What are asteroids worth?

It is just fascinating to watch the worldwide interest in space mining grow. Our Off-Earth Mining Forum at the University of New South Wales drew international media attention.

As you might expect, as in other "viral" phenomena, there is some craziness. It's a great ride!

One crazy thread is the discussion about "What are asteroids worth?" Deep Space Industries kicked off the topic as they breezily suggested that asteroid 2012 DA14 might be worth $195 billion. Since we are so early in the space resources business, such speculation might not be too harmful. (Our friends engaged in actual mining on Earth remind us that value estimation of mineral resources is subject to strict regulation, and mis-stating values can get you sued or even imprisoned.)

But, in fact, DSI's comment was probably useful, because it keeps the conversation going. And indeed it has: one tech blogger in Forbes countered that the asteroid's value is zero. Well, that bounds the problem!

Both DSI and the Forbes chap are inexcusably wrong. DSI's $195 billion estimate is wrong because it doesn't cost the tech development. Tim Worstall's estimate of zero is wrong too. If someone gave me $50 billion, I could CERTAINLY develop a complete asteroid mining architecture. Technology doesn't have to be completely in hand for things to have value. The oil industry is constantly developing new technologies to exploit previously inaccessible but known oil reserves.

But unlike the oil case, if there is no market, valuation is very challenging.

If we decide that resources mined in space are going to be brought back to Earth, then there are existing markets. But we also know that it's hard to compete in those markets. I have created a new aphorism which addresses this: "Reentry burns up value." We suspect that our mining products have significant value in space, because of launch cost avoidance. But THERE ARE NO MARKETS IN SPACE. Yet. And to state the obvious: there is no justification for developing a commercial technology if there is no commercial market.

There have been some suggestions of markets that could develop. Jeff Greason, CEO of XCor Aerospace, was a member of the Augustine commission that reviewed US plans for human spaceflight. Jeff suggests that the US government could pay for propellants in order to make human planetary exploration more efficient. Surely I've included Jeff's ISDC 2011 talk in previous blog entries, but if not, here it is:

https://www.youtube.com/watch?v=Wy2kIPLsUn0

The Augustine report itself also makes reference to propellant depots--but does not say how they will be filled!

Wannabe space resource developers must address the establishment of markets for their space products, thereby addressing the value question. DSI has actually been very open about its business case, as have Planetary Resources and Shackleton Energy. Shackleton is focusing on the propellant market.

The question of value versus system design was at the core of my work as a principal investigator for the DARPA F6 project developer's kit. The inventor of that concept, my good friend Owen Brown, published several articles on introducing real options into spacecraft engineering. Owen and co-authors found that a fractionated architecture gave options that enhanced the value of the architecture as a whole, and value of each participant's piece. My own work built on the advances of computer scientist Dr. Tatiana Kichkaylo to develop an automated design tool, which searched for optimal designs within fractionated (and non-fractionated) design spaces.

This work led to the realization of how ephemeral the concept of "value" is. An early output of our tool was a set of design points for an imaging spacecraft system--many cameras in space looking at the Earth, able to downlink images in real time. The optimal design point would change as the number of images per day was varied. If you're only interested in 1000 images per day, you don't need 100 cameras, but if you're interested in 100,000, you need several, etc., and the processing power, downlink, etc., all varied.

But the question is: how many images per day do you want? If this is a commercial system, the question becomes, how many images per day CAN YOU SELL? It's not an engineering question, it's a MARKETING question. The engineer should not proceed to design until the customer has made a decision on this point.

Which brings us back to space mining and the value of asteroids. For the sake of credibility, the industry needs to be doing CO-DEVELOPMENT OF TECHNOLOGY AND MARKETS FOR SPACE RESOURCES. This actually represents a fascinating intellectual challenge. How does a given technology IMPROVE the ultimate market?

Let us not be daunted by our current lack of market understanding. The computer industry, as did most of the revolutionary technologies of the 20th century, developed with significant misunderstanding of the market. Bill Gates, one of the world's most successful businessmen, has at least three huge misapprehensions attributed to him: "We'll never develop a 32-bit operating system," "No one needs more than 640k of RAM," and "OS/2 is destined to be the most important operating system of all time."

Perfect understanding doesn't seem to be required. What is required is courage and determination. Gates had them. I hope the space resources community maintains its courage and determination too. The good stuff is out there.