Monday, July 17, 2006

A Sucker Born Every Minute

"It might be worth something in a few years."

This gem of an insight brought to you by Ms. Sarah Lang, a 31 year old housewife in England who won 1 million pounds in a contest ("Pokerface") and apparently has decided she wants to buy a plot on the moon.

According to the article in Moon Daily, "the mother-of-two is a huge fan of the science-fiction television and film series 'Star Trek.'"

"I am really into sci-fi and horror so I really want to go to a big Trekkie convention in the US and dress up," she confessed.

She should fit right in...

Thursday, July 06, 2006

My final word on bread and circuses, New Space style

While it has been an "enlightening" conversation of late, regarding the philosophy and economics of that-which-we-will-NOT-call-spaceports, it has reached the point where there is a definite risk of going around in circles (as NASA has for decades) to a place of marginal utility. So I purport to make my final case here, then move on to other topics, as there are so many to discuss in the kool-aid universe.

I also find it interesting that someone who admits to "not being a rocket scientist" - and presumably not an economist, academic, investment manager, or serial entrepreneur, either - attempts to "defend" the efforts of people like Peter Diamandis, Eric Andersen and Sir Richard Branson, without any real knowledge of their personal or business motivations for doing what they are doing. (In fact, if I were they I would not presume the need for such a defense, and would say so in no uncertain terms.)

Having said all that, I believe there is only one place where or New Space, as it were, can truly add value and make the ultimate human expansion into space possible, and that is "CRATS": Cheap and Reliable Access to Space. If that is not achieved, all the theme parks in the world will amount to nothing. I also submit that building lots of "spaceports" without certified "spaceships" to fly out of them on a regular basis could ultimately backfire on promoters and their investors. Those investors - assuming they're private - will be loathe to invest again, the industry will fail (again) to gain credibility, and yet another generation's time and energy will have been wasted going down a false road.

I'm 52 years old. I've already waited over 30 years for CRATS - if I have to wait another 30 I'll be investing in biotech and nanotech (but NOT!) simply to keep me alive and healthy long enough to finally see that day. (There are people who insist that the technological capability for CRATS is already available, and it's just a matter of getting rid of what is perceived as political, bureaucratic and budgetary constraints - but that is a topic for another series of posts - for now I'll just refer you to what I call the "three doctors paper".)

Moving on, I have to say that this quote floored me:

"But I don't see how theme park spaceports can hurt provided we do not expect too much from them."

[snark] Yes, "Mr. Bill"...I'm certain Diamandis, Branson and Andersen said that very same thing in their business proposals to take taxpayer's money in NM, Dubai, and Singapore [/snark].

But seriously - I'd bet potential investors in those theme parks - taxpayers in particular, who are involuntary - have a LOT of expectations for them, based on the hyperbole being pitched by the promoters themselves. They have been told to expect oodles and oodles of money flowing in through lots of repeat business.

What is the promoter's and pol's plan to pay back the tax money to the people being forced to subsidize these operations? There isn't one, because being a taxpayer means never having to receive value for their money, and being the politician who spends it means never having to apologize to them for throwing it away - they instead try and use it as a lever to higher office. (NM Gov. Bill Richardson, in particular, has Presidential aspirations, or so I've heard.) They just wave their arms and claim all that increased tourist activity will magically generate lots of taxable income to more than make up for the tax dollars being re-routed from other programs. That's going to be a big issue in NM in particular, which is technically one of the poorest states in the US. I haven't seen a definitive study verifying this, however.

No, going back to an earlier analogy, we should forget Tin Cup (which was an eminently forgettable film, in any event), and look instead at a Kevin Costner classic that unfortunately fits the world all too well - Field of Dreams. Most New Space companies' business plans are distilled directly from the major tagline from that film: "If you build it they will come". Even the most optimistic prognostication from the Futron study stated that, 15 years down the line, they, in fact, would not come, at least not at a rate sufficient to keep even one dedicated launch facility going at the level of the smallest terrestrial airport capable of handling a 737 or better.

"Mr. Bill", however, continues to insist that these very low flight rates don't matter - it's just the entertainment value that counts, and that's what will (somehow) keep people coming, to ultimately subsidize further R&D and pay back the poor taxpayers of NM. It ain't necessarily so. Let's go back to school, specifically Econ-101:

All risk capital - even capital stolen from taxpayers - has both an intrinsic and opportunity cost associated with it. The intrinsic cost is either straight-up interest for a banker, Return On Investment for venture cap, or net tax dollars funneled back into the system via increased taxable economic activity at the site - in the hopes that more comes in, net-net, than was spent out. The opportunity cost is an analysis of how well one might do investing in this particular opportunity as opposed to other competing opportunities, i.e., "what else may I be missing out on?".

The amount of capital out there - whatever its source - is limited. There is competition for that capital by businesses large and small who already understand how to turn a decent buck in established growth industries. If I have $100 million to invest, and I have to choose between a space theme park and the next generation microprocessor which has 100 times the speed at one tenth the heat output, what do you think I'll pick? A veritable minefield of a new industry with no track record and fraught with unknowns, or something where the market, customer base, and path to profitability is well understood?

Five so-called "spaceports" are being built when not a single commercial spacecraft has proven itself, let alone received an AST launch license. If you stick with the theme park business, however, you're now back in the Real World, a la The Matrix; in other words, you now find yourself in heavy competition with a LOT of other theme park chains who have have their marketing turf staked out quite well, not to mention cheaper rides. While there may be a lot of traffic initially due to the "novelty" value, it going to take a lot more than "build it and they will come" to keep customers coming back. Why? Because theme parks suffer another challenge: "seen one, seen 'em all". It costs a lot of money, creativity, and advertising to keep things fresh and tourists encouraged to return. Kids in particular outgrow things quickly.

I haven't been to Disneyland since I was 17, and was forced to shepherd my sister around. I took my daughter to Hershey Park when she was 12. Now she's 17 and would rather drive to Idaho with her friends to see the Red Hot Chili Peppers concert. Theme parks? Mickey Mouse? Fuhgedaboudit. Experiencing space tourism from the sidelines, which is what this is, will, like extreme sports, be done once or twice for the experience. Then, "Mr. Damn, Mrs. Damn and the whole Damn family" will go find something else to waste their 2-week vacation on in future years. The more adventurous will eventually tire of watching things from the sidelines, and will grow frustrated that the costs of the Real Thing haven't come down far enough to get within the Damn Family's budget.

Can the "Rocket Racing League" generate the interest, crowds, ad revenue and aftermarket sales as NASCAR? I will submit a qualified "no", for one reason - you can drive a NASCAR vehicle yourself, or mod something similar in your own garage, if you have the tools and desire. Ergo, people know they can go along for the ride if they wish, but are content for now to live vicariously through Dale Earnhardt, Jr. How many people will be building rocketplanes in their backyards? There is an initial "ohhhhh-ahhhh" factor, but it will once again wear off, just like Apollo and the Shuttle, as people realize this will never apply to their own lives and within their own budgets, any time soon. The "qualification" however, is that it's probably not the promoter's primary goal to make as much money/recognition as NASCAR does - perhaps only a small fraction will suffice to keep interest up, and development/sponsor dollars coming in.

Given that theme parks may not make the tourism itself definitely won't drive enough traffic soon enough to make a again, why is all this necessary, and how is it going to pay?? And before anyone tries try to lecture me that some taxpayers are in favor of subsidies to businesses - like building new ballparks to keep the major league team in town - those voters actually had a say in the matter on an actual bond issue at the ballot box.

Again, quoth Mr. Bill: "...should we hold Diamandis and Branson to a higher ethical standard than the NBA, NFL and major league baseball?"

Well, perhaps we should, actually(!) - but more to the point, the taxpayers themselves are now holding their own city governments to a higher standard. In the late 1980's, the owner of the San Francisco Giants, Bob Lurie tried twice to convince the voters of that fair city to subsidize the construction of a new ballpark at China Basin. The measure failed both times. But despite veiled threats, the Giants never left town. Ultimately a new China Basin ballpark was finally built, in 2000, but using private money. This has now become a curse for other baseball franchises seeking taxpayer help to build new ballparks in their towns.

However, nothing is mentioned about public plebiscites in any of the currently proposed "spaceport" areas.

The last thing that I thought was a bit over-the-top was this line: "...doing a makeover of a Lear-jet so it can fly in space is wicked cool...but no one should pretend that a made-over Lear-jet is on the critical path to anything more significant than an awesome episode of Monster-Garage."

That statement is just so wrong on two fronts: (1) the people at Rocketplane, who are leveraging millions to make their vision a reality, may not think of their efforts in that vein (and, like Peter D. and Sir Richard, may not appreciate someone like this as a self-appointed defender); and (2) we shouldn't think of anything in this area as "wicked cool" until the builders have proven it won't wickedly kill people right off the tarmac. Hyperbolic press releases notwithstanding, rocketry is a dangerous game, with a very real risk that someone will get maimed or killed in the process. Death of paying customers in a fireball or a crumpled fuselage is not "wicked cool", especially if one of those customers is friend or relative of yours.

Those promoting and attempting to build these theme-park-hybrid-space-carnivals may succeed very well, and God bless 'em if they do. They will take whatever tax subsidies they can get, as that is free money, and they have no responsibility to those taxpayers once the thing is built - if the traffic and increased tourism doesn't pan out in the long run, the pols will take the heat, but the promoters will cash in - maybe.

However to me, such projects are nothing more than a bread-and-circuses distraction. I'll probably be a customer myself this year, at XPrize Cup - nevertheless, I'm not in any way convinced these projects will seriously do much to help make CRATS a reality - and CRATS will be the only real legacy of New Space that will be worth writing about, to future historians. Fail in that, we fail everybody.

Wednesday, July 05, 2006

Port or Starboard?

In his recent blog post: Agreement! At least I think so... Bill stated the following:

But I don't see how theme park spaceports can hurt provided we do not expect too much from them

They can hurt in one very obvious way: financial. You may not have an issue with governments expropriating taxpayers' money on these white elephants, but i do.

Some within the community chafe whenever the "wasting of tax dollars" argument is made, responding with the "well, they waste money on [insert program name here] so why shouldn't we spend it on space projects?" This is flawed for the very basic reason that two wrongs don't make a right. Note that they don't actually explain why it is *not* a waste of money, but rather try to use the tired "but they're doing it too" line which seems to be a justification for just about anything these days.

If someone wants to build a privately funded space themepark, a la Disneyland, i say good luck with that. But even in that case, there is a moral flaw in the argument made by most spaceport enthusiasts - the ones who sell the spaceport on its own merits (as a port) - to the non-space-savvy financial investors who may put $$$ in those spaceports.

Let's not kid ourselves, the vast majority of space tragics do not have the financial wherewithall to finance their own small space projects, much less a hundred million dollar plus spaceport. That money comes from other sources - be it rich people who are sold the kool-aid of a space idea (and why do they always seem to go for building rockets, anyways?) or investment funds which are slowly duped by the repeated articles in the mainstream media (hardly a critical bunch these days anymore anyways, but that's a whole separate blog in itself).

The moral flaw is this: when you sell someone kool-aid, they usually are buyers because they like the flavour and want something sweet to drink. But if it's sold as a nutritional supplement that is good for building strong healthy teeth and bones, it's a lie. When you sell someone on the concept of a spaceport as an operating port that will make money through the large number of repeat flights from yet-to-be-built vehicles, it's no longer a dixie-cup filled with kool-aid for 10c from the kid with the stand, it's buying the entire Kool-Aid company.

And that just isn't right.

Monday, July 03, 2006

Ports and Theme Parks are Incompatible

I see that someone has gone to considerable length to reply to my recent arguments concerning the economics of proposed "spaceports". The author apparently saw nothing amiss with the notion that it's OK to create a theme park atmosphere to attract customers at some level or another. In so doing, he unwittingly grants me the argument that commercial space tourism might never be able carry the load on its own to allow a spaceport to pay for itself. So instead we'll create a circus atmosphere with a few launches thrown in for the "ooooh-ahhhh!" factor. And that was the entire point of my piece.

While I mentioned the long term potential of point-to-point suborbital flight, I never suggested that it would be the "killer app" justifying spaceports, but rather a long term commercial justification for heavy investment in the technology itself. Such craft may not ultimately require a "spaceport", perhaps a major-sized international airport, retrofit with custom facilities, would suffice - I don't know. But either way, whatever scenario plays out will be a long time in coming.

Where our understanding breaks down, perhaps, is in the use of the term "spaceport" itself.

By common convention, a "port" is a place where people or cargo embark or disembark to or from other places. The business of a port is to achieve this as efficiently and cost effectively as possible. No more, no less. They manage lots of traffic into and out of their hub of influence, because that's all their customers expect of them. If we stick with the gaming analogy, these people don't "play golf with only one club", because they're not playing golf at all. They're playing darts - all tightly focused on a single goal - get something from here to somewhere else, or get something from somewhere else safely here - and they want to hit bullseyes every time, 24/7/365.

People go to "airports" because they are going somewhere, and are focused on getting there as quickly and comfortably as possible. The design and function of airports support that singular purpose. While there are many 3rd-party support services that airports offer, from food to magazines to liquor to internet access, it is still with the understanding that their customers are just "passing through", for a handful of hours at most, so the marketing goal is one of convenience, solving a personal emergency, or encouraging a last minute "impulse buy" before getting on the plane.

"Seaports" move massive amounts of cargo that we import from foreign lands off of container ships to waiting trains and trucks, which in turn move those goods to other destinations further inland, where those who purchased the goods are patiently waiting. Those containers are refilled with US-made goods to transport, via the same ports, to buyers in other nations.

In short, those things we call "ports" exist to serve travel and commerce, and nothing else. They are not tourist play destinations.

So when I hear the word "spaceport", I envision something similar, a place through which people and goods are moved efficiently and economically from point to point, only the "points" we think of are either on the opposite side of the planet, or off the planet entirely. But you don't go there to gamble, to engage in "space entertainment" or just to watch a launch (unless a friend or relative is about to take a flight).

Plus, if some miracle happened, and we really did one day get all that passenger traffic promised by the kool-aid sellers, wouldn't all those milling about, partying non-travelers just get in the way? How would LaGuardia, for example, which moves up to 25,000 passengers a day, function if a lot of non-traveling people showed up and just hung around for hours and days, clogging the parking lots, access roads, and restaurants? A potential "spaceport" in particular, may have other problems associated with it (such as noise or exotic fuel handling) that would require it to be much further removed from the nearest hub of civilization, thus creating a specific marketing challenge in attracting people to go the extra distance. This could be mitigated by requiring space tourist vehicles be limited to smaller craft that piggyback on more conventional jets - but again, those could conceivably be launched from more conventional airports, thus obviating the need for and expense of a specialized facility.

If one grants (however reluctantly) that traffic alone won't even come close to covering the expenses, then perhaps a multifunction theme park is the best way to make the business case for those the promoters want to foot the startup costs. But if non space launch activities are touted as being the largest proportion of total business, as a potential investor I would still want to know precisely how these activities contribute to the total bottom line. And I would still submit that this is NOT a "spaceport". It's something else, but it's not a spaceport, and therefore anyone who insists on calling it that is being disingenuous - especially to potential investors.

Ports and theme parks are conflicting, and therefore incompatible entities, as they serve entirely different functions. One can't effectively combine them into a single thing. All I'm suggesting is that promoters of such, in the space commerce arena, should exhibit more honesty in their intentions.