What it is: the ratio of a finished product's price to the raw cost of the materials it is made from. A high ratio means the cost is in the process, not the substance — which means it is attackable.
When to reach for it
Any time someone says a thing is expensive because it is hard. The index tells you whether you are looking at physics or at organisation. Physics you respect. Organisation you attack.
The steps
- Take the finished price of the object.
- Take the raw-material cost of its constituents — metal, propellant, silicon, at commodity prices.
- Divide. A ratio near 1 means the materials dominate. A ratio of 50 means almost all the cost is process, tooling, labour, margin or bureaucracy.
- Point at the ratio, not the price. The ratio is where the opportunity is.
Worked example
- Applied to launch → "There's one number that tells you where the money is hiding in a rocket." Published 2026-07-08. The best-performing GForce piece to date, and the proof that a method note makes better content than an opinion.
- Natural next objects: a data-centre rack · a mouthguard · a black belt syllabus. The method does not care what you point it at, which is exactly why it is a format and not a post.
Where it fails
- Raw-material cost is not marginal cost. Tooling, yield and certification are real costs, not waste. A high index is a question, not an accusation.
- It is blind to volume. At n=1 everything has a terrible index; that is not inefficiency.
- It flatters the analyst. It is easy to compute and feels like insight. Pair it with Reverse bill of materials before drawing a conclusion — the BOM tells you which line the cost is hiding in.
Where I learned it
Musk's framing, applied to launch. The contribution here is not the ratio — it is pointing it at objects nobody points it at, which is the whole job.
Reading rule. Anything marked unverified or on-air is a claim made on the podcast and has not been checked against a primary source yet. It stays marked until it has. Sourced numbers link to where they came from.