Healthy Industries vs. Monocultures

One of the things I’ve believed for a long time is that for the NewSpace industry to be successful and healthy, that we need to see multiple providers and customers for the various goods and services in the industry. One needs look no further than the situation with Aerojet/Rocketdyne and ULA to realize how unhealthy monopoly/monopsony arrangements can be. In an ideal, healthy industry, we’d see several competitive low-cost launch companies offering a range of launch services, multiple companies building in-space facilities like hotels, stations, unmanned free-flyers, and depots, etc.

Having multiple providers and multiple customers is good for many reasons:

  1. Resiliency: If you have multiple providers and customers, problems with one entity don’t necessarily grind the industry to a halt. An example of this was how badly ISS was impacted by the Shuttle fleet stand-down post Columbia. There was also the close-call with Soyuz a year or two ago, where it wasn’t clear if they were going to have to stand-down crew deliveries to the station. On the customer side, technologies and consumer preferences change over time, so having a wide range of customers means that if one particular application stops being as viable, it doesn’t take down the industry with it. In general, more providers and more customers makes any one entity less critical, and makes the industry more robust.
  2. Competition: Having multiple providers to chose from often helps keep an industry innovating, and keeps costs lower than if there were just one provider. Think how good it was for computer users to have both AMD and Intel competing with each other for much of the past 20 years. Would Intel have moved as aggressively at innovating, and would costs have been as low for consumers without them?
  3. Diversity and Specialization: One size doesn’t fit all, and the more firms there are in an industry, the more likely you are to see specialization leading to better solutions for people with different needs.

The interested reader could probably think of other reasons why it’s good to have a range of providers.

Now admittedly, while having a range of providers and a range of customers is ideal, not all industries are large enough to support that level of diversity. Some tend towards “natural monopolies”.  I think at current launch costs, reasonable people can differ on if space launch falls into that category or not. But I think we can all agree we’d like to see a space industry that has a big enough pie to make that sort of healthy diversity possible.

Why am I bringing this all up? Mostly because I’ve been noticing an unhealthy trend towards monoculturalism/”Highlander Syndrome” among many in the NewSpace community. You see this a lot in twitter commenters who seem to think the government should just ditch ULA and give all their flights to SpaceX, or the anger over why NASA picked Boeing as well for a CCtCap award even though they were more expensive than SpaceX. You see this in how people only ever talk about Bigelow Aerospace for in-space habitats. You see this with people badmouthing Masten or Blue Origin and saying that they should give up now because obviously SpaceX is better.Now, I actually like SpaceX and Bigelow a lot, have a ton of respect for what Elon’s team has managed to do over the years, and really genuinely want to see both of those companies wildly successful. But I want to see others successful too. In many cases there isn’t a huge amount I can actively do, since Altius isn’t very involved anymore on the launch side of things, so my support may be limited to trying to cheer on progress by not just SpaceX, but ULA, and Blue Origin as well. I do what I can to put ideas out there that can benefit everyone, and to work on technologies at Altius that can help more than one provider be competitive. I’ve always preferred to run a shop with a reputation for being on friendly terms with everyone as much as possible.Anyhow, I hope others find these thoughts useful.

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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.
This entry was posted in Bigelow Aerospace, Commercial Crew, Commercial Space, Launch Vehicles, Space Policy, SpaceX. Bookmark the permalink.

17 Responses to Healthy Industries vs. Monocultures

  1. gbaikie says:

    –The interested reader could probably think of other reasons why it’s good to have a range of providers.–
    Yup. And it’s good to have bunch of different kinds of fishes.

    –Now admittedly, while having a range of providers and a range of customers is ideal, not all industries are large enough to support that level of diversity.–

    I can’t think of single industry that this applies to.
    Including government.
    It would be tricky to have more than one US government for the US, but I think it could be done, and it would be better.
    Though I think country which has five or more political parties, is bad idea- 2 or 3 is enough, but one could have more governments- but it’s never really been done.
    Unless one is counting local and State governments as different government, but mean more than one Local and/or State and/or Federal government. But like I said it would be tricky to do. One advantage of more than one government would be one could take it with you. Sort of healthcare which is tied to a person rather a job. So government not connected to where one lives. Or a government which is connected to where one lives- whatever a person wants. Though obviously it would require more work from the government- all kinds of hassle would be involved.
    I think opening space frontier will eventually lead to this- and though like to get started on getting into space as soon as possible, I am not in hurry for broad selection of governments.
    Even the bloody Soviets didn’t limit themselves to one “company” for an industry- as recall they had 2 or 3 “rocket companies”.
    Where does this idea come from if even totalitarian government don’t want it?
    I think it’s related to a government wanting private sector making a bridge, and one does want more than one bridge, or something. Or something invented by bureaucrats to explain why they pick businesses that do things so poorly. So it some silly response to why do you bureaucrats always pick some company that does a bad job, and so the bureaucrats simply make it some stupid theory [story}, rather admit than their cousin owns the business or they are getting some kind of kickbacks.

    And I think we do much better if we had two NASAes.

  2. Jonathan Goff Jonathan Goff says:

    Gbakie,
    Some people believe in natural monopolies, and I know at least one person whose opinion I respect (but don’t always agree with) who felt that at the current price point, there might not be enough of a market to justify more than one launch provider. I disagree with them though–I’d rather see at least two launch vendors for the resiliency reason mentioned above.

    ~Jon

  3. gbaikie says:

    –Some people believe in natural monopolies, and I know at least one person whose opinion I respect (but don’t always agree with) who felt that at the current price point, there might not be enough of a market to justify more than one launch provider. I disagree with them though–I’d rather see at least two launch vendors for the resiliency reason mentioned above.–

    Ok, you forced me to see up natural monopolies. Wiki:
    “William Baumol (1977) provided the current formal definition of a natural monopoly where “[a]n industry in which multi-firm production is more costly than production by a monopoly” (p. 810). He linked the definition to the mathematical concept of subadditivity; specifically of the cost function. Baumol also noted that for a firm producing a single product, scale economies were a sufficient but not a necessary condition to prove subadditivity.”
    So that is wrong.
    “History

    The original concept of natural monopoly is often attributed to John Stuart Mill, who (writing before the marginalist revolution) believed that prices would reflect the costs of production in absence of an artificial or natural monopoly. In Principles of Political Economy Mill criticised Smith’s neglect of an area that could explain wage disparity. Taking up the examples of professionals such as jewellers, physicians and lawyers, he said:

    [Bah, bah, etc]
    “So Mill’s initial use of the term concerned natural abilities, in contrast to the common contemporary usage, which refers solely to market failure in a particular type of industry, such as rail, post or electricity. Mill’s development of the idea is that what is true of labour is true of capital.”
    http://en.wikipedia.org/wiki/Natural_monopoly
    I still think it was probably invented by bureaucrats.

    With water [US pipes about 500 billion tonnes of it, making it the largest commodity transported] there no reason a home owner could not own the pipes and hire some company to maintain his stake in his pipes. Or it could be like the internet.
    Same with electrical power. So the service one is buying is having a dependable supply of power and water- and there no reason why any party could do that for the owners of the pipes [whoever these owners are].
    And if they were less monopolistic then they are now, one might have choices of what kind of water and power one gets. So the green wackjobs could buy windmill power- so the rest of us who less crazy do not need to buy this kind of electrical power. Also one get real drinking water [like bottled water] or one get grey water or whatever in between. One could have several water pipes providing a variety of water rather than being provided with one kind of water.
    Or it’s only due to incompetence that there limitation to the consumer of the type of power and water service one can get.

    In terms of space launch, it’s obviously an international market- as water is not [at least not yet- if one dragging polar glacier ice- so consumer could buy “natural glacial drinking water” -then it would more an international market].
    So number of launch companies in a nation is not as relevant as number of launch companies in the world.
    So idea of only having a couple of US launch company is unnecessary limitation oppression for the US government to implement. Or it’s basically handing over the space launch industry to other parties in other countries- so they have less competition.

    In terms of such things as mining water on the Moon- any monopoly granted would be bad for business, and could even give opportunity for the incompetent politicians to start another world war.

  4. Andrew_W says:

    These days I tend to think in terms of monopoly vs competitive market, rather than private vs public. A privately owned monopoly can, I think, be as destructive as a state owned monopoly, and several state owned companies in competition can, I think, be as efficient as several privately owned companies in competition.

  5. johnhare john hare says:

    FWIW, it disturbs me when otherwise rational people suggest that SpaceX has won the game and everyone else should pack it in. Anyone that has ever shopped in a lone store forty miles from nowhere is aware that prices reflect the lack of competition. IOW, government doesn’t keep McDonalds prices in line, Burger King does. SpaceX without competition becomes NASA MKII in a couple of generations.

    Law enforcement tends to monopolies in certain jurisdictions, as do military organizations without serious external threats.

  6. ken anthony says:

    SpaceX has the potential to become dominant and that is not healthy. However, what they’ve really done is show what’s possible. Which others can do as well.

    The main players seem to have already decided not to compete (politics isn’t going to work anymore.) I expect someone new will come along if SpaceX is to have any real competition. Bigelow gets the press but competition to them is even easier.

  7. Paul451 says:

    [Nice of John Hare to allow guest bloggers on his site.]

    Jon,
    “You see this a lot in twitter commenters who seem to think the government should just ditch ULA and give all their flights to SpaceX, or the anger over why NASA picked Boeing as well for a CCtCap…”

    I can sympathise with them though.

    A lot of people, especially younger guys, feel that the old guard must be the reason why “space”, by which they usually mean HSF, has been so stagnant for their entire lives. SpaceX (and Bigelow in its area) feel like they came out of nowhere. “Why didn’t it happen 20 years ago?!” “We’re finally moving again!” All those designs and ambitions people had when I was young suddenly seem possible again.

    So now every delay is utterly intolerable, signs of the enemy dragging us back down again.

    “You see this with people badmouthing Masten or Blue Origin and saying that they should give up now because obviously SpaceX is better.”

    This, otoh, is not good. It’s perfectly reasonable to criticise a company’s plans, or be skeptical of a market; but to suggest that there’s no path to space but through SpaceX is stupid. I’d love to see the guys who can beat SpaceX at their own game! Who lower launch costs to the point where SpaceX is struggling to compete. I don’t care if it’s Blue Origin, or Reaction Engines, or Ariane 6, or the Chinese. I just want MOAR!

    “You see this in how people only ever talk about Bigelow Aerospace for in-space habitats.”

    To be fair, does Boeing even talk about space stations any more?

  8. Paul451 says:

    John Hare,
    “SpaceX without competition becomes NASA MKII in a couple of generations.”

    In the previous thread, following Ken Anthony’s link to USAspending.gov, I noticed that LM was the largest contractor for the whole of government. (Boeing second.) Last year they were individually responsible for around 10% of the budget. Elsewhere, I found that LM earns 85% of its revenue from US government contracts, and another 13% from foreign government contracts. With just 2% from commercial sales.

    So it made me wonder, why not just nationalise Lockheed? What advantage is there in having what amounts to a whole government agency in private hands? It’s can’t be any myth of “competition efficiency” because they are too intertwined with the government, too big to fail. They barely compete with Boeing, given that there’s a tendency to make sure both of the monsters get their share no matter who wins the contract, to prevent them shutting down key facilities. (Again what amounts to key government R&D facilities in the hands of private owners.)

    I can accept the idea of a natural monopoly, but I don’t accept the idea of a private monopoly. Seems like the worst of both worlds.

  9. Paul451 says:

    Andrew_W,
    “A privately owned monopoly can, I think, be as destructive as a state owned monopoly,”

    I’d say worse. You are effectively turning control of a public good over to a handful of rentiers.

    gbaikie,
    “there no reason a home owner could not own the pipes and hire some company to maintain his stake in his pipes.”

    No reason… except that it never happens. Over and over and over, new industries arise, but if they are utility-type (pipes and supply, roads and traffic), they always end up as monopolies. Unregulated competition can only happen with commodity-type items, never with utilities. Your example of the internet seems to be increasingly heading down the same path, back to the old telecommunication monopolies. Areas where it doesn’t happen are those where it’s being actively prevented from happening by governments/agencies less enamoured with “business good/regulation bad” rhetoric and more aware of the value of actual competition, even if you have to force it.

    Water is a good example of why it doesn’t happen. How does a new player emerge? A SpaceX of plumbing? How does he get his pipes to the customers? He has to dig up roads and yards, land he doesn’t own, or beg access to service trenches owned by established rivals. Do you think ULA would have let SpaceX play if ULA owned all the launch sites?

    Re: Overlapping governments.
    I doubt you could have multiple geographically overlapping governments, too easy for free-rider effects to destroy the system. But UK SF author Charlie Stross talked about devolution as a model for national and international government. Essentially replace the “federal” level with ad hoc groupings of smaller independent states. Nations would devolve to the smallest logical clumps, which then voluntarily join larger blocs. But the larger blocs would not be permanent “nations” (or supranational states like the EU); rather, fluid alliances in trade, defence, even cross-citizenship, where the pocket-nations jump in and out of multiple overlapping task-specific groups as suits their individual circumstance. Imagine North America as a cluster of a few dozen regional nation-states, merging and splitting alliances to fit their politics and needs.

    Ie, the groupings and alliances are competing, but individual nation-states are singularly governed.

  10. Andrew_W says:

    The overlapping states idea was something I suggested a few years ago and recently mentioned at Simberg’s place.
    http://www.kiwiblog.co.nz/2007/03/the_libertarian_debate.html#comment-292401

    Paul451, what do you mean by “free-rider effects”? If anything, I would think the system would kill what I’d call “free-rider effects”, pretty thoroughly wiping out big expensive government.

  11. johnhare john hare says:

    [Nice of John Hare to allow guest bloggers on his site.]

    Nice shot, Paul. I’ll try to remember my place in the lower echelons of amateurism a bit better from now on when the pros have something to say. 🙂

  12. Paul451 says:

    Andrew W,
    “what do you mean by “free-rider effects”?”

    Tragedy of the commons. With multiple overlapping governments, where you can chose not to join/obey/recognise some of them, that means that while most governments might contribute to decent services roads/schools/police/etc, and charge a commensurate tax; you can join a government that provides nothing and taxes nothing, but you can still take advantage of the services that others provide. (Even if you don’t use those services personally, having workers who can use public transport, have basic education and healthcare, non-garbage-strewn streets, etc, is valuable to you. You benefit but you don’t contribute. Pretty soon most people join governments that don’t tax, and the system is a race to the bottom, even if everyone wants roads and schools and hospitals, no-one wants to be the last sucker footing the bill.)

  13. Andrew_W says:

    From my link:
    Examples of natural monopolies are reticulation systems, physical networks. In our society these are often managed by local government (in effect it becomes a co-operative of ratepayers/residents) to minimize the exploitation that would occur if it were privately owned.

    Most of the services provided by central and state governments are not natural monopolies THEY ARE NOT GEOGRAPHICALLY BASED, so once we recognize the separate roles of state and local government, there is no logical reason for states within a confederation to be contiguous!

  14. Dave Huntsman says:

    To his credit, one of the people who believes in competition helping everyone is Elon himself. It’s come out that he’s pushed Jeff Bezos several times to devote more than the one-day-a-week that Bezos does to Blue Origin, for example, because Elon feels that it’s held Blue Origin back. And the fact that he’s released all of Tesla’s patents is another sign that he realizes the healthiest thing that could happen to all is to create a vibrant, multi-competitor, growing industry, rather than just get rich off of a single company.

  15. reader says:

    The complete and utter lack of new semi successful space transportation companies springing up in the wake of apparent early successes of SpaceX is troubling.
    Over the last decade, apart from SpaceX “making it” most everything that has been happening is foldings and failures or descopings of grand plans or endless delays.

    It is true that of every 100 new ventures 99 fail and one makes it, which IMHO means that we need 1000 new space transportation ventures for meaningful progress to actually happen within anyones life span.
    Apart from massively incentivizing this somehow, not sure how to make it happen. Prizes apparently dont work in the modern day – see X-Prize and its multiple grand efforts that have not amounted to any new products or services on the market.

  16. gbaikie says:

    — reader says:
    October 9, 2014 at 9:28 am

    The complete and utter lack of new semi successful space transportation companies springing up in the wake of apparent early successes of SpaceX is troubling.
    Over the last decade, apart from SpaceX “making it” most everything that has been happening is foldings and failures or descopings of grand plans or endless delays.

    It is true that of every 100 new ventures 99 fail and one makes it, which IMHO means that we need 1000 new space transportation ventures for meaningful progress to actually happen within anyones life span.–

    The 99 fails are not usually visible to public [they don’t get that far].
    But anyhow to get the 100 or 1000 thousand, you need a large market potential.
    So suborbital tourism is example of large market potential, and resupplying ISS or
    even the satellite market is not example of large market potential [though when have possibility putting up hundreds satellites to transform the internet and media- that in the direction of large market potential in satellite business- many people were excited by this possible potential].
    So, we are at point of about more than 50% chance of suborbital tourist starting in 2015 or late as early 2016.
    So it might happen pretty quick.
    Or course there other ways to get other large market potential, such as lunar mining of water- but not getting much news about plans of exploring the moon to enable this to happen.

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