Colbeck Capital Management on Space Exploration Becoming the Ultimate Playground for Innovation

In early 2003, a seasoned rancher from West Texas by the name of Ty Holland met with a mysterious real estate buyer. At the time, Ty didn’t know much about the 39-year-old billionaire that he was working with, though he figured that the man might want to purchase a vanity project out in the boonies to pretend to be a cowboy.

Holland said of his earliest meeting with Jeff Bezos, “I knew exactly nothing about him or Amazon or internet… or any of that stuff.” At the time, Holland didn’t even own a computer. Ty figured that Bezos was just another wealthy individual trying to steal away a slice of open sky in the Lone Star State.

Nearly 20 years later, Ty certainly understands the gravity of his meeting and the impact that his work with Bezos would have.

Jeff Bezos, Billionaires and the Final Frontier

Jeff Bezos is an internet entrepreneur, media proprietor, and tech investor. With a net worth sitting at nearly $193 billion, it is easy to forget that Bezos came from at least somewhat humble origins. When Bezos was a kid in high school, he had dreams similar to many other kids his age — to explore and colonize space.

The Miami Herald would acquire a copy of Jeff’s Valedictorian speech from high school, and even then his intentions were clear. Bezos said during his speech, “The whole idea is to preserve the Earth […] and the final objective is to get all people off the Earth and see it turned into a huge national park.”

An early interest in space exploration would lead to an exploration of West Texas and the massive amounts of free space therein. Though Ty Holland didn’t know it yet, Bezos was looking for a place to headquarter the operations of his company, Blue Origin, one of the most innovative space startups on the planet. Inspired by the film October Sky (1999), Bezos founded Blue Origin in 2000, and by 2003, the company began acquiring massive tracts of land throughout Texas.

Jeff would end up purchasing a slate of land in Texas nearly half the size of Rhode Island. For reference, you could fit Rhode Island 221 times inside the state of Texas! Jeff said of his decision to purchase extra space, “When you are building rockets and launching rockets, it’s nice to have a bit of a buffer.” As Colbeck Capital Management recently wrote, Bezos is far from the only billionaire looking to make his way into the space race. Beginning in the early aughts, figures such as Richard Branson, Larry Page, and Elon Musk have all committed masses of wealth toward investing in the commercial space race. Onlookers can see an immediate impact through SpaceX and how the company has secured north of 60% of global commercial launches within the rocket industry.

The private sector is hungry to explore space as well as to profit from the pursuit, and billionaires like Musk and Bezos are more than happy to supply the funding necessary to do so.

From NASA to Commercial Space Exploration

This new focus on commercial space exploration through the efforts of the billionaire class has been a rather stark change from times of old. For more than five decades, the space industry was almost solely pursued through government initiatives, focusing largely on the Space Race between Russia and the United States. NASA itself was born in response to Russia’s launching of Sputnik, a revelation that caused quite the scare in the Cold War-era U.S.A. Lyndon Johnson would argue, “Soon they will be dropping bombs on us from space…”

To respond to these major concerns, the United States government would spend $650 billion in nominal dollars since the founding of NASA to become more competitive in the sector. Despite this rather large share of financial supply, public perception of NASA’s budget combined with a lack of post-moon landing public affinity would cause their budget to suffer. In 1997, an American poll revealed that the public believed NASA possessed nearly 20% of the nation’s GDP for its budget, rather than the actual 0.5% figure.

Following the Apollo Lunar missions, astronaut Buzz Aldrin would argue that America “lost its love of space.” The American astronaut would continue by saying, “Russia’s demise left a vacuum in the competitive arena U.S. government initiatives succumbed to inefficiency, apathy, and a complete aversion to innovation or risk.”

Despite Buzz’s harsh words, the institution would still inspire a young Jeff Bezos. Jeff has long been a staunch proponent of funding NASA, saying, “How many government agencies can you think of that inspire 5-year-olds?”

Billionaires Step Into the Arena

And now we are back standing on a stretch of land in the middle of West Texas outside Corn Ranch. Blue sky above and the stars hidden beyond, Jeff Bezos and his work at Blue Origin would set the table for a billionaire space revolution.

While Jeff Bezos has spent more than $1 billion per year on his Blue Origin project, the founder of Amazon was not alone in his efforts. Elon Musk is one of the other figures credited with functionally transforming and transitioning the space race from the public sector into the private sector.

Musk would establish SpaceX in 2002 after earning his fortune from PayPal. With a focus on developing reusable rockets, Musk would target sustainability while advocating for a lower cost of entry for rocket launches and future exploration. In doing so, SpaceX was able to reduce rocket launch costs from $50k per kilogram down to $2k per kilogram.

Adam Jones, an analyst for Morgan Stanley Equity, believes that lowering rocket launch costs will lead to further exploration and innovation. Likening the invention of elevators to the success of skyscrapers, Jones believes accessible launches will create mature space innovation.

Budgeting for the Future

According to Sinead O’Sullivan of Harvard Business School, data mining has the potential to become a serious issue in the coming years. Sinead stated in an interview that an entire “Library of Congress’ worth of data” is created on the topic of our orbit through satellite operators. Sinead went on to say that the private sector is the most likely champion to “figure out really clever and cheap ways” of working with this information.

As Colbeck Capital Management has written, financing space will make for an entirely new challenge. Bruce Cahan, a former banker and lawyer who teaches at Stanford University, would say that we need to build, essentially, “infrastructure assets today that pay for themselves and their technologies over life cycles.”