How Elon beat the Russian Mafia and became the Richest Man on Earth? @SpaceX

when you had that third failure in a row did you think I need to pack this in never why not I don't ever give up the year is 2008 and the world is on the brink of a collapse what the is going on down here uh I don't know all of a sudden here we started hearing screaming by market didn't work it broke down the machines broke down fear came back into the market in a very big way now it's official we are in a recession it is definitely a very very difficult time and it's not going to get better quickly people are seeing this and those memories of fear are coming back the Dow tumbled more than 500 points after two pillars of the street tumbled over the weekend a year so catastrophic that the American Stock Market was in a freef fall billion dollar companies were crumbling into dust $600 billion of assets collapsed overnight 2. 6 million jobs vanished Into Thin Air and the S&P was down by 40% because this was the 2008 crisis 2008 was brutal you um yeah 2008 we had the third consecutive failure of the falor rocket for space the the reason that there hasn't been a huge uh number of a big Improvement in in the space industry talk about space exporation just for a moment how is it going in terms of uh creating the systems that will engage Us in space exploration and during this time if you asked anyone in America about starting a business they would have called you crazy but in the middle of this chaos there was one man who took a leap of faith so bold it could have destroyed him he bet every last penny he had on a rocket yes a freaking rocket musk decided that the only way to get an affordable rocket was to build it himself read every book I possibly could on Rocket Machinery um and decided to prob giving it a go and he started SpaceX he's obviously a gambler and many many times he has put all of his money down and take a great risk $100 million into something that you did not would work at the beginning yes what our industry needed was somebody like say a Steve Jobs somebody that could really push the envelope by this time his company had already launched three rockets only to see them fail miserably and now he is 1 in away from bankruptcy so this launch could either make him a legend or the stupidest businessman in America and as the clock take down to launch America saw something that changed the world forever Elon Musk just launched the Falcon 1 on a remote island in the Pacific Ocean Falcon 1 did it we have liftoff this time around everything works SpaceX became the first to privately develop and successfully launch a liquid field rocket to orbit this is when SpaceX evolved from an engineering dream into a business ver launchs go little did the people of America know that day that this rocket is going to turn Elon Musk into the richest man on earth people called you the real Tony Stark Welcome to the [Music] [Applause] but before we move on I want to quickly introduce you to our partners of today's episode which is scaler School of Business and they are bringing in something absolutely revolutionary people if India is to become a $ 30 trillion economy by 2040 it will need many more Visionary leaders like Elon Musk amitab Khan the EXC of nidi AOG recently stated that our education system has traditionally focused on students earning degrees rather than producing high quality talent and in the IIT curriculums need restructuring meanwhile companies like scaler are already helping res skill students which get them jobs with a median CSU of 25 lakh rupees so if you're seeking world-class business education you must check out scaler School of Business they offer a full-time oncampus 18-month PG program in management and Technology where you learn business Hands-On from the leaders who have built billion dollar companies like uber minra and McKenzie you know even the best Business Schools don't teach you how to build a business they only teach you business Concepts that is why scaler follows a practical First approach where students work on real world projects reviewed by CEOs themselves just imagine if you get the chance of presenting a tier three Market strategy to Uber India's CEO himself feels amazing right just like this as a part of the curriculum students also have to build a business take them to the market generate revenue and even raise VC funding all while studying on the campus in fact their first year students have already closed pre seed funding for their startups the best part is with over a decade of experience scaler has access to 1,200 plus industry Partners boasting placement rates of 96% and a median CDC of 25 lakh rupees perom last year the program received over 1,000 plus applications with a 4% acceptance rate and students came from Top firms like Deo ebi Amazon and Uber and now their next batch launches in July in Bangalore so applications are now open and you can receive scholarships up to 1 100% so if you find this interesting apply for Scala School of Business through the link in the description or in the pinned comment section below and now on with the episode The Story of Elon musk's wealth started in the late 1990s and this era from the 1990 to 2000 was an iconic era in American history because this was the dotom Boom in the late '90s the dotom bubble started to grow as the internet became a part of people's daily lives no technology in history has ever spread so far so fast to so many people it it's very easy to predict that there going to be lots of successful companies born of the internet now the dotom bubble was the most euphoric time in America most people called it the Gold Rush of the dotom bubble because every person who had a doom as in every person who had a website got a million dollars in funding without business plan yes you could do anything with this website you could sell books you could sell pet products you could send wedding invites or simply play the godamn radio on a freaking website it's it's become a place where people are publishing information so everybody can have their own homepage companies are there the latest information it's wild the internet is changing everything it touches we link to literature the Arts the world at your fingertips all you needed is just a website if you had a website you could make a million dollars with or without an idea with or without a business plan this was the Gold Rush of the. com bubble when Elon saw the tech Gold Rush he dropped out of Stanford and started an online city guide and sold it to compact for $37 million out of this deal he got 22 Mill milon then Elon built an online payment platform called x.

com which then got sold to eBay for 1. 5 billion and Elon Musk made $180 million out of PayPal so in just 3 years Elon had another $180 million in his bank account after taxes this is crazy right but you know what's even more crazier he spent his entire $180 million of Fortune in three absolutely bizarre ideas he put 100 million in a space startup called SpaceX he put $70 million into a car company called Tesla and he put $10 million into a solar startup called Solar City now do you realize how big a deal this was Elon Musk was entering not one not two but three of the most ruthless Industries on the planet all at the same time each of these industries had Titans that could eat three Elon musks for breakfast in space while Elon Musk had no background and no degree in Aerospace he he faced the unshakable Giants named boing and loed Martin while SpaceX was a baby startup scrapping for funding LED Martin was pulling in $ 42. 7 billion in sales and Boeing's Revenue stood at $6.

9 billion and then came cars while Elon had absolutely no background on car manufacturing the industry had Titans like Ford which stood at a market cap of 26 billion and Toyota had already crossed $100 billion in market cap these companies had been dominating the Auto industry for over a century but you know what Elon did he came out of nowhere and told the entire world that he will build a car that's better than Ford better than General Motors and better than the legendary Toyota Motors on one hand while NASA found it difficult to land on Mars Elon said he doesn't just want to land on Mars he wants to call colonize Mars and build cities on Mars sounds ridiculous right well it was ridiculous so everybody called him crazy they said Elon is building toys not Rockets Tesla is not a car it's a joke and they said no one wants to drive an ugly quiet car and these were not stupid people on Twitter these were experts who spent decades into engineering and they didn't just criticize him they laughed at him people who've been in the rocketry business for decades who say about you that you don't know what you don't know spacex's lack of experience bothers some NASA Legends like Apollo Astronauts Neil Armstrong and Jean cernon they've testified to Congress that the Obama administration's drive to commercialize space could compromise safety and eventually cost the taxpayers now is the time to overrule this administration's pledge to mediocrity and this hurt Elon Musk a lot but little did those people know that Elon Musk is just about to pull off a miracle so the question is what exactly did Elon Musk do with very little money with no experience and with all the Titans against him how did Elon Musk launch his rocket and how did he turn SpaceX into the most valuable private company in the world and interestingly the story starts with the Russians in the year 2001 Elon walks into a Russian office and the Russian official says so Mrmusk it's actually Musk yeah whatever but why do you want to buy Rockets I want to buy two decommissioned icbms and launch them to Mars people man wants to fly to Mars maybe he can send money to aliens too mars. com free money transfers across the Galaxy and as soon as the Russians started mocking him in the first sentence itself Elon was shaken he flew hours just to be mocked by a bunch of Russians who did not know a thing about engineering but Elon knew that he was in Russia and not the United States of America so he humbly says um I understand why it seems funny but um reusable Rockets will lower the cost of space travel significantly and make missions to Mars feasible reusable you want to fly a rocket L and flight again that's like you saying you drink water you speed it back in a bottle and you drink it again that's ridiculous I'm serious and I'm willing to pay 8 million per rocket $8 million haha $8 million for $8 million I'll give you a Brer of rockets maybe a small bottle of WKA for free with that now Elon is shaken so he makes a better offer what if I buy three rockets yes sir with three rockets with throwing three botles of work special just for you Mrmusk so now Elon thinks yeah the Russians are maybe ready to sell the Rockets So he says all right sounds good so how much will it cost me $18 million okay that's great $6 million per rocket that works very well let me know how do I proceed $6 million each you think we are selling toys Mrmusk it's $18 million per rocket and now Elon is started $18 million each that's way too high I don't have that kind of money fine no problem let's make it $21 million per rocket no Mrmusk is that okay wait you're increasing the price of the rocket because I said it's too high that doesn't mean any sense and this is when Elon realized that the conversation that he was having was absolutely pointless thanks for the advice gentlemen I think I will just go and build my own Rockets of course you will and then what send Rockets to go maybe deliver him a package with their PayPal money and that is how the meeting ends now you tell me guys how would you react to this situation most people would just get angry give up or they would just go ahead and find a different supplier right but you know what Elon did Elon literally decided to build his own rocket and this wasn't just a random dream it was based on a genius framework a framework so powerful that while the Russians quoted $18 million SpaceX launched their rocket at just $6. 7 million and this cost was so miraculously low that it even left giants like NASA and boing absolutely stunned this framework is famously called the idiot index to tell you about it while Elon was coming back from Russia he tried to understand the actual cost of making a rocket and Elon found that the Rockets were primarily made out of aluminium Alloys titanium copper and carbon fiber so he calculated that by sourcing these materials directly the raw materials for a rocket cost less than 2% of the final price tag for example a rocket that cost $60 million to buy only requires about $2 to $3 million worth of raw materials so he went to his team and he asked them why are we paying $60 million for something that cost only $2 million to build so Elon spoke to his team and made a chart on one side was a raw material cost and on the other side was the purchase cost and he said that the ratio of the purchase cost to the raw material cost has to be the lowest and whenever it is very high the team must look into cost cutting for example there is a component called turbo pump which is responsible for delivering Fuel and oxidizer to the combustion chamber in a rocket now the raw material cost as in the cost of the steel and aluminium was just $10,000 but the purchase cost from A supplier was $200,000 so do you realize that's a 20x markup so whenever this index was as high as 20x elon's approach would be to question this ratio and he would ask why are we paying $200,000 for something whose material cost only $10,000 this is how he asked his team to question every component of a rocket and when his team looked deeper they realized that the domain of aerospace engineering was so messed up and so inefficient that the suppliers were overcharging locked and boing by 100 times for something that could be made out of a college Warehouse sounds unbelievable right look at this NASA's policies were so dumb that they used to buy a single latch for $1,500 or 1.

3 lakh rupees so Elon was like why the hell are we paying $1,500 for a latch and the engineer responded by saying uh because Mrmusk these latches are Aerospace grade latches so Elon was like what does it do special and as it turns out those latches did nothing but closed the godamn door so you know what Elon did he literally went to a hardware store got hold of a $30 bathroom latch and banged it on the table to say this will close the door in the Moon Mars and my godamn bathroom and that is how by getting a bathroom latch Elon saved $1,470 per latch and brought down the cost of a component by 49 times so assuming 200 latches per rocket you can imagine how much Elon saved simply by getting hold of a $30 component similarly Elon drastically cut cost for his 5,000 T SpaceX Starship by simply switching from Aerospace grade carbon fiber to a stainless steel material and this made such a huge difference to their cost that while the Aerospace grade carbon fiber cost $200 per kg the stainless steel cost him just $3 to4 per k kog so again it saved SpaceX millions of dollars in material costs on top of this by investing heavily into Cutting Edge engineering Elon did The Impossible Elon Musk built reusable rockets that could launch themselves and land back on Earth in the most mesmerizing way possible [Music] that was as as I seen it we had phenomenal shots that was mind-blowing right and you know how magical these reusable Rockets were to the cost of SpaceX look at this the cost of a rocket can be broken down into three parts the first stage contains engines and fuel tanks and then comes payload fairing which protects the payload satellites cargo and crew during the intense forces and vibrations of the launch and then we have the second stage which is responsible for delivering the payload to its final orbit this stage contains a smaller engine and avionic system for navigation and control and if you look at the cost breakdown if a rocket cost 60 to 880 million 36 to $48 million go into the first stage 12 to $16 million go into the second stage and 12 to6 million go into Fairing and launch costs but you know what the Titans were doing while boing let their first stage of the Rockets burn up in the atmosphere or crash into the ocean like a discarded piece of trash SpaceX changed the game the Falcon 9 doesn't just launch it comes back 5 4 3 2 1 that is that first stage coming back down to the land first stage is returning to land uh that was as smooth as I'd seen it we had phenomenal all the way through the landing and after delivering the second stage in a breathtaking feat of engineering the first stage of the rocket lands vertically on its station and after landing this rocket is ready to fly again while Boeing payload fairing is discarded into the ocean SpaceX fairings deploy parachutes to slow their descent back to the Earth in the oceans and then the SpaceX team literally sails on a ship to bring these fairings back to the station so if you see it's only the second stage that SpaceX does not reuse because it's obviously stationed in the orbit this is how through recovery inous production and reusability SpaceX brought down the cost of the Rockets to such an extent that while the Russians qued $21 million for a single rocket SpaceX launched their first rocket for just $6. 7 million and if you think it was easy it wasn't SpaceX burned millions of dollars their Rockets exploded and SpaceX tared on the brink of bankruptcy in fact at that time Elon Musk himself admitted that if the next launch doesn't work SpaceX will go bankrupt 2008 was brutal if um yeah 2008 we had the third consecutive failure of the Falcon rocket for SpaceX Tesla almost went bankrupt we we closed our financing around 600 p. m.

Christmas Eve 2008 it was the last hour of the last day that it was possible we would have gone bankrupt 2 days after Christmas otherwise but then ladies and gentlemen on 28th of September 2008 as the entire world grappled with an economic nightmare SpaceX pulled off the impossible the Falcon 1 the first rocket was launched and it reached the orbit no privately developed launch vehicle company had ever achieved Earth Oran everybody tried and fail weeks later I think we had the first successful light of Falcon one we buckled the stage on the way to podul in and we still managed to get that rocket to orbit SpaceX has designed and developed this vehicle from the ground up from a blank sheet of paper only about 550 people on the team and we've just managed to do what very few companies around the world have ever done it wasn't just a victory for SpaceX it was a declaration to the world that Innovation doesn't come from playing it safe it comes from risking everything to build what others call impossible space X didn't just build Rockets they built hope and in that moment amidst the wreckage of the global financial crisis they proved to the world that even in the darkest times the light of innovation can ignite the star but having said all of this the biggest question of all is how on Earth does SpaceX make money today well as it turns out Elon musk's extraordinary cost cting strategy gave SpaceX three incredible superpowers firstly NASA space shuttle used to cost $1.