Space Policy Edition: A Trillion-Dollar Space Economy?

Mat Kaplan: Hello, and welcome to the July, Space Policy Edition of Planetary Radio. I'm Mat Kaplan of Planetary Radio and the Planetary Society joined by the Planetary Society's, Chief Advocate and our Senior Policy Advisor, Casey Dreier. Welcome Casey.

Casey Dreier: Hey Mat, happy 4th of July to all of our US listeners and happy Canada Day to all of our listeners in Canada.

Mat Kaplan: We are actually recording this on Canada Day, and our couple of Canadian colleagues are celebrating as they should be. It's a strange time to be celebrating, but certainly we still have a lot to celebrate, including a lot of great stuff happening in space exploration. Casey, I will jump right to something else. I mean, now is when we would usually push joining the Planetary Society, going to planetary.org/membership. So there I just have. But it's not too late to talk about another drive that we have on underway right now and an Advocacy Campaign.

Casey Dreier: That's true. As our listeners probably know, you and I don't work for free, even though we probably would, if we could-

Mat Kaplan: Shh, don't tell anyone.

Casey Dreier: ... but we're running a fundraising campaign that helps directly fund the advocacy and policy work that I do, that my colleague Brendan does, and the society at large does on your behalf as members and supporters of the Planetary Society. As a reminder, right? We're not an organization that is funded primarily by corporations. We're not an organization funded by government or an organization funded by people. We need to ask our supporters every now and then to help focus their donations to specific programs. And this time of year it's for the advocacy and policy program.

Casey Dreier: So this helps us do our job, right? It helps us offset the cost of our salaries, of our travel when we're able to travel again, working with partners to develop the great things like the Day of Action, developing policy solutions, outreach to the Biden and Trump campaigns going forward for next year, being ready to hit the ground running in 2021, no matter what the political change is, if any, in the US. So I hope you really consider if you like what you listen to here doing this kind of a show, or some of the writing that we do, or working to reach out to members of Congress with our information, go to planetary.org/advocacy, and you can chip in to the degree that you can. And literally every dollar makes a difference because we don't operate on this huge, massive thing here. We are a very efficient organization, and we put your money to work.

Mat Kaplan: Planetary.org/advocacy. I was just reading another review in Apple Podcasts of Planetary Radio, someone who, talking about how much he loves the show and especially the Space Policy Edition. Well, if weren't for the advocacy and policy effort by the Planetary Society, we wouldn't be doing this show. Would we on a monthly basis with the chief advocate? If this is something that you not only enjoy, but think is important, that you'll go to that site now. And of course we hope you'll also consider becoming a member because then you really become a part of the family. Why not do both. Planetary.org/membership as well. Casey, we've got a good long in depth interview with your guest today. Do you want to say something about her? I just got to listen to the two of you talking live, and this is going to be fascinating for everyone.

Casey Dreier: Yeah. The guest today is Dr. Bhavya Lal. She works at the Science and Technology Policy Institute in Washington, DC. And I think she is one of the most intellectually consistent, and thoughtful and critical in a good way, people working in Space Policy right now. I've been a big fan of her work for a long time. And she leads a lot of teams that take in some pretty in depth and very analytical approaches to big problems in Space Policy.

Casey Dreier: Today, we're talking about a recent paper that they just published the other month, which is on the size of the space economy and how important it is to define and openly analyze, or share your decision process about what's actually defined as the space economy, what assumptions goes into it, and then how you can use that to drive good policy from government going forward, and how we as people who support space exploration and those who may consider investing in it in the future, have a really clear understanding of what goes into people who talk about the future of space economy and space marketplace. So this is just a lot of fun to have her on finally. We linked to that paper. You can read it for free in our show notes. I recommend that you do. You can find her work on STPI, a lot of papers that she does there, I also recommend reading.

Mat Kaplan: And if you want to find those show notes, which we provide every month along with those for the weekly show, you'll find them at planetary.org/radio, because we know a lot of you are listening elsewhere and that's perfectly fine. We don't care where you find us. All right, here is this outstanding conversation that Casey has just had with Bhavya Lal, and we'll be back right at the end to wish you a good month.

Casey Dreier: Bhavya Lal, welcome to the Space Policy Edition. Thank you for being here at this month.

Bhavya Lal: It's an honor to be here with you Casey.

Casey Dreier: Today, we're going to talk lot about a recent paper that was released by your organization, the Science Technology and Policy Institute about measuring the space economy. I just want to go right into it. What is the space economy as it is now? And I think what we'll get into is how do different groups define that?

Bhavya Lal: That's a great question. Yes, we recently did complete this report and it is on our website for those of your listeners who would like to read it. Let me start down by acknowledging the team that worked in the project, our Senior Economist, Keith Crane and colleagues, [Evan Lincoln 00:06:31], [Rachael Wei 00:06:32], who've now gone on to graduate school and other awesome things. Getting right to your question, the definition of the space economy that we employed includes only the value of goods and services provided to governments, households, and businesses from space, or are used to support activities in space. And by that what I mean is our definition excludes activities that are enabled by space, and are primarily generated terrestrially.

Bhavya Lal: So for example, our definition will not include Uber. It won't include payments made to movie stars because of the payments that they're getting from [DIRECTV 00:07:10], that sort of thing. We believe we adopted this narrow definition because we think that focusing on activities from, or in space would help the US government develop better policies to foster the growth of commercial activities in space. And of course, help clarify for investors and entrepreneurs interested in the space economy. So the idea behind our assessment was to focus exclusively on space. And obviously, as you said, there are other organizations who have developed some numbers and ours are different from theirs, and I can guarantee that.

Casey Dreier: Yeah. I mean, this is ultimately what we'll get into I think in today's discussion that I found just fascinating reading this report, and I do recommend everyone who listens at the show to read it. We'll put a link up on our show notes. So much of what we talk about of the space economy and kind of the hype I would say around it, really depends a lot on who's defining the term and what it includes, and then the resulting numbers and how big they look coming in and out of this. So maybe even before we go and look at those comparisons, just maybe very broadly from the heuristic that you used and your team used on this report, what are some of the major sections of the space economy, just to ground our listeners before we go further as they exist now?

Bhavya Lal: So there're four major sections of the space economy. There is government expenditures on space, which are basically things like human space exploration, or science, or military space programs. Then the second one is space services, which are essentially expenditures by households and businesses on services generated in space for use on earth or in space. And this would be things like broadband internet provided by satellites. The third is the space supplier industry. This is things like sales of goods and services like satellite, space launches, ground stations, things that make possible the achievement of government space missions, or the production of goods and services in space for sale on earth. And last but not least is what's generally called space service user support industry. So these are things like consumer satellite TV dishes, or GNSS' hardware and services, things that are needed to utilize space services. And when you add all of it up, you see that this is where the differences between different organizations start to show up.

Bhavya Lal: We looked at data from 2016 for a variety of reasons, 2013 and 2016 for a variety of reasons. The most important of which is some of the more granular data that you need to be able to sum up especially this fourth category of user support industry. More recent information is not as freely available, and since we wanted to do our own map from scratch, we had to use the year for which all the information was available which was 2016. And we found that the size of the space economy is about 170 billion. And of course our major finding was that that's about half that of what some of the other organizations have estimated [inaudible 00:10:10] the Satellite Industry Association has. I think about 300 ish billion for the year of interest and other Space Foundation's number is a little bit higher than that. Again, there's a variety of reasons why that's the case.

Casey Dreier: And we will go into those. But again, let's just pause-

Bhavya Lal: Sure.

Casey Dreier: ... and emphasize those, yeah. What was it... 160 ish-

Bhavya Lal: 170, mm-hmm (affirmative).

Casey Dreier: ... 170?

Bhavya Lal: Yeah.

Casey Dreier: For 2016? Let's just keep it simple. We'll talk about the 2016 number from here on out, and not necessarily compare it to 2013. But half the size of what is commonly reported. And I'll emphasize to these other reports, these tend to be annual reports particularly from the Space Foundation that released this kind of summary. And this is used in a lot of places referencing these types of reports. And why don't we outline too why we're talking about this, even? Why is this important to understand the size of the space economy before we go in and really understand it? How are these reports generally used, and what was the goal with your report and your analysis trying to come in to further help this whole discussion?

Bhavya Lal: The reports are actually used pretty heavily by obviously the private sector that is trying to understand where investments ought to be made. They're used for the government and again, deciding where support is needed, where investments need to be made and how the government can leverage this, the emerging private sector. In particular, when you have this high base and you start to project forward at very high rates of growth, that's when you start to see estimates like the trillion dollar space economy by 2030 or 2040. I mean, already there are some challenges with the predictions. But when you start on a very high base, you obviously get to a very high point in the next 10 to 20 years.

Bhavya Lal: And again, there's lots of reasons why we want to be realistic in our forecasts, partly because we don't want to be disappointed. I mean, I'm as much of a space cadet as the next guy, I want us to be a [inaudible 00:12:12] billion dollar space economy, but that's... One followed by 15 zeros, right now is just 12. So I'm absolutely a big fan that we want to grow the space economy. I just happen to think that we just need to be realistic so we make good decisions around specific areas of investment or use of these products and services that are presumably available through the space economy, whether it's asteroid mining or space-based solar power or some of these new emerging areas that are being talked about.

Casey Dreier: And another way of saying that I'd say is it's very sensitive to initial conditions these projections. And so depending and if you're looking at a 300 billion or 170 billion, how you then project forward is really going to change based on what the actual size is now. So let's go back to this idea of the space economy then. You've outlined four major sectors, government being one, and then this kind of the users, and you said this term GNSS, that's a global navigation, right? From like GPS satellites and related types of satellites.

Bhavya Lal: That's right. GPS is the name of the US GNSS. And the Chinese one is called BeiDou and the European is called Galileo. So yeah, GNSS is a generic term for GPS. That's exactly right.

Casey Dreier: Is it the largest or one of the largest chunks of the space economies is using this type of navigation system I think if I remember off the top of my head. I don't have your report right in front of me. So you can jump in with any corrections with your more familiar details of this. But what strikes me... And again, this is something that I feel, and I'll be curious to hear from our listeners, if this was their experience too, that there's a difference, almost a chasm between what's talked about as the... Or at least in the media or in the public sphere as the future of the space economy being this really ambitious like, as you said, asteroid mining, or space-based solar power, or this cislunar space economy.

Casey Dreier: And what is actually the space economy now, which is primarily navigation, communication systems, commercial satellites, and then a big chunk sponsored by government. It always strikes me there's this functional kind of romantic difference. It's like there's a romantic idea, but that's not a very big part of the space economy. And then there's the functional space economy which, forgive me for lack of a better term, is kind of boring. Do you agree with that characterization? And then where do you think that comes from, that difference of understanding and discussion?

Bhavya Lal: So the largest chunk of the space economy is communication from geo. So the intel sites of the world, and a big chunk of the consumers are actually government buyers. That's the biggest chunk of our space economy today. It is growing at a three ish percent rate. And there's a sense that once LEO, low-Earth orbit broadband satellite constellations come into being, as you know SpaceX is about to launch its next [inaudible 00:15:13] of 60 satellites this weekend, the sense is that that will expand. So today it's about three and a half billion dollars. And the sense is that in the next 10 to 20 years, it will be $300 billion. And again, we can talk about how realistic that is. But your question is where does that schism come from? I think part of it may well be what you exactly said. Some of what we are doing currently is just the boring, the foundational stuff.

Bhavya Lal: What's really exciting is, how much money can we make when we are mining asteroids? [inaudible 00:15:45], whom I'm sure all of your listeners know well, talked about the first billionaires in the world would be working in space, basically mining asteroids, bringing platinum group metals back on earth, or mining asteroids for water and propellant. And that's exciting. So I think that's where some of the optimism about space comes from all the amazing things that will happen in the future. But as we know, well, none of those things are currently even in play. No government agency is spending any significant money on either asteroid mining or space with solar power, or cislunar communications.

Casey Dreier: Of the current space economy then you identified, so communications is the largest chunk. What's the relative size of government expenditures? And this is global expenditures on government's spending for space. Is that the second largest, or one of the largest?

Bhavya Lal: It is a quarter. So it is not the largest. It is a quarter of the total economy if you believe the bigger estimates, so 300 billion ish estimates, but when you look at ours where we didn't do some of the double counting that is done, we didn't include some of the terrestrial activities that are counted, it is fully half. So the government activities are a very important part of the space economy currently.

Casey Dreier: I'll just preface the rest of this discussion say, I believe your numbers. So I'm going to take the half, but it's a huge chunk, right? And so that's I think also a really important consideration for people too as we discuss the current space economy that it is, I would say dominated by government. And this is almost a whole other discussion, but I mean, this is direct government expenditures on things like NASA and the Chinese Space Program and ISA and so forth. And they're maintaining these types of GPS systems, right?

Casey Dreier: Which are all national systems, or consortium's even beyond that just those direct payments, space is just this highly regulated sphere so to speak, right? That to get into space, there's a huge amount of regulatory control by governments, whether it's spectrum control or access to these shared slots in the geostationary orbits. This is not like this big open free market I think in the same way that people tend to maybe associate it with whatever romantic notions of westward-expansion, or like Gold Rush, right? Like this is not just sitting there open to be exploited. This is heavily regulated. Government is at the huge part of this, no matter what.

Bhavya Lal: Yeah. So currently the government is a huge part, and there was a lot of regulation. The regulation is on launch and re-entry, so anytime any private company or any private entity wants to launch, they need to go through the FAA, Federal Aviation Administration. You need to go to the FCC for spectrum licensing. You need to go to NOAA to get a license, to do remote sensing from space. So yes, there's a lot of regulation. I think there is an effort underway to have a light touch regulation, especially for future activities. So, if we do have a system in our economy for the sake of argument, if there's a big commercial economy on the moon, then I think thus the hope is that there would be minimal regulation and a lot of encouragement of private activity. So that's one point I wanted to make.

Bhavya Lal: The second point to make is, well, the government is and will remain a large and a growing part of the space economy. In fact, with the US Space Force just being established, there's a sense that the national security side of government expenditure on space will grow. But having said all that, there is also growing private investments in space. There is venture funding that's going into space. And I think this is where the distinction needs to be made between investment and customers. While there is growing private investment in space, it is unclear if there are growing private customers in space, and this is something the remote sensing community and the small satellite community learned in the last few years that despite hopes and aspirations, they weren't able to generate as many private customers.

Bhavya Lal: And that was sort of the big change from the past that we were expecting to see that, governments will no longer be the major players, we'll have more and more private entities. For many areas that hasn't [inaudible 00:20:13] out and even when it has [inaudible 00:20:14] there's actually an important distinction that the ultimate customer may still be the government. So it is possible that Lockheed Martin gets a whole number of small companies that it pays to get services. And for those small companies, their customer isn't the government, right? I mean, Lockheed Martin is a private entity, but ultimately the money is coming from the government. And I think some of these details and nuances get lost in the distinctions and the discussions.

Casey Dreier: That's a really good point. And maybe let's just dwell on that for a minute more, this difference between investment and private customers. Well, first with investment, I mean, it's definitely grown over the past decade for sure, but I'm always struck still by the relative modest size of the investment. And I have to do the numbers off the top of my head. But last year that we had the full data, it was maybe a few billion dollars of private investment into space companies. The vast is something like 80% of that private investment was chocked up to Blue Origin, which is kind of like, yeah, the one investor, which is the guy who owns it. SpaceX of course, and then OneWeb, which just filed for chapter 11 bankruptcy. And the rest of every other space company that's out there getting private investment is something around a billion dollars. So, I mean, it's good that it's happening, but it's... Even compared to the size of the marketplace or the economy itself of 170 or so billion, that's small and relatively small for a lot of private economies and marketplaces.

Casey Dreier: This has been this perennial issue with the commercialization of space, right? That it's just an expensive, hard, high risk, uncertain payoff situation that doesn't necessarily lend itself to models of private investment that we've seen or developed over the last 100 or so years. And so, yeah, it seems like ultimately government is setting a lot of the conditions, and capabilities here. And it just continues to strike me, is that what we tend to think of when we're talking about this that it's a government defined economy, or do you see a way for this to move beyond that in the kind of the classic sense of how people are maybe anticipating this future market place to look?

Bhavya Lal: There's basically two categories of customers in the space economy. They are governments as we've been talking about, and then there's individuals and call them households and businesses. For the moment, governments have been the main game in town, right? I mean, whether it's science or human exploration or any of these. In recent years, we've had individuals or households and businesses that have become growing players. So on the communication side, individuals are coming into play even if you buy services for satellite TV, for example, or satellite radio. In principle and [inaudible 00:23:12] real estate companies, and others could be purchasers of remote sensing data, buying pictures from areas from space. I mean, do you hear these stories about Target and Walmart buying services from space to look at the size of parking lots and ascertaining what are [Christmas 00:23:32] sales.

Bhavya Lal: So there is a growing proportion of markets that are not governments. This is what I would add to what you just said, but I think where we don't know where things are going, is how much would that grow? In the VC community, [inaudible 00:23:50] that will take over government expenditures, and maybe in the next 20 years, it would, but so far we are not seeing those signs. So far the government remains a major buyer of space-based products and services.

Casey Dreier: And I guess the whole bet of SpaceX's Starlink system is that, right? That there will be a customer base out there for the space [inaudible 00:24:16] access to the internet, for example, in their case.

Bhavya Lal: That's right. I think the challenge there is that all the substantial number of people in the world do not yet have internet access. The challenge's that people may not be able to pay for those kinds of services. They have incomes less than the World Bank poverty line up $2 a day. They don't have the ability to purchase satellite internet. Wealthier households, those who can purchase satellite internet or the SpaceX Broadband, they are concentrated in urban areas where fixed line connections are more competitive. So I think satellite internet may have a difficult time competing against cell phone operators for these cost sensitive customers. Although obviously they can earn revenues by providing back-end network services to cell phone networks. With 5G becoming more common again, there's more competition. It remains to be seen if satellite internet will be used outside of niche markets [inaudible 00:25:11] use more likely in wealthier, rural parts of the world, mobile users like ships and aircraft, which again they could be growing, like gangbusters, monitoring pipelines and other infrastructure that go through remote areas.

Bhavya Lal: However, these markets may not be in the range of hundreds of billions of dollars, which are some of the predictions. But again, I mean, I want to remain optimistic and say, I just want to... I don't want to make anybody sad about this amazing new world of space, I think, and I say more power to all the ones who are developing new applications.

Casey Dreier: Good point. And we'll talk about that. We'll go into this, being an optimist while being a realist too. I definitely want to discuss this. But first let's go back to your report because again, I think this is just so interesting, particularly again, in contrast with some of these other reports and how you define these, the space economy. How did you define the space economy that was different than some of the more regular kind of annual reports that made it look smaller? Is it a function of just definition? Was there fundamental errors in the other reports, or it's just how you define what's part of the space economy?

Bhavya Lal: Great question. There's three reasons why our numbers were different. I mean, obviously that was an important part of our work. We really wanted to understand if we got something wrong, right? So one thing I do want to say that all the organizations that do develop some of these estimates are well meaning, and I highly respect them. So I don't think anybody is trying to pull the wool over anybody else's eyes. But just to go through the things that we did differently, we all tried to sum the value of goods and services purchased or sold by each of those four categories that I've mentioned, right? However, in some cases summing the value results in some double counting.

Bhavya Lal: So for example, when industry is selling rockets and spacecraft to government, and government is buying it, you either count the industry sale or you count the government purchase, but you don't count both. And when you add up both to put into a pie chart, when there is some amount of double counting happens then that leads to [inaudible 00:27:23] numbers. So this first one is sort of a mechanical issue, but the second one, as you said, is a definitional issue. We can find the value of satellite services to services generated in space. We included on the revenues or imputed revenues based on costs generated from owning and operating satellites and transmitting signals to earth. We excluded, for example, as I said earlier, direct payments for royalties, for films or other content or marketing expenses.

Bhavya Lal: The third major reason our numbers are different is that there's differences between how we estimate the value of the space service user support industry. Now, the fourth category I had mentioned, we only included the piece where the full value of a good or service is to receive or use signals from services, not the entire device itself. So for example, for GNSS data, we didn't include the entire value of the iPhone, just the microchip and other components that make the reception of signals from space possible. And again, that reduces the total dollar value. Again, this is not to say that the other estimates are incorrect. We just have a tighter system boundary.

Casey Dreier: I found that last point how you include the value of things that receive G, GPS signals or GNSS signals really instructive. Why you have to read things carefully, right?

Bhavya Lal: Yes.

Casey Dreier: Why you have to understand what's going into these types of discussions beyond reading the headline. The idea that the iPhone is a pure product of the space economy, just doesn't, in my opinion, hold water... It would exist with, or without that GPS receiver in it. And with WiFi mapping and cell tower ping, you can still do some function of geolocation. For me, it comes down to, what are some of the incentive structures and how we talk about the space economy, not saying it's purposeful or not, but are we encouraged as a community when given the option, maybe go for the larger number, because then you get more attention and it helps the industry. It's complicated, I guess. And this is I think the value of having multiple analysis like this, and particularly really open analysis, like the one that your group did. Beyond this definitional aspect of how you include the value of these types of economies, how did you try to create this heuristic in advance? So how did you try to avoid similar types of either your own desires or optimisms for outcomes, or what types of incentives were you trying to... Structural incentives, if any, were you trying to avoid in your group? How did you choose this system to identify the size of the space economy?

Bhavya Lal: The only incentive we had was to just be very crystal clear about defining the bounds. And we felt that space economy is what is created in space, or the interaction between ground and space, no broader, because after a while you don't know where to stop. And really good example is electricity generation, right? So if you asked me, "What's the electricity generation sector of the United States?" Now, the entire economy runs on electricity. We could say, "Well, it's the entire 20 trillion GDP." But that's not... That's on the electricity generation sector. I mean, obviously I'm exaggerating for effect here. Nobody else has done that. If we were to do the electric generation, we would focus on the equipment use for the power plants, transmission lines, turbines, the fuel, the oil or gas or nuclear fuel, whatever else that you're burning to generate electricity.

Bhavya Lal: So that was sort of what we were trying to do, get a narrow assessment. And of course we completely understand that this is subjective. And for some people, including Uber may actually be part of the space economy. And I think that's why then... You also mentioned this other thing about transparency, right? Sometimes it's just really not clear how something was done. So we need transparency of methods. We need that analysis to be publicly accessible. It needs to have peer review, right? I mean, we are perfectly happy if you and others come back to us and say, "We got A, B and C wrong and we will try to fix it." But I think the peer review part is also pretty important.

Bhavya Lal: I mean, there's things that the government can do to make this better. Right now we don't have in the commerce department, we don't have space specific industry codes to be able to very narrowly capture some of these things. Right now I think that it's like aerospace, which of course mostly [inaudible 00:32:06], it's an aviation. I think there's a whole bunch of things that we need to do as a community to get a better handle of what the size of the space economy is.

Mat Kaplan: Much more of Casey Dreier's conversation with Space Policy expert, Bhavya Lal is just a head. Stick with us.

Casey Dreier: If there's one lesson to take away from this discussion is that, it's actually surprisingly hard to definitively answer that question about the size of the space economy, right? because it's so subjective. We've just been talking about two definition and then your methods can be very different in terms of how you approach it. It's so much context dependent, I guess, which is maybe just the fundamental, what was it? The dismal science of economics, I suppose, right? It's very context dependent on what you define and what you're looking to understand. While reading the paper for example, I went back and forth on whether DIRECTV payments for royalties was part of the space economy or not. Because I was like, well, obviously it doesn't depend on things in space. Like Hollywood doesn't depend on space, but would they be making those payments if they didn't have satellites in space? And I can see a gray area. I can see kind of both arguments for that.

Bhavya Lal: Then the difference between the size of the space economy and the impact of the space economy. And the impact is quite out sized, as you just mentioned, right? That our banking system depends on space, that our transportation and logistics services depends on space, that [Pokémon GO 00:33:39] depends on space, generally they're part of the space economy, right? I mean, it just means that our investments in space have a multiplier effect on our society and economy and we need to nurture and protect the space domain. So I think sometimes we get confused between, is it the size or is it the impact? And we try to incorporate the impact into the size and maybe that's something to discuss.

Casey Dreier: That's a really good point. Again, it's like the idea that I was trying to think of in my head of a way to think about what is the space economy and it is nice you just [inaudible 00:34:11] the impact of it. Who advocates for space policy that helps them? So I don't see Hollywood demanding regulatory reforms to commercial launches to enable more, let's just say lower cost of commercial satellite services or something that would give them some impact effect through revenues. And I think maybe that's like a rule of thumb, perhaps. If there's no direct self-advocacy through an industry, is it really part of the space economy or is it just benefiting from something else that someone else is doing?

Bhavya Lal: That's an interesting rule of thumb to go with. I'm trying to see in real time, if there is a community I can think of that isn't advocating but benefiting, but you're right. That's actually an interesting point. I was just thinking, you mentioned Hollywood. I mean, I think the role of Hollywood in the space economy should not be underestimated. I mean the movie Gravity was impactful enough that there were hearings in Congress, with the title How To Avoid A Real Life Gravity In Space. I think it's really brought the idea of orbital debris to the fore of people's minds and movies like Martian I mean, oh my God, you cannot underestimate the impact of movies like that on our society. I heard that after that movie came out, JPL's recruitment day, I think they had like 30 mile backup of people wanting to go on and put their names in the industry fair or whatever fair they were having for recruitment that day.

Casey Dreier: That's the classic what you were just saying about the difference between impact, right? And there's a, great [Roger Linnaeus 00:35:50] paper, looking at the public history of support for space and seeing this jump in public support in the mid 1990s that has no other correlative explanation beyond the fact that Apollo 13 movie came out around that time, that probably caused like a permanent 10% or a 10 point boost in public approval of space. It is incredibly impactful, but at the same time, it's like the inverse of it, right? It's creating a public perception and it can certainly drive awareness and discussion through culture. By doing that, they're not also then advocating for the actual policies to enable the type of self serving incomes. I guess that's what it comes down to. To me are they doing self serving industry advocacy? Because I think that's where you come down to, how important is space to a business?

Casey Dreier: Well, if they're going to spend money on a lobbyist to directly impact regulatory structures or whatever types of industry subsidies or support technology investment from government, that's how you know if they're spending their own money to get more. So Lockheed Martin obviously spends a lot of money on lobbying on space issues because a huge chunk of their business depends on it. I'm not sure if Disney does. They might. I'll be happy to be wrong, but I think that invert, that kind of division that you were discussing between the secondary impacts of space versus the direct kind of economic measure of space.

Bhavya Lal: Yeah, I absolutely 100% agree with you. I'm just thinking of this recent news announcement that Tom Cruise is going to be filming on the space station. So, now we are adding space tourism. So, yeah, so it is getting more nebulous as we go forward. And I'm excited about that. I mean, I want more people to be going up in space, although for 55 million a shot, which is, I think the last number I saw for Axiom Space, I don't know if it's going to be due to many people going.

Casey Dreier: Well, this is maybe a good transition into looking into future with projections. And this was a whole section of your paper, and this is maybe important to kind of segment out the context of this too, is that, we've been talking about these other reports from the Satellite Industry Association and the Space Foundation, but those are kind of snapshot reports. Other groups have been taking those snapshots and making projections, Merrill Lynch, Bank of America, other banks, kind of investment type firms that then move this forward into the future. So these are two different groups of people who are, one is doing the snapshot and other types of groups are doing projections. What are the range of projections that are being put out there? And then let's discuss what ideas and assumptions are going into them.

Bhavya Lal: So we identified five reports, not all of which actually were available publicly. UBS made a projection for 2040, that it would be 926 billion and by 2040, the size of the space economy. Again, they were starting with a base of $340 billion. And if you do the math, it's about 4.3% compound annual rate of growth. Morgan Stanley started with about the same number, 339 billion and they projected it out to 1.1 trillion, which is 4.9% growth rate, roughly. And again, these are all 20 year estimates to 2040. The US Chamber of Commerce actually just did a straight line projection, 6%. They went from 3 billion to 1.5 trillion. Bank of America looked a little bit farther 2045, and they went from 340 billion today to 2.7 trillion, which is a 9% increase. And Goldman Sachs, the numbers is a little bit difficult to pin down since most of the report wasn't public, but they called it a multi-trillion economy. It seemed like about 9.5% compound annual rate of growth.

Bhavya Lal: So it went from 4.3% to 9.5% from 926 billion to multi-trillion, or at least 2.7 trillion. I should just clarify one thing. Unlike the snapshot where we actually did make our own estimates for projections, we did not have our estimate. We just looked at what the other estimates were and we tried to critically review them what they included, what they didn't include. Yeah, it was a lot of fun to read these reports.

Casey Dreier: I mean, they're certainly ambitious. So what are some of the common assumptions that these reports make that get you from a few 100 billion, let's say just as their starting point to the trillion dollar kind of space economy, which seems to be the phrase thrown around quite often about where this is going?

Bhavya Lal: One area where you see a large role across the board was satellite broadband internet services. In fact, Morgan Stanley's projection at $1.1 trillion, over three quarters of this number came from an increase in broadband internet demand. And actually this is important, accompanying demand for ground equipment, and then they included secondary effects. For example, now that there's global broadband internet availability, there's going to be more e-commerce, there's going to be more online advertising, there's going to be more social media revenues. So they included all of that in their $1.1 trillion economy, which brings us back to that original question of, where do you draw the boundary? I mean, do we want to draw the boundary at, in online advertising because there is greater internet access?

Bhavya Lal: And in some cases there were some very specific assumptions on that, that there will be 1000 astronauts in [North Orbit 00:41:42]. There will be [inaudible 00:41:44] at lunar habitat. There will be space solar power from geo and active lunar regolith and asteroid mining. So in some cases there were specific assumptions for the next 20 years. And space tourism and space mining going to shoot up in many of these estimates, not all of them, but at least to up the five of them.

Casey Dreier: A lot of things that basically haven't happened yet, they would say, "That's what gets you to the trillion dollars, whatever ish type of economy." Is that an accurate way to characterize it, maybe a pithy way to characterize it? Like if you assume magic, right? Or if you assume things happen like that don't exist yet, then it's sure like it can be worth a lot of money, but they're not... I mean, they're projecting what we have now, but it's kind of, you identify a couple of areas of what we do have data for, and they tend not to match that gross projections already that they're identifying.

Bhavya Lal: That's right, sort of as a side fun fact, in 2002, there was a study by Futron, which is actually a very impressive space consultancy and forecasting company. They predicted that by 2021 just next year, they will be over 15,000 passengers flying annually on suborbital flights with revenues exceeding 700 million. A year away from 2021, and we are still waiting for the first passenger to fly. I mean, I'm confident that this market will take off, but we don't know how big it will be and by when. And of course, on orbital flights as well, we've had only what seven people who've ever flown to the space station on eight separate trips. Again, as I said, Axiom has offered $55 million per passenger, Space Adventures just this week or last week signed up two passengers for a spacewalk. But these are onesies and twosies, right? These don't make a market.

Bhavya Lal: If we want to talk about a market and... A tourism market for example, it needs to be closer to an airline market, not five to 10 a year. So I think that's one of the issues. The other, I think the underlying problem with some of these estimates isn't even really sort of optimistic assumptions on asteroid mining and some of these things. Some of them is just extrapolating some trends, which are not really extrapolatable, right? So for example, one of the reports talked about Dennis Tito, went to the space station for $20 million. And now we can do 80 kilometers for $250,000. So the point they're making is, "Hey, the prices have come down towards [inaudible 00:44:18] magnitude, just keep extrapolating and they'll keep coming down."

Bhavya Lal: However, I think the lack of understanding there is that flying to sub-orbital space isn't the same as flying to orbital space, right? It takes 50 times as much energy to get to the space station as to some point at certain suborbital space. The same with sort of, there's this point about, "Oh, we have Rocket Lab and it's 100 times cheaper than the Space Shuttle." Well, yes, absolutely. But the Space Shuttle is doing different things and you cannot be going... You won't be taking human beings to the moon with the Rocket Lab's rocket or in fact, the specific example I'm thinking of is Rocket Lab's going to an asteroid again, I mean, it's an awesome company and I adore everybody there and all the great things they are doing, but it's unclear that you can take that price point and say we can now mine asteroids. So the costs haven't come down for the same capability. And some of it seems to be that because these are banks maybe doing the work, they don't understand some of these aerospace subtleties and nuances that you do need to understand to be able to make these plans.

Casey Dreier: Right. This is where understanding of physics certainly is useful when it comes to analyzing space issues.

Bhavya Lal: This is really an important point. Everybody has to have some aerospace engineers in their life. So I try to make sure anytime I'm trying to understand something or write something, I try to reach out to aerospace folks and say, "Hey, what does this mean? Explain this to me. What's the difference between specific impulse and thrust? How does solar electric propulsion do A versus chemical propulsion differently?" So you just need to make sure that even when you're writing for a policy audience, which is what we do for a living, our math is right. Our understanding of the principles is correct, which means you just need to get the right sort of technical experts involved.

Casey Dreier: So your background in nuclear engineering was then helpful for your recent report on nuclear launch policy then?

Bhavya Lal: That is correct.

Casey Dreier: Okay. Which just came out. We'll link to if anyone's... I thought that was also interesting, but we don't have time to talk about that one today. This really comes to me, again, this reinforces this idea of incentives, not ascribing malintent from these folks at the investment banks who are putting this together, but it certainly aligns with any sort of structural incentives to take the most optimistic projection of a future economy if you are then going to be selling financial products to potential private investors about that future economy, right? The incentives align to enhance that type of bullish analysis. That's where I think people just... It's important to understand how these come together if you're considering, or just analyzing this, maybe this is a good time, I think for our listeners and for people who follow this, how should they take in statements and claims like this? Because I guess you kind of approach this in a similar way I mean, as a professional, but how do you approach these types of claims and what are good things to keep in mind, just as a person when seeing someone wave around a $3 trillion space economy claim, for example?

Bhavya Lal: Carl Sagan once said, "Extraordinary claims require extraordinary evidence," right?

Casey Dreier: Sure.

Bhavya Lal: So I think if somebody makes a claim about something really incredible, you want to just look for what's the data, what's the evidence. And it really helps to have a combination of optimism and skepticism. So to give the fundamentals in mind, who is the customer, who's buying this stuff, how much does it cost? Do the growth rates make sense? Do they follow historical growth rates? So for example, if the space sector has been growing at three to 6% annually, thinking that it will grow at 15%, it may be possible. And fingers crossed that it does, but it's just something that should give you pause.

Bhavya Lal: So I think that sort of thing would be useful. Look for common errors in analysis, which are not again, as you said due to malice, but you're frequently double counting. Now, what are the system boundaries? Are they explicit? Are they justifiable? And again, the core point you've made that, just think about whether there could be motivated reasoning. Do people writing the report have a reason for exaggerating capabilities? And I think this is where some of the things... Something like this it maybe time that the government takes the bigger lead on it. I mean, Bureau of Economic Analysis and the Department of Commerce develops estimates for all sorts of sub sectors of the economy.

Bhavya Lal: Maybe this is something they should be doing for the space sector as well. And actually I'm saying that, and I actually happened to know that they have began doing this. That's a very good development because there's... It's more likely than not that it's going to be transparent from [inaudible 00:49:12] perspective. It will be accessible publicly. It is likely going to be subject to peer review, use common definitions across various different entities, whether it's commerce or treasury or the National Science Foundation or OECD, even when sort of these authoritative organizations develop these products, they are likely to be using common definition. So I think it's, we may be getting on a good trend here.

Casey Dreier: That's a good point. I mean, that's just kind of a good plug for the value of none interested public or nonprofit analysis and data collection for a larger community. It's a public good. I was just thinking that, you can tell me if this is too far along the analogy, but the idea of back in the Gold Rush era people would put up these advertisements in the East Coast saying, "Gold everywhere in the West Coast, come on out, [inaudible 00:50:02] jobs free for everybody. You'll be immediately rich." To paraphrase. Those were put by people who were incentivized to make it sound better than it was to draw a bunch of cheap labor out West. In a way and by having a public organization or public data gathering analysis that their financial outcome doesn't depend on inflating those numbers or showing really exciting outcomes of those numbers is probably a very important aspect to counter that type of boosterism that is otherwise type of just like a part of human nature.

Bhavya Lal: Right. And then there's a balance to be had, right? So one of my favorite stories to tell is that in 2012, the National Academies actually wrote a report for the Air Force on Reusable Booster Systems. And their bottom line was that given uncertainties in the business case and the yet to be mitigated technology risks, it is premature for the Air Force base command to program significant investments and a Reusable Booster System capability. So the part authorities in the country, the National Academies was telling the Air Force, "Don't bother with reusable first stages." And guess what happened? At about the same time SpaceX started investing in the area and in the next three to four years, they landed a booster, and we flew it, right?

Bhavya Lal: And yesterday actually launched a payload. The latest GPS satellite, I think, for the Air Force or I guess, Base Force now and landed their booster. So there was value, right? I mean, I'm glad that there's folks who are pushing the boundaries. And I mean, another example is the dot-com bust, right? I mean, sure most of the companies, there was a lot of hype in the system and most companies went out of business, but out of the ashes came, Amazon and eBay, and some of these other ones. Sure they know that that [inaudible 00:51:51] went away. Thank God. [crosstalk 00:51:54]. [inaudible 00:51:55]. I think there's, I guess, a case to be made for balance.

Bhavya Lal: And technology really is moving fast. There's this thing called Amara's law, "We as humans overestimate technical risks in the near term, and underestimate it in the longterm." I guess my point is that let the government do what the government needs to do, which is some portfolio of mostly conservative, but also some high risk things. And that the private sector kind of push the boundaries a bit more, although I would like to make the case that the government needs to have more of a portfolio approach to it, it's an investment then do few more high risk things, that it does currently.

Casey Dreier: Let me just take the fun perspective on that National Academy study. I guess they were totally right in a way, right? Like it's a good thing the government didn't start to invest in it because then SpaceX just went and did it, right? So in retrospect, government didn't even need to put extra money into SpaceX, or other reusable rocket technology, because it was then solved maybe in a cleaner fashion. So maybe ironically that report ended up being the right pathway from a policy perspective, but they just, or just, maybe they got lucky. But the bigger point that you're making, I think is [inaudible 00:53:11] dwelling on a moment that projections are hard and they're frequently wrong.

Casey Dreier: And so I can hear listeners saying, "Well, people said you couldn't do exactly that. You couldn't use reusable rockets." So why should we listen to you about the future of Starlink or other things, because for example, Elon Musk has proved people wrong his whole life. You can't make an electric car company. You can't make a reasonable rocket company, can't go to Mars. So how do you factor in the idea of just this kind of unpredictable aspect of development? Everyone's wrong until one person is right? And then that made you have this paradigm shift in terms of what's possible. So it's, is it even worth looking at predictive or critiquing predictive analysis like this?

Bhavya Lal: I think there's probably grains of reality and truth in almost all predictions. So I think it is worth looking and examining the assumptions and then seeing what doesn't stand up to reason versus what does. So I think there is value to predicting. So one area we recently wrote a report on is on orbit servicing, assembly and manufacturing for our assignment by the [inaudible 00:54:25]. Our job was to make predictions and we did. So I hope we have a chance to discuss that report sometime. But we kind of lay out why we think the markets and servicing would be this or assembly would be that, it may be useful for private companies. One thing that's say to have, fuel depots in North Orbit or not, I actually think it's worth the effort, but I think the key is to make sure that you examine them critically and do not take away just the top line, the runaway trillion dollar, or the growth rate of 15% kind of assessment.

Casey Dreier: It's almost like the difference between the idea of that it will, and the idea that it might happen. That maybe it just comes down to that informed consent or informed risk of how risky is something. Particularly with space I think where we touched on this a little bit, but there's so many basic physical challenges to being in space for humans and to spacecraft, right? Like it's just a harsh environment. Orbital mechanics, you can't shortcut orbital mechanics, right? You can't shortcut the rocket equation. Those all feed into ultimately what's likely versus unlikely to happen.

Casey Dreier: So I guess I kind of see it in terms of like, when you're making those projections, particularly at least in space compared to something like software where it's a lot harder to predict, because it's just software ultimately and clever programming and so forth, you're restricted by these real physical limitations. And so it's good to understand those I suppose, when you're making these types of bets on the future. How do you then take that knowledge, and particularly as a professional who's been doing this a while? I was thinking about how, when you write a report like this, and you're saying, "Hey, actually, the space economy we think is half the size of what other people reported." I don't see any politicians going up at hearings and waving that around just like, "Ah, yes, finally the space economy is half the size we hoped it would be like." No people keep talking about the trillion dollar space economy, right? They don't necessarily want to hear this information.

Bhavya Lal: But having said that two things did happen. So the Department of Commerce did start. And again, I don't want to attribute that start to our report alone, but the Department of Commerce did start an effort to, in earnest, estimate the size of the space economy and so did OECD. And both entities invited us to come present our work and look at some of the ways they were proceeding. So I think there is that kind of impact at the sort of the nuts and bolts of the policy level. But you're right, I don't think we will stop seeing the trillion dollar economy claims going away. And if it gets people excited, as long as the government is not overly taken by these claims and continues to make good decisions, we should be okay. I'll give you an example. So the asteroid mining just yesterday, there was a Twitter feed that the asteroid mining market would be [inaudible 00:57:26] in a $4 billion by 2025 in five years.

Bhavya Lal: I really hope the government doesn't take that as reality. We finished a report recently where we looked at the case for asteroid mining. And in fact, as we were doing our interviews and data collection, we learned that the two major companies that wanted to do asteroid mining, like they went out of business during the course of our study, we were like, "Can you please wait until our study is over." So the [inaudible 00:57:54] assumption was the private sector is all set. There's no need for government funding. These private companies will go do what needs to be done. Turns out that that's not the case, that is not going to be the case. It's asteroid mining is hard. It will take a lot of government investment all the way from prospecting as in knowing what asteroids have, materials of interest to us. And then from there to the equipment that's needed to mine asteroids, to capture the materials, to bring them to places of interest.

Bhavya Lal: It is likely not going to be private investment. I hope that our report helps NASA and other government organizations understand that if living off the earth is of interest to us as a society, as an economy as it is, then they won't just say, "Yeah, this thing is taking care of the private sector, is going to take care of it let's just invest now." So I hope that does happen.

Casey Dreier: You've mentioned you're an optimist, or you want things to happen in space as do I. I hope obviously, even though I tend to, I think instinctively maybe take a more pessimistic view of some of these activities. I always try to balance that out and I struggle with it, frankly, right? Like I want to be an optimist sometimes where even though I feel pessimistic. So how do you balance this out through your professional career of taking these critical looks at these ambitious ideas? Like how do you personally work through that contradiction? Have you remained an optimist going through this?

Bhavya Lal: Yeah, absolutely. I mean, I believe humans need to be a multi planet [inaudible 00:59:29] species. I want millions of us living and working in space. I believe the solar system is brimming with resources. We need to bring the solar system in our economic realm. This is the optimist part of me, however, I think, and this is where I put on my policy analyst hat, I think the way, and I believe it will happen, maybe not all of it in my lifetime, but I think the way it will happen is with careful planning with government investment and partnership to the private sector. We just have to be deliberate and methodical in this planning, right? So one example, the government needs to design mission plans and architectures that are flexible. So let's say when a commercial company does reach adequate readiness levels, they can be incorporated in these missions and architecture.

Bhavya Lal: Then we aren't stuck in some old, outdated monolithic paradigm. So, these asteroid mining companies or moon mining companies, let's say they do develop a water extraction system that is significantly cheaper than what the government is developing, our architectures should be in place that the government can quickly transition their operations to exploit them. So I think that's where we can bring those two points of view together, sort of staying optimistic and also staying evidence and data driven and trying to find points of interjecting sanity, or I guess reality and optimism.

Casey Dreier: Clear-eyed optimism. It seems like a-

Bhavya Lal: Yes. I like that. I think my husband uses this term apocaloptimist, which is so you have... Basically if we don't kill ourselves, we have a really bright future. So that's one term that I've used to describe some people.

Casey Dreier: ... it seems very appropriate at the moment especially. Dr. Bhavya Lal, I want to thank you so much for joining us on the Space Policy Edition this month. I hope you'll come back some time in the future.

Bhavya Lal: Casey, that was so much fun. I had a great time. Thank you so much for inviting me. And I think what you do and what the Planetary Society does is just fantastic. Keep doing it.

Casey Dreier: Thank you.

Mat Kaplan: Great conversation Casey, as usual with your guest Bhavya Lal. I really do look forward to hearing her again on the show. She's terrific, and if you have not been to this week show page yet at planetary.org/radio, that's where you'll find this month's edition of SPE. You got to see her the photo she gave us with her bio of her leaning against the biggest rocket engine ever built. The F-1 built for the Saturn V. It's great fun. I also learned before the two of you started talking Casey that she is a sister Trekkie. So, she automatically got extra points in my book.

Casey Dreier: That's true. We should have a whole separate episode about that one at some point.

Mat Kaplan: Oh, I hope we can. Anyway, great conversation. Thanks for inviting her to the show. And with that, I guess we're done other than maybe reminding people of how they can become a part of all this.

Casey Dreier: Yeah, well obviously just planetary.org/membership. The most basic thing you can do starts at $4 a month. Really again, I cannot emphasize how true the statement is that I'm about to say, we depend on having members. Absent members of the Planetary Society, we do not exist. There is no big corporate funding. There's no big government money that's keeping us afloat, is only through the dues and donations from individuals, just like you. So I hope you consider doing that. Or you can also donate right now to the Advocacy Program. The program that I run with Brendan Curry in Washington, DC at planetary.org/advocacy. Every dollar you give there, it goes right to our program.

Mat Kaplan: That's Casey Dreier, the chief advocate for the Planetary Society and our senior policy advisor. I'm Mat Kaplan, the host of Planetary Radio. Hope you will tune in right now as this show comes out, we're featuring a great conversation with Jim Bell who happens to be the president of the Planetary Society, but he's also the principal investigator for Mastcam-Z on the Perseverance rover, heading to Mars before long. It's a great conversation. We have them all the time here on Planetary Radio. Casey, I look forward to our next one on the first Friday in the month of August.

Casey Dreier: We'll talk then.

Mat Kaplan: And thank all of you for joining us, as always have a great month. Ad astra.