The Harvard Business School Professor Who Isn’t Counting Elon Musk Out
Andy Wu makes the case that Twitter was in trouble long before the new CEO came aboard.
In the weeks since Elon Musk took over as CEO of Twitter, the company has laid off nearly half of its workers and offered the remaining employees an ultimatum: Commit to being “extremely hardcore” going forward or leave the company. According to The New York Times, hundreds of employees have opted for the latter.
On Wednesday night—as the deadline loomed—Andy Wu, an assistant professor of business administration at Harvard Business School, told me that Musk’s tough, authoritarian management style “generally doesn’t work in most situations.” However, he argued, it has seemingly worked at least somewhat at Tesla and SpaceX. Wu stressed that Twitter had been in trouble prior to Musk’s acquisition, so its odds of long-term survival were already limited.
We caught up again this morning to discuss the fallout from the ultimatum. Wu was still hesitant to count Musk out. “I’ve been consistently wrong about projecting out Musk’s potential, so I really don’t want to bet against him this time,” he said. “He’s always exceeded my expectations.”
Our conversations have been edited and condensed for clarity.
Caroline Mimbs Nyce: What do you make of Musk’s management style, as demonstrated in the past week?
Andy Wu: Musk is definitely a hard-charging, impulsive, and risk-tolerant leader, and he’s willing to go for the kinds of changes at Twitter that I can’t imagine any other CEO or entrepreneur going for. I do think there’s some logic to the madness.
That said, Musk definitely has a certain desensitization to the broader impact on the outside world, which other executives would be more concerned about.
I think Musk is right in that he needs to take some chances here and try out some new things.
Nyce: So you don’t necessarily think the strategy is wrong?
Wu: Well, individual choices may be wrong. It’s unclear if the blue-check-mark thing will turn out to be the right strategy. And it’s unclear if cutting specific teams is the right strategy. But at a high level, I’ll just highlight that Twitter is a business that, for a very long time, has been very, very weak. And so what we’re seeing today is just that weakness exposed to the public. But it’s actually been weak for a long time. And the two weaknesses are—one, it’s a very inefficient cost structure relative to any other social-media business. And two, it’s very, very slow at actually generating new features and innovating.
Nyce: Like, from a software perspective?
Wu: From a product standpoint as well, as in the features available to us.
And so you’ll see what he’s done in the early days here is, first, to aggressively cut costs. And second, to begin the process of changing the culture so that it’s acceptable to experiment in public and try out new things and take risks and occasionally fail.
Nyce: That’s interesting. I’ve been thinking a lot about Agile, the iterative way of working popularized in software. Moving in an agile way seems to involve some trust among the team members. When we look at Musk as a manager—the ultimatum he gave, feuding with a developer on Twitter—are those things that would empower software teams to ship features quickly and move in that “build fast” way?
Wu: It generally doesn’t work in most situations. But it seems to have had some success at Musk’s prior companies. It is pretty clear from prior companies he’s managed that he’s quite authoritarian, as well as hard-charging and aggressive in his goals. There are definitely rumors that he doesn’t tolerate dissent and will react to it quite negatively. We know this happens inside Tesla and inside SpaceX.
I think we’re still in the phase of cost cutting at Twitter right now to get the financial situation in shape. Twitter does need to cut employees. And I do think some of these ultimatums are designed to see if he can organically shake out some of the employees.
Nyce: Does this kind of—you called it authoritarian; I might call it hard-ass—management style typically work for an employer in the long run?
Wu: It’s definitely a tough environment, and it doesn’t work for most people. It definitely wouldn’t work for me. I can also tell you that in 2019, the annualized turnover of executives reporting to Musk at Tesla was 44 percent, which is four times higher than that of a similarly sized firm. So there’s a huge amount of churn in his organizations.
Nyce: So, is he a good CEO? Just to ask a point-blank question. What are the metrics you would look at to judge whether someone is a successful manager and CEO?
Wu: Musk is a one-of-a-kind CEO.
Nyce: [Laughs] That’s very neutral.
Wu: I will say, on the upside, what Musk has accomplished so far at Tesla and SpaceX is really unbelievable and impressive and really special, as far as his generation of business leaders in terms of the amount of scale and resources needed to mass-produce electric cars and build commercial spaceships. It’s unfathomable, and he actually got there. The challenge now is that Musk has never been held to a benchmark of actually being profitable.
Nyce: Isn’t profitability pretty important if you’re a business executive?
Wu: We think about growth and profitability separately. When you’re in the growth phase of the business, investors value you on growth, and you can justify growing without thinking about profitability. At some point, inevitably, any business has to shift to thinking about profitability. And we don’t know yet if that’s within Musk’s skill set.
As one illustrative example, for at least a 20-year window, Amazon was given a free pass by Wall Street to not think about profitability, and that has actually allowed Amazon to do a lot of amazing things. But as you can see, in recent years, profitability is definitely more on the minds of executives at Amazon.
Twitter is certainly an incumbent, established business. And given the financial structure of Twitter—and its debt situation—I imagine profitability is certainly on Musk’s mind.
Nyce: A lot of tech companies really pitched themselves as alternative work cultures to Wall Street or traditional corporations. Musk’s management style is a bit more traditional and a bit more top-down.
Do you think a leader can realistically change a place whose employees expect that alternative culture? Can you put in a leader who has a totally different management style and get that culture to change?
Wu: So cultural change is among the hardest, if not the hardest, management challenge possible. There are not many examples I can point to where managers successfully shift the culture of an entire firm from where it started.
Nyce: Right. Like, can you turn a Facebook into a Goldman Sachs?
Wu: Some of my colleagues are of the opinion that full cultural change is only possible when everyone leaves or dies.
What’s concerning here is that cultural change is not something Musk has really done in the past. In the past, he’s been the early employee or founder. He’s been able to establish a lot of the culture. Here, he’s got to make a shift happen.
Nyce: With software, it’s probably pretty important to have legacy employees around, right? Can you just shuffle out people of one culture and shuffle in people of another culture without having the company completely fall apart?
Wu: Doing that kind of switch is very, very dangerous. So we’re going to have to wait and see what’s going to happen here. My sense is that they are prioritizing the internal core of the technology of Twitter, the social graph. And a lot of what we’re seeing is really on the external-facing functions and the product-user interface—like the blue check mark and stuff like that.
So, for example, one of Musk’s big things coming in is that he wants to change the culture around moderation. And that’s one of those where Musk would probably lean toward cutting everybody and replacing them with his own team. Because that’s one of those topics where there is a very strong cultural affinity to how you do that job.
The key punch line here is that Twitter was actually in very bad shape and didn’t quite have a future anyway. In terms of really tough problems, this is the kind of CEO you probably need to try out. Twitter is actually a very, very difficult business challenge that nobody else has been able to solve. So at this point, we might need to, like, swing the car around and see what happens.
Nyce: That’s interesting. There are real-world consequences to a lot of this—to building fast and breaking things in the software sector.
Wu: I do think that moving fast and breaking things definitely has its limitations. There are two distinctions here. First, when we look at SpaceX or Tesla, a lot of people agree, on a societal basis, that electric cars and going to space are generally good things—whereas people have certain political and ideological views on what Twitter should be doing, and that is necessarily divisive in a way that wasn’t true at SpaceX and Tesla in the early days.
The other distinction is that Twitter plays a critical role in communication, especially in elite circles of our world. It’s not so clear whether we want to have this kind of strategy for something that some might consider public infrastructure.
Nyce: What letter grade would you give Musk the manager, if you had to?
Wu: The choice to do the deal, I would give a D or an F. Assuming the deal is done, I would give it maybe a C+, B–.
Nyce: So he’s not totally failing in your book.
Wu: It’s basically the game. He’s playing the game you have to play to make this work. There’s still a high probability of failure. But if you were in this position, you would have to make a lot of these really, really tough choices, because this is a tough company to manage that has struggled for a long time. I’m trying to factor in the fact that the company was weak already and then give him some benefit of the doubt from that perspective.
The reason I’m hesitant to give you decisive predictions here is that Musk has surpassed my expectations already on Tesla and SpaceX again and again and again. And I don’t think we can count Musk out.
Last night, news broke that hundreds of employees had declined to take Musk’s ultimatum and decided to leave Twitter, raising concerns that the site could fail. I called Wu back on Friday to ask whether these events had changed his opinion.
Nyce: Do you still think Musk has a shot at turning this company around?
Wu: I still think Musk has a fighting chance at turning Twitter around. That said, from what we’re seeing on the outside, the cultural mismatch between Musk and the existing Twitter organization seems to be quite large—and larger than I would have expected going in.
Nyce: Are you surprised by how many people reportedly didn’t take the “extremely hardcore” mandate?
Wu: No, the amount of people that we would expect to reject the “hardcore” mandate makes sense. The only question for me is whether or not Musk and his team anticipated that level of people rejecting the “hardcore” situation.
I think we have to keep in mind here that there are a number of reasons that Musk would want certain people to depart the company beyond their official layoffs. And one of those reasons—which I think we’ve forgotten in the tumult—is that Musk does care about people working in person. There is a good argument that—in a time when you need to be very agile, and you need to coordinate and innovate—having people close together and working in a co-located way makes a difference. This actually creates a window for those people—the people who don’t want to come into the office—to leave. And I imagine some fraction of [the outgoing employees] are those people.
Nyce: But if he’s really trying to create a window for people who don’t want to work in person to leave the company, are there not more effective ways of doing that?
Wu: Well, there are definitely more reasons than that. But this is a nice way of letting people self-select it.
Nyce: Is it a nice way?
Wu: I think he wants to be straight-up here about exactly what the expectation is. I think giving people the chance to opt out is actually, in some ways, kind of polite. That said, you can argue that this management style is broadly impolite and unprofessional. But this is how he’s managed at Tesla and SpaceX. So giving people the chance to decide to not be part of that regime is faithful.
The “hardcore” thing is definitely unconventional, but this is an unconventional deal. A private-equity firm would never put themselves in this particular kind of financial situation. This is a company that private-equity firms have looked at and constantly rejected taking over because the financials look bad, and the company’s potential looks bad.
And one of the key challenges, of course, is that any private-equity firm that would come in on this deal would have to heavily restructure the workforce. And that is not something anyone wants to do. There’s nobody who can be in this position and look good coming out of it. At the end of the day, you could put anybody in charge here. In one year, a lot of people will not be at that company anymore.
Nyce: On Wednesday, we talked a little bit about how this authoritarian management style doesn’t work at most places, but that it seems to have found some success at Tesla and SpaceX—and that maybe there’s this Elon exceptionalism, where he can get away with it. Do you think last night’s news casts any doubts on that line of thinking?
Wu: I think it definitely calls into question some of the faith we had in both Musk’s ability to draw people in with this cult of personality and his ability to get people aligned around a vision. What’s different, looking at it now, is that at Tesla, SpaceX, and the other businesses, the people who are aligned on the mission and the cult of personality are people who selected that environment. Whereas here, these are people who didn’t select into that environment—they were forced into it. And what’s clear now is that Musk isn’t converting people. He’s just finding the people who would be easy to convert.
Cultural change is just as hard as I would expect it to be. It’s going down in a very dramatic way. But I do want to point out that, largely, Twitter is still functioning as a technical product. The website still exists, and you can still post. So I think it’s actually amazing that it still functions. I think we’ve got to give some credit to Musk there, even though he’s lost a significant portion of the company.
Nyce: Would you give credit to Musk there, or would you give credit to the people who work on Twitter?
Wu: That’s fair. The people who built the Twitter product definitely built a pretty resilient infrastructure to survive through all of this. The technical part can operate without a lot of the people.
Nyce: Do you think some of the “RIP Twitter” hashtag stuff is overblown?
Wu: No. I think that’s a legitimate risk here. I think it’s very possible Twitter could go down in the coming weeks or months. But I do want to point out that it’s amazing it hasn’t gone down already. This is huge turmoil at the company. And again, the turmoil is necessary to make this kind of transformation. But it’s not the transformation that any private-equity firm or myself would have ever gone for. But Musk has historically gone for all kinds of things that people said were impossible. I’ve been consistently wrong about projecting out Musk’s potential, so I really don’t want to bet against him this time. He’s always exceeded my expectations.
Nyce: I asked you to grade him earlier this week. What do you give the past 24 hours?
Wu: I would change my first grade—for the choice to do the deal—to a strict F, because I think the mismatch between Musk and Twitter is something that could have been figured out in due diligence.
Assuming the deal is done, and you have to manage the company, I’d downgrade this to a C. There are definitely a lot of rough edges here. This could be done more professionally and more cleanly. But at the same time, it’s not strictly an F for me, because I think there’s still a chance here. And cultural change is hard for anyone.
Nyce: You mentioned before that you don’t count Musk out. Is that where you still stand?
Wu: I still stand by that. I think we can’t count Musk out. What stands out to me is, if you follow the more recent tweets from Musk, he’s actually taking this in amazingly good spirits, and able to poke humor at himself in an irreverent way. And I can assure you that, like, I or you or anybody would not have that ability to poke fun at ourselves in this kind of situation, when the whole house is burning down.
Musk has been through a lot of turmoil in his past, and he can handle a lot. And I think that’s really special in his leadership. We have to remember, he was fired from PayPal. Even from the very beginning of his career, he’s gone through a lot. And that kind of resilience, I think, is special. And honestly, I’d like to see that in more leaders. Not necessarily the crazy behavior—but the resilience is nice.