Sinéad O’Sullivan, entrepreneurship fellow at Harvard Business School, discusses how space is much more important to modern business than most people realize. It plays a role in making food, pricing insurance, and steering self-driving cars. While moonshot projects from SpaceX to Blue Origin drive headlines, the Earth-facing space economy is booming thanks to plummeting costs of entry. As tech companies large and small compete to launch thousands of satellites, O’Sullivan says we are actually running out of space in space.

CURT NICKISCH: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Curt Nickisch.

If you believe competition is pretty stiff in the global economy, try space.

Once the domain of one-upmanship by national governments, the so-called “Final Frontier” is fast becoming the arena of private enterprise.

Amazon recently announced Project Kuiper. It would put more than 3,000 satellites into orbit to provide high-speed Internet to up to 4 billion new customers.

Meanwhile, SpaceX is launching Starlink to put nearly 12,000 satellites into low-earth orbit. Facebook is reportedly working on satellites, too.

And that’s just for surfing the web anywhere on earth. Amazon CEO Jeff Bezos says he’s personally spending more than $1 billion each year to fund his other enterprise. Blue Origin is building rockets and landing modules to take people to the moon. Elon Musk has Mars in his sights with SpaceX.

And then there’s space tourism and asteroid mining. Some founders even dream of the day when ventures on other planets will disrupt lowly Earth businesses.

Our guest today has been studying this new space race, sorting through the actual value propositions. And she says space is probably much more important to your business than you now realize, although some of this is still far-off fantasy.

Sinéad O’Sullivan is a space economist and an entrepreneurship fellow at Harvard Business School. Sinéad, thanks for coming on the show.

SINÉAD O’SULLIVAN: Thanks for having me.

CURT NICKISCH: I read a forecast that projected that the global space economy would reach $1 trillion in 20 years. Where’s that money coming from? And why is it growing so much?

SINÉAD O’SULLIVAN: Yeah, that – so I actually read that statistic myself recently and that number just seemed wildly huge to me. So at the minute, this space market is roughly $325 billion. Now, whether or not there’s an opportunity to 3x that in the next few years is something I’m a little bit skeptical about.

So, I think the current earth-facing kind of space economy certainly is going through a huge growth and expansion at the minute. So, where I start to see the trillion dollars come into play is when we start to think about mining minerals, mining asteroids, space mining in general that creates huge resources that have already large valuation on earth and bringing them back to earth.

CURT NICKISCH: You’re essentially saying there’re two different space economies it sounds like?

SINÉAD O’SULLIVAN: Yeah, and I – you know, the way I think about the two space economies is that you have one that is very much earth focused. And by that I technologies that either deliver something to space or exists in space that help Earth – mainly satellites – through telecommunication, cameraing, imaging, something that really services the current earth economy.

And then on the other hand you also have this kind of completely new economy in space which is focused more on both exploration of space and creating this kind of interplanetary existence in space, which up until five to 10 years ago, would never have been, or it couldn’t have been imagined that it would be a private sector company trying to take on that challenge.

CURT NICKISCH: Well, let’s talk through these different economies and maybe work our way out, starting close to the earth and moving away. The Earth-facing satellites – you have said in the past that we’re running out of space in space. Can you explain?

SINÉAD O’SULLIVAN: Yeah, you know it seems insane. We’re running out of space in space. I mean, ridiculous. But actually, similar to how aircraft have slots at an airport to kind of load passengers, de-load passengers and take off from, you have the same situation with satellites.

It’s in fact so competitive that there’s a secondary market for satellite spots in space. So, when you think about SpaceX and Jeff Bezos both announcing that they want to put thousands of satellites into space simultaneously. One of the big issues that space law and space policy folk are working on is how do we, A, how do we manage the competition between the two of them for their kind of parking spots in space, and B, what do we do when we run out of space because this is effectively a natural resource similar to water or land.

CURT NICKISCH: Yeah, it sounds like a land rush, except it’s a space rush.

SINÉAD O’SULLIVAN: It is. Yeah.

CURT NICKISCH: You could have private investors send up a satellite to occupy space and then just rent it out because that’s like valuable real estate that’s only going to get more valuable with time.

SINÉAD O’SULLIVAN: Completely. And that’s what’s happening at the moment. So, now with the entrance of Jeff Bezos and Elon Musk with their thousands of satellites into space, it’s going to be very interesting to see how that changes the competitive dynamic of space in space.

I mean let’s look at the primary cause of the explosion in this market. And it has been a reduction in launch costs. So, whereas it now costs $2,000 – roughly looking at SpaceX numbers, $2,500 to launch one kilogram into space. It used to cost upwards of $50,000 with a very, very long lead time. So, with very cheap access to space, people are putting a lot of satellites into space because it’s making it, the availability of data much higher and the price of that data much cheaper.

CURT NICKISCH: At a time when data’s becoming more and more valuable.

SINÉAD O’SULLIVAN: Right. And you know, interestingly, this is what used to be a government-oriented approach. So now it’s the private sector doing that.

CURT NICKISCH: Yeah. And of course, we don’t really have a governing body for space to figure that out. These are, there are different countries that have their own satellites with their own interests and geopolitical power. Does this worry you?

SINÉAD O’SULLIVAN: It does worry me. It worries me a lot. So, there is no one governing organization that solely looks after space. And I think what has happened up until now is that we’ve relied on unilateral agreements to act responsibly in space. Now, what happened recently with a U.S. tech startup, I found very worrying.

One of the U.S. tech startups launched a satellite into space that did not have permission to launch. This could have been seen as an act of war from other states, from other nation states. But what worries me is that there was really no fallout for the startup company.

So, I think they were fined some arbitrary amount of money, but what this says to me is that let’s say that they’re trying to raise their next investment round to launch satellites into space. They’re going to go ahead and they’re nearly being incentivized to act badly at the risk of damaging geopolitical tensions to act in this new private sector race to space.

CURT NICKISCH: What – I mean to be clear, what are these satellites for?

SINÉAD O’SULLIVAN: So, the amazing thing is that people are affected by satellites throughout their day. There are very few ways in which you can interact with the world that you’re not going to be affected by a satellite – either a piece of data or a satellite system during your day. And a very few people understand that.

So, everything from the food that you eat – so when you go into a supermarket, it’s much more likely than not that the food was grown using satellite images and grown more efficiently than ever before. Weather and earth observation satellites; then looking at shipping logistics to get the food to you, looking at wifi for you to use your credit cards and connectivity to pay for your food. You leave the shop and you might call somebody on your phone. You have your insurance that is priced using satellite data. You watch TV. You listen to the radio. You communicate with people thousands of times a day. So, I think the reliance on satellite-based services is increasing as quickly as this kind of growth and the market is increasing.

CURT NICKISCH: So, costs have come down and it’s kind of like a Moore’s law of space, of the space economy. And that’s just opening the doors for many, many smaller actors, not just big, not just big tech companies like Google and Amazon, but also smaller players.

SINÉAD O’SULLIVAN: Right. So, this is largely why you have so many space startups at the moment. I can build a satellite in my garage and launch it relatively cheaply. This is why a lot of emerging economies, for example in Africa, India and the East are able to start launching their own satellites.

But I also want to touch on the point, I mean you mentioned the, kind of the Moore’s Law in space and it is and it isn’t. Access to space has gone down drastically which has been able to increase the number of players in the field, or the space. But it will never come down to the extent that everybody can participate. And so, there’s a hard stop there, unlike Moore’s Law.

You’re always going to have a somewhat relatively high cost in respect to other industries. And I think what we’ve seen with SpaceX over the last few years is that I think we’re very close to having hit the cheapest possible launch that we’re going to see and that we’re seeing that it’s not going to be reduced enough to be able to facilitate something as big a vision as colonizing Mars.

CURT NICKISCH: Autonomous vehicles – I’m wondering how much satellites are a part of that.

SINÉAD O’SULLIVAN: So, when you look at an autonomous vehicle, one of the most important aspects of that is going to be geopositioning. Does this vehicle know where it is, A, within the road and the natural physical boundaries of the road? But nearly more importantly, B, in respect to other vehicles and other cars that are going places. Now the way that we currently geoposition ourselves using GPS is A, not going to be accurate enough to do it.

CURT NICKISCH: It’s not military grade.

SINÉAD O’SULLIVAN: It’s nonmilitary grade. The basic GPS you get at the moment, the nonmilitary grade, gives you accuracy to within half a meter. Now, if you’re sitting in your car with your family and there’s a three-lane highway, and there’s a half a meter accuracy with three cars that are driving next to you, I wouldn’t like to test driving those autonomous vehicles. So, getting ultra-high accuracy is going to involve having much more powerful satellites.

But also, even before we start thinking about autonomous vehicles, every few hours one Library of Congress worth of data is created on orbit by satellite operators. So, the cost of getting this data from the satellite to the ground is already very high. So, we’re going to have to start thinking about trying to find new ways of getting basically a ton of data from space to the ground very cheaply. Having a private sector in the kind of near-Earth space market that can figure out really clever and cheap ways of doing this is going to be incredibly important.

CURT NICKISCH: Well, let’s move a little further out. Ten years from now, an asteroid’s going to whiz by the earth at 19,000 miles which is very, very, very close. What do you make of these efforts to go to asteroids to mine precious materials that are very valuable on earth? There’s a lot of money going into this, right?

SINÉAD O’SULLIVAN: There’s a ton of money going into this. So, I think there are two different ways to look at this. In the context of NASA and in the context of using very close to earth asteroids to test and figure out new technologies that are going to be used on Mars, I think it’s an excellent idea, and I think it’s a very, very pragmatic and cost-effective and efficient and safe way of completing a longer-term mission to Mars.

CURT NICKISCH: So, just to be clear, you’re saying that going to asteroids, trying to extract materials for construction or to bring back to earth, that’s a great way to test what you would actually do if you went to Mars, like a cheap stepping stone to do that.

SINÉAD O’SULLIVAN: Right, yeah. Because I definitely don’t want to be the first astronaut that gets to Mars and to create a habitat with technology that’s never been tested before in a space environment. Because more likely than not in that situation I’ll be homeless for a very long time.

But in the context of a private investment, I think it really baffles me and I think this is where you start to see a little bit of science fiction coming into play and what should be a normal venture capital or other investment.

Just looking at basic economic principles and thinking about the fact that doesn’t make sense to go to space, to mine something, and to take that mineral back to earth where its magnitude is cheaper, that off the top of my mind doesn’t make sense in the context of making money on earth. It’s pretty mind-blowing that companies have been selling that story to investors who have invested in it.

CURT NICKISCH: Yeah, I’ve seen stories like the first trillionaire would be somebody who got involved in asteroid mining. And it sounds like you’re very skeptical of that. Not going to happen.

SINÉAD O’SULLIVAN: Yeah, I’m incredibly skeptical about that. It just doesn’t make sense to me. You know, whether or not that asteroid can be mined and even contains anything valuable, statistically is extraordinarily low. So, if you think it’s going to cost you $1 to $20 billion to mine it and the chances of it having anything useful on it, to mine, is let’s say not quite, not 1 percent and the fact that even if you did mine it and you were successful doing that, you know just thinking about how flooding the market is going to reduce the price and it may not hold any intrinsic value on Earth anyway.

CURT NICKISCH: Why do ventures like that get funding? What is it about space or the idea of mining an asteroid that is so attractive to people?

SINÉAD O’SULLIVAN: That’s a great question. I mean and it kind of goes back to on a deeper level, why does Elon Musk say that he wants to go to Mars? And importantly, he has never said that he wants to go there himself. He said that he just wants to send other people. And I think it goes back to, I mean he’s put a lot of his own money and his own net worth into trying to fund and create this kind of interplanetary existence.

And it goes back to investors being very, nearly contrarian about the way that they see the world that we live in. So, you look at some investors who’ve made big bets with technology that you think is never going to work, and it seems counterintuitive to human behavior, but you can look at something like Uber and say, people will never get into a strangers car. That is insane. It goes against everything that we’ve ever learned.

Then you can also look at space and say this is insane. This goes against every economic principle that exists, yet people have created extraordinary value by doing something that is very counterintuitive. Add to the fact that people are very idealistic in how they see the future and they want to have these amazing technologies that were unimaginable before now, kind of come to life and they want to be, I think, some of it’s egotistical. They want to be part of the way that that happened.

CURT NICKISCH: Where do see this economy going in the next five years? And what about 50 years from now? You’re projecting a lot on costs of everything and you’re seeing the investment go up in certain places. What do you, where do you expect the space economy, where do you expect the space economy to be in five years and then 50?

SINÉAD O’SULLIVAN: Interesting question. And I think my answer to both may be very similar. So, I think in the short term we’re going to see this gigantic growth of kind of Earth-focused space technologies.

So, anything to do with launching satellites – I mean, there are over 100 satellites launched, startups in existence right now. Anyone creating micro nanosatellites, anyone dealing with the data relay between the satellite and earth, even downstream creating analytics is another huge sector that’s growing extraordinarily fast.

What do you do when you actually have the satellite data? I think that is going to become increasingly important to the way that we live on a day-to-day basis and that we’re going to have increasingly more touch points with this data every day.

And I think what we’re going to start to see happen in the kind of second economy that we talked about, the exploration economy. Am I optimistic that SpaceX will ever be able to turn this into a viable business model? No, I’m not. But what I do think will happen is that the role of the government and the public sector in this space will increase. And I think within the next 50 years, I do think a human will be sent to Mars. But I am very un-optimistic about the fact that we’ll be colonizing it within my lifetime.

CURT NICKISCH: Well, Sinéad, this has been fun to talk through, kind of the real economy that’s happening and also some future ones that could be down the road. Thanks for coming on the show.

SINÉAD O’SULLIVAN: Yeah, thanks so much Curt and yeah, it was great to talk to you too.

CURT NICKISCH: That’s Sinéad O’Sullivan. She’s an entrepreneurship fellow at Harvard Business School.

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This episode was produced by Mary Dooe. We get technical help from Rob Eckhardt. Adam Buchholz is our audio product manager.

Thanks for listening to the HBR IdeaCast. I’m Curt Nickisch.