Who's (Actually) Winning in the Elon Musk Saga?

I think what Twitter did is Twitter's like, let's raise the stakes by sending it to court. The cards are getting a little closer in the game of chicken.

I think they handed him a lot of cards. I think it's a giant mistake. How much more successful would you be.

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Hey, everybody. We are back with another episode of Business Lunch with your host, Roland Frazier. That's me. And the good looking guy to the right of me on my screen, but maybe the left on yours, who knows? Or maybe you don't have a screen at all. Is Ryan Dice. Brian. How you doing today?

I'm doing great and I'm excited because we are doing a regular segment that we like to do pretty much just so that we can rank high in the algorithms. It's one of our Elon Musk segments. And this is good because it is an entrepreneurial show, after all. Show for entrepreneurs. And so anytime you talk about Elon, people listen. So welcome to all the new listeners who are only here because we're talking about Elon.

And Elon, I'm sure is listening too, because, I mean, why wouldn't he, right? I mean, he always does.

He always does. Yeah.

So it's kind of fun because right now there is a meme of himself that he posted, which is the best ever meme. I want to post memes about myself. I actually really do. So we've got it up here and are going to cut it in. I think it's on the video. Through the magic of the people that actually make this show go, which would be Hector and Ryan, my son Ryan. Ryan And I are basically just eye candy, which I think is obvious from looking at us.

So yeah, if you watch this on YouTube, you know that here, here, here.

Is the meme though. It's the first frame is they said I couldn't buy Twitter with a smiley Elon. Then a more laughy Elon saying then they wouldn't disclose bot info. And then a more laughing Elon saying, now they want to force me to buy Twitter in court. And then the rolling on the floor laughing Elon, which is now they have to disclose the bot info in court. So I think that's kind of interesting. Ryan, what thoughts do you have about A, this self meming, B, what he has to say here, and C, the content of what's. What's going on? What do you think?

So, just to set it up for those who have been living under a rock. So Elon Musk was going to buy Twitter, right? And the board came out and was like, no, we're not going to let you buy Twitter. And then they were like, okay, just kidding, you can, because you just already went and bought a bunch of it. And then Elon, in kind of doing the due diligence is like, hey, seems like a lot of your users are actually fake bots. Give me that information. Twitter basically said, nuh, both, nuh, they're not really bots, and nuh, we're not going to give you the details. Then Elon's like, fine, if you're not giving the details, I want out of the deal. And now Twitter's like, you have to do the deal because you signed this thing. So they're going to go to court. And in court, Elon's going to get the info that he wanted all along because now it's going to be. And I guess if it's in court, I don't know if it becomes a matter of public record or how that works. Maybe they keep it sealed, but the.

Bot is coming process, so you're allowed to subpoena all the things that you want. And they, you know, it's a material issue and here's why. The other thing that's important to know in the context of this is that Elon said, I don't need to do diligence, due diligence. I will rely on publicly available information. And in one of the bits of publicly available information, as I understand that was out there, they said that no more than I think it was, 5% of the accounts on Twitter were bots. And so he's like, okay, I take you at Your word. And I am entering into this agreement based on that. Now, at the time, I think the company was valued at, was it 44 billion or 54 billion? I don't remember exactly, but here's the deal, is that the market has changed since this happened. And so Twitter's trading right now at significantly less billions. It was 13 billion last time I looked less than what Elon offered. And so it would make sense he had a billion dollar breakup fee that he agreed to as well. So we got a couple of options that Elon's looking at. He's like, I can go through with my deal and pay $13 billion more than if I just went and bought it now, or I can not do that and pay a billion dollar breakup fee, which is less than the 13 billion I would lose if I went through with the deal as originally planned. Or I can just not buy the company and not do the breakup fee. And I guess there's a fourth option which would be I can re tender and say, tell you what, I'll give you this much for it. So that's what he's looking at. So I think what he's doing is smart no matter what, because he's got a chance of not paying anything. He does want to find out what's going on on the bot side. It's going to be brutal for Twitter because that's clearly information the public's entitled to. And the board at Twitter, which is notoriously slow moving and underperforming, is going to have to like snap to and go, holy crap, now we actually have to answer these questions. And they're in a fight with a guy who has unlimited capital. Like, you don't ever get in a fight with a government. Right? You definitely don't get in a fight with a guy that has more cash.

Than the government and he just doesn't care. Also, I mean, you're talking about somebody who, which I respect. He's a bit like, we're kind of the same way. Our thing is like, if you're going to screw with me, I will just drop the grenade at both of our feet. I know I'm going to get blown up, but you're going to get blown up too. So I'm okay with it.

I will totally blow myself up before I will take an ultimate.

Absolutely, yeah, completely. Right. And so you're dealing with him, who's like way more resources and arguably just as insane, if not way more insane. And which, I mean, again, Elon, if you're listening, and we know you Are we mean that as a compliment?

So you're crazy. Matches are crazy, Elon.

So, yeah, you're all kind of crazy. Welcome. Welcome to the party.

So it's kind of interesting and I guess that's what we'll ultimately get to see. But they were. Yeah, I'm kind of surprised that they would take him to court because it's like, we're going to force you to do this deal. But he has so many outs and if there's anything in the public record that you know that they've said that was wrong. As I understand the agreement to be written, he gets to basically bow out anyway. And even if he just said, I don't want to do the deal, there's a billion dollar breakup fee. So I mean, it seems like a giant and predictable waste of money for a board that's not really done a great job anyway. And if nothing else, for him to take a billion dollar hit as opposed to a 13 billion would make a whole lot of stuff sense. So it'll be kind of fun to see what happens with that. What I wonder too is like, as a marketer, Ryan, what do you think? Is this just a crazy thing that he's posting just because he's crazy, or is he posting it with some sort of intent to accomplish something? What do you think? What's the meme itself? Yeah, yeah.

I mean, so, I mean, the meme itself is. He's just. He's owning the message. Because there's a couple of ways, right? There's a couple of narratives at play here. The narrative that Elon is putting forth is I sought to buy this company. Company at a goodwill. I came in goodwill, I wanted to buy it. I was willing to pay, still am, a fair price, even though it's gone down. I just want to make sure that. Yeah, I just want to make sure that what I'm buying is what it is. And this 5% number doesn't seem right to me as one of the power to users on the platform. So just prove it to me that it isn't. And the fact that they're withholding that he's saying that's not right. And so that's his positioning. And so he wants to own that narrative, which this meme and what any marketing does, great marketing, is going to define a narrative. It's going to have. It's going to clearly define a point of view and then it's going to build around it. Different proof cases, proof points, like different. You know, it's basically going to fire everything it has at that singular point of view. So his point of view is, I'm the good guy. I'm the Robin Hood. I'm going to take this, I'm going to make it, you know, free and open platform. That's what I'm looking to do. Now, here's the opposing narrative. The opposing narrative is you got a guy who is kind of notorious for going out there and, you know, pumping up, whether it's like dogecoin or, you know, other things like pumping stuff up. And we don't know whether or not he sold or if he's just fooling with it, but kind of going out there and playing with people, right? And maybe playing with people to make money off of it. Maybe playing and screwing around with people just to have fun. Like just having fun at some other people's expense who you don't like. And so he went into this the entire time saying, I'm going to make a bid on Twitter. It's going to create a whole big stink. I'm going to bid it at a point where they got no choice from a fiduciary responsibility perspective. But at the end of the day, I know I can back out of this thing. Maybe I buy it for a song, maybe I don't. Either way, it's going to be fun. That's the other narrative. So what he's doing with this meme, which is clever because it's a meme of him anyway, he's. He's piggybacking on one of his own memes to reinforce a narrative with his tribe. And of course his tribe is going to get it because they already use this meme. Now, who winds up being right? I don't know. I believe somebody's playing chess and somebody's playing checkers. It's hard for me to know enough about what's going on, but I just. Boys, seeing what I see, have seen from the folks at the leadership people at Twitter, it's hard for me to believe that they're the ones playing chess.

But.

But it could also be two people playing chicken and nobody's playing chess or checkers, and we're both about to run into each other. That's the third option. But that's what he's doing from a marketing perspective. He's defining the point of view. He's owning the narrative.

So if you're Twitter's bored and you're super sharp, how would you respond to this? What would you do? How would you try to take control and wrest that back away from him or can.

Well, I don't think you got a. I don't think you got a shot at competing on. Ironically enough, Twitter doesn't have a shot at competing with Elon on their own platform because Elon is way more famous on Twitter than anybody at Twitter is, including the Twitter account itself. So there is no taking back the narrative from somebody who, you know, you mentioned never go to battle with the government. There's also the, you know, never pick a fight with somebody who buys ink by the barrel. Right? In other words, don't screw with media. In this case, though, the media is the individual, not the platform. Twitter is not the news agency. Twitter's a printing press, okay? And so if you're in media, you're a business person, you go pick on printing press manufacturers all you want. That's what Twitter is in this. That's their problem, right? They own the platform, they don't monetize it particularly effectively, but they don't have a way to control the people who are on it. And if they do, here's the crazy thing. So what do you do if you're Twitter? I mean, he's got him, right? He's got them dead to rights. Because what do you do if you're Twitter? You shut them down, you shut them off the platform. If you do that, you're playing into the narrative he has established, which is that the problem with Twitter is they push people off. I want to fix this. And so if they push them off, then that's it. Like they're going to blow up their own stock price. So, no, I think Twitter's pretty much hosed. I think the deal probably doesn't happen. Oh, yeah, I think the deal probably doesn't happen because Elon, I don't think at the end of the day necessarily wants it to happen. If it does, it'll be because of what you said. He tenders a new offering at the low stock price. But I think if you're Twitter's board at that point, you could say, you know, it makes a deal at that premium price. It doesn't make. It doesn't make. You know, it's not a good deal for us at this one, so we're just going to pass. I think. I think what Twitter did is Twitter's like, let's raise the stakes by sending it to court, which is the cars are getting a little closer in the game of chicken. I don't know, though, if they didn't hand more. Pass more cards across the table to him.

I think they handed Him a lot of cards. I think it's a giant mistake.

I think it was the only. Probably the only the hand they had to play. And maybe it buys them some time and they come up with some ideas. Maybe they feel like there's something that they're going to be able to get from the discovery process that Elon doesn't want out. But you got a dude that he doesn't care. It just came out of the news that he basically has twins with like one of his executive assistants or something like that and nobody cares. That's the thing. It's like fine. It's like, oh, oh, you're telling me like the rock and roll person, you know, threw a lamp out the hotel window. They're supposed to do that.

That's shocking. That's their job, right?

Exactly.

Oh, well, it'll be fun to see.

It's gonna be fun to watch. I will tell you this, if you're not Elon, you don't get to make memes of yourself though. I think there's only so many people that are allowed to quote themselves and even those people look like sociopaths. I think, think if you're not self deprecating. I would not advise a self meme as a marketing strategy. That's just me. But give it a shot, Roland.

I like it. I like it. All right, well, we're going to take a little break here for our sponsor to share some words with you guys and then we will be right back to talk more about Elon in the form of Tesla.

Hey, business.

Such listeners. We're going to get right back to the show, but Roland wanted me to invite you to a brand new training that he's doing on acquiring businesses with no money out of pocket. It's something that he's talked quite a bit about on the show, but he's doing a free training where he's going to walk through the entire process. So if you want to get access to that, go to businesslunchpodcast.com epic that's businesslunchpodcast.com epic and you can get signed up.

Okay, and we're back. What is there is an interesting thing. It looks like. So it's trading right now at $703. Does it tell us the market cap cap in there?

Market cap is 728 billion.

728 billion. So $700. It's trading basically at a. There must be a billion shares. Right? Here's the thing that I wanted to read was there was a recent upgrade in the share Price So it's basically should you buy Tesla? UBS upgraded the Elon Musk led company to buy from to buy from neutral. So to a buy, hey, you should buy it from neutral. We don't know if you should or not. Citing the electronic the electric car makers operational strength and they said, quote, we expect Tesla's vertical integration in semiconductors, software and battery to result in superior absolute growth and profitability in the years ahead. I thought that was kind of interesting. It said the firm reiterated its eleven hundred dollars per share price target on Tesla, implying an upside of about 51.6% from Wednesday's close when I got this. So trading at $700 now they say it's going to go to 1100. What do you guys think? Let us know in the comments and also feel free to call in and we have a place you can do that which Ryan knows and I don't that you can tell us what you think about this. But so Ryan, number one, are you invested in Tesla stock?

I am not. Individually, I might be invested through some. If I've got money with a hedge fund or something like that, perhaps they've got some. But from a disclosure perspective it would not be material enough for anything I say to matter. And I just want to be clear, anything I say, I have no idea generally what I'm talking about.

So just that is a universal thing that we aspire to here at business lunch. So that said, yes, I also do not own any Tesla shares right now. So it's good for you guys to know we're just kind of chatting about this but $700 a share and they say it's going to go to 1100. And what I thought was cool is they said that Tesla, I don't know if that matters. Did we disclose that my son owns a Tesla? I don't actually own a Tesla and that was the first one too. But the interesting thing to me is that the reason, and this goes to something that in our EPIC programs we talk about and in scalable, when we're talking about what are some of the ways that you can grow a company. One of the ways that you can grow a company is to either launch or acquire up and down the supply chain. So when they talk about vertical integration, they're talking about that in terms of batteries and semiconductors and even distribution for Tesla, they own all of that supply chain. And so if batteries are hard to get and they're manufacturing them, then that's going to be a good thing for them. Now I do know that I've recently read that Tesla's having a hard time acquiring the components to make the batteries that are the components of their Tesla. So, you know, ultimately it's a little Russian nesting doll game of, of how far up and down the supply and distribution chain you want to go. But I think it's interesting to think about that, that, that, that provides them with a big advantage in simply having access right now because supply chain is so, so fragile and also in the ability to have more margin because they own, rather than going to a battery company to buy, they've got their own battery manufacturing company. And so that margin becomes part of the profit and the profitability of Tesla. So I just kind of wanted to explore that a little bit and say, what do you guys think of it, number one? Brian, what do you think of that in terms of that providing a significant advantage to them over, you know, other manufacturers that are out there?

Well, I think, I think it's worth breaking down. Why vertical integration got uncool, Right. Because it's funny, it used to be, I mean, think about it. If you were basically a farmer, right, in an agrarian society, you were about as vertically integrated as you got. Like, you planted the seeds, it grew up, you did everything, you know, until the point where you took it to market. But even some of those, there would be a farmer's market, you'd sell direct, right? Exactly. So we used to, it used to all just be vertically integrated. And the idea of outsourcing, especially outsourcing, major components of your logistics, really is a phenomenon that is only about 20 or 30 years old in business. And it got very popular as internationalization occurred, as treaties were done, whether it was NAFTA or just generally the US and the west, you know, playing nicer with, with China and other parts of the world that have lower, lower labor costs. And so there's been this trend, you know, toward, I guess, away from vertical integration and just, you know, like, you know, Apple, they don't make phones, right. They're all done by Foxconn, stuff like that.

So. But they are making their own chips now. Right, Right.

So I think what we're seeing now is a return to vertical integration because you can make a really good spreadsheet argument for having a whole lot of suppliers that do every little piece. And essentially you just own your brand. And it's always going to work on a spreadsheet. And it's almost. And it's, and it's frequently not going to work in real life, and it's almost never going to work when we have the macro climate that we have right now with wars, with pandemics stuff.

Getting shut down, that whole nationalistic like way that things are going. I mean, you figure we've lost a lot of programming capability because of the challenges and the displacement of so many people during the Russia and Ukraine war. Slash military operation, special military operation. And then you've got Russia, which is now isolated by law from pretty much everything for us. And so those markets are disappearing. You've got China, which seems to be what the United States government perceives as the biggest threat of all. Bigger than Russia, certainly. And this dependence that we have on them, which we saw during COVID with the lack of ability to get things. And then we found out that we've got I don't know how many billions of dollars of cars just sitting there and other things that don't have microchips. Because the microchip processing is primarily happening. Creation is happening in Taiwan. It's like, it seems like where earth.

Mining is primarily happening in places that we don't own or control. And that's what makes the chips. Yeah, it's a mess.

It seems like we're going towards a de globalization of the world economies now. And maybe NATO will continue. So I guess within diversification in NATO. But a lot of those countries are pretty expensive to make things in. So it's kind of interesting, I think, in terms of a necessity to vertically integrate, to hedge now against this deglobalization and the challenges with supply chain and everything, and to vertically integrate domestically. What do you think about that?

I think, I mean, look, we can't all be farmers, but also if we literally outsource every aspect and we only just own a logo, we've seen that that doesn't work great either. So as is so often the case, the answer is going to be somewhere in the middle. And so I think a good thing to ask is like, so if I'm an entrepreneur doing a few million dollars a year in a business and I want to go to 10, you know, what does this mean to me? Or If I'm at 10 and I want to go to 100, right. I would just encourage. And you and I had this conversation, actually had this conversation with one of our founders board members right before we hopped on, what do we do internally? What do we outsource? And I think it's important to know what are you good at? So one of the things we teach and talk about is knowing what your strategic anchors are. So these are your true competitive advantage. Right? The things that you truly do better, like you need to know what those are. You also need to understand what is your value creating process. Like how do you go about acquiring and fulfilling a customer? Right. What all goes into that? If you haven't visualized that, if you haven't mapped that, you need to do that and then you need to say, okay, of these things, which stages are critical? If it's critical, you need to own it. And if you don't own it today, if one of those critical stages is not one of your strategic anchors, meaning it's not something that you're particularly good at, you need to know that's a risk and that's where an acquisition can help. Because frankly, learning how to turn a weakness into a strength, you're probably not going to read a book and figure that out. Like teaching training can help. But I think when you're talking, Roland, you know, we're working with supporting, enabling, you know, our EPIC board members serving. There's a word. God dang, that's. Yeah, when we're serving our EPIC board members or our portfolio companies anytime, we can identify, okay, this is a critical aspect of the value creation process and yet you suck at it. What the world has been telling us for the past couple of decades is no problem, just have somebody else do it. That's terrifying. I think the better response is, let's get vertically integrated here. We're probably not going to learn it fast enough. Can we acquire it? So as opposed to outsourcing, can we acquire the company that we would look to outsource to? And if we can't acquire number one, what about number two or three? But I do think vertical integration with respect to the critical value creation stages is essential. But you got to know what those critical stages are and that's going to be different for every business.

Yeah, I think so. And I think that's the lesson to take away is that identifying what are the things that you need to own that are critical to your value prop and seeing what you can do to set about owning them because of the uncertainty of present times, particularly if you're depending on any external source. And there's an article that my son just put up that says Russia's alternative to McDonald's is facing a french fry shortage. So it's like, if you make French fries and those are important to you, then you better own as much of that as you possibly can. Because these days, and I think going forward in the recession, we're going to see a whole lot of companies that don't make it through that. It's important for you to own that. And even if not, the whole theory of vertical integration is that you capture more of margin. And so one of the things that businesses like to solve for is how do I get more profits? Well, if you want more profits, get a better margin. How can I get a margin that's better? Acquire your distribution and manufacturing chain and supply chain. And one of the things also I just want to point out, and I love that you referred to outsourcing because that means that in the supply chain of you getting your customer includes, it's not just for manufacturers. So a lot of people turn off to vertical integration because they're like, well, I don't make anything. It's like, well, but what if you're a digital marketing agency? If you're a digital marketing agency and you outsource your content creation or your Google Ad buying expertise or any of those kinds of things, or if you're a company that outsources to a digital marketing agency, would it make sense for you to own that so that you have number one priority claim on what they're doing so that they won't allocate resources someplace else to more profitable endeavors? And you ultimately lose either the focus of them, which is the worst, most insidious, and they start being just B level or C level to you, or you lose access to them altogether. Whereas on the other hand, if you acquire them, then you control 100% access, you've got exclusivity and exclusivity meaning you can exclude your competitors and other people that might be competing with you that might want to access them. And then on the other side of that, down to the distribution chain, it's not just if you've got wholesalers and retailers. If you've got affiliates that sell any of your stuff and you're paying a 20, 30, 40, 50, 60% commission, as many people do, then if you acquire them, you instantly get 100% of that margin back that you're giving away right now. And that can be game changing for your company.

So can I tell you a story about that really quick? So Kinko's. Do you remember Kinkos? Yeah, the print, it's now Obviously it was FedEx, it became FedEx office. Right. The reason that FedEx bought Kinko's is because what they were paying to Kinko's in essentially affiliate, that's not what they called it, but what they were paying in commissions for Kinko's to run this stuff, they're like, we could literally buy the entire company for what we're paying them. And I forget the amount of time, but it was absurd how quickly that paid off. And you're exactly right. They simply bought. They simply acquired a distribution partner. And I think we, we all forget this. And certainly the trend in Wall street companies has been, no, outsource everything, get rid of this. Like, and it's almost said in a way of focus on just the one thing that you do best. Which, it's one of those things that sounds right, but it sounds logical. But it's a logical lie. Because if you only focus on the thing that you, quote, unquote, do best. But there is a critical component of you doing your best work that is owned exclusively by somebody else, and they can turn that off in any minute.

Yeah.

Then, oh my God, yeah, you can't focus on what you do best because a snap of a finger and you're out of business. And so.

Or as they say in Russian, you can't make French fries without taters. That's how they say it.

Do they say that?

They do, yeah.

Well, that's a great. That's a great place to wrap. That's a great place to wrap. So if you own. Yeah, so if you definitely. If you own a. Yeah, Russia, McDonald's, maybe try to acquire some potato farms, I guess. I don't know. But yeah, no, I think it's great advice. Great advice. Thanks.

Well, we always have fun sharing with you guys and we appreciate you coming into our lunchtime conversations to participate with us. If you would like to never miss any of these conversations, then we would love for you to subscribe to the podcast. And we'd also really appreciate it, if you enjoy it, to give us a five star review. So with that, we will wish you happy. Tatering.

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