Elon Musk has proved visionary in defying conventional wisdom. When others said electric cars were the technology of the future, he made them a profitable venture in the present. When others claimed private space travel was a niche, he created an industry that looks as if it could boom in the next few years.
But when last week he gave Twitter employees an ultimatum – become “hardcore” workers or quit – he sounded to many like a throwback. It’s a vision “almost like the 1930s,” says economist Daniel Hamermesh, “that people work as hard as he tells them to because they haven’t got any alternatives. But clearly right now, they’ve got lots of alternatives.”
Mr. Musk is shaking up worker relations on several fronts: instituting massive layoffs, firing workers who disagree with him, and overhauling Twitter’s mission and corporate ethics around radical free speech, including antisemitic and racist commentary. His brash personal style has brought with it complications. Either Mr. Musk is playing the contrarian, foreseeing a labor force driven by the same workaholic passion that powered his drive to the top, or he has made a serious management mistake that threatens the viability of the company he just bought for $44 billion.
Why We Wrote This
Twitter might be the most extreme example of workplace culture issues that have been playing out in the United States since the pandemic. Is its new owner a contrarian visionary or did Elon Musk mistake this moment in labor?
Elon Musk has proved visionary in defying conventional wisdom. When others said electric cars were the technology of the future, he made them a profitable venture in the present. When others claimed private space travel was a niche, he created an industry that looks las if it could boom in the next few years.
But when last week he gave Twitter employees an ultimatum – become “hardcore” workers or quit – he sounded to many like a throwback. In the United States and many nations in the West, post-pandemic workers appear to be looking for balance and flexibility rather than long hours at the office.
It’s a vision “almost like the 1930s,” says Daniel Hamermesh, an economist at the University of Texas at Austin, “that people work as hard as he tells them to because they haven’t got any alternatives. But clearly right now, they’ve got lots of alternatives.”
Why We Wrote This
Twitter might be the most extreme example of workplace culture issues that have been playing out in the United States since the pandemic. Is its new owner a contrarian visionary or did Elon Musk mistake this moment in labor?
By Thursday, hundreds of remaining employees quit. (Mr. Musk had already laid off or fired about half of Twitter’s employees.) The chaos was so great that the company denied all workers badge access to its buildings, asking them to work from home temporarily. Then, Mr. Musk called an in-person meeting for Friday at 2 p.m. for “anyone who can write code.”
Mr. Musk is shaking up worker relations on several fronts: demanding employees to go “hardcore,” firing workers who disagree with him, and overhauling Twitter’s mission and corporate ethics around radical free speech, including antisemitic and racist commentary. On all these fronts, Mr. Musk’s brash personal style has brought with it complications. Either Mr. Musk is playing the contrarian, foreseeing a future labor force driven by the same workaholic passion that powered his drive to the top, or he has made a serious management mistake that threatens the viability of the company he just bought for some $44 billion.
Back to the office
Mr. Musk is hardly alone in asking employees to return to the office and commit to full days of in-person work. In June, Starbucks’ CEO said he was doing all he could to coax staff back to the office. In October, Goldman Sachs revealed it had convinced about two-thirds of its staff to return to the office five days a week, not far from its pre-pandemic norm. Last week, Apple CEO Tim Cook reiterated his call that employees ditch full-time work from home.
But Mr. Musk and the rest of corporate America have met with resistance from workers. In September, a survey of about 3,500 workers in Australia, Canada, the United Kingdom, and the U.S. found that nearly 6 in 10 said it was time to ditch the 40-hour workweek.
That may explain why these companies have coaxed and urged workers rather than issued ultimatums. The employee turmoil at Twitter is only the latest apparent misstep in Mr. Musk’s one-month ownership of the social media company and threatens to tarnish his reputation as a manager. It also hints that even the world’s richest man has financial limitations.
“Musk directionally has some good ideas” for Twitter, says Dan Ives, an analyst at Wedbush Securities. “His execution has been a train wreck.”
Twitter Blue’s rough launch
He has wasted no time in making changes. In less than a month, Mr. Musk has shaken up Twitter’s board, fired key executives, and laid off 3,600 workers. And that was before last week’s ultimatum, when more workers quit. His suggestion that users pay for verified status angered many celebrities, news organizations, and charities, who up to now got the designation for free because they were influential users whose brands were deemed important to defend against copycats.
Indeed, Twitter launched the Twitter Blue service, allowing anyone to become a verified user for $8 a month. Spoofers immediately began to pose as PepsiCo; Eli Lilly, tanking the pharmaceutical company’s stock by announcing that insulin would be “free”; and even Mr. Musk’s own Tesla, claiming proudly that the carmaker was using child labor. Twitter has now paused the service. But it, too, is now vulnerable to reputational harm since Mr. Musk eliminated its communication department, charged with protecting the brand.
If Mr. Musk were an ordinary entrepreneur, these moves might be understandable. Company founders often make lousy CEOs. By the time a typical startup company lists itself on a stock exchange, more than three-quarters of its founders have left the company, points out Noam Wasserman, author of “The Founder’s Dilemma” and dean of Yeshiva University’s business school in New York. “Founding skills are very different – often the opposite – from later-stage CEO skills,” he writes in an email, “which is both why a change in CEO is often needed as the company grows and why it’s rare to find someone who can do both well.”
Mr. Musk joins the ranks of exceptional founders, like auto pioneer Henry Ford and Microsoft’s Bill Gates, who successfully ran the companies they started. He’s pulled off the even rarer feat of successfully founding multiple companies and taking over others. The late Steve Jobs founded and managed two companies – Apple and NeXT computers – and took over Pixar, which became a computer-animation leader. Mr. Musk has founded four companies and taken over two: Tesla, his most profitable success so far, and Twitter.
So how is it that the consummate entrepreneur-CEO, who has demonstrated the ability to balance competing priorities by leading Tesla and SpaceX to the forefront of their respective industries, could fall flat on his face with Twitter?
For one, the model of a part-time CEO is not one that is widely embraced as best practice in the corporate world. “This is just weird,” says Eric Talley, a corporate law professor at Columbia Law School. “Who has a part-time CEO that’s a major company?”
Three of Mr. Musk’s four companies are transportation-based, which provides some overlap for his limited time to oversee each one. Also, Twitter is a much bigger and more established takeover for Mr. Musk than Tesla was, writes Mr. Wasserman.
Then there are the multiple financial challenges that may be straining even Mr. Musk’s considerable resources. He became a hero in Ukraine earlier this year when he offered free access to his satellite-based internet service, Starlink, to keep its war-torn populace connected. But it was such a financial drain that he threatened to cut off that access. The uproar was such that Mr. Musk continued the free service even though it could cost his SpaceX company $400 million over the next 12 months.
That sum may not sound like much for someone reportedly worth $180 billion. But as a startup, SpaceX is still dependent on rounds of funding from private sources. These investors may not take kindly to a $400-million-a-year drag on profitability.
By contrast, Tesla is a public company and quite profitable. But it faces an ever-growing list of competing electric vehicles from the world’s largest automakers. Even Mr. Musk’s whopping pay at Tesla is under attack from a shareholder suit claiming the company paid the “part-time CEO” too much in 2018.
Twitter’s own financial woes are also a burden. Twitter was struggling even before Mr. Musk came on the scene. By piling on extra debt to buy it, he now faces the challenge that its revenues won’t cover the payments needed to service that debt, says Professor Talley. From that perspective, Mr. Musk’s rush to raise revenue and cut workforce costs makes sense. In meetings with employees, he has reportedly painted a bleak picture of the company’s future without serious changes.
The political overtones surrounding the Twitter acquisition complicate his task. In 2021, two days after the storming of the Capitol, the social media company permanently banned its most famous user – then-President Donald Trump – because of the risk of further incitement to violence. That move alienated many conservatives, who moved to other platforms. On Saturday, after conducting a poll of Twitter users, Mr. Musk reinstated the former president’s account, which risks alienating liberal users. In the interim, Mr. Trump helped start a new social media company, Truth Social, and so far has expressed disinterest in returning to Twitter.
In the first five days after the libertarian billionaire took over, more than a million users deactivated or suspended their accounts, according to one estimate. That’s a drop in the bucket for a platform with more than 230 million daily active users, from which Twitter can profit. The bigger danger for Mr. Musk is that the turmoil at Twitter leaks over to his other companies, especially Tesla.
Are his bluntly expressed politics turning off potential Tesla buyers? Will his managerial missteps at Twitter cause Tesla investors to reevaluate the carmaker’s high value?
In a way, Mr. Musk faces his own version of the founder’s dilemma in trying to recover his reputation and managerial balance. Either he gives up Twitter leadership to someone more experienced or he risks failure by moving forward. The serial entrepreneur has stared bankruptcy in the face before and proved his naysayers wrong.
There are “a lot of challenges in the next three to six months,” says Mr. Ives, the Wedbush analyst. “If he gets through this dark storm, there are better days ahead.”