Private sector space travel is all well and good, but where are the business models to support the final frontier, asks Pascal-Emmanuel Gobry.
I have science fiction fantasies like everyone else. But as a good market analyst, I have to ask: where’s the business model? Government space exploration has clearly failed. We are putting a Micro Machine on Mars and calling that a success. When the space age dawns, it will be thanks to entrepreneurs. But entrepreneurs can’t succeed without a winning business model, and the business models available to private space exploration seem limited.
The first is space tourism. Isn’t that nice? Yes. It’s nice. That’s what Richard Branson’s Virgin Galactic is going to do. Perfect for its small space planes that can’t go higher than a low Earth orbit; perfect for a “company” that’s really a publicity ploy for Virgin Airlines. (Which is, of course, totally fine, but let’s not kid ourselves that Branson is the next Christopher Columbus.)
But, even if you can get the price down far enough that it’s not just eccentric billionaires who can enjoy a whirl in zero gravity, that is still a small market in the grand scheme of things. A potentially profitable market, for sure. But not a market that is going to propel humanity in a new era.
The business model for private space companies is public procurement. If private companies can bring down the costs of bringing payloads in orbit, then governments can just contract with them to get their satellites into orbit cheaper. Everybody wins. It’s what SpaceX can do, which has lined up billions of dollars’ worth of US government contracts to bring payloads up to the space station.
Unfortunately, like the space tourism business, while that’s a perfectly sound model, it’s also limited: entrepreneurs end up doing what the government was doing before, albeit mildly more efficiently, not doing something new. It’s fine as a stepping stone, but it can’t be the business of the future.
So, is that it?
On the contrary. Firstly, if the likes of SpaceX can really bring down the cost of going to space tenfold, there will be new use cases for space travel that we haven’t envisioned yet. Each great university would be able to develop its own space program. Twitter could have a space program! I don’t know why they might want one, but they could. An immutable law of the universe is that radically lowered costs plus human ingenuity leads to amazing novelty.
Can’t space companies mine asteroids for precious metals and sell those? Wouldn’t that be extremely profitable? The startup Planetary Resources attracted funding from a coterie of billionaires based on this idea. The problem is that it’s hopelessly stupid for a completely obvious reason: supply and demand. The commodities that Planetary Resources proposes to mine are expensive because they’re rare. If they mine tons of them, they’ll stop being rare. So they’ll stop being expensive.
There is one exception to this rule, however, and that exception could prove a very lucrative business model for space exploration: He-3. He-3, an isotope of helium and the required fuel for cold fusion, which is, in theory, one of the most bountiful and cleanest energy sources available.
He-3 is only present in minute quantities on Earth; it is, however, what giant gaseous planets like Jupiter and Saturn are made of. The company that could successfully harvest He-3 from those gas giants and bring it back to Earth for fusion would make Saudi Arabia look like a ragged band of paupers and usher in an age of unimaginable prosperity back on Earth with plentiful, cheap, clean energy.
Now that’s something to get excited about. This absolutely must-read review on Slashdot imagines that He-3 mining can be achieved with space elevators using energy from the Earth’s rotation to fling ships across the solar system.
As wonderful as that sounds – and it does sound wonderful – there’s even more that a great space exploration company could do, and it’s obvious to anyone who watches a lot of sci-fi: set up colonies.
The problem with dreaming up ventures to mine space, whether it’s gold or He-3, is that it imagines that wealth comes from stuff, whereas free marketers know that wealth comes from the co-operation and ingenuity of people, not from material things. The best way to make money is therefore to harness that energy, in the form of new space colonies that a private company sets up and manages in exchange for a percentage of the revenue generated by that colony.
If that sounds like what a government does, you’ve got the idea. And, depending on your political persuasion, the idea of companies setting up proto-states in space will have you either terrified or thrilled.
Think of the East India Company, the Apple of its day in economic terms… but an Apple that controls the US Navy and resolves its disputes with Samsung with drone strikes. Think of Venice, one of the greatest city-states of the world, whose glory still enraptures us.
Venice was one of the earliest examples of a Republic, with a quasi-democratic regime, but it is best-understood as a for-profit corporation, with its Doge as board chairmen. (Which is why corporate-run space city-states don’t sound so bad – corporations would recognize citizens as customers and cater to them.)
We remember, rightly, the Age of Exploration as the age of corsairs and pirates, but it was also the age of entrepreneurs, who differentiated themselves through canny marketing and the ruthless steel of the blade. Anyone with gumption and a bit of luck could not only become rich, but build themselves an empire.
Does that sound scary? Maybe a little. But if you don’t find it just a little bit exciting as well, you ain’t got no heart.