Elon Musk, a human-sized Ponzi scheme

(Notes on economics and more; Peščanik.net)

Yesterday I went on a short trip. First I went to the local hyperlupom I drove through a tunnel built by the Boring Company. Then I called a fully autonomous Tesla robotaxi via my built-in neural implant. Along the way, I read the latest news from the Mars colony.

Of course, none of that has happened, because none of that exists. There are no functional hyperloop vehicles. The Boring Company has yet to build a commercially viable tunnel. Tesla has a few — not quite autonomous — taxis in Austin. And that’s it. (While Google is heavily offering Waymo driverless taxis in several major cities.) Neuralink, the purported pioneer in the brain implant industry, has conducted tests on a few patients, and that’s it. And of course, there is no colony on Mars: a manned flight to Mars has not yet been made, and there is little chance of that happening in the foreseeable future.

On multiple occasions over the past decade, Elon Musk has claimed that all of these services will be commercially available by 2025, perhaps even sooner.

True, Musk has also had business successes. Tesla got into the electric vehicle business on time, and Starlink offers critically important services that make it profitable.

But those accomplishments aren't enough to make Musk the richest man on the planet. Historically, his wealth has largely been built on the self-fulfilling faith of investors convinced of Musk's genius, who buy shares of every company he controls. The resulting appreciation further cements Musk's reputation as a business genius.

There's a term for companies that appear successful because they attract new investors, and attract new investors because they appear successful. It's a classic Ponzi scheme. Elon Musk is, in fact, a Ponzi scheme in human form.

The just-completed initial public offering for SpaceX clearly shows that Musk's most important skill is not developing futuristic products, but a mastery of financial matchmaking and the skillful use of insider influence, especially influence over the Trump administration.

To see what I mean, consider how Musk bought Twitter in 2022 and renamed it X. To finance the investment, he had to borrow $13 billion from investment banks. The banks figured they would quickly get rid of this debt by selling it to greedy investors. But Musk destroyed X’s business model, turning it into a far-right, Nazi-friendly cesspool, which quickly drove advertisers away. By the summer of 2024, the former Twitter was valued at half the price it had been sold for. Faced with the prospect of a 40 percent loss if they got rid of the debt immediately, bankers resigned themselves to the knowledge that they would have to put up with it on their balance sheets for much longer than they had imagined, leading the Wall Street Journal to conclude in August 2024: “Musk’s Twitter Purchase Is the Worst Bank Deal Since the 2008 Financial Crisis.”

Then two things happened that saved the bankers and Musk’s credit worthiness: Donald Trump’s victory in 2024 and the arrival of artificial intelligence. In an effort to curry favor with Musk and Trump, advertisers began to flock to X. In March 2025, Musk announced a merger between X and a newly formed AI company, xAI, and used the AI ​​craze to boost X’s valuation and his own personal wealth.

Unfortunately for Musk, xAI Grok is apparently a much inferior product to the AI ​​models offered by Anthropic and OpenAI. Many consider it unsafe and unreliable. At one point, it began spewing racist and anti-Semitic comments and even nicknamed itself MechaHitler. Trump administration officials have been pressuring government agencies — including the Pentagon — to start using Grok, but without much success.

So, after first saving X by merging it with xAI, in the next step he saved xAI by merging it with SpaceX, which has a truly successful business model in Starlink.

Then SpaceX went public. The initial public offering debuted on Nasdaq at a price that gave a valuation of $1,77 trillion for a company that had only $18,7 billion in revenue the previous year and was losing money.

How can such a valuation—let's call it astronomical—be justified? The initial public offering was based in part on the assumption that retail investors would buy shares, not based on any rational assessment of SpaceX's value as a company, but because they believed they were acquiring a share of Elon Musk's genius.

But since it was not certain that the hordes of believers would be enough to bring the match-fixing game to a happy conclusion, Musk's Wall Street allies had to step in. Some of the leading stock indexes, such as the Nasdaq 100 and the FTSE Russell, recently changed their own internal rules to include SpaceX in their stock selections almost immediately.

It is important to understand that the inclusion of a company's shares in the leading stock market indices brings enormous financial benefits. A large part of the shares are held by "index funds" - investment funds that design their portfolios to mimic the movements of the major indices. So, as soon as a company's shares are included in a major index, the demand for them increases because the index funds have to include them in their portfolios.

Historically, major indexes have waited at least a year after an initial public offering before even considering including new stocks, giving them enough time to “mature.” The way Musk has bent the rules in the case of SpaceX shows that he hasn’t lost his ability to co-opt and corrupt key institutions. (It should be noted that the S&P 500 has not caved in to pressure and will wait a year before including SpaceX in its index.)

Which brings me to my point. The giant human-sized Ponzi scheme known as Elon Musk must eventually fail. But traditional Ponzi schemes have exploited only those investors who have freely chosen to join them. This time, much of the money behind Musk's scam is coming from the pockets of ordinary Americans who are practically forced to join him. Roughly 52% of the capital under the control of mutual funds today is invested in index funds, and over 50% of American households have at least a minimal stake in them. Thanks to Musk's collusion with Wall Street, enabled by the pervasive belief that Musk is backed by the Trump administration, many small investors - perhaps most - are participating in the fattening of Musk's stock market monster, whether they like it or not. Should anyone in Trump's America be surprised by this?

(Translated by Đorđe Tomic)