Thread by @TheWorthyHouse

1. Today I follow up to this November tweet, and show @elonmusk has won. I claimed that his firings, by themselves, moved Twitter from negative profit to the profit margin of Apple or Google (approaching 30%). I was 100% correct, but I underestimated the new profit margin.

https://twitter.com/TheWorthyHouse/status/1594812682636754946

2. Last week, Musk said Twitter now has 2,300 employees. This means my estimate that Musk had fired 70% of Twitter’s employees was nearly exactly on-target (I had said Twitter had, after Musk’s cuts, 2,250 employees).

3. However, I appear to have underestimated the cost savings. I had estimated that 58% of Twitter’s expenses were personnel costs. A 41% drop would be saving $2.4 billion. Given that net loss was $1.1 billion, I said “new annualized projected profit [will be] $1.3 billion.”

4. (As before, I am using annualized percentages based on Twitter’s most recent quarterly filings, for the period ending 6/30/22. These documents are freely available at the SEC’s website.)

5. These numbers imply that each worthless eater fired by Musk had cost the company more than $400K (plus major non-cash costs and drag, of course, which are irrelevant to today’s analysis, but not to the company’s future). Some said salaries could not be that high. False.

6. Christopher Hohn’s recent letter to Sundar Pichai says the average salary at Alphabet is “much higher” than $300K, and that’s just salary, not including benefits, rent, and myriad other associated costs. No way Alphabet pays more than Twitter.

7. Thus, more likely each Twitter employee fired saved $500K (or more), meaning total savings were more like $2.7 billion (or more). That means the real “new annualized projected profit,” ignoring revenue, could be as much as $2 billion. Hard to say exactly, but very high.

8. Let’s turn to revenue (ignoring the political questions around it).

9. Allegedly, “A top ad executive said during a staff meeting that Twitter’s revenue for the fourth quarter dropped by around 35% to $1.025 billion.” If this stayed true, the “new annualized projected profit would be” between $400 million and $0 (ignoring other possible cuts).

10. This would not enough to pay debt service (allegedly $1.2 billion annually), although of course negative cash flow can be cured by equity investment, which Musk has also been pursuing.

11. But it’s pretty obvious Musk has won the ad war. Most notably, Musk successfully played chicken with Apple. Tim Cook backed down, because Musk plausibly threatened Apple with destruction. Apple rushed to restore its ad buys, and Cook toadied to Musk. King.

12. It seems extremely likely that most ad revenue has now been restored or replaced (and this ignores new subscription revenue). This is particularly true since Musk has publicized engagement metrics that make Twitter very attractive.

13. Predictions of permanent revenue drop, as I said two months ago, are thus mere cope by Musk’s ill-wishers.

14. Twitter profit could not only be $2 billion, but be going up, with the sky the limit.

15. All other predictions of Musk’s critics have been falsified. As I predicted, but contrary to common wisdom, not only has Twitter not collapsed, but its functionality is vastly improved. Nobody is moving to Mastodon. There will be growing pains, but none dangerous.

16. However, the main, crucial, key takeaway from all this, for society as a whole, is not that Musk is competent, but that nobody can deny that the vast majority of employees at tech firms are worse than worthless. The spell is broken for the “email job” class.

17. True, Twitter faces threats from the Regime, here and abroad. Yet those are fading, as the Regime has much on its plate, and failed to knock Musk off the board in 2022. They cannot do it anymore. Musk has won.