world tweets “Gamestonk!” then I think that means that, if you buy GameStop stock, you will partake in his wealth and dynamism at a remove; you will get rich and have fun doing it. (Not! Investing! Advice!) Maybe that is not how it works on a conscious level—though I think that sometimes it is?—but surely at some subconscious level people want to order their lives in accordance with the cryptic instructions of a charismatic flying zillionaire.
Now, uh, things are different? Tesla Inc., Musk’s main company, was worth as much as $1.2 trillion at the start of this year; it’s now worth about $440 billion, and Musk is no longer the richest person in the world. One possibility — one that sort of fits within the spirit of the Elon Markets Hypothesis — is that Elon Musk no longer seems all that dynamic or fun or even interested in traveling to Mars; now he spends all his time moderating a niche internet message board and getting in fights with posters, and absolutely no one aspires to that.
Another possibility is that this entire hypothesis was (1) stupid or (2) a low-interest-rates phenomenon. When capital is cheap and plentiful and a dollar in the distant future is worth as much as a dollar today, the guy who promises robot taxis and Mars colonies can easily create value with a tweet. When it isn’t, he can’t.
On Twitter this weekend, investor Ross Gerber complained that Tesla’s stock isn’t doing that well, and Musk replied:
Go back and read your old Securities Analysis 101 textbook
In simple terms: As bank savings account interest rates, which are guaranteed, start to approach stock market returns, which are *not* guaranteed, people will increasingly move their money out of stocks into cash, thus causing stocks to drop.
People quickly pointed out that in fact rates have gone down, and competitors’ stocks have gone up, since Musk closed his deal to buy Twitter Inc., even as Tesla’s stock has plunged; Tesla is down because of Musk, not rates. Still it is interesting to see Musk endorsing Securities Analysis 101. Less than two years ago, it looked like Musk might have transcended Securities Analysis 101. If Musk’s businesses are valued based on the expected value of their future cash flows then that’s fine, I guess, but it is a disappointment. Tesla is apparently worth $440 billion based on its cash flows; it was worth $1.2 billion based on the Elon Markets Hypothesis.
Anyway Musk does seem to be pretty full time at Twitter, though he has said that he will step down as chief executive officer as soon as he can find a replacement CEO. That is a hard position to fill:
So the proposition is … what? You take all of your money, you give it to Musk to buy equity in his company at a price that you all agree is absurd? And then you get to work for him, running a sullen and broken Twitter according to his ever-shifting whims, until he changes his mind and fires you? And when he fires you he denies you severance and dares you to sue, and accuses you of being a sex criminal?
But it’s actually a little worse than that, because, as CEO, not only will you answer to Musk (as the owner of Twitter), but you’ll also be his boss. He tweeted yesterday: “I will resign as CEO as soon as I find someone foolish enough to take the job! After that, I will just run the software & servers teams.” So … like … if you are Twitter’s “CEO,” and you meet with your senior executives and decide that you need to update the software to attract advertisers or to comply with the law, what do you do? You walk down to the hardcore software-engineering floor, tiptoe into Musk’s nap room, shake him gently to wake him up, and say “Elon sir here is my software request”? And then he looks at it and says “what is this woke mind virus nonsense, never!” and runs out to yell at his engineers to build more Twitter polling analytics tools so he can have a more fine-tuned sense of which Twitter users love him and how much? What are we doing here? Musk is going to hire a CEO of a software company, but the CEO won’t be in charge of the software?
Also if you are a Tesla shareholder, the thing that you are mad about is that the CEO of Tesla is now working long hours as the CEO of Twitter, and I am not sure that you will be happier to learn that the CEO of Tesla will instead work long hours as a senior manager at Twitter? Like, I mean, at Tesla, the people who make the cars seem to have important jobs, while the CEO can apparently be absent for months at a time without impacting production too much. (Impacting the stock price, sure.) You could imagine Musk being CEO of Twitter as a part-time job, the way it is at Tesla, where he tweets a lot and makes some policy decisions but is not in the weeds of every engineering decision. But, no, he is in the weeds of every engineering decision, and wants to continue that even after he steps down as CEO.
Also if Musk does a bad job as head of software and servers, can the new CEO fire him? To be clear I would never, ever, ever want to be CEO of Twitter — even before Musk took it over, and certainly not after — but wouldn’t it be a little tempting to be CEO just so you could fire Musk? Like obviously he would then fire you, more or less immediately; you are both his boss (you’re the CEO and he is the head of a division) and his employee (you’re a manager and he’s the majority shareholder). But you’d have, like, 15 minutes. You could order security to escort him out of the building; you could put out a press release; you could tweet from the official account “Elon has been fired for not being hardcore enough, let that sink out.” Oh then he’d fire you and deny you severance and call you a sex criminal; your life would be horrible forever. But for a minute it would be very funny.