- Experts told Insider Elon Musk's close business relationships were a "recipe for disaster."
- In November, an early Twitter investor said the billionaire was surrounded by "yes-men."
- Five experts highlighted some of the difficulties people faced when trying to "speak truth to power."
Elon Musk has some of the most powerful relationships in the business world, but experts say his circle of "yes-men" could be his undoing.
"It's the classic scenario where the emperor has no clothes but everybody's too afraid to tell him," William Klepper, a management professor who teaches an executive-leadership course at Columbia Business School, told Insider, referencing a parable. "It's a very vulnerable position to be in because no one in the CEO ranks is immaculate."
This month, Musk was booed by the audience at Dave Chappelle's comedy show. At the time, the billionaire said it was "a first for me in real life." Experts told Insider it's not surprising that the second-richest man would be taken aback by public criticism. In his personal life, Musk appears to be surrounded by praise.
In October, a trove of text messages between Musk and some of the biggest names in tech and media showed that the billionaire received much praise for his plans to take Twitter private. The texts included offers to run the company, requests for accounts to be reinstated, and desires for relatives to be considered for roles. Jason Calacanis, an angel investor, offered to "jump on a grande" for Musk — likely misspelling "grenade" — and told the billionaire "you have my sword."
Musk, Calacanis, and Kimbal Musk, Musk's brother, did not immediately respond to requests for comment.
'People want to be close to people with that much power'
Rosabeth Moss Kanter, a professor at Harvard Business School and the author of "Think Outside the Building: How Advanced Leaders Can Change the World One Smart Innovation at a Time," said Elon Musk was likely surrounded by a type of cult.
"People want to be close to people with that much power, which often means your so-called friends are more like followers," Kanter said. "The naysayers are out there, but people in power get surrounded by yes-people who never let the naysayers close to them."
Across his companies, Musk also appears to have built up a slew of allies. In November, during a trial over Musk's Tesla compensation package, a shareholder said the billionaire had stacked the carmaker's board with some of his closest friends, including his brother, Kimbal Musk. Similarly, at Twitter, Elon Musk has brought in some of his personal associates to assist in the transition.
'A recipe for disaster'
Arthur Boni, a professor of entrepreneurship at Carnegie Mellon University, told Insider that Tesla's board was "a recipe for disaster," but Sabina Nawaz, a CEO coach who has worked with executives at tech companies including Microsoft, said it could be a positive sign.
"A hallmark of great managers are managers who build loyalty," Nawaz said, declining to comment specifically on Musk. "People will follow them across organizations. Some CEOs use that as a selling point, proof that people want to work with them."
There has to be a balance between maintaining a circle of people you trust and promoting diverse perspectives, Ayelet Fishbach, a professor of management at the University of Chicago, said.
"We often talk about diversity for the sake of equality, but it also just makes business sense," Fishbach said, declining to comment on Musk specifically. "Usually the best people in the room are the people that have different perspectives."
Kanter of Harvard Business School said a lack of dissenters in his inner circle could put Musk and his companies in a "very perilous situation" and pave the way for a "long losing streak."
What's more, it's not clear Musk has left room for people close to him to provide criticism, Kanter said. In the past, Musk hasn't responded positively to critical feedback. Most recently, the billionaire fired several Twitter employees who corrected him on social media.
'Speak truth to power'
It can be very difficult to "speak truth to power," Nawaz told Insider, adding that it's important for CEOs to create "psychologically safe" environments. She said she often coached executives on how to promote and respond to feedback.
Without room for negative feedback, Nawaz said workers would either leave a company or "sabotage" it by taking extra days off or doing lower-quality work.
Ultimately, as Tesla's stock plummets, and Twitter struggles to maintain advertisers, Klepper said if Musk did not find a way to turn the companies around, his business associates might be forced to "step up to the plate."
"My general feeling is they have put their treasure into his companies because they know they can get money out of it," he said. "The relationship is can you or can't you make me money, and as soon as the money is at risk, that relationship changes."