The Harvard Business School Professor Who Isn’t Counting Elon Musk Out

In the months due to the fact Elon Musk took more than as CEO of Twitter, the business has laid off just about half of its employees and supplied the remaining workers an ultimatum: Commit to becoming “extremely hardcore” heading ahead or depart the business. According to The New York Periods, hundreds of employees have opted for the latter.

On Wednesday night—as the deadline loomed—Andy Wu, an assistant professor of enterprise administration at Harvard Business enterprise Faculty, informed me that Musk’s rough, authoritarian administration type “generally does not function in most conditions.” Even so, he argued, it has seemingly labored at minimum relatively at Tesla and SpaceX. Wu stressed that Twitter had been in difficulties prior to Musk’s acquisition, so its odds of extensive-term survival have been previously restricted.

We caught up all over again this early morning to discuss the fallout from the ultimatum. Wu was nevertheless hesitant to depend Musk out. “I’ve been consistently erroneous about projecting out Musk’s likely, so I definitely really don’t want to guess versus him this time,” he explained. “He’s always exceeded my expectations.”

Our discussions have been edited and condensed for clarity.

Caroline Mimbs Nyce: What do you make of Musk’s management fashion, as shown in the past 7 days?

Andy Wu: Musk is certainly a difficult-charging, impulsive, and threat-tolerant leader, and he’s willing to go for the forms of variations at Twitter that I just can’t consider any other CEO or entrepreneur going for. I do feel there’s some logic to the madness.

That mentioned, Musk undoubtedly has a certain desensitization to the broader impact on the outside the house world, which other executives would be additional worried about.

I imagine Musk is ideal in that he needs to take some odds here and attempt out some new factors.

Nyce: So you really don’t essentially feel the approach is mistaken?

Wu: Perfectly, individual alternatives may perhaps be erroneous. It is unclear if the blue-examine-mark detail will convert out to be the appropriate system. And it’s unclear if chopping distinct teams is the correct method. But at a high amount, I’ll just highlight that Twitter is a small business that, for a really lengthy time, has been really, extremely weak. And so what we’re viewing now is just that weak spot uncovered to the community. But it is basically been weak for a extended time. And the two weaknesses are—one, it’s a extremely inefficient price composition relative to any other social-media business enterprise. And two, it is quite, pretty gradual at truly creating new functions and innovating.

Nyce: Like, from a software viewpoint?

Wu: From a solution standpoint as effectively, as in the features offered to us.

And so you’ll see what he’s accomplished in the early days in this article is, first, to aggressively lower charges. And 2nd, to begin the approach of transforming the culture so that it is satisfactory to experiment in public and try out new factors and acquire threats and at times fail.

Nyce: That is interesting. I’ve been considering a whole lot about Agile, the iterative way of operating popularized in software. Shifting in an agile way looks to involve some rely on amongst the group users. When we glimpse at Musk as a manager—the ultimatum he gave, feuding with a developer on Twitter—are all those things that would empower software program groups to ship options swiftly and move in that “build fast” way?

Wu: It usually doesn’t perform in most scenarios. But it seems to have experienced some achievements at Musk’s prior organizations. It is fairly distinct from prior organizations he’s managed that he’s really authoritarian, as nicely as challenging-charging and aggressive in his goals. There are undoubtedly rumors that he does not tolerate dissent and will respond to it rather negatively. We know this takes place inside Tesla and inside of SpaceX.

I imagine we’re however in the stage of price cutting at Twitter proper now to get the financial condition in condition. Twitter does need to have to slash staff members. And I do think some of these ultimatums are designed to see if he can organically shake out some of the workers.

Nyce: Does this sort of—you known as it authoritarian I may phone it tricky-ass—management model typically get the job done for an employer in the extended run?

Wu: It is undoubtedly a challenging environment, and it does not function for most men and women. It absolutely would not do the job for me. I can also explain to you that in 2019, the annualized turnover of executives reporting to Musk at Tesla was 44 p.c, which is four times bigger than that of a likewise sized agency. So there’s a massive amount of money of churn in his businesses.

Nyce: So, is he a good CEO? Just to inquire a point-blank dilemma. What are the metrics you would seem at to decide whether someone is a productive supervisor and CEO?

Wu: Musk is a a person-of-a-form CEO.

Nyce: [Laughs] That’s really neutral.

Wu: I will say, on the upside, what Musk has achieved so significantly at Tesla and SpaceX is actually unbelievable and spectacular and definitely exclusive, as considerably as his technology of small business leaders in conditions of the sum of scale and methods essential to mass-develop electric cars and develop business spaceships. It’s unfathomable, and he in fact received there. The problem now is that Musk has by no means been held to a benchmark of basically getting lucrative.

Nyce: Is not profitability quite important if you’re a business enterprise govt?

Wu: We think about advancement and profitability separately. When you are in the progress stage of the company, traders benefit you on advancement, and you can justify expanding devoid of pondering about profitability. At some position, inevitably, any business enterprise has to shift to thinking about profitability. And we don’t know nevertheless if which is within just Musk’s talent established.

As 1 illustrative illustration, for at the very least a 20-12 months window, Amazon was specified a free pass by Wall Road to not feel about profitability, and that has basically allowed Amazon to do a whole lot of wonderful items. But as you can see, in latest many years, profitability is definitely far more on the minds of executives at Amazon.

Twitter is undoubtedly an incumbent, founded organization. And provided the economic composition of Twitter—and its financial debt situation—I consider profitability is unquestionably on Musk’s mind.

Nyce: A ton of tech companies genuinely pitched on their own as different perform cultures to Wall Road or common firms. Musk’s administration style is a little bit more standard and a little bit more best-down.

Do you think a chief can realistically transform a area whose workforce be expecting that alternative society? Can you set in a chief who has a completely distinct management type and get that lifestyle to transform?

Wu: So cultural improve is amongst the toughest, if not the most difficult, management challenge achievable. There are not many examples I can issue to in which supervisors properly change the lifestyle of an overall agency from the place it commenced.

Nyce: Suitable. Like, can you turn a Fb into a Goldman Sachs?

Wu: Some of my colleagues are of the viewpoint that total cultural modify is only doable when all people leaves or dies.

What’s about listed here is that cultural adjust is not a thing Musk has definitely done in the earlier. In the earlier, he’s been the early worker or founder. He’s been capable to establish a good deal of the tradition. Right here, he’s acquired to make a change materialize.

Nyce: With software program, it’s possibly really crucial to have legacy workforce all around, correct? Can you just shuffle out people today of a single lifestyle and shuffle in people today of a different culture without the need of having the firm absolutely drop apart?

Wu: Undertaking that kind of swap is really, extremely dangerous. So we’re heading to have to wait and see what’s heading to materialize in this article. My feeling is that they are prioritizing the inside core of the technological innovation of Twitter, the social graph. And a good deal of what we’re looking at is really on the external-struggling with features and the solution-person interface—like the blue check mark and stuff like that.

So, for case in point, 1 of Musk’s major points coming in is that he wants to adjust the culture around moderation. And that’s one particular of all those where Musk would in all probability lean toward reducing everyone and replacing them with his possess group. Because that’s 1 of all those matters where by there is a quite robust cultural affinity to how you do that career.

The critical punch line right here is that Twitter was essentially in very negative condition and did not pretty have a foreseeable future anyway. In terms of seriously difficult troubles, this is the sort of CEO you almost certainly have to have to test out. Twitter is in fact a extremely, really complicated small business obstacle that no one else has been able to solve. So at this position, we might will need to, like, swing the automobile close to and see what occurs.

Nyce: Which is intriguing. There are authentic-globe effects to a great deal of this—to creating quick and breaking factors in the software program sector.

Wu: I do feel that transferring rapidly and breaking factors absolutely has its restrictions. There are two distinctions below. Initially, when we search at SpaceX or Tesla, a good deal of persons concur, on a societal basis, that electric cars and likely to house are commonly excellent things—whereas people have selected political and ideological views on what Twitter really should be doing, and that is always divisive in a way that was not legitimate at SpaceX and Tesla in the early days.

The other difference is that Twitter plays a important position in communication, especially in elite circles of our planet. It is not so distinct regardless of whether we want to have this kind of method for one thing that some could possibly consider community infrastructure.

Nyce: What letter quality would you give Musk the manager, if you had to?

Wu: The decision to do the deal, I would give a D or an F. Assuming the deal is accomplished, I would give it possibly a C+, B–.

Nyce: So he’s not fully failing in your reserve.

Wu: It is fundamentally the match. He’s enjoying the video game you have to play to make this get the job done. There is however a superior chance of failure. But if you were in this place, you would have to make a good deal of these definitely, truly difficult selections, due to the fact this is a tricky corporation to deal with that has struggled for a extended time. I’m trying to variable in the reality that the enterprise was weak presently and then give him some benefit of the question from that perspective.

The purpose I’m hesitant to give you decisive predictions here is that Musk has surpassed my anticipations presently on Tesla and SpaceX once more and all over again and once more. And I do not feel we can depend Musk out.

Final night time, information broke that hundreds of staff members had declined to get Musk’s ultimatum and determined to leave Twitter, elevating problems that the internet site could are unsuccessful. I referred to as Wu back on Friday to ask regardless of whether these gatherings experienced improved his viewpoint.

Nyce: Do you even now think Musk has a shot at turning this organization all over?

Wu: I nonetheless assume Musk has a fighting possibility at turning Twitter about. That reported, from what we’re viewing on the exterior, the cultural mismatch involving Musk and the present Twitter organization would seem to be fairly large—and more substantial than I would have expected going in.

Nyce: Are you surprised by how several folks reportedly did not consider the “extremely hardcore” mandate?

Wu: No, the amount of persons that we would count on to reject the “hardcore” mandate will make feeling. The only issue for me is no matter if or not Musk and his workforce expected that degree of persons rejecting the “hardcore” problem.

I consider we have to preserve in mind listed here that there are a number of reasons that Musk would want specific people today to depart the corporation past their formal layoffs. And 1 of people reasons—which I think we’ve forgotten in the tumult—is that Musk does care about folks performing in person. There is a good argument that—in a time when you require to be quite agile, and you want to coordinate and innovate—having people shut alongside one another and doing work in a co-situated way can make a difference. This basically makes a window for all those people—the individuals who do not want to arrive into the office—to leave. And I imagine some portion of [the outgoing employees] are all those men and women.

Nyce: But if he’s actually attempting to generate a window for persons who really do not want to perform in individual to depart the business, are there not much more powerful approaches of executing that?

Wu: Perfectly, there are definitely more reasons than that. But this is a pleasant way of permitting people today self-decide on it.

Nyce: Is it a pleasant way?

Wu: I believe he wants to be straight-up below about just what the expectation is. I assume supplying people the prospect to opt out is in fact, in some techniques, sort of well mannered. 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 prospect to come to a decision to not be part of that regime is devoted.

The “hardcore” matter is certainly unconventional, but this is an unconventional deal. A personal-equity agency would hardly ever set by themselves in this individual type of financial predicament. This is a organization that non-public-equity firms have looked at and continually rejected getting about for the reason that the financials glance terrible, and the company’s prospective looks undesirable.

And 1 of the crucial issues, of course, is that any personal-fairness company that would occur in on this deal would have to closely restructure the workforce. And that is not a little something everyone needs to do. There is nobody who can be in this position and search fantastic coming out of it. At the conclusion of the day, you could place any one in charge below. In one 12 months, a good deal of persons will not be at that company anymore.

Nyce: On Wednesday, we talked a little little bit about how this authoritarian administration design doesn’t get the job done at most locations, but that it appears to have identified some achievement at Tesla and SpaceX—and that maybe there’s this Elon exceptionalism, exactly where he can get away with it. Do you assume past night’s news casts any uncertainties on that line of wondering?

Wu: I imagine it certainly calls into issue some of the faith we had in each Musk’s capability to draw people in with this cult of character and his ability to get folks aligned around a eyesight. What’s different, seeking at it now, is that at Tesla, SpaceX, and the other corporations, the men and women who are aligned on the mission and the cult of temperament are men and women who selected that setting. Whilst right here, these are people who didn’t select into that environment—they were being pressured into it. And what is obvious now is that Musk isn’t changing men and women. He’s just getting the people who would be quick to transform.

Cultural alter is just as tough as I would  hope it to be. It is heading down in a very remarkable way. But I do want to place out that, largely, Twitter is even now performing as a technical products. The website still exists, and you can still submit. So I assume it’s essentially amazing that it even now functions. I feel we have got to give some credit history to Musk there, even however he’s shed a major part of the enterprise.

Nyce: Would you give credit rating to Musk there, or would you give credit rating to the individuals who do the job on Twitter?

Wu: That is fair. The persons who built the Twitter product or service surely developed a quite resilient infrastructure to survive via all of this. The specialized component can run without a lot of the people today.

Nyce: Do you believe some of the “RIP Twitter” hashtag stuff is overblown?

Wu: No. I consider that’s a authentic hazard listed here. I think it’s pretty feasible Twitter could go down in the coming months or months. But I do want to point out that it’s amazing it has not absent down previously. This is large turmoil at the corporation. And once again, the turmoil is vital to make this variety of transformation. But it is not the transformation that any private-fairness business or myself would have at any time gone for. But Musk has traditionally gone for all varieties of matters that men and women explained had been not possible. I’ve been regularly improper about projecting out Musk’s probable, so I seriously do not want to bet towards him this time. He’s always exceeded my expectations.

Nyce: I asked you to quality him previously this week. What do you give the past 24 hours?

Wu: I would adjust my initial grade—for the alternative to do the deal—to a strict F, due to the fact I believe the mismatch in between Musk and Twitter is a thing that could have been figured out in owing diligence.

Assuming the offer is performed, and you have to regulate the company, I’d downgrade this to a C. There are absolutely a good deal of rough edges in this article. This could be done additional skillfully and much more cleanly. But at the very same time, it is not strictly an F for me, because I believe there is continue to a probability below. And cultural change is tough for anyone.

Nyce: You mentioned before that you really do not rely Musk out. Is that in which you nevertheless stand?

Wu: I nonetheless stand by that. I feel we can not rely Musk out. What stands out to me is, if you follow the more the latest tweets from Musk, he’s truly getting this in surprisingly good spirits, and in a position to poke humor at himself in an irreverent way. And I can assure you that, like, I or you or any person would not have that capacity to poke fun at ourselves in this form of problem, when the complete home is burning down.

Musk has been through a lot of turmoil in his past, and he can handle a ton. And I believe which is actually particular in his management. We have to recall, he was fired from PayPal. Even from the really beginning of his career, he’s long gone through a lot. And that sort of resilience, I feel, is exclusive. And honestly, I’d like to see that in additional leaders. Not automatically the mad behavior—but the resilience is pleasant.