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Sunday, October 23, 2022

Opinion | Should we take Elon Musk's Twitter layoff plans seriously? - The Washington Post

Opinion Just when you thought Musk’s Twitter foray couldn’t get wilder

Twitter's headquarters in San Francisco on Oct. 6. (David Paul Morris/Bloomberg)
"Twitter's headquarters in San Francisco on Oct. 6. (David Paul Morris/Bloomberg)

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By now, it should no longer be possible for Elon Musk to surprise me.

I am a veteran of Musk’s epic battles with reality. I lived through his fleeting musings about taking Tesla private. I survived his brief foray into bitcoin payments. And I have of course slogged through his months-long, on-again-off-again conquest of Twitter.

I should by now be beyond astonishment. Yet I am sitting here in slack-jawed wonder, contemplating reports that Musk plans to fire nearly 75 percent of Twitter’s employees.

What can he be thinking? Of course, some layoffs are customary when a new boss takes over. But 75 percent — this is not customary. Layoffs of that magnitude mean critical operations running at half strength. It means accidentally firing the only person who knew how to perform some core business function. It means shellshocked survivors wandering the empty halls, whispering forlornly to the ghosts of happier days.

As with so many things Musk-related, this is so over the top that I am unsure what to make of it. Could it be that Musk didn’t mean it? Musk says absurd things all the time, including wild things that SEC regulations specifically forbid him from saying, such as idly tweeting that he had secured funding to take Tesla private at $420 a share. Could he have said it just to make the Twitter deal look better? When I asked a securities lawyer about that possibility, he replied, “In a presentation to potential big-ticket investors, it is reasonable to assume that his lawyers and compliance people were slightly more involved than with, say, his Tweets.”

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Besides, investors in deals of this size presumably have enough experience to understand what layoffs of that magnitude mean. So they’re not really a selling point unless you can actually explain how Twitter can function effectively with only a quarter of its current head count.

Okay, well, what about that, then? I mean, it can be hard to tell just how much you need every worker in a modern corporation. If you’re stamping out machine parts, your company knows almost exactly what it makes off your labors. But exactly how much does it increase profits when Twitter increases the number of content moderators from 10 to 20?

This fuzziness makes it easy for companies to bloat. Especially in Silicon Valley, where payrolls have been swollen by rivers of cash flowing in two directions — from advertisers to a handful of tech giants and from start-up investors hoping to fund the next behemoth. Complaints about Twitter’s overstaffing go back years.

That said, it does seems like someone would have noticed if three out of every four Twitter employees were actually adding no measurable value. I’m not saying it’s impossible. But if Musk cuts that many people and nothing goes wrong, it will be his most surprising act yet.

Alternatively, maybe Musk does plan these cuts, and he is wrong and is about to destroy the company. (Please, sigh thousands of self-hating Twitter addicts).

Fair enough, Musk acts wackily sometimes. But he is also running multiple companies successfully. He may be theatrical and impulsive, but I struggle to believe he has lost touch with reality.

A more plausible possibility is that Musk, who sometimes gets a little out over his skis before pulling back, did at one time think that he could just get rid of a large majority of his workers. But with more time to examine Twitter operations and think things through, he may have pared back his ambitions. This theory is compelling because it doesn’t require either Musk, or Twitter’s current management, to be oblivious to the facts on the ground. It only requires Musk to be who he is: prone to temporary fits of hyperbolic whimsy but also realistic enough to make cars and launch satellites and make money doing those things.

In this scenario, Musk is still going to make deep cuts because Musk is about to borrow a huge amount of money to finance this deal, and it will reportedly cost him almost $1.2 billion a year to service the debt. In a good year, the company’s free cash flow is maybe half that. Besides, even Twitter’s current management thinks the company is overstaffed; reportedly, it was planning to reduce head count by almost 25 percent.

Our hypothetical sane Musk undoubtedly wants to go further but also understands the risks of going too far and alienating customers or losing too many good employees to competitors. He will target the dross that inevitably accumulates in any large firm — the business practices that don’t make sense, the operations that don’t make money, and the workers who don’t make a good fit. However rash the initial offer for Twitter was, he will take the job of rebuilding it seriously and carve a leaner, more profitable firm out of the current bloated mess.

That’s certainly the best-case scenario — if our hypothetical Musk turns out to closely resemble the real one. Will he?

You know, maybe I’ve been at this too long, but if he did, I actually wouldn’t be all that surprised."

Opinion | Should we take Elon Musk's Twitter layoff plans seriously? - The Washington Post

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