Musk Wants to Build a Rocket That Will Get You Anywhere on Earth in an Hour
Comment of the Day

September 29 2017

Commentary by Eoin Treacy

Musk Wants to Build a Rocket That Will Get You Anywhere on Earth in an Hour

This article by Dana Hull and Perry Williams for Bloomberg includes a video of Musk’s full presentation at the 68th International Astronautical Congress. Here is a section:

"Fly to most places on Earth in under 30 mins and anywhere in under 60," Musk wrote in an Instagram post after he’d left the stage without taking questions. "Cost per seat should be about the same as full fare economy in an aircraft. Forgot to mention that."

With many commercial satellite operators as customers, the revenue from those contracts will help fund the development of the BFR, which would be capable of carrying satellites to orbit, crew and cargo to the International Space Station, and complete missions to the Moon and Mars, said Musk. He said the BFR would contain 40 cabins capable of ferrying roughly 100 people at a time.


Eoin Treacy's view

The cost of lifting payloads into space is dropping fast. Meanwhile the size of satellites is decreasing meaningfully while their technical specifications are improving even more rapidly. Economics 101 dictates that if the cost comes down demand will rise. 

Google and Facebook have plans to blanket the sky in satellites to provide internet connectivity to the globe. If we forget about Mars for a moment, they are planning to triple the number of satellites in the sky within the next decade. Data, who controls it and how easy it is to access is the basis for the digital economy and our reliance on data is only likely to intensify over time as both the breadth of what is available and what we can do with it expand. 

Luxembourg based SES Global pioneered the market for communications satellites but the share is languishing despite its more than 7% yield. Perhaps this is because it is a legacy provider while the barriers to entry to what was once a niche field are falling rapidly. The share is testing the lower side of a yearlong range but a clear upward dynamic will be required to confirm more than temporary steadying. This article from The Guardian covers Luxembourg’s support for the proposed asteroid mining industry.

Northrup Grumman’s acquisition Orbital ATK can be seen as a play on the evolving space sector as well as an attempt to build scale within the traditional defence sector. Boeing has already built the US Air Force’s X-37B robotic space plane which keeps beating its own records for time in flight, but is tiny relative to what Musk is proposing. That suggests the company has the capability to compete with SpaceX should it need to but the risk is that it will end up playing catch up in much the same way that automotive manufacturers are. 

I am reminded of Craig Venter’s entry into the Human Genome Project nearly 20 years ago. The original project was government backed, proceeded at a lackadaisical pace and did not have a profit motivation. The entry of private capital sped up and shrank the cost of achieving the goal of sequencing the first human genome. Subsequently the cost of genetic sequencing has collapsed so that it could be virtually free within the decade.  

What if the introduction of private capital can do something similar for space flight? That was the question which immediately came into my mind when I watched Elon Musk’s presentation. Right now, it is inordinately expensive. The space station cost $150 billion to build but they are now talking about putting a base on the moon for $5 billion. In a world where central bank balance sheets stand at close to $20 trillion that’s not a lot of money. 

There is another point which I’ve been musing on which relates to the Jevon’s Paradox. Throughout history when technology improves the cost of using essential commodities declines and we find new uses for them. That leads to higher prices which encourages efficiency gains and economising which eventually leads to technological gains which increase supply and therefore lower prices. 

In the energy markets the technology gains achieved, primarily in hydraulic fracturing and horizontal drilling, battery economies of scale and electric vehicles represent a headwind for prices over the medium-term. Nevertheless, the comparatively low price will encourage new use cases. The methane used for rocket propulsion is a fossil fuel and if the planetary and interplanetary travel sector is going to evolve the world is going to need a lot of it.  

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