# Why Elon Outcompetes Everyone | Casey Handmer, Terraform Industries **Channel:** Relentless **Source:** https://www.youtube.com/watch?v=f1Wn95p8SOU **Transcript page:** https://www.withtranscript.ai/video/f1Wn95p8SOU ## Chapters - 0:00 — Moon Mass Driver Economics - 3:49 — Space Compute Versus Earth Data Centers - 8:53 — Why Large Projects Get Stuck - 14:26 — Elon, Terafab, and Industrial Decline - 20:02 — StarMind and Space Data Centers - 26:19 — Scaling Starship and Talent - 32:56 — Elon’s Management Style Over Time - 41:42 — Choosing Hard Problems in Business - 52:09 — Regulation, Government, and Agency Decay - 59:54 — Taxes, Productivity, and AI Takeoff - 1:05:04 — Starship, AI, and Inequality ## Transcript **[0:00] Speaker A:** Today I'm sitting down with Casey Handmer, the founder and CEO of Terraform Industries. This is going to be the third part in our series of why Elon outcompetes everyone. Uh and I want to start off with mass driver on the moon. So, can you go through your essay of making the mass driver on the moon work? **[0:18] Speaker B:** It's a good question. Mass driver is an interesting one. I worked on Hyperloop for a few years. So, I actually worked with like magnetically accelerated levitated systems. The thing about the moon is that the gravity is a bit lower than on Earth and there's no atmosphere. So, you can actually in principle, you can launch mass from the surface of the moon into space without a rocket. Which in the '70s seemed very attractive because back then rockets were as soon as very very difficult to do. And also the moon doesn't have, you know, fuel supply. Um so, you can imagine you know, some kind of factory on the surface of the moon that is processing rocks, has nuclear power plant, and um device receives its power beamed up from Earth will probably be even cheaper. And then launches that mass into orbit where you do something with it and then make make money. **[1:07] Speaker B:** So, it goes the theory. Um and if you're not constrained on the acceleration that you subject these things to, your mass driver could be like just like less than 1,000 ft long, like really short. And it would like shuttle back and forth. So, it'd be like a like a like a machine gun, right? Like so so, you think oh, well, you know, a rocket launch, you can like launch every couple of days if you're really good. No, no, with this mass driver, you'd have a shuttle that sits in a in an electromagnetic track that shuttles back and forth. So, shuttle actually is a component of a loom, like for making cloth. **[1:41] Speaker A:** Mhm. **[1:41] Speaker B:** And they shuttle back and forth as well. Um and and once it starts to slow down, you know, roughly halfway down the track, whatever the payload is will separate, you know, from momentum, and then fly the rest of the way however far it's going into space. Uh and then the the shuttle will slow down, accelerate in the other direction, and then get reloaded with another, you know, wire bale of moon rock or whatever, and and and shoot itself back into space. And at the at the speeds involved, it might be like one a second kind of thing. So, like **[2:14] Speaker A:** This will be happening fast. **[2:15] Speaker B:** Well, yeah, I mean, you you don't need some like colossal mass driver. Say, if you want to do, I don't know, 100 tons a day, you don't need to do like one Starship a day. You do it in 86,400 bite-size pieces of a few kilograms um at a time. So, so the thing is you could actually build this mass driver on the Earth, test it on the Earth, launch it to the moon, maybe do a minimum of assembly or like deployment on the moon, um and then operate it. Uh it would have to be anchored to the surface quite well because of, you know, Newton's laws. Um but it's way easier to do that than, for example, to try and build something like precision-aligned structure that's 20 mi long to like accelerate at a more stately pace. **[2:54] Speaker A:** Do you have any idea on what the timeline, you know, we're in 2026 right now, what the timeline is for having that fully built? **[3:04] Speaker B:** Um no idea. And it actually to be really blunt, like the the the reason you would do this is to provide some of the mass for Starlink, for the for the um orbital AI constellation. But it's it's hard to imagine like what set of circumstances would would make it like obviously economically preferable to do that as opposed to building more Starships, more launch pads, more factories on the Earth where everything's like thousands of times cheaper. And just launching more stuff from the Earth. And I think the constraint might be something like if you're launching 10,000 Starships a day, people will say, "Hey, come on." But like, if they don't, then just keep launching from the Earth. **[3:49] Speaker B:** Because like Starship will ultimately get launch costs into that constellation down to a few hundred bucks a kilogram, which is not very much compared to the cost of a mass-produced high-performance GPU. So, if you look at like the embodied cost of the of the item in orbit, most of what we the part that does the thinking, the GPU, and then a bunch of other mass associated with radiators and solar arrays and communication. But even that is not all that much and almost all those systems are spatially two-dimensional, so you can fold them up or make them really thin and not very heavy. So, it'd be interesting to see. **[4:26] Speaker A:** Elon on the Joe Rogan Gian Carlson podcast basically said that in 3 years from the date of that podcast, he believed it would be cheaper to launch like space compute **[4:37] Speaker B:** Yeah. **[4:38] Speaker A:** versus building it on the ground. **[4:40] Speaker B:** Yeah, it's like one of those like monkey paw twitches thing. Well, **[4:43] Speaker A:** How does that equation work? **[4:44] Speaker B:** Well, Starship is getting a little cheaper. Well, I mean, me and everyone else have made a little spreadsheet to try and figure this out. Um Starship will ultimately ultimately make launch cheaper, but also much more launch available. So, if you're saying, "Well, we want to do a gigawatt of deployment." That's just not really feasible even with Falcon, but uh with with Starship, that's possible. Uh and then at the same time, I think Elon correctly foresaw that large-scale deployments of data centers on the surface of the Earth would run into headwinds that would increase their cost. This didn't didn't require like an exceptionally accurate crystal ball back in the day, um because there's just so many marginal constraints that sooner or later one of them will come to bite. **[5:22] Speaker A:** It kind of seems like uh the data center thing on Earth, it's like this unicorn where the companies that are building them will almost pay any amount to just have them built. And it seems like there's a whole bunch of other that's just getting like layered on on top of the data centers. **[5:37] Speaker B:** Yeah, all the local jurisdictions saying, "Well, we'd like our piece of the action." And **[5:40] Speaker A:** Exactly. **[5:41] Speaker B:** I think they're in a what's called a price discovery phase. Um where they will Yeah, know, find out what the market clearing rate is for the appropriate sized official bribe to make these things happen. Um I mean, we're actually working on that at Terraform as well. So, it's a neat thing where we we currently have a 1.8 megawatt solar array that we built earlier this year. And um we get turns out you can you can run your synthetic fuel plant on it during the day and you can also hook up the batteries and and then run a a continuous much smaller but continuous load like a an AI computing rack or data center rack or something off that at the same time without these two uses conflicting. So, you basically like more than double the economic output of of your fixed solar infrastructure which in terms of land use is is the dominant contributor at the end of the day. **[6:34] Speaker B:** All almost all AI compute over the next say 10 years will converge will kind of will will be done with this silliness with natural gas and and nuclear and so on and it will converge on at massive scale. Basically like a a giant Starlink satellite in space which needs you know, a a decent radio antenna and a couple of other bits and pieces to work properly in space. Um and a GPU or basically the same thing on the ground where you in addition to you can basically delete the giant radio transmitter and replace a battery. They put a battery there. So, the kind of the the real question mark there about like asymptotic cost is whether or not batteries are cheaper than launch. Right? Because one of them requires a launch and the other one requires battery to last to to run at night. **[7:17] Speaker A:** Interesting. And so, it's basically like batteries plus bureaucracy. **[7:21] Speaker B:** Yeah, plus plus land. Um land is like ridiculously abundant though. **[7:26] Speaker A:** Mhm. **[7:27] Speaker B:** You know, like Nevada is like what? 65 million acres or something. It's it's absurdly enormous amount of land and and and a lot of that land is still federal because back in the day they they couldn't even give it away. Right? It was so economically marginal. And now this like absurd technological deus ex machina has kind of landed in all our laps. Where it's uh a system that's uh essentially apparently unbounded economically economic productivity. So, it's like way better than farming was in like 1860. And the only thing it needs to operate is is is power, which you can get from from the sun. That's it. Basically, like in the United States, like income taxation and so on, basically only occurred in the last century. Um prior to that point, the United States government was was much much smaller and was funded primarily by tariffs. **[8:10] Speaker B:** Um and so we've had this like massive tax and spend thing that was largely put in place by Roosevelt in the 1930s. Um and it's grown and grown and grown. And and you can see in other countries that you know, they're starting to run out of places to find revenue to fund the government. Right? But if it if if instead like the United States had managed to retain like its small government like fairly like light touch on the economy through to the present day, and they start saying, "Oh, we're the feds and we need a source of revenue to run our government." The feds would be getting into building data centers on like federal land in Nevada. And then leasing it out to the highest bidder. Because the revenue available is just absurd. So, it's kind of a funny thing that we're in this situation now. **[8:53] Speaker A:** It kind of seems like over time large-scale projects are almost becoming sort of illegal. **[8:58] Speaker B:** Yes, very much so in the last 50 years. **[9:00] Speaker A:** Do you want to go into that? **[9:02] Speaker B:** Well, I did I did tweet about this the other day. Um it's very frustrating to me. Now, it is the case that in general, if you if you murder someone, you go away for a long time, but you know, the newspaper writers and so on love the outrageous headline where they find, you know, some bizarre confluence of factors that results in in in a murderer being released early or not even getting convicted or whatever. That's fine. You know, everyone deserves a day in court. Yeah, I prefer to live in a in a world where where justice is imperfect, but you know, innocent people stay free kind of thing. Um but on the other hand, the the presumption behind like giant projects that are building or maintaining infrastructure for the public good is that it's going to um result in a environmental impact with unbounded downside. **[9:45] Speaker B:** Um I can imagine a process that could do that, but it'd be pretty hard work actually. Um and and and and just the de facto like way that this is kind of worked its way through the system over the last 50 years, mostly of the regulations is not even in statute is that if you want to do anything at all at large scale uh in California, but also in much of the rest of the country, you have to go through this like debilitating process that that takes so long and costs so much money and has so many handouts to everyone involved that the you don't it's not just that like the the project doesn't pencil on paper monetarily, but the sorts of people you need to run these sorts of projects are just not interested. Right? Like who's going to sit around in 15 years waiting for permission to fix some basic thing in their backyard? **[10:29] Speaker B:** It's ridiculous. Yeah, so it's just like I just kind of had Brock run the numbers for me on like you know, in terms of like the value of a statistical life, what is the the net loss to our society for you know, California's inability to repair the California Aqueduct, which has been I think nominally it it's can transport like 4 and 1/2 million acre-feet a year of water to LA from the Sacramento River Delta, but its actual capacity is like maybe 50% of that because a couple hundred miles in the southern section have subsided due to groundwater extraction over the last 30-40 years. And obviously it's like you know, between pumping stations is meant to be pretty flat. Um and so if a section subsides, it will overflow if it's too full. Yeah, well, it's not rocket science. Uh bulldozer, concrete, done. Okay? And and we know that you know, when a bit of the freeway falls down or something, we can fix it in a week or two. **[11:20] Speaker B:** Like that capacity does exist. And so instead, we live in this insane situation where the farmers haven't got enough water and Southern California doesn't have enough water and the infrastructure already exists in a corridor where it's already been built um where the environmental disturbance has already taken place and just the process of getting permission to like send out you know a local road repair crew with a bulldozer and and cement to like make this canal work at its design capacity thus solving everyone's problems the like fix everything easily button is like 10 years and billions of dollars right so it coming back to the value of statistical life the the economic value that's lost as a result of this of this kind of clot just with this one example is equivalent to 10,000 lives. Right? So if you're like I don't know scrolling on on on Tik Tok and you run some kid over that's vehicular manslaughter and if you're unlucky and you have a bad lawyer you'll probably go to prison for a while **[12:14] Speaker B:** but like you'll get out of prison and that project will still be in like yeah the the approval agency hasn't even looked at it yet. Purgatory right? And and in that meantime that one year like equivalent to a thousand statistical lives have been have been lost completely just due to our inability to fix it. It drives me crazy. It drives me absolutely crazy. We know we can move extremely fast and we also know that the key to delivering like really cost-effective high value infrastructure at scale for people that benefits everyone it's super progressive because it benefits poor people way more than it benefits rich people. Rich people will be able to afford services no matter what. Rich people are not running out of water. It it it it only harms the poor people when these things fall apart really is to move really quickly. Because because then your labor cost you know is less because you know you're getting more stuff done in a given unit of time. **[12:59] Speaker B:** This is how we built ships really quickly in World War II. This is how we built aircraft you know the plant is across the road here in World War II. Just like reduce the number of labor hours per unit by a factor of 10 and actually increased output by like a factor of 50. So so labor did well as well. Everyone got more basically just for for moving quickly but but these days it's it seems insane like it's it's essentially impossible to get to get the green light to do it. I mean this was starting to happen in the 50s and and Henry Kaiser was was the uh the entrepreneur um who who did the the the Hoover Dam and a few other things and did the Liberty ships in Richmond. And um he wanted to build a an estate up in Lake Tahoe. And he was older by that point and he didn't want to screw around. **[13:39] Speaker B:** So, um he just had his construction crew up there and build it 24 hours a day under lights including 6 ft of fill and like multiple structures and a dock and and uh and a place for his speedboats and and you know, a couple of large houses and house for guests for staff and so on. And um he managed to complete the project before an injunction was able to be filed. Right? He did the whole thing in 22 days. Right? That's insane. Like Altadena burned down what? Almost 2 years ago? Uh 20 months ago? And just now **[14:08] Speaker A:** Yes, there are a few now. **[14:09] Speaker B:** There are a few now. A year ago, nothing. Uh now there's been a few houses built um but yeah, they lost 10,000 structures. They'll be at the current rate still rebuilding by the time the next fire goes through in 20 years. So, man. It was a housing crisis. Anyway. **[14:26] Speaker A:** At the same time that it's like effectively becoming illegal to build large mega projects, you have Elon turn around and say, "Actually, we're going to build the biggest building in the world by like maybe twi- double or something uh in the form of Terafab." **[14:39] Speaker B:** Oh, Terafab, yeah. **[14:40] Speaker A:** in Texas. So, how does if if you had to like think about how he's thinking about that project, he's both saying like it's impossibly difficult to get this stuff through and yet I'm going to do it anyway. **[14:51] Speaker B:** in the next in the next 5 years. It may be the case that that he gets the green light to like begin part of it sooner because of like national national security imperatives. Um in particular like onshoring of of chip production. But yeah, if he just went through the same lane as everyone else has to go through like even in Texas you would get you'd get stuck with a project of that scale. **[15:10] Speaker A:** Why do you think that he thinks that he's able to pull this off? **[15:13] Speaker B:** Well, he's done it many times at this point. But also like he knows the numbers to call to say like, "Hey, do you want chips or do you want to lose the next war to China?" Right? And And help actually helps to be on the critical path for national security at a certain scale. And and you know in in in those cases you can you can sometimes cut some corners, but but you know the the the reality is that most of US economic growth is not happening by like one or two people, right? It's it's tens of thousands of of small businesses that are growing gradually like mine is that are providing mentorship and opportunities for people to to like build their build their skills and and level up and good pay and local housing and and tax revenue for the local cities and all the rest. **[15:50] Speaker B:** And um I mean I actually I relistened to our our interview this morning on my way to work just so I'd be you know, up to the moment. And a year ago I said we're in this castle and we're going to gradually expand through this entire neighborhood until we're up to the freeway, which would be it's probably 500,000 square feet or something. Maybe maybe a million square feet between here and the freeway. Like plenty basically over the next 5 10 15 years. I like it. The city likes us. We get on well. We like the local fire brigade. It's convenient. All the people already live nearby. There's local residential areas. It's it's a great place to build, okay? But but it turns out that even here in like heavy industrially zoned Burbank there are enough restrictions that basically make it impossible for us to expand here. **[16:33] Speaker B:** And we're going to move into like down the road like miles and miles into another area another industrial area that's larger. Um I can give you some examples. Uh the all the buildings east of here they're like a few blocks east of here were redeveloped in the '90s and they even though it's it's heavy industrially zoned land they're built as light industrial. And so even though the city will permit heavy industrial use the building owner won't. So he they're just going to have like you know, city block full of vacant studios because all the studio businesses left Burbank generating zero income or tax revenue for the city for you know as long as the landlord can afford to be patient I guess. Decades. Um that's just as an example, you know, and in the meanwhile it's just up the road here we have some of the last anodizing plants in California because it's now illegal to do metal metal refining in California of **[17:22] Speaker B:** any kind. You can't even build like PCB like printed circuit board traces here. Same to make it very good on this. And so you got these legacy shops that are like 100 years old and like ridiculously bad for the environment for the people who work in them. And but they grandfathered in. And they'll they'll never shut them down because once they do that's it. They'll have to go they'll have to go to Texas Texas or Louisiana to do this work. So this neighborhood and this whole city was once like a global center of aircraft manufacturing. They built maybe 100,000 aircraft here in World War II. And it's it's pretty much all gone. It's desolate. It's I mean there's still businesses occurring here. LA is still a vibrant and economically dynamic place, but it's not like it was. And it's no longer a center of manufacturing and secondary manufacturing is is massively underrated for its importance. **[18:08] Speaker B:** I think it's like the single biggest like value increase. Right. So the purpose of a business is to like consume inputs where they're cheap and then produce outputs and sell them where they're expensive or market them where where they're valuable. And that's generate value. And secondary manufacturing takes in commodified input you know materials like aluminum or whatever for airplane manufacturing and then does a series of operations on it with extremely sophisticated machine tools. Our neighbors across the road here do aircraft hinges and they're the only as far as I know the only certified aircraft hinge manufacturer of all of NATO. So all of Airbus and all of Boeing and all of the military people and their maintainers and everyone else for the hinges that like allow flaps and stuff on the wings to work. They get them done here. Right? That's it's bizarre. Right? But these are just like you know all these all these old all these old places here they're kind of the original proprietors are aging out now and and they were part of the satellite kind of industrial complex that **[19:03] Speaker B:** served the Lockheed plant which is now an Amazon fulfillment center. Um until the mid-90s. You know this is where Kelly Johnson built all those airplanes and he was able to go out and get the landing gear made and and so on like the specialists who do just those things that weren't within the plan itself. They got to rebuild it. Or we just won't have wealth. The Australian economy made this mistake. Like the Australian economy lost its middle and now it's just tertiary services, which is extremely low low leverage because it's just one on one on one stuff, right? And primary production, which is just digging up dirt and shipping it to Asia. And none of those things Yeah, basically like you get your first 1% and your last 1% of value generation and you miss the 98% in the middle. And Australia's economy is flat. **[19:42] Speaker B:** That's insane. Like it's a peaceful, modern, you know, Western world democratic system with well-educated, relatively young, demographically vibrant workforce, good culture, no violence, no no threats really. Like New Zealand's not going to invade. Um and unlimited natural resources and their economy's flat. Look at those numbers. **[20:02] Speaker B:** Let's talk through the buildout of StarMind, uh the economics behind it, and what the timeline looks like for that. It's interesting. I decided to say like I wish there was moon dirt here. **[20:15] Speaker A:** Yeah. **[20:15] Speaker B:** Yeah. Be so cool. Um StarMind. I don't like the name very much. **[20:21] Speaker A:** You should talk with Beth. **[20:23] Speaker B:** Is it his fault? **[20:24] Speaker A:** Yes. **[20:25] Speaker B:** Okay. Um like StarThink was right there. **[20:30] Speaker A:** You like StarThink? Well, it rhymes with StarThink. **[20:33] Speaker B:** Uh **[20:33] Speaker A:** It's got dad joke potential, right? **[20:36] Speaker B:** It's an interesting one. So when I when I first you know, heard like, "Oh, we're going to do data centers in space." I was pretty skeptical. There's a couple of good reasons to be skeptical. The first is that, you know, the juice is never worth the squeeze when it comes to like, "Oh, but there's infinite free power in space." It's not infinite and it's not free. And you know, if you're in in most orbits, you'll eventually be shadowed by uh by the Earth, etc. etc. Um but there are a couple of ways to kind of get around that. Um and I think Starlink really shows the way. So people who've read some of my blogs will know that that like space-based solar power is kind of dumb. Um because you're you're taking a product where it's expensive and you're selling it somewhere where it's cheap, which is not what a business should do. **[21:17] Speaker B:** Um so in space power is really expensive and then you're beaming that power as undifferentiated microwaves down to the earth where you're collecting them and now you're having to compete with solar and nuclear and coal and gas and everything else uh for like I don't know. Like what is what is your merchant power producer earning in California? 10 cents a kilowatt hour? Like not very much. You pay more than that, but you're paying for distribution. However, Starlink works because instead of just beaming like a shitload of microwaves at the earth for power, they modulate those microwaves with like um something or other like some uh quadrature amplitude modulation radio signal thing that allows them to transmit not power, but but information. Right? And so if you if you run the math on like what is the revenue per watt of transmitted microwave power for Starlink, it's a billion times higher than space-based solar power. **[22:08] Speaker B:** So while SpaceX is making money hand over fist with Starlink and it's worth kind of putting a pin here in the fact that other people have tried and not succeeded, but space SpaceX has, their margins might be I don't know, 100% or something uh optimistically. Um if you reduce their revenue by a factor of a billion, they're no longer in business. So basically you take that model and you say, well, we can make money being the middleman transmitting data from uh your content delivery service or an edge edge node or whatever. It's you know, Netflix is down the road here. Um via our network, which initially was just this bent pipe system and now they've got laser link set up so they can they can transmit a lot of um you know, a lot of data in in the shell, you know, this the shell of Starlink satellites and then land it again at some other place, either at a consumer place or or you know, like a consumer satellite dish or or a um fiber hotel or you know, **[22:58] Speaker B:** a a gateway, what they call a gateway, which is like a gigantic dish, which is you know, where all the data goes in. They can make money doing that, which is very cool. Then you say, "Well, what if we like mess up our latency a little bit? And so we can put all these satellites in sun-synchronous orbit so they're always in the sun, um except for during lunar eclipses. Um and then we don't need anywhere near as many batteries. And we use laser links to transmit data to and from those via the Starlink network. Although if you didn't have that, you could also transmit to the ground. And instead of charging people 100 bucks a month to relay like Netflix, where like the value of the marginal bit is not all that high. In fact, Netflix, like all these systems, uses error correction, so you can delete 10% of the bits and it'll be fine. **[23:42] Speaker B:** You won't notice. And instead of transmitting Netflix, um you instead transmit tokens of some hyper-intelligent model that you can update with software. So once you got the hyper-flying, you update software. And then you say, "Well, what is the comparative value between your your average Starlink bit versus your average uh a a Starmind bit uh of data?" And it it's probably at least a thousand times more valuable. Like a token. Like what do you pay for tokens versus like your subscription to Netflix or something, right? It's it's not even in the same category. I was doing a a project on on Saturday um where I rediscovered that like nested loops consume resources um when I basically had an AI go out and scrape uh scrape the entire internet for all sorts of data on on 200 separate topics and then categorize that data across 200 separate um principal components, um which then resulted in like 40,000 times. **[24:40] Speaker B:** Yeah, it's like 260 bucks of tokens. Like unbelievable. Like this is it gave me better results than a team of expert professional analysts would do in a year with a year's work. And this is just like just as an idea, just like me mumbling into my phone and then forgetting about it. Um yeah, so that's that's real money. That's real money right there. Um it will be interesting to see if uh economic demand for intelligence in the form of, you know, AI tokens can saturate. **[25:06] Speaker A:** Hm. **[25:08] Speaker B:** I suspect not. Yeah, so that's the idea. Giant giant solar array uh GPUs. Now, and and like data center in space, you have this like massive thermal problem. But you don't necessarily have that if you do it right. Like instead of building like a giant box with full of racks of hardware and cooling systems, you can actually just like sprinkle the GPUs out along the solar array. Like cuz like each solar module generates a kilowatt and each GPU consumes a kilowatt. And then just have like local Wi-Fi or or or optical fiber link or something to transmit data up and down the the um solar array you know, train or or or chain or whatever. And then you've got, you know, a star tracker and a couple of radio antennas and stuff in the middle. Then if your GPU dies, who cares? It's like it's bolted onto a solar array and the GPU is the expensive part. **[25:55] Speaker B:** Does that make sense? So, it's like, "Well, how do you replace a GPU when it dies?" In a in a data center, you have all these fixed costs. And if your GPU dies, you got to go find it and rip it out and put a new one in. In space, you're like, "Oh no, like I've got 100 GPUs on this particular satellite and one of them just died. And then uh 99 of them are still going fine." And eventually, you know, maybe you're down to one or two or they're very old and you just deorbit. Burn up, crash in Alaska. **[26:19] Speaker A:** If you believe that Elon has the same view where token demand is effectively infinite, and if he just make more tokens or, you know, put more GPUs up there, um someone will buy them and either it'll be him or someone else, then how do you think he's thinking through the problem of just maximum scale as fast as possible? **[26:40] Speaker B:** Well, it's not exactly a secret. Oh, there's one other aspect to this, which is to say uh Starlink as a business model is possible if you have like a legal monopoly lock on you know, a plurality of the world's most talented engineers and a highly mature launch system that is extremely affordable. Um and as we've seen with Chinese, Russian, European, and other American attempts to compete in the space, it is extremely difficult to do if your satellites are not best in class, uh like very good value, and then you don't have access to you know, preferred launch, basically. Um so, how do you do this as quickly as possible? There's probably some optimization to be done in terms of like maximizing tokens per kilogram, but ultimately it's about um maturing Starship design and then scaling up production. So, Starbase is Starbase is Louisiana. **[27:33] Speaker A:** Mhm. **[27:33] Speaker B:** Right? You got one one launch pad in Texas, two actually now. Uh a couple going up in the Cape, and now they're saying 10 or 12 in Louisiana and and who knows where else. **[27:42] Speaker A:** This is another thing. He's building this massive launch facility in Louisiana. **[27:46] Speaker B:** Well, I don't think any I don't think any like dirt has been turned over yet. **[27:49] Speaker A:** Mhm. **[27:50] Speaker B:** Again, like they have to go through the federal agencies because it touches the coast and it touches the Intracoastal Waterway and it touches the Mississippi system, so the Army Corps of Engineers is going to get a say, and it's adjacent to wildlife refuges, so like National Parks is going to get a say, and then the state's going to get a say, and like by the time even even at Elon's speed, it may take a long time to get the thumbs up to really start moving on that. **[28:13] Speaker A:** You think so? I kind of feel like he, you know, if if I think about the infrastructure projects that Elon has said that he's going to start, I can't think of a single one that didn't maybe Hyperloop, uh might be one where he kind of said like **[28:27] Speaker B:** that personally. If you think about like **[28:30] Speaker A:** But with these **[28:30] Speaker B:** Well, they started work on Starbase in what, 2012 or something? And like not much really took place there until 2018, and then once they started working in in earnest, they were held up for months at a time. **[28:40] Speaker A:** Do you not think that he's he has like built teams that are much more effective in like ways that are much more effective at getting these large-scale projects done. **[28:49] Speaker B:** I mean, yeah, it's definitely like the reps. You don't get worse at it for doing more of it. **[28:52] Speaker A:** Yeah. **[28:52] Speaker B:** Yeah. And that's actually an interesting point. I think Anthony Colangelo makes this point on um on Managing Cutoff quite often, which is that people say, "Well, you know, SpaceX makes the best rockets and and and so on." But actually like SpaceX and Tesla are um are also probably like the preeminent real estate development firms in the entire country right now, for example. **[29:12] Speaker A:** For large-scale projects? **[29:14] Speaker B:** Just in general. Like if you look at If you look at total cash flow devoted to those particular areas, um it is like best best in class across a range of areas at this point. **[29:24] Speaker A:** If you had to think about the way that Elon operated 10 years ago versus today, what do you think the biggest changes are? **[29:31] Speaker B:** That's a good question. I was wondering about this myself the other day. Um cuz it does certainly seems to me that that like there's less filter and he goes faster now. Yeah, it'd be interesting interesting to get get him on record about about how he feels about that. Um you know, whether he's become you know, more or less hardcore or more or less consequentialist or you know, how how he approaches talent development now versus in the past. Um for for me personally, it's certainly been a case of like unlearning a bunch of fairly like logically consistent but not actually useful assumptions or not correct assumptions that I had, you know, going in. Um and then finding out the hard way that like no, actually the world doesn't work that way. **[30:13] Speaker A:** I've noticed with a lot of Elon's companies there's like this decade-long baking period before things really take off. **[30:19] Speaker B:** Boring Company didn't I mean, like they're drilling holes, it's great. Like it seems like it incubated for a long time. **[30:26] Speaker A:** Yeah. **[30:26] Speaker B:** Now, all complicated things take time. I should know that as well as anyone, been at this for over 4 years now, but maybe it's just like there's a minimum like 6-year spend or something to do a new kind of thing from the ground up. I don't know. **[30:37] Speaker A:** Elon 10 years ago or 20 years ago would start off with a relatively small team and the company would just take probably like six or eight years to bake before they had like a real, you know, good product that they that they wanted to ship. Like I think it took that long for Tesla. I think that took it roughly that long for a rocket to make it to orbit. I think it's the same thing. **[30:58] Speaker B:** Yeah, I think it's the same thing for Neuralink and Boring Company where they're starting to like they're starting to ramp on the Neuralink implants and they're starting to ramp on the number of tunnels dug where like **[31:09] Speaker A:** Well, I think it's fair to say Yeah, I think for Neuralink there was a fairly well understood like set of steps that have to be gone through to get approvals to do like, you know, statutory trials in humans and then and then scale up. It's hard to say. I I suspect that for the projects that are not like obviously on the critical path, they probably don't get like priority access to talent. And it it really matters having the right people on the job. Like It's kind of a strange thing. People people might assume from the bottom looking up. Actually, I think Shawn went on about this for a while. That like, you know, two or three steps above my level like talent saturates. But it doesn't. And this is if you watch sport, it's intuitively obvious that that at the high levels of anything it separates. **[31:50] Speaker A:** You know, and um it differentiates. And so, you know, the the three best people at at SpaceX to work on getting Starlink up and running made that project possible. And previously they had fully staffed the project with talented, well-regarded engineers who were making progress, but they they weren't going to ship. And Elon fired them all. So, it makes a huge difference. Um There's essentially like I think particularly like a lot of talented people come through school and they're like, "Yeah, I got like, you know, 98% plus in all my exams. Pretty much saturated the metrics." Like, "Nope, like in the real world, there's no upper bound. There's no there's no there's no like limit to the upside. You know, like you're 10 times better than the next person. Good. Why don't Why aren't you 100 times better? What what what what would 100,000 times better look like? **[32:39] Speaker A:** What do what does it take to get there? You would see this in podcasting as well, right? It's power law distributed. I think and the the best the best are really good. **[32:49] Speaker B:** Yes. **[32:49] Speaker A:** Chris Ballas said you've gotten better. I don't know if I can see it. We'll have to wait and see. **[32:56] Speaker B:** I was having a conversation with one of one of my founder buddies last night and we were kind of talking about the evolution of Elon over time and he didn't believe that, you know, 20 years ago Elon would go into a room and then just like fire an entire team and walk out. Um but he kind of does that today. some other things today. **[33:14] Speaker A:** and friend believes that now? **[33:15] Speaker B:** I believe so. **[33:17] Speaker A:** Yeah. Um I I learned pretty early on that um and actually it's the same with parenting as well, that there's no upside in being like highly finessed when it comes to solving problems. Right? If you're If you want to motivate your team to solve the problem and not escalate it to you, they have to believe that like if they don't solve the problem and it escalates to you, it's going to be messy. And it will be. You know, and that's part of it, I think. But I don't have a recruiting team here, right? Whereas Elon Elon has very prestigious companies and there's always hordes of people who want to come in and work really hard and he just takes in a lot of talented people and and gives them steadily graded increasing difficulty of problems and it's upper out, you know, and that's how you surface talent. **[34:00] Speaker A:** Like it's not like you can do some exam at the end of high school and then be like, oh, you're destined to be like uh like one in a million project manager. The only way you find out is you find 10 one in 100,000 project managers and you give them the next level problem difficulty and you see who succeeds. **[34:16] Speaker B:** If you look at Elon over time, he becomes more and more raw. It seems not only like publicly facing on social media and X, but also like privately. It feels like he just makes decisions faster. **[34:28] Speaker A:** I'm not sure. I think there's more exposure now, but I I know a few people who worked with him in PayPal days and I think he he also shot from the hip then as well sometimes. **[34:37] Speaker B:** I think I think he did. I just don't think he did it in the same way. And do you think do you think that there was any advantages **[34:42] Speaker A:** He didn't have Yeah. 100,000 people to deal with his messes, so. **[34:45] Speaker B:** Do you think there's any advantages to being like maybe a little bit more coarse like sandpaper? **[34:50] Speaker A:** Well, there's a There is There is a kind of a question here which is I think a lot of managers or startup founders or whatever will reach a point where where they can't really scale to the next size of the business, right? But Elon has been able to work effectively at organizations of a range of sizes. That's actually pretty unusual. The important thing is getting the message out and it's it's crazy how easy it is to be misunderstood on even stuff you think is the simplest. And I've been coaching my managers here to like boil it down boil it down. Like your message is getting lost. Like one bit of information like a single bit of information is really all that needs to be transmitted if you can transmit it well. That's enough. But you know, you you don't have enough time in the day to like sit over all your reports shoulders all the time. **[35:32] Speaker A:** They have to model what you're going to say in their head so you don't have to say it. So it it you definitely have to have a big personality or like the appearance of a big personality to achieve that. **[35:43] Speaker B:** Do you think that you suffer from probably basically the **[35:50] Speaker A:** Warren Buffett has this idea of you know, there's like investing hurdles where sometimes you have to like be a genius and jump over this 10-ft bar and other investments it's like this 1-ft bar and he likes to just step **[36:04] Speaker B:** Whereas I think he mentioned that a lot of smart people get stuck in this trap of trying to jump over the 10-ft bar because they like it's intellectually challenging and interesting. **[36:13] Speaker A:** Yes. **[36:14] Speaker B:** Do you think that you suffer from that problem? **[36:16] Speaker A:** With a caveat maybe. Um Warren Buffett was probably dragging Jim Simon in that quote. And Warren Buffett strategy works brilliantly if you plan to live to 100 years old, which worked for him but not for everyone. **[36:27] Speaker B:** I think he was dragging Long Term Capital Management, actually. The yes. **[36:30] Speaker A:** Probably them, too. **[36:31] Speaker B:** He actually he and Charlie has a lot of respect for Jim Simons, Medallion **[36:34] Speaker A:** Oh, of course. Yeah, as friends, too. Like I'm dragging you from time to time. Um Actually, Charlie uh had this amazing book called Poor Poor Charlie's Almanac. It's really good. Highly recommend it. So, it's definitely true that when you set out on your entrepreneurial journey, and a year ago I said, "You're a smart guy, access to rich people. Why don't you give up this chit-chat nonsense and actually start making things that are useful for people." Um and here we are. Um maybe **[37:02] Speaker B:** maybe you just can't. Um **[37:03] Speaker A:** Oh my god. **[37:05] Speaker B:** Apparently, there's a competition to see who's the meanest Australian uh hardware startup founder in LA. And you're adjudicating this competition now. Earlier, Ty told me that there is no one thinks that Australians can be mean. **[37:18] Speaker A:** I think that they can try to be mean. I just don't think that anyone serious would listen to their voice and think you know, feel bad. Like **[37:28] Speaker B:** We're not testing that proposition. **[37:29] Speaker A:** All right, go for it. **[37:31] Speaker B:** As if we just did. Um **[37:32] Speaker A:** I I I feel great. **[37:33] Speaker B:** When you start a company, if hypothetically one were, um you want to find an area where you have ideally persistent differential advantage. Um And so, for example, when I was thinking of starting a company, I was also thinking of working on drones. But it's very clear that like Sauron and Co. like they're just going to do a better job than I am. Right? There are some areas where I would have insights because of my background and knowledge that would help me, but it would not help me enough to clear the hurdle, which is that this is already an obvious thing for capitalism to work on, and capitalism is already reasonably effectively allocating capital, human capital, and money capital towards solving this problem. And that was before the Ukraine war like popped off. And now it's like this is six years ago, seven years ago. So now it is extremely obvious that like if you don't have AI and drones, you don't have national sovereignty. **[38:32] Speaker B:** And a handful of countries have even got the memo on that. So for me, I wanted to find something that I was interested in enough to actually work on for a long time where my particular interests and skills would give me any kind of advantage. Um and where capitalism was not currently doing a very good job of allocating resources towards solving the problem. So it has to be like kind of on the frontier. And uh synthetic fuel actually works quite well for that. **[38:56] Speaker A:** If you had to, you know, plot or put uh synthetic fuel on that one-foot to 10-foot bar, where is it? **[39:05] Speaker B:** In terms of like raw difficulty? **[39:07] Speaker A:** Sure. **[39:07] Speaker B:** Oh. Well, I don't I'm not even sure yet. It's it's higher than I've seen. It's really ridiculously difficult. It It's not as hard as orbital rockets, I think. But actually doing doing this as a successful business that makes money, no one's ever done. **[39:21] Speaker A:** Yeah. Is it currently in the science projects phase? **[39:24] Speaker B:** Um I think we're mostly past the science project phase at this point. Like the technology like the science has been around for 100 years or longer. But like basically making the scientific processes legible to a manufacturing process that has more in common with kitchen appliances, for example, um or consumer consumer electronics appliances is just ridiculously impossibly difficult. And uh we were just talking over lunch. Like I I made a list the other day of of like hardware companies in this same area. Not just synthetic fuel, but but a few other things in the same area. Carbon capture, hydrogen, and a bunch of others. And just the field is littered. I mean, carbon capture, hydrogen, and a bunch of others. And just the field is littered. I mean, evolution like capitalism in general is a system that actually does a pretty good job of recycling talent after ventures fail, and you can discharge debts and all the rest. **[40:08] Speaker B:** It's a It's a good system. But I I feel like this particular field is littered more than most with the carcasses of like very respectable attempts to uh to like experimentally discover if a particular business model would be capable of generating net value in the space and finding out 10 or 100 or 1,000 million dollars later that no, no, it can't. Um but to kind of misquote Timothy Chalamet in in in the next Dune film, there is a way. Um I can see a way. It's rather narrow. Uh but we're on the right track. Yeah, we figured it out. But it is it's like at the time I was like, this is incredibly obvious. And then I went and explained it to 100 people, smart people who know what they're talking about, and I realized this is not obvious at all. It's one of those things where it seems extremely obvious to me, but it is not in fact obvious at all. **[41:02] Speaker B:** And even now, if I try and put it down on paper in like 1,000 words or so, why it is obvious, it is extremely difficult. In in much the same way that I think probably SpaceX had difficulty motivating reusable rockets when they first started doing that in 2014 or 2015, and you had highly compensated professional CEOs of rival rocket companies with technical backgrounds themselves, like that Arianespace guy, stand up and say, "That's It's never going to work. And even if it did, it wouldn't be a good idea. Why is anyone even thinking about this?" And of course, turns out, as Elon says, he's he's right more often than you would than chance would it would it would allow for. Um his intuition is correct. **[41:42] Speaker B:** Actually, I think I'm I'm reasonably confident now actually that that a lot of Elon's advantage here is that actually he is very intuitive and his intuition is is correct rather than him like sitting down in some like secret chamber full of spreadsheets and like deriving some weird thing that no one else saw. **[41:57] Speaker A:** Why do you think he's so abrasive publicly? Uh if most like if he's got a good intuition in predicting human behavior and how the future **[42:07] Speaker B:** Technical stuff. **[42:08] Speaker A:** Really? **[42:09] Speaker B:** I mean **[42:10] Speaker A:** Cuz he kind of does predict human behavior with his companies. Like he's saying like people want to buy cars and you can book a car. **[42:17] Speaker B:** Harry Seldon kind of way. I think he's got a good feeling for product. **[42:20] Speaker A:** Okay. **[42:20] Speaker B:** Yeah, but like he's obviously not the sort of person who would go and win an election. Put it that way. **[42:27] Speaker A:** Is he not? **[42:27] Speaker B:** I don't think so. **[42:29] Speaker A:** He's kind of doing that with his companies. **[42:30] Speaker B:** He's too ungaurded. No, I mean he he owns owns a business and he's controls the board. It's not a popularity contest. He would never win a popularity contest. He just wouldn't. I mean we saw that in in Doge. Like he's he's too easy to hate. He's too easy to make fun of. He's too easy to misunderstand. He's He's too easy to take out of context. He's too unfiltered. Uh which are all good things for us overall because he'd be wasted as a politician. **[42:52] Speaker A:** This is something that's happened since last we talked is he left Doge. And the way that I think about Doge is it is one of the only things that Elon, you know, organizations or situations that Elon's ever come into contact with and been like this is too hard from what I can tell. Or it's like the reward for trying is just not great enough. **[43:15] Speaker B:** Well, Doge did a bunch of different things, okay? And I think it's not very well understood in general what they were doing. But one of the things they did was assemble a whole bunch of programs that should be cut. And uh Congress voted on it and they they voted against it. You know, and at that point you could he could continue working there day-to-day um doing the other things that Doge is working on. Um particularly things within, you know, your executive uh control or things to do with the modernization of government services and systems. But actually a lot of that work has continued without him. Um and you also have to wonder like what's the opportunity cost of his time. It's probably like millions of dollars per minute. And he's a officer of multiple publicly traded companies. So you can't just like abandon his companies to go and fiddle around in the government, especially when I think Well, I think I said in the last podcast like it was it was weird to see for me you **[44:09] Speaker B:** know, a bunch of my like you know, I have I have friends on all sides of the political spectrum, but like, you know, team left, you know, the ultra woke kind of deep state types team up with the uh the ultra right deep state types to kick this newcomer out, which is what they did, essentially. Um so, anyway, we will see. Um but yeah, I think, you know, it was as a society we're better off with Elon on the outside trying to outgrow the spending state than on the inside trying to trying to prune it. I do worry about it, though, and um I think as I said last time, it seems to me highly unlikely that that our political system can survive its long-term structural challenges without uh solving solving the problem of old age dependency through like radical extensions in in um longevity. **[44:53] Speaker B:** And um and and also like radically increasing growth, so you have to like either smash through these regulatory barriers we discussed earlier or or build new kinds of economic growth that can um exist in places that are not yet uh regulated to death, uh so that you actually have like permission to grow the economy faster than dependency, which is a tough a tough ask these days. You know, when FDR put in place the New Deal in the '30s, um it looked like it could be sustained for, you know, 50 plus years, and that was long enough to solve the problem it solved at the time. Um but, you know, the basically any country on Earth one day will get they they'll they'll develop until they're rich enough that the people are no longer dying young, which is a great thing. It's a great thing that, you know, people your age, my age aren't dying of preventable disease, but that just means sooner or later we like your description of New Zealand, and everyone around there is old, and everyone has **[45:43] Speaker B:** health problems, and everyone has dependencies, and everyone like children are like crazy dependent and relatively expensive for a few years at the very beginning, then they're relatively independent, but they're not economically productive for another decade or so, and then they become economically productive, but for old people, you know, there's no like economic productivity ahead of them. They're just spending down whatever the their society has managed to accumulate. Which is not like it's it's it's a socially worthwhile thing to do, but at the same time it is not compounding. Right? And and sooner or later everyone's old. You can walk around uh you know, Germany right now, the median age is 48. 48. Right? And the median voter age is older than that obviously cuz children don't vote. And you wonder why is it these these societies, why Europe is is kind of in its own death rows? **[46:30] Speaker B:** Well, why wouldn't they be? They don't they don't like the the median voter is is past the point where they can vote for a future they want to be part of. **[46:39] Speaker A:** You think that this outside of like a major war, is there any ability for us to down regulate? **[46:44] Speaker B:** It's a good question. Um some people say, well, you know, the regulations get cleared out in a major war, but it's pretty clear that a major war in 2026 would be extremely different from a major war in 1941. Basically, what happens in a war is you end up with this like what we're seeing this in in Iran right now, this kind of extremely kinetic exchange of explosives and and weapons that the net effect of it is you're killing people who don't want to die and uh in many cases uninvolved civilians. Um the number of people involved in this in actually fighting these wars is collapsing, right? Even in Ukraine, the number of people involved in active combat is minuscule compared to World War I and World War II. And so instead what you do is blowing up infrastructure and you're just making money expensive and destroying wealth. **[47:23] Speaker B:** Right? So, it's just pushing us back in the Stone Age and you say, well, we need to rebuild this stuff maybe. Um it seems to me that the forcing function for improving regulations is more likely to be competitive pressure. Um so, you end up in a situation actually we're already seeing this where um the Anglophone uh West um is relatively economically non-dynamic compared to parts of Asia for example, particularly South Asia, and has a lot of homologation in their regulatory uh setup. So, for example, if you're an entrepreneur in England and you don't like the fact that the English government has a certain policy, you could say go to the EU and work there. But how different is the EU? They have all the same structural problems and much of the same laws and despite Brexit, it's pretty much the same deal. You can go to United States and you get a better deal because capital there's more capital here, it's more propitious environment and so on. **[48:16] Speaker B:** But if you're Japanese, right? You're a young Japanese guy and a woman and you want to you want to start a company and and build a new business and build wealth and help the economy grow. Nope. You have to you have to learn a new language, go to a new country. Um and so what I would like to see is it would only take one of these countries to defect from the current consensus that we just have to like increase spending, increase taxation, increase the size of the public sector by like three or four x the size of the overall economy on an ongoing basis. I wrote a blog post a couple months ago pointing out that Australia for like 15 years now has been locked into a future where it becomes fully communist essentially, like full government control over the economy because the private **[48:57] Speaker B:** economy, that the economy that actually generates net wealth and takes taxes, is shrinking. Um but you only need one one of these countries to say face an existential problem, realize it's facing existential problem and undergo massive reform. So actually um Patrick Collison and Mario Draghi recently announced the Rome Group, which is a kind of a think tank whose efforts are around restoring European dynamism. I find it's an interesting or useful thought experiment to think of Europe as a um as kind of a a successor civilization to the civilization that built all the infrastructure that's kind of living in the ruins of that infrastructure but isn't capable of building it again. And we're talking like not 1700, we're talking like 1960 kind of thing. Uh like only a few generations ago. I think a lot of it was driven by energy scarcity. Right? So like big big economic shock in the 1970s when basically the Saudis nationalized uh Saudi Aramco. **[49:48] Speaker B:** Um and uh and and then formed the OPEC oil cartel. Um, and we were able to find like a modicum of economic growth in the intervening periods through capital deepening, improvement in public health, um, kind of a little bit of Cold War nonsense and uh, and kind of elevation of of the developing world. Uh, and then more recently in software, consumer software, which is a really great way of improving productivity without increasing energetic inputs particularly. Although now data centers have grown to the point where they're like pushing double digits of uh, total energy consumption and like we're starting to rub against those limits again. And so it's really important I think for us to grow to uh, to break these constraints on energy availability. So our friend Isaiah is working on this for example and on on with nuclear energy and and obviously solar is a key way to go that direction. **[50:36] Speaker B:** You know, and then you know, bring back permission to do things. One thing is the Japanese do do nicely, um, and and it has its own proclivities and weirdnesses though, but they they they normalize construction. So they're actually constructing things all the time. And part of the reason they've got an extremely powerful steel cartel basically, um, with you know, very very politically connected that that that wants to keep on building things. But they also understand that like, you know, a city is is really only a city if it's constantly in the process of of regeneration and recreation. And it's completely acceptable to say, well, yeah, there's one or two nice buildings, we'll keep them nice. Uh, we'll restore them, but in general we want to replace 98% of the fabric of the city every 50 years, right? What a radical point of view that is, right? **[51:14] Speaker B:** But 98% of the fabric of the city every 50 years is just means that, you know, on average your buildings are 25 years old instead of 150 years old, um, which is a major problem we have facing in the West. And it means that you get lots of practice in construction, you get lots of practice in project financing and and and management. Uh, and if you build a real stinker, you're not stuck with it forever. You just rip it down and try again, right? So I'd I'd love to do something with the Salton Sea one day. Um, it's this environmentally desolate wasteland in the southern end of California that could be like like Phoenix, Arizona but some with uh, this beautiful lake uh, in the middle of it could be the most extraordinarily beautiful part of the world. And like there's no downside to trying. **[51:53] Speaker B:** The worst that can happen is it remains an environmental catastrophe. It is already an environmental catastrophe. You could only improve it by changing it. You know, it's kind of like the the right to try laws around using weird drugs if you're about to die of cancer anyway. Like what difference does it make? **[52:07] Speaker A:** On the same kind of thread of regulation **[52:09] Speaker B:** Yes. **[52:10] Speaker A:** in America **[52:11] Speaker B:** America. **[52:12] Speaker A:** I've never understood this idea that if Elon believes that the kind of like American system and all the regulation that surrounds this is basically like this unstoppable, you know, thousand strings, you can't do anything over time situation. Like he's not going to import that bad system to another planet. **[52:33] Speaker B:** One would hope not and I think that's kind of the libertarian you know, you need you need one state which tries things differently, does things differently to become competitive, right? So like in some sense the the um the Arab states do this like UAE has radically lower taxes. It's quite attractive to certain uh areas and in the United States the federation different states are able to compete in terms of their you know, regulatory approach to various things. So some states have decided they're going to be like business-friendly places. Um other states are so wealthy through no fault of their own that they can afford to be extremely profligate in the way that they spend money. Cough California cough. Um yeah, there's never been a really strong forcing function for great governance in any part of the United States. Um but yeah, we we need we need one Western liberal ideally anglophone democracy to defect and say we're going to adopt a extremely like aggressive deregulatory agenda. **[53:26] Speaker B:** Like AI is a great way to do it. You say like, "Hey, I I I had Claude 4.62 this year ago like ingest the complete corpus of American law and regulation and compress it to 4,000 pages which is a McMaster card text uh catalog book, right? I'm a fit guy. I should be able to fit the laws of the land in an overhead locker. Right? In an overhead bin. That should be your constraint. Like, you can't just keep on adding laws forever. How many laws do you really need? You know, we Anyone who's developed software knows that there's an optimum size, right? And you should not have too much or too little. You should have the optimum size. But there's no forcing function. There's no process even for the destruction of laws that are you know, obsolete or no longer needed. In the reconstruction period after the Civil War, I think under Jackson, there was a uh an effort to for the first time actually get all of US law in one place. **[54:20] Speaker B:** Um so you had the Constitution, the founding documents, obviously. But then you had lots of laws that followed all the place. It wasn't particularly well kept. It came to 1,700 pages at that time. 1,700 pages. But like, Lincoln himself was uh originally a a trial circuit lawyer um in Illinois, I believe, way in prior to prior to his election. And um And so those days, they're just like terrible lifestyle, just like going from town to town trying cases and getting to know people. And um yeah, and they didn't have like a central source of truth for what the law was back then. Kind of wild. Um obviously, the federal government was much smaller back then. But yeah, 1,700 pages seems like a good number. Uh 4,000 pages, I could live with. You know, we got airplanes and stuff now to deal with. Um 12 million pages is what the current **[55:07] Speaker A:** That's the current law. **[55:08] Speaker B:** Yeah. Yeah. Fed Fed Federal Code and Regulations is 12 million pages. Which is more than than anyone could even read the index for in a lifetime. It's It's absurd. **[55:17] Speaker A:** I I've thought a lot about this whole idea of like dictatorships and you know, companies **[55:22] Speaker B:** Companies these days are like **[55:23] Speaker A:** are basically like especially in founder-led companies, they are a mini dictatorship where you live or die based on how good you are at making something that people want. **[55:31] Speaker B:** Well, it's different though. Like, the nice thing is in our system, and this is 10 years ago, I would not have not have seen the value of this. Now I do. Is and I think it would maybe it was Palmer Lucky or someone who was talking about the value of the limited stock or joint stock company as an innovation. Every single company in the entire country is governed differently. Right? You have everything under the sun and within very broad bounds almost anything is legal. Right? You can have You can have a company where you've got a constitution and all your employees have proportional votes and they vote on what gets done. Right? And the thing is this structure works really well because no one's locked in. Anyone can resign and go to another company. Right? So it's not like a religion where if you're an apostate you get killed. **[56:12] Speaker B:** You can always leave. It's voluntary association. But it becomes this this laboratory for experimentation of different governance systems that work better for particular types of businesses, for particular types of founders, for particular times types times in history. Different systems work better. **[56:28] Speaker A:** The other great thing is it's it's kind of live by the sword die by the sword. And if your system doesn't work you rapidly get killed. Um **[56:34] Speaker B:** Yeah, for sure. **[56:35] Speaker A:** And and and this is like the difference between you know, the US government where it can have like a non-functional non-functional system. **[56:42] Speaker B:** Aside from USAID, but like agencies like here's a radical idea. The the executive should be allowed to split split up agencies to solve problems. That makes sense to me. Um some of those agencies are chartered in the constitution. Some of them are not. For the ones that are not they get automatically sunsetted after 10 years. That solves all the problems. Right? Because you could then you could then you could always re-charter it. DARPA does this automatically. Right? So whoever invented DARPA was a genius because they knew that the problem of all agencies is that you get a founding team. That team sits in in place and they hire people like them and over time it gets captured and sclerotic and it can't do its job anymore. And we've just seen this over and over and over again. Uh there's 400 something agencies in the United States and their ability like if they were actually independently operated businesses like with paying customers they'd be out of business tomorrow. **[57:27] Speaker B:** Like they just can't they don't function in a functional way that we'd recognize in the private sector. Okay? Um They're funded by the private sector. They can never go out of business. Okay? In DARPA, if you're an employee of DARPA, you can only be an employee for a fixed term. Right? And then you're out. And I It might even be for life. Um and so you don't have that problem of you know, the the kind of I I I'd say boomer, but like there were boomers 50 years ago in these places as well. It's like the people who are who stay there forever. It's a real problem, and this is why um in all these in all these agencies, anyone who's got any degree of risk tolerance or um labor market value over time will be attrition like attrited from the system because they'll get cross-recruited or they'll leave to do something different. **[58:12] Speaker B:** And so, if you solve for the equilibrium, the people who remain will be the people who either can't or don't want to leave ever. And they might have good reasons not to, but on average, the character of the organization will just trend more and more risk-averse and older and older and more and more conservative with respect to decision-making. And so, their ability to actually um dynamically execute against their uh purported and stated goals will diminish necessarily. And their ability to attract new talent to work on them will diminish. And so, you have to have a natural mechanism for sunsetting this. And in in the capitalist system, this happens naturally. Most businesses don't last that long. And the ones that do, sometimes you wish they hadn't. They kind of have a a full life cycle. The resources get recycled. **[58:53] Speaker A:** I do find the government kind of fascinating cuz you have this organization that over time just grows and grows and grows and grows. It's just a corporation in the limit. Its revenue source is taxes or like printing money. And then **[59:07] Speaker B:** Which is taxes by disguise because if you're just diluting everyone else's money supply, you're just stealing wealth from them. **[59:12] Speaker A:** Yes. And their their the uh like effective output is like rules and regulations, from what I can tell, for the most part. **[59:18] Speaker B:** Okay, well, some some agencies make things as well. I mean, like to be clear, like NIST outputs, you know, standards, right? And NASA outputs rockets and space probes, and they build things in And actually, some of these agencies, you know, Department of Transportation like outputs roads that generate economic value, and you don't have to pay a toll when you drive to Vegas. So, like I'm not trying to say here that like agencies just can like burn money up on a in a on a in a in a in a in a furnace, right? That **[59:40] Speaker A:** But have we got 40 trillion in value? Is the question. **[59:43] Speaker B:** The question is, do these agencies operate with equivalent efficiency or productivity of the private sector? And the answer there is, no, absolutely not. Like not even close. Not even within a factor of two. In some cases, not even within a factor of 10. **[59:54] Speaker B:** And given that you know, I ran the math a couple of months ago, I took our financial data and plugged it into an LM and and said, "Hey, you figure out what's going on here." So, uh I don't know. In the grand scheme of things, like the Collisons have put a few million dollars into this business, okay? That's that's public information. They wouldn't mind me saying that. I'm proud to be associated with them. Um I whether they're proud to be associated with me, one can never tell. Um but the Collisons have put some money into this business. And the Collisons are very wealthy. How did they get their money? They they built an extremely valuable business themselves, okay? That business is a huge benefit to this country in particular, right? And all the other businesses, like millions and millions of businesses depend on it. They're probably responsible, I think they tried to estimate this at some point, for like measurable amounts of GDP increase or attributable to Stripe decreasing friction on transactions, okay? **[1:00:45] Speaker B:** We should throw these guys a parade. Okay? Pin a medal on them and make statues in Silicon Valley of them, you know, 100 ft tall. Okay? But like any business, they pay tax. They pay a shitload of tax. They pay all kinds of tax. They had to move to San Francisco because San Francisco was like, "We're going to charge you a transaction tax." Genius move, okay? So, they had to pay they pay a shitload of tax. Uh the Collisons, like most rich founders, uh probably not paid much in the way of salary, but they are they have equity and they can borrow against the equity. They still pay tax on that. Then, um in addition to paying all income tax on some of that money, gets invested in companies like ours. And then we pay tax, okay? So, I ran payroll on Monday and I'm paying on the order of 350,000 dollars a month in payroll, and of that payroll, almost half of that goes into either payroll tax or income tax. **[1:01:36] Speaker B:** So, the actual amount of like And then when my employees go out and like try and rent a building to live in around here or buy food or something, they're paying tax on that as well. So, if you think like what we want here is the net economic surplus to make it from the Colossus' hyper-productivity into actual like physical things that my employees need to survive, what fraction of that value gets siphoned off by the government? It's like 70%. It is unbelievable how much just disappears. And you say, "Well, why is it that this neighborhood here is no longer full of like vibrant businesses building state-of-the-art aircraft that allow enable people to fly around the world? Could it be that 2/3 of the net value between the source of capital and the goods and services that the the people actually doing the actual work need in order to survive is just yoinked out of the system **[1:02:33] Speaker B:** along the way? It's It's nutty. It's absolutely crazy. I'm I'm I'll give one more example. I'm I'm blessed to be married to a very talented woman, Christine, and um and she has always and continues to earn more than I do, which is my own damn fault. I set my own salary, but like it's not even close. And And so, I I I asked Grok the other day like in our net family income, does just my income like cover the tax or something? And Grok was like, "Your income covers less than half of the tax." And I was like, "I should just retire. My wife should just retire. We're We're like comfortably middle class. We effectively buy the company a luxury car every couple of months. Like it's kind of nutty. And And And the thing is, maybe for some people maybe for people it's different, but for me I feel like the US people are no longer getting out of the government what they were putting in. **[1:03:26] Speaker A:** Do you think that civilizations just have to do a hard reset every couple hundred years **[1:03:30] Speaker B:** We're in a crisis one right now. Fresh. Like this year. We're in the AI takeoff. We're in the the singularity. And like this is the thing that you like you can you can kind of argue this way or that way about demographics this, birth rate that, tax rate this, you know, uh offensive drone warfare that all this stuff is swamped by hyper intelligent AIs. And so the the correct question to ask really is what is it's it's kind of like you know, New York City was in a crisis uh over a century ago due to their inability to dispose of a horse manure from people using horses to try to things around the place. And even in the Second World War, the German army depended on horses to drag artillery pieces from place to place, right? It was not fully mechanized. And the answer was not like oh, taxation on horses or something, right? **[1:04:21] Speaker B:** The answer was we invented new technology, a motor car that has its own problems, but its own benefits, and here we are. So, we're literally in the process right now of not so much changing this legacy tax and spend economic system, but like just superseding it entirely. Yeah, so if you think like let's run the block 10 years forward in a in a good outcome scenario, 90% of the net benefit that accrues to humans will be downstream of AI. And AIs will be you know, incorporating our economic system in a way that's very different from the way that FDR's team and you know, the presidents around the the Congress is around that time decided that they were going to essentially fund the operations of the government by appropriating a fraction of everyone's labor through income tax. Right? **[1:05:04] Speaker B:** Like income tax makes sense if if most of the people in your economy are working for businesses that are on payroll where they're like turning screws in a factory or something, which was yeah, reasonably descriptive of the of the of the 20th century. But, most of the economic activity in our economy today is not that. You know, the United States still does a lot of manufacturing, but it's not the nexus of economic productivity here. And in the future, it won't be either. Most of the economic productivity will be machines emitting streams of ones and zeros in Lower Thornton. **[1:05:30] Speaker A:** Want to talk about Starship? **[1:05:31] Speaker B:** Starship. **[1:05:32] Speaker A:** Okay. Let's Let's talk about Starship. **[1:05:33] Speaker B:** So cool. **[1:05:34] Speaker A:** Um it's extraordinarily cool. On the the Louisiana buildout, I think it's at like 12 towers **[1:05:41] Speaker B:** It's not at 12. I mean, who really knows? **[1:05:43] Speaker A:** It's somewhere around there. Um but I think that there's like some constraint for Starbase where they can only launch so many uh Starships a day. **[1:05:53] Speaker B:** Well, Elon's in the process of undergoing regulatory arbitrage. So, the impression that I get is that the uh Rio Grande Valley uh authorities having jurisdiction were perhaps getting a little bit cozy or comfortable with their little monopoly on on Starship development and the enormous revenue and so on that that's brought to that area and perhaps becoming a little too extractive or potentially having the ability to become too extractive. Uh and so, how do you make sure that you keep that relationship healthy? You create a a an escape hatch that is non-zero cost and non-infinite cost. And then, you can outrun the regulatory arbitrage. And the Louisiana governor was in actually in that announcement video, it's kind of interesting. Louisiana governor had the name tag cuz no one knew who he was, but Elon brought the bodyguards. Um that um that you know, if push comes to shove, he will do to Texas what he did to California and say, "I'm taking my business elsewhere because like you can shear the sheep, but you can't skin them." **[1:06:56] Speaker B:** Like if you shear the sheep, it makes more wool. If you skin it, it dies. So, you don't want to cut too deep. **[1:07:01] Speaker A:** I guess he wants to get to something like 10,000 flights a year in a very short period. **[1:07:05] Speaker B:** that's a number. **[1:07:06] Speaker A:** Yeah. **[1:07:07] Speaker B:** power **[1:07:07] Speaker A:** 10, right? But like that that's a good number because it it helps his team orient around like we're not just doing 10 a year. And like 10 million a year is too far off. So, 10,000 is a good number to **[1:07:17] Speaker B:** Actually, that's a good question. How do you think Elon sets basically objectives? Like are these these arbitrary? Are they 5 years out objectives? **[1:07:27] Speaker A:** He's pretty well calibrated on that, actually. I think he's got a good sense **[1:07:30] Speaker B:** calibrated than he was on timelines and also objectives. **[1:07:34] Speaker A:** he's always had a good sense of what the the unifying goal, like the North Star for an organization needs to be to keep everyone motivated and aligned. It's certainly something that has been not super obvious here because, you know, when you're in science project phase, it's never quite sure like when you when you when you're good enough, when you're done. Um so, 10,000 I think is a good number to fixate on. Will he hit it in the next 5 years? Probably not, but **[1:07:59] Speaker B:** You really don't think so? **[1:08:00] Speaker A:** No. **[1:08:01] Speaker B:** There's there's kind of these interesting uh **[1:08:03] Speaker A:** Well, we can run the math right now. I mean, like let's say let's say like the next generation Starship, which is produced in the next 2 years, can do 10 landings, right? Like the first um line first stage they need to do the 10 landings. The factory in Starbase is set up, I think, to max out about 250 Starships a year. That's 2,500. Right? It may be the case that they they build them there and then launch them and then they land them in Louisiana and then relaunch them there as I don't know. Like they become like airports, right? They can can fly them from You don't have to land at the same place you take off from. **[1:08:36] Speaker B:** It seems that a lot of people both say they believe in AI and like can kind of see the exponential, but then also kind of like extrapolate out the current trend versus like pulling in you know, if there's like some intelligence explosion, who the hell knows what the future looks like. **[1:08:51] Speaker A:** Well, that's the singularity. You can't really predict what comes next. Um but you know, I know I know a number of relatively well-informed people who think that for example, the real world economic impacts of AI will be diluted by Baumol's cost disease. That seems to me to be not entirely unlikely. Like you say, well, right now the United States economy grows at like 3% a year, um which is quite respectable. Um how much more will it grow as a result of AI? You can make an argument that most of the growth right now is AI. But is that going to go to 5% or 10%? Is it going to go to 10,000%? You know, ultimately what becomes the limiting factor? Time to power? **[1:09:31] Speaker B:** It would be fascinating to **[1:09:33] Speaker A:** to live in this world that Elon has talked about where he's like GDP just growing 100% a year. And he's like, we're going to be there in like 4 or 5 years. **[1:09:41] Speaker B:** He says like you'll have not universal basic income, you'll have universal high income. Yeah, because you'll be able to essentially produce anything that you want on demand. **[1:09:49] Speaker A:** Ironically, I don't think we'll ever have a universal high income because I think the way that the hedonic treadmill works in human brains, whatever you have, it's like not good enough anymore and suddenly you want, you know, that plus two. **[1:10:00] Speaker B:** Well, we we already see that now. **[1:10:02] Speaker A:** Yeah. We're like **[1:10:03] Speaker B:** not to pick on anyone too much, but like who are these people in New York in the DSA, right? Like when I was a kid, the leftist labor leaders, the union bosses and so on, who were running um even in the 1990s, like um you know, um wage labor like hourly labor, labor trade disputes, strikes, blah blah blah blah blah, right? Um they were genuinely on the bottom end of the economic totem pole. They were often older gentlemen who had grown up in genuine poverty, in public housing, uh often like their dad had died in World War II or whatever, and they they'd worked their way up from the ground floor. They were usually pretty tough, right? They not like you and I, not like soft-handed like weirdos, you know, like they actually they genuinely worked with their body, Longshoremen, loaded ships by hand, Like, hard work, like that, okay? **[1:10:59] Speaker B:** Nowadays, the the lefties that I know, uh and that that we see in in public and so on, they're the most privileged people you've ever seen in your life. It's astonishing. Um **[1:11:12] Speaker A:** It's like Elizabeth Warren uh in the back of a limousine being like, "Hate the rich." **[1:11:16] Speaker B:** Yeah, posted from my iPhone. **[1:11:18] Speaker A:** Yeah. **[1:11:18] Speaker B:** It's um it's like, you know, we're we're not we're not sharing the benefits of technology, posted from my iPhone. I'm like, "Oh, you know, the benefits of wealth." I'm like, "You have the same iPhone as Elon Musk." Like, it's uh basically like, once you reach some relatively minimal tier, it's like horseshoe theory. If you're too privileged, you become a a champagne socialist or something. **[1:11:38] Speaker A:** Yeah, it's it's very interesting to me that, you know, 150 years ago, there might have been a major difference in between like the wealthiest people in the world and the poorest people in the world. But, if you look across like the US today, **[1:11:50] Speaker B:** Yeah. **[1:11:50] Speaker A:** the vast majority of activities that people partake in, like you roughly eat the same food. There's not like some billion-dollar mattress. There's not some you know, maybe you have like a pool, but you watch the same Netflix or or YouTube. You don't have access to a faster DoorDash. **[1:12:05] Speaker B:** Yeah, the only real differences are around energy availability. So, like, can you afford to air-condition a large house? Can you fly private? Whatever, right? **[1:12:12] Speaker A:** Yeah, but like honestly, I I think people misunderstand private jets as well. Like, for Elon, it really what you should compare it to is if if unless it's like purely **[1:12:21] Speaker B:** Elon is an anomaly in that in that class, right? Because most people who are actually flying private uh themselves private citizens and no one knows who they are, right? So, the the thing that Elon doesn't have and that you will also one day lose if you become famous enough and I will as well, is that you'll be unable to exist in public. The same thing to the movie stars who live in the hills here, right? They can't exist in public because they can't go outside without being harassed or someone trying to kill them. Um and the same thing for you know, sufficiently prominent politicians. But, most people are not don't have enough face recognition that they could do that. Yeah, totally agree with you. People People bang on about income inequality and so on. Like the United States is is the worst income inequality on Earth. **[1:13:00] Speaker B:** I'm like the United States has the richest poor people on Earth. **[1:13:03] Speaker A:** Yeah, there's there's no like teleportation device for a billion dollars either. Like you actually just have to get in the same roughly same jet and there might be some guy that spends a boatload of money on the flight, but you're going to get there in the same amount of time. **[1:13:16] Speaker B:** I mean, I don't I don't really envy the rich. Um I mean, I am rich, but I don't envy the the super rich. And I'll tell you why. Um the people who are significantly wealthier than I am, their lives are more complicated. Okay? They private security. They're usually much older and in much worse health. They don't have privacy, obviously. They have people actively trying to destroy their privacy. Um They're They're wealthy enough that they they're surrounded by very few tran- uh relationships that are not transactional one way or another. It's very hard for them to you know, interact with other humans as as humans. Uh and the ones that are not ridiculously old or or inherited wealth or whatever are by and large like cracked founders who have by their own choice, but nonetheless extremely difficult professional lives. Right? So, that usually like the family life is not quite there or whatever. **[1:14:00] Speaker B:** Right? And you say like is that something you really want? Um I think that this this obsessing over income inequality is actually a negative thing. I think the optimum amount of income inequality is not zero and a certain amount actually incentivizes success. It rewards success. It rewards hard work. It rewards innovation. It rewards technological development. And it as a result it actually lifts the floor. So, the thing you should worry about, I think, is not so much income inequality like some Gini coefficient nonsense. It is like are the bottom decile in our economic system starving or do they have an opportunity to get on that ladder? Do they have opportunities to get educated, to try as hard as they can to build a better life for themselves, for their children, for their grandchildren, for their communities, and so on. And on that front, I think the United States has always done a really good job. **[1:14:50] Speaker B:** It's done a better job now than in the past, perhaps. But, the United States is accumulating wealth for people up and down the spectrum. People say that the middle class has disappeared, as though like what was the middle class 70 years ago, which was like, you know, some guy working hourly at the Lockheed plant, yeah, putting his kids through some public school in in a car with no safety standards, is the middle class. The middle class has disappeared in the United States because people have left it through the ceiling. Um but these these things are not not well appreciated or educated or not well taught or understood.