David Senra

This is the main point.

Fewer moving parts means fewer failure modes means lower cost.

Compare this to the Atlas V rocket, which uses up to three different rocket types in a single vehicle, each optimized for its flight phase.

Elon's response to this was, you've just tripled your factory costs and all your operational costs.

And so he continues to give examples of how they think and all these little decisions they're making.

The Merlin engine family embodies this trade-off.

Russian RD-180 engines cost 20 to 25 million each, while the Merlin 1D production runs around a million.

How?

SpaceX eliminated hydrogen's complexity by using kerosene, used regenerative cooling with the fuel itself, and optimized for manufacturability over maximum performance.

The result was 95% of theoretical efficiency for 80% cost reduction.

Merlin's performance is slightly lower, but good enough at 1 20th the cost.

But identifying where to cut costs doesn't mean you can actually cut them.

You still have to build the parts.

Once SpaceX concluded that atoms were cheap and process was expensive, vertical integration followed almost inevitably.

That's a great line.

SpaceX concluded that atoms were cheap and process was expensive, and so therefore vertical integration followed almost inevitably.

The next subheading talks about this, becoming your own supplier.

If materials are cheap and the tax is all process and overhead, you need to control the process to capture the savings.

You cannot negotiate your way to a 10X cost reduction with suppliers who have profits baked in at every tier.

So SpaceX became its own supplier.