Lessons from the Elon Musk School of Management shed light on how the billionaire will go about slashing government spending in a new Trump White House.
Little is known about how exactly President-elect Donald Trump will use the world’s richest man in his coming administration beyond proposing to appoint him to a new government efficiency commission, as “secretary of cost-cutting.”
When it comes to finding efficiencies in his companies, Musk has a long history of taking a shock-and-awe approach, as when he worked to turn SpaceX and Tesla into industry-leading companies from startups that he often said had less than a 10% chance of success.
When he took over Twitter-turned-X in late 2022, Musk quickly slashed spending at the financially troubled social-media platform, eventually eliminating about 80% of its workforce while continuing to operate even among criticisms for how he treated workers.
He has even recommended other companies run leaner, saying he thinks staffing cuts can increase productivity.
“At any given company, there are people who help move things forward and people who sort of try to slam the brakes on,” Musk said at a Wall Street Journal event last year.
His dramatic actions at Twitter have inspired other tech companies to become leaner and were often cited by voters as something they’d like to see Musk do for the government.
In talking about his role as head of a new Department of Government Efficiency, or DOGE, Musk has said he thinks he can slash $2 trillion out of the federal budget—about a third of the money the government spent in the fiscal year that ended Sept. 30.
Conservatives have long complained about the size of the U.S. government and perceived runaway spending.
Talking about it is one thing, but taming it is another thing altogether.
Trump’s first administration is an example of that: Deficits ballooned as he looked to win support with new spending. The government’s deficit in the past fiscal year was $1.8 trillion.
Musk has experience hunting for ways to reduce costs—a daily part of the car business. “Getting cost out of things is kind of like a game of pennies—it’s like Game of Thrones, but pennies,” Musk told analysts in October. “If you’ve got 10,000 items in a car—very rough approximation—and each of them cost $4, then you have a $40,000 car. So if you want to make a $35,000 car, you got to get 50 cents on average out of the 10,000 items.”
The challenge for any dramatic cost-cutting in Washington, D.C., is that more than half of the federal budget is made up of Social Security, Medicare, military spending and interest on the federal debt, things Trump has either promised he wouldn’t cut or would have great difficulty reducing.
Still, the new administration could have a rare window of opportunity to pursue spending cuts, with the Republicans taking a majority of the Senate and poised to maintain control of the House of Representatives. Democrats could still try to slow some cuts in the Senate, where Republicans won’t have a filibuster-proof majority.
Even if Congress doesn’t approve spending cuts, some of Trump’s supporters have said he could try to use legal authority to claw back congressionally approved spending.
Musk has suggested similar administrative maneuverings for cutting regulations.
“If Congress has created an agency then often, if you look at the law…the agency has a very simple task but then that agency over time vastly increases its authority and starts doing things that were never authorized by Congress,” Musk told podcaster Joe Rogan this week.
“You can curtail the agencies to be much smaller and say, ‘You got to stick to what Congress authorized instead of all this other stuff you’re doing,’ ” Musk said.
Musk has stressed that some regulations are needed and tries to assure—somewhat simplistically, perhaps—that if DOGE inadvertently cuts too much, the government can simply return a rule.
He has applied a similar move-fast-and-break-things approach in business. At Tesla a few years ago, Musk said he would dramatically scale back the automaker’s physical stores, a move the company later rolled back amid landlord pressures.
Sometimes Musk finds himself needing to slash spending quickly because he has overspent, such as in 2018 when Tesla was near bankruptcy as the electric-car company struggled to increase production of the bet-the-company Model 3 sedan for the masses.
Throughout the years, Musk’s cost-cutting hasn’t been simply reducing head count: He has appeared to favor some jobs at his companies over others—such as production workers over salaried workers at a time when his factory was ramping up production.
Similarly, Musk has talked about which kinds of workers he thinks should be cut within the government and where resources should be shifted.
“Our priorities are clearly misplaced here, where hiring vast numbers of people to audit and chase after Americans for taxes while failing to hire critical personnel to secure our border makes no sense at all,” Musk said last month.
His austerity work could be a shock to the economy in the near term, Musk has suggested.
“That necessarily involves some temporary hardship, but it will ensure long-term prosperity,” he said last month during a virtual town hall.
As Musk has told employees at his companies when justifying dramatic actions, the alternative is dire: bankruptcy.
“Insane government spending is driving the country into bankruptcy,” Musk told a crowd in suburban Philadelphia last month while campaigning for Trump.
While most CEOs like to avoid talk of the B-word, Musk often embraces it as an apparent motivating tool, creating a sense of urgency and raising the stakes.
Shortly after taking over Twitter, he noted the possibility of bankruptcy as he talked about needed changes. Similarly, a year earlier at SpaceX, where he is chief executive, he warned employees in an email that failure could mean bankruptcy. And at Tesla, where he is also CEO, he has turned to tough talk.
“Please prepare yourself for a level of intensity that is greater than anything most of you have experienced before,” he wrote in a 2012 memo as the automaker prepared to bring out a new sedan. “Revolutionizing industries is not for the faint of heart, but nothing is more rewarding or exciting.”
His reputation for having little patience is well-known among fans of his success.
Before taking over Twitter, Musk infamously sent the company’s then-CEO a cutting text message that underscores his blunt approach to management: “What did you get done this week?”
That exchange has become something of a calling card on social media, with users joking that Musk is preparing to soon send similar messages to the heads of government agencies.
Damian Paletta contributed to this article.
Write to Tim Higgins at tim.higgins@wsj.com
