In an email Tuesday to all 48,000 Tesla employees, Elon Musk asked for their help reducing costs and warned that the company's stock price could plummet if that didn't happen. The email, first reported by Electrek, is a master class in effective leadership. Here's why.

The email starts out:

At a time like this, when our stock is reaching new highs, it may seem as though spending carefully is not as important. This is definitely not true.

The recent rise in Tesla's share price propelled Musk past Bill Gates to become the world's second-richest human (after Jeff Bezos). Musk begins by tacitly acknowledging this reality, and the seemingly logical notion that the company's newfound value is a good reason to be a bit less frugal. The next two sentences explain why frugality is still needed.

When looking at our actual profitability, it is very low at around 1 percent for the past year. Investors are giving us a lot of credit for future profits, but if, at any point, they conclude that's not going to happen, our stock will immediately get crushed like a soufflé under a sledgehammer!

Without using financial terms like "P/E ratio," Musk makes clear in a beautifully simple sentence exactly what could happen to the company's stock. "Like a soufflé under a sledgehammer" is a phrase that's sure to get employees' attention. Unlike most automakers, Tesla provides stock options to all its employees, not just those in management. Thus, a drop in its share price is a direct threat to everyone who works there. 

Just as important is what the email doesn't say. Have Tesla employees become profligate with their spending? We don't know, and Musk doesn't say or imply that they have. His message doesn't criticize anyone, but simply warns of something that could happen unless they remain vigilant.

Much more important, in order to make our cars affordable, we have to get smarter about how we spend money. This is a tough Game of Pennies -- requiring thousands of good ideas to improve part cost, a factory process, or simply the design, while increasing quality and capabilities. A great idea would be one that saves $5, but the vast majority are 50¢ here or 20¢ there.

There's so much to admire about this paragraph. First, Musk reminds employees of the company's longstanding goal to make electric cars affordable for everyone. In fact, he recently announced that Tesla would manufacture a car that could be sold for as little as $25,000, though he hasn't said when that would happen. 

The rest of the paragraph is pure inspiration. First, his reference to a highly popular fantasy series serves as a call to arms. Next, he says he needs "thousands" of good ideas -- implying that all Tesla employees can and should share their thoughts. He reinforces this by adding that even an idea to save 20¢ would be valuable. In other words, no employee is too low-level to share an idea, and no idea is too small.

In order to make the electric revolution happen, we must make electric cars, stationary batteries, and solar affordable to all.

Thanks and great working with you as always,

Elon

He ends by reminding employees of the company's mission, which is nothing less than a revolution. Then he thanks and acknowledges them. My guess is, by the time they get done reading, most employees will start looking for ways to help cut costs, even though they're being asked to do so by the second-richest man in the world.

Here's the entire email:

At a time like this, when our stock is reaching new highs, it may seem as though spending carefully is not as important. This is definitely not true.

When looking at our actual profitability, it is very low at around 1 percent for the past year. Investors are giving us a lot of credit for future profits, but if, at any point, they conclude that's not going to happen, our stock will immediately get crushed like a soufflé under a sledgehammer!

Much more important, in order to make our cars affordable, we have to get smarter about how we spend money. This is a tough Game of Pennies -- requiring thousands of good ideas to improve part cost, a factory process, or simply the design, while increasing quality and capabilities. A great idea would be one that saves $5, but the vast majority are 50¢ here or 20¢ there.

In order to make the electric revolution happen, we must make electric cars, stationary batteries, and solar affordable to all.

Thanks and great working with you as always,
Elon