The Space Economy Is No Longer Science Fiction ft. Rainer Zitelmann

[00:00:01] Rainer

You know, this is the reason why we were, in 1969, on the moon and now, 54 years later, NASA was now very proud to fly by the moon, 45 years later. If we were not able to do it for 54 years, this proves our theory. It was only a fake.

I don’t believe it. I have another alternative explanation why it didn’t happen. Because everything is about incentives. And there were no incentives to do it.

[00:00:34] Intro

Welcome to Top Traders Unplugged. In markets success doesn’t come from predicting what happens next, it comes from being prepared for what you can’t predict.

In each episode we go deep with some of the world’s most thoughtful minds in investing, economics, and beyond to understand how they think, how they prepare, and how they decide, and the experiences that shaped how they see the world. No noise, no short-cuts, just real conversations to help you think better and invest with confidence.

[00:01:07] Kevin

Welcome everyone to Top Traders Unplugged. My name is Kevin Coldiron and I’m host of the Ideas Lab series where we talk with authors of new books that help us understand how the global economy works and where it’s headed in the future.

Okay, I have to admit, I really had to resist the temptation to start today’s show by reading out the opening monologue to Star Trek. Because today we’re going to be talking about space, which is shaping up to potentially be the final frontier for capitalism. And the captain on our journey today is going to be Dr. Rainer Zitelmann. Dr. Zitelmann is a prolific author.

He’s written and edited 32 books which have been translated into 35 languages, including In Defense of Capitalism, the Power of Capitalism, and How Nations Escape Poverty. He’s here today to talk about his latest book which will be released in the US on June 9, called New Space Capitalism: The Entrepreneurial Path to the Stars.

Dr. Zitelmann, thanks for joining us today and welcome to the show.

[00:02:18] Rainer

Yes, thank you for inviting me.

[00:02:22] Kevin

So, it sounds like you have been a space capitalist since you were a boy. You were 12 years old when the first moon landing took place and you wrote a special edition of your school newspaper and sold it to your classmates. So, you made some money from the moon landing. Can you tell us about how your interest in space got started, please?

[00:02:47] Rainer

Yes, I think, like a lot of children, watching science fiction movies on TV, not Star Trek, it was another one in Germany, and I saw it when I was 9 years old. And then it’s correct with 11 years, I founded a school newspapers called Galaktische Zeitung. It means Galactic Newspaper. It was only about astronomy and space flight. And yes, I had good luck, at this time was also the first moon landing.

So, you mentioned it. I had a special edition about this, but all in my children’s room was full with a big poster from the moon, and from the Saturn 5 rocket, and books about astronomy. So, this was what it was all about. But it was not this way if I’m to be honest, all of my life interested in these topics.

You know, I’m a historian and in the last years I wrote a lot of books. Why capitalism is better with the example of countries. I give you two examples. I wrote a book, How Nations Escape Poverty. It’s about Poland and Vietnam. And always I showed what happens if you add more market economy in a system or on the opposite, more government.

Maybe I can compare it with a test tube with two ingredients: market and state, or capitalism and socialism. And then I watched what happens if you add more market and what happens if you add more state. And, as an example, Vietnam, where I have also produced a film, Vietnam Beating Poverty With Market Economy. This was the poorest country in the world in 1990, poorer than all African countries.

And then they started with free market reforms, the so called Doi Moi reforms. And the result is that the number of people living in poverty decreased from 80% to 3%: from 80% to 3%. And I have a lot of other examples.

And now I turned from studying countries or nations to studying an industry, and an industry that was, decades ago, totally led by the government. And I think almost no one could imagine that some day there would be Elon Musk, or Jeff Bezos, or multi billionaires, like this will start there private companies. So, everyone thought this is definitely something that can only be done by the state. And today, you see, it’s the time of private, as I call it, space capitalism. And this is what the book is about.

[00:05:45] Kevin

Yeah, thanks for that because, I have to say, I approached your book. I don’t know if skepticism is the right word, but I mean, I definitely had that perspective of, well, space is something that the government runs. And, you know, in the US, in America, the mythology of the moon landing and NASA is very deep in our psyche.

And I guess your perspective is that the success of NASA, and government funded space programs in general, were really an historical exception, not the roadmap for the future. So, I’d like to kind of explore those ideas a little bit.

First of all, why was the initial NASA government funded space program successful? Tell us about how that worked and then we can kind of transition to why that’s not the correct model for the future.

[00:06:36] Rainer

Yes, of course it was successful. Maybe the greatest thing ever done in the history of mankind. And I don’t say that absolutely everything, 100%, what the government does will fail. Of course there are exceptions. But you have to know that the Apollo program cost US$300 billion in today dollars; US$300 billion.

And at its peak it had 400,000 people and 20,000 companies working on it. So, it was a mobilization, as in war times. And this is what Johnson said at this time. He said who’s first in space is first everywhere. And who is second in space is second everywhere. So, money plays absolutely no role. It was at this time 5% of the American budget in NASA. This is 10 times more as a percentage as it is today. Today’s only 0.4%. So, you can’t do it for such a great thing for a couple of years.

But of course, I tell the story then what happened after Apollo with the space shuttle. And we can talk more in detail about it. But this was, as far as concerns, with manned space flight, 50 years of failure. It’s now only a couple of months ago that we came, the second time, close to the moon, even not landed there. And not to talk about Mars. NASA had planned a Mars landing for 1981. There was a fixed date for 1981.

And maybe we can speak about the failure, but of course the Apollo program was a big success. But then the politicians thought, okay, what we did one time so successful, we can do always not only in space, also with other ideas. For example, President Nixon, who was the President of the United States at this time, he even had the idea to reprint the NASA to give a new name because he didn’t want to focus only on space. But he had some other ideas, like the fight against cancer, for example. But these were all failures.

And this is what the politicians thought, okay, we were so successful, we did it and now we can do everything in the same way. But this is not true because I tell the story then what happened after this with the space shuttle program. Maybe we can talk about this. This was a total failure.

[00:09:22] Kevin

Yeah, let’s talk about the space shuttle program. Because that, I think, probably for, well, listeners my age and younger, I mean that’s kind of what they identify with spaceflight now. And you say it essentially became a program where the goals kept changing all the time. And it was almost like a… My reading of your take is that it almost became like a social program where politicians competed to dole out the spending in their districts. And you say, in the end, it had all these goals and really couldn’t deliver on any of them.

So maybe, just maybe, walk us through the chronology of the space shuttle a little bit. And I think that’s a good kind of template for why you think we need a different path in the future.

[00:10:10] Rainer

Yes. First of all, there was no clear idea. Everyone had another idea what to do with it; the military, the scientists, everyone had another idea, the politicians. And it was a discussion for about three years of what to do with the Space Shuttle. It changed a lot of times.

And they had them estimate that the development costs would be US$5 billion. And then for every flight between US$5 million and US$10 million; between US$5 million and US$10 million. The reality was it was between US$1 billion and US$1.5 billion every flight. And why is that? Of course, if you make a calculation, you know, with Axle, the more flights you predict per year, the cheaper it will be. And they started with maybe the estimate of 10 flights a year. And in the end they calculated with 140 flights every year. This was the calculation. The reality was 135 flights in 30 years.

So, they had in 30 years less flights than they predicted for one year. And then in the end, you know, then there were two accidents where 14 people died. And then they stopped it in 2011; In 2011. And then, this is the headline of this chapter in my book, The End of the Future, because what happened then?

The Americans were not able to bring their own astronauts with their own rockets from American soil to the International Space Station. But they had to rely on very old Russian Soyuz rockets. They had a monopoly at this time. And so, every flight costs maybe US$10 billion or US$20 million more than before.

And after winning this first space flight, being so successful, of course then it was really a big disaster, for the United States, that they were not able to bring their own astronauts; a total failure. The whole program was a failure. There were some smart people who even had, before the idea, let’s do it in a different way. Let’s cooperate with private companies in another way than we did before. But most politicians reject it. No, this will be a disaster. It will never happen. This is a totally stupid idea. Go away with this.

Okay, but then if you have the situation that you have lost everything and almost no alternative, it’s like in a football game, you know, the Hail Mary pass. Yes, and they said this was our Hail Mary pass. Then let’s try it with these crazy SpaceX people with Elon Musk.

And, of course, it was not everyone in NASA. There was one woman especially, she believed in it. And she reported, and every week some people came into her room and told, oh, you’re so poor that you have to work with this idiots for this private space. So, I feel with you, my sympathies. But she liked it anyway, so what happened then…

[00:13:50] Kevin

Okay, I just want to make sure I get what you’re saying. So, I think what you’re saying is you had the space shuttle program, it was a long period of time, it wasn’t achieving its goals. By, I think you said, by 2010, we had kind of lost the ability, America had lost the ability to put astronauts in space. And so, a few years after that there was a thought, well, maybe we can outsource some of this to a private company, SpaceX, Elon Musk.

And so, what you’re talking about now is the kind of, I guess, the origins of the private space industry as we know it today.

[00:14:30] Rainer

Exactly. It was another way of cooperation. You have to understand, even in the time of the Apollo program, in the ‘60s and the ‘70s, NASA never built their own rockets. They were also built by private companies like Boeing and Rockwell. But the corporation was like micromanagement from NASA. They told them exactly what to do, even sometimes who to hire, what employees worked, so, in every detail. And they had very strange kind of contracts – you call it cost plus contracts. I have to explain it, because this is very important to understand.

The Cost Plus Program means, okay, you build a rocket for us and we buy it, and you have to make clear your costs and then you can add maybe 8% or 10% profit because they had fear that these private companies would make profits that, in their eyes, from the bureaucrats and politicians, would be too high. So, okay, this is the best idea, show us the cost and then you can add it.

But the result was that it became more and more expensive. I spoke with one person who was, at this time, worked for one of the two biggest companies in the space industry. And he said our best product was our overhead because, I think, it’s simple to understand. For example, if you have US$1 billion in costs and you can add 10%, then you make US$100 million. But if you have US$3 billion in costs, then you make US$300 million. So, it was really an incentive for increasing costs.

“Oh, it takes longer than we thought or it’s more complicated. We have to do this and that.” I think it’s always very important in the economy to understand the incentive. And if the incentive is to make it even, that it costs more, and more, and more, then it will cost more. And this is exactly what happened.

And now, to understand what’s the difference in the cooperation today, between SpaceX and NASA. SpaceX doesn’t sell any rockets to NASA, but a service, a service like FedEx or UPS. We bring your satellites to orbit, for example, and charge you a fixed price. Or we bring your astronauts to the International Space Station and charge you a fixed price. But how we build the rocket and what our costs and our profits and all this, this is ours.

And from this moment on this was an incentive for lower costs because lower cost would mean more profit. And before, with this Cost Plus Program, higher costs mean more profit. Of course, companies are profit seeking entities. And the result (and this is amazing), if you compare the launch costs (this is the word for how much does it cost to bring one kilo to space), if you compare the space shuttle with the cost that Elon Musk has today with his rockets, he reduced it by 95%; 95%. This is his self-cost.

And how was this possible? For example, one very important thing is that he was the first to build reusable rockets. The Falcon 9 is a reusable rocket. The same rocket was used now 34 times. And of course it makes a huge difference in the cost.

Imagine you go from maybe from LA to New York and after this the plane, you have to throw it away. It’s only one time use for the aircraft. I think the cost, I don’t know how much, maybe $800,000 for the ticket or something like this. It’s only cheaper because it’s reusable. And this is what NASA also tried before, but without success. And other countries tried also.

So, today no state-owned space agency, not in China, not in Russia, not in Europe, and not in the United States, was able to build such a reusable rocket. But Elon Musk did it 10 years ago. And the only other one who was successful now, I think it’s a half year ago, was Jeff Bezos. He did it 10 years later. But these are two private companies.

And so, you see, this makes the difference. And no one told Musk, you should make a reusable rocket. It was not NASA, it was his idea. And why? Because he thought, it’s much cheaper. And this was not the only way to reduce costs, there were a lot of other things that he did, but in the result he reduced it, as mentioned, by 95%. And he says today, from this point I will reduce it even 90% more.

So, it’s important to understand the completely different way for cooperation between the government on the one hand and these private companies on the other hand.

[00:20:32] Kevin

Yeah, thank you for that. That serves as an excellent description of how things work now.

And you say, in the book, that it’s kind of fascinating because you were saying, well, okay, once rockets become reusable, their contribution to total cost goes down and then other stuff starts becoming relevant, in particular fuel. Right? So, once you start getting reusable rockets, then fuel costs start to matter a lot more.

And so, it made me think that maybe there’ll be some innovation on that side as well, like figuring out how to lower the fuel costs. Or is that still something that…?

[00:21:16] Rainer

There are a lot of things to reduce costs in this way. But I think the most important thing now, if we go maybe a little bit… First, one thing, some people ask me, you know the title of my book is New Space Capitalism. And then they ask, when is it, this space capitalism? Because they think, like you told me, maybe you had a little bit of a similar idea, that it is still government led in a way. Everyone knows their private commerce. And I will give you one number that is the most important number, two numbers.

First of all, we had, last year, 324 rocket launches worldwide; 324. And from this 324, 165 were SpaceX. So, it means SpaceX alone, as a private company, had more launches than all other countries together. Or, to say it in another way, if SpaceX were a country, it would be number one far before China that comes with 88 launches. After this, if I compare it with Europe, where I live, we had eight launches. So, it means we had 5% in all of Europe, what SpaceX did as a private company…

Or it’s not only SpaceX, I have a lot of content about another company, it’s Rocket Lab. It’s founded in New Zealand from Peter Beck. Later they moved to the United States, but founded in New Zealand, and they had 21 rocket launches last year, 100% successful. It means this private company from this Peter Beck, who never studied or did anything like this, had three times more rocket launches than all of Europe. And so, you see, the space capitalism is reality today.

Or if I speak about satellites, we have today 15,000 active satellites in orbit. From this 15,000, 10,000 are Starlink, from SpaceX. So, you see, it’s still private. But now the most important thing is, in my book, that I say all these other goals, some people (maybe we can talk about this), think about asteroid mining, space mining. Elon Musk has the idea to settle on Mars, or maybe now, first the moon, to build a city there.

And all these plans will not happen, or are very hard to realize, if we have no private property in space. And this is a big, big problem. And to be honest, this is really the main message of my book and the reason why I want to start a discussion about it. And if you like, I can explain a little bit why I think it, and what is the legal status today?

[00:24:36] Kevin

Yeah, okay, I do want to talk about that. And that would be because you have a chapter in the book where you talk about, I think, some of the things we’ve talked about, we hear; asteroid mining and then also space tourism. So, two kind of natural ways potentially for, you know, there to be capitalism, profit making in space. But that’s all founded, to a large extent, on, as you say, private property rights. So, let’s talk about that.

There are a couple existing, you know, kind of international agreements on property rights. There’s the moon agreement, from 1984, and also the outer space treaty, 1967. Tell us about those two, briefly, and then explain why you think they’re not sufficient to promote a robust space industry going forward.

[00:25:32] Rainer

Yes, fortunately we don’t have to talk long about the moon treatment because only about 20 countries signed it and not one of the space faring countries. It’s a real socialist idea that celestial bodies and everything is like a common good or something like this. But forget about this.

More important is the Outer Space Treaty from 1967, because this treaty is signed by almost all important countries, by all space ranked countries. And there’s a problem, or I say problem and an opportunity in the same side.

According to Article 2 of this Outer Space Treaty, it’s prohibited for nations to aim ownership over celestial bodies or land over celestial bodies. So, it means the United States cannot say this asteroid, or moon, or Mars, or forever is a part of the United States, or belongs to us. This is forbidden.

And this is crystal clear. There is no dispute among space lawyers that it’s not allowed. Because it’s crystal clear in this…

[00:26:48] Kevin

There are space lawyers out there?

[00:26:51] Rainer

Yes, yes, there are experts for space, yes. They have also discussions. And one discussion that they have is how is it with a private person, with private companies, because there is nothing in the Outer Space Treaty explicitly. And it’s crystal clear why. Because in 1967, or when it was negotiated, no one thought about Elon Musk, or Jeff Bezos, or people like this. So, there is nothing.

And there are two opinions among space lawyers. The one, they say, okay, they try to make it indirectly clear that what is forbidden for nations is also forbidden for a private person and private company. And the other said, no, there’s nothing in the treaty, and what is not forbidden is allowed in the first place. So, the only thing that is really clear is that it’s not clear. And this is, of course, not really good for investors if it’s not really clear, the legal situation.

And my approach, I ask a question, and I wonder why not more people ask this question, when Elon Musk had this idea of settling, he’s talking about 1 million people to settle them on Mars. Whether we speak about 1 million, or like Robert Zubrin, who’s the founder of the Mars Society (I spoke with him), he’s talking about 50,000. Whatever it is, whether it’s thousand or a million, this can’t be funded by the government.

We have, anyway, more than enough debt right now. And I think it’s absolutely not possible. Of course, another landing on Mars to bring 5 or 10 people there, yes, this could be funded by the government, but not like a city on the moon or on Mars. So, who could pay for it? And what’s the business model behind it?

And I give an answer. It’s not possible without private property because on Earth there is no system that works without private property. There were 24 socialist experiments, in the last hundred years, and they failed without any exception. And there is no successful economy in the world without private property. Also, private property of land.

In some countries, like China or Vietnam, you have no private property of land, but you can lease it and sell it for maybe 70 years. What is similar, but without any form of private property, it will not work. It would be like in North Korea, maybe. And if it doesn’t work in North Korea, why should it work on Mars? Of course not. Maybe you have lower gravity there, but the laws of the economy still exist.

So, my question is, who should have the right to own Mars or part of it (maybe not the whole planet)? And I have this idea. For example, if Elon Musk or whoever, private company, is able to go there. They take the risk, they spend the money, they are able to go there. They are not only able to go there, but to develop it, then they could claim ownership. Of course ,not of the whole planet.

It’s similar to homesteading. In the history of the United States, it was this way. The only difference is there was a government who gave to the settlers a part of the land on the condition that they develop it and do something; build a house within four or five years. The difference is that there is no government who owns Mars because it’s not allowed.

But also, this is not so different from the way as it happened in the United States at this time. Because the idea that there was a government, and they told people you can use it, it was a little bit different. In a lot of cases, first they took it without any permission, and then later they legalized it. Okay, keep it there if you do this.

And this is the way, I think, how it should happen on Mars. For example, Elon Musk goes there, and then he takes apart maybe as big as Singapore. Singapore there are place for 200,000 [Singapores]. The area of Singapore fits 200,000 times [into the area] Mars. So, even if he takes a part of the Mars that is as big as Singapore, there’s enough for anyone else, but of course to develop it and do something. And then the next idea is he should bring it to the stock exchange like a real estate investment trust; REIT. And then who owns Mars? Every shareholder, maybe you and me. And I think this is a way to finance all these things.

[00:32:23] Kevin

Yeah, you have a couple of ideas like that. And I do want to talk about that in a second. I just said I wanted to circle back on the property rights. So, how would you imagine (and I know you’re not a lawyer), how would you imagine property rights get enforced? So, you say, okay, if you can finance and get there, then you can own this Singapore sized bit of Mars. And then they get there and they start mining outside their given property. And there’s no police force that’s going to go up and stop them.

[00:33:00] Rainer

Sure.

[00:33:01] Kevin

So, you know what happens there? How does that work?

[00:33:06] Rainer

Sure. Of course, on Mars there’s no police force and no one who could stop them. But, of course, on Earth there are. And if maybe it’s in the United States, and it’s not legal, and it’s illegal or something like this, okay, then they will go to another country. Maybe Javier Milei will make then a better space law. And then Elon Musk goes there. Then he will move, maybe, from the United States to Argentina, or whatever. This is a little bit science fiction of course, but on Mars they cannot do anything against it.

I think this is the only way how you could finance it. In my point of view, it’s a real estate story. Maybe it has a little bit to do… I’m a mixture. I studied history, political science, and sociology. But on the other hand, I spent 20 years in the real estate industry, and I had a very successful company in real estate. So, maybe I see it a little bit with a real estate perspective with this real estate investment trust.

But I think, in the same moment as it will be possible to buy and sell land on Mars and on the Moon, even before people go there will be a trade. People will start to buy and sell only because they think, they hope, the same when you buy Bitcoin or stocks and so on, that it will increase in value and people will have the fantasy. Or maybe this part is the best. Or maybe you know this movie: Once Upon a Time in the West.

So, there was this, I think they called him, crazy Irishman who bought their piece of land in the desert. And they said, ah, he’s totally crazy. But he knew, because water was near there, that it will increase in worth. And so, it was the only mistake that he made. He didn’t know that the owner of the railway, that later he came and killed his family, by the way.

But the idea is to start buying something because you see something that can increase in value in the future. This is the same that will happen there. And on the other hand, if Elon Musk talks about this 1 million people there, and there would be no private property, how should they organize their society? This would be a completely not socialist, a completely communist society there. And why should it work on Mars?

On Mars it’s even harder. You know, on our planet, on Earth, in some countries, it worked in a way for some decades. Very poor and a lot of people died and were poor, but it worked in a way. But on Mars, the conditions, you know, they are so hard. Every place on Earth is much more relaxed than going to Mars. So, you should have an economic system that is even much more efficient as it is on Earth. And the same is with asteroids; asteroid mining. I think this will be a great topic. But if you go there for asteroid mining, of course it should be clear that, for example, there’s a lot of platinum or water. You have a lot of water on asteroids; frozen water.

But it’s important in space, because you cannot bring all the water from the Earth in space, the water that you need, you have to get it there on asteroids or on Mars. And then who should be the owner? And of course, I’m not the only one who sees these problems.

There was an executive order from Obama and also another executive order from Trump, for space mining, that you can keep what you dig there, for example. But the problem is, if you don’t own the land, then it’s hard to finance such things. So, it was halfway towards a solution, but I think without real private property (this is my opinion) all these things will not work. Because let me…

[00:37:47] Kevin

Can I just ask a question? So, I mean, that makes sense. I understand that. Yet, at the same time, you have someone like Elon Musk continuing aggressively to pursue things like going to Mars, colonizing the moon, potentially setting up data centers in space, all these things without those property rights having been, you know, determined.

So, do you think his bet is just that it’s going to be determined, that I’m just going to go ahead, or is he just kind of operating on the principle that what you’ve just outlined, like, if I get there, then it’s mine.

[00:38:29] Rainer

Unfortunately, I had not the possibility to talk with him in person. I know some very close friends of his. I talked with them, and I talked with Robert Zubrin. You know, he’s the one who gave Elon Musk all these ideas with Mars. He was the first one. He’s the founder of the Mars Society and he wrote a lot of books about it.

And I think sometimes these people think about the economic perspectives. But I think Elon Musk is more someone like, if the problem is there, we will find a solution. Not before you start to think about the next, next, next, next step, how we will. But I think if it is there, we have to find a solution. But I’m very proud. When I wrote the book, I’ve sent it to two experts.

The one is Matthew Weinzierl. He’s I think the most famous expert for space economy at Harvard Business School. And he said, everyone should read this book, this is how it is about. And Robert Zubrin, the man who gave Isacmann ideas, he said something about the book. I am very proud. He said, freedom will bring us space. Space will bring us freedom. And Zitelmann shows us the way, how to do it.

And because this is what I think, I can say it in a technical way. But what was very important for me, I had a conversation with one from NASA Aims Center, Harry Jones, and we had some emails and he sent me some papers that he wrote. And he’s older than 80 years. I think he’s now almost 60 years in the space industry. And he told me, and this was very important, there are no technical showstoppers for our way to Mars. It’s all today, ee can solve all this.

There are problems – a lot. But he has this paper and he lists seven or eight huge problems and said none of these problems are not solvable. So, the reason why we were not there, and this is my answer, it’s the incentive. For the moon landing, there was a crystal clear incentive. It was the moon race, who will be number one. The competition between the Soviet Union and the United States, it was about national prestige and being number one.

But in the moment, when there was the American flag on the moon, there was no incentive. They had gone five times more and then stopped. Because no one does everything without incentive, without a clear reason.

Are you doing anything without having a reason? And even not things that cost so much money? No, you have to have a clear reason, incentive.

And this is what the architect of the Apollo program, Wernher Von Braun, when they asked him, after ending of the Apollo program, what is the next? He said, we should make it in a way that it makes, in an economic way, sense. And this is where all these scientists from NASA, maybe they didn’t think about enough. We have this funding from the government, and we have taxpayers money, and now we think what we can do with it.

But of course this is no answer for this question. This is the reason why we were, in 1969, on the moon and now 54 years later NASA was now very proud to fly by the moon 45 years later. But I think you have to ask why?

And you know, there are these conspiracy theorists. I don’t believe anyway in moon landing. This was all made on TV. I don’t believe in this stuff.

But of course, they feel, oh, you see, if we were not able to do it for 54 years, this proves our theory; it was only fake. I don’t believe it. I have another alternative explanation why it didn’t happen. Because everything is about incentives and there were no incentives to do it.

[00:42:49] Kevin

Well, let’s talk about some of the areas that, you know, the space economy might develop. And we’ve mentioned, we kind of mentioned both of them. One is, you know, mining for minerals on asteroids. And the other one is, essentially, space tourism.

So, tell us… The space industry, at the moment the space economy is mostly about satellites. Let’s talk about asteroid mining. I mean, is that something that we can expect kind of realistically in kind of the next five years or so? I mean, you have a great section where you talk about, asteroids aren’t necessarily what we think they are. They’re not just solid hunks of rock floating in space. Oftentimes they’re almost like, you know, patches of rubble that are held together by weak gravitational forces.

So, it’s not trivial to land on them. And it’s not even clear that once you start mining them that they won’t just break apart. So, tell us a little bit about what your take is on asteroid mining. Is that something that we can really expect to be a part of the space economy?

[00:43:55] Rainer

First of all, I don’t think that it will happen in the next five years or more. The next 10 to 20 years it will happen. But it depends, again, on the property rights. If it would be illegal, or you find a way; you are there on this asteroid, and then you’re the owner, and you take the asteroid on the stock exchange. What is my idea. I think then they would start raise first, there, and to get it. But this is not the situation.

[00:44:27] Kevin

And so just to be clear, so, your example, essentially, you list an asteroid on the stock exchange, right? You sell shares in it. And that provides the capital for a company to go and do the mining.

[00:44:43] Rainer

Sure, and who should have the right? The one, of course, not you and me, I’m not able to go to an asteroid and I don’t know anything about asteroid mining. You’re not… we’re not. But the ones who are able to go there, and take the money, and take the risk, they should be the owner. But then of course, if they’re smart, they bring it to the stock exchange and then we have a lot of owners.

But let’s talk a little bit more about it. There are maybe between 700,000 or maybe even 1.7 million asteroids. But most of them are between Mars and Jupiter. But they are very far away.

But we have also, like, 30,000, 40,000 near-Earth asteroids. These are ones where usually we have fear, and rightly so, but they are closer to us and it’s not so hard to reach them. And of course, what to do there.

So, there’s a big misunderstanding that people think we will bring the resources back to Earth. This will happen, for example, for platinum, this PGM group, or gold, or so. But this is the exception. I think it’s more important to use it in space, because we need a lot of resources in space.

For example, if Elon Musk wants to build like data centers in space, even with reduced launch costs, it costs a lot of money to bring it to space. Better to use the things that are still in space. The same with water. Water is a basis also for propulsion. And of course, you need water when you are in space. And so, I think most of what you do with asteroid mining is not for use on Earth. Some things, yes, but to use it in space.

And there were two companies, but it’s more difficult than you think. And these companies, they had a good lobby in the United States. You know, both of them, it was Ted Cruz and Marco Rubio, they lobbied for them, for these asteroid mining companies. And the result was Obama’s and then Trump’s executive orders that the resources, that you get there, belong to you, and that it’s nothing against the Article 2 of the Outer Space Treaty.

But these two companies failed in the end. And I think it will take time but, of course, it will happen in the future when there are resources that are valuable for us that we need, especially that we need in space. And the same, they will do it on the moon, and on Mars, and everywhere. So, this is one topic.

The other topic that you mentioned is space tourism. Of course, today it’s extremely costly. It costs a lot of money. There’s this…

[00:48:06] Kevin

What does it cost? If you want to go up with Jeff Bezos?

[00:48:09] Rainer

There’s a cheap version, the cheap version is like US$300,000. This is going only for a few minutes, for example, with Jeff Bezos, who did it for a time, not at the moment, Richard Branson with his virtual Galactica. There were some space trips, but this is the cheap version.

[00:48:34] Kevin

So, it’s like the Ryanair version.

[00:48:35] Rainer

Yes, for US$300,000. But the other version to go, for example, to the International Space Station. Some people did it, but not many. This is, I think, today it would cost like US$40 or US$50 million. So, you have to be a billionaire.

I give you one example of who did it, Isaacman. He’s the new NASA director, CEO, and he was a space tourist with Elon Musk. He did it because he’s a billionaire. And he has also a hobby. I think his hobby is he’s the owner of the biggest private collection of (how do you call it) fighters.

[00:49:20] Kevin

Oh, fighter jets.

[00:49:21] Rainer

Fighter jets.

[00:49:23] Kevin

Yes, I remember that in your book.

[00:49:24] Rainer

Yeah, it’s his hobby. He was a space tourist, and I think he paid something like US$40 million. So, this is only for billionaires. And so, you think, okay, why it’s only for rich people? But if we go back, all innovations in history were first for very rich people. Even a window, to have a window was such luxury, only the richest people in the country could have a window, like kings. Or with cars in the beginning, or even with flight, this was always for very rich people.

And in the end, it became cheaper, and cheaper, and cheaper, because the wealthy people, first they finance it, and in the end it becomes cheaper for everyone. And I think with space it will happen in a similar way.

I know for some people it sounds like science fiction. They can’t believe it. But it was also… I read something, in 1903 when the first man tried to fly with an airplane. He failed. And then there was an article in the New York Times and they had it; yes, of course it failed because it will be possible in between 1 million and 10 million years, if we put all this knowledge from the best scientists. This is what they wrote. And in reality, two months later were the Wright brothers, and they did it.

And there were surveys before the moon landing and the majority of people said, no, it will never happen, this is not possible. And everything that was science fiction in the first way, later it became reality. But I think this will not… The precondition for this (and I come back to this), there has to be a strong reason why to do it. So why space? Why space matters? And if it is not national prestige or space race… Now we have a little bit of the situation, as we had in the ‘60s. In the ‘60s it was between the Soviet Union and the United States. And now it’s China and the United States. It’s, again, about national prestige.

But I think this is not enough. If you look in our society, money matters and money makes the world go round. And so, I think space capitalism is an important topic because it will not work without economic incentives.

[00:52:15] Kevin

Yeah, I completely agree with you. And you know, especially on that point about initially a lot of, you know, what we consider to be normal industries were kind of play things with the wealthy. I mean, you make the point that even something like an African safari, in the 1800s, was almost like a space journey is now. It was something that only the rich could do. It’d be very dangerous. And now, you know, it’s commonplace.

Just to kind of maybe wrap things up, for someone who believes in your story, believes that the space economy is in its infancy and we’re just at the very, very beginning. How do you… And again, I’m not asking for any specific advice, but how should they go about thinking about investing in that?

I mean, we have SpaceX IPO coming up. That’s obviously one way to do it. There’s some listed ETFs, I think, out there, there might be like seven or eight of them. You know, are those kind of viable ways, from your perspective, or is it just too early?

I guess, the other question that is kind of related, you know, you have the SpaceX, you have Jeff Bezos’s company, Blue Origins is what it’s called, but you know, presumably there’s also kind of secondary industries that benefit from the growing space industry. They provide components or raw materials or things like that. So, I don’t know, it’s a broad question, maybe not a totally fair one, but how do you think about kind of investing in this new future space economy?

[00:53:52] Rainer

Okay, first of all, if you would have invested like two years ago, for example, two companies that I mentioned in my book, Rocket Lab, I mentioned it, this is from Peter Beck, a New Zealand company. And there’s another, Planet Lab, they are based in San Francisco and in Berlin, by the way, only five minutes from my home.

So, I spoke with them and they have now the plans, for example, they work together with Google for data center in space. But Elon Musk does the same. They have 200 satellites in space. So, of course if you believe in these topics, I’m more as an investor I am more a real estate investor, very, very successful as real estate investor. Of course, I’m also invested in equities. But I’m all with what you mentioned, passive ETF because I think, according to statistics, there are not so many laymen people who are really successful with stock picking. So, I don’t believe that I am.

But of course, people are different, and if they read my book… you see, I think with SpaceX, especially, on the one hand it’s a great opportunity. I think they have the opportunity to be the biggest company in the world, maybe, because today they have a kind of monopoly, even, if I tell the numbers. But of course, on the other hand, it depends a lot maybe on Elon Musk. So, this is the risk, what if he’s going to die, or get a heart attack, so you never know. But of course, it’s a great story. But of course, on the other side it’s not cheap.

But Tesla is also not cheap, this earning ratio, so I don’t know where they will be, some hundreds maybe. So, it depends, I don’t give advice but definitely it’s a future industry. And there was a prediction, a couple of years ago, I don’t know which investment bank it was, bank of America or Merrill Lynch? I don’t know. They predicted that the first trillionaire will be a space entrepreneur, and people laughed at them, I think it was three or four years ago. But now I don’t know, today, what Elon Musk’s estimated net worth is, but last time I watched it was US$840 billion.

I don’t know how is it today, but it’s close to this trillion. So, people laughed about it after the IPO. Definitely he will be the first trillionaire. And the prediction was correct. And when I started to write about space economy a couple of years ago, not a book, but paper and some essays, people said, ah, this is a strange idea, and this is a niche topic, and so on. But of course, now it will be with Elon Musk, the biggest IPO in history. If it happens, we don’t know always. You know, capital markets, a lot of things, what happens with Iran, or what does Trump do tomorrow, things no one can predict. A lot of things, you know, influence then the capital market, and if it is the right time for an IPO or not.

But if it happens, it should happen in June. So, this is the reason why my book is published in June. Then he tries to raise more than US$70 billion. And this is by far the biggest IPO in history. Because, so far, the biggest IPO they launched was US$29 billion and it will be twice as much. And this shows only if one thing, that it is real. It’s not fantasy. It’s really a topic. It’s an important topic.

This is the reason why I wrote a book about it in spite of the fact that people told me no one will be interested in this. And what is this strange space economy? And this sounds like science fiction. I can tell them now this science fiction happens today for sure. It’s here and now.

[00:58:27] Kevin

Well, you’re right, it is here. And we’re going to be hearing a lot more about the new space economy as the SpaceX IPO approaches and as a number of the developments you talk about in the book begin to take shape. So, I think that’s a good place to wrap up today. Dr. Zitelmann, thanks so much for joining us. It’s been truly fascinating conversation and a great introduction to a topic that we’re all going to be hearing a lot more about in the future. So, we wish you all the best.

[00:58:56] Rainer

Great, thank you for the opportunity and I apologize because I’m German that my English is not as good as it should be. But I hope, for your question, that you could follow everything and I hope the audience also.

[00:59:12] Kevin

Okay. The book is called the New Space Capitalism. It will be out in the US in June. Please make sure to get a copy and to follow Dr. Zitelmann’s work because I think you can tell from today’s conversation that many of these topics are not being discussed enough, or even at all on mainstream media. For all of us here at Top Traders Unplugged, thanks for listening and we’ll see you next time.

[00:59:39] Ending

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