May 26 • 46M

Matt Levine on Elon Musk and Compliance

Most CEOs don't behave like this. Are they missing something?

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Very Serious is a weekly conversation with top political commentators, columnists and policymakers, focused on how events in the news relate to major, long-standing controversies in politics, economics and culture. Host Josh Barro is joined by a rotating set of regular guests to work out the ideas behind the arguments on topics serious and not-so-serious. It’s a great conversation across ideological lines that will leave you entertained, enlightened, and maybe even persuaded.
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Dear readers,

Why doesn’t JP Morgan CEO Jamie Dimon make fart jokes on Twitter?

Why doesn’t he say he’s going to take JP Morgan private at $169 a share, for a laugh? Why doesn’t he offer to buy a company and then threaten (on Twitter) to renege on the deal for reasons not permitted in the acquisition agreement — and then tweet poop emojis when the acquisition target CEO explains that his reasons are unfounded? Why doesn’t he smoke weed on the Joe Rogan podcast?

Why doesn’t he ask public officials difficult questions like this?

One answer could be that he’s worried about regulatory risk. The SEC could get real mad if Jamie Dimon tweeted material non-public information, especially if it wasn’t true. He could get fined. But I don’t think that’s the main reason he hesitates.

I think there are a few, more important reasons:

  • He would find it embarrassing.

  • He thinks JP Morgan board members and employees would disapprove.

  • He thinks he would be made fun of in the press, and by his relatives.

  • He thinks major clients might be more wary of doing business with JP Morgan if it appeared to be led by a weirdo.

  • He thinks it would cause JP Morgan’s share price to fall.

  • He thinks he might get fired, or at least his compensation package would shrink.

  • He has a busy, difficult job, and he doesn’t have time for any of that shit.

Well, Elon Musk is the CEO of two companies, and he’s in the process of taking over a third, whether he likes it or not. And yet, he has the time and energy to behave like this, and that third acquisition appears to be, in part, intended so the platform where he causes most of this trouble — Twitter — is optimized to his specifications. The man has energy that puts me, and Jamie Dimon, to shame.

And in the process of all this, he’s become the richest man in the world.

I invited Matt Levine, who writes the popular (and essential) Bloomberg finance newsletter Money Stuff, on the podcast this week to talk about the relationship between Elon Musk and regulation. There are rules about securities — you can’t just go and tweet out that you have “funding secured” to take your company private when you don’t, and you have to file certain paperwork when you’ve bought up a lot of another public company so people know that you’re doing that and why.

There are also rules in the contract he’s signed to buy Twitter — he can’t back out because he thinks the platform has too many bots, though he’s been publicly threatening to do that.

Elon Musk breaks a lot of rules and he seems to get away with it. But he doesn’t just get away with it in the sense that whatever punishments he’s gotten from the government are minor compared not just to his wealth but to the investment returns he’s generated by memeing himself into market glory. I mean he gets away with it in the sense that he’s not punished by the usual counterparties that we expect to enforce norms of fair dealing and non-weirdo behavior. Pretending in an extremely public manner that you’re going to take your own company private would tend to make most future potential takeover targets very skeptical that you’re going to follow through on your offers to take their companies private. And yet, Twitter accepted Musk’s offer to buy them, and (as I discussed with Matt) apparently didn't think to ask for a large enough breakup fee to induce him not to try to walk away from the deal.

So one of my big questions for Matt was, why does this work for him, and would it work for more CEOs if they had the balls to try it? Should Jamie Dimon try tweeting more poop emojis at his counterparties? Is he destroying JP Morgan shareholder value by failing to do so?

I think the answer to that is no. But at a time when Donald Trump figured out how to hack the norms of our political system and do things that other people thought not only that they shouldn’t do, but that they wouldn’t get away with, it’s worth considering what Elon’s figured out and why others don’t copy it.

Of course, part of the answer is Elon’s real success. He’s not a Trump-like figure in business: He makes sleek electric cars and sends rockets into space. He has real, impressive things to show for his work. Not necessarily impressive enough to justify Tesla’s stock price, but impressive. Still, it’s worth considering that his persona is not just a side gig but a part of the investment product — part of what makes people want to put money into his companies, and part of what makes it possible for him to buy Twitter without an impressive business plan to whip it into shape. It’s not just the electric cars that are working — the shenanigans are working, too.

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That’s part of what Matt and I discuss on this episode. But not all of it — we talk about ESG investing, and what’s in Matt’s portfolio, and whether financial innovation is all it’s cracked up to be. And he answers a number of questions that you, the readers, sent in ahead of our taping.

I hope you enjoy the episode. As always, please leave any thoughts in the comments.

Very seriously,

Josh

P.S. Next week’s podcast guest will be with James Kirchick — he just wrote a book called Secret City: The Hidden History of Gay Washington, which took him about ten years to complete. It’s an impressively reported book about a topic that’s extremely difficult to report on, for reasons we discuss. I really enjoyed this conversation and I think you will too. That’s coming out next Thursday.

P.P.S. As we’ve mentioned, the Very Serious podcast is now hosted directly on Substack, coming to you through the same series of tubes as the newsletter. We think the migration has been pretty seamless — if you already subscribed to the podcast, it should still be coming into your player of choice just like before; and if you want to sign up now, we have a button here for you to press.

We are now offering episode transcripts. You can see this episode’s transcript here.

Questions about the process? Technical issues with your feed? Email podcasting@substackinc.com for support. For any other inquiries, please email mayo@joshbarro.com.