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Hyperloop, Tesla, SpaceX, and the Usual Elon Musk-Bashing Nonsense

Resurrecting criticisms of the entrepreneur that have already been debunked.

by
Rand Simberg

Bio

August 14, 2013 - 2:01 am

In response to Elon Musk’s announcement of a new transportation concept , R. D. Brewer wrote a post at Ace of Spades which cited this bit of ignorant, snarky, bravo sierra by Craig Pirrong, which itself cites some two-year-old lies by bought-and-paid-for Lockheed Martin lobbyist Loren Thompson:

…consider SpaceX. This venture provides evidence of Musk’s love for Occupy: he has promised that this private space venture will go to Mars, and wears an Occupy Mars shirt to make the point.

It is also touted as a privately capitalized space venture, which it is, I guess, but it is also almost completely dependent on government contracts. The private money is attracted by the scent of public money. Sorry, but a company that is dependent on NASA’s IV for support is not truly a private company: the company is basically a cutout between the investors and the taxpayers.

The company has not exactly covered itself in glory. It had serious trouble with its initial launches, including an embarrassing episode in which the ashes of Star Trek’s Scotty, James Doohan, were on a SpaceX craft that didn’t make it into space: it crashed instead somewhere in the South Pacific. Which I guess would have been great if James Doohan had starred in South Pacific. Don’t worry, though. As a precaution, some of Mr. Doohan’s ashes were retained, and that part of the beloved actor’s remains did make it into space as he desired.

And speaking of Broadway and movie classics, Musk is auditioning for a role in a summer stock Music Man with his boosterism of SpaceX:

You don’t have to be a believer in conspiracy theories to wonder why senior government officials are so committed to going the commercial route in space. Even a cursory review of SpaceX programs and plans reveals reasons for doubt. The questions begin with a business strategy that isn’t just disruptive, but downright incredible. Mr. Musk says that he can offer launch prices far below those quoted by any traditional provider — including the Chinese — by running a lean, vertically integrated enterprise with minimal government oversight that achieves sizable economies of scale. The economies of scale are possible, he contends, because there is huge pent-up demand for space travel in the marketplace that cannot be met within the prevailing pricing structure. By dropping prices substantially, this latent demand can then be unlocked, greatly increasing the rate of rocket production and launches. When combined with other features of the SpaceX business model, the increased pace of production and launches results in revolutionary price reductions.

There isn’t much serious research to demonstrate that the pent-up demand Musk postulates really exists, nor that the price reductions he foresees are feasible. He has suggested in some interviews that launch costs could decline to a small fraction of current levels if all the assumptions in his business plan come true, and he has posted a commentary on his web-site explaining how SpaceX is already able to offer the lowest prices in the business. It’s hard to look inside the operations of a private company, but SpaceX does seem to be doing all the things necessary to minimize costs such as using proven technology, building as many items as possible in-house, and hiring a young workforce willing to work long hours. And to his credit, Musk has committed over $100 million of his own money to the venture. However, his rockets have major performance limitations compared with other launch vehicles in the market, and they are not yet rated as safe for carrying people. Becoming “man-rated” will necessarily increase the role of federal officials in monitoring SpaceX operations, which is not good news for a business model grounded in minimal government oversight (traditional launch providers say government regulations and overhead charges are a key driver in their own pricing policies).

Downright incredible sounds about right. It sounds like a con to me. Especially the whole “economy of scale” thing. That’s the kind of thing defense contractors say to get the government to buy more units of a plane or ship. It’s not good economics.

And Musk’s winning personality was on display when questioned about SpaceX’s launch failures:

Mr. Musk recently responded to a question from Space News reporter Amy Svitak about the two-year delay in accomplishing that second Falcon 9 launch by observing, “In the space business that’s on time.” Perhaps he was irritated by the reporter’s implied criticism, but it goes without saying that if astronauts on board the space station are awaiting supplies, a prolonged launch delay could spell big trouble.

What a guy. Takes your money, and then gets peevish when you accuse him he’s blowing it.

Phew. Well, first, Thompson’s libelous, deceitful nonsense was ably responded to at the time by Bobby Block.

Whether or not Mr. Pirrong finds it credible or not, the fact is that Elon Musk has developed an entire company, two launch vehicles and a manufacturing facility for them, test facilities, launch pads and its own mission control for about the cost of a single Space Shuttle launch. He has broken the NASA/Air-Force Cost Model (NAFCOM) which would have predicted his system development to cost from three to ten times more than it actually ended up being.

The other fact is that the company is not on a “NASA IV,” or “completely dependent on government contracts” (though that’s certainly true of, e.g., Lockheed Martin). It has a solid order book, with many commercial launches on the manifest, the most recent of which was from the Canadian company MacDonald Dettwiler & Associates a couple weeks ago to launch their new radar satellites. It is taking back the foreign satellite launch sales that American industry had abandoned to foreign competition in the nineties because Atlas and Delta had been priced out of the market by Europe, Russia and China. Now, the company even has the Chinese running scared, because they can’t compete against it, even with a taxpayer-subsidized system.

And speaking of taxpayer subsidies, the only taxpayer money the company has ever taken was not (unlike Tesla) in the form of guaranteed loans, but simply as fee for payment for fixed-price milestones, in order to accelerate the development of the Dragon cargo (and soon, crew) capsule. This will enable it to resupply the ISS, and reduce (and eventually, hopefully eliminate) our reliance on the Russians for its support. That is to say, NASA needs SpaceX much more than SpaceX needs NASA’s money. Without the NASA contracts, the company would simply be doing commercial launches, and developing the Dragon at a more leisurely pace. The ultimate and much larger market for the system is to support private space facilities, such as those being developed by Bigelow Aerospace, in the latter part of the decade. And yes, launch delays are in fact entirely normal for this industry, as are failures of early test flights, from which the company has obviously learned lessons, since it has never suffered a significant failure of the Falcon 9. No one at the ISS was going hungry waiting for the Dragon delivery, because the Russians have been delivering cargo.

As for the other nonsense, I’m aware of no evidence that Elon is supportive of the Occumorons, and I certainly saw none presented here. From what I know of him (and we’ve spoken a few times), I find that highly improbable. If he ever did wear an “Occupy Mars” shirt (again, I await evidence), it would be much less indicative of any sympathy for the police-car poopers than as an expression of his oft-stated goal of sending thousands there, and retiring there himself.

As for Tesla, which is a completely different business model than SpaceX, I don’t think that taxpayers should subsidize loans for anything, but if the government is handing out money for a business in which you’re engaged, it would be just as foolish to turn it down as to not take advantage of every tax break when you do your personal return. And unlike Solyndra, which went mammaries up with taxpayers holding the bag, Tesla has repaid its loans in full ahead of schedule. I don’t know whether the company will be successful or not, or whether it could survive absent idiotic subsidies from California, but at this point it doesn’t really matter to the taxpayers.

Now, I don’t think that Elon is a saint, and there are certainly some things for which to criticize him. I think he’s working very hard to build a company, but not hard enough to build an industry, and he’s reportedly pretty hard on both his people and his vendors, with a lot of churn in his growing company. But that’s not atypical of Silicon Valley, which is the model for all his companies, rather than the traditional hierarchical aerospace industry model. It seems to be working, at least in terms of revolutionary reductions in the cost of space access — with a promise of much more if he can get the reusability for which he’s ultimately aimed. I don’t know whether or not the hyperloop makes any economic sense (though I suspect that it’s certainly technically feasible), but if you’re going to criticize him, as many who love to hate on him seem determined to do at every opportunity, it would be nice if, just once in a while, the criticism would have some basis in reality.

Rand Simberg is a recovering aerospace engineer and a consultant in space commercialization, space tourism and Internet security. He offers occasionally biting commentary about infinity and beyond at his weblog, Transterrestrial Musings.

Comments are closed.

Top Rated Comments   
I've read a lot of positive reviews of Model S and haven't seen any negative ones. Could you point me to evidence supporting your assertion that those who love driving hate Model S?

All the fuel cell vehicles I know of have been utilitarian cars like the Honda Civic - and the reviews I've seen have not shown them as especially good or even interesting. So again, where's your evidence re the superiority of fuel cells?

1 year ago
1 year ago Link To Comment
Musk is suggesting the hyperloop as an alternative to California's high speed train to nowhere. He has also stated that he has no intention of attempting to build the system, he is merely suggesting it as a better use of taxpayer dollars.

Musk is an idealist who wants to make the world a better place. He's doing it by spending his money, time and effort to transform our nation's infrastructure. He's not trying to pass a law to force you to buy an electric car, he's trying to produce an electric car that you will want to buy.
1 year ago
1 year ago Link To Comment
The key to understanding SpaceX is G. Harry Stine's book "Halfway to Anywhere: Achieving America's Destiny In Space" ( M. Evans & Company, 1996). Stine makes a thorough economic analysis that demonstrates that the only way for space travel to become economic is to develop a fully reusable launch vehicle. After all, United doesn't throw away a 747 after every trans-atlantic flight!

NASA began with and is stuck in the "ammunition paradigm" for launch vehicles. They are, perhaps necessarily, extremely risk averse and will spend tremendous amounts of money to avoid failure. A good business, on the other hand, anticipates and manages failure.

SpaceX has made their plans for launch vehicles very clear. Please see their movie showing their plans for full reusability. What you see them doing is what NASA should have been doing 20 years ago: steadily working towards a fully reusable launch vehicle. The Falcon is designed to be upgraded to a fully reusable system; SpaceX has shown that the basic system works, and is steadily adding the other elements required to recover and reuse the launch vehicle.
1 year ago
1 year ago Link To Comment
All Comments   (47)
All Comments   (47)
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50 weeks ago
50 weeks ago Link To Comment
Occupy Mars tee shirt ? Good idea , where's mine ? As NASA seems to have been forced to sit on its thumbs , private American space exploration needs to get up and running . Better we get first shot at all the goodies waiting .

Validate your 2nd Amendment Rights . Carry
1 year ago
1 year ago Link To Comment
Again, for those who are interested, here's a recent hour long interview:
http://youtu.be/1sumVEEAZ_w
1 year ago
1 year ago Link To Comment
For those interested, here's Musk talking about why it's so difficult to make a fully reusable rocket:
http://www.youtube.com/watch?v=IIVCCaYWGpk

1 year ago
1 year ago Link To Comment
Why do we hate Greens?

Because they are fundamentally sadists who say we should make do with less. Less energy use, less speed, less privacy, packed like sardines in subways and tiny apartments instead of the freedom of the road and the spacious yard.

Elon Musk is a green who has a completely different approach. What if I can show you a car that's better than your existing car, AND environmentally sensitive? Everyone who drives Tesla's Model S has been awestruck. Even the most hardened skeptics I know, people who didn't think he had a chance when he started, were impressed by the driving experience.

Do you understand how subversive this is to the Green establishment? A great electric car pretty much kills the arguments against suburbia. We can have our leafy third acre lots and manicured subdivisions back. And we can enjoy our cars more than ever. They're much cheaper to run, more fun to drive and look stylish as all get-out.

Elon Musk took a bit under $500m from the government. He's already repaid the loan. Did you know Nissan got $7 billion for the Leaf? Not nearly as nice a car, very conventional, pretty boring to drive by all accounts.

Elon Musk was paid a billion or so by NASA for designing space vehicles they weren't able to do for tens or hundreds of billions. If plans continue to advance, in a few years his vehicles will have replaced the Russian spaceships that are now our only path to the Space Station. If so it will be because of Elon Musk that we are no longer dependant on the Russians. Our government designs were not only unfeasibly expensive, they were decades late and fatally flawed. Elon Musk is in the process of bailing us out.

In short, yes, Elon Musk takes money from the government. But he delivers, in spades. However much you loathe government and governement overspending, maybe the answer is to hand the whole thing over to Elon Musk.

*

Roughly $2 billion has been allocated to the strange task of connecting two obscure California towns via high speed rail. Construction is about to begin. The whole project makes no sense whatseover, in the context of a full system that's completely unaffordable and will almost certainly never be built.

This is the context in which we should consider Elon Musk's hyperloop proposal. The total high speed rail system is likely to cost more than $60 billion. Musk says he can do it for $6 billion - and he has an excellent track record of delivering projects on or under budget.

Furthermore, Hyperloop follows Musk's desire to make the project genuinely worthwhile. He proposes super-fast travel on the cheap. High speed rail is slower than the airplane, and projected fares are about 50% higher than equivalent airfare. Is anyone going to ride it? The obvious answer is nobody.

Hyperloop can be done for half or less the cost of airfare. It's about the same speed. Capsules will take off every few minutes, so you'll be able to get to the station and hop right on. So really, Hyperloop has huge advantages over airplanes, is much faster and more economical than the automobile, and looks pretty darn interesting.

I would definitely support halting the money for high speed rail and redirecting it to this technology. If nothing else, there is enough money sloshing around the system to actually build it. High speed rail may never be built, and will be absolutely useless even if it is. I say Musk is, once again, doing us a big favor in at least showing us how ridiculous the current plans for high speed rail are.


1 year ago
1 year ago Link To Comment
"Everyone who drives Tesla's Model S has been awestruck."

Try talking to a few people who actually enjoy driving, and you'll get a different story. The car is an overpriced solution looking for a problem. So was the first one. So will be EVERY EV that isn't based on a hydrogen fuel cell, and unfortunately those cost around a million bucks per unit at present.

Musk is a dreamer who delivers dreams. He takes government money because said government is stupid enough to shovel it out by the truckload, and he's smart enough to back up said truck to the trough.

The difference between Musk, and say, Apple, is that Apple builds products that work very well for a lot of people, where Tesla et al build products that are mostly useless save for a very tiny fraction of the population. That's why the former needs subsidies up the wazoo, while the other swims in cash.
1 year ago
1 year ago Link To Comment
I've read a lot of positive reviews of Model S and haven't seen any negative ones. Could you point me to evidence supporting your assertion that those who love driving hate Model S?

All the fuel cell vehicles I know of have been utilitarian cars like the Honda Civic - and the reviews I've seen have not shown them as especially good or even interesting. So again, where's your evidence re the superiority of fuel cells?

1 year ago
1 year ago Link To Comment
I sort of liked EM at first, but this loopy idea has caused me to reevaluate and I now find virtually every criticism of him more believable.

He seems pretty much dedicated to sucking down government dollars, without that there would be no SpaceX or Tesla. Neither is revolutionary, neither is even supposed to be.

I still respect him putting loads of his own cash on the line for some fun and interesting projects, but that is not the same as believing he can actually deliver on much of anything, much less at a profit, once he government moolah is subtracted.
1 year ago
1 year ago Link To Comment
anyone out there know the connection between "Tesla" and GHW Bush? out of curiosity.
1 year ago
1 year ago Link To Comment
The ''hyperloop'' that this Musk guy has been pushing sounds completely impractical. Who could possibly need to get from SF to LA in 30 minutes?
1 year ago
1 year ago Link To Comment
Let's try projecting that argument back a century. In those days, the only way from London to New York was by ship and the passage took roughly a week. There were no better options and probably several slower ones. In those days, people would have said "Who could possible need to get from London to New York in 6 hours?" They knew that the trip took a week or more, planned accordingly, and knew they were doing as well as a person could do in terms of time.

If someone makes it possible to get from SF to LA in 30 minutes at prices mere mortals can afford, there will be a market. And as the price comes down, that will become the standard of service that people expect and demand. I can't prove it but that has certainly been the pattern in history.
1 year ago
1 year ago Link To Comment
You realize that getting through TSA will expand that to a couple of hours, right? And, there *will* be TSA in your way...
1 year ago
1 year ago Link To Comment
I don't see Musk as a modern day Edison. Personally I think the Tesla is half-baked and the carbon credits are the only reason the company was "profitable". Is a car running on giant, heavy cell phone batteries really that novel? The E/V has been with us since 1890.

The true test is what comes after the early adopters by their copy and the hype dies down. So far E/V's haven't been setting sales records and his is pretty expensive. It is a toy for well-off eggheads and Joe Taxpayer is forced to subsidize these people.

The Hyperloop is just a concept at this point, surely there are dozens of ideas like that floating around. Musk puts his out there and is proclaimed a transportation visionary. I don't find the claims that it would be cheaper than high speed rail credible. The solar arrays alone would be a ton of money and nothing like that is going to get built without taxpayer subsidies.

My understanding of SpaceX is that they have received $278M in government subsidies. Tesla has received another big chunk. Publicly Musk says he is opposed to subsidies which is odd given that he has received them.

I don't think the guy is all bad, I give him credit for his achievements. I just think the hype around him is overblown.
1 year ago
1 year ago Link To Comment
As Rand said, it's NOT a subsidy when you are paid to render an actual service.

I know where the anti-Musk stuff comes from on the "right." Musk is an Obama supporter and campaign funder. It is unfortunate that he holds those political views as they are antithetical to his general business ethos.
1 year ago
1 year ago Link To Comment
He has also held fund raisers for Dana Rohrabacher in his manufacturing facility in Hawthorne. He's not an "Obama supporter." He supports whoever he has to in order to get the policies his business needs. If a Republican were in the White House, he'd probably "support" him as well.
1 year ago
1 year ago Link To Comment
My understanding of SpaceX is that they have received $278M in government subsidies.

They have received fixed-price payments from NASA for services delivered, not "subsidies." In doing so, it will save the taxpayers a great deal of money in the future, relative to other ways of servicing the International Space Station.
1 year ago
1 year ago Link To Comment
.. and it's not like he had a choice. Everyone in the rocket business who has refused NASA money has quickly discovered that their competitors will not, and you simply can't compete with someone on the government teat. That isn't to say that Elon would prefer not to have government money.. that's certainly not the case.. but in this case it doesn't matter what Elon wants.
1 year ago
1 year ago Link To Comment
First time commenting on this site that I've read for years.. plaintext passwords? REALLY?

Okay, that's out of my system.

Rand, you know full well why "conservative" websites should be bashing Elon Musk. Anyone who has read the Hyperloop Alpha document will see the same Elon environmental nonsense all over it. I can certainly appreciate a desire to rush to the defense of Elon when he's being unfairly bashed and you've done a great job of that here, but that last paragraph is pathetic. Elon is the biggest warmer around, and he openly advocates big government solutions to climate change, including a carbon tax, and insists that the world is heading for an apocalypse without them.
1 year ago
1 year ago Link To Comment
Corn flakes were a spin off of the Kellogg brothers health spa business. The idea of bashing Kelloggs corn flakes because of the loopy health ideas at that spa makes no sense.

Musk doesn't have to be perfect with hyperloop to be laudable. He's just got to be better than the government of California's high speed rail white elephant.
1 year ago
1 year ago Link To Comment
I agree completely. Rand's complaint is that the people bashing Elon are not very good at it. He had the opportunity here to tell them how to get better at it, but he didn't. Presumably, because he likes Elon overall and is willing to set aside the fact that Elon is crazy, a warmer, and a crazy warmer.
1 year ago
1 year ago Link To Comment
As I said, he's no saint, and I don't agree with him on CAGW, but he's hardly the "biggest one around." No one comes close to Gore yet in that regard. Yes, I think that carbon is a dumb reason to build a hyperloop, but I can certainly understand why he'd like a faster way between SF and LA.
1 year ago
1 year ago Link To Comment
Musk is suggesting the hyperloop as an alternative to California's high speed train to nowhere. He has also stated that he has no intention of attempting to build the system, he is merely suggesting it as a better use of taxpayer dollars.

Musk is an idealist who wants to make the world a better place. He's doing it by spending his money, time and effort to transform our nation's infrastructure. He's not trying to pass a law to force you to buy an electric car, he's trying to produce an electric car that you will want to buy.
1 year ago
1 year ago Link To Comment
Actually, he is trying to get laws passed that would force more people to buy electric cars. Did you not know?

1 year ago
1 year ago Link To Comment
citation please.
1 year ago
1 year ago Link To Comment
1 year ago
1 year ago Link To Comment
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