Bugs exposed by other teams using that component will go unfixed and will need to be patched around by the caller. New features that might have used component X will be sidelined because no one wants to put more load on it or risk their feature on a component that people have started whispering about in the corridors. What is worse is that the people frantically spending their days patching and repairing this Titanic below decks do not see the iceberg and do not have enough manpower to turn the ship even if they did, the people who could help give warning or helped prevent the problem left a while ago. Eventually this component is going to get stressed, some lingering bug will get triggered, or some other system elsewhere in the architecture diagram will fail and shed load to our component X that is barely keeping up and it too will fail. The danger for Twitter is that the failure could cascade through multiple poorly-maintained systems and lead to a much bigger problem.
The fact Twitter hasn't died shows that Elon fired a good engineering team.
Certainly you can make a microblog service with less than 500 engineers, but there is a lot of work invested in their datacenters (from physically managing the machines to their network / orchestration control plane). That can even be outsourced as many companies do, but it ain't free.
I am actually a fan of cycles where "no new features" is a priority, making systems less fragile and tollerate the weekend / holiday helps you sleep at night, and sleeping at night is nice.
To think you necessarily need thousands of them, though, is a stretch.
I think people have drunk the kool aid over the past decade of 'growth-driven' startup where the game was to hire as many engineers as possible as fast as possible. This is what is partially fueling the current job reduction cycle in the industry. There are simply more engineers on the payroll than needed to deliver a profitable product.