Space Industry's Weird 2022
After a year 2022 which saw many public space companies’ stock reduced to confetti1, one—and not without a touch of hindsight—cannot help but think about how particular this industry is.
For starters, the trend stays: no one seems to have a flying clue what customers want. Many “established” remote sensing constellation operators are pivoting into selling hardware because what the early 2010s made us believe—data is the new oil/gold23—was not as hot. And all while we still wait for another boom that McKinsey “predicted” and it’s behind schedule: the IoT4. Ah, hype cycles…
So, as data started to appear as quite boring revenue-wise, space companies tried to market a more attractive, mysterious derivative called “insights”, which consisted in pairing raw data with the obligatory dose of “artificial intelligence” and machine learning to make it a bit more trendy. Customers still yawned.
One possibility is that we are already drowning in data, so maybe data—and all its derivatives—are showing what economic science calls marginal utility, which is the added satisfaction a consumer gets from having one more unit of a good or service. Diamonds, for example, are high in demand and are expensive to find and produce so that the supply is limited and the intersection of the supply and demand curves occurs at a high price. Today, data is cheap and diamonds are dear.
Another possibility is that the true value of data only materializes from the opportunistic combination of multiple sources from across the spectrum in order to get a truly useful ‘observation’. But this requires collaboration, standardization and consensus in many levels, which this industry is not known for.
The end of the year has seen SPAC’d companies struggling to stay afloat amidst delisting warnings and violently adjusting their overoptimistic revenue projections. Some might say: but hey, ongoing recession, supply chain crisis, etc. Still, specialized media is talking of a boom of demand. Too niche of a boom?
Common sense dictates that, when projecting, it tends to be a good idea to ponder that bad things may happen, because they tend to happen more often than we think5. The real world is not normal. Otherwise, you are hoping for the best, and planning for the best.
In the famous story of the three little pigs, we know which one succeeds and why. It may take longer, but hedging one’s bets is what will eventually boil the wolf and put it on your plate. A Minsky Moment is always around the corner, and only the paranoid shall survive.
While some others are being sold very expensive
https://ec.europa.eu/commission/presscorner/api/files/document/print/en/speech_11_872/SPEECH_11_872_EN.pdf
https://www.mckinsey.de/capabilities/strategy-and-corporate-finance/our-insights/are-you-ready-for-the-era-of-big-data
https://www.mckinsey.com/~/media/mckinsey/industries/technology%20media%20and%20telecommunications/high%20tech/our%20insights/the%20great%20transformer/mgi_impact_of_internet_on_economic_growth.pdf
https://en.wikipedia.org/wiki/Fat-tailed_distribution