🏛️ Broken cost-plus procurement forces a shift to new-entrant defense tech

“We didn't have a set price. The government didn't come and say, you will build it for X and I'm only doing it one time. The free market was able to solve this problem, and it turned out the more capable solution was 40 percent cheaper than the one that they thought was going to work.”

“the defense industry is consolidated down to these five prime defense contractors who are basically in oligopoly. And we have this cost plus procurement system where they just raise their prices every year and the government pays it... the only way that's going to change is if the defense industry gets disrupted by a bunch of startups doing innovative things”

“eight years ago, I came to this conclusion and I invested in this company called SailDrone, which is autonomous drones in the seas. Our customers include the US Navy”

“the investors in Silicon Valley that are making these investments are likely going to outperform those who are not”

“on the defense side, there's a large portion of that budget that's migrating away from traditional tactical warfare to things that are unmanned vehicles and cyber and whatnot, that could save two or $300 billion there”

“we led the Series A in a company called SailDrone about seven years ago. ... it is incredibly hard for startups, no matter how innovative we've been to break through this logjam.”

“there's no question that we need to shake up the military industrial complex. We need to get a lot more startups in there. There's a lot of VCs now who are funding defense startups. ... this is going to be a huge area of innovation. And I think that because of the Ukraine war, the Pentagon must now realize the urgency of being able to mass produce effective drones, as well as create effective drone air defense.”

“There's no competition and they're charging cost plus. They're not innovating anymore. And they need competition, right? Just like SpaceX was massive competition for all of the governmental agencies around doing space travel.”

“you can really do incredible damage to very expensive airplanes with hypersonic missiles that go incredibly fast or like Mach 5 or something insane, and they're cheap. ... So $100 million or $20 million fighter jet can just be annihilated by a couple of $100,000 in hypersonic missiles.”

“the asymmetry of the warfare that the hoodies can launch a drone or a cheap missile that costs thousands of dollars and it costs us millions of dollars to shoot it down. ... That is just not sustainable for the US.”

“In Silicon Valley, we have now the funding of military startups, and there's a whole new class of warfare, supersonics, drones, quadcopters”

“But the thing that I think we agree with is that the US better bring more innovation into the military industrial complex and figure out, like, procurement, because our whole cost plus system right now is so broken. There was an article recently in The New York Times where it said that the cost of the United States of producing an artillery shell is $6,000. For Russia, it's $600.”