The ‘Great Punishment’ with Elon Musk, Mark Zuckerberg: Rich from the suffering of others, now panic when the fortune flies hundreds of billions of dollars

At the end of May, Elon Musk took some time off in the middle of the battle to try to shake off the Twitter acquisition. He offered a view on the country’s economic health, predicting that the US was falling into a recession. For his part, Musk has nothing to worry about. “This is actually a good thing,” he tweeted. “There has been a rain of money going on for too long. There needs to be some bankruptcy.”

But Musk has a reputation for being a good… bad judge. In March 2020, he announced that Covid-19 cases would go to zero, but that has never been the case. On the personal finance front, he was excited to embrace cryptocurrencies in 2021, just before they collapsed.

However, Musk’s predictions about the economy seem quite right. While there is no recession, the slowing economy has exposed the reality of the number of entrepreneurs – over the past decade, taking advantage of low interest rates, the shadow of technology and finance to their advantage.

Currently, tech stocks have been engulfed, the virtual universe is just beginning, crypto assets have evaporated, and many criminal investigations are underway. Bloomberg calls this The Great Comeuppance – “The Great Punishment” – something historic, unexpected with billionaires rising from the suffering of others.

Around the end of 2021 the economy will be shaped by inflation, rising interest rates and a return to post-Covid normal life. Many people believe that some digital coins are created to be worthless and that there is more to life than interactions in the digital environment. The economy has not yet reached the point of recession as predicted by Elon Musk, but it is also really bad. One thing Musk hasn’t predicted, however, is that such an economic backdrop would bring disaster for him personally.

In Musk’s case, he’s had a very bad 2022. Over the past year, his fortune has dropped 49%, or $133 billion, the largest in history. This comes at a time when the stock market plummets and demand for Tesla electric cars is also waning, Musk is taking out more debt and buying Twitter at a price above the times. Things have gotten worse since then, with Twitter on the verge of collapse and Musk warning the social network could go bankrupt. Tesla stock price is down 70% in the past 12 months.

Musk isn’t the only tycoon to witness the disaster. Mark Zuckerberg’s fortune also fell 64%, or $80 billion. The previous record was that Masayoshi Son lost $70 billion of his fortune in 2000, and the Japanese billionaire himself also had a very bad 2022.

Musk’s decline, like Zuckerberg’s, is related to a combination of unfortunate macro problems and an almost inexplicable development of self-destructive arrogance. Seeing Facebook’s dim growth prospects, Zuckerberg turned to a money-consuming field, involving virtual reality meeting rooms with legless cartoon avatars.

Jeff Bezos experienced a similar situation when his fortune fell 43%, equivalent to $ 85 billion when Amazon expanded too aggressively into virtual assistants, delivery robots, self-driving cars … and eventually they had to lay off people. .

Then comes cryptocurrencies, perhaps the most fragile portfolio at the most fragile time. Changpeng Zhao, CEO of Binance, said his fortune has dropped by 87%, or $83 billion, despite being a “face” in the industry and Binance is the largest cryptocurrency exchange in the world.

That doesn’t mean Zhao is immune to punishment. The US Department of Justice is investigating Binance for signs of money laundering, and the accounting firm Zhao hired to confirm its assets recently suspended crypto-related activities and removed Binance from the list. customer book on website. Zhao denied the money laundering allegations and said his exchange was fine. “The problem is with the accountants,” he said.

Those who once praised cryptocurrencies are in even worse shape. Among them are Alex Mashinsky (founder of Celsius – a bankrupt cryptocurrency lending company), Do Kwon (the founder of Luna is wanted globally) and Sam Bankman-Fried (the founder of FTX was recently arrested). extradited to the United States to await trial).

But it must be admitted that, although the tech elite lost billions of dollars, this “Great Punishment” is still milder for most people than the 2008 crisis. After the financial crisis jobs, unemployment rose, the stock market crashed, and millions of Americans lost their homes. In 2022, many Americans face rising prices, workers in the technology sector are laid off. However, the rest of the economy is fine with GDP continuing to grow and unemployment near historic lows.

Musk, Zuckerberg and others have reacted to swings in interest rates with an almost panicky attitude. That shows the fragility of these people’s success. “ The Fed needs to cut rates immediately ,” Musk raged on Nov. 30, repeating the theme several times in the days that followed. “ Beware of debt in turbulent macroeconomic conditions, especially as the Fed continues to raise rates ,” he tweeted on December 13, seemingly forgetting about the debt piling up on the balance sheet. Twitter math.

In fact, “The Great Comeuppance” is not quite, but largely a financial phenomenon. The very forces that have brought down Musk and his colleagues have contributed to eroding the cultural and moral authority of the venture capitalists that financed their success.

Marc Andreessen is the co-founder of venture capital firm Andreessen Horowitz, which invested in cryptocurrencies several years ago and is currently under investigation by the US authorities. Sequoia Capital, another top venture capitalist, became notorious for giving Bankman-Fried $150 million even though he was playing the game while giving a fundraising presentation. And Chamath Palihapitiya has seen his SPAC deals lose more than half of their value last year. Like Musk, Palihapitiya has blamed the Fed for his troubles and says no one is forcing investors into those stupid stocks.

Of course, it is possible that things as they are now will only be a fleeting matter. Musk still owns over $130 billion, and he’ll most likely figure out how to get rid of Twitter and stabilize Tesla eventually. Admittedly, most of us didn’t risk buying a failing social media company or taking a trillion-dollar public company into the virtual universe.

Source: Bloomberg