How LA Is Quietly Becoming America's New Industrial Tech Hub

The story you hear nowadays is that America is struggling to make things and can't compete with China when it comes to advanced manufacturing. But of course, there's tons of high-tech stuff being produced in the US, and more and more companies are doing it out of Southern California, with factories sprouting up around Los Angeles to build things like precision metal parts and jet engines. Two founders who are actively engaged in building things in LA are Tom Mueller, founder of Impulse Space (and Employee No. 1 at SpaceX), as well as Hadrian founder Chris Power. Impulse Space is building in-space transport vehicles while Hadrian is creating autonomous factories. This episode, which was recorded live at the Vermont Hollywood, is from our first ever Odd Lots live show in LA . We talk to Chris and Tom about how the US lost its manufacturing edge and why LA is becoming a destination for people who want to make and build hardware. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and research get you up to speed on what matters and what to watch next. About the time it takes to grab a coffee, so search Barclays Brief wherever you get your podcasts.

• 0:24Speaker 01

  Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com by selecting Work Mode, available on Plus and Pro Plans.

• 1:06Speaker 02

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• 1:43Joe Weisenthal?

  Hey, Odd Lots listeners, the Odd Lots tour continues, and our next stop is in Chicago.

• 1:48Tracy Alloway?

  That's right. Joe and I will be at the City Winery Chicago on October 15th for a live Odd Lots recording. Tickets are on sale now at Bloomberg dot com forward slash Odd Lots.

• 1:58Joe Weisenthal?

  And of course, a special thank you to Barclays for supporting Odd Lots Live.

• 2:03Tracy Alloway?

  So that's October 15th at City Winery in Chicago. Get your tickets now.

• 2:11Speaker 04

  Bloomberg Audio Studios, podcasts, radio, news.

• 2:26Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 2:31Tracy Alloway?

  And I'm Tracy Alloway.

• 2:32Joe Weisenthal?

  So we're doing our live show here at the Vermont Theater in Hollywood. And one of the things that I've know very little about, but that I'm very excited to learn more about is the attempts to like turn this in this part of the country into a booming in part of our industrial tech ecosystem.

• 2:49Tracy Alloway?

  Yeah, so we hear about reindustrialization efforts in America all the time. But what does it actually take to try to do that? And what are the companies actually doing in this space right now? We have two very interesting ones for you.

• 3:02Joe Weisenthal?

  Yes, I'm very excited. You're going to be hearing our chat with Chris Power. He is the founder of Hadron, which is trying to build a new generation of factories, as well as Tom Mueller, founder of Impulse Space, also the first employee of SpaceX. We're going to learn about these attempts to reindustrialize Southern California. Take a listen.

• 3:23Tracy Alloway?

  All right. Well, thank you so much for coming on Odd Lots. Truly the perfect guest. I'm going to start with, I guess, the question I alluded to at the beginning, which is, what is your narrative for the hollowing out, to use a cliche, of US manufacturing? Why does it seem that we lost some sort of edge? Chris, do you want to start?

• 3:44Speaker 05

  I do. And I think the first question is, do you want the

• 3:51Speaker 05

  accurate answer that's going to take three minutes or the political one?

• 3:55Tracy Alloway?

  How long does the political one take? But can't you do both?

• 3:59Speaker 05

  So here's what, here's what happened. But it happens in context. So every great, every great power of all time does four very simple things.

• 4:15Speaker 05

  They have some generative population function. They have the best industrial capacity. And then they win or prevent a war, and then they get incredibly lazy, and they end up with a financial industry and the offshore, what made them successful in the first place. And by the way, this function is represented in the trade of the reserve currency of the world. So the last three times this happened, the Netherlands ceded power to the British Empire, and the British Empire ceded power to the American Empire. And in each moment of industrial power being retraded by financial power, you switch the reserve currency of the world.

• 4:58Speaker 05

  And the mistake that everyone makes, because you have four or five generations of softness, is that just because you have the reserve currency means you rule the world. And you forget the fact that the only reason you have the reserve currency is because you had the best shipbuilding capacity or manufacturing capacity. So this is also the founding story of Hadron, which is, if you track these things, roughly every 150 years, the reserve currency of the world changes.

• 5:26Speaker 05

  And the reason is because you, you think you're Mike Tyson in your prime, and the other guy or gal thinks you're Mike Tyson before the Buster Douglas fight.

• 5:38Speaker 05

  And the pattern remains the same. So what the, the founding story of Hadron and the answer to your question is, the reason why it's important is because you've ultimately traded spreadsheet returns from a high affect and luxury of belief society. And if you've gotten that the world is real, and eventually that comes back to bite you.

• 6:01Joe Weisenthal?

  We just did an episode with Francis Fukuyama, and so we're very well acquainted with this fantasy that the world comes with the.

• 6:10Speaker 05

  You're in the full turning. Yeah.

• 6:11Tracy Alloway?

  Okay. Wait, wait, wait, just out of curiosity, before we go to Tom on that question, how often do you think about the Roman Empire? I'm assuming a lot.

• 6:22Speaker 05

  A lot in the sense that I think that America was, so everyone knows like what a weeaboo is. Yeah.

• 6:30Joe Weisenthal?

  A what?

• 6:31Speaker 05

  There's a lot of laughs. So America was founded by a lot of Romaboos, which is like obsessive Roman. So a lot of, a lot of the fundamental infrastructure of the fourth estate and Congress was Roman. The flaw that happened with Rome is eventually the elites lost the capacity to connect with reality.

• 6:55Speaker 05

  So in a sense, what you, what you outsource when you have a reserve currency is reality, and then you get bitten in the ass and, yeah.

• 7:05Tracy Alloway?

  Tom, what's your version of the decline of US manufacturing story? And do you also think about the Roman Empire?

• 7:13Speaker 06

  First of all, I'm going to put on my glasses to try and be as smart as this.

• 7:20Speaker 06

  My take on that was, you know, having, being a founding employee at SpaceX, we, I still say we because I still feel like I'm still at SpaceX even when I left there five years ago. We launched 165 rockets last year, more than any other country. And we put 10,000 satellites in orbit, three times everybody else's number of satellites. So tell me again why we can't build in the US?

• 7:49Joe Weisenthal?

  Okay, great answer, optimistic. All right. I'm going to ask you, this is, I promise this will be the most cynical question that I ask tonight. I promise. But and I'll ask it to both of you. We all love the sound of, quote, reindustrialization. It makes us feel really good. There's a lot of imagery associated with reindustrialization that we like. We like the image of factories, all these things. There's this very cynical part of me that when I hear, say, like VCs and founders talk about all of this stuff, that really what they want to do is they want to go on podcasts and give their theory about the decline of empires. And that they're actually, no offense, that was, and I believe you.

• 8:34Joe Weisenthal?

  But then, and then I'm like, yeah, but where's the thing that you've built? So why don't we start with you and both of you and maybe give me, why don't you tell me what you're doing and tell me why I should believe it's real, rather than creating good footage for a 90 second tweet?

• 8:52Speaker 06

  So my company is Impulse Space. I started it within, you know, six or eight months after I left SpaceX in 2020, or 2021, sorry. And we do in-space transportation. So we still use SpaceX and other rockets to get to space.

• 9:08Joe Weisenthal?

  Okay.

• 9:08Speaker 06

  Everything I build operates in space. So we, we take over where launch vehicles leave off. So think of a launch vehicle, especially like Starship, you know, a gigantic launch vehicle that can take 100 tons to orbit. Think of it as like the container ship coming into a port, the port being at a certain orbit.

• 9:30Joe Weisenthal?

  Okay.

• 9:31Speaker 06

  And all that cargo needs to go to different places. So we provide the Sprinter vans and the, you know, the, the trucks to move that cargo to other places. So we have two, two, two products. We have one that's a very precision maneuvering satellite that has a lot of propulsion that can move very, very closely. We just had, we had, we have three of these on orbit right now. Two of them just came within 200 meters of each other. 200 or two football fields, which is really close in space, actually.

• 10:00Joe Weisenthal?

  Yeah.

• 10:01Speaker 06

  And then we have another product called Helios, which is basically a rocket on a rocket. It's a, it's a giant tank of propellant with a very high energy engine that can take you way out. It can escape Earth's gravity. It can improve the payload of a Falcon 9 to the moon or to Mars by about a factor of five. So those are the two main products, and then there's other ones I can't talk about.

• 10:22Joe Weisenthal?

  And what are you actually building?

• 10:24Speaker 05

  So we build design agnostic autonomous factories, which means manufacturing is hard. We will take any design and build factories as a service with our software platform and our technician base that we trained from scratch, where we are an automated contract manufacturer.

• 10:47Joe Weisenthal?

  Got it.

• 10:49Speaker 05

  What we actually produce is everything from spaceflight components for the products that Tom said, to an entire missile, to 30% of a Virginia-class submarine. So our job is to use technology to do process designs into a digital twin, run that into factories as a service, where we build software-powered factories combined with the workforce, where we can operate lights out 24/7. So we are incredibly more efficient and competent. But we are like, you know, Foxconn to Apple.

• 11:29Joe Weisenthal?

  Yeah.

• 11:29Speaker 05

  We are Foxconn to every defense brand.

• 11:32Tracy Alloway?

  When you say autonomous manufacturing, how autonomous are we talking about here? Could I, for instance, run one of your machines? And then also, one of the things I always wonder is, when we talk about autonomous machinery, what are the humans who are actually running them doing? Just like pressing the button that says go and stop?

• 11:49Speaker 05

  So the first thing that people get wrong is, if you look at a factory and you see a bunch of humans moving things, you think it's a like humanoid robot problem. Actually, what's happening in advanced manufacturing is there's an incredible amount of smart humans, either at a desktop doing digital engineering, or they're at the factory floor driving an incredibly dumb computer. And that's 90% of advanced manufacturing. This is why we're a software company, because it looks like to any robotics person that like, if you could optimize a technician not loading the part on the machine, or the assembly into the robot, that's going to save you money. It's not. It's actually all massive amounts of software engineering to tie everything together and

• 12:34Speaker 05

  make it autonomous. The reason why a welder or a machinist has to stand in front of a machine

• 12:40Tracy Alloway?

  Yeah.

• 12:41Speaker 05

  is because it's not closed loop. They're genuinely doing trigonometry in their head, being like, oh, I think the tool's about to break, and therefore I have to like, stand in front of it. That's all actually a software problem. So we build software-powered factories to make sure that you can do a physical task, which is very hard for any robot to do, which is high judgment, set up something very fiddly, and then load it into a robotics in CNC or welding system and say, go, it's done, walk away. And the power of the software is that you're able to walk away without being really scared that you're going to accidentally make a code change and crash a $3 million machine.

• 13:20Tracy Alloway?

  I think the trigonometry point was a polite way of saying that, no, I could not in fact run one of these machines, which is fair. It's fair.

• 13:28Speaker 05

  I think fundamentally, what humans do in our factories is, they have high judgment, they have control over their, what they are going to do, and they do very high dexterity tasks. Most of the load is on the software.

• 13:57Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis. But sometimes you've only got 10 minutes and just want to know what's moving markets fast. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused, and brief. Search Barclays Brief wherever you get your podcasts.

• 14:22Speaker 01

  Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful, can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com by selecting Work Mode, available on Plus and Pro Plans.

• 15:05Speaker 07

  This is Robert Smith from Business History. If you're listening to this, there's a good chance you're a small business owner. And like every small business owner, you started with a dream, to do what you love and watch it grow. What you probably didn't dream about, keeping up with cyber threats. That's where Mastercard can help, with access to tools that help identify cyber threats to better protect your business. Building your dream business, priceless. For cybersecurity in a changing world, there's Mastercard.

• 15:31Speaker 07

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• 15:35Joe Weisenthal?

  So I was in, I spent, I was in Shenzhen earlier this year, and one of the things that people always talk about the Chinese manufacturing success is the ecosystem, right? You need some part or something like that, that's custom fit, and there's someone a mile away, and they can make it for you that afternoon, and then you like, have it there. And what's interesting, or intriguing, or why we wanted to have this part of the conversation, is I know that there's actually quite a number of companies in the Southern California area building stuff. And I'm curious, like, is it becoming rich, in the sense that you're complementing each other, and sort of like, building on each other's successes, and each one of you is

• 16:18Joe Weisenthal?

  increasing the odds of you that the other succeeded in some way?

• 16:22Speaker 06

  I think it's both. We're stealing talent from each other, certainly. And we're competing for talent, for sure. There are so many companies that, a lot of founders that were ex SpaceX like me, and a lot of my employees are ex SpaceX, and other, and then, like, right across the street from me is Northrop Grumman, which was TRW. I worked there for 15 years. It's literally across the street from me. I look out at my office window, and I was in that building. We steal a lot of people from them. We steal from Boeing. It's just, there's only so much talent in the area, and there's so many companies growing so fast. We're bringing it back. I was talking in the green room about this chart that I used to love, that showed aerospace jobs in the South Bay like this.

• 17:07Speaker 06

  And SpaceX started in 2002. It took, it took maybe three or four years, and it started going up, and it's just going like that. Because there's this, and then, and you think about, like, all the other startups are not necessarily all space startups. There's, there's nuclear companies, there's, there's drone companies, there's, you know, defense companies, there's 3D printing companies, all kinds of new tech happening in the area. And if you go even further, like, not just, not just South Bay, but, you know, like Andorl, you know, down in Orange County and, and the general area, it's just, I always say that, like, software is done in Silicon Valley, hardware is done in LA.

• 17:50Tracy Alloway?

  Wait, can both of you say a little bit more about how you think about producing stuff in-house versus sourcing it externally? Because you think about SpaceX, and one of the famous things about SpaceX is vertical integration, right? The idea that there weren't enough space manufacturers making vital components, so they brought everything in-house in order to do it, you know, to the speed at which Elon desires, to put it politely or mildly. How do you think about that trade-off?

• 18:17Speaker 06

  I mean, that, that's a great discussion to have, because Chris and I, you know, it involves both of us, because we're very vertically integrated at Impulse, just like we were at SpaceX. But also, we buy a lot of parts from outside. Like, I think it's really important to, to, like, you make your first development engine or spacecraft, you build it yourself, and you learn all of the problems that you're going to have assembling it, machining it. If I, if I gave a, a development thing to a machine shop, and they had all these problems with the drawing and making the part, and then we get it and we can't assemble it, like, you learn it on your, on your prototypes. And once you get that tight, then you send it out. Like, I know Chris is getting ready to make Raptor parts, so even SpaceX is sending parts out.

• 19:03Speaker 06

  We get to the point where you get into production, that's, that's when you don't need to grow your facility to handle high production. Maybe, maybe you'll keep some of the really super secret parts in your house, but you'll send the easier-to-machine or, or stuff that his shop can make really great out. That's my take on that.

• 19:24Speaker 05

  I agree. I, I think every company should have 10 to 15% in-house. There's no amount of software or service in the world that, like, you got a hot pot, you need the one genius guy to make it in an hour to hit flight. But scale has to happen externally.

• 19:43Speaker 05

  For us, as a contract manufacturer, you know, for some customers, we make parts, for some customers, we make the entire missile. And for submarines, we make somewhere in halfway. Even for us, what I, what I trade off is, I think in manufacturing, you sell and buy trust. So our vertical integration strategy is, we want to outsource everything possible to every reindustrialized startup, every small business that we possibly can, because we have so many programs to run. But we vertically integrate where we just don't believe you're going to get the job done. And it's not a financial trade. It's like, I'll, I'll put a $2 million piece of CapEx, $2 million piece of CapEx in the ground, and hire a team to do it.

• 20:27Speaker 05

  Because I would rather spend more money making sure we're on schedule, than taking the risk that outsourcing it to a legacy casting facility that's been late for the last 30 years on every submarine program. For me, it's all about trust. It's not economics, it's not anything, it's just, I need it to be on time, and most of America is incompetent in terms of trust and schedule. Is that, is that fair?

• 20:51Speaker 06

  A manufacturing, a machine shop or a manufacturing house that you can trust is gold.

• 20:57Joe Weisenthal?

  You know, we did, actually did an interview yesterday with the guy who's heading the LA 2028 Olympics. But I recently saw the, the robot Olympics in China, and all the humanoid Olympics, and they were like, running, it was like, really impressive. Let's be honest, in future Olympics, will Americans ever medal in the humanoid robotic Olympics?

• 21:20Speaker 05

  Not yet, but I, I'd take a roided up Midwesterner versus a communist robot every day of the week.

• 21:31Joe Weisenthal?

  I would too.

• 21:31Tracy Alloway?

  That's a good answer.

• 21:32Joe Weisenthal?

  But, no, but this is a serious question because

• 21:36Joe Weisenthal?

  future warfare could be

• 21:39Speaker 05

  No, it is, it is.

• 21:41Joe Weisenthal?

  And I would not want to put up a roided up Midwesterner against a robot that like

• 21:46Speaker 05

  Well, I'm just glad to know that you're full of clankers, but

• 21:50Joe Weisenthal?

  But no, seriously, like, how anxious should we be about the robot gap?

• 21:55Speaker 05

  So in terms of so let me, let me go back a step. Netherlands, British Empire, American Republic, the next trade is the CCP versus America. America has a lot of flaws. We like to debate because we are so rich that we get to debate the culture of the country instead of fighting for survival out of a famine. Ultimately, hard power wins politics because at some point you don't want to be polite and you can just be like, well, you, I have 2,000 warships.

• 22:22Joe Weisenthal?

  Yeah.

• 22:23Speaker 05

  We have our current missile inventory in any war game, we expand everything in the warehouse and we run out in seven days. China produced 2,600 ships and we produced six, et cetera, et cetera, et cetera. And the thing that you need to realize is in Germany versus America, which is the proxy of World War II, we actually sucked at engineering. The German engineers destroyed us. We just McDonald's the out of them. We were China in World War II. No, no, it's not a laughing matter. We were China in World War II. We just outproduced them. We had better logistics. We made more stuff because we were the

• 23:06Speaker 05

  we weren't rich, but we're the industrial superpower and we became rich because of Bretton Woods. You're in the same situation. So it's incredibly serious because um, you're in the fourth turning where you are like, we spent the last 10 years in COVID trading cat pictures on JPEGs on the internet.

• 23:27Joe Weisenthal?

  Yeah.

• 23:27Speaker 05

  And we've forgotten why we're successful in the first place, which ultimately was we were the largest industrial superpower in the world. So the reason why it's serious is you can have the best engineering in the world. Like you've got the best Raytheon missile, but if you literally can't just make mass, which is ultimately a production issue, there's, there's no choice. So we are so far behind and no one realizes this purely because you're in a cultural time where America currently is, is, is IBM. And you go to the board of IBM and you say, hey, guys, would you like to invent Claude Code? And the board and the CEO says, yes, sir. And you look back, you're 500,000 employees and you go, we're

• 24:14Speaker 05

  and the good thing is America's got a lot of dynamism. America's got people like Tom Mueller and Elon and um the nuclear stuff. It's possible to correct, but we are so far behind that ultimately robotics is how good are we at software? But ultimately, most of software, especially AI is now determined on what is the velocity of your training data, which means physical world deployment?

• 24:37Joe Weisenthal?

  Yeah.

• 24:37Speaker 05

  Which means mass manufacturing. So uh, it is a real civilizational fight and it's not this like fun game between American companies where like, hey, if Tesla ships more optimist versus Google, the consumer is going to end up in a better product. No, no, no, no, they're going to kill you. And people are not tracking this at all. And Tom, I know you're much more of a space guy than defense guy, but I'd love your opinion on this.

• 25:03Speaker 06

  Well, I, I have a pretty, I've been thinking about robots a lot lately and I think that the resources of the moon are going to be needed to do what we want to do in space. And how do you do that? Like having people on the moon, like a lot, like an army of people working on the moon is just not sustainable. It's too dangerous. It's too expensive. It's, it's just, it's not a good environment for humans. Maybe a few, but um, you want an army of robots to build on the moon and eventually Mars. And what do you need to make a really good robot? I think you need three things. You need dexterity. You need a human hand, basically, and people are working on that.

• 25:44Speaker 06

  You need great vision, uh, which is already pretty much solved and you need a brain, AI. Once those pieces all come together, you have the capability of a human plus a superhuman. Of course, that can be used in war also, but for me, I always think about what you can do in space. Because it's such a harsh environment. Humans, humans should not have to be there. We, we should choose to go there. But, but, but to try and work and build there is, is, is a losing game, I think. And, and we don't need to do it because robots are on the cusp of being ready.

• 26:35Speaker 01

  Some people treat ChatGPT like some kind of smart search engine and some use it to get work done. ChatGPT work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com by selecting work mode, available on plus and pro plans.

• 27:17Speaker 07

  This is Robert Smith from business history. If you're listening to this, there's a good chance you're a small business owner. And like every small business owner, you started with a dream to do what you love and watch it grow. What you probably didn't dream about, keeping up with cyber threats. That's where Mastercard can help with access to tools that help identify cyber threats to better protect your business. Building your dream business, priceless. For cybersecurity in a changing world, there's Mastercard.

• 27:44Speaker 07

  Learn more at mastercard.com/smallbusiness.

• 27:47Speaker 08

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• 28:55Tracy Alloway?

  What is the actual key constraint to your respective businesses then? Because when you, when you say these things, everything is couched in these existential terms like, you know, war and death, and I'm sure we all want to survive. So why aren't we cracking this particular problem? Is it, I've seen your respective valuations, so it's probably not a question of money, but is it a question of labor or materials or what's going on here?

• 29:21Speaker 06

  You go

• 29:25Speaker 06

  you know, the, the last two weeks, I think the discussion has been, will the AI just kill us outright before we even get to war, right?

• 29:36Speaker 06

  Yeah. Technology is a great thing. It's a super dangerous thing. I think there's been no greater example of that than AI. And um, I read uh, Superintelligence by Ben Bostrom, like when that came out, like 10, 15 years ago?

• 29:52Joe Weisenthal?

  Yeah.

• 29:52Speaker 06

  And, and

• 29:55Speaker 06

  Elon read it too, and we were scared. Like, it was just like, that book was so comprehensive. And it's like, well, at least, you know, the futurists think this is like, you know, 2045, 2050, this is going to happen. Because of LLMs, nobody knew that an LLM, maybe to study human language and do these, these neural networks, how much could be in there, right? We still don't understand. So it happened much sooner than we thought and we're not ready for it. And um, here we are. We can't slow down too much. I think we're ahead of China so we can slow down, but we can't slow down too much and let them get ahead because whoever has the super intelligent AI could possibly rule the world. I think that's probably true.

• 30:39Speaker 06

  So we're at a really important place in history right now.

• 30:44Joe Weisenthal?

  You know, when I asked that question about the Robot Olympics, I was really hoping your answer was going to be something like, yeah, that's just show we're really not that far behind. Like I was, I was trying to set you up for like an optimistic spin. And I thought, oh no, don't get fooled by like those videos you see of robots. But everything since then has been unfortunately

• 31:06Joe Weisenthal?

  by the way, I understand we're a nicotine fueled empire or I heard that great, that great powers are fueled by nicotine.

• 31:13Speaker 05

  Every great company or empire is fueled by one drug. Stripe was an ad role company. Everyone in manufacturing is a nicotine and alcohol fueled empire.

• 31:21Joe Weisenthal?

  So

• 31:21Speaker 06

  Caffeine.

• 31:22Joe Weisenthal?

  So you, um, Tom, you said something really important, actually, at the, at the beginning, which is, you know, you mentioned the number of uh, rockets that we've launched. And we always say, oh, you can't build in America. But it is evidently provably false because there was this one individual who actually built the biggest car company in the world and is the built, built the biggest rocket company and the biggest satellite company, et cetera, which they're, they're not multiple of him, but it was clearly in retrospect possible to build big things.

• 31:53Speaker 06

  And he was about to build the, the biggest data server company in the world.

• 31:57Joe Weisenthal?

  Right. So I don't know, you know, in what is as SpaceX employee number one? What was it? How would you characterize to a broad public? What Elon was capable of doing, which so many people presume cannot or could not have been done in the US in the first half of, the first two decades of the century?

• 32:20Speaker 06

  I mean, you know, I went through, I couldn't hire, when we first started, there was like four of us and I couldn't, all the people I worked with at TRW, all of them like rolled their eyes and would not come work with me. All the Rocketdyne guys, Rocketdyne did all the engines that got us to the moon back, you know, back in the 60s. None of them, they, like, only governments and big money can, can build a rocket that can get to orbit. So we had, at every step, people saying, you can't do it. Like, you can't build an engine that can do this, you can't, a pump-fed engine, you can't get to orbit. Okay, you can get to orbit with a little, single-engine rocket, you can't get to orbit with a nine-engine,

• 33:03Speaker 06

  you know, Falcon 9 orbit. We did that. You can't get, you can't get a space capsule to work. We did that. You can't go fly humans to the space station. Dragon, right now is the only, in the Western world, the only way to get to our space station is a SpaceX Dragon capsule. We did that. And so, the biggest rocket in the world is Starship. No way can you do that. It's flying. It's about ready, about ready to become aircraft-like operational. So, when Elon's, people still call it hype, and I don't, because I've been through it for 20, for almost 25 years. It's not hype. He's gonna build it. It's, if it's, I, I believe, if it's possible, it will be solved. And it might take longer than Elon

• 33:47Speaker 06

  thinks, but he will solve it.

• 33:49Tracy Alloway?

  What's the most surprising thing you ever saw Elon do?

• 33:52Speaker 06

  I've talked about this. I think the one thing, I was in the meeting when they presented the, the landing legs for Starship, and it was super heavy, and it was just, you know, Starship is stainless steel. It's a heavy machine. And anything that's secondary structure, like landing legs, is just, we need to get rid of it. And he says, we're gonna get rid of the landing legs, we're gonna, we're gonna catch it in the air on these, on chopsticks, like, like catching a fly with chopsticks. And we all just rolled our eyes like, this is crazy. There's just no way. Did y'all see it? That Starship, the biggest rocket in the world, came in and landed on the chopsticks. And none of us, I wouldn't say none of us, but some of us did not believe it could be done. And, and it was done. And

• 34:36Speaker 06

  it's like, if, if it's possible, it's solvable.

• 34:40Joe Weisenthal?

  I have a sort of a nuts and bolts question, maybe, I guess, literally, but, trade policy. So obviously, there is a view, okay, like, one way to accelerate demand for American production is tariffs and so forth. I have also heard, however, from talking to other people in the industrial space, that it cuts both ways, because there are certain components that must be imported, and therefore raises the cost of certain input goods into this. And I'm curious what you've seen in your own world, the degree to which some of these policies can perhaps cut in both directions.

• 35:16Speaker 05

  So, I, I, this is a very nuanced answer, and both administrations have gotten it slightly wrong.

• 35:24Joe Weisenthal?

  Okay.

• 35:25Speaker 05

  So let me set the macro, which most people don't understand. Fundamentally, fundamentally, there's, there's four inputs to manufacturing. There's energy, there's labor, there's capex, financing costs, and then there's export tariffs.

• 35:45Joe Weisenthal?

  Okay.

• 35:46Speaker 05

  In most circumstances, you know, and I've done this exercise, if you dial our factory down to 0% labor cost, 0% energy, whatever, Chinese imports are still three, I, I can, I can make a component for a customer, I can buy the raw material in the United States, and it's three times the cost of the component in, imported from China, for some of our commercial customers.

• 36:11Joe Weisenthal?

  Yeah.

• 36:12Speaker 05

  If I dial my business model down to zero. So fundamentally, what the tariffs meant to event is, first principles, the CCP is subsidizing energy, labor, capital, and export tariffs to draw competency out, again, to the fourth turning command, to generate industrial power subsidized by the American consumer. Same with drones. The reason why we are bad at drones is because, not because DJI is the best software drone company, but those things cost 60 bucks, and they sell into American consumers for 20 bucks. This is

• 36:50Speaker 05

  an explicit understanding that China has always treated industrial policy like national security.

• 36:58Joe Weisenthal?

  Yeah.

• 36:59Speaker 05

  And since 85, America's treated industrial policy like financial spreadsheet returns for hedge funds. That's point number one. The intent of every Biden or Trump subsidy or economic policy was to give Americans an even playing field against a country that is operating their industrial base like national security. That's point number one. In terms of tariffs, it's complicated. The reason why it's complicated is for two reasons. One is, you have to ring fence everything around China. And in practice, what happens is, if you only ban China, but you don't ban Singapore, some Chinese company will ship something

• 37:43Speaker 05

  to Singapore, they'll call it Singapore, and it's the same impact on the American workforce or industrial policy. The third thing is, is that there's a definition issue here. So as an example, raw materials from China are under, like, they're on the tariffs. If you, if you have a little bit of human labor in it, it's an assembly, and that's negative against American businesses that are trying to import assemblies from Mexico. So there's no, there are trade-offs all over the place. The principle was correct, which is provide Americans an even playing field against a company that has a fake balance sheet and projects 6% GDP growth and draws American capital in, American consumer capital in.

• 38:25Speaker 05

  That has to get solved. It's not Americans suck at manufacturing, or software engineers are not good at manufacturing autonomy. You're subsidizing from 30% to 60%. Every implementation is like, really tough to do, in terms of the nuance.

• 38:39Joe Weisenthal?

  Sure.

• 38:40Speaker 05

  The correct thing to do, in my opinion, is what we just did with drones and robots, which is, it's a terrible idea that every American police drone or military drone can have any Chinese circuit board in it. Because obviously, you can then turn them into like, oh, if we go to war, you're gonna zap the guy in the head. Same thing with robots. I would like a $10,000 laundry folding robot, but industrial policy means that you're gonna buy a $30,000 laundry folding robot, because otherwise it's gonna [bleep] kill you eventually, and that's bad leverage for the country. No, I'm serious. Because they don't actually make them for $10,000, they make them for $30,000, but the national policy says, I

• 39:24Speaker 05

  would much rather have every laundry folding robot in America cost $10,000, because the American consumer is the largest capital allocator in the world, much bigger than Blackstone and Bakra. So, the banning of components and assemblies, to say, you've gotta buy American, American allies, and let the market correct for cost, is correct. Tariffs are a imperfect way to do that, but the core principle for any administration of leveling the playing field is correct. But each side has gotten this materially wrong, because it's complicated. And there's many ways to commit fraud inside any regulatory system.

• 40:07Joe Weisenthal?

  Chris and Tom, oh.

• 40:09Tracy Alloway?

  Oh, I was gonna say, we could go on for a long time, but we're gonna have to leave it there, because we've run out of time. But Chris and Tom, thank you so much for coming on Odd Lots, really appreciate it. That was our conversation with Chris Power and Tom Mueller, recorded live here in LA. I'm Tracy Alocke. You can follow me at Tracy Alocke.

• 40:42Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at TheStalwart. Follow our producers, Carmen Rodriguez at CarmenArmond, Dashil Bennett at Dashbot, Cale Brooks at CaleBrooks, and Kevin Lozano at KevinLloydLozano.

• 40:54Tracy Alloway?

  And for more Odd Lots content, you should check out our daily newsletter. You can find that at Bloomberg.com/oddlots.

• 41:00Joe Weisenthal?

  And you can chat about all these topics 24/7 in our Discord, discord.gg/oddlots.

• 41:05Tracy Alloway?

  And if you enjoyed this conversation, then please like the video, or leave a comment, or, better yet, subscribe.

• 41:11Joe Weisenthal?

  Thanks for watching and listening.

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