Two Freedom Portfolio holdings made news last night and this morning: Twitter (TWTR) and Tesla (TSLA). Here are some quick thoughts on each:

Twitter

Twitter released their Q1 earnings this morning, and the market seems to like what it has seen, as the stock is up around 10% as of the time of this writing. I can understand why, and overall it was a pretty decent report, but I found myself a little disappointed. Why? Because the focus seems to be more on making money rather than user growth. Obviously making money is huge and the ultimate goal of every company, but part of my investment thesis for Twitter was the opportunity to grow its user base. I looked at the hundreds of millions of users that Twitter had compared to the billions that Facebook (FB) had and wondered why Twitter couldn’t get there too. I personally find Twitter to be so much more useful and irreplaceable than Facebook or Instagram. Apparently billions of people disagree with me.

Twitter has moved the goal posts yet again. It’s no longer about Monthly Active Users (MAUs) or Daily Active Users (DAUs), it’s about Monetizable Daily Active Users (mDAUs). Is it a better metric? It could be, but it definitely shows where the focus of the company is right now. There is no incentive to grow the user base unless that user can be monetized. There’s nothing necessarily wrong with that, but it does seem to be a shift in thinking that Twitter is no longer a growth company doing everything it can to grab market share, but instead is working towards becoming a more mature (and profitable) company. It could still be a good investment going forward, but I think it deserves a re-evaluation by me to see if I still want to keep it in the Freedom Portfolio.

One more concern:

We are taking an even more proactive approach to reducing abuse on Twitter and its effects in 2019. Improvements in Q1 emphasized proactive detection of rule violations and physical, or off-platform, safety — including making it easier to report Tweets that share personal information, helping us remove 2.5 times more of this content since launch.

Twitter Q1 2019 Letter to Shareholders

A lot was made in the shareholder letter of how much content that Twitter was taking down in order to help foster a healthier discourse. I’m all for higher quality content and against abusive messaging, but I really hope Twitter is keeping a close eye on whether or not they are removing the right content and not just more content. We’re told that 2.5 times more content is being removed and we’re supposed to trust that that is a good thing. It very well could be, but if incentives aren’t aligned properly and the main metric of success is removing more content and not just the right content, then that’s not a good thing and is one more example of growth being de-emphasized.

And by “right content”, I’m not making any allusions to political content or any judgement on any bias against conservatives that many people think that Twitter has. I will note, however, that I believe that the major social media companies underestimated the quagmire they were stepping into when they decide to more heavily police their content. Twitter and Facebook are private companies who can enforce whatever standards they want and aren’t bound by things like the First Amendment, but once they decided to take a stand on things like fake news and harassment and hate speech, they entered a very murky and uncertain area. One person’s hate speech is another person’s freedom of speech, and almost every decision is bound to anger one side or another. It’s telling that both sides of the political aisle seem to have the social media companies in their sights now. It’s not a good position to be in, and I consider it to be a major liability for Twitter going forward.

Tesla

Tesla held an Autonomy Investor Day yesterday where they released more information about Tesla’s pretty ambitious plans for a self-driving taxi fleet within a year. Part of my long term investment thesis for Tesla was the hope that they could take the lead in self-driving cars due to the amazing amount of data collected from their auto-pilot functionality. In essence, I saw Tesla as running a mass market beta test to iron out the flaws in their system. I thought that could give them the ability to catch up with competitors like Alphabet’s (GOOG) Waymo which might be ahead.

None of that thinking has changed after last night. The biggest news coming out of that event seems to be that Elon Musk has claimed that this could all happen as soon as next year. That seems wildly optimistic, and something that isn’t news is that Elon Musk tends to be wildly optimistic. The market seems similarly unimpressed, as Tesla is down a bit as of this writing. It’s been a bit of a trend in 2019, as Tesla is down around 16% year to date.

I’m generally a fan of Elon Musk, and I’m a fan (and shareholder) of Tesla. However, I worry sometimes that Musk (and by extension Tesla) are too concerned about “burning the shorts” and focused on short term share price instead of the long term health of the company. Pretty much everybody knows Tesla won’t have fully automated robo-taxis in a year, so why throw out that goal? At this point, I really do think it would be in the best interests of Musk and Tesla for Musk to step down as Chief Executive Officer and instead become something like a Chief Evangelical Officer. That way Tesla can have a less controversial leader who can set more realistic goals and make the right decisions for the company both long and short term while still benefiting from the aura and optimism of Elon Musk.

Plus, it would give Musk more time to spend on SpaceX… or maybe even get some sleep.