Alex and Evelyn sit down with New York Times technology reporters Ryan Mac and Kate Conger to talk about their new book on Elon Musk's acquisition (and destruction) of Twitter, Character Limit, and where they think Musk goes from here.
Alex Stamos:
It will be interesting to see whether or not this has a long-term impact of his inability then to raise money. Now, he personally doesn't need it. He's perhaps past that, but the next time he wants to do an LBO, getting Morgan Stanley or Fidelity, taking the call might be hard.
Ryan Mac:
I think that's where the accountability will happen, where Morgan Stanley puts their foot down and is like, "No, look at the last deal you did. We just lost billions of dollars. You can't do that this time," but I don't think it's going to happen. I think they're just going to still do it, because they just saw what happened with XAI. When he comes up with another boring company in Neuralink, they'll be right there.
Evelyn Douek:
Oh, what a functioning democracy where Morgan Stanley is the accountability mechanism for the destruction of the public sphere. That's great.
Hello, and welcome to Moderated Content, stochastically released, slightly random, and not all comprehensive news update from the world of trust and safety with myself, Evelyn Douek, and Alex Stamos. We are joined today for a very special episode with two people I assume are well-known to our listeners, and who I certainly have been reading for a very long time now.
Ryan Mac and Kate Conger are technology reporters for the New York Times, and they are out with a book about Elon Musk's acquisition, and then subsequent destruction of Twitter, with, I think, the best title of any of the books about Twitter that I have seen, and maybe one of the best titles I've seen this year: Character Limit. Congratulations on the book and on the title. Do you remember where you were when you came up with that title? I think it's just perfect.
Ryan Mac:
Oh, this is a...
Kate Conger:
This is kind of funny, because we actually, Ryan and I were dead set on calling it Hell Site, and we were unwilling to negotiate or change our minds, and our editor came up with the title, Character Limit, and very-
Evelyn Douek:
Oh, so this is a sore point for you?
Kate Conger:
Well, he very tactfully-
Ryan Mac:
We need to give him his flowers. Yeah.
Kate Conger:
Yeah. He very tactfully and politely won us over and was like, "Your idea is not sellable, and mine is witty and fun, and people will like it."
Ryan Mac:
I think this is one of our-
Kate Conger:
We're like, "Fine."
Ryan Mac:
... Yeah, main lessons in book publishing, which is just because it's funny on the internet or it's an internet term doesn't mean it's going to translate to 65-year-old grandma in Missouri who buys books.
Alex Stamos:
Which is definitely the target for a book about the acquisition of [inaudible 00:02:06].
Ryan Mac:
Clearly. Missouri, huge market for us, but Will, if you're listening, thank you for the title. He wore us down over many months I think, and it worked. Everyone is raving about it. When people started tweeting about it, we were like, "Hell yeah. That was not our idea, but we'll take it."
Evelyn Douek:
Yeah, always listen to your editor, I think is the lesson.
Kate Conger:
Yeah, that's the takeaway there for sure.
Alex Stamos:
Absolutely. Well, the book's fantastic. It's got all this incredible reporting. You guys have obviously worked really well, and also it's amazing how many people obviously spoke to you. I'm not going to make you reveal your sources, but it is clear there are people here who are trying to salvage their reputations from having to do this, as well as folks who are very, very sad about the demise of Twitter.
First off, let's just talk a little bit about, to roll the history back a little bit before we come back to today. You read the book, and it just, once again, reminds everybody this was not... I've been part of a number of corporate acquisitions, both being bought and on the buy side. This is the most insane acquisition I've ever read anything about. There is no straight line here at all. It was almost completely by happenstance that this thing even happened at all.
Do you guys just want to talk a little bit about the incredibly crooked crayon line that got us to the final point at which Elon Musk ended up as the primary owner of Twitter?
Kate Conger:
Yeah, I think that you're right, that this acquisition really has no parallel in modern history, and that was one of the things that made us really want to write this book is just the sheer chaos of it all. The way this was brought together, I think any lawyer or mergers banker who looked at it was just baffled by the way Musk chose to handle this.
Obviously, it's a very valuable acquisition and he was just kind of tossing money around and not paying a lot of attention to the detail. There are many moments throughout the book where it becomes very, very apparent that he didn't read the contracts that he signed, and didn't understand what his legal responsibilities were.
Alex Stamos:
I can't say I've read every single contract I've ever signed, but those contracts generally have maybe one comma in them, not Tres Comas, as in this case. He obviously makes a decision that he's interested in it. He secretly buys all this stock, which turns out to perhaps be an SEC violation, something that's still being investigated. He makes the offer, he forces the hand of the board, he decides to back out.
Ryan Mac:
Well, the board offers him a board seat, and then he says yes, and then he says no. Then he gets in a fight with Parag Agrawal, the CEO, and is like, "Screw this, I'm going to buy the whole company," and kind of says it on a whim, and then puts in a very short offer letter to buy the company at $44 billion.
Alex Stamos:
What was the stock price again?
Kate Conger:
6420. We had to have a weed joke.
Alex Stamos:
Yes.
Kate Conger:
It would not be a Musk offer without a weed joke.
Ryan Mac:
I've never smoked weed in my life. I don't know what that reference is.
Alex Stamos:
Could you explain it?
Ryan Mac:
No.
Alex Stamos:
Right. Makes that offer, and then the offer ends up getting accepted because it turns out to be way more than the actual enterprise value of Twitter, even at the time. Then that's right at the top of the market. The market ends up, the bottom falls out, and then he spends months and months trying to get out of this binding deal. The board, while pretty much nobody at Twitter wants him to end up owning it, they are locked in by a fiduciary responsibility to force it.
I'm sure you spoke to some folks on the board. What was it like for the folks at Twitter at this time, where they both were probably dreading the idea of Musk owning it, but also, I guess they felt like they had to legally go after trying to make this acquisition happen? Is that what was going on through their heads?
Kate Conger:
Exactly, and I think that this deal, it's such an odd scenario for so many reasons, but one of them is that I think no one involved wanted this deal to happen. Elon Musk obviously didn't want it to happen, but neither did the company, and neither did a lot of the board, I think. Those board members were, as you said, bound by their fiduciary duty to get that best price for the stockholders, but were well aware that Elon Musk would not be a responsible steward of the company, and would bring about a lot of destruction to the value of the platform as a place for speech.
Alex Stamos:
Right. In the end, in some ways, this becomes a weird story about capitalism and the Delaware Chancery Court, of the fact that all of these folks did not want this deal to happen, but from the moment he made a legally binding offer, everybody's position was set and their hands were tied.
Ryan Mac:
It's about breaking capitalism, in a way. I go back to the origination of the deal and how someone like Elon Musk, who could amass half or a quarter of a trillion dollars in wealth of net worth, and then one day just wake up and be like, "I'm going to buy a whole ass company. This isn't a super yacht that I want. This isn't a sports team. It's not even an island. I want a company," and corporations buy companies or other companies buy companies, but individuals, it's very rare for that to happen.
We compared it to Bezos buying the Washington Post, for example, but that was $250 million. We're talking about a $44 billion acquisition, and that that could happen says a lot about where we are as a society. It says a lot about wealth and equality, and it says a lot about the state of capitalism, I guess.
Alex Stamos:
Although it's interesting, he didn't buy it by himself, and I think we should talk about that a little bit, because I think it relates to some of the things we want to talk about when we talk about governments. Why don't you guys talk a little bit about who his partners ended up being in this?
Kate Conger:
Yeah, so there are a couple different players in the making of the deal. Elon Musk, obviously, and then the banks that he went to for loans, Morgan Stanley is his primary lender, and I believe Bank of America as well is in on the deal. Then he has sort of a who's who list of other investors who came in on it. Let's see, Vy Capital, which is a-
Ryan Mac:
Yeah, Vy Capital. You have Larry Ellison, you have Andreessen Horowitz, Sequoia, who has backed SpaceX in the past. You have Prince Al Waleed of the Saudi Royal family who rolls over his shares. You have the Qatar Sovereign Wealth Fund in there, which I think he raised about six to $7 billion in external capital plus the loans. Obviously, he didn't put in all the money, and he has a lot of his friends along for the ride, which is an interesting part of the deal.
What we came down on in that is a lot of people invested in this deal, not because they necessarily thought it would be a great business deal, maybe some did, but it's just to be close to Elon, to be there by his side, to show that they support him, and then maybe they're there for the next big thing that he does, or the next SpaceX round, or the next XAI valuation. That has a lot to do with it as well.
Evelyn Douek:
Yeah, I think this is a really super important point, because Ryan, you said breaking capitalism, and I think it's a huge part of this story. We often think of why do platforms do content moderation, why do they sort of engage in that? It's not because they have moral pre-commitments, maybe partly, but it's always been because of the commercial driver, that people don't want to open their feed and see a Hell Site, which is why it would've been a great title too, just to be clear.
When unconstrained by those forces, when unconstrained by advertiser pressure, what happens? That's what you see here. He could give the big middle finger to advertisers in a certain respect, because he didn't have those pressures on him. Do you think that that was his goal? Do you think that that's how he set out seeing where this would go, that he could, unconstrained by capitalism, this is what the platform would look like, or he just didn't expect it to be this way?
Ryan Mac:
I don't think so. I've come to this realization with Elon after reporting on him for so many years that there's not really a 3D chess game plan behind it. He kind of just sometimes bumbles his way into things, and he'll talk about free speech, and defending it, and not wanting to do content moderation, but you're also looking at if that's the case, why are you suing advertisers to advertise on your platform, which is what he's done recently?
He's like, "Those things don't make sense hand in hand," but it's really hard to think of him rationally, or having some really long term plan. I guess no. Yeah.
Evelyn Douek:
Even the commitment to free speech, which was a common refrain. That wasn't just a random thought bubble, that was something that he professed loudly, proudly, repeatedly. Do you think that there's anything real of substance to that?
Kate Conger:
I think he does believe that Twitter had gone too far in moderating certain types of content. We see his kind of radicalization to the right begin in earnest in the COVID years. He was very against the shutdowns here in California because they affected Tesla's manufacturing. He himself spread theories that the virus would be gone within a month or so of the first outbreaks, said that it didn't affect children, a number of falsehoods about it.
He also was very upset by Twitter's decision to take down misgendering content. That was something that I think was motivated by some of his personal struggle. He had a child who was coming out as trans during that period, and really reacted poorly to Twitter's decision to moderate that kind of content. One of the examples he returns to throughout the book is that of the Babylon Bee, it's a right wing satirical site that had been banned from Twitter for violating the misgendering policy, and it was something within the first several hours of him being in the building after the acquisition that he was demanding their account be brought back online.
Ryan Mac:
In terms of finding an ideology behind that, I think free speech, especially, I remember when he went on stage at the TED conference and explained why he made the offer. The thing with Elon is he's a branding expert. He's a very good salesman. It's why he's able to sell people on getting rockets into space or electrifying vehicles, and they really believe in his mission and what he's selling. I think he latched onto free speech because it was a great selling mechanism for his takeover.
I don't think he had thought it through what that really meant, what he'd have to do with content moderation, how that would, the interplay with advertisers. That was not anything he thought about when he wrote those four sentences to take over the company.
Alex Stamos:
No, and you saw that in those first days, because the funny thing, for those of us who have done this for years, you saw in those first days, weeks, months, he started to speed run what everybody else has done for years, which he started to be like, "Oh, wow, this is hard, and there's laws here." Then he started to come around to, "Okay, so first maybe everything that's not illegal should be allowed," and then, "Okay, well, no, we need to definitely stop spam and we need to stop some porn stuff."
Then he gets to freedom of speech, but not freedom of reach, which our colleague, Renee, was actually the one who coined, who he has attacked personally by name, but he doesn't understand, know the irony there, and he kind of bounces back and forth on all these things and talks about, "Oh, well, we're going to follow the law in whatever location we operate in," not understanding-
Ryan Mac:
That one was the strangest thing for... That one's...
Alex Stamos:
That one was bizarre, because he didn't understand at the time the incredibly difficult dichotomy, which is that every company says, "We want to respect human rights," and they also say, "We follow the law," and that those two things actually turn out to be completely incompatible. That is the fundamental challenge for companies that operate around the world, as Ryan, you have written about multiple times.
Perhaps I've been on the other side of arguments with you guys when you've written that about situations I've been involved in of the challenge of companies trying to deal with those two things trying to be true at the same time. He had no idea, he had completely no idea when he bought the company. Like a child, he just kind of blunders into this, except a child with all this incredible power and money. You're right. This 11 dimensional chess theory, I think, completely falls down when you look at that.
Now, I think now what's happening is he's trying to back in not just the branding expert, but he is trying to utilize, I think from my perspective, there's a couple of different things here, and I'd love to test it, because you guys have done all this reporting. He's doing the branding, he has main character syndrome in which he wants to be the most famous person in the world. He can't live without the dopamine hit.
From that perspective, this has been an incredible success, because he has become one of the most famous people in the world. This lets him create all of this incredible feedback that he was already famous, but now he gets all of this captured audience of people that he can be famous to, and he controls, and that he can amplify himself to. I don't follow him on Twitter, and he's on the top of my feed continuously. He has obviously tweaked the algorithm that he just injects himself into everybody's feed.
If you create an account right now, he's the person you see doing nothing. There's nothing for the algorithm to key off of, he just injects himself into your feed. There's that. Then the logical side is he's also trying clearly to utilize it as leverage for his other business purposes, and to that, it's kind of like a Yevgeny Prigozhin play where Prigozhin used the internet research agency as a mechanism to also build up his business interests in Africa and such.
That's why you see this conflict between his free speech ideals and then his giving into India, for example, where he wants to sell Teslas. That's why I think you see a difference between how he's acting in Brazil and acting in India, because you also have all these pictures of him traveling to India over and over again, trying to open up the Indian market where there's no equivalent in Brazil. I don't know, but it seems like he doesn't have two wolves. He actually has like six wolves, and depending on what's going on in any moment, it's one of those different six wolves is in charge.
That's why it doesn't feel like 11 dimensional chess. It's actually, you're seeing a conflict of all these different forces inside of him that, depending on how he's feeling or whether he's in a K hole at that moment or something, that that's actually what's coming out.
Kate Conger:
Yeah, six wolves fighting their way out of a sack. There's the common knowledge of Twitter has always been that you don't want to be the main character on that website, and I think for Musk, the opposite is true. He really does want to be the main character on the website, and has successfully made himself the main character on the website all day every day, which is interesting, because it's something that most people have spent their whole online careers trying to avoid. You're right, he has really used the platform to flex his political power.
He's used it sort of as an entry point to build relationships with world leaders. You mentioned the example in Brazil. He has really aligned himself with Bolsonaro and used X to sort of build that relationship, and then allied with Bolsonaro to bring Starlink to Brazil. Now that Bolsonaro is no longer in power, you see him still sticking by him and resisting calls to take down posts from supporters of Bolsonaro, and people who are engaging in election denialism there. I think it is partly motivated by right-wing politics, sure, but it's also motivated by his other business interests in the country.
Alex Stamos:
Right, but when the going got too tough, he ended up giving up.
Kate Conger:
Right. It's so interesting, because when he was resisting those court orders to take down accounts in Brazil, he was posting nonstop about it. Since X has made the decision to re-enter the country and started re-establishing a legal presence there, he has been absolutely silent on the subject and hasn't said anything more about the judge.
Alex Stamos:
No, you switch back to American, to making up lies about American immigrants and such. Yeah, he has changed, and it's amazing and it's worked, right? All of a sudden, Brazil was the number one topic among his followers, and now nobody cares anymore. It's interesting, because I went to Brazil in the middle of all this, just completely coincidentally, I was speaking at a conference and this had been decided six months ago. Nobody cared. Nobody cared that X was blocked. It's like, it's a non-factor in that society. Everybody uses WhatsApp, and nobody cared about Musk.
It's just a fascinating, the difference of how important Brazil was to him and his followers versus it was kind of the New York/Chicago thing, right? In Brazil, everybody's like, "Oh, okay, whatever." Yes, X didn't work in my hotel, but nothing of value was lost to people there.
Ryan Mac:
You're on your VPN, trying to get on.
Alex Stamos:
Oh, yeah, I couldn't stop myself, of course. I think that's the fascinating question, but you bring up a good point, Kate, because most people don't want to be the main character on Twitter, and you could probably empirically show that there's probably no famous person who has lost more credibility with a larger number of people than him. He had one of the most incredible personal brands of a bipartisan white swath of people, and now half the country hates him.
Ryan Mac:
I think the best way to understand him is he has to be the center of his own, or the hero of his own myth. He wants to center himself. Like a basic understanding of him is he's the guy that's going to get us to Mars. He's the guy that's going to electrify cars. With Twitter, he makes these missions up for himself. When we go back to free speech, he's the guy that's going to save free speech, and he believes it.
He gets high on his own supply and just works himself into a frenzy. I think with Twitter, he's insulated himself. He's taken the check marks away from journalists, so they're not so prominent on the platform. He has elevated other voices that are friendly to him-
Alex Stamos:
And sold them to Russian and Chinese disinformation firms.
Ryan Mac:
He's created this bubble around himself where he is the greatest thing since sliced bread, and that's exactly what he wants. He wants to be the hero, whether that's saving the kids in a cave in Thailand, or bringing people to Mars... He's the hero.
Alex Stamos:
I guess it opens the question where this goes. He seems to be in kind of a self, he's been in a spiral this entire time, but it seems to be getting worse as we get closer to the election. He was in this interaction with Ian Miles Cheong about being targeted by the Harris administration, that he's got these persecution fantasies, but also, the way he was talking about, that other people are saying that they're going to come after you with law fare, one, raises the question of are there legal things that he knows are happening?
Is there actually a logical argument of why he is trying to endear himself to one political party because he's actually looking for support/a pardon? Second, his behavior, his companies are massively based upon government subsidy. Tesla never would've existed without massive tax breaks and tax incentives. SpaceX, the vast majority of its revenue comes from the United States Federal Government. It is a DoD contractor. It has a TSSCI facility clearance.
If you go on clearancejobs.com, you will find people who have their clearances revoked for 1/100th of what he has done publicly, or has been said to have done from both a drug use perspective, but also joking about the assassination of the President of the United States. It's just kind of amazing. Just feels like he is spiraling out of control in a way that cannot, even for somebody with his money and the quality of the lawyer that he has hired, who you highlight in this book a number of times, there's only so long that throwing money at Alex Spiro is going to be able to protect him. What is your guys' prediction? How does this end for him?
Ryan Mac:
He's Eric Adams's lawyer, by the way.
Alex Stamos:
That was amazing, that little factoid. That felt like kind of like hiring Mark Geragos was the...
Kate Conger:
There's only 12 characters in news right now, and-
Ryan Mac:
Yeah, they cycle through them.
Kate Conger:
... They just keep recurring.
Alex Stamos:
Yeah. Sorry for the nineties throwback, but it was like hiring Johnny Cochran, right? Used to be, how do you tell people you're definitely guilty?
Ryan Mac:
He saved Alec Baldwin, so why can't he save Eric Adams like he saved Elon Musk?
Kate Conger:
I think the question of accountability for Elon is something that we explore a lot in this book, and I don't think we ever come up with an answer that feels satisfying. You see several enforcement agencies take a crack at him throughout this. The FTC is investigating the deal, the SEC is investigating the deal, and neither of them are very successful in trying to hold him to account.
You also see, obviously, employees bringing lawsuits against him, and I believe the first of more than 2000 just won a case in arbitration, and he's continuing to fight rest of those cases. We're looking at years and years and years before he's actually forced to pay some of those severances that he skipped out on. Then beyond that, you see a little bit of international pressure in Brazil and in the EU, but there's still this really open question of who's going to step in here and put a stop to some of this reckless behavior?
You mentioned specifically him calling for, or appearing to call for the assassination of Vice President Kamala Harris, and then making mention of his own assassination threats, kind of trying to insert himself into the narrative in this weird victim way. I think that, again, it goes back to what Ryan was saying about him wanting to play a hero in any situation, I think. He saw that very viral image of Trump raising his fist after being shot and felt a little pang of jealousy that it wasn't him in that photo.
I think when he said this thing about an attempted assassination on Kamala Harris, and then walked it back, claiming that it's just a joke, but I think he really tries to, again, see himself in that narrative as someone who's very intelligent, and who's calling things before they happen, and is aware of the way the political winds are blowing. You see a lot of that kind of building of his self-mythos and self-image in those moments.
Alex Stamos:
Which is why Trump and Elon could never actually be true allies is that they both need to be the absolute main character. One of them cannot be behind the other.
Kate Conger:
Correct.
Alex Stamos:
Yeah.
Ryan Mac:
Yeah, that's why you have Truth Social and X exist...
Alex Stamos:
Which is a fascinating interplay-
Ryan Mac:
... In different places, yeah.
Alex Stamos:
... That he let Trump back on, made a big deal of it, and Trump has barely used Twitter. Every once in a while, there's a little posting, but it's from his team and it's kind of polished, and it's clearly written by a political operative. When you want the all caps true ID straight from the former President's thumbs, that's clearly untruth.
Kate Conger:
Yeah, and part of that is former President Trump's contract with Truth Social. He is obligated to post there first, but he has a loophole for campaigning. The posts you see now on X are campaign posts. It is really interesting to see Musk's evolution on that, because he was someone who up until very recently, was quite critical of Trump, and had said that he should fade into the sunset, but I think realized Trump's power to drive engagement on X, and has been trying to coax him back there just to juice engagement and juice user growth.
It hasn't quite been successful yet. As you said, Trump is still really sticking to Truth Social, so it remains to be seen whether Musk is going to get any bang for his buck in terms of his investment in Trump.
Alex Stamos:
This could turn into a literal investment. If the DJT stock keeps on dropping, you could see... Since this is the most interesting election in our lifetimes, you could just see Musk buying him out, merging Truth and X, and that would be the way to have a direct financial contribution.
Ryan Mac:
There's a great tech stack over at Truth Social they want to... Engineers they want to roll over, yeah.
Alex Stamos:
Right, their fork of the masses on code base.
Kate Conger:
Yeah, interesting training data for XAI, perhaps.
Ryan Mac:
No, I think there's a distinct advantage to supporting Trump in that I have to count the amount of investigations his companies are under right now, Tesla, SpaceX, even X. There's probably more than a dozen investigations that he's facing, where it makes sense to support a Trump administration that wouldn't care about that kind of stuff.
Alex Stamos:
Right, I feel bad for the people. I know lots of, I have friends who work at these companies. I'm definitely not going to say their names, because...
Ryan Mac:
Just tell us after.
Alex Stamos:
There's lots of good people who work, and especially at SpaceX, you got to feel incredibly bad for Gwynne Shotwell, who's the real CEO of that company and who's the person who actually runs it. I actually interviewed for a high up position at that company, and one of the things I heard was a big chunk of her job and the job of other executives there is executing while Musk kind of sweeps in with all this chaos.
Then there's the key executives there. It's their job to keep things running while he says crazy things. They're like, "Okay, great. We're going to go back to doing our real jobs." She's the absolute master at that. One of Tesla's problems that they don't have... They've lost the executives that have the ability to do that, and you see that in the Cybertruck and some of their distraction, whereas SpaceX has that. The flip side is Tesla sells a product to direct to consumer. SpaceX has one real customer, and that is a customer that he's doing everything he can to alienate, and I think that is kind of amazing for her.
As bad as it is to be Linda Yaccarino, nobody thinks she can be successful, whereas SpaceX has been a spectacularly successful company. It's also a company that, from my perspective, is very important for American national security, and I would hate to see it fail because his personal spiral takes down this company that he was obviously key to funding and founding, but he also has the personal power to pull it down and cause huge damage to through his personal actions.
Ryan Mac:
I have a bit of a counter take to that, which is one, think Shotwell enables a lot of his behavior. We've seen her defend him. There was these employees that stood up and wrote this open letter that complained about his behavior, and she went in and fired all of them. She's enabled some of that at the company and kind of cleaned up house for him when she needs to. What the other point, though, is I think he's realized that SpaceX is too big to fail.
He can say whatever he wants. He can go on Joe Rogan and smoke weed. There's a lot of realization that came out in 2018 when he got away with the funding secured Tweet, when he got away with the pedo guy Tweet, that he realized there's really nothing that can hold him accountable. As his company has grown bigger, I think there's more than $13 billion worth of contracts with the US government right now with SpaceX, what are they going to do? What can they do to him? They're completely reliant on him, to the point where even if Trump loses this election, they'll be fine.
Alex Stamos:
I don't know if you want to say that to, "What can you do to me?" You don't want to say that to a US attorney, not the kind of thing you want to throw out.
Ryan Mac:
If anyone can, he can. He's gotten away with it so many times.
Evelyn Douek:
Well, the point about the election is interesting, because one question I have about this is, is this a success story from Musk's perspective? I'm very conscious of the echo chambers that I'm in or the bubbles that I'm in, where this is a terrible thing that's happened to a product that I used to quite enjoy and used to find very, very valuable. I've said often, I think probably the job I have at Stanford is in part as a product of having had a Twitter presence, and having had this place to get attention, and interact with journalists from esteemed publications who then started calling me and quoting me in their stories.
I used to love Twitter. I think it was a great product. I'm really sad at its destruction. The question is, does Musk see it as, this is a failure, he's lost a lot of money, the stock price is down, revenue is down? Is it he's got everything that he wanted, he's the main character on the site every day, he gets all of the attention. He's in this echo chamber.
We used to think that the problem with echo chambers was that it would corrupt the average person's understanding of society and the political discourse. It actually turns out that the problem-
Ryan Mac:
Just one person.
Evelyn Douek:
... With echo chambers is it's like, Trump and Musk don't understand the world because of their online environment, and that's incredibly destructive for the rest of us. Does he think of it as a success story, or does it in part depend on the election? Does it in part depend on what happens in November, and whether the sway that he purchased comes to fruition?
Kate Conger:
I do think that he largely views the acquisition as a success. We talked about this earlier, but he's secured himself the spot on X as the main character, and he quite enjoys that. From a financial perspective, he's certainly not happy with the way things have gone. He spent 44 billion on the company, his own internal valuation is 19 billion, and Fidelity just marked it down again. I think they're valuing it-
Ryan Mac:
It's 9 billion.
Kate Conger:
9 billion now?
Ryan Mac:
Nine point something, yeah.
Kate Conger:
Yeah. It's just a spectacular destruction of value, but I think that is less important to him than the clout that he experiences from the platform. I do think that the outcome of this election will have some impact. I think it's becoming clearer and clearer that he purchased X in part for political influence. If it doesn't give him that, I think that will be upsetting for him.
We've talked a lot about how he sort of plays into these hero and victim narratives in his own self mythos, and I think in the event that Trump loses the election, there's a potential for, I think, a further radicalization of Musk and X as a platform, as he kind of uses it to push back against a Harris administration and uses it to kind of save democracy if you will.
Ryan Mac:
Yeah. I'll say from a valuation standpoint too, it's not as big of a financial failure for him, because we haven't even talked about XAI, which is trained on this corpus of data from Twitter and X. He took that and then raised several rounds of capital. The of the company is at $28 billion. He owns a significant chunk of that. That is, he just created that out of nothing. If you're kind of doing a plus minus of, yeah, he's still down on the acquisition itself, but it's not as bad as we think.
Alex Stamos:
Did he reimburse the...
Ryan Mac:
He did not. He just raised new capital,
Alex Stamos:
He basically stole that training data from.... This is the fascinating thing, like from that-
Kate Conger:
From the X investors.
Alex Stamos:
From the X investors.
Kate Conger:
Well, and he said, I think, that he would give the ex investors 25%.
Ryan Mac:
25%. He tweeted it. I don't know if there's a contract.
Kate Conger:
Yeah, we've never seen...
Evelyn Douek:
Oh, we know he takes his tweets very seriously. He's never backed down on any of them. That's right.
Ryan Mac:
Look, if I'm Sequoia Capital, I'd love to ask Sequoia Capital, "Aren't you mad at him because he just started a new company that you now have to reinvest in and redeploy?" I don't know, if I'm an LP at Sequoia Capital, I'm probably not happy, or maybe I'm so happy because he's generated so much value for me over the years that-
Alex Stamos:
It's one of the worst iBanking deals ever. It's like-
Ryan Mac:
The worst.
Alex Stamos:
It will be interesting to see whether or not this has a long-term impact of his inability then to raise money. Now, he personally doesn't need it. He's perhaps past that, but the next time he wants to do an LBO, getting Morgan Stanley or Fidelity taking the call might be hard.
Ryan Mac:
I think that's where the accountability will happen, where Morgan Stanley puts their foot down and is like, "No, look at the last deal you did. We just lost billions of dollars. You can't do that this time," but I don't think it's going to happen. I think they're just going to still do it because they just saw what happened with XAI, and when he comes up with another boring company in Neuralink, they'll be right there.
Evelyn Douek:
Oh, what a functioning democracy where Morgan Stanley is the accountability mechanism for the destruction of the public sphere. That's great.
Ryan Mac:
It's that astronaut meme, he's looking at the astronauts, he's like, "It always was."
Evelyn Douek:
Yeah, that's true.
Alex Stamos:
Right. We're back to the Tim Geithner era, right? Who's making the decisions? Yeah. Well, it is fascinating, because it is, I think a lot of it does come out of the election. I think Kate's right too, if you look at the trends, what's happened is X has become, from my perspective, and I think if you look at their influence, they've consolidated...
What happened after 2020, the companies after January 6th, the big platforms, including Twitter at the time, but especially Facebook and YouTube, took these actions to de-platform Trump, but then also the most aggressive accounts that were pushing anti-election, pro-stop-the-steal content. That caused a fracturing of social media. What X has done is it reassembled all those groups. They've... Gab, Parler, a lot of the stuff that went to Telegram, it's all come back to X.
For what they've lost for their general influence among journalists, and normies, and folks who have left the platform, they have re-consolidated among people who had left Twitter in that era. Really, they're the big game in town, it's X, Telegram, and Truth, and Truth is really just one account, Trump's account. I think part of the question will be what happens around the election? What happens with Stop the Steal 2.0, and what happens on X around that?
Does it end up driving violence? Does there end up being direct calls to violence? What does Musk personally do, because it's pretty clear what is trending on X is mostly determined on what he is personally doing. More than any other platform where you talk about algorithms, and opaqueness, and numbers being tweaked, it is what has he personally decided, not just from an algorithm perspective, but he has such a incredible list of people who follow his every move and amplify his every move, that if he decides that something's going to be a big deal, that is going to become the message of the day.
Kate Conger:
Yeah, and I think we've seen now so many times the way Twitter and now X has been used as a tool to foment real world violence. We saw this in part leading up to January 6th, although certainly not all of the planning and preparation for that event was taking place on Twitter. There was a lot of Qanon, stop the steal content that was circulating, and I think after January 6th, Twitter ended up deleting something like 70,000 QAnon accounts. There was a significant presence there.
Then we've seen it more recently in after the Musk takeover, he ratcheted back content moderation in Brazil surrounding their election, and that led directly into January 8th there, which is a similar riot and raid of federal buildings there. Then more recently, in the UK, online conversation leading to riots in the real world. There's quite a significant track record now for conversation moving from the platform into real world violence, and I think that that is the real risk of X going into this election.
I'm a little less concerned maybe with stop the steal type narratives, and more concerned with specific threats on Secretaries of State, and attacks on people who are trying to establish the outcome of the vote.
Alex Stamos:
Right, of, "This person here is stealing the election."
Kate Conger:
Exactly.
Alex Stamos:
... For which section 230 does not apply for things he says himself. This might also be, to bring it back to this being a Stanford Law podcast, this might become the interesting test case of his interesting quote Tweet for somebody actually saying, "This person is doing something, we should do something violent," him quote Tweeting and saying, "Interesting."
Kate Conger:
Right, or exclamation point.
Alex Stamos:
Or exclamation point of whether or not that should attach some kind of, does he get section 230 protection on that, or is that broad enough that...
Evelyn Douek:
I don't think section 230 is the question there. I think the first amendment is-
Alex Stamos:
The first amendment.
Evelyn Douek:
... The question there. Is that a threat?
Alex Stamos:
Is that a threat? Yeah.
Evelyn Douek:
Does an exclamation mark or a quote Tweet, is that sufficient to show specific enough mens rea or whatever that he's endorsing the threat or whatever?
Ryan Mac:
There's precedent of him winning cases, like the defamation case, the pedo guy case, it was a joking Tweet. "I didn't mean it."
Evelyn Douek:
Of course.
Alex Stamos:
That's amazing, because he just straight up said the guy was a pedophile.
Ryan Mac:
He won, he got away with it, and that was when he had way less money and wasn't as known. He was still known, but wasn't as known. I think there was a lot of lessons from that trial.
Evelyn Douek:
I'm curious what surprised you both most in reporting out this story. You've both followed this very, very closely for a long time. You followed Musk closely for a long time. You followed social media and Twitter, now X. I love the book. I'm learning a lot as I read it as someone that followed this closely, but from the outside, I'm learning a lot getting into rooms that I wasn't in.
That's fantastic, and as Alex said, you've clearly talked to a phenomenal amount of people and done a whole bunch of reporting here. I'm curious, what was it that surprised you from the outside getting into the inside in this story that you weren't expecting?
Ryan Mac:
We talk about the lack of planning from his side, and we kind of understood that going into the reporting, but to the level that happens, so there's a scene in the book where they want to close a day early of the deal. They have a court mandated date to close the deal. They want to get it done a day early, so they go to Twitter's side, and they're like, "Let's close the deal a day early. We can do this. Let's just save everyone the hassle. Oh, by the way, we're short $400 million. You have about two-"
Alex Stamos:
Spot a brother 400 million?
Ryan Mac:
"You have about 2 billion in your balance sheet. That's going to be ours anyways, once you buy the company. Can you just give that to us?" Then seller financed lending, it happens. Twitter's finance department was like, "What the... What? What are you doing? First of all, you've tried to back out of everything. We're not going to just hand you $400 million casually, because what happens if you just run with it? You've tried to run already."
There was that scene with Antonio Gracias was the one leading the call from Elon's side. We got in the room, we talked to folks that heard about this meeting, and it was just this very surreal moment that kind of illustrated a lot of how that deal happened, kind of seat of the pants moment. That for me was just a big takeaway of just how many... Just if a screenwriter wrote him in a movie, you wouldn't believe it.
Kate Conger:
Yeah, I think a lot of our reporting was, so what was Elon's plan, and finding out that he really had none was surprising. I think one of the other things that was really surprising to me was actually how much cohesion there was between the three CEOs that we cover in the book and their views on content moderation.
We have Jack Dorsey, Parag Agrawal, and then Elon Musk, and I was surprised to learn that all three of them felt that Twitter had gone too far in moderating content, and were looking for ways to change that, and kind of ratchet back the number of accounts that Twitter was banning or taking down. Obviously, they all had radically different approaches about how to do that and how to achieve it. I think Jack was really interested in Blue Sky as an alternative to offload some of his content moderation responsibilities.
Parag Agrawal had come up with this whole plan for something he called Project Saturn, where he's going to use algorithms to sort of push nefarious or negative content out to the fringes of the platform, where you wouldn't see it unless you went explicitly looking for it, and use algorithms to promote and surface content that was considered more good or productive, but ultimately, move Twitter away from just using a ban hammer to get rid of bad content. Then you go into the Musk era and his solution to this is just to bring back accounts willy-nilly because he feels like it-
Alex Stamos:
To open up the doors of Arkham Asylum, as Casey Noone put it.
Kate Conger:
Exactly, and then ban people who are tracking his jet, or ban Ryan for reporting on the tracking of the jet.
Ryan Mac:
It was probably justified.
Kate Conger:
Ryan should be banned from Twitter, and that's something that Elon and I will always agree on.
Ryan Mac:
Happiest day of my life, really. Finally, I was free. Hell yeah.
Kate Conger:
I was really surprised to see that kind of through line of thinking between all these people who were trying to lead this company, and all of them coming to the realization that the current approach wasn't working.
Evelyn Douek:
Yeah, I think that's such an interesting point. I thought the Project Saturn stuff was really, really interesting as well, in that it also, it preceded the Musk era, and I think one, so the simple version of the story that kind of gets told a little bit now is we had this content moderation ratchet up until the 2020 election, and then there was this backlash against that. Musk comes in, buys Twitter, and reverses it, and then maybe the other platforms fall in behind him or hide behind his skirt, and also are rolling things back or not.
We'll see what happens in the election. The Project Saturn stuff, the reporting around that suggests, well, no, there might've been this ratcheting back anyway, that maybe Musk accelerated it, made it more spectacular, or flamboyant, or whatever, but it was already, maybe there is this cyclical nature that might've happened in any event.
Alex Stamos:
I'd say there's two differences there, though, in that those two working CEOs understood two things that Musk clearly didn't in those first days. One, that 99% of content moderation is not politically interesting. Musk thought all content moderation was the Babylon Bee's-
Ryan Mac:
And Trump, yeah.
Alex Stamos:
... And Trump, and misgendering, and the truth is is 99.9% of it is spam, and porn, and things that most people agree you can't have on a social network that's operational. Second, that identity is key, that neither of those CEOs were proposing, "Let's get rid of blue check marks and sell them, and let's get rid of our team that stops foreign adversaries and other organized teams from creating fake accounts."
From my perspective, those two decisions are actually the dumbest decisions in those first six months that have caused all of the downstream effects. Go try now to have any conversation about certain political topics, especially of geopolitical significance, and you'll be flooded by, maybe they're bots, maybe they're humans, but of blue check mark accounts that are clearly being driven for a political purpose.
Kate Conger:
Right.
Alex Stamos:
It's because now it is incredibly cheap to run a troll farm to buy blue check marks that buy you amplification.
Ryan Mac:
There's actually this amazing scene we have in the book where he's on the day of the launch of Blue, he's like, someone brings up this possibility like, "Oh, Russia is going to buy a bunch of blue check marks," and he's like, "What are you talking about? It's going to be too expensive for them. Think about all the credit cards."
Kate Conger:
Yeah, when he says they don't have credit cards?
Ryan Mac:
"Think about all the credit cards they're going to have to use. $8 a month? It's going to get so expensive for them to do it," and everyone in the room is just like, "What are you talking about?"
Kate Conger:
Russians famously don't have credit cards.
Alex Stamos:
Which this has come out in the recent banning of and documents that have leaked from Russian troll farms is that in the documents, they talk about how X is now the platform that is best for them, because it is the platform that does not catch their, we call this the recidivism problem, content moderation, which basically just means people come back over and over again with fake accounts.
Kate Conger:
Yeah.
Ryan Mac:
Hey, if you want [inaudible 00:46:41] bio, you're going to go on X these days.
Kate Conger:
Oh, my god. Yeah.
Ryan Mac:
That one for me.
Alex Stamos:
Okay, there you go. There's our explicit tag. Thank you, Ryan.
Kate Conger:
Ryan.
Ryan Mac:
For me, that's like...
Alex Stamos:
There's our cold open, too. We got them both-
Ryan Mac:
Yeah, well we got our okay, yeah.
Alex Stamos:
... Into one, in one.
Kate Conger:
This is why Ryan needs be banned from X.
Alex Stamos:
And moderating content. On that note, this episode brought to you by...
Kate Conger:
Oh, my gosh.
Evelyn Douek:
No one's going to sponsor us now. Thanks, Ryan.
Alex Stamos:
Well, I think we should wrap it up there, but thanks, Ryan, for killing the conversation.
Ryan Mac:
You're welcome.
Alex Stamos:
Thank you guys both for coming. Thank you, Kate, so much for coming. We really appreciated Kate Conger-
Ryan Mac:
You need to ban me from the podcast now.
Alex Stamos:
... Coming.
Kate Conger:
Yes. Thank you for having me-
Alex Stamos:
... Ryan, who's a Stanford alumni-
Kate Conger:
... And my evil sidekick.
Alex Stamos:
Yes. Ryan, who's no longer a Stanford alumnus.
Ryan Mac:
They're revoking my degree. They're actually carrying me out of the building as we speak. Bye, guys.
Evelyn Douek:
Bye, and congratulations, both of you, on the book and the book launch. It's so fantastic to see and to see the tour going so well. It's a great book. Show notes and a transcript of this episode will be available at Law.stanford.edu/moderatedcontent. This show is produced by the wonderful Brian Pelletier. Special thanks also to Lily Cheng and Rob Huffman, and we'll talk to you next week.