On The Economics of the Space Industry

I knew very little about the space industry, let alone its economics, before reading the piece that I am going to speak about today. And that’s one reason I enjoyed reading this guest post in Not Boring so much, about the space economy.

The second reason I enjoyed reading this so much is because it is a rare combination of three things: it was in-depth, it was informal and it was informative. That takes skill, and reading it was therefore a pleasure.

I’d strongly urge you to take an hour ot two out of your week to read the whole thing at leisure. What follows are points that interest me, and that I have made notes of – but this is something I really do think you should do for yourself too.

Before we begin, I question that I have thought about after reading this article. What, I asked myself, is the chance that I will get to experience space tourism in my life? The question would have been hilarious in the 1990’s, when I was in school, and while it still seems fanciful right now, I’d go as high as even 10%. And for my daughter during her lifetime, I’d put the chances at above fifty percent. What a time to be alive.

  1. I’d memorized during my school quizzing days the name of the first dog to go into space (Laika). I learnt while reading this article that Sputnik-2 didn’t have any “Earth return capabilities”, and I felt very sad indeed.
  2. NASA had a predeccosr called NACA, and responding to the Russian advances in space in the late 1950’s necessitated the formation of a new organization. I found this to be very interesting.
  3. “Astronauts were living legends and international celebrities. They drove (or, more accurately, raced) Corvettes across town in Houston.” James May had a lovely segment on this in one of the episodes in The Grand Tour. The reverence in his voice as a he drove the very same Corvette that was once owned by Neil Armstrong (I think it was NA’s) was wonderful to behold.
  4. NASA’s budget in its heyday was 4% of all US federal government spend. It is now at 0.4%.
  5. COTS, or Commercial Orbits Transportation services, and the incentives offered by that program have resulted in Starliner’s $/kg in 2021 to be about the same as that of Mercury, in 1961!
  6. I learnt about flippening.
  7. The value in space exploration is mostly about driving benefits back to earth: GPS, transparency about what is happening back on earth, fighting climate change, and spillovers. Speaking of spillovers, here’s a useful list.
  8. Turns out you can see cow farts from space!
  9. The Russo-American conflict has not been good for space exploration, and the Chinese are doing some really advanced stuff. Speaking of which, I also learnt about hypersonic glide vehicles.
  10. The chart below this paragraph doesn’t show India’s budget separately. I wish this were not so.
  11. The economics of funding space startups is (surprise, surprise) very different. But that being said, read the section that comes next very carefully, and then take a look at this talk, and this book.
  12. The launch cost curve is encouraging, as is the satellite cost curve.
  13. Take a look at the market map below this paragraph to get a sense of the firms working in this (n.p.i) space.
  14. I had no clue space manufacturing was a thing!
  15. SpaceX will “not recognize international law” on Mars.

Again, I strongly encourage you to read the whole thing yourself, and take your own notes. If you are a student of finance, for example, the sections on funding, business models and risks deserve a deeper dive.