I believe this quote to be talking about the immediate first line manager. THEY need to be execellent. Not the CEO.

I had a management mentor that told me, he belived that when building an org, each leader should be capable of doing all jobs two levels below themselves. That way, they could mentor their immediate reports, and could assess if their immediate reports were getting effective action out of their immediate reports.

I think this is exactly right. But notice it does not imply that the CEO of every company needs to be excellent in every activity of all employees!

Second, it is certainly true that being excellent at software does not make you an excellent software manager. But that does not logically follow from what what claimed. They are only saying it is NECESSARY, but not SUFFICIENT for one to have excellent skills.

So I am not trying to defend Musk. Only to clarify support for the claim he made. It is basically right.