I'll try to make this as interesting as
possible if you like space you'll like
possible if you like space you'll like this
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
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
billion um so that worked out pretty well
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
improved uh so I started looking into that
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
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
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
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
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
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
acceleration that we did that we saw in the
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
exploration and and then space then my company
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
architecture would need to change for an orbital
orbital
vehicle and there's John KX
SE uh you see he's a little irreverent
this is from his
this is from his website
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
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
put uh small to mediumsized satellites into
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
tank this is an engine test of our main
and that that generates about uh roughly
thrust at sea level this is our upper
thrust at sea level this is our upper stage
engine it's about it's about 7,500 lb of
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
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
had had software at the as the heart of the
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
um they were both in paloalto where I lived
lived
lived uh
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
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
when I thought that should have been the way
way
way go
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
be the you know the best possible uh customer
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
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
all um yeah why is it so expensive to
send something into space um well let me
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
space can you talk a little bit about
difference in the customer base you have
difference in the customer base you have to
to
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
account which doesn't really cost you much
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
counting on it
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
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
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
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
Falcon is 6 million the Pegasus is 25 million
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
launch vehicle at $6 million
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
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
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
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
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
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
showered at the YMCA on page M and El Camino
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
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
is is a tough one for first-time entrepreneurs
entrepreneurs
um um you're better off starting with
something that that requires low capital
