Capitalists Cross Final Frontier

The Enterprise, from Star Trek, was a government vessel. In the 1960s it would have been fantasy to think a privately-owned company could boldly go where no man had gone before.

Fifty years later, it isn’t a fantasy. I’m acquainted with Virgin Galactic. But that’s more an vertically-oriented amusement park ride than a serious industry. Enter SpaceX:

SpaceX was founded in June 2002 by PayPal co-founder Elon Musk who had invested US$100 million of his own money by March 2006. On August 4, 2008, SpaceX accepted a further US$20 million investment from the Founders Fund.

SpaceX has nearly doubled in size every year since it was founded in 2002. It grew from 160 employees in November 2005 to more than 500 by July 2008, to over 1100 in 2010.

Musk believes the high prices of other space-launch services are driven in part by unnecessary bureaucracy. He has stated that one of his goals is to improve the cost and reliability of access to space, ultimately by a factor of ten.

SpaceX aims to outcompete national and government space operations in business of lifting payloads into space. They’re in the transportation industry, not the entertainment industry.

Musk’s philosophy of rocket modularization (and cost reduction) had been proven out. A mere six months later, the company launched a second Falcon 9 to orbit with a pressurized “Dragon” capsule on top. SpaceX became the first private firm to launch and recover a crew-capable space capsule, with a splash-down off the Pacific coast of the US. To successfully launch a brand-new model of rocket, twice, with complete success, defies the laws of probability in the space launch industry. Maybe Musk really had stumbled onto a new way of designing, manufacturing, and operating rockets.

The idea that a private firm could deliver cargo, let alone crews, to the International Space Station at a fraction of the cost of the Space Shuttle or Russian Soyuz capsules would have been inconceivable a decade ago. And yet here we are in 2011 with an American dot-com multi-millionaire announcing new rockets and successfully delivering them.

It is true that these flights are only going where taxpayer-funded men have already been. But it shows that smaller, focused and efficient organizations, with access to the immense wealth capitalist systems generate, could push into the final frontier.

If their competition—governments and protected corporations—do not sabotage them by legal or illicit means:

There are a lot of rocket engineers around the world who’ll be out of work if Elon Musk and his company can deliver cargo and people to space for half of what it costs the current aerospace giants. And even the Russians and Chinese, who can subsidize launch costs to the tune of hundreds of millions of dollars, still can’t afford to give away those launches indefinitely. Both nations operate in the market economy to the extent that they can, at the very least, estimate their per-launch losses trying to undercut SpaceX’s prices.

As an amateur who’s thrilled by the appearance of a private space industry in the last ten years, I enthused about SpaceX’s successful December launch to an colleague (ex-military) who specializes in high-tech project management. His response was “now the sabotage begins.”

And he may well be right. Whether Musk has been smart, or just plain lucky, the progress of SpaceX over the last decade has been (to my mind) dramatic. My sense is that it’s a matter of capital investment leveraging a backlog of knowledge (in technology and operational process). As long as he was a unproven minnow at the government trough, he could be ignored. Now however, SpaceX is getting big enough to put a dent in established companies’ profits and executive bonuses. There’s no reason why nations or large corporations could not have duplicated what Musk has done … but they either had no incentive or had organizational and social impediments. An “installed base.”

At the moment, they don’t seem to be trying to beat him with comparable technology. And he doesn’t seem to want to be bought out. So what competitive strategy is left? Political impediments are cheapest. Intellectual property theft is likely but it still takes time to turn that into a competing product. And what if the technology is just a part of the equation. What if workforce optimization and “one rich, risk-taking, boss” are the essential components of SpaceX’s rapid success? Will sabotage of SpaceX rockets be the only route to slowing the company down? Fulfilling, conveniently, Russian “concerns.”

Austrian economic theory holds that monopolies cannot endure without government sanction. The monopoly on space transport is at its breaking point. Star Trek’s optimism was of another era, and not grounded in dismal economic realities. Will SpaceX (or another upstart) carry earthlings beyond the moon? Or will we have James T. Kirk working for the post office?