Gavin Baker interviews SpaceX CFO Bret Johnsen at Mission Control

Launch is foundational to everything you do.

Yeah. I think launch, if you're going to be a space company, I tell people it's hard to be a space company and not have assured access to space. And so we started out making sure that we had launch nailed down, and Elon really focused on driving down the cost of access to space at a far cheaper price than anyone had ever even thought of before. We're now the lowest cost per kilogram to space ever in the industry, and we're looking for Starship to do another 10x improvement as we get to rapid reusability with Starship. So, it is definitely at the core of what we do and it's the enablement for all of the other businesses, whether it's Starlink or direct to cell very soon or now AI compute. And so I think you absolutely have to start when you talk about SpaceX by talking about our launch capabilities, and Starship will be, to your point, next level because what we're doing now is taking on this huge, I would say like the holy grail of rocketry, which is rapid reusability. It's one thing to bring back the first stage, which is amazing and transforming the industry, but we did that 10 years ago with Falcon. What we're doing now is we're flying the largest rocket ever built with the goal of it getting to aircraft-like operations. And that is a completely different dynamic. But I think that's what it will take to be that catalyst for the whole space industry related to turning the 2030s into something that we had expected when we were kids related to the space industry.

I think our first launch of V3 that you're referring to from just last week was a huge success for us. The fact that we were able to demonstrate the full system capability, the new V3 Raptor engines, all of the changes that you saw on the bottom of the vehicle, all the operational changes that we did as well, and then you saw that soft splashdown at the end of the second stage, gives us a lot of conviction about where we're going, not just in years to come, but really even in the next couple of flights. And that's really exciting because that is, as we were talking about, that platform or catalyst for the rest of the business. Having a rocket that can take 100 metric tons to low Earth orbit is going to be hugely important for everything we're about to go do.

Well, I think as soon as we can bring back that second stage to the tower and start rapidly reusing it in the next couple of years, I think you're going to experience a 10x from a cost per kilogram to space from where we're at with Falcon today. And so that is, I think, a huge springboard for multiple pieces of our business.

Yeah, it's very exciting because we actually haven't been in the connectivity business for that long when you think about it. Really having our first production satellites in space back six years ago and ramping that business to where we're at today with over 10 million customers and over 10,000 satellites that we have now flown to space and 160 plus countries around the world. It is clear that we're delivering a capability that the world really wants, and I think it just gives you so much conviction when you know you're delivering a great product. And we've had so many notes, in fact, we send out an email each month with how many communities around the world we've had a positive impact in. It's really special, whether it's indigenous tribes in Canada or down in Brazil where we're connecting schools, or in Africa where they haven't had any connectivity before. Bringing something like Starlink to the world has been pretty amazing. And so, what it's done is it's given us an extension of the mission we were talking about. First and foremost, we want to make mankind multi-planetary. But above and beyond that, now having the ability to connect the other three billion people on the planet and really bridge that digital divide has been really special for folks. And I think that really resonates. But yes, I agree. Starlink was that first piece of the business. And I think that 10 million customers can become hundreds of millions of customers around the world in time because of the fact that it's so much more efficient to deliver to so many different locations from space than it is terrestrially. And so we're just heading down that path right now. And we're incredibly vertically integrated related to it. So I think we end up being a little bit of the blockers now become our own capabilities, which is great. That's exactly the way we want it. But what Starlink also was, was it was, I would say, that catalyst for the Falcon business to really ramp up operationally because if you don't have payloads lining up, then you don't really have a reason to go from 10 launches to 22. We launched 165 times last year with our Falcon vehicles. And what we would do is we bring multiple stacks of Starlink satellites to the launch site such that when there's an opening between launches of third-party satellites, we can then, okay, we're going to take that slot for Starlink. And so now, as you go into our next phase with Starship, I think we have another catalyst like that. And above and beyond Starlink now, we're going to have AI compute satellites.

You're my boss.

Yeah, I think it's pretty funny because it's for sure we'll talk about broadband in a minute, but especially if you think about the direct-to-device that we're going to ramp, our next generation of direct-to-cell or direct-to-device will be 5G quality in the next two years. We're about to bring something that's pretty unique to say the least and something I think anyone would want, which is to go anywhere with your phone, have global roaming, be out in the middle of the desert on the highest mountain and not have dead zones. I mean, these are pretty special things that I think people would want and probably pay extra for, but especially if it's the same price. So, I think we are very excited about bringing a very differentiated product to the market. Again, it feels great when you're bringing a product I think that's great for everybody. It's also going to be great for disaster recovery and when there are emergencies, the fact that the network doesn't go down and you don't have to worry about the tower being out. But circling back on the broadband side, the fact that you can deliver low latency to your point, I think that's really critical. Low latency, high-speed capability really everywhere, other than the countries that I'm not allowed to go into, is something that just won't make sense terrestrially. And so I think it will become harder and harder to justify many of the deployments on a terrestrial perspective because Starlink now exists. And I do think people really now are starting to see even on aircraft, when you start to see all the announcements, United Airlines now, American Airlines just announced, and many of the others without listing many over and over again, getting on an airplane and having that type of low latency, high-speed experience really kind of opens people's eyes to what it could be at their own homes or offices as well.

Well, I do think on the connectivity side, those two businesses will ramp nicely. And what's also great about those is I think when people think about space, they think about the new markets that we will create in the years to come, which I agree with that. Whether it's point-to-point transportation on Earth and 30 minutes flying to Singapore kind of thing or whether it's the lunar economy, I think all of those will happen. But what I think people discount is there are massive, to your point, almost $2 trillion of existing markets just on connectivity that are existing markets today to us. And so the fact that you're able to deliver a better product in an existing Earth market before even talking about space is probably what gets missed some of the time.

Good combo in my time as a tech investor. But any one or two of those markets, whether it's freight, whether it's point-to-point travel, I think the next big one though is going to be AI compute. And so we should definitely spend some more time on that. But I think that is a market that really needs Starship to really happen. Because there are large payloads and you really are focused on cost. And so I think that's the one that's kind of near and dear for us because you already see those next two happening, right? And this will just be a significant enhancement. If I think about what Starship's going to do for our broadband satellites, our V3 satellites that we're about to fly in the coming months here on Starship, every Starship launch of those satellites brings 20 times the capability of what we're flying with a Falcon launch today. So it is a huge enablement for our broadband business and soon to bring 5G capability on the direct-to-cell.

Yeah, I love the racks in space. I might steal that from you. I think that's the right way to think about this. I actually had the same issue when someone said data centers in space internally the first time. I thought, 'Oh, wait. How are we going to connect all these pieces together?' And they're like, 'Johnson, this is literally like another constellation.' Oh, okay. But really, you then realize virtual networking has been obviously a key component of networking for a number of years now. And this is that same concept of virtually networking rack by rack to your point of satellites that look just basically like larger versions of the Starlink V3 satellite we're about to fly for broadband, a lot more solar and now compute over the top related to, we'll just start with Nvidia GPUs on there and a large sheet of metal from a radiative cooling capability perspective, but otherwise looks largely the same as what we're flying from a comms perspective, although we've pulled the comms payloads off obviously. But really I feel like people think that this is a completely new concept for us and it's not. It's a kind of a logical extension of the satellite technology that we're already using today with all the connectivity down to Earth, the inner satellite links connecting the different satellites together, the prop systems. I mean, there's so much of what we're already doing with Starlink today that we immediately get to benefit from on these. And I think when people see the picture of one satellite versus another satellite, they kind of have an aha moment of, oh, well, these guys are going to be able to do this very quickly.

Yeah, it's funny. So I agree on all four and the one that I think maybe start with is regulatory, right? The fact that people are already having concerns about I don't want this data center in my backyard is clearly a trend, a little bit concerning trend. And so the fact that we can bring a clean energy, good for everybody type solution by just sending these up and being powered entirely off the power of the sun is pretty amazing. The fact that the solar cells are in space and get roughly five times if not more energy per cell than they get terrestrially because they don't have to deal with going through the Earth's atmosphere and they're in sun sync where the sun is on those cells 24 hours a day. And the fact that you can make them cheaper because you don't need the glass protection on these cells because there's no environmental issues when you're up in vacuum. You start to see these first principles kicking in on the power significantly. And from a cooling perspective, which is one of the more challenging things already to deal with on the terrestrial side. If you walk in one of our data centers, all that liquid cooling and all the plumbing that we've had to do and really engineering around that to really figure out innovatively how to do that becomes very straightforward radiative cooling, simply kind of extending the radiative cooling solutions that we're doing with Starlink and now doing it with AI compute. And then obviously no land lease to deal with. And so really it then becomes your cost is your satellite and your launch. And I look at it as being a tech person because I was semiconductors before space, you kind of have those cost curves traditionally that you would have, right? And as you ramp up in volume in time, your costs go down and you're benefiting from Moore's law or maybe soon a different type of Moore's law. But if you look at the satellite, most of the cost is silicon. And so we're ramping up factories and we're benefiting from silicon cost reductions process node to process node so our costs are going to go down over the few years. If you look at the terrestrial solutions, the curve is going the other direction, right? Everything's getting more expensive, right? The way you're doing the cooling, power bills are not going down, and land regulatory is getting more and more challenging. And so I think this just all lends to better for the population and a trajectory to be significantly better from a cost perspective as well.

Yes it is. In fact, my engineers, they've heard me explain where it's kind of a logical transition and we've done most of the pieces of this already. They say, 'You got to just make sure people understand there's a lot of work still to do.' I said, 'I understand that.' I think and some of that is actually scaling this, scaling to the numbers that we're talking about such that you can put up gigawatts a year into space is a very hard challenge. And we have just been able to demonstrate scale whether it's launch scale or whether it's flying and building ourselves thousands of satellites a year. And that is definitely going to be one of the challenges here again that we deal with here. But certainly we're going to be able to demonstrate capabilities as soon as next year. And so it is near. And I think the ones that say we believe, like if you list kind of the people that are supporting orbital compute solutions at this point, it's basically a who's who of the tech AI industry. I won't list other people's names, but certainly Elon Musk being on the top of that list, right? But I think they think that it's a lot further away because you can't do it without launch, right? Without the rapid reusable launch that Starship is going to provide.

I completely agree with you. Yes.

He is not, nor am I. And I think that's why you see us spending so much time to get Starship to rapid reuse. Right now with the existing first iteration of our satellite in our V3 version of Starship we just flew, it's roughly 200 launches for every gigawatt that we put up. And I would just emphasize that's first gen of the satellite and the rocket. And so we are just starting down this path. But even at that point, we're capacitizing for thousands of launches a year right now. And you see the two launch towers and pads in South Texas. You see the first one almost done at Cape Canaveral and the second one on its way with launch complex 37 within the next year. And so those first four towers alone kind of give you that initial path. And we've got other locations that we're starting to talk about too. And so I think that is critical to start down the path of having that capacitization as the rocket itself starts to ramp.

Yeah. I mean, I've got 15 years working for him. It's always special. It's one of the reasons I'm still here to be honest with you. He creates a culture where you set out with these what initially look like audacious goals and then step by step you realize that you're marching towards something that is absolutely achievable. The schedules themselves are sometimes challenging to make as far as the initial schedule, but what's amazing is he does everything that he sets out to do and I think that's the key here. In fact, if I think about going to Mars for example, when I first got here in 2011, 15 years ago, people would be kind of like rolling their eyes when we talk about Mars and being a multi-planetary species. Nowadays when we say that literally the response is what year, you know, it no longer even sounds audacious. And I think what Elon's done a masterful job on is, along with probably a lot of other things, is setting out these targets and then creating a fantastic business model around each piece of IP that you need for that end goal. It reminded me of when back when I was at Broadcom, we would go in and we would want to do a new SOC and if we were missing pieces of IP, we would do an acquisition, right? And you grab those pieces in because you wanted to win the next socket at wherever Apple or something. And here, if we need the next piece of IP, we're doing it organically for sure, but it was we got to get to orbit, then we need reusable rockets, then we need heavy lift with Falcon Heavy and now Starship. We want manned carriage, right? So now Dragon and now Starship. And then we need comms in space. And so you kind of go step by step by step. And then you need rapid reusable launch. And once you have that, you get to the point if you're flying thousands of times a year when a Mars window opens, you have a fleet of vehicles that you're ready to launch to for that month or so. And then you're back to your operational cadence again, right? Because it's every two years. And you didn't really have to have a crazy investment to make that capability happen anymore. And now it's, hey, let's get the lunar economy going. Let's learn what it is to live in space knowing that we're going to want those capabilities for the moon and then Mars as well. And so I think that kind of step at a time has kind of removed any concerns that people initially had of how are you going to raise all this money for something and what's the business model around multi-planetary species. And now people don't worry about that. And so we all get to stay here focused on the mission and yet the business model itself is pretty amazing. And I think you start to see that same dynamic happening with AI where we're going to leverage this capability. It's going to ramp up our launch capability along the way. I think it's going to absolutely give us an extension to our mission related to bringing the human consciousness off planet, right? And preserving that consciousness in space and yet it's a great business model for us step by step.

I mean, I think we've seen that type of dynamic a handful of times for sure. And you're exactly right. I think what's amazing to me is that he is in there in the details working with the engineers on these critical issues. And it's also incredibly inspiring to know that your leader is in the trenches with you and working probably harder than any employee that I know. And I don't know how he keeps that energy level up for the length of time, the decades literally that he's been able to do it. It's pretty amazing. But I absolutely would tell you I've witnessed those technical challenges or technical discussions over the challenges that we face on a regular basis. Raptor engine was one of them for sure, but there have been many others along the way. And he's going toe-to-toe with the technical leaders on those items. And it's just incredibly inspiring.

Yeah. No, listen, I appreciate it. I think going into the AI business has a couple of different incredibly rewarding elements. Certainly, there's a financial opportunity and there's the opportunity to give us the reason to really ramp up to thousands of launches from a financial perspective, but I think it's also critical that we have the ability to make sure that the AI model that people start to really rely upon is a truth-seeking model. And so having the content, the real live content from X, integrated into our solution, I think is important to us and I think will, in the end, be a huge differentiator related to our AI solutions.

Well, it's probably not a surprise that we have a very diversified AI business because we've done the same thing with our other businesses. If I think back to our space business, the fact that we launch commercial missions and Space Force missions and NASA missions really gives us diversification. And then you look at connectivity with broadband and direct-to-cell and the fact within broadband, we didn't even talk about enterprise and government, but that's certainly a big piece of our broadband business as well. And so now you talk about AI and again a very diversified business. Certainly hosting others was a key item that we talked about related to even in the next couple of years with orbital compute, but there's nothing better to prove out that business model than demonstrating it right now with the Anthropic deal that we announced. We can do that right now with our terrestrial data centers. So certainly hosting others as well as building our own model both enterprise and consumer to your point. Certainly on the consumer side the differentiation of our real-time data from X is huge. By the way, even X, I think we can do far better related to the optimization of the ads engine. We're investing in that technology right now. And you saw us not be happy with where we were at on the enterprise solution on the coding specifically and so we went out and did the deal with Cursor and brought in one of the industry-leading solutions even on that front to move us faster and bring in all of that enterprise data. So I think in all of those areas you're seeing huge strides already. But what I also love is that it's now SpaceX AI. If you go up there at Palo Alto, it is SpaceX and you feel it already. You're seeing the impact of that bringing our DNA and integrating the two companies as fast as possible has been really special and I think you're just in the early days of seeing what we're going to do in AI.

Yeah. I think that just there's nothing better than just demonstrating the capability even before we get to space that we feel like we're bringing a solution to the AI industry that's desperately needed. I think Elon was very vocal even a year ago that he felt like the constraint was going to be compute and power and you're already seeing that. And what we have is we have these dense training clusters which makes it really premium compute that we're able to offer folks as well. But I don't want to also give people the sense that that means we're backing off related to our own internal solutions. We're absolutely not. But the fact that we can keep our model and our solutions training and doing inference on the bleeding edge related to GB300s in this particular case and really monetize the other compute in our terrestrial data centers is huge. And I think you're going to see us be able to do more of that ideally with more folks over the next whatever time period we want to give it here even before we get to space. And that's really been part of the key. I mean we at our core are builders, right? We are strongly entrenched in building the infrastructure of the future and so AI being one of those key industries. And so I think you'll see likely more and more folks want to lean to us. There's just a tremendous amount of technical challenge in putting up these, to your point, gigawatt-scale data centers.

Well, it's a really great team first and foremost. When we were doing the diligence and talking to Michael Terrell and team, I think when you find a team that's a good cultural fit and so once that was identified then looking at the data that they were able to bring to the table for us, that was huge. The fact that they're working with over half the Fortune 500 and have thousands of enterprise accounts. It was certainly a huge opportunity and then for them, they were starved for compute and you saw immediately what the benefit was for their tool. And so now having that Cursor coding engine as well as our own Grok LLM and really the harness with Grok Build that's coming out really right now is pretty magical.

Yeah, I think Terafab is a really interesting one. Being a semiconductor guy before we were talking about, and certainly it's a partnership first and foremost with SpaceX and Tesla and so now bringing in Intel into the fold is huge, right? Having an industry leader of decades in the semiconductor industry brings that know-how to the table. I look at it as if you were starting up a foundry business from scratch, I just think it would be so challenging to convince people to tape out their products to you. And so, I don't even know that you could start a new company from scratch unless you had a captive customer like in this scenario like SpaceX and Tesla saying, 'We will take every wafer that you can yield out.' And so then it takes that risk away and then really the risk is a capital risk only. And so I also think that there are going to be some very exciting elements of having my view the entrepreneur innovator of our lifetime going and challenging the requirements in a new industry again and sitting with the process engineers that have 50 steps to their requirements list and pushing on each one related to why that has to exist that way and bringing everything under one roof and taking a completely different approach. I think we'll yield a pretty amazing result and Elon's been able to demonstrate that industry after industry after industry. But what I would say is we are doing this because we're very concerned about the supply chain constraints that might exist very soon in the next handful of years related to being able to fab out anywhere else. If you look at it when you start talking about Nvidia or the AI5 chip or a TPU, all of a sudden you start talking about TSMC, right? And so it isn't that you're being able to diversify out from a supply chain perspective if you go one more layer down. And so our concern is really more than anything else that the supply chain won't be there for us to ramp to many, many gigawatts. Ideally 100 gigawatts a year is our target in the years to come without being able to have a tariff. We need to make sure that we have assured supply of silicon.

Yeah, I think that really capital allocation's been one of the bigger challenges of this job for 15 years. And what I would just say is we have a pretty good track record of being able to do this. And certainly the dollars are now bigger than they have been in the past. But I also am incredibly proud of the value creation along the way that we have already been able to achieve. And I think that track record also is something that people should consider when they're thinking about the future for us as well. But we really take an approach from a capital allocation similar to what you would do in a just-in-time model for manufacturing. You're looking to capacitize Starship with different towers and air separation units for the fuel and additional hangars. And so you're looking at that. You're looking at whole new facilities for satellite builds and solar capability and now you're looking at terrestrial data centers and orbital compute all happening at the same time. And so you really have to go map it out quarter by quarter and just not get ahead of yourselves related to when do I need that capacity in each of these businesses.

That's right. That's right. I wish I could take credit for that, but that's certainly Elon. I just execute on the man's incredible vision, but I agree with you. The timing is pretty magical.

It is. And I think when people look at it from the outside, they think about all these kind of disparate businesses, but it's actually not that at all. It is the fact that we have a launch platform that was Falcon and now is about to be Falcon and Starship. That really is the enablement for every business you just listed. And so we get to just go get better and better at that core launch capability, that core DNA of being the space business of the world. And each of these vertical offshoots comes to play out where you have a differentiation because of the fact you're able to deliver a better product because of it that it's coming from space. And it's different versions of satellites in most cases or it is back to our core of being incredibly vertically integrated in each of these core pieces of the business and really bringing infrastructure to the forefront in each of these.

That's right. Yeah. Exciting times. Exciting times.