#142—Matthew Weinzierl and Brendan Rosseau: The Impact of the Space Industry on Business and Humankind

In this episode, we are joined by Brendan Rosseau and Matthew Weinzierl co-authors of Space to Grow: Unlocking the Final Economic Frontier. This episode is a journey, metaphorically speaking, into the beyond: outer space itself. 

Matthew is a Professor of Business Administration at Harvard Business School, and the Senior Associate Dean and Chair of the MBA program, where his award-winning research and teaching focus on economic policy and the business of space. He is the founder of the Economics of Space project at HBS and serves as an adviser on space to government agencies, companies, and investors. 

Brendan is a recognized leader in the space industry. He works in strategy at Blue Origin (the space company wholly owned by Jeff Bezos). He previously served as a teaching fellow and research associate at Harvard Business School and as a consultant to the U.S. Space Force. He is dedicated to using space technologies to bring about a more prosperous, peaceful, equitable and exciting future. 

In this episode, we explore the boundaries, and intersection, of fundamental laws of economics within the context of the rapidly developing space industry or market. We also glean insights on how other markets have and will evolve: the automobile industry, ecommerce, precision farming and potentially the economies around AI or blockchain. 

If we understand these underlying economic forces, we can more accurately anticipate when and how such new markets will emerge and, in the case of space, it may be coming much sooner than most of us outside of the space industry think. 

In this episode, we discuss: 

• How the space industry and space technology have the potential to—and will—disrupt many business industries as we know them today 
• The fascinating evolution of NASA as a government-funded R&D entity to a private sector ‘market creator’ acting as a “customer among many customers” so they can pave the way for space innovation 
• The fundamental economic laws that govern how the space industry will evolve—and how markets here on earth will evolve as well 
• The near-term financial opportunities you may not be thinking of that are providing a kind of economic bridge from private sector actors (who need near-term profit) and long-term players (like the government or large corporations who have the funding to pursue the opportunities offered by the moon and Mars) 
• How the rapid formation of a space industry will directly impact companies in nearly every sector, even those with no obvious connection to space 

Episode Timeline:
00:00—Highlight from today's episode
01:28—Introducing Matthew and Brendan + the topic of today’s episode
05:37—If you really know me, you know that...
07:03—What is your definition of strategy?
09:14—What are near-term opportunities the space industry will open?
12:15—Some use cases of revenue opportunities from space
17:39—Introducing the Evergreen '7 Ps'
19:40—How has the role of NASA changed over time?
29:26—What are things that need to be in place to realize the market of space?
32:14—The governing laws of space
37:32—How will competition of the space markets unfold?
40:17—What mo

Thank you to our guests, thank you to our executive producer, Karina Reyes, our editor, Zach Ness, and the rest of the team. If you like what you heard, please follow, download, and subscribe. I'm your host, Kaihan Krippendorff. Thank you for listening.

Follow us at outthinkernetworks.com/podcast

Transcript

Kaihan Krippendorff: Matt, Brandon, thank you so much for being here. It is great. I've really enjoyed preparing for the podcasts in addition to reading the book. I listen to all kinds of content that you have out there, and it really flipped my mind on what space actually is and what the near term opportunities are. So it is a real gift to have you here.

Thanks for being here.

Matthew: Well, thanks for being your kind. I can't tell you how glad we are, especially to speak to people who spend their days thinking about strategy. It's Brandon, one of our core goals is that this book would reach exactly your audience who's thinking around the corner. So thanks for having it.

Kaihan Krippendorff: Yeah. And to bring the academic big thinking, big picture view, and then the strategist view of, like, what is happening now, the zoom out, zoom in is is really special because good thing gets teamed up together. I always start with the same two questions just to warm us up a little bit like each of you to answer the question. Let's start with Brandon. Complete the sentence for me.

If you really know me, you know that. Oh, okay. Nothing to do with your work at all.

Brendan: Oh, man. If you know me, you know that I speak French and love everything France related by my last name is Rizzo, and so I've got some French family. They moved here before World War one, but one of my favorite things to do is head back over there and see where where my roots came from. So It's it's one of my favorite things.

Kaihan Krippendorff: And did you learn French, like, in school? Maybe. Excellent. Thanks.

Brendan: But you lose it. So you're gonna practice it every day. Yeah. It's amazing. It's like it's almost like reaching for a tool where you haven't spoken French in, like, a year.

And you're like, oh, for it's definitely right there. I can just grab it and use it right away. And it turns out the tool has rusted, so you need to Right. You gotta keep it

Kaihan Krippendorff: up and Yeah. I've been using a platform called Preppedly, and I just do once a week, just like a one hour Zoom German and one hour Zoom Spanish just to keep it going. Yeah. Excellent. And, Matt, what about you?

What if you really know me, you know that.

Matthew: Well, if you really know me, you know that. I love lakes. I grew up in Minnesota, land of 10,000 lakes, although most minnesons will tell you that's an understatement. And so I think for those reasons, you know, if I can spend time at a lake, I'm a happy guy.

Kaihan Krippendorff: That's awesome. Awesome. And so we'll stay with you, Matt. Second question, what's your definition of strategy assets of all of our guests, and we always get a different answer. So whatever you say is right.

Matthew: I was so glad you asked because I'm not a strategy professor, so I've never had to put into words how I think about this question, how I think of this concept. But it's funny in addition to working on space, I am currently serving as the faculty chair of the MBA program at HBS. So I spend a lot of time actually trying to think about an execute strategy. And so I tried to reflect on how I would define it. And so here's what I came up with, which is it's about choosing core objectives and then deciding how to use scarce time and resources to achieve them.

So nothing particularly surprising in that one, but that's how it's been for me.

Kaihan Krippendorff: Well, I think a scarcity is particularly a proposed for the topic of space. Right? Because you're working in which access to resources is difficult or not sure if possible.

Matthew: Oh, we're starting to start struggling at that all the time.

Kaihan Krippendorff: Yeah. Yeah. Excellent. Great, Brendan.

Brendan: Well, Matt's definition, I completely agree with this. I don't know how much I can improve on it. But I would say, for me, though I'm early in my career, one area that I've seen, strategy, incredibly important, and sometimes overlooked is choosing the the activity of choosing the right goal, a very specific goal that kinda makes you or your company or your organization what it really can be. A lot of times, I've seen organization kinda hand way through the okay. So we wanna be the best at this. And the organization I really love that I've been proud to be proud part of are the ones that get very specific and say, we are going to be, you know, the best at either manufacturing the specific thing or doing this specific thing in this kind of way because it reflects the kind of people we wanna be. And just the specificity for me, it lets us sync in a lot more, trickle through the organization. And so I whatever. It's time for me to execute a strategy or choose goals. I never skipped that, you know, that that component of it.

Kaihan Krippendorff: That's great. Yeah. Because I think that it'll be interesting. Eventually, we'll talk a little bit about what is it that blue origin wants to be, and is that different than what SpaceX wants to be, and are the pads because it seems like the pads are different, but are the destination's different as well. And others that will that are playing.

Good.

Kaihan Krippendorff: : So let's talk about space first. I think that like me, as, I was preparing for this, a lot of our listeners are thinking when they think space, they're thinking, I don't know, some decade or decades from now, there is There are some people on Mars, and you teach a class on with students, executive ed people as well. And they're talking about near term opportunities. So first, just kinda make it real for us. Talk to us a little bit. What are these near term entrepreneurial opportunities that you encourage students to look at?

How can we make money on this now?

Matthew: That's a great question. And let me just say, I'm glad you mentioned our students because it really is vital to what we've been trying to do. You know? I'm fortunate to teach our business school. Brandon worked with me for three years there on on our research and the writing about space, the book, space to grow that recently came out and what we're gonna talk about in part today as well.

But We also created this course that we've now taught for three years to MBA students, and there's about 95 students in the class each year, and only a dozen or so of them have direct experience in the space sector coming into school. And so very much to your question, you know, most of the ones in the room are curious about how they might use space in their careers, whatever industry they find themselves in, right out the door. Right? They're about to graduate. How can they use it?

And we really like to stress that point that space is already completely essential to our way of life. I think we all most of us take that for granted, and we can, you know, explore various ways in which that's true, but also the expanding reach of space in terms of Internet satellite constellations, earth observation as we often refer to data through and from space as potential to transform essentially every industry that your listeners work in and help to lead. And so we are really eager to get folks, whether it's an agriculture or finance or even on the ESG side of things, to be thinking about how they might incorporate data through and from space into their business model.

Brendan: Yeah. I think one of the traps that we see folks run into when they think about spaces. Typically, when we imagine space activities is kind of the Apollo era, you know, boots on the moon or giant space stations. It's explorations. It's things almost by definition that are completely apart from normal day to day business.

But what I think is changing today with the introduction of the private sector coming in and making space activities more routine and cheaper and unlocking all kinds of new capabilities, I think what's changes that's forcing us to reevaluate the society what is space and what is it good for. There's it's really just a place out there where we can put technologies that do certain things that there's no prescribed way to do space. And we've seen companies lean in to especially the web management data that's coming through space and data that's being captured from space to better execute their business models, to execute new and bold strategies. And it's really been exciting to be at this moment in particular where we're running inflection point of what's possible in space and seeing more and more value being created from there.

Kaihan Krippendorff: So just to help us visualize that, can you give us an example of an existing or hypothetical soon revenue opportunity from data and space?

Matthew: Oh, sure. So one of the examples that's often cited So listeners who are familiar with Space, well, heard of it before, but think about the insurance industry and how they need to monitor the various assets they ensure. Now, of course, you can send agents out to do that monitoring. You can try to leverage technology to do that. But, especially, if you're in sharing assets at scale or there are remote, the ability to monitor those assets in a real time, quick way, and increasingly in sophisticated ways.

So we might your listeners might think, okay. Yeah. I can get some grainy picture from space, but, like, how is that actually gonna help me? Turns out many start ups have formed over the past decade that in leverage increasingly sophisticated technology to measure things like moisture levels and soil and temperature and various emissions, but down even actually below the surface. They can penetrate even into the soil.

And so insurance companies have a huge interest in being able to monitor other assets more efficiently and quickly. That's just one example.

Brendan: Yeah. Another one is and Huston might be or listener's rather might be familiar with this is SpaceX's satellite constellation called StarLink. So it's a relatively new system. The first prototypes prototype satellites went up just in 2019, so only a few years ago. But already, they've launched and put it to orbit thousands of these you know, Internet satellites in the low earth orbit.

They provide high speed connectivity to any point on the earth, and that's may seem like kind of a mundane thing we're used to being in Wi Fi connectivity or at least Internet connectivity. But huge parts of the earth are have no Internet at all, and even fewer have the high speed connectivity. So it's been an amazing thing to be able to provide at a moment high speed Internet connectivity to every part of the world, and it's just getting better every day. And we've seen companies everything from Maersk, the the shipping conglomerate to United Airlines to everything in between. There's now over 5,000,000 users, and it's generating billions of dollars a year.

And it's a really unique kind of value for the moment. The main impact has been providing Internet to places where it's has not been before, so kind of allowing us to do familiar things with Internet access just in maybe less familiar places. But in the long run, people are really excited about, you know, what does this mean for twenty first century infrastructure when we have a high speed, always online web of connectivity that truly blankets the globe. What does that mean for self driving cars or drones or planes or everything in between? Could you have businesses that are fully autonomous, you know, they're executed by machines that that don't need to be operated by humans regardless of who they are in the world.

So we're not there yet, but we're at a really interesting inflection point where those kinds of conversations that maybe once where sci fi seem a little bit less out there.

Matthew: And this is so fun to talk about because there may be listeners out there who are thinking, yeah. Okay. Data, that's interesting. I'm not really sure mobile Internet's not useful to me or without observation. But if you're in an industry that makes, you know, physical objects, I mean, this is a little farther down the line, but we've been talking just about data.

The other another one of the other areas people are really excited about in space is manufacturing. And this has been a dream that's been held for decades in space, but we're finally getting to the point we hope where the costs of doing it and the capabilities of doing it are gonna really change and be able to drive some value for various sectors. A a fun thing perhaps for your audience to to think about is the idea that, you know, what is special about space. Brandon made a great point. Like, space is just a place.

We talk about that a lot in the book. It's like Latin America or anywhere else. It's a place to do things increasingly. But it does have its own natural resources like other places might, and one of those is microgravity. It's really hard to generate microgravity.

At scale for long periods of time on earth. And so does that change the manufacturing processes, the r and d processes for things that might be really quite valuable and therefore create opportunities that, again, thinking around the corner a bit five, ten years from now, you know, might be a reality.

Kaihan Krippendorff: So then I'm thinking about if we imagine I'm just visualizing these factories and stuff getting transported up and down and all the products that now can be made more economically or with better performance or that don't couldn't be made before. There's there's a whole bunch of services around that and other providers around that that. What are some of those that might emerge?

Matthew: Well, exactly. The picks and shovels. Yeah. No. That's right.

There's a booming industry these days in the startup world in space. To provide what's called satellite servicing or moving satellites to different orbits the sort of thing you're talking about. So one nice example is refueling. Right? So we've often we've we've sent satellites up with carrying a certain amount of fuel they're gonna need to maneuver and to operate over time.

What if you could kind of pull up a mobile gas station and refuel them so that they could extend their life and maybe provide some fixits as well when you're there? That's a whole new sector.

Brendan: Yeah. A lot of what we're seeing being created in space today, there's there was first, in the February and twenty tens, there was a disruption in the launch industry. So the it's the indispensable capability to get in the space is launching of the other call into orbit, and we saw companies like Spacex, but Spacex, in particular, bring the cost way down 90% lower than what it cost for the spatial era. And then now they're working to bring those costs down again. So we first saw a disruption of launch.

And then as that for a goal as that way you've kinda trickled out, then satellite companies started thinking, win a minute, launches are a lot more frequent, they're a lot more cheap. What if we rethought how we built satellites, and then we saw a lot of cheaper, smaller, more numerous kind of that move fast and break things approach came into the satellite industry, which really transformed it where the midst of that changed today. And then now we're seeing even larger changes when it comes to commercial space stations or beyond or, okay, these satellites are gonna need servicing. We're seeing those ripples of destruction move further and further. And it's really exciting because it they're building up the capabilities and infrastructure that it takes to execute more and more sophisticated, more low cost, more, you know, high cadence based activities.

And for most people, they might just think, okay. That's great. I'll see it on the news sometimes, some cool space images. But it's really the start of bringing about capabilities that really matter to folks back here on our one of the critical changes that I think we have to get across here is that there are with the introduction of market forces in the past twenty years, more and more of space activities being driven by space companies, and that's a fundamental change from everything we've known about space through through NASA's history and beyond. That matters for us because if space companies are leading the way, then they need customers.

They need customers by definition to stay alive. And the vast majority of these space companies are not going after some in the sky, you know, let's go tear for Mars or let's go do, you know, some crazy thing that isn't super relevant to folks on the ground. They're interested in how do we serve businesses where they are today, how we provide a capability that you know, terrestrial businesses don't even know they need yet, but could be hugely disruptive in the future. So that for us, it is part of what makes this so exciting, and it feels like we're at a moment where enough time has passed that it's definitely real. We've seen businesses leaned in and normal folks in organizations kind of benefit from what's put on the space, but also there's so much that is exciting that's ahead of us.

So it's a great sign for listeners of this podcast if you think about space.

Kaihan Krippendorff: Yeah. No. This is popping several things for me. One is if we think about, say, the founders of Blue Origin and SpaceX, they've kind of all both have this model of, you know, make do something small, make money to fuel the next thing, to fuel the next thing this. So we start seeing this near term opportunity that maybe didn't exist before.

So that's why the government sort of had to monopolize the funding of these very long term things. But what has changed? You talk about the NASA viewing itself, less is the funder and more is a customer. Just talk to it like, well, how did that come to be? And what's the mindset?

Like, from you know, I know what you call it, monopolist to market maker.

Matthew: It's a fascinating story. Actually, I'm really glad you asked about it. Because I think a lot of us, including Jeff Bezos and Elon Musk, and a lot of the folks who are driving the space industry were today, grew up in an era when you think of space, you think of the space shuttle, or maybe you think of the Apollo missions, you think of big government led space programs. And for the first fifty years of the space age, that's what it was. In fact, there's an amazing quote from one of the early founders of SpaceX, Jim Cantrell.

He says, in the early two thousands, he's looking back at the space the first fifty years of the space sector, And he says, the Great American Space Enterprise that defeated communism and defense of capitalism was an is operating on the Soviet economic model. And the irony of that was really quite poignant that we had run this centrally commanded single drive it a single driver space sector for so many years, and that worked wonders in its early days. I mean, there's not you can't take away from the accomplishment of those first few decades in space, and even in the subsequent decades, amazing engineering achievements. But over time, that model started to show its age and started to show the weaknesses of not having market forces of competition and the price mechanism and various things that we all know drive efficiency and innovation. And so In the early two thousands, many of your listeners will remember the space shuttle had its second accident in 02/2003, second tragedy.

And at that point, that was a crisis point for the general space enterprise. People realize we had to try something different. And so there was a little pilot program run out of NASA called commercial orbital transportation services that seeded some of these startups that have now grown into these massively important companies to resupply the International Space Station through a different model. And, you know, you asked what changed, and I'll just highlight three key things that really shifted and that made this much more as Brandon was saying a a market than it was before. The first is that NASA decided to be one customer among many.

So kinda just like you were saying rather than being the only customer, they decided to tell these companies, look, we wanna support you, but you should also build things that you can sell to other people. The second was that NASA decided to provide insight rather than oversight. So NASA has amazing people with amazing experience and ideas and expertise, they can help companies do the job better, but rather than monitoring them. They want to support them with the insight. And then the third was a very it sounds kind of technical or in the weeds, but it was a shift from contracting that provided a margin over a cost.

So cost plus contracting, it's called to a fixed price method of contracting where you pay these companies to deliver something for a certain amount of money. And you can imagine all the incentive changes that in in genders and really brought market forces in that we've been now living twenty years since seeing those market forces play out. So

Kaihan Krippendorff: I just wanna double click on that just so I may understand. What I'm envisioning is Whereas before, it was a long term contract with Lockheed Martin that was billions of dollars now. It is I'll buy from, you know, short term contract or transactional, I guess. Is that we're

Brendan: typically what they think of as buying services. So before NASA would say, we're going to build the space shuttle, and so we're going to contract out the manufacturing of, you know, the door that goes to the crew hatch to, you know, whoever. And so before but they they would give them a, as Matt mentioned, like, a cost plus amount so that they cover their cost plus a margin, and so they were supervising them. And that's how NASA did most of its business for most of its history. Now there's been a real push especially because since the commercial or road transportation services cost, the program that essentially created SpaceX and so many other companies.

Because that's been so successful now, there's a big push where NASA is hoping to acquire services and be one purchaser out of many of these services than others. So it's moving away from owning and operating the things that it doesn't have to. So when NASA wants a ride to space now to launching our crew or cargo or it's fantastic satellites like the James Webb, it buys the launch like any other customer would would it wants someone to put his astronauts. Now as the international space station is getting retired, it's gonna buy services from commercial space stations. Of course, there's things that NASA will always be the only institution doing.

It's a public research focused institution. So when it comes to exploring the loan or doing all kinds of other things, basic science and r and d, NASA will be the one doing those. But the big changes that it's been looking at, how do we incorporate the private sector as much as possible to do things more efficiently, more lower cost, and be more sustainable. So we don't just have these, you know, kind of boots on the moon and then never to go again for the next fifty years. Yeah.

How it comes like we have with Got it.

Kaihan Krippendorff: Don't this question, I think, is maybe not as important as the many other questions I wanna get to, but I'm just curious what caused that shift? Was there a change in leadership or Yeah. Economics? Or yeah. Why?

Matthew: That's a great question. I mean, interestingly, you can go back to the nineteen eighties. And maybe it's not surprising that under president Regan, who was very big on free market forces, that there was even then a lot of interest in commercial space and in in stimulating sort of private sector space activity. And there were various laws passed and some funding provided, and, you know, the little fits and starts of progress here or there. I think, like, many, again, of the folks who listen to this who are focused on strategy will recognize, sometimes it takes a crisis.

To really shift things. And I think that the second shuttle accident and the fact that we often say, you know, the country that put men on the moon and brought them back in 1969, '40 years later, At the time, of course, after the moon landing expectation was just imagine what we'll achieve in the next forty years. But in fact, forty years later, The United States was looking at a situation in which it couldn't put astronauts in orbit from its own soil. Let's let's do some of the great things that were envisioned before.

Kaihan Krippendorff: Yeah. It often is that there's, like, there's kind of a a shift in mindset or perspective or metaphor that's emerging, and then there's a trigger that has the new mindset kind of take over sort of like a kunzian Yeah. Kind of revolution.

Brendan: That much will. But it was amazing because it was almost I don't wanna get too, like, fluffy about it or philosophical, but it's amazing not just in a space context, but if you think about, like, organizational change, NASA was created to in the way that we know NASA today or the way that it existed for so long was created to do a very specific thing. I would say it was born in the version we know today out of the space race and response to Splunk Nick in the first flight of your gigahertz saying, we need to you know, show our force in space. We need to be South American space capabilities, and that obviously culminated in the moon landing. So it was created to do a very specific job to mobilize immense national resources to serve the country at a time of really a national emergency to execute the largest piece time engineering project in human history, which Apollo still is.

And that was fantastic. Obviously, it it 10 out of 10 on on that mark. But once the space race ended in in the late sixties, and it was time to decide what to do next is what in the book mat and I call act two. That same model seemed to kinda break down a little bit, you know, instead of rallying the nation and emotionally incredible amount of resources to cute specific goal, which is something that governments can be very good at. Now for act two, the which was the space shuttle, the International Space Station.

The goal was all about, well, let's bring the astronaut cost out of astronautics. Let's make things cheaper. Let's think make things more routine, let's make things more user friendly so that we can go to space more and more frequently and really benefit from all these potential use cases that we think there are in space. And if you've noticed that there that's a tricky little switch in terms of the goals involved and there's that's that's a pretty different it's a pretty different ask out of a government organization, which is one from a set of goals where it could be very strong yet. If you provide the resources to one where and maybe we should leverage the private sector a little bit more.

Of course, the rest is history. And it still took decades to to in the real crisis, as Matt mentioned, to be able to introduce market forces in the way that we see it today. Yeah.

Kaihan Krippendorff: I think I'll talk about this market forces, and the things that have been in place for us to reduce market. And I think it is it has to do with more things than space, although space is big enough. But, you know, I live in Miami. We've got messy here. If you look at how the Saudi government like, they had a centralized we're gonna give you a billion dollars, and then we put together this coalition of different players, whether it's Apple TV and others and kind of created a variable upside, kind of it's about, like, more market force versus centralized.

And then I think about this is just uneducated from the outside in. I think about I would think China, India, Russia are probably leaning less into a market force approach. I don't know. And I think that companies are shifting towards introducing market forces inside their companies as opposed to being a centralized hierarchical, kind of centrally regulated, but allowing for more entrepreneurialism. So I just wanna say that because I think that we're talking about here is because significant implications.

So I'd like to talk about what are the things that need to be in place. And you've laid out some. I have a list here that I just you know, I came up with ahead of time. Public goods and free rider problem. Negative externality.

Incomplete and unclear property rights, thin or missing markets, information asymmetries, lack of standards, and interoperability, coordination failures, just as, like, a kind of a list of some things that you've talked about. Let's just, like, talk about a couple of the things that are not in place maybe yet that need to be in place in order for us to really realize this market based space.

Matthew: No. That's great. Thanks. And, you know, you're getting it. I mean, I'll talk about one specific example in a minute, but I wanna just tie go on something for folks.

You know? One of the things we try to do in the book, if people are interested in taking a look at it, is bring some of the, like, basic, most fundamental tools of economics to bear on understanding the space sector, to try to give people a bit of a foothold to understand all the complexity of what's going on. And we start actually with what's often considered the most important idea in economics called the first fundamental theorem of welfare economics. And the simplest statement of it is that under certain conditions, the equilibrium of a competitive market is efficient. So all that's really saying is that under certain conditions, and that's an important thing to say.

You'll see why in a second. If you wanna maximize the size of the economic pie, markets are the best way to do it. Markets are really good at efficiently using resources, something I'm sure all your listeners have personal experience with. Reason that's such an important starting point is, you know, just as we were talking about market forces are the big new thing in space. And they're the big new thing because they can produce this kind of efficiency and innovation and growth that we're all so excited about why we're having this conversation today, and that's new.

But the other part of that Theorem is that this holds under certain conditions. And so many of the things you just mentioned are factors that sometimes cause markets not to be efficient on their own, ways that can hamstring markets from achieving that maximum economic pie. And sometimes can justify government intervention or various other ways of coordinating activity. And so a lot of our book and a lot of what we talk about and teach about and what a lot of people in the space sector think about are exactly those situations. Brandon, I'm sure, has a million, he could mention.

I'll just take thirty seconds or so on property rights because you mentioned it. I think that's a really essential one. Of course, the foundation of any market activity is property rights, and it has lots of implications for space. So two are about resource mining in space, which I'm sure many of your listeners are kind of interested in. Are we gonna mine aspirates?

Are we gonna mine the surface of the moon, things like that? And then space debris, which is a big potential threat and something a lot of people are worried about. Both of those activities crucially or solving the latter and taking advantage of the former both crucially depend on property rights, and that's something we're still figuring out in space.

Kaihan Krippendorff: What what property of what?

Matthew: Exactly. So we have a treaty you might wonder what is the law of space at this point. And the the main one is the 1967 outer space treaty, which major space varying nations have signed on to, including The United States and at the time, the Soviet Union, but that's Russia. And The outer space treaty does one really important thing or two really important things. I mentioned on this score, first, it says that, actually, you cannot claim sovereignty over any territory in space.

So people might think that the American flag on the moon is sort of a claim of sovereignty, and that's not what it United States does not own any of them. And nor can we own asteroids or any of those. At the same time, it does allow it actually requires that any activity that's licensed by a country is that country's responsibility in space. So when SpaceX or Blue Origin gets a license from the United States government to do its activity in space, the government is eventually responsible for that. And so that creates a bit of property rights at some level around the satellites that are up there in space and so on.

But you can imagine that there's some slippage between the fact that we don't have property rights like we do here on earth, over territory, and over space, and that we do kind of have properties over objects in space. And so we're still trying to sort out, I think, as a collective, how we're gonna navigate those different attach.

Kaihan Krippendorff: So you're talking about the tragedy of the commons. Is that right? Just explain that to us.

Matthew: Yeah. We can go in real deep on on either of these or both of these. I mean, on Space to Breathe is totally fascinating, and a lot of your listeners will have seen the George Cooney movie where they almost get killed by the space debris. The trick with space debris is that just like any negative externality on earth that your listeners might be thinking of with pollution, the costs to me of putting a satellite up in space don't include the extra risk that I put on all the other people operating in space by having my satellite in orbit. The explosive force of a little piece of space junk, the size of a cherry, is equivalent to a grenade exploding here on earth because they're traveling at $17,000 an hour.

And so there is a risk that as we get more satellites up in space, as there's more space debris up there, that you can get this cascade effect called the Kessler syndrome, where debris creates more debris and eventually could wipe out all the satellite that are operable in Norp. Obviously, with huge economic consequences. How do you solve a potential tragedy of the commons like that? How do you avoid it? One classic way that you would think to do it is to create property rights.

So you could imagine sort of fencing off orbital space and giving people rights over different parts of it so they could then regulate the use of their little territories. But that's actually pretty hard to do in low earth orbit, defense off space. And so instead, we have to rely on other mechanisms to try to avoid that trash.

Brendan: And I think you mentioned standards before, so I'm happy to talk about one of the issues that's happening now. So part of the trend that that's going on today with more and more satellite system. We don't only want satellites to communicate up from the ground and back. Also, with thousands of satellites and low earth orbit today, an order of magnitude increase from even just a decade ago. We want satellites to be able to communicate with one another and all with other constellations of satellites as well.

So the idea is that you can create this mesh of essentially computers learning this guy that can communicate with one another and do all sorts of incredible things. But, of course, that means that satellites built by different companies and for different purposes have to be able to communicate with one another. So one of the and that creates a problem. You need a standard, but not everyone wants to coalesce around the same standard. This dictionary where we saw the government be able to step in and play to its strengths as an organizer of economic activity where there's a group within the defense department.

It's called the space defense agency, the SDA. It's a new organization that's entirely focused on speeding up acquisition and doing kind of cutting edge things in space. And they are building a constellation that for Azure Security that has lots of different satellites that communicate with one another, and they instituted a standard for themselves so that one satellite could send a laser beam and communicate information to the other. And the nice thing was that without issuing a hard and fast requirement to all of the industry to to, you know, saying, you know, here's a mandate of how satellites are gonna communicate, it's created a kind of natural consolidation where because this is the standard that's being used for a major project, people tend to kind of be coalescing around this this standard. So it's great.

It's one of the big problems that we'll have to address in the space where we're gonna capture the complete size of the economic pie that we think exists is coordination. You know, there's a lot of value out there, but sometimes capturing value means you have to have a lot of different players pulling their risk and working together so that they're work is better than the sum of these parts. We see it in satellite communications. We see it in space stations. We see it from the Earth, the moon, and beyond.

And it's very exciting to be at a time today where there are so many companies working on this, companies that are working smarter and thinking together that I think in the next few years folks are gonna be hearing more and more news about space, and it's not just gonna be kind of out there news. It's gonna feel more and more relevant. I I think that views this opportunity for all of us.

Kaihan Krippendorff: That's great. So I know we only have a a few more minutes with you, and I've got more questions that we have to cover. But luckily, people should buy your book, and there's a lot of other content that you have created. Let's just just, like, zoom a little bit further out to the future. You know, this race for standards, I think, you know, beta max and DVD, and, like, this all has been like, if I can own the standard, then I can raise switching costs.

I can start concentrating. But then I don't need to innovate as much, and I don't need to invest as much. So there's this kind of, like, trade off of, you know, gotta let them make enough money that they're gonna invest now, but we how do you see it going? Are we gonna have a duopoly of SpaceX and Blue Origin, and are we gonna have, like, concentrated, or are we gonna have a very open marketplace while the providers and the infrastructure providers that, like No.

Matthew: That's a that's a really great question, Kai. And, you know, we've talked about you mentioned a long list of things you need for markets to function, and we've talked a little bit about few of them, including property rights and price mechanism a little bit. We were talking about the cots program and interoperability you guys were just talking about, but we didn't really talk about competition. And I think that I'm glad you brought that up because that is one of the key ingredients to really having a market work well. And space does kind of lend itself to concentration for some of the reasons you were hinting out there at the fixed costs of operating in space, at least historically, have been pretty high.

And so that can lead to kind of a natural monopolistic setting. Also, I think we happen to live in an era when SpaceX moved faster than just about anybody would have ever imagined a company moving. And so they got out to a lead on some of the core activities in commercial space that has seemed almost instrumental. And so the lot of concerns have been raised about whether they have too much market power. One thing I think, you know, when we think about these questions, you're always looking for whether the leading company is creating value or just kind of trying to capture value.

And it seems to us at least that SpaceX has continued to try to push the envelope on technology and creating value more broadly. I think, you know, our perspective is that the leading space companies these days, not just SpaceX, but Blue and others see the potential size of this market is so enormous that they'd rather grow it and then have a piece and try to just grab the biggest piece themselves right now. But it is, I think, incumbent upon all of us and upon governments to, nevertheless, continue to encourage competition. You know, to subsidize the startups, try to make sure there's lots of people nipping at the heels of the leaders to keep them sharp and to be there to push prices down, not just costs. So that is a and luckily, I will say, I think, governments around the world, the NASA, but also the Department of Defense, which is a huge funder of space in The United States actually much larger than our civilian funding for space.

Also wants competition. They don't wanna be dependent on any one provider over time.

Kaihan Krippendorff: Yeah. Yeah. It's fascinating to see how and I guess it's hard to predict. As you say, when you're looking at a marketplace, it's harder to project what how a marketplace will evolve than how essentially controlled system will evolve. So we both came to space in a circuitous route.

You didn't start off with space as a topic, but there was something that maybe, you know, that some science fiction that you're exposed to. That had you come back to space each of you. I've heard you talk about so what do you think what movie or what book do you think gets it right? If, like, you know, if if I wanna read something that is sort of a maybe a realistic ish depiction of what could be. I personally really love the series for all mankind.

What do you think this describes a plausible future?

Matthew: That's a great one that that's super popular and especially folks in the space. I usually love that. Some of the topics that they latch on to, especially where it involves commercial companies that come out of it and different national goals and how that plays out. It feels like they've kinda peeked around the corner of some of the things that are intermaintained in space today and have addressed this. So absolute love for all mankind.

I'm more of a history buff than a science buff. So if folks are really interested in space and not just space, but, like, the role of the government in dealing with large national problems and the role that space has played for us historically and kind of how we got the origins, how we got to this moment. There's a book, a polar surprise when we book by Walter McDougall called The Veterans of the Earth. And it's all about the origins essentially of NASA. And not just in a space context, it said, well, why what was the government's the US government in particular its relationship with technology?

And then how, in some ways, did the space race change that where all of a sudden the technology begins something that government was very interested in, and how did that in turn change us, our country, our government, and our relationship with technology. So I absolutely loved that. They haven't said the year before Wells Fargo.

Kaihan Krippendorff: Great. Thanks for the recommendation. Matt, any recommendations from you?

Matthew: Well, I was gonna say I'm I I hear you on wanting something that's practical, but I think one of the great things about space is that it is different. I mean, it's like every other place, but it's also unlike every other place in the fact that it's inspired humans for millennia to dream really big. And so I would encourage your listeners who are maybe excited about space, not to be shy about grabbing some big think science fiction and letting their minds letting their imaginations roar. And in some ways, that will aspire you then to try to figure out ways to take steps now that will eventually lead to that future. So I've often recalled how my dad and I watched Star Trek next generation when I was a kid, and I watched it now with my daughter and my wife.

And you know, is it realistic? I mean, probably not for the twenty fourth century. Let's I don't know exactly when we'll reach quite that level of advancement, but, boy, did it plant the seeds that have led, I'm sure, to all of this. We're trying to take the first steps that we can.

Kaihan Krippendorff: Yeah. I was like, quote, man can only build what it can imagine.

Matthew: Okay.

Kaihan Krippendorff: And so that's where it starts. Excellent. So definitely encourage people to get the book space to grow, which is recently published as a as of this recording a couple months ago. How else can people stay in touch with you, learn from you, connect with you?

Matthew: Great. Thanks for asking. So if you go to economicsofspace.com, just that website, that's a place where we try to gather some of the research that we're doing at HBS, at Harvard Business School. It's not just me. There's a variety of faculty engaged on this topic, you'll find Brandon there even though he's now in the private sector as well.

And we are eager to, you know, share ideas and work with folks who are excited about this, especially if you're running a business or doing strategy for business and wanna learn more about ways you might leverage space. Please don't hesitate to reach out. You can find how to contact us right there.

Kaihan Krippendorff: Amazing. Well, Brenda and Matt, thank you so much for the work that you do and for packaging it for us and at least exposing us to some of it here and getting the conversation going. We really appreciate your time. Thank

Matthew: Thanks so much. So much pleasure. Thanks.

Kaihan Krippendorff: Thank you to our guests. Thank you to our producers, Karina Reyes and Zach Ness, our editor, and the rest of the team. If you like what you heard, please follow, download, and subscribe, and your host, Kaihan Krippendorff. We'll catch you next time with another episode of Outthinkers