The schoolyard rivalry between Mark Zuckerberg and Elon Musk has been going on for many years; and, in terms of supporters and admiration, the one who has usually won easily is Musk. As an innovator, Zuckerberg, co-founder of Facebook and head of social media giant Meta, has often been disparaged as a geeky, hoodie-wearing dilettante. He has never achieved the Promethean glory that Musk has achieved for turning Tesla into an electric vehicle benchmark and SpaceX into a rocketry sensation. Zuckerberg is famous for his motto “Move fast and break things,” which may have helped Facebook take over the world but has allowed critics to view him as a social menace. Musk is revered as a rule breaker, playing into his bad boy image and almost always getting his way.
That was at least the tenor of their relationship when Musk challenged Zuckerberg to a cage match in June last year, just before Meta launched a short messaging app, Threads, to compete with Twitter (now X). Musk. Let's leave aside the physical fight, which never took place. In business terms, Musk had the upper hand at that time. He was the richest man on the planet. Tesla's market value, although declining, was higher than Meta's. His income was growing faster. The fact is that since then he hasn't been able to kick himself in the mouth harder. In recent weeks, Tesla has shocked investors with a dire earnings presentation. Musk's $56 billion pay package since 2018 was annulled by a judge, significantly cutting his net worth. From the United States to China, his vehicles have been recalled.
Meanwhile, Zuckerberg raises his fist in the air. On February 1, Meta released results showing a staggering increase in sales and margins. Its market value has reached $1.2 trillion, exactly the same level reached by Tesla at its peak in 2021 and more than double the current value of the electric vehicle manufacturer. To be sure, short-term assessments of economic performance are not everything. Now, if we look at longer-term factors, such as the way both men run their businesses, treat shareholders and customers, and respond to their own failures, it's clear that the fight is over. Zuck has won.
To understand why, let's start with the interplay between the way the two mega-millionaires control and run their companies. Both have great control over them in a way that makes defenders of corporate governance pale: Zuckerberg through a dual share structure that gives him majority control of Meta; Musk, having everyone at Tesla under his yoke. However, as Zuckerberg has become more attentive to his coerciveness, Musk has become less so. That has had a big impact on performance.
Zuckerberg's turnaround began in 2022, when shareholders showed their rejection of the way he was wasting money (theirs and his own) on crazy projects like the metaverse, just as Meta's core business was slowing down. Instead of ignoring them, he listened to them. It has since changed its tune to focus on cutting costs, increasing profits and using liquidity to invest in artificial intelligence and the metaverse in a way that improves existing products, as well as funding futuristic bets. On the other hand, in order to convince shareholders that it is not wasting their money, Meta will return cash to them by repurchasing shares and will pay the first dividend in the company's history.
Musk has not experienced a similar epiphany. In the two years since Tesla's stock price peaked, he appears to have dedicated himself to disappointing other owners of the company's stock. The more sensible yearn for a cheap electric car for the general market; Instead, Tesla is selling expensive vehicles at a margin-busting discount. They also want Musk to dedicate more time to Tesla, but he divides it with SpaceX and wastes it on (and with) X. They long for fully autonomous cars that act as catalysts for a robotaxi revolution. Now, even die-hard fans were stunned recently when Musk threatened to pull Tesla's efforts in artificial intelligence and robotics if he wasn't given 25% of the voting rights.
That brings us to a second big difference: motivation, which was the crucial element in the Delaware judge's decision on January 30 to strip Musk of his outsized salary. Zuckerberg, as the ruling noted, receives no salary or stock options. His 13% economic participation in Meta is the main incentive to go to work every day. However, Musk is different. Although at the time his stake in Tesla made him $10 billion richer every time Tesla's value increased by $50 billion, that didn't seem like enough to him. The board of directors (many of whose members were, according to the judge, too friendly with Musk to be independent) convinced the shareholders of the need for an additional incentive to remain very dedicated to the company: specifically, the higher remuneration of the history of public markets. Now that it has been annulled, presumably his motivation is even more in question.
And then we have both their attitudes toward customers, which have also moved in opposite directions. Zuckerberg was reviled for Facebook's hasty and lax approach to user data, content moderation and privacy. Concerns remain important; especially when it comes to young people on social networks. However, Facebook now has an independent oversight board to decide on content, and Meta says it has invested $20 billion since 2016 in online security. There is no doubt that Musk still has loyal customers. Still, considering how many electric car-owning Americans lean Democrat, the more X rants, the clearer it becomes that he despises his political views. The latest vehicle recalls are another source of concern (although the problem can be solved with a software update). In China, a huge market, it faces fierce competition. Meta, on the other hand, acknowledges that Chinese advertisers helped drive a big increase in advertising revenue last year.
In short, as Zuckerberg gets older, he appears to have learned from his mistakes. As Musk ages, he becomes more childish and scattered. His irritated reaction to the Delaware court ruling, threatening to break camp and move Tesla's headquarters to Texas, is a good example of this. He indicates that he wants shareholders to have even less protection than usual from his whims. If anyone should get into the ring and beat some sense into him, it's them.
© 2024 The Economist Newspaper Limited. All rights reserved Translation: Juan Gabriel López Guix
