[music]

Nancy Solomon: It's The Brian Lehrer Show on WNYC. Welcome back, everybody. I'm WNYC reporter Nancy Solomon filling in for Brian today. With us now to give an overview on the news coming out of Twitter after Elon Musk's acquisition, and to discuss layoffs across tech companies in the United States, corporate finance picture, we have corporate finance and deals editor at The Financial Times James Fontanella-Khan. Hi, James. Welcome to WNYC.

James Fontanella-Khan: Hi. Thanks for having me on.

Nancy Solomon: Last week, you reported that Twitter let go of 3,700 employees, and that since then, Twitter has been scrambling to rehire some of those very same workers. Tell us about who was laid off and how Twitter went about deciding who gets the boot.

James Fontanella-Khan: Well, it wasn't actually that straightforward. As you can imagine, what we've noticed and learned from how Musk operates his companies, it's often quite confusional. Even before firing approximately half of the staff, he immediately shut the door to the former CEO and the upper management. Again, that maybe was to be expected, but then more or less indiscriminately, he asked a few of his people that he got to know during the process of buying the company to figure out who was underperforming, and just to basically let them go.

However, since they did that, they realized that they were missing basic capacity on the engineering side, on moderation, and on a series of parts of the business, so they've been slightly backtracking on that. Anybody we have spoken to tells us that it's slightly unclear what is the direction of the company despite the attempts by Musk to make those clear and being transparent on Twitter itself.

Nancy Solomon: Tech workers out there, we want to hear from you. Have you been laid off from Twitter or Meta or any tech company recently? Did you survive the layoffs? What's the mood amongst your colleagues? Do you have any insight about what is happening inside Elon Musk's Twitter? Help us report the story. Call in at 212-433-WNYC. That's 212-433-9692. Tell us a little more about the broader financial picture at Twitter, and what led up to these mass firings.

James Fontanella-Khan: Well, one of the things that Musk revealed since he's taken over is there's been a massive drop in revenue, which is partly related also to the fact that advertisers, which are one of the main sources of revenue for Twitter, were somewhat nervous about Musk taking over the company. You've got brands like General Motors, Carlsberg, the beer company, Volkswagen, General Mills and so forth, that were like, "We are not sure that the way Musk envisions transforming Twitter is compatible with our branding."

What they're referring to specifically is Trump's vision on moderation and effectively loosening rules on moderation. A lot of the advertisers are concerned. They don't want their adverts to appear next to somebody potentially saying something racist or saying something offensive or gruesome. That has been negative. That was already happening beforehand, even when there was a lot of uncertainty over whether Musk would end up owning Twitter or not, as some of our listeners here might recall, at some point he tried to pull out of the deal, but then failed to achieve that despite fighting Twitter in a court of law.

At the moment, he is trying to figure out ways that he can increase revenues, and one of the most controversial ways he seems to want to achieve that is by getting more people to pay a regular subscription fee to get their accounts verified. Anybody who uses Twitter probably is aware that at the moment you can get your account verified. It has a blue tick. That means people know that you are a real person rather than a bot, a digitally created avatar. Now, Musk is saying, "If you want to have that verification tick, you've got to pay up because we've got to keep the lights on." Not everybody is enthused about that.

Nancy Solomon: Listeners, have you been laid off from a tech company recently, or users of Twitter, are you leaving the platform? How do you feel about the new ownership at Twitter? Give us a call at 212-433-9692, 212-433-WNYC. James, is there any data about how many people have actually left the platform since Elon Musk took over?

James Fontanella-Khan: I haven't seen any definitive data on that. At the moment, anecdotally, there's a lot of-- Trump-- sorry. There's a Freudian lapses there. Musk has said that, actually, engagement is at all-time record high, so don't believe the people who are saying that they're moving on to alternative platforms. The truth is these platforms are somewhat sticky, especially if you build big audience. Certainly, you do have other social media companies that are definitely willing to take on people. The one that a lot of friends I've heard been talking about is Mastodon as a potential replacement to Twitter, but it's unclear whether it's actually getting any real traction.

Nancy Solomon: We're going to go to the phones. We have Oliver in Brooklyn. You're on--

Oliver: Hello.

Nancy Solomon: Hello, Oliver. Welcome.

Oliver: Hi. I just wanted to comment that I was surprised not to hear anybody talking about how Elon Musk letting go of all these people and then rehiring them might not be just him fumbling awkwardly into a new business, but actually a strategic decision in order to rehire those same good employees, the best employees that he let go at a lower rate. This is not something that is unheard of for companies to do in order to lower their wage bill, and certainly he's interested in cutting that. Is that not a possibility?

Nancy Solomon: That's a great question, Oliver. Thank you. James?

James Fontanella-Khan: Yes, that's a great question. I don't know. As a matter of fact, obviously once you fire people, then you need to pay severance, so it's not a cheap move. I think from the conversations that we've had with people at Twitter or who have worked close to Musk in these early days, the main driver seems to be absolute chaos. I don't think it's a conniving or a calculated move to try to save a bit of money. I think the problems that Twitter faces are much larger, and maybe we'll get to talk to this, but the broader context is that the whole tech industry, particularly in this consumer-facing tech industry, is going through a tough period post-pandemic.

Nancy Solomon: Tell us a little more about that. Tell us about some of the other companies and what's going on.

James Fontanella-Khan: I think regardless of whether Musk had taken over Twitter, I think we would have seen layoffs at Twitter as we've seen at Meta, the holding company around Facebook, Instagram, and WhatsApp. We are seeing similar cuts in a number of other tech groups like Salesforce. There's a general reorganization. The reason is during the pandemic, when we were all stuck at home or at least in the heat of it in 2020, 2021, effectively, we were all spending a lot of time on social media, and that led to hiring more people, offering more services.

These companies, their stock values went through the roof, hitting all-time highs, and then as restrictions to move and people start returning to some new normality, which includes spending more time outdoors and less time on our handsets, basically, you start seeing the value of these companies coming down quite sharply, and this impacted Netflix, it has impacted Google, it has also impacted Amazon, which everybody thought was impossible.

The other major change is the fact that we are in a situation where inflation, although today we've got technically some good news in the sense that it seems to have tamed a bit, but inflation is at historically very high levels, which means that as a response to that, the central bank, the Fed, has been increasing interest rates as a way to put a lid on these hikes in prices of the goods that we buy, but that is basically putting a lot of pressure on the economy and simply, there's less money in the system and a lot of the money that was out there in the system during the previous decade when interest rates were essentially at around zero, well, a lot of that money was just going into the stock market, raising valuations.

Again, that was giving a currency to these companies to keep on growing, investing in new sectors, paying people very, very high salaries, and now there's a bit of a reality check, really. I think everybody I've spoken to or pretty much everybody I've spoken to over the last five, six months agrees that-- even before that, but tech stocks were highly overvalued and there was a complete detachment from reality.

Nancy Solomon: Okay, let's get another question from a caller. We'll go to Mickey in Harlem. Nicki, I'm sorry. Nicki, are you there?

Nicki: Hi. I'm here. My daughter was laid off about two months ago from Groupon. She's a product manager and she's now quite worried, even though she's been interviewing every day, she's worried now that she's got this big competition and I didn't know what to tell her and what the future looks like.

Nancy Solomon: That sounds really hard.

James Fontanella-Khan: Yes. I'm sorry to hear that, Nicki. Sorry, I didn't want to cut you off.

Nancy Solomon: Did you want to ask a question or just to represent the realities of what's going on out there?

Nicki: Yes, that's basically what I wanted to do, is just to put it out there that it's going to be rough for everyone in tech.

Nancy Solomon: Of course, the tech sector in New York is huge. How long do you think this malaise, James, is going to last? Are we looking at a readjustment of the tech economy that's going to take a long time, or is there a possibility of these jobs bouncing back?

James Fontanella-Khan: A lot of people ask, for example, whether what we're experiencing now is similar to the .com bus in the early 2000, and it's impossible to tell, really, but I think there are some substantial differences, and these substantial differences I think might be good news for Nicki's daughter and for anybody who's just lost a job in the sense that these companies are way more robust, they're actually generating real profits in many cases. Back in the day, it was just basically, it was mainly a stock bubble whereas here you have actually much more real companies offering real services and we have come to be so much more dependent on tech services and what they offer us that it wasn't really true then.

The economy in itself isn't actually doing that bad. In terms of employment statistics, we're still at a relatively low level of unemployment, all things considered. There's a lot of industries where people are looking for people to employ, and especially they're looking for people who have tech skills because pretty much now every company, even if you're not a "tech company" like Facebook or Google, they depend heavily on technology. What might change, and I think that might be the harder part, is people's expectations on pay.

If you were working for a tech company, your pay was probably significantly higher than average, and so if you're then having to go and work for a company that is not a "pure tech company", you might have to accept that you need to take a 20%, 30% pay cut. I don't think there's-- It's not as bleak as it feels right now. It is going to be bumpy, it is going to be tough because even if inflation came down a tad today, we should-- There's no sense of the central bank that the Fed is going to lower rates anytime soon. In fact, it's likely to increase rates furthermore, especially because it wants to remove some of the overheat as economists call it.

The system has been overheating over the last 10 years when again, there was a lot of so-called free cash coming from the Fed and other central banks around the world.

Nancy Solomon: Nicki, thanks so much for your call, and of course, good luck to your daughter. This is WNYC FM, HD and AM, New York, WNJT-FM 88.1 Trenton, WNJP 88.5 Sussex, WNJY 89.3 Netcong, and WNJO 90.3 Toms River.

This is New York and New Jersey Public Radio. We're talking about the takeover of Twitter and ripples across the tech industry. James, tell us about what's going on with the blue check, that now they're going to try to get people to pay for having that verified blue check. Tell us about the blue check, how it works, what it is, and then we can pick apart what's going on now with it.

James Fontanella-Khan: Absolutely. Anybody who uses Twitter now and wants to make sure they are-- it's a way of proving that you are a real person, and so you basically sign up for free, at least you did until very recently, a form online that allowed people to make sure that you were a real person and not a bot. What Musk said is, I don't think this is working out. In fact, I want to offer a premium script subscription. Bear in mind that Twitter already offered a subscription model called Twitter Blue, which used to be offered at 4.99 a month.

It gave you a bunch of services, including an edit button. It's one of those annoying things, if you don't have it, if you make a typo, it stays or you've got to delete the whole thing. You can't edit it. He's now saying, in addition to these services, we are also going to, if you want to be verified, if you want to have that blue tick, you need to pay $8 a month. Some people feel like that is completely reasonable.

Twitter is offering a service, because part of the debate, let's not forget, I think it's important to underline this. At the moment, some of the critics of social media companies broadly is that the users are the business model in the sense that they mine our data and sell that data to advertisers. If we went into a model where we're actually paying for the service, we would stop being the business model, the users, and actually, we'd just be customers who are paying for a service and we'd get greater protection.

That's part also of the discussion that Musk is having internally, and he says, "If you don't want to pay for it, then go somewhere else, but I'm trying to build a sustainable business, and if you like using Twitter, pay for it." Whether a lot of people will want to do that is to be seen. Another issue, I think, that's important to clarify, if you decide not to pay these $8 per month, you can still use Twitter, you just won't be verified. That might or might not have an impact further along the line in terms of how your posts get moderated and where they get placed in the general algorithm. We don't know the exact outcome.

Nancy Solomon: Okay, we're almost out of time. Let's squeeze in one more caller. We have Abby in Tribeca, you're on the air.

Abby: Hi, thank you. This is a really great talk. A couple of points and then two questions. Inflation cooled in October and the consumer price Index rose about 7.7%, so to your point, things actually aren't as bleak as we think. My question is around, what you would advise-- I have a couple of friends who actually lost their jobs at Meta and at Twitter. What would you advise in terms of their transferable skills in the marketplace and what do you think is the timeline for the market to recover to be able to hire these folks? That's number one, and then on the verification side, I did some rough math, about 400,000 verified users on Twitter. At $20 a month, you're looking at about $96 million a year.

It's a drop in the bucket, but what I love about that is that it shifted the focus of the product from our data to the platform and our ability to pay for the platform. My question is, do you think that the success of this transfers to other social media platforms and taking into consideration some of our habits? We saw the devaluation of Clubhouse because we started to become more mobile again. Those are my two questions around the product transference [crosstalk]

Nancy Solomon: I'm afraid we're running out of time, so let's get an answer for you before James has to leave. Thanks for your call, Abby.

James Fontanella-Khan: Thank you for the great question. Quickly, skills, anybody who works in the tech industry has skills that most companies are dying for, as I said earlier. You can transfer those skills into other companies that are not purely tech companies. As you mentioned, this is not a crisis, it's not 2008, it's not the .com bubble of 2000, so it's not as bleak as it seems. On the verification, I agree. It is a model. Whether this model will be copied by other companies, say the Metas of this world, I don't think so, partly because the advertising business is still incredibly lucrative and so I think it will be the backbone for most other social media companies. I don't know if we have more time, but I tried to be as brief as possible.

Nancy Solomon: We're trying to get you back out the door, so if you want to make one more point, go ahead.

James Fontanella-Khan: I think the broader point is, what is going on in the tech sector looks bad, but I think even just today, on the back of the news that inflation has come down a bit, tech stocks were rallying at plus 5%, 6%, 7%. That shows you how quickly things can-- in fact, the Nasdaq today is up 5.7% in real time, so that is unusual. It's slightly, freakishly, scary to see the index go up so much in one day.

I think it shows the markets are dying for some good news, and fundamentally, these companies are still very good companies with excellent talent. As Musk did, he fired a lot of people then he started rehiring them. If things start turning in the right direction, the measures of the Fed is taking work. We are likely to see people getting rehired very quickly. I think the takeaway is it doesn't look good right now, but it's not likely to persist long-term.

Nancy Solomon: I'm very happy to end on a note of optimism. Thank you so much. My guest has been James Fontanella-Khan, US Corporate Finance and deals editor at the Financial Times. James, thanks so much for joining us today.

James Fontanella-Khan: Thanks for having me, and have a great day.

Copyright © 2022 New York Public Radio. All rights reserved. Visit our website terms of use at www.wnyc.org for further information.

New York Public Radio transcripts are created on a rush deadline, often by contractors. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of New York Public Radio’s programming is the audio record.