Elon Musk and Strategy: Perspectives from Decision Theory and Behavioral Economics

Key Chapter Title List

1. Introduction
2. Core Elements of Information Economics
3. The Small World in a Grand World
4. The $2 Trillion Reference Point Game
5. Signaling Models: Uninformed Moves First vs. Informed Moves First
6. Entrepreneurs, Uncertainty, and Creative Destruction
7. Conclusion and Implications

Document Introduction

In November 2024, one week after Donald Trump was elected President of the United States, the incoming administration announced the establishment of the Department of Government Efficiency (DOGE), led by Elon Musk and Vivek Ramaswamy (who later withdrew to focus on the Ohio gubernatorial race). The department publicly recruited high-IQ, small-government revolutionaries via social platforms, requiring over 80 hours of work per week, dedicated to unglamorous cost-cutting tasks with no monetary compensation. This initiative sparked in-depth discussions on strategic decision-making.

This study uses DOGE as a core case, integrating multidisciplinary perspectives from game theory, information economics, decision theory, and behavioral economics to analyze its organizational goals and practical challenges. From an information economics perspective, DOGE attempts to alter the form of government organization to align with either established government objectives or commercial efficiency standards. This involves key decision-theoretic elements such as utility, information costs, information structure, decision costs, and organizational form. The core challenge lies in adjusting the existing government organizational structure to fit this new optimization perspective.

The study introduces Savage's "small world" theory and the Austrian School's view on uncertainty, pointing out that decision-makers, constrained by resources and cognition, can only operate within a "small world" (a partial problem space). The government bureaucracy may control information flow, confining DOGE to a "small world" of its own construction, thereby hindering the advancement of cost-cutting measures. Simultaneously, based on Kahneman and Tversky's prospect theory, DOGE's set goal of saving $2 trillion becomes a key reference point. Its decision-making behavior is influenced by loss aversion, shifts in risk preference, and probability weighting distortion. Failure to achieve the target may lead to a tendency for risk-seeking.

By analyzing two signaling models (uninformed moves first and informed moves first), this study explores the interactive dynamics between DOGE and the bureaucratic system, highlighting a game-theoretic relationship where both sides seek to avoid falling into a domain of losses while simultaneously limiting the other's gains. Furthermore, positioning DOGE decision-makers as Schumpeterian entrepreneurs emphasizes their characteristic of embracing uncertainty and promoting "creative destruction," which stands in stark contrast to the conservatism of the bureaucratic system. This trait introduces new possibilities for breaking the deadlock of government waste.

This study provides a unique theoretical framework and empirical reference for understanding organizational interaction, decision-making psychology, and strategic games in government reform. It holds significant academic value and practical implications for policy analysts, public administration scholars, and geopolitical researchers.