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WarTalk: No Ammo for Taiwan, Polymarket, Bye Phelan, Will Driscoll Go The Distance?
00:58:12
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- [00:00]
A
War talk. Why is everyone in the Pentagon saying we don't have the ammo to win a war for Taiwan? What's the deal with firing Sec Nav. How's that? Oh whole blockade thing going? Is $400,000 of winning on winnings on polymarket enough to spend a few decades in jail. To discuss we have on Brian Clark, former submariner at the Hudson Institute. Justin, former Green Beret in Defense Tech Eric Robertson. Eric Robinson, former OSC NCT in 101st Airborne, now a lawyer and and Tony Stark, former head of Stark Industries who now writes military fiction. Welcome back to Wartok.
- [00:36]
B
Why is the Pentagon starting to scream to the press about war stocks? Something that countries should probably keep in their back pocket is how many precision weapons do you still have available? And in an open society like the United States attempts to be some of these secrets are difficult to conceal. That the number of specific munitions gets published by Congress at the Pentagon speaks about it openly. You can assess the capability of the United States Navy to carry certain warheads into certain locations. You can look at the Air Force and determine what kind of ordinance can go over a target. So there is a baked in ability to do informed speculation and people are doing that. And when General Kaine and the Secretary of Defense go on TV and talk about the number of targets that have been struck in the Iran war, you can start to take an X and do a bunch of minuses beneath it and reach some conclusions. But we're starting to see incremental precision coming out informally from the Pentagon that's indicating the American ability to fight a sophisticated war is substantially degraded because of this war with Iran.
- [01:55]
C
I think this is a case where people in the Pentagon are trying to get the attention of the President via the press, which is a time tried, I guess a long time. Tradition. Time honored tradition. Thank you.
- [02:08]
D
I wouldn't say it's honored, but not
- [02:10]
C
honored but it works. So yeah, definitely people trying to get the attention of the President by going to the leaking to the press how we're low on missions and maybe we need to wrap up this Iran war post haste.
- [02:23]
D
Yeah, I think too like this is one of those natural tensions we're starting to see bubble up where you've had like you have these O plans or these comm plans that are supposed to be in place for contingency operations. They are predicated on certain availability of weapon systems in the first like hour, first 12 hours, first 24 hours. Because really that's where you're trying to get like okay, how do we start Moving. How do we start getting things into position and to be able to make it to 72 hours and beyond, we need to have certain things in place. And I think you're also probably starting to see people who have very vested interest looking at you into OPACOM with making sure that their comm plans are sufficiently funded and have a robust capability. Looking at what's happening in centcom to no fault of centcom but because they were directed to do this and saying like hey guys, that thing over there seems to be taking away my ability to do the thing that you've told me to always be ready to do like the most dangerous. I think that has a lot to
- [03:24]
C
do with it as well.
- [03:25]
E
Yeah.
- [03:26]
B
Hyper powers have constraints.
- [03:28]
E
Yeah, yeah. And, and to lean into that because I think where some people try to get around this is oh, but we've already ramped up production. We've ramped up production in the last few years after Ukraine. The problem is we were on minimal sustaining rates for way too long. It's not like we just had a max capacity magazine and we decided to empty it out and we can, we can, you know, get back to it in like two years. It's, we were already low, we've burned way too much and now just to get back to that previous low standard, it's going to take years.
- [03:58]
D
Yeah. I mean this is one of the big knocks against the Obama administration during the Asia pivot. Trump won during the Asia pivot. Biden during the Asia pivot. You're going to see a theme. There's a lot of talks about pivot, but they never did the things that would actually enable a pivot which are actually moving war stocks and having them pre positioned in the Indo Pacific in the types of quantities that are now necessary to support forces going forward. And then the actual type of disengagement that would be necessary from the Middle east specifically because that is obviously where the lion's share of our forces have gone. And I think that real tension is exactly what you're talking about Tony is like we have over indexed on exquisite technologies because we have the ability to produce them. The problem with exquisite technologies is they take a very long time. They have very tenuous supply chains and you can't really do exquisite if high capacity. There's like a whole chart you learn in business school of like, you know, you can do mass or you can do, you can do high end and like there's Bugattis on one side and
- [05:01]
B
are you talking about guns and butter? Are you saying that There are there trade offs? I'm not, I'm not so sure about that. I think we can just will ourselves to power.
- [05:11]
A
Well, yeah, Brian, I mean, like, okay, so now we're not doing the Trump ship. Is this an opportunity to kind of reset in a potentially different direction?
- [05:20]
C
Well, so, so a couple of things, I mean, like what Justin just brought up is, you know, maybe this is a good chance to kind of rethink the munitions portfolio and say, do we want to refill our munitions stocks with the exact same thing we just spent on Iran? Because maybe Jassm er is not the, you know, kind of the only weapon we want to have in the inventory for doing air to ground attack. Maybe we need some of these low cost weapons. There's a bunch of options out there that the Pentagon's been fund development of but just never funded procurement of. So hey, this is a great chance to kind of rethink what the portfolio should look like and rebalance it towards these lower end or more modular weapons. Not even really lower end, more modular weapons that maybe don't have quite the performance of the kind of preferred munitions, but can. You can buy them at much higher volumes and the production is much easier because they're modular and some of them even use commercial components like this Eram missile that the Air Horse developed. The other thing it makes me think of is why are we using Jasm ers against Iran? Because. Are you kidding me?
- [06:20]
B
Where?
- [06:20]
C
So I mean, yeah, I get that you wanted to use PRISM to kind of test it out and the army guys like to go show off their toys. Fine, but. And we didn't have that many, so it wasn't like a big loss. But to go out there and burn through a bunch of our Jasm er stocks to attack Target and our Tomahawk stocks, why are we launching Tomahawks into Iran?
- [06:38]
B
Supposedly they have no alarm against the vaunted Iranian navy.
- [06:42]
E
That right.
- [06:43]
C
It just.
- [06:43]
B
Brian, you're at the heart of the question is that was there an American strategic assumption? We imagine that this is an Obama issue, this is a Trump one, a Biden issue, that there are numerous parents of this failure. But had the Pentagon ever baked into its war planning that we were going to conduct a military campaign of this style where you are going to just go after targets without a political objective and the expectation being that if you employ a sufficient amount of violence, if you do gunfight properly, all of a sudden strategy emerges that there is this baked in sort of collective understanding that if the United States is going to go to war against one of the big four threats, that there's going to be a collective sort of Clausewitzian strategic approach to it. And we are not there. And instead we've got people who are doing wheelies and Lamborghinis and it looks really cool and it gives you your sizzle reels. But we are still at an impasse within an Iranian state that refuses to fundamentally break down. And using your entire inventory of lrasm, which for viewers that haven't engaged with this before, it is an advanced anti ship missile that is almost expressly designed for the United States Air Force to employ against the People's Liberation Army Navy in pacific contingencies. But instead we went after the Iranian navy which is sort of like expending LRASM's on the Austrian navy. It doesn't matter. But here we are, we are disaggregated from strategy and now we've got empty war stocks. So we've got a six year pipeline to try and restore this assuming Congress gets behind it and funds it.
- [08:25]
D
Yeah, I mean we sank the SS Minnow with elrasm. So I mean we've done well.
- [08:30]
B
We got the Good ship Lollipop and the Yellow submarine.
- [08:34]
D
Yeah, I mean I think that's exactly right. And I mean even for the prisms, like while I get that we wanted to showcase what the PRISM could do, there is a good argument that like the PRISM is most useful in the land war in Europe. It's not super useful in a over the sea battle in the Pacific because 900 kilometers isn't.
- [08:59]
B
Can we just do a quick backup? Why does the army have the prism? It's because army fires, artillery is looking at long range strike. That army artillery is based on a chassis from the 1960s that had with rocket assist, projectiles can max out at 25, 30 kilometers. The army recognized that the Russians were able to outshoot you and the multiple launch rocket system, the HIMARS system were not sufficient. So the army started looking at longer strike packages and the prsm. The PRISM is the army's most modern weapon system that's designed to use this. And the first time that it was tested or employed in combat was the most recent Iran war. So this is the army trying to bring something to what's almost effectively an air and sea campaign.
- [09:44]
E
Well, and the other thing about PRISM is like it solved one problem, it still didn't solve the mass problem, which was the actual Russian artillery problem.
- [09:52]
D
Exactly.
- [09:53]
E
It was, it was basically, I don't want to say converted. It is now for A purpose in the Pacific that it actually makes it effective. It still wouldn't have been that effective in a Europe fight because it doesn't solve the close in conventional artillery battle.
- [10:07]
D
Yeah, exactly. And that's, that's kind of the thing is like it solved a problem. It, it solved the wrong problem in its development. Then it developed and they kind of came up with the potential to have a solution within the Pacific. But still the place where it's the most useful. It's not use, it's not the, it's not as useful.
- [10:25]
B
And ultimately like the Lucas system is probably just as good and less expensive in certain environments like having long range strike.
- [10:36]
D
I imagine the PRISM still has the same anti personnel capabilities that like some of the marks of the high Mars have, which are, which are very nice, which the Lucas won't have, which, which do make it more formidable against like mass formations and stuff like that.
- [10:50]
B
And for the audience the Lucas is. I'll give credit. The Department of Defense innovated and stole a model from the Iranians. They didn't go and buy a turd copter from Silicon Valley. They got something that they knew worked on the battlefield and copied it relentlessly. And maybe the IRGC will go to court in the Southern District and go after the United States for stealing its ip. But in this war the United States tested what we effectively stole from the Iranians and repurposed.
- [11:20]
C
Yeah, I think so. And my, so my concern now going forward is we've got this big defense budget that we're looking at and now you've got this lobbying campaign by people inside the Pentagon over at indopacom to basically restock all these weapons that they've built their plans around. So not new weapons, but existing weapons. And that's going to take up a huge chunk of the budget. And we want to make these long term commitments on weapons production to try to get the production capacity increased. Because a company like Raytheon is not going to expand production capacity unless they have a long term commitment from the government. So if you do a five or seven year multi year procurement then they're going to be willing to facilitize to support that level of production. But that means you're locking in a huge chunk of investment over the next seven years that's going to be devoted to these weapons that are designed in the Cold War or immediate aftermath and designed really primarily to go after the highest capability threats posed by China. It just seems like we're going to lock ourselves into a portfolio that's going to have the same challenges as our existing portfolio. It's never going to get big enough and it's never going to have the ability to surge in the way that maybe a new portfolio of weapons that was more modular, more focused on one way attack drones might be able to do.
- [12:40]
D
I mean the other thing too that I think that comes out. And it's worth thinking about the consternation that we had over even in the Biden administration giving himars to the Ukrainians. If we're really talking about enabling partners in the Pacific, that's the next question is do we build these high end systems that we're going to instantly have concerns about giving to partners, the Philippines, the Japanese, the South Koreans. Because if that's the case, then again it's not really a capability if it isn't in theater and controlled by people who can use it. And that's another thing that I think the department really has to come to grips with and go to Congress with and be like, hey, we need weapon stocks that we can actually give to our allies that allow them to present a credible deterrence or you know, response capability.
- [13:28]
C
You another, another, another aspect of this too is adaptability, you know, because in Ukraine, you brought the Ukraine example and they found that the Excalibur rounds we sent to them were quickly obviated by Russian electronic warfare against GPS. And same with GMLers.
- [13:42]
B
And Excalibur is, I'm sorry Brian, it's a 155 round, 155 millimeter round that can be guided by GPS. The army has had precision guided artillery rounds for about 40 years. They used to be laser guided and they were called Copperheads. They were extremely difficult to deploy in the global war on terrorism. Excalibur came out because the wars in Iraq and Afghanistan were sort of uncontested electronic warfare environments. And it enabled individual battalion commanders to Effectively choose a 10 digit grid like a 1 meter spot on a battlefield and say okay, I'm going to blow that up. So the Excalibur kind of revolutionized precision strike to Brian's point when it got to Ukraine. And the Russians are a far more sophisticated adversary and jams global positioning satellites. Those rounds were dumb rounds and were not particularly helpful.
- [14:31]
C
Well, and that's same with gimblers.
- [14:33]
E
Yeah, and that's the thing about so you know, GPS is this wonderful invention that we've also had around for over 40 years. The problem is, is that because of the way it functions, it's incredibly easy to jam. And so being rely on it because it's everywhere simultaneously. If your entire targeting package is built around being able to find that 10 digit grid, that's a massive complication. And the US still hasn't quite gotten around that.
- [15:01]
D
Right.
- [15:01]
C
Because all these weapons that we're Talking about here, Elrasm, Jassm, SM6, they all use GPS to some degree to be part of the guidance solution. So even if it has a seeker, even if it's getting a guidance update via the radio, it's still using GPS to kind of orient itself in the world. And if it loses that, then it's very difficult for it to orient itself. And you now have to think about either adapting the inertial navigation units on board to make them more capable, or you're going to have to provide a constant radio signal to tell it where it is, or you've got to have other sensors on it that allow it to predict its location based on starshots. There's companies doing that or detecting emissions from cell towers or TV and radio antennas which you can use to geolocate your. So there's options available. And the problems we have with these legacy weapons, these kind of high end weapons that are highly integrated like that, like Excalibur is, they're too hard to modify. We still haven't really fixed Excalibur to address this GPS jamming issue. And they're desperately trying to fix the GMLers to make it able to use other sources of navigation like radio emissions or something. So we're going to invest a bunch of money and make these long term commitments in weapons that are difficult to adapt to because we don't know what the next countermeasure from the opponent is going to be. You know, it's GPS jamming today, but it could be something else tomorrow that goes after their seeker mechanism or goes after their ability to orient because we're going after something else in the electromagnetic spectrum. So there's all these opportunities for move, counter move competitions that these weapons don't give you the ability to respond to.
- [16:38]
D
I mean, absolutely, yeah.
- [16:40]
B
One point that I want to build on a layer that Brian really helpfully said earlier is these stories are coming out in the press because somebody is trying to signal to the White House and it is arguably stakeholders inside the Pentagon. It is probably also the primes for these dastardly six companies who are trying to communicate, one to Congress, two to the White House that hey, pay us money, let's get reconciliation through, let's get the President's budget through so we can start ramping this process. Up that it reflects an interesting communication mechanism in Washington, D.C. right now, because there's really not a whole lot of value in going to Pete Hagseth and talking about munition stocks. It's just not something he cares about. You can go to the deputy, and the deputy absolutely cares about this, but he's also not necessarily going up to Glen on Capitol Hill. So you sort of do the scattershot communication strategy to raise the profile of vital issues. So then you can go to omb, you can go to Senator Wicker at the Senate Armed Services Committee, Representative Rogers, and say, okay, we do have a crisis. Let's start to solve it. So we're witnessing this creation of an information environment where once you get past the official bluster from the Secretary of Defense, there is an authentic problem now that has to be resolved.
- [18:08]
A
But here's the problem. You know who else uses remove paywalls on the Washington Post? Our allies in the Pacific and the Chinese government. So it's like, you know, this is not ideal the way you're going about this. If we're trying to sort of like preserve deterrence capacity.
- [18:25]
D
I mean, one of the, quote.
- [18:26]
A
One of the quotes from a senior administration official was like, we can't win a war today in over Taiwan. Which is like, I don't know, if you're, if you're a Taiwanese politician and you read that, what are you feeling?
- [18:39]
D
It's just, it's, it's, it is a
- [18:42]
A
signal of like, the breakdown of this administration and how they're trying to.
- [18:47]
B
It is. It is not new that in the late 1950s, when you had giants of the Senate like Jack Kennedy and Arthur Vandenberg, they would go to the floor and talk about weapon systems. Like you had carrier generals and missile generals and bomber generals or senators. And like, they all sort of had their pet members of Congress and they would basically dump the national secrets into the Congressional Record. And the Soviets were monitoring that going back to 1862 and, sorry to Trump, a century prior, after the United States faced its most grave military threat in its entire history, which is the. The Confederacy was effectively on the offensive in four different theaters in August and September 1862, with a knife to the throat of constitutional democracy. And it was basically a freak accident within the army of Northern Virginia, where George B. McClellan, leading the United States army forces in Maryland, Virginia, at the time, discovered written orders that Robert E. Lee had used to dispatch to his forces during their invasion of Maryland. And he unusually concentrated his forces in a way that Robert E. Lee didn't anticipate it led to the Battle of Antietam, which was somewhat inconclusive, but it also did stop the offensive so overarchingly. It was an American victory. Robert E. Lee had no idea why that happened. You didn't know. Like, it wasn't like the prisoners that the Confederates took, like, revealed the fact that we got this written order. It was a congressional investigation in November, December 1863 that revealed that to the Confederacy. And it was probably the single most decisive secret that the United States had uncovered during the war. And it was spilled to the press and to the public. So Congress, through its position of supervising the Executive, which is the core function of the American republic, has this habit and maybe even a responsibility of conducting sort of aggressive due diligence on what the Executive is doing. And we're witnessing that now. And it's ugly. And I don't mean to minimize it, but it's not new.
- [21:06]
D
Yeah, I will just push back to a little bit, Jordan, only because I don't see this as demonstrably indifferent than the purges that occurred with the PLA Rocket Force. When we found out that there was. When she found out there was a lot of corruption within the Rocket Force. I think the difference is that this comes from multifacets, and it's not like people like Bill Bishop pulling out reporting and like figuring out what has happened. So it is slightly different in the volume and the tenor that occurs that. But it's not indifferent. Like, I don't think that we think that China also is in the best spot. That being said, I also think that saying we're not in a position to win a war is different than saying we're in a position to lose a war.
- [21:52]
C
And I'll add to that that I. I mean, I think when people. Obviously this guy was not. I'd be trying to. I guess obviously this guy's trying to grab attention with what he's saying, but I feel like what he means is we're not able to win a war on the terms we want to win it on, you know, so using the things to use to win it. And I think there's lots of ways that a war over Taiwan could play out. We war gamed a lot of them, and usually it results in the Chinese losing. And it's very. Just the main differentiator is how much do we lose in the process. And so when they say we're not in a position to win a war, normally it means the losses we're going to incur don't seem attractive. And it may be enough to cause a president to be reticent about intervening on Taiwan's behalf. So it's. It's a lot more about how well does it go rather than, are we able to stop the Taiwan or stop an invasion of Taiwan.
- [22:45]
D
Does it become a Peloponnesian Pyrrhic victory where you get taken over by the Persians right afterwards?
- [22:51]
C
Right, right, right, right.
- [22:53]
E
Yeah. And it's. It's a pretty good bet that the best description for that fight is. Is a drunken bar. Bar fight. It is like, as. As nice as you want to make it. It's going to be ugly just by the geography, by the munitions burned. And I think there was reporting this week that some of the most recent purges in the PRC are due to the fact that there's skepticism over whether the weapon systems actually work going beyond the rocket force. Right. You know, I think we've said it before, but Xi Jinping has to have some concerns if he's watching, you know, all these Russian SAM systems which the Chinese cloned, you know, just getting burned around the world. Right. Yeah. So it's. We might be out of ammo. Their ammo. Ammo might not work. It's a great time all around. Right.
- [23:39]
C
At least our stuff works.
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A
Maybe.
- [23:41]
D
I mean, we're proving it works. Yeah.
- [23:44]
C
I mean, it works in the context of Iran against them and the Houthis. So it's not necessarily. I mean, and like, great, great example that is, you know, the Patriots up against the Russians and the changes they were making to the programming on the Kinzhal, I guess, cruise missiles and how. Or the. The. Maybe it was the. The caliber ballistic missiles, but they were making changes to ballistic missile trajectories to overcome Patriots flight profiles. And they were successful for a while. So. So I guess, you know, there's. There are cases where we might find that our weapons don't work. And it's a matter of how adaptable you might be against an opponent that's going to try to continue to innovate against you.
- [24:23]
E
Well, and I think that goes back to the. I would say that goes back to, like the PRISM thing. Right. Is that we're adapting a lot of these weapons to be able to fight, but they're not. That's not necessarily like their natural geography.
- [24:35]
B
If we're speaking of opponents, this is a good opportunity to talk about a perhaps lesser opponent in the Maduro regime and their Cuban personal security detachment and poly market being a vehicle for not informed speculation, but direct knowledge of the events being used to generate financial rewards that I think it was just yesterday, Department of Justice revealed an indictment of a special operations soldier at Fort Bragg, North Carolina, who, with knowledge of pending action against the Maduro regime, elected to speculate on polymarket and apparently got, according to the Department of Justice, $400,000 based off of, I think the market was. Will Maduro be in power, excuse me, by the end of the month or something. So we are in a world that the President has described as a casino, and he's not particularly concerned, but in this instance, a, a master sergeant in the. In army special operations land is now being held to account for insider trading.
- [25:48]
E
So I want to play this through of like, yeah, all right, so you're going to place this bet, you win all this money. You got to file that in your taxes. Right. Like, this is not. Especially when you have a security clearance. Like, people notice the sudden windfall, which is like a literal insider threat mechanism of $400,000 to an, to an enlisted man.
- [26:10]
A
But it's, it's in crypto in some account. That's the thing is like actually like the taxable earn. Like, you can, you can go presumably, if you want to like, repatriate it into a US bank, someone's going to.
- [26:23]
E
Okay, let's not teach the audience how to avoid taxes.
- [26:28]
A
But that's the weird thing about polymarket is it's just, it's just like, it's this crypt. It's, this is like crypto on up and I think.
- [26:35]
B
Yeah, it's not like an American sports book. Right?
- [26:37]
A
Yeah. So a month ago, they started saying that they were going to deal with saying that like, insider trading wasn't cool anymore. And this is like, I mean, presumably the Department of Justice gave them a call at point, some, some point between February and, and now. But I mean, it's, it is wild that they thought this would be a sustainable thing. And it's also so predictable.
- [27:02]
E
Right?
- [27:03]
A
It's so predictable. I mean, how many people knew that this was going to happen? Probably thousands. Right?
- [27:10]
B
Yep.
- [27:10]
A
And, and, and, you know, okay, you need one and they're not going to bet 50 bucks. Right. Though did catch like a handful of people in their primaries betting on whether they were going to run or not.
- [27:24]
D
You know what, though? I bet you that's how it started. I'll get. So this is that slippery, like, ethical dilemma kind of thing that happens. We had been already talking about it with other actions. Midnight Hammer. We had been talking about it with Boots on the Ground. We had been talking about it with strikes on the drug boats. There were things that were going on.
- [27:43]
B
There's a substantial American presence. Like, there was obviously something coiling in the Caribbean. Like, it was not a lightning bolt.
- [27:51]
D
Exactly. And there was these slow bets that were. And I don't want to presume what this particular person has done. I don't think that I would, on my very first time of doing an illegal activity, decide that I was going to put whatever the amount of money I would need to put down to make $400,000.
- [28:09]
A
It was only 30 grand, Justin, because these were like. These were like crazy specific, like, this is gonna happen on this date.
- [28:17]
D
Yeah.
- [28:17]
A
I mean, but, yeah, I'm sure you're right. I'm sure there's more than just this happening.
- [28:22]
D
Yeah.
- [28:23]
A
And, yeah, you probably build yourself up to it and you get hyped up and then you're like, oh, man, this is the big one.
- [28:28]
D
Okay, this is the big one. Exactly. And that's. That's, to me, the pernicious effect that's gonna happen and that where it's gonna get super regulated. Like, I mean, like, you know, before we used to go on missions, and just to caveat, at least what I've seen about the guy, this guy was actually. He was a Special Forces guy, but he was a. They call it a Romeo. He was a radio operator. He was a communications specialist that was supporting Tier one units. He was not actually one of the operators in the Tier one unit. So there is a distinction just there because they go through a slightly different selection process and stuff. So just to do due diligence on that. But if that's all correct. But before operations, like before Afghanistan, before fifth group went into Afghanistan, they took all the teams and they isolated them. And it was 2001, so it wasn't a huge deal. But when they isolated them, they put the teams in like a tent. And the only way they could even ask questions or get information was to, like, write it down and hand it to someone who then would go out and, like, get it from the real world and then bring it back to them and give it to them. And you start hearing like, well, maybe that's what we're going to go back to is like, we're going to start isolating these guys well in advance. And then they're literally going to just be cut off from anything that is not classified systems until they. Until the missions are over or whatever. Which again, what are the effects of that?
- [29:52]
B
Oh, something that modern information markets, whether it's predicted or Kalshi or Poly market. It does encourage individual action to spike these markets and it's not unique to American special operations. And Matt Levine's money stuff. He did a write up yesterday about a temperature measure in Paris that there are markets you can bet on the high temperature in a variety of locations. And someone at one of the boom Paris airports, I don't know if it's Charlotte G. Or one of the others, brought a. Put a hair dryer next to a. Like just a thermometer or some. Yeah, a sensor of some sort and spike the temperature. And that triggered a result on markets. And this is not new behavior, but it's being dramatically exacerbated. It used to be like you had to be a sports hero in order to throw a game or something like that, or you had to have a sufficient amount of financial backing to witness something that was coming. And then you could place a bet in commodities markets and you could look at the price of oil. There were ways to do this. But sleaze is now super democratized that there are such a great variety of markets and there are ways for individuals to sort of push events one way or another. There's another story out there that I'm just going through off the top of my mind. I haven't done any research on this. I think he was an Israeli journalist who reported on an Iranian surface to surface missile strike in Israel. And it was something about the location of the target or the timing of the target. And he said it happened and that there are betters on this market. The market wasn't resolved. We're like giving him death threats to change his reporting because there is money on it. So these systems, while they may provide some useful forecasting information, what they're doing is they're encouraging an extraordinary amount of sleaze and just decrepit behavior. And I am curious in our sort of financially libertine environment in the United States, whether or not people are going to start looking at this and saying, hey, this is kind of like allowing smoking in daycares. It's a really bad idea. We should pare it back. Let's get the leaded gasoline out and cure ourselves before it gets any worse.
- [32:24]
A
We've had congressional insider trading for like decades now. I mean there was, which is sort of the, the justification that one Congress member made yesterday saying this person should be, should get a pardon and just have to give their money back. But I mean, it starts with that, right? I think there's some like, level of like permissivity coming from the legislators themselves. Which is not to say that this should be, that, that should be legal or this stuff should be legal. But yeah, there's a, there's a wholesale reckoning with the whole kind of like graft ecosystem that's.
- [33:01]
E
Well, I think you.
- [33:02]
A
Rather than.
- [33:03]
C
Later.
- [33:03]
B
Sorry.
- [33:03]
D
Good.
- [33:04]
E
No, I think there's, there's a bipartisan bill in Congress right now on this topic. But of course I think it only covers, you know, the troopies and not members of Congress or any other senior federal official. And quite frankly, I've got a article and draft somewhere about all these reforms that need to happen. And one of them is just like if you are a US government official in any capacity, you do not get to bet on anything. You want to bet go to Vegas, but you do not get to place polymarket bets or anything else. You don't get to use the stock market. Sorry, it's become absurd to the point of ridicule at this point.
- [33:42]
A
We haven't even talked about the Hegseth trade he tried to put on before the Iran war started.
- [33:51]
E
Well, it was not him, it was his advisor for the, for the purposes of, of those listening. It was his financial advisor who wanted to make a bunch of his fiduciary.
- [34:00]
A
Just happened to want to buy some.
- [34:03]
B
Yeah, like this extraordinarily illiquid ETF that had like 100,000 shares in its float and you picked that one out of the entire galaxy of available financial instruments. Now that strikes me as completely on the up and up.
- [34:20]
E
Yeah, well, you know, it's a lot of us lost money to the slot bowl index there, Eric, so you got to make it up some way.
- [34:29]
D
I mean, it is possible that he accidentally added his advisor to a signal chat and then he got inside information and it was completely innocent.
- [34:37]
C
Yeah, completely in a burden.
- [34:40]
D
I mean it goes back like I'm a 40 year old man, so of course I love ancient Rome. But it goes back to like when Caesar divorced his wife. Like then they asked him, well, if she didn't commit adultery, why did you divorce her? And it was like, because the wife of Caesar should be above being accused. And it's like, yeah, like, hey everybody, you got. That's how you have to act if you want to be in charge and if you want to have responsibility, like you have to be beyond reproach. And you're absolutely right that Congress also needs to get their shit together. But the fact that they commit a wrong doesn't mean that other people should be allowed to commit wrongs. You know what I mean? And I Get that. People will use that as a justification. But, yeah, I mean, just. It is what it is.
- [35:26]
E
Yeah.
- [35:26]
C
It creates some perverse incentives, though, inside the department. If we're just worried about the military side, on the operational side, you know, there's going to, you know, weird behaviors could emerge if you get to the chance to bet on an op that you're going to be a part of. And then I think even more important, like if you're making decisions on this new big defense budget, those decisions obviously could be, you know, useful in a stock environment or, you know, the equities market. So that information might be something you could use for your own insider training. And we've got lots of, you know, at the SES level and I guess, you know, the, the level of people who make decisions about money, you're supposed to be reporting all of those potential exposures. But I wonder if we're really starting to throw all that by the wayside, because at the top levels, we're sort of ignoring it. So is this starting to filter down? And we've got the senior bureaucrats in the Pentagon and elsewhere now not really worried that much about being transparent about their holdings because their bosses and their bosses. Bosses aren't.
- [36:23]
D
Yeah.
- [36:25]
E
I forget if we talked about this before, but one of the ways CIA allegedly made inroads into the Chinese Communist Party in the 2010s was because of the way the graph system worked. You don't want to create that in your national security apparatus where, oh, here, I'll give you an insider tip for polymarket. Bet you know, if you give me information like that is the type of stuff that intelligence services will attempt to use in order to gain intelligence.
- [36:49]
D
I mean, if they haven't already at least attempted it, I would be shocked.
- [36:54]
C
But it undermine. It undermines the efficacy of the organization. I mean, which is what you're seeing in the pla, right? Is that where these purges are in part because just people are not effective in their jobs because they have been corruptly operating their fiefdoms. And you end up with things like weapons that don't have warheads and stuff because it's cheaper to. You can pocket the difference if you buy the weapon without the gas or without the warhead. And are we going to start to see that kind of behavior because there's all these opportunities for malfeasance that we're ignoring and allowing to kind of fester inside the department?
- [37:28]
E
Yeah, and I think that's a perfect point there of like, I think there was a tolerance Even amongst the voting base of, well, if they're corrupt but they're effective, then it's okay. And that was, you know, the CCP's model for a long time was, well, graft and corruption are allowed because that's how you build your patronage network. Like, that's a part of it. Don't get caught. You know, that's. That's the. The stakes of the game. But it's quite clear from the PLA purges that corruption corrupts absolutely. And it will eventually, no matter how effective they were in the first place, it will eventually degrade your readiness.
- [38:00]
D
Yeah, I'll have to look it up. There was actually a report where they went and they looked at companies that operate in countries that are known for corruption, and they looked at companies who didn't participate in the graph system and companies that did. And they actually found that the companies who didn't participate in the graph system in the end actually made like, higher returns and generated more wealth and value because they had to get so creative to work through a system without just taking the easy road of paying bribes. And I think that that's also something that you also just start seeing people just take the low road and take the path least resistance because, well, you can make money that way. And it does try to SAP out some of that creativity from the system.
- [38:40]
A
Should we do a Driscoll life watch check in?
- [38:43]
E
Yeah, he's still alive.
- [38:45]
B
Let's do some Kremlinology. We lost the Navy Secretary this week. Long may he rest in his fantastically lucrative art collection and nice collection of homes. He will be.
- [38:59]
D
I mean, to be fair, he may still be in the lobby of the White House waiting to be.
- [39:02]
B
I mean, he's. He's probably gonna. He's gonna die in.
- [39:06]
D
I think it's worth.
- [39:07]
A
Was it a Politico article?
- [39:09]
D
It was a wall. I think it was Wall Street Journal that published it. I think that's the one I sent out to you.
- [39:13]
A
Okay, let me just. Let me just take one second.
- [39:16]
E
Wait, I didn't see this. He did the West Wing thing where he just sat in the line, right?
- [39:21]
C
He refused to.
- [39:22]
E
No, that was leave.
- [39:24]
C
Until he was told by the president.
- [39:26]
B
Yeah, he refused to just take it from the Secretary of Defense because he has an authentic personal relationship with the President. He's a fundraiser. He's a Mar. A Largo. He's a bundler.
- [39:37]
A
Sorry, I'm gonna have you restart. There's like some echo or some. Or some like, like mechanical verb or something.
- [39:43]
E
Yeah.
- [39:45]
B
Whirly bird Try talking. I have no idea what to tell you. My.
- [39:49]
D
That's perfect now.
- [39:50]
C
Okay.
- [39:53]
B
The former Secretary of the Navy had a long standing personal relationship with the president. Like, he wasn't a random selection. He is a West Palm beach resident. He's a Mar a Lago diner, probably. He's the waffle bar on the weekends. And he was a bundler. He raised tens of millions of dollars for the president's reelection campaign. He didn't really have a national security background, but he's like an independently wealthy financier. So as he received final notice of his departure from the position once reserved for people like, is it fdr, I guess he was Assistant Secretary of the
- [40:33]
E
Navy, Teddy Roosevelt, or was Teddy Roosevelt also Assistant Secretary?
- [40:37]
B
Yeah, but a position that is as old as the country itself. He didn't just take it from the Secretary of Defense. He went to the White House and sought.
- [40:49]
A
Let me read it.
- [40:50]
B
So, yeah, let's hear it.
- [40:52]
A
Sat in the lobby of the West Wing for more than an hour Wednesday night, waiting to see if his longtime friend and neighbor, President Trump, would save his job. He would leave disappointed. That afternoon, Phelan, the Navy secretary, had received a phone call from his boss, Pete Hegseth, asking for his resignation. Phelan had spent much of Wednesday on Capitol Hill, meeting with lawmakers about Navy shipbuilding. A few miles away at the White House, another gathering was taking place that would decide his fate. According to US Officials, Hegseth and his deputy Feinberg had made the argument to Trump that Phelan wasn't moving quickly enough on Trump's shipbuilding priorities, especially the Golden Fleet and increasing reliance on U.S. use of steam. The Navy, they determined, needed new leadership. Phelan made a round of calls, including to the president's executive assistance, saying he needed to speak with Trump. Flying feeling, then headed to the White House. Once the president had a spare minute Wednesday evening, Phelan asked to keep his job. But the Commander in Chief backheads this decision, according to a senior official. I mean, like, leaking, that is just, you know, just put it a little bit, you know, kick on the butt on the way out.
- [41:58]
B
And there's some other interesting reveals about it in that the people commenting on the entire saga are saying that it was kind of a combined position, a combined decision between the secretary and the deputy that we often talk about Deputy Secretary Feinberg and how he's sort of exerting discipline throughout the Pentagon. But there's some organizational decisions that Deputy Secretary Feinberg made that really undercut the Secretary of the Navy that he sort of captured the Submarine Program office and put it under his direct supervision. He wasn't inviting the Navy Secretary to meetings. And that strikes me as sort of the death rattle of his tenure. Ultimately, Steven Fiberg is sufficiently sophisticated to not promise the Trump battleship, the Defiant class, whatever they're going to call it, like he knows that it's fantasy. You might as well promise Imperial Star Destroyer. It's just never going to happen. But the level of personal animosity that existed with Secretary Hegseth firing the chief of staff to the Secretary of the Navy, the personal relationship between the undersecretary Hong Kong and the secretary, there's this thicket of interpersonal hostility that sort of boiled over. And John Phelan sort of went to Washington without much of a constituency, and I think he found himself without a friend. But he'll be back in the president's good graces at a personal level very quickly. I don't think there's any. Like, he didn't break from the phalanx. He just didn't really deliver.
- [43:29]
D
Yeah, this. Oh, sorry. Go ahead. Go ahead, Brian. You're way more qualified.
- [43:33]
C
Well, I think what. But I thought I'd like to commend the secretary for Secretary Hegseth for his apt bureaucratic wrangling, because neither he nor Feinberg like the idea of the Trump battleship. They don't like the idea of the Golden Fleet. They have certain priorities that they want the Navy to pursue. Unmanned systems, submarines, electronic warfare. There's some other stuff that they. Those are the things that they want to focus on. New technologies that help us better address a more contested environment. And you've got the secretary off here freelancing, pursuing the battleship with the President and then this new frigate, which is sort of just an effort to make the fleet bigger and spend a bunch of money on shipbuilding, which I guess is not a bad thing in general. And so what they did is instead of going to the president and saying he's not a team player on the things we're trying to do inside the department, which is their real reason they want to get rid of him, they went to him and said, well, he's not really following through on your battleship idea, even though we hate it. You know that subtext, they go and say, well, he's not really a team player, plus he's not really doing the things you wanted to do, Mr. President. You should get rid of him. So very well done to them on how to manage your boss and how to manage the bureaucracy in a way that gets rid of a thorn in your side and helps to move the program along in the direction you want to go.
- [44:52]
D
They promoted him to constituent again.
- [44:54]
C
It was good,
- [44:58]
D
I think, too, though, like, this is a demonstrably different situation than Driscoll finds himself in. Driscoll and Hegseth seem to have personal animosity for whatever reason. Ranger tap, that's always one of them when you're, when you're an infantry officer. But I don't know that Secretary Hegseth would be able to create the groundswell for Driscoll, because from everything you can
- [45:35]
F
see
- [45:38]
D
Secretary Driscoll and the Deputy secretary get along and seem to be in lockstep on most things. And I think that. But again, based on the way that things have gone, if I had to guess at who was better at bureaucratic machinations, if it were Secretary Hegseth or Secretary Feinberg, I would imagine that it's. Secretary Feinberg is the one who's like, no, no, don't do the public pronouncement thing. Do it this way. This is how we're going to do this. I don't see him offering that same level of support for Secretary Driscoll's removal.
- [46:16]
E
Yeah, so let's, let's step back for a second and look at the broader political landscape here, because I think that's part of the differentiation between Driscoll's position and Phelan's position, which is that Driscoll has an ally in the Vice President. They're close friends. Driscoll is also known to be effective within the building. He is liked by his own service. On top of the fact that he's liked on, on the Hill, he's liked in the White House. And that that is substantially different from what SECNAV's position was. And that matters at a time when you have an already schisming, schisming Republican Party where like Driscoll could be one of the fault lines. It is like that, that from a Washington, D.C. politics standpoint, not from a. The grassroots does not care. But in terms of the various factions in Washington like that, that is a schism you don't want to happen, particularly before, especially most of the party is at this point with a 30% approval rating, looking to what comes next. And it's very clear that with Vance, I think at 42% is the most likely candidate for 2028 right now. You don't want to piss off an ally of Vance if you want to have a future in the Republican Party, at least as it stands right now. And so I'm not saying that Driscoll is untouchable, because I could say that, and in five hours, you know, a phone call could happen and he could be gone. But I think he is a lot more protected, both through his own actions and the broader politics of the party than Phelan was.
- [47:50]
A
But so how do you square that with all of, you know, all of these generals and like his chief of
- [47:56]
E
staff and like randomizers generals are. Because generals are the domain of the Secretary of Defense. And that, that is, I think, how Trump sees it. They're. They're not his appointees and you can get away with. Well, they were Biden generals. I think that is fundamentally it. I also think that those firings have caused part of this schism. It has made it worse. And I think Driscoll is the fault line for something you can't walk back from.
- [48:26]
D
Yeah, I mean, when you have Republicans coming out and openly supporting, like Representative Cole coming out and openly supporting Driscoll, saying while he was excoriating Secretary Hegseth on the decision to fire General George, saying that you're exactly the right person at this time, like, that's, that's a pretty, that's a strongly worded letter that was, you know, said to the media.
- [48:48]
A
So if, if headsets out in like three months, what happens to all these people? I mean, they just go like, hang out at Raytheon still? Or can you, can, can we reel them back into the foal? Like, what is the, what is the mechanism here?
- [49:02]
E
So you're running into two issues there, one of which is that people get tired after two years in politics, even normally. Um, the Biden administration was a bit of an aberration in that most people stuck around for four years and some might argue part of the problem. And so, you know, most people looking to change over anyway, with a completely open primary on both sides in 2028, you're going to see a lot of people scrambling to go, you know, look for congressional seat to go, look which campaigns they're going to work on. The last two years of the admin are going to be people either trying to secure their legacy because they know they won't be welcome in Washington for the next 20 years until we have another round of this, or they are actively going to look for their next job. And so a lot of these people are going to say, eh, I don't want to go back in. The people that will stick around or will bump around, Driscoll might be one of them. He might become secdef he might become National Security Advisor. I actually think that might be a probably better space given. Given his age. So we'll see where that goes. I, I think at the ASD and DASD level, most of these people are going to try to hold on because there's nothing out there for them.
- [50:11]
D
Well, and I wonder too, I can't imagine either of the next administrations really are going to be like, we really need a former officer to lead the Department of Defense. I have to think that it's going to be a non. A non. They're going to go back to the, to the Gates. Right. The Gates model, where it's somebody who is. Understands policy. Exactly.
- [50:35]
B
Once upon a time.
- [50:35]
D
But it wasn't. Yeah.
- [50:37]
E
Yeah. I think junior officers are fine, which is what Secretary Driscoll is. I don't think you're gonna see another go. I've seen some other names floated. I, I know like, well, and so that. That is how you know Joni Earst. So that's how you know the Peach days are numbered because Trump only floats those names when he is thinking about making a change. He's not going to pick DeSantis. That's not passing the Senate this one or the next one. But I could see a world in which if they.
- [51:08]
B
Governor DeSantis can't get through the Senate, he's not. Well, is he personally unpopular?
- [51:14]
E
Yeah. Yeah. You know, it's my little rumor, it's a little Washington cider business for people, is that he's not. I would say that there's probably a world in which if the House flips, and it probably will, that maybe Chairman Rogers gets the tap, which I think Most people in DoD would welcome, but it's more likely just to be a personal ally of somebody else or somebody who wants to be, you know, just a caretaker for the next two years. Or you might see what happened in the first admin, which is people change out every six months. I. That's a pretty likely possibility, too. And you're going to see a lot of people in the, you know, performing
- [51:49]
A
the duties of Tom Cotton, another name. But honestly, would you take that for two years? I.
- [51:55]
C
Right.
- [51:56]
E
The Tom Co Wants to run for president and that's the problem.
- [51:59]
C
Yeah, he's.
- [52:01]
D
Yeah. The only thing I see with him is he doesn't want. He, he. He thinks his time probably in the halls of Congress are over, but he wants to move up to something else.
- [52:11]
C
So.
- [52:12]
E
Yeah. I'd also say that if, if you're thinking there still might be a GOP admin in 2029. Sure. You don't want to taint yourself by saying, well, I already held a cabinet position from 27 to 28, and it was, you know, the great upsie of 2027 that I was responsible for. And I'd also say the politics of a lot of these people who want to work for the DoD are not necessarily the people that a Vance would have in his administration, given his proclivities towards isolationism.
- [52:43]
C
I think one thing to think about too is that as we move into the last two years of this administration, the if they lose the House, if they lose the Senate, for sure the President's wiggle room in terms of, of things he can do with his time is going to really be constrained domestically, so he'll pursue more foreign adventures, which means he needs a SecDef that's going to be willing to go along with those, which means not somebody who's going to have an independent base of support or an independent perspective really on what the DoD or DoW should be doing. So maybe somebody who's more compliant in the mold of somebody like Hegseth, who kind of depends on the President for his position and future. So I think there's a. It's likely we'll get somebody in there who's going to be willing to go along with most of what the President wants to do for this last two years, which could be on the model of last time where it was people who were in there for every six months. Because if, you know you could be fired that easily, then you're always going to either go along with it or you're going to get bounced and the next guy will come in. But I think it's going to be something like that because I think the President's going to want to continue the foreign adventurism in the face of domestic resistance.
- [53:48]
E
Yeah, I think when Congress flips. No, when Congress flips, like, you're just it's going to get so weird. I think that's the best description of the last two years. It's going to get really weird.
- [53:59]
A
Well, the question is, like, how much can a Democratic Congress, like, I don't know, physically restrain the President from invading new countries?
- [54:09]
E
Well, nominees are the one control they have. Right. So that's the thing. If he wants to make the swap on Hegseth and he wants somebody, he has to do it now. Like that's. He can't do it when the Senate flips even by two seats or he
- [54:21]
A
can have a boring person.
- [54:24]
C
Yeah.
- [54:24]
D
I mean, conceivably Heritage probably has somebody.
- [54:29]
A
Last two years of Trump laying duck to just being like normal, boring conservatives. I mean, I guess probably zero. So, yeah, we'll just be, we'll just be an acting world for, for the end.
- [54:42]
B
Anything else they might play? Yeah, they might fleet up like Earl Matthews or somebody like that. It's not gonna be normal, but, yeah.
- [54:49]
A
All right, I guess we're done. See you. Next week on War Talk.
- [54:58]
F
John Villain, Secretary of the Navy, neighbor to the president, friend to the man, sat in the lobby of the West Wing Wednesday with with a phone in his pocket and a half made plan. Wednesday morning, Capitol Hill, meet in with senator selling the bill. Then the phone rings and it's Hexith on the line. Says, john, I'm gonna need your resignation signed. Phyllan says, wait, let me talk to the boss. He's my neighbor, he's my friend. I can cover this loss. So he calls the assistant, he says, put me through. I just need a minute. That's all I'm asking you. Banberg's in the room where it happens. I'm in the lobby where it doesn't. I'm on the couch watching staffers walk past. And the clock keeps ticking, ticking fast. Meanwhile, Hex sits me making the pitch. Mr. President, sir, we got a glitch. Phelan's not moving on the Golden Fleet, and he's dragging his heels on the return to steam. We need catapults hissing on every deck. We need a Navy that gleams. We need a Navy that flexed. And with all due respect to your friend from back home, the man's not the man to get the mission done. Fainberg nodding, deputy cosine. Trump's listening hard. Trump's making up his mind. Down the hall, felons checking his watch. One more hour, one more shot. Fainberg's in the room where it happens. I'm in the lobby where it doesn't. I'm on the couch watching staffers walk past. And the clock keeps ticking, ticking fast. Finally, the President's got a spare minute. Phelan walks in, gives it everything in. It says, sir, please, I can pivot, I can steam, I can build every hull. I can build a golden dream. Trump looks up, says, john, you know I love you, but Pete made the call and I gotta stand above y' all feeling knots once doesn't make a scene. Walk south past the portraits, past the Marines. Bloomberg was in the room where it happened.
- [57:02]
B
Some follow the noise. Bloomberg follows the money, whether it's the funds fueling AI or crypto's. Trillion dollar swings. There's a money side to every story. Get the money side of the story. Subscribe now@bloomberg.com
- [57:20]
F
I was in the lobby where it didn't Thought my neighbor of years would save me Turns out my neighbor wouldn't the room where it happens the room where it happens no one really knows how the sausage gets made no one really knows how the deals get played But Pete got the gold and the hiss and the steam and I got to walk to my limousine.