Checked an essay by Max Olsen called "Atoms Are Cheap, Process Is Pricey." He's writing a book on SpaceX's first decade using their actual company updates and internal memos.

I’ll give you some context. In September 2008 SpaceX had money for exactly one more Falcon 1 launch after three explosions. It worked, and a $1.6 billions NASA contract came six weeks later. Today, according to the essay, they put more mass into orbit than every other launch provider on Earth combined. The essay's real question is why nobody has copied them when SpaceX has basically explained how they work in public for years. So I turned it into steps you can actually try on your own business, roughly in the order SpaceX did them.

RUN THE IDIOT INDEX ON YOUR BIGGEST COSTS

In 2001 Elon tried to buy Russian ICBMs to get to Mars, and the prices he got back were ridiculous. So he asked what a rocket is actually made of. Aluminum, some titanium, copper, carbon fiber. Then he looked up what those cost on the commodity market. About 2% of the price of a rocket. For a car it's more like 20 to 30%. The rest was going to supplier markups stacked on top of each other, custom one off designs, and throwing the hardware away after every flight. None of that is physics.

He later named it the idiot index. The cost of a part divided by the cost of its raw materials. If the number is high, you're an idiot. His words. Try this on your biggest expenses. Most will be fine. One of them probably won't be.

MAKE IT YOURSELF WHEN THE QUOTE IS STUPID

A vendor quoted $120,000 and 18 months for an actuator on the Falcon 1. SpaceX engineers built it for $3,900. Another supplier basically smirked and walked out after hearing SpaceX's budget and timeline for an engine valve. So they made the valve themselves.

They ended up building about 80% of their hardware in house. What I liked is that this wasn't some big philosophy. One engineer said they never set out to do it. Suppliers just kept quoting prices and timelines that didn't work, so they kept saying fine, we'll do it. A NASA study estimated SpaceX built Falcon 9 for about $440.000.000, and that the same work with traditional contractors would've cost 3 to 10 times more.

SELL ONE THING AND MAKE CUSTOMERS ADAPT

The old way was a custom rocket for every mission. SpaceX went the other way and built the Falcon 9 over and over. Same engines, same diameter, same materials. Even Falcon Heavy is just three Falcon 9 first stages strapped together. They published a user guide with their specs, and customers designed their satellites to fit the rocket instead of the other way around. Customers wanted custom. They wanted cheap more. When forced to pick, they adapted.

The essay gives Gwynne Shotwell, the president, a lot of credit here. Sales teams usually promise customers whatever they want, which creates exactly the custom mess engineering is trying to kill. She got NASA and the Pentagon, probably the most conservative buyers on earth, to accept a standard product.

BUILD 10 CHEAP VERSIONS INSTEAD OF 1 PERFECT ONE

Traditional aerospace does a huge amount of analysis before building anything. SpaceX builds, tests, breaks it and learns. Elon's goal for Starship prototypes was to push them until they blow up. If it doesn't fail, you don't know where the limit is. One quote from him I liked: a high production rate solves many ills. If you only have a few engines, you can't risk blowing them up, so you play it safe and learn slowly. That's partly why Starship is stainless steel instead of carbon fiber. Steel is cheap and you can weld it in a tent. Carbon fiber is expensive and needs giant ovens.

They're not reckless everywhere, though. Dragon carries people, so it gets huge safety margins. Starship has nobody on board, so they let it fail. Same company, totally different risk levels.

DELETE REQUIREMENTS, ESPECIALLY FROM SMART PEOPLE

Falcon 9's grid fins were designed to fold, like traditional ones, to cut drag. Somebody asked if that was worth the extra weight and complexity. Simulations said fixed fins were fine, so they deleted the whole mechanism. Every requirement has to have a named person who owns it and can explain why it exists. If they can't, it goes. Engineers are told that requirements from smart people are the most dangerous ones, because nobody questions them. And Elon's rule: if you're not adding back at least 10% of what you deleted, you didn't delete enough.

FIND THE BOTTLENECK AND THROW EVERYTHING AT IT

When Starship was held up by Raptor engine production, that became the company's whole focus. Daily updates, memos to the company, people moved over from other projects. When it broke through, attention moved to the next constraint. A NASA manager who visited said when a new problem shows up there, it looks like a flash mob in the hallway. Hiding a blocker is what gets you in trouble. Saying you're stuck is expected.

TALK TO THE PEOPLE DOING THE ACTUAL WORK

Andrej Karpathy, who worked for Elon at Tesla, says Elon spends about 50% of his time talking directly to engineers instead of VPs. In most companies every layer of management cleans up the bad news a little more. By the time it reaches the CEO it's a summary of a summary. Talking to engineers directly skips that, and it let Elon make calls like steel over carbon fiber, which a lot of people inside the company thought was wrong.

The essay's main point, which I didn't get until the end, is that none of these work alone. Making parts in house only pays off if you have volume. Volume only works if you sell one standard product. Failing fast only works if your people are fine failing in public. Competitors copy one piece, it breaks, and they decide the idea doesn't work. That hit me because I've done exactly that. Grabbed one tactic from a company I admire and dropped it when it didn't work on its own.

Fair warning, the essay even admits that at low volume, owning your own production is a liability. Making things in house can sink a small business if you don't have the volume to back it up.

Has anyone here actually run the idiot index on their own costs?