What’s going on in business and technology at the start of 2023? Because the deadline for this column is in advance of the New Year, a certain amount of guessing is required. As of this writing, the two hottest biz-tech subjects are Twitter and cryptocurrencies.
My last column was written just as Elon Musk completed his acquisition of Twitter at the end of October. Several weeks later, it was reasonable to ask whether Twitter would still be running at the start of the new year. One of Musk’s first moves was to lay off roughly half of Twitter’s 7,000 employees. This was followed by an ultimatum to the remaining employees: be prepared to go “hardcore” at work, or resign (with three months severance). Without a clear picture of where Musk wants to take Twitter, unclear financial incentives (other than keeping one’s job), and the prospect of long hours and little free time, it’s estimated another 1,000 employees decided to take the money and run. Some of those who remain do so because they are foreign nationals, whose H-1B visas require them to have a sponsoring employer.
People point to other services, like Instagram, which serve more users with fewer employees as evidence that Twitter needed a reduction in force. And because of Twitter’s precarious finances, action needed to be taken swiftly. Twitter has rarely been profitable over its lifetime: its 2021 financial statements show an annual loss of about $500 million on revenues of just over $5 billion, primarily from advertising (89%). In addition, the $13 billion in loans which Musk took out to finance his purchase added roughly $1 billion a year in interest payments to the cost of running Twitter.
So, Musk cuts staff to reduce expenses, which on paper makes the business profitable. But the associated turmoil causes advertisers to get nervous about the viability of the service, on top of their existing concerns about their brands appearing next to unsavory tweets (brand safety) as Musk champions “absolute free speech.” And while the Twitter service is provided by hardware and software, which doesn’t care about any of that, said hardware and software is maintained by people who do.
The fundamental question is whether enough people remain to ensure that the hardware and software continue to run. Clearly, some employees remain, but whether they have the deep knowledge and broad experience to respond in a timely fashion as problems inevitably arise is unclear. To quote a Twitter engineer interviewed by the MIT Technology Review, “Things will be broken. Things will be broken more often. Things will be broken for longer periods of time. Things will be broken in more severe ways. Everything will compound until, eventually, it’s not usable.”
Soccer’s World Cup, which has traditionally resulted in high levels of Twitter activity, began in late November, and Twitter seems to be running normally. Regardless, I expect I will be returning to the Musk/Twitter saga in future columns, if only to plant a headstone.
As for cryptocurrencies, the big news has been the drop in their value: Bitcoin has dropped from $60,000 to $16,000 in the past year, Ethereum from $4,200 to $1,200. The most recent drop followed the bankruptcy of FTX, a cryptocurrency exchange. Longtime readers will remember that I have always been skeptical of cryptocurrencies, due to the hype factor, the lack of regulation and the leverage employed by speculators. One of the main arguments made in favor of cryptocurrency is there is no central authority—you could keep your crypto wealth in a software “wallet” rather than a central bank, safe from prying eyes.
But, because keeping your own wallet requires some tech smarts, the majority of people were content to let central exchanges (like FTX) keep track of their holdings. FTX customers are now unable to access their accounts, and have to stand in line for the bankruptcy courts to take action before they will see a penny. To cap it off, in all the confusion, it’s possible that $600 million in client funds was stolen. To quote the new CEO (who oversaw Enron’s bankruptcy): “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”
In short, decentralized finance (DeFi) remains a pipe dream. Some form of regulation is required to ensure that ordinary people are protected from the potential abuses. Whether that regulation can co-exist with the anonymous nature of cryptocurrency remains to be seen.
This column begins my 23rd year writing about technology and business for NorthBay biz, meaning that I’ve written over 250 columns since my debut in January 2001. I’ve never missed a column during the past 22 years, which is a small point of pride (although my past editors can attest that I frequently missed deadlines). And yet almost every month I wrestle with choosing a topic that is informative, entertaining and, most of all, useful. As always, I welcome your suggestions and questions at
mike@mikeduffy.com.
Happy New Year!
