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Hello and welcome to another episode of The Odd Lots Podcast.
I'm Joe Wisenthal and I'm Tracy Alloway.
Tracy, you know my Twitter handle at the store.
I'm vaguely familiar with it.
Yeah, I always mentioned do you know how where I got it from?
Oh, that's a good question. I know you had it when you first started writing about the market, and I know you've said at various points in time that you kind of regret using it.
Is that right when I joined Twitter in like two thousand and eight, and like, I didn't think it was going to be like a very big deal for any reason. It was just the name of my old blog at the time, and that was the name when we you know, people just did like, yeah, screen names.
It was just the name of a blog. The name means nothing to me.
But before I was ever a journalist or even thought that I would get into journalism professionally, you know, I had this blog, The Stalwart.
You know, if you thought Twitter wasn't going to be that serious, I feel like you could have chosen a much worse name, that's true, than the Stalwart.
But anyway, I had this blog, the Stalwart dot com. It was actually I had a co author on it who went to do great things anyway, you know how like we sometimes tweeted like, Hey, we're going to be in subcity. Who wants to get a drink? I was visiting San Francisco in like two thousand and six and I posted a thing and I think I ate about two hundred readers of my blog, and I said, does anyone want to get a dim summ in San Francisco?
And I got two people responded and show up.
That's I mean, that's not a terrible two hundred.
Yeah, that's right. It's not bad at all.
But anyway, one of those people who actually showed up to get dim sum and a few friends of mine showed up, is going to be coming on the podcast today.
One of those two.
See, it's about quality, not quantity each other.
That's right.
So the two people that showed up are useful.
To you, that's right. So I went on.
I stayed in media and I did you know, the blogging and casting and journalism thing, and another became the CTO of one of the hottest companies in the entire world. And so, you know, some interesting people at that lunch in China Town and.
What did you tell him over dim SiZ I don't remember.
I don't remember. Anyway, this is a very sort of inward facing intro. But to sort of zoom forward, you know, we've wanted to do more on defense in the year
twenty twenty five and how we spend money, et cetera. Anyway, and it turns out that this person, this guy who came to dim Sum in two thousand and six, is a great person to talk about defense because he recently wrote a piece called the Defense Reformation eighteen thesies about how we currently spend money on defense in this country and why the way we do it is insufficient for this new world, especially with all of these geopolitical attentions.
Of course, he works for a company that might benefit from a change in how we do spending on defense. We're going to be speaking with I'm Sunkar. He is the CTO of Palenteer, one of the hottest companies in the world, but which I'm still trying to wrap my head around exactly what they do. But we're maybe going to learn that and how they or Sham specifically in visions changing how we do defense and how Palenteer could play a role in it. So, Cham, thank you so
much for coming on odd Lots. It's nice to talk to you again after almost twenty years.
It's a pleasure to be on. Yeah, it's great to hear you again.
Okay, here's a question. So, like I watched these videos on YouTube about Pallenteer products and it looks very like sort of like Minority Report.
Where it's like these like big walls.
Of screens and they like zoom in on something and they're like, oh, and here's an asset in the South China Sea and why are these ships here? And like someone's like, look up, is that really what you guys sell? Like is it really this minority report? Not, I know it's not Minority Report like pre crime, but these sort of like visualizations like give me like the sort of like what does Palenteer actually sell?
Well, the cynical way to think about Palenteers that it took something as sexy as James Bond to motivate engineers to work on a promise boring as data integration. But I do think that is the seminal problem. It's not that we don't have this information, it's that we don't have it in a way that we can easily access it to make a decision. I like saying, you know, maybe ten years ago, the idea that data was the new oil became very popularized. I strongly disagree with that.
I think data is the new snake oil. It's not inherently valuable. What really matters are the decisions we as humans make, and am I making a better decision? Am I getting into a continuous learning loop of how I will make that decision better tomorrow? That is something that Colonel John Boyd would recognize as the Uda Loup, the Observed orient Decide Act, a piece of trade craft he
developed to beat big fighters in dogfighting. But it's really like the human decision making process and how we see ourselves and win as a consequence of being better at it than our competitors in the commercial sector or our adversaries in the military space.
So Joe mentioned that we want to do more on defense, and it is a difficult topic to sort of wrap your head around because the defense industry is sprawling in many ways, so neither of us know that much about it. But one thing I do know is defense is an industry that is characterized by Monopsony. Oh, do we still have the monopsy Clason.
Yeah, we're going to put a sound effect here.
Monopsony Clackson, Okay, Monopsony. So there's one big buyer for defense equipment and services, which is the government, and if you are a defense contractor, you are basically only pitching to the government. If you fail to convince the government, It's not like you can turn around and sell missiles
to the private market, at least hopefully not. How did pal Andeer actually break into this particular space and why did you decide to do it, because you know, it seems like a pretty binary bet in some respects.
I mean, first of all, I love the fact that people listening to this podcast know INNI oh yeah.
Thesis is that is.
The root of what ails us in terms of defense. But you're exactly right, it is what makes this market so challenging. I mean, look, no great company is principally created to make money. You have a mission, a purpose. We wanted to work on hard problems in national security. When we came together to work on these problems, it was before there was like a political tinge to working on defense. It was actually people just thought we were wasting our life, like maybe you should self sofered banks.
Wouldn't that be a better business.
Later, maybe ten years after that, it became somehow highly unpopular in Taboo to work on prompts of national security, And now it's become in vogue, which I think is great. It's really a call back to a prior era. You know, the birth of Silicon Valley was absolutely the Face program and defense and missiles. Lockeed made those missiles in Sunnyvale, in the heart of Silicon Valley. Who was the largest
employer in the fifties in the Silicon Valley. So to your question of how did we break in very painfully, is the honest answer that all of our adoption was driven from the field backwards. Monopoly is strongest in DC. It's where the opinion of a single buyer really matters. But the closer you get to soldiers in harms Way, people who are actually doing things, the more you start to approximate something looks like a market. People have heterogeneous
ideas of what they need. They're able to express their opinion of this is better than that. They may not have the resource or the buying power to actually affect that economically, but it starts with the very beginning of a demand signal that actually, there is something better, there is something else that we would like out there, and then you're doing battle with the bureaucracy every day. When we first started the business, I thought our competition would be the existing defense players.
I could not have been more wrong.
Our competition was the program of record, as they call it. It was the government program that thought it had a monopoly on providing a capability in a certain area. And if you challenge that monopoly in any way, they view it as their job to disquish you, to crush you. And in this system that we've built up, the defense primes are just essentially yes men to the monopsonists. You know, their job is to do whatever the monoposinists asked for.
And I think this is an important phenomenon because it's not how it always was.
We can look at the present.
Moment, which is very much an outgrowth of having won the Cold War. It's something we've built up without pure competitors as a nation since the nineties. But when we were at our best in World War Two, in the early Cold War, it looked very different. Our services competed against each other all the time. Today we think about it as the Air Force's Minuteman as the intercontinental ballistic missile, but the Army and the Navy they put in their
own competing efforts. It's really that the Minuteman won that great free market competition for having the best product. When we were building submarine launch ballistic missiles, Admiral Raybourne had four competing programs running concurrently. And so the consequence of the monopsony is not that there isn't competition within the industrial base. It's actually that there isn't competition within government.
How did that work? It's not intuitive to me.
And like you know, you say, there's not competition within govern even within many large corporations. Even in the private sector, you don't often see that phenomenon in which say, different offices within a company are competing against each other in terms of what they're buying and who bought the better technology and then went out. I'm sure it happens to some extent, but buying large, even at a private corporation, procurement decisions are corporate wide. For certain types of products.
There's like you know, there might be a teams company and there might be a Slack company, there might be a company that uses AWS, and there might be a company that uses Google.
Cloud, et cetera.
Talk more about how, as you say, at least at one point, there could be within the defense overall competition over technology development.
And these things are dialectical where you can think about it as like if we were always duplicating efforts and competing, that somehow seems really inefficient. On the other extreme, which is where we tend to find ourselves, if implication is viewed as taboo and inherently bad and something that we
always need unitary efforts around, that's also really bad. Now these modalities skewed towards So if you're in this sort of hey, we should have a unitary effort, we should all just pick Slack or teams.
Something like that.
That makes a lot of sense for something that's in the one to end phase. It's functionally a commodity. There's value to standardization. You're not expecting a lot of innovation. On the other end, where you're dealing with zero one problem, where there's fundamental uncertainty, a lot of innovation is needed. Innovation is fundamentally messy and chaotic, and trying to wrap it with all this process just means that you don't
get the innovation at all. Then the lack of competition and the lack of competing ideas heterodox approaches means that you lose I think one of the most important responsibilities of a leader is to grant and revoke monopolies within your institution. Look, I'm calling the shot. I'm saying this is the blessed way. I have high conviction and the people and the approach, and we're all moving out. We're putting all of our wood behind the sero. On the
other end, it's like there's fundamental uncertainty here. I'd like to fund three teams to go after this in different ways, and I will have to manage that as we go through to figure out what is the answer going to be?
Okay, So on this note, as you point out, there's a lack of competition within the government, maybe a lack of creativity. There's a tendency to be very bureaucratic, and of course one of the things we hear a lot is that the government can be very slow in its processes and it's not very good at like changing course when that is needed. Because there's always the sprawling, infinite number of stakeholders and all these boxes that you need to check and things like that, and all of that combined,
I imagine, can make for a somewhat frustrating customer. If you're a defense company. I mean, if you're a defense company, the government is your customer. The government is certainly palenteer's customer. How could they be basically a better customer.
By having more buyers?
You know, how can we start to approximate something that looks closer to the free market. So I think defense is one of these interesting places where it's the only place I know of where we disaggregate supply and demand. You think about that, the integration of supply and demand, the sales and operation planning process. It's the beating heart of most companies or institutions in defense. You have the services, the Air Force, the Navy, and Marines, etc. They're responsible
for manning, training, and equipping. This is the supply side. They produce the things that people are going to need. On the demand side, you have what we call the combatant commanders. We have thirteen geographic and functional combatant commands that they actually do the war fighting.
If something happens in China.
It is the Indo Pacific command that we'll have to do that fighting, and they will use the supply that's been provided by the services to do that. But they don't really have a say and what is being produced, what the supply would be, what their opinions are. I mean, it's a very indirect sort of say. And I think this disaggregation ends up being one of the major bugs
in our system. So you have thirteen buyers essentially. Now, I'm not sure you should ask these folks who have three to five year horizons to go build you an aircraft carrier. But I do think ninety five percent of the things that we need to fight and win fall within a time horizon envelope. They're going to care about and wear their feedback and their heterogeneous needs. I'm not sure why each of them should need exactly the same thing.
There's so much output to be had by capturing what is different about them and how you make that work for each of them, rather than averaging alder requirements out for the sake of efficiency but at a loss of effectiveness.
The US hasn't fought a war against a really powerful adversary in a long time. There are certainly wars that we've fought that have been frustrating outcomes from the US perspective, but not necessarily because we were technically outmatched. I understand like you make these points, and obviously you make these points in part because you think it will benefit your company. How do you establish that we're not doing it? Well, it seems like we still have an incredibly powerful military.
What is the evidence that there's actually something wrong with the existing system.
Well, I think we need.
To look at the world around us here, So I'd say that empirically we've lost to Terrence as the West. You know, if you go back to roughly twenty fourteen, Crimea was annexed by the Russians, the Sprattley Islands were militarized, Aroan got shockingly close to getting the bomb, and certain policy enabled them to get and continue to get much closer. I think that a decade ago we lost to Terrence, and that's really accelerated. We've seen that we've had a
pogram in Israel. We now have North Korean soldiers dying in Ukraine, and we have unprecedented Phase zero gravestone operations in the South China Sea, not to mention suddenly undersea cables keep getting cut and snapping, so that there's this sense in which people aren't afraid of us anymore, and that the whole point of defense is not to fight the war, it's to be so strong that you're deterring conflict.
And I feel like.
But just to push back, yeah, but just to push back on this for a second, Like, how do you establish that this lack of deterrence as you perceive it has something to do with where we are technologically along the state of the art versus domestic US politics, in the appetite after the Iraq War, after Afghanistan, et cetera. This sort of like appetite to be active and involved in all of these different places. Because we're talking technology,
we're talking weapon systems. But another aspect of the sort of perceived lack of deterrence could just be about American appetite to exert our might.
I do think it's multi factorial. I don't think I would discount that to zero there. But let's think about this just in terms of the cost of air defense. If you're using a two million dollar missile to shoot down a two thousand dollars that'd be general, it's more like a two hundred dollars drone.
You have a problem.
And if it takes you two years to make each one of those missiles, you have a bigger problem. And so I think our adversaries can sense the ways in which we have, you know, and then that then feeds into political will. I'm not sure these things are entirely disaggregatable.
Since Joe brought up political will or political appetite, this is one of the other things I wanted to ask you.
But you know, if you talk about the government maybe changing its ways, being more experimental in the way it does things, encouraging competition, there's a risk involved in that, right, which is, at some point, if something doesn't work, then someone in Congress is going to have to stand up and explain why the government quote wasted I don't know, ten billion dollars on a program that didn't actually work out.
How do you actually like go about I guess it encouraging like the culture, or changing the options around what constitutes success and failure.
I think you put your hand right on the issue here, which is how did we get here? You know, if we go back to the early Cold War, our industrial base looked very different. It was an American industrial base, not a defense industrial base. Chrysler made cars and missiles. Ford made satellites until nineteen ninety, not that long ago.
General Mills, the Cereal Company, used everything they learned about processing cereal in their mechanics division to make torpedoes, artillery, and inertial guidance systems, every camera, car and cereal box Americans. Bot was actually subsidizing our national security. So the breath of the investments, the commercial R and D investments we were making, we could actually use to have price, performance
and capability improvements in defense. And that really changed. It changed very slowly in the seventies and eighties because actually the monoposist was not a great customer. People realized we should try to sell off these defense businesses. It's too bureaucratic, it's too slow. Then it changed all at once. In nineteen ninety three, there was this famous dinner at the Pentagon called the Last Supper. We had won the Cold War,
the country wanted a peace dividend. We slashed defense spending sixty seven percent, So for every dollar we're spending before, we were only going to spend thirty three cents and this led to a massive consolidation in defense. We went from fifty one prime contractors down to five today. And you know, the consequence most folks see in this is that this consolidation led to a lack of competition inside the industrial base, less choices. I think that happened, but
I don't think that's the high order bit. The high arder bit is that this consolidation bred conformity. This was the real beginning of the financialization of defense, of founderless companies that were principally run for the shareholder. They really thought about the return on capital, what's happening this quarter? And that plays into the hands of the monopsinists. You're not going to behave like Elon. You don't have the grand vision of getting to Mars and as a consequence
of doing so, reducing launch costs by ninety percent. And that's not what it was because we think about it as North of Grumman today, but it was Jack Northrope Androy Grumman, Lockeed Martin was the Lockheed brothers, and separately it was Glenn Martin. We had a very different kind of structure of founder driven American capitalism. That meant that
people were investing in big ideas with bold ambitions. That is I think really important to understanding how we've kind of so when the Berlin Wall fell, only six percent of major weapons systems spending went to defense specialists. The rest went to what I call as dual purpose companies, the Chryslers of the world, the general mills of the world. Today that number is eighty six percent. So we have taken our defense industrial base. We've put them on the
Glopgos Island. They're serving this one custom of the monopsonist. They're largely deprived of market signal from the competitive and dynamic commercial markets, and they've evolved in certain ways. And if you bring them to the mainland, you know, the wolves will eat the giant tortoises. And that's not what the Chinese industrial base looks like. Chinese primes only get
twenty seven percent of their revenue from the PLA. The rest comes from US, as silly Patsy's buying cheap crap on Amazon, it comes from commercial So every now camera, cereal, box and car we're buying might be subsidizing lethality against US soldiers.
I get this point, but to me, this also speaks to a different dimension, because if this is the story, then it can't really just be about decisions made at the Pentagon to winnow down the number of official suppliers, because this is really an economy wide story, right setting aside defense, you know, a company like General Mills is in twenty twenty five not going to devote much of its internal attention to you know, milling machinery, which is
I see on Google's what got transformed into a warplan that would there would be some other company that they would contract out like this phenomenon. Would you call it financialization or specialization or prioritizing shareholders being good at one
thing that you sort of like optimize. This is an economy wide phenomenon, but there must be some root of it that can't be explained in a change of defense policy, because we truly see it across the board, lots of US great US companies in Nvidia, for example, choosing not to focus on the low margin manufacturing aspect of semiconductors. This is an economy wide phenomenon where companies shed these capabilities.
I think that's right, and you don't need everyone to be participating in it, but you could look at you know, counter was the first defense company to enter the S and P five hundred and forty six years, not from mergers or spinouts. And I think that looks much more like the sclerotic European capital markets than dynamic US capital markets.
So I think that tells you something about the rate at which we are creating new ideas, new companies in the innovation that's happening here now a little bit more directly to Tracy's point on how do we avoid, you know, getting hauled in front of Congress. I'm not sure you avoid that, but I think the risk aversion plays. So we built the Pentagon in sixteen months. Kelly Johnson, the founder of skunk Works at Lockeed, he built the U
two spy plane in thirteen months. You know, he built forty one airframes in his entire career, which today you're lucky if you work on.
A third of an airframe in your career. So there's a sense in which we did have these really great people. We bet on them. Not everything they did worked out.
I love this story of Admiral Raybourn, who was building the submarine launch ballistic missile, the Polaris. You know, Congress is breathing down his neck. Other admirals were breathing down his neck.
Hey, when is it going to work? Give me the like Gant chart of Gan charts, show me the project plan. Are you managing this? We're spending a lot of money on this.
And he came up with the latest in decision analysis techniques. He used Monty Carlo simulation. It's called perk peert. You can research this and it produced the Gan chart of Gan charts, and Congress was happy and the admirals were happy.
But it was all a smokescreen. What he actually did.
He created this total fiction of Gant charts so that he could protect the engineers, so that they could actually just do the work. He didn't know when it was going to work or how it was going to work. But this is the reality of zero to one that actually you're doing this messy innovative process, and if you try to wrap it in so much process that you eliminate all the risks, you can't cut off one end of the taiale of distribution of outcomes, like all the
bad things, without cutting off the good end too. So you're locking yourself into a system that's driving mediocrity and One of my favorite examples to illustrate this is David Packard, co founder of HP. He was the Deputy Secretary of Defense the one period of time in the seventies he came up with a simple set of rules to improve acquisition called the DoD five thousand series seven pages.
Pretty small.
Today that five thousand series has turned into two thousand pages. Wow, that is an eleven percent compounded growth rate of barnacles of bureaucracy. People love to look at the five thousand series and they complain, look what Packard did to us,
you know, but we did this to ourselves. And we do this because when anything goes wrong, we need to come up with a new rule of how it will never go wrong again, which all we're really doing is coming up with rules to make sure nothing can go right again.
I'm a sucker for alliteration, but barnacles of bureaucers use is a nice phone just to drill down on this point. Palenteer has both military and commercial clients. Can you walk us through what the differences are in as much granularity as you know possible between designing a product for commercial client versus designing something for the governments, Like, how do those contracts actually come into being, and how do they differ from each other.
Well, one of our headerdox takes, which you can see in the line of argument I'm pursuing here, is that it shouldn't be that different. And what has made it hard for us is we're not designing what we do to spect that either the commercial company or the government are asking us. We have our own opinion of what ought to exist to solve the problem.
If you don't think it solves the problem, you shouldn't buy it.
But allow us to pursue our opinion, leveraging all the stimulus that we have out there in the market and to deliver the innovation to you as a consequence of doing so. And you know, we would think of this is so simple. You go to the Apple store and if you like the iPhone, you by it. If you don't like the iPhone and you don't buy it. And of course that's not how the government likes to think
of it. They want to come up with a requirements document that lists out everything they think they're going to need and then have essentially what is a fiction writing contest for you to respond to that and say whether you can build those things and a what price you can build those things?
And then through that process.
You're making a decision of who's going to actually then go build those things. And I think you're transferring all the risk to the taxpayer by doing so, the taxpayer has to fund the development. The taxpayer is betting that the government got all the requirements right, and the history would suggest that's not a great bet. You know, there's a reason we believe in the free market. Instead, why wouldn't you transfer the risk to a private company, let me build it on balance sheet.
If you don't like it, I go out of business.
But if you do like it, there's opportunity there. And I was able to do that with much less risk to the taxpayer.
But just to play devil's advocate for a second, there are reasons that the government might have specific requirements that a commercial company doesn't. You know, the government might have more stringent rule rus around something like data privacy, something like that. Is it really possible to standardize products across commercial businesses that might be sensitive in one way or another, but military operations that are extremely sensitive.
I mean I would say we're an existence proof that's possible. That's like essentially my technical risk to manage of like where do I enable the government to plug in things that they need to build a plug in that are in fact government unique, but how do I have the greatest possible common baseline. One of my favorite examples of this is Operation Warp Speed and the supply chain for
the vaccine. We were able to build that supply chain in two weeks for General Purna because we had built a similar digital twin for BP to optimize hydrocarbon production two years prior. There's no way we could have met the moment of need for the nation had we not had this broad, diverse commercial stimulus across fifty different industries.
Talk to us about what specifically yourself, because you're not selling missiles, et cetera. You're a software company. I also know I think you've probably worked with them for a while, but obviously at the end of last year there was some announcement where you're working with Andreill Palmer Lucky's company. What in your vision is the DoD buying more from you years from now than they are today, And talk to us about like some of like what the what the pitch is in.
The commercial world, you call it a value chain from the hand of your supplier to the hand of your customer. But you can think of this as a series of decisions that create dependencies on the ones that are downstreaming. So you know, you go from procuring things to producing things to pricing those things with customers. Simple example of the value in the military, you call that a kill chain from sensor to shooter, but it's literally the same thing.
It's a decision chain.
Maybe if you thought about it more generally, and every one of those decisions, you want to make faster than your competitors, and you want to make them better than your competitors.
And the way to do that is with AI.
So we provide an AI decision making platform that spans the breadth of your enterprise that allows you to get better and better, faster and faster. And so we don't make the hardware, but we make the end you're talking about on.
The battlefield, you're talking about software that when you say make a decision better than your competitor, it means you're selling software that you say, on the battlefield allows some entity to fire better than their competitor.
That's right.
Or in the commercial world, allows Airbus to build aircraft more effectively, or Chrysler to build cars better, or ht Hundi to build ships better.
There's one other thing I wanted to ask you. I guess this is very top of mind for everyone at the moment, but the Trump administration, there's been a lot of rhetoric from Trump about shrinking the military industrial complex, which I presume you know. There aren't a lot of specifics here, but I presume it means eliminating waste and also reducing the overall amount of money that's allocated to the military in the form of government subsidies or whatever else.
How does that square with your vision of revolutionizing the Defense Department.
I think it's pretty congruent.
I mean, if you thought about the eight hundred and eighty billion that we're spending a year, what percentage of it do you think we're spending efficaciously to deter our adversaries.
We could all come up with different numbers, but largely people.
Would agree there are a lot of legacy things we're spending them on. Some of those are because Congress wants to protect certain programs, some of them are because the services want to protect Curain program Some of them just because we haven't yet realized they're not going to meet their moment, so I think we could be substantially more efficient.
We should be thinking about this as an acid allocation problem of the capital we have, how is it allocated against the problems and the threats that we face, and is it kind of the same allocation it was thirty years ago?
How much of that have.
We retooled and regeared towards the future fight that we're likely to a you.
Know, we did an episode recently someone we've had on the podcast a couple of times, Jennifer Palka, talk about software, and you know, we were talking about DOGE.
And this idea that like it's one thing to.
Identify a problem of government procurement or government operation, it's another thing to actually do it. And doing it is probably some combination of changing rules that are written down somewhere, maybe in Congress, maybe not, maybe bureaucratic rules, and then they're sort of like the cultural change too, and that's also extremely difficult, and sometimes maybe you just need like a sort of bully type who is like very aggressive
to change. When you think about your vision for intra DoD competition or bringing more of that, how much of that is changing rules versus changing culture, And how do you think about sort of like we're adopting Cham's eighteen theses, what does that actually look like in practice?
Yeah, so I think a lot of it is culture. I might call it leadership if we think about Hymen Rickover. So, Admiral Ricover built the nuclear Navy. You know, he was a five foot tall, pretty middling to bottom of class US Navy academy grad didn't even drive a warship. But after World War Two, by happemstance, he got to go see the remnants of the Manhattan Project and realized, holy cow, we could be building nuclear powered submarines and warships with this.
Admiral Ricover was in place leading that effort for thirty years. He was protected by Congress. He was a notoriously difficult human to deal with. Admiral Zombwald, who was the Chief of Naval Operations, basically the senior most Navy person, said, you know, the Navy has three enemies, the Soviet Union, the Air Force, and Hymen Rickover. So you can see how difficult this human must have been. But he was
a genius. And I think there's no stimulation of the world where we said what if we had only Ricover for three years, or what if we had him for ten years?
Like our nuclear navy is one of our.
Last remaining asymmetric advantages, and he built it in the fifties and sixties.
It's truly spectacular.
And I think if we go back and look at our history here Kelly Johnson building forty air frames, including the SR seventy one, John Boyd.
We call it the F sixteen.
Maybe more accurately, we should call it John Boyd's plane. We call it the Apollo program. Maybe we should call it Gene Krantz's program. There's this beautiful humility in this kind of Midwestern sensibility we have in America that we think of the program as not being defined by a single person, but oftentimes it really is. And so to the point of culture and leadership ever since the Goldwater Nickel reform of I think eighty six, where we prioritize
this sense of jointness. You know, we want people to rotate every two or three years. We want them to have lots of different experiences to fill out their BINGO cards. It's been very hard to have actually the deep time and space that's required to be in a role long enough not only to make mistakes, but to learn from those stakes so that you can ultimately succeed in delivering cutting edge technology.
You know, I like the idea like, oh, there was this guy Kelly Johnson, he made forty one planes, etc. And why can't we get back to that where like someone is just some like visionary and they like build all the stuff. On the other hand, like, it's clear that like objectively, airplanes must have been much simpler in some sense because we know the right brothers, for example.
Invented and that was just two of them.
It is inconceivable today on any scale the two individuals could go into a barn and build an airplane. I mean, so, like I get this story that like cultural change, et cetera. But just the sheer technological complexity of the cutting edge technology doesn't that just sort of like make some of these stories impossible to replicate today?
My counterpoint would be SpaceX Elon can build a starship faster than the FA can give them launch approval.
What they've done in the last fifteen years.
When I grew up in the shadow of the space coast, I used to wake up to the double sonic booms of the Shuttle re entering for landing at Kennedy. The Shuttle was amazing. It inspired me in so many ways to follow, you know, stem But the launch cost was fifty thousand dollars a kilogram to orbit. With starship heavy reuse, we're looking at ten to twenty dollars. I'm not missing any zeros there ten to twenty dollars, and we were stuck on a linear cost curve between twenty thousand dollars
and fifty thousand dollars until SpaceX came around. And I think the timelines they've done this, and people would say that's not possible. It's within a small lifespan of someone working on these rockets, and it's largely been the same people who've been leading these efforts since the very beginning. So I think when we take new approaches, we can still do these things. We can still do these things very fast. I think one of America's great strengths.
If we were.
Literally at war, we would throw all these rule books away and we would just be entrepreneurs again. We'd be very innovative, and we'd be very focused on the primacy of winning. But the sort of sclerosis that sets in with peace. Time of following all these rules without a critical eye towards which rules are making us better and which ones are making us worse, you accumulate them. John Boyd I used him as an example. He never made it past colonel because he was so difficult, he was unpromotable.
We tend to give credit to someone like John Boyd as we should.
What we don't give.
Enough credit to is the three star Air Force general that protected Boyd his entire career. There was the talent, but there was also the talent manager who understood that there was something special here and it was worth going out of their way to protect this person. The same is true for Rickover. He didn't survive on his own.
Congress deserves a lot of credit for protecting him. So many admirals, so many civil political appointees tried to get him fired, and no one succeeded until Layman in the eighties. And arguably Layman succeeded for the right reasons.
I'm glad you brought up SpaceX, because you know, you're talking about encouraging commercial companies to do more defense stuff and the sort of co mingling and the benefits that would come with that. But a lot of people would look at SpaceX and say, well, it's kind of worrying that we have a commercial company which is now dominant
in US space exploration. Or they might look at Starlink and say, like, oh wait, a second Elon Musk owns all these really important satellites, and maybe that's not ideal for the US. Maybe the US government wants more diversification in its suppliers of extremely important infrastructure and technology. How do you ensure, you know, as more commercial companies come into the space theoretically, how do you sort of deal with those types of concerns.
Well, I think one of the great strengths of America is our skepticism towards power.
So here we are. We've reduced launch costs from fifty.
Thousand dollars a kilogram to ten dollars a kilogram, but we're still worried about the cumulation of power, and I think we should be. But the on the other hand, to look at that without acknowledging the massive effectiveness, like our assured access to space exists because of SpaceX, our dominance in this category, it has become a national security strength.
So I think we have to.
Recognize that We've gotten this massive, outsize, nonlinear benefit, and we have these concerns.
And the way to address these concerns is have more options, more competition.
We need more people who could achieve launch costs that are actually competitive. You know, when the alternative is Boeing in the star liner, that's not a real alternative.
What should we be watching for with the new administration? Obviously we have the new head of the dd IT, he says, in the months ahead, who are either the individuals or bureaus or whatever where we like, Oh, something is meaningfully changing here in terms of how we buy defense.
It's a good question.
I mean, I have a lot of confidence in the incoming team here, Folks like Emil Michael really coming from the tech industry, leading RNE, folks like Steve Finberg who've been in around many of these challenges in defense in the defense industry for a long period of time on the private side at SERBS. So that gives me a great degree of confidence that these folks actually understand what the problems are and that there is a need to
fundamentally change how we approach these things. I don't expect it to be perceived as being wildly discontinuous because the answer is not to get rid of America's primes, like America needs her primes.
Like the things that Lockheed.
And Northrope and the other three of them are exquisite, They are incredibly high tech. They're also low volume, and they're not the entire solution. So it goes back to this idea of ascid allocation, and I think that would be the first thing that we would see as a sign of change, which is a changing of how we're allocating those assets.
I think a lot of the ideas.
That Senator Wicker has put forward in the Forged dec where the first step is to cut red tape, is a big part of this, which is, I think we have all the talent in the world. This department is extraordinarily talented.
We have the people.
We need to actually just put them in the role and give them the discretion to actually execute these programs. Understanding to Tracy's point earlier, some of these are going to fail, probably in pretty spectacular ways, but some of them are going to succeed in very spectacular ways, and we just need a few of our asymmetric capabilities to really work to preserve deterrence.
So I don't know if Elon Musk listens to this podcast, but I do know that he sometimes reads tweets about this podcast, or at least he did once and responded to it. But what would be your big piece of advice for DOGE as it sets out on the very very large task of eliminating waste at the government. You know there are sort of infinite ways you could do this because the government is so sprawling.
Gosh, I mean, far be it for me to tell DOGE how to do this. It seems like a group of experts here. But my broad advice nineteen years crawling through and fighting the bureaucracy and God, is that there are two things that really matter. The first is that we should push more decision making authority on what to buy and how to buy these things to our combatant commanders to introduce strategic competition.
You don't need to give them the entire budget.
I'm not sure they would succeed if they were given the entire budget, But even having five percent of it to express where they disagree with the market signals, or to be able to decide which of the services are going to build something for them, I think starts to introduce the necessary vector for new entrants to get on the field and new ideas to be tested in reality. And the second part to that is a very concrete way of how we could do that is we could
introduced this notion of competing programs more formally. You know, we used to have it in formally, like I mentioned earlier, how we had four competing programs for the submarine launch ballistic missile. That does not happen today because that duplication.
Is viewed as heresy.
You know, that would be being irresponsible with tax payer money. So before we even get started, we need to agree x ante on a unitary effort. I'll give you a counterfaction. Should we have had one F thirty five. You know, we conceived of the F thirty five in the mid nineties, and it was supposed to be all things to all people. There was going to be a variant for the Marines and the Navy and the air Force. And you know, if we just have a single platform, it'll be Swiss
Army Knife of fighter jets. And now you know it is it's pretty spectacular plane, but it's also thirty percent available, and it's going to cost US two trillion dollars. Maybe a counterfaction would have been, we're going to have an F thirty five and F thirty six and F thirty seven,
and none of them have the birthright to win. And in fact, we're going to go to the quote unquote legacy platforms, the F eighteen, the F sixteen, the F fifteen, and we're going to say, here's a little bit of money for you guys to innovate and to actually be so good that I decided I canceled the new programs, but instead we said you're the old no more money for you. Before the new thing even exists, we've already told you that you're going to be sunset and we
don't have a bird in hand. And I think this is one of the major things that slows down innovation. So institutionalizing the concept of the competing PM, I think is very important. I'll give you an anecdote from my own experience. We were the software prime on a hardware project. We were building a satellite ground station on wheels, and in the midst of this competition, it was Palncer versus Atheon and the teams that we had underneath us. In the midst of this competition, chat GPT came out and
I thought, this is great. You know, this is a very complicated piece of equipment. When my son is in the back of this vehicle, I don't want him flipping through a ten thousand page PDF manual.
I want him to be able to chat with the bot.
To figure out how to fix the vehicle or troubleshoot any situation that he's in. And I went to the PM and said, I'd like to give you this chatbot, you know, for free. It's just going to be a better product. And he said, there's no reques vironment for that. Even though there's no I'm not asking for a resource. You know, I guess the perceived possible risk for schedule. There's no incentive to do it.
Why do it.
I've already decided what it is we needed, and it's not on it. Even though the world's changed around us, even though the competition takes two years and two years in infinite time and technology, let's not even consider it. So by the time we're going to end up considering it, it'll have been an obvious thing and we'll probably get
to it like ten years from now. But I'll give you a counterfaction where what if there are two pms, one for Palenteer, one for the raytheon team, and they woke up every day thinking about how they were going to destroy and humiliate and win the competition. I'm pretty sure that PM would have said, absolutely, let's show up to the next soldier touch point with this great capability.
I can't wait to win.
And I think if our only competing point is at a period of great conflict in war, that's too little, too late. We need to have many competitions amongst each other all the time so that we're continuously innovating.
Chum Soundkar, Thank you so much, Really appreciate you coming on on odd lotch and great to talk to you again after all of these years on much heavier topics than steam.
Buttons, which I think is what we talked about last time.
Well, thank you guys for having me.
Tracy.
I like to believe the idea that we could have intra military competition like it's a nice it's a really nice sounding idea.
Yes, intuitively sounds nice. I guess my reticence is slightly you know, Okay, everyone can agree monopolies are bad, monopsony is bad. But I guess my reticence is you brought up the specialization point, right, Like the idea that companies can get really good and efficient by doing one thing, and maybe that one thing is developing ballistic missiles or whatever like that exists in the world for a reason, and there are lots of examples of that, and you know,
there are anti examples of that. Boeing does both military and commercial, and I would say at the current moment in time, Boeing has not been especially successful. So there's that point, which I think is a good one. And then the other concern I guess is the one around you know, corporate dominance. Yeah, the idea that while you bring more commercial players into the market for something that
is really essential, as Sham emphasized my time structure. Yeah, there's a little bit of a tension there, a bigger than a little bit, I should say.
No, absolutely, I do take his point at the end that it would be nice. I mean, I think there are a lot of points, but one is the idea, like it probably makes sense that if you're going to have competition, that means you're going to have failures, that means you're going to have wasted public money. That it's like a cultural thing that strikes me is like very difficult.
But obviously in the private sector, big winners emerge and we don't usually talk that much about all of the ones that were losers, but they had to be there. It strikes me as you know, like a tremendously difficult task. It also seems like it would be nice to have like good sense of the state of our defense industry and not suddenly discover various weaknesses at a time of actual kinetic warfare or were being put to the test.
So I thought, anyway, we got to do way more on this topic, and I appreciated that as a sort of way into it, even obviously coming from a very specific perspective.
A launchpad into the topic. But I do agree the idea of being able to change course seems like a really important one. And the story, you know, the example he gave about rfq's growing from like twenty pages to two thousand pages, that's something we hear over and over again.
I could also probably just listen to stories about you know, random guys in Ohio building planes and the nineteen year.
You have truly reached Middle ages.
So Boomer, I'm so boomer with this. This is totally true.
All right, shall we leave it there.
Let's leave it there.
This has been another episode of the Odd Loots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
And I'm Jill Wisenthal. You can follow me at the Stalwart. Follow our guest hum Soundcar. He's at Ssundcar and you can read his big thoughts about defense at the website eighteen feces dot com. Follow our producers Carmen Rodriguez at Carmen armand dash O Bennett at Dashbot and Killbrooks at Kilbrooks. From our Oddlots content, go to Bloomberg dot com slash
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