The Bridge with Peter Mansbridge - SMT - Why Would Elon Musk Spend 45 Billion on Twitter?

Episode Date: April 27, 2022

It's a huge purchase but why.  Elon Musk is no dummy, so why this move and what's he really thinking? Bruce Anderson puts the SMT microscope on the Twitter deal and what it may mean for a social media future.

And hello again, Peter Vansbridge here. You are just moments away from the latest episode of The Bridge. And today's episode of The Bridge is Smoke Mirrors and the Truth with Elon Musk. Okay, we don't have Elon Musk, but we go one up. We go one better. We've got Bruce Anderson is with us. He's also here in Scotland. And so am I, Peter Mansbridge.

And today we're going to talk about, well, we are going to talk about Elon Musk and his purchase of Twitter and what it means in the big picture and in the smaller picture. Now, it's funny because we're in Dornick, Scotland, which is a beautiful community about an hour north of Inverness. So it's up near the top of Scotland. Okay. And there's a connection between Dornick and Elon Musk. His first marriage was here in Dornick scotland it's got married in the in the cathedral here that marriage didn't work out unfortunately but such are things nevertheless nobody here talks about elon musk there's no plaque on the wall saying elon musk got married here but so what that's not what we get that idea peter did he get that idea from the material girl but donna didn't she get married she did well her marriage

didn't work out either but she got married at the cathedral she was staying in a resort not far from here a ski boat castle, very exclusive resort. But she got married in the cathedral, which is a beautiful cathedral with centuries and centuries of history. It was first established on that spot around 600 and has been rebuilt and has gone through a number of changes. But it's still a gorgeous spectacular cathedral and as it turns out both madonna and then later or earlier i can't i don't know who was first uh elon musk got married here

as well neither of those worked out but hey who's to criticize that that's what happens maybe they did who's to say who's to judge whether that worked out well or not? Clearly not us. However, we are here to talk about Elon Musk and Twitter and his purchase of Twitter. And there are a number of angles to this story. Let me start off, I guess, with the business angle. You know, it's not up to you nor I nor I, to judge Elon Musk's business abilities because, you know, a guy's the richest man in the world. He must have done something right. He clearly

has parlayed his push on electric cars into something, and he's a space guy. There's a lot of things he's done right. This one kind of puzzles me. He paid 40, what was it, 45 billion dollars, or at least that's what he's offering to pay to purchase Twitter when it goes through all the various regulatory hoops that it has to get through. But 45 billion dollars for Twitter, a social media giant. You know, some people still call it a fad, although it's been around for a dozen years or more. So it's not a fad, but it's vulnerable in today's

world as a lot of things are vulnerable on the tech side. Look what happened to or has happened to Netflix just in the last couple of weeks even apple's been taking a hit on the markets and twitter what did he offer i think 54 or 55 dollars a share and it's already gone down since he made that offer so you can actually buy if you can still buy shares right now you can get them for like 48 49 bucks you can flip them for 54 if musk is buying them now i'm no broker and i don't understand how all that world works

but i do have this question about about this decision i mean if if you had 45 billion dollars bruce anderson would you use it to buy twitter if i had 45 billion dollars i would use it to choose a path that avoided twitter i would not be on twitter i would use money for lots of good things but one of them would not be to try to buy and improve Twitter. Now, Elon Musk's version of improving Twitter, I think, isn't what everybody thinks Twitter needs to be better. But let's go back to the math to start with, because we've got a few lines, I think, of conversation that we should cover on this. As I understand it, and I happen to think that I agree with you, i think he's done a lot of really smart things i think this might be the stupidest thing that he's ever done with his money might turn out to be and time will tell but if it's true that he's worth 150 billion dollars and what has he done he's taken about 20 billion of that value that he has and buried it with 20 billion dollars of cash from a variety of banks there's a whole group of banks that agreed to help underwrite this deal apparently including

some canadian banks as well including a couple of canadian banks that's right and if he so let's say he lost all of his money which unlikely to be the case, he's still up $130 billion. So it's probably not going to change his life all that much. That having been said, $44 or $45 billion for a company that didn't make any profit up until about 2019, I think, and then made about a billion dollars a year in each of the two subsequent years. That's a very steep price to pay. He's paying a real premium for that. Put it in another way, in terms of context, GM, the market cap is about $55 or $59 billion.

And of course, GM has factories and makes cars and trucks. And Twitter basically is a piece of software that allows people to say whatever they want on it, or at least most of whatever they want. And he wants that to be anything that they want. uh investment and and i'm just too skeptical of it or whether or not he sort of got a little bit drunk with the kind of idea of power and influence and and the money didn't mean very much to him and so he decided that he wanted to have this so that he could do more to influence the course of uh of civilization or contemporary thinking but as i said i think it might turn out to be the dumbest thing that he's done with his money yeah i i don't know whether it's it's just that a lot of people thought it was dumb when he started doing the electric cars thing right a lot of people thought it was dumb when he said i'm going to go into space and both of those have

turned out at least so far to be spectacular successes right so it's a little hard to um to make the suggestion that this is dumb although you know i i hear your point i mean it's so dramatically different than what he's on those first two things. Here's a couple of reasons why, Peter, I think it's fraught with risk, more risk than opportunity. And I don't mean to he's evaluated the risk and the opportunity the way that he might, or he might come to regret whether or not his calculation of that was right. There are two things. First of all, Twitter has struggled a little bit to achieve the kind of scale that Facebook has.

And I think part of the reason for that is a lot of people have looked at Facebook and come to the conclusion that it's not a friendly enough social media platform for them, that there's too much toxicity in it, that it's not a meaningful way for them to share and engage with other people who share their interests without coming across a whole level of kind of anger and disinformation and other negative effects. And so the scale of it hasn't been what it could be if it didn't run into those problems. And Facebook is a much larger scale company. I think the value of Facebook is $500 billion, Twitter, $45 billion. That's almost, well, it's 10 times the size.

So then the question is, what can he do to try to increase the user base, increase the advertiser comfort level? And how likely is it that he's going to do that or succeed at that? I think the first question is his vision for it is a much more free speech oriented Twitter. And I don't think that that model increases participation from those who feel like if I step into that platform, I'm going to be victimized. I'm going to be targeted. I'm going to be subject to hateful comments. I'm going to be subject to disinformation. I'm going to be stigmatized.

So if you say free speech to people who feel like they're often the victims of what that means or the targets of people who want to extol free speech. Then you're not going to grow the base that well. And then the second thing, and maybe the bigger issue, is he's not the first of these tech billionaires who've come along who said, I want to create a platform where speech should be really open. And then over time, what they find is that that's quite a bit more complicated, that at some point, either you put in your own controls over speech to avoid your business from getting into too much trouble or governments will. how easy it will be for him to be that one entrepreneur who can take a social platform and make it truly free as he sees it and not find himself running afoul of public concern that then translates into political pressure that then translates into regulation.

So if he doesn't grow the base and if he finds himself in a sea of regulatory trouble, I think it's going to be hard to make that $45 billion worth more. And easy to imagine a situation where he finds himself really frustrated with this investment in a few years. Well, let's talk about the free speech angle for a bit, because clearly he is listening to some of these concerns that are being expressed and some of these criticisms that are being expressed about things he said in the past about the need for sort of a kind of wide open free speech yesterday he kind of toned that down a little bit he tweeted by free speech i simply mean that which matches the law. I'm against censorship that goes far beyond the law. If people want less free speech, they will ask government to pass laws to that effect. Therefore, going beyond the law is contrary to the will of the people.

Yeah, I think that I didn't notice that. And I think he's already sort of surmised that the problem that he's going to run into is likely to be a regulatory one. But saying I'm going to build something that's for free speech, but I know that it's not really going to be free speech, but I'm going to put that blame for the lack of free speech on governments. How does that change the dynamics of the company right now? Except in the sense that he's a polarizing figure, he's a high profile figure, he's used Twitter himself to make inflammatory kind of comments about different things. If you take somebody like that, put them in a situation where they're trying to fulfill their vision of a fully free speech or a pretty free speech Twitter, and your fellow investors and the banks backing this deal are also seeing what governments are feeling about this, right? Which is that free speech is great

unless you're one of the types who routinely are victimized by it. And it's fine to say, well, we can have laws, but do the laws apply in every single country where somebody in the same way, where somebody uses that platform? Or are you then in a situation where you're trying to regulate

what Twitter shows in Canada based on Canadian law versus another country in the world, which might have different laws and different approaches to free speech. It feels to me that the idea of taking something that already suffers to some degree, a kind of a brand stigma from being a place where people can go and peddle this information, which isn't in every case against the law, that can use language and concepts and forms of derogatory commentary that creates mental health issues, that creates social divisions. I mean, if you basically say, I'm going to build a platform,

everybody in the world can bring their grievance to it, what do we think is going to happen to the world? Is that going to make everybody go, I'm glad that I get to hear everybody else's grievance. That makes me understand them better. And then we'll all come together and it'll be like teaching the world to sing in perfect harmony? Or is it likely to deepen the divides that exist in the world, cause more of the kinds of disconcerting disruptions that we've seen during this pandemic, where people don't agree on what a set of facts are, and therefore they don't agree on what a sensible health policy or health approach might be? Where people have a debate about something like Brexit in the place that we are right now.

And they make a decision that maybe wasn't as well informed, maybe is a bit over conditioned by kind of heated and torqued use of social platforms. I just I think he's probably not really thought through how powerful he is as an individual versus how powerful those alternative pressure points and forces will be. And frankly, I don't believe that it's a good idea for us to have a more free Twitter. I believe in free speech, but I think that within the bounds of laws is right. I think laws can only ever go so far. There are going to be things where we're going to be able to look at them and say, do we really want the law on that? Or do we want to socially condition it? The last thing I'll say is that you remember, as I do, it wasn't that long ago that newspapers,

when they started to go online, opened up these comment sections. And they thought, what a great way to democratize our relationship and open up our relationship with the people who read our newspapers. And then within a couple of years, they were all horrified by what was happening in their comment sections. And they started to lock down certain stories so you couldn't comment. They started to moderate comments. And it's good that they did that but it was definitely them saying yeah this version of free speech is not a good idea and we shouldn't wait for governments to regulate this away we need to do something ourselves because it's harmful and i think that's the test uh that elon musk has bought himself is is he doing something harmful for the world or helpful to the world and electric vehicles definitely helpful to

the world space probably helpful to the world i'm a little bit you know i want to see how that turns out but this i don't know it doesn't sound like it to me. You know, you make a great point on the comment section thing. I mean, I remember back in the day when I was at the CBC and we went through the same thing that so many other news organizations went through. from some of the things that were being said and being, you know, manipulated by different, you know, special interest groups or troll groups or you name it. The debate that took place within the CBC about what to do on that was the kind of debate we're talking about here, the overall debate that you have on free speech. And there were those who were adamant,

no, you've got to let them say whatever they want. That's why we do this. That's the whole purpose of it. And we're a public broadcaster and on and on and on. Versus those who felt, look, it's gone too far and there has to be some control here. And the question is, how do you run control on something like this um and it went from everything from certain stories won't won't allow comments at all

to others are you know regulated or moderated um so that is an excellent point let me um we're going to take a break in a minute but, you know, in some ways it seems like Musk is on a collision course with the Trudeau government in Canada. I mean, I'm not sure how exactly the U.S. government is going to deal with this issue of free speech, you know, given their history and their constitution and the fights they have over everything, you know, from guns on down to speech, it will probably play out for a long time. In Canada, there's already a move afoot by the Trudeau government to regulate certain things about the Internet that impact social media groups. And Musk has made it clear, as I said earlier, he's no fan of Trudeau's. I mean, he went after him vigorously on the truckers con.

He was all in with the truckers, right? And so it seems to me this one, you know, they're going to be in direct conflict, depending on where Musk settles down on this issue of free speech and where he is. And as we said, he's already a little less firm than he had been even a week ago. but is there a direct conflict shaping up there? And does it, you know, in the big scheme of things, does it even matter what happens between Musk and, and, and Trudeau and his government?

Are we, well, I thought we were taking a break there, but I'll, I'll give you my, my sense on that. I don't think it will matter very much, the relationship between Musk and Canada and Twitter and Canada. I do think that the European Union has passed new law that has very specific requirements of what can and can't be on platforms. I think Canada's, you know, obviously kind of following a similar path in terms of how to deal with the complex question

of online hate. And in a way, you know, Musk, according to the comments that you raised, Peter, is already acknowledging that he knows that there's going to be and needs to be law in this area. I don't think I've heard anything that explains how as a business they're going to deal with the complexity of the different laws in different places. And I was

reading a piece in the New York Times that our listeners might be interested in reading as well. And it talks about the fact that there are rules in places like Europe on what can be put on sites like this in terms of misinformation and abuse. But in other countries like Vietnam, is the specific reference here, social media companies could put themselves in legal jeopardy when people post unflattering criticisms of government, which, you know, I don't think is the right, right kind of law, but it is the law in, in, in Vietnam. And so the question in my mind is this, does Elon Musk intend to use Twitter to campaign for his version of free

speech, which I think would probably make a fair number of progressive people anxious because, you know, it does tend to be the far right that is claiming that its voice is being cancelled or negated by social platforms, not so much the far left. And if he does intend to campaign for a relaxation of some of these laws, as opposed to say, put the laws up that you need to and I'll live by them, then I think he's setting himself up for an even bigger conflict than he's ever faced before with any of his more controversial positions and i don't i just from the standpoint of if i was an investor in that i don't like the look of that from an economic model standpoint there's only so many people who will say completely unregulated free speech is what i want there's a lot more people who will say i can see a reason why some speech needs to be outlawed, needs to be regulated. And also, I think there's a lot of people who say everything that needs to be done that's

for the public good shouldn't have to be done by law, that companies should operate within an ethical set of boundaries and a sense of what their role is in society that encompasses an understanding of if their platform is being used to promote division, to promote hate, to promote misinformation and poor decision-making in a democracy, that's something that they should take some ownership of. He may not agree with that, but I think there are lots of people who do see the world that way. When you draw that conclusion about what lots of people will agree with, but at least assumes that they have a responsibility. Facebook and Google have undertaken significant efforts to manage

the way in which their platforms exist in society, not just to say, well, we'll follow the law and the regulation, but to go further than that and say, we're going to do things that we think fit within our understanding or our sense of the public interest, even understanding that that puts some restrictions on how people can use their platform. A good example being Donald Trump. I mean, he was banned by Twitter, which presumably Musk will turn around. But also he was taken off Facebook and YouTube, Google's platform, as I understand it. And so for those companies to have made that choice is clearly them saying we have responsibilities. We're not doing this because the law requires us to. We have responsibilities and we're living up to those responsibilities that way. You suggest that Trump's banning from Twitter may be changed as a result of Musk's takeover of that spot and his belief in free speech.

It may not be quite that simple. Because as you know, Trump had started his own social media channel. I forget what it's called. it's been a total bomb i think he's going as well as his steak business or the university but part of the problem here is he's kind of locked in on it from an investment uh side of things trump that is um i'm not sure he can get out of it that easy, and part of the deal was he can't be involved in any other one. Anyway, we'll see how that plays out. We both suggested there's time for a break before we wrap it up

with some general thoughts on this topic, and a break is what we're going to do right now. Peter Mansbridge back with Smoke Mirrors and the Truth. Bruce Anderson is with us as well. And you're listening on Sirius XM, Channel 167, Canada Talks, or on your favorite podcast platform, wherever you're listening to us. We're glad you've joined us. Brian Fung is an online writer in the United States who works on one of those kind of news watch online columns.

His is at CNN, where he watches news organizations around the country, his country, and around the globe, in terms of trends and what's happening. That's what he wrote this morning, actually, about this whole Elon Musk story. And I think it's interesting. I'm just going to read a couple sentences here. Part of why the Twitter story feels like such a big deal

is because it sits at the crossroads of multiple unresolved societal debates about the power of billionaires. And, you know, Bruce, you talked about that briefly a few moments ago, about tech platforms' influence on democratic discourse. And, of course, we, you talked about that briefly a few moments ago. About tech platforms' influence on democratic discourse. And, of course, we've been dealing with that. And about the rules that govern digital speech and who gets to enforce them. By buying Twitter, Musk has suddenly collapsed all these threads into one. Right as policymakers and the courts are poised to make some very big decisions regulating tech platforms.

We're at an important turning point for tech. And in classic fashion, Musk has jumped in and blown it all up. Agree with that? I don't know if we're at that turning point. I think that turning point probably will come i think that society is going to you know be faced with another different version of what we've seen in the past i mean there is you know peter there was in the long history of the news media there's been a tradition of significant parts of the news media owned by the wealthiest people in society,

which they then could use or bend to accomplish their own personal goals, advocate the political ideas and philosophies that they believe in. So that idea in and of itself isn't new. What might be a little bit different is that social media allows you to do more more quickly than Hearst could do with a string of newspapers, for example, and have a more deleterious effect as a consequence of being able to do more more quickly than perhaps Hearst could have had. Although, you know, I fear having said said that that we're going to hear from people who are more knowledgeable about hearse effects and they're going to have some pretty good arguments to make that he was pretty harmful in terms of how he used his media empire and i don't

really dispute that but i i guess that one of the things about musk that's maybe a little bit different as i was reading someone on twitter last night who said the richest guy on the Forbes 400 list for 2021 owns the Washington Post, that's Bezos. Number two, the second richest guy now owns Twitter. Number three owns Facebook. Numbers five and six started Google. So there's no question that technology companies and, in some cases, technology billionaires have become interested in owning and having access to media platforms. I happen to think that the version of that where the company is a public company is a safer and better version than the Elon Musk taking Twitter private. Now, you could make the case that, well, okay, the banks who are at the table who put up half the money for the deal, they're going to have some influence. But a private company is different from a Google or a Facebook where ownership is spread much more widely, where there's

public requirements for reporting and sustainability reporting and social engagement reporting. Twitter won't necessarily have any of that as a private company. I think that model is rife with more danger for society as a whole, and it will be incumbent on, well, it'll be Musk's choice, I guess, as to whether or not he shows us whether people are right to be anxious about the impact that he's going to have or that people are over-anxious about what impact he's going to have because sometimes his, his statements don't really amount to much more. It seems to me then, you know, somebody being a bit cranky some days and saying things that are on their mind and then wondering if maybe that was the right thing to do. That happens as you know, about every millisecond on Twitter. And on the other hand, he has built an incredibly successful

motor vehicle company and deserves to be understood as an extremely smart, capable person in that regard. If I could answer one question for me would be because this guy hasn't done this for the status quo. I mean, he's got something in his mind about how he wants to change Twitter, how he wants to improve Twitter in his terms. I would love to know a year from now, what will Twitter look like compared with what it looks like today?

What will it be offering a year from now that it's not offering today? Why a year from now are we going to be more interested in Twitter, which obviously is his belief as an investor, than we are today? So I'm fascinated by trying to come up with what the answers are to that question. Just as you are wondering, you know, has he made a mistake this time? Has his judgment left him in terms of what's the right thing to do with his money. And let me just close on this with a quick question and an even quicker answer.

If, say, you turn out to be, your concerns about the future aren't founded. In fact, it's successful. In what way would you look at it as being a success? What would Twitter have to look like a year from now or whenever the time is that you would say, you know what? Not only was he right, he'd done the right thing. What would have to happen?

Look, I think it's a great question, Peter. And I think you're right that he's brilliant. And he could well have this idea what he wants to do with Twitter and then own it and take a look at his situation and say, you know what, that idea isn't going to work. And so I need a better idea. I need to do some things with Twitter that nobody sees coming, either because they're uses of the platform that nobody else has imagined or they run contrary to his early comments about wanting to make it the freest speech platform in the world and, or some combination of both.

But I do think that it's a, it would be a mistake and I do not intend to sound like I'm imagining that he's not clever enough to invent something out of Twitter that is even better than is, that is, I shouldn't say even better, that is better than what exists now. And it will turn out to be a successful investment for him and those who joined him in that investment. He is incredibly creative. And the idea of Twitter is a fantastic idea. I think that the problem is that the version of free speech that's already on Twitter is caustic in too many parts of society. So more of that version won't work. If he

reverses courses or amends his thinking about that and comes up with other creative ways to develop the platform that allow people to do what it was originally intended to do, I think that success is there for the making. Okay. We're going to leave it at that. Good discussion. Wasn't sure where it would lead, but I think it's led us to a number of places that give us a lot to think about in terms of the way this story will continue to unfold over the days, months, years ahead.

All right. Bruce is, I'm heading out back to Canada after tomorrow. Bruce is here for a while yet, enjoying some well-earned holiday vacation time with family. And look forward to, you'll probably take a couple of days off from some of your obligations with the bridge, but we won't let you get away with too many. And we'll talk again soon. So stay safe, travel well, enjoy your time. You bet, Peter. Take care.

And that's it for this day's Smoke Mirrors and the Truth. Travel well. Enjoy your time. You bet, Peter. Take care. And that's it for this day's Smoke Mirrors and the Truth. Thanks for listening. We'll talk to you again in 24 hours.