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Welcome to In-Orbit, the fortnightly podcast exploring how technology from space is empowering a better world.
[00:00:11] Dallas Campbell: Hello and welcome to Outer Orbit. In these little shorter bonus episodes, we're going to be continuing the conversation from our main episode, focusing in on a particular topic or a point of view and today we're back with Pat Mathewson, who's the Head of Business Strategy and Analysis at Astroscale, to explore space economics. Examining the growing role that space technology plays in global markets and the UK's industrial strategy, discussing how it aligns with space innovation, sustainability and the opportunities for the UK to become well, a key player in the global space economy. Pat, thanks for staying on. We've just been talking a lot about sort of space debris and that's one of those subjects that, you know, when you're at space conferences, there's always big panels about space debris, what to do about space debris. But economics is really interesting and it's funny, actually I was just, I think I mentioned this a few weeks ago, I've been reading a book by Arthur C. Clarke that was written just during Apollo, actually and in it, he was making this argument about space economics. It's like, if you want to work in space and space to become a thing, it doesn't just work to have these big single missions, you have to come up with some kind of economic framework to make it work, otherwise nothing will happen, you need economics is like really, really important. So I just wanted to sort of talk to you about economics, if that's okay, and how it works and how important governments are in this and how we should be thinking about economics in space.
[00:01:34] Pat Mathews: Absolutely. I'm sure you've been to plenty of space conferences or events. What is kind of the cardinal sin of the space industry is all of us are already converted, preaching to the converted and often these are interesting science projects or interesting technology that we think has merit in its own right.
[00:01:51] Dallas Campbell: That's it because we're all science brains, we're like, we're going to go and explore here. We're going to go back to the moon, we're going to go and do this.
[00:01:57] Pat Mathews: But the problem is the farmer using the satellite based technology actually doesn't really care that it comes from space. Maybe they do, maybe they're interested in space, but they need it to work. And they need it to work at a price point that's useful for them. Similarly governments might have an interest in space, there might be very persuaded ones, but it's within a larger portfolio of considerations. So does space do the job they want it to do for them? And that's what we always have to consider and something I think as members of the space industry have to continually remind ourselves that there is a much larger audience out there that we have to consider.
[00:02:33] Dallas Campbell: Well, give us a, I guess as an idea of, where we are with this then, like, I mean, with governments, for example, what should the role of governments be in this? should we be looking at big national missions or should, it be much more disparate and spread out, how should it all work?
[00:02:48] Pat Mathews: So let's go with the UK example for this. So the new labor government arrives into power now and faces a general economy that is higher inflation, weaker growth and lower labor productivity than its peers throughout the G7. So it's,in a, Britain is not in a good state right now and the major focus of this government is going to be, how do we grow quickly and cheaply? Where are these opportunities going to be? And in this context, the way we think about space and the way we think about national space programs really national missions are going to be super important. So governments look at these space has to stand on its own merits versus other opportunities to grow, where does it put its money? Space has to be an opportunity for the kind of growth that government's looking for, the kind of productivity improvements, wage premia, or strategic considerations that the government wants to make.
[00:03:43] Dallas Campbell: Why should governments invest in space?
[00:03:46] Pat Mathews: So typically governments invest in space or deep technology for a few reasons and largely it has to do with what we call spillovers, what economists call spillovers and so say you buy a satellite and I sell a satellite, right? That's one transaction that happens. You're better off because you wanted to buy a satellite, I'm better off because I wanted to sell a satellite. But there's all sorts of things that happen around that transaction, that you and I don't account for that might be valuable to the government, to the public writ large, for example, building that satellite might train people and build their skills. They may then move other, move over to other companies, then they take that expertise to other places, it may sponsor certain industries that nationally we think are important or have defense purposes, or help achieve other strategic goals. So, when governments invest in space, they're typically thinking there's all sorts of things that if the private market alone, were to provide for it would under provide all these extra spillover benefits. It would only sell a few satellites, but if we wanted more satellites or more technology to be developed, that would be very valuable.
[00:04:57] Dallas Campbell: I want to go back even further, can you give us an idea, I suppose, of the space economy? How valuable is the space economy? Like how important is it? how fast is it growing?
[00:05:08] Pat Mathews: Yeah. So there are various projections. So it's a hard thing to wrap your arms around because there's so many different applications upstream in space, the products that are delivered downstream, whether that's, you know, weather calculations, or agriculture benefits, or GPS. So some ratings by Morgan Stanley have said it's a trillion dollar space economy or the new World Economic Forum said it's a 1. 8 trillion dollar space economy. But all these estimates, you know, there's a lot of different variables that go into it. Safe to say, as we've mentioned in the previous episode, space is intimately woven into the fabric of our lives. If you're listening to this, you've already used space today. You've tapped into the tube, you've had a financial transaction verified by space, you've eaten food that's come through a international supply chain via space. The weather report came from space and that's if you're in a developed country. If you're in a developing country, more than half of the UN Sustainable Development Goals are facilitated by space based technology. So rather than, I think, the figure that's abstract, know that our lives and our livelihoods depend on space technology.
[00:06:19] Dallas Campbell: Why did governments very rarely talk about it other than at space conferences? If it is so important and it is so important and there's such an underpinning thing in everyone's lives, you never, it's never mentioned on the news, when subjects of the economy come up on the news, no one's really still talking about space. I'm always like baffled as to why not.
[00:06:38] Pat Mathews: Similar reasons of a lot of things. We take our standard of living for granted. We want to turn our tap on and the water comes out, but we don't think intimately about all the innovations that came to make that water flow out of a faucet. so there's,a lot behind that. It's one of those things in Britain, you know, they now speak about space as critical national infrastructure. There have been some interesting studies talking about how much the UK would lose if GPS was wiped out for a week. It's about a billion pounds a day. So we're starting to wrap our hands around this, but a lot of people still think of space, they close their eyes and they picture the Apollo missions and a handful of folks walking on the moon, but they don't realize how closely it is tied to their own lives and that includes policymakers.
[00:07:21] Dallas Campbell: What else do you think that governments can do, I mean, other than direct investment to increase growth in the space sector?
[00:07:28] Pat Mathews: So I think one of the most interesting examples comes from our experience at Astroscale, which is our ELSA D mission, which was the 2001 demonstration of a debris capture mission. We brought our own debris with us and released it and captured it in orbit. The reason that mission occurred in the UK was because the UK took a very advanced position on licensing. So Astroscale wanted to do this mission, we wanted to pioneer this technology and we went around to different governments and say, will you grant us a license to do this? And it was the UK that showed the foresight and leadership to do that.
[00:08:05] Dallas Campbell: Yeah, That's really interesting. So leadership, leadership as a concept, as well as things like satellite building, which we're really good at in the UK, we kind of punch above our weight, I always think, but actually the kind of the legal stuff, the regulatory frameworks, the licensing, this is what the UK is good at and we should be pushing.
[00:08:23] Pat Mathews: For sure. It's what the UK has a demonstrated history of doing very well. If the UK was ever going to have an ambition, it should be make it the easiest place in the world to safely license a novel satellite technology or novel space mission and this is increasingly important in a time where the UK is very fiscally constrained. There's not a lot of money to go around, so you have to think of other levers. So do you have a policy measure, or in Astroscale's example, or other companies, do your investments bring in a lot of foreign direct investment, we call it. So the UK invested about 34 million into different Astroscale missions to date and that brought in over 70 million from abroad. Now imagine if all of our other social programmes, all of our other government spending, every pound the government spent, two more came in behind it from outside sources. So when the government's constrained like that, it has to think a lot about how it can crowd in more money from other places to help serve the British people.
[00:09:23] Dallas Campbell: Honestly, when I'm prime minister, Pat, I'm going to make you my science minister. are you sort of optimistic? I always ask guests this about the future and economics is one of those things I think we just don't really think about, but it's really, it's so, it's so underpinning of everything.
That's
[00:09:36] Pat Mathews: deeply optimistic about the future. I mean, we spoke about this briefly in the other podcast, but, you know, I grew up reading sci fi books and this great kind of adventurous, beautiful future and what I was interested in is what is the bridge out there? How does that actually happen? And not just in art and books and science.
[00:09:56] Dallas Campbell: That's a great term, bridge. I'm looking for the bridge.
[00:09:59] Pat Mathews: Economics is that bridge. You can wish all you want, but you have to understand these things.
[00:10:04] Dallas Campbell: That's really interesting because I always, people always say to me, well, why didn't we, you know, why did Apollo end? Why didn't we go back to the moon? And it was purely, there was no bridge. You know, we did this grand mission. We went to the moon and did all the things, but there was nothing coming back or not enough stuff, not enough science technology coming back in return that would make it sustainable.
[00:10:23] Pat Mathews: Absolutely and economics gives you terms and ideas to help understand how that bridge might function. So when we think about national missions and their value in the UK, so there's a couple schools of thought for how government might support science or technology. They might spread a lot of bets around early stage technology, say in a little bit in robotics and a little bit in computer vision and a little bit in, artificial intelligence. But when it does a national mission and it says all those things have to work together to come and combine into a single system that delivers a capability. It ensures all those things work together. What it does is it solves a coordination problem that delivers a service that can then be sold globally. So then you establish markets out of those things. So late stage investment, trying to pull things together, establish a capability and crowd things into something that can be sold on behalf of a government or a people is very, very important for it to continue and have momentum beyond that initial investment. So when we think about, when we think about where economics helps build that future, there's a lot of language and concepts that are super important to bring in.
[00:11:37] Dallas Campbell: That's great. I think we'll leave it there. Honestly, it's been so good, it's been really fascinating to talk to you, Pat. I mean, these are things that, you know, we don't really think about,
on a day to day basis. You know, economics as a bridge, it's great.
[00:11:49] Pat Mathews: Well, it's genuinely been wonderful, and I mostly, you know, I mostly I've been very lucky in that I've gotten to work with much better economists than myself, and much more knowledgeable space folks than myself. But it's the, I think there's a lot of value in between the subjects. Where, you know, if you can just hold a bit and get them to meet,there's a lot we can all learn from that.
[00:12:11] Dallas Campbell: That's a nice way of putting it, the value in between subjects. It's a bit like the importance of the gaps between your fingers.
[00:12:16] Pat Mathews: Yes. Yeah.
[00:12:17] Dallas Campbell: You need that or the gaps between notes and music. These are the important things. You need the gap.
If you want to hold on to anything, you need them.I've loved talking to you, Pat. Thank you so much!
[00:12:25] Pat Mathews: It's been very good. Thanks very much.
[00:12:27] Dallas Campbell: To hear future episodes of In Orbit, don't forget, subscribe on your favourite podcast app, and to find out more about how space is empowering industries in between episodes, you can visit the Catapult website, or you can join them on social media.