A launch monopoly has little incentive to sell capacity

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 0:09

   And so I wanted to start this off on the state of the launch industry as it stands today with like SpaceX, Blue Origin, Rocket Lab, and a few others. So can you just walk me through that? So the state of the launch industry is pretty simple. There's one launch company. It's called SpaceX. They know how to launch rockets. that work for the present day. And they also know and are making a rocket that works for the application of tomorrow. So break that into pieces. Rockets today are used for basically one thing, which is deploying telecommunication satellites. The most common telecommunication satellite, and by extension, the most common satellite is SpaceX's Starlink, which services many millions of customers, maybe even tens of millions. I don't actually know a lot and is basically the only product in space that is used by humans broadly. There are some niche products

2. 1:07

   that are used by a very small number of humans, but Starlink is the only product that is serviced from space that is used by humans broadly and paid for by humans broadly today. And the application of uh the the servicing of uh telecommunication satellites requires on the order of a hundred rockets per year roughly it you know you could argue it requires a little bit more than that or maybe like a few hundred but on the order of 100 rockets here that are the size of spacex's falcon 9 and so spacex has been building for three or four years now hundreds of falcon 9 rockets here where the majority of them are for starlink um for those same five years there have been rocket companies that have seen that TAM, TAM of telecommunications, and said, wow, it's a big TAM. It's a $40 billion market, $100 billion market, and then tried to build rockets that

3. 2:02

   are similar to Falcon 9. And most of them, basically none of them have succeeded so far, and some of them will probably succeed the next few years. But more importantly, the future applications of rockets will service telecommunication satellites and AI data satellites. And the ratio between the quantities of these two will be something like 0.1% or 1% and 99.9% or basically 99 and 1. Okay. And the type of rocket that can service the second category of demand, AI data satellites in space, by definition must be cheaper and of a much bigger scale, which means that it has to be completely reusable. So basically to achieve the cheapness and the scale that is required to create a meaningfully sized constellation of AI data sats requires a fully reusable rocket. So, I mean, if you think about the launch market,

4. 3:05

   zero competition, one player that can service the present slash old market, and that is steamrolling the world and racing towards a rocket that can service the next generation of spacecraft. Meanwhile, you have like 10-ish competitors, quote unquote, that are trying to catch up to the yesterday rocket and basically just one competitor that's also trying to build at the same time a rocket that can achieve the economics and scale of the future to service the future market. So why is the market bad? It sounds decent. Well, um actually nobody there are there are zero vendors um so you know to call it a market is actually a misnomer um right now if you try to buy launch from spacex they won't sell to you basically under any circumstances um they may sell you like sort of obscure products like they'll sell you launch to the moon or they'll sell you

5. 3:59

   They have a new product called Starfall, which are great new products, but they will not sell you traditional launch services that are useful for either of these two applications, which collectively, one plus 99, account for 100% of satellites that humans will launch. Meanwhile, the other companies are also not in the market. Some want to be, but have no rocket, and so are sort of a selling rocket launch service that doesn't exist.

6. 4:26

   most are not even trying to match uh the capabilities of starship they're trying to match the capabilities of falcon um and so it might actually be the worst market of any kind because um it looks like there there used to be a market there used to be supply it looked like the supply was increasing but actually there is no supply um and no matter how much money you have you can't buy supply so um very bad so with this sort of thing if spacex is going to be mostly putting up AI data center sats in a few short years. I think Elon said that the cost of putting compute in space in like three years from the date of the Dwarkech podcast, it would actually be cheaper than here on Earth. Sounds about right. And if that's his view, and he believes that roughly there's like no, you know, demand limit on intelligence, why would he like ever sell

7. 5:18

   launch to anyone else, even if it scales, you know, scales launch like crazy with Starship? Yeah. And that's the perfect question to ask. If I owned a monopoly on a service and that service unlocked the scaling of what I personally and maybe others believe to be the most useful and valuable technology ever made. And the supply and demand relationship of that technology is that there is drastically more demand than supply, which is to say the prices are extremely high, the margins are extremely high, because there is more demand than supply.

8. 6:02

   Any rational economist would say that it's dumb to sell launch services, the bottleneck, to anybody else. And so actually the future that I see is there's really two possible futures. Future one is that we create competition. And I think this is the probable future. Actually, some very good reasons to believe that that's the case. And then future two is we continue to fail to create competition. And the result is that all of superintelligence capacity is owned by one company that isn't motivated to reduce price.

9. 6:42

   And isn't motivated to increase quality. And, you know, if we just ask ourselves, this is like not some kind of like revolutionary question, which future is better? Just about every single person in the room, except for the holder of Monopoly, would say the one with competition.