Speaker 1: I'll try to make this as interesting as possible. If
Speaker 1: you like space, you'll like this talk. So my background
Speaker 1: in brief, I'll talk a little bit about ZIP two
Speaker 1: and PayPal, and then mostly about space and what we're
Speaker 1: doing in space. So I originally came out California to
Speaker 1: do energy physics at Stanford actually and ended up putting
Speaker 1: this is in ninety five, and ended up putting that
Speaker 1: on a hold to start ZIP two.
Speaker 2: And ZIP too.
Speaker 1: I'll tell you a little bit about the thought process
Speaker 1: of exactly what happened there in ninety five. It wasn't
Speaker 1: at all clear that the Internet was going to be
Speaker 1: a big commercial thing. In fact, most of the venture
Speaker 1: capitalists that I talked to hadn't even heard of the internet,
Speaker 1: which sounds bizarre. On Sanduil wrote, so, but I wanted
Speaker 1: to do something in there. I thought it would be
Speaker 1: a pretty huge thing, and I thought it was one
Speaker 1: of those things that only it came along once in
Speaker 1: a very long while. So I got a deferment at Stamford,
Speaker 1: and I thought i'd give it a couple of quarters
Speaker 1: and if it didn't work out, which I thought it
Speaker 1: probably wouldn't, then I'd come back at school and Actually,
Speaker 1: when I talked to my professor and I told him this,
Speaker 1: he said, well, I don't think you'll be coming back,
Speaker 1: and that was the last conversation on having him. But
Speaker 1: there weren't a lot of waste Again, the only way
Speaker 1: to get involved the Internet in ninety five that I
Speaker 1: could think of was to start a company, because they
Speaker 1: want a lot of companies to go and work for
Speaker 1: Apart from Netscape, maybe one or two others. So and
Speaker 1: then I didn't have any money, so I thought, well,
Speaker 1: we've got to make something that's going to return It's
Speaker 1: going to return.
Speaker 2: Money very very quickly.
Speaker 1: So we thought, well that the media industry would need
Speaker 1: help converting its content from a print media to electronic
Speaker 1: and they clearly had money, so if we could find
Speaker 1: a way to help them move their media to the Internet,
Speaker 1: that would be an obvious way of generating revenue. There
Speaker 1: was no advertising revenue on the Internet at the time,
Speaker 1: so and that that was really the basis of ZEP
Speaker 1: two and I ended up building quite a bit of
Speaker 1: software for the media industry, primarily the print media industry.
Speaker 1: So we had as investors and customers Hearst Corporation, night Ridder,
Speaker 1: most of the major us Print Publishers. We built that up,
Speaker 1: and then we had the opportunity to sell to Compack
Speaker 1: in early ninety nine, and basically.
Speaker 2: Took that offer. It was for a little over three hundred.
Speaker 1: Million dollars in cash, and that's that's a currency I
Speaker 1: highly recommend. So we had that and and but I
Speaker 1: wanted to do something something more after ZEP two. So
Speaker 1: post the sale, in fact, immediately post the sale, I
Speaker 1: didn't really take any time off.
Speaker 2: I was trying to think of where where.
Speaker 1: The opportunities in this in early ninety nine, where the
Speaker 1: opportunities remained in the Internet, And it seems to me
Speaker 1: that there hadn't been a lot of innovation in the
Speaker 1: financial services sector. So and when you think about it,
Speaker 1: money is low bound with You don't need some sort
Speaker 1: of big infrastructure improvement to do to do things with it.
Speaker 1: It's really just an entry in the database. The paper
Speaker 1: form of money is really only a small percentage of
Speaker 1: all the money that that's out there. So it should
Speaker 1: land itself to innovation on the Internet.
Speaker 2: And so we thought of a couple of different things
Speaker 2: we could do.
Speaker 1: One of the things was to combine all of somebody's
Speaker 1: financial services needs into one website, so you could have banking, brokerage,
Speaker 1: insurance and all sorts of things in one place.
Speaker 2: And that was actually quite a difficult.
Speaker 1: Problem to solve, but we could solved most the issues
Speaker 1: associated with that. And then we had a little feature
Speaker 1: which took us about a day. That was the ability
Speaker 1: to email money from one customer to another. So you
Speaker 1: could type in an email addressed or actually any unique
Speaker 1: identifier and transfer funds or conceivably stocks or mutual funds
Speaker 1: or whatever from one account holder to another. And if
Speaker 1: you try to transfer money to somebody who didn't have
Speaker 1: an account on the system, it would then forward an
Speaker 1: email to them saying, hey, why don't you sign up
Speaker 1: and open an account. And whenever we demonstrate these two
Speaker 1: sets of features, we'd say, well, this is a feature
Speaker 1: that took us a lot of effort to do, and
Speaker 1: look how you can see your bank statement and your
Speaker 1: mutual funds.
Speaker 2: And insurance and all that. It's all on one page,
Speaker 2: and look how convenient that is.
Speaker 1: And people got home and then we'd say, and by
Speaker 1: the way, we have this feature where you can enter
Speaker 1: somebody's email address and transfers funds and they go, wow,
Speaker 1: so we we're like okay. So we focused the company's
Speaker 1: business on on email payments and in the early game
Speaker 1: going the companies called x dot com and then there
Speaker 1: was a there was another company called Confinity, which had
Speaker 1: actually also started out from it from a different area.
Speaker 2: UH.
Speaker 1: That they started out with the PalmPilot cryptography, and then
Speaker 1: they had as a demo application the ability to beam
Speaker 1: token payments from one PalmPilot to another by the infrared
Speaker 1: port UH. But then they had a website which is
Speaker 1: called PayPal, where you'd reconcile the beamed payments and and
Speaker 1: what they found was that the website portion was actually
Speaker 1: far more interesting to people than the than the pomp
Speaker 1: pilot cryptography was. So they started leading their business in
Speaker 1: that direction.
Speaker 2: UH. And then in basically early.
Speaker 1: Two thousand, uh X dot Com acquired Confinity UH and
Speaker 1: then about a year later we uh we ended up
Speaker 1: changing the company's name to PayPal. And that's that's kind
Speaker 1: of how the approximate evolution of the company and the
Speaker 1: PayPal is really a case of where the whole viral marketing.
Speaker 1: It's really a perfect case example of viral marketing like
Speaker 1: hotmail was where one one customer would essentially act as
Speaker 1: a salesperson for you, for all of you, for bringing
Speaker 1: in other customers, so they would send money to a
Speaker 1: friend and essentially recruit that frend into the network. And
Speaker 1: so you had this exponential growth. The more customers you have,
Speaker 1: the faster it grew. So it was like bacteria in
Speaker 1: a petri dish, you know, it just goes like does
Speaker 1: this s curve? And in fact I ran paypoaler for
Speaker 1: about the first two years of its existence, and we
Speaker 1: launched after year one and by the end of year
Speaker 1: two we had a million of customers. So it gives
Speaker 1: you an example, you know, to give your sense for
Speaker 1: how fast things things grow in that scenario.
Speaker 2: And we didn't have a sales force.
Speaker 1: We actually didn't have VP of sales, we didn't have
Speaker 1: a VP of marketing, and we didn't spend any money
Speaker 1: on advertising. In about February of last year, for those
Speaker 1: some of your probably following it, In February of last year,
Speaker 1: PayPal went public and we were I think we were
Speaker 1: the only internet company to go public in the first
Speaker 1: part of last year. It went off reasonably well, although
Speaker 1: I think we had more sec rewrites than any company
Speaker 1: I can imagine, Like we.
Speaker 2: Said a record on sec rewrites. This was right around the.
Speaker 1: Enron time and when there was all sorts of corporate scandal,
Speaker 1: so they put us through the ringer.
Speaker 2: And then shortly thereafter.
Speaker 1: In about June July, we struck a deal with eBay
Speaker 1: to sell a company to eBay.
Speaker 2: And for about four and a half billion dollars. But
Speaker 2: that was when eBay's.
Speaker 1: Stock price was about fifty five dollars and they hadn't split,
Speaker 1: so I guess in today's dollars with about three billion dollars,
Speaker 1: so that worked out pretty well. It happened coincidentally that
Speaker 1: in the first part of last year I've been doing
Speaker 1: just some background research on space, and let me talk
Speaker 1: a bit about that. So essentially, I was trying to
Speaker 1: figure out why we had not made more progress since
Speaker 1: Apollo in nineteen In the sixties, we went from basically nothing,
Speaker 1: not being able to put anyone into space, to putting
Speaker 1: people on the Moon and developing all the technology from
Speaker 1: scratch to do that. And yet in the seventies and
Speaker 1: eighties and the nineties we've kind of gone sideways, and
Speaker 1: we're currently in the situation where we kind of even
Speaker 1: put a person into low Earth orbit, and that doesn't
Speaker 1: really well, with all of the other technology sectors out there,
Speaker 1: the computer that you could have bought in the early seventies,
Speaker 1: you know, would have filled this room and had less
Speaker 1: computing power than your cell phone.
Speaker 2: And so just about every sector of technologies improved.
Speaker 1: Why has this not improved? So I started looking into that. Initially,
Speaker 1: I thought, well, perhaps it's a question of funding, and
Speaker 1: that funding can be garnered by really marshaling public support.
Speaker 1: So I thought, well, one way to get the public
Speaker 1: excited about space would be to do maybe a privately
Speaker 1: funded robotic mission to Mars.
Speaker 2: And so we figured out.
Speaker 1: A mission that would cost about fifteen to twenty million dollars,
Speaker 1: which isn't a lot of money, but it's about a
Speaker 1: tenth of what a low cost and NASA emission would be.
Speaker 1: And the idea was called Mars Oasis, where we would
Speaker 1: put a small robotic glander on the surface of Mars
Speaker 1: with seeds and dehydrated nutrients. They would hydrate upon landing,
Speaker 1: and you'd have plants growing into Martian radiation and gravity conditions,
Speaker 1: and you'd also be maintaining essentially lifeesport.
Speaker 2: System on the surface of Mars. And this would be.
Speaker 1: Interesting to the public because they tend to respond to
Speaker 1: precedents and superlatives, and this would be the furthest at
Speaker 1: Life's ever traveled in the first life on Mars, so
Speaker 1: pretty significant. And then when I started looking at launch
Speaker 1: vehicles that the lowest cost vehicle in the US is
Speaker 1: Boeing Stalt for two, which costs about fifty million dollars,
Speaker 1: and that's a bit that's a bit steep what we were
Speaker 1: trying to do. So I made three visits to Moscow
Speaker 1: to Russia to look at buying a Russian launch and
Speaker 1: it's actually pretty interesting going to moscout to negotiate for
Speaker 1: a refurbished ICBM, if you know, on the range of
Speaker 1: interesting experiences, that's pretty pretty far out there. But we
Speaker 1: actually did get to a deal, but there were so
Speaker 1: many complications associated with the deal that it didn't I
Speaker 1: wasn't comfortable with the risk associated with it. So when
Speaker 1: I got back from the third trip, I thought, well,
Speaker 1: you know, why is it the Russians can build these
Speaker 1: low cost launch vehicles, because it's not like we drive
Speaker 1: Russian cars, fly Russian planes, or have Russian kitchen appliances,
Speaker 1: And you know, when's last night I brought something Russian
Speaker 1: that was in vodka.
Speaker 2: So I think the US is a pretty.
Speaker 1: Competitive place and we should be able to build a
Speaker 1: cost efficient launch vehicle. So I put together a feasibility
Speaker 1: study which consisted of engineers that have been involved with
Speaker 1: all the major launch vehicle developments over the last three decades,
Speaker 1: and we iterated over a number of saturdays in the
Speaker 1: beginning of last year to figure out, well, what would
Speaker 1: be what would be the smartest way to approach this
Speaker 1: problem of not just launch cost but also launch reliable.
Speaker 1: And we came up with a default design and that
Speaker 1: actually sort of fortunate timing. That feasibility study finished up
Speaker 1: right around the time that we agreed to sell PayPal
Speaker 1: the eBay, so coincident with that sale, I moved down
Speaker 1: to la where there's actually the biggest concentration of aerospace
Speaker 1: industry in the world. It's actually the biggest industry in
Speaker 1: southern California, much bigger than entertainment or anything else. I
Speaker 1: was living in pala Alta for about nine years before that, anyway,
Speaker 1: So just to.
Speaker 2: Talk it a little broadly about space and where things.
Speaker 1: Are today, Obviously US government man's exploration is not in
Speaker 1: a great place. We've got the three remaining shuttles agrounded,
Speaker 1: it looks like first flight might only be a year
Speaker 1: from now if that, and we've got a vehicle that
Speaker 1: is incredibly expensive and really quite dangerous. It's so you know,
Speaker 1: for reasons mentioned there, it's got a side mounted crew compartments,
Speaker 1: so if there'sn't an explosion, it's basically instant death.
Speaker 2: Uh.
Speaker 1: The you've got solid rocket boosters, which once you denite them,
Speaker 1: you can turn them off. And there's something fundamentally dangerous
Speaker 1: about pre mixing your fuel and oxidizer or I think, uh.
Speaker 1: And then it's you've got wings and control surfaces when
Speaker 1: you when you re enter, you've got to maintain a
Speaker 1: precise angle of attack. Even a momentary variance in that
Speaker 1: can break the whole vehicle apart. So and and then
Speaker 1: of course it's got no escape system, so if anything
Speaker 1: does go wrong, your toast and and that you've got
Speaker 1: a cost that is really pretty hard to fathom. The
Speaker 1: shuttle program, where you add up all the pieces, is about.
Speaker 2: Four billion a year.
Speaker 1: And so you can divide uh four billion by the
Speaker 1: number of flights and I'll tell you what the cost is.
Speaker 1: And if there's say four flights a year, which they
Speaker 1: haven't been for a while. Then you're talking about a
Speaker 1: billion dollars of flight. The plans for the muted future
Speaker 1: are obviously we've got to continue building the space station,
Speaker 1: so we're going to keep flying the Shuttle, but I
Speaker 1: think it's probably going to be the minimum number of
Speaker 1: Shuttle flights that we need to launch.
Speaker 2: The long term plans are.
Speaker 1: Build something called overital space plane and would safe plane
Speaker 1: in quotes, because one of the options is a capsule,
Speaker 1: so it should be called, you know, maybe overtal space thing.
Speaker 2: But the basic idea is to have something that's.
Speaker 1: Hopefully a little cheaper and a lot safer than the
Speaker 1: space Shuttle. So in particular, it's going to have an
Speaker 1: escape system so if something does go wrong, you can
Speaker 1: abort to safety. The downside is that it's still while
Speaker 1: it might be a little cheaper, it's still going to
Speaker 1: be pretty darn expensive. Estimated cost per flight of overital
Speaker 1: space plane is someone in the region of three hundred
Speaker 1: to four hundred million dollars a flight, and of that amount,
Speaker 1: two hundred just two hundred million dollars alone goes to
Speaker 1: Boeing for the Delta four heavy expandable booster and it's
Speaker 1: a fifteen billion dollar development effort and expected to be
Speaker 1: completed in nine or ten years now.
Speaker 2: Typically, typically things have.
Speaker 1: Not been under budget and under time, so it's unlikely
Speaker 1: I think, given historical precedent that it will stay within
Speaker 1: fifteen billion dollars and the twenty twelve twelve timeline, and
Speaker 1: a bit about what's going on elsewhere in the world
Speaker 1: in Russia, that this is really the Sayers is our
Speaker 1: only access to space station. It's considerably cheaper, considerably safer.
Speaker 1: The Sawyers has a very good track record. The crew
Speaker 1: is top mounted, it has an escape system, there are
Speaker 1: no wings or control services to go wrong. Overall, it's
Speaker 1: a pretty good system. And the estimated carts are about
Speaker 1: sixty million dollars a flight, which is an auto more
Speaker 1: than Auto Bank two less than the Space Shuttle. The
Speaker 1: thing that constrains them, obviously, is the weakness of the
Speaker 1: Russian economy. It's very hard for them to embark on
Speaker 1: ambitious programs with an economy the size of Belgium. So
Speaker 1: China is probably the most interesting thing that's going on
Speaker 1: in space.
Speaker 2: This month.
Speaker 1: China is expected to be only the third is expected
Speaker 1: to launch their first person into space. They will make
Speaker 1: them only the third country ever to put someone in orbit,
Speaker 1: and they put a lot of money and effort into
Speaker 1: this program. If anything serves as a spur for human
Speaker 1: space exploration, it is likely to be the China's ambitions
Speaker 1: in space, and hopefully a sentence in America that we
Speaker 1: want to at least keep up with China. And they
Speaker 1: have grand ambitions beyond just low with orbit. They're planning
Speaker 1: on setting up a space station, putting a base on Mars,
Speaker 1: and eventually sending humans to Mars. So what's happening in
Speaker 1: the US that I think might ultimately surpass all of
Speaker 1: that stuff is entrepreneurial space activities, where things are led
Speaker 1: by the spurt of free enterprise. And I think there's
Speaker 1: perhaps an analogy here where just as DARPA served as
Speaker 1: the initial impetusiple for the Internet and underwrote a lot
Speaker 1: of the costs of developing the Internet in the beginning,
Speaker 1: if may be the case that NASA has essentially done
Speaker 1: the same thing by spending the money to developed some
Speaker 1: of the fundamental technologies in the beginning, and then once
Speaker 1: we can bring sort of the commercial pre enterprise sector
Speaker 1: into it, then we can see the dramatic acceleration that
Speaker 1: we did that we saw in the Internet. So there
Speaker 1: are several serious particle efforts underway. Talk about each one.
Speaker 1: There's there's Burt Ratann of Scale Composites. Bert Rattan is
Speaker 1: one of the world's foremost aircraft designers, and he's developed
Speaker 1: a subor little vehicle that they're actually flying out of Mohave.
Speaker 1: This is an X Prize class vehicle. There's John Cormack,
Speaker 1: who wrote Quake and Doom. It's probably one of the
Speaker 1: best software engineers in the world, one of the best
Speaker 1: engineers that I know period, and he's developing a vertical
Speaker 1: take open landing vehicle. Jeff Bezos, who I understand was
Speaker 1: here last week, is a huge space advocate, and it's
Speaker 1: my understanding that he intends to spend something in the
Speaker 1: order of a billion dollars over the next twenty years
Speaker 1: on space exploration, and then space then.
Speaker 2: My company SpaceX, and I think within the next.
Speaker 1: Several years, these entrepreneurial efforts will actually be what derives
Speaker 1: space exploration. So a little bit about each one. That's
Speaker 1: a picture of the Rotratan effort. It's called White Knight
Speaker 1: is the carrier plane, and then spaceship one is the
Speaker 1: thing that's held in the belly there. And this project
Speaker 1: is supposedly funded by Paul Allen, so there's quite a
Speaker 1: lot of capital also, it should make that point, quite
Speaker 1: a lot of capital that's sort of entering this entrepreneurial
Speaker 1: space sector as well. The only drawback I think of
Speaker 1: this architecture is that it's not really scalable for for something.
Speaker 2: That would get to orbit.
Speaker 1: This is pretty good for sub orbital, but I think
Speaker 1: the architecture would need to change for an orbital vehicle.
Speaker 1: And there's a John Comas effort. He's a little irreverent.
Speaker 1: This is from his website.
Speaker 2: His his vehicle is a vertical takeoff and landing vehicle.
Speaker 2: He's made.
Speaker 1: He's made really incredible progress for somebody who has no
Speaker 1: background in.
Speaker 2: Aerospace engineering and.
Speaker 1: Is also kind of doing it all himself with him
Speaker 1: in like three buddies.
Speaker 2: So and I think that will make something that works.
Speaker 1: Actually, if you can check out their website Amgeller Aerospace,
Speaker 1: it's pretty interesting stuff. But in order to get to orbit,
Speaker 1: this would require a substantial improvement in the mass efficiency,
Speaker 1: in the engine efficiency, and probably be a two stage vehicle.
Speaker 1: Jeff Bezos, who I'm sure almost everyone here is aware of.
Speaker 2: He is a pretty huge fan of space.
Speaker 1: In fact, his high school valedictorian speech was about the
Speaker 1: necessity of humanity expanding to other planets, so it's pretty
Speaker 1: important to him.
Speaker 2: From what I nderstand, this is our effort.
Speaker 1: We're spanning quite a bit more than the three prior
Speaker 1: entities that I mentioned. In some case is probably an
Speaker 1: order of magnitude more, because what we're doing is really
Speaker 1: an order of managetude more difficult.
Speaker 2: We're building an orbital launch.
Speaker 1: Vehicle to two stage, very high efficiency engines, very high
Speaker 1: mass efficiency launch vehicle, and it's targeted to the satellite
Speaker 1: delivery market. So our approach is really to make this
Speaker 1: a solid sound business. And so I've predicated the strategic
Speaker 1: plan on a known market, something that we know for
Speaker 1: a fact exists, which is the need to put small
Speaker 1: to medium sized satellites into orbit. And so that's what
Speaker 1: we are going after initially, and then with that as
Speaker 1: a as kind of a revenue base, we will move
Speaker 1: into the human transportation market. It's the long term age
Speaker 1: of the company. Are definitely in human transportation. I think
Speaker 1: the smart strategy is to first go for cargo delivery
Speaker 1: essentially satellite livery and our eventual a great path is
Speaker 1: to build the successor to Saturn five, build a super
Speaker 1: heavy lift vehicle that could you know, be used for
Speaker 1: setting up a Moon base or doing a Mars mission.
Speaker 2: That would be the Holy Grail objective.
Speaker 1: On the upper right there you can see a test
Speaker 1: firing of our engine, and on the lower right you
Speaker 1: can see the our first stage tank. This is an
Speaker 1: engine test of our main engine, which is called Merlin Yeah,
Speaker 1: and that that generates about roughly seventy five pounds of thrust.
Speaker 2: At sea level. This is our upper stage engine.
Speaker 1: It's about it's about seventy five hundred pounds of thrust
Speaker 1: in vacuum. And this is a accelerated version of our
Speaker 1: launch sequence. Our first launch will be from the SpaceX
Speaker 1: Launch Complex at Vanderberg Air Force Base an approximately March
Speaker 1: of next year, basically early next year, and we will
Speaker 1: be flying a Navy satellite, maybe communications satellite. So it's
Speaker 1: notable because often launch picle companies are not able to
Speaker 1: get somebody that get a paying customer on their first flight,
Speaker 1: but we've been able to do that.
Speaker 2: This is also the Falcon development.
Speaker 1: At SpaceX is the fastest launch picle development in history,
Speaker 1: including wartime. That's actually Vanderberg Airport Base, which is about
Speaker 1: two hours away from Santa Barbara. Common themes between zip
Speaker 1: two and PayPal, well, I guess both of them involved
Speaker 1: had had software at the as the heart of the technology.
Speaker 1: Even though zip two was in was servicing the media
Speaker 1: sector and obviously PayPal was servicing the financial sector, the
Speaker 1: the heart of it was really software and Internet related stuff.
Speaker 1: So certainly that's a huge commonality. They were both in
Speaker 1: pala Alta, where I lived. I think we, you know,
Speaker 1: took a similar approach to building both companies, which was
Speaker 1: to have a small group of very talented people and
Speaker 1: and keep it small.
Speaker 2: You know.
Speaker 1: I think PayPal had at its height, probably thirty engineers
Speaker 1: for a system. That's I would say it is more
Speaker 1: sophisticated than the Federals of clearing clearing system. I'm pretty
Speaker 1: sure it is, actually because the Federal was a clearing
Speaker 1: system sucks, So what else is there it generally, you know,
Speaker 1: I think the way both zip to and PayPal uprade
Speaker 1: was was really your It was your canonical Silicon Valley startup. Uh,
Speaker 1: you know, pretty flat, a hierarchy, you know, everybody had
Speaker 1: a roughly similar cube, and.
Speaker 2: Anyone could talk to anyone.
Speaker 1: We had a philosophy of best idea wins, as opposed
Speaker 1: to you know, the person proposing the idea winning because
Speaker 1: they are who they are, even though there were times
Speaker 1: when I thought that should have.
Speaker 2: Been the way it goes.
Speaker 1: And obviously, you know, everyone was was an equity stakeholder.
Speaker 2: I can't give us anything.
Speaker 1: If if there were two paths that you know, let's
Speaker 1: say we had to choose to do one thing or
Speaker 1: the other, and one wasn't obviously better than the other,
Speaker 1: then rather than spend a lot of time trying to
Speaker 1: figure out which one was slightly better, we would just
Speaker 1: pick one and do it.
Speaker 2: And sometimes we'd be wrong, and and we'd picked these
Speaker 2: off the more path.
Speaker 1: But often it's better to pick a path and do
Speaker 1: it than to just vacillate endlessly on a choice. We
Speaker 1: didn't worry too much about intellectual property, paperwork, legal stuff.
Speaker 2: We really were very focused on.
Speaker 1: Building the best product that we possibly could. Both to
Speaker 1: PayPal were very product focused companies. You know, that's incredibly
Speaker 1: obsessive about how do we build something that is really
Speaker 1: gonna be the you know, the best possible customer experience
Speaker 1: and that that was a far more effective selling tool
Speaker 1: than having a try salesforce or thinking of you know,
Speaker 1: marketing gimmicks or.
Speaker 2: Twelve step processes or whatever.
Speaker 1: I'm not super familiar with Friendster certainly. I mean, the
Speaker 1: essence of viral marketing is do you have something that
Speaker 1: one customer is going to where one customer is going
Speaker 1: to sell another customer without you having to do anything.
Speaker 2: And there are there are lots of instances of that.
Speaker 2: Friends there might be one.
Speaker 1: Obviously, Hotmail was one, PayPal was one, eBay was one.
Speaker 1: And in a situation like that, going back to what
Speaker 1: I said about product, product matters incredibly because if you're
Speaker 1: going to recommend something to somebody, you've got to really love.
Speaker 2: The product experience.
Speaker 1: Otherwise you're not going to recommend it because you don't
Speaker 1: want to burn your friend. Hurdles in the space industry.
Speaker 1: Entering the space industry, well, you know, it is a
Speaker 1: very complicated regulatory structure, as you might imagine when somebody
Speaker 1: tries to build an orbital launch vehicle, which is not
Speaker 1: really all that distinguishable from an ICBM. There's a lot
Speaker 1: of regulation and they probably should be because you know,
Speaker 1: you don't want to launch something and end up hitting LA.
Speaker 2: Where I live.
Speaker 1: So probably the regulatory stuff was very difficult. The environmental
Speaker 1: approvals certainly proven very difficult, much more so than we expected.
Speaker 1: I mean here in silicon value. You look, you know
Speaker 1: what I came to appreciate is silicon value. You live
Speaker 1: in a libertarian paradise. There's almost no regulation. And what
Speaker 1: can be very frustrating is that regulation is often irrational.
Speaker 1: It doesn't make any sense. But you've got somebody there
Speaker 1: who's simply executing a set of rules independent where those
Speaker 1: rules make sense, and you can try to convince them
Speaker 1: that rules don't make sense, and they won't listen to you.
Speaker 1: So probably regulation is the most annoying.
Speaker 2: Thing I would say.
Speaker 1: Overall, though, I'm very pleased because I think we've had
Speaker 1: a very smooth development process and on the whole I
Speaker 1: can't complain at all. Yeah, why is it so expensive
Speaker 1: to send something into space? Well, let me tell you
Speaker 1: what makes a rocket hard. The the energy and the
Speaker 1: velocity required to get into orbit is so substantial that
Speaker 1: compared to say a car or even a plane, you
Speaker 1: have almost no margin to play with. Typically, a launch
Speaker 1: vehicle will get about two percent of its liftoff mass
Speaker 1: to orbit. So, and that's the case for for a Falcon.
Speaker 1: And so if you can only get two percent of
Speaker 1: what your rocket ways to begin with to to orbit,
Speaker 1: you can if you're wrong by two percent, you're not
Speaker 1: gonna get anything to orbit. You know, come crashing down
Speaker 1: on the Pacific noway. So that means all of your
Speaker 1: calculations have to be right. If you miss, if you
Speaker 1: mis calculate something, you get an answer wrong, it blows up.
Speaker 2: And it's very.
Speaker 1: Expensive trying to get all your answers right and then
Speaker 1: double checking that they're right and testing them all and
Speaker 1: doing as much as you can on the ground. I
Speaker 1: think that's a lot of what makes rockets expensive. The
Speaker 1: low launch rate typically is also what makes rockets Brook's expensive.
Speaker 1: If you had, you know, thousands of flights a year,
Speaker 1: then it would be a lot cheaper. Although it's a
Speaker 1: bit of a chicken and egg because it needs to
Speaker 1: be cheaper in.
Speaker 2: Order to have thousands of flights a year. But at
Speaker 2: the end of the.
Speaker 1: Day, when you in the final analysis, I would say
Speaker 1: that rockets.
Speaker 2: Really should be a lot cheaper than they are today.
Speaker 1: And I think the way they're both the way they're
Speaker 1: operated is just very inefficiently.
Speaker 2: And I think.
Speaker 1: With with SpaceX and Falcon, we're going to we're going
Speaker 1: to show that that's that's the case. Our vehicle will
Speaker 1: sell for about six million dollars a flight.
Speaker 2: That our nearest.
Speaker 1: Competitor is the Pegasus from Orbital Sciences, which is about
Speaker 1: twenty five million dollars a flight, and that has less
Speaker 1: capability than our rocket. So Falcon well represent a pretty
Speaker 1: substantial breakthrough on the cost of access to spaces. Yeah,
Speaker 1: the customer base with SpaceX is just it's dramatically different,
Speaker 1: obviously from PayPal. PayPal is a consumer product, whereas SpaceX
Speaker 1: we're selling rockets, and the number of people who want
Speaker 1: to buy rockets is quite small. If anyone here has
Speaker 1: six billion dollars and once a rocket, I don't know
Speaker 1: if they glance to sell it to a but so
Speaker 1: it's much more of an individual selling process. There's a
Speaker 1: great deal more thought that goes into any purchase of
Speaker 1: a launch, much more so than signing up a PayPal account,
Speaker 1: which doesn't really cost you much. So, Yeah, and there's
Speaker 1: not a lot of viral marketing that's going to happen
Speaker 1: with the rocket.
Speaker 2: I suspect.
Speaker 1: I'm hoping that, you know, I'm not counting on it.
Speaker 2: It's a.
Speaker 1: I think a successful entrepreneurs probably come in all size
Speaker 1: of shapes and flavors. I'm not sure there's any one
Speaker 1: one particular thing.
Speaker 2: For me.
Speaker 1: You know, some of the things I've described already I
Speaker 1: think are very important. I think really an obsessive nature
Speaker 1: with respect to the quality of the product, it is
Speaker 1: very important. So, you know, being obsessive compulsive is a
Speaker 1: good thing in this context. Really really liking what you
Speaker 1: do whatever area that you get into, given that you know,
Speaker 1: even if you're if you're the best, the best, there's
Speaker 1: always a chance of failure. So I think it's important
Speaker 1: that you really like whatever you're doing. If you don't
Speaker 1: like it, life.
Speaker 2: Is too short, you know, i'd say if.
Speaker 1: And also if you if you like what you're doing,
Speaker 1: you think about it even when you're not working. I mean,
Speaker 1: it'll just it's something that your mind is drawn to,
Speaker 1: and if you don't like it, you just really can't
Speaker 1: make it work.
Speaker 2: I think SpaceX is about thirty people and what we
Speaker 2: do internally at SpaceX is we do all of.
Speaker 1: The design analysis, integration of hardware testing.
Speaker 2: And then launch operations.
Speaker 1: But a lot of the heavy manpower stuff like welding
Speaker 1: together our primary structure, the heavy machining and so forth,
Speaker 1: that we outsource, So we'd be a much larger company
Speaker 1: for do all of that internally.
Speaker 2: And sorry, you had another party question.
Speaker 1: Oh yeah, Actually we don't have any lawyers. The regulatory
Speaker 1: stuff that we deal with is very technical. It's it's
Speaker 1: it's really a lot like trying to get an aeroplane
Speaker 1: certified with the FAA.
Speaker 2: We're just getting a rocket certified.
Speaker 1: So so our documentation is it's very I wish we
Speaker 1: could offload it to some latch. They wouldn't know what
Speaker 1: the heck to do. So you know, how did the
Speaker 1: Wharton degree help? I think it A business degree teaches
Speaker 1: you a lot of the terminology. It introduces you to
Speaker 1: concepts that you would otherwise.
Speaker 2: You know, this terminology is somebody to be said for that.
Speaker 1: It introduces you to concepts you you would otherwise have
Speaker 1: to learn them perrectly.
Speaker 2: I mean, I think, I think you can.
Speaker 1: You can learn whatever you need to do to start
Speaker 1: a successful business, either in.
Speaker 2: School or out of school.
Speaker 1: School, and you know, theory should help accelerate that process.
Speaker 2: And I think it. You know, oftentimes it does.
Speaker 1: It's it can be an efficient learning process, perhaps more
Speaker 1: efficient than per learning lessons, but really I think you them.
Speaker 1: There are examples of success entrepreneurs who never graduated high school,
Speaker 1: and there are those that have PhDs.
Speaker 2: So I think the important principle is to.
Speaker 1: Be dedicated to learning what you need to know, whether
Speaker 1: that is.
Speaker 2: In school or in Perkeley.
Speaker 1: Well, I should point out that a Falcon outpost vehicle,
Speaker 1: it doesn't really have the same capability as either the Chinese,
Speaker 1: the Russian or the Space Shuttle vehicles that I mentioned.
Speaker 2: Falcon would be in the in the.
Speaker 1: Light class of launch vehicles, whereas the Space Shuttle would
Speaker 1: be a heavy class launch vehicle. So it's not it's
Speaker 1: not quite an Apple Staffle's comparison. However, the right comparison
Speaker 1: would be Falcon compared to the Pegasus from Overtal Sciences.
Speaker 1: Falcon is six million, the Pegasus is twenty five million.
Speaker 2: And the way we've gotten.
Speaker 1: Our prices low, our cost low, is we've really focused
Speaker 1: on every element of the launch vehicle.
Speaker 2: There's really no one.
Speaker 1: Silver bullet that has been responsible for a substantial portion
Speaker 1: of the cost savings. It's been really hundreds of small
Speaker 1: innovations and improvements.
Speaker 2: And so we've done improvements in the.
Speaker 1: Propulsion system, the structure, the avionics, and the launch operations,
Speaker 1: as well as maintained a very low overhead organization. And
Speaker 1: when you add up all the things we've done.
Speaker 2: Those areas that allows us to produce the.
Speaker 1: Launch vehicle at six million dollars.
Speaker 2: As far as PayPal, there were a lot.
Speaker 1: Of back office relationships that we needed to establish and
Speaker 1: to attach to various heterogeneous data sources. We needed to
Speaker 1: attach to the credit card system for prices and credit cards.
Speaker 1: We needed to attach to the Federal Reserve system for
Speaker 1: doing electronic funds transfers. We needed to attach to various
Speaker 1: fraud databases to run fraud checks. That there was a
Speaker 1: lot that we had to uh, we had to interface
Speaker 1: with and and that that that took. That took a while, but.
Speaker 2: It all came together, I think roughly simultaneously.
Speaker 1: I mean, developing the software and having it ready for for.
Speaker 2: The general public.
Speaker 1: Reasonably coincide with us being able to conclude those deals
Speaker 1: and interface with the outside vendors and all that took
Speaker 1: about a year. I think one thing that's important is
Speaker 1: to try not to serialize dependencies, So if you can
Speaker 1: put as many elements in parallel as possible. A lot
Speaker 1: of things have a gestation period and there's really nothing
Speaker 1: you can do to accelerate. I mean, there's it's very
Speaker 1: hard to accelerate that justtion gestation period. So if you
Speaker 1: can sort of have all those things just dating in parallel, uh,
Speaker 1: then then that is one way to substantially accelerate your timeline.
Speaker 1: I think people tend to serialize things too much.
Speaker 2: We did do a few.
Speaker 1: Patents on pay on the PayPal system, although nothing that
Speaker 1: ever actually mattered. So patents are mostly useful in a
Speaker 1: defensive situation rather than offensive. It can be very difficult
Speaker 1: actually OFFENSI would prosecute a patent, so I think I
Speaker 1: think in certain industries like pharmaceuticals and so forth, patents
Speaker 1: can be incredibly important.
Speaker 2: In software, particularly when you've.
Speaker 1: Got a very rapid life cycle, where you know you
Speaker 1: made sure you've got a patent, but now it's redundant,
Speaker 1: So who cares It's less relevant.
Speaker 2: In when you've got a rapid life cycle. Well, I
Speaker 2: don't you know.
Speaker 1: I've looked at the various There are a couple of
Speaker 1: things that I think are pretty bogus. One is space mining,
Speaker 1: another is space solar power. I mean, if you if
Speaker 1: you calculate how much it costs to bring either the
Speaker 1: photons from uh space solar power, you know, back to
Speaker 1: Earth or the raw material back to Earth, it's the
Speaker 1: economics don't make sense. If you just can't close the
Speaker 1: economic case, not even by it's probably off by three
Speaker 1: orders magn too. So I think the probably the biggest
Speaker 1: thing that can happen is if if we if we
Speaker 1: decide to establish a base on the Moon or based
Speaker 1: on Mars, and particularly if we if we attempt to
Speaker 1: make it self sustaining, uh self sustaining based self sustaining
Speaker 1: civilization on on.
Speaker 2: The moon of Mars.
Speaker 1: That that that is enormous opportunity on probably the trillion
Speaker 1: dollar level, because then you got basically interplanetary commoce going on.
Speaker 1: I think that that's pretty huge. But but it's it's
Speaker 1: it's you know, it's not going to be space all power.
Speaker 2: It's not going to be space mind. I think. So
Speaker 2: let's see the government, you know, who knows.
Speaker 1: Maybe we've been spied upon it, I don't know, but
Speaker 1: certainly we are. There are some restrictions which are really annoying,
Speaker 1: such as the fact we're only allowed to employ people
Speaker 1: who have at least a green card or a citizen
Speaker 1: of the US. We're not allowed to employ anyone who
Speaker 1: does not have permanent residence in the US. Basically, if
Speaker 1: they can't throw you in jail, they won't let you
Speaker 1: work work on rocket stuff.
Speaker 2: And we have if we talk to.
Speaker 1: Any foreign nationals, we need a technology transfer agreement or
Speaker 1: something like that from the State Department. So our second
Speaker 1: launch is actually a non US governmental launch, and it's
Speaker 1: taken us six months to get the State upon approval
Speaker 1: just to engage in a contract discussion with them, so
Speaker 1: that that is problematic. We had several offers actually from
Speaker 1: a number of different entities for PayPal, and in fact,
Speaker 1: the closer we got to IPO, the more more offers
Speaker 1: we got. But we always felt that those undervalued the company,
Speaker 1: and subsequently, when we were in public, I think the
Speaker 1: public markets kind of indicated the value of the company.
Speaker 1: So I think that's one of the good things about
Speaker 1: the public markets is that they're an objective value of companies.
Speaker 2: When you're a private company, it's very hard to.
Speaker 1: Say how much you're worth because you have to basically
Speaker 1: think of some metric. You know, are you going to
Speaker 1: go for a multiple of future earnings? Are you going
Speaker 1: to go off some something of revenue? What are your
Speaker 1: comparable is going to be? There are all sorts of questions.
Speaker 1: It's really up for debate what sort of value your
Speaker 1: company is when you're public, it's it's you know, it's
Speaker 1: whatever the market says.
Speaker 2: You're you're worth, that's what you're worth. So so yeah,
Speaker 2: so I.
Speaker 1: Think eBay made a number of office prior to going public
Speaker 1: that were substantially blow our the value once went post
Speaker 1: public and that kind of cleared up the disagreement and
Speaker 1: then we sold them and what else it was, Actually
Speaker 1: you had a second part of the question. Yeah, eBay
Speaker 1: had a it was initially bill Point, and there was
Speaker 1: eBay Payments and and it was really a pretty tough,
Speaker 1: long running battle of PayPal versus versus eBay's payment system,
Speaker 1: and it was certainly a very challenging I mean, I
Speaker 1: think it was you know, there were times where it
Speaker 1: felt like we were trying to win the land war
Speaker 1: in Asia and you know, they kind of set the
Speaker 1: ground rules or trying to beat Microsoft in their own
Speaker 1: operating system it's.
Speaker 2: Really really pretty hard.
Speaker 1: That took a lot of our effort to to actually
Speaker 1: beat eBay on their own system, and one of the
Speaker 1: long term risks, certainly for the company, was that eBay
Speaker 1: would one day prevail.
Speaker 2: And one way to retire that risk, obviously, was to sell.
Speaker 1: The eBay writing software. During the summer of ninety five,
Speaker 1: trying to make useful things happen on the Internet, and
Speaker 1: I wrote something that allowed you to get maps and
Speaker 1: directions on the Internet, and then something that allowed you
Speaker 1: to do online manipulation of content, kind of a really
Speaker 1: advanced blogging system. And then we started talking two small
Speaker 1: newspapers and media companies and so forth, and we started
Speaker 1: getting some interest, I mean half time to be like,
Speaker 1: what's the internet un in Silicon Valley? But then occasionally
Speaker 1: somebody would buy it and they would get a little
Speaker 1: bit of money from them. And then there was basically
Speaker 1: only about six of us. There were myself, my brother
Speaker 1: who I convinced to come down from Canada, and a
Speaker 1: friend of my mom's so and then and then three
Speaker 1: salespeople we hired on contingency by.
Speaker 2: Putting an ad in the newspaper.
Speaker 1: But things were pretty tough in the in the early going,
Speaker 1: I didn't have any money. In fact, I had negative money.
Speaker 1: I had huge student debts so well, in fact, I
Speaker 1: couldn't afford a place to stay and an office, so
Speaker 1: I rented an office instead because that was that was
Speaker 1: actually I got a cheaper office than I could get
Speaker 1: a get a place to stay. And then we I
Speaker 1: just sort of slept on the futon and showered at
Speaker 1: the y m c A on Pagemall and al Camino.
Speaker 2: That's in the best.
Speaker 1: Shape I've ever been, you know, to shower, workout and
Speaker 1: you get to go. And then there wasn't There was
Speaker 1: an I s P on the floor below us, just
Speaker 1: to like a little tiny I s P. And we
Speaker 1: drilled a hole through the floor and connected a null
Speaker 1: modem cable.
Speaker 2: That gave us our Internet.
Speaker 1: Collectivity for like one hundred bucks a month. So, I mean,
Speaker 1: we had just an absurdly tiny bone rate, and we
Speaker 1: also had, you know, a really tiny revenue stream. But
Speaker 1: we actually had more revenue than we had expenses. So
Speaker 1: so when we went and talked to VCS, we can
Speaker 1: actually well, like I said, it's there's no silver bullet
Speaker 1: that I can point to as to why the our
Speaker 1: vehicle is a lot cheaper.
Speaker 2: We've really focused on reducing the cost across the board.
Speaker 1: I mean, one thing, our overhead in a thirty person
Speaker 1: company is, you know, an automatitude less than it is,
Speaker 1: and Lockheed're bowing just just for starters. So even if
Speaker 1: we did everything the same and both the same launch vehicle,
Speaker 1: we'd be considerably cheaper. And then every decision we've made
Speaker 1: has been with consideration to simplicity. And the reason simplicity
Speaker 1: is because that both improves the reliant ability as well.
Speaker 2: As it reduces your cost.
Speaker 1: If you've got fewer components, that's fewer components to go
Speaker 1: wrong and fewer components to buy. I think there's there's
Speaker 1: I think a fairly significant innovation in our airframe, which
Speaker 1: is a semi pressure stabilized monocoque with variable skin thickness
Speaker 1: and a common bulkhead. If you know what that means,
Speaker 1: I need a diagram to explain it all. But the
Speaker 1: net result is that it's very cheap, and it's very
Speaker 1: mass efficient, and I think easy to test and quite reliable.
Speaker 2: Our avionic system.
Speaker 1: To give you a non example our avionic system, we
Speaker 1: use an ethernet on the vehicle to communicate. They may
Speaker 1: that may not sound like a great innovation, but it
Speaker 1: is an Orange vehicles. Well, the other Orange vehicles communicate
Speaker 1: in the vehicle by these cereal cables that run the entire.
Speaker 2: Length of the vehicle.
Speaker 1: And so you've got these these giant copper bundles as
Speaker 1: thick as your arm running up and down the vehicle
Speaker 1: makes it heavy, it makes it expensive. And there's just
Speaker 1: so there's there's things like that which when you add
Speaker 1: them all up, it makes a huge difference.
Speaker 2: No, that's that's a good question. That's a good question.
Speaker 1: No, I would not. I think space X is not
Speaker 1: this is advanced entrepreneur and it may also you know,
Speaker 1: I can't tell you how many people have said that,
Speaker 1: you know, the fastest way to turn uh, the fast
Speaker 1: way to make a small portune in the aerospace industries
Speaker 1: to start with a large one.
Speaker 2: So you know, hopefully that doesn't doesn't work out.
Speaker 1: But I would definitely I think space is a tough
Speaker 1: one for first time entrepreneurs.
Speaker 2: You're better off starting with something.
Speaker 1: That that requires low capital, and space is a high
Speaker 1: capital effort.
Speaker 2: Sorry, last question,