← Capital Decanted
Loading summary
Transcript66 lines
- [00:00]
A
I'm curious if you think, as we enter this new age of geopolitical instability, on whether some of those geopolitical forcing functions are creeping back in and what that might mean for the commercial forcing function, the new geopolitical forcing function. How do you expect all this to play out?
- [00:17]
B
I agree with your contention there. I think the B2G model, which is what a lot of the original space race was based on, does seem to be making a bit of a resurgence. Whereas I'd say the past 10 years or so, the second space race, if we want to call that, was much more about a B2B and potentially even a B, to see if you include the Starlink applications. So it's interesting to see all three of those cohorts starting to overlap in ways which are complementary and also raise some questions about where we might be conflicting instead.
- [00:50]
A
Welcome to Capital Decanted. In this show, we say goodbye to tired market takes and superficial sound bites. Because here, instead of skimming the surface, the we dive into the heart of capital allocation, striking the perfect balance and exposing the subtleties that reveal the topic's true essence. Prepare to have your perspectives challenged as we open up the issues that resonate with the hearts and minds of those shaping capital allocation. We've enlisted the wisdom of visionary leaders in the industry and just like a meticulously crafted wine, will allow their insights to breathe, unfurling their hidden depths and transforming our understanding. Welcome to season three of Capital Decanted. And this is episode one, the Space Economy and the New Race. I'm John Bowman.
- [01:41]
C
And I'm Aaron Filbeck.
- [01:43]
A
And we are your hosts. Well, for the third year in a row, our title sponsor is once again our friends over at Alternatives by Franklin Templeton. They've really been a constant in supporting our efforts to bring compelling educational content to life here at Kaya. They have over 40 years of alt investing and over 260 billion of assets under management. FT specialist investment managers have expertise across six different asset classes. Real estate, private equity, private credit, hedge strategies, venture capital, and digital assets. And of course, all of them operate with the client first mentality that has always defined Franklin Templeton to help prioritize investment outcomes. So thanks so much as always. Alternatives by Franklin Templeton. Well, Aaron, we were joking in the green room because China to date last season is our record. But I have to say, length aside, even space seems like our most ambitious episode yet. Would you agree with that?
- [02:37]
C
I would agree. It's a wide universe.
- [02:40]
A
It is indeed. I know I said this for China, probably the most prep I've done simply because I don't have an engineering, aerospace, scientific background. So it just took a whole lot more preparation. You have these milestones in the back of your head of course, that defined at least your parents childhood and perhaps some of our childhood. But most of this was very foreign. So we're excited about this. So for many of you, just as with me, it may be easy to write off space as a fantasy stories, as I mentioned, of your parents childhood, the stuff of hokey movies and books. But the reality is that rocket and orbital science and the applications that they enable on earth are much more ubiquitous to our daily lives than most of you might think. Let's just be honest. Most of us drive cars navigated by GPS every day, where we jump in an Uber assisted by that same mapping technology. We could doordash dinner to our apartment where our drivers both communicate and find our homes. Using satellite technology. We track our FedEx parcels, we check the weather, modern supply chain and transportation, climate monitoring, farming, mining, emergency response, electric vehicles, the Internet of things and much else are already deeply dependent on space assets to function. The dawn of the commercial space economy has opened up opportunities for all of us and is no longer a realm exclusive to astronauts and scientists. So the space economy, as we'll call it through the course of this episode, is currently about a 600 billion US market and on most accounts expected to grow beyond 1 trillion by 2030 or shortly thereafter. The forecasted slope from there, of course, begins to vary widely, depending on a combination of demand, cost curves and a healthy dose of imagination. But the bulls foresee development and monetization and disaster forecasting and mitigation, crime, intelligence, rapid military deployment, space based manufacturing, data centers and mining, tourism, and shall I say, maybe even multi planet civilizations. And we will certainly get back to that. Unlike the monopolistic state owned programs of the past, in recent years an entire ecosystem of private startups and new ventures have begun to unlock promising new paths for investors to participate in this next space age. Could the space economy become as ubiquitous as the radio? As the Internet? As mobile? Is this another platform opportunity that rivals all the hype around AI? Well, that's going to depend on the pace of development and their associated business models. So today we want to explore the legitimacy of some of those tailwinds that will determine how near these future realities might be. Now, the very basics of physics, of course, teach us that stationary objects need an external force to overcome inertia and begin moving. New markets or industries similarly need what we call a forcing function to develop and maintain urgency and momentum. The forcing function of the original space age and space race was this one upping of the US and the Soviet Union. And of course, after the Cold war had subsided, SpaceX and particularly Elon Musk provided a second forcing function that disrupted the industry and proliferated complements and competitors around the globe. And shall I say, maybe awaken the childhood wonder with space that had been lost for a generation. So is this forcing function sustainable and enough is there a new one lurking that will catapult discovery in new nonlinear ways? So our path today, which unfortunately you cannot track even by satellite gps, I'm afraid, is as follows. So first I'm going to help us understand the history of rocket development, space exploration and technology advancement. As with a primer on any formative industry, it's important we equip and ground ourselves with how we got here and what are the lessons of the past that influence current state, particularly when it comes to those forcing functions I just mentioned. Aaron's going to then spend some time sizing and segmenting today's space economy, which is way more complex and interesting than it ever has been. And it's going to help us understand what future applications, some of which I've just hinted at, might be on the horizon. And then we'll address the elephant in the room, the wobbly state of geopolitics around the world and whether a new space race is emerging. It's a modern but delicate space race that could mirror Star wars level orbital conflict or cooperation that could be in an exemplar of multinational peace. So we'll have to see that play out. All right, now, before we jump in, you might have remembered if you listened to the teaser that we're going to experiment with a slightly different format this year. So rather than discreet interviews, in some cases with guests that can help us bring to life some of these topics, we're going to start interspersing some of those clips and conversations in the context of the narrative. And I hope that leads to a more continuous story that is helpful for both us and you as we journey together and better understanding these topics. And so today, what you're going to be hearing from different parts of this conversation are the result of conversations that we had with two individuals that know this space economy very, very well. The first is Luke Ward, who is an investment manager at Bally Gifford, which is the $209 billion pound investment manager that spans both private and public assets. And Emma Norsett, who leads the private tech investing business within their T. Rowe Prices private equity business. So, again, a very diversified asset manager here that spans all types of asset classes and all stages of equity investing. So, again, you'll be hearing from them at different times during this episode, and I assure you that you will benefit from some of their wisdom and their experience in investing across many of these companies that we allude to through the course of this study. So with that, Aaron, you're a bit. I hope this doesn't offend you of a space geek, at least in your pop culture choices. I have to imagine choosing this as our inaugural season three episode was awfully exciting and personal to you.
- [08:32]
C
It was. And you're right, I am a bit of a sci fi nerd. So whether you're talking Star Wars, Star Trek, even maybe in the spirit of this episode, the Hitchhiker's Guide of the Galaxy, which is what we're attempting to do throughout the episode, this was really exciting for us to tackle. I'm very glad we're doing this during the season. But I also grew up a lot around space and astronomy, and I remember being a young kid and going to the planetarium with my parents and brothers. So this has always been a fascinating topic, even before I became a bit of a sci fi nerd. So this is great. I'm really excited to dive into this.
- [09:04]
A
Just as a disclaimer for the audience, I do not condone the identity of Aaron, which is this rare occurrence of schizophrenia where people claim to like both Star wars and Star Trek. It's similar to saying, I love the Red Sox and the Yankees, so we'll just leave it at that. I love most of Aaron, but he's got some major flaws, and this is one of them.
- [09:27]
C
Well, lucky for you, John, I'm not accepting any criticism at this time.
- [09:31]
A
Well, we've got a whole lot to go, so buckle up. You see, I'm wearing my sweatshirt, my Metroid sweatshirt.
- [09:37]
C
I did.
- [09:38]
A
I thought you'd appreciate that. Second best video game of all time. So let's get started. Fun aside, we're gonna dive in. So, history, our story, or at least my version of the story, begins at the turn of the century when an English author, H.G. wells, publishes the War of the Worlds. Aaron's nodding and laughing. I always surprise him with where I'm going to start, where I'm going to originate these deep dives. So War of the Worlds was a science fiction novel about an attempted invasion of Earth by beings from the planet Mars, which is a rather ironic home planet for this episode. As you're going to see a little bit later. Now, to be fair, War of the World certainly wasn't the first science fiction novel. Authors as famous as Jules Verne had written about space travel 30 years earlier in the middle of the 19th century. But the popular serialized publication in both the UK and the US followed by the book itself, incited new public fascination with space travel, the idea of extraterrestrial life and the spirit of exploration. But the story would only take on legendary status about 40 years later, just before the dawn of the Second World War, in October of 1938, when CBS, I think it's fair to say, infamously aired an adapted dramatic storytelling of War of the Worlds. And it was positioned at a series of breaking news stories by a young Orson Welles, who of course would go on to be one of the most iconic radio and film personalities in history. This really made Orson's career. But the breaking news structure and segmentation of this dramatic storytelling about the invasion actually confused a portion of the population that it was real at one point, that New York City had actually fallen to the aliens. As you can imagine, it set off a widespread panic. And frankly, the jury is out about whether this social experiment about the manipulative power of media was necessary or beneficial. Aaron, I think you could say that this was the first fake news.
- [11:27]
C
Indeed you could.
- [11:28]
A
So that is far from new. So around the same time leading up to World War II, the Germans, Americans and Soviets all were experimenting with small liquid fuel rockets for scientific purposes. But after the invasion of Poland, less than a year after Orson Welles famous broadcast, the Germans significantly accelerated their innovation in weaponizing these rockets to create larger ballistic missiles. The Nazis would in fact create the first long range guided ballistic missile that they called the B2. These were the first supersonic missiles that would cross over what's called the Karman Line. So. Okay, pause. This episode's going to require a lot of definitional work it did for me in the preparation. So we're going to try to aid you and hold your hand along as we go. The Karman Line is largely considered the edge of space. And it's an altitude of 100 kilometers above Earth. That's about 62 miles or 330,000ft. So think of it as about 10 times higher than where we fly our larger commercial planes today. So the V2s were the first rockets, or any artificial object for that matter, to travel in space above that Karman line. And over 3,000 V2s would be used to pummel the Allied forces in London and Paris and Antwerp and Other cities before the tide turned. So after the war you could imagine that Germany's huge advantage in rocket technology was deeply attractive to the Allies. So as such, both the US and the USSR acquired custody of German rocket development assets, scientists, technicians, files. In fact, the US would run a very controversial intelligence program called Operation Paperclip. This needs to be made into a movie. And this was where 1600 Nazi rocket scientists, technicians and engineers, including Wernher von Braun, remember that name, who's the co developer of the V2 rocket, were seized and brought to the US. Operation Paperclip would go on to be the catalyst that fueled aerospace innovation in the US and both military arms and yes, the entire space program that would culminate in the Apollo lunar program two decades later. So public interest in space flight after the war was further aroused in the early 50s when US Colliers magazine published a series of seven articles called Man Will Conquer Space soon detailing Wernher von Brauns. There's that name again. Plans for crewed spaceflight in March of 1955. Disneyland's animated episode man in Space, which was broadcast on US television to 40 million people, further raised public and government interest in the subject. Well, Collier's magazine was right about von Braun and the US government aspirations for a crude space flight and the literary glamour of space was about to get very real in many ways and to find the beginning of the most intense chapter of the Cold War. And this combination of fear, national security and drive for symbolic superiority would serve as that powerful first forcing function for the space race. And then it happens. Aaron. On October 4, 1957, Soviet Union launches the first satellite into orbit. Of course, I'm talking about Sputnik. The Sputnik moment of all Sputnik moments. The satellite sent radio signals back to Earth for only three weeks before its battery died. But really it didn't matter. The Soviets had struck first. They had taken the lead, dramatically showcased this to the free world with their superiority in scientific space achievement. And to put it mildly, the United States was just stunned. Eisenhower in particular was frantic. He at first tried to downplay the significance of the event, but once it was clear the country was in a state of anxiety and fear over the Soviets using that technology advantage for military threats against America, he knew he had to act to calm the panic and perhaps steal back the narrative. So Eisenhower's response was threefold. And these are really important, groundbreaking foundational elements of what would define the future. First, he authorized formation of what we now call the Defense Advanced Research Projects Agency, or darpa, to develop Emerging technologies for the US military. Now if you're not familiar with darpa, to put their influence in perspective, the Economist, the magazine later dubbed darpa, quote the agency that shaped the modern world, end quote. With at least credit for discoveries and innovations such as Moderna's COVID 19 vaccination weather satellites, GPS drones, stealth technology, voice interfaces, the personal computer and yes, the Internet. Sorry Al Gore, that's a pretty darn good resume. It has been the heart of US government R&D for 70 years. So that's number one. Second, he signed the National Aeronautics and Space act, the creation of course of NASA. Now beyond the name recognition, the greater importance here is that it consolidated all space related R and D to one agency. Why is this significant? Well much later it was declassified that the Juno rocket, which was a mashup of technology from previous US technology and what they were learning from the V2 rocket from Germany, was ready to launch the first US Satellite Explorer 1. Get this Aaron, as early as 1956, that's a year before Sputnik. But unhealthy interfighting and selfish rivalry between competing rocket programs of the army and the Air Force paralyzed the program and delayed the launch. Now you might imagine as the five star general and supreme commander of the Allied Force, Eisenhower knew a thing or two about alignment and clarity of purpose. I have to imagine that this enraged him. So he forced the military to centralize and transfer all space related activities to NASA's George C. Marshall Space Flight center under its inaugural director Von Braun. Yes again the former Nazi lead scientist. So that's two. Finally, the third major pillar of Eisenhower's response was that Congress passed the National Defense Education Act. It was a four year program that poured billions of dollars into the US education system to deepen engineering curriculum with the goal to produce world class engineers and scientists. So after a first failed attempt to try again only two months after Sputnik, the US finally was able to get the aforementioned Juno rocket off to deploy their own satellite, Explorer 1. But the Sputnik moment beyond policy and regulation also commenced a tit for tat game as each meaning the Soviets and the Americans aimed to be the first to achieve every new space accomplishment. The Soviets surprised the world and beat the Americans once again. This time in sending humans into orbit. On April 12th, 1961, Yuri Gargarin was launched for a 108 minute orbit around the Earth in a craft called Vostic 1. Just like with the runner up with the satellite launch, the Americans had a parallel program to urgently get a human into space. Called man in space soonus, or the acronym Ms. Well, that name Ms. Got a bit awkward after they were bested again and the program was renamed Project Mercury. So, almost a year after the Soviet Union put a human into orbit, astronaut John Glenn became the first American to orbit the Earth. In February of 62, his Mercury Atlas 6 mission completed three orbits in the Friendship 7 spacecraft and splashed down safely in the Atlantic Ocean. So both Gargarin in Moscow and Glenn in New York City were given parades and became national heroes. Now, fast forwarding. As we all know, JFK, upon his election in 1960, would raise the stakes even more by including the exploration of space and explicitly landing on the moon as part of his campaign platform. And all too short, sadly, his legacy. At a Rice University speech in the fall of 1962, which is about a year before he was assassinated, he famously exclaimed, quote, we set sail on this new sea because there is new knowledge to be gained and new rights to be won, and they must be won and used for the progress of all people. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard. End quote. So this height of the space age was driven by a combination of national pride around two competing worldviews. Capitalism versus communism, certainly strategic aerospace technology advancement, and obviously a bit of bravado to boldly go where no man had gone before. And that would continue for the next 30 years, really, until the collapse of the Soviet Union. However, this geopolitical forcing function, as powerful as it was for a time, did not have an incentive or case for economic gain or sustainability. There was no real business model in the lexicon or the framing of these pursuits, and it resulted in massive, enormous budgets. Now, to be fair, there were a couple inklings of commercial opportunity during this period of development in the 60s, mostly on the broadcasting side. The most notable was the first geostationary communication satellite, Syncom 3, which was launched in 1964 and was used to telecast the 1964 Tokyo Summer Olympics. But I would categorize these more as novelty than grand vision at the time. So we need another pause here. Quickly, Aaron, for again, some definitional work. I just mentioned the word geostationary to describe the Syncom satellite. What does that mean? Well, there is a critical distinction that we need to separate here that's going to take on much more relevance in the story as we approach recent history and some of the commercial players like SpaceX and Blue Origin. There are two orbits. To oversimplify this, there are two orbits to keep in mind that offer distinctly different advantages and disadvantages for satellites and other space economy applications. Geostationary Earth orbit or GEO GEO, is much farther away from Earth, 36,000 kilometers away or 22,000 miles. This positioning, which is common for all early satellites and still most broadcasting, think DirecTV, Sirius XM radio offers a continuous view because it's so high and connection of a broad geographic region. And it orbits the Earth at the same rate as Earth's rotation. So in 24 hour periods, that's why they actually appear. These geostationary satellites appear stationary. They are moving at the same rate as us. In contrast, lower Earth orbit or LEO, is only 400 to 1200 kilometers above Earth. Now remember, earlier we learned that the edge of space, the Karman line, is at 100km. So this area, Leo, is in many cases barely in space. But the advantage here is that the latency, the clarity of signals, the high resolution imagery is much crisper and reliable because of course you're significantly closer. However, in order to provide applications through these satellites, you need large clusters or constellations of satellites instead of just one as they rotate the Earth at that height at much higher speeds. So these clusters of LEO satellites can get around the Earth in 90 minutes or less. Leo constellations are the mechanisms for which high speed Internet and high resolution mapping occurs. LEO is where Starlink's satellites operate the Hubble Telescope and where the International Space Station lives. Now interestingly, GPS services and data that sell to our Apple Maps or Google Maps or Waze operate somewhere in between, sometimes called Middle Earth orbit or meo. But there you have it, a quick overview of distances from Earth and the various orbits. So let's return to the story. So Kennedy's grand vision of walking on the moon manifests itself with Neil Armstrong's One Giant Leap for Mankind in July of 1969. And the United States Apollo Lunar Program would have 17 missions between 68 and 72, with six of them landing humans on the moon surface. And by the way, America is still. This shocked me. America is still the only country to this date to land humans on the lunar surface. And the human race hasn't been back to deep space for 50 years. Let that just percolate as we'll return to that in a few minutes. Now, you've probably sensed that the tide had turned in the space race significantly over the last decade. As America, thanks to Eisenhower's decrees and Kennedy's vision casting, the US had flexed his muscles. And it was clear that the Soviets were now a distant second by the mid-70s. In fact, there's some evidence that Khrushchev and Kennedy were moving towards detente and space cooperation before Kennedy's assassination. Khrushchev famously has been reported to have wept over Kennedy's death as despite the scary stare down over Cuba, they had built a growing trust and appreciation for each other. Well, needless to say, Khrushchev did not feel the same way about LBJ and therefore the space race and the underlying forcing function continued unabated. But in the mid-70s, the competition felt more like a fourth quarter blowout than a rivalry any longer. And many suggest that the enormous capex required to maintain leadership in rocket technology was beginning to cripple the Soviet treasury and stress the system. In fact, many consider the closing act of the Cold War era of the space race to be the deeply symbolic rendezvous and docking of a US and a Soviet astronaut crew in 1975. This came on the heels of a thawing of tensions negotiated a few years earlier between Nixon and Khrushchev. And this handshake and docking telecast, the two crews shaking hands, exchanging gifts, visiting each other's ships. So with the Soviets largely waving the white flag on what had been almost 20 years of, as I said earlier, one upsmanship, NASA's sense of urgency diminished and their goals shifted. Gone were pressing the frontiers of space exploration and the priority shifted to low Earth orbit launching of satellites, as I said, work on the Hubble telescope and as we'll get to in a minute, both the assembly, servicing and transportation to and from the International Space Station. This was transitioning to a shipping and transportation business and development at NASA. Obviously under these new priorities evolved or maybe you could say devolved from deep spacecraft capsules and landing modules to payload and cargo optimization. And of course, all of this transformation resulted in NASA with manufacturing contracts with Rockwell, Northrop, Grumman and others setting out to design the first reusable lower Earth orbit, what they called, quote, space truck, to serve as the vehicle for space logistics. And this of course, was the Space shuttle program. Between the five shuttles that were built in the 30 year program until their retirement in 2011, 135 missions of the space shuttle were flown. Now, I mentioned the International Space Station a moment ago, which was a major part, perhaps the primary role of the space station. Think of the ISS as a floating orbiting scientific laboratory. It is a joint venture and collaboration between five major global space agencies, NASA of course, and its equivalents in Russia, Europe, Japan and Canada. And it has been continuously inhabited for 25 years. It took nearly 10 years to design and nearly 36 space shuttle trips starting in 1998 to bring all the pieces up and parts to assemble this monster in lower Earth orbit. By the way, this is only about 400 km from Earth, barely even in Leo. Now, while the space shuttle program is serving as the primary expression of space activity for NASA through this period, there were seedlings of commercial attempts at creating viable business models. And yet most of them were dramatic fairytale failures. In 1980, perhaps most importantly, Aryan Space was a joint venture between Airbus and a French aerospace company called Safran. Arianespace was the first commercial launch provider. This is really important in the world and an influence on many of the contemporary commercial providers like SpaceX. While much more of a marginal player now, as recently as 2016, just before SpaceX really began solidifying their contracts for launch, arianespace still controlled 60% of the launch market. I think it's fair to say that they were probably the first true commercial space business. But shifting to the more fabled stories of excess and irrational exuberance, the fun ones, the rise of the Internet and.commania led to several attempts at building satellite communication companies that would provide global coverage. Teledesic was founded in the 90s and backed by Bill Gates, McCall Cellular and the Saudi prince with the intent to build a broadband satellite Internet constellation. Sadly, not one satellite was ever launched and they were shut down in 2002. Globalstar was another high profile attempt at satellite phone service given its participants. It's a joint venture between Laurel, which is defunct defense contractor, and Qualcomm. They received funding from Alcatel, Airtouch, Deutsche Aerospace, Hyundai and Vodafone. These were big names with grand plans or perhaps delusions of grandeur because Global Star declared bankruptcy also in 2002. But the hall of Fame winner Aaron in this period is the story of Iridium. Just a quick search on the Iridium lore will result in case studies at Harvard, Dartmouth, Thunderbird, Stern and many others. This is taught everywhere in business school. Largely funded by Motorola, Iridium took its name because the metals. Iridium's atomic number is 77, which is the number of satellites originally planned for orbit. For this mobile phone communication system. The infrastructure was almost a decade behind and several billion over budget and became one of the largest bankruptcies in history and truly one of the iconic symbols of the dot com bubble. By the way, you can still view some of those early brick sized phone devices in the Smithsonian and much more amusingly and this needs to be a favorite on your browser. The Museum of Failure, which is an awesome site by the way, and I got lost deep in that site. So as with most Web 2.0 services, broadband fiber, online food delivery and many other.com chapter bus mobile phone networks were not an inherently bad business model or Insight, Teledesic, Globalstar, Iridium. I would say we're just about 20 years too early. The technology, and particularly rocket launch cost structure at the time simply prohibited economic opportunity. But the lessons and the models they displayed, despite the caricature, would set the stage for other players, namely Starlink, much later. Okay, the final piece of our background in history here that really created the environment for the rise of the commercial space economy that I've started to tease were two interwoven threads. And these patterns, progressions and sadly tragedies worked together to cultivate a new environment where privately funded space startups could raise capital, sustain themselves economically and ultimately thrive. It was the intersection of significant changes of public sentiment and regulatory support that would lead to an astounding new phase of innovation. So the first of these two was the progression of bipartisan regulation and legislation designed to encourage and support commercial space activities. In 1984, the Reagan administration approved the Commercial Space Launch act that provided legal indemnification for commercial launches and empowered the Department of Transportation to oversee commercial launches and relationships. The legislation was designed to foster a robust commercial space industry by providing finally a regulatory framework for private companies to conduct space launch services and build tighter coordination between public and private entities. In 1998, that same act was amended with an aim to explicitly promote the development and give preference to the commercial space industry. That emphasis was mine. It required NASA to study and consider commercial opportunities to service the International Space Station and other federal agencies to transition to using commercial space transportation alternatives. So compared to the 84 original bill, this was much more of a pro growth statement to facilitate private sector leadership. I think it's even fair to say, instead of government funded activity in these advanced space technologies. And finally, in 2004, the Space act was further adapted to add commercial human spaceflight activity. And George W. Bush began formally advocating at that time for the retirement of the space shuttle program and for full dependence on commercial players. So that's the regulatory trajectory that smacked a bit of government capitulation due to the bloated cost and evaporated geopolitical motivations, but also, I think a realization that the private sector could probably do this a whole lot better. But there was a second threat here, a much more morbid and tragic one that also played a major role in the public Psyche. And that was the disasters and losses of two space shuttles. 1986, of course, the Challenger explodes during launch horrifically on live national TV, killing all seven crew members. And then in 2003, a repeat, the Columbia disintegrates upon re entry, also killing the seven astronauts. You remember the 2003 one, Aaron? By chance I do.
- [31:25]
C
That was a big moment.
- [31:26]
A
Everyone has that list of historical events, that list that you wish you could erase from your memories. For me, the Challenger was one of those visceral lifetime moments that is seared in my consciousness along with Reagan getting shot. 9 11, the invasion of Iraq was in the middle of a high school basketball game, Princess Diana's death during my first internship, and more recently of course, the day Covid shut down the world for the Challenger. I was in the sixth grade and all of our classes were literally. All of the classes in the whole elementary school were literally sitting in the auditorium watching this together. You might know that it was the first ever teacher to be on that shuttle launch, Christa McAuliffe. So there were classrooms and children across the country that I think were overly interested in particular with this shuttle launch because a teacher was on there and we were all tuning in around the country. I remember my math teacher, Mrs. Kavitsky, sobbing, having to leave the room. It was just a really sobering, sad day. The American public and to some extent the world were left stunned. And it led to widespread public mourning. The shuttle program was temporarily halted. But more importantly to our story arc here is that these disasters had a profound effect on the public and political appetite for further space exploration. Reagan canceled his State of the Union scheduled for that evening and instead addressed the nation from the Oval Office. There was an outcry from the public and Congress for much more stringent safety and regulatory oversight of launches. Risk taking advancement gave way to an era of conservatism. All of this is to say is that the combination of all these factors was rapidly reducing the forcing function that had driven the space economy for decades. With the removal of the Soviet competition, the transition away from deep space exploration to lower orbit somewhat pedestrian transportation activities. And by the way, those transportation activities were increasingly by commercial players that were largely out of the public eye. And also the relative souring towards NASA based on those explosions, motivation and incentive had eroded. The romance of the stereotypical 60s and 70s child desiring to be an astronaut was largely gone. Not only that, the perception of economic opportunity for space activity, as we talked about earlier, had become caricatured in failures like Iridium. So was Further space activity moving to just mere mythology, Costs continued to balloon as there was no incentive to innovate or disrupt. In fact, all of these contracts from NASA rockets, boosters, manned shuttles, capsules were all awarded on what's called a cost plus basis, meaning these contractors, mostly aerospace companies, had zero incentive to meet deadlines or to be fiscally responsive. Their margin was secure and got bigger, frankly, the more the cost overruns occurred. Space programs budgets peaked at 1% of GDP and almost 5% of the federal budget. Neil Degrasse Tyson, the author and scientist, has this famous tweet in 2011. I don't know if you saw it, Aaron, but when the shuttle was retired, that captures this confluence of events and feelings perfectly. He said, quote, or he tweeted rather quote. Apollo in 1969, shuttle in 1981. Nothing in 2011. Our space program would look awesome to anyone living backwards through time. The space shuttle was more expensive than the Saturn rocket launches of the Apollo missions. We hadn't sent anyone past lower Earth orbit since the Nixon administration. The space program, as Tyson said, was going backwards. Discovery in progress had atrophied. It was an industry, if you can even call it an industry in this chapter of history that sorely needed disruption, reinvigoration, perhaps even rebirth. You needed a champion that could resurrect a new forcing function as the old tailwinds and the marvel of Americans had completely stagnated on space. And into that void steps a young South African tech entrepreneur. That, of course, would be Elon Musk. Quick commercial break. Now for you listeners, we need to remove any immediate political, social or moral feelings that you have towards Elon. If necessary, try to set aside the much more recent Doge Elon or even Twitter Elon. Because regardless of what we or you personally think of the man, there's no denying by some combination of brilliance, passion and unrelenting determination, Elon and eventually Space X would take the matter into their own hands and provide the next and much needed forcing function. So in late 2000, 25 years ago, the rest of the PayPal mafia, as they're called, this among them Peter Thiel, Reid Hoffman and others, push Elon out of the founding leadership group and the CEO seat of the digital payment company, much to Elon's dismay. Now, if you know anything about Musk, he is constantly seeking new challenges. Let's just say this guy doesn't vacation well, he doesn't like free time. And this is pre Tesla just to ground your timeline bearings so there wouldn't be a Liquidity Vent on PayPal for a couple more years when they IPO'd. But Elon did have some resources. About 22 million in fresh cash through the sale of his first startup, Zip2, that he sold to Compaq in 1999 that he needed to put to work. Now. Musk, like most of us in his generation, as Aaron and I joked in the introduction, grew up with Star Wars, Star Trek, Alien Space Odyssey, A Hitchhiker's Guide to the Galaxy, space comic books in particular to Musk. And so the adventure in him, the astronaut worship with him, were still strong. By the way, Aaron, do you even know why he called his first SpaceX rocket the Falcon?
- [36:37]
C
I don't.
- [36:37]
A
Can you guess?
- [36:39]
C
Did it have something to do with one of the mcu? I don't know. I really don't know.
- [36:43]
A
That would be after Han's Millennium Falcon.
- [36:46]
C
Mm, that's good. Does he have a Star Trek name in there as well? You got to keep it balanced, you know.
- [36:51]
A
Well, Starship will get two. I think that's probably inspired by your favorite. Not any else's favorites, but. So Elon talked with great reverence at the time about the Apollo accomplishments, but lamented the chronic malaise since, in other words, we went to the moon and that's it. Did we really peak with those boot prints on the lunar service? Five decades ago, Buzz Aldrin of Apollo 11 captured this disillusionment with the death of the space age when he said in 2012, quote, you promised me Mars colonies, instead I got Facebook, end quote. And so Musk, channeling Aldrin, begun to be fascinated with creating a multi planetary human civilization, particularly on Mars. And by the way, this whole story is taken from Walter Isaacson's biography of Musk. That is truly a must read. We've linked in the show notes, but I would encourage all of you to read it. Elon says at the time, quote, the United States is literally a distillation of the human spirit of exploration. This is a land of adventurers. That spirit needs to be rekindled in America. And the best way to do that would be to embark on a mission to colonize Mars. End quote. Now, let's be honest. Whether that ultimate goal was ever realized or driven by some portion of God complex that Elon has is almost irrelevant as the forcing function of that higher singular focus, that big hairy, audacious goal, which you might say is the bhag of all bhags to get to Mars. Unbelievable to most, massively seductive and inspiring to others. It plays a Huge role in regenerating the momentum. This higher purpose of Mars inhabitants, once formalized in SpaceX, would allow Elon to attract the most extraordinary engineering talent in the world, acutely align around a destination and a goal, whether fantasy or not, and relentlessly drive cost cutting and discovery to get there. Tren Griffin, who is a senior Microsoft executive, recently said on a business breakdowns podcast, that was fantastic. He described this confluence of breakthroughs that Elon ignited as a quote, lollapalooza of opportunity. He was in the right place at the right time with the right dream. Stagnation had ended and the forcing function, the new forcing function in the commercial chapter of the Space Economy was born. And Isaacson tells this amazing story of how Musk, first, through some mutual scientific acquaintances, is able to meet with Russians in Moscow in 2002 that are running a black market on decommissioned Soviet rockets. You literally cannot make this up. He went there twice. Musk feels like the Russians are trying to gouge him. Remember, he only has 22 million and they're asking nearly that whole amount for two older rockets. So he declines. He brusquely ends the meeting. But then on the flight home, he puts together a spec sheet, an inventory of all the parts of a rocket and their costs. And he's basically learns this self teaches himself by just thumbing through old Russian rocket manuals and through what later famously would be known as Elon's Idiot index, he calculates the difference between the cost of a finished product and adding up the cost of all the material component parts. This was the first principles and hyper pragmatism playbook that Elon would employ countless times at both SpaceX and of course Tesla. In the end, his spreadsheet suggested they could build a rocket for 1/50 the cost of what the Russians were charging. This dual epiphany of the very steep cost curve that Elon could surf and the software build principle of move fast and break things he learned at his startups convinced him this audacious plan might just work. He had found the secret sauce to convert this conservative old model of Washington controlled bureaucracy to a fail fast continuous feedback loop common on Sandhill Road. And so on that return trip from Moscow, SpaceX was devised. So before I finish off this final recent chapter, SpaceX Blue Origin, the entrance of China and India over the last decade, I want to quickly hand to Aaron here to break down the cost curve mechanics of SpaceX. This is the critical ingredient in moving these activities from novelty to business. In fact, this step function decrease in Cost structure not only allows for more self sustaining current LEO activities that were these huge cost centers as we talked about for the government, but more excitingly, it allows us to begin imagining completely new space economy industries or even moving existing ground economies off earth into space. And if that's true, it fundamentally changes the trajectory of our investment thesis. So Aaron, help us break down what SpaceX figured out on the cost side.
- [41:07]
C
Yeah, absolutely. And it's so funny to talk through some of those examples in the 90s of being 1, 2, 3 decades early relative to what we see today. Because I think that's a common theme that we see in big tech and consumer. You hear the stories around Amazon and so all of this snowballs into where we are today. John, by the way, love the way you open this. I never know what to expect on the history. You know, Genghis Khan was one and Orson Welles is another, so these things would never have anything in common. But that's what capital cancer brings to the industry. So thanks for that. So before I get into some of the numbers, I think some additional GEO and LEO framing is important here. So John walked through some of those different definitions, but it does influence a bit of the cost curve conversation that we have here. The LEO area is where we've seen a lot of the cost reductions over the past two decades. In particular, GEOs have also seen some cost reductions, but not to the extent that we see in the LEO space. As John mentioned, there are fewer GEOs that are out there, but they're large, heavy, complex and you're launching these very high into the sky. So the on ground infrastructure is less complex, but actually getting it up in the air is very complex and requires a lot of engineering and fuel. LEOs on the opposite end of the spectrum are different. They're smaller, they're cheaper, mass produced, and you need to make a lot of them to be successful. And oftentimes you need backups that you can switch online if one or two of them goes down. So a bit of a different setup, but I think influences what we've seen on the cost curve side of things. So let me start with the leos. Cause that's where a lot of the innovation has taken place. So when you zoom out and you look at all the different phases and points in history that John walked through, the cost curve decline, while some might say it's astronomical and the way to measure this is to look at the cost in dollars per kilogram, because it's hard to compare one rocket versus another, these cost figures are all over the place. But trying to standardize this like a PE ratio is to look at the cost per weight. There's a lot of great data sets that are out there and visuals that show this cost curve going down starting in 1958 with the Vanguard project at a million dollars per kilogram. So that is the peak of what we've seen. But 10 years later, so 1969 with the Saturn V that was used to send the Apollo 11 team to the moon, dropped from a million dollars per kilogram to, to 10,000. So that's a very, very large decline in just a short amount of time. But after that, the cost really stagnates and it actually goes the other way for a little bit. In some instances, you're looking around 25, sometimes 50,000 per kilogram. So we creep up over the subsequent three decades from a cost perspective, and there's not a lot of activity or downward push that comes from that. At the end of this period, John mentioned the Iridium launch, which was probably the big moment where people are throwing their hands up and saying, okay, something's cut. Give Elon relatively quickly after, moves into some of the innovation with SpaceX in the early 2000s. But I think Iridium is the focal point of this cost bloat that we've seen or we saw over that subsequent three decade period from the late 60s into the late 90s. So SpaceX was founded with this vision of going to Mars, but it really wasn't until the 2010s, so maybe 10, 15 years later that we see this cost curve go down even further. And it was the Falcons Series, the 1, the 9, and the heavy across the 2010s that continue to put downward pressure on costs, ending with that Falcon Heavy, which estimated cost to be around $1,600 per kilogram. So going from 10,000 in the late 60s to about a 90% reduction here in the 2010s. Now, a significant portion of this cost decline was due to the increasing reusability of the components of these rockets. Early rockets that were sent into space. Most of those materials were lost, exploded, launched back into the atmosphere and burned up. So a lot of the innovation that was taking place within the organization of SpaceX was figuring out how can we reuse most of this material and instead of rebuild every time we want to launch, we refurbish. So again, rather than losing all your materials, you can reuse them and improve upon them when you send them back out. And as an example, those Falcon rockets have been sent up and back into Space hundreds of times. The Falcon 9, I think the stat that I saw was about 450. But that $1,600 per kilogram is not the end game for both SpaceX and now Blue Origin and other players that are trying to push the cost curve down. And in fact the goal now is to push things down below $100 per kg or even in some cases even close to $10 per kg. So a lot of this is the efficiency of capex, but huge portion of this is further leaning into that reusability technology that's so important, particularly for SpaceX. And a big test case for this will be SpaceX forthcoming Starship launch in 2026. This is the largest rocket that they made and the goal is for it to be completely reusable. And it's also meant to launch the largest payload, a hundred tons at a fraction of the cost of what it was just two decades ago. Now on the GEO front, it's a bit of a different story. Costs have fallen, but not to the degree that we've seen with Leo. Some of this is because GEOs have gotten bigger and therefore heavier and more complex. And then the other element of this is there just aren't that many launches that are focused on getting to the outer atmosphere. A lot of attention and capital has moved into the LEO space. And I'm sure John will talk a little bit more about some of those competitive forces and new entrants as SpaceX has pushed that cost down. But because the capital and the efforts have focused on the LEO side, you've seen a much more aggressive push down in those costs. Now that is to say that we're seeing some GEO competitors pop up here and there. There has been a little bit more of a move into the MEOS that John mentioned, that midpoint between the low and the GEO segment. So that will also have an impact on costs. But I think maybe I'll end here. What is shocking about all of this is that GEO shouldn't be all that much more expensive the further you move away from Earth. The biggest challenge is getting the rocket off the ground. But as you move further away from Earth, there's less gravity, there's less resistance as you get further outside of the atmosphere, so you don't have gravity working against you. So with Mars being an objective of SpaceX and Elon Musk, once you get out of the gravitational pool, there is additional cost, but it's not an exponential curve like you might expect. So I expect some more competition to occur here over the long term as this becomes more viable and the technology improves and the costs go down. But for the most part, it's mostly been on the LEO side instead of the GEO side.
- [47:56]
A
Aaron, that's really interesting about the disproportional amount of energy required to get off the ground. Getting this cargo out of the atmosphere is the biggest headwind to innovation is gravity is this super expensive element, particularly in that first phase of exiting into space. But if the cost curve of launch continues to trend downwards even more, I push Luke a little bit further on what that would mean for industries that are currently on Earth, perhaps having the opportunity to move off Earth.
- [48:29]
B
We talked a little bit about the International Space Station earlier, and I think that might be quite a useful guide to where we could get if things became cheaper. The International Space Station is probably the most expensive piece of real estate anywhere. $150 billion project. It cost around about $20 billion just to launch it. So the notion of being able to have several space stations in orbit is very cost prohibitive. Space shuttle took I think 40 flights over a decade to install it. With the starship rocket that SpaceX is developing. If you were to do a comparison between the volume and the mass of the space station and how much of that would fit on Starship, you're probably only looking about five launches of Starship, which if it's fully reusable and can launch every day, it's less than a week to launch, rather than a decade, and potentially being able to happen at 99.5 or lower percent of the cost that it took to install the International Space Station. So another way to think about it is if we could launch 200 international space stations for the same price today, how much real estate does that represent? How much equipment might we be able to put into orbit? So you look at the space station, the things that we should have been doing has predominantly been R and D for pharmaceuticals or for new materials development, or the human condition, etc. Or energy or communications or observations, you know, science type stuff. If we were able to do that at a much higher scale and cheaper, would we actually do manufacturing rather than discovery in space instead? So taking the principles of protein crystallization, which we've been experimenting with on the space station, and turning that rather than just being a proof of concept, but to something that can produce billions of dollars worth of pharmaceuticals every year and have them regularly delivered back to Earth, you can make these things more effectively or to have superior qualities in a microgravity environment, you can go one by one and you can get more and more sci fi as you go between the kinds of things which should move up. I think that probably are various stages along this cost curve as we keep coming down with launch, that it makes more and more sense to do more and more things. So it's not going to be this sudden switch of everything makes sense to nothing makes sense. They're still looking for those hero products at each stage on the cost curve that unlock. But I'd say pharmaceuticals is probably quite a careful how I say this, but quite a likely one. If you look at a lot of the commercial space station projects which are being discussed at the moment, a lot of pharmaceutical companies are vaguely involved with what's going on there. And it gives you a bit of a hint as to where people might be seeing the value in them.
- [50:51]
A
So you could literally start to visualize George Jetson, who we used to laugh at commuting up to a LEO based factory each morning is kind of what you're referring to.
- [51:03]
B
Yeah, and I mean this sounds daft to talk about in that context, but this could be the reality within the next 10 years. If you look at what SpaceX was doing a decade ago, we didn't really have reusable rockets back then. There was a handful of launches, Starlink didn't exist. And now all of a sudden we're talking about these millions and millions of subscribers and being able to provide an Internet connection anywhere on Earth. People would have said that's science fiction, that's not going to happen. But when the cost curve conspires with capability, these are the things that get unlocked on much shorter timeframes than people suggest. I think one of the Musk quotes is turning the impossible into the merely late. They are very ambitious in terms of the things which they do. And I think there is definitely uncertainty around some of these timelines, but there is a degree of inevit.
- [51:50]
C
So John, listening to Luke just reminds me of how incredible the cost decline has been in terms of magnitude and speed. I almost have to double check some of these numbers and dates. It was only the early 2010s when this really accelerated. It's pretty crazy.
- [52:04]
A
Yeah. I mean it's just an extraordinary decline in costs. A couple of their footnotes that I found in my research. There was a interesting 2011 NASA Commission report that attempted to forecast what it would have cost NASA to build the Falcon 9 using their cost plus model and their culture and processes. And the Result was about 4 billion US. It cost SpaceX 400 million. It's about a tenth of the price. So it's amazing, as we've been stating, that when you are liberated and unconstrained by the industry's legacy tools, assets or risk averse philosophies, what can happen then? Maybe moving back to your pe, your apples to apples cost per kilogram. So let's think about starship a little bit, which we've alluded to in the past. This is meant to be 10 million per launch at scale originally and there's even been hints this might actually drop to even 2 million. Now if you do the calculation, getting down to 2 million, which could be a little bit of elon exaggeration, he has a tendency to do that. But that could be $10 per kilogram. Now just to put that in perspective, that's 100 times cheaper than Falcon 9. 99% cheaper than the space shuttle. $10 per kilogram is effectively what we pay FedEx or the United States Postal Service or Amazon prime to get our stuff here. Well, I guess Amazon prime is free, but Amazon to get our stuff, our packages to our doorstep. Can you imagine the potential applications and competition that that opens up? And I would not be surprised therefore that Jeff Bezos understands that too. I don't think that's his only motivation, but you better believe that he understands that this could change how packages, goods and maybe even people are moved around in the future.
- [53:45]
C
Exactly. The use case for Amazon is pretty obvious, but the implications for society more broadly are also really interesting to think about. We actually asked Luke again to imagine a $10 per kg world for a moment and he had a lot of really interesting use cases too. Let's listen to what he had to say here.
- [54:04]
B
I think it's something that again, if these cost curves and these technologies continue to conspire in the way in which they have been, it's not unreasonable to expect that within a 10 year potential time frame we could achieve something like that. I mean, it'd be fantastic if we do. We're not basing our investment hypothesis on that particular cost point. But in the interest of sort of exploring what does that mean, what kind of crazy things might be possible? Well, there's a $20 billion or more market in premium next day delivery globally. If you're able to launch a starship for that kind of cost, you can get anywhere in the world in 40 minutes. Now the part which we don't tend to mention in that is that the acceleration will probably be quite severe and it'll be awfully loud for wherever you're taking off from and landing. So you probably won't be doing that to the middle of a city. But if there's areas out at sea or slightly more remote places that you could then use as a new version of a harbour for international freight and then ship it into a logistics hub or something like that. Or if you need to do rapid response for crisis situations, be it humanitarian or military, one of the big problems is getting stuff where it needs to go within a decent amount of time. So the rapid deployability of vaccines, medical hardware, disaster recovery stuff for earthquakes, et cetera. But equally, if you need to deploy special forces or tanks or power generation capabilities to remote bases, et cetera, you can envisage these things being palletized and put on a high performance rocket like that. Maybe we will turn that into can we get to Australia within the space of an hour? And is that going to open up some crazy holiday market both on Earth or in orbit or to the moon, et cetera. If we get to that $10 per kilo type cost, I think it's likely we will have got to Mars already, or we will be on the moon already with a base or with some settlement by that point. Mars is ultimately a function of how cost effectively we can get cargo into low Earth orbit. Once we're in low Earth orbit, it's from an energy point of view, much less demanding to go anywhere else in the solar system. You know, the big problem to climb out of is gravity on Earth. And so if we get to that level of cost, it means that we've got a level of reusability in starship and a level of performance in starship that it makes a lot of this extra solar system exploration possible. So if we are talking about those things, it's what are the implications that's already happened to get to that point, which I find quite interesting. Again, as I've said elsewhere, I don't think exploration is this business scuttling cost adventure that it might sound initially. If we are getting to Mars, it means that we're able to get thousands and thousands of tons of cargo into orbit, which means better broadband services, better Earth observation. It means probably data centers in space connected to Starlink or other satellites, it means factories in orbit, et cetera, all of this. And then Mars is a bit of a rounding error on that in that we just send one ship further out into the solar system, but a thousand of them are orbiting the planet inst.
- [56:52]
A
So what I'm hearing, Aaron, is Shanghai for breakfast, Cape Town for lunch, and you could be home for dinner.
- [56:57]
C
Yeah, we could do a capital Decanted episode in space.
- [57:01]
A
We could actually travel to China and back before we finished a capital decanted episode. This is maybe another way to put it. All right, so let's bang through the rest. We've got one more decade. But this last decade, meaning 2025 backwards, has been fast and furious. So I do just need to walk you through before we get to Aaron sizing and segmenting the space economy market today and perhaps the TAM in the future. Let me finish this near history in a bit of a speed round timeline. So, 2008, on its fourth attempt, Falcon 1 becomes the first commercially developed rocket to reach orbit. Also in 2008, very interestingly, India dramatically enters the space discussion by launching a lunar orbiter and discovering water on the moon. 2009, Falcon 9 launches. And by the way, the number is Simply the number Falcon 1 versus Falcon 9, the number of what they call Merlin engines on the bottom of the rocket. So same rocket, nine engines instead of one. 2011, the Wolf Amendment prohibits us from collaborating with China on space exploration, igniting the state sponsored program in Beijing. 2012, SpaceX's Dragon becomes the first private spacecraft to dock at the ISS. 2013, China completes the first lunar rover landing on moon surface since 1976. 2015, SpaceX has their first successful landing of the Falcon 9 booster. I think you mentioned this kicking off huge opportunity and more cost savings in this idea of reuse. 2019, ispace becomes the first private Chinese company to reach orbit. 2020, first crewed SpaceX flight bringing NASA astronauts to ISS. By the way, this ends a complete reliance on the Russians in the previous 10 years since the retirement of the space shuttle to get astronauts to the iss, we were paying them huge amounts of money for each launch of astronauts up to the ISS in that intervening decade. 2021, with Jeff Bezos aboard the Blue Origin successfully orbits their New Shepard craft. 2023, China completes their first fully functional space station. And also India becomes the first nation to successfully land on the lunar south pole. And then finally 2023, SpaceX's Starship has its first test flight with operational aimed for 2026 for that mega ship. Now, just to put the starship in perspective, Aaron, you alluded to its size a moment ago, but my understanding this is basically to get some bearings on this effectively twice as wide and twice as tall, the cargo area, the payload area as Falcon 9. So exponentially, if you do the math, greater payload opportunity. So for example, I heard that a Falcon 9 you could carry 60 Starlink satellites in it. Starship could have hundreds of those satellites or to your earlier point, much bigger geo satellites. Right. So in the meantime, startup competition from companies like Electron rocket lab, ula, which is a Lockheed and Boeing JV start to form. And finally, the cherry on top of this next year I mentioned it's been 50 years at the time of this recording in 2026, the Artemis program, the first crewed mission to the moon since 1972. So exciting. Airbus, Lockheed, SpaceX, Blue Origin, they are all involved in different aspects of this program. Unlike the Apollo program where the astronauts had this two hour timer on the surface and bounced around for a few minutes with great sound bites, my understanding is we're going to be able to send a skyscraper's worth of cargo and living space material, which is just mind boggling. So completely different goals and opportunity with this trip.
- [60:33]
C
So John, when we were talking to Emma about this whole collective enthusiasm for space, she actually framed it as more of a cooperative initiative than a competitive one. And really SpaceX being at the center of it, I don't know how long that'll last, but let's listen to her explain that a little bit further.
- [60:52]
D
I don't think that space as a category would be investable today if it wasn't for SpaceX. I think SpaceX has created, in my view, the talent pool. I don't think that we would have the same talent pool that we have today if it wasn't for them. And it also created the infrastructure for a lot of the other companies to be able to launch and build on top. I do think that most of the companies that we have actually seen emerging see SpaceX as the US for orbit, so they don't try and go and compete directly with SpaceX. But most of the conversation that I've been having with private companies is we've mapped where SpaceX was playing and we are building around it to create a more fulsome landscape and allow for more use cases. I think when we think just a little bit about what makes a company interesting or investable from our side, especially for us, we do late stage when you're raising at an evaluation where we would be investing, it's hard to invest on the back of an idea. So I think one of the first questions that we often been asking team is have you flown this space? What have you sent to space? Or have you done any form of mission or testing? And I don't think that any of those companies would be able to as easily say yes if it wasn't for leveraging SpaceX for sending some of their mission out there. So for example, the company Firefly that recently went public, I attended their first mission to the moon. So they were sending their moon launcher in January in the sky and it was done out of a SpaceX mission. And then if we are looking into most of the other companies out there, we were talking a little bit earlier about ISS on the new station, while Axiom is partnering with SpaceX on something like that. So I think competition, yes, but there's also a lot of collaboration and SpaceX has overall, in my view, really being an enabler and space as a service stack on top of which most of the companies have been able to build.
- [63:20]
A
So Aaron, I think we'll talk about this a little bit later in the episode too, but I'll be curious to see to Emma's point, how long that cooperation lasts among the different companies in the ecosystem. Competitive forces are rising both at the government level and certainly the corporate level continues. And so again, let's cover that a little bit later in more depth.
- [63:39]
C
Well, John, I actually think you'll remember she brought this up too. The industry more broadly is looking for alternative options out there. So let's listen to that response too.
- [63:50]
D
I do think that as we have seen over the last probably year, of course people are also thinking about, oh, if SpaceX has so much Runway and control over whatever is happening in space, does it mean that we should have some alternative option when it comes to launch and everything? So there is a broader economy that's being created. But I do think that overall most companies have tremendous amount of respect for what SpaceX has been building and most of them are trying to build around that ecosystem versus trying to compete with the company.
- [64:35]
A
So that is the recent history, the completion of all the history. I am going to pass it back to you, Aaron, to help us size up this current market, help us think through the growth opportunities moving forward.
- [64:45]
C
So let's talk about the space economy, which is a very broad category of the investment universe, if you will. There's a few different estimates of how big the space economy really is. So I've done a bit of math to try to separate the components as best as I can. At the highest level, there's an estimate from the Space foundation that reported that they estimate the space economy in total to be around US$615 billion. And there's a forecast depending on where you look and John mentioned 1 trillion. I've seen as much as 2 trillion. So it depends on what you categorize in this Universe. But directionally you can see doubling over the next five to 15 years. So 1 trillion by 2030, 2 trillion by 2040, and so on. And a lot of this growth is expected to come from the private sector as investment continues to grow. And again, that reusable launch technology improves. I think that'll be a game changer for a lot of this. So of that 615 billion, the Satellite Industry association estimates that about 300 billion of that is in the private sector satellite and launch industry today. So roughly half just focused on satellites. And when I think of this investment stack, if you will, there's a very strong foundation followed by five more investable categories. And in fact, that very foundation is not an investment opportunity at all. It's more around policies and rules and standards that enable the rest of the stack. And that's really important, especially as we start to get into public private partnerships and agreements between nations. Having that foundation is important for revenue contribution in each of these different components. So I'll give you a bit of a dollar amount within each of these. Again, this is not an exact science pun intended, but it does give you a bit of a pie chart within this 300 billion or so. So let's walk through the five. First is launch and logistics. So this is how you get access to space. It includes launch technology, refueling rockets, tugs and so on. And that's around US$10 billion in revenue. Second is infrastructure in orbit. So this is satellite manufacturing stations, relays, and this is around 20 billion or so. Then you start getting into some of the bigger categories. So infrastructure on the ground, this is orbit stations, cloud edge processing and so on. And that's around 155 billion in revenue. And then you have end user. So agriculture, finance, national security, logistics, around 105 billion estimated, and then the smaller portion. But one of the faster growing portions is data and analytics. So AI, geospatial services and so on. Roughly around 4 billion in revenue. So as you move up this stack, the more private sector is required, typically the more private capital is required because of the long time horizon associated with payback and actually generating revenue for a lot of these initiatives. But some of the growth areas here are places where the cost curve has come down and the cost curve is enabling some of these growth areas. So it's a bit of a circular conversation, especially around launches. So what about the other half? That's the 300 billion focus on satellite. It's really simple if you broadly categorize this, around half of the other 300 billion is government spending. So this is civil space agencies, government initiatives that are supporting space exploration and so on. And then the second part is non satellite commercial spending. So logistics mapping, location based services and then of course human space tourism and operations representing the other half.
- [68:26]
A
Well, thanks Aaron. I think it's a really helpful categorization. But when we spoke with Emma at T row, she had a slightly different way of looking at the universe, which we also really like. So let's listen to that now.
- [68:39]
D
I think the universe has been divided between space for Earth and space for space. I think when we're looking into space for Earth, I think this is more immediate, accessible opportunity. And when we looked into what have been some of the biggest opportunities, I think SpaceX really with their launches, business has been a big catalyst for other companies to emerge. What we've seen on the private side is a whole universe of companies that have been looking into small and medium launches. So a complement to SpaceX or competition to SpaceX in some ways and capacity. And I think we've seen most recently companies going public. We've seen Rocket Labs, we've seen Firefly that recently went public as well. I think Firefly has been now at about their seventh launch they've been looking at in space. And I think the original universe of opportunity had a lot of companies that were tackling that problem. So what is the alternative to SpaceX and then how can we get there? So I think that's been one category. There's a couple of folks that are doing things that are interesting. Stokespace is one of them that you've probably heard about and that is looking really into reusability as a differentiator. The other opportunities that we've seen emerging a little bit more on the private markets has been looking into the retirement of the iss. That creates a big opportunity for someone to step in from the private market. We have a couple of companies in that segment. I think Axiom is one that has been really laser focused on this opportunity. So that is something else that I think is interesting. Couple of other space that have been seeing a lot more activity, satellite buses. We have couple of companies that are focusing on different sizes of satellite buses. We've seen for example our friends at Founders Fund backing this company called Endurosat that is a European player that is doing more on the small buses side. We have a couple of folks, Xspace X that have been building this company called K2 Space that has been looking into slightly larger vehicles. So that is also a category that is up for grab. The other thing that's Become also pretty interesting is the opportunity in defense at the Farm. We are an investor in next gen prime, like Anduril for example, and the company has been quite active in terms of looking for partnership for national security missions. There's one company that's pretty interesting that has been really targeting the segment that is called Impulse Space. I was founded by Tom Wheeler, who was one of the Pioneer at SpaceX and I think it creates big opportunity for these partnership to look into the defense aspect of space.
- [71:42]
C
Well, space for Earth and space for space is definitely a more eloquent way to put it. I like that framing a lot, especially around where most of the activity has taken place, which is really in that first group. However, I think the activity of the future is in that second group which I want to talk about now. The space economy is projected to grow at somewhere between 6 to 8%. So that's more than twice nominal GDP growth globally to that $2 trillion revenue target according to McKinsey by 2040 for comparison. By the way, this is the same growth trajectory that we're expected to see in semiconductors. And there's actually a pretty similar trajectory in terms of cost reduction and efficiencies in the semiconductor space versus the space economy. So if you're trying to give yourself an apples to apples comparison on how you scope this, that's always an interesting anchor point as well. It will also represent about half of the global payments industry from a revenue perspective. So this is a large industry and a lot of opportunity. So that investment stack improves. And as more launches take place, there's a lot of opportunities for investment in areas that we don't currently have. So some of those things that I mentioned before may improve and change and evolve. But I'll focus on some of the new stuff that I think is going to be very interesting. So first is space tourism. And while this is already in existence, it's really small and really reserved for the ultra wealthy. The billionaires that are going up in.
- [73:04]
A
The space and Katy Perry.
- [73:06]
C
And Katy Perry, baby, you're a firework. Human travel is currently going for, depending on the seat, $250,000 to $500,000 US. So a seat for low orbit is expensive. High orbit is even more expensive. It's actually in the millions to take that seat. So SpaceX executes on its vision. This will come down as well as the costs decrease just to create some of these different rockets. So space tourism likely, as we see efficiencies improve and that cost curve continue, will become cheaper. And we're Likely to see more people going up to tour space. Second is orbital construction and in space manufacturing. And John, I was taking some notes as you were walking through the history, but you talked about the International Space Station and how we're flying all these components up and trying to build on the ground and launch it into space. But imagine if it's so cheap and affordable and efficient to actually take some of those components into space and actually build things in space where you're not as worried about the size and the weight in order to do so. You could have very large international space stations in that particular scenario. There's other industries as well. Pharma is one that was highlighted in some of my research. And I was listening to a podcast on this, and the quote that stuck with me was, anything that can be made on the ground can be made in space. So rather than making satellites and shooting up in the air, why not build them in the air? So there's a lot of opportunity when the lack of gravity isn't there and can actually benefit some of these different research initiatives. Additionally, when you're out of the Earth's atmosphere and you're into deep space, if you will, you've got much greater connectivity to the sun. So solar power and other alternative sources of energy could help contribute to some of these different efficiencies, which could create a whole new economy in itself. So something to consider there, and this is actually one of the areas that Jeff Bezos is pretty passionate about, is why don't we take some of this stuff that we're building, building on the ground and actually build it out in space. Third is resource extraction. So this is either on the moon or it's on asteroids. But how do we extract natural resources that we see out in space and bring it back home? And this has implications both for natural resources in general, but also AI and robotics. A lot of opportunity there to bring natural resources home. Of course, defense. And it's interesting to think through the history that you were walking through, John, of a lot of the early urgency around space was national defense. We wanted to be the first ones to get up there. It was government led. And as we see more and more commercial interest moving into space, we're likely to see governments come back online and develop things like surveillance and defense and intelligence that is up in the atmosphere. No one is going to want to sit on the sidelines when there's an opportunity for you to monitor other players around the world. And then the final category is colonization. If we actually get there, whether that's the moon or if it's on Mars, that's a long ways off, but could create an entire ecosystem and economy as well.
- [76:06]
A
So Erin, again, like the current space stack, we asked Emma about this using her framing of space for Earth and space for space and I think she had some interesting overlap with what you said, but she also had a few new and what you might call other industries that were also really interesting to add to the mix as well.
- [76:25]
D
I think what we are seeing in space for Earth is in my view, investable and something where we will see revenue coming out over the next three, four, five years. I think when we're looking into space for space, some is a little bit more near term and some might feel a little bit more sci fi. But I think it is the broader thematic that we should be paying attention to. Probably a little bit more suited for earlier stage venture than growth stage. But I think things like in space manufacturing and materials is one thing that comes to mind. So there's this company called Redwire that's doing in orbit 3D printing for example. So that would be something that I would fit into that category. If we're looking into life support and biotech in space, you have companies like spacebourne that's looking into embryo in space or Interstellar Labs that is looking to do biogenerative greenhouses. One thing that is a little bit more near term, but I think interesting categories debris removal. So there's a few companies that are looking at that more specifically as a problem than energy. So how do you create energy power system once you're in space? I think this is also something that we should be paying attention to health and human performance in space. I think that's probably another category where we're going to see a lot of players that are coming out and that can be quite interesting in space, cloud and edge computing. I think that's probably something else where we're going to see a number of players emerging. I had spent some time a few years back with this company that was also looking into cyber security and space. Those are for me categories that I think is a bit harder to predict the success today and in terms of the timeline to seeing real revenue streams coming out. There's a lot of uncertainty for investors like us, but I think ultimately it will be interesting and if we continue to seek the type of advancements that we are seeing. I live in San Francisco and I sometimes feel it's a little bit like a sci fi movie. I think that we have flying cars and things like that. So if things Continue to move at this pace, this might be something that we actually see as investable in a couple of years.
- [78:53]
A
So Aaron, let's summarize your framing a bit. A lot of the opportunity lies in the space for Space Group as we look to the future. And by the way, as a side note, cybersecurity as an industry wasn't really in your list. Wasn't on my radar. But I guess that doesn't surprise me. If all this new online activity is taking place out there, you might say I also 100% agree with her that debris cleanup, perhaps cover this a little bit later as well, is going to be a concern. All this junk orbiting our planet, the more we bring up there, the more we're trying to build up there. It is likely to be a bigger and bigger issue.
- [79:25]
C
So as I was looking at the current makeup of the space economy and the future space economy, it's so funny. We can imagine and come up with all these different creative solutions. But I think in the short term where we're going to see a lot of improvements is what you mentioned at the very beginning John, which is these are technologies and solutions that impact mundane day to day things. It's our Google Maps, it's Uber, it's having a more clear satellite imagery on Google Earth. So I think we're going to continue to see improvements there. Obviously there's a lot of opportunity longer term, but really interesting to talk through the micro and then these big amorphous initiatives. So I don't know if that's synced up with what you saw as you were looking at the different opportunities out there, but there's a lot, as you can tell.
- [80:08]
A
No, just a couple reflections. I think you said it well, you know, launch itself, while it is capturing the imagination and attention of all of us because of the very dramatic SpaceX launches and re landings is actually a very small portion of the overall pie itself. And in some ways I heard someone talk about launch and liken it to fiber optic cable lane of the late 90s. This, meaning it commoditizes it is effectively a enabling business for purposes of profitable applications. So meaning it will be overbuilt, the cost curve will continue to decline, it won't be a money making enterprise. So launch goes the way of 360 and WorldCom and Global Crossing. And by the way, that's back to the brilliance of Elon, is that he maybe saw this early and realized he had to create his own demand in Starlink to actually build a business eventually from it. And Starlink in the near term, in this interim is feeding the capital expenditures to keep funding the launch business. It's just a really interesting, I think, metaphor. So the other thing that comes to mind is when you talk about data centers up in lower Earth orbit. So the cloud actually is in the cloud.
- [81:21]
C
In the cloud.
- [81:22]
A
So there you go. But I think really helpful segmentation to bring it all together. And as I said at the very beginning, which trajectory curve you choose is dependent on how quickly you think all of this is going to develop. And as we'll get to in a minute, I think significantly dependent on public and private cooperation.
- [81:39]
C
Absolutely. We'll definitely get to the private side. Elon and SpaceX have effectively created their own demand, but I think increasingly created their own competition as well. Maybe not what he wanted, but certainly reality as you move forward. Yeah, I think on that point, John, I'd love to talk to you a little bit more about the geopolitical element of this. I think this is the surprising part of the research around this episode is I went in like, okay, let's understand the economy here. Let's understand. Understand the components of where the private sector plays and the public sector plays. But as I got further into it, there's definitely a geopolitical element to this that I think maybe wasn't there even five or ten years ago. And it's almost a redux of what we saw early on between the US and the Soviet Union. So there were a couple of angles that I took away from this one was just the blocks that we've seen from a geopolitical perspective almost aligning pretty well with these different polls that we're seeing come up with, with the US on one end and China on the other, and Europe, depending on where you are, sits somewhere in the middle between all of those. Some of the tensions with those blocks, and then of course, some of the commercial interests that are mostly in the private sector, but as the private sector interacts with governments, creates some tension as well. So I'd love to get your take and maybe starting with the first element of this, these blocks you've got on one end, the Artemis Accords, with the US Leading the way. NASA leading the way, was established in 2020. And the whole purpose here was to establish a safe, peaceful, prosperous future of space exploration. And you now have 56 signatories on this particular accord. So a lot of countries that have come together to support this. On the other end of the spectrum, you now have the International Lunar Research Station, ILRS, which was established shortly after 2021. With China and Russia, 17 countries, 50 research institutions, and their purpose was to build a research station and orbital assets on the moon. Now those are interesting in themselves, but I think what's interesting about both of those initiatives is that there's only two countries that have signed on to both Thailand and Senegal. Everyone else is almost picked aside to some degree. So maybe that's the purpose that has attracted certain countries to one versus the other. But as you were looking through this, I'd be curious, this geopolitical swirl that we're starting to see, how do you think about those two initiatives just purely from a government country level?
- [84:07]
A
I think first I'd say, or just underscore what you said earlier, is that there's no country that is not now concerned about this for national security purposes. All of them want to be in the game and are finding ways to fund, support, develop, exploit space for purposes of defense. And so obviously we know the mainstays over many, many years, but we didn't mention explicitly India and China are new entrants, but Saudi and Peru are other, as examples, entries into developing their own space programs. The way you describe that with the ILRs is similar, I liken it to what we've done recently with semiconductors and creating this binary block or binary stacks of development or AI. So mobile or AI is I think, a good test case. And this duplication and competition in some ways for innovation is good. I mean, we saw the recent Sputnik moment of deep seek, but in reality, I think there's lots of, when you think of that semiconductor case, lots of unintended consequences of deciding through national security purposes, like the Wolf amendment to embargo or eliminate trade or collaboration with a quote, competing nation is that you are incentivizing them to develop their own competing force and use it for their own selfish purposes, which is completely understandable. And is that really what we want to do? There's obviously trade offs here. I completely understand. But if there's two stacks of space stations and two stacks of launch capabilities and two stacks of space forces, this seems to be at odds with this idea of a peaceful use of space. So it is a very challenging conundrum. We don't seem to be in a place, to your point, on two blocks where the world can come together and build a collaborative regulatory and legal framework for space, I think it's sorely needed. We should talk a bit about that, but we just don't seem to be in the right psyche globally right now to be able to do this proper foundational work.
- [86:06]
C
I think that's exactly right, John. And we asked Luke about the unintended consequences of countries not cooperating with one another and in some cases, putting restrictions on any collaboration. So let's listen to him now.
- [86:20]
B
I mean, you look at the International Space Station, notably does not include certain nations. It's not everybody at the UN who has a place on the International Space Station. So it's been something that's been a very cognizant choice for many decades. I would say, too, in terms of where does the US Partner with, where does the US Source components or supply components to? I think China has been kept out from a lot of those partnerships for a lot longer than maybe recent history. I think we're just seeing that manifest in some of these ways much more prominently now. Now, to your question about has that been a forcing function? 100%. Any nation who has a desire to achieve greater and greater technological feats and where you can see the value of that, if you're kept out from the party in one place, that's not going to stop you from having that desire to succeed or diminish the benefits of success if you were to go after them. So I think there's been a really strong incentive for China to build its own domestic space industry, and they've done a phenomenal job at that, to be honest. There is less media coverage of that because the Chinese space program, as best I understand it anyway, there isn't a distinction between NASA and the space force. They are one and the same entity. There isn't a civil department, a defense department in that sense. So maybe quite a lot of the activity is shrouded in more secrecy than NASA launches that are very public by their nature. So you don't really get a sense of just how quickly China is actually moving along the cost curve and the volume of launches which they're carrying on. But they are, if you were to call China a company, they are the biggest competitor, SpaceX, in terms of number of launches. There is a Chinese space station on orbit now with astronauts working there. They're very clear ambitions to go back to the moon in the same way that NASA is with the Artemis Accords. China has its equivalent there of, well, who might be interested in the Chinese lunar station, et cetera. So, yes, I agree with your contention that all these things are causing rival nations, if you want to describe that, competitors to think about how can they do this without having to rely on a lot of the technology stack that the US has already built.
- [88:12]
C
Yeah. And it's a Interesting when you look at history, some of these treaties that were established in the 60s and 70s were that global mindset, but the US was the only one that was leading the charge at that point. So it's easy for us to say here's a treaty, lets everyone sign on. But now that you've got different motives and initiatives, it's a little bit more challenging. And you mentioned Saudi. And it's interesting as I was looking at the way that these countries work together and even the way that they enable private capital to go after these initiatives, you've got the Middle east, which is trying to create its own center of influence, if you will, where they want to cooperate with both the US and China and Russia. And you even see that where they send astronauts and where they collaborate on certain things. So they're not really picking a side as much as just trying to keep the peace between the two. And then you've got the eu, which is very closely tied to the US as an ally, but they want to be independent. And I think a lot of this was driven by some of the more political leaning parts of Elon Musk. And they don't want to be dependent on Starlink, for example, so they're creating their own satellite constellation that they want to be known for and not be as dependent on one person. So I don't know how you react to that or if anything showed up in what you were researching, but I just found that frenemies element of you've got these ally blocks, but then we're all jockeying for our own interests in the private sector. How do you think about that?
- [89:35]
A
Well, we saw that decision tree of Elon reliability come to life on the international stage with Ukraine's request to use Starlink. They were using it for some intelligence gathering, but at some point a line was drawn and so that has become an issue already. And I think it's a nice foreshadowing of where this could go. To your point, you're right that places like the Emirates and Saudi are today's Switzerland in many ways of World War II. They want to play both sides. They want to be seen as independent. They don't want to align themselves exclusively with either of the two blocs. You alluded to it. We didn't really mention the Outer space treaty of 1967, but I should stress it was just a treaty. So it's got over 100 signatories, but it was meant to basically govern the exploration and rights of use to outer space. It does prohibit the use of weapons of Mass destruction. And it makes ambiguous statements about demilitarization, but it's not completely clear. So I think it outlaws death Star, imperial starship, destruction of planets kind of thing. But it's only as good as nations want to follow this. I mean, there is no body, there's no police force. I really think we need, and I mentioned it earlier, we need a UN equivalent, a literal international standards body that has teeth and a regulatory framework to make sure that this is truly accessible to all. And all should be around the table. All of these space and aspirational space countries should be around the table. I mean, it's things like what do we do with space debris and space traffic and launch windows, but also things like militarization of space and who owns minerals that you discover on an asteroid and can you actually inhabit, can you actually create sovereign property rights? The Outer Space Treaty actually says you can't currently. But when we're talking about the Moon and Mars civilizations, that has to be something. And there has to be a place, a body that actually determines and rules and judges on those issues. And if this is allowed to be created through whoever gets there first and through sheer force of will defines the rules, that would not be good. It's funny, we don't want a Dutch East India company of space that dominates or for you Avatar fans, a resources development administration that basically has a complete hold on any use of space. We've got to make sure this is democratized. And this standards body that I'm waxing on is, I think, one important way to do that.
- [91:58]
C
Well, not only were the motivations different back then when these treaties were being signed 50 plus years ago, but also the technology, John. We had no idea what tech we'd be dealing with, so it was hard to put any anticipatory language around it. And we spoke to Luke about this as well, and he had some views on the outdated nature of these treaties too. So let's listen in here.
- [92:19]
B
I think there's always going to be room for improvement in these things. And the lessons you take from many other industries as principles which applied at a certain scale are no longer valid at orders of magnitude large. The kinds of challenges and problems that you encounter there or externalities which are created can be quite different then I think space is actually quite a successful area for that sort of regulation. Historically, the Outer Space Treaty and other things which have kept space relatively peaceful and free of weapons of mass destruction, but for example, were written at a time where no one really conceived of a commercial entity operating in space. It was very much around governments not claiming sovereignty over particular areas or thinking about that great power competition. Whereas now maybe a lot more of the volume of the externalities might be in the hands of businesses rather than in government. I suppose if we move to space militarization that might flip again. But I would agree with you in terms of that at greater and greater level of scale there is going to be more and more of a need for coordination to avoid conflict is maybe the way to think about that. And the direction of travel, I think for most international bodies at the moment isn't necessarily the most promising one for everyone getting along and coming to a consensus style agreement about things. That seems to be a bit more Balkanization of how we think about it. Spectrum is maybe an example of a success story there. I suppose the radio frequencies, who's allowed to transmit on which frequency is organized by the International Telecommunications Union, which is a department of the United Nations. But you still need to go and get landing rights in every single country which you want to broadcast in. So it's kind of a bit of a hybrid model there, but maybe one that stood the test of time in terms of that has allowed international businesses and cross border provision of services to exist. So maybe not throwing out what we have and replacing it with something brand new is needed, but definitely thinking about that levels of scale is going to be a challenge for regulation. And indeed what are the liabilities? How are we sharing the liabilities of space debris or deorbiting all these kind of things?
- [94:09]
C
I think Luke's comments really get to the heart of this entire episode. John, what kind of space race are we building? Ultimately it's the ones that are in charge that write the rules and treaties. So the regulation and perspectives will follow all of that. And I 100% take his point on the balancing act of government versus business and how that might influence things too. When things are peaceful, businesses might drive things, but the moment you start to escalate into military or conflict, the government will have different motives. So John, we're getting close to the end, so why don't you land this rocket, Take us home.
- [94:40]
A
I want to just close with one more point that I think is important. I mentioned this idea of public private cooperation. So these forcing functions have existed mutually exclusive I think to date. There was the government cold war based forcing function and then There was the SpaceX and now commercial forcing function. And I think we need both for this to be effective not in just international standard setting bodies, but in actual development, funding, creation, design. Artemis is a start to be fair, there's this interesting McKinsey paper that's in the show Notes where they talk about the importance of this overlap and coordination. And they have this two by two grid and the northeastern corner, the one you want to be in is they call the accessible, self sustaining space economy. And they define that as, quote, marked by unprecedented technological innovation catalyzed by global collaboration, widespread funding and healthy competition, and significant public and private alignment. So the vertical axis, by the way, is size and opportunity in the market, and the horizontal axis is how much coordination between public and private. So this northeast corner is meant to be nirvana. I found this quote Aaron, by a gentleman named Michael Suffredini. He was co founder and former CEO of Axiom Space, which is by the way, building the first commercial space station. And he said, similar to this McKinsey, two by two, quote, the key enabler for the advancement of civilization is synergy between a supportive space policy framework, pioneering business models and the development of a vibrant space economy. The future of space is not just about the destinations we build, but about the economic ecosystems we create along the way. And he really stresses again this importance of countries working with commercial players. So that's a critical piece that I think is a huge missing element of the dialogue, the discussions and the progress today.
- [96:25]
C
Great.
- [96:25]
A
All right, Decanters. We have, I think, exhausted that, so we're grateful you hung with us. I hope that was interesting. I hope it equipped you to have discussions about the investability of space and the space economy. I hope it equipped you to analyze some of these opportunities, these newer segments that Aaron laid out. There is certainly a spectrum there of dreamy fantasy and near term opportunity in the future that I think is very, very promising. So see where this goes. So thanks again and we will see you next time.