Spacex, Tesla, Apple discussed on Acquired



Was interesting because in some ways I'm trying to think if the analogy holds in the other direction like apple has has apple vertically integrated the IPHONE. They've it's whereas extended vertically integrated an boy. I think there's actually a great contemporary post on the fact that this is not vertically integrated that they they do make they make the things that they've you as too tightly couple so like us the Oh ass and actually interesting. They don't make them. They design them at true. Then they outsource thousands of race right they have in a Lotta ways really out. I mean if anything apple is kind of like the Detroit on your manufacturer model Wailing. They design it. They make the core engine and then have a ton of suppliers for all the other parts yet but they have so much power over those suppliers that they're able to squeeze margins on those Yup whereas there was nobody squeezing margins in aerospace. Everybody was happy to let their downstream partners have fat margins. Yup Yup Yup because again from the Lockheed's Boeing's perspectives the higher the total price. The better the more money they made they were just a straight percentage. Yeah so interesting. It's funny I. I didn't articulate it quite the same way you had but I tried to write out. Like the bullet points of the Business Model. Which was like one get paid exorbitant fees but not as exorb- exorbitant as everyone else for every launch. Nasa is willing to pay this because the old world competitors had crazy high cross structures and importantly no reusability hasn't been important yet but will be and so what I th I think. They're gross margin positive on every launch. Now on the first try even without re I'm not totally sure but that's what what Some estimates suggest that to is take those profits to fund the development of more usability and more lower cost systems. Three make even more margin from doing that and getting paid for those contract launches of Satellites Etcetera Four. Enjoy these fat margins. Well everyone else is trying to catch up to reusability and trying to vertically integrate or squeeze all their suppliers and as a data point here. You know space x charges less than their competitors but obviously well above their their cost basis. If they're actually able to harvest all this margin there they would have been giving away by vertically integrating The data point is that Falcon nine missions even to the US government with with the additional thirty million in Costco for under one hundred million dollars and you L. contract that was I can't remember which one. But basically has all of the launches at four hundred million guns so like there's just so much margin in there so then then component five use the funds from these fat margins to fund their own owned and operated businesses like Starlink. Or like the the Mar- Steph that. I think we'll talk about here. We're basically SPACEX themselves will be able to charge for those owned assets on an indefinite basis. Like they're able to like bootstrap the production of rockets using NASA and then bootstrap their their owned and operated business with all this margin that everyone let them play with. It's like this to step bootstrap debts pretty awesome Couple they quick ones. I WanNa hit on One We've alluded blue origin. A little bit on this and that's probably another episode for another day but I you know with different strategies different approaches but strikes me as interesting back to the whole you know Funding Money Mo problems like basis is putting a billion dollars a year into blue origin. Visas is selling a billion dollars Amazon. Stock that could be used for Lord but certainly a lot more than one hundred million dollars has gone in in terms of equity funding into blue origin. It's interesting though. Lake SPACEX in terms of equity funding has received so much less money and Ilan from the beginning was focused on this is going to be revenue generating profitable business and so on the one hand you'd think naively like oh they have so much fewer resources but I think it's in many ways precisely because of their resource constraint and having to build this profitable business that they've figured out how to disrupt the industry and accomplished so much and this is like the like we see all the time in on this show and in startups rate is lake. Sometimes you think when you're out of the gate lake you see these companies raise tons of money and like think they're gonNA know clear out the industry and have all the success but it ends up hurting them because like they're not forced to not forced to build a real business. Yeah I hadn't really thought about it in those terms. And then the last one is related to that man is Alon Across Cross spacex and Tesla is he dislike the living embodiment of you know the skin in the game. You know Axiom like this guy like absolutely put his money where his mouth is. And you can say many things about John But you know he's been quoted on so many occasions saying like if either. Tesla goes bankrupt. I will personally go bankrupt. And that is has it should be and the number of near death moments. They've had and pulled through like if that were the case if he really you know I'll be fine. I'll still have my McLaren. If this goes bankrupt like would they have had the fortitude and he had the fortitude to to pull through. I don't know I do think so. I think you're reversing the chicken and the egg button. That's why it's a chicken or the egg thing the way that I would think about. This is like He launches drive to make this thing. Success is the reason like it's not any monetary skin in the game. He I mean he cares if he goes bankrupt but not really like if he really cared about not going bankrupt than he wouldn't have doubly leveraged himself across two companies so like clearly the thing he cares about is succeeding in this mission and that is what drove him to put all of his money in. It's not like he's like logged into succeeding now because of the fact that he's so invested but he definitely burned. The bridge is behind him. Yes yes there is no way for him to I mean now there's a way out because there is just he he still owns probably forty something percent of space x and there's so much equity value there that you know. Yeah he he. There's there's a way out for Tesla purely by by getting OUTTA SPACEX Yup but this point and it's such a good business truly like making making one hundred hundred million bucks a pop if you can do that twice a month. I yeah especially if you can reuse those rockets yeah sorry go go for your themes. Ya Now. I've got a couple of fun ones so I WanNa talk about a different type of vertical integration which is Spacex assembles their rocket horizontally and most other companies assemble their rockets vertically and As you can imagine when you lay them on the ground and you build them that way you don't have to take really expensive crazy hydraulic machines and move around. You know you don't have to construct a skyscraper around your rocket and this is a. I'm using this as an example. But it's super illustrative of House. Space X problem solved every single component of building their company in cash constrained environment into finding a more innovative more inexpensive way of doing something and like. I think Ilan has this interesting is yeah actually the Russians. I don't know fizzy Lonner Gwen but the Russians actually manufacture them on the ground. Most of these companies actually manufacture them vertically. But the the number. That gwen sites is that She says Spacex rocket factory is fifty cents a square foot. And if you've vertically integrate your rocket no pun intended Stand up and and assemble at that way Space Ends up effectively costing you twelve to eighteen dollars a square foot. Because you're you're moving people up and down to build these rockets way the heck up in space and it's just like it's just a great l. Association of the incredible constraints that SPACEX was under that no other player that's ever reached the scale that they're at has been under.

Coming up next