Elon Musk’s name has become synonymous with efforts to shake up the world of business with his disruptive innovations at Tesla and SpaceX. The automotive industry is being forced to adapt to the changes brought on by Tesla’s automated, all-electric vehicles and the space industry hasn’t seen this level of competition since the cold war.
Even then, it was world governments taking to the stars, not business owners!
Elon Musk latest headline grabbing stunt results from a Twitter poll. Musk took to Twitter and set up a poll asking his 63.7 million followers, and anybody else who might see the poll, asking if he should sell 10% of his Tesla stock. In a subsequent tweet he pledged to abide by the results of the poll, whichever way it went.
The tweet read: “Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this?”
Not only does Elon Musk seem to enjoy poking the capitalist bear with his tweets, but he poses an interesting question about how a business can be run. Do companies serve us best when a CEO makes the final decision on things, or would it be better to run a business by vote, just like a democratic country? It is an interesting thought experiment that Musk appears to be bringing to life.
Does it hold any water, though?
The roots of a democratic business
A democratic leadership seems to hold many benefits for businesses, employees and society at large. When compared to the current standard where the CEO has the final say, democratic leadership involves as many invested parties as possible to make decisions.
Economists have been discussing a more democratic way of working since the 1920s, so the notion is nothing new. Many models have been shown to be quite effective in the past, from collectives to co-operatives. Ultimately, it is all about distributing decision-making more evenly across a company’s hierarchy.
Musk’s Twitter democracy
Elon Musk has shown that his way of thinking can change business practices across entire industries, so him taking to Twitter to up-end how Tesla makes their business decisions is no real surprise. Still, asking the general public via poll about selling 10% of his stock (about $2 billion USD) is definitely a bold move that caused shockwaves throughout the stock market.
Musk’s announcement caused a noticeable dip in stock prices for Tesla too, which worsened when the more than 3.5 million voters concluded that ‘yes’, Elon should sell the stock.
The reality is that handling business decisions like this can be very risky, even for an eccentric billionaire like Musk. CEOs tend to make big decisions because they can act quickly, use insider information and ultimately if something goes wrong, they can be accountable. What happens when the general public causes a dip in the stock prices of a company, though? It would be difficult to hold them to account, which causes problems for any business moving forward.
Although this is a very interesting thought experiment, cynics might suggest that Musk’s true intentions are much less disruptive to business and more about protecting his own assets. With a looming tax bill, he needs to come up with some serious capital by August 2022 or he will be in hot water with the IRS. Selling his Tesla stocks will be the financial boon he needs to cover these hefty tax bills and perhaps he suspected even before conducting the poll, that the answer would be yes!
