SpaceX turns 20 years old in a few months, and
Elon has certainly made a lot of progress in that time, but big things have small beginnings.
The early days were incredibly difficult for the company: test launches kept failing, suppliers
weren’t delivering, and bankruptcy was always just around the corner. There was even a group of drunk
Russians who almost ruined everything, but we’ll get to that story in a minute. The early history
of SpaceX is a powerful lesson in the importance of perseverance, so let’s go back to the year
two thousand and the very beginning of SpaceX. It was October, and Elon Musk, who was
serving as the CEO of PayPal at the time, was in Sydney, Australia to watch the Olympic
Games with his girlfriend. This wasn’t great timing though. PayPal was in turmoil as executives
and investors argued over which direction to take the company. This battle came to a head while he
was still 7 thousand miles away from the office, and by the time he made it back to Palo Alto, he
was out of a job. Getting fired from PayPal was definitely not part of Elon’s plan, but there was
a silver lining. He had always been interested in space travel and now that he wasn’t in charge of
a growing company, he could spend as much time as he wanted exploring his true passions. It was a
bit of a blessing in disguise, since what he would go on to build at SpaceX would be dramatically
more ambitious than PayPal, but it would require a ton of work, so he started studying. First,
he joined a space-advocacy non-profit called the Mars Society. The organization was filled
with tons of scientists and researchers who were obsessed with space travel and the colonization
of Mars in particular. Elon didn’t want to just talk about space exploration though, he actually
wanted to do it. So he started pitching an idea he called the “Mars Oasis.” His plan was to send
a small greenhouse to Mars that would grow plants in Martian soil. Elon believed that if people
saw concrete evidence that life was possible on the red planet, it would reinvigorate interest
in space exploration. After we landed a man on the moon, and the space race came to a close,
NASA funding fell significantly, and no one was seriously working on Mars colonization. So Elon
got to work. He needed a rocket, and not just any rocket, a big one. So he assembled a crack team of
experts to help him find the ideal rocket. First, he called Adeo Ressi, who was one of his friends
from UPenn back in his college days, but Adeo didn’t have any space experience, so Elon called
Jim Cantrell. Cantrell had worked on various joint missile defense programs conducted between
America and Russia and was perfect for this job, there was only one problem: he thought Elon was
crazy. See, when Cantrell first picked up the phone, Elon told him that he was a billionaire,
which he wasn’t yet, who wanted to save humanity by sending rockets to Mars. It sounded like the
ravings of a madman, so Cantrell was very wary to meet Elon in person. Just to be safe, he insisted
that they meet at the Denver Airport behind the security checkpoint, so he could guarantee
that Elon wouldn’t have any weapons on him. Fortunately, once they sat down and had a
chance to talk through Elon’s full vision, Cantrell was convinced and agreed to help
out. So the three of them flew to Paris, where they met with a French aerospace
company to discuss the purchase of a rocket. But the only rockets available cost over a hundred
million dollars each. Even though Elon was rich, he wasn’t that rich yet. He only had about $30
million dollars which he had made from the sale of his first company Zip2, so he had to find another
option. The team then flew from Paris to Moscow in hopes of finding a cheaper rocket. After
the fall of the Soviet Union, demilitarization treaties required that Russia decommission
thousands of intercontinental ballistic missiles, or ICBMs. These were well designed rockets, and
after you removed the nuclear warhead from them, they could definitely be used as orbital
launch vehicles. While they were in Russia, Elon and his team scheduled meetings with
two separate Russian space organizations. They thought it would be easy to buy an old ICBM,
since they were basically just sitting around useless at this point, but negotiation with the
Russians turned out to be close to impossible. I really enjoyed Adeo’s account of the whole fiasco,
he said: “Then we started having meetings with the Russian space program, which is basically
fueled by vodka. We'd all go into this little room and every single person had his own bottle
in front of him. They'd toast every two minutes, which means twenty or thirty toasts an hour.
'To space!' 'To America!' 'To America in space!' I finally looked over at Elon and Jim and they
were passed out on the table. Then I passed out myself.” It seemed like a dead-end, but Elon
was willing to do anything to get a deal done. He spent hours talking to the Russians just in
order to get them to open up a bit about what they actually had in stock. And they weren’t exactly
friendly to his inquiries. During one particularly heated exchange, one of the Russians actually spit
on Elon in disgust. But even all those ridiculous events in Russia didn’t end negotiations entirely.
For the next meeting, the Russians flew to Los Angeles to meet with Elon on his home turf, but
they seemed more interested in partying than doing business. They reportedly called him and asked for
$5,000 in cash to go clubbing for the night. Now, it’s not exactly easy to withdraw 5 grand from
a bank on a weekend, and ATMs have limits. But Elon’s friend Adeo knew someone who worked at the
Mondrian in West Hollywood and kept lots of cash on-hand. It must have been a ridiculous favor
to ask someone to borrow thousands of dollars from the hotel safe, but it worked. The Russians
were appeased and spent the night partying. For their third meeting, Elon was more determined than
ever. It was February of 2002 and at this point, Elon had been trying to find a rocket for over
a year with no luck. So he flew to Russia, but this time, he brought Mike Griffin. This guy was
a space industry veteran and actually went on to lead all of NASA in 2005. Griffin brought a level
of seriousness to the discussions that helped move negotiations forward and Elon was finally
able to get a quote. There was only one problem, it was still too high. The Russians wanted $8
million dollars for a single rocket. Elon was willing to pay the $8 million dollars, but for
that price, he wanted two rockets. The Russians held firm to their original pricing and wouldn’t
cut a deal with Elon, so he stormed out of the meeting into the freezing Moscow air outside and
took a cab back to the airport. On the flight back to America, Elon’s team ordered a round of drinks
to celebrate getting out of Russia alive. But Elon wasn’t celebrating, he had his laptop open and was
already thinking about his next step. He started building an Excel model for rocket construction
costs, and he found something incredible. Only 3 percent of the cost of a rocket came from
raw materials like aluminium and copper. There were a ton of inefficiencies, most of which could
be eliminated with careful planning. Historically, the space industry has operated using a cost-plus
model, which means that the rocket manufacturer will total up their costs and then add a profit
margin on top. This leads to perverse incentives though, since the higher your costs are, the
higher your profits will be. And governments are notoriously bad at demanding lower costs. On that
flight, Elon discovered that if he streamlined the entire rocket construction process and cut out
the inefficient subcontractors, he could get to orbit for a fraction of the industry-standard
cost. Even though Elon started by planning to go straight to Mars, realistically, he had to start
smaller. So he settled on a small-payload rocket where he could prove out his ideas before going
bigger. He’d been tracking the industry for years and found that, until the 1990s, the vast majority
of launches were transporting large satellites, usually for government agencies. Elon couldn’t
afford to build a rocket big enough to compete for these types of contracts, at least initially,
but satellites were getting smaller. Increasingly, smaller telecommunications satellites were
providing critical connectivity to private sector companies and Elon believed that for around
$100 million, he could build a rocket that could get those satellites to orbit. That still wasn’t
a ton of money, and a good portion of that was going to need to go toward designing the rocket
engine. Luckily, Elon found the perfect partner. His name was Tom Mueller, and he’d been obsessed
with building model rockets since his childhood. After graduating from the University of Idaho
with a degree in mechanical engineering, Mueller moved to California and was hired by TRW.
While there, Mueller developed several advanced liquid rocket engines, most notably the TR-106,
which generated 650 thousand pounds of thrust. It was a huge achievement, but after
15 years climbing the corporate ladder, he was ready for a change. Mueller wanted
to move faster and try out new ideas, but TRW employed over 100 thousand people and was
hesitant to take big risks. So Mueller joined a group of amature rocket enthusiasts called the
Reaction Research Society. Everyone had a real hacker mindset and would drive out to the Mojave
Desert to launch rockets they’d build in their own garages. While Mueller was at one of these events,
he met a man named John Garvey. The two hit it off immediately and started working together on nights
and weekends on a completely new idea. They called the BFR, which, if you follow SpaceX at all, you
probably know what that stands for already. Now we don’t know for sure, but rumor has it that the BFR
was the largest amature rocket engine ever built. It could generate 12 thousand pounds of thrust,
and it was enough to impress Elon when he saw it in person in early 2002. It wasn’t quite strong
enough, but it was close. Elon wanted to deliver a half-ton payload to orbit, and needed 80 thousand
pounds of thrust to do it, but he could tell that Mueller could deliver if he just had a little
more budget. So Elon made both Mueller and Garvey job offers to join SpaceX. Garvey declined, but
Mueller signed on as the first official employee and VP of Propulsion. The team wasn’t complete yet
though, Elon would definitely need more talented engineers to make his dream a reality, so he
started recruiting an aerospace engineer named Chris Thompson to work on the body and structure
of the rocket. Thompson had worked at Boeing and was the perfect person for the job, so he
joined SpaceX as employee number 2. This new team immediately started planning what would become the
Falcon 1. The design criteria were pretty simple. The rocket needed to deliver a half-ton satellite
to orbit and not much else. All the reusability stuff you hear about now-a-days was still a long
way away. Just getting off the launchpad in one piece would be a big enough challenge, and the
Falcon 1 had to do it on a shoestring budget. This was a blessing and a curse though. Obviously it’s
tough to build a big rocket without a big budget, even basic materials are extremely expensive
after all. But the SpaceX team was working from a blank slate, so they didn’t have any legacy
technology weighing them down and they could design completely from first principles.
They still needed a bit more money though. Elon’s $30 million wasn’t quite enough. Luckily,
PayPal was just about to go public and Elon had held on to a huge stake in the company. In
February of 2002, the IPO went off flawlessly, and Elon suddenly had an extra $165 million dollars
to play with, and he wasn’t about to just sit on all that cash. He immediately went out and rented
a 30 thousand square foot warehouse in El Segundo, California to use as a factory. Hiring was also
top of mind for Elon, so he hired Hans Koenigsmann as his VP of Avionics. Before joining SpaceX,
Koenigsmann had worked at Microcosm developing low-cost rockets and knew what it took to deliver
quickly without sacrificing on quality. The pieces were finally coming together, so Elon registered
SpaceX as a real company on May 6th of 2002. To celebrate the occasion, Elon threw a party
with a Mariachi band in what looks like a completely unfurnished office. I guess people
don’t need office chairs if they’re dancing. With most of the leadership team in place, Elon
began hiring more engineers to help with the more technical aspects of rocket development.
And his strategy here was really brilliant, he already had some solid industry veterans in
place, so he focused on engineering students with zero work experience. And he took a very hands on
approach here, personally calling universities to get in contact with the top performing students.
It’s hilarious to imagine getting a personal phone call from Elon Musk while you’re sitting in
your dorm room nowadays, but back then, he was a complete no-name in the aerospace industry.
Taking chances on young engineering students allowed Elon to keep costs low and he extended
this thinking to his entire business. He knew that the space industry had been plagued by complex
networks of contractors and subcontractors. If SpaceX was going to succeed, they would need to
do things differently. And Elon really didn’t hold back when it came to doing things differently.
Nearly all rockets are manufactured vertically. But SpaceX actually found that it would be cheaper
to build the entire rocket horizontally instead. Now, there was some precedent for this, the
Russians did it this way, but it definitely challenged common knowledge here in the States.
But that’s the type of creative thinking you need to employ if you’re going to build a rocket with
200 employees instead of 20 thousand. When you’re understaffed, the natural reaction is to try
and outsource more of the work to third-party contractors, but Elon really tried to do the
opposite. He was constantly trying to bring any expensive or time-consuming activity in house
as soon as possible. SpaceX even spent $10 million dollars building a welding workshop, just so they
could make more critical rocket parts in-house. This strategy served them well, and by early 2003,
the first Merlin engine was ready for testing, but they couldn’t just turn it on in the El
Segundo warehouse. There’s always a risk of an engine exploding, so you need a big open space
to run a safe test. And you know what they say, everything’s bigger in Texas. So SpaceX headed
to McGregor, Texas and set up shop in a defunct rocket testing facility. The site was pretty well
equipped and even had a massive concrete tripod for mounting rocket engines. The only problem was
that McGregor was 1,400 miles from Los Angeles, so every time the SpaceX engineers wanted to run a
test, they had to rent a Hummer and tow the engine for days to get there. It wasn’t easy, but it
got the job done. At least most of the time. One test was cut short by the United States
Secret Service. They pulled up just as the SpaceX team was about to turn on the engine and stopped
the test. It turned out that the Merlin engine, which had been mounted on the tripod, was
pointing directly at President Bush’s ranch, which wasn’t far from McGregor. They must have
had some pretty good intel to pick up the engine, but the incident led the SpaceX team to make
sure to inform the local community before each test fire. Even though SpaceX now had a viable
engine testing facility, they still needed a place to actually launch the rockets. They initially
looked at Vandenberg Air Force Base in California, which would have been great because it’s so close
to the main SpaceX headquarters. But like always, there was a problem. A Titan 4 rocket with a $1
billion dollar spy satellite on-board was sitting on the launch pad just waiting to get launched.
The schedule for this satellite was constantly shifting and until it took off, SpaceX couldn’t do
anything. The Air Force was worried that if SpaceX failed, debris from the explosion could damage the
billion-dollar satellite. Elon and his team spent six months waiting for the Air Force to clear the
launch site, but eventually they got frustrated and started looking for a new option. They had
already scouted a few potential launchpads out in the Pacific, and one location stood out in
particular. It was the Kwajalein Atoll in the Marshall Islands and it satisfied a lot of key
criteria. It had already been used as a Missile Defense Test Site and was close to the equator.
So SpaceX started refurbishing the facilities in late 2005 and began to prepare for the launch of
Falcon 1. At this point SpaceX was already a few years behind schedule. The original plan was to
launch the first rocket by October of 2003, but that didn’t matter to Elon, he was still moving
incredibly fast by industry standards. In early 2006, the SpaceX team packed up the Falcon 1 and
shipped it to Kwajalein by boat. Once it arrived, the engineers completed the final assembly and
were ready to launch. Elon gathered with his team on the nearby island of Kwajalein to watch the
launch, and at first, everything went smoothly. The first stage Merlin engine ignited and the
rocket lifted off, but just 33 seconds later, the engine caught on fire and exploded. Even
though this was the first flight ever, Elon was so confident that it would work he had loaded
the rocket with a fully-functioning satellite, which crashed through the roof of a storage shed
on the island. After digging through the wreckage, engineers found the culprit responsible for
the explosion. It was a single corroded bolt, which had been overlooked during inspections.
Even though this launch was a failure, the SpaceX team still went out for drinks to celebrate the
milestone. They got back to work pretty quickly and just a few weeks later, the team was ready
for launch number two. But traveling to Kwaj is not easy. The trip from Los Angeles required a
five hour flight to Hawaii, an overnight layover, another flight to the Marshall Islands, and then
a military transport ferry to get to the actual atoll. And island life on this tiny military
outpost doesn’t quite compare to Los Angeles. Since it’s a military site, there aren’t any
tourists and the island basically only has two hotels. The rooms are run down and the
TV only shows military channels. There are two bars on the island and I’m sure that after
a few weeks the SpaceX employees basically knew everyone on a first-name basis. But what the
island lacks in entertainment, it more than makes up for with its beautiful nature. SpaceX employees
would spend their free time going scuba diving and exploring the coral reefs. During World War 2,
a German cruiser ship had sunk in the lagoon and became a beautiful artificial reef,
perfect for curious SpaceX divers to explore. On March 21st, 2007, SpaceX launched their second
Falcon 1 rocket. This time, they were a bit more realistic about their odds of success and used a
dummy payload instead of a customer satellite. The first and second stages both fired successfully
this time, but about 4 minutes into the flight, the rocket started to wobble. The Merlin engine
kept working for another 3 minutes, but ultimately failed to push the rocket into a proper orbit.
One year later, SpaceX tried for a third time, and again they failed to deliver the rocket to
orbit. The first stage was working perfectly, but after it separated from the second stage,
it kept accelerating, which caused it to smash into the back of the second stage. This must
have been a crushing defeat for the entire SpaceX team. They had been working for years on
this project and just couldn’t get it to work. Even worse, the company was now about to run
out of money. Elon knew he was close though, and really wanted to get one more launch together,
so he called up his PayPal co-founder Peter Thiel and got him to invest $20 million dollars
in the company. Now this might sound like a lot of money for most startups, but at SpaceX,
it would only cover a few months of expenses, so they had to work quickly. There was a glimmer
of hope on the horizon though… NASA was about to award a massive $1.6 billion dollar contract for
12 supply runs to the International Space Station. All the usual big names would be competing for
the contract, but NASA was open to giving a startup like SpaceX a real shot. This was the
chance that Elon needed to save the company, but there was no way he could win the contract
without a successful launch under his belt. There was no time to build an entirely new Falcon 1 from
scratch, but SpaceX did have a spare rocket in the LA factory. So the team packed up the rocket and
rented a military cargo plane to fly the rocket to the launch site. A small group of SpaceX employees
rode in the plane with the rocket, and it’s good that they did. As the plane started to descend,
they noticed that dents were starting to form in the rocket’s body. The pressure levels inside the
rocket were destabilizing and it could implode at any minute. So one of the engineers stepped up to
fix the problem, and in doing so, probably saved the entire company. He climbed inside the rocket
and used a wrench to open a valve that equalized the pressure. The plane landed safely and the
rocket was still in one piece, so after a few minor repairs, SpaceX was ready to launch. This
time around, everything worked perfectly. This was Elon’s last chance to keep SpaceX alive and
he’d done it. SpaceX had just become the first commercial company in history to design, build,
and launch a liquid-fueled rocket to orbit. That fourth launch marked a turning point for
SpaceX. Just a few months later, Elon and his brother Kimbal were on a family trip to Disneyland
when Elon received a call. It was NASA. SpaceX had just won the $1.6 billion dollar contract.
This changed everything for SpaceX. Even though they wouldn’t receive all the money upfront, it
provided predictable cash flow and allowed them to attract investors and employees. SpaceX was now a
real space company and they could start working on bigger projects like the Falcon 9, Dragon capsule,
and Starship. I love the story of SpaceX because it’s all about perseverance. Watching a rocket
that you spent years designing and building go up in flames just a few minutes after launch has to
be crushing. But Elon never let that get him down. He always found a way to get one more chance,
because he knew what he was building was worth fighting for. If you want to learn more about
SpaceX, just drop your email at johncoogan.com and please check out this recommended video, the
YouTube algorithm thinks you’ll really like it.
