By Sverre Spoelstra and Nick Butler
Tesla has announced it is offering its CEO Elon Musk a performance-based pay package worth US$1 trillion. That’s right: 12 zeros.
To put this figure in perspective, it is double the amount of Musk’s existing fortune of US$500 billion (£380 billion) and equal to the GDP of Switzerland.
There are, of course, strings attached. The compensation will be be paid out in new shares on the condition that the company meets some ambitious goals within the next decade. Still, US$1 trillion is an absurd amount of money – even for someone who is already the richest person in the world.
So how do we make sense of it?
Tesla’s chair of the board Robyn Denholm warned shareholders that Musk might walk away from the company if they didn’t approve the unprecedented pay package. Shareholder confidence was no doubt buoyed by the recent rise in Tesla’s stock, with one investor describing Musk as “key” to the entire enterprise.
But what the chair of the board didn’t mention was that Tesla’s sales (and stock price) had plummeted earlier this year, thought to be largely due to Musk’s cost-slashing activities at the US department of government efficiency (Doge). After Musk stepped back from the Trump administration, Tesla’s share price rebounded.
Christopher Penler/Shutterstock
So why award him this record-breaking pay plan? According to Tesla’s board, the package is meant to “incentivise” Musk to propel the company to new heights. In other words, Musk will aspire to achieve more if he is paid more.
This explanation rests on the longstanding myth of the “economic man” – the idea that humans are primarily motivated by financial gain. But behavioural economists such as Daniel Kahneman and Dan Ariely have long since debunked this. Humans often act in weird, irrational ways that don’t always make economic sense. They make decisions based on habits and emotions rather than careful calculation.
The figure of homo economicus offers only a partial account of human behaviour at best, and a misrepresentation of reality at worst. And what’s a few hundred billion dollars more to a man with a personal wealth that is already on a par with the total value of energy giant ExxonMobil?
To understand excessive executive pay, forget the rational “economic man”. In management studies, there’s a theory called the “the romance of leadership”. It tells us that people grossly overestimate the influence of leaders on organisations.
In his classic account of charismatic leadership, German sociologist Max Weber notes that people tend to attribute “extraordinary” qualities to certain individuals, making them appear capable of feats that are far beyond the reach of ordinary people. They become larger than life, at least to those who are in their circle of influence.
The deeds of charismatic leaders are rarely viewed by their followers in a clear-eyed way. As if blinded by their charisma, people tend to exaggerate the leader’s efficacy and ignore their shortcomings.
A typical product engineer at Tesla earns around US$115,000 a year, plus stock options. Musk’s pay package is several million times larger than the average salary at his own company. It’s enough to buy a Rolls-Royce Droptail – one of the world’s most expensive cars at around £25 million – every day for 90 years.
Only a true believer, someone with faith in the power of leadership, could think this is a good idea.
Rolls-Royce Motor Cars
Other companies are following Tesla’s lead. EV company Rivian recently awarded its CEO RJ Scaringe performance-based stock options that could exceed US$4 billion dollars. Small change for Elon, but probably a big deal for RJ.
In the case of Tesla, Musk is portrayed as a “visionary” leader, despite recent controversies. In the words of business professor Gautam Mukunda: “Tesla’s current valuation only makes sense if you attribute magic powers to Elon Musk.” So another part of the explanation is that Musk was awarded the biggest pay package in history because shareholders believe him capable of performing corporate miracles.
There is a good chance that the bonus never materialises. But what if it does?
Tech elites like to ask each other about their “P(doom)” – the likelihood that AI will destroy the world in the foreseeable future. Some of this is sci-fi hokum, based on the idea that AI will soon develop human-like agency and begin making decisions in its own interest. But decisions like the one made by Tesla’s shareholders could actually raise the P(doom) value for the world.
Why? Because AI is what Musk likes to spend his money on. The entrepreneur is building AI-driven businesses, including Grok, that have reportedly reproduced contentious arguments around climate change, claims about “white genocide” in South Africa and praise for Hitler.
After these incidents, parent company xAI said it had taken steps to make Grok “politically neutral”, which could allow space for more minority views and so amplify climate scepticism, and blamed the South Africa posts on an “unauthorised modification” to the system prompt. In response to the Hitler posts, Musk wrote on X that Grok had been “manipulated” and that the issue was being addressed.
The problem isn’t a superintelligent AI diverting every resource on Earth into making paperclips as in a well-documented thought experiment. The problem is a run-of-the-mill chatbot spouting dangerous nonsense.
Tesla shares dipped after the compensation package was announced. Perhaps the shareholders are finally on to something?
Sverre Spoelstra is Professor at Lund University; Nick Butler is Professor at Stockholm University.
Ed P says
Compare it to the largest athlete contract ever signed. 15 year, $765 million deal-Juan Soto. Yahoo sports claims it worth every penny.
Reflect back on Musk’s time spent on DOGE, monetarily only, quite a bargain.
Musk hasn’t finished leaving his imprint on the world. Not yet.
The pay package probably isn’t even an actual motivator for him. Musk will go where his genius leads him. Money is rarely the number 1 motivator for anyone who has a higher calling.
I’m going to speculate that Musk will “invent” a philanthropic way to benefit mankind beyond anything we could formulate.
Samuel L. Bronkowitz says
The only smart thing Elon Musk has ever done was to convince the rubes that he’s a genius, and those of us with actual technical backgrounds cringe every time he opens his mouth in preparation for the bullshit that’s about to emerge.
Ray W. says
Hello Ed P.
You might be right about the intrinsic value of an incentive-laden pay package, should Tesla and other companies transform certain business sectors.
As I understand it, Tesla is investing heavily in solid-state graphene aluminum-ion battery technology. There are untold billions of dollars to be made in the personal transport sector.
Pogo says
@The Moon Is a Harsh Mistress
… and Overlord Musk likes her that way…
https://www.google.com/search?q=intersection+musk+heinlein
In Musk’s strange land, no one is a stranger; or wasted as food. Welcome home — to the hive…
https://www.google.com/search?q=intersection+musk+neuralink+for+all
Musk is my shepherd; I shall not want.
He maketh me to lie down in green pastures: he leadeth me beside the still waters.
He restoreth my soul: he leadeth me in the paths of righteousness for his name’s sake.
Yea, though I walk through the valley of the shadow of death, I will fear no evil: for thou art with me; thy rod and thy staff they comfort me.
Thou preparest a table before me in the presence of mine enemies: thou anointest my head with oil; my cup runneth over.
Surely goodness and mercy (and infinite dividends) shall follow me all the days of my life: and I will dwell in the house of Musk for ever.
— Sea of Tranquility Scrolls, from bathroom stall wall of a KFC on Earth’s original recipe moon
Laurel says
I recently saw a video on Musk’s new tiny homes. They are being created to help get the homeless off the streets, and help the poor have shelter. They look like clever little domes, very small efficiency style, all in rows, all very much the same, with very little landscaping, all on one property and all with the Tesla Logo all over them. The domes look very modern.
The domes are stationary, and connected to utilities that are included in the rent, or purchase (very cheap), and of course, owned by Tesla. The electrical plant is to be solar. The domes collect the sun’s rays, which is sent to the plant, and returned back to the domes. It is planned to have the domes on the same properties as Walmart super stores. That makes it accessible for the people who shop at, and can afford, Walmart.
I thought about it for awhile, and, at first, thought it seemed a good idea. How Americans could “afford” shelter. Then, I realized, that all these domes are one neighborhood, like a family of mushrooms. Where are the jobs? How would the tenants earn money? Would these tiny homes be subsidized by the government? All poor people, shoved together, in one neighborhood! Cast aside from the rest of society. The people of Walmart.
The way things are going, it might just be the middle class who moves in.
That Musk. Whatta guy!
Ray W. says
Thank you, Laurel.
You pose many good questions.
Can it be argued that there will always be a time when someone or another will try to make a buck off of the tiny home movement?
When Sears sold its catalog kit houses so many decades ago, it was that era’s tiny home movement. I looked it up. For a time, Sears sold catalog two-story kit school houses.
When the Levitt family built Levittowns in Pennsylvania and New Jersey after WWII, the small, assembly line homes were that era’s tiny home movement. I have seen other efforts to build tiny homes with identical amenities.
About a year ago, I stayed in a D.C. four-story home built near the capital around the time of the Civil War. Tiny footprint, but extremely livable. Maybe 20 feet wide, but very much more deep. One of my cousins lived nearby in a four-story home that was no more that 12 or 14 feet wide, but also fairly deep in footprint; she bought the house maybe 30 years ago. It, too, was quite old. From the street it was part of a string of about four homes built in the same manner, but her home had its own brick sidewall; it didn’t share a dividing wall with her neighbor’s home.
Modern multi-story apartment complexes provide housing for many people in a small land footprint.
For that matter, for a time when my children were very young, I lived in a small 50’s-era, two bedroom, one bath home some five lots from A1A in the Shores close to where I grew up. I don’t remember the square footage, but it had to be less than 1,000 square feet. Access to the beach for me and my kids. Close to my office, an elementary school, doctors, grocery stores, restaurants and some entertainment. I enjoyed living the simple life there.
If Tesla can pull this off for less than $8k per tiny home, as claimed in a Youtube video, complete with solar power and battery storage, I suspect there will be a market, young and old, for that type of lifestyle. I am aware that many retirees live year-round in motor homes, some new, many old; they enjoy being able to pull up roots at any time and move about the country. Tesla claims its tiny homes can be broken down, transported, and then reassembled 50 times without appreciable wear.
Laurel says
The Tesla view will group poor people in selected areas, not much different than now. There is innovation, that’s clear, but to place them on the Walmart properties? With the Tesla “T” logo on all? If a person picks up and moves, does the logo go with it? Looks a little more self serving for Musk than serving the citizens.
I’m an advocate of mixed income, walkable development. That does work. Let me give you a somewhat related example. My husband went to Nova High School. It attracted students from all walks of life, not just from designated neighborhoods. Kids went there from Ft Lauderdale, Hollywood, Davie, Plantation, Melrose and so on. Nova moved kids along by their abilities, not so much by year. There were rich kids, there were poor kids, there were white and black kids, there were all manner of kids. These kids are now grey haired seniors today, and yet, many, more so than from other schools, are still connected. They stay in touch. They have “Novapaloosas” and come back from all over the country to attend, not at the school, but at one gal’s house. They enjoy their differences, and celebrate them. This is done by exposing kids from different walks of life, and it worked. It worked really well!
Housing can be done the same.
Ray W. says
A news outlet named Morning Overview reports that growth in electricity generation by American wind and solar plants has finally outstripped growth in demand for electricity. Solar, alone, has nearly matched growth.
In the reporter’s words, “[t]he result is a power system in which solar is no longer a niche add-on but a central force holding down emissions and wholesale prices even as consumption rises.”
This result means that the need for new coal and gas generation is being limited. In the reporter’s estimation, the U.S. may be “closer than many expected to a tipping point where renewables, rather than fossil fuels, define the trajectory of power-sector expansion.”
Yet U.S. factory expansion in solar panel manufacturing is not keeping pace with increasing demand, forcing solar farm developers to juggle domestic and foreign solar panel supply chains.
Writes the reporter:
“[Grid operators] are adapting. They are investing in transmission upgrades, flexible resources, and storage to manage the variability of solar output and to shift surplus midday generation into evening peaks. Legal and policy analysts have noted that, despite regulatory and market headwinds, the outlook for U.S. solar has bright spots, particularly where grid planning, permitting reforms, and storage deployment are moving in step with new solar capacity.”
Meanwhile, The Guardian reports that the Trump administration has for a second time extended a 90-day term May executive order that has forced onto Michigan electricity customers the additional expense of running a coal-fired power plant past its shut-down date.
I posted a comment when the original 90-day administrative order was filed. I posted a second comment when a first 90-day extension to the original administrative order was filed.
Factually, Consumers Energy owns a 63-year-old western Michigan coal-fired power plant. Planning since 2021 to close down the aging plant, Consumers Energy built a new natural-gas power plant to replace the soon-to-be-lost power. The company said, in the reporter’s words, ” that the plant’s closure would save ratepayers in the state $600 million by 2040.”
But when it came time to shut down the inefficient and comparatively more costly plant, the company was prevented from doing so, even though the “Miso grid had excess power far above what [the coal plant] provided during peak demand this summer.”
In an October 30 earnings call, Gary Rochow, CEO of Consumers Energy, told investors that the Trump administration’s order to keep open the inefficient coal-fired plant meant that Consumers Energy ratepayers would pass on to ratepayers any extra costs.
In a separate “regulatory filing”, the utility company wrote that the Trump administration order was costing the utility company’s ratepayers approximately $615,000 per day.
Consumers Energy never asked the Trump administration to keep the aging coal plant open. The Trump administration did not consult local regulators before issuing the executive order forcing the company to delay the retirement of the plant.
According to the Michigan Public Service Commission, “[t]he unnecessary recent order … will increase the cost of power for homes and businesses in Michigan and across the Midwest.”
Make of this what you will.
Me?
That estimated $600 million in savings over the next 15 years from just one replacement natural gas plant has turned in just 100 days into a $615,000 per day cost to ratepayers. This is the price ratepayers are paying because the professional liars who sit atop one of our two political parties have pushed the “coal is king” political argument onto the most gullibly stupid among us. The better the economic argument against coal becomes, the harder the professional liars will continue to push economic garbage out to their followers.
I am beginning to more and more argue that solar and wind, when coupled with battery backup, has become an economic choice, meaning that there is no longer a need to make either a political or environmental argument.
Cheaper and cheaper forms of electricity generation will drive future growth in the electricity generation sector. Any environmental benefits from that pivot will be a bonus, not an impetus.
BillC says
“Worldwide solar and wind power generation has outpaced electricity demand this year, and for the first time on record, renewable energies combined generated more power than coal, according to a new analysis…”In the first six months of the year, China added more solar and wind than the rest of the world combined, and its fossil fuel generation fell by 2%… India saw record solar and wind growth that outpaced the growth in demand. India’s fossil fuel generation also dropped. In both nations emissions fell…
“But in the U.S., demand growth outpaced the growth of clean power generation. In the E.U., sluggish wind and hydropower generation contributed to higher coal and gas generation… In both the US and EU, fossil fuel generation and emissions increased.”
—US News & World Report Oct. 2025
Ray W. says
Thank you, BillC.
DaleL says
Tesla pays no dividend. People who own Tesla stock, including Mr. Musk, do not make any money unless they sell the stock at a higher share value than they bought it. This is a common practice for a “growth” company. As the company grows (increases in value), each share gains value. However, Tesla as a car company has reached maturity. Car sales in many markets have fallen. Tesla’s car lineup is limited and stale. In the USA, pollution & EV tax credits have dried up due to the Republican Big Bloated Bill. As a result, Tesla’s stock value might be partially the result of Mr. Musk’s “genius reputation” rather than reality. Tesla’s market cap (total stock value) is $1.43 trillion.
The graphene aluminum battery technology, mentioned by Ray W, has not yet been perfected. It has been around for at least a couple of decades.
https://www.science.org/doi/10.1126/sciadv.aao7233
Even if it is successful, it would mean a reduction in the price of an EV of maybe $2,000 to $4,000. That is evolutionary, not revolutionary. The potential increase in capacity (range) from a solid state battery is also not that great. The electrolyte, in a lithium-ion battery, makes up about 15% of its mass and volume.
I strongly believe that this insane compensation package to Mr. Musk is “the romance of leadership” taken to absurd heights.
Ray W. says
I agree with you, DaleL, that compared to other battery technologies, solid-state batteries, while doubling in energy storage capacity that of today’s liquid-state lithium-ion batteries, might be more evolutionary than revolutionary, but when compared to gasoline powered cars, these batteries will be revolutionary. A 600-mile range, more powerful electric motors, longer lasting batteries, all at less cost? Yes, revolutionary.
Pogo says
@Denial
… ain’t just a river in Egypt; but keep pretending that megalomaniacal, malignant narcissist, money grubbers are the Übermensch heralds of a technocratic utopia.
Suits with pocket-size perpetual motion machine powered personal atmosphere and teleportation, for the Mars commute, made to order while you wait; come in today!
The dude says
The techbros and oligarchs have banded together and bought themselves a kleptocracy.
What could possibly go wrong?