How SpaceX Works

A few years ago, I started working on a A few years ago, I started working on a book called SpaceX Foundation, a book called SpaceX Foundation, a book called SpaceX Foundation, a historical account of Spac X's first historical account of Spac X's first historical account of Spac X's first decade told through firstirhand sources. decade told through firstirhand sources. decade told through firstirhand sources. Firsthand sources like Elon's company Firsthand sources like Elon's company Firsthand sources like Elon's company updates, launch dispatches, internal updates, launch dispatches, internal updates, launch dispatches, internal memos. This is the real time record of a memos. This is the real time record of a memos. This is the real time record of a company that almost died three times and company that almost died three times and company that almost died three times and then became the most dominant launch then became the most dominant launch then became the most dominant launch provider on Earth. The gap between provider on Earth. The gap between provider on Earth. The gap between SpaceX and everyone else is enormous and SpaceX and everyone else is enormous and SpaceX and everyone else is enormous and widening. Yet, most of what's been widening. Yet, most of what's been widening. Yet, most of what's been written focuses on Elon himself, not on written focuses on Elon himself, not on written focuses on Elon himself, not on the specific methods, cultures, and the specific methods, cultures, and the specific methods, cultures, and decisions that actually built the decisions that actually built the decisions that actually built the company. That is what the book is about. company. That is what the book is about. company. That is what the book is about. While the book is still in progress, While the book is still in progress, While the book is still in progress, I've been writing an introduction essay I've been writing an introduction essay I've been writing an introduction essay as a way to work through the central as a way to work through the central as a way to work through the central question. Why did SpaceX succeed in ways question. Why did SpaceX succeed in ways question. Why did SpaceX succeed in ways no one else has been able to replicate? no one else has been able to replicate? no one else has been able to replicate? And more importantly, is any of it And more importantly, is any of it And more importantly, is any of it learnable? The practices that made learnable? The practices that made learnable? The practices that made SpaceX dominant aren't unique to SpaceX dominant aren't unique to SpaceX dominant aren't unique to rockets. their blueprint for building rockets. their blueprint for building rockets. their blueprint for building anything hard. That's the introduction anything hard. That's the introduction anything hard. That's the introduction to this introduction essay of this book. to this introduction essay of this book. to this introduction essay of this book. So the introduction essay is called So the introduction essay is called So the introduction essay is called atoms are cheap process is pricey what atoms are cheap process is pricey what atoms are cheap process is pricey what SpaceX teaches us about building hard SpaceX teaches us about building hard SpaceX teaches us about building hard things. It is written by Max Olsen who things. It is written by Max Olsen who things. It is written by Max Olsen who is writing that book called SpaceX is writing that book called SpaceX is writing that book called SpaceX Foundation. I've read this essay three Foundation. I've read this essay three Foundation. I've read this essay three times. I think it's really good. So I times. I think it's really good. So I times. I think it's really good. So I want to go through some of the main want to go through some of the main want to go through some of the main ideas with you. And so the essay starts ideas with you. And so the essay starts ideas with you. And so the essay starts like this. SpaceX has been remarkably like this. SpaceX has been remarkably like this. SpaceX has been remarkably open about how they operate. They've open about how they operate. They've open about how they operate. They've been succeeding in public for more than been succeeding in public for more than been succeeding in public for more than 15 years now. And yet, no one has 15 years now. And yet, no one has 15 years now. And yet, no one has replicated the results. Competitors know replicated the results. Competitors know replicated the results. Competitors know their strategy. The engineering their strategy. The engineering their strategy. The engineering philosophy gets explained in interviews, philosophy gets explained in interviews, philosophy gets explained in interviews, tweets, and factory tours. Many of the tweets, and factory tours. Many of the tweets, and factory tours. Many of the ideas aren't even new. Lheed Skunkworks ideas aren't even new. Lheed Skunkworks ideas aren't even new. Lheed Skunkworks ran similar approaches 60 years ago. ran similar approaches 60 years ago. ran similar approaches 60 years ago. Founder Kelly Johnson's 14 rules read Founder Kelly Johnson's 14 rules read Founder Kelly Johnson's 14 rules read like a SpaceX operations manual. The like a SpaceX operations manual. The like a SpaceX operations manual. The performance gap just keeps getting performance gap just keeps getting performance gap just keeps getting bigger. In 2025, SpaceX launched more bigger. In 2025, SpaceX launched more bigger. In 2025, SpaceX launched more mass to orbit than every other provider mass to orbit than every other provider mass to orbit than every other provider on Earth combined. much more. This is on Earth combined. much more. This is on Earth combined. much more. This is crazy. Every payload from China, Russia, crazy. Every payload from China, Russia, crazy. Every payload from China, Russia, Europe, and all American launchers Europe, and all American launchers Europe, and all American launchers wasn't even a fifth of what SpaceX put wasn't even a fifth of what SpaceX put wasn't even a fifth of what SpaceX put into orbit. They're the only company into orbit. They're the only company into orbit. They're the only company producing rockets at an industrial producing rockets at an industrial producing rockets at an industrial scale. A Falcon 9 goes up every 2 to 3 scale. A Falcon 9 goes up every 2 to 3 scale. A Falcon 9 goes up every 2 to 3 days. Competitors manage singledigit days. Competitors manage singledigit days. Competitors manage singledigit launches per year. The same boosters launches per year. The same boosters launches per year. The same boosters have been reused 20 times each. The have been reused 20 times each. The have been reused 20 times each. The company has sent astronauts to the company has sent astronauts to the company has sent astronauts to the International Space Station, the first International Space Station, the first International Space Station, the first private company to do so. Starlink, private company to do so. Starlink, private company to do so. Starlink, their satellite internet constellation, their satellite internet constellation, their satellite internet constellation, now has over 9,000 satellites in orbit, now has over 9,000 satellites in orbit, now has over 9,000 satellites in orbit, the largest in history. Both built and the largest in history. Both built and the largest in history. Both built and launched by the same company. SpaceX is launched by the same company. SpaceX is launched by the same company. SpaceX is now the most valuable private company on now the most valuable private company on now the most valuable private company on the planet. Yet, the skeptics were the planet. Yet, the skeptics were the planet. Yet, the skeptics were confident it couldn't happen. Apollo confident it couldn't happen. Apollo confident it couldn't happen. Apollo astronauts Neil Armstrong and Gene astronauts Neil Armstrong and Gene astronauts Neil Armstrong and Gene Kernan testified before Congress against Kernan testified before Congress against Kernan testified before Congress against commercial space flight. They said that commercial space flight. They said that commercial space flight. They said that they thought reusability is a dream and they thought reusability is a dream and they thought reusability is a dream and even if it did work, the market was too even if it did work, the market was too even if it did work, the market was too small to support the hundreds of small to support the hundreds of small to support the hundreds of launches needed to make reusability launches needed to make reusability launches needed to make reusability worth it. Elon was described as a worth it. Elon was described as a worth it. Elon was described as a software guy playing with expensive software guy playing with expensive software guy playing with expensive toys. The early failures seemed to toys. The early failures seemed to toys. The early failures seemed to confirm them. Three Falcon 1 explosions confirm them. Three Falcon 1 explosions confirm them. Three Falcon 1 explosions between 2006 and 2008. By September between 2006 and 2008. By September between 2006 and 2008. By September 2008, SpaceX had funds for exactly one 2008, SpaceX had funds for exactly one 2008, SpaceX had funds for exactly one more attempt and Tesla was weeks away more attempt and Tesla was weeks away more attempt and Tesla was weeks away from bankruptcy. Elon was borrowing from bankruptcy. Elon was borrowing from bankruptcy. Elon was borrowing money for rent. Then it worked. Flight 4 money for rent. Then it worked. Flight 4 money for rent. Then it worked. Flight 4 succeeded and NASA's $ 1.6 billion cargo succeeded and NASA's $ 1.6 billion cargo succeeded and NASA's $ 1.6 billion cargo contract followed six weeks later. Then contract followed six weeks later. Then contract followed six weeks later. Then came Falcon 9, Dragon, ISS docking, came Falcon 9, Dragon, ISS docking, came Falcon 9, Dragon, ISS docking, boosters exploding on the pad, boosters boosters exploding on the pad, boosters boosters exploding on the pad, boosters landing, crude flights, and eventually landing, crude flights, and eventually landing, crude flights, and eventually Starship. So, is any of this outlier Starship. So, is any of this outlier Starship. So, is any of this outlier performance repeatable? This is the performance repeatable? This is the performance repeatable? This is the puzzle. If the strategy is known and the puzzle. If the strategy is known and the puzzle. If the strategy is known and the principles are public, what's actually principles are public, what's actually principles are public, what's actually hard to copy? Obvious factors explain hard to copy? Obvious factors explain hard to copy? Obvious factors explain some of this, but not enough? And so he some of this, but not enough? And so he some of this, but not enough? And so he goes over some of the factors. The space goes over some of the factors. The space goes over some of the factors. The space shuttle retired creating a gap. This was shuttle retired creating a gap. This was shuttle retired creating a gap. This was really good timing for NASA to become really good timing for NASA to become really good timing for NASA to become SpaceX's biggest customer. But Blue SpaceX's biggest customer. But Blue SpaceX's biggest customer. But Blue Origin was founded two years earlier and Origin was founded two years earlier and Origin was founded two years earlier and Boeing and Loheed saw the same Boeing and Loheed saw the same Boeing and Loheed saw the same opportunity. The grand vision of Boots opportunity. The grand vision of Boots opportunity. The grand vision of Boots on Mars attracted missionaries. But on Mars attracted missionaries. But on Mars attracted missionaries. But ambitious visions are cheap and plenty ambitious visions are cheap and plenty ambitious visions are cheap and plenty of founders have them. Elon putting in of founders have them. Elon putting in of founders have them. Elon putting in $100 million bought Early Runway, but $100 million bought Early Runway, but $100 million bought Early Runway, but Bezos poured much more into Blue Origin Bezos poured much more into Blue Origin Bezos poured much more into Blue Origin and Legacy Primes had multiples of this and Legacy Primes had multiples of this and Legacy Primes had multiples of this amount. Technology was also getting amount. Technology was also getting amount. Technology was also getting better. 3D printing, simulation, better. 3D printing, simulation, better. 3D printing, simulation, advanced materials, all commercially advanced materials, all commercially advanced materials, all commercially available to competitors. These factors available to competitors. These factors available to competitors. These factors are real and none are sufficient. If are real and none are sufficient. If are real and none are sufficient. If they explained it, others could have they explained it, others could have they explained it, others could have caught up easily, but they're not even caught up easily, but they're not even caught up easily, but they're not even close. SpaceX is a hotbed of case study close. SpaceX is a hotbed of case study close. SpaceX is a hotbed of case study material. Engineering, product, finance, material. Engineering, product, finance, material. Engineering, product, finance, strategy, manufacturing, product strategy, manufacturing, product strategy, manufacturing, product management, etc. If you're interested in management, etc. If you're interested in management, etc. If you're interested in the company, these are all important, the company, these are all important, the company, these are all important, but I'm more curious about which are but I'm more curious about which are but I'm more curious about which are repeatable. The question isn't why did repeatable. The question isn't why did repeatable. The question isn't why did SpaceX succeed? That's too vague to be SpaceX succeed? That's too vague to be SpaceX succeed? That's too vague to be useful. The sharper question, what can useful. The sharper question, what can useful. The sharper question, what can someone building hard things actually someone building hard things actually someone building hard things actually take away? And so then Max breaks it take away? And so then Max breaks it take away? And so then Max breaks it down into a bunch of subheadings. The down into a bunch of subheadings. The down into a bunch of subheadings. The first one is the strategy. What SpaceX first one is the strategy. What SpaceX first one is the strategy. What SpaceX has done more than anything is minimize has done more than anything is minimize has done more than anything is minimize the cost of getting things to space. The the cost of getting things to space. The the cost of getting things to space. The vision is humanity expanding across our vision is humanity expanding across our vision is humanity expanding across our solar system, but the lever is the cost solar system, but the lever is the cost solar system, but the lever is the cost of moving mass from Earth's surface to of moving mass from Earth's surface to of moving mass from Earth's surface to orbit and beyond. Everything else, the orbit and beyond. Everything else, the orbit and beyond. Everything else, the launches, the landings, the reuse, launches, the landings, the reuse, launches, the landings, the reuse, serves that goal. When you study how serves that goal. When you study how serves that goal. When you study how companies hold advantages over time, companies hold advantages over time, companies hold advantages over time, consistently being the lowcost provider consistently being the lowcost provider consistently being the lowcost provider might be the hardest to maintain. The might be the hardest to maintain. The might be the hardest to maintain. The reason is that it has to be baked into reason is that it has to be baked into reason is that it has to be baked into everything you do. It cannot be an everything you do. It cannot be an everything you do. It cannot be an initiative or an afterthought. It has to initiative or an afterthought. It has to initiative or an afterthought. It has to shape how you design products, structure shape how you design products, structure shape how you design products, structure the company, and choose what to build. the company, and choose what to build. the company, and choose what to build. And as you'll see in the book, it all And as you'll see in the book, it all And as you'll see in the book, it all started from the earliest days. Before started from the earliest days. Before started from the earliest days. Before starting SpaceX, Elon wanted to get to starting SpaceX, Elon wanted to get to starting SpaceX, Elon wanted to get to Mars, but he didn't set out to build a Mars, but he didn't set out to build a Mars, but he didn't set out to build a rocket manufacturer. In 2001, he tried rocket manufacturer. In 2001, he tried rocket manufacturer. In 2001, he tried buying Russian ICBMs to get there, but buying Russian ICBMs to get there, but buying Russian ICBMs to get there, but the Russians quoted him ridiculous the Russians quoted him ridiculous the Russians quoted him ridiculous prices. So, he famously reframed the prices. So, he famously reframed the prices. So, he famously reframed the question from first principles. What is question from first principles. What is question from first principles. What is a rocket made of? Aerospace grade a rocket made of? Aerospace grade a rocket made of? Aerospace grade aluminum alloys plus some titanium, aluminum alloys plus some titanium, aluminum alloys plus some titanium, copper, and carbon fiber. And then I copper, and carbon fiber. And then I copper, and carbon fiber. And then I asked, what is the value of those asked, what is the value of those asked, what is the value of those materials on the commodity market? It materials on the commodity market? It materials on the commodity market? It turned out that the materials cost of a turned out that the materials cost of a turned out that the materials cost of a rocket was around 2% of the typical rocket was around 2% of the typical rocket was around 2% of the typical price, which is a crazy ratio for a price, which is a crazy ratio for a price, which is a crazy ratio for a large mechanical product. 2%. Your car's large mechanical product. 2%. Your car's large mechanical product. 2%. Your car's raw materials are maybe 20 to 30% of the raw materials are maybe 20 to 30% of the raw materials are maybe 20 to 30% of the sticker price. Consumer electronics are sticker price. Consumer electronics are sticker price. Consumer electronics are similar, but rockets, 98 cents of every similar, but rockets, 98 cents of every similar, but rockets, 98 cents of every dollar was going somewhere other than dollar was going somewhere other than dollar was going somewhere other than what it was made of. Where was it going? what it was made of. Where was it going? what it was made of. Where was it going? Three places, it seems. Supplier markup Three places, it seems. Supplier markup Three places, it seems. Supplier markup stacking through contract layers. Each stacking through contract layers. Each stacking through contract layers. Each tier adding 15 to 30% margin. Custom tier adding 15 to 30% margin. Custom tier adding 15 to 30% margin. Custom designs that couldn't achieve designs that couldn't achieve designs that couldn't achieve manufacturing scale. And expendable manufacturing scale. And expendable manufacturing scale. And expendable hardware thrown away after every flight. hardware thrown away after every flight. hardware thrown away after every flight. None of these are the laws of physics. None of these are the laws of physics. None of these are the laws of physics. Traditional aerospace treated high costs Traditional aerospace treated high costs Traditional aerospace treated high costs as fixed constraints. But what if you as fixed constraints. But what if you as fixed constraints. But what if you treated them as variables? How do you treated them as variables? How do you treated them as variables? How do you actually capture that 98%. I'm reading actually capture that 98%. I'm reading actually capture that 98%. I'm reading an early copy of this book called The an early copy of this book called The an early copy of this book called The Book of Elon. It's written by my friend Book of Elon. It's written by my friend Book of Elon. It's written by my friend Eric Jorgensson. It'll be out in a few Eric Jorgensson. It'll be out in a few Eric Jorgensson. It'll be out in a few weeks. It's about 200 pages of just Elon weeks. It's about 200 pages of just Elon weeks. It's about 200 pages of just Elon in his own words. And he was actually in his own words. And he was actually in his own words. And he was actually talking about another way to think about talking about another way to think about talking about another way to think about this. This is what Elon says from this this. This is what Elon says from this this. This is what Elon says from this book. How could the Russians build book. How could the Russians build book. How could the Russians build lowcost rockets? It's not like we drive lowcost rockets? It's not like we drive lowcost rockets? It's not like we drive Russian cars, fly Russian planes, or Russian cars, fly Russian planes, or Russian cars, fly Russian planes, or have Russian kitchen appliances. The US have Russian kitchen appliances. The US have Russian kitchen appliances. The US is a pretty competitive place and we is a pretty competitive place and we is a pretty competitive place and we should be able to build a costefficient should be able to build a costefficient should be able to build a costefficient launch vehicle. So, back to the essay, launch vehicle. So, back to the essay, launch vehicle. So, back to the essay, another subheading, rethink from first another subheading, rethink from first another subheading, rethink from first principle. Start with the actual principle. Start with the actual principle. Start with the actual product. If you accept existing product. If you accept existing product. If you accept existing solutions, you accept their cost solutions, you accept their cost solutions, you accept their cost structure. So, rebuild from physics structure. So, rebuild from physics structure. So, rebuild from physics instead. Don't ask what do rockets cost. instead. Don't ask what do rockets cost. instead. Don't ask what do rockets cost. Ask what should rockets cost. Elon Ask what should rockets cost. Elon Ask what should rockets cost. Elon eventually named this the idiot index. eventually named this the idiot index. eventually named this the idiot index. the ratio of the actual cost of a part the ratio of the actual cost of a part the ratio of the actual cost of a part to the cost of its raw materials. If the to the cost of its raw materials. If the to the cost of its raw materials. If the ratio is high, he says, you're an idiot. ratio is high, he says, you're an idiot. ratio is high, he says, you're an idiot. Consider the Falcon 1 actuator. A vendor Consider the Falcon 1 actuator. A vendor Consider the Falcon 1 actuator. A vendor quoted $120,000 quoted $120,000 quoted $120,000 in 18 months of development. SpaceX's in 18 months of development. SpaceX's in 18 months of development. SpaceX's engineers built it for $3,900. engineers built it for $3,900. engineers built it for $3,900. When founding engineer Tom Mueller's When founding engineer Tom Mueller's When founding engineer Tom Mueller's team asked about a critical engine team asked about a critical engine team asked about a critical engine valve, the supplier kind of smirked and valve, the supplier kind of smirked and valve, the supplier kind of smirked and left after hearing SpaceX's timeline and left after hearing SpaceX's timeline and left after hearing SpaceX's timeline and budget. Mueller's team made the valve budget. Mueller's team made the valve budget. Mueller's team made the valve themselves. This pattern repeated across themselves. This pattern repeated across themselves. This pattern repeated across the vehicle. The Dragon's capsule the vehicle. The Dragon's capsule the vehicle. The Dragon's capsule docking mechanism was reinvented from docking mechanism was reinvented from docking mechanism was reinvented from offthe-shelf bike shocks and catalog offthe-shelf bike shocks and catalog offthe-shelf bike shocks and catalog parts instead of adopting NASA's parts instead of adopting NASA's parts instead of adopting NASA's existing design. There are probably a existing design. There are probably a existing design. There are probably a hundred examples like this, most not hundred examples like this, most not hundred examples like this, most not discussed in public. The philosophy discussed in public. The philosophy discussed in public. The philosophy extended to fundamental architecture. extended to fundamental architecture. extended to fundamental architecture. SpaceX uses one propellant pair, liquid SpaceX uses one propellant pair, liquid SpaceX uses one propellant pair, liquid oxygen and RP1 kerosene across all oxygen and RP1 kerosene across all oxygen and RP1 kerosene across all stages. The vacuum Merlin engine uses a stages. The vacuum Merlin engine uses a stages. The vacuum Merlin engine uses a fixed nozzle extension instead of a fixed nozzle extension instead of a fixed nozzle extension instead of a deployable one. This is the main point. deployable one. This is the main point. deployable one. This is the main point. Fewer moving parts means fewer failure Fewer moving parts means fewer failure Fewer moving parts means fewer failure modes means lower cost. Compare this to modes means lower cost. Compare this to modes means lower cost. Compare this to the Atlas 5 rocket, which uses up to the Atlas 5 rocket, which uses up to the Atlas 5 rocket, which uses up to three different rocket types in a single three different rocket types in a single three different rocket types in a single vehicle, each optimized for its flight vehicle, each optimized for its flight vehicle, each optimized for its flight phase. Elon's response to this was, phase. Elon's response to this was, phase. Elon's response to this was, "You've just tripled your factory costs "You've just tripled your factory costs "You've just tripled your factory costs and all your operational costs." And so, and all your operational costs." And so, and all your operational costs." And so, he continues to give examples of how he continues to give examples of how he continues to give examples of how they think and all these little they think and all these little they think and all these little decisions they're making. The Merlin decisions they're making. The Merlin decisions they're making. The Merlin engine family embodies this trade-off. engine family embodies this trade-off. engine family embodies this trade-off. Russian RD180 engines cost 20 to 25 Russian RD180 engines cost 20 to 25 Russian RD180 engines cost 20 to 25 million each, while the Merlin 1D million each, while the Merlin 1D million each, while the Merlin 1D production runs around a million. How? production runs around a million. How? production runs around a million. How? SpaceX eliminated hydrogen's complexity SpaceX eliminated hydrogen's complexity SpaceX eliminated hydrogen's complexity by using kerosene, used regenerative by using kerosene, used regenerative by using kerosene, used regenerative cooling with the fuel itself, and cooling with the fuel itself, and cooling with the fuel itself, and optimized for manufacturability over optimized for manufacturability over optimized for manufacturability over maximum performance. The result was 95% maximum performance. The result was 95% maximum performance. The result was 95% of theoretical efficiency for 80% cost of theoretical efficiency for 80% cost of theoretical efficiency for 80% cost reduction. Merlin's performance is reduction. Merlin's performance is reduction. Merlin's performance is slightly lower, but good enough at 120th slightly lower, but good enough at 120th slightly lower, but good enough at 120th the cost. But identifying where to cut the cost. But identifying where to cut the cost. But identifying where to cut cost doesn't mean you can actually cut cost doesn't mean you can actually cut cost doesn't mean you can actually cut them. You still have to build the parts. them. You still have to build the parts. them. You still have to build the parts. Once SpaceX concluded that atoms were Once SpaceX concluded that atoms were Once SpaceX concluded that atoms were cheap and process was expensive, cheap and process was expensive, cheap and process was expensive, vertical integration followed almost vertical integration followed almost vertical integration followed almost inevitably. That's a great line. SpaceX inevitably. That's a great line. SpaceX inevitably. That's a great line. SpaceX concluded that atoms were cheap and concluded that atoms were cheap and concluded that atoms were cheap and process was expensive and so therefore process was expensive and so therefore process was expensive and so therefore vertical integration followed almost vertical integration followed almost vertical integration followed almost inevitably. The next subheading talks inevitably. The next subheading talks inevitably. The next subheading talks about this becoming your own supplier. about this becoming your own supplier. about this becoming your own supplier. If materials are cheap and the tax is If materials are cheap and the tax is If materials are cheap and the tax is all process and overhead, you need to all process and overhead, you need to all process and overhead, you need to control the process to capture the control the process to capture the control the process to capture the savings. You cannot negotiate your way savings. You cannot negotiate your way savings. You cannot negotiate your way to a 10x cost reduction with suppliers to a 10x cost reduction with suppliers to a 10x cost reduction with suppliers who have profits baked in at every tier. who have profits baked in at every tier. who have profits baked in at every tier. So SpaceX became its own supplier. By So SpaceX became its own supplier. By So SpaceX became its own supplier. By building 80% of its hardware internally, building 80% of its hardware internally, building 80% of its hardware internally, engines, structures, avionics, software, engines, structures, avionics, software, engines, structures, avionics, software, and key ground systems, SpaceX collapsed and key ground systems, SpaceX collapsed and key ground systems, SpaceX collapsed the traditional aerospace stack. They the traditional aerospace stack. They the traditional aerospace stack. They outsource raw materials and commodity outsource raw materials and commodity outsource raw materials and commodity parts and make everything else parts and make everything else parts and make everything else themselves. That's something SpaceX themselves. That's something SpaceX themselves. That's something SpaceX didn't originally set out to do, one didn't originally set out to do, one didn't originally set out to do, one engineer noted, but was driven by engineer noted, but was driven by engineer noted, but was driven by suppliers high prices. This wasn't an suppliers high prices. This wasn't an suppliers high prices. This wasn't an ideological commitment to doing ideological commitment to doing ideological commitment to doing everything in house. It was the result everything in house. It was the result everything in house. It was the result of suppliers repeatedly quoting prices of suppliers repeatedly quoting prices of suppliers repeatedly quoting prices and timelines incompatible with SpaceX's and timelines incompatible with SpaceX's and timelines incompatible with SpaceX's cost targets. cost targets. cost targets. The benefits compound. When several The benefits compound. When several The benefits compound. When several tiers each add 15% margin, total cost tiers each add 15% margin, total cost tiers each add 15% margin, total cost multiplies through the layers. A NASA multiplies through the layers. A NASA multiplies through the layers. A NASA study found SpaceX developed Falcon 9 study found SpaceX developed Falcon 9 study found SpaceX developed Falcon 9 for roughly 440 million. They estimated for roughly 440 million. They estimated for roughly 440 million. They estimated the same work with traditional the same work with traditional the same work with traditional contractors would have cost 3 to 10 contractors would have cost 3 to 10 contractors would have cost 3 to 10 times that amount. Vertical integration times that amount. Vertical integration times that amount. Vertical integration also accelerates iteration. Another also accelerates iteration. Another also accelerates iteration. Another great line, vertical integration also great line, vertical integration also great line, vertical integration also accelerates iteration. When an engineer accelerates iteration. When an engineer accelerates iteration. When an engineer needs to change a bracket, weld, or needs to change a bracket, weld, or needs to change a bracket, weld, or circuit board, the manufacturing circuit board, the manufacturing circuit board, the manufacturing engineer is in the same building using engineer is in the same building using engineer is in the same building using the same CAD systems and tooling. the same CAD systems and tooling. the same CAD systems and tooling. Materials, jigs, and processes can Materials, jigs, and processes can Materials, jigs, and processes can evolve together on the scale of weeks, evolve together on the scale of weeks, evolve together on the scale of weeks, enabling a rapid progression from Falcon enabling a rapid progression from Falcon enabling a rapid progression from Falcon 1 to successive Falcon 9 variants. each 1 to successive Falcon 9 variants. each 1 to successive Falcon 9 variants. each iteration improving performance and iteration improving performance and iteration improving performance and reducing cost without waiting for reducing cost without waiting for reducing cost without waiting for suppliers to retool on multi-year suppliers to retool on multi-year suppliers to retool on multi-year cycles. But vertical integration creates cycles. But vertical integration creates cycles. But vertical integration creates a new problem. It concentrates fixed a new problem. It concentrates fixed a new problem. It concentrates fixed costs. If you own the factory, the costs. If you own the factory, the costs. If you own the factory, the machines, and the staff, you're losing machines, and the staff, you're losing machines, and the staff, you're losing money every second they aren't building money every second they aren't building money every second they aren't building something. At the traditional launch something. At the traditional launch something. At the traditional launch cadence of two to four vehicles per cadence of two to four vehicles per cadence of two to four vehicles per year, in-house manufacturing is a year, in-house manufacturing is a year, in-house manufacturing is a liability, not an advantage. To make the liability, not an advantage. To make the liability, not an advantage. To make the math work, you need volume. Before we math work, you need volume. Before we math work, you need volume. Before we get back into this, I want to tell you get back into this, I want to tell you get back into this, I want to tell you about the presenting sponsor of this about the presenting sponsor of this about the presenting sponsor of this podcast, RAMP. One of the main themes in podcast, RAMP. One of the main themes in podcast, RAMP. One of the main themes in the history of SpaceX is constantly the history of SpaceX is constantly the history of SpaceX is constantly attacking and questioning your costs. attacking and questioning your costs. attacking and questioning your costs. Ramp helps many of the most innovative Ramp helps many of the most innovative Ramp helps many of the most innovative businesses in the world do exactly that. businesses in the world do exactly that. businesses in the world do exactly that. The median company running on ramp cuts The median company running on ramp cuts The median company running on ramp cuts their expenses by 5%. And just like their expenses by 5%. And just like their expenses by 5%. And just like SpaceX has demonstrated a religious SpaceX has demonstrated a religious SpaceX has demonstrated a religious dedication to controlling costs helps dedication to controlling costs helps dedication to controlling costs helps increase revenue and pursue increase revenue and pursue increase revenue and pursue opportunities you couldn't otherwise. We opportunities you couldn't otherwise. We opportunities you couldn't otherwise. We see that in the ramp data, too. The see that in the ramp data, too. The see that in the ramp data, too. The median company running on ramp also median company running on ramp also median company running on ramp also grows their revenue by 16%. Many of the grows their revenue by 16%. Many of the grows their revenue by 16%. Many of the top founders and CEOs I know run their top founders and CEOs I know run their top founders and CEOs I know run their business on ramp. I run my business on business on ramp. I run my business on business on ramp. I run my business on ramp and you should too. Go to ramp.com ramp and you should too. Go to ramp.com ramp and you should too. Go to ramp.com today to learn how they can help your today to learn how they can help your today to learn how they can help your business save time and money. That is business save time and money. That is business save time and money. That is ramp.com. So that brings us to the next ramp.com. So that brings us to the next ramp.com. So that brings us to the next subheading. Build a platform. The only subheading. Build a platform. The only subheading. Build a platform. The only way to get volume is to standardize. way to get volume is to standardize. way to get volume is to standardize. Build a common platform that customers Build a common platform that customers Build a common platform that customers have to adapt to. The existing approach have to adapt to. The existing approach have to adapt to. The existing approach was bespoke vehicles per mission. custom was bespoke vehicles per mission. custom was bespoke vehicles per mission. custom adapters, mission specific adapters, mission specific adapters, mission specific modifications, multiple vehicle modifications, multiple vehicle modifications, multiple vehicle families. This optimizes each mission at families. This optimizes each mission at families. This optimizes each mission at the expense of manufacturing scale. the expense of manufacturing scale. the expense of manufacturing scale. SpaceX bet the opposite, that cost SpaceX bet the opposite, that cost SpaceX bet the opposite, that cost savings from standardization would savings from standardization would savings from standardization would exceed the value of customization. exceed the value of customization. exceed the value of customization. Yes, customers wanted custom solutions, Yes, customers wanted custom solutions, Yes, customers wanted custom solutions, but they wanted low prices even more. but they wanted low prices even more. but they wanted low prices even more. Force them to choose, and they will Force them to choose, and they will Force them to choose, and they will adapt. The Falcon 9 became the adapt. The Falcon 9 became the adapt. The Falcon 9 became the industry's Model T. One rocket built in industry's Model T. One rocket built in industry's Model T. One rocket built in volume. Same nine Merlin engines on the volume. Same nine Merlin engines on the volume. Same nine Merlin engines on the first stage, same vacuum Merlin on the first stage, same vacuum Merlin on the first stage, same vacuum Merlin on the second. Same structure, same diameter, second. Same structure, same diameter, second. Same structure, same diameter, same aluminum, lithium alloy, same same aluminum, lithium alloy, same same aluminum, lithium alloy, same welding methods, same avionics, same welding methods, same avionics, same welding methods, same avionics, same ground systems. Even Falcon Heavy is ground systems. Even Falcon Heavy is ground systems. Even Falcon Heavy is just three Falcon 9 first stages just three Falcon 9 first stages just three Falcon 9 first stages strapped together with a shared upper strapped together with a shared upper strapped together with a shared upper stage. A scaled variant from the same stage. A scaled variant from the same stage. A scaled variant from the same core, not a new vehicle. SpaceX core, not a new vehicle. SpaceX core, not a new vehicle. SpaceX published a Falcon users guide which published a Falcon users guide which published a Falcon users guide which defined bolt circles, electrical defined bolt circles, electrical defined bolt circles, electrical connectors, and fairing environments. connectors, and fairing environments. connectors, and fairing environments. Customers designed to SpaceX's spec Customers designed to SpaceX's spec Customers designed to SpaceX's spec instead of demanding customizations. instead of demanding customizations. instead of demanding customizations. Satellite orbits adjusted to Falcon Satellite orbits adjusted to Falcon Satellite orbits adjusted to Falcon performance curves. This flipped the performance curves. This flipped the performance curves. This flipped the negotiating power. Instead of aerospace negotiating power. Instead of aerospace negotiating power. Instead of aerospace companies serving satellite companies serving satellite companies serving satellite specifications, satellites adapted to specifications, satellites adapted to specifications, satellites adapted to SpaceX capabilities. SpaceX capabilities. SpaceX capabilities. The economics of manufacturing is what The economics of manufacturing is what The economics of manufacturing is what makes this work. Building 40 identical makes this work. Building 40 identical makes this work. Building 40 identical Falcon 9 annually creates automotive Falcon 9 annually creates automotive Falcon 9 annually creates automotive style learning curves that are style learning curves that are style learning curves that are impossible in custom aerospace. As impossible in custom aerospace. As impossible in custom aerospace. As production scales, learning improves and production scales, learning improves and production scales, learning improves and cost declines. cost declines. cost declines. How this worked in practice is that How this worked in practice is that How this worked in practice is that every anomaly, wear pattern, or every anomaly, wear pattern, or every anomaly, wear pattern, or manufacturing defect fed back directly manufacturing defect fed back directly manufacturing defect fed back directly to the teams that design the parts. to the teams that design the parts. to the teams that design the parts. Finally, there's the logical conclusion Finally, there's the logical conclusion Finally, there's the logical conclusion of standardization, which is of standardization, which is of standardization, which is reusability. Reusable boosters are still reusability. Reusable boosters are still reusability. Reusable boosters are still the same Falcon 9 cores. You weren't the same Falcon 9 cores. You weren't the same Falcon 9 cores. You weren't just building the same model of rocket. just building the same model of rocket. just building the same model of rocket. You were literally flying the exact same You were literally flying the exact same You were literally flying the exact same hardware. Because every booster was hardware. Because every booster was hardware. Because every booster was identical, every landing attempt identical, every landing attempt identical, every landing attempt provided perfectly comparable data. If provided perfectly comparable data. If provided perfectly comparable data. If making 40 rockets creates a making 40 rockets creates a making 40 rockets creates a manufacturing learning curve, flying the manufacturing learning curve, flying the manufacturing learning curve, flying the same rocket 20 times creates an same rocket 20 times creates an same rocket 20 times creates an operational learning curve that's even operational learning curve that's even operational learning curve that's even steeper. The economics are devastating steeper. The economics are devastating steeper. The economics are devastating for competitors. for competitors. for competitors. Traditional providers launching a Traditional providers launching a Traditional providers launching a handful of custom vehicles per year handful of custom vehicles per year handful of custom vehicles per year never accumulate enough data to even never accumulate enough data to even never accumulate enough data to even start this cycle. And this is so good start this cycle. And this is so good start this cycle. And this is so good how Max ties this all together. You can how Max ties this all together. You can how Max ties this all together. You can probably see why all three tactics were probably see why all three tactics were probably see why all three tactics were necessary. First principles identified necessary. First principles identified necessary. First principles identified the waste. Vertical integration provided the waste. Vertical integration provided the waste. Vertical integration provided the control to eliminate it. the control to eliminate it. the control to eliminate it. Standardization allowed the volume to Standardization allowed the volume to Standardization allowed the volume to make that control profitable. Without make that control profitable. Without make that control profitable. Without all three, the system breaks. They work all three, the system breaks. They work all three, the system breaks. They work together so each flight makes the next together so each flight makes the next together so each flight makes the next one cheaper. What does this sound like? one cheaper. What does this sound like? one cheaper. What does this sound like? A flywheel. Lower costs enable lower A flywheel. Lower costs enable lower A flywheel. Lower costs enable lower prices which capture market share which prices which capture market share which prices which capture market share which increases volume which drives cost lower increases volume which drives cost lower increases volume which drives cost lower still. The incumbents understood this still. The incumbents understood this still. The incumbents understood this too late. They optimized components too late. They optimized components too late. They optimized components locally. Better engines, lighter locally. Better engines, lighter locally. Better engines, lighter materials, incremental gains. SpaceX materials, incremental gains. SpaceX materials, incremental gains. SpaceX optimized the system for cost, accepting optimized the system for cost, accepting optimized the system for cost, accepting component level compromises for system component level compromises for system component level compromises for system level dominance. This flywheel relies on level dominance. This flywheel relies on level dominance. This flywheel relies on high volume. Competitors couldn't even high volume. Competitors couldn't even high volume. Competitors couldn't even imagine there was even a market for so imagine there was even a market for so imagine there was even a market for so many rockets, and they weren't willing many rockets, and they weren't willing many rockets, and they weren't willing to take the risk of spending all the to take the risk of spending all the to take the risk of spending all the money just to find out. In a world where money just to find out. In a world where money just to find out. In a world where atoms are cheap and processes expensive, atoms are cheap and processes expensive, atoms are cheap and processes expensive, the real innovation was not a single the real innovation was not a single the real innovation was not a single engine or material, but the decision to engine or material, but the decision to engine or material, but the decision to redesign the entire stack around the redesign the entire stack around the redesign the entire stack around the economics of cost. But a cost target economics of cost. But a cost target economics of cost. But a cost target doesn't build itself. First principal doesn't build itself. First principal doesn't build itself. First principal strategy says what to build. It doesn't strategy says what to build. It doesn't strategy says what to build. It doesn't say how to build it without catastrophic say how to build it without catastrophic say how to build it without catastrophic mistakes along the way. Onto the next mistakes along the way. Onto the next mistakes along the way. Onto the next subheading, the engineering. If the subheading, the engineering. If the subheading, the engineering. If the strategy is to rethink everything from strategy is to rethink everything from strategy is to rethink everything from first principles, how do you actually first principles, how do you actually first principles, how do you actually execute that without major consequential execute that without major consequential execute that without major consequential failures? The standard answer is to failures? The standard answer is to failures? The standard answer is to analyze exhaustively before building. So analyze exhaustively before building. So analyze exhaustively before building. So he's going to describe the standard he's going to describe the standard he's going to describe the standard answer. And I love how he talks about answer. And I love how he talks about answer. And I love how he talks about SpaceX literally inverted this. SpaceX literally inverted this. SpaceX literally inverted this. Traditional aerospace follows this path Traditional aerospace follows this path Traditional aerospace follows this path religiously. A NASA report on the religiously. A NASA report on the religiously. A NASA report on the commercial crew program noted that commercial crew program noted that commercial crew program noted that Boeing utilizes a wellestablished Boeing utilizes a wellestablished Boeing utilizes a wellestablished systems engineering methodology targeted systems engineering methodology targeted systems engineering methodology targeted at an initial investment in engineering at an initial investment in engineering at an initial investment in engineering studies and analysis to mature the studies and analysis to mature the studies and analysis to mature the system design prior to building and system design prior to building and system design prior to building and testing. Must be really fun to read testing. Must be really fun to read testing. Must be really fun to read these kind of reports. Plan extensively. these kind of reports. Plan extensively. these kind of reports. Plan extensively. Freeze requirements early. Minimize test Freeze requirements early. Minimize test Freeze requirements early. Minimize test failures. This is the measure twice, cut failures. This is the measure twice, cut failures. This is the measure twice, cut once approach. SpaceX inverted this. once approach. SpaceX inverted this. once approach. SpaceX inverted this. Here's the problem with the traditional Here's the problem with the traditional Here's the problem with the traditional approach. You can't think your way to approach. You can't think your way to approach. You can't think your way to perfect solutions for problems you don't perfect solutions for problems you don't perfect solutions for problems you don't fully understand. That's another bar. fully understand. That's another bar. fully understand. That's another bar. You can't think your way to perfect You can't think your way to perfect You can't think your way to perfect solutions for problems you don't fully solutions for problems you don't fully solutions for problems you don't fully understand. Your model is always wrong understand. Your model is always wrong understand. Your model is always wrong in the ways you don't know yet. Complex in the ways you don't know yet. Complex in the ways you don't know yet. Complex systems have emergent behaviors that systems have emergent behaviors that systems have emergent behaviors that only appear when the pieces are actually only appear when the pieces are actually only appear when the pieces are actually bolted together. This is the paradox of bolted together. This is the paradox of bolted together. This is the paradox of first principal design. If you're first principal design. If you're first principal design. If you're questioning every inherited assumption, questioning every inherited assumption, questioning every inherited assumption, which you should, you're venturing into which you should, you're venturing into which you should, you're venturing into territory where analysis alone can't territory where analysis alone can't territory where analysis alone can't tell you what works. The physics might tell you what works. The physics might tell you what works. The physics might be known, but how the physics will be known, but how the physics will be known, but how the physics will interact with your specific materials, interact with your specific materials, interact with your specific materials, your specific manufacturing tolerances, your specific manufacturing tolerances, your specific manufacturing tolerances, your specific assembly process, that's your specific assembly process, that's your specific assembly process, that's not something you can derive from first not something you can derive from first not something you can derive from first principles, that's something you have to principles, that's something you have to principles, that's something you have to discover. And so what SpaceX does discover. And so what SpaceX does discover. And so what SpaceX does instead is they use reality as their instead is they use reality as their instead is they use reality as their validation tool. The alternative is to validation tool. The alternative is to validation tool. The alternative is to use reality as your primary validation use reality as your primary validation use reality as your primary validation tool. SpaceX focuses on rapidly tool. SpaceX focuses on rapidly tool. SpaceX focuses on rapidly iterating through a build, test, learn iterating through a build, test, learn iterating through a build, test, learn approach that drives modifications approach that drives modifications approach that drives modifications towards design maturity. Where Boeing towards design maturity. Where Boeing towards design maturity. Where Boeing invests up front in analysis, SpaceX invests up front in analysis, SpaceX invests up front in analysis, SpaceX invests upfront in prototypes. The core invests upfront in prototypes. The core invests upfront in prototypes. The core philosophy is deceptively simple. philosophy is deceptively simple. philosophy is deceptively simple. Failures are data, not disasters. Tight Failures are data, not disasters. Tight Failures are data, not disasters. Tight feedback loops lead to a high rate of feedback loops lead to a high rate of feedback loops lead to a high rate of innovation and adaptation, quickly innovation and adaptation, quickly innovation and adaptation, quickly finding better solutions of what not to finding better solutions of what not to finding better solutions of what not to do. Speed is a tactical advantage. do. Speed is a tactical advantage. do. Speed is a tactical advantage. This isn't new. During World War II, the This isn't new. During World War II, the This isn't new. During World War II, the P80 fighter jet went from concept to P80 fighter jet went from concept to P80 fighter jet went from concept to test flight in 5 months. In the early test flight in 5 months. In the early test flight in 5 months. In the early 1960s, the SR71 Blackbird went from idea 1960s, the SR71 Blackbird went from idea 1960s, the SR71 Blackbird went from idea to roll out in 4 years, and it's still to roll out in 4 years, and it's still to roll out in 4 years, and it's still the fastest man plane ever built. That's the fastest man plane ever built. That's the fastest man plane ever built. That's nuts. Is that Could that possibly be nuts. Is that Could that possibly be nuts. Is that Could that possibly be true? In the early 1960s, the SR71 true? In the early 1960s, the SR71 true? In the early 1960s, the SR71 Blackbird went from idea to roll out in Blackbird went from idea to roll out in Blackbird went from idea to roll out in four years, and it's still the fastest four years, and it's still the fastest four years, and it's still the fastest man plane ever built. Small teams, fast man plane ever built. Small teams, fast man plane ever built. Small teams, fast iteration, real hardware. In a 2021 iteration, real hardware. In a 2021 iteration, real hardware. In a 2021 Starbase interview, Elon explained the Starbase interview, Elon explained the Starbase interview, Elon explained the goal with each Starship prototype. Push goal with each Starship prototype. Push goal with each Starship prototype. Push the envelope such that it blows up. That the envelope such that it blows up. That the envelope such that it blows up. That is the end of his quote. That that is is the end of his quote. That that is is the end of his quote. That that is his whole quote. Push the envelope so it his whole quote. Push the envelope so it his whole quote. Push the envelope so it blows such that it blows up. This sounds blows such that it blows up. This sounds blows such that it blows up. This sounds reckless until you understand what he's reckless until you understand what he's reckless until you understand what he's actually saying. If the vehicle doesn't actually saying. If the vehicle doesn't actually saying. If the vehicle doesn't fail, you haven't learned where the fail, you haven't learned where the fail, you haven't learned where the limits are. Each failure is a precise limits are. Each failure is a precise limits are. Each failure is a precise data point about where reality diverges data point about where reality diverges data point about where reality diverges from your model. How can you reconcile from your model. How can you reconcile from your model. How can you reconcile this fail fast approach with the care this fail fast approach with the care this fail fast approach with the care that's needed to reliably build things that's needed to reliably build things that's needed to reliably build things where human lives are on the line? The where human lives are on the line? The where human lives are on the line? The crucial distinction is between crucial distinction is between crucial distinction is between development and operations. SpaceX runs development and operations. SpaceX runs development and operations. SpaceX runs both, but with completely different risk both, but with completely different risk both, but with completely different risk profiles. So for the Dragon, it carries profiles. So for the Dragon, it carries profiles. So for the Dragon, it carries crew. It can never fail. So there's crew. It can never fail. So there's crew. It can never fail. So there's large margins of safety. There's large margins of safety. There's large margins of safety. There's exhaustive testing. There's conservative exhaustive testing. There's conservative exhaustive testing. There's conservative everything. The Falcon 9, which is the everything. The Falcon 9, which is the everything. The Falcon 9, which is the operational launch vehicle, it's middle operational launch vehicle, it's middle operational launch vehicle, it's middle ground. It says ascent can't fail, but ground. It says ascent can't fail, but ground. It says ascent can't fail, but some landing attempts are allowed to. some landing attempts are allowed to. some landing attempts are allowed to. And then Starship, which is development, And then Starship, which is development, And then Starship, which is development, failure is instrumental. failure is instrumental. failure is instrumental. And Elon has a quote about this. He And Elon has a quote about this. He And Elon has a quote about this. He says, Starship does not have anyone on says, Starship does not have anyone on says, Starship does not have anyone on board, so we can blow things up. It is board, so we can blow things up. It is board, so we can blow things up. It is really helpful. And this is a good way really helpful. And this is a good way really helpful. And this is a good way to think about this. This is the same to think about this. This is the same to think about this. This is the same company doing two very different things company doing two very different things company doing two very different things with two very different groups of people with two very different groups of people with two very different groups of people and two very different risk profiles, and two very different risk profiles, and two very different risk profiles, but they're talking to each other. And but they're talking to each other. And but they're talking to each other. And so, if you go back to their very first so, if you go back to their very first so, if you go back to their very first four launches, says the contrast with four launches, says the contrast with four launches, says the contrast with traditional aerospace is stark. In that traditional aerospace is stark. In that traditional aerospace is stark. In that world, a three failure start may have world, a three failure start may have world, a three failure start may have triggered years of analysis, review triggered years of analysis, review triggered years of analysis, review boards, and redesigns on paper before boards, and redesigns on paper before boards, and redesigns on paper before the next attempt. At SpaceX, each flight the next attempt. At SpaceX, each flight the next attempt. At SpaceX, each flight became the next test with fixes became the next test with fixes became the next test with fixes incorporated immediately. This pattern incorporated immediately. This pattern incorporated immediately. This pattern continued into Starship. The early continued into Starship. The early continued into Starship. The early integrated flights each ended in rapid integrated flights each ended in rapid integrated flights each ended in rapid unscheduled disassemblies, which is just unscheduled disassemblies, which is just unscheduled disassemblies, which is just their name for explosions, but each came their name for explosions, but each came their name for explosions, but each came after achieving partial objectives such after achieving partial objectives such after achieving partial objectives such as clearing the pad, passing the match as clearing the pad, passing the match as clearing the pad, passing the match max Q, reaching near orbital velocity, max Q, reaching near orbital velocity, max Q, reaching near orbital velocity, then finally the famous catch of the then finally the famous catch of the then finally the famous catch of the Superheavy booster, which is the Superheavy booster, which is the Superheavy booster, which is the equivalent of catching a 20story equivalent of catching a 20story equivalent of catching a 20story building that's falling from the edge of building that's falling from the edge of building that's falling from the edge of space. Each subsequent flight space. Each subsequent flight space. Each subsequent flight incorporated design changes based on incorporated design changes based on incorporated design changes based on telemetry from the previous one. Where telemetry from the previous one. Where telemetry from the previous one. Where traditional aerospace might take years traditional aerospace might take years traditional aerospace might take years to go from flight anomaly to design to go from flight anomaly to design to go from flight anomaly to design change, SpaceX was doing it in between change, SpaceX was doing it in between change, SpaceX was doing it in between flights. Next subheading, have a high flights. Next subheading, have a high flights. Next subheading, have a high production rate. Iteration only works if production rate. Iteration only works if production rate. Iteration only works if you can afford many attempts. This is you can afford many attempts. This is you can afford many attempts. This is where SpaceX's hardware approach becomes where SpaceX's hardware approach becomes where SpaceX's hardware approach becomes essential. This is what Elon says about essential. This is what Elon says about essential. This is what Elon says about this. A high production rate solves many this. A high production rate solves many this. A high production rate solves many ills. He has said this repeatedly. ills. He has said this repeatedly. ills. He has said this repeatedly. continues any given technology continues any given technology continues any given technology development is how many iterations do development is how many iterations do development is how many iterations do you have and what's your time and you have and what's your time and you have and what's your time and progress between iterations. So if you progress between iterations. So if you progress between iterations. So if you have a high production rate, you can have a high production rate, you can have a high production rate, you can have a lot of iterations. You can try a have a lot of iterations. You can try a have a lot of iterations. You can try a lot of different things. If you have a lot of different things. If you have a lot of different things. If you have a small number of engines, then you have small number of engines, then you have small number of engines, then you have to be much more conservative because you to be much more conservative because you to be much more conservative because you can't risk blowing them up. SpaceX can't risk blowing them up. SpaceX can't risk blowing them up. SpaceX builds many cheaper prototypes, builds many cheaper prototypes, builds many cheaper prototypes, hardwarri fleets of test articles. hardwarri fleets of test articles. hardwarri fleets of test articles. They'd rather have 10 rough versions to They'd rather have 10 rough versions to They'd rather have 10 rough versions to blow up than one polished version blow up than one polished version blow up than one polished version they're afraid to break. This can lead they're afraid to break. This can lead they're afraid to break. This can lead to specific design decisions like using to specific design decisions like using to specific design decisions like using stainless steel for Starship, which is stainless steel for Starship, which is stainless steel for Starship, which is cheap, easy to weld, and can be welded cheap, easy to weld, and can be welded cheap, easy to weld, and can be welded in a tent by the way, instead of carbon in a tent by the way, instead of carbon in a tent by the way, instead of carbon fiber, which is expensive, and requires fiber, which is expensive, and requires fiber, which is expensive, and requires giant autoclaves. Vertical integration giant autoclaves. Vertical integration giant autoclaves. Vertical integration really helps enable this. When you own really helps enable this. When you own really helps enable this. When you own the factory, you can build fast without the factory, you can build fast without the factory, you can build fast without waiting on vendors. When you own 3D waiting on vendors. When you own 3D waiting on vendors. When you own 3D printing capability, you can produce printing capability, you can produce printing capability, you can produce parts on an ad hoc basis. When you can parts on an ad hoc basis. When you can parts on an ad hoc basis. When you can manufacture Raptor engines at high manufacture Raptor engines at high manufacture Raptor engines at high volume, losing one to a test failure volume, losing one to a test failure volume, losing one to a test failure doesn't set you back months. SpaceX is doesn't set you back months. SpaceX is doesn't set you back months. SpaceX is big into simulation as well. This moves big into simulation as well. This moves big into simulation as well. This moves atoms to bits where possible. Letting atoms to bits where possible. Letting atoms to bits where possible. Letting them pre-screen designs before blowing them pre-screen designs before blowing them pre-screen designs before blowing things up, but real tests remain things up, but real tests remain things up, but real tests remain primary. The question being constantly primary. The question being constantly primary. The question being constantly asked is how quickly can it be tested in asked is how quickly can it be tested in asked is how quickly can it be tested in as real environment as possible? And as real environment as possible? And as real environment as possible? And again, Max does a great job of tying again, Max does a great job of tying again, Max does a great job of tying this all together down here. The pieces this all together down here. The pieces this all together down here. The pieces reinforce each other in a way that's reinforce each other in a way that's reinforce each other in a way that's easy to miss. First, principles easy to miss. First, principles easy to miss. First, principles engineering reduces unnecessary engineering reduces unnecessary engineering reduces unnecessary complexity. Fewer parts means each complexity. Fewer parts means each complexity. Fewer parts means each prototype is cheaper to build. Cheaper prototype is cheaper to build. Cheaper prototype is cheaper to build. Cheaper prototypes mean you can build more of prototypes mean you can build more of prototypes mean you can build more of them. More prototypes means faster them. More prototypes means faster them. More prototypes means faster iteration. Faster iteration means you iteration. Faster iteration means you iteration. Faster iteration means you can push each prototype to failure can push each prototype to failure can push each prototype to failure without being precious about it. More without being precious about it. More without being precious about it. More failures means more data. More data failures means more data. More data failures means more data. More data means better designs. Better design means better designs. Better design means better designs. Better design means even simpler solutions and the means even simpler solutions and the means even simpler solutions and the cycle continues. cycle continues. cycle continues. Meanwhile, fail fast iteration extracts Meanwhile, fail fast iteration extracts Meanwhile, fail fast iteration extracts maximum information per prototype and maximum information per prototype and maximum information per prototype and per flight. You're not just testing per flight. You're not just testing per flight. You're not just testing whether something works, you're finding whether something works, you're finding whether something works, you're finding exactly where it breaks. That precision exactly where it breaks. That precision exactly where it breaks. That precision accelerates the next iteration. The accelerates the next iteration. The accelerates the next iteration. The strategy, lowcost vertical integration strategy, lowcost vertical integration strategy, lowcost vertical integration enables the engineering approach. The enables the engineering approach. The enables the engineering approach. The engineering approach validates the engineering approach validates the engineering approach validates the strategy faster than analysis ever strategy faster than analysis ever strategy faster than analysis ever could. Traditional aerospace eliminates could. Traditional aerospace eliminates could. Traditional aerospace eliminates uncertainty through planning. SpaceX uncertainty through planning. SpaceX uncertainty through planning. SpaceX eliminates uncertainty through doing. eliminates uncertainty through doing. eliminates uncertainty through doing. But this system doesn't run itself. But this system doesn't run itself. But this system doesn't run itself. Running an organization that constantly Running an organization that constantly Running an organization that constantly questions requirements, deletes parts, questions requirements, deletes parts, questions requirements, deletes parts, and accepts visible failures requires and accepts visible failures requires and accepts visible failures requires something that can't be built through something that can't be built through something that can't be built through iteration. An engineering process that iteration. An engineering process that iteration. An engineering process that treats failure as data only works if the treats failure as data only works if the treats failure as data only works if the engineers themselves believe it. A engineers themselves believe it. A engineers themselves believe it. A system that pushes to the edge of what's system that pushes to the edge of what's system that pushes to the edge of what's possible only survives if the people possible only survives if the people possible only survives if the people doing the pushing can handle the doing the pushing can handle the doing the pushing can handle the intensity. The practices described here intensity. The practices described here intensity. The practices described here are the mechanism, but they're powered are the mechanism, but they're powered are the mechanism, but they're powered by something else entirely. And that by something else entirely. And that by something else entirely. And that goes to his next subheading, which is goes to his next subheading, which is goes to his next subheading, which is the people. And so Max writes, back to the people. And so Max writes, back to the people. And so Max writes, back to my original point, the practices I've my original point, the practices I've my original point, the practices I've described so far aren't secret, so why described so far aren't secret, so why described so far aren't secret, so why can't others just copy them? The can't others just copy them? The can't others just copy them? The standard answer is organizational standard answer is organizational standard answer is organizational inertia, bureaucracy, risk adversion, inertia, bureaucracy, risk adversion, inertia, bureaucracy, risk adversion, etc. And yet, there's truth to all of etc. And yet, there's truth to all of etc. And yet, there's truth to all of these, but it's not the whole story. The these, but it's not the whole story. The these, but it's not the whole story. The answer is that strategy doesn't exist in answer is that strategy doesn't exist in answer is that strategy doesn't exist in isolation. The same playbook in a isolation. The same playbook in a isolation. The same playbook in a different environment would produce different environment would produce different environment would produce different results or nothing at all. You different results or nothing at all. You different results or nothing at all. You can't copy strategy without can't copy strategy without can't copy strategy without transplanting the conditions that make transplanting the conditions that make transplanting the conditions that make them work. A fail fast culture needs them work. A fail fast culture needs them work. A fail fast culture needs people willing to fail visibly. A first people willing to fail visibly. A first people willing to fail visibly. A first principles approach requires people principles approach requires people principles approach requires people willing to question experts. Skip level willing to question experts. Skip level willing to question experts. Skip level truth seeeking requires people willing truth seeeking requires people willing truth seeeking requires people willing to deliver bad news directly to the CEO. to deliver bad news directly to the CEO. to deliver bad news directly to the CEO. The variable I've been circling around The variable I've been circling around The variable I've been circling around is people, not in the bland HR sense of is people, not in the bland HR sense of is people, not in the bland HR sense of our people are our greatest asset. In our people are our greatest asset. In our people are our greatest asset. In the structural sense, who shows up, what the structural sense, who shows up, what the structural sense, who shows up, what they believe, and what behaviors they're they believe, and what behaviors they're they believe, and what behaviors they're willing to accept from each other. willing to accept from each other. willing to accept from each other. SpaceX didn't just hire good engineers. SpaceX didn't just hire good engineers. SpaceX didn't just hire good engineers. It built a system that attracts, It built a system that attracts, It built a system that attracts, retains, and amplifies a particular kind retains, and amplifies a particular kind retains, and amplifies a particular kind of engineer while filtering out everyone of engineer while filtering out everyone of engineer while filtering out everyone else. The variable starts with Elon. else. The variable starts with Elon. else. The variable starts with Elon. Without him, none of this exists. I Without him, none of this exists. I Without him, none of this exists. I don't say this as a hagography, only an don't say this as a hagography, only an don't say this as a hagography, only an observation about initial conditions. observation about initial conditions. observation about initial conditions. Someone had to fund a rocket company Someone had to fund a rocket company Someone had to fund a rocket company when the idea seemed crazy. Someone had when the idea seemed crazy. Someone had when the idea seemed crazy. Someone had to decide that colonized Mars was an to decide that colonized Mars was an to decide that colonized Mars was an actual engineering target. I want to actual engineering target. I want to actual engineering target. I want to call out three factors in particular call out three factors in particular call out three factors in particular that were foundational to SpaceX's that were foundational to SpaceX's that were foundational to SpaceX's culture. The first, an ambitious vision culture. The first, an ambitious vision culture. The first, an ambitious vision that functions as a recruiting filter. that functions as a recruiting filter. that functions as a recruiting filter. Building cities on other planets isn't Building cities on other planets isn't Building cities on other planets isn't just aspirational branding. It's a just aspirational branding. It's a just aspirational branding. It's a sorting mechanism. The mission attracts sorting mechanism. The mission attracts sorting mechanism. The mission attracts missionaries. Engineers who would never missionaries. Engineers who would never missionaries. Engineers who would never work for just another launch company work for just another launch company work for just another launch company will work brutal hours for a shot at will work brutal hours for a shot at will work brutal hours for a shot at making humanity multilanetary. When the making humanity multilanetary. When the making humanity multilanetary. When the mission is that clear, prioritization mission is that clear, prioritization mission is that clear, prioritization becomes automatic. That's another great becomes automatic. That's another great becomes automatic. That's another great line. When the mission is that clear, line. When the mission is that clear, line. When the mission is that clear, prioritization becomes automatic. Every prioritization becomes automatic. Every prioritization becomes automatic. Every decision has a simple test. Second, decision has a simple test. Second, decision has a simple test. Second, constant forcing functions, both real constant forcing functions, both real constant forcing functions, both real and manufactured. I think this part is and manufactured. I think this part is and manufactured. I think this part is underrated. Some were genuinely underrated. Some were genuinely underrated. Some were genuinely existential, like the 2008 cash crisis existential, like the 2008 cash crisis existential, like the 2008 cash crisis when SpaceX had funds for exactly one when SpaceX had funds for exactly one when SpaceX had funds for exactly one more Falcon 1 attempt. Others Elon more Falcon 1 attempt. Others Elon more Falcon 1 attempt. Others Elon created himself. Aggressive public created himself. Aggressive public created himself. Aggressive public timelines that even he knew were timelines that even he knew were timelines that even he knew were ambitious. Internal do or die milestones ambitious. Internal do or die milestones ambitious. Internal do or die milestones that felt real even when they weren't that felt real even when they weren't that felt real even when they weren't legally binding. The forcing function legally binding. The forcing function legally binding. The forcing function prevents drift. You can't endlessly prevents drift. You can't endlessly prevents drift. You can't endlessly study when a deadline, real or study when a deadline, real or study when a deadline, real or perceived, is bearing down. Even an perceived, is bearing down. Even an perceived, is bearing down. Even an arbitrary deadline is better than no arbitrary deadline is better than no arbitrary deadline is better than no deadline because it forces decisions. deadline because it forces decisions. deadline because it forces decisions. Third, direct technical engagement that Third, direct technical engagement that Third, direct technical engagement that bypasses organizational filters. bypasses organizational filters. bypasses organizational filters. Andre Carpathy, who worked for Elon at Andre Carpathy, who worked for Elon at Andre Carpathy, who worked for Elon at Tesla, notes that Elon spends about 50% Tesla, notes that Elon spends about 50% Tesla, notes that Elon spends about 50% of his time talking directly to of his time talking directly to of his time talking directly to engineers, not to VPs summarizing engineers, not to VPs summarizing engineers, not to VPs summarizing engineering work. This sounds obvious, engineering work. This sounds obvious, engineering work. This sounds obvious, but it's unusual in the corporate world. but it's unusual in the corporate world. but it's unusual in the corporate world. The CEO has to trust the CTO who works The CEO has to trust the CTO who works The CEO has to trust the CTO who works through layers of managers to enact a through layers of managers to enact a through layers of managers to enact a vision. Each layer is a hop where vision. Each layer is a hop where vision. Each layer is a hop where information is lost. It's like a game of information is lost. It's like a game of information is lost. It's like a game of telephone. By the time the technical telephone. By the time the technical telephone. By the time the technical reality reaches the CEO, it has been reality reaches the CEO, it has been reality reaches the CEO, it has been polished, caveed, and derisked. It is a polished, caveed, and derisked. It is a polished, caveed, and derisked. It is a summary of a summary with the summary of a summary with the summary of a summary with the inconvenient details removed. SpaceX inconvenient details removed. SpaceX inconvenient details removed. SpaceX collapses the chain. The CEO, CTO, VP, collapses the chain. The CEO, CTO, VP, collapses the chain. The CEO, CTO, VP, engineer layers become a single engineer layers become a single engineer layers become a single conversation. By talking directly to the conversation. By talking directly to the conversation. By talking directly to the engineers, Elon removes the signal loss. engineers, Elon removes the signal loss. engineers, Elon removes the signal loss. They become the source of truth, not the They become the source of truth, not the They become the source of truth, not the filtered narratives that typically reach filtered narratives that typically reach filtered narratives that typically reach the CEO. This isn't just about speed and the CEO. This isn't just about speed and the CEO. This isn't just about speed and accuracy. It also allows SpaceX to make accuracy. It also allows SpaceX to make accuracy. It also allows SpaceX to make bolder technical bets. Elon stays bolder technical bets. Elon stays bolder technical bets. Elon stays aligned on what is actually possible. A aligned on what is actually possible. A aligned on what is actually possible. A non-technical manager can't tell the non-technical manager can't tell the non-technical manager can't tell the difference between a tactically painful difference between a tactically painful difference between a tactically painful path and a strategically necessary one. path and a strategically necessary one. path and a strategically necessary one. If your managers tell you a certain If your managers tell you a certain If your managers tell you a certain chassis design or an engine material is chassis design or an engine material is chassis design or an engine material is too difficult and you don't have the too difficult and you don't have the too difficult and you don't have the technical depth to interrogate them, you technical depth to interrogate them, you technical depth to interrogate them, you have to defer. The decision to use steel have to defer. The decision to use steel have to defer. The decision to use steel for Starship over carbon fiber is a for Starship over carbon fiber is a for Starship over carbon fiber is a prime example. It was highly against prime example. It was highly against prime example. It was highly against conventional wisdom and controversial conventional wisdom and controversial conventional wisdom and controversial even within the company. Ultimately, even within the company. Ultimately, even within the company. Ultimately, Elon had to understand all the Elon had to understand all the Elon had to understand all the trade-offs himself and make a call. When trade-offs himself and make a call. When trade-offs himself and make a call. When there's a blocker, such as a raptor there's a blocker, such as a raptor there's a blocker, such as a raptor production, GPU supply, a regulatory production, GPU supply, a regulatory production, GPU supply, a regulatory delay, Elon intervenes personally. delay, Elon intervenes personally. delay, Elon intervenes personally. Personal phone calls to other CEOs. I've Personal phone calls to other CEOs. I've Personal phone calls to other CEOs. I've heard hilarious stories about that, by heard hilarious stories about that, by heard hilarious stories about that, by the way. Daily updates on the specific the way. Daily updates on the specific the way. Daily updates on the specific constraint until it's resolved. This is constraint until it's resolved. This is constraint until it's resolved. This is the large hammer approach, as Carpathy the large hammer approach, as Carpathy the large hammer approach, as Carpathy puts it. The hammer only works because puts it. The hammer only works because puts it. The hammer only works because the signal is clear. If you don't know the signal is clear. If you don't know the signal is clear. If you don't know exactly where the bottleneck is, you're exactly where the bottleneck is, you're exactly where the bottleneck is, you're just swinging in the dark. But Elon just swinging in the dark. But Elon just swinging in the dark. But Elon alone doesn't explain SpaceX. Plenty of alone doesn't explain SpaceX. Plenty of alone doesn't explain SpaceX. Plenty of ambitious, technically engaged founders ambitious, technically engaged founders ambitious, technically engaged founders have failed spectacularly in aerospace. have failed spectacularly in aerospace. have failed spectacularly in aerospace. Founders set direction, but it takes Founders set direction, but it takes Founders set direction, but it takes more than that to sustain a company. more than that to sustain a company. more than that to sustain a company. Start with Gwyn Shotwell, currently the Start with Gwyn Shotwell, currently the Start with Gwyn Shotwell, currently the president of SpaceX and part of the core president of SpaceX and part of the core president of SpaceX and part of the core founding team. She's the one quote founding team. She's the one quote founding team. She's the one quote holding it all together as many believe. holding it all together as many believe. holding it all together as many believe. But it's a mistake to view her as merely But it's a mistake to view her as merely But it's a mistake to view her as merely the steady hand who keeps the lights on the steady hand who keeps the lights on the steady hand who keeps the lights on while the engineers dream. She is the while the engineers dream. She is the while the engineers dream. She is the strategic co-architect of the entire strategic co-architect of the entire strategic co-architect of the entire system. I wonder if Shaw does any system. I wonder if Shaw does any system. I wonder if Shaw does any podcast. If anybody listening to this podcast. If anybody listening to this podcast. If anybody listening to this happens to know her, I'd love to have a happens to know her, I'd love to have a happens to know her, I'd love to have a conversation with her on my other show conversation with her on my other show conversation with her on my other show on my new show. So, back to that. She's on my new show. So, back to that. She's on my new show. So, back to that. She's a strategic co-architect of the entire a strategic co-architect of the entire a strategic co-architect of the entire system. In most other companies, the system. In most other companies, the system. In most other companies, the sales and business teams are natural sales and business teams are natural sales and business teams are natural enemies of engineering logic. They enemies of engineering logic. They enemies of engineering logic. They promise the customer whatever they want, promise the customer whatever they want, promise the customer whatever they want, which creates the very bespoke which creates the very bespoke which creates the very bespoke complexity that the first principles complexity that the first principles complexity that the first principles thinking is trying to delete. Shotwell thinking is trying to delete. Shotwell thinking is trying to delete. Shotwell did the opposite. She recognized that did the opposite. She recognized that did the opposite. She recognized that for the manufacturing flywheel to work, for the manufacturing flywheel to work, for the manufacturing flywheel to work, the market had to be forced to adapt to the market had to be forced to adapt to the market had to be forced to adapt to the rocket. She made it so the world's the rocket. She made it so the world's the rocket. She made it so the world's most conservative buyers, NASA and the most conservative buyers, NASA and the most conservative buyers, NASA and the Pentagon, would accept a radical new Pentagon, would accept a radical new Pentagon, would accept a radical new model of standardization. She ensured model of standardization. She ensured model of standardization. She ensured that every dollar saved by engineering that every dollar saved by engineering that every dollar saved by engineering was converted into a dominant market was converted into a dominant market was converted into a dominant market position. She's the reason SpaceX didn't position. She's the reason SpaceX didn't position. She's the reason SpaceX didn't end up as another very impressive, very end up as another very impressive, very end up as another very impressive, very bankrupt space startup. The combination bankrupt space startup. The combination bankrupt space startup. The combination also worked because of where it also worked because of where it also worked because of where it happened, Southern California, where happened, Southern California, where happened, Southern California, where aerospace culture runs deep. Not just aerospace culture runs deep. Not just aerospace culture runs deep. Not just available talent from declining available talent from declining available talent from declining programs, but the lineage back to the programs, but the lineage back to the programs, but the lineage back to the early aviation pioneers building flying early aviation pioneers building flying early aviation pioneers building flying machines in hangers. That expertise was machines in hangers. That expertise was machines in hangers. That expertise was dormant, buried under decades of dormant, buried under decades of dormant, buried under decades of bureaucracy. What Elon grafted onto it bureaucracy. What Elon grafted onto it bureaucracy. What Elon grafted onto it were Silicon Valley operating norms, were Silicon Valley operating norms, were Silicon Valley operating norms, flat hierarchy, engineer ownership, flat hierarchy, engineer ownership, flat hierarchy, engineer ownership, permission to walk out of unproductive permission to walk out of unproductive permission to walk out of unproductive meetings. From this foundation, specific meetings. From this foundation, specific meetings. From this foundation, specific cultural practices emerged. not values cultural practices emerged. not values cultural practices emerged. not values on a poster. Actual behavioral memes on a poster. Actual behavioral memes on a poster. Actual behavioral memes that spread through the organization. that spread through the organization. that spread through the organization. Memes that show up in day-to-day Memes that show up in day-to-day Memes that show up in day-to-day decisions about what to build, who gets decisions about what to build, who gets decisions about what to build, who gets promoted, and how to respond when promoted, and how to respond when promoted, and how to respond when rockets blow up. And real quick before rockets blow up. And real quick before rockets blow up. And real quick before we get back into this, I need to tell we get back into this, I need to tell we get back into this, I need to tell you about Vanta. Vanta. Vanta. Vant. you about Vanta. Vanta. Vanta. Vant. you about Vanta. Vanta. Vanta. Vant. Vant helps your company prove your Vant helps your company prove your Vant helps your company prove your secure so more customers will use your secure so more customers will use your secure so more customers will use your product or service. You can think of product or service. You can think of product or service. 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Many companies won't sign can trust. Many companies won't sign can trust. Many companies won't sign contracts unless you're certified, and contracts unless you're certified, and contracts unless you're certified, and this is causing you to lose out on this is causing you to lose out on this is causing you to lose out on sales. That is why the average Vanta sales. That is why the average Vanta sales. That is why the average Vanta customer reports a 526% return on customer reports a 526% return on customer reports a 526% return on investment after becoming a Vanta investment after becoming a Vanta investment after becoming a Vanta customer. Automate your compliance, customer. Automate your compliance, customer. Automate your compliance, security, and trust with Vanta. Vanta security, and trust with Vanta. Vanta security, and trust with Vanta. Vanta will help you win trust, close deals, will help you win trust, close deals, will help you win trust, close deals, and stay secure faster and with less and stay secure faster and with less and stay secure faster and with less effort. Go to vanta.com/founders, effort. Go to vanta.com/founders, effort. Go to vanta.com/founders, and you will get $1,000 off. That is and you will get $1,000 off. That is and you will get $1,000 off. That is vanta.com/founders. vanta.com/founders. vanta.com/founders. So, Max breaks this down into five So, Max breaks this down into five So, Max breaks this down into five separate memes. The first one, meme separate memes. The first one, meme separate memes. The first one, meme number one, tip of the spear, focus. number one, tip of the spear, focus. number one, tip of the spear, focus. Always identify and attack the biggest Always identify and attack the biggest Always identify and attack the biggest limiter. Don't spread effort across limiter. Don't spread effort across limiter. Don't spread effort across secondary problems. Laser in on the secondary problems. Laser in on the secondary problems. Laser in on the single constraint that if removed would single constraint that if removed would single constraint that if removed would unlock everything downstream. unlock everything downstream. unlock everything downstream. That is true at every level. Each SpaceX That is true at every level. Each SpaceX That is true at every level. Each SpaceX site has a single dominating objective site has a single dominating objective site has a single dominating objective to simplify prioritization. A NASA to simplify prioritization. A NASA to simplify prioritization. A NASA manager who visited SpaceX observed that manager who visited SpaceX observed that manager who visited SpaceX observed that when a new problem appears, it looks when a new problem appears, it looks when a new problem appears, it looks like a flash mob in the hallway. When a like a flash mob in the hallway. When a like a flash mob in the hallway. When a system level bottleneck is identified, system level bottleneck is identified, system level bottleneck is identified, it gets disproportionate resources. When it gets disproportionate resources. When it gets disproportionate resources. When Starship development was bottlenecked on Starship development was bottlenecked on Starship development was bottlenecked on Raptor engine production, that became Raptor engine production, that became Raptor engine production, that became the company's focus. Not propellant the company's focus. Not propellant the company's focus. Not propellant loading, not heat shields, not launch loading, not heat shields, not launch loading, not heat shields, not launch infrastructure. Raptors. Elon gave it infrastructure. Raptors. Elon gave it infrastructure. Raptors. Elon gave it absolute focus. Daily updates, memos to absolute focus. Daily updates, memos to absolute focus. Daily updates, memos to the company, resources redirected from the company, resources redirected from the company, resources redirected from elsewhere. Once engine production broke elsewhere. Once engine production broke elsewhere. Once engine production broke through, attention shifted to the next through, attention shifted to the next through, attention shifted to the next constraint. The limiter always gets the constraint. The limiter always gets the constraint. The limiter always gets the hammer. Meme number two, push through hammer. Meme number two, push through hammer. Meme number two, push through roadblocks. A roadblock isn't a reason, roadblocks. A roadblock isn't a reason, roadblocks. A roadblock isn't a reason, it's a problem statement. You either it's a problem statement. You either it's a problem statement. You either clear it or you escalate it until clear it or you escalate it until clear it or you escalate it until someone does. Admitting you're blocked someone does. Admitting you're blocked someone does. Admitting you're blocked isn't shameful at SpaceX. It's expected. isn't shameful at SpaceX. It's expected. isn't shameful at SpaceX. It's expected. Hiding a blocker is what gets you in Hiding a blocker is what gets you in Hiding a blocker is what gets you in trouble. As one engineer described it, trouble. As one engineer described it, trouble. As one engineer described it, solving blockers move the needle forward solving blockers move the needle forward solving blockers move the needle forward on several projects. The cultural on several projects. The cultural on several projects. The cultural expectation is honesty about what's not expectation is honesty about what's not expectation is honesty about what's not working and the relentless effort to fix working and the relentless effort to fix working and the relentless effort to fix it. That's another good line. I got to it. That's another good line. I got to it. That's another good line. I got to repeat that. The cultural expectation is repeat that. The cultural expectation is repeat that. The cultural expectation is honesty about what's not working and honesty about what's not working and honesty about what's not working and relentless effort to fix it. Meme number relentless effort to fix it. Meme number relentless effort to fix it. Meme number three, scrainess. Costs sensitive three, scrainess. Costs sensitive three, scrainess. Costs sensitive resourcefulness over bureaucratic resourcefulness over bureaucratic resourcefulness over bureaucratic process. This goes handinhand with the process. This goes handinhand with the process. This goes handinhand with the lowcost provider mentality. SpaceX's lowcost provider mentality. SpaceX's lowcost provider mentality. SpaceX's replacement for NASA's heritage docking replacement for NASA's heritage docking replacement for NASA's heritage docking system was prototype with bike shocks system was prototype with bike shocks system was prototype with bike shocks and catalog parts. Crude prototypes let and catalog parts. Crude prototypes let and catalog parts. Crude prototypes let you test ideas before committing to you test ideas before committing to you test ideas before committing to expensive development. The scrappy expensive development. The scrappy expensive development. The scrappy approach extends everywhere. Reuse test approach extends everywhere. Reuse test approach extends everywhere. Reuse test hardware, hacking tools together, hardware, hacking tools together, hardware, hacking tools together, building ground support equipment from building ground support equipment from building ground support equipment from industrial components instead of industrial components instead of industrial components instead of aerospace grade systems. Small teams aerospace grade systems. Small teams aerospace grade systems. Small teams build end to end instead of handing off build end to end instead of handing off build end to end instead of handing off between specialized groups. Engineers between specialized groups. Engineers between specialized groups. Engineers are expected to design, build, and test are expected to design, build, and test are expected to design, build, and test what they own. Elon calls the what they own. Elon calls the what they own. Elon calls the alternative ivory tower engineering. alternative ivory tower engineering. alternative ivory tower engineering. Design something, throw it over the Design something, throw it over the Design something, throw it over the wall, and let someone else figure out wall, and let someone else figure out wall, and let someone else figure out how to actually make it. At SpaceX, the how to actually make it. At SpaceX, the how to actually make it. At SpaceX, the person who drew the bracket is the person who drew the bracket is the person who drew the bracket is the person who welds it. Meme number four, person who welds it. Meme number four, person who welds it. Meme number four, question requirements. Every constraint, question requirements. Every constraint, question requirements. Every constraint, customer, regulatory, internal, is customer, regulatory, internal, is customer, regulatory, internal, is treated as a hypothesis to interrogate, treated as a hypothesis to interrogate, treated as a hypothesis to interrogate, not a fact to accept. This is the not a fact to accept. This is the not a fact to accept. This is the embodiment of first principal thinking. embodiment of first principal thinking. embodiment of first principal thinking. Here's an example. Falcon 9's grid fins Here's an example. Falcon 9's grid fins Here's an example. Falcon 9's grid fins were originally designed to fold like were originally designed to fold like were originally designed to fold like traditional aerospace grid fins. The traditional aerospace grid fins. The traditional aerospace grid fins. The folding mechanism reduced drag during folding mechanism reduced drag during folding mechanism reduced drag during ascent, which seemed obviously ascent, which seemed obviously ascent, which seemed obviously necessary. SpaceX questioned whether it necessary. SpaceX questioned whether it necessary. SpaceX questioned whether it was worth the mass and complexity. was worth the mass and complexity. was worth the mass and complexity. simulations showed fixed fins were simulations showed fixed fins were simulations showed fixed fins were acceptable. So they deleted the acceptable. So they deleted the acceptable. So they deleted the mechanism entirely. This is what Elon mechanism entirely. This is what Elon mechanism entirely. This is what Elon said. The best part is no part. The best said. The best part is no part. The best said. The best part is no part. The best process is no process. process is no process. process is no process. Engineers are explicitly told that Engineers are explicitly told that Engineers are explicitly told that requirements from quote unquote smart requirements from quote unquote smart requirements from quote unquote smart people are the most dangerous because people are the most dangerous because people are the most dangerous because nobody thinks to question them. Every nobody thinks to question them. Every nobody thinks to question them. Every requirement must have an owner, a requirement must have an owner, a requirement must have an owner, a specific person who can defend why it specific person who can defend why it specific person who can defend why it exists. If the owner can't explain it or exists. If the owner can't explain it or exists. If the owner can't explain it or the original reason no longer applies, the original reason no longer applies, the original reason no longer applies, that requirement gets deleted. This that requirement gets deleted. This that requirement gets deleted. This turns into Elon's now well-known rule. turns into Elon's now well-known rule. turns into Elon's now well-known rule. If you are not adding back at least 10% If you are not adding back at least 10% If you are not adding back at least 10% of the requirements you deleted, you of the requirements you deleted, you of the requirements you deleted, you aren't deleting enough. aren't deleting enough. aren't deleting enough. And meme number five, treat everything And meme number five, treat everything And meme number five, treat everything as learning. Failures and explosions are as learning. Failures and explosions are as learning. Failures and explosions are data for the next iteration, not data for the next iteration, not data for the next iteration, not disasters to be concealed. disasters to be concealed. disasters to be concealed. SpaceX published compilation videos SpaceX published compilation videos SpaceX published compilation videos titled, "How not to land an orbital titled, "How not to land an orbital titled, "How not to land an orbital rocket. Spectacular drone ship crashes rocket. Spectacular drone ship crashes rocket. Spectacular drone ship crashes set to music." This isn't just PR. It's set to music." This isn't just PR. It's set to music." This isn't just PR. It's a genuine signal that visible failure is a genuine signal that visible failure is a genuine signal that visible failure is acceptable if you extract the lesson. acceptable if you extract the lesson. acceptable if you extract the lesson. Many would see the early Falcon 9 Many would see the early Falcon 9 Many would see the early Falcon 9 booster landings as spectacular booster landings as spectacular booster landings as spectacular failures. Rockets exploding on drone failures. Rockets exploding on drone failures. Rockets exploding on drone ships, tipping over, crashing into the ships, tipping over, crashing into the ships, tipping over, crashing into the ocean. But over time, those iterations ocean. But over time, those iterations ocean. But over time, those iterations produced a landing success rate high produced a landing success rate high produced a landing success rate high enough to support reusing boosters enough to support reusing boosters enough to support reusing boosters dozens of times. That reusability is dozens of times. That reusability is dozens of times. That reusability is what makes Falcon 9 economically what makes Falcon 9 economically what makes Falcon 9 economically dominant. You don't get there without dominant. You don't get there without dominant. You don't get there without the explosions first. The cultural frame the explosions first. The cultural frame the explosions first. The cultural frame matters. A failed test is only bad if matters. A failed test is only bad if matters. A failed test is only bad if you didn't learn enough from it. These you didn't learn enough from it. These you didn't learn enough from it. These memes reinforce each other and they memes reinforce each other and they memes reinforce each other and they reinforce the strategy. Vision attracts reinforce the strategy. Vision attracts reinforce the strategy. Vision attracts people who thrive in this culture. The people who thrive in this culture. The people who thrive in this culture. The culture then selects for more of the culture then selects for more of the culture then selects for more of the same. High performers stay, others self- same. High performers stay, others self- same. High performers stay, others self- select out. Small elite teams maintain select out. Small elite teams maintain select out. Small elite teams maintain by default. Low performers actively by default. Low performers actively by default. Low performers actively removed rather than accumulated. This is removed rather than accumulated. This is removed rather than accumulated. This is the real moat. SpaceX's cost advantage the real moat. SpaceX's cost advantage the real moat. SpaceX's cost advantage can theoretically be matched. Their can theoretically be matched. Their can theoretically be matched. Their technical innovations can be studied and technical innovations can be studied and technical innovations can be studied and replicated. But the culture requires replicated. But the culture requires replicated. But the culture requires rebuilding an organization from scratch. rebuilding an organization from scratch. rebuilding an organization from scratch. Are you seeing the pattern yet? The Are you seeing the pattern yet? The Are you seeing the pattern yet? The entire system reinforces itself, entire system reinforces itself, entire system reinforces itself, spinning the flywheel faster and spinning the flywheel faster and spinning the flywheel faster and becoming increasingly hard to copy. Its becoming increasingly hard to copy. Its becoming increasingly hard to copy. Its loops all the way down. And so that loops all the way down. And so that loops all the way down. And so that brings us to the last subheading, brings us to the last subheading, brings us to the last subheading, feedback loop. So what is actually hard feedback loop. So what is actually hard feedback loop. So what is actually hard to copy? Strategy identified the waste. to copy? Strategy identified the waste. to copy? Strategy identified the waste. 98% of every dollar going down to 98% of every dollar going down to 98% of every dollar going down to process instead of atoms. Engineering process instead of atoms. Engineering process instead of atoms. Engineering found the path. Iterate fast and found the path. Iterate fast and found the path. Iterate fast and validate using reality instead of validate using reality instead of validate using reality instead of thinking your way to perfect solutions. thinking your way to perfect solutions. thinking your way to perfect solutions. Culture made it move. Question Culture made it move. Question Culture made it move. Question requirements. Fail visibly. Attack the requirements. Fail visibly. Attack the requirements. Fail visibly. Attack the tip of the spear. Three systems mutually tip of the spear. Three systems mutually tip of the spear. Three systems mutually reinforcing. Each turn of the flywheel reinforcing. Each turn of the flywheel reinforcing. Each turn of the flywheel makes the next one easier. The answer to makes the next one easier. The answer to makes the next one easier. The answer to what's hard to copy isn't any single what's hard to copy isn't any single what's hard to copy isn't any single tactic. It's that the tactics are a tactic. It's that the tactics are a tactic. It's that the tactics are a system. Copy one without the others and system. Copy one without the others and system. Copy one without the others and it breaks down. First principles it breaks down. First principles it breaks down. First principles designed without vertical integration designed without vertical integration designed without vertical integration gives you targets you can't reach. gives you targets you can't reach. gives you targets you can't reach. Vertical integration without volume Vertical integration without volume Vertical integration without volume makes your fixed cost a liability. A makes your fixed cost a liability. A makes your fixed cost a liability. A fail fast culture without people who can fail fast culture without people who can fail fast culture without people who can tolerate visible failures becomes tolerate visible failures becomes tolerate visible failures becomes theater. The output isn't just cheaper theater. The output isn't just cheaper theater. The output isn't just cheaper rockets. The real output is a generation rockets. The real output is a generation rockets. The real output is a generation trained to build hard things. trained to build hard things. trained to build hard things. Engineers who internalize these memes, Engineers who internalize these memes, Engineers who internalize these memes, question requirements, fail fast, tip of question requirements, fail fast, tip of question requirements, fail fast, tip of the spear, are now scattered across the the spear, are now scattered across the the spear, are now scattered across the frontier. Space startups, defense tech, frontier. Space startups, defense tech, frontier. Space startups, defense tech, manufacturing, automation, energy. The manufacturing, automation, energy. The manufacturing, automation, energy. The cultural memes are spreading. The cultural memes are spreading. The cultural memes are spreading. The lessons aren't trapped inside one lessons aren't trapped inside one lessons aren't trapped inside one company. This matters for anyone trying company. This matters for anyone trying company. This matters for anyone trying to build something hard. Working at to build something hard. Working at to build something hard. Working at Frontiers creates optionality invisible Frontiers creates optionality invisible Frontiers creates optionality invisible from the ground. Starlink wasn't in the from the ground. Starlink wasn't in the from the ground. Starlink wasn't in the original vision. It emerged because original vision. It emerged because original vision. It emerged because SpaceX was already there, launching so SpaceX was already there, launching so SpaceX was already there, launching so frequently and cheaply that a 9,000 frequently and cheaply that a 9,000 frequently and cheaply that a 9,000 satellite constellation became feasible. satellite constellation became feasible. satellite constellation became feasible. Others couldn't see that opportunity Others couldn't see that opportunity Others couldn't see that opportunity because no one else was in a position to because no one else was in a position to because no one else was in a position to take it. When you're at the frontier, take it. When you're at the frontier, take it. When you're at the frontier, possibilities present themselves that possibilities present themselves that possibilities present themselves that don't exist for anyone else. don't exist for anyone else. don't exist for anyone else. Small groups with the right structure Small groups with the right structure Small groups with the right structure can do extraordinary things. Not can do extraordinary things. Not can do extraordinary things. Not brilliant individuals. structured teams brilliant individuals. structured teams brilliant individuals. structured teams with fast feedback loops, real forcing with fast feedback loops, real forcing with fast feedback loops, real forcing functions, and cultural tolerance for functions, and cultural tolerance for functions, and cultural tolerance for visible failure. The P80 in 5 months, visible failure. The P80 in 5 months, visible failure. The P80 in 5 months, the SR71 in 4 years, Falcon 1 to Falcon the SR71 in 4 years, Falcon 1 to Falcon the SR71 in 4 years, Falcon 1 to Falcon 9 in 4 years. This has happened before, 9 in 4 years. This has happened before, 9 in 4 years. This has happened before, it can happen again. The lesson isn't be it can happen again. The lesson isn't be it can happen again. The lesson isn't be like Elon. Hero worship is the wrong like Elon. Hero worship is the wrong like Elon. Hero worship is the wrong takeaway. One person didn't build takeaway. One person didn't build takeaway. One person didn't build Starship. The lesson is that structure Starship. The lesson is that structure Starship. The lesson is that structure matters more than the hero. Get the matters more than the hero. Get the matters more than the hero. Get the system right and the results follow. If system right and the results follow. If system right and the results follow. If I had to distill to one question, it I had to distill to one question, it I had to distill to one question, it would be how fast are your feedback would be how fast are your feedback would be how fast are your feedback loops. How fast can you get to reality? loops. How fast can you get to reality? loops. How fast can you get to reality? You can see this pattern in every You can see this pattern in every You can see this pattern in every successful frontier tech effort. The successful frontier tech effort. The successful frontier tech effort. The common thread is treating reality as the common thread is treating reality as the common thread is treating reality as the teacher and getting to class as often as teacher and getting to class as often as teacher and getting to class as often as possible. And then he describes what the possible. And then he describes what the possible. And then he describes what the book is going to be. That's the book is going to be. That's the book is going to be. That's the analysis. But analysis is analysis. But analysis is analysis. But analysis is reconstruction, pattern matching after reconstruction, pattern matching after reconstruction, pattern matching after the fact, shaped by hindsight. It's the fact, shaped by hindsight. It's the fact, shaped by hindsight. It's useful, but it's not the same as useful, but it's not the same as useful, but it's not the same as watching the system get built, which is watching the system get built, which is watching the system get built, which is what he's doing for the book. What what he's doing for the book. What what he's doing for the book. What follows is the raw material. The SpaceX follows is the raw material. The SpaceX follows is the raw material. The SpaceX company updates over a 100 dispatches company updates over a 100 dispatches company updates over a 100 dispatches from 2003 to 2013. The first 5 years from 2003 to 2013. The first 5 years from 2003 to 2013. The first 5 years written primarily by Elon. Technical written primarily by Elon. Technical written primarily by Elon. Technical challenges explained in real time. challenges explained in real time. challenges explained in real time. Near-death moments, incremental Near-death moments, incremental Near-death moments, incremental victories that didn't seem incremental victories that didn't seem incremental victories that didn't seem incremental at the time, the culture and memes at the time, the culture and memes at the time, the culture and memes showing up in the language before anyone showing up in the language before anyone showing up in the language before anyone named them. It starts in May 2002. Elon named them. It starts in May 2002. Elon named them. It starts in May 2002. Elon hires Tom Mueller, a propulsion hires Tom Mueller, a propulsion hires Tom Mueller, a propulsion engineer, building rocket engines in his engineer, building rocket engines in his engineer, building rocket engines in his garage on nights and weekends. They garage on nights and weekends. They garage on nights and weekends. They incorporate a company called Space incorporate a company called Space incorporate a company called Space Exploration Technologies, Exploration Technologies, Exploration Technologies, and they begin. and they begin. and they begin. There's a link down below to read the There's a link down below to read the There's a link down below to read the entire essay. Make sure you add your entire essay. Make sure you add your entire essay. Make sure you add your email so you're notified when the book email so you're notified when the book email so you're notified when the book is available.