Author Topic: Post-speech discussion about Obama's April 15 KSC speech  (Read 382245 times)

Offline Namechange User

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #40 on: 04/15/2010 09:59 pm »
Incorrect.  Soyuz is massively subsidised.  Remove the subsidy and costs skyrocket.

You are making a fundamental economic mistake. You see, there IS a demonstrated market for Soyuz seats at $20 million or so.  Costs don't matter in determining a market, only prices do. Let me give you an example:

You go down to IKEA and buy a couch for $200. A boatload of other people buy the same couch at that price. It would be a reasonable assumption to conclude that there is a market for that couch at that price.

The next quarter, you read the earnings reports for IKEA and find that IKEA lost money on the couch and was subsidizing it. Does that fact change your opinion that there was a market for the couch at $200?



Does that mean that IKEA will keep selling the couch for 200 and is content with losing money?  Or will they increase the price of the couch and see if people are still willing to buy it?  If not, they discontinue it so that they don't lose money.

This will also apply to spaceflight.  No company wants to lose money.  If they are being asked to pay an extreme amount but not making the necessary, or no, profit they will pull out.

This means NASA is forced to pick up the tab or lose that capability too.  If the goal is to create a market, how do these decisions get made?  Where does it become unacceptable from a government cost perspective to carry the burden of everyone else and where will this money come from?
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Offline Danderman

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #41 on: 04/15/2010 09:59 pm »
3.  If you say that these companies will have to invest their own money in addition to that to do anything, I would say you are correct.  However, what are the terms of this to incentivise them to do that if they also say their business case does not close?  What are, or what will be the details of this public/private partnership?

The easy way is for the procurement requirements document to be explicit that companies should not bid if they cannot do so within the program funding levels and their available resources. This is a standard situation for all procurements. If companies can't break even on procurements, they "no bid".

As for the details of the "partnership", please wait for the procurement document.



Offline Danderman

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #42 on: 04/15/2010 10:01 pm »

Does that mean that IKEA will keep selling the couch for 200 and is content with losing money?  Or will they increase the price of the couch and see if people are still willing to buy it?  If not, they discontinue it so that they don't lose money.

This will also apply to spaceflight.  No company wants to lose money.  If they are being asked to pay an extreme amount but not making the necessary, or no, profit they will pull out.

This means NASA is forced to pick up the tab or lose that capability too.  If the goal is to create a market, how do these decisions get made?  Where does it become unacceptable from a government cost perspective to carry the burden of everyone else and where will this money come from?

Ooops. My use of IKEA was simply to demonstrate that market demand is uncoupled from costs to a very large degree.

IKEA, of course, makes a profit on its products, so your questions are irrelevant in this case.

Offline FinalFrontier

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #43 on: 04/15/2010 10:01 pm »

So why has it not happened yet? 

Why is Virgin doing it themselves? 

Why are companies saying their business case does not close?

Easy question. They are saying that without an anchor tenant, their business case for human orbital spaceflight doesn't close. NASA is proposing to serve as an anchor tenant.

Next question?


How much will that cost?  When will that be availble?  What happens if that "anchor tenant", the ISS, is not in the state it was supposed to be by the time they are available?

What happens if the market still is not there?  Will NASA continue to pay subsidies or an inflated "price per seat"?  Where does that budget come from?


Are you asking what happens under NASA commercial contracts if the customer cancels their purchases? Are you suggesting that NASA might decide not to, you know, fly anyone in space? OK, if NASA decides to stop spaceflight, the commercial contract termination clauses will be triggered.



Goodness sake.  For someone so sure of all of this you are very good at dodging questions and then trying to turn it around on them. 

I am asking:

1.  How much will it cost NASA to develop these multiple "commercial" vehicles?

2.  Will the six billion over 5 years be sufficient?  If not, where will the additional funding come from?  In addition, the president and the CSF quoted "over 10,000 jobs" will be created because of this.  Assuming 10,000 jobs, this translates to $120,000 per person per year.  That is close to the burdened rate, so where is the purchasing power of this money?

3.  If you say that these companies will have to invest their own money in addition to that to do anything, I would say you are correct.  However, what are the terms of this to incentivise them to do that if they also say their business case does not close?  What are, or what will be the details of this public/private partnership?

4.  When will these vehicles be ready for, as you called - which is correct, the "anchor tenant", meaning the ISS?  What if the ISS is not in a state it is in now because logistics and other materials have not kept with demand?  If ISS deteriorates, along with the business case for the anchor tenant, what will keep these companies wanting to invest their money as outlined in number 3?

5.  Once operational, what if the business case is still not there for them to do other missions outside NASA?  Will NASA continue to be forced to subsidize multiple companies in order to keep redundant access alive?  How will the decision be made on what companies to kept alive in that case?  What about the funding invested in the ones that die?  Are we willing to write that off? 

6.  Once the 5 years/6 billion is used up, what then?  If the market is not there still, how will NASA address this?  Where will that budget come from?  What if the subsidies or inflated "per seat" price (to keep supply chains active, manufacturing sites available and the people that will be required) sums up to a large amount of money?  How do we address the fixed costs over the long term?
And therein lies the problem. These are questions that should be answered before hand, not after the fact. Like LONG before hand (i.e. years ago.).
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Offline Danderman

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #44 on: 04/15/2010 10:03 pm »
The next quarter, you read the earnings reports for IKEA and find that IKEA lost money on the couch and was subsidizing it. Does that fact change your opinion that there was a market for the couch at $200?

Irrelevant if it is no longer possible to pay for supplying it at that cost.

That is where the equation breaks down of course.  If it were sustainable to launch tourists at that cost, with that level of subsidy, why is it not done so more often? After all, you argue that there are possibly hundreds of potential customers.  If there is a market and Roscosmos can fill it in a way that benefits them, why don't they? It is because they can't afford it.

In your example, the couch is a "loss leader".  By selling a couch at a loss, IKEA are hoping that I and others will come to like their products and come back for more, these priced in such a way as to cover the cost of subsidising the cost of the couch.  In the case of commercial HSF, there is no mechanism for recouping the subsidies.  So it will never be practical to fly any but a handful of space tourists at a loss because it is impossible to cover the cost of the necessary subsidies from the agency's profits from other revenue streams (satellite launch and flying stuff for NASA, mostly).

Similarly, SpaceX's ticket price will never go below cost minus the maximum margin offered from leveraging the profits from their other revenue streams.  Worse still, as the commercial cargo launch market is massively over-supplied, SpaceX cannot afford to over-gouge on cargo launch prices or they will lose customers.

Ergo: Commercially subsidised launch cannot create a healthy market.  Only with public subsidies, which could effectively be said to come from a bottomless pot limited only by the Federal Reserve's printing press, can this problem be overcome.

QED.


[edit]

Clarified my point about subsidies.

Okay, we are in la-la land here.

Let me be specific: Soyuz has demonstrated a market for tourists at some $20 million per seat. It doesn't matter if they make a profit or not, but even for a casual observer, its pretty obvious that the margin costs to RSC Energia and Roskosmos for that 3rd seat are waaaaaaaay less than $20 million, so they are in effect making a profit on space tourism.

Cue extended pointless debate about Russian costs, and average vs marginal costs.


Offline Ben the Space Brit

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #45 on: 04/15/2010 10:05 pm »
Let me be specific: Soyuz has demonstrated a market for tourists at some $20 million per seat. It doesn't matter if they make a profit or not, but even for a casual observer, its pretty obvious that the margin costs to RSC Energia and Roskosmos for that 3rd seat are waaaaaaaay less than $20 million, so they are in effect making a profit on space tourism.

The facts (specifically, the lack of more pure-tourist launches) suggests that the casual observer is entirely wrong.
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Offline Bill White

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #46 on: 04/15/2010 10:07 pm »
I also want Soyuz, Shenzou and Dragon to race to EML-2 and return.

Not very much to see, IMHO.  Mostly coasting for... what, 10 days there and another 10 back? What is the average viewership for long-haul sailing races like the Americas Cup?

It is interesting that you should mention those three vehicles as all three are unsuited for BEO without extensive modifications.

That said... a solar sailing lunar cup? Even if they were robot vehicles, watching pictures of those things gliding through space, especially if there were any overtaking manoeuvres, would be worth seeing.  Might earn some sponsorship money if corporate logos can be added to the sails.

Last cycle Larry Ellison of Oracle dropped $200 million to not win the America's Cup. This cycle he won and spent Lord knows how much money.

Also, a wealthy adventurer would get to go along for the ride and EML-2 is further out than Apollo 13 ever went. Crews would be further from Earth than any human being, ever.

Sponsorship money would also focus on pre-race hype, with nationalistic competitive overtones. Russia versus China versus United States.

Yes, most of the race itself would be deadly boring. However if national pride were on the line, I believe it is possible people would watch 15 or 30 minute updates every day for the duration and the sponsors would get publicity during the pre-race preparations.

Am I sure this would work? Of course not. I'm merely trying to think outside the more conventional boxes.
« Last Edit: 04/15/2010 10:07 pm by Bill White »
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Offline Danderman

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #47 on: 04/15/2010 10:07 pm »
Let me be specific: Soyuz has demonstrated a market for tourists at some $20 million per seat. It doesn't matter if they make a profit or not, but even for a casual observer, its pretty obvious that the margin costs to RSC Energia and Roskosmos for that 3rd seat are waaaaaaaay less than $20 million, so they are in effect making a profit on space tourism.

The facts (specifically, the lack of more pure-tourist launches) suggests that the casual observer is entirely wrong.

Pure-tourist Soyuz launches would require all seats to be sold at the average cost, which is  more than $20 million a pop. However, Google execs are buying a 3 seat Soyuz launch, so those average costs are not out of this world.
« Last Edit: 04/15/2010 10:07 pm by Danderman »

Offline Namechange User

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #48 on: 04/15/2010 10:09 pm »




 

The question I have been asking, I have been asking for months.  All the while you keep saying everything will be great and then going after people. 
« Last Edit: 04/15/2010 10:18 pm by Andy USA »
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Offline Bill White

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #49 on: 04/15/2010 10:10 pm »
Danderman, if you are correct about the tourist market, why does NASA need to play anchor tenant?

I see the "NASA as anchor tenant" argument as an admission that the commercial market isn't very strong, or, as with MirCorp, there are people who don't want facilities other than ISS up there in LEO.
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Offline Danderman

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #50 on: 04/15/2010 10:11 pm »
 I am pointing out that many of your questions are procurement-level issues which are far from being resolved. I hope you understand that such questions are trashed out over during the procurement process, not when the President enunciates the goal.
« Last Edit: 04/15/2010 10:18 pm by Andy USA »

Offline Ben the Space Brit

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #51 on: 04/15/2010 10:12 pm »
Let me be specific: Soyuz has demonstrated a market for tourists at some $20 million per seat. It doesn't matter if they make a profit or not, but even for a casual observer, its pretty obvious that the margin costs to RSC Energia and Roskosmos for that 3rd seat are waaaaaaaay less than $20 million, so they are in effect making a profit on space tourism.

The facts (specifically, the lack of more pure-tourist launches) suggests that the casual observer is entirely wrong.

Pure-tourist Soyuz launches would require all seats to be sold at the average cost, which is  more than $20 million a pop. However, Google execs are buying a 3 seat Soyuz launch, so those average costs are not out of this world.

The fact that it isn't happening more often suggests that they are high enough to be a barrier to making the deal.  If the costs were as (relatively) low as you imply, then there would be more 2- or 3-tourist flights in the planning stages.  The fact that there are so few examples suggest that the subsidies are high enough for RSC to be unable to convince the Russian government to let them do it.

To re-emphasise: If the market supported the supply, then there would be a lot more tourist-only flights.  Heck MIRCorp might even have a 'Salut-10' up there as a destination.  As it is, the market is false and subsidy-dependent.  Without that, it would fail and all those tourists would have tickets barely worth the paper they were printed on.
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Offline Danderman

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #52 on: 04/15/2010 10:13 pm »
Danderman, if you are correct about the tourist market, why does NASA need to play anchor tenant?

I see the "NASA as anchor tenant" argument as an admission that the commercial market isn't very strong, or, as with MirCorp, there are people who don't want facilities other than ISS up there in LEO.

The commercial spaceflight is NOT strong. There have been a handful of space tourists. I did NOT state that it was strong, I stated that it existed.

Please don't waste our time with non-issues.

There is a space tourism market at $20 million a pop and 6 months of training. If a safe provider offered a cheaper ride with less training, the market would expand.

Please don't bother stating that the commercial providers are not yet demonstrated to be safer than  Soyuz, or some other tangent.

Offline northanger

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #53 on: 04/15/2010 10:17 pm »
I, for one, can see the future & excitement in Obama's plan. And so I dare to dream. Will you?

I'm totally there, today helped put some things in place for me. But think we do have to deal with the short-term impact of this decision to manage expectations, disappointments and some valid distress.

I agree. I would like to see a Shuttle extension, because the ISS needs downmass capability, and the Shuttle is the only vehicle that will be able to provide it for the foreseeable future.

Bringing in a comment from the other thread.

Return to Flight was a huge deal for me. My mother's a teacher, so I won't forget Challenger. I remember Columbia. I don't want to go through that again. Watching NASA since 2005 I've learned more about their real contribution instead of questioning why we spend money to go to space. As a quality assurance engineer I've observed SSP make real changes to safely deliver crew & payloads and complete the ISS. I will be absolutely happy with joy when SSP makes its final wheels stop, but also sorry to see it go.

Saying all of that, it was difficult for me to be okay with a shuttle extension. But yes, nothing else has the downmass &c and there is nothing present to ensure ISS's future health. However, continuing shuttle means we don't spend money needed elsewhere. It's been a major conundrum for me. And maybe that's the real challenge: Space, the final frontier.

That's really Roddenberry-ish, but I'm beginning to appreciate a president willing to put it us right on that edge.

Offline Danderman

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #54 on: 04/15/2010 10:19 pm »
The fact that it isn't happening more often suggests that they are high enough to be a barrier to making the deal.  If the costs were as (relatively) low as you imply, then there would be more 2- or 3-tourist flights in the planning stages.  The fact that there are so few examples suggest that the subsidies are high enough for RSC to be unable to convince the Russian government to let them do it.

To re-emphasise: If the market supported the supply, then there would be a lot more tourist-only flights.  Heck MIRCorp might even have a 'Salut-10' up there as a destination.  As it is, the market is false and subsidy-dependent.  Without that, it would fail and all those tourists would have tickets barely worth the paper they were printed on.

I assume that most people here have a basic understanding of economics and finance, which is probably a mistake. Oh, well.

There is something called an "inflection point" when it comes to building stuff, a construction level after which which marginal costs increase for additional units. For RSC Energia, its a real push to build 4 Soyuzes a year. To build an extra one for Google and then another one for India is tough, they have to hire and train extra workers, and their subcontractors have to do the same.  So, production costs for Soyuz are non-linear, and there is a "hockey stick" in there.

IF there were a demonstrated market for 5, 6, or 7 per year over the long haul, Energia could bite the bullet and make the big one time investment to build that many Soyuzes per year at lower marginal and average costs, but they don't have the confidence that there will be more than an average of one or so tourist per year. That's the real world.

Now, when and if space tourists fly on Dragon alongside NASA astronauts, feel free to claim that their tickets are also subsidized by the government. In fact, ALL of the early airlines were subsidized by government air mail.

Do you have a point to make?


« Last Edit: 04/15/2010 10:19 pm by Danderman »

Offline dks13827

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #55 on: 04/15/2010 10:28 pm »
I keep thinking about the high probability numbers I've seen for catastrophic orbital debris impacts at ISS, and wondering about the wisdom of basing so much of our future plans around ISS support.  Talk about a single point of failure...

This is also an argument against Mars missions, as well, which are more exposed to catastrophe in this regard. If ISS were punctured by impact, probably a module or two may be lost, but the crew can evacuate to Earth.
The missions to Mars thus far don't show this to be too much of a risk.

Offline Diagoras

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #56 on: 04/15/2010 10:30 pm »
Listen, I agree with you, but you are acting like an absolute jerk. You're unlikely to convince anyone that you're right when you alternate between disrespecting them and openly mocking them.

And if you're not in this thread to have a civilized discussion and convince people of your point of view, please leave. We have enough trolls as it is.

You are probably correct, but the attacks on the Obama are getting pretty kooky today.


I agree with you 100%. Nothing annoys me more than a Republican KSC employee who's rabidly against the public option in healthcare and rabidly for it in LEO. But the guys you're talking to seem pretty solid. Take ten minutes away from the computer to cool down?

The people who really tick me off are the ones who join this forum, spam some anti-Obama "he's a socialist trying to let China win" nonsense, and then refuse to respond to rebuttals. OV and Bill are both smart people who want the same thing we do: humanity in space. We all have the same goal here, people, we just have to figure out the best way to reach it.

Sorry for the dramatic interruption, please resume your discussion. :p
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Offline Pheogh

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #57 on: 04/15/2010 10:32 pm »
I think the real point of this speech was to add in a sprinkle of enough concessions to prevent a veto proof majority from re-instating PoR. Other than that it was polishing.

As for 5 years for HLV. This has one singular purpose. To make impossible the apparent findings already contained within the Bolden study.

The biggest question in my mind is why.

Dismantle a "perceived" expensive (existing mind you) Heavy Lift infrastructure for an even more expensive Brand New one 5 years from now.

If that is not the definition of wasteful then I don't know what is?

Offline dks13827

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #58 on: 04/15/2010 10:32 pm »
The 'research money' may well just be slush fund money to universities et. al.  and not likely to produce anything.  (  so says Homer Hickam ).  I agree.

Offline neilh

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Re: Post-speech discussion about Obama's April 15 KSC speech
« Reply #59 on: 04/15/2010 10:36 pm »
The 'research money' may well just be slush fund money to universities et. al.  and not likely to produce anything.  (  so says Homer Hickam ).  I agree.

On what do you base this belief?
Someone is wrong on the Internet.
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