I didn't see Newsnight, but I believe Elon Musk's argument is that technology is advancing at such a rate, that it's only a matter of time before a virtual digital world is indistinguishable from the real thing. He specifically references gaming technology, so one assumes we're talking about computing power, as well as our own intellectual capacity to model real-world environments, physics, "intelligence", evolution, etc. And once such an artificial world is possible, the autonomous agents within that "world" may then eventually develop the capacity to develop their own technology - maybe even their own virtual worlds. And so on and so on, and you therefore end up with N levels of virtual worlds... the "top-level" ones being the worlds still too primitive to create new worlds. And in EM's opinion, the likeliness of us living in the "base-level" (i.e. "real" world) is miniscule. My opinion - the likeliness of humans (or any race/civilisation) lasting long enough to develop this kind of technology is zero. And you'd also have to question the motivation to create something this powerful in the first place... the resources required by the ultimate hosts would be unimaginable...