In the year following the first Covid-19 diagnosis in the United States on 20 January 2020, nine million Americans lost their jobs and Elon Musk’s personal wealth increased by $171.1bn. This is probably the fastest accumulation of uninherited personal wealth in the history of capitalism, and Musk used it to secure a deal he has long coveted: the ownership of Twitter, which on Monday 25 April agreed to be acquired by Musk in a leveraged buyout worth $44bn.
How did he make so much money so quickly? Partly we must credit Musk’s brilliant leadership of Tesla, but mostly we should point to the Federal Reserve and its chair Jay Powell. The Fed bought assets at a rate of $120bn a month during the first year of the pandemic. To stabilise their economies, the world’s largest central banks have increased their balance sheets by more than $11trn since January 2020. In doing so they have not only stabilised capital markets but supercharged them; the returns offered by the S&P 500 index of America’s largest companies have more than doubled. Money surged towards speculative technology companies as institutions and individuals realised the stock market was, for the moment, a game they couldn’t lose.
Twitter itself is also a key ingredient in Musk’s success, however. When he tweeted on 27 March about his intent to “seize the memes of production”, he acknowledged how reliant his wealth is on the socially agreed value of Tesla, which has increased its market capitalisation by more than 13 times since the end of 2019. Tesla promises to revolutionise the $2.7trn automotive manufacturing market, but Musk, its enigmatic CEO, promises to create a world in which the internet is connected directly to people’s brains and there are cities on Mars – and he does so mostly on Twitter.
[See also: Elon Musk’s Twitter utopia can never be realised]
That Musk saw it as necessary not just to use Twitter but to own it could suggest a fundamental change in the digital economy.
The means by which money is made from the internet is often referred to as the “attention economy”. In its first iteration, this meant making websites available for free and charging for advertising to run alongside them. But this model is running out of road: readers of quality websites would rather pay for a better experience, and the rest of the internet is a slurry of misinformation, algorithmic weirdness and bots. Facebook users are in decline; its ad-supported platform is losing traction, particularly with the young. Google’s main product, its search engine, is similarly hampered by ads.
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Musk has long been opposed to conventional advertising, on which car manufacturers spend more than $35bn per year, and on which Tesla spends nothing at all. But as the first generation of attention-economy companies begins to struggle, Musk uses a more direct strategy: being the world’s most recognisable businessperson – the constant focus of attention – gives him a unique personal ability to move markets.
This has become a real means of making money for him: Tesla’s total net income from over a decade of selling cars amounts to a loss, so far, of more than $350m. Its income from selling shares and bonds on capital markets over the same period is around $32bn (plus a further $20bn in private equity funding).
This could explain why Musk claims to be a “free speech absolutist”; like Donald Trump, he has found that the internet rewards controversy more than anything else. His insults and boasts have resulted in court cases and fines, but ultimately this has only been to his benefit in the fame-based economy. It is no coincidence that he is an advocate of Bitcoin, which derives its price solely from the number of people who have heard of it and have an opinion about its value.
[See also: Will the internet’s third iteration free our virtual selves from Big Tech’s control?]
It does not follow from this, however, that Musk values other people’s free speech as much as his own. In 2018, Musk tweeted that he was “Going to create a site where the public can rate the core truth of any article & track the credibility score over time of each journalist, editor & publication”. But people already compare the legitimacy of various news sources within their social groups, on the internet, over the breakfast table and in the pub. The only reason to set up a website to facilitate this would be if you also wanted to control it.
Musk has shown an appetite for controlling the message about himself and his companies. When the BBC and the New York Times were critical of their experience of Tesla products, he called their coverage “fake” and “staged”. Tesla owners given early access to new software have been required to sign nondisclosure agreements, and Musk appears to have personally offered to pay off a student who used public data to create a Twitter account tracking his private jet.
As the owner of Twitter, Musk will be faced by competing interests. He may well see free speech as “the bedrock of a functioning democracy” and Twitter as the world’s “digital town square”, but a significant part of his wealth is derived from an undemocratic state in which free speech is not tolerated. Tesla’s latest annual report to the US Securities and Exchange Commission (SEC) identifies China as its fastest-growing source of sales, and its second-largest sales location after the US. China – which buys almost five times as many electric cars as America – is the only market where Tesla can live up to its dizzying valuation. Commenting on the Twitter deal, Jeff Bezos asked: “Did the Chinese government just gain a bit of leverage over the town square?”
Then again, Bezos himself has invested in public discourse in the form of the Washington Post, while the Salesforce CEO Marc Benioff has bought Time and the Alibaba founder Jack Ma has bought the South China Morning Post. The internet economy may be changing, but the people who have made the most from it are determined to remain in charge.