Defense Tech, Innovation and Regulatory Capture: No Longer the Luxury of Time
Notes from among the innovators and lessons from the ground
“Igitur qui desiderat pacem, praeparet bellum.”
“If you want peace, prepare for war.”
— Publius Flavius Vegetius Renatus in Epitoma Rei Militaris, circa 390 AD
Big numbers have their place. It would be both unfair and inaccurate to ignore that the military spending increases announced from Germany and others in Europe and the West are historic. Big numbers grab attention. Big numbers are politically easy to communicate commitment at home and resolve to one’s adversaries abroad.
Big numbers, however, can often also mask the essence of the problem to be solved (and opportunity to be unleashed.) I come from a tech investment background and the quality of investment is invariably as or more important than the quantity of it. Speed is the essence among competitors and adversaries overall.
I have been recently examining a wide series of crucial innovation under the broad rhetoric of “defense tech.” I have made a handful of small investments in outstanding innovators in America and one in Europe and befriended some of the greatest entrepreneurs now at scale.
I just returned from a week in Estonia - the front line of very new lessons from very new war at their border. They are already committed to 5% of their GDP to military spending, and are host to some of the most innovative entrepreneurs in AI, drone and info war capabilities at home and from Ukraine.
I have met at length with military and security officials across the West. And as I spend much of my time with innovators in the “global south” - a term I hate – from Vietnam or Taiwan or the Gulf and more innovation in defense and security is being unleashed globally.
Speaking to all of them - to a person - one message is clear: money isn’t the greatest need. Faster, innovative and transparent procurement and regulation to move product more broadly is the foundation of defense strength in the 21st century.
I have asked a few sources for a simple chart comparing procurement schedules of leading defense countries and had great deal of trouble finding one. So, I relied on GPT, knowing that painting with a broad brush of very complex systems would be problematic. Even so, and if the following chart were to be taken as an index, the numbers are eye-popping and begs obvious questions:
The irony is all the lessons we need for the future of our defense are being learned in real time by Ukraine, with adaptation and innovation from Russia. Legion were the stories of instant battlefield assessment of, say, drone strikes, using AI with massive data to analyze learning and make adjustments on the fly, employing 3D printers to mock up new prototypes to be made and deployed in weeks or days. As one entrepreneur on the ground said to me, “The key is feedback loop, test and validate things fast – and any company or country who is not doing this loses the opportunity to achieve sufficient technology and readiness.”
This is not an ad hoc exercise but built into the very infrastructure of operations. Another investor explained, “It is the difference between wartime rules and peacetime rules. To have fast adaptation and adoption Ukraine has effectively decentralized the procurement system. Of course, for major arms there are central decision making and parameters set, but those will change quickly based on realities. There are then over 200 different procurement “agencies,” local governments, local military at the battalion and even brigade level making decisions and authorized to have purchasing power with budgets.”
Another laughed, “Do you know how many serving in Ukraine now are trained engineers, AI scientists, entrepreneurs who live by immediate turnaround?” They refer to forces on the grounds effectively having CTOs for strategy and implementation.
Two examples among hundreds:
A Ukrainian jammer company in 2024 navigated a more centralized procurement system that took six months – a lifetime in Ukraine but to my chart above lightening speed. None the less, in that period so much had changed at the front line that the product was all but ineffective. The company, however, knew this but continued to build to original specs to meet the contract and get paid. But in parallel, based on their own learning, they built retrofit capabilities so when the jammers were sent back they turned around the more relevant product within 24 hours. Six months meant hundreds of lives. Ukraine learned and changed.
Russia learns as quickly and shows the power of instant data learning. As Ukraine interceptor drones began to target other drones air to air, huge data sets on enemy hits allowed fast innovation for building in evasive new capabilities in real time. Air-to-air drone-based interceptors are still mostly manually piloted, the advantage in capability and reduced cost will be massive. “It is the 21st century cat and mouse game,” one venture capitalist noted.
As an aside, I was told repeatedly that units tell these stories regularly on Instagram not only to share their learning but to attract the best talent to go to the best units successfully solving complicated operations.
It is well above my pay grade and understanding as a novice in all this, but I have not seen much evidence that intimate detail of the lessons of this war is changing existing ways of doing procurement anywhere near fast enough. There has been encouraging mandates both in Europe and America on procurement efficiency overall, including The White House’s Restoring Common Sense to Federal Procurement a few weeks ago.
Others have cautioned me to believe it when we see it. One officer noted, “Too many of us, under the NATO umbrella really cannot fathom that war could come our way directly, so the urgency and incentive to fast change is limited.” Those I met in Estonia suffer no such illusion.
If I were to waive my hand I would hope leadership in the West would study every lesson from Ukraine, their innovators and the astounding defense tech startup entrepreneurs and leaders more broadly. As I wrote here, I was in Taiwan last October and was flabbergasted by the significant sophistication and rapid changes in info war and AI there. Ukraine and Taiwan are the schools of 21st century defense. I hope we welcome their schooling. I have no doubt our adversaries have.
As a last reflection, a massive and rapid rethink and implementation of regs and procurement for defense tech cannot be separated from looking hard at rules and regulations that stifle innovation more broadly.
One of the great American investors I know - with not inconsequential holdings in defense tech and massively in AI - has looked long and hard in Europe and has opted off. I am just reporting here:
They have found EU regulations bordering on assault to innovation - fines, taxes, investigations, prosecutions, blocked mergers, regulations that are massive ankle weights. There are crucial debates to be had on AI and privacy, but regulations weigh much more comfortably on the risks rather than serious unpacking of what it takes to unleash its unprecedented opportunities. In recent years they ran into this too often in America as well.
China has its own challenges, but they are not these.
As I wrote here, there are three very basic questions about regulation whose answers can be highly instructive throughout:
What current or new regulations most unleash leap frog innovation and how?
What current regulations well enforced require no new regulations?
What existing regulations killed would most drive fast implementation and growth?
I’m sure you have all read Palantir’s Shyam Sankar. His October 31 piece noting that we are in “an undeclared state of emergency” should be a must read to anyone who cares about the intersection of policy, technology and business in national security and beyond.
It is strategic leadership who prioritizes this and bluntly assesses not only what is needed to unleash innovation but wipe out what stands in its way. We are all in this together whatever politicians say. For innovation acceleration, all else is secondary.
People tell me more should have been done by now. That is sunk costs. Opportunity is in front of us now. Time is not our friend.