The Economist April 9th 2022 Business 57ElonMuskandTwitter
Another
Musk-have
W
hatwillhedowithit?Thatwasthe
bigquestionafterElonMuskletitbe
knownonApril4ththathehadamasseda
stakeof9.2%inTwitter,makinghimthe
socialmedia firm’s largest shareholder.
Will theworld’s richest man buy more
sharesoreventakeTwitterprivate?Will
thebossofTeslatakea handsonrolein
Twitter’smanagement?Willthelibertar
iantrollpushtobringbackDonaldTrump,
kickedofftheplatformafterincitinganas
saultontheCapitolinJanuary2021?Specu
lation mounted after Twitter said a day lat
er that Mr Musk would join its board.
As is his wont, Mr Musk will reveal his
plans in his own time and probably in his
own tweets to the 80m people who follow
him on the platform (not many fewer than
followed Mr Trump before he got the boot).
Inpostspublishedbeforeheannounced
the investment, he complained that Twit
ter “serves as the de facto public town
square” but fails “to adhere to freespeech
principles”. He urged the company to open
up the algorithm that decides which tweets
users see. In light of his welldocumented
sympathies for cryptocurrencies and theirunderlying technology, the blockchain, he
could try to turn Twitter into a decentral
ised service controlled by users.
It is hard to see how that would make
the company more profitable. Investors re
joiced anyway. Some may be believers in
the “Elon markets hypothesis”, which
holds that stocks should be valued based
not on fundamentals but on their proxim
ity to Mr Musk. Others may hope that he
can really shake things up. Twitter has
been a much bigger cultural success than a
commercial one. Before Mr Musk’s move
sent its share price up by a third, the firm’s
market value had been languishing around
$30bn, not much higher than where it was
when it went public in 2013. By compari
son, its socialmedia rival Meta (née Face
book), briefly became a $1trn company and
its market capitalisation is up more than
fivefold in the same period despite a re
cent tumble (it is currently worth $631bn).
Whatever Mr Musk’s designs for Twit
ter, one nearcertainty is that they will
require money, time and attention. That
raises another question: is the selfstyled
Technoking overextending himself?
Financially, he isn’t. The investment in
Twitter, which cost less than $3bn, is
chump change for Mr Musk—about 1% of
his net worth. A bigger concern, especially
to investors in his other firms, is over his
workload. Twitter comes on top of several
big corporate commitments. Besides run
ning Tesla, a $1.1trn electriccar giant with
nearly 100,000 employees, he heads up
SpaceX, a privately held rocketry firm val
ued at $100bn. He also helped found two
drilling startups, one making big holes to
build tunnels (The Boring Company), the
other making tiny ones to implant elec
trodes in the brain (Neuralink). Adding a
Twitter board seat to his résumé may over
tax even a functioning workaholic and as
tute delegator like Mr Musk. Now 50 years
old and the father of eight, he has been put
ting in 100hour weeks for decades, as he
recently revealed in an interview.
Where Mr Musk may be most over
extended is in his trolling—not so much of
his numerous critics (though he does plen
ty of that in his spare time) but of regula
tors. America’s Securities and Exchange
Commission was already after him for al
legedly violating a court agreement to have
his tweets lawyered before publishing,
reached after he tweeted in 2018 that he
had “funding secured” to take Tesla priv
ate, which he ended up not doing.
The Twitter investment may get him
into further trouble. He made it public a
few days after the deadline for such disclo
sures. And his filing suggested that he
would be a passive investor, which seems
at odds with his joining the board. Expect
his Twitter habit to raise evenmoreeye
brows now that he is no longerjusta big
user but a large shareholder, too.nS AN FRANCISCO
A stake in Twitter may be a meme too
far for the world’s richest man
ceo, chairman, social-media baronH
arvardbusinessschoolisall
about its graduates’ “lifelong im
pact” on society. insead exhorts its
alumni to “drive business as a force for
good”. Believe these and other mbapros
pectuses, and a student arriving as an
ordinary human being will leave as a
virtuous dogooder. Such claims have
always strained credulity. A new working
paper by Daron Acemoglu, Alex He and
Daniel le Maire, a trio of economists,
puts numbers on the disbelief.
The authors look at newly appointed
ceos in America and Denmark. They find
those with mbas increase returns on
assets in the five years after their ap
pointment—by a total of three percent
age points on average in America and 1.5
points in Denmark. But that is not be
cause they boost sales, ratchet up in
vestments or raise productivity. Rather,
the higher returns are the result of sup
pressing workers’ wages, which fall by
6% in America and 3% in Denmark over
the five years after an mbatakes charge.
In short, ushering mbas into corner
offices seems to boost shareholder value
by slicing the pie in certain ways, not by
making the pie bigger.
The researchers put this phenomenondowntochangeinbusinessschool
syllabuses. mbaprogrammes, says Mr
He, have over the years grown less fo
cused on technical aspects of finance
and management, and more obsessed
with maximising shareholder value and
corporate leanness. The result, he and
his colleagues contend, is that workers
have increasingly been seen as “costs to
be reduced” rather than an investment in
human capital.
People drawn to mbacourses in the
first place may, of course, simply be more
ruthless than holders of other degrees.
But there may be something to the sylla
bus hypothesis. Chief executives who
earned their mbas after 1980 were likelier
to stint on employees than graduates
from earlier mbaclasses. If the general
shareholderfriendly zeitgeist which
took hold around that time were the
whole explanation for this intergener
ational difference, then mbas and non
mbas ought to be equally affected. The
study shows this was not the case. Fur
ther work will be needed to see whether
feeding mbas modules such as “Re
imagining Capitalism” (Harvard) and
“Business and Society” (insead) does
anything to reverse the trend.BusinesseducationDegrees of unconcern
Bosses with mbas are good for profits but bad for workers