Tesla, Elon Musk’s car-making corporate vehicle, so to speak, was historically one of the most shorted companies in the world, carrying a short interest of about 25% of the stock. Short sellers bet that a share price will decline over a period, so you could classify them as generally sceptical. Or perhaps sceptical grumpy naysayers might be a more appropriate description.

These days, the short sellers have been flushed out of Tesla and only about 3% of Tesla’s shares are currently shorted. But back in the day, much to Musk’s annoyance, professional investors were sceptical grumpy naysayers. The reasons were entirely logical and, by the way, many of their reasons still apply.

Tesla has a market value of roughly $660-billion, which is well off its peak of over a trillion dollars, but is still three times larger than its closest rival Toyota, even though Toyota makes double the profit off three times the revenue. Generally, car manufacturers trade at about six times their annual earnings; Tesla trades at 50 times.

But now the scepticism is gone because Musk has managed to convince shareholders that Tesla’s longer-term growth prospects are better than other car makers and, frankly, I think his argument is probably right. Tesla has just announced sales for the first quarter, which are up for the nth time. The share price is bouncing up and down, but generally, the company is cruising. It has been one of the most extraordinary business achievements of our time; there is just no other way to describe it.

In the 2019 to 2022 period, however, it was another story. In 2020 alone, Tesla short sellers lost around R40-billion. Musk now has a fabulous reputation as someone who just treads air. Bet against him and you lose. He has entered the zone once occupied by former Apple CEO Steve Jobs: the reality distortion field.

So, now with this backdrop, what on Earth does one make of his claim that Twitter will one day be worth R250-billion? “I think it’s possible to become the biggest financial institution in the world,” Musk said last month at a Morgan Stanley conference.

And just one second here. Who exactly has the gall to say, at a conference sponsored by a bank, that his company will end up being bigger than its host is currently? Well, Musk, obvs.

And Musk has done this before. In 2015, for example, The Wall Street Journal reports, he drew some collective eye-rolling from Wall Street when he claimed Tesla, then valued at around $25-billion, would, in a decade, match Apple, then worth about $700-billion. Tesla surpassed that $700-billion valuation and became the first automaker to be worth more than $1-trillion in 2021. So his prediction not only turned out to be modest in its estimation, but it happened four years earlier than he predicted.

But how likely is that with Twitter? Sadly, I think it is very unlikely, despite Musk’s history of proving the commentariat (that would be, you know, me, and people like me) wrong. And the reason has to do with the concept of the first-mover advantage.

Musk’s plan is simple: he wants to revive his original plan for payment company PayPal, from which he was rudely ousted years ago, but which provided him with the cash to explore all his other adventures. That company was X.com, originally designed as a wide-ranging bank.

But what happened was that Musk merged X.com with PayPal, which is not a bank but a payment facilitator. The merger was successful, and PayPal’s ability to email money between users was a breakthrough at the time. But in the process of the merger, Musk lost control and was famously knifed in the back while on a rare holiday with his first wife.

Musk said very explicitly at the Morgan Stanley event, “I’m going to execute the X.com game plan from 22 years ago with some improvements,” explaining where he intended to take Twitter. He also spoke about the two Chinese payment giants Alipay and Tencent, saying Twitter should copy them.

But the big question is whether, in this case, Musk has missed the bus or, to put it another way, has lost the first-mover advantage. Now it must be said, first-mover advantage is a slippery concept. The most famous example of its utility was the Sony Walkman. A decade after Sony produced the first Walkman and the entire electronics industry had ample opportunity to catch up, the Walkman still had 50% of the market.

Yet the first-mover advantage didn’t help Sony when the VCR came on to the market, nor did it help Netscape, the first internet browser. It’s not as simple as just being first.

But even with that said, payment platforms have been around for almost a decade now. People flashing their Apple and Android phones and watches over credit card machines is now old hat, as are QR code payment systems, like SnapScan. The entire financial services industry has watched with mesmerised horror as these new payment options have become commonplace, caught between wanting to join in and wanting to hold them back.

However, Musk is not suggesting that Twitter should become a payment platform, but something more like a shadow bank. His model, Alipay, is more of a lifestyle choice than a payment platform. It does provide QR code payments, but you can also hold cash in the card, pay bills, transfer money, top-up your mobile phone, buy bus and train tickets, order food, hire cars, and buy insurance. It offers payment services to about half a million Chinese businesses. It took 20 years for Alipay’s owner, Alibaba, to reach this pinnacle.

Another question is whether it’s conceivably possible to use a commentary platform like Twitter as your starting point. Granted, it has a huge number of users; that’s a utility surely. But financial institutions don’t only need customers, they need trust, and a commentary platform is almost inherently designed to be untrustworthy. 

Twitter’s business model, like other social networks, is to fire up arguments and disagreements, break news, make jokes and present points of view. All great things, of course, but it’s best expressed in the unacknowledged rallying cry of all social networks: “enragement is engagement”. You gotta enrage your clients a bit, but not so much that they leave the platform.

Put it this way, would you want your bank to spend its day shouting at other banks? Wait. Don’t answer that.

It all reminds me of a joke. A tourist travelling through the Irish countryside asks a farmer for directions to Dublin. “Well,” says the farmer, “if I were going to Dublin, I wouldn’t start from here.” DM/BM