Why Elon Musk’s Twitter Poll Was Right
Elon Musk was right to hold a Twitter poll. 3.5 million people voted. He will now sell $20 billion of Tesla shares. This explains why.
Why Elon Musk’s Twitter Poll Was Smart Some of us awoke to the headline, “Tesla Share Price Slides After Musk Promises to Sell $21 Billion Stake.” Was this another of Musk’s “oops” moments, similar to smoking marijuana on a podcast or selling his only home? For the world’s wealthiest man, who also happens to crash on friends’ couches when he’s away from home, it begged the question of how outrageous a genius can get. Ostensibly, the purpose of the 10% share sale was to get liquid just in time to pay a higher Joe Biden tax bill. Most billionaires would have contacted our broker and placed a series of sell orders via a masked account, which we would have denied all the way to the bank (or the IRS).
He polled his followers on Twitter. “I was prepared to accept either outcome,” Elon Musk said following a Twitter poll asking users whether he should sell Tesla stock. The bad news is that Tesla Inc. shares fell 5.2 percent in brisk premarket trading Monday. The good news is that Twitter’s voters opted to have him dump it, as Gordon Gekko famously stated. Musk said participants in the poll backed a sale by 58% to 42%. More than 3.5 million votes were cast.
According to Sir Francis Galton, Musk is the smartest person in the room.
Oxen Weight Matters
Galton was a famous British scientist who accidentally observed a crowd at the annual West of England Fat Stock and Poultry Exhibition in 1906. Local farmers and townspeople gathered to judge the quality of cattle, sheep, chickens, horses, and pigs. Galton was a highly regarded 85-year-old statistician and researcher in the field of heredity, as well as Charles Darwin’s cousin. Galton was one of the first professional researchers in modern science to develop the theory of crowd wisdom, the foundation for every statistical finding we have today. (His research led him down some blind alleys, mainly regarding eugenics and race, typical in his time.) Nonetheless, society owes him a debt: he was the first to realize that optimal decisions require diversity of views and independent judgment.
While strolling through the fairgrounds, Galton noticed a crowd betting on the weight of an ox on a scale. Each entrant wrote the best estimate of the ox’s weight on a piece of paper, much like an election card at a voting booth. Indeed, Galton wrote, “the average competitor is probably as well equipped to judge the dressed weight of the ox as the average voter is to judge the merits of the majority of political issues.”
Over 800 individuals made educated guesses about the ox’s weight. Some had experience with livestock, while others had been away from the farm for two generations and had no idea how much an ox weighed. Galton compiled the 787 guesses (13 were illegible) and graphed them from highest to lowest to determine if a bell curve formed. Galton assumed that the average would be wildly incorrect — by a large margin. When he examined his graph, he discovered that “the crowd estimated the ox would weigh 1,197 pounds.
In reality, the ox weighed 1,198 pounds. The crowd was off by one pound.
Galton’s lesson is that “in the right circumstances, groups can be astonishingly intelligent, frequently smarter than their smartest members.” Even if the majority of members of a group are not particularly well-informed or rational, the group can still make a collectively wise decision.”
For groups to make sound judgments, we need vigorous debate, not cancel culture or safe spaces. The most intelligent group decisions happen when we are allowed to be our outrageous selves.
For Elon, that seems to come easy.