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- [00:00]
A
Second breakfast. We're talking Iran, we're talking anthropic, we're talking European defense tech here with special guest Eric Schlesinger, who runs his own fund. We'll learn more about that in a little bit. But first, you know, whiffs of World War Three. Brian, I think you wanted to kick
- [00:25]
B
us off on this.
- [00:27]
C
Yeah.
- [00:27]
D
So we've masked quite armada down in the Central Command area of responsibility. So there's like about 15 ships down there, including the Abraham Lincoln strike group and the Ford Strike Group. And you got bunch of couple dozen fighters ashore and tankers to support them and then AWACS to support them. So it's, you know, at this point, you've probably got about 100 aircraft, 100 tactical aircraft kind of poised to be able to go do strikes on Iran, plus a bunch of cruise missiles on the ships. So it's a pretty substantial presence at this point. The commitment level is high enough to where they're going to have to get something for this or else it's going to look like we got dissed. Right. So the president's going to be forced to make either Iran say they gave us something and call victory, or we're going to have to go blow something up and then claim victory. But one way or the other, there's going to have to be some kind of return on investment here for the massive deployment that we've undertaken. Or at the same time, we basically denuded every other theater. Right. So the weird thing of this is people will say, oh, how much did this cost? Well, it didn't really cost that much extra, at least from the Navy's perspective, because these were all ships that were already on deployment. We've just taken them and dumped them all into centcom, which means every other theater is now basically without any sort of naval presence to speak of. So we're sort of right now running on fumes. But if this goes any more than another couple of weeks, then we start cranking up the bills. Right, because you're looking at probably tens of millions of dollars a week to pay for this after about next week, because then the ships that are on deployment will be extended. All these airplanes that we've sent out there are now on some kind of extended deployment. So that's all extra money that the department didn't have any money for. So they're having to take that out of somebody else's budget. So there's kind of a clock ticking here on the US Side of how much longer do we want this to go before it looks like we're getting, you know, pushback from the feckless little Iranian regime before the President feels like he has to take action because otherwise we look like we're pussing out on that collective point.
- [02:37]
C
Both the Wall Street Journal and Financial Times did substantial infographics on it this morning. So if you aren't necessarily familiar with the array of aircraft from the F22 to the F15E to the F35 variants, both the Journal and the Financial Times have graphics, have helpful maps that illustrate where some of these assets are located. And on top of all that, while Brian was talking about all of these assets shifted into Centcom, there are also off MAP assets. There are B2 strike capabilities. There are other aircraft that can come in from around the world. And part of this military buildup, beyond the rank anti constitutionality of it, because Congress hasn't authorized any kind of military action against Iran, is that the saga of the US Iran standoff for really the last five weeks has been local partners, principally the United Arab Emirates, the Kingdom of Saudi Arabia, sort of at first screaming bloody murder about it and now silently or maybe with a more firm voice, if not a scream or saying, hey, you can't do this through our airspace. That there is reporting that the United Kingdom has limited the ability of the United States to use its facilities from Diego Garcia to Cyprus and elsewhere to stage assets to conduct whatever operation this might be against the Iranians.
- [04:08]
D
Yeah. So what it is it creates is this situation where the US is going to have to, which is why there's so many sea based platforms involved here, is because it avoids the whole challenge of getting host nation approval or even access basing and overflight amongst what are thought to be our allies. Right. So supposedly we're tight with the Saudi Arabians and the UAE leadership, but apparently not that tight because they don't want to have. This is obviously bad for business. If you start a war in their backyard, we're going to then probably go home and leave the mess for them to clean up. So it's going to make it less efficient and we're not going to be able to do as much damage. And the expectation will be that we'll just probably do something, a gesture of some kind, and then go home after declaring victory in this campaign because it's unclear what the objective was. So without a clear objective, it's easy to say that whatever you did was sufficient to meet the need. So I anticipate that that's probably what we're looking at here, but it's a substantial outlay of resources, interestingly. So going back to the national defense or the national security strategy that came out a while ago, we've taken all these forces out of other theaters, right? So we've essentially put in, we've embodied the strategy now of basically the US Military is going to go do these discrete operations and the idea of presence or posture or deterrence in other theaters is sort of a gone by the wayside. Right. So we're walking away from this idea of maintaining a posture that deters aggression and instead we're going to be going on offense essentially against whatever actor we believe is going to be the biggest or best target for us on any given day. So if you're China, this is great because right now the George Washington and its strike group are more or less in their maintenance period until May. And you've got this window where there's not much Navy there, there's not much Air force there beyond what's maybe based there on a day to day basis. So it's just interesting to see that the strategy is now being kind of played out in this, you know, little, you know, vignette with Iran.
- [06:09]
B
I think that's interesting. I think it is playing out the strategy, but it's also ignoring it. Because if you look at the, I mean it's 85%, right. Was supposed to be Norscom and Indopacom and really the rest of the theaters were supposed to deal with the remaining percentage. We're seeing the lion's share still go to Centcom and continually pushing this income. And like you said, obviously the Trump administration has read Clausewitz and they understand that you have to have a clearly definable end state for military action.
- [06:45]
C
But yeah, they read Clausewitz like they write 100 Years of Solitude.
- [06:49]
B
Yeah, exactly. But like from a Saudi Arabian perspective, it makes sense that they wouldn't want to get involved.
- [06:56]
E
Right.
- [06:56]
B
Aramco is closer to Bindar Abbas than it is to the other everything. All of their oil, oil infrastructure sits one within the very limited area that the Shia somewhat controlled within Saudi Arabia and then is on the coast that is adjacent to Iran. Of course, they don't want to jeopardize that. There's like one pipeline that runs from the east side of the country to the west side of the country where they could potentially move oil if that gets targeted without a clear intent. Like why would we antagonize from Saudi Arabia standpoint, why would we want to antagonize them? Because America has also kind of said we're not going to defend you if you're not going to give us Patriot batteries and protect Aramco and make sure all these things I don't really have to.
- [07:44]
D
This is the three dimensional chest that you're missing is that if we start this war with Iran and then UAE and Saudi Arabia have to clean it up, they're going to have to buy a bunch of our weapons to do it because we're not going to do it for them. So we walk away, we sell them stuff. And I've had plenty of time sitting in a room drinking tea with MBS to sell him destroyers or I guess the eventual frigates that they bought to know that they are interested in buying US stuff. But they always sort of dilly dally and this is a way to force the Arab countries to come to the table and actually put some money down.
- [08:16]
B
Every defense tech business development guy sweat dream is to get Saudi Arabia to buy their stuff.
- [08:23]
F
Exactly.
- [08:24]
E
So this does raise an interesting question though which is like what are the actual conditions of a nuclear deal? Right. Like no one has stated what that end state looks like either. Like even before the, you know, soon to be bombing I suppose, like I don't know if there's a deal that this administration would actually accept that the Iranians would also accept.
- [08:46]
C
Yeah, the windset doesn't exist. The Iranians have created a rhetorical cul de sac and they have put themselves into a corner that the Iranian regime in 2012 I believe declared the defense of the shrine of Al Zainab and the backing of Bashar Al Assad the most present and important obligation of the Islamic revolution. And that obligation failed. The Bashar Al Assad is playing candy crush in Moscow. Lebanese Hezbollah is actively disarming now the Iran. The revolution has not been chastened like this before. So rhetorically the credibility of the regime, whether it is related to fuel prices, to the availability of bread, to their Covid response and to their foreign policy has been decisively checked and effectively humiliated. So now they are being asked to reconsider their so called right to enrich. Kind of a new concept in international relations that the Iranians have asserted for maybe two decades about they assessing that as a sovereign state they can enrich highly or they can develop highly enriched uranium for their own sovereign purposes. And that obviously puts them at odds with the United States, with Israel and with other regional international actors. And the effect of gambit if you listen to the Vice President is that there, there is no right to enrich that. The, the answer you must accept is Zero. And the Iranians see that as an effective form of strategic capitulation. So to Tony's point, the, the strategic winset of let's negotiate over the nuclear program does not exist. That two different sort of authoritarian regimes are speaking directly to one another and saying there is no middle grounds. Like the Iranians cannot enrich to 15%. The United States has said we will not accept that. We will continue dropping ordinance to prevent it. And the Iranians say, hey, this is critical to regime survival. We will never give it up. So therein you probably have the rhetorical grounding of a war that's going to break out maybe over the weekend, but
- [11:02]
D
that may be part of the point as you generate this confrontation that then it becomes protracted. And because they don't really have the ability to conduct a decisive operation, you can beat up on the Iranians for a while because of the axis of disruption or whatever. They're the, the weak gazelle. Right. So that if you want to go take out a regime that the Iranians are the one to go after right now.
- [11:24]
E
So this is also all being done, like to the backdrop of new start collapsing. Right. So it's. I, I feel like I'm starting to see, at least for those who care about nuclear weapons in the admin and whatever concerted lobbyists are associated.
- [11:40]
C
Right.
- [11:42]
E
There seems to be this broader push of simultaneously we can't reach, like at the great power level, there's not going to be a nuclear deal unless China's involved. China is not going to agree to a nuclear deal because they do not have the same perspectives on this as us or as the Russians. And simultaneously it's like, okay, the Iranians can't have anything close to nuclear weapon enrichment, but at the same time, like, we're creating a world in which more states are going to want nukes. So is this going to turn into a new whack a molecule where. Where we have to go end up chasing more enriched uranium down the line?
- [12:16]
B
I mean, I think that's absolutely. North Korea taught us that, right? Like the, the fact that North Korea was able to get the bomb changed. The way that the US Interfaces with and thinks about the North Korean problem set pre. Pre weapon it was a very different calculus where we're like, well, need be. We'll just take them out. And then it becomes like, well, actually no, they could, they could eliminate Seoul or Tokyo like that. Now it's a very different problem. Like, yeah, maybe they can't hit the mainland, but they can, they can really, really make it like painful. So we have to. We have to. Yeah, we can have big rhetoric, but we're also not streaming weapons into the strait. I think that's exactly what you're going to see. You're going to see, you know, the continued chase down like why does Pakistan and India need it? Well, because both Pakistan, because India has it, Pakistan needs it. It's going to the regime survival and the ability to put, you know, the weapons, to hold the weapons as a threat to. You can't get rid of me unilaterally. Like there may be something that can get rid of me.
- [13:18]
C
If I can give you a little bit of insight on that. Justin and Tony and sorry to interject, but I think this is helpful. When I was in graduate school, I was in a program called studies and grad Strategy and I had. They organized it with we get it,
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E
Eric, you went to Yale.
- [13:32]
C
Yeah, yeah. It's super impressive. I went to fake Yale. Jordan went to real Yale. That's how we know each other. But in my small group, there are a couple of people who had worked in Mitt Romney's 2008 campaign and were gearing up for the 2012 campaign. So they were mainline conservatives and both of whom worked in Trump 1, one of whom is a very senior official in Trump 2. And we spent a substantial amount of time talking foreign policy. I was there working on international relations. They were there at the law school and they were laser focused, rhetorically, organizationally, thematically on the Libya experience that they were really uncomfortable with Barack Obama intervening in the Libya war not because of non interventionism, but because they saw that Muammar Gaddafi had cooperated. That from a non proliferation standpoint, he took affirmative steps to take his chess pieces off the table and say, I am going to reorient my foreign policy to be more cooperative to the rest of the world. And a international coalition still punished him and he still got lynched in a gully in Libya in an extraordinarily indignified fashion that he was lynched, he was not murdered. He was subject to political execution. And these very serious conservatives who are now part of again, one of whom is a very senior official in the Trump administration, his politics have shifted. He has become overtly authoritarian. But I do want to say that they do have this ground, this point of origin where non proliferation could have worked, but we elected to not make it work. So we need a different gambit and that trying to just politely encourage company or countries to abandon 1940s technology is fundamentally foolish and that a much more Aggressive disposition is necessary. And this person who again, we were just sort of like chatting or texting or whatever, is now the deputy at CIA, and he is shaping operations against this regime with some of these lessons in his back pocket. And while I don't share his politics, I, I am deeply sympathetic to the baseline lesson of what the United States did to Libya. Insofar as counterpolarifation goes, I think that's exactly.
- [16:02]
B
Yeah, that's exactly right. Like if, if you're going to say give up your weapons and you'll be okay, like, you know, whatever. And then they give up their weapons, which are the one thing that kept you from taking military action. And then you take military action when you don't like something they do. Again, like, what is it? What is the Iranian.
- [16:20]
A
Where's the Cuban nuclear program? Is this where we're heading, guys? They got like six months to pull it off.
- [16:27]
E
They tried that once and 13 whole days.
- [16:30]
B
Very famous. The whole thing happened.
- [16:33]
D
So interesting, Eric, on the other end of it though is at the same time we're punishing these guys who've cooperated. We also kind of make our allies that depend on extended deterrence question whether we're really going to be there for him. So obviously last week at Munich, there was a lot of sort of wishy washy support to Europe from the US and then Bridge Colby comes out and says, oh no, extended deterrence is still alive. We're still on board with that. But I think at least in our discussions with allied countries in Europe and in Asia, they're all like, we can't really trust the whole extended deterrence idea at this point. Unless maybe your own forces are at risk. Right. If you're in Japan and your bases are going to get attacked, then maybe you'll respond, retaliate with nuclear weapons, but other than that, not so much. And in our discussions with the Japanese mod, because they're developing their new defense strategy right now, they're very worried about like the threat from Russia, North Korea and China altogether, plus the threat now. Open ocean of an open ocean, blue water, China being able to attack them from the east and they're having to figure out we don't have enough missile defense capacity to guard against all these potential axes of attack. Which makes you wonder, are they thinking about maybe a nuclear weapon as a way to preserve their country's survival because they just face too many threats without the assurance of a US extended deterrence umbrella anymore.
- [17:55]
E
So this is, you know, always a fascinating IR grad student or undergrad Student exercise.
- [18:00]
B
Right.
- [18:00]
E
Which country is going to get the bomb next? 10 years ago that was a nice little exercise and nobody really cared. Now it's. It's a very serious consideration. And I mean if you read Bridges book, right. He basically says, well maybe in the end if this all doesn't work, maybe the Japanese should get the bomb.
- [18:15]
B
Right.
- [18:16]
E
Basically his whole thing is like toss the pieces off the chessboard if he doesn't get what he wants. And so I mean now we're not yet to the Japan thing. They might possibly build the Europeans. There's some talk. I can't imagine a world in which that goes well for any European nation, particularly one in central Europe. If they start building, I still think they're a long ways off. I can see a world in which polls. I was going to say I can see a world in which certain members of the admin or elsewhere decide the polls should have the bomb.
- [18:51]
C
But polls are going to decide themselves. Yeah. They're going to find themselves in a tough neighborhood with a weak neo weak need neighbor and a neighbor that's indecisive. And they. There's this joke about hey, Europe can't rely on the. The wisdom of 40,000 Wisconsinites to elect the right president and think and depends which Wisconsin. Well, the fascinating article in the Wall Street Journal about sturgeon fishing. But the polls are not going to rely on the whims of 40,000 voters in San Jose and France that if France flips to a far right, pro Putin, anti Europe regime and you've got goobers running Britain, Poland is not going to suffer the Red army spilling over the borders like 1921 again. They will not. And they are going. They are sufficiently engineering that their engineering capacity is sufficient. They are sufficiently wealthy and they are hard, hard nosed about troubles on their border. They've got deep experience with what's happened to Ukraine being put to the sword. Tony, to your point about this grad student riffing, I would put Poland at the top of the list. All right.
- [20:11]
A
I think now's a good time to bring in Eric.
- [20:14]
C
Yeah.
- [20:15]
A
Why don't you do two seconds of self introduction and then your hot take on Polish nuclearization.
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B
If you wouldn't mind.
- [20:24]
F
It was actually going to be my third point. You'd be surprised at how many whispers and not so quiet whispers on the sidelines of Munich were precisely about this. And by the way, those conversations were mostly started by the Germans that I was talking to. I was asking them what's your hot take? And, and you know, anyway introduction. My Name is Eric Schlesinger. I live in Madrid, Spain. I invest in early stage startups in Europe through a fund I founded called 201 Ventures. We do pre seed and seed stage investments. This is like a team in a garage kind of thing. And before this, I had a different life in the US Intelligence community. I was in Munich two years ago. I was in Munich this past couple weeks. If two years ago was like the dressing down from J.D. vance, everyone was sort of in shock in the audience. I think the response, as I'm sure everyone has read on Rubio's, was just one big exhalation basically, in the room. The other sort of piece of this all is that, yeah, I found that the conversations I was most fascinated by were one sort of a bit of relief on, okay, we're not. We're not sort of getting into a cat fight here in Munich again this year. That was good point to basically being. The Europeans in the audience were expecting like this dressing down this year potentially, and I think they were prepared to respond to that. But then when it didn't happen, it was kind of like, oh, okay, great. And it wasn't exactly, in my opinion, a very clear, like, next step. It was sort of like a, you know, you're expecting to, like, get in an argument with your significant other and the argument never comes and you're like, oh, I didn't plan out that part of the decision tree. I was really sure this was going
- [22:19]
B
to come the entire thing.
- [22:21]
A
Also, Eric is like, Davos was a month ago.
- [22:25]
D
Right.
- [22:25]
A
And we were going to invade Greenland like a month ago.
- [22:29]
C
So, I mean, why are people.
- [22:31]
A
How much solace can you take in a Marco Rubio speech?
- [22:34]
C
Yeah, I want to build on that. Marco Rubio speech was fascinating that people who are hearing it and are given, like, a sigh of relief. Like, he provided an affirmative defense of the United States as a court offender of Christendom. Like, it was a major departure from American foreign policy. It was a reflection of his theological journey that this is somebody who has clearly, at a personal level, shifted his religious disposition and is now putting it into his official statements as National Security Advisor and Secretary of State. It was a substantial shift. And it's entirely possible that he delivers a speech with greater elegance than the Vice President. But there's no defense professional who could hear that and say, oh, you know, let's relax. This is a different United States.
- [23:28]
F
It wasn't what I think what it felt like. What it. Yes, it was very much a personal journey kind of speech. Like a, Like A talk you'd expect maybe someone like who's coming of age in undergrad to give to their classmates about how they're saying just the worst
- [23:44]
E
student in the room.
- [23:45]
F
Yeah, but, but it wasn't the dressing down and that. It sort of was like as long as it wasn't that, everyone was happy. Okay, so that's point number two. Point number three was the last couple years. So I live in this defense tech world that I invest in this space the last couple years. Munich has always been this place where you know to get into the buyer's your hof like it's. You're either a politician, you're given a ticket or you have to buy your way in. And it's like 65 grand. It is not cheap. This is a business that is exorbitant. The last couple years there was always these whispers of where's the defense? Where are the defense tech folks? Like watching what was happening in the US and of course no startup is paying 65 grand. So what we used to do is we would do these like, you know, these meetings under the overpass basically. And just like literally last year we had an event where we got a bought out a bar, tapped a keg and just had like a kegger and it was great. And I think the last couple of years people were asking like, is the defense tech in the room with us now? Like people couldn't quite understand whether it was there or not. And this year it was very much there, which was really fun to see because the announcement of the Germans doing like 270 to Stark this German, one German defense tech company, another almost equivalent to Helsing, each with longer tales of potential in those contracts. The conspicuous absence by the way of a third bucket of money that was maybe going to go to Rheinmetall but did not. And that absence was quite loud when there were started to be a couple hit pieces that came out on the Friday of MSC against those two startups, tbd, sort of whether that was just.
- [25:25]
E
So what's the, I'm really curious here, what's the cultural differences between, you know, VC and startup culture in the US Particularly for defense tech. And then what you see in Europe, are there, are there advantages that European startups have culturally that are different in the United States? Is it entirely an American advantage? Yeah,
- [25:47]
F
well, the big advantage that the US startups have in this world is that they've had just advantage of time, a couple more years to be in the oven and a couple more years of time to get the buyers on board with buying from a riskier startup. So that is by far the biggest advantage that has resulted probably in some pretty good capture on the part of US defense tech startups and being able to plan, having at least one administration change so you can plan your sort of placements of your folks in the administration earlier on in Europe, planning that is more tricky because you've got all these countries to cover and you've got coalitions that rise and fall with the change of the tides. And so that's tricky. You're culturally still newer in Europe to see folks go from other parts of startup land into these defense tech firms. They're still sort of viewed as defense first, tech second, whereas in the US I think it's sort of tech first, defense second. And so you don't see the talent movements quite as fluid. And then third, and this is really, in my opinion, actually a sign of a more maturing system. This Munich security conference was the first time we really saw a bit of infighting within the ecosystem. Some folks throwing some tomatoes on whoever was talking on stage, so to speak. And that like, okay, that kind of means that now we've got competition, the competition is working and we have winners and losers. And I actually take that as a sign of maturity. But that's newer here in Europe too.
- [27:16]
B
How much does the labor pool for the startup ecosystem, how different is that? Like, I know it's harder. Like in France, it's harder to hire and fire than it is in even California. So how does that play in when you're like a startup and like, you realize, okay, we don't have a fit for a purpose, we need to change. Like, does that play into slowing things down?
- [27:37]
F
It definitely does, but it's not, that's not a problem unique to the defense tech startups out here. You'd see some of the more efficient companies structure their employment contracts to allow for longer probation periods. But yes, like firing either because of a poor fit or just you have to shrink the company because of, you know, downturns in your revenues and profitability. Like, yes, it is harder. I, to be honest, like just, I, I think it's the startups that are, are sort of leaning on that. I think it's like a lot of copium. I think there are plenty of examples of startups that can build the teams they want, exit the people that aren't not a good fit. It, it is real. This, this sort of, you know, the, the story of like the French or, you know, who take pick, pick your pick your country to Pick on someone going on sick leave for 18 months like it happens occasionally. But that is not the reason the startup is not working.
- [28:38]
D
So Eric, what's the relative ease with which governments can make contracts and actually spend money on these startups? Because us, we're just now sort of turning the corner on having commercial type contracting methodologies and money's actually starting to flow out to some of these companies just now. So in Europe, I mean I know Germany has this very convoluted two pass system where everything has to get approved and then it has to get approved again before you actually spend the money. Do the European governments have contracting and like budgeting mechanisms that allow them to take advantage of startups or are they having to work into a fairly kind of traditional model in which the primes is normally dominated?
- [29:20]
F
The answer to those two questions are yes and yes. So you still do have to fight against the traditional systems. I'm sure I was not obviously in the mix of this, but I'm sure that when those two larger contracts went to Stark and Helsing that the primes in Germany, Rheinmetall deal, MBDA like, I'm sure they were throwing the kitchen sink of their lobbying efforts against that. I think that is short sighted. I think the long term view is actually you do want those companies because you can take Hensold for example. In Germany they just partnered with Helsinki. They know that these primes know that they suck at software and their software talent pools are like so thin. Their hardware talent pools are aging quicker than they can replace them. They know they need to partner and that's the huge advantage that startups have to the first half of the question. Are there new or budgeting processes in place? Yes, and the countries that are doing those best are the ones that are feeling the heat the most. So I would go almost in order. The Estonians, Latvians, Lithuanians, Poles and then the nor Nordic countries. Danes are getting with the program pretty quick. The Finns have their own special ecosystem which is the most finished. It is effective, but it's built like a Nokia phone. And then.
- [30:48]
C
Yeah, Eric, something that. So I'm a startup attorney, primarily operating mostly in the American market and I've got a substantial number of companies that are selling into Europe. How do European founders talk about their their exit? Do they think that their exit is just sort of perennially selling to a European defense prime? Is there M and A activity that they're seeking out? Are they trying to sell their ip? Are they looking for an aqua hire? So they as a celebrity get brought into one of the monsters because in the American context it's often like Anduril or Palantir will save us or we're going to get big enough and the Office of Strategic Capital will give us a loan and we'll dine out that for 30 years. So if you are creating a counter UAS system and let's say you're a Dutch engineer and you've got world class technology, what does your future look like? To what do they aspire?
- [31:46]
F
Yeah, it's funny, I know that I don't always get the clearest answers from founders in this book. I'm the early stage investor so that's the last thing that they want to sort of expose.
- [31:57]
B
We're in it for the whole.
- [31:58]
F
Yeah, exactly, exactly. Which I very much respect. But also there's the pragmatic side of this which is like, okay, well let's look at the statistics. In all likelihood there's going to be exit opportunities before going public. There's a few things that are happening. So one, a lot of these companies have found themselves in a very interesting position where they have created these Itar islands. So they have great tech and it is by definition outside of Itar and that is hugely valuable. The US Primes and the US Neoprimes are wising up to this. And so I think we're going to see a lot more things that start as partnerships and then progress and mature into either like significant minority ownership or possibly even full, full acquisition so that these non itar capabilities can easily be exported without having to worry about US export.
- [32:57]
D
Just sorry to interrupt, but do they have a resistance then to selling to the US government for fear that their system will become Itar controlled when we modify it and then they're stuck holding the bag because that system is no longer widely available. Available.
- [33:12]
F
Think. I think that's that is going to come like that is going to start to play out more and more. Yes. Or there's going to have to be a separate system configured just for USG that is like very much walled off completely. I think this is not a bad thing though. This is actually a very helpful thing I think for the market to have these sort of two buckets. That's number one. Number two, the European Primes are sitting on like balance sheets right now that are. The cash in their balance sheet is burning a hole in their pockets. The stocks are through the roof. I mean my God, I run a venture capital firm. If I could have had. I'm not just competing against S&P 500 for what my limited partners are looking at. If you look at the basket of European defense tech stocks, I mean it is performing fantastically. The problem for these companies is they need to put that cash to work. And so I think we're going to see a really busy acquisition market. Those will probably be in the say 100 to 600 million range. And then I would not be surprised if as year by year passes, you know, each Munich is like a mark, a milestone, sort of for me, like a mile marker on the highway. I think we're going to see a lot more sort of sovereign driven financing opportunities. And what I mean by that is like not quite in the vein of like let's take some percentage of intel as esg, but like there will be European governments that want to protect the cap tables of these startups and to date they have been quite laissez faire on that actually. That's perfect. The frames are the one exception. But outside of France. Yeah, exactly. Ironically, they're quite not laissez faire. They are very protective as they always have been. And that has resulted, by the way, in some very interesting exits for French startups who have not been able to run a proper auction because the rest of the bidders are outside of France. And the French government says no, no. And I think we're to see more of that outside of Europe. And for an investor, excuse me, outside of France, for an investor like me, it makes it interesting because those governments will naturally apply a premium to that. There is a sort of patriotic premium I think that we're going to see applied to these things. And that is an interesting exit opportunity for the founders as well. So Eric, I don't know. I think that's like a lot of things that can happen in the future. To date it is not too much. There's no special exit in Europe. I would say the only one that is see sort of tbd is this what I would call the patriotic premium exit where countries for the first time in like 80 years are gonna have a bit more of a heavy, like heavy handed approach to local capital.
- [35:55]
E
So speaking of the French, are there concerns in the startup world in Europe about corporate espionage? You know, how are the various nations competing against one another for this? Because it's not like Alabama's not sending their startups to go spy on Oregon, right? Well, I mean, maybe they are.
- [36:15]
F
Are you suggesting the French are conducting corporate espionage? I'm shocked.
- [36:20]
C
I don't think there's any gambling in the casino.
- [36:24]
F
That's right.
- [36:26]
C
For Just a baseline. There's this famous story in the 90s of Air France being used by the French DGSE to mic in headsets. Next in first class seating where they could monitor conversations of select business executives. Certain treaty allies of the United States have been known to conduct very aggressive corporate espionage like dgse, not necessarily looking at American nuclear secrets, but very much looking at like pharma pharmaceutical secrets. And then DGSE returning that to French industry.
- [37:05]
B
I mean, I mean there's also the whole like military cooperation also comes with a little bit of a, let's be careful, like that's part of cooperation. Make sure you scan that thumb drive before you plug it in.
- [37:20]
C
I was part of A4 deployed special operations task. I was a civilian at the time. I was in no danger. Very soft handed work. But it was international and we had partners from a variety of different countries working on legitimately important analytic work. And a country that shall not be named, but is in, let's say northern Europe and is known for good looking blondes. Dropped a couple of intelligence analysts at the site who spent a lot of time hanging out at the gym and telling American green berets how smart and interesting they were. And they got pnged because their external security service eventually admitted to it and said like, yeah, we seated a couple of agents here to see what we could do. So there are all kinds of experiences, even if that one was less hostile than others.
- [38:18]
D
This is just part of the, this is just part of the doing business. We had Admiral Wu Sheng Li come out to visit the US when he was the CNO for China. And we toured him around the Nimitz and had him talk to the enlisted folks and look at the catapults and the arresting gear and how all that stuff worked. This was before they had their own carriers. And he was very interested, as was his staff, in all the things that these guys did and how they did it. We kind of knew that that was all a part of an intelligence gathering exercise. But you know, the hope was maybe we show them how hard this is and they maybe get a little bit more respect for the lift they have to make. I don't think it worked, but it's just kind of. You accept that as part of the cost of doing business.
- [39:00]
F
I think it's part of the game. Yeah. And what's interesting is that for the startups out here in Europe, yeah, they are now these startups that are performing well, they're on target lists now that they were not on before. And those target lists by the way, which would previously have had like, you know, government targets, include more private sector and where the private sector target before would have been large companies, you know, take your pick, your prime. And now they include these startups which earlier and earlier have to make sure that their cyber defenses are sort of make them as annoying a target as possible so that the adversaries just decide it's not worth the cost. I think it is sort of wishful thinking to think that am a 20 person startup will be able to defend against a, a proper, properly budgeted and resourced state backed effort like you. You will, you will lose. But you can make life difficult in the meantime and you can sort of, you know, you don't just not, you can be the, the, the, the second slowest person when the bear is chasing you. And so I think that's sort of the way the most startups go after it. We do see, we have heard anecdotally a lot of these startups, you know, the way they prove their tech is they'll do a demo and there's been some funny stories about sort of friendly nations asking hey, can you just run that one one more time and making sure all their gear is all spun up this time to collect on that, get the telemetry.
- [40:24]
B
Yeah.
- [40:25]
E
So another question here is like how much Ukrainian tech is kind of flooding the market or informing some of this startup culture and then how much of that is these grifters going? Ah, this is Ukrainian tech, you know, and it's actually just a cardboard box, you know, with a note in it.
- [40:43]
C
Well, is Ukraine, is Ukrainian defense tech the new Red Mercury or is it actually decisive?
- [40:50]
F
It's very decisive. The Ukrainian tech is fantastic. And what's, what's the reason it's so decisive is that the Ukrainian tech that is working is able to show very clearly that your sort of cost per shot, pick whatever modality your shot is in, but the cost per shot can actually be orders of magnitude lower than the status quo. That is effective. I think that there's real criticism you can make on like, well, does the actual backend and data structures behind this support the scale that's needed if the US or Germany or France were to buy it? Okay, that's a valid question. I don't think that's insurmountable at all. It's very clear that like the payloads and the end effectors that they are using, which are the most important parts to sort of get right near the front lines, are extremely effective. Yes, there are grifters of Course, I think the community and the ecosystem, at least of investors and other founders does a pretty good job of sniffing them out. And they get kind of like neutralized and sort of PNG from the startup world pretty quickly. And I think that, like, the, the best startups are making sure that they're getting to Ukraine and not just dropping in for a weekend and testing in a field outside of Kyiv, but they're actually on the front lines, sustained, figuring out logistical chains with the best units. That. That is like par for the course now. And so usually if there's a company that hasn't done that, you're sort of like, okay, well, why not? Do you have a different. Are you approaching it a different way? And usually there's a good answer. But if it sort of makes sense, they should be there and they're not quite there, it does raise some eyebrows.
- [42:31]
D
Hey, Eric. So one of the lessons that people are drawing here from Ukraine is this need for adaptability or the need for basically building an infrastructure so that you can make your stuff adaptable and have the CI CD pipelines and be able to push out new software, be able to adapt the configuration of your hardware and do all that at a pretty high tempo, which is different than kind of how the US normally thinks about building military systems. Do you see some other startups in Europe that are starting to focus on this sort of infrastructure of military adaptability rather than just building the end product hardware?
- [43:07]
F
Yeah, I mean, there's a company called Alterian, I know them well, and they're doing more and more work with us now, by the way, but they're partnered with a number of firms in Ukraine, and their whole thing is like, we don't care what UAS system you want to fly, we'll help you orchestrate them. And they're just this nice middle layer where it's like, okay, you bring your own kit. We'll make sure it can talk to your command center. We'll orchestrate it. We'll sort of be your content delivery network and make sure it can work everywhere. And by the way, then we'll help you use that data so you can fly in swarm functionalities. And like, we don't have to make the hardware. We can just sit on your existing silicon. I think that's pretty cool. I think that a couple years ago when they started, they were ahead of their time and they had to really educate the market. And now it's becoming very obvious when the US systems are becoming so commoditized that I think you could very Much argue it's a risk to the bottom in terms of cost. They'll probably be like a few exquisite ones that can just do that one thing really well or companies like say like Neros that can just pump out the quantity at a good enough quality that can fill these large orders out of the Pentagon. But in between that I think there' to be like a pretty mushy middle where ah, doesn't matter if it fits the task, throw it onto our sort of middleware and I think that middleware is a cool place to be right now. Right? Yeah. Yeah. I'm trying to think what else. The, the. I teased this earlier but like the, the conversations that I, when I walked away from when I flew back to Madrid from Munich this year, the first time it came up on the new nuclear deterrent was from a German front and he's like hey. And I sort of said like what's your hot take from this year? And he said like I think we really need our own deterrent again. And this was a pretty senior person in the German military, had just retired. I think for the, for the first time in a while that conversation is being taken very seriously and it's happening more and more in the open. Obviously if Germany gets it, Poland will like there's no, I think there's sort of no way that one would get it and the other would not follow. I, I think that this is a very much a non zero chance at this point. I, I actually think it will, will happen.
- [45:23]
D
Do you see start? Oh, go ahead.
- [45:25]
C
I was going to ask Eric, you're talking about strategic weapons in the traditional sense and I, I share your assessment. Did you pick up any discomfort with the lack of, of a European anthropic or an OpenAI or a Deep SEQ? Are they speaking about AGI as a future decisive tool of geopolitics?
- [45:49]
F
Everyone knows it will be but the problem is there actually isn't like a pan European version of that right now. And the proposals put on the table like out of Brussels are laughable. Right. Like the closest we have is Mr. Olimp France again. France. The French system is going to change the boundaries of where Mistral can, can operate a little bit. Everyone is also very aware that like you probably heard the, the, the, the Dutch sort of joke about like jailbreak in the F35
- [46:23]
D
and rather than buy
- [46:25]
B
the source code from the Chinese, sorry or get off GitHub.
- [46:31]
F
Yeah. We hear like yeah, people are sort of. There's always talk about like ah, what about a European palantir but like, when you actually dig at that, dig into that and you start talking for real, it's like, yeah, like there is no LLM, there is no near AGI in Europe right now that matches the performance of these other models. And so I, I sort of believe that, like as much as there's going to be a little bit of drama probably between the US and European countries right now, like the best models are. It matters to have the best models more than it matters to have a fully sovereign model right now. I think I would be very interested to see if that sovereign sort of sovereign European model, where it comes from, if it ends up being like another sort of Airbus, like shotgun marriage. I have my doubts that would work.
- [47:20]
B
Yeah. I mean, that's the really hard one, right? Because as you're looking at the adoption of AI across, even the way the military, the US military starting to adopt it and demand it, like we see the stories coming out of Anthropic and the Venezuela move, you're seeing competition too, hardcore competition within the US market space. Where apparently it was, it wasn't that Anthropic ever came out and said, hey, we have an issue with the way this is being used. It was Anthropic asked a question to Palantir, which supposedly was a very like, hey, did they use our AI on this? And then Palantir's like, call Hegseth. Like, we gotta let him know. Like they're questioning. And then of course, because there's always, and there's becoming more and more as the DoD changes. The DoD is getting much more into, okay, data rights. We want data rights. We want to be able to control and be able to use it the way we want to. You have like Anthropics saying, like, actually, you know, we would still like to
- [48:22]
C
have the data rights and control it.
- [48:24]
B
It since it's ours. Do you see that as an opening for the Europeans to be able to say like, hey, like we could. Minus Brussels, we could be the land of the free for you to. You can still own it. And then, you know, have and still work within the defense ecosystem.
- [48:41]
F
Oh my God, Justin, we're going to be like, I'm imagining like having a click accept cookies every time I want to chat to Claude now for every conversation. Exactly that.
- [48:54]
C
If you're at the Department of Defense, you're going to get a pop up to classify all of your prompts according to cui.
- [49:01]
B
So the CL classified unclassified.
- [49:04]
F
Oh yeah.
- [49:05]
D
So exactly.
- [49:06]
E
Kind of related to that. Like we have. No, actually Go ahead if you have an answer.
- [49:11]
F
No, I, I was gonna say I. I obviously am not well didn't grow up in Europe. But I've been here for a number of years now and long enough to know that I think the competing interests on like data security and privacy and by the way for very good reason in Germany we've got very strong cultural aversion to sort of the fluidity of citizens data to the German government. I would be surprised if we sort of pull ahead in terms of free flowing data with one model that can sort of touch every European country. That said like if there does end up being a big sort of more catastrophic like geopolitical event in Europe. Yeah. That could force it the other the. I say that because the last sort of vibe I took away from Munich this year was very much like okay, we kind of got like our assets handed to us on Ukraine intelligence, for example, like oof. Yeah, the Brits in the US were right. Right. We also like stepped into this story on Greenland without realizing how big of an issue this was going to become. And that was also surprising. And all of these things I think have been lessons for European political bodies first and ministries of defense, intelligence second. To say maybe the next things we do when a surprise hits us should be a bit more of a bold move. Whereas in the past I think like bold move was not among the initial sort of entrepreneurs. Yeah, exactly, yeah.
- [50:49]
E
So kind of related to that. The US has DoDi 3000.09 if I'm getting that right, which is covers lethal autonomous weapon systems and kind of, you know, you still see all this discourse of oh, we don't know how we'd employ, you know, killer robots. No, we do. I mean it's actually pretty clear and it's clear who's responsible if something goes bad. For the most part there are some gray areas like what is the European regulation look like? I know culturally like the, the Brits are talk about it but simultaneously they're like weird about you know, you know, stop killer robots was founded there. You know, what is the culture look like about actually implement implementing autonomy on
- [51:27]
F
the battlefield look like the term we hear, I hear more is like human machine teaming. That is sort of. I think we're still where we're at right now in Europe. For better or for worse. These regulations will not be coming out of Brussels like dictated by von der Leyen. That's just not how it works. It will be from each country on their own. And even within that I think we're going to probably See largely because of the Marshall Plan machinations to make sure that in every country you had some checks and balances within the military and intelligence ecosystem. I think we'll probably see some units within one country that are more forward leaning than others. And by the way that are under sort of different law and regulation.
- [52:11]
B
The same thing in the US honestly.
- [52:12]
F
Exactly. Sort of title 10, title 50 question all over again. And in this case in Europe, in Europe, where this was obviously some places sort of bit by design to make sure that there was always some friction. I think in the US we kind of did that accidentally to ourselves at times. But the human machine teaming Tony is the biggest thing that comes up now. So I think we're going to see and we see companies like Helsing which are very forward in their statements about the ethics behind what they're building and the fact that humans will be in the loop. I don't think they're talking points nor their actual position in a company has changed on that since inception. That's actually the perfect example because if you sort of run that company up the chain, Daniel Ek was the first, the first money in founder of Spotify. I think the Swedish approach to this, which is like obviously the famous Swedish neutrality but in recent years the entrance to NATO that would be like a. I think that'd be the perfect place to show this like more measured approach where yes there will be great technology but I think like the Swedish population for example would probably not really accept sort of press a button and walk away type systems at this point. I might be wrong.
- [53:25]
D
I mean Hellsing also has the advantage. I think mostly what they're doing is like anti submarine warfare in some areas where it's a splow or kill chain. Right. So it's easier to keep people in the loop. And then the DoD or DoW, there's a lot of reclassification of one way attack drones as missiles essentially. So we're sort of reframing what a lot of these autonomous systems are to fall into as Tony was saying, the category of weapons. So it's not even really a. It's. It's just like a tomahawk anymore or harpoon or something. It makes it easy avoid that.
- [53:58]
F
That could be where it goes out here because I mean I'm very long. I mean I'm out here because I think this is the thing we really need to be doing and investing in this stuff for Europe as the US continues to pull away. But you know the criticism which is valid is that like for many decades Europe has been ruled by like a political lawyer class. And if there's one thing that political lawyer class does extremely well, it's form working groups and find ways to lawyer themselves to the solutions that they want. And so I actually like if there is the will to reclassify or you know, it can happen and I think that would happen here. I'm just not sure that that will exist today.
- [54:41]
C
Right. As the resident lawyer for second breakfast. Can we table that and turn it over to a ministerial roundtable?
- [54:48]
D
Exactly.
- [54:48]
C
And let's reconvene in six and report on our progress.
- [54:52]
F
This was Greenland. This was Greenland, right? Yeah.
- [54:55]
B
Dan Wang's breakneck argument about the US just applied to the entire EU seems apt.
- [55:05]
A
Eric or sorry, Justin.
- [55:07]
B
So my only question just keeping with that, is there do you think there would be more acceptance on the European side to allow for increased autonomy in weapon systems? If Russia dives head first into increased autonomy on weapon systems, I want the
- [55:21]
F
answer to be yes. I think that the lessons of the last couple years in Ukraine are well felt here in Europe even for countries like, I mean even I live in Spain, those are the farthest away. Those lessons are still felt however, I just don't really see that type of forward leaning change happening until there's actually like a knock on the door door from an adversary like that and I mean like a pounding on the door. I don't think it's going to be proactive. I think that the, yeah, there's the fabric of, of society here in Europe is going to be just much, much, much more diverse in the views on this. And you have. I, I, I could, I would say, I guess if I had to sort of guess who might do it first, it would be Poland or Estonia. And I think that, that, but I don't think it's going to be like one country decides that they are willing to take that step and then like there's this wave of adoption. Like no, no, no. I think it's going to be very piecemeal.
- [56:25]
B
Yeah. I mean obviously everything's by committee. Portugal doesn't have to worry about it. It'll take a while before they stream over to them.
- [56:31]
F
Yeah, yeah. I don't know. My closing thought is that I'm Munich this year and I'll sort of bring it back to the Munich Security Conference. Was it's a really great conference. Like everyone is there there, everyone is there. Everyone knows that it's really not about just Munich or just Europe. Like I was staying at a hotel and I think there's like A Malaysian delegation in my hotel. It is a truly global conference, which is really cool. It definitely took on a heightened sense of like, there was eyes on it this year just because of JD Vance's speech last year. And it was cool to see that. My takeaway just from being a venture investor was that that the defense tech companies were now considered like a serious part of the conversation. I was in a meeting with a head of Five Eyes Intelligence service, and there was a number of founders in that room and that head of that service was listening intently to their thoughts. And that was really cool. That would not have happened a number of years ago. And so I could say, just from my perspective, being an investor and someone who works with these founders day to day, it's really cool for them to get this demand signal and be kind of invited into the rooms and not have to. To not have to barge their way in quite as much as they used to.
- [57:45]
C
Yeah, I. I have a client, a El Segundo based subsurface company doing extraordinarily interesting work. And the founder hit me up on like Monday. He's like, are you going to be in Munich? And I said, no, I did this. I'm booked elsewhere. And he's like, what the hell, dude? Everybody's gonna be in Munich. Like, there's a new culture around it.
- [58:05]
F
Yeah, like an assistant.
- [58:07]
C
Yeah, like an assistant secretary for European affairs from State would go to Munich. But now if you've got a series seed or series a founder that's going out there because of network effects, that is substantial. That is different.
- [58:19]
F
It really is. And Monk, it's also to the point where you used to have to be in the Bayerscherhof itself, in the hotel within the cordon. You know, you didn't have to be in the bylads, but like you had to be near within the ropes. At least it's not the case anymore. You can be there and lobby surf and side events all day long and you can get a ton out of it. I think that's the mark of a. A good. A good movement for. For MSC.
- [58:44]
A
Second breakfast, main stage 2027. Be there.
- [58:50]
F
Yeah.
- [58:51]
C
When are we gonna start doing our. We should do live shows.
- [58:54]
B
Yeah.
- [58:55]
A
Where are we gonna do something in Austin? What happened to that?
- [58:57]
F
Where the.
- [58:58]
A
Is that still on the calendar?
- [58:59]
B
Tony moved away from Austin.
- [59:01]
E
Yeah, that's kind of the problem.
- [59:03]
B
You gotta meet.
- [59:04]
A
Tony's never going back. Don't make me.
- [59:08]
F
There's actually an event that's gone last three years in Munich called the Munich Security Breakfast. So it would be really funny if you did second breakfast.
- [59:14]
G
We gather here today as members of a historic alliance. An alliance that saved and changed the world. We were unified not just by what we were fighting against. We were unified by what we were fighting for. And together, Europe and America prevailed. And a continent was rebuilt. That infamous wall that had cleaved this nation in too came down. And with it, an evil empire. And the east and west became one again. But the euphoria of this triumph led us to a dangerous delusion that we had entered the end of history. This was a foolish end idea that ignored both human nature and the lessons of over 5,000 years of recorded human history. And it has cost us dearly. The men who settled and built the nation on my birth arrived on our shores carrying the memories and the traditions and the Christian faith of their ancestors as a sacred inheritance and unbreakable between the old world and the new. We are part of one civilization. Western civilization. We are bound to one another by the deepest bonds the nations could share, forged by centuries of shared history, Christian faith, culture, heritage, language, ancestry. And the sacrifices our forefathers. The fundamental question we must answer is what exactly are we defending? Because armies do not fight for abstractions. Armies fight for people. Armies fight for a nation. Armies fight for a way of life. It was this continent that produced the genius of Mozart and Beethoven, of Dante, Dante and Shakespeare, of Michelangelo and Da Vinci, and the vaulted ceilings of the Sistine Chapel and the towering spires of the great cathedral in Cologne. They testify not just to the greatness of our past or to a faith in God that inspired these marvels. They foreshadow the wonders that await us in our future. Our predecessors recognize that the decline was a choice. And it was a choice they refused to make. We in America have no interest in being polite and orderly caretakers of the West's manage decline. The only fear we have is the fear of the shame of not leaving our nations prouder, stronger and wealthier. For our children. Our story began with an Italian explorer whose adventure into the great unknown brought Christianity to the Americas and became the legend that defined the imagination of our pioneer nation. For us Americans, our home may be in the Western hemisphere, but we will always be a child of Europe. We have fought against each other, then reconciled, then fought, then reconciled again. And we have bled and died side by side on battlefields from Capillon to Kandahar. Yesterday is over. The future is inevitable. And our destiny together awaits.
- [62:56]
H
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