SpaceX showed the universe what private enterprise can do

Ian Silvera

June 2, 2020

When you assemble and build a rocket, an explosive pastime not yet widely taken up to fend off lockdown languor, it is much more cost-effective to complete the process horizontally. This was an uncommon practice among US space contractors, who preferred to take a more vertical approach to the engineering ordeal before SpaceX came along in 2002.

But Elon Musk’s disruptive company isn’t against all vertical approaches. In fact, the business, unlike some of its peers and competitors, is vertically integrated – the company designs, develops and manufacturers the vast majority of its key components, including its Merlin engines, and sells its services and products. 

It’s a case study in “value capture”, where a minimal amount of value being created by a business is being lost because there are little-to-no middle men and outsourcers taking a slice of the company’s sales. 

SpaceX’s rockets are also famously reusable, another cost-saving and efficiency-boosting measure which seems blindingly obvious until someone comes along and does it in style. By “style”, I mean to say the Falcon Heavy’s side boosters landing simultaneously like a pair of synchronized swimmers after propelling the main rocket toward space. It’s science fiction come true. 

But before NASA’s Commercial Crew Development (CCDev) programme launched in 2010 under President Obama’s White House administration, SpaceX’s history was a lot less sexy. It had concentrated on becoming the cosmic equivalent of FedEx or Royal Mail, transporting supplies to the International Space Station (ISS) with its Dragon cargo ship, which became the first private spacecraft to dock with the ISS in 2012.

The CCDev programme would make SpaceX more of a taxi business albeit at a location Uber could never reach alongside other private contractors Blue Origin, Boeing, and the Sierra Nevada Corporation. Until then, every spacecraft built for humans in America had NASA’s “deep involvement”, as the agency has noted itself. The start of this initiative would also coincide with the winding down of the space shuttle fleet, meaning the US would have to rely on Vladimir Putin’s Russia to get its astronauts onto the ISS.

To date, NASA has awarded SpaceX $3.14 billion in contracts as part of the programme. As to the potential return on investment, since 2017 America has contracted for 12 seats on Russia’s Soyuz spacecraft at a cost of approximately $1bn, or an average of $79.7 million per seat, according to a 2019 report from NASA’s watchdog, the Office of the Inspector General. The estimated average cost per seat (based on four astronauts) for SpaceX is $55m.

That comparison, without even factoring in geopolitical or other value-generating considerations, speaks for itself. So, as the Falcon 9 rocket and its Crew Dragon module successfully took off on Saturday, it was a victory for the power of the market economy, free enterprise, and – as Musk would have it – the survival of mankind.


Written by Ian Silvera

Ian Silvera is a member of 1828's advisory board and a former journalist.


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