Moneyball Military: An Alternative Force – Affordable, Achievable, Able To Deter China

>> Stephen Kotkin,: Hey, everyone, I'm Stephen Kotkin, the director of the Hoover History Lab, and it's my honor to introduce our first case study of application of history to contemporary policy issues. Chris Brose. Let me say a few words just about the Hoover History lab to our live studio audience and to our Zoom audience.

We use history, evidence rich, document rich history to engage in discussions of contemporary policy issues. We're particularly interested in military diplomatic history, economic financial history, political institutional history, and scientific technological history. We have three vectors. One is a public sector one where we engage the policy community at the level of governments, including our allies.

Another is private sector financial industry, where we engage investors. And a third is classes that we teach and other educational programs we run. So public sector, private sector, educational are three vectors. History can help, doesn't predict the future, doesn't tell you what's going to happen. But by studying the fact that things changed, they may change again, so the present can't be projected forward.

You learn about perverse and unintended consequences, how sometimes things don't turn out the way people intended. You learn about failures and lessons learned from failures, which are important. But even more so, you learn about successes, because success can become a problem, because the institutions created to achieve one problem can live on after that problem is solved, and they can be not a good match for the problems that may be confronting us after.

So success can present significant problems even when it has done the job. The initial conditions are no longer there. But institutions are not necessarily adaptable for new challenges. And in fact, they can prevent adaptability or new institutions from taking those challenges on. And we have a prime example of that today from Chris Brose.

Chris is the chief strategist, the chief strategy officer at Anduril Industries. So he's walking the walk of his subject today. He's also a visiting fellow at the Hoover Institution. He's a former staff director of the Senate Armed Services Committee under Senator John McCain, and he's the author of that acclaimed book Kill Chain, which, just like a fine wine, gets better and better every year.

Today he's gonna do moneyball military, an alternative force, affordable, achievable, able to deter China. Ladies and gentlemen, please join me. Warm welcome, Chris Brose.

>> Chrise Brose: Thank you very much, Professor Kotkin. It's an honor to be here. The weather is so much better here than in Washington, DC, where I came from.

I want to certainly also thank Doctor Condoleezza Rice, old boss, and someone else who made this happen together with you, to give me the opportunity to spend a bit more time here at Hoover and really kind of benefit from the community here. A lot of old friends here, new friends, hopefully.

And what I aim to do today is just talk for a little while about the theme of the paper that the Hoover history lab is releasing today and then really dive into a conversation. So really kind of eager for all of the kind of advice and thoughts around the table.

My time in government working for Senator McCain, you don't really leave with riches and fame. You definitely leave with no ego and an incredibly thick skin. So, you know, you can just beat away on many of the things that I say here, which are intentionally provocative, but I do believe so really look forward in the q and a to just kind of having you all poke and tear it apart.

Where I'll start today, you know, is, again, a bit of a provocative thesis. In my time sort of working in and around and sort of with our national defense enterprise in America, I've really kind of come to believe that it's systemically broken. I think we're failing to generate a sufficient amount of military readiness for the present and sufficient amount of military modernization for the future.

I think our ability to deter great power conflict has been eroding for decades. This hasn't been like an earthquake that sort of sneaked up on us. This has been a systemic challenge that we've largely been slow and sort of inadequate to respond to in the form of the Chinese Communist Party.

Growing concerns around a potential CCP move against Taiwan have been kind of out there for years, but now have been moving left for a while to the point that us military and intelligence leaders are now warning that that could happen as early as 2027. So you kind of look at this and say the specter of great power conflict is more real than it has been since practically the latter part of the last century.

That doesn't give me great reassurance about the state of our defense enterprise. Now, the sort of slight good news here is I think there's kind of an emerging consensus, emphasis on emerging, that this is a problem and that we need to do something different to address it, that we don't have a lot of time to react to it.

And that largely what that looks like is kind of generating a different kind of military force or set of military capabilities, things based around these emerging technologies that we talk so much about, AI, autonomy, low cost robotics, and this is not sort of photon torpedoes and cloaking devices, right?

I mean, these are largely technologies that are visible on battlefields in Ukraine right now. And that largely have the kind of attributes kind of directly opposite of our traditional military, which largely consists of relatively small numbers of big, expensive, exquisite, kind of hard to produce, hard to replace military systems.

I think the kinds of things that people are now talking about that I was writing about in the kill chain that Mike Brown has written so eloquently about and pushed in his time at Diu, again have kind of the inverse set of attributes. So larger and larger numbers of smaller, lower cost, more autonomous kind of robotic systems that you can provide easily to allies and partners.

And this is, for the purposes of this paper, what I've just kind of dubbed in shorthand, kind of a moneyball military. So for those of you who are baseball fans, right, taking a page out of the Oakland A's playbook of, well, we don't have the game to sort of beat our rivals at the traditional game.

We have to figure out how to win a losing game that we're being sort of forced to play. How can we do this in a way that is affordable, achievable and capable of winning? That's largely the way I think about this kind of alternative world of military systems.

Again, I think increasingly the question that I hear in Washington is less why do we need this? Whether we need this, it's more of like, yeah, we do need this, but how in the world are we actually gonna do it, and how are we gonna do it on a timeline that's relevant?

And I think a lot of that focus then gets turned into how do we actually fix what is systemically wrong about defense? And in recent years, there's been a real focus on the kind of historic central planning process of the Department of defense, what is called the planning, programming, budgeting and execution process, or PPBE for short.

There was bipartisan congressional commission stood up two years ago to really look at making sort of systemic reforms. Forms to this process by which the Department of Defense thinks about the requirements for military power, programs for it, budgets for it, and ultimately acquires it. So really kind of the meat and potatoes of what national defense really does.

My view on this is, and kind of the thrust of this paper is that the real problem we're facing is not how to optimize a centralized planning process from the 1960s. The problem we face is the existence of that process with respect to how it really kind of impedes the generation of this alternative set of military capabilities that I'm writing about in my paper.

And that is something where, again, you have a process right now that is kind of the disease masquerading as the cure. And we can't fall kind of prey to the idea that by making changes around the margins, we're actually addressing what's systematically wrong about our national defense enterprise.

So I don't see that change coming from the existing system. I see the need to generate an alternative kind of military on a very rapid timeline coming through the generation of an alternative system, one that is, frankly, also kind of inversely drawn up to the current system. So not overly centralized, uncompetitive, consolidated, and frankly, overly statist, but one that is much more competitive, much more meritocratic, properly disruptive.

So kind of in short, I think we need a military kind of force generation process that looks less like China at its worst and more like America at its best. So that's what I'm going to attempt to kind of unpack here for you guys today. In writing this, I actually went back and sort of re-familiarized myself with the actual history of the PPBE process and the generation of it kind of in the aftermath of World War II.

And I won't belabor it here, but it's absolutely fascinating. You guys should go back and look at it. I write about it a little bit in the paper. The bottom line is the people who conceived of this genuinely believed that what they were solving for were the failures of capitalism, and they were trying to actually eliminate the vagaries of the free market in defense planning and replace it with, frankly, a very soviet sort of centralized planning process because they believed it was superior.

And at the time, they could kind of be forgiven perhaps, for thinking that. But when people talked about it as being sort of socialist in its metaphysics, like that was actually true. The intellectual origins of this kind of grew out of the german school of economics that very much kind of thought this way.

And it was echoed in how McNamara thought about the challenges that the United States was facing, which is essentially that innovation had become routine, that the real problem was not qualitative development of new military capabilities. Most of those problems had been solved. The real question was, how do you generate a quantitatively superior number of things that we already knew we needed to have?

Underlying this process was the belief that you could essentially predict the future. You could essentially direct innovation to happen to the extent that you needed it, and more or less kind of eliminate surprise and those kinds of technological disruptions from your planning process through kind of rational allocation of resources from the center.

And that process largely still exists today. I mean, it's been tweaked and changed and modified and reformed around the margins. But when you kind of lay it all out, oftentimes it comes in as the acquisition system, which is really to blame. And I think the problem is actually much larger than that.

It basically starts with how the centralized planning process defines military requirements. So what are the things that we are going to need in the future, by which we mean 1015 years off, which then turns into a process to stand up programs around those kinds of requirements, which then turns into a resource allocation challenge to align resources to validated military requirements, which then turns into a process to go out and competitively buy the things from private industry that you believe that you have requirements for, which then follows into the congressional authorization of resources and appropriation of resources, by which time someone can actually give money to somebody in industry to go off and build the thing that someone defined requirements for at this point, the better part of a decade or more behind you.

So this whole process becomes kind of elongated now to a decade or longer, where you have very well meaning people trying to predict the future on timelines that have just become completely unrealistic, especially at times where threats and technology are moving as fast as they are. So the problem that I would argue that we're now facing is the very thing that the creators of the PPP process believed wasn't possible anymore, which is essentially that America has been ambushed by the future.

The US military is being disrupted again, not something that just happened to us, something that has been in the works now for three decades in one form or another, and has sort of placed us into the horns of the dilemma, know, somewhat akin to blockbuster video or Barnes and noble dealing with the emergence of Amazon, Apple and Netflix.

We have to figure out how we are dealing with, you know what I try to kind of line out here, and I'll explain a little bit, are essentially three different kinds of disruptions, the first of which is an operational disruption. So very briefly, we are dealing with a peer competitor in China that has gone to school on the US ways and means of war for 30 years, and they have been systematically building up and modernizing military capabilities to offset America's traditional advantages.

That doesn't necessarily look like kind of a one for one attempt to compete with us in the areas of our strength. What Chinese doctrine really calls out and what they have really been sort of focusing on building is what they refer to as systems destruction warfare. So essentially, the ways and means of systematically attacking, degrading, and denying us access to all of the underlying capabilities that we rely upon to project military power.

Such as access to forward basing intelligence, information, command and control, the electromagnetic spectrum, space, logistics, things that we don't tend to think about as the pointy end of the spear, but without which, you know, we're basically a continental power. And that is what they've been working so hard.

And we can go deeper into all the details of what that actually looks like. Part of the challenge here is also from an operational perspective, is what I think some have called out, and I tend to agree, is kind of a shift from offensive warfare to defensive warfare in terms of really kind of a dominant theme.

And this kind of ping pongs back and forth throughout history as technology changes and militaries adopt operationally and organizationally. But I think we're in a period now where kind of the advent of ubiquitous sensing, the proliferation of the sort of precision fires kind of regime really just kind of advantages the defender over the attacker.

It is hard to hide if found. It is hard to survive. And I think a lot of these are, you know, I hesitate to say lessons from Ukraine because it's still ongoing. You can see these kinds of things emerging on the battlefields there where projecting power is really hard.

It was hard for the Russians to do into the teeth of the sort of cobbled together precision strike regime that the Ukrainians have built with our help. And it looks pretty difficult also for the Ukrainians to do now that they're going onto the offensive. So again, these things change very quickly.

But I think at a period right now, we are seeing the technological changes really kind of advantaging the defender in ways that I think are really challenging and disruptive to the US military, which has really built itself around. Again, these large. Exquisite platforms by which we have assumed we would project military power, we would be able to evade detection, we would be able to penetrate into the physical spaces of our competitors and really sort of persist there.

And I think that is a fundamental challenge to the american way of war, which, again, is something that has been a disruption emerging for some time now. The second disruption that I would point to is industrial. We can have debates about the continued utility of large, exquisite military platforms.

I don't believe that they're obsolete, I think there'll continue to be needs and uses for them. What I think is somewhat less debatable, especially a couple of years into the war in Ukraine, is frankly the inability of our traditional industrial base to produce these kinds of systems at the speeds and the scales and rates that are required to be relevant for the kind of future we're facing.

Again, I don't think this is something that just happened to us. I think it's largely the result of four decades of US deindustrialization put together with four decades of Chinese hyper industrialization. So just you kind of play that out as a function of time, and you end up, to take one example, where we are with shipbuilding.

China currently has 232 times the capacity of shipbuilding of the United States, 232 times the capacity. And this is according to public documents attributed to the United States Navy. They are on track to have a 400 ship navy in two years and a 440 ship Navy by 2030.

The United States currently is struggling to produce a Navy of 300 ships, we still do not have that. And under no realistic budget kind of planning or expectations will we have the 355 ship that the Navy says it requires in 30 years. It is literally not possible for us to produce it.

You see this as well in the submarine portion of the defense base. The Navy has a stated requirement of 66 submarines. We currently have 49. We have been pouring money into this segment of the industrial base for the past decade, and the result will be that in 2030, we will have three fewer submarines than we do today.

So again, I love submarines. When I was in government, I desperately was trying to put money into that segment of the defense industrial base. We desperately need more of this. We are lacking the capacity to produce it, and we are dealing with a rival that has a significant orders of magnitudes more capacity to produce it.

Again, Ukraine has put all of this into high relief. We thought we were producing weapons at a sufficient rate until the Ukrainians went through about a decade's worth of tactical weapons in the first several months of combat. We are not even close to the kind of quantities that we're going to need to be relevant for these kinds of future scenarios that we're envisioning.

I'd argue this is the ironic, albeit logical, conclusion of the PPBE process that was put in place in the 60s. You had a process that was designed, again, to kind of eliminate the vagaries of the free market in defense planning, and that's exactly what has happened. When it comes to defense, capitalism is basically dead.

We have an industrial base that looks a heck of a lot more like a Soviet grocery store in the 1980s. You have one or two suppliers of critical things, the shelves are sort of disturbingly bare. This is, again, not something that happened by accident. It happened very intentionally as a result of incentives that we created.

Final disruption that I'll kind of point to is technological, and again, don't need to belabor it. A lot of the originators of the sort of centralized planning process can be forgiven for thinking that they can literally kind of direct innovation. At a time in 1960, when US defense R and D spending accounted for 36% of global R and D spending, today it's around 1%.

So we're just not living in the world that we were living in in the 1960s when we were making this assumption about what centralized planning could do for us. And a lot of the enabling technologies that we're all talking about, AI, autonomy, robotics, networking, etc, are really being driven by the commercial world.

Again, processes that have been playing out now for 20 years. This also has affected manufacturing and production. So again, anecdotally, recently, the United States Air Force has been patting itself on the back of hitting full rate production on one of its critical munitions, which is the joint air to surface standoff munition, or jasmine.

In terms of an ability to produce 530 ish of these weapons per year, the cost of about $1.3 million around. Meanwhile, down the street here, you have a single Tesla factory that is producing 400 to 500,000 cars per week at the cost of about 36 or $37,000 per vehicle.

A jasmine is a very complicated system, but no one can sit here and explain to me that it is a more complicated system than a Tesla that is going to literally take human life around the world inside of it. So again, orders of magnitude off in terms of what we are going to need to produce.

And the ways in which we're going to need to produce military systems really leveraging the kind of changes in technology that are now available to us outside of the traditional defense industrial base. And again, I think you can point this back to Ukraine very clearly. A lot of these debates that we're having about Ukraine sort of fall into this false dichotomy of, it's all the old stuff that matters, tanks and weapons and blood and iron or no, it's all the new stuff.

AI enabled weapons and commercial satellites and autonomous systems and the like. And the reality is that it's the ability to blend both of these things together to generate what is inevitably kind of a fleeting military advantage. But nonetheless, that's what the Ukrainians have been able to do. And in 18 months, they have attritted 50% of Russia's combat power.

I don't think that was actually possible five to ten years ago. And largely, that is a result of a lot of these new technologies increasing the lethality and effectiveness of a lot of traditional systems that we've had for a very long time. So to me, those are the sort of three forces that are acting against us and really kind of systemically challenging us in terms of disruption.

So I think the question becomes, how do we respond to this? Again, for shorthanded purposes, a moneyball military, I think, Mike, you referred to it as a hedge force, I think all the terminology is right. I mean, what we're ultimately getting at here is, again, a military or a set of forces that have an inverse set of attributes from our current force.

And I think there's an incredible value proposition to that, right? You can produce a larger quantities much faster, you can replenish them when you lose them, which you inevitably will. You can actually get mass back onto the battlefield to work in our favor at a time where we're dealing with a pure competitor that has four times the population of the United States and a GDP that may or may not be closing in or close to rivaling the United States.

So the traditional kind of way of just throwing people and money at the problem is really not going to get us out of our current predicament. Which is where I see the benefits of this kind of more intelligent, more autonomous, kind of larger scale force really kind of showing itself.

And again, I think the good news is that people are now really focusing on this. When you look at the recent announcement from the Deputy Secretary of Defense, Kathleen Hicks, launching what she referred to as this Replicator initiative. Which is a desire to create thousands of low cost unmanned systems and weapons in the next 18 to 24 months.

When you look at Secretary of the Air Force, Frank Kendall, talking about the desire to have thousands of what he calls collaborative combat aircraft, which are essentially kind of autonomous fighter jets generated inside this decade. When you look at even what is happening on the Hill, where, Members of Congress can't seem to agree that the sky is blue and the grass is green.

But you have a Republican chairman of the House Appropriations Subcommittee on Defense increasing the funding of the defense innovation unit to a billion dollars with the explicit purpose to generate exactly the kind of hedge forces that Mike has called for. The moneyball forces that I'm calling for. All the same thing again, here you have a republican chairman giving money to a democratic administration saying, go do more of this.

To me, this is good news. I think the challenge is this isn't the first time in american history where we've had bold initiatives and big talk. The question then comes down to how do we actually do this? I tend to think that, again, the problem is not going to get solved if we try to run it through the existing system that we have to generate an alternative kind of military or alternative set of military capabilities.

I think you need to create kind of an alternative defense system, something that is kind of the polar opposite of our traditional kind of central planning process. National defense is always going to be a monopsony. And for certain kinds of military capabilities, big warships, ICBM's, long range bombers, you're gonna need something like a PPBE centralized planning process to exist.

You only have a small number of companies that can actually produce those kinds of things. You're going to need very stable requirements over a long period of time. Government is going to have to completely fund the R and D to develop those kinds of systems. You're not going to buy very many of them.

And then once you've bought them, you're probably going to keep them in inventory for two to three to four decades. Hopefully the PPBE commission can make the current centralized planning process a less bad version of itself, but it is only going to be applicable to that class of systems.

I tend to think that for the type of systems we're talking about, moneyball military or a hedge military, you need a completely different process. And it's possible to have a completely different process that really has the opposite attributes, where you can have lower barriers to entry, where you can have more companies that are actually viable in terms of their ability to produce these kinds of low cost autonomous systems or weapons systems.

The government can buy more frequently, and in buying more frequently, they can modernize things in place. They can essentially create incentives that get the capability to improve at a faster rate. And you're not gonna hang on to it forever, right? It becomes more of a military version of a consumable item, more so than sort of a traditional military system.

So when I look at what does an alternative process like this need to look like, again, it's not gonna be quote, unquote, socialist in its metaphysics. I think it needs to be the exact opposite. It needs to be built around sort of humbler, more kind of capitalistic assumptions and attributes that uncertainty and contingency kind of define the human condition.

Ambitious schemes launched by central committees tend to end in tragedy. And a successful system is kind of defined more by its resilience and its ability to adapt when things inevitably turn out differently than you expected and the future turns out differently than you assumed. So again, in short, this is a system that I would say is less about central planning, it's more about how does a government, how does a Department of Defense use its monopsonistic powers to actually facilitate the creation of markets?

Again, I don't think we're ever gonna have markets for aircraft carriers and long range bombers. But if you use monopsony the right way, I think the government can create markets, or at least kinda facilitate the creation of markets for the kinda moneyball capabilities that I'm talking about. So with the time remaining, what I'll do is just kind of tick off what I think are kind of the rough attributes of what an alternative or kind of parallel process would need to look like from the standpoint of really thinking about how a government can facilitate market creation for a different class of military systems.

I think, first and foremost, you need to define the market. So I would just bust the US military right into two pieces, right? There's the big traditional stuff that is going to be governed by the PPBE, where the problem of government is essentially how do I manage cost and performance in the absence of real competition?

And on the other side are all of the sort of things that fit into the rough category of a moneyball military. So that would include, but not kind of totally encompass, robotic vehicles, unmanned systems of all kinds and all domains, commercial satellite constellations for communications, surveillance and other things.

And other kinds of commercially derived military systems, military applications of data and software, AI and autonomy, networking, analytics, things of that sort. And I'd argue even a significant class of weapons I would put into this category. I mean, most weapons, all weapons are inherently expendable items. You are literally going to consume them through the utilization of them, and then you buy more of them.

So maybe you could say some of them really don't belong there, but I would say most of them need to be thought of in this vein of just like, how do I generate much larger quantities of systems on a much faster pace with constant improvements in technology. I don't think this becomes a kind of a take it out of hide type of challenge.

I think this does necessitate kind of increased funding for defense, at least in the short term. I think the challenge that I've seen in some of these initiatives that are being announced, the replicator initiative, I think the price tag associated was a few hundred million dollars. That doesn't actually seem like it's going to move the needle to me.

I think when Secretary Kendall talks about several billion dollars over the next five years for collaborative combat aircraft, that starts to get closer to the mark. But when I look at what we have invested in the defense of Ukraine, I think we're around $40 to $50 billion in.

That's a single digit percent of the annual US defense budget. I'd argue that's probably closer to what we should be thinking about in terms of generating this type of an alternative force, which, again, is maybe 5% of our national defense budget annually. That strikes me as a decent deal, but I think in the short term it is going to require additional resources to manage ourselves through that transition.

The second sort of feature of this that I would call out is really kind of empowering consumers. Our defense system separates kind of the demanders of military power from the suppliers of military power and largely the suppliers in the form of the military services, army, navy, air force, Marine corps, space force.

They really have a monopoly over the authorities, the resources, the people to generate military capability. That needs to change. I think we really need to look at how do you create mechanisms to give the actual consumers and users and demanders of military force a greater voice in actually being able to influence what gets bought or to buy directly military systems that are going to move the needle for them in terms of their operational challenges.

I think that leads to kind of a second or a third part of this, which is they need alternative pathways to do that. Operational commanders are incredibly busy. Many of them also have kind of solution bias or other things, or they just don't necessarily know what they need yet in this kind of world of unmanned systems and AI enabled weaponry.

And I think what they really need are alternative organizations inside of the defense enterprise that can essentially act as kind of like personal shopping services in that they can go out to the. The market and they can do the things that in defense we refer to as kind of a program offices function of buying things, managing programs, managing contracts and the like, but doing it with an understanding that they're going to deliver it directly to operational forces who are going to be able to take it out into the field, experiment with it, use it, come up with new ideas for how they're going to kind of bring it into their operations and organizations, not with the idea that they're going to maintain it for forever, but they're going to use it and then either get rid of it, transfer it to allies and partners, transfer it to the garden reserve, but then go back and buy again.

And I think in the past 10-ish, 15 years or so, we've seen the creation of a lot of these kinds of alternative organizations. Defense Innovation Unit, I think is best positioned to really kind of make an impact right now, building on a lot of the great work that Mike has done.

But there are other organizations out there as well. But I think these really need to be invested in now as kind of parallel institutions to create a direct channel to deliver different kinds of military capabilities to the operational forces. A few more points and I'll open it up to questions.

I think an alternative system needs to do the opposite of what the PPBE does, which is not over index on, on the definition of the specific requirements of solutions that we believe we need, but more spend our time identifying the actual operational problems that we are seeking to solve.

That is actually how consumers enter a market. When I'm trying to get here from my hotel, I'm interested in getting a ride and arriving quickly, cheaply, safely, reliably. Whether it's an Uber, a taxi, a horse and buggy, I don't particularly care so long as I get where I'm going.

When we over focus in defense on the actual requirements of the solution, we end up pushing out a lot of the creative space for new and disruptive thinking and new and disruptive ideas. And we always get what we say that we want, even if it's not necessarily the things that we actually need.

So I think this alternative process, again focusing on consumers getting close to the actual users of our military capabilities, needs to focus on the definition of problems and seek to solve those problems, rather than assume that the answer to our problems is going to simply be a better version of something that we currently have.

In order to do this, I think we need real competition. So much of competition in defense is competition in PowerPoint presentations and white papers. I think a lot of what we need is just the ability to go out and buy the best versions of this class of moneyball systems that exists now with the understanding that we're just going to go out and do it again in a year or two years from now, and we're going to get better versions of this.

More people are going to enter that marketplace to the extent that they see the government actually spending money and rewarding winners who have real capability that are able to be demonstrated in the field. And if you do this as a function of time, I would submit a crazy thing will happen in a capitalist society, which is companies will actually move into the market.

They will invest in themselves to the extent that they're successful. You'll be able to unlock the trillions of dollars that are just sitting in private capital markets looking for good things to do, good companies to invest in. And you'll actually start to create something that looks more like a functioning market.

Albeit one inside of a very kind of military, unique defense, unique subsector of our economy. And the final point here is I think this kind of an approach to thinking about capability generation. Also is a way of kind of creating better conditions for managing the political and bureaucratic aspects of this change.

So often when I was in Congress, what I saw was an attempt to make change in one foul swoop, in a very, again, centralized planning kind of way. We thought we needed this thing, we don't need this thing. We're going to cancel it or retire it all in one year.

And we've laid down an alternative thing that will deliver in like five or seven or maybe ten years. Members of Congress are many things, but they're not idiots. When they're getting elected on two year cycles and you're showing up and saying, I'm going to get rid of this thing that's built in your district, that employs your people, and maybe in the future, when you may or may not still be in Congress, something new will show up to replace it.

That's exactly when members start to say, like, well, maybe we should hang on to the things that we have until we actually see the new things show up. And I see in defense, the future has a bad habit of not emerging and not showing up on time. So I think the ability to start buying in this way, to start creating more of this market allows you to incrementally change in a more transformational way.

You can begin iteratively replacing things. You can begin actually bringing people along and creating stakeholders in the future because these things are actually showing up companies are actually building them. They're actually setting up operations in states and districts where you begin to have political stakeholders in the success of these kinds of systems and the desire to see more of them.

So I'll stop here, I mean, my basic contention just to kind of finish and get off the stage here is actually I'm pretty optimistic. I shouldn't be considering most of my time has been just kind of exercises and frustration and banging my head against these kinds of problems continuing to this day at Anduril.

But I actually think America has all the sort of strategic advantages that you need to be able to orchestrate the kind of changes that I'm talking about. We have the money, we have the people. We have technology. The challenge that we have is just, we need to get out of our own way.

We have to think differently, have a broader imagination about what we need. We have to have the will to actually complete the swing. And I think all that's possible with leadership and resolve. If we didn't have those things, I think we'd be cooked. But, you know, the fact that we do means that our destiny is still in our hands, and we can solve these problems if we choose to.

We just are running out of time to do so, and we really need to get after it. So apologies for going a little over, but-

>> Stephen Kotkin,: Perfect.

>> Chrise Brose: Thanks for listening-

>> Stephen Kotkin,: Perfect time.

>> Chrise Brose: I'd love to just have this torn apart by you guys and take the conversation whichever direction you wanna go.

 

>> Stephen Kotkin,: We're gonna engage the audience quickly. I just want to make sure that everyone has caught some of the big stuff that you laid out on the table. For us, it's rare to see broad and deep at the same time. So we have a gigantic military industrial complex that's centrally created and centrally managed.

Okay, so for a cold war against an adversary that has the same thing, this can make sense. In other words, a land war in Europe, projecting power far away from our homeland through Asia and other spots. And so let's build big, and let's build bigger than them, or at least let's build as many of the big things as them.

Whether that's the right idea or not, that's what happens. Okay, and it looked like a success from many points of view. We had a deterrence capability, we had a forward projection capability. We had a lot of the stuff that you would say would have been necessary to prosecute the cold war without turning it into a hot war along the way.

There were some hard lessons that we learned about jungles in Asia and other things. About whether our weapon systems work in certain types of weather and whether there's a lot of sand around and etc., okay. So, but nonetheless, you could argue potentially we built something that we needed to build, more or less, and it was fit for purpose.

Then the Chinese come along and they don't have the. The kind of money that we have. So they gotta do a lot more with a lot less. And it turns out that they preview what you're asking us to do. They decide that, well, America has these capabilities, we're not gonna confront those capabilities directly, we're gonna confront them indirectly or in clever, ingenious ways.

We're gonna figure out how to counter them without the same type of scale and money. But we're gonna build a military industrial base in order to do that at the same time as we're not gonna build exactly what they're gonna build. Okay, so that looks like a good wake up call or whatever you wanna call it for us.

Then here we are. Now we have the most innovative economy in existence by far. Okay, we got a gigantic innovation ecosystem. That's pretty promising asset. I'll take that asset on my side, right? We have a consensus around our top military officials and some of our political people that this is a good idea, right?

To use our innovation ecosystem, it's a good idea to bring that on board and to redo, rethink, reinhabit the space with new stuff. Okay, so the consensus is building, and then we have the interest groups that are holdovers from the previous epoch, which was a success. So once again, the success could be the problem.

And what you're arguing for is creation of new interest groups. In other words, not an immediate displacement, we're gonna just pull a chain, as they said, flush everything, and start with a blank slate, because we can't do that. Instead, we're gonna encourage markets, encourage interest groups to arise, encourage the future to arise alongside the past and compete with it and maybe be bigger as a result of that.

I think that's my primitive understanding of your argument. So it's not an unrealistic centralized version to get rid of the centralized system and to create the innovation ecosystem, right? It's not a centralized version of that. Although the centralized piece is a part of that. So the part that I don't get is the relationship between the existing centralized piece and the innovation ecosystem creation.

When you say create markets, we're at the Hoover institution, not all of us would use that kind of language, that the state's gonna create markets. We would use more the language of encouraging, you said facilitating, providing credit, providing demand, deregulating or getting out of the way. So that interface between the big thing that built the Cold War stuff, and the new thing that you're on the frontier of, talk to me a little bit more about how that interacts before we open it up to the table.

 

>> Chrise Brose: So I think the thing I go back to with defense is it is a monopsony, right? I mean, if we were talking about the automotive sector or something else, I wouldn't probably use market creation, but in defense, there is one buyer for the kinds of capabilities we're talking about.

So I think in that respect, the question is sort of how does the government use its monopsonistic powers to get what it believes that it needs? I think answer one on the traditional side was, we know what we need. We've largely already invented it. Innovation has become a routine and something that is largely forecastable and directable by the state.

Most of the R&D, a significant chunk of global R&D is happening inside of the defense industrial base directed by the government in the 1960 era. So that ability to kinda get traditional forces through centralized planning, you could argue it kind of made sense for the time.

>> Stephen Kotkin,: Yeah.

 

>> Chrise Brose: The problem is that the problem is now different. All of these technologies are not things that are being developed inside of the traditional defense industrial base, they're largely being developed outside of it. But it's not a matter of saying, like, cool, we're just gonna go buy commercially off the shelf because these are inherently military systems.

Even if you take something like drones, it's like, well, I can buy that drone off the shelf. But now I needed to survive in a GPS denied environment, I need to militarize it, I need to do other things to make it survivable, etc, and useful in these very kind of harsh and challenging conditions.

So again, there are unique requirements to be relevant in the national defense kind of marketplace. I guess what I'm contending is that, because the class of capabilities that I'm talking about is so fundamentally different and unknown, right? I mean, I think if you were to sit here and talk to our operational forces, let alone me, I don't think they'd have any idea in terms of where these kinds of capabilities are going to go, where technology is going to lead.

The different ways that they or their successors are going to incorporate them into their force and their planning, and actually use these kinds of capabilities. So I think in that sort of era of uncertainty, to me, the market concept makes more sense because I'm trying to create incentives for surprise and disruption and adaptation.

I don't know what I want. Technology is gonna change, the threat is gonna evolve, and I need to have, in much the same way that we get disruption in the commercial world, because we incentivize it and we reward it, we don't do that in defense. And I think this different kind of paradigm could begin to create incentives where the kinds of changes that we say that we want can evolve more organically, rather than as a function of what somebody believed was required a decade ago.

 

>> Stephen Kotkin,: Incentives, right?

>> Chrise Brose: Yeah.

>> Stephen Kotkin,: That word kept coming up. All right, we're gonna call on Phil Zelikow here, perhaps our most recent addition to the Hoover fellowship. Did we accept our offer?

>> Stephen Kotkin,: Okay, that's great news, Phil.

>> Phil Zlikow: Thank you.

>> Stephen Kotkin,: Part of the team now. Please, go right ahead.

 

>> Phil Zlikow: I am an indentured servitude now.

>> Stephen Kotkin,: Great news.

>> Phil Zlikow: A historical, and then a kind of a political comment about the consumers. I was trained in defense planning by Bill Kaufman, who was part of the McNamara group with Enthoven, and Yarmolinsky, Rowan, and McNaughton. So everybody reacts in their notion of how to do defense planning to their recent formative experiences.

This is a movement that comes into being in the late 1950s, mainly, and into the early sixties. Based on the last 15 years, driven above all by experiences, the formative experiences with three defining kinds of systems, atomic energy and how that was developed, long range bombers, and guided missiles.

So this group of people, they look around, their experience with this, as you can see, how all those things got developed at scale. And they think, for this group, their exemplary failures were the Thor and Jupiter missile programs, which were individually service driven. And the exemplary success was the Polaris program, from nuclear propulsion to the missile, which was driven by mavericks in the Navy over a lot of opposition within the Navy.

So one little takeaway from that historical Comment is that, first, there was a lot of capitalism in the emerging aerospace world of the late 50s. And it was producing proliferated, extremely capital intensive systems that the government could not afford to build and was producing almost kind of simultaneous failures.

And then the real buyers were the services. And the companies were capturing the services, the dominant cultures and the services were driving the buys. So PPBE was coming into existence to tame the services, the whole reason the secretary of defense was created as an institution to begin with.

Now, that's important when it comes back to the political comment today. I was asking myself, well, who is the consumer of the defense budget? Well, it's who gets the contracts. The consumers, the defense budgets are the people who get the money from the contracts. And then from companies to employees and represented by their members of Congress.

In other words, the argument is that we have a system that actually is optimized to serve the powerful consumers. And it works extremely well in doing that. And it's extremely, from that point of view.

>> Chrise Brose: Six companies take two thirds of the total procurement budget. There's six companies you're talking about.

 

>> Phil Zlikow: Yes, and actually, because it's very hard to do the multi-year contracting that can allow you to build up new companies. You basically need to sustain the companies that already have the sunk capital and don't need the multi year contracts in order to slowly get afloat. So it's very hard to get startups to scale.

Unless then one of the big companies buys the startup and incorporates it into its web of influence. That can seem like a very cynical view of. The defense budget, in other words, is not driven by strategy, and it's not driven by what the armed forces need. It's not driven by China, it's not driven by any of your good arguments.

It's driven by other needs and interests which are very well served. And my source for that cynical view is none other than Chris Brooks. All right, so then I'm, in a way, I then have to come up with a political theory of how I beat this. So I'm actually substantially convinced by the substance of your argument.

So then the big problem then is, as you know, is my problem. And there you can quibble around the edges, but it's substantially right. Is you then have to have a political strategy of how you change this. And so in a way you can set up a DIUX that's kind of like the smart guy's PPBE.

But if one alternative is gonna, well, let's let the armed forces that need stuff buy it. What will happen, though, in that is, you'll return very quickly its services. Like who will represent the armed forces? Will these buys be done by combatant commanders? Maybe socom can buy a few, right?

And then you're gonna be back to service driven world, which then is reminder of kind of why you built those centralized systems anyway because of all the vices that service driven world. And then you can go into examples like literal combat ship and some other famous recent stories.

So I'm intensely sympathetic to the argument. And so in a way, what I wanna do is I wanna kind of pocket your argument. And let's say the stage we need to move to now is actually we really need to work this consumer slash political strategy problem. And because at a one level that sounds very appealing.

But if you kind of let that go, it'll turn into something that's service driven, which actually may just end up replicating the kinds of problems we built this system to overcome.

>> Chrise Brose: Yeah, so, yes, I largely agree. I think we can quibble over the definition. I think when you say the consumers are the actual companies and military services that are consuming the resources, I would totally agree.

And I think that's exactly the problem that I'm trying to get around is that we have built.

>> Phil Zlikow: Well, I actually was kind of taking the military out of it. I was mainly-

>> Chrise Brose: Well, no, but I mean Companies, congressmen and their employees. Yeah, but they also have strong constituencies inside of the military services because they believe these are the capabilities that they need, right?

This isn't just a politically driven exercise. So when I was on the hill, I mean, you'd see these kinds of coalitions form all the time where it was never logical or sort of partisan. It was always very kind of issue specific. And it would be this military service with this bipartisan coalition on the Hill with this kind of network of outside interest groups that would, would gang up together to say, we need to keep this around or we need to put more funding into this particular legacy thing.

It was all very logical and rational from the standpoint of how they thought about the world and benefited from it. When I think of consumers, though, inside of the defense context, I think of the actual people who utilize military capability to accomplish missions. So in sort of Defense Department parlance, it's not so much the military services on the organized, train equipped side.

It's the combatant commands and the operations operational forces that are demanding forces and essentially kind of consuming the forces that the other services are generating. I think what I am pointing out in sort of this market creation analogy is there's no consumer choice in this market. We have emasculated the actual consumers because they are beholden to an entirely different part of the institution that is institutionally charged with providing them what the services believe they need, regardless of whether those are the things that they actually need or not.

And there are mechanisms for the operational force to insert their demands into the market, so to speak, but they're largely trivial and the services can essentially ride over them if they choose to do so. And the basic belief is that the operational commands are too short term in their thinking.

And the generation of military capability is a long term exercise that we sort of need to take care of and manage in a more responsible way. We can't have these peasants involved constantly saying I need this, I need that, and changing their minds. And you could again maybe argue that's true if you're talking about long range bombers and ICBM's that take 15-20 years to kind of come up with.

But when we're talking about the kinds of things that I'm writing about, Mike's talking about, these are things that exist now. And I think what I call the consumers are often left on the worst sort of both worlds, where the things that they're promised by the services aren't showing up and they don't actually have the buying power to go out and acquire things that they know exist today that could actually help them move the needle on operational problems that they're trying to solve, like now.

And this is where I go back to, I don't think the answer is just give them walking around money and the ability to just go out and like buy stuff. But I do think that's where you need these alternative institutions that have been largely created over the past ten years.

I don't think we really need more of them. I think we need to kind of like really kind of continue to refine and empower those organizations that do exist. I think DIU is really kind of the best positioned in this respect. And let's state very clearly what I mean.

I mean organizations that are not military services, that are specifically mandated and resourced to go buy things that operational commanders want, enable them to experiment with them, and then go buy better versions of those systems and deliver them directly to the operational. Forces, regardless of whether the services want them to do that or not.

I actually think some healthy competition in this respect is good. But again, that's where I would say you got to define the market. I don't want DIU trying to buy nuclear submarines and long range bombers, not their remit, but nor is it that they're gonna go out and buy kind of commercial, off the shelf stuff, right?

I mean, there's plenty of ability to go buy those things that are truly dual use. I'm talking more about the things that are actually militarized versions of these kind of commercial or consumer derived capabilities, drones, and other things where you do need some sort of thought put into that.

You do need a little bit of development put in, but I don't think you need to develop it in the way that the traditional military services think about government funded development. I think you develop it by buying it. You go buy the best version that exists today and then you say to the industry, we're coming right back in a year or two, and we're gonna buy the best versions that exist in that time.

So the signal to the winners is like, look, don't get complacent because we're coming after you, we're recompeting what you think you have. And the message to the losers is like, look, if you lost this round, there's going to be another round. Bring your a game, invest in yourself and show up with something that's better than what you now know is what we think is the winner.

Yeah. So again, my attempt is to actually create viable mechanisms around what I see as the sort of problems of our system to date as it pertains to this kind of unique class of military systems. And in so doing, whether it's facilitation of market creation or market creation, beginning to create a more robust segment inside this defense market.

Where there are political stakeholders and bureaucratic stakeholders that are emerging. There are people in uniform who are saying, dude, this stuff exists now and it's making my mission better. It's making me more successful. I want more of it. There's members of Congress saying, this stuff's made in my state and my district, I wanna produce more of it.

Like, let's actually have greater support for this kind of stuff rather than future always exists in theory, and nobody actually shows up to support it in reality. Sorry for the long answer.

>> Stephen Kotkin,: It's good, I like this demand-driven concept you've got. So much of the demand-driven version we have now is too binary, right?

You got a big weapon system, what you call an exquisite platform. And one company gets it or the other company gets it, or one company gets the major part of it and the other company gets them, right? And then it's a 15, or a 20, or whatever the overrun might be, it's a forever problem.

Whereas when you're talking about demand is demand is continual, demand never goes away, it's never binary, and it's never generational.

>> Chrise Brose: Yes.

>> Stephen Kotkin,: It's every year or it's every half year, and it's enough to facilitate, to encourage, to, let's say, bring into being a market of supply to meet the demand that you're into.

So if you can drive demand across the innovation ecosystem, and you can drive it again, and again, and again, you can have a flourishing market to meet the problems with solutions that are battlefield driven. I think that's what you just said.

>> Chrise Brose: Provided one important thing happens.

>> Stephen Kotkin,: Right.

 

>> Chrise Brose: Which is the monopsonistic government buyer actually spends real money to buy the things that it says that it values. If it talks a big game and then shows up with pennies on the dollar, it's not actually going to move the market and create the kind of market that we're talking about because people just won't believe that it's real.

However, you know, I think the way that the government signals the importance of something, well, it can do that in many ways. The biggest way is actually spending real money on it. So we say we value chips cuz we're putting a lot of money into the development of domestic industrial supply for chips.

You know, we wanted to be coronavirus. We put real money into the development of vaccines. Like, this is what America does when it's serious. And I think it's very possible to do in the, you know, kind of narrow world of this kind of alternative set of military capabilities as well.

 

>> Stephen Kotkin,: Okay, we're gonna go at some point to the Zoom audience for their questions, but let's get Mike Brown in here. Mike, another Hoover affiliate. Go ahead, Mike, introduce yourself.

>> Mike Brown: Hello, here at Hoover. Chris, that was really incredibly well done. No surprise. I agree with pretty much everything you said.

To your and Steven's point, it really comes down to more than signaling and how do we get more money that's available to the people producing this? The venture capital industry, which I'm participating now, is ready with multiples of what the defense R&D budget is, ready to put money to work.

But to date, the purchases have been miniscule, almost immeasurable.

>> Chrise Brose: Yep.

>> Mike Brown: So I think Philip is right, we need a political solution to this that I don't see happening. So I see some rhetoric from the Defense Department, great. There are some folks in uniform calling for it, a few members of Congress, but it's not a groundswell.

I don't know if you have any thoughts on how do you change enough of the political landscape to create the change at scale? Because lip service is given, $100 million is-

>> Chrise Brose: Pocket change.

>> Mike Brown: Pocket change, we're not moving anywhere near the scale of the defense procurement, which is 200 billion a year.

Well, if you start talking about 10 or 20 billion of that, okay, now you have people's attention. And just a perfect example of that is the aircraft carrier, right? The aircraft carriers today, we're gonna spend $18 billion for the rest of this decade replacing probably one or one and a half aircraft carriers.

That touches 350 congressional districts, once you work through the supply chain. That's the essence of the problem. And you wrote about it in the kill chain, the congressional industrial military complex. Congress is a big part of this. How do we get enough change, and my perspective is Congress probably has to do it, the Defense Department is not gonna reform on its own.

 

>> Chrise Brose: Yeah, I think that's largely right. I think Congress is gonna have to lean in and really kind of direct and sort of prime the pump on a lot of this. Yeah, I guess maybe I'm searching for reasons to be optimistic, but as I kind of look back as a function of time here, I do see the debate moving, right?

I mean, I do see the kinds of things that the current administration is doing in this respect is like, that's progress. Is it sufficient? No, do I want it to be kind of greater and faster than it is? Yes, but when you look at, you know, at the same time that's happening, you have members of the other political party on the Hill literally pushing greater resources to the department saying, like, go do more of the things that you are saying are important.

Like, that's a good thing, right? I mean, I would sort of take that, pocket that and say, like, all right, so now how do we go do more of that? I tend to think a lot of this is a momentum theory of political change. The reality is, like, I don't think you could actually spend $40 billion on the kinds of things that I'm talking about today at all.

The industrial capacity just isn't there for it. And I can tell stories about when we sought to do things like this when I was in the Senate. It turns out it's really hard to spend a lot of that money, right? It's like the old adage of planting trees like 20 years ago and today are the best times to start.

So if you start today, you can essentially start year over year, sending that market signal to a different segment of industry that the government is serious. We are showing up with more money each year. We are going to buy the capacity that you can generate. And when we send the signal to generate more next year, we're going to buy that as well.

And I think that pertains to missiles and weapons as well, that this is the signal that the department is trying to send to industry now and the sort of the heels of Ukraine war of, like, we need more weapons. So I think it's something that's going to change over time.

It's not going to be kind of a big bang, but you need to get started, because in getting started now, that's what enables capacity to grow and the seriousness of the government to be projected over time into industry. And people then start to get the hint. But again, it comes down to the government actually being serious about committing real resources, not spreading them around across a thousand different companies, but actually making bets on winners, rewarding large contracts to elicit the response that it wants to see to get more of that capacity in the future.

 

>> Stephen Kotkin,: We have our national security affairs fellows for this academic year in the room, and so we're gonna turn to a representative. Please self introduce.

>> Patrick Biggs: Patrick Biggs, national security affairs fellow representing the army. I think I really like what you're talking about. I think there's a way that we can make this happen.

Really? How? We authorize what we're authorized for equipment. I think you could authorize your equipment. Normally we say you're authorized this particular piece of equipment. We could do it by program. I think what I thought of as our satellite communications gear, we're authorized a specific piece of equipment.

We could easily be authorized. Use this procurement program. You authorize replacement every two years. I think that would send the signal you're looking for. We know we're going to replace four brigades next year, six brigades the following year, ten brigades the following year, and they're going to grow.

The thing that I'm concerned about and I think we need to address is how do we get that into the Army logistics pipeline or any of the services? Right now, most of our logistics personnel that fix stuff is based on saturnization. They're not experts in that field. They know that particular piece of equipment.

How would we address that moving forward if we're changing stuff out and we don't have that knowledge base and expertise that builds up over time?

>> Chrise Brose: Yeah, this is why I really try to kind of cabin the argument I'm making to, again, what I call sort of like the moneyball military, where I think the model is just opposite to the one that we kind of traditionally operate on, right?

If I wanna buy a Bradley, there's a long logistics tail that comes with that, sustainment contracts and the like, because I'm keeping that system in the inventory for decades. I think what I'm sort of trying to suggest is that for a lot of the things I'm talking about, the plan would be to actually not keep them in inventory for more than like a couple or few years, right?

Treat them more like consumer technology where they're intuitive enough that basically kind of reasonably technically capable logisticians or sustainers can kinda maintain them in the field to keep them operationally up to date and relevant. But that you're not gonna try to kinda sustain them for 20 or 30 years at a time.

Even if you necessarily could. Right. I think like part of the, part of the argument I'm making here is that the act on the government's part of buying new is itself a good thing. And that by buying new more often, you actually create this kind of flywheel effect of modernization where you pick something from the army, a robotic combat vehicle.

If I go buy that and soldiers use it for a couple of years and I plan to go buy a better version of it, it's going to be more autonomous, it's going to have more payload, better endurance and range, et cetera. And because the technology changes that fast, you're actually rewarding it.

That, I think, is really where we need to get. When I look at the defense budget problem is we're not actually spending as much on procurement as we should be. The bigger problem is when you actually look at the ways that we're spending money on our large programs, 80% of them are sustainment contracts.

We're literally spending most of our defense budget to keep old stuff around and fix old stuff rather than buy new stuff. To me, that's the bigger problem. So I think this act of buying new and incentivizing modernization is the thing that we really need to get after. With the understanding that we're breaking the model of sustainment, we're not planning to sustain this stuff.

If it's still useful and there's someone that you can transfer it to, again, foreign allies and partners or garden reserve or whomever, do that, push it to them, let them get whatever life is out of the system. But then let the operational force buy new again so that they're getting a better capability more often.

 

>> Stephen Kotkin,: We have a question from the zoom, which is skeptical about the need to increase the size of our military. The point is with the current demographic collapse of our major international competitors, why should we move to add new military equipment or procedures as opposed to bettering our own societal and economic enterprise?

In other words, maybe the threat is exaggerated. Maybe we need to attend to a lot of domestic issues that are also, let's say, contributing potentially to our strength or lack of strength in terms of national security.

>> Chrise Brose: Yeah, I mean, look, I don't want anybody to suggest that I'm looking at this problem as an either or proposition.

There are plenty of problems that we have in our country that are non defense in nature, not all of which the government and government spending can make an impact on, but some perhaps can. So I'm all in favor of government involving itself where and when it matters and can help in that respect.

I would simply say that I think we need to do both, right? I tend to think of national defense as an insurance policy. I think if Ukraine is taught at least me anything, it's that when our adversaries say things in public, they might actually mean them. And that whether we think those are crazy or illogical things, they may actually have the willingness to carry them out nonetheless.

So I think we need to have the ability to be prepared and ready for those kinds of contingencies. And in so preparing and readying ourselves actually deter them and sort of prevent them from happening so that we can focus on what's really kind of important, which is a healthier society, a more vibrant economy, being a peace loving nation.

So, yeah, I tend to think we need to do both things. And I think when you actually look at the percentage that we're spending on national defense as a percentage of GDP, it's actually kind of historically smaller than it usually has been as a percentage of our overall government spending.

It's by no means the thing that is really kind of dragging down federal debt, national debt. So again, $850 billion sounds like a lot. It is a lot. But when you put it into different kind of historical context or federal government spending context, I think it puts it into a much greater light in terms of the insurance policy that I think the nation needs to have.

 

>> Stephen Kotkin,: We can also point out that the defense budget covers job training, skilling, housing, medical insurance, educational programs for a significant portion of the population that comes from deprived backgrounds that otherwise wouldn't have that opportunity. And so the defense budget is actually in the game of societal investment in its own way.

I don't know what. The exact percentage of our defense budget, approximately, would be spent on human capital writ large. But it's non-trivial.

>> Chrise Brose: That's a good point.

>> Stephen Kotkin,: Okay, let's go to the Shultz.

>> Speaker 7: 50% is just your military pay and your health care, not any of the other additional training.

 

>> Stephen Kotkin,: So it's very difficult in our political system to spend that amount of money on people from the lower rungs of our society or from the middle rungs of our society, right? System has difficulty investing in people who come from challenged backgrounds without a whole lot of financial capital.

But the military can do that, and we can do that at scale. Now, you can argue that that's an inefficient way to invest in your society, and I would agree. But if your choice is nothing or something, anyway, so let's go to our Shultz team. Please self introduce.

 

>> David Fedor.: Sure, thanks. Thanks, Chris. Just following up on this, David Fedor. And in honor of the inaugural director of the Office of Management and Budget, let's just push the budget constraint issue a little bit more here. I think that I hear you suggesting a 5% top line growth in overall defense budget, maybe 15% growth in procurement, in order to deliver this sort of vision that you've sketched out and sustaining that over time.

I mean, is that a fair characterization, are we talking bigger budgets to do this, or can we do it the same amount of money?

>> Chrise Brose: Yeah, I would say. I mean, kinda going back to the conversation we were just having, right? I mean, if I think, like, the right answer at some point in time is low.

Tens of billions of dollars, right? Being spent on these kinds of capabilities, like, I don't think we're going to get there next year, I don't think we could spend that amount of money. So even if Congress showed up with all the will in the world to bust through budget caps and put that kind of money toward the kinds of things I'm saying here, I don't think there's an ability to kind of.

There's not ability to spend it and use it. So it's more of like an iterative thing over time where you kind of snap to the outer bounds of what you think you can reasonably buy in this kind of class of capability, and then you buy over time. But I think my kind of assumption is that because this is happening as a function of time, you are iteratively replacing certain things along the way as well.

There are things that we are spending money on that these kinds of systems could and should replace over time, but they're never going to be capable of replacing them if they don't actually exist. So we have theoretical arguments about whether this idea is better than that existing legacy system.

But unless and until someone puts it out into the real world and you get operational feedback from people saying, like, dude, I'm using this. This is like, far better than this other thing that we're spending lots of money on. So I don't wanna suggest that over time it's like we'll spend less on defense or it'll net out to the same.

But I don't think that it's just purely adding on top of adding over time. I do think initially there's probably some transitional period where there is adding required, but for the kinds of things that I'm talking about, it's a relatively small amount of money that would be added, and it's very possible that they could find those kinds of cuts and changes inside the, you know, the parameters of the existing budget.

 

>> Stephen Kotkin,: We have another question from the zoom. This may be more a question for the office of net assessment rather than from the chief strategist.

>> Chrise Brose: I do not represent two industries.

>> Stephen Kotkin,: It's about the professionalism and military effectiveness of the PLA, the chinese military, the People's Liberation army.

It says that many people have called there operational effectiveness into question. Do they actually have the technical capability to achieve their stated doctrinal objectives? We've seen a bit of a shake up in personnel at the top of the chinese system recently. So how capable are they? In other words, again, is the threat question here, and once again, that's outside the parameters of your presentation.

 

>> Chrise Brose: No, but it's a core. It's a core, I'd argue it's a core assumption that I'm making. How operationally effective is the plA? I don't know, and I don't think anybody does to include them. I think that they spend a lot of time building up capabilities that they have developed in larger quantities and faster speeds than most people in the United States who've been looking at this thought were possible.

I think that part of what I worry about when I look at Ukraine, which is that we, in sort of typical American fashion, exaggerate our reaction to Russia's underperformance in Ukraine. By assuming that China will also similarly underperform in a conflict, God forbid, that involves the United States.

Maybe they will. I don't know. I tend to believe that for planning purposes, the assumptions that I make are that capability matters and that you have to go in assuming that you're going to honor the threats that your adversary is presenting. If it turns out that they're not as capable as you thought that they were, that they're not as effective in sort of integrating combat power as you thought that they might, then that's a great day.

But I would certainly not sit here and say that we should be planning for the assumption that they're not actually going to be as good as, you know, maybe we could argue that they would be. I think that is just not an assumption that I think is credible to make.

So if I'm going tonna be wrong, I would argue I'd rather be wrong in over exaggerating the threat and the capability rather than the alternative of under exaggerating it and then finding out that they're actually way more capable than I planned for.

>> Stephen Kotkin,: There's also a deterrence issue here.

 

>> Chrise Brose: There's also that.

>> Stephen Kotkin,: Right, exactly. Speak to that.

>> Chrise Brose: I mean, you could look at, you know, what we have done in Ukraine and said, like, well, maybe if we had done that, I don't know, three to four years ago and been able to present that as a credible threat to the Russians, like, maybe you could have actually deterred it.

I don't know. Interesting debate for future history labs, but there's an argument for doing the things now that you believe you're going to have to do anyway as a way of actually generating deterrence, and then you don't necessarily need to test the enemy's capabilities in war. Winning without fighting.

Yes.

>> Stephen Kotkin,: Okay, let's now have our students step up here. Student representative, please self introduce.

>> Johan Smith: Hi, my name is Johan Smith. I'm a history major, work with Professor Kotkin. I was curious, is this solely an American problem in terms of being behind eight ball militarily, or is this a Western problem?

If it's a western problem, what are the reasons behind it being a western problem?

>> Chrise Brose: Yeah, no, it's a great question. I barely consider myself an expert on the american system. I've lived within it. I've worked within it.

>> Stephen Kotkin,: We'll give you that expertise. Well, I'll give it to.

 

>> Chrise Brose: Simply saying-

>> Stephen Kotkin,: It's like in golf when you're within the hole and they say, you can have it.

>> Chrise Brose: There you go. So I got a mulligan on this one. I would argue that I'm definitely not an expert in a lot of UK, Australia, and other kind of western systems, but I tend to believe that their problems rhyme a heck of a lot with ours, and I think it's largely for similar reasons.

I think a lot of the analysis resonates. I mean, certainly when I talk to british or australian or canadian, you know, kind of military officers and defense planners, I think they see a lot of their own problems. And the things that I've written about in the past, the things that we're talking about here today, and I think it's.

It's probably largely for many of the similar reasons. I think the interesting question is how do you then sort of get out of it? And I think part of what I didn't talk about as much here I kind of get to in the paper a little bit, but not as much as I should, is I tend to think that historically, we've always largely paid lip service to allies and partners.

We tend to sort of treat them as, like a nice thing to have. But when it actually comes down to doing hard things where you have to transfer real technology to them or really kind of incorporate them into your operational planning, you know, the view is just kind of like, yeah, like America's got this, like, you guys just kind of hang out in the anteroom, and I think that's just not going to cut it in the future.

You know, I think, again, a lot of the risks that we have not been willing to run with respect to doing those kinds of things in the past, you know, are really not risks that we can afford to run in the future where I think we need to err on the side of really bringing them in, almost treating them as kind of part of our industrial base so that we can transfer technology back and forth, really kind of get best out of what all of us have to offer, and sort of treat it as a way of really kind of, you know, leveraging, I think, one of the great strengths of the United States, which is our allies and partnerships, but really kind of, you know, operationalize it when it comes to how do you generate larger quantities of the kinds of capabilities that we say that we need?

I mean, even under the best of circumstances that I'm writing about, America by itself is only gonna get you a bit so far. But if you can do that in terms of multiplying what the kind of allies and partners can produce and kind of align it a bit better.

Then I think you really start to get to interesting kind of interoperability and real scale.

>> Stephen Kotkin,: Do you think Aukus is a step in that direction, a significant step? If it is a step or it's- I think it's too soon to tell, I think Aukus should be, I think it's a great idea.

 

>> Chrise Brose: I think that the things that we've done to date are really good, and I applaud what has been done. I just think there's a heck of a lot more kind of meat on that bone in terms of what we should be and could be able to do together with the three allies there.

 

>> Stephen Kotkin,: So Australia, UK, US, talking about transfer of certain technology more in the exquisite large.

>> Chrise Brose: That's where a lot of the focus is. But the so called sort of pillar two piece of this with kind of emerging technologies, advanced capabilities. There's an enormous amount that we can and should be doing together there that hopefully will get done in the near future.

 

>> Stephen Kotkin,: All right, one more, we'll have the students are ready to step up again, self introduced.

>> Kate: I'm Kate, I'm a undergraduate junior within Professor Cotkins Hoover history lab. I really enjoyed your presentation, I found it incredibly insightful. My question has to do with whether this sort of drastic system overhaul is compatible with the timeline of amounting great power competition, especially as that relates to Taiwan.

This sort of paradigm that you proposed is drastically different from the status quo. And how does that interact with the timeline that we're witnessing with Taiwan, especially sort of before 2040-2050.

>> Chrise Brose: Yeah, I guess I tend to think that it's the only way we're actually going to get into a position to respond on the timeline that's required.

And again, I'm talking more about the establishment of an alternative process or an alternative system. That's something that kind of emerges over time. But, boy, you've just got to start generating those initial muscle movements to get going. And I think that's the thing that we've really been lacking.

So putting a conceptual framework around what it is we're actually trying to do and how we're trying to do it differently, but that doesn't obviate the need for real leadership, kind of real national will, real commitment of resources, real willingness to kind of buy a certain way and sort of act differently.

I think all of those are the things that really need to start happening at scale much faster than they have been. Over time, that starts to turn into something that you might argue is an actual process or system. But initially, right now, it's just getting that flywheel starting to spin much faster than it has been to generate the kinds of effects we need.

 

>> Stephen Kotkin,: All right, let's close now with what success will look like, right? So we've had an episode where we didn't really have a defense industrial complex. We didn't even have a military. And then we got attacked the first, there was some stuff in Europe, then we got attacked Pearl harbor.

And 1941 was not a great year, 1942 was not a great year, 1943 was a pretty darn good year, and 1944 was a blow me away year. And then by the time 1945 rolled around, we had ships and planes. And we had more stuff than anybody thought could have been produced, in theory, by all the world together, let alone by the US, right?

We supplied our allies, we ended the war with enough to keep going for quite a long time thereafter. So something big happened in the past that seemed unimaginable in the 39 to 41 period, or let's say, hard to imagine. Okay, and it happened, and we did it, and breathtaking.

Okay, so we won't delve into how that happened. That's a subject for another time, an important one, but let's look forward. Here we are. It's 2023, we are where we are. We wouldn't start here if we could, we'd start somewhere else. But this is where we're starting. Not wholly starting, but as you pointed out, the innovation ecosystem that couldn't absorb the kind of billions that you hope.

So let's project out to 2035 or 2040 or 2033, if you prefer, just the ten year thing. What does success look like in your mind? If we're coming back into this room at that time, that already is a fantasy that I'm still alive, then, but, okay, let's just go for it.

And this is what in existence at that time, like this number of companies or whatever it might be, give us the success outcome.

>> Chrise Brose: Yeah, so I think maybe just to go through, I guess, a few criteria. I just think as a portion of our defense spending, we're spending more on procurement than we are on R&D.

Because we're actually using procurement to create incentives to pull private capital out of capital markets. To fund a lot of the kind of development of the kinds of capabilities that we're buying. I think that when you look at the defense industrial base, you don't have, as Mike mentioned, five or six companies that take the lion's share of defense spending.

I think it's more like dozens of companies that are multi billion dollar companies, but are nonetheless multiproduct, developing viable, successful companies. Maybe not as big as a Lockheed Martin today, but they're viable, successful, publicly traded companies contributing to different parts of the defense marketplace. I think the kinds of systems that I'm talking about are actually being produced at real scale.

And what that looks like in terms of industrial base is, I know this isn't what you were saying. But it's not America using the Defense Production act to take over Tesla gigafactories in order to make robots for warfare. It's more like, no, actually, Tesla gigafactories can be stood up, you know, in a very similar way to produce different kinds of systems that are the kinds of, along the lines of the things that I'm talking about.

And you're starting to see more of that because there's an actual market demand for it. It's actually being rewarded, it's being bought at scale. So you start to see real kind of production capability that looks very much like the production capability that exists in the commercial market, producing what are, again, very exquisite sort of commercial technologies.

In this case it would just be very similar kinds of processes and kind of industrial base for these kind of military unique types of systems. So, again, all of that, I think, can be kind of generated over time if the department and the government again uses its kind of buying power in a certain way.

And then, look, I mean, the ultimate outcome, right? I mean, what we're ultimately seeking is that rather than this kind of specter of a great power conflict or a fight over Taiwan moving from 2040 into the 2030s, now into the late 2020s, this is something that's actually now moving, right, because we're generating real deterrence.

It's something where there's less of a kind of short term sense that a competitor might think that there's a strategic opening or a vulnerability or a window that they want to act within, but we're actually generating the deterrence and pushing that problem off into the future and playing for time, which I tend to think looks like winning in many of the games that I like to play, that I think, to me, would be a resounding success.

I think it's all possible. I think we have the money, the people, the technology to do it. It's just a matter of whether we create different kinds of incentives to get the things that we say that we want at the scales and the speeds that we believe that we need it.

Again, not for photon torpedoes and cloaking devices, not the invention of new physics. Eminently things that are doable now and achievable on a pretty rapid timeline, if we're serious.

>> Stephen Kotkin,: Ladies and gentlemen, chief strategist, Andoral Industries visiting fellow, Hoover Institution History Lab, author of Kill Chain and just all around major American asset.

Let's give it up, Chris Bros.