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What Would Warren Say? April 6, 2008

Posted by shubber in CRATS, gauntlet being dropped, investment, public service announcement, PYMWYMI, smack talk, space tourism, suborbital tourism, venture capital, Wasting Money.
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(NOTE: this post courtesy of the Old Space Cadet)

When I was a wee young lad in the mid 1960s I bought some stock because of my confidence in the company’s principal. His name was Warren Buffett. Since then, I have made a point of treating the annual reports of Berkshire Hathaway the same way many people treat outstanding textbooks. The latest is no exception. Substitute any of the terms alt.space, space tourism, new space, or suborbital tourism for the term airline in the following Buffet comments from the Berkshire Hathaway Inc. 2007 Annual Report, (Page 8):

The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.

The airline industry’s demand for capital ever since that first flight has been insatiable. Investors have poured money into a bottomless pit, attracted by growth when they should have been repelled by it. And I, to my shame, participated in this foolishness when I had Berkshire buy U.S. Air preferred stock in 1989. As the ink was drying on our check, the company went into a tailspin, and before long our preferred dividend was no longer being paid. But then we got very lucky. In one of the recurrent, but always misguided, bursts of optimism for airlines, we were actually able to sell our shares in 1998 for a hefty gain. In the decade following our sale, the company went bankrupt. Twice.

Given the regulatory environment, economic volatility, and gigantic entry barriers associated with alt.space, and given the frequent demands of the alt.spacers for “airline-like” operations for their fantasy spaceships, could Warren Buffet possibly be making a valid observation? If we are truly not quite into the DC-3 era of space flight, perhaps now is the time to think things through very carefully.

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Comments»

1. Dave Salt - April 6, 2008

Old Space Cadet, I do hope you’re not suggesting that we now go out and shoot the likes of Jeff Greason and John Carmack 🙂

Airlines and the aircraft industry may not have been the crock of gold that some would like them to have been, but are you seriously suggesting that they have had no real economic benefit and/or are not worth investing in?

I suspect the real message here is that anyone who does invest in them (and, by implication, alt.space/NewSpace) should be prepared for the long-haul and not expect to make a quick killing. Moreover, they should also have more than just a passing understanding of the technology, markets, regulation and other relevant business issues before making a serious investment. The nature of your comments (e.g. “given the frequent demands of the alt.spacers for “airline-like” operations for their fantasy spaceships”) suggests that you should actively avoid this type of investment.

I know some of the alt.space/NewSpace community have made (and still make) silly promises to investors — maybe you were one of their “victims” and it’s the reason why you are now such a cynic. However, I don’t think this is sufficient reason to try and tar everyone with the same brush.

N.B. One definition of a cynic is “a person whose outlook is scornfully and often habitually negative”. All I can say is that Old Space Cadet does an absolutely splendid job of expressing the true spirit of a real Space Cynic 🙂

2. Dave Salt - April 6, 2008

Old Space Cadet, I do hope you’re not suggesting that we now go out and shoot the likes of Jeff Greason and John Carmack 🙂

Airlines and the aircraft industry may not have been the crock of gold that some would like them to have been, but are you seriously suggesting that they have had no real economic benefit and/or are not worth investing in?

I suspect the real message here is that anyone who does invest in them (and, by implication, alt.space/NewSpace) should be prepared for the long-haul and not expect to make a quick killing. Moreover, they should also have more than just a passing understanding of the technology, markets, regulation and other relevant business issues before making a serious investment. The nature of your comments (e.g. “given the frequent demands of the alt.spacers for “airline-like” operations for their fantasy spaceships”) suggests that you should actively avoid this type of investment.

I know some of the alt.space/NewSpace community have made (and still make) silly promises to investors — maybe you were one of their “victims” and it’s the reason why you are now such a cynic. However, I don’t think this is sufficient reason to try and tar everyone with the same brush.

N.B. One definition of a cynic is “a person whose outlook is scornfully and often habitually negative”. All I can say is that Old Space Cadet does an absolutely splendid job of expressing the true spirit of a genuine Space Cynic 🙂

3. xx - April 6, 2008

The media covers the giant meat packers but doesn’t cover private airlines, foreign airlines & general aviation at all. If you stick to building spaceships, flying executives, and don’t hire Americans, you might do better than the meat packers.

4. Alfred Differ - April 7, 2008

Heh, heh.

You want to shoot someone down? Several someones? 8)

Entry barriers are a matter of perception. Low risk projects can face them easier than high risk ones.

While I really, really appreciate Buffet’s success, he is not the only rich person out there and some have used a different approach. His works across a variety of companies and with the people he tends to choose, but surely his approach isn’t the only way. Can there be only one immortal survivor?

5. Monte Davis - April 7, 2008

Ron Davies, a curator at thje Smithsonian NASM with a long, deep background in the economics of air transportation, believes that no airline actually made money until at least 1945 and arguably a decade later.

Before that, the difference between loss and profit (when there was a profit) came from a mix of direct governmental subsidies, mail subsidies, and assorted “knit together the empire” subventions for infrastructure — explicit in the UK, France, and Germany, slightly less so in the case of US airline growth into Latin America and the Pacific.

(Hint: Pan Am et al wouldn’t have seen a business case for those cool Clippers to Rio, Hawaii, etc., had the facilities they needed not been of great interest to the Depts. of War and State as well…)

6. oldspacecadet - April 7, 2008

Regarding Monte Davis:
Buffet said in one of his shareholder letters a couple of years ago that the airline industry cumulatively has lost money from day one to the [then] present.

Regarding Al Differ:
Thank you for your observations. You make an excellent point about project risk and entry barriers. Buffet’s approach isn’t the only way to succeed, but I do think his track record suggests that his opinions are worth consideration. I am aiming to shoot down fantasy pretending to be reality – illconceived ideas, not people – see below.

A Teachable Moment for Dave Salt:
I have given grant support to 2 universities to fund propulsion and advanced robotics projects, have given corporate grants to space start-ups with interesting ideas, invested in 2 closely held alt.space companies, invested in a publicly-held company I would consider to be a space start-up, and was an early investor in Orbital Sciences. In addition, I have guest-lectured in various space-related scientific and business topics at the university level and have published on space-related topics in a peer-reviewed journal. I believe that I have a “more than passing understanding” of the issues and certainly invest for the long term.
People who know me well have characterized me as a technological optimist, but I am “scornfully and habitually negative” about unfortunate confusion of fantasy with reality that appears to be so common and inversely related to knowledge among the more vocal space advocates.
I clearly am not advocating shooting Jeff Greason and John Carmack as you suggest. Perhaps you should reread my post and try to comprehend it this time. I have a lot of respect for John Carmack and his goals. For the record, I invested in XCOR in the spring of 2003. Read the XCOR press release about their DOD matching program for pump technology that quotes me:
http://www.xcor.com/press-releases/2003/03-04-16_XCOR_secures_equity_investment.html
That said, I am finding the continual flogging, by you and a few other ignorant space cadets, of Power-Point vehicles that are typically 2 years out but never fly to be tiresome.
What have you done for alt.space other than drink the Kool-Aid?

7. Dave Salt - April 8, 2008

Dr. Jurist, I readily concede to your record on investing money in alt.space/NewSpace companies: I haven’t invested a penny, to date! However, I fail to see how this can justify some of your pronouncements (e.g. “given the frequent demands of the alt.spacers for “airline-like” operations for their fantasy spaceships”), which puts into question your basic understanding of their engineering goals (i.e. to develop a vehicle with minimal maintenance requirements and a quick turn-around between flights in order to reduce operations costs).

Having said that, the main reason I responded to your original posting was because I saw it as a swipe against ALL alt.space/NewSpace ventures, not just the crazy or crooked ones. That may not have been your intent, but it’s exactly how it appeared to me. Had you tempered your comments with at least some support for the likes of XCOR or Armadillo – I assume you don’t regard them as cranks or charlatans? – I would not have had a problem.

Incidentally, I’d be very interested to know how you justify your accusation of my “continual flogging, by you and a few other ignorant space cadets, of Power-Point vehicles that are typically 2 years out but never fly”. Please provide evidence of where I’ve EVER tried to “flog” ANY type of vehicle. If you really are trying to “teach” me something useful, please be aware that such statements only serve to undermine any respect that you may be trying to engender. Oh, and that question about “shooting Jeff Greason and John Carmack” was followed by a smiley (:-), so I can only assume that your web browser had a problem displaying it.

Look, I’ve been in the space business for nearly a quarter of a century (I did system and operations engineering work on HOTOL as far back as 1986, so I do know a little bit about RLVs), which puts me on the wrong side of 50 and so have also suffered the disappointment of all those broken promises from post-Apollo programmes like Shuttle, ISS, NASP, X-33, etc. I’m fully aware of all the Bull S#!t that’s been spread by many “companies” regarding our imminent expansion into space and so, you may be surprised to learn, am something of a sceptic regarding many alt.space/NewSpace ventures. However, I do see some good progress being made and think we should give support in whatever way we can – which doesn’t necessarily mean cash (some of us just aren’t that well off) – to those who are making a demonstrable difference.

If you have a problem with that, then there’s not much I can do about it. All I can say is that I wish you good luck with your investments and let history show how right, or wrong, each of our perceptions may be.

8. Eric Haynes - April 8, 2008

Comparing alt.space to airline operations is quite common and the comparison certainly has it’s merits. I’m not sure if there’s even a better business model to compare it to. Obviously, alt.space is quite far away from today’s “airline-like” operations. In todays terms (Present day to 2020 or beyond?), I’d think that any alt.space company that can launch humans into space is going to be able to charge quite a premium and could possibly thrive. This is especially true if it’s orbital instead of sub-orbital. They would A. almost certainly corner the market for a considerable amount of time and therefore B. charge that premium price. I’m not saying I drink the Kool-Aid but I think there’s much more promise than anytime in the past. Let’s face it, the 80’s and 90’s were pathetic. I won’t even mention the 70’s. Okay, I couldn’t help it!

9. Professor L - April 8, 2008

This message is really for Dave Salt re his comments to the Old Space Cadet post. But first, I have no problem with the Buffett strategy and remember well when he made these comments about the airline industry. It was prime time news, even larger than the typical financial and business news that was reported. But there are numerous successful strategies. Warren is just a very famous and success guy and people listen to what he has to say. However, I do have concerns about the comments posted by Dave Salt.

Dave, how do you infer or extrapolate that the Old Space Cade is suggesting shooting either Carmack or Greason or their likes? Not only do I fail to see anything in the Old Space Cadet posting mentioning their names or any other names, let alone their businesses or any other business, I can only ponder that you are really talking about what is in your deep and dark psyche and you let it surface, trying to connect it to Old Space Cadet to keep your secrets as secrets. You do no justice to yourself or this industry with outrageous comments and assaults as you did in your comments. I would urge you to keep your comments to the substance of what is being written and not something that only your imagination can understand. Especially when your thoughts are marginally violent. Of course everyone knows you are joking but Dave, it was a lousy joke and reflects badly on you. Perhaps proof reading and counting to ten or even giving yourself a time out would help before you post your next comment on a blog. If you go for the timeout, when my kids were young and in grade school, I found a minimum of ten minutes worked well.

10. Alfred Differ - April 8, 2008

ah. 8)

Shooting down fantasy ideas is a good idea. That puts your cynicism to work evolving our community. It sounds like you already have some of your money at work, so the armchair folks are just going to have to learn to live with your particular brand of heresy.

I think you all need to come up with another type of award. Something like faerie wings if you want to go with the fantasy theme. Those wings will get us to space about as fast as a walking eagle, right? The winner for the best work of fantasy space business literature for 2007 goes to… ?

11. Thomas Olson - April 9, 2008

There’s a pun there somewhere, about rubbing Salt into an open wound, but I seem to have misplaced it. ;^)

It’s nice to see the Old Space Cadet stirring things up again. Let’s keep up the momentum. Kool-aid season is upon us.

tao

12. Dave Salt - April 9, 2008

Dr Livingston,

If scolding me like a child or making veiled accusations about my mental health is the best you can do to engage me in debate, all I can say is… oh, please!

Know, however, that I do have the greatest respect for what you do on The Space Show, but it does diminish somewhat when I read responses like the one you just posted.

13. Jonathan Goff - April 9, 2008

Question for oldspacecadet,
In your original article you use the term “airline-like” operations. Almost all the sources I’ve heard in alt.space though have talked about “airplane-like” or “aircraft-like” operations. There’s a difference between airplanes in general, and mass-transport passenger airlines in specific. I think that “airline-like” operations for a 1st, 2nd, or 3rd generation commercial RLV is probably fantasy. But “aircraft-like” operations? I think thats a far more realistic goal.

I’m not arguing for or against your claims re the air transportation industry. I’m just saying that at least one of our technical points doesn’t jibe with what most of the people I know trying to build RLVs are claiming.

~Jon

14. oldspacecadet - April 9, 2008

Dave Salt said –“Had you tempered your comments with at least some support for the likes of XCOR or Armadillo – I assume you don’t regard them as cranks or charlatans? – I would not have had a problem.”

There you go again. You are assuming opinions I either may or may not have regarding XCOR and Armadillo. I didn’t express any opinions about either of them in my original post. In addition, in my response comment I stated that I had invested in XCOR. I expressed no opinion about how I regarded them or their management either then or now. You display a lack of reading comprehension.

Al, the faerie wings won’t work in a vacuum, but the babe they are attached to looks better than the walking eagle.

15. Monte Davis - April 10, 2008

Jon G: a very good distinction, although by no means an absolute one. Historically, the technological robustness and operational experience that went into “aircraft-like” were both a cause and an effect of the expanding market and increasing flight rates that went into “airline-like.”

When I board a commercial jet with a high expectation of disembarking safely at the destination — and can easily afford the ticket — the reason is less the inherent engineering wonderfulness of the designs for its engines, airframe, avionics, etc. than the miles of shelves full of thick ring binders saying “Subsystem K155 is good for 600 flight hours, Subsystem TR23 should be recalibrated every 20 landings, and for Subsystem P21 see manufacturer’s bulletin 2005-191…”

(OK, these days it’s GB of storage feeding the maintenance team’s laptops and handhelds, but you know what I mean.)

16. oldspacecadet - April 10, 2008

I mostly agree. “Airplane” or “aircraft” would have been a better choice than “airline” except for the proviso described by Monte. In my previous 3-13 post, I concluded after extended reflection that “dweeb” would have been a better choice than “dork,” although I reserve the right to still consider a subset of the Kool-aid crowd as “dorks.” Now about working to make humanity space-faring ——

17. Chance - April 10, 2008

“Especially when your thoughts are marginally violent. Of course everyone knows you are joking but Dave, it was a lousy joke and reflects badly on you.”

Heck, I thought it was funny. Why is everyone piling up on Dave? Jeez, just cause you’re a cynic doesn’t mean you have to be a jerk.

18. Chance - April 10, 2008

“There you go again. You are assuming opinions I either may or may not have regarding XCOR and Armadillo. I didn’t express any opinions about either of them in my original post.”

Right, you didn’t define anything in your original post, so maybe if you had, we wouldn’t have to fill in the blanks.

19. Jonathan Goff - April 10, 2008

Monte,
Exactly. My point was that none of the actual serious players in this industry really think they’re going to achieve “airline-like” operations right-off-the-bat, because they understand that just getting to “aircraft-like” operations is a huge challenge, and that evolving from there to “airline-like” operations is going to take a lot more time, money, and especially flight experience. The good news is that they don’t have to reach airline-like operations immediately. ELVs (both orbital and suborbital) have set low enough expectations price and reliability-wise that it should be feasible for a good 1st gen RLV to get a toe-hold long enough to start clawing its way (through continuing development and refinement) toward airline like operations.

~Jon

20. Professor L - April 10, 2008

Dave, how about telling us how you assumed or even conjured up your company and people examples that you assumed Old Space Cadet was talking about? While at it, please let us know how you extrapolated that the Old Space Cadet might be suggesting that space cadets go out and shoot someone, anyone, even the likes of Jeff Greason and John Carmack. As I cannot find any reference to companies or people in the original post, I can only assume (assumptions are damn dangerous, right?) that your fantasy assumptions were a result of what is in your mind, your psyche, and you expressed your thoughts by attempting to transfer them to Old Space Cadet. So instead of defending yourself, please explain your process to all of us so we can better understand you, where you are coming from, and the content of your posts. How do you create an assumption, how do you extrapolate? I think these clarifications would be useful. Thanks in advance for the explanations. I am sure they will be enlightening for us all.

Just so you know, I am anal when it comes to assumptions in business or other plans. Ask any of my grad students at Space Studies at UND about it. If I get a paper from a student with nonsense assumptions and fantasy extrapolations, I reject the paper and have the student do it over again. Late grade penalties apply. I take no prisoners on this subject because faulty assumption building and thinking is rooted in dangerous planning for missions, operations, and strategic thinking. One can be creative and imaginative, no problem there. But there has to be a solid foundation someplace and that foundation shows up in assumptions. They need to be reasonable. What you opened with in your original comment to the Old Space Cadet post was neither reasonable nor grounded in reality. While I don’t know you in person, I do believe you can do better. That’s all.

21. Dave Salt - April 11, 2008

Dr Livingston,

Given the general spirit of your posts (more ‘bait’ than debate, I fear), I hope you don’t mind if I decline your generous offer to help relieve your “anal” obsession. However, I trust that others (maybe even some of your students?) will read your missive and draw their own conclusions.

As I said before, I do have the greatest respect for what you do on The Space Show, but it does diminish somewhat when I read responses like the one you just posted.
——————–
Dr Jurist,

The expression I used was “the likes of XCOR or Armadillo”, so my reference to them was as a generalisation (i.e. companies like them) and not an explicit request for their endorsement. May be it’s not so much my “lack of reading comprehension” as a case of two nations separated by a common language (I am English, by the way), but somehow I don’t think that this is the case. Again, I trust that others will read your missive and draw their own conclusions.
——————–
Jon/Monte,

Back on topic for once; I think you’re absolutely correct to question the understanding behind the terms “aircraft-like” or “airline-like”. Having started my career at Rolls-Royce as a cycle design and test engineer, I’m only too aware of what’s required to demonstrate engine safety. Having said that, I see no reason why rockets cannot be evolved to similar levels of reliability, safety and maintainability – it’s just going to take a rather large amount of time and effort in order to achieve it.

The bottom line is that “aircraft-like” operation is NOT a crazy thing to aim for… in the long-term! It is crazy to assume that it can be achieved with 1st, 2nd and probably even 3rd generation vehicles, as Jon so rightly says.

I guess this is why I got annoyed at the original post. Many of the people I talk to DO understand the magnitude of the problem and so are not quite the crazy/crooked/kool-aid drinkers that some would have you believe. Moreover, after many years (decades?) of failed promises, we’re finally starting to see a few groups taking small steps in the right direction (i.e. build a little, test a lot and go for modest goals that are relatively easy/cheap to realise) and they’re starting to generate hard evidence to back their case (N.B.it’s far from being proven but it’s now somewhat more believable). Given this situation, I’d hope that those who purport to be knowledgeable about the subject would at least acknowledge it in some small way.

Maybe my problem is that I viewed this blog as being somewhat serious. What I’m now realising is that it’s more akin to a cross between Private Eye (Pseuds Corner) and a Monty Python sketch (is this the right room for an argument?).

22. shubber - April 11, 2008

Maybe my problem is that I viewed this blog as being somewhat serious. What I’m now realising is that it’s more akin to a cross between Private Eye (Pseuds Corner) and a Monty Python sketch (is this the right room for an argument?).

Ok, now you’ve gone and insulted the Space Cynic.

The issue, my friend, is that this industry – and especially those in the alt.space community – has proven time and time again that the hype far outstrips the reality, and grossly underestimates the complexity of the problems (engineering, technical, and financial) that must be solved. Cool posters, powerpoint presentations, scale models, and booths at major tradeshows do NOT open the space frontier – they simply serve fresh batches of kool-aid to the gullible masses and the choir to keep the faith alive and sucker people out of their time and money.

Is incremental progress FINALLY being made in the area of spacecraft development? perhaps. But there remains a dearth of proper funding, which I continue to assert will NOT come from NASA or from investment-driven private sector financing outfits (I can’t speak to billionaire tragics – they have been notorious for throwing money at all sorts of things, but it’s a bad way to plan for developing your industry….).

But the way the alt spacers (you know who you are) get all a tingle when another incremental milestone is hit, and blather on about how we are FINALLY at the opening of the frontier – well, I believe you are in for a serious disappointment.

If I recall correctly – and I do – I was the focus of much hatred and pity on the blogosphere for discounting the importance of Ms. Ansari’s trip to ISS (other than to her). So how has that worked out for opening the frontier for the rest of the masses? Oh, that’s right, it hasn’t done a damn thing. In fact, the price of access to ISS on a Russian ride has gone UP, not down.

Frankly, the reason I can’t be bothered to engage in some of these debates any more, and why I chose not to return to a full-time career in this industry when I returned to the consulting world recently, is that I get tired of explaining the facts to those who refuse to listen, or accept. Facts cannot overcome belief and emotion if the holders of those beliefs and emotions don’t wish to look at the facts.

23. Jim Davis - April 11, 2008

Jon Goff: “The good news is that they don’t have to reach airline-like operations immediately. ELVs (both orbital and suborbital) have set low enough expectations price and reliability-wise that it should be feasible for a good 1st gen RLV to get a toe-hold long enough to start clawing its way (through continuing development and refinement) toward airline like operations.”

Now the bad news.

Implicit in the above is the assumption that a first generation RLV – good or otherwise – can be designed and built. It is by no means clear that one can be now or even in the next few decades. To continue with your aircraft analogy, space advocates like to assume it’s the early 1900s when it might just as well be the early 1850s.

24. Dave Salt - April 11, 2008

Shubber, I always considered myself to be essentially in-line with your way of thinking (e.g. I agree with you vis-à-vis Ms. Ansari’s trip to ISS) but maybe I was mistaken – I’m genuinely saddened that you think the situation is so bad.

I interact with people from SFF and the like only rarely, so hadn’t appreciated how “fundamentalist” their attitude can sometimes be. Living on this side of the Pond may be one of the reasons why I still have some small degree of optimism, though I do admit that my many talks with Jeff Greason and John Carmack may, over the years, have subtly influenced my opinion.

So, maybe I have drunk the kool-aid and lost what little sense of perspective I may have once had. However, I still believe that something good is starting to evolve but I’m not hailing it as the “opening of the frontier”… I doubt that I will witness this in my lifetime.

If, in your eyes, this makes me a lost cause then so be it. It doesn’t alter my opinion of you: I encourage you to keep arguing the facts because, for the most part, I still believe you’re right.

25. Dave Salt - April 11, 2008

Jim, the key word in your final sentence is “might”. The bottom line is that no one really knows and, until someone goes out and really tries, we’ll probably never know.

If you’re advocating caution, then I’m 100% with you. However, if you’re asking us to take the small amount of evidence we have to date (Shuttle, NASP, X-33, Kistler, etc.) and consider this as exhaustive proof of the likelihood of failure then, to my mind, you’re mistaken.

As you no doubt remember, we’ve had similar discussions over the years and have essentially agreed to disagree. My argument has always been that no one has ever made a serious attempt to actually build an fly a truly operable vehicle – DC-X was sort of in the right direction but even that had its issues – so there’s no way of knowing how close/far we are to/from that goal. NASA has effectively done nothing along these lines after Shuttle and is unlikely to ever consider it in the foreseeable future, though some would argue this may actually be a good thing 🙂

Whatever you think is driving XCOR and Armadillo to do what they’re doing (kool-aid, vision or just a sense of fun), you cannot deny that they’re at least doing something that, small as it maybe, appears to be heading in the right direction. However, these comments only relate to the technical/engineering issues – the markets and financing is quite another issue, though no less important.

If any of the alt.space/NewSpace ventures is genuinely trying to con would-be investors with bogus claims, then they should be both exposed and the full force of the law brought against them. However, I do appreciate that this may be easier said than done but I hardly think that this sort of problem is unique to the space industry.

26. Professor L - April 11, 2008

For Dave Salt: Dave, this exchange served my purpose in getting in your face, tilting to the mean spirited side of things, and driving home the point about fantasy assumptions and extrapolations. The thing is that the NewSpace and most of the space industry is very fragile in its development. I wish you had been at the VC luncheon I was at today in Silicon Valley, completely dedicated to space. I was there to tell them about The Space Show and its business like approach. About a hundred VC members were there, eyes glazed over and some asleep as space biz types made their company pitch. Part of the problem is that when you get in front of people that know finance, assumption building, modeling, extrapolations, marketing, etc, and they do it with the data in front of them or their research, they know crap when they hear and see it even if they are not familiar with the business or the industry. Doing it with fantasy stuff and even assigning to the writer of an article as your post suggested does nothing but put the people into a deeper sleep and drive home the fact that space is hardly ready for prime time money and investment. I wish you had been at the Investment Summit in San Jose in December last year. Listening to what the VC guys said, speaker after speaker, and then here come the space biz presentations. Perhaps you and many others might have had a reality shock. Shubber was there. Tom Olson Cynic was there. I was there. The Old Space Cadet was there in spirit and through my cell phone. What I am saying here was witnessed a 100 fold.

Dave, had you been a guest on my show, and by the way, you are welcome to be a guest on the show, and had you offered your comment about the Old Space Cadet post, I would have stopped you in your tracts, very politely (I don’t do hit journalism and never will on the show) and I would have held you accountable for what you were saying and suggesting re the original Dr. Jurist post. You would have chosen to either explain your comments in detail, possibly backtrack or do something to further the conversation about why you were making such a comment when none of it could be connected with the Jurist post. I seriously doubt you would have overlooked my stopping the discussion to have you explain. Again, this would have been polite, maybe humorous, certainly giving you the chance to clarify something that needed clarification.

Ok, all of this may be petty. And yes, I got your attention, didn’t I? So next time you post and I hope you post frequently, understand that lots of people see what you and others write and not all are true believers but many really know this stuff backwards and forwards, they know assumptions, reality, they know how to extrapolate and make a good analysis and they can draw rational and logical conclusions from such work. What you did hurts this fragile industry. So I ask you to give some thought to what you are posting next time, to what you are assuming, to how you extrapolate from something. When you do that, all of us and this developing industry are winners. When you don’t, its teaching time if I know about it. And yes, I am about as lacking in diplomacy and PC stuff as anyone can be, especially when warranted and the Cynics site is the place to do it. As I said, never on air, always polite on air and never ever will I do hit journalism or allow that on the air.

I think the point has been made. You clearly got the in the your face tilting to mean spirited flavor of my posts. I hope you got the essence of it all and why I did it and understand it even more with this note. Its not important that you concur and jump on my or anybody’s bandwagon. Just give some thought to what you are doing and does it help or hurt the industry and realize lots of people read this stuff and not all are true believers. Is it truthful and accurate or a wish? A true believer belief? If so, just say so, but don’t lead with phony assumptions and outrageous extrapolations. Some who read will want to believe but we ourselves often get in the way of that.

Final thought as I am now bugging out of this discussion is that you are welcome on the show. I think we talked about this once before by private email. I believe we are around the same age and I recall some of your bio when we had our exchange. I think it was early last year. Anyway, its possible my memory is wrong, hell, once one is past 60, the AARP has a lock on your soul and mind and a few other things and its not fun.

Final thought, everyone go party at a Yuri’s Night Party near you on April 12. Celebrate man getting into space. Let’s hope we can keep doing it, make some money at it and have some fun. Way to go YURI! We love you wherever you are.

27. Dave Salt - April 12, 2008

Dr Livingston,

I’m somewhat puzzled when you say “What you did hurts this fragile industry”, when all I did in my original post was: 1) make a joke based upon an extrapolation of one of Buffet’s comments, which I assume was itself a joke; 2) suggest that the people who do not have a very good understanding of the industry, as a whole, should avoid investing in it.

I can understand that some may see 1) as puerile and unfunny, but I have a hard time understanding how you can disagree with 2). Moreover, if you really believe that what I posted “hurts this fragile industry”, then all I can say is that: a) if it’s that fragile then it’s pretty much doomed, regardless of what I say, or; b) you credit me with far more power and influence than I have, or deserve to have.

Nevertheless, I’m flattered that you put such effort and thought into your response. As I said to Shubber, I honestly believe our opinions are not that far apart – the only difference seems to be that I’m more willing to suspend my disbelief in those cases where I see real engineering progress. However, I’m more of an engineer than a financier, so your criticism of my views may well be justified.

I think I’ll decline the offer to come onto your show, given present circumstances. However, I do appreciate the good work you do there and hope that you continue to interview the sort of people who actually can make a difference.

28. bcrussell - April 14, 2008

I would like to inform you all of our organization;
Americans in Orbit-50 Years Inc.
Our website is http://www.aio50.org

Craig Russell

29. nick - April 14, 2008

The airline/aircraft distinction applies to Buffet’s original point about profitability as well. The airline industry may well be so competitive as to be a low-margin business, their benefits going mainly to customers rather than shareholders. But making airplanes is quite another matter. Only Boeing and Airbus make big airliners, the former at least with hefty margins. DoD contracts fatten the investors’ returns.

AFAIK, the communications companies that operate comsats are on average fairly profitable, as are the contracts to make and launch the comsats, and good profits are also made on DoD space contracts.

alt.space, or at least that portion of it trying to achieve NASA’s preposterously uncommercial goals by commercial means, is quite another matter. Much of it just seems to be charity in disguise — a way for rich people to brag about their far-out investments, rather than a way for rich people to make even more money.

30. accountingguy - April 28, 2008

As something of a newbie to all of this, I will refrain from going too far into the discussion, but rather throw out an observation of mine.

Focusing too much on the “airline” aspect of space is a bit like focusing too much on the railrod aspect of industrializing economies.

One might poo-poo “trillion dollar asteroids”, but at some point, there will be something in space we will want. The solar system has a lot of mass, and a lot of energy.

If you want to get into space in a big way, figure out how to tap into those two things, in a self-sustaining way.

Railroads were the means by which the US industrialized, not the end unto themselves.

Take any good computer game that has some aspect of economics, like Civilization or similar, and you see the self-sustaining aspect of growth over and over. It makes for an entertaining game, but I think holds a key to understanding about how we will get into space and what we will do once we get there.

I see a lot of the debate here as a chicken/egg conundrum. If we get into space there are things we can do, but without something to do we won’t get into space.

Has anyone here SERIOUSLY thought and put some effort into what to do once we GET there?

I know we have some concepts like “space hotels” and similar, and there is a proven market for that.

But what ELSE is there? The USA was not founded by tourists…

I see a lot of concentration on the supply part of the equation, but not much on the demand side.

31. nick - April 29, 2008

Has anyone here SERIOUSLY thought and put some effort into what to do once we GET there?

Hundreds of people over many decades have come up with an extremely long list of ideas, most of which will not pan out for various reasons. We will also make many serendipitous discoveries which can only be imagined in a general way now: for example amongst the wide varieities of solar system geology we will probably discover ores of precious metals, gems, or other interesting high-value materials. But guesses today as to where specifically such might be found are likely wrong. It’s also quite probable that vacuum and microgravity combined with ISRU will lead to very useful manufacturing processes, but work on this combination has been minimal. Space industry is a vast virtual space of possibilities waiting to be explored, not a set of projects one can plan out ahead of time.

An exception is the reasonable expectation that we will expand what we’re already using space for. It’s too mundane for alt.spacers, but a big part of space industrialization will be just enhancing and expanding what we already do in space: communications relays, surveillance, and science and exploration of various stripes.

The Next Big Thing in space, I predict, will be moving from a fixed-plan paradigm to a real options paradigm in satellite operations. Real options for space operations will be implemented with multi-purpose satellites that can be reconfigured and reprogram to adapt to market changes while on-orbit, and can be refueled via propellant depots (no fancy cryogenics, just Orbital Express technology with storable propellants). This will require some entrepreneurial genius to identify and sell the end benefits (the real options) to space users (e.g. to comsat operators and spysat users in intelligence agencies) rather than the means (software uploads, general-purpose equipment, propellant depots, and other ways of providing real options). It will also require vertical integration, because it requires designing a whole new fleet of refuelable and reconfigurable satellites as well as any propellant depots and other assets associated with providing the real options.

32. anonymous - June 9, 2008

What would Warren Buffet say about Fedex and Southwest?

These entities make money like crazy.


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