Seth Jones and David Susser
Subject: Getting on a War Footing
Bio: Seth: President of the Defense and Security Department at the Center for Strategic and International Studies – CSIS and author of The American Edge: The Military Tech Nexus and the Sources of Great Power Dominance, David: President of HEICO Distribution Group
Transcript:
Larry Bernstein:
Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is Getting on a War Footing.
Our first speaker is Seth Jones who is the president of the Defense and Security Department at the Center for Strategic and International Studies – CSIS. Seth is also the author of a new book entitled The American Edge: The Military Tech Nexus and the Sources of Great Power Dominance.
Our second speaker is a very good friend of mine and golf partner David Susser who is the President of HEICO Distribution Group which is a leading company in commercial and defense aviation.
I want to learn from these two speakers about getting on a war footing to compete against our adversaries. How can we reduce ever increasing delivery times for weapon systems and how can we change our procurement processes to reduce costs? In addition, I want to hear about the rise of venture capital in the defense industry to drive military armament innovation.
Seth, please begin with six minutes of opening remarks.
Seth Jones:
The great historian Paul Kennedy said in his book, The Rise and Fall of the Great Powers that in a long drawn out, great power war, victory has gone to the side with a more flourishing, productive base. That leads to three major points in my book. The first, countries in a wartime environment need to operate with urgency, to spend to maximize defense production, minimize excessive regulations, and streamline their acquisitions and contracting systems.
The goal should be what Andrew Gordon calls more like ratcatchers, those who are committed to win wars, and less like regulators who are prone to bureaucracy and process. That leads to my second point, the tragedy today is that the U.S. defense industrial base is operating on a peacetime footing.
The U.S. is at risk of losing deterrence to China in the Indo-Pacific.
Third point the Chinese are operating on a wartime footing and outpacing the U.S. The PLA Navy with an overall battle force more than 370 ships larger than the U.S. and has a military and commercial shipbuilding capacity that is roughly 230 times larger than that of the United States.
Larry Bernstein:
Trump has spoken publicly about possibly buying Aegis cruisers from the South Koreans who have offered to build these ships with fixed contracts and a quick delivery. Should we use foreign defense contractors to manufacture our armaments?
Seth Jones:
The Navy needs to fight against adversaries who conduct precision strikes. In the first island chain, the Chinese can hit a range of targets. On the maritime front, what is most important is the subsurface fleet. Submarines like Virginia and Columbia class are critical in conventional and nuclear capabilities. Second, the unmanned underwater vehicles or UUVs.
These are both integral parts of what the INDOPACOM Commander, Admiral Paparo talked about as developing a hellscape operations that will make it difficult for the Chinese to conduct an invasion of Taiwan. The Chinese are vulnerable. They cannot do anti-submarine warfare. They cannot see what is going on subsurface. It is their biggest vulnerability. Submarines should stay U.S.-built.
UUVs that are being produced across various countries, that is what the U.S. should be looking to buy. There are some good ones that come from American companies but there are going to be others elsewhere.
When it comes to surface ships, especially at the lower end of the spectrum like frigates and certainly commercial vessels that can be used for logistics, countries like Japan and South Korea should be leveraged. The Chinese have 50% of shipbuilding capacity in the globe. The South Koreans and Japanese are number two and three. U.S. is less than 1% of shipbuilding capability. So, it is going to take far too long for the U.S. to get up to speed on surface vessels.
Larry Bernstein:
What did you learn in the Ukraine war about the future of the navy? I was shocked at how incapable the Russian Navy was in the Black Sea. Ukraine successfully used a jet ski with a weapon to blow up a Russian ship and afterwards the Russians have laid low. This story reflects the vulnerabilities of surface ships.
Seth Jones:
The challenge becomes once you cross over into a shooting war, there are limitations. Having surface ships close to the Chinese mainland around the Taiwan Straits; they’re going to be very vulnerable.
Larry Bernstein:
Richard Fontaine from the Center of New American Security spoke on my podcast about a Taiwan war game in which neither the Chinese nor the Americans were able to control the skies. How do we plan and prepare for this battle eventuality?
Seth Jones:
The U.S. has what it calls operational plans or O-plans. These are war plans for respective countries. The U.S. has a war plan for Russia on the Baltics, China on Taiwan, and North Korea on artillery against Seoul. What becomes important in these war games is what capabilities do the adversaries and the U.S. have?
One of the biggest issues is protracted war. With the Russia-Ukraine wars about to hit the four-year mark, major power wars can be long duration. War games involving Taiwan one consistent finding is that the U.S. runs out of its long-range missiles in less than a week of war that raises huge questions about the ability of the U.S. to fight a protracted war. How effective is the U.S. going to be in deterring an adversary if its stockpiles are so limited?
Larry Bernstein:
Let’s go back to your primary thesis, which relates to wanting the US defense establishment to act more like ratcatchers. Eric Labs from the CBO spoke on my podcast where he discussed the ever increasing lead times required to make naval ships. Tell us about the problems with our defense procurement.
Seth Jones:
Right now, it takes a long time for companies to build infrastructure to purchase additional land, securing permits. Then the production timelines for weapon systems are long. When you add onto that, the contracting is completely anachronistic. One Department of War study warned that major defense programs continue to take 10 years or more to deliver less capability than planned, often at two to three times the planned cost. The challenge is the dizzying federal acquisition regulations. These are regulations established to make sure contractors follow best practices. All these requirements add years to the acquisition, contracting and production process for weapons.
Larry Bernstein:
Do our allies or adversaries have superior defense procurement processes?
Seth Jones:
We have seen Chinese timelines decrease. The Ukrainians produced a range of different weapon systems like the Flamingo their long range missile. The U.S. is not going to provide Tomahawk cruise missiles to the Ukrainians, but they are building their own. When you are in a war, it tends to expedite timelines. The Ukrainians have cut red tape. They are doing the same thing with drones. The Ukrainians are an ally that able to produce quickly.
Larry Bernstein:
What about the Israelis?
Seth Jones:
The Israelis have moved on the air defense side. They’ve got Aero, Iron Dome, David Sling and the munitions that go with them. Look at the wartime environment that they’re in. In both cases Ukraine and Israel, there is an impetus to shrink those production timelines because there’s an urgency.
The U.S. has done this in peacetime. It did it in the 1950s during and the 1970s. Wartime doesn’t have to exist for a country to have urgency, but these are the two best examples today of countries in conflict.
Larry Bernstein:
In the book, you tell the story about how in WW2 the US put our manufacturing onto a wartime footing and successfully made record numbers of Liberty ships and aircraft. Implied in your book discussion was that today the Chinese should be able to change their consumer-oriented factories to manufacture armaments, but that would be nearly impossible for us. Tell us about the relationship between peacetime industry and its ability to change to wartime manufacturing?
Seth Jones:
The Chinese have tried to fuse both the civil and military sides of production. Their shipyards are producing both commercial and military ships. I looked at the World War 2 example where the U.S. was able to leverage commercial companies like Ford Motor, General Motors, and Chrysler. There would be big challenges having companies today building weapon systems.
I don’t think there’s a close parallel to what the U.S. faced in the 1940s with today, but I do think there’s examples of where the commercial sector should be better integrated, and that is in advanced technology, quantum, and artificial intelligence. Nvidia or Google are not involved in the defense sector because of the barriers that we talked about earlier. In practical terms, you have defense companies spending money on AI when we should be leveraging our big tech firms.
Unmanned and autonomous platforms have huge commercial applications. SpaceX or Starlink have huge commercial and military implications. Star Shield, the military version of SpaceX has become important. Starlink has been used on the battlefield. There are areas where our commercial sector can be useful.
Larry Bernstein:
In your book you tell the story of the Last Supper. After the collapse of the Soviet Union and the expected peace dividend our Secretary of Defense suggested to the defense industry that they merge to just a handful of firms and reduce their operations. Did this governmental policy serve us well?
Seth Jones:
There is a great quote from Norm Augustine, the chairman of Martin Marietta, and eventually the chairman of Lockheed Martin, that regulations grow at the same rate as weeds, and that gets to the regulators versus ratcatchers theme in the book. In the Last Supper was a briefing by senior Pentagon leaders in 1993 to the CEOs of the main defense companies, May 18th, 1993. A slide presentation that shows the number of current suppliers of key weapons systems. There were three companies building bombers, five building fighters, four building helicopters, and on down the line. The next column was the number of future suppliers the Pentagon wanted to see.
The Pentagon said, “Industry, you figure out your mergers.” Some companies die or sell off their defense. That was understandable at a time in the 1990s when the Soviet Union had collapsed. But we are now in a world where the U.S. does have to worry about two major adversaries and conflict in Europe and the Indo-Pacific. Our defense sector had come down to big firms like Lockheed, Boeing, Raytheon, Northrop, and General Dynamics. We need to rebuild a diversified set of companies big and small that can produce technology and equipment for the military.
Larry Bernstein:
Tell us about the role of new firms funded by venture capital like SpaceX and Palantir and how they are at the forefront of technological defense applications.
Seth Jones:
In the Cold War, investments in the defense sector came from DARPA and the Department of Defense. Starting in 2010s is the role of private capital. Venture capital investments in defense companies goes from $2 billion in 2013 to over $40 billion by 2021. It’s a massive increase. Private equity deals in the defense sector quadrupling. Investments in early stage companies like SpaceX, Anduril, Palantir, Shield AI, where venture capital. Venture capital firms like Founders Fund has been critical.
We don’t see anything like this with the Chinese. They have companies producing technology like Huawei that includes AI and quantum, but most of the big defense companies on the China side are state-owned enterprises, which are corrupt and inefficient. The U.S. does have an advantage in the private sector.
Larry Bernstein:
In Eisenhower’s final farewell speech, he spoke about the military industrial complex driving U.S. foreign policy. And when you tell a story like “The Last Supper,” it seems the opposite and that the military industrial complex could not put up a fight. Eisenhower’s fear of too much power being concentrated in our defense industry seems misguided.
Seth Jones:
The United States faces a dicey international security environment. We have seen a big increase in cooperation between the Chinese and the Russians. The Russians invaded Ukraine; we have seen Russian activity in Africa and Chinese activity in the South China Sea.
It is much more costly in blood and treasure to fight a war with some combination of the Russians and/or the Chinese. It is infinitely cheaper to be spending money to strengthen deterrence.
Eisenhower was at the front end of deterring a Soviet advance. Eisenhower supported the building of Polaris nuclear weapons and the B-52. From my perspective, the U.S. needs to spend money on weapon systems to effectively deter adversaries.
You want to eliminate as much as possible fraud, waste, and abuse. But I would push back on those who interpret that Eisenhower closing speech as being wary of the defense sector in general, because that was not his action as president.
Larry Bernstein:
Russia did a particularly poor job in executing its Ukraine battle plans. Yet, we hear that the Europeans perceive the Ukraine invasion to be an existential threat to their existence. Do you think that Russia’s behavior in Ukraine shows weakness and what have we learned about our adversary’s ability to wage war?
Seth Jones:
Predictions in the first few days that the Russians were likely to win in a matter of days if not weeks. The Chairman of the Joint Chiefs of Staff said that. That was reflected in U.S. intelligence assessments from every intelligence agency because the quantitative military balance between the Russians and the Ukrainians in the number of soldiers and weapon systems. Those assessments did not appreciate the qualitative side: morale, corruption, or the importance of joint operations. Four years into this war, the Russians are not able to effectively combine their air-ground operations, firing from aircraft in support of forward deployed forces to break through Ukrainian territory. They are like a third-world military.
That is not to say the Russians are poor across the board. We’ve seen the Russians effective in developing new types of drones, effective in electronic warfare and jamming, but militaries have to execute.
Larry Bernstein:
How problematic is it for the Chinese that they have not been in hot war since the 1979 conflict with Vietnam?
Seth Jones:
They can produce weapons at scale and have been quite innovative in technology including artificial intelligence and quantum. But the Chinese have huge challenges, massive corruption within the People’s Liberation Army including in China’s Central Military Commission.
They are very weak undersea compared to the Russians. Their submarines are pretty loud, easily findable by the U.S.
Big questions about their ability to conduct a kill chain and their organizational structure for fighting a war. Unlike most militaries, the Chinese have a dual-hatted command structure. On a ship the Chinese have both a PLA Navy military commander as well as a political commissar.
Larry Bernstein:
That sounds ridiculous.
Seth Jones:
The Soviets ditched that organizational structure during World War 2. It was very inefficient and a lot of chaos in it. They had that command structure against the Indians in the 2020 war.
Larry Bernstein:
Do you think that the US can get on a war footing?
Seth Jones:
The United States, as Franklin Delano Roosevelt said, can be the arsenal of democracy. Alexis de Tocqueville expressed deep admiration for the innovative spirit and the boundless energy of Americans. The U.S. has what it takes to conduct a national industrialization strategy to bring the commercial sector to mass produce at speed and scale. It can fix supply chain challenges of strategic stockpiles. We see that with critical rare earth minerals. Our allies like the Japanese and South Koreans are very capable of filling in gaps in shipbuilding. There is a mindset issue.
There’s got to be a White House level initiative. The U.S. is going to have to spend money to get to a wartime footing. The whole goal here is deterrence. The U.S. has what it takes. The question is, is it going to wait for a war to do this?
Larry Bernstein:
Thanks Seth. I would like to move to our second speaker my buddy David Susser.
David Susser:
My name is David Susser and I have been in the aviation and defense business for 38 years. I started a company in 1990 and sold it to a public company in 2005. I currently manage three businesses in commercial aviation and defense for the firm is HEICO Aerospace. It’s got a market capitalization of approximately $40 billion.
Larry Bernstein:
What it is like to interact with the Department of War?
David Susser:
Working with the Department of Defense is cumbersome to say the least. Trying to interpret how to bid on certain contracts requires specific software. It requires a lot of man-hours to figure out who is approved to supply a particular product. For instance, you could have an approved source at the Department of Defense and there could be three other viable ways to provide a similar product, but the mechanisms to get them approved at the Department of Defense could take years to accomplish and you need to have buy-in from a particular engineer.
Larry Bernstein:
Our previous speaker Seth Jones was saying that there is a difference in how you manage defense procurement when you are on a war footing. If it is life and death, the decision-making loop can be much faster. Obviously, we want cost transparency without mistakes. In WW2, Seth said that we converted factories, developed new armaments with delivery in months not decades. Why does the current system take so long and toilets cost $40,000?
David Susser:
There are different reasons why we have these extended lead times. The commercial version of the approval process for alternative products could 100% apply to the defense department, and we could open the world to a larger number of suppliers. Increased competition makes the OEM and the aftermarket suppliers more competitive.
For F-15s, F-18s, and F-16s, Lockheed granted licenses for third parties to develop alternative parts and it has worked effectively. The F-35, which is our newest state-of-the-art stealth fighter, Lockheed 100% controls all spares and will not grant any licenses on that. That aircraft was predominantly funded by the U.S. government, I do not understand why they cannot force Lockheed Martin to open up licenses for all those parts, particularly when the operational readiness of that aircraft is hovering around 50% to 60%.
Larry Bernstein:
The Jones Act limits production of U.S. naval vessels to the US with American citizen employees. We used to have a large shipbuilding industry, and Congress passed a law with the intent of maintaining domestic production. But the United States is not the best, cheapest, or most efficient shipbuilder. How should we think about relying exclusively on U.S. production of armaments?
David Susser:
Even if we wanted to increase our spending on shipbuilding, an area where the Chinese are dominating us, we don’t have the labor to build ships. We could partner with the South Koreans which can use their labor and manufacturing capabilities without necessarily sacrificing proprietary secrets of the United States. We could use them to manufacture heavy metal hardware and the sophisticated electronics could be fitted out once the ship is in the United States.
There is a lot of ways we can protect our IP and know-how and utilize other countries to manufacture the labor-intensive hardware.
Larry Bernstein:
Regulations exist because we fear fraud and cost overruns by the defense industry, so we put in regulations and systems to prevent us from getting ripped off. But does this end up costing us in time and money?
David Susser:
On the commercial side of the business, when a customer approaches us to come up with an alternative part for a particular aircraft, we do a safety evaluation and determine is this a product that if it failed, what type of downstream damage can it cause and could it lead to a potential safety issue?
The major issue here is cost and availability of products. When you hear stories of operational readiness below 75%, clearly there’s a supply chain problem. We want alternative products for cost and availability. You add the component of criticality in there and you can segment the procurement process and perhaps cover at 50% of your operational needs with an option of either OEM equipment or some alternative product.
Larry Bernstein:
A couple weeks ago, I did a podcast entitled You Sank My U-Boat. One of the subjects that we discussed was the rapid technological evolution during the Second World War. It’s like football, the offense and defense try new strategies and opponents need to adapt.
When the fighting started the U-boats were sinking a large number of cargo ships, so the British responded with convoys of ships and destroyers. The Germans U-boats evolved a new strategy of using a wolfpack of six U-Boats to overwhelm the destroyers. When the British began using sonar, the Germans coated their submarines to confuse the sonar. War is a a constantly evolving game of cat and mouse. Tell us about the war in Ukraine and the evolution of technology particularly for drones.
David Susser:
The use of drones has become an offensive weapon, an incredible tool for surveillance utilized at altitudes practically undetectable. In Iran we tried to strike their nuclear capabilities, the first order of business is to take out their communications and that gives our aircraft huge flexibility in how they attack their targets.
When the Russians took out the communications for Ukraine, we had Starlink an option for countries when communications get knocked out. There ultimately will be a defense to that. So as you said, there’s a measure and then a countermeasure.
When drones were first introduced into the Department of Defense, they were utilized as target practice, and then people started to realize that you could make slight modifications to utilize drones for surveillance, as well as for offensive wartime engagement. Drones are significantly more cost-effective than flying aircraft. They do not put pilots at risk. You can have them be precision guided with a pilot in a remote location. Drones are an unbelievable tool to fly longer distances and cause more catastrophic damage than anyone imagined.
Now, if you compare that to operating an F-16 or an F-35, you’re still going to want a pilot in the cockpit who’s making real-time decisions in a forward location as opposed to being on a camera thousands of miles away.
There is a measure and then a countermeasure that we will ultimately come up with some jamming device which will disable them, and then they will be modified again. The game will go back and forth between technological improvements and then countermeasures to those improvements, but drones have clearly changed the landscape of the battlefield.
Larry Bernstein:
Going back to Seth’s book, FDR hires Knudson away from General Motors to take over the War Department’s weapon procurement in World War II. He simplified matters by asking, “What equipment do you want, how much are you willing to pay, and when do you want it. And I’ll deliver it. I am in the manufacturing business not the policy and planning department.”
You, David, are in the manufacturing business. Seth says, “We need to be on a war footing, meaning we need to be able to deliver armaments in shorter time less expensively. How can we change things around to be most efficient?
David Susser:
The complexity of being operationally ready for our armed conflicts throughout the world has changed dramatically. It’s conventional warfare, urban warfare, and cyber warfare.
Prior to the Russia-Ukraine war, we felt that most of our conventional hardware was obsolete. Now we’ve learned since Russia-Ukraine that we need to have operational readiness with conventional warfare. And as we see what is going on in the Pacific with the Chinese, we need naval warfare.
Not 100% sure how we prepare to fight all these battles to defend territories with all these different weaponries. We are going to have to commit defense dollars towards what we believe are the highest probability to defend the nation.
The flexibility to change those priorities with rapid notice is the real challenge for the Defense Department. Streamlining decision making on the allocation of resources is important but cycle times for weapon development is a multi-year commitment. 3% of GDP on defense is not enough. We need to be committing a larger percentage of our GDP towards defending the United States.
Larry Bernstein:
Thanks to Seth and David for joining us.
If you missed the previous podcast, the topic was The Wondering Jew.
Our speaker was Abby Pogrebin was previously the President of the Board of Central Synagogue where I am a member. She is also the author of My Jewish Year: 18 Holidays, One Wondering Jew. Abby spent a year celebrating every Jewish holiday and we discussed what she learned from her adventures.
You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.
Check out our previous episode, The Wondering Jew, here.
