Musk, Trump and how DOGE can help the West

Nobody knows if the Musk-Trump relationship will work, but if it does the Western world will become a very different place.

US President-elect Donald Trump and Tesla and SpaceX CEO Elon Musk watch a fight during UFC 309. Picture: Kena Betancur/AFP

Elon Musk has already recruited a significant number of business and technology people prepared to donate up to six months of their time, often working 80 hours per week, to help reduce US government expenditure by up to $US2 trillion ($3.2 trillion), or 30 per cent.

Nothing on this scale has ever previously been attempted in the world.

This will not be a traditional and simple slashing of benefits and burning of government activities but rather a huge reduction in administration and costly regulation. The program will be aided by an adaptation of Elon Musk’s unique management technique which has enabled him to build the Tesla electric car empire and to become the largest operator in space. Naturally, artificial intelligence will be harnessed.

Given his space, communication and defence dominance, and his close links with the US President, Musk is arguably the most powerful person in the world. And, he also has his own media platform, X, which is likely to become important in the exercise.

With entrepreneur Vivek Ramaswamy, Musk will head up President Trump’s so-called Department of Government Efficiency (DOGE). When Trump announced the DOGE he described it as an effort to “slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies”.

Musk is volatile and there are many things which could go wrong, including a fallout with President Trump and Congress’ (plus Musk’s) often displayed inability to work with others.

Confirming Musk’s “inability to work with others”, Ramaswamy on Monday said he would step down from DOGE before it moves into full operational mode. But, if the operation succeeds other countries will need to follow, including Australia.

Trump had said Musk and Ramaswamy’s work “will conclude no later than July 4, 2026,” which is the 250th anniversary of the Declaration of Independence.

In accepting the role Musk told Americans: “Your money is being wasted, and the Department of Government Efficiency will fix that.”

I will first describe Musk’s unique Tesla and SpaceX management scheme and its so-called “idiot index”, and then how it will be applied in the US government affairs to reduce costs.

The repercussions for Australia are much bigger than our major political parties understand and I will highlight them in future commentaries.

The key driver of Musk’s past success, the idiot index, is the ratio of the total cost of base raw materials (metal, rubber plastics, etc) in a product to the actual cost of the product. An item with a high idiot index might cost $1m when the base ingredients cost only $10,000. As Musk describes it: “if the ratio is high, you are an idiot”.

Items which score highly on the idiot index usually have: a too-complex design; an inefficient manufacturing process; are the subject of unnecessary or bad regulation; and, are delivering huge profits to producers.

SpaceX boomed because in the US space programs using “cost-plus contracts” with a high idiot index. Contracts with large companies like Boeing and Lockheed Martin paid all their costs, plus a guaranteed profit.

Musk believes the cost-plus system stymies innovation. Worse, if the contract goes over budget the contractor gets paid more. There was little incentive for cost-plus contractors to take risks, be creative, work fast or cut costs.

Musk will slash US costs this way. He vividly remembers when, in 2010, President Obama cancelled the Constellation space program, but Musk via SpaceX offered an alternative and Obama backed him.

SpaceX risked its own capital, and it would be paid only if and when it delivered on certain milestones. There was a lot of money to be made if it built a cost-efficient rocket that succeeded — and a lot of money to be lost if it failed.

Musk and the idiot index slashed the cost of rockets and space exploration. Amazon’s Jeff Bezos competed with him. The US would send more astronauts, satellites and cargo into space than any other country.

Vivek Ramaswamy will be heading up DOGE alongside Elon Musk. Picture: Jim Watson/AFP

DOGE will embrace a key rule in the idiot index — question every rule and regulation and assume every requirement is dumb until proven otherwise.

Challenging regulations often involves discovering the actual person who is responsible either for creating the regulation or administering it. Musk worked incredible hours in implementing the index to both SpaceX and Tesla. Now, to DOGE.

When Musk applies the idiot index to government social services, the equivalent of the raw material cost is likely to be the money which goes into the pockets of the recipients. The cost of the project will be the bureaucracy and regulations that deliver the benefit. They will be measured by the idiot index. The DOGE plan is not to initially attack legislative complexities of government departments but rather concentrate on federal government bodies.

Musk has declared there are more than 400 federal government agencies which have overlapping areas of responsibility. He wants to bring the number down to a maximum of 99.

The goal is for most major agencies to have two DOGE representatives, and DOGE will provide a mechanism to share the discoveries of its representatives.

Can two people on a government board deliver change? Watch it happen. Bodies which don’t share information and co-operate in delivering efficiency will be severely punished, almost certainly including the ridicule of delinquent directors via X.

Delinquent government board directors will be unlikely to be involved in any future government contracts.

There will of course be great controversy in this process and there is a real possibility amid that and other controversies there will be a split between Musk and President Trump.

But, inserted on the edge of the DOGE process is a person with a unique relationship with both Trump and Musk to smooth out differences

Peter Thiel has been a longtime Trump supporter and is trusted by the US President-elect. Both Musk and Thiel were involved in the early days of PayPal and although they split Thiel later helped Musk with capital for SpaceX at a crucial time. Thiel knows Musk’s strengths and weaknesses.

(As I will describe tomorrow, these two men are set to have a huge direct impact on Australia.)

Trump needs the DOGE process to work and if it does the Western world will be in a very different place, with the largest economy combining industrial strength with efficient government.