Sunday, May 12, 2013

Business is business

Except that everybody knows that their business is special. It isn't like every other business; it's different. It's extra special if it's a space business... Bullshit. While every business does have it's qualities that only an owner understands it still has fundamentals that are the same for all.

Business is business: All of them, without exception, provide products and/or services to customers for revenue that hopefully exceeds expenses. So business operates for profit. Without profit it's a hobby.

Customers buy products and services because they want them. It isn't generally about profit for them unless the customer is itself a business. A customer that is a business requires their own customers. At some point you have to have customers that are not in it just for profit. Customers are fickled, so it's best to have a lot of them for business stability. Government (speaking of fickled) is the only customer that doesn't have it's own customers; it has taxpayers. Sorry for being pedantic but it's a necessary lead IMHO to the following...

Space is only sustainable if business leads the way. Government will never do that except in time of war. The space race was part of the cold war. The space race fooled most people into thinking government might, or even must, do that and we are still living in the momentum of that race, frozen in institutions established during that race; but business is starting to take their rightful place.

Business is business. Space business is no different at all with regard to the fundamentals of business. One of the main space businesses is transportation but there are and will be others. Again, transportation businesses are all the same in fundamental ways. A customer wants something to go from one place to another and is willing to pay a price. A market exists, over $70 billion, for going to orbit and companies are making their profit providing that service.

The next step is to have customers wanting to go BEO, but this likely require an intermediate step.

We need a ship in orbit. Bigelow thinks he can charge governmental customers up to $26 million (above transportation costs to and from orbit) per person for up to two months in orbit. His Alpha station could hold a dozen at a time. If he's right, this is a business. Right now it's a billionaires hobby that could turn into a business. Many have high hopes, as do I, that it will. We shall see.

Government is not a business. It may transport people BEO but that doesn't establish a transportation company for that purpose. But if someone did see an opportunity for paying customers they could start a BEO transportation company (BTC.) Transportation companies on earth buy their vehicles. They don't usually make them. They might modify them for their own purposes, but generally they buy them from other companies. There is no reason it couldn't be the same for a BTC that could even have government(s) among their customers. But government alone does not provide the stability a company needs. It needs other customers. Currently there are none.

The thing about a BTC is, it is in many ways much easier to start and operate than any launch company. The vehicle doesn't have to handle the stress of getting to orbit and any thrust is enough if it lasts long enough. The main thing it requires for profit is a long revenue generating life to overcome the one time cost of putting it into orbit. It's main expense is fuel, but that establishes another market. The customer ultimately pays for fuel just like for all transportation companies on earth. The fuel market is simply another potential type of space business.

There may never, ever be any customers for a BTC because space is an expensive place to go. It may forever remain an expensive place to go. Does this mean space business really is different? No. No. Emphatically no. The fundamentals do not change. Business is business. But people pinning their hopes on lower costs are going to be disappointed if space has few customers because those lower costs remain forever too high for enough customers to provide businesses the stability they need to operate. It may require a paradigm change to overcome this; consistent with the fact that business is always and will forever remain business.

One company is poised to be a transportation company for a new market. They have already published a price for a specific service. They have credibility because they are already profitable in the space transportation business and have been for most of a decade. They are currently working to develop a modification of an existing vehicle to provide that service. This service will transport 2500 kg. (including up to four passengers) from mars orbit to the surface for $190 million. Actually, for that price they intend to go from surface to surface (earth to mars) but that's only practical for cargo. Unless they design a different vehicle they are going to ultimately realize they need something different for transportation from orbit to orbit and will need to transfer to the landers when they get to mars orbit. The Mars One Dragon lander is the wrong vehicle for going from orbit to orbit. The point is for $190 million they will make a profit each time they sell that service. Will they have customers?

Perhaps a few, but not many without a paradigm change. People have always had the right to claim land if they can get to it (under certain conditions even when it's owned by another, but with absolute certainty if it's unowned.) But how can they get to it if they can't afford it? That's the issue that needs to be directly addressed. My solution is to provide free transportation and assets when they arrive for those that would risk their lives to expand the human economic sphere. The transportation company would get their revenue in land claims directly related to each transported individuals single claim.

There is plenty of land for this to work. The only question is how much land would provide enough revenue for profit? We already know that people will pay $20 for a worthless deed because that's what they are already doing now for mars and the moon. Will they pay $100 for a real one? I think so. Others call this nonsense. The thing about business is, you do not really know until you try.

Update: This old article from this discussion seems to be making my point. It's not a lack of interest. Would anyone have guessed Mars One could get about $3 million in two weeks? The problem is they need a better plan because that one is below the required need ($6b/520 wks is almost $12m/wk.) So they are only making one eighth what they require and I estimate their plan will only come up with about a third at best. Half acres plots in a registry if sold to speculators on earth for the same amount they are paying now just for a chance at being one of four our of about 80,000 so far would pay half the entire cost. A ship in orbit with shakedown cruises pays for everything in less than ten years as well.

Funding is no longer the show stopper. Imagination is.

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