GUEST BLOG: Standing on the Moon by Aegis Frumento Esq

July 18, 2019

Standing on the Moon

by Aegis J. Frumento, Partner, Stern Tannenbaum & Bell

It seems that Hilton Hotels has fallen behind in catering to the ultra-rich. The Wall Street Journal reported this week that the storied hotelier is looking to upgrade its luxury hotel offerings in 29 key cities. The impetus is a realization that by 2023, there will be 55 million "millionaires." They can afford to buy a lot of overpriced water bottles from their room's mini-fridge.

Alas for poor Hilton. Its legendary founder, Conrad Hilton, dreamed bigger. You may recall a scene from the hit show Mad Men when Don Draper got a dressing down from Connie Hilton because a proposed ad campaign did not include a Hilton on the moon. "When I say I want the moon," fictional Hilton said, "I expect the moon." His real son Barron actually outlined plans for an Orbital Hilton and a Lunar Hilton at a conference in 1967. And in an early example of product placement, even the space station depicted in 2001: A Space Odyssey (1967) included a Hilton hotel.  But that's as close as Hilton ever got.

In 2023, Earth's population is expected to reach 8 billion. That means that only 0.66% of the planet's people will qualify at "millionaires." We also expect that by then 4.5 billion will be urbanites, as presumably will be virtually all the ultra-rich. So the numbers are a little less stark, but only a little: 98.8% of all urbanites will not be millionaires, the storied 99%. Earth's total wealth in 2023 is estimated to reach $400 trillion, but the 1% will own well more than half of it. That will leave the average 99-percenter with a net worth less than $25,000.

Shocking news, but old. More astonishing to me is that I looked all that up, did the math -- and wrote it -- on my phone while on a train into Manhattan. Such a thing was the stuff of science fiction when I was growing up. Real computers and communications devices were big, bulky things crammed with transistors and vacuum tubes and mechanical relays and switches. The more powerful of them would fill a hangar. That many magnitudes of that computing power now fits in my back pocket is a direct legacy of what happened 50 years ago this week, the Apollo 11 moon landing. 

The original moonshot had its detractors even then. Once we had walked on the moon, Congress canceled the last three scheduled missions. Even today, some question whether it was all worth it. Our late-60s lunar adventure cost about $25 billion. That's about $165 billion in today's dollars. That's a lot of money, but not so much. The TARP bailout was authorized at $700 billion and cost $400 billion. Even though it may have saved the economy and did return a $15 billion profit at the end, I doubt anyone will be celebrating it in 2058.

Our profit from Apollo is even harder to gauge. Perhaps the most visible to the layperson's eye is the technological revolution that it spawned. Back in the 60s, engineers at MIT had a concrete problem to solve. They had to invent a general-purpose computer and make it small enough to fit aboard the lunar lander, and it had to work under extreme conditions. They did it by adapting cutting-edge integrated circuits to replace transistors, and streamlining computer code to minimize memory. The computer they came up with was nothing compared to my iPhone, but the iPhone is its direct descendant. When the Apollo program was abandoned in the 1970s, many of those engineers took their surplus parts and expertise, decamped for Silicon Valley, and invented our world. See The Apollo program's $25 billion was about 2.5% of US GDP at the time. The equivalent expenditure of $165 billion today would only be about 0.8% of current GDP. The enormous GDP growth since the 1970s, far outdistancing the cost of putting a man on the moon, is due in no small part to the technology that Apollo made it necessary to invent.

But there also came a downside. That $165 billion figure coincidentally is also Jeff Bezos' net worth, as he sits at the summit of personal wealth. Jeff made his billions from Amazon. Just this week Amazon hosted its Prime Day promotions, trying desperately to get us all to buy even more stuff we don't need. Amazon has made buying stuff too easy. We used to have to go to a store to get something, or at least put up with the bother of mailing in an order or placing a phone call. Now it's all search, select, and one-click, it's there. It's almost like having your own Star Trek replicator.

But there is no replicator. Amazon can only get you your stuff before you forget you ordered it by forcing employees in its fulfillment centers to work faster and faster. There have been reports of Amazon warehouse workers being timed on how fast they get packages out, of being given limited bathroom breaks to keep the orders going out without delay, of being fired for not moving fast enough. You get images of Frederick Taylor with his stopwatch speeding up the assembly line. See
. You get images of Charlie Chaplin in Modern Times, of Lucy and Ethel in the candy factory. Hell, you get images of Charles Dickens' workhouses! Now, Amazon plans to replace most humans with robots, aiming to get rid of them all, with their pesky bathroom breaks, in a decade or so.

This is progress only for Bezos's bankbook, which is guaranteed to grow as a result. As Balzac noted, there's a great crime behind every great fortune.

And what does Bezos plan to do with his $165 billion? He plans to go to the moon! His company, Blue Origin, is designing and building reusable rockets with the intention of building a lunar colony. In the meantime, Blue Origin is offering a $200,000 seat to those who can afford it on its New Shepherd rocket. You too can train to be an astronaut in one day, feel the G's of take-off, see the curvature of the earth. Jeff might do better offering free rides to the Flat Earth Society than collecting fat fees from rich people, but that's just me.

None of this should surprise. Look what happened to Mount Everest. Sir Edmund Hillary scaled it because it was there. Now, any rich tourist with a spare $45,000 can trudge up the mountain with Sherpa in tow, just so they can cross another completely unnecessary item off their bucket list. That's too cheap. The line to the summit can look like those queueing up for Powerball lottery tickets. Can the lines to lunar attractions -- maybe for a glimpse of Neil Armstrong's bootprints -- be far behind?

I was an awestruck young teen watching Armstrong walk the moon. But the vision of Earth as a lovely blue marble in the void didn't work as some astronauts thought it might. In the decades that followed, here back on Earth, too much of the technology spawned by the space program has been used to widen inequalities of wealth and income to levels not seen in a century. The rich always get richer by squeezing the rest of us, but the technology born of Apollo helps them do it faster and more effectively than ever. The next trips to the moon won't be to explore in the name of all of us, but to exploit for the benefit of the few of us. That's the big picture, though maybe we need to stand at a distance to see it clear -- on the moon, say, where talk is cheap and vision true.



Aegis J. Frumento
Stern Tannenbaum & Bell
Co-Head, Financial Markets Practice

380 Lexington Avenue
New York, NY 10168

Aegis Frumento is a partner of Stern Tannenbaum & Bell, and co-heads the firm's Financial Markets Practice. Mr. Frumento represents persons and businesses in all aspects of commercial, corporate and securities matters and dispute resolution (including trials and arbitrations); SEC and FINRA regulated firms and persons on regulatory compliance issues and in SEC and FINRA enforcement investigations and proceedings; and senior executives of public corporations personal securities law and corporate governance matters.  Mr. Frumento also represents clients in forming and registering broker-dealers and registered investment advisers, in developing compliance policies, procedures and controls, and in adopting proper disclosure documents. Those now include industry professionals looking to adapt blockchain technologies to finance and financial market enterprises.

Prior to joining the firm, Mr. Frumento was a managing director of Citigroup and Morgan Stanley, a partner and the head of the financial markets group of Duane Morris LLP, and the managing partner of Singer Frumento LLP.

He graduated from Harvard College in 1976 and New York University School of Law in 1979. Mr. Frumento is a frequent author and speaker on securities law issues, and is often quoted in the media on current securities law developments.

NOTE: The views expressed in this Guest Blog are those of the author and do not necessarily reflect those of Blog.