Earlier today, I read an article in the Wall Street Journal titled: There Has to Be a Better Way to Lose $800 Billion— https://www.wsj.com/articles/meta-facebook-metaverse-mark-zuckerberg-11667424987?st=dxn07v3lgwobx82 . I read the whole thing, something I rarely do with the WSJ. I recommend reading it as this post is not a synopsis, but a companion to that piece.
The WSJ piece is about Meta, not Twitter, but you already know that if you tracked Twitter’s stock price over the past year. That said, the article is about Mark Zuckerberg’s, so far, failed attempt to lead Meta and the rest of social media players to his vison of the future of the industry.
I believe that both Zuckerberg and Musk have made the same fatal mistakes in their attempt to co-opt the future:
- They are doing it on too large a scale. Transformations like the ones they are attempting are (very, very) rarely successful. Bet-the-ranch investments should not be done at the expense of killing your golden goose, i.e. the engine that is paying the bills. In Meta’s case it looks like the company is abandoning a very successful model before they even have the glimmer of what its successor will be. In Twitter’s case it is even worse. Musk has loaded the company with so much debt that he is cutting staff and capital costs to manage the income statement because the deal doesn’t make sense (period) and to the bean counters, the only solution is to cut—even if it is deeply into the muscle. In both cases (worse for Twitter because its finances are much more precarious) this does not bode well for the short-, medium- or long-term health of either company.
- They are over-funding their efforts. Keep new (revolutionary) efforts small, lean and hungry. Well-financed efforts waste money! And from my experience they do not produce measurably better outcomes. Use an angel/venture capital model to fund these efforts. Make the leaders prove themselves (vision, execution, passion) and earn the resources they need to realize their venture’s potential. Musk should have bided his time and developed a complete, workable business and operating plan prior to pulling the trigger on his purchase of Twitter. If he had done that homework, he might never have done the deal. And after doing the homework, if he still decided to do the deal, he probably would be executing better than it appears he is so far. Zuckerberg has a large enough umbrella that he could have incubated a dozen ideas before picking one to commit to.
- Do not bet the business on one path to the future. Both Musk and Zuckerberg think that they can drive the vision. They are both very gifted businessmen, but they have convinced themselves that they (and only they) are right. This is not likely the case. Both Zuckerberg and Musk are living inside of a boxes of their own construction. These boxes, while admittedly bigger than most of us can conceive—giving them credit where credit is due) are still limiting and is likely to eliminate the true new golden goose from the field of vision. So, I would identify and then incubate ideas and the (best and brightest) leaders to shepherd the efforts through a series of gates that would eventually deliver one or more golden geese.
In both cases these mistakes are driven by arrogance. Musk and Zuckerberg have more reason than most to be self-confident in their visions. They are two of the most successful entrepreneurs in history. But that does not mean that the rules do not apply to them and the bigger the stakes and scale, the bigger the consequences and likelihood of failure. And the bigger the consequences of failure, no matter how rich they are, for failure on their current respective efforts is consequential (maybe even record setting) in both cases.
These are both cautionary tales and worth remembering for those of you who are trying to take their company on to its second act.
Copyright 2022 Howard Niden
— you can find this (days earlier) and other posts at www.niden.com.
And, if you like this post: 1) please let me know; and 2) pass on your “find” to others.