An Interesting Thought About Space Markets

On a whim, I was just reading an article on MSN.com, and it got me thinking. The writer, Tamim Ansary, was discussing history’s top 9 most underrated inventions. He made the following rather interesting statement about the rotary printing press (emphasis mine):

Johannes Gutenberg invented the flatbed printing press in 1450. His invention remained basically unchanged until 1827. That year the steam-powered rotary printing press was invented, which printed from a single continuous roll of paper. The best flatbed press could print about 125 pages an hour; the new device could do about 18,000. At the time, no one needed that many copies of anything that fast, but invention is the mother of necessity. In 1833, a New Yorker named Benjamin Day decided to print a newspaper so cheap that at least 10,000 people a day could afford it: He would profit on volume. But what could he possibly put in a newspaper that 10,000 people a day would want to read? That’s when Day’s newspaper, the Daily Sun (and soon a host of imitators), invented … news.

I really like how he put that: invention is the mother of neccessity.

A lot of poor business decisions and practices have been made during the history of the development of commercial space. It shouldn’t be too surprising, especially since many of the people running commercial space programs are typically brilliant engineers with little practical business experience. One of the most common marketing errors that gets harped on is what is called the “if you build it, they will come” mentality. Basically, some people use that kind of thinking as an excuse to avoid actually trying to identify potential customers.

However, Tamim had a very valid point (one that was also made in The Rocket Company): new inventions lead to new needs. While we can sometimes predict how people might use a new capability, and thus get at least a starting guess at what the demand might be, you can never really tell in advance what will really happen when that new capability hits the market. The guy who invented the rotary printing press probably had no idea about the concept of mass market newspapers. He was just trying to make a more efficient press. The market he received was probably more than an order of magnitude more business than would have been predicted based upon previous models of printing demand. Could he have predicted that exact response in advance? Probably not. Did he need to try and justify the investment using more predictable demand? Probably.

The point here isn’t that trying to find out potential customers is a waste of time. Far from it. The point here is that any sufficiently improved capability will create demand that didn’t exist before. The key trick here seems to be to find a way to predict at least some of that new demand, and then find ways to bring that new demand it into existance fast enough that you can benefit from it. So, basic market research is still quite important in a new market like the commercial space transportation market, however actively trying to create new markets that use those new capabilities may be the real critical difference between a succesful space transportation venture, and a repeat of the failures of the past.

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Jonathan Goff

Jonathan Goff

President/CEO at Altius Space Machines
Jonathan Goff is a space technologist, inventor, and serial space entrepreneur who created the Selenian Boondocks blog. Jon was a co-founder of Masten Space Systems, and is the founder and CEO of Altius Space Machines, a space robotics startup in Broomfield, CO. His family includes his wife, Tiffany, and five boys: Jarom (deceased), Jonathan, James, Peter, and Andrew. Jon has a BS in Manufacturing Engineering (1999) and an MS in Mechanical Engineering (2007) from Brigham Young University, and served an LDS proselytizing mission in Olongapo, Philippines from 2000-2002.
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9 Responses to An Interesting Thought About Space Markets

  1. Juan Suros says:

    This sort of topic always reminds me of the errors made in evaluating the value of space resources from the moon or asteroids. I read about how Platinum Group Metals (PGM) could make asteroid colonies self sufficient and counter arguements about how introducing tons of gold or diamonds into the market would crash the price of these commodities and bankrupt the colonies. So much is true, but so what.

    Consider resources that are difficult or impossible to obtain on Earth. Helium 3 is the obvious example, but I’ve been wondering if Scandium from the asteroids might be more important. Scandium-Aluminum alloys (typically 1 part Scandium to 199 parts Aluminum) have been used in the Soviet Union in supersonic fighters and rocket components due to their superior welding and wear over standard aerospace aluminum alloys. Market price today is USD$14 million per tonne, which you could almost justify if you used one ton in a 200 ton 747 that could lift an extra 20 tonnes of cargo as a result. The problem is that total world output of Scandium is about 20 kilos a year, as a byproduct of processing mine tailings.

    If tonnes of Scandium were available on the market, they would find their way into everything from climbing gear you wouldn’t have to replace every year to bike frames to automobile bodies. Even after a collapse on the commodity market to 1% of the current price, you could probably sell every gram you could produce to the world aerospace industries at a fat profit.

    So is Scandium a resource “with a limited market” like Helium 3 “for which no power plants exist to burn it”?

    Or is the word “yet” the missing part of discussions of Space Markets?

  2. Kelly Starks says:

    Such errors are extreamly common in everyones analysis of space.

    Fav examples:

    Launching from the moon would cost 1/20th launching from earth. No, the energy cost would be 1/20th, but the energy cost of launching from earth is about $0.05 a pound out of the $10,000 a pound actual costs.

    Given the current launch costs of $10,000 a pound, the cost to launch the tens of thousands of tons of ..L-5 colony, SSPS.. etc NO, the current cost is largely due to the small market for launch. You couldn’t design a system that could lift that much that did use industry standard reusability, etc. And with a lanch rate that big, you’ld drive costs down 100 fold even if you didn’t try. You might do better then that if you worked at it. Suddenly Earth becomes a FAR more cost effective material source then space.

    Helium-3 would… And we wouldn’t design the reactors to use fuels comon on Earth with similar advantages like Lithium-6, which retainls for $1 a pound? Yeah the reactors a bit harder to do – but not compared with …first start up a interplantary industrial infastructure.. a lunar mine/space port/city… etc.

    Anyway I have several such pet peeves, and yes linear thinking tends to lead you into falacies.

    Yes most of the big users for space transport will be groups we’ld never think of, but you beter find SOME customer ahead of time.

  3. Paul Dietz says:

    To be honest, D+3He is a lot easier to make work than p+6Li. However, if levitated dipole reactors work we could build reactors fueled with just deuterium, yet with neutron output comparable to D-3He, so there’d be little point in mining lunar 3He.

  4. Kelly Starks says:

    I always got the feeling He3 was of a lot more interest, and more critical, to folks looking for a reason to colonize the moon, then folks wanting to build power plants.

    😉

  5. murphydyne says:

    One of the things that has to be considered is the extent to which lesser materials are used in manufacturing because of scarcity (high cost) of the better, more efficient material. Thus, as the abundance of space-derived resources increases, especially of high-purity vacuum-processed materials, their effect is not solely on existing applications. People will start to go back and re-visit the assumptions that led to current manufacturing decisions, and in many instances find that it makes sense to use the now cheap but better materials for significant increases in efficiency (while contributing to environmental remediation [ooh, maybe there’s a good tax incentive in there!]).

    I’ve long wondered what would be the effect of introducing perfectly spherical ball-bearings into a mere 2% of the machines that use that kind of bearings. That tiny, marginal increase in efficiency can have enormous environmental and energy-use applications.

    Attempting to define all benefits, or business cases, or “killer aps”, or what have you ahead of time is a fool’s errand. It’s by unlocking capabilities that the human mind unlocks its creativity. My vacuum spheres are a perfect example. Having the capability to manufacture something in space (at least while the GASCans and Hitchhikers were a quasi-viable possibility) unlocked the idea of creating glass spheres in space to bring that vacuum back down to Earth for the idle rich to have on their desks (for a fair price).

    By actually setting up shop in, and not just visiting, LEO and beyond we’re putting in place the capabilities that will allow the creativity of our scientists and engineers to create new products that will help to make the world a better place. What kinds of things will a materials scientist invent when he has immediate access to a 15 million square mile vacuum chamber? How in tarnation am I supposed to know! I sure want to go find out, though, and I want it to be American scientists who are sitting at those lab benches running experiments, and out counting craters, and monitoring Sun-side asteroids, and building power towers, and fixing the telescopes that watch our neighborhood for threats, and building the power satellites that let us tap a permanent energy supply, and growing the new spices and herbs never before seen on Earth, and a million other things that are impossible to foresee at the moment.

  6. Ed says:

    …still waiting for your discussion with Gene Meyers…

  7. Kelly Starks says:

    Still hoping to hear Gene Meyers closed the SSPS deal with India or China.

    😉

  8. Karl Gallagher says:

    When I used to go to Space Access I used the line “If you build it, they will come to the bankruptcy auction” a lot.

    Now the guy buying the ship at auction can make a profit, no problem. The customers have had a couple of years to get payloads ready and there’s no need to repay NRE. Rough on the investors though.

  9. Jon Goff says:

    Karl,
    Yup. It does a company no good if the new markets that their vehicles help create don’t come into being until after they’ve already gone bankrupt. The key seems to be trying to figure out what at least some of the emerging markets might be, and finding ways to start growing them immediately–before the vehicle is even ready. Much easier said than done, but I do have some ideas in that regard.
    ~Jon

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