Entrepreneurial Innovation... at Microsoft?

How ironic is it that a title like that---Entrepreneurial Innovation at Microsoft---itself seems contradictory, or ironic? This is the company that perhaps more than any other, made computers work for ordinary consumers back in the 1980s and 1990s.

And yet, here we are, in 2010, and there's nothing at all surprising about reading an op-ed in the New York Times by a former Microsoft vice president, asking why it is that Microsoft has managed to become almost irrelevant to the quest for innovative new technologies.

Microsoft’s huge profits — $6.7 billion for the past quarter — come almost entirely from Windows and Office programs first developed decades ago. Like G.M. with its trucks and S.U.V.’s, Microsoft can’t count on these venerable products to sustain it forever. Perhaps worst of all, Microsoft is no longer considered the cool or cutting-edge place to work. There has been a steady exit of its best and brightest.

The headline on Dick Brass's article is "Microsoft’s Creative Destruction." I love that phrase, and in fact I originally considered entitling my upcoming book about entrepreneurship, "Creative Destruction for Fun & Profit." But I think there's something inspiring about the seemingly immutable law that says eventually almost every entrepreneurial, innovative new venture will become the stodgy status quo.

Now if I could just figure out why I'm hearing The Circle of Life playing over and over again in my head...

At rock bottom, she found the foundation for her success...

From council flat and near poverty to gazillionaire known the world over.

If you haven't see JK Rowling's 2008 Harvard commencement speech, it's well worth 20 minutes of your time.

J.K. Rowling Speaks at Harvard Commencement from Harvard Magazine on Vimeo.

Risk-free space travel?

I've been thinking a bit about commercial space travel over the past couple of days. And I've concluded that while space travel itself is still quite risky, starting a well-thought-out company that specializes in space travel might actually be much less of a gamble.

[youtube=http://www.youtube.com/watch?v=1hc49hI8soQ&hl=en_US&fs=1&]

It's going to take a few best-sellers and maybe a winning lottery ticket or two before I can afford to join the more than 300 people who have shelled out $200,000 for a ride on Richard Branson's SpaceShipTwo. But between thinking about that, and reading Malcolm Gladwell's recent piece in The New Yorker about entrepreneurial risk-taking (basically he says the most successful entrepreneurs are actually incredibly risk-averse) ... and most importantly, after spending more than a year writing a book about Harvard Business School and intelligent entrepreneurship---I started to ask the question:

Just how risky is space travel anyway?

First, how much of a gamble is it to fly into space? And second, how uncertain is it to start a commercial venture like Virgin Galactic, Branson's space-travel company?

First, the risk of actually traveling into space.

The most-tested, most-modern space ship the world has devised is the soon-to-be-obsolete Space Shuttle, scheduled to fly its 134th and final mission in September 2010. Over the shuttle's 30-year history, two flights haven ended in disaster: the 1986 Challenger explosion, and the 2003 disintegration of Columbia. Presuming (and praying) that the remainder of the shuttle flights launch and land safely, the shuttle will retire with a 98.5 percent safety record. NASA itself claims that its astronauts have a 1:100 chance of dying each time they go up; presumably NASA thinks it's caught and resolved safety issues, so that shuttle flights now are safer than they were.

Now let's look specifically at Virgin Galactic. Before SpaceShipTwo has even been completed, three engineers working on a prototype were killed when one of the spacecraft's engines exploded in a test. And Branson's chief designer says that he thinks early 21st century space tourism will be about as safe as 1920s aircraft travel was. To put that in context, Charles Lindbergh flew from New York to Paris alone in 1927. On the one hand, he made it; on the other hand, doing so was so novel and exciting that it made him into an international hero.

Next, the risk of starting a space tourism company.

Virgin Galactica has two major, major capital costs that I can think of offhand. First, the company has to had to design and build the spaceships that its passengers will ride. Second, it needs needed a facility from which the ships could depart and return. (I'm tempted to include insurance as one of the monster up-front costs, but as that's probably more of an ongoing operating cost than a startup cost, we'll just note it and move on for now.)

The space ship.

"SpaceShipTwo," to be precise. SpaceShipTwo will be piggy-backed aboard a larger craft known as "WhiteKnightTwo" as far as 50,000 feet. Then, SpaceShipTwo will detach, and rocket up to 360,000 feet above the Earth. It will stay there for only about five minutes during which passengers will achieve full weightlessness. Then it will glide unpowered back to Earth. (Knock on wood.)

In order to build five SpaceShipTwos and two WhiteKnightTwos, Branson reportedly expects to spend a total of $400 million.

Each ride costs $200,000. As of December 2009, Branson reported that "more than 300 people" had already ponied up the money, even before the space ship is finished. Planning on a first launch next year, Branson said he estimates that a thousand people will fly during calendar year 2011. (That's pretty amazing, considering that as of right now only about 450 people in the history of the world have ventured into space.)

So, let's do the math. Before the first flight takes off, he's supposedly recouped about $60 million of the $400 million development and ship construction cost (and keep in mind, that's for five ships.) And, presuming he hits the target of 1,000 passengers during 2011, that's a total of $100 million. In other words, one-fourth of the total design and construction cost before the first flight.

Now, the second component, the spaceport.

This one's easy. Branson got the state of New Mexico, with a little help from the federal and local governments, to pony up the entire construction cost of a facility in the Mohave Desert. We're talking $200 million or more.

It will have a 3,000m (10,000ft) runway and a suitably space-age terminal and hangar building designed by Foster and Partners.

(I have to say this is a great deal for Branson, but it's could be a great bet for New Mexico, too. Right now, the state's economy is based primarily on natural resources, tourism, and federal spending---things like the three air force bases and the nuclear laboratory contained within its borders. Gaining an early foothold in the commercial space industry might---might---prove turn out to be a great boon for the state.)

But back to Richard Branson. When you analyze everything, I think his startup risk isn't all that severe. The state pays for his facility, and his passengers pay for his space ships---even before he's finished building them. Clearly there are going to be huge operating costs. I can only imagine what insurance, fuel, and personnel are going to cost. (Frankly, I wonder whether he's actually underpriced rides on this thing. I mean, once you're at the $200,000-a-ticket level, what's the point? Why not a nice, round $250,000---thus adding another $50 million in projected revenue during 2011?)

Regardless, we're left with the odd situation in which I think if Branson's estimated costs are accurate, his risk in starting Virgin Galactic is significantly less severe than the risks each of his passengers will be taking when they strap themselves in. Very impressive.