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Junk Bond Trader
Elon Musk is not an inventor, a creator or an innovator. He is not a thoughtful leader or steward of companies, nor is he worthy of any title that suggests he has been the active force behind any major accomplishment by any company.
He isn’t Steve Jobs, because Steve Jobs had ideas. He isn’t Tony Stark, because Tony Stark was a scientist. He doesn’t cleanly match any startup founder’s template, because most founders — even the most insipidly-privileged Stanford graduate — seem to find some sort of joy in the creation of software or hardware, even if said joy is how much money it might make them in the future.
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No, Elon Musk is far more of a modern-day hustler, a nihilistic master of the art of financial plate-spinning and theoretical value. He is, in many ways, quite innovative, but only in the sense that he has repeatedly found ways to swindle the media and the financial markets without ever having to make or do anything. His joyless, banal and destructive path to becoming the world’s richest man is fueled entirely through exploiting the weaknesses of society. To quote Michael Lewis’ Liar’s Poker, Musk has a “Ph.D in man’s ignorance,” and can cleanly see where rules can be bent or broken entirely without creating any real existential threat.
Musk is possibly the world’s greatest plate-spinner. Never quite lying, never quite telling the truth. "Hard to pin down,” but not in the way that Kara Swisher thought. In another life, Musk would’ve been one of the traders that Lewis worked alongside at Salomon Brothers (now part of CitiGroup) — a selfish, arrogant, and sexist con artist, taking advantage of the desperation and greed of others by selling them a pleasant and real-sounding dream connected to, at best, a somewhat inferior version of reality.
And he’s really good at using the levers of the financial markets to sustain his empire of nothing, leveraging one part of his wealth to sustain or enhance another part — like getting SpaceX to buy tens of millions of dollars of SolarCity’s “solar bonds” back in 2016 (the same year that Tesla acquired them), or borrowing $1 billion from SpaceX to purchase Twitter.
A sensible, normal and moral person might believe these actions were illegal, perhaps covered by some sort of insider trading rule that stopped a rich guy pumping the value of a public stock using the coffers of another company he owns. And that person would be wrong, because Musk, despite often acting like a complete dipshit, is acutely aware that there is no golden rule other than that whoever has the gold makes the rules.
Musk has a unique talent in picking companies that can have their market capitalization grown through showmanship — cars, rockets, solar panels, things that you can buy and sell and grow and innovate upon, virtue signaling to the growth-at-all-costs rot economists. Elon has successfully convinced the financial media and analysts that Tesla is an eternal growth machine to the point that many outlets have become Musk’s de facto PR agencies, even if some cracks have begun to show thanks to his obsession with the cybertruck.
Musk realized early on that by crafting a certain persona — the modern day trailblazing innovator with his hands in the future — he could take advantage of the emotional (and at times deeply illogical) nature of the markets, manipulating large cadres of investors into believing that he was a kingmaker.
As a result, Tesla has grown into the world’s largest meme stock with a market capitalization of $665 billion — nearly 15 times that of Ford ($46 billion) and 16 times that of General Motors ($41 billion) — despite selling only 1.3 million cars in 2022, compared to Ford’s 4.2 million and GM’s 5.9 million, and having FY22 revenues roughly half that of Ford and GM. One might argue that the revenues from Tesla’s supercharger network or their relatively low debt (just under $3bn compare to over $100bn in Ford and GM’s cases) justify its weighty market cap, but the reality is that Tesla’s overblown valuation is based on Musk’s talent in manipulating growth-hungry markets into believing every single thing he makes is a rocket ship.
And nowhere have the markets been more thoroughly hoodwinked than by Musk’s acquisition of Twitter, where he successfully conned banks like Morgan Stanley, Bank of America, and Barclays into giving him $13 toward the $44 billion purchase of a massively-overvalued public company. A year into the acquisition, Twitter is worth a tenth of its purchase price, its value destroyed by the very kingmaker the banks had hoped would turn their investment into easily-floggable debt rather than what may go down as the worst acquisition in tech history, somehow beating deals like aQuantive ($6bn, written off in 5 years) and Lycos ($12.5 billion, sold for $95m in 4 years) through sheer force of ignorance.
What makes this deal particularly, historically awful is that none of those acquisitions were made by one guy. Like many of Musk’s historical moves, one might assume that such a thing wasn’t possible — that one person could not buy a $44 billion thing — but Musk was aware that while this might seem impossible (and at the very least be inadvisable), it was quite doable if you had enough capital and had studiously built an image of a man who was capable of making more money appear at will.
And that’s what makes the Twitter acquisition a masterpiece of hustle, a deal that only Elon Musk could (or would) complete, and a deal that only Elon Musk could get funded. Musk had proven that he had, on some level, broken the financial markets. He was able to have Tesla (a company he ran and owned about 20% of) buy SolarCity (a company he owned 20% of run by his cousins), nakedly manipulated Tesla stock with no consequences, and somehow did not have to pay anything in the Tesla board compensation derivative suit that had directors hand back $735 million.
Musk took advantage of the greed and arrogance of financiers that have crafted a market that responds to signals and vibes over good company financials. A company can firmly sit in the red for years without fear that their stock will drop as long as they can show revenue growth, and a stock like Tesla’s — one decoupled from rationale or fundamentals — can soar based entirely on the bloviating of a 53-year-old man-child. Musk’s facade had been carried by the fact he had, for the most part, made good investments and then left the companies in question to actually build the things, operating as an awkward carnival barker, calling questions he didn’t like “boneheaded” and “uncool.”
The problem was that Twitter, for the most part, is totally unlike any other company that Musk has owned or had a hand in creating.
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The Rime of the Ancient Moron
Every great hustler has a weakness. Poker player and golfing hustler Titanic Thompson (a man who conned Al Capone out of $500 and also loved getting married, divorced and having multiple children) made his money by tricking men in a variety of ways, including playing golf against them right-handed, then offering to play them left-handed in a double-or-nothing game, failing to mention that he was a stronger golfer with that hand. Thompson got away with killing five different men in self-defense, but ended up virtually penniless thanks to his addiction to betting on horse-racing, which would (according to historian Kevin Cook) lose him millions of dollars.
While Musk may not be in the business of convincing people he’s less capable, he is hurtling dangerously toward the classic failing of all great hustlers — playing outside of the odds that made him rich in the first place.
Musk’s successes — SolarCity, Tesla, SpaceX and Starlink (which has only recently hit profitability) — come from buying into or building companies that sell something, juicing their revenues and valuations by extolling bright futures of eternal growth, the kind that the market adores. Anything that Musk talks about is automatically covered by the media, which is something that inherently boosts any company that actually sells something, because there’s a call-to-action at the end of whatever churlish statement he chooses to make. When motivated by greed, Musk can be incredibly effective, because there’s something (theoretically) valuable at the end — Elon Musk has endorsed this product, the product does this, and you should either buy the product or the associated stock.
Every product decision he’s made feels like every time I’ve seen a desperate man lose thousands at a craps table “trying to make his money back,” mumbling that he “has a system” as the dice seem to work against him with every roll. Musk’s playbook has always been to sell the sizzle - that you’re buying into the future of something, even if that future is murky and the something kind of sucks - but it hinges heavily on there being something tangible and “cool” to own.
Musk has ultimately made the biggest mistake one can in gambling or hustling — letting emotion take the wheel. Acquiring Twitter was never about making money. Musk wanted to prove something non-specific to those he considered “woke” while also avoiding the painful discovery process that would’ve accompanied walking away from his acquisition offer.
Musk took a publicly-traded company private, a company that had a questionable value proposition and made money primarily through its meager share of online advertising spend. Twitter’s core product — tweets — were (and are, for now) free, and thus the only thing one could sell to users would either be an experience they already paid for or something that somehow enhanced the free product, a challenge that Twitter’s previous administration had only ever vaguely attempted to face.
And, crucially, what is it that Twitter sells? What is the product? What can asset can Elon Musk pump, and why would you buy it over something else?
This is why Musk feels the need to discuss weird metrics like “unregretted user-minutes,” or post unmarked graphs that say that “monthly users are over 540 million,” only for puppet CEO Linda Yaccarino to state months later that daily active users were actually dropping. Musk cannot encourage “more” of Twitter, because Twitter is already so vast, and monetizing an experience that is already free hasn’t been particularly successful. Twitter Blue has just over a million subscribers, and they’re “superspreaders” of disinformation, weakening the core “tweets” product that actually makes Twitter money.
One might argue that Elon’s sell-the-sizzle playbook is antithetical to Twitter as a company. Twitter had, until 2022, become notable less as a company and more as an institution — a place where news was broken, arguments were had, and discourse brewed. By making Twitter more conspicuous, Musk has somehow increased scrutiny while reducing traffic, because much of the press around Twitter is telling you that the core product is worse, and its creators (and leadership team) are part of the problem. While Musk can temporarily distract from build problems with the cybertruck by driving one to an F1 race, his near-autonomous ability to drive press to his products is a never-ending advertisement for why Twitter sucks and you shouldn’t visit it.
As Dan Primack of Axios noted, the Twitter acquisition was effectively a huge private equity deal, and these deals hinge heavily on cash flow to handle interest payments of, in this case, a billion dollars a year. Twitter is cash flow negative, and Musk and Yaccarino’s meager attempts to lie about it don’t change the fact that this website is a ticking time bomb, one riddled with ugly debt and an uglier future.
It’s hard to guess where things go next. Musk could offer to buy the debt at dirt-cheap prices, but the banks will likely refuse, demanding instead that he continues to make his $1 billion interest payments. Twitter itself could file for bankruptcy, as the debt is held by the company itself, which would likely lead to a fire sale and the company’s acquisition by another big tech giant, assuming that at that point there’s much left of a platform crumbling on a daily basis.
And what makes both the cybertruck and Twitter acquisition so unique is that they’re thoroughly, unquestionably bets that Musk himself made. Tesla’s engineers hated the cybertruck so much that they made an alternative design which Musk didn’t even look at, choosing instead to go with a design that has serious flaws and has, to quote Musk, “dug Tesla’s grave.” Tesla will (unlike the Model S, X and 3) launch the Cybertruck without any first-mover advantage. You can pick up a Rivian R1T or Ford F150 today for a fraction of the rumored $98,000 Cybertruck, and by the time Musk’s polygonal monstrosity rolls off the production line, there will be virtually no reason to own it.
One of the most common hustle culture mantras is that you should “bet on yourself,” and trust in your own ability to get things done.
Musk is quickly becoming an exception.
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