ROB CURRAN

ELON Musk’s US$44 billion deal to buy Twitter is the biggest gamble in a life full of historic risks. You may well ask: what was he thinking?

The answer is that he did not think. This is not business at the “speed of thought”, this is business at the speed of instinct. Everything about the deal was at rocket-speed and completely unorthodox. But that’s the way it works in the network of highly successful, cutting-edge businesses that some people have dubbed the “Muskonomy”.

Consider the speed: it was less than two weeks ago that Musk made a knee-jerk offer to buy Twitter, and less than a month ago that he had started a campaign on the platform to reform its policies.

Consider the structure: Musk will cough up US$21 billion in cash. If that were to come from a bank account, it would be by far the largest personal check anybody has ever written. Twitter will assume US$11 billion in new debt, a burden that some credit-ratings agencies say will be onerous for a company of its relatively limited annual revenue. Most controversially, Musk will borrow US$12.5 billion in “margin loans” against his roughly one-fifth stake in electric-car maker Tesla.

That last part of the bet has terrified Tesla investors. There was a 12 per cent or US$126 billion selloff in Tesla’s stock on Tuesday, as investors balked at the fine print in Monday’s deal.

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Twitter is not even turning a profit on a day-to-day basis. Investors are selling out of highly profitable social-media rivals like Facebook parent Meta.

Usually, to know what Musk is thinking, one checks his Twitter account. There, Musk has cast his decision to buy Twitter as a philanthropic move in defence of free speech. He and others such as former United States President Donald Trump have faced legal actions or ejection from the platform in the past, for tweets that users or moderators found objectionable.

It’s unlikely that free speech was the sole motivation. While the companies that Musk founded – PayPal, Tesla and SpaceX – all had varying degrees of social utility, you don’t become the richest man in the world through philosophical purity.

Nor is this merely a billionaire’s bauble, like Robert Kraft’s New England Patriots American football team or even, arguably, Jeff Bezos’ Washington Post. Those ventures were only ever going to be marginally profitable.

Musk is buying Twitter for the same reasons that William Randolph Hearst bought the New York Journal and Rupert Murdoch bought Fox News: to position themselves at the nexus of money and power so that they could generate more of both.

Hearst and Murdoch found many ways to make money on the popular media of their day – and many ways to use the media to put their stamp on politics and history. Musk might well do the same.

“The fact that a single person could have so much money as to buy out one of the largest social media platforms in the world on a whim is incredible,” said a spokesperson for the Patriotic Millionaires, a group of wealthy Americans advocating for higher taxes, in e-mailed commentary. “But what’s even more incredible, and even somewhat frightening, is that the decisions and changes that Musk makes to Twitter as its new leader will affect millions of people around the globe directly and indirectly.”

Other ethical issues raised by the purchase include the Chinese government’s efforts to establish a Twitter presence, despite a poor domestic record on free speech. In addition, the European Union has already raised the alarm about efforts to completely do away with moderators. Former Twitter chief executive and company co-founder Jack Dorsey portrayed Musk’s deal as “taking it back from Wall Street,” but the loans backing the deal mean that Wall Street will still have a say.

There are surely financial motives, too. As reporters at The Wall Street Journal pointed out, Musk has likely already benefited from the free marketing for his cars and startups provided by his access to roughly 86 million followers. He’s likely to extract more value now that he’s gaining access to all 201 million users.

There are bigger social networks, but Twitter is arguably the most influential, given its popularity with powerful media and political figures.

As with many Musk projects, this may have started as an idle musing. When he first polled his followers about Twitter reforms, the conversation was mostly about things such as introducing an “edit” button. On Apr 14, just over a week after he disclosed amassing a 9 per cent stake, Musk tweeted an offer for the whole shebang: US$54.20 a share, with the digits clearly referring to a favourite marijuana gag of his.

People thought Musk was crazy or joking or both. But they thought the same thing when he tweeted that he had “funding secured” for a US$420-a-share Tesla buyout in August 2018. He may have exaggerated the status of the negotiations with the Saudi sovereign wealth fund, but he underestimated the value of Tesla, which has risen by multiples of that price.

Musk was operating on instinct with his hasty Tesla buyout plan, just as he is operating on instinct now. And his financial instincts have, so far, been unerring.

The reason that investment bankers at Morgan Stanley put together Musk’s unorthodox bid for Twitter was not because they could see a profitable future at the company that justified the risky bet, but because they believed Musk was a visionary who could see such things.

Maybe he sees a way to grow users by decreasing moderation. Maybe he sees a way to capitalise on missteps by Mark Zuckerberg's Facebook or Evan Spiegel's Snapchat. The engineering and business success of his rapid decision-making at Tesla, SpaceX and even the Boring Company – which will soon test an improbable high-speed hyperloop under the city of Las Vegas – is what underpins this US$44 billion roll of the dice.

As the ironic name of that last company suggests, Musk’s Twitter could be a financial bonanza or a financial disaster, but it’s unlikely to be boring.