Assorted links

by on April 24, 2012 at 11:03 am in Uncategorized | Permalink

1. Is this a golden age for inventors?  And what is the asteroid-mining business plan?

2. Is this a golden age of Hunger Games econometrics?

3. Should gamblers be made to stand?

4. “The fundamental question is: “Why is government’s share of the voluntary donations market so damn small?” “, more hereFurthermore “There are plenty of redistributionist goals which do not require concerted collective action or threshold levels of contribution.”

5. Shout it from the rooftops! (some results about auction pricing)

Greg G April 24, 2012 at 12:24 pm

Regarding #4:

Often thinking like an economist will give you new insights. Occasionally, it will cause you to miss something everyone else sees. Daniel Kahneman would have had no trouble with this one. People simply use a different heuristic to decide how much to pay when contributions are voluntary than they do when they are mandatory. If contributions are mandatory, then everyone is done with considering whether or not to pay more.

Economists are free to argue they shouldn’t behave the way they always do. Good luck with that.

Andrew' April 24, 2012 at 1:11 pm

Maybe it’s partly because the only first-hand experience I have with a “government” employee who really seems to care about their mission is in education, where a lot of volunteer money and energy does in fact go.

TallDave April 24, 2012 at 12:31 pm

1. This is the first plan I’ve seen that makes even a little sense. I doubt mining asteroids for terrestrial use will ever be economical — the potential energy difference in stuff sitting outside our gravity well vs stuff at the bottom of it is just impractically large — but volatiles for use in space might make a lot of sense for the same reason.

4. Interestingly Liz Warren of the viral “omg people, we all use roads!” fame didn’t opt for the Massachusetts voluntary higher rate. Apparently even she doesn’t love gov’t that much.

Andrew' April 24, 2012 at 12:42 pm

Of course, we don’t all use roads equally. That’s why they have truck weigh stations.

Sometimes I feel like my job is to point out things so obvious that noone notices them.

Dan Weber April 24, 2012 at 1:09 pm

It’s partly investment, but also significantly consumption. Instead of funding a bunch of libraries or museums they are funding space exploration. There’s a small chance they’ll break even, and a very small chance they will become even more fantastically rich than they already are, but they seem perfectly fine with that.

Just the science from step 1 (launching a zillion telescopes) will be awesome.

Finch April 24, 2012 at 1:14 pm

> Instead of funding a bunch of libraries or museums they are funding space exploration.

That’s something I could believe. It’s really a form of charity. They could structure it as a non-profit.

Finch April 24, 2012 at 1:12 pm

1. I still don’t understand the plan. It seems like any in-situ processing can’t possibly be cost effective.

There are some possibilities, in decreasing order of likelihood. If we want people living in space for years, we’ll need real radiation shielding for them, and that means lots of mass. Asteroid material could provide that without much processing. Debris shields don’t really need a lot of mass. Reaction mass is a possibility, but even that’s not simple. How much processing are you going to need to use asteroidal water? Can you imagine the required engineering? A steel mill in orbit just seems totally out before there are tens of thousands of people up there as a market. Even then I’d have doubts about its competitiveness with terrestrial production.

The first order problem is that any processing requires very expensive engineering; closely followed by the fact that there are no customers who are at all prepared to buy or take delivery of anything like raw materials in orbit. Look at the cost involved in getting SpaceX able to overcome NASA’s obstructionism, er, meet NASA’s vital safety specifications, when all they’re doing is delivering stuff NASA had made on Earth.

If you could find the proverbial platinum asteroid via remote sensing and then nip off a chunk, it might make economic sense to hard-land it on Earth, but that’s not a business that scales.

JWatts April 24, 2012 at 1:56 pm

“1. I still don’t understand the plan. It seems like any in-situ processing can’t possibly be cost effective.”

Sure. But billionaires don’t buy Ferrari’s, islands or blonde bimbo’s because they are cost effective either.

TallDave April 24, 2012 at 2:25 pm

Well, as they point out, volatiles are probably cheaper to mine than to drag out of our gravity well at thousands of dollars a pound, and the ISS needs them.

But I think you’re correct that this does suffer from the traditional problem that space is basically worthless.

Finch April 24, 2012 at 2:44 pm

I’m not sure I agree with either point.

Costs of space launch are high now because space launch is provided by the same people who bring you the Department of Motor Vehicles. If there’s going to be a market for lots of basic materials in orbit, it will only come if launch costs are reduced to more natural prices, say $100 a pound, or 10x the fuel costs. Ergo, the scheme is not competing with stuff lofted on the SLS at $10k a pound, it’s competing with stuff launched on whatever Bezos eventually makes, and it only has a market if Bezos (or others) succeed. ISS is a small potential customer that’s very expensive to do business with. It’s not a market.

Regarding space being basically worthless, I’d strongly dispute that. Can you name another place people regularly spend $10k a pound to send stuff to? It’s the single most valuable destination we have. Because the price is so high we only use it for extraordinarily profitable projects like weather, communications, and spy satellites, but that doesn’t say much about what the market would look like if launch costs were much lower.

Finch April 24, 2012 at 2:59 pm

I’m not sure my “Costs” paragraph was particularly clear.

For this scheme to work a significant market for raw materials in space needs to emerge. The only way that’s going to happen is if launch prices fall a great deal. Therefore it has to compete with things launched from Earth at future low prices, not current high prices, for it to make sense.

I suspect the true answer is more like: it looks like space is the next big development for humanity, and this is a good way to grow some teams with expertise, develop some patents, and otherwise get in on the game in the early stages. The specific plan is not that important since these guys are spending a relatively small fraction of their wealth to get a foothold. There are probably also elements of charity and vanity as Dan Weber and JWatts have suggested.

Adrian Ratnapala April 25, 2012 at 1:16 am

I don’t think they would be too worried about launch costs going down. Although that would stiffen the competition, it would also reduce their own costs and increase the size of the space market (or at least make any such market more likely to exist).

Of course that doesn’t mean this plan is actually profitable, but as everyone is saying, the investors are probably willing to loose money just to find out what happens. Besides, their company will be getting experience doing space-stuff, so if cheaper rockets scuttle the mining business, they can still take their knowledge and their IP and apply it to something else.

Finch April 25, 2012 at 9:36 am

> Although that would stiffen the competition, it would also reduce their own costs

I think this would be true if launch costs were a significant part of their budget, but I imagine engineering dominates. It matters how dependent they are on launch costs, with asteroid-volatile mines and robot telescopes, relative to the guy who puts water tanks on launches he buys on the market. Simple tanks on launchers benefit a great deal more from cheap launch.

But yeah, they’re buying an option on space industry. The specific plan doesn’t really matter at this point. It will change.

TallDave April 25, 2012 at 10:34 am

Well, keep in mind — 99% of the cost of mining is going to be the cost to lift the mining eq out of the gravity well. So as the cost of lifting water drops, so does the cost of mining it.

But here’s the thing that I think really explains why this is probably going to make sense: something like 99% of the mass of a rocket is actually fuel, and there’s just no way to engineer around that with chemical rockets. If you can mine volatiles, you can make your fuel instead of lifting it, and that is pretty compelling for non-LEO stuff. The only way I see that dynamic changing is if we go to magnetic or nuclear launches.

TallDave April 25, 2012 at 10:41 am

Regarding space being basically worthless, I’d strongly dispute that. Can you name another place people regularly spend $10k a pound to send stuff to?

Where in space can you go that’s worth spending $10K/lbs to get to?

Beyond Earth orbit, there’s essentially nothing of any practical value. That’s why we didn’t go back to the Moon — there was no reason to. The Apollo mission had about the same value as the Great Pyramids: a noteworthy achievement, but essentially a great big publicity stunt.

I think there are some great long-term prospects for robotically terraforming Mars/Venus/etc into somewhere worth going, but those are millennial projects.

Finch April 25, 2012 at 1:31 pm

> 99% of the cost of mining is going to be the cost to lift the mining eq out of the gravity well.

I don’t think that’s true even for pure commercial ventures with simple engineering. I think, typically, the number is more like 10% of the cost is launch for something like a comsat. The issue is that when the launch is a $50m purchase, you are required to make the device one-shot and quite reliable, because trying again if it fails is out of the question, and that drives up engineering costs. No one would bother making tri-redundent rad-hard ASICs for comsats if sending a repair guy up to fix it was at all practical.

I guess I don’t believe that the engineering involved in mining volatiles from asteroids will amortize out to less than $100 a pound for water delivered to LEO, even leaving aside launch costs of the mining venture which will have some non-infinite leverage. Frankly, I’d be surprised if you could hit $1000 a pound.

> Where in space can you go that’s worth spending $10K/lbs to get to?

Low earth orbit. I don’t know what will happen when it costs $100 per pound, and I don’t think anyone else does either.

TallDave April 25, 2012 at 5:38 pm

Finch,

True, but I think if you could build a reliable satellite for $100 rather than $100M, you would do it, all else being equal. Telecommunications is hard, mining is relatively easy. I believe they are planning to do something very simple like heat up rocks in a cage till they outgas, then capture the volatiles. My guess is they will be slow (solar powered) so they’ll try compensate by making them cheap, light, and plentiful.

I agree Earth orbit is obviously useful, but I have yet to hear of anything of value beyond it.

Finch April 27, 2012 at 9:59 am

> I agree Earth orbit is obviously useful, but I have yet to hear of anything of value beyond it.

How much would a real, growing autarkic colony, say on Mars, be worth? One that had a reasonable chance of surviving a terrestrial collapse? 10% of the present value of all future GDP? It depends on how likely you think collapse or disaster is, and how risk averse you are. But surely such a reduction in existential risk would be worth a lot.

The problem is finding intermediate steps that are worthwhile. People pay a lot today for remote observation and comsats. They look like they’ll pay a lot more for tourism at slightly lower prices. They might pay a great deal more for space-based solar power if launch prices fall a bunch. But there’s obviously a gap to bridge, and while I’m enthusiastic, I concede I don’t really know how this is going to play out.

TallDave April 25, 2012 at 10:50 am

I think this would be true if launch costs were a significant part of their budget, but I imagine engineering dominates.

That’s more the NASA “build something really really expensive and complicated to do something really amazing” model. If you look at how Elon Musk is doing things, you can see how the future of private space is going to be different. They are probably planning mining bots to be relatively simple, cheap and even mass-produced.

Sunset Shazz April 24, 2012 at 12:36 pm

“The investors aren’t making decisions based on a business plan or a return on investment,” he told me. “They’re basing their decisions on our vision.”

Oof. Rich guy vanity project.

JWatts April 24, 2012 at 1:52 pm

+1

TallDave April 26, 2012 at 10:35 am

True, but then the moon mission was basically a national vanity project.

Tangurena April 26, 2012 at 1:41 pm

Hey, if I had that kind of money, I’d do something like that too. Space is the final frontier. Some one has to wear the red shirt.

MattJ April 24, 2012 at 12:48 pm

#4: Money being fungible, the government cannot credibly commit to spending any ‘extra’ I might throw their way in ways I prefer.

In the rest of the charitable donations marketplace, practically everyone else can.

I have chosen a single charity to give approx. 80% of my charitable donations to, because they have a mission I am happy to support.

Generally, any extra money I give to the government will go primarily to things I’m ok with, with smaller amounts going to things

1) I approve of whole-heartedly or
2) despise utterly

Who would choose to give extra money to the government?

JWatts April 24, 2012 at 1:54 pm

Perhaps the US Government should allow charitable giving to specific departments. It would seem trivial for the Treasury to add the appropriate money to the specific departments general fund every year.

KLO April 24, 2012 at 5:38 pm

People are more likely to give to causes that don’t already charge them for their services. Churches do not demand payment, even if they do apply a certain amount of persuasive pressure. Public radio cannot charge for its services, something that is evident to donors who may feel some moral obligation to donate. Colleges do charge tuition, but many students are on scholarship and the largest, wealthiest donors are alums who probably feel that got a lot more out of their education that they paid. I am guessing that in this era of large tuition bills, student debt, and high unemployment among college graduates, generosity towards colleges and universities among the middle class will decline precipitously. Tax-supported, public institutions have a harder time raising money due to the perception among alums that continuing tax obligations are already covering their costs.

People will give to charities that charge them for services, but only when the benefit to them is more direct. Parents will raise money for their children’s public school so that it can offer foreign language classes. They will not contribute to the school’s general fund, however.

Andrew' April 24, 2012 at 1:08 pm

“Call for standup pokies” is a headline for several potential more interesting stories.

Cliff April 24, 2012 at 1:39 pm

The inventors article gets it wrong when it says patents are not worth anything to small inventors because they cannot afford the $1 Million cost of a patent infringement lawsuit. Today more than ever there are many alternatives- beyond the traditional contingent fee suit, there are now litigation funding companies and, even more important, professional patent enforcers (trolls) who can afford the $1 Million and are willing to pay some hefty cash for your patent if it is infringed by deep-pocket companies. Having your patent be infringed by deep-pocket companies is realistically probably the best thing that could happen to you.

Adrian Ratnapala April 25, 2012 at 1:21 am

I think the real risk is that such a company will be able (with the help of trolls) to find a way to countersue you. The claim might be totally specious, but whaddya going to do about it?

Well, I suppose what you do is settle for a few x$10k, but the point is that small developers face an upper limit on what they can extract from _even the lucky few patents that are any good_.

Dave Hansen April 24, 2012 at 2:34 pm

1. “Once invented and prototyped, those new products have to compete for space in a very narrow pipeline.”

Seems possible. What’s the evidence?

“Retail has become so concentrated that three companies (Walmart, Kroger and Target) control about a fifth of all United States in-store sales, and a tiny number of Internet and made-for-TV giants (Amazon, QVC) dominate in-home sales.”

The narrow pipeline is three companies having just 1/5th of in-store sales, and this doesn’t even count online sales??? How does this compare to Sears Roebuck? And isn’t having several big retailers (plus the ability to put anything you want to sale online) much better than having to go town to town and convince the local shopkeeper to buy your product?

Cliff April 24, 2012 at 4:18 pm

Yeah, anyone can sell on Amazon. Do they realize “Amazon” includes thousands of small businesses?

Neil B April 24, 2012 at 5:27 pm

Re #5: Interesting that I just ran across a company that sells market-based pricing tools for bars. It’s a stock ticker-type system that sets the price based on demand throughout the evening, and even has “market crashes” that reset prices to the daily low. They even have a kiosk where you can buy drink futures. I wonder if there’s a secondary market in bars using this system to resell your drink shorts. Could you bring in a huge group of friends and make the market? Here’s the site: http://www.thedrinkexchange.com/

Markets in everything, right?

NPW April 24, 2012 at 8:23 pm

For those who can’t see why mining astroids might be finacially viable, examine the issues with rare earths. It could be profitable.

Petar April 24, 2012 at 8:35 pm

It could be, but it won’t be in the foreseeable future. By that I mean at least 50 years from now on. This company launch is just as useless vanity. It sounds to me as Charles Babbage setting up a computer company back in the day. But, actually, now that I think about it, his chances would have been better.

Dan Weber April 25, 2012 at 11:00 am

Are there concentrations of rare earths in asteroids?

Finch April 26, 2012 at 1:29 pm

IIUC, rare earths aren’t particularly rare, it’s just expensive to get them out of ores and into pure metal form.

They vary in number of electrons like any other set of elements, but they all have, I think, two in their outer orbitals and for various reasons have their variance in their inner orbitals. So you wind up with a bunch of metals that all mass about the same and have similar interactions with other chemicals, and therefore it’s hard to process them.

Scoop April 24, 2012 at 9:02 pm

#5 Assuming you have reasonably usual tastes, auctions mean that in exchange for never getting something you (and other normal people) value a lot, you’ll pay almost nothing for things you (and other normal people) place almost no value on.

I’ll take my consumer surplus. Thanks.

Also, auctions do favor rich guys over poor guys because they equate the value of an experience not with how much joy it gives you but with how much money you’d spend to have it. I might get far more joy from front row seats at Fenway than a billionaire who can’t name one player in the lineup but the money that the Sox want for the seats means almost nothing to him and much to me.

Scoop April 24, 2012 at 9:03 pm

first graph should read “in exchange for never getting a great deal on something you value a lot…”

Jeff Kaufman April 25, 2012 at 9:18 am

My voluntary donations go to the charity that I think is best which isn’t the government. But the government may still be, in my opinion, a much better
charity than the ones other people are giving to. The amount of extra good the government can do with more money outweighs the small amount of money I wouldn’t be able to give away because of my personal tax increase, even when considering other people’s decreased discretionary money. (I would prefer a tax to benefit GiveWell’s top charity, but that’s not going to happen.)

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