Within the weeks since Elon Musk took over as CEO of Twitter, the corporate has laid off practically half of its staff and supplied the remaining staff an ultimatum: Decide to being “extraordinarily hardcore” going ahead or depart the corporate. In response to The New York Instances, lots of of staff have opted for the latter.
On Wednesday night time—because the deadline loomed—Andy Wu, an assistant professor of enterprise administration at Harvard Enterprise Faculty, advised me that Musk’s powerful, authoritarian administration fashion “usually doesn’t work in most conditions.” Nevertheless, he argued, it has seemingly labored a minimum of considerably at Tesla and SpaceX. Wu careworn that Twitter had been in hassle previous to Musk’s acquisition, so its odds of long-term survival have been already restricted.
We caught up once more this morning to debate the fallout from the ultimatum. Wu was nonetheless hesitant to depend Musk out. “I’ve been persistently improper about projecting out Musk’s potential, so I actually don’t need to guess towards him this time,” he stated. “He’s all the time exceeded my expectations.”
Our conversations have been edited and condensed for readability.
Caroline Mimbs Nyce: What do you make of Musk’s administration fashion, as demonstrated previously week?
Andy Wu: Musk is certainly a hard-charging, impulsive, and risk-tolerant chief, and he’s prepared to go for the sorts of adjustments at Twitter that I can’t think about some other CEO or entrepreneur going for. I do assume there’s some logic to the insanity.
That stated, Musk undoubtedly has a sure desensitization to the broader influence on the skin world, which different executives could be extra involved about.
I believe Musk is correct in that he must take some possibilities right here and check out some new issues.
Nyce: So that you don’t essentially assume the technique is improper?
Wu: Properly, particular person decisions could also be improper. It’s unclear if the blue-check-mark factor will grow to be the best technique. And it’s unclear if chopping particular groups is the best technique. However at a excessive degree, I’ll simply spotlight that Twitter is a enterprise that, for a really very long time, has been very, very weak. And so what we’re seeing as we speak is simply that weak spot uncovered to the general public. However it’s really been weak for a very long time. And the 2 weaknesses are—one, it’s a really inefficient price construction relative to some other social-media enterprise. And two, it’s very, very gradual at really producing new options and innovating.
Nyce: Like, from a software program perspective?
Wu: From a product standpoint as effectively, as within the options out there to us.
And so that you’ll see what he’s executed within the early days right here is, first, to aggressively reduce prices. And second, to start the method of adjusting the tradition in order that it’s acceptable to experiment in public and check out new issues and take dangers and sometimes fail.
Nyce: That’s attention-grabbing. I’ve been considering lots about Agile, the iterative manner of working popularized in software program. Shifting in an agile manner appears to contain some belief among the many group members. After we take a look at Musk as a supervisor—the ultimatum he gave, feuding with a developer on Twitter—are these issues that will empower software program groups to ship options shortly and transfer in that “construct quick” manner?
Wu: It usually doesn’t work in most conditions. However it appears to have had some success at Musk’s prior firms. It’s fairly clear from prior firms he’s managed that he’s fairly authoritarian, in addition to hard-charging and aggressive in his targets. There are undoubtedly rumors that he doesn’t tolerate dissent and can react to it fairly negatively. We all know this occurs inside Tesla and inside SpaceX.
I believe we’re nonetheless within the part of price chopping at Twitter proper now to get the monetary state of affairs in form. Twitter does want to chop staff. And I do assume a few of these ultimatums are designed to see if he can organically shake out a few of the staff.
Nyce: Does this type of—you referred to as it authoritarian; I would name it hard-ass—administration fashion usually work for an employer in the long term?
Wu: It’s undoubtedly a tricky surroundings, and it doesn’t work for most individuals. It undoubtedly wouldn’t work for me. I may inform you that in 2019, the annualized turnover of executives reporting to Musk at Tesla was 44 p.c, which is 4 occasions greater than that of a equally sized agency. So there’s an enormous quantity of churn in his organizations.
Nyce: So, is he an excellent CEO? Simply to ask a point-blank query. What are the metrics you’ll take a look at to guage whether or not somebody is a profitable supervisor and CEO?
Wu: Musk is a one-of-a-kind CEO.
Nyce: [Laughs] That’s very impartial.
Wu: I’ll say, on the upside, what Musk has achieved up to now at Tesla and SpaceX is basically unbelievable and spectacular and actually particular, so far as his technology of enterprise leaders by way of the quantity of scale and assets wanted to mass-produce electrical automobiles and construct business spaceships. It’s unfathomable, and he really bought there. The problem now’s that Musk has by no means been held to a benchmark of really being worthwhile.
Nyce: Isn’t profitability fairly vital when you’re a enterprise government?
Wu: We take into consideration development and profitability individually. While you’re within the development part of the enterprise, buyers worth you on development, and you’ll justify rising with out serious about profitability. Sooner or later, inevitably, any enterprise has to shift to serious about profitability. And we don’t know but if that’s inside Musk’s talent set.
As one illustrative instance, for a minimum of a 20-year window, Amazon was given a free go by Wall Road to not take into consideration profitability, and that has really allowed Amazon to do lots of superb issues. However as you’ll be able to see, in recent times, profitability is certainly extra on the minds of executives at Amazon.
Twitter is definitely an incumbent, established enterprise. And given the monetary construction of Twitter—and its debt state of affairs—I think about profitability is definitely on Musk’s thoughts.
Nyce: Plenty of tech firms actually pitched themselves as various work cultures to Wall Road or conventional firms. Musk’s administration fashion is a little more conventional and a bit extra top-down.
Do you assume a pacesetter can realistically change a spot whose staff anticipate that various tradition? Can you set in a pacesetter who has a completely completely different administration fashion and get that tradition to alter?
Wu: So cultural change is among the many hardest, if not the hardest, administration problem doable. There usually are not many examples I can level to the place managers efficiently shift the tradition of a whole agency from the place it began.
Nyce: Proper. Like, are you able to flip a Fb right into a Goldman Sachs?
Wu: A few of my colleagues are of the opinion that full cultural change is barely doable when everybody leaves or dies.
What’s regarding right here is that cultural change shouldn’t be one thing Musk has actually executed previously. Previously, he’s been the early worker or founder. He’s been capable of set up lots of the tradition. Right here, he’s bought to make a shift occur.
Nyce: With software program, it’s most likely fairly vital to have legacy staff round, proper? Are you able to simply shuffle out individuals of 1 tradition and shuffle in individuals of one other tradition with out having the corporate fully disintegrate?
Wu: Doing that type of swap could be very, very harmful. So we’re going to have to attend and see what’s going to occur right here. My sense is that they’re prioritizing the inner core of the expertise of Twitter, the social graph. And lots of what we’re seeing is basically on the external-facing capabilities and the product-user interface—just like the blue verify mark and stuff like that.
So, for instance, considered one of Musk’s massive issues coming in is that he desires to alter the tradition round moderation. And that’s a type of the place Musk would most likely lean towards chopping everyone and changing them together with his personal group. As a result of that’s a type of matters the place there’s a very robust cultural affinity to the way you try this job.
The important thing punch line right here is that Twitter was really in very dangerous form and didn’t fairly have a future anyway. By way of actually powerful issues, that is the type of CEO you most likely have to check out. Twitter is definitely a really, very troublesome enterprise problem that no person else has been capable of resolve. So at this level, we’d have to, like, swing the automobile round and see what occurs.
Nyce: That’s attention-grabbing. There are real-world penalties to lots of this—to constructing quick and breaking issues within the software program sector.
Wu: I do assume that shifting quick and breaking issues undoubtedly has its limitations. There are two distinctions right here. First, once we take a look at SpaceX or Tesla, lots of people agree, on a societal foundation, that electrical automobiles and going to house are usually good issues—whereas individuals have sure political and ideological views on what Twitter must be doing, and that’s essentially divisive in a manner that wasn’t true at SpaceX and Tesla within the early days.
The opposite distinction is that Twitter performs a important function in communication, particularly in elite circles of our world. It’s not so clear whether or not we need to have this type of technique for one thing that some may take into account public infrastructure.
Nyce: What letter grade would you give Musk the supervisor, when you needed to?
Wu: The selection to do the deal, I might give a D or an F. Assuming the deal is completed, I might give it perhaps a C+, B–.
Nyce: So he’s not completely failing in your ebook.
Wu: It’s mainly the sport. He’s enjoying the sport you must play to make this work. There’s nonetheless a excessive chance of failure. However when you have been on this place, you would need to make lots of these actually, actually powerful decisions, as a result of it is a powerful firm to handle that has struggled for a very long time. I’m attempting to think about the truth that the corporate was weak already after which give him some good thing about the doubt from that perspective.
The rationale I’m hesitant to present you decisive predictions right here is that Musk has surpassed my expectations already on Tesla and SpaceX time and again and once more. And I don’t assume we are able to depend Musk out.
Final night time, information broke that lots of of staff had declined to take Musk’s ultimatum and determined to depart Twitter, elevating considerations that the positioning might fail. I referred to as Wu again on Friday to ask whether or not these occasions had modified his opinion.
Nyce: Do you continue to assume Musk has a shot at turning this firm round?
Wu: I nonetheless assume Musk has a preventing likelihood at turning Twitter round. That stated, from what we’re seeing on the skin, the cultural mismatch between Musk and the prevailing Twitter group appears to be fairly massive—and bigger than I might have anticipated entering into.
Nyce: Are you stunned by how many individuals reportedly didn’t take the “extraordinarily hardcore” mandate?
Wu: No, the quantity of people who we’d anticipate to reject the “hardcore” mandate is sensible. The one query for me is whether or not or not Musk and his group anticipated that degree of individuals rejecting the “hardcore” state of affairs.
I believe now we have to bear in mind right here that there are a variety of causes that Musk would need sure individuals to depart the corporate past their official layoffs. And a type of causes—which I believe we’ve forgotten within the tumult—is that Musk does care about individuals working in individual. There’s a good argument that—in a time when that you must be very agile, and that you must coordinate and innovate—having individuals shut collectively and dealing in a co-located manner makes a distinction. This really creates a window for these individuals—the individuals who don’t need to come into the workplace—to depart. And I think about some fraction of [the outgoing employees] are these individuals.
Nyce: But when he’s actually attempting to create a window for individuals who don’t need to work in individual to depart the corporate, are there no more efficient methods of doing that?
Wu: Properly, there are undoubtedly extra causes than that. However it is a good manner of letting individuals self-select it.
Nyce: Is it a pleasant manner?
Wu: I believe he desires to be straight-up right here about precisely what the expectation is. I believe giving individuals the prospect to decide out is definitely, in some methods, type of well mannered. That stated, you’ll be able to argue that this administration fashion is broadly rude and unprofessional. However that is how he’s managed at Tesla and SpaceX. So giving individuals the prospect to resolve to not be a part of that regime is devoted.
The “hardcore” factor is certainly unconventional, however that is an unconventional deal. A personal-equity agency would by no means put themselves on this specific type of monetary state of affairs. It is a firm that private-equity corporations have checked out and consistently rejected taking up as a result of the financials look dangerous, and the corporate’s potential seems dangerous.
And one of many key challenges, in fact, is that any private-equity agency that will are available on this deal must closely restructure the workforce. And that isn’t one thing anybody desires to do. There’s no person who could be on this place and look good popping out of it. On the finish of the day, you possibly can put anyone in cost right here. In a single 12 months, lots of people won’t be at that firm anymore.
Nyce: On Wednesday, we talked a bit bit about how this authoritarian administration fashion doesn’t work at most locations, however that it appears to have discovered some success at Tesla and SpaceX—and that perhaps there’s this Elon exceptionalism, the place he can get away with it. Do you assume final night time’s information casts any doubts on that line of considering?
Wu: I believe it undoubtedly calls into query a few of the religion we had in each Musk’s means to attract individuals in with this cult of character and his means to get individuals aligned round a imaginative and prescient. What’s completely different, it now, is that at Tesla, SpaceX, and the opposite companies, the people who find themselves aligned on the mission and the cult of character are individuals who chosen that surroundings. Whereas right here, these are individuals who didn’t choose into that surroundings—they have been compelled into it. And what’s clear now’s that Musk isn’t changing individuals. He’s simply discovering the individuals who could be simple to transform.
Cultural change is simply as laborious as I might anticipate it to be. It’s taking place in a really dramatic manner. However I do need to level out that, largely, Twitter continues to be functioning as a technical product. The web site nonetheless exists, and you’ll nonetheless put up. So I believe it’s really superb that it nonetheless capabilities. I believe we’ve bought to present some credit score to Musk there, regardless that he’s misplaced a good portion of the corporate.
Nyce: Would you give credit score to Musk there, or would you give credit score to the individuals who work on Twitter?
Wu: That’s truthful. The individuals who constructed the Twitter product undoubtedly constructed a fairly resilient infrastructure to outlive by means of all of this. The technical half can function with out lots of the individuals.
Nyce: Do you assume a few of the “RIP Twitter” hashtag stuff is overblown?
Wu: No. I believe that’s a legit threat right here. I believe it’s very doable Twitter might go down within the coming weeks or months. However I do need to level out that it’s superb it hasn’t gone down already. That is big turmoil on the firm. And once more, the turmoil is critical to make this type of transformation. However it’s not the transformation that any private-equity agency or myself would have ever gone for. However Musk has traditionally gone for every kind of issues that folks stated have been not possible. I’ve been persistently improper about projecting out Musk’s potential, so I actually don’t need to guess towards him this time. He’s all the time exceeded my expectations.
Nyce: I requested you to grade him earlier this week. What do you give the previous 24 hours?
Wu: I might change my first grade—for the selection to do the deal—to a strict F, as a result of I believe the mismatch between Musk and Twitter is one thing that might have been discovered in due diligence.
Assuming the deal is completed, and you must handle the corporate, I’d downgrade this to a C. There are undoubtedly lots of tough edges right here. This may very well be executed extra professionally and extra cleanly. However on the similar time, it’s not strictly an F for me, as a result of I believe there’s nonetheless an opportunity right here. And cultural change is difficult for anybody.
Nyce: You talked about earlier than that you just don’t depend Musk out. Is that the place you continue to stand?
Wu: I nonetheless stand by that. I believe we are able to’t depend Musk out. What stands out to me is, when you comply with the more moderen tweets from Musk, he’s really taking this in amazingly good spirits, and capable of poke humor at himself in an irreverent manner. And I can guarantee you that, like, I otherwise you or anyone wouldn’t have that means to poke enjoyable at ourselves in this type of state of affairs, when the entire home is burning down.
Musk has been by means of lots of turmoil in his previous, and he can deal with lots. And I believe that’s actually particular in his management. Now we have to recollect, he was fired from PayPal. Even from the very starting of his profession, he’s gone by means of lots. And that type of resilience, I believe, is particular. And actually, I’d prefer to see that in additional leaders. Not essentially the loopy conduct—however the resilience is good.
