#147. Welcome to Elon’s World

December 30, 2024; 15 min read

[The position of the satellites in the Starlink constellation, as of 12//25/24]

The world’s richest person (Elon Musk) and the world’s soon-to-be most powerful person (Donald Trump) are best buddies, with all of the resonating overtones of American exceptionalism, robber baron technocracy, and “all power corrupts” conspiracy theory. The difference is that in four years, Donald Trump will be stepping down from the ‘most powerful’ position, but Elon will still be the richest and one of the world’s most powerful, because he isn’t shy about projecting the power inherent in his wealth.

This is notable because of what it says about the power balance — Trump has historically had the upper hand in almost all of his relationships, where the phrase “I serve at the pleasure of the President” reinforced the idea that he could pluck you from the fringe, put you in a position of power, and then routinely deport people like Anthony Scaramucci to a land of obscurity just as quickly. So Donnie will have to be much more measured when dealing with Elon compared to the Rex Tillersons, because Elon will have power long after Trump steps down. The power balance at the moment might be on similar footing now, but in time it will become unequal, and Donnie will want to be on Elon’s good side.

My objective in this issue is not to discuss politics, always a contentious topic, but to delve into the world of Elon a little, including his companies, and his purported ambitions, which extend far beyond the United States.

Tesla: commercializing EVs

While I think Tesla, 13% owned by Elon, was instrumental in creating a paradigm shift in the auto industry (and succeeded as a disrupter where GM could not, ideologically, as an incumbent), it may have a more complicated future as it wrestles with its identity as a pure EV company. As detailed in my issue on EREVs (Extended Range EVs), consumers need to make very few compromises with EREVs, which makes them far more adoptable and far more impactful, potentially, to reducing the carbon footprint of personal transportation overall. I do not think Tesla will adopt EREVs for philosophical reasons until it is too late; the EREV sales trends in China show there is a clear preference for EREVs over pure EVs, even in places where full charging networks have been built out. Even as batteries evolve, enabling longer ranges and lower weight, charging infrastructure will remain an issue for all of the emerging world.

That said, Tesla was instrumental in getting the chassis rolling, but even in pure EVs, where there are really only three important components: they have a (narrowing) lead on the software, but are unlikely to ever challenge the Chinese for economies of scale around the other two areas of primary value in an EV: batteries and motors. Although much of this advantage is due to Chinese government support and subsidies, it is also clear that BYD is gaining global scale faster than Tesla, and is dominating Tesla in the markets where they compete head to head. As the upside to entrepreneurial enterprises wanes sharply in China, this model of government-supported economy of scale dominant global player will become the primary industrial strategy for the Middle Kingdom.

X/Twitter

Wealthy people buying media franchises (Jeff Bezos — Washington Post, Marc Benioff — Time Magazine, Laurene Powell Jobs — The Atlantic (!), and many others) is not new, but in my mind they have tended to be less about turning around a money-losing franchise in a digitally disrupted business area, and more about preserving a symbol of public service (while ideally bringing it back to sustainability).

Elon’s purchase of Twitter appeared to have two primary drivers — to realign the left-leaning, bot-filled platform, and to streamline the business for greater efficiency.

Although Twitter/X feels less influential than it once was (reputationally it has suffered; and BlueSky / Truth Social have eaten somewhat into Twitter share), it is important globally even if it doesn’t dominate in the US, and that probably makes it more interesting for Elon, whose ambitions clearly are not restricted to the projection of power in America. Elon only holds 9% of X Holdings, the parent company, with some fellow billionaire buddies (among them: Ackman, Benioff, Andreesen; plus the troubled Sean “Diddy” Combs).

In one proposal which underlines the various solutions that a network of wealth enables, Elon has apparently granted his underwater Twitter backers with 25% of the equity in his fast rising x.ai artificial intelligence startup; those shares are valued at roughly $12.5bn. Normal entrepreneurs would not have access to these behind the scenes windfalls, and therefore Elon has the ability and willingness to play the game at a Meta level (sorry).

SpaceX/Starlink

I’ve been writing more about technical revolutions (AI, EREVs) lately – so many important technical landscapes seem to be undergoing paradigm shifts in real time, that I find myself jumping down rabbit holes with increasing frequency, and finding Elon running ahead of the pack on many of these shifts. Originally I was going to write the entire article about SpaceX/Starlink, but I felt the wider subject of Elon was more important. Musk owns approximately 42% of SpaceX, the largest ownership stake of any of his major companies, which is starting to rival his stake in Tesla as the largest component of his assets. Within SpaceX, the commercial launch business, which can stand on its own, is the enabler (and moat) for other attractive businesses like Starlink and Starshield (the government/military version of Starlink).

First, there were pigeons

Humans have always had a need to communicate over distance; the Romans use of messenger pigeons was probably the first reliable way to relay complex messages (therefore I have skipped over low complexity colored smoke signals). The invention of the telegraph in the 1830s was probably a great relief for the exhausted pigeon population; long distance networks and communications exploded. The telephone followed in the 1870s, radio in the 1890s, television after WWII, and the Internet in the 80s. The transmission medium of the Internet has shifted from all wires (telegraph to broadband) to a mix of wired and wireless (radio, television, modern phones). And practically speaking, almost all Internet traffic involves some kind of wired connection (cell phones communicate with cell towers, which have wired backbones).

The idea of using satellites to communicate has been around since the 1960s, but has typically been associated with expensive low-bandwidth high latency services for niche markets (kind of like the early cell phone bricks). But over the last five years, high speed satellite-based communications networks have become a reality because of SpaceX’s Starlink system, facilitated by SpaceX’s material improvements in launch costs and domination of moving mass into low-earth orbits (LEO).

The current Starlink satellite constellation operates at an altitude of about 342 miles, 64 times lower than the geosynchronous satellites which made up the first generation of communication satellites, which operate at an altitude of 22,000 miles. Whereas by definition geosynchronous satellites appear to hover over the same place on earth because their speed matches the earth’s rotation (and therefore a single high orbit satellite can constantly cover a relatively wide area, albeit with high latencies), LEO satellites require constellations of satellites to provide continuous coverage to any part of the earth, and by the nature of the constellation, can cover the entire earth (excepting the poles), with low latencies.

Although the Starlink coverage map shows they aren’t licensed to provide service in every country, a map of the Starlink constellation of satellites shows that they already cover the entire (non-polar) earth. This implies that to ‘turn on’ service to a country would be relatively trivial, because their constellation already covers the globe, compared to the difficulty and tremendous incremental expense of installing cell towers (for traditional mobile), or fixed lines, across an entire country.

Aircraft connectivity

The average consumer doesn’t have any experience with Starlink, but this will change in 2025. A number of major airlines (United, Air France, Qatar, Hawaiian, JSX, et al) have contracted with Starlink to provide unlimited WiFi to their fleets, so this should materially change the traditional image of unreliable slow in-air WiFi to an experience of feeling just as connected as on the ground. Because of the Starlink stipulation that the airlines offer unlimited high speed WiFi to all their airline passengers for free, this will become the de facto standard, and other airlines will have no option other than to beg Starlink to provide them the same service (although likely not at the same price as the early adopters). Since Starlink promises a gate-to-gate experience, those arbitrary rules about turning off your transmitting devices during takeoff and landing will probably go away.

Direct to cell

In addition to near ubiquitous in-flight WiFi, Starlink has signed with T-Mobile, KDDI, and others to offer satellite service for their customers, on a direct-to-cell basis, i.e. no need for a specialized antenna. Starlink will be exclusive to these partners for one year, and then they plan to open up the service to other carriers, because that first year should prove that LEO satellite connectivity is an important differentiator with customers (and highly revenue generative). Although full details are not available yet, the emphasis appears to be on coverage to otherwise uncovered or spotty areas; my selfish wish is much more for global roaming, where they are theoretically able to offer exactly the same high speed connectivity no matter where the T-Mobile customer happens to be, thereby avoiding roaming or foreign data charges. A premium worldwide solution would highly suit the road warrior class, while also conveniently circumventing country-specific constraints in places where the governments are paranoid about content.

Starlink currently generates about $6-7bn of revenue off just over 4 mn subscribers. The jump from specialized Starlink base stations to direct-to-cell service exponentially increases Starlink’s addressable market, which is the primary reason I believe SpaceX/Starlink will easily become the next trillion dollar company (and perhaps the first one to reach that level before going public).

Competition, or rather lack of it, is a bit of an issue: Eutelsat OneWeb, which was cobbled together from a variety of incumbent telecom and distressed satellite companies, plans to work directly with existing telecom providers, and has a higher altitude (2X Starlink) constellation with about 1/10th the number of satellites (see map). Interestingly, SpaceX has been accommodative of competitors – I think the idea is let the best satellite communication technology win, rather than restrict launches to only Starlink: SpaceX recently helped OneWeb complete its constellation, after they ran into problems with Russia’s launch program. Amazon’s Project Kuiper is perhaps a more credible competitor in the long run, because of the deep pockets of their backer; although it has primarily contracted from traditional (higher cost) launch providers (United Launch Alliance, Arianespace) as well as Amazon’s own Blue Origin, it too has contracted launches with SpaceX.

The current competitive situation seems heavily skewed towards Starlink, and for that reason it is SpaceX’s longer term interest to assist competitors (who are both subscale and late to market) on the margin, lest everyone worry about the concentration of power in the hands of one person. At the same time, SpaceX’s launch capabilities enable a powerful negotiating position, horse trading for other important assets like spectrum rights.

Although Elon is primarily known for his leadership of Tesla and X, I would argue his global power comes from his position at SpaceX (which arguably benefits more from his Trump connection than his other companies), and specifically his ability to affect communications technology on Earth, through SpaceX’s economic domination of the realm of space.

Continuous improvement

Elon’s engineering mindset, both in terms of rethinking issues from first principles, and then applying pressure for continuous improvement, has resulted in very positive outcomes. Even discounting the magical feat of recovering booster stages, the results of this mindset can be seen just in the external appearance of the Raptor engines (1 to 3, above). To be sure, there is a lot of complicated engineering contained inside the engine itself, but I like this as a metaphor for what this addiction to improvement can produce over the long run. The Raptor 3 engine, the base engine for the SpaceX Starship reusable super heavy lift launch program, is both more powerful and far lighter than its precedents; I’m excited to see far SpaceX can take this.

Political Elon and the power surge dilemma

Elon has decided to venture into politics from the fringes, for the moment at least, and that makes many people rather nervous. Not only in terms of spending considerable time mentoring the titanic intellect of the US President-in-waiting, he has picked sides and taken positions in Brazil and Ukraine, and the three largest pillars of his business empire (Tesla, Twitter/X, SpaceX) literally span the globe, meaning his influence comes with business leverage as opposed to celebrity / influencer types who might be well-liked or respected, but have little actual leverage.

At the same time, there are issues around potential ethical conflicts – although he is currently an advisor without a portfolio or even an official title, he is routinely included in high level discussions and US affairs of state where he has a variety of consequential interests. Within the Republican party, he appears to have won an initial round against the MAGA faithful in regards to H1-B visas, which could theoretically benefit his companies. His outreach to world leaders preceded his accession to the position of Trump Bestie, so it’s probably fair to say his interests are concentrated on, but not restricted to, the United States.

Although he is currently the richest person in the world, I am probably not alone in thinking that, unlike some people on the Forbes list who dispute their position, he doesn’t obsess about where he ranks. That said, I do think he probably spends considerable energy thinking about how best to leverage his considerable wealth in pursuit of the future he sees, and that makes him an active dynamic wealthy person, as opposed to the passive heirs of large fortunes, frittering away their funds on frivolities.

Genius, and collateral damage

For at least a decade, thanks to my friends at Heywood Hill in London, I’ve been reading along a thread around people who accomplished great things (in hindsight), but where the collateral damage was acceptable (also in hindsight).

For me, perhaps the quintessential example is Otto von Bismarck, who used his relationship with Kaiser Wilhelm I to unify what we know now as modern Germany (and end the seemingly never-ending squabbling of the states that preceded modern Germany), while rubbing many people completely the wrong way.

In a different realm, the reason Paris has a dramatically different aesthetic, and uniquely long vistas, is largely the vision of Baron Haussmann, who was selected by Victor Persigny, Napoleon III’s Minister of the Interior. Recalling their interview:

“It was Monsieur Haussmann who impressed me the most. It was a strange thing, but it was less his talents and his remarkable intelligence that appealed to me, but the defects in his character. I had in front of me one of the most extraordinary men of our time; big, strong, vigorous, energetic, and at the same time clever and devious, with a spirit full of resources.

[…]

Whereas a gentleman of the most elevated spirit, cleverness, with the most straight and noble character, would inevitably fail, this vigorous athlete ... full of audacity and skill, capable of opposing expedients with better expedients, traps with more clever traps, would certainly succeed. I told him about the Paris works and offered to put him in charge.”

In the moment, the various schemes, misdirections, and tactics can seem objectionable to the incumbents; over time, the longer term benefit either becomes apparent or it does not – it becomes a ‘do the ends justify the means’ debate. Of course this same mindset can be used to justify / rationalize silly initiatives as well; but my higher order point is that there is a natural frisson around long term radical change (EVs, LEO satellite communications, computer-brain linkages) and the current norms and incumbents; they are battles which can really only be judged in the long run (unless your perspective is as a victim of the short term negatives). Real progress is rarely served by consensus thinking and marginal improvements to incumbent paradigms, it takes a broader mindset and a risk-taking mentality to go against convention to propose and implement superior solutions; over time, the collateral damage is then viewed as acceptable, depending on what the benefits have been.

Final notes

Of all the modern day multi-faceted entrepreneurs, Elon stands largely alone – historically, I suppose Steve Jobs, someone who is now known primarily for his vision rather than his somewhat unfortunate management methods, would have represented useful competition in terms of changing the world in a variety of ways, and seeing the future as far more malleable than ordinary humans.

I would argue that Elon’s impact, much like Steve’s, has been wider than the explicit industries he has created – having recently visited the El Segundo / Hawthorne area where SpaceX has one of its bases, it was thrilling to see a wide variety of deep tech companies bubble up all over. I think we may be in the early stages of a Silicon Valley-like flywheel in Southern California, where SpaceX plays the Ebay/Paypal role, encouraging generations of engineers, financiers, and managers to attempt to reach for places previously thought to be unexplorable – by methodically breaking down seemingly impossible goals into a discrete stream of eminently solvable components, and in the process, finding ourselves in places we never thought we might ever be.

That is not to say Elon is a Mother Teresa character, or that I condone all his actions. But since I am philosophically inclined towards greater good arguments, I think his revolutionary accomplishments so far, especially the sheer range of areas where he has applied himself and taken personally irresponsible amounts of risk, mean that he should be given a far wider berth when examining his weak points. Plus, I’m very excited about the prospect of nearly ubiquitous Starlink service, which seemed like an impossibility until now.