Rocket Billionaires

by Tim Fernholz

  Arguments for sending humans to Mars or colonizing the moon have a tendency to ultimately boil down to “because it’s there.” And while that may not be sophisticated, it’s a more powerful argument than it might initially appear. Alexander MacDonald, a NASA economist who has studied the history of space exploration funding, recalls a chemistry professor who criticized the nascent Apollo program to a reporter in the 1960s and retracted his comments the next day: “When men are able to do a striking bit of discovery, such as going above the atmosphere of the Earth and on to the Moon, men somewhere would do this regardless of whether I thought that it was a sensible idea or not. All history shows that men have this characteristic.” Women have it, too, of course, and in this book I do my best to refer only to human space exploration, not manned space exploration, even if the intelligentsia of the 1960s were not so enlightened.

  Ever since Galileo observed mountains on the moon in the seventeenth century, MacDonald told me, people have schemed to leave the earth. When the early scientist Robert Hooke described the properties of the vacuum later that century, there was a pause in such planning. Aspiring space travelers couldn’t figure out how to theoretically survive in space, MacDonald says, and “they stop thinking about it until the industrial revolution delivers a pressure vessel,” that is, an airtight chamber that can hold an atmosphere within a vacuum. “Starting in the 1830s, people start thinking about the problem again. By the late nineteenth century, Robert Goddard reads a couple science fiction books and decides he’s going to build a spacecraft.” As Goddard attempted to crowdfund money for his rocket experiments, one newspaper opined that “he will hardly get it by popular subscription, but millionaires have financed wilder schemes.”

  This urge to expand the frontiers of human experience has long been a private endeavor. MacDonald’s original research shows that investment in space technology by private sources is an American tradition dating back to post–Revolutionary War days, with Musk and Bezos as merely the next space billionaires in a long heritage. In nineteenth-century America, wealthy individuals would fund astronomical observatories at much the same cost—and with a relatively similar impact—as modern-day robotic space probes. Those telescopes expanded scientific knowledge but also showed that the young republic was on par with its European cousins when it came to the Enlightenment game of amateur scientific discovery. Signaling efforts like these dominate the history of space exploration, whether for national or personal glory. The richest man in California after the Gold Rush was James Lick, a real estate magnate. He paid more than $1.5 billion in today’s money to build what was then the world’s largest refracting telescope in the mountains of central California. It was intended as a monument to himself, and he was buried underneath it.

  For Goddard—and later Musk and Bezos—the economic case for human space exploration was based on potential scarcity of humanity’s most important resource, the very earth itself. “The navigation of interplanetary space must be effected to ensure the continuance of the race; and if we feel that evolution has, through the ages, reached its highest point in man, the continuance of life and progress must be the highest end and aim of humanity, and its cessation the greatest possible calamity,” Goddard wrote in 1913. And he, of course, wasn’t around to have experienced the age of nuclear paranoia or human-driven climate change. Musk and Bezos, on the other hand, came of age during the twilight of the Cold War and became business leaders as society began to reckon with the transformation of the global ecosystem by a fossil-fueled economy.

  Musk is, by training and temperament, a physicist—he dropped out of a PhD program at Stanford to start Zip2—and takes diligent stock in empirical research. The dire warnings of climate scientists hit home for him, and as a man who planned an extensive family, the future of the species weighed heavily on his next business ventures. For SpaceX, Musk would refine a philosophy about a “multiplanetary future.” Human civilization, so dependent on a fragile earth, deserved redundancy, and the sooner it got started preparing a backup planet, the better.

  “Why go anywhere?” Musk would ask in 2015, during the grand unveiling of SpaceX’s Martian colonization plans. “Eventually, history suggests, there will be some doomsday event. The alternative is to become a spacefaring civilization and a multiplanet species.”

  The earliest focus of Musk’s space work was proving the potential of this thesis. He had little training in the realities of spaceflight, beyond the science fiction he devoured as a youth and degrees in physics and economics from the University of Pennsylvania. But he did have an idea. He started a group called the Life to Mars Foundation, with a simple plan: he would fly a greenhouse habitat to the surface of Mars, land it there, and create a tiny oasis of life on the barren surface. This was a bold proposition in itself: the Mars Polar Lander, a probe launched by NASA in 1999 as part of its “faster, better, cheaper” initiative, had cost $120 million—and that was before the cost of the rocket to launch it. The lander had been destroyed when it crashed into the surface of the planet: a software error led the probe to cut its landing engines too soon.

  Musk wanted to send his habitat to Mars for $20 million or less. He just had to figure out how to do it.

  Like many a seeker of truth, Musk found himself searching in the desert. He wasn’t looking for a burning bush. He wanted a burning contrail, and the people who made them.

  The town of Mojave is just a two-hour drive north of Los Angeles, through the San Fernando Valley, up the steppe, and out into the high California desert. It’s flat, brown, hot, and laden with aerospace history: nearby Edwards Air Force Base is where Chuck Yeager broke the sound barrier and the US government minted men with the “right stuff” to fuel the glory days of the space program in the 1950s and ’60s. US Air Force and NASA test pilots still push the envelope there, and it is where the space shuttle orbiter touched back down after its first trip to orbit.

  Residents here don’t find sonic booms or explosions too out of the ordinary, which makes it a perfect place for the aerospace tinkerers who’ve come to test their contraptions at a safe distance from the general population—and from skeptical corporate managers. Burt Rutan, the legendary aviation designer, operated his company Scaled Composites as a kind of private skunkworks here. A few groups—the Reaction Research Society, Friends of Amateur Rocketry, and the Mojave Desert Advanced Rocket Society—maintain engineering sites out there in the desert, complete with concrete bunkers, fueling stations, launchpads, and stands to hold engines in place during testing. Many members have day jobs back in LA, where for decades big contractors like Boeing, Lockheed, Northrop Grumman, and others have laid their production base.

  The men and women who worked at these companies were the products of the best engineering programs in the country—CalTech, MIT, Stanford—with advanced degrees in physics and engineering, including computer scientists dealing with the challenges of complex software. As they toiled away in the bureaucratic, paperwork-heavy world of government space contracting, they saw their peers in Silicon Valley deploying technical know-how at exciting companies that turned some into millionaires. A few hours south, in San Diego, another high-tech start-up, Qualcomm, had also minted a cadre of wealthy techies by creating the chipsets critical to cell phone communication.

  The rocket industry’s bet on the tech boom remained Boeing and Lockheed’s participation in the EELV program. That plan to build a government-financed launch vehicle relied on a new wave of privately owned satellites. But the writing was already on the wall—or, rather, the NASDAQ—for those projects. The satellite firms faced increasing difficulties; their bankruptcies and the first discussions of higher rates for new rockets were imminent.

  It felt as though Los Angeles was the only place in California where someone with a brain for computers couldn’t find an exciting job or win a boatload of stock options. But the point of being a rocket scientist was to launch rockets. For the true believers, inspired by a heady mixture of the Apollo program and science fiction
, there were vanishingly few places to do that outside of the big contractors and NASA.

  While it’s true that the world spends hundreds of billions of dollars a year on space technology, the bulk of that money comes from government or quasi-government programs. The most lucrative private business models in space were still telecommunications providers and television broadcasters, both of which are heavily regulated by the government, thanks to their reliance on publicly owned airwaves to get their messages across. The satellite plays that hadn’t gone bankrupt were either television broadcasters or those that survived by focusing on narrow, niche products: transponders for boats and planes, emergency communications in rugged areas of the world, and top-secret communications for the military.

  The financiers who run these businesses manage satellites in orbit as though they were high-end real estate investments, leasing their services from snug offices in Washington, DC, London, Paris—or Luxembourg. The latter, a tiny European kingdom, cleverly became an early backer of commercial satellites, making it easier for companies to gain access to internationally regulated radio spectrum to transmit data back and forth from space. The satellite company SES was founded there in 1985 and quickly grew to become a major player in satellite television. SES and firms like it would raise billions of dollars, contract out the construction of the satellites, purchase the launch services, and do their best to outsource customer service and sales to a terrestrial communications provider.

  Other than satellites, there was apparently little for anyone to do in space besides science experiments, which didn’t represent an attractive return on investment. This was not due to a lack of rhetoric: ever since the Apollo program, private industry had been expected to find its way into space, pursuing futuristic profits.

  This attitude accelerated in the early days of the Reagan administration, which championed a law that ordered NASA to bolster space commerce. Deke Slayton, one of the first astronauts, led a rocket company that launched the first privately financed space vehicle, the Conestoga 1, in 1982; the company would quickly run out of funds. Another firm, the American Rocket Company, attracted top engineering talent but broke apart in acrimony after cofounder George Koopman died in a car accident on his way to a rocket test. NASA allowed employees of private companies to fly as “payload specialists” on the space shuttle: Charlie Walker, a McDonnell Douglas employee, developed a system to synthesize proteins in space. He flew three times, on his company’s dime, to test and develop it—making him the first human in space who wasn’t a government employee. Commercial representation on the shuttle was halted after Greg Jarvis, an employee of Hughes Aircraft, died during the Challenger accident. Still, the idea of business in space appealed—just a week after the accident, the Gipper called for a “new Orient Express” rocket system that, among other things, would fly passengers from New York to Tokyo in just two hours. This flight of fancy would eat up $1.6 billion and be canceled because it was technically infeasible.

  In 1999, entrepreneurs betting on space tourism leased the failing Russian space station Mir. Despite a successful seventy-three-day crewed repair mission funded by MirCorp’s investors, the orbital habitat fell into the ocean before it could be permanently saved. Financial difficulties and pressure from NASA, which saw the effort as competition for its own space station, ended the project. But it did prove that a market for space tourism existed among the wealthy. In 1996, Peter Diamandis, an eager space fan with a talent for networking and raising money for space ventures, created a $10 million prize to be awarded to the first privately funded vehicle to fly to space twice in two weeks. Five years after its inception, the award was still unclaimed, and it would be another four years before Burt Rutan’s SpaceShipOne claimed it. No major space hardware companies competed; there was far more money to be had in working for the government. The participants hailed from universities or experimental aircraft companies, which helped forge an identity for the still vague “new space” sector: idealistic engineers kicking around ideas outside the mainstream of the industry. For the foreseeable future, little of substance would emerge to fill the blank that was marked “commercial space.”

  The main obstacle to doing business in space is physics. Getting anything—equipment, people, raw materials—into space costs tens of thousands of dollars per pound. Getting anything back was even more costly. Astronomers had established the existence of valuable resources in space—minerals and chemical compounds—and microgravity is seen as a powerful enabler in designing advanced materials or attempting to generate biomatter to solve human health problems. But none of the benefits appeared to outweigh the enormous getting-into-space surcharge. Satellites, on the other hand, made financial sense, because the cost of moving data into space and back down was essentially zero once the spacecraft was safely in orbit.

  Still, if there’s anything rocket engineers like, it’s beating physics at its own game. The employees of the big aerospace companies with ideas and passion were finding time for their own projects out in the desert. One propulsion expert at the aerospace conglomerate TRW, Tom Mueller, spent nights and weekends building the world’s largest homemade liquid-fueled rocket engine in his garage, not knowing the role his prototype would play in changing the launch-vehicle business forever. The mechanically gifted son of a log-truck driver, he cut timber to work his way through college. He split his time between building a huge engine for NASA at work and dealing with the realities of the amateur rocketeer, which included showing up in court to pay a fine after one wildcatting experiment started a small fire.

  Garvey, for his part, had his own garage project. It was a small rocket designed as a test bed for new components. From there it could be scaled up to launch small satellites efficiently. But there was little interest in experimenting with it at Boeing, which was immersed in creating a new rocket for the US Air Force’s EELV program and still reeling from the failures of the Delta III. Experimenting on a small scale didn’t attract attention and funding like the big, splashy projects. “To make it worthwhile, it’s got to be a billion-dollar program,” as Garvey put it.

  “If they started off and said, ‘We’re going to develop a reusable system that would put a hundred pounds into orbit and come back,’ it would have been much easier,” Garvey told me. “But if you’re Boeing, if you’re McDonnell Douglas, if you’re NASA, there’s no glory in that. I’d do that stuff on the side, then go into work and say, ‘Hey, look what I’ve done. Can I get some [R&D] money?’ I found it was easier to build it in my garage and just keep going than to go and spend the time to try and lobby and get the funds internally. I may as well just do it myself.”

  Garvey left Boeing in 2000—“after Y2K,” as he put it—and set up a small space consultancy to keep building small rockets, seeking out contracts and advisory jobs. His timing was good, because Silicon Valley had finally come calling. One of the first jobs he landed was with a company called BlastOff, set up by a couple of wealthy Silicon Valley investors named Bill and Larry Gross.

  “There was a lot of money flowing, people wanting to do stuff. A lot of folks are interested in doing space now, either because they already owned a sports team or they weren’t into sports,” Garvey says. “We can argue whether it made sense or not. It was like, ‘Okay, if they want to spend their money, that’s why America is great.’”

  Bill Gross was a Caltech grad who had made billions off an incubator that invested in internet stock darlings like eToys, Pets.com, and Webvan. The latter, a grocery delivery concern, would come to epitomize the unrealistic business plans of the era, at least until a wave of start-ups—notably Amazon—embraced aspects of its model a decade later. Wealthy, and apparently moonstruck by the heady fumes of their digital riches, Bill and his brother Larry were disappointed by their inability to purchase moon rocks or lunar dust on eBay, or anywhere else, for that matter. They decided to fund a new company that would send a spacecraft to the moon and return with the goods. Eventually, they determined that the best way to f
und the company would be by way of advertising to people tuning in to watch video of the mission.

  Diamandis, the X Prize organizer, was tapped to be the CEO of the new company, a dream job for any space visionary. Garvey provided technical advice, along with a handful of other space engineers with a similar mind-set—impatient to build hardware and get things done. Tomas Svitek, a former Jet Propulsion Lab engineer, was the chief technology officer. James Cantrell, who had spent the past decade as a liaison between the US and Russian space programs, cleaning up after the fall of the Cold War, and developing never-launched joint missions to Mars, acted as a consultant, offering advice on obtaining surplus Soviet rockets. Just out of school, BlastOff’s marketing manager, George Whitesides, would later be the NASA chief of staff and CEO of Virgin Galactic. One engineer, Chris Lewicki, would go on to spend a decade at NASA’s Jet Propulsion Lab before founding the space mining company Planetary Resources. Other engineers on the team would be key early employees at Blue Origin or SpaceX.

  When BlastOff’s mission timeline was revealed—a moon landing the next summer, in 2001, ideally on July 4, followed by an initial public offering in the fall to cash in on what would be a signal event in the history of technology venture capital—the aerospace types began to understand the gap between perception and reality in the dot-com world. Such a schedule posed an insurmountable challenge, and the company still needed to raise $10 million.

  The stock market was also beginning to notice the credibility gap in the internet sector. The Gross brothers’ whole ecosystem of start-ups had been under threat since the market began falling in March 2000. In the words of one employee, “BlastOff burned through a lot of money and basically died.” The company was shut down in 2001. Its legacy would be one of hubris: another case of digital entrepreneurs striding boldly into the space hardware business, flailing, and ultimately failing. A cynical aphorism about the space industry was borne out: “If you want to make a million dollars in space, start with a billion.”