We have here a perfect example, in an area that I've noted previously:

During the whole time I was there [at the San Francisco Chronicle] I constantly pleaded with the powers that be to do the online version of the classifieds right, the way it could be done with all the power of the web. At that time, 1995, craigslist was still a gleam in Craig Newmark's eye. The Chronicle owned the classified space for the Bay Area. I created a classified section on sfgate, but it was just an online version of what was in the newspaper, no more, no less. I argued that we should add interactivity, let people purchase ads online cheaply, have pictures and links, make sfgate.com the goto place for everybody in the bay area to buy, sell, rent, and know everything.

But this was utterly impossible. It was a question of turf. There was a large department that sold and processed classified ads. It was a major source of revenue, employed a lot of people, and had a big budget. No way they were going to yield that turf to a bunch of weirdos over at the six person, unprofitable, experimental web site crew. Besides, online ads would cannabalize the whole business. Even as time went on, and craigslist grew and the sfgate website traffic and personnel grew, there was never any possibility of going up against the entrenched bureaucracy. Newspapers are the most old-fashioned organizations left alive in the marketplace. Even book publishing companies are more with it.

They couldn't innovate themselves, because it would have wrecked an existing profit center, but by avoiding it, they let someone else do it to them instead.

This is the fix that NASA is in as well. They can't innovate, because the politicians (and their own internal fiefdoms and rice-bowl sitters) won't let them shed the jobs in Houston and Huntsville and at the Cape that would be destroyed. So instead, they'll be put out of business in a few years.

Of course, given that (unlike newspapers) they're not a business, it's possible that they'll continue to get their multi-billion dollar stipend from Washington, but it's hard to believe that even they will be able to continue to persuasively justify their hyperexpensive elitist activities in an era of cheap private access to space.

Rand, I was going to completely agree with you, but then I reread the post and found a serious error. This is not the fix that NASA is in:

They couldn't innovate themselves, because it would have wrecked an existing profit center, but by avoiding it, they let someone else do it to them instead.

Revenue stream maybe, but I'm not sure about profit.

It's profit in a government sense.

It's real profit for the contractors that receive NASA funds.

Christiansen observed in his book that when threatened, entrenched businesses retreat into the higher performance product area. If we suppose that the same mechanism acts here, we may expect NASA to retreat higher and higher as the private spaceflight develops. You're playing in LEO with an inflatable? Bah, we are on the Moon. Now you're building a Budget Suites at the Moon? We are at the Mars! And Jupiter! So there! Keep paying us to make "fundamental science"! The "stipend" you mentioned is going to continue way past the arrival of private spaceflight.

Also, I do not put it past NASA and the old aerospace to pull legislative strings to stiff new entrants (a-la the music and movie industry), once they feel sufficiently threatened. Heck, if I were a Boeing's CEO, I'd move a few steps further.

Craig's List hasn't put NYTimes and WSJ out of business yet. Let's wait for alt.space to have $16 billion in annual revenues before we announce old space dead. IBM still makes money on main frames 20 years after the PC revolution.

The point is not that it's dead, Sam, but that it's a dead man walking. It will take it a while to die.

And the IBM analogy is severely flawed, in that the mainframes were commercial, and provided value for their willing customers, and continue to do so (though many of their functions have been superceded by minis and micros). NASA's manned space program is an historical accident, and ultimately unsustainable politically in its current form.