WEBVTT - Shark Tank's Steve Baxter: Inside Australia's Secret Defence Tech Boom 0:00:00.160 --> 0:00:02.360 Steve Baxter, Welcome to straight Talk, mate. Thanks for having 0:00:02.400 --> 0:00:04.560 me make so me asking you on the show has 0:00:04.559 --> 0:00:06.080 actually come off the back of you and I having 0:00:06.080 --> 0:00:09.239 a really interesting conversation, well maybe a month ago, a 0:00:09.280 --> 0:00:12.799 few weeks there anyway now about the defense sector and 0:00:12.840 --> 0:00:17.639 all that encapsulates lots of things, investors, technology, you know, 0:00:18.160 --> 0:00:21.599 defense capabilities, asking all the big questions about Australian and 0:00:21.680 --> 0:00:24.680 the rest of the world. But before I get into that, 0:00:25.239 --> 0:00:27.040 I wouldn't mind just having a little bit of a 0:00:27.080 --> 0:00:29.360 dig into your background, like as to you growing up, 0:00:29.360 --> 0:00:31.400 et cetera. You know where you grew up and what 0:00:31.560 --> 0:00:35.080 type person, because I noticed in the brief you spend 0:00:35.080 --> 0:00:37.440 a bit of time growing up with a guy called 0:00:37.440 --> 0:00:41.479 Bevern Slattery as a maid of mine and similar sort 0:00:41.479 --> 0:00:45.040 of entrepreneurial flare as you Bevan. He does school together. 0:00:45.159 --> 0:00:48.400 Mums are best friends? Are they my mum's past? But yeah, 0:00:48.400 --> 0:00:51.080 they were best friends. How do you describe that they 0:00:51.120 --> 0:00:55.480 are best friends? Yeah, we'll go with yeah, yeah. 0:00:55.480 --> 0:00:56.800 Your prawd coueens leading for a start. 0:00:56.960 --> 0:00:58.960 Yeah. I was born in clond Curry actually and then 0:00:59.000 --> 0:01:01.240 grew up in Emerald. My dad was in Queensland rail 0:01:01.720 --> 0:01:04.399 he went. Where the next promotion was, I suppose so 0:01:05.319 --> 0:01:09.839 Curry Emerald, Rockampton. Out of thirty six cousins armies and uncles, 0:01:09.880 --> 0:01:12.959 I'm the only one not born in Rockhampton. So it's 0:01:13.000 --> 0:01:14.920 a bit of a regional que the Central Queens. They 0:01:14.920 --> 0:01:16.680 have family, to say the least. And I was born 0:01:16.680 --> 0:01:18.759 in clon Curra. All amazing places. 0:01:18.880 --> 0:01:21.360 And you joined the army at at a young age. 0:01:21.040 --> 0:01:24.560 Sure that's a pretty outher thing, mind you. I guess 0:01:24.640 --> 0:01:27.040 up that way. Though there is army. There are army 0:01:27.080 --> 0:01:28.160 towns like towns, etcetera. 0:01:28.400 --> 0:01:30.399 There are, but that's not really impacting on that, to 0:01:30.440 --> 0:01:32.679 be honest. So that was a scheme at the time 0:01:33.319 --> 0:01:36.039 I joined in eighty seven, and within seven years that 0:01:36.080 --> 0:01:38.800 scheme had been gone. So it was an army apprentice 0:01:38.840 --> 0:01:40.440 scheme where like a recruit sort of fifteen and a 0:01:40.480 --> 0:01:44.440 half year olds and we went did three years, two 0:01:44.560 --> 0:01:47.040 or three years. My trade was three years in we're 0:01:47.440 --> 0:01:50.840 we were on good and that was it sort of fun. 0:01:50.960 --> 0:01:53.360 Oh so people asked if I enjoyed the Army. I 0:01:53.520 --> 0:01:55.600 enjoyed a lot more now I'm out to be honest 0:01:55.760 --> 0:01:58.680 just talking about it. So but yeah, I did that 0:01:58.720 --> 0:02:01.080 sign up for a fifteen years signed nine year contract 0:02:01.120 --> 0:02:03.680 when you're fifteen, which wow, yeah, well your parents up 0:02:03.720 --> 0:02:06.440 the co sign. So now as a father, I realized 0:02:06.480 --> 0:02:08.520 my mother was devastating. I didn't get I didn't understand 0:02:08.560 --> 0:02:11.160 it at the time. And now I have like mates 0:02:11.160 --> 0:02:13.080 with fifteen year old kids, and I think, oh, that's 0:02:13.280 --> 0:02:15.960 way too young, because it was your idea. 0:02:16.000 --> 0:02:16.360 I guess. 0:02:16.680 --> 0:02:18.400 Yeah, I was not doing what at school. I was 0:02:18.440 --> 0:02:20.360 just a mixed up kid, Pubert. It was just playing 0:02:20.440 --> 0:02:22.120 have it with my common sense, if you know what 0:02:22.160 --> 0:02:23.760 I mean. I was in the fights, that sort of stuff. 0:02:23.919 --> 0:02:26.400 And then so this was a pretty good opportunity, truthful, 0:02:26.600 --> 0:02:27.919 either out of the meat works when I Campton. 0:02:27.960 --> 0:02:30.320 To be quite blunt, yeah, so would you say it's 0:02:30.360 --> 0:02:33.680 like not much opportunity in those those days, in those environments. 0:02:34.000 --> 0:02:36.000 No, but even back then, but going working the mines 0:02:36.000 --> 0:02:37.640 were seen as like some sort of it was a 0:02:37.680 --> 0:02:39.160 failure in life. You had to go work with the 0:02:39.200 --> 0:02:41.919 ruins because you couldn't get another job. Now, oh my god, 0:02:42.360 --> 0:02:44.760 you're making bank in the minds, well then everybody. Yeah, 0:02:44.800 --> 0:02:46.560 so kids left school to go to meat works and 0:02:46.560 --> 0:02:48.400 they all get an apprenticeship, which then you end up 0:02:48.400 --> 0:02:49.440 in the mines essentially. 0:02:49.680 --> 0:02:52.480 So what happened after you left the army? 0:02:53.000 --> 0:02:55.959 Yeah, so I left the army in nine to early five, 0:02:56.160 --> 0:02:58.680 So a year before leaving I usually started a business 0:02:58.680 --> 0:03:01.960 from home, a dial upt in service sort of you 0:03:02.000 --> 0:03:05.200 put not as email home mate, and actually yeah actually 0:03:05.200 --> 0:03:06.760 I was E mail are quiet us actually in the end. 0:03:06.840 --> 0:03:08.840 So we started that ninety five and saw that in 0:03:08.840 --> 0:03:12.000 twenty ten, two thousand, saw that in two thousand. Excuse 0:03:12.040 --> 0:03:15.200 me in Adelaide. So back then there was I was 0:03:15.240 --> 0:03:17.480 the thirty cent local called tariff on the telephone call, 0:03:17.600 --> 0:03:20.520 so you could service a very large casement of people 0:03:20.520 --> 0:03:22.959 for not much money essentially, and so there was a 0:03:23.040 --> 0:03:26.480 very strong regional ICP. So there was if you know, 0:03:26.639 --> 0:03:29.040 Michael Malone out of iron It in Western Australia, for example, 0:03:29.520 --> 0:03:31.880 we owned Adelaide to a large degree. And then there 0:03:31.919 --> 0:03:34.320 was another business out of Melbourne and as email sort 0:03:34.320 --> 0:03:35.200 of rural East Coast. 0:03:35.200 --> 0:03:36.800 To be honest, I got you to do that though, 0:03:36.960 --> 0:03:39.360 I mean, like you, how were you think? Like I 0:03:39.360 --> 0:03:41.400 don't understand it, like your sort of you know X 0:03:41.520 --> 0:03:45.120 army guy apprentice blah blah blah, and then here you 0:03:45.160 --> 0:03:49.040 are thinking about it building a dial up business too. Yeah. 0:03:49.080 --> 0:03:51.440 Well I was a guide weapons technician essentially in the army. 0:03:51.520 --> 0:03:52.600 So back in the. 0:03:52.640 --> 0:03:55.240 Days guided weapons technician. Yeah, so what is that? 0:03:55.680 --> 0:03:58.760 So the I primarily worked on two weapons systems, A 0:03:58.800 --> 0:04:01.720 low level air defense missiles to shoot down aircraft, so 0:04:02.880 --> 0:04:06.640 an RBS seven in Rapier technically, so we looked after 0:04:06.640 --> 0:04:08.320 the guidance, the hydraulics, optics, the. 0:04:08.600 --> 0:04:10.480 Whole box and die guidances, comms. 0:04:11.120 --> 0:04:14.960 Guidance now is laser and all radar, right, So so 0:04:15.160 --> 0:04:17.080 on the on the the RBS seven it was a 0:04:17.120 --> 0:04:18.880 laser god it so it was a laser your point 0:04:18.880 --> 0:04:20.320 of a laser beam at the aircraft. The missileld to 0:04:20.360 --> 0:04:22.680 ride the beam to the aircraft and you know the 0:04:22.680 --> 0:04:24.279 operators had to say in this so go for the 0:04:24.279 --> 0:04:26.200 glass bits. So they'd like to put these things for 0:04:26.279 --> 0:04:28.120 the pilot's heads essentially, if you know what I mean. 0:04:28.200 --> 0:04:30.200 So they were very very accurate weapons to be honest, 0:04:31.360 --> 0:04:34.800 and so so technical background, and we used to go 0:04:34.800 --> 0:04:37.279 and exercise for you know, four weeks to four months, 0:04:38.000 --> 0:04:40.119 and back then, you know you couldn't take enough books 0:04:40.120 --> 0:04:42.479 in four months to not go because it's actually really boring. 0:04:42.680 --> 0:04:44.599 You go, you drive for three or four days. You 0:04:44.640 --> 0:04:47.200 dig a whole. Every few days someone will bring you 0:04:47.200 --> 0:04:49.200 something to repair, and then that's how it sort of goes. 0:04:49.240 --> 0:04:51.120 And it's really boring. So you used to take books, 0:04:51.320 --> 0:04:53.080 and you can only take so many books. So I 0:04:53.200 --> 0:04:55.320 enrolled in part time university, so I ended up getting 0:04:55.320 --> 0:04:58.560 exemptions for me not finishing school. Did part time Universe, 0:04:58.600 --> 0:05:00.920 which is a computing science in the end, and that 0:05:01.040 --> 0:05:04.839 got my really fired my passion for it. I hate 0:05:04.839 --> 0:05:09.480 the word it, but for computers. And then you know, 0:05:09.520 --> 0:05:11.760 I did this one subject where it was called Linux, 0:05:11.800 --> 0:05:13.880 which is a very proper or popularp brating system now, 0:05:14.520 --> 0:05:16.560 and then you know, I got to boot it up 0:05:16.560 --> 0:05:18.160 at home and plug some items and it went, holy 0:05:18.200 --> 0:05:20.200 do you could you could charge people to use this? 0:05:20.480 --> 0:05:22.440 It was just that sort of entrepreneurial brain far actually, 0:05:22.440 --> 0:05:25.360 Glenn Richards from Shark Tank cause entrepreneurial brain farts, which 0:05:25.360 --> 0:05:27.719 I think is a really good term. And then you know, 0:05:27.880 --> 0:05:31.000 you start it. It's almost a bit like Gerber's. If 0:05:31.000 --> 0:05:33.400 you've read the Myth by Gerber, he talks about that, 0:05:33.480 --> 0:05:36.080 you know, the accident for entrepreneur type thing. It was that, 0:05:36.279 --> 0:05:38.880 but we jumped through a window that was open into 0:05:38.880 --> 0:05:41.040 that Internet in the mid mid nineties, which is well 0:05:41.040 --> 0:05:44.160 probably the twenty fifth or thirtieth internet service provider in 0:05:44.160 --> 0:05:46.440 Australia at the time. Within the year that were twelve hundred. 0:05:47.200 --> 0:05:49.080 That gives you an idea how much it rammed up 0:05:49.120 --> 0:05:52.760 if you good time, alf Yeah we sold. We sold 0:05:53.279 --> 0:05:55.920 just prior to the dot com bust. So I was 0:05:55.920 --> 0:05:59.279 email requiring us and they got acquired by unit and 0:05:59.320 --> 0:06:01.160 halfway through that says you unit got a quiet baby, 0:06:01.240 --> 0:06:02.479 so I will come. So we're in the middle of 0:06:02.600 --> 0:06:05.320 three acquisitions as we're getting where we're getting purchased. For 0:06:05.680 --> 0:06:07.360 the time, it was good to five mill win. You 0:06:07.360 --> 0:06:09.000 know what, I made a bit almost five mil. That's 0:06:09.000 --> 0:06:10.919 a lot of money then yeah, yeah, big time A 0:06:10.920 --> 0:06:13.200 business partner then as well, So we were fifty five 0:06:13.240 --> 0:06:16.200 percent of that business. So mate Chris, he was it 0:06:16.240 --> 0:06:18.000 was forty five. It's still a good bunch of the him. 0:06:18.160 --> 0:06:21.080 But I guess where I'm going to is, why do 0:06:21.160 --> 0:06:24.920 you think you decided to build a fund that's going 0:06:24.920 --> 0:06:27.080 to invest in defense opportunity? 0:06:27.760 --> 0:06:29.880 In twenty sixteen, the Army asked me to get involved 0:06:29.880 --> 0:06:32.440 with their innovation program. I was a so exulgier boy 0:06:32.480 --> 0:06:34.600 made good at a public profile. That was two years 0:06:34.600 --> 0:06:36.960 on shark tanking at that point, literary pr job coming 0:06:36.960 --> 0:06:38.640 to camera, I get a picture with the general pattern 0:06:38.640 --> 0:06:40.800 on the head and they let me in the tent 0:06:40.880 --> 0:06:42.760 say to speak, and I just saw this amazing capability 0:06:42.760 --> 0:06:45.440 that was being created through non diluted grants out of government, 0:06:46.240 --> 0:06:48.640 which is incredible. It's like James Bond's weapons lab. I 0:06:48.640 --> 0:06:49.560 walked into. It was amazing. 0:06:49.720 --> 0:06:51.680 And then he walked into like an actual lab. 0:06:51.800 --> 0:06:53.880 No, it was. It was as a demodo. It was 0:06:53.920 --> 0:06:56.640 like a it was a display. Yeah, he's got Army 0:06:56.680 --> 0:06:59.640 Innovation Day was the name of the event. And they 0:06:59.680 --> 0:07:02.240 have a series of programs over the years, and I 0:07:02.279 --> 0:07:04.960 culminate in this in this display at the end type 0:07:05.000 --> 0:07:07.279 things a graduation display almost and I've walked in. I 0:07:07.279 --> 0:07:08.880 thought it was also. I thought it was all classified, 0:07:09.120 --> 0:07:10.680 but that we'll get around taking pictures and put on 0:07:10.720 --> 0:07:13.240 LinkedIn and I was like, oh, this is interesting. So 0:07:13.280 --> 0:07:16.360 that's where the other Where are the other investors? And 0:07:16.440 --> 0:07:20.080 they said, oh, we don't trust investors, but while I'm here, 0:07:20.800 --> 0:07:22.760 we trust you, And I said, you just meant me. 0:07:23.880 --> 0:07:26.320 So So I worked with Army. I tried to work 0:07:26.360 --> 0:07:28.800 with the army and then defense about the role private 0:07:28.840 --> 0:07:31.720 capital complaining early stage innovation. So I saw this amazing 0:07:31.720 --> 0:07:33.480 stuff being credited and just falling into the valley of 0:07:33.520 --> 0:07:35.720 death for move that concept of value of death. Yeah, 0:07:35.880 --> 0:07:37.840 but in defense to chasm and nothing gets out of 0:07:37.840 --> 0:07:39.240 the chasm. So these things just die. 0:07:39.400 --> 0:07:39.880 Yeah. 0:07:39.960 --> 0:07:41.680 So I thought, well, I know a better way to 0:07:41.680 --> 0:07:44.160 do this, and I know there's a larger customer, which 0:07:44.200 --> 0:07:46.960 is the US. So the US Department of War at 0:07:47.000 --> 0:07:49.360 that stage were spending about eight hundred billion dollars a 0:07:49.400 --> 0:07:52.320 year US on defense. We're spending about thirty billion US 0:07:52.360 --> 0:07:55.320 dollars on defense at that point, and so there's a 0:07:55.360 --> 0:07:58.200 there's an opportunity to take this great capability, find that 0:07:58.320 --> 0:08:01.600 exquisite customer user market budget long in the US, get 0:08:01.600 --> 0:08:04.360 in that market, get the high revenues, get the multiple 0:08:04.440 --> 0:08:07.880 uplift because they're very undervalued in Australia. So the real 0:08:07.880 --> 0:08:11.200 opportunity is the buyseld equation. These things are that unloved. 0:08:12.200 --> 0:08:14.480 They're very cheap to buy, to be quite blue. So 0:08:14.560 --> 0:08:16.200 our role is to get them into the US, get 0:08:16.240 --> 0:08:17.800 them revenue, and get them get them rated as the 0:08:17.840 --> 0:08:20.120 US company to go from two or three times revenue 0:08:20.200 --> 0:08:23.440 multiple for example, to a thirty two hundred times revenue multiple. 0:08:23.680 --> 0:08:26.000 Make you just explained to you then, so if they so, 0:08:26.840 --> 0:08:28.480 let's just go through a little unpacking a little bit 0:08:28.520 --> 0:08:31.320 if you don't mind. So when you say on the 0:08:31.320 --> 0:08:33.200 buy side, you talk about the US as a buyer, 0:08:33.240 --> 0:08:36.760 potentially I spying the equity here in Australia, you buy 0:08:36.800 --> 0:08:38.280 the equity hearing so you can get. 0:08:38.520 --> 0:08:42.120 When we invest in the startup here. Yep, it's irrationally unloved. 0:08:42.480 --> 0:08:44.960 So for a variety of reasons, defense assets here rational unloved. 0:08:45.040 --> 0:08:47.360 The perception of the market is this one customer being 0:08:47.360 --> 0:08:49.439 the austrain Defense Force, right, And that's not true. There's 0:08:49.480 --> 0:08:52.000 thirty three customers we can sell to in Australia. The 0:08:52.080 --> 0:08:54.920 thirty three Allied customers we can sell to without being 0:08:55.000 --> 0:08:57.600 arrested as a gun runner. So we have Defense Corporation, right, 0:08:57.640 --> 0:08:58.959 and each one of those as an army in ad 0:08:59.080 --> 0:09:02.080 Air Force Blessed America. They've got Marines, Coast Guard, Space 0:09:02.120 --> 0:09:04.640 Force as well. Each one of those has at least 0:09:04.679 --> 0:09:08.079 one unit that can buy off tender. You knock on 0:09:08.120 --> 0:09:09.800 their door and you can sell them and stuff. 0:09:09.559 --> 0:09:10.800 Through the door without a tender. 0:09:10.920 --> 0:09:13.520 Yeah, it's very I'm being a bit flipping there. It's 0:09:13.520 --> 0:09:18.200 a very low overhead process. Yeah, right, typically uncompetitive process, 0:09:19.000 --> 0:09:21.679 which is good. So in fact, in the US Department 0:09:21.720 --> 0:09:23.920 of War there are two to seventy five organizations that 0:09:23.960 --> 0:09:26.599 have the ability to do that, right, and budgets and 0:09:26.679 --> 0:09:30.120 budgets yep. So the thing about the US Department of 0:09:30.160 --> 0:09:31.680 War is that they don't buy the best technology. They 0:09:31.720 --> 0:09:34.040 buy the best technology they can get on contract. So 0:09:34.120 --> 0:09:35.720 you might have the best tech, but if you knocking 0:09:35.720 --> 0:09:37.280 on the wrong door and the person who can't spend 0:09:37.800 --> 0:09:40.240 you got it wrong. So the opportunity there is to 0:09:40.320 --> 0:09:42.760 buy the equity in Australia to invest in the startups 0:09:42.800 --> 0:09:45.800 here and then to transition them into the US. We 0:09:46.080 --> 0:09:47.760 will not invest in the startup here that has a 0:09:47.840 --> 0:09:51.280 material exposure to Theustralian Defense Force, Austraini defense forces a 0:09:51.360 --> 0:09:55.400 risk to its supplies. Really my word, why you've seen 0:09:55.440 --> 0:09:58.480 the headlines about the bugget that the stuff ups with 0:09:58.600 --> 0:10:01.440 contracts and bringing capability. I mean, I'm an exultier. If 0:10:01.480 --> 0:10:03.040 they need a meit to carry a offle again, I'd 0:10:03.040 --> 0:10:05.120 do it tomorrow. That need to be pretty desperate. My 0:10:05.200 --> 0:10:09.520 needs are pretty bad, to be honest, But it's it's 0:10:09.720 --> 0:10:13.080 just in all my investing careers about finding finding an 0:10:13.120 --> 0:10:15.640 investment and getting him into a bigger market. Great, you're 0:10:15.640 --> 0:10:17.840 you're the expert at this. I'm not. That's awesome. Now 0:10:17.920 --> 0:10:19.439 let's get you the courage and the capital get in 0:10:19.480 --> 0:10:21.480 a bigger market. So it's no difference in defense to 0:10:21.760 --> 0:10:24.120 some degree, to be honest. And the US is a 0:10:24.400 --> 0:10:26.040 it's not an easy market, but it's a damn so 0:10:26.200 --> 0:10:29.000 easier than Australia. No government sales easy, and this is 0:10:29.080 --> 0:10:32.120 still a government sale. So but you've got a new 0:10:32.200 --> 0:10:34.760 US administration there and the Secretary of War that you 0:10:34.920 --> 0:10:37.800 young Pete Hess's a young man in a hurry, and 0:10:37.920 --> 0:10:39.600 I really hope he's just a young man in a hurry. 0:10:39.640 --> 0:10:41.280 He's not staring at a piece of intelligence and he's 0:10:41.320 --> 0:10:42.880 got he's got to do what he's doing because he's 0:10:42.960 --> 0:10:45.360 being flagrant with capital over there. They just are trying 0:10:45.360 --> 0:10:47.199 to bring this new capability in and they're happy to 0:10:47.280 --> 0:10:50.439 spend like drunken saless to do it. I said, I 0:10:50.480 --> 0:10:54.160 hope it's you know, I fear what's coming. 0:10:54.200 --> 0:10:56.520 You hope it's not reckless. You just hope it's like purposeful. 0:10:57.400 --> 0:10:59.760 No, I think I hope he's I hope he's reckless 0:11:00.280 --> 0:11:02.040 to be honest, because you can keep selling to it. 0:11:02.280 --> 0:11:02.480 Yeah. 0:11:02.520 --> 0:11:04.280 No, because because he's not reck close, it means he's 0:11:04.280 --> 0:11:06.280 looking the piece of intelligence, which means confidences about to 0:11:06.360 --> 0:11:09.120 kick off. There's there's there's there's a there's a background. 0:11:09.160 --> 0:11:11.720 There's a background macro here, which is the demographic issues, 0:11:11.760 --> 0:11:14.079 rend the jew geo political issues around the world, and 0:11:14.200 --> 0:11:17.839 demographic to be honest, you know, exemplified by what's happened 0:11:17.840 --> 0:11:20.000 in Ukraine, in the Middle East and what China is 0:11:20.360 --> 0:11:23.679 threaten to do with Taiwan, to be quite blunt, that's 0:11:23.720 --> 0:11:28.240 all the background. And so the US is arming, rearming 0:11:28.280 --> 0:11:31.839 like crazy. And I started this back in twenty twenty three. 0:11:33.040 --> 0:11:36.880 The Allied the Allied cumulative defense expendites was one point 0:11:36.920 --> 0:11:39.640 two trillion new stormers. This year, it's one point seven 0:11:39.679 --> 0:11:42.079 next year, it's one point nine trillion. Well, and none 0:11:42.080 --> 0:11:43.320 of that's gone to an extra soldier. 0:11:43.960 --> 0:11:45.400 That's all gone to staffing. 0:11:45.679 --> 0:11:49.520 It's not starfing your basis, it's it's it's technology changing 0:11:49.559 --> 0:11:52.040 out as well. So in the in the in the press, now, 0:11:52.200 --> 0:11:54.120 in the popular press. Now you see a lot about 0:11:54.160 --> 0:11:58.160 the drone, the expensive missile versus the cheap drone. It's 0:11:58.200 --> 0:12:00.120 a lot more nuanced than that. But that's essentially so 0:12:00.160 --> 0:12:02.839 that they're changing out arsenals and what I call the 0:12:03.280 --> 0:12:06.360 articles for conflict. They're changing those out into the more 0:12:06.400 --> 0:12:08.959 commodity stuff the people we invest in essentially, so that's 0:12:09.800 --> 0:12:12.320 all that uplift goes into things that we can put, 0:12:12.600 --> 0:12:14.840 we can allocate capital, and the companies that can exploit 0:12:14.920 --> 0:12:16.080 that increase in budget. 0:12:16.440 --> 0:12:20.240 So it is therefore in the US is a big 0:12:20.360 --> 0:12:24.400 retooling exercise, very much retooling the manufacturing or whatever it 0:12:24.440 --> 0:12:25.240 is that they're going to use. 0:12:25.440 --> 0:12:27.160 You look at the start of the year, just provider 0:12:27.200 --> 0:12:29.679 prior learning tick war. They kicked off on a m 0:12:29.720 --> 0:12:32.079 prior to that. So Secretary of War Pete eggs that 0:12:32.120 --> 0:12:34.439 he had this. He's a showman about this. It was 0:12:34.600 --> 0:12:36.439 called the arsenal of democracy too. What he called it. 0:12:37.320 --> 0:12:40.080 Eight out of the ten companies a visitor didn't exist 0:12:40.160 --> 0:12:43.000 twenty five years ago. And if you because SpaceX is 0:12:43.040 --> 0:12:45.400 twenty three years old, exclude those seven out of ten 0:12:45.440 --> 0:12:48.920 didn't exist ten years ago. So he's making a statement there. 0:12:49.040 --> 0:12:51.160 He doesn't like the old primes. He's really tired of 0:12:51.200 --> 0:12:53.439 being ripped off and the US generally are they understand 0:12:53.520 --> 0:12:56.640 their defense base was just fat, dumb and happy, if 0:12:56.640 --> 0:12:58.800 you know what I mean. And spending yeah so now, 0:12:58.880 --> 0:13:01.880 but now they're actually spending with smaller companies, more agile companies, 0:13:01.960 --> 0:13:05.600 startups let's call them near primes are sometimes called as well. 0:13:06.280 --> 0:13:08.360 And they're getting results. To be honest, there they are. 0:13:08.640 --> 0:13:11.120 They are changing, they're changing how this all, how this 0:13:11.200 --> 0:13:11.640 all works? 0:13:12.000 --> 0:13:13.400 How how has war changed? 0:13:15.400 --> 0:13:17.760 It's well, it's been to change a lot of ways. 0:13:17.760 --> 0:13:23.000 I suppose the and it's been the once again, I'll 0:13:23.000 --> 0:13:25.240 ever characterize it's the drone, but it's it's unmans systems 0:13:25.280 --> 0:13:29.439 and men platforms really really cheap and inexpensive. I'll like 0:13:29.559 --> 0:13:31.480 really cheap and expensive things. Not because I'm a tired ass, 0:13:31.520 --> 0:13:33.960 to be quite honest, right, but because if it's cheap, 0:13:34.000 --> 0:13:35.880 you can give it to a corporally use. If it's expensive, 0:13:35.920 --> 0:13:37.520 you give it to a kernel to use, and that 0:13:37.640 --> 0:13:39.600 corporates more like and pullice through drive out and fix 0:13:39.640 --> 0:13:41.600 it if it's broken, or to if it's not working right, 0:13:41.640 --> 0:13:45.280 to modify it so that the innovation cycles you get 0:13:45.320 --> 0:13:52.120 through commodity war goods will speed up development innovation a lot, so, 0:13:52.320 --> 0:13:54.599 and there's there's lots of new modern business techniques. So 0:13:54.640 --> 0:13:57.160 the biggest change in war is that the new modern 0:13:57.240 --> 0:14:01.040 Internet marketing techniques have actually come into equip procurement. So 0:14:01.120 --> 0:14:03.360 there's an amazing book it's about twenty three years old 0:14:03.440 --> 0:14:05.520 called the Clue Train Manifesto. 0:14:05.320 --> 0:14:07.079 Their Clue Train Minifestosto. 0:14:07.160 --> 0:14:09.000 Yeah, the clue trains leaving the station, get on board. 0:14:09.040 --> 0:14:12.199 It was the late nineties. It was essentially when organizations 0:14:12.240 --> 0:14:14.280 were resisting get on the Internet because their customers might 0:14:14.320 --> 0:14:16.839 say bad things about them. And the whole part of 0:14:16.880 --> 0:14:19.360 the thesis of the book is, well, they'll say bad 0:14:19.400 --> 0:14:21.400 things about you whether you're on that marketplace with them 0:14:21.480 --> 0:14:23.240 or not. So the internet's a marketplace of ideas. If 0:14:23.240 --> 0:14:25.480 you're not there, they're still talking about you. You just 0:14:25.760 --> 0:14:28.520 have not have no ability to absorb that feedback. So 0:14:28.680 --> 0:14:30.480 get on there, get on the clue train, essentially. But 0:14:30.560 --> 0:14:32.760 then it goes into the whole the modern mechanisms around 0:14:32.800 --> 0:14:35.280 gamification and rewards and that sort of stuff at the 0:14:35.320 --> 0:14:40.800 same time, and so the in one example that the 0:14:40.920 --> 0:14:43.880 Ukrainian Ministry Defense, they have an innovation and they're obviously 0:14:44.000 --> 0:14:47.320 threat that war with the rushiappoinment. The Ministry of Defense 0:14:47.400 --> 0:14:49.720 have their innovation arms called Brave One, so Brave number 0:14:49.760 --> 0:14:54.040 one essentially, and so you can approach them and get 0:14:54.120 --> 0:14:54.720 your goods. 0:14:54.520 --> 0:14:56.480 Into the Indo, the Aman civilian or anybody. 0:14:56.520 --> 0:14:58.200 Yeah, anyone can. Yeah, yeah, I don't want anyone in 0:14:58.200 --> 0:15:01.080 the old will can. Yeah. And then they created something 0:15:01.120 --> 0:15:03.360 called the Brave one marketplace, so it's like it's like 0:15:03.480 --> 0:15:06.040 t move for war goods. So you put your stuff 0:15:06.080 --> 0:15:10.440 on there. And then a Ukrainian, a soldier in a 0:15:10.480 --> 0:15:12.000 trench with mud and his boots, gets to his phone 0:15:12.040 --> 0:15:13.840 and goes, I need that sort of drone. He's an 0:15:13.880 --> 0:15:15.920 allocated currency from the Ukrainian center. 0:15:15.840 --> 0:15:19.320 That they can make this sort of democratic redistributed the 0:15:19.360 --> 0:15:19.920 decision making. 0:15:20.120 --> 0:15:22.280 Yeah, yep, and I can get it. He gets delivered 0:15:22.320 --> 0:15:24.400 to his trench, he gets to use it. He can 0:15:24.440 --> 0:15:27.360 give staff feedbacks, he can give one to five star feedback. No, no, 0:15:27.640 --> 0:15:29.520 this is the whole thing. No one wants one starff feedback. Right, 0:15:29.560 --> 0:15:30.880 If you launched this thing in a Russian and it 0:15:30.920 --> 0:15:33.760 doesn't work, that's bad. If proba be angrysoken to give 0:15:33.760 --> 0:15:35.800 one staff feedback, what you do is you bring up 0:15:35.800 --> 0:15:38.600 the supply and say, mate, this didn't work right, and 0:15:38.680 --> 0:15:41.240 it goes, well, what to Leo's people, give me a 0:15:41.320 --> 0:15:43.320 bed with you, I'll fix it and send your ten more. Yeah, 0:15:43.520 --> 0:15:47.160 And so that all of a sudden that that cycle 0:15:47.200 --> 0:15:50.520 in the West takes years and that Ukraine takes weeks. 0:15:51.280 --> 0:15:54.560 So it actually shortened these cycles out. But they've added 0:15:54.920 --> 0:15:57.880 one other aspect in which is quite macarb but fascinating 0:15:57.920 --> 0:15:59.400 at the same time. So not only can you use 0:15:59.440 --> 0:16:02.680 central hour added currency from the from the bank, but 0:16:02.960 --> 0:16:04.960 you have in game currency. So if you actually can 0:16:05.120 --> 0:16:07.920 submit proof you destroyed a certain piece of Russian equipment 0:16:07.960 --> 0:16:10.680 for example, you get allocated You get allocated in game points, 0:16:11.160 --> 0:16:13.800 so Russian tank's worth forty and artillery piece is worth 0:16:13.840 --> 0:16:16.560 sixty and are as a leader board and so every 0:16:16.600 --> 0:16:18.560 week they publish a leader board results and the units 0:16:18.600 --> 0:16:21.040 have competition to see how much Russian equipment they can destroy. 0:16:21.960 --> 0:16:24.560 You and take those intend then take those points, go 0:16:24.720 --> 0:16:26.800 back to the store. Instead of using money, you can 0:16:26.880 --> 0:16:30.280 use points to buy more drones, more radars, more intendors. 0:16:30.320 --> 0:16:33.480 What if you actually need they're their credits, their credits. Yeah, 0:16:33.560 --> 0:16:35.600 and they actually they actually did an incentive test. So 0:16:35.640 --> 0:16:39.000 they actually changed the score for a Russian KA, so 0:16:39.120 --> 0:16:42.360 actually killing a Russian soldier from two to six in 0:16:42.440 --> 0:16:45.800 one week, they doubled the KA account. Wow, so InnoCentive 0:16:45.800 --> 0:16:50.880 an outcome, right, So Barry mccabb fascinating. The US are 0:16:50.920 --> 0:16:53.800 trying to most Western militaries are implementing that. They've actually 0:16:53.840 --> 0:16:56.680 seen what that does, just shortening that innovation cycle down. 0:16:57.360 --> 0:17:01.400 So that's probably the biggest innovation in military logistics since 0:17:01.440 --> 0:17:02.680 the standardization of rifle. 0:17:03.320 --> 0:17:06.320 Is that, like in terms of changes the way wars 0:17:06.440 --> 0:17:11.960 been waged? Is that about making your players, your team 0:17:12.840 --> 0:17:14.719 be more intense in terms of what they do day 0:17:14.720 --> 0:17:18.000 to day, thinking intense, physically intense, intense and every aspect. 0:17:18.160 --> 0:17:21.040 So you just sitting there being like a like an 0:17:21.080 --> 0:17:22.159 old school soldier. 0:17:22.480 --> 0:17:25.560 Look, I think the driver is the desire for the 0:17:25.600 --> 0:17:27.760 soldier to go home end of the day, so that 0:17:27.880 --> 0:17:29.719 they face a very extontential every day. It's a very 0:17:29.760 --> 0:17:33.200 existential problem they face. Yeah, so everything everything they do 0:17:33.320 --> 0:17:36.560