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

In the weeks given that Elon Musk took in excess of as CEO of Twitter, the corporation has laid off approximately 50 {8ba6a1175a1c659bbdaa9a04b06717769bcea92c0fdf198d429188ebbca09471} of its employees and provided the remaining staff an ultimatum: Commit to remaining “extremely hardcore” heading forward or go away the business. In accordance to The New York Situations, hundreds of staff members have opted for the latter.

On Wednesday night—as the deadline loomed—Andy Wu, an assistant professor of business administration at Harvard Business enterprise University, informed me that Musk’s tricky, authoritarian management design and style “generally doesn’t do the job in most circumstances.” Even so, he argued, it has seemingly labored at the very least somewhat at Tesla and SpaceX. Wu stressed that Twitter had been in difficulty prior to Musk’s acquisition, so its odds of lengthy-phrase survival were being now restricted.

We caught up all over again this early morning to talk about the fallout from the ultimatum. Wu was however hesitant to count Musk out. “I’ve been regularly completely wrong about projecting out Musk’s probable, so I genuinely really do not want to wager in opposition to him this time,” he said. “He’s generally exceeded my expectations.”

Our conversations have been edited and condensed for clarity.

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

Andy Wu: Musk is absolutely a difficult-charging, impulsive, and possibility-tolerant chief, and he’s ready to go for the types of variations at Twitter that I can not consider any other CEO or entrepreneur likely for. I do feel there’s some logic to the madness.

That reported, Musk definitely has a particular desensitization to the broader influence on the outdoors earth, which other executives would be a lot more concerned about.

I feel Musk is suitable in that he demands to take some odds right here and consider out some new items.

Nyce: So you really don’t essentially think the strategy is wrong?

Wu: Properly, particular person possibilities might be erroneous. It’s unclear if the blue-look at-mark issue will convert out to be the ideal technique. And it’s unclear if chopping unique teams is the suitable method. But at a superior amount, I’ll just spotlight that Twitter is a business enterprise that, for a really extended time, has been really, really weak. And so what we’re seeing currently is just that weak spot exposed to the public. But it’s in fact been weak for a extensive time. And the two weaknesses are—one, it’s a pretty inefficient price construction relative to any other social-media business enterprise. And two, it’s very, quite gradual at really making new characteristics and innovating.

Nyce: Like, from a computer software point of view?

Wu: From a solution standpoint as nicely, as in the capabilities obtainable to us.

And so you are going to see what he’s finished in the early times listed here is, to start with, to aggressively cut expenses. And second, to start off the system of modifying the tradition so that it’s acceptable to experiment in public and try out new issues and choose hazards and sometimes fail.

Nyce: That’s interesting. I’ve been thinking a good deal about Agile, the iterative way of operating popularized in program. Relocating in an agile way would seem to entail some believe in amid the workforce associates. When we glimpse at Musk as a manager—the ultimatum he gave, feuding with a developer on Twitter—are those things that would empower software program groups to ship functions swiftly and move in that “build fast” way?

Wu: It commonly doesn’t perform in most predicaments. But it seems to have had some achievements at Musk’s prior providers. It is quite crystal clear from prior firms he’s managed that he’s really authoritarian, as effectively as hard-charging and aggressive in his goals. There are absolutely rumors that he doesn’t tolerate dissent and will react to it pretty negatively. We know this comes about inside of Tesla and within SpaceX.

I assume we’re nevertheless in the stage of price cutting at Twitter ideal now to get the economical situation in condition. Twitter does require to minimize workforce. And I do consider some of these ultimatums are intended to see if he can organically shake out some of the personnel.

Nyce: Does this form of—you known as it authoritarian I may well simply call it challenging-ass—management type usually work for an employer in the prolonged run?

Wu: It is surely a rough setting, and it doesn’t do the job for most people. It absolutely would not function for me. I can also notify you that in 2019, the annualized turnover of executives reporting to Musk at Tesla was 44 {8ba6a1175a1c659bbdaa9a04b06717769bcea92c0fdf198d429188ebbca09471}, which is 4 moments larger than that of a likewise sized agency. So there’s a enormous amount of money of churn in his corporations.

Nyce: So, is he a excellent CEO? Just to request a issue-blank question. What are the metrics you would search at to choose no matter whether someone is a profitable supervisor and CEO?

Wu: Musk is a 1-of-a-form CEO.

Nyce: [Laughs] That’s extremely neutral.

Wu: I will say, on the upside, what Musk has accomplished so far at Tesla and SpaceX is really unbelievable and impressive and genuinely special, as significantly as his era of business leaders in conditions of the volume of scale and sources desired to mass-produce electric powered vehicles and establish business spaceships. It’s unfathomable, and he truly acquired there. The obstacle now is that Musk has never been held to a benchmark of essentially being rewarding.

Nyce: Is not profitability quite significant if you are a enterprise govt?

Wu: We feel about growth and profitability independently. When you are in the advancement period of the company, investors worth you on advancement, and you can justify rising without the need of wondering about profitability. At some stage, inevitably, any business has to shift to wondering about profitability. And we do not know nonetheless if that’s within just Musk’s skill set.

As just one illustrative instance, for at minimum a 20-year window, Amazon was specified a totally free go by Wall Road to not believe about profitability, and that has really permitted Amazon to do a large amount of amazing items. But as you can see, in modern years, profitability is unquestionably additional on the minds of executives at Amazon.

Twitter is certainly an incumbent, proven small business. And supplied the monetary composition of Twitter—and its personal debt situation—I picture profitability is certainly on Musk’s head.

Nyce: A good deal of tech companies actually pitched on their own as choice get the job done cultures to Wall Street or common corporations. Musk’s management style is a bit additional classic and a bit a lot more prime-down.

Do you believe a leader can realistically improve a area whose workers expect that alternative society? Can you put in a leader who has a entirely diverse administration type and get that society to adjust?

Wu: So cultural improve is among the the toughest, if not the hardest, management problem achievable. There are not several examples I can point to where professionals efficiently shift the lifestyle of an whole firm from where it begun.

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

Wu: Some of my colleagues are of the view that entire cultural transform is only possible when every person leaves or dies.

What is regarding right here is that cultural improve is not one thing Musk has really accomplished in the earlier. In the earlier, he’s been the early employee or founder. He’s been able to set up a good deal of the lifestyle. Below, he’s bought to make a shift materialize.

Nyce: With software package, it is likely pretty vital to have legacy workers close to, ideal? Can you just shuffle out persons of a single society and shuffle in people of a different lifestyle without possessing the enterprise completely slide apart?

Wu: Carrying out that form of change is very, incredibly harmful. So we’re likely to have to hold out and see what’s heading to transpire in this article. My sense is that they are prioritizing the interior main of the technology of Twitter, the social graph. And a ton of what we’re viewing is definitely on the exterior-dealing with features and the merchandise-user interface—like the blue test mark and things like that.

So, for example, a person of Musk’s huge things coming in is that he wants to change the society close to moderation. And which is 1 of all those where by Musk would in all probability lean towards chopping most people and replacing them with his own group. Because which is one particular of these topics wherever there is a very powerful cultural affinity to how you do that occupation.

The key punch line here is that Twitter was truly in pretty negative form and did not pretty have a foreseeable future anyway. In terms of really tough difficulties, this is the form of CEO you most likely will need to consider out. Twitter is in fact a really, pretty tough business enterprise problem that nobody else has been ready to address. So at this issue, we could possibly need to, like, swing the vehicle about and see what transpires.

Nyce: That is attention-grabbing. There are true-environment repercussions to a ton of this—to making speedy and breaking factors in the program sector.

Wu: I do consider that transferring speedy and breaking factors absolutely has its limitations. There are two distinctions in this article. Initial, when we glimpse at SpaceX or Tesla, a large amount of men and women concur, on a societal foundation, that electric cars and going to place are generally good things—whereas men and women have specific political and ideological views on what Twitter ought to be undertaking, and that is automatically divisive in a way that was not true at SpaceX and Tesla in the early times.

The other distinction is that Twitter performs a significant job in communication, specially in elite circles of our globe. It’s not so clear whether or not we want to have this sort of strategy for one thing that some could possibly consider public infrastructure.

Nyce: What letter grade would you give Musk the supervisor, if you had to?

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

Nyce: So he’s not thoroughly failing in your guide.

Wu: It’s in essence the game. He’s taking part in the recreation you have to engage in to make this function. There’s nevertheless a significant chance of failure. But if you were being in this posture, you would have to make a large amount of these definitely, truly rough possibilities, simply because this is a tough enterprise to manage that has struggled for a very long time. I’m making an attempt to variable in the point that the business was weak previously and then give him some profit of the doubt from that viewpoint.

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

Previous night, information broke that hundreds of personnel experienced declined to take Musk’s ultimatum and determined to leave Twitter, raising worries that the internet site could are unsuccessful. I called Wu back on Friday to check with regardless of whether these occasions had changed his view.

Nyce: Do you even now consider Musk has a shot at turning this enterprise all-around?

Wu: I nonetheless feel Musk has a battling likelihood at turning Twitter all around. That stated, from what we’re viewing on the outdoors, the cultural mismatch concerning Musk and the current Twitter corporation appears to be to be fairly large—and larger sized than I would have anticipated likely in.

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

Wu: No, the quantity of persons that we would expect to reject the “hardcore” mandate tends to make feeling. The only issue for me is regardless of whether or not Musk and his group expected that stage of men and women rejecting the “hardcore” circumstance.

I consider we have to continue to keep in head right here that there are a quantity of motives that Musk would want specific men and women to depart the firm beyond their formal layoffs. And a person of all those reasons—which I believe we’ve forgotten in the tumult—is that Musk does care about people today doing the job in man or woman. There is a superior argument that—in a time when you have to have to be incredibly agile, and you require to coordinate and innovate—having people today shut alongside one another and doing the job in a co-situated way helps make a change. This in fact generates a window for people people—the people today who really don’t want to come into the office—to leave. And I think about some fraction of [the outgoing employees] are those folks.

Nyce: But if he’s definitely striving to develop a window for folks who do not want to get the job done in individual to go away the firm, are there not far more successful ways of doing that?

Wu: Very well, there are certainly a lot more factors than that. But this is a nice way of allowing individuals self-pick it.

Nyce: Is it a wonderful way?

Wu: I feel he would like to be straight-up below about specifically what the expectation is. I assume supplying folks the prospect to decide out is essentially, in some methods, variety of well mannered. That reported, you can argue that this administration fashion is broadly impolite and unprofessional. But this is how he’s managed at Tesla and SpaceX. So giving men and women the probability to make a decision to not be part of that routine is faithful.

The “hardcore” factor is surely unconventional, but this is an unconventional deal. A non-public-equity organization would hardly ever put themselves in this individual form of economical problem. This is a business that non-public-equity firms have seemed at and constantly turned down taking around for the reason that the financials appear poor, and the company’s prospective seems to be lousy.

And one of the critical challenges, of class, is that any non-public-equity firm that would arrive in on this deal would have to seriously restructure the workforce. And that is not one thing anyone needs to do. There is no person who can be in this placement and glimpse very good coming out of it. At the close of the working day, you could put anyone in demand here. In a person year, a whole lot of people today will not be at that firm any longer.

Nyce: On Wednesday, we talked a minimal little bit about how this authoritarian administration fashion doesn’t work at most sites, but that it looks to have identified some achievement at Tesla and SpaceX—and that probably there is this Elon exceptionalism, in which he can get away with it. Do you think previous night’s information casts any uncertainties on that line of pondering?

Wu: I consider it undoubtedly calls into concern some of the religion we had in both of those Musk’s potential to attract persons in with this cult of personality and his potential to get people aligned all around a eyesight. What is different, looking at it now, is that at Tesla, SpaceX, and the other companies, the persons who are aligned on the mission and the cult of personality are individuals who chosen that atmosphere. While here, these are persons who didn’t select into that environment—they had been forced into it. And what’s apparent now is that Musk is not converting individuals. He’s just obtaining the people today who would be easy to transform.

Cultural alter is just as tough as I would  be expecting it to be. It is heading down in a quite extraordinary way. But I do want to level out that, mostly, Twitter is even now functioning as a complex solution. The site nevertheless exists, and you can however submit. So I believe it’s essentially incredible that it still capabilities. I consider we’ve acquired to give some credit history to Musk there, even though he’s lost a substantial portion of the business.

Nyce: Would you give credit to Musk there, or would you give credit to the men and women who function on Twitter?

Wu: That is fair. The folks who crafted the Twitter item undoubtedly crafted a really resilient infrastructure to endure via all of this. The technical element can operate with no a great deal of the individuals.

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

Wu: No. I imagine which is a respectable risk in this article. I think it’s really feasible Twitter could go down in the coming months or months. But I do want to point out that it’s incredible it hasn’t absent down already. This is large turmoil at the organization. And once more, the turmoil is important to make this type of transformation. But it is not the transformation that any non-public-equity business or myself would have ever long gone for. But Musk has historically gone for all types of things that persons said were being not possible. I’ve been continually incorrect about projecting out Musk’s potential, so I actually do not want to bet in opposition to him this time. He’s generally exceeded my anticipations.

Nyce: I questioned you to quality him before this week. What do you give the previous 24 hours?

Wu: I would change my first grade—for the preference to do the deal—to a stringent F, because I feel the mismatch involving Musk and Twitter is one thing that could have been figured out in thanks diligence.

Assuming the deal is done, and you have to regulate the business, I’d downgrade this to a C. There are certainly a large amount of tough edges here. This could be done additional skillfully and far more cleanly. But at the same time, it’s not strictly an F for me, for the reason that I feel there’s nonetheless a chance here. And cultural adjust is difficult for any one.

Nyce: You described prior to that you really do not depend Musk out. Is that the place you however stand?

Wu: I nonetheless stand by that. I consider we just can’t rely Musk out. What stands out to me is, if you observe the more the latest tweets from Musk, he’s truly taking this in astonishingly excellent spirits, and equipped to poke humor at himself in an irreverent way. And I can guarantee you that, like, I or you or any individual would not have that capability to poke entertaining at ourselves in this sort of situation, when the complete property is burning down.

Musk has been via a good deal of turmoil in his previous, and he can tackle a ton. And I feel that’s really particular in his leadership. We have to don’t forget, he was fired from PayPal. Even from the very beginning of his vocation, he’s long gone by means of a lot. And that sort of resilience, I feel, is particular. And truthfully, I’d like to see that in more leaders. Not necessarily the ridiculous behavior—but the resilience is good.

Maria Flores

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