Elon Musk has to find over a billion dollars a year to cover interest on the debt he’s incurred in acquiring Twitter, from borrowing directly, and interest on margin loans he’s taken against Tesla shares. Twitter doesn’t make that much. And its revenue has taken a hit from advertiser pullback. He needs to find both revenue and cost savings.
The Twitter culture also fundamentally doesn’t match the Musk-driven company culture. He works insane hours with unbelievable dedication to the causes he commits himself to, and he expects the same (or something approximating it) from those that work for him. He doesn’t like meetings, bureaucracy, or waste. He likes doing things and breaking things and pushing aggressively.
So in laying off staff he isn’t just trying to make Twitter more efficient, he’s trying to remake the company culture, hoping that those who remain are more grateful and willing to work harder. Anyone staying is told the conditions under which they’re still there.
Part of both remaking the culture and shedding costs is unloading non-personnel expense, both for the immediate savings and for the symbolism. He’s reportedly stopped paying office rent, trying to renegotiate leases.
Musk’s twitter has reportedly refused to pay some bills for services provided in the last days of previous management – like a $197,725 roundtrip private jet flight from Teterboro to San Francisco for the executive who served as the company’s Chief Marketing Officer and head of HR the day prior to close of the sale of the company.
The Twitter executive might have chosen one of 21 flights between New York and San Francisco offering flat business class seats instead.
- New York JFK – San Francisco is served by a dozen flights a day across Delta, American and JetBlue offering a premium business class (so excluding Alaska’s four flights).
- United alone offers 9 daily Newark – San Francisco flights with flat seats (again we ignore Alaska’s service for this purpose).
Is Musk justified in being mad? Is he justified in not paying?
- Lavish spending quite reasonable chafes Musk. Remember that, despite doomsaying predictions, Twitter is still running despite shedding two thirds of staff. They’ve eliminated meals meant to keep people in the office, who largely weren’t in the office, and many of whom weren’t working so hard they couldn’t leave the office had they been there to begin with. Much furniture is being auctioned off.
Here’s private jet travel he’s being asked to pay for, nearly 200 grand for a roundtrip transcon ‘because the trip was urgent’ as though the executive couldn’t have taken a commercial business class flight. They’re spending his money and he likely takes it as gratuitous, at the last minute when it was going to come out of his pocket and he’d have no way to stop it.
- He’s found a technical loophole to at least argue an out. The trip was booked by someone not authorized under the charter services contract to obligate Twitter to pay.
Twitter and PJS signed an agreement in June 2020 to allow Twitter to book charter passenger transportation services through PJS. …It states that the agreement requires Twitter’s “designated representatives” to book its services, but in practice, Twitter’s process of booking strayed from the agreement on numerous occasions, as employees other than the designated representatives often booked the flights.
- That’s still probably a stretch. While it’s a technical violation of the contract, the trip was booked and taken by a Twitter employee who themselves would have been able to obligate the company. The service was actually provided to the company. And, apparently, it was literally signed off on by the then-CEO.
Moreover, Twitter in practice had people other than designated representatives booking private jet travel. They regularly paid those bills. It’s a breakdown in twitter’s processes, more than the private jet charter company’s, and they’ll argue that Twitter will be estopped from arguing that they shouldn’t be obligated to pay under the circumstances since they created the precedent.
Refusing to pay for an executive’s private jet travel sends a signal about lavish spending at the company. Getting sued for the $200,000 roundtrip is almost better for Twitter under that scenario, since it makes the decision very public in a way remaining employees see it. In fact, even if Twitter winds up paying the bill plus legal expenses it’s probably cheaper than any other way of getting that same message across. Of course it may make vendors wary of doing business with Twitter.
Twitter seems to have been fairly bloated. That’s not uncommon in a medium-to-large enterprise, especially in tech. On the one hand Musk needs that to change for financial reasons. On the other, he’s reportedly negotiating to buy back much of the debt issued to fund his purchase at a discount (while personally obligating himself rather than twitter to cover its cost). He can afford it if he is sure he wants to keep twitter! So refusing to pay bills, and taking firm stands in publicly firing employees, is as much or more a culture play as an economic one – it’s about the future of the company, and the future of the company the way he wants to build it.
Personally I’d hate to be a vendor to a company that has to be sued to pay its bills. Ultimately he’ll probably have to pay for those private jet flights.