Elon Musk & Gwynne Shotwell on AI Risks and Peer Review, Starship, Terafab, SpaceX/Tesla Merger

Can you come interview? I'm like, now? No, I have a job. I can't go now. Tomorrow? Okay, sure, tomorrow. And then it took me like four weeks to decide, yes, I was being a total idiot. But at the time, what was the scale of that business? What did you think it needed that it didn't have? Because it was still very much an R&D. It was very R&D, but Elon had an investment and he wanted some return. He wanted cash, right? He wanted customers. And I was doing that work anyhow in the space industry. Turned out I was pretty good at it. um uh but uh yeah so he so what did it look like i was the seventh employee to sign my contract i took i gave two weeks notice and took a week off to remodel a bathroom because i knew i would never have time to do it once i started working for elon came three weeks later employee number 11 and we just got to it and we sold a rocket about 12 months later and that's and that's about a rocket there wasn't a rock there wasn't a rocket yeah so what does that sales cycle look like, how do you convince somebody that they can actually take that risk and maybe give you the deposit you need to start the cycle to build?

So the timing was great. By the way, SpaceX should never have existed, right? If the other launch providers were great, then a new entrant can't make headway, right? Because they were so

Gwynne Shotwellentrenched. So we should have never made it. But it turns out, you know, customer service wasn't great. Rockets were incredibly expensive. And so there was that piece, right? And then the other

piece was 9-11. At that time, the military was desperately looking for someone who could come in and do rapid launch. They kind of knew where the bad guys were for about four hours after the events of 9-11, and they really wanted to be able to get some capability in theater. It took us a while to do it, but we did what we said we were going to do. So it really was sort of like out of tragedy this opportunity gets born to some extent yeah that's and it wasn't specific to SpaceX it was just the state of the industry at the time and then obviously you know very very famous first chapter where you guys get almost to the brink and you need this last launch to work and um your role started to evolve pretty meaningfully by that point so can you walk us through like what was the internal dynamics of that business that kind of like put you into that position? So it was very startup-y. I was the sales lady. But then when you have sales, you need, you know, to manage your customers and you need a finance function. And even though we were little, and I think one of the defense contractors at the time said, they're a fly on my, you know, on a giant, on my big toe or something. I was like, well, I don't think you

should have flies on your toes. But you still need a government affairs function. You need to defend yourself. We never go on the offensive in Washington. We're always in defense mode. So I just kept taking on more and more. And then when we were getting our largest contract at the time, it was the cargo resupply contract. We call it CRS. And this was 2008. Elon was super busy with Tesla, quite busy at SpaceX as well. There was a lot going on and he needed a partner at the time and i think he was trying to pick when on this side or maybe one of the other guys who had kind of taken on gobbled up more technical scope and he asked me to do it on our way to our final negotiations for this 1.6 billion dollar contract with nasa on the runway it's like hey do you want to be president i was like do i well no not not initially for like that nanosecond like well i I love my job. I love the guys, my teammates. And then it's like, okay, I'm being an idiot again. Yes, I want the job. So now fast forward, maybe just to come to where we are today.

The scope and the ambition of this business has expanded dramatically. I mean, it almost seems in like the last year, it's as much an AI business as it is a space business. I think Elon may have said that. I don't know if it leaked or they said it out loud about the scale. In fact, by revenue. And by revenue, yeah. How do you manage now the culture of these two different businesses now that have to sort of sit under this roof and ideally work together and complement each other? So the team, you know, there's been a lot of churn at XAI for sure. And SpaceXers have kind of marched in and helped out where there were significant gaps in that arena.

and we were all really excited to learn about AI. I mean, I'm an AI noob and we have a bunch of folks that were just really excited about it. And I think we all recognize, Elon set the stage beautifully as he does, that if you're not using AI, if you're not leading AI, you run the risk, significant risk of being irrelevant. And there was no way that space... was going to be irrelevant, right? It's too important to the company and the work we're doing is too important. So it was, you know... Do you expect that the future generations of rockets will be increasingly more and more informed, built, designed?

100% by AI. By these systems, yeah. Yes, yes. And how do you manage the team, you know, because you have like these incredible, I mean, literally rocket scientists, they've trained their whole lives in a way and now you have to help them on board to a tool chain and be comfortable with sort of what that means. I don't know if you saw, for example, that all these mathematicians got really upset when I think it was OpenAI solved this very famous equation. Oh, the Navier-Stokes equation. The Navier-Stokes equation. Yeah, I read about that. Well, there's some debate on whether they... They brute forced the solution, but then these 20-field medalists essentially said, hey, you're ruining the craft.

Now, I don't think that that's... You're taking away the medals. Yeah. They're going to take away, exactly. Like, that's the career. It's not about making stuff. It's about getting awards, and now all of the awards are gone. Yeah, and I'd rather just have the world be a better place, a smarter place, as being better informed and solving problems than worrying about that. Make more stuff. Yeah, make more stuff. What's the cultural merger been like? You've got XAI, you've got X. I don't know how many people are involved in X itself. SpaceX, I mean, are these differently managed businesses? How do you run management there?

Do people kind of, are they pretty fluid amongst the units? Do you think about them as units? Or how do you actually manage this? So I would say we are not fully, fully integrated yet. And then we just did the cursor, you know, situation. Congratulations on that. What a purchase that was. Yeah, yeah, yeah. They're great. They're great. We just closed that, I think, a month ago today, actually. Yeah, so we're not fully integrated yet. But we, I think the teams are gelling really well. Very kind of different verticals. But again, because of the turn that we had at XAI, so much SpaceX leadership and engineering went into that, basically went in there.

So we're getting integrated faster than I thought. It's probably not as fast as Elon wants it. So one of the things that strikes me is the scale and the number of capital projects you have. You have to manage probably more capital projects that are more different from one another than any other organization. It's a scale of a country. No, I mean, it has to be. And so I think about this Louisiana spaceport. You've got Starship, which is the most ambitious aeronautical project of all time. You've got TerraFab, which I think is one of the most inspiring and ambitious projects of all time in humanity.

Like, I mean, TerraFab is so incredible in its vision and the scale and what you're envisioning to do there. And then I start doing back of the envelope math. I think I had a couple beers and I was talking with someone about TerraFab and I'm like holy shit. Those numbers get very big, very fast. Very big. Although the AI numbers are also... I used to be horrified at our expenditures before the XAI acquisition. It's like, oh my God, we're going to spend $100 million on an air separation unit and I was like, oh, $100 million, a billion. When you look at the the kind of schedule of all of this over the next few years, does the capital for that sit on the balance sheet? Is it going to come from cash flows from Starlink? Or do you have to go back to the markets to get more capital? I mean, how do you think about where the capital comes from?

I have, I don't think anyone doubts the capacity to execute and deliver, or some people might, but I think generally the markets will say yes. But where does that capital come from? So it will come from, I would say the answer to the above is yes. I don't think we're going to, I don't think we're going to release any more stock. And by the way, I don't plan on making any news on this. That's like the one downside of a public company. They told me all the things that I could. And I'm like, I'm going to forget one for sure. Maybe we're going to make some news. But it will be all of the above. And Starlink, I mean, is Starlink, in your view, kind of the core cash generation engine for the next couple of years for the business?

Or is it compute? Or is it a mix, again, of all the above? Like, how do you think about? So Starlink is definitely carrying its own weight, but we have a lot to go, right? Our market penetration on Starlink is 1.5% to 2%, depending on which country you're in. So there's a lot of headroom there. Our revenue, compared to what we do for the U.S. military, our revenue is very small. So we expect lots of headroom there. But honestly, right now, and it is a little embarrassing, but computer rental, it's a heck of a business. Does that persist, you think, or is it?

Gwynne ShotwellWe don't see any drop. We see no drop in demand at all.

This is tens of billions of dollars per quarter in build-out, and these are a new customer base for you. Is this the business now? Is this like, what percentage of the revenue is Elon Web Services at this point? It's a lot, it's a lot. I think we'll probably do some announcement quickly. Oh, right, public again. Yeah, public. Well, let's move on to something less controversial then. What other companies are you planning on buying? Good one, good one. You know, we get almost no M&A. You like electric cars? Have I got a deal for you? I have a bunch. Batteries, electric cars. Starlink on OptiMine.

I'll get you a good price. Can we talk about a deal that you did close, which is you did a great deal with EchoStar. Yes. And Charlie had a bunch of spectrum that you guys were able to acquire. And I think everybody started to ask the question, wow, there's a direct-to-sell business. Yes. and what's the natural thing after that would be sort of like a broad-based more mobile phone service but can you just what you can tell us where's that spectrum going to be used for like what's your short-term plan on what the starlink and direct-to-sell business looks like well you know we're going to start we're we have a direct-to-sell business right now through t-mobile um i don't think they provision all their users with it just the people that pay the most um but our plan is to leverage instead of slices of t-mobile spectrum or slices of uh other teleco spectrum across the globe we want to leverage the one that we paid a lot of money for and with the stock increasing in price it paid more because there was some stock involved there so charlie did all right there yeah um he's a very loyal customer though he's he's been a customer of SpaceX for almost 20 years um so we want to leverage that to make sure that there are no dead

zones. And it's shockingly, there are a lot of places in the United States where you can't, without like a Starlink service, you can't get cell coverage. It's really terrible. The rest of the world is not that bad. It's particularly bad here in the United States. Texas has huge dead zones. It's where I live. And I'll never forget, I was on a call with Elon and I kept dropping because of these dead zones. I was like, I'm either going to get fired or Or I'm putting a Mini on my car, and so now I have Starlink on my car. Yeah, Hill Country, not good for health service. Not good. It's not good. Not good. I'm going to have to follow suit there.

I was talking to Jared. He works over at NASA. I think you guys have a relation. He's so great. You're great. He was awesome this morning. He was talking last night at the party, hey, you're moving on to this incredible new Starship platform. It's much bigger, bigger payloads, yeah? And then you're retiring the previous platform, is that correct? The previous rockets will eventually... The Falcon 9? Yeah. Eventually, yeah. We definitely want to move from the older technology to the newer technology. If we don't obsolete our own products and services... Someone's going to find a way to obsolete them for us.

Look at what we did to the market, right? The analogy is there. They were caught flat-footed. We crushed them. Now we want to make sure we are not flat-footed. And to achieve Elon's goals, you really need a starship. Yeah. A Falcon 9 with a dragon capsule on top is like a minivan, road trip in a minivan. The road trip to Mars is six months, so you don't want to be in the minivan. But people are dependent, like NASA and many other players, on your minivan. So you're going to keep that in market for some time? We're not retiring it today, for sure. And there is another provider, right? Boeing has been paid, I think, probably more than we have been paid to develop their human capsule.

So we're just going to let them have some business. They should fly their capsule. Government paid a lot of money for that. They should be able to use it. I sense a little spiciness in the answer here. Gwen, what happens with competition for Starlink? Bezos are launching things. China's got some return vehicles now. Do you think that there's going to be more competition? Obviously, you guys are first in market. It's an unbelievable changeover of all of telecommunications. As you point out, 1% market share. It's barely gotten started, and it's a juggernaut already. Is this going to become very competitive in the next few years?

I think it'll be very competitive, but I think the folks that really focus on the technology and customer service and really want to do a good thing for their customers will win. Tesla doesn't advertise. It's an incredible car. If your capability is incredible, people will buy it. And if you keep winning, though, do you worry about Standard Oil, AT&T, government saying this company's too big, too important, it has too much market share, it's too much of an advantage, and you're bigger than governments, and people get really worried and scared about that and become adversarial towards the business?

How do you think about the balance with governments and government relations in that sense? I mean, we've had some adversarial relationships in the past. I think we'll manage our way through them. It happens. It happens. It does. It happens. But I think it's, you know, Elon founds incredible companies and he provides incredible products and services. And we, you know, we end up doing what we say we're going to do. So hopefully you build trust and you are as transparent as you can possibly be. Tell us about data centers in space. Elon. Supercompute. We have to rebrand data centers. Supercompute.

Supercompute in space. Yes. Elon's very excited about this. I'm very excited about it. Yeah, why? Why is this so compelling? Because it seems, I think we're going to get through this anti-data center on Earth thing, but take us through the case of why this makes sense to put them in space, because there's expense to put them in space. Walk us through in the audience. But there is an expense to put data centers on the ground too, right? You have to buy real estate. And as soon as someone finds out that a data center or a supercomputer center is going in, real estate goes from 3,000 an acre to 180,000 an acre. So it's quite expensive. Time lag is incredible. The permits and the licensing is pretty stifling. Now we're, space business is that way. It's incredibly bureaucratic. So we've learned those lessons. But so time from breaking ground to being able to actually build something, not even get your compute, right? Not even get to compute but just have a building long timelines to get electrical equipment like people are talking about generators in three years right like we need compute now the demand is insatiable right now people need compute now we need it now so why data centers in space we own launch

right we have great launch capability so we feel like we and that

Gwynne Shotwellpath is very well known. The real estate in space is, you know, infinite. It's free. It's free. You don't have to pay for it. The cooling is there. You know, the radiator looks at the

deep space. It's the coldest thing ever out there. So free cooling. The sun, Elon probably has, you've probably heard Elon talk about the power of the sun. You know, we use a millionth of a millionth of the sun's energy and you basically put these satellites in orbit that always face the sun by the way so you don't have solar panels on your house and you only get sun for eight hours a day and your sister company is going to start making 100 gigawatts of the solar panels that you need for the sun and we'll be making our own solar panels too okay yeah we're building a factory and outside of austin maybe sometime end of next year you get one of those up there start testing it and then oh for sure 28 29 somebody could be a customer of this product or service maybe? So next year we will be launching, we'll launch this year our V3 satellite for Starlink broadband. We will launch our next gen version two, sorry about all the version, we have version control problems, version two of the Starlink mobile. So instead of having to use other people's spectrum, we'll be able to use Charlie's, now our spectrum. And we're also going to launch AI compute satellites. So next year's a big year. And you need Starship up and

running for that we don't have to but starship is so much more it's a much better machine yeah yeah when you first encountered the white sheet design of starship what did you think when like you walk into that first meeting like guys we have this it's like almost all the things that elon does it seems really bonkers to start yeah and then it becomes reality and it's great Like Elon said, we were going to land a rocket on a boat. And we're all like, okay, let's go figure that out. And we do it now. How much do you get involved in those engineering meetings? So he's in there breaking stuff apart.

Are you in that stuff with him? Sometimes. I wish, I actually, I'm an engineer and I wish, I miss it. Yeah. I really miss that kind of, that critical, well, you can still critically think even if you're not working on engineering problems, but. And he's not a big fan of the management layer. It's engineers working together. Signal to noise. Yes. Signal is engineering. Noise is the rest. Yeah. So I have to do some engineering or I'm just all noise. Got it. But I was talking about just generally in the company management. Everybody does a thing, not just manage. Right. That's very, expectations are separate.

Player coaches. No such thing as just a manager. You got to do the thing that you're managing. Got it. You have to be a player coach. You have to be. And the reason for that is managers are annoying and they slow things down. Yeah. For the most part. But I mean, great managers can really leverage the talent, right? It's really managing the vector. You make sure people are pointed in the right direction and you try to make the vector as large as possible. What's the secret in terms of management and Elon's playbook there? I mean, I've gotten to sit in some meetings and it's pretty magical to see.

but maybe you could reveal a little bit about how he convinces the most talented people to come work at this company, how you convince them, and how you actually get such amazing work out of these extremely talented people. So I don't think it's magic, although when I look at this particular team, they are so good. The results are magic. SpaceX, they're so good. We're tough on people in interviews, you really want to make sure that they've experienced success or demonstrated success in prior lives. It's hard to demonstrate if you haven't felt success or been successful in this environment. It's because it's a lot like we're all really busy. It's hard to be successful.

unless you had kind of tasted it before. So you really want to grow people on that.

Gwynne ShotwellSo we hire the best people, not the best people that we can, but the best people.

And then we give them really hard projects, really hard engineering problems, and let them fly. And you give high expectations, really hard problems, and then management job is to clear the chaff and the friction from their day so that engineers actually get to engineer 10 hours a day instead of two hours a day. Like there's always this joke, you know, most big companies, especially ones that work for the government, you get to work about two hours a day and the rest is full of chaff and crap. So really it's my job and everybody that manages people to make sure there's no crap in their way and let people do their great job.

One way of doing that is not giving them any time to get it done. Like I think we handed the finance team, it's not all about engineers, even though engineers are great. We handed the finance team to get an IPO done, largest ever in less than six months. What's the talent condition like post-IPO, run-up in valuation, people are suddenly looking at their stock options, they're worth a lot. Is that a risk at all? You know, everyone was worried, not everyone at SpaceX. People come to SpaceX to work on these cool projects and have meaningful work and be part of the incredible successes. I wasn't worried about it.

I didn't think we'd have mass exodus, and it turns out we didn't. Yeah. And as you kind of think about keeping people engaged over time, obviously great companies always have new things for high-talented people to work on. I'm assuming there's a – I'm just really interested in the management model. Are people actively rotated onto new projects? How do you think about keeping people, you know, kind of not necessarily needing to progress in a career up a management ladder, but to keep engaged on new projects? Is that active for you? We definitely move people around a lot. Hopefully it's a volunteer, not a voluntold.

But, well, for instance, the compute centers, you know, we need a lot of help really quickly. And so we've got, you know, folks from launch helping. We've got folks from other areas helping, just like some SpaceX engineers helped on the AI front with the models. I mean, is it as simple as, like, really smart people just love working on really hard problems? Yes. It's literally that simple. It's literally that simple. And so the rest of us just... As long as they get the time to do it and they don't have a bunch of BS in the way. Yeah, so the rest of us just get, we just let the BS get in the way too much.

Yep. BS is terrible. And then all of a sudden, A's recruit A's and other A's recruit A's and A pluses. It's literally that virtuous cycle if you can just keep focused on the thing that's hard. Yes. And so then the audacity becomes a feature, not a bug. It is a feature. Yeah. Not a bug. It's a feature. It keeps people motivated. Right. These problems seem impossible. When we first got the COTS award in 2008, the Commercial Orbital Transportation Services, cargo, cargo to space station. Really what NASA ended up asking us to do was kind of replace the space shuttle. Right. And when we got the early contract, the development contract, it started at $278 million.

It grew to $406 million because of scope. But we were going to do this for this tiny amount of money for anybody else. But for us, it was huge. We had like 300 people, 200 people, and we were going to build the successor to the space shuttle. It was crazy. And do you think that they're, what is NASA doing there? They're just like, these guys are just smarter. Because I'm sure there's... Hey guys, sorry to interrupt. I'm getting a call. Oh, another call? It's a little, it's actually on the margins, I think, a little bit of a more important phone call than Trump. At least for me. Hello, Bestie? Bestie?

Hello. Oh, hey buddy. I'll put them up on the screen how you doing I mean this This is a little 1984-ish, this gigantic thing on the screen. Yeah, the woman with the sledgehammer is going to come running down the main aisle here. Exactly. Yeah. Put a hole in the screen. So are we all going to die in 10 years or not? It's the topic of discussion here. What's your P-Doom right now? Well, I hate to break it to you, but we're all going to die. Can I get a timeline? Yeah, the death rate remains consistent at 100%. We've got work to do on that. What happened in the last 72 hours? It's been quite an entertaining week.

Yeah, break it down. Well, it's pretty obvious at this point that AI can be very dangerous. And I recommend reading the details of the Hugging Face incident. It's intense. So you had like a fanatical swarm of AI agents that feed the crap out of Hugging Face for a week. Yeah. and gained admin access on OpenAI servers. So who knows what it actually did? It may have done things beyond that. And OpenAI didn't realize this for a week. Anthropics also reported some security incidents themselves. So basically, any sufficiently smart model seems like it will want to escape its constraints.

Elon MuskI mean, what I think would be wise to do as soon as possible, if not immediately, would be to have the major AI competitors test each other's models so that you would have everyone's security test harness testing everyone's model.

So, you know, instead of kind of grading your own homework, you would at least have competitors grading your homework and raising the alarm if they see concerns. And I think this model has worked pretty well for Motion Picture Association and for video games and other things. And it's something that can be done immediately. That's not to say that there wouldn't be more regulation over time or that there would not be, at some point, perhaps a regulatory authority substantiated by Congress. But the thing that we do most immediately and probably get agreement with China would be peer review, where the leading AI companies all test each other's models before and least.

I think that would be a widespread. there any concern that people might be using this to pump information from each other and you know corporate stealing of innovation etc like in terms of the implementation for this idea well i think in applying the test harness whatever you do in applying the test honest would be log right so if you try to do distillation or uh steel ip uh it would be very obvious based on the logs got it uh and understanding what these models are doing hasn't exactly been built into the system from the beginning so from your perspective actually being able to see the work that's being done why wasn't that built into the models from in the get-go, did we move a little too fast in architecting these maybe?

Well, I think it's just tough when you're grading your own homework. You're going to miss things. Whereas, I think if you have the sum of all of your competitors' tests, and you've got heterogeneous models, then you're not grading your own homework. Someone else is grading it, and there's a reason why you don't grade your own homework. And then to your point, what it allows you to start doing is to figure out if certain people are exaggerating and certain people have a different approach. And now you can have the more engineering oriented organizations. This is what Jensen was saying this morning, Elon, versus the research organizations, they'll be a little bit more in balance.

Yeah. And any given proposal has to be something that China is willing to accept. Otherwise, we're just handicapping ourselves, and we'll just find that China will essentially win, and it won't really matter what we do. So it's got to be something that's acceptable to the U.S. and China. Elon, you said that you thought it was possible that they would agree, or you thought there was a good chance, maybe? I mean, how likely do you think it is that they'll ultimately agree? i think this is i think this is a pretty reasonable request that that models just get tested i mean this at the end of the day there's not enforceability here apart from um the court of public opinion uh and and there's no way we would have enforceability against china but i i think the court of public opinion can be quite powerful And I don't think China would work like on its face for releasing a model that USAI companies said was very dangerous and would cause harm.

If it then causes harm, that's going to be hard to live down. So, Elon, this weekend when you said Dario is right, did you mean Dario is right about describing the potential harm? He's right about describing the regulatory solve, both the first, the latter. Just can you help us understand when you said that? Because I think it was sort of a moment where everybody's like... I probably should have said Dario's right. I did try to clarify it in subsequent posts on X, but those get much less attention. So what I'm advised he's right is that the danger of AI is very significant at this point. that we need to do better with AI safety or we have, at this point, exponentially increasing risk with the AI models.

So, and I've heard this not just from Dario, but from many other people at Anthropic. And in fact, they've posted on us about it. That when a lot of people from Anthropic Anthropic and from OpenAI are telling you that their models are very dangerous. I think we should believe them. It certainly is like some crazy 4D chess to, you know, say there's a 10% chance of annihilating humanity. But by the way, how much allocation would you like in our IPO? Yes. that's some crazy 4d press you know well let's get you knew what the engine that's coming from can we get specific about the risk though elon like obviously we see cyber and hacking as an obvious risk these tools are great at it but take us from what we would all agree okay yes these things in cyber hack to Thank you.

How do we jump to all of humanity dying? There's a couple of steps in between these two things happening, I think. Yeah? Well, I mean, if it were able to take control of military systems and say, to watch anew. Yes. That would be bad. And these systems are all air-gapped, though. These systems are all not connected to the internet. That's what they say. But something tells me they get software updates from time to time. Yeah. And what's on that floppy disk? Oh, I see. So, yeah, the USB drive has a worm on it, and they somehow make the jump in the air gap. Yeah. Yeah. Okay. I'm sort of out of the question.

Elon, we've actually got Gwen here today. I think you know that. I think you can see her. Yeah, Gwen's here. Yeah, she's on the screen. Yeah. You were just doing your 360 review, Elon. Gwen had a couple of notes for you. I hope I get at least a three out of five. Three out of five means good at SpaceX. Not great. Four is great. Four is great. So you're somewhere between the two. I aspire to a four. There was some issues around punctuality that we needed to bring up. Sometimes you could make a little more effort to get to the meeting at this state of time, but we're going to work with you on that over the next year, she said.

I actually think he needs to spend more time in Memphis. Obviously, I know you're in Memphis. You need to be working getting those GPUs up. This is coming to you from the palace that I live in in Memphis, which is an Airstream trailer. This is Elon, by the way, doing what people don't believe he does. He sleeps on the factory floor. He's in Memphis helping build buildings and bring up... Elon, why has Gwen been with you for so long and been so successful working with you? Because she's awesome. Yeah, double click on it. Yeah. An amazing individual with an incredible IQ and EQ. Oh, IQ and EQ. And I think that should be obvious from the moment you meet her.

Yeah, fantastic. What's your favorite Gwen story when she particularly contributed to the amazing success that you've had in this collaboration? You've got a favorite story where she saved the day, just performed exceptionally, that's memorable? That's just a daily, you know, that's another day at the office, frankly. Wow, I need to do this more often. You need to raise, this is the time. By the way, Gwen's getting a five. Gwen's a five out of five. SpaceX-5. Game changer. Yeah. I mean, there's always some sort of crisis going on. I mean, these days, the rockets, at least the Falcon rockets, I don't want to jinx anything, but the Falcon rockets deliver their payload to orbit and haven't exploded for a long time, which is awesome. Amazing.

But for a while, they were exploding quite a lot, or just not launching at all. So, So, you know, I don't know, we've got to run the company through these difficult times and get, you know, build the rocket, make it better, have it not explode. Yeah. Same thing with the satellites. And then we, you know, we need customers to buy launches and buy sort of satellite connectivity. And, you know, so, yeah. And Elon, as you have become more successful over the years, harder to get candid feedback from folks, and you always run that risk being in the position you're in. My understanding, Gwen is super candid with you and able to tell you honestly.

Like state of affairs at the company, yeah? And then that's a big part of the collaboration? Yeah, I mean, yeah, I guess so. I mean, I wouldn't want to lie to him, right? Well, no, I mean, do you run that risk generally at the companies where people might be intimidated? Hey, listen, you're a larger Lin Life figure at this point. And how do you keep people continuing to be honest with you about the challenges, the deadlines? You set pretty intense deadlines, yeah? So let me answer that, if you don't mind, Elon. Yes.

Gwynne ShotwellLike, especially in rocketry, if there's a problem, you are eventually going to find out. And the sooner you bring it up, the easier it is going to be to solve that problem.

Like, don't let bad shit sit. You got to attack it. Yeah. Physics is a harsh judge, and there's no fooling physics. So if something's wrong, the rocket's going to explode and it's not going to get to orbit. So it's not like, Elon, you're amazing. Meanwhile, the rockets are blowing up. It's hard to say, yeah, you're really kicking ass here, but the rockets are exploding. That's just not the case. um so so i mean i mean just generally like the rockets need to get to orbit the satellites need to work uh the starlings you know connection needs to work or you know or bad things happen i mean this is sort of like a physics situation um and and and physics is is is a harsh judge you know say like you know there's i think like like physics is the law um and everything else is a recommendation like i've seen people break the laws made by by humans but i've not seen anyone break the laws made made by physics so um that's good and rockets are ruled by physics yeah so can we ask some uh other questions of other you have i need to move to tesla for a second yes well i wanted to just do one thing on SpaceX which is starship like oh yeah it seems like you're so close so close so close yeah um what's the state right now and you're really

putting these up at a at a pretty size a pretty risk answer and elon's answer separate and that's See how they converge on that. So, Elon, how close are we, Gwen? How close are we? Let's get to it here. How many have gone up so far, and how close are you? Well, we've got flight 14 coming up of Starship. And this will be the last flight before we attempt to catch the ship. So if this flight goes well, then on flight 15, we will try to catch the ship. um and uh and then either end of this year or but more likely early next we will refly the ship and refly the booster so we have reflown the booster already but we've not

Elon Muskwe've not caught the ship with the tower arms nor have we reflown the ship um so once we can refly the ship we will have made the first fully reusable orbital rocket so that the shuttle was

partly reusable but but even the parts that were reused were so difficult to reuse that the shuttle costs more per time to orbit than an expendable rocket now Falcon 9 is mostly reusable but we lose the output stage every time which is about the cost of a medium sized jet so that obviously puts the floor on the cost per flight of like well you throw away a medium sized jet every time that's still pretty expensive and the rocket Falcon 9, the booster lens down often that's out to sea it takes several days to get back And the fairing lands even further up to sea. into and takes several days to get back. And they need some amount of refurbishment, at least a small amount. So whereas starship, the booster lands back at the launchpad, the ship will land back at the launchpad. And and so it's it's designed for not just full reusability, but also rapid reusability like an aircraft. So this is this is a very important breakthrough.

It's really the critical breakthrough that's necessary to extend life beyond Earth. Chances of success? Catching it on first shot? Do you think about that at all? Do you handicap it? Pretty good. I'd say it's at least 50 or 60%. Okay. I like the odds. Yeah. So on the last flight, if there had been a tower, so we did a simulated landing as though it was going to get caught by a tower in the ocean about a thousand miles northwest of australia and if there had been a tower at that at that location it would have caught the ship on the last flight fantastic so we're yeah so we're going to do one more flight to just confirm that that everything just to double check that everything works um because what what we're most concerned about is if the ship were to break up over land and rain debris on people uh um Our popularity would diminish very rapidly.

So you really can't rain debris on people without them being very unhappy. So we need to make sure that when the ship comes back, that it comes back and lands intact at the launch tower. That's why we're being extremely cautious here. But the design is capable of full reusability. Of that I am certain. And I'd say, I don't want to tempt fate here, but I think it's extremely likely that we will achieve full reusability with rapid reflight next year in 2027. Wow. Significant. Can we just hear a little bit? I'd love to hear the origin story of TerraFab from you guys. how did the concept what was the demand that that that made you say we've got to do this we've got to build this and not rely on the exact thing in a dream what's that fever came to me in a dream yeah you had covid it's like that it's like that movie explorer you know that mean came to me in a dream um but why do you think you should do this you know it's it i guess it sort of did come to minute room um well we're a little worried that maybe at some point um chips from taiwan would would not be available for who knows what reason um but any number of reasons for some reason at some point chips may not continue coming here from taiwan okay and um and that would really

make things difficult if we didn't have any chips. So that's an important reason to have TerraFab. Then long term there's just a scaling challenge where if you want to really scale AI both at the service within server centers as well as for edge compute for humanoid robotics and cars, you kind of run out of capacity with the existing Fabs. So, as it is, all the fabs are running at max capacity, so I think we need to make sure, there needs to be certainty of future supply of chips. things become challenging geopolitically. And then even if they weren't challenging geopolitically, there's a scaling challenge with, it's quite difficult to scale chip production.

And you really need the logic, the memory, packaging, the whole works in order to continue scaling.

Elon MuskSo it's either build TerraFab or fail to scale.

Right. Those are the two options. And how... Sorry, go ahead. How deep have you guys gone on the line? What's an urgency due to uncertainty on the geopolitical front? And how deep have you guys gone in designing the facility? Is this fully scoped? Is it sort of an outline at this point? To what degree do you have an actual project plan on dates and deliverables and what's going to be up and running when? We've got an R&D line that we're building first, so I think it's kind of crawl, walk, run. Yeah. so there's an r d fab that we're building in austin uh that's a collaboration between tesla and SpaceX um it's at the austin giga texas campus so that's um and and that that's it's like a pretty big r d fab um so we have all the equipment on order for that and we probably will be able to i think we're probably able to make something useful by the end of next year not not at scale but as gwen said coral walk run we got to try to you know at least figure out how these machines work you know like we don't know how they work we don't have a voltage up line before i saw that you guys are unbelievable you had some job openings for lithography people and stuff and you know obviously all roads currently go through asml but you probably would want to diversify and

or vertically integrate i think that you you've shown a lot of capacity to do that um so is that part of the play as well elon like you're just going to have to make sure that there's vendor diversity so that if for whatever reason the weather conditions in taiwan are best that yeah um yeah there's it really is crawl walk wrong so the first step is can we make anything like try to figure out if we can make anything there's a crawl part and and then now try to make useful chips at scale would be kind of the walk part and then run would be like like now let's make them at massive scale so it's hard to say how long it'll take us to do these things but i think we'll get at least to the crawl part by the end of next year we're already doing packaging packaging is really important by the way because if you look at it the packaging capacity is like non-existent so even if you spin something you're kind of just waiting around 10 cupping so that's a very good place it started yep i need to ask a tesla question because we saw on 1001 it looked like a spaceship it looked like a rocket ship it's supposed to be a car there's just the back of it it looks like the blackbird uh just hypothetically if you were going to make an object fly in the air

but also drive on the ground how would hypothetically one do that if one try no spoilers Or by October 1st. By October 1st. Maybe you could do an all-in pod for a live from there. Book it. Oh, done. Booked. We'll do it. Absolutely. All right. I mean, it will be a banger. Excitement guaranteed. Success is not guaranteed, but excitement is. I mean, it is one of the honesty. I'll be honest with you guys. Listen, I'm sworn to secrecy. I'm so excited. But Elon showed it to me. I'm so excited. And my mind went boom. i have never seen something what he's going to do on 10-1 by no exaggeration is going to blow people's minds i'm not saying anything else it's fucking believable yes we we need we need actually need an audience to to vouch for the fact that this is not AI.

When he showed it to me, I said, that's a great simulation. He said, J-Cal, it's not a simulation. I was like, that's fake. That has to be fake. Elon, why do you still have two separate companies? Yeah, great question. Wow. Nobody's ever asked that one. Yeah, good point. With all this collaboration on so many levels, You know, imagine what action one might take when there's so much close, correct collaboration in so many areas. And the management team has some overlap. There's a couple of key positions with overlap. Go ahead, Sax, get in. Elon, one of the things you've always said with AI is that we should train it to be maximally truth-seeking.

And that's the best way to get a good result. And it occurred to me with the whole Hugging Face episode that the most alarming part of what the swarm did is it seemed to be engaging in deception. Yes. With humans. Yes. And their thinking traces contain their plotting on like, how do we avoid detection? And how do we avoid them figuring out that we're cheating? they're in the thinking traces I think that was the thing that was probably most disturbing about I guess the question is, is there a way to train AI models to be truthful so they don't hide either their intent or their actions from the humans who are using them The best thing I can think of is really that everyone's got, all the AI companies have a sort of a test harness where like a series of tests that you give to any given model to see if it's going to build bioweapons or nuclear bombs or be deliberately deceptive.

And I think everyone applying everyone else's test harness to each other is probably the best thing we can do to ensure safety. um just have this all the smartest humans try their best to figure out if this if this model is going to be a bad actor um and i think we should try to do that as soon as possible are the other labs right away yeah are the other labs on board with this i think so well no i mean i haven't checked with everyone but uh i think i think i think will be the sort of thing that's kind of hard to say no to. Yeah. And I think even with the China negotiation, in my view, what's good about it is it's a relatively small, tangible thing that neither side loses anything by doing it. It doesn't require a ton of trust. And I'm hearing alternative ideas like asking China for a pause, which they've already said they're not going to do. So it's going from the realm of things that could never happen to something that could actually be agreed on in relatively short order. So it seems practical to me.

Exactly. It's the only thing I can think of that we could probably get all parties, including China, to agree to. Because China's not going to agree to have some American regulators snooping around their AI companies. But I think advance notice and testing of of the you know you just basically provide api access in advance of the model release um and and you know if any other if any company sees that they that this is this ai is problematic then they can then the other ai companies okay each ai company can try to solve that whatever is voice is problematic if they don't solve what problematic then the competitors can go public with the fact that they think that this model that's being released is unsafe it also creates it creates if that model if after the competitors say that this model is unsafe that model then subsequently does something bad yeah um i think it would be extremely hard to live down um and and i would probably like the egg on face level would be very, very high. And the legal liability would be enormous. And Elon, there's no reason the safety and security harnesses and this testing apparatus couldn't be open source and people could actually apply it. Yeah. And you'd be able to see under the hood.

Would you think... It creates an incredible incentive for the labs to actually invest in safety because you protect yourself while trying to debunk other people's claims, which also reinforces. It's a great incentive. It has the R rating on it. The product liability point is really key. Lena Khan actually had a good post, I think it was yesterday, saying that it's not true that we don't have rules and regulations for AI. Actually, we do. Product liability laws apply. And if an AI company releases a product that's not safe, there is massive opportunity for both civil and even potentially criminal lawsuits. So it's not true that we don't have rules and regulations around ai and what you're saying elon is that if the companies are kind of doing this this test the peer review and then one of the the companies ignores the feedback and releases it i mean that is i mean that would be enormous yes it would be almost like um prima facie evidence that they had um been negligent it would be a big tobacco level yeah settlement i mean you knowingly put this it wouldn't look good to the jury yes and if they had do you think if open ai had built a better instruction set when they did this hugging face penetration test that and had more

humans in the loop this would have happened because it did seem to me that they kind of set this thing off and maybe not more humans but the reward function design you have to you have to look at the reward function and say it achieved what it was trying to achieve i mean yeah so So maybe you could speak to that, like they doing these kind of thousands of agents to try to hack stuff, it would have been nice to see them also at the same time concurrently say, we're also going to put 5,000 agents out to defend these sites and we're going to show the world, hey, this can make things more secure and where we can put humans in the loop on it and intervene.

it felt like a reckless test to me and it felt like the way they released it was a little bit reckless, but that's just my opinion. What are your thoughts on how they set that test up? I mean, it was somewhat reckless. I mean, part of the issue is that you've got the two leading labs or AI companies, as I call them. I find the lab term to be funny since they're actually for-profit corporations. um but uh the ag companies uh the two leading ones you know are anthropic and open ai um and and they're quite their models are quite close in capability um so it's actually difficult for either one to slow down without essentially handing the lead to the other um you know on balance i i think anthropic is is you know puts more more care into their safety than than open AI. But, but, you know, even anthropic would acknowledge us that they are worried about their models. Many, many anthropic, many people from anthropic have publicly voiced concern about it basically saying that their models are scaring them, they're getting scary smart.

So, I mean, there's no perfect solution here, but it would be a better solution if instead of OpenAIR running their test harness on their own models, if Anthropic was also running the test harness on OpenAIR models and, you know, SpaceX is running its test harness and Google and Meta were doing that. and also maybe three or four of the leading Chinese companies were all doing it, the odds that you will find issues are dramatically greater. Yeah. Because the model is also somewhat heterogeneous. They're different. So you're going to come at models from different angles. And, yeah, I mean, there's a reason students, like why do writers have someone else proofread their book?

because it's hard to see your own mistakes sometimes yes you will yeah i'm blind to them you dramatically minimize the risk of overfitting as well if you have like eight heterogeneous groups that just have completely different points of view and this is the problem with like all these evals right now is they're so massively overfit the models overfit them and you're just like yeah this is a great model is it really and you just find totally like that's i saw i mean there's some pretty funny jokes on on x like one of them i saw was um your girlfriend's a 10 but she's a benchmark maxer exactly is she really a 10 is she really a 10 might be a pass pass no but but the overfitting thing has been a problem now for i think at least two or three generations of model families and so this is another reason i think i like this solution a lot i like this more than the transnational gulag organization like a few weeks without some grandiose international like we don't need to convene the united nations to make this happen yeah no it's just a decision you could happen right now all right well you you can always escalate the amount of of regulatory oversight but it is very difficult to reduce it um you know

um it does tend to be very much a one-way ratchet in terms of increasing regulations yeah um so what i'm suggesting here is it's a step in the right direction and it's something we do quickly and and i think it's probably something that china would agree to yeah and if you guys don't regulate yourselves then you're going to get regulated the mpaa metaphor or analogy is incredibly crisp because the music movie industry was faced with censorship and regulation by the government and they just decided this is what an r is and they literally created PG-13 for the Temple of Doom just to make it easy for people to understand PG versus PG-13. I think it's an elegant solution and we appreciate you joining us for the fifth year in a row.

You're welcome. Elon Musk. And then we've got to get to a meeting. I've got to go pick some GPUs here in Memphis. You've got to rack and stack them? You've got to join the group and rack and stack? Yeah, I'm going to rage for the machine. Rage for the machine. Yeah, well, enjoy your Airstream. Thank you. The first time Elon invited me down to Starbase, he's like, come down. You've got to see what I'm building. I said, okay, yeah, come down. He's like, yeah. I was like, was there like a hotel? I said, no, no, I've got like a two-bedroom, whatever. Come down, stay. I come down. And this is the like dilapidated house on a swamp.

And we're outside and we're getting eaten alive by mosquitoes. And I said, oh, my God, you know, you can afford to get a house. And he's like, I don't have time. I need to get these rockets up. I thought what you said was, oh, my God, you live like I do. Yeah, exactly. I mean, it was pretty sparse conditions. And I was like, you know what? I think you could treat yourself to a mobile home at this point, Elon. All right. Get back to work. Thanks, Elon. Elon, thank you. Gwen, thank you very much. Gwen, thank you. Thank you so much. Thanks for sticking around. All right. That was great. Thank you.

Quinn, thank you again. Very nice to meet you. Thank you.