Rocket Billionaires

by Tim Fernholz

  There are other magic numbers in the rocketry business. Konstantin Tsiolkovsky, a Russian mathematician and rocket theorist, derived many of these expressions at the turn of the twentieth century. The self-educated child of Russian peasants, he contemplated, on paper, technological theory that would not be realized for more than half a century. (You will not be surprised to learn that he was an early enthusiast of Martian settlement.) More practically, he was the first to derive the important relationships between the amount of propellant a rocket must carry and its weight, and between its propellant and its destination. Remember that rockets must carry all their own fuel and oxidizer, since, in order to burn anything in space, you must bring all the ingredients—there’s no oxygen hanging around.

  Once we know how much energy we need to get to orbit—at least enough to move at 17,500 miles per hour—and how much energy a given propellant mix can generate, we know exactly what percentage of the vehicle’s total mass needs to be propellant in order for the rocket to reach its destination. The effects of this rule are known as “the tyranny of the rocket equation,” and the physics are despotic indeed.

  Consider that a common rocket propellant in use today—a mix of ultra-refined kerosene and liquid oxygen—requires that an orbital rocket be 94 percent propellant by mass. That’s an extraordinary number as compared with an automobile, where 3 percent of its mass is fuel, or even a jet fighter, where the figure is 30 percent. And for a rocket, too little propellant or too much mass means disaster, since there isn’t a lot of margin for error when you are moving that quickly at that altitude. Margins that small mean that the simplest techniques that engineers use to deal with problems—like overengineering parts to withstand more force than they might be expected to endure—aren’t as easy in a rocket.

  There are ways to improve this figure: the most common is called staging, which in effect stacks multiple rockets on top of each other. In flight, once the first rocket’s fuel is exhausted, its structure, tanks, and heavy engines all drop away. Now you can start your rocket equation over again at a much higher altitude and velocity, so your vehicle carries a higher ratio of rocket to propellant—that is, more weight. That is why the space shuttle used a discardable fuel tank and solid fuel rocket boosters to achieve liftoff. The ratio refers to the mass of the propellant versus the rest of the rocket, which includes the vehicle itself—the metal structure, the plumbing, the electronics, the engines. That’s before we get to the payload and, if the payload involves humans, the systems needed to make sure those humans can breathe, eat, drink, go to the bathroom, and not get broiled or frozen alive. The space shuttle’s launch mass was 85 percent propellant, 15 percent rocket. But only 1 percent of its mass was payload carried to orbit. It weighed more than two thousand tons on the launchpad, fully loaded—but it carried just twenty tons of people and cargo to space.

  These fundamental physical and mathematical laws, expressed here in their most basic form, were the dominant and cold realities that SpaceX’s engineers faced as they sought to build the first privately funded orbital rocket in US history. They had an initial budget of roughly $100 million—but that was a fairly small sum compared with the $500 million the government had given to both Boeing and Lockheed five years before to develop their own rocket engines, on top of which they made their own significant investments. Expectations for SpaceX were not high outside of its offices: it was just the next BlastOff. Even his earliest advisers were skeptical of Musk’s ambitions. At the start, the entrepreneur envisioned his first rocket being ready for launch in November 2003, less than a year and a half after the company opened its doors.

  “He had very aggressive schedules and assumptions about what could be done that didn’t sync up with what I thought was possible for a brand-new rocket company,” John Garvey, who had brought Musk into the world of rocket makers, told me later. Garvey decided not to join the company as its business plan grew more ambitious, preferring to pursue his small-satellite rocket. He was a veteran of Boeing’s rocket development cycles, and took that experience to heart. “Delta III was done by professionals who had a history building rockets; [it cost] $300 million or something, it took a couple of years and it took a couple hundred people, and then it wasn’t successful initially,” he told me. “How can you beat that? Even if you bring in the smartest people and do everything from scratch, you can’t knock that down by a magnitude.”

  On the one hand, Garvey was right: Musk’s very ambitious schedule would never be met. His optimistic expectations, often shared in the press, gave Musk a reputation for overpromising. At the same time, as we’ll see, the promised product usually arrived. But the tension between schedule and reality often drove SpaceX’s employees up the wall and would become a constant challenge for the company to manage. But the high expectations that Musk set helped create a powerful culture of accountability at the company, reminiscent of the kind of shoestring projects that Garvey and SpaceX’s early employees learned their craft on: “Those programs which are fast-paced and exciting and you shut the door and work twenty-four hours with the techs.” This culture would be the company’s most powerful early advantage.

  “I was trying to figure out why we had not made more progress since Apollo,” Musk told a roomful of Stanford students in 2003, a few months after the Columbia disaster. “We’re currently in a situation where we can’t even put a person into low earth orbit. That doesn’t really jell with all of the other technology sectors out there. The computer that you could have bought in the early seventies would have filled this room and had less computing power than your cell phone. And so just about every sector of technology has improved. Why has this not improved?”

  To Musk, the now grounded space shuttle was “incredibly expensive and really quite dangerous.” Boeing and Lockheed’s government-designed plan to build new rockets was likely to exceed both its bloated, multi-billion-dollar budget and its timeline. The Soyuz, while “considerably cheaper, considerably safer” than US vehicles, was unlikely to prompt a revolution in space access as long as it was owned by economically flailing Russia. The way forward to “ultimately surpass all of that stuff is entrepreneurial space activities, where things are led by the spirit of free enterprise.”

  The stockholders and management of the major space contractors who actually produce all this hardware may not appreciate Musk’s characterization of their enterprise as something other than free. Yet their own employees (or any economist) could quickly identify the problem with that argument. The prime contractors were frequently monopolists, locking down control of a single aerospace franchise, and in turn they frequently served a single customer: the government. This gave them the ability to demand contracts with a guaranteed profit, which critics of these arrangements say undermines the very profit-maximizing urges that drive innovation. Cost-plus contracts are extremely good for shareholders, but they shouldn’t be mistaken for competition. In a few years, Musk would become perhaps the only aerospace CEO to insist on fixed-price government contracts, and SpaceX would become a dramatic example for procurement reform.

  But shortly after opening its doors, SpaceX was a start-up where “everybody does a billion things and you don’t know what you’re really going to do until you start,” as Gwynne Shotwell put it later. She was employee number eleven at the company, hired after visiting a former co-worker for our tour of SpaceX’s first office. At the outset, she was charged with bringing in customers for the as-yet unbuilt rocket, a task which would grow to all aspects of the company’s external relations, from regulatory approvals to legal to mission integration.

  Hiring Shotwell would turn out to be an inspired choice, though it would be years before Musk handed her operational control of the company. Shotwell combined her serious technical background and no-nonsense Midwestern attitude with a sense of flair that stood out. She had decided to pursue engineering as a career when, as a child, she attended a Society of Women Engineers forum with her mother. She listened to a speaker who combined marve
lous shoes and a matching bag with self-assured competence. Whatever a mechanical engineer was, well, that was what Shotwell wanted to be. Now, in charge of selling a rocket that didn’t exist yet, she met potential clients while wearing crisply tailored pantsuits and walking on sky-high heels, in stark contrast to the more disheveled engineers roaming the facility in sneakers.

  The lack of a product to sell didn’t daunt her. For Shotwell, SpaceX’s biggest advantage in designing the new rocket was being able to start with a “clean sheet. We did not have to evolve the launch vehicle.” Instead, the team could ask, “What are the smart things that we want to do to make this vehicle highly reliable but still low-cost?”

  More often than not, the space program had focused on enormous projects like the space shuttle that were designed to satisfy every possible user, from the military to the science community to satellite companies. But the first SpaceX rocket was designed to be what a tech start-up would call a “minimum viable product”—basically, the cheapest thing you could build that would attract paying customers. From there, the company could iterate and expand its offerings.

  Their minimum viable product would be called the Falcon 1. Yes, it’s a reference to the Millennium Falcon of Star Wars fame. Space pop culture helped animate SpaceX and make it unique. It didn’t name its rockets after Greek gods, like Titan or Apollo, or using bureaucrat-speak, like the Space Transportation System, as the space shuttle was officially known. Even the individual shuttle orbiters’ names—Enterprise, Columbia, Challenger, Discovery, Atlantis, and Endeavour—harked back as much to the virtues of doughty Victorian explorers as they did to the future imagined by the people building them. If established rocket makers thought that SpaceX looked silly for naming its spacecraft after a literal flight of fancy, the company’s broader mission to attempt to colonize the solar system certainly led them to scoff. But embracing the grand operatics of space was exactly what had brought the best young engineers to SpaceX and made them willing to work long hours on mind-bending engineering projects.

  “The reason I joined the company, one of the key differentiators of our culture, is intense mission focus,” Brian Bjelde, the company’s head of human resources, told me. In August 2003, Bjelde was the seventh employee at the company, and the program manager for the Falcon 1. “Elon founded this company to revolutionize access to space, with the ultimate goal of making humankind a multiplanetary species. There are a lot of people in the industry today that can rally behind that mission . . . and the focus is on Mars.”

  But the Falcon 1 was not designed to go straight to Mars. It was simply a first step toward the Red Planet. “It was to figure out the basics of rocketry,” Musk told me of the project. “We didn’t know anything. I’d never built anything before.” Shotwell called it “our practice rocket.”

  The Falcon 1, which was developed from the original spreadsheet over those many weekend bull sessions, was designed to fly small satellites. Though it would carry less weight than its competitors—a maximum expected payload of about one ton to low earth orbit, about two hundred miles up—it would cost only $6 million, far less than the bigger vehicles available at the time. With the space shuttle grounded, the space station unfinished, and expendable orbital launch vehicles costing more than $150 million per flight, there was little opportunity for small companies or researchers to test hardware in space, even as the miniaturization of electronics made such experiments increasingly attractive. SpaceX’s engineers thought a low-cost alternative that could bring satellites to orbit on demand would quickly find a market, and they wouldn’t have to worry about competing directly with larger vehicles built by Lockheed Martin, Arianespace, and the Russian aerospace industry.

  There was another angle to the play: ever since the Strategic Defense Initiative (SDI) of the eighties—aka “Star Wars”—the military had been eager to find a way to quickly deploy small satellites into space. That had been a key motivator behind the DC-X project. One of SpaceX’s earliest customers was DARPA, the Pentagon’s high-tech research division, which wanted to quickly deploy and operate small satellites in response to potential conflicts. “That was a key thing: you have only a handful of satellites, and your opponent knocks them out, you’re kind of screwed,” Air Force Brigadier General Pete Worden, a veteran of the SDI, told me. After retiring from active duty in 2004, Worden advised DARPA in its competition in search of small rockets, and SpaceX’s Falcon 1 was selected.

  To service this market, the engineers came up with one of the most basic designs they could. “Every decision we’ve made has been with consideration to simplicity, and the reason for simplicity is because that both improves the reliability as well as reduces your cost,” Musk said in 2003. “If you’ve got fewer components, that’s fewer components to go wrong and fewer components to buy.” The Falcon 1 would end up being seventy feet tall and comprise two stages, each with one engine. Working from equations grounded in Tsiolkovsky’s iron-clad laws about the relationship between mass, propellant, and orbital velocity, the team began developing the structure of the rocket, its frame and skin, the tanks of propellant, the plumbing that would carry that propellant to the all-important engine, and then the brains of the rocket—the guidance and navigation system that would communicate with the outside world and direct it in flight.

  The engineers, many with experience working at the prime contractors, had some immediate ideas about what not to do. Their thirty-person team and small office represented a far lower cost of doing business than that faced by their competitors, and the company intended to keep it that way. They did their best to look ahead to every stage of the manufacturing and flight processes in order to ensure that the entire system supporting the vehicle could function as efficiently as possible.

  Deceptively simple ideas come with surprising savings. For example, many rocket companies assemble or test their vehicles vertically, in the same way they are launched. SpaceX chose to keep its rockets horizontal virtually until it was time for them to fly. That meant they could use regular commercial warehouse space, at fifty cents a square foot, instead of constructing a “high bay” space—essentially a hollowed-out skyscraper—at a cost of $30 or $40 per square foot. The decision came with other benefits, too: workers clambering around sixty feet in the air require extensive safety equipment, training, and expensive insurance. Workers clambering around twelve feet in the air is a much cheaper and more manageable safety problem.

  Another simple idea: mass production. While you might imagine rocket manufacturing as a kind of Detroit-style assembly line populated with robots and automation, the truth is that launch vehicles are mostly bespoke products, made to order for their customers. A dozen rockets a year represented a huge book of business for rocket companies, but a dozen of anything is a small batch in the world of precision manufacturing. Rockets were handmade by highly trained technicians and assembled largely by hand. SpaceX, however, adopted a different philosophy.

  “High-volume production tends to lead to lower costs, so let’s get in the higher-production mode,” Shotwell said of the approach at the time. “And by the way, those vehicles are more reliable than the artisan-crafted, like a Honda is more reliable than a Ferrari. Ferraris are beautiful, but Honda is more reliable.”

  At a traditional aerospace firm, much of this development would be farmed out to subcontractors, but at SpaceX, engineers insisted on figuring out almost every single aspect of the vehicle themselves. Hans Koenigsmann developed the avionic systems for the Falcon 1 before becoming SpaceX’s launch chief engineer. Prior to SpaceX, he had earned a doctorate in his native Germany and then spent five years working on satellites in the United States. Musk recruited him to work at SpaceX after showing up at Koenigsmann’s house to interview him. The engineer was bemused at the effect his accent had on winning consensus around his ideas—a Pavlovian response built into American rocket engineers since the days of Wernher von Braun, perhaps—but he found it invigorating to be surrounded by the enthusiastic, work-hard,
play-Quake-hard crowd at SpaceX. In Germany, his professional home was an institution known by the acronym ZARM, roughly the European equivalent of NASA’s Jet Propulsion Laboratory. Koenigsmann summed up both SpaceX and ZARM with Teutonic efficiency: “Young people, we had good money for big projects, we did new stuff.”

  Sometimes that new stuff required some literal outside-the-box thinking.

  “At that point in time, I really felt that space technology fell behind the rest of the world,” Koenigsmann said later. “The bottom line is, because of the relatively long development times you have in space technology, you don’t fly the latest stuff. You fly the stuff that was around by the time you wrote the proposal. The downside of that is obviously that you’re always five years behind, maybe ten years behind, or even more. That is something that we always wanted to avoid. We weren’t ashamed to look at other places: ‘What are cars doing? What’s done in cell phones? What’s the technology in batteries? And can we use that?’”

  Koenigsmann affectionately called the Falcon 1’s avionics computer the ATM, because it was so simple, yet reliable enough to handle important activities, whether financial transactions or steering a rocket at Mach 5. The company’s reluctance to get sucked into the high-priced world of space technology extended to slight subterfuge. Employees looking for potential subcontractors didn’t say they were looking for aerospace parts, since that was a one-way ticket to high prices—“we try not to tell anyone outside the space business that it’s for a rocket, because they assume rockets are made of magic,” Musk would say later. If there was something better out there, they’d use it. Instead of using traditional cables—“giant copper bundles as thick as your arm”—to connect the rocket’s computers and electrical controls, they used simple ethernet cables, which were lighter in weight and more reliable than the older cables. “There are things like that which, when you add them all up, it makes a huge difference,” Musk says.