NASA: Making markets, not rockets?

There is an old joke in NASA, “a million here, a million there, before you know it, you might have real money.” It’s probably a line in any business grown large enough to develop an unhealthy disrespect for money. Yet our more serious discussions enforced the same idea. Could NASA nudge industry this way or that, in the dry world of standards or the exciting world of launchers and spaceships? Probably not, argued most, a long time ago. In the big scheme of things, NASA was just too small. All we could spend was a billion here or a billion there, not real money. We were small fish, and the big fish were over in the Defense Department, or they were our prime aerospace contractors. At best, NASA could be a bee stinging a giant, an annoyance, and not much more.

If that was then, what about now?

Such a row over so little money. And lettuce too.

Recently, the world saw how a giant bit by a bee could be more than just annoyed. The headlines for a while were about the short-lived government of Prime Minister Truss in the UK, axed when a financial crisis followed the announcement of a plan to cut taxes and borrow the difference. We could forgive the PM’s number crunchers for being clueless to the chaos that would follow over a mere 45 billion pounds spread over five years. For a little perspective, that’s under $11 billion yearly or only 38% of NASA’s 2022 yearly budget. The UK finance folk must have missed the joke. The plan was real money, after all, not for the small amount itself but for what it affected.

The money with a “t,” as in a trillion, reacted swiftly for the worse. There was talk of implosion and bankruptcy in the vastness of UK pension funds, bond markets, and banks. Things start to break when a giant bit by a bee jumps around in the China shop.

This ability to create or destroy wealth comes from leverage and interconnectedness.

Part of NASA gets the joke now too, how little bits of money can have effects far out of proportion to the amount everyone debates. But rather than threaten to bring down a national economy, parts of NASA have applied relatively small amounts of funding to build new economies. This ability to create or destroy wealth comes from leverage and interconnectedness.

If small fiscal changes can bring down a government, evaporate billions in wealth, and shrink markets enough to notice, we can imagine the opposite. Take (relatively) puny amounts of cash, so millions bring about billions. Investments do this all the time. Now let your imagination run wild and ask what billions might do. Instead of saying, “NASA spent,” say, “NASA invested,” and say it with meaning.

In 1994, a US aerospace industry group looked at a version of this investment effect. If costs drop to put something in orbit, at what point do significantly more people show up who would never have launched anything? The idea was “elasticity,” and the report returned at a daunting 661 pages (the full version is here, the short version here.) Ask a complicated question, get a complicated answer. The simple version was the “hockey stick” non-linear jump in demand was at a cost way below where everyone was at the time. The matter was getting to these low costs, and how NASA’s investments play a role.

“Elasticity,” from the 1994 Commercial Space Transportation Study.

NASA would make a market, not rockets or spaceships.

NASA tested this idea in the real world many times. There were X-vehicles and focused R&D, and even US Defense Department launch was going “commercial,” for a time. There were failures and mixed successes. But if at first you don’t succeed, with the Shuttle soon to be retired, NASA decided it would try again. This time the goal was to create a commercial market for cargo to the International Space Station. NASA would make a market, not rockets or spaceships.

In 2006, SpaceX became one of two private sector partners investing alongside NASA to build new ships to get cargo to the ISS. Never did some hundreds of millions do so much good. Without NASA’s investment, and later awards buying rides once available, SpaceX might not exist. This means all the commercial satellites SpaceX lured away from Russia or Europe’s Arianespace might never have launched from the US. This means the multi-billion-dollar Starlink network might not exist. This means our talk about one day having launches every week would still be a goal, not a reality, as it is now. Ditto for reusable rockets. By hook or by crook, NASA became a market maker and not a bad one at that.

Do you have a story about seeing the future and buying Amazon stock at $10. NASA has an even better story. Credit: NASA

If investments are about a new thing, market elasticity is about the shape of the business around it. Did new customers show up to take advantage of such low SpaceX prices? If Starlink counts as an idea no one would have done at previous costs, then yes. But only SpaceX gets SpaceX launches at cost, not price. By price, the data is not clear that a notable hockey-stick uptick effect is apparent from lower SpaceX launch pricing. Though in small launch, customers appear to have shown up that arguably might not have been around at all otherwise (and SpaceX is capturing those customers too.)

Subtract Starlink and there remains a slight uptick, but not quite a dramatic “hockey stick” effect, from the lower launch prices available from SpaceX.

There are other parts to these NASA moves where things have not fared as fantastically. Antares and Cygnus were also an outgrowth of NASA investments with industry toward developing a new way to get cargo to the ISS. Yet the price for these, though attractive to NASA relative to Door-Dash using Space Shuttles, has not been attractive to anyone else. There have been no non-NASA ISS Antares launches.

Similarly, NASA’s investments in commercial crew providers have resulted in only two non-NASA flights (to date), both by SpaceX. Boeing’s Starliner has no non-NASA customers lined up. Promisingly though, more non-NASA crew flights are planned (again, by SpaceX). For crew, it took billions above the hundreds of millions for cargo ships to develop new spacecraft. Add a zero to the monies, and get life support and amenities for people. And the zeroes keep growing to where we see Spacesuits as rentals, but still on the pricey side. The why and at what of all these will eventually make for some curious forensic accounting of NASA’s investments, a subject I am familiar with (for cargo).

NASA partnerships are no longer about a million here or some millions there. We’ve seen how leverage can turn millions in NASA into billions elsewhere. As Archimedes said, “if you give me a lever and a place to stand, I can move the world.” That is so for NASA too. But as we saw with cargo to the ISS, it’s not the amount of money that matters. It’s interconnectedness. Just what are we applying the lever to? It’s not about money alone, and too much may even be counter-productive, forgetting the bar for pricing is way below current prices. (High volume will be essential.)

Admittedly, it’s not easy connecting NASA’s needs with the needs of others for markets that may not yet exist. But when NASA makes the connection, they have a lever that can move the world.

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