The Podcast of the Lotus Eaters - PREVIEW： Brokenomics ｜ SpaceX

00:00:00.000 Hello and welcome to Brokonomics.

00:00:24.980 Now, dark times in the news.

00:00:28.440 We just had the time recording.

00:00:30.080 We just had the Rape Inquiry published.

00:00:33.840 And I thought about going through that.

00:00:35.200 It's a bit grim.

00:00:36.900 And you've got to find some positive stuff, haven't you?

00:00:41.520 And I kind of want to return a bit to the knitting,

00:00:43.900 get a bit more back to the economics and finance,

00:00:47.180 because people grumble when I stray too long from that.

00:00:49.880 So I thought, let's talk about the SpaceX IPO,

00:00:53.060 which I think is a good news story potentially for humanity. It's a stock that I do like

00:00:58.740 and maybe you might be interested in my thoughts on SpaceX whether that is a good investment

00:01:05.200 and whether it's a good company. My answer to the second one is most definitely yes

00:01:10.180 I'm just a little bit more tactical on the first one. So a bit of background on SpaceX well of

00:01:16.600 course, it's an Elon Musk story, isn't it? And I'm a bit of an Elon Musk fan girl because he

00:01:23.100 seems to be able to create enormous amounts of value. Several trillion dollar companies. I mean,

00:01:28.020 creating one trillion dollar company in your lifetime is a remarkable thing, but creating

00:01:31.980 whatever it is now, five or six, is quite something else. And the leftists, they attack

00:01:38.420 Musk all the time, don't they? Because he's just become a trillionaire. And the leftists really

00:01:43.860 don't like that. So let's just remind ourselves how Musk found himself in this situation in the

00:01:48.540 first place. So back in all the way in 1995, he created Zip2. And Zip2, it was basically Google

00:01:55.960 Maps before Google Maps existed. And he sold that to Compaq, I believe, for about $300 million.

00:02:04.420 Now, he did have some investor money in that, and some other people who are working with him,

00:02:08.340 like his brother and a few others. He personally took away from that $22 million. So he then took

00:02:15.300 that $22 million and he rolled it over into what was originally called X, but became PayPal.

00:02:24.260 Went into PayPal and they built that up, a whole bunch of them, the PayPal mafia.

00:02:29.720 they built that up to 1.5 billion valuation sold it to ebay that was back in 22 no 2002 that was

00:02:39.340 now his share of that was 180 million so he's got 180 million and what does he do with it does he

00:02:46.720 retire to the beach no um which of course every lefty would have done every lefty would have made

00:02:52.220 some you know token activism with that and then basically sorted themselves out on a beach for

00:02:58.240 rest of their lives no he used that to launch uh spacex and tesla and solar city which then

00:03:04.440 rolled into tesla now he put a hundred million into early spacex and his original vision for

00:03:15.860 spacex was just that he is genuinely concerned that if humanity is stuck on earth all it takes

00:03:22.640 like one asteroid or you know gamma ray burst or whatever the hell it is to wipe us out and we're

00:03:28.400 just done so he genuinely believes that getting to mars is absolutely crucial for the species and

00:03:34.200 so he was willing to take of his 180 million 100 million drop it in spacex and his original

00:03:41.640 ambition was actually something called mars erases and what he wanted to do was get a rocket to mars

00:03:49.720 and autonomously deploy a greenhouse that would kind of land,

00:03:58.020 open itself up, grow crops, and have a webcam.

00:04:01.160 And the idea is that after that, you would be able to connect to this webcam

00:04:09.440 and see plants growing on Mars.

00:04:12.820 and the idea was is that would encourage nasa to take exploration to mars more seriously

00:04:20.120 build public support get political support it would start the ball rolling through a mars colony

00:04:25.440 and he was willing to spend a hundred million on that which again no bloody leftist who was

00:04:31.500 criticizing him now for being a trillionaire would have done and he's the spacex ipo that

00:04:37.120 pushed him up into trillionaire status.

00:04:41.020 So off he goes to Russia to try and buy a nuclear weapon.

00:04:45.560 I say a nuclear weapon because they had loads of former nuclear weapons,

00:04:51.040 which were actually basically rockets.

00:04:53.260 And they took the nuke out and they were selling the rockets.

00:04:56.160 And he went off to Russia to have a look at these nucleus nukes, these rockets.

00:05:01.000 And he came to the conclusion, actually, this doesn't look so hard.

00:05:05.200 I'm going to do it myself.

00:05:07.120 So there is, in 2002, he's founded SpaceX, he's put $100 million into it,

00:05:11.480 and he starts building rockets.

00:05:13.240 Now, even though he's got $100 million of his money,

00:05:16.120 rockets are quite expensive.

00:05:18.380 And he could basically afford to build and launch four of them.

00:05:23.960 And if they weren't working by number four, that was it.

00:05:27.360 That was $100 million up in smoke.

00:05:29.740 I mean, quite literally up in smoke.

00:05:31.100 I mean, little bits would come raining back down.

00:05:34.680 And so he started with Falcon 1.

00:05:37.120 and Falcon 1, the first launch of Falcon 1, exploded, and so did the second one.

00:05:45.740 But the third one exploded, and he had enough money left for one more Falcon 1 launch,

00:05:53.960 and if this didn't work, he was done.

00:05:57.900 He had one final attempt, and it worked.

00:06:00.680 uh falcon one launch four worked and it was the first time a privately funded space orbit had

00:06:10.680 been achieved now at that point uh he's proved he's got something he's proved he can get into

00:06:17.080 orbit um nasa desperately needed um american-based launch capability because even by this time

00:06:26.760 early 2000s they were they were starting to get heavily dependent on the russians for basically

00:06:31.360 everything into launch because they had scaled back nasa so far and so nasa gave him a contract

00:06:37.040 for i think 1.6 billion and that set up um spacex to to do early launch so it went from an eccentric

00:06:46.220 millionaires um or centimillionaire attempt to um you know inspire people to go to mars

00:06:54.700 to something which NASA wanted to invest in,

00:06:58.660 and so SpaceX was up and running.

00:07:02.060 So that's how SpaceX came about.

00:07:03.740 And you might be broadly familiar with SpaceX

00:07:07.140 because, you know, obviously,

00:07:09.560 well, I've done a couple of segments on it over the years,

00:07:12.940 but you do need to update your VU.

00:07:15.480 So picking what SpaceX used to look like

00:07:17.920 in, say, 2001, five years ago,

00:07:19.980 its core mission was still make humanity interplanetary,

00:07:23.540 and mars was the long-term objective but the business was basically launch which was um

00:07:30.200 important because there was a real dearth of non-russian launch capability and so we had

00:07:37.260 revenues back then of like two to three billion and that was coming from the u.s government and

00:07:42.420 nasa and military stuff which again obviously the military stuff if you're launching a military

00:07:48.860 satellite you don't really want to do it on a Russian rocket and there was also commercial

00:07:53.820 satellite in there as well and um you know SpaceX back then the the launch costs were coming down

00:08:02.220 but they were still very high I mean put it this way right do you remember the space shuttle 0.98

00:08:08.620 the the squatty older people will know what I mean by the space shuttle but younger people just look

00:08:14.760 Space Shuttle. It's like this stumpy little plane thing that NASA used to use for going up into

00:08:21.960 space. To get a kilogram of mass into space cost 50 grand for one kilogram. So to get one Dan into

00:08:34.040 space will cost you five million. And what SpaceX was able to do by iterating from Falcon 1 to

00:08:40.840 to falcon 2 and so on eventually you get up to falcon 9 which is the thing that's running at

00:08:44.900 the moment the cost per kilogram for falcon 9 is two and a half grand down from 50 grand

00:08:50.680 so it is a huge reduction and he did it by thinking why don't we make rockets reusable

00:08:58.260 um you know think about how much a plane journey would cost if the plane could only be used for

00:09:07.260 one leg and then and then you had to throw the plane away and and use a new plane so he wanted

00:09:12.980 to make rockets reusable and by falcon 9 he's done that thus thus the launch costs come down

00:09:19.240 significantly you spend you still spend quite a lot on fuel but but reusability helps a great deal

00:09:25.380 so five years ago yep launch very interesting business very viable dragon the crew capsule

00:09:34.800 thing so this is for transporting crew up to the international international space station and it

00:09:41.280 proved that spacex was reliable enough to fly humans up and down uh and that was again very

00:09:46.800 important because you know for many years at this point the americans who maintained a presence on

00:09:53.480 the international space agency the space station uh were reliant on getting all their people up

00:09:59.140 there via russia uh which of course they are a little bit belligerent to so um dragon capsule

00:10:08.160 they had that um starlink the early starlink was around five years ago and it was emergent

00:10:15.380 satellite internet business i bought one of those um i don't actually use it because regular

00:10:21.760 broadband is like half the price but i've got it in the shed just in case i ever need to break it

00:10:25.740 out. And it's low orbit, low latency satellites. So it goes up, it launches a bunch of these

00:10:33.980 satellites, launches more. And it gives you a telecommunication network that you can access

00:10:39.820 the internet through. And if you live remotely, it's basically your only choice. It's the only

00:10:45.080 way of getting internet in Ukraine, for example, at the moment. Very handy for people who live in 1.00

00:10:51.560 the countryside one of the places it would be most handy is if you lived in south africa because

00:10:56.440 telecoms and even the power is so extraordinarily unreliable but unfortunately in south africa that

00:11:05.620 is one of the few that is like basically one of the only countries in the world where you can't

00:11:09.780 get spacex uh reason being is because they would only let it operate in south africa if it was a

00:11:16.740 black majority owned business and even though musk is himself an african-american um he's not

00:11:24.740 got enough melanin and so it's banned in in south africa but you know a picture picture living

00:11:30.260 anywhere um unreliable or rural you know star links for you you can also put it on planes and

00:11:36.500 cruise ships and all that kind of stuff and five years ago they had the plan for starship now

00:11:42.060 starship is the next quantum leap up from falcon it's a much bigger rocket and they were spending

00:11:48.700 huge amounts of r and d on it but it's a lot bigger can carry a lot more and therefore your

00:11:52.940 cost per kilogram of getting mass into orbit comes down quite a lot valuation of this business over

00:11:59.840 the years i think in 2018 it was valued about 30 billion by 2020 about 45 billion 2021 which i'm

00:12:09.020 talking about here 100 billion and i actually got the opportunity to invest in 2021 um back at the

00:12:16.080 100 billion valuation and i didn't take it because it would have meant tying up money for god knows

00:12:22.980 how long because you had no idea when the ipo was going to be and it would have meant taking money

00:12:28.860 out of my other really high conviction stocks like microstrategy and tesla i probably would

00:12:36.220 have done better putting my money in spacex but it came with big unknowns i couldn't realize it

00:12:40.900 i would have had to take my money out of a tax-free account which i could never then get back in again

00:12:44.980 at that sort of size so i don't feel too bad about not doing that um but it was it was really

00:12:51.280 very difficult to get into spacex before the ipo you had to because i was active in the tesla

00:12:55.880 community the online investing investing community i i could have i could have got in but decided not

00:13:00.820 to pursue it back then you know 2001 it was it was you know profitable-ish lots of money on r&d

00:13:06.840 lots of capital spend lots of ambition starship was was pure ambition and investment um and and

00:13:14.780 the company was really valued on future potential not current earnings although it easily proved

00:13:20.060 that it was worth is easily worth 100 billion in 2021 given what it's done but it had this fly

00:13:26.880 Which is it does these launches, makes the launches cheaper, more satellites go up, more Starlink revenue, more cash flows, more Starship development, cheaper launch, and so on.

00:13:41.880 All right. What has changed fundamentally since 2001? What are the key upgrades since your mental model of SpaceX from whatever it probably is? You're probably stuck five years behind on this. I mean, I know I was before I properly looked at it recently after last having a look at it back then.

00:14:03.040 it's now got a near monopoly on launch these days 80 of the mass that goes into orbit

00:14:09.180 is spacex 80 bloody percent right and bear in mind the russia hasn't cut back they're still

00:14:17.800 doing as much as they were before but now they're now they're um very much secondary

00:14:22.700 so they are completely dominating the launch business all the commercial military satellites

00:14:29.980 all of that as well as starlink that goes up that all goes through them it started out with this

00:14:35.180 concept of a global telecom network and now it's it's well beyond con it's a mature it's a maturing

00:14:40.660 business it's got 10 million subscribers it's accessible in basically all of the countries

00:14:46.080 i don't think it works at the polls yet and it doesn't work in south africa but apart from that

00:14:50.200 it's got pretty much everything got 10 000 satellites um the tech is there i don't think

00:14:55.620 the consumer device is available yet for a direct to phone connectivity um so it probably won't be

00:15:03.000 that much longer before you can have a starlink phone um which you can just use anywhere unless

00:15:09.360 you're in south africa or the poles and i think that is coming soon it's just you need more

00:15:14.440 satellites to do the polar orbit and as long as you can see the sky and it should penetrate most

00:15:20.120 roofs the frequencies they use should penetrate i don't know how it's going to work in like an

00:15:25.180 underground car park or something or mine but other than that you should be quite good starship

00:15:31.280 is coming along nicely they've done about 12 12 test flights at this point and you know they're

00:15:38.300 targeting putting proper payload on it um in about now i think second half of this year which we're

00:15:46.040 basically in the ai business that is that is a entirely new business line from what you may have

00:15:54.060 thought that SpaceX is doing. So they're building out at the moment a gigawatt of compute

00:16:02.120 infrastructure. And that infrastructure is tied in with Grok and the X ecosystem, X as in Twitter.

00:16:10.600 And the AI infrastructure story is kind of pivotal to the prospects of this business at this point.

00:16:17.520 and it's an explicit roadmap item for them um and i will talk about that more in just a moment but

00:16:25.300 you know the real upgrade is launch satellite business existed in five say five years ago

00:16:33.280 and now you've got launch you've got telecoms you've got mobile networks you've got ai

00:16:38.300 infrastructure ai models uh cloud compute um defense infrastructure i suppose they had a bit

00:16:45.780 that before and orbital industry and this is where it starts to get really interesting you see

00:16:50.900 actually let's do a quick a quick run through of the vehicles actually that that might be worth

00:16:56.920 touching so falcon one we talked about small um it was a liquid fueled launcher you know went up in

00:17:04.320 2008 it was basically a proof of concept but it wasn't reusable falcon nine that was a real

00:17:11.040 breakthrough medium lift rocket most of it is reusable you get about 23 tons on it and it's

00:17:21.160 about two and a half grand to get a kilogram into space so you know we went from costing

00:17:28.160 five million dollars to get a dan into space you can now get a dan into space for the price of a

00:17:34.440 new toyota which is nice should anyone ever want to inject me into space

00:17:41.580 dragon capsule bolts on top of the falcon 9

00:17:44.080 falcon heavy you sometimes hear that referred to that's basically

00:17:49.140 three falcon 9 boosters strapped together more thrust more lift heavier loads therefore lower

00:17:55.700 cost per kilogram into space that gets the um cost per critic per kilogram down to about one

00:18:04.580 thousand four hundred dollars so you can now get a down into space for the price of a second hand

00:18:09.060 toyota um starship one uh like i said i think i think that they've done 12 launches um

00:18:18.020 mostly reusable they're having issues with the heat shield because the heat shield for whatever

00:18:25.640 reason tends to burn up on re-entry if they can get that sussed it they should get to the cycle

00:18:33.240 of a of an airplane which is flight land inspect do another flight potentially the same starship

00:18:42.380 could be doing a a new flight every day that's something like the ambition um but what they're

00:18:48.600 what they're sort of really targeting is starship version three they talk about that a lot a lot in

00:18:54.160 the ipo deck i put the ipo deck in the reading uh links if you want to take a look at it 100 tons

00:18:59.980 capacity in that 100 tons of capacity and hopefully fully reusable possibly swapping

00:19:09.340 in and out a heat shield now that is going to get you down to something like 200 kilograms

00:19:16.900 No, it's $200 per kilogram, which is just an absolutely extraordinary drop in launch cost.

00:19:27.440 You're now getting a Dan into space for $2,000.

00:19:31.440 For a month's wages, you could put me in space.

00:19:36.960 Just extraordinary turnaround from the days of the NASA shuttles.

00:19:42.780 you know you're very close to a 99 reduction in in launch costs there and they're even starting

00:19:49.660 to speculate about a starship four which would be high throughput that one would be 200 metric tons

00:19:57.580 you're taking up at any one time i mean that is a proper space freight train at this point

00:20:03.820 and the cost that you're looking at per kilogram is in like the tens of dollars

00:20:09.020 extraordinarily cheap extraordinarily cheap to get mass into orbit and what this unlocks

00:20:18.240 is space industrialization an episode of brokonomics people really liked was the

00:20:24.100 industrializing space episode with grant donahue good trap and um we talked about the the job of

00:20:32.640 industrializing space and just the sheer scale that you get into when you're looking at

00:20:38.320 industrializing space now you might think oh why would you want to do that why can't you just do

00:20:43.840 it all on earth it's it's it's because of the scale the scale of everything once you get into

00:20:48.520 space is just ginormous and what spacex reminds me of the most is the railway companies in early

00:20:58.600 continental america you had this vast continent bloody difficult to do anything with it apart

00:21:04.860 from the east coast because if you were going to go anywhere you needed to fit it onto the back of 0.99

00:21:09.640 a wagon and okay yes you might get shot at by indians but i mean just the logistics of trying 0.99

00:21:15.620 to move any sort of industrial bolt we couldn't do industrial bolt moving anything by a wagon 0.75

00:21:21.480 across the u.s continental size land mass um the railways were an absolute game changer there was

00:21:29.960 lots of railway companies but we're kind of in the situation now where there's effectively one

00:21:34.400 railway company uh but it's not railways it's it's rockets and it gives us access to space

00:21:40.700 and and the american railways i mean they took a east close east coast sliver of civilization and

00:21:50.040 allowed it to just spread out and industrialize the entire continent um dramatically increased the

00:21:57.240 capacity of the US economy to grow, dramatically increase the US economy over time,

00:22:05.060 the scale of this increase could be quite a bit larger. I mean, before I go on to fully talk about

00:22:11.160 the case of industrializing space, let's just talk about why you put compute. Why do you put AI in

00:22:17.240 there? Why do you want to run AI into space, right? So think about it from an Earth perspective.

00:22:23.100 what does ai on earth need well it needs chips lots and lots of chips and you still need those

00:22:30.640 if you're in space but then think about the rest of the list power and that is a massive limiting

00:22:37.340 factor you can't get power anymore there's just no power i mean okay there is in china because

00:22:44.160 they're expanding their electrical output but in the rest of the world in the rest of the rest of

00:22:50.300 well, there's just no bloody power. And we're getting very close to the point where chips are

00:22:55.260 going to start being delivered that cannot be turned on because there's no power.

00:23:01.660 What else is there? Cooling. You need the land itself. You need permits. You need permissions,

00:23:08.480 regulatory approval, state approval, bureaucrats all over it. You need substations. You need 0.81

00:23:13.320 turbines you need transmission lines uh batteries any cooling you need a lot of cooling if you're

00:23:21.600 going to do this on earth utility connections all of that is really expensive and and with

00:23:27.280 the regulatory stuff it's really really slow so you might think okay well yeah but surely that's

00:23:35.460 all no it's not it's it's not easier to do that than it is to put it into space because in space

00:23:42.340 talk about the big the big limiting factor which is which is power

00:23:46.920 in space there's no night so you don't need batteries there's no clouds there's no seasons

00:23:56.320 there's no atmosphere limiting uh what's coming in there's no weather you don't need to take your

00:24:01.600 solar panels and glass the hell out i mean you use a little bit of glass but only a little 0.60

00:24:06.660 you don't glass the hell out of them to protect them from bird shit and weather and hailstones

00:24:11.940 and all the rest of it and i mean even not taking into that account a solar panel in space generates 0.88

00:24:18.060 about five times more power than a solar panel on earth because of no weather and all the rest of it

00:24:22.900 and you don't have night and you don't have um weather to deal with um and and that's before

00:24:31.020 you get into things like bloody um cooling as well don't ever you don't have to worry about any

00:24:37.640 of that um it's it's just you get more power more simply but the big one is the permitting disappears

00:24:45.580 um you know a lot of these big ai companies they're trying to build their own nuclear power

00:24:52.840 stations at this point and it's going to take them 10 years to do it 10 years if they're lucky

00:25:00.580 It would take you 25 years if you did it in this country.

00:25:03.740 So Hinkley Sea, 25-year project,

00:25:06.600 because the bureaucrats and the regulations just slow everything down,

00:25:12.340 not to mention acquiring the land in the first place

00:25:15.020 and dealing with the local objections

00:25:16.420 and getting the grid connection on all the rest of it.

00:25:20.080 Cooling is a lot easier.

00:25:22.080 I mean, you still need radiators because you need to radiate the heat out,

00:25:26.120 but you only need to radiate it straight out into space,

00:25:28.780 and then you're done.

00:25:29.700 so the vast amount of energy that you spend on earth-based data centers just cooling them it's

00:25:38.440 a huge proportion of the cost that's all gone if you enjoyed that content and of course you did

00:25:44.300 because you are a smart person then why don't you go over to lotus eaters.com where you can watch

00:25:49.720 the whole episode for as little as five pounds a month which really is not much money at all

00:25:55.840 and you get loads of really good content.

The Podcast of the Lotus Eaters - June 30, 2026

PREVIEW： Brokenomics ｜ SpaceX

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