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by Richard Godwin
Chicago IL (SPX) Jul 24, 2014
Creating an economic zone of influence that encompasses our solar system will be the single most difficult endeavor the human race has ever attempted. The biggest hurdle isn't even the engineering; it's not that we don't dream big enough and it has little to do with national governments ... it's that we simply cannot comprehend the economics.
Let's put it another way: we will not achieve this until we convince the investment community that, there is that substantial Return-On-Investment (ROI), that they require.
Any economic zone of influence needs trade, finance, banking, manufacturing, consumption and all basic needs that those processes encompass and rely upon; food, shelter, ability of raising families ... and most importantly ... the pursuit of happiness, which makes it all possible.
To hear the dreamers speak of, mining asteroids or building power stations in space, is to realize that, we do, indeed, as a species, dream big.
The problem is connecting the dots, from an economic viewpoint, so that finance-ability allows the business case to close and sustain-ability allows the endeavor to continue, unabated. In other words our community doesn't talk investment banker speak.
So, how do we get the investment community to commit the staggering sums required to mine an asteroid, so as to therefore transform a company with a dream and some fancy engineering? Indeed, the answer is to convince them your engineering is sound, but mainly that your business can produce the ROI concomitant with the high risk involved.
Many spacers will contend that we have identified certain asteroids containing enormous quantities of Platinum group metals, if only we could mine them. And the number bandied about is Nineteen-trillion-dollars, for one candidate, in the main belt. That's a big number. However, it doesn't close the business loop; if you drop that much Platinum into Earth's market, you will be selling it by the ton, not by the ounce. Its rarity value will be subsumed by availability.
Some would state the answer is, to adopt DeBeers business model. Maintain the rarity by squeezing only relatively small amounts into the main economy. Nice idea, but not one that will best serve your investors. Squeezing small amounts will not finance a $50B+enterprise.
Others would state that they would process the metals and sell them to the increasingly numerous new business comers in Low Earth Orbit and higher. In other words, "if we build it, they will come." A quaint but outdated 19th Century business motto, and again not something to convince your investors.
To the investor, in order to view a new idea as a business, the business must ensure it has five crucial stages in place, in order to create a real company. A problem to solve, a solution to the problem, an end client for your solution, money (of course) and then: execution, execution, execution!
The biggest problem to running a solar-system-wide economy, is having to deal with the laws of physics and the enormous distances involved. Trade cannot be run by large freighters running physical goods between planets. Trade, if anything, is going to be of an intellectual sort, with an open flow of ideas. But even this model will be tough.
Elon Musk's intrepid colonists to Mars will be little more than a high-tech hippy colony, with initially little specialization of skill sets. Those initial castaways will be producing water, food, shelter and the energy needed for their basic needs. A large initial industry might be making bricks...hardly a high tech tradable resource.
It will be required that these off world pioneers come to terms with physics, Delta-V and sustainable economics. How to marry these problems and find a solution?
An endeavor such as this: colonizing a new planet, will require equally bold economic thought and completely out of the box financial creativity and ideas. What I propose is, a staggered approach, for a space corporation to become a sizable, highly profitable solar system wide entity.
First: Don't go straight for the asteroid belt; start closer. Start easier. Use the technology needed for asteroid mining to start clearing space junk in low to high Earth orbit. Governments will, sooner or later, be compelled to fix the mess they've created.
At the moment, they want to drop the large junk into the ocean, but that requires more Delta-V than moving it into, shall we say, a Sanford-and-Son or "scrapyard" orbit. Moving junk into a scrap orbit could provide the first revenue stream for the company, with governments as first anchor client.
Second: The "junk" is mainly comprised of aviation grade aluminium, at a cost of about $10k/pound to place into orbit. This becomes a commercial second revenue stream for the company, selling to other new clients that will likely emerge. Chew up the junk into aluminium powder, place it in 3D printers and sell finished products on orbit, whatever the client requires.
Third: Economic, financial, out of the box thinking. You now have a revenue stream and enough expertise to go mine that platinum asteroid. Don't even think of bringing an asteroid back to near earth or lunar space; it's too dangerous. Process your platinum at the main belt location; two cubic feet represents one ton of mass and is worth about $55m at current market prices.
Commence returning the processed precious metals, to a bullion repository, in a strategic yet convenient location such as the L1 Lagrange point, where it will be visible from Earth. Call it New Fort Knox if you like. Now invite up a few key visitors to view your bullion repository; perhaps a delegate from World Bank, the Federal Reserve, Lloyds of London.
Let them observe the ever accreting mass of precious metal at your "vault" in the sky. Demonstrate to them the rate of increase of mass, and boast the security of your facility and the quality and purity of the metal.
At this point, without ever having to return any platinum, palladium or iridium to the surface of the Earth (except for PR purposes), you commence printing your own bullion backed currency on Earth, where the real market resides ... at least for now. The world is ripe for a better securitized default currency for closing all trade or commodity deals, around the world.
A currency backed by limitless, precious resources, with more practical utility than gold; backed by a useful metal as always had been, prior to 1972; as opposed to by the good faith of governments perhaps incapable of balancing their own books.
The Federal Reserve, along with the US Government, enjoys enormous benefit from being the world's reserve currency. The US must look to this technology, which may perhaps provide a continued and advantaged position, in perpetuity, to it and to the financial markets.
If not, someone else will eventually figure out that the way to control a solar-system-wide economy, is to maintain the resources securely off world and use them to securitize a new currency; one accepted as backed by real value, as opposed to merely a promise. Printing the solar system's default currency bestows upon the issuer a seat at the high table of global finance.
Godwin is CEO of Zero Gravity Solutions Inc. Boca Raton Florida and President of Apogee Books Toronto.
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