Mad Hedge Technology Letter
July 5, 2023
Fiat Lux
Featured Trade:
(TWITTER’S COPY IS FINALLY HERE)
(META), (TWITTER)
Posts
Facebook’s Mark Zuckerberg is coming out with a copy of Twitter to rival Elon Musk’s takeover trophy Twitter.
This effectively means that the Metaverse project is a dumpster fire.
Twitter is the town square of the world.
Every big name with clout has a direct voice open to the world on Twitter and nowhere else.
Apparently, Zuckerberg wants the same.
Instagram is not a bad asset, but it's more of a photo collage that acts as a dating profile to the whole world.
World leaders don’t use Instagram which matters so I don’t believe this will be a slugfest – more of a strong whimper.
Facebook’s new product will be called “Threads.”
In short, it’s basically a texting version of Instagram.
Instagram users will be able to keep their user names and follow the same accounts on the new app, according to screenshots displayed on the App Store listing.
Threads won’t make many inroads against Musk, who acquired Twitter last year for $44 billion and has brilliantly purged a useless workforce and added a slew of new advertisers to his new app.
The success has been so good that he has claimed that Twitter will soon be profitable.
Allowing Instagram users to port their profile to Threads could give the new app more traction with potential users by providing a ready-made set of accounts for them to follow.
However, I believe it’s a bad idea because these services will compete with each other and users will be cannibalized.
Interestingly enough, the mainstream media has been printing negative articles on Musk since the day he bought Tesla because Musk has been highly vocal against left wing investors that own major publications like Bill Gates and George Soros.
It’s smart that Musk took Twitter private because a public Twitter would need to navigate his critical tweet storms and dealing with unhappy shareholders.
Most users might be put off by Meta’s data privacy track record and would-be Twitter challengers like Mastodon have found it a challenge to sign up users.
For Threads to succeed, it will need to poach Twitter users.
Pew Research found last year that among U.S. adults who use Twitter, the top 25% of users by tweet volume produced 97% of all tweets. Musk isn’t going to cede Twitter’s role in the social-media ecosystem lightly, if his early reactions to Meta’s plans are anything to go by.
From my analysis, Twitter does a relatively good job with its platform.
At the very minimum, the Twitter experience isn’t such a bad experience to the point where it will bleed users.
I don’t exactly understand where Thread’s advantage is here and how they will cheaply steal Twitter’s business.
If they do steal Twitter’s business, the cost will be extremely cumbersome.
For me, the only way I envision Twitter capitulating is with a self-inflicted wound.
Twitter is stronger than ever not only as a revenue model but also its scarcity value which is at an all-time high.
There is a reason why Zuckerberg is going after Twitter and not the other way around.
Twitter is the best social media app on the market and the so-called negativity of Twitter by coastal journalism has sour grapes written all over it.
Zuckerberg’s Thread has a higher chance of stealing Instagram users.
That being said, Meta shares have had an outstanding 2023 and even if this is another soccer-like flop like the Metaverse, it won’t materially damage the stocks’ trajectory. Buy META on the dip.
Mad Hedge Technology Letter
November 18, 2022
Fiat Lux
Featured Trade:
(THE LUCK OF SILICON VALLEY)
(TWITTER)
Elon Musk sends people to outer space; I’m confident he can figure out how to run a simple app run by juveniles.
Let’s talk about the most controversial tech company out there right now, Twitter, and a tech firm that sets the tone for the rest of the industry.
Twitter has undergone an extreme makeover lately.
Not the product, but the staff.
Musk started off by firing half the staff, which later turned into an ultimatum for the rest to either get on board with the new Twitter or accept 3 months’ severance pay out the exit door.
Many left.
Cutting staff was rejuvenating, maybe not for the employees who were let go, but for a dire need of a mentality change.
Twitter became too corporate and too political inside its office.
Most of the former Twitter staff was utterly useless.
The 10% leftover is really what is essential and like Musk said, he was able to hang on to the “best people.”
Next, he should cut the office space to increase efficiencies or at the very minimum renegotiate the office lease to downsize the square footage by 90%. San Francisco city center is a ghost town now – a relic of its former self.
Twitter’s big layoff will also act as a feeder strategy for the rest of Silicon Valley to push staff into a leaner and more efficient model.
In a way, Musk is saving the technology sector by offering the blueprint of how to manage a software company.
Silicon Valley needs to fire 90% of staff immediately, maybe even 95%.
Elon Musk noted that Twitter was paying an average of $400 per lunch at the Twitter headquarters in San Francisco.
I know San Francisco is expensive and almost unlivable, but this was the type of extreme activity that was allowed to happen under the past management whose main job was to wait for their monthly paycheck.
It’s no wonder that shareholders were getting screwed.
Although it’s quite fashionable to jump on the Musk hate wagon lately to say how Twitter will go down in flames, I don’t think it’s justified and it appears to be more about sour grapes because many don’t like Musk’s politics.
Ruthlessly cutting costs is a great tactic for tech executives. Costs are way too high, which is why Facebook let go of 11,000 workers last week.
Amazon just announced 10,000 firings too, and I think they could handle 50,000 firings easily.
Luckily, positions like Chief Diversity Officer, Chief Ethics Officer, and the managers of middle managers need no replacements at all.
Musk noted that Twitter is losing $4 million per day and these measures will go a long way to fixing that.
He’s smart enough to find solutions and I wouldn’t bet against him. I can already visualize him picking apart the best slices of Twitter and supercharging them.
Twitter is a premium asset with unlimited scarcity value. We are just scratching the surface with it.
Where is the end game?
I wouldn’t be surprised if Twitter went public in 5-7 years with a valuation of $150 billion after Musk unlocks the embedded value that is literally everywhere on Twitter.
I would say $150 billion is lowballing him and this company will be worth between $180 billion- $220 billion in the next 7-10 years.
Many people still don’t understand Twitter very well and it’s become even more important than the mainstream media.
