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"Thinking Clearly About Space Part IV: The Virtuous Cycle"

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  • Monart Pon
    ... Thinking Clearly About Space Part IV: The Virtuous Cycle By Monte Davis National Space Society posted: 01 September 2005
    Message 1 of 2 , Sep 1, 2005
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      Continuing Pt 4 of 4:


      Thinking Clearly About Space Part IV: The Virtuous Cycle
      By Monte Davis

      National Space Society <http://www.space.com/adastra>
      posted: 01 September 2005
      06:29 am ET

      The temptation to slip from hurrying the future to hustling it is
      always present. You can see the latest variation at every space
      conference, on every space forum and weblog:

      * "What will make us a space-faring civilization is people making
      money on space tourism and orbital hotels; on solar-power
      satellites or on helium-3 from the moon or asteroid mining."

      * "NASA and the big aerospace vendors and the politicians are all in
      the same bureaucratic swamp, maintaining their turf and their
      constituencies. Look at Spaceship One! Only private enterprise is
      lean and innovative enough to get us out."

      * "Sure, rockets have always been expensive, but that's only because
      we make so few of them and fly them so rarely. With high flight
      rates and the streamlined operations that will bring, costs will
      drop to a fraction of what they are today."

      The common thread is that we don't need more federal spending or new
      technology to speed our progress into space. All we need is the proven
      power of market economics to transform what is new, rare and expensive
      (electricity 1850, automobiles 1900, computers or jet aircraft 1950)
      into the routine and affordable.

      Like any effective hustle, this one contains a lot of truth. Profit is a
      powerful and enduring motivation, at least as old as the urge to
      explore. NASA does share some dysfunctional, business-as-usual traits
      with other government agencies, especially those that buy expensive
      technologies with a long lead time (paging Donald Rumsfeld). Higher
      flight rates would reduce cost per pound to orbit--first by spreading
      development and support costs (often larger than hardware costs) over
      more flights, then by helping us learn to develop and support more

      But let's look more closely, because sometimes the most insidious
      hustle is the one that implies, "You've seen through the old scams. This
      is the real stuff." By this point you may be skeptical about a political
      or technological Next Big Thing in space. What are the prospects for one
      driven by market economics?

      Economics textbooks show the curves of declining cost and increasing
      demand for innovative products and services. They explain the "virtuous
      circle" of learning, economies of scale, and competition that shapes
      those curves. All this has been a powerful mechanism for the creation of
      new wealth since we signed up for science, capitalism and the industrial
      revolution. But read on, and you'll also learn about the central role of
      market elasticity. When the price drops by 10%, does demand increase by
      more than 10% (elastic demand) or less than 10% (inelastic demand)? And
      when demand rises, how much does supply increase to meet it? It's
      elasticity that determines when the virtuous circle begins for a given
      industry, and how quickly it turns.

      Elasticity is challenging to measure, even more so to predict. But it
      is indisputably lower in general for very expensive goods and services:
      there are few price wars for diamond watches or aircraft carriers. And
      the one money-making business in space with a track
      record--communications and imaging satellites, and launch services for
      them--has shown only faint and inconsistent signs of elasticity over
      four decades. Investors haven't forgotten that space suffered its own
      version of the dot.com bust in the late 1990s with Iridium, Teledesic,
      and Globalstar.

      Maybe that's about to change. Maybe a surge of demand for Virgin
      Galactic's sub-orbital tourism, or SpaceX's Falcon rockets to orbit, or
      private contracts to supply the ISS, or something else in the new
      constellation of alt.space will kick-start the virtuous circle. Maybe in
      2045 we'll be much farther along than anyone would guess based on the
      slow progress from 1965 to 2005.

      But if that happens, it will be an empirical fact, not an inevitable
      result. It's not an outcome that's guaranteed by the limitless resources
      in space. As long as resources here are cheaper, we won't go after them.

      It's not guaranteed by the superiority of private enterprise over Big
      Bad Bureaucracy. That view has more to do with political and ideological
      trends since 1980 than with NASA's vices or Scaled Composites' virtues.
      It is reinforced by a deep American preference: we tend to root for
      maverick entrepreneurs with the Right Stuff over any agency ever funded.

      It's not guaranteed because lean, mean teams always do better than big
      organizations under the dead hand of government. Robert Goddard worked
      with a handful of technicians in New Mexico, and never got a rocket two
      miles high. During the same period, Wernher von Braun directed a
      technical and testing staff of thousands within a nightmare bureaucracy.
      The result: 3500 state-of-the-art rockets were launched in nine months,
      brushing the edge of space on their way to Antwerp or London.

      What about the cost projections that inspire some alt.spacers? The
      ones showing that X hundred reusable spacecraft, each orbiting Y tons Z
      times a week, would make money at 20% or 10% or 5% of the current cost
      per pound to Low Earth Orbit? That those numbers may add up does not
      guarantee that there is a profitable path from here to there--nor, if
      there is, that any of the current players will find it before bankruptcy
      finds them. Market economics, like natural selection, has a brisk and
      ruthless way with losers. That's not a regrettable side effect of the
      system's power. It's the source of its power. Let a thousand business
      plans bloom, and the death of 997 will free resources for a few survivors.

      There are sound reasons to believe that private enterprise can make a
      big difference... eventually. But, it won't be easy, and it won't be
      cheap, to make access to orbit cheap.

      So be wary the next time you hear someone talking as if it's a done
      deal, as if private enterprise in space must deliver our future in space
      faster than government programs have. That person is hustling the
      future... even (or especially) if that person is you.


      Monte Davis is a science and business writer living near Philadelphia.
      He helped launch OMNI and Discover magazines, and has observed the path
      from lab to market for twenty years as a communications strategist and
      writer for leading corporations in IT, telecomm, engineering, and
    • Dennis L. May
      Monart Pon wrote: http://www.space.com/adastra/adastra_hustle_part4_050901.html Monte Davis wrote: ...not an inevitable result. It s not an outcome that s
      Message 2 of 2 , Sep 5, 2005
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        Monart Pon wrote:


        Monte Davis wrote:

        "...not an inevitable result. It's not an outcome that's guaranteed
        by the limitless resources in space. As long as resources here are
        cheaper, we won't go after them."

        Some guys I work with were recently in Holland where an average
        house in a small village goes for a million dollars. Here in North
        Missouri that price would be fifty thousand, or as little as five
        thousand for a fixer-upper. Last fall I was in Chicago where two
        bedroom high-rise apartments can rent for as much as forty thousand
        a month - I'm sure some places in New York, London, and Tokyo are
        much higher. Here on Earth - in developed areas - the price for
        equivalent goods varies by as much as five hundred times. We don't
        ship houses hundreds or thousands of miles for the 200X payoff. The
        value is location, location, location.

        During my Friday afternoon/evening 500-mile trip from Central
        Arkansas back to North Missouri the price of gas varied from $2.78
        [cheapest] in Russellville, Arkansas to $3.40 a gallon in
        Springfield Missouri [highest]. Even during our current fuel crisis
        commodity goods do not vary that much in price except as related to
        local taxation and regulation.

        In the quoted article the writer "Monte Davis" found a theme, which
        will make some people think. The infinite niche of space is best
        compared to land and air at a time when all the higher animals lived
        in the water.

        The short-term question may be how to satisfy the economics of the
        initial industrialization of space. In the long run what things
        cost on Earth won't be relevant. Industrialization becomes more
        complex on Earth every year - what it would take to start basic
        industrialization in space continues to get easier.

        As Austin Powers taught us a billion dollars in one era might as
        well be a zillion quadrillion in another era. As long as Western
        wealth continues to grow the number of individual millionaires and
        billionaires able to afford interest in space will grow.

        "Hustling" the future is not the problem. Basic economics will
        drive people to space as long as government stays out of the way.
        Sending back goods is only of many factors that will drive space

        Earthly politics are the biggest obstacle to space development. At
        some point the hand full of politicians who embrace free economics
        in space will be the ones to open the floodgates.

        Dennis May
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