SpaceX and the “red-top businessman” Musk

SpaceX is one of the hottest startups out there. It’s valued at more than $40 billion alone, but even more impressive is what it’s doing: taking space technology to a new level almost single-handedly and with ambitions to establish a colony on Mars.

SpaceX and the "red-top businessman" Musk

One of the company’s most recent hot stories is that its next-generation space vehicle, Starship, has achieved liftoff and return to land, taking an important step toward its goal of going to Mars.

Musk, the founder of SpaceX, is undoubtedly one of the most reported entrepreneurs and probably the one who has been given the most magical aura since Steve Jobs, such as genius, disruptor, pursuer of big ideals, tyrant, and Silicon Valley Iron Man.

However, these labels may have left out one of the less legendary and seemingly less appealing labels, namely that Musk is perhaps the best “red-top businessman” of his time at doing business with the government, which has become one of the most important traits that has helped Musk achieve success. The story of SpaceX also illustrates Musk’s “red-top businessman” attribute.

SpaceX is the company that Musk actually founded himself, while the most famous Tesla is not. Tesla was started by several other founders, Musk was an investor, then became chairman, then CEO, and SpaceX was started with the goal of Musk’s personal ambition: to go to Mars. The basis of how this goal progressed step by step to where it is now is very much Musk’s ability to do business with the government.

Currently, SpaceX is a unicorn company, not yet listed, its revenue business is divided into three main pieces, one is commercial air transportation, that is, using its own developed rocket – mainly Falcon IX – to send customers’ things to space; the second part is commercial human spaceflight, which is using its own-built rockets to carry its own-built spacecraft, Dragon, to send people to the International Space Station; the third part is Starlink, which is using its own rockets to send thousands of communications satellites — 42,000 to be exact — -launched into near-Earth orbit, turning them into a space Internet network, which then provides Internet service to people on the ground for a fee.

Of course, in addition to all that, one of the major things SpaceX is doing is building a Mars colony, shipping rovers and supplies to Mars, shipping people, and eventually establishing a base. This plan has not yet earned a penny, but is the most money spent.
In these three businesses that already have incoming revenue, it already has major customers and potential customers, all of which are agencies under the U.S. government. According to Wikipedia data, SpaceX’s Falcon 9 rocket, which is now its primary commercial launch vehicle, has been launched 121 times since 2010, with 119 successful launches through May 15, 2021. And the number one customer for launch missions is NASA, the National Aeronautics and Space Administration, with 33. It is SpaceX itself that is in second place. And the rest of the manned spaceflight business, in fact, is the targeted cooperation with NASA.

U.S. space “country into the people” is also based on cost considerations

NASA and SpaceX relationship, scattered in a variety of public reports, SpaceX can survive, mainly on the orders of NASA, as well as the U.S. government’s policy on NASA.

Prior to this, the U.S., like other major spacefaring nations around the world, had a space business that was state-owned, primarily for military purposes. And before SpaceX, most of the world’s commercial aerospace satellite launches rely on technology that was basically invented by the U.S. and the Soviet Union during the Cold War – and of course by the 21st century, China was an important space launch provider.

However, also in the 21st century, the U.S. government began to feel that the spaceflight was too costly, especially at that time the mainstream technology, the space shuttle each launch to hundreds of millions or even more than a billion dollars, not only had a very serious accident, but also little other returns (the main purpose is to send astronauts to the space station). The U.S. government felt that it was not cost-effective, so the space shuttle was retired. Next, the United States entered a long period of space development stagnation, astronauts have to rely on Russian rockets to send.

The U.S. government developed a commercial space program, which led to the emergence of SpaceX, and private startups such as Bezos’ Blue Origin. In other words, space has become a business that the government can also participate in, which is itself a process of national retreat.

Of course, these companies were not born solely to do government business. The space companies themselves, established by the very rich, were certainly born out of the founders’ personal interests, their aspirations, or ambitions, for space. Musk, for example, pays homage to science fiction in the names of all his devices, while Bezos is particularly fond of Star Trek. But these are not new either. In the 1980s and 1990s, one after another, various rich people got involved in this field, but they all failed.

And these rich people from Silicon Valley, can really make space companies, into a revenue company, of course, there is a lot of personal input, interest and effort, but a more important background or the government opened up this business, and willing to invest to fund these startups.

Musk moved from Silicon Valley to move to Los Angeles in 2002, and a big reason he moved there was that Los Angeles is an important aerospace industrial base in the United States. It was also there that Musk joined and funded a civil science organization called the Mars Society, clarified his goal of starting a space company, and built his connections in the aerospace industry. These contacts became the core team of what would become SpaceX.

Initial investment, major orders from U.S. government agencies

How much money did NASA give to SpaceX? The total amount that can be found in public sources is close to $8 billion. This includes, for example, a seed investment of $396 million in 2006; a commercial transportation contract of $1.6 billion in 2008; $2.6 billion to develop the human spaceflight Dragon in 2017; and most recently, $2.9 billion to realize the moon landing program.

And that’s just the money part; many of SpaceX’s core personnel, are engineers associated with NASA or with the U.S. military. From this point of view, the seed of SpaceX can germinate solely because of the soil of the U.S. government.

By the way, recently Bezos protested the contract for the moon lander, and NASA suspended the program. Musk and Bezos themselves are good friends, and because of the like-mindedness of space. spaceX and blue origin business vision is also very similar, is to make space transportation cheap, replicable. But now the two are in fierce competition, poaching each other, and the two are in bad relations, and the email system in SpaceX is rumored to have started blocking the words blue and origin.

If we look at the global space industry as a business, we will find that, at least at this point, although the United States has been the country retreat, but NASA as the representative of the government agencies, is still the main customer of the space business.

According to a report by the consulting agency bryce, in 2019, the global space business has $336 billion, which can be roughly divided into four equal parts, a quarter is satellite TV, a quarter is navigation, a quarter is the various links in the industry chain (such as equipment, manufacturing, etc.), the remaining quarter is the government budget for the project. And of the quarter of the government budget, a large part of it is U.S., about $55 billion, and a small part is non-U.S. government.

Of that $55 billion, only $20 billion is for NASA, and the rest is more or less military-related, such as missile regulations and systems, the U.S. Air Force, and there is also a National Reconnaissance Office – a division dedicated to launching reconnaissance satellites.

In fact, even Starlink, a commercial project that appears to be open to the world, is very relevant to the government. Starlink is currently the largest satellite launch program in the world, with 42,000 satellites. And until 2016, the total number of announced successful launches of artificial satellites worldwide was less than 4,000. Starlink has already launched over 1,500 and is able to provide internet service to North America.

Many people will think that this plan is for ordinary people, and later cell phones can be used, the purpose is to compete with 5G. Actually, it is not at all. Currently, Starlink’s public test service is priced at $99/month, and you must also purchase a $499 matching terminal to use it. This is very expensive, and because of the different frequency bands, you can’t actually use the Internet on your cell phone.

We can think of Starlink as a complement to the existing mobile network, and the core of it is to give access to those places where mobile Internet coverage is difficult. For example, you can think of the African continent, other less developed areas of the world, and an application market that is close at hand for SpaceX: rural America.

The Federal Communications Commission does have a “Village Access Network” program, or “New Infrastructure” as we call it now, which is a $20 billion investment over 10 years to make gigabit broadband available to rural America, and SpaceX is fighting for this program to be the mainstream solution.

In short, SpaceX, whether the company was born in the background, the company’s earliest resources, the earliest investors, or the main customers, are the U.S. government.

Musk’s “salesman instinct” when facing the government

But as mentioned earlier, there were actually many space startups at the beginning of the 21st century, and there were many private companies that were originally in the satellite and rocket business, such as Boeing and Lockheed Martin, which were very powerful giants. But why SpaceX can take so many nasa’s single it? In this, Musk’s own ability is very important.

The first is his personal charisma, he can really make people believe that they are really all in this thing, really believe in this thing, rather than playing the ticket, or cheat some government funding. This sincerity is actually very important. There is a paragraph style story, is Musk and the British actress Tallulah Riley after the first date, Musk invited each other to his home to see his big rocket, Riley is still a little suspicious of this person is not a little brain problems, the results to Musk’s home, he really is to show her his rocket model video.

The concept of mental power is difficult to detect and assess, but there is an observable and equally important fact that Musk is very adept at salesmanship and he knows how to show it to the government.

One example mentioned in Musk’s biography is that when they were developing the earliest small rocket, Falcon 1, in 2003, Musk’s engineers were over there working all night, 20 hours a day. But Musk slipped them a new task, which was to make a model of the rocket. Making the model was very easy and was done in a few days, but the engineers were disgruntled and someone mentioned, “It seems to me that this is very boring.

This model is what Musk gave to the government for demonstration. He put the rocket on the company’s own mobile launch system and then transported the whole set to the doorstep of the Federal Aviation Administration in Washington, D.C., where he held a launch party, saying he had built an exceptionally inexpensive rocket that still had higher performance. Musk’s biographer Ashley Vance calls this Musk’s “salesman instinct.

Also, Musk knows that government relations and public relations are one and the same. Logically, aerospace is something that has nothing to do with the average consumer, and nothing to do with electric cars, but Musk is trying to tie them together to create an overall very cool image and make SpaceX the irreplaceable headliner of the industry.

At the same time, SpaceX also knows that dealing with the government is not all about knee-jerking, but about arguing, arguing, and doing its best to get benefits. For example, in 2014, Musk went to court with another old aerospace giant at the time, opening congressional hearings to fight over who could take more government orders. He showed a PowerPoint on the spot, saying that a merger between Boeing and Lockheed Martin would create a monopoly and send customer spending soaring, the equivalent of introducing a catfish into the market.

In fact, Musk’s government communication skills are not only shown in SpaceX, but also very visible in Tesla as a company. In Tesla’s most difficult time, he managed to get two sums of money, one is a contract and investment from Mercedes-Benz, and the other is a loan from the U.S. government to new energy vehicle startups. With these two sums of money, Tesla came out of the crisis of broken capital chain.

The other time it was shown was when Tesla had become a hot star, Musk wanted to open a super battery factory, and then played into the hands of several bidding state governments, eventually getting much higher tax incentives and policies than at the beginning.
The pursuit of stardom presupposes a steady income

Of course, Musk is not a red-top businessman in the narrow sense of the past Chinese definition, such as working for the government and earning administrative monopoly money on the side – this kind of red-top businessman is actually a supporting role for the government, sometimes a white glove. Musk is different. He himself has clear goals for the company’s vision, and they are very ambitious goals, and the cooperation with the government is just one of the means to put his ambitious goals on the ground.

Musk has said very clearly that SpaceX’s goal is the sea of stars, but to achieve this ultimate goal of colonizing Mars, it is first necessary to ensure that the company has a stable income, and the Starlink program is for this purpose, with its important potential customers, and the U.S. government’s program.

It is because SpaceX has now made space a profitable business that it can go and burn money doing something as crazy as colonizing Mars without being seen as crazy by investors. Because he has proven himself reliable.

SpaceX can be so hot at the moment, the core or because it has an overwhelming advantage in technology, and this advantage translates into the advantages of the business model. At the heart of this is its Falcon 9 heavy-lift launch vehicle, which is reusable and greatly reduces the price and difficulty of sending objects into space. Taking recent data as an example, the cost of a SpaceX rocket launch was reduced to $50 million, and if divided by the weight of the goods it carries, the minimum per kilogram is already only $5000. This is a tenth of what it used to be or even less.

It is easy to understand why the global rocket launch market, SpaceX has the highest market share, after all, it is the best quality products and services, the price is also the cheapest.

It can be said that because of the breakthrough technology of reusable rockets, transporting goods and people to space has become a potential large-scale business. For example, SpaceX has launched a single launch business, which means you can spend a minimum of $1 million to buy an empty space on the Falcon 9 and put what you want to launch on it.

Musk has an amazing target number to bring the cost of space transportation down to $20 per kilogram, which would be in the same order of magnitude as a cross-country air courier. By that time, the price of a man in space may not be such a big difference compared to a plane ticket.

SpaceX has also changed the way the industry works by introducing a fast iterative approach to work, and the pace of work in startups, changing the kind of bureaucratic approach that NASA used to have. many of SpaceX’s startup talent came from NASA, and they didn’t arrive at the new company with improved skills, but with a lot less process and thought, just thinking about how to reach their goals and an atmosphere of garage entrepreneurship has developed.

From this perspective, this is Musk’s greatest value, that of tapping into the potential that human civilization already has and turning it into a drive to continue taking risks. Musk’s ability to make the ideal a reality relies on his side of dealing with government. Successful business people are often romantic and shrewd at the same time. That’s how business works.

SpaceX and Musk are also featured in the latest episode of the podcast, “That’s the Way Business Is. In this episode, the two hosts talk about the less glamorous and romantic side of Musk and the miracle-working SpaceX he founded.

Posted by:CoinYuppie,Reprinted with attribution to:
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