La Bourse / Volume VII / Nº VII.09 / Workbook — the executive

A watercolour of a young woman with an open book, flowers and leaves around her. — Plate VII.09 · Workbook — the executiveThe Weight of the Bottle.The bottle holds one kilogram. On this bench it is worth a tenth of a penny. Four hundred kilometres above her head, the same kilogram is worth three thousand and fifty-nine dollars — and nothing about the water has changed.

WORKBOOK — THE EXECUTIVE

Chapter VII.09 · Space, Materials, and Real Abundance

For the person with a P&L, a board calendar and a capital committee. You may have no interest whatever in space. Read this anyway: the chapter is a worked example of the most expensive category error in corporate strategy — mistaking a statement about quantity for a statement about position — and your firm is almost certainly making it somewhere in its own accounts this quarter.

WHY THIS CHAPTER IS ON YOUR DESK

Three reasons, in ascending order of how much money they are worth to you.

One: you are being pitched this. Space-adjacent propositions are reaching industrial boards — in-orbit servicing, satellite constellations, launch-linked supply contracts, and, at the edges, resource ventures. The chapter gives you a decision procedure that takes ten minutes and is unarguable: compute the break-even, compare it to a price list, and ask what happens to the price if the venture succeeds at scale.

Two: you have the same error in your own supply chain. Somewhere in your business a shortage is being managed as a quantity problem when it is a position problem — a material that exists in adequate volume but is in the wrong place, the wrong form, the wrong concentration, the wrong month or somebody else's title. Chapter II.01 gives you the five positions; this chapter shows what happens when the positional premium is extreme.

Three: the convexity of closure is sitting in your accounts, unclaimed. The multiplier 1/(1 − p) runs from 6.67 times at 85 percent to 14.3 at 93 and 50.0 at 98. If you handle any recoverable input at all — solvent, water, packaging, catalyst, tooling, heat, a returnable asset — the last few points of recovery are worth more than everything before them, and almost nobody's reporting pack shows p.

PART ONE — THE TEN-MINUTE SCREEN

For any proposition that involves moving material

Run this before the deck reaches slide four.

Step 1 — What is the benchmark price for the same thing delivered conventionally? In the chapter's case that is the launch price: $3,059 per kilogram to low Earth orbit, $3,493 to geostationary by electric tug, and falling at 5.05 percent a year. In your case it is whatever your incumbent route costs. Write it down with its source and its date.

Step 2 — What is the all-in delivered cost of the proposition? Not the marginal cost. The cost including the capital, amortised over an honest throughput. The chapter's version: $3,208 per kilogram on propellant alone, $7,313 with a real vehicle, $12,313 with $500 million of capital over a hundred tonnes.

Step 3 — Divide. If delivered cost over benchmark is less than one, it is a logistics contract. If it is greater than one, it is a hope, and no amount of strategic narrative will change the direction of the inequality.

Step 4 — Ask what the price does if it works. This is the step nobody takes and it is where the chapter's cut lives. If the venture's revenue depends on a price that exists because of the scarcity the venture proposes to relieve, then success is self-liquidating. The chapter's arithmetic: landing 23.9 tonnes of platinum — 13.3 percent of world supply — moves the price −33.2 percent, realises $668 million against a billion, and destroys $2.50 billion of incumbent value. $3.74 destroyed per dollar earned.

Step 5 — Ask for grade, never total mass. The chapter's best-case asteroid is 1.67 times the grade of an operating South African mine, which means 100,000 kilograms handled per kilogram returned. Whenever a proposition quotes a total, ask for the fraction.

That is the screen. Five questions, ten minutes, and it is robust to charisma.

PART TWO — THE SAME ERROR, IN YOUR OWN ACCOUNTS

The positional audit

Exercise 2.1 — The five positions, applied to your top ten inputs (one working session, cross-functional)

For each of your ten largest bought-in inputs by spend, classify the constraint:

Position	The question	Your remedy
Place	Is it somewhere else?	Logistics, routing, local substitution
Form	Is it in the wrong state?	Conversion, refining, processing
Concentration	Is it too dilute to be worth recovering?	Grade economics, energy of concentration
Time	Is it available, but not now?	Storage, buffers, inventory, hedging
Title	Is it somebody else's?	Entitlement, transfer, licence, purchase

Then the test that makes it worth the afternoon: for each input, does your current mitigation spend match the classification? A material classified as a time problem and mitigated with a second supplier is money spent on the wrong axis. This finding is common and it is usually worth more than the meeting.

Exercise 2.2 — Find your p (two weeks, one analyst)

For every recoverable input, compute the fraction that returns to service. Not the fraction recycled by somebody else downstream — the fraction that comes back to you and does the job again.

Then rank by proximity to 0.9, not by size of spend. The item at 0.93 is where five more points buys you 14.3 to 50.0; the item at 0.4 is where five points buys almost nothing. Effort goes where the curve is steep. This ranking is usually the opposite of the one your sustainability report produces, and it is the one that makes money.

Exercise 2.3 — The benchmark that is falling (half a day)

Identify one input whose conventional delivered price is on a measurable downward trend, and compute the trend properly: compound rate, halving time, and the date at which it crosses the cost of the alternative you are being asked to fund. The chapter's worked version gives −5.05 percent a year and 13.4 years to halve.

Then ask the board question: is our proposed investment competing with today's benchmark or with the benchmark at commissioning? A project justified against a price that will have halved by the time it delivers is not a project. It is a forecast with concrete poured into it.

Exercise 2.4 — The self-liquidating revenue line (half a day)

Go through your revenue lines and ask, of each: does this price exist because of a scarcity that our own growth would relieve?

Most firms have at least one, and it is rarely the one they expect. A specialist component with two qualified suppliers. A skill your firm is unusually good at hiring for. A location premium. A regulatory position. A licence window. In each case the margin is positional, and the ordinary strategic instinct — scale it — is the one move that reduces it.

Write, for each, the elasticity you believe applies and the multiplier 1 + 1/ε. At −0.40 that multiplier is −1.50 and growth destroys revenue; at −2.0 it is 0.50 and growth is straightforwardly good. You will not have an elasticity estimate for most of these lines, and the absence is the finding. A firm that cannot say whether its own growth raises or lowers its own revenue has a gap in its commercial model, not in its ambition.

Exercise 2.5 — The uncertain capacity you are already treating as a number (one session)

Somewhere in your business there is a capacity figure — a plant, a network, a warehouse, a service desk, a regulatory headroom, a risk appetite — that is published internally as a single number and is genuinely uncertain by a wide factor.

The chapter's version is stark: the carrying capacity of low Earth orbit is between 4,412 and 196,111 catalogued objects, a bracket 44.4 times wide, with 40,500 in it today and a central estimate of 29,417. Everybody plans as though the answer sits at the top.

Find yours. Write the two ends. Then decide, explicitly and on the record, whether you are planning to the middle or to the top, and who signed that choice. An assumption that has never been written down has never been decided, and it will be defended anyway.

PART THREE — THE BOARD PAPER

One page, and the shape of it

The paper you write is not about space. It is about a class of decision. Use this structure; it fits on one side.

Title. Positional exposure in our top-ten inputs, and the closure opportunity.

Paragraph one — what is working. Name the input where your firm already has an unusually high recovery rate, or an unusually well-placed supply, and who built it. With the figure. This is not politeness; it establishes that the paper is a measurement rather than a critique, which is the condition under which the rest of it gets read.

Paragraph two — the classification. Ten inputs, five positions, one table. Which are misclassified, and what the mitigation currently costs on the wrong axis.

Paragraph three — the closure number. Current p, the multiplier, the five points nearest to hand, and what they are worth at your own input prices.

Paragraph four — the benchmark trend. The falling price, the halving time, and the one capital decision it changes.

Paragraph five — the ask. One number, one signature, one date. Nothing else.

Paragraph six — what could go wrong, with its remedy in the same sentence. Three lines, no more. A board paper that states a risk without its remedy has handed the board work rather than a decision.

The appendix. Every figure with its input, its unit and its source, in the form a sceptic can re-run. The chapter's own arithmetic is published in lib/verify/VII_09.py for exactly this reason, and it is worth copying the habit: a paper whose numbers cannot be re-derived is a paper that will be argued about instead of decided.

PART FOUR — THE INSTRUMENT, IF YOU ARE THE BUYER

Delivered-in-orbit, and its terrestrial twin

The chapter's instrument is a delivered-in-orbit offtake with a floating strike against a published benchmark and a disposal bond attached. Strip the altitude out of it and you have a structure you can sign this year:

A floating-strike offtake. Price struck as a discount to a public benchmark rather than as a fixed figure. This is the correct structure whenever the benchmark is moving and you do not control it. A fixed price against a falling benchmark transfers all of the benefit of technical progress to your counterparty, and most long supply agreements do exactly that without anybody intending it.
Take-or-pay set by amortisation, not by ambition. The chapter's version: $500 million over 10,000 tonnes amortises to $50 a kilogram; over 1,000 tonnes to $500; over 100 tonnes to $5,000, which is already above the benchmark. Throughput decides, not resource. Ask your counterparty for their amortisation table before you ask for their reserves.
A performance bond as restricted cash, not a provision. A provision can be released by a change of estimate; restricted cash cannot. Where an obligation matters — decommissioning, remediation, disposal, take-back — the balance-sheet treatment is the whole enforcement mechanism.
An onerous-contract test you actually intend to fail if you are wrong. A genuine take-or-pay puts the buyer's minimum volume on trial every reporting period. That is a feature. It is what keeps the minimum honest at signature.

PART FIVE — WHERE THIS FAILS IN A FIRM

Name these before the programme starts, because each one has a cheap remedy at the beginning and an expensive one later.

It fails when the classification is done by whoever receives the budget. The five-position table decides where mitigation money goes, and anything that decides a budget will be argued toward whichever answer funds the arguer. The remedy costs about a day a quarter: whoever classifies is not whoever receives, and the classification is published with its reasoning rather than only its conclusion.

It fails when p is defined generously. The fraction that matters is what comes back to you and does the job again — not what is collected, not what is notionally recyclable, not what a downstream processor claims. Define it once, narrowly, in writing, and never widen it, because a definition that widens makes a rising number out of a flat reality.

It fails when the trend is fitted to two points. The chapter's own trend comes from two figures thirty-seven years apart, and the chapter says so. If your benchmark trend rests on two observations across a technology change, treat the rate as a direction rather than a forecast, and stress the capital case at half the assumed rate.

And it fails when it is argued philosophically before it is argued numerically. The order is not a matter of taste. The closure convexity, the positional classification and the floating strike are all conclusions a finance function will reach on its own once it has the figures. Hand over the figures.

THE NINETY DAYS

Day	Action	Artifact
1–15	Classify the top ten inputs by position	The five-position table
16–30	Compute `p` for every recoverable input	The closure register
31–45	Rank by proximity to 0.9 and cost the five points	The convexity case
46–60	Compute the benchmark trend for one falling input	The trend note, with halving time
61–75	Draft one floating-strike term sheet	The term sheet
76–90	Board paper, one page, appendix re-runnable	One page, one signature

THE NUMBER THAT DECIDES IT

For every proposition in this category, in your firm or out of it:

        all-in delivered cost per unit
        -------------------------------   <   1
        benchmark cost per unit, same
        place, same date

If it holds, the thing in front of you is a logistics contract with an unusual freight rate, and it should be presented and financed as one. If it does not, the resource is irrelevant, because your buyer is comparing two prices for the same unit in the same place and the geology was never one of the terms.

And the sentence to take into the next capital committee, which has nothing to do with space: before we ask how much of it there is, let us ask where it is, what moving it costs, and who is standing there wanting it. That question is faster, it is answerable from data you already hold, and it is right more often.