In the 1980s there was a globally admired real estate company called Olympia & York run by three Toronto-based brothers: Paul, Albert, and Ralph Reichmann. O&Y was the gold standard in real estate; the company was responsible for the development of major financial office complexes including New York’s World’s Financial Center, London’s Canary Wharf, and Toronto’s First Canadian Place. At their peak, the Reichmanns held about 8 percent of New York City’s commercial office space, more than twice as much as their closest rival, the Rockefellers.
The real estate acumen of the Reichmann brothers wasn’t the only reason they commanded such awe. Rather, it was their integrity. The Reichmanns were legendary for agreeing to landmark deals on a handshake. Their word was their bond, and if they agreed to something, the deal was as good as done. The function of O&Y lawyers was to dot the i’s and cross the t’s.
Character once mattered in business, and there was a baseline integrity requirement. While there were always “due diligence” provisions allowing the cancellation of a deal because of information discovered while examining a company’s books and operations in advance of an acquisition, absent of something material being uncovered a business leader would face serious reputational consequences for simply walking away from a transaction.
Acting out of altruism
Elon Musk has demonstrated he isn’t a man of his word. In April he announced with great flourish and fanfare that he was acquiring Twitter, based on a wing and a prayer and a back of the envelope calculation. The $54.20 a share Musk offered to pay was a healthy premium over Twitter’s then trading price. Musk dispensed with the customary due diligence, having supposedly decided that Twitter had “extraordinary potential” that he would “unlock.”
Musk claimed he was a “free speech absolutist” and led the public to believe that he was acting out of altruism. Twitter, he argued, was a “de facto town square” and that it was “really important the people have both the reality and the perception that they’re able to speak freely” within the bounds of the law.
“This is not a way to sort of make money,” Musk told a TED conference. “My strong intuitive sense is that having a public platform that is maximally trusted and broadly inclusive is extremely important. So the future of civilization, but you don’t care about the economics at all.”
On Friday, Musk was singing another tune about economics mattering after all. A regulatory filing revealed that Musk’s lawyers had sent Twitter a letter arguing he has the right to drop out of the agreement because Twitter hasn’t given him enough information about the company’s business. Media reports said that Musk’s stumbling block was that Twitter has more bots, or phony automated accounts, than the company has let on. Twitter said it will seek to hold Musk to the terms of the deal.
Musk a “technology utopian”
Musk has taken refuge under the skirts of his high-priced lawyers. Given his track record I expect he will prevail yet again making a mockery of U.S. rules and regulations. What’s troubling is that Musk has a sizable following celebrating his disrespect and his further weakening of crippled U.S. institutions like the SEC, the National Highway Traffic Safety Administration, and the presidency. Musk’s antics have distracted from China’s great strides threatening U.S. national security interests. U.S. counterintelligence officials have warned that the Chinese government is engaged in efforts that “threaten the integrity of the U.S. policy making process and interfere in how U.S. civil, economic, and political life functions.”
Americans should be unnerved that Musk is deeply in bed with China, where the Communist government granted Tesla significant competitive advantages in exchange for helping the country achieve global control of electric vehicle manufacturing and materials. According to the Wall Street Journal, Xi Jinping, China’s leader for life, regards Musk as a “technology utopian with no political allegiance to any country.” Notably, Musk has repeatedly expressed his admiration and support for Xi’s regime.
How in bed is Tesla with China? Bloomberg reported last December that Tesla lobbied China to use the Communist government’s censorship powers to silence Tesla critics on Chinese social media who questioned the safety of the company’s cars. Tesla also sued Chinese consumers who were critical of the company on social media. These were hardly actions consistent with an owner professing to be “a free speech absolutist.”
Musk characterizing Twitter as “town square” was also a lie. Only about 20 percent of Americans are on Twitter and 10 percent of the tweeters account for 90 percent of the tweets. Twitter is best characterized as a safe place for people who relish disparaging and destroying others, and the conversation is artificially tilted in favor of liberals because those with conservative values or who question the U.S. government’s pandemic and fossil fuel policies are routinely censored and silenced.
Bots a bogus concern
Musk’s professed concerns about the pervasiveness of Twitter’s bots are also bogus. He was on record as saying that he favored converting Twitter to a subscription model and eschewing advertising, so the number of Twitter bots is irrelevant. Moreover, Musk has a special appreciation for Twitter’s bots and their benefits.
According to David Kirsch, a business professor at the University of Maryland, automated Twitter accounts for years have tweeted messages about Tesla that reinforced its planet-saving, world-dominating messages. Kirsch told the Los Angeles Times there is enough “smoke” to warrant investigating whether there was a correlation between Tesla bot tweets and the company’s stock price. The Times didn’t make clear whether Krisch believes Tesla is directly responsible for the bots tweeting favorable company messages but presumably Musk is aware of the activity.
A corrosive impact
What’s undeniable is that Musk is having a corrosive impact on U.S. institutions that’s furthering American distrust. Musk declared in a 60 Minutes interview that he had “no respect” for the SEC. He’s routinely flouted U.S. securities rules, including how he amassed a 9.2 stake in Twitter.
The NHTSA has issued more than a dozen Tesla recalls, including two that violated federal safety standards. Michael Brooks, acting director of The Center for Auto Safety, accused Tesla of playing “a little fast and loose” with the safety of its features.
Musk in an earnings conference call a year ago last January said that he was “highly confident” a Tesla would “be able to drive itself with reliability in excess of human” by year-end. Chris “CJ” Moore, previously Tesla’s director of Autopilot, wrote in a leaked memo that Musk’s claim didn’t match “engineering reality.”
Musk has publicly ridiculed President Biden, calling him a “damp sock puppet.” While most Americans share Musk’s dim view of Biden, the entrepreneur only knows how to disparage rather than offer solutions or alternatives. Peter Thiel, who was also part of the PayPal Mafia and whose intellect rivals Musk’s, is devoting considerable time and financial resources to get candidates committed to protecting U.S. interests elected in Ohio, Arizona, and elsewhere. Thiel has publicly expressed concerns about China’s world domination plans, and Google’s “treasonous” activities supporting the country’s military.
Americans’ growing distrust
America has entered a very dark place. According to a Gallup poll released last week, Americans have reached a record-low confidence in the country’s institutions with only 23% having confidence in the presidency, 7% having confidence in Congress, and 16% in newspapers, and 11% in television news.
Meanwhile, the heads of the FBI and the UK’s MI5 have warned China is readying to take over Taiwan and has demonstrated its willingness to risk global conflict though cyberattacks, industrial espionage, and electoral interference. Perhaps the biggest U.S. threat is that Americans have lost confidence in the institutions without which a Democracy can’t function.
Musk has fanned the flames of this distrust.