After a few years, SpaceX was making in-house 70 percent of the components of its rockets.

Sunday, February 11th, 2024

Elon Musk by Walter IsaacsonMusk was laser-focused on costs, Walter Isaacson explains (in his biography of Elon):

He challenged the prices that aerospace suppliers charged for components, which were usually ten times higher than similar parts in the auto industry.

His focus on cost, as well as his natural controlling instincts, led him to want to manufacture as many components as possible in-house, rather than buy them from suppliers, which was then the standard practice in the rocket and car industries. At one point SpaceX needed a valve, Mueller recalls, and the supplier said it would cost $ 250,000. Musk declared that insane and told Mueller they should make it themselves. They were able to do so in months at a fraction of the cost. Another supplier quoted a price of $ 120,000 for an actuator that would swivel the nozzle of the upper-stage engines. Musk declared it was not more complicated than a garage door opener, and he told one of his engineers to make it for $ 5,000. Jeremy Hollman, one of the young engineers working for Mueller, discovered that a valve that was used to mix liquids in a car wash system could be modified to work with rocket fuel.

After a supplier delivered some aluminum domes that go on top of the fuel tanks, it jacked up the price for the next batch. “It was like a painter who paints half your house for one price, then wants three times that for the rest,” says Mark Juncosa, who became Musk’s closest colleague at SpaceX. “That didn’t make Elon too enthusiastic.” Musk referred to it as “going Russian” on him, as the rocket hucksters in Moscow had done. “Let’s go do this ourselves,” he told Juncosa. So a new part of the assembly facility was added to build domes. After a few years, SpaceX was making in-house 70 percent of the components of its rockets.


  1. Gaikokumaniakku says:

    Two points:

    1. I think it was Coase who said in 1937 that firms exist because their internal costs are lower than the costs of outsourcing. Musk seems to be good at running companies precisely because he can organize effective, low-cost operations in-house.

    2. In the long term, human communities cannot survive on profits alone. Humans need clean air, clean water, etc. Thus “landfill capitalism” is doomed to kill off a lot of people, and it may kill itself if it prioritizes funneling profits to the 1% and sticking the 99% with the externalities. Managers who can minimize in-house costs have a choice to make: they can serve the 1% and possibly be well-paid in the short run, or they can serve the 99% and build a survivable planet. Unfortunately, managers who can minimize in-house costs seem to be few and far between. It is hard to train promising candidates into good managers without having the good managers snatched up by the 1%.

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