Elon Musk versus Jeff Bezos: Who makes a better rocket?

Since President John F. Kennedy launched the space race that propelled the first humans to the Moon, we've dreamed of the day when space travel becomes as safe and routine as hopping on a commercial airliner.  And with the increasing privatization of the space industry, that day seems to be getting ever closer.  

One beneficial side effect of privatization is the competition to perfect the technologies that will eventually pave the way for civilian space flight.  For governments and corporations that rely on rockets to send satellites into orbit, this competition will help drive down costs and benefit both taxpayers and shareholders.  In this respect, it's disturbing that a company like SpaceX, founded by Elon Musk, one of the richest individuals in the world, is relying more and more on government subsidies to fund its work.  

Mr. Musk has won much acclaim for his achievements, most of it completely deserved.  However, concerns are arising at SpaceX that call into question whether an overreliance on U.S. government subsidies and contracts may be creating a lack of accountability – or worse, moral hazard.  

SpaceX received nearly $400 million from NASA to develop its Falcon 1 and Falcon 9 rockets.  The company has also recently been given over $70 million to develop the new Big Falcon Rocket, or BFR, and SpaceX president Gwynne Shotwell has said she expects the government to kick in even more taxpayer funds.  

Government-subsidized development of new technologies is not necessarily a bad thing, but it must come with significant strings attached to protect American taxpayers.  The mere expectation that NASA will continue footing the bill, without more skin in the game from SpaceX, leads to problems, as evidenced by recent reports.  

In December, the Pentagon's inspector general issued a report on quality management at the military's launch vehicle provider facilities.  The I.G.'s investigation revealed that SpaceX's and United Launch Alliance's "inadequate quality assurance management could increase program costs, delay launch schedules, and increase the risk of mission failure."  The I.G. found 33 major nonconformities at SpaceX sites – 50 percent more than those found at its leading competitor – that could "contribute to a failure in quality controls."  

In space travel, where a microscopic oversight can prove fatal, the I.G.'s report lays bare some critical flaws that SpaceX and other contractors who receive development funding and launch contracts must address.  The justification for continued government R&D funding gets weaker when there are other entrants to the space industry who are not reliant on subsidies to develop their products, like Blue Origin, the brainchild of Amazon founder and world's richest man Jeff Bezos.  Unlike SpaceX, Blue Origin has stayed largely out of the spotlight and conducted a successful test launch of its New Shepard reusable rocket last week.  

Mr. Bezos has also made it clear he is in the space race for the long haul, pledging to liquidate $1 billion of his Amazon stock each year to fund Blue Origin's operations.  That's a lot of skin in the game, and by committing a large chunk of his fortune, Bezos is sure to demand the accountability necessary to ensure that those resources are not wasted.  At a time when SpaceX recently raised launch costs by 50 percent to resupply the International Space Station, new players like Blue Origin are welcome additions to help drive competition and innovation.

None of this is to suggest that SpaceX shouldn't receive government contracts or even have NASA subsidize (to some extent) new rocket development.  Yet the stark contrast between the approaches taken by SpaceX and Blue Origin illustrates how taxpayers can fall victim to moral hazard when private companies rely too much on government funding of R&D.  

And with the number of companies now in the space industry that will be vying for lucrative government and corporate launch contracts, perhaps it's better in this case to let the market sort out who can make the best products.  At the very least, the government must demand far more robust accountability measures from SpaceX and all companies that receive R&D support.  To do otherwise harms taxpayers and creates disincentives in an industry where anything less than perfection can be disastrous.  

Demetrios Karoutsos is a public affairs strategist and author.  He advises corporations and industry associations and is a former communications director in the U.S. Senate and House of Representatives.

Since President John F. Kennedy launched the space race that propelled the first humans to the Moon, we've dreamed of the day when space travel becomes as safe and routine as hopping on a commercial airliner.  And with the increasing privatization of the space industry, that day seems to be getting ever closer.  

One beneficial side effect of privatization is the competition to perfect the technologies that will eventually pave the way for civilian space flight.  For governments and corporations that rely on rockets to send satellites into orbit, this competition will help drive down costs and benefit both taxpayers and shareholders.  In this respect, it's disturbing that a company like SpaceX, founded by Elon Musk, one of the richest individuals in the world, is relying more and more on government subsidies to fund its work.  

Mr. Musk has won much acclaim for his achievements, most of it completely deserved.  However, concerns are arising at SpaceX that call into question whether an overreliance on U.S. government subsidies and contracts may be creating a lack of accountability – or worse, moral hazard.  

SpaceX received nearly $400 million from NASA to develop its Falcon 1 and Falcon 9 rockets.  The company has also recently been given over $70 million to develop the new Big Falcon Rocket, or BFR, and SpaceX president Gwynne Shotwell has said she expects the government to kick in even more taxpayer funds.  

Government-subsidized development of new technologies is not necessarily a bad thing, but it must come with significant strings attached to protect American taxpayers.  The mere expectation that NASA will continue footing the bill, without more skin in the game from SpaceX, leads to problems, as evidenced by recent reports.  

In December, the Pentagon's inspector general issued a report on quality management at the military's launch vehicle provider facilities.  The I.G.'s investigation revealed that SpaceX's and United Launch Alliance's "inadequate quality assurance management could increase program costs, delay launch schedules, and increase the risk of mission failure."  The I.G. found 33 major nonconformities at SpaceX sites – 50 percent more than those found at its leading competitor – that could "contribute to a failure in quality controls."  

In space travel, where a microscopic oversight can prove fatal, the I.G.'s report lays bare some critical flaws that SpaceX and other contractors who receive development funding and launch contracts must address.  The justification for continued government R&D funding gets weaker when there are other entrants to the space industry who are not reliant on subsidies to develop their products, like Blue Origin, the brainchild of Amazon founder and world's richest man Jeff Bezos.  Unlike SpaceX, Blue Origin has stayed largely out of the spotlight and conducted a successful test launch of its New Shepard reusable rocket last week.  

Mr. Bezos has also made it clear he is in the space race for the long haul, pledging to liquidate $1 billion of his Amazon stock each year to fund Blue Origin's operations.  That's a lot of skin in the game, and by committing a large chunk of his fortune, Bezos is sure to demand the accountability necessary to ensure that those resources are not wasted.  At a time when SpaceX recently raised launch costs by 50 percent to resupply the International Space Station, new players like Blue Origin are welcome additions to help drive competition and innovation.

None of this is to suggest that SpaceX shouldn't receive government contracts or even have NASA subsidize (to some extent) new rocket development.  Yet the stark contrast between the approaches taken by SpaceX and Blue Origin illustrates how taxpayers can fall victim to moral hazard when private companies rely too much on government funding of R&D.  

And with the number of companies now in the space industry that will be vying for lucrative government and corporate launch contracts, perhaps it's better in this case to let the market sort out who can make the best products.  At the very least, the government must demand far more robust accountability measures from SpaceX and all companies that receive R&D support.  To do otherwise harms taxpayers and creates disincentives in an industry where anything less than perfection can be disastrous.  

Demetrios Karoutsos is a public affairs strategist and author.  He advises corporations and industry associations and is a former communications director in the U.S. Senate and House of Representatives.