#154 A Masterclass in the Business of Space with Michael Sheetz (CNBC’s Space Reporter)

On the latest episode of Outlier Founders we sit down with Michael Sheetz, CNBC’s Space Reporter, to explore the Cambrian explosion that’s taking place in space.
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August 13, 2023
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#154 A Masterclass in the Business of Space with Michael Sheetz (CNBC’s Space Reporter)


On the latest episode of Outlier Founders we sit down with Michael Sheetz, CNBC’s Space Reporter, to explore the Cambrian explosion that’s taking place in space. We break down the landscape of companies, from launch providers to imaging and communication satellite companies, to understand the future of space. We explore the intertwined web of science, technology, and defense focuses that’s powering the next phase of space companies, and we dive into how space will shape all of our lives and careers in the decades to come. Originally recorded on October 25, 2022.


Daniel Scrivner (00:00):

Michael Sheetz, I'm so excited to have you on Outlier Founders today. Thank you so much for making time.

Michael Sheetz (00:05):

Thank you Daniel. Great to be here.

Daniel Scrivner (00:06):

So I'm just going to add a little bit of preamble, which I normally don't do, but this is a little bit of a different interview. You're a space reporter at CNBC, you're incredibly well respected. We've had on Dylan Taylor from Voyager Space, we've had on Delion from Far Space Holdings, a couple of other space CEOs. They've all spoken incredibly highly of you. And so something that I wanted to try to do that we're going to try to do today is to effectively map out and give people a guide to the business of Outer Space. So thank you so much for coming on. I'm excited to get into it. To start, I want to get people from zero to one on you. Can you just share a quick sketch of your background and how you wound up at CNBC covering space?

Michael Sheetz (00:44):

Sure. So I grew up in Southern California in Orange County. I had these vague dreams of becoming a journalist, had no idea what that was going to look like. And I actually moved to New York City for school, ended up having an incredible professor who was a former Wall Street Journal reporter who was the one who was, "First of all, I think you absolutely can become a journalist. Second of all, I think you should be a business journalist and focus on the business world." And that's how I got started interning while I was here in New York and started trying out different places, understanding how the cultures of different newsrooms worked. Found myself at CNBC, fell in love with the work culture there. Fell in love with so many of the people who were just amazing support for me trying to find my way. And along the way as I was working my way through a couple different roles, I discovered the space industry and realized that we didn't have anyone who was covering this full time.


Some people would talk about it when there was something really monumental, like a new NASA Mars mission that landed or something like that. But it didn't get a lot of day to day play. And I was at the time seeking for what's my beat going to be? What's the thing that I can own as a journalist and build a beat? And I didn't really necessarily want to find and following the footsteps of someone else covering a big tech company like Apple or Google or something like that. And so I was trying to find what could make me a little differentiated. Realized that not only was there already this existing space industry worth hundreds of billions of dollars, but that it was rapidly changing and you had all this capital flowing in that was changing the game.


And all these companies being founded from the likes of the billionaires who are household names all the way down to people who just decided, "Hey, I want to try out my hand at launching a rocket space or building a spacecraft. And kids who were inspired as grad students and they put a cube satellite in orbit or something like that." This whole industry was just being seated and changing very, very quickly. And so I wanted to tap into that and tell with so many great reporters already out there telling a lot of the different science aspects or personality or industry aspects, I wanted to tell the business a story behind it. I wanted to talk about can you make money in space? What does it look like to make money in space? And answer that question.

Daniel Scrivner (03:00):

Yeah. Well, it's fascinating and I think you're totally right. I hope that more people end up covering space because it's changing incredibly rapidly. One of the questions I just want to ask, going back to something you said there, for people that aren't familiar with different newsrooms and what they're like, you talked about the culture of different newsrooms and being really being attracted to how CNBC approached it. Can you just, I guess, give a little bit of commentary of what is it like, what are the different styles of journalism, let's say, and what drew you to CNBC? What do you enjoy there?

Michael Sheetz (03:29):

I mean there's a number of similarities where when new big news breaks, all of a sudden just becomes this clamoring bullpen of new people yelling at each other and trying to make sure we have the right headlines going out and all that kind of stuff. But then there's also some noted differences. And one of the big ones that I loved about CNBC was that we had this very collaborative environment that was already this multimedia platform. We had our TV side, our digital side, and then everything in between. And the fact that we were just a much more nimble operation than I would've expected meant that there was so much freedom as a young journalist learning the craft to try out different opportunities and try my hand at writing up a company like General Electrics earnings report, something like that. And learning on the go about something that maybe you would've learned in business school.


And so that was a very amazing kind of eye opening experience and the wealth of opportunities there, the flexibility that people at CNBC showed and this kind of really just steadfast dedication to their craft and a deep level of focus on quality because the quality aspect of the work that we're trying to do was such a huge emphasis. Every part of the newsroom that I've worked in that I really loved that piece of it. And then there was also, we also understand that you're a human being who has a personal life outside of this and we work on the stock exchange schedule for the most part. So stock exchange is closed, you guys are on vacation. So there was this nice balance of, "Hey, we want to be the best, we want to be the number one in television and online business news and we also want you to be thriving and surviving in your own personal life as well." So there was this a wonderful balance that hadn't really found anywhere else that the folks at CNBC really have.

Daniel Scrivner (05:31):

Yeah, I would say for any company, balancing that ambition of all that you want to do and how well you want to do it with just not burning people out is a very tough thing. So it's amazing that you found that at CNBC. One of the things I thought was fascinating about your story is that you had to literally go from zero to one in terms of your own understanding of space in order to be able to cover it.


And I don't know how quickly you did that if it took a number of years, but one of the questions that I wanted to ask to flip that around is I think there are a lot of people listening as we've talked about before, that are just getting interested in space or they feel like they have a little bit of knowledge of maybe something like say SpaceX or Starlink, but they don't really have a deep knowledge of what's going on in the space. And so what I wanted to ask you is if you have any advice for other people who want to dive in, is there anything you'd encourage people to read, watch, spend time studying, just any pointers?

Michael Sheetz (06:21):

For me, it was primarily reading and it was very much understanding, reading both everything from trade magazines and publications who really take deep technical dives into the sector all the way up into what do Americans think about space and how taxpayers are being spent. Those are great 2018 Pew Survey on and just American's thoughts of how NASA was prioritizing its budget that things like that were helping me understand, "Okay. So how do you think about it? Where does the money come from?" Well, most people would think that it comes from launching astronauts or these really expensive missions, the Mars, but most of the money in the space industry comes from stuff like satellite communications and providing direct from satellite TV service. So trying to unravel all that is a ... there's not really necessarily one path and I'm always learning myself. There's a couple good books out there that I'll quickly plug.


I'd say Escaping Gravity by Lori Garver was really helpful in understanding and it will help anyone trying to understand a lot of the change that's happened in the industry. Space Bearings by Christian Davenport, another great book that helps understand some of these high profile billionaire entrepreneurs that got involved and why they got involved. Sorry, eccentric orbits, I almost mispronounce it. Eccentric Orbits by John Bloom. That book really helped me understand a lot of the risk factor involved and is it kind of tells the story of the original iridium constellation and satellite communications and this dream of providing this direct from satellite cell service.


So all those kind of touch on a different topic area. I'd say that you can't go wrong in just reading as much as you possibly can because that was my approach and it served me very well. And then trying to talk to people who are in the know and are more experienced than you already, that just being willing to learn from them and truly learn from them and not pretend that you know what they're going to say. That is so, so helpful.

Daniel Scrivner (08:29):

Yeah, those are great books. We will link to those and add a little bit of commentary to them in the show notes that. People can find that outlieracademy.com. One of the things related to that, that you just touched on a little bit is just the challenge of space. And I feel like if we're going to cover space, it's worth covering the challenges of it because it's very, very, very different. If you're building a business that has to send something to outer space and get it back safely or just even get something up into orbit, it's difficult to wrap your head around. And it feels like there's a few things here. It's difficult to wrap your head around technologically, also environmentally you're at very cold temperature, you're in zero Gs, it's technically a vacuum. So if you could just talk a little bit about the challenges of space and how that shows up in some of your work or in some of the reporting that you do.

Michael Sheetz (09:15):

Well, it shows up in my work because you have things like rocket launch failures or you have things like spacecraft not deploying or communicating with the ground tumbling in space. I mean, we just had it recently, thankfully the spacecraft was recovered and is still on its way to the moon. But there's this great groundbreaking mission called the Capstone Mission that was funded by NASA, bunch of fun, scrappy, smaller companies behind it, a really innovative approach that NASA was taking. But midway through its journey to the moon, it started spinning. And so they had to diagnose, "Okay, why is it spinning? Can we get it to stop spinning?" Because if it keeps spinning, you're not going to be able to transmit data and control it and it's not going to end up where you want it to be. So just a simple add thing of like, "Hey, the spacecraft's not going the right direction, can cause so many other problems," and you can't go grab it.


It's not like my car where, "Okay, my right front tire stopped spinning. Okay cool, I'll call tow truck, tow it to the mechanic, have it fixed." You can't call a tow truck for a satellite. And so that's a huge problem. And then you add in the human space flight side of things when you have things like bone loss and microgravity effects on your body and exposure to radiation and the fact that if a small piece of plastic in orbit hits your spacecraft, it's going to blow a hole in it bigger than the windows in my apartment here.


So just trying to understand the risks and the difficulties about it are one aspect of what makes telling the space story so interesting because my favorite words that is used way too often in the industry is the word anomaly. An anomaly is just like, "We don't know what happened but something happened that wasn't according to plan," and it doesn't really ever describe truly what's going wrong. Using the word anomaly is kind of this cop out to, "We're trying to figure out what went wrong," when it could be hundreds or thousands of things because it's not something that you can diagnose quickly yourself typically. And it's such high stakes in terms of the physical extremities that you're dealing with.

Daniel Scrivner (11:25):

Yeah, anomaly seems like a throwaway word because it's effectively meaningless. The immediate next question is, "Well, what was the anomaly? Explain what this anomaly was."

Michael Sheetz (11:34):

Every single time.

Daniel Scrivner (11:36):

I want to ask a little bit of a follow up question, which is I'd love it if you could share a little bit of the context of, so space is very difficult to build things and to build things for, and I'm curious how that shows up in the way companies go about building. I would guess that rigor is way, way higher. They're potentially maybe more conservative in terms of what they're doing and it very clearly, I would guess, that the move fast and break things is not a metaphor that's being used when you're building something for space. So talk about how does that show up in some of the company cultures?

Michael Sheetz (12:11):

So I would say that there is definitely an aspect to move fast and break things that's been introduced through the likes of SpaceX and some companies who are willing to take on more risk, but it still doesn't look quite the same as it does maybe in the tech industry because at the end of the day, you're trying not to lose a 50 million rocket or something like that because if you lose it's not like, "Let me refresh this line of code and we'll rebuild it tomorrow." No, it's in little pieces in the Atlantic Ocean. So the risk factor that you're dealing with is a little bit different, which means the application of that process is a little different. But space industry especially the companies who are a lot more flexible and have moved the fastest, have taken some incredible lessons from tech and especially in the last decade seen the software aspect of the more advanced your software is, the better it can be for whether it's a spacecraft or a capsule or a satellite or a rocket.


So that's a huge aspect of learning that I've seen along the way. I think another thing that people, the rigors side of it is that at a certain point, and this is something I've talked to a number of engineers about at a certain point you do have to just go, "All right, we're going to push the button." And you always have to accept some amount of risk. You can never be like a hundred percent certain this is going to absolutely work. You could have really quality work and things still go wrong. And so that is a thing that people have to learn to live with in the industry and the best engineers are the ones who think around problems both innovatively but also in a sense of how much risk am I willing to take on here?

Daniel Scrivner (13:55):

You can't mitigate all the risks and I love that phrase at some point you just have to push the button. Over the last few decades since really the Apollo era, it's felt like space has gone from being this very far out frontier thing where, one, we didn't know a lot about it, we hadn't sent a lot of things up into space, we didn't have a lot of things in space to something that right now seems like it's right on the edge of our understanding where there's a bunch of companies that are moving really quickly doing fascinating things from satellites to different launch systems. It feels like something we're beginning to understand and master. Do you agree with that and how do you think about and contextualize this in less than a hundred years? Just the amount of progress that we've been able to make.

Michael Sheetz (14:35):

So I'll say that there's a really important piece of this question that I see pretty often because people often, if I talk about say a company that's trying to build a private space station, they're like, "We already have the International Space Station. This is done 20 years ago, this shouldn't be hard, shouldn't be difficult. Why are we doing this now?" Or sending astronauts back to the moon like NASA wants to do, "We did that 50 years ago, why are we doing this again?" So I would encourage people to go to a kind of space camp, whether it's the one in Huntsville or Kennedy Space Center, they have a lot of good history at the Smithsonian and take a look at the Apollo and Gemini and Mercury era vehicles. If you strap into one of those capsules, if they have a mockup or something, you realize how terrifying it was in essence ao much of a China just launching someone in a tin can and hoping that they come back.


You step into one of the capsules today and you take a closer look at maybe it's still capsule, right? Like Blue Origin's New Shepherd or SpaceX's Dragon. You step in, look inside of one of those and you recognize not just the hardware side that's been upgraded, but the software side of it, there's like not buttons everywhere, that's just very simplified. The work is being done largely automated and that's a huge difference, a huge step change where we can start to build on that. And I would say the maturation side of it is really starting to come into its own and that applies to a lot of different kind of sub sectors of the space industry right now.


But it's happening in a way that it had never happened previously and that's all kind of coming to the floor in the last 10 years. And you have these really amazing advancements where a small satellite that the size of some of your microwave in your kitchen can take a photo of the ground multiple times in a day. And if you put 200 of those, it can do this amazing mapping of the world. The earth observation applications, that whole sub-sector and its growth and change in the last five years is an excellent study on how the industry has changed so much and where it's headed.

Daniel Scrivner (16:45):

Yeah, I mean, the earth observation piece, just talk about that for a moment, has been fascinating because I'm a big fan of Planet and I followed them for a number of years. But one of the things that I started noticing that I think people have generally picked up on, but I don't know if it's still got enough coverage, is just how much satellite imagery now shows up in news reporting of all sorts of things. Whether it's people talking about the Jinjiang Camp in China to people talking about ballistic missiles to people doing Ukraine and doing Ukraine war reporting. It's amazing.

Michael Sheetz (17:17):

The troop movements in Ukraine was a great example.

Daniel Scrivner (17:19):

Totally. And this is in many cases it's everyday people, it's more like citizen reporting. So I don't know, it's just been very cool to watch that take off. I'd love it if you could talk a little bit about where you think earth observation goes from here. And one of the things I brought up, and I'll share it with everyone listening because it's somewhat funny, but I have in the past couple of years seen pitch decks for even people saying, "Hey, we think that the future of wedding photography is going to be done in outer space. Everyone that gets married outside is going to want a satellite image of what their wedding looks like." I don't know if that's the case, but I'm curious how you think about the future applications of earth observation.

Michael Sheetz (17:57):

That's a very interesting end application of the technology and maybe at this current point it's not possible in terms of the tech that's up there unless you have a very high national security clearance. Maybe then you can sell some wedding photography. But I think the where it goes side of things is this kind of tipping point, if you will, where the quality of the imagery continues to improve and the amount where we're able to revisit locations improves and the pipeline of data that you're getting down from that is then able to properly be distributed and not just to a couple hundred customers but to thousands of customers or anyone who wants to be a customer. And I think a great example of this is Google Maps. Google Maps when you look, you back out, I remember that when I was a kid and Google Earth first became a thing backing as far out as I possibly could to see the entire planet and then getting to zoom all the way down in.


And so when you start to get this holistic picture and into people's hands, what can they do with that and the boundaries that you can push with that instead of just a couple sectors of customers that you're serving. And I think that's a really interesting question because some of the earth observation companies are doing fairly well, pulling 50 to a hundred million dollars in revenue a year. I'm curious about when one of them is going to be making a billion dollars or 10 billion in revenue a year. What gets us across that line to where it's become that proliferated? And I think that's going to be an interesting thing to watch.

Daniel Scrivner (19:42):

Yeah, I can't think of a tipping point. You would be much better able to guess what that is, but I mean, it does feel like that's a really interesting signal to look for as soon as revenues go because that they've fundamentally made a step function change in terms of who they're serving and their ability to monetize that. So this is another question, it's the last one I'll kind of spend maybe looking back, but again just for people that are getting caught up on space trying to understand a little bit more deeply. I was wondering if you were going to teach a short class on space, so say it's just a couple of minutes and you wanted to try to have some milestones that have led up to where we are today, what milestones would you pick that you think have significance, especially maybe significance in terms of how we think about the space industry today?

Michael Sheetz (20:25):

I would say a couple different ones, especially from understanding the industry in terms of when we're talking about not the defense primes because they still draw a huge amount of revenue, they make a large part of the industry but in terms of private companies founded in the last 20 years or so. A great place to start is the Ansari X Prize, the crew that was able to fly twice within a few weeks there and get to the edge of space. I think that was a great inflection point to understand a little bit more about how things started to change where for a few tens of millions of dollars instead of hundreds of millions of dollars, you could just go beyond the edge of the atmosphere. Then I'd say another point to point to would be the commercial crew programs formation, maturation, and then ultimate success.


So when you look at how it came about this end of the space shuttle era, the shift in how we were going to deliver astronaut crews to orbit, the companies that were competing against each other, the fact that the very first launch actually got off the ground, not only successfully but in the middle of a few months into the COVID pandemic. It was amazing that NASA and SpaceX pulled off that mission despite what else was happening in the world at the time. And so you look at what the commercial crew program has done for making access to space, bringing it back for US astronauts and now for private passengers to be able to actually have an option. Yes, it may be a very wealthy individual that is required to be able to do this, but that very wealthy individual didn't really have an option in the market before this.


So what the commercial crew program meant both in its formation and maturation and then more recently I'd say that just the capital formation of the last five years I think is a broader milestone. Whether it's the venture capital funding that's poured into it, the private equity that started to pour into it, the spec frenzy that we saw last year, all these different aspects of being able to from an investor's standpoint go, "I actually think that you might not be insanely hair brained and just are going to throw my money into this directly into the sun, but you might actually be able to provide a service that's based in space that might require some capital up front but I see where this is going."


And people started to actually really buy into it. And so I think that in the last five years especially has been a significant shift in the industry where it's taken seriously by so many more investors, especially investors who might not be space focused at all. There's some great space focused investors out there, there's also some investors who have made some savvy plays who don't have a space background at all. And so that kind of opportunity and seizing that opportunity is different than it was in years previous.

Daniel Scrivner (23:19):

I think it's a great point around the capital formation because it does seem like we've reached a tipping point where space got de-risked enough in the eyes of capital people that are in the business of investing money and trying to get returns back to be able to say, "Okay, there's enough one ..." To me it feels like the diversity of companies, it finally got to a point where there was just so many interesting companies led by fascinating founders working on big problems. And then two, yeah, I think you started to see enough success in terms of space companies that were already existing that investors who as much as they might like to embrace risk, my thought is most investors are kind of risk off. So I think that was an important milestone that's happened recently.

Michael Sheetz (23:58):

Well, you may have heard this phrase already, but I've heard it a couple of different times and it's so fitting for the space industry and maybe how people are starting to change. Because the old saying in the industry was the fastest way to become a millionaire in the space business is to start out as a billionaire.

Daniel Scrivner (24:16):

Hopefully, it's no longer the case. I mean, I think that Bezos would probably have maybe a plus one to add to that in terms of just how much money he's invested in Blue Origin. But we're in the early days and if all things go well, these are 50, a hundred year old businesses that hopefully we're in the very early innings of building. So I'm going to try to flip that around now and ask the impossible question. And I'm going to caveat this with, it's always impossible to predict the future. So I'm not pretending that is a realistic thing, but so we just talked about those milestones that have happened. I'm curious now, if you were to try to look forward over the next couple of years, pick the timeframe you want, what milestones would you point to? And one that I know gets an enormous amount of coverage is Starship and Starship maybe being a thing that starts to fly more regularly. Is that on your list and what else is on your list?

Michael Sheetz (25:05):

Starship in the next five years, this is a great question. I certainly see it making the orbit the progress that they've been able to make, but they're certainly now facing this huge change in the program. And so we've seen already, it's now been over a year since it was supposed to have flown to orbit still yet. I think they'll certainly get there, but how quickly they can iterate off of being able to reach orbit. I think looking back at one of the most transformative rocket development programs in a long time, the Falcon 9 system and how long it took them to get to the point of ... They're shattering records left and right now, but we're still talking about less than a hundred launches in a year. And when SpaceX and talking about flying people, they said they want to have flown hundreds of missions before they put people on Starship.


So it took us over a decade to get there with Falcon 9. And that is one of the most aggressive programs ever tried previously. So I think that's a good understanding of where we're going to go. I don't think we'll have returned astronauts to the surface of the moon in the next five years. I think that's because Starship need to fly more and SLS won't be able to fly fast enough. And I think that's kind of a weird two headed monster of a problem. More importantly, I think kind mentioning our earth observation question again, I think that we will see an earth observation company cross a billion dollars in revenue, can't tell you which one right now. But I think that the excitement and the applications and the wide variety of customer base that their technologies have, whether it's the likes of planet with more traditional optical imagery or hyper spectral, the likes of ISSI with synthetic-aperture radar and everyone else in between, those applications are so fascinating and so wide reaching that I think we will see their observation company pulling over a billion dollars in revenue a year.


The other thing that, this is more of a curiosity to me, but I'm curious if the fascination with space stays focused on largely human space flight or if the success of different businesses will grow the fascination of space as a business and as a sector into looking at the robotics and the manufacturing in space and the satellite communications. Already we've seen that people are excited about stuff like Starling because of the consumer application side of it. We've seen people are excited about the Polaris program because they hope that they can one day flying space, right?


Blue Origin, New Shepherd, Virgin Galactic. I think we'll see Blue Origin's New Glenn fly at that point. I think we'll see a huge shift in the rocket launch market. We're already seeing happen slowly at the beginning, but I think that curve is really starting to turn and there's so much money flowing in that even if it's only a couple of winners, that's a couple winners more than we have right now. And so I think that'll have a huge shift. But I think it'll be interesting to see does the fascination with the space sector just stay kind of niche with human space flight and the likes or does it go beyond that?

Daniel Scrivner (28:19):

Yeah, I mean, I think that's a great question to try to ponder. One of the things you talked about there that I wanted to cover is this business of launch. In launch, I'm going to give my layman's definition, please feel free to correct it, because I'm sure it's going to be probably somewhat bad. But it's basically just rockets or different systems to be able to get mass up to orbit and the mass could be people, could be satellites, could be a number of different things. And you talked about, I think if you were to ask, go to Americans and maybe pull them and say, "Who's building rockets that are moving things in outer space?"


I think everyone would probably say SpaceX. I think a lot of people would say Blue Origin, but there's a long tale of businesses underneath that from Relativity to Rocket Lab to even I think kind of kooky stuff like Spin Launch, which is effectively taking something and spinning it so quickly and when they finally release it, all of that energy and momentum takes it into orbit. I guess I'd be curious to get your take on what do you feel like is underrated when it comes to launch businesses? Whether you're thinking about Rocket Lab or Relativity and maybe another way of framing that, there's a couple names people know, there's a lot of names people don't know. Who do you think we might hear a lot more of in the future that today's undercovered, undertalked about?

Michael Sheetz (29:28):

Well, so a name that you hadn't mentioned that I think probably we'll get some more play in the next year or so, it would be ABL Space. They're getting close to their debut launch. They have a pretty impressive backlog of orders for someone in that category. Firefly just got to orbit the very first time joining the select few. We've got Virgin Orbit. I think it's going to be really interesting if the business case for Virgin Orbit can really lock in that national security side and be this kind of, the way I at least understand their business potential is this launch provider for a wide variety of US allies where if Poland wants to send something in orbit, they can order a Virgin Orbit, launch, they fly it out there, they launch it from there, it's all done off of that national soil. You take out a lot of the different kind of complications if you will.


So I think that sort of technologies is going to be interesting in application. I do find it really fascinating that launch continues to take so much focus in because it's kind of the most exciting part of flying stuff in space. Seeing the earth from space or cameras and stuff like that is always fun but everyone wants to watch a rock and launch. And having seen a couple myself I'll say that yeah, it's really exciting. It's amazing to witness and especially when you watch what's the equivalent of a 20 story skyscraper suddenly just get off the ground and disappear. So I think there eventually will be two things. One, you'll have a number of these newer launch providers like you said that are on the tail establish themselves, really start to carve out their pieces of the market. We've already seen that with Rocket Lab and Electron. Rocket Lab might be able to not compete on price per kilogram with SpaceX, but they can compete on delivering you directly into an orbit and that's where you're paying the premium to get to your orbit faster because time is money.


So I think each one kind of finding their niche, finding where they fit is going to happen over the next few years. And then alongside of that I think then there's going to be a point where it's no longer interesting aside from ... and I think the example here is you used to have thongs of crowds that would come to watch airplanes take off on land. Now there's like plane spotters is kind of this fun geeky small cohort of people who post pictures of cool liveries on planes and stuff like that. The space rocket launch, all that will always have the plain spotter equivalent. But I think there will be a point where you don't have 300,000 people showing up to watch four astronauts go into space.

Daniel Scrivner (32:16):

For an hour with enormous amount of commentary on what's happening at the stage.

Michael Sheetz (32:20):

I think that'll disappear and that's when we know that it's started to become more interesting. And we actually have already seen this happen with the SpaceX webcast. When you watch a Starling mission, they start like five minutes before and they give a couple minutes commentary and they cut it before even deployment. They just cut it after the booster lands. So the whole thing is about 15, 20 minutes. Those used to be hour, three hour long webcast. They're now just a few minutes long. So I think we're already seeing that because yeah, it's a bunch of Starling satellites, we've watched 30 of them go this year already. So people are less interested and you're kind of just more checking on like, "Hey, does everything go okay?"

Daniel Scrivner (32:59):

Yeah, no, I mean, I love that concept because it does feel like we've reached, I don't know, one of the thoughts I had as I was preparing for this is again just that I think space is fascinating to me because there's extremely advanced sophisticated things that are happening with it and yet it's a very, I would say immature industry. And I'm not saying that in a negative way, I'm just saying I think you could maybe point at nuclear and a couple of other spaces where just the amount of time that it's been around, it hasn't been around that long.


And so we're still in the very early innings kind of relatively speaking anyways. And so it'll, one, be cool when that actually happens. But I will also just say, and I'm sure you would add a big plus one to this, I think it's been a huge just humanity goodwill gesture for SpaceX and everyone to put on these broadcasts because I think it's a way of bringing this exciting far out stuff to everyone you know can watch it on your phone. I see people constantly talking about it in Twitter and that's definitely gone down. But I will say that I think it's been really cool just to be in a period to see excitement grow around space after such a long time of people just feeling unexcited about it.

Michael Sheetz (34:03):

Well, I'll say this much, I think that the webcast maybe won't necessarily ever go away in the truncated form that the Starling ones are now is a good example of how they might just continue to exist because it's great marketing, it's great publicity and there's a reason why you can watch a ULA launch too. People aren't as excited about those rockets because they don't come back down and land because that's super exciting and everyone wants to see that aspect of it. But there's still a strong cohort in the industry who are going to watch it, tweet it, talk about it and so they're still going to tune into that webcast. So yeah, the PR publicity side's always going to be interesting. I think the analogy of space flight following aviation airline travel is going to be interesting to see how much that analogy tracks and where it maybe diverges. Is it always still interesting to watch a booster come back down in land or not?

Daniel Scrivner (34:59):

And I will say, I'm sure it's amazing to watch a rocket launch. I would love to watch a rocket launch, but seeing the videos of the rockets come back to earth is just breathtaking. Because you are like how is this even possible? It just seems impossible.

Michael Sheetz (35:11):

If you'll indulge me in a short story very quickly. The very first launch I ever witnessed in person was the Falcon Heavy Demonstration Mission. I was not prepared for a rocket launch period. I was especially not prepared for what's currently the most powerful rocket in operation. And the thing that was crazy was not just the launch but when the both boosters came down simultaneously, you were just looking in the sky and you all of a sudden saw these two candlesticks basically looked like they were upside down screaming back in and gently landing and the sonic booms that hit you, I mean it almost knocked me off my feet. It was crazy. Because it was like two shotgun blasts right next to your ears. It was wild, wild to experience.

Daniel Scrivner (35:54):

Wow, that's so cool. I want to talk for a second and I don't want to spend too much time here, but I want to talk a little bit about space as this kind of national security defense thing and space is more of this business consumer B2B thing. And I guess one of the questions there just for a little bit of background is quite a few of the people I've talked to around space, have basically said that it is inextricably tied with national security because one, you even think about things like space force and just the growing need to defend space, have more control and awareness of what's going on in space.


So very clearly it seems like from where we stand today there's this kind of big national defense tailwind around space. Can you talk a little bit about, and you may not have this data so maybe you can just provide a little bit of commentary, but how much of space activity is dedicated to national defense stuff today? And are we at a tipping point where the kind of consumer or business side has already outweighed that? And if not, what do you think that will take or how long might that take?

Michael Sheetz (36:51):

So maybe a good way to understand it because I don't have the specific data on how much money goes to defense versus civil, but I struggle to think of a single company that doesn't have a national security contract in some state shape or form. Whether it's a development one all the way up to big huge billion dollar, multi-billion dollar programs that depending on has had for a long time or the [inaudible 00:37:17] contracts with NASA andPlanet and the like. So I can't really think of a company that doesn't have that. It is inextricably linked. I think two big reasons for that, one, are the implications of the technology and space and this applications, the fact that it like a earth observation satellite goes over enemy territories. The fact that we're very worried about satellites being taken out in orbit and on the second type piece of it, the regulatory side of it with ITAR restrictions.


So when we talk about how far reaching those are, there's so many times when I'm walking through say a spacecraft manufacturing line and they're like, "No, you can't take a photo of that because it's ITAR restricted." I'm like, "Is it really though? I swear I've seen a picture of exactly that online before." And the problem is that there are some people who definitely absolutely know. I mean, I've talked to some people who are very smart and understand exactly what ITAR is and isn't. It is really gray and murky for most people even in the industry.


And the fact that it is tried directly into munitions regulations means that there's always this national security component. Now maybe someday from a regulatory side, it gets a little de-linked and we reform some of those policies. We'll see, I'm not sure. I don't see a world where we separate it out anytime soon and I don't see why from a business case perspective companies would want to do that necessarily because, and a great example is the current economic environment, when you're in a down period, the military budget doesn't usually get cut or if it gets cut it's not by a whole lot. And so if you have a contract, that can be a lifeline in economic uncertainty and that's kind of a piece of the puzzle for some of these companies.

Daniel Scrivner (39:17):

Yeah, I mean, as you were saying that, my immediate first thought was I bet this is also a big reason why so much capital start into the space is because if you can have 10, 20, maybe more of your business be defense spending and then you can have the rest be this kind of forward looking revenue that you think could explode over time or 10 x over time, you start to have something that feels and looks really interesting and pretty de-risked. I haven't heard the term ITAR before. Could you just quickly give a little bit of a layman's overview of what that is and how it works?

Michael Sheetz (39:44):

I will try. I'm not an expert here. I've tried desperately tried to get better acquainted with it. So ITAR's an acronym and it basically phrases around how rockets and spacecraft are treated and underneath US munitions laws. And so there's a very strict regulations about who can work on specific technologies because at the core, "Hey, is this something that North Korea could use to build a missile?" And we don't want that to be online or to be disseminated. So it's very wide ranging because there's a lot of stuff that kind of is questionably within ITAR and there's stuff that very clearly is within ITAR. So that is a kind of oftentimes an interesting thing to learn about with different companies, how they handle it, the problems that they face with getting around it, the problems they face with hiring people into roles that have ITAR restrictions. That whole talent side is another conversation we could have for another half an hour. So that's kind of maybe the simple understanding of it.

Daniel Scrivner (40:54):

No, that makes sense. And I guess I had not made that connection but I do remember, I think another guest I had on that was on to talk around space basically made the point which you just made, I'll just kind of underline for people that the difference between a missile and a rocket is actually just very, very, very small. It's honestly just the payload it's carrying but you're still taking and moving mass and trying to do that as accurately as possible and make it move as quickly as possible, as cheaply as possible. So yeah, it would make sense that that would cover that.

Michael Sheetz (41:22):

And for listeners who want to do a quick Google, the ITAR is an acronym stands for International Traffic in Arms Regulations.

Daniel Scrivner (41:29):

Got it. Okay. Very helpful. And I'll include that in the show notes too. Try to maybe demystify ITAR a little bit for people.

Michael Sheetz (41:36):

Good luck.

Daniel Scrivner (41:36):

Yeah, yeah, exactly. If you haven't been able to crack it, I'm definitely not going to be able to. So I will make an embarrassing attempt. I want to talk for a second around Starlink and then I'll go and I think it would be interesting just talk about the industry map and try to map that out for people a little bit. But Starlink's interesting for a couple of reasons. So one, I'll just share my own personal story. We live remotely, we used to have HughesNet, which I'm sure was probably a sophisticated modern internet company maybe a decade or so ago. But we've had them for the last few years until we just got Starlink three months ago. Starlink is no joke, a third the cost and probably 10 times faster than what we had before.


And so I can attest that Starlink in terms of the technology I could get before is just a massive game changer and that's someone for someone in the US, let alone someone in an undeveloped market or a place that doesn't have any internet infrastructure. So I'm super bullish on Starlink. I would love your take on what you think is interesting about Starlink and also I think it would be helpful for people if you could flesh out or just talk a little bit about previous companies that competed in this same space. Because I know Iridium's a name you talked about before that has actually done a lot of great things from the research I've done. HughesNet is another one that I happen to know. I'd be curious if you could throw out others that are working on similar things to what Starlink is doing.

Michael Sheetz (42:54):

Yeah, I mean, there's not too many that are in the ballpark. Another name in that area, you mentioned a couple already, it would be ViaSat. You maybe have seen when you're walking onto an airplane you'll see a ViaSat symbol on the airplane and that airplane has Wi-Fi, which is okay but not super great. You're not going to be doing a live video call like this. So the thing that's really interesting about Starlink is the approach of putting the satellites in lower earth or orbit as opposed to geosynchronous orbit. And the simple way to understand the difference between those two things is it's the difference between me yelling out your name, being like, "Hey, Daniel," and you're in the living room and I'm in the bedroom or me yelling at your name and I'm standing across Flatbush Avenue over here and there's tons of traffic and horns are blaring and you had thrown open the window.


Yeah, maybe you can hear me a little bit but you're so much closer in this kind of quieter environment that the lack of interference, the lower distance means that it's a much higher connection. So the problem with that is that you need these thousands and thousands of satellites to cover the same amount of area because one huge geosynchronous satellite can be very, very, very far away but cover a very wide area. So you just need to put up one of them over a region such as wide is like South America, right? SpaceX with Starlink is trying to tackle that problem by putting them super close to the earth. But tons and tons of them, a couple of their companies are doing the same thing. You got one web, it's probably the most mature alongside Starlink. They had a little bit of a pause because of the whole Russian invasion of Ukraine and their satellites being seized by the Russian government.


That was super exciting. Thankfully, they're on their way launching again so that that's moving along. That's a kind of UK based if you will. But they have a kind of this multinational conglomerate investors behind that project. You've got Telesat in Canada, they're light speed constellation they're working on that would be a couple billion dollars in funding. Amazon's announced their project Kuiper couple form of SpaceX. People went over to Amazon to kind of build a Starlink equivalent over there called it Amazon Project Kuiper.


So there's a couple different in development, it's still early days. I think you're showing the first fruits of what that looks like. We've seen in recent months problems with cells being overcrowded for Starlink. They need to get more satellites up, higher powered satellites. And so it's changing but it's not quite there. I think this is something that maybe by 2030 we'll have three major constellations in play who have truly good level coverage and now we can see how the competitive landscape is being shaped. But it's going to still be quite a while because it takes so long to get that many satellites into orbit.

Daniel Scrivner (45:44):

Yeah, I would just say as well too, for anyone that is curious, look up what it looks like when the Starlink constellation goes overhead in the night. Because I saw this for the first time maybe a year and a half, two years ago. We live in an area pretty bad or pretty low light pollution and my first thought was, what the hell is that? Because it literally just looks like a series of stars that are all moving in a line together, almost like a worm or something like that in the sky. So anyways, it's very cool if you can see it now there's a bunch of videos online.


One of the things I wanted to talk about, and I actually haven't done a lot of research here, so maybe you can fill in some of the blanks. So we just talked about satellite communication and one of the things that is we're starting to see is this technology show up in products that we use every single day. And I think an interesting recent example of that is Apple's Emergency SOS, and they are very clear, you have to have a clear view of the sky. There's certain conditions that have to exist but they effectively were able to integrate satellite communication into this emergency SOS feature. Did you cover that and can you maybe give a quick overview of what happened there in a bit of context about how exciting that was for you?

Michael Sheetz (46:47):

Sure, I did cover that naturally. It's not every day that someone tells me I should tune into the Apple event today. And I'm like, "Okay, really? The space guy needs to tune in?" They're like, "Oh yeah, you should pay attention to today's Apple announcement." So yes, and the basic premise behind it is it's a partnership with this existing satellite company called Globalstar. Globalstar has a network of satellites in orbit. They're not a huge competitor in the communications space but because they didn't have a lot of market share and they weren't utilizing a lot of the network, Apple's essentially paying to make use of most of the existing network and pay to launch more satellites and kind of upgrade the existing infrastructure. So that partnership exists to where you have a clear view of this guy, you're sending a compressed text message.


So you have a very limited amount of, I think characters even specifically that you can send and it takes about 15 seconds to send a message whether or not they'll be able to two way communicate, we'll see over time whether that comes to the forth. I think a really interesting thing about the Apple announcement was they said for iPhone 14 users, it'd be free for two years. So this gives a sense that they're trying to monetize it at some point how much that monetization looks like where the capability grows.


We can actually point to, and I just published a kind of overview explainer of this exact topic over the weekend. So if you want to go CBC and read, you can read about satellite smartphone communications, but a couple other companies are partnering with what you call MNOs, so mobile network operators down on the ground on terrestrial communications networks and sending signals directly from unmodified devices. So not a big clunky satellite phone but your actual smartphone or internet of things devices and the like and sending signals back and forth. So there's a couple different projects but I mean, if our conversation about satellite internet, high speed broadband is early days, that's even more early days because that's like a step ambition further.

Daniel Scrivner (48:52):

Yeah, I had not caught that it was going to be free for two years. I think that fascinating because it does make you think, "Okay, they're going to compete with cell phone providers and actually be able to have their own satellite communication built into the iPhone." Gets super interesting in two years is it's not that far out in the scheme of things. Okay, I'd love to ask a question. I'm going to try to mingle two of them and which is probably going to make it difficult for you so apologies in advance.


But what I feel like we have to cover before we wrap is at a high level we've talked about launch, we've talked about satellite communications. What other areas of the industry map, if you were to try to create one, would you call people's attention to? Because not everything do we need to cover, but I'm sure there are probably other areas you think are interesting. And then on top of that, if you could just give a little bit of commentary of which of these industries you think will have the best businesses long term. So trying to overlay this kind of business view on the different aspects. And if you want to do something totally different, please feel free trying to cover those two.

Michael Sheetz (49:51):

I'll answer the second question first because it's a little simpler and I'll just say that absent some sort of massive change in the industry, at least for the next decade, satellite communications has reigned supreme. I think will continue to reign supreme, albeit with maybe a little different shape to it. I mean, if Starlink can really start to take on some of these other existing satellite communications providers, do more than even just the current existing capabilities really expand more broadly, start to change that game a little bit. But as far as business case goes, I think satellite communications has the strongest business and I think it'll keep going into just more data applications and data communications services.

Daniel Scrivner (50:36):

Just really quickly on that, can you give a little bit of commentary around why that's the case? Because I guess one thought would just be there's the most use cases available today for satellite communication, so just have the biggest volume. Am I far off? How do you think about why that's doing so well?

Michael Sheetz (50:51):

I would say that that's a big piece of it. The second piece of it is the demand side of it, which is that even the amount of customers that there are existing today, that demand just continues to spike like crazy. And the demand for data and delivering data to all parts of the world in all forms just continues to grow. And there's nothing really debating at this point. So I think that's the second piece of it. To go back and answer the first question that you asked about kind of other sub sectors in the space industry that we didn't talk about, I'd call out two that I think are really interesting. There's a couple different players out there in each of these. So it's starting to get some nice seating in terms of the funding going into it and people are starting to pay attention in terms of the broader applications for each of these sub sectors.


The first one would be private space stations. So international space station's been around for over 20 years, getting towards the end of its life. We've seen the applicability of what the research may done on this ISS can provide. We have had a little bit of a issue with the fact that it's government controlled and maybe it's not the most cost effective to run a research experiment on board, but there's been tons of science that's been done every month for going back years. There's a couple different private space stations in development by different US led projects, and I think it'll be interesting to see how those mature over the next five years, which ones get to orbit first, and then what markets they're able to serve beyond just like the tourism hotel, let's visit a hotel and space side of things. I think it's going to be really fascinating to see what people can do onboard those space stations at lower costs and maybe what sort of research can be done and the folks who are going to want to utilize it.


So that'll be interesting to see. Our big pharmaceutical companies are going to be even more interested in sending stuff, sending research up to space. They already are pretty interested, for sure, but does the biomedical world really push that further? The second one, I'll call it really briefly is manufacturing in space. And this is kind of a little connected, but even not necessarily dependent upon the space stations where can we push the boundaries beyond what we've already done, which is some limited manufacturing in space? Can we build a satellite in orbit?


Like answer that question for me. We recently answered the question of can we service an existing satellite already in orbit and refuel it, connect up to it and give it more energy and keep it on its way. So we answered that question very recently. Can we answer the next question of, "Hey, what if we just built the whole thing in orbit already and what if we built it at parts of other dead satellites that we collected?" I don't know, there's like a million other different possibilities within that, but that's another huge possibility of what manufacturing and space could look like.

Daniel Scrivner (53:56):

Yeah, I mean, just really quickly on the space station bit, it would be really exciting if that wasn't just focused on tourism and if it was something where there was scientific research and was almost like a Xerox PARC as from the 1950s living up in space with a bunch of researchers working on interesting applications. I think that would be very cool.

Michael Sheetz (54:16):

And I would a hundred percent see that that could be a future if the price of those space stations was cost effective enough. You launch one module in the space and you're like, "Cool. You can send three researchers onto it for a week at a time. It's got plenty of supplies for them to do what they want." You pay for a Dragon capsule to stop by and bring them there and take them home. It's wild what you can do off of that. Yeah.

Daniel Scrivner (54:42):

Yeah. That's super cool. Okay, last question, and thank you so much for the time to go all over the map and this has been such a fun conversation. Last question would just be, if you were to zoom out and kind of think about just project forward, what do you hope to see and how do you hope that the nature of how we think about space changes over say the next decade or two?

Michael Sheetz (55:03):

This is maybe an undying hope that I don't know will ever be realized, but I would love to see people recognize more of how almost everything that they do every day is impacted by space. The fact that they have a smartphone in their pocket, the fact that they have Velcro on their kids' shoes, the fact that they could order an Uber because of satellites, whatever it is. I don't know what keeps bringing it more to the fore and helps people understand. I hope the thing that doesn't help making people understand is those things get taken away because of a national security issue. That would be a horrible way for people to learn that lesson, and part of what I see, my role as a reporter is trying to tell that story a little bit more of why we're spending the money that we are on some of these companies and these projects because of what it does for everybody in a global economy.

Daniel Scrivner (56:07):

Totally. I mean, it feels like we need some sort of branding initiative here. It needs to be made in space. You can just stamp that on Velcro, any sort of product that is benefits from something to do with space technology.

Michael Sheetz (56:17):

That actually used to be a company named before they got acquired by another company. But that's another story.

Daniel Scrivner (56:22):

Yeah. There we go. Well, thank you so much for the time, Michael. This has been so much fun and I do think that this will be enormously helpful for people listening that are trying to get from zero to one just on understanding space and how space and business and the intersection of that works.

Michael Sheetz (56:34):

Certainly, it was wonderful to talk to you, Daniel.

On Outlier Academy, Daniel Scrivner explores the tactics, routines, and habits of world-class performers working at the edge—in business, investing, entertainment, and more. In each episode, he decodes what they've mastered and what they've learned along the way. Start learning from the world’s best today. 

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