Thursday, September 29, 2011

Business model for mars settlement

For me, this was the exciting statement to read...
"Apparently [SpaceX is] proposing a business venture for a Mars settlement."
While the linked article had great information, I was a bit disappointed that it didn't really include a business model. However, we do have another data point for a business model...
Musk suggested a ticket price of $500,000 per person.
So here's my business model...

They put together a group of banks willing to support a mars settlement charter.

That charter specifies the conditions of a loan to anybody that wants to go to mars... anybody! They don't even need good credit, all transactions will be within this group of banks ensuring payments of the mars settlement loan package will be paid.

Assume one million dollars to travel to mars fully supplied for two years (this assumes Musk is giving a lowball figure and life support is non recycled.)

Assume a half hectare (time to use metric rather than non metric acres) plot developed for habitation is included in the travel package (life support for three.) This plot is selected by the traveler from a catalog of completely developed plots (with specified parameters) and purchased from an earlier traveler that has organized the work to completion on mars from a part of his own one square kilometer claim. Every person with boots on mars can make a single claim. This is legal by historical precedent. Everyone part of the charter will enforce this.

The bank gets paid immediately from the sale of this plot so the traveler has no down payment to make. A willingness to go and work in support of the charter is all that is required. They are free do to anything else they desire.

Suppose it cost $50k in material from earth to develop a habitable plot and six months of labor (another $50k.) They sell the plot for something in the neighborhood of $200k. The settler getting $50k and the bank getting $50k toward the payment of the mortgage loan. Assume 80% utilization one square kilometer provides 160 half hectare plots (from 400 quarter hectares.) This provides a potential eight million dollar return on a one million dollar investment. Plenty of room for banks and settlers to make a deal that works.

SpaceX has what it takes to make that work. Banks have an incentive to make it work. This provides a life time of income for the settlers. What's the hold up?

Update: Why this is not a Ponzi scheme...

Children will eventually be born and grow up and marry on mars. Which should have a vibrant economy by then. Suppose a couple buy a developed plot for themselves for $200k (the kids are moving out of the house folks.) This is not part of a mars settlement loan package; it's in addition to it. The two are paying only $100k each rather than a million each (no addition mortgage requirement on them.) They each have also gotten their own undeveloped one square kilometer claim... until the 144 million square kilometers on mars runs out. They could of course build rather than buy. Same choice as on earth.

Update 2: Where is this young couple going to get $200k for a home of their own? They have collateral: two square kilometer of undeveloped land. Their will be plenty of work to provide income to pay back a mortgage. This second generation will also have less debt burden. Ownership of real estate distributed among a population is the most important factor in economic growth. Too bad we can't learn that here on earth.

No comments: