Are we living in an alien’s computer game? Elon Musk thinks it’s probable

Elon Musk is messing with our heads again: this time he’s saying it’s more than likely that life on earth is just the creative imagining of a super advanced civilisation that is playing us for their (super advanced) entertainment pleasure.
His argument – which was covered in lots of places – runs so:
Step 1: look at the rate in which humans have made progress in computers simulating technology.
Step 2: If we extrapolate and keep inventing and improving at that rate, it is entirely likely that at some point we are going to be able to simulate something that is indistinguishable from reality.