Friedberg @ 00:19:01Wrong
techmarkets
If Elon Musk successfully makes Twitter significantly more profitable by cutting approximately 30–50% of its workforce, then over the following couple of years (roughly 2023–2024) this will set a new benchmark for tech profitability and trigger a noticeable flurry of private‑equity buyouts and M&A targeting distressed small- and mid-cap software companies, with PE firms explicitly emulating the “Elon playbook” of deep cost-cutting to drive profitability.
if what Elon is going to do at Twitter or what is reported ... that he's going to cut so deep, he's going to cut 30, 40, 50% potentially of the employee base... it really sets a new standard for how profitable a tech company can get... there could be the case that private equity firms take a look at this... and you could see a bit of a flurry of buyout activity as more folks come in and maybe try and mimic the Elon playbook. So, you know, that's one kind of prediction I think may arise. If Elon is successful in making Twitter a much more profitable enterprise, it could set a new model that catalyzes a lot of other M&A activity, a lot of other buyout activity of these distressed small and mid cap companiesView on YouTube
Explanation
Two key parts of Friedberg’s conditional scenario did not materialize in the 2023–2024 window he specified.
- Musk making Twitter/X “much more profitable” via deep cuts and setting a new profitability benchmark
Musk did execute extremely deep layoffs—roughly half the staff was cut in late 2022. (en.wikipedia.org) However, in 2023–2024 X’s business performance deteriorated rather than becoming a standout profitability model:
- Ad revenue and total revenue fell sharply after the takeover. External data show X’s ad sales for 2023 projected around $2.5–2.9 billion versus about $4.7 billion in ad revenue in the last four quarters before Musk took over, with Musk himself citing roughly a 50–60% drop in ad revenue and negative cash flow. (investing.com)
- Detailed analyses of X’s finances show revenue declining from about $4.4 billion in 2022 to $3.4 billion in 2023 and $2.6 billion in 2024, indicating a shrinking, not dramatically more profitable, business. (businesstechweekly.com)
- Local subsidiaries such as the UK and India units reported large revenue collapses and steep profit declines despite massive workforce reductions, contradicting the idea that the cuts quickly yielded exceptional profitability. (theguardian.com)
Within 2023–2024, X was generally portrayed as struggling with revenue loss, advertiser boycotts and high debt service, not as setting a “new standard” for tech profitability.
- A flurry of PE buyouts of distressed small/mid-cap software firms explicitly emulating the “Elon playbook” (2023–2024)
There was notable private‑equity public‑to‑private activity, but its pattern and stated drivers don’t match the prediction:
- Across all sectors, global PE take‑privates hit a 16‑year high in 2023, driven mainly by depressed public valuations, SPAC delistings and attractive pricing—standard market-dislocation reasons, not Musk/X. (spglobal.com)
- In tech/software specifically, 2023 PE tech M&A and take‑privates fell versus 2021–2022; a Cooley review notes PE’s share of tech M&A hit a six‑year low, with only 16 U.S. tech take‑privates in 2023 and major sponsors like Thoma Bravo and Vista stepping back compared to 2022. (mondaq.com)
- Software take‑privates in 2023–2024 (Qualtrics, New Relic, EngageSmart, etc.) are discussed in deal reports as responses to valuation gaps, interest‑rate dynamics and AI/strategic fit, not as intentional copies of Musk’s Twitter cost‑cutting; sector overviews attribute the activity to cheap public valuations and financing conditions. (ionanalytics.com)
- Broader management commentary explicitly warns against “mimicking Musk’s playbook” of mass layoffs, framing his approach as a cautionary reference rather than a model PE firms are following. (forbes.com)
Because (a) X/Twitter did not clearly become “much more profitable” or a widely recognized benchmark for tech profitability in 2023–2024, and (b) there is no evidence of a PE “flurry” in distressed small/mid‑cap software driven by explicit imitation of Musk’s Twitter cost‑cutting—even though sufficient time has passed—the prediction’s envisioned scenario did not occur. Therefore it is best classified as wrong.