On a Saturday morning in December 2022, Elon Musk summoned finance executives at Twitter, which he had purchased six weeks earlier, to a convention name. Then he drilled right into a spreadsheet that contained the social media firm’s expenditures.
Musk was indignant, three individuals who have been on the decision mentioned. Although Twitter had simply shed greater than three-quarters of its workers — leaving it with simply over 1,500 employees, down from practically 8,000 — the corporate’s spending nonetheless gave the impression to be uncontrolled, the billionaire instructed attendees.
Over the subsequent six hours, Musk learn out the spreadsheet line by line and requested employees to account for every merchandise. He ordered some gadgets — comparable to automotive providers for executives — to be minimize fully. At one level, he confronted an worker who was chargeable for a multimillion-dollar contract associated to web site safety and mentioned his electrical car firm, Tesla, spent far much less on the identical job. After the worker pushed again, Musk mentioned she was not with Twitter.
The assembly was attribute of the strategy that Musk has taken to chopping prices. Frugal to a fault, the 53-year-old has been intimately concerned in hacking down budgets at his firms, together with Tesla, SpaceX and Twitter, which he renamed X. Over practically three many years as a tech entrepreneur, he has honed his penny-pinching by digging into trivialities and chopping as deeply as doable — typically preferring to chop an excessive amount of reasonably than too little, based on 17 present and former workers and others with information of Musk’s methods.
Maybe most significantly, Musk has been brutally unsentimental concerning the cuts, paying little regard to norms and conventions. The tech mogul has been unabashed about slashing prices to the purpose that company processes — and generally even product security — break down, philosophizing that he can simply make things better later, the individuals mentioned. And he has been unafraid to offend, stiffing distributors to barter higher costs and sidestepping conventional suppliers to fabricate cheaper elements from scratch.
“He was a deity,” mentioned Jim Cantrell, SpaceX’s first vp of enterprise improvement. “However you recognize he’s only a enterprise man. And he needs to chop all the pieces to the bone.”
Now Musk, whose internet price exceeds $307 billion, is about to take his economizing ways to the federal authorities. On Tuesday, President-elect Donald Trump named Musk and Vivek Ramaswamy, one other Trump loyalist, to steer a brand new Division of Authorities Effectivity. Trump mentioned the division would drive “drastic change” by making main cuts to bloated businesses throughout the federal paperwork by July 4, 2026.
Musk seems to relish the mandate, repeatedly posting on X to his greater than 205 million followers in latest weeks about how inefficient and spendthrift the federal authorities has been.
“The sheer magnitude of presidency waste is staggering to behold!” he wrote Wednesday. He has additionally sharpened his ax.
At a rally for Trump final month, Musk promised to eradicate $2 trillion, or 30%, from the annual U.S. funds. He just lately steered that authorities employees ought to ship weekly lists of accomplishments to justify their employment. And he has mused that the federal government wants solely 99 businesses, no more than 400.
The prospect of Musk’s making use of his strategies to the U.S. authorities has introduced again troubling recollections for some who skilled his cuts.
“It was clear they got here in with quite a lot of assumptions concerning the workforce and the worth total groups have been bringing to the corporate,” Lara Cohen, a Twitter advertising vp who was laid off after Musk’s takeover, mentioned of the billionaire and his lieutenants. “They weren’t concerned with listening to from individuals who had been doing the work, particularly if it referred to as their assumptions into query. That led to quite a lot of errors.”
But whereas Musk’s strategy to budgets has generally induced chaos, his cuts might have helped pull again at the very least one among his firms from the brink of chapter and propelled others forward of rivals. He constructed Tesla and SpaceX into main companies that dominated their fields whereas preserving prices down.
At X, Musk launched into a very sweeping austerity marketing campaign, conducting mass layoffs, ignoring workplace lease payments and as soon as personally pulling the plug of a server pc to expedite the shutdown of an information middle so he may cease paying lease. Workers, analysts and customers predicted that the cost-cutting would crash the social platform — however regardless of minor outages, it has continued working.
Nonetheless, lowering spending at X, Tesla and SpaceX isn’t the identical as slashing nationwide expenditures, that are topic to a thicket of legal guidelines and processes. Congress dictates the federal funds, and any main trims may dip into entitlement applications, inflicting a backlash from vested pursuits.
The dearth of apocalyptic outcomes from his firms’ cuts has nonetheless fueled Musk’s confidence. “I’m fairly good at enhancing effectivity,” he mentioned on a podcast this month. He didn’t reply to requests for remark.
‘I Will Eat My Ball Cap’
From his earliest days as a tech entrepreneur, Musk was allergic to prices. In 1995, after establishing his first enterprise in Silicon Valley — a software program firm for newspapers referred to as Zip2 — he slept within the workplace to keep away from paying for an condo and showered at a close-by YMCA.
Musk later based an organization that advanced into the digital funds agency PayPal, which eBay purchased in 2002 for $1.5 billion. Musk put aside $100 million of his share of the windfall for a personal spaceflight firm, SpaceX, which he based that very same yr on the assumption that he may manufacture a less expensive rocket than the U.S. authorities.
SpaceX stripped out pointless elements from rocket elements, simplifying them in a approach that made them cheaper and quicker to fabricate. Cantrell mentioned he had as soon as instructed Musk that the gasoline tanks on the corporate’s first rockets would value $1 million or extra.
“It so offended Elon,” Cantrell mentioned. “His phrases to me have been, ‘If it prices that a lot I’ll eat my ball cap.’”
Musk started analyzing tanks utilized by vehicles and the oil {industry} to see if they’d be cheaper than people who main rocket firms had relied on, Cantrell mentioned. SpaceX in the end purchased rolls of metal and welded items collectively to construct its personal tanks for a number of hundred thousand {dollars}.
Chester Crone, an govt at Moog, which makes high-performance elements for spacecraft, mentioned the corporate had offered mechanical actuators — units that use energy to drive a bodily motion — to SpaceX for one among its early rockets. However after their first buy, SpaceX executives requested Moog to radically minimize the worth of its half.
“We don’t need it for $100,000,” Crone mentioned he recalled SpaceX executives telling him. “We would like it for $10,000.” SpaceX then requested if it may merely purchase the design to fabricate the half itself. Moog refused, so SpaceX went elsewhere.
“On the finish of the day, if he doesn’t like the worth level that he’s getting from a provide maker, he’ll work out another,” Crone mentioned of Musk, including that Moog has hardly ever offered to SpaceX since.
SpaceX didn’t reply to a request for remark.
In 2010, SpaceX launched its Falcon 9 rocket, which prices about $550 million in inflation-adjusted {dollars} to fabricate, based on Mo Islam, a co-founder and CEO of the space-industry e-newsletter Payload. The Falcon 9 is used for all of SpaceX’s business launches. NASA has estimated that the identical system would have value it as a lot as $4 billion to construct.
Musk’s frugality not solely saved SpaceX cash but in addition created a business area increase. Getting a kilogram of cargo to orbit right this moment prices about $2,600, in contrast with $65,000 on NASA’s now-retired area shuttle.
Cameras or Radar Sensors
At Tesla, the place Musk grew to become CEO in 2008, his low-cost ways helped make the corporate’s electrical automobiles worthwhile, whereas rivals like Ford Motor and Normal Motors lose cash on each battery-powered car they promote.
Musk has additionally used cuts as a motivational approach on the firm. When Tesla rolled out its Mannequin X SUV in 2015, Musk eliminated the free cereal from the corporate’s workplaces, two former workers mentioned. That saved a number of thousand {dollars} a month and despatched a message that Musk was prepared to chop — and minimize deep — to maintain the then-struggling firm afloat.
At instances, Musk’s effectivity measures might have put the protection of Tesla’s automobiles in danger. Since 2021, he has refused to make use of radar sensors for Tesla’s self-driving expertise, relying as an alternative on cameras to imitate a human driver’s imaginative and prescient. The price of a digicam is one-fifth that of a radar sensor, or much less, at present costs.
In distinction, main autonomous car firms comparable to Waymo use radar and generally lidar sensors along with cameras.
Accident victims or their survivors have filed quite a few lawsuits, claiming Tesla’s expertise failed to acknowledge cease indicators, automobiles and different obstacles, resulting in accidents and deaths. The Nationwide Freeway Visitors Security Administration is investigating whether or not Tesla’s camera-dependent self-driving system was chargeable for 4 collisions, together with one which killed a pedestrian.
Musk has refused to budge. Imaginative and prescient “is admittedly how people drive,” he mentioned throughout an investor name in April.
Tesla, which didn’t reply to a request for remark, has steadily elevated spending on synthetic intelligence and different analysis and improvement tasks through the years, to $3.3 billion within the first 9 months of 2024 from $2.9 billion a yr earlier. However its income has elevated quicker: Analysis spending as a share of gross sales has declined to 4.5% to this point this yr from 4.8% in 2021.
Mass Layoffs
Musk’s starkest cuts have been at Twitter. The day he accomplished his $44 billion buy of the platform in October 2022, he fired the corporate’s 4 high executives “for trigger,” a transfer that he concluded may save $128 million in compensation. (The executives have sued Musk for withholding severance funds.)
The firings have been just the start. Musk then demanded mass layoffs earlier than a November 2022 deadline to pay companywide bonuses. Whereas the bonuses have been ultimately paid, Musk eradicated greater than 75% of the workforce in his first six months in cost.
The job cuts and departures have been so wide-ranging that they left the corporate “with vastly diminished institutional information,” mentioned Eddie Perez, who led Twitter’s civic integrity group and left the corporate in September 2022. “There was a lot uncertainty and haphazardness about it.”
Musk additionally sought to eradicate greater than $500 million in nonlabor spending. On Christmas Eve 2022, he flew to Sacramento, California, to close down Twitter’s knowledge middle there. He had been angered by lease negotiations with the corporate that owned the property and demanded that Twitter depart the area instantly, two former workers mentioned.
Towards the recommendation of his workers, Musk unplugged a server whereas there to hasten the exit, the individuals mentioned. That disrupted a device used to watch criminality on Twitter, forcing workers to work over the vacations to reconfigure the social platform’s infrastructure and ship servers to its two remaining U.S. knowledge facilities.
Twitter quickly skilled a number of outages. However the modifications generated greater than $100 million in annual financial savings, the corporate introduced a yr later. X didn’t reply to a request for remark.
Musk has generally backtracked on his cuts after slashing too deeply. He tried rehiring some employees he laid off from Twitter. In April, he additionally introduced again some workers of a Tesla unit that builds charging stations, weeks after firing all 500 of them.
Ultimately, although, no element was too small to avoid wasting just a bit. In December 2022, Musk stopped paying for janitorial providers at Twitter’s workplaces, leaving trash cans overflowing and bogs unstocked. On the firm’s New York workplace, one worker took rest room paper to work and hung it within the lavatory stall with a steel coat hanger as a makeshift spool.
This text initially appeared in The New York Occasions.
