Musk: I tend to approach things from a physics framework. And physics teaches you to reason from first principles rather than by analogy. So I said, OK, let’s look at the first principles. What is a rocket made of? Aerospace-grade aluminum alloys, plus some titanium, copper, and carbon fiber. And then I asked, what is the value of those materials on the commodity market? It turned out that the materials cost of a rocket was around 2 percent of the typical price—which is a crazy ratio for a large mechanical product.

Anderson: How does that compare to, say, cars?

Musk: It depends on the car. For Tesla it’s probably 20 to 25 percent.

Anderson: An order-of-magnitude difference.

Musk: Right. So, I thought, we should be able to make a much cheaper rocket given those materials costs. There must be some pretty silly things going on in the market. And there are!

Anderson: Like what?

Musk: One is the incredible aversion to risk within big aerospace firms. Even if better technology is available, they’re still using legacy components, often ones that were developed in the 1960s.

Anderson: I’ve heard that the attitude is essentially that you can’t fly a component that hasn’t already flown.

Musk: Right, which is obviously a catch-22, right? There should be a Groucho Marx joke about that. So, yeah, there’s a tremendous bias against taking risks. Everyone is trying to optimize their ass-covering.