Philippa Kaur

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The playground rivalry between Mark Zuckerberg and Elon Musk dates back years—and in who-is-cooler-than-whom terms, Mr Musk usually wins easily. As an innovator, Mr Zuckerberg, co-founder of Facebook and boss of Meta, a social-media giant, has often been dismissed as a geeky dilettante in a hoodie. He has never received the Promethean kudos Mr Musk has for turning Tesla into a stallion of electric vehicles (EVs) and SpaceX into a rocket sensation. Mr Zuckerberg is notorious for his motto “move fast and break things”, which may have helped Facebook conquer the world but gave licence to critics to cast it as a social menace. Mr Musk is revered as a rule-breaker, plays up his bad-boy image and mostly gets away with it.Such was the tenor of their relationship when Mr Musk proposed a cage match with Mr Zuckerberg in June last year just before Meta launched a short-messaging app, Threads, to compete with Mr Musk’s Twitter (now X). Forget the physical fight that never happened. In business terms, even then Mr Musk had the upper hand. He was the richest man on Earth. Tesla’s market value, though falling, was higher than Meta’s. Its revenues were growing faster. Yet since then, he could not have kicked himself harder in the teeth. In the past few weeks Tesla has shocked investors with a horror-show earnings presentation. Mr Musk’s $56bn pay package from 2018 was rescinded by a judge, which has slashed his net worth. From America to China, his EVs have suffered recalls.Mr Zuckerberg, meanwhile, is punching the air. On February 1st Meta released earnings showing a staggering rise in sales and margins. Its market value has reached $1.2trn, exactly the level Tesla achieved at its peak in 2021, and more than twice what the EV-maker is worth now. To be sure, short-term measures of financial performance are not everything. But look at longer-term factors, such as the way both men run their businesses, treat their shareholders and customers, and respond to their own failures, and it is clear the fight is as good as over. Zuck has won.To understand why, start with the interplay between the way both gazillionaires control and run their companies. Each of them lords it over their firms in a way that makes corporate-governance advocates blanch: Mr Zuckerberg via a dual-share structure that gives him majority control of Meta; Mr Musk, by having everyone at Tesla in his thrall. But as Mr Zuckerberg has become more sensitive to his fellow shareholders, Mr Musk has become less so. That has had a big impact on performance.Mr Zuckerberg’s volte face started in 2022 when shareholders recoiled at the way he was blowing their money (and his) on moonshot projects like the metaverse, just as Meta’s core business was slowing. Instead of ignoring them, he listened. Since then he has changed his tune to focus on cutting costs, boosting profits, and using the cash to invest in artificial intelligence (AI) and the metaverse in a way that improves existing products as well as funding futuristic bets. Moreover, to convince shareholders he is not wasting their money, Meta will return more cash to them via share repurchases and pay the company’s first-ever dividend.Mr Musk has had no such epiphany. In the two years since Tesla’s share price peaked, he seems to have doubled down on disappointing fellow owners of the company’s stock. The sensible ones long for a cheap, mass-market EV. Instead Tesla is selling expensive ones at a margin-shredding discount. They want him to spend more time at Tesla, but he splits it with SpaceX and wastes it at (and on) X. They yearn for full-self-driving cars as the catalyst for a robotaxi revolution. Instead, even diehard fans were stunned recently when Mr Musk threatened to move his AI and robotics efforts away from Tesla unless he was given 25% voting control.That leads to a second big difference: motivation, which was the crux of the judge’s decision in Delaware on January 30th to strip Mr Musk of his gargantuan pay cheque. Mr Zuckerberg, as the judgment noted, receives no salary or share options. His 13% economic stake in Meta is the main incentive to come to work each day. Mr Musk, however, is different. Though his Tesla shareholding at the time meant he would become $10bn richer every time Tesla’s value jumped by $50bn, that wasn’t enough. Tesla’s board (many of whom the judge ruled were too chummy with Mr Musk to be independent) convinced shareholders that an extra incentive was needed to keep his nose to the grindstone: namely, the biggest payout in the history of public markets. Now that it has been voided, his motivation, presumably, is even more in doubt.Then there are both men’s attitudes to customers, which have also moved in opposite directions. Mr Zuckerberg was vilified for Facebook’s fast-and-loose approach to users’ data, content moderation and privacy. The concerns are still strong, especially when it comes to youngsters on social media. But Facebook now has an independent oversight board to rule on content decisions, and Meta says it has invested $20bn since 2016 in online safety. No doubt Mr Musk still has some loyalists as customers. But considering how many American EV owners lean Democratic, the more he rants on X, the more it is clear that he disdains their political opinions. The latest recalls are a further source of worry (though the problem can be fixed with a software update). In China, a huge market, he faces stiff competition. Meta, by contrast, credits Chinese advertisers with helping drive a big surge in ad revenues last year.Caged tyrant In a nutshell, as Mr Zuckerberg grows older, he appears to have learned from his mistakes. As Mr Musk grows older, he gets more puerile and distracted. His huffy reaction to the Delaware court’s judgment, threatening to up sticks and move Tesla’s incorporation to Texas, is a case in point. It indicates he wants the company’s shareholders to have even less protection from his capriciousness than usual. If anyone should get into the ring and hammer some sense into him, it is them. ■ More

America’s stockmarket is on a tear. Over the past three months the S&p 500 index of large companies has soared by nearly 15%, reaching a record high (see chart 1). Recent economic data support investors’ optimism. On February 2nd the Labour Department reported that 353,000 jobs were created in January, far more than expected. The economy grew by a healthy 3.3% (at an annual rate) in the final quarter of 2023. Despite that, inflation slowed to 2.6% on the Federal Reserve’s preferred measure, not far off its 2% target. Investors are now betting that by the end of the year the Fed will lower its benchmark interest rate from its current range of between 5.25% and 5.5% to below 4%, putting a rocket booster under America’s economy—and with it America Inc.image: The EconomistThis wager is not, however, by any means sure-fire. On January 31st Jerome Powell, chairman of the Fed, scuppered hopes of an imminent rate cut, arguing inflation was “still too high”. As cheap pandemic-era debts begin to mature, the interest bill on America’s $21trn pile of non-financial corporate debt will continue to creep upwards. Profits are more or less stagnant. In the final quarter of last year, which S&P 500 firms are currently reporting, they grew by a modest 1.6% year on year. What is more, three of the forces that propped up profits may now be weakening.One source of concern is America’s consumers. Some of the fuel that had sent consumption soaring, confounding expectations of a recession in 2023, is running out. The excess savings accrued by shoppers during the pandemic, thanks in part to government stimulus cheques, have now largely been spent, according to a recent paper by Francois de Soyres and co-authors from the Fed. Default rates on credit cards have been steadily rising. Student loan repayments, which resumed last October after the Supreme Court quashed a pandemic-era moratorium, are adding to pressure on pocketbooks.As a result, pedlars of discretionary goods are bracing for tough times. On January 23rd Wayfair, an e-emporium for furniture, announced it would lay off 13% of staff in response to “persistent category weakness”, just weeks after its boss sent an inspiring Christmas memo to staff extolling the joys of “working long hours” and “blending work and life”. On January 25th Levi Strauss, maker of America’s favourite jeans, said it expected its revenue to grow between 1% and 3% this year, below what analysts had anticipated, and announced it would fire 10% to 15% of its workforce. On January 30th Whirlpool, a maker of home appliances, said it expected like-for-like sales to be flat in 2024.That same day Mary Barra, boss of General Motors, America’s biggest carmaker, cheerily predicted that the number of cars sold in America would rise by 3% this year—not bad, but well below last year’s 12% increase. And prices are expected to fall to bolster demand, squeezing margins just as carmakers are digesting higher costs from a new wage deal won by their unionised workers late last year. American consumers are also switching more slowly to pricier electric vehicles (EVs) than carmakers had anticipated. On January 24th Tesla, America’s EV champion, warned that its growth “may be notably lower” this year. Its shares plunged by 12% in response, wiping $80bn from its market value.Even sellers of consumer staples are signalling caution. Over the past two years manufacturers of packaged food and sundry home essentials have managed to protect profits from rising costs by jacking up prices without crushing demand. That strategy now looks to be running out of road. On January 26th Colgate-Palmolive, a purveyor of toothpastes, said it expected sales to grow between 1% and 4% this year, down from 8% last year. On January 30th Mondelez, a confectioner, estimated revenue growth for 2024 of 3-5%, down from 14% in 2023.A second worry for some companies is the health of consumers in China. A collapse in the country’s property sector has weighed on consumer sentiment. In December Nike’s share price plunged after it reported slowing sales growth in China as a result of “increased macro headwinds”. An order by a Hong Kong court on January 29th compelling Evergrande, once China’s biggest property developer, to liquidate could further dampen the mood. The next day Laxman Narasimhan, boss of Starbucks, an American coffee chain, warned that “a more cautious consumer” in China was weighing on its growth. Although Apple, the iPhone-maker, managed to notch up year-on-year 2% growth in the final quarter of last year, its sales in China slumped by 13%. For Apple, Nike and Starbucks, stiffening local competition is adding to their woes.image: The EconomistBack at home, America’s manufacturing boom also looks to be slowing—a third source of concern for the year ahead. In the first half of last year monthly factory construction in America surged by 17%, adjusting for inflation. In the second half this growth slowed to 8% (see chart 2). TSMC, a Taiwanese chipmaker, announced on January 18th that it would delay the opening of a second semiconductor factory in Arizona by one or two years. It had already delayed the first in July. On February 1st it was reported that Intel, an American chip manufacturer, would delay the opening of a factory in Ohio. That may be because subsidies promised by the Biden administration have been slow to materialise. Of the $52bn designated in the CHIPS Act for supporting domestic semiconductor production, only a small fraction has been allocated so far. American carmakers are also postponing investments in EV production in response to disappointing demand. That could start to weigh on the factory builders and suppliers that have benefited from the boom.I think AI canOne area of activity that shows no sign of slowing down is artificial intelligence (AI). Amazon, Alphabet and Microsoft—America’s cloud-computing triumvirate—reported year-on-year growth in their cloud divisions of 13%, 26% and 30% for the final quarter of last year, powered in part by increasing demand from customers for the computationally hungry technology. All three told investors that their lofty ambitions for AI would lead them to increase their capital investments in the year ahead. On February 1st Meta, which also harbours AI ambitions, reported blockbuster earnings and said it would spend up to $37bn this year, a lot of it on data centres to train and run AI models. In contrast to its previous investment binge, on its unloved virtual-reality metaverse, investors lapped it up—as they did news that the company would buy back more shares and pay out its first-ever dividend. The next day Meta’s market value soared by nearly $200bn, to $1.2trn, the biggest one-day jump in Wall Street history.It may be some time, however, before the rest of corporate America sees a boost to the bottom line from AI. According to a recent survey by BCG, a consultancy, only 5% of companies are doing nothing whatsoever with the technology. But 71% are merely “pursuing limited experimentation and small-scale pilots”. As America Inc runs low on other fuel, more such pilots may be needed to ensure a smooth journey ahead. ■ More

America’s stockmarket is on a tear. Over the past three months the S&p 500 index of large companies has soared by nearly 15%, reaching a record high (see chart 1). Recent economic data support investors’ optimism. On February 2nd the Labour Department reported that 353,000 jobs were created in January, far more than expected. The economy grew by a healthy 3.3% (at an annual rate) in the final quarter of 2023. Despite that, inflation slowed to 2.6% on the Federal Reserve’s preferred measure, not far off its 2% target. Investors are now betting that by the end of the year the Fed will lower its benchmark interest rate from its current range of between 5.25% and 5.5% to below 4%, putting a rocket booster under America’s economy—and with it America Inc.image: The EconomistThis wager is not, however, by any means sure-fire. On January 31st Jerome Powell, chairman of the Fed, scuppered hopes of an imminent rate cut, arguing inflation was “still too high”. As cheap pandemic-era debts begin to mature, the interest bill on America’s $21trn pile of non-financial corporate debt will continue to creep upwards. Profits are more or less stagnant. In the final quarter of last year, which S&P 500 firms are currently reporting, they grew by a modest 1.6% year on year. What is more, three of the forces that propped up profits may now be weakening.One source of concern is America’s consumers. Some of the fuel that had sent consumption soaring, confounding expectations of a recession in 2023, is running out. The excess savings accrued by shoppers during the pandemic, thanks in part to government stimulus cheques, have now largely been spent, according to a recent paper by Francois de Soyres and co-authors from the Fed. Default rates on credit cards have been steadily rising. Student loan repayments, which resumed last October after the Supreme Court quashed a pandemic-era moratorium, are adding to pressure on pocketbooks.As a result, pedlars of discretionary goods are bracing for tough times. On January 23rd Wayfair, an e-emporium for furniture, announced it would lay off 13% of staff in response to “persistent category weakness”, just weeks after its boss sent an inspiring Christmas memo to staff extolling the joys of “working long hours” and “blending work and life”. On January 25th Levi Strauss, maker of America’s favourite jeans, said it expected its revenue to grow between 1% and 3% this year, below what analysts had anticipated, and announced it would fire 10% to 15% of its workforce. On January 30th Whirlpool, a maker of home appliances, said it expected like-for-like sales to be flat in 2024.That same day Mary Barra, boss of General Motors, America’s biggest carmaker, cheerily predicted that the number of cars sold in America would rise by 3% this year—not bad, but well below last year’s 12% increase. And prices are expected to fall to bolster demand, squeezing margins just as carmakers are digesting higher costs from a new wage deal won by their unionised workers late last year. American consumers are also switching more slowly to pricier electric vehicles (EVs) than carmakers had anticipated. On January 24th Tesla, America’s EV champion, warned that its growth “may be notably lower” this year. Its shares plunged by 12% in response, wiping $80bn from its market value.Even sellers of consumer staples are signalling caution. Over the past two years manufacturers of packaged food and sundry home essentials have managed to protect profits from rising costs by jacking up prices without crushing demand. That strategy now looks to be running out of road. On January 26th Colgate-Palmolive, a purveyor of toothpastes, said it expected sales to grow between 1% and 4% this year, down from 8% last year. On January 30th Mondelez, a confectioner, estimated revenue growth for 2024 of 3-5%, down from 14% in 2023.A second worry for some companies is the health of consumers in China. A collapse in the country’s property sector has weighed on consumer sentiment. In December Nike’s share price plunged after it reported slowing sales growth in China as a result of “increased macro headwinds”. An order by a Hong Kong court on January 29th compelling Evergrande, once China’s biggest property developer, to liquidate could further dampen the mood. The next day Laxman Narasimhan, boss of Starbucks, an American coffee chain, warned that “a more cautious consumer” in China was weighing on its growth. Although Apple, the iPhone-maker, managed to notch up year-on-year 2% growth in the final quarter of last year, its sales in China slumped by 13%. For Apple, Nike and Starbucks, stiffening local competition is adding to their woes.image: The EconomistBack at home, America’s manufacturing boom also looks to be slowing—a third source of concern for the year ahead. In the first half of last year monthly factory construction in America surged by 17%, adjusting for inflation. In the second half this growth slowed to 8% (see chart 2). TSMC, a Taiwanese chipmaker, announced on January 18th that it would delay the opening of a second semiconductor factory in Arizona by one or two years. It had already delayed the first in July. On February 1st it was reported that Intel, an American chip manufacturer, would delay the opening of a factory in Ohio. That may be because subsidies promised by the Biden administration have been slow to materialise. Of the $52bn designated in the CHIPS Act for supporting domestic semiconductor production, only a small fraction has been allocated so far. American carmakers are also postponing investments in EV production in response to disappointing demand. That could start to weigh on the factory builders and suppliers that have benefited from the boom.I think AI canOne area of activity that shows no sign of slowing down is artificial intelligence (AI). Amazon, Alphabet and Microsoft—America’s cloud-computing triumvirate—reported year-on-year growth in their cloud divisions of 13%, 26% and 30% for the final quarter of last year, powered in part by increasing demand from customers for the computationally hungry technology. All three told investors that their lofty ambitions for AI would lead them to increase their capital investments in the year ahead. On February 1st Meta, which also harbours AI ambitions, reported blockbuster earnings and said it would spend up to $37bn this year, a lot of it on data centres to train and run AI models. In contrast to its previous investment binge, on its unloved virtual-reality metaverse, investors lapped it up—as they did news that the company would buy back more shares and pay out its first-ever dividend. The next day Meta’s market value soared by nearly $200bn, to $1.2trn, the biggest one-day jump in Wall Street history.It may be some time, however, before the rest of corporate America sees a boost to the bottom line from AI. According to a recent survey by BCG, a consultancy, only 5% of companies are doing nothing whatsoever with the technology. But 71% are merely “pursuing limited experimentation and small-scale pilots”. As America Inc runs low on other fuel, more such pilots may be needed to ensure a smooth journey ahead. ■ More

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Listen to this story. Enjoy more audio and podcasts on More

“FREEDOM GAS” saved Europe from an energy crisis. The old continent’s imports of American liquefied natural gas (LNG), first equated with liberty by Donald Trump’s administration in 2019, ballooned from 16m tonnes in 2021, the year before Russia invaded Ukraine and all but stopped piping gas to Europe, to 46m tonnes last year. The decisions to redirect LNG cargoes destined for Asia and elsewhere to Europe were made by private companies. But they enjoyed strong official support from Mr Trump’s successor, Joe Biden. So did LNG exports more broadly, turning America into the world’s biggest exporter, ahead of Qatar and Australia.On January 26th Mr Biden threw a spanner in the gasworks. He announced a “temporary pause” on pending LNG-export projects such as gas terminals, so that officials can scrutinise their economic, security and environmental impact. The decision is not an export ban and does not halt initiatives that have already been approved by the Department of Energy. But it does freeze a few big proposed but unapproved projects that would benefit countries which do not have free-trade agreements with America (a large group which includes big markets in Europe and Asia).The move delighted those climate campaigners who claim that LNG is not about freedom but about locking economies into continued dependence on fossil fuels. It disappointed the more level-headed sorts who see natural gas as a cleaner “transition fuel” that would help ease the shift to greener energy, especially in light of Mr Biden’s efforts to crack down on methane, a powerful greenhouse gas that can leak during the production and transport of the fuel. To America’s allies, it was another example of how the superpower is becoming an ever more unreliable partner.For Mr Biden, though, it was all about politics. To stop the war in Ukraine from disrupting energy markets, his administration has overseen a big expansion in domestic fossil-fuel output. As well as being the world’s top LNG exporter, America continues to be the biggest oil producer. That angers the climate-anxious left wing of Mr Biden’s Democratic Party. In announcing the pause, Mr Biden adopted its language. His decision, he said, “sees the climate crisis for what it is: the existential threat of our time”. The head of a big environmental group calls it “a big win for progressives in an election year”. Bill McKibben, an influential activist behind a campaign to end LNG exports, declared that “We all just won…I have a beer in my hand”.Mr McKibben may want to keep that beer on ice. As Joseph Majkut of the Centre for Strategic and International Studies, a think-tank, wryly points out, the impact of the pause on global markets—and thus on global emissions, which is what matters to the climate—will be minimal. Forgone American exports will be offset by fresh supplies from Qatar, Australia and elsewhere. “I think there is an opportunity,” declared Jonathan Wilkinson, Canada’s energy minister, on January 30th.Moreover, American hydrocarbons will wash over world markets, pause or no pause. Should the carbon-cuddling Mr Trump return to the White House, which polls suggest is as likely as not, America will drill, baby, drill. Even if Mr Biden staves off the Trumpian challenge, America will keep producing lots of LNG. The approved projects alone would propel American exports to a level 50% above those of Qatar, a gas superpower, by 2030.And if the extra scrutiny of projects pledged by Mr Biden, combined with his methane crackdown, leads to further reductions in the carbon-intensity of American LNG, that would make the stuff more competitive in places like Europe and Japan, which want their fuel produced in the cleanest way possible, argues Amy Myers Jaffe of New York University. The movement that sought to topple America’s LNG industry would then, in other words, shore it up instead, while damaging American alliances, which some of the same left-wingers would prefer to preserve. Mr McKibben had better enjoy a bitter. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More