NYT columnist John Tierney has announced he will take on all people willing to bet that commodity prices will rise. He just placed a $2500 bet. He follows Julian Simon’s logic (again) that prices have gotten cheaper on everything except human labor since prices started being recorded.
All posts by Sam Dinkin
Next Trillion Dollar Colonization
Today’s NYT reports that Iraq and Afghanistan if they drag on for another five years will comprise, “The Trillion Dollar War”. World War 2 was a multitrillion dollar war. Every war with more than a million casualties is a trillion dollar war if you take the value of a life at a million dollars. That might not be reasonable some time and place where the median income is less than ten thousand dollars, but I would call for measuring by purchasing power parity. While the article is a pretty poor analysis considering opportunity costs. First, that veteran’s health costs would have been big without the war. Second, that salary and so on would have to be paid without the war. Third, that there would be some major price to pay in blood and coin keeping the prior regimes in place in Afghanistan and Iraq.
Seen in that light, a trillion dollar war is a bargain. Especially if it results in friendly economies (if not friendly polities) in Iraq and Afghanistan going forward.
As I have stated before, we should step up to the plate and spend the next trillion colonizing the Moon and Mars. $50 billion a year could launch 20 times as much stuff into orbit as was launched last year and colonists could pay for their own payload. With the long bond rate at 5%, the net present value of $50 billion a year forever is a trillion dollars.
There are a bunch of good reasons why the Moon would be a better bet than Iraq. Colonizing the Moon would not face any guerilla warfare. There are no existing users of Lunar resources. There is no government worthy of note to displace. There are no Lunar sympathizers that would start violent revolution if we went. (If you are out there, keep quiet until after the colonization gets going so you can have your fifteen minutes while I have my colonization.)
No air on the Moon? Oxygen is there and nitrogen costs $0.50/gallon on Earth. Let’s say we imported 11,000 liters of air a day and just vented it into space. A liter of air weighs about 1.25 grams. Importing your 14 kg of air a day is not a big deal. $50 billion a year could deliver enough air for 1,000 people to just vent every single breath to space at today’s launch rates. Don’t you think a thousand people could work out a way to recycle and replace air from local materials? There are 4000 kilograms of nitrogen in every 1000 tons of regolith. At 1300K, some of it will come out as Nitrogen gas (a ton worth of various gases). If I could get $50 billion a year for selling air on the Moon, I would sure as heck work hard to figure out how to do it for less.
So we could have our lunar colony and if people consumed two pounds of earth imported food per day (which should be plenty) and we can get air and water recycling down pat, we could support 7,000 folks. If we can get food production going then we can support a lot more for $50B/year. We would need to get the cost of the mass to the Moon down to $100,000 per year if we wanted to support 500,000 on the Moon like we have in Wyoming for $50 billion/year. That would either mean just 5 kg in Earth imports at $20,000/kg to the Moon or about 20 kg at $5000/kg to the Moon which is roughly what Elon Musk is promising by 2010.
By Sam, not Rand
NYT Calls for Shuttle, Space Station Retirement
In tomorrow’s New York Times, they call for the cancellation of Shuttle and ISS. I called for it last June. Seems like a long shot still.
Whither are flights at $100/lb?
Clark Lindsey touched some nerves at Hobbyspace with his post on flights at $100/lb.
I think we all agree that costs are high now and that in some rosy future with high demand, mass production, high utilization rates, R&D amortized over many units, continuous improvement from families of commercial rockets developed by the same team and other kinds of standard obtanium can get the price down to some single digit multiple of the fuel cost. It probably won’t be 3 like aircraft, but even if it’s 9, that’s only $180/lb at current fuel prices.
The questions are, “How?” and “How soon?” There are a variety of ways to increase utilization. The one economists favor is firms that can’t cover costs going out of business so that the ones that can increase their utilization. For that, we need to get all the governments out of the subsidized rocket business. Another is to really grow demand. I am working on that one.
For “How soon?”, we appear to be a factor of 20 away from $100/lb. If Elon makes $500/lb by 2010 then we will be a factor of 5 away. If improvements continue at that pace, we might see $100/lb in 2015. Others will say we won’t see those prices for 300 years. The latter seems moot to me. At $500/lb, that
is $100,000 to deliver 200lbs to orbit. That looks to me like a price point that would support millions of tourists even if no further improvements in technology are made. Of course, millions of tourists is inconsistent with low utilization and low flight rates that are required to justify high capital costs. (If you throw in ejections seats, non-recyclables and so on, you can still get a week in orbit for much less than the millions that is the current conventional wisdom for the early retail prices).
There is the possibility of a disruptive technology getting us to skip to an interesting future. E.g., a space elevator at $100/lb. would grow demand for rocket propulsion at geo-synch, on the Moon, in LEO, lunar orbit and lots of other places that become accessible for a cheap outgoing trip.
Unbalanced Transfer Offer
I got a call claiming to be from my Discover Card. The caller asked me if I wanted to make a balance transfer at an attractive rate. I said, “Sure, but I won’t give you my credit card numbers since you can’t authenticate that you really are Discover Card.”
Triumphantly, the agent told me the last four digits of my credit card number, my “member since” date and my last transaction. While this does indicate that the caller has access to my bill or account (or did at one time), it does not authenticate them as Discover Card because they could have stolen a bill from my mailbox.
More insidiously, they could have dialed a wrong number or a house guest or sitter could have picked up the phone. They did not authenticate me before giving me the personal information that they were so proud of. Not that they could have authenticated me since I would be reluctant to provide any personal information to someone who I did not already know was authentic and authorized.
I asked if there was a way to contact them through my number on the back of my card. They said no, but “I can make a notation on your account and customer service can verify its authenticity and you can call me back on a separate number.” While just possibly securely authentic (if the employee isn’t steering me to an illegitimate outsider), it requires me to make two calls. Why not just call the credit card directly and speak with someone else? I could, but my guy would have trouble getting a commission on the transaction. Maybe they should arrange for a share of any transfers I initiate in the next few minutes or ask for me to do a three-way call to my issuer.
I like checks better. They only go back to the offering party after they have been cashed and even then there might not be any evidence of what account I paid off.
Non-Mutual
“Non Mutual” was the accusation when The Prisoner was pilloried for not having enough community spirit. Mutual funds are being accused of being non-mutual by Ross Miller in his paper that decomposes an actively managed mutual fund into an active market neutral part and a passive part that looks just like an index. What he finds is that expense ratios on the active part look like about 7% if you consider most funds only have about 10% of their portfolio actively managed and that means the 1% vs. the .3% annual fees for managed vs. index fund has to be attributed just to the managed portion. This is great for hedge funds that if their fund is going up 10% a year only charge 2% fees + 20% of the 10% profits or 4% altogether. That’s quite a bit less than the comparable active mutual fund.
This is make quite a stir in financial circles.
OK Spaceport OK in 2005
I just got a call from Bill Khourie (pronounced ‘curry’), Director of OSIDA who let me know that they are putting their finishing touches on Oklahoma’s spaceport application with FAA AST and environmental impact statement and are targetting December 2005 for approval for horizontal takeoff horizontal landing vehicles. He said they would be delighted to be approached by the vertical crowd and would be pleased to welcome them assuming AST says OK.
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Wednesday, 15:30 CDT: One of the vertical crowd emailed me and said that they already approached OSIDA some time ago and “would be pleased” might not be enough to get a new AST spaceport application filed.
Robots vs. People
USA Today is in favor of the Cylons conquering space. They cite Van Allen. My reply to him is here. For the debate, check out Space Politics.
48 Killed in Lightning Strikes This Year
An average of 90 people die every year in the US in lightning strikes. Of 103 leading causes of death of 2.4 million people in the US, assault without firearms killed 5500. 1% would be 24000. If we want more people to live, we should research heart attack, cancer, stroke and so on and buy automatic electronic defibrillators. The media frenzy about terrorism induces bad public policy. We might be able to cut heart attack (acute myocardial infarction) deaths in half from 170,000 to 85,000 a year by spending a one-time $82 billion on defibrillators. That’s a one time $1 million for one life saved per year. If we completely stop all homicides not from firearms for that amount of money per year, that would be more than $16 million per life saved. Focusing just on the deaths from terrorism, it’s probably closer to $160 million per life saved.
Virgin Galactic OK
I got this message from Ned Abel Smith of Virgin Galactic this morning.
Hope all is well. Only 2 of us made it into the office this morning due to the Suicide attacks on London, but have heard that everyone is accounted for. Very scary.
He also answered my question about where deposit money goes:
All moneys are not kept in escrow and therefore any deposit received is backed by Virgin Holdings Ltd.
This project is so exciting because its so real and anyone that has the opportunity to become a Founder or Pioneer with us is incredibly fortunate. I have attached your Terms and Conditions to be printed and signed.
Here are the terms and conditions Ned mentioned: