HDE Advent Calendar Day 15: Why SpaceX was founded

Hi, I'm Kirby and I've had the pleasure to work at HDE as a GIP Intern over the last 7 weeks.

Thanks to the surprising amount of English in Tokyo and the HDE staff's astounding speed of transition from Japanese to English as a business language over the last 2-3 years, I find myself leaving Japan with my Japanese unimproved. I wouldn't have thought this possible before. While contemplating this, I dug up a short passage I wrote over a year ago while I was trying to learn Japanese.

At the time, I had just finished reading Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future written by Ashlee Vance and while surfing the net, I noticed that the Japanese wikipedia entry for Elon Musk didn't describe why Musk started SpaceX in the first place. Before the feel-good-inspiration imparted by the book faded away, I painstakingly tried to describe Musk's original motivation in Japanese but the result was riddled with awkward phrasing and grammatic errors. So to give it some justice, I'll write it again in English (translation: I ran out of ideas to write about thanks to the 2 MTS's and the HDE Medium blog post).



While Musk is mainly associated with SpaceX and Tesla nowadays, he actually started in the IT industry back in the dot-com era. At 24 years of age, Musk left his PhD program in applied physics and materials science at Stanford University in order to participate in the emerging internet phenomenon. A brief timeline of his endeavours is shown below:

  • 1995 - Musk and his brother, Kimbal founded Zip2 with US$28,000 given by their father.
  • 1999 February - Compaq acquired Zip2 for US$307 million in cash. Musk earned US$22 million while Kimbal earned US$15 million.
  • 1999 March - Musk co-founded X.com with US$10 million earned from Zip2
  • 2000 - X.com merged with Confinity which had a money transfer service called PayPal
  • 2001 - The merged company was renamed to PayPal
  • 2001 - eBay acquires PayPal for US$1.5 billion in stock. Musk earned around US$180 million

Having earned this much wealth at age 31, Musk then made a strange decision. He founded the space company, SpaceX in 2002. Traditionally, the space industry resided exclusively in the realm of governments. After all, the industry is extremely capital intensive and the liklihood of success is low. Neil deGrasse Tyson eloquently describes that here:


Naturally, most people, Elon included, figured the business would fail. So why did he risk his personal fortune then?

Before founding SpaceX, Musk's original goal was different. Whilst browsing NASA's website, he became confused over why there was no roadmap to sending people to Mars. Initially, he assumed that the reason was because NASA's budget was too low so they couldn't conduct the required research. To address this, Musk and several prominent figures in the aerospace industry came up with a project called "Mars Oasis".

The goal would be to launch a rocket with a small greenhouse containing dehydrated nutrient gel and seeds to Mars. Upon landing, the contraption would scoop in Martian soil and use it to grow a plant in. If it were to succeed, there would be money shots of a green plant growing against the red Martian background, and headlines like "The furthest life has ever travelled". Public interest in space would reignite and thus redirecting more tax revenue into funding NASA could be justified.

However, while researching the details and costs, which incidentally involved trying to buy 3 ICBMs from Russia, Musk eventually came to the conclusion that rocket costs were prohibitively expensive. Even with a reasonable increase in budget, NASA would remain incapable of attaining any sort of sustainable access to Mars. Not giving up, Musk, as he describes it, addressed the problem from first principles. He calculated that the cost of raw materials only made up 3% of the sales price of a rocket. With vertical integration, the construction costs could probably be reduced by up to an order of magnitude. But more significantly, the primary reason rockets are so expensive is because they are not reusable. All our modern forms of transportation are reusuable - airplanes, ships, cars, trains, you name it. Rockets are an astronomically expensive one way ticket. They would be launched once and the most expensive portion of the rocket, the first stage, would burn up in the atmosphere during re-entry and smash apart in the ocean. Rocket technology had truly stagnated since Apollo 11 landed Armstrong and Aldrin on the Moon back in 1969.

And so, Musk founded SpaceX in order to build reusable rockets. If they could get it to work, they would reduce space access costs by over a factor of 100. It's certainly an ambitious goal and a highly risky investment but then again, he had originally planned on spending a sizeable portion of his wealth on Mars Oasis, a philanthropic gesture which would have had a zero ROI.

Moving forward 7 years, 2008 would likely have been one of the worst years Musk experienced. SpaceX had failed to launch their rocket, the Falcon 1, three times, each with explosive results. The costs of these rockets had exhausted SpaceX's capital. At around the same time, Tesla, the electric car company Musk cofounded in 2003 was also facing bankruptcy. With the Financial Crisis of 2007-2008 fresh on everyone's minds, finding new capital for two high risk businesses was difficult to say the least.

Faced with the imminent death of both companies, Musk agonized over the idea of having to invest all his remaining fortune into one of the two companies - which would maximize the chance of one company surviving, but guarantee the death of the other. However, unwillingly to give either up, he split his remaining wealth and invested in both companies to keep them afloat for a while longer. At this stage, Musk had to borrow money in order to pay off his rent. To add to the stress, Musk was also going through a very public divorce at the time.

Fortunately, on September 28, SpaceX managed to successfully reach orbit with their fourth Falcon 1, a milestone that had never been achieved by a private company before. Then, on December 23, SpaceX won a US$1.6 billion contract from NASA for twelve flights to the International Space Station. Had this fourth launch failed, SpaceX would no longer exist today.

While juggling all of this, Musk was also engaged in trying to secure a round of funding for Tesla. It culminated in a US$40 million funding round, half of which Musk put in. The deal was finalized on December 25, a few hours before Tesla would have gone bankrupt.

Fast foward to today, and I daresay Musk's companies are fending fairly well for themselves. SpaceX managed to succesfully reland a booster for the first time in history on April 18, 2014. Thus far, they have relanded 19 boosters out of 24 and relaunched and relanded 3 used boosters. Their launch frequency is also increasing quite rapidly, with 30 launches planned for 2018. Check out some stats here. SpaceX also do live web broadcasts of their launches so if you're interested in seeing one live, I'd suggest following them on Twitter for notifications.

On the other side, Tesla has also done fairly well with its Model S and Model X line. They have used the capital they earned from these models to build two Gigafactories, with several more planned for production. These Gigafactories will be essential for the mass production of the Model 3 and the Tesla battery. Whether they succeed at production of this scale remains to be seen but I'm certainly hoping they overcome the hurdles.

And that's it from me. I would recommend giving the biography a read. It almost reads as if it were some sort of movie script. https://www.amazon.co.jp/Elon-Musk-SpaceX-Fantastic-Future/dp/0062301233

And maybe one day, we'll see this happen.


Hopefully, we don't build Gundams after that and end up in a Earth-Mars interplanetary war though.