Speaker 1: Welcome to mid Rats with sal from Commander Salamander, an
Speaker 1: Eagle one from Eagle Speak at Seer Shore your home
Speaker 1: for a discussion of national security issues and all things maritime.
Speaker 1: And welcome board everybody for another edition of mid Rats.
Speaker 1: We really appreciate you joining today. We just want to
Speaker 1: go ahead and dive in directly to our guest today,
Speaker 1: Tom Suncar. He is the chief technology officer for a
Speaker 1: pall Andeer, and today we are going to dive into
Speaker 1: a really robot piece of work that he's done looking
Speaker 1: at the macro Department of Defense here for the United States,
Speaker 1: and we'll have links for it in the show page.
Speaker 1: It's the Defense Reformation and it based upon something that
Speaker 1: really kind of caught my eye is I'm looking at
Speaker 1: another podcast right now that I do during my commute.
Speaker 1: It's Dirk Hoffin's a History of the Germans podcast, and
Speaker 1: we just reached the point that we're going into the
Speaker 1: Reformation with Martin Luther, and the unbearingly describes what led
Speaker 1: Martin Luther to that point in the condition of the church.
Speaker 1: And I got to give a lot of credit here
Speaker 1: because in the kickoff, we don't have one of these
Speaker 1: slow boils where are we going here? And I just
Speaker 1: want to do a right at the masthead quote. As
Speaker 1: a nation, we are in an undeclared state of emergency.
Speaker 1: And also in the start you had this kind of
Speaker 1: extended quote that lets you know that what you have
Speaker 1: to follow is going to be clear and right to
Speaker 1: your faith. Well extended quote, your quote. This is a
Speaker 1: Cold War two. The West has empirically lost to terrence.
Speaker 1: We must respond to this emergency to regain it. We
Speaker 1: have a peer adversary China. Near peer is a shibble
Speaker 1: of a euphemism to avoid the embarrassment of acknowledging we
Speaker 1: have peers when we were once peerless. And with that
Speaker 1: some welcome to Midraps.
Speaker 2: Well, thank you guys for having me.
Speaker 1: And like I kind of mentioned in the in the
Speaker 1: opening here, for those that study European history, the Reformation
Speaker 1: and what Martin Luther did was a serious act at
Speaker 1: a serious point right up there in front and talk
Speaker 1: for a bit. What as you are looking through the
Speaker 1: through the challenges and the recommendations that that you think
Speaker 1: that we need to to better improve how we provide
Speaker 1: for the national defense, what resonated with you at that
Speaker 1: point in history?
Speaker 2: Well, I think a key part of the Reformation is
Speaker 2: realizing that that the church religion is such a core
Speaker 2: component to Western civilization, and that it had become sclerotic,
Speaker 2: it had picked up some barnacles along its multi millennia
Speaker 2: history that needed at least some fresh thinking and as
Speaker 2: much credit as I'm almost viewing this dispassionately as someone
Speaker 2: looking at the Reformation, it was both the Reformation and
Speaker 2: the counter Reformation, the Revival that led to great changes,
Speaker 2: And I think having the sort of fresh thinking saying
Speaker 2: things that are heretical but possibly true, enables us to
Speaker 2: have that sort of robust conversation and reform the institutions
Speaker 2: from within.
Speaker 1: Yeah.
Speaker 3: One of the questions I had as I was reading
Speaker 3: through your work and looking at some of the other
Speaker 3: stuff you've done, is how do we unleash creativity given
Speaker 3: the structures we have now? And I think you've talked
Speaker 3: about the Last Supper in the first Breakfast, how do
Speaker 3: we unchain people to be innovative and meet the challenge
Speaker 3: you see in front of us.
Speaker 2: It starts with understanding that the structures were created to
Speaker 2: serve us at a point in time. You know, the
Speaker 2: structures are not sacricynct we have to understand that we
Speaker 2: built these structures because we were organizing ourselves around a problem.
Speaker 2: And this is one of the great lessons I've learned
Speaker 2: over twenty years at Palenteer, is that you get a
Speaker 2: lot by organizing and then committing yourself to continuously reorganize
Speaker 2: around the problem as it exists today, not as it
Speaker 2: existed in the past. And that's where that's that's the
Speaker 2: starting point for accumulating all these barnacles, which is like
Speaker 2: you were right in the past and you're just wrong
Speaker 2: in the present, and that error you're letting it accumulate.
Speaker 2: And I think there's a very human reason we do that.
Speaker 2: We like predictability, we like organ we like legibility in
Speaker 2: our organizational structures. It can feel like there's thrash when
Speaker 2: you're changing things, but that might also be needed. A
Speaker 2: lot of these things are dialectical, right Like if you
Speaker 2: have if it's all thrash and you're changing things all
Speaker 2: the time, nothing works. On the other end, if there's
Speaker 2: no thrash and you're changing nothing, nothing works.
Speaker 1: People are always calling for reform, and a lot of
Speaker 1: times it just never bears fruit because the timing's not right.
Speaker 1: And for those that aren't familiar with the report. It
Speaker 1: was put out kind of surprisingly right around Halloween, but
Speaker 1: it was before the election, and I know this is
Speaker 1: not something that you pounded out over a couple of
Speaker 1: hours on a weekend. There's a lot of work involved here,
Speaker 1: so this is going on for months ahead of time,
Speaker 1: so it's not something that was done. Okay, Well, I
Speaker 1: know who's coming into the new administration, so what can
Speaker 1: I shape for that? But we're reaching a point where
Speaker 1: some people call it you whether it's chaos is a
Speaker 1: ladder or change is an opportunity. But this is a
Speaker 1: nice moment in time where you're going to have new
Speaker 1: people with new perspectives and an open mind to look
Speaker 1: at things new. And again, when you look at a
Speaker 1: lot of the people who are coming into the administration
Speaker 1: are advising them, there is this undercurrent of let's do
Speaker 1: a fresh look, let's do a clean sheet, let's have
Speaker 1: a different view of how we're trying to do business.
Speaker 1: Are you seeing this as one of those opportunities for
Speaker 1: you and other ones that have been looking for reforms
Speaker 1: and not just asking for it, but are saying literally,
Speaker 1: here are by eighteen points as an entering argument for discussion.
Speaker 1: Do you see that from a timing perspective, that you
Speaker 1: really have more of an opportunity you may have thought
Speaker 1: in January of twenty twenty four.
Speaker 2: Unquestionably the time is now for this. There's a golden
Speaker 2: opportunity to do this. There's an emerging consensus that maybe
Speaker 2: people weren't willing to say many of these things out loud,
Speaker 2: but both inside and outside the building, there was a
Speaker 2: huge amount of resonance with this content because people are
Speaker 2: thinking it. And I think there's something to be said
Speaker 2: that the new team coming in you see a lot
Speaker 2: of first principle thinking, and that's what we kind of
Speaker 2: need right now. We need to re examine this from
Speaker 2: from top to bottom, and we need to say, well,
Speaker 2: why can't it be this way? You know, we've been
Speaker 2: I would say the critique would be, we've been overly
Speaker 2: committed to historical playbooks that don't seem to be working.
Speaker 2: And that sort of improvisational, dynamic thinking is an American strength,
Speaker 2: you know, and I mean this in the best possible way.
Speaker 2: We're crazy as Americans, and so that willingness to reconsider, reinvent,
Speaker 2: to reorganize it is going to play to our strength.
Speaker 2: Once we hit that precipice of believing that absolute changes needed.
Speaker 3: Do you think this is how much of this is
Speaker 3: connected to the rise of the Silicon Valley and people
Speaker 3: who are dealing with technologies that didn't exist thirty or
Speaker 3: forty years ago. Does this open up their minds more
Speaker 3: to being able to adjust to a new world that
Speaker 3: perhaps people who grew up like I did in a
Speaker 3: more corporate world where you really didn't want to stick
Speaker 3: your head out too far.
Speaker 2: Well, you know, the older I get, the more I
Speaker 2: realized there's nothing new under the sun. As much as
Speaker 2: we might look at the present moment with defense tech
Speaker 2: and we see a Silicon valley's interest in getting involved
Speaker 2: in defense, we shouldn't forget that Bill Perry, who was
Speaker 2: a Deputy Secretary of Defense and a Secretary of Defense,
Speaker 2: who who kind of shepherd stealth and GPS into existence.
Speaker 2: He was a Silicon Valley founder. He founded Electronic Systems
Speaker 2: Laboratory first company or agency. He even beat the government
Speaker 2: to doing digital singing. Everything before then was analog. And
Speaker 2: David Packard co founder of HB he was a depth
Speaker 2: sec of Defense. So this idea that our technologists have
Speaker 2: not been involved we've just kind of forgotten it. Maybe
Speaker 2: it's a comfortable legacy of the Cold War having won
Speaker 2: the Cold War, rather that we forget the role that
Speaker 2: the valley really played. And I'm excited as an American
Speaker 2: to see that the most dynamic parts of our economy
Speaker 2: is represented in our tech industry and the new parts
Speaker 2: of our manufacturing industry are getting involved with national security.
Speaker 1: And your spot on me. That is the one thing.
Speaker 1: And it's not just this generation. It's transgenerational. And you
Speaker 1: can look back at some of the comment the German
Speaker 1: General staff had to say about fighting Americans or the Soviets.
Speaker 1: Are you just look at our modern world and whether
Speaker 1: you're looking at your electricity, cars, medicines, you pull that thread.
Speaker 1: It comes back to the opportunity unities that our culture
Speaker 1: and our rule of law and our nation enabled smart
Speaker 1: people with good ideas and drive to be able to accomplish.
Speaker 1: And you would think that that would be reflected throughout
Speaker 1: our government our culture, but it's not. And a lot
Speaker 1: of people don't see that. And that's okay. People have
Speaker 1: busy lives, they've got to get on. They have a
Speaker 1: lot of trust that the government's doing the right thing
Speaker 1: and I wouldn't call it un American, but maybe contra American.
Speaker 1: You do a good job at outlining that the trillion
Speaker 1: dollars plus or minus that our nation invests in its defense,
Speaker 1: it's not reflecting the best of that American culture. One
Speaker 1: of the quotes that I think, again, people don't have
Speaker 1: a vision of this, and a lot of people who
Speaker 1: have served are very aware of this. But I think
Speaker 1: this is helpful in informing the larger public and decision makers.
Speaker 1: And here's a little bit of a quote quote Everyone
Speaker 1: including the Russians and Chinese, have given up on communism
Speaker 1: except for Cuba and the Department of Defense. The only
Speaker 1: problem is that we make very bad commies unquote. So
Speaker 1: you combine this consolidated view of we're not going to
Speaker 1: have individual farms, were going to put all the coulocks
Speaker 1: onto the collectives with you mentioned McNamara early, and he
Speaker 1: comes up again. You have this era US auto industry
Speaker 1: approach in view of a program management that is almost
Speaker 1: stuck in this aspect here in twenty twenty five. And
Speaker 1: what type of levers do you see that we need
Speaker 1: to get people to get hold of that can help
Speaker 1: break open this aspect and bring out some of the
Speaker 1: better parts of our culture and our environment that we
Speaker 1: can leverage into making our defense better for the dollars
Speaker 1: we're putting into it.
Speaker 2: I just want to double click on macnamara because we
Speaker 2: forget that the auto industry and the fees even into
Speaker 2: the sixties was very different. Basically Ford when he was
Speaker 2: on Forward, they had unlimited demand. Any card they could
Speaker 2: make they would sell. That means you're going to focus
Speaker 2: very much on the efficiency of the supply side. How
Speaker 2: do you produce, you know, how do you manage the
Speaker 2: production You don't actually have the same complexity of problem,
Speaker 2: and that ended up hurting American auto companies in the
Speaker 2: seventies when we started facing Japanese competition. We basically as
Speaker 2: America had to throw away the McNamara playbook in Detroit
Speaker 2: in order to make our auto companies competitive again. But
Speaker 2: the Department didn't do that, you know, we stuck with
Speaker 2: the McNamara playbook, and the legacy of ppbe to the
Speaker 2: present day. And so to my point about organizing and reorganizing, look,
Speaker 2: that might have been the right way to approach things
Speaker 2: in the fifties and sixties. Although I think smart folks
Speaker 2: like Eric Lafgan would say even then it wasn't a
Speaker 2: good approach and it was fatally flawed with systems analysis,
Speaker 2: but it certainly isn't the right way today. And I
Speaker 2: think when we look at the era, when we think
Speaker 2: about big things that we've done, like ICBMs or the
Speaker 2: submarine launch ballistic missiles, we had a lot a lot
Speaker 2: more inner service rivalry, We had a lot more competition
Speaker 2: within government, and I think it really is a legacy
Speaker 2: of having won the Cold War. That and a desire
Speaker 2: for a peace dividend, which is very reasonable, but it's
Speaker 2: pushed us towards this consolidated approach, a unitary effort. You know,
Speaker 2: duplication is bad, but of course if you look at
Speaker 2: the American economy, we have lots of companies competing all
Speaker 2: the time. We have duplication all the time, and we
Speaker 2: think that gives us the fitness, the survival function. And
Speaker 2: I would offer you as an example, Europe has created
Speaker 2: zero companies from scratch over the last fifty years, worth
Speaker 2: one hundred million dollars one hundred billion, sorry, one hundred
Speaker 2: billion dollars or more. America has created all of her
Speaker 2: trillion dollar companies from scratch in the last fifty years,
Speaker 2: the relative performance there is astronomical. We're not even in
Speaker 2: the same league. And I think a lot of that
Speaker 2: comes down to our American culture and our willingness to
Speaker 2: I would say it's founder led You know, of all
Speaker 2: the nations in the world, we call them the founding
Speaker 2: fathers for a reason. We understand that there's something special
Speaker 2: about founders. This is not a random group of people
Speaker 2: in seventeen seventy six who just happened to pull this off.
Speaker 2: The people really mattered, and each of their individual contributions
Speaker 2: really mattered. And when you look at World War Two
Speaker 2: or the early Cold War, but today we might think
Speaker 2: about it as Northrop Grumman, but it was Jack Northrop,
Speaker 2: it was Leroy Grumman. It wasn't Lockheed Martin, it was
Speaker 2: Glenn Martin. It was William Bowing. And when you look
Speaker 2: at the present the most functioning parts of our economy,
Speaker 2: it's Elon Musk, you know, Mark and Dreesen is. You see,
Speaker 2: those founders have now migrated to technology. So I'm not
Speaker 2: sure there's something special about Silicon Valley per se, but
Speaker 2: I do think there's something special about the American founder,
Speaker 2: Letter Frontier, founder letter approach.
Speaker 3: Yeah, you talk about a lot about people like John
Speaker 3: Boyd and Rickover and other people that were viewed at
Speaker 3: the time as mavericks and heredicts. That's the most complimentary
Speaker 3: thing you could say. Yeah, they were, they were. I mean,
Speaker 3: what do we do? How do we get the wild
Speaker 3: card people who? And I think you also talked about
Speaker 3: the engineer to some of whom contribute a hundred times
Speaker 3: more than other.
Speaker 2: Engineers airframes in his life. You know. Like so when
Speaker 2: I say founder, I don't just mean commercial founders like
Speaker 2: people building companies. I consider Kelly Johnson and Rickover and
Speaker 2: Boyd founders American founders. You know, is it the F
Speaker 2: sixteen or is it Boyd's playing?
Speaker 1: You know?
Speaker 2: And what's the counterfaction with the nuclear Navy? Now, maybe
Speaker 2: to the question you're going, sorry to have interrupted there.
Speaker 2: I think a big part of this is reminding ourselves
Speaker 2: of the need to protect these personalities the sort of
Speaker 2: comfortable path. You know, like, these very creative people are
Speaker 2: often pretty disagreeable. They're there. It requires a lot of
Speaker 2: human management to keep the band together, to get the
Speaker 2: right person in the right role, and realizing as leaders
Speaker 2: that's part of our job Rickover did not survive thirty
Speaker 2: years as the head of the Navy nuclear program, subprogram,
Speaker 2: reactor program just because people wanted them there. Zumbwaldt actually said,
Speaker 2: the Navy has three enemies, the Soviet Union, the Air Force,
Speaker 2: and Admiral Rickover. So it it actually took many, many
Speaker 2: acts of Congress to keep him in place, and his
Speaker 2: tenure finally expired when Congress decided his time was up.
Speaker 3: Yeah, I guess my question you've hit most of it.
Speaker 3: But how do we not They played whack a mole
Speaker 3: with Boyd, they played whack a mole. They played it
Speaker 3: with Rookover too, but he had some congressional support that
Speaker 3: helped him survive. How do we prevent that from happening
Speaker 3: to people who are in that mode? But maybe, you know,
Speaker 3: the system seemed to squash him pretty heavily.
Speaker 2: Yeah, I mean I think we shouldn't. I don't want
Speaker 2: to be too pollyannish about it in the sense that, like,
Speaker 2: I think it will always be hard to protect those people.
Speaker 2: But the primacy of winning, I mean, do you want
Speaker 2: to win or do you want to comfortably run program
Speaker 2: that's you know, leading our deterrence into the ground. And
Speaker 2: so I think the right folks, like if you think
Speaker 2: about I think Shreiver is a great example of this,
Speaker 2: where he protected Edward Hall, who was building the Minuteman
Speaker 2: up until the very moment that the Minuteman worked. As
Speaker 2: soon as it worked, it was Hall's time. And I
Speaker 2: think there's something very real politique about that, where Shreiver
Speaker 2: was optimizing on the primacy of winning. There's only one
Speaker 2: person who could get it here. There are other people
Speaker 2: who can get it to the next phase, and all
Speaker 2: of our difficult, found driven personalities will at some point,
Speaker 2: you know, their time will come. I think anyone who's
Speaker 2: built a business sees that over and over as well.
Speaker 2: But it starts with sorry, it's a long answer your question,
Speaker 2: but it starts with the commitment to realizing that part
Speaker 2: of our job as leadership is to protect these really
Speaker 2: unique humans, to cultivate them and protect them. We don't
Speaker 2: want to lose them when they're always when they look
Speaker 2: up and they just see a boorg or a machine
Speaker 2: that's going to grind them mouth, that's going to treat
Speaker 2: their career as a bingo card of experiences to kind
Speaker 2: of fill out. Versus like these really they're almost like
Speaker 2: artists like deeply, profoundly creative humans who have the skill
Speaker 2: set to do something for a decade and in doing
Speaker 2: so fundamentally and asymmetrically impact our capability as as a nation.
Speaker 1: And the Navy. I sometimes refer to the personnel policy
Speaker 1: as the Millington Dick Top because Millington, Tennessee is where
Speaker 1: our personnel is located. And you're talking about protecting the people.
Speaker 1: And when you run into an organization and you're looking
Speaker 1: too how to repair things or to optimize it, you're
Speaker 1: looking at people. Process are procedures one combination of the
Speaker 1: three policies and the people part. And that's one of
Speaker 1: the recurring things that we see in your discussions in
Speaker 1: your eighteen thesis is people matter, individual people. Finding those
Speaker 1: people and like you said, protecting them matters. And there's
Speaker 1: also constantly updating what works best for today. And when
Speaker 1: you look at two of the large frameworks that not
Speaker 1: just people, but the process and policies the DD runs on,
Speaker 1: it's almost comical when you look at and again as
Speaker 1: I try to emphasize the people, these are created by humans,
Speaker 1: They can be changed by humans. These these are not
Speaker 1: acts of nature. Here you have dopma, the Defense Officer
Speaker 1: Personnel Management Act. It's from nineteen eighties. Goldwater Nichols is
Speaker 1: nineteen teen eighty six. It's you know, big Hair Neon
Speaker 1: post disco America is running things in twenty twenty five.
Speaker 1: And to change these it requires not just people like
Speaker 1: you've done. Here's some ideas, here's some outlines, but it
Speaker 1: requires people at the House of Representatives in the Senate
Speaker 1: and both parties to say, hey, I want to be
Speaker 1: part of joining the twenty first century. Twenty five years
Speaker 1: too late, let's get to work on it. Are you
Speaker 1: finding good partners in the Senate and the House that
Speaker 1: are willing to be this generation's Goldwater in Nickels and
Speaker 1: perhaps look at bringing the Jimmy Carter theory of personnel
Speaker 1: management into the modern age.
Speaker 2: On personal management. I'm starting to see it. I think
Speaker 2: if you want to get there, we have to wedge
Speaker 2: into it. You know, do you want to like fix
Speaker 2: the system or do you want to win? And they're
Speaker 2: not the same thing. And if if you spend too
Speaker 2: much time trying to quot unquote fix the system, you're
Speaker 2: going to get bogged out in trench warfare and lose
Speaker 2: all your maneuver room but what we need are some
Speaker 2: early efforts that are actually working, that generate momentum and
Speaker 2: show us a path of alternative ways that we could
Speaker 2: be organizing. I think it would be very bold to
Speaker 2: say that we should reorganize the whole department, because I
Speaker 2: kind of feel like the opposite of one mistakes another mistake.
Speaker 2: You're not going to quite get this right. What we're
Speaker 2: really missing is the ability to have the human discretion
Speaker 2: for saying this program needs to be run differently. You know,
Speaker 2: first principle, I'm thinking about it, this is the right
Speaker 2: setup for it. I need someone to be around longer,
Speaker 2: and I think you can if you look at naval reactors,
Speaker 2: there's a reason that the person in charge sticks around
Speaker 2: there for eight years.
Speaker 1: You know.
Speaker 2: That's not very DOPMA compliant. It's not the traditional three
Speaker 2: year rotational program. But we recognize the gravity of the role,
Speaker 2: the value of experience, the need for continuity for something
Speaker 2: that critical. We should have more heterogeneous approaches that match
Speaker 2: the specifics of what we're dealing with. And I think
Speaker 2: as a consequence, like my big pushback would be that
Speaker 2: we need to give our officers more discretion. You know,
Speaker 2: I guess very frustrated when I hear this axiomatic line
Speaker 2: that you know, it's like, well, we've shown this is
Speaker 2: what I hear from general officers. You know, we've shown that.
Speaker 2: You know, we're not always the best stewards of the
Speaker 2: tax payer money. We really need all this oversight. I'm
Speaker 2: all for oversight. That's part of the role, that's how
Speaker 2: the system works. But this sort of self flagellation, I
Speaker 2: don't really believe it. When you're doing these really hard things,
Speaker 2: you can't expect them all to work out. There's there's
Speaker 2: a price to pay for your own experience and getting
Speaker 2: up the curve. There's a need for you to learn
Speaker 2: from your mistakes. What we The real oversight comes from
Speaker 2: betting on the right people are you know, do you
Speaker 2: have the right people in the role? Great? You know
Speaker 2: you're probably not gonna be able to do much better
Speaker 2: than that, and the journey is what it's going to be.
Speaker 2: I love the anecdote of Admiral Rayburn when he was
Speaker 2: building the submarine launch blistic missiles. First of all, he
Speaker 2: had four competing programs. He had Congress breathing down his neck,
Speaker 2: he had other admirals breathing down his neck. You know,
Speaker 2: show me the gant chart of gansharks, like, how is
Speaker 2: this program going? Tell me when it's going to deliver?
Speaker 2: And he created something called per peert, the latest in
Speaker 2: decision sciences and analysis. It was, you know, use Monte
Speaker 2: Carlo simulation to tell you how long these things were
Speaker 2: going to take. And this was in the sixties, right,
Speaker 2: so it's actually kind of hard. You didn't really have
Speaker 2: modern computers then. But it was all a smoke screen,
Speaker 2: you know. It was a way of giving false comfort
Speaker 2: to the overseers. And what he was really doing is
Speaker 2: protecting the engineers to do the messy zero to one
Speaker 2: work that actually was very hard to predict and who
Speaker 2: knew when or if it would deliver, and it did,
Speaker 2: of course deliver. We got Polaris from that. I mean,
Speaker 2: I think maybe an unfortunate legacy for him, as his
Speaker 2: smoke screen was so good that people thought that pert
Speaker 2: is what led to the success, and they subsequently institutionalized
Speaker 2: that as a way of running all future programs.
Speaker 3: Yeah, we we have a tendency in the military to
Speaker 3: do the cargo cult thing where we see something that
Speaker 3: looks like it worked a certain way and we're just
Speaker 3: gonna ape it and it'll work for us that same way.
Speaker 3: How do we The Navy tried to have an innovation
Speaker 3: cell at one point. I don't know what happened to it,
Speaker 3: but I don't think we innovated a whole lot out
Speaker 3: of that cell. Can you push innovation by creating an
Speaker 3: innovative group or is it just something you have to
Speaker 3: wait for the right people to pop up at the
Speaker 3: right time.
Speaker 2: I'm a little bit closer to the ladder there. You know,
Speaker 2: you need the right people. They need to be organized
Speaker 2: around the right problems. I think if I was to
Speaker 2: offer something productive around the idea of innovation selves, I
Speaker 2: think where sometimes people get mixed up is thinking that
Speaker 2: you can have an enduring innovation effort. You know, the
Speaker 2: most creative teams I see there is an ephemeral component
Speaker 2: to them, like, hey, this team the rock band is
Speaker 2: making the right music. You have the right members, it
Speaker 2: all sounds great and it works for three years, and
Speaker 2: so you know, the expansive view would be, maybe you
Speaker 2: need lots of innovation selves. There's no monopoly on innovation.
Speaker 2: It's not like you do the O and m over
Speaker 2: here and these these people have the only right to
Speaker 2: think about how we're going to innovate and do things
Speaker 2: better in the future, like we need to create enough
Speaker 2: surface area that innovation can bubble up. You know, maybe
Speaker 2: another way of thinking about it is our system as
Speaker 2: it's currently designed, is so well designed to handle any
Speaker 2: problem that can be thought through and solved deductively top down.
Speaker 2: It is horrible at anything that requires induction or bottoms
Speaker 2: up iteration. And that sort of inductive bottoms up iteration
Speaker 2: is first of all a fundamental American strength. And secondly,
Speaker 2: it is messy and chaotic. That's the reality of it.
Speaker 2: And that's why I think these institutions we should plan
Speaker 2: for them to be a little more ephemeral, the innovation organizations,
Speaker 2: and we should expect that innovation can come from anywhere.
Speaker 2: And a big part of a leader's role is seeing
Speaker 2: the green shoots and then betting big, helping that scale,
Speaker 2: creating the space, protecting them from the antibodies, protecting the
Speaker 2: talent so they have the room to run to do this.
Speaker 2: And you know, when I look at the most if
Speaker 2: you look at Jasock and how they work, they absolutely
Speaker 2: practice a right like rank means much less the outcomes
Speaker 2: really matter. You will move people around the collaboration is
Speaker 2: structurally very flat. And the reason I keep coming back
Speaker 2: it's not just a platitude to keep calling this in
Speaker 2: American strength. I have a longer exegesis on this. But
Speaker 2: you know, one of the things America is best at
Speaker 2: in the world is software by a yawning margin. There
Speaker 2: really is. Number two is very very distant. Think about
Speaker 2: the fact that there are zero Chinese or Indian enterprise
Speaker 2: software company needs that are competitive on the world stage.
Speaker 2: That tells you that software is not just about IQ.
Speaker 2: I mean, look, they're smart people everywhere. You would expect
Speaker 2: a much more kind of evenly distributed set of companies
Speaker 2: and capabilities if it was just about intelligence. It's about culture.
Speaker 2: And when people look at Silicon Valley they kind of
Speaker 2: sometimes think, oh, maybe we imported this culture from Israel
Speaker 2: or India, And it is true we imported it, but
Speaker 2: we imported it from Iowa. It came from Bob Nois,
Speaker 2: a famous Iowan co founder of Intel, co inventor of
Speaker 2: the transistor. It's deeply rooted in a willingness to play
Speaker 2: positive some games, a high trust atmosphere, open communication, all
Speaker 2: harm hallmarks of the Midwestern culture. I mean the very
Speaker 2: term open door policy is something that Noise coined. And
Speaker 2: I think there's a way in which we don't even
Speaker 2: understand how all of American tech is actually a descendant
Speaker 2: of Noise and a descendant of this Midwestern culture. And
Speaker 2: that is very sticky because if you're the Singaporeans and
Speaker 2: you come and visit Silicon Valley, you see Stanford, you
Speaker 2: think maybe I need a world class research diversity. You
Speaker 2: see Sandhill Road and you think maybe I need a
Speaker 2: venture capital ecosystem. You probably need those things, but you're
Speaker 2: totally actually missing the root cause of what's enabling all
Speaker 2: this stuff to take hold where it's taking hold. And
Speaker 2: by the way, if you do figure it out, it's
Speaker 2: the one thing you don't want to copy. As a Singaporean.
Speaker 2: You're pretty happy with your culture. You're not trying to
Speaker 2: be Midwestern. And so this has led to a pretty
Speaker 2: enduring advantage for us. I don't want us to let
Speaker 2: rest on our laurels about it, but I think you
Speaker 2: could very easily reason by analogy to see how that
Speaker 2: same approach, that same sort of mentality applied to innovation
Speaker 2: bottoms up with a lack of hierarchy, plays to our strengths.
Speaker 1: Yeah, I want to back up a bit because it
Speaker 1: reminds me of something early on. If we brought it
Speaker 1: in and goes with systems work best when they take
Speaker 1: advantage of their natural capabilities. There are comparative advantages, and
Speaker 1: in some ways it looks like DoD has devolved into
Speaker 1: a series of systems they fight against this. You mentioned
Speaker 1: earlier that our defils industrial base and its bureaucracy. It's European,
Speaker 1: it's not American in its format. And when you look
Speaker 1: back at something we mentioned earlier on in the discussion
Speaker 1: was Bill Perry's Big Supper, I mean last supper where
Speaker 1: we took all the huge numbers of businesses that were
Speaker 1: involved in defense and as as opposed to letting there
Speaker 1: be creative destruction, let there be the creative friction in
Speaker 1: the competition of the free market getting everybody to consolidate.
Speaker 1: And it's created a situation that you bring up a
Speaker 1: lot that I don't think is really understood, and that
Speaker 1: is the weird impact it has between the people supplying
Speaker 1: goods and those that are purchasing the good and that
Speaker 1: is monopsony and how monosomy monopsony has become almost the
Speaker 1: standard practice on how we get the material and the
Speaker 1: process to providing national defense.
Speaker 2: That's poor, so monopsony. Most people are very familiar with monopoly,
Speaker 2: where there's one seller of an item, and as Americans,
Speaker 2: we look at monopolies quite skeptically and believe it's anti
Speaker 2: innovative and it's unlikely to give you the best price.
Speaker 2: Monopsony is the mirror of that. When there's one buyer
Speaker 2: for a thing so and in many ways the department
Speaker 2: is fundamentally a monopsony. Who else is going to buy
Speaker 2: an aircraft carrier?
Speaker 1: So?
Speaker 2: But at the same time, when you have one buyer,
Speaker 2: the burden on the buyer so high you have to
Speaker 2: think of everything. Can you imagine if you had to
Speaker 2: be the one buyer to conceive of the iPhone? Couldn't
Speaker 2: be Steve Jobs thought of it. You had to think
Speaker 2: of it. You had to come up with the requirements
Speaker 2: dock and you had to specify. You had to think
Speaker 2: about all like how would you even make that? Probably
Speaker 2: wouldn't come up with the best idea, and whatever you
Speaker 2: came up with would not be affordable. And as Americans,
Speaker 2: we believe in the free market, so we should be
Speaker 2: finding ways to approximate free market principles inside a defense
Speaker 2: to leverage the forces of innovation that we see powering
Speaker 2: American hegemony commercially every chance we possibly get. Now, just
Speaker 2: to back up a little bit, the reason I think
Speaker 2: you could say, well, it's always been a monopsony, and
Speaker 2: I think just the very structure of the American economy
Speaker 2: as we entered World War two, as we entered the
Speaker 2: early Cold War was very different. I don't think we
Speaker 2: had a defense industrial base. We had an American industrial
Speaker 2: base when the Berlin Wall fell. I mean Chrysler made
Speaker 2: cars and missiles, Ford made satellites until nineteen ninety, General Mills,
Speaker 2: the Cereal Company, made torpedoes and artillery. So if we
Speaker 2: look at that, what you really see is I think
Speaker 2: too much is probably said about dual use companies. Look
Speaker 2: at a missile of single use and lethality matters, and we're
Speaker 2: going to have a need for many, many single use
Speaker 2: things that actually scare our adversaries. But we did have
Speaker 2: dual purpose companies everything. You know, why did General Mills
Speaker 2: have a mechanics division that did these things? Well, they
Speaker 2: were producing equipment to process cereals. You know, that is
Speaker 2: a mechanical. Everything they learned about doing that, all the
Speaker 2: price performance, all the innovation, all that demand signal helped
Speaker 2: them produce lethality for America's national defense. That's the same
Speaker 2: thing with Chrysler. Everything they learned about building a car
Speaker 2: enabled to build missiles better, faster, cheaper. We've lost a lot.
Speaker 2: So I think the last Supper, this mass consolidation from
Speaker 2: fifty one primes down to five. Really people look at it,
Speaker 2: and I think they probably take away a true statement
Speaker 2: that is not the most impactful. They look at it
Speaker 2: and say, oh, this led to a lack of competition
Speaker 2: in the industrial base, and at this point, the government
Speaker 2: lost pricing power, the government lost options. I think that
Speaker 2: kind of happened, but I think it's closer to the margin.
Speaker 2: What really happened is that consolidation bred conformity. You know,
Speaker 2: we exited the era of Leroy Grumman and began the
Speaker 2: era of kind of big, faceless corporations who were just
Speaker 2: you know, I don't want to trivialize it, because these
Speaker 2: are great, patriotic companies, but there was no one who
Speaker 2: had the weight of a founder to really make bold decisions,
Speaker 2: invest in innovation, to push back against the customers. I
Speaker 2: don't think it's an accident that SpaceX and Pounter have
Speaker 2: both had to sue the government. We have to go
Speaker 2: a long way back in time to look at that
Speaker 2: those things happening where you have a deep conviction and
Speaker 2: what is right for the nation, and you're going to
Speaker 2: fight for those things. And so then now we live
Speaker 2: in a world where we don't get to benefit that
Speaker 2: much from the commercial innovation towards national security. Like we
Speaker 2: used to live in a world where every car, every camera,
Speaker 2: every cereal box we bought as Americans actually subsidize and
Speaker 2: enhance our national security. That doesn't happen anymore. And sadly,
Speaker 2: I think if we just look at this competitively, the
Speaker 2: Chinese have figured this out. They learn from our history.
Speaker 2: You know, the Chinese primes only twenty seven percent of
Speaker 2: their revenue comes from the PLA. The rest comes from
Speaker 2: commercial sales. You know, the cheap crap we buy on
Speaker 2: Amazon as Americans is actually subsidizing lethality against US service
Speaker 2: members in a future fight.
Speaker 3: Yeah, I like your concept of the founders. I've worked
Speaker 3: for a couple of different corporations, both of which when
Speaker 3: I started the original kind of the original founders were there,
Speaker 3: which gives you a whole different flavor than when you
Speaker 3: shift to the they bring in the money guys to
Speaker 3: start running and worry about the stock prices, because the
Speaker 3: founders didn't care. They had a vision of where they
Speaker 3: wanted to take the company and what they were doing
Speaker 3: for the company, and a lot of other things. How
Speaker 3: do we, how do we this is another one of
Speaker 3: those how do we How do we encourage more founders
Speaker 3: to be that cutsy, to not worry about what Wall
Speaker 3: Street thinks?
Speaker 2: Well, the very good news is the founders have shown up.
Speaker 2: You know, if you look at the last four years
Speaker 2: or so, there's been over one hundred billion dollars of
Speaker 2: capital deployed in the US national interest to build defense,
Speaker 2: tech and adjacent companies. So they're here again. They care again.
Speaker 2: I think we just need to help them get to scale.
Speaker 2: And you know, I think as a monopsonist, it actually
Speaker 2: isn't true that you don't pick winners. You know, you
Speaker 2: shoar the government say that all the time. We don't
Speaker 2: want to pick winners. We don't want to pick winners.
Speaker 2: When we were trying to build out the titanium supply
Speaker 2: chain in the fifties, the government made very strategic investments
Speaker 2: deep down in the supply chain to enable aerospace companies
Speaker 2: to subsequently succeed. It wasn't a direct subsidy, but they
Speaker 2: financed the necessary R and D that enabled titanium to
Speaker 2: come to mass scale and change our national security. So
Speaker 2: I think we need a more kind of realistic take
Speaker 2: on that interaction between industry and government on these things,
Speaker 2: and for these founders to continue showing up, we just
Speaker 2: need to make sure some of them succeed. It's very
Speaker 2: much power law, and I think the mistake we kind
Speaker 2: of make esthetically, especially in DC, as we think about
Speaker 2: peanut butter spreading the capital around, which just gives you
Speaker 2: a class of living zombies like these companies can't reach scale.
Speaker 2: None of them are that successful. None of their investors
Speaker 2: are able to say we should invest more capital here
Speaker 2: because it's working. Because we've just evenly distributed the funds.
Speaker 2: Nothing quite works. But that's not how Silicon Valley works. Right,
Speaker 2: for every ten investments, maybe one succeeds. You know, your
Speaker 2: most successful investment as a venture capitalist needs to return
Speaker 2: the whole fund, And so you expect a few of
Speaker 2: these things to be really big successes and the rest
Speaker 2: of them not to work out. And I think that's
Speaker 2: more authentic to how innovation actually works. Like we're not
Speaker 2: looking for private equity businesses. We're looking for venture scale
Speaker 2: zero to one innovations, and the department is getting more
Speaker 2: educated about that. I think, you know, having said that
Speaker 2: five years ago, ten years ago, people looked at me
Speaker 2: like I was crazy. Now I think people realize it.
Speaker 2: But it's a big ship to turn.
Speaker 1: Here one person we didn't talk about yet that it
Speaker 1: kind of goes along with your rickover Emboyd pre nineteen
Speaker 1: eighty no surprise there. Innovators is somebody that Mark and
Speaker 1: I have talked about many times on the show over
Speaker 1: the years that I should have a little votive candle
Speaker 1: with his picture in the corner. That's Rue Adromaier, who
Speaker 1: was responsible for developing AEGIS and his phrase build a little, test,
Speaker 1: a little, learn a lot. And I see in what
Speaker 1: SpaceX and Elon Musk has done where he'll put up
Speaker 1: these big, beautiful starships and tell people ahead of the time,
Speaker 1: this is going to explode at some point, but we
Speaker 1: want it to that freedom to fail. It's like, no,
Speaker 1: I want it to fail. So I can find out
Speaker 1: what the cause was and then we can improve it.
Speaker 1: When you look over the DoD side of the house,
Speaker 1: we'll go back to the seventies again. The first airframe
Speaker 1: of the F fourteen, during one of its test flights,
Speaker 1: had I believe was a hydraulic failure. It doesn't matter,
Speaker 1: but it's on video that thing it crashed. Same thing
Speaker 1: with the first hole of Valkyrie, and those were used
Speaker 1: as excuses to kill They almost killed the F fourteen
Speaker 1: program of it. So it's like a completely different worldview.
Speaker 1: And some people will say, well, we've never had that
Speaker 1: in the military. Well, actually we have an individual like Radwellmeier.
Speaker 2: Absolutely. I mean one of the ways is it's a
Speaker 2: little bit of a wonky way of framing it. But
Speaker 2: you can't chop off the tail of the distribution of
Speaker 2: all the bad things that can happen without chopping off
Speaker 2: the tail of the distribution of all the exceptional outcomes too.
Speaker 2: So the more we wrap ourselves in process to make
Speaker 2: sure that nothing goes wrong, the more you're actually ensuring
Speaker 2: that nothing can go right either. And we've accumulated these
Speaker 2: barnacles over time. Every time something went wrong in a program,
Speaker 2: there's a new rule do this do that it slows
Speaker 2: the whole thing down. But maybe even much worse than
Speaker 2: slowing us down. It means that we can't hit the
Speaker 2: exceptional outcomes anymore. You know, could we build the U
Speaker 2: two in thirteen months? You know, I mean, clearly we can.
Speaker 2: There's nothing about the physics of the universe that say
Speaker 2: that we can't. But we would have to really go
Speaker 2: back to first principles and how we think about this.
Speaker 2: People love. Another example of this that I love is
Speaker 2: people love to critique David Packard's five thousand series as
Speaker 2: this hugely bureaucratic approach to procurement. It's two thousand pages long,
Speaker 2: but when he wrote it it was seven pages long.
Speaker 2: That doesn't seem that bad. So think about the rate
Speaker 2: of barnacle accumulation. I calculated out it's about seven It's
Speaker 2: eleven percent annual compounded growth in pages. And so you
Speaker 2: just think about we need to kind of have a
Speaker 2: willingness to re explore and re examine these things. And
Speaker 2: if we're sticking on the religious theme, maybe I'll offer
Speaker 2: something that might be just to you know, I've already
Speaker 2: been heretical enough. I might add to my own heresy
Speaker 2: around this one of the concepts that's really missing from
Speaker 2: the Western canon. As someone who was raised by Hindu parents.
Speaker 2: In Hinduism, there's actually a god of destruction. There's a
Speaker 2: god of creation, a god of existence, a god of destruction.
Speaker 2: So destract the need for reinvention is institutionalized. It's not
Speaker 2: viewed as oh, something must have gone horribly wrong, therefore
Speaker 2: we must burn into the ground. It's it's part of
Speaker 2: the cycle in the Western canon that you know that's
Speaker 2: supposed to be the end, like when that when that
Speaker 2: day comes, everything's kind of done. And I think a
Speaker 2: greater willingness that we should our institutions will be enduring
Speaker 2: because we're constantly willing to reinvent them is actually the
Speaker 2: path I believe in.
Speaker 3: Well, that was kind of the intention. I think of
Speaker 3: Jefferson and some of the other founding fathers that that's right.
Speaker 3: We would not be a static society that we would
Speaker 3: continue to to develop. And I you know, the question
Speaker 3: I used to ask people when I when they were
Speaker 3: working for me, was is there a better way to
Speaker 3: do what we're doing? There's always a better way. The
Speaker 3: challenge is defined it, I mean, is that something that's
Speaker 3: lost these days. People in some of these organizations, they
Speaker 3: are so wrapped up and deciding whether things should be
Speaker 3: twisted to the left or to the right that they
Speaker 3: forget about why are we twisting it at all?
Speaker 2: I think so, because, you know, I come back to
Speaker 2: this phrase, the primacy of winning. You know, as leadership,
Speaker 2: we have to always remember that's the goal. The goal
Speaker 2: is to win. Now, let's work backwards. And one of
Speaker 2: the techniques that I use internally at Palenteer is institutionalizing
Speaker 2: the rebellion. I love it when I find someone who's
Speaker 2: a little puckish, who wants to prove me wrong, who
Speaker 2: has the energy to rebel, and I want to feed that.
Speaker 2: And I you know, like some of the greatest innovations
Speaker 2: we've ever come up with technically are because someone wanted
Speaker 2: to a junior engineer wanted to prove to a senior
Speaker 2: engineer that there was a better way of doing it. Now,
Speaker 2: that can lead to a little bit of interpersonal strife
Speaker 2: and discord, and but I think that's the reality of innovation.
Speaker 2: And if you are set up in a way to
Speaker 2: view that as insubordination, you're going to you're going to
Speaker 2: push out the creative personalities and you're going to get
Speaker 2: what you're incentivizing. But if you view as Jefferson said,
Speaker 2: you know, from time to time a little rebellion is
Speaker 2: a good thing. We need to we need to just
Speaker 2: be open minded to.
Speaker 1: That kind of Let my my top three things that
Speaker 1: I like to rage against. It's the whole joint that
Speaker 1: we have a thread running through everything and that we're
Speaker 1: tripping over on a regular basis. And of course goldwater
Speaker 1: nickels that I mentioned before, but also CoCom reform for
Speaker 1: the combatant commanders. And you had a really interesting idea
Speaker 1: that I was kind of mad that I had never
Speaker 1: thought of all the ranted I've done about co com reform,
Speaker 1: and now I actually have something because a lot of
Speaker 1: times people come to be like, okay, you say co
Speaker 1: com reform, what do you want? And I'd blake and
Speaker 1: I'm a couple of times like something that we don't
Speaker 1: have right now. But you have an idea of and
Speaker 1: you mentioned earlier about free market principles and how you
Speaker 1: can bring that into an institution like the US military,
Speaker 1: that there is a way that we could use the
Speaker 1: COCOMs to leverage the positive aspects of free market competition
Speaker 1: and kind of flush that out a little bit.
Speaker 2: Yeah, so we have these thirteen command commanders that could
Speaker 2: be our source of demand. As command commanders, they're dealing
Speaker 2: with real world events that represent the demand signal of
Speaker 2: what the department needs to respond to. The services on
Speaker 2: the other end are representing the supply side of this equation.
Speaker 2: And I think there might be cleverer ways of integrating
Speaker 2: supply and demand, which is kind of the beating heart
Speaker 2: of any institution or business, and so in particular, instead
Speaker 2: of trying to have a consolidated view of what the
Speaker 2: services should be building for an abstract set of any contingency,
Speaker 2: any theater, any operation, maybe we should be enabling more
Speaker 2: differentiated signal to come from the COCOMs and then giving
Speaker 2: them the ability to strategically introduce competition. Hey, I want
Speaker 2: to buy this from the Navy. I really believe in
Speaker 2: the program they're doing. Or actually it's not clear between
Speaker 2: the Navy and the Air Force who's going to deliver
Speaker 2: on this, and I want to be able to allocate
Speaker 2: my resources across these programs, or maybe I need my
Speaker 2: own internal R and D effort to go after this.
Speaker 2: And I think we should embrace the fact that sentcom
Speaker 2: is not indo pay coom. They're going to have different needs,
Speaker 2: and actually we're optimizing our national security and the lethality
Speaker 2: of our force by allowing ourselves to express that differentiation
Speaker 2: across the combat commanders rather than trying to reject it
Speaker 2: and turn it into a unitary Soviet style signal. There,
Speaker 2: I think probably the most flushed out thinking around this.
Speaker 2: I really heard from Derrek Tunier, who's the leader of
Speaker 2: the Space Development Agency, a version of Goldwater Nickel reformed,
Speaker 2: and he really he should speak for himself because it's
Speaker 2: all his thinking here, and I think it's quite genius.
Speaker 2: But maybe we allow the COCOMs to start owning some
Speaker 2: of the palm process. What if they own twenty five
Speaker 2: percent of the budget and the ability to program the
Speaker 2: money for twenty five percent of the budget, How would
Speaker 2: they allocate it differently? How could they own some of
Speaker 2: that signal? How would that change the incentives for what
Speaker 2: the services are going to produce and respond to based
Speaker 2: on not just the captive ability for them to decide
Speaker 2: what to build, but also based on what the field
Speaker 2: is essentially asking for. And then over time, you could,
Speaker 2: you know, maybe twenty five grows, maybe it doesn't, but
Speaker 2: it provides you this dialectical piece. You know, you wouldn't
Speaker 2: move all the budget to the COCOMs. I don't think
Speaker 2: they're going to build the aircraft carrier, but I think
Speaker 2: having none of it there is is and just currently
Speaker 2: we're kind of just putting duct tape over problems. By
Speaker 2: trying to give them urgent operational needs funds, there's a
Speaker 2: more strategic role for them to play there that introduces
Speaker 2: real competition inside of government.
Speaker 1: Yeah.
Speaker 3: Part of what I think I see too, is that
Speaker 3: there's a need for a feedback loop from the people
Speaker 3: who were actually using the products. So if Jimmy Thatch,
Speaker 3: I think it was, it was developed the fat we've
Speaker 3: during World War Two. He was able to feed that
Speaker 3: information on how to defeat the zeros back into the
Speaker 3: fleet and everybody started using it. That that is an
Speaker 3: innovative process that worked because the system allowed him to
Speaker 3: tell people what he was doing. Of course, he survived
Speaker 3: to tell people what he's doing. And I keep wondering
Speaker 3: about how many other people higher low level, I mean
Speaker 3: co coms are down to the to the PFC. But
Speaker 3: you know, we had those those need for m wraps
Speaker 3: in Afghanistan and dan Iraq because of the IEDs, and
Speaker 3: it took a long time to convince DoD apparently that
Speaker 3: we ought to have vehicles like that. Well, where do
Speaker 3: we failed? Where we failed the ultimate consumer in the
Speaker 3: military way with the guy who's gonna as the point
Speaker 3: end of the stick.
Speaker 2: That's exactly right. I mean, if you a more kind
Speaker 2: of brutal retrospective on Palanter's own history is that I
Speaker 2: think we might have gone more than fifteen years without
Speaker 2: a program of record. Everything we did was funded by
Speaker 2: the field. We lived, you know, quarter to quarter, sometimes
Speaker 2: you know year to year, but there was no visibility
Speaker 2: into a long term future. And what we were competing
Speaker 2: against were the programs of record, right, we were competing
Speaker 2: against the services led efforts, and the war fighter was voting.
Speaker 2: They were saying, no, what's going to give me maximum
Speaker 2: lethality and give me the greatest chances of coming home?
Speaker 2: Is this thing over here? And I think a lot
Speaker 2: of the programs of record, their attempt to fight us
Speaker 2: was not like, hey, I'm going to make my product better.
Speaker 2: It was I'm going to use policy. But this is
Speaker 2: the program of record. You know, this thing has no
Speaker 2: long term funding. You don't want to bet on that.
Speaker 2: It was, you know, fear, uncertainty and doubt. And that's
Speaker 2: where I think we have the most opportunity to really
Speaker 2: leverage the free market principles of saying no, let's just
Speaker 2: compete on product, because that is what is going to
Speaker 2: give a compounding advantage to our warfighters across theaters, across
Speaker 2: roles every single day.
Speaker 1: There's another thing that's not chiseled in stone that sometimes
Speaker 1: we act like it is. You also have some interesting
Speaker 1: ideas we could address something that people will think it's
Speaker 1: just part of the landscape. There's nothing you can do about,
Speaker 1: even though it's just one hundred percent under the control
Speaker 1: of people who establish policies. But one of the things
Speaker 1: that we've seen evolve when we went down to the
Speaker 1: five primes is cost plus contracting and how what seems
Speaker 1: on paper to be logical has a lot of warping
Speaker 1: functions on how we pay for develop and even pitch
Speaker 1: different weapons systems.
Speaker 2: Percent I mean, you could say the origin of cost
Speaker 2: plus was very well intended, and I think it fit
Speaker 2: the moment if you're suddenly taking all these automotive companies
Speaker 2: and you're saying, I need you to build weapons. You know,
Speaker 2: I'd be reasonable for them to say I haven't built
Speaker 2: weapons before, I don't know how I can build them profitably,
Speaker 2: I don't know what it's cost. And the government just
Speaker 2: based says, look, whatever your cost is, i'm going to
Speaker 2: give you a fixed profit on top of it. Don't
Speaker 2: worry about it. Let's just let's just get to work.
Speaker 2: The problem is that that makes a lot of sense
Speaker 2: and kind of this emergency retooling sort of approach. It
Speaker 2: can make a lot of sense when there's a lot
Speaker 2: of fundamental risk and what you're doing. But then the
Speaker 2: continuation of that is it creates all the wrong incentives.
Speaker 2: Like the two industries that really use cost plus today
Speaker 2: are the DoD and home remodeling general contractors. And I
Speaker 2: don't know if any of you have done a whole
Speaker 2: home remodel, but I think as a consumer you would
Speaker 2: say that's not a great model. The incentives are all wrong. Somehow,
Speaker 2: the cost keeps growing and as a consequence, the plus
Speaker 2: keeps growing as well. And the fundamental incentive is to
Speaker 2: when you have a firm fixed price, is to build
Speaker 2: a product and to figure out how to make that
Speaker 2: product better, faster, and cheaper, which is the you know,
Speaker 2: the basis of our commercial economy here. And you see
Speaker 2: this with with a company like SpaceX, where you know,
Speaker 2: I grew up in the shadow of the Space coast.
Speaker 2: I love the Space Shuttle. I love being woken up
Speaker 2: to Saturday Saturday morning cartoons with the double sonic booms
Speaker 2: every now and then. But it took fifty thousand dollars
Speaker 2: a kilogram to get to orbit with the Shuttle, and
Speaker 2: with Starship heavy reuse, we're looking at ten to twenty
Speaker 2: bucks a kilogram. I mean, that sort of price performance
Speaker 2: improvement which has really happened over the last two, you know,
Speaker 2: fifteen years, is astonishing. And we in the cost plus
Speaker 2: model locked us into a very narrow range. That meant
Speaker 2: like the price wasn't moving that much. Okay, maybe you
Speaker 2: guys are twenty thousand dollars a kilogram, but we were
Speaker 2: not going to see the fundamental innovation that was possible.
Speaker 2: And the cost thinking, you know, it leads us to
Speaker 2: valuing effort spent as opposed to value delivered. And so
Speaker 2: NASA's own cost estimates for the Falcon was that it
Speaker 2: would cost four billion dollars to build Elon. Did it
Speaker 2: for four hundred million, and in a true cost plus paradigm,
Speaker 2: you're just going to penalize the on you say, well,
Speaker 2: your cost was lower, your plus should be lower. In fact,
Speaker 2: the fact that you did it for four hundred million
Speaker 2: means your plus should be much bigger. There's value that
Speaker 2: you created that we should all be able to share
Speaker 2: now as a con sequence of doing this, and that
Speaker 2: then drives more capital into the ecosystem. It brings more founders,
Speaker 2: it brings more innovation. It becomes a flywheel that is unstoppable.
Speaker 2: And I think that's that's probably the long term consequence
Speaker 2: of costs plus that people don't realize it. It is
Speaker 2: a break on the flywheel. It is part of what
Speaker 2: drives there's no leverage in your business. You can never
Speaker 2: get leverage of your fixed costs, so it drives the
Speaker 2: innovators out of the industry.
Speaker 3: Yeah, let's talk atlet's speaking of that. Let's talk about
Speaker 3: the budget process we have. You talked about it with
Speaker 3: the oodle loop for the ability to move money around
Speaker 3: and the current system, it takes forever if you can
Speaker 3: even do it, because things are slotted, and you said,
Speaker 3: I think it must be able to program money inside
Speaker 3: of two months, not two years. Talk about how important that.
Speaker 2: Is is it is, it is crucial. I mean, there's
Speaker 2: so many cuts at this. The first is we could
Speaker 2: just reason about it commercially. If you went to a
Speaker 2: commercial company in America and you said, hey, I've got
Speaker 2: the greatest mouse trap, and they came back to you
Speaker 2: and said, oh, this is amazing, I really want to
Speaker 2: use it. Get me two years to go find the
Speaker 2: money to start a program, to even experiment with it.
Speaker 2: It would just retard our entire economy and the rate
Speaker 2: of innovation and the adoption of innovation. And I'd say,
Speaker 2: when we started our commercial business almost two decades ago,
Speaker 2: I would see, you know, people would sometimes say, okay,
Speaker 2: I need a couple quarters to get the money, never
Speaker 2: even a year. Really. But now our commercial companies have
Speaker 2: the fiscal agility to find the money inside of a quarter.
Speaker 2: They've improved their own budgeting and planning processes. They view
Speaker 2: the budget almost through a lens of dev secops like, yeah,
Speaker 2: I can move money around. I have some agility. I'm
Speaker 2: gonna not do this so I can do this. I
Speaker 2: can make trade offs like when I made this budget,
Speaker 2: this capability didn't exist the world has changed, chat GPT happened,
Speaker 2: whatever the case might be. In the department, Not only
Speaker 2: are we not talking about quarters, we're talking about two years.
Speaker 2: In a very systematic approach to doing this that biases
Speaker 2: massively towards central planning. It is kind of the starting
Speaker 2: input to the fight it right, a five year centralized plan.
Speaker 2: But I find that strange because doctrinally we believe that
Speaker 2: you know, plans, nope, plan survive first contact. Even if
Speaker 2: the act of planning is invaluable, Well, a budget is
Speaker 2: a plan. Why would we ever believe that something we
Speaker 2: conceived of two years ago ought to be correct today,
Speaker 2: or that you know what we call the president's budget.
Speaker 2: I've heard so many times people love saying I support
Speaker 2: the president's budget because they have to say that that's
Speaker 2: the that would you would be an insurrectionist if you
Speaker 2: didn't support the president's budget. But the only thing I
Speaker 2: believe to be true is there's no way that the
Speaker 2: president's budget can be right. You know, the second it's made,
Speaker 2: it's got to be wrong. The world is changing around us,
Speaker 2: and so how do we how do we improve our
Speaker 2: ability to adjust our plan to meet the reality of
Speaker 2: the world we're at and I think a lot of
Speaker 2: that comes down to discretion. So first it's recognizing there
Speaker 2: is no physical physics limitation of the universe. That means
Speaker 2: it has to take two years to do these things,
Speaker 2: and that these are all man made, self imposed constraints.
Speaker 2: And then secondly it starts with with then empowering people
Speaker 2: with the discretion and the credit. You know, you have
Speaker 2: to credibility wait these things, like we have the right leaders,
Speaker 2: this is the person that we should give more discretion to.
Speaker 2: We should enable them to make bets and follow their
Speaker 2: intuition and move money around. And I know that's particularly
Speaker 2: hard because it's not just the Department. There's an inner
Speaker 2: there's a complex interplay between the Department and Congress to
Speaker 2: make that happen. But I'm quite confident that we can
Speaker 2: make it happen.
Speaker 1: One of the more challenging things to do, at least
Speaker 1: for me, is when one of my closely held beliefs
Speaker 1: is challenged right to my face, and the instinct is
Speaker 1: to get all huffy and puffy and dismiss it. But
Speaker 1: that's not a healthy thing to do. And as I
Speaker 1: was reading the report or the Defense Reformation, I found
Speaker 1: myself vibing and nod in my head a lot, but
Speaker 1: I would be doing a disservice to the folks who
Speaker 1: have heard me bring up this topic before. One point
Speaker 1: had my claws come out and the spines popped out
Speaker 1: of my back. And I just wanted to give you
Speaker 1: a chance, please to flesh this out, because the more
Speaker 1: I read it, the more I went, Okay, I need
Speaker 1: to do my own little clean sheet look at it.
Speaker 1: And that was point fourteen. Productivity is more lethal than
Speaker 1: weapons stock piles. And I won't do a full quote,
Speaker 1: I'll do a partial quote of it for you know.
Speaker 1: Point fourteen we quote, we obsessed about stockpiles with stockpiles
Speaker 1: are irrelevant. Our munitions delivery to Ukraine were Cold War
Speaker 1: error kits sitting on shelves collecting dust. While decades of
Speaker 1: innovation occurred, the consumption of ten years of production in
Speaker 1: ten weeks of fighting in Ukraine demonstrated that the rate
Speaker 1: of production was the actual weapon all along. Unquote, talk
Speaker 1: to me a little bit about how I'm missing the
Speaker 1: big story with my obsession about stockpiles and empty magazines.
Speaker 2: Yeah, so of course it's framed intentionally a little controversially,
Speaker 2: But my claim is not that you don't need a stockpile.
Speaker 2: I think you do, but that you shouldn't get false
Speaker 2: comfort from the stockpile. So one extreme is, look, I
Speaker 2: have this exquisite stockpile. Let's look at it. But you know,
Speaker 2: just so you know, I shut down all the production lines.
Speaker 2: I can't make any more of these weapons, but I've
Speaker 2: got the stockpile. And I think we should look at
Speaker 2: that and say, ooh, that's not a really big deterrent
Speaker 2: that actually the deterrent comes from the ability to quickly
Speaker 2: produce the stockpile. And this is also I think partly
Speaker 2: the legacy of the peace dividend, which is like, oh,
Speaker 2: we can't afford to keep running these production lines, or
Speaker 2: let's do more live virtual constructive exercises, so we don't
Speaker 2: expend our munitions because these munitions are very expensive and
Speaker 2: it takes a long time to make. It's two years
Speaker 2: to build an LRASM, eight years to build a Patriot battery. Oh,
Speaker 2: you should just conserve these things, but let's have comfort
Speaker 2: that they're in the depot. And I think that's probably
Speaker 2: the mistake because what we should be saying is, Wow,
Speaker 2: how could I make the l RASM in one year?
Speaker 2: How could I make it in one month. What are
Speaker 2: the investments I need to make? How do I change
Speaker 2: the design? How do I emphasize the design for manufacturability?
Speaker 2: And it's the constant. It's the fact that you are
Speaker 2: constantly producing innovation. I'm not sure I'm going to steal
Speaker 2: this from Arthur Herman, but I'm not sure innovation is
Speaker 2: actually possible without production. Production is the prerequisite to then
Speaker 2: driving the innovation. My favorite example of this is the LLM,
Speaker 2: This the Large Language Model. Where did the transformer architecture
Speaker 2: even come from? Well, it came from Google. They put
Speaker 2: out a paper in twenty seventeen. It's called Attention is
Speaker 2: All You Need? What motivated them to do that research
Speaker 2: They wanted a three percent super incremental improvement in Google Translate,
Speaker 2: and that investment led to a revolution, an American revolution,
Speaker 2: I'll note as well, but that I don't think you
Speaker 2: get that in an academic research lab. It is because
Speaker 2: they were producing things that they were able to innovate
Speaker 2: on how they were going to produce things. And I
Speaker 2: think we've kind of dialed down all of our production
Speaker 2: lines to minimum sustainment rates. You know, we've kind of
Speaker 2: then whether you need to believe it because it's the
Speaker 2: only world we could win or not. It's like, well,
Speaker 2: all conflicts are going to be relatively short. We think
Speaker 2: we have enough. You know, if we think we might
Speaker 2: have eight days of weapons on hand for a China fight,
Speaker 2: you know, what's the right number. I think it's closer
Speaker 2: to eight hundred days than eight days, but even more
Speaker 2: than the absolute number. The question is really what is
Speaker 2: the cycle time to produce? How do we start thinking
Speaker 2: about that production latency as part of the kill chain.
Speaker 3: Actually, yeah, I think this kind of cuts back to
Speaker 3: the comment you made a discretion in the sense that
Speaker 3: we somebody asked them to make those decisions. How much
Speaker 3: do we need and how much discretion do they have
Speaker 3: to make those choices? I mean, I was thinking about
Speaker 3: this because it reminded me of the old saying back
Speaker 3: in the day when US Navy captains couldn't talk to
Speaker 3: the Washington d C. They would be given orders to
Speaker 3: go to X spot and act in the best interests
Speaker 3: in the United States. That was their orders. They didn't
Speaker 3: they didn't have they didn't have SATCOM. And I'm thinking, well,
Speaker 3: what happened to us that this instant communications has screwed
Speaker 3: us up? To the point where nobody does anything nowadays
Speaker 3: without checking with home base. And I remember reading in
Speaker 3: the book Up the Organization, one of my favorite management books,
Speaker 3: that he talks about delegating a lot of these decisions
Speaker 3: down low. You know, he doesn't the CEO does not
Speaker 3: need to be involved in deciding whether the cups in
Speaker 3: the cafeteria are breaking to be green or brownie. You know,
Speaker 3: we need to we need to. I think we need
Speaker 3: to give. We have to trust people, and you know
Speaker 3: they're going to make mistakes, but you still have to
Speaker 3: trust them. And I think that was one of your
Speaker 3: your points on the budget. You could just move money around,
Speaker 3: but you know, allow for mistakes, but let people have
Speaker 3: a chance.
Speaker 2: That's what I was talking to a general who was
Speaker 2: leading the early AI efforts in the government. This is
Speaker 2: this is almost a decade ago now, and he was
Speaker 2: saying how hard of a time he was having with Congress, explaining,
Speaker 2: you know, he's spending hundreds of millions of dollars he's
Speaker 2: doing this stuff, and the Congress SEP's asking him, you know,
Speaker 2: what are we getting? And I told him, you know,
Speaker 2: they're they're actually paying you to learn. And the light
Speaker 2: bulb went off in his head. But I understand how
Speaker 2: difficult of a position that is for him to explain
Speaker 2: back to the oversight. But I think that there's a
Speaker 2: fundamental truism in that. I certainly look at the journey
Speaker 2: of any of our most innovative companies. That's a big
Speaker 2: part you are. The capital you're deploying is about the
Speaker 2: first revative of learning, and the company with the highest
Speaker 2: first derivative of learning is the one that wins. So
Speaker 2: when we think about the lethality of our fighting force
Speaker 2: and our ability to draw our adversary, that is that
Speaker 2: is it. It is the first derivative. It's not where
Speaker 2: are we today? It is you know, how how quickly
Speaker 2: are we improving? And that's a second point, which is
Speaker 2: kind of a corollary to the productivity is more important
Speaker 2: than the stockpile. When you look at the weapon obsolescence
Speaker 2: life cycle in Ukraine with the dynamic electronic warfare environment,
Speaker 2: you know drones might only be useful for two to
Speaker 2: four weeks before you have to actually rebuild your drone
Speaker 2: to survive the environment. You look at how the drop
Speaker 2: off in the efficacy of precision guide ammunitions. They're what
Speaker 2: you have to take away from that is, oh, it's
Speaker 2: not what the weapon does today, it's actually our ability
Speaker 2: to change the weapon and how it works. And you know,
Speaker 2: how do we think about the weapon as a malleable
Speaker 2: capability and how many how much practice are we getting
Speaker 2: at changing our TTPs and how these things actually function,
Speaker 2: updating the software to make these things work when we
Speaker 2: need to use them in anger.
Speaker 1: One thing you mentioned earlier on in the conversation that
Speaker 1: stuck with me. You just hit it on again is
Speaker 1: it's easy. It's easy to look for problems and to
Speaker 1: be critical and to point out things. And sometimes you
Speaker 1: can overlook what we as a nation and a culture
Speaker 1: have as our comparative advantage. And as you mentioned earlier,
Speaker 1: our superpower is software. We are beyond comparative advantage. It's
Speaker 1: something we could really take advantage of. And I look
Speaker 1: at our Navy. We still do our fitness reports on
Speaker 1: NAFIT ninety eight as in nineteen ninety eight. And when
Speaker 1: I when I was a manpower person twenty years ago,
Speaker 1: if I needed to go into Millington and where we
Speaker 1: do our manpower and I wanted to check on where
Speaker 1: billets were going, what things were needed, what were the priorities.
Speaker 1: I had to do a doss dial into a Unix
Speaker 1: database just out of curiosity. Earlier this year, I put
Speaker 1: out a call to my people, It's like, hey, are
Speaker 1: we still using this old Unix database? And the answer
Speaker 1: is I got yes. And then and yesterday our previous
Speaker 1: mid rat show Brian Clark over at Hudson. He mentioned
Speaker 1: to me something that I looked up last night is
Speaker 1: Pallenteered back in twenty twenty one had their contract exte
Speaker 1: ended for their foundry software for the Royal Navy. You know,
Speaker 1: we think we have challenges Royal Navy, it really has
Speaker 1: some challenges and they are just a big fan of
Speaker 1: what software is enable to do for them, especially in
Speaker 1: their manpower arena. You know this big problem we have,
Speaker 1: this multifaceted attack. How do you see that not just Paletair,
Speaker 1: but the industry in general can find a more receptive
Speaker 1: attitude to people understanding what you talked about, where you
Speaker 1: have the physical material weapon our device far unit, but
Speaker 1: it's to software that you're able to update and put
Speaker 1: in there a greater appreciation of how we can leverage
Speaker 1: what really is this nation's superpower skill and that's in software.
Speaker 2: Absolutely first I want to have that caveat that we're
Speaker 2: not going to win the next war by shooting bits
Speaker 2: at our adversaries, where you know we're going to need atoms.
Speaker 2: The physical world absolutely matters, but we should be using
Speaker 2: software to achieve asymmetric advantage in the physical world. And
Speaker 2: there's two parts of that. One is how do we
Speaker 2: do production differently Elon with his vertically integrated approach and
Speaker 2: co locate the research with the production. It's a whole
Speaker 2: methodology and there's a whole school of founders that have
Speaker 2: come out of his world that show us that actually
Speaker 2: America is good at manufacturing. It's just said that that
Speaker 2: knowledge is not evenly distributed amongst our legacy manufacturing base,
Speaker 2: and that is principally it's a software driven approach. The
Speaker 2: second piece of this is to reindustrialize as a nation,
Speaker 2: which I deeply believe we need to do. We need
Speaker 2: to do so by giving American workers superpowers. We certainly
Speaker 2: have a lot of experience helping like Panasonic Energy. They
Speaker 2: build every battery in the Tesla Reno gigafactory. The employees
Speaker 2: prior to working on this exquisite Japanese equipment, they were
Speaker 2: working in casinos. So how do you give these American
Speaker 2: workers the kind of AI iron Man suit that enables
Speaker 2: them to be as effective or even more effective than
Speaker 2: a level four Japanese engineer. And I think that's going
Speaker 2: to be a big part of how we You know
Speaker 2: this is David Slingshot. You know, we were the best
Speaker 2: in mass production at the beginning of World War Two. Unfortunately,
Speaker 2: our adversary is today and we're going to need an
Speaker 2: asymmetric approach to get back to that. Now. There is
Speaker 2: a more direct aspect with software, which I think actually
Speaker 2: gets to the last thesis, which is that war fighters
Speaker 2: fight with guns and get. And it's a little cheeky
Speaker 2: way of saying what I've noticed is that the most effective,
Speaker 2: most lethal general officers. I think they wouldn't really like
Speaker 2: me saying this, but they have the mentality of a
Speaker 2: product manager. They don't think software is something for the
Speaker 2: nerds in the corner. They think software something I, the
Speaker 2: general officer, use to run my combatant command. I have
Speaker 2: opinions of how the pixel should be laid out. I'm
Speaker 2: going to give my feedback directly to my pit crew,
Speaker 2: to my engineers, and I'm going to tell them how
Speaker 2: to tweak this thing so that tomorrow and they come back,
Speaker 2: I'm more lethal and engaging, and so I'm picking the
Speaker 2: Kambat commander there. I think you could have the exact
Speaker 2: same thing for your a doss manpower based example. And
Speaker 2: I think this is one of the paradoxes of technology,
Speaker 2: which is the sort of anodyne removed view is something
Speaker 2: like the technology is going to make the human less important.
Speaker 2: And that's because somehow technology makes the media and human
Speaker 2: more capable. That's true, but it actually makes the very
Speaker 2: best human way more capable. And so the determinative outcomes
Speaker 2: in the battlespace or in the in the free market
Speaker 2: are going to come from the very best person being
Speaker 2: kind of wrapped in the very best software, and so
Speaker 2: small differences in the leadership are going to be compounded
Speaker 2: massively and finding and thinking about our general officer corps
Speaker 2: and the from a perspective of yes, you have all
Speaker 2: these capabilities, you need, all these skills you need to
Speaker 2: be able to do. One of them is actually being
Speaker 2: a product manager having an opinion on the malle You know,
Speaker 2: it's the most malleable weapons system you have, and you
Speaker 2: can you can change it all the time. One of
Speaker 2: my real world examples around that is the Afghan Neo.
Speaker 2: You know, we push ninety thousand software upgrades a week
Speaker 2: to our fleet when the neo happened. When crisis happens,
Speaker 2: the historical view is you code freeze. Oh, no, crisis
Speaker 2: is happening. It's too risky, you can't change anything. Well,
Speaker 2: there was no concept in the DoD war fighting system
Speaker 2: of having a passenger manifest you know. The whole thing
Speaker 2: was really about, actually, oh my gosh, we need to
Speaker 2: actually push more code in the crisis because the signal
Speaker 2: is coming in harder and the first derivative really matters
Speaker 2: here right now, let's accelerate change. It's like it's like
Speaker 2: punctuated equilibrium, and that I think is a very powerful
Speaker 2: lesson that we need to be practicing for exactly that.
Speaker 3: Well, that's a terrific, brilliant and it's a good time.
Speaker 3: We've used up an hour of your time and it's
Speaker 3: been it's been really really interesting. So we probably take
Speaker 3: another two or three months, but I don't think we
Speaker 3: we can have you sit still that long anyway. That
Speaker 3: thanks so much for coming with us today. I appreciate it.
Speaker 3: Thank you for having me Chalm has been.
Speaker 1: A great pleasure, and thank you very much everybody for
Speaker 1: join us for another edition in mid Rats and until
Speaker 1: next time, I hope you have a great Navy day.
Speaker 1: Cheers to reply to a.
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