The saga surrounding the pending acquisition of Twitter and the recent public disclosure of texts between Elon Musk and his network are revealing in a few ways.
1: “Randos” Everywhere: The strategies he and his pals throw around for monetizing and "freeing speech" on social media are totally random or "rando" as he would put it. It reflects the opinion of people operating in the clouds, rather than in the trenches of social media technology or policy. With enough money thrown at the problem, they will likely back into some “right answers” for improving Twitter’s performance -- but it would not be because of any special insight or grit.
2. The Billionaire Insider’s Club: Elon puts together a syndicate of friends / investors to purchase Twitter and it is a club of people willing to toss in a billion here, a billion there -- because it would "be fun" (Reid Hoffman). Oracle founder Larry Ellison agrees to invest a couple billion after a few text messages.
This behavior seems to echo the recent announcement by a16z -- that they would fund Adam Neumann with a $350 million second chance “comeback” transaction despite the shameful wreck he left behind at WeWork (where he personally already earned more than $1 billion). There are so many worthy female entrepreneurs and entrepreneurs of color excluded from these investor circles – and they struggle to raise far more modest sums for a “first chance” to benefit their investors.
It really screams out for the need for greater use of alternative financing, like regulated investment crowdfunding (#RIC), for the 99.99% of entrepreneurs that don't have a membership in this tiny exclusive club. I think Crowdfunding Professionals should work to get LPs and institutional pools of capital diverted away from VCs and focused on crowdfunding -- perhaps as pools of matching funds (e.g. crowd commits $1m and institutional matching fund automatically triggers 1:1 / $1m match if it's in one of the fund's target sectors).
3. Some VCs are just Glorified Bodyguards: VC investor Jason Calacanis texted to Musk to tell him he would "jump on a grande {grenade}" for him - and also expressed his desire to be made the CEO of Twitter. This is why the word "cringe" exists. As I drove my pre-teen son to school one morning after the story broke, I shared that exchange as an example of how NOT to behave. He acknowledged the 'dad lesson' and quipped "Gee, I didn't know that once you have over 200 billion dollars, you get free body guards."
4. Exponential Capitalism is a Core Problem: Professor Scott Galloway, an NYU Professor and a person I respect, wrote an article about the Musk text exchanges and summed it up with:
“I believe it’s important to have incredibly successful people who are exponentially wealthier than the rest of us — it’s a bedrock principle of capitalism, creating an incentive structure that inspires productivity and prosperity. However, when people are offering billions over text to help out with another billionaire’s vanity project, in the same nation where 1 in 5 children live in food-insecure homes, then … isn’t America a bit fuc*ed up?”
I agree with the second part of his statement but disagree with the first. The wholesale acceptance of this principle is the reason so many problems of inequity exist. It’s also why progressives are increasingly making the case that “every billionaire is a policy failure.” Before anyone pulls out the “socialist” label, let me state that I’m an unapologetic capitalist. However, I believe in LINEAR CAPITALISM and I think it works just fine. Work 2x harder or more time, get 2x. Twice as educated? Get 2x. Luckier? 2x. In all, person A gets 6x person B. In that system, there’s plenty of incentive to drive innovation and the capitalist engine. Unfortunately, Scott Galloway and most of the rest of America buy into EXPONENTIAL CAPITALISM and create laws and policies to reinforce it — so person A gets 1,000,000x person B and society gets all the political and social distortions that go along with it.
Summary thoughts:
- It’s time to promote public policy that replaces EXPONENTIAL CAPITALISM with LINEAR CAPITALISM.
- Crowdfunding professionals should work to redirect the flow of institutional capital controlled by a tiny club of Silicon Valley insiders to pools that will instead invest by following the wisdom of the crowd.
- Respect the crowd -- and don’t take VCs too seriously.
#LINEARCAPITALISM #EXPONENTIALCAPITALISM
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