 All right, let's quickly say something about Musk buying Twitter and then I'll go to your questions because I know there are a lot of them now Please no more Under $20 questions because I do I don't want to make the show too long and we're already at 866 and I Am starting to feel like maybe I'm losing my voice and I don't want to get to the point where I actually am losing my voice All right. So Musk has put in an offer to buy Twitter Which is pretty amazing It's about 50 billion dollars. This is his own money I don't know of another example of an individual buying a company for this kind of money I would have to do my research to figure it out but You know, but I I Don't I don't know It is partially amazing because of The the rationale that Elon Musk is using is using the rationale of he wants Twitter to be better not more profitable and necessarily just better In terms of being a better platform for speech I think it's a great motivation Particularly for private investor who doesn't have shareholders and it doesn't have to worry about how we use the shareholder money I think it's great that a private individual wants to wants to change direction of a company What's to use it for what he sees is the good? I think this is phenomenal as I said on my show on muskin Twitter last time I think this is a great example of how capitalism works. It doesn't just work to You know promote Materialistic values it also works to promote other values and here you get an example of Somebody trying to promote a society with more speech rather than less I think that's incredibly noble and good And that's what Elon Musk is doing and he's willing to engage in a hostile takeover in order to achieve it That is a beautiful thing. I think what's happening with muskin Twitter is a validation of capitalism a validation of How capitalism works and the efficaciousness of capitalism whether he succeeds or fails It is such a validation because the fact is that He'll probably fail because of a lack of capitalism and I'll explain in a minute in in in the world in which we live So You know a lot has put in a significant bid a significant premium on what the stock was pre trading at But why did he put in this bid because of course the bid now makes it clear what his aims are? the bid also You know Gives an opportunity for other bidders to get organized and to potentially outbid Elon The bid also makes it possible for the company itself to defend itself and it already has it is I think it has already voted to put in a poison pill or is at least talking about Putting in a poison pill so You know that is It is a It's a significant issue. So we'll get to what what a poison pills and how they work But the fact is that the fact that he had to make up a bid for the company Um gave the company enough time to put together a defense and in this case the defense is the poison pill So why did he have to put in a bid for the company? Because of security law Basically in 1968 securities law Prevent somebody from stealthily stealthily just means on the quiet and the hush hush buying 60% of 51% sorry 51% of a company and firing its CEO before 1968 That could be done and indeed that was done. It was done regularly in corporate America companies were bought out by the buyer buying 51% of a company without Disclosing the fact that it was doing so and then basically once it reached 51% firing the CEO and Declaring that it now owns this this company CEOs CEOs of companies that were afraid of being bought out note that there's something like that happens if you're buying 51% of a company on the quiet necessarily bids up the price of the stock So you have to be willing to put more and more and more of your own money into buying the stock and you buy 51% And then you have to believe that the stock is worth more than what you paid for to justify this Which means that you believe that management were not doing a good job maximizing the profit-generating Potential of the assets of the company and that's what was going on It was a huge era of takeovers during the 1960s in which Companies were taken out Because the belief was they were mismanaging the assets You could argue Twitter is Mismanaging the asset that it has Twitter is not a particularly if at all profitable companies even on the basis of profit Not just on the basis of speech Twitter is not doing a great job So in 1968 because manages lobbied Congress to protect themselves Congress passed the 1968 security law. This is the exam. This is a real example of cronyism This is an example of managers CEOs Lobbying Congress to protect themselves all in the name of shareholders and what they said was what the law says was is That you cannot accumulate stock without letting the world know why you are accumulating it and if you want to maintain if you want to get control of a company The only way to get control over a company is To do what's called a tender offer to publicly announce that you want to take over the company and Yeah, it's called the Williams Act You want to take over a company and You're willing to pay X for it and the reasoning they gave the reason why this was presented as good for shareholders is one You would have to pay More shareholders, you wouldn't just pay Incrementally a little bit more as you gain towards 51% You would accumulate stock next say up until 10% because 10% you would have to make your intention public And then anything beyond that you would have to pay this tender price Which would have to be significantly eyes shareholders would get more but more than that It would open up the company forbidding because now other people would know that you're interested in this company And they could then step in and say well, we're willing to give you willing to give 40 will give 42 And then there'd be a bidding war that would drive the price up So this is supposedly good for shareholders and indeed for some shareholders It is very good for companies that are way undervalued and where there's a lot a lot of buyers and a lot of people would want to buy them There is a this would Increase the share price on the other hand for companies that are marginal for companies that you won't don't expect a lot of bidders Like I think Twitter You're not gonna get a significant increase and at the margin a lot of people are not going to take over the company because of How expensive it was now from 1968 till the 1970s You so significant decline in hostile takeovers in the United States because of this and then the 1980s People found a way around this primarily by raising cheap capital called at the time junk bonds or high-yield bonds What you what you got is a whole new generation of corporate raiders People who would come in buy up companies break them up sell off the assets make a fortune kind of people that other people's money the movie celebrate and The 1980s were period in which this was celebrated this was amazing This was American capitalism in in a sense in this sector at least reborn American conglomerates being Broken up in my view. This is one of the great errors in American history Into in American financial history and a great error for for American business. It's an error in which we went from inefficient cumbersome Conglomerates to efficient competitive Incredibly profitable businesses of the 90s and 2000s well in the 90s Companies came up with this idea of a poison pill poison pill is basically where the board decides That it is going to give preferential treatment To other shareholders other than the one making the tender offer So they would issue new shares at a very low price and By doing so dilute but issue new shares that the new that they tend to the person tendering for the company Didn't have access to was discriminated against and issue these shares at very low price Encourage all of the shareholders to buy into them and therefore dilute the share ownership of the guy who is tendering and Therefore make it prohibitively expensive for them to actually buy the company out Initially, this was fought in court because it you would think that this would be illegal This is against their fiduciary duty to protect shareholders This is a killer of hostile takeovers, which are very friendly to shareholders And indeed there were courts that determined that it was a violation of the fiduciary duty of the board but then The most important court in the land When it comes to corporate governance the most important court in the land when it comes to these kind of issues is The Supreme Court of the state of Delaware The Supreme Court of the state of Delaware ruled that poison pills were okay, and as a consequence of them being okay They are now Everywhere and indeed if you look at the last 20 years, we've had very few hostile takeovers that whole idea of American Finance restructuring American business of American finance using capital to complete the Reorient American business towards maximizing shovel to wealth towards profit maximization That went away. One of the reasons we've seen so much slow economic growth theme master Thank you really appreciate that one of the reasons. We've seen so much slow economic growth over the last 20 years is I think because finance has been neutered The ability of financiers to restructure American business has been neutered and And and and that's what we're seeing. That's what we're seeing right now So Twitter is using why the reason by the way that the Delaware Supreme Court is the court that matters is Because the Delaware because almost every major corporation in the United States is Incorporated in Delaware The reason every major corporation in the United States is incorporated in Delaware therefore corporate governance is determined by the courts in Delaware is because Delaware courts are very friendly towards management And therefore management has a huge incentive to Incorporate in Delaware So there you have it a quick lesson on corporate governance in America It's perversion. I think and it's distortion The lack of freedom in accumulating stock in order to buy The lack of freedom in takeovers The basic disappearance of hostile takeovers, which is what we're seeing now Elon Musk trying to take over Twitter is hostile because the Twitter board does not want him to It's hard to see a path by which Musk actually succeeds because Sadly The courts have given boards of directors almost unlimited power To stop people like Elon Musk from taking over their businesses. I think this is a disaster I think this is horrible not just because of Twitter, but more broadly for American business We will continue to pay the price for this for decades to come It is a this is a exact example of the kind of Regulation that most of us don't even know exists. Most of us don't even know is out there and yet Really limits the ability of markets to function properly function properly so It's unlikely Musk is going to be able to succeed if he does succeed Then I think it becomes interesting Because one of the things I think Musk will discover if he takes on Twitter is how difficult the job is It's not difficult to job as well Well, I think Twitter can probably be run much better than it is. I don't think This issue of speech on Twitter is easy to solve. I Don't think it's something that you can just do like that There's some simple principles some simple rule you can impose this requires deep hard Thinking it requires thinking about the kind of culture you want to have the kind of speech you want to have It requires rules that are transparent and objective which are not easy to formulate And I think Musk will discover that and that's good Let Musk use his IQ and let him bring the best people he can find to try to deal with it but So shaking up social media like this who would be a terrific thing would be fantastic, right? You can have any speech you want except threats on your property not on somebody else's that's the difference so What kind of speech should you be? Permitted to have on private property like Twitter is an interesting question, and it's not obvious what the answer is and it's not obvious that Elon Musk has the answers, but I do think that shaking it up to trying something new on this that that Doing it differently is something worth experimenting with But those of you think that this is easy and straightforward, I think under appreciate the issues involved and one of these days will get into those issues Maybe if Musk takes them over we'll get into those issues, but unfortunately. I don't think that's likely to happen But I don't think anybody has the answer to a clear answer to it. I'm sure people have the answer but It's a real challenge. It's a real challenge and be a successful company and make money Don't forget you have to do that as well your job is not To guarantee speech for everybody your job is to make money And so whether you can bet how you do all that in in a corporate structure on a platform like this Is super difficult and nobody else has been successful in creating an alternative Which I find interesting right if it was easy somebody would have done it and created a real alternative Thank you for listening or watching the Iran book show if you'd like to support the show We make it as easy as possible for you to trade with me. You get value from listening. You get value from watching Show your appreciation. 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