Thank you for having me, it's really an honor to speak here at The National Press Club.
I have an exciting announcement with respect to space and I think one which should be able to provide some inspiration and some belief that innovation is alive and well in America and going in really interesting directions. I'm going to get to that but I'm going to preface that with the logic why such a thing is important, because it may not be immediately obvious.
So first of all, going to back to why I am in space and electric cars and solar power and Internet and stuff, it really goes back to when I was in college and I was trying to think of what were the most important things that would affect the future of humanity. What could have a significant positive effect on the future of humanity, and the three things that I came up with were, the Internet, sustainable energy, both in production and consumption, and space exploration but specifically making life multi-planetary, and I didn't expect when I was in college to actually be involved in all three of those areas but as a result of some success in the Internet arena, that gave me the capital to get involved in very high capital endeavors like cars and rockets, which really are very high capital.
I'm mostly going to talk about space. So I want to explain why do I think space is really important, and what about space? Because I believe in building things up from a rational framework of logic and so you start with, sort of, how do you decide that anything is important? And I think the lens of history is a helpful guide here, in that things that may seem important in the moment but aren't that important in the grand scheme - over time, if you look at things over a broad span of time, things that are less important sort of fall away. If you look at things from the broadest possible span of time, as relates to life itself, the evolution of life has been - primitive life, I think, started around 3.5 to 3.8 billion years ago, and what are the important steps in the evolution of life? Obviously there was the advent of single celled life, there was differentiation into plants and animals, there was life going from the oceans to land, there was mammals, consciousness, and I would argue, also on that scale should fit, life becoming multi-planetary.
In fact, I think, it is consciousness which makes this the next step. You really need consciousness to design vehicles that can transport life over hundreds of millions of miles of irradiated space to an environment that they did not evolve to exist in. It would be very convenient, of course, if there was another planet just like Earth nearby, but that's unlikely and as it turns out, not the case. So there's no way for life to just, by dint of natural selection, just sort of get over to Mars and survive. So you need consciousness, but I think it is the next natural step. If one could make a reasonable argument that something is important enough to fit on the scale of evolution, then it's important, and maybe worth a bit of our resources.
One can also think of it from a standpoint of life insurance. There's some chance, either as a result of something humanity does, or as a result of something natural like a giant asteroid hitting us or something, that civilization - life as we know it - could be destroyed. There's clear evidence for life being destroyed, multiple times, in the fossil record. So, we don't need to guess that this is something that can occur, it already has occurred. The permian extinction being a particularly interesting one as I think that destroyed between 90 to 95% of all species on Earth, which doesn't tell the full story as most of the remaining species were fungi. "So, unless you're a mushroom, you're out of luck."
If we think it's worth buying life insurance on an individual level, then perhaps it's worth spending more than - spending something on life insurance for life as we know it, and arguably that expenditure should be greater than zero. Then we can just get to the question of what is an appropriate expenditure for life insurance, and if it's something like a quarter of a percent of the GDP that would be okay. I think most people would say, okay, that's not so bad. You want it to be some sort of number that is much less than what we spend on health care but more than what we spend on lipstick. Something like that, and "I like lipstick, it's not like I've got anything against it. Can't wait for that comment to go out there." So that's kinda the thing that I - I think it's important that we give a little bit of our mindset towards.
I think it's also one of the most inspiring and interesting things that we could try to do. It's one of the greatest adventures that humanity could ever embark upon. You know, life has to be about more than solving problems. If all that life is about is solving problems then why bother getting up in the morning? There have to be things that inspire you to be proud to be a member of humanity. The Apollo program is certainly an example of that. Only a handful of people went to the Moon, and yet, actually, we all went to the Moon. We went with them vicariously. We shared in that adventure. I don't think anyone would say that was a bad idea. That was great. You know, we need more of those things. Or, at least, we need some of those things. Even if someone is in a completely different industry and a completely different walk of life, it's still something that's going to make you feel good about the world, and that's the other reason why I think we should try to do these great things.
Then now, let's get to the question of, well, how do you do these things? How do you make life multi-planetary? What are the fundamental obstacles to that? Because it's all well and good if everyone agrees that that's worth doing, but if we can't do it, well, it doesn't matter. So, the pivotal breakthrough that's necessary, that some company has got to come up with, to make life multi-planetary is a fully and rapidly reusable orbit class rocket. This is a very difficult thing to do because we live on a planet where that is just barely possible. If gravity were a little lower it'd be easier, but if it was a little higher it would be impossible. Even for an expendable launch vehicle, where you don't have to have any recovery, after a lot of smart people have done their best to optimize the weight of the vehicle and efficiency of the engines and the guidance systems and everything, you get maybe 2 to 3% of your liftoff weight to orbit. That's not a lot of room for error. If your rocket ends up being just a little bit heavier, you get nothing to orbit, and this is why only a few countries have ever reached orbit.
Now you say, okay, let's make it reusable, which means you've got to strengthen stages, you've got to add a lot of weight, a lot of thermal protection, you've got to do a lot of things that add weight to that vehicle, and still have a useful payload to orbit. Of that meager 2 to 3%, maybe if you're really good you can get it to 4%, you've got to add all that's necessary to bring the rocket stages back to the launch pad and be able to refly them, and still have useful payload to orbit. It's a very difficult thing. This has been attempted many times in the past, and generally what's happened is when people concluded that success was not one of the possible outcomes, the project's been abandoned. Well, some government projects kept going, even when success was not one of the possible outcomes, unfortunately, but then eventually they get cancelled. So it's just a very tough engineering problem.
It wasn't something that I thought - I wasn't sure it could be solved for a while, but then, just relatively recently - in the last 12 months or so - I've come to the conclusion that it can be solved, and SpaceX is going to try to do it. Now, we could fail. I'm not saying we're certain of success here, but we're going to try to do it, and we have a design that, on paper, doing the calculations, do the simulations, it does work. Now, we have to make sure those simulations and reality agree, because generally when they don't, reality wins. That's yet to be determined, and the simulation that you may have seen in the lobby coming in, which will be posted to our website right around now, will show you a simulation of what we plan to do.
That simulation is mostly accurate but there are a few errors that were inaccurate. In some cases just to timing constraints we were unable to work with the simulation people to get it completely accurate, and in some cases we're keeping a few technical things under our hat, but it gives you a pretty good idea of what we intend to do. Which is to, basically, for the first stage, after stage separation, to turn the stage around, relight the engines, boost back to the launch page and land propulsively on landing legs, and then, with the upper stage, after dropping off the satellite, or Dragon spacecraft, then do a deorbit burn, reenter - you need quite a powerful heat shield - steer aerodynamically back to the launch pad - you don't actually need wings by the way, it's kind of a common misconception around, you just need some lift over drag number, or lift vector - and steer back to the launch pad, and then land propulsively with the upper stage, also with landing gear. So we'll see if this works, but it's going to be certainly an exciting journey and if it does work it'll be pretty huge.
If you look at, say, the cost of a Falcon 9 rocket. It's a pretty big rocket. It's about a million pounds of thrust. It is the lowest cost rocket in the world, and even so, it's about $50 to $60 million, but the cost of the fuel, and oxygen and so forth, is only about $200,000. So obviously, if we can reuse the rocket, say, 1000 times, then that would make the capital costs of the rocket per launch, only about $50,000. There'd be maintenance and other things that we'd factor in there, and fixed costs and some overhead allocation, and what not, but it would allow for about a 100 fold reduction in launch costs, and this is a pretty obvious thing if you think at it applied to any other mode of transport. You can imagine if planes were not reusable, very few people would fly. You know, a 747 is about $300 million. You'd need two of them for a round trip, and yet I don't think anyone here has paid half a billion dollars to fly, and the reason is because those planes can be used tens of thousands of times and so all you're really paying for is fuel, and pilot costs and incidentals. The capital cost is relatively small. That's why it's such a giant difference.
I thought of another way. I mentioned that we could probably afford a quarter of a percent of our GDP for making life multi-planetary, that's the cost if you have a fully reusable rocket. The cost if you don't have a fully reusable rocket would be 100% of the GDP, and that would mean no money for food, health care, or anything else. Obviously, that's impossible. So that's why, I think, a fully and rapidly reusable system is fundamentally required for life to become multi-planetary, for us to establish life on Mars - Mars is the only realistic option for another planet - Venus being too hot, Mercury being way too hot, Jupiter being a gas giant and the moons of Jupiter are a possibility but it's much further out and harder in a lot of different ways, and the Moon is sort of too small and resource poor to make life multi-planetary. Emphasis on the planetary, not just to have a little base. A little base is not that interesting, but a self-sustaining human civilization that's on multiple planets, where life could continue even in the event of a calamity on Earth, that is the real thing.
Yeah, so I think this is pretty exciting and I think everyone in America and arguably the rest of the world, should be pretty fired up about what we're doing and hopefully wish us well, and we'll do our best to succeed in this regard and it's definitely going to be an adventure. I'll say one final thing, which is, that sometimes people say, well, what is the business model for Mars and sometimes they think, well, can you mine Mars and bring things back and that is not a realistic business model for Mars because it's always going to be far cheaper to mine things on Earth than Mars, but I do think that there's a business model where if you can reduce the cost of a flight to Mars, or moving to Mars, to around the cost of a middle class house in California, which do seem to be rising over time, maybe not recently but certainly still pretty expensive. So maybe to around half a million dollars, then I think you'd have enough people who would buy a ticket and would move to Mars to be part of creating a new planet and be part of the founding team of a new civilization. You'd obviously have to have quite an appetite for risk and adventure but there's 7 billion people on Earth now. There will be probably 8 billion by the mid point of the century, so even if one in million people decided to do that, that's still 8,000 people, and I think maybe more than one in a million people would decide to do that. So that's what I think is perhaps the Mars business model, if you will, and then ultimately Mars can probably export intellectual property like software, inventions and things like that. If you can beam it back with photons, that's a better way to go.
Alright, so I'm happy to answer any questions.
In the near term, the technology will be applied to launching satellites and to resupplying the space station, taking cargo and crew up there. That's the near term thing and that's what SpaceX's current business is predicated on. We're doing okay in that regard. We've got about three billion dollars in revenue under contract. Yeah, it's okay. It's spread out over the next five years, so it's not all at once, unfortunately, and we do have to do lots of things to get that money, but that's not bad. We have been profitable for the last four years. Not hugely profitable but moderately profitable, and we expect to be the same this year, and I think that's somewhat necessarily. Obviously if the amount of money going out exceeds the amount of money coming in, then sooner or later we'll die. So we have to make sure that we have more money coming in than going out, but that seems to be going reasonably well.
[Question about SpaceX being the leading launch provider.] If measured by launch contracts awarded, that is correct. The United States has been uncompetitive in the international launch market for a long term and Russia has actually been the leader in that regard, followed by Europe and then, to a lesser degree, India and China. Although China is growing rapidly. Except in the last few years, where the United States has done the best and that's due entirely to SpaceX.
As far as launch is concerned, I think it's fair to say that the United States has by far the most competitive launch capability with SpaceX. The only realistic competitor is China. I tell ya, it's not the most easiest thing, competing with national governments, which are heavily subsidized, and they have certainly set their sites on us, and have told us that. But that's okay, I think we'll win. With respect to China, we have a conscious strategy of filing the absolute minimum number of patents. We file very few patents on the rocket and we've very careful about cyber-security and we're very careful about physical security, because there's obviously history of absconding with intellectual property in China. The enforceability of patents against the Chinese government is zero. Contrast that to Tesla, where Tesla files a lot of patents because the competitors are commercial companies and there's enforceability. But not to worry about launch, we'll take care of that.
We do spend a fair bit on space, much more than any other country, from a government standpoint. I think we'll continue to be the biggest spender on space in the United States, but by the same token, I think the budgets in absolute terms will decrease, just because of overall compression on the federal budget. We have a huge budget crisis and largely have our head in the sand and are ignoring the reality that we're spending far more than we're bringing in. That chicken will come home to roost. I think we can expect massive compression of all budgets including space from a government standpoint, just because we simply won't have any other choice.
Actually our primary launch facility is Cape Canaveral and we're building a launch site at Vandenburg Airforce Base in California. We're not currently using the Marshall Islands launch site. We did use that initially but the logistics are just too difficult, getting out there. It's like Waterworld out there, it's miles from anywhere. It's convenient in some ways but then inconvenient from a logistics standpoint. So, our primary launch site is Cape Canaveral and then Vandenburg and we also plan on establishing a commercial launch site which would - because it only makes sense. Vandenburg and the Cape are actually air force bases and it makes sense to actually concentrate air force and NASA business at those two facilities and then concentrate commercial launch activity at a commercial launch site, just as occurs with aviation.
I should first of all say that SpaceX would not be where it is without the help of NASA, both historically the great things that NASA has done and currently with the business that NASA gives us, and the expert advice and everything, so I should make sure to strongly credit NASA in this arena in terms of how helpful they've been. We do have a bit of a challenge with the air force, and this is something where I'm surprised there is not more journalistic interest because the air force is currently proposing to extend the sole source monopoly of Boeing and Lockheed until 2018. The reasoning given for that is preservation of the industrial base. Although, oddly, for some reason we're not included in the industrial base, and this is doubly odd because the main rocket used by Boeing and Lockheed is the Atlas 5 which has a Russian main engine and a center airframe, the interstage, and the forward airframe, the faring, which are made in Switzerland. So which industrial base are we talking about preserving? The one in Russia? That doesn't make much sense.
"You know, we have 1% of the lobbying power of Boeing and Lockheed. If this decision is made as a function of lobbying power, we are screwed."
[Question about reusability diverting from servicing the space station.] I wouldn't in any way consider this to be a diversion. This is a parallel effort and so it's not really impacting our sending of cargo to the space station, nor is it effecting our human spaceflight development activities that we're doing in partnership with NASA. Which is going really well. So think of this as a parallel thing. It doesn't really affect the ascent phase of the vehicle but we're really trying to have the descent phase not be: hits atmosphere and explodes. That's actually what happens to all rockets, otherwise.
With the Soyuz failure that occurred recently, it will actually likely result in a delay in our launch to the space station because it sort of pushes out the other missions and NASA rightly wants to have the appropriate level of astronaut - the right number of astronauts with the right training and everything - on board the space station when we arrive. So, it looks like things will be more like January for the launch to the space station, and that is contingent upon the Russians meeting the schedule that they've currently stated.
I think, despite the recent failure of the Soyuz, it is actually a good vehicle. It has a good track record. I think there may be some concerns going future long term with Russia in that a lot of their expert rocket engineers have retired, because it is much more compelling, financially, going into the oil and gas industry in Russia than it is to go into the rocket industry. So that expertise is tailing off and I think that may lead to decreased reliability for Russian rockets in the future. Hopefully it doesn't.
I think long term, like I said, I think long term China is the serious competitor. "If you look at Russian rocketry, since the fall of the Soviet Union, there's really been no significant developments. The technology has barely progressed." No new rockets have launched since the fall of the Soviet Union, so obviously what that means is that as soon as that technology level is succeeded then they're rendered redundant and they have no ability to compete, and I think that's what's likely to occur with the Russia launch industry. [How long do they have?] 5 to 10 years. [and then China moves in?] I'm quite confident we can take on China. Maybe I'm overconfident but I'd rather bet on us than China. Could be famous last words.
I think here it's important to clarify what can "the Falcon 9/Dragon system that we're launching today, what can it do? If the degree of safety required was equivalent to that of the shuttle, we could actually launch astronauts on the next flight." On the one that will likely go up in January. The system is fully capable of carrying biological cargo. You know, which is people. However, what it doesn't have is a launch escape system. The shuttle also does not have a launch escape system. Both NASA and we agree that a launch escape system is a wise move. It will take us about two years, maybe at the outside, three, to develop and qualify the launch escape system and the way we're doing the launch escape system is, I think, a significant innovation beyond what's done in the past where escape thrusters are bolted into the sidewall of the spacecraft, so you can actually use those same thrusters for propulsive landing. Which is cool, and we're actually talking with NASA about potentially doing missions to Mars and other places using Dragon as a general science delivery platform. To various places in the solar system. So that's an important distinction. We could launch astronauts next flight, if requirements were the same as the shuttle, but if we want to add a launch escape system, it's two to three years.
Relatively speaking, we're a pretty open and transparent company. There are some restrictions here, which are ITAR restrictions, and they're not restrictions that we have any choice over, because advanced rocket technology is considered protected technology. We can't just publish to the general public a detailed analysis of failure investigations that contain secrets on how to make rockets. That's actually a violation of the law. All that information is available to NASA and to the FAA, so for missions that we do for NASA, they have a detailed oversight role, and then the FAA as well has an oversight role. If you're comfortable flying commercial aircraft then you should be pretty comfortable with what we're doing in commercial rocketry.
[Question about SpaceX surviving accidents that result in loss of life.] Yeah, I think that'll be okay. If you look at all other modes of transport, aircraft, boats, cars, I'm somewhat familiar with cars, there's loss of life in every mode of transport. "If one set a standard that you couldn't have loss of life, then there would be no transport. You wouldn't even be allowed to walk." You have to allow for some amount of risk. It needs to be reasonable and measured, but you have to allow for that. I think a commercial company, arguably, would be better able to deal with that than a government entity because if you're the government then you have the congressional hearings and it tends to become sometimes a political football. [Congress investigates private companies too.] Oh sure. That certainly occurs when it appears like there's been a violation of the rules or something like that, but as long as things are within the rules - obviously there's fatal car accidents every day but you don't get a congressional hearing on it.
Certainly NASA is our largest customer and our most important customer, but if you look at our launch manifest we have over thirty Falcon 9 missions under contract, thirteen of those are with NASA, so effectively we've got about 40% or so of our business with the government. "Let's say you made pencils, well, about 40% of your business would be with the government. That's not an unreasonable number."
If you look at the amount of money that is allocated to commercial space, relative to the overall NASA budget, you'll see it's a pretty small number. Last fiscal year it was about $300 million but that was split over four companies. We got about $75 million or something like that. That's about a half of a percent of the NASA budget. "It's important to bear in mind that we'd love to hire a lot more people than we currently hire but we also can't run out of money and die." So we can only hire a few people. In terms of what characteristics we look for, we're generally quite engineering centric so we're big fans of what have people done from a hard core engineering standpoint. What tough engineering problems have they solved. How they solved them. We're less interested if it's been more of a paper oriented role that they've had because we try to minimize that at SpaceX. [Are you more demanding than NASA?] Well, that's a tough question to answer. I think we're probably more demanding. NASA's a large organization. I think the level of demand on people based in different parts of NASA varies significantly. I'm sure that there's parts of NASA which are just as demanding, maybe more demanding than SpaceX, but SpaceX is an extremely demanding organization and we expect people to work super hard and be very good at their job.
"The climate debate is an interesting one. If you ask any scientist, are you sure that human activity is causing global warming, any scientist should say no. Because you can not be sure. On the other hand, if you said, do you think we should put an arbitrary number of trillions of tons of CO2 into the atmosphere and just keep doing it until something bad happens, they'll probably say no too." We, essentially, are running an experiment, and that experiment is to test the carbon capacity of the oceans and the atmosphere. Now, that experiment may turn out to be fine. It may also turn out to be really bad. I just don't understand why we would run that experiment. Particularly when you consider that, at some point, we have to get to something that is sustainable. We have to have sustainable production of energy, and consumption of energy because, tautologically, if it is unsustainable you will run out of it. You can certainly say, well, let's say hypothetically, CO2 was good for the environment, and let's say hypothetically, the United States possessed all the oil in the world. Well, you'd still have to get off oil, because it's a finite resource and as you start to run out of it, the scarcity would drive the cost up and cause economic collapse. So why not do it sooner? I'm not saying it has to be a radical or an immediate change, or that people need to inject a great deal of misery into their lives to avoid CO2, but we should lean in that direction. We should lean in the direction of supporting technologies that are sustainable and lean slightly against technologies that are unsustainable. That just seems pretty sensible. Even if environment isn't a factor. In fact, my interest in electric vehicles predates the current climate issue. I mean, I was interested in electric vehicles 20 years ago when nobody was really talking about global warming, because I just thought it was the obvious means of transport, but I do think the climate thing does add urgency to things and I do think we will see quite a significant increase in the cost of oil. Just from a demographic standpoint you've got China, India, and a few other countries that represent almost half the world's population and have very few cars on the road but are rapidly adding cars to the road. So you can expect a doubling of demand and I think it's going to be difficult to achieve a doubling of supply.
[Question about the Solyndra investigation, and Tesla's DOE loans]
In the case of Solyndra, it's obviously become somewhat of a political football here. The DOE programs necessarily are portfolio programs where some number of the things that are funded there are going to fail. That should be assumed. You should not assume a 100% success. In the case of Solyndra, people forget that private investors lost twice as much as the government did, and there were some really first rate venture capitalists in Solyndra. It's not as though these were suckers. If you've got first rate venture capitalists who have lost twice as much money as the federal government, you have to say, okay, it was a bet, the bet didn't work, but that doesn't mean something really terrible happened. The most you could say is that Solyndra executives were too optimistic. They presented a better face to the situation than should have been presented in the final few months, but then, if they didn't do that, it would have become a self-fulfilling prophecy of - as soon as a CEO says I'm not sure if we'll survive, you're dead. You know, I think people are making too much of this Solyndra thing. Do I think there are parallels with Tesla? I mean, we got a loan from the DOE, from a different program I should point out, but in our case, we have significant capital reserves. We have more money at Tesla than we need to complete the program in question and we don't face the same issue that Solyndra faced which is extreme competition from China on a commodity product that drove the cost per watt of solar panels from $4/watt down to $1. That's the fundamental reason Solyndra went down. Solyndra would have been okay at $2/watt but not $1, and that's it. There's another thing which is not getting enough press, which is, "how much money do you think the Chinese government has put into solar? Estimates are about $40 billion. Okay? So, we've got our team operating on a pittance, and we've got China operating on $40 billion, and our team lost. That should be no surprise."
[Has that tarnished the view of the solar industry?] There's probably a little bit of tarnish, but it's unwarranted tarnish. The scenario that occurred with the cost per watt of solar was something that I expected would occur. "So if someone had asked me, do you think Solyndra is a good investment, I would have said no, you're going to get your ass kicked." Solar City works on an overall system, where they do everything except the panel, and they own the end customer relationship. They're kind of like Dell or Apple. You know, Apple don't make the CPU or the memory or the hard drives but they design the overall system and they provide it to customers through the sales and marketing service and that's what Solar City is. "Solar City is doing super well. They're growing at 50% to 100% a year with positive cash flow, which is pretty incredible. I just show up at the board meetings to hear the good news. It's really great." All credit to those guys. For them, the more rapacious the competition on solar panels, the better.
There's lot of great ideas that people come up with all the time. I don't necessarily wish I'd had them myself, but certainly what Larry and Sergey came up with with Google was really smart, you know, with the backwards links to pages, obviously what Facebook has done, Twitter. I mean, they're great examples of the Internet. I-Pad, obviously, i-Phone. Apple, Google, Facebook, I mean, these are examples where you're sort of like, who's their competition? I'm not even sure.
The United States - it's sort of like that comment about democracy - it's a bad system but it's the least bad. "Well, the United States is the least bad at encouraging innovation." Silicon Valley actually, I'd say, is particular good at encouraging innovation. Silicon Valley is just orders of magnitude better than any place in the world for creating new companies and fostering innovation. It's quite remarkable. I don't think we necessarily need to worry about some other country out there out-innovating us. I don't think people realize that almost all innovation in the world comes from America. A ridiculous percentage. But that doesn't mean it couldn't be better. I think we need to be concerned about excess regulation, a tax structure that potentially doesn't promote innovation. The thing to remember is that when companies are little they're like tadpoles. I mean, they just die very easily. You need to have an environment that tries to protect little companies and help them get bigger. Silicon Valley does that very well and America, in general, does that very well a lot of the time compared to other countries. Most other countries tend to foster and protect the big companies. Big companies don't need protection.