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<v Speaker 1>Welcome to mid Rats with sal from Commander Salamander, an

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<v Speaker 1>Eagle one from Eagle Speak at Seer Shore your home

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<v Speaker 1>for a discussion of national security issues and all things maritime.

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<v Speaker 1>And welcome board everybody for another edition of mid Rats.

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<v Speaker 1>We really appreciate you joining today. We just want to

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<v Speaker 1>go ahead and dive in directly to our guest today,

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<v Speaker 1>Tom Suncar. He is the chief technology officer for a

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<v Speaker 1>pall Andeer, and today we are going to dive into

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<v Speaker 1>a really robot piece of work that he's done looking

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<v Speaker 1>at the macro Department of Defense here for the United States,

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<v Speaker 1>and we'll have links for it in the show page.

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<v Speaker 1>It's the Defense Reformation and it based upon something that

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<v Speaker 1>really kind of caught my eye is I'm looking at

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<v Speaker 1>another podcast right now that I do during my commute.

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<v Speaker 1>It's Dirk Hoffin's a History of the Germans podcast, and

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<v Speaker 1>we just reached the point that we're going into the

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<v Speaker 1>Reformation with Martin Luther, and the unbearingly describes what led

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<v Speaker 1>Martin Luther to that point in the condition of the church.

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<v Speaker 1>And I got to give a lot of credit here

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<v Speaker 1>because in the kickoff, we don't have one of these

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<v Speaker 1>slow boils where are we going here? And I just

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<v Speaker 1>want to do a right at the masthead quote. As

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<v Speaker 1>a nation, we are in an undeclared state of emergency.

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<v Speaker 1>And also in the start you had this kind of

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<v Speaker 1>extended quote that lets you know that what you have

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<v Speaker 1>to follow is going to be clear and right to

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<v Speaker 1>your faith. Well extended quote, your quote. This is a

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<v Speaker 1>Cold War two. The West has empirically lost to terrence.

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<v Speaker 1>We must respond to this emergency to regain it. We

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<v Speaker 1>have a peer adversary China. Near peer is a shibble

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<v Speaker 1>of a euphemism to avoid the embarrassment of acknowledging we

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<v Speaker 1>have peers when we were once peerless. And with that

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<v Speaker 1>some welcome to Midraps.

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<v Speaker 2>Well, thank you guys for having me.

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<v Speaker 1>And like I kind of mentioned in the in the

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<v Speaker 1>opening here, for those that study European history, the Reformation

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<v Speaker 1>and what Martin Luther did was a serious act at

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<v Speaker 1>a serious point right up there in front and talk

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<v Speaker 1>for a bit. What as you are looking through the

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<v Speaker 1>through the challenges and the recommendations that that you think

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<v Speaker 1>that we need to to better improve how we provide

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<v Speaker 1>for the national defense, what resonated with you at that

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<v Speaker 1>point in history?

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<v Speaker 2>Well, I think a key part of the Reformation is

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<v Speaker 2>realizing that that the church religion is such a core

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<v Speaker 2>component to Western civilization, and that it had become sclerotic,

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<v Speaker 2>it had picked up some barnacles along its multi millennia

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<v Speaker 2>history that needed at least some fresh thinking and as

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<v Speaker 2>much credit as I'm almost viewing this dispassionately as someone

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<v Speaker 2>looking at the Reformation, it was both the Reformation and

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<v Speaker 2>the counter Reformation, the Revival that led to great changes,

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<v Speaker 2>And I think having the sort of fresh thinking saying

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<v Speaker 2>things that are heretical but possibly true, enables us to

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<v Speaker 2>have that sort of robust conversation and reform the institutions

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<v Speaker 2>from within.

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<v Speaker 1>Yeah.

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<v Speaker 3>One of the questions I had as I was reading

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<v Speaker 3>through your work and looking at some of the other

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<v Speaker 3>stuff you've done, is how do we unleash creativity given

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<v Speaker 3>the structures we have now? And I think you've talked

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<v Speaker 3>about the Last Supper in the first Breakfast, how do

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<v Speaker 3>we unchain people to be innovative and meet the challenge

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<v Speaker 3>you see in front of us.

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<v Speaker 2>It starts with understanding that the structures were created to

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<v Speaker 2>serve us at a point in time. You know, the

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<v Speaker 2>structures are not sacricynct we have to understand that we

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<v Speaker 2>built these structures because we were organizing ourselves around a problem.

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<v Speaker 2>And this is one of the great lessons I've learned

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<v Speaker 2>over twenty years at Palenteer, is that you get a

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<v Speaker 2>lot by organizing and then committing yourself to continuously reorganize

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<v Speaker 2>around the problem as it exists today, not as it

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<v Speaker 2>existed in the past. And that's where that's that's the

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<v Speaker 2>starting point for accumulating all these barnacles, which is like

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<v Speaker 2>you were right in the past and you're just wrong

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<v Speaker 2>in the present, and that error you're letting it accumulate.

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<v Speaker 2>And I think there's a very human reason we do that.

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<v Speaker 2>We like predictability, we like organ we like legibility in

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<v Speaker 2>our organizational structures. It can feel like there's thrash when

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<v Speaker 2>you're changing things, but that might also be needed. A

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<v Speaker 2>lot of these things are dialectical, right Like if you

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<v Speaker 2>have if it's all thrash and you're changing things all

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<v Speaker 2>the time, nothing works. On the other end, if there's

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<v Speaker 2>no thrash and you're changing nothing, nothing works.

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<v Speaker 1>People are always calling for reform, and a lot of

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<v Speaker 1>times it just never bears fruit because the timing's not right.

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<v Speaker 1>And for those that aren't familiar with the report. It

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<v Speaker 1>was put out kind of surprisingly right around Halloween, but

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<v Speaker 1>it was before the election, and I know this is

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<v Speaker 1>not something that you pounded out over a couple of

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<v Speaker 1>hours on a weekend. There's a lot of work involved here,

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<v Speaker 1>so this is going on for months ahead of time,

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<v Speaker 1>so it's not something that was done. Okay, Well, I

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<v Speaker 1>know who's coming into the new administration, so what can

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<v Speaker 1>I shape for that? But we're reaching a point where

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<v Speaker 1>some people call it you whether it's chaos is a

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<v Speaker 1>ladder or change is an opportunity. But this is a

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<v Speaker 1>nice moment in time where you're going to have new

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<v Speaker 1>people with new perspectives and an open mind to look

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<v Speaker 1>at things new. And again, when you look at a

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<v Speaker 1>lot of the people who are coming into the administration

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<v Speaker 1>are advising them, there is this undercurrent of let's do

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<v Speaker 1>a fresh look, let's do a clean sheet, let's have

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<v Speaker 1>a different view of how we're trying to do business.

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<v Speaker 1>Are you seeing this as one of those opportunities for

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<v Speaker 1>you and other ones that have been looking for reforms

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<v Speaker 1>and not just asking for it, but are saying literally,

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<v Speaker 1>here are by eighteen points as an entering argument for discussion.

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<v Speaker 1>Do you see that from a timing perspective, that you

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<v Speaker 1>really have more of an opportunity you may have thought

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<v Speaker 1>in January of twenty twenty four.

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<v Speaker 2>Unquestionably the time is now for this. There's a golden

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<v Speaker 2>opportunity to do this. There's an emerging consensus that maybe

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<v Speaker 2>people weren't willing to say many of these things out loud,

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<v Speaker 2>but both inside and outside the building, there was a

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<v Speaker 2>huge amount of resonance with this content because people are

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<v Speaker 2>thinking it. And I think there's something to be said

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<v Speaker 2>that the new team coming in you see a lot

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<v Speaker 2>of first principle thinking, and that's what we kind of

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<v Speaker 2>need right now. We need to re examine this from

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<v Speaker 2>from top to bottom, and we need to say, well,

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<v Speaker 2>why can't it be this way? You know, we've been

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<v Speaker 2>I would say the critique would be, we've been overly

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<v Speaker 2>committed to historical playbooks that don't seem to be working.

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<v Speaker 2>And that sort of improvisational, dynamic thinking is an American strength,

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<v Speaker 2>you know, and I mean this in the best possible way.

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<v Speaker 2>We're crazy as Americans, and so that willingness to reconsider, reinvent,

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<v Speaker 2>to reorganize it is going to play to our strength.

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<v Speaker 2>Once we hit that precipice of believing that absolute changes needed.

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<v Speaker 3>Do you think this is how much of this is

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<v Speaker 3>connected to the rise of the Silicon Valley and people

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<v Speaker 3>who are dealing with technologies that didn't exist thirty or

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<v Speaker 3>forty years ago. Does this open up their minds more

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<v Speaker 3>to being able to adjust to a new world that

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<v Speaker 3>perhaps people who grew up like I did in a

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<v Speaker 3>more corporate world where you really didn't want to stick

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<v Speaker 3>your head out too far.

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<v Speaker 2>Well, you know, the older I get, the more I

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<v Speaker 2>realized there's nothing new under the sun. As much as

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<v Speaker 2>we might look at the present moment with defense tech

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<v Speaker 2>and we see a Silicon valley's interest in getting involved

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<v Speaker 2>in defense, we shouldn't forget that Bill Perry, who was

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<v Speaker 2>a Deputy Secretary of Defense and a Secretary of Defense,

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<v Speaker 2>who who kind of shepherd stealth and GPS into existence.

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<v Speaker 2>He was a Silicon Valley founder. He founded Electronic Systems

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<v Speaker 2>Laboratory first company or agency. He even beat the government

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<v Speaker 2>to doing digital singing. Everything before then was analog. And

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<v Speaker 2>David Packard co founder of HB he was a depth

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<v Speaker 2>sec of Defense. So this idea that our technologists have

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<v Speaker 2>not been involved we've just kind of forgotten it. Maybe

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<v Speaker 2>it's a comfortable legacy of the Cold War having won

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<v Speaker 2>the Cold War, rather that we forget the role that

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<v Speaker 2>the valley really played. And I'm excited as an American

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<v Speaker 2>to see that the most dynamic parts of our economy

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<v Speaker 2>is represented in our tech industry and the new parts

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<v Speaker 2>of our manufacturing industry are getting involved with national security.

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<v Speaker 1>And your spot on me. That is the one thing.

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<v Speaker 1>And it's not just this generation. It's transgenerational. And you

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<v Speaker 1>can look back at some of the comment the German

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<v Speaker 1>General staff had to say about fighting Americans or the Soviets.

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<v Speaker 1>Are you just look at our modern world and whether

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<v Speaker 1>you're looking at your electricity, cars, medicines, you pull that thread.

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<v Speaker 1>It comes back to the opportunity unities that our culture

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<v Speaker 1>and our rule of law and our nation enabled smart

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<v Speaker 1>people with good ideas and drive to be able to accomplish.

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<v Speaker 1>And you would think that that would be reflected throughout

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<v Speaker 1>our government our culture, but it's not. And a lot

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<v Speaker 1>of people don't see that. And that's okay. People have

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<v Speaker 1>busy lives, they've got to get on. They have a

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<v Speaker 1>lot of trust that the government's doing the right thing

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<v Speaker 1>and I wouldn't call it un American, but maybe contra American.

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<v Speaker 1>You do a good job at outlining that the trillion

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<v Speaker 1>dollars plus or minus that our nation invests in its defense,

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<v Speaker 1>it's not reflecting the best of that American culture. One

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<v Speaker 1>of the quotes that I think, again, people don't have

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<v Speaker 1>a vision of this, and a lot of people who

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<v Speaker 1>have served are very aware of this. But I think

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<v Speaker 1>this is helpful in informing the larger public and decision makers.

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<v Speaker 1>And here's a little bit of a quote quote Everyone

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<v Speaker 1>including the Russians and Chinese, have given up on communism

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<v Speaker 1>except for Cuba and the Department of Defense. The only

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<v Speaker 1>problem is that we make very bad commies unquote. So

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<v Speaker 1>you combine this consolidated view of we're not going to

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<v Speaker 1>have individual farms, were going to put all the coulocks

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<v Speaker 1>onto the collectives with you mentioned McNamara early, and he

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<v Speaker 1>comes up again. You have this era US auto industry

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<v Speaker 1>approach in view of a program management that is almost

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<v Speaker 1>stuck in this aspect here in twenty twenty five. And

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<v Speaker 1>what type of levers do you see that we need

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<v Speaker 1>to get people to get hold of that can help

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<v Speaker 1>break open this aspect and bring out some of the

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<v Speaker 1>better parts of our culture and our environment that we

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<v Speaker 1>can leverage into making our defense better for the dollars

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<v Speaker 1>we're putting into it.

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<v Speaker 2>I just want to double click on macnamara because we

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<v Speaker 2>forget that the auto industry and the fees even into

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<v Speaker 2>the sixties was very different. Basically Ford when he was

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<v Speaker 2>on Forward, they had unlimited demand. Any card they could

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<v Speaker 2>make they would sell. That means you're going to focus

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<v Speaker 2>very much on the efficiency of the supply side. How

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<v Speaker 2>do you produce, you know, how do you manage the

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<v Speaker 2>production You don't actually have the same complexity of problem,

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<v Speaker 2>and that ended up hurting American auto companies in the

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<v Speaker 2>seventies when we started facing Japanese competition. We basically as

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<v Speaker 2>America had to throw away the McNamara playbook in Detroit

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<v Speaker 2>in order to make our auto companies competitive again. But

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<v Speaker 2>the Department didn't do that, you know, we stuck with

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<v Speaker 2>the McNamara playbook, and the legacy of ppbe to the

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<v Speaker 2>present day. And so to my point about organizing and reorganizing, look,

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<v Speaker 2>that might have been the right way to approach things

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<v Speaker 2>in the fifties and sixties. Although I think smart folks

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<v Speaker 2>like Eric Lafgan would say even then it wasn't a

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<v Speaker 2>good approach and it was fatally flawed with systems analysis,

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<v Speaker 2>but it certainly isn't the right way today. And I

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<v Speaker 2>think when we look at the era, when we think

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<v Speaker 2>about big things that we've done, like ICBMs or the

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<v Speaker 2>submarine launch ballistic missiles, we had a lot a lot

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<v Speaker 2>more inner service rivalry, We had a lot more competition

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<v Speaker 2>within government, and I think it really is a legacy

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<v Speaker 2>of having won the Cold War. That and a desire

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<v Speaker 2>for a peace dividend, which is very reasonable, but it's

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<v Speaker 2>pushed us towards this consolidated approach, a unitary effort. You know,

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<v Speaker 2>duplication is bad, but of course if you look at

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<v Speaker 2>the American economy, we have lots of companies competing all

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<v Speaker 2>the time. We have duplication all the time, and we

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<v Speaker 2>think that gives us the fitness, the survival function. And

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<v Speaker 2>I would offer you as an example, Europe has created

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<v Speaker 2>zero companies from scratch over the last fifty years, worth

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<v Speaker 2>one hundred million dollars one hundred billion, sorry, one hundred

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<v Speaker 2>billion dollars or more. America has created all of her

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<v Speaker 2>trillion dollar companies from scratch in the last fifty years,

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<v Speaker 2>the relative performance there is astronomical. We're not even in

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<v Speaker 2>the same league. And I think a lot of that

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<v Speaker 2>comes down to our American culture and our willingness to

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<v Speaker 2>I would say it's founder led You know, of all

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<v Speaker 2>the nations in the world, we call them the founding

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<v Speaker 2>fathers for a reason. We understand that there's something special

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<v Speaker 2>about founders. This is not a random group of people

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<v Speaker 2>in seventeen seventy six who just happened to pull this off.

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<v Speaker 2>The people really mattered, and each of their individual contributions

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<v Speaker 2>really mattered. And when you look at World War Two

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<v Speaker 2>or the early Cold War, but today we might think

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<v Speaker 2>about it as Northrop Grumman, but it was Jack Northrop,

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<v Speaker 2>it was Leroy Grumman. It wasn't Lockheed Martin, it was

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<v Speaker 2>Glenn Martin. It was William Bowing. And when you look

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<v Speaker 2>at the present the most functioning parts of our economy,

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<v Speaker 2>it's Elon Musk, you know, Mark and Dreesen is. You see,

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<v Speaker 2>those founders have now migrated to technology. So I'm not

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<v Speaker 2>sure there's something special about Silicon Valley per se, but

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<v Speaker 2>I do think there's something special about the American founder,

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<v Speaker 2>Letter Frontier, founder letter approach.

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<v Speaker 3>Yeah, you talk about a lot about people like John

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<v Speaker 3>Boyd and Rickover and other people that were viewed at

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<v Speaker 3>the time as mavericks and heredicts. That's the most complimentary

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<v Speaker 3>thing you could say. Yeah, they were, they were. I mean,

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<v Speaker 3>what do we do? How do we get the wild

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<v Speaker 3>card people who? And I think you also talked about

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<v Speaker 3>the engineer to some of whom contribute a hundred times

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<v Speaker 3>more than other.

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<v Speaker 2>Engineers airframes in his life. You know. Like so when

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<v Speaker 2>I say founder, I don't just mean commercial founders like

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<v Speaker 2>people building companies. I consider Kelly Johnson and Rickover and

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<v Speaker 2>Boyd founders American founders. You know, is it the F

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<v Speaker 2>sixteen or is it Boyd's playing?

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<v Speaker 1>You know?

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<v Speaker 2>And what's the counterfaction with the nuclear Navy? Now, maybe

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<v Speaker 2>to the question you're going, sorry to have interrupted there.

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<v Speaker 2>I think a big part of this is reminding ourselves

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<v Speaker 2>of the need to protect these personalities the sort of

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<v Speaker 2>comfortable path. You know, like, these very creative people are

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<v Speaker 2>often pretty disagreeable. They're there. It requires a lot of

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<v Speaker 2>human management to keep the band together, to get the

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<v Speaker 2>right person in the right role, and realizing as leaders

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<v Speaker 2>that's part of our job Rickover did not survive thirty

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<v Speaker 2>years as the head of the Navy nuclear program, subprogram,

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<v Speaker 2>reactor program just because people wanted them there. Zumbwaldt actually said,

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<v Speaker 2>the Navy has three enemies, the Soviet Union, the Air Force,

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<v Speaker 2>and Admiral Rickover. So it it actually took many, many

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<v Speaker 2>acts of Congress to keep him in place, and his

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<v Speaker 2>tenure finally expired when Congress decided his time was up.

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<v Speaker 3>Yeah, I guess my question you've hit most of it.

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<v Speaker 3>But how do we not They played whack a mole

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<v Speaker 3>with Boyd, they played whack a mole. They played it

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<v Speaker 3>with Rookover too, but he had some congressional support that

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<v Speaker 3>helped him survive. How do we prevent that from happening

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<v Speaker 3>to people who are in that mode? But maybe, you know,

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<v Speaker 3>the system seemed to squash him pretty heavily.

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<v Speaker 2>Yeah, I mean I think we shouldn't. I don't want

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<v Speaker 2>to be too pollyannish about it in the sense that, like,

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<v Speaker 2>I think it will always be hard to protect those people.

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<v Speaker 2>But the primacy of winning, I mean, do you want

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<v Speaker 2>to win or do you want to comfortably run program

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<v Speaker 2>that's you know, leading our deterrence into the ground. And

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<v Speaker 2>so I think the right folks, like if you think

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<v Speaker 2>about I think Shreiver is a great example of this,

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<v Speaker 2>where he protected Edward Hall, who was building the Minuteman

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<v Speaker 2>up until the very moment that the Minuteman worked. As

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<v Speaker 2>soon as it worked, it was Hall's time. And I

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<v Speaker 2>think there's something very real politique about that, where Shreiver

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<v Speaker 2>was optimizing on the primacy of winning. There's only one

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<v Speaker 2>person who could get it here. There are other people

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<v Speaker 2>who can get it to the next phase, and all

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<v Speaker 2>of our difficult, found driven personalities will at some point,

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<v Speaker 2>you know, their time will come. I think anyone who's

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<v Speaker 2>built a business sees that over and over as well.

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<v Speaker 2>But it starts with sorry, it's a long answer your question,

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<v Speaker 2>but it starts with the commitment to realizing that part

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<v Speaker 2>of our job as leadership is to protect these really

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<v Speaker 2>unique humans, to cultivate them and protect them. We don't

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<v Speaker 2>want to lose them when they're always when they look

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<v Speaker 2>up and they just see a boorg or a machine

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<v Speaker 2>that's going to grind them mouth, that's going to treat

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<v Speaker 2>their career as a bingo card of experiences to kind

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<v Speaker 2>of fill out. Versus like these really they're almost like

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<v Speaker 2>artists like deeply, profoundly creative humans who have the skill

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<v Speaker 2>set to do something for a decade and in doing

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<v Speaker 2>so fundamentally and asymmetrically impact our capability as as a nation.

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<v Speaker 1>And the Navy. I sometimes refer to the personnel policy

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<v Speaker 1>as the Millington Dick Top because Millington, Tennessee is where

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<v Speaker 1>our personnel is located. And you're talking about protecting the people.

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<v Speaker 1>And when you run into an organization and you're looking

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<v Speaker 1>too how to repair things or to optimize it, you're

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<v Speaker 1>looking at people. Process are procedures one combination of the

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<v Speaker 1>three policies and the people part. And that's one of

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<v Speaker 1>the recurring things that we see in your discussions in

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<v Speaker 1>your eighteen thesis is people matter, individual people. Finding those

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<v Speaker 1>people and like you said, protecting them matters. And there's

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<v Speaker 1>also constantly updating what works best for today. And when

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<v Speaker 1>you look at two of the large frameworks that not

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<v Speaker 1>just people, but the process and policies the DD runs on,

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<v Speaker 1>it's almost comical when you look at and again as

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<v Speaker 1>I try to emphasize the people, these are created by humans,

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<v Speaker 1>They can be changed by humans. These these are not

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<v Speaker 1>acts of nature. Here you have dopma, the Defense Officer

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<v Speaker 1>Personnel Management Act. It's from nineteen eighties. Goldwater Nichols is

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<v Speaker 1>nineteen teen eighty six. It's you know, big Hair Neon

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<v Speaker 1>post disco America is running things in twenty twenty five.

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<v Speaker 1>And to change these it requires not just people like

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<v Speaker 1>you've done. Here's some ideas, here's some outlines, but it

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<v Speaker 1>requires people at the House of Representatives in the Senate

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<v Speaker 1>and both parties to say, hey, I want to be

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<v Speaker 1>part of joining the twenty first century. Twenty five years

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<v Speaker 1>too late, let's get to work on it. Are you

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<v Speaker 1>finding good partners in the Senate and the House that

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<v Speaker 1>are willing to be this generation's Goldwater in Nickels and

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<v Speaker 1>perhaps look at bringing the Jimmy Carter theory of personnel

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<v Speaker 1>management into the modern age.

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<v Speaker 2>On personal management. I'm starting to see it. I think

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<v Speaker 2>if you want to get there, we have to wedge

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<v Speaker 2>into it. You know, do you want to like fix

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<v Speaker 2>the system or do you want to win? And they're

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<v Speaker 2>not the same thing. And if if you spend too

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<v Speaker 2>much time trying to quot unquote fix the system, you're

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<v Speaker 2>going to get bogged out in trench warfare and lose

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<v Speaker 2>all your maneuver room but what we need are some

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<v Speaker 2>early efforts that are actually working, that generate momentum and

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<v Speaker 2>show us a path of alternative ways that we could

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<v Speaker 2>be organizing. I think it would be very bold to

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<v Speaker 2>say that we should reorganize the whole department, because I

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<v Speaker 2>kind of feel like the opposite of one mistakes another mistake.

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<v Speaker 2>You're not going to quite get this right. What we're

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<v Speaker 2>really missing is the ability to have the human discretion

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<v Speaker 2>for saying this program needs to be run differently. You know,

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<v Speaker 2>first principle, I'm thinking about it, this is the right

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<v Speaker 2>setup for it. I need someone to be around longer,

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<v Speaker 2>and I think you can if you look at naval reactors,

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<v Speaker 2>there's a reason that the person in charge sticks around

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<v Speaker 2>there for eight years.

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<v Speaker 1>You know.

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<v Speaker 2>That's not very DOPMA compliant. It's not the traditional three

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<v Speaker 2>year rotational program. But we recognize the gravity of the role,

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<v Speaker 2>the value of experience, the need for continuity for something

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<v Speaker 2>that critical. We should have more heterogeneous approaches that match

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<v Speaker 2>the specifics of what we're dealing with. And I think

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<v Speaker 2>as a consequence, like my big pushback would be that

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<v Speaker 2>we need to give our officers more discretion. You know,

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<v Speaker 2>I guess very frustrated when I hear this axiomatic line

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<v Speaker 2>that you know, it's like, well, we've shown this is

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<v Speaker 2>what I hear from general officers. You know, we've shown that.

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<v Speaker 2>You know, we're not always the best stewards of the

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<v Speaker 2>tax payer money. We really need all this oversight. I'm

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<v Speaker 2>all for oversight. That's part of the role, that's how

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<v Speaker 2>the system works. But this sort of self flagellation, I

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<v Speaker 2>don't really believe it. When you're doing these really hard things,

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<v Speaker 2>you can't expect them all to work out. There's there's

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<v Speaker 2>a price to pay for your own experience and getting

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<v Speaker 2>up the curve. There's a need for you to learn

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<v Speaker 2>from your mistakes. What we The real oversight comes from

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<v Speaker 2>betting on the right people are you know, do you

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<v Speaker 2>have the right people in the role? Great? You know

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<v Speaker 2>you're probably not gonna be able to do much better

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<v Speaker 2>than that, and the journey is what it's going to be.

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<v Speaker 2>I love the anecdote of Admiral Rayburn when he was

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<v Speaker 2>building the submarine launch blistic missiles. First of all, he

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<v Speaker 2>had four competing programs. He had Congress breathing down his neck,

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<v Speaker 2>he had other admirals breathing down his neck. You know,

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<v Speaker 2>show me the gant chart of gansharks, like, how is

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<v Speaker 2>this program going? Tell me when it's going to deliver?

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<v Speaker 2>And he created something called per peert, the latest in

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<v Speaker 2>decision sciences and analysis. It was, you know, use Monte

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<v Speaker 2>Carlo simulation to tell you how long these things were

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<v Speaker 2>going to take. And this was in the sixties, right,

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<v Speaker 2>so it's actually kind of hard. You didn't really have

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<v Speaker 2>modern computers then. But it was all a smoke screen,

404
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<v Speaker 2>you know. It was a way of giving false comfort

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<v Speaker 2>to the overseers. And what he was really doing is

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<v Speaker 2>protecting the engineers to do the messy zero to one

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<v Speaker 2>work that actually was very hard to predict and who

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<v Speaker 2>knew when or if it would deliver, and it did,

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<v Speaker 2>of course deliver. We got Polaris from that. I mean,

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<v Speaker 2>I think maybe an unfortunate legacy for him, as his

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<v Speaker 2>smoke screen was so good that people thought that pert

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<v Speaker 2>is what led to the success, and they subsequently institutionalized

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<v Speaker 2>that as a way of running all future programs.

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<v Speaker 3>Yeah, we we have a tendency in the military to

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<v Speaker 3>do the cargo cult thing where we see something that

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<v Speaker 3>looks like it worked a certain way and we're just

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<v Speaker 3>gonna ape it and it'll work for us that same way.

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<v Speaker 3>How do we The Navy tried to have an innovation

419
00:21:49.799 --> 00:21:52.400
<v Speaker 3>cell at one point. I don't know what happened to it,

420
00:21:52.480 --> 00:21:54.240
<v Speaker 3>but I don't think we innovated a whole lot out

421
00:21:54.279 --> 00:21:57.400
<v Speaker 3>of that cell. Can you push innovation by creating an

422
00:21:57.400 --> 00:22:00.039
<v Speaker 3>innovative group or is it just something you have to

423
00:21:59.880 --> 00:22:01.799
<v Speaker 3>wait for the right people to pop up at the

424
00:22:01.839 --> 00:22:02.319
<v Speaker 3>right time.

425
00:22:03.279 --> 00:22:05.319
<v Speaker 2>I'm a little bit closer to the ladder there. You know,

426
00:22:05.359 --> 00:22:07.599
<v Speaker 2>you need the right people. They need to be organized

427
00:22:07.599 --> 00:22:10.119
<v Speaker 2>around the right problems. I think if I was to

428
00:22:10.119 --> 00:22:12.720
<v Speaker 2>offer something productive around the idea of innovation selves, I

429
00:22:12.720 --> 00:22:15.640
<v Speaker 2>think where sometimes people get mixed up is thinking that

430
00:22:15.680 --> 00:22:18.960
<v Speaker 2>you can have an enduring innovation effort. You know, the

431
00:22:19.000 --> 00:22:21.839
<v Speaker 2>most creative teams I see there is an ephemeral component

432
00:22:21.880 --> 00:22:24.039
<v Speaker 2>to them, like, hey, this team the rock band is

433
00:22:24.079 --> 00:22:26.559
<v Speaker 2>making the right music. You have the right members, it

434
00:22:26.680 --> 00:22:29.200
<v Speaker 2>all sounds great and it works for three years, and

435
00:22:29.279 --> 00:22:32.559
<v Speaker 2>so you know, the expansive view would be, maybe you

436
00:22:32.720 --> 00:22:35.480
<v Speaker 2>need lots of innovation selves. There's no monopoly on innovation.

437
00:22:35.640 --> 00:22:37.759
<v Speaker 2>It's not like you do the O and m over

438
00:22:37.799 --> 00:22:40.240
<v Speaker 2>here and these these people have the only right to

439
00:22:40.240 --> 00:22:42.279
<v Speaker 2>think about how we're going to innovate and do things

440
00:22:42.319 --> 00:22:44.920
<v Speaker 2>better in the future, like we need to create enough

441
00:22:44.960 --> 00:22:48.440
<v Speaker 2>surface area that innovation can bubble up. You know, maybe

442
00:22:48.440 --> 00:22:50.519
<v Speaker 2>another way of thinking about it is our system as

443
00:22:50.519 --> 00:22:54.000
<v Speaker 2>it's currently designed, is so well designed to handle any

444
00:22:54.079 --> 00:22:57.799
<v Speaker 2>problem that can be thought through and solved deductively top down.

445
00:22:59.160 --> 00:23:02.279
<v Speaker 2>It is horrible at anything that requires induction or bottoms

446
00:23:02.319 --> 00:23:05.400
<v Speaker 2>up iteration. And that sort of inductive bottoms up iteration

447
00:23:05.480 --> 00:23:08.440
<v Speaker 2>is first of all a fundamental American strength. And secondly,

448
00:23:08.599 --> 00:23:10.759
<v Speaker 2>it is messy and chaotic. That's the reality of it.

449
00:23:11.119 --> 00:23:13.400
<v Speaker 2>And that's why I think these institutions we should plan

450
00:23:13.480 --> 00:23:16.200
<v Speaker 2>for them to be a little more ephemeral, the innovation organizations,

451
00:23:16.400 --> 00:23:19.279
<v Speaker 2>and we should expect that innovation can come from anywhere.

452
00:23:19.400 --> 00:23:22.680
<v Speaker 2>And a big part of a leader's role is seeing

453
00:23:22.720 --> 00:23:25.599
<v Speaker 2>the green shoots and then betting big, helping that scale,

454
00:23:25.599 --> 00:23:28.759
<v Speaker 2>creating the space, protecting them from the antibodies, protecting the

455
00:23:28.799 --> 00:23:30.599
<v Speaker 2>talent so they have the room to run to do this.

456
00:23:31.119 --> 00:23:33.119
<v Speaker 2>And you know, when I look at the most if

457
00:23:33.160 --> 00:23:35.920
<v Speaker 2>you look at Jasock and how they work, they absolutely

458
00:23:35.960 --> 00:23:39.240
<v Speaker 2>practice a right like rank means much less the outcomes

459
00:23:39.279 --> 00:23:42.039
<v Speaker 2>really matter. You will move people around the collaboration is

460
00:23:42.079 --> 00:23:44.480
<v Speaker 2>structurally very flat. And the reason I keep coming back

461
00:23:44.519 --> 00:23:46.079
<v Speaker 2>it's not just a platitude to keep calling this in

462
00:23:46.119 --> 00:23:49.400
<v Speaker 2>American strength. I have a longer exegesis on this. But

463
00:23:49.559 --> 00:23:51.119
<v Speaker 2>you know, one of the things America is best at

464
00:23:51.200 --> 00:23:53.759
<v Speaker 2>in the world is software by a yawning margin. There

465
00:23:53.799 --> 00:23:56.000
<v Speaker 2>really is. Number two is very very distant. Think about

466
00:23:56.000 --> 00:23:59.440
<v Speaker 2>the fact that there are zero Chinese or Indian enterprise

467
00:23:59.440 --> 00:24:01.839
<v Speaker 2>software company needs that are competitive on the world stage.

468
00:24:02.200 --> 00:24:04.440
<v Speaker 2>That tells you that software is not just about IQ.

469
00:24:04.559 --> 00:24:07.039
<v Speaker 2>I mean, look, they're smart people everywhere. You would expect

470
00:24:07.079 --> 00:24:09.960
<v Speaker 2>a much more kind of evenly distributed set of companies

471
00:24:09.960 --> 00:24:14.039
<v Speaker 2>and capabilities if it was just about intelligence. It's about culture.

472
00:24:14.400 --> 00:24:17.240
<v Speaker 2>And when people look at Silicon Valley they kind of

473
00:24:17.519 --> 00:24:20.640
<v Speaker 2>sometimes think, oh, maybe we imported this culture from Israel

474
00:24:20.759 --> 00:24:23.240
<v Speaker 2>or India, And it is true we imported it, but

475
00:24:23.279 --> 00:24:26.119
<v Speaker 2>we imported it from Iowa. It came from Bob Nois,

476
00:24:26.240 --> 00:24:28.720
<v Speaker 2>a famous Iowan co founder of Intel, co inventor of

477
00:24:28.759 --> 00:24:32.119
<v Speaker 2>the transistor. It's deeply rooted in a willingness to play

478
00:24:32.160 --> 00:24:37.039
<v Speaker 2>positive some games, a high trust atmosphere, open communication, all

479
00:24:37.079 --> 00:24:40.599
<v Speaker 2>harm hallmarks of the Midwestern culture. I mean the very

480
00:24:40.720 --> 00:24:44.359
<v Speaker 2>term open door policy is something that Noise coined. And

481
00:24:44.640 --> 00:24:46.000
<v Speaker 2>I think there's a way in which we don't even

482
00:24:46.079 --> 00:24:49.000
<v Speaker 2>understand how all of American tech is actually a descendant

483
00:24:49.079 --> 00:24:52.519
<v Speaker 2>of Noise and a descendant of this Midwestern culture. And

484
00:24:52.559 --> 00:24:55.039
<v Speaker 2>that is very sticky because if you're the Singaporeans and

485
00:24:55.039 --> 00:24:57.880
<v Speaker 2>you come and visit Silicon Valley, you see Stanford, you

486
00:24:57.880 --> 00:25:00.480
<v Speaker 2>think maybe I need a world class research diversity. You

487
00:25:00.519 --> 00:25:02.480
<v Speaker 2>see Sandhill Road and you think maybe I need a

488
00:25:02.559 --> 00:25:05.480
<v Speaker 2>venture capital ecosystem. You probably need those things, but you're

489
00:25:05.519 --> 00:25:09.440
<v Speaker 2>totally actually missing the root cause of what's enabling all

490
00:25:09.519 --> 00:25:12.240
<v Speaker 2>this stuff to take hold where it's taking hold. And

491
00:25:12.279 --> 00:25:14.119
<v Speaker 2>by the way, if you do figure it out, it's

492
00:25:14.119 --> 00:25:16.160
<v Speaker 2>the one thing you don't want to copy. As a Singaporean.

493
00:25:16.200 --> 00:25:18.079
<v Speaker 2>You're pretty happy with your culture. You're not trying to

494
00:25:18.079 --> 00:25:20.359
<v Speaker 2>be Midwestern. And so this has led to a pretty

495
00:25:20.400 --> 00:25:22.200
<v Speaker 2>enduring advantage for us. I don't want us to let

496
00:25:22.240 --> 00:25:24.400
<v Speaker 2>rest on our laurels about it, but I think you

497
00:25:24.599 --> 00:25:26.799
<v Speaker 2>could very easily reason by analogy to see how that

498
00:25:26.880 --> 00:25:30.359
<v Speaker 2>same approach, that same sort of mentality applied to innovation

499
00:25:30.759 --> 00:25:34.519
<v Speaker 2>bottoms up with a lack of hierarchy, plays to our strengths.

500
00:25:36.279 --> 00:25:38.359
<v Speaker 1>Yeah, I want to back up a bit because it

501
00:25:38.680 --> 00:25:41.160
<v Speaker 1>reminds me of something early on. If we brought it

502
00:25:41.200 --> 00:25:46.279
<v Speaker 1>in and goes with systems work best when they take

503
00:25:46.319 --> 00:25:51.720
<v Speaker 1>advantage of their natural capabilities. There are comparative advantages, and

504
00:25:51.759 --> 00:25:55.880
<v Speaker 1>in some ways it looks like DoD has devolved into

505
00:25:55.920 --> 00:25:58.960
<v Speaker 1>a series of systems they fight against this. You mentioned

506
00:25:58.960 --> 00:26:03.920
<v Speaker 1>earlier that our defils industrial base and its bureaucracy. It's European,

507
00:26:04.319 --> 00:26:06.920
<v Speaker 1>it's not American in its format. And when you look

508
00:26:07.000 --> 00:26:09.799
<v Speaker 1>back at something we mentioned earlier on in the discussion

509
00:26:10.039 --> 00:26:14.400
<v Speaker 1>was Bill Perry's Big Supper, I mean last supper where

510
00:26:14.400 --> 00:26:18.319
<v Speaker 1>we took all the huge numbers of businesses that were

511
00:26:18.319 --> 00:26:21.759
<v Speaker 1>involved in defense and as as opposed to letting there

512
00:26:21.880 --> 00:26:26.400
<v Speaker 1>be creative destruction, let there be the creative friction in

513
00:26:26.440 --> 00:26:30.240
<v Speaker 1>the competition of the free market getting everybody to consolidate.

514
00:26:30.759 --> 00:26:34.799
<v Speaker 1>And it's created a situation that you bring up a

515
00:26:34.839 --> 00:26:37.799
<v Speaker 1>lot that I don't think is really understood, and that

516
00:26:38.000 --> 00:26:42.519
<v Speaker 1>is the weird impact it has between the people supplying

517
00:26:42.799 --> 00:26:46.279
<v Speaker 1>goods and those that are purchasing the good and that

518
00:26:46.440 --> 00:26:51.559
<v Speaker 1>is monopsony and how monosomy monopsony has become almost the

519
00:26:51.640 --> 00:26:57.160
<v Speaker 1>standard practice on how we get the material and the

520
00:26:57.200 --> 00:26:58.880
<v Speaker 1>process to providing national defense.

521
00:27:00.200 --> 00:27:04.079
<v Speaker 2>That's poor, so monopsony. Most people are very familiar with monopoly,

522
00:27:04.119 --> 00:27:06.839
<v Speaker 2>where there's one seller of an item, and as Americans,

523
00:27:06.839 --> 00:27:09.920
<v Speaker 2>we look at monopolies quite skeptically and believe it's anti

524
00:27:09.960 --> 00:27:12.400
<v Speaker 2>innovative and it's unlikely to give you the best price.

525
00:27:12.519 --> 00:27:15.000
<v Speaker 2>Monopsony is the mirror of that. When there's one buyer

526
00:27:15.240 --> 00:27:17.960
<v Speaker 2>for a thing so and in many ways the department

527
00:27:18.160 --> 00:27:20.680
<v Speaker 2>is fundamentally a monopsony. Who else is going to buy

528
00:27:20.680 --> 00:27:21.559
<v Speaker 2>an aircraft carrier?

529
00:27:21.720 --> 00:27:21.799
<v Speaker 1>So?

530
00:27:22.440 --> 00:27:24.480
<v Speaker 2>But at the same time, when you have one buyer,

531
00:27:24.920 --> 00:27:27.079
<v Speaker 2>the burden on the buyer so high you have to

532
00:27:27.119 --> 00:27:28.799
<v Speaker 2>think of everything. Can you imagine if you had to

533
00:27:28.799 --> 00:27:32.440
<v Speaker 2>be the one buyer to conceive of the iPhone? Couldn't

534
00:27:32.440 --> 00:27:34.000
<v Speaker 2>be Steve Jobs thought of it. You had to think

535
00:27:34.000 --> 00:27:35.440
<v Speaker 2>of it. You had to come up with the requirements

536
00:27:35.480 --> 00:27:37.160
<v Speaker 2>dock and you had to specify. You had to think

537
00:27:37.160 --> 00:27:39.559
<v Speaker 2>about all like how would you even make that? Probably

538
00:27:39.599 --> 00:27:41.720
<v Speaker 2>wouldn't come up with the best idea, and whatever you

539
00:27:41.720 --> 00:27:43.920
<v Speaker 2>came up with would not be affordable. And as Americans,

540
00:27:43.920 --> 00:27:45.839
<v Speaker 2>we believe in the free market, so we should be

541
00:27:45.839 --> 00:27:49.839
<v Speaker 2>finding ways to approximate free market principles inside a defense

542
00:27:49.920 --> 00:27:52.839
<v Speaker 2>to leverage the forces of innovation that we see powering

543
00:27:53.000 --> 00:27:58.279
<v Speaker 2>American hegemony commercially every chance we possibly get. Now, just

544
00:27:58.279 --> 00:27:59.880
<v Speaker 2>to back up a little bit, the reason I think

545
00:28:00.079 --> 00:28:02.759
<v Speaker 2>you could say, well, it's always been a monopsony, and

546
00:28:02.880 --> 00:28:05.359
<v Speaker 2>I think just the very structure of the American economy

547
00:28:05.640 --> 00:28:08.759
<v Speaker 2>as we entered World War two, as we entered the

548
00:28:08.799 --> 00:28:10.720
<v Speaker 2>early Cold War was very different. I don't think we

549
00:28:10.759 --> 00:28:13.599
<v Speaker 2>had a defense industrial base. We had an American industrial

550
00:28:13.640 --> 00:28:16.920
<v Speaker 2>base when the Berlin Wall fell. I mean Chrysler made

551
00:28:17.119 --> 00:28:21.319
<v Speaker 2>cars and missiles, Ford made satellites until nineteen ninety, General Mills,

552
00:28:21.359 --> 00:28:25.519
<v Speaker 2>the Cereal Company, made torpedoes and artillery. So if we

553
00:28:25.559 --> 00:28:27.880
<v Speaker 2>look at that, what you really see is I think

554
00:28:27.920 --> 00:28:30.480
<v Speaker 2>too much is probably said about dual use companies. Look

555
00:28:30.480 --> 00:28:33.200
<v Speaker 2>at a missile of single use and lethality matters, and we're

556
00:28:33.200 --> 00:28:35.599
<v Speaker 2>going to have a need for many, many single use

557
00:28:35.640 --> 00:28:38.640
<v Speaker 2>things that actually scare our adversaries. But we did have

558
00:28:38.720 --> 00:28:42.200
<v Speaker 2>dual purpose companies everything. You know, why did General Mills

559
00:28:42.200 --> 00:28:44.640
<v Speaker 2>have a mechanics division that did these things? Well, they

560
00:28:44.640 --> 00:28:48.079
<v Speaker 2>were producing equipment to process cereals. You know, that is

561
00:28:48.119 --> 00:28:51.000
<v Speaker 2>a mechanical. Everything they learned about doing that, all the

562
00:28:51.000 --> 00:28:53.880
<v Speaker 2>price performance, all the innovation, all that demand signal helped

563
00:28:53.920 --> 00:28:57.480
<v Speaker 2>them produce lethality for America's national defense. That's the same

564
00:28:57.480 --> 00:28:59.440
<v Speaker 2>thing with Chrysler. Everything they learned about building a car

565
00:28:59.599 --> 00:29:04.880
<v Speaker 2>enabled to build missiles better, faster, cheaper. We've lost a lot.

566
00:29:04.920 --> 00:29:08.160
<v Speaker 2>So I think the last Supper, this mass consolidation from

567
00:29:08.200 --> 00:29:12.200
<v Speaker 2>fifty one primes down to five. Really people look at it,

568
00:29:12.240 --> 00:29:15.559
<v Speaker 2>and I think they probably take away a true statement

569
00:29:15.599 --> 00:29:17.279
<v Speaker 2>that is not the most impactful. They look at it

570
00:29:17.319 --> 00:29:19.240
<v Speaker 2>and say, oh, this led to a lack of competition

571
00:29:19.279 --> 00:29:22.160
<v Speaker 2>in the industrial base, and at this point, the government

572
00:29:22.240 --> 00:29:26.559
<v Speaker 2>lost pricing power, the government lost options. I think that

573
00:29:26.640 --> 00:29:28.640
<v Speaker 2>kind of happened, but I think it's closer to the margin.

574
00:29:29.039 --> 00:29:32.680
<v Speaker 2>What really happened is that consolidation bred conformity. You know,

575
00:29:33.039 --> 00:29:36.200
<v Speaker 2>we exited the era of Leroy Grumman and began the

576
00:29:36.240 --> 00:29:40.319
<v Speaker 2>era of kind of big, faceless corporations who were just

577
00:29:40.599 --> 00:29:42.920
<v Speaker 2>you know, I don't want to trivialize it, because these

578
00:29:42.920 --> 00:29:45.400
<v Speaker 2>are great, patriotic companies, but there was no one who

579
00:29:45.480 --> 00:29:48.440
<v Speaker 2>had the weight of a founder to really make bold decisions,

580
00:29:48.519 --> 00:29:52.000
<v Speaker 2>invest in innovation, to push back against the customers. I

581
00:29:52.000 --> 00:29:54.319
<v Speaker 2>don't think it's an accident that SpaceX and Pounter have

582
00:29:54.359 --> 00:29:56.119
<v Speaker 2>both had to sue the government. We have to go

583
00:29:56.200 --> 00:29:57.759
<v Speaker 2>a long way back in time to look at that

584
00:29:57.799 --> 00:30:00.119
<v Speaker 2>those things happening where you have a deep conviction and

585
00:30:00.200 --> 00:30:01.759
<v Speaker 2>what is right for the nation, and you're going to

586
00:30:01.799 --> 00:30:04.480
<v Speaker 2>fight for those things. And so then now we live

587
00:30:04.519 --> 00:30:07.519
<v Speaker 2>in a world where we don't get to benefit that

588
00:30:07.720 --> 00:30:11.240
<v Speaker 2>much from the commercial innovation towards national security. Like we

589
00:30:11.319 --> 00:30:13.480
<v Speaker 2>used to live in a world where every car, every camera,

590
00:30:13.559 --> 00:30:16.960
<v Speaker 2>every cereal box we bought as Americans actually subsidize and

591
00:30:17.039 --> 00:30:21.359
<v Speaker 2>enhance our national security. That doesn't happen anymore. And sadly,

592
00:30:21.400 --> 00:30:23.319
<v Speaker 2>I think if we just look at this competitively, the

593
00:30:23.400 --> 00:30:25.559
<v Speaker 2>Chinese have figured this out. They learn from our history.

594
00:30:25.599 --> 00:30:28.720
<v Speaker 2>You know, the Chinese primes only twenty seven percent of

595
00:30:28.759 --> 00:30:31.799
<v Speaker 2>their revenue comes from the PLA. The rest comes from

596
00:30:32.359 --> 00:30:34.680
<v Speaker 2>commercial sales. You know, the cheap crap we buy on

597
00:30:34.720 --> 00:30:38.480
<v Speaker 2>Amazon as Americans is actually subsidizing lethality against US service

598
00:30:38.519 --> 00:30:39.480
<v Speaker 2>members in a future fight.

599
00:30:40.799 --> 00:30:43.640
<v Speaker 3>Yeah, I like your concept of the founders. I've worked

600
00:30:43.640 --> 00:30:47.279
<v Speaker 3>for a couple of different corporations, both of which when

601
00:30:47.279 --> 00:30:50.599
<v Speaker 3>I started the original kind of the original founders were there,

602
00:30:50.880 --> 00:30:53.079
<v Speaker 3>which gives you a whole different flavor than when you

603
00:30:53.279 --> 00:30:56.200
<v Speaker 3>shift to the they bring in the money guys to

604
00:30:56.240 --> 00:30:58.839
<v Speaker 3>start running and worry about the stock prices, because the

605
00:30:58.839 --> 00:31:01.519
<v Speaker 3>founders didn't care. They had a vision of where they

606
00:31:01.559 --> 00:31:05.079
<v Speaker 3>wanted to take the company and what they were doing

607
00:31:05.119 --> 00:31:08.000
<v Speaker 3>for the company, and a lot of other things. How

608
00:31:08.039 --> 00:31:10.519
<v Speaker 3>do we, how do we this is another one of

609
00:31:10.519 --> 00:31:12.839
<v Speaker 3>those how do we How do we encourage more founders

610
00:31:12.839 --> 00:31:16.319
<v Speaker 3>to be that cutsy, to not worry about what Wall

611
00:31:16.319 --> 00:31:17.039
<v Speaker 3>Street thinks?

612
00:31:17.599 --> 00:31:20.119
<v Speaker 2>Well, the very good news is the founders have shown up.

613
00:31:20.200 --> 00:31:21.839
<v Speaker 2>You know, if you look at the last four years

614
00:31:21.960 --> 00:31:24.559
<v Speaker 2>or so, there's been over one hundred billion dollars of

615
00:31:24.599 --> 00:31:28.240
<v Speaker 2>capital deployed in the US national interest to build defense,

616
00:31:28.319 --> 00:31:31.839
<v Speaker 2>tech and adjacent companies. So they're here again. They care again.

617
00:31:31.920 --> 00:31:34.000
<v Speaker 2>I think we just need to help them get to scale.

618
00:31:34.039 --> 00:31:36.640
<v Speaker 2>And you know, I think as a monopsonist, it actually

619
00:31:36.720 --> 00:31:38.440
<v Speaker 2>isn't true that you don't pick winners. You know, you

620
00:31:38.440 --> 00:31:39.960
<v Speaker 2>shoar the government say that all the time. We don't

621
00:31:39.960 --> 00:31:41.519
<v Speaker 2>want to pick winners. We don't want to pick winners.

622
00:31:41.880 --> 00:31:44.000
<v Speaker 2>When we were trying to build out the titanium supply

623
00:31:44.119 --> 00:31:47.279
<v Speaker 2>chain in the fifties, the government made very strategic investments

624
00:31:47.319 --> 00:31:50.000
<v Speaker 2>deep down in the supply chain to enable aerospace companies

625
00:31:50.079 --> 00:31:53.079
<v Speaker 2>to subsequently succeed. It wasn't a direct subsidy, but they

626
00:31:53.119 --> 00:31:56.200
<v Speaker 2>financed the necessary R and D that enabled titanium to

627
00:31:56.200 --> 00:31:59.680
<v Speaker 2>come to mass scale and change our national security. So

628
00:31:59.720 --> 00:32:02.359
<v Speaker 2>I think we need a more kind of realistic take

629
00:32:02.440 --> 00:32:06.200
<v Speaker 2>on that interaction between industry and government on these things,

630
00:32:06.279 --> 00:32:08.920
<v Speaker 2>and for these founders to continue showing up, we just

631
00:32:08.920 --> 00:32:11.039
<v Speaker 2>need to make sure some of them succeed. It's very

632
00:32:11.079 --> 00:32:12.920
<v Speaker 2>much power law, and I think the mistake we kind

633
00:32:12.960 --> 00:32:15.480
<v Speaker 2>of make esthetically, especially in DC, as we think about

634
00:32:15.519 --> 00:32:19.039
<v Speaker 2>peanut butter spreading the capital around, which just gives you

635
00:32:19.119 --> 00:32:22.400
<v Speaker 2>a class of living zombies like these companies can't reach scale.

636
00:32:22.759 --> 00:32:24.880
<v Speaker 2>None of them are that successful. None of their investors

637
00:32:24.920 --> 00:32:27.039
<v Speaker 2>are able to say we should invest more capital here

638
00:32:27.079 --> 00:32:30.079
<v Speaker 2>because it's working. Because we've just evenly distributed the funds.

639
00:32:30.839 --> 00:32:33.759
<v Speaker 2>Nothing quite works. But that's not how Silicon Valley works. Right,

640
00:32:33.920 --> 00:32:36.839
<v Speaker 2>for every ten investments, maybe one succeeds. You know, your

641
00:32:36.839 --> 00:32:39.759
<v Speaker 2>most successful investment as a venture capitalist needs to return

642
00:32:39.759 --> 00:32:41.960
<v Speaker 2>the whole fund, And so you expect a few of

643
00:32:42.000 --> 00:32:44.440
<v Speaker 2>these things to be really big successes and the rest

644
00:32:44.440 --> 00:32:46.640
<v Speaker 2>of them not to work out. And I think that's

645
00:32:46.799 --> 00:32:49.359
<v Speaker 2>more authentic to how innovation actually works. Like we're not

646
00:32:49.400 --> 00:32:52.319
<v Speaker 2>looking for private equity businesses. We're looking for venture scale

647
00:32:52.599 --> 00:32:57.599
<v Speaker 2>zero to one innovations, and the department is getting more

648
00:32:57.680 --> 00:32:59.400
<v Speaker 2>educated about that. I think, you know, having said that

649
00:32:59.440 --> 00:33:01.880
<v Speaker 2>five years ago, ten years ago, people looked at me

650
00:33:01.960 --> 00:33:04.279
<v Speaker 2>like I was crazy. Now I think people realize it.

651
00:33:04.319 --> 00:33:06.359
<v Speaker 2>But it's a big ship to turn.

652
00:33:06.400 --> 00:33:10.759
<v Speaker 1>Here one person we didn't talk about yet that it

653
00:33:10.839 --> 00:33:13.759
<v Speaker 1>kind of goes along with your rickover Emboyd pre nineteen

654
00:33:13.799 --> 00:33:17.359
<v Speaker 1>eighty no surprise there. Innovators is somebody that Mark and

655
00:33:17.440 --> 00:33:19.160
<v Speaker 1>I have talked about many times on the show over

656
00:33:19.200 --> 00:33:21.720
<v Speaker 1>the years that I should have a little votive candle

657
00:33:21.759 --> 00:33:24.559
<v Speaker 1>with his picture in the corner. That's Rue Adromaier, who

658
00:33:24.839 --> 00:33:29.680
<v Speaker 1>was responsible for developing AEGIS and his phrase build a little, test,

659
00:33:29.720 --> 00:33:33.680
<v Speaker 1>a little, learn a lot. And I see in what

660
00:33:33.920 --> 00:33:36.799
<v Speaker 1>SpaceX and Elon Musk has done where he'll put up

661
00:33:36.839 --> 00:33:39.880
<v Speaker 1>these big, beautiful starships and tell people ahead of the time,

662
00:33:40.279 --> 00:33:41.960
<v Speaker 1>this is going to explode at some point, but we

663
00:33:42.039 --> 00:33:44.480
<v Speaker 1>want it to that freedom to fail. It's like, no,

664
00:33:44.839 --> 00:33:47.160
<v Speaker 1>I want it to fail. So I can find out

665
00:33:47.240 --> 00:33:49.559
<v Speaker 1>what the cause was and then we can improve it.

666
00:33:49.839 --> 00:33:51.960
<v Speaker 1>When you look over the DoD side of the house,

667
00:33:52.079 --> 00:33:55.079
<v Speaker 1>we'll go back to the seventies again. The first airframe

668
00:33:55.119 --> 00:33:57.400
<v Speaker 1>of the F fourteen, during one of its test flights,

669
00:33:57.599 --> 00:33:59.920
<v Speaker 1>had I believe was a hydraulic failure. It doesn't matter,

670
00:34:00.480 --> 00:34:03.759
<v Speaker 1>but it's on video that thing it crashed. Same thing

671
00:34:03.759 --> 00:34:06.200
<v Speaker 1>with the first hole of Valkyrie, and those were used

672
00:34:06.279 --> 00:34:09.800
<v Speaker 1>as excuses to kill They almost killed the F fourteen

673
00:34:09.880 --> 00:34:13.679
<v Speaker 1>program of it. So it's like a completely different worldview.

674
00:34:14.000 --> 00:34:15.679
<v Speaker 1>And some people will say, well, we've never had that

675
00:34:15.719 --> 00:34:20.440
<v Speaker 1>in the military. Well, actually we have an individual like Radwellmeier.

676
00:34:21.440 --> 00:34:23.599
<v Speaker 2>Absolutely. I mean one of the ways is it's a

677
00:34:23.639 --> 00:34:25.320
<v Speaker 2>little bit of a wonky way of framing it. But

678
00:34:25.599 --> 00:34:29.000
<v Speaker 2>you can't chop off the tail of the distribution of

679
00:34:29.039 --> 00:34:31.840
<v Speaker 2>all the bad things that can happen without chopping off

680
00:34:31.880 --> 00:34:34.719
<v Speaker 2>the tail of the distribution of all the exceptional outcomes too.

681
00:34:35.239 --> 00:34:38.960
<v Speaker 2>So the more we wrap ourselves in process to make

682
00:34:39.000 --> 00:34:41.719
<v Speaker 2>sure that nothing goes wrong, the more you're actually ensuring

683
00:34:41.760 --> 00:34:44.840
<v Speaker 2>that nothing can go right either. And we've accumulated these

684
00:34:44.920 --> 00:34:47.760
<v Speaker 2>barnacles over time. Every time something went wrong in a program,

685
00:34:47.800 --> 00:34:51.079
<v Speaker 2>there's a new rule do this do that it slows

686
00:34:51.079 --> 00:34:53.679
<v Speaker 2>the whole thing down. But maybe even much worse than

687
00:34:53.760 --> 00:34:56.239
<v Speaker 2>slowing us down. It means that we can't hit the

688
00:34:56.280 --> 00:34:58.840
<v Speaker 2>exceptional outcomes anymore. You know, could we build the U

689
00:34:58.920 --> 00:35:02.880
<v Speaker 2>two in thirteen months? You know, I mean, clearly we can.

690
00:35:02.960 --> 00:35:04.880
<v Speaker 2>There's nothing about the physics of the universe that say

691
00:35:04.880 --> 00:35:07.599
<v Speaker 2>that we can't. But we would have to really go

692
00:35:07.639 --> 00:35:09.320
<v Speaker 2>back to first principles and how we think about this.

693
00:35:09.400 --> 00:35:11.519
<v Speaker 2>People love. Another example of this that I love is

694
00:35:11.559 --> 00:35:14.480
<v Speaker 2>people love to critique David Packard's five thousand series as

695
00:35:14.519 --> 00:35:18.760
<v Speaker 2>this hugely bureaucratic approach to procurement. It's two thousand pages long,

696
00:35:19.039 --> 00:35:21.119
<v Speaker 2>but when he wrote it it was seven pages long.

697
00:35:21.920 --> 00:35:24.760
<v Speaker 2>That doesn't seem that bad. So think about the rate

698
00:35:24.800 --> 00:35:28.199
<v Speaker 2>of barnacle accumulation. I calculated out it's about seven It's

699
00:35:28.239 --> 00:35:31.480
<v Speaker 2>eleven percent annual compounded growth in pages. And so you

700
00:35:31.840 --> 00:35:36.159
<v Speaker 2>just think about we need to kind of have a

701
00:35:36.199 --> 00:35:39.239
<v Speaker 2>willingness to re explore and re examine these things. And

702
00:35:39.320 --> 00:35:41.320
<v Speaker 2>if we're sticking on the religious theme, maybe I'll offer

703
00:35:41.400 --> 00:35:43.480
<v Speaker 2>something that might be just to you know, I've already

704
00:35:43.519 --> 00:35:45.920
<v Speaker 2>been heretical enough. I might add to my own heresy

705
00:35:45.960 --> 00:35:49.039
<v Speaker 2>around this one of the concepts that's really missing from

706
00:35:49.039 --> 00:35:52.639
<v Speaker 2>the Western canon. As someone who was raised by Hindu parents.

707
00:35:53.000 --> 00:35:55.679
<v Speaker 2>In Hinduism, there's actually a god of destruction. There's a

708
00:35:55.679 --> 00:35:58.440
<v Speaker 2>god of creation, a god of existence, a god of destruction.

709
00:35:58.800 --> 00:36:03.320
<v Speaker 2>So destract the need for reinvention is institutionalized. It's not

710
00:36:03.440 --> 00:36:06.039
<v Speaker 2>viewed as oh, something must have gone horribly wrong, therefore

711
00:36:06.079 --> 00:36:07.960
<v Speaker 2>we must burn into the ground. It's it's part of

712
00:36:08.000 --> 00:36:10.880
<v Speaker 2>the cycle in the Western canon that you know that's

713
00:36:10.880 --> 00:36:12.679
<v Speaker 2>supposed to be the end, like when that when that

714
00:36:12.760 --> 00:36:16.320
<v Speaker 2>day comes, everything's kind of done. And I think a

715
00:36:16.360 --> 00:36:19.400
<v Speaker 2>greater willingness that we should our institutions will be enduring

716
00:36:19.440 --> 00:36:22.679
<v Speaker 2>because we're constantly willing to reinvent them is actually the

717
00:36:22.679 --> 00:36:23.480
<v Speaker 2>path I believe in.

718
00:36:24.559 --> 00:36:26.280
<v Speaker 3>Well, that was kind of the intention. I think of

719
00:36:26.360 --> 00:36:29.039
<v Speaker 3>Jefferson and some of the other founding fathers that that's right.

720
00:36:29.199 --> 00:36:31.840
<v Speaker 3>We would not be a static society that we would

721
00:36:31.840 --> 00:36:35.199
<v Speaker 3>continue to to develop. And I you know, the question

722
00:36:35.320 --> 00:36:37.840
<v Speaker 3>I used to ask people when I when they were

723
00:36:37.880 --> 00:36:41.199
<v Speaker 3>working for me, was is there a better way to

724
00:36:41.239 --> 00:36:43.079
<v Speaker 3>do what we're doing? There's always a better way. The

725
00:36:43.159 --> 00:36:45.800
<v Speaker 3>challenge is defined it, I mean, is that something that's

726
00:36:45.840 --> 00:36:48.320
<v Speaker 3>lost these days. People in some of these organizations, they

727
00:36:48.320 --> 00:36:51.400
<v Speaker 3>are so wrapped up and deciding whether things should be

728
00:36:51.480 --> 00:36:53.159
<v Speaker 3>twisted to the left or to the right that they

729
00:36:53.199 --> 00:36:55.440
<v Speaker 3>forget about why are we twisting it at all?

730
00:36:56.719 --> 00:36:59.000
<v Speaker 2>I think so, because, you know, I come back to

731
00:36:59.000 --> 00:37:01.679
<v Speaker 2>this phrase, the primacy of winning. You know, as leadership,

732
00:37:01.719 --> 00:37:03.519
<v Speaker 2>we have to always remember that's the goal. The goal

733
00:37:03.559 --> 00:37:06.320
<v Speaker 2>is to win. Now, let's work backwards. And one of

734
00:37:06.320 --> 00:37:10.159
<v Speaker 2>the techniques that I use internally at Palenteer is institutionalizing

735
00:37:10.159 --> 00:37:12.800
<v Speaker 2>the rebellion. I love it when I find someone who's

736
00:37:12.840 --> 00:37:15.559
<v Speaker 2>a little puckish, who wants to prove me wrong, who

737
00:37:15.679 --> 00:37:18.559
<v Speaker 2>has the energy to rebel, and I want to feed that.

738
00:37:18.760 --> 00:37:21.159
<v Speaker 2>And I you know, like some of the greatest innovations

739
00:37:21.159 --> 00:37:23.800
<v Speaker 2>we've ever come up with technically are because someone wanted

740
00:37:23.800 --> 00:37:26.199
<v Speaker 2>to a junior engineer wanted to prove to a senior

741
00:37:26.239 --> 00:37:28.679
<v Speaker 2>engineer that there was a better way of doing it. Now,

742
00:37:28.800 --> 00:37:31.239
<v Speaker 2>that can lead to a little bit of interpersonal strife

743
00:37:31.280 --> 00:37:35.280
<v Speaker 2>and discord, and but I think that's the reality of innovation.

744
00:37:35.480 --> 00:37:37.960
<v Speaker 2>And if you are set up in a way to

745
00:37:38.039 --> 00:37:41.360
<v Speaker 2>view that as insubordination, you're going to you're going to

746
00:37:41.400 --> 00:37:43.920
<v Speaker 2>push out the creative personalities and you're going to get

747
00:37:43.960 --> 00:37:47.000
<v Speaker 2>what you're incentivizing. But if you view as Jefferson said,

748
00:37:47.000 --> 00:37:48.840
<v Speaker 2>you know, from time to time a little rebellion is

749
00:37:48.880 --> 00:37:50.960
<v Speaker 2>a good thing. We need to we need to just

750
00:37:51.039 --> 00:37:51.880
<v Speaker 2>be open minded to.

751
00:37:51.840 --> 00:37:56.159
<v Speaker 1>That kind of Let my my top three things that

752
00:37:56.440 --> 00:38:00.719
<v Speaker 1>I like to rage against. It's the whole joint that

753
00:38:00.920 --> 00:38:03.559
<v Speaker 1>we have a thread running through everything and that we're

754
00:38:03.599 --> 00:38:06.039
<v Speaker 1>tripping over on a regular basis. And of course goldwater

755
00:38:06.119 --> 00:38:10.239
<v Speaker 1>nickels that I mentioned before, but also CoCom reform for

756
00:38:10.320 --> 00:38:14.079
<v Speaker 1>the combatant commanders. And you had a really interesting idea

757
00:38:14.480 --> 00:38:15.800
<v Speaker 1>that I was kind of mad that I had never

758
00:38:15.840 --> 00:38:18.360
<v Speaker 1>thought of all the ranted I've done about co com reform,

759
00:38:18.400 --> 00:38:19.840
<v Speaker 1>and now I actually have something because a lot of

760
00:38:19.880 --> 00:38:21.679
<v Speaker 1>times people come to be like, okay, you say co

761
00:38:21.679 --> 00:38:23.760
<v Speaker 1>com reform, what do you want? And I'd blake and

762
00:38:23.800 --> 00:38:26.559
<v Speaker 1>I'm a couple of times like something that we don't

763
00:38:26.599 --> 00:38:29.920
<v Speaker 1>have right now. But you have an idea of and

764
00:38:29.960 --> 00:38:33.239
<v Speaker 1>you mentioned earlier about free market principles and how you

765
00:38:33.320 --> 00:38:37.280
<v Speaker 1>can bring that into an institution like the US military,

766
00:38:37.800 --> 00:38:40.079
<v Speaker 1>that there is a way that we could use the

767
00:38:40.199 --> 00:38:44.840
<v Speaker 1>COCOMs to leverage the positive aspects of free market competition

768
00:38:44.880 --> 00:38:46.119
<v Speaker 1>and kind of flush that out a little bit.

769
00:38:46.440 --> 00:38:49.239
<v Speaker 2>Yeah, so we have these thirteen command commanders that could

770
00:38:49.239 --> 00:38:51.639
<v Speaker 2>be our source of demand. As command commanders, they're dealing

771
00:38:51.719 --> 00:38:54.400
<v Speaker 2>with real world events that represent the demand signal of

772
00:38:54.519 --> 00:38:57.280
<v Speaker 2>what the department needs to respond to. The services on

773
00:38:57.320 --> 00:39:00.360
<v Speaker 2>the other end are representing the supply side of this equation.

774
00:39:00.559 --> 00:39:03.440
<v Speaker 2>And I think there might be cleverer ways of integrating

775
00:39:03.480 --> 00:39:05.360
<v Speaker 2>supply and demand, which is kind of the beating heart

776
00:39:05.400 --> 00:39:08.199
<v Speaker 2>of any institution or business, and so in particular, instead

777
00:39:08.199 --> 00:39:11.800
<v Speaker 2>of trying to have a consolidated view of what the

778
00:39:11.840 --> 00:39:15.719
<v Speaker 2>services should be building for an abstract set of any contingency,

779
00:39:15.960 --> 00:39:20.440
<v Speaker 2>any theater, any operation, maybe we should be enabling more

780
00:39:21.079 --> 00:39:23.960
<v Speaker 2>differentiated signal to come from the COCOMs and then giving

781
00:39:24.000 --> 00:39:27.480
<v Speaker 2>them the ability to strategically introduce competition. Hey, I want

782
00:39:27.519 --> 00:39:29.599
<v Speaker 2>to buy this from the Navy. I really believe in

783
00:39:29.639 --> 00:39:32.519
<v Speaker 2>the program they're doing. Or actually it's not clear between

784
00:39:32.519 --> 00:39:34.079
<v Speaker 2>the Navy and the Air Force who's going to deliver

785
00:39:34.159 --> 00:39:35.960
<v Speaker 2>on this, and I want to be able to allocate

786
00:39:35.960 --> 00:39:39.320
<v Speaker 2>my resources across these programs, or maybe I need my

787
00:39:39.360 --> 00:39:41.960
<v Speaker 2>own internal R and D effort to go after this.

788
00:39:42.039 --> 00:39:44.760
<v Speaker 2>And I think we should embrace the fact that sentcom

789
00:39:44.880 --> 00:39:47.639
<v Speaker 2>is not indo pay coom. They're going to have different needs,

790
00:39:47.679 --> 00:39:52.239
<v Speaker 2>and actually we're optimizing our national security and the lethality

791
00:39:52.280 --> 00:39:55.519
<v Speaker 2>of our force by allowing ourselves to express that differentiation

792
00:39:55.599 --> 00:39:58.000
<v Speaker 2>across the combat commanders rather than trying to reject it

793
00:39:58.199 --> 00:40:01.800
<v Speaker 2>and turn it into a unitary Soviet style signal. There,

794
00:40:01.920 --> 00:40:04.960
<v Speaker 2>I think probably the most flushed out thinking around this.

795
00:40:05.039 --> 00:40:07.360
<v Speaker 2>I really heard from Derrek Tunier, who's the leader of

796
00:40:07.719 --> 00:40:11.800
<v Speaker 2>the Space Development Agency, a version of Goldwater Nickel reformed,

797
00:40:11.800 --> 00:40:13.480
<v Speaker 2>and he really he should speak for himself because it's

798
00:40:13.519 --> 00:40:15.719
<v Speaker 2>all his thinking here, and I think it's quite genius.

799
00:40:15.920 --> 00:40:19.760
<v Speaker 2>But maybe we allow the COCOMs to start owning some

800
00:40:19.920 --> 00:40:22.000
<v Speaker 2>of the palm process. What if they own twenty five

801
00:40:22.000 --> 00:40:24.199
<v Speaker 2>percent of the budget and the ability to program the

802
00:40:24.239 --> 00:40:26.400
<v Speaker 2>money for twenty five percent of the budget, How would

803
00:40:26.400 --> 00:40:28.679
<v Speaker 2>they allocate it differently? How could they own some of

804
00:40:28.719 --> 00:40:31.599
<v Speaker 2>that signal? How would that change the incentives for what

805
00:40:31.639 --> 00:40:34.760
<v Speaker 2>the services are going to produce and respond to based

806
00:40:34.800 --> 00:40:37.119
<v Speaker 2>on not just the captive ability for them to decide

807
00:40:37.119 --> 00:40:38.920
<v Speaker 2>what to build, but also based on what the field

808
00:40:39.000 --> 00:40:41.639
<v Speaker 2>is essentially asking for. And then over time, you could,

809
00:40:41.679 --> 00:40:43.920
<v Speaker 2>you know, maybe twenty five grows, maybe it doesn't, but

810
00:40:44.079 --> 00:40:46.639
<v Speaker 2>it provides you this dialectical piece. You know, you wouldn't

811
00:40:46.639 --> 00:40:48.400
<v Speaker 2>move all the budget to the COCOMs. I don't think

812
00:40:48.440 --> 00:40:50.800
<v Speaker 2>they're going to build the aircraft carrier, but I think

813
00:40:50.840 --> 00:40:53.599
<v Speaker 2>having none of it there is is and just currently

814
00:40:53.639 --> 00:40:56.400
<v Speaker 2>we're kind of just putting duct tape over problems. By

815
00:40:56.400 --> 00:40:59.079
<v Speaker 2>trying to give them urgent operational needs funds, there's a

816
00:40:59.119 --> 00:41:01.760
<v Speaker 2>more strategic role for them to play there that introduces

817
00:41:02.239 --> 00:41:05.280
<v Speaker 2>real competition inside of government.

818
00:41:06.440 --> 00:41:06.920
<v Speaker 1>Yeah.

819
00:41:07.519 --> 00:41:09.760
<v Speaker 3>Part of what I think I see too, is that

820
00:41:09.800 --> 00:41:13.079
<v Speaker 3>there's a need for a feedback loop from the people

821
00:41:13.239 --> 00:41:16.280
<v Speaker 3>who were actually using the products. So if Jimmy Thatch,

822
00:41:16.360 --> 00:41:18.679
<v Speaker 3>I think it was, it was developed the fat we've

823
00:41:18.760 --> 00:41:21.400
<v Speaker 3>during World War Two. He was able to feed that

824
00:41:21.519 --> 00:41:24.079
<v Speaker 3>information on how to defeat the zeros back into the

825
00:41:24.119 --> 00:41:26.960
<v Speaker 3>fleet and everybody started using it. That that is an

826
00:41:27.000 --> 00:41:30.760
<v Speaker 3>innovative process that worked because the system allowed him to

827
00:41:31.239 --> 00:41:33.280
<v Speaker 3>tell people what he was doing. Of course, he survived

828
00:41:33.320 --> 00:41:35.719
<v Speaker 3>to tell people what he's doing. And I keep wondering

829
00:41:35.760 --> 00:41:40.159
<v Speaker 3>about how many other people higher low level, I mean

830
00:41:40.239 --> 00:41:42.559
<v Speaker 3>co coms are down to the to the PFC. But

831
00:41:42.880 --> 00:41:45.239
<v Speaker 3>you know, we had those those need for m wraps

832
00:41:45.280 --> 00:41:50.079
<v Speaker 3>in Afghanistan and dan Iraq because of the IEDs, and

833
00:41:50.920 --> 00:41:53.320
<v Speaker 3>it took a long time to convince DoD apparently that

834
00:41:53.400 --> 00:41:56.159
<v Speaker 3>we ought to have vehicles like that. Well, where do

835
00:41:56.239 --> 00:41:59.360
<v Speaker 3>we failed? Where we failed the ultimate consumer in the

836
00:41:59.400 --> 00:42:02.159
<v Speaker 3>military way with the guy who's gonna as the point

837
00:42:02.239 --> 00:42:02.840
<v Speaker 3>end of the stick.

838
00:42:03.440 --> 00:42:06.280
<v Speaker 2>That's exactly right. I mean, if you a more kind

839
00:42:06.320 --> 00:42:10.320
<v Speaker 2>of brutal retrospective on Palanter's own history is that I

840
00:42:10.400 --> 00:42:12.880
<v Speaker 2>think we might have gone more than fifteen years without

841
00:42:12.880 --> 00:42:16.239
<v Speaker 2>a program of record. Everything we did was funded by

842
00:42:16.280 --> 00:42:20.159
<v Speaker 2>the field. We lived, you know, quarter to quarter, sometimes

843
00:42:20.199 --> 00:42:22.880
<v Speaker 2>you know year to year, but there was no visibility

844
00:42:22.880 --> 00:42:25.480
<v Speaker 2>into a long term future. And what we were competing

845
00:42:25.480 --> 00:42:27.920
<v Speaker 2>against were the programs of record, right, we were competing

846
00:42:27.920 --> 00:42:31.440
<v Speaker 2>against the services led efforts, and the war fighter was voting.

847
00:42:31.920 --> 00:42:34.480
<v Speaker 2>They were saying, no, what's going to give me maximum

848
00:42:34.559 --> 00:42:37.760
<v Speaker 2>lethality and give me the greatest chances of coming home?

849
00:42:37.840 --> 00:42:40.159
<v Speaker 2>Is this thing over here? And I think a lot

850
00:42:40.159 --> 00:42:42.639
<v Speaker 2>of the programs of record, their attempt to fight us

851
00:42:42.800 --> 00:42:44.960
<v Speaker 2>was not like, hey, I'm going to make my product better.

852
00:42:45.400 --> 00:42:47.320
<v Speaker 2>It was I'm going to use policy. But this is

853
00:42:47.360 --> 00:42:49.280
<v Speaker 2>the program of record. You know, this thing has no

854
00:42:49.320 --> 00:42:50.960
<v Speaker 2>long term funding. You don't want to bet on that.

855
00:42:51.000 --> 00:42:53.840
<v Speaker 2>It was, you know, fear, uncertainty and doubt. And that's

856
00:42:53.840 --> 00:42:56.159
<v Speaker 2>where I think we have the most opportunity to really

857
00:42:56.239 --> 00:42:58.320
<v Speaker 2>leverage the free market principles of saying no, let's just

858
00:42:58.360 --> 00:43:00.679
<v Speaker 2>compete on product, because that is what is going to

859
00:43:00.679 --> 00:43:04.639
<v Speaker 2>give a compounding advantage to our warfighters across theaters, across

860
00:43:04.719 --> 00:43:09.280
<v Speaker 2>roles every single day.

861
00:43:10.000 --> 00:43:13.840
<v Speaker 1>There's another thing that's not chiseled in stone that sometimes

862
00:43:13.840 --> 00:43:15.679
<v Speaker 1>we act like it is. You also have some interesting

863
00:43:15.719 --> 00:43:18.679
<v Speaker 1>ideas we could address something that people will think it's

864
00:43:18.800 --> 00:43:21.159
<v Speaker 1>just part of the landscape. There's nothing you can do about,

865
00:43:21.159 --> 00:43:23.360
<v Speaker 1>even though it's just one hundred percent under the control

866
00:43:23.559 --> 00:43:27.519
<v Speaker 1>of people who establish policies. But one of the things

867
00:43:27.519 --> 00:43:29.880
<v Speaker 1>that we've seen evolve when we went down to the

868
00:43:29.880 --> 00:43:35.559
<v Speaker 1>five primes is cost plus contracting and how what seems

869
00:43:35.559 --> 00:43:38.679
<v Speaker 1>on paper to be logical has a lot of warping

870
00:43:38.800 --> 00:43:43.159
<v Speaker 1>functions on how we pay for develop and even pitch

871
00:43:43.360 --> 00:43:44.719
<v Speaker 1>different weapons systems.

872
00:43:45.079 --> 00:43:47.360
<v Speaker 2>Percent I mean, you could say the origin of cost

873
00:43:47.400 --> 00:43:49.519
<v Speaker 2>plus was very well intended, and I think it fit

874
00:43:49.599 --> 00:43:52.679
<v Speaker 2>the moment if you're suddenly taking all these automotive companies

875
00:43:52.719 --> 00:43:55.000
<v Speaker 2>and you're saying, I need you to build weapons. You know,

876
00:43:55.039 --> 00:43:56.719
<v Speaker 2>I'd be reasonable for them to say I haven't built

877
00:43:56.719 --> 00:43:59.159
<v Speaker 2>weapons before, I don't know how I can build them profitably,

878
00:43:59.280 --> 00:44:01.679
<v Speaker 2>I don't know what it's cost. And the government just

879
00:44:01.679 --> 00:44:03.840
<v Speaker 2>based says, look, whatever your cost is, i'm going to

880
00:44:03.880 --> 00:44:06.360
<v Speaker 2>give you a fixed profit on top of it. Don't

881
00:44:06.400 --> 00:44:08.400
<v Speaker 2>worry about it. Let's just let's just get to work.

882
00:44:08.519 --> 00:44:10.239
<v Speaker 2>The problem is that that makes a lot of sense

883
00:44:10.280 --> 00:44:13.039
<v Speaker 2>and kind of this emergency retooling sort of approach. It

884
00:44:13.079 --> 00:44:14.360
<v Speaker 2>can make a lot of sense when there's a lot

885
00:44:14.400 --> 00:44:17.159
<v Speaker 2>of fundamental risk and what you're doing. But then the

886
00:44:17.239 --> 00:44:20.039
<v Speaker 2>continuation of that is it creates all the wrong incentives.

887
00:44:20.039 --> 00:44:22.360
<v Speaker 2>Like the two industries that really use cost plus today

888
00:44:22.519 --> 00:44:25.639
<v Speaker 2>are the DoD and home remodeling general contractors. And I

889
00:44:25.639 --> 00:44:26.840
<v Speaker 2>don't know if any of you have done a whole

890
00:44:26.880 --> 00:44:29.000
<v Speaker 2>home remodel, but I think as a consumer you would

891
00:44:29.000 --> 00:44:32.239
<v Speaker 2>say that's not a great model. The incentives are all wrong. Somehow,

892
00:44:32.239 --> 00:44:34.960
<v Speaker 2>the cost keeps growing and as a consequence, the plus

893
00:44:35.079 --> 00:44:38.840
<v Speaker 2>keeps growing as well. And the fundamental incentive is to

894
00:44:39.760 --> 00:44:41.719
<v Speaker 2>when you have a firm fixed price, is to build

895
00:44:41.760 --> 00:44:43.480
<v Speaker 2>a product and to figure out how to make that

896
00:44:43.559 --> 00:44:46.559
<v Speaker 2>product better, faster, and cheaper, which is the you know,

897
00:44:46.599 --> 00:44:49.679
<v Speaker 2>the basis of our commercial economy here. And you see

898
00:44:49.679 --> 00:44:52.480
<v Speaker 2>this with with a company like SpaceX, where you know,

899
00:44:52.719 --> 00:44:54.840
<v Speaker 2>I grew up in the shadow of the Space coast.

900
00:44:54.960 --> 00:44:57.199
<v Speaker 2>I love the Space Shuttle. I love being woken up

901
00:44:57.239 --> 00:45:00.000
<v Speaker 2>to Saturday Saturday morning cartoons with the double sonic booms

902
00:45:00.159 --> 00:45:03.519
<v Speaker 2>every now and then. But it took fifty thousand dollars

903
00:45:03.559 --> 00:45:06.400
<v Speaker 2>a kilogram to get to orbit with the Shuttle, and

904
00:45:06.440 --> 00:45:09.239
<v Speaker 2>with Starship heavy reuse, we're looking at ten to twenty

905
00:45:09.360 --> 00:45:12.719
<v Speaker 2>bucks a kilogram. I mean, that sort of price performance

906
00:45:12.760 --> 00:45:16.599
<v Speaker 2>improvement which has really happened over the last two, you know,

907
00:45:16.679 --> 00:45:21.400
<v Speaker 2>fifteen years, is astonishing. And we in the cost plus

908
00:45:21.440 --> 00:45:24.960
<v Speaker 2>model locked us into a very narrow range. That meant

909
00:45:25.079 --> 00:45:26.760
<v Speaker 2>like the price wasn't moving that much. Okay, maybe you

910
00:45:26.760 --> 00:45:29.400
<v Speaker 2>guys are twenty thousand dollars a kilogram, but we were

911
00:45:29.639 --> 00:45:32.039
<v Speaker 2>not going to see the fundamental innovation that was possible.

912
00:45:32.519 --> 00:45:35.000
<v Speaker 2>And the cost thinking, you know, it leads us to

913
00:45:35.119 --> 00:45:39.280
<v Speaker 2>valuing effort spent as opposed to value delivered. And so

914
00:45:39.440 --> 00:45:41.679
<v Speaker 2>NASA's own cost estimates for the Falcon was that it

915
00:45:41.679 --> 00:45:44.519
<v Speaker 2>would cost four billion dollars to build Elon. Did it

916
00:45:44.559 --> 00:45:48.000
<v Speaker 2>for four hundred million, and in a true cost plus paradigm,

917
00:45:48.199 --> 00:45:49.920
<v Speaker 2>you're just going to penalize the on you say, well,

918
00:45:49.920 --> 00:45:52.480
<v Speaker 2>your cost was lower, your plus should be lower. In fact,

919
00:45:52.480 --> 00:45:54.039
<v Speaker 2>the fact that you did it for four hundred million

920
00:45:54.119 --> 00:45:57.199
<v Speaker 2>means your plus should be much bigger. There's value that

921
00:45:57.199 --> 00:45:59.239
<v Speaker 2>you created that we should all be able to share

922
00:45:59.320 --> 00:46:02.280
<v Speaker 2>now as a con sequence of doing this, and that

923
00:46:02.320 --> 00:46:05.519
<v Speaker 2>then drives more capital into the ecosystem. It brings more founders,

924
00:46:05.559 --> 00:46:09.159
<v Speaker 2>it brings more innovation. It becomes a flywheel that is unstoppable.

925
00:46:09.320 --> 00:46:12.239
<v Speaker 2>And I think that's that's probably the long term consequence

926
00:46:12.239 --> 00:46:14.039
<v Speaker 2>of costs plus that people don't realize it. It is

927
00:46:14.079 --> 00:46:16.119
<v Speaker 2>a break on the flywheel. It is part of what

928
00:46:16.239 --> 00:46:18.639
<v Speaker 2>drives there's no leverage in your business. You can never

929
00:46:18.679 --> 00:46:21.480
<v Speaker 2>get leverage of your fixed costs, so it drives the

930
00:46:21.480 --> 00:46:22.880
<v Speaker 2>innovators out of the industry.

931
00:46:23.599 --> 00:46:26.079
<v Speaker 3>Yeah, let's talk atlet's speaking of that. Let's talk about

932
00:46:26.119 --> 00:46:28.840
<v Speaker 3>the budget process we have. You talked about it with

933
00:46:29.320 --> 00:46:32.079
<v Speaker 3>the oodle loop for the ability to move money around

934
00:46:32.079 --> 00:46:34.880
<v Speaker 3>and the current system, it takes forever if you can

935
00:46:34.960 --> 00:46:37.360
<v Speaker 3>even do it, because things are slotted, and you said,

936
00:46:37.440 --> 00:46:39.840
<v Speaker 3>I think it must be able to program money inside

937
00:46:39.840 --> 00:46:43.159
<v Speaker 3>of two months, not two years. Talk about how important that.

938
00:46:43.239 --> 00:46:47.280
<v Speaker 2>Is is it is, it is crucial. I mean, there's

939
00:46:47.280 --> 00:46:48.880
<v Speaker 2>so many cuts at this. The first is we could

940
00:46:48.880 --> 00:46:50.800
<v Speaker 2>just reason about it commercially. If you went to a

941
00:46:50.840 --> 00:46:54.840
<v Speaker 2>commercial company in America and you said, hey, I've got

942
00:46:54.840 --> 00:46:57.039
<v Speaker 2>the greatest mouse trap, and they came back to you

943
00:46:57.119 --> 00:46:59.320
<v Speaker 2>and said, oh, this is amazing, I really want to

944
00:46:59.400 --> 00:47:01.159
<v Speaker 2>use it. Get me two years to go find the

945
00:47:01.199 --> 00:47:04.000
<v Speaker 2>money to start a program, to even experiment with it.

946
00:47:04.000 --> 00:47:07.320
<v Speaker 2>It would just retard our entire economy and the rate

947
00:47:07.360 --> 00:47:09.960
<v Speaker 2>of innovation and the adoption of innovation. And I'd say,

948
00:47:09.960 --> 00:47:12.800
<v Speaker 2>when we started our commercial business almost two decades ago,

949
00:47:13.480 --> 00:47:15.760
<v Speaker 2>I would see, you know, people would sometimes say, okay,

950
00:47:15.800 --> 00:47:18.199
<v Speaker 2>I need a couple quarters to get the money, never

951
00:47:18.239 --> 00:47:20.960
<v Speaker 2>even a year. Really. But now our commercial companies have

952
00:47:21.039 --> 00:47:23.280
<v Speaker 2>the fiscal agility to find the money inside of a quarter.

953
00:47:23.360 --> 00:47:26.360
<v Speaker 2>They've improved their own budgeting and planning processes. They view

954
00:47:26.440 --> 00:47:29.719
<v Speaker 2>the budget almost through a lens of dev secops like, yeah,

955
00:47:29.880 --> 00:47:31.920
<v Speaker 2>I can move money around. I have some agility. I'm

956
00:47:31.920 --> 00:47:33.760
<v Speaker 2>gonna not do this so I can do this. I

957
00:47:33.760 --> 00:47:36.039
<v Speaker 2>can make trade offs like when I made this budget,

958
00:47:36.039 --> 00:47:39.320
<v Speaker 2>this capability didn't exist the world has changed, chat GPT happened,

959
00:47:39.480 --> 00:47:42.519
<v Speaker 2>whatever the case might be. In the department, Not only

960
00:47:42.599 --> 00:47:44.880
<v Speaker 2>are we not talking about quarters, we're talking about two years.

961
00:47:45.199 --> 00:47:48.159
<v Speaker 2>In a very systematic approach to doing this that biases

962
00:47:48.280 --> 00:47:51.599
<v Speaker 2>massively towards central planning. It is kind of the starting

963
00:47:51.599 --> 00:47:54.400
<v Speaker 2>input to the fight it right, a five year centralized plan.

964
00:47:54.599 --> 00:47:58.679
<v Speaker 2>But I find that strange because doctrinally we believe that

965
00:47:58.840 --> 00:48:02.039
<v Speaker 2>you know, plans, nope, plan survive first contact. Even if

966
00:48:02.079 --> 00:48:05.400
<v Speaker 2>the act of planning is invaluable, Well, a budget is

967
00:48:05.440 --> 00:48:08.280
<v Speaker 2>a plan. Why would we ever believe that something we

968
00:48:08.320 --> 00:48:10.639
<v Speaker 2>conceived of two years ago ought to be correct today,

969
00:48:11.079 --> 00:48:13.360
<v Speaker 2>or that you know what we call the president's budget.

970
00:48:13.360 --> 00:48:15.119
<v Speaker 2>I've heard so many times people love saying I support

971
00:48:15.159 --> 00:48:17.239
<v Speaker 2>the president's budget because they have to say that that's

972
00:48:17.320 --> 00:48:19.320
<v Speaker 2>the that would you would be an insurrectionist if you

973
00:48:19.320 --> 00:48:21.400
<v Speaker 2>didn't support the president's budget. But the only thing I

974
00:48:21.440 --> 00:48:23.679
<v Speaker 2>believe to be true is there's no way that the

975
00:48:23.679 --> 00:48:26.239
<v Speaker 2>president's budget can be right. You know, the second it's made,

976
00:48:26.280 --> 00:48:28.440
<v Speaker 2>it's got to be wrong. The world is changing around us,

977
00:48:28.639 --> 00:48:30.360
<v Speaker 2>and so how do we how do we improve our

978
00:48:30.400 --> 00:48:33.280
<v Speaker 2>ability to adjust our plan to meet the reality of

979
00:48:33.320 --> 00:48:35.079
<v Speaker 2>the world we're at and I think a lot of

980
00:48:35.079 --> 00:48:37.440
<v Speaker 2>that comes down to discretion. So first it's recognizing there

981
00:48:37.559 --> 00:48:40.800
<v Speaker 2>is no physical physics limitation of the universe. That means

982
00:48:40.800 --> 00:48:42.559
<v Speaker 2>it has to take two years to do these things,

983
00:48:42.960 --> 00:48:46.519
<v Speaker 2>and that these are all man made, self imposed constraints.

984
00:48:46.559 --> 00:48:49.760
<v Speaker 2>And then secondly it starts with with then empowering people

985
00:48:49.800 --> 00:48:51.480
<v Speaker 2>with the discretion and the credit. You know, you have

986
00:48:51.519 --> 00:48:54.039
<v Speaker 2>to credibility wait these things, like we have the right leaders,

987
00:48:54.159 --> 00:48:56.000
<v Speaker 2>this is the person that we should give more discretion to.

988
00:48:56.039 --> 00:48:58.000
<v Speaker 2>We should enable them to make bets and follow their

989
00:48:58.039 --> 00:49:01.480
<v Speaker 2>intuition and move money around. And I know that's particularly

990
00:49:01.480 --> 00:49:03.559
<v Speaker 2>hard because it's not just the Department. There's an inner

991
00:49:03.639 --> 00:49:06.079
<v Speaker 2>there's a complex interplay between the Department and Congress to

992
00:49:06.079 --> 00:49:09.320
<v Speaker 2>make that happen. But I'm quite confident that we can

993
00:49:09.400 --> 00:49:10.000
<v Speaker 2>make it happen.

994
00:49:12.000 --> 00:49:14.159
<v Speaker 1>One of the more challenging things to do, at least

995
00:49:14.199 --> 00:49:17.039
<v Speaker 1>for me, is when one of my closely held beliefs

996
00:49:17.199 --> 00:49:20.119
<v Speaker 1>is challenged right to my face, and the instinct is

997
00:49:20.159 --> 00:49:23.039
<v Speaker 1>to get all huffy and puffy and dismiss it. But

998
00:49:23.280 --> 00:49:25.559
<v Speaker 1>that's not a healthy thing to do. And as I

999
00:49:25.599 --> 00:49:28.280
<v Speaker 1>was reading the report or the Defense Reformation, I found

1000
00:49:28.320 --> 00:49:30.719
<v Speaker 1>myself vibing and nod in my head a lot, but

1001
00:49:30.920 --> 00:49:33.559
<v Speaker 1>I would be doing a disservice to the folks who

1002
00:49:33.599 --> 00:49:38.000
<v Speaker 1>have heard me bring up this topic before. One point

1003
00:49:38.039 --> 00:49:40.440
<v Speaker 1>had my claws come out and the spines popped out

1004
00:49:40.440 --> 00:49:41.800
<v Speaker 1>of my back. And I just wanted to give you

1005
00:49:41.840 --> 00:49:44.239
<v Speaker 1>a chance, please to flesh this out, because the more

1006
00:49:44.280 --> 00:49:46.039
<v Speaker 1>I read it, the more I went, Okay, I need

1007
00:49:46.039 --> 00:49:47.920
<v Speaker 1>to do my own little clean sheet look at it.

1008
00:49:48.440 --> 00:49:54.519
<v Speaker 1>And that was point fourteen. Productivity is more lethal than

1009
00:49:54.599 --> 00:49:56.880
<v Speaker 1>weapons stock piles. And I won't do a full quote,

1010
00:49:56.880 --> 00:49:59.039
<v Speaker 1>I'll do a partial quote of it for you know.

1011
00:49:59.159 --> 00:50:03.480
<v Speaker 1>Point fourteen we quote, we obsessed about stockpiles with stockpiles

1012
00:50:03.519 --> 00:50:06.920
<v Speaker 1>are irrelevant. Our munitions delivery to Ukraine were Cold War

1013
00:50:07.079 --> 00:50:10.480
<v Speaker 1>error kits sitting on shelves collecting dust. While decades of

1014
00:50:10.599 --> 00:50:14.440
<v Speaker 1>innovation occurred, the consumption of ten years of production in

1015
00:50:14.480 --> 00:50:17.599
<v Speaker 1>ten weeks of fighting in Ukraine demonstrated that the rate

1016
00:50:17.639 --> 00:50:21.880
<v Speaker 1>of production was the actual weapon all along. Unquote, talk

1017
00:50:21.960 --> 00:50:24.320
<v Speaker 1>to me a little bit about how I'm missing the

1018
00:50:24.320 --> 00:50:28.159
<v Speaker 1>big story with my obsession about stockpiles and empty magazines.

1019
00:50:28.679 --> 00:50:31.920
<v Speaker 2>Yeah, so of course it's framed intentionally a little controversially,

1020
00:50:31.960 --> 00:50:35.159
<v Speaker 2>But my claim is not that you don't need a stockpile.

1021
00:50:35.239 --> 00:50:37.599
<v Speaker 2>I think you do, but that you shouldn't get false

1022
00:50:37.639 --> 00:50:41.000
<v Speaker 2>comfort from the stockpile. So one extreme is, look, I

1023
00:50:41.039 --> 00:50:45.000
<v Speaker 2>have this exquisite stockpile. Let's look at it. But you know,

1024
00:50:45.320 --> 00:50:47.320
<v Speaker 2>just so you know, I shut down all the production lines.

1025
00:50:47.360 --> 00:50:49.119
<v Speaker 2>I can't make any more of these weapons, but I've

1026
00:50:49.119 --> 00:50:52.079
<v Speaker 2>got the stockpile. And I think we should look at

1027
00:50:52.079 --> 00:50:53.920
<v Speaker 2>that and say, ooh, that's not a really big deterrent

1028
00:50:54.400 --> 00:50:57.920
<v Speaker 2>that actually the deterrent comes from the ability to quickly

1029
00:50:58.159 --> 00:51:01.199
<v Speaker 2>produce the stockpile. And this is also I think partly

1030
00:51:01.239 --> 00:51:03.280
<v Speaker 2>the legacy of the peace dividend, which is like, oh,

1031
00:51:03.320 --> 00:51:05.960
<v Speaker 2>we can't afford to keep running these production lines, or

1032
00:51:06.280 --> 00:51:09.679
<v Speaker 2>let's do more live virtual constructive exercises, so we don't

1033
00:51:09.719 --> 00:51:12.159
<v Speaker 2>expend our munitions because these munitions are very expensive and

1034
00:51:12.159 --> 00:51:13.800
<v Speaker 2>it takes a long time to make. It's two years

1035
00:51:13.800 --> 00:51:17.039
<v Speaker 2>to build an LRASM, eight years to build a Patriot battery. Oh,

1036
00:51:17.079 --> 00:51:19.440
<v Speaker 2>you should just conserve these things, but let's have comfort

1037
00:51:19.480 --> 00:51:22.760
<v Speaker 2>that they're in the depot. And I think that's probably

1038
00:51:22.760 --> 00:51:25.199
<v Speaker 2>the mistake because what we should be saying is, Wow,

1039
00:51:25.280 --> 00:51:26.920
<v Speaker 2>how could I make the l RASM in one year?

1040
00:51:26.960 --> 00:51:28.639
<v Speaker 2>How could I make it in one month. What are

1041
00:51:28.679 --> 00:51:30.400
<v Speaker 2>the investments I need to make? How do I change

1042
00:51:30.400 --> 00:51:33.920
<v Speaker 2>the design? How do I emphasize the design for manufacturability?

1043
00:51:34.159 --> 00:51:37.119
<v Speaker 2>And it's the constant. It's the fact that you are

1044
00:51:37.159 --> 00:51:40.199
<v Speaker 2>constantly producing innovation. I'm not sure I'm going to steal

1045
00:51:40.199 --> 00:51:42.480
<v Speaker 2>this from Arthur Herman, but I'm not sure innovation is

1046
00:51:42.559 --> 00:51:47.440
<v Speaker 2>actually possible without production. Production is the prerequisite to then

1047
00:51:47.519 --> 00:51:51.440
<v Speaker 2>driving the innovation. My favorite example of this is the LLM,

1048
00:51:52.000 --> 00:51:55.679
<v Speaker 2>This the Large Language Model. Where did the transformer architecture

1049
00:51:55.719 --> 00:51:57.480
<v Speaker 2>even come from? Well, it came from Google. They put

1050
00:51:57.480 --> 00:51:59.599
<v Speaker 2>out a paper in twenty seventeen. It's called Attention is

1051
00:51:59.599 --> 00:52:02.519
<v Speaker 2>All You Need? What motivated them to do that research

1052
00:52:02.719 --> 00:52:07.639
<v Speaker 2>They wanted a three percent super incremental improvement in Google Translate,

1053
00:52:08.079 --> 00:52:12.320
<v Speaker 2>and that investment led to a revolution, an American revolution,

1054
00:52:12.400 --> 00:52:15.800
<v Speaker 2>I'll note as well, but that I don't think you

1055
00:52:15.880 --> 00:52:18.559
<v Speaker 2>get that in an academic research lab. It is because

1056
00:52:18.599 --> 00:52:21.639
<v Speaker 2>they were producing things that they were able to innovate

1057
00:52:21.679 --> 00:52:23.679
<v Speaker 2>on how they were going to produce things. And I

1058
00:52:23.679 --> 00:52:26.559
<v Speaker 2>think we've kind of dialed down all of our production

1059
00:52:26.679 --> 00:52:30.079
<v Speaker 2>lines to minimum sustainment rates. You know, we've kind of

1060
00:52:30.239 --> 00:52:32.400
<v Speaker 2>then whether you need to believe it because it's the

1061
00:52:32.400 --> 00:52:34.280
<v Speaker 2>only world we could win or not. It's like, well,

1062
00:52:34.320 --> 00:52:36.960
<v Speaker 2>all conflicts are going to be relatively short. We think

1063
00:52:37.280 --> 00:52:39.519
<v Speaker 2>we have enough. You know, if we think we might

1064
00:52:39.559 --> 00:52:41.800
<v Speaker 2>have eight days of weapons on hand for a China fight,

1065
00:52:42.119 --> 00:52:44.320
<v Speaker 2>you know, what's the right number. I think it's closer

1066
00:52:44.360 --> 00:52:46.480
<v Speaker 2>to eight hundred days than eight days, but even more

1067
00:52:46.519 --> 00:52:49.599
<v Speaker 2>than the absolute number. The question is really what is

1068
00:52:49.639 --> 00:52:52.079
<v Speaker 2>the cycle time to produce? How do we start thinking

1069
00:52:52.079 --> 00:52:55.760
<v Speaker 2>about that production latency as part of the kill chain.

1070
00:52:55.840 --> 00:52:59.920
<v Speaker 3>Actually, yeah, I think this kind of cuts back to

1071
00:53:00.079 --> 00:53:04.360
<v Speaker 3>the comment you made a discretion in the sense that

1072
00:53:04.440 --> 00:53:06.719
<v Speaker 3>we somebody asked them to make those decisions. How much

1073
00:53:06.760 --> 00:53:08.519
<v Speaker 3>do we need and how much discretion do they have

1074
00:53:08.559 --> 00:53:10.480
<v Speaker 3>to make those choices? I mean, I was thinking about

1075
00:53:10.519 --> 00:53:13.840
<v Speaker 3>this because it reminded me of the old saying back

1076
00:53:13.880 --> 00:53:16.400
<v Speaker 3>in the day when US Navy captains couldn't talk to

1077
00:53:17.199 --> 00:53:19.960
<v Speaker 3>the Washington d C. They would be given orders to

1078
00:53:20.000 --> 00:53:22.159
<v Speaker 3>go to X spot and act in the best interests

1079
00:53:22.159 --> 00:53:24.480
<v Speaker 3>in the United States. That was their orders. They didn't

1080
00:53:24.480 --> 00:53:27.239
<v Speaker 3>they didn't have they didn't have SATCOM. And I'm thinking, well,

1081
00:53:27.440 --> 00:53:30.599
<v Speaker 3>what happened to us that this instant communications has screwed

1082
00:53:30.679 --> 00:53:33.239
<v Speaker 3>us up? To the point where nobody does anything nowadays

1083
00:53:33.239 --> 00:53:36.000
<v Speaker 3>without checking with home base. And I remember reading in

1084
00:53:36.079 --> 00:53:39.039
<v Speaker 3>the book Up the Organization, one of my favorite management books,

1085
00:53:39.079 --> 00:53:42.000
<v Speaker 3>that he talks about delegating a lot of these decisions

1086
00:53:42.000 --> 00:53:44.400
<v Speaker 3>down low. You know, he doesn't the CEO does not

1087
00:53:44.519 --> 00:53:46.679
<v Speaker 3>need to be involved in deciding whether the cups in

1088
00:53:46.760 --> 00:53:49.440
<v Speaker 3>the cafeteria are breaking to be green or brownie. You know,

1089
00:53:49.519 --> 00:53:51.320
<v Speaker 3>we need to we need to. I think we need

1090
00:53:51.360 --> 00:53:54.639
<v Speaker 3>to give. We have to trust people, and you know

1091
00:53:54.679 --> 00:53:56.559
<v Speaker 3>they're going to make mistakes, but you still have to

1092
00:53:56.599 --> 00:53:58.320
<v Speaker 3>trust them. And I think that was one of your

1093
00:53:58.440 --> 00:54:01.360
<v Speaker 3>your points on the budget. You could just move money around,

1094
00:54:01.400 --> 00:54:04.440
<v Speaker 3>but you know, allow for mistakes, but let people have

1095
00:54:04.480 --> 00:54:04.960
<v Speaker 3>a chance.

1096
00:54:05.599 --> 00:54:07.480
<v Speaker 2>That's what I was talking to a general who was

1097
00:54:07.559 --> 00:54:10.880
<v Speaker 2>leading the early AI efforts in the government. This is

1098
00:54:10.679 --> 00:54:13.199
<v Speaker 2>this is almost a decade ago now, and he was

1099
00:54:13.239 --> 00:54:16.000
<v Speaker 2>saying how hard of a time he was having with Congress, explaining,

1100
00:54:16.360 --> 00:54:19.639
<v Speaker 2>you know, he's spending hundreds of millions of dollars he's

1101
00:54:19.639 --> 00:54:22.400
<v Speaker 2>doing this stuff, and the Congress SEP's asking him, you know,

1102
00:54:22.679 --> 00:54:24.800
<v Speaker 2>what are we getting? And I told him, you know,

1103
00:54:24.840 --> 00:54:27.679
<v Speaker 2>they're they're actually paying you to learn. And the light

1104
00:54:27.719 --> 00:54:30.239
<v Speaker 2>bulb went off in his head. But I understand how

1105
00:54:30.239 --> 00:54:32.239
<v Speaker 2>difficult of a position that is for him to explain

1106
00:54:32.400 --> 00:54:34.719
<v Speaker 2>back to the oversight. But I think that there's a

1107
00:54:34.760 --> 00:54:38.119
<v Speaker 2>fundamental truism in that. I certainly look at the journey

1108
00:54:38.119 --> 00:54:40.960
<v Speaker 2>of any of our most innovative companies. That's a big

1109
00:54:41.000 --> 00:54:44.039
<v Speaker 2>part you are. The capital you're deploying is about the

1110
00:54:44.039 --> 00:54:46.800
<v Speaker 2>first revative of learning, and the company with the highest

1111
00:54:46.800 --> 00:54:49.280
<v Speaker 2>first derivative of learning is the one that wins. So

1112
00:54:49.320 --> 00:54:51.440
<v Speaker 2>when we think about the lethality of our fighting force

1113
00:54:51.480 --> 00:54:54.119
<v Speaker 2>and our ability to draw our adversary, that is that

1114
00:54:54.239 --> 00:54:56.400
<v Speaker 2>is it. It is the first derivative. It's not where

1115
00:54:56.400 --> 00:54:59.039
<v Speaker 2>are we today? It is you know, how how quickly

1116
00:54:59.079 --> 00:55:01.360
<v Speaker 2>are we improving? And that's a second point, which is

1117
00:55:01.400 --> 00:55:03.800
<v Speaker 2>kind of a corollary to the productivity is more important

1118
00:55:03.800 --> 00:55:07.480
<v Speaker 2>than the stockpile. When you look at the weapon obsolescence

1119
00:55:07.519 --> 00:55:11.400
<v Speaker 2>life cycle in Ukraine with the dynamic electronic warfare environment,

1120
00:55:11.400 --> 00:55:13.760
<v Speaker 2>you know drones might only be useful for two to

1121
00:55:13.840 --> 00:55:16.400
<v Speaker 2>four weeks before you have to actually rebuild your drone

1122
00:55:16.440 --> 00:55:19.440
<v Speaker 2>to survive the environment. You look at how the drop

1123
00:55:19.480 --> 00:55:23.159
<v Speaker 2>off in the efficacy of precision guide ammunitions. They're what

1124
00:55:23.199 --> 00:55:25.159
<v Speaker 2>you have to take away from that is, oh, it's

1125
00:55:25.199 --> 00:55:28.599
<v Speaker 2>not what the weapon does today, it's actually our ability

1126
00:55:28.639 --> 00:55:31.920
<v Speaker 2>to change the weapon and how it works. And you know,

1127
00:55:32.039 --> 00:55:34.800
<v Speaker 2>how do we think about the weapon as a malleable

1128
00:55:35.000 --> 00:55:37.880
<v Speaker 2>capability and how many how much practice are we getting

1129
00:55:37.880 --> 00:55:40.599
<v Speaker 2>at changing our TTPs and how these things actually function,

1130
00:55:40.800 --> 00:55:43.760
<v Speaker 2>updating the software to make these things work when we

1131
00:55:43.800 --> 00:55:44.760
<v Speaker 2>need to use them in anger.

1132
00:55:46.079 --> 00:55:48.079
<v Speaker 1>One thing you mentioned earlier on in the conversation that

1133
00:55:48.159 --> 00:55:50.119
<v Speaker 1>stuck with me. You just hit it on again is

1134
00:55:50.199 --> 00:55:53.760
<v Speaker 1>it's easy. It's easy to look for problems and to

1135
00:55:53.800 --> 00:55:56.519
<v Speaker 1>be critical and to point out things. And sometimes you

1136
00:55:56.559 --> 00:55:59.280
<v Speaker 1>can overlook what we as a nation and a culture

1137
00:55:59.800 --> 00:56:03.920
<v Speaker 1>have as our comparative advantage. And as you mentioned earlier,

1138
00:56:05.199 --> 00:56:11.760
<v Speaker 1>our superpower is software. We are beyond comparative advantage. It's

1139
00:56:11.800 --> 00:56:13.639
<v Speaker 1>something we could really take advantage of. And I look

1140
00:56:13.679 --> 00:56:17.000
<v Speaker 1>at our Navy. We still do our fitness reports on

1141
00:56:17.119 --> 00:56:21.079
<v Speaker 1>NAFIT ninety eight as in nineteen ninety eight. And when

1142
00:56:21.119 --> 00:56:24.199
<v Speaker 1>I when I was a manpower person twenty years ago,

1143
00:56:25.199 --> 00:56:27.639
<v Speaker 1>if I needed to go into Millington and where we

1144
00:56:27.679 --> 00:56:30.039
<v Speaker 1>do our manpower and I wanted to check on where

1145
00:56:30.079 --> 00:56:32.639
<v Speaker 1>billets were going, what things were needed, what were the priorities.

1146
00:56:32.960 --> 00:56:35.880
<v Speaker 1>I had to do a doss dial into a Unix

1147
00:56:35.960 --> 00:56:40.000
<v Speaker 1>database just out of curiosity. Earlier this year, I put

1148
00:56:40.079 --> 00:56:43.119
<v Speaker 1>out a call to my people, It's like, hey, are

1149
00:56:43.159 --> 00:56:46.320
<v Speaker 1>we still using this old Unix database? And the answer

1150
00:56:46.400 --> 00:56:50.480
<v Speaker 1>is I got yes. And then and yesterday our previous

1151
00:56:50.559 --> 00:56:53.480
<v Speaker 1>mid rat show Brian Clark over at Hudson. He mentioned

1152
00:56:53.519 --> 00:56:56.199
<v Speaker 1>to me something that I looked up last night is

1153
00:56:56.880 --> 00:57:00.000
<v Speaker 1>Pallenteered back in twenty twenty one had their contract exte

1154
00:57:00.119 --> 00:57:03.400
<v Speaker 1>ended for their foundry software for the Royal Navy. You know,

1155
00:57:03.440 --> 00:57:05.480
<v Speaker 1>we think we have challenges Royal Navy, it really has

1156
00:57:05.480 --> 00:57:09.039
<v Speaker 1>some challenges and they are just a big fan of

1157
00:57:09.079 --> 00:57:11.960
<v Speaker 1>what software is enable to do for them, especially in

1158
00:57:12.039 --> 00:57:15.320
<v Speaker 1>their manpower arena. You know this big problem we have,

1159
00:57:15.440 --> 00:57:20.079
<v Speaker 1>this multifaceted attack. How do you see that not just Paletair,

1160
00:57:20.119 --> 00:57:23.800
<v Speaker 1>but the industry in general can find a more receptive

1161
00:57:23.800 --> 00:57:26.360
<v Speaker 1>attitude to people understanding what you talked about, where you

1162
00:57:26.360 --> 00:57:31.000
<v Speaker 1>have the physical material weapon our device far unit, but

1163
00:57:31.079 --> 00:57:33.440
<v Speaker 1>it's to software that you're able to update and put

1164
00:57:33.440 --> 00:57:36.760
<v Speaker 1>in there a greater appreciation of how we can leverage

1165
00:57:36.880 --> 00:57:40.679
<v Speaker 1>what really is this nation's superpower skill and that's in software.

1166
00:57:41.280 --> 00:57:43.599
<v Speaker 2>Absolutely first I want to have that caveat that we're

1167
00:57:43.840 --> 00:57:45.719
<v Speaker 2>not going to win the next war by shooting bits

1168
00:57:45.719 --> 00:57:47.800
<v Speaker 2>at our adversaries, where you know we're going to need atoms.

1169
00:57:48.000 --> 00:57:50.639
<v Speaker 2>The physical world absolutely matters, but we should be using

1170
00:57:50.679 --> 00:57:53.599
<v Speaker 2>software to achieve asymmetric advantage in the physical world. And

1171
00:57:53.599 --> 00:57:55.639
<v Speaker 2>there's two parts of that. One is how do we

1172
00:57:55.719 --> 00:57:59.440
<v Speaker 2>do production differently Elon with his vertically integrated approach and

1173
00:57:59.440 --> 00:58:02.480
<v Speaker 2>co locate the research with the production. It's a whole

1174
00:58:02.480 --> 00:58:04.559
<v Speaker 2>methodology and there's a whole school of founders that have

1175
00:58:04.599 --> 00:58:07.360
<v Speaker 2>come out of his world that show us that actually

1176
00:58:08.039 --> 00:58:10.519
<v Speaker 2>America is good at manufacturing. It's just said that that

1177
00:58:10.559 --> 00:58:13.960
<v Speaker 2>knowledge is not evenly distributed amongst our legacy manufacturing base,

1178
00:58:14.119 --> 00:58:16.559
<v Speaker 2>and that is principally it's a software driven approach. The

1179
00:58:16.679 --> 00:58:19.800
<v Speaker 2>second piece of this is to reindustrialize as a nation,

1180
00:58:19.840 --> 00:58:21.960
<v Speaker 2>which I deeply believe we need to do. We need

1181
00:58:22.000 --> 00:58:25.480
<v Speaker 2>to do so by giving American workers superpowers. We certainly

1182
00:58:25.480 --> 00:58:27.559
<v Speaker 2>have a lot of experience helping like Panasonic Energy. They

1183
00:58:27.559 --> 00:58:31.360
<v Speaker 2>build every battery in the Tesla Reno gigafactory. The employees

1184
00:58:31.400 --> 00:58:34.199
<v Speaker 2>prior to working on this exquisite Japanese equipment, they were

1185
00:58:34.400 --> 00:58:36.960
<v Speaker 2>working in casinos. So how do you give these American

1186
00:58:37.000 --> 00:58:40.199
<v Speaker 2>workers the kind of AI iron Man suit that enables

1187
00:58:40.239 --> 00:58:42.719
<v Speaker 2>them to be as effective or even more effective than

1188
00:58:42.719 --> 00:58:45.440
<v Speaker 2>a level four Japanese engineer. And I think that's going

1189
00:58:45.480 --> 00:58:47.119
<v Speaker 2>to be a big part of how we You know

1190
00:58:47.159 --> 00:58:49.840
<v Speaker 2>this is David Slingshot. You know, we were the best

1191
00:58:49.840 --> 00:58:52.719
<v Speaker 2>in mass production at the beginning of World War Two. Unfortunately,

1192
00:58:52.760 --> 00:58:55.000
<v Speaker 2>our adversary is today and we're going to need an

1193
00:58:55.000 --> 00:58:57.760
<v Speaker 2>asymmetric approach to get back to that. Now. There is

1194
00:58:57.800 --> 00:59:00.719
<v Speaker 2>a more direct aspect with software, which I think actually

1195
00:59:00.760 --> 00:59:03.280
<v Speaker 2>gets to the last thesis, which is that war fighters

1196
00:59:03.360 --> 00:59:06.039
<v Speaker 2>fight with guns and get. And it's a little cheeky

1197
00:59:06.039 --> 00:59:09.079
<v Speaker 2>way of saying what I've noticed is that the most effective,

1198
00:59:09.159 --> 00:59:12.559
<v Speaker 2>most lethal general officers. I think they wouldn't really like

1199
00:59:12.639 --> 00:59:15.039
<v Speaker 2>me saying this, but they have the mentality of a

1200
00:59:15.039 --> 00:59:18.079
<v Speaker 2>product manager. They don't think software is something for the

1201
00:59:18.119 --> 00:59:21.039
<v Speaker 2>nerds in the corner. They think software something I, the

1202
00:59:21.079 --> 00:59:24.280
<v Speaker 2>general officer, use to run my combatant command. I have

1203
00:59:24.400 --> 00:59:26.920
<v Speaker 2>opinions of how the pixel should be laid out. I'm

1204
00:59:26.920 --> 00:59:29.480
<v Speaker 2>going to give my feedback directly to my pit crew,

1205
00:59:29.519 --> 00:59:30.920
<v Speaker 2>to my engineers, and I'm going to tell them how

1206
00:59:30.960 --> 00:59:33.280
<v Speaker 2>to tweak this thing so that tomorrow and they come back,

1207
00:59:33.360 --> 00:59:36.800
<v Speaker 2>I'm more lethal and engaging, and so I'm picking the

1208
00:59:36.840 --> 00:59:39.760
<v Speaker 2>Kambat commander there. I think you could have the exact

1209
00:59:39.760 --> 00:59:42.559
<v Speaker 2>same thing for your a doss manpower based example. And

1210
00:59:42.599 --> 00:59:44.599
<v Speaker 2>I think this is one of the paradoxes of technology,

1211
00:59:44.599 --> 00:59:48.639
<v Speaker 2>which is the sort of anodyne removed view is something

1212
00:59:48.800 --> 00:59:51.360
<v Speaker 2>like the technology is going to make the human less important.

1213
00:59:52.000 --> 00:59:55.039
<v Speaker 2>And that's because somehow technology makes the media and human

1214
00:59:55.119 --> 00:59:59.119
<v Speaker 2>more capable. That's true, but it actually makes the very

1215
00:59:59.159 --> 01:00:03.039
<v Speaker 2>best human way more capable. And so the determinative outcomes

1216
01:00:03.039 --> 01:00:05.719
<v Speaker 2>in the battlespace or in the in the free market

1217
01:00:05.800 --> 01:00:08.639
<v Speaker 2>are going to come from the very best person being

1218
01:00:09.039 --> 01:00:11.159
<v Speaker 2>kind of wrapped in the very best software, and so

1219
01:00:11.199 --> 01:00:14.119
<v Speaker 2>small differences in the leadership are going to be compounded

1220
01:00:14.199 --> 01:00:18.039
<v Speaker 2>massively and finding and thinking about our general officer corps

1221
01:00:18.199 --> 01:00:20.920
<v Speaker 2>and the from a perspective of yes, you have all

1222
01:00:20.960 --> 01:00:22.920
<v Speaker 2>these capabilities, you need, all these skills you need to

1223
01:00:22.920 --> 01:00:26.079
<v Speaker 2>be able to do. One of them is actually being

1224
01:00:26.079 --> 01:00:28.559
<v Speaker 2>a product manager having an opinion on the malle You know,

1225
01:00:28.559 --> 01:00:31.400
<v Speaker 2>it's the most malleable weapons system you have, and you

1226
01:00:31.480 --> 01:00:33.639
<v Speaker 2>can you can change it all the time. One of

1227
01:00:33.639 --> 01:00:35.920
<v Speaker 2>my real world examples around that is the Afghan Neo.

1228
01:00:36.320 --> 01:00:39.280
<v Speaker 2>You know, we push ninety thousand software upgrades a week

1229
01:00:39.400 --> 01:00:42.159
<v Speaker 2>to our fleet when the neo happened. When crisis happens,

1230
01:00:42.159 --> 01:00:45.360
<v Speaker 2>the historical view is you code freeze. Oh, no, crisis

1231
01:00:45.360 --> 01:00:47.760
<v Speaker 2>is happening. It's too risky, you can't change anything. Well,

1232
01:00:48.000 --> 01:00:50.480
<v Speaker 2>there was no concept in the DoD war fighting system

1233
01:00:50.519 --> 01:00:52.800
<v Speaker 2>of having a passenger manifest you know. The whole thing

1234
01:00:53.039 --> 01:00:55.320
<v Speaker 2>was really about, actually, oh my gosh, we need to

1235
01:00:55.320 --> 01:00:58.719
<v Speaker 2>actually push more code in the crisis because the signal

1236
01:00:58.880 --> 01:01:02.599
<v Speaker 2>is coming in harder and the first derivative really matters

1237
01:01:02.599 --> 01:01:05.599
<v Speaker 2>here right now, let's accelerate change. It's like it's like

1238
01:01:05.599 --> 01:01:09.239
<v Speaker 2>punctuated equilibrium, and that I think is a very powerful

1239
01:01:09.320 --> 01:01:11.559
<v Speaker 2>lesson that we need to be practicing for exactly that.

1240
01:01:12.679 --> 01:01:16.960
<v Speaker 3>Well, that's a terrific, brilliant and it's a good time.

1241
01:01:17.519 --> 01:01:19.519
<v Speaker 3>We've used up an hour of your time and it's

1242
01:01:19.559 --> 01:01:23.480
<v Speaker 3>been it's been really really interesting. So we probably take

1243
01:01:23.480 --> 01:01:26.199
<v Speaker 3>another two or three months, but I don't think we

1244
01:01:26.000 --> 01:01:28.480
<v Speaker 3>we can have you sit still that long anyway. That

1245
01:01:28.599 --> 01:01:30.960
<v Speaker 3>thanks so much for coming with us today. I appreciate it.

1246
01:01:31.119 --> 01:01:34.159
<v Speaker 3>Thank you for having me Chalm has been.

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<v Speaker 1>A great pleasure, and thank you very much everybody for

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<v Speaker 1>join us for another edition in mid Rats and until

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<v Speaker 1>next time, I hope you have a great Navy day.

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<v Speaker 1>Cheers to reply to a.

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<v Speaker 4>Mike MONDONI wants to marry me and all friend, all

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<v Speaker 4>your being to blame my love, fairly love me, silly

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<v Speaker 4>faulting your the tame. It's a long way to Dipperary.

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<v Speaker 4>It's a long way to it's a long way to Dipperary.

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<v Speaker 4>To the Queen Gorb piccond E farewell left, not well.

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<v Speaker 4>It's a long long way to Dipperate, but my my way,
