The Space Reviewin association with SpaceNews

Falcon 9 launch
The successful launch this month of the Falcon 9 demonstrates that launch vehicle development is now within the reach of the individually wealthy. (credit: SpaceX)

Individuals pick up the space development torch

Bookmark and Share

Private development of computers has revolutionized the world economy. In 1946, the first electronic computer, ENIAC was built for $6 million [all amounts in inflation adjusted 2010 dollars] paid for by the United States Army. In 1976, the first Apple I was built for $5,000 (plus sweat equity) primarily as a curiosity to impress fellow hobbyists. The Apple II went on to democratize computing.

The Redstone rocket (which was renamed Juno to launch the Explorer in response to Sputnik) was developed by General Electric and the Army starting in 1944. It was first launched in 1953 at a development cost of $700 million. From 2002 to 2010 SpaceX developed its Falcon 1 and 9 with $130 million in investment, primarily from Elon Musk. Is it possible that orbital rocketry is about to blossom?

Keeping up with the Joneses amongst yuppie rocketeers may someday mean launching settlers to Mars.

The hard cost of development of rockets has not fallen by a factor of 1,000 like the cost of computer development has. However, the number of entities that have sufficient net worth to pay for development has grown dramatically in a half century. In 2009, there were 78,000 people in the world with investible assets of $30 million or more. Assuming the same wealth distribution, there were about 120 people with $360 million or more in 1944.

The factors that make more entities capable of developing rockets can be broken down as follows:

  • Growing global income
  • Growing percentage of income that is capitalized as wealth
  • Shrinking cost of rocket development leading to a march down the wealth distribution curve

These factors are leading to a growth in the number of people with the potential to build an orbital rocket of over 10 percent per year.

Wealth follows a Pareto distribution where 80% of the wealth is owned by 20% of the people, 64% of the wealth is owned by 4% of the people, and so on. At $1 million and more, there are about 110 times as many people as at $30 million and more. So if wealth continues to double every generation and the price of rocket development shrinks modestly, so that ten percent per year growth continues, there may be millions of people who can afford to develop a rocket in fifty years time—about the same number as the 8.6 million millionaire individuals in 2009.

The increase in the population of potential financiers in the last 50 years is likely to be the main reason that rocket development is now becoming a personal pursuit. In addition to Elon Musk’s orbital venture, many people have used the proceeds from other businesses to fund suborbital rocketry in the past 10 years (and perhaps orbital in the future), including Paul Allen, Jeff Bezos, John Carmack, and David Masten. As successful developments conclude, the pursuit may become more popular and competitive. Keeping up with the Joneses amongst yuppie rocketeers may someday mean launching settlers to Mars.

The prospect of government contracts may also have encouraged SpaceX and helped make it successful. It’s certainly possible that SpaceX will be captured by the culture of its customers and become ossified some day. But as more wealthy individuals come on the scene, new entrants will bubble up with the money to succeed at rocketry. There will be ongoing competition from new entrants to keep the incumbents in check.

The Netscape moment for rocketry may be imminent after Elon Musk’s divorce is finalized and ownership of SpaceX is sufficiently squared away. (I also predicted an imminent SpaceX IPO 5 years ago, so don’t start pestering your broker.) Apple had an initial public offering in 1980 giving Apple a market capitalization of $4.6 billion.

Government dropped the torch

India, South Korea, and NASA have expensive rocket developments that are not as successful as SpaceX’s. India in April launched a rocket with an indigenously-developed cryogenic engine. The launch failed around the time that new engine was to ignite. Certainly the US International Traffic in Arms Regulations (ITAR) and other technology transfer restrictions have made it more difficult technologically for India to develop a rocket. On the other hand, ISRO has an annual budget of on the order of $1.2 billion, which is nearly ten times the total startup capital that went to SpaceX. The money from the space agency’s budget also went toward other activities, but that begs the question of whether space technologies can be pursued successfully without indigenously developed rockets. National pride may delay ISRO from buying rockets from SpaceX, but may not prevent it. Flag-carrier national airlines don’t let US manufacture get in the way of flying Boeing hardware.

Similarly to India, South Korea launched a rocket earlier this month. Their Korean Space Launch Vehicle 1 (KSLV-1) program cost about $400 million to develop. KSLV-1 used Russian technology so ITAR-related issues were mitigated for them. Yet still, they had that rocket program’s second failure out of two launches.

As more wealthy individuals come on the scene, new entrants will bubble up with the money to succeed at rocketry. There will be ongoing competition from new entrants to keep the incumbents in check.

SpaceX had some launches that were not deemed as successful as their most recent one. It is expected that every rocket program will have some growing pains. One of the disadvantages that government has is that failure is an option. The space agency will survive if the rocket development fails. SpaceX certainly would have failed if its Falcon 1 and 9 programs continued to disappoint. This possibility of failure means that evolution can occur in private space programs far more readily than in public ones. Even though some countries have tried rockets and stopped (Brazil comes to mind), evolution is intuitively much more active when private firms fail. Private development efforts also have to succeed or fail quickly and do so on a budget far less than government ones. That kind of fast, cheap evolution could lead to a radical drop in launch costs unlike rising costs for NASA launches.

The United States has had a long string of expensive rocket developments. The most recent one saw Ares 1 make a test flight, but the test flight was not designed to take anything to orbit. Ares 1’s estimated cost to develop is $40 billion. Even if it does achieve “successful” launches, they will each cost more than the flight hardware plus the development of a whole new SpaceX-style firm and rocket, perhaps by a factor of eight ($1 billion vs. $120 million) if there is only one flight of Ares 1 per year. Success of Ares 1 would cost more than failure. This begs the question of what failure means. It’s not enough for a rocket to achieve technically if the cost is too high for the achievements to be more valuable than the cost.

The Ares 5 is also in the process of failing before it even reaches the launch pad eight years before its (re)scheduled maiden flight. (SpaceX was only founded 8 years ago!) Together Ares 1 and 5 comprise the launch vehicle elements of the Constellation program, which has $2.5 billion budgeted just for the program to close down. Closing SpaceX would be a lot less expensive. Perhaps future rocket programs in the US will have to manage their cost better. During the Bush Administration, value for the money has clearly not been the main driver of rocket development by NASA. Perhaps it never has.

Similarly, India and South Korea have trillion-dollar economies with governments with budgets of hundreds of billions of dollars. They can afford dual-use military technology, national prestige, jobs and technology spinoffs.

By contrast, SpaceX has an owner who is profit motivated. That means that every job goes in the minus column of the ledger. SpaceX does not have any constituency that values spinoffs unless they can be patented and commercialized by the firm. Elon Musk does not strike me as a James Bond villain who would harvest any military benefit from knowledge of rocketry.

I personally am more proud of my nation to have produced a SpaceX than an Ares 1.

We don’t have anything to fear from the government space programs of other governments. The Soviet space program didn’t result in global domination. As long as all countries’ space programs follow the Soviet model, no government’s civilian space program will be worthy of our fear of them being anything other than a costly jobs program. A fearsome rival to surpass the achievements of our grandfathers would only arrive if another country outsourced its rocketry to its private sector.

I personally am more proud of my nation to have produced a SpaceX than an Ares 1. But prestige is in the eye of the beholder. The budget for Constellation is so big that it generated a cadre of sycophants. They nearly morphed Ares 1 and the rest of Constellation into something that generates prestige. Constellation almost changed from an object of worship by a cargo cult to a black hole that can only be measured in the media by its weight and spin.

The way forward

Government-developed super computers continue in the age of privately developed microcomputers. They have become increasingly irrelevant to the economy compared to privately developed computers. Today’s graphics cards have the capability of the super computers of ten years ago. Falcon 9 at $50 million a launch is like the minicomputer that made computing accessible to organizations as small as university departments. My hope is for rockets to become as prevalent as cars were in 1920 so that every one of the world’s 8.6 million millionaires can afford a custom-made one. Maybe the next step is to find demand to spur sufficient competition to drive launch costs down further. Elon Musk’s stated goal to personally fund the settlement of Mars may be the first glimpse of a self-sustaining ecosystem where profitable launches fund the additional launches that make the profitable ones so profitable. A $4.6 billion IPO can certainly fund nearly a hundred Falcon 9 launches at retail prices. We will not have to wait for individuals to have $40 billion they want to invest in rocket development before privately funded rockets revolutionize space transport.