The argument goes like this: If we can assume that technology will eventually reach a point where we can create a perfectly lifelike simulation of reality, then we can create people who think they're alive. If we allow those virtual people to go their own way and advance, then they will eventually create their own simulations, and those people will create their own simulations in turn, etc. Assuming that these simulations are indistinguishable from reality, then the odds that we're living in the one really real reality are, according to Musk, "one in billions." Tyson agrees; it's a simple matter of statistics and probability!
Why You Shouldn't Have Asked Them:
The theory itself isn't necessarily stupid, but what neither Musk nor Tyson seem to realize is that it's actually philosophy, not science. Tyson in particular is famously disdainful of that stuff, so maybe it's no surprise he doesn't like the descriptor. But ask either a scientist or a philosopher about this theory, and they will come to a rare agreement: Musk and Tyson are full of s**t.