The scenarioIn 2002, Elon Musk wanted to buy a refurbished ICBM from Russia to launch a small payload to Mars as a publicity stunt for space exploration. The Russians quoted him $8 million per rocket. On the flight home from Moscow — reportedly furious — Musk opened a spreadsheet and started listing the raw materials in a rocket: aerospace-grade aluminium alloys, titanium, copper, carbon fibre composites, RP-1 kerosene fuel. He calculated the commodity cost of those materials. It came to roughly 2% of the price of a typical orbital rocket. The question shifted from "where can I buy a cheaper rocket?" to "why does a rocket cost 50 times its material inputs?"
How the tool appliedMusk and his early team — including Tom Mueller, who had designed the TR-106 engine at TRW — decomposed every major cost driver in rocket manufacturing. The conventional aerospace supply chain involved layers of subcontractors, each adding margin, each building to military specifications that often exceeded what commercial spaceflight required. Engines were the most expensive component, and the industry's assumption was that rocket engines required exotic manufacturing processes available only from a handful of suppliers. The first principle: an engine is a combustion chamber, a turbopump, injectors, and a nozzle. The physics of combustion and thrust are well understood. The question was whether those components could be manufactured in-house, using modern techniques, at a fraction of the subcontractor price. SpaceX chose vertical integration — building roughly 80% of the Falcon 1 (and later Falcon 9) in-house, including the Merlin engines. They used friction stir welding instead of traditional aerospace welding. They used commodity-grade alloys where military specifications weren't structurally necessary. They designed for manufacturing simplicity rather than theoretical performance optimisation.
What it surfacedThe decomposition revealed that the majority of rocket cost was not driven by physics or materials but by procurement structure, specification inheritance, and risk-averse institutional culture. NASA and the Department of Defense had spent decades building a supply chain optimised for reliability at any cost — appropriate for their missions, but not the only viable approach. SpaceX's Falcon 9 eventually achieved a launch cost of approximately $2,720 per kilogram to low Earth orbit, compared to roughly $54,500 per kilogram for the Space Shuttle. The reusable first stage — itself a first-principles insight (why throw away a $30 million booster after one use when aircraft don't discard their fuselage after each flight?) — reduced costs further.
