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Oh. Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest Best Like the Best. This show is an open ended exploration of markets, ideas, stories and strategies that will help you better invest both your time and your money. Invest like the best is part of the Colossus family of podcasts. And you can access all our podcasts, including edited transcripts, show notes and other resources to keep learning at join Colossus Dotcom.


Patrick O'Shaughnessy is the CEO of O'Shannassy Asset Management, all opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shannassy asset management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shannassy Asset Management may maintain positions in the securities discussed in this podcast.


My guests this week are Josh Wolf and Tony Thomas, better known as T to Josh is the co-founder and general partner at Lux Capital. T two is now a venture partner alongside Josh Lux after serving almost 40 years in the U.S. military and becoming a four star general and the 11th commander of U.S. Special Operations Command. Our conversation focuses on the technology frontier in defense, as well as the geopolitical threats that the U.S. faces. We talk about everything from semiconductors and autonomous weapons systems to the moral dimensions of investing in defense technology.


I hope you enjoy this fascinating conversation with Josh Wolf and Tony Thomas. So, too, I think since the audience knows Josh very well, we have to begin with you and your fascinating background, could you begin by giving us sort of the thumbnail sketch of your career up until this point?


Thanks, Patrick, and thanks for the opportunity to engage with you here today with my teammate Josh. I come from some pretty common formative years. And in fact, I joked I was probably voted on more occasions and not if we'd had that early balloting of least likely ever to become a four star general and would be the oldest of six kids from the Philadelphia area stumbled through 10 years of education before I finally had the opportunity to visit West Point. And for whatever reason, and I still don't understand how I was mature enough on that day to grasp the opportunity.


It struck me that I need this place, I need some orientation, I need to go here. So I switched out a Catholic school in a public school, got a haircut, started hanging around with the right kids and applying myself up to that point. My parents universally said I was the most underachieving person on the planet and luckily by hook or crook, got into West Point. Like a lot of guys and gals that go to the military academy, I had no intent of making a military career.


I mean, I was interested in serving my country, certainly, and I knew that there was a five year commitment. I didn't have a plan passed that I didn't have a plan on where I wanted to go for my initial assignment until I fixed it. But I got into the military and immediately just grew incredibly fond and passionate about the people in the shared sense of purpose that drove me for thirty nine years through all those ranks from LT on up to four star general, where I ended up culminating as the commander of Special Operations Command.


Most Americans don't realize that the Special Operations Command is seventy five thousand strong and on any given day operating in 80 different countries around the world that spooks a lot of Americans on why are we there? Why are we doing these things? I tried when I do engage the public, I try to assuage their concerns by mentioning that I think it's an insurance policy ahead of time that we are trying to develop partner capacity in countries so they can deal with their own crises when they happen so that we don't have to deploy loads of US service members down the road.


My experience over the last couple of years really has been seminal in the context of the nineteen years now going on. Twenty years of continuous combat against Islamic extremism, but also where people don't realize we were knee deep in countering Russian activities, especially on the Eastern European front. We were turning, pivoting as everybody was towards the challenge that is China, which is massive. And then we're also dealing with some not so small contingencies in the form of North Korea and Iran, so incredibly busy command across all those areas.


During my stint, we picked up responsibility for weapons of mass destruction, no small mission from strategic command. And at the very end, we were given a mission that I was actually salivating about, and that's information operations to help the DOD at least compete in the information space, which is now more challenged than ever. But if you look back over this last 19 years, we've had this living laboratory of a conflation of all things automated. Everybody thinks predators and reapers and things like that.


But it's yes. Plus so many other aspects of automating our approach to that kind of combat. But it transcends to other forms of warfare. And, of course, teasing the heavy question of if you integrate A.I., do we go automatically? Skynet and I try to assuage people that concern if they are even inclined to listen to you. But the other part is this aspect of the mis and disinformation that is really complicating matters is complicated or matters even in the backwards environments, the less developed environments of Afghanistan, Syria, Iraq, but even more so in the global scheme now, with major competitors like Russia and China who are manipulating the information space like nobody's business.


And we in the United States suffer from the thing. I harken back to it. Stephen Colbert is it was one of the day. One day the inventor was truthiness. We in the Western world suffer from the intent to be factual to our fault. And I'm of the school of thought. Now that better to be fast. Get something out there in the information space and recover off that and just off that. Then in the pursuit of perfection and truth, when the ship has sailed, the story's already out there and you're in the recovery mode.


So we've been lucky to have a developmental environment to trot out and work for our national security repetitions of last twenty years. What the next ten to fifteen years are going to present some much more daunting challenges that I hope we're able to pick our game up and be prepared for ultimately to deter war. I'm one of the bigger advocates that we should be. The last button you press the press send that you've exhausted every other thing you should have. That big cannon will pass in the closet the find a challenge, but it has to be integrated with your diplomatic approaches, your information and your economy levers that are keeping things real short open the can of worms.


That balance going forward is tough for any administration. It'll be a huge challenge for the current one. Again, as they pick up from where we are now and projects in the future against some really daunting adversaries, we might. Call this episode of what past I was like naming them early on. I think it's actually the kind of perfect framing. Josh, I'd love you to talk a little bit one about how you met, too. I think it's an interesting back story.


But then to start to lay the groundwork for this inextricable link between government, military and technology through history, I don't think maybe many fully appreciate just how important both government and military are at the bleeding edge or frontier of technological innovation. So first, tell us, though, how you met Teito and then let's get into that history. I had a former Navy nuclear sub officer who used to work for me, and he went and helped stand up at the Pentagon.


This entity called Jak's, which was the joint EHI Center, and he had met to Tony Thomas and said, you know what, he's going to be in New York. He's starting to look at some of the cutting edge technologies that can help the war fighters. And I recommended that comes to you. So this was scheduled, I think, for a Friday, two days earlier. Unbeknownst to me on a Wednesday, I'm in my office, which you've been to.


And Beeby, who is my partner and assistant, runs my life, knocks on the glass window. I sort of waiver off because I'm engaged with an entrepreneur and I'm really excited by what they're pitching. And she's a bit persistent. And so I suddenly get up and I say, OK, what's going on here? She very quietly but nervously turns to me and says, are three federal agents downstairs?


And Josh Wolf and I sort of now pause feeling bad that I had waved her off. And I said, OK, she's like, what do you want me to do? And I'm like, well, let them up. I'm not sure she thought I was gonna, like, rappel out the window or I was wanted for something. These three guys come in flak jackets. I am drenched now in sweat pondering what could I have possibly done that the feds are here.


They come out the front elevators, you know, it opens up into our main space and they say we're here for Josh Wolf. And I said, that's me very nervously and sheepishly. And they said, we're Tony Thomas's advance team. And I let out this great exhalation of relief. But they had come to basically scout out every angle and window and entry point to make sure that if somebody was on a rooftop going to take him out, they knew it ahead of time.


But that scared the heck out of me anyway. Too comes I don't know. We're scheduled for a half hour, something like that. And maybe two or three hours later we finish. And we had covered everything from cutting edge technology to science fiction, where he was an afficionado. At the end of it, he turned and said, I'd like to take you out to the edge of the formations to actually see some of the men and women in theater.


I think in particular, I talked about one of the identifying techniques that we use it LAX, which is, as you know, asking what sucks. He said, you know, I want you to go out to the edge of the formation and take a look and tell me what sucks at the end of that trip, which I think was a little under two weeks covering, I don't know, eight countries or so in the Pentagon. He's in full uniform and I'm in a black T-shirt.


I think I was wearing a nice cover shawl, but trying to be as respectful as possible. I don't think I wore my crazy bands that day. He said, what do you think? And I said, if I was a peer adversary and I wanted to sabotage your systems, I would basically planned a nineteen eighties guy out of office space, a bureaucrat to put the IT system in that you have now.


We are sabotaging ourselves and I was astounded visiting some of these folks where the Philippines or Thailand or inside Malaysia, and they could paint a target in five seconds with a laser, but it would take them five minutes to send a classified file, just listening to the frustrations of people who wanted to do something like Blue Dot tracking the ability to track peers like we do for our families on an iPhone. And they're on these kludgy basically slightly better than BlackBerry phones and just that cycle of technological innovation that might happen every six months or a year that we're so adapted to here as civilians.


And the six year plus cycles for adoption into the DOD was just astounding. We hit it off. We both speak a mile a minute. He's got the Philly Jersey thing and I got the Brooklyn thing. And a few years later, he joined Lux as a venture partner and is just an incredible addition.


Tony, I'm curious, just a double click on one of those ideas. It sounds like in the military, often the pace of kinetic flow, I'll call it, the ability to paint the laser can be quite cutting edge and fast. But information flow and the systems behind that much slower. What did that feel like from your felt experience across those three or four decades, watching technology progress and seeing its utility change to you and your teammates?


I was actually very lucky to be in units that were decidedly nimble at leveraging modern technology, at least as much they knew about it. I would offer they didn't know everything that was brewing. But special operators that I work with always had that insatiable desire for an advantage, whatever it might be, and we were able to bring it back at that level, not necessary to scale. And in fact, part of the problem, when I got up to Sock'Em, I realized that a lot of the leading edge technology was resident in some of our special mission units, but had not scaled to the entirety of our formation.


We some interoperability issues at a point in time. We had better interoperability between one of our special mission units and our Kurdish surrogates in Syria than we did with special forces and elements that we inserted later. That was a terrible shortcoming that we hadn't rectified. But I was lucky again to be with those units that had the adaptability early on to bring technological advantages to bear it diminished the higher I went. And in fact, it was a source of frustration.


The higher went the. There was less of that practitioner driven innovation tied to our tactics, tied to our operations, that was enlightening me to where we needed to invest in the future when I was out in the Far East. We spent a day with some of the breachers, the people who break down doors and collect information and people. And some of the inventions that they had were straight out of McGyver. They had hacked together these systems, whether it was a saw that was fit into a backpack, explosive tape that was hidden, all these kinds of jerry rigged things that out of necessity, they had very scarce resources that they had to pull together in very creative ways.


Just as easy as saying is the exact opposite of a top down bureaucratic approach to designing something, it was instead this completely. Oh, crap, we've got a problem. How do we solve it with the stuff we've got almost like that scene out of Apollo 11 when they're like, you've got to make this fit into our luck that we invited Josh to get under our tent.


The immediate return was what I took away is so beneficial based on the realization we were chasing technology everywhere. We were literally chasing our tail and mostly trying to ferret and find individual companies. I give Dave Spirt, who's now the chief data officer for DOD credit. We flipped that paradigm and said, let's bring these people under our tent, assume some risk in terms of classification and things. We'll have to figure out possibly getting them killed. That's but let them come in with their creative minds and more importantly, just the expanse of their networks to understand our problems and say, geez, I can come up with five or six solutions.


That problem, which one would you like to pick that changed our approach, at least? Certainly my approach at the time, and it's something I think the department needs to do at scale. I appreciate it more now that I'm outside, how very difficult it is for individual companies to get in the department and blossom to any sort of program of record. There's a better way to do this. Josh did so well at the Reagan Library last year. I'm going to try and leverage him to get into the system some way, somehow serving our defense establishment to help us get across this divide.


Josh, I want you to set up for us this background and history of what I'll call everyone talks about B2B or B2C businesses. We're going to talk about BTG businesses that are selling into the government and also just working with the government, R&D wise and development wise to develop new technologies. Can you give us kind of the background of the relationship between government and Silicon Valley and technology innovation like you alluded to in the beginning?


It's something that is totally lost on a lot of people. I mean, the roots of Silicon Valley are this myth of vineyards and orchards and really nerds hopping and catching fire in garages and Hewlett Packard. But Silicon Valley and tech, as we know it, was really rooted in 40 years of electronic warfare. post-World War two, nineteen forties, nineteen fifties, the US government funding universities to basically do weapons research and technology. The dean of Stanford at the time of that freedom.


And he's encouraging grad students and professors. It's been your research out into startups that can be sold as products to defense contractors. And a lot of people don't know the first IPO out of Silicon Valley. It wasn't Google, it was nineteen fifty six for a company called Burián, which sold microwave tubes for military applications. And so there's a symbolic significance that we'll probably return to later, I think, when we talk about semiconductors and things that are of geopolitical significance.


But the dawn of the computer chip, the soul of the new machine was all Defense Department funded a year after that. Nineteen fifty six Varian IPO to nineteen fifty seven. We've got Fairchild Semiconductor, which was born out of Shockley and Bell Labs and is really considered the pioneer, the icon of today's Silicon Valley. And it won its first revenue through military contracts, building chips that basically help US astronauts get to the moon, help build missiles to arm the US in the Cold War.


You go back to Lockheed obviously today about waveband, a giant defense contractor. It was almost nonexistent. It sets up shop in Sunnyvale, in California in the valley, gets a contract to build all the submarine missiles for the US. And then employees go from basically zero to twenty five thousand in four years. You go back before covid to Sand Hill Road. And if you ever visited Rosewood, sort of the inside joke that on Thursday nights you see all these Russian ladies of the night preying on rich young techie nerds for both money and Intel and maybe Kompromat.


But from the nineteen sixties to the late eighties and nineties, Silicon Valley was basically crawling with Soviet spies. We've completely forgotten this history today. We think tech is Facebook and Google and Instagram and SNAP and Clubhouse and Amazon. And it's coincided with this site, Gaist over the past really fifteen or twenty years that's been anti defense, anti-government. Some of that is tech company employees at Google refusing to work with the DOD or walking out or quitting in protest.


And it's one thing to be anti-war. I'm anti-war, I would even argue to is probably anti-war. But it's another thing to be pro defense. I think Microsoft got this morally right and I think Google got it morally wrong. Microsoft basically said we're an American company. First, we're going to make sure that the men and women on the front lines in US defense are going to have the best technology and the best advantages and not be disadvantaged, especially when our peer competitors are aligned between industry and government.


And I think that was an important stand and says eight guys, that is now starting to change. We're working to change it. The companies we're funding are working to change it. I think it's interesting if you look at why, like what caused the zeitgeist in the first place, because it wasn't always like this, right? We just talked about how 40s, 50s, 60s and beyond, you had this close relationship, one that was even chastised as being a military industrial complex.


Some of it I think is generational. The past 20 years, you had two main wars, Iraq and Afghanistan, and to play a key role in these and some called it war of choice, a war of necessity. You had jingoistic American neocon sensibility and Bush for two terms. You had a more internationalist Obama fighting a global war on terror. And then you've got this offensive populist, anti globalist and Trump that's abandoning allies and bizarrely buddying up to North Korea and Russia.


So for many, myself included, the politics was gross and demoralizing. But some of it was also the demographic. When you look at the valley over the past 20 years and you look at some of the brilliant and beautiful people, the influx of immigrants that are populating our companies, many of them did not feel that same feeling that Russian immigrants felt in the 80s when they came to the US. They were running to the US, they were running from Russia.


Instead, a lot of the last 20 years of immigrant entrepreneurs, many were more transient visitors. They get equity that get rich. They get out with no real roots or loyalty or even sort of an understandable resentment to the growing anti-immigrant sentiment. The second thing, I believe that there have been information operations that have been influencing certain points of views and sowing seeds of dissent. And when I grew up in the eighties, we had a very clear and present danger in Russia.


We had it in every movie and every TV show and Saturday night wrestling. It was Hulk Hogan waving the flag of America versus Nikolai Volkov with USSR. It was Red Dawn. It was rocky in his big American flag shorts versus Russian Drogo. It was James Bond versus the KGB. It was the hunt for red. October was red heat, red dawn, red scorpion. So I'm visiting Pacific Command and I'm talking with Brigadier General John Brada, one of two guys who helped lead the war on ISIS.


And we noted that where are all the Chinese villains? You can't name one. Some of that is basic economic interest.


You've got Hollywood that has this huge incentive to sell to a huge, multi-billion population of moviegoers so they don't want to upset the country. And so they self censor content. Some of it is China actually making purchases strategically very cleverly. They bought AMC back in twenty twelve for just under three billion dollars. They bought a series of other movie theaters and change. They bought Dick Clark's production company. They bought legendary pictures. So this was very successful information operation.


It could be this mass oversimplification. But if you just observe history, you can see this undulation in the domestic sentiment between peace and war, between unity and domestic strife and division. And that's almost always coming because there are some common folk you've got. The civil war happens basically right after the US crushes what's the closest thing to an enemy, 1940 to Mexico, 13 years later, you got the Civil War, World War One. We get unified again.


Then you get this crazy division amongst the Roaring Twenties and the Great Depression. You have the rise of the KKK. You had divisions of cities versus towns, wet first dry with prohibition, reds versus Americans. You go into World War Two. It turns out it wasn't the New Deal so much that started to bond us.


But military and our mobilization, you get common bonds between ethnic Italians and Irish and Polish immigrants, all now compatriots fighting a common enemy. And then after World War two, you get this peacetime dividend. We get the civil rights movement, but then you get Vietnam and then we get unified again during the Cold War with this common enemy in Russia and the propaganda that was connected to that. And then you see this huge surge in partisanship since then. And one measure of that, which I thought was interesting, since nineteen eighty eight, that was the last time that we had a unanimous confirmation of Supreme Court nominees.


The one conclusion which is sort of this weird one, we want unity. We need higher purpose. That could be from a shared ideology. It could be about some big technological achievement going to the moon or going to Mars. But what's united us most often has been this us versus them. It's a foe and a foe typically has to have two big things. It's got to be really big to scare us and it's got to be really alien and different and weird that we are just like uncomfortable to make a tribal Nazi Germany was a perfect fellow, right was big.


It was alien ideology. It was unifying Japan in the nineteen eighties big, but not really a rival in democracy. It was sort of a common system rival in electronic sure.


Russia check big alien, different weird perfect foe. Al Qaeda and ISIS might have been alien to us, but it wasn't big. It was diffuse. It was abstract. It was a war on terror, wasn't really a war on territory.


China, China is interesting because it's now got the potential to be both big and sort of scary and threatening with an alien ideology. And so the downside of this rivalry of growing disharmony with China and ideally it need not be that way. There are big global problems to tackle and doing it as allies, would it be better? But the upside of it, as cynical as it may be, is that we may end up creating domestic harmony as we get unity that's forged against this foe.


There was this quote from some Soviet era adviser. He said to an American audience, sort of as the Cold War was ending is very chilling quote. He says, We are going to do something. Terrible to you? We're going to deprive you of an enemy. It's a fascinating idea, Tony. I'm really curious to hear your take on back to the can of what past. So we'll talk about the cancer, what vacillator in terms of what they mean technologically, but in terms of just the nature of the threats that we face.


I always loved Eric Hoffer's nature of mass movements and his concept that, like the most important thing was a common devil. That was the galvanizing force. And Drash just kind of laid out that history. What was your perception of that being in the military and how that evolved and how would you describe the state of that sort of consensus threats today, whether they be kinetic or information based?


I'm glad you asked that because I think we don't look back often enough. Your perspective can vary to see how we got to here to flash forward. I'll pick a point 30 to 40 years ago, but 40 years ago, vis a vis Russia, as Josh described, I can remember the same movie genres. The acknowledgement for me as a military professional was that is an incredible foe, much bigger than us. Conventionally, we probably will not win in Germany, probably go nuclear.


And then against the backdrop of mutually assured destruction, that's how we grew up, acknowledging that this is tenuous and you had the fringe activities against the Soviet Union, the smaller wars that were on the periphery. But it was something that obviously was a focal point and it drove our national animus. We had our stuff together in terms of Voice of America, our strategic messaging, our economic approaches, and then tried to recover our army from the nature of Vietnam into a fighting force that might be able to go belly to belly with the Russians.


But you think about the same time frame some 10 years later after I got commissioned the fall of the Berlin Wall, which I think shocked everybody, how quickly the dissolution of the Soviet Union and I would offer we spiked the ball at the one yard line. Conversations at the time were, let's not affect too hardships. Let's not have the Forsys of our time. So we force the bear to come out of the closet. Let's take advantage of this unexpected development.


Let's let them fade to black. Now, the problem is we left a big fat piece of red meat out there unresolved. And so that was specifically Ukraine. We had Estonia, Latvia, Lithuania, Poland all come into the NATO construct. Russia didn't like that at all. In fact, Putin has leverage that the great advantage back into the Russian population, that NATO is now on our front. We used to have this buffer with the Warsaw Pact, but we left Ukraine out there.


And what do you know, the not quite dead yet. Soviet Union now in the form of a revisionist. Russia stole a march on us. We saw it coming. I think there were every sort of indicators we slept through those indications Crimea was a fait accompli. And now the morass of what's going on in Russia. China 30 years ago was Tiananmen Square. I think our universal thought among the Western world was, oh, this has got to be the beginning of some modification of the hard line Chinese approach.


And arguably they did that economically. I mean, amazing coming economic development from there, but they ratcheted the party system down harder and meanwhile gained steam in terms of an economic juggernaut. But I can remember five or six years ago, the economist, among every other publication disparaging the Chinese economy as, quote, state sponsored capitalism, they would then go on to say completely stunted terms of innovation, can't take off, can't go to scale. They'll have moderate development.


But it's not going to be something we have to contend with. Three to five years later, the cover of The Economist was Albar West got China wrong. But I would offer about the same time that that article came out was about the time I joined the Four Star Club and my very first China table top. The chairman and all the other four started about twenty of the room. They had a bunch of young bucks in there and we were talking about China as an adversary and the chairman felt compelled to tell all of us new members, hey, you need to know that the administration policy, the Obama administration policy is do not refer to China as an adversary.


We're not picking a fight here. We're dealing with this developmental country, don't want to call them an adversary and don't want to talk about containment or any other generalised approach to it. We're trying to figure out what's the nature of this thing short of calling it a threat. I think you've seen that transformation in the last three to four years. We're on a bipartisan basis. People are realizing this is a threat. It could be a really, really substantial threat if they march all the way to taking Taiwan or an inevitable imbalance of power.


But it came up on us in a hurry and we'd certainly have to acknowledge it inside that you could talk about the failure or just utter failure. It was an underestimation that there's no way, no how North Korea can get a nuclear bomb. We are now being held nuclear hostage by a totalitarian despot. God help us if anybody can predict what he's going to do next, intent on finding out. But in just the last three years, my gallows humor was the good news as I sit here in Tampa is he can only reach Topeka.


The apogee test three years ago that shocked everybody, all the Intelligence Committee, and they had to reluctantly acknowledge he can hit anywhere in the United States. The good news is it's only a Hiroshima size bomb dropped. Hiroshima size bomb and duplicate state or municipality, the United States is saying when you heard about that point, I'd love to talk to you both about what you view as the most important competitive frontier. So against all that backdrop, a couple of things stand out in my mind.


One is, as a civilian, it just seems as though I'll call it pure weapons technology, like kinetic weapons technology is, I don't know, less important or less prominent. I hear about it less. I think about it less as somebody that's interested in military history. And obviously, the nuclear arms race was maybe the most profound example of kinetic weapons being developed at an incredible pace and being really important in the balance of power and a competitive frontier that drove global geopolitics.


But then I also think about this book that just came out about Russia, cyber warfare against Ukraine. You mentioned earlier, and it seems like there's these twin separate fields, one digital, one physical. And I would just love to hear maybe Josh, starting with you, what in your mind the competitive frontiers are just like we would think about a competitive frontier in business in the world of the military and governments. What are the most competitive frontiers and how are we doing on those fronts?


It's almost the blending of almost every sphere you can imagine. And I'll give you an example from history that I think is sort of poignant on how little things that are totally overlooked can have decisive advantages for one party or the other. And it isn't predictable apriority. But I think every domain obvious ones that we already categorize air, land, sea, space, information, cyber. But it's really the intersection of these things, the ability to influence the population, as you've seen Russia and China do, turning our own tools on us in the same way that terrorists did with our own domestic airplanes on 9/11, with our own elections and sowing seeds of dissent and disharmony and civil unrest domestically using Facebook, which was always a benign thing, but hitting on the technologies.


Chris Brown, head of strategy at one of our companies, Andrle, which is a real defense focused company, was sharing that over the past decade in the US when we did war games against China, the US to surprise at a near perfect record. And the punch line was we lost almost every single time. And so the Chinese are so far ahead of us in many of those domains, particularly in space, at a microtechnology level, like to underscore the importance of basic science research and constantly celebrating our scientists, making sure that they're welcomed here.


There's a story of a guy, Eugene, who dreer how geometric announced the Frenchman. He's a tank commander in World War One. He resettled in the US. He goes and sees the Indy five hundred and he gets obsessed with cars and then particularly becomes obsessed with fuel. And there's this widespread belief at the time that petroleum is going to be going out of business and you got to find ways to get gasoline. So he figures out using hundreds of different catalysts, how can we coax out of coal gasoline to basically produce a fuel?


This is late thirties now. By the early 40s, a bunch of these plants are actually up and running, is created as effectively a catalytic converter. And what was crazy was the British were using a fuel that was eighty seven octane. OK, this is such a trivial thing. They're getting trounced by the Luftwaffe, by the German Air Force over France. A few months later, they start using this fuel, which is one hundred octane, thirteen different points just in the chemistry and the pressure that it's being able to produce.


And all of a sudden the Spitfire planes are now going twenty five miles an hour faster at sea level, thirty five miles an hour faster at ten thousand feet. And that extra speed gave the British the decisive advantage over the German Luftwaffe because they're able to climb faster, they have better maneuverability, they have better performance in higher altitudes. So over the English Channel, Hitler is looking at this technological superiority and turns away from the attack on the UK, allows the UK time to regroup and probably change the face of history.


You could argue that a single chemist played a pivotal role. We same planes, different fuel, technological breakthroughs, little things lead to big things. So I think in a sense it would almost be arrogant to point to any given technology and say this is the thing that's going to matter because it's going to be small things like that, cumulative advantage and a decisive point. One of the amazing trends we detailed over a pretty long period of time now is that technology tends to evolve between this perennial arms race, between deception and detection.


You see this everywhere. Day after Pearl Harbor gets bombed, Lockheed Martin has this huge ammunition plant. They've got arguably America's most important military assets time and therefore to target. So they scramble. They create a decoy California suburb made out of burlap sacks on top so that if there was aerial surveillance of it, all you would see is what looks like this town, not a military munitions bag. You had audio engineers that were basically making tank sounds. You had people that were literally stagecraft and Broadway theatrical artists that were doing inflatable tanks to communicate that we were there when we weren't actually there.


Or conversely, you want to let somebody know that we're not here, but we actually are sort of really evade detection. And it's this infinite game, that sonar as a technology. Nobody would have anticipated that it was super valuable, but it was invented to detect submarines and then to evade sonar. Subs ended up getting the silent engines that were basically Navy nuclear, putting nuclear. Ones that have loud engines and now China has invented the ability to detect this thing from the sky using lasers to go subsurface in the ocean.


So I think that that perennial sort of evolution is just this natural force, that ventricles out into the real world, but constantly trying to detect something that is hidden the smallest signature. Every day, I'm sure you have a pattern of life. And when you go to Starbucks and you pick up your kids from school and you go to the gym and and when there's those aberrations, that's a signal that is valuable to somebody that is trying to detect a pattern of life where find a targeter or identify when two people that shouldn't have been meeting at a certain place met.


The counter to that is people trying to defend against that detection. We've got satellites up in space and many of our companies that are imaging and revealing all kinds of crazy stuff. We've got revelations of Chinese concentration camps done by planet labs. We've got revelations of Iranian nuclear development and testing of weapons. And at the same time, you've got Chinese technology on the ground that are developing lasers to basically be able to take out satellite detection. And they're probably the most advanced at this because they don't want to see a 10 centimeter resolution of what's going on.


So that constant arms race is playing across you. And I just named a bunch of technologies, the solid state chemistry that is going into high powered CO2 lasers to satellite launch capability. Again, it touches everything from air, land, sea space information and just this aggregation of all of those things to do.


I have it right in my impression that the kinetic has sort of taken a backseat. And I also want to understand what I view as a little bit of a strange paradox for me, which, as you mentioned, I think when you're done seventy five thousand people in special operations, which seems like I certainly would not have guessed such a high number. So that's grown a lot while at the same time it seems as though warfare involves individual humans fighting each other face to face, less and less.


So help me understand from your perspective the same question, the competitive frontier and the degree to which kinetic warfare has lessened and other forms of it have increased across your career? I think I would challenge weapons being less significant in that they've been relegated to a broader or perception where they're not as significant. But I think it goes back to one of his favorite lines. This is a failure to imagine failure. They're going to matter. And I'll bring this back full circle.


And if I get too far off the reservation here, remind me that I want to come back and absolutely emphasize that the information challenges are paramount. You can have all sorts of kinetic success. When you lose the information fight, you lose, period. And that's both attacked on strategic level on the theme or the topic of deterrence based on the block or cantaloupe's. Let me first start by saying that none of our adversaries and this has been consistent for the last several decades and up until the current time that none of our adversaries, anybody we've mentioned so far, wants to go toe to toe with the United States.


That's a good thing. They all know that we're incredibly capable. We've got a lot of reps. We train our tails off. We've got extraordinary people. So none of those adversaries want to go toe to toe with us. The China War Game pieces is interesting. I would offer when you play the same set of eight little up the middle into the South China Sea with aircraft carriers and things like that that the Chinese have planned on for years, you're going to lose that fight every time you come up with a new strategy.


That's a failure to really innovate terms of strategy, strategic approach. And it does beg the question, do you want to own the South China Seas? Do you want to be on the Asian mainland, or is there another way to push your national interests further forward? This does go back to and weapons, as you brought up the topic ain't cheap right now is the Department of Defense is flush with the biggest budget we've ever had. Three straight years of seven hundred billion dollars a year equip ourselves to advantage USA.


And against the backdrop of it's almost like they feel compelled to remind us. But actually, it had me thinking, oh, my God, this is twenty twenty. We were hearing Putin rattle a nuclear capability in the form of nuclear torpedoes, the non-strategic nuclear weapons. There's no such thing in the US inventory as a non strategic nuclear weapon. I hope we never lose sight of that, that we go nuke it strategic. There's nothing tactical about a nuclear weapon, but Putin likes to play in that space there that if you go on moving pieces around, I think partly to force us to recommend a good chunk of our seven point fifty billion dollar budget over the last three years has been to rebuild the nuclear triad.


Because at the end of the day, if if you at least don't have that to maintain ourselves, you're probably on a wing and a prayer. China is building up their nuclear capability. So one of the less publicized aspects for years, China has been way behind. They could trade nukes with us, but not the scale they are seeking. Nuclear parity, I would imagine, for the same reason we do that you don't want to go here. I will belly up to whatever you have to offer and it'll just be ugly and mankind ceases to exist.


So you've got those big brewing issues on the background. Again, who would have thought this day and age we've had it? You've got the fascinating aspect of the unbelievable empowerment of individuals, whether it's off the shelf stuff or the ability, just like we had here in Florida recently, where somebody tried to poison the water system for over in St. Pete and. Not too far from me, it's almost a menu for miscreants to do bad things. Time now much less empowered by more technology coming their way back to the information space again.


We, the US, are not even competing in the information space right now. We're watching Russia disrupts, I think, Russia's more about disinformation than driving the narrative. And then you've got China. Interestingly, dude, they have a daily product that pushes out the daily news stories that are pertinent to DOD. Then once a week, they give you the Chinese version, played it back at us. And it's amazing how they manipulate the information space to a growing global audience as we go forward.


Just like the one story to tell about empowerment of individuals. But in Mosul, Iraq, which was my hometown from 07 09, I was back out there in about the 15 timeframe. We were retaking Mosul because I saw some pictures recently of a historic town, the pre biblical town of amazing history that's been laid to waste is razed to the ground thanks to the nihilists of ISIS. But on the day I was out there in 15, here is ISIS leveraging J.I. technology and the Iraqis refer to it as the day of the drones.


That twenty four hour period, they had floated 70 plus drones above friendly forces armed with little 40 millimeter grenades. Just the very ad hoc attachment to the underbelly of a DGI drone that they could release once they loitered over your target. Imagine we had air superiority above this with every fighter in the inventory. Nothing could come at us that way. But underneath that, you had swarms of drones that were wreaking havoc among the allied forces. All we had was small arms to deal with these things, but that was just a day in the life.


And that problem and I don't like to talk about this too much in public, but I certainly have talked about it with law enforcement folks. That problem is coming to a theater near you, if it's New York City, L.A. or whatever, where anybody who wants to do bad things would enabled by unmanned aerial vehicles, they could bring it to you tomorrow. It could be just worse than a freeway shooter in terms of disabling economies and paralyzing the kind of security apparatus.


So all of that is happening and around this current environment. And again, we are badly suffering from a failure or imagine a failure and not taking the leap ahead to really safeguard our interests both domestically and overseas, to mention the cost of some of these programs historically.


And that used to be an advantage when something was multi billion dollars, the average person or a small non-state actor could not put together the funds or the resources or the talent to be able to do that. As more and more technology has become democratized, we lose that advantage. And so the sting of the drones and great example, even when you think about the origin of the drone itself in its current incarnation, there's this amazing story. One of our other venture partners, Jim Woolsey, who used to run the CIA, it was nineteen ninety three.


He's looking at genocide. It's happening in Bosnia with Milosevic in Serbia. He's trying to get eyes on the ground beneath cloud cover. He remembers seeing in Israel a drone that was able to laser to laser target something. And he said to the Pentagon, hey, can you get me one of these things? And they said, it'll take six years. Five hundred million dollars. He reaches out to this contact. He had this guy, Gabe Caramelizes, Israeli engineer.


He says Abe was developing this thing called Ambre, which was a basically 30 hour loitering glider. He said, could you make a more sophisticated version for me? He said, yes. How much would it cost? Remember, the Pentagon said six years? Five hundred million dollars. It was basically an entrepreneur says six months, five million bucks. So Woolsey Hustle's he goes to Charlie Wilson. The congressman is Wildcat gets the money sort of secretively, puts it together, ends up getting a few of these things made, takes one, send it out to Albania where they get an airfield that he traded two truckloads of alpaca blankets for use of an airstrip.


And from Langley, he's got eyes on the famous bridge, Mostar Bridge in Bosnia. And then the Pentagon jumps on this. General Atomics gets this huge win as a result when they get the contract to make this stuff. And then Jim turns to Abe and says, this thing's pretty successful, what you want to call it. And he says when we call it Predator, and that was the birth of that program. But that used to be really expensive.


Those things were thirty forty million dollars apiece or more. And the cost of these things to put some sort of payload on a guy, like you said, is quite scary.


I can springboro that because I think, Patrick, your audience would find it fascinating. Thankfully, America puts its money where its mouth is and has written a check consistent year on year to resource our department. The frustrating part is we're stuck on old school approaches and the glaring example I trot out. My Navy brethren hate me for bringing it up. The primes don't like me. I'll never sit on a prime board. That's no worry. That's not what I want to do.


But on two occasions we're having dinner with the president, United States, the previous guy, and on two occasions he trotted out as the chief of naval operations. John, tell me that. Thirteen dollars billion I just spent on the Gerald Ford is the best thing money can buy. That's state of the art, right? Our carriers are without any parallels. John would look at me usually when he'd say that because I would start smiling because the 13 billion dollars that we spent on the Gerald Ford was my annual budget.


It's apples and oranges, but it was out of a 700 billion dollar annual budget, 13 bill gets you sock'em 13 Bill gets you Aqeel in the water. It builds an aircraft carrier. It's not the operating costs for that thing. You're on your own. It's what builds it. The president went on to say, John, actually, the thing cost me 18 billion because it went five billion overcorrect. And no, I said, yes, Mr. President, you got that right.


It goes well. I've been reading this was four years ago, mind you. And it showed that he did he was at least adhering to some of the intelligence that passed his way. He said, I've been reading that in two years time the Chinese will have a mix of weapons systems, hypersonic light, et cetera, that can defeat any one of our great holes east of the Second Island chain room. That kind of quiet because he was just loading up for the follow on.


He said, why would I ever buy another aircraft carrier? And you could hear a pin drop in the room. Right now, the US taxpayer has funded in this last NDAA two more carriers that you won't see for another decade that you wonder are going to be applied against what aircraft carriers have been the best power projection platform that we've had for the last seventy five years. But they arguably have gone the way of the dodo with a little more shelf life to go.


And we should be spending our seven hundred billion dollars on something else to have advantage us and not put five thousand kids in the Strait of Taiwan to hope at a rate of twenty ones isn't going to just smoke them out of the water. But we're still stuck on that and it's as much stuck on what congressmen represent, the carrier building communities and constituencies and what crimes are working our government to say don't lose sight of the potency of this platform. It's not done yet.


So you could go on F thirty five, you could go on any number of topics. I told Josh, the one that had a brief moment of time six months ago or less to me should be driving daily conversation right now was the DARPA dog fight, which I commend any of your viewers to cut to the chase. It's a four hour YouTube thing. Go to the last twenty minutes, five zip A.I. beats. These are guys from the weapons school and actually felt for them because they look so pathetic in their chairs trying to keep up with these drones.


To me, most frustrating was the after action comments. The good news is we still drill down on things in a very vigorous fashion and after action reviews on what went right, what went wrong, what's this mean for the future. And in almost every case, people were discounting the results of this thing because the guy was doing suicidal like tactics. Well, no kidding. The guy knows no fear. It actually may do a suicidal event to kill you.


And it will be machine one, human zero. You can write it off. The machine knows no fear, no fatigue. So many advantages. Yet the fighter community wants to hold on to the advantage of a guy in a cockpit, a guy or gal in the cockpit. To me, I don't want my kids going up against some iron able fighter in the future. We need to leap ahead right now, make the sky black with automated Yayi enabled capabilities and get your check, if not checkmate for the next 20 30 years.


You've raised two fascinating examples the grey holes and the thirty fives as these iconic projections of power and military technology and excellence and then raise the point that, well, yeah, for fighting the last war perhaps, but for fighting the next war, there may be a basket four or five things that we should be investing in. And that's going to be what matters. I'd love to talk through those things now. So I'm thinking here of I'd like to talk more about drones, about space, about simulation as a technology.


I think that's going to be really important about semiconductors and on shoring. Maybe we can start with drones and just wrap that up. I would be curious what the state of that technology is. So you talked about the story of the Predator drone, what has happened since then? What is important in this frontier that the audience might find interesting?


There's probably more imaging capabilities, Isar, things that are able to measure very different things and pick up sound signatures and conversations that you'd be shocked by. But by and large, that is something that I think is increasingly becoming democratized and noisy. And the key thing is really, can you give deterrents by denial? Can you create these anti drone systems which you basically want to be able to rapidly detect, intercept a projectile that's moving in some cases a hundred miles an hour and half second and be able to basically destroy it.


So companies like Andrle Performance Drone Works, others that we've invested in are basically focused on how do you find this thing that basically is flying faster than any bird intercepted and destroyed before it can do damage? Even if you look at something that was hailed like Israel's Iron Dome, it's still a very crude mapping projection analysis, mathematical calculations. So I think that will evolve more on the actual defense side than the offensive side. And I think that you'll see bad actors basically take off the shelf stuff.


The one drone that is causing utter havoc is the Turkish drone. But these are basically like six foot or eight foot wingspan that are basically dive-bombing. They're almost on suicide missions. And so they can hover and loiter for a very long period of time. And then once the target comes, they just basically are like a missile. Diving down and destroying the material, that's something that people are trying to contend with right now, I think in the Azerbaijan conflict, that was one of the things that was absolutely destroying people, tanks and vehicles to anything you'd add on drones.


That's important. I think, unfortunately, most people automatically go to the sky high like one of our portfolio companies, sale drone. And this is interesting. When I first met them, I just come on board with Luxo is touring different companies and someone recommended I stop by this great company out in Alameda, automated maritime capability with unlimited range and limited duration out there. It's just extraordinary technology. But the founders had no intent of any military application for it.


And so as I talk through all the possibilities, I could tell I was making them a little uncomfortable and they got together afterwards. And their internal discussion was, why wouldn't we be interested in the space? We hope to do very well in the private sector. But if our technology is applicable to national security or even local security, think of New York Harbor or L.A. Harbor or anything like that. Why wouldn't we consider to adapt ourselves to space just the prevalence of unmanned capability, maritime land, air space?


I'm more clients in every case. Why can't it go unmanned? What is the advantage of being manned at this point in time? I had a very celebrated helicopter pilot who was my operations officer here, so come in to Star commanded the Night Stalkers, one 6th aviation best helicopter organization on the planet, still phenomenally head and shoulders above any other capability like that. What I came in one day and I said I just read an article about the biggest quadcopter experiment in the world on going right now.


It's actually in the form of a unk 60 alpha out on the Nilus range somewhere that they tricked up with all sorts of sensors and on average competing against and think of drone racing like some of these other things. But competing with a manned crew, it's winning on average by two seconds per event. You pick the courses that they're throwing them into. And I intentionally lay this out to my friend, my counterpart, and said, when are we going to an unmanned cockpit in the front of these helicopters?


And naturally, he took it as a personal affront and came back very testy fashion, said, what are you going to put your skinny ass in the back of that helicopter? Actually, I was prepared for that response. I said, I am comfortable. I think I'm there now. As long as you are sitting in some ground control station somewhere with enough Cheetos and Mountain Dews, whatever it is that keeps you so that you can go to override if and when helicopter, the enabled platform fails me.


But you think of the pucker factor events of a helicopter coming in and flaring over target and fast roping, making gun runs and things like that, where the incredible pressure on an individual pilot can be removed just by getting them out of the cockpit, put them somewhere. The Air Force now is going to the loyal wingman concept where you'll have one man guy up there with some drones along with them. It has me asking, why is that guy even up there?


Is it just an individual could throw a scarf back and say, I'm still up in the blue? Or is he he or she better off on the ground without that inherent pressure managing the entire fleet? It does assume a command and control structure, a far reaching command and control structure that I honestly don't think is going to be there. It requires a guy at the edge compute at the edge enablement where things can function when they're not tethered back to a antilabor command control structure.


But I think it's all very feasible. By the way, I think one big innovation and something that we're funding we haven't yet announced, but very quiet, almost secretive rotor motors. Sounds that have a signature that is almost completely undetectable is something that will probably find its way first in military applications and then ultimately in consumer probably very high end consumers of all the Hampton lights or whatever you or not the blade copters flying overhead. But that's something where you listen to the sound of our arguably crude machines and engines.


And I think that those will basically be eliminated in the same way that today you hear an electric car and have to actually put a sound signature on it because you otherwise can't hear it. We'll see something in the air on a scale drone, as you mentioned, truly stunning achievements. I'm sure you've read the leadership books about Shackleton and these were the guys with pure just good intentions, no interest in being involved in defence or military. But they did the first autonomous circumnavigation of Antarctica.


And that's just for scientific data collection. They map the Arctic. Now, both of those things very geopolitically relevant. Russia does not want us mapping the Arctic. They do not want us circumnavigating Antarctica. These guys did one hundred ninety six days, twelve thousand nautical miles, 50 foot rogue waves, 80 mile an hour winds, collisions with icebergs, sea lions that hijacked this thing. Video footage imageries is pretty crazy. They navigated the Bering Strait talking about Russia five months, eight thousand nautical mile mission, leaving from San Francisco, going to the Bering Sea, totally autonomous and almost perilously coming close, the fastest Atlantic crossing by an autonomous vehicle and the first ever in both directions.


That was thirty four hundred nautical miles in just under sixty eight days. And you think about having a fleet of these today, they're bright red, but tomorrow they won't be helping with some of the geopolitically sensitive things you think about China, whether it's their Coast Guard becoming more militarized, building islands off their coast, cutting off sea lanes, territorial disputes, illegal fishing and pollution concerns that are affecting another 200 million Asian population, their own growing Navy presence.


You're going to have these things for both peacetime and wartime mode peacetime. They're going to be more geared toward scientific observation, detecting and looking for signals and patterns. And then more time it's going to be trying to anticipate signals for hypersonics and cruise missiles and seabed sabotage. We've got a lot of fiber optic cables in that vicinity that need to be protected along with some critical infrastructure. So on the drone front, I agree with you, too. It's not just air, it's sea and of course, space.


Right? I mean, satellites are effectively autonomous systems. Space is a stunning frontier. You've got this amazing phenomenon. If you wanted a historic analogy in space to the railroads, we did add one hundred and thirty hundred fifty years ago where if you were to take the tracks horizontally laid down in our pioneering spirit, going west and just flip those vertically and make them disappear. That's the first leg of this. The first is the launch capabilities of the space shuttle was in operation.


It could launch a payload of twenty seven thousand kilograms, give or take a billion and a half dollars. Fifty per kilogram. Now you got SpaceX Falcon nine doing a rocket to the east and it's about three per kilogram. And so that's just going to keep directionally our progress. It's going to keep getting cheaper and cheaper. We've got relativity in our portfolio. We've got Rocket Labs, you've got Blue Origin, you get that space X.


So those are the railroads. Flip those things vertically, boom. We're going up to space.


Then the second is what's the infrastructure that follows? That is going to be communications. Same ways like you had the telecommunication replacing the Pony Express all along the lines of the railroad. This was easy to get the infrastructure in the maintenance along those same routes. And so you're going to have the same sort of thing. But instead, now, again, invisible satellite communication going to low earth orbit, launching thousands upon thousands of competing constellations. That, of course, means on the defense side, you're going to have people that are developing both kinetic interference, RF laser weapons to be able to take these things out.


Some already have those capabilities right now. There's about six thousand satellites above that, or at least known, 60 percent of them are defunct, done. They don't serve any purpose. They're space junk. A lot of people, including China, that have been showing that they can remove space junk, which is really a euphemism for we can blow your stuff out of the space. Forty percent of those are operational. So we've got twenty five hundred operational satellites.


We talked earlier about laser capability from the ground to be able to disrupt those things, whether it's communication signal or in imaging capability. China, interestingly, in space, wasn't really talked about years ago or so. Maybe sooner they visited the dark side of the moon. It was like a Pink Floyd, you know, phenomenon's.


There will be lunar bases, the ability to have assets, refueling material, listening, Baz's. It's like something straight out of a James Bond Moonraker kind of thing. It's very real. The next thing after that is thinking about privatization of space stations. So you had Mir Mir one, Mir two, which was planned is today modular units that basically go on and create the physical platform literally for research, observation, different missions that people have. You're going to see private companies launching things like that, and then it's going to be jurisdictional questions over who gets to govern those things.


We just funded a company with Founders Fund, some tremendous people out of SpaceX that were responsible for Dragon One and Falcon and that are basically focused on one of the craziest things, which is manufacturing things in space. This is Vata. Yes. And so Dalyan had the vision of this pull together. Incredible team, really fascinating people, very high risk. And it's really thinking about what kinds of things would you want to manufacture off Earth that have very high dollar per value, per kilogram value in a market, but are very low mass.


It's much more in line with the Bezos model of why don't we take the dull, dirty, dangerous stuff off planet and send it up into space as opposed to let's go populate Mars, which to me feels like fire festival. Twenty, twenty five. Mars is not that attractive. Lots of cool things will come in our pursuit to go to Mars. It's stunning watching what NASA has done and what Elon even is doing. But I think low earth orbit and just everything that's happening around our own planet is going to produce some incredible innovations in the entire space ecosystem.


So every aspect of that, if you have a factory in space that's making something and that could be pharmaceuticals, it could be fiber optic cables, it could be novel materials that only can be made cheaply in low earth, low gravity or no gravity space. Then you want to think about other means of transporting that stuff and you're going to have propulsion systems and positioning systems. You're going to have satellite repair robotics, which today you can do on the ground.


Watch some of these companies that are able to basically lock on visually using computer vision and machine learning to find an object, lock on to it, and then basically do some small repair mission. And so whether that's replacing a solar cell or panel, whether that's refueling that entire ecosystem is going to evolve very much like the railroad industry classic, sort of Carlota Perez.


Toni, what's your take through your unique lens on everything that's. Happening in space, especially both from a military standpoint and also based on what you've seen through the portfolio, it looks better.


I've actually been public when people say what keeps you up at night? Space is the one domain that I am very concerned how far behind we are and without getting into classified levels of discussion. Josh touched on some of the anecdotal things that have been trotted out for public consumption. That's the tip of the iceberg. Meanwhile, we debate whether or not we want to weaponize space. Genie's out of the bottle ship Israel, use whatever analogy you want to. So we're a little bit of dreamland there that we need to catch up.


If I could come back to Retek, though, I don't want your audience to wander away muttering that when I say I think unmanned everything challenge me. What shouldn't be unmanned. I can imagine some of them will immediately go to the Skynet discussion. Here we go. We're taking over and we've lost all control. That discussion has to happen. But I think you have to press all the way up to the very tenuous edge of that. We may have complete disagreement.


We've had the luxury of last 20 years operating in an environment where we haven't had a lot of compelling, imminent threat type of situations. But your future adversaries, that decision making is going to be so much more impressed and challenged than it is right now that I think we humans need that assistance. We need to sort through the madness and the disinformation, misinformation, target identification, et cetera, et cetera. We need to function in conjunction with the laws of armed warfare, which is necessity, distinction, proportionality, all those things that we could sit back and have a nice, leisurely conversation.


Or I could talk about situations where that's going to be several decisions a minute you're going to have to make. We absolutely need to be able to from an A.I. standpoint, there's an interesting discussion that when I'm allowed press into this environment, that if you acknowledge that guys like Putin are saying he gets a first is the most his wins, he's absolutely intent on gaining the advantage here, but tied to nuclear deterrence. If the day comes when the lights are out, the satellites are out, the communications is out, I think you want a capability that is still in the footlocker that is enabled.


I can still come find you and kill you. Don't do this. It is the deterrence. It's that mutually assured destruction aspect that will again mitigate command and control infrastructure being knocked out is probably the first couple of shots fired.


By the way, just to put a fine point to this, if you take the best of science fiction where you think about impulse and power is gone, what survived Ghostly was the analog ship, the one that was disconnected from the network that was advantaged, in a sense, by being previously disadvantaged. But what he was talking about here is if you have a perfect simulation, perfect model of a target where you need to go in a total GPS, the environment with GPS, remember triangulation satellites, you knock out the satellites, you got no GPS.


But if you have something that whether it's visually identifying the real world, having run and been trained off of the simulation, and you can then go from point A to point B and that your adversary knows that you can do that and have that capability even hours out. That's a really powerful mutually assured destruction deterrent. To that point.


I need to work on a more eloquent in this discussion, because if folks can hang with me to the bitter end, what I'm arguing for is this might be the ultimate deterrence. It actually might prove out the futility of future national nation state on state warfare. Let's stop doing this stuff, pursuing this madness. But you don't know what I have. What? It's not human. It's enabled and it'll come get retribution down the road. It almost borders on philosophical, but it's a practical discussion we need to have sooner rather than later, because there's too many arguments already coming up on why we should never go down this road.


And I think it's foolhardy.


You both have mentioned simulation a few different times. It seems like kind of an interesting, weird side piece that fits into a lot of these different technologies. It certainly fits into running games or whatever the case may be. What is the cutting edge of simulation that the audience may find interesting? What's the technology look like there?


I'll give you a few and then maybe you can give us few, including even the actual practical simulation of something like a bin Laden raid. But the cutting edge started with autonomous vehicles and basically repurposing views and gaming and in the model, the real world that has since evolved in a very serious way to really do first principles physics, to be able to not just say we're going to have the static rectilinear world, but we're going to be able to actually into whatever shape châteaux surfaces we're encountering that we may never encountered that is paired with a big movement in something that we're calling synthetic data, which is you don't need to actually train the model on data that you're collecting from sensors, but you can actually generate all kinds of variations of that data now for a drone or for a satellite or even for a ship.


It might be in a simulation. It might be a topographic or geographic simulation. But you're basically generating examples of a world that doesn't really exist, totally fictional world training it so that when it does encounter that it's encountered more possible edge cases. The philosophical point here is if you think about where most of the systems have failed historically on video games, it was. Literally on the edge, it was the unusual fat tail, for thing, that was improbable to happen here.


If you're basically training for the edge cases, it flips the value for the simulation. So companies like Applied Intuition, which is an increase in a handful of others, are funded by an incredible guy. Kasserine is really taking that approach, starting with automotive. But I suspect they'll go into other fields like we're talking about here. And I think that that's important because philosophically also I'm obsessed at the moment with this combination of sensors that can capture the real world with ever higher fidelity, with ever higher resolution, whether that's inside the body from space on ground or whatever it is, and then basically ingest that, compare it to a model that is forecasting what it's going to see.


And as soon as model encounters what's been sensed, it's then at this compute layer where it's either updating its model and sort of this Bayesian way, the same way that we encounter each other and change our beliefs or it's moving the system to that state of the world. And I just think the speed at which that is happening is going to blow people away. And I think it ties very nicely into what he was talking about, ultimately having this as a system of deterrence because the system will be that good to be able to, in the absence of power and connectivity, be able to find a target.


From my experience, when we've had the opportunity, every time we've had the opportunity, we rehearse to non technical term and that says detail what might happen on target. We'll throw all sort of permutations at it, but it'll be a full up rehearsal. It'll be everything live fire, nothing short off to simulation. Everything is realistically rehearsed. It's possible that the inside advantage, I think simulation and simulation capabilities that are developed now and I think of gaming at all is when they don't have the time to build out a full scale mock up and do all these things.


You literally could have all the members of a team up on simulation going through reps at the speed of failure at the speed of a reconquered go again, again, again. OK, throw this variation to it and the level, the degree, the sophistication of the simulation. I'm not a gamer. I wish I had more time in my life to get into gaming. I can understand the fascination with it. But one time in my office, just as an example, one of our SEALs had taken a program, a gaming program, brought in some aspects to it.


Let me put on the sites and play with it. I would have played with that for the next twenty hours if given the advantage, because it was so realistic of directing combat operations and I know I screwed it up. OK, let's do it again. Play it from the beginning. It's just incredibly powerful. Before I get anything I could conceive of doing from either from a national security or from a law enforcement standpoint. But it's that crossover from gaming that many of my people my age disparage is a total waste of time to actually some huge applications, if you can bring it into practical application, too.


And I were talking about this the other day, but my love for science fiction, he was invoking the Tom Cruise movie Edge of Tomorrow. The practitioner was basically at war is almost like a videogame player where he does it, he dies, he starts over again. And in a sense, that's what you get to do in this simulated environment, but without dying.


So our last topic is semiconductors. I've left it for last because I think it is sort of a unifier here that we've talked a lot about machine learning and automation and all this information warfare, cyber warfare, et cetera. Underneath all of these, I spent a lot of my time and machine learning is chips, where we began the conversation with Fairchild and Shockley and the origins of the intersection of military and Silicon Valley Semiconductor started. Fascinating point, because so much of their fabrication happens overseas.


In Taiwan, Intel has very visibly and famously sort of lagged behind. What is the cutting edge here, Josh? What do you think the most important thing for us to know about and consider as we look to the future of semiconductors?


I'll give you the punch line, which is triplets. And there's a bunch of winners, I think, in the interstitial period in software and hardware as this competitor is basically reassuring of semiconductors happens. But you're right. Seventy five percent of chips are made in Asia. There's basically two companies, TSMC and Samsung, that can manufacture the seven nanometer node and do it in high volume. Both those companies, obviously, Asia, you've got a huge risk that companies are basically automated away and gone entirely fabolous.


So they turn what would have been an internally CapEx decision to an OpEx one and shift that over 40 years, more or less TSMC. He's got 30 percent of the market share in everything below 40 nanometers, 50 billion in revenue. And then you've got UMC and Samisoni and Samsung and GlobalFoundries that are all sort of high single digit, low double digit market share. But you have probably with TSMC, as you noted, the most geographically or geopolitically important company in the most sensitive place that you can imagine.


And we think about it as a little possibility, but it's certainly a probability of China making a move on Taiwan. They've been pretty overt that they believe it's theirs. And so, yeah, Intel, I think that they've got to get in the game. I think you could see a combination of activism pushing them to manufacture other people's chips and possibly government or US industry consortium that purchased for it because. He needs the capacity to TSMC, Intel wrote a note to the government and said, we're going to do a plan.


The government said we'll give you money for in Arizona, but that at best will produce about 20 thousand wafers a month. And you compare that to 12 million. It quite literally is analogous to like a piece of dust on a chip in one of their facilities. Congress passed chips, which is creating helpful incentives to produce semi's 15 billion dollars. And then you've got the American Foundries program. That's another twenty five billion we have today, one pure play, Semi Foundry, which is in Minnesota.


It basically produces next to nothing and strictly dedicated to defense. So I think they're going to be winners, losers and disruptors. When you have a new fab that costs 15 to 20 billion dollars to build because of the semiconductor in the scientific instruments, metrology, the process of handling the clean rooms that have to be done so that you can't even have a speck of dust in a square metre of space, upgrading the facilities cost another few billion dollars. Designing the chips themselves is now hitting close to half a billion dollars.


So who the beneficiaries are likely to be the beneficiaries? As you have renewed demand, you're going to have on the software side cadence and synopsis both today, 40 billion dollar market cap companies, they'll continue to crush it. On the hardware side, you've got ASML. That's now two hundred fifty billion dollars. You've got LAM research. That's going to be really at the forefront of doing 3D chip stacking, which I think is important. KLA-Tencor applied basically all the semi cap equipment companies that are going to continue to crush it.


You've got a German company, interestingly, called Trump's Trump with an F at the end, and that is the sole manufacturer of one of the key lasers that's used in EUV machines that ASML makes. And so even when you think about supply chain vulnerability for these things, it's very, very concentrated industry and that's got to change. My partner Shaheen has had the view and he's been pounding the table that we revisit basically the obsession that we have with cheap transistors and said, think about how do you make them cheap to design and deliver.


So these two curves, look at the transistor cost and accessibility are diverging. And we love creating new there's areas that other people think are that sexy. He's convinced and he's convinced me that the key is going to be instead of having a monolithic system on a chip, which is basically what's done today. And then the other extreme, where you have an integrated circuit that's on a different circuit board, you're going to have this middle ground, which is basically going to be these chipwich, just like everything else we're talking about, from drones to chips themselves, everything became modular and distributed.


These triplets are basically going to be higher yield, lower quality than some complete integrated circuit on monolithic system on a chip, but are basically going to allow people to more cheaply design and manufacture chips. Today, Intel in Oregon and Arizona really is only one of three companies, TSMC and Samsung being the other that can do these high end chipwich. I think you're going to see a handful of companies that basically become the next TSMC. But in this chip, what technology?


So that's something that I think could be quite disruptive. It's going to take time, but it could be like what you Samsung was 20 years ago. One thing felt important to talk about was just the moral dimension of defense. And because this was something that is probably for a partnership, which is a very ethnically and cognitively diverse firm or something that was very controversial, getting involved in the idea of funding defense. And even though a lot of people have written that the history of Silicon Valley started with these roots in defense, if you look around and say, one of my favorite questions, of course, that I love to ask is what Sock's often.


What success, human nature, the grudges. It's the hostilities, the humiliations, the delusions of grandeur. The maligned ambition's, the tribal red lines that create an us versus them irreconcilable differences, the injustices, the atrocities, the conflicts, the rivalries, the revanchist China and Russia, all of which have the sad reality, which is that in reality there are bad actors, bad actors do bad actions and they cause human suffering. And if you have indifference to that, as they say, indifference to injustices, this paves the road to hell.


You've got North Korea, China, Russia, Iran, all with closed societies, information suppression, human rights, atrocities, corruption. And they're aggressively using technology to take territory to interfere in elections, to sow seeds of civil unrest, to build islands, transform, terraform the ocean, to censor, surveil, suppress, murder, dissidents, minorities, ideally in a beautiful world, sanctions and diplomacy and economic and international pressure affect the outcome to get these people to act well and kind and benevolent.


But when that fails, as Clausewitz said, that force is politics by other means or is one of the special operators that was hosting me of Tito's push was said in God, we trust all others we recon.


I think there are two moral things that give me comfort that we're on the side of good in investing in technologies and people who are developing and delivering technologies.


One is about precision, technological precision and moral precision. I think the greater your technological precision, the greater your moral precision. We went from hand-to-hand combat, which was one to one to a nuclear bomb at the other extreme, which was from one to many. And I think we've returned to this precision targeting where it's a moral good. If you can discriminate between a good guy with a pickaxe that is going home from the farm to his family and a bad guy with an AK.


Forty seven that's going to a schoolhouse to shoot it up. So this idea of like deterrence by denial, a year ago you had the Iranian military leader, Soleimani, who was targeted with precision. I think 10 people in that immediate vicinity were killed or less. I think they were fifty five people that were killed at his funeral a week later in a stampede. But the second thing, in addition to the technological precision that I think gives the greater moral precision, is a sense of moral leadership that technologies get invented often before the standards that govern them do.


This was true of nuclear, chemical, biological satellites, missiles. And so the powers that produce them, they are the ones that ultimately get to lead and define as others follow behind. And you've got a situation now where it's observable. China is lobbying the UN to define standards for facial recognition, which they have already shipped to dozens of countries. You have to make a moral decision. Is it better to act with indifference and just let that kind of stuff happen?


Or do you want to take a moral leadership position at being in the forefront of helping to develop these technologies, but also lead the very public discussion so that they're used in the best way possible?


You've mentioned already very anti war yet in favor of creating the kind of weapons as a deterrent to ensure that people that don't need to die don't. What's your view on this moral lens through which to view the investment in and development of military technologies?


I'd like to think on a practical level, as a military professional, for four decades, my sons have both served. I know the anxiety of having your kids in combat. I get skin in the game. That's really what drives my logic, my rationale for I hope we know what we're getting into. I hope when we were playing this is the last resort. But I do think practically you need to have that capability to avoid war for ultimately and then if necessary, to deal with it.


Josh mentioned on the morality of this, I think the missed opportunity with the whole Google episode. I remember being in Pentagon talking to the secretary of defense at the time, and he was giving a big hand for state of affairs with the private sector. And I said, well, this Google thing just happened. What do you think of that? Oh, no, no worries there. And while Google now has come back fully in the game and said, hey, we had our epiphany internally, we want to be players here, specifically with Eric Schmidt and others, the missed opportunity I think we had was to Josh's point, that America and new companies that are associated with this.


Here's what we're in pursuit of the most pristine, precise application of military power ever envisioned, zero collateral damage. And oh, by the way, we've been trying to do that all along. We don't get a lot of credit for it, but we kept a very rigorous log of our successes and failures and we were succeeding ninety nine plus percent of the time in terms of the target identified the individual we were searching for and zero collateral damage on a couple of occasions we had misplaced and we would take them as failures, that we had collateral damage or we missed Target for whatever reason.


But we're pursuing this extraordinary objective inside this idea of sometimes you have to go to war. And so to have the technology that pertains to that is critical or we could just go back to carpet bombing or other techniques that people advocate for, that we were in the military profession. We were absolutely opposed. We don't eat carpet bombing what it's like. We didn't need harsh interrogation techniques. We had better ways to correct that than going old school and techniques that are not in keeping with our moral standards.


When I was in these theaters looking in some of these operation centers, there was something in there that I was shocked to see, totally surprised. And it was like my naiveté at the scales falling from my eyes. It wasn't the cutting edge lasers or the drones or the straight out of the movie operation center with all the screens. It was lawyers. And I'm sitting there watching as one guy is flying drones and there's lawyers looking over basically documenting and authorizing and making sure that he or she is doing what they ought to be doing.


And I do think that that's one of the great technologies that we have, which is the sort of rule of law, the rules of engagement, the democracy that is built that and I think it's not celebrated enough.


If I could expand on that, but I'd call those situation God calls much like a surgeon cracking a chest and all. When people have asked me the toughest decisions I had to make in the military, one was putting people in harm's way. Too often that led to casualties and sometimes to folks being killed in action. That will weigh on me to the end of my days when I have presented flags to wives and mothers where I made that decision, I literally sought those opportunities to say, OK, if you want to look for who decide to send that element into combat, for that raid, that operation, I did this.


This is what we were thinking. This is what we're trying to do, blame me. And they never do. The amazing part is they never rear up and blame me that they knew that their husband or spouse was doing what they love to do in the profession that they just relished. But the other one, the toughest decision or what I call God calls, and I probably have made a couple of thousand God calls where from a remote location, sometimes halfway around the world.


I have said, take that shot. That is whoever we've been looking for. We've been watching him for the last five, ten. 15, 30, sometimes months to make sure it was the right guy, take that shot, and every time I had that little gremlin on my shoulder thinking, Thomas, I hope you're making the right call. And I would tell our commanders, the day you lose that gremlin a little creeping down, you probably should check out of the community because you're a soulless bastard.


It was like a little bit of humanity. But interestingly, inside those calls, and I don't know that I've ever spoken about this publicly, but to the lawyer point that Josh mentioned at the height of ISIS, when literally had the FBI director, James, calling me saying, can you take out Abu X, who is calling back to New Jersey actively right now, fomenting more plots that we can't keep up with? And he knew we had him in our sights, that we were watching him move around some environment.


We're going after a whole network. We weren't just going after individuals inside that scenario. I was given by our lawyers. And this is that it's hard to describe the discussions wrapped in this. But I had what was called an NCBI, a non noncombat value of ten. And that meant when I thought the time was right, that we had the individual that we were targeting, I could accept a non-combatant valuation of 10 people in that shot group. I could accept the death of 10 people.


I waived that one time out of thousands of shots and it was for an individual who was particularly bad and we needed him gone. He was causing a lot of problems, but he would go from his high rise apartment, a lot of people to a marketplace every day. That was his pattern of life. And the only opportunity to kill him was in his taxi ride between the two locations. And so for five days or so, we watched him take that ride.


And I couldn't tell if the taxi driver was one of his teammates, confidants or just a hapless taxi driver who he happened hook up with and on a fateful day because we just couldn't get a better opportunity to take that shot. And I'll live with that forever. I mean, I hope that that wasn't an innocent soul. I hope that was one of his contemporaries. No way.


No, but that's the kind of warfare that we had for two decades now, Patrick, that trivialises almost every consequential decision that we make on a daily or weekly or monthly or yearly basis. It's incredible, right?


The opportunity I've had to talk to Josh means Tony, that I get to ask you my two traditional closing questions. I'll tailor one to you specifically and then ask you the one I ask of everybody. The first is for me to point out clearly, none of this is easy. It's incredibly far from easy. It's incredibly hard. You've had the opportunity to work with, I'm sure, some of the most exceptional, not just soldiers, but also leaders.


What do the most exceptional of those that you've worked with share in common as you think about a great soldier, generically speaking, or the average of the great soldiers that you work with? What are the qualities that allow them to stand apart that made you proud as their leader?


Every leadership venue, every book, all the professional attempts to categorize leaders usually harps on the ability to listen. I don't think people still listen to that. One of the most critical characteristics of really, really good leaders and more importantly, to listen and adjust. And I usually cite Bill McRaven is just an incredible mentor, but an example in that regard where you literally could walk into his office, shut the door. And I was his deputy for Osama bin Laden raid.


I worked with him for years, a tremendous professional and always very positive. But you could walk in the office, shut the door and essentially say the emperor has no clothes on right now. You're not seeing this or you're missing something or your message being misconstrued, whatever. And you might get a little pushback because a human being, after all. But invariably he would digest the constructive criticism you were giving him. And amazingly, here, here's a guy at the height of his game now is an international celebrity.


He often would come out, whether it was me or somebody else who would come talk to him and say, hey, I'm seeing things differently now, so and so. Talk to me. I was missing this. I was a little bit blinded by my own biases. I'm going to know if we were on the wrong path. We're going to change it. And to me, that was just incredibly self actualized, self aware. And certainly he lived that the monster that I tried again, James Comey, before he had his implosion to me was an incredible public servant.


And the FBI really I since they really loved his leadership because he was a very humble guy, he talked about your organizational humility one day and he said, the longer I've been at this, the harder it is for me to come into a room and not think I had the answer before. The question is, he asked what he said. I checked that I try and block that preexisting condition out when I come in the room. And I don't know if it was him or somebody else that came up with this mantra that I try to play to myself because I suffer from the same challenge.


Are you listening or are you just waiting to talk? And even today, while we're going, one of you would go down tangent. I'd be scribbling to all. I want to pick up on that. But the problem with that is, are you listening or are you so damn self-important? You think I've got the ultimate nugget that must get out here? So how you really wrestle through listening intently to understand the other guys up, the other guy, other gals.


Optic is to me the mark of a real leader, an incredibly hard skill that's very hard to cultivate, but very, very valuable to this. Been so much fun, Josh, thanks for doing this with us. I've learned so, so much as I always do a very unique conversation. I asked the same closing question of everybody as I referenced that question, too, is what is the kindest thing that anyone's ever done for you?


I hate to admit that Josh might have warned me ahead of time and I'd be struggling with it ever since. That was the kindest thing. The kindest thing was just giving you the heads up. I've wrestled with it ever since.


He said, be prepared for this. I have been blessed by so many incredible mentors and parents all the way up to countless mentors and teammates. So I was going down that tangent. But actually the more I thought about the kindest thing I would chalk up and not attribute to one individual or the number of folks who forgave my transgressions, forgave my my passion, my temperament, and allowed me to make mistakes and recover from them and move on. So it's a broader than it can wait for.


The kind of thing I feel so very grateful that I was able to fumble through a lot of situations and figure it out. Ultimately, I hope to a successful level. But that didn't happen without people saying, oh boy, give me a little more rope and or they pulled me in and said, you could have screwed that up a little harder, but you might have to try. But they they didn't allow me to recall and get back at it.


Well, guys, my favorite discussions explore complicated topics and leave open twenty threads to go pull on. This one has done that in spades. I'm so appreciative of your time.


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