Peter Dixon opens with what he saw near the front lines in Kharkiv: volunteer units rebuilt three times over, kids with a thousand yard stare, hunted by AI drones. His read is that an American battalion dropped onto that battlefield without changing how it operates would be wiped out in 72 hours. From there he makes the case that non-traditional defense companies moved from optional to mandatory, warns that much of the capital flooding the space is not patient enough for defense timelines, and notes the loss of 17,000 small and medium businesses from the industrial base. He closes by naming the people he credits with making defense innovation real — Lauren Daly, Jason, Bryon and Enrique, Nicolas, William and Pete Newell, Drew Cukor — and hands the work to the room.

Hey everyone. It's great to see a lot of friendly faces here. These events are always just amazing just as a chance to catch up and see a lot of folks. Even sometimes where we may work close to somebody and somehow it comes to coming out here in order to get a chance to really see folks and advance the ball on so many things that we're all working on. Okay, so I'm Peter Dixon. You got a little bit of my background, but something that struck me is being in Ukraine maybe about two and a half years ago when things really were not going that well for Ukraine. And I have served with a lot of combat Vets. I've been in combat in Afghanistan. I've served in Iraq. And so for me, I thought, okay, I understand what these folks are dealing with. And we ended up near the front lines in Kharkiv and meeting with a lot of units that had either just come off the lines or were still on the lines.

And the units that we were meeting with were volunteers and they volunteered in groups of maybe a dozen or two dozen, maybe students or folks from a village together, or in one case, they were all working for an American software company together and ended up volunteering. Now, the Russian units that were across the lines from them had been cycled and reconstituted seven times, meaning those units had been destroyed, had been decimated is the military term, where they were reduced in strength with KIA or WIA below 50% and they had to rebuild the unit. That had happened to those units seven times. So in this case, it was a parachute regiment and the guys that knew how to jump out of planes had existed seven units ago. But on the Ukrainian side, that had happened three times where their units had been decimated and they'd been rebuilt three times.

And out of the kids that had volunteered, there were maybe out of the dozen or two dozen, there were maybe three left who weren't killed or wounded. And I think about my own combat experience and as a platoon, maybe two or three guys out of the platoon ended up getting killed, but to have that the other way is just horrifying. And I always thought that that thousand yard stare thing was like a literary device because I just had never really seen it before. I'd never seen it on the faces of the folks that I served with. And these kids all had it. They all had that thousand yard stare because as we all know, they're fighting a World War I style war, but with elements from the future where they're being hunted and killed by AI drones, right? And so that scenario that we have all been warning is coming, that third offset or overmatch or all these terms, it's real now and it's on the battlefield now.

And what I realized there, which I hadn't fully comprehended, is whether it was a Marine battalion or the 75th Ranger Regiment, if we ended up on that battlefield without changing what we were doing, we would be wiped out within 72 hours. We look at the Russian Navy and the Black Sea, which has lost a third of their tonnage to basically kayaks with a Bomb on the front, a jet ski engine, and a Starlink on top, and they've sunk a third of the Russian tonnage, and we think that wouldn't happen to our Navy. We're diluting ourselves if we think that this doesn't apply to us.

As you look around the world, in terms of what's happening, what we were able to accomplish with the capture of Maduro, which was, gosh, as a military guy or gal, watching that happen, it was like the Super Bowl for us. I mean, it was just to perfection in terms of its orchestration, having Delta Force operators who are professional athletes sprinting through that compound at a dead sprint, shooting the 30 Cuban security forces, and grabbing him before he could get to the secure room. I mean, it was just a masterclass in what right looks like. I also felt like it was maybe the last charge of nights or something, where it was the last best use case of a type of warfare that we won't be able to practice in the future. Because if Venezuela, which is a client state of Russia, had had the sort of capability that's being used on the battlefield in Ukraine, there's no way we would have been able to do that operation with taking just a handful of WIA.

So that era of us being able to do that is coming to a close. In Iran, we're seeing that, where those shahids are holding our ability to create the strategic outcomes that we would want to see. And their ability, the math, as we all know, is not in our favor. We've been warning that for years and years and years. We're now actually seeing it where our interceptors cost more than the shahids that they're shooting down. And we've long warned that this is unsustainable. It's actually now unsustainable. So all that leads us, of course, to how do we deter war with China? And it's with qualitative and quantitative military overmatch for us to be able to do that. Now, our ability to do so, the traditional primes are warning that it's going to take them nine years to replenish our arsenal. We all know what the official count is on how many days we can fight a war with China before we go bingo.

We all know what the official numbers are. The unofficial numbers, probably most of us know those as well, right? It's not a good scenario. Now, the interesting thing here is that defense tech or non-traditional defense companies just went from being optional and upside to mandatory. We have to now get this right. And so the good news is that a lot of that capability has been developed, a lot of that funding is in place, and that talent is in place as well. So the ingredients are there. It's now that last mile of can we truly pull all this amazing capability into production level scale because that is what this moment requires. So what I wanted to talk a little bit about here is... I was on a podcast a couple days before I was asked to send in my slides on this, and somebody asked, "Hey, where are the lucky Palmers within the Pentagon?" And I though, "Wait, what are you talking about?" Because when I started my last company in 2014, the defense venture capitalists, actually there was no such thing.

The VCs were maybe putting in $10 million a year into our type of companies. Now it's billions and a hundred billion dollars plus in the last three years. So the amount of money and talent into our space has been unprecedented.

But let me talk about why a lot of that money is frankly dumb money and why we should be worried as Americans. So we all set the conditions by helping to create the defense innovation ecosystem, the DIUs, the AFWERXs, In-Q-Tel has been around for a long time, but those acted as a spur to bring those venture dollars into our ecosystem and that talent into our ecosystem. But a lot of those investors are SaaS investors. They don't truly understand this space. And so the concern is that they aren't used to the timelines that it requires or how to fund the lifecycle of those companies for them truly to break in.

And we should also be worried about the SMBs. So at a time when we're trying to expand the defense industrial base, we've lost 17,000 small and medium businesses from the traditional defense industrial base. These in many cases are tier two or tier three suppliers that we count on. So in fact, as we're trying to be better, the opposite is occurring here outside of the top echelons of defense primes. Finally here, as we all know, the timelines don't match. We have long been talking about as a benchmark date 2027 to be ready for deterring a war with China. Obviously that's been pushed out with some of the purges and other things that they're doing of their military, but we expect within the next, call it five years, to be either in a war with China or have deterred war with China.

Now it takes us a majority of that time to bring a new capability, even today into the Pentagon when you look at the traditional metrics. Now this has improved. When we started, it was 105 months from RFI to initial fielding. So it was nine years to take a capability from pilot into full production on average. And then obviously a more cycle is every 18 months. So things were definitionally obsolete by the time that they were fielded. But this is truly, I think, the best Pentagon of our lifetimes. All right, I'll just be blunt here. So our generation of warfighters is ****** off. Why are we ****** off? Well, there's a whole host of reasons, but one of them is that the primes, which are filled with American patriots and people who care deeply about the mission, but their structural incentives are terrible. During the global war on terror, they took their innovation budget and R&D is in big companies, R&D is not breakthrough innovation, it's iterative innovation.

The breakthrough innovation is their merger and acquisition budget. They let somebody else take the risk and then they acquire those companies. So they took their R&D and M&A budgets and they reduced them by 54% across the primes. Where did that money go? Dollar for dollar went into stock buybacks, which this administration to their credit has stopped that practice. They went into stock buybacks, which inflated the stock price and then informed CEO bonuses. So when we needed them to innovate the most during the global war on terrorism, they screwed us. They screwed the warfighter and they took that money they should have used for that and they used it to drive their own bonus pay. So the folks that lived through that are now in charge. It would have happened in any other administration maybe five years or 10 years from now, but those folks got pushed out.

And so our generation came up earlier. So it's all of us as change makers that are now in the building. So this is the best Pentagon of our lifetimes in terms of their willingness. That frozen middle is gone. That frozen middle is change makers now, which is amazing.

And so I wanted to call that out. What does that look like? Because defense tech or defense innovation or all of this stuff, which is now coming into its mainstay, it's not that old. It's 10 years old. And so there are folks that are truly OG that go back a long, long time that were the voices in the wilderness trying to make this happen. But there's just a handful of folks that made this revolution where it came into the main, where it attracted this level of talent and level of capability and level of funding. It was a handful of folks that made it happen. Now, if you're an entrepreneur, my VCs expect me to take risks. They expect me to try and be disruptive. They expect all of that. So my tribe right now is urging me to do those things. If you're in the building, if you're in the government, if you're in the military, in a lot of cases, the tribe is reinforcing the status quo.

And so the folks that were able to break out of that, I think are in many ways more impressive than the entrepreneurs that have become billionaires over all of this. And so when that podcaster was saying, "Hey, who are the lucky palmers in the building? Gosh, we really need some." I had just such a visceral reaction to going, "Yeah, this didn't happen by accident. This happened because of those change makers in the building and the VC dollars followed. The VC dollars didn't front run anything here." So let me talk about a few of who those are. I have left off a lot of people off this list. I've also left off a lot of people who are still serving because inappropriate to call them out. Lauren Daly. So Lauren at my last company was our COO. Before that, she came into Defense Innovation Unit Experimental.

And you hear a lot about the founders of DIU or all that kind of thing. I don't want to take anything away from them. All very impressive people. But what Lauren figured out was the mechanical function of how to execute the change. So at the time, OTAs were just used by the Army. You had to go to Aberdeen Proving Grounds and find the three people who knew how to set up OTAs. And they were almost exclusively done. The Navy had experimented with arsenal ship and moved away from it. It hadn't really caught on anywhere. It was exclusively used by the Army, mostly around those OT consortiums. Nobody else was doing it. So Lauren had an Army background. She paired that with DIUx, and she created the commercial solutions opening. That then was used at AFWERX, but that became the mechanism that everybody got comfortable with.

And the ability to do contracts on commercial terms was huge. By the way, there are other authorities as well that we considered and did not use because we thought we got to just pick one and just be all in on that one. So there are still authorities that are amazing that are sitting on the shelf that people have not grabbed and created an effort around. Okay. So that was Lauren absolutely instrumental. DIU would not have succeeded without the commercial solutions opening. Second is Jason. Jason is currently my executive chairman. What Jason did is so impressive because rather than just going and asking for more money or more authorities, he spent his time at Stanford where he was doing his career study to really do the true PhD level diligence on the SBIR program and how the SBIR program was meant to galvanize innovation across the United States and what that program was meant to do and what it was not doing.

And that became the thesis for AFWERX, where he took the $2 billion spend of SBIR money that in the Air Force, the Air Force basically considered that as a tax where it went into what statistically was overwhelmingly SBIR mills, smart people doing interesting work, overwhelmingly ended up as shelfware. And he figured out how to grab a huge portion of that and turn it into viable venture backable companies.

He then improved on that by understanding what was going wrong in the small business administration program that was meant to galvanize venture capital spending and debt spending in this space, specifically because he recognized that there's a valley of death problem set. And so he took those, again, existing authorities and existing funds and he figured out how to repurpose them. All right, Bryon and Enrique. So I initially met Enrique early on at DIUx when we were getting that going. But the thing that you guys did here, and I'll just tell a little bit of the real story because this all gets painted like there was just a desire to let Airmen code. The reality is, I shouldn't say their name, Northrop had spent $300,000 a week on modernizing the Air Force Operations Center, had gone back to Congress twice to ask for more money and was rejected the third time and the Air Force panicked.

And that was the only reason that they gave you guys the stick. And so your ability to be scrappy and get that done and start Airmen coding and showing what innovation, internal innovation could look like, huge. Okay. Just so everyone knows that I haven't just put a list of my friends, here's Nicolas. Nick is such an impressive guy. He and I don't necessarily see eye to eye. What he did at Platform One is phenomenal. So he took what really started out as NGA, as ATO in a day, had gone to 18F and then gone to GSA. And he took that and he turned it into a platform that my company Second Front would not have existed without the methodologies and the top cover that Platform One provided. So this in conjunction with my last company solved the idea of how do you bring the SaaS revolution that had skipped the armed forces.

Here we're talking about AI. This is the SaaS revolution, something that has existed in the private sector for a long time. We figured out how to bring it into the American Armed Forces, which is huge. I want to call out William, who's one of my co-founders and Pete Newell. They co-founded BMNT together, but they did Hacking for Defense as well. So often the talent piece of this doesn't get mentioned. And the talent here, the amount of talent and capability that is coming into this space is huge. Stanford is the engine that drives Silicon Valley because it's the people. That often gets forgotten. These guys knew that and they figured out how to get students interested in defense problems. It's not the companies that came out of Hacking for Defense. Those are few and far between if we're being really honest. It's all of the people who got energized in this and then joined all of these companies and made these companies successful.

all right. Finally, I should call out my former boss when I was at the Pentagon, Drew Cukor. Drew got passed over for command because of how much he was willing to break glass and try and get things done.

He is the most inspirational Marine I've ever met because he comes from a long lineage of Marines who were trying to make the Marine Corps better in really asymmetrical ways. And that became Project Maven. So everybody was saying, "Hey, look, when we really need AI, there are all these SAP programs that will come out. Okay. Where are they?" It was all a Ponzi scheme, in my opinion, of SAP programs that didn't actually deliver anything. If you look at what actually delivered value, it was this, it was Project Maven, and this would have failed without guys like Drew Cukor and Joe Larson. I knew them previously to that when we were in the Pentagon putting Palantir into Afghanistan. And I think about leading men outside the wire and what we were able to do with that piece of bureaucratic jiu-jitsu saved more lives than I ever did leading Marines in combat.

So this is critically important. Okay. I've given you guys a little bit of the sort of unvarnished talk here because we're at a critical moment right now. We have the ingredients, the funding's there, the talent's there, these capabilities are there. We have the ability to transform the armed forces permanently so that our kids are never in a fair fight with the Taliban like my Marines were. We have the ability to make sure that that never happens, but it's going to come down to us. It's coming down to us. It's the folks in this room. So the final thing that I would leave you with is: you are the cavalry. There is nobody else coming to save us. There is nobody else who knows this stuff. There is nobody else who is going to be these change makers. We're at the five yard line here. We have to figure out how to push this all through and we're this close.

Let's finish the fight. So with that, thank you. It's phenomenal to be here with you guys, all. This is a phenomenal group of people and it's been really, really interesting talking to a lot of you hearing about the things that you're doing. I would encourage anybody who wants to come find me and we'll talk about all of this, but I just want to give credit to the organizers of this conference. I can't tell you how many times I go to conferences and it's like being stuck in step one of Alcoholics Anonymous where folks are just being like, "Oh, the Pentagon's hard to work with." Yes, we know. How do we move beyond that? What is working? How do we scale that? And so having a practical roadmap focused tactics and techniques focused conference like this is what this space has been needing for so long and credit to the folks that have put it together.

So thank you.

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