How much thinner can Elon Musk spread himself?

As originally featured on stuff.co.nz on 29 Apr 2022

The most surprising thing about Elon Musk buying Twitter, to me at least, wasn’t that he closed the deal, but at how surprised financial pundits were when he did so. Obviously those within the financial industry know a lot more about how difficult it is to close transactions of this magnitude than I do, but we are talking about the richest man in the world here - one who could have bought Twitter six times over using his net worth alone and still have more money left over than most of us will see in a lifetime.

It’s also Elon Musk who we’re talking about. At the age of 50 he’s already had more of an impact upon society and industry than Henry Ford and, I’d argue, Steve Jobs. Don’t believe me? Watch internal combustion engines disappear and humans occupy Mars over the next 10 years.

I found it surprising that anyone would have thought Musk’s bid for Twitter would fail given his current net worth, Twitter’s poor sharemarket performance (its share price peaked at around US$117 (NZ$178) per share as recently as February this year, but has regularly traded below its 2013 IPO price of around US$40 per share) and his track record for getting things done. Yeah, yeah there have been red herrings like his intention (tweeted, of course) to take Tesla private at US$420 per share, but prior to his Twitter takeover bid the guy had already shelled out over US$4b to buy 9.1% of the company. By this stage it was pretty clear that he wasn’t joking.

As a side note, it is simultaneously depressing and alarming how much control such a small number of American, Chinese and Russian billionaires have over the top 15 social networks. I couldn’t find a single social network in this top 15 that isn’t now under the control of Mark Zuckerberg (Facebook, WhatsApp, Instagram, Facebook Messenger), Larry Page and Sergey Brin (YouTube), Zhang Yiming (TikTok), Pavel Durov (Telegram) and a handful of other fabulously wealthy tech entrepreneurs.

Musk now becomes part of this very exclusive club and, although I admire his public commitment to openness and free speech, I am deeply unsettled by how much influence and power such a small number of people, all rich men, have over these platforms. This is particularly worrying given the problems with misinformation and disinformation that these platforms are grappling with.

Will Musk’s acquisition be good for Twitter?

Undoubtedly. Twitter has been poorly managed since the days of the Fail Whale (kids, ask your parents) and has been a consistent under-performer amongst its peers. In terms of monthly active users, Twitter hasn’t been in the top 10 for years. It currently ranks a lowly 15th place in terms of monthly active users. Due to the likes of Musk and (the now banned) Trump, Twitter occupies an outsized number of column inches for a social network, but with 436 million active monthly users it’s way behind the likes of Facebook (2.9 billion ) and YouTube (2.6 billion).

Elon Musk is a PR machine and the buzz that he’ll bring to Twitter alone will drive it to new heights. Twitter has also been rudderless for over a decade and Musk will bring fresh direction, new ideas, fewer spam bots and, of course, an iron rule to Twitter’s famously chaotic internal culture. The guy also has a proven ability to make the unprofitable profitable and I suspect the company will be producing regular and healthy cash flows in no time.

Will Musk’s acquisition be good for society as a whole?

I believe Musk when he says that he’s trying to save the human race by taking us to Mars and by buying Twitter. I have no doubt that he believes in his crusade, but I’m not so sure if he’s the guy who will single-handedly “save” free speech. The jury is out on this one, particularly as Musk is going to be highly susceptible to influence from the Chinese and US governments given his extensive business holdings in those countries.

Will Musk’s acquisition be good for Musk?

I’m not so sure and I think the biggest threat to Elon Musk is Musk himself.

The guy is famously impulsive. He’s already the CEO of two multi-billion dollar companies (Tesla and SpaceX) and has major interests in a long list of other companies (The Boring Company, Neuralink and OpenAI to name a few). Tesla is not only an automotive company, but also has interests in solar (it acquired SolarCity in 2016) and has announced that it is working on a humanoid robot, which it plans to produce in 2023 (yeah, right!) SpaceX is also simultaneously working on moon missions, sending people to Mars and, through its Starlink venture, attempting to become one of the world’s largest telecommunications companies.

I find him both brilliant and hilarious, but he’s also proven himself to be unpredictable and he clearly answers to no one.

Musk announced last year that he has Aspergers Syndrome and you can’t help but think that this has contributed to his almost obsessive, all-absorbing interest in rockets, electric vehicles and all of the other things that have made him so successful. But his obsessions have not always been helpful or productive.

Take, for example, his ongoing beef with the SEC. After Musk’s “$420 per share”’ tweet (420 being a marijuana reference) the SEC slapped him with fines and forced him to step down as Tesla’s chair. Since then Musk has continued to troll the SEC with hilariously immature “420” jibes. His offer to buy out Twitter was for US$54.20 per share and, of course, his SEC filing was dated 20 April (420 day in the US).

As entertaining and newsworthy as this makes him, how much more can Musk take on, or how more erratic can he become, before his empire starts to cave in on itself?

We should remember that Musk’s status as the richest person in the world is newfounded and is based almost entirely on Tesla’s astronomical share price. His net worth rose from about US$38b to over US$300b during 2021 alone and has continued to skyrocket with Tesla’s market cap this year.

Tesla outperformed the auto industry handily during 2021 as its innovation and nimbleness helped it deal with issues such as global component shortages and logistics problems better than any of its competitors. This drove it to a record US$3.5b profit for the fourth quarter of 2021.

But Tesla’s astronomical market cap (approximately US$1.4t at time of writing, or more than its five biggest rivals combined) is based on the anticipation of Tesla’s future, rather than historical, performance.

Investors are betting that Tesla will become the biggest, most profitable car (and, possibly, robotics) company ever.

You’d have to think twice before betting against Musk given his track record and prodigious work ethic, but is it practical to believe that he can drive Tesla to four to five times the size of Toyota while simultaneously saving humanity (via SpaceX) and democracy (via Twitter)?

I don’t think so, particularly given how Tesla is quickly losing its head start in the electric car market. A Tesla vehicle just isn’t as desirable as it once was given how many excellent alternatives there are on the market, with more and more appearing all the time.

I suspect Tesla’s share price will experience a significant correction and will come back down to earth over time. This will reduce Tesla’s ability to make huge investments in factories and new products that we’ve seen over the past few years, further limiting its ability to stay ahead of the electric vehicle pack.

And I suspect that Musk will continue to collect shiny new obsessions as they continue to catch his eye.

This is a problem for Tesla and SpaceX – companies that he’s both made in his image and that are huge, but still in the formative years.

If Musk continues to spread himself thinner and thinner then surely this is going to have a negative impact on the growth potential of these, and possibly other Musk-related companies.

Will he still have time to save the world?

— Damian Funnell, Choice Technology Founder