by Tim Fernholz
Now the countdown was beginning to approach its climax. At five minutes before launch, the flight director checked in with the control team monitoring the rocket’s engine and guidance systems, the Dragon, the status of the landing pad, the weather, even the flight path of the space station itself. All systems go. The tall stanchion that supported the rocket and raised it to vertical, called the “strongback,” disconnected and leaned back from the rocket. One minute left on the countdown. The ground controllers put the rocket in the hands of its own internal flight computers. Seconds before ignition, water poured from enormous pipes onto the launchpad. The water would absorb the sound of the engines so their vibration wouldn’t tear the rocket apart.
“Five, four, three, two, one, zero . . . we have liftoff of the Falcon 9.”
Great clouds of white smoke poured from the rocket as it strained upward, rising from the launchpad. A jet of flame nearly as long as the rocket itself poured from its nine rocket engines as it rose, with almost painful slowness.
“Stage one propulsion is nominal.”
After thirty seconds, the rocket was miles above the ground, gaining speed, briefly disappearing into the clouds before emerging above them. After a minute, the rocket was going faster than the speed of sound. Another thirty seconds later, it hit “max Q”—the time of maximum force exerted on the rocket, when the power of the engines and the intersection of gravity and atmospheric drag pulls and twists at the vehicle’s metal structure. The rocket was fourteen miles up, moving at 1,542 miles an hour and still accelerating.
Ten seconds later, the rocket flew at almost 1,900 miles per hour, nineteen miles above the earth. As the atmosphere thinned, the shape of the rocket’s exhaust wake changed from a dagger of flame into a kind of nine-petaled flower of wispy clouds.
Seconds later, there was nothing but smoke. It poured from the top of the rocket, engulfing it in a haze. The Falcon 9 disappeared. And when the smoke cleared, there was nothing to see but scattered, plummeting debris. The rocket had flown for two minutes and eighteen seconds before exploding. Three hundred thousand people watching the company’s live video stream online were left staring at the pure, baby-blue Florida sky.
There weren’t even good pictures of the disaster. It was as if the rocket had just . . . vanished.
Musk’s birthday had taken a turn for the worse. He took in the news. And then he started tweeting.
1
Adventure Capitalism
Many people have said that the fastest way to make a small fortune in the aerospace industry is to start with a large one.
—Elon Musk
Musk was hardly the only billionaire entrepreneur seeking to make a big splash in the space industry. On the contrary, it seemed as if anyone who’d made it big in consumer tech was finding a way to put a little money and time into a far-fetched space venture. Most of these enthusiasts—whatever their previous successes in commerce—failed the harsh tests of the rocket business. The ragtag band of space geeks who cheered, critiqued, and often worked for these bets on the high frontier watched wealthy visionaries of all stripes, from bankers to former astronauts, try to build businesses in space, and fail.
Many of the billionaires hailed from Silicon Valley and the tech sector. Most had succeeded in creating profitable businesses while being told that their plans were silly, financially dubious, or plain impossible. They had a knack for convincing other people to put their money and time behind risky ideas that promised a big payoff. And they understood trends in technology, particularly in telecommunications and the internet, that would drive private capital into the rocket business. One narrative for understanding the rise of internet companies in the United States at the turn of the century is that government networking technology was spun out into the private sector. Fortunes had been built on top of the computer networking revolution, which was spurred by the Defense Department’s needs. Couldn’t a similarly lucrative ecosystem be derived from the billions of dollars NASA had spent developing space technology?
Initially, the answer was a very hard no.
As the 1990s internet boom blossomed, its luminaries quickly saw that dial-up internet over phone lines wasn’t going to move enough data around for all the audio and video applications they already foresaw as the future. They also wanted to cut the cord and find a wireless solution; while fiber-optic cables were beginning to carry the load of internet traffic, they were controlled by telecoms, the business was heavily regulated, and it required lots of workforce and maintenance. Why not leave those earthly problems behind and put your network in space?
At the time, commercial satellites existed, but expense limited their use to entertainment companies broadcasting television shows and live sporting events to a mass market. Putting a satellite communications network into orbit was a much more complex technological challenge, one that would need huge amounts of capital up front. The kinds of institutions with billions of dollars to invest in a business, however, tended to the conservative side. But as the stock market rose behind Microsoft, Netscape, PayPal, and eBay, it created a class of super-high-net-worth individuals who thought they understood the technology and fully embraced risk.
Among the first to take a swing was Bill Gates, who, with his childhood friend Paul Allen, cofounded a little company called Micro-Soft in 1975. By the nineties, it dominated the digital economy to the point of monopoly. Led by telecom entrepreneur Craig McCaw and backed by Saudi prince Alwaleed bin Talal, Gates financed a company called Teledesic. The new company would launch and operate a huge network of hundreds of communications satellites. This constellation of satellites would provide voice and data services to customers around the world, bestriding mere terrestrial phone lines like an orbital colossus.
But this glorious vision was to end in bankruptcy before even a single satellite was launched. Veterans of the project ascribe Teledesic’s failure to a number of challenges. It was an idea that had arrived too soon, and the technology to make the satellites and launches cheap enough to be feasible just didn’t exist yet. It was also a crowded market: besides Teledesic, firms like Iridium and Globalstar were also planning to fly large communications constellations, worrying investors who saw the already risky plays as being locked into a suicide pact. All three companies would go bankrupt; Iridium and Globalstar would reemerge several years later as key players in the satellite industry.
The entire satellite brain trust—and the world at large—were taken by surprise by mobile phones. As telecoms swept around the world to expand high-capacity cellular networks—ground-based antennae linked to fiber-optic cables—they gobbled up a huge amount of the prospective market for satellite communications. And, despite the hopes of Teledesic’s financiers, the terrestrial networks did so at a much lower cost than the satellite companies could match. This revolution would prove fruitful to the space sector in just a few years, but at this moment it was fatal.
The final straw, if one was needed to break the camel’s back, was the stock market crash of 2000, which marked the end of the tech boom. As the tide receded for the dot-coms, major investors sold out of their riskiest plays, and that meant no more easy money for people using explosives to launch five-ton orbital computers. If any of these satellite firms had hoped to raise new money, the markets made it clear that it wasn’t the time.
The year 2000 was an appropriately futuristic time for a different tech entrepreneur to lay the groundwork for a bet on space: Amazon founder Jeff Bezos. The king of internet retail had taken his fledgling online bookstore public in 1996. In 1999, he had been Time magazine’s Person of the Year. Amazon survived the downturn and thrived, thanks to Bezos’s demanding style and focus on measurable results. He could take some time to pursue a personal project.
As the world entered a new millennium, Bezos started a new LLC called Blue Origin. The company’s name referenced humanity’s starting point on earth but implied a future somewhere else. It would be the nest for Bezos’s fledgling space dreams. At the time,
few outside of Bezos’s inner circle knew about the company, and most would not for years. It lay dormant, acting more like a space think tank than a design-and-engineering company. It was a secretive place. There were rumors about space tourism—and space elevators.
In 2005, Bezos walked into a small office in the back of a RadioShack in Van Horn, Texas, to see the editor of the Van Horn Advocate. Bezos had just purchased 165,000 acres of land in the tiny West Texas town (population 3,000), about two hours southeast of El Paso. He intended to build a private rocket test site where Blue could safely put new space technology through its paces. He also wanted to build a ranch for his family, a remote refuge like the one his grandfather had owned, which Bezos had visited as a child. He wanted local residents, some skeptical of outsiders with big ideas, to hear the plans directly from him.
“He told me their first spacecraft is going to carry three people up to the edge of space and back,” the editor, Larry Simpson, told the Associated Press. “But ultimately, his thing is space colonization.” Bezos told Simpson that he was building a spaceport. News traveled around the country quickly. Bezos declined to speak to the AP about the project, and a spokesman simply said that the company “won’t go anywhere soon.” That, at least, was true.
Amazon was already big, but not yet the Goliath it is today. This was before iPhones led the smartphone revolution, before the Kindle, before Amazon Prime, and before Amazon Web Services and Alexa. At this stage in its lifespan, the retailer hadn’t even made an annual profit, despite spending the past four years as a publicly traded company. Investors loved the stock because of its incredible growth rates, the way it scarfed up market share, even entire markets, with ravenous energy. The idea of Bezos devoting time and energy to another company, especially one with such a nebulous future, wasn’t likely to play well with investors who already tolerated quite a bit of eccentricity. So after the announcement of the spaceport and the opening of a design facility in Seattle, the company’s first big capital investments, Blue Origin resumed radio silence.
Bezos’s decision to reveal his company with a Texas surprise may have been spurred by another ultra-wealthy space geek, one with a much greater penchant for the limelight. Admittedly, that’s a long list, but here we refer to the English entrepreneur Richard Branson, he of the blond-going-white goatee, a toothy grin perpetually stretched across his face, and above all, the eye to seize an opportunity.
Branson and his Virgin Group were as much a story of marketing prowess as anything else. After starting a music magazine as a teenager, he had built his fortune selling music during the seventies and eighties, under the brand name Virgin, undercutting existing distributors and creating a retail empire. Branson expanded his conglomerate to include a record label, television stations, and eventually an airline and a mobile telecom provider. Branson wasn’t an obvious innovator in product. What set all his businesses apart was flair, youth-culture branding, and Branson’s own larger-than-life personality. And in 2004, he saw opportunity in flying humans to the stars above.
At the time, there existed only one privately funded, flight-proven vehicle that could take humans up to space. It was called SpaceShipOne, and in 2004 it won the Ansari X Prize by flying a human out of the atmosphere twice in two weeks.
The prize had been created in the spirit of the great aviation challenges of the 1930s. Just as Charles Lindbergh flew across the Atlantic, spurred by a big cash prize, before paying passengers existed, so, too, did the donors behind this prize hope to goose space commerce. To fund the prize, the prize’s organizer, Peter Diamandis, called on the Ansaris, a wealthy Iranian family that had fled to the United States during the revolution. In the early nineties, Anousheh Ansari, then an employee of MCI, convinced her husband and brother-in-law to start a new company called Telecom Technologies Inc., which provided software to manage the growth of digital networks. The timing was propitious, and their firm was acquired by a competitor, at the peak of the internet bubble, for more than $1.2 billion, making the family a fortune. After purchasing the insurance policy that guaranteed the X Prize in 2002, Anousheh became the first Iranian in space two years later, when she paid a reported $20 million to spend eight days on the International Space Station.
SpaceShipOne was designed by Burt Rutan, a legendary engineer credited with creating some of the most innovative planes ever built. He was an eccentric, obsessed with ultra-strong, lightweight materials made of woven carbon fibers, a pioneer when many in the industry weren’t ready to trust new composites over tried-and-true metals. Microsoft’s Paul Allen, seeking a space investment of his own, had been won over by Rutan’s effort to capture the private spaceflight prize and backed him with a $20 million investment.
Unlike other space engineers, Rutan usually kept one foot in the atmosphere. SpaceShipOne is a space plane. This is a term of art for a vehicle that can reach space through rocket propulsion but also has wings to generate lift, allowing it to fly in the atmosphere like an airplane. Picture the space shuttle landing on a runway at the end of its mission: that’s a space plane. Some space engineers think it is inefficient to design a vehicle for both environments, which is how you wind up with space capsules that parachute back to earth. Rutan, though, liked pilots. His vehicle was designed to be dropped from an airplane to save fuel. A custom-made mother ship ferried the spacecraft almost nine miles up before cutting it loose; then the pilot would fire up the rocket engine and leave the atmosphere behind entirely.
Branson already owned an airline, and he figured he understood the business of putting butts in seats for regular flights, so he created a joint venture with Rutan’s Scaled Composites, calling it the Spaceship Company (TSC). TSC would build a larger, improved version of the vehicle for regular passenger flights. And to that end he launched a new brand, Virgin Galactic. He envisioned daily operations, where seven space tourists would climb aboard the craft, travel to the edge of space, and enjoy a few minutes of weightlessness and incredible views before coming back down for a landing.
Never one to miss an opportunity for the limelight, Branson began drumming up business for Virgin Galactic with gusto. He sold tickets to space for $250,000 a seat, which he bought for himself and his family and then hawked to celebrities like Tom Hanks, Angelina Jolie, and Stephen Hawking. The first flights were expected to begin in 2007 from a new “spaceport” in New Mexico. Given the relative speed with which the Ansari X Prize had been won—less than eight years of work between announcement and achievement—commercializing the design seemed like a fairly trivial engineering problem. It was 2004, and the space age that Americans had been promised for decades finally seemed within grasp.
When Virgin Galactic was unveiled, Musk’s SpaceX was still just a few years old, barely more than a group of enthusiasts. They were still planning a test flight of their first rocket, the Falcon 1. Virgin looked destined to be the first into the private spaceflight market, with a proven design, a sales plan in action, and a passionate backer making headlines.
Is that why Bezos, whose space company predated them both, chose to unveil his company’s plans and bold investment in 2005? Given the lack of warning and apparent lack of follow-up, the question is interesting. Bezos, unlike Musk or Branson, does not have the cocky salesman’s personality, eager to win over the public and the press. He is, above all, an operator, a systems manager, and a strategist. Yet he is clearly world-beatingly ambitious, with a sense of timing that suggests he doesn’t like to be forgotten.
Yet, for all the attention they garnered, the splashy unveilings from both Branson and Bezos came to naught.
Virgin Galactic’s first flight kept being pushed further and further into the future. The same eccentricities that made Rutan the right person to hand-build an experimental spacecraft also brought him difficulty in designing one that could operate with consistent safety and be manufactured efficiently. The nature of a space plane like Rutan’s is that it is neither fish nor fowl, perfect for neither atmospheric flight nor the vacuum of sp
ace, and it relied on a folding wing and an unusual propulsion system, both of which presented challenges. Its first spacecraft would not even perform a test flight until 2014, more than a decade after its prototype flew twice in one week. As of press time, none of its more than seven hundred paying customers have actually climbed into a spacecraft and ventured beyond the atmosphere. This long delay, combined with Branson’s nonstop promotional promises, bolstered the reputation of the “new space” business as one dominated by dilettantes.
Neither the cadres of engineers and scientists at NASA, who jealously guard their mission of space exploration, nor the premier American rocket builders at United Launch Alliance (ULA), a joint venture of venerable firms like Boeing and Lockheed Martin, were impressed. Sure, these new guys were good at putting rockets down on paper and drumming up hoopla in the media. But when were they going to actually fly something useful?
Musk, at least, answered that question definitively, with the first flight of the Falcon 9 in 2010. Its debut and seventeen more successful flights in the next five years were sufficient to win over satellite operators and NASA, two groups that lived with budget pressure and prioritized SpaceX’s dramatic cost savings. But there were still plenty of critics, who thought Musk’s team was cutting corners. Once you fly, you have to be reliable. Rockets are like banks in two ways: they’re capital intensive, and they need confidence.
So when the Falcon 9 exploded on June 28, 2015, two minutes and eighteen seconds into its nineteenth flight, it didn’t just signify a problem with that one contract, or even for SpaceX alone. It was a threat to the entire concept of private space business that Musk and the other entrepreneurs were trying to reinvent and to pry out of the hands of the military-industrial complex.
SpaceX was in the middle of an effort to win the right to bid for launch contracts offered by the US government, not as civil exploration missions, but for national security purposes—launching spy and communications satellites on behalf of the US Air Force and the intelligence community. These jobs are tough to win for many reasons—they are top secret, and the technology involved is expensive and unique. Most of all, SpaceX’s competitive advantage—being cheaper than anyone else—didn’t matter as much, since cost had not been an object. United Launch Alliance, a company jointly owned by Boeing and Lockheed Martin, had won a full-fledged monopoly on national security launches in 2006, for one major reason: it was the only option. But it protected the monopoly because its primary rocket, the Atlas V, a descendant of the original American ICBMs, had a nearly perfect launch record. To break into the market, worth billions a year, Musk not only had to beat a monopoly at price—he also had to beat it at perfection.
