Space and Spinoff Innovation

In 1957, Russia ignited the ‘space race’ by launching Sputnik and drawing the United States into an era of investment in space exploration. Since that era began, the push to explore beyond our own atmosphere – and the successful lunar landing in 1969 – inspired new generations of researchers, scientists, and engineers. 

Earlier this week, India reached the most recent milestone by being the first country to land a rover on the south pole of the moon – a region that may have water-ice, which could unlock new possibilities and support future missions to establish permanent facilities on the moon. Adding to the feat, India managed to accomplish this on a fraction of the budget of larger space programs, spending only $75M on the Chandrayaan-3 lunar lander project compared to NASA’s stated average cost per launch of $450M.[1] 

India’s accomplishment has captured the fascination of onlookers around the globe and offers a reminder that what began as a competition between two superpowers is now a global endeavor with more than 90 countries operating in space.[2] Increased participation and competition in the space industry improve our knowledge of the universe and also lead to innovations and spinoff industries that benefit our global economy on Earth.

Noteworthy Spinoffs 

Like the first in a line of dominos, public investment in large-scale scientific endeavors can start a chain reaction of innovation that benefits economic growth and sustainable development in unforeseeable and beneficial ways.  

Historically, 80% of NASA’s budget went to private contractors to design and manufacture rockets and spacecraft, while NASA maintained close oversight and operated the equipment. Many of the technologies that NASA co-developed with private industry partners eventually led to recognizable commercial products and services – from memory foam mattresses to Bluetooth headphones, from laser eye surgery to artificial hearts to improved mammograms. Since 1976, technologies originally developed for space exploration have led to more than two thousand spinoffs when they were transferred to the private sector.[3] 

Some of these innovations are more directly related to space and Earth’s atmosphere, such as vast satellite networks that allow broadband communication, accurate weather forecasting, and the ability to GPS track your deliveries all the way to your doorstep. These have created entire industries, leading to further innovation by subsequent generations of entrepreneurs who enhance the technology as they discover new applications. 

The Circular Nature of Innovation

Modern space exploration continues to contribute to the development of new technologies; commercialization in turn further improves space exploration capabilities and decreases costs. Advances in blockchain technology, artificial intelligence, 3D printing, materials science, and nanotechnology have led to two key trends – decreasing launch costs and increasing capabilities of smaller satellites – both of which are expanding our exploration capabilities as well as creating direct benefits to communities globally. 

Decreasing launch costs make it possible to significantly expand the number of small satellites in orbit. Compared to larger satellites, constellations of small satellites are significantly cheaper to make, faster to produce, and easier to troubleshoot due to advances in 3D printing and materials science. Small satellites make up about 94% of all spacecraft launches, increasing from a total of 53 in 2017 to an astonishing 1,743 launches in 2021.[4] Companies including SpaceX, OneWeb, Telesat, Samsung, and Boeing are already leveraging small satellites to build large broadband constellations that have commercial benefits. 

These networks of small satellites have expanded the use of remote sensors to capture new forms of imaging and data collection about our atmosphere, weather patterns, and other aspects of life on Earth. These sensors produce an enormous amount of data, which has led to significant growth in demand for companies that provide data storage and analysis. Companies using AI and machine learning turn data into intelligence that powers a range of sustainability-oriented applications including monitoring food supply, tracking greenhouse gas emissions, and monitoring energy supply chains. 

Growth and Stability

We know that investing involves risk, and that is amplified when investing in innovative industries and emerging technologies. The nature of innovation is that many ideas won’t deliver on their promises of transformative impact. Over the past few years alone, we’ve seen bubbles form in cryptocurrencies and companies promoting the metaverse as the future. Other predictions such as fleets of self-driving cars haven’t arrived on the timelines that many were expecting, even as progress continues to be made. Failure is a key part of the innovation economy – which reinforces the importance of diversifying investment portfolios across many companies and industries. 

At North Berkeley, our portfolios are designed to include allocations to growth industries and innovative companies. Our portfolios also include allocations that prioritize the liquidity and stability of mature companies and high-quality bonds. The balance between these two portfolio elements is determined by each investor’s time horizon and risk appetite. The key is to have both – growth and stability – since each offers critical value at different moments in the economic cycle and different moments in our own lives.

1. ‘India is now on the moon’: A shoestring budget and can-do attitude equaled a cosmic success LA Times   
2. The New Space Era Will Drive the Economy of Tomorrow Wilson Quarterly 
3. NASA Spinoff Website: Technology Transfer Program 
4. The Future of Space Technology and How It May Benefit Humanity 

Brian Kozel, CFP 

About Brian Kozel, CFP®

Brian Kozel is a Partner at North Berkeley Wealth Management. Brian helps clients feel confident as they navigate their financial journey.

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This commentary on this website reflects the personal opinions, viewpoints, and analyses of the North Berkeley Wealth Management (“North Berkeley”) employees providing such comments, and should not be regarded as a description of advisory services provided by North Berkeley or performance returns of any North Berkeley client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data, or any recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. North Berkeley manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

By |2023-11-10T16:00:57-08:00August 25th, 2023|