One Small Step For The Markets ...
one giant leap for Statism. To be more explicit, Teflon makes it
to frying pans and man makes it to the Moon. Whilst the USA was
racking up large number of ego points against the Soviets in the
politically led Space Race, our eggs were sliding effortlessly off
their pans. The cost to develop Teflon plus the Apollo missions
was 24 billion dollars or more than $100 billion in today's money.
In terms of the whole US economy, the annual Apollo budget peaked
at 0.8% of GDP in 1965 after Khrushchev raised the political value
of Space records. Well, I exaggerate slightly in only mentioning
Teflon, there were benefits for biomedical devices and semiconductor
technology but the whole exercise was assuredly not about improving
health facilities or mainframe performances.
is ironic to think that all this would not have happened without
the existence of the killing machine known as the USSR. We free-marketeers
like a bit of competition to bring out the economic and innovative
best in a given sector. Unfortunately, the duopolistic nature of
the Space/Arms Race was not what we had in mind.
don't get me wrong, putting a man on the Moon is a wonderful achievement
of mankind's ingenuity and sense of adventure (not the Stateís I
may hasten to add). I remember watching those fuzzy images on the
TV as Neil Armstrong historically set foot on another world and
this partly inspired me to follow my hobby of Astronomy, which I
eventually pursued as a university degree.
although the buzz factor was high, was it worth the cost? If this
sort of exploration is so important, why have we not put a man on
Mars yet? The appearance of "2001: A Space Odyssey" the year before,
featured the confident speculation of a manned mission to Jupiter
within a generation. One generation later, we still haven't gone
further than the Moon. Has the State lost the sense of adventure
or is the political mileage to be gained from a Mars expedition
hugely outweighed by the crippling costs to the taxpayer (conservatively
put at $20 billion without private partnership)? Are the familiar
threatening questions of why such money was not spent on state schools
and hospitals ringing in officialdom's ears (which is a proof in
itself that the State never attempts anything big and adventurous
unless seriously provoked as we saw with Sputnik and Gagarin)?
there was proof that publicity as well as politics was an influential
factor, then the canning of the last 3 Apollo missions in the face
of declining TV ratings revealed something. Or, put another way,
such ratings perceived as de facto voters' opinion polls probably
saved the taxpayer billion of dollars. After all, apart from bringing
back a few bagfuls of lunar rock, there is not a lot else you can
do up there to justify the huge price tag. Well, excluding one or
two tantalising objects of commercial opportunity.
Starship Private Enterprise
brings us to the private sector. The critics will make the accusation
that private enterprise could not have pulled off such a stunt.
I presume that is meant in terms of the prohibitive costs and not
engineering ability. They are right in the sense that no single
company would have taken on such a huge financial risk with no perceived
benefits to present or potential future customers. With the moon
shots now a thing of history and with no major advantage to the
average American's lifestyle (apart from the Teflon), we have the
classical situation of the State either doing too much too soon
as opposed to the usual charge of too little too late. The moon
shot was a product that could not be packaged, nobody wanted it,
not even the military. Having lain on the shelf for so long now,
the technology is well past its sell-by date and any similar project
in the future would basically have to start from the scratch.
in terms of discussing how private companies would have handled
this kind of enterprise, some preliminary points have to be made.
Firstly, I am talking here about how private enterprise could have
done it from day one onwards. We are not talking about NASA privatisation,
which is no doubt a good thing to do and would drive down the cost
of launches and development significantly (For example, see this
Secondly, corporate taxation obviously hinders the ability of a
company (or group of companies) to allocate resources for big ticket
R&D projects - this limits the pool of companies capable of
doing such a project and hence reduces the competitive aspects of
what would surely start of as a small pool of participants. Thirdly,
considering the military history of missile technology and national
security, one has to ask how much interference and licensing restriction
the State would impose upon the marketability of key aspects of
certain technologies and hence the diminished return on investment.
major government strictures aside, we have a scenario where timing
and the level of service offered is critical. Too much or too little
can make or break a company. Space technology in the hands of private
enterprise would require a profit motive and not a political one.
As one example, we had one ready made problem which required a solution
due to the curvature of the Earth. The company which would be first
to put up a satellite to allow live international communications
was onto a winner when the prohibitive costs of a worldwide network
of thousands of miles of sub-ocean cables was compared and contrasted.
task was actually accomplished in 1962 via the Telstar launches
using the government-regulated monopoly of AT&T and the military
monopoly of space launch facilities. The former is now somewhat
privatised and deregulated; the latter is still jealously guarded
by the Pentagon. That such a task could have been achieved on solely
private grounds is not in much dispute when the prize of international
telecommunication profits is sparkling before corporate shareholders.
Producing the small ball of electronics known as the satellite is
one thing, wresting launch technology from the grip of the State
is another. The Soviets and Americans scrambled to divide the spoils
of Nazi rocket scientists after Berlin fell. America got Werner
Von Braun's V2 expertise which begat Mercury, Gemini and Apollo.
The baton from State to State ran on with the outreached hand of
private enterprise greedily and suspiciously ignored.
surprisingly, it is difficult to rewind history and transplant entrepreneurial
investors and inventors into the economic landscape without the
State sniffing around for a competitive edge to the weapons of their
warfare. But, assuming some government allows total private research
and development of propulsion techniques and use of land for private
launch testing, we come to the small matter of ROI. Viable projects
which promise big returns in the future have no trouble attracting
investors subject to two conditions - how much and when.
private projects have produced for the investor in the past. We
had the TransAlaska Pipeline of 1977, which cost $20 billion in
today's money. We had the England to France channel tunnel built
in 1995 at a cost of $15 billion. We could also add major railroad
and surface communications infrastructures which private enterprise
has funded from hopeful investors. But, the one thing they differ
from as we move from private satellites to a manned lunar project
is the time from initial investment to the first profits coming
in. It took the American government eleven years to get from the
first satellite launch to a man on the moon; could private investors
wait that long? No, they couldn't if one adopted a monolithic approach
to this investment problem. The answer lies not in huge spending
programs at taxpayers' expense but in an incremental approach to
private space development, which seeks alternate forms of return
on investment and then build towards new goals on existing, profitable
technology. In other words, there was an instant market for geosynchronous
communication satellites and satellite communications services as
well as low Earth orbit communication satellite constellations.
From America's first satellite (Explorer I) to Telstar was two and
a half years, so profits would be guaranteed to space telecoms companies
who could then plough a proportion of these revenue streams into
the big project of putting an employee on the moon.
to Apollo was a relatively longer leap of seven years and one I
suggest that competing companies would do in less time than the
Cold War race. Once the lunar probe satellites had been deployed
and transmitted back their surface data, all it would take is indefatigable
courage allied with the insatiable spirit of the pioneer to make
the final steps. And, yes, an "Invest to get an American on the
moon first!" promotion campaign is a darn good way of getting millions
of small investors in on the act, but this time without the coercion
may indeed satisfy enough investors just to see their man walking
on the moon, but the next chronological leap for others is to start
extracting whatever resources the Moon offers back to Earth at competitive
prices. What could the Moon offer in that respect? We spoke of unappealing
lunar rocks from Apollo missions, but as the Lunar Klondykers are
now hollering: "There's Helium-3 in them thar hills!".
fusion power is the big hope for this century and Lunar Helium-3
is a major player in that nascent market. Alongside competing fuels
of Deuterium and Tritium, Helium-3 is far too rare on the Earth.
But it is abundant on the Moon and offers the real advantage over
the other two fuels of being more efficient in yielding energy and
is emits much less radioactive by-products hence reducing build
and safety costs of fusion reactors. Forget about renewable wave
and wind sources, what fusion offers will dwarf any of those and
will dominate once fossil fuels begin to become more scarce. One
study suggests that 60% of all US energy requirements could come
from Helium-3 fusion by the year 2050, indeed the entire projected
supply of lunar Helium-3 could supply the Earth's entire energy
needs for 1000 years!
major efficiency gains of Helium-3 makes attempts to get this isotopic
gas off the Moon a profit-motivated incentive. This means one or
more lunar mining companies who can get miners and machines on the
Moon long term - this is expensive and has a long lead time in setting
up (for an overview of lunar mining see this article).
Thereafter, the profits will flood in like a meteor shower.
major start-up costs in R&D would be the cost per pound of launch
and the construction and maintenance of lunar mining bases and equipment.
suggests a $3 billion investment (1993 dollars) in mining R&D
from 1995 to 2015 which does not include the R&D required for
a scientific lunar base. The cost of developing a multi-market lunar
base obviously carries attractions to others not primarily interested
there is the cost of placing over 2000 mining machines to harvest
the helium by 2050 with the first machine reaping revenues in 2015.
This comes to about $20 billion for the machines and $123 billion
for launching them. The commercial incentive to lower launch costs
is there for all to see. The Space Shuttle is reputedly on over
$12000 per kg and private enterprise is aiming for $1000 in the
is where the studies get a bit edgy about purely private investment.
The minimum 20-year wait for the first revenues (1995-2015) would
put off those with a high time preference. This is why such studies
advocate a joint private-public initiative with the government supplying
the tax dollars and bringing back Helium-3 at a price of $500-$800
per gram. After 2015, the government gets back its original investment
at 20% growth.
doubt, this is a high-risk investment which promises big returns.
Considering the aforementioned $3 billion for developing mining
equipment, this is not a lot compared to the billions we have seen
poured into dubious dot-com start-ups. At least an investor can
see the Moon and look at the helium-3 distribution maps. This is
obviously not so much a majority venture for individuals but corporates
with a long-term view of global investment strategy. There are plenty
of multinationals with large amounts of risk capital looking for
profitable opportunities, which can wait for the long term. As such
an investment proceeds, stock flotations can provide further equity
from others as the profile and credibility of the venture increases.
at the R&D budgets of suitable companies in the aerospace sector
such as Lockheed Martin, Boeing, etc we see that the numbers are
heavily influenced by defence spending. According to the 1999 Corporate
of the U.S. Department of Commerce, $4.7 billion or about 3.5% of
sales were ploughed into R&D in this sector. This compared to
11.8% in the medical industry and 7.0% for IT and electronics. This
disparity confirms the boom in Biotechnology and the Internet markets
at that time (1997) and the idea that longer-term profit motive
oils the wheels of change (dot-coms were not expected to become
major revenue earners for some years).
this sector up to date, last October, the U.S. Senate approved a
defence budget of $343 billion. The amount allotted for research
and development was $51 billion with 20 percent to be allocated
to new technology. So, with private companies traditionally getting
more than half, this gives about $5 billion alone - a figure comparable
to the numbers above.
would be required to quell investor fears would be a major advance
in fusion technology or assurances of spin-off revenues. A prototype
fusion reactor that consistently outputs more energy that it consumes
is years off and that has to be accepted as the reality of commerce
- once the major components of a business venture begin to fall
into place then the dollars begin to flow into the R&D coffers.
Meanwhile, ancillary costs such as launch dollars per pound will
continue to drop and reduce the overall development budgets. That
is not an argument against commercial funding - it is rather a proof
that the markets employ investment timing that reflects technological
reality in a more efficient manner than the State.
spin-offs could fund R&D? It has to be noted that a company
exclusively dedicated to lunar mining would be too focused to produce
viable spin-offs. The spin-off strategy would have to be come indirectly
from large donor corporates such as Lockheed Martin, Boeing or Hughes
Electronics who have costed future provision of related technology
against the capital they have put into the mining company (or division).
for example, there is the potentially lucrative area of Space Tourism,
which has a recent precedent in billionaire Dennis Tito paying $20
million to the Russian Space Agency for the privilege of going up
in the Soyuz for one week. A 1995 survey by the National Aerospace
Laboratory concluded that 30% of households surveyed would pay up
to 3 months salary for such a trip. The economy of scale is not
big enough for that yet but a steady supply of multi-millionaires
paying millions would provide a supportive revenue stream.
mentioned, reducing launch costs has an overall benefit to the satellite
industry but this would not require any particular ring fencing
of budgets for lunar purposes. Unfortunately, one of the most recent
attempts at this was the single-stage launch X-33 plane that was
scrapped at 85% completion due to problems in engine development.
NASA had put in over $1 billion whilst Lockheed had put in $357
million (see article).
As a consequence, Lockheed discontinued the VentureStar
which was a similar but commercial payload delivery vehicle and
was being exclusively developed from private funds. If the project
had succeeded then reusable launch costs could have been reduced
by a factor of 10.
aside the technology aspects, the aesthetic argument against a private
launch is mooted in terms of the famous close up shot of the steel
column bedecked in gas clouds. The missile rises to reveal not the
words "United States Of America" but "MacDonalds ", "Ford" or any
other corporate willing to self their collective soul to get their
name on that mother of all adverts. What would a company give to
co-sponsor the first private moon shot? A large amount, a considerably
large amount of cash. One should not be ashamed of taking the money
in such situations, though one would expect such adverts to be discreetly
placed at the appropriate points on the projectile as it hurtles
at prodigious speed towards the Sea of Tranquillity. One wonders
what the franchise would cost for the first lunar fast food outlet!
in conclusion, this scenario raises the question of state versus
private projects. Is there a limit to what private enterprise can
do? Is there a point where taxation rather than investment can only
fund truly large-scale projects? Does free market capitalism grind
to a halt after so many billion dollars? Obviously, it does, there
is only so much wealth flowing about and there are a lot of people
wanting to divert it to their own further wealth creation or wealth
this rather proves is that the markets adapt to the fluid and progressive
prosperity of the economy they inhabit and inject realism into the
financial worthiness of projects. If capitalism cannot obtain so
many billions of dollars in so many years, it waits; it merely waits
with an almost inscrutable patience. The technology will come and
the investment will come. State interference aside, the Industrial
Revolution happened at the right time, the Computer Revolution happened
at the right time and the Lunar Revolution will happen at the right
time. Dynamic allocation (and non-allocation) of resources, that's
free market capitalism and you can trust the projections it comes
could blame the State for indirectly guiding me to study a university
subject, which turned out to be less than useful in finding a commercial
job. But then again, even I do not blame the State for everything.
Infinity and beyond!
Watson [send him
mail] writes from Edinburgh, Scotland.
needs your help to stay on the air.