138. What is Elon Musk really up to?

0:10Hello and welcome to The Rest is Money with me Robert Paxton and me Steph McGovern. Now, I'm slightly concerned. You've had a troubled night. Yeah, I'm not sleeping great because of my arm, so I have to sit upright to sleep. But last night was particularly troubling because, I don't know if you know this about me, but I get night terrors every so often where I really vividly think something's happening in the night and it isn't. So what was happening? It was Elon Musk had turned up at the flat and had like... So Elon Musk was banging on your door? No, he'd put up all these bug things around my room and I woke up seeing...

0:46He's monitoring you. Thinking I could see him in the curtains. And honestly, it was so vivid. It was about half past one this morning. And I ended up going around my flat and turning everything off. I turned off the Alexa. I turned off like... Because you assumed he was monitoring you. Yeah, because I'd watched too many Musk videos last night before I went to sleep. And then really... But do you know what? It's probably not far from the truth, is it? We're probably all being watched by him in some way or another now. Well, you know, I was talking to a friend of mine who's using Starlink for their broadband because they can't get decent broadband where they live, which is his satellite network.

1:24And actually this individual was saying he was wondering whether the world's richest man was keeping an eye. So, yes, so that was my night terror. And it kind of leads us neatly into what we're going to be talking about on the show. So, yeah, look, Musk is everywhere in all our lives at the moment. And therefore, what we're going to focus on are three enormous issues. One, his attempts to dismantle much of the American state. Second, his attempt to take control of Apen AI, the developer of ChatGPT. And thirdly, whether there will be a massive falling out between Musk and the American president, Donald Trump.

2:02Let's kick off with whether it's a good idea to put a tech billionaire in charge of remaking government. It's really interesting this. I don't know if you saw him in the Oval Office where he's with his son, X. I mean, I think everything in his life is called X. But he takes X. One of the things that's very interesting about X, I mean, he's got all these, you know, he's got an extraordinary number of kids. He's built this special compound for his partners and kids in Austin. But X is the one, the youngest, who he sort of takes everywhere. Yeah. So with him. So he's there in the Oval Office. Trump is sitting there.

2:38Next to him is Musk stood up with a coat on, like a big winter wool coat, a baseball cap, and his son, who's to begin with doing quite a bit of chatting. He had him on his shoulders at one point as well, didn't he? But the thing that really stood out to me is Musk looks like the one in charge. You know, it's like Succession. It looks like a scene from Succession where Trump looks like Logan Roy. Musk looks like one of the kids who's about to take over the business. Trump looks like he's just there nodding along, not really knowing, you know, what's going to be said next by Musk. It's quite incredible how the person that looks like they're in charge of America at the moment is Elon Musk.

3:15Let's come back to, you know, whether or not they're ever going to fall out. I mean, there are plenty of people who think it will all end horribly. For various reasons, I think that's not right. The other thing that always comes to mind, you know, you say he looked a bit like Logan Roy. I have to say, whenever I see his sort of current look, it always reminds me of The Matrix. And the reason that's sort of significant is because if you talk to people who sort of have known him for years, they say that somehow at the back of his subconsciousness, he believes he's in a simulation, right? This is all, you know, we're all players in some sort of super beings game.

3:55He obviously thinks of himself as somebody who has agency. But as you know, that whole world talks about the people with agency and the so-called non-playing characters, the NPCs, who are just there to observe and, you know, essentially be manipulated by people like him. There does seem to me to be some plausibility in the idea that in some way he thinks it's all a simulation because the kind of risks that he takes are the kind of risks that people take in a computer game where they're not really going to die or be wiped out. I mean, he just pushes the envelope in terms of risk taking in a way that is extraordinary.

4:39So take, for example, the way that he's drafted all these 18 to 25 year old tech kids, authorize them to go through the US government. There used to be an expression in this country like a dose of salt. Yeah. And, you know, there are these reports that these kids, right, are interviewing lifelong American civil servants, basically draining them of as much information about whether or not they're really doing a good job and refusing to identify themselves. You know, they're sort of behaving like characters in a film like The Matrix. And, you know, I think if you're on the receiving end of all of this, it's pretty scary.

5:17And the other thing they're doing, which is really extraordinary, I mean, really extraordinary, is they are tapping in to all the computers in the government, attaching artificial intelligence programs, draining all the information, then looking at it to see if via AI they can work out which are the programs that should be cut, which are the programs that may deliver genuine services to people. It's an astonishing, jaw-dropping revolution. We don't yet know, because obviously there are legal actions now going through the courts in America that will try and rein some of this in, and we don't know how much in the end of what's going on will result in astonishing numbers of jobs being cut.

6:01You know, initially we had Musk talking about$2 trillion of savings. that's now been scaled back to a trillion of savings. That's what they want to achieve. But I mean, these numbers are sort of off the charts in terms of what's ever been managed through this kind of reorganisation. Doing things like asking every civil servant to apply for redundancy and essentially warning them that if you don't apply for redundancy, you may end up being told that you're working 100 miles from where you currently live because they're also doing things like closing down offices and not giving any guarantees to people that when if they keep their job that you know they're not going to have to have a hundred mile commute i mean this stuff is mad yeah making it impossible for them it's uh you know you talk about all these young people who are now um you know working for musk and doing this job the call out for them was really interesting as well so did you notice the story i said to the group about you know the 18 year old called big bulls who apparently has been empowered to be uh you know one of musk's agents yeah so that i mean so the call out for you know to attract these people to come and work for musk on this is you know for super high iq small government revolutionaries who are willing to work more than 80 hours a week on the initiative and if you look at what he's doing you know lots of people are comparing this to exactly what he did when he took over Twitter.

7:27He had this team of people who came in, who quickly slashed costs, fired 80 % of the workforce, then put incredible pressure on the people left to prove that they were worth their job. But he did all this. Does anybody in the world think Twitter is, or X as it now is, is a better service as a result? It's chaos. Yeah, it is chaos. He would argue it's better now. It's been through a rough time, but his argument is it's better now. There is a question, though, about whether this might actually work, though. I appreciate it. It's totally bulldozering through. He's getting rid of anything that does all the checks and balances that would normally happen in government, because his big view is government regulations hinder innovation and growth.

8:15So he's just come in and absolutely bulldozing through all of them. But maybe this is the only way to change government because all the kind of little salami slicing done around the edges when you're trying to reduce budgets in a government department with everyone arguing that their department should be given more, not less. maybe I mean I'm not saying I do think it is going to work because it just sounds too extreme but a revolutionary view to bureaucracy might be the thing that could be the perfect solution longer term start again just get rid of everything and start again I mean in the meantime you've got all kinds of crazy things happening but what if it works so look I think there are two different issues here one is it's patently the case and it's obviously the case as much in the UK as anywhere that it's important to get the productivity of the public sector up.

9:07I mean, there was some data released by the Office for National Statistics just the other day, which was really shocking. It showed that across the British public sector, output per person productivity was 10 % lower today than it was before COVID. And in the health service, 18 % lower than before COVID. So in terms of, in a sense, value for money for the British taxpayer, that is a desperate collapse. The sort of positive aspect of that is if you could only get people to provide services on a par with what they were providing before COVID, the quality of public services ought to improve without us having to spend that much more additional money.

9:49But just be clear, there is an issue across the Western world of making sure that our public services are delivering more for the money we put in. So that is a genuine challenge we all face. But let's be under no illusion about the costs to human beings of some of what Musk is doing. So one of his earliest recommendations, which President Trump adopted, was the closure of United States AID or USAID, the United States Agency for International Development. This is one of the most important providers of, for example, basic health services to really poor people across the world. And as a result of this already, so for example, I'm going to read out a list of programs that have already shut down.

10:45So clinics providing HIV treatment and health services in Johannesburg, in this case for transgender individuals, have been shut already. In Haiti, programs offering treatment to AIDS patients have been halted due to funding uncertainties. In Ghana and Kenya, planned anti-malaria spraying campaigns have been delayed. In Thailand, health clinics in refugee camps along the Myanmar-Thai border have been closed. You know, people will lose their lives as a result of the just dramatic shutting of these programs. Will Americans care? No, but the world should care. I'm not arguing that point, but I'm saying none of that is going to be felt by Americans, is it?

11:30So one of the things that is striking is that Donald Trump's poll rating in America is at a high, right? I mean, you know, 53 % of Americans approve of what he's doing. So he would argue that politically, this is moving in the right direction. But on the other side, I was having a conversation with a very senior member of the Tory party yesterday. And he used this expression that I cannot stand. It's such a cliche, but I'm going to repeat it. because I've got to slag it off now, which is the Overton window. Have you come across the concept of the Overton window? Basically, any sort of politician who wants to sound grown up uses this ridiculous cliche.

12:12It's a concept created by political scientists in the 1990s, and it's basically, it was called Overton, and it's basically this idea that where respectable debate can take place shifts according to prevailing trends. So the Overton window, let's say when Corbyn became leader of the Labour Party, definitely shifted to the left. Yes. Right. Because you had for the first time in years, a leader of a mainstream party massively in favour of things like nationalisation. And for a period, the whole tenor of British debate, including within the Tory party, move leftward. Right. You know, all the talk then was of more public spending, for example.

12:54since the rise of reform and Farage, you would argue that in the UK, the Overton window has shifted dramatically to the right in this country, with even the British government now talking the talk, for example, of much greater crackdown on immigration and being, you know, much tougher on crime and all sorts of things that, you know, are much more associated. I'm not saying any of these policies are, in a sense, bad, but they are definitely associated with the right. Now, what this senior Tory was saying, in terms of what's possible in terms of reforming the public service, he would say, thank you, Elon Musk, because we can now, as a mainstream Conservative Party, adopt much tougher stuff in terms of what we're going to do to the British public.

13:36And not look as mad as the Americans. Exactly. So, you know, they can adopt much tougher stuff in terms of proposals to reform the British public service, thanks to Elon Musk, who's therefore shifted the Overton window in that sense in a much more radical direction. So it is definitely having not just an impact in America, but more widely. I mean, here's another example of the shift in the window. I don't know if you saw, it was a very interesting interview with the European boss of Goldman Sachs on the BBC today, talking about how Goldman had originally had a policy that said it wasn't going to help companies that didn't have diverse boards.

14:14it's now dropped that stipulation you know if you happen to have an all-white mail board the goldman will now work for you in a way that they were not going to work for you in the past and also trump's got rid of the stipulation about um you can't be bribed by foreign companies and foreign countries when it comes to taking on contracts with like for example if you're doing construction or whatever bribes are fine now too so it's like we're going get rid of diversity get rid of things that stop corruption. It's, I mean, this is, how is it going to end? Are we going to go backwards? If, you know, you're in that now very unfashionable category of progressive liberal, you know, I'm still wearing the badge.

14:56You know, obviously I regard an enormous amount of what Trump is announcing as a backwards step. There's a question about if it does manage to massively reduce the debt issue that the US has and it does bring down costs, So you're talking about the reform of public services, because let's be absolutely clear that so much else of what he's proposing, this is Trump now, you know, the tax cuts inflates the debt. Right. So there's certainly at best with shrinking the public service or robbing Peter to pay Paul. It won't necessarily, you know, the US debt is rising too fast, many would say anyway. Whether this, whether given what he wants to do with tax cuts, whether these cuts in the public service will go fast enough to really slow down that increase in debt.

15:41We just don't know yet. But if it does, then as you say, given what, you know, the senior Tories said to you, I really wish you'd name people whenever you say that, by the way. I know you can't, but... There's this stupid, there is this stupid convention. As you may remember, I am a member of the political lobby, that wonderful British institution which brings together a particular journalist like myself. And if you're a member of the lobby, there are still these arcane rules which say if I talk to an MP in the Palace of Westminster, by definition, everything they say is off the record. If you belong to a club, you've got to follow the rules.

16:19Sorry, but I think some of these rules are nuts, but that is the rule. Yeah, abolish the clubs. That's what I say. So coming back to if this does, though, if this does somehow work for America in terms of it does bring down the cost for their public services and this does start to reduce the debt. I know there's a million ifs around this, but then is it not going to be the case, as you're saying from talking to the senior Tory, who we can't name because we're all in a club, that it might mean that there is more radical decisions made in countries like ours when it comes to public services. And therefore we do go, let's just start from the beginning again with what we're doing with the NHS or, you know, how we fund defence or how we do education.

17:05And might that be a good thing rather than us just constantly just, you know, snipping around the edges? Look, certainly with this artificial intelligence industrial revolution that we are living through, you do have to go back to first principles to really get the most out of it. because what you will want over the next few years is AI delivering some core public services. And that does require genuinely radical thinking if you're going to get the most out of this technology. It is nonetheless striking to me that we have a British government that when the Chancellor in the autumn initiated the current public spending review, she said that this would be the first zero-based review I think since the last year or two of the last Labour government, so I think the last so-called zero-based review was something like 2008 from memory, something like that.

18:03Anyway, what a zero-based review means is you are asking the ministers and their senior officials to justify from first principles every item of their public spending. Now, do I believe that that is really going on within the British public sector? Honestly, no, I don't. I think that's a massive project. Funny enough, I was talking to a former minister, another one I can't name because of where I had the conversation, literally again just the other day. And one of the things this minister said was it was impossible to find out everything that their department did. that, you know, during the time this minister was there, the surprises just kept, you know, we do that?

18:52You know, she would routinely discover during her tenure there that actually lots of civil servants don't know what their departments do in the round, but they also said that quite a lot of civil servants just don't tell you what they do. Yeah, of course, because they protect what is theirs. It's like when there's a review in a business, everyone who's a head of a department will just, you know, totally protect their budget. It's what you do, isn't it? But what's going on in America, very differently from what's going on in Britain at the moment, is genuinely zero-based. You know, Musk is literally saying to every bit of government, what do you do?

19:29Are you sure we need to be doing this? In fact, in his case, he's not even saying, are you sure we need to be doing this? He's making judgments. He's deciding, as is Trump, that there's all sorts of stuff that they're doing that they don't want them to do. And almost the entire, you know, go back to this badge, progressive liberal badge that I wear, almost the entire progressive liberal agenda is being literally swept away to a literally extraordinary extent. I mean, I am interested in the extent to which Keir Starmer himself is welcoming what's going on in America. I'll tell you why, because like all prime ministers of modern times, he has found out quite painfully that when you're prime minister, you think you can basically just make an order and it happens.

20:19He's finding out to his cost that he can say, you know, let's have a load more wind farms or, you know, solar panel fields or, you know, new towns or whatever. And, you know, what he hears from civil servants is, oh, that's all a bit hard. It's all a bit difficult. And he's getting, you know, he used some language in a recent speech, which was very, very derogatory about civil servants. He had to row back a bit because he suddenly discovered the morale of civil service was such that they really hated it. And there was a real threat that some of them would sort of down tools. But, you know, he is really frustrated.

20:58I don't know if you saw Angela Rayner the other day, I think, talking on the BBC where she, as you know, she has this plan to build one and a half million houses. She said when she got into office, she told her civil servants. The first reaction of the civil servants was, oh, are you sure you really want to do that? It looks a bit hard. so getting the machine not only more efficient but also to work for you is very hard so I am going to be interested to see the extent to which our Prime Minister takes what Musk is doing and sort of uses that somehow as a threat to British civil servants to pull their fingers out Shall we have a quick break and then maybe talk about the open AI stuff that's been going on because that's really interesting too We'll be back with you in a couple of minutes

21:46Welcome back to The Rest is Money with me, Robert Peston. And me, Steph McGovern. So, I mean, just in the few spare minutes that Musk had when he wasn't playing computer games or completely dismantling the American state, he announced quite a big deal, didn't he? He did. So you'll have heard us talk countless times about open AI and what's been going on there. And, you know, this is a company that was, well, actually Musk was part of it at the beginning. it was originally set up as a not-for-profit and you might remember many many moons ago i was talking about this whole concept of effective altruism and so this group of um i don't know tech revolutionaries who wanted this tech to be for good and that's why they kind of set it up as not-for-profit but then as time has gone on they've obviously wanted to get investment from companies so they set up this kind of subsidiary within open ai which is for profit now it works very close with microsoft exactly so a lot of money from microsoft in it sam altman now is trying to sort out this kind of messy structure of a company that's for profit being essentially ran and owned by a part of the business that is not for profit so he's trying to sort this out musk however has swept in with this bid for the not-for-profit bit of the business he came in with this offer of near$100 billion, even though apparently it's only worth about a third of that.

23:12However, he's coming with this bid. He's basically just messing with Sam Altman's head, isn't he? Because Musk was involved in this business at the beginning. He pulled out of it in 2018, but he was involved in the early days of OpenAI. And he also has his own AI business. So Musk has got, and you wouldn't believe this, it's called XAI. Where did he come up with that idea? I mean, my God, he's so creative, so imaginative when it comes to branding. So what's going on at the minute is Sam Altman's trying to sort it out. Elon Musk's come in and gone, nah, this is not right. You should keep it as not-for-profit.

23:47We want the bit that's not-for-profit. We'll give you$100 billion for it. Then Sam Altman came back and said, no way. Actually, instead, I'll buy Twitter off you or X for near$10 billion. Only a$30-40 billion loss. Because he bought it for, I think it was$44 billion, wasn't it? So there's a lot of trolling going on between the two of them, isn't there? Yeah. So as things stand, Elon Musk is not going to be successful in this, is he? It's just more of a, I just think it's two lads dicking about, isn't it? So I think it's very unlikely that Musk will succeed with this takeover. I mean, we should just formally say that there are processes that have to go through.

24:29The chairman of the board is a man called Larry Summers. He was a U.S. Treasury Secretary, a Democrat Treasury Secretary many years ago. And they have to make a formal recommendation, which as of the moment we're broadcasting, they haven't yet made a formal recommendation on this takeover, partly because they haven't actually had the formal offer yet. So this is a process. It plays into this weird sort of obsessive sort of game between Elon Musk and Sam Altman. You know, Musk constantly goes on about how somehow Altman has betrayed the not-for-profit origins of open AI. This from the world's wealthiest man, a tech entrepreneur who doesn't seem to be anything very much in his life that is not for profit.

25:25Interesting question, given his relationship with Donald Trump, how much of that ultimately will end up leading to contracts for his extraordinary range of businesses, whether it's in the SpaceX space area. Neuralinks, the chips in the Brins. You know, all the satellites and all the rest of it. So it is just another element of the extraordinary soap opera of this man's life. I mean, obviously, it shines a light on the value of the current market value, even post DeepSeek, of these astonishing AI new businesses. I mean, Sam Altman has said 100 billion is nowhere near what the value of this business really is.

26:15And, you know, certainly if you look at the sort of fundraisings that OpenAI is going through, you know, you can come up with valuations near 300 billion. Now, goodness only knows. I've got to go back to one of my obsessions again. And, you know, I mean, goodness only knows, therefore, what that means for the value of DeepMind, which is the British created AI business created and sold to, you know, Alphabet. Yeah, Google. I mean, you know, this is one of the things that just drives me nuts when I talk about it out loud. It was sold by Sir Demis Sassabas and his partners to Alphabet for around 400 million in 2014.

26:54if you look at the valuation that Musk has just put on OpenAI and then you look at the breadth of what DeepMind does compared to OpenAI, it's a much broader based AI company. You can now come up with valuations for DeepMind of something like 300, 400 billion. And, you know, it is such a national tragedy that all of that value has gone to Alphabet, an American-based company and the investors in Alphabet. I went so much of, just think about, you know, what it would have meant to the UK if that was a UK domiciled company. It's such a gamble though, isn't it? Because it gets to a point, doesn't it, where the owners of DeepMind surely, you know, it's a bit like when you, I don't know if you're playing Who Wants to Be a Millionaire?

27:41Or, you know, you're trying to work out whether to take the gamble for the next bit of money that might be added to it. And you don't know whether that might be the best bid you ever get. and a few years later, things haven't gone as well as you thought and you get a lot less. And also, I think, as a business owner, there's a certain amount of zeros where it just doesn't mean anything anymore. Once you go past a million, hundreds of millions, you're into the billions. It's just not even fathomable. This is not really a point about whether, you know, he should have personally sold. As I understand it, the reasons he sold, and he's talked about this to a friend of mine, He said that given the funding that is available in the UK for scaling up, and that is the money you need to take a business from one level to the next, he had two big concerns.

28:36One was simply getting, as I say, the capital in that would allow them to make the investments that they need. But it's not just about kit. kit it's also about people yes he was losing because you know as a uk-based company with their funding they could only pay money for their top technicians and engineers up to a certain level basically his people were being poached by silicon valley on one and a half million dollar two million salaries and he he just felt if i don't move my business effectively to silicon valley obviously there's still a big operation here but a lot of it is now in silicon valley if i don't i'm not going to be able to retain the talent that i need to take it to the next level now you know what i'm saying is that's a national tragedy that we ought to have what's known as you know the scale-up finance here because you know we talked a bit about this with peter kyle you know we have something like 750 companies that might what you know a few of those might be the next deep mind in this country.

29:47We're really good at creating high tech, whether it's in life sciences or AI or digital, we are really good at creating businesses from scratch and then taking them to a certain kind of size. And these businesses are all generating revenues of$25 million plus. So many of those are likely now to move to Silicon Valley for the people, for the money and one of the things that if we want to become a more prosperous nation we have to do is we have to create the financial and human resources infrastructure so that they feel they can stay here without sacrificing their ambitions yeah totally anyway to get back to to this musk madness so i you know i you never know with musk what the eventual game plan is you know he will have spent money right and putting together this investor group to buy open AI.

30:40Yeah, it's a consortium, isn't it? You know, it's a consortium. I find it difficult to believe that it's simply a trolling exercise. He must feel that there is something he can do to somehow get control. Musk loves trolling, though. Have you seen how often he tweets now? It's literally every 15 minutes he's putting something online. I mean, I don't even know how he even functions as a person. Can I just mention something as well, which we've talked about a lot, which is the infrastructure around AI as well. Because obviously, you know, you've said a number of times now about how quickly Elon Musk is, you know, building these AI centres.