VALUE: After Hours (S08 E11): First Principles Thinking Explained: The Elon Musk Method That Changed SpaceX Forever

During their recent episode, Taylor, Carlisle, and Eric Jorgenson discussed First Principles Thinking Explained: The Elon Musk Method That Changed SpaceX Forever. Here’s an excerpt from the episode:

And he goes to Russia. There’s great stories and like going to Russia and trying to like haggle and buy an intercontinental ballistic missile as like the basis for the rocket. And the Russians are like spitting on him and making fun of him and like doubling the price when he’s, he’s trying to negotiate.

And he says like, I got, I got mad. And when I get mad, I try to reframe the problem. And so he’s literally on a flight home from Russia like hung over and pissed because they made him drink a bunch of vodka and they wouldn’t sell the rocket.

And he’s like, starts doing the math on, well, why does a rocket cost this much? Like it costs $60 million to buy this thing. And the first principles piece is he’s like, all right, how much, what are the material components of the rocket?

It’s X amount of carbon fibre, X amount of steel. What is the mass of those things? And what is the, what is the weight of the material that goes into the rocket?

And for a rocket, it turned out to be like 2% of the price of the rocket was the value of the raw material. And if you don’t know, like the, you know, maybe for an iPhone or a car, it’s like 30% is a much more kind of normal consumer thing. So he’s like, all right, why are these things so expensive?

And he started to dig into sort of the structure of the industry and the process of the manufacturing. And he’s like, oh my God, there’s all these like super specialised aerospace guys. And they, they’re actually all incentivised on cost plus contracts.

And there’s like, they’re subcontracting to subcontractors to subcontractors. There’s just a bunch of crazy inefficient things that are going on because we just really incentivise to be efficient. But if this is the system that we allow to exist, we’re never going to get off earth because we have this perception that launch costs are so high.

So he’s like, all right. He collects a bunch of engineers. I think this is actually a really interesting, like a playbook to run too.

He’s like, I went and found, you know, a collection of engineers that have worked on the major launches and space vehicles over the last 30 years. And he had a, for a series of Saturdays, like these working sessions to test the viability of different design rocket designs. And that’s how they sort of came to terms with the fact that there may be an order of magnitude or two potential for improving space launch costs and working towards this ideal of a reusable rocket, which would do another order of magnitude or two.

And so the first principles model is really just starting from what is the maximum possible efficiency? Like what is, what is the, what do the laws of physics allow and working up from there rather than allowing the existing historical analogy or prior best art or best practises to allow your starting place and trying to make incremental efficiency gains from there. And so he says it is important to use both, but like your perception of the ceiling of potential improvement when you start from the existing analogues is just so much lower than if you start with like, what is the, what is the limit of what is possible and how close to that can we get?

And that is where his instinct to like, or his drive to sort of question assumptions and push and simplify and drive things down to get closer and closer and closer. Cause he’ll, you know, there’s stories of him in meetings being like, there is no first principles physics based reason that this design cannot work. Like there’s no reason you can’t build a gigantic tower to capture the landing legs.

And there’s always friction in this. Like all the engineers are like, that’s, that’s stupid. That’s crazy.

We can’t do that. Every rocket needs landing legs. And he’s like, just give it a week, just give it a day.

Just think really hard for a day about like, whether there’s any actual fundamental physics based limitations for why this can’t work. And if you have them, I’m happy to hear them. And if you don’t, then let’s start working on a design.

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VALUE: After Hours (S08 E11): First Principles Thinking Explained: The Elon Musk Method That Changed SpaceX Forever

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