Fact check: Nonprofits are NOT a scam

You may have missed this news story amidst all the others. But in late February of 2025, on the Joe Rogan Experience podcast, Elon Musk claimed this about NGOs and nonprofits: “It's a gigantic scam. Like one of the biggest, maybe the biggest scam ever.”

Elon Musk has done well for himself while regularly making exaggerated and poorly-supported claims. But I’m here to help give you materials to refute these claims when they’re leveled against your organization.

Part of the problem in our current moment is a total lack of nuance. All nonprofits are bad or all nonprofits are good. Let me propose something entirely out of left field: a few nonprofits give the majority of amazing nonprofits a bad name.

If you were looking for an article that proposes that every single nonprofit is excellent, you’re in the wrong place. But if you think that Elon Musk’s oversimplifications about the state of our economy — and the nonprofit sector specifically — are dangerously misleading and poorly thought out, then you’re in the perfect place.

Why we need nonprofits

While Mr. Musk is busy trying to get himself to Mars, NGOs and nonprofits are filling the gaps that the private sector isn’t great at. A few examples: healthcare, education, disaster relief, justice, and environmental conservation.

I for one don’t envision a society functioning well if disaster relief only goes to people who can pay for it — and I don’t even want to go there with healthcare and education.

So for a democracy to serve all its people, we’ll need to expect at least something from this space between the free market and government.

But the most puzzling response from Musk comes around the 19 minute mark (in his over three-hour long conversation) when he claims that nonprofits have “no requirements” as it relates to what they do with their money.

This is actually by definition the exact opposite of what a nonprofit is.

A 501(c)(3) can’t do whatever it wants with its money to remain a 501(c)(3). Honestly, no company is entirely unregulated, but nonprofits are more regulated than most. So we’re honestly just confused by his belief that there are “no requirements.”

Anyone who has spent any time in the world of grants knows how rigorous the process is — and what amount of data and research go into these decisions. 

It’s exasperating, to say the least, to hear statements as devoid of evidence as 501(c)(3)s have “no requirements.” Because while he’s saying that, 501(c)(3)s are doing weeks or months of research to spend a single dollar on a community in need.

Some unsettling math

It’s a rather bold claim from the wealthiest man in the world to say nonprofits are overpaying their executive directors. 

Musk has been fighting for a personal, five-year, $46 billion pay package from Tesla, one of the many companies he partly owns. If Tesla hits all the goals during that five-year period, he’ll make a little over $9 billion each year.

Most people consider 40 hours a week to be full time, but we suspect Mr. Musk works a little more. Let’s be generous and say he works every single hour of every single day — the full 8,760 hours of the year. That would mean he’d make $1,027,397.26 per hour. 

And he found a way to spend over three hours with Joe Rogan talking about how wasteful nonprofits are. So effectively during those three hours he made over $3 million just from Tesla. I know Tesla isn’t technically paying him for that time. But you really don’t want to do the math calculating what Tesla pays him while he’s living in DC, firing government employees.

The more important reality that Mr. Musk misses is the fact that nonprofits are an essential component of the U.S. economy, contributing over $1.4 trillion — or 5.2% — of our total GDP. And that’s while employing 12.8 million people — or 9.9% of private-sector jobs (in 2022).

Any sector in our economy that contributes $1.4 trillion is going to have some problems. You’re talking about 12.8 million people here! And you think it’s all going to be pretty? Nope. But it’s likely a whole lot better than paying someone $3 million to throw around some half-baked ideas.

What else is there to say?

I’m guessing if you’ve made it this far, you’re in the camp of thinking that this whole conversation is tiresome. What else is there to say when the conversation is being defined by a guy who named his car models S, 3, X, and Y?

Are we really talking about whether nonprofits are scams or not?

The sad thing is that Musk’s fictional claims threaten real organizations that provide tangible solutions to society’s biggest challenges. The nonprofit sector as a whole is not a loophole or a scam — though there are loopholes and scams anywhere you look.

Nonprofits like yours are a cornerstone of our economy, our communities, and our ability to help those in need. And real human beings will suffer if we continue to listen to narratives like these. 

I encourage you to stay focused on the critical work you’re doing, get creative with strategy if you’re dealing with limited resources, and remember you have a lot of people in your corner.