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Dude, you gotta get on Starlink. I know, I know. I can't wait. Fix up this latency in a heartbeat. Seriously. Welcome to season six, episode seven of Acquired, the podcast about great technology companies and the stories behind them. I'm Ben Gilbert. I'm David Rosenthal. And we are your hosts. Today, we are talking about SpaceX, the company that will this very week be attempting to launch humans into space as a private company and make the United States a space-faring nation for the first time since the end of the Space Shuttle program, which unbelievably was a decade ago. David, how crazy is it that it's already been a decade since the end of the Shuttle program? And also how crazy is it that we haven't sent humans to space as the US since then? So crazy. I remember when that happened, just like, how disappointing that was, which makes what's about to happen so exciting. Yeah, because I mean, there was no date set for when it was gonna start again. We decided, okay, the Shuttle program's coming to the end. It was expensive. It was dangerous that it had its mishaps. And there's plans for stuff that's coming next, but there wasn't, there was no date. There was no plan. There was no mission. And so now here we are almost a full 10 years later. With a date, a plan, and a mission, which we'll get into. Indeed. All right, so listeners, here's the things that I knew about SpaceX more or less before we started researching. They're the first private company ever to launch a rocket to orbit, recover it, and reuse it. They can do all three of those things simultaneously where they bring two rockets back down on land and one rocket back down on a boat, almost a thousand miles away, pretty unbelievable. They're of course led by the controversial genius, Elon Musk, or I should say genius entrepreneur. Yep. And of course, he has a plan, many would argue a credible plan of getting a million human beings to live on Mars. But until I dove into this mountain of research, I didn't understand the company's truly amazing business model. The winds of change going on around the company in the space industry at just this moment in time or really how they were actually going to be able to pull any of this off. So what is the business? Who pays them? And for what? And what's with all these satellites that they've been launching recently? So today, David and I are going to dive into all of that in full gory detail. Yeah, we are. Yeah. Well, a few announcements before we get into it. If you love acquired and you want more, you can become an acquired limited partner. Our most recent episode was a crash course in fundamental startup concept pricing with Patrick Campbell, the founder and CEO of ProfitWell. So Patrick is literally the world's expert on the topic. And so we brought him in to dive into how you should price software, because most people do it wrong, how you can raise your prices and still have that be OK for your existing customers. And things like, what's the proper way to do a free trial? So if you want to join, you can get access by clicking the link in the show notes or going to glow.fm slash acquired and all subscriptions come with a seven-day free trial. And also come with access to our monthly LP calls that we've started doing, which I don't know about you, but they are super fun. Super fun. We've had a lot of awesome LP's joining us. Super great chat and just like an amazing reminder of the incredible people that listen to this show and RLP's, so I can't wait for the next one. Great way to get to know so many of you. Our presenting sponsor for this episode is not a sponsor, but another podcast that we love and want to recommend called the Founders Podcast. We have seen dozens of tweets that say something like, my favorite podcast is acquired and founder. So we knew there's a natural fit. We know the host of founders well, David Senra. Hi, David. Hey, Ben. Hey, David. Thank you for joining us. Thank you for having me. I like how they group us together and then they say it's like the best curriculum for founders and executives. It really is. We use your show for research a lot. I listened to your episode of the story of Akyo Marita before we did our Sony episodes this incredible primer. You know, he's actually a good example of why people listen to founders into acquired because all of his great listeners and investors, they had deep historical knowledge about the work that came before them. So like the founder of Sony, who did he influence? Steve Jobs talked about him over and over again if you do the research to him. But I think this is one of the reasons why people love both of our shows and there's such good compliments. It's not acquired. We focus on company histories. You tell the histories of the individual people. You're the people version of acquired and where the company version of founders. Listeners, the other fun thing to note is, David will hit a topic from a bunch of different angles. So I just listened to an episode on Edwin Land from a biography that David did. David, it was the third fourth time you've done Polaroid. I've read five biographies of Edwin Land and I think I've made eight episodes of them because in my opinion, the greatest such primer to ever do it, my favorite entrepreneur personally is Steve Jobs. And if you go back and listen to like a 20 year old Steve Jobs, he's talking about Edwin Land's My Hero. So the reason I did that is because I want to find out like I have My Hero's who were their heroes. And the beauty of this is the people may die, but the idea is never do. And so Edwin Land had passed away way before the apex of Apple, but Steve was still able to use those ideas. And now he's gone and we can use those ideas. And so I think what Aquarius doing, what a founder trying to do as well, is find the best ideas in history and push them down to generations. Make sure they're not lost to history. I love that. Well listeners, go check out the founders podcast after this episode. You can search for it in any podcast player. Lots of companies that David covers that we have yet to dive into here on acquired. So for more indulgence on companies and founders, go check it out. And now David, over to you to take us into SpaceX. Wow. Where do you even start? Well, the place to start listeners, if you haven't already, go back and listen to our Tesla episode, which was now a couple of years ago, which is just crazy. Man, we got to revisit that because a lifetime has happened to Tesla since we recorded that episode. But in that, we talk obviously a lot about Elon and his background. Him as a person, some of the crazy things that happened to him that have turned him and his personality into the unique brew, the unique blend vintage that it is. But just to, by a quick way of background to catch everyone back up on it. So Elon obviously was born in South Africa. He grew up with a pretty insane family. And even in an even more insane time to grow up in South Africa with apartheid and all the terrible violence that was happening there. And he wanted to know that he wanted to come to the US. He thought America was the land of opportunity. He thought it was where things could happen. He was particularly interested in space and sci-fi and making the future the present. And so he basically, at age 17, hitchhiked his way from South Africa to Canada, lands in Canada, and then ends up going to the University of Pennsylvania. From there, he makes his way out to Silicon Valley. He starts two very successful internet companies, one of which was a little company called PayPal. And somehow in true Elon fashion, managed to get himself ousted as CEO of these two internet companies at least three and potentially four times, which is pretty impressive, given that there's only two companies. This is x.com and then, I'm sorry, before this, this is zip two, and then x.com, which merged into become PayPal. Yep, first company is zip two, got asked to the CEO. Second company x.com, his employee staged a coup. That's the one that you may or may not count. Then the board removed him. Then he came back quickly. Then they merged with PayPal, confinity.com, which would become PayPal. Then the board removed him again. So all of this before you start your rocket company, have all these experiences to form you and then see what happens. Let's just play that experiment out. Exactly. Well, so this unique brew of life experiences for this man who's only 29 years old, he decides after in October of 2000, being outstead for the final time from the newly merged PayPal. He's had enough. He's done with Silicon Valley. He's hanging up his spurs. He is walking away from it all at age 29, with about $200 million, some of which, a small amount of which coming from his zip two sale earnings, and a large amount of that from his equity in PayPal, and a silver McLaren F1. Oh, by the way, we didn't talk about this in the Tesla episode. Did you know Ben that he and Peter Tiel were driving said McLaren F1 up Sandhill road to go meet with Sequoia Capital one day? Peter asked him what this thing could do. Elon said, essentially hold my beer, and they end up spinning it around, completely totalling it, being an amazing stroke of fate that they do not die. And then they end up going to the meeting afterwards with the car totally wrecked. Oh my God, I knew they totalled it. I had no idea it was with Peter or going to Sequoia. That's like almost to, they got away with their lives. I mean, this is Elon, we're talking about here. So a lot of this history comes from the great, great Ashley Vance biography of Elon, appropriately titled Elon Musk, because what else are you going to title a biography like that? And Ashley writes to take this into SpaceX now, and so the stage actually writes about what is going on with SpaceX. He says, with SpaceX, Musk is battling the giants of the US military industrial complex, including Lockheed Martin and Boeing. He's also battling nations, most notably Russia and China. And then shortly after he has a quote from Elon, he says, my family fears that the Russians will assassinate me. Man, and you thought online banking was rough. No kidding. And how do you think about Elon at this point in time? Like is he, like Rich Tech guy, who now wants to get into rockets, much like the many sort of billionaire types before him who want to start a rocket company, or what's... How do you think about that? You're referring to Jeff Bezos? Well, I'm referring to the litany of people who have started a rocket company, bought one rocket, crashed it, and given up. I mean, there's like people who have started all sorts of companies have then gone and done this as their second act when they, you know, have a God complex. And yeah, there's... It's interesting, you... Almost always, it's... Well, always, it's men that do this. He is like little boys growing up wanting to be astronauts, make a bunch of money, then decide to go create some spaceships as they toys. And that's what everybody thought Elon was doing here, including all of his friends, which we'll get into now. So it's October 2000. He's just been ousted. He's decided he's leaving Silicon Valley, for good, like literally like metaphorically leaving, but also physically leaving. He's going to move to Los Angeles because space is now what he's going to do with the rest of his life. And the aerospace industry is, his primarily headquartered in the Los Angeles area. And so he's going to move there. He's going to make connections, and he's going to figure out what's next for him. And kind of amazingly through all this, this also says a lot about Elon. Despite having been ousted from PayPal twice, he remains really, retains really good relationships with all the team there, including Peter and Max and, you know, all the PayPal mafia and Rulof. And so one weekend, PayPal is starting to really take off at this point. They're not public yet, but they're starting to figure things out. The whole team, including Elon, goes to Vegas for a weekend. And Kevin Hartz, who was an early angel investor in the company, is interviewed in Vance's book. And he talks about that they're sitting, he says, we're all hanging out in this cabana at the Hard Rock Cafe. And Elon is there reading some obscure Soviet rocket manual that was all moldy and looked like he had bought it on eBay. And talking openly about space travel and changing the world. So this is like everybody's like, okay, man, this guy has gone off his rocker. Yeah, and he's not sort of hiring someone to go do this forum and say, put my name on it. I'm going to flash way forward to today, but he's effectively, and maybe even entitled the chief engineer. I believe he is entitled the chief engineer. Yeah, I think I've heard the NASA director refer to him as chief engineer of SpaceX, Elon Musk. Like, he was a sponge. Like, he would go find resources on rockets and just go like, suck all of the information out of physics textbooks and physics professors. And, you know, exactly what you just pointed out rocket manuals. I don't want to, I don't want my question from a moment ago to linger too long feeling like I'm mischaracterizing him. Elon is absolutely not an eccentric billionaire who now decided to get into space because there's nothing else to do. Like, this is sort of the plan all along. And online payments were sort of this brief exit from the highway before he got back on to go and really run at this big problem. Yeah, well, it was a way to get all of these resources. So when he lands down in LA, he gets hooked up with a nonprofit organization called the Mars Society. And he, and he's been percolating on Mars. He talks about, when he first started thinking about all this, he goes to the NASA website and he's expecting on the NASA website to find, you know, all sorts of great plans about the future and exploring space. And in particularly Mars, like makes sense that people should go explore Mars. We've been to the moon. And there's nothing there. And so he gets really disillusioned. He's like, I kind of want to make like, I've got some resources. I want to make a grand gesture. He's not thinking about a company. He's not thinking about a business. He's thinking about something to inspire people to get back into space exploration. So the Mars Society, this is their charter. So he makes $100,000 donation to the Mars Society. He joins the board and he starts meeting all of these aerospace people in LA. And not just in LA, of course, back up in Silicon Valley. There's NASA's Jet Propulsion Lab in Mountain View. And so Elon, he's mostly down in LA, but he's going back and forth and he starts organizing these Saturday salons. He calls them where he's just getting together industry leaders in aerospace and at JPL, both in LA and Palo Alto. And he's just kind of like, there's no agenda, but he kind of lets it be known to all of them that like he's got some resources. He's, you know, a dot com rich guy. And he wants to make a gesture. And like what could be done on the order of kind of 10 to 20 million dollars. So they start to coalesce the group on this idea of building a quote unquote Mars Oasis. And the idea behind a Mars Oasis is that they're going to buy a rocket and they're going to put a plant on it. And they're also going to put a robot on it. And they're going to shoot this rocket to Mars. And when it lands on Mars, I can't remember if the Mars rover had landed at this point. I think so was a thing. The lander that was the one that I remember was a really big deal that I think found ice. Yeah, I remember that. The Mars Phoenix lander was somewhere like 2008. And so that hadn't happened yet. But I think the rover had. Yeah, I think the rover was there. Anyway, it wasn't like, I mean, it was kind of crazy. Obviously everything about this is crazy. But you know, you could sort of piece together how you could string along somebody that this could happen. So they were going to put this there. And then the idea was that the robot was going to create a greenhouse. And then was going to put the plant in the greenhouse and let the plant grow on Mars. And then the robot would have a camera. Or they would have controlled the VOICES room. And Whiteboards were able to integrate them into theava. Oh, Yep. Over to Incredible model. Yeah. That work of that sort of terrifying over a 60 year old bicycle get on the long side and that the way the robots know. It should step back. maybe even like a, you know, some kind of performance art project, not to foreshadow what's going on in Elon's life today. But yeah, that's kind of the idea. There's one problem though, and nobody in the group in the salon group is really willing to tell Elon. You know, he's thinking he's got, you know, probably 10-ish million left over from the sale that he made. I think 22 million from the sale of Zip 2 is first company. He's probably got about 10 million left over. He thinks he can probably scrape together maybe 20 million, maybe take some loans out against his PayPal equity. That's his budget for this. And David earlier, you had said that number 200 million, that obviously would come later when he did get liquid on those PayPal shares. Now he's only got sort of this 10 to 20 million from their first company. Right. You know, he could, he will end up being with $200 million in liquidity. But at this moment, it's all tied up in PayPal. So the thing that none of these space experts want to tell him is that like he's off by an order of magnitude on the cost of this thing. And 10-20 million isn't going to cut it. You're needed more 100-200 million, $300 million. So Musk, though, like he's very, you know, he's singular in his focus. And so he keeps pushing forward on this. And he comes up with this idea. I think this was his idea that the way he was going to make this happen was he was getting to get a deal on a rocket. By instead of using a, you know, purpose built space launching rocket, he was going to go over to Russia. And remember this point, we're not that far removed from the, you know, dissolution of the Soviet Union. It's kind of the Wild West days in Russia. It's fine to 2001. Yeah. We're now in 2001. And Musk's idea is he's going to go over there. And he's going to buy an intercontinental ballistic missile. Because the Soviet Union has disintegrated, you can like kind of do that in Russia these days. Apparently, there's an open market where you can go and buy, you know, well, maybe it's not open, but it's, you know, it's great. It's it's a, that's right. Didn't he have some sort of like shady, not shady, but a connection like it is. Wow. We get into sort of like help him figure this out. We're about to get into this. We should also contextualize here. I think to be able to actually buy one of these in the US through more appropriate channels. Like if you could actually get your hands on one, I think it's something like $65 million. Like the reason to sort of look elsewhere is there's no way you're getting one here for any reasonable amount. Yeah. He thinks he's going to get a deal by buying a missile and converting it into a rocket. This is like, you know, cue the cue the James Bond, you know, villain theme. So he goes over there. He hears, well, he hears from his network that there's a guy who can maybe make this happen. And that guy's name is Jim Cantrell. And so Jim lived in Utah. He's an American. And he had worked for NASA and also the French space agency and ended up doing a lot of actually like super classified collaborative missile defense projects with the Russians. I don't know if this was during the Cold War or just after where they were actually working together on, you know, missile defense. So he knows the Russians pretty well. So he tells the story one day he's in Utah. He's driving. He gets a call on his cell phone. And he says, this is in Vance's book. This guy in a funny accent said, I really need to talk to you. I am a billionaire. This is Elon by the way. Elon is not a billionaire at this point. I am going to start a space program. And Musk finally refuses to give Cantrell his cell phone number and Musk made the call from his fax machine line. He's like starting to get paranoid about what this is going to entail to go try and buy a missile. So Musk asks Cantrell to if there's an airport near where he is and if he could meet the next day. And Cantrell says, my red flag started going off. And then he's he's fearful that one of his enemies is trying to set him up. He says, OK, I can meet you at the Salt Lake City airport, but only behind security because he wants to make sure that these. It's actually really smart. I mean, these used to deal with the Russians here. Just like it's a good if I ever want a super high security meeting. Like now I know how to do it. Yeah, go to an airport. It's probably pretty empty these days. Coronavirus is going to have a very private meeting. So Cantrell runs out of conference room in the Delta lounge at the Salt Lake City airport. And they mean they end up hitting it off. And Cantrell's like, Oh, OK, like, I mean, this guy is something, but he's not totally crazy. And so he says he agrees. He says, OK, I'll go back to Russia with you. And I can I think I can help you buy a rocket. So at this point, Elon's friends all basically try and stage an intervention. They create like a compilation video of rockets blowing up. They come up with all the stories Ben, you were mentioning of everybody who's lost all their money doing this. He goes forward. But one of his best friends from college, a day of Rese, who started the funded.com and founder institute is not great entrepreneur in his own right. He says, I'm going to come with you. Like he's like the friends must have like nominated him to keep tabs on Elon. So the three of them, Cantrell, Elon, Rese and one other guy end up going to Russia and making a pilgrimage to try and do this. The other guy who goes with them is going to make Griffin who they get introduced to. I was seeing Mike Griffin. I was seeing Ben's face right now. We'll come back to Mike Griffin later in the episode. I have Mike Griffin listeners in my notes. I won't tell you where or what his title was, but wow. It's the same Mike Griffin. Yeah. Ben and I were talking before the show and I was like, all right, there's going to be a thing. Like just wait, just wait, listen, there's going to be a thing about Mike. Wait, so what's Mike's role in this? So he comes over to just be part of this. What's the right word? Like, MSAry, entourage, maybe to just kind of make introductions and meet with people. See how one would go about buying an ICBM from Russia. Yeah, I mean, you could call it an ICBM. You could call it a rocket to get to space, which is what, you know, the intention here is. So Mike, he had worked in NASA earlier in his career. And then he had run Inquitel, which is the, it is part of the government. It's the CIA's kind of venture arm for investing in commercial ventures that are going to be helpful to the government. So, you know, who knows why Mike was coming with them? You know, again, he's coming from the government. He's coming from Inquitel. Maybe he's keeping tabs on everything that's going on here. So he comes along and it basically goes as you would expect listeners. They meet with much rushes, you know, Cantrell and maybe Mike sets set up some meetings. And they kind of go like this, you know, that advanced describes a bunch of them in the book. You know, they walk in, they sit down. There's a lot of, you know, the first thing that happens, of course, is vodka shots. And Vance talks about one meeting where they do everybody in the room does vodka shots. And the Russians are toasting to America. And that probably should set, you know, some red flags off there for everybody just in the get-go there. And then, you know, the chat for a while, they're not really talking about anything related to buying a missile, lunches served, you know, a couple hours go by. And then finally, they get around to like, so the purpose of your visit. And for anyone who's ever met with any of Elon's companies, let alone Elon himself. Like, this is not how you get to have a meeting with someone at SpaceX. It's quick. It's to the point. It's how fast give me really good reasons for everything and let's move on. And like Elon is the personification of that type of meeting. So he starts getting really frustrated by all these meetings. And finally, you know, by the end, he's had enough of this kind of Russian way of doing things. And he just starts coming out like right after the bad kishats like, I want to buy, I want to buy rockets. You know, here's my offer and he's calculated he's willing to offer the meeting with one group. This is the last group they meet with. I think has either two or three rockets. He offers them eight million for the two of them. And they're like, yeah, how about eight million each? And they needless to say they don't come to a deal. So everybody leaves the meeting. By the way, they're there in the middle of Moscow and Russian winter, which is. It's awful. I've been in I've been in Moscow in February and it is like. It is like freeze your face off cold. So it is it is literally February 2002 when this is happening. Wow. Yeah. So let's let's recap dollars real quick. Just everyone has a because dollars are going to be an important thread through this. Through this whole story, not just because this is an expensive endeavor, but because the scale of dollars to other dollars is important to think about of how would you go about solving this problem. So Elon's basically got a hundred and seventy million from PayPal of post tax dollars. Once the acquisition happens, which is not for another five months. And yet, so he's got 20 million total now, but you know, he'll eventually have a hundred and seventy million. And so that number that I quoted buying a rocket like this from a US company that manufactured, it's like $65 million. So you know, he's trying to buy him for eight million for for two of them in Russia. So that keep those sort of relative dollar amounts in your head. Of course, the deal goes blows up. He doesn't actually end up buying them, but that would have been what it cost him. And he couldn't, you know, even if you were willing to put all his money into this, he couldn't do the sixty five million dollar launch because that's just the launch. Like, you know, then you got to like get the stuff there. You got to build the robot. You got to set up all this stuff. Like, I'm sorry. That's sixty five million that I'm quoting you was literally to buy a rocket from. Oh, interesting. Yes. I didn't realize that you couldn't even, I guess you couldn't at that point in time just walk up and like reserve a launch spot on a rocket. You had to actually buy it. 2001. Yeah. Who, who, who can you just go and say, hey, I want to. Yeah. Well, imagine if they were a company that did that offer that. And also, I take that back. I think such a concept did exist, but I think it would have cost you 150 million to 500 million. I think quoting some of my numbers that we're going to bust out later in our future cost comparisons. Wow. Wow. So, okay. So back to February 2002 in Moscow. They leave the meeting this, this motley crew. They get on the airplane and they head back to the US on the plane. And I can't tell. Talks about this. He says, whenever you get on a plane in Moscow, particularly in in February heading back for the for the states, he says you always feel particularly good when the wheels lift off in Moscow. It's like, my God, I made it. So he and Griffin, you know, they're veterans here. They, you know, call over the drink cart and they start, you know, celebrating getting out. Meanwhile, Elon's sitting in front of them. And he's just like furiously typing away on his laptop silent. They can't, you know, figure out what's going on. And I'm about halfway through the flight. He turns them and he says, hey guys, I think we can build this rocket ourselves. And then he hands them the laptop. And they look at it and they're just like dumbfounded. Elon has this spreadsheet on his laptop. This is, I don't know if it's like a must have been Excel like Google sheets and existence points. He got this Excel doc. And it's like a hyper detailed spec sheet with costs and all the materials needed to build a rocket. Not necessarily a rocket that would get them to Mars, but it's like, you know, it's real. And, and so they're, they're stunned. And they say, how did you build this? Well, it turns out Elon had been reading a lot of Soviet rocket manuals. And he had also met as part of this kind of group of advisors he's been putting together. He met this guy named Tom Muller. And Tom had worked at Hughes Aviation. Hughes, of course, being Howard Hughes back in the day. Speaking of, of billionaires who started rocket companies indeed. And then we've done to TRW space. And he was kind of known in the industry as a real savant about engines. Like probably the best, most impressive rocket engine engineer in the world. And must have gotten in touch with him and met him and started asking him all these questions about how rocket engines work. And what needs to, you know, go into building a rocket. And he had helped him put together this spreadsheet. So it was, it was pretty damn good. So they get back to the US. And then basically a whole chain of events gets kicked off that ends up in space X. And tomorrow an American company launching people into space. Yeah, another just to keep the dollars thread going. I think it was, I can't remember exactly which of the sources it is. We David and I have 20 or 30 different sources that are in the show notes where you can go and read, read more about this. I want to say this was originally from a space X engineer, but pointed out if you calculate the cost of goods sold for aerospace greed, aluminum alloys plus some titanium copper and carbon fiber on the open commodities market. It's about 2% of what rockets cost. And I want to plant that seed because the question in your mind throughout all of this should be. Where, why is this expensive? Like obviously this is expensive. It's almost unfathomably expensive. When you've heard about anything in this industry contracts awarded, cost of a mission. NASA's budget, which by the way, in the last 20 years has gone from about 1% of our federal budget down to about half a percent. It was as high as 5% in 1969. I thought of the space race. So just interesting thing about that. The question. That's of the US government budget. By the way, these are the numbers. That's the entire federal government. Yes. But so it's immensely expensive, almost to the point where it's you can't even discern between the millions and the billions. And I'm trying to sort of paint a picture here where you really should just try and figure out every single time you hear a high number. And why is it expensive and where does the money go? And of course you can't make a rocket just by throwing commodities at a wall. So you're not going to get it all the way down to 2% of what that rocket costs. But 2% being sort of like the hard materials. I'm not someone who's in a industrial job, but I have to imagine that in most manufacturing businesses, the actual hard materials are much more than 2% of the final sticker price of what's off the line. Yeah, the bomb versus the MSRP. Totally. Well, and this is Elon, Elon studied physics and under add in addition to business, he is a physicist. And this is the question. He asks himself, he's like, yeah, like this is hard, but at the end of the day, these are atoms. And like, you know, it's a bunch of gas in a tube, right? That's what a rocket is. And so this is what he's putting together in spreadsheet. So they touched down back in the US and basically at the same time, PayPal finally goes public. And right after. So even they were the first, we talked about this with with rule off on our adapting episode with with with real off at Sequoia, who was at the time to see a photo of PayPal. They broke, you know, they were the one bright spot in the in the dot com, you know, the Russian Russian like dot com winter. The stock pops 55% right after the IPO. So Elon sees this, he's got this spreadsheet. And something clicks in his mind and he says, you know what? This isn't just a gesture. This isn't just an inspirational thing I want to do. I can actually disrupt this industry. I want to build a company. I can take, you know, all of this cost blow that's happened in this industry. Use my spreadsheet, use my connections and do this for real. So he gathers up, you know, they walk off the plane, he gets control, he gets Griffin, he gets smaller, the rockets, you know, the literal the rocket scientist. And again, Chris Thompson, who was an aerospace engineer at Boeing. And he says, let's do this. Let's start a company nonprofit is dead. I'm going to start this. I'm going to fund this all myself. PayPal is a liquid public currency. The lock up will be over soon. I can get out exit my stock. And I'm willing to go all in on this. So almost all in. Greater than half an greater than half an now he hasn't yet met JB Stravel and gotten introduced to the electric car scene. So at this point he's he's thinking all in. The one person who everybody's in except for for Mike Griffin, he lives on these coast, you know, he's the former Anky tell guy, he says, you know, look guys, I'm a little farther on in my career. I'm a little more senior, you know, this is all a great adventure. Best of luck. I'm rooting for you, but I'm not going to move out to California and do this. And that ends up being a very good thing for space SX that he did not do that as we will see. I'm like, I'm like learning in real time for you on this episode. I had it's a very good thing for space X that is a very good thing for space X and the world that he did not do that. Everyone else though is in can trails in for a few months, he ends up leaving a few months later. In June 2002, they officially incorporate space exploration technologies and then the very next month in July 2002, he buys PayPal for one and a half billion dollars. And Elon now doesn't just have a liquid public stock currency. He has $180 million plus in straight up cash that that he gets out of PayPal. And at this point in time, he says, you know, remember, he's been ousted three or four times from the two companies he started in the past. This is going to be his life's work his next company. He says, I don't want any, any chance that anyone could kick me out here ever again. I'm not taking on any outside investors. I'm putting my entire fortune into this. I will fund it all myself. It's mine. And the super interesting thing is, you know, Ben, we were talking about this, we were texting about this all told over the life of space X. I think Elon has only put in about $100 million into the company versus Bezos at Blue Origin puts in a billion dollars a year. And so many other, you know, people that have entered into the space industry just become money pets. That's a good, let's plant that seed because yes, space X is very revenue funded instead of equity funded. Of course, it's very equity funded too. This is a company that has a what $35 billion valuation today and has over $3 billion invested in it from much of which is second. Yeah, I think much of which is secondary. Okay. Well, the point I want to drive home here is space X was founded. And there's two, there's one thing that's known about the company at this point and one thing that's not super solidified, at least as far as I can tell, the thing that is known is we're going to freaking Mars, like we're figuring this Mars thing out and we're going to start by light and a one engine candle on fire. And like we're going to we're going to figure out how to, you know, take baby steps here. So that part is figured out the part that's not figured out is what you'll find in the very first paragraph of the Wikipedia entry on space X, which is this sentence. They're an American aerospace manufacturer and space transportation services company. It is very, very important to understand space X today is both of those things and they are different. They are a company that makes stuff for aerospace and may well one day run a business on that. And then they also have this business where they're basically a logistics company to ship stuff up to space and that ladder business funds the former business. And I think the missing puzzle piece that sort of comes along that lobbies for space X to do that is is not yet in place yet. Yeah, well, so the business plan for this new company and again, very, he was very insistent this is now a company is that he's seen all this cosplay in the industry. He thinks they can do much better and he realizes really the hard part about launching things into space is the engine of the rocket. And he has the best rocket engine engineer in the world, Tom Mueller working for him. They're going to build their engine completely in house. And then the idea is that the initial initial idea is they're going to go to third party suppliers and commodity folks and get all the all the rest of the stuff together and work with work with contractors kind of like you can imagine the business plan ironically is sort of like the traditional Detroit automotive companies where they make the engines and they make the finished products. But everything in between the engine and the final car comes from a whole network of suppliers. Yeah, yeah, horizontally integrated company. Yeah, exactly, exactly. So the plan is this is what they're going to do. They're going to build the engine and they're going to start launching in September 2003. It is now July 2001. Yeah, that's that was some whistle. You want to think classic. Yeah, classic. May have been the first the beginning of the Elon timeline because in software, you know, you can ship that fast. Well, harder and hardware. We should also say like there's a this I think is from from the Ashley Vance book as well like the way that Elon calculates these deadlines is like he thinks about it. About literally how long would he sort of like build a gantt chart in his head. And then he tries to compress all the minutes together. And then he also tries to apply a speed acceleration there where he says look like I would work on this really fast all the time. So anybody that I hire would also do that. And so he basically creates this like ultra ultra compressed gantt chart that's massively sort of like has the Elon multiplier on it. And that's sort of how he expects the work to get done. Yep. Yep. So they decide they're going to name this first rocket the Falcon one after the millennium Falcon, of course. And since the rocket is named Falcon and the key is the engine, they're going to name the engine Merlin, which is a type of a type of Falcon. Also, I wasn't able to find I don't know if you were if this was intentional or not, but the Merlin engine actually has a storied history as a different type of engine, which is the Rolls Royce Merlin engine. I thought that was a mistake. And I think that was one of the most of the British air fleet during World War II and the Battle of Britain and was like storied for being its power and reliability and, you know, helping the allies win the war. That threw me for an SEO loop because I was I was searching for information on the Merlin and kept getting this Rolls Royce thing. And I was like, what the I thought SpaceX always made their own engines. That would be the ultimate irony based on where the company would end up today and their sort of strategy and principles. I know. I know. Okay. So they get to work building the Falcon and the Merlin working with all of these, you know, the network of contractors and suppliers being, you know, horizontal, horizontally integrated company. And they pretty quickly find that it's not just Boeing and Lockheed and everybody who is subject to cost, bloat and time, bloat and projects, scope, bloat in this industry. It's all the contractors all the way down. So Elon starts asking questions that these guys pretty quickly. And this isn't just like two levels of contractors is not like, well, I'll sub it out to Boeing and then they'll sub it out to someone. This is like like it's turtles all the way down type type thing. Like there's a crazy recursive loop where yeah. It's everywhere. So Elon of course starts asking questions and people in this industry aren't really used questions being asked of them. And he starts figuring out that some of these components, whether it's, you know, part of the shell for the fuel tank on the rocket or some of the avionics components that contractors are charging 100,000, multiple hundreds of thousands of dollars a piece that they can just manufacture them either in house, fab them in house or use off the shelf, you know, consumer grade electronics and computers for, you know, 1% or less of the cost that that these contractors are quoting them. So he says, all right, screw it. We're not just like Tesla. We're not going to take the Detroit, you know, approach to this. We're going to vertically integrate. We're going to make 90% plus of this rocket in our own factories, which is wild. I mean, the SpaceX sort of coily talks about how raw material rolls in one side of the factory and rockets roll out the other side. And they almost like talk about it. Well, minerals show up on the left side and rocket. It's not quite that they do have a network of suppliers. I think the number is 3000 suppliers and 1100 that supply them product every week. But the way to think about it is those suppliers are just sort of like way lower level. Like they're more the raw material, you know, think about sheet metal and wiring rather than fully assembled, you know, motherboards and, you know, fuselages. This is like it's it's kind of a crazy undertaking because really in business, the theory is only take your core competency in house and outsource everything else outsource everything they can be commodity. There were so few players in this industry and so like such limited number of customers on the demand side that like there was a very specific way that it was done. And that way just involved this wild scattering of subcontractors, each of which had to make their own product profit margin. And so you end up with this stacked like margin margin margin margin margin and as someone who we will talk about here shortly brings up in a in a speech, her quote is it's exponential GNA that you get when you have multiple layers of integration. And I've never heard someone describe it so aptly that of course this is exponential because every time somebody needs to make their 30% or whatever it is that's on the previous person's 30% or whatever it is and I bet it's a lot higher than 30. Yeah. Well, let's think about who the end customers were in the space market, mostly, you know, pre space X, well, and even now post space X, they were governments, you know, primarily the US government, but also other governments around the world. These are entities like a lot of these contracts are done on a cost plus basis, which you know, by the way, side note, playbook theme. If you ever as an investor or an operator encounter a situation where there is a cost plus contract as a way of doing business, you need to either if you're an entrepreneur, disrupt them as soon as possible or if you're an investor, run the other way. Because with a cost plus, literally it's you get a there's the cost of what it cost to make something and then the contractor makes a percentage profit on the cost. So the incentive of the contractor is to make it cost as much as possible so that their absolute dollar profit as a percentage of the bigger number is bigger like it's nuts. Yeah, it's a great point, David. And I think, you know, it's ambitious, but it still seems silly that this is a company that is both best in class at, you know, creating motherboards for this purpose and best in class at writing software and best in class at creating rocket engines or, you know, top three in class of creating rocket engines. It's like an insane number of people. Reading goes rockets and right that's the other thing is they yeah, they are the operator of the final product. Yeah, they vertically integrate everything. It's just, you know, it's obviously it's a 7,000 person company now, but it is just shocking how many core competencies they need to be excellent at. Yeah, so, okay, so what's the business model for all this like what's the target market so Elon, you know, he comes from this internet industry, you know, new, you know, PayPal, ZipTeeve, new markets, lots of demand, you know, highly rapidly growing markets. And all the folks that he surrounded himself with who are instrumental at SpaceX, they're all the, these are the bleeding edge of the bleeding edge folks in the space industry, the people who like Boeing and Lockheed aren't moving fast enough for them. So they think there's this concept in the space industry at the time and has been for many, many years that small satellites are going to take over and there's going to be this big democratization of the space market. You know, and where, whereas it was just governments and big satellite companies that were launching big stuff into space, there's going to be small sats and CubeSats and now like everybody is going to be this massive opening of the market, kind of like there was with PCs and cell phones. And that's who SpaceX is going to try and serve exactly like PCs and cell phones. Like if you think about it, the reason that a lot of these CubeSats can do what they do is because we've got, you know, a few billion smartphones out there and we can massively bring down the cost of, you know, the really innovative stuff that goes into creating something that, you know, fits between your hands outstretched. Yeah, and it really amazed me doing the research. We've all heard this story about space and small satellites in recent years with the venture funding in the space, but this was the story even back in 2002, 2003, like it's. That's true. That's a fair point. This is five years before the iPhone. Yeah. You know, eight, nine years before smartphones had scale. So people were always thinking this. And, you know, I think it will materialize in the future, but the reality is it didn't quite materialize for a long time, the big market there. And so at this point, SpaceX makes a critical, critical hire, the venue we were all leading to earlier, a woman named Gwen shot well. Gwen is just an incredible force in nature in every dimension. Today she is the president and CEO of SpaceX and runs most of SpaceX at the time. She was the first salesperson. And so she had come actually interestingly, vice president of business development, David. All the sales. Oh, it was sales. Which, you know, in Elon's world is a good thing. And so Gwen started in the automotive industry earlier in her career, but then moved into the space industry and she says, hey, wait a minute, guys, like. So everything around the company was architected to sell to this emerging market of small satellites, like the Falcon, the Merlin engine was incredible. It was the most highly efficient rocket engine ever built, but the Falcon one using one of these engines was a pretty small rocket and could get just small satellites up. She said, I think it's like 70 feet tall. Does that sound right? It's like it's not called exactly. When you think about walking up to a rocket and marveling at sort of this, this skyscraper struck like that's not what the Falcon one was when I sort of like made a joke earlier about, you know, dropping a rocket to a candle like it's tall, but it's not that tall. No, I mean, compared to like a Saturn V or something like this is this is just a little bean shoot. Right. And so Gwen says, you know, yeah, like let's go pursue, you know, try and sell to these small seconds, but honestly the market, like she knows the market. And she says, it's not there, but I think you guys are, I think she's the one who says this, you guys are missing something. The big players, the governments, the big satellite guys, the Department of Defense NASA, they're also interested in what you're doing. Like they don't like it that they are paying so much money for all of these rockets and these launch operations that they need. You know, if we can prove to them that we can actually do this, we can get some money out of the big boys. Yeah. And Gwen importantly spent a decade at the aerospace corporation and microcosm. So she sort of like knew the way that this industry did business and sort of knew the way that money flow around, floated around, knew what the different total addressable markets were. I think Elon probably didn't have a pie chart on his computer of sort of like segments in the TAM for sending stuff to space. Like Gwen lived in that pie chart and she was the second tab at the model. Yes. And when we were alluding earlier to, of course, my comment on Gwen with the sort of benefits of and cost savings of vertical integration, but also to the sort of dual business model of SpaceX, the sort of owned and operated things that they send up versus the Hey, we're a shipping company. She sort of is the force behind Hey, we're a shipping company and that's going to fund the rest of this operation. Yeah, like proof concept of the Falcon one. Let's load it up on a truck and let's take it to Washington DC and just park it in front of the, I think it was in front of the FAA, not the pet and gone. But the engineers are like, what are we doing? This is crazy. This is like just showmanship, but, but it works. They get the attention of DC. That's crazy. And I think I remember too is something like it's a more shiny, nice, idealized rocket than the one they were actually designing. But it had the space. I'll go on it. So meanwhile, the Tom and the team are working away at building the Maryland and the rocket and of course the original well. So the original goal was to fly in 2003 that gets pushed to 2004. And then finally in 2005, they're ready to go and Gwen has managed to land not a small satellite, the player as the first customer, but the Department of Defense has a, they're starting to experiment with launching smaller satellites. And so they want to say they say like, okay, we'll take a flyer on you guys. We'll put up a small satellite. You've never set a rocket to space. Like let's take our satellite and we'll put that right there in the nose cone in the fairing of your, of your of your rockets. So they do. They believe they're going to launch out of Vandenberg Air Force Base just North L.A. in California, but typical bureaucratic red tape also because there's some competitors that may or may not also have some launches going on at Vandenberg at the time may have forced them out. They have to go find another site so they scour the world. They find an abandoned, not abandoned, but a not currently used space in the Pacific Ocean between Hawaii and Guam and the Coagelyan Island islands or Quaj, which is part of the Marshall Islands. Yeah, I think it's the Quajolin at all the Quajolin at all. And they basically they ship the rocket and they ship the company out there. They say like, all right, we're going to we're going to set up a rocket launch site there. Yeah, all right. Let's let's talk about this. So the launch site is on Omuleck Island in the Quajolin at all. And so if you work for SpaceX at this time and you have to go out there. Here's how you do it. So you take a five hour flight from L.A. X to Hawaii. You stay overnight. You catch the 7 a.m. flight to the Marshall Islands, which of course makes several stops in that area of the Pacific because you're not. You don't just have a everyday back and forth single shot to the Marshall Islands. This is like a place where in fact, I think my high school guidance counselor went on the Peace Corps there. Like this is a remote remote location. Also, sadly, a place where we tested lots of weapons in in World War two. And I'm sure many other times. So then you get to the Marshall Islands. You then have another hour long boat ride to actually get to Olameck Island. So you're like every time you go out and back. I mean, it's like a multi day experience that you're putting up with changing time zones all over the place just to do your job, which is top point 1% in terms of cognitive requirement to do that job. Yeah. And spoiler alert, a good portion of the company spends most of the next three and a half years going back and forth to this island. They initially think they can launch in November 2005. There's a valve problem. The launch gets canceled takes them until March of 2006 until they get all systems go again the night. The Falcon 1. It takes off. It starts climbing. Everybody's going nuts and about 25 seconds in. It blows up. And remember, it has the Department of Defense. You know, experimental small sat in its fairing, has its payload that gets blown out of the rocket ends up falling through the roof of the building of the launch facility there mostly ends up surviving. I realize that. Yeah, a lot of the rocket ends up getting blown into the ocean. But Elon notes in his postmortem from the event. It is perhaps worth noting that those launch companies that succeeded also took their lumps along the way. SpaceX is in this for the long haul and come hell or high water. We are going to make this work. So they're not deterred. It takes them another year to attempt a second launch March 2007. This time they make it three minutes into the flight. The first stage of the rocket had separated the Merlin engine did its job fantastically. The second stage kicks in the Kestrel, the smaller Kestrel engine and that's going to take the rocket and the payload up into orbit. Everybody's cheering high-fiving. Then, as Ashley says in the book, it starts to wiggle. I can also imagine this must have been so demoralizing. So two things I want to point out here. One is, and I remember thinking about this the first time I watched Apollo 13 when I was a kid. They don't know exactly what's going to happen when it goes up. But you can model a lot of it out with equations. And so you do. And you run computer simulations and you do your best. But what if you didn't think of just one force that's going to be acting at one point during the journey. And in this case, the one force that they either didn't think of or that, you know, it just was miscalculated in some capacity is that it was either the fuel or some kind of fuel and was like sloshing around causing it to spin or causing it to. It was that everything functioned perfectly as it was going up because the fuel tank was mostly full. But then when it got to the second stage in the fuel tank was getting down towards empty. And there was all this empty space in there. It started sloshing around in and in the body of the rocket. And that started started wiggling and moving around in a circle. And then eventually it sloshed so much that there was an air bubble. And the air bubble got into the engine and it exploded up almost into orbit. God, that just must have been so demoralizing. I mean, to be especially after just having the last year. Yeah. Whole year. Yeah, I think it's this is a good place to like just just do a all systems go on on our terminology here because listeners, as you know, David and I neither of us are in the aerospace, but I'd say no enough to be dangerous here. It's worth just articulating some of the terminology we're using and what are these rockets. So the things that that's the big main body of the rocket. I'm going to work my way out from the bottom is called the first stage. And this is where all that liquid fuel is that gets it up not all the way to orbit. Maybe all the way to orbit. It basically gets it off the ground. It gets us through the thick atmosphere of the close to the earth. And it sets it off on its sort of more horizontal journey to start orbiting. And of course the engines are sort of the attached to that. And in this case in the Falcon 1, just the one Merlin engine. So that goes up and David, you mentioned the stage separation. So the first stage sort of falls back toward Earth. Nowadays it can land than it couldn't. And you know splashes down some casually dropped that. Yeah, nowadays it can land. Doesn't it feel barbaric like, okay, I was thinking about this the other day. Some of SpaceX's competitors have rockets that the first stage when they come down they splash down into the ocean and they're useless. Doesn't that feel barbaric? Like it was mirrors a few years ago where it was the most amazing thing in the world that oh my god, we vertically oriented a rocket and then we can sort of like clean it up and then we can use it again. And now you're like, wait, wait, I'm sorry, it's just wasted. It's just like you can never, it's just trash. Like it feels like like you just threw it at the bottom of the ocean. Yeah. Yeah, it feels like I just like finished a look Roy and then threw it directly in a trash can. It's like the you know that scene in in Mad Men, I think it's in the first season maybe where the draper family is out on a picnic in a park. And they just yes, and they just dump all the trash. They pick up the blanket and just kind of shake it in all of it just gets fed and they just walk off like happy family. I take it back. This is like finishing your now gene water bottle and then throwing it in the trash. It's like it's amazing how your perspective changes. But anyway, I digress. So we, so we've got through that first stage. Then you've got the second stage of the rocket or you know, this is the part that does something out in space. This has another engine on it. David, you just mentioned the Kestrel engine. That's the smaller engine that's sort of better for little maneuverability out in space because these Merlin and then later the what's the current remind me the Raptor. Yeah, the Raptor. These are powerful freaking engines. Like if you're going to go try and dock it against something that's going to create a problem. And so you've got this smaller stage that has a single, you know, smaller engine on it. So that's the second stage that we're going to talk about. It does stuff in space. Then there's one more thing on top and that can be one of two different things. One is a payload that is contained within. I think the right way to say it is within a fairing. I think so. Maybe within fairings. But basically the the fairing splits into two. Those things fall back toward earth and then it's got something in there. It's got, for example, a satellite or a bunch of satellites in there. The other configuration is that it could have a capsule on there. That would be a spacecraft that you know humans could operate one day. Who knows. And so that's sort of the structure of the rocket and the terminology that for a long time when people talked about the multiple stages of a rocket or my eyes would sort of glaze over. But it's at least in space X's case because it's a relatively straightforward design. It's it's good to just sort of keep in mind so you can go, OK, and follow along. Yep, yep. So they were so close. They were so close to actually doing this being the first private company ever to launch a satellite into orbit. And then right at the last minute it failed. So they're under turret classic Elon fashion. He says not only are we go for number three. We're go for so this is the Falcon one, which was both the first and one engine one Merlin engine. They had been Tom is Muller's genius. He and Elon have been thinking about this isn't just one of this is a modular system. And you could you can have multiple of these engines put together and build bigger rockets with the same engines. And so the idea initially was they're going to have the Falcon one and then the Falcon five, which was going to have five Merlin engines and then the Falcon nine with nine Merlin engines. Elon says not only are we undeterred by the second failure. We're going to go full steam ahead with trial number three, try number three with the Falcon one. I'm green. I'm killing the Falcon five to green light the Falcon nine all systems go development on that while we haven't even launched the Falcon one. Now there was a big reason away. He did that, which we've we've been building up the whole episode. But when we add more in an octa web around that engine, it will really work. And to be fair, the first stage did work. So that that that second launch was a success by some measure, although they never could have delivered whatever payload wasn't. You know, on the second stage and going into space. Yep. So the third try again takes them a year to the summer of 2008 when they are finally ready to to give the third try at the Falcon one launch from the island to go the first attempt on August second 2008. They have to abort the launch of T minus zero seconds, but they've got to they've got a launch window the weather cooperating they're going to try again on the same day. They go later on that same day. It all starts working well again. And then there's another failure before the first stage is even finished. And Elon only has so much money. I know, I know it's just like it's crazy. So Elon is what put so we said total about 100 million in a million into SpaceX. I think he said at some point that that was enough for three or four. And I'm quoting the wait, but why is for urban here, which is great, which is three or four launches. Right. But that's cool because you know, hey, like like he's deep into this. He said they're going to do this. He's put a hundred million. He made like close to 200 from PayPal, right. So like he's good for it. Right. No, he's not because this is 2008 and two things had just happened. This is summer of 2008. One, Elon has now summer of 2018 takes over a CEO of Tesla and he's pumped almost all of the rest of his money into Tesla. 70 million. 70 million. And two, even brothers is about to collapse. And the world is about to the financial world is about to go nuts. So good luck raising money. So internally, like he keeps a cool head to the company and externally, but internally he is like freaking out. So what does he do? He calls up his old friends from PayPal who are now at Founders Fund. Hey, remember that time we were in a McLaren. Yeah. He calls up Peter and Peter's Peter's partners at Founders Fund and says, yeah, I didn't want to raise capital outside capital. But I guess I'm going to do it from anybody. I'll do it from you guys. Peter, you replaced me as CEO once. So there's no way you would do it again. Yeah, right. Well, I don't think that was Peter's choice to replace him at Payton. No, I don't think it was. And so Founders Fund in the summer of 2008 invests $20 million into the company. That is enough to very quickly turn around for a fourth and what would be final attempt to first do the first successful launch of a Falcon 1. The very next month in September 2008, the same month that Lehman brothers went under, they finally succeed in a launch. And it's crazy. They don't even they only have a dummy payload at this point in time. The only customer that that trust them that Gwen has been able to wrestle up is I believe the Malaysian government, I think to launch a communication satellite. The Malaysian government tell the next one. Yes, well, the Malaysian government didn't even trust them enough that it wasn't going to blow up. So they said, all right, we'll like, we'll let you take us up. But on this one, you got to put a dummy payload on there. And like if this works, then you're going to do another one and you're going to take our actual satellite up. Yeah. And revenue for these Falcon 1 launches was pretty low. It was something like $7 million. Oh, wow. So they got to even the initial price was $7 million. And I don't know if they'd raised it by by this point in time. Well, they only ever did five launches of the Falcon 1. So they did. They couldn't climb too high. So they finally, they finally succeed. Elon gives a speech afterwards in classic. Elon he says, well, that was freaking awesome. There are a lot of people who thought we couldn't do it a lot actually. But as the saying goes, the fourth time is the charm, right? They're only a handful of countries on earth that have done this. It's normally a country thing, not a company thing. My mind is kind of frazzled. So it's hard for me to say anything. But man, that was definitely one of the greatest days in my life. Not to be fair, he has family and five kids and so yes, one of. But like a classic Elon. I think probably for most people here too. We showed people we can do it. This is just the first step of many. I'm going to have a really great party tonight. I don't know about you guys. So Elon was he on the quage like, do you know where I believe he was there? Yeah. Okay. Because this was it like everything was writing on this and he had taken out a loan against his SpaceX. Are you about to take out a loan against his SpaceX stock to fund Tesla at this point. Yeah. I mean, that's that's a whole another story. I suppose that's worth telling here too. Well, we'll get into that in one sec. But the code on this is that finally in in July 2009. They did do a fifth launch of the Falcon one to get the actual Malaysian satellite up into orbit. But by this point in time, they had already moved on to what was going to be the real business model here, which is the Falcon 9 and government contracts. Yep. And again, the real business model of the space shipping company, where we're still very far from the hey, we we own a rocket and were our own internal customer. Like we also own things that were sort of operating in space. We're very much hey, we're a shipping company. We're a shipping company and so remember a little bit ago when Elon and Gwen put the model of the Falcon rocket into DC and started, you know, querying favor there and remember all the way back to that trip to Russia where the guy Mike Griffith was along for the ride. Well, guess who's headed NASA at this point? Mike Griffin. Mike Griffin. Just incredible. And he was a Bush administration of point D if I remember right indeed. He was indeed he wasn't that I believe he resigned. And I'm incredibly when when the Obama administration took over. So this is right at the end of his tenure, like literally the 11th hour we're talking here at the end of December 2008. And through presumably through Mike and other context, Gwen and Elon had found out that NASA was going to bid out a resupply contract, a new resupply contract for the international space station. And this is going to be a big big contract. And NASA was maybe open to a new entrant in the space potentially taking on this contract. Yeah, I mean, reflecting back now understanding the who the NASA administrator was at the time, makes a lot of sense how incredibly fast SpaceX was able to build and be awarded this contract. I'm sure they went through all the proper review and everything, but that relationship has to help. I do want to give a little bit of context to listeners on sort of what a big shift this was in space policy. Like if you think about the Apollo missions, like NASA would design something. It was the NASA engineers and then they would bid out these sort of sub contracts to different people. And like ultimately it was a NASA owned and operated vehicle that they paid enormous amounts of money to someone else to build and then they'd run their own missions on it. And this is over many more decades than sort of getting compounded, things get more expensive. They're bidding out more and more and more. If you're Northrop Grumman or Lockheed Martin, like you then have subcontractors under you and on and on. And this is a huge policy shift where NASA is basically saying, well, instead of us just subbing out the manufacturing, let's just tell people, hey, our statement of work is we need to get this thing, the ISS. And like we will pay you to do that for us. Whoever can do that's the best and best. Yeah, like that's all we're asking here. And that's like a staggering shift in policy that enabled this to actually happen. The nuts and bolts of it are cots, the commercial orbital transportation services that later led to other contracts for both cargo to go to the ISS and people to go to the ISS. But this is a what they call a space act agreement, which is sort of like a contract where the, you know, that NASA's done a ton of these over the years, but this time frame we're talking about this oh six to oh eight time frame is when they really started to use them to say, hey, can one of you be a shipping company for us and will we'll fund you helping to build your UPS trucks and figure out how to design those. But then you get a big contract for doing the shipping for us. And you may know this more than me was was Mike kind of architect of this huge change in policy for NASA. He was I don't think the architect, but it was definitely under his watch and a big, a big shift for sort of the industry that he's sort of credited with kicking off. Yeah, I mean, this is this is so huge and incredibly visionary, I mean, without this change in the way NASA operated like there be no space X there be no none of all the innovation that's happened in space like it's incredible. The thing is you know for for space X to bid on this contract they got to be able to get like stuff like a lot of stuff up to the ISS that means you need a lot more than the Falcon one so back member when Elon canceled the Falcon five and said we're going straight to the Falcon nine. This is what it was all about they needed the nine to be able to get up to the ISS and bring enough stuff up there. So this is great like 2008 is winding down or in December 2008 like Elon is literally running on fumes like he's not going to be able to make payroll at either Tesla or space X for like the January first 2009 payroll on December 23rd two days before Christmas. They get the news from NASA they have one there the two winners two companies get the contract split the contract space X gets a big part of it 1.6 billion dollar payment from NASA to fund I think it was 12 missions cargo missions up to the ISS and it's just like game change or remember they were charging you know 10 million dollars on the order of that for like a space for a Falcon one launch. You know this is this is 1.6 billion dollars for 12 missions just completely changes the company. So at this point then he learned does a whole bunch of stuff he also as he's quoted in the Ashley Vance book as he says it's like the flipping and he doesn't say flipping matrix the moves the financial moves that he was making to stay alive at this point so this contract comes in he takes out a loan against his space shares. He he's an investor in a company called ever dream that gets which is a hosting company gets acquired he gets liquidity from that and he's able like he's able somehow to make it out of this with both Tesla and space X surviving him with space X at this point like completely set up to transform from these Ragtag guys are launching you know rockets from an island in the Pacific to like no we're going to Cape Canaveral we're launching out of the Kennedy Space Center. Yeah completely incredible. It's worth you know you say they make it out alive by the skin of their teeth and it was a near death experience that will continue to happen for Tesla over and over and over again in the coming years I mean like the the amount of financial engineering that it takes to keep that company alive and the amount of you know spikes in production and all that that that we've all watched them. Go funding secured. Yeah I mean it would be nice if the you weren't triggering SEC investigations like that would make it easier but the point that I want to make here is to contrast space X because there are places where space X definitely puts it all on the line. But they were kind of out of the woods at this point they didn't have the constant near death experience after this that that Tesla would have space X as a company that very very quickly grew from this Ragtag bunch of guys that smell bad and we're also being in a room in the quage. To suddenly having guaranteed revenue if they could come through on some promises so they staffed up aggressively they got huge and they turned into a grown up company and of course you know they they they kept a lot of their same culture I mean Elon famously has these weird interviews that he did for the whole first thousand people and all the engineers after that and you know it's a very different company that's still aggressive on vertical integration that's still. Yeah a lot of the same principles but like they weren't. On the verge of dying constantly the way that we we described Tesla in that yeah this is the moment when it like it's it's all a step change at this moment and again like I think it was was all the way back to go and saying like no no we got to go like this is the market we got to go after these contracts and then having Mike as as had an asset and like having this come through. Yeah so the other thing so they so now they got to make the Falcon nine work but again because Tom had Mueller designed this module in a modular fashion like they know the Merlin engine works now and the castro a second stage engines. It's a lot easier even like you said Ben was stringing together an octo web which is the configuration that they have them in together but it's a lot easier to go from you know that building a whole brand new engine to take up. A rocket the size of the Falcon nine the other thing they have to do though is they have to make a capsule to go on top of it so they're not just taking satellites up they got to take a spaceship up no an unmanned spaceship to to bring cargo to the ISS but a spaceship nonetheless and so they. That would have poke funny here from it the in the way but why article one of the best lines is when he's describing the thing that I did with each component of this the rocket he's like and of course the thing that sits on top is a spacecraft or if you're nine a spaceship. Yeah that's right I thought you were going to go at the other part of that post where you know of course these things all look like back to childhood he was yeah palaces yeah of course I mean basically we're all nine years old you know with everything that's happening here for sure. What was it worth talking about a little bit of context around the space industry around them at this point yeah go for it yeah so I alluded earlier that space space space has been heavily revenue funded and you know lots of that by NASA there's a great publication which is a great thing about NASA as a government agency so everything's public so there's is audit it's called audit of commercial resupply services to the international space station and this is published in 2018. That has this great diagram of you know money that flowed to different companies space expoing orbital Sierra Nevada others and what it flowed for all the different programs be it commercial crew or or shipping people up and space has received seven point seven billion dollars in contracts from NASA for launches which is is astounding compared to a company that would be trying to sort of do as much as space X has done without actually having a customer on the end of every rocket it be it be impossibly hard I mean it would take so much more capital and it would change your priorities and what space X really has has done here and I don't think I realize this every time I'm watching one of these space X launches and get all excited about a new piece of technology on that rocket which by the way there's a new piece of technology on every rocket every single mission they fly is is different hardware than the previous one because they're constantly iterating every time they do that almost every time save for ten or so there's there's a customer that's paying them money to send that thing up and so you know NASA has been responsible for seven point seven billion of that the other thing that NASA has put in money for which is a lot of money put in money for which has been really interesting is when you mentioned the spaceship David which would ultimately be called the dragon capsule developing the some total the Falcon nine which were about to go into the story of and the dragon that cost about four hundred million dollars of NASA's money and about four hundred and fifty million dollars of space X's money to go and develop that and at some point that's a did an internal audit to basically say well how much would that have cost us if we didn't sort of bid this out to space X to go and do this you know if we had built this the way that we built the space shuttle how much would that have cost us and it basically what they find is the numbers about four billion so it is the cost absolutely like say what you will about wow space X really got in there and scored that NASA contract but they're they're saving NASA an enormous amount of money by sort of taking on the risk to vertically integrate all of this and making much cheaper rockets yeah it's actually you know I thought about this told down the word recording the episode I suppose you could listen to everything we just said and say wow what a case of the case of cronyism like you know this dude Mike was on the initial trip to Russia with Elon and then he's had a NASA and like of course they get the contract I don't think that's what's going on here at all like this is a combination of several people all the spoke the folks at space X any Mike at NASA lots of other people in the government and the DOD coming together and saying like the industry needs to like innovation has died and progress has died in this industry and we need to change the way it works and if we can do that you know maybe we can get people excited and recording podcasts about a space launch again and here we are yeah build a real industry yeah I mean this is an actual great example of sort of a win win where you know they're able to enable a company to bootstrap itself by you know space X now owns and operates rockets that NASA is not paying them for emissions that NASA is not paying them for so you know in the one hand you could say hey come on that's that's a taxpayer money that's now going to allow this company to generate profits enterprise value all in their own well it's a win win because it costs the taxpayers a lot less to get these these missions done and I think it's a it's just this really interesting example where I don't know the who loses here probably just the congressman who's who represented districts where there was a sub sub sub sub contractor and they were you know winning winning on sort of bureaucracy to be able to win those contracts but yeah it's a it's a great example of a growing pie this is probably a good time to to give a little context on the industry around space X because they're not the only people that NASA is trusting to go and send stuff up their awarding contracts to other people they're big and come in so what the heck this startup isn't just going to come in and win the one point whatever billion dollar contract and everybody else goes home and you know that that's not how this is going to play out so what's happening in the industry around them well in the space industry to date the least for governments the goal has really been build a really extravagant machine to do one thing where price is basically no object because either were trying to win the space or were you know calling it a part of national defense or that's the lineage of whatever we're currently working on so that's the only thing that we know that it costs so we're just going to keep going you know these things are funded by the military and NASA and all of the stops were pulled out for reliability and performance and you know we talked about how it's very sub contractor driven here so the if you were a sub sub sub contractor and you could make your things slightly more reliable or slightly more perform it even if that's not totally necessary for that you know practical purpose for that mission you know you do it anyway to kind of win the bid and so you can almost think of these existing space and components like united launch alliance who will go into detail on as sort of the intel of this world and intel today where space X is a lot more like the arm and the reason I draw this comparison is you know Intel made much more powerful chips for for computers but notoriously lost in smartphones but you know those chips were hotter they were bigger and they were more expensive which is fine when we all had dust tops and space X being like these arm chips you know especially early on and having this you know sort of toy rocket with the the Falcon 1 worked under a very different set of requirements and ended up building a completely different system one that was cheaper and they could iterate on it very quickly shipping up a different rocket every single time especially because they controlled the whole stack right exactly but initially it didn't seem very useful for anything I don't know for sure but this feels like it could be a case of disruptive innovation here yeah looking like I mean the Falcon 1 definitely looks like it's like a toy to a lot of people in the industry right absolutely you don't look at the Falcon 1 and say well there are just a few years away from resupplying the ISS and probably sending people up to it to like that's just not it's not your natural inclination there but David as you were mentioning like the design requirements around a lot of the other stuff that they was sent up in the meantime was totally changed with these small satellites keepsats commercial space sort of developing so getting back to United launch alliance who I mentioned there and I think they're important to understand in the context of the story so Lockheed Martin and Boeing had both been long time government contractors they built amazing things to their credit still build amazing things and a few examples you know Lockheed made that big orange tank on the space shuttle that we all know and as iconic and I think still one of the most elegant you know when you see the space shuttle launch videos that's still to me is this romantic version of space that in some ways the space the space rockets aren't as beautiful and don't just sing space to me the way that shuttle design did they also made the Hubble telescope and the Mars lander so you know the the Phoenix so lots of really storied stuff that they manufactured Boeing on the other hand made everything from the lunar rover back in 1971 to the actual space shuttle orbiter itself so long time space companies so here we are in 2006 Boeing and Lockheed and I think it's important to understand their motivations because then you really get the context for what people thought the space industry was Boeing and Lockheed had decided that the one real customer that they were both doing work for was the US government but the government didn't have enough business for both of them to justify their massive size so by combining the manufacturing and research work of the two companies this would be a cheaper and safer way to get the same stuff out the door Boeing already had the delta Lockheed had the atlas you know these existing rocket programs it kind of sounds like a good idea unless you've heard this story before or a story much like it the first thing I want to tell you is you don't need to look any further than the ULA logo to discover that everything was basically designed by committee something where the ULA had a massive advantage with all the existing contracts that the two companies had they actively continued to work on the space shuttle program for another five years after this they they just had years of knowing how the industry worked but what they didn't see was that the industry was going undergoing this massive change you know for one with other potential non-US government customers there could be this real commercial industry and that was something that the US had basically lost to nations who could launch stuff cheaper like Russia China China yeah China through all we haven't talked about China China was you know hey I think a Vance wrote the Elon Musk book and I want to come out like 2014-15 maybe 15 maybe. So maybe there. No, 16. At that point in time, you know, it was the Russians were still predominant in space, but China was making a push. Now China, like China and their long march rocket, like space today have been correct me if I'm wrong, but is a two horse race between SpaceX and China and it's crazy. Yeah, and in a lot of ways, and I think Elon certainly looks it at that way. Another thing that I didn't really realize was that there's this great talk linked in the show notes. It's a relatively under viewed video on YouTube of Gwen Shotwell giving a small fireside chat to some industry insiders in 2014. And she points out that the US was competitive in commercial space, sort of in the up till the 80s or in the 80s, but it has basically lost it since then. And that was the case really until this re-ignition of a commercial space industry here. So long story short, ULA was completely unsuccessful in capturing a commercial market in the US. If you think about it, it's actually a huge failing on their part because there were tons of commercial satellites starting to go up. You have direct TV who sort of owns and operates tons of satellites in order to provide their service. You have intelligence satellites. You have surveillance. You have research concepts. You have startup companies. David, you mentioned these CubeSats. Like ULA managed to capture basically zero of this because they were focused on winning contracts from the US government. And there's more to blame than ULA themselves. International traffic and arms regulations in the 90s sort of built up barriers. But the biggest problem was Boeing and Lockheed Martin just didn't compete anymore. So everything got so bloated and expensive when they just combined into one big behemoth. And so you might see the opportunity here. And if you do, then you are similar to Elon and Gwen and everyone else who sort of saw this gap and then decided, hey, we're going to go build a frickin' cash cow of a business in the Falcon 9. And we're going to go shoot that gap. Yeah. Well, there's a Ben you said, I mentioned a minute ago, that I think over the life of SpaceX thus far, they've received what just under $8 billion from the government. Now by our calculation, SpaceX is obviously a private company, but you can tell by their launches and launch manifest their public. We think based on sticker price for Falcon 9 launches of which there's now been over 80, right, that they've done? Yeah. I think over 80. So they've made six launches and somewhere around 55 on the future manifest. Yup. And something like 22 of those ish are for government and the Dragon Program. The rest of it, they probably made just about that same amount and another $8 billion give or take in commercial revenue from other governments launching satellites, from commercial satellites, from all sorts of stuff. Yeah, I don't think it's quite that much. I think it's probably about half that, but if the revenue mix will definitely start to skew toward commercial as we sort of see them fly out their backlog, there's all these committed launches that they haven't launched yet, that you're right. I definitely don't think it's more than the US government right now. By the way, private company, so who the heck knows. But if you just sort of add up the sticker price of 60 million times the number of commercial launches that they've sent up, which are probably, I don't know, 40, 50, 60 somewhere in there. Yeah, you're right. You're in the single digit billions. Yeah. So yeah, it'll move quickly. It's funny to move quickly through all the amazing technical and engineering feats that SpaceX has accomplished since then, but I think Ben, you hit the nail on the head like getting this contract. This was the moment that like made the company getting that initial NASA ISS contract. Real quick before we move on, because I know I just threw a bunch of shade and I want to, I always want to make sure I like do right by someone rather than just blasting them on the show. ULA has since replaced their CEO. They're actually working with Blue Origin now. That's right. And designing a new rocket called the Vulcan and hoping to use, or I think they are going to use Blue Origin engines on there. And so blue is actually commercially selling those engines to ULA, which is kind of amazing. One more digression on ULA here. I can't help but do this. They, the supplier that they have for the engines on, I think it's the Atlas 5. I'll correct myself later if I'm wrong, but they're main, they're basically their competitor to the Falcon, either Falcon 9 or Falcon 9 heavy. It uses Russian engines. Oh, interesting. And this is the main US government contractor for sending up things like intelligence satellites. And the current iteration of that uses Russian engines of which the Russians have decided for the US. We don't want to keep supplying you with those. So they've stopped. Like there's only something like, there's some number in the single digits or teens of those engines in country in the US that like that ULA can use. And so like I think it's called the RD 180 is the, it's the Atlas 5 is the, is the rocket. Like ULA is in this position where the world is closing in on them from every direction. They're running out of the engines that they can use for these launches. SpaceX is massively undercutting them on price, which we'll talk about here in a moment. And like the clock is just ticking with their, basically, their one customer looking to them and going, wait, I'm sorry, what ways are you better? And so, you know, they're going to try and run out of the house before it burns down with the, the new Vulcan program and partnering with blue. But, you know, there are powerhouse and we'll continue to win contracts for a while. But, you know, they are certainly SpaceX's number one enemy. Yeah. Indeed. Well, you know, it's disruptive innovation coming to the launch, Brad. Yeah. The, the space shipping market. So it was end of 20, 2008 when SpaceX gets the, the contract from NASA for the ISS resupply, pretty quickly within 18 months, they have a successful test flight of the Falcon 9, which again, they'd already been working on. And then, so that was June 2010. And then only six months after that in December 2010, they have a successful test flight of the Falcon 9 plus the dragon capsule, which they've engineered from scratch, you know, in house, it's SpaceX. And it takes a little while longer after that, but on May 22, 2012, the first real dragon mission reaches the ISS. They do the first of the 12 resupply missions. And this is just incredible. I mean, I remember this happening, like a private company has made a, not just a rocket, an entire spacecraft and operated it and sent it to the ISS. You know, again, like Elon said, with the first, with the first successful Falcon 1 launch, like this is the stuff that countries do not companies said, here's SpaceX, you know, doing it. It's just a, just crazy. Yeah. And Delayra, the reason it's called dragon is, Elon named it after the Peter Paul and Mary song, Puff the Magic Dragon. Where basically it was to give the finger to everyone who said he could never do it. And you know, you're sort of chasing the dragon and saying, look, here it is. I did it. Yeah. And I think the, I think the ISS, as they were, they were pulling in the dragon and said something like Houston, we've caught ourselves a dragon here or something like that. We've got a dragon by the tail. Then the next year in 2013, to what we were talking about about using these, you know, all the technology they built for the government in the commercial sector in September 2013, the first commercial Falcon 9 launch takes place. They launched several Canadian satellites up into orbit, you know, less, just about a year later. And then in 2014, so they complete six Falcon 9 launches in 2014. In 2015, they complete seven Falcon 9 launches, including the first successful test of a new program with NASA for the crew dragon, which is what's going to happen on Wednesday. The first step towards what's going to happen here takes place in 2015. And then at the very end of 2015, this is the other big, big thing we want to talk about. The one more thing, the land of rocket. Do you remember when this happened? Just a holy, holy God moment. I just, it is so unnatural. I remember thinking that when it was happening, it was like this moment of sci-fi. Yeah, I was, I was traveling because it was over the holidays. It was like late December. Yeah, it was. Of 2015. This week, we was right after we started acquired. Yeah. And it was, it was on the drone ship. And so, uh, no, it was, first was on land, uh, the drone ship didn't come to the land. First was on land. Yep. Yep. So they had to do the boost backburn to they were, they had done several attempts. So here's, here's how it goes down. So all the way back in 2011, Elon and the team had started thinking about this. And it was the analogy we talked about earlier, like it's crazy that you would build these massively expensive things and then drop the dishes. The analogy is, every time you fly a 747 from New York to London, just throw it away afterwards. Yeah. Imagine how expensive airline tickets would be if that were the case. So they started working on the technology in 2011, um, to land rockets. And people think this is impossible, like the laws of physics. People think won't allow it. And so they call the program Grasshopper and then in March 2013, then Grasshopper, they're just sending these building these short rockets, shooting them up, not into space or anywhere in your space. And they're just trying to land them. They've land their first Grasshopper in 2013 and then bend what you might be thinking of in 2014 and one of those Falcon 9 launches, they're, like, they're pretty quickly getting this tech into production. They try and land in April 2014, a Falcon 9 rocket on a drone ship and it falls over. That one blew up. Yeah, that blows up so. It got really close though. Got really close. Yeah. Then the second attempt, January 2015, that fails. The third attempt fails. It's just like the first, getting that first Falcon one up and then finally, the fourth attempt was on land because it's much easier to do it on land on the ocean, like the, you know, it's on the ocean, like the ship is bobbing up and down and moving around. They successfully land the first time on land in December 2015. Then they have two more fails in the ocean and then in April 2016, they successfully land the 23rd Falcon 9 launch on a drone ship, followed by a second successful landing. This crazy. Of course, I still love you, drone ship. Yep. Yeah, this is, that's right. It was on land. It's interesting thinking about this because the way that SpaceX lands these looks really unnatural. Like if you, I remember watching the first blue origin rocket that went to space and came down and successfully landed back on Earth, which they actually beat SpaceX to. So SpaceX was doing the Grasshopper stuff first, but Blue Origin flew a rocket not to orbit, but above 100 kilometers above the Earth. I mean, that's a, it's the formal definition of space, so I think it's the Carmen line. I don't know. Exactly. Exactly. Yeah. And, you know, SpaceX sort of was the first then to beat them to that big milestone of getting to orbit and then landing back down. But if you watch like Blue Origin's rocket do this, it sort of seems more natural. They sort of decelerate and then it lands kind of gently. And the way that it works for SpaceX in the industry, the way they sort of refer to it is as the hover slam or in a much less delicate way of referring to it, people call it a suicide burn. Where basically what they do is they put just one of the nine engines, you know, they turn one of those nine engines on. And even at the minimum thrust from one of those nine, if you just leave it burning, it will decelerate the rocket and then it will go back the other direction. Like these are just, those raptors are so crazy powerful. And I should mention too, the raptors are flying today have twice the thrust of the raptors they started with in the original Falcon 9. So like their iteration, they think it's still the Merlin's, the raptors are the engines for the Starship. Oh, you're right. Okay, cool. I was referring to the wrong thing. Yes, the Merlins have gotten twice as performance. So anyway, they turn just one of the Merlin engines on as it's sort of decelerating. And the reason they call it the Hoverslam is it comes in so fast and then just at the exact right time, like they have unbelievable sensors on this rocket, they can fire it at minimum, you know, the minimum amount of thrust just in time for it to decelerate and hit basically, you know, zero miles per hour, zero meters per second, right as it's setting down. And so it's this like magic trick every time they pull it off of unbelievable sensors and unbelievable precision over when they're firing that engine at minimum thrust. Yeah, incredible. So now of course, the point of all of this is that you're going to reuse the rockets. So in 2017, they have the first successful Falcon 9 reuse in March of 2017. In 2017 was just a banner year for SpaceX, 18 successful launches, no failures and they landed every single one of them except the few that they were the end of the useful life of the rocket where they were planning not to land them. Yeah, coming out of 2015, this is a company that is firing on all cylinders, like perfect product market fit on the business side, iterating super fast, launching all their R&D stuff actually into production super fast, like they're they're flying out their backlog at remarkable pace. Like it is, it's just impressive. Totally. The next year in 2018, they hit their 50th successful Falcon 9 launch. They have 21 total launches in 2018, including the Falcon Heavy, which is an adapted of it. Folks have probably seen this and watched videos, but like it is amazing. So this is three Falcon 9 rockets wired together for 27 total engines burning that can bring up, you know, an incredible amount of payload. And these guys and what they do is all three rockets go up and then they all land. And he's honestly like watching a magic trick. It's like a ballet. Anyone that watch the SpaceX fly Tesla's Elon's Tesla Roadster up with the Starman in it, like this was on a Falcon Heavy and then exactly that ballet of the two come down simultaneously, land next to each other on pads on land. The third sort of main booster then goes and lands on the drone ship, which actually that one ended up tipping over and that one's a lot harder to do because that one's it's especially reinforced to be able to hold on to the other two pre-stages. Right. Which apparently in the block five, which is the most recent and I think final version of Falcon 9, yeah, they've actually figured out a way to sort of fix that problem and they're going to be able to I suppose catch them much more easily out in the drone ship. Yeah. So that brings us to now. There are a couple things we're not talking about here that we might mention at the end of the episode, but in less than 48 hours now, the plan is one of these Falcon 9's is going to have a manned crew capsule dragon on it. And we're going to be sending astronauts up to the International Space Station. It's so funny. I'm saying we like it's, you know, like it's us. It's a very neat lot of company. Yeah. Like I know we're a little bit of a US setrix show, but like my gosh for a US company to fly, you know, US astronauts up to the ISS is, is, you know, it's compelling. It's cool. Yeah. And it is. So this goes back to in September 2014, NASA bit out a $2.6 billion contract to do this. This was the point of, you know, all of Griffin's work to rearchitect how NASA operated with their suppliers for a private company to fly humans to the ISS and SpaceX wins it. So they last year in 2019, a big key step in this is they completed the first autonomous ISS docking with a dragon capsule. So it was a crew capsule. There were no people on it. It was just cargo. There was like a little stuffed animal, I think, that then the ISS astronauts went in there and showed and waved to the camera and held up the stuffed animal. That's amazing. Yeah. And on Wednesday, May 27th, scheduled to bring US astronauts Bob Bankin and Colonel Doug Hurley up to the ISS. Yeah. It's, it's, it's, it's astoundingly cool. I mean, it's just what a time to be alive. Yeah. So the items that people might think about in SpaceX that we haven't dove into here, because we might talk about a little bit, but there's so much to talk about, obviously. They are obviously starlink their own small satellite communications, broadband communications internet network that they're developing. The Starship, which is the future venue alluded to this, they're going to be retiring the Falcon program and the dragon program and merging everything into one giant spacecraft, the Starship, which will eventually go to Mars. Everything rocket of some sort, the spaceship or the, it's the Starship. Which I wish was still called the BFR. I know. So cool. They've had a successful engine test for that. So that work is well underway on that. And then there's the little thing called the boring company. Yeah. Which I think is something like like it ended up spinning out and SpaceX is a minority investor along with Elon. Yep. So Elon owns about 90% of the company, I believe, maybe a little less SpaceX on six. Six percent. And then there's the employee. Oh, the employees are the other minority. Yeah. Wow. There we have it. SpaceX as of May 25th, 2020. Yep. Well, I do think before moving out of history and facts here, because we're sort of ending history and facts with the events that are happening Wednesday, it is worth talking about this particular contract. Because you, a skeptic could say something like there's lots of interesting skeptics of SpaceX. But one skepticism could be, why is it so impressive what they're doing? Like other countries have been flying people up to the ISS forever. Like, you know, get, get, get off your high horse and get less excited. So what? It's a private company instead of a government. So what they maybe spend a little bit less money. Like, not that this is easy to do, but like there's plenty of other people that could do it. Well, NASA doesn't sole source crap. Like NASA always awards multiple contracts because like this stuff is super hard. And the second person, or the second company that got this same contract was Boeing. And Boeing has built a thing to produce, you know, it's basically their version of the dragon called the starliner, but in December of last year, it launched a test to dock with the ISS and then we're viewing off course. And they did manage to get it home, but basically scrubbed the mission in order to do it. And Boeing took a $410 million write down on earnings last quarter as they prepare for NASA to potentially ask them to run another full test, do another full launch of the exact same thing, you know, which is actually quite telling that for Boeing, that's a $400 million expense because for SpaceX, that would be somewhere between a $60 million and $100 million expense. Yeah. But, well, maybe that's not fair because there's more reusability. Anyway, the point that I want to make there is like this could be Boeing, you know, later this week, but it's not. It's SpaceX. And they managed to do it, you know, better faster, safer, more reliable. Yeah. And so fingers crossed everything goes well, but it's, you know, you can throw shade at Elon and whatever way that you want or at this company in whatever way that you want, but you can't argue with results. Yeah. Should we talk about narratives? Yeah. Yeah, let's do it. Well, I think there's at least three vectors that I can think of around Bull and Bear here. One is around Elon himself by people, you know, that you could call him the Savior or you can call him an ego maniacal sort of work you to the bone, words we can't say on this show. So David, any sort of like color that you want to add to narratives on Elon? I mean, what else could we add? It is interesting though, like again, until really until doing recording this episode now, I hadn't, I'd obviously thought you know, SpaceX and Tesla are at very different situations, but, but I think the Elon factor, the Elon randomness factor in SpaceX is just so much less than in Tesla, you know, probably one because he has Gwen, but then also two because the company at least Tesla, I think, is in a very good place now. But you know, six months ago, Tesla was not in a very good place and SpaceX is. So there's just kind of less, even though SpaceX is in many ways in a more politically sensitive position than Tesla, like there's just kind of less for one person to mess up right now. Yeah, I mean, it's also a private company, which is nice because if you could tune out all the noise around Tesla stock and only focus on the more intrinsic stuff, like I think there'd be a lot less narratives period, 90% less narrative around Tesla. And you know, SpaceX has that and they also have the benefit of, you know, long, long term commitments with agencies and governments that can always come through on that cash. And so to the extent that they can deliver, you know, they have guaranteed stable, predictable revenue. The only thing that's not predictable is, you know, when are you going to crash a stage one into a drone ship and have to take a, you know, multi-dozen if not $100 million right off, but you know, that's the hard part that comes with the guaranteed contractual revenue. The other narrative that I think is important to highlight, so that one, the Elon one is one that everyone outside of aerospace talks about. The one that's more internally debated is around reusability. And so a lot of the SpaceX bears will tell you that's total BS that those things are reusable. It's total BS that even if they are reusable, that it's cost efficient. In fact, some of these people include CEOs of competing companies who when someone flags the point, well, SpaceX is able to do this cheaper because they've done this, perform this miracle of engineering, of reusing the rockets. They'll say things like, well, you don't know their cost structure. You don't know that it's actually cheaper. And the examples exist in the past of the solid rocket boosters, for example, on the space shuttle, those white ones on either side of the big red tank, those would fall back down to the ocean. And then they would be refurbished and then those would launch again. So this sort of thing theoretically has happened, but the difference is with things like that, the order of magnitude, it's probably an order of magnitude more expensive where they basically cycle out every part, scrub it clean, and then send it back up. And SpaceX is iterating toward, you know, this is the bull case on reusability, being able to just give a one or a two day inspection on the rockets and then send them back without replacing anything. And only need to replace things maybe every 10 times or so that you send it up. And right now, I think the maximum that they've sent a rocket back up or a stage one that back up has been three times. But you know, there are very, very real cost savings that you have here from, you know, not having to produce, I don't know what the costs of goods sold are on a Falcon 9, but $20, $30 million rocket every single time. And you know, I think in the coming years, we'll see if SpaceX is actually able to get to the milestone of, you just need to give it a once over and 48 hours you can fly it again. But there's massive debate over whether the reusability actually provides the type of savings that SpaceX claims. Yeah, um, um, should we move on to what would happen to otherwise? Yeah, let's do it. Where do you even start here? There's like, there's so many moments where this all could have gone off the rails. I mean, I think the biggest one is what if, uh, what if NASA hadn't sort of changed their, their tune on how we bid stuff out? Yeah, I mean, I think without that, the small set market just, you know, I think it probably will, like, like we said, will materialize in the future and it is materializing now. But during the time period that SpaceX needed it to, it just wasn't going to. Yeah. And this is actually, I think a big point related to, um, we didn't really talk about Starlink at all in this episode thus far. But, um, I think one of the reasons besides Starlink and providing satellite internet access being a big market and attractive in and of its own, that SpaceX decided to launch this division internally was too stimuli, um, the small set market and demand for it. Like now they are going to be their own first and best customer for small sets and, uh, the, um, the ride share program that they launched where, you know, when they're sending up big stuff, having, having space available for, for little sets as well. Yeah, I want to give a little bit of detail on both of those things that you just described. Now that we've sort of, uh, we've tipped our hand a little bit. So for people who don't know what Starlink is, which is me probably two months ago and mostly me even a week ago, uh, SpaceX is going to put 1200 satellites up in low Earth orbit around the earth. 12,000 satellites, uh, low Earth orbit. So way, way, way closer than the direct TV satellite that needs to be out in geosynchronous, which is, I don't know, it's 22,000 miles away. Like these things are on the order of, uh, 200 miles away. So, you know, takes a rocket to get it up there, but, you know, it's, uh, it's, it's not, it's not as far away as, uh, as the old stuff is or as, as a lot of the, um, fixed geosynchronous stuff. So, space is going to launch these, these 12,000 satellites and, um, they are all going to have line of sight to each other and they are all going to, uh, be able to provide broadband internet anywhere on Earth at any time to anyone in a cost-effective way. And the way that it works is, is kind of a miracle. The fact that all of them have this line of sight to each other and can communicate in high bandwidth between one another, it means that the latency can be way less. So since they're way closer right now, the problem with using satellite internet is, it has to round trip all the way out, 22,000 miles and back. And even at the speed of light, that's still time. And so you're getting, you know, dogcrap slow speeds on, uh, on satellite internet. And if you have a whole bunch of them pretty close here and they can all communicate with each other, it's kind of okay if there's not a single, same one above you all the time. As long as there's something above you all the time and they can communicate with each other, you can. And the, uh, the Wi-Fi mesh network of a satellite broadband. Totally. It's genius. And so you might think, my gosh, that's so many satellites that must be really far in the future. Well, they launch 60 at a time and they've done this, I think three times now. Yeah. Like they literally stack them real tight. They jam 60 of them in a fairing in a nose cone of a, of a Falcon 9 and they shoot them up and they all sort of make a little string in the sky and they, they go right behind each other. And it works like Elon Musk has sent a tweet from, from Starlink internet. Oh, the way I haven't seen that. He has. He tweeted something like, I'm tweeting this from Starlink and then he replied to himself a minute later and was like, got it. And, uh, you know, it's, it's these publicity sense, but like that you can see turning into this very interesting owned and operated business where they can be, you know, it's a huge fixed cost to send them up there. It's, uh, you know, to them, uh, the cost, it would cost me $62 million to send something up on a Falcon 9, but it would cost the government something like 90 million because they have additional regulatory stuff. But for SpaceX, I don't know what their costs are. Call it 40 million. So it's that sort of big fixed cost investment to get them up there. But they can run a profitable business and we can all, or a lot of people get their internet from Starlink and that can be a cash machine that then can bankroll future endeavors. So they're not just getting paid every launch, but they can get paid in perpetuity for subscription to something that's already in the sky. So I know I'm dipping all over the place here in analysis and business model. And when you dip into Sky Starlink there, I think it's important to sort of like what the heck that is and how real it could be and how soon it could be, you know, two, three, four years before that, that starts to be meaningful. Yeah. Yeah, I mean, it's like the satellites are already up there. Yeah. Totally. And they've got competitors there too. Amazon's got Project Kuiper and Softbank funded a company called OneWeb that's doing it. But yeah, it's futuristic stuff that's actually out of town. Well, SpaceX has the, you know, back to the vertical integration, like they have the advantage of, you know, their benefits all sides of the business. They're building this business internally, be they're giving more, they're stimulating more demand for launches of which they are the primary provider. It's going to lead to more launches, more vertical integration, cost comes down farther. And then you know, the flywheel's just going to keep spinning. 100%. 100%. And you mentioned ride share too, which is a funny word to use in space. But it's a thing that they put on their website in the last year or so. But by the way, you can put in a credit card to, to, for them to take a deposit on this and it's, it will charge your credit card. But you can basically pay as little as a million dollars to hitch a ride. So it's exactly what you said, David. You're sending a big satellite up, take my little one up too. You can go to the website and you can say, I want, I want to send up something that's 100 kilograms by 2024. And like quote me. And it is the craziest. I didn't realize they take orders. But this is like the equivalent of an Apple Pay down payment on a Tesla on the website. Absolutely. Do you know if if Shopify powers it, like Tesla, that would be amazing. I know. I know. I know. I know. It's a good question. The design is pretty similar between the Tesla website and the SpaceX website. Yeah. I want to finish Shopify. Yeah. Like, just because I don't want to talk about this twice, I'm going to pull forward my, my playbook thing now about, about the pricing there. It is a massive disruption to the entire aerospace ecosystem that SpaceX has a pricing page. Like it is the craziest thing you can go to, there's the ride share thing. But then there's also like literally just a PDF that you can click and pull up. And it's like, do you want a Falcon 9? It's $62 million. Do you want a Falcon heavy? It's more expensive and I don't know what it is. But this has never been an industry with price transparency. And by bringing that, it is just like, you know, it freaks everyone in the industry out for them to be that transparent. Plus the Uber pool. Right. Right. Okay. So, that was what would have happened otherwise. I dipped us into playbook. Let's keep going. If someone wanted to do something like this, what is the playbook? They should run. And what are some of the themes that we noticed here? Woof. Oh, man. Well, okay. I'll run through some of the ones I jotted down quickly. When I started thinking doing the research about like, what would Hamilton help me say about like, what is SpaceX's, does SpaceX have power? If so, what is it? And I think the, right one I think this is basically what we've been banging the drum on all episode is they came out with counter positioning. Like the vertical integration and the whole approach that they've taken with price transparency, everything to the industry. If you, AL and other competitors matched that it would destroy their whole organizational structure and business model. Totally. So, there's no way they can match it. But I think there's another interesting thing here. And I'm not quite sure if this is a pat or how many other industries this is applicable to. But I started thinking about vertical integration. And in so many industries, you see going from the disruption happened when you go from vertical to horizontal. Like, this is what happened in the PC industry. You know, and I started thinking about why. And I think it's often when, if you think about like when computing was vertically integrated in the deck days, it was when you had mainframes and you had pretty few units. Shipped like at a very high price for each of them. That's like when it makes sense to vertically integrate. And then as volumes grow and you get a lot more unit shift and goes up and price goes down, then horizontal integration makes more sense. Because you can be more nimble. You can define layers of the stack where there's more power versus another and you can have more profitability and outsource commodity parts. What's interesting here is that you had this industry structure where you had an extremely small end number of units shipped like number of rocket launches around the world was extremely small. And yet you had these because of the way most of it being government business, you had these like horizontally integrated players that were competing within it. SpaceX came in and said like, oh, no, there's actually like an anti-scale economy here. We should be vertically integrated. And like I can't think of any other markets that exist like that where you have like a really small number, but you have this bizarrely horizontalized industry. But it struck me that like this was like a major key to how SpaceX was able to disrupt it. That's interesting. Because in some ways, I'm trying to think if the analogy holds in the other direction. Like Apple has Apple vertically integrated the iPhone. Well, they started it vertically integrated. Oh boy. I think there's actually a great strategy post on the fact that this is not vertically integrated, that they do make they make the things that they view as differentiable to tightly couple. So like CPUs, the OS and actually interesting, they don't make them. They design them. That's true. They have thousands of right. Right. They have in a lot of ways really. I mean, if anything, Apple is kind of like the Detroit on your manufacturer model where like they design it, they make the core engine. And then they have a ton of suppliers for all the other parts. Yep. But they have so much power over those suppliers that they're able to squeeze margins on those. Yeah. Whereas there was nobody squeezing margins and aerospace. Everybody was happy to let their downstream partners have fat margins. Yep. Yep. Because again, from the lock heats, the Boeing's perspectives, the higher the total price, the better, the more money they made because they would just get a street percentage. Yeah. So interesting. It's funny. I didn't articulate it quite the same way you had, but I tried to write out like the bullet points of the business model, which is like one, get paid exorbitant fees, but not as exorbitant as everyone else for every launch. NASA's willing to pay this because the old world competitors had crazy, high cross structures and importantly, no reusability. Hasn't been important yet, but will be. And so what I think there grows margin positive on every launch now on the first try, even without reuse. I'm not totally sure, but that's what what some estimates suggest. So then two is take those profits to fund the development of more reusability and more lower cost systems, three, make even more margin from doing that and getting paid for those contract launches of satellites, et cetera. Four, enjoy these fat margins while everyone else is trying to catch up to reusability and trying to vertically integrate or squeeze all their suppliers. And as a data point here, SpaceX charges less than their competitors, but obviously well above their cost basis. If they're actually able to harvest all this margin there, they would have been giving away by vertically integrating. The data point is that Falcon 9 missions even to the US government with the additional 30 million in Costco for under $100 million. And ULA is contract that was a camera, which one, but basically has all of the launches at $400 million. And so like there's just so much margin in there. So then component five, use the funds from these fat margins to fund their own owned and operated businesses like Starlink or like the Mars stuff that I think we'll talk about here. We're basically SpaceX themselves will be able to charge for those owned assets on an indefinite basis. Like they're able to like bootstrap the production of rockets using NASA and then bootstrap their own and operated business with all this margin that everyone let them play with. It's like this two step bootstrap. Yeah. Yeah, it's pretty awesome. A couple of the quick ones I want to hit on. One we've alluded to Blue Origin a little bit on this and that's probably another episode for another day. But I just, you know, with different strategies, different approaches, but it strikes me as interesting back to the whole, you know, fun and algae. I use it as mo money, mo problems like, business is putting a billion dollars a year into Blue Origin. And business is selling a billion dollars in Amazon stock that could be used for funding. Right. But certainly a lot more than a hundred million dollars has gone in in terms of equity funding into Blue Origin. It's interesting though, like SpaceX in terms of equity funding has raised so much less money and Elon from the beginning was focused on this is going to be a revenue generating profitable business. And so on the one hand, you think naively like, oh, they have so much fewer resources, but it's I think it's in many ways precisely because of that resource constraint and having to build this profitable business that they figured out how to disrupt the industry and accomplish so much. And it's just like, that's just such a theme like we see all the time on this show and then startups, right? Is like, sometimes you think when you're out of the gate, like, you see these companies raised tons of money and like, I think they're going to, you know, clear out the industry and have all the success, but it ends up hurting them because like, they're not forced, they're not forced to build a real business. Yeah, I hadn't really thought about it in those terms. And then the last last one just related to that, you know, man is Elon across, across SpaceX and Tesla is he just like the living embodiment of, you know, the Naseem to live a skin in the game, you know, actually, I'm like, this guy like absolutely put his money where his mouth is. And you can say many things about Elon, but, you know, he's been quoted on so many occasions saying like, if either Tesla or SpaceX goes bankrupt, I will personally go bankrupt. And that is as it should be. And the number of near death moments they've had and pulled through like, if that weren't the case, if he were like, you know, I'll be fine. I'll still have my McLaren if this goes bankrupt. Like would they have had the fortitude and he had the fortitude to pull through? Like, I don't know. I do think so. I think you're reversing the chicken and the egg there, but that's why it's a chicken and the egg thing. The way that I would think about this is like, Elon's drive to make this thing a success is the reason, like it's not any monetary skin in the game. I mean, he cares if he goes bankrupt, but not really. Like if he really cared about not going bankrupt, then he wouldn't have doubly leveraged himself across two companies. So like clearly the thing he cares about is succeeding in this mission. And that is what drove him to put all of his money in. It's not like he's like locked into succeeding now because of the fact that he's so invested. Yeah, but he definitely burned the bridges behind him. Yes. Yes, there's no way for him to, I mean, now there's a way out because there's just, he's still owns probably 40 something percent of SpaceX. And there's so much equity value there that, you know, yeah, he, he, there's a way out for Tesla purely by by Elon getting out of SpaceX. Yeah, at this point. And it's such a good business. I mean, truly like making, making a hundred, hundred million bucks a pop if you can do that twice a month. I, yeah, especially if you can reduce those rockets. Yeah, sorry, go for it. Go for your themes. Yeah, yeah, yeah. Now I've got a couple of fun ones. So I want to talk about a different type of vertical integration, which is SpaceX assembles their rockets horizontally. And most other companies assemble their rockets vertically. And as you can imagine when you lay them on the ground and you build them that way, you don't have to take really expensive, crazy, hydraulic machines and move around, you know, you don't have to construct a skyscraper around your rocket. And this is a, I'm, I'm using this as an example, but it's super illustrative of how SpaceX problem solved every single component of building their company in a cash constrained environment into finding a more innovative, more inexpensive way of doing something. And like, I think Elon has this interesting quote, where he's like, yeah, actually the Russians, I don't know if it's Elon or Gwen, but the Russians actually manufacture them on the ground. Most of these US companies actually manufacture them vertically. But the, the number that Gwen cites is that she says SpaceX's rocket factory is $0.50 a square foot. And if you vertically integrate your rocket, no pun intended, stand it up and, and assemble it that way, space ends up effectively costing you $12 to $18 a square foot because you're, you're moving people up and down to build these rockets way the heck up in space. And it's, it's just like, it's just a great illustration of the incredible constraints that SpaceX was under that no other player that's ever reached the scale that they're at has been under. Yeah. Man, that's crazy. That's such, that's like a, so it's more than an order. They're a magnitude difference in the cost. Absolutely. And like, why the F wouldn't you do that then? Absolutely. Hmm. It's really amazing. The other one that we talked about is sort of new market needs. So they sort of built a, this isn't a, this is from the Elon Musk book, but they built a Honda Accord instead of building a Ferrari. And everyone else thought only for our ease would, would be wanted, but it turned out there's an emerging market for Accords, which is unexpected and cool to see. And I think will be the, we'll see the innovation compound now that we're having all these CubeSats and things like that up there much faster than we saw with only shipping a Hubble up once a decade. Yeah. Well, and it turns out even the people who drive for our ease are McLaren's, you know, they don't want to drive those every day. Right. And then at some point, you know, Tesla did, SpaceX did exactly the same thing Tesla did, which is like, Hey, we know how to make Accords really cheap. So now we're also going to make a really cheap Ferrari. And sorry, existing Ferrari people, but you're also going to want ours. I was looking at this the other day. What is the performance model three, which granted is still a very expensive car. It's like a 55,000, 60,000 dollar. Yeah. Right. And it's still way too exlike. Yeah. Basically not going to buy one, but, but, but the, you know, for call it, let's say $60,000, you can get zero to 60 time. What it's down like three below three now? Like, I don't know, something like that. Yeah. For like, you used to have to spend a couple hundred thousand to get that, you know? Yep. That's a great point. All right. My last, this is my last, I think is my last playback here is customer diversification. So, they are not relying on one customer or even one type of customer. They have all these different sectors. They have defense. So within the government, they have defense and they have civil. So NASA's resupply in human contracts. But and the defense, they have these Air Force contracts among other things. And then they've got the commercial business with telecom, with media. And so it's, it's at this point, it's a robust and diversified business that is just, that was not true in space largely before now. And it's, it's going to be defensible for them. And it's going to help them weather storms in different markets. Yeah. It's interesting. Well, we're going to get to, we'll get to this in grading in a minute. So hold off. But the question is like, okay, so how big is this market going to get? But all right. Yes. Let's hope for grading. Yep. Lastly, the thing that I want to point out, I think as of May 2019, Elon Don't, 54% of space X. And so they did just raise something like 550 million since then. But like, holy God, did that guy hold on to equity in his company? He managed to, he is, Elon is a master of many things. You know, he's the chief engineer. He's, you know, he's lots of things. He is a master of raising capital. Well, I mean, it's interesting, right? He didn't raise, he put his own capital in. But then I think what's interesting is, so we didn't talk about this in history in facts. But after they got the NASA contract and after the successful Falcon 9 and Dragon, after the successful dragon, we're not arguing with the ISS, I think there was a lot of pressure internally from employees for the company to go public because they were like, like, look, we just hit this massive step change in valuation. Like, we've been killing ourselves here. We want some liquidity. And Elon actually wrote a memo, an email to the company with the reasons why he thought like they should, like going public isn't as good as you think, you know, and he's lived through all this Tesla. But in the wake of that, they started doing these regular fund raises, but I believe most, some of the capital made them primary, but I believe most of it was secondary for employees to buy out the employees. It's interesting. liquidity. And I think Elon was pretty outspoken about this, like, this is like, I'm going to do this. This is going to be a much better solution for SpaceX. We won't have to be a public company. We can get employee liquidity. We've got this massive long-term vision of getting to Mars. Right. Yeah, so I actually don't think that the money was raised for the company mostly. Interesting. Well, that speaks even better to the profile of the business than that, you know, they've been able to fund with at least a gross margin profit dollars rather than funding the business with all new equity capital. Yeah. Yeah, I don't think SpaceX is a profitable business, but I do think they're profitable on a unit basis. Well, and I believe Gwen has said they have operated profitably in certain years. Huh, wow. I mean, I'm sure they're not now. Now that all the R&D is happening in both Starlink. Well, I mean, first of all, they lose money every time they launch a Starlink launch because that could have made them 90 million bucks from someone else. And they've estimated it's going to take $10 billion in capital to get that whole built and easy. And then the other thing, they're spending tons of money on is the R&D for the Starship. Yep. But yeah, interesting that those are mostly secondaries. All right. Value creation and value capture. So I'm going to be very brief on this. This is a two-part segment that we usually do. The first part covering of all the value that they created in the world that they do an effective job of capturing it. People who do a good job at this are Google, people who do a bad job at this are Craigslist. And then the second piece, did they actually do value creation in the world at all or did they maybe either destroy value, like we've talked about on many episodes with soft bank backed companies or did they perhaps just shift value from one person's pockets to another person's pockets. I think it's just like an absolute no-brainer that it was new value creation in the world, enabling new markets, accelerating markets, and they're doing a bang up job capturing value from it. Yeah, totally. A little opaque because of their private company to know on part one, but it seems like yes. But oh my god, if there were ever a no-brainer on part two, like you said on this show, there is no reasonable argument. I mean, I'm sure there's some arguments, but to my mind, there's no reasonable argument to be made that SpaceX did not, like having it exist is not good for the world, you know? Right. All right, grading. So there's never been a transaction, which is normally what we would grade. If you're new to the show, the way this section works is a big company buys little company, we grade in hindsight, how good of a use of capital was it for big company to buy a little company? Was it as good as Instagram or as bad as AOL? And you know, issue a letter grade. The way that we do that in this world where there hasn't been a transaction yet is talk about what would an A plus B or what would an FB and maybe what would a C look like. And in this case, because I don't think we're talking about it IPO-ing or somebody buying them, I think we're basically just going to talk about what is an end state look like for this company in each of these scenarios. And David, you asked the question earlier, which I wish I could reach through Zoom and slap you for, which is really how big is the market? And then it's called foreshadowing. Like, sure we could talk about a market for how many of the people without broadband would pay for broadband. And sure we could talk about both the commercial and the government markets for launching satellites. But how big is the entire Mars economy going to be in 2,300, you know? Like, there is some future where the, what we're talking about here is the GDP of Mars. And the GDP of Mars with a productive capacity of a million people on it. And I know I sound like a nut job for throwing that out. But like, that is Elon Musk's A plus case here is like, that's the whole goal of this thing. Yeah. Yeah. Well, so, okay, is that, do you want to say more? Do you want me to jump in? I'm painting, that's the A plus here. Like, it is nothing shy of we figure out a multi-step process to get people to Mars reliably, cheaply, safely, and build a society and economy there. Yeah. Well, now the interesting thing though is, so usually when we do this, it's so funny with SpaceX, the usual rules don't apply. We provide a time frame, a time horizon of like five years. That's fair. So, the interesting thing about SpaceX versus, I think a lot of other new age space companies is not all of them by any means. But certainly there have been many new age space companies in the past several years that have had a similar A plus case of like something like the Mars economy, you know, like, you have planetary resources, right? Or like, you know, gas stations in space, mining asteroids. The problem with those companies was, it was a binary. Yeah, we get to that A plus in some far future state. There's nothing along the way. What's amazing that Elon and SpaceX have done is they've stair stepped up to it. It's like, oh, well, okay, first we're going to become a, you know, we're in build brackets and then we're going to become essentially a space shipping company. Well, and then we're going to be a satellite company and provide internet probably satellite broadband. Well, then we're going to spin off the boring company because actually if we're going to be on Mars, like we need tunnels to live on Mars, so we need that anyway. And actually, that's useful on Earth. Okay, then we're going to supply the ISS and we're going to do, we're going to do the Dragon Program with NASA. And it's like every step along that's like, you can hit an A plus in each kind of five year timer, isn't it? Yeah, that's a fair point. I also shouldn't have said 2300. I said that because I couldn't think of the timeline is to actually get a million people up there. But like, it's much sooner. But yeah, you're right. Like the, there are potentially incrementally pluses. I don't know what the, I actually should know this, but don't. What the goal of Starlink is is how much internet do we intend to provide to how many people and at what price? Like there's some, there's some business case for like just operating Starlink is a really good business to be in and might be a $30 billion enterprise value thing on its own. I don't know if that's true. I suspect it's not, but. Well, we, we, what they might be, I mean, it might be more. We know that they expect to put $10 billion worth of CapEx into it, both from, that's CapEx funded by cash flow from other projects within SpaceX. They have raised a lot of the primary capital that they've recently has been for Starlink. So I don't know. I mean, like, would you, would it be reasonable to put $10 billion to CapEx into something if you didn't think you could generate 30 plus billion in revenue out of it? Yeah, it's a good point. I haven't seen the pitch deck, but I'm sure it says something like that. Not to mention, you know, they'll continue to, they'll continue to sort of pull away, I think, in the launch market. And I mean, Falcon 9 is just a workhorse in a, in an, an amazing business of, of doing these launches. And so for the next three, four years until they really have Starship humming, if they can actually take up to a month, there's, there's, you know, they'll do what is, what's 60 million times, times 24 is 1.4 billion a year in revenue just from the, the Falcon 9 launches. So I don't, I don't know what kind of multiple you want to apply to that, or if we should figure out actually what the EBITDA margin is and, and do it that way, but yeah, it's good business. All right. So you moved to the F case. F. Yeah, I mean, there's some F cases that I, I don't want to say so I'm not going to, but one would be that factors outside of SpaceX's control cause more than one launch to, to go poorly or in fact an important launch to go poorly and, and basically make it so that they don't get orders anymore. This business is incredibly bit brand dependent in a way that other businesses that are not this high risk are not and I think it would be very, yeah, their revenue could go to zero much more easily than, than other businesses because of that risk factor. Yeah. It's interesting though. I mean, at the same time that risk factor, well, cause a private company has never really been doing this kind of stuff before, but that risk factor has always existed in this industry like this is a danger of a industry and in fact, there have been terrible, you know, accidents in the history, you know, of the industry made by governments. Yeah, but we, I mean, we canceled the shuttle program. Right. But was that, that wasn't because of the Columbia, was it? I don't know for sure. Feels like a compounding factor though that it was both expensive and unsafe. Yeah. Yeah, for sure. Well, hopefully we don't face that particular case, but it's a good point. I mean, like, you know, as Elon makes the point, we've made the point several times on this episode, typically this stuff is the domain of countries, not companies. And so there might be all sorts of unforeseen factors that pop up here. Totally. Yeah, you could have governmental problems. I mean, you could have problems where foreign governments aren't able to do business with American companies. I mean, the risk factors that would go on this company's X one are just at such a bigger scale than you would ever see in most, for most companies. Yeah. Well, so here's one. I mean, I guess this is a sort of a, a scenario. Well, I think kind of is an interesting lens through which to look through greeting here, which is if they're ultimately successful in everything that they're talking about here and they get a million people to Mars, what is it? What does that actually mean? Like, there's a lot of questions they're going to have to get figured out. Like, is SpaceX like the government of Mars? I was wondering is this a company or is this a country or is this like, we're starting to sound like pretty, pretty sci-fi dystopian future here. I mean, like if Columbus makes it to the US, does the Ducy-Sendia company own North America or does? Right. Columbus, the Spanish government, you know? It's a good question. Yeah. Over time, whoever has the army that's able to conquer it probably owns it. Yeah. I mean, just looking at history as a, as a guide. Yeah. I mean, again, this sounds sort of crazy, but I, you know, Elon talks about this that this is sort of, he hopes the same type of analogy with Mars is like, you know, it's been 300 plus years since there was a new world. You know, if this happens, there will be a new world and like, well, who owns that world? Mm-hmm. Yeah. If you've thought about this question or you know the answer to this question, please reach out, join us in the, in the acquired Slack, acquired.fm-slack or email us at acquired fm. gmail.com. This goes with everything else in the episode too. I'm sure there's lots of people here who are more sort of aerospace native than we are and certainly lots of sci-fi geeks. So yeah, I think we'd love to, to think more about this with, with folks. Yeah. I suspect this won't be our last space, episode, too. Yeah. Or space episode, broadly. Yeah. Totally. All right. Carvouts. Let's do it. It's been a while since we've had a car valve. Yeah. So much good stuff been going on. I think among much great content I've been consuming during quarantine from books to, both fiction and nonfiction to podcasts to, to TV shows to movies. I think the last dance takes the cake for me. I wrapped it up earlier this week. Have you finished it yet? I haven't yet. Oh, it's so good. So good. It's like, especially growing up, watching, I remember being a kid and watching a lot of those games on TV, especially the 98 run for the balls. And then just getting this super deep behind the scenes, look at all of it and the portrait not just of Jordan, but of everybody on that team. So great. I enjoyed every single second of it. I want episode three. I already, all the best parts are spoiled because I saw all the memes, but I am still looking for it. Oh, yeah, the memes are just, I say, Thomas meme. So good. I met all the criteria. I don't know why. Yeah, why wasn't. Was not selected. So good. That's right. So good. Mine is, I think there's some chance that this may have already been a car valve because I've recommended this so many times to different people. It is a five year old talk by Michael Malbuson. This one at Google for his, I think, book tour, or at least just discussing the book, Untangling Skill and Luck, the Success Equation. And it is one of the best hours you could spend with your time where he lays out games of skill and games of luck and every, or most things are both and understanding where a lot of the different sports that you love or games that you love are on that continuum and also thinking about competitions in your life of what's more skill based and what's more luck based and doing this really analytical and theoretical analysis of it that is just a privilege to watch because he uncovers weird paradoxes like this one, the more skill and activity requires, the more luck will play a role in the outcome. Yeah. Yeah, it's at the paradox of skill, right? It's going up. And it's so interesting. And like if you're interested in, if you're a sports fan or if you're an investor or if you compete in anything at the highest level, it is wildly clarifying to watch this and understand sort of what game you're in. And I can't recommend it enough. So good. And you read a book about this, right? Same title. Yeah, and with the same title. Yeah, I think it was, I should go back and reread that, or at least rewatch the video. I remember being fantastic. It's awesome. It's awesome. Well before, before our usual sort of wrap up here, we have one more kind of fun announcement and that is that David and I are going to be speaking at an aerospace industry conference in November called Ascend, it's something that obviously based on both of us getting to go deep on the research here, I'd call ourselves aerospace novices, but curious and love diving into this stuff. And we were fortunate enough to get to attend and do some talks at Ascend. And so if you're like us where this stuff is interesting to you or you think space may be the future or you're interested in getting into a space adjacent industry, Ascend should be a great event. Hopefully we'll get to do it in person, but folks should check it out and we'll put a link in the show notes if that tickles your fancy. Yeah, I can't wait for it. Really hope it'll be in prison. It'll be such a great, you know, in many ways, I think this time has for us to acquire it personally and for many of our listeners too, you know, forced us to grow and obviously adapt. But you know, folks may know we used to do all of our episodes with guests in person. We would fly to go see our guests and obviously we haven't been doing that now, but which is on the one hand been great. But on the other hand, you know, I miss it and it just be great to hope that happens in person be there together and just have our community together. Yeah, for sure. Well, one talk I'm really excited for is Jim Britton Stein, who's NASA's administrator who was sort of overseeing everything about what's going to be happening this week. He'll be speaking there and it's a lot of, you know, it's as sort of high up as the sort of folks go in the aerospace industry. And you know, one other person who I'm sure will be a fascinating one to hear is the president and CEO of ULA is going to be there. And so for all the shade, I just threw I think it'll be really interesting to hear how there they're sort of navigating, you know, SpaceX and other competitors. So, all right, that's a send. Check it out. Ascend.events. If you aren't subscribed and you're new to the show and you like what you hear, you totally should. You can subscribe to us in any podcast client or we are now sending out new episodes via email and so you can subscribe to that on our website at acquired.fm, either in the footer or in the top right hand corner there. And that way we can shoot you know when we post something new. If you want to become a limited partner, subscribing gets you access to our bonus show. And as mentioned, the LP calls where we get to interact with all of you, which will be super fun. And to listen, you can click the link in the show notes or go to glow.fm slash acquired and all new listeners get a seven day free trial. If you just want to hang out and chat, you should join the Slack. We've got over 4,000 people in there talking about different topics of company building, news of the day, acquisitions, and discussing previous episodes. So I'm sure we'll be chatting in there after we drop this episode. With that, we will see you next time. We'll see you next time.