A slow-motion train wreck.
That’s what we have all been watching for the last 9 months as Elon Musk took over Twitter - a property he wanted so badly he proposed a price 38 percent more than the value of the shares when he began his takeover. And then he decided he didn’t want it and tried to pull out.
But our shareholder economy wouldn’t let him.
That’s the perplexing part.
There were two points at which Twitter might have been able to salvage its former ownership structure under the rules (the preeminence of shareholder value over stakeholder value) that it abides by.
One was in April of 2022, the day after Musk announced he wanted to buy the company. Twitter adopted a “poison pill,” which would stop an attempted hostile takeover by capping the number of shares a single investor could own. It would also allow existing shareholders to buy more stock at a lower price, thereby diluting the value of the stock.
It’s sort of the opposite of a stock buyback, when companies purchase their own stock in order to make it more scarce and drive the price up.
But it didn’t work. Ten days after introducing the concept of a poison pill, Twitter accepted Musk’s offer.
Weirdly, we don’t know why. I have been scouring financial journalism for the last year in an attempt to figure out what happened to make Twitter change its mind. I have seen lots of speculation (pun intended) but no definitive knowledge.
When Musk did pull out of the deal in July of 2022, Twitter sued Musk to make him buy the company.
The suit accused Musk of manipulating Twitter’s share price and creating chaos, then walking away from the deal. By golly, they were going to hold him to his promises.
Huh?
Why would Twitter CEO Parag Agrawal - who took over after founder Jack Dorsey resigned in November 2021 - put everything the team had built in jeopardy by forcing someone who had shown himself to be unstable to buy their company? Why didn’t they get things back on track, and then sue Musk for damages, without insisting that he buy Twitter?
Musk ultimately agreed to the purchase just a day before the court proceedings were to start. He told the BBC that he changed his mind because he was afraid of the legal consequences.
Dorsey and the people he put in place built something that was good, even though it started out not good. It took them over a decade to get it to the place that Steven Beschloss described on Substack Notes as:
“…a public square where people connected, communicated, relied on for breaking news and critical updates, made new friends, built community, even made sense of things.
“Then came a billionaire bent on change for reasons that remain unclear.”
I don’t know what Musk’s reasons were for buying, and destroying, Twitter. Except for some vague, meritless charge that it was somehow muting “conservative speech,” by which he really meant “racist and untruthful speech,” which too many conservatives - and the journalists who cover them - think is just a “side” that requires equal time.
I do remember, though, learning about how government worked when I was in high school in the early ‘80s, and coming away with a certainty that journalism would thrive in the future because the FCC had rules in place - since the 1930s, then strengthened to keep up with newer media - that ensured a diversity of ownership in news entities. The FCC was also clear that media’s role was to serve the public interest.
Mama Don’t Take My Kodachrome Away
Also in the ‘80s, I learned about men like George Eastman, founder of the Eastman Kodak Company, who saw running a business as a responsibility to the society that made it possible. Before he died, he gave the equivalent of $2 billion to all sorts of philanthropic enterprises - much of it in and around Rochester, his hometown. This included a medical school that focused on dentistry for poor children, and a music school that is still considered one of the best in the world. Eastman also gave millions to what we now know as HBCUs. And he created numerous other educational opportunities for Americans who, just a generation before, were enslaved.
Eastman also “was a pioneer in creating sick pay, disability compensation, pensions, and hospital benefits,” according to Philanthropy Roundtable. And he was one of the first entrepreneurs to give his employees bonuses for their good work.
He embodied the stakeholder economic vision.
That all began to change in the 1980s, as “corporate raiders” - as Robert Reich refers to them in his Wealth and Poverty lecture series - began to target companies, buying more than 50 percent of their stock, and then stripping the companies down for parts, or merging them to create bigger companies.
Workers became just another cost to be contained.
Consumers who relied on competition to drive choice suddenly found they had no choices left.
New investors in up-and-coming media technologies, such as cell phones and social media, never saw the need to abide by rules of competition. After the Telecommunications Act of 1996, the rules enforcing a public interest aspect of media were effectively neutered - or rather, “public interest” was interpreted as meaning “shareholder value.” This is when media mergers took away consumer media choice - in news as well as entertainment.
Check out this list of TV stations owned by Sinclair Broadcasting, which has “local” stations all over the country. In 1971 they owned one station. In Baltimore. Then, in 1994, after Bill Clinton’s first year in office, they started buying more. After 1996, their ownership spread to every major city in the country.
It’s a Crooked Game We’re Playin’
“The structure of our political economy depends a lot on laws and regulations,” says Reich in his Wealth and Poverty class. “The market does not exist without the government. The government sets laws and rules that shape the market.” (Watch the one-and-a-half-minute clip below.)
What Reich is doing here is making us look at the soup we are swimming in, and telling us that it is, in fact, a soup that has been created with certain ingredients, by certain chefs that directly affect our well-being. It is not invisible. It is not “just the way things are.”
Yet, last October, when I voiced my concern over why Twitter was forcing its own demise, people answered with, “Well, Musk offered a lot of money, and the company’s allegiance is to their shareholders.”
In other words, “That’s just the way things are. What can you do?”
In the 20th century, the “way things were” was the idea that monopolies were bad: that media companies could not control the means of production and the means of distribution and collude over prices and wages.
Somehow we went from rules that forced separate ownership of local newspapers, and TV and radio stations - to ensure a diversity of ideas - to media companies that own everything and can, on a whim, destroy an ecosystem that people have come to rely on to make a living.
For some people, this has always been the endgame. James L. Gattuso of the conservative Heritage Foundation writes that since 1996, “it has become abundantly clear to anyone with a computer or a phone that [media] rules were written for a media world that no longer exists.”
What he’s saying is, “The world has changed, so we should get rid of the rules,” rather than, “The world has changed, so we should adapt consumer, worker, and competition protections for the new world.”
This is the definition of the word “specious.”
Of course, the Heritage Foundation had a lot of influence in making the world this way. They have a clear stake in making everyone whom their policies harm apathetic about the ability to effect change.
One Ringy-Dingy
My first introduction to the idea that competition required diversity of ownership came in 1982, when the government made AT&T divest its local telephone companies. The national company’s ownership of telephone lines, local service providers and even the equipment in peoples’ homes constituted a monopoly that squashed competition.
In high school history, I learned that Standard Oil was similarly broken up 70 years before because they owned the oil, the refineries, the trucks that moved the refined oil, and the gas stations in many cities.
Growing up a movie buff, I knew about the breakup of the Hollywood studios, which kept artists under exclusive and long-term contracts, colluded with each other about salaries, didn’t give artists a choice of which films they were in or directed or wrote. To boot, the studios owned the theatres that the movies were shown in.
Now, we have writers and actors on strike because the producers are once again monopolies that are even more powerful than they were in the 1940s.
And media companies who, like Twitter, ended up building something that included and served a vast community, are not allowed to save what they built in service to their stakeholders. Now, it is all about shareholders, about who offers up the most money.
If that means ideas are squashed and careers are hurt, well, that’s the way it is. Unless, of course, laws and regulations are put in place to protect stakeholders.
Before that can happen, though, ordinary voters need to understand that the way things are is not the way they HAVE to be. Sadly, that is a steep hill to climb.
It’s a Contest!
Every week at least one subhead is a lyric from or reference to a song from musical theatre. Guess the song and the show and I will feature a video congratulations in next week’s piece. Bonus points if you can identify the origins and artists behind all three of this week’s subheads. Give your answers in the comments!
Yes!
Yep.