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How Space X Grew, Part 2

How Space X Grew, Part 2

Rockets are marvelous pieces of technology. They seem to rise in fairly stately fashion when you watch them launch, but to reach orbit they must fly at 7.7 km per second or about 18,000 miles per hour, nearly 25 times the speed of sound in air. Nothing else made by man goes that fast with people in it. Rockets are mostly fuel—for SpaceX, $200,000 worth of kerosene and liquid oxygen—with an almost delicate metal skin, mostly aluminum. Musk once asked an investor to imagine his 64 meter (224 ft) rocket, shrunk down to the size of a Coca-Cola can: The walls of the tiny explosive would be many times thinner than the drink in your hand.

It is easier and cheaper to use solid-fuel engines. That would typically make them the first choice of the company’s chief designer—also Musk—but for the fact they are harder to control once ignited. For safety’s sake, more complex liquid-fueled rockets are the standard for taking people to space. The engines are spidered with metal capillaries that use the vessel’s own chilled fuel as coolant to keep the 3-D printed nozzle from melting in the wash of its own exhaust. Human flight was always the standard to which Musk’s associates say he aspired; and so the Merlin was the first new liquid-fueled rocket engine to fly in the United States since the 1990s.

Rockets headed for space typically have two stages. The first stage provides the massive thrust to get into space; then it’s discarded, and the second stage glides the payload to its final destination in orbit. A satellite, encased in a custom-made carbon fiber fairing, or a Dragon space capsule full of cargo—someday, passengers—perches on top of the rocket at launch. SpaceX’s first rocket prototype, the Falcon 1, used one Merlin engine in its first stage. There are nine in the Falcon 9 rocket that is the company’s main product. And there will be 27 in the putative Falcon Heavy, as yet unrealized, for massive cargo—and trips to Mars.

Falcon, Merlin, Kestrel, and Dragon: Not the Victorian virtues—Enterprise, Endeavor, Discovery—honored by the space shuttles they replace, nor competitor NASA’s classical Atlas, Orion, Apollo, and Saturn. SpaceX’s machines were made by people who read pulp fantasy novels as children, or the paperback science fiction of Musk’s childhood in Pretoria, South Africa.

The only thing that matters is cost?

The nine merlin engines that power a SpaceX rocket.

The nine Merlin engines that power a SpaceX rocket.(SpaceX)

Regardless of its inspirations, the company was forced to adopt a prosaic initial goal: Make a rocket at least 10 times cheaper than is possible today. Until it can do that, neither flowers nor people can go to Mars with any economy. With rocket technology, Musk has said, “you’re really left with one key parameter against which technology improvements must be judged, and that’s cost.”

SpaceX currently charges $61.2 million per launch. Its cost-per-kilogram of cargo to low-earth orbit, $4,653, is far less than the $14,000 to $39,000 offered by its chief American competitor, the United Launch Alliance. Other providers often charge $250 to $400 million per launch; NASA pays Russia $70 million per astronaut to hitch a ride on its three-person Soyuz spacecraft. SpaceX’s costs are still nowhere near low enough to change the economics of space as Musk and his investors envision, but they have a plan to do so (of which more later).

The secret to the low cost is relatively simple, at least in principle: Do as much as possible in-house, in an integrated manufacturing facility, with modern components; and avoid the unwieldy supply chains, legacy designs, layers of contractors, and “cost-plus” billing that characterized SpaceX’s competitors. Many early employees were attracted to the company because they wanted to avoid the bureaucracy of the traditional aerospace conglomerates.

 “SpaceX was the first real tech startup in that space developing their whole platform from the ground up, questioning everything.” 

“I guess I would call them bureaucratic integrators, people at large entities integrating other people’s technologies,” says Scott Nolan, who joined the company out of college as an early employee and is now a partner at Founders Fund. “SpaceX was the first real tech startup in that space developing their whole platform from the ground up, questioning everything.”

But there’s a reason for everything to be the way it is, and the reason the dominant aerospace contractors were slow-moving behemoths of paperwork is that their prime customers—indeed, the prime customers of the entire space world—are governments. From SpaceX’s point of view, much of the blames lies with cost-plus contracting, the common government strategy of hiring companies to do work and paying their expenses plus a guaranteed profit margin.

“When you do that, your engineering force is brain-dead,” Nosek says. “The incentive structure destroyed their ability to create true innovation.”

How opposites attract

NASA Administrator Charles Bolden (L), and SpaceX CEO and Chief Designer Elon Musk view the historic Dragon capsule that returned to Earth on May 31 following the first successful mission by a private company to carry supplies to the International Space Station at the SpaceX facility in McGregor, Texas, June 13, 2012. Bolden and Musk also thanked the more than 150 SpaceX employees working at the McGregor facility for their role in the historic mission.
Elon Musk with NASA’s current administrator, Charles Bolden.(Reuters/Bill Ingalls)

At first, the partnership between a government agency used to paying whatever bill it was presented with and a start-up bent on cutting every corner it could find went much as you might imagine. “For every NASA person you put on my site, I’m going to double the price,” Musk warned Marty. The company made hatch handles out of parts for bathroom stall latches to save $1,470, and found that using racing-car safety belts to strap in astronauts was more comfortable and less expensive than custom-built harnesses. It used live people inside a full-size model to make sure that astronauts could move about the cargo capsule, rather than computer simulations. SpaceX executives disdained NASA’s love of acronyms and documentation. Employees took pride in working late on Friday nights.

“They’d say, ‘Well, we could go buy this from this vendor, but it’s like $50,000. It’s way too expensive, it’s ridiculous. We could build this for $2,000 in our shop,’” said Mike Horkachuck, the NASA official who was the primary liaison with the company. “I almost never heard NASA engineers talking about the cost of a part.”

But NASA did bring a focus to the company, one that other space start-ups often seem to lack. And, just as important, it brought early revenue. ‘”Okay, we have a schedule, we have milestones, we have funding,’ which was obviously key as well at the time, being such a small company,” Giger said of the NASA award. “That really gave us focus.”

 “Early on, [NASA] was what was keeping the lights on in the company.” 

“I think we brought them up from being a little 100-man company, if that, to what they are today,” Horkachuck said. “Early on, [NASA] was what was keeping the lights on in the company. They’ve just evolved into less of a hobby shop and more of a real aerospace company that’s building production rockets.”

But SpaceX always thought of itself as a tech firm, and its clashes with NASA often took a form computer developers—or anyone familiar with the troubled roll-out of healthcare.gov—would recognize as generational. SpaceX followed an iterative design process, continually improving prototypes in response to testing. Traditional product management calls for a robust plan executed to completion, a recipe for cost overruns.

“We weren’t just going to sit there and analyze something for years and years and years and years to the nth degree,” said David Giger, a SpaceX engineer. “SpaceX was built on ‘test, test, test, test, test.’ We test as we fly. We always say that every day here, ‘Test as you fly.’”

2 Launches away from failure…

The Falcon 1 at its test site in the Marshall Islands.(Reuters/Tom Rogers)

Kwajalein is an atoll in the Marshall Islands, home to a US Navy rocket test facility. “I don’t think there’s a place in the world with more corrosion,” Musk said of the place. “It was basically just a small little island with a tent on it,” said Giger. The rockets themselves had to be flown in on massive C-17 Globemaster aircraft.

Kwajalein is about 7,700 km (4,785 miles) from Vandenberg Air Force Base, where SpaceX had expected to hold the first launch of the Falcon 1 in 2005. But the Air Force kicked SpaceX out despite millions of dollars in investment and months of planning. A Lockheed Martin rocket launching something classified was being prepared nearby, and military officials feared that the upstart company’s first launch could malfunction and destroy their secret project.

They were prescient. In 2006, the first Falcon 1 launch ended with the rocket exploding over the launch pad at Kwajalein. A corroded fuel line was the culprit. In 2007, the second rocket failed before reaching orbit.

“The vehicle actually flew very far, and then didn’t make orbit, but at least it flew out of sight,” Koenigsmann, the German SpaceX engineer, said of the second launch. “It’s a difference whether the rocket comes back and hits the launch site and you collect debris, or that it goes away and then disappears somewhere. It doesn’t make a difference in the end, but for you personally it’s a different feeling.”

Despite those two failed launches, Nosek and another of Musk’s PayPal co-founders, Peter Thiel, invested $20 million in SpaceX through the venture-capital firm Founders Fund. NASA’s investment in the company had convinced them that Musk knew how to build rockets.

Even so, the fact that he hadn’t yet built a working one was proving tough for the fledgling company. Gwynne Shotwell, an experienced aerospace engineer who became SpaceX’s president and chief operating officer, devoted much of her time to drumming up business for the unproven product. “I didn’t get to do as much engineering as I would have liked to, but continually convincing customers to invest in SpaceX, and to take the risk associated with buying launches from us,” she said. “I was focused on keeping the company alive, keeping people paid while we were struggling.”

The partners at Founders Fund calculated that three more failures after the first two attempts at Kwajalein would exhaust the firm’s remaining capital and the confidence of its customers. That would mean the end not only of SpaceX, but of the fund’s largest investment at that point.

 “Between the third and the fourth flight we changed one number, nothing else.” 

“I knew that would wipe [Musk] out,” Nosek says, “and I also knew that at the last point, we’d have to ask the hard question, how much would we be willing to spend?”

Nosek disappeared on a camping trip in the Sierra Nevada mountains during the third launch, and returned to a mobile phone full of condolence texts. The rocket—which carried a cargo of three satellites and the ashes of James Doohan, the actor who played Scotty on the original series of Star Trek—had been destroyed when a small amount of fuel remaining in the first-stage engine had ignited after separation, causing it to collide with the second stage.

That left just two launches before disaster. But each flight had gone further than the last. The company’s engineers were confident they understood the problem. “Between the third and the fourth flight we changed one number, nothing else,” Koenigsmann said. “That was the time we needed to separate the two stages.”

It was enough. In August 2008, the rocket put a dummy payload into orbit. A month later, another Falcon 1 would launch the company’s first contract satellite on behalf of the Malaysian government. SpaceX was viable, and NASA awarded it a $1.6 billion contract, one of two (the other went to Orbital Sciences, the veteran NASA contractor that replaced Rocketplane Kistler) to bring 20 tonnes of cargo to the ISS before 2016. In 2010, now launching from NASA facilities in Cape Canaveral, Florida, SpaceX launched the first Falcon 9 rocket, which replaced the now discontinued Falcon 1. Soon after, with the maiden flight of the Dragon space capsule, SpaceX became the first private company to send a spacecraft into low-earth orbit and bring it back safely.

The Dragon spacecraft docked with the International Space Station.

The Dragon spacecraft docked with the International Space Station.Credit: Space X

But SpaceX still had to show it could safely dock the Dragon, flying under remote control, at the Space Station. Imagine having to park your car in the world’s most expensive garage, from thousands of miles away, with the knowledge that even a tiny accident could end up destroying them both. Confident in the wake of the successful first flight, it proposed to NASA that it combine the two final tests of the Dragon—approaching the ISS and docking with it—into one, to save costs.

NASA officials were nervous. Radar problems forced the reprogramming of the capsule’s sensors mid-flight so the mission would not be aborted for fear of collision. But the link-up was successful. The company has flown three successful resupply missions so far, and the fourth is currently docked at the station. NASA’s side-bet on SpaceX had succeeded.

The price of politics

Musk is a man of several personas. There is Musk the awkward showman, doing his best Steve Jobs impression at product launches. There is Musk the soft-spoken but intense nerd in interviews. And, increasingly, there is Musk the establishment figure.

This summer it was the latter Musk, in need of a haircut and sweating gently in humid Washington, DC, who showed off the second iteration of the Dragon, this one intended to bring humans into space. He demonstrated the features of a seven-person spacecraft to Bill Nelson, a Florida senator with a long history of shoveling money into his state’s aerospace industry, as a swarm of onlookers pretended not to eavesdrop. Rotund members of Congress hauled themselves up a ladder and into the capsule for photo opportunities. Political operatives, many hired by SpaceX itself, debated the surprise defeat of the House majority leader, Eric Cantor, by a candidate who found even the very conservative incumbent too spendthrift for his tastes. There’s no sign in the capital that funding for space is set to increase, and while that may not appear good for SpaceX, it’s even worse for its pricier competitors.

Inside the Dragon capsule. Credit: Space X

Few of the reporters swarming Musk were asking about the new space capsule, with its iPad-like control panel and 3D-printed engines. They wanted to know about SpaceX’s lawsuit against the Air Force, which had awarded an $11 billion contract to the United Launch Alliance without opening it up to other bids. Musk gives good quote; this was the summer of Russia’s buccaneering in eastern Ukraine, and he had been excoriating ULA for its reliance on Russian engines as relations deteriorated. Later in the summer, a judge ordered the Air Force and SpaceX into a mediation process that SpaceX executives hope will end with their receiving a share of the contract.

In September, NASA announced that it was awarding two contracts to carry astronauts to the space station—$4.2 billion for Boeing and $2.6 billion for SpaceX. The startling discrepancy between the two contracts has yet to be convincingly explained, since NASA says both are for the exact same set of tasks. Boeing representatives say it likely reflects their greater reliability, a subtle dig at what they see as an immature space vehicle—even though by now the Falcon 9 has had 13 launches with not one failure. According to leaked documents, NASA officials said that SpaceX is ahead of schedule compared to Boeing, but the NASA official grading the suitability of the two proposals had Boeing edging out SpaceX by 6%—roughly the difference between “excellent” and “very good.”

But given that Boeing’s proposal costs 62% more, it seems clear that the veteran firm will be under pressure to trim the fat, just as ULA has embarked on a radical cost-cutting project and a partnership with Blue Origin—a space company founded by Amazon’s Jeff Bezos, which is another target of Musk’s public skepticism. Congressional appropriators are already questioning the cost of supporting two commercial crew programs and of NASA’s own scaled-back manned exploration project, Orion, which replaced Constellation in 2011. A third firm that competed for the job and lost, Sierra Nevada Corporation, has formally challenged NASA’s decision specifically on the basis of Boeing’s added cost.

To boldly go

With 33 commercial launches on its manifest in the next four years, a plan to launch manned missions by 2017, and subsidies from Texas to build its own spaceport there after several years of leasing government facilities, SpaceX is now a serious competitor in the launch industry. That’s a validation for NASA’s public-private partnership, which was focused on developing a business, not a product.

But the question for Musk and his investors now is whether he can be more than just a better rocket builder. They want to unlock something far more challenging: A space economy where humans can vastly increase their productivity in the vacuum around our tiny world and beyond, even if nobody is quite sure how yet. Nolan of Founders Fund compares this hopeful uncertainty to the founding of the internet. “It wasn’t clear exactly what kind of business can come out of exchanging information really rapidly,” he says.

For example, if it weren’t so pricey, investors could imagine putting up hundreds of new satellites in lower orbits than existing ones, making their communications and imaging far more powerful. Because of the high launch costs, current satellites aren’t upgraded frequently and are stationed relatively far from earth so that they can last longer—the closer a satellite flies to earth, the faster its orbit decays, leading to its eventual demise. As a result, the electronics in them are relatively old technology.

Can the $6 million launch—or even cheaper—replace the $60 million launch? 

Cheap enough launches could also enable terrestrial flights that hop up over the atmosphere, turning a day-long flight around the world into a matter of hours. Space tourism is often cited as a possible source of revenue, as is commercial research, even asteroid mining, but making any of those sustainable will mean—you guessed it—far lower costs, as NASA has found in its failure to drum up much commercial research at the ISS.

Can the $6 million launch—or even cheaper—replace the $60 million launch? The way to solve that is to stop throwing rockets away after one use; after all, they cost about as much as a 737. Make them reusable and the cost savings are enormous: SpaceX says that while the rocket costs $54 million, the fuel only costs $200,000.

Hence the company’s focus first on the Grasshopper, a scale model of a Falcon 9 that experimented with vertical takeoff and landing. Now, nearly every SpaceX satellite launch uses a rocket equipped with those massive landing legs we mentioned earlier, and the company attempts to “land” the rocket in the ocean. So far, there hasn’t been a success, but company insiders say the data they are gathering is bringing them closer and closer to bringing the huge tube from super-sonic speed to a delicate touch-down. That would be the killer app.


The twin risks of sclerosis and megalomania

But some observers fear SpaceX is becoming less nimble, losing the advantages it had over the big military-industrial contractors. Musk can no longer interview every employee now that the staff numbers in the thousands. Yes, standards remain high: Almost 400 workers were fired this summer after winding up at the bottom of a performance review, prompting a lawsuit. Nonetheless, towards the end of his time working with SpaceX, Horkachuck fretted that the company itself was starting to behave more and more like the traditional contractors it disdained. Meanwhile, Marty, NASA’s former in-house venture capitalist, fears that the agency is already losing its brief focus on disruption and commercialization to build another large bureaucracy around the commercial crew program.

And then there are the distractions of financing and dealing with investors, which get more complex as the sums increase. The company was reportedly exploring another fundraising round earlier this year that could have valued it at $10 billion, but no deal has materialized. “SpaceX is not currently raising any funding nor has any external valuation of that magnitude or higher been done,” a SpaceX spokesperson says.

Musk is reportedly not done yet. Everyone around him speaks of his single-minded devotion to the company, despite being the CEO of Tesla and chairman of Solar City, and of his single-minded focus on the fantastic long-term goal—Mars. Not long after SpaceX won its first $1.6 billion contract from NASA, he surprised some of the directors during a meeting at the company’s rocket-testing facility in Texas by mentioning, in an aside, that the designs for the Martian vessel were nearly complete. In 2009, he promised tourist trips around the moon by 2014.

While a CEO obsessed with going to Mars might be seen as a detriment, SpaceX’s backers say it protects the company’s culture—and helps its near-term goals. It’s no accident that the data gleaned from rocket-landing experiments is also of interest to scientists thinking about landing cargo on Mars.

Meanwhile, however, the next milestone is a more modest one: To prove that human passengers will be safe in Dragon 2. First, there will be a pad abort test, to prove that if something goes wrong with the rocket before launch, the space capsule can detach, using its own thrusters to fly the crew to safety. If that goes as planned, there will be an in-flight test of the same ability to act as a lifeboat if the rocket breaks up before reaching orbit. These safety measures are a reminder that there will come a point when SpaceX’s rockets could be destroyed while carrying real space engineers, not just the ashes of an actor who pretended to be one.

Rockets are tricky, as Musk says. But this is a man who thinks he’ll own a Martian colony with perhaps thousands of people in 2040, in time for his 70th birthday. You can trust he’ll get you to a space station just 205 miles up, right?