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No Mercy No Malice

SPAC(e)

June 25, 2021

People worried about starving or being eaten don’t have time to ponder the finite nature of life. But once we know we’re going to survive in the short-term, immortality begins to loom larger than mortality. Affairs, Teslas, and ayahuasca are the accessories of a life with more money than time. Now the billionaire class has taken midlife crises to a new level. In the past month, French billionaires alone have cut ribbons on: a $194 million art museum in Paris; a $175 million Frank Gehry-designed “creative campus” in Arles; and a nearly $900 million, 16-year renovation of La Samaritaine department store, complete with hotel, spa, and wavy glass facade.

We do things bigger here in Texas, though.

Last month, Jeff Bezos announced he would be aboard Blue Origin’s first manned space flight, scheduled for July 20. A recently divorced billionaire on human growth hormone transported into space in a giant dildo powered by an oxygen-rich rocket engine that produces 490 kilonewtons of thrust is ground zero for everything that is right and wrong with society. Mostly the latter. But I digress.

Not to be outdone in the big bank/little dick department, Richard Branson is rumored to be seeking to beat Bezos into space. He might get suborbital before Bezos, but he’s hardly breaking new ground. At least 570 people have sojourned in space since Yuri Gagarin made the first trip in 1961. Branson wouldn’t even be the oldest person to do it: John Glenn left the planet at 77 years old (his second trip).

The Final Frontier

The desire to bravely go where no one has gone before is deeply rooted in the human spirit. Discovery must be a feeling of great wonder. At that moment, you are here for a reason. You are immortal.

Exploration can be hugely beneficial for those who follow, who get to cross Donner Pass on pavement. Yet nearly 50 years since the Apollo astronauts last walked on the moon, we’ve … not been back. Space is not the Sierra Nevada.

Space is exponentially more expensive and dangerous. Nineteen of the 570 people who’ve ventured into space haven’t returned, yielding a mortality rate of 3.3%, vs. 1.3% for climbing Everest and .04% for base jumping. Worse, by American standards, space travel is going to be a shitty business.

Even with our advanced technology, and a fawning CNBC engaging in a consensual hallucination that these billion-dollar hair plugs are for all mankind, the ROI is suspect. That last sentence is my way of saying “makes no fucking sense whatsoever.” There is 100x the return investing in technologies and systems of cooperation on a planet already perfect for human life, a mere 38.6 million miles from Mars. The billionaire obsession with space fantasy (and our willingness to go along with it) isn’t just disappointing, it’s nihilistic. Our idolatry of innovators is morphing into phantasmagoria.

More Space

There are four reasons to put a rocket into space. In order of near-to-medium-term relevance (i.e. having any purpose this century), they are:

  1. Hauling stuff
  2. Scientific exploration
  3. Tourism
  4. Colonization

Hauling

There’s a real business in hauling stuff — mostly communications satellites — into orbit. Indeed, this is where both Bezos and Musk have placed their bets. Blue Origin and SpaceX are serious space-hauling companies. Apparently, it’s also a profitable business. Says Blue Origin CEO Bob Smith: “We make money on every flight.”

Scientific Exploration

Scientific exploration is worthwhile, but it’s not a business. It feeds businesses (hauling, materials, communications), but this is deep science, better pursued by our commonly owned enterprise, the government.

In fact, contracting is becoming a competence for NASA. In 2010 commercial launches represented about 30% of all U.S. launches. Last year, they accounted for 80%. Private enterprise is eliminating NASA’s need to design, build, and launch. That’s a good thing: It means they have more time to focus on exploring. Let capitalism handle the picks and shovels. NASA will handle the science.

Tourism

After that, we venture into ego and fantasy. Space tourism is a bad business that could end in a flash … literally. What’s the market for people willing to spend $250,000 to be weightless for a few minutes? What’s the repeat market? And what will be left of that market after the first tourist rocket explodes on the launch pad, killing Bob from accounting? Because the nature of rockets is … they explode. About 90% of U.S. rocket launches were successful last year. That might sound OK until you start putting humans in them.

In human transport, superior shareholder returns will be a function of fast vs. far. In my view, the most under- and overhyped transportation firms are Boom Technologies and Virgin Galactic, respectively. The market for people willing to pay $25,000 to get from NYC to London in 3.5 hours is (at a minimum) 1000x the market for people willing to pay $250,000 for a 90-minute suborbital ride to the Kármán line. Six hundred people have paid $250,000 to reserve a seat on Virgin Galactic. Six hundred people land on a private jet at Teterboro every 6 hours.

Colonization

As for colonization of Mars … really? The only interesting question is whether Elon actually believes any of this — whether anyone at SpaceX believes any of this — or whether it’s purely a PR stunt. Colonizing the Red Planet will not happen in my (or my kids’) lifetime. Intense solar radiation, combined with the lack of atmosphere and low gravity, would require living (dying) quarters buried deep under the planet’s surface for any hope of survival. As astronomer Caleb Scharf told us on Pivot, “there’s a lot of stuff [on Mars] that wants to kill you.” The worst place on Earth is better than the best place on Mars.

The SPAC(e) Race

The biggest trend in space over my lifetime has been the rise of the private space hauler. Who’s best positioned to win in this new market? In general, there are three ways to maximize profits: reduce costs, do more (in this case, more flights), and diversify your business.

The Big Three — Blue Origin, SpaceX, and Virgin Galactic — are all making headway on #1. All have invested in reusable rockets, which have reduced launch costs by 70%. On #2, we have a clear leader: SpaceX has launched almost three-quarters of this year’s U.S. flights.

As for #3, Virgin Galactic is the clear loser, as Richard Branson is focused on space tourism. Jeff and Elon, by contrast, are investing heavily in orbital infrastructure. Between them, SpaceX’s Starlink project and Amazon’s Project Kuiper plan to launch nearly 14,000 satellites, providing continuous, high-speed Internet access globally. That should keep the space haulers busy for some time.

In sum, there’s real money to be made in hauling stuff — but satellites, not tourists. The past decade has seen more than $125 billion of investment poured into positioning, navigation, and timing (PNT), a sector that relies on good satellite constellations to feed Uber, Maps, DoorDash, and nearly every other app on your phone. This is why launch vehicles and satellites are hogging all the space infrastructure investment.

With 1,480 unique space companies competing for a place in the stars, the space economy is very thirsty. But a rocket needs more fuel than a Ford F150 — about 12,300x more. What do you do when you need fuel (capital) in exuberant excess? You either 1) find a billionaire or 2) access the public markets.

SpaceX, Blue Origin, and Virgin Galactic all have a massive head start because they were birthed by billionaires. Musk, Bezos, and Branson will pay their kids’ expenses no matter how dysfunctional or explosive. But the sector is attracting new sources of capital.

Take Rocket Lab, a 500-employee startup that also launches rockets. How will it get the capital it needs to keep up with the 9,500-employee behemoth that is SpaceX? Via SPAC. In March, Rocket Lab merged with Vector Acquisition Corp. and raised $750 million at a $4.1 billion valuation. The company has already had two successful launches this year.

A dozen other space startups have also gone (or are going) public via SPAC. Astra, a small satellite-launching company, raised $500 million at a $2.1 billion valuation. Spire Global, a satellite-data company, raised $475 million at a $1.6 billion valuation. There are hundreds of other space startups thirsty for an injection of public cash. The 2021 SPAC boom is yielding tremendous opportunity and risk for astronauts and investors.

Near vs. Deep Space

My observation is that men are more focused on deep space, and women near space. Men are more ego driven and obsess about frontiers in business and the solar system. Women are (cue the Twitter hate) more concerned with exploring things near them, finding less reward in being the first person on Ganymede. My advice to young men, especially those with kids, is to be more focused on near space. As you get to the end of your time on the third rock from the sun, you won’t be desperate to spend more time with strangers, but the people closest to you. I spent the first 40 years of my life obsessed with getting affirmation from people I didn’t know. It came at a cost to relationships with my family, friends, and ex-wife.

Tonight the family ate at a sushi restaurant, and my 10-year-old ordered kakigori, Japan’s quintessential summer treat: shaved or crushed ice drizzled with flavored syrup or condensed milk. It’s awesome. Nobody, despite my son’s urging, would try it. I agreed and demonstrated a rare expression of joy (see above: It is awesome). My son, at that moment, felt so close to me he pushed the kakigori in front of me and sat on my lap so we could enjoy the dessert together. It felt as if I was discovering something nobody had ever felt/seen before, and all of mankind would benefit.

I am strong, here for a reason … immortal. Going where (this) man has never gone before.

Life is so rich,

P.S. Bold decisions like navigating space and exploring new frontiers require reams of data and sound strategic analysis. Section4, my startup, gives students the tools to tackle today’s critical business decisions — whether in space or on Earth. Our newest two-week course (we call them Sprints) will level up your data & analytics game. It’s taught by Tom Davenport, one of the best and brightest in his field. Sign up for early access.

38 comments

  1. BKJ says:

    And mining an asteroid worth $10,000 quadrillion

  2. G Close says:

    Good article, as always.
    On a side note, it’s interesting how many people are focused on the expense and environmental damage of space flight, while completely ignoring the expense and environmental damage of a $750b spent per year on the US military. I think this is a much more important issue.

  3. Les says:

    Scott, love the punch line of your article. For the fact that billions of $ will be spent on hauling and or exploring into the vacuum of space, there may be tangible benefits to mankind. New revelations of what’s out there, how much mineral rich solid ground exists on other worlds? As our minds may be able to expand consciousness to the farthest reaches of the universe, we know and feel that what is out there is right here in our own being. You can “explore” the universe by looking within and to those who sit right next to you. The interaction with your son is priceless, timeless and enduring. And it sure beats one small step for man, one giant leap for mankind.

  4. Bijoy kumar sarker says:

    Dear sir
    We have respect and your so much budgets in this we have small family’s our behalf manage impossible even we have request kindly not looking for greedy.
    Thank you for regard
    Your faithfully
    Bijoy kumar sarker
    Nabajug Unnayan Sangstha
    Thakurgaon Bangladesh.

  5. Larry Press says:

    Scott,
    I am a big fan, but you have overlooked major space industry drivers.

    The most striking omission is the provision of global high-speed Internet connectivity to users in rural areas, civilian or military vehicles, ships and planes and rural cell-towers. Large investments in low-Earth orbit Internet service constellations are being made by SpaceX, OneWeb (private plus the UK government), Telesat (Canadian), Amazon, and China SatNet (state owned with state-owned and private suppliers).

    All are significant and have different advantages and disadvantages. For example, here is a comparison of SpaceX and Telesat:
    https://www.circleid.com/posts/20210519-spacex-starlink-vs-telesat-lightspeed/

    The least known and most recent entrant is China Satnet: https://www.circleid.com/posts/20210329-guowang-starlink-will-be-chinas-global-broadband-provider/

    Only SpaceX is offering (beta) service today so the market is unproven, as is the need for debris mitigation:
    https://www.circleid.com/posts/20210427-avoiding-low-earth-orbit-collisions-the-clock-is-ticking/

    Larry Press
    (UCLA grad from the time when tuition was $76 per semester)

  6. Allan says:

    Would love to see ASTS SpaceMobile included in this piece!

    A space company using satellites for everyday cell phone coverage, not only specialty applications that can pay for the privilege.

  7. Sean says:

    Hi Scott
    I want to start off by saying that, unlike many of your articles (which I congratulate you on), I feel like much of this is inaccurate, mostly due to misunderstanding, to a degree I need to at least rebuff or comment on some of the statements I felt stand out. I’m just going to place points here, to avoid having to meticulously format.

    1. “Yet nearly 50 years since the Apollo astronauts last walked on the moon, we’ve … not been back. Space is not the Sierra Nevada.”
    Ok, so I understand your intention here, but I feel your metaphor is flawed on a massive level. Apollo was not an exploration plan like that done of the Sierra Nevada. Instead, it was a shot to the west coast, which was then never followed up on thanks to a war going on in the east coast (a.k.a. Vietnam) and a lack of proper funding or preparation by government for what would have come after. Compare this to how the American government continuously pushed westward for multiple decades, and how NASA has continuously been on a downward slope funding-wise, even before Apollo 11.
    2. ” Says Blue Origin CEO Bob Smith: We make money on every flight. ”
    This is the most glaring factual error. Unlike SpaceX, Rocket Lab, or ULA (which is absent in your article), Blue Origin has not lifted *a single payload* to orbit. They haven’t even launched a flight to orbit. So, I think you’ve misunderstood the quote, which was likely given in regards to Origin’s *tourist* business (on New Shepard), and not at all in regards to hauling.

    3. “About 90% of U.S. rocket launches were successful last year.”
    Okay, as stated, 10% (or four launches) out of the 44 launches from the US last year failed. Three of those were test flights (Rocket 3.1 and 3.2 from Astra, and LauncherOne from Virgin Orbit). Only *one* launch (‘Pics or It Didn’t Happen’ by Rocket Lab) failed, and notably, this was on a vehicle (the Electron) without the ‘Human-rated’ standard which is followed by all vehicles capable of human spaceflight. So, I feel that this is a misrepresentation of the situation regarding crewed spaceflight, even without regarding the difference in current flight cadence between air and space travel (the latter of which will markedly increase in the next decade).
    That being said, I completely agree with your assessment of suborbital space tourism; it does seem overhyped. However, you have ignored orbital tourism, which will become more prevalent this decade (with four orbital flights already booked on SpaceX’s Crew Dragon iirc), albeit still the realm of the wealthy.

    4. “Intense solar radiation, combined with the lack of atmosphere and low gravity, would require living (dying) quarters buried deep under the planet’s surface for any hope of survival”
    I’m sorry, but this is portrayal of the problems associated with Mars as unsolvable is dead (pun not intended) wrong. These challenges, which do indeed exist, have been solvable for decades by now. Radiation is solvable with the use of radiation-shielding materials (notably including water and plain regolith) and ‘storm shelters’, both of whom are shown in SpaceX’s Starship plans, and used on the ISS. Atmosphere can be maintained in habitats, like on the ISS. The likely effects of low gravity (which is still an unexplored area) can be mitigated through exercise, as with the ISS. These are not impossible problems, as you state them to be, and are routinely dealt with. So… no. It’s not a PR stunt. There are easier ways of getting to Mars than building a Starship and Falcon Super Heavy.

    5. “Richard Branson is focused on space tourism”
    Correct, but still somewhat inaccurate; Branson has actually started a company hauling things into space (named Virgin Orbit), which is already operational.

    6. “In sum, there’s real money to be made in hauling stuff — but satellites, not tourists.”
    Completely correct, no problem here.

    So, in summary, I feel that you have much of the economic/capital base (such as SPAC) down really well. However, your presentation of the technical side of the current space market is lacking, especially with regards to ‘deep space’ (which is a somewhat nebulous concept which you don’t define, but which I understood is ‘beyond LEO’). In addition, you miss a critical portion of the space industry which will likely grow increasingly relevant as launch costs plummet (largely thanks to the emergence of reusable launch vehicles after the success of the Falcon 9, increasing miniaturisation of electronics, and rising public interest), namely that of asteroid mining. While definitely out of range for the 2020s, and probably 2030s, this area is one of the most economically promising, especially considering the potential availability of space infrastructure (such as fuel depots, space habitats and the more futuristic ideas such as tethers).

    Hoping for your response,
    Sean

  8. Frank mossa says:

    Excellent article Scott , and I do share your criticism in the idea of taking humans off earth, seems unearthly. Yet I’ve read that a “Space Hotel” us in the works and will be starting construction in 2025. They claim it’ll resemble a cruse line in terms of amenities, albeit hovering over the earth and circling it every 90min! So , hold on pal, perhaps you’re kids will be heading up after all…

  9. CL D says:

    Scott – I’m one of your loyal fans, ardent readers, and a one-woman PR machine for The Algebra of Happiness. Favor? Please go back to your post from late April ’21 where you explored the reasons why young men are picking up guns and slaughtering people. There were so many fascinating ideas in that piece. Would you think about partnering with someone like Stephanie Ruhle to do a deep dive and further explore this critical issue? I’m afraid for this country and our children when they return to school in the fall. Thank you, Scott. I’m grateful for your brilliant insights.

  10. Joe says:

    Branson also has Virgin Orbit, which launches satellites from the underbelly of a refitted 747 – a pretty unique methodology that gives a clear differentiator – so he’s actually pretty diversified across assets even if not within each specific company.

  11. Ryan Cohen says:

    Not a single mention of Redwire Space & in space manufacturing huh? Can’t say i’m shocked. This entire article feels extremely bias and almost like an attack on the space industry as a whole.
    You speak of near space vs deep space but you didn’t even begin to explain the importance of near space and you brush aside many of the benefits of deep space.

    This is just woeful.

  12. Lalit says:

    Such a sad outlook. Who would oppose going farthest we can go

  13. Yoomi says:

    Any space or rocket related company called “Boom” I probably gonna have a hard time.

    • Sean says:

      It’s not a space-related company thankfully. Rather, its a company trying to make a supersonic airliner (hence the name).

  14. Beatrice says:

    Here’s hoping Jeff Bezos’ flight into space is a one-way ticket.

  15. Milos says:

    Great thinking and writing, as always. Thanks for sharing.
    Intersted to see your opinion on tobacco, big shift that’s happening there with ecigs and cannabis stocks – how would you play this market, also from ESG point of view (which I think might not be so bad for this industry as many think). Thanks

  16. Ryan says:

    “Because the nature of rockets is … they explode.”

    Thought for sure this was going to be the hyperlink: https://youtu.be/0R4qeEplBsU

    Thanks for the newsletters – I always enjoy them.

    • Georgia Pangle says:

      Thanks for another great piece, starting with a clear-eyed view of billionaire hubris and penis measuring and ending with what actually feeds the soul.

  17. John Azevedo says:

    I’ve always thought that spending millions on space exploration was silly when people in our country are sick and hungry. Our prioritizing the military over people is beyond silly; it’s tragic. Near space wins every time.

  18. Paul says:

    Nice rundown Scott and a special moment with your son. Life is rich indeed. Bless!

  19. Karel Kumar says:

    Loved this Scott, thank you.

    I am a youngish man in my thirties, pre-kids, reading this was has not been just good business advice but good life advice.

  20. Rich Goldfarb says:

    I’m a huge fan of Prof Scott and his analysis is likely right on. That said, perhaps I’d like a bit more wonder and a bit less diligence, smart investing be damned.

  21. marcds says:

    If you haven’t figured out that the Boring Company’s real catalyst was for developing a reasonable way to deal with solar storms on Mars, you haven’t been paying attention. Like SpaceX, it needs a terrestrial rationale to keep the technology moving forward. But i would bet that one of the very first missions to Mars has a tunnel machine on it

    • Ryan says:

      And the PR frenzy of going to Mars is actually a catalyst to mining asteroids for the rare earth metals we’ll need to combat climate change.

      Mars is just to get people excited. The economics and resources of space mining are the real goal.

  22. Frances says:

    Loved the story of your son and you trying kakigori. ❤️ So cute.

  23. Jose A. Chez says:

    This is great stuff. I was craving for someone that made blunt and objective críticism on this hyped ilusión of Mars conquering. No body wants to tell Musk, Bezos and the other conquerors the truth about their crazy dreams.

  24. JRuss says:

    It always surprises me when otherwise educated and thoughtful people resort to vulgarities and coarse language.

    • Dave says:

      Speak for yourself. I thought it was a hilarious and if your sense of humor is more g-rated go watch a disney movie. Love Scott and just because someone’s humor is a little more blue doesn’t mean that person is any less intelligent.

    • Greg says:

      I agree with JRuss. To some of us (more than most would guess, I’d guess), profanity–in this and many other cases–is distracting to an otherwise interesting, credible thought.

  25. Jeff says:

    Great thoughts on near and medium-term space relevance, but you really should’ve included long term as well. Exploration and colonization are heavily linked, as our solar system is a finite inhabitable space. While I agree tons more money should be put into our current home, humans have to keep an eye and money to the skies for our species to survive well beyond our current comprehension.

  26. Dario Eklund says:

    I think that once the technology matures and scales, you will be able to take off from Sydney and land in London two hours later. For the price of today’s first class ticket. This could be the most disruptive technology since the internet. Lawyers, surgeons etc will be conducting business globally and home for dinner. Unintended consequences ? The front of the plane will disappear over time and Economy tickets will become unaffordable to many as they are currently subsidized by First and Business travelers.

  27. Michael says:

    Curious why you did not include Lockheed Martin or United Launch Alliance within the competitive set as more reason that these upstarts don’t make sense. When the government is far and away the biggest customer and the payloads going up (satellites) are an order of magnitude more expensive than the vehicles (rockets), the company with the longest track record makes the most sense as the vendor. For taxpayers, why save a few million bucks on the vehicle when a lost payload costs 10-20x that? ULA’s launch success rate = 100%, SpaceX launch success rate = 93-97% depending on where you look. That is in the billions of dollars of lost payload. This does not even take into account the impact on national security, which is large.

    All this to say, I agree. These don’t make sense as businesses only as fancier Ferraris.

    • Derek says:

      I agree with most of Prof G’s assessments, but have to say that your comment indicates you work for (or near) to the two defense contractors you mentioned. It’s been clear that Lockmart and ULA are upset by SpaceX’s success because they are showing them how to innovate in the launch space. Frankly its refreshing to see the pace of change in the space industry accelerate. Also, both of your arguments are old red herring that I’ve heard used against SpaceX for years. Taking them in reverse order, SpaceX actually enhances national security by having a diversity of launch providers (and also by restoring the ability to put humans into space from American soil). As for your argument that a few million dollars extra is a small price to pay when your payload cost billions. This self-reinforcing logic has kept the pace of innovation low on these giant space programs, while benefiting the cost-plus defense contractor base. Single Shot multi-billion dollar satellites are a consequence of expensive launch vehicles. If launchers cost less, then its easier to send multiple payloads into orbit, which increases the reliability of your overall system, and also lets you modernize/update/adapt much more quickly (doing away with waterfall design, getting a learning curve going, are all benefits of lower cost to orbit).

      • GLloyd says:

        In you comment, “how to innovate in the launch space” you may want to study a bit about ULA’s revolutionary technology in role forming of the huge triangular grid, as developed in the Decatur, Alabama plant.

  28. Joel Pliskin says:

    I am with you on tourism, not so much on colonization. You are essentially saying to Columbus, “why leave Europe? It’s perfect for life as we know it.” There is no doubt that the first colonists will have very difficult lives. There’s a lot of work to be done in potential terraforming. But I have always believed and still do that we can’t have all our eggs in one basket. If you want more information on terraforming, check out a guy name Robert Zubrin.

  29. Phillip Soltan says:

    Finally, someone is pointing out how crazy colonizing Mars would be. Besides all the hazards of Mars, people don’t realize how biologically connected we are to the Earth! Trying to take the necessary parts of our biome with us to another planet would be an enormous undertaking. AFAIK, no “Biosphere 1 or 2” type project has ever succeded on Earth. Maybe we should get that right before we even think about going to other planets (The ISS doesn’t count because it is constantly getting supplies from Earth).

  30. Ian Good says:

    Think you’re missing a reason for putting a rocket into space — mining. I don’t believe it’s a coincidence that Musk’s newest startup is essentially a mining operation (Boring Co). Think it’s also no coincidence that that’s why Musk has started experimenting with Crypto market manipulation. IF we get asteroid mining, most non-cryptographic resources will be utterly devalued. This may take 60 or even a hundred years, but that’s my theory on Musk’s behavior over the past few years.