Clone wars: Meta’s Threads takes on Twitter

Hello and welcome to The Intelligence from The Economist. I'm your host, Jason Palmer. Every weekday, we provide a fresh perspective on the events shaping your world. A number of Arab states are deeply in debt, albeit for different reasons. We examine Egypt, Lebanon, and Tunisia as case studies in why going to the IMF for help isn't the obvious solution that it once was. And how about going on safari— in Brooklyn— to spot parakeets? We look at just one of America's thousands of invasive species, one that builds nests so large they've become a genuine fire hazard. But first— Elon Musk. You just never know what kind of crazy thing the owner of Twitter is going to say next, which I guess is the way he wants it. But this recent one in a tweet about the boss of Meta, Mark Zuckerberg: "I'm up for a cage match if he is, lol." Well, he is. The reply? 'Send me location.' Then Musk again, 'Vegas octagon.' Can you imagine it? In this corner, Mark Zuckerberg, 39 years old, 5 foot 7 inches tall, self-proclaimed wizard of jiu-jitsu. And in this corner, Elon Musk, 13 years older, 6 inches taller, and considerably heavier. His signature move, the walrus. He promises just to lie on top of his opponent and do nothing. The internet predictably ate it up. The fight may even happen at the Colosseum in Rome. What a time to be alive.

I'm not sure this physical fight is necessarily going to go ahead.

Tom Wainwright is The Economist's technology and media editor.

At the same time, these two billionaires are getting ready for a possibly more consequential fight because Meta has today launched a new app called Threads, which looks like a pretty direct rival to Twitter. Mark Zuckerberg said that 10 million people had signed up in just the first few hours.

I quite like this sort of fighting analogy, so let's stick with it. Let's start with the fighters in this one, Twitter and Threads. Tell me where Twitter stands in the fight.

Well, Elon Musk has been in charge of Twitter for about 8 months so far, and it's been a pretty difficult time. I mean, he started off sacking the bulk of the company's employees. He's got rid of about 80% of the ones that he inherited, and users have started to ebb away as well. There hasn't been the kind of exodus that some people were predicting, but one A company I spoke to, a group of forecasters, said that they reckon this year perhaps about 4% will drift away. The bigger worry really is advertisers. Ad revenues this year at Twitter are predicted to be more than a quarter down on where they were last year. The latest is that Elon Musk announced just the other day that there's a new paywall, which means that unless you're paying $8 a month for Twitter Blue, you're quite severely limited in the number of tweets that you can see. So all of this really has damaged the platform in the eyes of some users at least. And certainly it seems investors— there was one disclosure by a company that invests in Twitter a couple of months ago that estimated that the company has lost more than two-thirds of its value since Elon Musk agreed to buy it last year. So it's been through a pretty tough time.

And in thinking about Threads and the fighter there being Mark Zuckerberg, it's not as if he's an uncontroversial figure himself.

Well, yeah, I know. I mean, this is a guy who, if you just go back a year or two, Facebook, as his company was then known, was just synonymous with invasion of privacy, misinformation, general kind of online bile. And that was one reason why they changed its name from Facebook to Meta. The Facebook brand had become so tarnished. And investors weren't that happy with Mark Zuckerberg either. I mean, he poured billions of dollars into this thing, the metaverse, which he's talked a lot about, but still not clear quite what it is and how it's gonna make money. So he was this, very kind of polarizing figure. And I think he in many ways has been helped really by the way that Elon Musk has run Twitter in the past year. You know, it's no longer the case that Zuckerberg is hands down the most polarizing person in Silicon Valley. I think Musk would vie with him for that title. So I think Zuckerberg has had a kind of a good year really because some of his social media rivals have been even more controversial than Facebook.

But starting up Threads is more than just burnishing his credentials, polishing up his reputation.

Absolutely. Yeah. Meta probably sees an opportunity here because Twitter is being run in a fairly kind of erratic way. And Meta's chief product officer said in a comment the other day that he thought that people might be interested in a network that was just sanely run. So in other words, they see the bar as being pretty low, really, for being successful here. And so far, no one else has quite managed to do this. There's been talk about people on Twitter wanting to leave. And there have been a few other networks that people have alighted on. There was a bit of a craze for one called Mastodon, which managed to attract a couple of million members towards the end of last year. But people found that kind of fiddly to use and seem to have mostly abandoned it now. There's been a few others, you know, Truth Social run by Donald Trump. You know, achieving that sort of critical mass where you get the network effects that make social media work is really tough. And despite Twitter's problems, no one yet has managed to poach a large number of its users.

But the idea is that Meta can because it already has the network effects in effect.

I think that's right. It's got a few advantages. Meta has got a long track record of very successfully cloning its rivals. So you can go right back to Instagram Stories, which was a copy of Snapchat Stories. And more recently, Facebook and Instagram have launched this feature called Reels, which is a pretty obvious copy of TikTok. It's a vertical short video format. Again, it's been very successful. So if anybody is gonna successfully clone Twitter, I think Meta probably are the people to do it. Threads is also going to have a bit of a head start in achieving that kind of scale that a social network needs because it seems that anybody who already has an Instagram login is going to be able to use that to log into Threads and instantly be able to follow all the people on Threads who they already follow on Instagram. So that should help to get it off the ground. And perhaps most importantly, it's estimated that about 87% of people on Twitter already have an Instagram account. So in other words, the vast majority of Twitter users have a pretty frictionless way of switching to another app if for whatever reason they're fed up with Twitter.

But I guess the question is, what's in it for Meta, for Mr. Zuckerberg? It's become clear, certainly in the Elon Musk era of Twitter, that it is not exactly a hugely money-making business.

Yeah, I mean, I think that's the big question in a way. You know, Twitter's got about 350 million monthly users, which is a decent number, but compared with Meta, Meta's got 3.8 billion users overall across all its apps. And when you you look at the size of the business in revenue terms, the difference is even bigger. I think Twitter's annual revenue in the latest reported year was about 4 or 5% that of Meta. So it's really small fry as far as Zuckerberg is concerned. So people might wonder what he's doing here. And I think there's a couple of things that he could be up to. The really obvious one is just that it's a new advertising market. And I think there's reason to think that Meta can probably make a bit more money out of Threads users than Twitter has been able to make out of Twitter users. The other reason that I think is interesting and perhaps less obvious has to do with artificial intelligence. And you may have seen in recent weeks there's been a bit of controversy over online companies like Reddit and indeed Twitter kind of complaining that AI companies are scraping their text data in order to inform their so-called large language models. And one person I was speaking to said that they thought that one motive that Meta has in launching Threads is to collect its own big treasure trove of online text data, which could be very useful for large language models in future. And Meta could either license this data to another company that might want to use it, or it could use it for its, for its own purposes if it wants to get into this kind of AI.

So you've clearly got a ringside seat at this, this coming battle. Who do you pick? Who's your money on?

I don't know. I mean, I think Meta are in with a chance here. I mean, just speaking as a Twitter user, I have found that in recent months it's just become become a less useful product. The way in which you can pay now to get verified and thereby get your tweets more prominent means that the experience for users is that they don't any longer see the best and most relevant tweets. They see the tweets that people have paid to promote, and that just makes it less useful. I've also found that I have a choice now between the, the so-called For You feed, where I get sent stuff that Twitter recommends from people I don't follow and which quite often doesn't interest me, or I get the chronological feed, which, as someone based in the UK who wants to know what's going on in other time zones, means that I often just miss out on good stuff. So I'm finding Twitter much less useful. And I think I'm probably one of those people who is in the market for a more sanely run platform, as Meta has put it. So we'll have to wait and see whether Meta comes up with the goods, but I think the opportunity is there. Twitter is not being run in a very effective way at the moment. Meta has form in creating effective clones. So I think Zuckerberg really has everything to gain here.

Thanks very much for joining us, Tom.

Thank you.

The IMF likes to say it'll never walk away from the negotiating table. If a country needs a bailout, talks, the fund says, have no deadline. But some countries seem determined to put that promise to the test.

In Egypt now, the pound has halved in value against the dollar. Food prices up 50%. The IMF is warning Lebanon urgently needs reforms to prevent hyperinflation. A conditional agreement. Many Tunisians are struggling with the rising cost of living.

Tunisia, Lebanon, and Egypt, home to a third of the world's Arab population, each faces economic crisis, and each has sought loans from the IMF to give them financial breathing room and reassure investors. A year ago, the fund's head, Kristalina Georgieva, said the IMF was in advanced talks with Egypt and Tunisia.

I can confirm that with both countries we are in a very advanced stage of discussing a staff-level agreement, whether it would be within—

And that the Fund had reached a preliminary deal with Lebanon's authorities that just needed to be implemented.

We have a staff-level agreement.

We cannot move. Why? Because the prior actions we have identified that are for the benefit of the Lebanese Yet halfway through 2023, talks with all three countries have stalled.

They may need the IMF's cash, but they may also have good reason to balk at the IMF's terms.

Egypt, Lebanon, and Tunisia are struggling to make progress with the IMF.

Greg Carlstrom is The Economist's Middle East correspondent.

And the fact that they're struggling tells you a lot, both about the economic dysfunction in many oil-importing Arab states, but also about the bigger issues with IMF programs. Programs in this region.

So let's back up a bit. Why is it that those 3 countries are in talks with the IMF at all?

Debt and dollars would be the short answer to that. All 3 have very high levels of public debt. In Egypt, it's climbed from 80% of GDP to a projected 93% this year. In Tunisia, it's more than 80%. Lebanon defaulted on its debts 3 years ago. And they're also all struggling with shortages of hard currencies. You've seen foreign reserves fall in Egypt and Tunisia. The banking system in Lebanon is now insolvent because it has run out of dollars. And so that in the short term makes it difficult to stabilize their currencies. It makes it difficult to import necessities from abroad. In the long term, of course, it raises the risk of default. Egypt and Tunisia have both seen their credit ratings downgraded in recent months, and so they're seeking loans from the IMF to try and pad their foreign currency reserves and also reassure foreign investors that they can start putting money back into these countries.

But those negotiations with the IMF not going so easily, I gather?

No, they're not. Egypt has made the most progress. It finalized a $3 billion agreement with the fund in December. And what happens when you make a deal with the IMF is you promise to implement certain reforms. And then there are periodic reviews where the fund assesses if you've made progress. And if you have, it unlocks additional rounds of funding. Egypt's first review was meant to be completed in March. It still isn't finished. And one of the reasons why is the exchange rate. Egypt promised the IMF would move to a flexible exchange rate. Doesn't seem to have done that. The currency still looks overvalued. The Egyptian government says we're not going to devalue again unless we build up a reserve of hard currency that we have more money to use for subsidies and welfare payments to help blunt the impact of a devaluation. But investors understandably are reluctant to put hard currency into a country where the currency looks overvalued. Tunisia has been talking with the Fund for more than a year. It has yet to reach an agreement. And then Lebanon, more than a year ago, signed a preliminary agreement with the IMF. To finalize that, it would have to implement a few basic reforms, unifying the different exchange rates in the country, coming up with a plan to restructure its banking sector. It's made no progress on any of those things.

So it sounds as if in all three cases, there's a certain element of potential recipients being the hangup, not necessarily the IMF being the hangup.

That is certainly true. You have the army in Egypt, which controls a large part of the economy. Now, under the IMF agreement, the Egyptian government promised that it would start selling off military-owned and state-owned firms. But the army, not surprisingly, doesn't want to sell off its lucrative assets. In Tunisia, you can point to, for example, the trade unions, which have a lot of power and historically have rejected any attempt at cutting subsidies or trimming the enormous public sector wage bill, which they would have to do under an IMF agreement. And then in Lebanon, where you have this cabal of politicians and bankers who drove the country into financial crisis, they are resisting any attempt at reforming the financial sector. You have these powerful figures who are blocking reform in all three countries, but that also isn't the whole story.

Well, what's the rest of it?

Take Egypt as an example. President Sisi recently ruled out a devaluation unless Egypt is able to build up dollars and come up with a plan for protecting citizens from the consequences. He's not wrong to worry about that. The last big deal Egypt made with the IMF, which was in 2016, as part of that agreement, Egypt devalued the currency. The result for ordinary people was more than a year of very painful inflation, and it didn't fix the country's underlying problems. Egypt is looking for another bailout from the IMF. And so that points to the bigger issue with many of the fund's agreements in the Middle East, which is that they bring some short-term respite, but they don't seem to bring permanent improvements in Arab economies.

So it sounds in this region anyway that the IMF is not being very good at the thing it's set up to do. Do I have that right?

I think the problem is often that what it does is very narrowly focused. You look back at the agreement with Egypt, it was focused on things like cutting the deficit, putting its debt-to-GDP ratio on a more sustainable trajectory. And all of those things are important, but It sort of misses the bigger issue that Egypt got into this problem in the first place, in part because it has had a very, very sluggish economy for a long time. The non-oil private sector in Egypt has been anemic for the past 7 or 8 years. You look at all 3 of these economies, they are very reliant on tourism and remittances to bring in hard currency instead of exports. They pay enormous public sector wage bills, which doesn't leave a whole lot of money to spend on social services or productive investment. And growth in all three countries has been sluggish for a number of years. And so the IMF comes in and it does a good job on monetary policy and budgetary policy, but its programs tend to do very little in this region to address the broader economic woes of these countries.

So the IMF isn't trying to, cannot fix those problems. Those countries then need to solve those problems themselves.

They do. And unfortunately, I think all three of these countries would need new political leadership. To solve those problems. If you look at Egypt, it's been ruled for the past decade now by President Sisi, who helped drive the country into this mess by spending tens of billions of dollars of scarce currency on white elephant megaprojects. He is scheduled to face reelection next year. It is unlikely to be a fair election. Same goes for Tunisia. And Lebanon hasn't had a president since October. It did have a parliamentary election last year that brought back many of the same sectarian figures who have ruled the country since the end of its civil war. So political change seems quite unlikely.

And meanwhile, the hobbled economies are going to really hit the citizens of these countries hard.

They do. You know, we've all been talking about inflation for the past couple of years, but Lebanon has had almost 3 consecutive years now where inflation has been above 100%. People who were once in the middle class have now been pushed down into abject poverty. In Egypt, the official inflation figures are running in the mid-30s with food inflation above 50%. In a country where one-third of the population was already living below a quite anemic poverty line, they have now been pushed even further into desperation. And this has been going on for years. So people don't have savings to try and deal with this. People are really, really struggling to get by. Across the region.

Thanks for taking us through all of that, Greg. Thank you.

What you're hearing there is the raucous calls of monk parakeets.

Rosemary Ward writes about America's Northeast for The Economist.

They're mid-sized, bright green with blue wingtips. They have a grayish breast and they have this lovely little cheeky face. And unusually for birds in the parrot family, they're amazing builders. They can build nests on anything. As long as they have a gap about 6mm long, they can shove a twig in, and the rest of the nest can hang off of it.

The rest of the nest, I mean, how big a nest are we talking about?

They can be enormous, up to 3 meters across, a couple hundred pounds in weight, with many different birds sharing the property. A bit like an apartment building. And the nests help them stay warm for roosting or raising their young, and it's a highly successful strategy. But more so when they choose to build the nest around some cozy, lovely, warm electrical equipment.

That doesn't sound like a wise move, building your apartment building around some electrical equipment.

No, for obvious reasons, this is a problem. Their building habits can cause power cuts and can even cause fires. And since May 2021, they have knocked out power for 41,000 customers on Long Island in about 50 separate incidents. And they shouldn't even be in America.

The birds shouldn't be in America.

Why?

Where are they from?

Well, the monk parakeets originate in Argentina and southern Brazil, where they're pests to farmers. But these cute and sociable birds also make really great pets, so they've been exported all over the world to be kept in aviaries and cages as chatty companions. And that's when their tenacity kicks in. Spain, Japan, South Korea, all have populations of these birds, most presumably escaped from their lives as pets. And here in America, they breed in the wild in more than 20 states, including cold spots like Chicago. And their ability to build large, warm communal nests undoubtedly helps them survive. But they also get some help from humans. It's believed that many parakeets, especially in the colder areas, rely on backyard bird feeders to survive in city winters.

So they're practically endemic, they're fairly cute, people like them except for the part that they cause power outages and maybe fires. What's to be done about that part?

Well, these power cuts and fires are costing Long Islanders and people all over America who experience these power cuts a lot. And the monks are far from alone in causing damage. Invasive species are estimated to cost $120 billion a year across America. But this is a problem that California in particular has sought to prevent. They've made it illegal to own a monk parakeet in the state. They also don't want ferrets, hedgehogs, gerbils. They're all banned. But New Yorkers most love their parakeets.

But why?

Why these parakeets in particular? Why are they so loved?

Well, they're cute. And being cute is an excellent survival strategy in the Big Apple. And indeed, since the advent of humanity. Parrots attract a lot more favor than, say, the Burmese pythons in Florida. And parakeet safari tours have even popped up in Brooklyn, where birdwatchers trek to the likes of Greenwood Cemetery to see the nests built on top of Gothic Revival entryway. And a lawmaker in New York even introduced a bill to give Monk Parakeets protected status. So it seems that despite their fire-starting potential, the Monk Parakeets are here to stay.

Parakeet safari tours in Brooklyn is, like, one of the most Brooklyn things I've heard this week.

Oh my God, right?

Rosemary, thanks for winging your way through that.

Thanks, Jason.

That's all for this episode of The Intelligence. If you're not a subscriber to The Economist, you should check out the deal we've got at the moment, a free 30-day digital subscription. Just go to economist.com/intelligenceoffer or click the link in the show notes. We'll see you back here tomorrow.

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