Should a CEO Manage Two U.S. Companies From Africa? MBA Faculty on Jack Dorsey’s Plans for Twitter and Square
What MBA program would teach that it’s OK for a CEO to run not one, but two billion-dollar companies headquartered in the United States on a part-time basis—and do it all while living in Africa?
This prospect of absentee corporate governance from nine time zones away seems difficult to fathom. Yet in December 2019, that’s exactly what one Silicon Valley tech CEO announced plans to do for up to six months during 2020. The reaction was swift—but believe it or not, several news outlets responded to this controversial move positively, citing reasons supporting the CEO’s plan.
Meanwhile, outspoken professors at two top business schools weighed in with their emphatic analysis.
Read on to discover the arguments for and against this CEO’s controversial plan.
What Sort of CEO Might Manage Two U.S. Companies While Living in Africa?
We’re talking about the most influential tech CEO of whom most of us have never heard. He’s Jack Dorsey, the 43-year-old low-profile founder and CEO of both Twitter and the fintech startup Square, and a figure beloved by many in Silicon Valley. His net worth was recently estimated at about $4.1 billion.
Twitter, of course, is that famous social media firm with the tight 280 character limit that’s currently a favorite of the the Tweeter-in-Chief President of the United States. It’s a publicly-traded firm with a market capitalization at the time of this writing (April 2020) of almost $21.19 billion. By contrast, Dorsey’s other project, Square, is a fintech transaction firm with a capitalization of $26.58 billion.
In Dorsey’s case, by age 14 this prodigy had already written software for dispatch routing services used by taxi cabs. However, Dorsey doesn’t hold an MBA or a college degree. He majored in computer science for two years at the University of Missouri, then transferred to New York University. He dropped out a semester short of graduating to work on Twitter, which he first conceived while studying at NYU.
After moving to Oakland, Dorsey originally wrote Twitter as an internal service for employees of Odeo, a now-defunct podcasting company. He guided Twitter through two financing rounds, then took the firm public with an initial value of $31 billion in 2013. Square went public in 2015 with an initial value of $2.9 billion.
Dorsey is known as an independent thinker with an unconventional lifestyle. CNBC reported in 2018 that he walked five miles to and from work each day in San Francisco. Late in 2017, he completed a ten-day silent meditation known as Vipassana, which is an ancient Buddhist technique.
Half of Twitter’s membership lives outside the United States, where the user base appears to have plateaued, so it might not be surprising that Dorsey might try to create the perception that he’s encouraging global users. However, key facts about Africa’s economic development suggest that his new payment company Square may have instead prompted his recent month-long visit to the continent.
Africa is one of the world’s regions displaying the fastest adoption rates for new technologies. In part, what drives this early adoption is a young, booming population, with an average age of 19 among the 1.25 billion people spread across the continent’s 54 nations.
Only about 388 million of those people are online, meaning that there’s a potential market of about 800 million new users for services like Twitter and Square. Emerging middle-class prosperity combined with inexpensive Android smartphones have also fueled this rapid adoption, which makes the continent a natural market for tech entrepreneurs.
Jack Ma, the billionaire Chinese founder of Alibaba and Lazada, recently returned from a trip to Africa where he met with young entrepreneurs. They convinced him that the “next digital revolution” will be driven by entrepreneurs in Africa. Ma, who wrote about his journey in this New York Times op-ed, is part of a trend encompassing dozens of tech CEOs and venture capital partners who are visiting the continent because they believe that the region is ripe for new disruptive technologies. Besides Dorsey and Ma, the CEOs of Microsoft and Google also made trips there during the past couple of years.
One venture capitalist who was an early investor in Facebook and is now the co-chair of IDG Capital, Jim Breyer, told CNBC that the opportunities across Africa mirror the opportunities in China in the early 2000s:
Africa similarly presents some fundamental leapfrog opportunities that have been unlocked through the use of mobile phones and other technology platforms. We’re seeing some of the smartest individuals from top academic institutions in the U.S. and elsewhere return to the African continent, thereby contributing to a growing talent pool of entrepreneurs and developers.
Another investor, Ben Lynett, remarked that a lack of legacy systems poses a unique opportunity:
What we’re now seeing is missing infrastructure that tech can solve. You have a lack of infrastructure and a potential leap-frog effect where things haven’t been built, but 2019 technology can come in and figure out what makes sense and apply it in a unique way.
Where infrastructure isn’t missing, it may be antiquated. About half of the continent still connects through 2G cellular networks, the “brick cell phone” networks that most Western industrialized nations decommissioned years ago. Those areas have the potential to bypass 3G upgrades and go directly to modern 4G service, which greatly accelerates the encrypted communications upon which transaction apps depend.
In particular, because Africa is home to the world’s largest population of “unbanked or underbanked” consumers, folks in the region have become early adopters of fintech payment apps. According to the venture capital firm Partech Partners, African startups—mostly operating in the fintech sector—received $1.16 billion in venture backing in 2018. That amounted to more than double the previous year’s level. Furthermore, Visa has purchased a 20 percent stake in PalmPay, a Nigerian payments platform that has also received generous backing from Chinese venture investors.
Moreover, tech companies have funded accelerators similar to Y Combinator to help launch more startups on the continent. Google, Facebook, Alibaba, and Microsoft have all invested in such initiatives, with Microsoft investing $100 million in their programs in Kenya and Nigeria.
A Dose of Reality Courtesy of Business School Faculty
So, with all this support for the rapid growth of tech in Africa, what could possibly go wrong? Why wouldn’t U.S. companies like Twitter and Square want their CEO to be calling shots from Africa?
Yale’s Dean Jeffrey Sonnenfeld: Dorsey’s “Strange Adventure”
Dr. Jeffrey Sonnenfeld, a Harvard MBA who is the senior associate dean of the Yale School of Management and an authority on corporate leadership and governance, was the first to weigh in. And he hardly minced words when he told CNBC in this video:
Jack Dorsey is going off on some strange adventure to Africa that makes a lot of sense for somebody else in the company to do. But to disappear for six months to leave both Twitter and Square, as the CEO of two companies. . .we have boards that are unable to direct genius founders . . .
Then Dean Sonnenfeld blasted both Dorsey and his board of directors. CNBC also quoted him as saying:
Proximity matters for leading a company. Jack would be reckless and ego-maniacal as well as the board irresponsible and negligent, violating their duty of care under Delaware law, to let the CEO just go AWOL. A one-month break can be pushing it for emotional/personal R&R or intellectually recharging batteries and doing some market research, but six months is abdication.
Dean Sonnenfeld explained that a six-month trip abroad would require Dorsey to take a leave of absence and name an acting CEO or chief operating officer for each of the two companies. He pointed out that “constant” financial, technical, and strategic decisions need to be made regularly—and choices like those can’t be accomplished by an absentee CEO.
Dean Sonnenfeld also cited Apple as a model. In that case, the ailing CEO Steve Jobs took several long leaves towards the end of his life, but always left the chief operating officer at the time, Tim Cook, at the helm while Jobs was away.
NYU’s Professor Scott Galloway: “At Least Tobacco Stocks Performed Well”
Professor Scott Galloway of NYU’s Stern Business School, whom we quoted at length in our faculty analysis of WeWork’s train wreck, is especially outraged by Dorsey’s plans. On his No Mercy/No Malice blog, Professor Galloway tore into Dorsey’s announcement. In an open letter to Twitter’s board chair, he demands nothing less than the immediate replacement of Dorsey as CEO.
Why? In part, that’s because Professor Galloway owns almost $11 million in Twitter stock that he believes should be worth several times that much if a seasoned, hands-on CEO were running the business. So, not surprisingly, Professor Galloway kicks off his letter by comparing Twitter’s terrible stock performance with that of the firm’s peers:
Twitter has, on every metric, underperformed peers for several years. Since Mr. Dorsey’s return to the firm in July 2015, shareholder return is -15%, vs. Google +153%, Facebook +129%, the S&P 500 +50%, Dow Jones U.S. Media Index +29%, and MSCI tech index +115% . . . the market is losing confidence in management, the board, and the firm’s prospects.
He then argues that an AWOL Twitter CEO would place American democracy at risk:
Fake accounts, GRU-sponsored trolls, algorithms that promote conspiracies and junk science, and inconsistent application of your terms of service have resulted in a firm that not only underperforms, but is dangerous. The poor citizenship of Twitter is bad. What’s worse is Twitter’s malfeasance coupled with scant benefit to stakeholders. The platform is all the calories of big tech (poor citizenship, divisiveness, hate) without the great taste (stakeholder returns). At least tobacco stocks performed well.
Political scandals happen daily under this administration. The president has tweeted about nuclear war. He becomes more erratic under pressure. How will the next bout of nuclear war tweets be handled? Whom, if not the CEO, are those delegated to?
James Madison wrote about the power of factions to divide society. He feared that strong partisanship passions “inflamed [people] with mutual animosity” and made them forget about the common good. Twitter is Madison’s fear come to life. The outrage that unchecked social media imposes on our psyches is pulling at the fabric of our republic and threatens the foundations of our social order. Democracy relies on mutual understanding and respect. In addition to handling urgent political crises, Twitter’s CEO needs to scale back “mutual animosity” and help heal public discourse in the U.S., not leave as it continues to deteriorate.
A Dose of Reality Courtesy of Business School Faculty
No matter how sound the rationale for investing in technology on the African continent, Dorsey’s plans to spend up to six months there are poorly conceived. The forcefulness of the opinions of Professors Sonnenfeld and Galloway suggests that Dorsey would have a tough time finding support among business school faculty for his “CEO by Skype” plans. At the very least, Dorsey needs to appoint two interim chief executives while he’s abroad on his safari.
Moreover, Dean Sonnenfeld astutely raises a larger issue: Why can’t corporate boards in Silicon Valley set limits on the antics of their genius founder CEOs?
Ever since Bill Gates and Steve Jobs taught us that young high-tech founders create more value than grey-haired adults imported from companies like Pepsi, boards have taken a laissez-faire approach to the antics of visionary founders. But is enabling the “creativity” of founders like Dorsey really prudent after disasters like WeWork?
Because this seems to be a ubiquitous issue among innovative young companies that hire large numbers of MBAs—and one likely to define Silicon Valley in the 2020s—we plan to examine this issue in-depth in the future.