Monday, July 18, 2022

What Motivates Billionaires? Twitter v. Musk Edition

 by Michael C. Dorf

My latest Verdict column discusses Twitter's lawsuit against Elon Musk. Twitter seeks to compel Musk to consummate the deal he signed in April to buy the company. If you don't want to read the column . . . well shame on you . . . but okay, here's a very rough summary:

(1) Twitter wasn't worth the $44 billion Musk agreed to pay for it in April and it's worth even less now; (2) under the terms of the deal, that doesn't excuse Musk's performance; (3) neither do his contentions about bot accounts or Twitter's cooperation since April; (4) so, at least if the complaint is basically accurate in the facts it recounts, Musk is in breach; (5) Musk's motion to delay trial until next year should probably be denied, because the matters that Musk says will take more time to complete appear to be legally irrelevant; (6) the remedy for breach is usually damages but here there's a specific performance clause; (7) the Delaware Chancery Court typically enforces such clauses; (8) but maybe the court shouldn't enforce this one because the "balance of the equities" factor cuts against giving control of one of the leading social media platforms to an impetuous egomaniacal man-child whose behavior resembles that of Donald Trump and who would run Twitter without any content moderation, so as to allow the likes of Trump to make Twitter (even more) toxic; (9) nonetheless, given what I've been able to learn about remedies in the Delaware Chancery Court, there's a good chance that specific performance will be ordered; and (10) at that point the best hope is that Musk and Twitter settle for some number of billions of dollars in lieu of Musk's purchase and then destruction of Twitter.

The full column contains more, but those are the basics. Here, however, I want to dwell on a point I accept from the complaint for purposes of the column but which strikes me as at least somewhat doubtful: Twitter says that Musk is having buyer's remorse because of the decline in the market, making what was a questionable deal in April look terrible now. I don't disagree that Musk appears to have buyer's remorse, but I'm not sure how much of that is due to the economics of the deal. It could be entirely about the economics, especially given the indirect impact on Tesla, the source of most of Musk's wealth. And so far as the contract is concerned, it doesn't really matter why Musk wants to get out of the deal. The key legal point is that he hasn't identified a breach by Twitter or other relevant circumstance that would excuse his performance.

Even though Musk's motive is irrelevant legally, we might be interested in it as a matter of psychology: if Musk was willing to make himself poorer to acquire Twitter in April, why doesn't he want to make himself even poorer--but still fabulously wealthy--now? I don't know the answer to that question, nor to the question of whether financial considerations really are driving Musk now. So I'll instead ask a more basic one: what motivates billionaires?

The question has at least two dimensions. The first is what motivates someone to become a billionaire. Some potentially overlapping possibilities include: (1) Nothing, but someone might become a billionaire accidentally or as a by-product of doing something else--like inventing a hugely successful product--for its own sake. (2) Some people are simply greedy or acquisitive well beyond the point at which money can make any sort of concrete difference in their own lives or those of their close family and friends. (3) Some people think of money as a way of measuring success or keeping score. (4) Someone might want to become enormously wealthy in order to acquire and wield power. (5) Someone might want to become enormously wealthy in order to do (what they regard as) good with their money, through philanthropy or otherwise.

I strongly suspect that there aren't a lot of people who fall into category (5), although there certainly are many examples of people who, having achieved enormous wealth for one of the other reasons, then use that wealth for good. Many of the best known philanthropies--the Ford Foundation, Bill & Melinda Gates Foundation, Getty Trust, etc--were founded by people who made their money and then turned to philanthropy. In any event, I want to pivot now from the question of what motivates people to become billionaires to what motivates billionaires in how they pursue goals beyond simply continuing to enrich themselves.

One possibility is to turn your business itself into a vehicle for doing good. That's not easy to do with a publicly traded company, given obligations to shareholders to maximize value, but a billionaire who wanted to do good with a company could take it private. Or they could simply buy some company that has public-serving potential. The purchase of the Washington Post by Jeff Bezos in 2013 fits this model. Although the Post is profitable under Bezos, owning the paper and allowing the journalists he employs to make editorial decisions according to their best professional judgment looks much more like a public-spirited enterprise for Bezos than a money-making venture. Notably, Bezos has earned praise for his role as public-spirited owner of the Post, a marked contrast of the criticisms he received for his leadership of Amazon--especially its treatment of employees and its impact on competitors--before stepping down as CEO last year.

Viewed charitably, Musk's motivation for (at least previously) wanting to purchase Twitter falls into the same broad category of public-regarding ventures, but there's at least one important difference. Like a great many traditional newspapers, the Post was struggling financially. In buying it and giving it some cushion, Bezos was able to stabilize and reinvigorate a once-great newspaper. Twitter, by contrast, had a successful business model before Musk decided to purchase it. Musk believed, however, that it was not serving the public interest as well as it could because of its content moderation policy, what Musk deemed the prevalence of bots on the platform, and various other complaints (including even the absence of an "edit" function, which is admittedly annoying but hardly worth $44 billion to fix).

In that sense, what Musk was doing with Twitter was the mirror image of what Bezos did with the Post. Bezos bought the Post to give it an infusion of cash and let the journalists run it. Musk wanted to buy Twitter and then run it himself or through agents he directed. Musk may well sincerely believe that he can run Twitter better than its current directors and managers, but there's a great deal of arrogance at work.

Accordingly, we might analogize Musk's desire to purchase Twitter to vanity projects of billionaires who purchase sports franchises. Some people do so and then run the teams either at a loss or at a mere modest profit. Others treat them as investments and businesses. And then some people in each category get involved in the running of the teams, regardless of whether they have any relevant knowledge or experience to do so. And when I say that, I know whereof I speak, because I'm a Knicks fan.

Having now compared Elon Musk to Knicks owner James Dolan and to Donald Trump (in the Verdict column), I'll close by acknowledging that Musk's success with Tesla has had the social benefit of moving the American automobile fleet towards electric cars faster than it probably would have moved otherwise. Even so, the company faces serious allegations of racial discrimination and other misdeeds, and Musk did real harm by repeatedly over-hyping the self-driving capacity of Teslas. Still, on net, Musk's direction for Tesla should probably count as a net social benefit. And in an era when NASA will rightly no longer hitch a ride from the Russians, SpaceX is also useful.

In the end, I don't really know what motivates Musk and other billionaires. I'm grateful to those who use their fortunes philanthropically, but I suspect that we would be better off with a political economy that didn't generate so many billionaires in the first place.