Sunday, December 2, 2012

Space Calculus

Be sure to scroll down and read the updates to this post or you will miss a major important point.

I've given a lot of thought regarding growth rates for my mars settlement proposal to work. Both Brock and George raise some good objections in the regard.

Brock, November 28, 2012, 8:29 am
...there’s no sustainable case here. Real estate is only valuable if people want it.

George, November 27, 2012, 4:58 pm
Without vastly lower launch costs there won’t be speculators for Mars because the third or fourth tier customers won’t be able to afford to get there. If the billionaires go in the first wave and second waves, but the millionaires and regular folks can’t afford the trip, the billionaires are stuck holding land that has no market value. They’d have been better off buying land in the middle of the Sahara.

Growth rate is the issue. For real estate to appreciate there has to be enough people interested to buy for prices to not fall over time. But first let me address the other side of the supply and demand argument...

144 million sq. km. of martian real estate, if all available for nothing would depress mars real estate values to almost nothing for generations. So my plan limits the supply for all members which also gives strength to their legal ownership claims. Even if others make unreasonable claims they can only do that by paying their own way. My plan provides free transportation but only to those that agree to its terms which restricts the supply of land they may claim and have enforced by other members that agree to the plan. So, enough about supply. Brock and George were addressing the demand issue which is the subject of this post.

Is it sustainable? Let's say it cost $10b to take 4 dozen from the surface of earth to the surface of mars and that that cost never comes down for any following trip. Those 4 dz. go for free and arrive on mars in a space suit with enough supplies to last them until ISRU takes over (75% of that is water, which should be ISRU almost immediately, baked from the soil.) Supplies that are included in that cost can be sent separately to their location on mars for $150m per 4 to 10 ton (Dragon 2 supply ship.)

While we are assuming the cost of transportation doesn't come down, ISRU means what supplies newer colonists bring will upgrade over time. They may very well give up some of their supply mass to older colonists already on mars wanting to buy stuff from earth.

Sustainable then is: will the transportation company be able to recoup $10b cost from the value of 48,000 sq. km. of martian real estate? This gives them over 2 million half acre plots to sell. While they may sell a few sq. km. of this to existing colonist, the only supply of money large enough would be speculators back on earth (that may have no intention of ever traveling to mars.)

It looks like I got the decimal off in my earlier calculations where I came up with $500 per plot. 2 million into 10 billion requires $5000 in profit per plot to cover costs. That's a bummer. $500 coming down over time I could easily see on undeveloped martian real estate. $5000 I only expect from developed property which is not the case for the land the transportation company receives.

Major bummer. This doesn't kill the idea completely, but it does mean I'm going to have to give it some more thought. The fact does remain that if costs do come down the numbers do start to line up and it doesn't have to come down as much as Elon and Zubrin claim they can reach. So, my plan is still a good one. Just not at today's costs as I've been claiming.

The one thing I already know is the solution is not: Allow the transportation company to claim more than 1000 sq. km. per colonist which they transported for free because that reduces the value of the land. It's also not to charge the colonists because that kills the number of colonists which you need to make the plan work. You always want more volunteers than seats available. While you could charge something and still do that it would not be enough to make a difference and I reject the idea that people risking their lives should give up capital they need to help them survive.

So I will have to give it more thought. But for now it looks like cost have to come down one magnitude at least.

Update: Salvaging the plan after sleeping on it...

How could I have made such a mistake? In a previous article I had calculated a break even for the transportation company of $250 per undeveloped plot and the math was correct. The difference is the cost per colonist to transport them, so let's take a closer look at that. Elon and Zubrin have talked about a future cost per person of $500,000. Mars One talks about a current cost of sending four for $6 billion or $1.5 billion per person. That's quite a difference. So let's look at it from a different perspective.

Let's say it's reasonable to expect speculators on earth to buy all the undeveloped land claimed under the terms of the settlement charter from the transportation company if offered at $100 per quarter hectare plot. That gives us a target transportation cost per person of $40m (400,000 plots x $100.) The good news is that's only 40% of the $100m I used in my calculations to arrive at $250 per plot. It's also much more than Elon's goal so he doesn't have to be totally successful for this plan to work.

So Elon (Brock and George) you only have to get the cost down to about $40m per colonist (80 times greater than Elon's target cost estimate) to have a sustainable plan. Ah, but does it still work for the colonists?

Nothing has changed for them. If there is a profit for the transportation companies more will want to get in on it so over time more people will go, but let's say it doesn't grow for whatever reason but is sustainable at about 100 colonists per year (which it certainly would be.) That means the ratio of new colonists that would buy developed plots from existing colonists would go down every year. That's worst case because if profitable for the transportation companies it would grow over time.

We can assume the colonist could sell their 400+ undeveloped plots for same $100 per undeveloped plot that only gives them a lifetime income of $40,000 which certainly isn't enough. But if they did arrive penniless (some may, most will be smarter than that) they could sell off some every once in a while to maintain their life support costs (and would soon be industrious enough to find other ways in the local economy to support themselves... there will be no shortage of jobs for centuries while the population is growing.)

But most will opted to sell property developed. Supply would exceed demand putting pressure to lower prices. However, that supply would never be too excessive because people are not going to develop land without a profit incentive. So over a lifetime, every martian will still be a millionaire. Thousands are willing to go now without that incentive. Millions will go with it. The future of mars just got brighter. I can keep my blog.

Update 2: Something else just occurred to me. It's still location, location, location. What this means is the colonists would own the preferred plots (undeveloped next to developed) so they could sell those at a premium. Everybody could be happy with that.

Update 3: In another previous post I'd calculated we can send 42 for $3b which would be $72 million per person without optimization that others tell me exists. That's makes the plan doable today (with colonists arriving within a decade.) Now I'm happy! (I'll still get looks, but hey!)


Anonymous said...

I think there is a germ of a workable solution in your concept that could ripen. Every time I thought about doing a critical post about it on SB, I changed my mind in favor of waiting until I can say something more positive. There are so many backbiting naysayers that attack everything new as it is, that legitimate criticism is often just dog piling. Hang in there.

john hare

ken_anthony said...

Thank you John. I was so discouraged because of my mistake I considered shutting down this blog (it is planet plots after all.)

However, after sleeping on it I have an update ready and will write it now...