00:49:24 · Ty Morse, Olaf Hichwa
[00:49:24] S0: I know that Elon has this idea of, like, walk to the red when he was going through production hell in 2018 for the Model three production ramp. I think there'd effectively be screens all over the factory of whatever was like slow on the line. Yeah. And he would just go to one of the red screens and then just unfuck the bottleneck and then go to the next red screen and unfuck that bottleneck and just continue doing that until the line worked. When you like go on the line and you see some bottleneck, how often are you like figuring out there's some part or process that you don't even need to be doing? [00:49:58] S1: I mean, all the time, like, you'd be really surprised how simple the solutions are to some of these problems. Right? Like, especially as the as the company grows, like, there are... There's a lot of juice to squeeze in in simple solutions. You know, you gotta try the the idiot checks. Do we even need this part? Can we delete this? Like, you know, who qualified this part? Show me the test data. Did we make sure this part works? But walking to the red, I'm a big fan of it. Like, Sorin and I, we both try very, very, very hard to put incredible people in charge of basically every responsibility we have by default. And then we spend a lot our time just unfucking. Like, in theory, if the company's running well, our calendar should be free. And we're able to just pick the most fucked area and dig there. That's that's of course not always possible. There's some things you want, you know, high touch on, but that's generally our philosophy.
00:49:58 · Olaf Hichwa, Ty Morse
[00:49:58] S1: I mean, all the time, like, you'd be really surprised how simple the solutions are to some of these problems. Right? Like, especially as the as the company grows, like, there are... There's a lot of juice to squeeze in in simple solutions. You know, you gotta try the the idiot checks. Do we even need this part? Can we delete this? Like, you know, who qualified this part? Show me the test data. Did we make sure this part works? But walking to the red, I'm a big fan of it. Like, Sorin and I, we both try very, very, very hard to put incredible people in charge of basically every responsibility we have by default. And then we spend a lot our time just unfucking. Like, in theory, if the company's running well, our calendar should be free. And we're able to just pick the most fucked area and dig there. That's that's of course not always possible. There's some things you want, you know, high touch on, but that's generally our philosophy. [00:50:58] S0: One of the biggest challenges with scaling this type of business is you have a, like, almost single customer. Yeah. And that customer has to scale with you or else, again, just like you'd have inventory piling up or, like, parts and stuff piling up, you can't scale without people buying the drones. So how does that relationship with the US government and other governments work? And are they kind of moving ahead of where you can scale? Or are they not?
00:51:24 · Olaf Hichwa, Ty Morse
[00:51:24] S1: It's such an important and complex relationship. There's a lot of really, really impressive, impactful work being done in that domain. If we wanna build this factory that credibly deters conflict, it needs to be profitable. It can't be like a charity item, you know. Our drones are $2,000 each. A million drones are $2,000,000,000 worth of drones. And that's just the drones. Like, what about the production, the engineers? There's a lot of stuff that goes into that. That's not like something that happens without a profitable enterprise around it. And the government really wants this too. Like, our incentives are super aligned. Right? Like, we exist to serve the American warfighter and to provide travel deterrence. And most of the people that are in the government, they they have dedicated their lives to this. Right? Like, they could get way better pay outside the government. Often, they served in the armed forces. They care so much deeply, deeply about making sure that America has credible deterrence. So the the, like, incentives are often aligned. It's just the government is a big organization. You know, it's a really, really big organization, largest employer. [00:52:39] S0: It's like the ultimate aircraft carrier. It takes Yeah. Know, 200 miles to turn.
00:52:43 · Olaf Hichwa
[00:52:43] S1: Every return. And and a lot a lot of details that go into, like, writing a company a $2,000,000,000 contract to build a million drones. Right? It's it's not, like, something that happens overnight. So that relationship, it's often, it's a lot of strategizing together. It's a lot of, like, you know, working with the customer. It's explaining the customer. Like I mentioned in the beginning, it's explaining to the customer what the warfighter needs. Explaining to the government what the warfighter needs. It's also explaining to the government how to contract, you know, a million drones and what they need to do. And these, like, very, very well meaning folks in the government, we sometimes have to explain to them, like, what we need. And and they also explain to us, like what their blockers are, what makes it hard to actually like buy these things or field these things. Like, you know, they tell us as an example, listen, marines wanna fly this drone, but they can't without crazy sign offs, very very very senior, you know, exception to policies because of spectrum regulation. So we go, great. The answer is a JF 12. That is like a approval to use the drone on any military base. And then we work, we figure out how does the JF 12 process work? Who do we need to talk to to move through that quickly? What engineering resources can we give? We start doing a bunch of testing ourselves to to make it so at the end of the day, the marine can fly the drone, and they don't have to stress about it. But it's very much a symbiotic relationship, and it's a partnership that goes very deeply. We really appreciate government partners that understand the importance of explaining the what but not the how. I think government is very good at, like... They they told us, you know, the marine can't fly can't fly the drone or we need to strike a target, you know, far away, x x kilometers far away. Those kinds of, like, high level capabilities are something great... Well described by the government, and then we work on how that's done. Like, we own the implementation, and we work best with customers that understand that really well.
00:54:59 · Ty Morse
[00:54:59] S0: You had to fast forward a couple years, and you guys do have this thing fully operational and is making a million drones a year. What does that business look like structurally versus the one that you have today?
00:55:12 · Olaf Hichwa
[00:55:12] S1: To build a million drones a year, you basically have to build a city. You have to build an entire ecosystem of components. And each little detail in that drone has a massive impact. You know, let's say you choose to use a chip in the drone and that chip is just $10. All of a sudden you have a $10,000,000 PO for just one year that you're waving around. You probably wanna do a few years of this. So there's a 30,000... $30,000,000 contract to be won for one chip in this drone. And there are hundreds of electronic components, probably thousands if you include all the SMT components in this system, you have to build a city of suppliers. I mean, lot of it should be vertical, but eventually, you know, someone's gotta sell you the sell you the raw materials probably, unless you're gonna open a mine. So you're building a massive ecosystem. And then internally, the kind of level of intention that has to be put into every part of the design at a million units per year, you assign, like, everything becomes a a challenge. Like just this, you know, this this this cable becomes a massive challenge. Like how do we how do we design this cable to be, you know, really compatible with a million unit per year run rate? How do we make sure that the motors are compatible? Each one of these almost becomes like its own little company with its own, you know, responsible individuals and folks that control the destiny of that part. So you you build a massive ecosystem with, like, areas, more specific areas of extreme ownership. I think that's the that's the best way to think about how to structure a million drone per year company.