A focus on that 71 million–mile journey to Mars?
5 October 2022 – So what happened? After spending weeks preparing for a legal battle to avoid buying Twitter, Elon Musk shrugged and said, “OK, I’ll buy it” – at exactly the $44 billion price he originally offered in April.
Knowing the media, geopbytes will be written about Elon Musk new offer to complete his proposed acquisition of Twitter – a dramatic U-turn on his decision to walk away from the deal. The media has been heaving all night and all day on Musk’s decision – looking at the backdrop against which he made this decision, whether it’s somehow an incredibly elaborate effort to get out of the deal, and what Twitter’s beleaguered employees were saying about it internally. I want to throw in my two-cents.
Like many, I read the letter Musk’s legal team sent Twitter with skepticism: the way it asks the court to stay or adjourn the trial before a settlement is reached; the way it declines to waive its ability to sue if “Twitter fails or refuses to comply with its obligations under the merger agreement”. Musk’s team has been whining endlessly that Twitter is refusing to comply with the agreement from the start as a way to delay the closing of the deal.
Yeah, just standard legal boilerplate. But it seems to me that if Musk was truly prepared to close the deal, he would have worked with Twitter to put out a joint statement indicating as much. How did Twitter respond? “We received the letter from the Musk parties which they have filed with the SEC. The intention of the company is to close the transaction at $54.20 per share”.
It was always Twitter’s intention to close at $54.20, of course; if they are to reach a new settlement with Musk after all this, they will surely seek some new assurances from their owner-to-be. And how Musk responds to that request, I think, will tell us a lot about how real today’s move really is.
Grand speculation greeted the move – as with all things Musk – about what was really going on behind the scenes. Was this another negotiating tactic? Does he have another plan up his sleeve?
Two biggies hit me:
1. Musk’s legal case wasn’t going well
If you’re looking for the Occam’s razor explanation for yesterday’s events, this is the one. Twitter’s lawyers had written a very good merger agreement, and Musk signed it without doing any due diligence. Like most US tech companies, Twitter is headquartered in Delaware, which prides itself on adherence to the rule of law and the tidy disposal of merger disputes. As the sterling team at Bloomberg Media (that’s Jeff Feeley, Ed Hammond, and Kurt Wagner) noted last night:
Musk’s legal team was getting the sense that the case was not going well, as Judge Kathaleen St. J. McCormick sided repeatedly with Twitter in pretrial rulings, according to one person familiar. Even with the late emergence of a Twitter whistleblower who alleged executives weren’t forthcoming on security and bot issues, there were concerns Musk’s side would not be able to prove a material adverse effect, the legal standard required to exit the contract.
2. Discovery reared its ugly head
For my non-ediscovery aware readers, electronic discovery (also ediscovery or e-discovery and sometimes just discovery) refers to discovery in legal proceedings such as this case (Musk’s mobile phone messages) where the information sought is in electronic format.
Days earlier, Musk had also found himself embarrassed by the disclosure of various mobile text messages in the discovery process sent to him by millionaires and billionaires offering advice, money, and other support as he sought to acquire Twitter. My colleague Cassandra Este covered this in detail earlier this week.
And Twitter had just been granted the right to search Musk’s messages further to include whether the Twitter whistleblower, Pieter “Mudge” Zatko, had contacted Musk before he tried to back out of the deal, which may have raised some unpleasant new questions for both of them – and revealed even more disclosures of various texts sent to him by his millionaires and billionaires crowd.
So had Musk lost, he faced two potential consequences. One is that the judge would have sided with Twitter and forced him to buy the company for $44 billion; the other, though, is that she would have sided with Twitter and forced Musk to pay only the $1 billion breakup fee stipulated in the merger agreement.
But as I noted a few months ago, the latter option was not terribly likely; as Matt Levine explained in July, it would be bad for the business world and the legal system that underpins it: “Letting the world’s richest person get out of a deal for a nominal fee because he got bored with it undermines the rule of law and the predictability of Delaware merger agreements.”
As usual, the latest twist in the Musk saga landed hardest on Twitter’s employees. Many of them were 45 minutes into a three-hour 2023 planning session, I’m told, when news of Musk’s latest antics hit the timeline. Meeting adjourned, I guess! Many are sending out the internal Slack channel, and scores of employees show their suspicions of Musk’s latest letter (I received multiple screenshots) with the gist being “I don’t understand why Elon would need to propose the deal again. The original one still stands. Just write the check, bro.”
Another employee summarized the mood by saying that employees generally have a low opinion of Musk, and whatever is going to happen next they would rather he and Twitter get on with it already. Since Musk’s announcement last spring he would buy Twitter, close to 1,500 employees have quit – 700 in September alone.
A few employees have actually offered some praise for current Twitter CEO Parag Agrawal, who has been mostly silent since the legal battle against Musk began, but appears to have the upper hand for the moment. He’s set to receive $42 million assuming Musk fires him after taking over. My favorite Slack comment in a post headlined “Congratulations, Parag” :
“You just completed the game. You outmaneuvered Musk, came out unscathed and millions of dollars richer. You’re under 40, have FU money, and your reputation is largely intact. You just won at life. Have to respect that. And to anyone else: Don’t hate the player. Hate the game.”
But I also think Musk’s reversal is simple: he has bigger challenges to contend with elsewhere. Spending hours and hours preparing for a trial everyone thought he was going to lose didn’t rank high on the list. Of course, you would think he would have realized that before entering this battle. But I suspect the reality of the distraction – coupled with perhaps other things needing more of his attention – really started to settle in. And I am sure the thought that even more embarrassing text messages and details might emerge about him and his friends didn’t help.
People who are plugged into the Musk juggernaut (a few run detailed blogs and Substacks tracking his every move) say he’s been preoccupied with the high-stakes launch of SpaceX’s new rocket. This is a big one. It’s the first orbital launch for the gigantic Starship rocket, the vehicle he hopes will eventually get people to Mars. He’s been camped out in Texas working on the launch, which he has said is likely to take place in November. That’s a huge potential milestone in his life’s work. Facing a grilling from Delaware lawyers is not.
It’s not a good time to take his eye off Tesla, either. Sales growth is up, but deliveries recently missed analysts’ expectations. The company said challenges with deliveries- not customer demand – caused the lag. But the weak economy and concerns over slower growth and geopolitical tensions with China make it a significant moment for the company.
Musk is a man of many priorities. And the man, who tweets on everything from Russia’s war with Ukraine to salted butter (he’s a fan), does seem prone to distraction. But when it comes to his businesses, he is a man of focus. He still sleeps on factory floors. He is meticulous and deliberate in how he spends his time. I think that version of Elon is the one that prevailed here.
Of course, it’s looking like he will in fact now own Twitter. And running that company, with its weakening ad revenue and endless speech issues, isn’t exactly a time-saver. I suspect he’ll be involved. How involved? Well, that will depend on how things are going in the center of Musk Inc., and specifically how things are going on that 71 million–mile journey to Mars.
But I suspect he’ll off-load management and that has raised all kinds of alarms. The impending deal always had watchdog groups worried that Twitter – already a combative place – will become worse, if not dangerous. The changing of the policies around misinformation, election ads, content, and undoing bans of hateful actors, will have harmful impacts on black users and voters. This deal going through in this moment, amplifies the harms that are going to unfold.
And if Musk sticks with his word and removes most of the content moderation rules in place, which could include those that ban hate speech, extremism and vaccine and election misinformation — it will turn the platform into an even more toxic “public square”, just before U.S. midterm elections this November.
And given the few names we have seen Musk vet as “potential chief operating officers for Twitter” he clearly demonstrates that he does not care.
As I have written before, there is nothing inevitable about democracy. For all the success that democracies have had over the past century or more, they are blips in history. Monarchies, oligarchies, and other forms of authoritarian rule have been far more common modes of human governance. The emergence of liberal democracies is associated with ideals of liberty and equality that may seem self-evident and irreversible.
But these ideals are far more fragile than we believe. Their success in the 20th century depended on unique technological conditions that are now proving ephemeral. In this second decade of the 21st century, liberalism has lost credibility. Questions about the ability of liberal democracy to provide for the middle class have grown louder; politics have grown more tribal; and in more and more countries, leaders are showing a penchant for demagoguery and autocracy. Brazil, Hungry and Italy are just the most recent examples.
But the causes of this political shift are complex, and too entangled to fully discuss in this post. But I will in the first part of a very long read next week.
We do know this. They are intertwined with current technological developments. The technology that favored democracy is changing, and as artificial intelligence and information science develops, it will change further. Information technology is continuing to leap forward (see my media team’s latest post for details). Even biotechnology is beginning to provide a window into our inner lives – our emotions, thoughts, and choices. Together, infotech and biotech will create unprecedented upheavals in human society, eroding human agency and, possibly, subverting human desires. Under such conditions, liberal democracy and free-market economics might become obsolete.
More to come.