A Glint of the Bluest Blue

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Charles Liu's picture

               “I’m coming back in… and it’s the saddest moment of my life.” That’s astronaut Edward “Ed” White, on reentering the spacecraft after becoming the first American to walk in space during NASA’s Gemini 4 mission.

               White took that historic first step onto the final frontier, and gazed upon Earth – a blue marble in the darkness – in June of 1965. He and Gemini were followed in the next 7 years by Project Apollo, the Skylab, and the joint U.S.-USSR Apollo-Soyuz Test Program. Finally, in 1972, NASA launched its last major exploration project, the reusable Space Shuttle program, which ended with the successful landing of the Space Shuttle Atlantis in July of 2011. Today, the legacy of the late-20th century Space Race lives on only passively through the International Space Station, a joint construct by the U.S., Russia, Europe, Canada, and Japan that orbits the Earth.

               Altogether, 53 years of space exploration – from the first U.S. rocket plane launch in 1958 to the Atlantis’ final landing in 2011 – cost NASA alone an estimated $848 billion (inflation-adjusted 2014 dollars). That resolves to an average of $16 billion per year spent by the United States on space travel, and accounts for a percentage of government spending ranging from a peak of 4.41% in 1966 (at the height of the Cold War) to a modern level of 0.49% in 2014. The monolithic costs of U.S. space projects are underscored by the fact that the former USSR/Russia has spent at least the same amount, and are reflected acutely in the fact that the International Space Station alone cost an estimated $150 billion – it is the single most expensive item ever constructed by mankind.

               Over a trillion dollars spent by the world’s governments on space travel – and to what end? An amount greater than the individual GDPs of 178 of the world’s 194 countries has been poured into ventures that seem at best theoretical and intangible in their returns. Billionaire investor Warren Buffet argued that no sector has destroyed more value than airlines – and if space travel seems just as asset-heavy, just as incapable of earning sufficient rates-of-return to fund inflationary needs or growth/acquisitions or distributions to stakeholders, and greater in size than the airline industry, wouldn’t the same be true of our attempts to conquer the cosmic frontier? Is there any reason why such a large project should continue, under anyone’s hand?

               Well, yes. In fact, there are quite a few reasons why space travel – whether it takes the form of suborbital flight tourism or human colonization of Mars – is a venture that is not only distinctly different from the airline industry, but also differentiated in exactly the ways that make it, beyond a worthy business pursuit, a project that is crucial to the continued economic and societal well-being of mankind.

               Let’s begin by going back to Ed White. “I’m coming back in… and it’s the saddest moment of my life.” What was he lamenting the end of? Certainly not a breath of fresh air after being cramped in a metal pod for days. It was something more – the zero-g sensation of almost flying, the view of that blue-green marble, swirled with white clouds and set against a backdrop of pure nothing; a maelstrom of nations, people, technology, wars, economies contained in a perfect sphere, tiny and insignificant amidst the utter black silence of space. It was a breathtaking high that White could never forget – and he’d been preparing for years!

               Would White have had the same reaction if he'd simply been shown a photograph taken by some remote satellite floating in space? Or if he was placed in a zero-g simulator? Certainly not. And it’s that distinction, one of living and breathing the visceral moments of an experience rather than being put through some simulation of it, that makes the irreplicable sensation White and a few lucky others have gotten so special, and as a result so financially and socially expensive – until now.

               Now, a new normal has been established when it comes to space travel and the unforgettable experiences that were once limited to government-sponsored astronauts. With the withdrawal of most nations from state-funded space programs, private entrepreneurs, especially Ultra High Net Worth Individuals (UHNWIs, who possess at least $30 million in net assets) have taken the stage. These millionaires and billionaires, many of whom made their fortunes by leveraging innovative technologies, have shifted their gazes to the stars and begun to formulate business plans. And just why do these UHNWIs see profits while investors such as Mr. Buffet see only red ink? Because they see the idea – the understanding that space travel, utterly divergent from the here-to-there-quickly transportation mentality of airlines, is almost completely about the sensations, the views along the way; space travel makes money the same way a safari does because it focuses on what happens along the journey – space travel is an ends, unlike airlines, which are simple means of moving around. And as is true of any entertainment sector where great value is added through less tangible products without great marginal capital cost, the return on investment in space travel can be staggering.

               Take Sir Richard Branson for example. Sir Richard, who began his career with a record business and eventually grew his Virgin empire to upend establishments in telecommunications, airlines, sustainable energy, and everything in between, is the founder and key mind behind Virgin Galactic, a space tourism company that uses licensed technology from Microsoft co-founder Paul Allen’s Spaceship One project to bring paying passengers into suborbital space. The concept behind Virgin Galactic’s main product is simple: use suborbital spacecraft to bring paying customers 70 miles into the sky, where they can experience the zero-g sensation Ed White felt while seeing with their own eyes the curvature of Earth set against the vast darkness of space. How much has this venture cost? So far, Virgin Group, along with Aabar Investments group and the New Mexico government, have invested over $680 million into Virgin Galactic. However, much of the cost associated with space travel is front-end overhead – although fuel costs are substantial, the physical construction of spaceports and spacecraft account for much of the needed investment. Yet with revenues of $60 million per flight ($200,000 per passenger and 300 passengers per flight) alongside historically low liquid fuel costs, the advent of reusable rockets that exponentially decrease launch cost and a years-long passenger waiting list, variable launch costs and fixed capital costs can be easily recouped – even more so should further government-sponsored assistance be injected. The future of privatized space tourism is promising, and not just for first movers such as Sir Richard – latecomers can easily benefit from lessons gleaned by Virgin Galactic and skip parts of the steep learning curve – after that, it’s the quality of the experience provided that differentiates.

               Sir Richard is one UHNWI pioneer of commercialized space experiences. Another is Elon Musk. Musk, a South African-born Canadian/American entrepreneur, invested a great deal of the proceeds from the sale of his company Paypal to e-commerce giant eBay into a venture called Space Exploration Technologies Corporation (SpaceX). Whereas Virgin Galactic leverages the entertainment industry-like ‘unforgettable experience’ aspect of space travel to earn high returns, SpaceX operates with a long-term mindset not unlike that found in the biomedical sector – it has received over $2 billion in funding (including $1 billion very recently from Google and Fidelity) with the intent of innovating space travel in leaps and bounds. Evidence that SpaceX’s emphasis on exponentially lowering costs by, say, designing reusable rockets to fulfill transportation and delivery contracts is working can be found in a manifest of over 50 launches planned through 2017, with $4 billion in total revenue as of summer 2014 and a $5 billion backlog. At the same time, SpaceX maintains a loftier ultimate goal of colonizing Mars. While the 21st century returns of such a venture are uncertain, there can be no doubt that given the unsustainable exploitation of Earth’s resources, mankind’s future lies in finding new homes – and someone has to get started on the incredibly complex work of getting there. But unlike in the case of Virgin Galactic, in such a research-and-development oriented field, SpaceX’s position as a first mover of innovation provides great advantage.

               “I’m coming back in… and it’s the saddest moment of my life.” White’s steps in space may have triggered the beginning of an era, but his words uncannily foretold its end. The close of most government-sponsored space programs seemed to end the dreams of a generation. White himself died in a fire during training for the Apollo 1 mission. There will always be risks. But when has humanity ever advanced into space without the leadership of a few brave heroes? In the past, those heroes have been White and Armstrong and Aldrin. In the years to come, the mantle will shift increasingly into the visionary hands of Branson and Musk.

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