Godzilla Government v King Kong Elon Musk
I have argued before that Elon Musk is Minimum Average Cost man. Minimum Average Cost is the long-run equilibrium cost for producing a good or service and the point where marginal cost equals average cost which also equals price in equilibrium. Musk’s biography is peppered with examples where he strips out cost from his car production lines or his rocket business often cutting too much and having to reinstall processes to patch up design holes that come from excessive cost cutting. This approach to costs is the dynamic that leads him to effectively find the correct cost setting.
Musk has made friends with Donald Trump with an apparent agreement for Musk to head up a ‘Government Efficiency Commission’ should Trump win the Presidential election. This will be absolutely fascinating to witness snd will be a real life Godzilla v King Kong match up. It is reason, alone, to elect Trump since Musk would try to take the chainsaw to government while the Government would try to sandbag his every action. Government’s do not face competition that drives costs down and it is unclear what each individual department’s objectives are. Furthermore, it takes someone with hands on experience to manage cost, rather than a Congressional committee, to implement the correct dynamic. From Musk’s perspective, a government function that has zero benefit should have zero cost – which means firing more than the tea lady.
Musk was a guest speaker at Trump’s rally in Pennsylvania on the weekend and it was interesting to watch a hushed crowd listening to his comments. Trump’s rallies are not known for their discipline so the fact that they were quietly listening to Musk’s every word is testimony to his credibility and standing.
In terms of social benefit, Musk’s Government Efficiency Commission promises far more than putting men on Mars. I can envisage him asking the heads of every department what they do and to justify the cost. This simple question will tie department heads in knots. Since price equals minimum average cost in a competitive economy, the cost of running the government is a proxy for the price that they need to charge. Opening up the government to private competition is an obvious result. Musk has already beaten NASA at this game, so he will be difficult to challenge.
But in hitching his Tesla to the Republicans he risks reprisals from the Democrats should they get re-elected. The Dems are voracious users of ‘Lawfare’ to damage critics and they could easily cost Elon a fortune by targeting X (formerly twitter) and cancelling SpaceX’s contracts with NASA. His companies could get regulated into bankruptcy. From this perspective, Elon’s decision appears reckless and inviting the downside. That said, his risk taking track record is pretty good so Trump might take heart.
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