No one polarizes a conversation about leadership more than Elon Musk.
If I talk about his successes at Tesla and SpaceX, his critics object that he wasn’t actually a co-founder of Tesla. Then they point out that government contracts are a major source of revenues for SpaceX, which they claim is inconsistent with Musk’s politics.
If I talk about Musk’s failures at Twitter (now X), his supporters object that I don’t understand his master plan there that will play out over time. Or they claim that he didn’t buy Twitter for financial reasons but to promote free speech.
I disagree with all of them. Here’s why.
Let’s Start with Tesla and SpaceX
Elon Musk is the primary leader responsible for the successes of Tesla and SpaceX, and these are amazing, unprecedented accomplishments.
Tesla is the first new large-scale automotive manufacturer to succeed in the U.S. in past 80 years, though there have been dozens of attempts. Not only that, but the company planned to make nothing but EVs long before it was obvious that there would be such a big market for these vehicles. The company has built a large charging network and overcome enormous opposition to create a different sales and support network (no dealerships in the traditional sense). The company was founded in 2003, and Musk participated in the first round of investment Tesla raised in 2004. He served as chairman and then became CEO of the company in 2008. He’s more responsible than anyone for the company’s success.
SpaceX is, in some ways, even more amazing. I mean, who wakes up one day and says, “I think I’ll start a rocket company” – and then succeeds? Not only that, but by any commercial measure, Musk is soundly beating fellow billionaire rocket-makers, Jeff Bezos (Blue Origin) and Richard Branson (Virgin Galactic). The criticism that SpaceX is funded by government contracts is nonsensical – SpaceX is getting contracts from the government, not handouts. Musk saw a market and pursued it by building an amazing company that produces incredible products – and he’s been successful.
Estimates from various sources put the percentage of SpaceX revenues from government sources between 50% and 70%, according to Google Bard.
That compares with 81% of Lockheed Martin’s. Does that make Lockheed a bad company? Sorry, Musk detractors, but Elon’s leadership at Tesla and SpaceX has been wildly successful.
But now, let’s talk about Twitter. Musk’s tenure at Twitter has been a financial disaster from the beginning. This deal had so many glaring problems that I have to attribute Musk’s hubris as a root cause of the issues. For example, Musk offered $54.20 per share for Twitter, which valued the company at $44 billion. That meant he paid 52X EBITDA for the company, which was absurd. Second, he waived due diligence, a decision that would get any M&A executive fired.
To those Musk defenders who proclaim he took over Twitter out of principle and not to seek profits, you are contradicted by Elon himself. In his pitch deck to investors, he claimed he would quintuple Twitter’s revenue from $5 billion in 2021 to $26.4 billion in 2028. Instead, revenues in 2023 are likely to be less than $3 billion and Fidelity, which invested in the deal, puts the company’s valuation at $14.75 billion. (Musk claims it’s $19 billion.) That means the company has lost between half and two-thirds of its value since Musk bought it and became CEO.
Sorry, Musk supporters, but Elon’s leadership of Twitter has been a disaster.
Takeaways for Distribution Leaders
Here are some takeaways for distribution leaders from Musk’s history at SpaceX, Tesla and Twitter:
Dramatic innovation demands hard work, brilliant teams, intense determination, grit and an ability to see possibilities others don’t. Musk is legendarily relentless when it comes to hiring the best people and driving them hard to achieve great things. Many entrepreneurs have tried to start new car companies and failed; hardly anyone has tried to start a rocket company. Musk succeeded at both with no experience in either industry.
Success in one company doesn’t guarantee success in another. The most common mistake a new CEO makes is to assume that the strategies that made him successful in his last job will work in his new one. For example, soon after taking over Twitter, Musk wrote an email to employees saying that the company would be, “Much more engineering-driven. Design and product management will still be very important and report to me, but those writing great code will constitute the majority of our team and have the greatest sway.”
That may be the right way to prioritize the contributions of your teams in engineering-intensive companies like SpaceX and Tesla, but it makes no sense in a social media company where product managers, marketers and media experts should have the most influence. Engineers aren’t trained to develop insights on social issues, understand the nuances of content and censorship, and drive widespread adoption of social media sites. This is an obvious mistake.
Confidence is good; hubris is bad. I think Musk developed a destructive level of self-confidence from his successes at Tesla and SpaceX and began to believe that his opinions were right because they were contrarian, not because his insights were better. He went against conventional wisdom with Tesla and SpaceX, and he was right. That doesn’t mean any contrarian view he comes up with is correct. In the case of Twitter, he continues to make painfully obvious mistakes, and I don’t think he’s going to turn the company around until he lets go of his “engineers know best” beliefs and begins listening to people who are real experts in social media.
Fit matters – a lot. The next time someone on your team is highly successful or they fail, be careful about summary judgments of their skills – good or bad. Today’s hero may be tomorrow’s failure – or vice versa – because the same person can be brilliant in one role and terrible in another. Elon Musk is clearly an ideal fit at Tesla and SpaceX and a complete misfit at Twitter.
Beware of your own biases. This lesson isn’t about Elon Musk’s successes or failures but rather how we perceive him based on our own prejudices. It’s not a contradiction to say that Musk succeeded brilliantly at Tesla and SpaceX and is failing spectacularly at Twitter. Indeed, that is the only reasonable assessment of his performance. I find many of Musk’s defenders and detractors ignore the reality of his performance and form their opinions of him based on how well their political views line up with his. It’s very difficult to be objective when personal biases come into play and that is a flaw that can lead to terrible decisions.
Ralph Waldo Emerson wrote, “Our strength grows out of our weaknesses.” The opposite is also true – our weaknesses grow out of our strengths. The same stubbornness and contrarian thinking that helped Musk succeed brilliantly in designing and manufacturing electric vehicles and spacecraft are blinding him to his mistakes at Twitter.
Musk’s default reaction to failure and criticism is to double-down on his decisions: Rumor has it that he’s considering making Twitter a subscription service, meaning everyone will have to pay use the platform. That would make a bad situation much worse; the company would rapidly shed users and usage, driving advertising revenues into the ground. It’s very doubtful subscription revenues would grow by enough to offset that loss.
Personally, I won’t bet against Elon Musk. Right now, I wouldn’t bet with him, either. But what about you? Do you think Musk will turn Twitter around and achieve new heights of success there? Or do you think Twitter is doomed under his leadership? Share your thoughts in the comments.
Ian Heller is the Founder and Chief Strategist for Distribution Strategy Group. He has more than 30 years of experience executing marketing and e-business strategy in the wholesale distribution industry, starting as a truck unloader at a Grainger branch while in college. He’s since held executive roles at GE Capital, Corporate Express, Newark Electronics and HD Supply. Ian has written and spoken extensively on the impact of digital disruption on distributors, and would love to start that conversation with you, your team or group. Reach out today at iheller@distributionstrategy.com.