Posts Tagged ‘Crony Capitalsm’

Financially oriented prelude(s) to a post:

I am staggered at how easily the concepts of Democracy and the Rule of Law – two of the pillars of the modern world – have been brushed aside in the interests of political expediency.

And this as well:

Bond and Currency markets are now so rigged by policy makers that I have no meaningful insights to offer…

Now, on with the countdown!

From the annals of crony capitalism, rent-seeking, and regulatory capture it is revealed that the regulatory concerns regarding LightSquared, a world-class GPS signal-killer, appear to have been brushed aside in the interests of political and personal expediency.

Before Barack Obama became president, he was personally an investor in SkyTerra [the company that would become LightSquared]. [Philip] Falcone’s Harbinger Capital Partners [LightSquared’s financial backers] donated $50,000 to Obama’s inaugural committee on Jan. 20, 2009, according to the Center for Responsive Politics. At the time, Falcone was still looking for the FCC’s sign-off on his hedge fund’s desire to purchase a majority stake in SkyTerra . The George W. Bush administration had failed to green-light the deal.

According to White House visitor logs, Obama’s new FCC chairman, Julius Genachowski, a classmate of the president’s from Harvard Law School, met with White House Personnel Director Don Gips on Feb. 18, 2009. Gips’ personal financial disclosure forms show he had between $250,000 and $500,000 of his personal finances invested in SkyTerra via stock options. Gips bundled at least $500,000 in donations to Obama’s 2008 election campaign, and served on the advisory board of Obama’s White House transition team.


On the same day Goldberg [Henry Goldberg of Harbinger’s law firm, Goldberg, Godles, Weiner & Wright] sent that email to [FCC International Bureau Chief Howard] Griboff — July 24, 2009 — SkyTerra asked the FCC to allow it to delay the launch of a new satellite because there was a “potential delay in [its] delivery.” The FCC approved the request, but later denied a near-identical one for SkyTerra competitor GlobalStar based on “extenuating circumstances” in 2010. This appeared to be one in a long line of instances in which the FCC favored SkyTerra, the future LightSquared, over GlobalStar.


…later, Falcone and his wife each donated the maximum legally allowed — $30,400 each — to the Democratic Senatorial Campaign Committee.

Of course, largely ignored is the effect of the LightSquared network on GPS. To quote myself, should LightSquared be looking for a new logo, something like “The first full-fail 4G network” or “SkyJam”?


You may have heard that Amazon had to smoke their booster, AKA they had to use the flight termination system for an anomaly/non-nominal event.

So what does this all mean?  That trying to “do space” has to be the worst business decision Amazon has ever made.  

Why?  First off, it’s a high risk-low margin endeavor (but it is very cool, yes.  So are time travel, tractor rays, and invisibility cloaks).  Next off, it’s a saturated market (consider China, India, SpaceX, et al).  Thirdly, it’ll make them government-dependent (that’s how you make money in space: selling products to the government.  Isn’t selling your company’s soul to the government a self-evident bad thing?).  Finally, to be successful as an aerospace endeavor, space has to be a core competency. 

I see space as more of a hobby (if that) for the Amazon overseers. 


What, besides crony capitalism (a sort of reverse NIMBY) and regulatory capture, might explain the lack of breakout space-faring progress within U.S. government space programs?  Could it be decision fatigue by lawmakers?

Decision fatigue describes the loss of mental acuity that results from analyzing and deciding on options. 

Decision fatigue helps explain why ordinarily sensible people get angry at colleagues and families, splurge on clothes, buy junk food at the supermarket and can’t resist the dealer’s offer to rustproof their new car. No matter how rational and high-minded you try to be, you can’t make decision after decision without paying a biological price. It’s different from ordinary physical fatigue — you’re not consciously aware of being tired — but you’re low on mental energy. The more choices you make throughout the day, the harder each one becomes for your brain, and eventually it looks for shortcuts, usually in either of two very different ways. One shortcut is to become reckless: to act impulsively instead of expending the energy to first think through the consequences. (Sure, tweet that photo! What could go wrong?) The other shortcut is the ultimate energy saver: do nothing. Instead of agonizing over decisions, avoid any choice.

“Reckless” shortcuts might include throwing more money at an unexamined idea (or at one where better options exist, were they to be considered fairly).  And ‘avoiding any choice’ in government programs that feature baseline budgeting normally means extending the baseline (also known as ‘keep doing what you’re doing’).  If what you’re doing is cheap, fast, and good, extending the baseline or sustaining the status quo is an excellent choice.  However, that is not often the case, especially as it regards government space costs.

When you exhaust your decision power, bad things can happen.

Once you’re mentally depleted, you become reluctant to make trade-offs, which involve a particularly advanced and taxing form of decision making. In the rest of the animal kingdom, there aren’t a lot of protracted negotiations between predators and prey. To compromise is a complex human ability and therefore one of the first to decline when willpower is depleted. You become what researchers call a cognitive miser, hoarding your energy. If you’re shopping, you’re liable to look at only one dimension, like price: just give me the cheapest. Or you indulge yourself by looking at quality: I want the very best (an especially easy strategy if someone else is paying). Decision fatigue leaves you vulnerable to marketers who know how to time their sales, as Jonathan Levav, the Stanford professor, demonstrated in experiments involving tailored suits and new cars.

In the last sentence, consider if professional and/or personal Congressional staffers as well as members of Congress might be ‘vulnerable’ to ‘marketers’ (lobbyists) at any point in their decision making process.  Given the demands on the Congress, might a sort of space decision fatigue explain some of the resistance towards true commercial space efforts?

Or is it just crony capitalism and regulatory capture?

Normally, I have little sympathy for NASA.  But when the Senate starts prescribing their material solutions, that’s quite out of bounds.  Fighting trousers?  Technical foul?  No, a red card.

Senators who agree that NASA is taking too long to develop a design and procurement strategy for the heavy-lift Space Launch System (SLS) that Congress ordered last year cannot agree among themselves on exactly what that design should be.

At issue is what kind of power will be used in the strap-on boosters needed to get the SLS off the pad, pitting powerful senators from both sides of the aisle against members of their own political parties in a letter-writing campaign to the executive branch aimed at generating jobs for their constituents.


Meanwhile, Senate Majority Leader Harry Reid (D-Nev.) joined a group of Republican senators, notably Orrin Hatch of Utah, in an Aug. 2 letter to Bolden and OMB Director Jacob Lew also urging quick action on SLS. But that letter, co-signed by Idaho Republican Sens. Mike Crapo and James Risch and Dean Heller (R-Nev.), objects to the call for a propulsion competition endorsed by Shelby and the California senators until after initial flight testing with the solid-fuel boosters built by ATK in Utah.

What’s next?  Human sacrifice, dogs and cats living together… mass hysteria?!

This, my friends, is another example of regulatory capture in its full gory glory.


epic failAn argument for uninventing NASA and government space in general comes from George Will, who himself is quoting "The Declaration of Independents: How Libertarian Politics Can Fix What’s Wrong with America" by Nick Gillespie and Matt Welch.  The quote below is regarding the broad topic of “existence bias,” the human predisposition to believe things will keep on largely as they exist (and how our dissatisfaction with existent organizations may be overcome by information and market choices).

"Think of any customer experience that has made you wince or kick the cat. What jumps to mind? Waiting in multiple lines at the Department of Motor Vehicles. Observing the bureaucratic sloth and lowest-common-denominator performance of public schools, especially in big cities. Getting ritually humiliated going through airport security. Trying desperately to understand your doctor bills. Navigating the permitting process at your local city hall. Wasting a day at home while the gas man fails to show up. Whatever you come up with, chances are good that the culprit is either a direct government monopoly (as in the providers of K-12 education) or a heavily regulated industry or utility where the government is the largest player (as in health care)."

Now regarding space, does it seem that government is the biggest player?  That it holds within it large bureaucracies (military services, intelligence community, NASA, and others)?  That government regulates the space industrial base via what it chooses to fund and at what levels?  And that new space is a threat to such activities?

Just askin’…

From a Yahoo article which starts things off by talking about an Elon Musk attended fund-raiser for the Obama 2012 campaign (at almost $40k per plate) and then transitions into a more…uncomfortable subject.

…the Musk/Obama partnership has been a very profitable one for both parties. Obama has funneled tens of millions of dollars, with much more promised, to Musk’s companies. Musk has given tens of thousands to Democrats and Democratic causes, with more to follow.

This shift toward Democrats contains great peril for Musk, however. The House has been taken over by Republicans, many of whom take a dim view toward what they see as crony capitalism going on in commercial space.

So is it possible crony capitalism is as important for new space as it is for traditional space? 

Remember the rule of thumb on how you make money in space: sell goods and services to the government.