In this week’s newsletter: Just like Donald Trump’s political rise, Tesla’s CEO and firms like Tether win by simply not playing by the same rules as everyone else
One of the biggest advantages you can have in life is the superpower of “getting away with shit”. If you manage to play by different rules from the people you’re competing against, you can appear unstoppable.
If you’re good enough at it, you can reveal that even deeply foundational rules of the system are, in practice, just guidelines, a gentleman’s agreement, or just politeness. The rise of Donald Trump in US politics, for instance, led to half a decade of commentators insisting he couldn’t do things that he, in fact, could and did do. (Depending on how you interact with politics, I can direct you to this comment piece or this viral tweet for an elaboration of that argument.)
Tech news this week has been dominated by two things: Elon Musk’s will-he-won’t-he game with Twitter, and the collateral damage across the crypto sector of the collapse of the stablecoin TerraUSD. But really, it’s been dominated by one thing: the incredible power of getting away with shit.
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Elon Musk’s long history of acting with impunity is well documented, in part because so much of what he’s got away with directly involves the social network he’s currently (maybe) buying.
There was the time he called a British cave diver a “pedo guy”, tweeted that if he wasn’t a paedophile he would sue, sent material suggesting he was a paedophile to a reporter, and then won in court based on the argument that he hadn’t intended to imply he was really a paedophile, and said sorry anyway. There was the time he tweeted that he would be taking Tesla private at a valuation of $420 dollars a share (he didn’t) and that he had funding secured (he hadn’t).
And there was the time he bought a five per cent stake in a publicly traded company, failed to disclose the stake when he was legally required to, saved $143m as he continued to build up his stake in secret, eventually disclosed his stake and committed to being a passive investor, immediately started pushing for changes to the company’s product, accepted a seat on the board and admitted he was an activist investor, then rejected the seat on the board and launched a takeover bid for the company. And we’re up to the present day.
Some may dispute that Musk has in fact got away with all that. Yes, he won in court against Vernon Unsworth, the British diver; but he was slapped with a fine by the SEC for his “funding secured” tweets, and is under investigation by the regulator for his missing disclosures over the Twitter purchase (for that, in case you weren’t paying attention, was the public company). But the odds are slim that Musk ends up paying a fine even close to the $143m he saved delaying his Twitter disclosure; and as for the SEC oversight following his bad tweets, well, take a look at his tweets since then to see quite how much the regulator is encouraging him to constrain himself.
Despite that history, a lot of people seem to be under the impression that Musk is playing the same game as his other public company chief executive peers. He is not. Even when CEOs don’t follow the letter of the law, they have a tendency to act like they know they should: they don’t just … tweet it out.
So when, this week, Musk started tweeting about how he didn’t believe Twitter’s publicly stated claim that less than 5% of accounts on the platform are related to spam, and how he would put the deal “on hold” until he was satisfied the figures were true, a lot of commentary focused on the fact that, well, he can’t do that.
The acquisition of Twitter is in motion. Musk explicitly waived his right to perform due diligence as part of his take-it-or-leave-it offer to the company. The terms of the deal allow Twitter to force Musk to complete the acquisition, with the only possible out being if his funding literally falls through, and even then, he has to pay a $1bn break-up fee. On Tuesday, the day after Musk tweeted “
Musk has, per the rules of the game he has entered in to, no real wriggle room. He cannot fish for a lower price; he cannot simply pay $1bn walk away because he doesn’t believe the statements of Twitter; he certainly can’t leave this without giving up something.
And yet! Twitter is imploding, even before Musk takes over. Agrawal aggressively reorganised his senior team, firing the head of product while on parental leave; the share price is falling, even though theoretically every shareholder stands to turn a profit the second the deal closes; staff are leaving, and the company has been thrust back into a culture war about its moderation policies. Legally, it might hold all the cards – but practically, it’s increasingly unclear that it could survive in its current form while fighting a multi-year battle to force Musk to pay up. So if, one day, the company is offered a lower price to close the acquisition ASAP – well, I think it might end up taking it. And Musk will have got away with more shit.
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There’s no purer example of this superpower than the world of cryptocurrency, though. If there’s one thing that defines the sector, it’s not playing by the same rules as everyone else.
Take tether, the $80bn stablecoin that many fear might be the weak link in the entire ecosystem. (Not to be confused with Terra, the formerly-$35bn stablecoin that collapsed last week and sparked the latest round of panic that the entire edifice might be about to crumble.) Tether has a relatively simple business model: you hand it US dollars and it gives you a transferrable note saying that it’s holding money for you; whenever you want, you can hand it the note, and get your US dollars back.
If you’re saying “that’s a bank”, you’re sort of right. The tether stablecoin carries out a bunch of the functions of a conventional bank in the cryptocurrency sector, and the Tether business behind it makes its money in the same basic way as a bank, investing customer deposits in safe and liquid assets to earn a profit from its reserves.
But, of course, Tether is not a bank. Tether is not regulated like a bank; it does not have to comply with reserve ratios like a bank, nor obey anti-money-laundering regulations like a bank. It can get away with stuff a normal bank simply could not begin to risk.
And even when it comes to the small number of things that Tether isn’t supposed to do, it still has a good record of getting away with it. Take its reserves: for years, the company promised depositors that every tether it issued was backed by US dollars. That, the New York attorney general said in 2021, “was a lie”. (Tether said at the time that the settlement it paid in response “should be viewed as a measure of our desire to put this matter behind us and focus on our business.”) Now, it simply claims its currency is “backed 100% by Tether’s reserves”, and has promised to regularly disclose what those reserves are – as well as paying a paltry fine to New York.
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