Time has a lot to do with our perception. Our focus on different things at different levels of intensity creates deceleration/acceleration and other opposing forces that coexist. I feel I am there with my digital life.
But Elon has unleashed other discoveries.
ABOVE: created using the AI system DALL-E that can create realistic images and art from a description in natural language. The prompt? “a cartoon blue bird sweating and screaming, digital art”
28 November 2022 (Washington, DC) – Day-to-day news is relentless, especially when the news medium … Twitter … is the news. In the moment, it’s easy to let insignificant issues command an unreasonable share of time, energy, and attention. Yours may not be a billionaire bulldozing social media, but you likely have one. Someone at work, an argument with a friend, something in the news … anything. We are programmed to think we’re the center of the universe; that right now is the only moment, what’s on the surface is the only reality.
My God, it was just 2 years ago we were trapped in what felt like a moment that would never end, with no travel, home school, little socializing (Zoom “happy hours”? Are you kidding me?) and the unseen threat of a microscopic virus haunting every interaction.
But sometimes, it helps to pause, and reflect on other moments. I spent the long Thanksgiving holiday weekend reading and working, mostly with my Ukraine War media team (albeit from afar), a good part concerning their coverage of Holodomor Commemoration Day which was this past Saturday. It commemorates the famine genocide of the Ukrainian nation in 1932–1933, an act of genocide against the Ukrainian people engineered by the Soviet government (yet again) to destroy Ukraine politically and socially. I wrote about it here.
I also spent some time scanning “tech stuff”. I was amused by a story in Forbes which noted a Tweet by Musk showing off slides from his company-wide presentation, Musk claiming Twitter averaged over 2 million new user sign ups per day in the past week, a record high for the platform, and that the monetizable daily active users (mDAU) on the platform have crossed 250 million for the first time, and a drop in impersonator accounts on the platform which spiked after the launch of paid verification. Full of fun stuff.
Except, off course you can’t trust any of these claims. Musk isn’t answerable legally if he lies here. Twitter is a now a private company, Meanwhile, if we do take these as accurate, there’s plenty of wiggle room:
• the signups could well be bots (how many of the signups were then removed?)
• mDAU does include bots (as the previous Twitter admin acknowledged)
• the “impersonator” accounts was measuring *reported* impersonations, not all impersonations
• there are fewer moderators to accurately record hate speech (as documented by scores of independent media monitors, and current/former Twitter employees on Slack accounts)
Trust nothing he says; analyse only what he does. The slideshow also mentioned encrypted DMs as forthcoming (but they can’t be end-to-end because otherwise you couldn’t read them in a web browser) and his “rise in payments” remains completely unsubstantiated.
Oh, I see myself leaving Twitter at some point, and reducing my digital life. Of the “100 – folks – I – need – to – follow – because – they – really – have – something – to – say” it appears 82 have left. But almost all of them had Substacks or other blogs, and the respected journalists among them have formed mega-chatrooms partitioned according to their respective newsletter readership. So am bouncing around a bit more (and I will miss Twitter’s centralised chain) but I am not missing out on the in-depth conversations.
Since Musk’s takeover, the question of the hour for Twitter users has been simple: “Where will we go?” The front-runners appeared to be Discord, a former gaming community platform that resembles an offspring of Slack and an early internet chat room, and Mastodon, which is essentially a clunkier Twitter spread across a loose federation of self-hosted servers. You can basically equate “server” with “community” or “digital tree house,” where each “tree house” has its own name and membership but mostly anyone can visit anyone else’s tree house, too.
But really, Mastodon is just blogs. Every Mastodon account is just a little blog. But a Mastodon server is also a feed reader, shared by everyone who uses that server. Do you still miss Google Reader, almost a decade after it was shut down? Well, it’s back.
I may gravitate to Mastodon but for now I am focused on Linkedin where I have earned 1,051 new followers and some intense conversations, plus my blog which has earned 602 new subscribers primarily due to my new daily series “Thoughts over my morning coffee” where I riff on one subject (you can find a sample by clicking here).
But this weekend, as I surveyed what people have described as “the social media carnage”, I saw other things.
For Twitter, the front-and-center event was 10 days ago (Friday, 18 November) after Elon Musk required employees to affirm their desire to remain at Twitter — with many declining — and Twitter users worked themselves into an absolute frenzy about the idea that Twitter was going to go away THAT VERY EVENING. I won’t belabor the point — if you were online that Friday, you saw the hysteria — but what was fascinating to me was how this seemed to flip a lot of the Twitter narrative on its head.
Everybody had 2 main concerns: (1) that Twitter is going to lose revenue because of its dependence on brand advertisers who have brand safety concerns, and (2) that Twitter is subject to regulatory action both in the U.S. and the E.U. Both those concerns remain although EU regulatory action would be years down the road (more in a separate post later this week).
But what the techies-in-the-know were NOT concerned about, I found out later, was that Twitter would, in the space of a few hours, simply cease to operate. Their view was that if Twitter’s employees were not up to the task of keeping the service up there would be slow degradation – not fail whales in a matter of hours.
Twitter, of course, has not gone down (although there do at times seem to be oddities consistent with some sort of degradation, but it’s hard to know to what extent this is a sort of psychosomatic suspicion of bugs that have always existed), and Musk is bragging about record users and engagement (see my notes above). Yes, monetization and regulators are still out there, but the advantage for Musk is that those are no longer the expectations: simply staying online is now seen as a Musk victory.
This isn’t the first time we have seen similar dynamics, of course: there is sometimes a tendency to imagine the worst possible outcome and to proceed as if it is an inevitability, and then, when that outcome does not come to pass, more moderate concerns are discredited in the wash.
But what IS NOT being discussed (other than by tech polymaths Benedict Evans, Casey Newton, and Ben Thompson) is the POSITIVE impact on Twitter’s financials of all of Twitter’s layoffs and resignations. According to Politico, Twitter had 2,700 full time employees as of last Monday; that’s down from 7,500 at the end of last year (there were also a reported 4,000 contractors let go). Let’s assume, for the sake of argument, that 20% of Twitter’s Cost of Revenue, and 80% of Research & Development, Sales & Marketing, and General & Administrative were salaries. Musk has knocked off an estimated $35 million from total annual costs.
Now, again, these are very rough estimates, but I think it is reasonable to assume that S&P Global’s estimates are on the money: Twitter’s employee costs have been cut significantly, leaving its total annual costs at around $3.0 billion (excluding last year’s lawsuit settlement).
Now, taking it a few steps further, add on the company’s reported $1 billion in interest payments and the company needs to come up with $4.0 billion a year in revenue. 2021 revenue, meanwhile, was $5.1 billion. And remember, Twitter had around $6 billion in cash pre-buyout. In other words, while I suspect Twitter’s ad revenue has been impacted, it will take a pretty large impact to drive the company bankrupt.
And so, the money shot. The reason these expectations matters is that the ramifications could be far larger than Twitter, a relatively minor company in the Silicon Valley ecosystem. Few think Musk will ever achieve a positive return on his purchase (a few think it a political move having nothing to do with business) and the media has set a low bar: Musk simply getting Twitter to to exist.
Soooooo … this certainly raises questions for every tech company about their costs: if Twitter can cut their workforce by a third (or even more, if you include contractors), then investors will start raising a lot of questions about how many employees other tech companies have, even after the current wave of layoffs. Indeed, you could see private equity firms looking to acquire companies, confident they can slash costs to pay off the debt necessary.
Lots of countervailing forces at work, obviously. There are a several important factors that would push against this: network effects are, if anything, underrated, and Twitter has some of the best network effects in the world (an argument, perhaps, that Meta also continues to be underrated for the same reason). And easy money is not so easy anymore, making big debt raises difficult (banks are not, I assume, very happy about having financed Musk’s Twitter purchase).
And, of course, there is the fact that Twitter has to actually make money – at some point.
Anyway, Musk’s actions, to the extent they are perceived as successful, could fundamentally change expectations about tech company cost structures. At a minimum it seems likely that management will be much more empowered than they have been over the past few years, when a negative story in tech media about unhappy employees would lead to executive responses within the hour. Those days might be gone.
To put it another way, for the last five years or so employees have ruled the roost in Silicon Valley; if Twitter clears the very low bar set for it by the media — don’t go down and don’t go bankrupt — that may change in a significant way the dynamics not just at Twitter but across Silicon Valley broadly. Maybe a bit simplified, yes, but I think Elon might be on to something.