Accountability and Future Outlook

Support for this show comes from Clavio Imagine hiring two brilliant employees The first takes your marketing from idea to full campaign, email, SMS, push and the time it takes to describe it The second handles every customer conversation twenty four seven Answering questions, recommending products, handling orders both on brand and always on Your next hires, Clavios's AI agents. Get started at K L A V I Y O . com Support for the show comes from serervice Now. AI is moving fast across the enterprise, but without visibility, it's just chaos Different tools, different models, different teams using AI in completely different ways Service now turns that chaos into control With the AI control tower, you see all your AI across the business in one place. What it's doing, what it's done and what it's about to do so you stay in control. To put AI to work for people, visit serviceNow. com Support for this show comes from Indeed When the pressure's on and you need to hire the right person for the job, indndeed sponsored Jobs has your back Sponsored jobs posted directly on Ieed are ninety five percent more likely to report a her than nons sponsored jobs Join the three point three million employers worldwide that use indeed to connect with quality talent that fits their needs. spend less time searching and more time actually interviewing candidates who check all your boxes Less stress, less time, more results When you need the right person to cut through the chaos, this is a job for indeed sponsored jobs And listeners of this show will get a seventy five dollars sponsored job credit to help your job get the premium status it deserves at indndeed d. com slash podcast. Just go to indndeed. com slash podcast right now and support the show by saying you heard about Indeed on this podcast That's indeed d. com slash podcast. Terms and conditions apply Need too hire? This is a job for indeed sponsored jobs. He wecome to Coder. I'm I Pll Eitor and Chie of the Virgin and Coder is my show about big ideas and other problems My guest today is Ryan Mack, teechnology reporter at The New York Times and co author of the excellent book Character Limit Now Elon Musk destroyed Twitter. book came out in twenty twenty four could not recommend it more. I want to have Ryanon today because we're on the cusp of the SpaceX IPO promises to be one of the most consequential public offerings in history for a variety of reasons its biggest ever size, of course, at nearly two trillion dollars, but also because all kinds of rules that keep our markets fair are being bent, if not outright broken along the way And also, because somewhere buried deep inside SpaceX is X a social platform formerly known as Twitter purchased in twenty twenty. That's what Ryan co wrote that book about. Now you might recall that I personally was very confident that Elon Musk would come to regret buying Twitter. O the day of the sale I wrote a piece called Welcome to Hell Eon which was probably the single most red thing I've ever written thesis was that there would be no way to grow Twitter users and revenue without moderating the platform well, and that ultimately, Elon buying Twitter would destroy his reputation and cause damage to his other companies. Well, now we have the numbers from the SpaceX IPO filing see how right my prediction was. And you'll hear us discuss X is shrinking by every major metric. also going to hear Ryan point out that it might not matter. I'm curious. Take a listen to this conversation and let me know what you think. Was I right or was I wrong Brian and I also got into all those rules that are being broken to land the SpaceX IPO, rules about shareholder control, inclusion onto the major index funds and all the other levers of market accountability that usually serve to keep companies in check You're going to hear say corporate governance a lot in this episode and While it might sound boring, it won't be if you simply take a shot every time it comes up don't you But do consider what it means that Elon Musk has become so rich, so powerful so detach from the levers of accountability He can apparently get away with anything he wants any major banks, fund managers or investors calling foul. because they don't want to miss out on what could be the biggest financial windfall in recent memory. There's a lot to think about in this episode Okay, New York Times Tpe repeporter Ry Mack on Elon Musk X in the SpaceX IPO Ry Mack, you're a technology reporter of New York Times,elcome to Codor. Thanks for having me. I amm really excited to talk you I can't believe you've ever been on the show before. I feel like we've done a lot of reporting, sort of in and around each other. I'm a big fan. Thankks so much for being on. I know what the hell, man. You just have boyed me this whole time, but no, I'm kidding.s It's good to be here. Listen to many episodes G t part of it Well, now we're going to ask you to answer for your crimes, whichich is what the enter audience really wants me to do every day. No, spepeaking crimes, we're going to talk about the SpaceX IPO. Elon Musk has obviously filed to take SpaceX public. There's a lot in that IPO, including the idea that there's like a twenty eight trillion dollars addressable market for SpaceX services, which more than the world. you know, just a lot, just a lot in there. And you've reported a lot of it. So I do want to dive into it. I actually want to start with X, the everythingthing app, the app formerly known as Twitter. U because The SpaceX S one really gives us our first look into what that business is, what it has become, where it's growing. In twenty twenty two, I wrote an article, maybe the most viral article I've written. It was called Welcome to Hellyon. in which I very confidently predicted that buying Twitter would be a disaster for Elon Musk And I'm just to read you my thesis. It was like the first sentence of the piece. And then I want to try to back into what we know about X. and I'm very curious if you think this is come true orough So my thesis was Twitter is a disaster clan car company that is successful despite itself And there's no possible way to grow users in revenue. without making a series of enormous compromises that will ultimately destroy Elon Musk's reputation and possibly cause grievous damage to his other companies. I think there's one view to say, yeep, that totally came true. I think there's another view to say, actually Elon is more powerful than ever and on the cusp of an IPO that's going to make him a trillionaire. So tell me about X. What do we know about X the company in the years since Elon has bought it? and what do we know about its financials as reported in SS one Sure. I think you mentioned the word growing in all that. and I think the place to start is the fact that X is simply not growing. You know, it's stagnated in terms of revenue stagnated in terms of user growth You know, it's been buried twice within Elon's companies first in XAI. and now into SpaceX So it's kind of become in some ways, an afterthought in the Musk emmpire despite it, you know, still being Arguably Mk's favorite thing. You know, he spends countless hours a day. on that thing like many of us used to, many of us still do But in terms of a business proposition It it's kind of a non factor. if you compare it to some of the other aspects of this business, you know, something like Starlink, for example Um And if you look back at twenty twenty two It's It's kind of just bizarre, right? He bought this company on a whim T. pitch this idea to investors that he would have a billion users, he would have payments integrated to it, it would be somewhere you could potentially book a attacks. you know, he pitches this idea of it being Wea, you know, you mentioned everything app, right? And it's certainly not the everything app. At one point he was like, you could watch TV on it and you know, and None of that has come to fruition Yet, I look at what's happened in the last four five years since then four years and he's Gon He's gotten more powerful than ever. you know, he is His net worth is increased. I think around the time he bought the company it was around three hundred billion dollars in net worth. His net worth fluctuates anywhere from six hundred to eight hundred billion dollars these days and a SpaceX IPO will take him potentially beyond the trillion dollar mark for the first time ever in human history. It's bizarre in that like there's a lot of contradictory things about it, but at the end of the day I'd argue he still comes out on top. Is it just as simple as he bought a distribution platform for his own tweets and he controlled it and he fixed the algorithm Beavver himself and that worked. And it doesn't matter that Revenue is down a hundred million dollars year over year. And it's only not even like quite forty percent of Twitter's pre acquisition revenue Like he's destroyed the business. byy every metric we can see in the S one every number is down and only the revenue from data licensing the AI companies is up. H own AI company too. And like, yes, if you singularly look at as a business, it's Uh Clearly a failure from the time he took over the company to fidelity marking the valuation of the company down to ten billion dollars before he merge it with XAI. You have to look at it in the whole landscape of Musk ink, I guess, and Since he bought the company, he spun up XAI raaised billions of dollars for that company He then merged it into XAI, kind of burying it and then he merged it again into XAI into SpaceX. And so I guess he's up if you're doing like a plus minus kind of, analysis of valuations of these companies. And again, these are valuations that seemingly have no basis in business fundamentals. You know we're playing with Musk math here and You know, he has this whole cadre of investors and friends that are willing to back him to the end of the earth, but Um Yeah, he's I'd say winning There's a version of this where you could straightforwardly make the argument that However many billions he lost on Twitter is worth it is an investment that got him to we're going to do a trillion dollars SpaceX IPO I caution against kind of looking back at it historically and thinking that was his plan. all along you know, I think There was this trope that kind of came up after Trump won the election that you know, Elon Musk bought to then help elect Donald Trump And I guess you know, there was really no proof of that, especially when we did our reporting at the timimes and for our book. character limit But you know, it has worked out for him. I think it's it's kind of undisputable in that sense And yeah, he has bought a distribution platform for his own Tweets You know, he's the most followed person on the platform now Um, you know, he controls the algorithm, he controls u you know, the content, other content that gets boosted on the platform. So Um Yeah, again, I don't know how to say this more, but He's winning and that's just where we are right now in I guess society In the pre X days when I was still Twitter Elon would constantly talk about how he didn't do any marketing for Tesla. They had spent no money in advertising. They spent no money in marketing. He would just tweet sort of Tesla sales up and down. And there's kind of infinite demand for the Tesla Model three in particular, in the mododel Y So much so that every other carmaker essentially got confused and made Tesla model wise of their own. And they just thought people wanted electric cars. And maybe they just wanted Tesla maybe there was a mean stock component to it. But Elon was just very good at using Twitter to drive demand for his products. and And would constantly say, I don't have to pay for marketing. I just have this platform The other part of my thesis was that buying X and Changing the algorithm and being as political as he has been would cause reputational damage to E. It would cause reputational damage to his companies I think there's some evidence that is true in the case of Tesla. where the cars are less popular than they once were. Certainly there are campaigns that protested Tesla dealerships Is that true for SpaceX? Is it true for the rest of his empire? That's a great question. And with Tesla, of course, after the election, you saw the Tesla takedown protests People you know, slapping those bumper stickers on their cars, you know, I bought this before you and went crazy. You could see Tesla the share of the Tesla market in the EV market kind of falling. Of course There's a lot to do with the rise of Chinese vehicle manufacturers like BYD. Um I I don't know. I don't think I see the same kind of reputational harm to SpaceX that I've seen with Tesla And that may be because there's just not as much consumer contact with part ofpaceX. I mean, I think it's something like the launch business, you know I'm not going buying a launch. You know, regular people aren't buying launches. They're contracting with governments and big companies and not to mention that they largely have a monopoly on getting things into space. And so if your option is working with a company that has a CEO that you know is reputationally compromised versus not getting into space at all, you're probably go with the former. Starlink is another, I guess is another basket, you know, I think it offers a product that is quite good and is not challenged in any way. You know, I think of something like Iiridium, for example, or, you know, the companies it competes against and It just blows him out of the water in a way. You know, it's such a strong service so much so that, you know, governments rely on it and Ukraine relies on it. and the numbers there continue to grow. I think that's kind of the crown jewel of the SpaceX Bus empire right now, you know, in terms of revenue and profit There's no moral case to be made for being on Hughes Net still. You can't You can't be a better person by being on some of the other satellite providers at service the rural parts of the country. We see it in our own traffic and our own comments We cover Starlink notothing better. They continue to innovate in the ways they continue to innvate And the audience doesn't like it But then there's a hge party the audience says, Wait, dont have a market alternative to this. You're kind of saying where there isn't a market alternative, the reputational issues have not been a problem in every place where there might be or there's a consumer market. reputational issues have damaged him. I think X is actually the example of this, right? There are a number of market alternatives to X And so people have just left the platform whether or not there's one big competitor to X, I think remains to be seen threads by some accounts is vastly bigger than , but it does not have the influence Blue guy is run by very charming very ideological people. They're doing whatever it is they're doing. It's certainly not a competitor head up to X Is there a reason that influence hasn't recapitulated itself anywhere or that the people still inX have stayed there Oh man. it's something I think about a lot. And I think I think the rumors of X's demise at the time were greatly exaggerated in a way. I just think these social platforms are so sticky And I remember remember One of the rounds of layoffs, right? Everyone thought, I think it was like the the fork in the rooad or one of those early rounds and Twitter went down for a period of time too. and I remember being at dinner and everyone just being just writing eulogies for Twitter that night And I'm like, guys, I don't I don't think this is it. Like this is a pretty resilient platform. It's been developed over you know, more than a decade. it's been around for a while. It's quite a resilient thing and it has a dedicated user base. That's why we love it. You know, it's It's kind of a great social experiment. And so Th At the time, you know I was wary to be like, you know, this is the end of Twitter And I think you're starting to see that now, how resilient it is. I think we're so caught up in it as reporters, like you know, and we're on it all the time. But there are normal people out there that go to Twitter still or go to X still because their soccer community is on it or Um, you know, it's where they talk about movies and they have their six best friends on there. And you know, it's still a very sticky platform And in spite of the, you know see Sam from Grock or the, you know, abusive stuff from Elon or the hate speech, like They persist because it's just where they've learned to be. and Yeah, it's hard to generate that from scratch. And I think that's why you're seeing things like Blue sky hit kind of a ceiling here in terms of attracting a wider audience. Do you think as we go into the IPO and the SpaceX becomes a public company and X is just ort one piece of the puzz increases or decreases in importance to Elon. It is his favorite thing Yeah, but running a public rocket company is just a very different set of priorities. maybe, but also like He never operates as we expect them to, right? Like U man, running Tesla and having a Twitter account has not worked out well for him in the past. You know, he's been sued for some of the stuff he's put on X, I think of or sorry on Twitter, I think of twenty eighteen when he got sued for saying funding secured for taking Tesla private Uh, you know, and I and he got away, you know, paid twenty million dollars in a fine and largely got away with it. He's way more powerful now, way richer than ever U So I don't think No know, SpaceX being a company. being a public company will necessarily change his habits on X these days. I mean, The other day I saw him posting about the anthropic deal. I don't know if you saw that that was in the S one And he was pushing back on the idea that Anthropic would pay this amount of money So for a certain amount of years, know, this large amount of revenue, one point two five billion dollars a year And he was openly contradicting what was in the company's IPO documents, which you cannot do during a quiet period And, you know I don't think anything's going to come about that. He I don't think he'll get a slap on the wrist or anything. He's just kind of higher than any form of accountability right now We're going to pause here for a quick break. We'll be right back Support for the show comes from Quo We're always looking for ways to stop leaving money on the table. And a big one, especially if you run a business, miss callalls because a miss callall is money out the door. That's why today's episode is brought to you by Quo, spepelled Q U O. the business communication system built so you never miss a call. Flo isn't just a phone system, it's a smart system AI automatically logs calls, generates summaries, and flags next steps so nothing falls through the cracks. And it can even qualify leads or respond after hours so your business stays on even when you're off With quQo, calls, texts, voicemails, transcripts, and contact details are all in one clean view, so your entire team can handle calls and texts from one shared number But this the season where no opportunity and no customer slips away Try Quo for free plus twenty percent off your first six months when you go to quQuo d. com slash decoder That's Quo dot com slash decoder Support for the show comes from Upwork. If you run a business, you want to keep it growing. But growth needs to be scaled properly, or else it could all come crashing down N workork helps teams quickly bring in specialized freelancers so you can move faster and take your business to the next level Netbork is a one stop platform to find, hire, and pay expert freelancers You can find specialized talent across web and software development, data and analytics, marketing, business operations, and more Browse profiles, review their passwork, Get help scoping the role so you can hire with confidence. You can also enjoy the benefits of Business plus, which gives you access to the top one percent of talent on their platform. With AI powered shortlisting, you'll get matched to the right freelancer in under six hours. Visit upwork. com right now and post your job for free. That's upwork . com To connect with top talent ready to help your business grow That's UP W O R k d. com . com Support for this show comes from Clavio There are only so many hours in a day. and Clavio's two powerful AI agents can make sure your team spends them on big things. The first Clavio AI agent turns your marketing ideas into reality instantly Describe what you want. A holiday campaign, a VIP reengagement series, and Clavio builds it instantly email, SMS, and push All coordinated on brand, grounded in fourteen years of Clavo marketing data Nothing goes live without your say so The other Clavio AI agent keeps your customers happy at any hour Brand trained to answer questions, make product recommendations, and handle orders and returns. No hold music Marketing that launches instantly. supportuort that never sleeps Join more than one hundred ninety three thousand brands, including Away Patrick Ta and Dollar Shave Club, already growing with Clavio The autonomous BaC CRM. Get started at KL A V IY O. com Were back with New York Times Tch reporter Ran Mac, discussing the path from El Musk buying the platform formerly known as Twitter taking space outs public I think that brings us to the larger SpaceX IPO in general. Because the whole thing is structured to avoid the mechanisms of accountability that usually exist in our markets. Right. It's going to end up on the NSDQ in some way shape or form. in a way that Basically all of us are going to end up invested in SpaceX And we can't take our dollars away because it'll be the index fund. Elon is going to control an enormous part of the company in a way that maybe he just can never be removed And who knows, who knows if E having a board of directors is important in that sort of case And then, you know, he has a monopoly in rocket launches, at least for now And who knows if there will be market alternatives that provide accountability SpaceX? Walk us through how this is structured. You've written about it at length The SpaceX IPO is a corporate governance disaster. If you care about corporate governance, walk us through it I'm a big corporate governance guy myself. It is the hottest. It's what all the TikTok dances are about lately. Yeah I have a corporate governance tattoo on my lower back, but this is like serious stuff and it's concerning to people that study corporate governance So let's talk about Elon Musk's ownership of the company or his voting control of the company. He has super voting shares that All told, give him about eighty five percent control of votes at the company And that's, you a super, super majority at this point. He basically controls every corporate decision at the share voting level. And you know I think of something like Meta, for example, and compare that to Mark Zuckerberg, I think with super voting and voting agreements, Zuckerberg controls about sixty percent. U so Elon has even been a larger stranglehold on his company than that So what does that mean? It means he controls the board points, you know, friends and advisors to board seats S Um you know There's no independent board. commission to structure pay packages. so essentially he has control over how he gets compensated. I wrote about this pay package that he got earlier this year where he was awarded one point three billion shares in what's called restricted stock And if you actually look at the footnotes there in that uh S one You can see that he's already able to vote that stock, which is kind of insane. and It's kind of unheard of. you know, he hasn't earned any of these shares and these shares are pegged to hitting milestones of the company creating colony on Mars with a million people and putting Data centers in space with I think a hundred terawatts of compute a year, just, you know, an astronomical figure And he has to hit these things in order to gain these shares to sell them Well, he hasn't hit any of these milestones and he's able to vote these already given the stipulations that were put on them. can I ask you about this? The colony and Mars, the million people, however many I mean, this is all bananas, right I guess we're brring the lead here. Yeah. Right Like he gets a huge pay package if he puts a colony and Mars with a million people in it He puts how many terwatts of compute in space He's in charge of this assessment. Like he obviously wrote it to his own specifications Why set milestones that are unachievable? and then vote the stock anyway instead of just giving yourself the stock Good question. I think I don't know, maybe it gives some semblance of like he has to work towards these goals. But if you talk to corporate governance folks They're sort of appalled that he gets to vote these anyways. You know, this adds to his voting control that eighty five percent we talked about earlier On top of that he gets to take out loans against these shares. And of course, that comes with board approval, but He controls the board. So He's able to take out loans against these shares and get cash Um and Yeah, I don't know. I don't know why even play this kind of dance of I have to hit these milestones. My theory is that so he can tweet about them Right Like legitimately, my theory is that he wants to be able to say, I don't get paid unless I put a million people on Mars regardless of the technical details of whether he can vote the shares or take out loans against them as collateral. He gets to represent to the world I don't I don't receive the windfall until there's a million people on Mars. Great point. There's also a fun little wrinkle here in that You don't pay taxes on them until you earn them And so because he hasn't earned them, because he doesn't technically hold them yet or doesn't have the ability to sell them It's not taxable. And so he doesn't have to pay taxes on that either U until he hits his milestone. So in some ways, if you believe he'll never hit them He can still derive the power and potentially financial gain from it simply by you know holding them, I guess, or you know having this pay package under his thumb. The usual way that a market could correct this is by a bunch of people telling retail investors, don't invest in this IPO. or a bunch of people who are angry Elon Musk selling their Teslas and telling their friends not to buy this IPO and driving the stock price down and that is a market corrective. And we can see this happen with a variety of companies over time. This IPO is going to end up in index funds, like very quickly in a way that I think is also terrifying a bunch of corporate governance experts. the sexiest new characters in American politics Talk about that. How are we gonna mechanically we all end up owning SpaceX whether we want to or not? This, I think is like the most underplayed And sort of insane thing to think about So how does this work? You maybe you and I take a look at the SpaceX IPO and we're like, I don't like those financials I personally would not invest in that company. I'm not going to buy shares through my Robinhood account or schwab account, whatever. But let's say we also have investments in index funds. know we all have retirement accounts, sometimes're invested in index funds So're just kind of passive investors in stock and these indexons trace the American industry by buying up shares and various sucks Um So what's happening here is that SpaceX and these indices have worked together to relax some of the rules And so let's take the NasDAQ one hundred, for example. The NSAq one hundred has one hundred socks in it that trace Again, American industry, like kind of blue chip stocks. Typically it takes about ninety days. for a company after its's IPO to enter the NAazAq one hundred or to be allowed into the NAazAq one hundred. The reason for that is it allows for some type of cooling period. Typically after IPO stocks go up and down, it takes some time to settle on the public market and to have you know, a steady kind of valuation. And that's normal. In this case, SpaceX gets to enter the index after fifteen days, you know kind of in the midst of this veryer big hype cycle And so that's essentially going to force a lot of these index funds to buy up SpaceX shares because it has entered you know, index. That will give SpaceX access to a lot of capital It would have had to have waited for for a couple months. you know, and that's going to continue to buy, you know, drive the buying frenzy in the stock And so it's sort of genius in a way, I guess, from SpaceX's perspective, to get to get that access to this billions and billions of dollars of capital in some of these index funds. And that's just kind of one way the rules have been relaxed for this with this IPO How did that occur? Did Elon just roll up to all the index fund owners and say pretty please. Did you buy them off? Was it above board?as it corrupt? It's been prettyt opaque, but you know these These things were simply announced. there's been rules around profitability that have been relaxed as well at some of these indices. There's been rules around governance that have been relaxed as well and What I'm seeing here, what I've talked to folks about is just just This level of hype has generated so much foMo around, you know, the stock, this fear of missing out And so you get to the point where These rules are being thrown. I talked to one corporate governance expert who said You know, it would be like haaving all the rules and setting aside all the rules for football. And you know you play the rules of football And you've perfected it and you have it down to the rules of the game. And then when you get to the Super Bowl, the biggest event of the year, you change those rules And that's kind of what we're seeing here with SpaceX. There's a lot of people who roote against the Kansas City chiefs who understand exactly what you're talking about in very specific ways. be like it'd be like taking the tush push out of this you know like Well, I mean, I get it, but it's also it is one of the biggest IPOs. the banks are all you know, they they've all been listed on the IPO. They're all participating in it Is it just as simple as they all want the business They also have some amount of influence over the index funds So they're Fomminated and change the rules Yeah, I think of this from A story that two of my colleagues wrote last week for the times And there's this one fund manager who simply said, you know, If I miss out on the SpaceX IPO, Someone's gonna to tap me on the shoulder and ask me why I wasn't in that. Whereas, you know, if I get burned on the SpaceX IPO, so many other people are going to get burned as well. So like I have a way to cover my ass. and's just and you're just like reading this quote and you're like What? Like Like what is going on here? it's kind of a herd ment he's just admitting to a herd mentality here And That's what we're seeing here. and Yet now multiply that by every, you retail investor who's getting marketing materials on Robinhood telling him, you know, oh, we have IPO shares available in SpaceX by, by byye. And so It's it's kind of unheard of The normal market dynamic is some people obviously heavily bet on SpaceX succeeding and some people would heavily bet against it. And you want that dynamic to find the right price the st and here that just seems to be erased. I'll be interested in the short kind of interest against the stock. I think that'll be very interesting. If you look at Elon's track record, let's say Tesla, for example and how the stock has gone up over the years there. I mean he's completely crush a lot of shorts there And so you know, he used to go to war against them. He used to tweet about them all the time. But the best way to beat short sellers is to continue, I guess increasing the value of the stock, which know Tesla has done over the years and There's just like a sort of memification of this whole thing. L this is not just a hype stock, but a meme stock in some ways. and you know that's what happens when you have a celebrity CEO like this running a company That sounds really interesting to me because the O sales aret falling. you know, product is not as successful as it once was. In many cases, the products are old, but Model S and Model X are being discontinued because they're so old and he doesn't want to spend money updating them Now he's promising robotics and robot taxis a bunch of other things that may never come to pass Is he going to be able to pull the same move with SpaceX justust continually promise something bigger to come in the future that changes the value dynamic of the company. He sort of is right now as we as we speak, you know he what happened at the beginning of this year? Well, SpaceX was going along its way. It was a launch business with rockets that have South landing capabilities and a really good business in Starlink And what did he do? He combined it with XAI and said, actuallyually, you know what we're going to do, we're going to put Data centers in a space, and this is the future I o, by the way, we're going to put a factory on Mars to build these satellites to launch into space And then we'll get to the Mars colony. You know, these are goals that have come up within the last year. He didn't talk about these things previously. And so in the same way at Tesla where he has completely pivoted the company towards robots and And you know, the human whatever things You're getting the same kind of effect at SpaceX where he's just selling people on a completely different bill of goods. I think its just it's just so interesting. I look at some of the contradictions he's made over the years. There's a tweet of his that he put up probably a year ago where he said the moon doesn't matter You know, we're not focused on when we're focused on Mars And then you go back and you look at the IPO documents and what he said. More recently in the last couple of months and now they're all in on the moon m and that's because, you know, NASA has put a renewed focus on the moon and there's money there. If you're Go off of what Elon says, you know, it's kind of whichever way the wind blows at this point and thus far that's worked for him. peopleeople are willing to go with him and believe in him. We have taken a short break here, we'll be back in just a minute Support for the show comes from Svice Now. AI was supposed to handle the parts of the job you hate. Instead, it just describes them, suggests what to do about them, and then leaves you to do it That's not help. That's homework ServiceNow's AI specialists are different. They're not a tool. Think of them as digital teammates who actually do the work fromom start to finish Cases get resolved, requests get processed, loops get closed, and most importantly, no extra work for you Because when you can truly delegate to AI, you can get back to the work only you can do. The work that requires a person with ideas and judgment And you know Pse To learn how to put AI to work for people, visit service now d. com Support for the show comes from Odu. Running a business is hard enough, so why make it harder? with a dozen different apps that don't talk to each other Introducing Odu It's the only business software you'll ever need. It's an all in one fully integrated platform that makes your work easier. CRM, accounting, inventory, e commerce and more And the best part, Odu replaces multiple expensive platforms for a fraction of the cost That's why over thousands of businesses have made the switch. So why not you Try Odoo for free at odoo. com. That's O d oo d. com Recommendations can be amazing I mean, maybe someone recommended that TV show you've been obsessed with lately But when it comes to home projects, it's different. If you don't like a show, you might lose a few minutes. If you hire a friend, of a friend, of a friend to fix a leaky ceiling, you could end up with a flooded kitchen Maybe I know a guy just isn't enough for your home That's why thumbtack works so well They'll match you with a top rated local proro, and you can see photos of past work, credentials, and reviews all right in the app For your next home project, try Thumb tack Hire the right pro today New York Timesech reporter Brian M For the break, we're discussing all of the relevant factors swirling around the SpaceX IPO. f course the Elon of it all But now I wantan to dig into the actual financials of the business to get a realistic idea of what this company actually is So here we are, a half hour into a conversation with the SpaceX IPO, and we're gonna talk about the fundamentals of the SpaceX business BeCcauseuse that's about where it ranks, right? It's like the fifteenth thing on the priority list when you talk about the SpaceX IPO is the fundamentals of the business As you've said several times now, Starlink is the only profitable part of this business. It generated eleven point three nine billion do in revenue last year. It goes up and down. Everything else is a gigantic money loser The AI division had a deficit of six point three five billion do The NASA contracts for launch lost six hundred fifty seven million Everything else is losing money and then Starlink is the business that's growing and generating actual profits I look at that, I think, boy, I've covered the broadband industry for a long time here at the Vverge. AT and T and Verizon are not the world's sexiest businesses. They're not throwing out so much margin. that you can lose six billion dollars on AI for the rest of your life How does that work? Is it Is there more starling to be had? Are We're going to ri up all the fiber in the world get satellites? How do you generate enough money with Starling to pay for all of this other stuff I believe SpaceX thinks Starlink can continue to grow. There are a lot of markets that hasn't tapped yet. I think of something like India, for example, where the company is heavily courting , the Modi government there to allow them to operate in a country with one point five billion people And there are markets like that that it can access and continue to grow that roughly ten million, I think, monthly active user base step back on that just for one second. Yeah. You know, the Indian market is very complicated, but it is very well served by its own telecoms providers Like Reliance Sheo is the winner in the Indian market and A huge number of people just have a cell phone as their primary connectivity device. And they're doing and it's dirt cheap Even if you're excited about putting Starlink in that market How do you compete against that? Is it possible have they laid out the case? They have not And you can also argue that the revenue per user there is not going to be the same as it would be in the US or wherever else. But Um Yeah, they've made the argument that As long as it continues to grow, it's a good thing. They'll continue to launch more satellites into space with these things and cover the world essentially Um, Gwen Shotwell, the CEO gave a presentation at Mobile World Congress earlier this year where she, you know basically put out like a a hit on all these big telecoms and Online, she's compared herself or compared SpaceX, you know, the David versus the Goliath, which is kind of a convenient. narrative where you have a one point two five one point two five trillion dollars David going against these supposed gooliaths here I mean, I mean, I guess that's the bull case for Starlink, right Um But if you look at the other fundamentals of this is like The spending on AI is quite nuts. L it's losing so much money on AI development, we haven't even talked about massive amount has to pay for cursor. Um, whichich is like a what sixty billion dollars deal. You asked earlier, like what are people investing in here They're investing in promise. There's no fundamentals here. Like we can talk So we're blue in the face about profits and revenues and growth, but like at the end of the day, most investors are betting on Elon's words and his ability to sell them on this idea of putting data centers into space or getting people to Mars. The AI piece is fascinating. They're estimating that twenty two point seven trillion dollars will be generated from enterprisees. I want to talk about this Tam. it's just insane Tan is a totalally addressable market. It is twenty eight trillion dollars, I think, maybe slightly more There's a great line in the S one, which is like it's something like This is the largest TAM ever in human history. And I'm like Cool L show me how you got there. And it's like it's kind of just like, trust me, bro. you know, it's like, you know, we got this. like we do the numbers and it's yeah, twenty three trillion dollars in AI three billion in rocket launches and sorry, trillion, not billion mix those up all the time. But I don't know where the fundamentals are for that. Like what are they basing that on? It's it's it's sure it's in their S one. But it's a lot of trust me at this point. The case for this is going to be a great IPO because SpaceX figured out the Falcon nine and Rocket reusability, and they essentially have a monopoly on launch services in the United States. A at least until Jeff Bezos and Blue Origin figure out whatever they're going to figure out. That's a pretty good case. I can see that case. Starlink is a growing business. we are essentially the default government contractor for a very important mission, both in national security and telecom and everything else that we satellites for. I see all of that Why add on tootally illusory enterprise AI twenty two point seven trillion dollars TAam. when you're up against open AI, andanthropic in Google And Elon has admitted very publicly that XAI was quote, not built correctly and needs to be totally rebuilt And we're selling compute capacity to anthropic on the sideite I think that TAM says everything, right? that shows where they think the addressable market is, which is an AI And all the hype right now is around AI, which you know, open AI anthropic and both are expected to go public or at least files to go public, know anthropic did today Um And so I think Elon saw that. and If you had just takeaken the old SpaceX business public. What does that look like? That's the launch business And that's Starlink. That's a solid business, right? Is it a one point two five, one point five trillion dollar business No But if you layer on all these promises of, actually, you know, we control getting things into space. so we're going to control getting data centers in a space And we're going to own all the data centers in space and everyone's going to have to rely on us to power you know, the future of the American economy That's a much more I guess bullish proposition and a much more valuable proposition and one that you can raise a lot more money on And I think Elon sees this as kind of a singular opportunity to raise money. We're talking about fifty to seventy five billion dollars in and cash raise, you know, that's outstrips the current largest IPO which is Saudi Aramco A couple of years ago, that raised about thirty billion dollars And so if you layer A on top of that, you get you know, a lot of this hype that he can sell into and Um, you know, raise all that cash What does he want to do with that cash Of course get people to Mars, you know That's obviously you know, off course, you know, easy. Once you have fifty billion dollars, you can land a million people on Mars. And yeah, I mean's You know, these are expensive propositions. Building Starship is an expensive proposition You know building data centers on on on eararth is an expensive proposition, buying up all those all that compute. Um buying up talent Bying company is like cursor So he needs that cash to do all those things and continue, you know building up Musk Inck. Yeah, it's not like they're going to sit on this cash pile for a long time. Yeah, it occurs to me that Elon does not enjoy normal rich guy activities. Like he's not buying boats He doesn't have a fleet of cars. He does have a lot of children. They're expensive. I've got two. They seem very expensive. I could use fifty billion dollars just for that. The AI piece of it is confusing to me becausecause it doesn't seem like there's evidence that Elon's AI efforts are competitive Right. Right. They're competitive in the fact that Grock has distribution at X And I think a lot of these companies would love to have distribution that way Right? Like the fact that X users can just talk to Grok whenever they want to do some unsavory things, but they still have distribution, right? It's just there in a way that the next claw does not have that distribution. But anthropic is ahead in coding, right? Anthropic is ahead in a lot of places. Opening has Mindshare Google has distribution in every way it can possibly have distribution. It's going to power the next version of Siri for Apple How do you win? How do you raise all this money and say we're going to have a twenty two trillion dollar enterprise service market When no one in AI thinks youre you're even close to the lead right. Can you just buy the talent I think XAI is clearly behind in the model war. I saw this great tweet the other day that know if Claude is Coca Cola and opening eye is Pepsi than like grock is like the RC Cola, you know, it's I knew you were going to say RC Cola and I was pre offended we R. Are you in RC I could go with I go with Fago too for for the Juggalos out there And you know, I'm sure there's a lot of Jugggalos that like using Rck, but, you know, it's like the fourth or fifth or sixth best model or at least in terms of popularity. And so can you build a business around that? Can that business be worth trillions of dollars? Probably not. There has been a ad mission from Elon that, you know, it hasn't gone as well. You mentioned how he said the company was a built right you look at the cursor acquisition as, you know, they're trying to pay to get back in the game You also look at this very interesting deal that the company has with Anthropic to rent out its compute to anthropic of one of its main data centers that are built in Tennessee. Colossus has two data centers Colossus one and Colossus two It has since rented out one of these too anthropic. in a one point two five billion dollar a month deal. you know, Anthropic is paying that much to get access to that compute And so you probably argue that if Everything was going swell at Rock and at XAI that they'd be using all that compute to you know, push their own models and help their own customers. But in this case, it's become sort of an AWS type service where it's running out its space and You know, that's a good business, you know, I'm not going to deny that, but it's not what that thing was built for in the first place. Is there a way back for them to lead at the frontier? Is itre we going to raise fifty billion dollars and maybe we'll just hire everybody from openp AI? Potentially. I mean and if you look at some of the comments last week from Elon on Twitter where he or sorry on X where push back on the idea that anthropic to would be, you know for the next three years. He said, we reserve the right to take some of that compute back you know, he's suggesting, you know, maybe the models get their models get good again to the point where they'll need that that compute. So you know, I think he changes with the wind. and I think His business plan changes with the wind. We've seen that in the last six months to a year, you know, these completely new businesses coming out of nowhere And so I don't think there's ever like a never or a never again for Elon Um And I guess he reserves the right to return to that at some point. So I want to end where we started, which is twenty twenty two, Ky buys. Twter he renam itX.'s famously the everything happened. We we're all doing our payments and they're all doing. You wrote a lot about it. You wrote a whole book about it made the prediction that Bying Twitter would trash his reputation and maybe harm his companies. Here we are in the cusp of what might be one of the biggest IPOs in history And it seems like in order to make it work, All of the rules of the game have had to be changed or rigged to favor you