Friday, July 14, 2006

Buy the Ride Balderdash

Some space advocates (alt.spacers or NewSpacers or whatever they call themselves these days) have been pushing the concept that NASA should “buy the ride instead of buying the rocket.” The idea is that private enterprise can do a better job of developing manned vehicles and NASA should just purchase transportation from the private sector. This has not worked in the past and probably will not work in the future.

A rough analogy would be the purchase of rides from a cab operator. The rider does not especially care whether the cab is a Checker or a Volvo, but only purchases the ride. Extend this to the space sector. NASA would hypothetically purchase rides on private sector spaceships to establish demand and drive down costs. How and on what? Assume the following: NASA announces that, effective 2011, it will purchase 7 rides to and from ISS on a monthly basis. According to the “Buy the Ride” concept, the private sector will then jump in and develop the spacecraft and off we go into the golden future. Who pays for the development of these vehicles? How does this differ from the current state except for the promise of future rides putting a bottom threshold on the launch market?

Right now, the alt.spacers appear to be expending a lot of energy whining about the lack of funding for vehicle development and how they could do much better than the private sector giants Boeing or LockMart. If they want to offer rides for sale by 2011, they should develop the vehicles now.

“Buy the Ride” appears to have an unstated agenda. That agenda is: NASA should give development money to the alt.spacers so they can develop really cool vehicles much more efficiently and cheaply than Boeing or LockMart. This is the desired goal even though the alt.spacers have no track record of delivering much hardware. This is equivalent to the current state of affairs except for advocacy of the unstated agenda and is diametric to “Buy the Ride.”

Instead, NASA, USAF, and DARPA are funding small seed-money development projects that are related to propulsion and launch operations to allow start-ups to develop and demonstrate management expertise. In addition, companies like SpaceDev and, on a smaller and privately held scale, Garvey, are executing small projects that are on a pathway to commercial orbital launches. Add SpaceX into the mix, assuming that they ultimately succeed in launching Falcon, and the end result should be additional launch capability as all of this somehow evolves a new generation of launch companies. If that happens, I predict the largely irrelevant alt.spacer peanut gallery will be claiming the credit.

27 Comments:

Blogger Alcuin Bramerton said...

Just meditate. It is a cheaper way of getting around the galaxy. And it is beyond political interference.

Friday, July 14, 2006 2:45:00 PM  
Blogger Bill White said...

Strong calls for NASA to just "buy the ride" suggest an uncomfortable truth (for NewSpacers). As of today, NASA may just be their greatest potential customer. Yet if NewSpace does succeed in winning NASA contracts why won't those companies simply morph into more chic trendy versions of Big Aerospace?

If it is true that humanity cannot really become spacefaring if taxpayer revenue is required to pay for spaceflight, then NewSpace needs to locate non-taxpayer sources of revenue to support humans in space. I see four categories for that (and would be thrilled if anyone can offer a category I have overlooked):

(1) Space Tourism

The Space Cynics just love this category, don't they? ;-)

(2) On orbit materials processing and Pharma research

Perfect ball bearings no longer appear to be sufficiently valuable to justify paying for humans in space. Big Pharma medical research may or may not. Bigelow is playing to this market (among others) and since Russia (today) and SpaceX (soon, we hope) can loft Bigelow habs at ~$1000/$1500 per pound we will soon see if Big Pharma starts writing big checks.

How many people will be needed to fly to accomplish this remains an open question, in my opinion.

(3) Space resources and energy

He3 & PGM & space solar power. Opinions vary. ;-)

(4) Media, marketing, sponsorships, brand enhancement

Anyone attempting (1) or (2) or (3) can combine those efforts with product placement deals such as "Intel Inside" spots for computers doing on orbit bio-tech reserch or a requirement that space tourists wear Nike logo flightsuits or appear in videos drinking Gatorade while on orbit.

Perhaps none of these categories will produce sufficient revenue. But I ask whether there any categories I have overlooked. (Communications and imaging satellites do not need people in space and therefore are excluded from my analysis.)

Others say "We just need to lower launch costs" - - Well okay, HOW do we do that? Who pays for that R&D? But even with lower launch costs unless there is non-taxpayer sourced revenue a space business will still lose money, or must remain on the public dole.

Rather than bash NASA to buy rides from companies that possess only viewgraphs (keep in mind, SpaceX already is selling flights to the government) NewSpace should work to develop markets and category (4) should not be overlooked.

Sunday, July 16, 2006 9:58:00 AM  
Blogger AmberJane said...

My own spin on this is that even the government market is not sufficient to allow a new launch vehicle to become established in the face of existing interests. I did a lot of research on this last year when I was contemplating an investment in an Alt.Space company (hadn't picked one in particular, but the idea intrigued me), and I can't really make the numbers add up.

Every last alt.space company, even the ones like SpaceX with serious bank behind them and actual government customers, suffers from the rich crazy guy problem. I don't mean to be flippant - it's just that basically every last dime of the investment that goes into these companies, even the ones with palpable markets and order books and stuff, comes from people who invested because of a personal passion for being involved in space, even with fortunes made in a hard-nosed way elsewhere. It's true of Allen, and Bezos, and French, and Musk, and Carmack, and the other guys I have forgotten to mention.

There are some exceptions in terms of business model. XCOR, for example, seems to be doing pretty well scooping up government R&D bucks, likewise T/Space, and perhaps Andrews. But none of them appears to be working on a product that I personally think is going to be a real moneymaker.

Then there's the whole management issue. I tend to believe that you don't have to be in a big organization to be a good manager, and that people who are good at keeping to schedule and budget while getting creative work done can always be hired. But it has to be demonstrated on the ground, as it were, and so far that really hasn't happened yet. And while any investor club will tell you "take the B technical team with the A management team" over the alternative, I believe that space is different. You can't fool nature. You're on the edge of fundamental physics. The technical team simply HAS to be 100% first class, even if they might be a little hard to work with. At the end of the day, the bird has to fly, and this is really really hard to do.

When a company shows up with a credible technical plan to develop a long range point to point transport capable of send me from LA to say, Israel, in less than a couple of hours, then I'm investing. Or pick your own favorite remote destination (I haven't been to Asia yet, maybe there). Until then, I think we're still in the gnomes and underpants problem.

Damn gnomes.

Monday, July 17, 2006 9:06:00 PM  
Blogger kert said...

Im just interested, do you think that companies like Microcosm and SpaceDev are also suffering from the "rich guy" syndrome ?

Tuesday, July 18, 2006 2:39:00 AM  
Blogger AmberJane said...

Kert, in SpaceDev's case, arguably, and to a lesser extent with Microcosm. Neither Benson nor Wertz misses any meals. But these companies are not entrepreneurial enterprises in any meaningful way; they're government clients who propose and execute proposals for NASA or the DoD for the most part. They'll do the occasional project for an entrepreneurial client, but it isn't apparent to me that the world is going to change because of them.

I could be wrong of course. My research is hardly exhaustive. But that's how it looks to me.

Tuesday, July 18, 2006 7:48:00 AM  
Blogger oldspacecadet said...

Space is NOT fundamentally different than other businesses. Take the A management team first and let them assemble the A technical team. The small program managers for NASA, DARPA, USAF, etc. comment much more about the general lack of business acumen than the lack of technical prowess.

The early-stage alt.space launch outfits I have invested in are not much more business-like than the typical science/engineering grad students I have encountered and their business plans reflect that. In fact, a couple of the academic programs I have played with are more business-like than the alt.space launch types.

Musk and Garvey have both stated in different ways that they can't close the business case for outside investors yet. If you don't have a revenue stream that exceeds costs, you don't have a business (think of the Fick Principle applied to money), and the alt.space launch companies aren't there yet despite all the hype and fancy Power-points. Any serious contenders that may be trying to emerge are handicapped by the damaged credibility engendered by the space hype-mongers.

If you want to learn about the real alt.space markets, go to SmallSat in Logan, Utah some August (no gnomes allowed). There, the various alt.space niche-fillers such as SpaceX, SpaceDev, Eclipse, Microcosm, Garvey, Andrews, amd T-Space are right alongside General Dynamics, ATK, and agencies such as Det-12, Space BattleLab, DARPA, AFRL, etc. That is where you can talk to Dr. Griffin, General Lord, and other past, present, and future players about reality as well as the large and small academic programs about their real needs and how they fill them.

When the space access world has changed at some point in the future with markets undreamed of today, and you look back at the people who made it happen, I predict they will have had more appearances on the programs at various AIAA meetings and academic meetings like SmallSat than the more traditional alt.space meetings, and they will have spent negligible time at the space advocacy meetings.

Tuesday, July 18, 2006 8:44:00 PM  
Blogger Kelly Starks said...

Just a nit, but NASA isn't really in the space busness - but in the jobs in districts busness. Congress would be far less likely to fund progrqams far cheeper - with the jobs not designated to a specific district. Its why they could never fix the shuttles. The fixes would lay off to many folks.

Wednesday, July 19, 2006 6:42:00 AM  
Blogger Bill White said...

Musk and Garvey have both stated in different ways that they can't close the business case for outside investors yet.

Exactly! Finding a reliable revenue stream is more important that fancy new rockets. Seems to me Musk is acting out of "love" - a desire to help humanity become spacefaring. If he was motivated primarily by profit, some new Paypal II idea would have been a far better route for Musk than SpaceX.

Robert Zubrin added a new funny line to his usual stump speech. As ISDC2006 he said, "If you are here to make money, you're at the wrong conference."

When the space access world has changed at some point in the future with markets undreamed of today . . .

Why do you think there are new markets to be discovered at AIAA meetings and SmallSat meetings? At least new markets that need humans in space? But we agree, until those new markets are discovered (or created) revenue will not exceed expenses.

Wednesday, July 19, 2006 7:10:00 AM  
Blogger Shubber Ali said...

Bill said:

If it is true that humanity cannot really become spacefaring if taxpayer revenue is required to pay for spaceflight, then NewSpace needs to locate non-taxpayer sources of revenue to support humans in space. I see four categories for that (and would be thrilled if anyone can offer a category I have overlooked):

(1) Space Tourism

The Space Cynics just love this category, don't they? ;-)


Ah, that would be sarcasm, wouldn't it? :-)

Here's my first (of many) issues with space "tourism". Flying a parabola, which has a vehicle reaching a velocity of ZERO at it's apex, isn't getting to orbit. There is a BIG difference between a parabolic tourist flight to an arbitrarily defined 100km "edge of space" and getting things to orbit cheaply, reliably, and reusably.


(2) On orbit materials processing and Pharma research

Perfect ball bearings no longer appear to be sufficiently valuable to justify paying for humans in space. Big Pharma medical research may or may not. Bigelow is playing to this market (among others) and since Russia (today) and SpaceX (soon, we hope) can loft Bigelow habs at ~$1000/$1500 per pound we will soon see if Big Pharma starts writing big checks.

How many people will be needed to fly to accomplish this remains an open question, in my opinion.


Big Pharma was asked this question point blank about 7 years ago (I know, because I asked them) - and the response was No. Nil. Zip. Nada.

In fact, of the over 70 Fortune 100 manufacturing, pharma, agri, etc businesses surveyed (heads of technology or VPs of R&D) on their interest in on-orbit research - guess what percent expressed an interest in spending a portion of their R&D budgets on such research?

50%?

30%?

10%?

No.

0%.

That's right - NONE of them.


(3) Space resources and energy

He3 & PGM & space solar power. Opinions vary. ;-)


Show me a working fusion reactor and their might be a need for He3. Show me an ability to construct a FACILITY at geostationary orbit, and a launch infrastructure that can do so at a cost-effective price.

oh, that's right - neither exists.


(4) Media, marketing, sponsorships, brand enhancement


I remember when alt.space.tragics were making a big hoo-haa about the Pizza Hut logo on the side of a rocket.

How many times have they done that since then?

marketers care about EYEBALLS - but if no one is watching, they aren't interested in sponsoring. Sure, they may try it once or twice if it's something different or novel, but when the novelty goes away (as it always does, and fairly quickly) they move on.

Hardly a basis for a sustainable business.

Thursday, July 20, 2006 1:18:00 AM  
Blogger Bill White said...

Shubber, first question. Did I miss any categories?

Otherwise I do not intend to argue with you in any great detail because big picture I agree with you. I can quibble and nibble at your comments, but no, there is no significant disagreement.

Therefore, if someone still has a non-profit driven desire to see humanity expand off the planet, new markets will have to be created where they do not now exist by people like Bigelow who march to a different drummer and Musk who can turn large fortunes into small ones with a tight lipped smile because they seek something other than money. Many (perhaps all) will fail.

None of this is investment grade and both Bigelow and Musk (being good at business) have chosen to remain privately held because there isn't yet a business case to be made for investing. They do it for "love" or because they hear a different drummer than: "profit, profit, profit" - - some guys buy minor league baseball teams for fun and others can start RRLs or build inflatable space modules.

In the meantime, that leaves us with the taxpayers. Mike Griffin does seem to have almost total bi-partisan support in Congress

= = =

The best long turn chance I see for funding space is to figure out how to make people want or desire to plaster their eyeballs on a space program, and follow it.

But no argument from me, its a long shot.

Thursday, July 20, 2006 5:32:00 AM  
Blogger Shubber Ali said...

In the meantime, that leaves us with the taxpayers.

Yep. And that's where my objection comes in again. Having the taxpayers fund your dreams (such as a spaceport for nonexistent vehicles) just because you want them to is not a fair use of our tax dollars.

And it doesn't matter if other programs are getting away with it - two wrongs don't make a right.

The proper thing to do is to try to eliminate those other programs, not to add to the overspending.

The best long turn chance I see for funding space is to figure out how to make people want or desire to plaster their eyeballs on a space program, and follow it.

Good luck with that. WIthout the threat of an impending asteroid impact, or a sudden upsurge in the "Red Menace" (or modern equivalent) with a space program (a la sputnik in the 50s), people don't and won't care.

We've seen it multiple times with space programs. The average citizen is titilated by firsts - they don't care about seconds, thirds, fourths, etc.

This applies not only to space, but most things in society - which is WHY it applies to space. Recognising the realities of human behaviour will go a long way in helping one to put to glass of kool-aid back on the table and walk the other direction...

Thursday, July 20, 2006 2:08:00 PM  
Blogger Paul Dietz said...

Perfect ball bearings no longer appear to be sufficiently valuable to justify paying for humans in space.

The truth is, in reality, they never did. Never mind the economics; the idea itself is flawed.

Von Braun liked this idea, until a group of NASA scientists was sent to MIT to talk to the metallurgy department there (now Materials Science) to get the idea evaluated. The professors informed NASA that a steel droplet, cooled and allowed to solidify in microgravity, would acquire "the external morphology of a porcupine" (I think this is because of phase separation during the solidification.)

Now, you could imagine making ball bearings of something else, that didn't solidify incongruously. High performance ball bearings are made of silicon nitride and its derivatives, for example. The problem is: silicon nitride isn't made by solidifying a melt.

Thursday, July 20, 2006 6:03:00 PM  
Blogger Monte Davis said...

AmberJane: I've been doing my own research on alt.space companies for a book, and my conclusions tally very closely with yours.

Are you familiar with the Dinkin-Jurist-Livingston paper on launch costs? (Someone around here must have a live link to it:-) In interviews I've followed up on why it ruffled the alt.spacers' feathers so much.

One of the key points was almost a throw-away line in the paper, to the effect that one might see the involvement of Musk, Branson, Bezos et al as analogous to millionaires staking sports teams, racing teams, Americas' Cup yachts, etc. -- for the high-profile fun of it.

That really upset the faithful, because in their world the millionaires are taken as evidence that real live successful businessmen are getting involved in space, so there must be big profits just around the corner.

By that reasoning, Gates and Buffett are evidence that the malaria market is poised for take-off.

Friday, July 21, 2006 6:18:00 AM  
Blogger Bill White said...

One of the key points was almost a throw-away line in the paper, to the effect that one might see the involvement of Musk, Branson, Bezos et al as analogous to millionaires staking sports teams, racing teams, Americas' Cup yachts, etc. -- for the high-profile fun of it. That really upset the faithful, because in their world the millionaires are taken as evidence that real live successful businessmen are getting involved in space, so there must be big profits just around the corner.

Precisely, in my opinion. Elon Musk has been quite candid on this point and as oldspacecadet wrote (above) Musk does not currently seek investors as he cannot make a business case for that investment. Bigelow too. Privately held also means no shareholders or board of directors to answer to.

IMO, Musk also upsets "the faithful" when he says that the opportunity to go into space personally is not really a motivation. Before SpaceX, Musk was going to fund that "spinning mice in zero gee while they made babies" experiment. Elon truly desires humanity to become spacefaring and whether he makes money or gets to fly in space is a secondary objective.

But since making money may be a necessary condition for our species becoming spacefaring, Musk will certainly try to make money. Its just NOT is primary goal. As Zubrin said, "Love, not money."

= = =

Several years ago I attended the first Moon-Mars blitz. When Jim Muncy attempted to rally the troops by asking "Who wants to fly in space, themselves?" he lost me.

I kinda shrugged my shoulders as I thought to myself: "Well, yeah. I also want a long weekend with Angelina Jolie and maybe a new Mercedes convertible. But that is not why I am here."

Friday, July 21, 2006 7:15:00 AM  
Blogger oldspacecadet said...

For the record, there is a link to the paper on this blog. The title is "When Physics, Economics, and Reality Collide." Monte's remark about ruffled feathers is an understatement of the reception at Space Access 2005.

Friday, July 21, 2006 7:30:00 AM  
Blogger Bill White said...

Here is a potential revenue stream:

Sell rides to astronauts from non-spacefaring nations. Not really tourism, but sort of. Russia and America do it now as a geo-political favor. A private sector company could sell rides for the first Japanese in space or the first South Korean, first German national and so on.

Universities could also send faculty.

Robert Bigelow just mentioned it during his speech at the Space Frontier gathering and he will offer his Bigelow habs as a destination.

Friday, July 21, 2006 10:11:00 AM  
Blogger Shubber Ali said...

Here is a potential revenue stream:

Sell rides to astronauts from non-spacefaring nations. Not really tourism, but sort of.

...

Universities could also send faculty.


Ahh, i see - replace domestic government subsidies with international ones, eh? And take money from the peoples' of countries that should be spending their hard cash on more important social causes, such as health care, education, etc.?

As for universities, i think you would be hard-pressed to find a university with an endowment so large that it would be able to throw away millions of dollars for a professorial joy-ride - much less one that has a faculty/administration that would allow so much cash to be wasted on a single professor's trip to space.

Call me a cynic.

Sunday, July 23, 2006 12:54:00 PM  
Blogger Bill White said...

Because cynics essentially are failed romantics (Oscar Wilde?) what could be more cynical than selling people the romance of space rather than selling them anything practical? Nike sells the romance of sport since non-logo shoes are usually just as good for half or a third of the price.

If there are no business cases for selling anything related to space on a practical level, what else is there? And if that actually worked, then we'd have a romantics emerging from failed cynics. ;-)

Remember, Musk and Bigelow are doing what they do for love, or because they hear a different internal drummer - - combined with a large personla fortune.

Monday, July 24, 2006 6:17:00 AM  
Blogger Shubber Ali said...

If there are no business cases for selling anything related to space on a practical level, what else is there?

Who ever said that? When we wrote the "State of the Space Industry 1997 Outlook" report at KPMG, the industry at that time was over $77 BILLION.

There's plenty of business to be done using space-related assets. Think telecommunications, imagery, satellite positioning devices (Trimble, Magellan), the list goes on and on.

It's the BS being spun about Space Elevators, Solar Power Satellites, Asteroid Mining, and Orbital Space Tourism (to name a few) that raises the hackles of us cynics.

Monday, July 24, 2006 5:13:00 PM  
Blogger Bill White said...

Shubber, does any of what you list (tele-com, remote sensing, sat-nav etc . . .) require that there be any people in space?

Monday, July 24, 2006 8:11:00 PM  
Blogger Shubber Ali said...

Shubber, does any of what you list (tele-com, remote sensing, sat-nav etc . . .) require that there be any people in space?

i'll assume you are kidding, but just in case you aren't:

no.

Monday, July 24, 2006 8:13:00 PM  
Blogger Bill White said...

Okay, back to our regularly scheduled conversation:

If there are no business cases for selling anything related to [people in] space on a practical level, what else is there?

People like the idea of people in space. That creates a market, selling to people who like the idea of people in space.

To date, its been engineers attempting this, not marketing professionals. Thus, the numerous over-hyped flops you accurately dissect.

Tuesday, July 25, 2006 5:15:00 AM  
Blogger TomsRants said...

People like the idea of people in space. That creates a market, selling to people who like the idea of people in space.

And...how many of those "people" are there, exactly? That's the issue. SOME people "like the idea of people in space". Even we "cynics" can count ourselves among them - but that doesn't mean we agree AT ALL with the "build it and they will come" crowd on a practical means toward that end.

Most people, frankly, don't care about people in space all that much - they're still stuck in a mindset of "we have to solve [insert your favorite domestic/global problem here] before we can even consider humans in space". (but that's a separate topic)

We "cynics" would humbly suggest that at this stage, there are not enough truly interested/passionate people, with cash in hand, to make a critical mass enabling a profitable robust market for "humans in space". Alt.space companies, however, when vying for funding, still have to make that business case - it's clearly hard to do.

"Marketing professionals", despite their skill, still need something concrete to work from - if the numbers are not sufficient, and they try to sell the deal anyway, they're being very disingenuous with both potential investors and potential customers.

Tuesday, July 25, 2006 6:04:00 AM  
Blogger Shubber Ali said...

That creates a market, selling to people who like the idea of people in space.

As long as it is positioned as a fictional idea at this point, that's fine. And plenty of people do that - such as the TV networks and hollywood studios (think Star Trek, Star Wars, Firefly, you name it).

But when it's positioned to the buyers as something that can happen in the near term, i would strongly suggest it borders on, or is, fraud.

Tuesday, July 25, 2006 8:55:00 PM  
Blogger Bill White said...

Fraud? Fraud requires some rather specific proof. Not that I disagree that some (many?) NewSpace ventures are selling vaporware. Or are jockeying for position to obtain cost plus government deals like the Big Boys.

On the other hand, Elon Musk should be praised for his candid acknowledgement that SpaceX is not yet investor grade. But then Elon isn't in this for the money, as I discuss here. Musk also appears to not be a "space tragic" since personally flying in space does not appear to be a high priority for him.

Of course, if you have money (Musk, Bigelow, Bezos) staying privately also helps avoid the need to answer to investors, shareholders or a board of directors.

As for making money, Paul Dietz offered a superb comment in your Black Hat / White Hat blog post here at Space Cynics. NewSpace White Hats need a sustainable revenue stream that does not depend on sugar from Uncle Sam. Spot on, IMHO.

Back to the fraud question. Shubber, your concerns are quite legitimate. But let me ask you this. If Elon Musk and SpaceX sold logo space on the Falcon rocket while being perfectly candid that SpaceX was not an investment grade company and that there was no guarantee that the rocket wouldn't blow up, would that be fraud?

Me, I don't think so.

This opens up the potential for a Talladega Nights revenue stream. Just like Masten Space is doing as well as the Rocket Racing League.

Saturday, August 05, 2006 6:33:00 PM  
Blogger Stephen Fleming said...

Of course, if you have money (Musk, Bigelow, Bezos) staying
privately also helps avoid the need to answer to investors, shareholders
or a board of directors.


I'm nitpicking here, but of course that statement is not true. Many (most) private companies have investors, shareholders, and boards of directors. And all those parties have a strong influence on what a company can and cannot do. What keeps Musk (et al) free to pursue his dreams is not that SpaceX is private, but that it's personally-owned.

Thursday, August 10, 2006 12:37:00 PM  
Blogger Bill White said...

Many (most) private companies have investors, shareholders, and boards of directors. And all those parties have a strong influence on what a company can and cannot do. What keeps Musk (et al) free to pursue his dreams is not that SpaceX is private, but that it's personally-owned.

I stand corrected. This is what I intended to say.

Thursday, August 10, 2006 7:00:00 PM  

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