By Max Chafkin
In late May, Elon Musk took a break from trying to get out of his purchase of Twitter to offer his view of the nation’s economic health. He predicted that the US was careening toward a recession. No worries for him, though. “This is actually a good thing,” he tweeted. “It has been raining money on fools for too long. Some bankruptcies need to happen.”
Musk is, somewhat infamously, frequently off-target when it comes to predictions, as anyone waiting for his years-late electric pickup truck or a ride in one of his nonexistent 600-miles-per-hour trains knows well. He’s also missed on topics such as epidemiology (in March 2020, Musk declared that Covid cases were heading “close to zero”), personal finance (he embraced cryptocurrencies in 2021, just before they crashed) and politics (he predicted a “massive red wave” for the midterm elections ahead of an historic overperformance by Democrats).
___STEADY_PAYWALL___But Musk’s forecast for the economy turned out to be pretty solid. While there’s no recession, an economic slowdown has indeed exposed a number of entrepreneurs who, for the past decade, took advantage of low interest rates, bubbles in tech and finance and a self-reinforcing media environment to convince themselves of their own genius and then to profit from their hucksterism.
Now tech stocks have nose-dived, the metaverse is floundering, crypto fortunes are crumbling, and criminal investigations are pending. Call it the Great Comeuppance—a sudden and historic opportunity for billionaire schadenfreude. The period began in late 2021 and has been defined by persistent inflation, rising interest rates and a return to certain pre-Covid norms—among them, the belief that made-up currencies might be worthless and that there’s more to life than interacting as a digital floating torso. The problem with Musk’s prediction was his failure to realize that these economic shifts had the potential to make him look like a fool, too.
Musk had, in case you weren’t paying attention, a very bad 2022. Over the course of the year, his net worth fell by 49%, or $133 billion—the biggest loss ever on the Bloomberg Billionaires Index. At exactly the time that irrational gambling on the stonk market was falling out of fashion and demand for Tesla Inc.’s electric vehicles was fading, he loaded up on debt and doubled down on his own status as the meme-stock master of ceremonies by agreeing to a hastily conceived buyout of Twitter for an inflated price. It’s been basically downhill ever since, with Twitter appearing to teeter on the verge of collapse and Musk warning of its possible bankruptcy. Tesla’s stock price is down 70% over the past 12 months.
Musk wasn’t the only overreaching titan taken down a few pegs. Mark Zuckerberg saw his net worth drop by 64%, or $80 billion, last year—itself an historic figure that’s substantially more than what had been regarded as the previous record wealth loss, Masayoshi Son’s $70 billion drop in 2000. (Son had a pretty terrible year, too, if not a record-setting one.)
Zuckerberg’s fall, like Musk’s, involved a combination of macroeconomic bad luck and an almost inexplicable flourish of self-destructive hubris. Seeing Facebook’s growth prospects diminished, Zuckerberg fixated on a novel, money-losing communication medium that for some reason involves virtual conference rooms full of cartoon avatars without legs. Jeff Bezos experienced a similarly epic net worth drop of 43%, or $85 billion, as Amazon’s wild expansion into all manner of businesses—voice assistants, delivery robots, self-driving cars, urgent care, retail stores, etc.— gave way to mass layoffs.
And then there’s crypto, perhaps the flimflammiest investment category in an age of extreme flimflammery. Changpeng Zhao, chief executive officer of Binance, saw his net worth decline by 87%, or $83 billion, even though he’s one of the industry’s grandees and Binance is the largest crypto exchange in the world. That doesn’t mean Zhao couldn’t experience an even greater comeuppance. The US Department of Justice has been investigating Binance for possible money laundering, and the accounting firm Zhao hired to verify his company’s assets recently suspended its crypto-related work and pulled its report on Binance from its website. Zhao has denied the money laundering allegation and said his exchange is fine. The problem, he’s said, is the accountants.
Other digital currency promoters have fared even worse. These include Alex Mashinsky (founder of Celsius, the bankrupt crypto lender), Do Kwon (creator of the failed cryptocurrency Luna who’s now an international fugitive) and Sam Bankman-Fried (recently extradited to the US on fraud charges related to the collapse of his cryptocurrency exchange, FTX). Kwon has denied wrongdoing. Bankman-Fried pleaded not guilty on Tuesday.
Even as tech’s elite loses money by the billions, the Great Comeuppance has been much kinder to the average person than 2008’s Great Recession. After the financial crisis, unemployment soared, the stock market tanked and millions of Americans lost their homes to foreclosure. In 2022, Americans had to cope with rising prices, tech workers were laid off in large numbers and the price of a Dogecoin fell. But most of the rest of the economy has been mostly fine, with gross domestic product continuing to grow and unemployment near historic lows.
Meanwhile, the current federal funds rate, 4.33%, isn’t especially high by historical standards. It’s a testament to the flimsiness of their success that Musk, Zuckerberg and others have responded to interest rates with something close to panic. “Fed needs to cut rates immediately,” Musk raged on Nov. 30, returning to the topic repeatedly in the days that followed. “At risk of stating obvious, beware of debt in turbulent macroeconomic conditions, especially when Fed keeps raising rates,” he tweeted on Dec. 13, seemingly forgetting his own decision to pile debt onto Twitter’s balance sheet.
The Great Comeuppance has largely, but not exclusively, been a financial phenomenon. The same forces that humbled Musk and his peers have helped erode the cultural and moral authority of the venture capitalists who financed their success. Marc Andreessen, the innovator behind Netscape and the co-founder of the venture capital firm Andreessen Horowitz, went all in on crypto several years ago, investing in companies that have seen the value of their tokens collapse or that have come under investigation by US authorities. Andreessen, once admired as one of the industry’s futurists, is now the industry’s get-off-my-lawn guy, raging constantly on social media about all things woke. Sequoia Capital, another leading VC, has become infamous for giving $150 million to Bankman-Fried even though he was playing video games during his pitch. And Chamath Palihapitiya, once seen as the Valley’s social conscience, is now better known for promoting a collection of controversial and lightly regulated public offerings known as SPACs to retail investors. His SPAC deals lost more than half their value last year. Like Musk, Palihapitiya has blamed the Fed for his troubles and has said that nobody forced the investors into those dud stocks.
The Great Comeuppance also came for American politics. Bankman-Fried, who was a major donor, has been charged with campaign finance violations in addition to wire fraud and money laundering, which threatens to destabilize candidates and interest groups that benefited from his largesse. Peter Thiel, who rode high during a frothy investment climate for tech stocks, watched as his protégé, Blake Masters, lost a Senate election and became a punchline for the failures of candidates who’d aligned themselves with former President Donald Trump. Early polls of the 2024 Republican presidential primary suggest that Trump’s own political future may be yet another casualty of the 2022 comeuppance. His Twitter competitor Truth Social repeatedly had to delay its SPAC merger to shore up investor support.
It’s possible, of course, that the current sense of populist vindication will prove fleeting. Musk is still worth more than $130 billion and may eventually figure out how to extricate himself from Twitter and stabilize Tesla. Trump looks like he’s fighting for relevance today, but his $99 crypto trading cards—known as NFTs and featuring the former president posing as a hunky cowboy, a hunky astronaut and a hunky superhero, among other hunky characters—shot up in value even as they were mocked by late-night comedians.
There’s also the likelihood that the Great Comeuppance could at some point widen its reach. Most of us haven’t trolled our way into the purchase of a flailing social media company or pivoted a trillion-dollar public company into the metaverse, but many of us did waste too much time on social media, perhaps taking some unnecessary financial risks along the way (by gambling on sports or stocks or real estate).
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