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 2: On a hold to start ZIP two and zip too.
Speaker 2: I'll tell you a little bit.
Speaker 1: About the thought process of exactly what happened there in
Speaker 1: ninety five, that it wasn't at all clear that the
Speaker 1: Internet was going to be a big commercial thing. In fact,
Speaker 1: most of the venture capitalists that I talked to hadn't
Speaker 1: even heard of the internet, which sounds bizarre. On sand
Speaker 1: Hill wrote, So, but I wanted to do something in there.
Speaker 1: I thought it would be a pretty huge thing, and
Speaker 1: I thought it was one of those things that only
Speaker 1: came along once in a very long while.
Speaker 2: So I got a.
Speaker 1: Deferment at Stamford, and I thought I'd give it a
Speaker 1: couple of quarters.
Speaker 2: And if it didn't work out, which I.
Speaker 1: Thought it probably wouldn't, then i'd come back at school
Speaker 1: and actually When I talked to my professor and I
Speaker 1: told him this, he said, well, I don't think you'll
Speaker 1: be coming back, and that was.
Speaker 2: The last conversation I had with him.
Speaker 1: But there weren't a lot of waste Again, the only
Speaker 1: way to get involved the Internet in ninety five that
Speaker 1: I could think of was to start a company, because they.
Speaker 2: Want a lot of companies to go and work for
Speaker 2: Apart from Netscape, maybe one or two others.
Speaker 1: So, and they didn't have any money, so I thought, well,
Speaker 1: we've got to make something that's going to.
Speaker 2: Return It's going to return 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 two,
Speaker 1: And we ended up building quite a bit of software
Speaker 1: for the media industry, primarily the print media industry. So
Speaker 1: 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 Compact
Speaker 1: in early ninety nine, and basically.
Speaker 2: Took that offer.
Speaker 1: It was for a little over a three hundred million
Speaker 1: dollars in cash, and that's that's a currency I highly recommend.
Speaker 2: So we had that and and.
Speaker 1: But I wanted to do something something more after ZIP too,
Speaker 1: so post the sale, in fact, immediately post the sale,
Speaker 1: I didn't really take any time off. I was just trying
Speaker 1: to think of where where the opportunities in this in
Speaker 1: the early ninety nine, where the opportunities remained in the Internet,
Speaker 1: And it seemed to me that there hadn't been a lot.
Speaker 2: Of innovation in the financial services sector. So and when
Speaker 2: you think about it, money is low bound with You
Speaker 2: don't need some sort of big infrastructure improvement.
Speaker 1: To do to do things with it. It's really just
Speaker 1: an entry in the database. The paper form of money
Speaker 1: is really only a small percentage of all the money
Speaker 1: that that's out there. So it should lend itself to
Speaker 1: 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 problem to solve,
Speaker 2: but we sold most the issues associated with that. And
Speaker 2: then we had a little feature which.
Speaker 1: Took us about a day. That was the ability to
Speaker 1: email money from one customer to another. So you could
Speaker 1: type in an email address or actually any unique identifier
Speaker 1: and transfer funds or conceivably stocks or mutual funds or
Speaker 1: whatever from one account holder to another. And if you
Speaker 1: try to transfer money to somebody who didn't have an
Speaker 1: account on the system, it would then forward an email
Speaker 1: to them saying, hey, why don't you sign up and
Speaker 1: open an account. And whenever we demonstrate these two sets
Speaker 1: of features, we'd say, well, this is a feature that
Speaker 1: took us a lot of effort to do, and look
Speaker 1: how you can see your bank statement and your 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: some of these email address and transfers funds and they
Speaker 1: go wow. So we were like Okay, So we focused
Speaker 1: the company's business on on email payments and in the
Speaker 1: early game going, the company is called x dot com
Speaker 1: and then there was a there was another company called Confinity,
Speaker 1: which had actually also started out from it from a
Speaker 1: different area.
Speaker 2: UH. They started out with the PalmPilot cryptography, and then
Speaker 2: they had as a demo application the ability to beam
Speaker 2: token payments from one.
Speaker 1: Pomp pilot to another by the infrared coort uh. And
Speaker 1: then they had a website which is called PayPal, where
Speaker 1: you would.
Speaker 2: Reconcile the beamed payments and and what they found was
Speaker 2: that the website.
Speaker 1: Portion was actually Palm more interesting to people the then
Speaker 1: pomp pilot cryptography was.
Speaker 2: So they started leading their business in that direction. Uh.
Speaker 1: And then in basically early two thousand, uh X dot
Speaker 1: com acquired Confinity UH. And then about a year later we.
Speaker 2: Uh uh we ended up changing the company's name to PayPal.
Speaker 1: And that's that kind of how the approximate evolution of
Speaker 1: the company and the PayPal is really a case of
Speaker 1: where the whole viral marketing. It's really a perfect case
Speaker 1: example of viral marketing like hortmail was where one one
Speaker 1: customer would essentially act as a salesperson for you, for
Speaker 1: all of you, for bringing in other customers, so they
Speaker 1: would send money to a friend and essentially recruit that
Speaker 1: brend into the network. And so you had this exponential growth.
Speaker 1: The more customers you had, the faster it grew. So
Speaker 1: it was like bacteria in a petri dish, you know,
Speaker 1: it just goes like does this s curve? And in
Speaker 1: fact I ran paypaler for about the first two years
Speaker 1: of its existence, and we launched after year one, and
Speaker 1: by the end of year two we had a million
Speaker 1: of customers. So it gives you an example, you know,
Speaker 1: to get your sense for how fast things things grow
Speaker 1: in that scenario.
Speaker 2: And we didn't have a sales force.
Speaker 1: We actually didn't have a VP of sales, we didn't
Speaker 1: have a VP of marketing, and we didn't spend any
Speaker 1: money on advertising. In about February of last year, for
Speaker 1: those some of your probably following it, In February of
Speaker 1: last year, PayPal went public and we were I think
Speaker 1: we were the only internet company to go public in
Speaker 1: the first part of last year. It went off reasonably well,
Speaker 1: although I think we had more sec rewrites than any
Speaker 1: company I can imagine, Like we said a record on
Speaker 1: sec rewrites. This was right around the en run time
Speaker 1: and when there was all sorts of corporate scandal, so
Speaker 1: they put us through the ring. And then shortly thereafter,
Speaker 1: in about June July, we struck a deal with eBay
Speaker 1: to sell a company to eBay and for about four
Speaker 1: and a half billion dollars. But 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 were about three billion dollars,
Speaker 1: so it worked out pretty well.
Speaker 2: 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 scratch.
Speaker 2: To do that.
Speaker 1: And yet in the seventies and eighties and the nineties
Speaker 1: we've kind of gone sideways, and we're currently in the
Speaker 1: situation where we kindt even put a person into low
Speaker 1: Earth orbit, and that doesn't really cherell with all of
Speaker 1: the other technology sectors out there. The computer that you
Speaker 1: could have bought in the early seventies, you know, would
Speaker 1: have filled this room and had less computing power than
Speaker 1: your cell phone.
Speaker 2: And so just about every sector of technologies improved. Why
Speaker 2: has this not improved? So I started looking into that.
Speaker 1: Initially, I thought, well, perhaps it's a question of funding,
Speaker 1: and 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. 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 tenth.
Speaker 2: Of what a low cost nasamission would be. And the
Speaker 2: idea was.
Speaker 1: Called Mars Oasis, where we would put a small robotic
Speaker 1: glander on the surface of Mars with seeds and dehydrated nutrients.
Speaker 1: They would hydrate upon landing, and you'd have plants growing
Speaker 1: into Martian radiation and gravity conditions, and you'd also be
Speaker 1: maintaining essentially a.
Speaker 2: Life support system on the surface of Mars.
Speaker 1: And this would be interesting to the public because they
Speaker 1: tend to respond to precedents and superlatives, and this would
Speaker 1: be the furthest that life's ever traveled in the first
Speaker 1: life on Mars.
Speaker 2: So pretty significant.
Speaker 1: And then when I started looking at launch vehicles that
Speaker 1: the lowest cost vehicle in the US is Boeing stalt
Speaker 1: To two, which costs about fifty million dollars, and that's
Speaker 1: a bit that's a bit steep what we were trying
Speaker 1: to do. So I made three visits to Moscow to
Speaker 1: Russia to look at buying a Russian launch and it's
Speaker 1: actually pretty interesting going to moscowt to negotiate for a
Speaker 1: refurbished ICBM. If you know, on the range of interesting experiences,
Speaker 1: that's pretty pretty far out there. But we actually did
Speaker 1: get to a deal, but there were so many complications
Speaker 1: associated with the deal that it didn't I wasn't comfortable
Speaker 1: with the risks associated with it. So when I got
Speaker 1: back from the third trip, I thought, well, you know,
Speaker 1: why is it the Russians can build these low cost
Speaker 1: launch vehicles, because it's not like we drive Russian cars,
Speaker 1: fly Russian planes, or have Russian kitchen appliances, and you know,
Speaker 1: when's the last night brought something Russian that wasn't vodka.
Speaker 1: So I think the US is a pretty competitive place
Speaker 1: and we should be able to build a cost efficient
Speaker 1: launch vehicle.
Speaker 2: So I put together a feasibility study which consisted of
Speaker 2: engineers that have been involved with all the major launch
Speaker 2: vehicle developments over the last three decades, and we iterated
Speaker 2: over a number of saturdays in the beginning.
Speaker 1: Of last year to figure out, well, what would be
Speaker 1: what would be the smartest way to approach this problem
Speaker 1: of not just launch cost but also launch reliable. And
Speaker 1: we came up with a default design and that actually,
Speaker 1: uh sort of fortunate timing. That feasibility study finished up
Speaker 1: right around the time that we agreed to sell paypalt
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.
Speaker 2: I was living in pala Alta for about nine years
Speaker 2: before that.
Speaker 1: Anyway, So just to talk it a little broadly about
Speaker 1: space and where things are today, Obviously US government manned
Speaker 1: exploration is not in a great place. We've got the
Speaker 1: three remaining shuttles are grounded, it looks like first flight
Speaker 1: might only be a year from now. If that, and
Speaker 1: we've got a vehicle that is incredibly expensive and really
Speaker 1: quite dangerous. It's you know, for reasons to mention there,
Speaker 1: it's got a side mounted crew compartments, so if there's
Speaker 1: an explosion, that's basically instant death.
Speaker 2: Uh.
Speaker 1: The you've got solid rocket boosters which once you nite them,
Speaker 1: you can turn them off. And there's something fundamentally dangerous
Speaker 1: about pre mixing your fuel and oxidizer, I think, Uh.
Speaker 2: And then it's you've got wings.
Speaker 1: And control surfaces when you when you re enter, you've
Speaker 1: got to maintain a precise angle of attack. Even a
Speaker 1: momentary variance in that can break the whole vehicle apart.
Speaker 1: So and then and then of course it's got no
Speaker 1: escape system, so if anything does go wrong, your toast
Speaker 1: and and that you've got a cost that is really
Speaker 1: pretty hard to fathom. The shuttle program, when you add
Speaker 1: up all the pieces, is about four billion a year.
Speaker 1: And so you can divide uh four billion by the
Speaker 1: number of flights and that I'll tell you what the
Speaker 1: cost is. And and if there's say four flights a year,
Speaker 1: which they haven't been for a while. Then you're talking
Speaker 1: about a billion dollars a flight. The plans for the
Speaker 1: mutate future are, obviously we've got to continue building the
Speaker 1: space station, so we're going to keep flying the Shuttle,
Speaker 1: but I think it's probably going to be the minimum
Speaker 1: number of Shuttle flights that we need to launch. The
Speaker 1: long term plans are build something called overital space plane
Speaker 1: out safe plane in quotes, because one of the options
Speaker 1: is a capsule, so it should be called, you know,
Speaker 1: maybe overtal space thing. But the basic idea is to
Speaker 1: have something that's hopefully a little cheaper and a lot
Speaker 1: safer than the Space Shuttle. So in particular, it's going
Speaker 1: to have an escape system so if something does go wrong,
Speaker 1: you can abort to safety. The downside is that it's
Speaker 1: still while it might be a little cheaper, it's still
Speaker 1: going to be pretty darn expensive. Estimated cost per flight
Speaker 1: of overital space plane is someone in the region of
Speaker 1: three hundred to four hundred million dollars a flight, and
Speaker 1: of that amount, two hundred just two hundred million dollars
Speaker 1: alone goes to Boeing for the Delta four heavy expandable booster,
Speaker 1: and it's a fifteen billion dollar development effort and expected
Speaker 1: to be completed in nine or ten years now.
Speaker 2: Typically, typically things.
Speaker 1: Have not been under budget and under time, so it's
Speaker 1: unlikely I think, given historical precedent that it will stay
Speaker 1: within fifteen billion dollars and the twenty twelve twelve timeline,
Speaker 1: and a bit about what's going on on elsewhere in
Speaker 1: the world in Russia, that this is really the Sawyers
Speaker 1: is our only access to space station. It's considerably cheaper,
Speaker 1: considerably safer. The Sawyers has a very good track record.
Speaker 1: Its crew is top mounted, it has an escape system,
Speaker 1: there are no wings or control services to go wrong. Overall,
Speaker 1: it's a pretty good system. And the estimated carts are
Speaker 1: about sixty million dollars a flight, which is an auto
Speaker 1: more than Autobank 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. China is expected to be only the third
Speaker 2: it's expected to launch their first person into space, they
Speaker 2: will make them only the third country ever to put
Speaker 2: someone in orbit, and that they've put a lot of
Speaker 2: money and effort into this program.
Speaker 1: If anything serves as a spur for human space exploration,
Speaker 1: it is likely to be China's ambitions in space, and
Speaker 1: hopefully a sentence in America that we want to at
Speaker 1: least keep up with China. And they have grand ambitions
Speaker 1: beyond just low with orbit. They are planning on setting
Speaker 1: up a space station, putting a base on Mars, and
Speaker 1: eventually sending humans to Mars. So what's happening in the
Speaker 1: US that I think might ultimately surpass all of that
Speaker 1: stuff is entrepreneurial space activities, where things are led by
Speaker 1: the spurt of free enterprise. And I think there's perhaps
Speaker 1: an analogy here where just as DARPA served as the
Speaker 1: initial impatus for the Internet and underwrote a lot of
Speaker 1: the costs of developing the Internet in the beginning, if
Speaker 1: may be the case that NASA has insentially done the
Speaker 1: same thing by spending the money develops some of the
Speaker 1: fundamental technologies in the beginning, and then once we can
Speaker 1: bring sort of the commercial pre enterprise sector into it,
Speaker 1: then we can see the dramatic acceleration that we did
Speaker 1: that we saw.
Speaker 2: In the Internet. So there are several serious more vehicle
Speaker 2: efforts underway.
Speaker 1: Talk about each one's Bertrictann of scale composites. Bert Riccann
Speaker 1: is one of the world's foremost aircraft designers, and he's
Speaker 1: developed a suborbttle vehicle that they're actually flying out of Mahabi.
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 of the landing vehicle. Jeff Bezos, who I understand
Speaker 1: was here last week, is a huge space advocate and
Speaker 1: to my understanding that he intends to spend something on
Speaker 1: the order of a billion dollars over the next twenty
Speaker 1: years on space exploration, and then space then my company SpaceX,
Speaker 1: and I think.
Speaker 2: Within the next several years these entrepreneurial efforts will actually
Speaker 2: be what derives space exploration.
Speaker 1: So a little bit about each one. That's a picture
Speaker 1: of the potratan effort. It's called White Knight is the
Speaker 1: carrier plane. And then spaceship one is the thing that's
Speaker 1: held in the belly there. And this project is supposedly
Speaker 1: funded by Paul Allen, so there's quite a lot of
Speaker 1: capital also, it should make that point, quite a lot
Speaker 1: of capital.
Speaker 2: That's sort of entering this entrepreneurial space sector as well.
Speaker 2: The only drawback I think of this architecture is that
Speaker 2: it's not really scalable for.
Speaker 1: For something that would get to orbit. This is pretty
Speaker 1: good for sub orbital, but I think the architecture would
Speaker 1: need to change for an orbital vehicle. And there's a
Speaker 1: John Comas effort. He's a little irreverent. This is from
Speaker 1: his website.
Speaker 2: His his vehicle is a vertical takeoff and landing vehicle.
Speaker 2: He's made. He's made really incredible progress for somebody who
Speaker 2: has no background in.
Speaker 1: Airspace engineering and is also kind of doing it all
Speaker 1: himself with him in like three bodies, so and I
Speaker 1: think that will make something that works. Actually, if you
Speaker 1: can check out their website Agell Aerospace, it's pretty interesting stuff.
Speaker 1: But in order to get to orbit, this would require
Speaker 1: a substantial improvement in the mass efficiency, in the engine efficiency.
Speaker 2: And probably be a two stage vehicle. Jeff Bezos, who
Speaker 2: I'm sure almost everyone here is aware of. He is
Speaker 2: a pretty huge fan of space.
Speaker 1: In fact, his high school baledictorian 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 understand, 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 cases, probably an or
Speaker 1: of magnitude more, because what we're doing is really an
Speaker 1: order of magnitude more difficult. 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 predicated the.
Speaker 2: Strategic plan on a known market, something that we know
Speaker 2: for a fact.
Speaker 1: Exists, which is the need to put small to medium
Speaker 1: sized satellites into orbit. And so that's what we're going
Speaker 1: after initially, and then with that as a as kind
Speaker 1: of a revenue base, we will move into the human
Speaker 1: transportation market. It's the long term management. Company are definitely
Speaker 1: in human transportation, but I think the smart strategy is
Speaker 1: to first go for cargo delivery. Essentially satellite livery and
Speaker 1: our eventual a great path is to build the successor
Speaker 1: to Saturn five, build a super heavy lift vehicle that
Speaker 1: could you know, be used for setting up a Moon
Speaker 1: 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 testifying
Speaker 1: of our engine and on the lower right you can
Speaker 1: see the our first stage tank. This is an engine
Speaker 1: test of our main engine, which is called Merlin YEA
Speaker 1: and that that generates about roughly seventy five pounds of thrust.
Speaker 2: At sea level. This is our upper stage engine. It's
Speaker 2: about it.
Speaker 1: It's about seventy five hundred pounds of thrust in vacuum.
Speaker 1: And this is an accelerated version of our launch sequence.
Speaker 1: Our first launch will be from the SpaceX Launch Complex
Speaker 1: at Vanderberg Air Force Base an approximately March of next year,
Speaker 1: basically early next year, and we will be applying a
Speaker 1: Navy satellite, maybe communications satellite. So it's notable because often
Speaker 1: launch bicle companies are not able to get somebody get.
Speaker 2: A paying customer on their first flight. That we've been
Speaker 2: able to do that. This is also the Falcon development
Speaker 2: at SpaceX is the fastest launch veicle development in history,
Speaker 2: including wartime.
Speaker 1: That's actually Vanderberg Airport Base, which is about two hours
Speaker 1: away from Santa Barbara. Common themes between Zip two and PayPal, well,
Speaker 1: I guess both of them involved had had software at.
Speaker 2: 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 and Internet
Speaker 1: related stuff. So certainly that's a huge commonality. They were
Speaker 1: both in pala Alta, where I lived. I think we,
Speaker 1: you know, took a similar approach to building both companies,
Speaker 1: which was to have a small group of very talented people.
Speaker 2: And and keep it small. You know, I think PayPal
Speaker 2: had at its height probably thirty engineers for for a system.
Speaker 1: That's I would say it is more sophisticated than the
Speaker 1: Federal Reserve clearing clearing system. I'm pretty sure it is
Speaker 1: actually because the clearing system sucks, So.
Speaker 2: What else is there it?
Speaker 1: Generally, you know, I think the way both zip to
Speaker 1: and PayPal upgrade was was really your It was your
Speaker 1: canonical Silicon Valley startup. Uh, you know, pretty flat hierarchy.
Speaker 1: You know, everybody had a roughly similar cube, and anyone
Speaker 1: could talk to anyone. We had a philosophy of best
Speaker 1: idea wins, as opposed to you know, the person proposing
Speaker 1: the idea winning because they are who they are, even
Speaker 1: though there were times when I thought that should have
Speaker 1: been the way it goes. And obviously, you know, everyone
Speaker 1: was was an equity stakeholder. I don't give us anything.
Speaker 1: If there were two paths that you know, let's say
Speaker 1: we had to choose through one thing or the other,
Speaker 1: and one wasn't obviously better than the other, then rather
Speaker 1: than spend a lot of time trying to figure out
Speaker 1: which one was slightly better, we would just pick one
Speaker 1: and do it. And sometimes we'd be wrong and and
Speaker 1: we've picked itself off the more path. But often it's
Speaker 1: better to pick a path and do it than to
Speaker 1: just vacillate endlessly on a choice. We didn't worry too
Speaker 1: 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 giant salesforce or thinking of you know,
Speaker 1: marketing gimmicks or twelve step processes or whatever.
Speaker 2: I'm not super familiar with Friendster certainly.
Speaker 1: I mean the essence of viral marketing is do you
Speaker 1: have something that one customer is going where one customer
Speaker 1: is going to sell another customer without you having to
Speaker 1: do anything.
Speaker 2: And there are there are lots of instances of that. Friends,
Speaker 2: there might be one. Obviously, Hotmail was one, PayPal was one,
Speaker 2: 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.
Speaker 2: 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 have mansion. When
Speaker 1: somebody tries to build an orbital launch vehicle, which is
Speaker 1: not really all like distinguishable from an ICBM, there's a
Speaker 1: lot of regulation and they probably should be because you know,
Speaker 1: you don't want.
Speaker 2: To launch something and end up hitting LA 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.
Speaker 2: Is often irrational. It doesn't make any sense.
Speaker 1: But you've got somebody there who's simply executing a set
Speaker 1: of rules independent where those rules make sense, and you
Speaker 1: can try to convince them that rules don't make sense,
Speaker 1: and they won't listen to you.
Speaker 2: So probably regulation is the most annoying thing. I would say.
Speaker 1: Overall, I'm very pleased because I think we've had a
Speaker 1: very smooth development process and on the whole I can't
Speaker 1: complain at all. Yeah, why is it so expensive to
Speaker 1: send something into space? Well, let me tell you what
Speaker 1: makes a rocket hard. The the energy and the velocity
Speaker 1: required to get into orbit is so substantial that compared
Speaker 1: to say a car or even a plane, you have
Speaker 1: almost no margin to play with. Typically, a launch vehicle
Speaker 1: will get about two percent of its liftoff mass to orbit.
Speaker 1: So and that's the case for for a Falcon. And
Speaker 1: so if you can only get two percent of what
Speaker 1: your rocket ways to begin with to orbit, you can.
Speaker 2: If you're wrong by.
Speaker 1: Two percent, you're not gonna get anything to orbit, you know,
Speaker 1: come crashing down on the Pacific somewhere. So that means
Speaker 1: all of your calculations have to be right. If you miss,
Speaker 1: if you mis calculate something, you get an answer wrong,
Speaker 1: it blows up.
Speaker 2: And it's very expensive trying.
Speaker 1: To get all your answers right and then double checking
Speaker 1: that they're right and testing them all and doing as
Speaker 1: much as you can on the ground. I think that's
Speaker 1: a lot of what makes rockets expensive. The low launch
Speaker 1: rate typically is also what makes rockets Brook's expensive. If
Speaker 1: you had, you know, thousands of flights a year, then
Speaker 1: it would be a lot cheaper. Although it's a bit
Speaker 1: of a chicken and egg because it needs to.
Speaker 2: Be cheaper in order to have thousands of flights a year.
Speaker 1: But at the end of the day, when you in
Speaker 1: the final analysis, I would say that rockets really should
Speaker 1: be a lot cheaper than they are today. And I
Speaker 1: think the way they're both, the way they're operated, is
Speaker 1: just very inefficiently. And I think with with SpaceX and Falcon,
Speaker 1: we're going to we're going to show that that's that's
Speaker 1: the case. Our vehicle will sell for about six million
Speaker 1: dollars a flight. That our nearest competitor is the Pegasus
Speaker 1: from Orbital Sciences, which is about twenty five million dollars
Speaker 1: a flight, and that has less capability than our rocket.
Speaker 2: So Falcon will represent a pretty substantial breakthrough on the
Speaker 2: cost of access to space.
Speaker 1: Than Yeah, the customer base with SpaceX is just it's
Speaker 1: dramatically different, obviously from PayPal. PayPal is a consumer product,
Speaker 1: whereas SpaceX we're selling rockets, and the number of people
Speaker 1: who want to buy rockets is quite small. If anyone
Speaker 1: here has six billion dollars and once a rocket, I mean,
Speaker 1: if they glance to sell it.
Speaker 2: To a.
Speaker 1: But so it's much more of an individual selling process.
Speaker 1: There's a great deal more thought that goes into any
Speaker 1: purchase of a launch, much more so than signing up
Speaker 1: a PayPal account where which doesn't really cost you much.
Speaker 2: So, Yeah, and there's not a lot of viral marketing
Speaker 2: that's going to happen with the rocket. I suspect I'm
Speaker 2: hoping that you know, I'm not counting on it. It's
Speaker 2: a I think a successful entrepreneurs probably come in all
Speaker 2: size of shapes and flavors. I'm not sure there's any
Speaker 2: one one particular thing 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.
Speaker 2: There's always a chance of failure. So I think it's
Speaker 2: important that you really like whatever you're doing. If you
Speaker 2: don't like it, life is too short, you know, i'd
Speaker 2: 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.
Speaker 1: And what we do internally at SpaceX is we do
Speaker 1: all of the design analysis, integration of hardware testing, and
Speaker 1: then launch operations. But a lot of the heavy manpower
Speaker 1: stuff like welding together our primary structure, the heavy machining
Speaker 1: and so forth that we outsource, so we'd be a
Speaker 1: much larger company, But do all of that internally. And sorry,
Speaker 1: you had another party question. Oh yeah, Actually we.
Speaker 2: Don't have any lawyers. The regulatory stuff that we deal
Speaker 2: with is very technical.
Speaker 1: It's it's it's really a lot like trying to get
Speaker 1: an aeroplane certified with the FAA.
Speaker 2: We're just getting a rocket certified. So so our documentation
Speaker 2: is it's very I wish we could offload it to
Speaker 2: some latch. They wouldn't know what the heck to do. So,
Speaker 2: you know, how did the Wharton degree help? I think it.
Speaker 1: A business degree teaches you a lot of the terminology.
Speaker 1: It introduces you to concepts that you would otherwise. You know,
Speaker 1: this terminology is somebody to be said for that. It
Speaker 1: introduces you to concepts you you would otherwise have to
Speaker 1: learn them perrectly. I mean, I think I think you
Speaker 1: can you can learn whatever you need to do to
Speaker 1: start a successful business, either in school or out of school.
Speaker 2: School, and you know, theory should help accelerate that process.
Speaker 1: And I think it, you know, oftentimes it does it's
Speaker 1: it can be an efficient learning process, perhaps more efficient
Speaker 1: than perrectly learning lessons.
Speaker 2: But really I think you there are examples of success.
Speaker 1: Entrepreneurs who never graduated high school, and there are those
Speaker 1: that have PhDs. So I think the important principle is
Speaker 1: to be dedicated to learning what you need to know,
Speaker 1: whether that is in school or in Berkeley. Well, I
Speaker 1: should point out that Falcon outpost vehicle, it doesn't really
Speaker 1: have the same capability as either the Chinese, the Russian
Speaker 1: or the Space Shuttle vehicles that I mentioned.
Speaker 2: Falcon would be in the in the light class of
Speaker 2: launch vehicles, whereas the Space Shuttle would be a heavy
Speaker 2: class launch vehicle. So it's not it's not quite apples
Speaker 2: to Affle's comparison.
Speaker 1: However, the right comparison would be Falcon compared to the
Speaker 1: Pegasus from Overtal Sciences. Falcon is six million, the Pegasus
Speaker 1: is twenty five million. And the way we've got our
Speaker 1: prices low, our cost low, is we've really focused on
Speaker 1: every element of the launch vehicle. 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. And so we've done improvements in the
Speaker 1: propulsion system, the structure, the abionics, 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, those
Speaker 1: areas that allows us to produce the launch vehicle at
Speaker 1: 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 pricesing 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 is
Speaker 1: fraud databases to run fraud checks. That there was a
Speaker 1: lot that we had to uh, we had to interface with.
Speaker 2: And and that that that took. That took a while, but.
Speaker 1: It all came together, I think roughly simultaneously. I mean,
Speaker 1: developing the software and having it ready for for the
Speaker 1: general public reasonably coincided with us being able to conclude
Speaker 1: those deals and interface with the outside vendors and all
Speaker 1: that took.
Speaker 2: About a year.
Speaker 1: I think one thing that's important is to try not
Speaker 1: to serialize dependencies, so if you can put as many
Speaker 1: elements in parallel as possible. That a lot of things
Speaker 1: have a gestation period and there's really nothing you can
Speaker 1: do to accelerate. I mean, there's it's very hard to
Speaker 1: accelerate that justation gestation period. So if you can sort
Speaker 1: of have all those things just dating in parallel, uh,
Speaker 1: then then that is one way.
Speaker 2: To substantially accelerate your timeline. I think people tend to
Speaker 2: serialize things too much. We did do a few.
Speaker 1: Patents on PA 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 offensive, but prosecute a patent, so.
Speaker 2: I think.
Speaker 1: I think in certain industries like pharmaceuticals and so forth,
Speaker 1: patents can be incredibly important. 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 in when you've got
Speaker 1: a rapid life cycle.
Speaker 2: Well, I 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 a space solar power. I mean, if you
Speaker 1: if you calculate how much it costs to bring either
Speaker 1: the photons from uh space solar power, you know, back
Speaker 1: to Earth or the raw material.
Speaker 2: Back to Earth.
Speaker 1: It's the economics don't make sense if you just can't
Speaker 1: close the economic case, not not even by it's probably
Speaker 1: off by three orders magnit.
Speaker 2: So I think the probably the biggest thing that.
Speaker 1: Can happen is if if we if we decide to
Speaker 1: establish a base on the Moon or based on Mars,
Speaker 1: and particularly if we if we attempt to make it
Speaker 1: self sustaining, uh self sustaining based self sustaining.
Speaker 2: Civilization on on the moon of Mars. That that that
Speaker 2: is enormous.
Speaker 1: Opportunity on probably the trillion dollar level, because then you
Speaker 1: get basically interplanetary commerce going on.
Speaker 2: I think that that's pretty huge.
Speaker 1: But but it's it's it's you know, it's not going
Speaker 1: to be space all power, it's not going to be
Speaker 1: space mining. Think so let's see the government, you know,
Speaker 1: who knows. Maybe we're being spied upon, I don't know,
Speaker 1: but certainly.
Speaker 2: We are.
Speaker 1: There are some restrictions which are really annoying, such as
Speaker 1: the fact we're only allowed to employ people who have
Speaker 1: at least a green card or a citizen of the US.
Speaker 1: We're not allowed to employ anyone who does not have
Speaker 1: permanent residence in the US. Basically, if they can't throw
Speaker 1: you in jail, they won't let you work work on
Speaker 1: rocket stuff. And we have if we talk to any
Speaker 1: foreign nationals, we need a technology transfer agreement or something
Speaker 1: like that from the State Department. So our second launch
Speaker 1: is actually a non US governmental launch, and it's taken
Speaker 1: us six months to get the State upon approval just
Speaker 1: to engage in a contract discussion with them, so that
Speaker 1: that is problematic.
Speaker 2: We had several offers actually from a number of different.
Speaker 1: Entities for PayPal, and in fact, the closer we got
Speaker 1: to IPO, the more more offers we got. But we
Speaker 1: always felt that those undervalue the company. And subsequently, when
Speaker 1: we were in public, I think the public markets kind
Speaker 1: of indicated the value of the company. So I think
Speaker 1: that's one of the good things about the public markets
Speaker 1: is that they're an objective value of companies. When you're
Speaker 1: a private company, it's very hard to say how much
Speaker 1: you're worth because you have to basically think of some metric.
Speaker 1: You know, are you going to go for a multiple
Speaker 1: of future earnings. Are you going to go off some
Speaker 1: something of revenue? What are your comparable is going to be?
Speaker 1: There are all sorts of questions. It's it's really upwor
Speaker 1: debate what sort of value your company is When you're public,
Speaker 1: it's it's you know, it's whatever the market says you're
Speaker 1: you're worth, that's what you're worth.
Speaker 2: So so yeah, so I think.
Speaker 1: 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.
Speaker 2: And what else it was? Actually you had a second
Speaker 2: part of the question. Yeah, eBay had a.
Speaker 1: It was initially bill Point, and there was eBay Payments,
Speaker 1: and and it was really a pretty tough, long running
Speaker 1: battle of PayPal versus versus eBay's payment system.
Speaker 2: And it was certainly a very challenging.
Speaker 1: I mean, I think it was you know, there were
Speaker 1: times where it felt like we were trying to win
Speaker 1: the land war in Asia and you know, they kind
Speaker 1: of set the ground rules or trying to beat Microsoft
Speaker 1: in their own operating system.
Speaker 2: It's 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, and one way to retire that risk, obviously,
Speaker 1: was to sell to eBay writing software during the summer
Speaker 1: of ninety five, trying to make useful things happen on
Speaker 1: the Internet, and I wrote something that allowed you to
Speaker 1: get maps and directions on the Internet, and.
Speaker 2: Then something that allowed you to do.
Speaker 1: Online manipulation of content, kind of a really advanced blogging system.
Speaker 1: And then we started talking two small newspapers and media
Speaker 1: companies and so forth, and we started getting some interest.
Speaker 1: I mean, have time to be like, what's the internet
Speaker 1: un in Silicon Valley?
Speaker 2: But then occasionally somebody would.
Speaker 1: Buy it and they would get a little bit of
Speaker 1: money from them.
Speaker 2: And then there was basically only about six of us.
Speaker 1: There were myself, my brother who I convinced to come
Speaker 1: down from Canada, and a friend of my mom's so
Speaker 1: and then and then three salespeople we hired on contingency
Speaker 1: by putting an ad in the newspaper. But things were
Speaker 1: pretty tough in the in the early going. I didn't
Speaker 1: have any money in fact, I had negative money.
Speaker 2: I had huge student debts so.
Speaker 1: Well, in fact, I couldn't afford a place to stay
Speaker 1: and an office, so I rented an office instead because
Speaker 1: that was that was actually I got a cheaper office
Speaker 1: than I could get a get a place to stay,
Speaker 1: and then we I just sort of slept on the
Speaker 1: futon and showered at the y m.
Speaker 2: C A on Pagemall and al Camino.
Speaker 1: That's in the best shape I've ever been, you know,
Speaker 1: going to shower, workout.
Speaker 2: And you get to go.
Speaker 1: And then there wasn't There was an I s P
Speaker 1: on the floor below us, just like a little tiny
Speaker 1: I s P and which ruled hole through the floor
Speaker 1: and connected a null modem cable that gave us our
Speaker 1: Internet collectivity for like one hundred bucks a month.
Speaker 2: So, I mean, we had just an absurdly.
Speaker 1: Tiny bone rate, and we also had, you know, a
Speaker 1: really tiny revenue stream. But we actually had more revenue
Speaker 1: than we had expenses. So so when we went and
Speaker 1: talked to VCS, we can actually well, like I said,
Speaker 1: it's there's no silver bullet that I can point to
Speaker 1: as to why the our vehicle is a lot cheaper.
Speaker 1: 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 automaticitude 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 conserveably 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 reliability as well as
Speaker 1: it reduces your cost. If you've got fewer components, that's
Speaker 1: fewer components to go wrong and fewer components to buy.
Speaker 1: I think there's there's I think a fairly significant innovation
Speaker 1: in our airframe, which is a semi pressure stabilized monocoque
Speaker 1: with variable skin thickness and a common bulkhead.
Speaker 2: If you know what that means, I need a diagram
Speaker 2: to explain it all.
Speaker 1: But the net result is that it's very cheap, and
Speaker 1: it's very mass efficient, and I think easy to test
Speaker 1: and quite reliable. Our avionic system. To give you ann
Speaker 1: example our avionic system, we use an ethernet on the
Speaker 1: vehicle to communicate. They may that may not sound like
Speaker 1: a great innovation, but it is an orange vehicles. Well,
Speaker 1: the other orange vehicles communicate in the vehicle by these
Speaker 1: cereal cables that.
Speaker 2: Run the entire 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.
Speaker 2: And there's just so this, there's things like that which
Speaker 2: when you add them all up, it makes a huge difference. No,
Speaker 2: that's that's a good question. That's a good question. No,
Speaker 2: I would not. I think space X is not this
Speaker 2: is advanced entrepreneur.
Speaker 1: And it may also I can't tell you how many
Speaker 1: people have said that, you know, the fastest way to
Speaker 1: turn uh you know, but the fast way to make
Speaker 1: a small portune in the aerospace industries to start with
Speaker 1: 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. You're better off starting with
Speaker 1: something that that requires low capital, and space is a
Speaker 1: high capital effort.
Speaker 2: Sorry, last question,