Congressman Porter and Nathan Fiala had the unique opportunity to spend time with National Security and Emerging Critical Technology Consultant Mike MacKay. Along with 20-plus years as a marine, his service includes time at the Department of Defense and advising Defense Appropriations Chair Congressman Calvert and Senator Joni Ernst.
In this enlightening episode of PoliticsAside, we explore the importance of defense spending, the dangers of operating under a Continuing Resolution (CR) to our national security and the future of venture capital investment in defense technology.
Congressman Porter and Nathan Fiala had the unique opportunity to spend time with National Security and Emerging Critical Technology Consultant Mike MacKay. Along with 20-plus years as a marine, his service includes time at the Department of Defense and advising Defense Appropriations Chair Congressman Calvert and Senator Joni Ernst.
In this enlightening episode of PoliticsAside, we explore the importance of defense spending, the dangers of operating under a Continuing Resolution (CR) to our national security and the future of venture capital investment in defense technology.
Greetings. My name is John Porter and welcome to another very special edition of Politics Aside. The purpose of these interviews is to talk to individuals that I think are changing their world in many different ways, bringing them to you live to hear about their expertise, but also a friend to, not only to the Puerto Rup, but our whole team here in Washington DC. There are key things that we've been talking about in a series, and that is the funding of our national security. Is it enough? Is it too much? We're also today going to take it to a next level and we're going to talk about the role of venture capital and how it can play in the defense innovation, why we should do it and why we're not as much as we ought to be. And I guess bottom line is do we need both venture capital dollars as well as congressional spending and, of course, administrative spending? So today, a special guest.
Speaker 1:We have Mike McKay, who I'm going to get into more details here in a moment, with his incredible background, and then Nate Fiala, who is with the Puerto Rup here in DC, was a specialist in the area of defense. First of all, mike, congratulations for many years of serving the country, but we're proud of you and want to say thank you, my gosh, 20 plus years in the Marines Marine Special Operations Command bless your time in the Senate. We won't hold that against you as a national security advisor to Senator Ertz from Iowa and also on the Senate Armed Services Committee. Also, I'll give you big points for working with a good friend of mine as well, and that is Chairman Ken Calvert from California, as National Security Advisor and, prior to that, chief of Staff and Congressional Liaison to the Assistant Secretary of Defense for Special Operations and Low Intensity Conflict in the Department of Defense.
Speaker 1:And I'll be honest with you, mike, I have to put all these titles together because I know they all really matter. But thank you for your public service and, more importantly, thank you for being here today. So I really want to start with Nate. Things are happening here every day on Capitol Hill in Washington DC, if not around the world. But what's happening on the Hill when it comes to the national security, national defense and the funding world? Yeah, thank you, congressman.
Speaker 2:First I'd like to say hi to Mike. Mike, you and I first met when we were both working in the Department of Defense and the Policy Shop.
Speaker 1:I was working for the Assistant.
Speaker 2:Secretary and you were the Chief of Staff to the ASD for Solar, so it's great to see you again and great to have you on. Appreciate it you too.
Speaker 3:Nate. Thanks and thanks, Congressman. I really appreciate this opportunity, and boy did you pick a good day to do this one.
Speaker 1:I guess we should put that in perspective. It is snowing. Whoever is tuning in tomorrow or next week, it's snowing today in Washington DC, so thank you.
Speaker 2:Great day to be inside. So speaking of Congress, so when we're talking about federal funding right now, we're really talking about two different issues. The first thing is the federal budget for the entire federal government, but specifically we're going to be talking about the defense appropriation bills. That's $886 billion. Congress recently passed the CR to push the funding deadline into March, so that's another push back into the congressional year. We've already done that previously and the impact that it has on DOD is that DOD can't start new contracts, they can't hire new people. A CR, while better than a shutdown certainly better than a shutdown is not great for the defense industrial base, but specifically it does hurt our ability to innovate and prepare for future conflicts. The second issue that we're talking about is the $110 billion in the National Security Supplemental Act for Ukraine, israel and Taiwan. I would like to highlight that the majority of Congress supports this funding, especially since the majority of the funding will actually be reinvested back into our defense industrial base to hire more contractors, to hire more people, to put people to work. We've talked about this a number of times, congressman. Now the congressional leadership recently went to the White House to discuss with President Biden to negotiate on the supplemental. Really, nothing came out of that, predominantly because the Speaker of the House he's very adamant that his caucus wants funding for the border and that he's not willing to put the bill forward until the border funding is included in the supplemental.
Speaker 2:The Senate leadership both Senator Schumer, a Democrat, senator McConnell or Republican they're looking to bring this bill to the Senate for sometime early next week. We are expecting Senator McConnell to be whipping Senate Republicans. For those of you that don't know what that term means, it means getting them to vote, getting the Republican caucus to vote to support this bill because it is a national security priority. Really, what I want to get to that is in the Senate. We're looking like there's a lot of support in the Senate, the House we have a minority of members in the House that are not in support of the supplemental funding without any border add-ons.
Speaker 2:There's a slim majority. Speaker Johnson has a very slim majority two votes. I don't see how he gets the border funding in there but at the same time he can kill any bill that comes to the House. Even with that slim majority, he does have to listen to the minority of his caucus in order to bring any bill to the floor. For that I want to ask, mike I want to ask you a question From your experience both in the Department of Defense and in Congress what's the impact of a shutdown on our national security and what kind of message does this send to our adversaries China, russia, iran, any online actors out there, mike?
Speaker 3:Yeah, thanks, nate, it's bad. Yeah, it's bad. I mean, there's no two ways around it. And everybody says this, which is a frustrating part for people in uniform, in the DOD, in Congress and out in the private sector. Everybody knows it's bad, everybody says it's bad and they say it over and over again. So look, this is what you're getting. No new starts.
Speaker 3:So all of these great ideas that we have and everybody's trying to make that is held up, and it's held up in a way where, when you look at the house appropriations bill, this stuff's sitting there, it's staring you in the face. It's there, it's ready to go. We just need to get across the finish line. It's not moving anywhere and people are looking at that too. You have ramp-up issues. You've got programs this year that are ready to go from prototype or like a low-rate initial production into full-scale production and the doubling of their budget, to go from that research and development money into procurement money that can't move. These are critical programs that not only have we already invested in, but we've already agreed that we need, and, because we're in a CR, just nothing moves Beyond that.
Speaker 3:To dig a little bit deeper, it creates contracting, chaos and terrible behavior in the Department of Defense and, with no mal intent, right, you're trying to figure out how to spend a year's worth of funding in six months. They have obligation and expenditure schedules. They can't just dump money into programs day one. It takes time for them to get the money. They have to put it on contract. They have to go through all that stuff, contracting, chaos and then you have these situations where they just buy what is available or what is easy, when at the same time the whole world's asking hey, do something hard, do something unique, figure out a better way to deal with private industry and commercial technologies. But the easy button is going to be to go to rebuy the things that we already have, which is probably the wrong answer.
Speaker 3:And the worst problem of a CR in totality is the waste the waste that goes into it. My favorite budget guru in the world, lane McCuster out of AEI. She's got estimates that $70 million a day is wasted during a CR in buying power. That is atrocious. So all these people that are saying, oh, I'm a budget hawk, I'm doing it for budget reasons, wrong $70 million a day in waste. And that was an estimate I think back from in October.
Speaker 3:It's probably worse today when we talk about waste, it's also in time. You can't get time back. You can't get training time back, you can't get deployment time back, you can't get promotion time back and you can't get that R&D time back. We're wasting time. Douglas MacArthur said the worst two words in the English language are too late, and he was talking about not reacting to World War II in the way that we should have. In 1938 or 1939, when Hitler was rolling into Poland, we were too late to react there and we are burning time right now in a CR where we need to be shifting our focus and addressing strategic adversaries in China and near-term threats with Russia and Iran Period.
Speaker 1:While we're on the CR for a moment, why don't you explain for our audience how the funding cycle works Technically? The CR is projects that DOD thought was a priority over a year ago correct, and things are also changing dramatically. So the CR as we see it stayed tomorrow whenever, and the supplemental. But we're actually acting upon Congress is acting upon priorities of 18 months ago. Worse than that.
Speaker 3:Worse than that, congressman. So when you look at the what's known as the PPB the planning, programming, budgeting and execution cycle of the Department of Defense they are planning right now for three and four years ahead, because they have to, because the Department of Defense and the PPB process was built on a large industrial waterfall cycle. That's really good at building aircraft carriers, because it takes a long time to build them. The nature of warfare changed, the nature of technology has changed and right now we are dealing with a budget that was agreed upon more than 18 months ago within the Department and, as we have seen over the last 18 months, draw it back to the beginning the collapse of Afghanistan, war in Ukraine and now everything we're dealing with now. It changes rapidly. So you mentioned him, and I mean hats off.
Speaker 3:It was an honor to serve for Chairman Calvert and I think the House Appropriations Committee for Defense is in great hands under his, under his leadership, and Acti is really leading the charge for change within Congress.
Speaker 3:We can point fingers at the Department of Defense all day and I'm happy to do that, but Congress is also the problem and Chairman Calvert has taken that on as a champion in a leadership leader for change.
Speaker 3:So when you talk about this gap in what we think we need 18, 24, 36 months ago and what the nature of warfare is today, the Chairman put together a program called the pilot to accelerate the procurement and fielding of innovative technologies, and what that does is it provided the Under Secretary of Defense for Research and Engineering, who is the closest to the next thing that's going to be real and needed, gave at right now it's Under Secretary Heidi Shue.
Speaker 3:This bill has 300 million dollars in agile procurement funding, so she can say these are the top things that we need in the Department. We didn't know, we needed them yesterday, we need them today. Awards from 10 to 50 million dollars to really go from prototype and low rate initial production to scale at quantity, which is what the industry needs to see in procurement dollars and contracts. And there is an agreement within the Department that you can only submit projects for this funding that you've already allocated in your out years budgeting, but you need to slide to the left to meet the moment of the day. Genius, but it's a Band-Aid Everything in the DOD provides an opportunity to again.
Speaker 1:If we're talking three, four years ago, adding to that 18 months, some of these things are five, six years old proposals, but this, as you are describing, provides opportunities for today, to that funding of things that are happening in national security today. That's what you're saying, Absolutely.
Speaker 3:Absolutely, but again, everything is hindered by this CR. It was $200 million last year. It's great. They made some great awards. I'm pretty sure they're about to do their next set of awards. They got $300 million sitting in there right now and I'm sure they want to use that.
Speaker 1:Well, I guess we're on the topic of spending monies Again. This is called politics aside and the goal is not to get into politics, so this is not a correct question. This is more of a functional from a practical application. What about funding for Ukraine, israel and Taiwan, and how important is our relations with those countries? It?
Speaker 3:has to happen, full stop, no question America doesn't fight alone.
Speaker 3:Right, you go back to World War II and you look at the Allies, you look at everything that we've been able to do in NATO since then. You see relationships that have been built that are critical to the challenges that we face right now in South Korea, in Japan. These are all enduring partnerships and the world is safer when America leads. But it's America in the leadership position, but it's not America alone and we need these partners. And when people look around the world and they see what happened in Afghanistan, look at what happened after that.
Speaker 3:After we abandon Afghanistan, Russia takes Ukraine, Iran escalates things in and around the region. They see that weakness. Weakness is provocative and adversaries and malign actors start moving on that If we abandon Ukraine, Russia will continue to reconstitute the Soviet Union. Vladimir Putin is very clear about this. The biggest atrocity in his mind of the 20th century was the collapse of the Soviet Union and he absolutely intends to reconstitute that. That's the future. Xi Jinping is very clear that he will take Taiwan and reunify one China in one way, shape or form.
Speaker 3:These are the things we risk when we let our partners and allies go, when we don't support them, when we're not there, you have the State of Israel. They're under an existential threat on a daily basis from a terrorist organization to their southern border that has, in the first paragraph of their charters and organization to I'm paraphrasing here what destroyed the State of Israel. It's pretty clear that they have problems and they are our best ally in the region and we need to be there and we need to support them, because America needs to lead, because the world falls into chaos when we don't.
Speaker 1:Well, there is, seems to be a there is school of thought that we're spending too much on national security and, by the way, you're just creating another Afghanistan by spending more. And we should be spending money on more programs here within the US and, of course, as we've had these discussions prior to this program as well, that a lot of the, a lot of the spending is really happening in the congressional districts across the country, but we do hear that possibly that we're spending too much. Are we spending too much on national security?
Speaker 3:No, absolutely not, and you can. You can carve this up a bunch of different ways. Look, I see, I see the resistance and the hesitation from some, you know, during these conversations on the CR, speaker Johnson, you know, made a point of what he needs to see from the White House. He needs to see a strategy. Many, many of us in Congress at the time we're asking for this what is your strategy? And we've, I have, been unimpressed by what the White House and the department has put out, not politically, just when you go to the president you say what is our strategy in Ukraine? And he says, well, that's the Ukrainian strategy. Or when you ask that question to the Secretary of Defense and he says, well, victory is up to the Ukrainians. No, you're obligating US tax dollars to that. You have to have a strategy as well.
Speaker 3:But when you look at, are we spending too much? Absolutely not. We are. This is competition. We are facing our global adversaries in a way. That is, when you carve up the numbers, not even close to what we have done in the past. I mean, in World War Two, we were doing 40% of GDP. Today, I think what, nate? What are we talking about? Two, two and a half, 2.7%, 2.7% I would much rather compete at a cost figure of 2.7% GDP that have to fight World War Three at 40%. So no, we're not it's it's. It's a. It's a dollar amount that should be articulated on how, why and where we're going with the spending. But it is not an egregious amount that you're. Look, you can't balance the budget on the back of our warfighters Bottom line. There are other ways you can dig into spending. You got to look at the mandatory side, but you're not going to do it by harping on DoD. It's just not going to happen.
Speaker 2:And the last time we were at 2.7% was in the 1990s, during the Clinton administration, during the, you know, the peace dividend, which is actually part of the reason we're in this predicament now, is because we've been under investing in our defense industrial base and in the warfighter for 30 years. But prior to the 1990s, the last time we are at 2.7% was right before World War Two, right, and then we had to skyrocket up to 40% in order to to beat the Nazis and to beat Imperial Japan, in order to get ourselves once after Pearl Harbor, once we were kicked out of East Asia.
Speaker 3:Right and look and look and, to be fair, there's mountains of GAO reports that show all kinds of bad programs, bad systems in the DoD. I'm not giving them a pass either. But you know when, when Ken put, when Congressman Chairman Calvert put his team against the initiative one drive innovations, but then two to reform the DoD. He has a team over there that's earmarked, not earmarked, wrong term.
Speaker 3:He has identified and marked about $20 billion of programs that have waste, overspending and are ripe for reform. So when you look at this, the DOD doesn't get a free pass here. There needs to be oversight and accountability of the dollars. They need to bring on modern technologies. They need to bring in enterprise systems so that we can get those economies of scale and drive down cost on things that we're doing. They need to bring in better buying practices. Will Roper when he was over at the Air Force, he has this plan to buy fighter jets like you would a Toyota Corolla, right, you buy it, you use it, you retire it and or you sell it to our allies so that they can compete against our adversaries. But when he ran his numbers, there's a hockey stick in cost. When you get into these service life extensions and you start trying to fly airplanes for 50 or 100 years, they get incredibly expensive in the out years. There are better ways to do things. It's just hard to get those processes implemented within the world's largest bureaucracy.
Speaker 1:So let's take a moment. I think Nate's got a question regarding the hedge strategy.
Speaker 2:Yes.
Speaker 1:Which is a very creative and again I want to give kudos to Chairman Calvert and Roy as well In finding alternative ways to fund this. So, nate, you want to talk about that a little bit. The hedge strategy yeah.
Speaker 2:so, Mike, you and I have talked about this a couple of different times, but we want to build on the conversation of federal spending. When you were working for Chairman Calvert, you were working on the hedge strategy, which is to incentivize non-traditional, innovative companies to work with the Department of Defense on our future technologies and the essential and potential future fight. Can you walk us through the hedge strategy, tell us how it works and why it's so important to the national security?
Speaker 3:Yeah, absolutely, I would be happy to. This is one of the things that just drives me nuts when we look at this CR. I mean this thing is in the bills, staring us in the face, and hats off to the entire HACTI, all the members, all the staff, for really doing their constitutionally directed work provide for the national defense and raise and support armies, which they did back in June. Right, their bill was done in June. The defense appropriations bill in the house was done on time to meet our fiscal year requirements and the constitutional requirements. This is in there and it's staring us in the face, so what it does is this year, the DOD did a really great job of elevating the director of the Defense Innovation Unit to a Secretary of Defense Direct Report. The person that they put in that position is Doug Beck. He's the former vice president of Apple. This is a strategic hire and this is important.
Speaker 3:When we talk about innovation and disruption in the Department of Defense, we can look back now at people who have done this Oppenheimer, rick Over Billy Mitchell. You need a person to shepherd this change, and Doug is coming out of one of the only places in the world where you have a gigantic organization, where all of their software and hardware, vertically and horizontally, are aligned. They work with everything else. Everything's interoperable. Ultimately, that's the plan for JADC, too, right? Everything talks to everything. Doug has seen this in real life. So you elevate him to a sec-def direct report and then you take these non-traditional fielding enterprises. The people that we know know how to do this work.
Speaker 3:The soft words, the aph words, the naval exes, the people out there who have the contacts in industry understand the emerging and critical technologies that private sector inventors, innovators and disruptors are already bringing to market without requirements, documents on their own dime, taking all the risks, saying I see a need, I'm going to fill it, just please buy it. And then you have this strategic overview of about I want to say it's about 6 to 700 million in portfolios that look like that and they leverage things that are cheap, easy to do and are expendable. When we wrote this, it wasn't as common a terminology but to see these cheap, throwaway drones that may only go in one direction because they got a bomb attached to them and they help provide an asymmetric advantage for Ukraine in the early days of the war.
Speaker 3:Well, I bet you, taiwan wants a whole lot of those right and we need a whole lot of those for our warfighters. So you look at these kinds of technologies that are cheap, attributable not in the hundreds of millions of dollars, sometimes in the hundreds of thousands of dollars or systems that really give us an advantage right now. So it aligns all of those. And then, most importantly, one of the things it does is it models great experimentation exercises, experimentations that have been going on in CENTCOM with Task Force 59 and down in Southcom with Scout. They're saying we have a big problem maritime domain awareness, lots of water, lots of bad guys, whether it be Iranian malign networks or drug dealers. Down in Southcom and saying lots of water, lots of bad guys, can't see everything. Hey, industry, come in. And whether it's a lower-dorbit satellite or an AI technology to manage massive amounts of data or a robot sailboat that's floating on the surface, hey, just bring us your ideas, we'll see what works. And then a contracting vehicle on the back end of that to start doing this.
Speaker 3:So in the hedge strategy there's about $200 million that the combatant commanders can use, who are on the battle, looking at the warfight every single day. They're living in the here and now Our programming folks back in the department. They're living in that two, three, four-year time frame that the congressman brought up. They're planning what's the future. Our combatant commanders are fighting the war today, dealing with the Houthis in the Gulf and in the Middle East. They're using these capabilities right now and they need budget and funding to buy not near-term capabilities but today capabilities, and the hedge provides that, with DIU doing the overhead, some of the contracting and alignment, so that they don't get burdened with administration down on the edge.
Speaker 2:Yeah, speaking of budget and funding, so venture capital will participate in this hedge strategy, I hope. What are some issues that they're experiencing when they're working with DOD? Why is this hedge important for them, or will it help them, and what can Congress do to alleviate those issues so that they can get the capabilities to the warfighter?
Speaker 3:Yeah, so DoD has to send the demand signal. Right, that's it, bottom line. We are well beyond the days where the DARPAs of the world are creating the Internet and creating GPS. That is not the case anymore. Our private industry, our entrepreneurs and inventors are leading the charge. Right now, the DoD needs to send a clear demand signal and they need to cut contracts. They need to cut big contracts with long-term recurring revenue so that it's a viable business model to be in national security, because right now we have a lot of people taking a lot of risk.
Speaker 2:Like cut you mean sign, not like get rid of, but cut you mean sign contracts.
Speaker 3:Yes, right.
Speaker 1:In our world, cut means cut reduce.
Speaker 2:No, no, no no.
Speaker 3:No, this is a good way to cut contracts. Sign on the dotted line Big contracts with long-term recurring revenue.
Speaker 3:Look, I'm going to give you the case study right now. I've been harping on this a whole bunch. The DoD goes out there and Depsec Hicks has a lot of great ideas. She rolls out this replicator idea. We've seen what's going on in Ukraine. We need drones. We need airborne drones, we need ground drones, we need surface amphibious drones, we need subsurface drones. We need all the drones. Great, we're going to buy them in orders of magnitude, in thousands. Great, love that. Okay, what's the plan? Well, we'll get back to you.
Speaker 1:Okay.
Speaker 3:Big problem. Okay, all right. Well, cool, where's the supply chain for that? Right now, our supply chains are penetrated by the Chinese. Most people could not put a zero at their delivery schedule every month right now, which is what's being asked of them. Oh, you're making 10, make me 100. You're making me 100, make me 1,000. They can't. They're going to run into supply chain bottlenecks and they're going to run into supply chain vulnerabilities where China owns the market and, as you've seen from their national security laws, they've been cutting off exports of drones. They've been cutting off exports of rare earth technology, manufacturing, processing. They're wise to what's going on here and they know where they can turn on and off this picket to affect our industrial base. So our supply chains are compromised.
Speaker 3:We don't make things in America anymore. When we mobilized Detroit in 1940, manufacturing was something like 30% of our GDP. Now it's in single digits. We just don't make things in America anymore. We've offshored that. You want orders of magnitude? We need to bring that back to the United States, or friend short in our places. You need those quantities of scale that we just don't have the ability to create right now. A lot of people are trying to get after it, but the DOD needs to support that.
Speaker 1:Well, Mike, it may ask. Just for clarification.
Speaker 2:Yes please.
Speaker 1:You have the hedge strategy, which it seems to make a lot of sense given the opportunity to explain it, especially with the increasing threats and different technology happening every day. So that's one piece is the hedge strategy, and what you're suggesting is to assist funding. Venture capital should be able to participate correct.
Speaker 3:Yep.
Speaker 3:And what's going on with Replicator right now is I'm hearing from all kinds of people out in industry. They are so frustrated. We have the deputy secretary of defense and we're going to buy drones in the orders of thousands of each. And their first tronche of awards is done behind closed doors without industry input. And they are furious the first time they see a clear demand signal for what they should be investing in.
Speaker 3:Most of the real players in this, the innovative, disruptive companies, were not at the table. They didn't know what the requirements were and they were cut out of the first tronche. And now it's a mea culpa. Oh hey, we'll get you on tronche too. Maybe we'll bring you in Now they're doing the visits, now they're getting out there, but this thing was baked before they did it and people are going.
Speaker 3:I've been asking for this for years. And then you go about your old way of doing it just giving it to people that you feel like giving it to Like. This Replicator has to work. Look, since the war of 1812, we have never faced an adversary that is superior economically and by population. Right. China's got four times as many people than us. Replicator has to work. We have to have that asymmetric advantage. But industry needs to be involved, they need to be at the table, they need to know what the requirements are and then again they need to cut those contracts that give the stability and the confidence in the industry to drive in that private capital. I've seen estimates that there's a trillion dollars between VC and private equity that is liquid in today's market that is dying to be invested in national security.
Speaker 1:Why is it, mike? Has it been so difficult for venture capital? Are there rules in place that prevent it? Is that what you're saying? It is.
Speaker 3:Or makes it too complicated. Well, look, so I saw VC get involved with what we call the Small Business Innovation Research program. These are rewards, right? The SBIRs are a reward for about a million bucks and they're funding prototypes, and we saw VC money go into these prototypes, but SBIR has no requirement to actually buy it on the other end, so they invest in these.
Speaker 1:If I remember right, there are three stages of SBIRs.
Speaker 3:There are Three stages is basically a technical assessment, a research project. The phase two is the delivery of a completed prototype and then the phase three is the large contracts that we're talking about moving into scale and quantity, but there is no requirement to move to phase three.
Speaker 1:So we have a lot of prototypes sitting on a reflected dust. And maybe even get to three or something you may not have but also the purpose of, if I recall, with the SBIRs. This is small business because there are these mega corporations bless them that are very involved in defense, in the defense world, but also the SBIRs were to help the smaller businesses get at the table right.
Speaker 3:The tagline for SBIR is America's seed fund, and venture capital approached it in that exact way. They said, ok, we are seed funding technologies and companies that are going to grow and scale, and they found out over time that there was no, there was not a guaranteed scale on the back end of this. So they've had to find ways to get into large programs of record which are dominated by the primes, and it's a difficult situation, and we've had great companies that are led by very eccentric, very well capitalized billionaires who've had exits from other great companies, and they're able to do that. Not everybody is not everybody is capable of doing that. And getting to those large contracts and long term recurring revenue has been increasingly difficult for the VC world, which is why they're skeptical on this, which is why they're angry at Replicator, because they saw that as the quantity that they need to make a viable business investment. And now they're questioning the program, and so they need more transparency.
Speaker 1:If I also understand correctly, a number of states and even local economic development authorities across the country are trying to come in and help fund these projects that are through the SBIRs right, and so what I hear you saying is, even those the venture capital world may be able to help even some of the states and the more regional economic development authorities to help fund some of these projects.
Speaker 3:Yeah for sure. So the Air Force has a great program called TACFI and Stratfy. That has a piece of SBIR money, a piece of company money and then a piece of outside money. So you can see that you have the brother or sister to SBIR, which is STTR. That is focused on research institutions and universities. That's where you see a lot of input.
Speaker 3:I mean, you know, for working for both Senator Ernst, working for both Senator Ernst and you know, chairman Calvert. You're getting into these universities with their engineering departments, their science and technology, and you're seeing cost sharing across these early stage investments and developments of really game changing and emerging technologies. And there are all these kinds of ways. We are not short on great ideas, great innovation and technology. What we are short on is a Department of Defense that is willing to say I see that we need it and we need a lot of it, and cut those checks. That's why DIU has been so successful in the ways that they've been employing their other transaction authorities that allow them to engage with the commercial market in the same way you do when you go out to buy whatever you're going to buy probably today or tomorrow. Once we get out of the snow right, they're able to cut contracts within the course of weeks and get capabilities. That's where we need to focus and we need to have those types of business processes in the department for our emerging needs.
Speaker 1:And Mike, we only have really have a couple of moments left, but before we lose this opportunity to quiz your great knowledge, and that is your experience in special operations, are there some within DOD or in Congress that want to reduce or eliminate special operations? Can you tell me what's happening with special operations?
Speaker 3:The Army has a concerted effort right now to reduce their special operations population by approximately 3,000 people. They are wrong. They are wrong in every way and sense of the word, and I couldn't be more bullish on that.
Speaker 1:And there are kinetic special ops and there are also corrections that not being discussed, from Green Berets on to that, the more the intelligence community as well, yep.
Speaker 3:So what we're seeing here is we have a national defense strategy that says we need to win in competition. You have an irregular warfare annex to the national defense strategy that my old office put together and said hey, this is how we win in competition. You have the joint staff putting out a document called the Joint Concept for Competing, which is a brilliant base framework for how we win in competition, but at the same time, the Army saying we can't do recruiting. The Army of the future is different. We don't need as much stuff. You know where they're cutting. They're not cutting Green Berets. You know where they're cutting. They're cutting enablers.
Speaker 3:You know what enablers mean Psychological operations, the folks that help us win in competition. Civil affairs, the folks that help us win in competition. Intel, the folks that help us win in competition. And you know what you want to do something to set back women in special operations and women in combat units. Start cutting enablers, because that's where most of them reside and that's where most of them have been able to blaze a career in special operations, in those exact career fields. And now that's where the Army wants to cut.
Speaker 3:They're wrong. They're wrong in every way, shape and form. We need more soft, not less. If we don't want to fight World War III, we need more soft, not less. We need to win in competition On what soft can do in competition. There's a concept out there right now which is called the soft space and cyber triad and I would encourage everybody watching this to watch General Hawke's confirmation in the Senate Armed Services Committee. He is the new Cybercom commander and he takes a good three to five minutes to explain why he can't do his job without special operations. Because whether you're talking to access or understanding of adversarial space capabilities or cyber capabilities, it takes humans who go out, figure out. Those things create dilemmas, complexity and confusion for the adversaries, and the only one that can provide that placement and access for our exquisite capabilities are special operations. More not less.
Speaker 1:I tell you what, mike. I've looked forward to additional conversations on all these topics, absolutely, and I don't think the need for that conversation is going to go away very soon. I don't either, unfortunately, and we appreciate it. Again, my best to your former bosses, who work with all the time, but certainly to you for your public service. We appreciate it. We're proud of you. Thank you for your time today, nate. Thank you for inviting Mike to be a part of our program. All the best Take care.
Speaker 3:Thank you, congressman. Thanks Nate, appreciate it. Bye now, thank you.