This week, Jeff Bezos announced that on Jul 20 he will be a passenger on the first human-crewed flight of Blue Origin’s reusable suborbital New Shepard launch system. (The New Shepard has had 15 successful unmanned test flights to date.) Known passengers in the fully autonomous crew capsule – which has no pilot and can seat 6 – include Bezos, brother Mark Bezos, and the winner of a live charity auction for one seat on Jun 12. (The current high bid during the unsealed bid phase is $4.8M as of this writing.) Bezos plans to hand the Amazon CEO reins to Andy Jassey on Jul 5 – about two weeks before his suborbital trip.

Passengers will be propelled just above the Kármán Line – 62 miles above sea level and considered the beginning of space – and then enjoy 3 minutes of unbuckled weightlessness. After that, they have to strap back in for the plummet back to the earth, with 3 parachutes carrying them to landing. The “first-class” experience – complete with reclining leather seats and “the largest windows in spacecraft history” – will last just 11 minutes in total. The rocket booster will land separately to be reused on a later flight. Blue Origin plans to have “a couple more crewed flights” in 2021.

The short, relatively low-altitude mission is indicative of space tourism’s focus on suborbital flight. Suborbital is less technically complex and requires less training – just 3 days for the New Shepard trip. While New Shepard will travel 3x the speed of sound, the G-forces experienced by passengers will be less than on some roller coasters. Because the vehicle is pressurized, they can wear a one-piece flight suit rather than a helmet and spacesuit. Passengers will not be required to take a medical exam but must be able to climb the 7-story launch tower in 90 seconds, fasten their harness in 15 seconds, and be comfortable with heights and pressure.

Like Blue Origin, Virgin Galactic is focused on suborbital, though its plane-like vehicles do require pilots. In May 2021, it completed the 3rd human-piloted flight – its first since Feb 2019 – of the SpaceShipTwo system, which launches space planes from a separate carrier plane at high altitude. The system can carry 8 passengers, including 2 pilots. There are 3 more flights planned in 2021, with founder Richard Branson expected to be on the second-to-last (though he may try to beat Bezos), and the last one being the first full-revenue flight (generating $2M in revenue, or $500K per seat). Commercial service is expected to be rolled out in 2022. Tickets used to be up to $250K each, with about 600 sold so far, though lately are going for $500K-$600K.

SpaceX is focusing more on orbital missions for civilian travel. It plans to launch 4 civilians in the first all-civilian private orbital spaceflight ever in Sep 2021. Last week, it announced it was partnering with Axiom Space to launch 3 more private crewed missions to the International Space Station (ISS) aboard its Dragon craft, adding to the first planned mission for Jan 2022 or later. (The 3 civilians for the first private mission are paying a reported $55M each.) Passengers on the first flight will live on the ISS for 8 days.

Less than 600 people have ever flown to space and very few have been civilians. While major investments by players like Blue Origin, Virgin Galactic and SpaceX are bringing the reality of civilian space travel closer, the nascent industry will remain one of constrained supply and high prices for years. It takes time to build rockets to launch flights. On the orbital front, for instance, NASA has allocated capacity for just 2 private missions to the ISS per year for 2022 and 2023.

Demand, on the other hand, is relatively high – there’s already a sizable backlog even at sky-high prices. Space tourism in these early days will be largely targeted towards wealthy individuals. A 2020 Cowen survey found 39% of high-net worth individuals are interested in paying $250K+ for Virgin Galactic missions. Scarcity and launch costs will keep ticket prices high for a while – tickets are currently ranging from $500K-$1M or more. For the ultra-rich, the experience will be a prestige buy – Blue Origin is already marketing an “exclusive Blue Origin alumni network” of passengers. Over time, however, we can expect prices to go down. By 2030, space tourism is estimated to become a $7.9B market.

Bezos’ trip is, in part, a media play to convey assurance that space tourism is safe enough for civilians as well as Blue Origin’s leadership. There are certainly risks, and suborbital tourism flights lack the rigorous safety standards of commercial air travel. Blue Origin has an escape system on the capsule, which has its own motor that can reportedly move the capsule away from hazards during launch. There’s also more minor concerns, such as vomiting in zero-g or injuries during descent.

For SpaceX and Blue Origin, space tourism is as much or more about the future of space exploration as it is about shuttling wealthy people on a tour. Reusable rockets can dramatically bring down launch costs – especially at the scale of SpaceX’s Starship and Blue Origin’s New Glenn. It has implications for satellite constellations, space-based defense, and future travel to other planets like Mars, as well as the possibilities of point-to-point cargo delivery and travel anywhere in the world in under an hour. Bezos, who is investing $1B per year into Blue Origin, has called it “his most important work.”

The promise of space tourism will naturally fuel optimism and investment. (Discovery is launching a reality TV competition to select one passenger for an upcoming Axiom mission.) By making space exploration feel more accessible, excitement around its opportunities will attract greater investment and perhaps entry by more forward-thinking entrepreneurs – potentially unlocking major milestones sooner than we think.

Mar 12 2021 (3 Shifts): SpaceX’s Starlink satellite broadband continues to widen its lead

Dec 23 2019 (Brief #17): SpaceX’s Starlink and the push towards global satellite-based internet

Last week, in a historic deal, the G-7 (Group of Seven wealthy democracies that includes US, Canada, France, Germany, UK, Italy, and Japan) agreed to support a global minimum corporate tax rate of 15%. It also announced an agreement that would link taxes to where customers are located rather than where a company has physical presence – a major shift in how taxes have worked to date. The new rules would focus on large, multinational corporations with a profit margin of 10%+, allocating taxation rights across jurisdictions on 20% of profits above that 10% margin.

The G-7 deal signals governments’ willingness to adapt tax rules for the digital age. The current global tax system is a web of thousands of treaties cemented over decades, and this is shaping up to be the most significant overhaul since the 1920s.

Not everyone is sure the deal will go through. It still needs to be converted into a binding agreement and needs support from the broader G-20 economies (including the BRIC nations of Brazil, Russia, India, China) – which is scheduled to meet Jul 9-10. It also needs support from the group of 135+ countries involved in the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) organized by the OECD (Organization for Economic Cooperation and Development).

The deal was shaped by a number of considerations, including the US need to raise taxes while remaining competitive, the longstanding issue of corporate tax havens, the desire by non-US jurisdictions to tax US tech giants and growing patchwork of digital services tax regulation around the world. In the US, the Biden administration had previously proposed a corporate tax increase from 21% to 28%, and an increase on the minimum foreign-profit tax from 10.5% to 21%. It runs the risk of corporate flight, however, unless other countries enforce a minimum tax.

The nations that are currently benefiting from a lower tax rate that attracts private investment – such as Ireland with its 12.5% corporate tax – may not be as quick to jump on board. Ireland is seeking an approach that allows it to offset its small size when seeking investment, with its Finance Minister recently tweeting, “Any agreement will have to meet the needs of small and large countries, developed and developing.” Other countries where the corporate tax rate is effectively 0% – like the Cayman Islands – would be impacted under any minimum-tax agreement.

The current G-7 deal addresses holdouts by allowing home countries to collect the difference between a tax haven’s rate and the new 15% global minimum – for instance, on the profits from offshore subsidiaries. Proposals also include a mechanism to address companies in countries without a minimum tax by denying them deductions for certain payments like interest and royalties.

In the past, the US has disagreed with governments in Europe and elsewhere over the taxation of US tech giants. European governments have singled out players like Google, Facebook, and Apple for tax-increase proposals, while the US has championed broader rules that don’t specifically discriminate against American big tech firms. The patchwork of regulation is growing – already 26 countries around the world have enacted digital services tax legislation, with more pending. The US has responded with tariffs that aim to equal the amount of new taxes collected, though these are currently suspended to allow negotiations to proceed.

In general, the G-7 proposals would make it harder for companies to use tax havens and other strategies to avoid paying taxes. The proposed rules have garnered public support from tech giants such as Facebook, Amazon, Google, and Apple, who stand to benefit from the reduced complexity and administrative burden, despite a potential increase in their tax expense. US companies that generate significant income in countries where tax rates are sub-15% and pay very low taxes today – such as chipmakers NVIDIA and Broadcom – would likely take a hit. Those with concentration in Europe, where most corporate taxes are above 21%, would be less impacted.

While there is still a long tail of complex international negotiations required before the G-7 proposals become reality, their global implications will be significant. An overhaul could help stabilize tax competition, reduce complexity for digital companies, and forestall future trade conflicts – ultimately resulting in greater geopolitical stability. At a time when companies are already reconsidering the architecture of their geographic location network to adapt to remote/hybrid work, a global minimum corporate tax also promises to reshape over time where companies situate their operations.

Jan 8 2021 (3 Shifts): The US Corporate Transparency Act effectively bans anonymous shell companies

Apr 4 2020 (Brief #28): Global supply chains diversify away from China

Last week, GM’s autonomous-vehicle subsidiary Cruise was given the first pilot permit from the California Public Utilities Commission (CPUC) (which governs for-hire passenger vehicles) to test passenger rides without a safety driver under its Driverless AV Passenger Service pilot program. The permit allows Cruise to provide rides to the general public. It does not allow Cruise to charge for rides, which would require separate full-scale deployment permits from both the CPUC and the California Department of Motor Vehicles (DMV) (which governs vehicles on public roadways). Cruise is the first autonomous player to obtain testing/pilot permits for passenger vehicles without a safety driver from both bodies.

While this is the CPUC’s first permit under the Driverless pilot program, the CPUC has granted 7 other companies (including Aurora, Waymo and Zoox) permits to test with a human safety driver. It has not granted any deployment permits under its Drivered or Driverless deployment programs, which were created in Nov 2021.

The California DMV has awarded testing permits to 55 companies for autonomous vehicles with a safety driver, as well as testing permits to 8 companies for autonomous vehicles without a safety driver (including Cruise, Nuro, Waymo, Zoox and Baidu). It has awarded only one deployment permit to delivery startup Nuro, which carries only cargo and not passengers (so doesn’t require CPUC approval). Both Cruise and Waymo earlier this year applied for deployment permits from the California DMV.

Cruise is considered the leading robotaxi effort from a traditional automaker (though Waymo is generally viewed as the autonomous leader overall). Cruise has been active in testing using a fleet of largely modified Chevrolet Bolt EVs, but production is expected to start in 2023 on its Origin 6-seater electric shuttle (which is designed for ride-hailing with a lifespan of 1M miles). Cruise has been gaining steam over the past year, landing strategic partnerships and funding from Walmart and Microsoft ($2B), acquiring smaller autonomous startup Voyage, and striking a robotaxi deal in Dubai.

While Waymo has focused on bringing its Waymo One fully autonomous robotaxi service to Arizona, Cruise has spent more time in urban San Francisco – where it is headquartered and the population density could present greater commercial upside. Cruise exceeded Waymo in 2020 in the number of miles driven in California. In San Francisco, Cruise has logged a total of 2M autonomous miles while Waymo has logged just 83K+.

Cruise’s new CPUC permit brings it one step closer to bringing fully autonomous ride-hailing services to market. California is often the bellwether for regulation in other states. While it is behind Arizona in fully autonomous paid passenger services, it may be the true proving ground for urban robotaxis at scale. If Cruise ultimately wins dual deployment permits and demonstrates the ability to offer autonomous rides to the public safely, it will catapult itself – and California – into leading positions in autonomous ride hailing.

Jan 22 2021 (3 Shifts): Big tech firms team up with automakers on EVs & autonomous vehicles

Apr 28 2020 (Brief #31): Robotaxis, local delivery & the future of driverless ground vehicles