Review: Space to Growby Jeff Foust
|
| But while the authors call this a “revolution,” this is book is not an uncritical, overzealous look at the space industry, but one grounded in the rigors of economics. |
Limp, a longtime Amazon executive, was hired a little more than a year ago by Blue Origin founder Jeff Bezos to make the company more decisive. ““He said he didn’t think Blue needed another rocket scientist,” Limp said of Bezos at the Commercial Space Conference in Washington a day before he announced the layoffs. “What we needed was a little bit more organization, a little more decisiveness, some manufacturing expertise.”
Those events demonstrated that technical success is a necessary but not sufficient condition for success in commercial space: companies, even those backed by billionaires, must eventually demonstrate that they can provide a product that meets the needs of customers and in a way that is financially sustainable. That is at the core of Space to Grow, a new book by Matthew Weinzierl, a professor at Harvard Business School (HBS), and Brendan Rosseau, a former teaching fellow and research associate there.
The authors, who created a space economics project at HBS, make clear they see tremendous opportunity for the commercial space industry thanks to the reduced costs to build and launch spacecraft and the growing value of services provided by those satellites in communications, Earth observation, and other sectors. But while they call this a “revolution,” this is book is not an uncritical, overzealous look at the space industry, but one grounded in the rigors of economics.
Many of the chapters in the book are case studies of some major space companies: Blue Origin, Planet, SpaceX, and others. Those chapters trace the rise (and sometimes fall: one of the profiled companies is defunct asteroid mining startup Planetary Resources) of these companies, including how they responded to, and sometimes reshaped, the markets. That is tied to what can be considered the book’s central theme, that under certain conditions, markets are efficient.
They use economic concepts throughout the book to support their analyses of the companies they profile. Those concepts range from simple supply-and-demand curves to more advanced concepts like the Le Chatelier principle, which explains how decreasing the cost of the supply of a product or service may create only modest increases in demand in the short term, but larger changes in the long term as the market takes more advantage of that less expensive supply. Fortunately, you do not need a background in economics to appreciate that: Weinzierl and Rosseau do a good job explaining those concepts in plain language.
They acknowledge that, despite that central theme, markets are not always efficient. They discuss market failures like orbital debris, where there are limited incentives for satellite operators to pay to clean up their defunct satellites, along with regulatory obstacles. They also cite concerns of monopoly power that SpaceX in particular holds in the launch sector; competition, they note, is one of those “certain conditions” required for markets to be efficient.
| By not competing for commercial crew, Blue Origin was “denying itself the discipline imposed by the market forces that are at the heart of the commercial space revolution’s promise.” |
Much of the background about the companies in the book will be familiar to readers, but the economic framing is useful for people inside and outside the industry alike. The authors stop short of making specific recommendations for companies or policymakers, but it’s clear they see potential for efficient markets to enable further growth of the industry.
In light of the recent events at Blue Origin, it was worth examining that chapter in detail to review their assessment of the company. A “monumental turning point” for the company, in the words of former president Rob Meyerson, was the decision not to bid on the next phase of NASA’s commercial crew program in 2012 after participating in earlier phases. By doing so, Weinzierl and Rosseau state, Blue Origin was “denying itself the discipline imposed by the market forces that are at the heart of the commercial space revolution’s promise” and acting more like a “philanthropic nonprofit than like a space startup.”
That appears to be changing now, both with Blue Origin’s technical accomplishments and its internal shakeups. “We have made a lot of progress in the past year on fundamentals and acting quickly and turning us into a world-class manufacturing company, and focusing the company,” Limp said at the Commercial Space Conference. “I think we’ve made some progress. We have a lot to do this year, too.”
Note: we are now moderating comments. There will be a delay in posting comments and no guarantee that all submitted comments will be posted.