00:06:15 · Ty Morse, Eric Jorgenson
[00:06:15] S0: Do you think that he underestimated or miss estimated the likelihood of success with Tesla and SpaceX? I know he's been quoted as saying that he thought that each of them had a roughly 10% chance of success, whatever success is. [00:06:28] S1: Yeah. [00:06:29] S0: But then because both of them work, the probability of that one, like, in a 100 outcome actually occurring is, you know, asymptotically small. [00:06:36] S1: Yeah. I I think we we, you know, we're in a good, a very lucky universe in the multiverse, maybe, of, like, where both of them happen to work. Like, the timeline is is being good to us. [00:06:47] S0: Has there been any other examples where he overestimated likelihood of failure?
00:06:52 · Eric Jorgenson
[00:06:52] S1: He was probably being kind to himself, I think, in retrospect there of, like, being realistic that these companies have low odds of success. I mean, nobody had had started its car... A successful car startup in a hundred years in America. And space launch company is like an unprecedented category. So, like, 10% probably overestimating the odds of success, especially if you stack them on top of each other. And even, you know, the greatest venture capitalists in the world, like, new Elon saw him be successful with Zip two and PayPal, and then he came around and pitched this, and they were like, yeah. Like, Michael Moritz, the Sequoia, like, made a bunch of money with him in PayPal, and Elon comes around pitching Tesla, he's like, sorry, bro. Like, not gonna happen. And, you know, luckily, Elon was in a position to fund these companies until they were, still not quite undeniable, but that he was able to get them to the point where it was clear that additional resources would create, you know, subsequent breakthroughs and make them successful. I mean, your question, he's he's off on estimates all the time. Like, overestimating success and underestimating success and compressing timelines. Like, I think one of the most interesting things that I I kind of see you probably do the same thing is, like, creating short timelines that he says have a 50% probability of being made. And that's such an interesting reframe from, like, we wanna prevent any chance of failure and choose timelines that we know are successful to, I want a short timeline that I think has a 50 chance of being successful. And, you know, we're gonna miss a lot of the time, but we're gonna achieve a lot more than we would if we gave ourselves a timeline that was very comfortable to beat.
00:08:28 · Ty Morse
[00:08:28] S0: It's also interesting he actually frames it that way because he's just by default saying that most of the time... Or like a lot of the timelines, we're just not gonna achieve in the first place.
00:08:38 · Eric Jorgenson
[00:08:38] S1: But I also know it's just this forcing function to make everyone move faster. The purposeful 50%, like, timeline thing is actually a really good example of a meta that goes across his whole operating philosophy, which is encouraging or allowing small failures in order to make the whole, like, more robust. He... He's really focused on increasing the learning rate of his companies and moving ever closer towards this more perfect product. And the the sort of quote that encapsulates this is failure is essentially irrelevant unless it's catastrophic. And having a high iteration rate and giving young engineers, like, huge responsibility and pushing program timelines and pushing iteration speed, all of these things sort of create these small failures that make the end product better because those failures are instructive. It shows you, you know, where something breaks. You call it building the box in the sort of rocket program. Right? So you wanna push each variable to failure so that you know where it fails, so that you know where the outer limit of performance of the material or the system is, and then you just wanna be just like a scooch inside of it to cover for some variability. But if you're in the very comfortable center of the box, you have no idea what your actual true range of performance is. And in the case of something like Starship, you're giving up huge amounts of of economics if you're over engineering for redundancy and safety to a degree that you don't even understand because you've never pushed the system to the limit.
00:10:03 · Ty Morse
[00:10:03] S0: He also had a very interesting philosophy at the start of SpaceX where he would think about, like, future revenue as, you know, per day, and I think he estimated at roughly, like, $10,000,000 per day every single day that they delayed of lost future revenue. You know, he famously had this situation where at one point, he, like, took a... You know, flew a little part on a private jet to Kwaj. Yeah. It costs, a $100,000 or something because he could basically make a 100 times more money in the future, you know, fifteen years later.
00:10:30 · Eric Jorgenson
[00:10:30] S1: No. He... He's very... Where he's frugal and where he spends lavishly is really interesting, and it only makes sense through, as you point out, the lens of the time. Right? Like, the opportunity cost of time is absolutely massive. It's the fundamental currency of everything that we're doing. It's how we live our lives. It's how entrepreneurs, like, drive their companies, but people tend to be sort of penny wise and pound foolish about focusing on the currency and wasting time in order to save small amounts of money. Whereas he understands, like, if we can accelerate the timeline towards that, you know, $10,000,000 a day of revenue or that future market cap or that next inflection point in the valuation of the company, if we can achieve that a week sooner, a month sooner, a year sooner, we are going to massively collapse and increase the ROI of of everything that everybody's doing all the way along. And so in that story of, like, flying apart to Kwaj, it was probably the fact that he's got, like, 10 engineers and, you know, $30,000,000 worth of rockets that's waiting on this one part. And so, of course, a $100,000 to get the part there, you know, twenty four hours sooner or a week sooner unlocks the progress of $50,000,000 worth of capital and equipment and buys you that future, you know, revenue and valuation, which is just, you know, that that is the driving force. I think of some of this maniacal urgency that he talks, maniacal urgency is our operating principle, and nobody moves at the pace that he does. And I think it starts with that kind of understanding of opportunity cost.