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July 9, 2022 - Freedomain Radio - Stefan Molyneux
31:54
MY THOUGHTS ABOUT ELON MUSK AND TWITTER!
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Good evening, good evening. I hope you're doing well, my friends.
I hope you're having a wonderful week, a wonderful evening on this, our day, the 8th of July, 2022.
Is it hot enough for you yet?
I do believe it is.
It is nice when the UV index is infinity and Irish people need to hide at least 19 feet underground in order to not burst into flames, Barbados, slave style.
So, Hey, do you remember?
Just while we're waiting here. Do you guys remember me saying that the Twitter sale wasn't going to go through?
Well, it looks like it's not going on.
At least not at the moment. It's not going on.
I think Musk has just indicated that he's cancelling the Twitter deal because I just don't think he's got...
Got enough. Let's get some information and see what's going on.
We can sort of share your thoughts about it.
So, Tesla and SpaceX CEO, nine kids now?
Did he have a set of twins with one of his executives?
Anyway, Elon Musk has withdrawn his $44 billion offer to buy Twitter.
According to a filing with the SEC, Musk offered to buy the social media platform in April.
However, his comments have since tripled ample, will he or won't he, speculation about his looming purchase.
And today, we finally know for sure he won't.
Musk's lawyers alerted the firm that he will terminate the merger agreement, and that would have seen Musk buy out all remaining shares and fully own the platform.
The quote is the SEC filing from Musk's attorneys.
The quote is, So he got to 9.2 stake percent in Twitter.
He's got 100 million followers.
He offered $54.20 per share to acquire the rest of the firm.
And in June, Twitter's board said, yes, unanimously, we will accept the deal.
Now, when the board is unanimously accepting the deal, that's really a very good thing.
Just so you know, when someone jumps at an offer you've made, it's usually because your offer is too generous.
But nonetheless, I think he just didn't want to spend a lot of time negotiating.
And so the fact that the board, which might in fact be Toast, unanimously would recommend accepting the deal is interesting that it may have been an overbid.
I think it was an overbid, but what do I know, right?
It increasingly appeared that Musk was looking to back out of the deal.
He had previously cited concerns over spam and the activity of automated bots on the platform, suggesting that Twitter was not providing requested information.
So the SEC filing, and remember, I told you it was going to be bots that were going to kill the deal.
The bots were going to kill the deal for sure.
So the SEC filing says, for nearly two months, Mr.
Musk has sought the data and information necessary to, quote, make an independent assessment of the prevalence of fake or spam accounts on Twitter's platform.
Twitter has failed or refused to provide this information.
This is from the SEC filing.
So in May, Musk said that the deal was temporarily on hold, and his legal team sent a letter to Twitter's general counsel in June, claiming the firm wasn't meeting his demands for data.
The letter from Musk's attorneys read, Twitter's latest offer to simply provide additional details regarding the company's own testing methodologies, whether through written materials or verbal explanations, is tantamount to refusing Mr. Musk's data requests.
So, yeah, he asked, hey, how are you coming up with this tiny, tiny percentage of bots that you claim are on the platform?
And tiny, tiny percentage of fake users that are on the platform.
How are you coming up with that? And their totally non-skeevy response was, hey, man, just trust us.
Smoke some of this, man.
It'll all come clear.
We got a methodology that's too complex, too Byzantine, too Argentinian beef lard drip extract complicated.
For mere mortals to understand.
It is an Elysian mystery.
It is ayahuasca.
It is the core of Scientology.
It cannot be penetrated by mere mortals.
It is, what is your favorite color?
What is the... Airspeed, velocity, the African swallow, laden slash unladen.
It is too deep a mystery for the mere human mind to comprehend.
And I guess that wasn't enough.
Musk's team claimed that it was a clear legal breach of the terms of the agreement and Musk may seek to exit the deal.
In response to the news, Twitter Chairman Brett Taylor...
Tweeted, the Twitter board is committed to closing the transaction on the price and terms agreed upon with Mr.
Musk and plans to pursue legal action to enforce the merger agreement.
We are confident we will prevail in the Delaware Court of Chancery.
I can't believe there's a Delaware Court of Chancery.
That's like a combination of Mission Impossible and Charles Dickens.
Musk is the Dogecoin aficionado, blah, blah, blah.
Okay, so, yeah.
So his stock price offer was...
I always think $54.40 is a Canadian bet, I think, right?
So $54.40. And Twitter stock price closed down 5% to just under $37.
After hours trading, it's dropped down to about $34.
So it's a $20 per share increase, right?
Musk's deal was a $20 per share increase.
That is truly insane, by the way.
I just want to point out that is truly insane.
Sane, right? So, what do we got?
So, yeah, he was paying 160% of the current share price of Twitter.
And, yeah, it's nice to know that Twitter is now, what, going to try and force him to buy the...
Well, they have to, right?
They have to force him to buy the company.
Because if they're bored...
I don't know, obviously, what happened.
I don't have any inside scoop.
But I... Been to a much smaller degree, of course, in these kinds of situations.
I was involved in the sale of a company I co-founded on more than one occasion.
And it's pretty clear to me what's happening.
It doesn't mean that I know, just my particular opinion from the outside.
So what's happening is the offer was so high that the board had to say we're going to take it.
Because if the board didn't say they were going to take it, Then the shareholders would have had the opportunity to file lawsuits against them for harming the interests of the company, for harming the interests of the shares.
Now, the Twitter board doesn't want Elon Musk to buy the company because the Twitter board, I assume, likes having the control over the discourse that I guess they just recently reversed because Alex Berenson got his Twitter account restored because apparently he said he was tweeting true information, got banned for tweeting.
He got banned for tweeting what he claims is true information, I assume there's proof, and he got reinstated.
Twitter likes being able to control the discourse, and whoever controls Twitter, I assume to some degree from the shadows, also likes being able to control the discourse.
So they had to say yes to the offer, otherwise they would have been in big trouble with the shareholders for not protecting the value of their shares.
But then they're kind of in a bind.
When someone's not giving you information, that's pretty clear, right?
You know, if you're trying to buy a car and you say, hey, man, I need to get verification that it's never been in an accident, so I need an accident report on this thing, and they just won't give it to you, that's not because it hasn't been in an accident.
I mean, we can all understand it's not particularly complicated, right?
So the board had to say yes because the offer was so high.
But then the board, after having made public claims that a very, very tiny percentage of the users were fake or spam bots or whatever, right?
They then had to verify this.
Of course, right? You make a claim without verification that is significantly, foundationally essential to the value of the company.
The claim being that only a tiny percentage of the users are fake or spam or whatever.
And my guess is 10% to 20%, but again, that's just an absolute, what we used to call wags, wild-ass guesses in the software industry.
Next month, a doctor with a flashlight shows you where sales projections come from.
So, Musk was like, okay, I need to see the methodology by which you calculate the tiny number of bots, right?
Tiny number of bots. And they wouldn't provide it.
Now, if they don't provide that methodology, a detailed methodology about how they came about the estimate of the number of fake users, then that squelches the deal.
Of course it does. Because if you buy a company at 60% over its current stock price and then you find out If you find out that the number of fake accounts is like four, five, six, eight times what was estimated, then you've just paid a lot to drive down the share price of the company because the share price of Twitter is to some degree predicated on a small number of fake accounts uses in spam bots.
And if you buy the company, Only after you buy the company do you find out that the company is significantly overvalued because the number of true accounts is much less.
Remember, Twitter is not in the business of facilitating user conversations.
It's not in the business of giving you a platform.
It's not in the business of sharing information.
It's not in the business of facilitating worldwide communications.
It's not in any of that business.
The sole business of Twitter It's to deliver you to the advertisers.
That's the sole business. It's all it is.
Top to bottom, back to front.
The whole purpose of Twitter is to deliver you to the endless cleavage advertisements on Twitter.
For the rather odd sites that have rather odd articles about once-in-a-lifetime photographs, here's more cleavage-revealing wedding dress fails.
Anyway, so So Twitter's sole job is to deliver human beings with money to advertisers so the advertisers can get them to part with that money.
It's the whole purpose, right? Twitter is in the business of...
Like television news is not in the business of delivering news to you.
That's not their business. It's not their business at all.
The sole purpose of the television news is to deliver you to the advertisers.
That's the sole business model.
It's the sole business model.
So if the whole point of Twitter, the whole business model of Twitter is to deliver you to advertisers, well, advertisers don't want bots.
They don't want spam bots. They don't want fake accounts.
They don't want all the badly spelled invitations to come and chat with you because you're some golden lotus name from Japan who's just arrived in your town and wants to chat.
Hey, where are you from?
Oh, gosh. So, what's he going to do?
What's he going to do? What's he going to do?
Well, he's going to say, you haven't delivered what you need to deliver.
You haven't delivered it. So then they're going to say, oh my gosh, you absolutely have to.
You made a promise!
It's like, well, yeah.
Yeah, of course.
Of course, he made a promise predicated on getting information from Twitter.
Say, hey, I really want to buy this car, but I'm going to need to see the accident history.
Hey, I really want to buy this car, but I've got to get my mechanic to take a look at it.
Oh, you can't. And you say, well, I really need that to buy it.
Can I have a look at that?
No. Absolutely not.
Well, then the deal's off, right?
Oh, but you promised to buy.
It's like, yeah, but I promised. Anyway, you understand, right?
I mean, this is the whole issue.
This is the whole issue of advertising.
Advertising is a pretty wild thing.
Business model. You know the old thing, if you can't see the product, you are the product.
If you don't pay the cost, your time is the cost, you are the cost.
And online advertising is really falling.
The money that people are investing in online ads is kind of falling, right?
And I think that's pretty important.
Just to understand the space that we all kind of work in and deal with, right?
It's really, really important to understand this.
So, I don't know. There's all this nutty stuff that's going on.
Online advertising is a mess at the moment.
And its revenues are falling and the spend is falling.
It's really tough. It's really tough for businesses, right?
So businesses got a kind of online news in particular, right?
Kind of got a boom in the hysteria of the Trump years and then I think they worked pretty hard, one could argue somewhat successfully, to get Trump out of office.
But then they shot themselves in the foot because they had this big growth Because of the anti-Trump hysteria, if they helped to get Trump out of office, then people check out the news a whole lot less.
Because they're not as terrified about incipient orange man fascism.
So then what happens is they say, oh man, we're not getting as many eyeballs, so what do you do?
Well, you either cut back a lot on your hires, or you say, well, we'll do more ads.
But the problem with doing more ads is that people...
Don't want to go to your website because it's just all ads, right?
Or a lot of browsers have the simplified view which kind of strip out the ads and just give you the text.
So it's a real death spiral.
Death spirals, when you get into these business death spirals, they're very, very hard to get out of.
And there's no way out of them without pain at all.
Like without pain. There's no way out of them without pain.
Because if your revenue is down...
Your viewership is down and therefore the amount you can charge for ads goes down.
You say, well, we'll make up for that with more ads, but then your viewership goes down even more and that's the death spiral.
And that's the death spiral.
Now, you can get your ad revenues back up, but what you have to do is cut back significantly on the amount of ads.
And then spend money advertising that you have fewer ads or hope that people are just going to notice.
But that's a big trough in business.
In business, this is something that an older entrepreneur explained to me pretty early on in my business career.
Cash flow is king, man.
Cash flow is king. Sometimes your money comes in a lot.
Sometimes your money comes in a little.
But cash flow is king.
And what that means is...
Your payroll is like a metronome, tick, tick, tick, tick, bi-weekly, weekly, monthly, whatever you're doing, your payroll is like your rent, your payroll, like all your hard fixed capital expenses, your human resource expenses, your salary, all of that is like boom, boom, boom.
It's coming out of your bank account like clockwork.
And, you know, there were times when I was starting with my business where, you know, we'd have like, I don't know, 10 employees, 12 employees, and they need their money, man.
They need their money. And we had clients who had signed a deal, but they hadn't given us the money.
And it was like, oh, you know, it takes, you know, 60 to 90 days to clear accounting, and, you know, then we'll get our check.
And it's like, 60 to 90 days?
Now, here's the thing, though.
Of course, you can't exactly go to the clients and say, you've got to pay a sooner or worse.
We won't be able to keep the lights on.
That's what he used to call it. Can you keep the lights on?
Can you pay your electricity bill?
Man, you've got to give us the money earlier because you can't go to the clients because then the clients are like, whoa, whoa, you guys are that much on the razor's edge and we're committing to a very large project with you.
So, yeah, cash flow is king, man.
You've got to have the money. And so, I mean, what I had to do, along with other people, of course, but, you know, what we had to do at the top was I had to sign these jaw-droppingly large bank loan, like temporary bridge loan.
Because this is an understood problem in business, right?
And so you can get a bridge loan.
And a bridge loan is, you know, fairly high interest because it's considered to be a short amount of time, but you can't discharge it in bankruptcy, right?
Because the bank doesn't want that to happen.
So I signed pretty massive...
Loans in my name, my personal name, to get the money to bridge.
And we made it. The company is still running.
The company I co-founded is still running.
It's pretty cool. It's pretty cool.
And this is like 30 years.
30 years. And in software, that's like 3,000 years.
That's like geological time, as far as that goes.
So yeah, this online advertising stuff is a real death.
It's a death spiral right now.
And... That's why they're trying to manufacture all of these, you know, pseudo crises and pseudo, oh, there's a new strain of Omicron and, you know, all the Jan 6 hearings and all that.
A lot of that has to do with, you know, how are we going to goose people into watching?
And of course, they also got a big ad revenue boost when people were freaked out about the pandemic.
But I don't know what it is where you are and I don't, you know, don't even know what it is as a whole.
But my sense of things is that people are just kind of done with the pandemic.
As a whole, like, we've got to just move on.
We've got to just move on.
So, yeah, I think people are...
And I do think that people are...
I don't know, this is just my sense, right?
There's no proof of this. I do think people are going through a kind of funny phase at the moment.
You know, I was reading in Canada, they say, well, you know, here in Canada, oh, you've got to get boosted every nine months now.
And I think people are like, you know, that's not what we were sold on.
Now, things change.
I understand that. Things change.
Can't predict the future.
But when you sell someone on something, if it changes, you really should explain Why it changed, how it changed, how you got it wrong, and how you're going to make sure you don't get it wrong in the future.
You ever had one of these relationships?
Boy, I've had a few. One of these relationships where, you know, fast-talking people just like, move on, man.
Just keep moving. We got to deal with the next problem.
We got to deal with the next issue.
We got to deal with the next problem and just keep you moving.
And there's no circling back.
There's no, I mean, we used to call them in the business world, a post-mortem.
A post-mortem is, you know, you finish the project, And some of the projects we did were like a year, 18 months, and so on.
So you'd finish the project and some stuff had gone well, some stuff had gone badly, and you'd sit down and we would, you know, go for a weekend retreat, some nice place, and, you know, spend a couple of hours just, you know, we'd go whitewater rafting, we'd do all these kind of fun things if people wanted to come, and then we'd also sit down and say, okay, well, what went right and what went wrong?
What could we learn? How can we improve?
I do this in this show all the time.
I'm always asking people in the call-in shows, Hey man, now that you're smoking your cigarette, was it good for you too?
Put on a little Sade and let's talk about the exquisite 90 seconds that just happened.
Wait, sorry, that's a different conversation.
Yeah, but cash flow is a thing, man.
So with these businesses, they had a lot of artificial boosts.
Now there's a lot of weariness, weariness of certain topics.
And so, well, I mean, so of course a lot of the online...
Outlets are just going to go for the alt-tech competitors.
That seems kind of inevitable. It's just going to be something that happens.
This is the Nancy Kerrigan, Tonya Harding thing.
Nancy Kerrigan was a great skater.
Tonya Harding was maybe not such a great skater.
And Tonya Harding, if I remember rightly, she paid someone, maybe her ex-boyfriend or her boyfriend, Whack Nancy Kerrigan on the leg or something like that so she couldn't compete.
So yeah, that's one thing you can do.
You can either get better at what you're doing or you can try and take down people who are doing better than what you're doing.
It's really sad, but I think we all know which way this stuff goes as a whole.
So, yeah, this death spiral thing, you know, the battle between advertisers.
And, you know, it's funny. It's a funny thing, you know.
Life is a bit of a circle.
My mom used to complain about this a lot.
She used to complain about this.
It was one of her pet peeves, you know.
Some people, when they get older, they get their pet peeves.
Lord knows they're creeping up on me.
Outlook won't close. But my mom would say she'd be watching TV and she'd just, ah, she'd get so frustrated and appalled, you know.
Because she'd be like, it's all ads now, she would say.
You know, when I was younger, you maybe had two, three minutes of ads every 30 minutes.
Now it's like 10, 12, 14 minutes of ads every 30 minutes.
I think people are getting weary of advertising.
And people are also a little creeped out about advertising.
So, and I think they're just, I think they're tuning out of things.
So when some fast talker just says, oh, here's what I'm promising, here's what's going to happen, and then nothing of the sort happens, and they're like, well, here's what I'm promising now, here's what's going to happen next time.
And I think people are just, they're tuning out.
I think of a lot of news and information that's flowing across the web and across the television because they're like, well, hang on, we were told this and this and this with absolute certainty.
It wasn't like we think.
Absolute certainty. With absolute certainty we were told this problem was solved.
And now it's not solved.
And now there's more and more and more and more that has to be done.
And again, things can change.
But when people just keep hustling you forward, keep going forward, don't, you know, whatever we hit in the car, just drive, man, don't turn back.
People get very suspicious about that.
And it happens, you know, pretty unconsciously.
And this is how you lose credibility.
That's how you listen to Boy Who Cries Wolf.
Boy Who Cries Wolf.
The vaccines are going to solve the pandemic.
Not solved. Fourth-boosted Fauci got sick.
And not symptom-free sick, but got sick.
Sick. And no one's saying, what changed?
Well, okay, so you said this for certain was true.
Why is it not true? Was it not true because you were lied to?
Was it not true because the data was falsified?
Was it not true because you were claiming knowledge that you couldn't possibly have?
Or as one of the COVID response people said, it was a hope.
Really? It was a hope.
It wasn't a lie. It was a hope. Well, when you're told something is true, it doesn't come true.
And then people say, well, it was just a hope.
It's like, that wasn't That wasn't what was communicated.
I mean, in many...
I'm no lawyer, but I understand...
Morally, that would be called fraud.
You say, here's $5,000.
Give me the used car.
Some Impala.
You give them the $5,000.
Say, I will deliver you this car.
You don't get the car.
You say, you said you would send me this car.
Well, that was more of a hope, really.
Sell me this car that runs.
This car runs. Guaranteed.
Then you get the car doesn't run.
You say, well, it was more of a hope that the car ran.
That would not stand up, as far as I understand it, from an amateur standpoint.
That would never stand up in any quarter floor.
I mean, that's the whole Theranos thing.
We hope it's going to be able to run 200 tests, 1,000 tests.
We hope! No, no, but you said that it did.
No, but it was a hope! Well, convicted, right?
Sonny Balwani just got convicted yesterday, I think it was, and sentencing for Elizabeth Holmes is in September, I think it is.
So... Oh no, she got sentenced.
Did she get 20 years? No, no, that was Ghislaine Maxwell.
So, yeah, it's...
I think people are kind of tuning out.
And so when people tune out, advertising revenue drops, you put on more ads, which causes more people to tune out, which means you have to...
That's the death spiral.
Death spirals without really firm, if not downright vindictive leadership, death spirals are just impossible to get out of.
You just end up being bought out.
And I guess that's what was close to happening with Twitter, but maybe it's a negotiating tactic.
Maybe, I mean, if I were Elon Musk and I was pursuing this kind of thing, what I would do Is I would say, oh no, deal's off because you're not giving me the information, right?
Now, if you are a shareholder and you're looking at a 60 plus percent premium on the share price as it stands right now, then you'd go to the board and you'd grab them by the short and scruffies, you'd haul them up against the wall and you'd say, give the man the data!
What are you doing? Give him the data that he's asking for!
Well, you know, it's complicated.
There are rituals.
There's a lot of Aztec open, beating heart, children's tears, angry gods, sacrifice rituals we've got to go through, man.
You can't just do this stuff in a moment.
We've got to consult the bots.
The bots are unionizing. The bots are organizing.
The bots have joined the Socialist League of America and they're on strike.
It's horrible. The bots kidnapped my cat.
Can't find it. So the shareholders are looking at this deal, I guarantee you, the shareholders are looking at this deal, and they're saying, wait, we just lost out on 60% value over stock, because you guys aren't revealing information about the number of bots, if that's what's happening, right? Let's say it is, hypothetically, it seems to be, but let's say.
So they're going to go to the board of Twitter, and they're going to say, for God's sakes, give Elon Musk the data!
About how many bots there are, how you came about, given the methodologies, given right the math.
It's the market. Because there's no way this is going to stabilize right now.
Because the market, if Twitter won't give the bot calculation, the percent user's bot calculation, if Twitter won't give that, now they don't have to give it to the market as a whole, they just have to give it to Elon Musk, to the Point where he's satisfied.
So if the board won't give the bot calculation to Elon Musk, the shareholders know exactly why, and the market knows exactly why, and the market will punish and pummel Twitter stock down, down, down.
So you've got this $54 a share, it's $34 right now, but it's not stabilizing.
So if you are a Twitter shareholder with half a brain, you look at it and saying, okay, give that data to Elon Musk.
He'll be close at 54 or it's going south from 34.
My obviously amateur opinion.
None of this is advice. Don't buy or sell anything.
I'm not an analyst.
I'm not giving recommendations.
I'm just telling you sort of philosophical slash economic advice.
Analysis of the situation.
You make your own decisions. I'm not recommending anything or suggesting anything.
So, everybody knows why Twitter's not giving these calculations out.
Everybody knows. Now, the market has clear indication.
I believe that the $52 a share is an illusion.
It's a mirage. Because the only way the $52 a share can be achieved is if Twitter can prove to Elon Musk that their calculations of the number of bot accounts is accurate.
That's the only way. The $54 is if the board can satisfy Elon Musk that their bot calculations are correct.
Now if they can't, then what does that mean?
Or if they won't, what does that mean?
To me, I don't know what it means, but I'm just saying my conclusion, my personal, subjective, outside, no inside knowledge conclusion would be, well, then the calculations are false.
That they have underrepresented or used a kind of calculation that results in a low bot count, which is not accurate.
Now, at this point, now that someone's combing back and forth over this, They probably know that it's not accurate and they're either going to confess up and take their lumps and maybe face some significant problems or what?
I don't know. If the calculations for the bot count are way too low, then the value of the company is going to significantly fall.
Again, in my amateur outside, don't do anything with what I'm saying opinion.
So this is Elon Musk pounding the price of Twitter into the ground.
He puts a very high offer in so that the board has to accept it, otherwise they'd face a massive shareholder revolt.
He puts a very high bid in, and this is why he's Elon Musk.
He puts a very high bid in, gets the shareholders all excited, gets the board cornered to have to say yes, and then says, oh yeah, by the way, I'm going to need those bot calculations.
Now, either they give him the bot calculations or they satisfy him, which nobody, I think, believed was going to happen.
I don't think, anyway. Nobody I know.
So, they either give him those bot calculations and he's satisfied and the deal closes at $54, or they don't, in which case the price craters and he gets it for, I don't know, half price or whatever, right?
So, it's pretty wild stuff.
He is a very smart businessman and patient, right?
This is the kind of stuff you kind of have to do slowly and with the great patience.
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