--- title: "Idiot index" description: "A first-principles test for where a product's cost can be cut by redesigning how it is made." canonical: https://tomsharman.com/bookshelf/elon-musk/idiot-index/ updated: 2026-11-03 --- # Idiot index > A first-principles test for where a product's cost can be cut by redesigning how it is made. Walter Isaacson's framework, from Elon Musk, pp. 124 to 130. Framework 1 of 7 from [Elon Musk](https://tomsharman.com/bookshelf/elon-musk/index.md) by Walter Isaacson. Category: Offers and pricing. ## The steps 1. **Price the materials.** Work out the cost of the basic materials that go into the product, such as carbon fibre, metal and fuel for a rocket. 2. **Compare with the finished cost.** Divide the cost of the finished product by the cost of its materials to get the idiot index. 3. **Attack the high ratios.** Where the index is high, cost can be cut significantly by devising a more efficient way to make it. ## Where it comes from From chapter: Chapter 15: Rocket Man: SpaceX, 2002, pp. 124–130 In Moscow, Musk, Cantrell and Ressi try and fail to buy a used Russian rocket, ending up spat on and quoted $21 million each for old Dnepr missiles. Angry, he reframes the problem with first principles and an idiot index, the ratio of a product's finished cost to its materials, and decides on the flight home that SpaceX can build the rocket itself. Friends stage an intervention with a reel of exploding rockets, which only strengthens his resolve. He founds SpaceX in May 2002 with a cost per pound to orbit as the key metric. ## The animation 24 seconds, 4:5, no sound. - MP4: https://tomsharman-downloads-006143767029.s3.eu-north-1.amazonaws.com/downloads/bookshelf/elon-musk/idiot-index.mp4 - MP4, dark: https://tomsharman-downloads-006143767029.s3.eu-north-1.amazonaws.com/downloads/bookshelf/elon-musk/idiot-index-dark.mp4 - Still: https://tomsharman-downloads-006143767029.s3.eu-north-1.amazonaws.com/downloads/bookshelf/elon-musk/idiot-index.png - Still, dark: https://tomsharman-downloads-006143767029.s3.eu-north-1.amazonaws.com/downloads/bookshelf/elon-musk/idiot-index-dark.png