Daredevils and Dreamers

Did you see SpaceX’s Starship Super Heavy booster landing recently? The booster manoeuvred back to the launchpad, where two “Mechazilla” mechanical arms secured it into position in what is delightfully known as the chopsticks manoeuvre. It is sci-fi. It is mindblowing. If you need a reminder what humans are capable of, go watch it.

Let’s take a step back and ponder how we got to this point: SpaceX realised it needed to break the existing economics of space travel as it was simply too expensive. By developing reusable rockets, SpaceX could reduce the cost per launch. The lower the cost per launch, the more launches, the greater the supply, the lower the price, and the greater the quantity demanded, and we’re growing the space economy. For all the technical excellence of NASA, with the government funded model, costs never reduce, as there is no imperative to do so. Without the private sector’s innovation and commercialisation focus, we may have never had 21st century space exploration.

Astronaut Jeff Bezos once said: “There are two kinds of companies, those that work to try to charge more and those that work to charge less. We will be the second.” This quote is timeless. Be the second type of company. The arc of technology is always one where what was exclusive and expensive becomes a mass market product. The examples are endless: the TV, the car, the mobile phone, plane travel, headphones and yes, space travel. 

I’ll let you into a secret: as much as I understand EBITDA, a balance sheet and various accounting terms I don’t actually care much for it. I care very much about actual financial and operational topics, as well as the unit economics of a business. I also care even more about building a great product and bringing the future to the present. But accounting? Not really. Is it sacrilege to say so?

What do I mean by that? I’m not interested in accounting tricks to change my bottom line (and if you want to see how accounting tricks can go badly wrong, financial services history is littered with examples like repo 105 and Enron’s special purpose vehicles; damn, even Charlie Munger described EBITDA as “bullshit earnings”). 

I am, however, interested in understanding the barriers to industry growth (rocket launches cost too much) and how to overcome these (make rockets reusable) to increase progress. So I’m interested in creating the technology to make it happen. 

Accountants, rarely, are risk takers. We wouldn’t have had the railways, space travels, the jet engine, supersonic flight, the internet and a whole host of other things if accountants had been in charge. You need accountants to figure out what is going on in a business, so pay attention to them, but when you need to take a risk, you’re better off saying we’re gonna do it anyway.

Now, this isn’t the same as financial discipline - there’s no denying how crucial financial discipline is. Once you start wasting money, you can’t spend on the things that actually need money spent on. Cost reduction through technological improvements is a win-win. You need an almost pathological desire to reduce cost, but through technology, not through mindless cost cutting, asset stripping or poor quality products.

And this is why it takes a certain sort of person (and I am that type of person) to view reusable rockets or watch supersonic flight, or see automated warehouses and ports, or driverless cars or the creation of artificial islands and marvel at human potential. We marvel at the technological capability, but we realise it’s opening up more potential in our economic sphere. It’s one step at a time, with occasional giant leaps. It’s what makes 2024 unrecognisable to 1924. Do you think the advent of the canals as freight routes increased or decreased trade? Do you think the advent of the railways increased or decreased trade? Do you think the advent of the TEU container increased or decreased trade? They all increased trade and helped form new connected economies, and that’s precisely what space freight will do - once the cost has been reduced.

Everything that we currently marvel at was once sci-fi and was once the source of ridicule for a budding entrepreneur. The daredevil early pioneers of flight, in particular the Orville brothers at Kitty Hawk in 1903, or the early pioneers of the railway, including Stephenson's Rocket, or Malcom McLean’s intermodal shipping container - they saw the world, imagined a better future, and then built it. They saw the economic potential and technology, not the balance sheet.

Now, I know - it sounds odd because we have to think different and not worry about the accountants whilst simultaneously making inventions commercially viable to have a lasting impact. But the inventions and innovations do not start by thinking about the accounting impact. When Steve Jobs was building one of the world’s most highly valued companies, he had this exact juxtaposition. His vision was based in building a better product and utilising technology, but he had financial discipline, getting rid of the accounting practice of standard costs to ensure the Apple II was commercially viable. The best way to change the world is through a company, and companies have to be profitable. Entrepreneurs are rarely driven by money, but they know that the companies they create must make money.

These daredevils and dreamers saw the sort of future where what happens in action, spy and sci-fi movies becomes a reality a decade or two later: the combination of software, AI and heavy industry has huge potential.

Building this type of world is hard, much harder than incremental software updates, but it drives the world towards progress. Because the world doesn’t need another workflow management software solution, it really doesn’t. What it needs is more rockets, supersonic planes, railways, driverless cars and drones. Don’t argue because no one, absolutely no one, gets excited over workflow management software.