Peter Beck on Rockets, Dinner with Elon and the Future of Space

The difference is that you can make bad decisions for a longer period of time if you have billions of dollars to put behind it, but you know, I think we're proof that it doesn't take billions. It just takes the right decisions at the right time.

Hello.

Thank you. Congratulations on your company. You've had one for much longer than I have.

No worries.

Yeah, it probably is.

Yeah.

Yeah, ten years. It feels like a very long time.

No, sadly. I must say I think Chris Kemp has aged better than any of us. He always looks youthful.

The big sucking sound of all resource, time and cash in the company is Neutron, so we're plowing towards getting that vehicle on the pad and launched. A lot of the earnings we spent a lot of time covering that. The company continues to grow. I think this quarter we're 32% over last quarter of this time period last year. So yeah, it's just continued growth. And the team now is knocking on sort of 2,600 I think or more. We have like 40 spacecraft in backlog and it was a big quarter for Electron. We flew five and booked eight, so that product continues to grow in demand. So no, it was a good quarter.

Yeah, 63 times. It's been a great success.

Well, I think the rocket business is an incredibly hard business, both technically and from a business standpoint. But it is the keys to space, and if you have the keys to space you can do almost anything and you have more options available to you. It becomes very powerful when you also can build all the infrastructure in space. So as a company, that's kind of where we're going. Two-thirds of our revenue comes from all of our satellites and spacecraft components and all the rest of it, and one-third from launch. But what it means is, I think it's fair to say we're about the only company in the world where someone can turn up and say 'Hey, I want to do this thing in space,' and we can design the spacecraft, architect it, build it, use all of our components, launch it, and then operate it. It really is an end-to-end thing we're trying to create here, which is pretty unique, especially because I guess SpaceX is serving itself all the time.

To me, it's a logical end point. Everything in a rocket is a giant engineering compromise, everything on a spacecraft is a giant engineering compromise. If you can mash those two together then you make less compromises, as simple as that. So it's just obvious that the big space companies in the future, at least to me, will always have the ability to launch stuff and the ability to build whatever platform they need. And if you want to take that one step further, it will become very, very blurry about what is a space company and what is a services company. I think you could say that with Starlink right now — is it a space company or is it a communications company? And I think that will only continue to shape up like that.

This is where you start asking about my feelings again.

Well, it's really Friday because if I'm down in New Zealand Monday is like Sunday. So this is fine.

No, no, I definitely do. So Neutron, I'm deep in that program and I get to do some cool stuff. And if I ever need some kind of mental therapy I just go to Stennis, our engine test site, and swing a wrench with those guys for a couple of days. So no, I still get to do all the things that I really enjoy. I would say that if I'm good at anything it's understanding complex engineering systems as a complete system. Understanding the rocket from tip to toe and how everything interacts with each other and the compromises that you can make. So I still think I'm useful — maybe the engineers think I'm no longer useful, but I still think I'm useful. And I certainly enjoy as much time as I can spend on that.

It changes. Absolutely. It just changes, it depends what's happening. If we've got a big engine test campaign or a tank test campaign or something then it all moves around. If we've got earnings like the last few days it's just been 100% focused on that. And I really enjoy the business part of business as well. Whether it's the entrepreneurial or the thrill of the chase or all those kinds of elements of the business thing. Building a business is not that dissimilar to building a rocket. You have to make the right decisions and apply the right resources. And at the end of the day, whether it's rocket building or company building, it's good fun.

No, look, if money was the solution or the key enabler to this industry then Virgin Orbit would have been successful. Richard Branson put $1.2 billion into a small launch company. Relativity would have been successful in its first incarnation. The good thing about this industry is yes you can have billions but it doesn't guarantee success at all. The rocket gods are the ultimate levelers of these kinds of things. You still have to make the right decisions. The difference being is that you can make bad decisions for a longer period of time if you have billions of dollars to put behind it. But I think we're proof that it doesn't take billions. It just takes the right decisions at the right time.

Well, I haven't really followed. I mean, I saw that he kind of took it over so I'm not really sure what the plans are there. But I mean, you certainly — I think there need to be some significant changes within the architecture and company and all of that to be successful, which I'm sure Eric's smart enough to see.

Yeah, it's a good question. It's not like one thing. I think that's what makes it hard. It's not like one thing that would be an easy thing to point to. I think it's a collection of a whole bunch of different stuff. In a lot of respects the cultures between SpaceX and Rocket Lab are similar but different. The one thing that we really drive home here is hustle. That means different things to different people, but in the Rocket Lab context it means when there is an issue you don't just stop and accept it as an issue. You just find a million different ways around that issue. I think a lot of people get to a problem and they just go 'well we can't get this valve, so it's going to be nine months till we get this valve, so we'll just have to wait nine months for the valve.' And maybe it's a boldness or an arrogance or just a sheer willingness to survive. We would just never accept that. We would just go and make a valve and just make it work. So I think that's part of it. I think we are an engineering company first and everything else is second. All decisions are kind of an engineering-based approach, methodical kind of approach. If you look right throughout our leadership, right up throughout our corporate structure, everybody's deeply technical. I mean, Adam Spice, our CFO — you can have as deep a technical conversation about a rocket engine as you want with him. So I think having that right across the business is important.

No, I've never read a business book or any of that self-help crap in my life. No, no, no. Everybody's got their own style and I lead differently to other people in this industry and other companies. And they lead differently to me. I think it's whatever works.

Not really. The thing I spend the most amount of time on is making sure things don't change. Making sure our culture doesn't evolve as we get larger. Particularly difficult when you go and acquire companies with their own distinct cultures and making sure that you infiltrate their culture with your culture. I spend more time and worry about the magic of Rocket Lab being diluted more than changing anything for a different system.

No, but there's always two approaches to this. There's one approach where you get up into everybody's junk and just get angry and publicly shame and all those sorts of things. And then there's the other approach where you try and convert the people to your way of thinking and bring them along on the journey. And genuinely, the vast majority of the time that's the approach we've always taken as a company, whether it be with the FAA or anybody else. We've always tried that approach. On occasion you just have to call it out and take a different approach. So yes, we had to deal with a lot more bureaucracy than we normally had to deal with. But the Electron pad at LC2 at Wallops Island — let's not forget we built that in nine months. We built it quick. Now we couldn't launch off it quick because of an autonomous flight termination system that was quagmired in regulatory. And Neutron's pad is the same — that is a big pad and it has been built in record time. Within a couple of years that pad has been built along with its assembly building. Sure, there are certainly things that bureaucracy slows you down and gets in the way, but we've been pretty successful at converting that bureaucracy into supporters and it not being much of a drag.

Yeah, but there was also a big team from the Wallops crew as well. We took the guys that built one pad because it makes sense — we don't have to learn or make mistakes again. But a lot of the work was also done by the local people at the pad and also the surrounding areas. And same with Neutron — exactly the same with Neutron.

Yeah, well, I mean that's exactly what we do. You can go to just about any site and you'll see a crazy Kiwi there. And we do that strategically. As I mentioned before, part of my job is to make sure the magic never dies, and we make sure that we put the right personalities in the right areas to reinforce and grow it.

It's totally a solvable problem. At this point there's one Electron rolling off the line every 15 days, which is by far the harder thing to do than just putting one on the pad. But I think the reason why you see these continual waves is that really you have to build a small rocket before you can build a big rocket. And it's a few things — the lessons you learn are at a much smaller scale. If you screw up a stage one tank it might owe you a couple hundred thousand dollars versus 20 million. So you kind of have to do that. And also, these are all entrepreneurial companies so they're raising capital. It's pretty hard to go 'I've never built a rocket before, this team's never built a rocket before, give me like a billion dollars and we'll go and build a rocket.' That experiment has been run, and by anybody's measure it was a pretty colossal failure. So by necessity you have to start off small with small amounts of capital. And if you've got small amounts of capital really you can only build a small rocket. It's literally a graduation — once you build your small rocket and you've figured it out and you have enough credibility that you can do that over and over again, you can go and raise the capital to go and build a much larger rocket. And I think that's probably where the billionaires come in — they can skip that step because they don't have to raise capital.

Longshot? No, what do they do?

Those guys. Yeah, Longshot's not doing a centrifuge, they're doing a 10 km long space gun.

So we have like a skunk works here at Rocket Lab, and we actually studied alternative launch for about two and a half years. I had two physicists looking at it. And the reason why I'm talking about this is because we published the paper — so somebody can go and find the paper — and we published the paper because it didn't work. But I think it was probably one of the most complete studies of beamed energy, where you have ground stations and either microwave or laser and you beam energy to heat a heat exchanger and dislocate some hydrogen. It gives you really, really high ISP, and it's one of those beautiful things, like space elevators, that in theory look really good on paper. So we studied that for quite some time. Things like laser blooming in atmosphere, it went into some really good details. Basically at the end of two and a half years we concluded it was just not a good idea. But I think it's great that people are looking for alternative launch means because I think we all want to travel around the solar system. But rocket propulsion as it exists today — it just hasn't changed since the end of the '50s. We've reached 98% C-star combustion efficiency very early on. We understand all the propellants that you can mix to make the highest performance, and it's hydrogen-oxygen. We've already maxed out chemical propulsion many decades ago. So the only thing that is left to do is build bigger and bigger rockets, and they just become comically large at some point. Unless you can solve this ISP or performance problem, it's very, very difficult to put any meaningful mass in orbit, which is the solution to exploring the solar system, because humans are incredibly fragile. We take a lot of crap around us to keep us going for any period of time, which translates into a lot of mass in orbit. So until that problem's really solved, we're not going very far at all. It was a super interesting program because you had thousands of seconds of ISP versus hundreds, but we basically concluded that it didn't work. It's a long way of answering your question, but I think it's important that people study different ways of doing it. We were studying it for different reasons — human exploration of our solar system — but kinetic would be a bit tough for that. That would be an unpleasant journey.

Well, you're saying G is a problem, right? G is always a problem. And the spin launch guys — same issue. At the end of the day, materials and systems are relatively fragile, so if you've got hundreds and hundreds of G then that's just problematic. And by the very nature of spacecraft, every kilogram is precious, so everything is as light and as flimsy as possible. So kinetically, if you're launching bricks or things like that into orbit, that may be great, and there might be a use case or a business for that. But if you're looking in the more immediate term of spacecraft and bits and pieces, then it's not clear to me that it makes much sense. But I could be completely wrong too.

Historically we've been okay at this, right? We were building Electron when other people were building one-ton vehicles. Which one has been more successful? If you're a small satellite, we understood very clearly that if you could ride on a ride share you obviously would because it's much cheaper. So the only people that ride on Electron, for example, are people that require dedicated launch. If you look at the kind of dedicated launch satellite masses, the 95th percentile is like 150, 200 kilograms. Electron's designed to take up to 300 kilograms, so there's very few satellites that we can't launch on it. And of course it's perfectly sized for that particular payload and represents the lowest cost. With a one-ton vehicle you're kind of in that no man's land where you're now too large — if you turn up with a 250, 300 kilogram satellite on a one-ton rocket, guess what — you don't get a discount for not using the 700 kilograms of capacity of that vehicle, but all the costs and everything still remain. So instead of an $8.5 million launch it's a $19 million launch. And then from a ride share perspective you're too small to be economically competitive on ride shares — you can't get enough on to be economic. So we don't just pull this stuff out of the sky. We studied it very, very deeply. When we were looking for Neutron we studied that very, very deeply as well. On a Falcon 9, if you just ignore Starlink, the average launch mass is five tons. And every kilogram of spare capacity costs money. Like I said before, you can't give anybody a discount for not using the full capacity of the launch vehicle. So no, I think we've selected a throw mass that we think is going to be extremely commercial. And if we're wrong, actually, because the diameter of Neutron is so huge, if we need to increase payload capacity a tank stretch becomes really pretty academic. So we reserve the right to be right and wrong, but we can also do something about it pretty easily if we are wrong. But history would say we've been pretty good at this.

Yeah, it's a good question. I think everybody needs to understand also that we're pretty much at the beginning of this. If we're honest, it's really only sort of five years since launch cadence and costs have dramatically changed, both on the medium class and on the small-sized class. Before Electron you had to buy a Pegasus if you wanted a dedicated small rocket at $50 million. So we're really at the beginning of this kind of evolution, and costs are only going to go down. It's only getting less expensive here. And as the scale of spacecraft go up, the cost of all the components and everything that's in them continues to go down and down and down. So a whole bunch of things that just wouldn't have been economically viable all of a sudden become very economically viable. So I'm not going to try and pontificate what might be next, because I know well enough that the biggest thing yet to be done in space hasn't even been thought of yet. I think we're very early in this journey.

As I said, once the economics drive to different places I think a lot of those things become much more viable and feasible. I think one thing that will be interesting is the evolution of the commercial space station, and I think that will drive a new human exploration solution and requirement. Space stations have been government assets, run like government assets, just like rockets were government assets. Now we're going to have commercial space stations, so I think that will be very, very interesting to see how that plays out. Because if the ability to build a space station and operate it dramatically reduces in cost, and the ability to get there dramatically reduces in cost, then all of a sudden it's not just tourism. I'm talking about much more useful things than that. All of a sudden accessing low Earth orbit in a human sense is going to become much more viable, and then all of the stuff that you can do with that.

Exactly. All of the above. And just the ability to build more stuff as well. It's sort of a circular reference and self-feeding — if you can get up there and you can build this stuff easily then you'll build more and more of it, and as you build more and more of it then it continues to grow.

AFL. Air Force Research Laboratory.