Ted Audio Collective.
HBR presents. Hi everyone!
You're listening to After Hours.
I'm Youngmi and I'm here with Felix and me here.
Hey guys! Hi, I'm Youngmi.
How are you doing this week?
Great! Semester is getting through and life is good.
Students all over campus, it's all good.
The chill in the air, it's all perfectly autumnal.
So, I have to say, as I was driving in today, I was reflecting on the fact that the three of us have never taught in a program together.
Which is why I am so excited that the two of you have agreed to teach in a program with me this winter.
Did we agree to that?
It's going to be great.
It's going to be really fun.
So, I need both of you to bring your best stuff.
As always. You need to be witty.
You need to be charming.
You need to be charismatic.
That's maybe asking too much.
It will be a great pleasure to actually watch you guys teach.
In fact, there are times when I've wondered if you guys do teach, given the sabbatical and everything.
Or for any good. Exactly.
Yeah, so it'll be fun.
We're going to have to behave ourselves though in the classroom together.
Okay, so we brought topics.
Mihir, you said you had a topic that you were excited to talk about.
I want to talk about space.
The business of space.
People are getting really, really serious about space as an industry.
Have you been reading about Elon Musk?
Well, he's one of them but, you know, pick your billionaire.
They're interested in space.
So, listen, I got to tell you.
Although I don't have any expertise at all in this area, my last name is Moon.
There's going to be puns galore.
It's going to be great.
Okay, and then I also brought in a topic.
You know, just traveling around to different cities, I have just been so struck by the invasion of the electric scooters.
Let's talk about it.
Let's talk about scooters.
Okay. Scooters in space.
It's going to be great.
Okay, Mihir. So, I want to talk about space.
So the business of space specifically.
So, first off, there have been a couple of news items recently.
Elon Musk has made some major announcements about SpaceX.
That's his company and his effort Starship to send literally 100 people into space.
And he's claiming this could happen within six months or a year.
But it's a much broader set of possibilities here.
You can pick your billionaire.
They're in the space business.
Richard Branson is trying to do this.
Jeff Bezos, of course, is trying to do this.
And I just can't tell if this is a huge business opportunity or the ultimate manifestation of billionaire hubris.
Do we have to pick, or could it be both?
It can be both. But as one data point, recently, Morgan Stanley came in with a value of SpaceX of 100 billion plus.
There are now new startups in the space business raising $100 million plus.
So, either this is something very real and very interesting, or something ridiculous.
So, which is it? I think where the real value is, and what explains the valuations of many of these firms, is the satellite business.
This idea of a web of satellites that are going to be much closer to Earth and will be essentially able to provide internet to everyone at really unprecedented speeds.
That is, I think, from a purely commercial value, that is probably the most significant opportunity.
And by the way, Elon Musk is not alone.
Airbus has pursued similar ideas.
SoftBank has talked about opportunities.
But Felix, let me just push you on that, which is, let's say that's right.
And we'll come back to this space travel piece of it.
How many providers do you need to do this?
Why do we have multiple startups doing this?
And doesn't this feel a little bit overdone?
I mean, this is maybe the most significant change in the organization of space activities.
It used to be very much government mandated, you know, NASA, European Space Agency, Chinese Space Agency, that would essentially drive these projects.
But I think now what we're seeing is multiple private companies, each with their own technology, each with their own flavor of how this is actually going to work.
I think an experimental approach where we have multiple companies that try to do this actually makes a ton of sense.
If you know how to do it, exposed, of course you would say, oh, actually, we probably only need one system.
But right now, we just don't know which of these companies can actually do it, which technology, if any technology, can actually work.
What do you think, Jungmi?
Yeah, you know, so I think what makes this space confusing...
I'm sorry. I can't help myself.
I can't help yourself.
All right. What makes this sector confusing, I think, for the layperson to follow is that all of the activity around space travel, the stated rationale for it, it's all over the place.
So one rationale is just purely exploration.
We need to explore space because that's what we do as humans.
And we have always tested the limits of human ability, and we have celebrated human accomplishment.
So that's one reason, and maybe that's a good reason.
And then there are these other, more speculative notions that are floating about.
So I've heard things like, perhaps it is possible for us to mine asteroids for raw materials.
Maybe we can unlock clean energy sources.
Maybe you can create better pharmaceuticals in zero gravity.
There's this notion that there might be certain advantages associated with manufacturing things in space.
Whenever I hear about these more speculative things, I'm deeply, deeply skeptical.
So what do you make about the space travel piece?
So then there's a space travel piece of it where the nearer term goal is tourism, and then the longer term goal is colonization, which just...
I'm sorry. The economics of space are terrible.
And the reason the economics of space are terrible is that it's expensive to go to space.
And once you're in space, there's nothing there.
And so to take anything up to space so that there's something there is really heavy and really expensive.
And if we find something and we want to bring it back to Earth, that's also really heavy and expensive.
Well, what about just the pure tourism part, Jungmi?
Would you pay to take a trip around the Earth in a rocket?
Because actually that's the one that's the most immediate.
But is that a market that's intriguing?
The percentage of people on Earth that could afford such a trip is so small that I can't imagine.
And so, look, the bottom line is I'm with Felix on this in the sense that I think there is a real opportunity.
But the real opportunity is much more mundane.
And it has to do with data, which is the product that is uniquely conducive to space because it doesn't weigh anything.
Exactly what Felix was talking about.
It's this explosion of satellite activity.
And satellites, what do they do?
They do things like telecommunications, navigation, weather forecasting, entertainment, spying, things like that.
Already, I think that's about a half a trillion dollar industry.
And I think it can easily be much, much bigger than that.
I'm kind of with you both in the sense that this has all the feels to me of billionaires gone crazy in some sense, right?
Which is looking for the ultimate challenge of some kind without really being sensitive to the underlying economics of what they're talking about.
And tourism feels a little bit light to me.
It doesn't feel like it's big enough to be something real.
The more speculative stuff is really way out there.
And I have to say, my final piece of this is that there is this sense in which the problems we're confronting today on this earth are of an order of magnitude that are gigantic.
And to have so many resources diverted towards exploring these kinds of very speculative efforts when those resources could be allocated to thinking hard about climate change and thinking hard about the environmental problems that we face.
In that sense, space doesn't hold for me what it held like 30 years ago.
30 years ago, it felt like exploration and discovery and there's newness.
Now, maybe I'm just a cranky old man, which is undoubtedly true, but it feels to me that the magnitude of the problems that we face on earth are of such a high order.
And this is where it feels like billionaires could be turning their attention to the problems we face on this earth.
So me here, I'm curious today, so many people are excluded from having access to information, having an ability to do transactions on the internet.
I completely agree with both of you, the zero gravity, 3D printing, who knows exactly whether that's a real opportunity.
But the one that feels most tangible to me, the one that feels at least I can imagine how it would improve people's lives is if we had much better communication for everyone that I do feel would change how people live.
Yeah, to build on Felix.
So here's how I would try to make the business case for it and why I think you could argue there's a huge economic opportunity, which is not to say that the money might not be better spent in other ways, but is a different argument than to say that these people are throwing their money away.
So data operates in two ways.
One is a transmission of data, so think about satellite TV, but the other is a collection of data.
So think of satellites that track the movement of ships, the movement of cars, the movement of clouds of people.
There is so much intelligence to be collected, and there is money to be made from that intelligence.
And right now, the number of private satellites up there, number in the thousands, and you could easily imagine that being tens of thousands or hundreds of thousands.
The problem is that what's expensive about a satellite isn't building the satellite.
What's expensive is getting it into space.
But this could change very, very quickly if someone out there were to develop the infrastructure that would enable private players, even the smallest players, to access space.
So the question is, who's going to build the railroad tracks to space?
Who's going to build the elevator, a mixing metaphors, but to space?
So Space X has demonstrated that it can deploy satellites to space at a fraction of the cost that NASA could.
In other words, if there were a player out there that were to create the infrastructure that would enable many, many small players to begin to access space, what you would see is a ton of exploration and innovation out there, and the outcome of that would be really, really unpredictable.
The trade -off, though, is that you end up ceding control over space to whoever has the resources to actually do it.
So the very last time there was a new market space that opened up without regulation, without any notion of where it might lead, was the internet.
We had no idea what the internet was.
We had no idea how you'd ever make money off of it.
It was just really cool and really interesting.
But what we learned from that is that when there is a new market space of such vastness and such potential scale, you get this commercial exploration and this innovation that tends to move much faster than regulation so that before you know it, you have these giant players like Google and Facebook that essentially
control the space. And so the risk...
Is this a utopian story or a dystopian story?
I can't quite tell.
Well, so how could this go badly?
I mean, this could go badly in many ways, right?
But that I think is the economic opportunity.
So I think that is really compelling.
And I think that's a good antidote to my kind of questioning of this.
But it is not the step change that the internet was, or doesn't feel like the same step change.
But Mihir, isn't this because you live in a rich country in densely populated areas?
Think about all the people who are excluded from all the opportunities that young Mihir just talked about.
Isn't that the real reason to do it?
Well, yeah, no, that would be amazing.
Is there gonna be a winner in this space?
Yes. Is it gonna be lucrative?
Absolutely. Do we need tens and hundreds of billion dollars chasing around after it right now?
I don't know. But maybe I don't have the imagination that you do.
I mean, already for less than $10 ,000, you can buy a kit and build your own satellite.
Now, you have to figure out how you're gonna get it up into space.
What I'm saying is if you gave everybody on this planet the ability to build a satellite and put it into space, which means they would have some mechanism to begin to collect data and transmit data in novel ways.
What you're gonna get is people inventing new usages, the likes of which we have never seen.
Now, could this go wrong?
Imagine if you're a super villain and you want to build a satellite network for all kinds of nefarious reasons.
I mean, this is the part that's really unsettling.
And this is why the kind of unregulated approach, which we might champion, because it might lead, as you said, to a lot of innovation, has lots of problems.
So let me ask you just as a final question here.
You know, if one of your students walks up to you and says, I want to spend my life in the next 30 years in the space industry, what do you say to them?
I would actually be super glad to see some of them involved in this because I think what you need, maybe in space even more than in other business arenas, what you need people who are not only clear -eyed with respect to seeing business opportunities, but also who understand the greater social ramifications
of rapid new technologies.
You know, for me, I think it would have to depend on the application.
So if they said, you know, I want to go work for a company that's launching into space for some far -fetched reason, I would probably express skepticism.
If they said it's part of a company that's trying to create pharmaceuticals in space, I'd probably say, well, isn't pharmaceutical development expensive enough as it is?
If it was somebody that said there's a company that has this super amazing surveillance technology, I would probably be extremely troubled.
On the other hand, I can imagine that there are applications that I would find really intriguing and potentially value -creating.
So for me, I think it would have to depend on the application.
What about you? Well, I'm coming away from this conversation a lot more intrigued than I was coming in to be frank.
The data stuff is intriguing.
It still to me feels like a maybe winner -take -all market or there's going to be a one or two winners, and I don't know if the economics are going to be as good as people think they might be.
So that all makes me a lot more concerned than I would be otherwise.
Now you can call that cranky old man.
I kind of call it pragmatic.
Anyway, I believe in it more than I did before this conversation.
All right, so suffice to say, this space is evolving.
Watch the space. Choose your pun.
Whatever it is, watch the space.
You are too funny, my friend.
So it's really interesting.
Two years ago, you could travel to most cities around the world, and these electric scooters were pretty much non -existent.
And today, in dozens of cities around the world, they are proliferating faster than you can imagine.
In Paris, for example, or Washington, DC.
A sample statistic, more than 10 % of Parisians now use scooters on a regular basis.
And remember, they've only been available in Paris for about a year.
So the behavior shift has been really visible.
The two biggest companies in this space are a company called Lime and a company called Bird.
These are very young companies.
They're growing very rapidly.
Both are now in hundreds of cities.
Uber and Lyft, they are now getting in on the action either through partnerships or by experimenting with their own scooter offerings.
And very quickly, the way these scooters work, if you're not familiar with them, you download an app.
And then if you want to use a scooter, you just open the app.
It shows you where the nearest scooter is.
You walk over to it.
Your app unlocks it, and off you go.
When you get to your destination, you simply park it next to the sidewalk and then essentially walk away.
Prices start at about a dollar, and then the meter is based on time and distance.
So my first question for both of you is, have either of you spent time in a city where there's been an invasion of electric scooters?
And what's your reaction?
Maybe the city where I saw the largest number of scooters is I spent a little bit of time in Helsinki.
And they were everywhere.
It was really quite remarkable.
And it had three different companies, and it was obvious that they competed essentially by trying to put an even larger number of scooters on the streets as quickly as they possibly could.
The reason why I think this was actually very exciting and worked beautifully in Helsinki had to do with, they have a really amazing system of bike lanes.
And so the usual issues that you have that you don't quite know at all, am I risking my life in Helsinki?
That's not really a problem.
If you manage to separate pedestrian traffic and maybe even bicycle traffic and scooter traffic, I think anything you can do in big congested cities from reducing the number of times people take cars, I think is a really great thing.
Me too. Well, so I have a confession, which is on the year -end 2018 show for After Hours, I had scooters as my overhyped trend of 2018.
So I was... I forgot.
I remember that. Yeah, I know.
Oh, are you going to double down on that?
I was really down on it then, and I'm kind of down on it now.
I just don't get it.
So I don't get what problem it's solving, right?
So microbability, which is what this industry is known as, used to be called walking.
And I think I quite enjoy that.
So that's the first thing.
The second thing...
And I'm not even sure what is the use case.
Now, clearly, short Uber rides are very non -economic.
And so we have an opportunity.
But figuring out the unit economics for a scooter strikes me as a hard problem.
So I guess on the demand side, I don't really know the use case.
And then on the supply side, this is actually a capital -intensive kind of industry.
And then on top of that, you have regulatory issues.
In short, I'm devolving into my usual cranky old man moment here.
It's your brand. It's good.
It's your brand. No, it's not a good brand.
I want to believe. I love certain things, but this has all the features to me of something...
Okay. So let's unpack it.
So the first thing you said, what's the usage occasion?
So to play devil's advocate.
What we've seen is this unbundling of mobility, right?
So for really long trips, we take a train or a plane.
For shorter road trips, you want to go to Vermont.
You take your car out of the garage.
Or zip car. For a night out on the town, you might want to Uber, so you don't have to deal with parking.
And then there are these even shorter trips that are maybe two and a half miles.
That if you walked would take half an hour.
But if you took an electric scooter, you could get there in four minutes.
What's the ideal form factor for a two mile trip when you only have five minutes to get there.
And you think it dominates bicycles.
So I'm playing devil's advocate a little bit.
But what I will say is the psychological difference between hopping on a bike and hopping on a scooter I think is not insignificant.
And I think there are practical differences as well.
I mean, try to wear a suit on a bike.
Think about the physical exertion that often comes with using even an e -bike.
So I wouldn't be surprised if maybe the mix between e -bikes and e -scooters varied from city to city.
But they're different experiences.
Let me just say one more thing because I see your face, which is filled with skepticism here.
I want to believe. And let me just be clear.
I'm not sure yet, but I'm open minded.
I will say that I've seen a statistic that 40 % of scooter rides either begin or end at public transit.
In other words, in many cities around the world, public transit is incomplete.
It's not comprehensive enough.
Now, there's still some public nuisance problems for sure.
Can I imagine a future where scooters are a part of the mobility solutions provided in cities as a complement to public transportation?
That sounds like a beautiful world, young me.
Is that a size of economic opportunity that's going to be governed by private companies in a successful way?
That I'm not so sure about.
So we know a little bit.
There was a lot of enthusiasm in 2017.
I think it's about the total today is about a billion dollars invested in the sector.
And then BERT in particular had a very rough patch.
What they will say now, and of course it's a private company.
We don't actually have access to the data.
But what they will say now, which doesn't seem completely implausible, is that they have a positive contribution margin of about $1 .30 per ride.
So that's $1 .30 that you can then use towards covering the overhead of the company.
At the same time, this is a business with direct network effects.
That is, I want to use the service that has the most scooters because the most scooters means proximity, means also, frankly, probably less rebalancing.
So rebalancing doesn't go away as an issue, but it's a much smaller issue.
And I think the main difference to ride sharing to Uber, why their economics seems to be so much better, is because you don't compensate drivers.
I mean, in a way, if you wanted to know what do the economics of autonomous cars look like, you get a little bit of a glimpse when you look at electric scooters because there's not the driver compensation issue.
Yes, what's interesting about electric scooters is there's this invisible infrastructure supporting them.
So there are people who collect these scooters from the field every night, charge them up, inspect them for damage, repair and replace the ones that need work, and then redeploy them strategically throughout the city.
And think about how decentralized this infrastructure has to be.
So they have to have, for example, mechanics in every city.
On the other hand, as Felix says, they don't have drivers.
So the competitive moats are very different, right?
With Uber and Lyft, you basically have a matchmaking platform with electric scooter companies.
They're basically building a huge service infrastructure with a supply chain.
And there are all kinds of operational challenges associated with getting that right.
So it's the kind of business that's easy to do in a very sloppy way, and it's very hard to do well.
So yes, I get it, which is that you don't pay the drivers, but you have this premium on execution, which you don't have in the ride -sharing space.
That premium on execution is everything you described.
That feels really tough.
And in a sloppy world where there's a lot of money that you can do those things, in a sustainable way over the longer run, it doesn't feel great.
We don't know enough about their economics, because Burd and these folks have not released their economics.
But gosh, it feels tough.
And again, I don't want to drop into cranky old man territory.
It feels tough to me.
So if you do some back -of -the -envelope calculation, it would say you need roughly 4 ,000 rides or so out of each scooter in order to make the economics work.
So I think, as with any business, I mean, the economics are not going to be trivial, but I think the presence of network effects, coupled with a rebalancing job that I think is much, much easier than the rebalancing job of traditional bike systems, I think I'm fairly hopeful.
And I think I'm actually excited for two reasons.
One is, the main substitute, I think, in many cities is cars.
And cars are just a terrible use of public space, and they have massive negative externalities that scooters don't have.
What about walking?
Can we talk about walking, or is that not an alternative?
Yes, if you live in a super, super high density city, walking is an option.
Walking is not an option in many of the...
Think of any... how often do you walk in Delhi?
Do you think you're going to ride an electric scooter in Delhi?
Yeah, absolutely. I would be stunned if you don't.
Can I add one more aspect of this?
Absolutely. So the other thing that I actually really like about the history of scooters is they tried to Uber local governments.
They crashed into cities without paying attention to regulation, without paying attention to the rules.
And unlike in the Uber situation this time, local governments were really smart and they pushed back hard.
And my secret hope that this idiotic idea that you launch the business, disrespecting all the rules that are out there, and then hope for a good outcome.
I hope that idea has died with the experience of electric scooters.
That alone would be worth the experiment of doing it.
Look, already I feel like I see a level of cooperation with cities that I never saw with ride sharing.
So I think the most optimistic vision of this, at least in my mind, is one where private companies work in collaboration with cities to make sure they try to integrate these scooters in a way that is a complement to city life as opposed to a public nuisance.
Say beautifully. OK, thanks.
I'm going to go first because I know my recommendation is going to energize both of you.
So I have a tortured relationship with airplane travel.
Oh, I love this. This is going to be a travel hack.
I'm loving it already, young me.
So first of all, let me just say I am in favor of anything anyone does to try to help themselves get comfortable on a plane.
On the other hand, it's important to remember that it is a public space, and so you want to be respectful of the people around you.
And so there are all kinds of behaviors that fall right on that cusp of making you really comfortable, but potentially stepping over the line.
Yeah, stepping over the line a little bit.
So here's an example.
Tell me what you think of this.
People who bring food onto planes.
I think it's reasonable.
I think it's completely reasonable too, because airplane service is so inconsistent.
I don't consider it a major violation.
See, that's interesting, right?
Because if it's something that doesn't have a strong odor to it, then it's perfectly fine.
That's right. But sometimes, you know, the person next to you will unwrap the fried chicken dinner.
It's not a good idea.
Yes. And that's, you know, so you might think mine is over the line.
So I was recently on a plane and I saw someone doing this and I was so inspired.
And just to be clear, I only use this on longer trips where they turn the lights down.
You're killing us. Just tell us what it is.
You're killing me. It's really simple.
I do a Korean beauty mask.
What is it again? What is that again?
I got you both Korean beauty masks.
Oh my God. Look at this.
A collagen essence mask.
Can I put it on right now?
Yes. Put it on and I'll take a photo and we'll post it on social media.
You open it up and then it's a mask and you put it on your face.
Here, look at this.
Oh, look at that. And you let it sit there for a while and then you take it off.
It's incredible. Oh my God.
I just want to say the length I'll go to for this podcast.
I actually think this is totally fine on an airplane.
Yes, I don't think this is a problem.
Yes, I think that's totally okay.
You really have to pat it down so that it gets into your face.
And that's my recommendation.
My travel hack is when you travel on a long flight, particularly if it's overnight, just slip a Korean beauty mask into your bag.
And after they've done the lights, you just, your own personal spa.
And then you feel so refreshed.
The recommendation is fabulous.
Can't wait to try it.
It does feel good. I have to say, it's nice.
Okay. I can't look at you with a straight face, but okay.
So your turn. So I am going to recommend an episode of a podcast.
So as you know, or you may know the New York times has the daily, which is a daily podcast, but in August they had a special called 1619, which was an effort by the newspaper to commemorate 400 years since the arrival of the first slaves in the U S.
So there's one specific episode from the daily that came out of that, which is narrated by Wesley Morris.
And it is a discussion of the effect and a deep influence of African Americans on culture in America and on music, and it is such a spectacular episode because his script and his narration is amazing and it has music.
It has meaning and you learn a ton.
So I recommend if you want to understand American culture and you want to understand American music, it is the best place to get started.
So the 1619 episode of the daily by Wesley Morris on the influence of African Americans on modern American culture is my recommendation.
Sounds fabulous. My recommendation is for a podcast.
Also, I would like to recommend a show called the world and it's produced by public radio international, and it is the best source of global information that I can think of.
And one of the things that I like best about the show is that it really tell stories from a local perspective.
Very often in international reporting, we hear about Iran or we hear about friends and the reason that we hear is that there's some connection to something that happens in the United States.
And the world is not like that.
The world really tells stories from a deeply local perspective.
Give you two examples of recent episodes.
There was a story around Judah in Iran and apparently I didn't even know this, but Iran is typically a top competitor in Judah tournaments.
One of the really tricky things that they try to navigate is when one of their competitors meets with a competitor from Israel and there's an entire political universe of tensions and envy and drama involved in that decision when they allow Iranian competitors to compete and when they don't allow them
to compete. And so this is sort of the flavor of the stories in that you see that when Thomas Cook, the travel company, when it collapsed, they had a story about how hotels and tourism in Tunisia, what that means for them.
And it was a completely Tunisian flavored story told from a local perspective.
And so the world sounds great.
It's called the world.
Called the world. Sounds fantastic.
So we have two podcasts this week and a Korean beauty treatment, which was really the highlight.
Where else do they get such content?
Anyway, thanks everyone for listening.
This is After Hours from the HBR Podcast Network.
Okay, so I mean, here, take it off.
Let's see how it feels.
What a difference. Yeah, what a different.
Seven years. Oh, my God.
I feel like this is all a big.
Oh, my God. Tina is going to go mad for you.
This is all a big. Hope.
Is there a version of this glow in the dark?
So goofy. There's all this.
Oh, don't be such a boy.
It looks fantastic.
Hey. Hey. Hey. Hey.
