By the time this essay goes up, there is a likelihood that its central focus – the much-discussed, debated, and questioned maneuver by Tesla mogul Elon Musk to take Twitter private may fall through and become non-news. Already, as we write this, the news cycle has moved on to obsess about other happenings in the world of tech and finance, namely Crypto’s week from hell on the stock market and the continued tumble that FAANG stocks are taking.
In April 2022, in keeping with a vainglorious social media persona that commands the strength of 81 million Twitter followers, the richest man on earth offered to buy out the publicly traded social media platform for USD 44 billion, spelling out the terms of what was essentially a hostile takeover through a newsworthy tweet. After a short-lived push back and a failed attempt to activate a poison-pill defense, Twitter’s board caved in and accepted the offer, triggering off what is one of the most-watched corporate takeovers of all time. Ever since, more drama has ensued, as Musk announced that the deal was on hold owing to purported discrepancies on part of the platform in the percentage of reported bot accounts on the site.
The debate over what Musk might do to alter the character of Twitter, should he follow through on taking it private, is not an insignificant debate and merits serious consideration. Analysts have speculated on how he could use his celebrity status on the platform to further boost the value of his companies such as Tesla and SpaceX. Others have sounded alarm bells regarding Musk’s proposals to undo many of the content moderation measures that currently go some way in protecting vulnerable users from the platform’s worst tendencies of misogyny, hate speech, and harmful behavior.
That the narratives of ‘taking back’ from Wall Street and saving democracy can be used to frame a leveraged buyout that would vest control of a piece of the internet, which has critical communicative and social value, with one highly wealthy individual, perhaps, sounds counter-intuitive.
“Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated,” announced Musk in a press release after the deal was finalized. In an earlier letter, where he had made the proposal to the company board, he asserted that Twitter had “the potential to be the platform for free speech around the globe” and that free speech was “a societal imperative for a functioning democracy”. Pointedly, he added a caveat, “I now realize the company will neither thrive nor serve this societal imperative in its current form.”
What ails Twitter in its current form, of course, differs hugely based on whom you ask. For Musk and free speech absolutists of similar and more virulent ilk, the problem is that the platform has steered away from the principles of free speech and needs a course reset, free from what is interpreted by a fair majority of the platforms’ users as punitive content moderation principles and unnecessary political correctness. For many more users, especially those from marginalized communities of religion, caste, race, gender, disability, and sexuality, the problem is the converse – being subjected to extreme abuse, retribution, and violence for being so bold as to make their views public on Twitter (and other platforms) and not finding requisite support in the platform’s policies. The online public sphere, of which Twitter also occupies a considerable space, has become rife with misinformation, misogyny, radicalization, and echo chambers. Amnesty International’s 2021 scorecard continued to reflect the trend that Twitter was not doing enough to protect those users who are at a greater risk of online abuse. In an earlier scorecard, the study had captured that disproportionate amount of hate on Twitter was aimed at “Women from ethnic or religious minorities, marginalized castes, lesbian, bisexual or transgender women – as well as non-binary individuals – and women with disabilities.” In many ways, platforms like Twitter have replicated violence perpetrated against minorities in the offline space, but with the ability to generate a large volume of hate against these marginalized groups. The right to free speech brings with it the right to public participation, which often gets denied to people facing such online vitriol.
But for Big Tech insiders, Twitter’s fundamental malaise is not really its inability to ensure a functioning, civil platform for exchange of ideas and opinions that is free from massive misinformation and extreme speech, but rather its structure as a publicly traded company and the circumscriptions this brings with it. This is why former CEO and platform co-founder Jack Dorsey, has cast the proposed change-in-guards as a positive move that would wean away the platform’s dependence on advertising revenue and institutional finance, claiming as he does with genuine lack of irony that “taking it [Twitter] back from Wall Street is the correct first step,” and that Musk could be trusted “to extend the light of consciousness”. Similar views were echoed by Silicon Valley investor Ben Horowitz, one of the founders of Andreessen Horowitz, who stated, “We believe in Elon’s brilliance to finally make it [Twitter] what it was meant to be.”
That the narratives of ‘taking back’ from Wall Street and saving democracy can be used to frame a leveraged buyout that would vest control of a piece of the internet, which has critical communicative and social value, with one highly wealthy individual, perhaps, sounds counter-intuitive. It should be pointed out that Musk’s investor bedfellows in this quest, which include rank and file Silicon Valley actors such as Sequoia Capital, Andresson Horowitz, and cryptocurrency exchange, Binance, also include sovereign wealth funds of nations that are far from the democratic spectrum such as the Kingdom Holding Company, an investment vehicle of the Saudi Royal Family and Qatar Holding. But it’s only the latest in a long history of discursive double talk that is part and parcel of the Silicon Valley toolkit. In fact, if anything, it is entirely in line with a philosophy of leadership that informs the highly undemocratic culture of Big Tech, one which must be interrogated more closely for the harms it begets.
At the outset, it has to be recognized that the online public sphere that Twitter offers, is not a public space and is in fact governed by private, corporatized interests – albeit, with the veneer of accountability offered by being listed on a stock exchange. This accountability is also limited to profit-making concerns, although non-financial considerations like their impact on society are also included. Taking this type of a social media company under the control of one individual – no matter how self-proclaimed as noble the intent – reflects a return to a feudal system of ownership, centered on individual aggrandizement. While neither is optimal, the latter creates scope for unabashed control in the hands of a few. The Big Tech version of Twitter – accountable to shareholders was bad enough – as an archetype of democracy by manipulation and algorithmic protocol. The takeover of the platform by Musk suggests a breakdown, the extreme anomie of a society held to ransom by platform capitalism, a neo-feudal society that is able to be imagined through the wealthy eyes of individuals who enjoy the right to arrogate to themselves the power to shape communicative discourse, the raw power to control democratic discourse.
Big Tech’s Flawed North Star
The arc of any profit-driven company follows a predictable pathway to financialization. The company kicks off operations, attains scale and success over time, attracts venture capital and other forms of investments, and then attempts to go public through a stock exchange listing, subsequently moving from a regime of private ownership and governance to being subject to the attendant forms of oversight, accountability, and governance that come with the territory of being a publicly traded entity. Admittedly, this is neither a perfect nor an ideal system despite how it looks on paper. Historically, IPOs and public trading have a tendency to reward maximum value to big actors, which are often big financial firms. In the past years, insiders within corporations have gamed the system through stock buybacks that inflate their holdings without necessarily enhancing the productive capabilities of corporations as such. However, the bottom-line of share-holder interest creates a (very) thin line of accountability that can, in theory, seek to check the activities of large corporations and counterbalance wayward executive power. Multiple instances of shareholder activism (one way to read Musk’s tactics) has allowed groups (such as workers, pensioners, indigenous communities) to have a seat at the table, amplify problems and sometimes prompt changes to policies and leadership. The unsuccessful attempts of pension funds in the US to challenge Musk’s proposed bid to acquire Twitter is an illustration of this.
But Big Tech’s unique relationship with Wall Street finance precludes the scope for any of this oversight, accountability, or intervention to materialize. Most publicly traded tech corporations, (with notable exceptions such as Amazon and Twitter) including Apple, Google, Meta, AirBnB, Deliveroo, Slack, Pinterest, and Zoom, follow a system of dual-class shareholding that imbues founders’ shares and stock value with disproportionately higher degrees of control and voting power. This allows a small pool of actors – CEOs, founders, and original VC investors – to benefit from public financing mechanisms but still retain all current and future control over the operations and direction of the corporation. For instance, in the case of Meta, Mark Zuckerberg’s stock in the company has allowed him to retain ownership over majority of the company and accords him a 10:1 voting power over the ordinary stock holder, thus assuring him full say over the way the company runs, impervious to its fortunes on the stock market or the contrary opinions of shareholders and other investors. Similarly, Google’s structure, which led this wave in early 2004, allows founders Larry Page and Sergey Brin strategic control over the company, even after they stepped down from the active running of the corporation in 2019. Alibaba, went so far as to opt out of a listing on the Hong Kong stock exchange (which did not permit dual-class share listing at the time) and went public on the New York Stock Exchange in order to reap this benefit. While private corporations holding important public digital architecture is a concern in and of itself, the dual/multi-class shareholder system provides an added layer of protection to the individual owners of these tech platforms, taking away any extant control the market could impose on them. Taking Twitter private thus is potentially an exercise in changing this characteristic feature of the company.
The system of dual/multi-class shares is not a new phenomenon. For instance, Ford, a family-controlled corporation to this day, opted to take this route as early as 1956 when the company went public. Nor is it entirely devoid of merits. Proponents emphasize it as a way to insulate corporations from short-term thinking, stock market variances, and hostile takeovers, and thus allow for strategic long-term vision for growth and success to prevail from those who have built it up.
But in the case of Big Tech, the system has been weaponized to guarantee vast cash inflows into these entities while entrenching founder control in ways that can be described as nothing more than feudalism. It is how tone deaf leadership can continue to tune out criticisms and backlash with little repercussions and pursue policies and practices that are entirely out of step with larger public, or even private investor interest for that matter. Because the logic goes – innovators are well-placed to take the necessary gambles and risks that result in breakthroughs and so, they must be protected from outside pressures through nothing short of absolute control.
This is Big Tech’s great-man theory in its worst avatar, a form of tech tribalism and exceptionalism that should worry us for its misplaced faith in individuals as solutions providers and purveyors of social value, and its tendency to obfuscate and divorce innovation from its many systemic antecedents, as well as the need for governance. In fact, data suggests that approximately 52% of dual-class shareholding companies fail to have an independent director or chair on their board. This is the path of thinking that leads someone like Elon Musk, routinely hailed as a great thinker and innovator for the times, to suggest with no irony that he can rescue Twitter for the good of democracy. It is likely, that Twitter under Musk could opt to restructure its capitalization structure to effect dual/multi-class shareholding, if and when it opts to become public again. It is still unclear whether the deal will go through of course, given the many twists and turns the negotiations have and continue to take. But even if it does not, that the illegitimate spoils of extractive Big Tech were nearly taken over in an exercise of remaking voice and the right to be heard through the eyes of one individual, is a testimony to the absurd limits of platform capitalism.
Indeed, Big Tech has never wavered from its flawed north star– that these ostensible visionaries have the license to play by different rules and that innovation must never be interrupted by pesky considerations like accountability. These are the guiding principles that have allowed it to create a structure of ownership and rulemaking, where tech corporations run like private fiefdoms for the most part, and that is something to be celebrated. Except for the rare case, where an extreme fall from grace prompts a dramatic restructuring of power, such as in the case of Uber founder Travis Kalanick or WeWork CEO, Adam Neumann, these arrangements go unquestioned for the most part.
The idea here is not to demonize the scions of technology or to even suggest that their strive for innovation is wholly false, but rather to question how the reins of the digital that touch every aspect of economic and social life, come to be implicated in a system that shutters accountability in such blatant ways and even in its most generous reading, can only be framed as a benevolent form of dictatorship. The halo, we as a society build around tech moguls, may seem somewhat harmless if silly, but when placed against such realities, they need serious rethinking.
This is not merely a discursive phenomenon and has very real consequences for how technology as a resource is owned and governed, how innovation is determined and in whose interest, and ultimately how on the ground corporate governance can really be meaningful. The fact that such trends have been on the upswing in the past two years, as regulators and lawmakers have sought to tighten the leash around the tech sector is not a coincidence either.
To contextualize this, in 2020, over 40% of tech companies in the US that issued IPOs did so through dual/multi-class shares, in some cases with generous sunset clauses that accorded unequal voting rights to founders. Between 2018 to now, multiple stock exchanges including Hong Kong, Singapore, London, Shanghai, India, and Tokyo have changed their rules to permit IPOs and listings with differential voting rights. In fact, India’s tech sector actively lobbied with the financial regulator, the Securities and Exchange Board, to effect this change, which was approved in 2019. Where governments have held out on such changes, such as the Australia Securities Commission, companies can simply elect to bypass and list on other exchanges, which is what Australia’s biggest homegrown technology company Atlassian, did in 2015.
Between the Devil and the Deep Sea
Given the popularity of dual/multi-class shareholding, this trend of power consolidation is unlikely to wane in the near future without fundamentally regulating such unaccountable capitalization structures. However, in the interim, strong regulation to protect public shareholders, and mandatory time-based or event-based sunset clauses could ease the vise-grip that founders have on these companies. These measures have to be considered not only from an adequate corporate governance perspective, but also from a business viewpoint as, where reports have shown that dual-class shareholding companies tend to underperform on metrics like return on equity, turnover growth, ratios of dividend payouts, as compared to one-share, one-vote companies.
The open market, typically concerned with generating short-term dividends and profits does not particularly set its sights on the type of moon-shot investments and speculative thinking that Big Tech is pursuing, something venture capital and private investment is more amenable to backing. By effecting the peculiar patterns of ownership and control discussed earlier in this piece, Big Tech manages a best-of-both-worlds situation for itself, while creating the worst externalities of both systems of financialization for everyone else. To illustrate this, we only need to look at the financial outlooks for May 2022, when stocks of major Cryptocurrencies, a highly speculative venture, including BitCoin, Ethereum, Luna, UST went into freefall, wiping out USD 2 trillion worth of value from the market in a matter of days. The brunt of such losses and instabilities yet again, were not borne by the insulated wealthier shareholders but by weaker economic actors.
The dependence of current platformization pathways on private capital, regardless of the model they pursue, remains constant and problematic, especially given how many of them have become akin to public utilities and stand in for key communicative, financial, social or economic infrastructure.
Unsurprisingly, the most outspoken faction against the maneuvers of Big Tech comes not from civil society or lawmakers, but from finance actors who have lost out on the ability to exercise control over Big Tech in the way that they would ideally like to. Large asset managers such as BlackRock have been advocating against dual-class share structures for some time now and demanding a return to one-share, one-vote systems. Institutional investors, typically pension funds representative such as the Council of Institutional Investors have also been strong in their opposition, raising valid concerns about corporate governance and shareholder interests.
But to get caught up in the defense of one form of financialization over another can obfuscate the large issues with tech capitalization at large, an area which has and continues to be under regulated. In fact, if anything, the proposed Twitter takeover only serves to highlight the regulatory bankruptcy of both models and the ease with which strong market actors, whether those be from Wall Street or Silicon Valley, ultimately make capitalization models work in their favor for maximal gains at significant social and economic costs. The dependence of current platformization pathways on private capital, regardless of the model they pursue, remains constant and problematic, especially given how many of them have become akin to public utilities and stand in for key communicative, financial, social or economic infrastructure.
A radical rethinking is thus needed about how our platforms and technological resources should be financed and funded, and in turn how ownership regimes around tech can be restructured for democratic social control to break power concentration and effect the necessary balance of socially-conscious management, innovation and growth, and non-negotiable public accountability. The FOSS movement and federated social networking sites such as Mastadon have been use cases for a non-market-oriented approach to tech development. Breakthrough and landmark technologies such as GPS, the bedrock of most major platform functionalities today, have also shown us what publicly funded research and development can yield. These illustrations contain important lessons for alternative platform pathways that often get forgotten in the frenzy of a financialization-fueled tech growth. As trite as such a statement may seem, society can do better than pin its hopes on tech billionaires to solve the world’s problems.