Why SpaceX Didn't Create a Space Economy
Even if it is a seriously amazing technology company
Two weeks ago, I delivered a talk for the European Space Agency that was quite controversial. Surprising, I know…
In short, I presented that while SpaceX is an extraordinarily advanced company that has done wondrous things, the existence of SpaceX is not the existence of a space economy. And that the two things — a company and a market — are not the same; at least when it comes to the economics of space.
First, let’s take a quick look at some of SpaceX’s numerous achievements:
It achieved a 20× reduction in the cost of reaching orbit
It conducted 165 orbital launches in 2025 (more than twice China’s entire program!)
It launched a Tesla into space (did you forget about that?)
The chopsticks? C’mon, that’s insanely cool
And yet, despite SpaceX paving the way, there is still zero functioning lunar economy segments, no in-orbit servicing markets with repeat customers, and no priced resource-extraction transactions from the moon or further afield (indeed, one of the mission designs I worked on for NASA and Jet Propulsion Lab was asteroid mining).
And let’s not forget, as investors remind us constantly, that the cost of launching something to space has collapsed.
But still! The space economy did not appear!
Why not?
Because, as I’ve said many times before, markets don’t form from good technology alone. They form when three architectures co-evolve:
Technical (can the hardware do the thing?),
Market (can you buy and sell it repeatedly at predictable prices?),
Institutional (are there standards, liability frameworks, and infrastructure that make it investable?).
In space, by my (imperfect) guestimates, technical architecture scores very highly, at around 87 out of 100. But market architecture scores lowly at 28, as demonstrated by a lack of learning curves in the space economy. Institutional architectures scores even lower still, at 12.
That gap between the technology and the “binding constraint” of institutional architecture — 0.67 on a normalized scale — is well beyond any plausible threshold that could create market viability. The sector is not “early” in that it needs time for technology to mature; it is structurally premature (i.e. it cannot ever, in this state, mature).
And so yes, here’s the part that will upset some people: SpaceX’s response to this problem was to vertically integrate past this problem of there being “no space market”.
How did it do this? By building Starlink in order to manufacture its own demand! Something that I wrote about for the Financial Times a while ago.
Look at the fact that 89 of its 139 Falcon missions in 2024 carried its own payloads. Its launch price is not, then, a market price — it’s a transfer price set by a vertically integrated company whose largest customer is… itself.
Thus, competitors aren’t benchmarking against a market, they’re benchmarking against a monopoly’s internal accounting, which is what Peter Beck, CEO of Rocket Lab, has whispered carefully about before.
That’s an extraordinary private workaround. Alas, it is not a model for a space economy. A European launch startup cannot, for example, look at what SpaceX has done and determine that there is a viable set of customers to sell launch services to.
This is largely because SpaceX has not closed the architecture gap for anyone else, which is what would ordinarily happen in a functioning market, and is the basis for the theory around “first and second mover advantages”.
As such, no other firm can replicate SpaceX’s cadence advantage, meaning that a supply chain cannot be formed around what is essentially a transfer (not market) price for launch.
While SpaceX’s vertical integration in this frontier sector was once considered strategic prowess, it was the only business model that can exist in an industry that didn’t really exist when SpaceX started, and doesn’t really exist at any scale today.
So what actually needs to happen?
The investment priorities in this weird space industry are inverted!
Governments and investors keep funding more launch vehicles and more upstream technology, which is the wrong layer to finance.
This is because the “binding constraint” is not the cost of launch, it’s the absence of the market and institutional architectures without which economic activity cannot form
These things include the boring aspects of new industries, such as standards and interface specifications, resource rights frameworks, anchor demand programs, and priced surface infrastructure.
They’re not as sexy as investing in rockets that blow up periodically, or get caught in chopsticks the size of Big Ben, but they are the structural prerequisites without which the space economy will remain what it is today: technologically extraordinary, commercially premature, and dominated by one company that found a private solution to a public architecture problem.
Read the paper → Why SpaceX Didn’t Create a Space Economy
This paper draws on two working papers: “Institutions as Coordination Architectures” and “Market Formation as a Systems Engineering Problem.” Full papers available on request: s@sinead.co