09 April 2022 |

How will Elon change Twitter?

By Trung Phan

Elon + Twitter

Here’s what happened 

For the uninitiated, please let me initiate you on how Elon now owns 9.1% of Twitter and sits on its board:

  • June 2009 – December 2021: Elon spends a lot of time on Twitter sh**posting, dropping memes and sharing videos of SpaceX launches / Tesla releases. 
  • January 31, 2022: Twitter’s stock price is ~$37. For reference, it went public in November 2013 and closed its first day of trading at ~$45 (translation: $TWTR has sucked big time as a stock investment). Spying a deal, Elon buys 620k shares of the stock (~$23m). He keeps buying at this cadence for the following two months. 
  • March 14, 2022: Elon’s ownership of Twitter crosses 5%, which requires an SEC filing within 10 days. 
  • March 24, 2022: 10 days pass. Elon does not submit an SEC filing. But he does run a Twitter poll that asks if the platform’s algorithm should be open source (70% of the 1.1m respondents say “yes”)
  • March 25, 2022: Elon runs another polls that reads: “Free speech is essential to a functioning democracy. Do you believe twitter rigorously adheres to this principle?” (70% of the 2m respondents say “no”). He follows up by noting that “The consequences of this poll will be important. Please vote carefully.”
  • March 26, 2022: Elon asks two questions on Twitter: 1) “Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy. What should be done?” ; and 2) “Is a new platform needed?”
  • March 27, 2022: He tweets “Seize the memes of production!” (which — as it turns out — was exactly what he was doing).
  • March 28, 2022: He posts a meme about Google Maps. 
  • April 2, 2022: He posts a meme about Boba Fett. 
  • April 3, 2022: He writes “Berlin rocks” as a nod to the opening of a Gigafactory in Germany (where Elon may or may not have been rejected at the door of one of the country’s most famous sex club)
  • April 4, 2022: Elon files a Schedule 13G form, which shows he spent ~$2.9B to  acquire a 9.2% stake in Twitter (about 1% of his net worth). He’s officially Twitter’s largest shareholder (in comparison, former CEO and co-founder Jack Dorsey owns ~2% of Twitter). Notably, a 13G form is for “passive” investors, who do not plan to influence a company. $TWTR jump 26% on the news to ~$50. Elon makes $700m on his position. 

    In a very non-passive move, Elon runs a poll asking if Twitter should have an edit button (quite comically, “yes” is misspelt “yse” and “no” is misspelt “on”; 74% of 4.4m respondents say “yse”). Twitter’s new CEO Parag Agrawal quote retweets the poll with a nod to the earlier Musk tweet: “The consequences of this poll will be important. Please vote carefully.”
  • April 5, 2022: Elon changes his SEC filing from a Schedule 13G (for passive investor) to a Schedule 13D (activist investor). Also, the new filing shows that he owns 9.1% of Twitter (his team incorrectly filed 327k extra share purchases). 

    Agaral announces that Elon is joining Twitter’s board and that they’ve been speaking for weeks. To join the board, Elon agrees to not own more than 14.9% of the company. Jack Dorsey applauds the move noting that
    “[Elon] cares deeply about our world and Twitter’s role in it. Parag and Elon both lead with their hearts, and they will be an incredible team.”

    Elon says he is looking forward to working with them to make “significant improvements to Twitter in the coming months.” Twitter announces it has been working on an edit button (separate from Elon’s poll). 
  • April 7, 2022: A leaked report shows that Twitter will host a town hall for its employees to ask Elon and Parag questions about the former’s new role (there’s been an “outcry” by some employees over Elon’s buying up of Twitter).

    That day, Elon posts a meme about the Twitter edit button. Plot twist: it’s a meme that I made and posted on Monday (for those wondering if I’m upset that Elon “took” my meme…I can say that I am not upset and always watermark your work lol).

Here is where we stand. 

On the SEC front, Elon is in hot water over his filings. By sending the forms in late, he may have “saved himself about $140 million” by buying at an average price of $39 during the days that his disclosure should have already been made (remember, the stock shot up to ~$50 when he officially announced). Matt Levine — who has been the go-to source covering this story — says it’s unlikely the SEC can clawback that amount; rather, Elon will likely be hit with a “hundreds of thousands of dollar” fine. 

Either way, Elon is now Twitter’s largest shareholder and one of 12 board members. He’s also the platform’s most influential user and an antagonist to the Woke crowd that think his takes on “free speech” are just cover for being an asshole (or worse). 

People are also upset that another organ of media — like Bezos with The Washington Post and Marc Benioff with Time Magazine —  has been co-opted by a billionaire. It wouldn’t be the first time a centi-billionaire tried to capture the Twitter magic, either: Steve Ballmer once owned 4% of the social network and was its biggest shareholder before selling out in 2018 (fun fact: Bezos made an angel investment in Twitter in 2008).

At Twitter HQ, employees are concerned about how much influence Musk wields (and how it will effect their day-to-day work). Meanwhile, advertisers are worried that a potential reduction in content moderation will make Twitter harder to spend money on (other marketers say that the Elon hype machine will make Twitter even more attractive for advertising). 

Now that we know “what”, let’s move on to the “why”. 

Why did Elon buy 9.1% of Twitter?

Here are some theories: 

  • Hobby: As Levine puts it, “nobody has ever cared more about anything than [Elon] cares about tweeting”. Elon really likes tweeting. It’s basically a hobby. Spending 1% of your net worth for a hobby sounds reasonable. I buy Retro Air Jordans. Elon buys social networks. Same same. 
  • SEC: Ranjan Roy at Margins posits that the SEC was about to come down hard on Elon, who’s been in the agency’s cross hairs since his infamous 2018 tweet: “Am considering taking Tesla private at $420. Funding secured.”

    He’s also been pinged for tweeting out information regarding Tesla production numbers and its stock price. Ultimately, he paid a fine and was supposed to have a “Twitter Sitter” vet the legality of all his tweets (hasn’t happened). 

    Fast forward to November 2021, Musk runs a Twitter poll on whether he should sell a portion of his Tesla stake for taxes. Tesla’s stock falls 15% on the next trading day. Meanwhile, Elon’s brother Kimbal — a Tesla board member — sells $108m worth of Tesla a day prior to the poll. While Elon denies giving insider information, the SEC has been turning up the heat on the incident. 

    To Roy, part of Elon’s move to take a big stake in Twitter is to make sure the SEC can’t kick him off the platform. Because if the President of the United States can be de-platformed, anyone can. 
  • Marketing: Apart from the SEC, Elon has every reason in the world to protect his place on top of Twitterdom. Why? Because Tesla/SpaceX basically spend $0 on marketing and advertising. Elon is a one-person attention machine. He communicates directly to 81m followers and his tweets control the news cycle. There’s no question that his mastery of Twitter is responsible for a material amount of his net worth. 
  • Free speech: Elon has tweeted that he’s a free speech absolutist. This was the issue he brought up in the lead-up to the official filing of his Twitter ownership. As a private company, Twitter isn’t held to the First Amendment standard but Elon clearly feels that tech moderation is a problem. 
  • Global nervous system: This is my pet theory. Yes, Elon uses Twitter for his businesses. But don’t forget his more philosophical musings. When Musk found out about the internet, he thought humanity finally had a “nervous system and access to any part of humanity’s knowledge from anywhere”. As the world’s pre-imminent real-time communication medium, Twitter is an approximation of that nervous system. 

Elon’s Twitter play is probably some combination of all the theories. It’s almost certainly not a commercial consideration. Compared to Twitter’s central role in culture, politics, media and tech, the social network has been criminally under-monetized through its existence. And there are no easy fixes.  

As noted above, there are other reasons than money for Elon to care. Those reasons are important enough to him that it wouldn’t be shocking if he took the CEO seat sometime in the near future. Dorsey ran Twitter while also heading Square/Block. Elon has been juggling multiple CEO roles (Tesla, SpaceX) for nearly two decades. 

Meanwhile, Agrawal is a very green CEO and doesn’t have the founder clout. There is precedent for someone buying their way to the top seat of a culturally-important media asset: in 1986, Larry Tisch bought 25% of CBS and later became CEO. 

Elon doing the same is 100% a possibility. 

How will Twitter change? 

Twitter’s future starts with Elon’s relationship with Jack, 

It’s a full-blown bromance.

During a Twitter AMA with Kara Swisher in 2019, Jack said that Elon was the most “influential” person on the social network. Also that year, Jack shared these thoughts about Elon in a Rolling Stone interview:

I love him. I love what he’s trying to do, and I want to help him in whatever way.

tweeted the quote last week and Jack re-affirmed his position. 

Elon has voiced support for Jack on many occasions, saying he has a “good heart”.

More practically, the two love Twitter and share similar views on free speech and content moderation. They also want Twitter’s algorithm to be open-source and legible. 

Before he left as Twitter’s CEO in November 2021, Jack was working on a decentralized social network protocol called Bluesky. The project gained extra urgency after Jack made the very controversial decision to boot Donald Trump.

Just as email is built on a decentralized protocol (Internet Message Access Protocol, IMAP), Jack wants people to be able to spin up their own social networks with their own moderation rules separate from Twitter. Today, there are many email providers (Gmail, Yahoo, Superhuman). In a Bluesky world, Twitter would be one of many microblogging social networks.

Even as an open protocol, Bluesky can still make money by providing moderation tools and giving access to the main Twitter social graph. 

Bluesky is already making progress. But having Elon support it could increase product velocity. Aside from Bluesky, here are Twitter tools Elon has tweeted about: 

  • Edit button: As mentioned, this is already in the works. I used to be pro-edit button but now agree with the view that its ripe for abuse. A tweet can go viral, then the user can change the message to something scammy or insanely offensive. Even if you add an edit history, only a small fraction of people read those. Edits should be time — or character — limited and made very clear (eg. with highlights or strikethroughs). 
  • Bots: Elon calls crypto scam bots the “single most annoying problem on Twitter”. (a related tweet: “Troll/bot networks on Twitter are a *dire* problem for adversely affecting public discourse & ripping people off. Just dropping their prominence as a function of probable gaming of the system would be a big improvement.”) He’s clearly motivated to address this issue. 
  • Verification: One way to deal with bots is with an improved verification system. It’s very hard to get Twitter verified now, but Elon thinks it should be “more widespread” and a person just needs “to prove who they claim to be.” That’s one way to slow down the indiscriminate spawning of random anon accounts.    
  • NFT profile pictures: Definitely not a fan. 
  • DMs: He’s complained about how the “laughing emoji” looks in direct messages. Sure. 

Per his tweets, Elon is also a big fan of another social network: Reddit.

Why? Well, it seems he’s very impressed by the technical knowledge on the platform. He tweeted that the SpaceX subreddit is “very well-informed…really impressive analysis by some commenters”. On one occasion, Elon applauded a Reddit answer to an AI question and said “Reddit is hardcore. Mostly correct analysis. Anyone who did this analysis should interview at Tesla.”

More broadly, he believes that you can “basically learn anything on YouTube/Reddit.” 

While the nexus of Twitter is real-time news and communication that optimized for virality, Reddit is built around communities (subreddits) with a robust ranking system that optimizes for quality (over pure vitality). 

Twitter is currently working on community tools and is experimenting with downvotes. Could these features receive extra emphasis now? 

And here are his thoughts on other social networks: 

  • Facebook: Elon’s said multiple times that Facebook gives him the willies. He’s also said “what’s facebook”, “facebook sucks” and explains why he never advertised on the platform: “None of my companies buy advertising or pay famous people to fake endorse. Product lives or dies on its own merits.” It seems he’s not a fan of the surveillance capital advertising model.
  • Instagram: On the Joe Rogan podcast, Elon shares this on IG, “Instagram people look like they have a much better life than they really do. If you look at everyone on Instagram, you might think ‘man, there are all these happy beautiful people and I’m not that good looking and I’m not that happy…so I must suck’. That’s going to make you feel sad. Some of the happiest-seeming people are actually some of the saddest people in reality. And nobody looks good all the time. It doesn’t matter who you are.”
  • TikTok: Tesla’s head of AI tweeted “TikTok is scary good. It’s digital crack. First time I feel attacked by AI in the brain.” To which Elon replied “TikTok feels like such an obvious AI attack that it’s annoying.”

The main conclusion I draw from Elon’s social network takes is that we’ll probably see a bigger push on the subscription side. Elon knows a large Twitter audience is worth its weight in gold. People (and brands) with big followings should pay up. 

In addition to having big accounts to pay to use the service, Twitter needs to soup out its Blue subscription with more features (maybe some of that Reddit stuff we discussed). 

A payment function could also help fight bots if the algo punishes clearly fake accounts with no skin in the game. Finally, a subscription push nudges Twitter away from the ad-based model, which drives so much of the outrage-engagement-bait content.  

Excited for the changes…as long as they don’t give us the willies. 

Some good financial advice: The 2x rule 

The latest Not Investment Advice (NIA) podcast was a hoot. We hosted Nick Maggiulli, the COO of Ritholtz Wealth Management and prolific finance blogger (“Of Dollars and Data”). He just wrote a new book called Just Keep Buying. 

Nick dropped some gems including advice on how deal with spending guilt. It’s called the 2x Rule: 

“Anytime I splurge on something, I take the same amount of money and invest it as well.  So if I want to buy a $300 pair of shoes, I’ll also have to buy $300 worth of equities (or give it to charity). By using this rule, I re-evaluate if I really want something because it forces me to save 2x the amount. If I’m not wiling to make that commitment, I won’t,”

Nick drops a ton of other great saving and investing insights here (def check out his new book). Subscribe Here

Links and Memes 

AI art: OpenAI — the AI research lab — released the latest version of its AI-powered text-to-image image generation technology (DALL-E). On Twitter, the organization’s CEO Sam Altman asked people for text prompts and he quickly produced AI-generated images using DALL-E.

This Reddit thread collects all the prompts and image outputs (they are very cool). Here’s a notable excerpt from Altman’s blog post on the project:

It’s a reminder that predictions about AI are very difficult to make. A decade ago, the conventional wisdom was that AI would first impact physical labor, and then cognitive labor, and then maybe someday it could do creative work. It now looks like it’s going to go in the opposite order.

Comments in the Reddit thread do mention ways that DALL-E can augment existing creative work (eg. help game developers create scenes) instead of replacing workers. I have no idea what the bar is to replace visual artists, but the AI-generated images below look pretty good…

Las Vegas: My latest Bloomberg Opinion piece is on the Las Vegas F1. An industry vet tells me the race could rival Monaco in terms of “prestige” if executed well. The funniest part of my research: Las Vegas actually hosted an F1 race in 1981 and 1982. It was pathetic. The race track was built in parking lot of Ceasar’s Palace and look like a Go-Kart arena. The new track — for the 2023 race — includes landmarks like The Strip, The Bellagio, The Venetian etc.

Fast-food lawsuit: Burger King is facing a class-action lawsuit over false advertising, including the fact that its Whopper is up to 35% smaller than shown in photos. This tomfoolery brings back memories of that time Subway was sued because its foot long subs weren’t…a foot long lol. Anyways, the Burger King legal filing has some super formal “evidence” of the crime.

For more on fast-food perception, watch this video of a McDonald’s food stylist making the Quarter Pounder look nice. The team spends hours and pulls out all the tricks — like using a blow dryer to melt cheese — to make the final product presentable. It’s from the official McDonald’s YouTube channel and the comments are hilariously turned off.

And here are some memes (see y’all next week): 

  • For me, the word is “successfully”. It always guffs me up (ironic, I know).