Published on August 4th, 2022
Elon Musk’s Twitter Bid fell Through not from Strategic Reasons
Published on August 4th, 2022
This article was originally published in Channel News Asia
Amid the automotive industry’s woes, the Twitter lawsuit is a distraction Elon Musk doesn’t need. All this turmoil is a result of Musk not having a lieutenant who can keep his excesses in check, says Howard Yu of IMD Business School.
LAUSANNE, Switzerland: Elon Musk is no stranger to self-inflicted pain. He constantly pushes himself to new limits, having founded groundbreaking companies like Tesla, SpaceX, and Neuralink, then in April, announcing his takeover bid of Twitter, vowing to reform the platform.
But the deal fell through less than three months later, when Musk attempted to terminate the US$44 billion merger agreement due to his concerns about the number of fake accounts on Twitter. He claimed Twitter violated the contract by providing false information.
Twitter responded with a lawsuit of more than 60 pages. In the counter-complaint, Twitter said that Musk was using bots as a pretext to get out of a contract for which he was experiencing buyer’s remorse.
On Jul 19, a judge ruled that Twitter’s lawsuit against Musk should go to a five-day trial in October.
The market downturn has hammered Twitter shares, as well as those of Tesla, which the billionaire was relying on to finance the transaction.
Musk has created turmoil for himself, a distraction he does not need. The automotive industry is experiencing a supply chain crisis, and Tesla is not immune.
In a recent earnings call, Musk said, “It’s been kind of supply chain hell for several years.” Delays in production at new factories in Texas and Berlin have transformed them into “gigantic money furnaces”, he said in an interview published in June.
Meanwhile, high-profile executives are departing. According to news reports, Musk’s right-hand man, Omead Afshar, could leave the company after being internally investigated for planned purchases of construction materials that could be for Musk’s personal use.
Earlier in July, Andrej Karpathy, head of artificial intelligence at Tesla, announced he will resign after a four-month sabbatical. Kristen Kavanaugh, who led diversity, equity, and inclusion, resigned a month prior.
How many more crises can a CEO endure?
SOME PEOPLE ARE ENERGISED BY CRISES
Some people can maintain their focus and energy levels in the face of stressful situations. Scientists believe this may be due to differences in the way our brains process dopamine.
Dopamine is a neurotransmitter that is associated with pleasure and reward. Those who thrive in times of crisis may have brains wired to seek out dopamine more than others. These people take risks or seek thrills, and are the ones who love paragliding, bungee jumping or skydiving.
Elon Musk is one of those people.
How someone’s brain is wired will also manifest in their interactions with others. Thomas Erikson, a Swedish behavioral scientist, asserts that people who are courageous, ambitious and motivated are frequently short-tempered, rash and dominant. He calls them “Red” people.
Red people are task-oriented extroverts who enjoy challenges and make rapid judgments. Inactivity irritates them more than anything else. Being eager to assume command and advance to the front, Reds are natural leaders.
On the opposite end of the spectrum are Green people: Loyal companions who will never forget your birthday. Because they are not envious of others’ success, they will not try to steal the spotlight. They will not assume command unless instructed, and will remain silent if the boss makes an unusual decision – not because they are indifferent, but because they prefer not to upset anyone.
In short, Greens are good teammates who will do everything in their power to preserve a relationship. A combination of Green and Red people is crucial for a team to function well.
THE ISSUE WITH TESLA IS THAT IT’S ALL MUSK
Elon Musk is, without question, a genius. He altered our conceptions of space travel and transportation with SpaceX and Tesla, both companies being worth billions of dollars. But there is one problem with Musk: He has no Green qualities.
Musk is the embodiment of the Red personality. These leaders, like Bill Gates and Steve Jobs, seek to reimagine and transform an industry or nation. But in contrast to Gates, Jobs and even Zuckerberg, Musk has never had or seen the need for a second-in-command.
We can see it in hard data. At the IMD business school, we have ranked companies based on their future readiness. While Tesla has dominated the global auto industry for years, the company has consistently lagged behind its peers in terms of ESG – environmental, social, and governance criteria.
From regulatory violations to media controversy, Tesla has chronic reputational issues, and the CEO does not intend to make any changes.
Bill Gates had Steve Ballmer at Microsoft. Steve Jobs had Tim Cook at Apple. Mark Zuckerberg had Sheryl Sandberg at Facebook. Behind every visionary leader stands a counterforce, who is either an execution tsar or someone who instills a sense of calmness within the organisation, or both.
In Musk’s case, there is no one. Tesla, one of the world’s most valuable companies, is strangely run by a single individual, a CEO who indiscriminately tweets about the company in a manner that even the most progressive attorneys would deem imprudent.
He signed an acquisition agreement and then withdrew a few months later, not primarily because his strategy or viewpoint on Twitter shifted, but because he deems himself invincible, above regulations and codes of conduct that others would not dare to violate.
Greens will tell you that Tesla’s problems are not with the product, but with the company’s culture. They are right.
Elon Musk, the company’s CEO, is aggressive, visionary and pushy. His lieutenants are fixers who quietly take orders instead of keeping his excesses in check, as evidenced by Tesla’s internal probe of Omead Afshar.
Referring to the ongoing challenges in the auto industry, Musk said “Some people don’t like change, but you need to embrace change if the alternative is a disaster.” Given growing diversions at Tesla, that quote may well apply to his leadership team as well.
Howard Yu is the LEGO Chair Professor of Management and Innovation at IMD business school. He is also the director for Center for Future Readiness.
Firms grow by consolidation and they can only do that by putting money into features that do not require any significant technical advances.