January 23 , 2005 

The Rocket Company
by Patrick J. G. Stiennon & David M. Hoerr
Illustrated by Doug Birkholz

  Chapter 1Seven Billionaires and One Big Problem

John Forsyth is a man with a net worth of approximately a billion dollars. Like many others in the last decades of the last century, he had made his money in the software industry. In the late 1990's he had also, for primarily ideological reasons, funded a small company comprised of space enthusiasts who believed that they knew how to reduce the cost of access to space by a factor of ten or more. It was Forsyth's belief, and one shared by many, that for all of the exciting visions of Humanity's future in space, the essential enabler was lower transportation costs. At that time his personal assets were considerably smaller, and after expending a large portion of his net worth to develop a new space launch vehicle, they needed still more money to take the project to completion. It soon became apparent that the usual sources of additional funding, especially Wall Street, were not yet convinced that rockets were a viable investment. At the same time, there were problems with the design. The end of the venture produced no clear technical consensus of how to achieve the goal of low cost space launch. A lot of interesting technological experimentation and simulation was done, but in the end no clear blueprint for achieving success had been developed.

Thus Forsyth's first foray into the business of building rockets left him convinced that before investing in space launch again, he had to have two things firmly in hand: a clear plan for making money, in order to attract the large amount of capital that his experience showed would be needed, and a clear technical plan or approach for building the rocket, so that success could reasonably be assured.

On the technical side, NASA and the space agencies of both major and minor world powers had shown that big budgets of hundreds of millions to tens of billions of dollars would not by themselves produce any clearer consensus as to how transport to earth orbit could be most economically achieved. He had carefully considered not only his own failed effort, but also earlier private efforts starting with the German company OTRAG back in the mid -1970s. It was clear in his mind that it would take more than merely private initiative, however much that was needed, to produce any major leap over the inability of governments to bring down the cost of space transportation.

I first met Forsyth at a conference of the L-5 Society in San Francisco in 1984, and had bumped into him from time to time since then at various gatherings of the space "faithful", those who believed that Man (the term still meant Humanity in those days) had a destiny which included moving into space and occupying at least the Solar System. Forsyth was one of those entrepreneurs who had in mind making a great deal of money at least in part so that he could achieve something in space. Forsyth, while certainly not the richest man to come out of the last decades of the last millennium, was one who had amassed a considerable fortune. At the same time, he was not particularly impressed by that wealth.

He now was proposing to risk it all if a real chance for opening up the space frontier could be found. My own background as a science reporter and author of several books detailing the successes and failures of various technical enterprises led him to engage me to observe and record the story of what he hoped would be a great adventure. My books tended to focus on the adventure inherent in bringing to market new technologies, or describing the excitement present even in mundane industries. Building rockets, however, has never suffered from being perceived as mundane. If nothing else, their unpleasant habit of blowing up - which they still did with some regularity more than five decades after the dawn of the Space Age - earned the industry a certain notoriety. Even the popular phrase "it's not rocket science" paid tribute to a universal understanding that rockets were still a domain of technology needing all the brain power which could be brought to bear.

But the real problem in reducing the cost of space launch, as Forsyth had explained to me, was not the technology; much technology development had been accomplished with those billions that had been spent in the government programs. No, the real problem was in finding a way to make money in the transportation side of the space industry, so that investors would be inclined to make the necessary capital available. The satellite business - especially the geostationary communication satellite segment - had proven to be extremely profitable, although with the useful orbital slots nearly full, it was now in a replacement-and-improvement mode with little growth in new systems or players. Even the low Earth orbit satellite constellations looked like they were beginning to make money.

The same couldn't be said for space transportation. The most reliable of the expendable launchers, supplied by Europe, the Japanese, the Russians, the Chinese, and in the United States, Boeing and Lockheed Martin, were used with some regularity to launch the comsats and occasional scientific spacecraft. But for the most part, they managed to avoid losing money only because of government subsidies, either directly or through the support infrastructure at the national launch ranges. The Russians, even with their impressive rocket engine technology, still lacked adequate resources to capitalize on their abilities. Various U.S. companies had purchased Russian technology and were still cooperating with them - mainly by paying royalties, but occasionally by engaging in joint production activities. Meanwhile, it seemed that every moderately developed nation in the world had developed one or more expendable launch vehicles and was aggressively marketing them.

Forsyth was politically a libertarian, in the old sense of the word. He was also an adherent of the Turner theory of the American frontier. Frederick Jackson Turner, a turn-of-the-century historian from Wisconsin, had set forth the thesis that what made America free was the open frontier. America had become a lot less free in Forsyth's reckoning. But if you believed in Turner's thesis, a new frontier would make even those remaining at home a lot freer. Forsyth was among those who saw the Internet as a kind of virtual frontier that had been largely responsible for the resurgence of democracy which had following the successful conclusion of the Cold War. It also served as an economic frontier, the likes of which had not been seen since the railroad boom of the late nineteenth century. For awhile the growth of the Internet economy had seemed to be outrunning even the endless growth in the federal government and its budget, but the long boom of the 1990s had finally ended with a shock whose effects were still being felt. It was, after all, only a virtual frontier, and the pioneers and "settlers" were still bound by the constraints of the "Old World".

Forsyth thought that America - with all its problems - was still the best place in the world to live, and his loyalties were strong. But the trends were troubling. Budget deficits were growing again, and a new value-added tax with its inevitable higher tax burden was beginning to seem likely. At the same time, the stifling effects of endless regulation and new social programs made it seem certain that America was heading where Europe had already gone: high unemployment, heavy-handed bureaucracy, and rapidly aging population. The latter was a problem because an aging population meant, obviously, fewer young people to provide the stimulus as well as the hands and brains for any kind of progress. At home, the population was aging too, but it had not yet reached crisis proportions, thanks to immigration both legal and illegal. But rising unemployment and the cost of social programs fueled a growing political consensus against immigration in the United States.

To be revitalized America needed a new frontier, in John Forsyth's opinion. A new frontier meant a place where ambitious men and women and capital could go if - or when - the environment at home became too oppressive.

Among the entrepreneurs who made their fortunes during the last decades of the twentieth century, Forsyth was not alone in being seriously interested in space exploration. Forsyth had gathered together a group of successful entrepreneurs each with a substantial fortune, who shared his interest in space. The reasons for their interest in space were almost as varied as their number, and because many of them had more than one motive, all the motivations exceeded the number of prospective participants. From this pool of wealthy space investors, Forsyth had formed an investment group. Their motives ranged from the ridiculous to the sublime, from a desire to contact extraterrestrial intelligence, to building a Benedictine monastery at the lunar South Pole. A few members of the group were still interested in proving that they could take on the next technological frontier and make money doing so. But every member of this small group had been profoundly affected by the early days of the Space Age, from Sputnik to the end of Skylab in 1975.

They had thrilled at the Apollo lunar landings and had marveled at the streams of pictures brought back by the space probes of the 1970s, 80s, and 90s. But the momentum of the early days dissipated as Apollo was shut down and the nation's human spaceflight efforts were narrowed to a single vehicle, the Space Shuttle. But the Shuttle never did provide the spark necessary to set off a new age of space exploration and development. The excitement was gone, and the spirit of adventure died. But not the longing. These six men and one woman had made themselves a promise in those Halcyon days, like so many others, that they were going to personally take at least one trip into orbit, if not to the Moon. Unlike so many of their contemporaries, they really meant to fulfill that promise, and not by bribing some government to stuff them into a capsule for a few unpleasant days in space. No, they meant to go in style, like the space travelers in the movie "2001 - A Space Odyssey."

Of course, they hadn't reached their positions or their fortunes without a keen sense of practical realities. They were not interested in adding yet more billions to the private and public monies that had been lost in pursuing the goal of low cost access to space. They were all familiar with (and in a few cases had been themselves among) the multimillionaires and billionaires, who had invested in space transportation start-ups in the past thirty years. Even with the help of some of the "fading lights" - experts from the glory days of Apollo - these efforts had had no practical effect. Space transportation was still as costly and far from routine. The human race was still planet-bound, save for the handful of government astronauts or the even tinier number of rich tourists who were dependent on the Space Shuttle and the venerable Russian Soyuz for their short and infrequent flights to low Earth orbit or the International Space Station. The promising suborbital tourist market, which was demonstrating some success, was still a long way from routine access to orbit and the solar system beyond.

Why did spaceflight still cost so much? As far back as 1952, Wernher Von Braun had proposed a very ambitious "Mars Project." He estimated that a three-year Mars expedition with ten vessels, 70 men, and placing 600 tons in Mars orbit would have logistics requirements no greater than those of a minor military operation in a limited theater of war. Von Braun's approach to cost-estimation was to look to the propellant requirements, which he could calculate fairly accurately, as a good measure of the total cost. He estimated the cost of the propellants at approximately $500 million, or about $100 per ton and assumed that would approximate the total cost. A key supporting assumption was that the launch vehicles used to mount the expedition would already be developed, with a demonstrated reliability comparable to that of modern transport aircraft. That last part, as history had shown, was the real trick!

The cost of the highest energy propellants - liquid oxygen (LOX) and liquid hydrogen (LH2) - these days is about $400 per ton, and less energetic propellants such as liquid methane and liquid oxygen cost less than $100 per ton. When inflation is taken into account the real costs of propellants today are less than Von Braun assumed by a factor of three to ten. The Saturn V launch vehicle, which Von Braun developed for the Apollo program, required about 22 pounds of propellant for each pound of payload launched into orbit. The Saturn used LOX and LH2 in its upper stages, and lower energy propellants consisting of a rocket-grade kerosene and liquid oxygen in its first stage. Even at $400 a ton, the cost of the propellants required to place a pound into low earth orbit is less than $10,000 a ton, or $5 a pound. However, as Forsyth was all too aware, the market price for placing a pound into earth orbit was over $3000, and much more if some of those pounds were people.

The recent history of the space program in the United States was full of promises that the next new launch vehicle program was going to reduce the cost of space transportation by a factor of 10, 8, 4, or 2, but none ever had. It seemed impossible to validate Von Braun's assumption that you could build a space launch vehicle which had the reliability and operating cost parameters of a modern transport aircraft. It had been over 50 years since Von Braun had proposed that such a thing was possible, and hundreds of billions of dollars had been spent on space transportation without significantly reducing costs. One could argue that the Soviets and the Chinese had achieved some economies of scale in the quasi-mass production of their expendable launch vehicles, but it was difficult to calculate true costs within command economies. Still, neither the Chinese nor the Russians nor anyone else was selling launch capability significantly below market prices, and given that the market was considerably over-built, it seemed likely that $3,000 per pound was close to cost, if not less than cost for most providers.

Forsyth had long been part of a Los Angeles - based Camerata which had gathered quarterly for almost two decades for the purpose of exploring ways and means of opening up the space frontier. The members were unanimous in their belief that this was utterly dependent on a major reduction in the cost of transportation to orbit. Therefore, they studied, critiqued, and learned from the various new launch vehicle companies which were forever being created only to fail a few years later. Many of these launch vehicle companies had been formed or funded by Camerata members who, after expending anywhere from $20 million to more than $100 million, had had to pull the plug on the ventures. A few of these companies had been technically successful, placing payloads in orbit, or carrying a few passengers on suborbital flights, and had gone on to become small player in the aerospace industry. None of them, however, had lowered the cost of space transportation enough to really change things. Given the incredible cash "burn rates" necessary for any serious dabbling in rocketry, in each of these cases it had soon become clear that with the relatively small amounts of money available, a revolutionary reduction in space launch costs was out of reach.

The kindred souls which Forsyth had assembled, most of whom he knew from the LA Camerata, comprised seven individuals with a combined net worth of approximately $10 billion. Of that sum, two to five billion were potentially on the table for this latest venture. They were by no means intending to squander yet more billions in a quixotic space enterprise. Rather, they were united by both a strong desire to bring about low-cost space transportation and open up a new frontier, and a by firm commitment to make another attempt only on the basis of a well-conceived plan that included a real probability of success - both technically and financially. That was absolutely essential before any of them would commit any significant amount of money.

He did not have a plan yet, but Forsyth was a believer. He was convinced that the physics was there, that it could be done technically. The opening of the space frontier just needed the appropriate economic engine to drive it. Bill Gates always talked about creating a positive economic spiral for a new product or service; a favorite example was the CD-ROM as a medium of information storage. If there were large numbers of useful products on CD-ROM, then consumers would demand CD-ROM drives, and they would be installed on every PC. On the other hand, if CD-ROM drives were installed on every PC, developers would make the investments to come up with new applications. To get the process started, Microsoft had invested heavily in creating CD-ROM products, with their Encyclopedia Encarta being the most significant. Once the process was started, it fed on itself: more installed CD-ROM drives meant that the cost of the hardware dropped, and once applications developers had a bigger market, the cost of those fell as well.

Forsyth felt sure that it could work for space transportation, too. Lower transportation costs would result in a larger demand for transport to orbit, a greater demand for transportation would result in lower operating costs and improved operating efficiencies, which would further lower space transportation costs, which would further increase demand for transportation in an ever-growing spiral. No one, certainly not any of the government space agencies, had ever come close to getting a self reinforcing spiral of lower-cost and greater demand started in space transportation.

In the early days of the Space Shuttle, NASA had attempted to provide low-cost transportation to orbit in the form of Getaway Specials and other small payload flight options, but these had been made available more for political reasons than for any real belief that demand could be stimulated. Furthermore, the cost of interfacing a small, inexpensive payload with a multibillion dollar national asset, and the many years of delay before your payload was finally launched, had always kept the real cost high.

On the other side of the cost equation is demand. The combined NASA and U.S. Air Force budgets for space transportation (excluding ground infrastructure) totaled $6 to $7 billion a year; worldwide commercial demand only another $4 to $5 billion , and other national space programs an additional $5 billion. This budget of $15-17 billion per year for space launch services resulted in less than the equivalent of 1.5 million pounds a year transported to low earth orbit. If costs dropped to $500 per pound, a seemingly reasonable near-term target, total weight to orbit just for the commercial demand would have to increase to 4 million pounds, just to keep the market at the size of the $2 billion which Forsyth thought was the minimum to support the necessary investment . It would be a long wait to develop a demand of 4, 8 or even 10 million pounds to orbit, which would be necessary if a reasonable return on a not-insignificant investment was to be achieved. Hence, the few new companies that had actually managed to fly payloads and satellites into orbit had to charge near market rates to keep from running out of cash, and were unable to stimulate that much new demand.

It seemed to Forsyth that in order to get the growth spiral started, it would have to become obvious to everyone that the cost of space transportation was on a really steep downward spiral. Something like Moore's Law would have to be set to work, with costs falling by half every 18 months or so, for the foreseeable future. Forsyth had researched and studied the problem long enough, including talking in-depth to as many knowledgeable experts as he could find, to be firmly convinced that no laws of nature would have to be overturned and no new science would have to be invented to achieve at least the first factor of 100 reduction in space transportation costs. All that was missing was the right engineering. And the right business plan. The big question was how much it would cost, and whether he could bring the necessary resources to bear.

The Group of Seven, as the members of the investment group had taken to calling themselves, had now been meeting regularly for over a year, and Forsyth had actually been able to get them all on the same page. If workable business and engineering plans could be developed, he felt confident that they would commit to a major investment. A limited liability corporation had been formed, called AM&M, and also a limited liability partnership so that they could funnel money into the development program while keeping open the possibility of benefiting from tax-deductible losses. In order to bring the necessary technical team together, an initial round of $50 million had been invested through the limited liability corporation. The task now was to put together a business plan, the most important part of which would be a marketing plan that showed how the company would actually make money. That was the tough nut to crack. All the technology and engineering in the world wouldn't be of any use if they could not demonstrate that the enterprise would pay off.

Although the marketing plan was the first major project, the first step was to hire a small engineering team so that marketing ideas and strategies could be checked for technical sanity. Secondarily, the engineering was going to have to be absolutely first-rate, and that meant pulling together a real team, not just a group of employees. The longer the team was together before they got all the way into a full-blown vehicle development program and real money was being spent, the faster and more smoothly the project should go.



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