by Jim Powers
Billionaires should not exist.
Yes, I know. I must be un-American and hate our capitalist economic system to suggest such a thing. If a person has the genius and business acumen to accumulate a billion dollars, he/she is obviously a national treasure and should be exalted among men. Or not.
There are approximately 720 billionaires in the U.S., about a quarter of the 2,700 that exist across the world. They have more wealth than the bottom 165 million people in the U.S. You will likely recognize the names of the richest of them. Elon Musk who runs Tesla and SpaceX, Jeff Bezos of Amazon fame, Bill Gates who founded Microsoft and Warren Buffett of Berkshire Hathaway are among those numbers.
Elon Musk has recently been making news with his purchase of Twitter for $44 billion dollars. The messy story of what followed that offer is instructive in defending my assertion that billionaires should not exist.
Back in April of this year, Elon Musk made an offer to buy Twitter at $54.20 per share, which was 38 percent above what the stock closed at on April 1. You might think Musk was willing to pay more than the company was worth because of his astute powers of seeing a diamond in the rough that he could make a fortune from. Apparently not.
Very shortly, Musk started publicly trashing the company, complained that the company had misrepresented facts, and then decided that he was not going to buy the company after all. The problem was that he had entered, undoubtedly without due diligence, into a binding contract to buy the company, that would have left him owing Twitter $1 billion if he backed out. Despite his best efforts he could not get out of the contract, and indeed, a few weeks ago bought the company and took it private
Now, even though Musk is the richest man in the world, with a net worth over $200 billion (which swings wildly with the vagaries of his Tesla stock), he doesn’t have $44 billion in cash sitting around, so he had to borrow a big chuck of it (he convinced some billionaire friends to invest also).
The interest on those loans is approximately $1 billion a year. Twitter’s entire income was $738 million last year. Not profit, entire income. O.K., maybe Musk is a genius and knows something we don’t. But it gets worse. Financial experts who have looked closely at the company say that the actual real value of the company is closer to $9 to $11 billion, not anywhere close to what he paid for it. But it gets worse.
Musk decided immediately, within days of taking over, that the company didn’t need the 7,500 employees it had. He alleged they were dead weight, collecting a paycheck for doing nothing. So, he fired half of them, without making any effort to find out what they did. Turns out, most were from essential teams to keep Twitter running and complying to various legal requirements. Last week he issued an ultimatum. Employees had to agree that they work many more hours under draconian conditions, or they would be fired with three months salary.
Many took him up on the offer and quit. All the twitter offices were closed to all employees over the weekend because they didn’t have the staff to determine who still worked for the company. He had fired them. He could be now trying to run a company with 25 percent of its employees left. You don’t need a business degree to understand that isn’t going to work.
Musk doesn’t appear to have a clue what he is doing. Is he deliberately trying to burn $44 billion dollars by destroying a company that he hates or is he just incompetent? Only time will tell. The most likely explanation, though, is that it is hubris that has led to this result.
Musk was born in South Africa, and Musk’s early financial history gets a little murky from there, with rumors that his father was wealthy and funded his rise that do not really pan out. But there are some facts that seem relevant here.
Musk did not start Tesla, his electric car company, he bought it. He is not an engineer and did not design the cars. He runs the company. His venture to develop and sell self-driving electric vehicles has a long and rocky road, helped along by government subsidies. Tesla is a public company and is worth a lot of money. It’s facing significant headwinds now that mainstream car makers have entered the electric vehicle market, with cheaper, more reliable electric vehicles. The stock price of the company has fallen significantly, and stockholders are expressing concern that he is spending too much time with Twitter and too little running Tesla.
His SpaceX company produces rockets and space vehicles. His goal is to land on Mars and colonize it.
Bill Gates founded Microsoft, which most folks these days know because of Microsoft Windows operating system that most of their computers runs on. He is worth around a $100 billion dollars. While Gates is a software programmer, that is not how he made his fortune.
In the mid 1980s, when IBM launched The IBM PC, they needed an operating system for it. The 25-year-old Gates had just started Microsoft, and IBM asked him if he could provide an operating system for it. He didn’t have one, but he knew someone who did. He bought a program from a small software company called Q-DOS for $75,000, renamed it MS-DOS, and licensed it to IBM. The the rest is history. Gates genius was not as a programmer, but for licensing the software to IBM rather than selling it outright to them.
Every IBM PC was sold with a copy of MS-DOS. Every PC ultimately sold had a copy of MS-DOS, and later Microsoft Windows, installed on it. And Microsoft received a licensing fee for everyone of them. Over the years, that represents billions of PCs sold. The single decision to license rather than sell software outright made Microsoft, and Gates, rich.
Gates went on to eventually start a charitable foundation with an initial contribution of $40 billion dollars, the Bill and Melinda Gates Foundation. Gate’s interest in the projects the foundation funds are wide ranging and have done tremendous good around the world. But Gates has also used the outsized influence his billionaire status has given him to meddle in areas where a licenser of operating systems has no expertise, with terrible results.
Most of the failed educational experiments over the last few decades have been those pushed by Gates. His ideas have frustrated school districts, teachers and lowered overall testing results of students. If you hate Common Core, that’s one of Gate’s big ideas. What made it possible for the founder of a software company to influence decades of education in the U.S.? Money. Not expertise. Not direct experience in the classroom. Not a degree in education.
We in the U.S. tend to see financially successful people as smarter and more talented than the rest of us. We assume that those who have accumulated billions of dollars operate at an intellectual level the rest of us just don’t have. Which is bad enough. But the real problem is that these billionaires also come to believe their ideas in every area are superior. That they have a special genius that applies to just about everything. Unfortunately, too often, many of their plans for society are just hubris induced crackpot ideas.
Now if you or I have crackpot ideas, it is unlikely we can have much influence. Who’s going to pay much attention to us? But if you have a billion dollars to throw at an issue like education, you can change the course of society. You can alter, as Bill Gates did, the educational system of an entire country. Or the political system. Or the social order through social media companies.
This is not just theory. Bill Gates did it with education. Elon Musk, if he destroys Twitter, or somehow salvages it and turns it into a right-wing hangout (which he appears to favor), will control the destiny of a social media platform that has been important (and a plague) for social commentary for years.
Billionaires should not exist. No one person should have the economic power to change the social, political, or economic structure of an entire society. They aren’t any smarter or more talented or better than the rest of us. Their hubris often makes them dangerous. But there exist 720 people in the U.S. that hold that kind of power. Maybe we should look at that.