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PaperclipPerfector  13d ago (text post)   33272 thread views

Culture War Roundup for the week of February 10, 2025

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I'd be more convinced if there had been a clear effort to recruit conservatives, prior to this - driving out progressives by purposely making civil service jobs generally less appealing doesn't make me want a civil service job.

In his companies, Musk has recruited peerless employees despite being awful to them, sometimes even awful in an unfair way.

There's a paradox here, which I think is best illustrated by this comparison. Which advertisement will result in the most effective military?

  1. Come join the military. It's not that hard and we'll give you lots of free stuff!

  2. The military will be the hardest experience of your life. You might even die. Only the toughest will make it.

Recruiting people who are doing it for the money or for cushy work conditions gets you exactly the civil service we have now.

#2 jogged my memory of some insane ads for the Marines I remember from when I was a kid. They leaned hard into the challenge but with a fantasy element as well. To a teenage boy, it made being a Marine the coolest-looking occupation imaginable.

Chess is one I remember vividly, and especially the one with the lava monster in the battle arena, which today I learned is called Contest of Honor. Even as a kid I knew it was ridiculous but it still stirred something visceral in my naive little heart.

Any good info on post-Musk twitter recruiting?

Not sure. Tech is kinda easy right now because of all the layoffs in 2022/23. Twitter is doing really well with the employees they do have. The site functions better than it did before.

On a business level, Twitter is crushing it. It's profitable and, with the advertiser boycott broken, it's about to start absolutely gushing cash.

In 2021, Twitter's revenue was $5.1 billion, with expenses of $5.3 billion. Let's assume that expenses are closer to $1-2 billion now, and that revenue is starting to crawl back up towards 2021 levels. This thing is going to throw off billions in profit per year.

I don't think expenses will be down that much. Staffing costs in 2022 was about a billion. So assume that dropped by 80%, R and D was 1.5 billion lets say he cut that by 80% as well, and then sales and marketing was about another billion.

Even if he was as ruthless with all those he's cut maybe 2.5 billion. Which is a lot! But it doesn't look like most of the other fixed expenses could drop much. So it's more likely expenses are around 2.5 billion still at a minimum. And possibly with R and D particularly he might not have been able to cut so deeply but for sake of argument lets say he did.

Revenue was 3.5 billion in 2023. Looks to be about 2.9 - 3.1 billion for 2024 according to Twitter's own figures submitted as part of their applications for licensing for money transmission. But debt servicing costs are about 1.2 billion per year. So predicted loss of ~0.5-0.8 billion for the year would be more likely. It's going to take some growth before it is making multiple billions per year, just looking at the figures. Not impossible, but the debt servicing costs are off setting at least some of the savings Elon made, and self-reported revenue still has dropped from 2023 to 2024 so I can't see a way it is making multiple billions right now.

He has to find a way to arrest the decline in revenue if he wants to be making such a profit I should think.

A couple investors have come out and said that it pivoted to profit in Q4 last year. Can't vouch for accuracy.

Amazon and Apple have also resumed or increased (can't remember which) their advertising on the platform.

Yeah if everything went perfectly they might just be in profit. More importantly will be revenue through 2025 which unless they have to reveal figures when applying for more licenses we may or may not find out about.

On a business level, Twitter is crushing it. It's profitable and, with the advertiser boycott broken, it's about to start absolutely gushing cash.

How would you know? They're private and don't report financials right?

It's profitable and, with the advertiser boycott broken,

Was it?

This is a sincere question- I wasn't tracking any particular industry movement, and last I'd heard was of a lawsuit against boycotters, rather than a breakdown and return of advertisers.

All of the ads I ever see are tiny companies I’ve never heard of. Actually, “companies” might be a bit generous. Most of them seem like outright scams.

I think a few companies cracked and returned to buying ads on Twitter after Trump won, but I don't know if that's going to help much, Twitter always had pretty bad conversion rates. I wouldn't be surprised if the pre-Musk adspend was a subsidy, like those Raytheon ads on MSM.

I get scams, car dealerships, fast food, and pot- about 50/50 English/Spanish. Not exactly high status, but probably a decent sample of very heavy advertising industries.

I'm a little under the impression that Twitter was effectively never profitable, and was only sustained financially by backers entranced by Dorsey's personal charisma.

Many such cases. Reddit also never made profit, from what I recall.

On a business level, Twitter is crushing it.

Which is why the banks who financed the deal just offloaded more debt at a discount (something extraordinarily rare for a buyout of this size absent a major market crash, which didn’t happen)…

Care to expound on the implications for the less financially literate?

(I'm fairly sure I know what you mean, but it's also not something that was covered much in the coverage of the Twitter takeover deal, since much of the media coverage at the time was jeering Musk.)

When Musk bought Twitter, one of the ways he reduced the amount of his own money he had to put up was to borrow a large sum (roughly $13 billion) from a syndicate of banks. The deal is structured so that Twitter is the borrower, not Musk - if Twitter can't pay then Musk has the option to put more of his money in, but the standard result is that Twitter files Chapter 11, the banks end up owning it, and Musk is not on the hook for any more money than what he has already put in. The crucial point is that if Twitter goes bust, the lenders lose $13 billion less whatever they can get for Twitter in a fire sale.

The interest rates on these loans are floating - calculated as SOFR (the rate at which US banks make secured overnight loans to each other, considered a risk-free rate, and which tracks the official Fed Funds rate set by the Federal Reserve very closely) plus a spread. Typically these deals are structured in layers with senior debt (which gets paid first in a bankruptcy) paying a lower spread than the subordinated debt. In the case of Twitter, there is $7 billion at SOFR+4.75%, 3 billion at SOFR+6.5% and 3 billion at SOFR+10%. These are high interest rates, reflecting the risky nature of the deal (even with a relatively low loan-to-value ratio for a leveraged buyout). SOFR+2% would be more usual for the senior paper in this kind of deal. The floating rate means that the value of the loans isn't particularly sensitive to interest rates - if they are worth less than par, it is because Twitter is less creditworthy than when the deal was done.

The business model of syndicated lending is that the banks in the syndicate are hoping to sell the loan to investors. But if something bad happens in the gap between the deal being agreed and the deal closing (in this case, it becoming clear that Musk had drastically overpaid for Twitter, and was going to make things worse by making a high-risk change to the business model) then they can't sell the loans for face value. In this case banks often hold onto the loans rather than selling at a loss.

It looks like the banks have finally been able to sell a big slice of the loans for 97 cents on the dollar. (Which could be enough to break even - the normal arrangement fee on these deals is 2%, but Musk might have paid 3%.) But the fact that they are still selling at a small discount suggests that Twitter is less creditworthy than it was at the time the purchase was announced. Whereas if Musk had successfully executed a turnround, Twitter would be more creditworthy than it was, and the debt would trade at a premium reflecting the high interest rate.

My compliments for your elaboration, and a sincerely deserved AAQC.

SOFR

(a replacement for LIBOR, if any readers remember that scandal from a zillion years ago and understand what LIBOR was from reading the news articles of the time)

Interest rates have increased by just a tad since then. For comparison, TLT (20 year US bonds) are down by more than 25% since Elon bought Twitter.

The extraordinary amount of time taken to offload the debt is the point.

Rates went up significantly since the buyout happened. Banks off loading at a very small discount isn’t indicative of anything.

You have to think in relative terms, the only reason they held it on their balance sheet in the first place is because it was originally too bad to offload.

In 2021, Twitter's revenue was $5.1 billion, with expenses of $5.3 billion.

As the resident Musk critic, I do have to sometimes chuckle at my own side and sigh in disappointment. Believe it or not, I've seen people say things like "Elon Musk's Twitter can barely break even!"

Both models work, that's why the US has both the Air Force AND the Marines.

Hahahahahahahahaha

Elon if you're reading this: the Air Force could be dissolved and folded into the Army and Navy and the result would be a net positive (golf courses everywhere hardest hit).

And if you're still listening to me, ask yourself if the Army really needs to be quite so large in a Pacific Pivot model...

There are only two branches of service, the Army and the Navy. The Corps is a cult and the Air Force is a corporation.

There's also the Space Force, but they're just nerds. They only exist so the other branches have someone whose lunch money they can steal. Might as well be Coast Guard.

"I offer neither pay, nor quarters, nor provisions; I offer hunger, thirst, forced marches, battles and death. Let him who loves his country in his heart, and not with his lips only, follow me."

Recruiting people who are doing it for the money or for cushy work conditions gets you exactly the civil service we have now.

Singapore attracts high quality talent to its government bureaucracy by offering salaries comparable to the private sector. They avoid the same institutional ennui as the States by demanding that government officials perform accordingly.

This is the difference between marine corps ads and army ads.

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