What Elon Musk's messages tell us
The Twitter v. Musk saga continues to rage on.
Musk and Twitter announced an acquisition agreement on 25th April 2022. A couple of months later Musk pulled out, citing concerns about bots and spam accounts on the platform. Now Twitter is suing Musk to force him to follow through with the deal.
Last week, the Delaware Court of Chancery released a trove of messages that Musk exchanged with people whilst he contemplated, and then proceeded with, an offer to buy Twitter for $43 billion.
And they make compelling reading.
Irresistible reading
Hundreds of messages between Musk and his contacts show the billionaire technologist engaging with Twitter’s management, his advisers at Morgan Stanley, potential investors such as FTX chief executive Sam Bankman-Fried, and random supporters of his bid, including podcast host Joe Rogan.
These messages provide a unique insight into the dealmaking process – or lack thereof. They make irresistible reading, with a host of characters massaging Musk’s ego, seeking to acquire access to him and his ill-fated deal.
Reality distortion
Musk’s exchanges with potential investors are almost comic in their simplicity. There has always been a healthy sense of reality distortion amongst Silicon Valley’s elite, but these guys take it to the next level, with vast sums of money and complex transactions reduced to prosaic one-liners.
One of my favourite takes comes from The Atlantic:
In a separate exchange, Musk asks Ellison if he’d like to invest in taking Twitter private. “Yes, of course,” Ellison replies. “A billion … or whatever you recommend.” Easy enough.
Reading through, you understand how Adam Neumann came back from the dead to raise huge amounts of money (Andreessen Horowitz’s have put $350 million into his new real-estate start-up), despite tanking WeWork.
Past performance, future success
As Sam Bankman-Fried, the CEO and co-founder of FTX, has observed:
“Most venture-capitalist investments are not “the paragon of efficient markets”, and are driven primarily by FOMO and hype.”
Of course, those who might have assumed that venture investors are super sophisticated might read all this in horror. But, the flip side is that this is a great illustration of the power of Bayes’ Theory.
As a reminder, Bayes’ Theory describes the probability of an event, based on prior knowledge of conditions that might be related to the event. VCs are always looking to derisk investments using this heuristic, and if someone has been a successful startup founder in the past, the probability that they will be successful in the future is higher… a lot higher.
The tech industry obviously takes this to extremes, with Elon Musk being offered a casual few billion to buy Twitter with essentially zero-due diligence on his plans (while those of us with slightly less cachet than Musk have to jump through a million hoops to raise funding).
Fear, greed, and FOMO
The process of acquiring high-profile technology companies is surprisingly low-tech. Clearly, despite attempts to systematise startup investing with data science, this remains a people’s game governed by personal relationships, network effects, and social capital. It’s not what you know; it’s who you know, and how much capital you can muster at a moment’s notice.
While this modus operandi leaves investors open to potentially high profile screwups (maybe Neumann’s new venture fails just like WeWork), given the low probabilities associated with successful tech investing, it’s hard to argue that net-net, it isn’t a successful strategy.
But it also shows that no matter how many billions you’ve made investing in or starting companies, the human emotions of FOMO, fear, greed, and everything else are still there – the same applies to the rest of us.
