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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
“Enshittification” is a term coined by tech critic Cory Doctorow in 2023. It describes the process whereby many tech offerings start as fun and life-enhancing, then become useful and then unavoidable, often indispensable. But over time, the offerings degrade in quality as the extractive ambitions of billionaires trump the interests of the ordinary people they were supposedly designed to serve, leading to miserable outcomes.
If we are not careful, this process will take root in finance too, and just like one area of consumer-facing tech, it all involves Elon Musk.
The mercurial Musk is, of course, the man who seemingly bought Twitter pretty much by accident and changed its name to X. Since then, the once fun and life-enhancing social media network has become an enshittified open sewer on the internet, infested with trolls, bigots, tinfoil-hatted conspiracists and AI slopaganda.
But the mercurial Musk is also the man behind carmaker Tesla and AI/rockets/satellites mishmash SpaceX, the latter of which has filed documents with regulators sketching out its intention to list on public stock markets and “extend the light of consciousness to the stars”. Its total addressable market, it says, is $28.5tn — an amount equivalent to more than a fifth of global GDP.
The filing, peppered with pictures of rockets and artist visualisations of human life on Mars, correctly explains that up to now, humans have been extremely reliant on Earth. We must look beyond this “single celestial body”, the document states, as “we do not want humans to have the same fate as dinosaurs”.
There’s a lot to unpack there. Maybe there really is a highly lucrative business in a fusion of seemingly sensible communications networks, iffy AI, and human colonies on Mars, and maybe that represents a wealth-enhancing opportunity for investors around the galaxy. Some serious professional investors tell me they buy that line and intend to buy the stock when it lists — a punt on this moonshot working out, just as Tesla shares have gained about 2,800 per cent over the past decade or so.
Musk himself believes SpaceX is worth a gravity-defying $1.75tn. That would make this the seventh-biggest company in the US despite revenues that would rank it at about 200th in the States, roughly on a par, as our Lex column pointed out, with General Mills, maker of the Lucky Charms breakfast cereal.
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But whether you believe in Musk’s business and valuation or not is irrelevant, because if you have a pension or savings or investments anywhere, you are very likely to start owning a tiny slice of it very soon.
That is because SpaceX stocks look set to be on a fast track to inclusion in big indices — the basis for passive investment, a phenomenon that started life 50-odd years ago as life-enhancing, then became useful, then indispensable, then unavoidable.
Picking individual stocks to buy is famously hard to do well, and advisers have spent decades telling investors that by far the better way to play the markets is to buy a low-cost, diversified index tracker and sleep easily. This transformational force prised open financial markets to the masses and provided a deep stream of investor money for companies lucky enough to be included.
In the past, it would have been tricky for a company such as SpaceX to get a coveted spot in an index, and drink from this stream, quickly. No company generally gets on to an index at speed — they are typically left to season on public markets for a while first. In addition, SpaceX is elaborately lossmaking. It has a corporate governance structure that would make most investment committees wince. (This is the Musk Show, essentially.) Only a tiny portion of it is going to float — up to $75bn, or some 4 per cent.
Some or all of this is off-putting to index providers, as a rule. But tech-friendly Nasdaq has already cleared a path for companies like this to join its index ranks, fast, and with representation in the benchmarks equivalent to three times the tiny floated portion. FTSE Russell this week also announced a fast track for new listings with small floats for some of its offerings. Neither has altered the rules specifically for SpaceX, but it does stand to benefit enormously, and timing is everything. Other index providers are likely to follow suit.
Companies come and go out of indices all the time and investors generally do not and should not care. And if Musk’s company really is worth $1.75tn then, sure, indices would be weirdly distorted if they had a SpaceX-sized black hole in them. But if SpaceX stumbles after it lifts off and hooks straight into the veins of passive flows, there are consequences for all investors.
Crypto has not succeeded in poisoning the core of investment (yet) as it still largely sits on its periphery. You can choose to participate or not. This fast-track access to the most mom-and-pop-and-apple-pie method of savings, by contrast, is potentially more of a direct strike. It sets a template that warrants careful attention if we are to cling on to any notion that markets reflect anything vaguely resembling real life.
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