Ryan Cooper writes at The American Prospect that Elon Musk is a walking, talking demonstration of the problem that affects billionaires and oligarchs. His extreme wealth, which at one point, was $300 billion, was about the same as the GDP of Finland. His bid for Twitter far exceeded its actual stock value, which is why he tried to back out of his offer.
He writes:
Elon Musk’s purchase of Twitter does not seem to be going well. Just three weeks after buying the company, Musk has fired the entire executive suite and half the staff, fired dozens more for insufficiently slavish devotion, and most recently has apparently driven off something like 40 percent of those who remain with an abrupt demand to submit to a “hardcore” new contract without most of the relevant details.
Though Twitter is still functioning at time of writing, in my experience it has become notably more glitchy and is swarming with bots. Informed observers are predicting that absent a major change of course, serious technical instability, major security breaches, or even total collapse are just a matter of time. “I know of six critical systems (like ‘serving tweets’ levels of critical) which no longer have any engineers,” one former employee told The Washington Post. “There is no longer even a skeleton crew manning the system.”
We can conclude one thing from this mess for sure: The oligarch class has entirely too much money.
One of Musk’s bad ideas was to change the verification system. Previously, if you established your identity, you got a blue check mark next to your name. Musk decided that anyone could buy the blue check mark for $8 a month, and a large number of fake accounts were created and used to insult or mock others. Someone opened a Pepsi account and advised people to drink Coca-Cola.
Musk promptly obliterated the company’s business model. He drove out the head of ad sales, alarming the companies that account for nine-tenths of Twitter revenue. He implemented a new verification system where anyone can pay for a blue check, which (of course) led thousands of people to impersonate celebrities, politicians, and huge companies. Eli Lilly and Lockheed Martin lost billions of dollars in market capitalization because two jokers spent $8. Advertisers, logically fearing Twitter would turn into a cesspit of abuse, racist slurs, and child porn, and turned off by Musk’s erratic behavior, started shunning the company….
Strictly speaking, an individual’s net worth is not the same as national GDP; one is a stock and the other is a flow. But it gets at the important point, which is that Elon Musk and his fellow ultra-oligarchs command resources comparable to those produced by a small wealthy nation over an entire year. Economists assume wacky stuff like “hugely overpaying for a company and immediately driving into a ditch” won’t happen, because all the monetary incentives are against it. But while Musk has lost nearly half his net worth since its peak, and probably will lose a lot more once all this is finished, he will almost certainly still be a multibillionaire at the end. Guys like him can lose more money than any single person has ever lost in history, in less than a month, and still have enough to live 10,000 lifetimes in resplendent luxury.
The odds of such a thing happening increase when one considers the social effects of extreme wealth. Being that rich tends to both convince people that they are heroic geniuses far beyond the capabilities of ordinary mortals, and isolate them from any normal social interaction or criticism. It is exceptionally easy to attract a coterie of yes-men and toadies who will indulge your every whim and bad habit. Substance abuse problems and delusions of grandeur are frequent. Sound familiar?
Non-rich people can be erratic weirdos too, and ordinary businesses without megalomaniac oligarch CEOs have destroyed themselves in the past. But allowing wealth to concentrate to such a degree greatly increases the chance of the kind of completely pointless disaster that has befallen Twitter.
During the New Deal, the oligarch class was cut down to size with confiscatory income taxes on the very rich, which topped out at 94 percent for the top bracket. We could go one better by adding a wealth tax to the largest fortunes, as economists Thomas Piketty and Gabriel Zucman suggest, perhaps even plowing the proceeds into an Alaska-style social wealth fund for the benefit of all.
The solutions are readily available. The larger point is this: The existence of major companies shouldn’t hinge on the behavior of loopy, Reddit-poisoned crackpots.
Diane Ravitch's blog 