Re: Getting Mega Projects Done

From: Henry Spencer (henry_at_spsystems.net)
Date: 11/27/04 

Date: Sat, 27 Nov 2004 19:25:29 GMT

In article <c730d17d.0411270825.58b1fa92@posting.google.com>,
David Summers <david@ualmiles.com> wrote:
>> ...Abe Hertzberg's ram cannon is, in my opinion, an excellent idea...
>> Similarly, Jordin Kare is promoting a laser launch system...
>> The physics of these have been worked out and they're "just" business
>> propositions now. :)
>
>These really demonstrate the problem I was thinking of. Why are these
>projects not being done? They seem technically feasible, so they must
>seem unfeasible from a business perspective.

The key word is "risk" -- a word investors do not like to hear.

There is technical risk, because although the fundamental physics looks
good, the detailed engineering for an orbital system has not been
*demonstrated* to work. There is some possibility that it might not, or
that it might have problems which would increase costs and delay returns.

There is market risk, because there are *no* *customers* right now for a
steady stream of small payloads, which is what those systems deliver.
Even disregarding that, the proven market for cheaper space launch in
general is inadequate -- existing markets are too small and not very
sensitive to cost, they won't grow much if the price drops. New markets
are needed, and they are all quite speculative: even if you can be fairly
sure that certain markets will appear, their size is quite uncertain.

And there is political risk, because there are unresolved regulatory and
liability issues galore, plus the possibility of government-sponsored
competition, plus the possibility of adverse legislation in general (space
being an area with a history of government meddling, not all of it well
thought out or even friendly).

Other people will sometimes classify the risks differently, but the bottom
line is that there are a lot of them, rather more than for investments in
other high-tech areas. The return on investment sometimes looks quite
reasonable... if you disregard the need for considerable extrapolation of
the technology, the uncertainty of the proposed markets, and the risk of
being stepped on by the government.

Looked at from the viewpoint of bankers and venture capitalists -- people
whose job is to make other people's money increase -- this is unappealing,
period. It's not as bad as it once was, but it still doesn't look good.

And finding people with serious money who are willing to buy into a dream,
with concern for the bottom line being secondary, is much harder.

>I am worried that the
>problem is that technology used to get cheap access to space is
>considered to revolutionary (and risky) for standard business,
>reguardless of proof of the technology's readiness.

The big benefit of a free market is that it doesn't *matter* whether
"standard business" buys into a new idea, because you can start a new
company rather than relying on winning support from the old ones. The
downside of this is that it isn't necessarily easy...

>This is really what I mean by "noone seems willing to invest." Is it
>still technical things holding these projects up? Business, as in
>they are not funded enough? Or political, as in not in my back yard?

The big bottleneck definitely is adequate funding. (For example, Rutan
won the X-Prize by a wide margin largely because he had money and most of
his competitors didn't.) Technical and political obstacles exist, but
most would-be launcher builders aren't even at the point of actively
confronting those. However, it's important to realize that the reason
why there isn't money is not "business" in some vague, mystical sense,
but the very high risks of investing in this field. 

-- 
"Think outside the box -- the box isn't our friend."    |   Henry Spencer
                                -- George Herbert       | henry@spsystems.net

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