What Companies Can Learn From Elon Musk’s “Idiot Index” To Cut Costs & Make More Profits!
Introduction:
Elon Musk has a concept that he calls the idiot index, where in building a rocket, he takes the component cost and the cost of the materials ($1,000 component, $100 raw material = idiot index of 10 to 1), finding inefficiencies. Or determining if you are an idiot.
SpaceX’s Raptor rockets cost $2,000,000, with the goal of using the idiot index to bring it down to $200,000. However, according to some leaked resources, Elon’s engineers were able to get it down to $250,000.
So many businesses are not spending their money efficiently in their advertising. However, if we apply Elon’s idiot index to traffic, you will see most business owners are inefficient and see which traffic sources pass Elon Musk’s idiot index.
The marketplace is filled with opportunities promising that they can get you the traffic you need; however, not all traffic sources are created equal.
In other words, if you understand the idiot index, you can achieve far greater results than your competition with less effort and resources.
For example, Kyle Handy is a real estate agent who spent $22,000 on Google ads, which brought in $41,324 and a profit of $19,324. So, he brought in a return of almost 87%. However, Tony Kelso invested $50,626 in direct mail that brought in $543,390, just shy of 1,120%.
So, it’s not about buying into the hype but understanding the economics of each advertising model by applying Elon Musk’s idiot index.
So, I asked ChatGPT to use Elon Musk’s “idiot index” in comparing different marketing channels to find the best traffic sources.
As you saw in the case of Kyle Handy and Tony Kelso, it’s not just about making money, because both made money, but what is the most productive money spent.
The productivity of advertising is a combination of a few different factors, including a person’s sales ability. So, even though two companies may be selling the exact same product, using the same traffic source, one may outsell the other because of their personal sales ability. However, ChatGPT did not give me the exact number but ranked each traffic source from high, moderate, low, and then ranked the top 5 based on this research.
So, we did additional research to find what the average business is spending and how much they are earning. Research can be dry at times; however, this is important for you because this data will arm you with knowledge that 99% of other businesses do not have access to. So, let’s dive into this.
