Why I like Elon Musk (anyway): vices and virtues of authoritarian business leaders

It’s a tough time for tech companies. Amazon, Meta (Facebook’s parent company) and Twitter are laying off people en masse. After Meta’s difficult week, which saw its market capitalization drop considerably, Twitter found itself in the spotlight after its takeover by Elon Musk. Both bring back the never-ending question of what good corporate leadership is. Is Musk the villainous leader portrayed in the media, an overbearing entrepreneur with an inflated ego, who is destroying Twitter? Not so sure. Because behind the apparent madness, there is a method, even if it is a debatable one.

Chaos seems to reign at Twitter. After its takeover by Elon Musk, an entrepreneur who already runs Tesla and SpaceX, two leaders in their sector, the company is at the center of a highly publicized storm. As soon as he arrived, the new boss laid off 3,700 employees, then announced changes in his business policy, only to backtrack a few days later, to the point where no one really knows where the company is going, or what its strategy is. The situation seems more like a fox entering the henhouse than a company being turned around by a seasoned executive. On social networks, the hypothesis that Twitter will soon disappear is now taken for granted.

However, if there’s one thing everyone agreed on before Musk arrived, it is that Twitter was in trouble. The company was poorly managed, it had no real strategy, its staff was bloated and unproductive, and like Facebook, it had failed to deal with the fake news controversies. In short, it was heading for the wall. Given its importance in the public debate, it wasn’t just its problem; it was ours too. While no company is irreplaceable, this one is harder to replace than others, so it had to be saved. Enter Musk. But Musk is not just anyone. He is the boss of Tesla, a pioneer in electric cars, and SpaceX, a pioneer in the space industry. He also created Starlink, which provides much-needed satellite Internet access to the Ukrainian military. An incredible track record, in short. But he is also an authoritarian, demanding, even unbearable boss, for whom it is very difficult to work. He is one of those bosses that we love to hate.

A method behind the apparent madness

So, is this the reign of madness at Twitter? Far from it. In fact, as Oliver Campbell (@oliverbcampbell) explained it very well… in a Twitter thread, Musk applies a shock therapy called ‘whaling and culling’. The analysis is this: there are too many engineers, but it’s hard to separate the wheat from the chaff. It would take weeks, and time is short. Moreover, it would have to be done by the very people who might be incompetent. So, it’s not feasible. Hence the strategy is to put the company under immediate pressure by giving it a very short-term goal that is almost unattainable, a kind of sprint, which will make a natural selection very quickly. Nothing original here, it’s what the military does in the first days of a boot camp. You see who survives this sprint, who gives his all and overcomes the obstacles, and who doesn’t. This is the ‘whaling’ phase. Then, you keep the first ones and kick out the others. This is the ‘culling’ phase. It’s not much fun, it’s morally questionable, the selection criteria are, at best, approximate, but again, the reasoning is that it’s better to go fast than to do well, because of the urgency. In this perspective, the fact that Twitter is rehiring people who had just been fired, and which seemed totally senseless, is easily explained. Once the ‘good guys’ have been identified, they are asked to rebuild their team; they will naturally look for the good guys who got fired, because the good guys know how to identify other good guys. We can discuss the morality of such an approach, of course, but not present it as crazy or irrational. Nor will we shed crocodile tears for those who got fired. They leave with a big check and will easily find another well-paid job within 24 hours.

Musk, a type 4 leader

In his book Good to Great, Jim Collins distinguished two types of leaders, which he called type 4 and type 5. Type 4 leaders are typically charismatic and authoritarian. Over time, they tend to be surrounded only by obedient people without much personality, who do not dare to question their decisions. Type 5 leaders are more modest. They don’t think they have all the answers. They have no problem surrounding themselves with people who are brighter than they are. According to Collins, type 4 leaders generally tend to generate outstanding performance in the short term, through their vision and their ability to make difficult decisions without getting lost in unnecessary debates. But they can also lead their company into the wall by their hubris (excess inspired by pride and overconfidence), for example by embarking on a big gamble, or by depriving themselves of talented managers, who are put off by their management style. In short, high risk, high return, or big failure. Moreover, after their departure, the succession is generally ensured by a member of their inner circle, i.e. by mediocre people, which leads to a more or less rapid decline of the company. On the other hand, type 5 leaders have a better governance. They are more consensual and make better use of the talent within their team, whose first circle is of higher caliber. However, this consensus can slow down decision making and prevent the company from making big bets, or making tough decisions, especially in times of disruption. Musk is typically a Type 4 leader. Lew Platt, who ran HP, was a highly respected Type 5 leader, but HP did not end up in great shape.

The fox in charge of the henhouse?

To better understand Musk’s actions, it is useful to draw a parallel with Steve Jobs, another type 4 leader. When Jobs returned to Apple in 1996, which he had created in 1976 but from which he had been fired ten years later, the company had become completely sclerotic, unable to produce competitive products. It was at the end of the rope, a few months away from insolvency. Jobs cleaned up the company. His first decisions consisted in firing a lot of people and appointing “good people, in key positions of the company” according to his formula. In a famous speech, he observes that his decisions “piss off people” (sic) and that those who don’t like them go to the press to vent. He adds that it is usually those who have been fired who vent their feelings in this way, even though they had done nothing for years. Those who remain say nothing and work. It is not surprising that the buzz is negative, and there is a bias there that we find today for Twitter, and which we must be wary of.

In fact, Musk is an extreme case of an entrepreneur, but he remains an entrepreneur in the sense that he takes a big risk. If it works, he will become a hero, will be very rich, and Twitter will establish itself for a long time as a leader in social networks. If it doesn’t work, he will lose everything. He can be blamed for many things, but not for lack of courage or intellectual honesty (he is essentially paid in shares, like Jobs in 1996). Moreover, the criterion for success is clear. His work is clearly measurable. He acts within the framework of the market, i.e. where there is an objective sanction mechanism for his performance. This is a notable difference from leaders in the political world, and authoritarian regimes, where failure is not sanctioned. However authoritarian Musk may be, his actions are still governed by the law, which he must respect; he cannot force an employee to stay in his company, nor someone to join it, and he cannot remain at the head of the company if its performance is poor for too long. Bankruptcy is in sight.

Nuancing the analysis

In sum, the discussion of Elon Musk and Twitter should be more nuanced than simply characterizing the former as a raving lunatic and taking for granted that the latter will disappear. Any corporate turnaround is painful, and some are more painful than others. Musk’s strategy is very risky, and certainly highly questionable, but doing nothing would have been even riskier, because the decline was inevitable. Taking Musk for a fool is a mistake already made by the auto manufacturers and the space industry, to their detriment. Let’s make sure we don’t make the same mistake when considering his actions at Twitter.

[🇫🇷version en français]

➕More about this topic with my previous articles: ▶️Is Meta the new Kodak? Eight history lessons on the necessity and risks of big innovation bets

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