Lockheed Martin (Audio)

1. 0:00 – 4:25

   Top Gun, the Darkstar cameo, and setting the stage for Lockheed Martin

   1. DRDavid Rosenthal0:00

      Those two movies are so freaking good.

   2. BGBen Gilbert0:04

      Yeah.

   3. DRDavid Rosenthal0:05

      It's so shocking how good Maverick is, so many years later, in such a different environment, and then, like, delayed due to coronavirus.

   4. BGBen Gilbert0:14

      Well, the funniest thing is when it was delayed for whatever years during coronavirus, the fighter that Maverick is in is an F/A-18 Hornet, the Boeing plane, and by the time the movie gets released, it's basically discontinued. Within a couple of years, that's when they end-of-life the F/A-18 Hornet for the Navy.

   5. DRDavid Rosenthal0:31

      Yeah.

   6. BGBen Gilbert0:32

      Did you catch the Lockheed thing in Maverick?

   7. DRDavid Rosenthal0:36

      The skunk on the tail of the plane?

   8. BGBen Gilbert0:37

      Oh, yeah, on the, uh, Mach 10 Darkstar aircraft. [laughing]

   9. DRDavid Rosenthal0:43

      Mach 10 Darkstar. [laughing] Oh, God.

   10. BGBen Gilbert0:46

       All right, let's do it.

   11. DRDavid Rosenthal0:47

       All right, let's do this.

   12. SPSpeaker0:48

       Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Is it you? Is it you? Is it you? Sit me down, say it straight. Another story on the way. Who got the truth?

   13. BGBen Gilbert1:05

       Welcome to season 12, episode five, of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert.

   14. DRDavid Rosenthal1:14

       I'm David Rosenthal.

   15. BGBen Gilbert1:15

       And we are your hosts. Today's episode is on a critical piece of American infrastructure, Lockheed Martin. They are the nation's largest defense contractor. They're actually the federal government's largest contractor, period. The American taxpayers pay Lockheed Martin around $50 billion a year, and just to state this early and clearly, Lockheed Martin makes, among other things, killing machines. The company is, of course, critical to defending the American way of life, and most of these things they make, fortunately, are used as deterrents to keep peace, but we should not mince words. They make weapons synonymous with phrases like overwhelming force and air superiority. You may feel, and probably should feel conflicted as you learn about this company. There are really no easy answers to the question, is what they make right or good? And that's why we entrust the decision to use their products to the office of the President of the United States. But this company's history is absolutely fascinating. There's stories of hardcore engineering, daring innovators, and it's frankly just inspiring.

   16. DRDavid Rosenthal2:23

       Yeah, going back and learning all this and soaking in the history of the times when Lockheed was really forged gave me at least a whole new perspective on this killing machines and deterrence question. To tell the full story of Lockheed and Lockheed Martin and all the predecessor companies that came before it, 'cause I think it's, like, 17 companies all merged together at this point, would probably require a full season of Acquired, so we're not gonna do that.

   17. BGBen Gilbert2:51

       [laughing]

   18. DRDavid Rosenthal2:51

       Instead, we're gonna focus on two interwoven stories from Lockheed, not Martin, but Lockheed's golden eras, and the first of those stories is the famous Skunk Works. The second one, I'm not gonna say what it is, so we don't spoil it just yet, but as a teaser, it's unbelievable and is directly tied in to the birth of Silicon Valley. So if you're in the tech world and you think Lockheed Martin and defense and fighter planes doesn't apply to me, think again, because pretty much everything you do came out of this, so I can't wait to tell it.

   19. BGBen Gilbert3:25

       Ooh, quite the teaser, David. Well, listeners, this episode was selected by Acquired LPs. So if you want to help pick an episode for next season, you can become an Acquired Limited Partner, come closer to the show in other ways, including a private Zoom call with us every month or two for all the LPs. You can join anytime at acquired.fm/lp. If you want more from David and I, you should check out our interview show, ACQ2. Our last episode was on the topic of how generative AI can be valuable specifically to B2B SaaS companies and probably more importantly, where it cannot. And listeners, you can just search ACQ2 anywhere podcasts are found.

   20. DRDavid Rosenthal4:04

       We've got some awesome interviews coming up, too. ACQ2 is on fire.

   21. BGBen Gilbert4:08

       Yep. Join the Slack, acquired.fm/slack. We'll be discussing this episode there afterwards, and without further ado, David, take us in. And listeners, as always, this show is not investment advice. David and I may have investments in the companies we discuss, and this show is for informational and entertainment purposes only.

2. 4:25 – 8:28

   From Allan ‘Loghead’ to Robert Gross: Lockheed’s messy early corporate lineage

   1. DRDavid Rosenthal4:25

      So for many of you listening, one thing you may not know that I didn't really know till we started the research is that the company that eventually became Lockheed Martin today was two companies. It was Lockheed and Martin Marietta, and there was a huge merger in 1995. Lockheed was actually the second Lockheed company, or really maybe the third. The first Lockheed company was founded in 1912 by one Allan Lockheed, but if you were to look at the spelling of his name-

   2. BGBen Gilbert4:56

      [chuckles]

   3. DRDavid Rosenthal4:56

      ... it would look like Loghead.

   4. BGBen Gilbert4:58

      L-O-U-G-H-E-A-D.

   5. DRDavid Rosenthal5:00

      Yes, but it was pronounced Lockheed because it is Scottish, like loch, like Loch Ness. Lockheed, not Loghead. He eventually changed his name to Lockheed, and the name of the second company to Lockheed to avoid mispronunciations.

   6. BGBen Gilbert5:13

      Which is great. He didn't just rename Lockheed the company. He's like, "Yeah, I'm actually gonna change my own name spelling to match it."

   7. DRDavid Rosenthal5:19

      Yes. So great. So he started the first company with his brother, Malcolm, and they were more or less contemporaries of the Wright brothers. It was based in San Francisco, of all places.

   8. BGBen Gilbert5:30

      Hmm.

   9. DRDavid Rosenthal5:30

      And it was mostly kind of a tourist attraction. They had one plane, the Model G, and they flew tourists around over the bay and evangelized this new flying technology. It had a bunch of ups and downs. Malcolm leaves the company and goes to Detroit to seek his fortune in the automobile industry, where he invented the modern hydraulic brake system for automobiles. So every time you press the brake in your cars, you're using Malcolm Lockheed's technology.

   10. BGBen Gilbert5:59

       No way!

   11. DRDavid Rosenthal6:00

       Yeah, super cool. They also end up hiring into this first Lockheed company one John Northrop.... That name might ring some bells to help them design their future airplanes. John would go on to be a co-founder with Allan of the second Lockheed company, then leave to strike out on his own, where he founded the Avion Corporation. That gets acquired by Douglas and becomes a big part of Douglas. Douglas, of course, is now part of Boeing. [laughing] And then after that, John, as you might imagine, founded, you guessed it, Northrop, which is now Northrop Grumman. So this one dude is responsible for founding or playing a major role in three of the remaining five defense prime contractors today. But anyway, the first Lockheed company goes under. They start the second one a few years later. They have some success with the Vega airplane. People might be familiar with that. It becomes a favorite of Amelia Earhart and Wiley Post, famous early aviators. It becomes successful, this second Lockheed company. They end up selling it to a consortium of Detroit auto moguls, maybe through the relationships from Malcolm or something, that have formed the, quote-unquote, "Detroit Aircraft Corporation," or the DAC. This is including Charles Kettering, the founder of Delco and head of research at GM, is part of this.

   12. BGBen Gilbert7:12

       You may know Memorial Sloan Kettering.

   13. DRDavid Rosenthal7:14

       Exactly, same dude. So the idea was they were gonna build the General Motors of the air. There was just one problem with that, is that aviation did not become a [chuckles] consumer industry like the automobile industry.

   14. BGBen Gilbert7:27

       [chuckles]

   15. DRDavid Rosenthal7:27

       Allan Lockheed departs at this point in time and is kind of tangentially involved, but this company that to this day bears his name, after this point in time, he doesn't really have a lot of impact on. Now, shortly after this maybe harebrained GM of the air idea comes together and Lockheed gets sold to the Detroit Aircraft Corporation, the stock market crash of 1929 and the Great Depression happens, and DAC predictably goes bankrupt. They sell off the Lockheed division, which is actually still fairly profitable, out of bankruptcy to an entrepreneurial young businessman named Robert Gross, and this is really the founding of the modern Lockheed.

   16. BGBen Gilbert8:04

       And the craziest thing, this price that he bought it for, forty thousand dollars, was so low that Allan Lockheed actually considered bidding to buy his company back when they had it on the auction block, and his considered bid was fifty thousand dollars. But he thought, "That is so low that it might be insulting. There's no way they'd ever sell it," so he didn't actually bid, and the winning bid was ten thousand dollars less.

3. 8:28 – 15:23

   World War II forges Lockheed—and introduces Kelly Johnson

   1. DRDavid Rosenthal8:28

      So amazing, when everything you know of Lockheed today got bought out of bankruptcy for forty thousand dollars. It's crazy. So under Robert Gross and his brother Courtland, who gets involved, they really are the ones who turn Lockheed into the great company it became. So before World War II, during the '30s, Lockheed builds the famous Electra airplane, which is absolutely iconic. This is the plane that Amelia Earhart disappears in. Perhaps even more timelessly, this is the plane at the very, very famous scene at the end of the movie Casablanca, when Rick puts Ilsa-

   2. BGBen Gilbert9:04

      Ah

   3. DRDavid Rosenthal9:05

      ... on the plane with Victor to escape the Nazis and says, "Here's looking at you, kid." That plane is an Electra, I believe an Electra Jr.

   4. BGBen Gilbert9:13

      And listeners, you know this plane. It's one of those romantic early aircrafts that were always sort of perched up at an angle, where if you saw it standing still on a runway, it looked like it could just take off at any moment.

   5. DRDavid Rosenthal9:25

      Oh, absolutely beautiful. The Electra and Casablanca brings us to the first core part of our story, which is World War II, which transforms everything, and a man named Clarence Kelly Johnson, who started the famous Lockheed Skunk Works division.

   6. BGBen Gilbert9:44

      And this is great because before I started the research, I was loosely aware that Lockheed had the first Skunk Works. Now it's become almost like Kleenex. When someone says Skunk Works, "Oh, we're gonna start a little Skunk Works division," and, like, it was not a thing until Kelly Johnson started the Skunk Works.

   7. DRDavid Rosenthal10:02

      So there's a wonderful book... There are a bunch of wonderful books around Lockheed, but a book titled Skunk Works that was written by Ben Rich, who was Kelly's second in command for a long time at Skunk Works and then took it over when Kelly retired, and this book is like the Top Gun of- [chuckles]

   8. BGBen Gilbert10:17

      Yes

   9. DRDavid Rosenthal10:17

      ... historical autobiographies. You read it, and you are just fired up. It is amazing what these people did.

   10. BGBen Gilbert10:23

       It's Top Gun for engineers.

   11. DRDavid Rosenthal10:25

       Yes, it's so great. I also highly recommend a book called Beyond the Horizons, which is hard to find and most people don't know about, by Walter Boyne, and that is an amazing history of Lockheed during all these eras that we're gonna talk about.

   12. BGBen Gilbert10:38

       David, that's so mean. You're recommending an out-of-print book to people? [laughing]

   13. DRDavid Rosenthal10:41

       [laughing] We keep doing this. [laughing] Uh, this one, I think I only paid, like, forty bucks for on Amazon.

   14. BGBen Gilbert10:47

       There you go.

   15. DRDavid Rosenthal10:47

       So it's not quite like Taste of Luxury at LVMH, which I think that's now, like, three, four, or five thousand dollars.

   16. BGBen Gilbert10:54

       Oh, yeah. No, we definitely spiked the price.

   17. DRDavid Rosenthal10:56

       We did. All right, so who is this Kelly Johnson? He's basically the Shigeru Miyamoto of airplane design.

   18. BGBen Gilbert11:03

       [laughing]

   19. DRDavid Rosenthal11:04

       His nickname is Kelly because when he was in grade school growing up in Michigan, you know, his real name was Clarence, an older boy called him Clara on the schoolyard, and Johnson attacked him so viciously that he broke this kid's leg. And so after that, all of his schoolmates never called him Clarence or Clara again, and they nicknamed him Kelly.

   20. BGBen Gilbert11:26

       Okay, so not Clara, but why Kelly?

   21. DRDavid Rosenthal11:28

       There was some character of Kelly, kind of an Irish tough guy, that they named him after, and that really was his personality. So after every Skunk Works test flight for the rest of his tenure running Skunk Works, they'd throw a big party, and Kelly would challenge anyone, all comers, to an arm-wrestling match. [chuckles]

   22. BGBen Gilbert11:46

       [chuckles]

   23. DRDavid Rosenthal11:46

       And even when he was, like, sixty years old, he was still beating people.

   24. BGBen Gilbert11:50

       You should Google a picture of this dude. He is just a 1930s man's man at his finest.

   25. DRDavid Rosenthal11:55

       And maybe the best airplane designer ever to live. That is Kelly Johnson.

   26. BGBen Gilbert11:59

       And when you hear the stories about him, he could intuit the answer to difficult math problems in his head, and not just math problems, but, like, physics problems and applying Bernoulli's principle in his head and come up with an answer that was five percent off from the actual answer. And someone else would go spend hours and hours and hours with pencil and paper and slide rule to come to basically the same number.

   27. DRDavid Rosenthal12:21

       The quote from his first boss, Lockheed's chief engineer at the time-... Kelly would become the chief engineer, but his boss at the time, Hall Hibbard, would say, "That guy can see the air." [chuckles] So Kelly ends up winning the Collier Trophy twice, one of only two people to do so in history. The Collier Trophy is the equivalent of, like, the Oscar for Best Picture. It's the best airplane design of the year. He wins it twice. He ends up being bestowed the Presidential Medal of Freedom by Lyndon Johnson later in his career. He is a true American hero. So he ends up joining Lockheed right out of the University of Michigan Engineering School- I'm sorry, University of Michigan, you know, Ohio State.

   28. BGBen Gilbert12:58

       Boo!

   29. DRDavid Rosenthal12:58

       Sorry, Ben- in 1933, at twenty-three years old, and Kelly is really one of the, if not the principal engineer, that designs and builds the Electra, so he becomes the star of Lockheed's then only six-person aviation design and engineering department.

   30. BGBen Gilbert13:15

       Whoa!
4. 15:23 – 22:17

   The 180-day jet challenge: the circus-tent birth of Skunk Works

   1. DRDavid Rosenthal15:23

      Okay, so that was kinda Lockheed and Kelly during the war. Fast-forward now to kind of the waning days of World War II, end of 1944 into 1945. It's pretty clear that America and the Allies are gonna win the war at this point in time, but it's also becoming evident that there are two big problems that are emerging, one very immediate and one sort of longer term. The immediate problem is that in the skies over Europe, in the air theater of the European front, a new technology is appearing on the German side. Jet-powered fighter planes have begun to pop up, and we're not a, uh, military history podcast. Save this for Hardcore History and Dan Carlin, but my understanding of this is that the German jet fighters entered the war too late to make a difference, but if they had entered service earlier, it would've been a big problem. So the US and the Allies, they're like, "Oh, crap, we need to step up our game and get a jet fleet in service for us ASAP."

   2. BGBen Gilbert16:31

      And for anyone who's not an av geek out there, or an aviation geek, it's worth knowing, going from a prop airplane to a jet airplane is not just incremental, it's an entirely different technology. You may have heard the phrase, if you've looked into this before, "suck, squeeze, bang, blow." It is a completely transformative process of how the engine uses the air in order to create thrust that is much more sophisticated than just a propeller.

   3. DRDavid Rosenthal16:58

      My understanding is the engines that airplanes were flying before then, even the P-38, as sophisticated as it was, were basically automobile internal combustion engines.

   4. BGBen Gilbert17:07

      Totally. So we're observing overseas our enemy has a completely new technology that we have not tamed and mastered yet. We're at a disadvantage.

   5. DRDavid Rosenthal17:17

      So that's one problem, and we're gonna focus on that first. The other problem, to put a pin in for later, and we start to get worried that our ally, the Russians and the Soviets, our relationship with them might not be quite what we think it is, and, uh, we might have to address that in the coming decades. So keep that in the back of your mind as we go along here. But let's start with the jet problem. So the German plane that had started appearing in the skies over Europe was the Messerschmitt Me 262, nicknamed the Swallow, and it was the world's first operational jet-powered aircraft. It flew close to five hundred and fifty miles an hour, which is over a hundred miles an hour faster than any Allied plane, including the Lightning P-38. So the US government turns to, of course, the very best person for the job to start the US jet fighter program, Kelly Johnson and Lockheed. And they tell him, "Go make us a jet fighter as soon as possible and by any means necessary. And when we say as soon as possible, we want a prototype in a hundred and eighty days-

   6. BGBen Gilbert18:22

      Wow

   7. DRDavid Rosenthal18:22

      ... with the spec that it must go faster than the German Swallow, so at least six hundred miles an hour. You need to pull out all the stops, bypass any red tape, do absolutely anything."... necessary to make this happen.

   8. BGBen Gilbert18:36

      And for those tracking along at home, six hundred miles per hour, not quite the speed of sound, not quite Mach 1, but approaching that. Something like eighty-ish percent to Mach.

   9. DRDavid Rosenthal18:45

      Yep. So Johnson handpicks 23 of Lockheed's very best engineers and designers and about 30 of the best shop people, the people that actually build the airplanes. And get this: he rents a literal circus tent to house them- [laughing]

   10. BGBen Gilbert19:08

       [laughing]

   11. DRDavid Rosenthal19:08

       -in the parking lot next to a plastics factory that is nearby to Lockheed's headquarters in Burbank, California. And it is because of this that the name Skunk Works is born, because of the outdoor nature in the tent and the smell coming from this plastics factory. At the time, there was a very popular comic strip called Li'l Abner, and a character in this comic strip had a, uh, outdoor moonshine still making bootlegged Prohibition-era alcohol, and this still in the comic strip was called the Skunk Works.

   12. BGBen Gilbert19:44

       I think it was called the Skonk Works.

   13. DRDavid Rosenthal19:46

       That's right, the Skonk Works with an O.

   14. BGBen Gilbert19:48

       Yeah.

   15. DRDavid Rosenthal19:48

       And eventually, the publisher of Li'l Abner sues [chuckles] Lockheed over using Skonk Works, so they change it to Skunk Works. So in this circus tent in a parking lot, Kelly and this super elite team from Lockheed build the first prototype US fighter jet, named the Lulu Belle, in 143 days, start to finish. This is just wild! For years, the US had been working on this technology, and they hadn't gotten it operationalized. The Germans beat them to it, and then in 143 days, Kelly and Lockheed go from zero to flying prototype.

   16. BGBen Gilbert20:31

       Wow.

   17. DRDavid Rosenthal20:32

       Crazy. What a testament to him and to this organization in the circus tent that he has built, the Skunk Works.

   18. BGBen Gilbert20:39

       Seriously. So this 180-day thing is a very interesting constraint placed on them, and it means that they immediately need to go to an acquired axiom that we've talked about forever: Don't do something that's not your core competency.

   19. DRDavid Rosenthal20:55

       AKA, doesn't make the beer taste better or make the plane fly faster. [chuckles]

   20. BGBen Gilbert20:59

       Exactly, and outsource everything else. And if you only have 180 days to do it, you are not going to become an engine manufacturing company. You are going to look around and say, "Okay, which of my allies has the capability to just give me an engine?" So they find this British company, Halford, and they take the Halford H1B Goblin engine, and that is what they put in this prototype.

   21. DRDavid Rosenthal21:22

       Yes. This prototype, the Lulu Belle, would go on to become the P-80 Shooting Star. Lockheed would ultimately make about 2,000 of them, and while they weren't really used in World War II, because the war ended, they would be used in Korea, and it would be the first jet fighter plane in the US military. You raise a really important point, though, that we didn't cover earlier about Lockheed and Skunk Works. They are not engine manufacturers. All of the engines that were going into the planes before, during, since, they're getting from other companies.

   22. BGBen Gilbert21:53

       And that is true across the aerospace industry. That's interesting that the value chain evolved this way, where basically no aircraft manufacturers to this day make their own engines. In commercial, you've got Rolls-Royce, GE, but every single one of these Lockheed planes, the engines are made by someone else.

   23. DRDavid Rosenthal22:08

       Yeah, very different from how the automobile industry evolved, where, like, obviously, Ford and GM and whatnot, they're making their own engines. [chuckles]

   24. BGBen Gilbert22:16

       Yep.

5. 22:17 – 33:29

   What makes Skunk Works work: Kelly’s rules, autonomy, and tiny teams

   1. DRDavid Rosenthal22:17

      So this amazing feat, building what becomes the P-80 Shooting Star and the US's first jet fighter plane in less than six months, this is the beginning of Skunk Works. And Kelly realizes, "Hey, this is something pretty special here." So I want to read a, a little quote from the Skunk Works book. "That primitive Skunk Works operation set the standards for what followed. The project was highly secret, very high priority, and time was of the essence. The Air Corps had cooperated to meet all of Kelly's needs and then got out of his way, and, boy, did they deliver."

   2. BGBen Gilbert22:54

      So the P-80 would eventually give way to the F-104 Starfighter, which was another invention from Kelly and the team. Kelly would win the Collier Trophy for this.

   3. DRDavid Rosenthal23:03

      So after the war, Kelly says, "Hey, this is special. We should keep this going." And the Gross brothers and Lockheed's management agree, and they say, "Yes, you can keep this, quote, unquote, Skunk Works division going, as long as it doesn't take too much money and it doesn't distract from your duties in the rest of the company as now the new chief engineer." [chuckles]

   4. BGBen Gilbert23:26

      [chuckles] Please.

   5. DRDavid Rosenthal23:26

      So Kelly is both the chief engineer of all of Lockheed and running Skunk Works at the same time.

   6. BGBen Gilbert23:31

      It's insane. This not taking too much money thing does become a core tenet of the Skunk Works operation because you can sort of get around management's ire and management's need to report to shareholders and things like that if you're doing amazing things and pulling rabbits out of hats, and when it's not going well, you're not a huge burden.

   7. DRDavid Rosenthal23:52

      Yeah. So I'm gonna read a little more from Skunk Works here. "So Kelly and his handful of bright young designers that he selected took over some empty space in Building 82." This is a building on the Lockheed campus, which is right next to the Burbank Municipal Airport. It's an unmarked building. Literally, like, this is a commercial airport that average people are taking off of every single day. So, then it continues: "Those guys brainstormed what if questions about the future needs of commercial and military aircraft, and if one of their ideas resulted in a contract to build an experimental prototype, Kelly would borrow the best people he could find in the main plant to get the job done. That way, the overhead was kept low, and the financial risks to the company stayed small. His small group were all young and high-spirited, who thought nothing of working out of a phone booth if necessary, as long as they were designing and building airplanes."... All that mattered to Kelly was our proximity to the production floor. A stone's throw was too far away. He wanted us, the engineers and designers, only steps away from the shop workers to make quick structural or parts changes.

   8. BGBen Gilbert25:02

      Yes, I love this. I think this is a huge learning, keeping your designers as close as possible to production so the game of telephone is as short as possible, it is incredibly valuable. And having the designers being able to glance up at their desk and see, like, literally the way things are being manufactured so they can say, "Oh, that looked good in the diagram, but in practice, you have to bring this big thing around over here. Maybe we can make that better the next time we design it." It's just such a great key insight. The other thing on the small number of people, this gets to the Skunk Works rules, and Kelly created this incredible document, 14 rules, that we'll link to in the show notes.

   9. DRDavid Rosenthal25:41

      Oh, yeah.

   10. BGBen Gilbert25:42

       The third of which-- I mean, they're all incredible, the third of which really applies here, and I quote, "The number of people having any connection with the project must be restricted in an almost vicious manner. Use a small number of good people, ten percent to twenty-five percent, compared to the so-called normal systems."

   11. DRDavid Rosenthal26:01

       These people should all be together, all of them building relationships, collaborating, working together to produce the very best product.

   12. BGBen Gilbert26:08

       And you see this in products in the future, too: the iPhone, the iPod. I mean, you read the stories about the early teams there are six, eight, ten people. They're all full stack, so there's these unicorns that cross disciplines, and they're ten-x, hundred-x engineers, so you really only need a handful of really good people.

   13. DRDavid Rosenthal26:25

       So I think it's worth going through a bunch of Kelly's rules. But first, we have one of our very favorite Acquired companies to tell you about.

   14. BGBen Gilbert26:34

       Yes, Vanta, and we have something all new to share this time. Of course, you know by now that Vanta enables companies to generate more revenue by getting their compliance certifications. And of course, you also know it's amazing for startups since it's the fastest and easiest way to get SOC 2, ISO 27001, and other certifications that, as a small startup, you just would not otherwise have the resources for. But today, we wanna talk about why Vanta is also the best security compliance platform as you hit hypergrowth and scale your company into a larger enterprise.

   15. DRDavid Rosenthal27:08

       Yes, Vanta now has a tremendous amount of customization to meet your increasingly complex security needs. If you're already a larger company, and in the past you maybe showed Vanta to your compliance department and heard, "Oh, we already have a process in place, we can't integrate this," now, even if you already have a SOC 2, Vanta makes maintaining your compliance way more efficient and robust. For example, just last week, they launched vendor risk management. Take, for example, oh, I don't know, the aircraft industry, where you have-

   16. BGBen Gilbert27:36

       [chuckles]

   17. DRDavid Rosenthal27:36

       ... tons of subcontractors that are working. You don't know what risks they have. You need to know this. This allows your company to quickly understand the security posture of the vendors that you are choosing in a standardized way that cuts down on security review times. This is awesome.

   18. BGBen Gilbert27:50

       Yeah, and on the customization front, they also now enable custom frameworks built around your custom security controls and policies. Of course, that's also in addition to the fact that with Vanta, you don't just become compliant once, you stay compliant with real-time data pulled from all your systems, and you get a Vanta Trust Page report to prove it. So whether you're an early-stage startup or a large enterprise, demonstrating trust with Vanta is a no-brainer. We have a brand-new offer from them for the first time in the company's history.

   19. DRDavid Rosenthal28:21

       Ooh.

   20. BGBen Gilbert28:21

       If you click the link in the show notes or go to vanta.com/acquired, you get a free trial, and if you decide that you love it, you will also get one thousand dollars off when you become a paying customer since Vanta loves Acquired. So to get both of those, remember, click the link in the show notes, go to vanta.com/acquired, and our thanks to Vanta. All right, David, so what makes Skunk Works work?

   21. DRDavid Rosenthal28:43

       Well, to start, all that mattered, literally the only thing that matters, is rapid delivery of superior products, and that was driven by the expedient requirements of World War II, [chuckles] literally saving America and the free world, and then the Cold War, which is gonna come in in a big way in a second here. Listeners might be thinking, "Isn't all that matters in any business rapid delivery of superior products?"

   22. BGBen Gilbert29:12

       [chuckles]

   23. DRDavid Rosenthal29:12

       Like, why is this new and unique and different? The reality, though, is that that's almost never the case. There's politics. There's personalities.

   24. BGBen Gilbert29:22

       Well, and you rarely have an existential threat that you must cut through all the red tape. It's like Operation Warp Speed, the way that we got the vaccines as fast as we did. If the world is on the line, what can you do away with in your processes, and which people can you hand-select to solve it?

   25. DRDavid Rosenthal29:38

       Competition and existential competition kinda has a way of bringing out the best in people. So Ben, you already talked about rule three. I wanna-

   26. BGBen Gilbert29:46

       Did we pick the same ones? I'm so curious. [laughing] We got 14 to pick from. Let's see. Let's pick three that we're gonna highlight here. We already talked about number three. What are your others?

   27. DRDavid Rosenthal29:55

       The next one I wanna talk about is, "The Skunk Works manager must be delegated practically complete control of his program in all aspects."

   28. BGBen Gilbert30:04

       Yeah, I mean, this is like the auteur theory. Like, you have to have a single person's vision and the buck stopping with a single person who has ultimate control and isn't a squeezed middle manager. He's the program manager for any given program that they're working on, any new aircraft, and also, he's the guy flying to Washington to interface with the government. It's not like he's dealing with the engineers and then calling the sales force and being like, "Hey, can you go to a steak dinner with our guy at, in Washington?" No, it's Kelly.

   29. DRDavid Rosenthal30:33

       And at its most productive, Skunk Works, I think, was about maybe 50 designers and engineers and maybe 100 machinists and shop people. Like, this is not a large organization.

   30. BGBen Gilbert30:44

       It's crazy.
6. 33:29 – 39:58

   Cold War terror and the intelligence imperative: why the U-2 mattered

   1. DRDavid Rosenthal33:29

      Yeah, all right. So a minute ago, I was talking about the two problems that America and its allies have at the end of World War II. One was the jets. Skunk Works addresses that with the P-80 Shooting Star. The other problem is, yeah, we're gonna win this war, but there's a whole new war that's just about to start.

   2. BGBen Gilbert33:46

      Yeah, and the war we're coming out of is World War II, but of course, the Cold War against the Russians is just starting.

   3. DRDavid Rosenthal33:51

      And this is so hard for us to process today, but doing the research, I really felt it. I think for a lot of people, the stakes and the pressure and the worry about the Cold War was greater than World War II.

   4. BGBen Gilbert34:08

      Yeah, that's a great point. When the Americans entered World War II, we had reason to believe that we could come in and win. The Cold War, I think, to the American psyche, felt very different.

   5. DRDavid Rosenthal34:19

      I think we had good reason to believe we were not gonna win. So right after the war, Churchill comes to America and gives his famous Iron Curtain speech in Fulton, Missouri, that an iron curtain has descended over Europe in the form of the Soviet Union. And then before the end of the decade, I didn't really realize the timeline on this, in August 1949, the Soviet Union detonates its first nuclear bomb. And nobody believed that they were gonna have the bomb that quickly or that powerfully. And not only did they have the bomb, but whether this was real or not, or positioning, people really believe that the Soviets' and Khrushchev's intention is to use the bomb against America if they ever believe that they could do so without fear of retaliation, that they could knock us out first, that they would do a first strike and use nuclear weapons on America. And this kicks off the Cold War arms race, and people probably know and learn about mutually assured destruction and deterrence. This really was the policy of the military and the American government, that we need to have capabilities to deter the Soviet Union from launching a first nuclear strike against us by being able to guarantee, and have them know that we guarantee, that if they do so, we will destroy them. So they can't do this, because if they do, they will be destroyed. That was the whole policy, and that's, like, a really scary place to be. This is like, if somebody over there in the Kremlin decides one day that they think they can win, we're all gonna die.

   6. BGBen Gilbert35:58

      Right.

   7. DRDavid Rosenthal35:59

      In 1955, there was a national poll that asked the question: What do you think you are most likely to die from? And over half of America responded that they thought they were most likely to die in thermonuclear war-

   8. BGBen Gilbert36:16

      Wow

   9. DRDavid Rosenthal36:17

      ... above any other cause. Let that sink in. Over half of the country thought they were gonna die in nuclear war.

   10. BGBen Gilbert36:24

       Horrifying. And so in a war of perception, intelligence is paramount.

   11. DRDavid Rosenthal36:29

       Bingo. It is the most important thing. Even more important than your ability to strike and wage war is your ability to know what the current state of the opponent's ability is to strike and wage war. So that means that the battleground is no longer the use of weapons, but the intelligence about the existence and positioning of weapons. And nobody is better suited than Skunk Works to be the U.S. government and military's primary, sounds cliché to say, but sword and shield during this war.

   12. BGBen Gilbert37:05

       Yes. So this brings us to the U-2 spy plane.... and this plane serves such an important purpose that it ended up being brought into service in 1955 and was only decommissioned in 1989.

   13. DRDavid Rosenthal37:20

       Yeah, incredible.

   14. BGBen Gilbert37:22

       Now, there are many airplane programs that have ten, twenty, twenty-five year time frames.

   15. DRDavid Rosenthal37:28

       For very different reasons.

   16. BGBen Gilbert37:29

       Yes, [chuckles] that we will talk about in the military industrial complex. But the U-2 was basically the first time that America found a plane that it could use for a long time and wasn't rapidly replaced by the next best thing.

   17. DRDavid Rosenthal37:41

       Okay, so it would be really great if, you know, you could fly a plane over Russia and take pictures and understand all this.

   18. BGBen Gilbert37:46

       'Cause there's no satellites yet.

   19. DRDavid Rosenthal37:48

       Whoa, are there satellites?

   20. BGBen Gilbert37:49

       [laughing]

   21. DRDavid Rosenthal37:49

       Whoa. We'll talk about that a little later. But you can't just fly a plane into Russia and do that. It's a closed country. The Russians are gonna shoot you down if you do it.

   22. BGBen Gilbert37:57

       We're not technically at war, so it would violate international treaties to go into their airspace. We would start the war by doing that.

   23. DRDavid Rosenthal38:03

       Exactly. So the first thing- - it's funny, you know, it's kind of in the news now that China's doing this now. The first thing we try is unmanned spy balloons. [chuckles] We send balloons over Russia.

   24. BGBen Gilbert38:13

       Failed weather experiments.

   25. DRDavid Rosenthal38:14

       Yeah, failed weather experiments. Yeah, that fails on many fronts, including actually returning usable photos of Soviet nuclear installations. So really, it becomes clear that what's required is an entirely new type of airplane that can either do one of two things, and ideally both: fly over Russia stealthily and undetected by radar, or two, fly high enough or fast enough that they can't shoot it down, even if they do.

   26. BGBen Gilbert38:42

       And so Skunk Works, being the ambitious organization that they are, tries for option one, and we don't frankly know very much about what Russia's capabilities are. So we're pretty sure that we can build some airplane that flies high enough that their radar systems won't detect us, and great, so let's do that.

   27. DRDavid Rosenthal39:01

       Yeah, great. So this is interesting. What government agency contracts them to do this? It's not the military. We're in the spy game now. It's not the Army, not the Navy, not the Air Force, it's the CIA. They are building their own air capabilities, and all of the work that Skunk Works does here, and for many years to come, is for the CIA.

   28. BGBen Gilbert39:22

       Yep.

   29. DRDavid Rosenthal39:23

       So what exactly is the challenge that Skunk Works has laid out in front of them for designing this new spy plane? Well, at the time, the maximum altitude that airplanes flew was about forty thousand feet.

   30. BGBen Gilbert39:36

       The US thought that the Soviets' best interceptor fighter aircraft could get to about forty-five thousand feet.
7. 39:58 – 43:34

   Building the U-2: custom fuel, space suits, and Edwin Land’s camera

   1. DRDavid Rosenthal39:58

      Right. So the CIA's spec for Skunk Works for the U-2 is to fly at seventy thousand feet. Now, there are a couple problems with that. [laughing] One is that normal jet fuel doesn't work at that altitude. You know, at that altitude, the pressure, the temperature, everything about the environment, you're getting to be closer to space than you are to normal Earth atmosphere, and things start going wrong. So, uh, that one, they actually subcontract with Shell Oil to make a new formulation of jet fuel that does work up there. So, you know, that problem is solved. Problem number two is maybe a little bigger, and that is that humans cannot survive at that altitude. [chuckles]

   2. BGBen Gilbert40:41

      So certainly you need a pressurized cabin, but if something were to happen and you needed to be out of the cabin, you know, cold, no air, blah, blah, blah.

   3. DRDavid Rosenthal40:49

      Yeah, and I don't know the technical details, but I think even the cabin pressurization technology that existed then was not gonna cut it at seventy thousand feet.

   4. BGBen Gilbert40:58

      So you basically need a space suit.

   5. DRDavid Rosenthal41:01

      Exactly. Some of this technology came from, like, diving suits and some other things that came before this, but I think this was the big coming together of the technology that created the space suit, and that's what they put these pilots in.

   6. BGBen Gilbert41:14

      Wow!

   7. DRDavid Rosenthal41:15

      So Lockheed and Skunk Works win the contract from the CIA. They start working on this plane in sometime in 1953.

   8. BGBen Gilbert41:25

      Incredibly top secret. We wouldn't reveal the fact that this existed to the Russians, our own people, for years and years and years.

   9. DRDavid Rosenthal41:32

      I mean, this is like the quote from earlier that we read from Ben Rich when he started working on this project day one and saw the prototype, and then it hit him like a sack of cement, you know, how important this was. So Skunk Works completes and delivers the plane by July 1955, so, like, a year and a half, and for a total project cost of three and a half million dollars. That's an M, that is not a B. A year and a half and three and a half million dollars for one of the most important products and pieces of technology in American history. Astounding! This is what Skunk Works is capable of.

   10. BGBen Gilbert42:12

       So they're flying higher than any plane has ever flown before. They're using a different type of fuel. People are flying in space suits for the first time. Feels like to be a reconnaissance aircraft, you would also need one other key component in order to achieve the mission of spying on the enemy.

   11. DRDavid Rosenthal42:30

       Yeah, to take photos, you need a camera.

   12. BGBen Gilbert42:32

       Indeed, and you would need an all-new type of camera with all-new type of lens, capable of taking photographs of something seventy thousand feet away from you through, you know, a whole bunch of atmosphere. Gosh, if only the US had someone who was just incredible at this sort of pioneering optics technology.

   13. DRDavid Rosenthal42:55

       Indeed, the US did, and that was Dr. Edwin Land and the Polaroid company, who subcontracted and created all of that. And actually, I believe it was Edwin Land himself that helped convince President Eisenhower to even pursue this project in the first place. He was like: "We can build the camera that can do this if we can get the airplane built."... we can do this project.

   14. BGBen Gilbert43:15

       This blew my mind. It is so cool to see the intersections of different innovators throughout history. I mean, Edwin Land is the man who inspired Steve Jobs, and he's building the U-2's camera.

   15. DRDavid Rosenthal43:27

       Oh, just wait. We are gonna have a lot more tech and Silicon Valley and Apple stuff that's gonna come up here-

   16. BGBen Gilbert43:33

       Ooh

8. 43:34 – 48:36

   Area 51 is born: Groom Lake testing, UFO lore, and pilot risks

   1. DRDavid Rosenthal43:34

      -in just a little bit. So they build the plane. You gotta test this thing. They're not gonna roll it out on the runway in Burbank and take off [laughing] and, uh, you know, just head for the Soviet Union. You gotta test it, and, uh, you know, it's gotta be secret and whatnot. And remember, Kelly Johnson, one of his big principles is, like, "We test our products. You, the government, don't test our products. We test our products."

   2. BGBen Gilbert43:55

      And we should be clear, this U-2 spy plane looks crazy.

   3. DRDavid Rosenthal43:58

      It has a hundred-foot wingspan.

   4. BGBen Gilbert44:00

      Yeah, this thing, if you saw it taking off, you would be like, "Okay, I've seen airplanes. That thing is completely different." So it's not like they could disguise it. Like, you need to figure out somewhere in the United States where there's basically nobody so that you can test this thing.

   5. DRDavid Rosenthal44:17

      Oh, this is so fun. Oh, the smile on our faces is like- [laughing] You can't see us, but it is stretching out of the room here. Yeah, you can't just paint this thing like a school bus and pretend it's something else. So they need to find a suitable test site. They go scouting all across the Western U.S. in kind of remote areas. Kelly Johnson is sort of like Sam Walton in his prop plane, scouting out for, you know, Walmart locations, flying sideways.

   6. BGBen Gilbert44:40

      And then they get an idea, and that idea is: Where is a place where, even if there were people before, there sure aren't people now because nobody in their right mind would wanna be anywhere close to where we just tested our nuclear bombs? [laughing] And they go, "Oh, as long as we figure out that it's safe, that would be a perfect place for us to test this airplane."

   7. DRDavid Rosenthal45:09

      So they find a dry lake bed in Nevada called Groom Lake, and there's a quote from Kelly Johnson here about this in the book. "We flew over it, and within 30 seconds, you knew that this was the place. It was right by a dry lake. Man alive, we looked at that lake, and we all looked at each other. It was another Edwards," like Edwards Air Force Base. "So we wheeled around, landed on that lake, taxied up to one end of it. It was a perfect natural landing field, as smooth as a billiard table, without anything being done to it."

   8. BGBen Gilbert45:41

      How insane is it that this is where we were testing nukes? I actually do not understand how there was not radiation poisoning, and I, I don't fully understand the half-life and all that needs to be done, but, like, how is that safe?

   9. DRDavid Rosenthal45:56

      Yeah, it's insane. And not only were there recently nuclear tests happening right nearby, I believe that nuclear testing continued right nearby while they're using this site, Groom Lake, to test the U-2.

   10. BGBen Gilbert46:10

       A hundred percent. It's the craziest thing. They had to, like, sometimes take some time between the most recent nuclear test and when they wanted to go fly, 'cause these sites are, like, I don't know, 12 miles away from each other or something pretty close. If you're curious, listeners, there's this great, uh, documentary on Amazon called Secrets in the Sky: The Untold Story of Skunk Works that has a bunch of footage of all of this.

   11. DRDavid Rosenthal46:33

       Wow. So, listeners, if you haven't caught on already, the location that we are talking about-

   12. BGBen Gilbert46:39

       A Nevada test site in the middle of the desert.

   13. DRDavid Rosenthal46:42

       Nuclear, some really strange-looking flying aircraft. This is Area 51. [laughing] Skunk Works creates Area 51.

   14. BGBen Gilbert46:52

       And, of course, there's rumors of UFOs there. They wanna keep everyone away. For the people who they can't keep away, they're gonna see some really weird flying stuff, so of course, the rumors are gonna start. It's all goodness for Skunk Works. This cover is great.

   15. DRDavid Rosenthal47:06

       Oh, it's even better than that. I can't remember which plane and/or when this was, but at one point in time, the, one of the test flights crashed, and, you know, the pilot survived, and, like, somebody saw him. He was wearing a spacesuit.

   16. BGBen Gilbert47:19

       [laughing]

   17. DRDavid Rosenthal47:19

       Nobody knew what a spacesuit was. Of course, he looked like a freaking alien.

   18. BGBen Gilbert47:22

       Right. It would be another 10 years before we would have the Moon missions.

   19. DRDavid Rosenthal47:27

       Yeah, that's so funny. Amazing. [laughing] Yeah, it's all Skunk Works and the U-2.

   20. BGBen Gilbert47:35

       Wow.

   21. DRDavid Rosenthal47:35

       And then the Blackbird and everything else we're gonna get into later in the story, all happening out of Area 51.

   22. BGBen Gilbert47:41

       The prep work that the pilots had to go through before getting on these planes, too, were nuts. They needed to breathe pure oxygen for two hours to remove all the nitrogen from their blood in case they had to eject, 'cause remember, these are test pilots on a super experimental aircraft. They were often ejecting, or they were often... You know, things went wrong in these tests.

   23. DRDavid Rosenthal48:01

       Yeah, a bunch of people died doing this, like, we should say.

   24. BGBen Gilbert48:04

       Yeah, I mean, a great sacrifice to bring this program and subsequent Skunk Works programs into the world. But basically, what was happening is, if you didn't breathe pure oxygen for two hours, you could get the bends, you know, for anyone who's scuba dived, and you can't fly right afterwards, from ejecting. And so it's like, well, if you managed to get out of the aircraft before it crashed, then that could kill you. So you needed to make sure that this sort of oxygenating of your blood and getting rid of all the nitrogen made it so that if you did need to eject, then you would survive this as well.

9. 48:36 – 1:01:15

   Overflying the USSR: success, miscalculation, and the Gary Powers shootdown

   1. DRDavid Rosenthal48:36

      Yeah, crazy. Okay, so they test the U-2 at Area 51. So great. They get it up and running and in active service as an operational spy plane, pretty much the world's first, at least of this type. Within a year, the first Soviet Union overflight happens on July 4th, 1956.

   2. BGBen Gilbert48:59

      Of course it was.

   3. DRDavid Rosenthal49:00

      Of course it was July 4th. Now, this is so interesting. There's a whole bunch of things that happen when they take off. Like, they don't know what's gonna happen. Is this thing gonna work? Are the Soviets gonna see us? Like, we're gonna learn so much here. You can't script this stuff. The Soviets tracked it on radar.... even at 70,000 feet.

   4. BGBen Gilbert49:16

      The whole way?

   5. DRDavid Rosenthal49:17

      The whole way. Right from it takes off, the whole flight path through Russia, they knew everything that we were doing.

   6. BGBen Gilbert49:24

      We were super wrong about their radar. They didn't just have low-altitude radar. They were capable of radar that could see straight up into space. Wherever we were flying, they were gonna see us.

   7. DRDavid Rosenthal49:36

      Yeah, which we had no idea, so we, we learned this as part of it. So here's what's funny. We know that they see it from takeoff. They track the U-2 the whole way, this whole top-secret program, like, "Oh, no, it's busted!" They see it, but it turns out they can't hit it. So, you know, a whole bunch of fighter jets scramble, and the fighter jets, they can't get up that high, so they can't intercept it. They launch surface-to-air missiles. The missiles can't hit anything that high up. So the U-2 just flies along. They're tracking it the whole way. There's planes flying along behind it, and they can't do anything.

   8. BGBen Gilbert50:07

      But at least we get the intel now in the US that, okay, [chuckles] they can see up here, and so it's probably just a matter of time before they're capable of shooting something down up here, too.

   9. DRDavid Rosenthal50:18

      Yes, but here's what's so interesting. Remember, this whole war, like, God, it's fascinating. It's a war, but it's not a war. It's a war of perception. So in that flight, we get incredible photographic observational evidence, and we would fly so many missions over Russia for the next few years, getting this incredible intelligence. The Soviets never say anything because if they were to say anything and say that they tracked us into it, then they would be admitting that they were powerless to stop it. This war of perception, like, it's so crazy, the incentives and motivations here, but it makes sense. They're not gonna say anything and reveal the program, so it remains top secret because if they did, their sort of position and posturing of strength would be compromised.

   10. BGBen Gilbert51:02

       And neither country really wants to be at war, so we're both maintaining this, uh, we're not at war, you know, and we're not gonna tell you that we're preparing for if we need to be, but of course, we're gonna do whatever we can to understand the best about our enemy, or not our enemy, uh, other countries-

   11. DRDavid Rosenthal51:19

       Yeah

   12. BGBen Gilbert51:19

       ... that we're not at war with.

   13. DRDavid Rosenthal51:20

       Adversary.

   14. BGBen Gilbert51:21

       Right.

   15. DRDavid Rosenthal51:22

       And I actually think there may be, you know, military historians that understand this better than us, but I think this was actually an optimal outcome for the US because remember, just like you were saying, Ben, nobody actually wants to go to war here. The goal is for both sides to keep each other in check, and so this, the U-2 and these reconnaissance missions, become a major chess piece for us on our side of the board to keep the Soviets in check. We like this state. I think that they know about it, but nobody talks about it.

   16. BGBen Gilbert51:55

       The other crazy thing is this camera is incredible. If you look up photos taken by the U-2 spy plane, it is remarkable what, in the mid-'50s, this thing was capable of taking photographs of from 70,000 feet.

   17. DRDavid Rosenthal52:07

       The engineering all around that went into this is just incredible. I mean, you could do a whole podcast just about the technical aspects of the engineering advances.

   18. BGBen Gilbert52:15

       And it basically works. They find a whole bunch of nuclear test sites. They find where missiles are kept. We basically have a real-time count of the Soviet Union's warheads, the Soviet Union's fighter jets, the capabilities that they have with their radar because it's painting our airplanes, so we now know that that exists. Mission accomplished in spades on this thing.

   19. DRDavid Rosenthal52:36

       And we talked earlier about the cost of $3.5 million. You know, I think you could make an analogy to, like, the Louisiana Purchase in terms of, like, best deals that the United States government-

   20. BGBen Gilbert52:45

       [chuckles]

   21. DRDavid Rosenthal52:45

       ... ever got relative to, like, the benefit to America. This is huge.

   22. BGBen Gilbert52:49

       Arguably, the last great deal they got from Lockheed Martin, but- [laughing]

   23. DRDavid Rosenthal52:53

       [laughing] Well, no, there's some more that we're gonna talk about in a minute. So this all continues. We fly dozens, maybe hundreds, of U-2 missions over the next few years. The Russians are constantly trying to shoot them down. They fail. Nobody says anything. And then on May 1st, 1960, ironically, on May Day, we launched the U-2 program on July 4th, and it ends, at least over the Soviet Union, on May Day 1960. The Soviets finally have developed a missile that can reach 70,000 feet with accuracy, and they shoot down a U-2. This was the first time in history that a ground-to-air missile had shot down an airplane.

   24. BGBen Gilbert53:34

       Huh.

   25. DRDavid Rosenthal53:35

       I didn't realize this. I read that. I was like, "Oh, whoa!" I guess maybe the technology didn't exist during World War II, uh, the Korean War, and, um, so this was a major historical moment in so many ways. America, and the CIA, and the government, the president, they're way, they're like, "Okay."

   26. BGBen Gilbert53:48

       Right, what do we do? America's posture is, we were never there.

   27. DRDavid Rosenthal53:51

       Right. But we know now that the motivation for Russia not to talk about it now is gone. Now, they can position this as, like, "Hey, we're so strong that we can keep people out." We expect them to say something right away. Couple weeks go by, they say nothing. Quite surprising.

   28. BGBen Gilbert54:08

       All we know is we've lost contact with our pilot, and we didn't see them come back and land, so we presume that they shot down our pilot, but they're not saying anything.

   29. DRDavid Rosenthal54:19

       But we don't really know, and we presume that if this plane was shot down, as we think, probably the pilot was killed. I mean, like, you shoot down a plane from 70,000 feet-

   30. BGBen Gilbert54:28

       Right
10. 1:01:15 – 1:17:26

    Lockheed helps create Silicon Valley: the Missile Systems Division moves north

    1. DRDavid Rosenthal1:01:15

       I honestly can't believe it, and I'm so glad that we get to tell it here. All right, let's set the context. So if we rewind back to World War II, one thing we kind of mentioned here now as we were talking about the U-2 and the Russians tracking it on radar, but we didn't talk about during World War II, was the importance of radar.... Now, so much of World War II was an air war, both in Europe and then especially in the Pacific, and the development of both radar and anti-radar technologies was paramount in the war efforts. Yes, there was lots of land-based fighting and tanks and all that stuff, but World War II was the first real air war. And obviously, that importance of radar continued into the Cold War, just like we were talking about with U-2 flights. Now, during World War II, where was all of the US and Allied radar work and research being done? It was primarily being done out of two institutions in Boston: MIT, with the Radiation Laboratory, or the Rad Lab, and Harvard, with the Harvard Radio Research Laboratory. Now, here's what's interesting. Neither of these two labs at MIT and Harvard existed before the war. [chuckles] The government directed MIT and Harvard to set them up as part of the war effort. They didn't exist before, and then MIT and Harvard, very fortunately for California and Silicon Valley, shut them down after the war.

    2. BGBen Gilbert1:02:46

       Hmm.

    3. DRDavid Rosenthal1:02:47

       Now, it turns out that the head of the Harvard lab was a professor named Frederick Terman. Might ring some bells for people, especially people who went to Stanford. Terman was probably the world's leading expert on radio engineering, and also vacuum tubes and early computing. Except Terman wasn't actually a Harvard professor, Terman was a Stanford professor! He was just on loan to Harvard during the war years because that's where the government set up the radio labs.

    4. BGBen Gilbert1:03:21

       And the government allocated millions and millions of dollars of funding to Harvard and MIT, and something like fifty thousand dollars to Stanford. All of the funding for this was Harvard and MIT.

    5. DRDavid Rosenthal1:03:31

       Yes. They assembled all of the world's experts, and Terman was arguably one of, if not the leading world expert in radio engineering, assembled them there in Boston, or I guess in Cambridge, at Harvard and MIT. Cambridge residents would get mad at us if we say Boston.

    6. BGBen Gilbert1:03:47

       [laughing]

    7. DRDavid Rosenthal1:03:47

       So after the war, Terman comes back to Stanford 'cause Harvard shut down the lab. He comes back to Stanford, and he does three things. First, he recruits away all of the best people that he worked with at the Harvard Radio Lab from universities all over the country. He recruits them to Stanford.

    8. BGBen Gilbert1:04:05

       And he gives them tenure immediately.

    9. DRDavid Rosenthal1:04:09

       Yes.

    10. BGBen Gilbert1:04:09

        He's like, "I wanna make this deal as sweet as possible for you because I wanna will Stanford into existence as an engineering institution."

    11. DRDavid Rosenthal1:04:18

        Yes, of the highest order. So that's one. Two, soon after he gets back to Stanford, he becomes the provost of the entire university, and as provost, he completely changes the way tech transfer is done at Stanford. No other university has as good of a tech transfer policy as Stanford.

    12. BGBen Gilbert1:04:38

        They're notoriously friendly.

    13. DRDavid Rosenthal1:04:40

        Yes, notoriously friendly, and everywhere else, including Harvard, MIT, Princeton, blah, blah, blah, are notoriously unfriendly and hard to work with.

    14. BGBen Gilbert1:04:47

        The classic story is Stanford owned one percent of Google at spinout, which ended up making them an ungodly amount of money because of how big Google became, and if that were at other universities, they would have said, "Fifty percent is what we need to keep," or, "Thirty-three percent is what we need to keep," and they would have smothered the innovation before it could become commercially viable.

    15. DRDavid Rosenthal1:05:06

        Now, I sorta in the back of my mind knew this, 'cause I had watched Steve Blank's talk many years ago, but I'd kind of forgotten. I just thought it was like, "Oh, well, that's 'cause Stanford and Silicon Valley, like, we get it."

    16. BGBen Gilbert1:05:16

        [laughing]

    17. DRDavid Rosenthal1:05:16

        "We're smart." Not that we're smarter, but there's this attitude of, you know, if you're in Silicon Valley, even to this day, you're like, "Yeah, we get how the culture works here, and, like, the East Coast doesn't get it."

    18. BGBen Gilbert1:05:26

        As if this somehow existed a priori 'cause it was just in the water and came from nowhere.

    19. DRDavid Rosenthal1:05:31

        Not at all. It's all thanks to Terman and World War II and his experience at the radio lab. When he becomes provost, he's still a super devoted patriot. He knows how important this work is, that it was during World War II, and he knows it's just as, if not more important during the Cold War. So what he does is he encourages students and professors to leave Stanford and go set up companies and work for defense firms and work for the military, not to make money, but to be, like, in the nation's service.

    20. BGBen Gilbert1:06:04

        Take the research and the people who are doing the research out, start a brand-new company. He would try to help you find funding, which, at that point, venture capital didn't exist, so he was introducing you to customers who could sort of pre-order from you to fund your research. And he basically believed that a commercial ecosystem leads to more innovation than one that is purely happening in academia, and thus, could better serve the needs of the nation.

    21. DRDavid Rosenthal1:06:32

        [chuckles] Customers.

    22. BGBen Gilbert1:06:34

        Customer. [chuckles]

    23. DRDavid Rosenthal1:06:35

        Customer!

    24. BGBen Gilbert1:06:36

        [laughing]

    25. DRDavid Rosenthal1:06:36

        Hang on to that thought for one second.

    26. BGBen Gilbert1:06:38

        If you were doing all of this ten years before, the university would have looked at you and said, "What are you doing? You're encouraging this stuff to go away from us."

    27. DRDavid Rosenthal1:06:45

        Oh, it would have been career suicide in academia-

    28. BGBen Gilbert1:06:48

        Yeah

    29. DRDavid Rosenthal1:06:48

        ... to do this. Instead, at Stanford, it becomes the best thing you can do for your career because in Terman's mind, it's the best thing you can do for your country. Okay, [chuckles] so that was number two. Number three, he carves off a big part of the Stanford campus. Now, if you've ever been to the Stanford campus... My God, I was so lucky to spend two years there. It's, like, paved in gold. It's literally Shangri-La. They have so much land. It's the most beautiful, like, idyllic place in the world.

    30. BGBen Gilbert1:07:15

        And, like, eighty percent of the land is still undeveloped.
11. 1:17:26 – 1:28:21

    Deterrence under the sea: Polaris and the submarine-launched nuclear triad

    1. DRDavid Rosenthal1:17:26

       Okay, so what was Lockheed actually doing there? We talked about them working on intercontinental ballistic missiles, ICBMs, and missile defense systems. I, I think they probably did continue to work on that. But there were two projects that this new division of Lockheed took on that really changed history, and both of them together became, for Lockheed at least, and the parent company, by far the biggest driver of profits for the coming decades. And really, as we'll see, this division, you know, not Skunk Works, this division kept Lockheed alive. Lockheed would have absolutely died without this division. So what were these projects? One went up to space, as perhaps is obvious, and we've foreshadowed, and literally is in the name of the company, the Lockheed Missiles and Space Corporation, and the other one went down under the oceans. So let's talk about that one first 'cause I think it happened first chronologically. So submarines had obviously been a thing since World War II and even before that, back to World War I. There's lots of advantages to submarines during wartime: they're stealthy, they can basically travel anywhere in the world, you can stay hidden for long periods of time, especially once nuclear submarines are developed that can stay underwater for months at a time, self-powered. They're both a great offensive and a great defensive weapon during periods of active war. But during the Cold War, they're kinda useless because if you wanted to have a chess piece in position to strike a land-based target, if you could even do that at all with a submarine, you gotta get the submarine pretty dang close to the land, which means close to Russia, which means they know you're there, and that's a provocation.

    2. BGBen Gilbert1:19:18

       Hmm.

    3. DRDavid Rosenthal1:19:19

       Unless somebody could maybe somehow figure out a way to fire an intercontinental ballistic missile out of a submarine and go up into, you know, the air and into space and then hit a land-based target far, far away. Now, this seems crazy. It's hard enough to make this happen from the ground. You're talking about doing this from the sea with all the, like, waves and the lack of stability? No way this could happen.

    4. BGBen Gilbert1:19:47

       This thing has to thrust through air after it thrusts through water.

    5. DRDavid Rosenthal1:19:51

       ... Oh, well, you're making the leap already that you would fire it underwater. At first, when the Navy contracts Lockheed to work on this in 1955 to build the Navy's Fleet Ballistic Missile system, its FBM, the idea is they're gonna fire these things from the surface of the ocean. The submarine's gonna rise up-

    6. BGBen Gilbert1:20:09

       Ah.

    7. DRDavid Rosenthal1:20:10

       They're gonna, like, stabilize it in water, and [chuckles] then they're gonna fire off a missile from the deck of a ship or a surfaced submarine.

    8. BGBen Gilbert1:20:17

       You could imagine another issue, which is these things have rockets on them, so you have to not destroy the launch pad, which is the submarine full of American humans, while launching it.

    9. DRDavid Rosenthal1:20:28

       Yeah, this is a big challenge. The reason that it was worth trying was that if you could create a naval-based intercontinental nuclear strike capability, it completely changes the strategic landscape of deterrence and first strike versus second strike and retaliation. So what we were really afraid of, we thought the Soviets would pursue a first-strike policy if they felt they were able to. The way that they would do that is if they felt that they could, in that first strike, knock out all of our nuclear capabilities. If they could target all of our land-based ICBMs, incapacitate them, then we would be incapable of responding with a second strike, and then they could blow up our cities and whatnot. Now, if all of a sudden you have a mobile naval-based missile system, well, that completely changes the chessboard.

    10. BGBen Gilbert1:21:29

        It's quite the deterrent.

    11. DRDavid Rosenthal1:21:30

        Quite the deterrent. You can now pretty much guarantee, as long as you can keep a fleet of nuclear submarines operating at all times, that you can't take them out, and they can move around and be anywhere. And so if you launch a strike, they're gonna launch right back, and first strike is now off the table. This is a huge strategic win if you could put this actually operationally in practice. The other medium, if you will, location, that could change the dimension, too, for doing this would, of course, be space. If you had nuclear missiles up in space, that also changes the dimension, and this, among many, many reasons, is why when the Soviet Union launches Sputnik into space in October 1957, even though Sputnik itself was far from having nuclear ICBM capabilities, the Soviets getting to space first was truly terrifying.

    12. BGBen Gilbert1:22:26

        I can't imagine how disconcerting it is in an era that, you know, now there are tens of thousands of satellites orbiting the Earth all the time. When that was a brand-new thing, when you could look up at night, if you could see Sputnik, and you're like, "Oh, my God, that thing any day now could have a nuke aimed at us."

    13. DRDavid Rosenthal1:22:41

        Right. Okay, so back to the sea. It turned out, like we [chuckles] were talking about a minute ago, that firing ICBMs from the deck of a surfaced ship, be it a submarine or otherwise, bad idea, basically impossible. But firing missiles from under the ocean was doable, and Lockheed did it with the help of Silicon Valley. So in December 1955, the Navy awards this contract to Lockheed. The name of the project was Polaris. People might have heard of Polaris missiles. Just over four years later, after the contract is awarded, in 1960, the very first US nuclear ballistic missile-equipped submarine sets sail on its patrol, and everything we just talked about is operationalized. Equipped with Lockheed Polaris A1 undersea-fired nuclear warheads, ballistic missiles could reach land-based targets up to 1,200 nautical miles away from wherever the submarine-

    14. BGBen Gilbert1:23:43

        Wow

    15. DRDavid Rosenthal1:23:43

        ... was when it launched it, and it was all built out of Silicon Valley, with many subcontractors all over the place.

    16. BGBen Gilbert1:23:49

        Right. I'm assuming Lockheed doesn't actually make the nuclear warheads, right? Like, that was still happening in national labs at Sandia and all the places that were pioneered during World War II.

    17. DRDavid Rosenthal1:24:02

        Yeah, Lockheed did not make the submarines, nor did they make the nuclear warheads. I think a lot of this work was done out of Sandia, which we talked about on the Amazon episode.

    18. BGBen Gilbert1:24:11

        Oh, yeah, Bezos's dad worked there, right?

    19. DRDavid Rosenthal1:24:13

        Uh, grandfather. Bezos's grandfather was the head of Sandia, which was in New Mexico, the military nuclear program. The division of the US overall nuclear program I think was out of Los Alamos, but Sandia was the military arm of it.

    20. BGBen Gilbert1:24:28

        Mm. Which, weirdly, Lockheed, for many years, actually had a contract to manage Sandia because there's some sort of strange partnership that happens where the federal government hires government contractors to manage national labs.

    21. DRDavid Rosenthal1:24:42

        Yeah. To enable this strategic chess piece, the key thing is the missiles. Nuclear submarines already existed. Nuclear warheads already existed. The challenge here was create a system by which you could launch a missile from under the ocean out of a submarine.

    22. BGBen Gilbert1:24:58

        Man, I just gotta say, it is so fortunate and insane to me that neither side ever launched. All the deterrence for all the scary things that could have come out of it and all the itchy trigger fingers and everybody getting close, it never happened. That is a big applause to humanity that we could have done this, and no one did.

    23. DRDavid Rosenthal1:25:21

        Well, this is one of the things that I mentioned at the top of the episode. Doing this research sort of changed my mind on the war machine aspect of Lockheed and the military and the military industrial complex. But I think people really believed, and I think there's a good chance this was reality, it was building all of these systems and advancing all of this capability that prevented it from being used. If we hadn't built this stuff, there's a good chance Russia would have done a first strike.

    24. BGBen Gilbert1:25:49

        Yeah, it's crazy. Okay, so Lockheed, after four years, successfully does the underwater ICBM launch.

    25. DRDavid Rosenthal1:25:57

        ... Yes, and then that quickly leads to more successor programs and developing the technology further. The Polaris becomes, the Poseidon is the next program, and then the Trident. The Trident missiles had a five-thousand-mile range and carry a hugely destructive nuclear payload. Unbelievable!

    26. BGBen Gilbert1:26:19

        Terrifying.

    27. DRDavid Rosenthal1:26:21

        All right, so we just told this incredible story about LMSC taking Silicon Valley under the ocean. This program, you know, Polaris, Poseidon, Trident, for most people listening, especially if you're American, these names aren't surprising to you. You've heard of these programs. You are aware that the US, starting in the 1960s, had nuclear submarines carrying intercontinental ballistic missiles.

    28. BGBen Gilbert1:26:51

        Yep.

    29. DRDavid Rosenthal1:26:52

        It was, if you think back to the kind of the chess game, it was in the government's best interest for the Soviets to know that we had these. The point was deterrence.

    30. BGBen Gilbert1:27:04

        In fact, we probably should have bragged about this even if it wasn't real.
12. 1:28:21 – 1:54:27

    Eyes in space: CORONA reconnaissance satellites and midair film capture

    1. DRDavid Rosenthal1:28:21

       Super interesting. Okay, so if you remember back when we pressed pause on the Skunk Works story and moved up the state of California, up the coast to Silicon Valley, uh, we'd said that when Gary Powers and the U-2 were shot down in May 1960, that supposedly this was the end of US observational capabilities in the Soviet Union, and that it was for about three months, [chuckles] but nobody knew it. Well, LMSC is the reason that we got our eyes back in the sky.

    2. BGBen Gilbert1:28:57

       And you might know that eventually, after the U-2, Skunk Works would create the next great spy plane, the SR-71, which we will get to, but that wasn't for a little while, so this intelligence gap was filled by this secret, not very well-known project.

    3. DRDavid Rosenthal1:29:13

       I think a lot of people in the military who did know about this stuff... This is heretical to say 'cause it's so beloved, but I think the Blackbird was a decoy. We were getting everything we needed from space.

    4. BGBen Gilbert1:29:27

       Hmm.

    5. DRDavid Rosenthal1:29:27

       Uh, we just didn't want anybody to know about it, and so everybody now is like, "Oh, the Blackbird, it's such a shame the government shut it down. You know, it was never used to its potential." It kinda never needed to be [chuckles] because of LMSC and space.

    6. BGBen Gilbert1:29:40

       Whoa. All right, I'm listening.

    7. DRDavid Rosenthal1:29:42

       Okay.

    8. BGBen Gilbert1:29:43

       I got a lot of hairs on my arms raised.

    9. DRDavid Rosenthal1:29:44

       Yeah, yeah, yeah. I know.

    10. BGBen Gilbert1:29:45

        I'm getting mad over here.

    11. DRDavid Rosenthal1:29:47

        People are probably getting very mad. Here we go. So when you think about America and space and the US space program, you think, of course, about NASA-

    12. BGBen Gilbert1:29:57

        Gemini and Apollo-

    13. DRDavid Rosenthal1:29:58

        ... Mercury, Kennedy putting a man on the Moon, all that amazing stuff, which for sure happened, uh, and was happening. All of that was basic science research. Nobody working on those programs, public observing it, like, it would be crazy to think there were gonna be actual applications in space anytime soon. There's no infrastructure. Like, these are science missions. This is research, and even, you know, Sputnik on the Russian side, Sputnik was a research vessel. It was, like, the size of, I don't know, like, a bowling ball or so. I think it was a little bigger but, like, it was very, very simple. It was a long, long, long, long time before you went from those initial science missions to applications in space, or so everybody thought. [laughing] Because in parallel, there was a secret US space program being run by Lockheed Missiles and Space Corporation out of Silicon Valley, and in basically the same timeframe as the initial NASA missions, the initial... Mercury, I think, were the first missions.

    14. BGBen Gilbert1:31:13

        Mercury, Gemini, Apollo, yep.

    15. DRDavid Rosenthal1:31:14

        Yeah, basically concurrently with that, they got a fully operational observational spy satellite system up into space and functioning at the same time.

    16. BGBen Gilbert1:31:27

        How did we launch them with nobody... Lay it out.

    17. DRDavid Rosenthal1:31:30

        There was a cover story for what these things were. I think it was called the Discoverer program. I believe the cover story was that this was, like, life form research in space. Like, they were sending animals up to space, like monkeys, to prepare for manned space flight. That was the cover story. [chuckles] They may have sent some monkeys up there, but that was not the point.

    18. BGBen Gilbert1:31:49

        Huh.

    19. DRDavid Rosenthal1:31:49

        The point was to get these reconnaissance satellites up to space. So the first program was called Corona.... and you should Google about it and read. There's a great declassification document story that the government put out in 1995 when they declassified this stuff, and the Wikipedia page is pretty good.

    20. BGBen Gilbert1:32:09

        Yeah, I downloaded it, and I have it open on my computer. It's pretty crazy. It says, "Secret," it has the classification on it, and then it's struck through.

    21. DRDavid Rosenthal1:32:17

        Yeah.

    22. BGBen Gilbert1:32:17

        It's literally the document that was prepared in secret and then declassified.

    23. DRDavid Rosenthal1:32:21

        I think what the CIA and the National Reconnaissance Office does, I think they write these stories maybe quasi in real time so that there's documentation of all this stuff, and then they stamp it secret, and then it never gets out until it gets declassified.

    24. BGBen Gilbert1:32:36

        Wow.

    25. DRDavid Rosenthal1:32:37

        Just amazing.

    26. BGBen Gilbert1:32:38

        But on the declassification website, which we'll link to in sources, you can see a bunch of the pictures that the CORONA satellite took, including of the Pentagon. So you can see, like, something you know what it looks like, and you can see the level of fidelity that this 1959 satellite got of that.

    27. DRDavid Rosenthal1:32:56

        Ah, let's get into it. Okay, so the name CORONA, there are conflicting stories of whether it comes from the Corona typewriter or the Corona type of cigar that apparently the, uh, Pentagon official that championed this program really liked. We'll never know. It's all classified. So these satellites, like we've been alluding to, had cameras on them. The first one went up in August 1960. It was built in the years leading up to that by LMSC, and then went up in August 1960. While everything else happening in space was, you know, research vessels, this first CORONA satellite had a camera system on it that was able to photograph any ground location that it passed over in its orbit around the Earth at a resolution as low as five feet from space. These were film systems. Now, the U-2 camera system did have a higher resolution than that, higher ground resolution, but five feet was still plenty good, and more importantly, the CORONA system could take photos anywhere in the world on its orbit, and if you had multiple of these satellites up there, you know, you could pretty much blanket the Earth, or at least everywhere you cared about, pretty quickly at basically any point in time. You know, they're spinning around the Earth, like, yes, you can't do it in real, real time, but, like, it doesn't take that long for the thing to fly around the Earth and then fly around again.

    28. BGBen Gilbert1:34:23

        Right.

    29. DRDavid Rosenthal1:34:24

        The very first CORONA mission, that very first satellite that went up in August 1960, produced greater photo coverage of the Soviet Union than all of the previous U-2 flights combined. Five years of operating the U-2 program, one satellite in one kind of month-long mission, I think it was about a month before it decayed, the orbit decayed, got more than all of that.

    30. BGBen Gilbert1:34:48

        Wow!
13. 1:54:27 – 2:20:59

    Back to Skunk Works: A-12 Oxcart and SR-71 Blackbird (Mach 3 sustained flight)

    1. DRDavid Rosenthal1:54:27

       Oh, there was a market need. Was there a threat-based need? Okay, so Skunk Works, the greatest airplane ever built.

    2. BGBen Gilbert1:54:35

       Gee, it sure would be nice if we had a plane that couldn't be shot down.

    3. DRDavid Rosenthal1:54:41

       So when Gary Powers is shot down in May 1960, of course, as you would expect, the CIA and Skunk Works is already hard at work at the successor airplane to the U-2. Everybody believes it's kind of a miracle that they were able to fly for five years like they did. They knew that this day was coming when the Russians would be able to shoot it down. So as we talked about, the U-2's primary defense, as it so happened, wasn't intentional, but as it happened in practice, was how high it flew. It was obviously trackable on radar.

    4. BGBen Gilbert1:55:17

       Seventy thousand feet.

    5. DRDavid Rosenthal1:55:19

       Yep. It's not like you could evade [chuckles] enemy fighters or missiles in this thing. It had a hundred-foot wingspan. It turned like a school bus. [chuckles]

    6. BGBen Gilbert1:55:27

       [chuckles]

    7. DRDavid Rosenthal1:55:28

       It was how high it flew, and then all of a sudden, that was no longer defensible.

    8. BGBen Gilbert1:55:32

       So it's not very fast, and it doesn't fly high enough to evade missiles, so kind of useless?

    9. DRDavid Rosenthal1:55:39

       Yep. So if you remember back to the original spec for the program, there were three sort of vectors that were possible for how you could operate a program like this. One was fly high enough. That's what the U-2 ultimately did. There was also, though, fly so that it can't be seen by radar, stealthy. We'll come back to that in a few minutes here. And then three...

    10. BGBen Gilbert1:56:03

        Make it go so fast that even if they do fire at you, it just falls behind and then explodes miles behind your incredibly fast airplane.

    11. DRDavid Rosenthal1:56:14

        ... Yep! So, uh, that's the path they took.

    12. BGBen Gilbert1:56:18

        If you can't evade them, outrun them.

    13. DRDavid Rosenthal1:56:20

        Yep. It's like the Sonic the Hedgehog of airplanes. So this program, if you know anything about the SR-71 Blackbird, you're like, "Well, that's a Air Force airplane." We're talking about the CIA here. The Blackbird was not a CIA airplane. The program that the Blackbird ultimately came out of was the A-12 Oxcart. This was essentially the same airplane, we'll talk about the differences in a minute, but this was the CIA contract that they had Skunk Works working on, and it was, yeah, the goal, make this thing so fast that whether they see it or not, they're not gonna shoot it out of the sky.

    14. BGBen Gilbert1:56:55

        It has an even better camera, I think, also designed by Edwin Land, and it can get these incredible photos flying really, really fast.

    15. DRDavid Rosenthal1:57:04

        Yep. And to be able to avoid surface-to-air missiles, that basically meant that the specs for this thing were that it had to go Mach three or faster. [laughing] Now, to outrun any, you know, missiles, it had to do that with a pilot in it. There had to be humans in this thing. Faster than Mach three is faster than two thousand miles an hour.

    16. BGBen Gilbert1:57:28

        If you fire a rifle, that bullet doesn't go Mach three. If you're standing on the ground and you pick up a rifle and you shoot it, and an SR-71 flies over your head, the SR-71 will beat the bullet.

    17. DRDavid Rosenthal1:57:41

        Yeah, it goes about two-thirds of a mile every second. [chuckles]

    18. BGBen Gilbert1:57:45

        This thing also is not very good at turning, as you would imagine. [laughing]

    19. DRDavid Rosenthal1:57:49

        [laughing]

    20. BGBen Gilbert1:57:50

        So there's a fun stat about the SR-71. It cannot turn around in the state of Ohio. Its turn radius to change direction by one hundred and eighty degrees is a wider turn than the state of Ohio.

    21. DRDavid Rosenthal1:58:05

        Oh, wow!

    22. BGBen Gilbert1:58:05

        Its decommissioning mission, just to show off how fast it ever went, was one hour and five minutes from LA to DC.

    23. DRDavid Rosenthal1:58:15

        For being placed in the National Air and Space Museum?

    24. BGBen Gilbert1:58:19

        Yep. Coast to coast in an hour.

    25. DRDavid Rosenthal1:58:22

        Wow. And at this- I remember being a kid and looking at this thing like, "Well, why didn't we commercial..." Then, like, y- you can't commercialize this thing.

    26. BGBen Gilbert1:58:28

        [laughing]

    27. DRDavid Rosenthal1:58:28

        You've gotta be in a spacesuit to fly this.

    28. BGBen Gilbert1:58:31

        Totally. It flies at eighty-four thousand feet. Up looks black to you, straight basically looks black to you. You can see the curvature of the Earth. You can't navigate really by Earth-based landmarks because the Earth-based landmarks are moving by you too fast, so, uh, the best you can do is be like, "The Rockies are in front of me. Oh, the Rockies are behind me," and that's not terribly useful. So they had to invent a new navigational guidance system that sits on the top of the plane, R2-D2 style-

    29. DRDavid Rosenthal1:59:02

        Yes

    30. BGBen Gilbert1:59:02

        ... looking like an astromech from Star Wars, to navigate by the stars!
14. 2:20:59 – 2:35:09

    Stealth becomes real: the Russian math paper, Have Blue, and the F-117 Nighthawk

    1. DRDavid Rosenthal2:20:59

       So, okay, we've mentioned stealth a few times here. Back to Skunk Works.

    2. BGBen Gilbert2:21:03

       There is one more great Skunk Works airplane, and it is under the administration of Ben Rich, Kelly's successor.

    3. DRDavid Rosenthal2:21:11

       One last hurrah, at least for the traditional Skunk Works organization.

    4. BGBen Gilbert2:21:16

       So there's a math paper published in a Russian journal-

    5. DRDavid Rosenthal2:21:21

       Around mid-1970s, right around this time

    6. BGBen Gilbert2:21:24

       ... which I think gets published because the Russians don't really see anything of value in there. They don't really know exactly what these particular equations that are getting published could be applied toward. But somebody at the Skunk Works reads the paper and says, "Huh, I think all the ways that we've been thinking about trying to make an airplane stealth, like the SR-71, with flattening the bottom a little bit and trying to use particular materials and paint and stuff like that, I think is good, but if I apply these equations to make a stealth aircraft, then I think we can do something two orders of magnitude better than anything we've done before. And I think we can make an airplane go from looking smaller than it is, like a bird on a radar, to something like a BB on a radar."

    7. DRDavid Rosenthal2:22:15

       Or a ball bearing, famously. [chuckles]

    8. BGBen Gilbert2:22:17

       Or a ball bearing.

    9. DRDavid Rosenthal2:22:19

       So that Skunk Works employee was then 36-year-old Dennis Overholser, who, uh, was a mathematician, and he, like you said, reads this paper and brings it to Ben Rich, who just six months earlier had taken over from Kelly as head of Skunk Works.

    10. BGBen Gilbert2:22:36

        And he's told, "Don't stick your neck out. No one's getting the crazy amount of rope that Kelly had, so prepare to just be Lockheed's yes man, and we're gonna use the Skunk Works for branding and marketing, but we're not doing anything too nutty in your little shop over there."

    11. DRDavid Rosenthal2:22:53

        And even Kelly himself, he's retired, but he stays on as an advisor, so he still has his fingers in everything. He's so disillusioned at this point, he tells Ben Rich, he says, "Don't even pursue this. It's not worth it. Missiles are where the future is. Nobody's making planes anymore. Don't invest the money on this."

    12. BGBen Gilbert2:23:12

        And in particular, because when you apply these equations to design an aircraft, the way you have to design it makes it incredibly not aerodynamic. If it works, it will be a thing that is invisible on radar, but Kelly sort of looks at some of the early sketches of what you would have to do to make this thing into an airplane and basically thinks, "That's not an airplane. That won't generate lift."

    13. DRDavid Rosenthal2:23:38

        He's such an aesthetic snob. [chuckles] He's like, "That's not an airplane. We can't make it. It doesn't look beautiful."

    14. BGBen Gilbert2:23:43

        And it's not just that it doesn't look beautiful, it's that literally there's, like, only a hint of Bernoulli in there. The way that it's shaped is unclear that it will generate enough lift to lift itself.

    15. DRDavid Rosenthal2:23:54

        Yes, also correct. Or, well, I think the bigger problem was less about lift, although I'm sure that was a problem, but more about, could you control it?

    16. BGBen Gilbert2:24:04

        Yeah.

    17. DRDavid Rosenthal2:24:04

        Could you fly this thing?

    18. BGBen Gilbert2:24:06

        So what's being proposed here is basically an enormous-looking cockpit, this big globular fuselage, and you can Google the F-117 A.

    19. DRDavid Rosenthal2:24:19

        The name is the Nighthawk.

    20. BGBen Gilbert2:24:21

        Stubby wings, these two little super thin, tall tail fins. It looks super unstable, and the whole thing has basically zero round surfaces on it. It's faceted. I mean, it looks like a diamond. In fact, its codename, or [chuckles] I would say probably not its codename, but its nickname internally, was the Hopeless Diamond.

    21. DRDavid Rosenthal2:24:41

        Yes. You know what this thing looks like if you aren't already intimately familiar with images of it? I actually think it looks really cool.

    22. BGBen Gilbert2:24:48

        Totally, but it doesn't look like it'll fly or fly in a controllable way. It looks like you made an airplane, like a paper airplane, and then you put a, a rock on top of it, and you were, like, trying to get that thing to fly.

    23. DRDavid Rosenthal2:24:59

        Totally. To me, it looks like the planes in the first Star Fox game for the Super Nintendo- [laughing] ... when Nintendo and other 16-bit game developers during that generation were trying to make 3D games with 16-bit hardware, and you didn't have enough-

    24. BGBen Gilbert2:25:17

        Right

    25. DRDavid Rosenthal2:25:17

        ... processing power and polygonal power to make rounded shapes, so you had to have flat surfaces.

    26. BGBen Gilbert2:25:22

        These big-ass triangles.

    27. DRDavid Rosenthal2:25:24

        Big-ass triangles, that's what this thing looks like. It literally looks like a... Not a Star Fox 64, a Star Fox Super Nintendo [chuckles] plane.

    28. BGBen Gilbert2:25:32

        Right. So Ben Rich decides that he wants to put his career on the line.

    29. DRDavid Rosenthal2:25:39

        Yeah, and take a risk and make this. So he goes to the Air Force. The Air Force says, "Well, you know, on the one hand, your timing is good. We actually also think stealth technology is worth pursuing. We have an active RFP out there. We didn't come to you guys 'cause Skunk Works hasn't made a fighter plane in God knows how long. You guys just had layoffs. We don't like the Blackbird. Sorry, you guys are old news." And Ben Rich, A, he, like you said, he risked his career six months into the job pursuing it at all. He risks it even further. He goes back to Lockheed corporate and says, "I wanna pursue this and make a prototype anyway, without a research contract. We're gonna fund this internally."

    30. BGBen Gilbert2:26:27

        ... which this is not something that defense contractors do.
15. 2:35:09 – 2:52:53

    Post–Cold War consolidation: ‘The Last Supper’ and the birth of Lockheed Martin

    1. DRDavid Rosenthal2:35:09

       So the Gulf conflict, I think, ends in '91, I believe, and it becomes really obvious that the Cold War era of arms buildup in the US is over, and defense budgets are gonna shrink massively.

    2. BGBen Gilbert2:35:23

       And we need to start nuclear disarmament. We need to start destroying a lot of the nuclear warheads that we built.

    3. DRDavid Rosenthal2:35:29

       Right. And everybody in the industry knows it, and then it becomes super explicit. This is kind of an amazing event that happens. In July of 1993, the then Deputy Defense Secretary, William Perry, calls the CEOs of all the major prime defense contractors to a dinner in Washington, at which he explicitly tells them, "Defense spending is going to shrink massively. Duh, you know that." And he instructs the CEOs present that, "You all need to consolidate and start merging with one another. We, the Defense Department, are no longer gonna be able to feed all of the metaphorical mouths at this table." And the CEO of then Martin Marietta, soon to be Lockheed Martin, refers to this dinner, tongue in cheek, as the Last Supper, and indeed it was. And this is an amazing event. Literally, a [chuckles] government agency just told an industry what to do. This doesn't happen in America.

    4. BGBen Gilbert2:36:33

       Very explicitly, and this was rumored for a long time. People were like: "Wait, did this really happen? The US government instructed these big companies to become anti-competitive, to all merge together?" And this 1993 thing really kicks off an era of intentional government policy around combining companies.

    5. DRDavid Rosenthal2:36:55

       Yeah, which is very odd. American industry, and I think as we saw during the Cold War era, America functions on competition and thrives in competition, and here the government is saying, "Less competition."

    6. BGBen Gilbert2:37:09

       And in part, they're basically saying, look, it's an acknowledgment that a lot of the times, companies thrive because they're in growing markets, and this is now a shrinking market. And so what do you do if you want to maintain America's military industrial base, but you know for a fact the market is shrinking this year and likely every year for the next decade or two? Like, what do you actually do? And so I think the intent here is to say, "We don't want to lose capability. We want the US to remain a country that has a whole bunch of people that know how to build this stuff, so if we need it, it's there. But you're gonna put each other out of business because we just won't have enough for you. So you need to, like, merge and get more efficient, so we don't lose the muscle, but, you know, you all have real businesses, real going concerns." And this whole, like, so you don't lose the muscle thing, that is unique on this episode versus any other episode because the government is an indifferent player in almost every episode, e- every company that we talk about. But in this one, they're an extremely interested party, where it is in the national interest-

    7. DRDavid Rosenthal2:38:20

       They are the customer.

    8. BGBen Gilbert2:38:22

       Right. It is in the national interest for us to maintain this capability, or so that's the sort of policy.

    9. DRDavid Rosenthal2:38:28

       Yep. So this sets off an amazing series of events, kind of similar to, um, hearkening back to the LVMH episode when Louis Vuitton and Moët Hennessy merged.... not 'cause they liked each other [chuckles] or 'cause there was a business reason. They merged for, like, practicalities and to avoid dying and getting taken over by hostile raiders. In 1993, Lockheed buys General Dynamics' fighter jet business that we already talked about, the F-16 business, and then in 1994, the big shoe drops. They announce a, quote, "merger of equals" with Martin Marietta. That goes through in 1995.

    10. BGBen Gilbert2:39:06

        Except they didn't merge everything about. There's two spin-outs of the Lockheed Martin combination. One is there's another set of things that Martin Marietta does around minerals and mining, and so there's literally a Martin Marietta company that's publicly traded today that still exists that's around mining raw materials.

    11. DRDavid Rosenthal2:39:26

        Do you know this because you looked up the mine safety disclosures? [laughing]

    12. BGBen Gilbert2:39:29

        I was disappointed to see that there were no mine safety disclosures in Lockheed Martin's financials. There's another thing that spins out called L3 Communications, which is-

    13. DRDavid Rosenthal2:39:38

        Oh, yeah

    14. BGBen Gilbert2:39:38

        ... the set of things that won't be combining into Lockheed Martin, and this has actually become a fairly formidable competitor today. There's the five big primes, Lockheed Martin, Boeing, Raytheon, Northrop Grumman, and General Dynamics, and L3 is kind of growing, which is fairly unprecedented in this era of primes. But you might be saying, "What is the L3?" Well, there were three L's involved in creating this company. One of them was the investment bank that helped combine them, Lehman Brothers.

    15. DRDavid Rosenthal2:40:07

        Lehman Brothers, yes.

    16. BGBen Gilbert2:40:08

        [laughing] Frank Lanza, Robert LaPenta, and Lehman Brothers are the L's.

    17. DRDavid Rosenthal2:40:14

        So the assets that do merge of Lockheed and Martin in January 1996, shortly after the big merger goes through, they then acquire the defense business from Loral for almost $10 billion. And then, as we said a minute ago, in July 1997, they attempt to merge with Northrop Grumman.

    18. BGBen Gilbert2:40:35

        Right, this is, like, Lockheed Martin sort of like looks at the DoD, and they're like, "Are we supposed to keep going?"

    19. DRDavid Rosenthal2:40:39

        Yeah, like, "You told us to do this, right?" [chuckles]

    20. BGBen Gilbert2:40:42

        Yeah.

    21. DRDavid Rosenthal2:40:42

        They misread the tea leaves on that one. That merger gets announced, uh, everything's signed off. The DOJ blocks it, I assume with tacit approval from the DoD on that.

    22. BGBen Gilbert2:40:52

        Yeah. I mean, the thing with the five big primes is they're all, like, very good at a certain bucket of things, and so if you start combining Lockheed and Northrop, which are the two that really kind of like bid against each other at this point in history, I mean, like the B-2 bomber and the B-21, like, there's often this face-off between Northrop and Lockheed. If you combine them, then you actually do away with all competition.

    23. DRDavid Rosenthal2:41:14

        Yeah. Would have been so fitting, right, given that Northrop was a co-founder of [laughing] Lockheed.

    24. BGBen Gilbert2:41:19

        [laughing]

    25. DRDavid Rosenthal2:41:19

        But, [laughing] all the way back to the beginning of the episode. So the DOJ blocks that, but also in 1997, Boeing merges with McDonnell Douglas and becomes the-

    26. BGBen Gilbert2:41:29

        Ooh

    27. DRDavid Rosenthal2:41:29

        ... giant that it is now.

    28. BGBen Gilbert2:41:30

        Do you know why that happened?

    29. DRDavid Rosenthal2:41:32

        Ooh, I do not.

    30. BGBen Gilbert2:41:33

        So we're gonna talk here in a second about the F-22 program and the F-35 program. We'll skip over the F-22 for the moment just to hit this point. For the JSF, the Joint Strike Fighter, F-35 program, this is gonna be, like, the biggest-ever military contract, and so it's really worth going for. And there's three companies that are worth gunning for in the mid-'90s. There's Lockheed Martin, right after their combination, there's Boeing, and there's still independent McDonnell Douglas.

Episode duration: 3:38:37