WEBVTT - This Is Palantir's Vision for Changing How the US Does Defense Spending 0:00:02.720 --> 0:00:16.360 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:18.560 --> 0:00:22.200 Hello and welcome to another episode of The Odd Lots Podcast. 0:00:22.280 --> 0:00:24.680 I'm Joe Wisenthal and I'm Tracy Alloway. 0:00:24.800 --> 0:00:27.360 Tracy, you know my Twitter handle at the store. 0:00:28.160 --> 0:00:29.440 I'm vaguely familiar with it. 0:00:29.520 --> 0:00:32.479 Yeah, I always mentioned do you know how where I 0:00:32.479 --> 0:00:33.000 got it from? 0:00:33.680 --> 0:00:35.919 Oh, that's a good question. I know you had it 0:00:35.960 --> 0:00:39.120 when you first started writing about the market, and I 0:00:39.159 --> 0:00:41.199 know you've said at various points in time that you 0:00:41.280 --> 0:00:42.479 kind of regret using it. 0:00:42.600 --> 0:00:45.080 Is that right when I joined Twitter in like two 0:00:45.120 --> 0:00:46.880 thousand and eight, and like, I didn't think it was 0:00:46.920 --> 0:00:48.560 going to be like a very big deal for any reason. 0:00:48.600 --> 0:00:50.159 It was just the name of my old blog at 0:00:50.159 --> 0:00:52.080 the time, and that was the name when we you know, 0:00:52.320 --> 0:00:54.240 people just did like, yeah, screen names. 0:00:54.320 --> 0:00:55.920 It was just the name of a blog. The name 0:00:55.960 --> 0:00:56.600 means nothing to me. 0:00:56.680 --> 0:00:58.640 But before I was ever a journalist or even thought 0:00:58.640 --> 0:01:01.680 that I would get into journalism professionally, you know, I 0:01:01.720 --> 0:01:03.160 had this blog, The Stalwart. 0:01:03.200 --> 0:01:04.920 You know, if you thought Twitter wasn't going to be 0:01:04.959 --> 0:01:06.920 that serious, I feel like you could have chosen a 0:01:07.000 --> 0:01:09.280 much worse name, that's true, than the Stalwart. 0:01:09.440 --> 0:01:12.360 But anyway, I had this blog, the Stalwart dot com. 0:01:12.360 --> 0:01:14.480 It was actually I had a co author on it 0:01:14.520 --> 0:01:17.039 who went to do great things anyway, you know how 0:01:17.080 --> 0:01:18.800 like we sometimes tweeted like, Hey, we're going to be 0:01:18.840 --> 0:01:21.039 in subcity. Who wants to get a drink? I was 0:01:21.120 --> 0:01:24.880 visiting San Francisco in like two thousand and six and 0:01:24.959 --> 0:01:26.600 I posted a thing and I think I ate about 0:01:26.600 --> 0:01:29.080 two hundred readers of my blog, and I said, does 0:01:29.080 --> 0:01:31.400 anyone want to get a dim summ in San Francisco? 0:01:31.480 --> 0:01:33.759 And I got two people responded and show up. 0:01:34.400 --> 0:01:39.000 That's I mean, that's not a terrible two hundred. 0:01:39.160 --> 0:01:40.959 Yeah, that's right. It's not bad at all. 0:01:41.160 --> 0:01:45.080 But anyway, one of those people who actually showed up 0:01:45.120 --> 0:01:46.880 to get dim sum and a few friends of mine 0:01:46.959 --> 0:01:49.400 showed up, is going to be coming on the podcast today. 0:01:49.760 --> 0:01:50.520 One of those two. 0:01:50.600 --> 0:01:53.000 See, it's about quality, not quantity each other. 0:01:53.040 --> 0:01:53.360 That's right. 0:01:53.360 --> 0:01:56.080 So the two people that showed up are useful. 0:01:55.680 --> 0:01:57.080 To you, that's right. So I went on. 0:01:57.160 --> 0:01:59.160 I stayed in media and I did you know, the 0:01:59.200 --> 0:02:03.480 blogging and casting and journalism thing, and another became the 0:02:03.520 --> 0:02:07.680 CTO of one of the hottest companies in the entire world. 0:02:07.880 --> 0:02:11.120 And so, you know, some interesting people at that lunch 0:02:11.200 --> 0:02:12.200 in China Town and. 0:02:12.400 --> 0:02:15.079 What did you tell him over dim SiZ I don't remember. 0:02:15.440 --> 0:02:17.760 I don't remember. Anyway, this is a very sort of 0:02:17.800 --> 0:02:21.560 inward facing intro. But to sort of zoom forward, you know, 0:02:21.600 --> 0:02:24.639 we've wanted to do more on defense in the year 0:02:24.760 --> 0:02:27.880 twenty twenty five and how we spend money, et cetera. Anyway, 0:02:28.040 --> 0:02:30.919 and it turns out that this person, this guy who 0:02:30.960 --> 0:02:33.360 came to dim Sum in two thousand and six, is 0:02:33.360 --> 0:02:37.320 a great person to talk about defense because he recently 0:02:37.560 --> 0:02:42.480 wrote a piece called the Defense Reformation eighteen thesies about 0:02:42.520 --> 0:02:46.399 how we currently spend money on defense in this country 0:02:46.600 --> 0:02:48.720 and why the way we do it is insufficient for 0:02:48.760 --> 0:02:52.160 this new world, especially with all of these geopolitical attentions. 0:02:52.680 --> 0:02:55.440 Of course, he works for a company that might benefit 0:02:55.520 --> 0:02:58.360 from a change in how we do spending on defense. 0:02:58.600 --> 0:03:01.320 We're going to be speaking with I'm Sunkar. He is 0:03:01.360 --> 0:03:04.320 the CTO of Palenteer, one of the hottest companies in 0:03:04.320 --> 0:03:06.480 the world, but which I'm still trying to wrap my 0:03:06.520 --> 0:03:09.079 head around exactly what they do. But we're maybe going 0:03:09.120 --> 0:03:12.480 to learn that and how they or Sham specifically in 0:03:12.680 --> 0:03:17.040 visions changing how we do defense and how Palenteer could 0:03:17.040 --> 0:03:19.440 play a role in it. So, Cham, thank you so 0:03:19.560 --> 0:03:21.880 much for coming on odd Lots. It's nice to talk 0:03:21.919 --> 0:03:24.000 to you again after almost twenty years. 0:03:24.320 --> 0:03:25.920 It's a pleasure to be on. Yeah, it's great to 0:03:25.919 --> 0:03:26.440 hear you again. 0:03:26.560 --> 0:03:29.440 Okay, here's a question. So, like I watched these videos 0:03:29.520 --> 0:03:34.080 on YouTube about Pallenteer products and it looks very like 0:03:34.160 --> 0:03:36.480 sort of like Minority Report. 0:03:36.120 --> 0:03:38.080 Where it's like these like big walls. 0:03:37.720 --> 0:03:40.320 Of screens and they like zoom in on something and 0:03:40.360 --> 0:03:43.400 they're like, oh, and here's an asset in the South 0:03:43.520 --> 0:03:45.600 China Sea and why are these ships here? And like 0:03:45.640 --> 0:03:48.200 someone's like, look up, is that really what you guys sell? 0:03:48.200 --> 0:03:50.640 Like is it really this minority report? Not, I know 0:03:50.680 --> 0:03:52.640 it's not Minority Report like pre crime, but these sort 0:03:52.680 --> 0:03:55.080 of like visualizations like give me like the sort of 0:03:55.120 --> 0:03:57.160 like what does Palenteer actually sell? 0:03:57.560 --> 0:04:00.080 Well, the cynical way to think about Palenteers that it 0:04:00.120 --> 0:04:03.440 took something as sexy as James Bond to motivate engineers 0:04:03.440 --> 0:04:06.640 to work on a promise boring as data integration. But 0:04:06.720 --> 0:04:09.080 I do think that is the seminal problem. It's not 0:04:09.200 --> 0:04:11.160 that we don't have this information, it's that we don't 0:04:11.200 --> 0:04:13.360 have it in a way that we can easily access 0:04:13.400 --> 0:04:16.000 it to make a decision. I like saying, you know, 0:04:16.600 --> 0:04:19.039 maybe ten years ago, the idea that data was the 0:04:19.040 --> 0:04:22.480 new oil became very popularized. I strongly disagree with that. 0:04:22.520 --> 0:04:24.400 I think data is the new snake oil. It's not 0:04:24.560 --> 0:04:28.280 inherently valuable. What really matters are the decisions we as 0:04:28.360 --> 0:04:31.360 humans make, and am I making a better decision? Am 0:04:31.400 --> 0:04:33.880 I getting into a continuous learning loop of how I 0:04:33.920 --> 0:04:36.680 will make that decision better tomorrow? That is something that 0:04:36.760 --> 0:04:39.520 Colonel John Boyd would recognize as the Uda Loup, the 0:04:39.600 --> 0:04:42.600 Observed orient Decide Act, a piece of trade craft he 0:04:42.680 --> 0:04:45.960 developed to beat big fighters in dogfighting. But it's really 0:04:46.040 --> 0:04:48.440 like the human decision making process and how we see 0:04:48.480 --> 0:04:51.840 ourselves and win as a consequence of being better at 0:04:51.880 --> 0:04:54.600 it than our competitors in the commercial sector or our 0:04:54.640 --> 0:04:56.120 adversaries in the military space. 0:04:57.000 --> 0:05:00.000 So Joe mentioned that we want to do more on defense, 0:05:00.440 --> 0:05:02.960 and it is a difficult topic to sort of wrap 0:05:03.000 --> 0:05:07.040 your head around because the defense industry is sprawling in 0:05:07.080 --> 0:05:09.720 many ways, so neither of us know that much about it. 0:05:09.960 --> 0:05:13.160 But one thing I do know is defense is an 0:05:13.160 --> 0:05:18.760 industry that is characterized by Monopsony. Oh, do we still 0:05:18.800 --> 0:05:20.039 have the monopsy Clason. 0:05:20.120 --> 0:05:21.760 Yeah, we're going to put a sound effect here. 0:05:21.640 --> 0:05:27.200 Monopsony Clackson, Okay, Monopsony. So there's one big buyer for 0:05:27.320 --> 0:05:30.520 defense equipment and services, which is the government, and if 0:05:30.520 --> 0:05:33.960 you are a defense contractor, you are basically only pitching 0:05:34.040 --> 0:05:36.800 to the government. If you fail to convince the government, 0:05:36.880 --> 0:05:39.719 It's not like you can turn around and sell missiles 0:05:39.760 --> 0:05:43.440 to the private market, at least hopefully not. How did 0:05:43.560 --> 0:05:48.479 pal Andeer actually break into this particular space and why 0:05:48.480 --> 0:05:51.159 did you decide to do it, because you know, it 0:05:51.240 --> 0:05:54.919 seems like a pretty binary bet in some respects. 0:05:55.560 --> 0:05:57.160 I mean, first of all, I love the fact that 0:05:57.200 --> 0:05:59.400 people listening to this podcast know INNI oh yeah. 0:06:00.160 --> 0:06:01.480 Thesis is that is. 0:06:01.440 --> 0:06:03.719 The root of what ails us in terms of defense. 0:06:04.080 --> 0:06:06.960 But you're exactly right, it is what makes this market 0:06:07.080 --> 0:06:10.040 so challenging. I mean, look, no great company is principally 0:06:10.040 --> 0:06:12.560 created to make money. You have a mission, a purpose. 0:06:12.839 --> 0:06:15.320 We wanted to work on hard problems in national security. 0:06:15.480 --> 0:06:18.360 When we came together to work on these problems, it 0:06:18.400 --> 0:06:20.839 was before there was like a political tinge to working 0:06:20.880 --> 0:06:23.320 on defense. It was actually people just thought we were 0:06:23.320 --> 0:06:26.040 wasting our life, like maybe you should self sofered banks. 0:06:26.040 --> 0:06:27.680 Wouldn't that be a better business. 0:06:28.080 --> 0:06:31.599 Later, maybe ten years after that, it became somehow highly 0:06:31.640 --> 0:06:34.360 unpopular in Taboo to work on prompts of national security, 0:06:34.360 --> 0:06:37.479 And now it's become in vogue, which I think is great. 0:06:37.560 --> 0:06:39.919 It's really a call back to a prior era. You know, 0:06:39.960 --> 0:06:42.799 the birth of Silicon Valley was absolutely the Face program 0:06:42.839 --> 0:06:46.560 and defense and missiles. Lockeed made those missiles in Sunnyvale, 0:06:47.080 --> 0:06:49.880 in the heart of Silicon Valley. Who was the largest 0:06:49.880 --> 0:06:52.599 employer in the fifties in the Silicon Valley. So to 0:06:52.680 --> 0:06:55.120 your question of how did we break in very painfully, 0:06:55.440 --> 0:06:57.800 is the honest answer that all of our adoption was 0:06:57.880 --> 0:07:01.960 driven from the field backwards. Monopoly is strongest in DC. 0:07:02.320 --> 0:07:05.760 It's where the opinion of a single buyer really matters. 0:07:05.760 --> 0:07:08.440 But the closer you get to soldiers in harms Way, 0:07:08.480 --> 0:07:10.800 people who are actually doing things, the more you start 0:07:10.800 --> 0:07:13.640 to approximate something looks like a market. People have heterogeneous 0:07:13.680 --> 0:07:16.040 ideas of what they need. They're able to express their 0:07:16.080 --> 0:07:18.360 opinion of this is better than that. They may not 0:07:18.440 --> 0:07:20.960 have the resource or the buying power to actually affect 0:07:20.960 --> 0:07:24.120 that economically, but it starts with the very beginning of 0:07:24.360 --> 0:07:26.920 a demand signal that actually, there is something better, there 0:07:26.960 --> 0:07:29.280 is something else that we would like out there, and 0:07:29.320 --> 0:07:32.880 then you're doing battle with the bureaucracy every day. When 0:07:32.920 --> 0:07:35.440 we first started the business, I thought our competition would 0:07:35.480 --> 0:07:37.680 be the existing defense players. 0:07:37.960 --> 0:07:39.360 I could not have been more wrong. 0:07:39.520 --> 0:07:44.239 Our competition was the program of record, as they call it. 0:07:44.240 --> 0:07:46.880 It was the government program that thought it had a 0:07:46.920 --> 0:07:50.080 monopoly on providing a capability in a certain area. And 0:07:50.240 --> 0:07:53.240 if you challenge that monopoly in any way, they view 0:07:53.240 --> 0:07:55.560 it as their job to disquish you, to crush you. 0:07:56.160 --> 0:07:59.360 And in this system that we've built up, the defense 0:07:59.360 --> 0:08:02.640 primes are just essentially yes men to the monopsonists. You know, 0:08:02.720 --> 0:08:05.320 their job is to do whatever the monoposinists asked for. 0:08:06.040 --> 0:08:08.360 And I think this is an important phenomenon because it's 0:08:08.360 --> 0:08:09.440 not how it always was. 0:08:09.680 --> 0:08:10.880 We can look at the present. 0:08:10.640 --> 0:08:12.880 Moment, which is very much an outgrowth of having won 0:08:12.920 --> 0:08:15.920 the Cold War. It's something we've built up without pure 0:08:15.960 --> 0:08:19.680 competitors as a nation since the nineties. But when we 0:08:19.680 --> 0:08:21.680 were at our best in World War Two, in the 0:08:21.720 --> 0:08:25.360 early Cold War, it looked very different. Our services competed 0:08:25.400 --> 0:08:27.440 against each other all the time. Today we think about 0:08:27.480 --> 0:08:30.960 it as the Air Force's Minuteman as the intercontinental ballistic missile, 0:08:31.480 --> 0:08:33.760 but the Army and the Navy they put in their 0:08:33.760 --> 0:08:36.760 own competing efforts. It's really that the Minuteman won that 0:08:36.840 --> 0:08:40.120 great free market competition for having the best product. When 0:08:40.120 --> 0:08:43.040 we were building submarine launch ballistic missiles, Admiral Raybourne had 0:08:43.080 --> 0:08:46.760 four competing programs running concurrently. And so the consequence of 0:08:46.800 --> 0:08:50.160 the monopsony is not that there isn't competition within the 0:08:50.160 --> 0:08:53.199 industrial base. It's actually that there isn't competition within government. 0:08:53.600 --> 0:08:56.480 How did that work? It's not intuitive to me. 0:08:56.679 --> 0:08:59.640 And like you know, you say, there's not competition within 0:08:59.720 --> 0:09:05.080 govern even within many large corporations. Even in the private sector, 0:09:05.640 --> 0:09:09.840 you don't often see that phenomenon in which say, different 0:09:09.960 --> 0:09:14.920 offices within a company are competing against each other in 0:09:15.000 --> 0:09:17.640 terms of what they're buying and who bought the better 0:09:17.760 --> 0:09:19.960 technology and then went out. I'm sure it happens to 0:09:20.000 --> 0:09:23.280 some extent, but buying large, even at a private corporation, 0:09:23.440 --> 0:09:27.959 procurement decisions are corporate wide. For certain types of products. 0:09:27.960 --> 0:09:30.000 There's like you know, there might be a teams company 0:09:30.040 --> 0:09:32.120 and there might be a Slack company, there might be 0:09:32.200 --> 0:09:35.240 a company that uses AWS, and there might be a 0:09:35.280 --> 0:09:36.599 company that uses Google. 0:09:36.360 --> 0:09:37.160 Cloud, et cetera. 0:09:37.559 --> 0:09:40.880 Talk more about how, as you say, at least at 0:09:40.880 --> 0:09:46.199 one point, there could be within the defense overall competition 0:09:46.640 --> 0:09:48.600 over technology development. 0:09:49.120 --> 0:09:51.320 And these things are dialectical where you can think about 0:09:51.360 --> 0:09:54.640 it as like if we were always duplicating efforts and competing, 0:09:54.880 --> 0:09:57.880 that somehow seems really inefficient. On the other extreme, which 0:09:57.880 --> 0:10:00.640 is where we tend to find ourselves, if implication is 0:10:00.720 --> 0:10:03.600 viewed as taboo and inherently bad and something that we 0:10:03.679 --> 0:10:07.120 always need unitary efforts around, that's also really bad. Now 0:10:07.120 --> 0:10:10.200 these modalities skewed towards So if you're in this sort 0:10:10.200 --> 0:10:12.000 of hey, we should have a unitary effort, we should 0:10:12.040 --> 0:10:13.840 all just pick Slack or teams. 0:10:13.520 --> 0:10:14.480 Something like that. 0:10:14.480 --> 0:10:16.560 That makes a lot of sense for something that's in 0:10:16.600 --> 0:10:19.640 the one to end phase. It's functionally a commodity. There's 0:10:19.720 --> 0:10:22.800 value to standardization. You're not expecting a lot of innovation. 0:10:23.360 --> 0:10:25.520 On the other end, where you're dealing with zero one problem, 0:10:25.600 --> 0:10:28.400 where there's fundamental uncertainty, a lot of innovation is needed. 0:10:28.679 --> 0:10:32.040 Innovation is fundamentally messy and chaotic, and trying to wrap 0:10:32.080 --> 0:10:34.440 it with all this process just means that you don't 0:10:34.440 --> 0:10:37.400 get the innovation at all. Then the lack of competition 0:10:37.520 --> 0:10:41.240 and the lack of competing ideas heterodox approaches means that 0:10:41.280 --> 0:10:44.359 you lose I think one of the most important responsibilities 0:10:44.400 --> 0:10:47.160 of a leader is to grant and revoke monopolies within 0:10:47.200 --> 0:10:49.920 your institution. Look, I'm calling the shot. I'm saying this 0:10:50.000 --> 0:10:52.000 is the blessed way. I have high conviction and the 0:10:52.040 --> 0:10:54.240 people and the approach, and we're all moving out. We're 0:10:54.240 --> 0:10:56.079 putting all of our wood behind the sero. On the 0:10:56.120 --> 0:10:59.000 other end, it's like there's fundamental uncertainty here. I'd like 0:10:59.080 --> 0:11:01.520 to fund three teams to go after this in different ways, 0:11:01.679 --> 0:11:03.480 and I will have to manage that as we go 0:11:03.600 --> 0:11:06.360 through to figure out what is the answer going to be? 0:11:07.240 --> 0:11:09.680 Okay, So on this note, as you point out, there's 0:11:09.760 --> 0:11:12.960 a lack of competition within the government, maybe a lack 0:11:13.000 --> 0:11:17.640 of creativity. There's a tendency to be very bureaucratic, and 0:11:17.679 --> 0:11:19.720 of course one of the things we hear a lot 0:11:19.920 --> 0:11:22.600 is that the government can be very slow in its 0:11:22.679 --> 0:11:26.640 processes and it's not very good at like changing course 0:11:26.800 --> 0:11:30.640 when that is needed. Because there's always the sprawling, infinite 0:11:30.720 --> 0:11:33.640 number of stakeholders and all these boxes that you need 0:11:33.720 --> 0:11:37.359 to check and things like that, and all of that combined, 0:11:37.520 --> 0:11:42.600 I imagine, can make for a somewhat frustrating customer. If 0:11:42.640 --> 0:11:45.880 you're a defense company. I mean, if you're a defense company, 0:11:45.880 --> 0:11:49.920 the government is your customer. The government is certainly palenteer's customer. 0:11:50.520 --> 0:11:54.160 How could they be basically a better customer. 0:11:54.360 --> 0:11:55.640 By having more buyers? 0:11:55.800 --> 0:11:57.960 You know, how can we start to approximate something that 0:11:57.960 --> 0:12:00.800 looks closer to the free market. So I think defense 0:12:00.880 --> 0:12:03.800 is one of these interesting places where it's the only 0:12:03.840 --> 0:12:07.079 place I know of where we disaggregate supply and demand. 0:12:07.320 --> 0:12:09.600 You think about that, the integration of supply and demand, 0:12:09.679 --> 0:12:12.320 the sales and operation planning process. It's the beating heart 0:12:12.360 --> 0:12:16.679 of most companies or institutions in defense. You have the services, 0:12:16.720 --> 0:12:20.120 the Air Force, the Navy, and Marines, etc. They're responsible 0:12:20.120 --> 0:12:23.040 for manning, training, and equipping. This is the supply side. 0:12:23.080 --> 0:12:25.280 They produce the things that people are going to need. 0:12:25.600 --> 0:12:27.320 On the demand side, you have what we call the 0:12:27.400 --> 0:12:31.840 combatant commanders. We have thirteen geographic and functional combatant commands 0:12:31.840 --> 0:12:33.440 that they actually do the war fighting. 0:12:33.480 --> 0:12:34.920 If something happens in China. 0:12:34.960 --> 0:12:38.160 It is the Indo Pacific command that we'll have to 0:12:38.200 --> 0:12:41.160 do that fighting, and they will use the supply that's 0:12:41.160 --> 0:12:44.000 been provided by the services to do that. But they 0:12:44.000 --> 0:12:46.560 don't really have a say and what is being produced, 0:12:46.640 --> 0:12:48.720 what the supply would be, what their opinions are. I mean, 0:12:48.760 --> 0:12:51.640 it's a very indirect sort of say. And I think 0:12:51.720 --> 0:12:54.880 this disaggregation ends up being one of the major bugs 0:12:54.960 --> 0:12:58.679 in our system. So you have thirteen buyers essentially. Now, 0:12:58.720 --> 0:13:01.520 I'm not sure you should ask these folks who have 0:13:01.920 --> 0:13:03.920 three to five year horizons to go build you an 0:13:03.920 --> 0:13:06.760 aircraft carrier. But I do think ninety five percent of 0:13:06.800 --> 0:13:09.040 the things that we need to fight and win fall 0:13:09.120 --> 0:13:11.880 within a time horizon envelope. They're going to care about 0:13:11.960 --> 0:13:14.320 and wear their feedback and their heterogeneous needs. I'm not 0:13:14.360 --> 0:13:17.280 sure why each of them should need exactly the same thing. 0:13:17.679 --> 0:13:20.480 There's so much output to be had by capturing what 0:13:20.600 --> 0:13:22.319 is different about them and how you make that work 0:13:22.360 --> 0:13:25.040 for each of them, rather than averaging alder requirements out 0:13:25.120 --> 0:13:42.160 for the sake of efficiency but at a loss of effectiveness. 0:13:43.240 --> 0:13:48.040 The US hasn't fought a war against a really powerful 0:13:48.240 --> 0:13:50.920 adversary in a long time. There are certainly wars that 0:13:50.960 --> 0:13:56.000 we've fought that have been frustrating outcomes from the US perspective, 0:13:56.000 --> 0:14:01.079 but not necessarily because we were technically outmatched. I understand 0:14:01.120 --> 0:14:04.560 like you make these points, and obviously you make these 0:14:04.600 --> 0:14:07.760 points in part because you think it will benefit your company. 0:14:08.080 --> 0:14:11.199 How do you establish that we're not doing it? Well, 0:14:11.760 --> 0:14:15.199 it seems like we still have an incredibly powerful military. 0:14:15.480 --> 0:14:18.560 What is the evidence that there's actually something wrong with 0:14:18.679 --> 0:14:19.680 the existing system. 0:14:20.080 --> 0:14:20.920 Well, I think we need. 0:14:20.760 --> 0:14:23.000 To look at the world around us here, So I'd 0:14:23.040 --> 0:14:26.080 say that empirically we've lost to Terrence as the West. 0:14:26.360 --> 0:14:28.480 You know, if you go back to roughly twenty fourteen, 0:14:29.040 --> 0:14:33.080 Crimea was annexed by the Russians, the Sprattley Islands were militarized, 0:14:33.440 --> 0:14:36.720 Aroan got shockingly close to getting the bomb, and certain 0:14:36.800 --> 0:14:39.440 policy enabled them to get and continue to get much closer. 0:14:39.480 --> 0:14:41.760 I think that a decade ago we lost to Terrence, 0:14:41.800 --> 0:14:43.680 and that's really accelerated. We've seen that we've had a 0:14:43.720 --> 0:14:46.720 pogram in Israel. We now have North Korean soldiers dying 0:14:46.760 --> 0:14:50.760 in Ukraine, and we have unprecedented Phase zero gravestone operations 0:14:51.080 --> 0:14:54.120 in the South China Sea, not to mention suddenly undersea 0:14:54.160 --> 0:14:57.280 cables keep getting cut and snapping, so that there's this 0:14:57.400 --> 0:15:00.120 sense in which people aren't afraid of us anymore, and 0:15:00.160 --> 0:15:03.040 that the whole point of defense is not to fight 0:15:03.080 --> 0:15:06.240 the war, it's to be so strong that you're deterring conflict. 0:15:06.800 --> 0:15:07.800 And I feel like. 0:15:08.240 --> 0:15:10.840 But just to push back, yeah, but just to push 0:15:10.960 --> 0:15:13.600 back on this for a second, Like, how do you 0:15:13.720 --> 0:15:17.320 establish that this lack of deterrence as you perceive it 0:15:17.360 --> 0:15:21.000 has something to do with where we are technologically along 0:15:21.040 --> 0:15:25.360 the state of the art versus domestic US politics, in 0:15:25.400 --> 0:15:30.600 the appetite after the Iraq War, after Afghanistan, et cetera. 0:15:31.080 --> 0:15:34.600 This sort of like appetite to be active and involved 0:15:34.640 --> 0:15:38.120 in all of these different places. Because we're talking technology, 0:15:38.520 --> 0:15:41.800 we're talking weapon systems. But another aspect of the sort 0:15:41.840 --> 0:15:45.040 of perceived lack of deterrence could just be about American 0:15:45.200 --> 0:15:47.640 appetite to exert our might. 0:15:48.080 --> 0:15:50.320 I do think it's multi factorial. I don't think I 0:15:50.320 --> 0:15:52.840 would discount that to zero there. But let's think about 0:15:52.880 --> 0:15:54.680 this just in terms of the cost of air defense. 0:15:54.960 --> 0:15:57.160 If you're using a two million dollar missile to shoot 0:15:57.200 --> 0:16:00.480 down a two thousand dollars that'd be general, it's more 0:16:00.480 --> 0:16:01.680 like a two hundred dollars drone. 0:16:02.280 --> 0:16:03.120 You have a problem. 0:16:03.400 --> 0:16:05.840 And if it takes you two years to make each 0:16:05.880 --> 0:16:09.400 one of those missiles, you have a bigger problem. And 0:16:09.440 --> 0:16:12.040 so I think our adversaries can sense the ways in 0:16:12.080 --> 0:16:14.280 which we have, you know, and then that then feeds 0:16:14.280 --> 0:16:17.880 into political will. I'm not sure these things are entirely disaggregatable. 0:16:18.480 --> 0:16:22.720 Since Joe brought up political will or political appetite, this 0:16:22.760 --> 0:16:24.480 is one of the other things I wanted to ask you. 0:16:24.560 --> 0:16:26.880 But you know, if you talk about the government maybe 0:16:26.960 --> 0:16:31.280 changing its ways, being more experimental in the way it 0:16:31.320 --> 0:16:37.040 does things, encouraging competition, there's a risk involved in that, right, 0:16:37.160 --> 0:16:41.520 which is, at some point, if something doesn't work, then 0:16:41.880 --> 0:16:44.440 someone in Congress is going to have to stand up 0:16:44.480 --> 0:16:48.120 and explain why the government quote wasted I don't know, 0:16:48.440 --> 0:16:52.640 ten billion dollars on a program that didn't actually work out. 0:16:53.440 --> 0:16:56.160 How do you actually like go about I guess it 0:16:56.320 --> 0:17:01.280 encouraging like the culture, or changing the options around what 0:17:01.440 --> 0:17:03.720 constitutes success and failure. 0:17:04.280 --> 0:17:06.520 I think you put your hand right on the issue here, 0:17:06.560 --> 0:17:08.239 which is how did we get here? You know, if 0:17:08.240 --> 0:17:12.760 we go back to the early Cold War, our industrial 0:17:12.800 --> 0:17:15.480 base looked very different. It was an American industrial base, 0:17:15.560 --> 0:17:18.920 not a defense industrial base. Chrysler made cars and missiles. 0:17:18.960 --> 0:17:21.800 Ford made satellites until nineteen ninety, not that long ago. 0:17:22.119 --> 0:17:24.960 General Mills, the Cereal Company, used everything they learned about 0:17:24.960 --> 0:17:28.560 processing cereal in their mechanics division to make torpedoes, artillery, 0:17:28.600 --> 0:17:32.840 and inertial guidance systems, every camera, car and cereal box Americans. 0:17:32.880 --> 0:17:36.720 Bot was actually subsidizing our national security. So the breath 0:17:36.720 --> 0:17:39.359 of the investments, the commercial R and D investments we 0:17:39.359 --> 0:17:42.120 were making, we could actually use to have price, performance 0:17:42.160 --> 0:17:46.119 and capability improvements in defense. And that really changed. It 0:17:46.200 --> 0:17:49.200 changed very slowly in the seventies and eighties because actually 0:17:49.240 --> 0:17:52.320 the monoposist was not a great customer. People realized we 0:17:52.320 --> 0:17:55.639 should try to sell off these defense businesses. It's too bureaucratic, 0:17:55.680 --> 0:17:58.639 it's too slow. Then it changed all at once. In 0:17:58.760 --> 0:18:00.879 nineteen ninety three, there was this famous dinner at the 0:18:00.880 --> 0:18:03.240 Pentagon called the Last Supper. We had won the Cold War, 0:18:03.840 --> 0:18:06.800 the country wanted a peace dividend. We slashed defense spending 0:18:06.880 --> 0:18:09.359 sixty seven percent, So for every dollar we're spending before, 0:18:09.400 --> 0:18:11.520 we were only going to spend thirty three cents and 0:18:11.600 --> 0:18:14.600 this led to a massive consolidation in defense. We went 0:18:14.640 --> 0:18:18.959 from fifty one prime contractors down to five today. And 0:18:19.000 --> 0:18:22.080 you know, the consequence most folks see in this is 0:18:22.119 --> 0:18:25.800 that this consolidation led to a lack of competition inside 0:18:25.840 --> 0:18:28.520 the industrial base, less choices. I think that happened, but 0:18:28.560 --> 0:18:30.320 I don't think that's the high order bit. The high 0:18:30.359 --> 0:18:33.560 arder bit is that this consolidation bred conformity. This was 0:18:33.600 --> 0:18:37.640 the real beginning of the financialization of defense, of founderless 0:18:37.640 --> 0:18:41.520 companies that were principally run for the shareholder. They really 0:18:41.520 --> 0:18:44.639 thought about the return on capital, what's happening this quarter? 0:18:45.080 --> 0:18:47.320 And that plays into the hands of the monopsinists. You're 0:18:47.359 --> 0:18:49.000 not going to behave like Elon. You don't have the 0:18:49.000 --> 0:18:52.040 grand vision of getting to Mars and as a consequence 0:18:52.080 --> 0:18:55.080 of doing so, reducing launch costs by ninety percent. And 0:18:55.119 --> 0:18:57.639 that's not what it was because we think about it 0:18:57.640 --> 0:18:59.760 as North of Grumman today, but it was Jack Northrope 0:18:59.760 --> 0:19:03.480 Androy Grumman, Lockeed Martin was the Lockheed brothers, and separately 0:19:03.560 --> 0:19:07.080 it was Glenn Martin. We had a very different kind 0:19:07.119 --> 0:19:10.840 of structure of founder driven American capitalism. That meant that 0:19:10.880 --> 0:19:14.199 people were investing in big ideas with bold ambitions. That 0:19:14.560 --> 0:19:16.960 is I think really important to understanding how we've kind 0:19:17.000 --> 0:19:20.200 of so when the Berlin Wall fell, only six percent 0:19:20.560 --> 0:19:23.359 of major weapons systems spending went to defense specialists. The 0:19:23.400 --> 0:19:25.679 rest went to what I call as dual purpose companies, 0:19:25.720 --> 0:19:27.840 the Chryslers of the world, the general mills of the world. 0:19:28.320 --> 0:19:30.639 Today that number is eighty six percent. So we have 0:19:30.720 --> 0:19:33.159 taken our defense industrial base. We've put them on the 0:19:33.160 --> 0:19:36.240 Glopgos Island. They're serving this one custom of the monopsonist. 0:19:36.520 --> 0:19:40.040 They're largely deprived of market signal from the competitive and 0:19:40.119 --> 0:19:44.199 dynamic commercial markets, and they've evolved in certain ways. And 0:19:44.240 --> 0:19:46.000 if you bring them to the mainland, you know, the 0:19:46.000 --> 0:19:48.600 wolves will eat the giant tortoises. And that's not what 0:19:48.640 --> 0:19:51.600 the Chinese industrial base looks like. Chinese primes only get 0:19:51.640 --> 0:19:54.959 twenty seven percent of their revenue from the PLA. The 0:19:55.000 --> 0:19:58.000 rest comes from US, as silly Patsy's buying cheap crap 0:19:58.000 --> 0:20:02.679 on Amazon, it comes from commercial So every now camera, cereal, 0:20:02.760 --> 0:20:05.600 box and car we're buying might be subsidizing lethality against 0:20:05.720 --> 0:20:06.360 US soldiers. 0:20:06.880 --> 0:20:09.679 I get this point, but to me, this also speaks 0:20:09.720 --> 0:20:13.760 to a different dimension, because if this is the story, 0:20:14.320 --> 0:20:18.760 then it can't really just be about decisions made at 0:20:18.800 --> 0:20:22.800 the Pentagon to winnow down the number of official suppliers, 0:20:23.000 --> 0:20:27.119 because this is really an economy wide story, right setting 0:20:27.200 --> 0:20:31.520 aside defense, you know, a company like General Mills is 0:20:31.560 --> 0:20:35.239 in twenty twenty five not going to devote much of 0:20:35.240 --> 0:20:39.480 its internal attention to you know, milling machinery, which is 0:20:39.880 --> 0:20:42.880 I see on Google's what got transformed into a warplan 0:20:43.160 --> 0:20:45.280 that would there would be some other company that they 0:20:45.280 --> 0:20:48.119 would contract out like this phenomenon. Would you call it 0:20:48.160 --> 0:20:54.760 financialization or specialization or prioritizing shareholders being good at one 0:20:54.800 --> 0:20:57.320 thing that you sort of like optimize. This is an 0:20:57.359 --> 0:21:01.840 economy wide phenomenon, but there must be some root of 0:21:01.880 --> 0:21:05.560 it that can't be explained in a change of defense policy, 0:21:05.560 --> 0:21:08.119 because we truly see it across the board, lots of 0:21:08.320 --> 0:21:12.439 US great US companies in Nvidia, for example, choosing not 0:21:12.640 --> 0:21:17.840 to focus on the low margin manufacturing aspect of semiconductors. 0:21:18.080 --> 0:21:23.119 This is an economy wide phenomenon where companies shed these capabilities. 0:21:23.600 --> 0:21:25.720 I think that's right, and you don't need everyone to 0:21:25.760 --> 0:21:27.840 be participating in it, but you could look at you know, 0:21:27.960 --> 0:21:31.480 counter was the first defense company to enter the S 0:21:31.520 --> 0:21:34.800 and P five hundred and forty six years, not from 0:21:34.840 --> 0:21:37.680 mergers or spinouts. And I think that looks much more 0:21:37.720 --> 0:21:41.720 like the sclerotic European capital markets than dynamic US capital markets. 0:21:41.720 --> 0:21:43.680 So I think that tells you something about the rate 0:21:44.080 --> 0:21:47.240 at which we are creating new ideas, new companies in 0:21:47.280 --> 0:21:50.000 the innovation that's happening here now a little bit more 0:21:50.040 --> 0:21:52.879 directly to Tracy's point on how do we avoid, you know, 0:21:52.920 --> 0:21:54.840 getting hauled in front of Congress. I'm not sure you 0:21:54.880 --> 0:21:57.159 avoid that, but I think the risk aversion plays. So 0:21:57.680 --> 0:22:01.119 we built the Pentagon in sixteen months. Kelly Johnson, the 0:22:01.119 --> 0:22:03.159 founder of skunk Works at Lockeed, he built the U 0:22:03.160 --> 0:22:05.800 two spy plane in thirteen months. You know, he built 0:22:05.800 --> 0:22:08.360 forty one airframes in his entire career, which today you're 0:22:08.440 --> 0:22:09.200 lucky if you work on. 0:22:09.119 --> 0:22:11.600 A third of an airframe in your career. So there's 0:22:11.600 --> 0:22:13.760 a sense in which we did have these really great people. 0:22:13.880 --> 0:22:16.080 We bet on them. Not everything they did worked out. 0:22:16.560 --> 0:22:18.639 I love this story of Admiral Raybourn, who was building 0:22:18.640 --> 0:22:21.840 the submarine launch ballistic missile, the Polaris. You know, Congress 0:22:21.880 --> 0:22:24.800 is breathing down his neck. Other admirals were breathing down 0:22:24.840 --> 0:22:25.120 his neck. 0:22:25.119 --> 0:22:26.399 Hey, when is it going to work? Give me the 0:22:26.520 --> 0:22:28.840 like Gant chart of Gan charts, show me the project plan. 0:22:29.240 --> 0:22:31.440 Are you managing this? We're spending a lot of money 0:22:31.440 --> 0:22:31.719 on this. 0:22:32.320 --> 0:22:35.880 And he came up with the latest in decision analysis techniques. 0:22:35.920 --> 0:22:39.159 He used Monty Carlo simulation. It's called perk peert. You 0:22:39.160 --> 0:22:41.720 can research this and it produced the Gan chart of 0:22:41.760 --> 0:22:44.439 Gan charts, and Congress was happy and the admirals were happy. 0:22:44.680 --> 0:22:47.000 But it was all a smokescreen. What he actually did. 0:22:47.040 --> 0:22:49.960 He created this total fiction of Gant charts so that 0:22:50.000 --> 0:22:52.040 he could protect the engineers, so that they could actually 0:22:52.119 --> 0:22:53.720 just do the work. He didn't know when it was 0:22:53.760 --> 0:22:55.120 going to work or how it was going to work. 0:22:55.320 --> 0:22:57.840 But this is the reality of zero to one that 0:22:58.119 --> 0:23:01.840 actually you're doing this messy innovative process, and if you 0:23:01.880 --> 0:23:04.240 try to wrap it in so much process that you 0:23:04.800 --> 0:23:07.959 eliminate all the risks, you can't cut off one end 0:23:08.119 --> 0:23:10.359 of the taiale of distribution of outcomes, like all the 0:23:10.400 --> 0:23:12.920 bad things, without cutting off the good end too. So 0:23:12.960 --> 0:23:16.439 you're locking yourself into a system that's driving mediocrity and 0:23:16.520 --> 0:23:19.439 One of my favorite examples to illustrate this is David Packard, 0:23:19.480 --> 0:23:21.919 co founder of HP. He was the Deputy Secretary of 0:23:21.920 --> 0:23:24.440 Defense the one period of time in the seventies he 0:23:24.720 --> 0:23:27.680 came up with a simple set of rules to improve 0:23:27.760 --> 0:23:31.360 acquisition called the DoD five thousand series seven pages. 0:23:31.560 --> 0:23:32.200 Pretty small. 0:23:32.640 --> 0:23:37.240 Today that five thousand series has turned into two thousand pages. Wow, 0:23:37.240 --> 0:23:40.360 that is an eleven percent compounded growth rate of barnacles 0:23:40.359 --> 0:23:43.040 of bureaucracy. People love to look at the five thousand 0:23:43.080 --> 0:23:45.120 series and they complain, look what Packard did to us, 0:23:45.280 --> 0:23:47.119 you know, but we did this to ourselves. And we 0:23:47.200 --> 0:23:49.240 do this because when anything goes wrong, we need to 0:23:49.240 --> 0:23:51.040 come up with a new rule of how it will 0:23:51.040 --> 0:23:53.679 never go wrong again, which all we're really doing is 0:23:53.680 --> 0:23:55.480 coming up with rules to make sure nothing can go 0:23:55.560 --> 0:23:56.000 right again. 0:23:57.040 --> 0:24:00.360 I'm a sucker for alliteration, but barnacles of bureaucers use 0:24:00.560 --> 0:24:04.360 is a nice phone just to drill down on this point. 0:24:04.560 --> 0:24:09.000 Palenteer has both military and commercial clients. Can you walk 0:24:09.040 --> 0:24:13.679 us through what the differences are in as much granularity 0:24:13.800 --> 0:24:18.240 as you know possible between designing a product for commercial 0:24:18.280 --> 0:24:23.080 client versus designing something for the governments, Like, how do 0:24:23.200 --> 0:24:25.880 those contracts actually come into being, and how do they 0:24:25.920 --> 0:24:26.960 differ from each other. 0:24:27.400 --> 0:24:29.640 Well, one of our headerdox takes, which you can see 0:24:29.640 --> 0:24:32.040 in the line of argument I'm pursuing here, is that 0:24:32.119 --> 0:24:35.159 it shouldn't be that different. And what has made it 0:24:35.200 --> 0:24:37.480 hard for us is we're not designing what we do 0:24:37.560 --> 0:24:41.200 to spect that either the commercial company or the government 0:24:41.200 --> 0:24:43.639 are asking us. We have our own opinion of what 0:24:43.720 --> 0:24:45.440 ought to exist to solve the problem. 0:24:45.760 --> 0:24:47.480 If you don't think it solves the problem, you shouldn't 0:24:47.480 --> 0:24:47.760 buy it. 0:24:47.800 --> 0:24:50.480 But allow us to pursue our opinion, leveraging all the 0:24:50.520 --> 0:24:53.040 stimulus that we have out there in the market and 0:24:53.119 --> 0:24:55.159 to deliver the innovation to you as a consequence of 0:24:55.200 --> 0:24:57.359 doing so. And you know, we would think of this 0:24:57.400 --> 0:24:59.040 is so simple. You go to the Apple store and 0:24:59.040 --> 0:25:00.480 if you like the iPhone, you by it. If you 0:25:00.480 --> 0:25:02.320 don't like the iPhone and you don't buy it. And 0:25:02.359 --> 0:25:03.960 of course that's not how the government likes to think 0:25:03.960 --> 0:25:05.800 of it. They want to come up with a requirements 0:25:05.840 --> 0:25:08.439 document that lists out everything they think they're going to 0:25:08.480 --> 0:25:10.960 need and then have essentially what is a fiction writing 0:25:11.000 --> 0:25:13.400 contest for you to respond to that and say whether 0:25:13.440 --> 0:25:15.159 you can build those things and a what price you 0:25:15.200 --> 0:25:16.119 can build those things? 0:25:16.760 --> 0:25:18.680 And then through that process. 0:25:18.320 --> 0:25:20.200 You're making a decision of who's going to actually then 0:25:20.320 --> 0:25:23.880 go build those things. And I think you're transferring all 0:25:23.960 --> 0:25:26.400 the risk to the taxpayer by doing so, the taxpayer 0:25:26.440 --> 0:25:28.840 has to fund the development. The taxpayer is betting that 0:25:28.840 --> 0:25:32.200 the government got all the requirements right, and the history 0:25:32.200 --> 0:25:35.040 would suggest that's not a great bet. You know, there's 0:25:35.040 --> 0:25:37.400 a reason we believe in the free market. Instead, why 0:25:37.400 --> 0:25:39.600 wouldn't you transfer the risk to a private company, let 0:25:39.600 --> 0:25:40.640 me build it on balance sheet. 0:25:40.680 --> 0:25:42.320 If you don't like it, I go out of business. 0:25:42.560 --> 0:25:45.879 But if you do like it, there's opportunity there. And 0:25:45.920 --> 0:25:47.640 I was able to do that with much less risk 0:25:47.760 --> 0:25:48.640 to the taxpayer. 0:25:49.040 --> 0:25:51.600 But just to play devil's advocate for a second, there 0:25:51.600 --> 0:25:55.320 are reasons that the government might have specific requirements that 0:25:55.359 --> 0:25:58.800 a commercial company doesn't. You know, the government might have 0:25:59.200 --> 0:26:02.399 more stringent rule rus around something like data privacy, something 0:26:02.520 --> 0:26:07.240 like that. Is it really possible to standardize products across 0:26:07.800 --> 0:26:11.880 commercial businesses that might be sensitive in one way or another, 0:26:12.040 --> 0:26:16.840 but military operations that are extremely sensitive. 0:26:17.359 --> 0:26:19.640 I mean I would say we're an existence proof that's possible. 0:26:19.880 --> 0:26:22.520 That's like essentially my technical risk to manage of like 0:26:22.680 --> 0:26:25.399 where do I enable the government to plug in things 0:26:25.400 --> 0:26:26.840 that they need to build a plug in that are 0:26:26.840 --> 0:26:28.960 in fact government unique, but how do I have the 0:26:29.000 --> 0:26:32.040 greatest possible common baseline. One of my favorite examples of 0:26:32.080 --> 0:26:34.920 this is Operation Warp Speed and the supply chain for 0:26:34.960 --> 0:26:37.720 the vaccine. We were able to build that supply chain 0:26:37.760 --> 0:26:41.320 in two weeks for General Purna because we had built 0:26:41.480 --> 0:26:46.080 a similar digital twin for BP to optimize hydrocarbon production 0:26:46.160 --> 0:26:48.920 two years prior. There's no way we could have met 0:26:48.960 --> 0:26:51.159 the moment of need for the nation had we not 0:26:51.320 --> 0:26:57.120 had this broad, diverse commercial stimulus across fifty different industries. 0:27:10.359 --> 0:27:12.600 Talk to us about what specifically yourself, because you're not 0:27:12.720 --> 0:27:16.920 selling missiles, et cetera. You're a software company. I also 0:27:16.960 --> 0:27:19.160 know I think you've probably worked with them for a while, 0:27:19.160 --> 0:27:21.159 but obviously at the end of last year there was 0:27:21.240 --> 0:27:26.000 some announcement where you're working with Andreill Palmer Lucky's company. 0:27:26.440 --> 0:27:30.400 What in your vision is the DoD buying more from 0:27:30.440 --> 0:27:33.359 you years from now than they are today, And talk 0:27:33.400 --> 0:27:35.639 to us about like some of like what the what 0:27:35.720 --> 0:27:36.840 the pitch is in. 0:27:36.800 --> 0:27:38.960 The commercial world, you call it a value chain from 0:27:39.000 --> 0:27:41.080 the hand of your supplier to the hand of your customer. 0:27:41.280 --> 0:27:43.200 But you can think of this as a series of 0:27:43.240 --> 0:27:46.080 decisions that create dependencies on the ones that are downstreaming. 0:27:46.200 --> 0:27:49.119 So you know, you go from procuring things to producing 0:27:49.160 --> 0:27:51.919 things to pricing those things with customers. Simple example of 0:27:51.960 --> 0:27:54.160 the value in the military, you call that a kill 0:27:54.240 --> 0:27:57.479 chain from sensor to shooter, but it's literally the same thing. 0:27:57.480 --> 0:27:58.320 It's a decision chain. 0:27:58.359 --> 0:28:00.480 Maybe if you thought about it more generally, and every 0:28:00.480 --> 0:28:02.560 one of those decisions, you want to make faster than 0:28:02.600 --> 0:28:04.600 your competitors, and you want to make them better than 0:28:04.600 --> 0:28:05.879 your competitors. 0:28:05.720 --> 0:28:07.480 And the way to do that is with AI. 0:28:07.760 --> 0:28:11.560 So we provide an AI decision making platform that spans 0:28:11.560 --> 0:28:14.320 the breadth of your enterprise that allows you to get 0:28:14.400 --> 0:28:17.400 better and better, faster and faster. And so we don't 0:28:17.440 --> 0:28:19.040 make the hardware, but we make the end you're talking 0:28:19.040 --> 0:28:19.480 about on. 0:28:19.480 --> 0:28:22.200 The battlefield, you're talking about software that when you say 0:28:22.280 --> 0:28:25.520 make a decision better than your competitor, it means you're 0:28:25.640 --> 0:28:30.359 selling software that you say, on the battlefield allows some 0:28:30.720 --> 0:28:32.840 entity to fire better than their competitor. 0:28:33.200 --> 0:28:33.640 That's right. 0:28:34.320 --> 0:28:36.879 Or in the commercial world, allows Airbus to build aircraft 0:28:37.160 --> 0:28:40.440 more effectively, or Chrysler to build cars better, or ht 0:28:40.480 --> 0:28:41.560 Hundi to build ships better. 0:28:42.480 --> 0:28:44.360 There's one other thing I wanted to ask you. I 0:28:44.360 --> 0:28:47.000 guess this is very top of mind for everyone at 0:28:47.000 --> 0:28:49.840 the moment, but the Trump administration, there's been a lot 0:28:49.840 --> 0:28:55.560 of rhetoric from Trump about shrinking the military industrial complex, 0:28:55.600 --> 0:28:57.960 which I presume you know. There aren't a lot of 0:28:58.000 --> 0:29:01.200 specifics here, but I presume it means eliminating waste and 0:29:02.280 --> 0:29:07.000 also reducing the overall amount of money that's allocated to 0:29:07.040 --> 0:29:10.080 the military in the form of government subsidies or whatever else. 0:29:10.560 --> 0:29:15.240 How does that square with your vision of revolutionizing the 0:29:15.280 --> 0:29:16.160 Defense Department. 0:29:16.840 --> 0:29:17.960 I think it's pretty congruent. 0:29:18.080 --> 0:29:19.960 I mean, if you thought about the eight hundred and 0:29:20.000 --> 0:29:22.560 eighty billion that we're spending a year, what percentage of 0:29:22.560 --> 0:29:26.040 it do you think we're spending efficaciously to deter our adversaries. 0:29:26.200 --> 0:29:28.960 We could all come up with different numbers, but largely people. 0:29:28.760 --> 0:29:31.120 Would agree there are a lot of legacy things we're 0:29:31.120 --> 0:29:34.280 spending them on. Some of those are because Congress wants 0:29:34.280 --> 0:29:36.040 to protect certain programs, some of them are because the 0:29:36.120 --> 0:29:38.000 services want to protect Curain program Some of them just 0:29:38.000 --> 0:29:40.280 because we haven't yet realized they're not going to meet 0:29:40.280 --> 0:29:43.920 their moment, so I think we could be substantially more efficient. 0:29:43.920 --> 0:29:45.760 We should be thinking about this as an acid allocation 0:29:45.880 --> 0:29:49.880 problem of the capital we have, how is it allocated 0:29:49.920 --> 0:29:52.760 against the problems and the threats that we face, and 0:29:53.040 --> 0:29:54.800 is it kind of the same allocation it was thirty 0:29:54.880 --> 0:29:55.400 years ago? 0:29:55.760 --> 0:29:56.560 How much of that have. 0:29:56.560 --> 0:29:59.600 We retooled and regeared towards the future fight that we're 0:29:59.640 --> 0:30:01.320 likely to a you. 0:30:01.280 --> 0:30:04.000 Know, we did an episode recently someone we've had on 0:30:04.040 --> 0:30:07.880 the podcast a couple of times, Jennifer Palka, talk about software, 0:30:07.960 --> 0:30:10.440 and you know, we were talking about DOGE. 0:30:10.240 --> 0:30:13.280 And this idea that like it's one thing to. 0:30:13.360 --> 0:30:18.360 Identify a problem of government procurement or government operation, it's 0:30:18.360 --> 0:30:21.960 another thing to actually do it. And doing it is 0:30:22.080 --> 0:30:26.600 probably some combination of changing rules that are written down somewhere, 0:30:26.960 --> 0:30:30.479 maybe in Congress, maybe not, maybe bureaucratic rules, and then 0:30:30.480 --> 0:30:33.640 they're sort of like the cultural change too, and that's 0:30:33.680 --> 0:30:36.200 also extremely difficult, and sometimes maybe you just need like 0:30:36.240 --> 0:30:38.760 a sort of bully type who is like very aggressive 0:30:38.880 --> 0:30:42.520 to change. When you think about your vision for intra 0:30:42.920 --> 0:30:46.880 DoD competition or bringing more of that, how much of 0:30:46.920 --> 0:30:50.800 that is changing rules versus changing culture, And how do 0:30:50.840 --> 0:30:54.960 you think about sort of like we're adopting Cham's eighteen theses, 0:30:55.440 --> 0:30:57.240 what does that actually look like in practice? 0:30:57.720 --> 0:30:59.960 Yeah, so I think a lot of it is culture. 0:31:00.280 --> 0:31:03.240 I might call it leadership if we think about Hymen Rickover. So, 0:31:03.280 --> 0:31:05.600 Admiral Ricover built the nuclear Navy. You know, he was 0:31:05.640 --> 0:31:08.920 a five foot tall, pretty middling to bottom of class 0:31:09.040 --> 0:31:12.720 US Navy academy grad didn't even drive a warship. But 0:31:12.920 --> 0:31:15.920 after World War Two, by happemstance, he got to go 0:31:15.960 --> 0:31:19.360 see the remnants of the Manhattan Project and realized, holy cow, 0:31:19.400 --> 0:31:22.840 we could be building nuclear powered submarines and warships with this. 0:31:23.600 --> 0:31:28.000 Admiral Ricover was in place leading that effort for thirty years. 0:31:28.680 --> 0:31:31.320 He was protected by Congress. He was a notoriously difficult 0:31:31.440 --> 0:31:33.720 human to deal with. Admiral Zombwald, who was the Chief 0:31:33.760 --> 0:31:36.360 of Naval Operations, basically the senior most Navy person, said, 0:31:36.360 --> 0:31:38.920 you know, the Navy has three enemies, the Soviet Union, 0:31:39.040 --> 0:31:42.160 the Air Force, and Hymen Rickover. So you can see 0:31:42.160 --> 0:31:44.480 how difficult this human must have been. But he was 0:31:44.600 --> 0:31:47.400 a genius. And I think there's no stimulation of the 0:31:47.400 --> 0:31:49.320 world where we said what if we had only Ricover 0:31:49.360 --> 0:31:50.680 for three years, or what if we had him for 0:31:50.680 --> 0:31:51.280 ten years? 0:31:51.720 --> 0:31:53.640 Like our nuclear navy is one of our. 0:31:53.560 --> 0:31:56.720 Last remaining asymmetric advantages, and he built it in the 0:31:56.720 --> 0:31:57.720 fifties and sixties. 0:31:58.320 --> 0:31:59.320 It's truly spectacular. 0:31:59.320 --> 0:32:00.760 And I think if we go back and look at 0:32:00.760 --> 0:32:03.680 our history here Kelly Johnson building forty air frames, including 0:32:03.720 --> 0:32:06.080 the SR seventy one, John Boyd. 0:32:05.880 --> 0:32:06.960 We call it the F sixteen. 0:32:07.040 --> 0:32:09.560 Maybe more accurately, we should call it John Boyd's plane. 0:32:09.840 --> 0:32:11.840 We call it the Apollo program. Maybe we should call 0:32:11.880 --> 0:32:15.160 it Gene Krantz's program. There's this beautiful humility in this 0:32:15.280 --> 0:32:18.360 kind of Midwestern sensibility we have in America that we 0:32:18.440 --> 0:32:20.760 think of the program as not being defined by a 0:32:20.800 --> 0:32:23.880 single person, but oftentimes it really is. And so to 0:32:23.920 --> 0:32:26.840 the point of culture and leadership ever since the Goldwater 0:32:26.920 --> 0:32:30.480 Nickel reform of I think eighty six, where we prioritize 0:32:30.480 --> 0:32:32.760 this sense of jointness. You know, we want people to 0:32:32.840 --> 0:32:34.640 rotate every two or three years. We want them to 0:32:34.680 --> 0:32:37.560 have lots of different experiences to fill out their BINGO cards. 0:32:37.720 --> 0:32:40.200 It's been very hard to have actually the deep time 0:32:40.240 --> 0:32:42.320 and space that's required to be in a role long 0:32:42.440 --> 0:32:44.880 enough not only to make mistakes, but to learn from 0:32:44.920 --> 0:32:48.320 those stakes so that you can ultimately succeed in delivering 0:32:48.360 --> 0:32:49.440 cutting edge technology. 0:32:49.560 --> 0:32:52.040 You know, I like the idea like, oh, there was 0:32:52.080 --> 0:32:55.120 this guy Kelly Johnson, he made forty one planes, etc. 0:32:55.520 --> 0:32:57.680 And why can't we get back to that where like 0:32:57.720 --> 0:32:59.760 someone is just some like visionary and they like build 0:32:59.760 --> 0:33:02.640 all the stuff. On the other hand, like, it's clear 0:33:02.760 --> 0:33:07.440 that like objectively, airplanes must have been much simpler in 0:33:07.600 --> 0:33:11.040 some sense because we know the right brothers, for example. 0:33:10.680 --> 0:33:12.400 Invented and that was just two of them. 0:33:12.760 --> 0:33:17.840 It is inconceivable today on any scale the two individuals 0:33:18.240 --> 0:33:21.600 could go into a barn and build an airplane. I mean, so, 0:33:21.760 --> 0:33:24.720 like I get this story that like cultural change, et cetera. 0:33:24.760 --> 0:33:29.600 But just the sheer technological complexity of the cutting edge 0:33:29.680 --> 0:33:33.880 technology doesn't that just sort of like make some of 0:33:33.920 --> 0:33:36.160 these stories impossible to replicate today? 0:33:36.960 --> 0:33:39.920 My counterpoint would be SpaceX Elon can build a starship 0:33:39.960 --> 0:33:42.080 faster than the FA can give them launch approval. 0:33:42.480 --> 0:33:44.040 What they've done in the last fifteen years. 0:33:44.040 --> 0:33:45.960 When I grew up in the shadow of the space coast, 0:33:46.040 --> 0:33:48.080 I used to wake up to the double sonic booms 0:33:48.120 --> 0:33:51.440 of the Shuttle re entering for landing at Kennedy. The 0:33:51.440 --> 0:33:53.800 Shuttle was amazing. It inspired me in so many ways 0:33:53.800 --> 0:33:57.000 to follow, you know, stem But the launch cost was 0:33:57.040 --> 0:34:01.240 fifty thousand dollars a kilogram to orbit. With starship heavy reuse, 0:34:01.280 --> 0:34:03.640 we're looking at ten to twenty dollars. I'm not missing 0:34:03.640 --> 0:34:06.240 any zeros there ten to twenty dollars, and we were 0:34:06.280 --> 0:34:08.920 stuck on a linear cost curve between twenty thousand dollars 0:34:08.960 --> 0:34:12.680 and fifty thousand dollars until SpaceX came around. And I 0:34:12.680 --> 0:34:14.719 think the timelines they've done this, and people would say 0:34:14.760 --> 0:34:17.080 that's not possible. It's within a small lifespan of someone 0:34:17.120 --> 0:34:19.319 working on these rockets, and it's largely been the same 0:34:19.360 --> 0:34:21.840 people who've been leading these efforts since the very beginning. 0:34:22.280 --> 0:34:25.160 So I think when we take new approaches, we can 0:34:25.200 --> 0:34:27.279 still do these things. We can still do these things 0:34:27.360 --> 0:34:30.760 very fast. I think one of America's great strengths. 0:34:30.800 --> 0:34:31.640 If we were. 0:34:31.400 --> 0:34:34.120 Literally at war, we would throw all these rule books 0:34:34.160 --> 0:34:37.279 away and we would just be entrepreneurs again. We'd be 0:34:37.360 --> 0:34:39.520 very innovative, and we'd be very focused on the primacy 0:34:39.560 --> 0:34:42.680 of winning. But the sort of sclerosis that sets in 0:34:42.719 --> 0:34:45.680 with peace. Time of following all these rules without a 0:34:45.719 --> 0:34:48.080 critical eye towards which rules are making us better and 0:34:48.080 --> 0:34:51.520 which ones are making us worse, you accumulate them. John 0:34:51.560 --> 0:34:53.719 Boyd I used him as an example. He never made 0:34:53.719 --> 0:34:56.960 it past colonel because he was so difficult, he was unpromotable. 0:34:57.520 --> 0:34:59.520 We tend to give credit to someone like John Boyd 0:34:59.520 --> 0:35:00.000 as we should. 0:35:00.560 --> 0:35:01.360 What we don't give. 0:35:01.280 --> 0:35:03.400 Enough credit to is the three star Air Force general 0:35:03.400 --> 0:35:06.080 that protected Boyd his entire career. There was the talent, 0:35:06.160 --> 0:35:08.320 but there was also the talent manager who understood that 0:35:08.320 --> 0:35:10.359 there was something special here and it was worth going 0:35:10.400 --> 0:35:12.560 out of their way to protect this person. The same 0:35:12.640 --> 0:35:14.640 is true for Rickover. He didn't survive on his own. 0:35:14.680 --> 0:35:17.440 Congress deserves a lot of credit for protecting him. So 0:35:17.560 --> 0:35:21.080 many admirals, so many civil political appointees tried to get 0:35:21.120 --> 0:35:24.320 him fired, and no one succeeded until Layman in the eighties. 0:35:24.360 --> 0:35:26.520 And arguably Layman succeeded for the right reasons. 0:35:27.680 --> 0:35:30.200 I'm glad you brought up SpaceX, because you know, you're 0:35:30.239 --> 0:35:35.320 talking about encouraging commercial companies to do more defense stuff 0:35:35.320 --> 0:35:38.120 and the sort of co mingling and the benefits that 0:35:38.160 --> 0:35:40.080 would come with that. But a lot of people would 0:35:40.080 --> 0:35:44.200 look at SpaceX and say, well, it's kind of worrying 0:35:44.480 --> 0:35:48.120 that we have a commercial company which is now dominant 0:35:48.360 --> 0:35:51.800 in US space exploration. Or they might look at Starlink 0:35:51.880 --> 0:35:54.920 and say, like, oh wait, a second Elon Musk owns 0:35:55.000 --> 0:35:58.920 all these really important satellites, and maybe that's not ideal 0:35:59.120 --> 0:36:03.440 for the US. Maybe the US government wants more diversification 0:36:03.800 --> 0:36:10.040 in its suppliers of extremely important infrastructure and technology. How 0:36:10.040 --> 0:36:12.960 do you ensure, you know, as more commercial companies come 0:36:13.080 --> 0:36:17.200 into the space theoretically, how do you sort of deal 0:36:17.320 --> 0:36:19.279 with those types of concerns. 0:36:20.000 --> 0:36:22.400 Well, I think one of the great strengths of America 0:36:22.520 --> 0:36:24.120 is our skepticism towards power. 0:36:24.520 --> 0:36:27.200 So here we are. We've reduced launch costs from fifty. 0:36:27.000 --> 0:36:29.400 Thousand dollars a kilogram to ten dollars a kilogram, but 0:36:29.400 --> 0:36:31.279 we're still worried about the cumulation of power, and I 0:36:31.280 --> 0:36:33.440 think we should be. But the on the other hand, 0:36:33.440 --> 0:36:36.319 to look at that without acknowledging the massive effectiveness, like 0:36:36.560 --> 0:36:40.480 our assured access to space exists because of SpaceX, our 0:36:40.520 --> 0:36:43.680 dominance in this category, it has become a national security strength. 0:36:43.719 --> 0:36:44.399 So I think we have to. 0:36:44.360 --> 0:36:49.359 Recognize that We've gotten this massive, outsize, nonlinear benefit, and 0:36:49.440 --> 0:36:50.240 we have these concerns. 0:36:50.280 --> 0:36:52.160 And the way to address these concerns is have more options, 0:36:52.200 --> 0:36:52.760 more competition. 0:36:52.800 --> 0:36:55.160 We need more people who could achieve launch costs that 0:36:55.200 --> 0:36:58.400 are actually competitive. You know, when the alternative is Boeing 0:36:58.520 --> 0:37:01.759 in the star liner, that's not a real alternative. 0:37:02.760 --> 0:37:06.560 What should we be watching for with the new administration? 0:37:06.840 --> 0:37:10.040 Obviously we have the new head of the dd IT, 0:37:10.160 --> 0:37:13.880 he says, in the months ahead, who are either the 0:37:13.960 --> 0:37:18.520 individuals or bureaus or whatever where we like, Oh, something 0:37:18.680 --> 0:37:22.720 is meaningfully changing here in terms of how we buy defense. 0:37:23.440 --> 0:37:24.160 It's a good question. 0:37:24.239 --> 0:37:26.040 I mean, I have a lot of confidence in the 0:37:26.040 --> 0:37:29.000 incoming team here, Folks like Emil Michael really coming from 0:37:29.000 --> 0:37:32.760 the tech industry, leading RNE, folks like Steve Finberg who've 0:37:32.760 --> 0:37:35.840 been in around many of these challenges in defense in 0:37:35.880 --> 0:37:37.799 the defense industry for a long period of time on 0:37:37.840 --> 0:37:40.800 the private side at SERBS. So that gives me a 0:37:40.840 --> 0:37:43.400 great degree of confidence that these folks actually understand what 0:37:43.400 --> 0:37:46.000 the problems are and that there is a need to 0:37:46.040 --> 0:37:49.080 fundamentally change how we approach these things. I don't expect 0:37:49.120 --> 0:37:52.279 it to be perceived as being wildly discontinuous because the 0:37:52.360 --> 0:37:55.239 answer is not to get rid of America's primes, like 0:37:55.360 --> 0:37:56.640 America needs her primes. 0:37:56.680 --> 0:37:58.280 Like the things that Lockheed. 0:37:57.880 --> 0:38:01.399 And Northrope and the other three of them are exquisite, 0:38:01.480 --> 0:38:05.839 They are incredibly high tech. They're also low volume, and 0:38:06.320 --> 0:38:08.600 they're not the entire solution. So it goes back to 0:38:08.600 --> 0:38:10.680 this idea of ascid allocation, and I think that would 0:38:10.719 --> 0:38:13.160 be the first thing that we would see as a 0:38:13.200 --> 0:38:16.000 sign of change, which is a changing of how we're 0:38:16.000 --> 0:38:17.120 allocating those assets. 0:38:17.320 --> 0:38:19.000 I think a lot of the ideas. 0:38:18.560 --> 0:38:21.200 That Senator Wicker has put forward in the Forged dec 0:38:21.560 --> 0:38:24.160 where the first step is to cut red tape, is 0:38:24.239 --> 0:38:25.759 a big part of this, which is, I think we 0:38:25.880 --> 0:38:28.080 have all the talent in the world. This department is 0:38:28.120 --> 0:38:29.200 extraordinarily talented. 0:38:29.200 --> 0:38:29.920 We have the people. 0:38:30.320 --> 0:38:31.839 We need to actually just put them in the role 0:38:31.920 --> 0:38:35.000 and give them the discretion to actually execute these programs. 0:38:35.080 --> 0:38:37.600 Understanding to Tracy's point earlier, some of these are going 0:38:37.680 --> 0:38:41.120 to fail, probably in pretty spectacular ways, but some of 0:38:41.160 --> 0:38:44.040 them are going to succeed in very spectacular ways, and 0:38:44.080 --> 0:38:46.759 we just need a few of our asymmetric capabilities to 0:38:46.800 --> 0:38:48.760 really work to preserve deterrence. 0:38:49.440 --> 0:38:52.800 So I don't know if Elon Musk listens to this podcast, 0:38:52.840 --> 0:38:56.280 but I do know that he sometimes reads tweets about 0:38:56.320 --> 0:38:59.239 this podcast, or at least he did once and responded 0:38:59.239 --> 0:39:01.880 to it. But what would be your big piece of 0:39:01.920 --> 0:39:04.959 advice for DOGE as it sets out on the very 0:39:05.080 --> 0:39:09.440 very large task of eliminating waste at the government. You 0:39:09.440 --> 0:39:11.600 know there are sort of infinite ways you could do 0:39:11.680 --> 0:39:13.920 this because the government is so sprawling. 0:39:14.440 --> 0:39:16.839 Gosh, I mean, far be it for me to tell 0:39:16.960 --> 0:39:18.839 DOGE how to do this. It seems like a group 0:39:18.880 --> 0:39:22.360 of experts here. But my broad advice nineteen years crawling 0:39:22.400 --> 0:39:24.880 through and fighting the bureaucracy and God, is that there 0:39:24.880 --> 0:39:27.560 are two things that really matter. The first is that 0:39:27.640 --> 0:39:30.520 we should push more decision making authority on what to 0:39:30.560 --> 0:39:32.560 buy and how to buy these things to our combatant 0:39:32.560 --> 0:39:35.080 commanders to introduce strategic competition. 0:39:35.560 --> 0:39:37.120 You don't need to give them the entire budget. 0:39:37.120 --> 0:39:38.719 I'm not sure they would succeed if they were given 0:39:38.719 --> 0:39:41.160 the entire budget, But even having five percent of it 0:39:41.280 --> 0:39:44.279 to express where they disagree with the market signals, or 0:39:44.320 --> 0:39:46.520 to be able to decide which of the services are 0:39:46.520 --> 0:39:48.600 going to build something for them, I think starts to 0:39:48.640 --> 0:39:51.880 introduce the necessary vector for new entrants to get on 0:39:51.880 --> 0:39:55.400 the field and new ideas to be tested in reality. 0:39:55.640 --> 0:39:57.840 And the second part to that is a very concrete 0:39:57.880 --> 0:39:59.920 way of how we could do that is we could 0:40:00.040 --> 0:40:03.560 introduced this notion of competing programs more formally. You know, 0:40:03.600 --> 0:40:05.560 we used to have it in formally, like I mentioned earlier, 0:40:05.640 --> 0:40:08.080 how we had four competing programs for the submarine launch 0:40:08.080 --> 0:40:12.120 ballistic missile. That does not happen today because that duplication. 0:40:11.800 --> 0:40:12.960 Is viewed as heresy. 0:40:13.360 --> 0:40:16.720 You know, that would be being irresponsible with tax payer money. 0:40:16.800 --> 0:40:19.440 So before we even get started, we need to agree 0:40:19.600 --> 0:40:22.680 x ante on a unitary effort. I'll give you a counterfaction. 0:40:23.000 --> 0:40:25.960 Should we have had one F thirty five. You know, 0:40:25.960 --> 0:40:28.200 we conceived of the F thirty five in the mid nineties, 0:40:28.640 --> 0:40:30.399 and it was supposed to be all things to all people. 0:40:30.440 --> 0:40:32.680 There was going to be a variant for the Marines 0:40:32.760 --> 0:40:35.560 and the Navy and the air Force. And you know, 0:40:35.640 --> 0:40:38.040 if we just have a single platform, it'll be Swiss 0:40:38.120 --> 0:40:41.200 Army Knife of fighter jets. And now you know it 0:40:41.239 --> 0:40:44.880 is it's pretty spectacular plane, but it's also thirty percent available, 0:40:44.880 --> 0:40:46.879 and it's going to cost US two trillion dollars. Maybe 0:40:46.880 --> 0:40:49.640 a counterfaction would have been, we're going to have an 0:40:49.719 --> 0:40:51.960 F thirty five and F thirty six and F thirty seven, 0:40:52.520 --> 0:40:54.560 and none of them have the birthright to win. And 0:40:54.640 --> 0:40:56.320 in fact, we're going to go to the quote unquote 0:40:56.400 --> 0:40:59.240 legacy platforms, the F eighteen, the F sixteen, the F fifteen, 0:40:59.239 --> 0:41:00.680 and we're going to say, here's a little bit of 0:41:00.680 --> 0:41:03.600 money for you guys to innovate and to actually be 0:41:03.719 --> 0:41:05.759 so good that I decided I canceled the new programs, 0:41:06.200 --> 0:41:09.520 but instead we said you're the old no more money 0:41:09.520 --> 0:41:12.040 for you. Before the new thing even exists, we've already 0:41:12.080 --> 0:41:13.920 told you that you're going to be sunset and we 0:41:13.920 --> 0:41:15.920 don't have a bird in hand. And I think this 0:41:16.040 --> 0:41:18.880 is one of the major things that slows down innovation. 0:41:18.960 --> 0:41:22.080 So institutionalizing the concept of the competing PM, I think 0:41:22.160 --> 0:41:23.960 is very important. I'll give you an anecdote from my 0:41:23.960 --> 0:41:27.480 own experience. We were the software prime on a hardware project. 0:41:27.480 --> 0:41:31.279 We were building a satellite ground station on wheels, and 0:41:31.640 --> 0:41:33.799 in the midst of this competition, it was Palncer versus 0:41:33.840 --> 0:41:36.480 Atheon and the teams that we had underneath us. In 0:41:36.520 --> 0:41:39.799 the midst of this competition, chat GPT came out and 0:41:39.880 --> 0:41:41.239 I thought, this is great. You know, this is a 0:41:41.360 --> 0:41:43.640 very complicated piece of equipment. When my son is in 0:41:43.680 --> 0:41:45.880 the back of this vehicle, I don't want him flipping 0:41:45.880 --> 0:41:47.720 through a ten thousand page PDF manual. 0:41:47.760 --> 0:41:49.280 I want him to be able to chat with the bot. 0:41:49.120 --> 0:41:51.520 To figure out how to fix the vehicle or troubleshoot 0:41:51.560 --> 0:41:53.920 any situation that he's in. And I went to the 0:41:53.920 --> 0:41:56.120 PM and said, I'd like to give you this chatbot, 0:41:56.440 --> 0:41:58.080 you know, for free. It's just going to be a 0:41:58.080 --> 0:42:00.719 better product. And he said, there's no reques vironment for that. 0:42:01.200 --> 0:42:03.600 Even though there's no I'm not asking for a resource. 0:42:03.920 --> 0:42:06.360 You know, I guess the perceived possible risk for schedule. 0:42:06.400 --> 0:42:07.560 There's no incentive to do it. 0:42:07.600 --> 0:42:08.000 Why do it. 0:42:08.000 --> 0:42:09.960 I've already decided what it is we needed, and it's 0:42:10.000 --> 0:42:12.040 not on it. Even though the world's changed around us, 0:42:12.040 --> 0:42:14.439 even though the competition takes two years and two years 0:42:14.440 --> 0:42:17.719 in infinite time and technology, let's not even consider it. 0:42:17.760 --> 0:42:19.960 So by the time we're going to end up considering it, 0:42:19.960 --> 0:42:21.680 it'll have been an obvious thing and we'll probably get 0:42:21.719 --> 0:42:23.520 to it like ten years from now. But I'll give 0:42:23.560 --> 0:42:25.640 you a counterfaction where what if there are two pms, 0:42:26.040 --> 0:42:28.759 one for Palenteer, one for the raytheon team, and they 0:42:28.840 --> 0:42:30.879 woke up every day thinking about how they were going 0:42:30.880 --> 0:42:34.480 to destroy and humiliate and win the competition. I'm pretty 0:42:34.480 --> 0:42:36.880 sure that PM would have said, absolutely, let's show up 0:42:36.920 --> 0:42:39.239 to the next soldier touch point with this great capability. 0:42:39.440 --> 0:42:40.399 I can't wait to win. 0:42:40.960 --> 0:42:43.640 And I think if our only competing point is at 0:42:43.680 --> 0:42:46.600 a period of great conflict in war, that's too little, 0:42:46.640 --> 0:42:49.319 too late. We need to have many competitions amongst each 0:42:49.360 --> 0:42:52.320 other all the time so that we're continuously innovating. 0:42:52.640 --> 0:42:55.719 Chum Soundkar, Thank you so much, Really appreciate you coming 0:42:55.719 --> 0:42:58.480 on on odd lotch and great to talk to you 0:42:58.560 --> 0:43:02.759 again after all of these years on much heavier topics 0:43:02.920 --> 0:43:04.439 than steam. 0:43:04.080 --> 0:43:06.399 Buttons, which I think is what we talked about last time. 0:43:06.640 --> 0:43:07.680 Well, thank you guys for having me. 0:43:20.400 --> 0:43:20.800 Tracy. 0:43:20.920 --> 0:43:24.879 I like to believe the idea that we could have 0:43:25.520 --> 0:43:29.279 intra military competition like it's a nice it's a really 0:43:29.360 --> 0:43:30.280 nice sounding idea. 0:43:30.480 --> 0:43:35.320 Yes, intuitively sounds nice. I guess my reticence is slightly 0:43:35.600 --> 0:43:38.880 you know, Okay, everyone can agree monopolies are bad, monopsony 0:43:39.040 --> 0:43:42.479 is bad. But I guess my reticence is you brought 0:43:42.560 --> 0:43:46.920 up the specialization point, right, Like the idea that companies 0:43:46.960 --> 0:43:50.279 can get really good and efficient by doing one thing, 0:43:50.400 --> 0:43:54.239 and maybe that one thing is developing ballistic missiles or 0:43:54.280 --> 0:43:57.680 whatever like that exists in the world for a reason, 0:43:57.719 --> 0:43:59.920 and there are lots of examples of that, and you know, 0:44:00.080 --> 0:44:04.520 there are anti examples of that. Boeing does both military 0:44:04.719 --> 0:44:07.400 and commercial, and I would say at the current moment 0:44:07.440 --> 0:44:12.080 in time, Boeing has not been especially successful. So there's 0:44:12.160 --> 0:44:14.279 that point, which I think is a good one. And 0:44:14.320 --> 0:44:18.160 then the other concern I guess is the one around 0:44:18.600 --> 0:44:21.799 you know, corporate dominance. Yeah, the idea that while you 0:44:21.840 --> 0:44:24.960 bring more commercial players into the market for something that 0:44:25.080 --> 0:44:30.080 is really essential, as Sham emphasized my time structure. Yeah, 0:44:30.120 --> 0:44:32.320 there's a little bit of a tension there, a bigger 0:44:32.360 --> 0:44:34.040 than a little bit, I should say. 0:44:34.160 --> 0:44:37.960 No, absolutely, I do take his point at the end 0:44:38.000 --> 0:44:39.839 that it would be nice. I mean, I think there 0:44:39.840 --> 0:44:42.040 are a lot of points, but one is the idea, 0:44:42.200 --> 0:44:44.960 like it probably makes sense that if you're going to 0:44:45.040 --> 0:44:49.319 have competition, that means you're going to have failures, that 0:44:49.360 --> 0:44:51.680 means you're going to have wasted public money. That it's 0:44:51.719 --> 0:44:54.759 like a cultural thing that strikes me is like very difficult. 0:44:54.840 --> 0:44:58.120 But obviously in the private sector, big winners emerge and 0:44:58.120 --> 0:45:00.360 we don't usually talk that much about all of the 0:45:00.360 --> 0:45:02.719 ones that were losers, but they had to be there. 0:45:03.120 --> 0:45:06.200 It strikes me as you know, like a tremendously difficult task. 0:45:06.480 --> 0:45:09.000 It also seems like it would be nice to have 0:45:09.160 --> 0:45:13.000 like good sense of the state of our defense industry 0:45:13.160 --> 0:45:17.120 and not suddenly discover various weaknesses at a time of 0:45:17.680 --> 0:45:21.239 actual kinetic warfare or were being put to the test. 0:45:21.280 --> 0:45:23.600 So I thought, anyway, we got to do way more 0:45:23.719 --> 0:45:26.000 on this topic, and I appreciated that as a sort 0:45:26.000 --> 0:45:28.839 of way into it, even obviously coming from a very 0:45:28.840 --> 0:45:30.400 specific perspective. 0:45:30.000 --> 0:45:33.000 A launchpad into the topic. But I do agree the 0:45:33.080 --> 0:45:36.160 idea of being able to change course seems like a 0:45:36.239 --> 0:45:39.760 really important one. And the story, you know, the example 0:45:39.800 --> 0:45:43.400 he gave about rfq's growing from like twenty pages to 0:45:43.480 --> 0:45:46.480 two thousand pages, that's something we hear over and over again. 0:45:46.680 --> 0:45:50.480 I could also probably just listen to stories about you know, 0:45:50.640 --> 0:45:54.680 random guys in Ohio building planes and the nineteen year. 0:45:54.600 --> 0:45:57.160 You have truly reached Middle ages. 0:45:58.040 --> 0:46:01.480 So Boomer, I'm so boomer with this. This is totally true. 0:46:01.600 --> 0:46:02.839 All right, shall we leave it there. 0:46:02.920 --> 0:46:03.640 Let's leave it there. 0:46:03.920 --> 0:46:06.719 This has been another episode of the Odd Loots podcast. 0:46:06.800 --> 0:46:09.760 I'm Tracy Alloway. You can follow me at Tracy Alloway. 0:46:09.880 --> 0:46:12.880 And I'm Jill Wisenthal. You can follow me at the Stalwart. 0:46:13.160 --> 0:46:17.120 Follow our guest hum Soundcar. He's at Ssundcar and you 0:46:17.120 --> 0:46:20.480 can read his big thoughts about defense at the website 0:46:20.600 --> 0:46:24.879 eighteen feces dot com. Follow our producers Carmen Rodriguez at 0:46:24.920 --> 0:46:28.600 Carmen armand dash O Bennett at Dashbot and Killbrooks at Kilbrooks. 0:46:28.840 --> 0:46:31.480 From our Oddlots content, go to Bloomberg dot com slash 0:46:31.520 --> 0:46:34.640 odd Lots. 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