I would like you to imagine a company three years ago that had $3.5 million of revenue. Modest, right? The company had an operating profit of $366,000, a decent 10% operating margin. The next year, the company’s revenues increased to $3.7 million, but only had an operating profit of a measly $26,000. Things going in the right direction? Not as we’d expect.
Last year, the company’s revenues leaped they jumped to $5.1 million, over a 45% rise in revenues. Happy days! Well…the company lost $500,000. I know. I know. The revenues increased by $1.4 million, and they lost $2.0 million for that growth. How can it happen? The answer is pretty easy when you are hiring aggressively.
Here is the question I want to ask you. Would you be willing to buy this company? A company that a couple years ago was earning over 10% and now was losing ten cents on every dollar? My magic mirror shows me that not many of you would pull out your checkbook.
I know one person who was ready to pull out his checkbook. Oh, before I tell you who made the purchase, I should inform you of an error I just made. The revenue and loss figures were off by a factor of a thousand. Sorry about that. Last year’s revenues were $5.1 billion. And the loss was $500 million! Okay who’s ready to pull out their checkbook now? Elon Musk that who. But he didn’t buy Twitter for the reasons you may think?
Welcome to Swimming in the Flood; a podcast where we develop the resilient leader’s mindset by navigating difficult currents in business. My name is Trent Theroux.
Last year, Elon Musk bought Twitter for the staggering amount of $44 billion dollars. Remember, this was a company that lost $500 million in 2021 and was on its way to losing even more in 2022. Musk’s plan was to take Twitter from a publicly traded company to privately held, which means that his profitability going forward would be opaque. Some items, though, may be visible.
Last week, Twitter was set to lay off at least 200 employees. The company would now have a work force under 2,000. This is down from 7,500 from when Musk purchased in October. Twitter has laid off over 5,500 people in five months. Most of these layoffs are to curb the sprawl of employees engaged in projects not central to Twitter’s mission. On day one of ownership, Musk fired the entire executive team. Top to bottom of the executive team. The team that is responsible for executing the vision of the company! But it wasn’t Musk’s vision. That’s why I think he purchased the company. This wasn’t a toy to purchase because he had extra allowance money in his piggy bank. No, Elon Musk had a different plan…well, he always has a different plan doesn’t he?
Musk said the acquisition of Twitter was part of his “grander vision” of creating a super app in Western markets that could be started from scratch, but I think Twitter would accelerate that by three to five years.”
In a separate interview, Musk said, “The reason I acquired Twitter is because of its importance to the future of civilization. We need a digital town square where a wide range of beliefs can be debated in a healthy manner without resorting to violence. There is currently a great danger that social media will splinter into far-right and far-left wing echo chambers that generate more hate and divide in our society.”
What amazes me the most about this transactions and all of Elon’s other ventures like Tesla, PayPal, Space X, Starlink and others is that Elon is absolutely clear of purpose when we invests in a company. He is standing at the top of a cliff, looking over the edge, with his $44 billion in his wallet, ready to jump. What Elon Musk needs…what Elon Musk really needs on that edge is Mikaela Shiffrin on his side. 85-time World Cup skiing winner Mikaela Shiffrin.
I am now going to give you my unscientific, non-peer reviewed, resilient leader theory on Clear purpose. Are you ready? Got your pencils out? Here’s it is. Pick Your Line. You heard it. Pick Your Line.
Mikaela Shiffrin is the most dominant skier in the world, perhaps ever. Still in her 20s she eclipsed the number of World Cup titles ever won by a woman and she has a shot of passing the men’s mark set by Ingemar Stenmark this year. When you are standing on the top of a cliff, Mikaela is the person you want next to you.
Mikaela credits her success to her sharp level of focus and discipline during her training. Part of that focus is her ability to visualize exactly how she is going to ski down the slope. In advance of her competitions she will pick the line that she is going to ski. She will identify the path she wants to follow then seeks to execute the plan. Sounds a little like Elon, right?
Create the vision for where you want to go and then work on the execution to achieve the vision. Elon’s vision of Twitter is not to be a sprawling enterprise. It is to be a focused town square that provides unfettered access to, and a save environment for healthy discourse. Time will tell whether that vision can be achieved or if Musk will crash into the slalom gates.
I had the opportunity to pick my line last week at Mont Tremblant, in Quebec. Tremblant is a huge mountain with over 100 trails. Each trail has a marking based on its difficulty. Green circle is easiest in turns and slope. Blue square is intermediate. Black diamond is for advance. And Double Diamond is for lunatics. And, that’s where I stood on my final run of the day. At the top of the cliff staring straight down to my death.
I should also explain that a blue on one mountain is very different than another. The blue square at Tremblant will be different than the blue square at my local ski hill, Yagoog. A blue square there may have all the difficulty of a summer slip n’ slide. At Tremblant, difficulty factor is cranked up to 11.
After my second to last run, I should have learned my lesson. I was skiing with two 20-somethings from Canada (so you know they can ski). My bravado got the best of me and I “challenged” (can you see my air quotes?) challenged them to ski a double diamond. We took a single diamond run to this fork in the path. To the left, a comfortable single diamond. To the right, a double diamond that was through a path of trees. Yes, I just challenged these guys to ski through trees. The altitude must have gotten in the way of my thinking. Isn’t this exactly how Sonny Bono died? Yes. Isn’t this exactly how Michael Kennedy died? Yes. Is this how Trent is going to die? Most likely.
My skiing prowess extends to maybe twenty days of skiing in my lifetime. I know…I know…perfectly trained for this run. In brief, I needed a Tesla’s auto driving system to keep me from crashing. I fell five times…well, only four because I skied into a tree and held so that doesn’t really count. The only thing that hurt more than my ribs after the run was the 20-something’s stomachs from laughing so hard. I was dejected and embarrassed.
Le broyeur d’os. That’s the French name of the run. It translates to the bone crusher is on the back side of the mountain. I would need to take the lift back to the top and ski down the front to finish my day. On the ride up, I thought that the softest green circle would be the perfect way to end my day. Slow, measured and full of 6-year old’s learning because that’s where they go. A slight anger built in me thinking about this tact. I was scared. I was scared to fall and hurt myself…again.
I got off the lift and watched the tiny children ski down the green in a follow the leader pattern. No, I needed to overcome this fear. I went the other direction and found this double diamond called McCullough, which is Scottish for You’re a Dumb Ass. I stood on the top of this run and I was straight down. It felt like standing on the observation deck of Rockefeller Center without the protection glass. I was trying to channel my inner Mikaela. Mikaela, help me get down without requiring a stretcher at the end.
Immediately after my prayer, an experienced skier went by me. I watched her. She wasn’t the best skier I saw that day, but good. I watched her path. Her line. That’s the line I want. I picked my line. I set my vision for how I would get down the mountain in one piece with some dignity. The starting bell went off in my head and I pushed off the edge.
I was following my line. I was slow and I was methodical. I may have topped out at around a brisk 12mph. (In Canada its 20kph which sounds better) I was frightened but exhilarated at the same time. I stayed on the line I picked through the top section. The middle section was a diamond that I was on earlier in the day. I remembered the path I took and one spot I needed to avoid. My speed quickened. My turns were sharper. The diamond bled into a blue to finish. At this point, I was skiing nearly straight downhill. I was flying. The end was near. I made one last big turn and stopped at the bottom. I executed my vision. I picked my line and survived the run without any bodily damage.
Finishing alongside me was another pack of 6-year old’s making their way back to the chairlift. They are adorable in their little snowsuits. Wham! One of those little twerps plowed right into me and knocked me ass over teakettle. Man, how does Elon deal with the little people?
Folks, thank you for listening to Swimming in the Flood. Resilient leaders face challenging currents, and it is tough navigating, but with one tack or another we can get there together.