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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.

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Speaker 3: I'm Joe Wisenthal and I'm Tracy Alloway.

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Speaker 4: Tracy, I have to say.

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Speaker 2: If I had any friend who I would have guessed

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Speaker 2: would have ever been on a Concord, it would have

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Speaker 2: been you.

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Speaker 3: Oh is that a nice thing to say?

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Speaker 2: You're international, You've been all around the world, sophisticated traveler

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Speaker 2: like I would have guessed that maybe at some point

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Speaker 2: when it still flew, that.

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Speaker 4: Maybe you would have flown aboard the Concord jet.

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Speaker 3: I mean, I would have been in middle school or

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Speaker 3: high school flying on the Concord, which would have been

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Speaker 3: quite an experience, I imagine. Let's see, so it stopped

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Speaker 3: flying in the early two thousands.

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Speaker 4: Yeah, right, I guess that was a long time ago.

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Speaker 3: Yeah, but of course it has this massive legacy. And

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Speaker 3: when people think of the Concord, they think of luxury

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Speaker 3: aeror travel, and I guess advanced technology too. And it's

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Speaker 3: kind of crazy to think that this plane, a supersonic plane,

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Speaker 3: started flying in I think it was the sixties or

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Speaker 3: the seventies, and now fifty years later, we don't have

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Speaker 3: any supersonic air travel commercially, at least I know there's

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Speaker 3: supersonic fire jets and things like that. Like is that weird? Well,

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Speaker 3: it's weird.

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Speaker 2: It's depressing too, because I think when I think of

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Speaker 2: like civil aviation in general, not only do I think

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Speaker 2: we haven't really made much progress, like we're not at

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Speaker 2: the cutting edge. We're going back right because okay, like

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Speaker 2: we're currently not building any supersonic jets are flying them.

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Speaker 2: Our capacity if you just think about the US and

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Speaker 2: you think about Boeing seems to have gotten worse over time.

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Speaker 2: So it's not just that Boeing hasn't launched new planes

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Speaker 2: in long time. It's ability to produce the existing planes

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Speaker 2: seems to have been degraded. So this is one area

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Speaker 2: where like it's not even lack of progress, it's like

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Speaker 2: literally going in reverse.

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Speaker 3: Also, every once in a while one of the budget

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Speaker 3: carriers in Europe especially will threaten to have like stand

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Speaker 3: up seating on one of their planes. It really does

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Speaker 3: feel like we're regressing.

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Speaker 4: By the way hot take.

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Speaker 2: I think for short flights I would be okay with

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Speaker 2: the stand ups.

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Speaker 4: No, yeah, I stand up on the bus. For a

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Speaker 4: long time, I stand up on the train. I could

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Speaker 4: do it for like an hour.

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Speaker 5: Yeah, I have.

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Speaker 2: Actually, But anyway, without digressing too much, So, you know,

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Speaker 2: we talk about manufacturing, we actually talked about aerospace affair amount,

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Speaker 2: but we should talk more about the people actually building

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Speaker 2: actual things, or at least aspiring to actual build things

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Speaker 2: in the United States. And what are the barriers and

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Speaker 2: why does it seem so hard?

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Speaker 3: Let's do it, especially for something like supersonic flight, which

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Speaker 3: was challenging at the best of times. I think that's

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Speaker 3: a fair way to describe it. So I'm excited to

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Speaker 3: dig into this totally.

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Speaker 2: So in early June, the White House instructed the FAA

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Speaker 2: to lift its ban on flying supersonic jets over the

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Speaker 2: United States.

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Speaker 4: I don't think the band.

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Speaker 2: Has been lifted yet, but it's been destructed to And

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Speaker 2: then the question is anyone they're actually going to be

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Speaker 2: new supersonic jets. Well, this actually matter because right now

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Speaker 2: none are flying anyway. There are companies that are trying,

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Speaker 2: and one of the companies that is trying to build

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Speaker 2: a commercial supersonic jet is Boom Supersonic, and I'm thrilled

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Speaker 2: to say we have its founder and CEO, Blake schul

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Speaker 2: On the podcast. They're actually trying to build a supersonic jet.

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Speaker 2: That's crazy. Welcome to the podcast.

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Speaker 5: Blake, Hey, Joe, Hey, Tracy, thank you for having me.

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Speaker 2: You think you can actually build a supersonic jet company

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Speaker 2: in America in the twenty twenties.

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Speaker 5: It seems like the answer is yes. We've built and

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Speaker 5: flown the actually the first ever civil supersonic jet made

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Speaker 5: in America. We became the first private company ever to

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Speaker 5: build and fly a supersonic jet. United Airlines, American Airlines,

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Speaker 5: Japan Airllians have signed up for the airplanes. We've got

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Speaker 5: a factory in North Carolina. There's still a lot of

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Speaker 5: work left to do, but every day that goes by,

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Speaker 5: we've got less excuses for failure.

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Speaker 3: So I have a question, which is I don't mean

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Speaker 3: this to sound insulting, but shouldn't you be an airline

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Speaker 3: rather than an aerospace manufacturer? And the reason I asked

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Speaker 3: that is because Concord famously developed by Aerospetsial and British

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Speaker 3: Aerospace and they never made money on it. They never

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Speaker 3: recouped their development costs. But BA and Air France, I

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Speaker 3: think those were the major airlines flying it at the time.

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Speaker 3: They made some money, you know, in certain years, So

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Speaker 3: what exactly makes you confident that this is going to

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Speaker 3: be a profitable enterprise for you?

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Speaker 5: Yeah. Well, I think we have to look back and say, like,

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Speaker 5: why was Concord such a disaster? And I think a

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Speaker 5: lot of the stories that are out there kind of

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Speaker 5: missed the basic truths. In nineteen sixty nine, we land

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Speaker 5: on the Moon and we flew Concord for the first time,

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Speaker 5: and at the time these were heralded as the harbingers

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Speaker 5: of great things to come of space exploration, of a

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Speaker 5: new age supercent travel. But of course now we're here

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Speaker 5: in twenty twenty five and we can't land on the

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Speaker 5: Moon and we can't fly supersonic. And I think in

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Speaker 5: many ways the deepest reason is that both of those

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Speaker 5: projects were deeply misguided. And I think Concord killed supersonic flight.

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Speaker 5: I think Apollo killed space exploration. And the proximal story

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Speaker 5: on Concord is what we were trying to do in

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Speaker 5: the West is compete with Soviet Russia, and very ironically

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Speaker 5: we did it by adopting communism and central planning, and

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Speaker 5: so we had these programs that were respect by governments

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Speaker 5: that were not thinking about market viability, and so Concord,

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Speaker 5: here's an airplane with one hundred seats on it. Mind you,

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Speaker 5: they are a hundred uncomfortable seats. You might mistake it

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Speaker 5: for Ryanair.

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Speaker 3: I thought they were plush leather seats.

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Speaker 5: They look like economy. Oh the lake room was better

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Speaker 5: than typical economy. But these were seventeen inch wide seats.

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Speaker 3: Because the actual body of the aircraft was so narrow, right.

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Speaker 5: Yeah, and they didn't I don't think they laid it

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Speaker 5: out very well. So one hundred seats not super comfortable.

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Speaker 5: You have to duck to get on the airplane. And

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Speaker 5: yet it just for inflation, and the fares are about

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Speaker 5: twenty thousand dollars. And guess what. You can't fill one

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Speaker 5: hundred seats at twenty thousand dollars a pop, especially not

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Speaker 5: with like seventies or eighties kind of travel volumes. So

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Speaker 5: the whole thing never made any sense. But that doesn't

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Speaker 5: mean you can't make a supersonic airliner. That makes sense.

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Speaker 5: It just means that Concord didn't because it was in essence,

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Speaker 5: because it was centrally planned.

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Speaker 2: Well, sorry, explain that further. Is the issue that was

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Speaker 2: centrally planned or was the issue that at seventies or

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Speaker 2: eighties tech and seventies or eighties air traffic volume, it

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Speaker 2: wasn't there to support the cause because those strikeen me

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Speaker 2: is two different things. And we'll get into the tech

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Speaker 2: of your plane. But I know there's been progress in

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Speaker 2: various fronts and seventies. Could it have been commercially viable

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Speaker 2: in the seventies or eighties when the tech theoretically existed,

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Speaker 2: because that strikes me as different than saying, oh, central planning.

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Speaker 5: I think those are two sides of the same coin.

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Speaker 5: The central planning leads to creation of things that don't

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Speaker 5: actually make any economic sense. Let me paint you a

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Speaker 5: very different history. So actually, let's start with the history

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Speaker 5: that really happened. So we had these sort of centrally

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Speaker 5: planned supersonic projects in the sixties. France and Britain got

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Speaker 5: together and did did Concord and Soviet Russia they did

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Speaker 5: the t U one forty four. People called it Concord

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Speaker 5: Ski and the US Nixon and Kennedy stood up what

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Speaker 5: was called the sst FAA Specta gave the contract to

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Speaker 5: Boeing that was going to be a three hundred seat

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Speaker 5: Mock three airplane. It made even less sense than concord,

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Speaker 5: and then the plug gets pulled on the SST. Now

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Speaker 5: it looks like Europe and Russia are moving forward with

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Speaker 5: supersonic it's not yet really obvious how doa those products are.

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Speaker 5: And then in nineteen seventy three, we did the worst

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Speaker 5: thing I think we've ever done in the history of regulation,

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Speaker 5: but as we banned supersonic flight in the US. And

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Speaker 5: what that did is basically outlaw the way this thing

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Speaker 5: should have come to market. So, if you think of

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Speaker 5: the way most technology comes to market, and cell phones,

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Speaker 5: electric cars, computers, these things typically start at relatively higher

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Speaker 5: price points for the more well to do, and then

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Speaker 5: as we scale and find efficiencies, that cost comes down.

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Speaker 5: And now our kids have cell phones. And so the

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Speaker 5: way supersonic passenger travel should have started was with a

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Speaker 5: small private jet really for the well to do and

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Speaker 5: for companies. And that airplane would have needed to carry

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Speaker 5: maybe five or ten people at a time, and it

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Speaker 5: would have only needed to fly safe from like Seattle

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Speaker 5: to Miami, kind of what's the longest sort of North

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Speaker 5: American route. You can imagine that small airplane would be

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Speaker 5: easy to make quiet. It wouldn't have mattered if it

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Speaker 5: was a bit more expensive to operate on day one,

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Speaker 5: and that would have kicked off in an iteration cycle that

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Speaker 5: would have led to bigger airplanes to airliners, and I

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Speaker 5: think had that history unfolded, we'd all be going mock

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Speaker 5: five by now. But when you ban supersonic flight over

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Speaker 5: the US, what you do is you make that product illegal,

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Speaker 5: and so we ended up freezing progress. It's an artifact

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Speaker 5: of I think, really, you know, Cold War era national

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Speaker 5: prestige politics.

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Speaker 3: So talk to us about what you're doing differently, because

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Speaker 3: I think this will maybe help solidify the point that

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Speaker 3: you're making. So for you, it sounds like the business

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Speaker 3: model is going to be more about scale and volume

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Speaker 3: versus having those high ticket prices and supposedly luxury good.

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Speaker 5: Right, everybody wants faster flights so long as they are

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Speaker 5: affordable and comfortable and safe, and airlines want them so

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Speaker 5: long as they can make money doing it, and so

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Speaker 5: the question really became, well how do you do those things?

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Speaker 5: And so we said, look, ultimately we want to do

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Speaker 5: this for everybody, but we're going to start focused on

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Speaker 5: people who'd fly first your business class today, which is

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Speaker 5: somewhere like eighty percent of international airline profits. So it's

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Speaker 5: the economically significant place to start. And so with all

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Speaker 5: the technology that's been developed since Concord, you can get

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Speaker 5: the fares down by about three quarters. So I think

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Speaker 5: more like a five thousand dollars business class fair, not

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Speaker 5: a twenty thousand dollars kind of bucket list item. And

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Speaker 5: then we put well, how many seats would the airplane have? Well,

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Speaker 5: should have as many as airlines can fill, so about

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Speaker 5: as many as you find in business class today. So

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Speaker 5: this is a sixty to eighty seat airplane. I think

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Speaker 5: the sweet spot's really going to be right around sixty

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Speaker 5: four sixty four really nice seats, the range and the

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Speaker 5: economics to make it work on hundreds of routes. And

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Speaker 5: so we started out thinking, let's assume that the regulation

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Speaker 5: is not going to change. Let's focus on an airplane

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Speaker 5: that can fly transoceanic on the routes that are the

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Speaker 5: most painful today. Let's find our foothold market there, and

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Speaker 5: then ultimately we'll find a way to conquer sonic boom

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Speaker 5: and expand the market to transcon as well. And it

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Speaker 5: turned out that actually happened much faster than we thought

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Speaker 5: it would.

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Speaker 3: As a former transfer two reporter. When I hear someone

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Speaker 3: talk about business class only flights, I think about this

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Speaker 3: sort of perpetual crop of companies that have attempted to

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Speaker 3: do that over the years, and silver Jet springs to mind. Joe.

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Speaker 3: I have to tell you a really funny story about

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Speaker 3: Silverjet later on. But you know, I think back to

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Speaker 3: those Most of them, the vast majority of them are

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Speaker 3: unsuccessful because you know, it turns out they still have

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Speaker 3: high operating costs, and the airlines can't They can't raise

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Speaker 3: the tickets enough to offset those What are you doing

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Speaker 3: on the operating costs side to make this model actually work?

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Speaker 5: So I have a slightly different point of view and

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Speaker 5: why the all business class airlines have mostly failed. Okay,

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Speaker 5: so first off, let's start why they're attractive. All the

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Speaker 5: money is in business class, So why not buy smaller

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Speaker 5: or cheaper airplanes, put business class in them, only be

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Speaker 5: able to lower the fairs and still roll in money.

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Speaker 5: It sounds like a great business plan, but the problem

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Speaker 5: is it's really start with the profit story, not starting

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Speaker 5: with the customer story, and the passengers by and large

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Speaker 5: don't care whether there's an economy cabin on the airplane.

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Speaker 5: What a passengers care about well they care about are

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Speaker 5: the flight times convenient? Can they use their frequent flyer miles?

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Speaker 5: Do they get the benefits of their status? Is it

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Speaker 5: easy to connect? The all business class airlines had no

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Speaker 5: advantage in the eyes of the passengers, and they had

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Speaker 5: lots of disadvantages. So the business plan didn't actually work

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Speaker 5: for that reason. Now if you bring it to supersonic,

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Speaker 5: now there's a reason for the passengers to prefer the airplane.

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Speaker 5: They can get there in half the time. And moreover,

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Speaker 5: you deploy these in the context of today's international airlines.

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Speaker 5: So United ordered, Americans ordered, it's going to fit in

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Speaker 5: their root network. You'll be able to connect, you'll be

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Speaker 5: able to benefit from your status. And so if you

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Speaker 5: put an all business class supersonic jet and you put

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Speaker 5: it into an existing airline network, it makes sense fundamentally

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Speaker 5: because it makes sense for passengers.

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Speaker 2: Before we move, you've been around for like a decade,

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Speaker 2: So why do you bring us up to speed? How

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Speaker 2: much money have you raised, where are you at within development?

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Speaker 2: And how much more money and time are you going

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Speaker 2: to need before you have a plane that's regularly coming

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Speaker 2: out of your factories.

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Speaker 5: Yes, we've been around for almost eleven years now, we

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Speaker 5: have raised bit over six hundred million dollars. And one

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Speaker 5: of the things I'm really proud of is the capital

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Speaker 5: efficiency story. We did the XB one airplane for less

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Speaker 5: than two hundred million dollars, including the airplane, including the

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Speaker 5: flight test program. And to put that in sort of

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Speaker 5: industry context, the closest comparison is the NASA X fifty nine,

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Speaker 5: And you know, we basically did everything that that thing

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Speaker 5: set out to do, did it faster, and that thing

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Speaker 5: hasn't even flown yet. I think we're going to come

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Speaker 5: out somewhere around six x more capital efficient versus legacy approaches.

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Speaker 5: And so some people look at this and they say, well,

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Speaker 5: she's Boeing takes ten billion dollars plus to develop new airplanes.

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Speaker 5: This seems financially infeasible, and I think that. I think

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Speaker 5: it's true if it's going to take you ten billion dollars,

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Speaker 5: but it doesn't need to take anywhere close to that

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Speaker 5: amount of money. I think new entrants and SpaceX I

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Speaker 5: think prove this by running circles around YLA and Locket

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Speaker 5: and Boeing, and I think we're in the process of

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Speaker 5: demostrating the same thing, we can be at least five x,

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Speaker 5: maybe ten x more capitally efficient, and so suddenly this

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Speaker 5: is a very very reasonable financial proposition.

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Speaker 4: Tell George, though, all right, where are you now?

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Speaker 2: And then getting to okay, we wake up in just

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Speaker 2: dear twenty thirty five. What did it take in terms

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Speaker 2: of money and time to get to where you have

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Speaker 2: planes rolling out of the gates?

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Speaker 4: How much more money? How much more time?

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Speaker 5: Yeah, I think it's going to be between one and

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Speaker 5: three billion to kind of get this all done. I'd

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Speaker 5: like to see it come out closer to one, could

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Speaker 5: be three to give you a sense of kind of

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Speaker 5: where we are today. So we've proven all the technology

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Speaker 5: is there, We've proven the airlines want it. I think

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Speaker 5: it's obvious that passengers want it. We've got a factory

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Speaker 5: in North Carolina. The next thing we're actually doing is

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Speaker 5: scaling up our engine technology. So you'll see the first

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Speaker 5: engine come together around the end of this year. And

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Speaker 5: then the next thing is we're scaling up the airplane

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Speaker 5: from our XB one prototype to the Overture Airline or

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Speaker 5: you'll see the first one starting the built next year.

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Speaker 5: And so our goal is to be ready to carry

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Speaker 5: passengers by the end of twenty nine, and I think

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Speaker 5: when that happens, in some ways, the most interesting story

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Speaker 5: will be how small the team was that did it,

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Speaker 5: and what a tiny amount of money it took compared

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Speaker 5: to what the big guys spend.

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Speaker 3: You mentioned the engines just then, and I wanted to

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Speaker 3: ask you about those. So you're developing your own engines.

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Speaker 3: I think they're called Symphony, and that seems like a

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Speaker 3: pretty big challenge to build an aircraft engine from scratch.

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Speaker 3: But on the other hand, you could see why the

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Speaker 3: engines would be a very key part of making the

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Speaker 3: plane actually economic and efficient, because I think that was

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Speaker 3: always one of the problems with Concord, the engines weren't

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Speaker 3: that fuel efficient. Why did you decide to go down

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Speaker 3: that route? And what has the actual development and manufacturing

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Speaker 3: experience been like so far?

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Speaker 5: Yeah, I mean, so we looked at using one of

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Speaker 5: the existing engine providers for it. There was no off

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Speaker 5: the shelf engine that would be a fit, and the

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Speaker 5: big engine players were at most willing to kind of

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Speaker 5: take a subsonic engine and shoehorn it, and that turned

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Speaker 5: out to be both extremely expensive and super inefficient, and

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Speaker 5: then we wouldn't end up with a custom engine that

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Speaker 5: actually fit what we needed. And so what we found

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Speaker 5: was that by building an engine ourselves, just the way

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Speaker 5: SpaceX does by the way, we could get a fully

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Speaker 5: custom engine much faster and much cheaper than any other approach.

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Speaker 5: So you were seeing about a four x reduction and

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Speaker 5: cost relative to what the big guys quoted us. And

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Speaker 5: then we end up in an engine that is optimized

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Speaker 5: together with the airplane, and that makes a big difference,

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Speaker 5: not just in fuel efficiency but in capability. So we

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Speaker 5: demonstrated boomless crews on XB one and that's a capability

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Speaker 5: that would not have been possible on overture if we

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Speaker 5: weren't doing our own engines.

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Speaker 3: If you're doing boomless supersonic flights, do you have to

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Speaker 3: change the name of the company boom to boomless.

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Speaker 5: We're gonna delete the boom, or we're just gonna call

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Speaker 5: the company supersonic.

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Speaker 4: I like that.

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Speaker 2: That's a nice thing. Actually, can you give us a

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Speaker 2: theory of the firm? So you mentioned that you know

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Speaker 2: SpaceX is done accomplished things at a fraction of the

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Speaker 2: cost of what it would be at some of the legacies,

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Speaker 2: and your ability to at least get one plane out

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Speaker 2: the door and in the air is cheaper than there

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Speaker 2: was in Nassa. There are a lot of sort of

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Speaker 2: hard tech industrial tech two point zero type companies that

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Speaker 2: are emerging these days with this idea seemingly that you know,

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Speaker 2: a lot of big industrial operations if you started over

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Speaker 2: from today, could be much simpler or at least much cheaper.

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Speaker 2: What is it that you all have in common such

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Speaker 2: that you think that these really advanced products starting over

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Speaker 2: without this big organization. What do you do that just

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Speaker 2: in your view so much cheaper and faster and more

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Speaker 2: efficient than the legacy industrial players.

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Speaker 5: There's a lot of things that go together into it.

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Speaker 5: Part of it is the power of small elite teams.

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Speaker 5: This is, you know, I think the most exciting thing

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Speaker 5: happening in aviation. So we get our pick of the

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Speaker 5: best engineers. And that the best engineers aren't like ten

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Speaker 5: or twenty percent better, they're like ten times better than

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Speaker 5: the average engineer. So we start with a small number

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Speaker 5: of highly talented engineers, we leverage them up with software.

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Speaker 5: So a lot of what we do at BOOM is

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Speaker 5: trying to fare out to make hardware developments look more

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Speaker 5: like software development, and that means reducing the cost of iteration,

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Speaker 5: both in time and money. And so that's that's software

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Speaker 5: design tools, it's extensive use of AI, and it's also

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Speaker 5: vertical integration to reduce cost of making parts and importantly

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Speaker 5: the time required to iterate on hardware. So if you

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Speaker 5: focus a lot of your energy on reducing cost of iteration,

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Speaker 5: what you find is that cost collapse in the pace

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Speaker 5: of progress just skyrockets.

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Speaker 2: Can you actually see more about vertical integration when we

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Speaker 2: do episodes about some of the Chinese manufacturing juggernauts state

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Speaker 2: of over the last several years. This is a recurring

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Speaker 2: theme and I'm interested in what the advantages are, but

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Speaker 2: also specifically like the challenges of when you're building a

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Speaker 2: new product for which you may be I have to

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Speaker 2: imagine that for a lot of the parts that are

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Speaker 2: going to go into your plane, you're the only customer

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Speaker 2: or the only customer that right now that there isn't

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Speaker 2: a large supply chain that currently exists for obvious reasons

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Speaker 2: for supersonic transport, how do you deal with the fact

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Speaker 2: that I assume for many parts the supply chain literally

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Speaker 2: currently does not exist.

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Speaker 5: Yeah, the supply chain exists, but it's kind of a disaster. Frankly,

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Speaker 5: I'll tell you a story. As I mentioned, we're building

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Speaker 5: our first symphony engine right now, about sixty percent of

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Speaker 5: the parts or somewhere in the manufacturing process. We're moving

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Speaker 5: towards being able to build ultimately all of those ourselves.

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Speaker 5: Right now. It's sort of a hybrid of things we

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Speaker 5: build ourselves and things we go to the aerospace supply

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Speaker 5: chain for. And as we are working through this on

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Speaker 5: our first prototype that the engine turbine blades are three

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Speaker 5: pers and we quoted them out of the traditional aerospace

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Speaker 5: supply chain. It was going to cost a million dollars

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Speaker 5: for one enginees worth of blades and take six months,

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Speaker 5: and that didn't support our schedule. And the cost was

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Speaker 5: just mind blowing, and so I started asking questions like, well,

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Speaker 5: how long does it actually take to make a blade?

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Speaker 5: And the answer was, well, only twenty four hours, but

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Speaker 5: you know it takes one hundred and eighty days to

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Speaker 5: get one out of the supplianet. Why a bunch of

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Speaker 5: stupid things? And like, okay, well what is the machine

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Speaker 5: that makes these costs? And I assumed that it would

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Speaker 5: be cost prohibitive and really hard to get but it

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Speaker 5: turned out the machine costs about two million dollars. They're

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Speaker 5: in an inventory. You can get one in a couple

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Speaker 5: of weeks. So we said, great, well, let's just buy

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Speaker 5: the machine and make these things ourselves. So for the

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Speaker 5: price of two engines worth of blades, we got the

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Speaker 5: three D printer that makes the blades. We set it

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Speaker 5: up in a matter of weeks, and we're iterating super rapidly,

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Speaker 5: and had we gone out of house, would still be

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Speaker 5: waiting for the first blades to show up.

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Speaker 3: And what are the stupid things that slow down the

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Speaker 3: supply chain?

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Speaker 5: One pattern is spreading production processes out across a large

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Speaker 5: number of facilities that are geographically spread out. And so

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Speaker 5: it's like, oh, well, to make this part, you start

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Speaker 5: with raw material in South Carolina, and then it goes

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Speaker 5: to like North Carolina for one process step, and then

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Speaker 5: you ship at the Wisconsin for another process step. Then

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Speaker 5: it goes back to South Carolina, and then you have

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Speaker 5: to put it into California actually like twice. And it's

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Speaker 5: it's insane, and like the thing spends like more time

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Speaker 5: on a truck back and forth and it does actually

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Speaker 5: getting any work done to it. So why I think

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Speaker 5: the answer is actually Congress. So why Congress? Right, So

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Speaker 5: since sort of the end of the Cold War, a

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Speaker 5: huge piece of aerospace is still driven by defense. You know,

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Speaker 5: it's still driven by defense procurement, and.

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Speaker 2: They need their supply chain in every city.

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Speaker 5: Exist exactly exactly, So you end up with these like

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Speaker 5: politically optimized really congressionally optimized supply chains. And everyone's on

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Speaker 5: a cost plus contract. So if you're on a cost

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Speaker 5: plus contract, you know your incentive is to actually maximize,

438
00:22:00,280 --> 00:22:03,159
Speaker 5: so you can maximize your plus so nobody cares that

439
00:22:03,160 --> 00:22:06,320
Speaker 5: it's inefficient. And yet that's the industrial base in the US,

440
00:22:07,520 --> 00:22:10,880
Speaker 5: and you can get enormous time and cost savings by

441
00:22:10,920 --> 00:22:12,359
Speaker 5: just putting everything under one roof.

442
00:22:14,200 --> 00:22:15,720
Speaker 3: Why has no one done that before?

443
00:22:16,480 --> 00:22:19,359
Speaker 5: Well, SpaceX has. I think one of the things that

444
00:22:19,440 --> 00:22:23,040
Speaker 5: lets you go do this is getting out from under

445
00:22:23,600 --> 00:22:28,000
Speaker 5: defense and congressional appropriations as kind of being your primary

446
00:22:28,040 --> 00:22:32,040
Speaker 5: revenue stream. So long as you're going through traditional DOOD

447
00:22:32,160 --> 00:22:35,800
Speaker 5: procurement processes, you end up being subject to all these

448
00:22:35,840 --> 00:22:39,880
Speaker 5: forces that end up with the complex difuse supply chain

449
00:22:39,960 --> 00:22:42,879
Speaker 5: being at some level optimal or at some level necessary.

450
00:22:43,119 --> 00:22:45,480
Speaker 5: But if you look at what SpaceX did, they pivoted

451
00:22:45,560 --> 00:22:49,880
Speaker 5: away from that approach, NASA did the commercial crew program

452
00:22:49,920 --> 00:22:52,320
Speaker 5: with them and with the commercial resupply program with them,

453
00:22:52,560 --> 00:22:54,840
Speaker 5: and that give them a lot more ability to just

454
00:22:54,920 --> 00:22:57,600
Speaker 5: do what was efficient. And I think we're doing the

455
00:22:57,640 --> 00:23:00,120
Speaker 5: same thing at Boom here, where we're starting with commercial customers.

456
00:23:00,600 --> 00:23:05,160
Speaker 5: We're not beholden to congressional funky dynamics, and so we're

457
00:23:05,160 --> 00:23:07,800
Speaker 5: able to go do the efficient thing, not the politically

458
00:23:08,040 --> 00:23:08,760
Speaker 5: expedient thing.

459
00:23:09,880 --> 00:23:12,760
Speaker 3: I mean, some people would argue that SpaceX did get

460
00:23:12,840 --> 00:23:15,439
Speaker 3: a lot of development money from the government, which is

461
00:23:15,480 --> 00:23:17,480
Speaker 3: one of the things that has allowed it to do this.

462
00:23:18,280 --> 00:23:21,200
Speaker 5: I think that's true, and yet they being I think

463
00:23:21,240 --> 00:23:24,119
Speaker 5: really the only alternative to the big legacy players. The

464
00:23:24,760 --> 00:23:27,440
Speaker 5: history shows they were able to do it without compromising

465
00:23:27,440 --> 00:23:29,800
Speaker 5: how they went about it. You know, you go to

466
00:23:29,840 --> 00:23:33,760
Speaker 5: their factory in Hawthorn in the Falcon nine days, it's

467
00:23:33,800 --> 00:23:36,320
Speaker 5: basically raw materials in one side of the building and

468
00:23:36,440 --> 00:23:39,359
Speaker 5: rockets and rocket engines out the other side. They brought

469
00:23:39,359 --> 00:23:43,840
Speaker 5: in house substantially all the production processes and that results

470
00:23:43,920 --> 00:23:46,320
Speaker 5: in frankly, I don't think the would have succeeded without that.

471
00:24:02,640 --> 00:24:06,720
Speaker 2: Talk to us more about financing from here, because this

472
00:24:06,800 --> 00:24:09,480
Speaker 2: is a thing that comes up, and maybe it's changing

473
00:24:09,480 --> 00:24:13,800
Speaker 2: a little bit, but large upfront investments aren't the sort

474
00:24:13,800 --> 00:24:16,840
Speaker 2: of natural domain of VC or tech. And there's a

475
00:24:16,920 --> 00:24:19,639
Speaker 2: reason that a lot of this kind of investment often

476
00:24:19,760 --> 00:24:22,719
Speaker 2: seems to come from the government or the public sector

477
00:24:23,320 --> 00:24:25,520
Speaker 2: in some way. And it's going to be a long

478
00:24:25,560 --> 00:24:27,159
Speaker 2: time before you have your factory, and then it's going

479
00:24:27,200 --> 00:24:29,280
Speaker 2: to be a long time before you have planes rolling out,

480
00:24:29,280 --> 00:24:31,120
Speaker 2: and there's going to be a long time before payback.

481
00:24:31,400 --> 00:24:34,600
Speaker 4: Talk about financing from here, who's going to invest to

482
00:24:34,640 --> 00:24:36,080
Speaker 4: get you through your next leg.

483
00:24:36,600 --> 00:24:39,239
Speaker 5: Starting with pulling the camera back? I think it is

484
00:24:39,920 --> 00:24:43,720
Speaker 5: largely a mythology that hardware companies are more capital intensive

485
00:24:43,720 --> 00:24:47,040
Speaker 5: than software companies. If you look at what lift and

486
00:24:47,440 --> 00:24:53,080
Speaker 5: Uber and Airbnb raised in VC, and you compare it

487
00:24:53,119 --> 00:24:57,560
Speaker 5: to like space Ax and Tesla and androll, what you

488
00:24:57,640 --> 00:25:00,800
Speaker 5: find is that many times the software companympany is actually

489
00:25:00,920 --> 00:25:04,639
Speaker 5: consumed way more venture capital than the hardware companies. And

490
00:25:04,720 --> 00:25:08,480
Speaker 5: I do think there is one important distinction, which is,

491
00:25:10,280 --> 00:25:13,159
Speaker 5: in a software company, you can prove you've built a

492
00:25:13,240 --> 00:25:16,199
Speaker 5: useful product by shipping a simple version of it and

493
00:25:16,280 --> 00:25:19,760
Speaker 5: noticing that it gets adoption. Yes, And the VC playbook

494
00:25:19,840 --> 00:25:23,240
Speaker 5: is largely spend a small amount of seed money, ship

495
00:25:23,240 --> 00:25:26,120
Speaker 5: a product, find out whether it's working, then double down.

496
00:25:26,359 --> 00:25:26,679
Speaker 4: Okay.

497
00:25:26,840 --> 00:25:28,679
Speaker 5: And you can't do a hardware company that way, Like

498
00:25:28,720 --> 00:25:31,520
Speaker 5: we can't go build a supersonic airliner in order to

499
00:25:31,520 --> 00:25:34,960
Speaker 5: find out whether anybody wants supersonic airliners. We have to

500
00:25:34,960 --> 00:25:36,879
Speaker 5: have another way of proving the markets really there, and

501
00:25:36,880 --> 00:25:39,520
Speaker 5: that's why pre orders really matter. I think in hardware

502
00:25:39,560 --> 00:25:42,199
Speaker 5: companies you got to prove that if you go invest

503
00:25:42,200 --> 00:25:45,080
Speaker 5: in the development, that there's actually there there in the end,

504
00:25:45,600 --> 00:25:47,640
Speaker 5: and then the risk is can you actually execute it

505
00:25:47,680 --> 00:25:49,480
Speaker 5: in a capital efficient way. It's not a risk of

506
00:25:49,520 --> 00:25:51,840
Speaker 5: like does anybody want this thing? The other thing that

507
00:25:51,920 --> 00:25:54,840
Speaker 5: I think as a piece of the strategy is you

508
00:25:54,880 --> 00:25:57,720
Speaker 5: need to get very clever about how to pull revenue

509
00:25:57,720 --> 00:26:00,439
Speaker 5: to the left. One thing we've done at Boom is

510
00:26:00,680 --> 00:26:03,600
Speaker 5: our agreements with United in America and include a prepayment schedule.

511
00:26:03,840 --> 00:26:07,000
Speaker 5: We've already gotten non refundable deposits. We'll get more from

512
00:26:07,040 --> 00:26:10,000
Speaker 5: both of them as we approach delivery. The other piece

513
00:26:10,080 --> 00:26:11,639
Speaker 5: is you want to find you want to find other

514
00:26:11,680 --> 00:26:15,159
Speaker 5: ways to monetize early and we've got something very exciting

515
00:26:16,000 --> 00:26:18,919
Speaker 5: that will probably reduce by an order of magnitude how

516
00:26:19,000 --> 00:26:21,800
Speaker 5: much capital we need to raise that we haven't announced yet,

517
00:26:21,880 --> 00:26:24,639
Speaker 5: but we'll be sharing later this year. Our equivalent of

518
00:26:24,680 --> 00:26:27,280
Speaker 5: what starlink is for SpaceX, the sort of the side

519
00:26:27,359 --> 00:26:28,720
Speaker 5: hustle that pays for the main hustle.

520
00:26:28,960 --> 00:26:31,880
Speaker 3: Huh yeah, back on.

521
00:26:32,440 --> 00:26:33,600
Speaker 4: Yeah, this is a real tease.

522
00:26:34,119 --> 00:26:35,760
Speaker 5: I wish I could share. It'd be fun. It's going

523
00:26:35,800 --> 00:26:36,600
Speaker 5: to be so much fun.

524
00:26:36,680 --> 00:26:40,399
Speaker 3: Okay, all right, Well we'll look out for it for sure. So,

525
00:26:41,080 --> 00:26:44,719
Speaker 3: speaking of pre orders, one of the complicating factors of

526
00:26:44,760 --> 00:26:47,600
Speaker 3: building a brand new aircraft has to be the regulatory

527
00:26:47,640 --> 00:26:52,919
Speaker 3: process and getting things like FAA approval. I'm really curious

528
00:26:53,280 --> 00:26:56,160
Speaker 3: what that has been like for you and what your

529
00:26:56,200 --> 00:26:58,960
Speaker 3: expectation is in terms of the timeline.

530
00:26:59,480 --> 00:27:03,560
Speaker 5: Yeah. The surprising thing is we've actually never had a

531
00:27:03,560 --> 00:27:07,479
Speaker 5: regulatory delay. And you read all the headlines about what

532
00:27:07,520 --> 00:27:11,720
Speaker 5: Boeing struggles with with FAA, and I think that the

533
00:27:11,760 --> 00:27:15,040
Speaker 5: principal reason there is really two things. One is they

534
00:27:15,080 --> 00:27:18,200
Speaker 5: lost the trust of their regulator, and then number two

535
00:27:18,280 --> 00:27:21,320
Speaker 5: is they operate in this delegated model where they have

536
00:27:21,440 --> 00:27:24,520
Speaker 5: their own sort of internal FAA that are all Boeing

537
00:27:24,600 --> 00:27:28,840
Speaker 5: employees that do approvals as they develop an airplane. And

538
00:27:28,880 --> 00:27:30,679
Speaker 5: then they show up at Papa FAA at the end

539
00:27:30,680 --> 00:27:33,199
Speaker 5: of the program and say please rubber stamp me. But

540
00:27:33,240 --> 00:27:36,399
Speaker 5: then then the Papa FAA one doesn't trust them, and

541
00:27:36,480 --> 00:27:38,399
Speaker 5: two hasn't seen any of the work along the way,

542
00:27:38,720 --> 00:27:40,280
Speaker 5: And so now you're at the end of the program

543
00:27:40,320 --> 00:27:41,960
Speaker 5: and they're telling you to go back and change things

544
00:27:41,960 --> 00:27:44,000
Speaker 5: that they never had any input along the way. And

545
00:27:44,040 --> 00:27:46,600
Speaker 5: that's just a really terrible way to work with the regulator.

546
00:27:47,000 --> 00:27:50,080
Speaker 5: And if you look back in history before Boeing really

547
00:27:50,119 --> 00:27:52,919
Speaker 5: lost its way, like in the nineteen nineties on the

548
00:27:52,920 --> 00:27:56,119
Speaker 5: Triple seven program, it was Boeing plus FAA versus the

549
00:27:56,160 --> 00:27:59,800
Speaker 5: problem and they shipped a pretty amazing airplane on time

550
00:28:00,520 --> 00:28:03,320
Speaker 5: with an FA certification process that took less than a year.

551
00:28:04,119 --> 00:28:06,640
Speaker 5: And so what we looked at that example, and when

552
00:28:06,640 --> 00:28:09,040
Speaker 5: we did our XB one, we said, we're going to

553
00:28:09,119 --> 00:28:11,280
Speaker 5: work with the FAA kind of the old good way.

554
00:28:11,600 --> 00:28:13,240
Speaker 5: And so we showed up in DC and we said,

555
00:28:13,320 --> 00:28:15,199
Speaker 5: let me tell you what we're doing. We'd love to

556
00:28:15,200 --> 00:28:17,359
Speaker 5: get your input. Come any time you want look at

557
00:28:17,359 --> 00:28:20,000
Speaker 5: anything you want to look at, Please give us your feedback.

558
00:28:20,040 --> 00:28:22,000
Speaker 5: Please give it to us early enough that when we

559
00:28:22,040 --> 00:28:24,800
Speaker 5: have your feedback, we can actually act on it. And

560
00:28:24,880 --> 00:28:27,119
Speaker 5: so they saw XB one when it was a piece

561
00:28:27,119 --> 00:28:28,560
Speaker 5: of paper, they saw it when it was a bucket

562
00:28:28,600 --> 00:28:30,919
Speaker 5: of parts, they saw it when it rolled out, and

563
00:28:30,960 --> 00:28:33,040
Speaker 5: they saw it when it was ready to fly. And

564
00:28:33,320 --> 00:28:37,000
Speaker 5: as a result, what usually is a ninety day like

565
00:28:37,080 --> 00:28:40,600
Speaker 5: approvals process for an R and D airplane took literally

566
00:28:40,720 --> 00:28:43,560
Speaker 5: ninety minutes, like the day we said we're ready, they

567
00:28:43,600 --> 00:28:47,000
Speaker 5: handed us the paperwork. And that's not some kind of

568
00:28:47,480 --> 00:28:51,280
Speaker 5: lobbying miracle. That's just building trust. And I think I

569
00:28:51,280 --> 00:28:53,880
Speaker 5: don't think it'll be ninety minutes on our airliner, obviously,

570
00:28:54,240 --> 00:28:56,200
Speaker 5: But you know, we're already talking with them. We're saying

571
00:28:56,240 --> 00:28:58,200
Speaker 5: here's what we're doing, here's some of the big choices

572
00:28:58,240 --> 00:29:00,000
Speaker 5: we need to make, here's how we're thinking about it.

573
00:29:00,040 --> 00:29:02,240
Speaker 5: There's trade offs. What do you think? You know, we

574
00:29:02,280 --> 00:29:06,280
Speaker 5: don't have that sort of boom FAA proxy. We just

575
00:29:06,320 --> 00:29:08,520
Speaker 5: work with them directly. And so by the time that

576
00:29:08,560 --> 00:29:13,480
Speaker 5: we're done, we'll have gone through the process together. Everyone

577
00:29:13,480 --> 00:29:16,200
Speaker 5: will understand the decisions, they'll understand the testing we've done,

578
00:29:16,240 --> 00:29:19,600
Speaker 5: and I expect that when FAA is convinced it's ready,

579
00:29:19,640 --> 00:29:21,360
Speaker 5: that'll be about the same time that we're convinced it's

580
00:29:21,360 --> 00:29:22,760
Speaker 5: ready because we've gone through it together.

581
00:29:23,480 --> 00:29:24,320
Speaker 4: I have a question.

582
00:29:24,440 --> 00:29:27,600
Speaker 2: It's more related to the business of SuperSonics than the

583
00:29:27,640 --> 00:29:30,680
Speaker 2: manufacturing of them. I've gone to Europe for work a

584
00:29:30,720 --> 00:29:33,680
Speaker 2: few times with Bloomberg, and I've been fortunate enough to

585
00:29:33,720 --> 00:29:36,440
Speaker 2: be able to fly business class and it's really nice

586
00:29:36,520 --> 00:29:38,640
Speaker 2: and I really like lying down on the plane. It's

587
00:29:38,720 --> 00:29:41,400
Speaker 2: just such an insane luxury every time, I can't believe

588
00:29:41,400 --> 00:29:45,640
Speaker 2: it's real. Are you sure that people will trade beds

589
00:29:45,680 --> 00:29:48,240
Speaker 2: for shorter flights on mess because.

590
00:29:47,960 --> 00:29:48,880
Speaker 4: I don't like it.

591
00:29:48,960 --> 00:29:50,440
Speaker 2: I'm just like, oh, yeah, okay, I get there a

592
00:29:50,440 --> 00:29:52,160
Speaker 2: few hours earlier, but then I don't get this really

593
00:29:52,200 --> 00:29:54,800
Speaker 2: nice live flight experience. Like, I don't know, why are

594
00:29:54,800 --> 00:29:58,440
Speaker 2: you confident so much demand will materialize just for the

595
00:29:58,480 --> 00:30:02,040
Speaker 2: sake of speed? And then yeah, it's longer with the

596
00:30:02,080 --> 00:30:03,880
Speaker 2: current thing, but is really comfortable.

597
00:30:04,600 --> 00:30:06,480
Speaker 5: A couple things. One is I think it helps to

598
00:30:06,520 --> 00:30:09,719
Speaker 5: look at what people pay for on flights that are

599
00:30:09,760 --> 00:30:14,000
Speaker 5: already shorter. So like a transatlantic flight supersonic is going

600
00:30:14,040 --> 00:30:16,840
Speaker 5: to be three to four hours. Yeah, and you say, well,

601
00:30:16,840 --> 00:30:19,280
Speaker 5: what about domestic flights that are three to four hours,

602
00:30:19,360 --> 00:30:21,000
Speaker 5: what it's like on board? Well, it's a nice first

603
00:30:21,040 --> 00:30:25,200
Speaker 5: class seat. And nobody puts flatbeds on flights that are

604
00:30:25,200 --> 00:30:27,240
Speaker 5: you know, three four five hours. They put them on

605
00:30:27,320 --> 00:30:30,959
Speaker 5: longer flights, particularly longer flights that are scheduled overnight, and

606
00:30:31,080 --> 00:30:34,640
Speaker 5: so the experience on overture there's another thing, unfortunately I

607
00:30:34,680 --> 00:30:37,080
Speaker 5: can only tease I can't show you yet it's going

608
00:30:37,120 --> 00:30:43,320
Speaker 5: to be nicer than domestic first class. Okay, from space, connectivity, comfort,

609
00:30:43,520 --> 00:30:46,040
Speaker 5: there's some really nice little innovations we're doing that will

610
00:30:46,080 --> 00:30:48,160
Speaker 5: I think beat the socks off a domestic first class.

611
00:30:48,480 --> 00:30:50,360
Speaker 5: And yet you'll be able to go to Europe or

612
00:30:50,360 --> 00:30:53,240
Speaker 5: to Asia in the time of a domestic flight, and

613
00:30:53,280 --> 00:30:55,600
Speaker 5: I think airlines will schedule them so the vast majority

614
00:30:55,600 --> 00:30:58,640
Speaker 5: of flights are daytime. So instead of leaving us in

615
00:30:58,680 --> 00:31:01,440
Speaker 5: the evening on the airplane and get into Europe in

616
00:31:01,440 --> 00:31:03,760
Speaker 5: the morning, you actually leave in the morning and you

617
00:31:03,800 --> 00:31:06,000
Speaker 5: get there in the afternoon or evening, and you're awake

618
00:31:06,040 --> 00:31:07,800
Speaker 5: and productive on the flight, and you get to sleep

619
00:31:07,840 --> 00:31:09,640
Speaker 5: in a far better bed that you can find on

620
00:31:09,680 --> 00:31:11,400
Speaker 5: any airplane the one at home.

621
00:31:11,880 --> 00:31:12,960
Speaker 4: If you could be productive.

622
00:31:12,960 --> 00:31:14,560
Speaker 2: I have to say, like I actually don't care that

623
00:31:14,640 --> 00:31:16,880
Speaker 2: much about seats anywhere, because I just scroll my phone

624
00:31:16,920 --> 00:31:17,520
Speaker 2: the whole time.

625
00:31:17,600 --> 00:31:20,240
Speaker 3: And if this is true, I've been on flights watching

626
00:31:20,320 --> 00:31:21,400
Speaker 3: Joe and this is what he does.

627
00:31:21,520 --> 00:31:24,200
Speaker 2: Yeah, it's totally fine as long as I have good

628
00:31:24,240 --> 00:31:27,560
Speaker 2: fast WiFi. I actually don't really care that much anymore.

629
00:31:27,600 --> 00:31:31,320
Speaker 2: All Right, I have another question. You know, obviously, building

630
00:31:31,360 --> 00:31:35,680
Speaker 2: planes is one part of a broader anxiety or push

631
00:31:35,760 --> 00:31:39,760
Speaker 2: or whatever for more domestic US manufacturing. One of the

632
00:31:39,760 --> 00:31:42,560
Speaker 2: things that they're seemingly a bypart is an interest for

633
00:31:42,680 --> 00:31:45,520
Speaker 2: though maybe different people have different ways of getting there.

634
00:31:45,960 --> 00:31:46,400
Speaker 4: I don't know.

635
00:31:46,440 --> 00:31:49,240
Speaker 2: Maybe the probably people from the Trump administration who do

636
00:31:49,280 --> 00:31:52,200
Speaker 2: ask you this question, so maybe it's not hypothetical.

637
00:31:52,560 --> 00:31:53,400
Speaker 4: What are the barriers?

638
00:31:53,440 --> 00:31:55,480
Speaker 2: It's like, Okay, we want to be, like, we want

639
00:31:55,480 --> 00:31:58,240
Speaker 2: to be at the cutting edge of more things in general.

640
00:31:58,560 --> 00:32:01,200
Speaker 2: What's getting in the way of that? And are there

641
00:32:01,280 --> 00:32:07,320
Speaker 2: policy things other than lifting the overland supersonic ban? Are

642
00:32:07,320 --> 00:32:09,560
Speaker 2: there other things that you could think of that generally

643
00:32:09,920 --> 00:32:13,080
Speaker 2: hold the US back from being in advanced manufacturer in

644
00:32:13,120 --> 00:32:15,560
Speaker 2: a range of things or things that you've discovered along

645
00:32:15,600 --> 00:32:18,000
Speaker 2: the way that are counterproductive to these efforts.

646
00:32:18,560 --> 00:32:24,640
Speaker 5: Yeah, I think there is enormous fundamental American dynamism and

647
00:32:24,720 --> 00:32:27,120
Speaker 5: what gets in the way is really ourselves and our

648
00:32:27,160 --> 00:32:30,360
Speaker 5: own red tape. The ban on supersonic overland in the US,

649
00:32:30,400 --> 00:32:33,120
Speaker 5: I think is probably the best example of a regulatory

650
00:32:33,160 --> 00:32:36,960
Speaker 5: own goal, where like literally every airplane from the Right

651
00:32:37,000 --> 00:32:39,920
Speaker 5: Brothers through the Boeing seven oh seven was faster than

652
00:32:39,960 --> 00:32:42,160
Speaker 5: the one that came before it, and then we banned

653
00:32:42,200 --> 00:32:45,000
Speaker 5: the primary vector of innovation. And if you follow that

654
00:32:45,040 --> 00:32:48,400
Speaker 5: thread forward, it's not the only cause, but I think

655
00:32:48,440 --> 00:32:51,320
Speaker 5: it's a big piece of the undoing of Boeing, because

656
00:32:51,320 --> 00:32:53,000
Speaker 5: if you put a lid on innovation, the best and

657
00:32:53,000 --> 00:32:54,360
Speaker 5: brightest don't even want to work there.

658
00:32:54,400 --> 00:32:56,840
Speaker 2: But Bowing kept building what you can find, but there

659
00:32:56,920 --> 00:32:59,760
Speaker 2: was not early nineteen seventies, and Bowling kept building power

660
00:32:59,800 --> 00:33:02,360
Speaker 2: high planes for at least a few decades after that.

661
00:33:02,480 --> 00:33:05,000
Speaker 5: Right, Yeah, they had a decent runout. But if you

662
00:33:05,080 --> 00:33:07,400
Speaker 5: look at the latest generation Boeing and you look at

663
00:33:07,400 --> 00:33:10,120
Speaker 5: next to put it next to the very first jet liner,

664
00:33:10,200 --> 00:33:12,760
Speaker 5: it's it is literally a carbon copy of the same

665
00:33:12,760 --> 00:33:16,959
Speaker 5: basic airplane concept. They kept iterating and optimizing the technology,

666
00:33:16,960 --> 00:33:20,320
Speaker 5: but they didn't have any capability, And ultimately it's like

667
00:33:20,360 --> 00:33:22,600
Speaker 5: who wants to go work for both? As if you're

668
00:33:22,600 --> 00:33:24,800
Speaker 5: a great engineer, so you can like re engineer the

669
00:33:24,800 --> 00:33:25,600
Speaker 5: same basic thing.

670
00:33:25,920 --> 00:33:28,360
Speaker 2: Okay, so that's plans and I get the speed thing.

671
00:33:28,440 --> 00:33:30,920
Speaker 2: There's obviously a lot of we seem to have stalled

672
00:33:30,960 --> 00:33:34,560
Speaker 2: out at the cars seemed to be falling behind in

673
00:33:35,080 --> 00:33:38,040
Speaker 2: obviously other things. Are there other sort of like broad

674
00:33:38,120 --> 00:33:42,320
Speaker 2: themes you've discovered in US manufacturing that are holding us back?

675
00:33:43,200 --> 00:33:46,640
Speaker 5: Yeah. I think there's a lot of regulatory environment, both

676
00:33:46,640 --> 00:33:50,200
Speaker 5: federal and state and local that it just adds cost

677
00:33:50,320 --> 00:33:52,720
Speaker 5: in time. I give you an example. So we build

678
00:33:52,720 --> 00:33:55,760
Speaker 5: a factory in Greensboro, North Carolina, almost two one thousand

679
00:33:55,800 --> 00:33:59,160
Speaker 5: square foot factory, and it took longer to get the

680
00:33:59,200 --> 00:34:01,560
Speaker 5: building permit, and then it took to build the factory.

681
00:34:01,800 --> 00:34:04,520
Speaker 5: It took about eighteen months to get the building permit.

682
00:34:04,800 --> 00:34:07,720
Speaker 5: And if you double click on that, it's like, why, Well,

683
00:34:07,760 --> 00:34:11,680
Speaker 5: we had to do an environmental impact study on the

684
00:34:11,719 --> 00:34:15,600
Speaker 5: noise that our airplane would make once it was built.

685
00:34:15,760 --> 00:34:17,279
Speaker 5: And it was like, wait a minute, we have to

686
00:34:17,520 --> 00:34:20,279
Speaker 5: before we can roll a cement mixer, we have to

687
00:34:20,320 --> 00:34:23,000
Speaker 5: study the noise profile of an airplane that we haven't

688
00:34:23,000 --> 00:34:26,560
Speaker 5: finished designing, let alone, building where we've pledged is not

689
00:34:26,600 --> 00:34:30,520
Speaker 5: going to be any louder than other airplanes. And if

690
00:34:30,560 --> 00:34:32,200
Speaker 5: it were China, my guess is they wouldn't have to

691
00:34:32,200 --> 00:34:34,920
Speaker 5: do that, And I could tell you more stories like

692
00:34:34,920 --> 00:34:38,719
Speaker 5: we're building an engine test facility here in Colorado, and

693
00:34:38,840 --> 00:34:41,000
Speaker 5: the long pole in the tent is the fire Department.

694
00:34:42,200 --> 00:34:44,200
Speaker 5: I think we've made a big mistake in the US.

695
00:34:44,320 --> 00:34:46,160
Speaker 5: So in China you can look at this stuff and

696
00:34:46,200 --> 00:34:47,960
Speaker 5: it's kind of anything goes, which I don't think is

697
00:34:48,000 --> 00:34:51,080
Speaker 5: the right answer. And in the US, you know, obviously

698
00:34:51,120 --> 00:34:55,120
Speaker 5: we want clean air, clean water, we want airplanes that

699
00:34:55,160 --> 00:34:57,920
Speaker 5: don't crash, buildings that don't burn down, like all this

700
00:34:58,000 --> 00:35:02,360
Speaker 5: is common sense. But the risk underwriting decisions we've given

701
00:35:02,360 --> 00:35:06,000
Speaker 5: to monopolistic government entities that have the sole power to

702
00:35:06,040 --> 00:35:10,120
Speaker 5: say yay or nay, and have an asymmetric incentive to

703
00:35:10,200 --> 00:35:12,640
Speaker 5: say nay because if they approve something they shouldn't improve,

704
00:35:12,640 --> 00:35:15,160
Speaker 5: it's their career. If they hold something up, it doesn't

705
00:35:15,200 --> 00:35:17,600
Speaker 5: really matter. And so all the incentive of these sort

706
00:35:17,600 --> 00:35:22,000
Speaker 5: of centrally planned risk underwriting entities is that they slow

707
00:35:22,080 --> 00:35:24,359
Speaker 5: things down and they add cost. But I think we've

708
00:35:24,360 --> 00:35:28,160
Speaker 5: got fundamentally the wrong frameworks for those things, and we

709
00:35:28,160 --> 00:35:29,400
Speaker 5: need to get out of our own way.

710
00:35:30,320 --> 00:35:33,719
Speaker 3: I'm so fascinated by the actual manufacturing process here and

711
00:35:33,760 --> 00:35:37,720
Speaker 3: the idea of starting to build an aircraft basically from scratch.

712
00:35:37,840 --> 00:35:42,040
Speaker 3: Could you maybe zero in on one specific part and

713
00:35:42,160 --> 00:35:46,319
Speaker 3: talk to us about how that particular thing comes into being.

714
00:35:46,480 --> 00:35:49,440
Speaker 3: So I'm thinking maybe something like composits, because you're building

715
00:35:49,440 --> 00:35:53,399
Speaker 3: out of composits instead of aluminum, like the concord. Where

716
00:35:53,400 --> 00:35:54,600
Speaker 3: do you actually get that from?

717
00:35:55,320 --> 00:35:57,719
Speaker 5: Yeah, well, maybe I'll talk about engine parts, because there's

718
00:35:57,719 --> 00:36:00,160
Speaker 5: some of the most fun So engines are these that

719
00:36:00,239 --> 00:36:03,160
Speaker 5: sort of jet ins are these amazing machines, and they

720
00:36:03,200 --> 00:36:06,600
Speaker 5: need to operate at super high temperatures in order to

721
00:36:06,600 --> 00:36:10,080
Speaker 5: be efficient. And in fact, the high pressure, high temperature

722
00:36:10,160 --> 00:36:12,680
Speaker 5: air that comes out of the back of a jet

723
00:36:12,680 --> 00:36:17,839
Speaker 5: engine combustor is actually above the melting point of the

724
00:36:17,880 --> 00:36:20,880
Speaker 5: metal that the turbine blades are made out of. And

725
00:36:20,960 --> 00:36:23,440
Speaker 5: so these turbine blades, they are these metal parts that

726
00:36:23,480 --> 00:36:27,680
Speaker 5: are hollow on the inside and cooling air goes through them.

727
00:36:27,719 --> 00:36:30,360
Speaker 5: It comes out these little pores on the tip of

728
00:36:30,360 --> 00:36:32,600
Speaker 5: the turbine blade and that cool By the way, the

729
00:36:32,600 --> 00:36:35,359
Speaker 5: cooling air is only a thousand degrees and it sort

730
00:36:35,400 --> 00:36:39,080
Speaker 5: of envelops the turbine blade and allows it to operate

731
00:36:39,120 --> 00:36:41,960
Speaker 5: in a thermal environment that's above its own melting point.

732
00:36:42,200 --> 00:36:45,160
Speaker 5: And all this is happening, well, it's spinning at thousands

733
00:36:45,320 --> 00:36:50,320
Speaker 5: of RPMs. And so to make these parts so strong,

734
00:36:50,719 --> 00:36:55,880
Speaker 5: they're actually cast out of a advanced casting process that

735
00:36:56,000 --> 00:37:00,920
Speaker 5: allows the entire blade to be one single crystal talent structure.

736
00:37:01,520 --> 00:37:05,280
Speaker 5: So these are investment castings in what's called a directional

737
00:37:05,320 --> 00:37:09,040
Speaker 5: solidification oven, where they start cooling it from one side

738
00:37:09,120 --> 00:37:11,520
Speaker 5: so that as the crystal starts forming, as the molten

739
00:37:11,560 --> 00:37:16,000
Speaker 5: metal freezes, the lattice spreads out, and it's one very

740
00:37:16,040 --> 00:37:20,640
Speaker 5: specific grain structure, one crystal the entire blade, and that

741
00:37:20,760 --> 00:37:23,920
Speaker 5: allows you to get this incredibly high performance. Now, the

742
00:37:23,960 --> 00:37:26,640
Speaker 5: most amazing thing about what I just shared is that's

743
00:37:26,760 --> 00:37:30,520
Speaker 5: nineteen seventies technology and it's still state of the art.

744
00:37:30,719 --> 00:37:33,120
Speaker 5: That's what we're We're using a more advanced version of

745
00:37:33,120 --> 00:37:35,880
Speaker 5: what I just described to build the production turbine blades

746
00:37:35,920 --> 00:37:38,680
Speaker 5: for our symphony engine, with some three D printing in

747
00:37:38,719 --> 00:37:40,160
Speaker 5: the investment casting process.

748
00:37:40,520 --> 00:37:43,279
Speaker 3: So how do you actually start doing that though, as

749
00:37:43,400 --> 00:37:46,160
Speaker 3: a brand new company that has never done this before.

750
00:37:46,440 --> 00:37:49,080
Speaker 3: What's step one and then step two and step three?

751
00:37:49,920 --> 00:37:54,120
Speaker 5: Step one is higher great people, and many times the

752
00:37:54,200 --> 00:37:56,680
Speaker 5: alchemy of great people is the most important part of

753
00:37:56,719 --> 00:37:59,880
Speaker 5: the solution. We have this thing we call the talent distill.

754
00:38:00,960 --> 00:38:03,840
Speaker 5: So what's that. It's about the mix of senior and

755
00:38:03,960 --> 00:38:07,560
Speaker 5: junior talent. I believe in teams that are basically eighty

756
00:38:07,600 --> 00:38:11,319
Speaker 5: percent young and up and coming, smart, driven, bright, they

757
00:38:11,320 --> 00:38:14,719
Speaker 5: don't know what's impossible. And about twenty percent of the

758
00:38:15,280 --> 00:38:17,360
Speaker 5: what we call the oak that's got a bit of

759
00:38:17,360 --> 00:38:19,640
Speaker 5: scar tissue, you got some experience, and then you put

760
00:38:19,680 --> 00:38:22,400
Speaker 5: them all together, and the oak and the spirits interplay

761
00:38:22,719 --> 00:38:25,319
Speaker 5: with this great alchemy. And many times what we do

762
00:38:25,400 --> 00:38:28,040
Speaker 5: is we put the like on our engine program. For example,

763
00:38:28,120 --> 00:38:30,640
Speaker 5: the guy leading is this guy, Nick Shirika, who's a

764
00:38:30,640 --> 00:38:33,080
Speaker 5: at this point a nine year Boom veteran. He ran

765
00:38:33,120 --> 00:38:35,720
Speaker 5: flight test on XB one. He's never done an engine before,

766
00:38:35,960 --> 00:38:38,360
Speaker 5: but he loves engines and he's a really fast learner.

767
00:38:38,400 --> 00:38:41,120
Speaker 5: And then we've surrounded him with people that've done engines

768
00:38:41,160 --> 00:38:44,239
Speaker 5: before and they just learn super quickly, and we get

769
00:38:44,280 --> 00:38:46,120
Speaker 5: to hardware super quickly. So you know, we'll go on

770
00:38:46,160 --> 00:38:48,600
Speaker 5: this like lightning tour, will tour every factory in the

771
00:38:48,640 --> 00:38:51,239
Speaker 5: country that's relevant to this decide what we're going to

772
00:38:51,320 --> 00:38:53,480
Speaker 5: do ourselves, decide where it makes sense to pick a

773
00:38:53,520 --> 00:38:55,239
Speaker 5: partner and go forward from there.

774
00:38:55,920 --> 00:39:01,360
Speaker 3: Have you been peeling any old oak engineers from Boeing unsuccessfully?

775
00:39:02,000 --> 00:39:05,760
Speaker 5: We've had interesting a handful of people that we get

776
00:39:05,840 --> 00:39:09,120
Speaker 5: out of Boeing earlier in their career before they've been corrupted.

777
00:39:10,440 --> 00:39:14,040
Speaker 5: But every single big aerospace higher that we've made out

778
00:39:14,080 --> 00:39:15,680
Speaker 5: of any of the top companies and put into a

779
00:39:15,680 --> 00:39:18,880
Speaker 5: senior leadership role, it hasn't worked out a single time yet.

780
00:39:19,200 --> 00:39:21,319
Speaker 4: That's interesting, and I think the reason.

781
00:39:21,239 --> 00:39:26,040
Speaker 5: Is that to succeed at a startup doing something differently,

782
00:39:26,040 --> 00:39:28,200
Speaker 5: you can't walk in thinking you already know all the answers.

783
00:39:28,520 --> 00:39:30,480
Speaker 5: So if we do this the way Boeing would do it,

784
00:39:30,719 --> 00:39:32,200
Speaker 5: we're going to end up with a ten or twenty

785
00:39:32,200 --> 00:39:34,719
Speaker 5: billion dollar program, and it's just impossible. You have to

786
00:39:34,760 --> 00:39:36,759
Speaker 5: be willing to think differently, and so you got to

787
00:39:36,760 --> 00:39:39,920
Speaker 5: have people that are willing to say, I want to

788
00:39:39,960 --> 00:39:41,680
Speaker 5: learn all the first principles, I want to learn all

789
00:39:41,680 --> 00:39:43,560
Speaker 5: the fundamentals. I want to learn all the physics and

790
00:39:43,560 --> 00:39:46,719
Speaker 5: all the manufacturing engineering. But I'm going to forge my

791
00:39:46,760 --> 00:39:49,200
Speaker 5: own path for how we go about the development program.

792
00:39:49,600 --> 00:39:51,120
Speaker 5: I'm going to write a new playbook because the old

793
00:39:51,120 --> 00:39:52,040
Speaker 5: playbook doesn't work.

794
00:39:52,320 --> 00:39:55,520
Speaker 2: I'm reading the bio page for Nick Shirka, who you mentioned,

795
00:39:55,520 --> 00:39:58,440
Speaker 2: and it says in his free time, Nick fabricated and

796
00:39:58,480 --> 00:40:02,800
Speaker 2: test flew his own experiment mental home built aircraft. Sounds

797
00:40:02,840 --> 00:40:05,359
Speaker 2: like a cool guy who you'd want to have, who

798
00:40:05,360 --> 00:40:07,000
Speaker 2: you'd want to have on your team. What don't you

799
00:40:07,040 --> 00:40:09,479
Speaker 2: mention how some of this tech is nineteen seventies tech.

800
00:40:09,640 --> 00:40:14,120
Speaker 2: What actually has substantively improved tech wise since the age

801
00:40:14,120 --> 00:40:17,000
Speaker 2: of the Boeing such that the economics just from a

802
00:40:17,080 --> 00:40:19,120
Speaker 2: sort of like cost per mile or cost per seed

803
00:40:19,520 --> 00:40:20,520
Speaker 2: are going to be better.

804
00:40:21,880 --> 00:40:24,960
Speaker 5: So it turned out that Boeing shipped all the technology

805
00:40:25,000 --> 00:40:27,799
Speaker 5: you need for an economic supersonic airliner on the seven

806
00:40:27,840 --> 00:40:30,080
Speaker 5: eight seven about fifteen years ago.

807
00:40:30,200 --> 00:40:31,160
Speaker 4: Okay, so it's.

808
00:40:31,040 --> 00:40:35,680
Speaker 5: Carbon fiber composite airframe, and that matters not because it's lightweight,

809
00:40:35,719 --> 00:40:38,200
Speaker 5: although it is. It matters because you can shape it

810
00:40:38,239 --> 00:40:41,720
Speaker 5: in very complex ways. If you look at the fuselage

811
00:40:42,200 --> 00:40:46,120
Speaker 5: on overture, it's not a constant tube. It's bigger in

812
00:40:46,160 --> 00:40:49,279
Speaker 5: the front and it's skinnier in the back. That results

813
00:40:49,400 --> 00:40:53,319
Speaker 5: in about twenty percent better aerodynamic efficiency and you can't

814
00:40:53,400 --> 00:40:55,680
Speaker 5: build that in an efficient way out of aluminum. You

815
00:40:55,719 --> 00:40:57,240
Speaker 5: need to be able to build it out of composites

816
00:40:57,360 --> 00:41:01,600
Speaker 5: very precisely. So new materials make a difference. Engine technology

817
00:41:01,760 --> 00:41:06,920
Speaker 5: concord flu with converted military engines with afterburners, and that

818
00:41:07,080 --> 00:41:10,319
Speaker 5: is a very expensive way, in a very loud way

819
00:41:10,320 --> 00:41:13,280
Speaker 5: to make thrust. But today every commercial airplane that flies

820
00:41:13,320 --> 00:41:16,520
Speaker 5: with a turbofan they're cleaner, quiet, or way more fuel efficient,

821
00:41:16,880 --> 00:41:19,200
Speaker 5: and you just have to have enough thrust to overcome

822
00:41:19,239 --> 00:41:21,480
Speaker 5: the drag. You don't actually need an afterburner to go supersonic.

823
00:41:21,840 --> 00:41:26,799
Speaker 5: So materials in the airframe improved engines. That's about engine architecture.

824
00:41:26,800 --> 00:41:29,319
Speaker 5: It's also about the super alloys that go into those

825
00:41:29,360 --> 00:41:32,319
Speaker 5: engines that allow them to run at higher temperatures. Then

826
00:41:32,360 --> 00:41:34,360
Speaker 5: a lot is computation as well. It used to be

827
00:41:34,360 --> 00:41:35,879
Speaker 5: you have to develop in a wind tunnel and every

828
00:41:35,880 --> 00:41:39,080
Speaker 5: iteration would take six months and cost millions of dollars.

829
00:41:39,520 --> 00:41:42,400
Speaker 5: And today we have software virtual wind tunnels and we

830
00:41:42,400 --> 00:41:45,880
Speaker 5: can press a button and overnight we can run the

831
00:41:45,920 --> 00:41:49,319
Speaker 5: equivalent of hundreds of wind tunnel tests, looking at many

832
00:41:49,360 --> 00:41:53,320
Speaker 5: different designs and pick the best ones. And with cloud

833
00:41:53,320 --> 00:41:56,520
Speaker 5: computing you can just rent that capability computationally, and then

834
00:41:56,520 --> 00:41:59,800
Speaker 5: we've got our own software that allows a small design

835
00:41:59,840 --> 00:42:03,440
Speaker 5: to team to do the work that would historically require

836
00:42:03,440 --> 00:42:06,160
Speaker 5: a large design team. So we've got new materials, we've

837
00:42:06,160 --> 00:42:08,200
Speaker 5: got better or dynamos, we've got better engines, we've got

838
00:42:08,200 --> 00:42:11,359
Speaker 5: software everywhere, and all of that adds up to about

839
00:42:11,360 --> 00:42:14,799
Speaker 5: a twenty percent aerodynamic efficiency improvement. Similarly, about a twenty

840
00:42:14,800 --> 00:42:18,160
Speaker 5: percent engine efficiency improvement. And you put all those together

841
00:42:18,200 --> 00:42:20,440
Speaker 5: into an airplane and you can, relative to concord, you

842
00:42:20,480 --> 00:42:22,640
Speaker 5: can make the seats bigger and more comfortable while the

843
00:42:22,680 --> 00:42:23,439
Speaker 5: costs come down.

844
00:42:24,800 --> 00:42:27,080
Speaker 3: I do remember seeing the seven eight seven for the

845
00:42:27,080 --> 00:42:30,520
Speaker 3: first time when it debuted at Farnborough and they took

846
00:42:30,520 --> 00:42:33,120
Speaker 3: all the reporters on. You could walk through it and

847
00:42:34,280 --> 00:42:37,280
Speaker 3: it was an amazing experience, and everyone was like ooing

848
00:42:37,280 --> 00:42:40,719
Speaker 3: and aweing over the composites and just moving from room

849
00:42:40,760 --> 00:42:44,480
Speaker 3: to room to room within the aircraft itself. But just

850
00:42:44,640 --> 00:42:47,760
Speaker 3: on this note, and this sort of dovetails with Joe's

851
00:42:47,840 --> 00:42:50,800
Speaker 3: question earlier about whether or not customers will be willing

852
00:42:50,880 --> 00:42:54,919
Speaker 3: to give up flatbeds for an extra I guess two

853
00:42:55,000 --> 00:42:59,279
Speaker 3: hours three hours of their time. How confident are you

854
00:42:59,800 --> 00:43:05,640
Speaker 3: the but airlines themselves are going to prefer higher speeds

855
00:43:06,239 --> 00:43:08,280
Speaker 3: over lower operating costs.

856
00:43:09,360 --> 00:43:12,040
Speaker 5: I think that United An, American and japan airlines deals

857
00:43:12,160 --> 00:43:14,480
Speaker 5: what are going to speak for this? At the end

858
00:43:14,480 --> 00:43:17,360
Speaker 5: of the day, airlines are in business to make money.

859
00:43:17,760 --> 00:43:20,719
Speaker 5: And if you look at the economic profile on overture

860
00:43:20,840 --> 00:43:23,880
Speaker 5: relative the economic profile flying a flatbed and business class,

861
00:43:24,440 --> 00:43:26,279
Speaker 5: the airlines are going to make more money supersonic they

862
00:43:26,280 --> 00:43:28,520
Speaker 5: would make subsonic. So there's just you know, there's a

863
00:43:28,680 --> 00:43:32,480
Speaker 5: very capitalist motivation there on one hand. On the other hand,

864
00:43:32,480 --> 00:43:35,879
Speaker 5: there's also an arms race. So our passenger research says

865
00:43:35,880 --> 00:43:38,160
Speaker 5: that eighty seven percent of people who fly first your

866
00:43:38,160 --> 00:43:42,200
Speaker 5: business internationally today would switch airlines in order to access

867
00:43:42,239 --> 00:43:44,560
Speaker 5: supersonic flights and walk away from their status and their

868
00:43:44,680 --> 00:43:48,040
Speaker 5: loyalty points and whatnot. And what that means is as

869
00:43:48,080 --> 00:43:50,920
Speaker 5: soon as one airline gets supersonic, all their competitors have

870
00:43:50,960 --> 00:43:53,080
Speaker 5: to get it too because passengers want it.

871
00:43:53,120 --> 00:43:55,480
Speaker 2: Wait, just real quickly, why are they just walked through

872
00:43:55,520 --> 00:43:58,000
Speaker 2: like the cost basis or the economics of a flight

873
00:43:58,040 --> 00:44:00,680
Speaker 2: onto supersonic and why it's competing or the.

874
00:44:02,360 --> 00:44:02,600
Speaker 4: Orders.

875
00:44:02,719 --> 00:44:06,160
Speaker 5: Yeah, let's let's take New York London as just an

876
00:44:06,200 --> 00:44:08,960
Speaker 5: example cast and it's pretty representative from a cost perspective.

877
00:44:09,480 --> 00:44:11,680
Speaker 5: With eighty percent of the seats full, which is a

878
00:44:11,680 --> 00:44:14,720
Speaker 5: little bit less than what airlines typically get. The break

879
00:44:14,880 --> 00:44:18,320
Speaker 5: even fair round trip is about thirty five hundred dollars,

880
00:44:19,200 --> 00:44:22,279
Speaker 5: and that compares to people routinely paying five grand or

881
00:44:22,320 --> 00:44:26,680
Speaker 5: more in business today. So it's super profitable. And why

882
00:44:26,840 --> 00:44:31,200
Speaker 5: is that, Well, you're starting with a pretty efficient airplane. Initially,

883
00:44:31,200 --> 00:44:34,400
Speaker 5: it only carries the premium passengers the first in business.

884
00:44:35,320 --> 00:44:38,400
Speaker 5: And because it's a faster airplane, it can do twice

885
00:44:38,440 --> 00:44:40,839
Speaker 5: as many flights with the same airplane and crew, so

886
00:44:40,880 --> 00:44:42,960
Speaker 5: you can sweat the asset. And I think that's the

887
00:44:43,000 --> 00:44:45,520
Speaker 5: thing that a lot of people don't realize about supersonic.

888
00:44:46,160 --> 00:44:48,640
Speaker 5: If you can build an airplane that's got enough demand

889
00:44:49,120 --> 00:44:50,640
Speaker 5: and it's got the right number of seats and the

890
00:44:50,680 --> 00:44:52,680
Speaker 5: right amount of range, you're gonna be able to fly

891
00:44:52,800 --> 00:44:55,319
Speaker 5: at you know, twelve thirteen, fourteen hours in a day,

892
00:44:55,560 --> 00:44:57,600
Speaker 5: just like a wide body, but you're gonna get twice

893
00:44:57,600 --> 00:44:59,759
Speaker 5: as many trips out of that. And so we call

894
00:44:59,800 --> 00:45:02,080
Speaker 5: that the speed dividend. By going faster, a bunch of

895
00:45:02,080 --> 00:45:03,120
Speaker 5: costs actually come down.

896
00:45:03,560 --> 00:45:05,680
Speaker 4: Blake schol this is super fascinating.

897
00:45:05,760 --> 00:45:09,360
Speaker 2: It's so great to I love hearing about manufacturing history

898
00:45:09,560 --> 00:45:11,759
Speaker 2: and all of this stuff. And when you have all

899
00:45:11,840 --> 00:45:15,320
Speaker 2: of these exciting new side projects and side revenue sources

900
00:45:15,480 --> 00:45:17,840
Speaker 2: and everything, Let's do Let's do another episode.

901
00:45:18,040 --> 00:45:19,640
Speaker 5: Let's do it anytime you want to come to Denver

902
00:45:19,760 --> 00:45:22,200
Speaker 5: and see the fly one, see the factory, and see

903
00:45:22,239 --> 00:45:23,880
Speaker 5: the test airplane.

904
00:45:23,560 --> 00:45:25,080
Speaker 4: Text test flight, the next test flight.

905
00:45:25,080 --> 00:45:27,000
Speaker 5: It's probably about three years out. We did thirteen on

906
00:45:27,040 --> 00:45:29,560
Speaker 5: the XB one, accomplished everything we wanted to accomplish, and

907
00:45:29,560 --> 00:45:32,560
Speaker 5: so that that airplane is retired now and the next

908
00:45:32,600 --> 00:45:34,080
Speaker 5: test flight is going to be the airliner.

909
00:45:34,520 --> 00:45:36,960
Speaker 2: Thanks so much, Blake. Really enjoyed you coming on odlock.

910
00:45:37,120 --> 00:45:39,319
Speaker 5: Appreciate you having me. Good to chat, Tracy, good to chat.

911
00:45:39,360 --> 00:45:40,919
Speaker 3: Jow, thank you, Thank you so much.

912
00:45:53,560 --> 00:45:53,920
Speaker 4: Tracy.

913
00:45:54,000 --> 00:45:55,879
Speaker 2: It was one minor point in there that I thought

914
00:45:55,920 --> 00:45:59,480
Speaker 2: was interesting. You know, when it comes to manufacturing, people

915
00:45:59,480 --> 00:46:02,520
Speaker 2: always talk about the importance of agglomeration and having everything

916
00:46:02,520 --> 00:46:05,319
Speaker 2: together in a Shenzen or whatever. It is funny to

917
00:46:05,400 --> 00:46:09,759
Speaker 2: think about that. For political reasons, we have specifically decided

918
00:46:10,160 --> 00:46:15,359
Speaker 2: to make the American defense manufacturing base extremely diffuse, so

919
00:46:15,400 --> 00:46:18,960
Speaker 2: that every Congressman and senator feels the need to protect

920
00:46:19,040 --> 00:46:22,280
Speaker 2: jobs in their own home state to consider various weapons programs.

921
00:46:22,320 --> 00:46:25,200
Speaker 3: It is funny, but I mean it also weirdly exists

922
00:46:25,200 --> 00:46:27,799
Speaker 3: for commercial products as well. Right, And I'm thinking there

923
00:46:27,880 --> 00:46:30,799
Speaker 3: was a chart that I tweeted many many years ago

924
00:46:30,880 --> 00:46:34,560
Speaker 3: that showed manufacturing of a hot tub in America and

925
00:46:34,640 --> 00:46:37,279
Speaker 3: you could just see the round trip that all these

926
00:46:37,320 --> 00:46:41,200
Speaker 3: different parts actually took. And it's built in like Colorado,

927
00:46:41,400 --> 00:46:44,640
Speaker 3: but then stuff gets sent to Arkansas, North Carolina, whatever,

928
00:46:45,080 --> 00:46:48,240
Speaker 3: and it does seem like it's very time consuming.

929
00:46:48,600 --> 00:46:51,520
Speaker 2: We just need one state, or one really big chunk

930
00:46:51,560 --> 00:46:52,800
Speaker 2: of a state to sort.

931
00:46:52,600 --> 00:46:55,720
Speaker 3: Of have Which state do you nominate, Joe, that's the problem.

932
00:46:55,840 --> 00:46:57,920
Speaker 2: Well, I would pick it somewhere like in West Texas

933
00:46:58,040 --> 00:46:59,680
Speaker 2: or something like that, where there's just a ton of

934
00:46:59,680 --> 00:47:02,200
Speaker 2: flat land and a bunch of solar parah.

935
00:47:02,239 --> 00:47:04,320
Speaker 3: Of course you would pick Texas.

936
00:47:04,040 --> 00:47:06,920
Speaker 2: And then you'd have it like libertarian, no rules and

937
00:47:07,120 --> 00:47:09,120
Speaker 2: no and just build up whatever you want.

938
00:47:09,400 --> 00:47:09,440
Speaker 3: No.

939
00:47:09,600 --> 00:47:12,120
Speaker 4: I thought that was really interesting. I don't know, I

940
00:47:12,120 --> 00:47:13,520
Speaker 4: guess I'll believe it when I see it.

941
00:47:13,680 --> 00:47:15,480
Speaker 2: Yeah, I mean it would be really cool.

942
00:47:15,920 --> 00:47:17,759
Speaker 4: Like I'm very pro it, but what does that mean

943
00:47:17,800 --> 00:47:18,439
Speaker 4: to be pro it?

944
00:47:18,520 --> 00:47:20,680
Speaker 2: So there you are pro it, but like it would

945
00:47:20,680 --> 00:47:22,480
Speaker 2: be really cool. I'd love to see it actually happen.

946
00:47:22,640 --> 00:47:24,960
Speaker 3: So there's two things that really stand out to me.

947
00:47:25,080 --> 00:47:28,040
Speaker 3: So number one is I think the operating costs are

948
00:47:28,040 --> 00:47:31,319
Speaker 3: going to be key, right, Like that really is one

949
00:47:31,360 --> 00:47:35,200
Speaker 3: of the things that kind of doomed the Concord. It

950
00:47:35,280 --> 00:47:38,000
Speaker 3: wasn't very fuel efficient, and then because it was such

951
00:47:38,000 --> 00:47:41,439
Speaker 3: a small fleet, the actual maintenance was really expensive because

952
00:47:41,480 --> 00:47:43,960
Speaker 3: you had to have all these specialists and things like that.

953
00:47:44,040 --> 00:47:47,439
Speaker 3: So operating costs are a big one. And then I'm

954
00:47:47,520 --> 00:47:51,360
Speaker 3: just not sure that airlines are going to airlines and

955
00:47:51,560 --> 00:47:54,440
Speaker 3: customers to the point that you made, are going to

956
00:47:54,480 --> 00:47:58,360
Speaker 3: be that interested in I guess like a two hour

957
00:47:58,560 --> 00:48:02,040
Speaker 3: gain on a fly if it comes with a higher

958
00:48:02,080 --> 00:48:05,239
Speaker 3: ticket price or a lower profit. So that seems to

959
00:48:05,280 --> 00:48:07,879
Speaker 3: me to be the key. And again, like I've seen

960
00:48:07,920 --> 00:48:12,080
Speaker 3: the business class airlines start up before, like Silverjet and

961
00:48:12,120 --> 00:48:12,720
Speaker 3: max Jet.

962
00:48:12,760 --> 00:48:14,279
Speaker 4: Well, what's your theory about why they fail?

963
00:48:14,960 --> 00:48:18,200
Speaker 3: It was operating costs. So they started I think it

964
00:48:18,239 --> 00:48:20,719
Speaker 3: was posts two thousand and eight and then things were

965
00:48:20,800 --> 00:48:23,960
Speaker 3: going okay, but then oil spiked, yeah, and that kind

966
00:48:24,000 --> 00:48:27,080
Speaker 3: of doomed them. And actually that reminds me I was

967
00:48:27,080 --> 00:48:29,640
Speaker 3: going to tell you a story Silverjet. Yeah, one of

968
00:48:29,680 --> 00:48:33,040
Speaker 3: the business class only airlines. So when it was entering

969
00:48:33,239 --> 00:48:36,919
Speaker 3: its last days, it was obviously having trouble getting extra

970
00:48:37,000 --> 00:48:40,760
Speaker 3: money from its various creditors, and so the CEO started

971
00:48:40,800 --> 00:48:43,680
Speaker 3: putting jet fuel on his personal credit card.

972
00:48:43,840 --> 00:48:44,560
Speaker 4: Oh that's cool.

973
00:48:44,960 --> 00:48:48,360
Speaker 3: And the funniest thing was his personal credit card had

974
00:48:48,600 --> 00:48:53,400
Speaker 3: reward points with British Airwins, so he was earning tons

975
00:48:53,440 --> 00:48:56,479
Speaker 3: and tons and tons of BA points while purchasing jet

976
00:48:56,480 --> 00:48:57,880
Speaker 3: fuel for his own airline.

977
00:48:57,960 --> 00:48:58,760
Speaker 4: That's a good nugget.

978
00:48:58,800 --> 00:49:01,480
Speaker 2: You know the story about a fat right how like

979
00:49:01,520 --> 00:49:04,840
Speaker 2: the company I think FedEx like was really close to

980
00:49:04,880 --> 00:49:07,520
Speaker 2: going bankrupt really early on as days. And the founder

981
00:49:07,600 --> 00:49:09,480
Speaker 2: there's like some story the founder like went to Vegas

982
00:49:09,520 --> 00:49:12,759
Speaker 2: and played blackjack. To let me look at a FedEx

983
00:49:12,920 --> 00:49:17,480
Speaker 2: founder blackjack. There's some story how Fred Smith rescued FedEx

984
00:49:17,480 --> 00:49:20,880
Speaker 2: from bankruptcy. He won twenty seven thousand dollars playing blackjack

985
00:49:20,960 --> 00:49:24,879
Speaker 2: one time, amazing, and he rescued the companies from bankruptcy.

986
00:49:24,960 --> 00:49:28,359
Speaker 2: So yeah, sometimes entrepreneurs they just got to like put it.

987
00:49:28,320 --> 00:49:29,520
Speaker 4: All on the line themselves.

988
00:49:29,600 --> 00:49:32,399
Speaker 3: They got a gown to save there literally, Yeah, all right,

989
00:49:32,440 --> 00:49:33,200
Speaker 3: shall we leave it there.

990
00:49:33,239 --> 00:49:34,160
Speaker 4: Yeah, let's leave it there.

991
00:49:34,280 --> 00:49:36,640
Speaker 3: This has been another episode of the Odd Lots podcast.

992
00:49:36,719 --> 00:49:39,879
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway and.

993
00:49:39,840 --> 00:49:42,560
Speaker 2: I'm Jill Wisenthal. You can follow me at the Stalwart.

994
00:49:42,760 --> 00:49:46,000
Speaker 2: Follow our guest Blake Schole, He's at b Shoal. Follow

995
00:49:46,000 --> 00:49:49,520
Speaker 2: our producers Kerman Rodriguez at Kerman ermann Dash'll Bennett at

996
00:49:49,640 --> 00:49:53,320
Speaker 2: Dashbot and kil Brooks at Kilbrooks. For more Odd Lots content,

997
00:49:53,400 --> 00:49:55,600
Speaker 2: go to Bloomberg dot com slash odd Lots with a

998
00:49:55,680 --> 00:49:58,319
Speaker 2: daily newsletter and all of our episodes, and you could

999
00:49:58,360 --> 00:50:01,000
Speaker 2: chat about all of these topics four seven in our

1000
00:50:01,160 --> 00:50:04,120
Speaker 2: discord discord dot gg slash onlines.

1001
00:50:04,480 --> 00:50:06,560
Speaker 3: And if you enjoy odd Lots, if you like it

1002
00:50:06,680 --> 00:50:09,480
Speaker 3: when we talk aerospace, then please leave us a positive

1003
00:50:09,520 --> 00:50:12,600
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1004
00:50:12,680 --> 00:50:15,239
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1005
00:50:15,280 --> 00:50:18,160
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1006
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1007
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