Orbital Mechanics:
Rockets and the New Launch Pad for the Economy
In 2023, a hobbyist working out of his garage in a remote location on Earth hurled a rocket packed with small satellites into outer space. Think we’re joking? We’re not. While most investors have focused on COVID and inflation concerns in recent years, a stunning surge in the development of the private space economy has been spinning up.
“We need to launch a satellite.”
So began a typical conversation one morning among the Payden Economics Team.
“What? Is that even possible for us?”
At Payden’s founding in 1983, there would have been only one option: “Call NASA.”
But a lot can change in four decades, and today, it’s not that far-fetched that your asset manager, or even a small start-up for that matter, could launch a satellite into orbit around Earth (for reasons we’ll get into later).
As the conversation continued, we covered how launch providers have changed, the transformation in the design and capabilities of satellites, and the increasingly valuable applications for satellites. It is safe to say that the “second space race” is unfolding more quickly than even our most optimistic expectations (see Figure 1) from when we wrote about it in these pages in 2012.1
“Only governments launch rockets,” was our colleague’s retort to our bizarre, caffeine-fueled rocket launch idea.
“First, it requires a massive rocket; second, it’s a costly, years-long process to get something into space. You have heard of gravity, right?”
It’s true that only a few spacefaring nations launch rockets and operate space programs, and space has long been the dominion of sovereign states. After all, who else could garner the financial resources to achieve such feats as putting a human on the moon other than a nation-state-level actor? In 1964, 380,000 workers worked on the Apollo project—making NASA bigger than Ford.2 At its peak, NASA spent as much as $3.0 billion in 1963 on Apollo alone ($28.7 billion in today’s dollars).3
But a rapid transformation is underway. Much like Uber and Lyft competed with the large taxi companies, SpaceX and Rocket Lab are the two leading private sector launch companies that have provided an alternative to large, bureaucratic, government-run space launch providers.
SpaceX has undoubtedly become the premier launch provider, even referred to as having an “effective monopoly” given that the Russian Soyuz rockets are unavailable due to sanctions.4 SpaceX, the first private company to successfully launch a rocket in September 2008, was the undisputed pioneer.
Beck, fascinatingly, has no college degree or experience working at NASA. Instead, Beck tinkered in his garage to create rockets that achieved orbit.
More frequent launches and competition in the space substantially cheapens launches. SpaceX’s workhorse rocket, Falcon 9, now launches its payloads at around $3,000 per kilogram (kg), down from the more than $100,000/kg the military had to spend when launching GPS satellites in the 1980s.
“Still,” our colleague interjected, “at $3,000/kg, a SpaceX Falcon 9 launch carries a 22,000 kg payload—that will cost you $67 million. Get out.”
Less heralded, though, is a small operation run out of New Zealand by Peter Beck (see Did You Know? Box). Beck, fascinatingly, has no college degree or experience working at NASA. Instead, Beck tinkered in his garage to create rockets that achieved orbit.
Beck’s firm, Rocket Lab, followed SpaceX by little more than a year by putting a rocket into space from a launch site on a remote New Zealand island in November 2009. Rocket Lab also successfully launched nine rockets in 2023, adding to the industry leader SpaceX’s tally of 27 successful launches. Rocket Lab ferries 300 kg of payload to space on each launch of its Electron rocket at just $7.5 million.
Rocket Lab ferries 300 kg of payload to space on each launch of its Electron rocket at just $7.5 million.
“You guys have completely lost the plot. $7.5 million? And that doesn’t even count the cost of the massive satellite!”
Ok, But Satellites Are Enormous and Expensive
Well, the first space race required large satellites, often in higher altitude orbits and with 15-year lifespans (or, in the case of the Voyager satellites, decades). The early satellites would take decades to build and cost taxpayers tens or hundreds of millions of dollars. Indeed, all that work and expenditure would culminate in a single launch of just one satellite.
However, the new space race involves smaller satellites placed into low earth orbit (see Figure 2). This new revolution in small satellites explains how Peter Beck could design a smaller rocket and find customers who needed their devices transported into space. After a trip to the U.S. in 2006, Beck realized that space was leaving behind the era of large multi-million-dollar satellites and embracing NanoSats, CubeSats, and other smaller satellites.
Did You Know? Must Be Something in the Water!
In this publication, we’ve discussed one of the most cited economists of all time, Bill Phillips, the creator of the Phillips curve—the oft-cited relationship between labor markets and inflation, stemming from work published in 1958. Another Kiwi, a physicist from New Zealand, Ernest Rutherford, was the first to propose that electrons surround the atom’s nucleus. This theory led to his winning the Nobel Prize in 1908. Now enter Peter Beck of New Zealand. His company, Rocket Lab, specializes in launching small satellites into the low Earth orbit using its own Electron rocket—powered by Rutherford engines. There’s got to be something in the New Zealand water.
NASA’s Ames Research Center in Silicon Valley started the trend under NASA’s Ames Research Center in Silicon Valley started the trend under Brigadier General Pete Worden’s leadership. Worden was among the first to ask, “Do we need multi-million-dollar satellites?” People often say, “There is more computing power in your iPhone than NASA had for the moon landing.” Taking that to its logical conclusion, Worden and his team of misfits used off-the-shelf products to launch “PhoneSats.” A “PhoneSat” is an off-the-shelf smartphone with added battery packs and code being sent into low earth orbit. Worden’s group found that it worked quite well.5
One of Worden’s acolytes who worked on the PhoneSat project, Pete Marshall, went on to found Planet Labs (not to be confused with Rocket Lab). This company has a constellation of 200 “doves” zipping around the Earth and photographing the entire surface of the globe daily. Doves are the size of a shoebox, weigh under 5 kg6, and are built and launched for thousands, not millions, of dollars.
Again, back to our Uber analogy: Imagine an Uber pool available now or an UberXL that you must wait 20 minutes for. Rocket Lab says it can build a new Electron rocket—designed to let us ride share with other small satellites in the same payload—in 18 days.
A $7.5 million tab to reach space? Nope. Now, we can put our satellite into orbit for only a few thousand bucks!
Twinkle, Twinkle, Little Satellite
Our skeptical colleague, now exasperated, admits we can join a Rocket Lab launch to put a small satellite into space.
“But, what is the point of that apart from some sort of novelty project you can write about in the Point of View?”
Well, thousands of satellites spinning above our heads disagree. We unwittingly interact with satellites as much as 300 times daily!7 That amounts to once every three minutes during your waking hours. There must be reasons to have them up there.
In 2016, we did a centerpiece on satellites for the Point of View. Back then, we were amazed at how the number of satellites had grown from a single one—Sputnik 1—in 1957 to more than 6,000. Today, almost 12,000 active satellites occupy space (that we know of), rapidly orbiting the globe with the most powerful engine we have on our planet—the Earth’s gravitational pull.
Between 1957 and 2016, humans launched anywhere between one and two payloads per launch. For most of human spaceflight history, the number of launches moved in lockstep with the number of payloads. (We don't just send satellites into space; we send astronauts to the international space station, too!) The trend of two payloads per launch persisted for nearly six decades (see Figure 3).
Lighter and cheaper to launch, since 2012, payloads have roughly doubled every three years. The average launch mass fell from over 6,000 kg in the early 1990s to under 300 kg in 2022.8
NASA’s Sun Monitoring Satellite weighed “just” 6,800 pounds and cost $850 million to build and launch in orbit.9 Meanwhile, Planet Labs’ 5 kg doves—which cost thousands to build and launch—can photograph some parts of the Earth hourly. We’ve seen impacts already. When Russia amassed troops on the Ukrainian border, it wasn’t spy satellites and intelligence agencies highlighting what was happening but rather hobbyists using Planet Labs’ images.
SpaceX has already set up a constellation of satellites providing internet anywhere globally for $120 monthly. The company’s Starlink satellites go up with SpaceX rockets, often hitching a ride with other, larger payloads.
Bringing It Back to Earth
“OK, you still haven’t answered my question back on Earth. Why would we need a satellite in space?”
Oh, that’s easy: We wanted to monitor whether workers are indeed returning to central business districts and, if so, which areas are doing best (or worst).
As it turns out, keeping track of commercial activity is one of the most common use cases provided by contemporary satellites. GPS satellites began launching in 1978, with the oldest one that is currently active having been launched in 1997. At a height of 20,000 km, GPS satellites spin around the earth once every 12 hours (see the Did You Know? box) and provide anyone with a GPS receiver their location at any time of the day.
You might think of Einstein’s theory of relativity as purely theoretical, not something practical. Think about it again next time you are using GPS. Those satellites move much faster than anything on Earth and lose 38 microseconds daily. It might not seem like a lot, but we know it happens from the highly specialized atomic clocks on them. As a result, the time is corrected so that you can more accurately pinpoint locations on Earth by using the GPS satellites. Why does the time have to be so precise? To pinpoint your location, your GPS receiver requires at least four satellite locations in space and the time they are there. If you are confused, it’s just some casual time travel happening, and it is relatively more challenging to understand than anything in financial markets.
The GPS service, with a constellation of just 31 satellites, is estimated to have added $1.4 trillion to the U.S. economy since its inception and is responsible for adding $300 billion globally every year.10 What will happen, though, with thousands of satellites going up annually?
We are excited to find out—even if it doesn’t involve a group of economists literally slinging a satellite into space.
Endnotes1. Payden & Rygel Investment Management.(2012) Point Of View: Is The Future of Space In Private Hands? 2. Fishman, C. (2020). One Giant Leap: The Impossible Mission That Flew Us to the Moon. Simon & Schuster.3. Stine, D.D. (2009, June). The Manhattan Project, the Apollo Program, and Federal Energy Technology R&D Programs: A Comparative Analysis. Congressional Research Service.4. Maidenberg, M. (2023, July 8). Elon Musk’s SpaceX Now Has a ‘De Facto’ Monopoly on Rocket Launches. The Wall Street Journal. 5. Vance, A. (2023). When Heavens Went on Sale: The Misfits and Geniuses Racing to Put Space Within Reach. Ecco.6. Planet. (2021, April 21). Insights - our constellations. 7. Nickisch, C. (2023, April 10). Blue Oceans in Outer Space. Harvard Business Review. 8. Union of Concerned Scientists. (2023, January 1). UCS Satellite Database. https://www.ucsusa.org/resources/satellite-database9. Reiny, S. (2018, April 19). How a NASA Team Turned a Smartphone into a Satellite Business. NASA.10. Gallaher, Michael P. (2019, November). Economic Benefits of the Global Positioning System (GPS). RTI International.
