Elon Musk, Human Ponzi Scheme – Paul Krugman | Substack
Yesterday I took a short trip. I began with a ride on the local Hyperloop, which ran through a tunnel dug by Boring Company. Then I used my neural implant to summon a fully self-driving Tesla robotaxi. While enroute I read the latest news from the Mars colony.
OK, none of that actually happened, because those products don’t exist. There are no working Hyperloops. The Boring Company has not dug any commercial tunnels. Tesla has a few self-driving — though not fully self-driving — taxis in Austin and nowhere else. (Google’s Waymo driverless taxis are operational in several major hubs.) Neuralink, which is purportedly pioneering brain implants, has tested its products in a handful of patients but done no more than that. And of course there is no Mars colony: there have been no manned flights to Mars, nor the prospect of any for the foreseeable future.
Yet at various points over the past decade Elon Musk promised that each of these services would be available by 2025 if not sooner.
Granted, Musk has had some real successes. Tesla was ahead of the EV curve, and Starlink is a critically important service as well as a viable business.
But these achievements weren’t enough to make Musk the world’s richest man. His wealth has, instead, historically rested mainly on self-fulfilling faith — investors believing in Musk’s genius have piled into stocks in Musk-controlled companies, and the rising value of these companies has enhanced his reputation for genius.
We have a term for enterprises that look successful because they keep drawing in new investors and keep drawing in new investors because they look successful. They’re called Ponzi schemes. And Elon Musk is basically a human Ponzi scheme.
Furthermore, the SpaceX IPO now in progress makes it clearer than ever that Musk’s greatest skill isn’t developing futuristic products. It’s his mastery of financial shell games and his ability to leverage insider influence, especially his influence with the Trump administration.
To see what I mean, consider Musk’s 2022 purchase of Twitter, which he renamed X. To finance the deal, investment banks lent Musk $13 billion, debt they planned to quickly move off their books by selling it on to investors. But Musk proceeded to destroy X’s business model by turning it into an extreme-right, Nazi-friendly cesspool, prompting advertisers to flee. By the summer of 2024, X was valued at less than half of its purchase price. Faced with losses of 40 cents on the dollar if they sold the debt, his bankers were forced to hold the Twitter debt far longer than anticipated, prompting the August 2024 Wall Street Journal headline: “Elon Musk’s Twitter Takeover Is Now the Worst Buyout for Banks Since the Financial Crisis”.
But then two things happened that bailed out the banks along with Musk’s future creditworthiness: the 2024 election of Donald Trump and the advent of AI. After Trump’s election, advertisers began returning to X, citing a need to appease Musk and Trump. And in March 2025, Musk merged his newly-founded AI company xAI with X, playing off the accelerating AI buzz to further prop up X’s valuation and his own personal balance sheet.
Unfortunately for Musk, xAI’s Grok is, by all accounts, much inferior to the AI models offered by Anthropic and OpenAI. It’s also widely considered unsafe and unreliable. At one point it began spewing racist and antisemitic comments, dubbing itself MechaHitler. Trump administration officials have pushed government agencies — including the Pentagon — to use Grok, but with little success.
So Musk, having bailed out X by rolling it into xAI, is now bailing out xAI by rolling it into SpaceX, which has a genuinely successful business in Starlink.
And today SpaceX is going public. Its initial public offering (IPO) debuts today on the Nasdaq at a price that implies a $1.77 trillion valuation for a company that had revenues of only $18.7 billion last year and lost money.
How can this, um, astronomical valuation be justified? The IPO is premised partly on the assumption that retail investors will buy in, not because they have made any rational assessment of SpaceX as a business, but because they believe that they are buying stakes in Elon Musk’s genius.
But the ranks of the faithful may not be enough to keep the shell game going. So Musk’s Wall Street allies are also rigging the game. Some of the major stock indexes, notably the Nasdaq 100 and FTSE Russell, have recently changed their rules in order to admit SpaceX almost immediately.
It’s important to understand that the inclusion of a company’s shares in a major stock index carries enormous financial rewards. A large share of stocks is held in “index funds,” mutual funds that hold portfolios designed to mimic the behavior of major indexes. Thus there is an immediate demand for the shares of a company when its shares are added to a major index because index funds must now add them to their portfolios.
Historically, the major indexes have waited at least a year after a company’s IPO before considering its inclusion in their market measures, to give the stock time to “mature”. The bending of the rules for SpaceX shows that Musk is again exerting his ability to co-opt and corrupt key institutions. (Notably, the S&P 500 has resisted the pressure and will wait a year before including SpaceX.)
Which brings me to my final point. The immense human Ponzi scheme that is Elon Musk will eventually collapse. But traditional Ponzi schemes only exploit investors who choose to participate. This time much of the money propping up Musk’s scam will come from ordinary Americans who have in effect been forced to buy in. Approximately 52% of mutual fund assets are now invested in index or index-based funds, and over 50% of American households are invested in mutual funds. Thanks to the collusion between Musk and Wall Street, enabled by the perception that the Trump administration has Musk’s back, many if not most of these small investors will be dragged, willy-nilly, into fueling the Musk juggernaut.
Should anyone in Trump’s America be surprised?
MUSICAL CODA
The article shows that Washington and big billionaires always have billions of dollars to bail out banks, Twitter, or fund SpaceX scams. But when it is time to save the Afghan partners who saved American soldiers on the battlefield, they always say they have no resources or time. While retail investors are losing money in these economic games, our families are hiding in dark rooms with zero future. True accountability means you fix your real promises to people, not making shell games for rich people on television
This right here is where the Musk story stops being merely ridiculous and becomes institutional capture.
He sells tomorrow, Wall Street packages the mythology, government power blesses it, and ordinary investors get drafted into the dream through index funds.
The product is no longer the car, the tunnel, the robotaxi, or Mars.
The product is belief itself.
And once belief gets written into markets and policy, the con stops being entertainment. It becomes infrastructure.
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