Mo Islam
Pierre, you are a fascinating individual that I’ve been following for quite some time. You’re a space economist. And in fact, according to your Twitter/X profile, you’re one of the very few. And the space industry is filled with dreamers, but I don’t know if I would consider you to be one of them. And you view the ecosystem with a critical eye. And I think that perspective is important, especially keep things grounded in an industry where things sometimes can get a bit too lofty. So welcome to the show, and I would love to kick things off with just your general feelings about how you feel about the space economy today.

Pierre Lionnet
Thank you, thank you, Mo, thank you for having me. So my general feelings about the space economy is that it has been a subject of very high interest in the past, let’s say, maybe 10 years, but before it was not really very much a subject because space was only addressed from the perspective of sovereign and institutional programs. So this has been a major change. I was in the space industry for the past 30 years. Now I’m about to celebrate my 30 years within Eurospace, which is a very long time in the company. Actually, it’s not even a company because we are a non-profit, we’re a trade association. And my job here is very much into looking at the data and providing analytics for our members. And our focus is always trying to understand things independently and to focus very much on data and verifiable facts. And one of the realities we see in space today is that there is a lot of anticipation. And anticipation is good because it projects you to the future. But at some point in time, you also need to look back at what was anticipated and see what was the actual outcome of all this anticipation. And this is very much one of the things I’m very much focused upon, measuring more than anticipating. So I’m always a bit late because the measure comes after the fact, while the anticipation comes before. But in the end, measuring is giving us the foundation for understanding. So anticipation gives you the focus for the future, but the measure of what has happened for real probably helps you understand better what are the dynamics which you should really focus upon. So this is where I come from.

Mo Islam
So you mentioned that over the last 10 years there’s been renewed or more interest and more players in the space economy. We don’t need to talk about why that is. There’s a host of reasons and certainly the audience knows those already. But I am curious, how is your perspective? You’ve been in the industry, you mentioned that you’ve space for 30 years. How is your perspective on the space industry evolved over those years?

Pierre Lionnet
Well, I think that the space sector is a very strange mix because there is a lot of passion in this sector. You really see a lot of passion at people who actually love the things they do. They love the complexity of space challenges. And at the same time, there has been a lot of resistance to change. This is also something which I believe is a strong point of the past 10 years. I think that space, from the engineering point of view, is a very challenging environment and making things that work in space requires to use a lot of trusted solutions. And this is probably what has been the most difficult step in the past years, because people have come and said, we can do things differently. And a lot of people then on the other side, what we may call the old space today, we’re saying, no, if you change anything, it will not work. And if it will not work, it will break. And if it breaks, then it becomes a problem. So this has been clearly what I believe has been the major evolution that we have seen in recent years with this resistance to change softening a lot and people embracing the possibility of changes. On the other hand, I have noted as well that some radical changes didn’t go very well. Also, there is a lot of, again, anticipation and expectation that those changes would produce results which we still fail to see. So this is maybe an area in which my natural prudence, I would say, or probably tendency to be a critic you know, it puts me a little bit on the side of the road looking at the people walking rather than walking and running with them. So I try to look at them and see how much of that change is happening and what is the deep transformation which is coming up.

Mo Islam
So you mentioned a word earlier, passion, which is definitely a way you can describe many folks in the space industry, especially the ones I meet. Maybe share a little bit about your journey into space and space economics and what sparked your interest in the field.

Pierre Lionnet
So I came into space by complete chance. I was an intern in a VC firm when I finished my master’s degree. And I was very frustrated to see that the financial decision was not leading the game. In the company where I was working with, it was the engineering group that eventually decided whether or not an investment was good. So we were betting the investment that was just putting together all the indicators from business plans and then presenting them. So when it was good, then the engineering decided whether or not it was worth to invest, and so I decided to go to a different type of study. So I did a master’s, which was a mix between engineering and business. And it was about managing innovations. And when I was doing that, I was proposed a job at the European Space Agency to make an assessment of a human space flight. At the time, it was 1991, 1992. And this is where I started working in space. And after that, it was very difficult to go back to the financing world because people were saying, but you were working in space, you must feel that finance now is very dull, very uninteresting. And at the time, there was no job where you would have finance and space at the same time. You know, it was space, it was all about.

So I found this job in aerospace and I started doing market research, market analysis and economic studies for the space industry. And it’s been an interesting journey because everything is complex in space, you know, and it goes very way beyond the simple economic analysis. If you don’t start understanding a little bit the layer of the technology then you get lost. And so this is where my journey was. So I started small in EuroSpace. Now I’m the research director, also the managing director. We’re a small group of eight people. And I believe that this has given me a unique site into the space industry, the space activities, but also space policy, the way the budgets are driven and also all those relationships with the institutions because this is what we do. As a trade organization, our job is speaking with our counterparts in the institution so that we can actually make sure that the programs happen the way industry is able to fulfill them. This is a nice way to say that we are lobbying the institutions and at the real level of ESA and the European Union. So you see, this is where I come from. By chance, I couldn’t qualify, I don’t qualify myself as a space enthusiast. I think that, again, space programs are interesting, challenging, complex, long-term and for an economist, it’s an incredible study matter. That’s really fascinating.

Mo Islam
So when you started really diving into the industry from an economist perspective, were there at the time, and we’re going to get into this in more detail later on in the show, but were there, was there anyone out there that was making estimations of the market size of the space economy or like predictions of how large it would get? Were those coming from reputable sources at the time?

Pierre Lionnet
Absolutely. Well, don’t push me there, it would be difficult to stay nice. So, yes, there were a lot of market studies. Actually, when I started working at Eurospace, Eurospace was also working as a consultancy firm, not only as a trade association, and we were producing a lot of strategic foresight, in particular for the European Space Agency and the European Union. So we’re basically working ourselves on making some kind of prospect and forecast. So how could the satellite solutions benefit the Mediterranean countries or what would be the potential of commercial communication satellites. Let’s remember that this was the beginning of the 90s, so that commercial communication satellites was still a brand new term at the time. And then I saw the excitement about the first constellation, Global Star Iridium, that was supposed to be a game changer. At the time, we already saw a lot of market studies. There was this company that was called Torrey Group that was producing a lot of market assessment and forecasts. I believe that the same company now is called Bristec. It’s more or less the same construction. There was Euroconsult also at the time. I must say that when I was studying those reports, I was always sceptical because I was missing background and methodological information. And I thought that a number of those studies were lacking consistency, one with the other, which you know, raise doubt.

If you have two different people looking at the same phenomenon and providing your very different appreciation, then you must ask yourself, is somebody looking the right way? Are they both looking the right way, but maybe they don’t understand the feature the same way? Basically, it created for me some kind of dissonance. And my main concern was to build within Eurospace the capacity to make those assessments by ourselves without having to rely on those figures, which we may not always feel consistent with the perceived reality that we had. And so we have now in Eurospace a market database, we have a budget database, and we also have a company database. So basically we are mapping the sector in terms of industrial capabilities, we are mapping the market in terms of what is happening in launch, and then we are also mapping the budget, focusing on European budgets, I’m not looking at the world, to see what are the budget opportunities for our members. And this is helping us to make our own assessment, and this is also helping me to share them with the world using our LinkedIn account, our X account, and sharing this information so that we promote the same understanding of the situation that we have.

Mo Islam
Pierre, how large is your team? How many folks are working on this?

Pierre Lionnet
So in Eurospace we are eight people and I would say that the people, so my work on space economics is about 30% of my time. I wish it would be more, but you know, I have other things to tend to. And I have two persons working with me on those database half time. So basically it’s one single full-time equivalent to produce all these economic assessment and data analytics, which I believe is very efficient. I wish we could do more, but this is what we do.

Mo Islam
Yeah, very efficient. So let’s start from the top. What are the most significant misconceptions about the space industry that you encounter, that you feel like you encounter more on a regular basis these days?

Pierre Lionnet
So there’s one catchphrase which I really don’t like, which is every company is a space company. I mean, let’s put it in another way. I like to say jokingly, every company is a chair company because you find chairs in every company. Does that make any sense? Does that help in any way understanding economic realities of companies? So no, yes, space is a ubiquitous service. So you see, you know, but light, electricity and the air you breathe and whatever, so many things are ubiquitous. So it doesn’t really make a lot of sense. Another one which is really getting on my nerves is launch cost is falling down. And this could be debated for hours. So I don’t want to jump into that right now. But clearly, people are not looking at the right things when they say those things. So they also create misconceptions about what the future holds for space companies which need to buy launch. I mean, you don’t. Launch is the reason why space applications exist. If you don’t go to space, if you don’t have a launcher, there is no way, and the last one, which is not to the same level, but again, it’s really something which sometimes for me is not really helping the people who use the phrase is about private investment, which is now really changing the game in space. I believe that the money fueled by private investors into space ventures is still so incredibly low and not really focusing on what is really helpful and useful that clearly doesn’t make a lot of sense. But our institutions today are very focused on looking at that. And some of them believe that this may even replace them so that what public players invested in space, public in terms of government money, now could be replaced by private investment. I don’t think this is true in any possible way. So those three things together, you know, everything should be space, space launch costs are falling down and private investment will supersede government investment. All this creates a mindset which I believe will probably hurt the sector in the long run.

Mo Islam
Well, I do want to actually expand a little bit on your launch comment and then on the private investment comment in just a bit. So moving from like misconceptions to trends, right? There are a number of like trends that are driving some of those investment categories. What are kind of trends in the industry that you find most interesting or more on the concerning side?

Pierre Lionnet
Well, there is one thing which is really game changing today. It’s the acceleration of mass in orbit. And so you see, when I started building those statistics, we had less than 100 launches a year. And we had, in average, less than 300 tons put in orbit every year. And this has been super stable since the late 80s. So clearly, we didn’t think that anything could change. And then Starlink happened. And Starlink really changed the game. And for me, this is not a trend. It is a unique event, a major one. I’m not saying this to minimize. On the contrary, I’m recognizing that SpaceX and Starlink have really changed the shape of space activity, probably for the very long term. And that this is a unique reality. And this acceleration of mass to orbit is today something which is completely changing the way we should approach the space business. We have now to question two major points. Do we need to develop those applications so that Starlink is one of the many mega applications in space that would require hundreds and maybe thousands of launches every year that would deploy to orbit thousands and thousands of additional tons? So is this a trend that really we need to move towards? And when we say we, it’s us as a trade organization, do we support this? It is also the government’s which are helping the industry to move along. And it is also the private investment which should be there. So this is the major point.

But then we also need to ask ourselves, is this having an impact that we have not really fully realized? And this is not a theoretical question. When we had 60 launches a year, we know that the launch system is basically a big pollution item. You know, it is happening and it is burning a lot of propellant through the atmosphere, it is going very high, it is liberating those particles in the upper layers of the atmosphere. So this is not a clean activity, like, I don’t know, windsurfing. You see, the impact is absolutely amazing, but it was small in quantity. It was not happening very often. So we could consider that at the global scale, this was negligible. When the activity now gets multiplied by a factor two, then maybe 10 than maybe 100, then we cannot consider it’s negligible anymore. We need to look at the overall life cycle assessment of this. And from that perspective, I believe that this is where we really need to reassess those trends and look closely at what exactly is the impact of this major change which is happening. And again, stalling is a unique thing.

Today, no one can be compared to Starlink. And if you remove Starlink from the global statistical equation, which I demonstrate pretty often, there is nothing really changed. I said at the beginning that change was a strange mixture of passion and resistance to change. Starlink is a change. But today, if you put Starlink on the side, the other people are still doing space the old way, the usual way, which means the same more or less number of launches, the same quantity of satellites and mass to put in orbit. Basically, beyond Starlink, I don’t see any major other change. And this is even more interesting because it means that you had this one single player that nobody was taking very seriously. Honestly, I remember watching the first Falcon 9 launch in this meeting room here with a group of industry experts from the launcher industry and the European guys. And everybody was very skeptical and that this launch wouldn’t really happen because they said the design was not very efficient, that the performance of the system would not be grandiose, and probably it would be a failure. Falcon 1s were failing a lot, so why would Falcon 9 be a success? And everybody was pretty faced when they saw that this was actually happening. And every new introduction, like reusing the booster, reusing the fairing, accelerating the cadence, shortening the time to return to flight, all those evolutions really have put on shock a lot of players in the industry. But this is the major change we see happening. And, but we still don’t understand the full economic dynamics of it because SpaceX doesn’t disclose sufficient financial information for people to really grasp what are the long term implications of.

Mo Islam
So in a way, what you’re saying is SpaceX in itself has created this change. So they are themselves are going to accrue most of that economic value of that change. And everything else has been sort of everything else looks and feels the same as it, not quite literally, but it generally looks and feels the same way as it did. So that kind of begs me to sort of the question is how big do you think the space economy is today. And there’s a lot of debate, there’s a lot of estimates out there. I mean, you wrote yourself in a recent paper that I think the consolidated value is somewhere in the $292 billion range. Talk a little bit about your number, talk about everyone else’s number and the differences there.

Pierre Lionnet
So the space economy is a very vague term. So I would like to focus my answer on a narrow part of that. Basically, the space economy is the economy of using space assets. So space assets are infrastructure. So it’s an investment. So how much money is actually invested in those space assets? And when I say invested in space assets, it’s actually the investment which is made in the satellites that actually go to orbit and the launchers which are required to put them in orbit and then the ground segment which is required to operate. And then on top of that, you also have the terminal equipment, which are for the users. This is a bit on the side, what we would call the downstream part. So the upper part, the part that is flying in space, for me, it’s more or less a market opportunity for companies which are actually building satellites, which is between maybe 50 to 60 billion a year, globally speaking, including China, Russia, including institutional and commercial programs. And the opportunity for people which are actually providing launch services is between 10 and 12 billion a year. And then the ground segment associated to that, the professional ground segment, is maybe 10% of the total of the spacecraft segment. This is usually bundled in the spacecraft infrastructure.

So basically the ground segment may be around $6 to $7 billion a year. So you see, you put this all together, the global space infrastructure, in terms of market opportunity, it’s maybe 60 plus 12 plus 7. So that’s maybe $80 billion in total, which are actually flying in orbit. On top of that, you have a lot of money which is coming from the space agencies to support research, development and innovation. This is not actually translating into practical systems which are flying in orbit. And I believe that this opportunity, which is a very sizable one, which is benefiting from Chinese for Chinese industries, for European and American ones, it may be overall 30 additional billion. So this is money which is actually there to fund research, development, technology let’s call it innovation at large. So this is what is available today. Most of that is funded by government budgets. I mean, the very vast majority, the commercial part of this is somewhere between three and six billion a year and maybe 1.2, 1.3 billion at launch. So you see, the upstream part is less than 100 billion overall, not including the totality of the R &D funding which is available, but most of it.

Mo Islam
So what sort of is the key gap between what you’re describing and the 300 to 500 billion plus numbers that we get?

Pierre Lionnet
It’s the money from services and what you consider the value of a service which is delivered by space. Sometimes I find myself using stupid examples, so I will do it again. My point when I was saying it’s about 100 billion, this is like you would say, this is the market of people building and selling cars. But then you see you can buy your car and you just use it every day to go to work. So what’s the value of the car? The service, it’s only your own personal use the market value is zero. But if you’re a taxi driver, the market value is the amount of revenue that you generate from that car. Maybe it’s two, $300 a day. Hopefully it’s that much. So this billion that you add to the 100, which I was mentioning at the beginning, is the revenue derived from the satellite. So if you’re a taxi driver, you would say my car has a service revenue of $300 a day. But if you bring in your brother, and instead of driving 12 hours a day, together you drive 24 hours a day, then this value probably doubles up. It’s still the same car. So in the end, the usage of the space systems is actually driving a number of assessments for what the space economy would be. The problem with those assessments is that they focus on the only things for which a measure exists. So they say, we’re broadcasting TV signals. Let’s see, what’s the value of that? Well, some TV is free, so the value is zero, so we don’t count it. But some TV is a pay TV. So people are buying for this premium service. And then they say, how much is that? It’s 80 billion a year. So let’s call this the telecom part of the space economy.

Then they look at the GPS signal and they say, the service is free. So the value is zero. OK, zero. But then they say, well, people have those chipsets in their phones. Let’s look at the value of the chipset. And then they say, OK, how many do we produce every year? Let’s put that into the space economy and so on. So basically, they’re finding elements which can be measured and they put it into the basket. I’m not saying this is wrong. I’m just saying that this is incomplete. And this is also potentially criticizable because if I look at the example of pay TV, so if you pay $29 because you are subscribing to some kind of offer for satellite television, which is premium television, what you are paying is for programs. If you look at the economics of the people, the channels which are actually providing that service to you, they may pay 5% of the total cost to broadcast, which is the value of the satellite service. The rest of that they pay to acquire the program. And you yourself, you’re not putting those $30 a month because you like to have a dish pointing to a satellite because you’re a geek. What you’re interested in is film, sports, and whatever which is coming to your screen. So basically saying these 80 billion for TV is the space economy is like saying your work as a taxi driver is the car economy. It’s not completely wrong, but it’s not completely true either. And so many things. If I put the example, keeping the example of the car, if I put the example, you’re not driving a taxi, but you’re driving a DHL truck. So basically you’re moving parcels around. I could say that the total value of the parcels you carry is the space economy. This is completely absurd because if some people are selling high value items that you transport, then the value grows without anything happening in the infrastructure above. So this is why I’m saying those measures are not helping the sector because they are incomplete, inconsistent and unrelated to the actual deployment of space infrastructure.

Mo Islam
What do you think the problems created or the damage done is from these types of estimates? Like, it’s one thing for folks to be, you know, just putting out these estimates based on, you know, whatever methodology that they’re using that, you know, they can justify. And like you mentioned, it’s not necessarily wrong, it’s incomplete. But like, what is the end negative effect that this can create for the industry?

Pierre Lionnet
Well, people do mental shortcuts on that. So we tell them the space economy is, I don’t know, 400 billion, whatever the figure Bryce is quoting at this moment. So let’s say 400 billion. And then you get these guys who are raising money for Momentus, and they say, our total addressable market is 400 billion. Momentus is a company which is providing this last mile service in orbit for people using large launch to deploy very small satellite that cannot go to the final destination by themselves, so they do this taxi service for them. Well, for Momentus, this figure of 400 billion doesn’t mean anything. But we found it ubiquitously used in every pitch deck for all those companies that eventually went back in the 2020, 2021, 2022 period. So basically, people don’t go looking behind those figures. Then they look at the projections which are made, like the one by, I think it was Morgan Stanley that was taking the figure at the moment in time, those 350 billion or so, and then it was stretching to 2040. And they say, OK, this is growing. This is the trillion dollar space economy. This is even more market for us. But eventually, people are not looking at the details. And the problem is not the estimate. It’s not the forecast. It’s the people that get this shortcut in their mind. They just keep the big figure. They don’t look behind what is actually the segment of that that would be applicable to their case, and so this is where, but the fact that people are then using those figures all the time without looking at them with any critical eye, well, even for institutions, for public servants, for politicians who make decisions, they blur their mind. They believe that, now maybe it’s self-sustained. Maybe all this can be paid by all those billions. So maybe we can invest less. And then for a lobby group like us, it’s a problem. But the problem is not that the mindset is changing. The problem is that the mindset is changing for the wrong reasons. If this was all true, I couldn’t care less. The problem is that when some information gets misunderstood and misinterpreted, and then people jump to conclusions, which technically are not OK. And this is where we need to fight. And it’s difficult.

Mo Islam
Let’s talk about the startup environment, especially since you mentioned Momentus. And you’ve mentioned in the past that you think that the startup environment may be unsustainable right now. So what is your current view and what do you think this looks like over the next decade?

Pierre Lionnet
So for me it’s unsustainable for two major reasons. The first one is that if you launch a business, whatever that is, what you must have in mind is solvent demand for your product or service. So if you launch a restaurant, you must have people lining up to buy your food. And if you’re in the burger business, if your crowd is vegetarian, if you don’t have vegan burgers, you will have a problem. Space is very much like this we see a lot of new projects launched without any vision of the demand. Actually, the vision of the demand they have was the Morgan Stanley projection on the space economy figure of Bryce that in 2040, we would have a $1 trillion market perspective. So basically, if I say this, I could say any space business could find the demand. But then again, the details of the figure are telling us that this is not actual addressable demand for space businesses. Because if you’re in a space business, what you do is either you build a satellite, either you operate a satellite, either you build a launch. And this is basically all of it. And so if you don’t have people who are actually able to pay to buy the satellite and the launch service, then there is no demand. And today what we have noticed is that in the past 20 years, the demand for space systems and the associated launch has not grown. It has not grown. Yes, it may have grown maybe 2%, 3% a year. If you take out the inflation, it’s a stable activity. And if you look at the total mass deployed in space, it is stable as well. So basically, we’re always expecting this growth to happen sometime tomorrow, the day after tomorrow.

The only growth which we have noticed is actually the Starlink impact. And again, this has been a major game changer. I said that at the beginning, people say, Pierre, you don’t like Starlink. You criticize them all the time. Absolutely not. I recognize that this is a unique thing happening to the space sector. On the other hand, one thing which is super clear is that Starlink created this demand for SpaceX. And I believe that one of the reasons, and again, I cannot read into the mind of Elon Musk, but I believe that one of the smart reasons for which they decided to start and try to have their own constellation system, was to drive down the cost of using the Falcon 9 launcher. And indeed, in our economic models, we demonstrate very easily that the more you launch, the less the average cost. The less the average cost, the more potential profit you can make on launch services, which means that they do good margins when they sell to NASA, DoD, but also to ESA and a few other commercial customers. But this is also helping them to improve the economics for the starting system, because every launch for starting is as cheap as it can be because there are so many launches. But I don’t see today a potential for emerging the demand, more demand. And this is where I come to the other problem. I was saying that there were two for the startups. One problem is that they don’t, I don’t see a demand for all those new systems and products. But the other problem is that I don’t see capital that would reassure me that this demand may happen in the future. When I look at how those companies are funded, we see that most of the money was brought into launch service, meaning that there is no capital today to support the fact that companies which would deploy Constellation in the future, they have the money to do so, which means that they would be able to buy satellites and then to buy launchers, which would justify the business cases of all the other guys.

On the contrary, my analysis is telling me that most of the startup environment is underfunded by launch. So what about the other players? Do we see more demand happening from the installed operator base? And today, if you look at the big ones, SES, UTL-SAT, Viacetin, Marsat, et cetera, et cetera, you see that all of these guys see profits dropping down. They have low capital outflow. They have reducing their capex. And so clearly, I don’t see any growth coming from these guys. So, what is the dynamic environment of growth that would justify all this investment in all those startups? Because clearly today, I don’t see this as a sustainable business because the demand is not there and I would say the installed one and the potential one doesn’t have the funds yet. I will take a very clear example. If you take the example of Rivada, so Rivada is a potential mega constellation in the making, but today they’re not able to demonstrate that they have raised the funds to actually deploy. They’ve already secured a contractor to make the satellites, which is Terran Orbitan, but the guys at Terran are always complaining that the money is not there to actually support the work they need to do to deploy the constellation. So basically everything is stalling, waiting for the money to happen. And this is at least is a prudent way of doing because in the past, Thales and ESA, they built the first global star constellation. And when the company was unable to pay for the satellites, it was a major problem for the manufacturer. So you see, this is what lessons we have learned from the past. We should really look at what solvent demand is there. And so today it’s not there. So you see no demand and insufficient capital.

Mo Islam
What do you do you think there are any major differences between the US and the European startup ecosystem?

Pierre Lionnet
Well, from the point of view of the demographics, yes, I see that in the US you see much more focus on, I would say, the constellation business. And you see also a lot of focus on launch, much more than in Europe. In Europe, you have a lot of focus on satellite equipment. Actually, in my list, I see that in Europe you have so many players that actually propose to do propulsion systems or antennas or chipsets or mechanical systems. This is one of the focus and actually I have the impression that Europe is really bubbling from that point of view. You have a lot of capacity which is actually being established. And the other big difference is that in Europe we seem to have less capacity to raise capital. That’s again, the ratio between Europe and the USA from the top of my mind must be a 1 to 4 or maybe 1 to 3.5 so there is more capital availability in the US clearly than there is in Europe.

Mo Islam
So you, before you became an economist, you spent a brief period of time as an investor. So when you think, when you look at the startup ecosystem today, what are the metrics or what’s sort of the framework that you would use to determine where you’d want to deploy your capital? If you were forced to deploy your capital into the space industry and related to that, I would say, look, I know you mentioned demand already, so we don’t have to talk about demand, obviously demand is probably the first thing you would look at based on what I’m hearing you say. But maybe talk about what else you would consider as metrics or key points that you’d make sure you’d want to hit.

Pierre Lionnet
So I don’t know because I have so many stupid things I want to say at this point. But first thing I would say is no bullshit. I mean, I need to have people that cut the bullshit. We hear a lot of bullshit. The other day, one colleague was asking me, are you going to the French New Space event called Les Assises du NewSpace that took place the other day here in Paris? And I said, that would be a bullshit overflow for me people having so many crazy projections and so people who are so ignorant of everything. So the other point is avoid ignorance. You know, people that go on YouTube and go blurting things which make absolutely no sense, such as with the miniaturization of satellites. Now you can do with a CubeSat what you could do years ago with the 12-ton satellite. I have seen this, including in official publications for investors. So yes some sense of what is happening. More seriously, I think that the main focus is really on some core technology. I believe that there is some good ideas to be funded in some very specific, narrow technology areas. But clearly, those in my book would be for defense contractor. I think that startups which are targeting defense services and defense contractors are really the good ones, at least the ones which have potentially more access to capital and solvent demand. People who are saying, I’m building one more broadband constellation, come on, why are you doing this? Or IoT, I mean, we have so many now and this IoT business is so small overall that nobody cares less. So you see, clearly stay away from commercial applications, stay away from the bullshit and stay away from saving humanity. I mean, we are not saving humanity with space no more than we are saving humanity with green planes. I mean, this is also something which for me is a no-go. And one last point again, I put this on the most of the joke part, but not so much. The website URL, the one which are dot space usually are the worst. I wouldn’t put this as a general rule, but if you choose dot space and you pay more for that, you’re probably not very smart. I’m sorry, this is a half a joke, half seriously, but in my list.

Mo Islam
Well, okay, let’s talk about some of the challenges of commercialization right now of space. I want to talk about a few different segments, but let’s start with launch because you mentioned earlier the pricing piece that launch demand hasn’t or launch pricing, I should say. Everyone’s talking about it coming down, but it hasn’t really come down. Do you think that that’s a product of demand, meaning there’s a common conception and there’s a common thought process now around SpaceX, which is SpaceX has every ability to lower cost if they wanted to, but they won’t because they don’t have to. So do you think it’s more because of that, or do you think there’s more on the technology side that, hey, we physically can’t get the cost down much further right now?

Pierre Lionnet
So no, I think that from the cost point of view, and this is what I wrote in my paper on Space News, I said clearly I believe now at this point that SpaceX has been able to lower the cost of launch thanks to the high cadence. So as an economist, the first launch cost equation which I’ve been building, and I’m not the only one, I mean everybody was doing them the same, you would see that eventually whatever technology you put in place, whatever the solutions you want to roll out, eventually one of the major factors to actually go down the cost curve would be cadence. That would be for expendable and for reusable systems. In every case, if you increase their launch rate significantly, you go down the cost curve. So this is a general rule. So clearly with the kind of rate of launch which SpaceX has achieved today, saying that they didn’t reduce cost would be stupid. And nobody, I believe, ever says that anymore. However, the point is this increased demand rate leading to potential additional benefits? And to put it the other way around, if I drop down my cost significantly, am I attracting more customers? Are more people lining up to launch if the launch cost is low? This is the question of elasticity of demand for launch service. And I believe that there is a very big misconception from that perspective.

Launch is a joint demand system from the economic point of view, meaning that you buy a launch because you buy a satellite. So the first factor to explain that you would buy a launch would be the price of the satellite before the price of the launch. And this again is counterintuitive. So many people say if I launch at a lower price, then I will see more customers lining up. And the fact is that today what is happening is that SpaceX is capturing most of the launch which is procured in competition because with their cost system they’re able to price themselves right below what every competitor best offer could be done. And this is the reality of SpaceX. So today low cost of launch is potentially a factor that would improve the demand for launch only if low cost of satellites can be achieved. So you cannot have one without the other. And today, what we see is that the only company which has achieved to reduce significantly the cost of satellites, again, is SpaceX with the starting satellites. And this cost reduction was not achieved thanks to high-tech or to dramatic innovation. What they did is they simplified, they optimized the design for load on the fairing, and they basically removed everything that was redundancies and over design so that they could come to the cheapest possible system, including using technologies that people would not fly typically. The silicon solar cells are not your preferred choice for space systems so far.

Moving to electric propulsion using Argon was completely new and possibly subpar in terms of efficiency, but it was good enough. So the good enough approach is driving down the potential cost of satellites in the future. If enough customers are ready to embrace this good enough approach, then probably we would see more spacecraft to be launched. And this would necessarily apply to the elasticity of the launch demand. So we would see more launch demand and potentially more launch players being ready to reduce the price for the launch, provided that their cost structure allows it. And today, to be very honest, I think that only SpaceX has the cost structure that would allow potentially in the future to lower the price. But you see this mechanism, which is pretty long to explain, I’m sorry for that. But it’s not immediate and this elasticity doesn’t work by itself. In economics, we usually explain this to students by talking about the meat market, which is potentially associated to the market for wool, if you know you’re eating a mutton, and also associated then to the market for leather. So basically those three things work together, including some milk. And so you cannot have one factor driving down the cost if all the factors are not aligned well for all the markets to move in the right direction.

Mo Islam
So what I’m hearing is that you don’t necessarily believe that at the moment that there’s demand growth beyond Starlink for launch.

Pierre Lionnet
Not significantly, there is a few additional ones. You have Kuiper notably, so we know these guys very well. But other than that, even IRISQUARE, which is a big program for European governments, even IRISQUARE will not generate a massive amount of additional demand. And my take is that some government customers may move to different systems. So in this case, IRISQUARE, you know, small LEO satellites instead of big geo systems for government communications. So basically, they will shift their demand from one to the other, which doesn’t translate necessarily in more demand for everyone. You see, so I’m very skeptical in the potential for high growth in the coming years.

Mo Islam
So we mentioned Starlink as the main source of demand growth for the time being. Do you think that there’s a viable business model around Starlink?

Pierre Lionnet
Well, it’s a difficult question to ask. I think that you can modelize, I did, a viable business model. But it hinges on a lot of, I would say, fringe assumptions. And basically, you can move one assumption a little bit to the right, so more costly items, and then you lose money. And then if you can manage to stretch your assumption a bit to the left, so a less costly item, then the thing turns out to profit. I believe that starting today, the profitability, which I believe is possible, hinges on a few things. First, of course, very low launch cost. This is a major item. Today, I believe that below 28 million per launch, Starlink can actually work towards profitability if the launch cost for the company was more than that, it didn’t work. The second one is incredibly low satellite costs. Elon Musk at the very beginning when the starting was still 250 kilograms of the Gen 1 is saying this satellite is $250,000 to build. We use this assumption in our model and but if you say the satellite is $500,000 to build then the system doesn’t work. It is not profitable. And there’s two other items which are a bit more subtle that we look into is the depreciation and harmonization. So basically the starting system the biggest cost is Capex. Actually, by far, I mean, it’s almost 90% of the total, which means that in the end, you must cash, you must have cash to actually fund that. But then at the bottom line, you must look at the DNA. And this DNA line actually hinges on a major assumption, which is the starting satellite lifetime must be five years or more. If you assume that the satellite in starting constellation only lasts four years, then it’s very difficult to achieve profitability. So you see, basically, you have those three points, manufacturing, launch service, and lifetime. If those three align well, then you have a good viable system. But this would apply to any other type of constellation, even the smaller ones. But in the case of a very large one, those things become massive, really massive.

Mo Islam
But importantly, it sounds like you think that the demand is there. There’s no question.

Pierre Lionnet
Today, well, I see that today there is maybe 3 million users. Again, there is no official declaration, so there’s no way to actually validate or not. I don’t know how much this demand will grow because they actually increasing the capacity they have in orbit because they launch more and more satellites every week. It’s meaning that there are more and more terabytes of available capacity in orbit.And I believe that one of the key factors of the future success is the capacity of Starlink now to attract even more customers on other geographies. So we see that the demand in Europe is still very small. The number of users they have in the African continent is still very small. I see similarly that Asia-Pacific is not super big. Australia is taking up, apparently, which is good. So you see, improving the field ratio and having less and use capacity is probably also a major dynamics for the system to actually make more

Mo Islam
Right. So I want to switch gears just a little bit and talk about the moon. So there has been a fairly significant growth of companies building commercial landers. There’s also been a uptick in lander attempts from sovereigns. So this is a question actually I get very frequently around the business case for the moon. Like what is the business case for the moon? I feel like I can guess what you’re going to say if I ask you if there is a business case for the moon. But I think the more interesting question might just be how do you think there could be one day a business case for the moon?

Pierre Lionnet
Oops, you’re putting me off guard here. I don’t know. Honestly, I don’t think the moon is an attractive place to be. So today the business case exists because a lot of governments have moon related programs such as Mars is also a business case. I don’t think it is anything close to what people believe would be a moon economy where there would be value generating activities based on the moon for anything else than actually being used on the moon. So you can say, I’m turning a business case because my astronauts would need space suits. This is what NASA is doing. And they said, OK, my business case is I will be renting those space suits on the moon so that my astronauts can actually use those space suits. And this business case will be as big as NASA wants it to be. So if they have three people working on the moon, they will need three suits. But if they have 50, then they will need 50 suits. On the other hand, I don’t think that there will be a substantial amount of non-government money buying the service, any service that would be available on the moon. You could say it would be a regulate extraction. You could say it could be a power supply. You could say water extraction. Yes, this may happen, but if there is some government program that will buy it. Other than that, honestly, I don’t see what kind of private company with non-government business in mind would be doing on the moon anytime soon or not even that soon.

Mo Islam
So talking then about sort of private investment, right now there seems to be a healthy level of interest from investors, both on the retail side and the public markets, on the venture side, within more traditional venture capital, and also on the institutional side. And I can say that because I know, and these are the folks that we talk to. I’m not necessarily saying they’re putting in big dollars, but there’s interest in learning and understanding and trying to figure out if there’s an ROI opportunity here. What do you think causes that to break? Meaning that what do you think is there? Is this something where like, you know, just for the foreseeable like the Pandora’s box has been open and for the foreseeable future, there will always be continued interest. There will be companies that especially the ones where the business case clearly doesn’t make sense, there’s no demand, they’ll go away, but there’s always gonna be a healthy level of new startups that get created because there’s going to be this inherent level of investor demand driven either by passion or maybe some sense of, hey, maybe this one day will become a business. Or do you think that there’s something that could happen in the industry that would cause investors to really take a step back? That felt originally, felt like could be sort of all the SPACs and that’s not just for space, there’s many other industries where that’s applicable. But that didn’t necessarily deter people, especially the institutions, from continuing to lean in and trying to learn about the industry.

Pierre Lionnet
Honestly, you mentioned passion, and I want to use that term again. There is some kind of passion with the idea of setting foot on other planets. So the moon is the closest to reach, so people are wanting to go back there because they know it’s easy, by the way. I mean, it’s already been done, so there’s nothing much to be demonstrated. So you can only say, I can go again and maybe stay longer. And that would be the change that will happen. But people are passionate about it. This has been one of the areas where when you start pushing people into their boundaries and say, but why exactly the moon is interesting? I mean, would you go on a vacation on the moon? I want, some people would, but I want. What kind of science would require the presence of people on the moon other than knowing the moon to do more on the moon? So you see it’s a self-contained thing. So if you think that going to the moon is interesting and valuable from a personal perspective, then clearly you move along. And I believe that this passion dimension is actually what is the driving force. The venture capital and the general investment in those things, for me, it’s another thing. It’s more the other element that you said. What if somehow, someday, something happens there that becomes a game changer?

When I was working for the European Space Agency in 1992, I was asked with one simple question and I produced a 250 page report to answer that simple question. Is there an economic interest in human activity in space? And I’ve been using a lot of economic evaluation and models to try and answer that question. And eventually I came to the conclusion that you couldn’t say yes and you couldn’t say no, because you didn’t know what the future would be like. And so I couldn’t answer like this to Issa, there is no yes and there is no thank you, goodbye. They were paying for me. So basically I created what they call an option value model. And the option value model is trying to put a value on the option rather than on the outcome. And basically you ask yourself, what would be the potential benefit if something good happened? And what would be the risk of not being there to grasp those benefits when they occur? And the option value is actually a number of mathematical formulas you use. So you put probabilities in your potential revenue and you put risk against those probabilities of losing it all if you’re not there. And then you invest the minimum amount required to be still there in case something very good happens. I believe the moon would be fitting that model as well.

Probably today, there is no good business case at all. But is it worth, and imagine you’re a very wealthy person, is it worth putting maybe 1% of your wealth there? I mean, if your name is Jeff Bezos, 1% really gives you a long way on the moon. So why not? And that basically I believe that this is what is happening and this is one of the main drives in all those funds which are eventually supporting those startups, which have those, I would call them nicely vague and far-fetching exploration purposes. Basically, the money that is going in those companies is not rational. It is what if, and I like the idea. And it’s only a small fraction of the money which is actually invested in the global economy and it is small enough to be lost in case it is lost and not being a problem for the people who actually invested.

Mo Islam
Sure. Are there any specific segments or areas of or technologies within the space industry that you feel like are overlooked or undervalued, however you want to think about it, but just areas that are just not getting that much attention but you find interesting or exciting?

Pierre Lionnet
I remember that you put this at the end, I was wondering what, and I think that it’s volume. The whole thing is about volume. We need to see, and this is what I was saying at the beginning, what we are able to do to change the way we do space by moving from exquisite systems produced in very low quantity to good enough systems produced in very large quantity that generate then more economic value per unit deployed than the exquisite systems. So for me, this is the case which is overlooked. I feel that in the sector, a lot of people are very much into tech and they like to innovate. They like to test new things and they like to break boundaries. So Mach 5, Mach 6, space planes, all those things. I think they’re overlooking the practicalities in economic terms, the industrialization and all those aspects which really will make a difference there. So you see, it’s not an area which is overlooked, it’s more of a mindset. The problem with this mindset is that sometimes the volume requires lower pricing and lower costs. And in the end, the market opportunity may shrink because you’re able to produce something at higher volumes. And so I don’t know if the industry is ready for that, you know, shrinking markets because they’re doing more. And the example of Starlink is pretty amazing from that perspective. If you agree with the idea that every Starlink satellite is about $1,000 per kilo deployed in orbit, it means that with the very high volumes that they deployed, they actually destroyed market value for themselves. The fact is that for them, it’s capex, so it’s good to keep it low. But if it wasn’t the business of selling satellites, nobody would actually go to their customers and say, OK, I’m proposing a satellite which is 10 times less expensive than the other one, the one I was selling before, provided that you buy five times more. I mean, I’m ready to go 10 times cheaper if you buy 20, 30, maybe 100 times more. Otherwise, as a provider, as a supplier, this would not be a smart choice, killing my own market. And I believe that this is the major thing which is currently being overlooked. People project a future of volumes and the future of riches at the same time. It doesn’t work like this.

Mo Islam
So if you had to work for a startup and leave your post, who would you work for?

Pierre Lionnet
A startup meaning a small company, because again, if you really want someone to go somewhere, you must go with the people who have success. So probably SpaceX would be the only one I would consider at this point. Although I don’t think I would accept the, it seems that people are very much overworked in SpaceX at the age I have. I don’t think I would still be able to keep that rhythm of work. No, frankly speaking, I don’t think I would join any startup because I’m very risk averse, personally speaking.

Mo Islam
Hahaha. Sure, okay, fair enough.

Pierre Lionnet
I wouldn’t join a company for which I believe that the business case is high risk and maybe not even considering the right directions, the right markets and so on. So that’s definitely not what I am. I’ve been criticized for that on X many, many times. People say, what did you do? You’re criticizing things, you’re making statements, but you didn’t do anything with your own hands. No, I didn’t. But it’s not the role of everyone. I’m doing analysis.

Mo Islam
Yeah, look, I’ll say something and I mentioned this before we started recording today, which is I do think, look, the space economy and the industry can be a bit of a bubble sometimes, right? And there is a or an echo chamber, however you want to describe it. But there are times when I when I step out and, you know, my, you know, my background is in finance, right? It’s not necessarily in space. And I’m certainly not an engineer, but when I talk to my friends and colleagues, my former colleagues, I actually realize that no one, most people, especially like the general public have no idea what’s going on in the space economy. They don’t understand the gravity of it. And honestly, the question that I get more often than not is like, why does it matter? Right? Which is like, which is, you know, I mean, I take personal offense to it as someone building a business within the economy, but my point is, it’s very easy to be in this echo chamber and everyone’s patting you on the back and everyone’s saying really great things. But I think that critical lens and that critical eye is extremely valuable. Whether you agree with it or not is not the question.

The question is someone’s asking the right, someone’s asking the question or bringing up something that might not be spent, where folks are might not spending as much time on. So I actually, look, I can see both sides, but my point is like the work that you’re doing is important. And ultimately, people will complain about, well, you don’t see this, or you don’t see things this way or that way. And that’s OK, in my opinion. I mean, you need that dialogue. And that helps the industry, ultimately. That kind of dialogue, honest dialogue, transparent dialogue, ultimately helps the industry. I am curious, Pierre, who are the thought leaders in space that you follow and value their critiques, other than payload, of course. Who are you, who are sort of the leaders in the industry where you’re like, I actually always are keen on and interested in what they’re saying, not from a news perspective, but more so because it’s helping drive your own perspective.

Pierre Lionnet
Well, there’s a few guys which I listen to with a lot of interest and attention. I would like to say that I’m not the fan type. So I wouldn’t say that there’s people I like or people I dislike. But I think that there are people which are worth listening to because they really make sense. Peter Beck is one of those. I think he’s very well-argumented. He makes a lot of things. There is this other person. There’s Tim Farrar, which is a consultant. So like me, it may not be very well rounded in terms and sometimes maybe a bit aggressive somehow, but I believe that the knowledge he has of frequency and the economics of space telecom is an interesting point. There is a few others which I believe they provide an interesting perspective, but again, not people necessarily well known. There is this electric propulsion engineer which I’m following up on X and is working for this Austrian company and I believe he has a lot of very interesting takes on electric propulsion and there’s a few people in my environment which are actually helping me grasp the elements of space policy but again I wouldn’t say there is one thought leader. I think basically that what you need to do is to follow as many people as you can and you know read and listen but not concentrate yourself always on the same message. This is what I do on XAM, maybe 150 accounts I follow. And if you go scroll through that list, you may be even surprised that they follow those people. Because sometimes you need to follow people just because you need to hear what they say, even if you completely disagree. And I believe that this is the basics. Try to keep an open mind and listen to different things. And I’m not listening to Elon Musk the same way today as I was listening to him 10 years ago. And I believe that this is good, that things are changing. So you see, you need to get the right balance. I cannot say there is one single person or one thought leader. I’m not comfortable with that.

Mo Islam
Well, Pierre, I know I don’t have to invite you to do this, but I expect many remarks on our ex-posts and telling us about where we’ve gotten things wrong, or maybe when we’ve gotten things right. But actually, there was one time, I think, you had commented on one of our researcher analysis pieces. You were like, I think this is thought of the right way. It was like a comment like that. And I remember telling the team, Pierre just said that I think it sounds like we did a good job. So I was actually, I was actually it’s actually kidding aside, I this did happen and I was quite proud of it. But I want to end with a question for you, Pierre, regarding, you know, just the general state of the economy. And, and if you were to leave a key message that you or if there’s a key message that you want to convey to policymakers, industry leaders, investors, you know, we have a whole host of people that listen to the show. What’s sort of a key message that you want to convey to those people that sort of, you know, really summarize your thoughts and like what could be done better to make sure that the space economy continues to grow the right way?

Pierre Lionnet
Yes, I think that this is something which is really very important for me. And if we’re really looking at exponential growth in space, when I say exponential growth, I’m not talking very much about business, but really more satellites and more launchers and more activity in orbit and beyond. If this exponential growth is actually something which has to be promoted and which is desirable for humanity, then we really need to speed up our understanding of what this is doing to the atmosphere. Again, as I said at the beginning, we can consider everything is negligible if it is small enough. But if this stress to grow, you know, a factor 10, maybe a factor 100, we need to look because the impact, particularly in the upper layers of the atmosphere are both launch and re-entry. And when I say re-entry, it’s all the satellites re-entering at the end of life. This, I believe, is a major concern for policymakers today, but also for a sensible business. You know, you cannot today accept that your business is actually polluting everywhere without caring. You must understand, know what you do and mitigate how much as you can. So this is probably my main message. Don’t go too fast and try to understand what is happening and don’t dismiss the people that say maybe that is dangerous because you may be a climate sceptic or not but we see things happening to the atmosphere. We know that human activity is changing things, sometimes in irrevocable ways. And we, the space sector, we were so small, but if we have to become very big, I mean, the huge energy deployment of a launch must be assessed. And the tons and tons and tons of satellites that will burn in the upper layers of the atmosphere, they must also be assessed. And this goes very, very way beyond the debris problem, which is really something which is concerning only for the orbit. I mean, for us, it’s the upper layers of the atmosphere. So space people, look at that, consider that as well.

Mo Islam
Yeah, no, I think that’s a very important point. Pierre, my final question is, when you’re not spending time on space economics and Euro space, what do you do for fun?

Pierre Lionnet
I do music. I’m very much into music. I do electronic music. I do, now nobody has an idea, but I do. I have a whole studio, I have lots of machines at home. I like programming music and making beats. That’s what I do.

Mo Islam
wow, I had no idea. Amazing. Okay, well, we have a lot to talk about separately. Well, that’s not the answer I was expecting.

Pierre Lionnet
I’m doing this since the early 90s, so I’m really very much into hardware things. I’m not using software.

Mo Islam
Who are some of the artists that you follow or you’d like to listen to?

Pierre Lionnet
Well, I’m very much into hip hop, but the reason I bought my first sampler was because of DJ Shadow. I mean, eventually this is what stunned my decision, you know, and Portishead. But a lot of hip hop, I mean, I’m very much a hip hop head. I don’t want you to keep that in the interview. Maybe that’s not the right tone, but that’s very much what I am.

Mo Islam
wow. No, no, no, no, I think that’s perfectly fine. I think though that’s so interesting hip. That’s amazing. Well, Paris, I mean, you know, you’re based in Paris, I know the hip hop scene and hip hop scene in Paris is a great scene. It’s a great scene. But amazing. All right, well, we’ll have to get a concert together one of these days. All right. All right. Here. Thanks so much. I appreciate it. Appreciate you being on the show. This is great.

Pierre Lionnet
Absolutely. It’s a great scene, yes. Lots of concerts. I still go out. Maybe yes, maybe. You’re welcome.

Pierre Lionnet
Thank you very much. I was very happy to speak with you. I hope it was not too long. Very good. Bye bye.

Mo Islam
No, this is great. Until next time.

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