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Source: Tencent Technology
Focus on
① Through strict cost reduction measures, Musk has built his Tesla, SpaceX and X into industry-leading companies.
② SpaceX has achieved a significant reduction in manufacturing costs and accelerated production speed by streamlining rocket design and removing redundant components.
③ Tesla insists on using cameras rather than radar sensors in terms of autonomous driving technology, which can save 4/5 of the cost.
④ X not only laid off employees significantly, but even stopped paying for office cleaning services, forcing employees to bring their own toilet paper to work.
According to the New York Times, Elon Musk has always maintained an almost harsh attitude towards cost control of its subsidiaries.He takes a nuanced look at every company’s expense through strict cost-cutting measures, tending to over-cut it to avoid any possible waste.During Donald Trump’s second presidency, these cost control strategies may be introduced into the operations of the U.S. government.
One Saturday morning in December 2022, Musk convened a meeting of top financial executives on Twitter (now renamed X) when he had just completed the acquisition for six weeks.Musk found that even though Twitter has cut more than three-quarters of its employees, the expenses of the remaining 1,500 employees are still out of control, which made him extremely dissatisfied.
Over the next six hours of long meetings, Musk reviewed the company’s expenditure details one by one and asked for a detailed explanation of each expenditure.He directly ordered the cancellation of some unnecessary fees, such as executive car service.When an employee in charge of a large contract for website security tried to defend himself, Musk pointed out that Tesla spent much less than Twitter on the same task and said it was no longer suitable to continue working on Twitter.
The conference fully demonstrated Musk’s usual style in cost cutting, and he has always been closely following and personally involved in cost-cutting efforts at his companies, including Tesla, SpaceX and Twitter.Musk has achieved the ultimate in cost reduction, and sometimes even breaks the normal process of company operations to wait for subsequent repairs.When negotiating with suppliers, he mercilessly lowered the price, even bypassed traditional suppliers and made cheaper parts by himself.
Jim Cantrell, SpaceX’s vice president of business development, once commented: “Musk was a god-like figure, but now he is more like a shrewd businessman. He is eager to cut everything toMinimum.”
Today, Musk’s net worth has exceeded $307 billion, and his careful approach is about to be applied to the US government.Trump has nominated Musk and another loyal supporter, Vivek Ramaswamy, to lead the newly established Department of Government Efficiency (DOGE).Trump said the department will promote “fundamental change” aimed at achieving massive layoffs by July 4, 2026 by cutting redundant spending in U.S. government agencies.
Musk is confident in this mission. He recently made many remarks on X, criticizing the inefficiency and wastefulness of the US government, showing that he is ready to lead the government to undergo drastic reforms.
1Musk “sharpens the knife”
Last month, at a rally in support of Trump, Musk promised to cut the U.S. annual budget by $2 trillion, accounting for about 30% of the total budget.He also proposed that government staff should submit a weekly list of job achievements to prove the value of their work.At the same time, Musk also half-jokingly said that the US government actually only needs 99 departments, rather than the huge number of more than 400.
However, Musk’s application of these effective cost-cutting methods among enterprises to the prospect of the U.S. government has deeply worried some people who have experienced its reduction policies in person.
“When Musk and his team entered the company, they had many assumptions and believed that the entire team was not worth a lot. They were reluctant to listen to those who actually did it,” said Lara Cohen, former vice president of marketing at Twitter.Opinions of employees who work specifically, especially when these employees question their assumptions. This attitude leads to many wrong decisions.”
While Musk’s budget cut strategy can sometimes cause chaos and controversy, it does help at least one company avoid the fate of bankruptcy and push others to stand out in the fierce market competition.He successfully built Tesla and SpaceX into industry leaders, while always maintaining a low-cost operating model.
At X, Musk also launched a large-scale cost reduction and efficiency enhancement campaign.He carried out massive layoffs, turned a blind eye to office rental bills, and even personally ordered server shutdowns to accelerate data center shutdowns, thus stopping payments.Employees, analysts and users have predicted that such cost cuts will lead to a complete collapse of the social platform.However, despite some small downtimes, the platform is still operating.
It must be noted, however, that there is an essential difference between cutting spending on X, Tesla and SpaceX and massively cutting state spending, which are strictly restricted by numerous laws and procedures.The U.S. Congress is responsible for deciding the allocation of the federal budget, and any large-scale budget cuts may have a profound impact on social welfare projects, which in turn triggers strong opposition from vested interests.
Nonetheless, Musk’s achievements in the company’s cost cuts have had no disastrous consequences, which undoubtedly strengthened his confidence.“I’m really good at improving efficiency,” he said in a podcast interview this month.
2“I’ll eat my baseball cap”
Since the beginning of his business, Musk has shown extraordinary sensitivity to costs.In 1995, when he founded Zip2, a startup that provides software services to newspapers in Silicon Valley, in order to maximize his expenses, Musk often spent the night in the office and even chose to bathe at the nearby YMCA.Avoid paying apartment rent.
Musk then founded the company that later transformed into electronic payment giant PayPal and sold it to eBay for $1.5 billion in 2002.He took out $100 million from the deal to create private space company SpaceX and believes he can build a rocket that is cheaper than the U.S. government.
SpaceX has achieved a significant reduction in manufacturing costs and accelerated production speed by streamlining rocket design and removing redundant components.According to Cantrell, the fuel tanks of SpaceX’s first rockets could have cost as much as $1 million.Musk was furious when he mentioned this issue to Musk.
“It obviously touched his bottom line and responded, ‘If I really wanted that much money, I would eat my baseball hat.’” Cantrell recalled.So Musk began to delve into the fuel tanks used by trucks and oil industries, exploring whether they are cheaper than the storage tanks that big rocket companies rely on.In the end, SpaceX decided to purchase steel coils and weld them to make fuel tanks by themselves, with a cost of only tens of thousands of dollars.
This move fully demonstrates Musk’s determination to reduce costs, and also puts considerable pressure on some suppliers.For example, Chester Crone, an executive at the aerospace parts maker Moog, revealed that Moog had sold a mechanical drive for its early rockets to SpaceX.However, after the initial purchase, SpaceX executives asked Moog to significantly reduce its price.
After being rejected, SpaceX proposed to purchase the design drawings for the part and intends to make it on its own.Moog refused the request again, and SpaceX then turned to other suppliers.”If Musk is not happy with the supplier’s price, he will eventually find an alternative,” Crohn said, adding that Moog rarely sells parts to SpaceX since then.
In 2010, SpaceX successfully launched the Falcon 9 rocket.The rocket’s R&D and manufacturing costs are about $550 million, according to inflation-adjusted data.Falcon 9 has now become the main rocket for SpaceX to conduct all commercial launches.According to NASA’s estimates, if its traditional aerospace technology is adopted, the same rocket system will cost up to $4 billion.
Musk’s move not only saved SpaceX a lot of money, but also promoted the booming development of the US commercial aerospace industry.Today, the cost of delivering a kilogram of cargo into orbit is about $2,600, while NASA’s retired space shuttle costs up to $65,000.
3Camera PK LiDAR Sensor
After Musk became Tesla CEO in 2008, his low-cost strategy played a key role in driving EV profitability.Traditional competitors like Ford and General Motors often face losses when selling electric vehicles.
Musk also uses cost-cutting methods to motivate employees.For example, when Tesla launched the Model X SUV in 2015, he ordered the cancellation of free breakfast cereals in the company’s office, a move that saved only a few thousand dollars, conveyed a clear message: Musk’s costControl is all-round, and even insignificant expenses he will cut without hesitation to ensure the company can survive when faced with difficulties.
However, Musk’s strategy in cost control has also sometimes caused controversy.Especially in the choice of Tesla’s autonomous driving technology, he insisted on using cameras to simulate the vision of human drivers, and rejected radar sensors.This choice is mainly based on cost considerations, as the cost of the camera is only one fifth or less than that of the radar sensor.
In contrast, leading autonomous driving companies like Waymo use cameras, radars and lidar sensors at the same time.
Musk’s decision to insist on using camera technology has sparked controversy over security.The National Highway Traffic Safety Administration (NHTSA) is investigating Tesla’s camera-powered autonomous driving system to determine whether it caused four collisions, one of which also caused pedestrian deaths.The victims of these accidents or their families have filed multiple lawsuits accusing Tesla’s technology of failing to identify stop signs, other vehicles and obstacles, resulting in casualties.
Despite these controversies, Musk still sticks to his own line.He reiterated in an investor call in April 2024: “Visual systems are the core of human driving.”
Tesla has been increasing its investment in artificial intelligence and other R&D projects in recent years.In the nine months of early 2024, Tesla’s R&D spending has increased to $3.3 billion, compared with $2.9 billion in the same period last year.However, its revenue has grown faster, with R&D spending as a percentage of sales this year falling from 4.8% in 2021 to 4.5%.
4X employee is forced to bring toilet paper to work
Musk took a series of fierce cuts to save money after acquiring Twitter.He first fired four senior executives to save up to $128 million in compensation expenses.However, the executives have sued Musk for him to pay severance.
The firing of senior executives is just the beginning of Musk’s plan to cut.He then demanded a massive layoff before paying the company’s year-end bonus in November 2022.Despite the end of the year-end bonus, Twitter’s staff fell by more than 75% in the first six months of his takeover.These layoffs touched almost all sectors of the company, resulting in a massive loss of talent and triggered widespread uncertainty and chaos.
In addition to layoffs, Musk also worked hard to cut more than $500 million in non-labor spending.He flew to Sacramento in person, closed a Twitter data center and expressed anger at the rent negotiations with the property owner.He even reportedly unplugged one server on site in person, forcing employees to reconfigure the infrastructure during the holidays and ship the servers to the company’s two remaining U.S. data centers.Although this series of changes led to multiple downtime events, it ultimately saved the company more than $100 million in annual expenses.
However, Musk’s cuts are sometimes too radical.He regrets at some point because the cuts are too deep and tries to re-hire some of the layoffs.For example, in April 2024, he re-engaged some of Tesla’s employees, especially those responsible for the construction of charging stations, who lost their jobs in his previous layoffs.
Despite this, Musk will not miss any opportunity to save money.He even stopped paying for cleaning services in Twitter offices in December 2022, causing deterioration in the office environment, overflow of trash cans and lack of toilet paper in the bathroom.In the company’s New York office, there were even employees who brought toilet paper to work themselves and hung it in the toilet compartment with metal hangers.
