[ExI] Elon Musk, Human Ponzi Scheme

[John Clark]

*Nobel prize winning economist Paul Krugman thinks Elon Musk used a Ponzi
Scheme to become the world's first trillionaire:*

*===*

*With Wall Street’s help, you’re about to be forced to buy stock in SpaceX*
By Paul Krugman <https://substack.com/@paulkrugman>


"Yesterday I took a short trip. I began with a ride on the local Hyperloop,
which ran through a tunnel dug by the 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
<https://substack.com/redirect/29b73d11-7cff-49b1-ab31-12e0e72522d7?j=eyJ1IjoiNngzbm4ifQ.I1PMvYo4mI3PquTDRhL5Dev-9_ouIq3kw6ZhrVNsy8o>,
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
<https://substack.com/redirect/46305120-7c1d-4d77-9655-dccbf1263b84?j=eyJ1IjoiNngzbm4ifQ.I1PMvYo4mI3PquTDRhL5Dev-9_ouIq3kw6ZhrVNsy8o>
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
<https://substack.com/redirect/29b38c5b-186a-4f94-a90a-4ad8f1bb5cb0?j=eyJ1IjoiNngzbm4ifQ.I1PMvYo4mI3PquTDRhL5Dev-9_ouIq3kw6ZhrVNsy8o>,
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
<https://substack.com/redirect/911c4a23-d1a0-480c-8fa5-9ed5dff12fa3?j=eyJ1IjoiNngzbm4ifQ.I1PMvYo4mI3PquTDRhL5Dev-9_ouIq3kw6ZhrVNsy8o>,
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
<https://substack.com/redirect/aa293e13-9b17-4c7e-9e60-8e2339ca8e98?j=eyJ1IjoiNngzbm4ifQ.I1PMvYo4mI3PquTDRhL5Dev-9_ouIq3kw6ZhrVNsy8o>
to
the AI models offered by Anthropic and OpenAI. It’s also widely
considered unsafe
and unreliable
<https://substack.com/redirect/551e7edb-bad1-419c-96c0-b87a1a383829?j=eyJ1IjoiNngzbm4ifQ.I1PMvYo4mI3PquTDRhL5Dev-9_ouIq3kw6ZhrVNsy8o>.
At one point it began spewing racist and antisemitic comments, dubbing
itself MechaHitler
<https://substack.com/redirect/355cafbd-5b5b-44c8-88cd-3aaa5525758c?j=eyJ1IjoiNngzbm4ifQ.I1PMvYo4mI3PquTDRhL5Dev-9_ouIq3kw6ZhrVNsy8o>.
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
<https://substack.com/redirect/16cbfc8b-85c9-4f1a-8491-9e5ba567ea93?j=eyJ1IjoiNngzbm4ifQ.I1PMvYo4mI3PquTDRhL5Dev-9_ouIq3kw6ZhrVNsy8o>
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
<https://substack.com/redirect/c5ae56ac-ccd4-440d-8ab7-1d30756d5873?j=eyJ1IjoiNngzbm4ifQ.I1PMvYo4mI3PquTDRhL5Dev-9_ouIq3kw6ZhrVNsy8o>
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
<https://substack.com/redirect/c17d6ebe-f9c7-4d16-b8e8-114f77f08e20?j=eyJ1IjoiNngzbm4ifQ.I1PMvYo4mI3PquTDRhL5Dev-9_ouIq3kw6ZhrVNsy8o>
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?"
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