WEBVTT - Lessons From the Russia-Ukraine War 0:00:02.440 --> 0:00:07.040 You're listening to Asia Centric from Globerg Intelligence, the podcast 0:00:07.080 --> 0:00:10.320 that pulls back the curtain non global business so you 0:00:10.360 --> 0:00:14.560 can invest better across the Pacific rim. I'm Tom Corbett 0:00:14.560 --> 0:00:15.680 in Hong Kong. 0:00:15.600 --> 0:00:19.360 And I'm John Lee. The Russia Ukraine war is forcing 0:00:19.400 --> 0:00:22.759 governments to rethink their conceptions of war, the role of 0:00:22.800 --> 0:00:24.720 technology and military spending. 0:00:24.960 --> 0:00:28.680 The rise of Asia's economic prosperity this century has also 0:00:28.800 --> 0:00:32.280 been accompanied by a large build up in defense spending 0:00:32.360 --> 0:00:33.400 across the region. 0:00:33.760 --> 0:00:38.120 How will technology and artificial intelligence reshape the global balance 0:00:38.159 --> 0:00:41.479 of power? Who stands to win or lose? And can 0:00:41.560 --> 0:00:44.400 the US and China make the hard choices to keep 0:00:44.440 --> 0:00:47.080 growth alive and keep global business prosperous. 0:00:47.560 --> 0:00:51.240 I think what has changed, especially looking at Russia's invasion 0:00:51.280 --> 0:00:56.480 of Ukraine, is that that idea that wars will be short, bloodless, 0:00:56.840 --> 0:00:58.680 clean has evaporated. 0:00:59.320 --> 0:01:03.400 Let's bring in Kevin Brand, aerospace and defense analyst with 0:01:03.480 --> 0:01:06.480 Bloomberg Intelligence. He joins us from Washington. 0:01:06.680 --> 0:01:09.759 Kevin, Welcome, Thanks Tom, John, Pleasure to be with you. 0:01:10.400 --> 0:01:13.520 Hi, Kevin. Are we in a global arms race? Everywhere? 0:01:13.560 --> 0:01:17.840 I read countries like Japan, Korea, Australia, China, Poland are 0:01:17.840 --> 0:01:19.720 all increasing their defense budgets. 0:01:20.160 --> 0:01:23.720 Yeah, great question. I think the answer is to some degree, yes. Now, 0:01:23.720 --> 0:01:27.000 I wouldn't characterize that as potentially an arms race, but 0:01:27.120 --> 0:01:30.160 the investment that you're seeing sort of across the board 0:01:30.160 --> 0:01:32.680 builth in Europe now and in Asia and to a lesser 0:01:32.720 --> 0:01:36.040 extent in parts of Latin America is definitely been spurred 0:01:36.080 --> 0:01:39.320 by global events, not the least of which has been 0:01:39.360 --> 0:01:42.039 the Russia's invasion of Ukraine, both in twenty fourteen in 0:01:42.040 --> 0:01:45.480 the most recent invasion that sort of threw off the 0:01:45.560 --> 0:01:50.600 veil of wars of aggression in the modern era are impossible, 0:01:50.920 --> 0:01:53.640 and so that has kind of regalvanized people needing to 0:01:53.680 --> 0:01:56.360 spend money on their defense infrastructure and be able to 0:01:56.400 --> 0:01:57.400 protect their own borders. 0:01:58.120 --> 0:02:01.040 And which countries are seeing the biggest increase in military 0:02:01.080 --> 0:02:01.720 expend each other? 0:02:02.840 --> 0:02:05.240 Yeah, well, right now, the biggest jump is in Europe 0:02:05.320 --> 0:02:07.560 as they're starting to move back towards their two percent 0:02:07.600 --> 0:02:11.399 pledge of GDP for NATO defense spending. So that's probably 0:02:11.440 --> 0:02:13.720 what's in the lead right now based on current events. 0:02:13.960 --> 0:02:16.000 But historically, what I would say over the last ten 0:02:16.120 --> 0:02:19.200 or so years, really since Secretary Clinton went to Shangrila 0:02:19.280 --> 0:02:21.600 in about the two thousand and eleven time frame and 0:02:21.639 --> 0:02:24.959 announced the US pivot to Asia. You've seen Asian defense 0:02:25.000 --> 0:02:27.600 spending really rise at double digits if you look at 0:02:27.680 --> 0:02:31.240 China specifically in East Asia up seventy two percent really 0:02:31.280 --> 0:02:34.919 since about twenty and eleven, so massive defense spending. You're 0:02:34.919 --> 0:02:38.080 seeing the same thing in Japan right now, in Korea, 0:02:38.320 --> 0:02:43.000 to a lesser extent, in Thailand, Indonesia, in parts of Singapore. 0:02:43.400 --> 0:02:45.520 And what do you think explains that, Kevin? Is it 0:02:45.560 --> 0:02:47.720 that we're just in a different world now? Is it 0:02:47.760 --> 0:02:52.360 that we've got one superpower trying to hold its ground 0:02:52.400 --> 0:02:55.800 while another one slowly emerges or is it more complex 0:02:55.840 --> 0:02:56.200 than that? 0:02:57.040 --> 0:02:59.760 No, I think that's exactly it. If you really look 0:02:59.800 --> 0:03:02.400 at what happened since the demise of the Soviet Union 0:03:02.480 --> 0:03:04.320 sort of the nineteen ninety one time frame, where we 0:03:04.360 --> 0:03:07.840 had a unipolar world very very quickly, that security environment 0:03:07.919 --> 0:03:10.280 enabled really the Asian countries we used to refer to 0:03:10.320 --> 0:03:13.639 them as the Asian Tigers, right, Their economies just really exploded, 0:03:14.639 --> 0:03:18.240 giving birth to middle classes, upper income that allowed people 0:03:18.320 --> 0:03:20.800 to spend on defense. But really what that did is 0:03:20.840 --> 0:03:23.639 as those economic ties sort of became more and more robust, 0:03:24.000 --> 0:03:27.280 and you had in large increases in trade. There was 0:03:27.320 --> 0:03:29.840 a natural tendency that those countries who were benefiting from 0:03:29.840 --> 0:03:32.239 those trade wanted to be able to secure those trade lanes. 0:03:32.760 --> 0:03:35.880 So China's rise is a perfect example of that expanding 0:03:35.920 --> 0:03:39.640 of their military to secure their own trade and relationships, 0:03:39.680 --> 0:03:42.160 to be able to provide for their own defense. But 0:03:42.280 --> 0:03:44.600 the second and the biggest trend I think there is 0:03:45.160 --> 0:03:47.120 as the rise of China came up, as they became 0:03:47.160 --> 0:03:50.520 a little bit more assertive in the region, that tension 0:03:50.960 --> 0:03:54.680 of a rising power meeting and established power has led 0:03:54.800 --> 0:03:56.720 the rest of Asia to sort of hedge their bets. 0:03:57.120 --> 0:03:58.960 They don't want to have to pick a side between 0:03:58.960 --> 0:04:01.640 the United States and China. China's going to remain probably 0:04:01.640 --> 0:04:05.000 their number one economic trading partner, but from a security perspective, 0:04:05.800 --> 0:04:08.240 the United States is sort of that guarantee of security, 0:04:08.640 --> 0:04:11.160 but neither country wants to pick a side. 0:04:11.720 --> 0:04:15.200 And how much more can military expenditure go for these countries. 0:04:16.160 --> 0:04:20.080 There is a large draw especially with this uncertainty sort 0:04:20.080 --> 0:04:22.560 of in the global economic environment where there's going to 0:04:22.560 --> 0:04:25.200 be a recession next year in the United States or 0:04:25.200 --> 0:04:27.719 in Europe. That sort of drives the rest of the 0:04:27.800 --> 0:04:31.120 globe into a recessionary period. That could put a lot 0:04:31.120 --> 0:04:34.599 of pressures on discretionary spending in these countries and social programs, 0:04:35.720 --> 0:04:37.520 especially in China as you look at sort of the 0:04:37.520 --> 0:04:40.400 aging of the population results the legacies of the one 0:04:40.480 --> 0:04:44.520 child policy, having to pay for parents, the evaporation sort 0:04:44.520 --> 0:04:47.200 of decline of the housing bubble which hasn't burst yet 0:04:47.200 --> 0:04:51.360 but is in difficult straits. That's going to pressurize in 0:04:51.440 --> 0:04:55.080 lots of places the available money for defense. My best 0:04:55.120 --> 0:04:58.440 guess looking at sort of the trend lines is places 0:04:58.480 --> 0:05:03.279 like Thailand, Japan, Korea, maybe Indonesian Philippines. To a lesser extent, 0:05:03.400 --> 0:05:05.640 you could see growth at around the six percent mark, 0:05:05.680 --> 0:05:08.440 above the rate of inflation. But everywhere else I think 0:05:08.480 --> 0:05:10.200 you're going to see that sort of moderate into the 0:05:10.240 --> 0:05:13.440 two to three percent range, which, if inflation remains high globally, 0:05:13.760 --> 0:05:17.080 will actually be a net decline in global spending per GDP. 0:05:17.880 --> 0:05:20.280 Kevin, let's move to the US. We've been hearing a 0:05:20.279 --> 0:05:22.880 lot about this debt ceiling and the issues it seems 0:05:22.880 --> 0:05:26.920 to crop up every year. Is this impacting the increase 0:05:27.040 --> 0:05:29.279 in potential US spending on defense? 0:05:30.440 --> 0:05:33.599 It is, But more importantly, it throws into this perpetual 0:05:33.640 --> 0:05:37.920 conversation about can we pass a National Defense authorization on time? 0:05:37.960 --> 0:05:41.200 Can we pass the defense budget on time? Debt ceiling aside. 0:05:41.240 --> 0:05:42.880 Sort of a larger thing that tends to be at 0:05:42.920 --> 0:05:46.919 play is consistently funding defense so that the defense industrial base, 0:05:47.279 --> 0:05:50.359 those industries and contractors that really supply the training, the 0:05:50.400 --> 0:05:53.880 equipment that the UNUIS military relies upon, has a steady 0:05:53.880 --> 0:05:56.280 demand sigle, so they can actually forecast for what they 0:05:56.320 --> 0:05:59.160 need to spend, as we're seeing play out in Ukraine 0:05:59.240 --> 0:06:01.480 right now. If you just look at the amount of 0:06:01.600 --> 0:06:05.200 munitions that they're you really can't surge your industrial base 0:06:05.240 --> 0:06:07.320 in time of war. And if you can't give them 0:06:07.360 --> 0:06:10.880 a predictive demand, they can't invest for the future to 0:06:10.920 --> 0:06:13.359 have that supply base where you need it to be. 0:06:14.720 --> 0:06:18.839 Kevin Brand Back during the Reagan era, President Reagan pretty 0:06:18.880 --> 0:06:21.839 much gave the Defense Department everything it asked for, or 0:06:21.880 --> 0:06:24.920 at least pretty close. We are in a much different 0:06:25.120 --> 0:06:28.880 era now when it comes to the cost of maintaining 0:06:28.880 --> 0:06:33.279 our defense capabilities technologically and otherwise. How do you see 0:06:33.480 --> 0:06:36.600 those higher costs? I assume they are higher costs now. 0:06:37.480 --> 0:06:41.880 Relating to the nation's ability to fund them. So I 0:06:41.880 --> 0:06:44.640 think there's two sort of macro trends. One John alluded 0:06:44.640 --> 0:06:47.239 to earlier with the debt ceiling. We continue to borrow, 0:06:47.279 --> 0:06:50.080 We continue to spend above the revenues that the United 0:06:50.120 --> 0:06:53.880 States brings in. That has two large implications. One is 0:06:54.160 --> 0:06:57.160 the size of the discretionary budget in the United States 0:06:57.160 --> 0:07:00.240 continues to shrink as we have to fund sort of 0:07:00.240 --> 0:07:04.640 mandatory spending social Security, Medicare, and service the debt. So 0:07:04.760 --> 0:07:07.159 as the debt takes a larger and larger chunk of 0:07:07.279 --> 0:07:10.560 the national budget, that's going to squeeze discretionary spending, which 0:07:10.600 --> 0:07:14.880 includes defense. The second thing is the United States pensiant 0:07:14.960 --> 0:07:21.400 for high end precision guided munitions and just in time manufacturing, 0:07:21.440 --> 0:07:23.400 so where you kind of leaned out your supply chains. 0:07:23.760 --> 0:07:26.160 That places a premium on sort of the prices you pay, 0:07:27.000 --> 0:07:29.320 and as you pursue higher technologies, in some cases the 0:07:29.320 --> 0:07:33.280 technologies aren't as proven or as you have to test 0:07:33.360 --> 0:07:36.400 those and certify that those weapons systems are safe to use. 0:07:36.720 --> 0:07:39.720 When they're leading edge technology, that tends to become very expensive, 0:07:40.080 --> 0:07:45.080 and what we see happening typically is initial order quantities 0:07:45.640 --> 0:07:48.840 decline over time. So we may have a forecasted buy 0:07:48.960 --> 0:07:53.360 of one hundred units of aircraft or ships, and very 0:07:53.440 --> 0:07:57.480 quickly those truncate down to thirty or twenty, and the 0:07:57.520 --> 0:08:02.440 cost per unit rises pretty high. And those higher costs 0:08:02.520 --> 0:08:07.440 are coming at a time when arguably the stakes geopolitically 0:08:07.640 --> 0:08:10.000 are just as high as they've been or even higher. 0:08:10.680 --> 0:08:12.600 Yeah, it's very unfortunate for the United States. We're in 0:08:12.600 --> 0:08:16.120 a position now where having been the world's sort of 0:08:16.240 --> 0:08:19.080 sole superpower for a while and with a penchant for 0:08:19.160 --> 0:08:23.559 high technology, our labor markets and our costs to produce 0:08:23.640 --> 0:08:26.720 any unit have gone up exponentially. That is not the 0:08:26.760 --> 0:08:29.200 case in other parts of the world. China is catching 0:08:29.320 --> 0:08:31.560 up in their labor costs to a rising but they 0:08:31.560 --> 0:08:35.520 can still produce equipment much cheaper than the United States. 0:08:35.240 --> 0:08:37.880 And the implications for that are Yeah. 0:08:37.920 --> 0:08:42.040 So the implications are over time we will reach near 0:08:42.120 --> 0:08:45.840 parity across all the warfighting areas in the air domain, 0:08:46.000 --> 0:08:49.200 in the surface domain, and the undersea domain, and potentially 0:08:49.280 --> 0:08:52.600 space and information warfare, which as we've seen in Russia, 0:08:52.960 --> 0:08:56.960 that competition for the information domain the public narrative is 0:08:57.000 --> 0:09:02.240 increasingly important. But what that really means is all of 0:09:02.280 --> 0:09:05.960 these bodies of war fighting domain are going to be contested, 0:09:06.400 --> 0:09:08.440 and the United States is going to have to work 0:09:08.440 --> 0:09:12.480 with its allies and partner partners in the region to 0:09:13.080 --> 0:09:15.720 sort of equal the combat power essentially of China. This 0:09:15.800 --> 0:09:17.560 way the throw weight of China. 0:09:18.120 --> 0:09:20.360 Kevin, So, you brought up an interesting point. The US 0:09:20.440 --> 0:09:23.480 still spends a lot more money than China on defense front, 0:09:23.480 --> 0:09:26.040 but you're saying that China just gets more value for 0:09:26.080 --> 0:09:26.400 the buck. 0:09:26.720 --> 0:09:28.200 That's right, if you think about it in terms of 0:09:28.200 --> 0:09:31.959 purchasing parity power, right, China is at a strategic advantage 0:09:32.040 --> 0:09:36.000 on costs for what they can afford. The other thing, though, 0:09:36.160 --> 0:09:38.240 really that doesn't get as much play, is they have 0:09:38.360 --> 0:09:43.400 invested heavily in their defense industrial base. You know, notwithstanding 0:09:43.440 --> 0:09:46.760 the sort of the blending of private ownership and state 0:09:46.840 --> 0:09:49.960 run directed economies. But if you just look at the 0:09:50.000 --> 0:09:53.480 size and scale of the defense industry that China has 0:09:53.559 --> 0:09:56.960 to rely upon, their manufacturing base far exceeds that of 0:09:56.960 --> 0:10:01.120 the United States. Because, again, you know, right, wrong or indifferent, 0:10:01.200 --> 0:10:03.920 the United States has sort of leaned out its industrial base. 0:10:04.040 --> 0:10:06.320 You've seen a lot of consolidation in the defense industry, 0:10:06.600 --> 0:10:09.440 sort of the Big five primes and that lack of 0:10:09.440 --> 0:10:12.320 competition and that lack of surge capacity has really limited 0:10:12.320 --> 0:10:15.520 our ability to produce quantity at cheap price. 0:10:16.640 --> 0:10:20.439 You're listening to Asia Centric from Bloomberg Intelligence. By the way, 0:10:20.520 --> 0:10:23.280 if you like what you hear, and we hope you do, 0:10:23.760 --> 0:10:28.640 please rate us on Apple Podcasts, Spotify, Google Podcasts, or 0:10:28.679 --> 0:10:31.400 wherever you may be listening to us. Of course, more 0:10:31.440 --> 0:10:35.200 stars are better. Your feedback matters, and we love hearing 0:10:35.200 --> 0:10:40.920 from our listeners. Kevin Brand. Technology has over the past 0:10:40.960 --> 0:10:45.000 century changed our lives in ways that we don't need 0:10:45.040 --> 0:10:49.360 to elaborate on. But one thing that technology has done, 0:10:49.400 --> 0:10:52.319 at least from a military perspective, is that it has 0:10:52.440 --> 0:10:57.480 enhanced the human power to kill and destroy. From your 0:10:57.520 --> 0:11:01.120 perspective and your study of the evolution technology as it 0:11:01.160 --> 0:11:05.840 applies to the military and defense, what surprises you most 0:11:06.040 --> 0:11:09.600 about how it has changed the nature of warfare? 0:11:09.880 --> 0:11:14.120 So I'd say two things. One is the United States, 0:11:14.200 --> 0:11:17.600 especially the Western allies Western Europe, we had sort of 0:11:17.600 --> 0:11:20.840 convinced ourselves that wars of aggression were going to be 0:11:21.160 --> 0:11:25.120 rare in the future or uncommon at least that had 0:11:25.200 --> 0:11:28.800 led us to smaller sales sort of contingencies. The idea 0:11:28.880 --> 0:11:31.680 that a massive show of force with high precision could 0:11:31.760 --> 0:11:34.319 have outsized impacts on the battlefield, and that allowed the 0:11:34.400 --> 0:11:36.199 United States and the West to sort of pursue these 0:11:36.240 --> 0:11:39.960 high technology, precision weapons which tended to be exclusive and 0:11:40.080 --> 0:11:44.000 very expensive, sort of the exquisite weapons systems. The second 0:11:44.000 --> 0:11:47.040 thing is we really thought that by dominating that battle 0:11:47.040 --> 0:11:49.839 space and having sort of uncontested control of the air, 0:11:50.000 --> 0:11:54.240 sea and underwater domain, that we can have those outside 0:11:54.240 --> 0:11:58.440 effects on land, on governments, on nations. And we also 0:11:58.480 --> 0:12:01.920 thought we could do this in a very quick, surgical way. Essentially, 0:12:01.920 --> 0:12:05.600 future wars would be short. I think what has changed, 0:12:05.960 --> 0:12:09.280 especially looking at Russia's invasion of Ukraine, is that that 0:12:09.520 --> 0:12:15.480 idea that wars will be short, bloodless, clean has evaporated. 0:12:15.800 --> 0:12:19.439 That doesn't mean, though, that the reason to have technology 0:12:19.679 --> 0:12:23.400 goes away. Europe this sort of a land centric theater. 0:12:23.480 --> 0:12:27.280 If you think about that domain, it requires standing armies. 0:12:27.880 --> 0:12:31.000 Controlling territory is just a hard fought slog. You can 0:12:31.040 --> 0:12:34.319 see the artillery jewels back and forth between Ukraine and Russia. 0:12:34.840 --> 0:12:38.960 The Pacific is a different domain. Vast distances, you know, 0:12:39.000 --> 0:12:43.080 twenty three time zones we're talking about in order to 0:12:43.080 --> 0:12:46.120 project power there. It takes days to get to the 0:12:46.200 --> 0:12:48.719 region from the United States from the West coast. That 0:12:48.760 --> 0:12:53.120 requires a different type of force with long range, reach, precision, 0:12:53.280 --> 0:12:56.199 fast weapons. That's why you're seeing this pursuit right now. 0:12:56.240 --> 0:12:58.920 I think of hypersonic weapons, among other things, in order 0:12:58.960 --> 0:13:00.960 to compress those times lines and battle spaces. 0:13:01.320 --> 0:13:02.760 The supersonic weapons. 0:13:03.320 --> 0:13:05.960 Ten years ago, I would have said, yes, the United 0:13:06.000 --> 0:13:08.760 States was well in the lead on hypersonic technology in 0:13:08.840 --> 0:13:12.000 our research and development. We sort of abandoned that because 0:13:12.040 --> 0:13:16.240 there wasn't a pressing need to have those technologies on board. 0:13:16.240 --> 0:13:19.240 We didn't see an offensive threat that we the United 0:13:19.280 --> 0:13:22.280 States needed to project that sort of power in the 0:13:22.280 --> 0:13:25.040 near term. That game has changed a little bit with 0:13:25.400 --> 0:13:27.640 sort of the rise of China, and we're actually playing catchup. 0:13:27.720 --> 0:13:29.920 China is a little bit ahead of the United States, 0:13:30.400 --> 0:13:31.520 probably by a couple of years. 0:13:31.920 --> 0:13:34.600 Kevin, is it going to be possible for technology to 0:13:34.679 --> 0:13:38.600 give any nation or any alliance of nations and edge 0:13:38.679 --> 0:13:41.640 a sustainable edge over another or is the nature of 0:13:41.760 --> 0:13:46.560 warfare in the future going to hinge upon something else 0:13:46.600 --> 0:13:47.679 other than technology. 0:13:48.160 --> 0:13:52.600 So the nature of warfare still is sort of unchanging 0:13:53.240 --> 0:13:58.240 contest of wills political wills among countries and the methods 0:13:58.240 --> 0:14:00.559 by which you wage that war. The technology she's involved, 0:14:00.600 --> 0:14:04.920 we'll change over time as technology changes. What I see 0:14:05.040 --> 0:14:08.760 technology doing is having a very specific role in very 0:14:09.400 --> 0:14:12.960 specific tactical situations. But what's going to matter more than 0:14:12.960 --> 0:14:15.760 the technologies because those will be sort of ubiquitous across 0:14:15.800 --> 0:14:18.880 the board equal access to people. You might have a 0:14:18.880 --> 0:14:20.800 little bit more of a technological edge in one spot 0:14:20.880 --> 0:14:23.640 or another, But the thing that's quickly coming to bear 0:14:23.840 --> 0:14:26.600 is really can you bring that technology to bear in 0:14:26.640 --> 0:14:29.240 a time and place of your choosing and in sufficient 0:14:29.400 --> 0:14:33.280 quantities to impact whatever the situation is on the battlefield 0:14:33.520 --> 0:14:35.440 or a political environment. And so it's going to be 0:14:35.440 --> 0:14:39.840 a combination of technology, speed of action, speed of decision, 0:14:40.240 --> 0:14:43.520 it's employment, and do you have this sufficient quantity to 0:14:43.640 --> 0:14:45.640 impact the situations. Those are kind of the factors that 0:14:45.680 --> 0:14:46.400 will come into play. 0:14:46.960 --> 0:14:49.840 And Kevin, with the Russia Ukraine war, what lessons are 0:14:49.840 --> 0:14:53.080 they providing defense plan is in terms of what the 0:14:53.080 --> 0:14:54.720 weapons that will be used in the future. 0:14:55.680 --> 0:14:58.920 I think what Russia's war in Ukraine has shown is 0:14:58.960 --> 0:15:02.440 that and war is really about attrition and there's no 0:15:02.560 --> 0:15:04.640 other way around that. You have to grind to a 0:15:04.680 --> 0:15:08.480 political stalemate and a negotiated settlement one way or the other. 0:15:08.680 --> 0:15:11.960 The idea of total victory is probably an illusion, and 0:15:12.000 --> 0:15:16.280 that requires investment in your defense industrial base. It requires munitions, 0:15:16.960 --> 0:15:19.560 it requires stockpiles of munitions. And if you think about 0:15:19.960 --> 0:15:22.000 I think one of the biggest things is it has 0:15:22.080 --> 0:15:25.240 thrown off this idea that in the defense space, just 0:15:25.280 --> 0:15:28.280 in time manufacturing, just in time supply is probably not 0:15:28.560 --> 0:15:31.800 the right national security decision for your country to make. 0:15:32.360 --> 0:15:34.360 And what about drones. There's been a lot of press 0:15:34.360 --> 0:15:36.960 coverage on the success of drones. Is this a game 0:15:37.080 --> 0:15:39.680 changer and a lot more country is going to adopt 0:15:39.680 --> 0:15:41.160 this technology? 0:15:41.240 --> 0:15:44.480 Yeah? Absolutely. I think there's two key technologies in there, 0:15:44.480 --> 0:15:48.960 and they're related. The first is unmanned you name it. 0:15:48.960 --> 0:15:51.640 It could be surface vessels, it could be under sea vessels, 0:15:51.640 --> 0:15:55.760 it could be aerial vehicles. And those vehicles will increasingly 0:15:56.520 --> 0:16:01.160 have sensor packages on them that could include armed sensor packages, 0:16:01.200 --> 0:16:04.360 and we'll see those employed. So I think over time 0:16:04.400 --> 0:16:09.320 you'll see a migration from large, heavy, exquisite platforms that 0:16:09.360 --> 0:16:14.119 take a long time to build to more nimble, smaller, 0:16:14.920 --> 0:16:18.520 many systems that are networked together that you can employ 0:16:18.800 --> 0:16:22.440 both from a sensor package and from a weapons employment perspective. 0:16:22.960 --> 0:16:25.800 I think that's one. The second thing I think that's 0:16:25.800 --> 0:16:29.119 going to become ubiquitous is this pursuit of artificial intelligence 0:16:29.560 --> 0:16:33.480 because as these systems and sensors proliferate, the need to 0:16:33.560 --> 0:16:36.680 make sense of the data that is coming in from 0:16:36.720 --> 0:16:41.400 all of these dispersed sensors increases, and that information overload 0:16:41.440 --> 0:16:44.480 is something that the human in the loop or the 0:16:44.560 --> 0:16:46.800 commander is going to need some help with, and these 0:16:46.880 --> 0:16:50.040 artificial intelligence tools from machine learning can help parse that 0:16:50.120 --> 0:16:53.480 information and distill down what is the most important information 0:16:53.520 --> 0:16:55.680 to act on. So that's going to be an important 0:16:55.680 --> 0:16:56.680 component of future war. 0:16:57.440 --> 0:17:00.800 And as you mentioned, speed of decision making is going 0:17:00.840 --> 0:17:06.600 to be increasingly essential to military success and in other aspects. 0:17:06.960 --> 0:17:09.280 Because of all that information that's out there. The commander 0:17:09.320 --> 0:17:14.920 who is able to understand the space make a decision, 0:17:15.359 --> 0:17:19.639 make that decision first, and make that decision accurately, and 0:17:19.680 --> 0:17:22.200 then put a weapon on a target or the most 0:17:22.200 --> 0:17:24.760 critical target first, is going to be victorious in battle. 0:17:25.080 --> 0:17:27.120 And so AI I think is going to play an 0:17:27.600 --> 0:17:31.040 increasing role or automated decision aids in some way shape or. 0:17:31.000 --> 0:17:36.000 Form our guest is Kevin Brand, thirty year Navy veteran 0:17:36.280 --> 0:17:41.280 and aerospace and defense analysts with Bloomberg Intelligence. Kevin Back 0:17:41.440 --> 0:17:45.399 in the nineteen fifties, President Dwight Eisenhower of the United 0:17:45.440 --> 0:17:48.280 States warned us for the first time about the military 0:17:48.400 --> 0:17:52.879 industrial complex. He warned us about the consequences of war 0:17:53.160 --> 0:17:58.800 essentially becoming profitable, which makes it more likely that countries 0:17:58.880 --> 0:18:02.280 might engage in it. Do you think that doctrine still holds, 0:18:02.320 --> 0:18:06.520 does it still play a role in today's theater, or 0:18:06.720 --> 0:18:08.879 is that something of the past. 0:18:09.280 --> 0:18:11.240 So I would turn that question a little bit on 0:18:11.280 --> 0:18:13.560 its head. I think if you're going to have a 0:18:13.640 --> 0:18:17.080 national security or defense policy, you need to provide for 0:18:17.119 --> 0:18:19.399 your national defense. You're going to have to rely, in 0:18:19.400 --> 0:18:21.400 some way, shape or form on your defense industrial base 0:18:21.440 --> 0:18:24.880 to provide the men, machine tooling, etc. To equip those 0:18:24.920 --> 0:18:28.920 armed forces. The relationship you have with the defense industrial 0:18:28.960 --> 0:18:31.960 base has to evolve over time. So to your point, 0:18:32.240 --> 0:18:33.760 at the end of the Cold at the end of 0:18:33.840 --> 0:18:35.879 the World War II, the defense industrial base sort of 0:18:36.240 --> 0:18:40.160 was in a very robust position coming off of mass production. 0:18:40.440 --> 0:18:44.440 You saw consolidation occur relatively rapidly in the post World 0:18:44.480 --> 0:18:48.160 War two era and then stabilize through the Cold War. 0:18:48.359 --> 0:18:50.680 At the end of the Cold War, you saw massive 0:18:50.680 --> 0:18:54.359 defense consolidation down into a few big prime contractors, and 0:18:54.400 --> 0:18:57.320 that leaning of the defense industrial base really drove up 0:18:57.440 --> 0:19:01.440 US costs and it limited competition, and it also though 0:19:01.600 --> 0:19:05.679 narrowed the surge capacity of the defense industrial base to 0:19:05.680 --> 0:19:09.919 deal with major conflict. That's going to be something that 0:19:09.920 --> 0:19:12.120 the United States has to look at and how they 0:19:12.160 --> 0:19:14.840 add some capacity to the defense industrial base, how they 0:19:14.920 --> 0:19:19.520 encourage small business startups and diversify that defense industrial base 0:19:19.560 --> 0:19:22.320 in order to bring the costs down for various weapon systems. 0:19:22.359 --> 0:19:26.840 If we're going to compete, Kevin, which companies benefit from 0:19:26.920 --> 0:19:28.680 rising defense budget spending? 0:19:29.600 --> 0:19:32.240 So in the United States right now, it's really primarily 0:19:32.359 --> 0:19:35.520 driven by your big primes. So you can think raytheel N, Lockheed, 0:19:35.560 --> 0:19:40.280 Northrop Grumman, General Electric, Boeing sort of and some of 0:19:40.320 --> 0:19:43.000 their subsidiaries. Those tend to be the big primes that 0:19:43.000 --> 0:19:47.280 are looking at the major weapon systems, the tanks, the aircraft, 0:19:47.520 --> 0:19:51.200 the surface ships. So those will continue to be major 0:19:51.280 --> 0:19:55.119 players looking ahead as you start to get into some 0:19:55.160 --> 0:19:58.560 of the more disperse drones and kind of commercial off 0:19:58.560 --> 0:20:01.960 the shelf technology proliferate to a lot of different companies 0:20:01.960 --> 0:20:04.719 that are out there. You can see aero v inmet 0:20:05.440 --> 0:20:07.560 and some others that are out there that are smaller 0:20:07.840 --> 0:20:10.640 as far as revenue goes, but are on the sort 0:20:10.680 --> 0:20:14.719 of cutting edge of weaponizing drones and small networking of 0:20:15.080 --> 0:20:18.320 unmanned platforms. In Europe, I think you're going to continue 0:20:18.320 --> 0:20:21.400 to see some defense consolidation there in the big primes, 0:20:21.440 --> 0:20:27.240 whether it's Bae and Britain, whether it's Kraus in Germany. 0:20:27.560 --> 0:20:30.480 I think there's not a hole of riementhal there's not 0:20:30.520 --> 0:20:33.680 going to be a whole lot of I think expansion 0:20:33.760 --> 0:20:35.919 in the European defense industrial base just because of the 0:20:36.040 --> 0:20:39.080 nature of the European Union. In Asia, I think you're 0:20:39.080 --> 0:20:41.760 still going to see some domination really by Japan, the 0:20:41.800 --> 0:20:45.879 major heavy industries in Japan and Korea, and to a 0:20:45.920 --> 0:20:49.080 lesser extent, you know, China and Russia, whose foreign military 0:20:49.119 --> 0:20:52.760 sales tend to proliferate through Southeast Asia and South Asia. 0:20:53.840 --> 0:20:56.240 Kevin, you worked in the US Navy for thirty years. 0:20:56.600 --> 0:20:59.800 What has surprised you most about watching the Russia. 0:21:01.359 --> 0:21:07.320 I think the first big lesson is how difficult it 0:21:07.400 --> 0:21:13.000 really is. To dislodge dug in prepared troops in a 0:21:13.119 --> 0:21:16.840 land campaign. As a Navy individual, I've studied war, but 0:21:16.960 --> 0:21:19.159 my domain of choice is sort of the air and 0:21:19.359 --> 0:21:23.040 surface space, not land warfare. And I think it's a 0:21:23.040 --> 0:21:26.200 wake up called. After sort of twenty years in Iraq 0:21:26.240 --> 0:21:30.960 and Afghanistan, the United States became sort of lighter, more mobile, 0:21:31.280 --> 0:21:34.840 looking at counterinsurgency what they would call coin type operations. 0:21:35.160 --> 0:21:40.280 And when you get back to conventional forces in a knockdown, 0:21:40.359 --> 0:21:44.719 drag out sort of competition for territory, that is a 0:21:44.920 --> 0:21:50.520 very difficult environment, something in the United States really hasn't 0:21:50.560 --> 0:21:53.719 seen since World War Two, notwithstanding in Golf War One 0:21:53.960 --> 0:21:56.479 that was a different sort of environment. We're much more 0:21:56.520 --> 0:22:00.280 akin to the urban fighting of World War Two than 0:22:00.320 --> 0:22:02.800 we were a Gulf wer type scenario. 0:22:03.440 --> 0:22:06.840 Kevin Brand wanted to shift gears. Just briefly. Let me 0:22:06.840 --> 0:22:10.880 mention two prominent business names to you, Jamie Diamond and 0:22:11.040 --> 0:22:13.840 Ken Griffin. Jamie Diamond who is the CEO of JP 0:22:14.000 --> 0:22:17.560 Morgan Chase. Ken Griffin is the head of Citadel. Both 0:22:17.560 --> 0:22:22.880 have made rather upbeat remarks recently about China, the business 0:22:22.920 --> 0:22:27.399 prospects there, the opportunity, the growth prospects given what you 0:22:27.560 --> 0:22:31.399 know about the overarching state of relations between the US 0:22:31.440 --> 0:22:35.880 and China and the rhetoric between the two countries. Are 0:22:36.119 --> 0:22:40.359 Diamond and Griffin just prescient or is there something they're overlooking. 0:22:41.160 --> 0:22:43.400 Yeah, it's a great point. I think, you know, first, 0:22:43.640 --> 0:22:45.679 to be fair, from a national security perspective, which is 0:22:45.720 --> 0:22:47.640