Like some people, I’ve been left scratching my head over Elon Musk’s decision to take over Twitter, although I have been enjoying the show so far. As somebody who works in IT, it’s been highly amusing to watch the internal business of Twitter’s IT department spill over into the public sphere over the past few weeks.
The thing that confuses me about Musk’s Twitter acquisition is that I don’t see any way for him to “win” but I see a whole lot of ways for him to lose. It looks to me like a lot of downside risk for very little potential upside gain. Aside from the money, the main loss he would suffer would be reputational damage. Given the value of his reputation and the very public nature of his Twitter takeover, I’m surprised he would gamble it in such an open fashion. If this were a poker game, Musk seems to have gone all in but it’s not clear what is in the pot or even what the rules are by which Musk can win.
Twitter seems to me a useful microcosm for the whole internet. Can Twitter actually be profitable? Can the internet be profitable? Is the internet profitable? Most people would assume the answer is ‘yes’, but it’s not at all clear that it is and the reason is because the arrival of the internet in the form we know it coincided with increasing manipulation of the financial markets. Almost all countries have been printing money in recent years including and especially the USA.
The way the system works is that newly printed money is given to financiers who invest it in the “real economy”. In the normal course of events, they would only invest in things that will actually generate a return. However, once financiers came to understand that the government was going to keep the money tap open indefinitely, they no longer needed to care about long-term returns. They started looking for short term pump-and-dump vehicles where they cash out and move onto the next thing. The IT industry is one of the main outlets for this kind of manoeuvre in the form of start-ups, which is how Twitter started its life.
From the point of view of investors, a start-up is like a pig that you’re fattening up for market. Ideally, this would involve building an actual viable business that has things like positive cash flow and maybe even, heaven forbid, runs a profit. But if the system can find a way to simply create the illusion of a viable business and sell it to a bunch of suckers (institutional investors like pension and superannuation funds) then nobody really cares and, as long as the central bank money tap stays turned on, the market always goes up even if the companies that constitute the market are not really viable businesses.
We can see how dependent the IT industry has become on the central bank money tap because right now there’s a bloodbath going on with layoffs galore, especially in the start-up space. This is due to the tightening of credit market conditions and the rising of interest rates. We may be entering the end game of the current status quo because the money printing of the last decade and more is finally showing up as real-world inflation rather than asset price inflation (of course, asset price inflation is very real if you’re trying to buy a house).
Most people would assume that start-ups are plucky young up-and-comers, lurking in garages or dingy rental properties, working 14 hour days and living on 2-minute noodles and instant coffee. There are still some like that. But start-ups that get financing up-front are usually run like mini-corporations. They rent office space, pay payroll tax, have a HR manager and, perhaps more importantly, they use the products of the IT giants.
Every start-up will have a commercial account with Google or Microsoft to handle internal requirements like email and video-conference. They will also host their website with one of those companies or, more likely, with Amazon (AWS). You can think of modern start-ups as digital serfs paying a tithe to their feudal overlords. What this means in practice is that if there is, for example, $1tn of new capital pumped into the start-up market each year, a significant portion of that will end up flowing into the coffers of Amazon, Google and Microsoft as well as an array of second-tier corporations.
The internet as we know it has become fundamentally tied to overarching political and economic conditions in which endless money printing has become the norm. It’s not an exaggeration to say that this money printing is now the cause of geopolitical conflict. A big part of the reason for the war in Ukraine was Russia saying enough is enough. Putin has openly stated that one of his goals is to bring an end to US dollar hegemony because he is sick of having revenue earned in US dollars inflated away. It’s fair to say that many other countries agree with him and will willingly move to an alternative once they think the time is right. When that happens, all bets are off and it’s not at all clear how much of the internet will be left in the aftermath.
Whether Twitter will be a viable company in that new world is anybody’s guess. The entire calculus of the poker game we call the modern economy is set to change drastically in the years ahead but it’s impossible to know when and how that will play out. Within the current calculus, Musk has shown himself to be a highly competent player; the best, if you go by net worth. So, the question then becomes: within the parameters of the game as it currently stands, what would success look like for Musk in relation to Twitter?
The first thing to note here is that Musk’s main other companies, SpaceX and Tesla, deal with domains that we might call pure engineering. The technical problems in such domains are very difficult but the results are easy to understand. An electric car either runs or it doesn’t. A rocket launch (and re-landing) either happens or it doesn’t. If you buy a Tesla and it breaks down, you’re unhappy. If it doesn’t, you’re happy. There’s no ambiguity there.
With Twitter, it’s the other way around: the technical problems are easy but the success criteria are obscure.
The original Twitter platform ran on a technology called Ruby-on-Rails and, within that technology, Twitter was dead easy to build. In fact, it was a standard training exercise you would give to an intermediate programmer to write their own version of Twitter. Of course, Twitter is a global website with enormous amounts of traffic. But, the technology to handle that traffic comes almost out of the box these days. If I was to guess, I’d say building and maintaining Twitter is an order of magnitude easier as an engineering challenge than building and maintaining a Tesla car or a SpaceX re-usable rocket. Therefore, I’d expect Musk to have no problem handling the engineering side of the Twitter equation.
It’s on the “customer experience” side of things that Twitter gets weird. If you buy a Tesla, you will be happy if the product performs as expected. And everybody is happy when a SpaceX rocket does something cool like land on a platform in the middle of the ocean.
With Twitter, being unhappy is the product. In recent years, Twitter has become a bottomless pit of misery; the digital equivalent of the biblical gnashing of teeth and rending of garments. A sizable portion of the users on Twitter, or at least the most vocal ones, use the platform in exactly the same way that George Orwell described as the two minutes of hate in 1984.
The horrible thing about the Two Minutes Hate was not that one was obliged to act a part, but, on the contrary, that it was impossible to avoid joining in. Within thirty seconds any pretence was always unnecessary. A hideous ecstasy of fear and vindictiveness, a desire to kill, to torture, to smash faces in with a sledge-hammer, seemed to flow through the whole group of people like an electric current, turning one even against one’s will into a grimacing, screaming lunatic. And yet the rage that one felt was an abstract, undirected emotion which could be switched from one object to another like the flame of a blowlamp.
A better description of Twitter could scarcely be written. But it was not always so.
I was a relatively early user of Twitter and in the early days it was almost devoid of animosity and trolling. Many of the early users of Twitter were scientists, artists, writers and thinkers including quite a lot of famous names. It was not uncommon to be able to read an interesting, real-time conversation on some subject and then have a very well-known expert in the field join in spontaneously. In those days, I used Twitter almost like an RSS feed with the links to blog posts or other interesting material being the main drawcard.
The tide turned once the politicians and propagandists got involved. But it was Trump who really turned Twitter into the 2 minutes hate with his presidential campaign. I remember that time well. I was following a couple of hundred people including a handful of friends, a larger handful of colleagues, some well-known names in my profession and a variety of other interesting individuals. It was extraordinary to watch people I personally knew turn instantly into frothy-mouthed loons who became so obsessed with Trump that their entire Twitter output became an endless diatribe of hatred. It was like watching somebody get sucked up into a vortex. Years later I saw the same dynamic, only worse, kick into action at the start of corona and I called it quits and I closed my account.
Why Twitter and social media in general suffers from this phenomenon is an interesting question. I suspect that it’s related to the basic dynamics of herd psychology. History matches Orwell’s 1984 description and shows how easily a mob can be roused to anger. You just need to provide a scapegoat. Twitter has an endless supply of scapegoats in the form of other users, some of whom are anonymous and some of whom are famous. Those scapegoats, like in 1984, are projected onto a screen (a computer/mobile phone screen) with the inherent de-humanisation entailed by that fact. Thus, social media combines the psychology of the 2 minutes of hate with the psychology of the old-fashioned public square hangings with the mob as judge, jury and executioner. Twitter accidentally provided political actors and propagandists with a tool to effortlessly form and manipulate mobs.
Musk seems to understand this on some level. One of his first tweets after buying the company was something like “let’s make Twitter maximum fun.” It’s a nice idea. But it seems to me that many of his users are very happy being miserable. Misery loves company and Twitter provides a global network of people to be miserable with. Amusingly, one of the leading hashtags over the last few days is about how people are leaving Twitter or Twitter is “dead”. People are using Twitter to dance on the presumptive imaginary grave that would be caused by them not using Twitter. That might just be Peak Internet.
It’s fitting that one of the big questions right now is whether Musk will let Trump back onto the platform. This one decision is symptomatic of the whole tangled mess that Musk has gotten himself into. Musk has now taken personal and public responsibility for a decision that is going to piss off a large group of his users whatever he does. He has all but guaranteed that he will become the scapegoat for a two minutes of hate that will last at least up until the next presidential election with either pro-Trump accounts bleating that it’s unfair that he’s banned or anti-Trump accounts bleating that it’s unfair that he’s back.
This doesn’t even get into the financial problems facing Twitter. How can Musk balance the demands of advertisers for a level of certainty in relation to ad placement against the demands of users not to have their user experience excessively manipulated. His experiment with charging users a fee for a premium version of Twitter speaks to this tension. Twitter might be viable if everybody paid a small fee for the service but in the internet world where people expect everything for free and have already been using the site for free for years, there’s no way such a move is possible. That should mean Musk will have to cave to the demands of the advertisers in order to generate revenue which is exactly what the previous management had already done. (Although note that, due to the financial conditions mentioned at the top of the post, it’s not clear that Musk needs to make Twitter turn a profit).
It’s noteworthy that Musk is on record as saying that he is on the autism spectrum. Autistic people are really good at solving engineering problems like car and rocket design. Those problems require discipline and focused attention over long periods of time. Modern Twitter is the exact opposite. It’s a steaming dung heap of emotional-ideological waste products swirling around a fetid cesspool of political doublespeak. Musk needed industrial-strength gumboots to wade into that mess. It looks to me like he only brought sneakers.
Whether Musk will drain the swamp, get dragged into it or somehow cut his losses and run is going to be fascinating to watch. I give him full respect for saying upfront that he’s going to try a heap of different things and see what works. He’s clearly not afraid to fail, even in public view, which is the true entrepreneur’s spirit.
Update: Trump’s back. Let the 2 minutes hate begin! – https://twitter.com/elonmusk/status/1594131768298315777