James Hasik

Is Oshkosh's FMTV bid really a risky move? Part Two: Some analysis of decision-making

In an interview in Defense News about three weeks ago, Pentagon procurement chief Ashton Carter complained of his difficulty in “getting good analysis of what to do to discharge the government's responsibility to make sure it has a good industrial and technology base” in the future. It was a frank and refreshing statement of just how the Pentagon is short on good thinking in economics and engineering, or as I was quoted in the Wall Street Journal last week, just how profoundly its plans are “divorced from economic reality.” [1] Let me first say that I’d be happy to help get the folks there back on track with some real, empirically-founded advice. Of course, Carter indicated that he would be relying on two sources in particular: federally-funded research and development centers (FFRDCs) such as RAND and the Institute for Defense Analyses (IDA), and a revitalized industrial policy office, under new Deputy Under Secretary Brett Lambert. Regarding the latter, a few years ago I recommended that the Pentagon provide greater resources and pay more attention to this office, as its leadership and output were coming up a bit short: [2]     Currently, Pentagon industrial policy on a particularly technology is largely determined by the proponent program office. Knowledge of foreign capabilities [in particular] is scattered, and the balance between foreign technologies and domestic capabilities is often hastily presumed. Industrial policy is mostly an after-thought in program awards, but it is always an after-thought, as there is always an effect to consider. The deputy under secretary of defense for industrial policy could benefit from more staff, a larger budget, and a greater voice in decisions. The capacity for deeper analyses of industrial questions could help determine just what capabilities are worth protecting at what costs, and which procurement contests should thus be restricted to which competitors, if at all. Frankly, I generally don’t advocate restricting competition to keep certain “capabilities” at particular companies. Let me also say that I greatly appreciated the comments that my friend Loren Thompson of the Lexington Institute provided on my last column concerning the observable state of Oshkosh’s finances, and that I agree with many of his points. In one, Loren asserted that     It really won't do to dismiss the bankruptcy concern on the basis of improved financial health in 2009. The company's financial health improved because the surge in share price associated with the M-ATV and FMTV awards enabled it to restructure debt, substituting equity for fixed obligations. In other words, its financial health improved because it won the awards, not exactly a sound basis for making those awards in the first place. On this matter, I’m not so sure that I agree. If the Army could have been certain that Oshkosh’s finances would improve after an award, then awarding the contract could be sound on that basis. There would be no ex post financial distress, regardless of ex ante appearances. There is perhaps yet more to this. I received many other comments via e-mail from colleagues around the world, and some commenting on Loren’s original column, some on my subsequent analysis, and some on his response. One from outside the US asserted that     All else being equal... improving the financial health of a weak national supplier is a very sound basis for making the award as it helps maintain the diversity of the defence industrial base at no extra cost to the government. As I noted above, that wouldn’t be my default position. It’s hard enough to figure out which contractor to pick in open competition—trying to stage-manage industrial structure presumes a prescience generally not in evidence in government. But if one is going to make decisions with an eye towards engineering a particular industry structure, one should do it with the facts in hand and the right team undertaking the analysis. In the urgency of wartime, things get worse, at least with constant resources. As Sandra Erwin puts it in her editorial in the October issue of National Defense, [3]     If Defense leaders are serious about permanently changing the procurement system, maybe they should consider instituting a “contingency team” that would have resident expertise in how to mobilize government and industry during a crisis. Contingency teams? I’d like a lot more than just that. I’d like some procurement officials who know at least enough about Altman’s Z-score and the Black-Scholes-Merton model to know how to hire a financial consultant who can intelligently apply those and other techniques. I’d like procurement officials who have the Pentagon’s industrial strategy office on speed-dial. I’d like procurement officials who can walk a factory floor and get an intuitive feel for when work-in-progress inventories are too high or too low, or if processes are out-of-whack. I don’t want them making decisions for their contractors at that level, but I do want them to have enough understanding of these issues to know how to ask the right questions. Perhaps they do. In the case of the Army’s FMTV program office, we may soon find out. Inside the Pentagon reports today that 25 federal legislators from Texas, led by my own congressman, (Republican) Mike McCaul, have requested that the Army brief them on the decision-making process. (If you’re wondering how a single federal congressman represents both the west side of Austin and an outer suburb of Houston, you really haven’t seen the extent of gerrymandering in Texas.) We already know that the Army’s decision-maker judged Oshkosh’s bid no more risky than BAE Systems’. What we don’t know yet is quite what reasoning process he followed to arrive at that decision. This is not to say, as Loren does, that the decision was “preposterous”. For more on that, I’ll have another commentary in a few days. ————— NOTES     1.    August Cole, “New Pentagon Priorities Reshape Defense Business: Smaller Contractors Benefit Amid Shift From High-Tech Weapons to More-Basic Arms Meant for Quick Deployment,” Wall Street Journal, 22 September 2009, p. B3     2.    James Hasik, “Military-Industrial Intelligence,” in Angela Sapp, editor, The Faces of Intelligence Reform: Perspectives on Direction and Form (Council for Emerging National Security Affairs, 2005), p. 125     3.    Sandra I. Erwin, “New Business Model Needed To Replace the Status Quo,” National Defense, October 2009

Is Oshkosh's FMTV bid really a financially risky move for the US Army? Part One: Some evidence from the financial markets.

In late August, I wrote about Oshkosh’s upset win over BAE Systems in the FMTV recompetition. About ten days ago, Loren Thompson of the Lexington Institute wrote about the award as well, but with a very different view (“Army Truck Award Looks Very Suspicious,” Lexington Institute, 8 September 2009). He noted that while BAE Systems had bid 21 percent below its own current price for FMTV trucks, Oshkosh had bid fully 30 percent below—a figure he found suspiciously low. Noting that this was a fixed price contract, and complaining that Oshkosh was “teetering on the edge of bankruptcy,” Loren asked

since Oshkosh has already indicated that it plans to use the same suppliers used by BAE -- who contribute much of the value of the finished vehicles -- how is it possible for a relatively untested challenger to substantially underbid a company that has been building medium trucks for the Army for two decades?

The answer, he said, was that the Army’s source selection authority did not consider the risk of Oshkosh’s financial failure in the decision, and didn’t adequately question whether it could actually make money on its own aggressive bid. Awarding contracts on overly aggressive bids, he observed, was a “practice that is at the root of many acquisition disasters.”

We can generally agree on the point about overly aggressive bids. The problem for a governmental customer is more obvious when the contractor underbids on a pay-my-costs development contract, but it’s still present in fixed-price work. If Oshkosh couldn’t make money on this bid, then it could be in bigger financial trouble than it already is—if it is indeed in such trouble. Further, the article’s titular assertion that the award itself was “very suspicious” is itself very strong, perhaps even bearing the image of an envelope of cash changing hands. Such a strong accusation, and strong conviction about the relative merits of the bids, themselves merit some serious analysis. It seems that there are two assertions here:

1. Oshkosh is too financially risky a company on which to rely, particularly if it cannot make money on this contract.
2. Oshkosh cannot make money on this contract.

Let’s deal with these questions in order. If the Army should be worried about whether Oshkosh is a bankruptcy risk, then we should estimate that probability. The literature goes back to at least 1968, when Edward Altman published his Z-score methodology [1], which seems to remain the most popular approach. James Ohlson [2] and Mark Zmijewski [3] followed in the early 1980s with analogous methods based on different data sets. Each is an empirically-derived multivariate approach that utilizes a particular firm’s financial results from the past year to estimate the probability of bankruptcy in the following year. Each is a logit regression model, which provides an abstract number that must be transformed logistically into a probability. For reference, Altman’s method relies on seven variables from the preceding reporting year: working capital, total assets, retained earnings, earnings before interest and taxes (EBIT), total liabilities, revenues, and the market value of the equity.

The results would be alarming, if we could have confidence in them: Altman and Ohlson’s methods each estimate Oshkosh’s probability of bankruptcy in 2009 at about 80 percent. However, in the case of Oshkosh today, there is a big problem with using any of these backward-looking approaches: the company’s financial prospects seem to have improved considerably in 2009, so drawing on 2008’s figures provides an unwarrantedly negative view. (Zmijewski’s method here is even less helpful, as it is particularly sensitive to variations in net income.) Indeed, recent research [4] has indicated that the coefficients in all these models have degraded over time, and vary from industry to industry. As interpretations of accounting rules tend to vary with time and across industries, this is not surprising.

Fortunately, there is another option—literally, option valuation. Note that the last measure in Altman’s method, the value of the equity, is found in the market estimates of all investors, and not merely in the financial statements of the public auditors. That alone suggests that drawing on the collective wisdom of the market may provide better results. As Robert Merton observed in his seminal 1974 paper [5], owning equity is essentially holding a call option on the value of a company’s assets. That hits zero when the company is bankrupt. If we assume equity price movements to be a normally-distributed but lower-bounded (Brownian) process, we can use a transformed version of the Black-Scholes-Merton (BSM) options pricing method to calculate the probability of bankruptcy. In a recent and excellent book [6], Robert MacDonald works out the details, which use the market value of all the assets, the face value of the liabilities (analogous in the model to the option strike price), the expected rate of return of the assets, volatility of the asset value, and the dividend rate (the value of the dividends expected divided by the value of all the assets) as arguments in an application of the standard cumulative normal distribution function,

As appealing as this approach is theoretically, one could have reservations. As Hillegeist, Keating, Cram, and Lundstead noted in their paper [7] testing the utility of the BSM model,

the stock market may not efficiently impound all publicly-available information about PB [probability of bankruptcy] into prices. In particular, prior studies suggest that the market does not accurately reflect all of the information in the financial statements. Thus, whether a market-based PB measure derived from an option-pricing model or an accounting-based PB measure performs better is ultimately an empirical question.

That said, Hillegeist et alia rather convincingly demonstrate that the BSM model much more accurately predicts bankruptcy risk across industries than any of the older accounting-based measures (whose coefficients have drifted beyond recognition anyway), and thus, that it should be generally used in research and by practitioners. The math is a bit heavier, requiring application of the Newton-Raphson algorithm to accurately estimate the total value and volatility of all the assets, which cannot quite be directly observed in the market (not many people are placing calls on the value of Oshkosh’s receivables, for example). If we’re content with first-order approximations, we can skip that part, and just slightly underestimate the volatility and overestimate the value. Given the final results (below), this should hardly matter. However, partly to compensate, and partly to provide a conservative view of Oshkosh’s prospects, we can draw on Oshkosh’s 2008 share price gyrations to calculate volatility, and we can presume that Oshkosh’s asset value cannot be expected to appreciate faster than that of the risk-free rate of interest. Both these approaches should overstate the probability of bankruptcy.

In his essay, Loren noted that Oshkosh’s “stock price shot up 24 percent even before the [FMTV] truck award was disclosed.” The timing itself is not surprising, as information about contract awards and merger announcements has long been known to leak in advance. But more so, the increase in the stock price itself is evidence that investors believe that Oshkosh will succeed financially with the FMTV, and that this success will stave off bankruptcy—increasing the “distance to default” in the random walk of the stock price.

Indeed, running the numbers with the BSM method on Oshkosh’s equity (NYSE:OSK) provides a probability of bankruptcy today that is so close to zero as to be irrelevant. All the computation aside, this is easy to see by inspecting MacDonald’s equation: when the fraction of a company’s asset value that is found in its assets gets much above highly leveraged, the risk of bankruptcy—intuitively—drops precipitously. That’s where Oshkosh is today—as Charles Brady of BMO Capital Markets put it late last month, the FMTV award itself “basically takes bankruptcy risk off the table.” [8]

From the standpoint of the source selection, however, the most important figure could be OSK’s share price around the time at which the contract decision was being finalized: about $14 per share. Running this figure through the BSM suggests that Oshkosh’s risk of bankruptcy was probably not all that great to begin with: well below one chance in a thousand over the next five years. To save the $440 million said to be the difference between the bids [9], it’s hard to fault that anonymous Army officer for taking such a slight gamble. Could the counterbalancing cost really be claimed to exceed $44 billion? That’s inconceivable.

Finally, even if one is really uncomfortable with relying on the predictive power of financial markets, Oshkosh’s debt structure provides some serious comfort. Reviewing Oshkosh’s most recent SEC filing, it’s clear that its debt obligations don’t become a serious problem until after 2013:

year	2009	2010	2011	2012	2013	thereafter
long term debt	$25 MM	$50 MM	$50 MM	$262.5MM	—	$2314 MM

While that’s not necessarily good news for Oshkosh or its shareholders, the Army shouldn’t much care. The five-year contract will be expiring as the first big debt payments are coming due, and if Oshkosh does get into trouble, finding someone to service the trucks five years from now shouldn’t be difficult.

In short, the potential for financial distress—apart from the feasibility of its bid—was not a reason for choosing any supplier other than Oshkosh. Could the market, then, be overestimating Oshkosh’s operational capacity? I’ll deal with that question in a column to follow.

NOTES

1. Edward I. Altman, “Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy,” Journal of Finance, 1968, pp.189-209.


2. James A. Ohlson, “Financial ratios and the probabilistic prediction of bankruptcy,” Journal of Accounting Research, Vol. 18, No. 1 (1980), pp. 109–131.


3. Mark E. Zmijewski, “Methodological Issues Related to the Estimation of Financial Distress Prediction Models.” Journal of Accounting Research, 1984, 22 (Studies on Current Econometric Issues in Accounting Research), pp. 59-82.


4. J.S. Grice and M.T. Dugan, "The Limitations of Bankruptcy Prediction Models: Some Cautions for the Researcher," Review of Quantitative Finance and Accounting, Vol. 17, No. 2 (2001), pp. 151-166


5. Robert Merton, “On the Pricing of Corporate Debt: The Risk Structure of Interest Rates,” Journal of Finance, Vol. 29 (1974), pp. 449–70. Merton built on the work of Fisher Black and Myron Scholes, “The Pricing of Options and Corporate Liabilities,” Journal of Political Economy, Vol. 7 (1973), pp. 637–54.


6. Robert MacDonald, Derivatives Markets, Addison-Wesley, 2002, p. 604.


7. Stephen A. Hillegeist, et al., “Assessing the Probability of Bankruptcy,” Review of Accounting Studies, Vol. 9, No. 1 (2004), pp. 5–34.


8. Bob Tita, “Military Truck Contract Reduces Bankruptcy Risk for Oshkosh,” Dow Jones Newswires, 28 August 2009.


9. Kris Osborn, “Sources: Cost Became Determining Factor in U.S. Army’s FMTV Decision,” Defense News, 14 September 2009.

"Are we in a hype cycle about MRAPs?"

That was one of the questions that my friend Dr. Burak Codur, of the Turkish Scientific and Technological Research Council, posed to me by e-mail a few weeks ago. I promised to follow up with a well-considered reply, and he consented to share the discussion more broadly.

A hype cycle, according to the book by Jackie Fenn and Mark Raskino of Gartner Research, is a social phenomenon that follows the introduction of many new technologies. Dispense for the moment with the fact that the MRAP concept isn’t exactly new, having originated in the 1970s is South Africa and Rhodesia. The point is that some new concepts are greeted with unwarrantedly high expectations early in their life cycles, and experience a collapse of confidence shortly thereafter, but eventually recover to do yeoman, if unspectacular, service over the long haul.

All said, if MRAPs were once in a hype cycle, we have some evidence that the gyration is not too strong, and is probably settling down. In this coming Monday’s issue, Inside the Army is reporting the following in one of its headlines:

ARMY: MRAP CONVERSION A 'COST-EFFECTIVE METHOD' TO MEET MMPV NEED

As the article continues,

The Army's pending request for information on converting nearly 1,000 Mine Resistant Ambush Protected vehicles into Medium Mine Protected Vehicles is part of an effort to make "maximum use of funds that have already been invested," according to the service’s assured mobility systems program manager.

To clarify the the difference between these two four-letter acronym blast-protected vehicles, I’ll recycle part of a column from last month. I observed then that the Army had just

released a request for information (RFI) regarding the upgrade of more than 1,000 MRAPs to the Panther Medium Mine Protected Vehicle (MMPV) standard. The MMPV carries the engineers of the Army’s route clearance companies; as the program was getting started in a Pentagon business-as-usual, buy a few hundred trucks, sort of way, the MRAP program raced ahead to procure thousands. The Army now wants many more MMPVs for route clearance, but the Category II MRAPs lack some critical features, such as remotely operable bomb-poking arms and robot deployment ramps. Note further that the RG33L is the basis of the MMPV, and the Army has over 1,000 RG33 MRAPs. The RFI has indeed gone out to firms other than BAE Systems, signaling that the Army may trust third parties to undertake these scale and complexity of an upgrade, and on a front-line vehicle.

Somehow, the Army’s finding that modifying MRAPs to be MMPVs is cost-effective just doesn’t hit me as news. It may be news to some people who grew up in the old, permanently broken, do everything de novo acquisition community, but it wouldn’t be for anyone else with calculator and a clue. There’s no need to move onto the next, new, hyped thing—what was built in a whirlwind of industrial activity over the past four or so years is pretty darn good for the task.

Polemics aside, is there anything that we can say of value for the industry, that derives from this otherwise unremarkable observation? Simply that route-clearance is hear to stay, and that the broader MRAP inventory is hear to stay, whether by MRAP, MMPV, or some other name. Home-made mines are just too well-poliferated, easy-to-make, and lethal for any enemy to ignore. Heck, professionally manufactured ones could conceivably have even nastier effects—or worse yet, be automobile. Think for a moment about the possibilities of combining robotics with explosively-formed penetrators. A sufficiently clever opponent could produce something like one of those frisbee-shaped vacuum cleaners, just with an antitank mission. Call it a Boomba for fun.

This means that the ongoing campaign to upgrade and life-extend these vehicles will go on for sometime. We’re not here writing simply of MRAPs and MMPVs, or even JERRVs (Joint EOD Rapid Response Vehicles) and MPCVs (Mine Protection Clearance Vehicles), but everything that’s new and more mobile in the alphabet soup of blast-protected vehicles: M-ATVs (MRAP All-Terrain Vehicles), MPPV (Mine-Protected Patrol Vehicles), LPPVs (Light Protected Patrol Vehicles), and the possibly forthcoming JLTVs (Joint Light Tactical Vehicles). Indeed, as some of the newer vehicles with with greater off-road mobility populate the wilds of Afghanistan, older vehicles meant for operations in relatively urban Iraq will come available for other applications.

After all, MRAP-type vehicles (all of the preceding included) are extremely adaptable platforms. An MRAP's protection is optimized against the three classes of weapons to which insurgents hew: the assault rifle, the shoulder-fired rocket, and that improvised explosive. While terrorists are frequently innovating new tactics and techniques, these three weapons have constituted the big three ways of doing violence for about forty years now. The vehicles’ monocoque steel hull and optional surrounding cage armor provide substantial proof against these threats, and also provide a relatively large interior, which has already been shown reconfigurable in many ways. They are entirely street-legal, and generally transportable by C-130. Excepting the relatively enclosed vehicles ordered by the British Army, MRAPs’ visibility is better than that of almost any other armored vehicles. And perhaps most usefully, a huge cadre of veterans from several countries is already experienced in operating MRAPs.

So what does this mean for counterinsurgency efforts? Well, stand by for ongoing innovation. We may see MRAPs extend and evolve in a range of security roles in the next few years:

• Counter-sniper platform. Many MRAPs in US Army service are equipped with remote weapon stations. For the internal security role, the machineguns and automatic grenade launchers could be replaced with single-shot, stabilized sniper rifles for engaging single targets at extreme range.
• WMD reconnaissance. Should dire-but-yet-unfulfilled predictions of chemical or biological attacks come to fruition, many MRAP-type vehicles are equipped with overpressure systems. If anyone out there starts combining explosive and biochemical effects, the combination of blast-and chemical-resistance will be very important.
• Armored firefighting or medevac vehicle. Terrorists, particularly suicide squads, have demonstrated already that they will fire upon those coming to the aid of those already down. The US Army is already buying quite a few blast-protected ambulances (RG33s from BAE Systems), and more customers may be in the market for these eventually.
• Robot mothership. In the form of the JERRV, this was one of the original roles of the US MRAPs. But much more can be done. So far, the troops have mostly been using those robots to poke suspected bombs. They’ll be doing a lot more in the future.
• Mobile command posts. The US Army desperately wants to retire its old and vulnerable M113s, and many of these serve as command post vehicles. Since command posts mostly follow roads, the offroad mobility of the M113 may be relatively lost on this purpose. Shifting this mission to MRAPs could be very cost-effective, particularly given the lower operating costs of wheeled vehicles.

Fortunately, the industry needed to pursue these experiments already exists, of course, in companies like Force Protection, BAE Systems, Kongsberg, Rafael, ITT, Finmeccanica/DRS, and many others. However, since the vehicles are substantially already in the inventory, automotive skills may be important, but not the end-all. Many developments will concern electronics, electro-mechanical systems, armaments, and materials science. That suggests that competition could stay intense—and that a good thing for the front line.

That emphasis on the front line points to a further factor for success. Engineering is essential, but in this sense, it proceeds hand-in-hand with marketing and customer relationship management. Sticking close the user community will be critical, as we can expect that much of this forthcoming innovation will draw on the ground-level experience and informal requirements-development of front-line troops and first responders worldwide. I’ll have more to say about this in a forthcoming essay.

"Immediate actions": how the USAF is finally getting serious about that unmanned thing

Having spent a week last month at the Washington DC convention center for the symposium of the Association of Unmanned Vehicle Systems International (AUVSI), I have rather had robotic flying in mind. The other day, a colleague insisted to me that the US Air Force will eventually have another big, manned, long-range, penetrating bomber program. I immediately recalled that back in May, Megan Scully of National Journal reported how

        Defense Secretary Robert M. Gates told lawmakers that he is considering making the Air Force’s next-generation long-range bomber a pilotless aircraft — an ambitious undertaking that would put unmanned technologies at the forefront of U.S. offensive military capabilities. The Air Force had planned to field a manned bomber in 2018, but Gates canceled the nascent program in the fiscal 2010 budget request sent to Capitol Hill last week. At a Senate Armed Services Committee hearing, Gates said advances in unmanned technologies since the Air Force launched the bomber program in 2006 were among the reasons he stopped the work. “Does it need a pilot in it?” he questioned.

No, I suppose that it doesn’t. Thus, I am finding the notion of another big, manned, long-range, penetrating bomber highly unlikely. After all, if the USAF is indeed finally getting serious about unmanned aviation, then this would be one of the next logical places to pull the pilot out of the plane. After all, this isn’t about divesting the service of the mission of long-range strike; it’s simply about altering (if profoundly) how it goes about it.

I’ll have more on divestiture below, but for now, I’ll comment a bit more on getting serious. The USAF recently released a plan for unmanned aviation through the year 2049. That silliness of that time horizon should induce eye-rolls, but the Air Force and the Defense Department as a whole cannot be criticized for systematically ignoring the concept. The Chairman of the Joint Chiefs says that drones are most of the future of military aviation; the Defense Secretary counts them alongside fighters in the force structure. The USAF’s plan covers all manner of issues related to unmanned aviation, but particularly singles out nineteen as “immediate actions”. In particular, eight of the tasks, from the standpoint of contractors, are largely about building the service structure for unmanned aviation. While they’re not about shiny new kit, they generally and clearly show that the USAF is finally, completely serious about unmanned aviation:

• Develop, promote and assign leaders with UAS experience to key enterprise positions as soon as possible
• Define UAS personnel career paths, training and sourcing by 1QFY10
• Define UAS personnel career paths, training and sourcing by FY10
• Review and provide product support and Independent Logistics Assessment policy guidance for future systems fielded through the rapid acquisition process; publish interim guidance by 1QFY10

        ▪        Airspace Integration: Propose comprehensive National Airspace Integration Policy to the Office of the Secretary of Defense by 4QFY09         ▪        Validate Flight Plan through the Joint Capability Integration Development System by 4QFY09

Airspace integration is a big deal with good reason—the RAF is already making noises about ditching its Reapers in 38 Squadron because it can’t fly them over Britain. Even if much of the training can be accomplished in simulation (see below), drone squadrons still need more room to operate over US territory. Their currently rather restricted ranges aren’t quite enough. But more importantly, as Ronald Reagan used to say, “people are policy.” More than where they fly, who and how they fly is going to have a big impact on the USAF culturally. Once the service builds a large community of pilots skilled in operating UAVs, that silk scarf culture will face a more serious challenge than it ever did from the space and missiles communities. Selling the next radical concept—whatever that is—will be much easier.

Crazy Larry Krauss, and the end of Big Space

This just in:

—————
        Origins Initiative Director Sees One-Way Trip To Mars As Way To Overcome Mission Hurdles. In an op-ed for the New York Times (1 September, page A29), Lawrence Krauss, director of the Origins Initiative at Arizona State University, writes on how the Augustine Commission has found that a mission to the Mars is likely to cost several hundred billion dollars, not to mention requiring to overcome many technical hurdles like protecting astronauts from radiation. However, the "way to surmount this problem...demands that we ask this vexing question: Why are we so interested in bringing the Mars astronauts home again?" Krauss believe a trip to Mars should be "one-way," which automatically cuts down on needed supplies and the costs of a return trip. "If it sounds unrealistic...then consider the results of several informal surveys I and several colleagues have conducted recently," where every participant "raised his hand" when asked if they would go on a one-way trip. Krauss comments, "To boldly go where no one has gone before does not require coming home.“
—————

Boldly go? Really. Was that Bill Shatner or Patrick Stewart I heard talking? Well, it's possible that Larry may not realize that Mars is not exactly the Plymouth Colony. News flash: it's a large red rock, strewn with little red rocks, and no breathable atmosphere. No styrofoam backdrops, no Orion slave girls. Sorry—can’t help you.

Still, W somehow got the idea (which Obama hasn't killed yet) to spend several hundred billion dollars so that two guys could take pictures of red rocks. Right. I already know that they're red, thanks. A robot—what we now call an unmanned vehicle—went there in the Seventies and confirmed that. Then, several more went, and took more pictures. The rocks were still red, and I still don’t like Tang. Thus, whether these proposed astronauts are coming back or not, this is stupid. At a time when we're figuring out how profitably to take the crews out of all sorts of vehicles, the crowd in Houston (including its oddball friend in Tempe) is obsessed—yes, obsessed—with the idea that they have to stuff a person in the pod.

But if you read the whole editorial, Larry says that science isn't really the point. It's mostly about how he watched too much Star Trek as a kid. Insight, Larry: if you're planting a colony, for whatever reason, you can't do it even on ten billion dollar airfares. Not even close. Granted, I'm not surprised that the New York (City) Times prints stuff from cranks like him—heck, they still carry Krugman's column, and that guy hasn't been a real economist in years. It's just that this was exceptionally bad, even for those guys.

There is an actual point to this. My wife told me the other night what innovation is. I had told her about some semantic and taxonomic problems that some colleagues and I had been having on an ongoing project on the subject, but she cleared up for me what innovation really is. Smudge-proof lipstick. That's innovative, and valuable. That has made a big difference in her life. Sending two guys to Mars to take pictures of rocks, she tells me, would not. If Martian rock-collecting is somehow innovative, then clearly not all innovations are good. I have written about this extensively, but it bears repeating.

Ultimately, though, what really matters to me is how we in the industry can make money from this. With now three US federal administrations in a row spending like a bunch of sailors on shore leave, there's just no money left. So, in the same way that we've been telling military contractors to face that reality, and start developing kit that really matters for the wars that are actually being fought, there's a message here for the civil space industry: Moon rockets, out. Microsats, in.

Big space is dead. It just hasn't figured that out yet. As Lawrence Garfield once said, don't blame me; I didn't kill it. It was dead when I got here. Let's sign the death certificate, collect the insurance, and invest the money in something with a future.