Elon Musk's 2003 Stanford University Entrepreneurial Thought Leaders Lecture

I'll try to make this as interesting as possible if you like space you'll like this talk so uh my background uh in brief

I'll I'll talk a little bit about zip 2 and uh and PayPal uh and then uh mostly about space and what we're doing in space um so I originally came out of

California to do energy physics at Stanford actually um and ended up putting this is in ' 95 and ended up putting that on hold um to start zip 2

um and uh ZIP 2 I'll tell you a little bit about the thought process of exactly what happened there um in '95 the it wasn't at all clear that the internet

was going to be a big commercial thing in fact most of the Venture capitalists that I talked to um hadn't even heard of the internet which sounds bizarre um on

San Hill Road um so uh but but I wanted to to do something and in the I thought it would be a pretty huge thing and um I thought it was one of those

things that only came along once in in a very long while so I I got a deferment uh at Stanford and uh I thought I'd give it a couple

quarters uh and uh if it didn't work out which I thought it probably wouldn't then I'd come back to school um and actually when I talked to my professor and I told him this he said well I don't

think you'll be coming back and that was the last conversation I had with him so um but there weren't a lot of ways to get the only way to get involved with the internet in '95 that I could think of was to start a company uh because

there wer a lot of companies to go and work for apart from Netscape maybe one or two others so um and then I didn't have any money so I thought well we got

to make something that's going to return uh it's going to return money uh very very quickly so we thought well

the the the media industry uh would need uh help converting its content from from a media to uh electronic and they clearly had money so uh if we could find

a way to help them move their media to the internet that would be an obvious way of of generating Revenue there was no advertising revenue on the internet at the time so uh and that that was

really the basis of of zip 2 and we ended up building quite a bit of software for for the media industry primarily the print media industry uh so

we had as investors and customers um H Corporation night rder uh um Mo most of the the major US print Publishers uh we

built that up and then we uh we had the opportunity to sell to compact in in early 99 and basically took that offer it was uh for a little over $300 million

in cash and that's that's a currency I highly recommend um so uh so we had that and um and uh

but but I wanted to do something something more uh after zip two so uh post the sale in fact immediately post the sale I didn't really take any

time off um uh I was trying to think of where where the were the opportunities in this is early 99 where the opportunities remained in the internet and it seem to me that there hadn't been a lot of innovation in the financial

services sector um so and and when you think about it money is is low bandwidth you don't need some sort of big infrastructure Improvement to to do to do things with it it's really just an

entry in the database the the paper form of money is is really only a small percentage of all the money uh that that's out there so it should land itself to Innovation on the internet uh

and so we thought of a couple of different things we could do one one of the things was to combine uh all of somebody's Financial Services needs into one website so you could have banking

brokerage insurance and all sorts of things in one place um and and that was actually quite a difficult problem to solve um but we we we we we solved most of the issues associated

with that and then we had a little feature which took us about a day um that was the ability to email money from One customer to another so uh you can

type in an email address or actually any unique identifier uh and uh transfer funds uh or or conceivably stocks or mutual funds or whatever from from one

uh account holder to another and if you try to transfer money to somebody who didn't have uh an account in the system it would then forward an email to them saying hey why don't you sign up and

open an account so and whenever we demonstrate these two sets of features we'd say well this this was a feature that took us a lot of effort to do and look how you can see your bank statement

and your your mutual funds and and insurance and all that it's all on one page and look how convenient that is and people go ho home um and then we'd say and by the way we have this feature uh where you can enter somebody's email

address and transpose funds and they go wow um so so we we like okay um so we focused the the company's

business on on email payments um and and in the early G Going the company was called x.com and then there was a there was another company called confinity uh which had actually also started out from

a from a different area uh they started off with the Palm Pilot cryptography and then they had as a demo application the ability to beam token payments from one Palm Pilot to another

by the impared court uh and then they had a a website which is called PayPal where you would reconcile the beamed payments um and and what they found was that the the website portion was

actually far more interesting to people than the than Palm Pilot cryptography was so they they started leading their business in that direction uh and then

in basically early 2000 uh x.com acquired confinity uh and then about a year later we uh we ended up changing

the company's name to PayPal and that's that's kind of how the approximate evolution of of the company um and but PayPal is really a case of of

of where uh the the whole viral marketing U it's really a perfect case example of viral marketing like hot mail was uh where um

one one one customer would essentially act as uh a salesperson for you for all for for bringing in other customers so they would uh send money to a friend and

essentially recruit that friend into the network and so you had this exponential growth the more customers you had the faster it grew uh so you it was like

bacteria in a Petri dish you know it just goes like does this S curve um and in fact uh I I ran PayPal for about the

first two years of its existence and uh we launched after year one and by the end of year two we had a million customers so gives you an examp you know to gives you a sense of how fast things

things grow in that scenario we were and we didn't have a sales force we actually didn't have a BP of sales we didn't have a BP of marketing uh and we didn't spend any money on

advertising in about February of last year for those some some of you probably following it in February last year uh PayPal went public um and we were I think we were the only uh internet

company to go public in the first part of last year um it went off reasonbly ly well uh although I think we had more um

SEC rewrites than than any company I can imagine like we set a record on SEC rewrites this was right around the Enron time and when there was all sorts of corporate scandals so they put us through the

ringer um and then shortly thereafter in about June July uh we um struck a deal

with eBay to sell a company to eBay um and uh uh pH about and half billion dollar uh but that was when eBay's stock

price was about $55 and they hadn't split uh so I guess in today's dollars we about $3 billion um so that worked out pretty

well um it happened coincidentally that in in the first part of last year I've been doing just some background

research on uh on space and let me talk a bit about that so uh essentially I was trying to figure out why we had not made more progress

since since Apollo uh in in 19 in the 60s we went from basically nothing not being able to put anyone into space to putting people on the moon and uh

developing all the technology uh from scratch to to do that and yet in the uh the 70s and 80s and the 90s we we've kind of gone sideways and and we're currently in a situation where we can't

even put a person into into low earth orbit and that that doesn't really gel with all of the other technology sectors out there uh the computer that you could

have bought in the early '70s you know would have filled this room and had less computing power than your cell phone um and so just about every sector of technology is improved why is this not

improved uh so I started looking into that um initially I thought well perhaps it's a question of funding and that funding can be uh garnered by by really

marshalling public support forward uh so thought well one way to to to get the public excited about space would be to do maybe a privately funded robotic Spa

Mission Tom Mars um and so we we figured out a mission that would cost about1 15 to20 million which isn't a lot of money but um it's about a tenth of what a

lowcost NASA Mission would be and uh and the idea was was called Mars Oasis where we' put a small robotic Lander on the surface of Mars with seeds and dehydrated nutrient Jael there would

hydrate upon landing and you'd have plants growing in Martian radiation and gravity conditions and You' also uh be maintaining essentially a life support system on the surface of Mars and this would be interesting to the public

because they tend to respond to precedents and superlatives uh and this would be the furthest at life has ever traveled and the first life on Mars so pretty significant um and then when I start

looking at at launch vehicles uh the lowest cost vehicle in the US is Boeing Delta 2 which costs about 50 mli million and uh and that's a bit that's a

bit steep uh what we were trying to do uh so I made three visits to to Moscow to Russia uh to look at at buying a a Russian uh

launch uh and uh it's it's actually pretty interesting uh going to to Moscow to negotiate for uh a refurbished ICBM

uh if you know on the range of interesting experiences that's pretty pretty far out there um but but we actually did get to to a deal but there were so many

complications associated with the deal that that I it didn't I wasn't comfortable with the risks associated with it um so when I got back from the third trip I thought well you know why

is it the Russians can build these lowcost uh launch Vehicles because it's not like uh we we drive Russian cars fly Russian planes or have

Russian kitchen appliances and you know when's Last bought something Russian that wasn't vodka so uh I think the US is a pretty competitive Place uh and and we should be able to to build a a cost

efficient launch vehicle so I I put together a feasibility study which consisted of of Engineers that have been involved with all the major launch vehicle developments over the last three decades

and uh we iterated over a number of Saturdays in the beginning of last year uh to figure out well what would be what would be the smartest way to approach this problem of not just launch cost but

also launch reliability and and we came up with a default design and and that actually uh sort a fortunate timing uh that feasibility study uh finished up

right around the time that we agreed to sell uh PayPal to eBay um so coincident with that sale I moved down to to La where there's actually the biggest concentration of Aerospace industry in

the world um it's actually the biggest industry in in Southern California much bigger than entertainment or anything else uh I I was living in in palala for about nine years before

that anyway so uh just to talk little broadly about space and where things are today um obviously US Government man's exploration is not in a great place uh

we've got the the three remaining shuttles are grounded it looks like first flight might only be a year from now uh if that um and and we've got a

vehicle that is incredibly expensive and and and really quite dangerous um it's uh you know for reasons mentioned there it's got a side mounted crew compartment

so if there's an explosion it's basically instant death uh um the you've got solid rocket boosters uh which once you ignite them you can turn them off and there's something fundamentally

dangerous about premixing your fuel and oxidizer I think uh and then it's you've got wing wings and control surfaces when you when you reenter you've got to maintain a precise angle of attack uh

even a momentary uh variance in that can break the whole vehicle apart so so and and and then of course it's got no Escape system so if anything does go wrong your toast and and you've got a

cost that is is really pretty hard to Fathom the the the shuttle program when you add up all the pieces is about 4 billion a year and so you can divide uh

4 billion by the number of flights and that'll tell you what the cost is um and and if if there's say four flights a year which they haven't been for a while then you're talking about a billion

dollars a flight uh the plans for the immediate future obviously we've got to continue uh building the space station uh so we're going to keep flying the shuttle but but uh I think it's probably going to be the

minimum number of shuttle flights that we need to launch the the long-term plans I would build uh something called orbital space plane and I'd say plane in quotes because uh one of the options is a

capsule um so it should be called you maybe oval space thing um but but the basic idea is to have something that's uh um hopefully a little cheaper and a

lot safer uh than the space shuttle so in particular uh it's going to have an escape system so if something does go wrong you can abort to safety

um the the downside is that it's still it while it might be a little cheaper it's still going to be pretty nonexpensive the estimated cost per flight of overal space plane is somewhere in the region of 300 to $400

million a flight um and of that that amount uh 200 just $200 million alone is uh goes to uh Boeing for the Delta 4 heavy uh Expendable

booster uh and and the it's a $5 billion development effort and expected to be completed in 9 or 10 years now typically

uh typically things have have not been uh under budget and under time uh so it's unlikely I think given historical

precedent that that it will uh St within $15 billion and the 20122 timeline um and a bit about what's going on elsewhere in the world in Russia uh

the this is really the soy is our only access to space station uh it's considerably cheaper considerably safer uh the so has a very good track record

um it's uh the crew is top mounted it has an escape system there are no wings or control servs just to go wrong um overall it's a it's a pretty good system um and the estimated costs are about $60

million a flight which is an order of Mag more than order of magnitude less than than the space shuttle uh the thing that constrains them obviously is the weakness of the Russian economy it's very hard for them

to embark on ambitious programs with an economy the size of Belgium so um China is is probably the most interesting thing that's that's

going on in space uh the this month uh China is expected to be only the third to it is expected to launch their first person into space that'll make them only the Third Country ever to put someone in

orbit um and uh they've put a lot of of money and effort into this program if if anything serves as a spur for human space exploration it is likely to be uh

the uh China's Ambitions in space um and and and hopefully a sense in America that we want at least uh keep up with with China um and they have grand

ambitions Beyond just lowth orbit they're planning on uh setting up a space station putting a base on Mars and eventually uh sending humans to

Mars so what's happening in in in the US that I think uh might ultimately surpass all of that stuff is uh entrepreneurial space activities uh where um things are

led by the spirit of free enterprise and um I think there's perhaps an analogy here where uh uh just as DARPA uh served

as the initial um impetus for for the internet and underwrote a lot of the costs of developing the internet in the beginning uh one it may be the case that NASA has is has essentially done the

same thing by spending the money to develop some of the fundamental Technologies in the beginning and then uh once we can bring sort of the commercial free enterprise uh sector into it then we can see the dramatic

acceleration that we did that we saw in the internet um so there there are several serious launch vehicle efforts underway uh talk about each one uh there's the

Bert ran of scaled composits uh Bert ran is is one of the world's foremost aircraft designers um and he's developed a subal vehicle that they're actually flying out of Mojave uh this is an x-

prise class vehicle uh there's John KAC who wrote quake and doom was probably one of the best software engineers in the world one of the best Engineers that

I know period um and he's developing a vertical tle from land vehicle uh Jeff Bezos who I understand was here last week uh is a huge space ad Advocate um

uh and it's my understanding that he intends to spend something in the order of a billion dollars over the next 20 years uh on space exploration and and then space then my company

SpaceX and I I think within the next several years uh these entrepreneural efforts will actually be what what deres uh space

exploration so a little bit about each one that's a picture of of the veran F it it's called White Knight is the carrier plane and then spaceship one is

the thing that's held in the belly there and uh this project is uh supposedly funded by Paul Allen so there's quite a lot of capital also I should make that point quite a lot of

capital that's sort of entering this entrepreneurial space sector as well um the I the only drawback I think of this architecture is that it's not really

scalable uh for uh for something that would get to orbit this is pretty good for suborbital but I think the architecture would need to change for an orbital

vehicle and there's John KX SE uh you see he's a little irreverent this is from his website um his his vehicle is a vertical takeoff

and Landing vehicle uh he's made he's made really incredible progress for somebody who has no background in uh um aerospace engineering and is also kind

of doing it all himself with him and like three buddies um so and and I think that will make something that works actually if you you can check out their website alad

Aerospace um it's pretty interesting stuff but in in order to get or to orbit this would require a substantial Improvement in the mass efficiency and the engine efficiency and probably uh be

a two-stage vehicle uh Jeff Bezos who I'm sure almost everyone here is aware of uh he

is uh a pretty huge fan of space in fact his uh High School B dictorian speech was about the necessity of humanity expanding to other planets um so it's

it's pretty important to him uh from what an that uh this is our effort um we're spending quite a bit more than uh the three prior entities that I

mentioned um in some cases probably an order of magnitude more uh because what we're doing is really an order of magnitude more difficult we're building an orbital launch vehicle it's a two-stage very

high efficiency engines very high mass efficiency uh launch vehicle um and it's targeted to the satellite delivery market so our approach is really to make

this a solid Sound business um and so I predicated the the Strategic plan on a known Market something that I we know for a fact exists which is the need to put uh small to mediumsized satellites

into orbit and uh so that that's what we're going after initially and then uh with that as a as kind of a revenue base uh

we will uh move into the human Transportation market so long-term aims of the company are definitely human Transportation I think this the smart strategy is to First go for uh cargo

delivery essentially satellite delivery and our eventual upgrade path is to fold uh the successor to Saturn 5

build a super heavy lift vehicle that could uh you know be used for uh setting up a moon base or doing a m mission that would be the Holy Grail

objective um on the upper right there you can see uh a test firing of our engine and on the lower right you can see the uh Alo stage

tank this is an engine test of our main engine which is called Merlin and that that generates about uh roughly 75,000 lbs of

thrust at sea level this is our upper stage engine it's about it's about 7,500 lb of thrust in vacuum

and this is a a accelerated version of our launch sequence um our first launch will be uh from the SpaceX launch complex at Vandenberg Air Force Base uh

and approximately March of next year basically early next year um and uh we will be uh flying a a Navy satellite u Navy communication satellite so it's

it's notable because uh often uh launch vehicle companies are not able to get somebody get a paying customer uh on their first flight but we've we've been able to do that uh this is also uh the

Falcon development at SpaceX is the fastest launch vehicle development in history including wartime so that's actually vburg Air Force Base which is about two hours away

from Santa Barbara common themes between zip 2 and PayPal uh well I guess both of them uh involved had had software at the as the heart of

the technology um even though zip 2 was in was servicing the media sector and obviously PayPal was servicing the

financial sector uh the the um the heart of it was really software um and and internet related stuff so certainly that's a a huge commonality

um they were both in paloalto where I lived uh um I think we you know took a similar

approach to building both companies uh which was to have a small group of uh very talented people um and uh and keep

it small uh you know I think PayPal had at at its height probably 30 Engineers uh for for a system that's I would say is more spe ticated than the Federal Reserve clearing clearing

system I'm pretty sure it is actually because the Federal Reserve clearing system sucks um so uh what else is there uh it it generally you know I think the the

way both zip2 and PayPal operated was was really your it was your canonical Silicon Valley uh startup uh you know uh

pretty flat hierarchy um you know everybody had a roughly similar Cube um and uh anyone could talk to anyone we

had a philosophy of best idea wins uh as opposed to you know the person proposing the idea winning because they are who they are um even though there were times when I thought that should have been the way

go um and um obviously you know everyone was was

an equity uh stakeholder uh give us anything if if if there were uh two paths that you know let's say we had to choose to

do one thing or the other um and the one wasn't obviously better than the other uh then rather than spend a lot of time trying to figure out which one was slightly better we would just pick one and do it and sometimes we'd be wrong

and and and we pick this sub optimal path but often it's better to pick a path and do it than to just vacillate endlessly on on a choice

um uh we we didn't worried too much about uh intellectual property uh paperwork legal stuff we we really were very focused on building the best

product that we possibly could um both Z two and PayPal were very product focused companies um you know that's we're just incredibly obsessive about how do we

build something that is really going to be the you know the best possible uh customer experience and and that that that was a far more effective selling tool than

than having a giant sales force or thinking of you know marketing gimmicks or you know 12-step processes or whatever um I'm not super familiar with frster um certainly I mean the essence

of viral marketing is do you have something that um One customer is going where One customer is going to sell another customer without you having to do anything um and uh there there are

lots of instances of that um frienda might be one uh obviously hot mail was one uh PayPal was one eBay was one um uh and and in a situation like that going

back to what I said about product product matters incredibly because if you're going to recommend something to somebody uh you've got to really love the product experience otherwise you're not going to recommend it because you

don't want to burn your friend hurdles in the space industry entering the space industry uh well you know it it is a very uh

complicated regulatory structure um as you might imagine when somebody tries to build an orbital launch vehicle which is not really all that distinguishable from an ICBM there's a lot of Regulation um

and there probably should be uh because you know you don't want to launch something and end up hitting La uh

I um so uh uh probably the regulatory stuff was very difficult uh the environmental approvals certainly proven very difficult um much more so than we

respected I mean here in Silicon Valley you look uh you know what I came to appreciate is in Silicon Valley you live in a Libertarian Paradise um you know there's almost no uh regulation um and

what can be very frustrating is that regulation is often irrational it doesn't make any sense um but you've got somebody there who's simply executing a set of rules independent of where those rules make sense and you can try to

convince them that the rules don't make sense and they won't listen to you so um probably regulation is the most annoying thing uh I would say overall though I'm very pleased because I think we've had a

very smooth development process and uh on the whole I can't complain at all um yeah why is it so expensive to send something into space um well let me

tell you what makes a rocket hard uh the the energy and the velocity required to get into orbit is is so substantial uh that compared to say a

car or in a plane uh the you have almost no margin to play with typically uh a launch vehicle will get about 2% of its

liftoff Mass to orbit so and that's the case for for Falcon and so if you can only get two% of what your rocket weighs

to begin with to to orbit uh you you can if you're wrong by 2% you're not going to get anything to orbit you know come crashing down on the

Pacific somewhere um so um that means all of your calculations have to be right if if you miss if you miscalculate something you get an answer wrong it

blows up um and and it's very expensive trying to get all your answers right and then double-checking that they're right and testing them all and doing as much as you can on the ground I think that's a lot of what makes Rockets expensive um

the low launch rate typically is also what makes rocket Rockets expensive if you had you know thousands of flights a year then it would be a lot cheaper although it's a bit of a chicken and egg because it needs to be cheaper in order

to have thousands of flights a year um um but at the end of the day when you in the final analysis I would say that Rockets really should be a lot cheaper than they are today and and I think um

the way they're built the way they're operated is just very inefficiently uh and I think with with SpaceX and Falcon we're going to we're going to show that

that's that's the case um our vehicle will sell for about $6 million a flight uh that our nearest competitor is the Pegasus from orbital Sciences which is

about $25 million a flight and that has less capability than our rocket uh so Falcon would represent a pretty substantial breakthrough on the cost of access to

space can you talk a little bit about difference in the customer base you have to Target experiences ch uh yeah the customer base with SpaceX is

just it's dramatically different obviously from PayPal PayPal is a consumer product uh whereas uh SpaceX we're selling Rockets and the number of people who want to buy Rockets is quite

small um if anyone here has $6 million and wants a rocket I mean I'd be glad to sell it to them um but uh so it's much more of an individual selling process um

it there's a great deal more thought that goes into any purchase of a launch um much more so than signing up a PayPal account which doesn't really cost you much

um so uh yeah and there's not a lot of viral marketing that's going to happen with the rocket I suspect I'm hoping but you know I'm not counting on it

so I think a successful entrepreneurs probably come in all sizes shapes and flavors um I'm not sure there's any one one particular thing um uh for me you know some of the things I've described

already I think are very important I think uh really U an an obsessive uh nature with respect to the quality of the product um is very important uh so

you know being obsessive compulsive is is a good thing in this context um uh really really liking what you do what whatever area that you get into um

given that you know even if you're if you're the best the best there's always a chance of failure so I think it's important that you really like whatever you're doing um if if you don't like it

life is too short um you know I'd say if and and also if you if you like what you're doing you think about it even when you're not working I mean it'll just it's it's something that your mind

is drawn to um and and if you don't like it you just really can't make it work I think um SpaceX is about 30 people um

and and what we do internally at SpaceX is we do all of the design analysis um integration of Hardware testing and then launch operations um but a lot of the

heavy Manpower stuff like welding together our primary structure the heavy Machining and so forth that we Outsource so we'd be a much larger company if we did all of that

internally um and sorry you had another part to your question oh yeah actually we don't have any lawyers

um uh the the the regulatory stuff that we we deal with is very technical um it's it's it's really a lot like trying to get an airplane certified with the

FAA um we're just getting a rocket certified um so so our documentation is it's very I I wish we could offload it to to some lawyers they wouldn't know

what the heck to do so um you know how did the Wharton degree help uh I think it a business degree teaches you a lot of the terminology um um it introduces you to

Concepts that you would otherwise you know this terminology there's something to be said for that um you introduces you to Concepts you you would otherwise have to learn empirically I mean I think I think you

can you can learn whatever you need to do to start a successful business either in school or out of school um School in you know in theory should help

accelerate that process um and I think it you know it often times it does it it's it can be an efficient learning process more efficient than empirically

learning lessons um but really I think you I there were examples of of successful entrepreneurs who never graduated high school and there are

those that have phds so um I think the important principle is to be uh dedicated to learning what you need to

know uh whether that is uh in school or empirically um well uh I should point out that Falcon our first vehicle doesn't really have the same capability

as as either the Chinese the Russian or or the space shuttle uh vehicles that I mentioned um Falcon would be in the in the light class of launch Vehicles whereas the space shuttle would be a heavy class launch vehicle so it's not

it's not quite an Apples to Apples comparison um however uh the right comparison would be uh Falcon compared to the Pegasus from overall Sciences

Falcon is 6 million the Pegasus is 25 million um and uh the way we we've gotten our prices low our cost low uh is we've really focused on every element of the

launch vehicle there's really no one Silver Bullet uh that has has um been responsible for a substantial portion of of the cost savings it's been really hundreds of small Innovations and

improvements and and so we've done improvements in the propulsion system the structure uh the avionics and the launch operations as well as maintain a very low overhead organization and when you add up all the things we've done in

those areas that allows us to produce a launch vehicle at $6 million um the uh uh as as far as uh PayPal um

there were a lot of back office relationships that we needed to establish and to attach to various heterogeneous data sources um we needed uh to attach to the credit card system

for processing credit cards we needed to attach to the Federal Reserve System uh for um doing electronic funds transfers uh we needed to attach to various fraud

databases to run fraud checks um there there was a lot that we had to uh we had to interface with um and and that that

that took that took a while um but uh uh it all came together I think roughly simultaneously I mean developing the software and having it ready for uh for

the general public uh reasonably coincided with us being able to conclude with those deals and interface with the outside vendors and all that took about a year um I think one one thing that's

important is to try not to serialize uh dependencies so if you can put as many elements in parallel as possible um a lot of things have a gestation period um

and there's really nothing you can do to accelerate I mean there's it's very hard to accelerate that just gation period um so uh if you can sort of have all those

things gestating in parallel uh then then that is one way to substantially uh accelerate your timeline I think people tend to serialize things too

much we did do a few patents on pay uh on the PayPal system although nothing that ever actually mattered um so patents are mostly useful in in a

defensive situation rather than offensive uh it can be very difficult to actually uh offensively prosecute a patent um so I'm I think I think in certain

industries like Pharmaceuticals and so forth patents can be incredibly important uh in software particularly when you've got um a very rapid life cycle where you know you made you sure

you got a patent but now it's redundant so who cares um it's less relevant in when you've got a rapid uh life cycle well I don't you know I've looked

at the various there are a couple things that I think are pretty bogus uh one is space mining another is space solar power I mean if you if you calculate how

much it costs to bring uh either the the photons from uh space solar power U you know back to Earth or or or the raw material uh back to Earth it it the

economics don't make sense they just can't close the economic case not not even by it's probably off by three orders magnitude um so uh I I think um

the probably the biggest thing can happen is if we if we decide to establish a base on the moon or a base on Mars and particularly if we if we attempt to make a

self-sustaining uh self- sustaining base self-sustaining civilization on on the moon or Mars that that that is enormous opportunity on probably the trillion dollar level um because then you got

basically interplanetary commos going on um I think that that's pretty huge um um but uh but it's it's it's you know it's not going to be space all power

it's not going to be space mining I think um so uh let's see uh the government I you know who knows maybe we're being spied upon I

don't know um but but certainly we are there are some restrictions which are really annoying um such as the fact we are only allowed to employ people who um have at least a

green card or a citizen of of the us we're not allowed to employ anyone who is does not have perent residency in the US us basically if they can't throw you in jail they W they won't let you work

work on Rocket stuff um and uh uh we have if we talk to any uh foreign Nationals we we need a a technology transfer agreement or

something like that from the state department um so our second launch is is actually um a non- US governmental launch and it's taken us six months to get the state upon approval just to

engage in a contract discussion with them um so that that is problematic uh we had several offers actually from a number of different

entities for uh for payal um and uh in fact the closer we got to IPO the more more often as we got um but we always felt that those undervalued the the company um and subsequently when we went

public I think the public mon is kind of indicated uh the value of the company um so uh I think that that's one of the good things about the public markets is that they're an objective value of

companies when you're a private company it's very hard to say how much you're worth um because you you have to basically think of some Metric you know are you going to go for a multiple of future earnings are you going to go off

some something with Revenue uh what are your comparables going to be there are all sorts of questions it's it's really up for debate what sort of value your company is when you're public it's it's you know it's whatever the market says

you're you're worth that's what you're worth um so so uh so yeah so I think um eBay made a number of office prior to

going public um that were substantially below our uh the value once we impose public and that kind of cleared up the disagreement and then we we sold

them um and uh what else I was actually you had a second part to the question um yeah eBay had a a uh I it was initially Billo and there was eBay

payments and um and it was really a pretty tough uh long running Battle of PayPal versus uh versus eBay's payment system um and it was certainly a very

challenging I mean I think it was you know there were times where it felt like we're trying to win a land war in Asia um and uh you know they kind of set the ground rules uh or trying to beat Microsoft in their own operating system

it's really really pretty hard um that took a lot of our effort to to actually beat eBay on their own system um and that one of the long-term risks

certainly for the company was that eBay would one day Prevail um and one way to retire that risk obviously was to sell to eBay writing software during the summer

of 95 uh trying to make useful things happen on the internet uh um and uh I wrote something that allowed you to get maps and directions on the internet and

then something that allowed you to do um uh online manipulation of content kind of a really Advanced blogging system um and uh uh and then we we we started

talking to to small uh newspapers and media companies and so forth and uh we started getting some interest I mean half the time be like what's the internet um even in Silicon Valley uh but then occasionally somebody would and

they would would get a little bit of money from them um and then U there was basically only about six of us there were myself uh my brother who I

convinced to come down from Canada and a friend of my mom's um so and then and then three sales people we hired on contingency uh by putting an ad in the

newspaper uh but things were pretty tough in the in the early going um uh I didn't have any money in fact I had negative money um I had huge student debts so um

uh or in fact I couldn't afford a place to stay and an office so uh I rented an office instead because that was I was actually I got a cheaper office than I could get a get a place to stay and then

we I just sort of slept on the futon and showered at the YMCA on page M and El Camino um I was in the best shape I I've ever

been you know go to shower work out and you're good to go um and and there was an there was an ISP on the floor below us just to like little tiny ISP and uh

we drove the hole through the floor and connected a null modem cable uh that that gave us our internet contivity for like 100 bucks a month um

so I mean we had just an absurdly tiny burn rate um and uh and and we also had you know a really tiny Revenue stream but we actually had more Revenue than we

had expenses so um so when we went and talked to VCS we could actually well like I said it's there's no Silver Bullet that I can point to as to why the

our vehicle is a lot cheaper um we've really focused on um reducing the cost across the board um I mean one thing our overhead in a 30 person company is um

you know an order of magnitude less than it is in lock or Boeing uh just just for starters so even if we did everything the same and built the same launch vehicle we'd be considerably cheaper um

and then every decision we've made has been with consideration to simplicity and the reason for Simplicity is because that both improves the reliability as well as U uh reduces your cost um if

you've got fewer components that's fewer components to go wrong and fewer components to bind um I think there's there's I think fairly significant innovation in our airframe um which is a

a semi- press stabilized monoco with variable skin thickness and a common bulkhead if you know what that means uh I need a diagram to explain it all uh

but the net result is that it's very cheap cheap um and uh it's very Mass efficient and I think easy to test and quite reliable um our avionic system

give you another example our avionic system we use an Ethernet on the vehicle to communicate they may that may not sound like a great Innovation but it is in launch vehicles um all the other launch Vehicles communicate in the

vehicle by these uh serial cables that run the entire length of the vehicle and uh so you've got these these giant copper bundles as thick as your arm running up and down the vehicle makes it

heavy it makes it expensive and this so this there's things like that which uh when you add them all up it it makes a huge difference uh no that's that's a good

question that's a good question uh no I would not um I think SpaceX is not this is Advanced entrepreneuring um and it it it may also you know I

can't tell you how many people have said that um you know the fastest way to turn uh uh you the faster way to make a small fortune in the Aerospace industry is to

start with a large one um so uh you know hopefully that doesn't doesn't work out but um I I would definit I think space is is a tough one for first-time

entrepreneurs um um you're better off starting with something that that requires low capital and space is a high Capital effort sorry last question