"When it comes to weapons, the Pentagon favors quality over quantity. The theory is that expensive high technology is superior to mass production. For 30 years this was supported by battlefield evidence.
Then America's adversaries reduced costs and scaled drones. The kamikaze drone has emerged as the most startling change in warfare in decades, disproving the Pentagon's thesis. Ukraine set a target to manufacture a million drones this year to keep up with Chinese and Iranian supplies to Russia -- and it's telling that Russia replaced its defense minister with an economist fixated on drones.
Cheap drones will soon be equipped with artificial intelligence, boosting their effectiveness.
This improvement represents an opportunity for the U.S., which has superior AI engineers and a wide global technical lead over the rest of the world.
Unfortunately, the Pentagon hasn't adapted. The nation is facing a capital squeeze, with debt service set to exceed the defense budget, but the military is also paralyzed by its obsolete business model. Most of its procurement budget is rigidly dedicated to a defense oligopoly that can't produce at low cost.
In the two decades following 9/11, half of the Fortune 500 disappeared. The free market produces creative destruction. In contrast, the defense industry remains unchallenged. In 2000 the top U.S. military contractor, Lockheed Martin, reported a loss in commercial telecommunications. In 2001, after winning the F-35 program, it divested from telecom. Rather than compete against innovators, Lockheed decided it was more profitable to use the enormous barriers to entry in military supply, focusing on government contracts that covered all costs plus a regulated profit. Two decades later, the $2 trillion F-35 is one of the costliest defense programs in U.S. history.
The military's five prime contractors resemble power utilities. Having mastered a complex regulatory system, they maximize profit when production costs are highest, stuffing fees into obscure line items. Asked why a bag of bolts costs $90,000, the Air Force secretary said in April that overpricing was a "systemic issue."
The military has expressed some interest in producing cheap AI drones. The flagship effort is called Replicator, capitalized with less than 0.2% of the defense investment budget. Replicator's self-described "poster child" is a loitering bomb that is estimated to exceed $100,000 to build. There aren't sufficient funds to mass produce at that price.
Change will require three steps. First, the defense secretary must insist that a million cheap AI drones are vital, as former Defense Secretary Robert Gates did when he declared "war on the Pentagon" to spend more than $40 billion on armored trucks. Drone scale can be achieved by shifting $20 billion over three years to new entrants.
Second, reallocation must be guided by an investment committee. This is standard procedure in major corporations, and the secretary of defense has an in-house equivalent, led by the Cost Assessment and Program Evaluation office. The problem is, the military doubts CAPE's ability to optimize the portfolio, and Congress is openly hostile. CAPE must be empowered to make strategic decisions.
Third, Congress must authorize the secretary of defense to pivot on spending. Modern enterprise management is stymied by more than 1,000 regulations added since 9/11. Congress has additionally upended the budget with more than 50 continuing resolutions since 2010, creating a "use it or lose it" environment that handicaps new initiatives.
AI drones will put our forces at risk, from ships to infantry. Just as the armored blitzkrieg caught Europe off-guard in World War II, so has the proliferation of drone munitions today.
America holds a distinct advantage in AI, but harnessing that advantage requires investment risk.
That can happen only if generals and the defense secretary acknowledge that America's expensive military machines risk being overrun by swarms of cheap versions of a technology that we invented.
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Mr. West is a former Marine and partner of Goldman Sachs. He served as assistant defense secretary for special operations, 2017-19." [1]
1. AI Drones Threaten U.S. Forces. West, Owen. Wall Street Journal, Eastern edition; New York, N.Y.. 05 July 2024: A.15.
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