The case for Elon Musk driving Twitter to bankruptcy

Musk had shown with solid consistency that he was not afraid to not pay his debts, office rent, or employee severance package. He has also been quite consistent at driving Twitter business in the ground. From pushing away advertisers by breaking all forms of moderation, to more recently killing the bird logo and its immense brand value, he didn't miss on a single opportunity to drive Twitter to bankruptcy.

Many explanations have been tried to account for this behavior. The one that was making the most in the first few months of the buyout was simply that social media is a vastly different type of complexity than sending rockets into space. And that was my main thesis for many months. In retrospect, this approach to 'WTF is Musk doing?' had only one flaw: assuming that Musk did want to make Twitter a better business.

What if, from the onset, he wanted to make it a worse business?

Imagine that someone would acquire a company with a lot of debt and high monthly repayments. Making the case for this person to strategically depreciate the hell out of this company value by actively making it less performing on all levels makes tons of sense.

In the short term, intentionally reducing the company's performance leads to lower revenue, which could reduce the company's ability to meet its financial obligations, including debt repayments. True. And Musk essentially demonstrated that he was more than willing to just miss paying debts (see above). But it also means that this could bully creditors to renegotiate the terms of the debt and accept lower payments, reduce interest rates that were contractually locked in, or even obtain partial debt forgiveness.

This strategy is very Trumpian in the way it simply disregards any form of social and business norms because the brand value of the individual strong-arming his creditors is deemed powerful enough. Who wants to be on the bad side of such a high-profile personality and his army of attorneys on retainers? Negotiating and taking losses is the path of least resistance.

There's another perk of such bullying. Heavy losses incurred due to decreased performance might lead to tax benefits, as the company could report lower profits and reduce its tax liability. Who always buy into the ultra-capitalist-free-market storytelling of the U.S. economy, but it's still a heavily publicly subsidized one. And if anyone is an expert at milking government money for its private businesses, it's certainly Musk.

The irony is that with such a strategy, Musk might end up fighting against his own investors' fan base.

When major advertisers left the platform, the Twitter stock dropped by 56%, and in January 2023, the social media company was valued at less than $20bn down from $44bn when Musk made the acquisition. But in August Twitter’s market capitalization was back up to $41bn without other reason that it became a Dogecoin-like meme stock.

Whether you are by now annoyingly bored by the Twitter/X drama or not, Musk is presenting an interesting challenge in the way we think about business as he seems ready to reject any ethical principles and regular business 'common sense.' While I'm certainly not advocating following this path (the term you're looking for is disgust) this still brings up an interesting exercise for innovators. How can you reframe and transform a critical challenge and not be tied up by the usual business mindset and toolbox?

The Amazon and Netflix of the world all did that at some point... They went against the 'Everyone knows you shouldn't do that.' or the 'We tried many times, it never works.' Disruption is not just a word.

→ And if you ask yourself how this could apply to launching an independent consulting business, I might have some answers starting in October.