No PriorsThe Future of Warfare: How the US Department of War Thinks About AI
EVERY SPOKEN WORD
45 min read · 8,898 words- 0:00 – 0:58
Emil Michael Introduction
- EMEmil Michael
The military buildup in China is the biggest military buildup in world history, and so there's a real urgency on our side to ensure that we are ahead, but we stay ahead. And that's gonna take a different level of investment and different type of thinking than we've had in the last twenty years. In the '80s, there were fifty defense contractors, and they got merged, so there are only about five. There's a lot of room for new entrants. It's crazy to me that SpaceX, and Anduril, and Palantir all had to sue the Department of War for their first contract. [chuckles] So the idea is, you don't have to sue anymore. Come through the front door, [chuckles] because no one's-- people are not gonna fight you. We're now excited about lower cost, faster, more sophisticated options.
- SGSarah Guo
[upbeat music] Hi, listeners. Welcome back to No Priors. We're here today with Emil Michael, the former Chief Business Officer of Uber, White House Fellow, and currently CTO of the Department of War.
- EGElad Gil
Emil, thanks for joining us. Welcome to No Priors.
- EMEmil Michael
Good to see you guys. It's been a long time.
- EGElad Gil
Congratulations on the new role, um, very exciting news. Could
- 0:58 – 5:22
Emil’s Role at the Department of War
- EGElad Gil
you describe a little bit more about what that role is and what's changed at the Department of War to sort of create this new war-- this new, um, role, this new momentum, new initiatives that you all are focused on?
- EMEmil Michael
Yeah. So, um, for a long time at the Department of War, there was one organization called, uh, Acquisition, Technology, and Logistics, and it was all bunched up into one thing. And then, about eight years ago, they said, "Well, tech is moving faster on new kinds of weaponry and defense systems than on the old system, so we're gonna split out acquisition from research and engineering," they call it. So I'm now Under Secretary for Research and Engineering, which is cool, right? Because I get to work on the stuff that I used to work on when I was in Silicon Valley, like with-- work with entrepreneurs, work with new companies. I'm now responsible for DARPA, which is obviously super cool because it's most-- some of the most advanced research that happens in the country, if not the world. Uh, in the last few months, I took over as chief AI-- the chief AI office in the Department of War, which with three million employees, the biggest organization with the biggest budget in the world, you know, is, is not a small thing to, to think about how to do AI right for. And then, the Defense Innovation Unit, which is actually based in Mountain View-
- SGSarah Guo
Mm-hmm.
- EMEmil Michael
- and it's supposedly the l-- it's supposed to be the link between defense industry and, uh, you know, the startup community that's building commercial products and may have dual use. And then, last is the Strategic Capability Office, which takes kind of existing, um, systems and tries to modify them in strategic ways or supplement them to get, you know, for strategic surprise, they call it. So all that all has technology underneath it, and the idea is to unify that across the department because we spend, you know, a hundred fifty billion dollars a year on tech in one way or another. So you wanna avoid duplication, you wanna bring things to market faster. So that, that was the big announcement yesterday by, by the secretary at, uh, at Starbase.
- EGElad Gil
You mentioned DIU's been involved with providing early funding to a variety of promising new defense tech and hardware companies. Could you tell us a little bit more about what they've done and, uh, how you've approached that so far?
- EMEmil Michael
Yeah. DI, DIU's had some good success, uh, with Ceronic and, and, uh, and a, a bunch of other companies, and now it's, uh, you know, we have-- now it's time to do more of it, so it's more of a focus. And yeah, DARPA's just, you know, they invented the Internet. You go to their gift shop, and they have, like, a, a napkin that where someone drew out the Internet, uh- [chuckles] - sort of architecture, and they sell that in the gift shop in case you guys come to DC, we can get you, get you some of those. [chuckles]
- SGSarah Guo
This is like a-- I mean, it's an amazing unification of, like, a bunch of stuff that's clearly important to America and to, you know, global security. Uh, it's a very different environment than Elad and I have seen you in, uh, in the past, right? You've worked with technology companies and, you know, even within them, as a leader, had this reputation for being, you know, high-speed, aggressive deal maker-
- EMEmil Michael
Mm-hmm
- SGSarah Guo
... uh, if I, if I'm allowed to say that. Um-
- EMEmil Michael
Of course.
- SGSarah Guo
How does that work with the Department of War, which, like, amazing impact, importance, and scale, not the strongest reputation in previous decades and administrations for speed?
- EMEmil Michael
Yeah. Well, I-- I mean, uh, hopefully, part of the reason I got chosen for the job, and certainly the reason I took it, is to inject some of that urgency, speed, you know, uh, being a little bit impervious to barriers and trying to run them over, as opposed to being stopped by them. And it ki-- it works. W- uh, leadership in, in organizations is not, is, is somewhat transferable, right? If you can show that kind of urgency and leadership and create a culture in a company, you could certainly make some progress in a bureaucracy or a government agency. It might not be as fast, but I also have way more resources, right? And I have a, a way more im-- you know, in some ways, g- important mission to humanity. So those two things are different in some ways, sort of give me the same abilities to sort of drive fast. And people respond. I mean, I'm getting a lot of people who wanna join my team or other teams at DoW, um, and across the government. And yeah, it's, it's harder, but, uh, in some ways, it's more impactful, so I'm, I'm just as motivated.
- 5:22 – 8:27
Innovation Priorities for the DoW
- EGElad Gil
Yeah, it's been interesting to watch all the entrepreneurs kind of gathering in DC in a way that, you know, I really haven't seen in a while. So it's, it's been impressive in terms of the types of talent that you all have been able to recruit. One thing that I think is related to moving fast is prioritization, and I think in another, um, interview in the past, you said something like, "Fourteen priorities mean no priorities at all," and you've kind of really honed down into a handful of key areas. Do you mind walking through sort of those key areas from an overall broader innovation focus, and then maybe we can touch on one or two of them as we go?
- EMEmil Michael
Yeah. I mean, so just to analogize to Uber or any company that you, you know, we worked on together, imagine you went to a management team, and you're like: "What's your-- How many product-- You know, how's your product line going?" You're a Series B company. You're like: "Well, I've got fourteen product lines." [chuckles] You'd say-
- EGElad Gil
Mm-hmm
- EMEmil Michael
... "Well, wait a minute. " It's sort of uninvestable, right? So, [chuckles] um, when I got here, there were fourteen critical technology areas, so critical.... critical to our national security.
- EGElad Gil
Mm-hmm.
- EMEmil Michael
So I, [chuckles] I looked at them, I said: Well, the, uh, number one, that if, if there's that many, they can't be critical. But number two, hard for people to hold in their head that many priorities and wake up every morning knowing that they have to get up and execute against those priorities and make progress. 'Cause you get distracted, you get too much, uh, dispers, you know, uh, separation, and therefore not enough resource to any one thing. So I, I cut 'em down to six a- after studying them, and I made it more action-oriented, so we put sprints behind them like you would in an engineering team. So, uh, you know, off the top of my head, the, the number one is applied AI, because we're not building a foundation model at the DoW because there's being hundreds of billions of dollars being spent by the private sector on this. So how do I adapt or use what's being developed in the, in the private sector and apply it to the Department of War use cases? So that's number one. Um, number two is, I don't know if you've heard of hypersonic missiles, but they're sort of the newest variation of, um... we used to have nuclear weapons and ballistic missiles, now these hypersonics, and Elon talks about this all the time, that could go five times the speed of sound, like minimum Mach five. And so they propose somewhat of a unique threat, and they're maneuverable. And so they're, you know, it's the new sort of threat environment, um, weapon, uh, that's entered the picture. Few countries can build them. The Chinese, Russia, US. But my, uh, critical technology area is to do that at scale and at, and at a, uh, reasonable price, 'cause they're all very expensive now. They're exquisite. So how do you make them, like in the way Anduril thinks about them, much more producible, much less exquisite, much cheaper, more mass? So I call it scaled hypersonics. Another one is scaled directed energy. So directed energy, um, is, you know, high-powered microwave or lasers to take down missiles, like Iron Beam, if you think about what the Israelis did. And now with all the drone warfare you see, it's much cheaper to take out drones with an energy zap than it is to send a missile at another-- at a drone, right? A $5 million missile at a $50,000 drone or something. So directed energy, again, is, is the technology exists, but how I do that at scale.
- 8:27 – 10:41
Shift Toward Autonomous Defense Technologies
- EGElad Gil
I, I'm a little bit curious, uh, on the, on the drone area in particular. One of the, um, things that I think a lot of people believe is that we're going to move from sort of big iron giant systems into more distributed fleets of autonomous drones or vehicles. And how do you think about that in the, in the context of some of the, uh, programs or purchasing behavior of the Department of War? You know, we're still buying aircraft carriers, we're still buying very big sort of systems, and there's all sorts of uses and needs for those. But what do you view as the shift to autonomy and the shift to drones that's going to happen over time? And what, what proportion of hardware do you think goes there?
- EMEmil Michael
I think that starting with the Russh- Russia-Ukraine war, you've got this sort of renaissance in drones or robots, think about it as robots, as the new front line, right? Let's say in a territorial battle, if you're fighting over land, you know, less costly in human life if you have robots fighting first and then before humans come in. Without the drone warfare in, in that area of the world, you're probably seeing way more human casualties. It would've... It's already devastating, it would've been way more devastating. So I think for territorial battles, you'll see that happen real fast, where the shift, the shift mix toward robots or drones will happen much faster. When you talk about carriers and sea, there's still projection of power, there's still protecting sea lanes, there's still, uh, all those things which will continue for some time. But the mix shift for-- is still also going to move to autonomous, whether it's autonomous submarines, autonomous boats, autonomous sort of big drones, essentially autonomous airplanes. That mix will happen, that shift mix will happen over time, and you'll see every d- defense budget year over year, more and more will be allocated to those kinds of things as AI gets more prominent and being able to control these things and sense the environment around them and, and create autonomous action. So, you know, in ten years, it wouldn't surprise me if 20, 30% of the budget is, is, is spent on those kinds of systems, which are also cheaper. So for 20, 10, 20, 30% of the budget, you get way more firepower than you would for the other systems that, uh, that are not designed to be, you know, uh, for that case, without humans in them-- with humans
- 10:41 – 12:02
Identifying Common Needs Across the DoW
- EMEmil Michael
in them.
- SGSarah Guo
Given the scope of the, uh, different services, right, and the scope of the organization, like, what does the prioritization exercise look like for you operationally? You know, you go talk to the different services, you have all the people reporting to you. Like, how do you decide if it is these hypersonic missiles, or it's electronic warfare, or space, or something else that m- is a, is a priority for like, you know, urgent undersecretary this year versus next?
- EMEmil Michael
If you're at the Pentagon and you're working for the secretary of war, then your job, or my job, is to, you know, as a representative for him in the technology area, is to look across the services, Army, Navy, Air Force, Space Force, and say: What are the common needs, uh, the enablers, or the tech enablers, if you will, or the enablers that are useful in a broad way? If it's just useful for one service and one use case, that's probably something that service can handle on their own, 'cause they have their own labs, and research, and development dollars, and ability to procure, and so on. So I'm looking for commonalities where you get economies of scale, where there's things that could be useful for all of them. And so that, that's why it took me a couple months to get through these 14 technology areas, so to go get a sense of what's really important, to scale them down to six that have some common thread to them that could be more useful across the enterprise.
- 12:02 – 13:48
Architecting GenAI.mil
- SGSarah Guo
So, uh, GenAI.mil, I think, was, like, a surprise in how quickly, um, it happened. Uh, uh, can you tell us the story of that and what the, like, the goal is?
- EMEmil Michael
So GenAI.mil, because if you're on a, on a-... Department of War network, you, you know, it's a-- even the unclassified networks are, are secure, right? And, and different levels of security as you go up. So you still have to figure out how to architect using AI in, into those networks. It's not as simple as going to chatgpt.com and, and signing up, because those things are sort of generally prohibited because you have to have restrictions on how you use them. So we had to figure out what are the, the policies, how do you architect it in the network so nothing goes back into the pool of data that ChatGPT, or Claude, or any of these companies have? Because we certainly don't want-- no one in this country wants our data getting out into the general public, right, into these models. So you have to architect a different, uh, data flow. So but we moved really fast. I had some, like, Databricks engineers, former Databricks engineers, former Meta engineers, former AWS people, tiger team, sixty days. Uh, good, great collaboration from Gemini, uh, from Google's Gemini, f- who already works at Department of War, so had some familiarity with our architecture and our systems, and got that launched to three million people, and we've had over a million people, uniques, use it in the last thirty days, which is kind of awesome.
- SGSarah Guo
Wow!
- EMEmil Michael
We've got one-third of the enterprise on one model that's 2.5, not 3.0. 3.0 is coming in a couple of weeks. Then we're going to do Grok, uh, with xAI, and we'll see where we get to with the other two, and then we do it across classification levels. So it's gonna ch-- it is going to fundamentally change the way we, we work here. And we were able to do it fast because we've got
- 13:48 – 15:57
Applied AI Initiatives at the DoW
- EMEmil Michael
fast people.
- EGElad Gil
It's amazing. Could you talk about, more broadly, what are the set of applied AI initiatives that you all are focused on? I know it's a major thrust, and it's one of the key areas that you talked about, so.
- EMEmil Michael
Yeah, so instead of white papers, and theories, and, and, and committees, we, we said, "Okay, how are we going to deploy AI?" So we simplified it and say: Well, there's three sort of broad categories we're going to deploy it on. One is enterprise use cases, like any company would use it for efficiencies, right? The second is intelligence. We get a lot of intelligence from satellites, from all the things the United States does across the enterprise that, uh, previously used human analysts for. And so if you could, uh, improve the, the le- leverage of the human analyst by keying up to them, "Here's ten things we saw that you should look at," man, you're going to make that analyst way more efficient, right? And then, well, if I could take this type of intelligence and fuse it with this type of intelligence, I'm going to make that analyst really capable, because usually one type of analyst looks at one type of intelligence. So the more data I can aggregate from all these sources, the more intelligence we can use, which is a great deterrent because we have the best intelligence collection in the world. And then third, for warfighting. So warfighting is a complex sort of thing. You're doing war gaming, you're doing, um, planning. You know, there's a lot of formalities in how you execute orders, how you simulate what might happen if you do different scenarios. So across those three areas, enterprise, intelligence, war gaming, we'll have a few pace-setting projects within each of them, which are designed to sort of both break down barriers to make sure we get their data in the system, but to show people in the department: Holy cow, do you realize this is what AI could do? So we picked them purposefully so that we could-- they could be both demonstrations or pathfinders, we call them, in, in our bureaucratese or, [chuckles] and, and across these dimensions, so we hit all parts of, of the Department of War. And we think that's a, a way to get people thinking about AI for every use case possible, and then deciding not to when-- only when it's, like, clearly not useful.
- 15:57 – 17:55
The Future of Warfare
- EGElad Gil
Yeah. One question that we've asked people from some of the major labs, uh, you know, researchers working on the technology and others, and they often don't want to answer the question 'cause it's hard to project. So if you feel the same, feel free to demur- demur. But if you think ahead five to ten years and you ask, what are the big areas where AI is going to most transform how the Department of War works, how you think about autonomous systems, how you think about warfare in general, and defense in general, what do you think are the big shifts that are going to happen, or what, what does that future world look like?
- EMEmil Michael
I mean, I think that, you know, autonomous systems is the clearest thing, 'cause we're already thinking about that with drones, and then now you take that to other things like Saranomics building or, uh, Andrews building or whatever, and, and you apply AI to them, and more sophisticated AI over time that could do sensing and change how it behaves. Those are absolutely going to be some of the things that happen, uh, in the next few years that AI will have a dramatic impact on, which is why Boston Dynamics didn't make as much progress as Optimus did in AI. You know, the things that started later on robotics just worked better because they were more AI-infused. So I think, um, we're actually in a good moment for, for Department of War to start taking advantage of those things, and that's where we see some, some big improvements. And then the enterprise piece, people... You know, you're like, it's sort of boring for Silicon Valley, Valley people. You're like: Okay, of course, but-
- EGElad Gil
I think it's exciting. [chuckles]
- EMEmil Michael
... but you guys, you guys are immersed in that-
- EGElad Gil
Yeah
- EMEmil Michael
- because you, you're living in, like, the frontier of AI use cases in the enterprise. We're just starting over here in DC, so I think people are going to go, "Holy cow, you don't have to write twenty-page PowerPoints, one hundred page congressional reports, you know, in the same way that you did with all the manpower you did," and that'll, that'll be more exciting for people to work at, too, right? It's because you're, you're not doing as much drudgery, so you'll attract better talent, uh, as a result. So I think those are two clear areas in the next few years you'll see a lot of, uh, a lot of advancement.
- SGSarah Guo
You
- 17:55 – 19:33
Recruiting for DoW
- SGSarah Guo
mentioned that one thing you have to have, uh, to get these changes to happen is, like, some talent from Silicon Valley or just talent that is excited about this pace. Like, who are you recruiting? Who do you want to be part of the Department of War?
- EMEmil Michael
One of the big untold stories about DOGE, which is, yeah, it did some, some aggressive actions in the beginning that were, um, controversial and all that, but the talent they brought in to every department, um, could then be deployed on other projects, like-... the AI action plan, uh, that we did with GenAI. So because they were already techn- like, Elon chose technically sophisticated people. They weren't all engineers, some were lawyers, some were- had from di- but they all had a mentality of, of a fixer-builder mentality. So I've borrowed a lot of those people, and then they attract more people on the way in, and then we have this US tech force that, that Scott Kapor from Andreessen Horowitz has deployed, and we're hoping to get thousands of people out of college for a two-year stint, sort of make it, um, you know, this is your service to the country as a technologist rather than as a soldier. Um, so now we want both, and we're gonna try to, you know, make- try to make that a badge of honor so that you go back in the industry with some cred-, you know, some additional credibility, and be proud of your service here. So those are the ways I'm attracting talent, and I'm dialing for dollars. I call everyone who's- [chuckles] ... has just left a job, and I'm like, "Hey, do you have a year to spare doing the coolest stuff you could possibly imagine?" Recruiting Tuesdays, I call them.
- SGSarah Guo
[chuckles]
- EMEmil Michael
And I call my friends, like you guys, and say, "Do you have anyone who's on the bench right now?" And we have so much interesting stuff to do that I'm picking a few people off every
- 19:33 – 22:25
Arsenal of Freedom Tour
- EMEmil Michael
month.
- SGSarah Guo
You and Secretary Hegseth have been on this Arsenal of Freedom tour. Can you tell us about it, or, um, anything you learned or that the American people should hear about?
- EMEmil Michael
I- it's been amazing, and I'll, I'll tell you why. So the Secretary's first reform or transform- or transformation, if you want to call it, was restoring the warrior ethos. It was bringing objective, um, gender-neutral, race-neutral standards to military service members, right? These are fighting units. This isn't, you know, this isn't ping pong. This is [chuckles] you know, these warfighters have to be capable to do certain things, and he was intent on restoring those things. So that's sort of a fitness standard if you, if you want to think about it that way. Like, what does a, what does fitness mean for our military? And then there's the fitness of the de- the industrial base, and what you give the warfighter to execute what tasks they're given. That's weapons, it's defense, uh, defense systems, it's cyber, cyber effects, and so on. We noted in this conversation, defense industrial base sort of wasn't ready to provide what's necessary for the threat environment. And if you think about threat environment, what we've done in Iran, what we've done in Venezuela, uh, what we've done with the Houthis, like, all-- just in one year, right? Not, not to mention what might come in the years ahead. You think about were we postured for that with, with the defense industrial base, and the answer was, we weren't as postured as we wanted to be. So he said: "Okay, my next fitness standard is to go to industry and tell them that we want them and need them to produce. We have their backs. We're gonna bring all the resources to bear. We're gonna cut out the bureaucracy. We're gonna make it an open, wide front door for new entrants to come in and help us solve problems. We're gonna change the way we buy, the way we, uh, do RFPs, even." Like, we-- for an RFP, it used to be, "Here's a three-hundred-page requirement document. Please fill it out, and we'll decide if you win or lost." Now we say: Well, here's our problem. We're trying to achieve this. Why don't you come back to us with a solution? And you allow them to, to come in with different ideas about how to solve the problem, and there's novel concepts out there. So it's a different-- So the primes will excel at filling out a three-hundred-page questionnaire.
- SGSarah Guo
Mm-hmm.
- EMEmil Michael
A start-up won't. So if you change it and say, "Here's the problem I'm trying to solve," well, a start-up might say, "Oh, I have, I have ways of solving this." So that Arsenal of Freedom tour is about giving them permission and promoting and making sure they understand that we're serious about the fitness and the expansion and health of the defense industrial base. So that's the Arsenal of Freedom tour. [chuckles] Um, so it's been a lot of fun, and I've been-- we've been, gosh, six days on the road in the last two weeks and visited about twenty companies, and, and it's been awesome. Both the workers and the tech together, you know, again, these combined hardware, software systems, um, it's, it's really been inspiring to see the motivation, um, in, in Southern California, in Texas, in North Carolina, and a lot of the places we've gone.
- 22:25 – 25:49
Opportunities for Entrepreneurs at DoW
- SGSarah Guo
Amazing. The other audience, uh, that, um, I think is going to be inspired by the, you know, leadership that they recognize or just pace of doing business, like, um, is entrepreneurs, right? And you have talked about the need for more new primes and, like, people to solve some of the problems that you're looking at and are important to American dominance and competitiveness. Um, what should entrepreneurs-- I, I think, like, it's, it's wonderful that, um, you know, you've been so early in this, and Elad as well, investing in defense technologies. That has now become much more mainstream in terms of... And then, like, it-- that sounds ridiculous to say, but it is acceptable and exciting to work on American defense now. What should people look at in terms of opportunities, and what should entrepreneurs know about doing business with the Department of War now?
- EMEmil Michael
I would say that-- So a few things. So number one, we're more open for business than ever before because there's a recognition that our adversaries, who started from a cleaner sheet of paper in the last ten, fifteen years, like the buildup, uh, the military buildup in China is the biggest military buildup in, in world history, and so there's a real, uh, urgency on our side to ensure that we are ahead, but we stay ahead, and that's gonna take a different level of investment and different type of thinking than we've had in the last twenty years. In the, in the '80s, there were fifty defense contractors, and they were got merged, so there are only about five now. So there's a lot of room for new entrants, and, and it's crazy to me, uh, that SpaceX and, uh, Anduril and Palantir all had to sue the Department of War for their first contract. [chuckles] So the idea is, you don't have to sue anymore. Come through the front door [chuckles] because people are not gonna fight you. We're, we're now excited about lower cost, faster, more technically sophisticated options. The caution I give entrepreneurs is, it's still not like selling to another business, so don't have illusions that, you know, this is sort of a deal with, a Uber deal with Amex or something. This is still government, um, and, and we have to make s- sure stuff works because lives are at stake, right? This is not just a, just a money game.
- SGSarah Guo
I love that Uber, Amex is your example of, like, the easy stuff, man.
- EMEmil Michael
[chuckles] Yeah, yeah.
- SGSarah Guo
You know, a lot of entrepreneurs out there are like, "I'm gonna sell to my buddy in YC today."
- EMEmil Michael
[chuckles]
- SGSarah Guo
Um, so we're, we're several tiers up in the hierarchy of pain, but- [chuckles]
- EMEmil Michael
... Yeah, okay, fair enough. Fair, fair enough. That was-- so yes, I consider that was, it was easy, at least in my day. And then the other thing is, when you're selling a combined hardware-software product, um, you also have, you have to manufacture it, and that's not something-- That goes back to the hardware is hard, uh, in Silicon Valley. Well, hardware is hard also in the defense industry, and so producing things at scale that are flawless, uh, means you have to have a different type, type of capability. Elon's mastered it with satellites and, and all that, but there's not a lot of startups that have mastered it. So mastering the production, the scaled manufacturing piece of it, is the thing that startups who are selling to the Defense Department have to also prove hire for, demonstrate competence in, and so on. And that's the one thing I'm learning in my, my first eight months here is that's the piece that I'm encouraging them. Like, "Hey, if you come, you come with a tech pitch and a prototype, that's great. What's the plan to get me ten thousand of these, right?" And so that's sort of the, the advice I'd give to the
- 25:49 – 28:37
Speeding Up and Scaling DoW Initiatives
- EMEmil Michael
community.
- EGElad Gil
How do you think about flexibility, um, of budget? So one of the things that often happens is, you know, there, there's a lot of line items in the congressional budget that basically establish certain programs that are then the ones that are, are, uh, implemented and sort of paid for or procured. And, you know, that's somewhat different from how you think about innovation. In terms of something new comes up, you want to rapidly be able to iterate, to launch it, to deploy it. And so if-- how do you think about either flexible budget spend or reallocation of budget over time, and how does that relate to the legislative process, and how does that impact entrepreneurs ultimately?
- EMEmil Michael
Yeah, the-- it's been, it's been a problem, such a problem that they've given, like, an awful name to it called the Valley of Death, [chuckles] which I- which, uh, Emil, you'll hear eight ways to Sunday here. And the ways, you know, we've come at it and I've come at it is we have this defense innovation unit, which is rapid contracting, has a billion dollars, has, like, re- a reasonable amount of money to do things really fast to get startups off the ground and get them through. We have several other programs that have that same capability, one called AFIT, that takes companies that have developed a product but now need to scale their manufacturing. So there's a different line in the pro... uh, you know, different point in the process. I have the Office of Stra-- uh, Strategic Capital, which has two hundred billion dollars in lending authority, uh, low-cost loans, and that both sends a demand signal to these companies that other private capital crowds around it, equity capital, often. And it, it's low-cost loans, right? It's treasuries plus one hundred bips. And in the last, I don't know, four or five months, we've done five critical minerals deals, like, really fast, 'cause that's an, that's a target area, and we'll have other target areas. So if you're a company that's in one of the, the super critical areas, um, we have this huge lending authority there, too. So I'm trying to collapse the Valley of Death by crowding capital around in different parts of the capital cycle. Um, and then also, we're reserving a bit of the budget every year so that we can make in-year budget decisions, because the, what, what, what the real problem is that Congress doesn't pass funding bills until halfway into the next year for the year of execution. And so if you're not planning a year and a half ahead, you're not-- you're gonna miss. So all these funding cycle, uh, mechanisms are a way to get at that Valley of Death. And I think we've got... We're really close to sort of pinching, pinching that into to being very minimal, if, if it exists at all.
- EGElad Gil
Mm-hmm.
- EMEmil Michael
And, and by the way, helps that you guys are investing in defense tech also, you and other-- your, your peers, because, um, equity capital has a lot of, uh, has a lot of, uh, value here, too. When you see promising companies and we see promising companies, you're gonna say, "Well, this is a promising company. They've got their DIU deal. I'm happy to fund them now," and that, you know, that helps solve it,
- 28:37 – 30:00
Innovation in Defense Tech
- EMEmil Michael
too.
- EGElad Gil
You've also, I think, advocated for dual-use companies. They're doing things for defense as well as the broader world.
- EMEmil Michael
Yeah.
- EGElad Gil
Are there any specific areas that you most wish a company existed today for where, you know, you think it's a sparse landscape or other areas that, if there are founders watching this, you think they should really focus from an innovation perspective?
- EMEmil Michael
Yeah, I mean, there's, there-- you know, this hypersonic weapons thing is a, is kind of a big deal. There is a startup, um, or a few, you know, very small number of startups that are innovating here, but former SpaceX people who are running around who understand the physics of, of that kind of thing, so I wish there were more. I think there's going to be, when you think about drones, not just the small drones, as you get to bigger and bigger drones that really look like long-range missiles, if you will. There's gonna be innovation there. There's innovation in the technology that goes into a drone that seeks things in a GPS-denied environment. Um, you know, it makes them more precise. For Golden Dome, which you've heard about-
- EGElad Gil
Mm-hmm
- EMEmil Michael
... we're looking at how to take things out from space, which is a compelling, really complex, but interesting proposition. So there's, those are kind of some areas. And then from an AI standpoint, you know, I feel like we're generally okay with the investment. I mean, there's so much money going in there that that's like a well-funded area, both the foundation models and the derivatives that are trying to do specific apps, you know, uh, on those models. So, you know, those, that's some direction for folks.
- 30:00 – 32:09
Change Management in Government
- SGSarah Guo
When you think about the pace of, uh, technology adop- I'm just thinking about you as, like, the CTO of a three million person organization, you know, whether or not those people are war fighters, right?
- EMEmil Michael
Yeah.
- SGSarah Guo
Um, a- and, you know, selling, if you have portfolio companies that sell to very large organizations, you see a large span of adoption of those tools. Over time, it's amazing that GenAI.mil has gotten a, a million users recently. Um, how do you think about, like, the, the workforce, right? You said it's the biggest single organization in the world that's consuming this technology, but you have to do a bunch of change management. Is that something that you, you think through?
- EMEmil Michael
Yeah, I mean, I try not to think through it so hard so that I'm like, oh, my gosh, this is gonna be too hard- [chuckles]
- SGSarah Guo
[chuckles]
- EMEmil Michael
-to, to do. Um, sort of the, again, the uber entrepreneur mentality. It's like, let's, like, move and see how far we can get things into the enterprise until someone says-... stop. Um, so it's a different way of thinking about it, but yeah-
- SGSarah Guo
Just make forward progress-
- EMEmil Michael
[chuckles]
- SGSarah Guo
-as fast as you can. That's a good strategy, too. Yeah.
- EMEmil Michael
Uh, it's, you know, it tends to work. Does it work as fast as in, as in private industry? No, but it still works. There's still human desire to do better in, in every case, and I do think, uh, b- bureaucrats get a bad rap where bureaucracies get-- deserve the bad rap, right? It's the collection of rules, regulations, people, culture, that end up being hard to change, whereas any one individual person, they wanna thrive. Especially if you're at Department of War, you kind of-- you don't, you don't come to Department of War if you're not mission-oriented. You don't have sort of an ethic that something-- you're working for something bigger than yourself.
- SGSarah Guo
Matters, yeah.
- EMEmil Michael
You're not-- you're certainly not coming here sort of to make a buck, right? You're coming here, um, because you, you, you care about the outcome, and that gives us a lot of really good motivation from people, and if I could just get some tools in their hands, and talk to them, and give them some leadership, and some, uh, you know, stuff, uh, you've-- surprising how receptive you'd find, even in this large of, of a department.
- 32:09 – 37:27
Rebuilding the Defense Industrial Base
- SGSarah Guo
In a different direction, because you mentioned, like... I was just thinking about some of the hardest problems that you have to go work on. Um, one is, like, rebuild the defense industrial base, right? Uh, and how do you, like, ig-- reignite that ecosystem when, um, a lot of people have given up on American manufacturing in different domains? What do you think are, like, the, the necessary missing components if, you know, you're saying the demand is there? 'Cause I think a lot of the arguments has just been like: "It's too expensive. We no longer have the capability or the knowledge in the United States." Like, how do you, how do you think about that?
- EMEmil Michael
I mean, I think in some cases, it's a matter of national survival, right? In, in, in, insofar as, like, I'm, I'm as free market a person as, as anyone.
- SGSarah Guo
Mm-hmm.
- EMEmil Michael
But I think if you look back on the last twenty years and say: Should we have outsourced all our pharmaceuticals, all our critical minerals, all our semiconductors, all of it, all of our nuclear power plant building capabilities, so that the vi-- like, if there's a scenario where your ad-- the adversary has control of those things, you don't have control of your own destiny, you would say that, "Well, it's worth the cost to bring it back." And bringing it back is not a snap-your-fingers thing, but with American ingenuity and entrepreneurship and capital markets, I think we can do it, and we have to do it, and we are doing it, and we'll do it. So you pick... You know, it's a little bit of a Maslow's hierarchy of needs. Like, what are the most important things we have to give back? Well, this deal with China says that in a year we have to, you know, the critical minerals export control thing, you know, cut-- you know, who-- if assuming that stays there. So we're, like, operating like we have to be self-sufficient in a year, and then you go down the list of, of things, and you try to tackle them. And the good news is, the enthusiasm about doing it is, again, widespread, and it's some-- it's-- i- I attribute it to President Trump. I tris-- I attribute it to SecRe-- Secretary Hegseth. I attribute it to just smart people looking at the playing field and saying, "Ah! You know, we have to be proficient in some of these things, and we have to do it ourselves." You know, there's two hundred pharmaceuticals on the critical shortage list 'cause we're dependent on other countries, so that's not vi-- that's not a viable thing. We don't want that for our chil- our children, right? So whatever it takes, we have to do it, and I'm relying on folks like you and the people you invest in to, to help on that, and I think we're gonna-- we just have to create the market conditions where it's viable.
- SGSarah Guo
My optimism here amounts to, in certain areas, there is demand, and that was not actually recognized before, right?
- EMEmil Michael
Right.
- SGSarah Guo
Like, we need to make it here, and we need to have the ability to make it. Uh, and, like, i- if, if there's a massive regrowth of American manufacturing, it will not be in exactly the form it was, like, forty years ago, right? It'll be because it is driven by automation, better processes, AI, like, being able to make things other people are incapable of making versus competing in necessarily a global marketplace for cost. Um, but I think that's totally doable. That's exciting.
- EMEmil Michael
Yeah, but, yeah, but the one thing I'd add there is, like, who's gonna, who's gonna, uh, dig and weld and electrify all the data centers we're building? There's gonna be people, to a large degree. There'll be robots doing some of this, but there'll be people. And who's gonna build all the new housing we need in these cities because of the housing shortage? Who's-- you know, so there's, there's gonna be work. It may not be in an auto plant to the degree we had workers in an auto plant as a percentage of sort of the workforce, but there's gonna be other big jobs. I mean, the weldings jobs, we're, we're trying to build ships here.
- SGSarah Guo
Mm-hmm.
- EMEmil Michael
Can't find enough, and it's a job that pays six fi-- well, more than six figures in areas that are not high cost to live in. So it's like, how do you point people with the right capital train- do the right training and so on? So I think there's a lot of opportunity, uh, for all categories of workers. Um, but yes, you're right. In some cases, you know, on farms, are you gonna have robots pick strawberry? Are you gonna, are you gonna use robots and automation to figure-- fill holes that are, that we can't otherwise fill? Like, yes, and we're best positioned to do it.
- SGSarah Guo
And I, I was really also thinking in the, like, effective productivity sense, right?
- EMEmil Michael
Mm-hmm.
- SGSarah Guo
Like, American workers with better automation-
- EMEmil Michael
Yeah
- SGSarah Guo
... and better lines and all of that can produce things that are best-in-class and cost-effective.
- EGElad Gil
The cost-effective thing, too, is sometimes a little bit overstated in terms of, um, there are subsidies, for example, for earth minerals by some of our adversaries, et cetera, and so I don't think these have acted as free markets. I think in many cases-
- EMEmil Michael
That, that's exactly right
- EGElad Gil
... there's been very smart strategic action by China and others to ensure the market isn't a free market so that there isn't competition.
- EMEmil Michael
Yeah, and that's, and that, that's a great point, Elad, because, uh-... if it was a true free market, it wouldn't be as, it wouldn't have disrupted, but there was a lot of dumping going on in certain areas to crush the other industries. I'm somewhat familiar with this from the Uber, Lyft days, but [laughing] -
- EGElad Gil
Mm-hmm.
- EMEmil Michael
But the, there's a lot of-
- EGElad Gil
[laughing]
- EMEmil Michael
- how, how do you inject capital into, in a certain way that gives you an ad-- an unfair advantage? And, and some, you know, people could debate the tariffs, but some of the tariff notion is to balance that dumping, uh, capability. So if you could, in theory, have a free market price for something, well, we're-- if we're, if we can't control one side of it, we have at least some levers on the other side of it to try to create some balance.
- 37:27 – 41:41
Initiatives and Opportunities at the Office of Strategic Capital
- EGElad Gil
So, you know, I guess related to that, you all did some really interesting deals around, uh, rare earth minerals through the Office of Strategic Capital. Can you talk about some of the other initiatives that you have going on there right now?
- EMEmil Michael
Yeah. So those are targeted at what part of the defense industrial base has a brittle supply chain, where the technology exists, there's actually probably a company that actually does it here, but we need them to produce ten times more than they're producing now. And so we've identified-- We went through, like, exhaustively these supply chains, and what are the things that go into this? Like, who knew germanium was a thing three years ago?
- EGElad Gil
Mm.
- EMEmil Michael
The American public wasn't thinking about it. So what we're trying to get ahead of it is, what are the ten, twenty things that are components, whether it's, uh, a brushless motor. A brushless motor goes into a drone. We're dependent on Chi-- the, on China for brushless motors. So, uh, you know, what kind of semiconductors, beside- besides TSMC, go into sort of a data center? What are the other things we have to make sure we domesticate? And how do I, um, ensure that there are-- that I'm taking the companies that exist and making sure they have the capacity to serve the whole nation's needs? And that's pretty exciting, uh, too, because that's another way of, of getting at, um, the supply chain fragility and our adversary dependency. So you kind of can solve, potentially- But we used to have a very robust defense industrial base and an industrial base, period. Now, you're down, in some cases, one supplier of a nozzle that goes in twenty different, [chuckles] you know, systems, and I want that one nozzle maker to succeed, but I also maybe want two or three so that we're innovating while we're doing that, and that's part of the mission of str- uh, the Office of Strategic Capital, and we have a lot of money to do it.
- SGSarah Guo
I think one of the things that's, um, really cool about studying some of this, uh, stuff on the supply chain side is actually, like, how distributed it is. Um, obviously, you know, you spent a long time in Silicon Valley. A lot of innovation's gonna happen in, you know, in Southern California and Silicon Valley. But I remember, like, as you said, I didn't know what germanium was.
- EMEmil Michael
[chuckles]
- SGSarah Guo
I remember looking it up when there was this Department of War investment in-
- EMEmil Michael
Yeah
- SGSarah Guo
- uh, Lattice Materials, and I was like, "It's in Bozeman, Montana," right?
- EMEmil Michael
Mm-hmm.
- SGSarah Guo
"That's where we are making, you know, germanium and silicon crystal," right?
- EMEmil Michael
Yeah.
- SGSarah Guo
"And we need it for defense optics." And so I, I do think that even just, like, showing people how much demand there is for, like, the entire supply chain across different communities is really important.
- EMEmil Michael
Yeah, I think that's right. I mean, you know, fiber optic cable, we don't make fiber optic cables in this country. Fiber optic, the, you know, basic fiber, which they're using in the Ukraine-Russia war to, to do drones 'cause they're jamming and all that, and we use for telecom and all that. So, so yeah, it's creating that list-
- EGElad Gil
Mm
- EMEmil Michael
... communicating it broadly, um, trying to ensure the market conditions are such that we're not subject to the dumping sort of practices that could, you know, really kill an industry very early on. So it's a complex set of things, which is why, why a research and engineering organization would have a strategic capital arm, right? That's why those two things go together, which is not apparent from the outside, is because both things go together a bit.
- EGElad Gil
Is there a list published anywhere where founders who are listening in can go and see what they should be building or areas where there's more demand than either people understand or has anticipated, or where the DoW is willing to help provide capital or other things to accelerate it?
- EMEmil Michael
So the D- DIU, for Defense Innovation, has, like, four or five categories of things that they look at, so that's, that's sort of a published and public thing. The Office of Strategic Capital is a little more proactive. They're going to say-
- EGElad Gil
Mm-hmm
- EMEmil Michael
... "We have this whole-- I'm gonna go find companies that already exist that do this." So it's not for startups 'cause they'll- it's a lending facility, if you will.
- EGElad Gil
Mm-hmm.
- EMEmil Michael
So they're looking for companies that already exist, and how do I expand their, their production? Uh, but it's a good point. Like, uh, you know, at some point, I was talking to the secretary about this the other day, is like, we should have some forum for-
- EGElad Gil
Mm-hmm
- EMEmil Michael
... for talking about the things that we need more proactively, so investors and entrepreneurs can think about them.
- EGElad Gil
Because if you're expanding capacity through loans, you could also expand capacity through new companies doing the same thing.
- EMEmil Michael
Yeah.
- EGElad Gil
And so that's why I'm wondering-
- EMEmil Michael
That's true
- EGElad Gil
... is there a-
- EMEmil Michael
Good point
- 41:41 – 44:30
Lessons from Emil’s Government Experience
- SGSarah Guo
I, I just have a last question for you. Um, you're, you know, couple, couple months in, guns a-blazing in terms of, uh, you know, impact already. What most surprised you or is, like, a, a thing you've changed about how you operate or something, you know, you learned?
- EGElad Gil
And, and this is your sec- second stint in government, by the way, right? And so I'd be really interested in a contrast first stint versus second stint through that lens, in terms of what's, what's shifted or what's different this time around.
- EMEmil Michael
Yeah. So I was a White House fellow, call it a glorified intern, in two thousand and nine to two thousand and ten, and we're in the middle of the Global War on Terror, and so what we were fighting at that time was, you know, a bunch of, of insurgents who had sort of crude weapons, like improvised explosive devices, and so on. Now, we have a near-peer adversary that has space capabilities, uh, you know, long-range strike capabilities, drones, AI. So the battlefield has shifted so dramatically toward being tech superior than it was back then. Back then, we were-- it was more like we had the superior tech, but then we were just vulnerable by, um, adversaries who had nothing to lose, that suicide bom-- I mean, it was a totally different kind of adversary. So that's been a dramatic change, and I didn't... You know, I guess I did realize that, and then part of why I took this job, is that I saw that change, and I wanted to be a part of sort of the solution there. Um, but I think what surprised me is that the, the recognition, broadly speaking, that this ad- this near-peer adversary had been doing so much in so little time in a concentrated way, didn't really hit me until I got in and started sort of getting, you know, really understanding what had happened to some of our markets. Like, again, the germanium example, the fiberglass example, the brushless motors example, uh, importance of Taiwan, these things, you know, when you're on the outside, you, you understand them theoretically, but now I understand them viscerally.
- EGElad Gil
Well, amazing. Thank you so much for everything you're working towards today. I think, um, obviously, you're one of the people that's been motivated by showing up and trying to have a big impact for the country. So, you know, it's, uh, exciting to, to watch what's, what's happening and changing.
- EMEmil Michael
Yeah. Thanks for your, for both of your support, and I will come back to you with the to-do list. [laughing]
- EGElad Gil
Yeah. [laughing]
- SGSarah Guo
We're ready for it.
- EGElad Gil
Wonderful. Yeah.
- SGSarah Guo
All right, thank you so much.
- EGElad Gil
All right.
- EMEmil Michael
All right. Good. Good talking.
- SGSarah Guo
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Episode duration: 44:30
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