Lawfare Daily: The Defense Tech Paradox, with Susannah Glickman

[Intro]

Susannah Glickman: They end up staffing the Pentagon and trying to sort of remake it in their own image—be that, you know, sort of the Silicon Valley model or as private equity. I talk a little bit about this new form of state capitalism that is emerging right now, like the MP Materials deal, the Intel deal, the Nvidia deal. That looks a lot like private equity.

Olivia Manes: It's the Lawfare Podcast. I'm Olivia Manes, associate editor of Lawfare with Susannah Glickman, an assistant professor of history at Stony Brook University, who specializes in the political economy of computation and information.

Susannah Glickman: There need to be some reliable safeguards and this kind of uncertain environment, lack of government planning, government funding of research, all of these infrastructures that all these companies benefit from, like the destruction of it. It makes reviving manufacturing or doing anything innovative, any kind of long-term industrial policy, impossible.

[Main episode]

Olivia Manes: Today we're talking about the shifting landscape of defense tech as it relates to policies of the second Trump administration.

In particular, we'll unpack a recent article by Susannah and the New York Review of Books, which traces the historical relationship between tech, defense and the U.S. government and explains how defense tech firms which have historically benefited from US industrial policy are now undermining it.

So Susannah, you recently wrote an article called “The War on Defense Tech” for the New York Review of Books.

Before we kind of dive into the substance of that, I wonder if you could kind of give us a really broad overview, kind of set the scene for us about how defense tech is making its mark on the second Trump administration.

Susannah Glickman: So to me, it seems whereas in the first Trump administration, these kinds of self-branded defense tech firms did not have, you know, the same intimate relationship to the administration.

I mean, there were some, you know, folks in the defense department like Ellen Lord, who are interested in industrial policy. And, you know, that's been a long current, going back at least to the mid 2010s, but maybe a little bit before, these sort of Silicon Valley defense tech folks really came to have a closer relationship with the Republican party and with Trump's coalition like midway through the Biden administration. And as a fallout, I think in part of some of the way that they perceived the Ukrainian war and how their efforts around that were sort of treated.

And by defense tech, I think there's a lot of things that can fall under that rubric. There are sort of traditional defense companies like the primes that we're not really talking about. There's tons of smaller contractors who have existed for a long, long time, the high-tech defense firms that sort of came out of the rearrangement of industrial policy under Reagan especially.

But this new set, when we talk about defense tech, it tends to be that we're talking about Silicon Valley tech firms or tech firms in Silicon Valley who have rebranded.

But I want to say, I want to just mark that there are lots of other firms that would call themselves that, but that aren't affiliated and like maybe aren't part of the same political project, although there's some that are.

Olivia Manes: I think you, you mentioned, you know, for example, that this is a really broad landscape and you know, it's a little bit difficult to define exactly what defense tech means, but the firms that you focus on a lot in the article, how do they differ maybe from what you call the primes? So really established firms like Lockheed Martin for example, how, what are they doing differently?

Susannah Glickman: Yeah, I mean, I think it's also like where they come from is very different. What they're doing differently, we can get to, but these new defense tech firms seem to have emerged or made their pivot, you know, much more recently.

So since a lot of the defense consolidation in the nineties and early 2000s, so like Lockheed—Lockheed Martin to say their full name, because they used to be Lockheed, used to be Martin Marietta and like a million other firms, right—are products of this intense defense consolidation in the nineties.

They tend to be relatively large, a bit sclerotic. Part of why they are the way they are is that the consolidation, the nineties happened so fast and so much faster than anyone thought that they ended up having all these different, you know, business capabilities or business responsibilities that maybe they weren't necessarily prepared to handle.

Whereas these new tech defense firms are products of actually some of the industrial policy that the, these earlier defense firms wanted for themselves. Institutional experiments like Intel, the CIA's sort of venture capital, unique venture capital firm whose success, if you want to define it as success, you know, many other agencies and sort of armed services have tried to replicate.

But these, yeah, the new group comes out. Especially those kinds of institutional experiments and then out of Silicon Valley startup culture proper. So like I'm thinking of firms like Palantir, Anduril, Shield AI, there's like a million of them now. They just pop out because there's a lot of money to be made even if you don't deliver on anything particularly exciting.

They're also tied to a different financial ecosystem, which we can talk about that encourages sort of, you know, that looks more like the startup IPO kind of pump and dump sort of infrastructure.

Olivia Manes: Yeah, and we'll get into kind of the different sort of methodologies of financialization that you talk about, in the article.

We'll talk about the different sort of models that we're seeing. I think maybe I want to really boil down at least what I see the article as doing, and then we can kind of branch out from there. But in my view, what the article is kind of doing is explaining a paradox that's at the heart of both, like the Trump administrations and defense tech’s purported industrial policy.

So I wonder if you could kind of talk a little bit about this paradox in really general terms, and then we'll dive a little bit more into what that looks like in practice.

Susannah Glickman: Yeah, so it's kind of interesting. So I'm a historian, so I'm always going to want to go back further than you want me to.

But what's really weird for me is I, so I wrote my dissertation a lot about firms that were insistent that they were not doing industrial policy, but in fact were. And were trying to lobby for that, you know, and coordinate with the government in very concrete ways to sort of secure that.

Now we're in a moment where industrial policy is popular, the buzzword, you know, especially, you know, I think a lot of it has to do with China and the success of the Chinese state, and it's very misunderstood. So we can talk about the misunderstandings too. How China works.

But yeah, so this, now we have the inverse of that, where you have all these companies saying we really need to, you know, these defense tech companies saying we really need to do industrial policy. We need to revive American manufacturing. We're the ones who can actually do it because we're more efficient, ruthless, whatever, when in fact what they're doing is undermining the possibility of doing industrial policy and the kinds of industrial policy that have actually worked or sustained or you know, like even very basic infrastructure, like standard making capacity.

There's a lot of inconsistencies and things that are incoherent about this group, and I can talk a little bit about why I think there are these contradictions.

But yeah, we sort of flipped from companies that say they're not doing industrial policy, but really solicit it and need it, to companies that say they're doing industrial policy, say they're encouraging industrial policy in the return to manufacturing, and in fact undermine the conditions through which that might be possible.

Olivia Manes: Yeah, and I want to talk about sort of weird coalition that we're seeing and some of those internal contradictions. I definitely do want to come back to that.

I think before we do that, I want to discuss maybe, you know, some of the criticisms that these new firms are levying against the sort of current space of defense or current US industrial policy, either you know, explicitly or implicitly in terms of like their discussion of the financialization of the military and the consolidation of the military.

So what are exactly, are people like Shyam Sankar, like the CTO of Palantir, what are they pointing to here? What are their criticisms?

Susannah Glickman: So I, I mean, I think a little bit about Naomi Klein's Doppelganger book. When I think about these guys, the ways in which, you know, a lot of the right has co-opted criticisms that traditionally sound like left criticisms in order to like gain purchase in a world where, you know, a lot of the status quo has sort of lost credibility.

And so some of the things that Shankar and, you know, his group criticize these big defense companies for sounds a lot like the kinds of criticisms that come from the left, especially like around the Bush administration. Bush 2 and, you know, these sort of like bloated, corrupt, inefficient defense companies that, you know, spend too much money on stock buybacks, are too tied to the stock market that don't actually innovate, that they're led not by engineers, but by MBA cadres.

There's also this very gendered criticism. I mean, it's not like—sometimes it's very explicitly in gendered terms and sometimes it's not. But that, you know, the really innovative companies like the tech firms, the greatest minds have been going into creating like financial instruments and ad tech instead of like manly submarines and we should have been preparing for war with China and all this.

This kind of, you know, it, it seems very gendered to me. There's those kinds of, you know, very familiar criticisms. But at the same time, you know, these guys, while invoking these criticisms, are maybe even more financialized than the kinds of firms that they're, than the Lockheeds of the world.

Olivia Manes: And maybe we could get a little bit into the ways in which they're more financialized.

So how are these firms more financialized? What is private equity doing here?

Susannah Glickman: Yeah, I would say venture capital and private equity are both heavily involved in the ways that these firms work. So there's different kinds and there's better and worse in each.

So Palantir got its start coming out of the CIA's venture capital firm, which is not like a venture capital firm, like the other sort of venture capital firms on the market. And we can talk about why it's different, why it's more, you know, just like state subsidy, and a lot of other benefits in a very different way than a bunch of other venture capital firms. So I kind of want to bracket that.

So basically like in the late 2010s, early 2020s, with the end of the sort of zero interest rate, cheap money phase, and there at the same time, there's all of these kind of speculative investments coming out like the Metaverse, NFTs early AI stuff that feels, I mean, felt, I think to investors and VC firms, pretty risky. And so I think that's part of why they start getting really interested in defense and defense tech, because that looks like a hedge against, like those kinds of things.

And we're pretty familiar with this, the criticism of the PE model and the VC model, I think, but I can go into it, but basically that, you know, what they're, what venture capital does is it invests in like a lot of different startups knowing that some of them will fail. Others might actually gain value.

Their goal seems to be to take them public and cash out and then kind of let those companies, you know, whatever happens happens. Like WeWork is a great example of the kind of model there. So the time, the timeframe is very quick.

These are not long-term investments. Private equity firms, you know, sort of emerged from the same period, the 1980s, and are very good at taking advantage of rules and regulations and financial rules in order to—basically their model is you take over a company. They originally did a lot of like hostile takeovers which, you know, affected actually a lot of the early primes and defense companies back in the eighties, made them very precarious. But we can bracket that.

And what they do is they tend to saddle the companies with a lot of debt, pay themselves out large salaries to justify making the firms more efficient. And what they mean by efficiency, efficiency could mean any number of things, but what they mean by efficiency is making the balance sheets look better in the short term often by cutting stuff that would make the firms more resilient in the long term.

But the balance sheet looks better in the short term. Then they bring those up for an IPO or some other way of cashing out, they cash out. And the companies sort of end up collapsing in a lot of cases. So, I mean, I know that they think they have a different model, but that, that is, that seems to be how this works.

And I, and there are obviously like better and worse ones, but private equity has been very successful in the Trump administration at getting important appointments, like the most visible of which is Steve Feinberg, who's deputy secretary of defense in charge of restructuring the Pentagon, in his mind.

Olivia Manes: So what is this notion of like software driven reindustrialization? Like, how does that differ for example, from like traditional weapon systems and like why is that being promulgated right now?

Susannah Glickman: You know, if I'm going to be completely honest, I think it's like a marketing term that volunteer guys came up, but they love these flashy, you know, like the whole ‘18 theses’ thing.

I think what they mean and because they specialize in software, they have this idea that the next sort of wave of industrialization—and they literally put it in this, you know, sort of timeline with, you know, the industrial revolution, you know, watermills, then oil—then steam, then oil, and then software.

And they have this idea that by putting software or AI in all sorts of weapons systems by you know, opetimizing data by optimizing, you know, using data to optimize systems that you can effect like another sort of industrial revolution, so yeah. Yeah, they literally list like water, steam, coal, oil, and software.

It's rarely precisely defined, but it does invoke some you know, yeah, it invokes like Palantir's strengths in terms of like data-driven optimization and efficiency, but it's very unclear what that would actually mean. So, they're like, we're going to, we're going to make, we're going to maximize lethality using software.

We're going to, you know, these precision guided weapons or, you know, linked drone swarms. There's lots of issues with these visions of where things are going. But the selling point is that Palantir is uniquely sort of positioned to affect this new industrial revolution in sort of defense hardware tech using software and data.

Olivia Manes: Yeah, and I think that dovetails nicely with something that you do in the article, which is like unpack this kind of great man theory of defense tech, which is like that singular individuals are kind of revolutionizing the world through these companies. And so I think, you know, you essentially say that this amounts to kind of historical revisionism.

So maybe unpack this theory a little bit more. And if you could explain why it's been used historically, why it's being used now and then I think we can get into maybe the corrective for that, but if you could just briefly explain what that is, what that looks like in practice, this kind of great man theory.

Susannah Glickman: As a historian, it's kind of mind boggling to watch all these guys. I was like, you know, I go around the world, right? And I think about history a lot, but these guys think a ton about history and they like love being called like Oppenheimer or, you know, like being, you know, collecting all this like Cold War relics and imagining themselves as the Manhattan Project gets invoked over and over and over again.

But these guys, Shankar has all these incredible quotes where he like retells the entire history of the 20th century as a story. Not of like World War II, like the way we won World War II. It’s not, it's not about the strong state. It's not about, you know infrastructure. It's not about industrial policy.

It's actually about a bunch of like founders. And he literally, he uses, I guess this quote, yeah, that somehow this focus on great men is really how you win. They love this word winning. He says I'm not a founder of Palantir, but I think going back to the World War II era period and the immediate Cold War, it was founders.

We think of it as Northrop Grumman and Martin Marietta. But in fact, it was Jack Northrop and Glenn Martin, Howard Hughes and Henry Kaiser and even inside of government, the Kelly Johnsons, the John Boyd. These are uniquely hardheaded, creative, difficult people that are required to win. And I think every startup understands that's what a startup looks like.

So that, you know, the whole World War II ever, this amazing reindustrialization, this reinvention of the U.S. state was in fact a product of all of these founders who happen to be dispersed in the government and in these crucial defense companies.

And it's totally ridiculous on its face, but it is, you know, a way of making the case for them to be invested with extraordinary power and control over, you know, the direction the U.S. government goes, and in particular, these kinds of industrial policy pieces that they seem to be trying to sort of effectuate the Pentagon.

Olivia Manes: So you then you provide a really compelling history of the U.S. government's historical, you know, historical intervention and defense-adjacent industries.

So, to that end, can you talk a little bit about the concept of military Keynesianism and explain like how it unraveled under Reagan and following the Cold War.

Susannah Glickman: Yeah, I mean, so I think we've really, I mean, we've never left military Keynesianism. It's just changed in form. That's something that I've discovered, you know, through my research.

Lots of other people have, like Tim Barker, his dissertation is really fantastic. I think he's turning it into a book on that.

But yeah, so like after the Great Depression there's like all of these institutional experiments with the New Deal. But none of them really turn the economy around or make large scale big changes, especially with wealth redistribution, till the government uses military spending to spur economic growth and enables not just the industrialization of whole parts of the U.S. like the South, the West or the Southwest and the West—all these sort of defense manufacturing places that we think of, like San Diego—but also to create lots of other public goods. The military still to this day functions as a kind of welfare state within a state, you know, providing housing, healthcare, education.

And that's been the. Especially during the Cold War, but even to the present day, like that's been the bargain, right? That massive spend, not massive dispense spending is how we do industrial policy in the U.S. and it underlies like a lot of other social spending. In the mid 1960s, that begins to unravel for various reasons that I'm very interested in my book when that comes out.

But some of it you can trace to McNamara and the kinds of “efficiencies,” and I'm saying this with scare quotes, that he tries to implement in the Pentagon, which lead to, you know, like long-term cuts, like the physicists all start freaking out because their whole political economy collapses. And by the seventies, like the early seventies, mid seventies, a lot of the defense industry is in crisis.

And it's not just the defense industry, right? It's all the stuff that relies on defense spending. And out of that, there's like a ton of political organizing, understandably. Because a lot of these major recessions that come out of that are localized in politically powerful areas. In fact, you know, like there is this regional coalition between California, both north and south, and Massachusetts and other sort of defense hubs to remake politics.

You know, this is part of where the Atari Democrats come from in the eighties, is they realize either we have to do something about all of these unemployed defense engineers and this whole sector of the economy because you know, everyone's hurting. You know, we're sort of an economic crisis.

What comes out of that? First there's an attempt by some on the democratic side to civilianize defense spending, to basically like all these defense engineers should instead work on like urbanization or like civilian—basically all of that dies. Especially with McGovern's loss in ’72, and instead gets channeled into a movement tied to venture capital like Bill Casey, who, you know, among other things is the guy who, you know, the CIA director did Iran Contra.

But before that he had like long life. He—Mols Solder writes about this very well, but he is the theoretician of tax havens, and he sees VCs as another way to do a kind of tax haven. He ties them together with a small business movement. And forms a very powerful constituency that's able to extract from Reagan, you know, a real industrial policy for small defense contractors.

SBIR comes at that, there's like other things like the ATP, the Advanced Technology Partnership, and like all these manufacturing, industrial policy pieces. I mean, Reagan does like a ton of new kinds of industrial policy. They're much more, it's much more corporate friendly. It's not as durable because by the, there's a lot of internal right-wing politics that lead to industrial policy being demonized.

Newt Gingrich in the eighties is very pro-industrial policy. And then all of a sudden, you know, in the nineties under Bush 1, and then especially under Clinton demonizes the term and it becomes really toxic. Yeah, so military Keynesianism survives in a kind of compromise that I described in the article where it's hidden and it's much more anemic.

And there's all kinds of new institutional experiments that are actually still ongoing into the Obama administration, but like, how are we, how we do industrial policy in a way that isn't too overt. But it does survive. And there's a reason why like the defense appropriation is chair in the house.

It's an incredibly powerful position. You're directing so much money and so you, you have so much power over where that money goes as a part of that. So, so yeah, that's sort of how that infrastructure is remade.

And now we're sort of at another crisis point where. There's a sense that version of industrial policy really hasn't worked, especially with the rise of China.

Although also, you know, COVID supply chain issues made some of the deficiencies very visible. And there's I'm sure other things that I'm not tracking. But yeah, we're at a moment where we're remake, we're remaking or thinking about remaking that, that kind of infrastructure.

Olivia Manes: You know, you talk about how these challenges in the post-Cold War era and the eighties and the sort of rearrangement of this system resulted in sort of the consolidation of these firms.

So, so how did defense respond to these challenges and what was the consequence of this, especially for the primes, but for other firms as well? The figure of Norm Augustine, I know, plays a really central role in your article as kind of almost saving defense from these challenges.

So maybe you could talk a little bit about how they adapted.

Susannah Glickman: So it's not kind of the narrative that we think about. So Norm is really interesting. I just, I think he is, you know, I, he generously spent a bunch of time letting me interview him, but also I think he is interesting 'cause he starts under McNamara, and those initial sort of efficiency, you know, business—bringing business practices into government shifts, the McNamara Institute in the Pentagon. It’s a disastrous sentence by the way, like the data-centric prosecution of warfare where you're like, how many North Vietnamese did we kill today?

And using that as a metric to sort of get a sense of how well the war is going failed under McNamara and, but somehow that idea has never died. That this—I'm writing an essay right now about lethality, so it's on my mind in efficiency and sort of these things coming together.

But anyway, so Norm starts under that and then sort of ping pongs between government, the private sector, and especially defense firms. And so he's useful to sort of track the way these things go, like how the industry has evolved. Starting, I mean, they have a lot of challenges in the seventies that I've described on these regional recessions.

They come into the eighties in a somewhat of a better position, especially with, you know, Reagan's commitment to defense spending in the 1980s. You know, that Strategic Defense Initiative does funnel a ton of money into the Defense Department.

However, about like midway through his term—you know, in Congress right now during the whole period raised is Democrat controlled. So they're pushing a lot of oversight, which, you know, is kind of quaint now. Nice. But we don't have that as much. But yeah, and then there's a lot of you know, Norm describes those years as the dark years, like I think trust between the defense industry and the government really fell apart.

Things were audited. Defensibility to profit, you know, sort of evaporated. Which, you know, I'm not weighing in whether that's a good thing or a bad thing. But it—that, together with all these sort of Reagan's sort of financialization of the economy, the loosening of regulations meant that all of a sudden all these defense term firms were targets for private equity, by corporate raiders. They also were much more exposed to needing to care about share prices. They were—they became a lot less profitable, right? So their share prices were much more endangered. All of these big companies that had defense wings, like GE—like much more weird companies—everyone had a defense wing.

They sold them all off because they were very unprofitable, and the defense industry started buying them up. You know, proper defense firms like Martin Marietta, Lockheed. They also, they'd relied so much on government spending, government planning, all that. But you know, sort of deteriorates to some degree during Reagan, the second half of Reagan and into the Bush administration. And a ton of them end up having these like huge debt equity ratios, low margins.

And then the 1990s happens, right? That the Berlin Wall collapses and there's all this political talk about a peace dividend. We've been spending so much on defense, shouldn't we spend that instead on other things?

There's also this idea coming out of the eighties that future wars will not be kinetic in the same way. They'll be economic, sort of more like the conflict between the U.S. and Japan over high-tech sort of products like semiconductors.

And so the Clinton administration really wants to do, people like Bill Perry, John Deutch, really want to do defense reform, defense cuts. And they come into the nineties trying to do that.

They hold this meeting I think Norm actually calls the last supper. I think it's his fault that it gets called this, that it carries all this weight where they say basically here's a slide of what defense capacities we anticipate needing. Here's what we have. So we're going to need you guys to figure out the difference.

And weirdly, and I don't think this is very well known, and I don't think, maybe this is not on the mind of Clinton people. I talked to this really interesting defense scholar who was around during the period who says he had no idea this was happening. But Norm was very worried that they might actually nationalize parts of the defense industry, because I mean, they really weren't profitable. They're necessary capacities.

But anyway, instead what happens is he's very good at negotiating a lot of government subsidies, a lot of mergers and acquisitions. And so you get all these huge monopolies in the defense industry that are pretty sclerotic.

They've taken over all of these different manufacturing capabilities, all these different sub-companies, and that's a really hard thing to do in a short period of time. You may not know how to run a company that like, does like a, you know, like a kind of subsidiary that you've taken over that you, you know, so it's just very very quick. Their margins are still fairly low. Yeah, they're just like massive and hard to run.

And then the Bush administration happens. Bush originally was going to kind of continue along the Gingrich line of cutting defense. Then obviously, you know, 9/11 happens. Rumsfeld basically says, you do your own thing, but with a focus on surveillance, precision tech, you know, the kinds of things Palantir likes now, actually. Kind of interesting.

And that's also when they get their start. And, you know, there's a defense bonanza these, you know, defense firms like Lockheed basically survive on that. And they try to diversify a little bit, but they basically have the same structural problems that they had coming out of the nineties.

Olivia Manes: Yeah. And then it seems what happens is then sort of tech swoops in, and this becomes sort of an opportunity, right, a unique opportunity for tech.

You have all these different indices and you know, private equity and emerging tech and venture capital, and they—you say they exploit these legal loopholes and kind of take advantage of the sort of decreasing regulation of the private sector.

This is kind of how tech firms kind of come in into the picture to some degree, it seems according to, you know, according to that history. We spent a lot of time on sort of the historical elements of this, and I think that's great because I think it's really—

Susannah Glickman: Sorry, I'm a historian..

Olivia Manes: No, I think it's really important to trace this genealogy to understand what's happening now. And so to that end, I kind of do, I want to move us a little bit more into the present. But before we do that, I wonder if you could talk a little bit about how In-Q-Tel and initiatives like the Defense Innovation Unit came into being.

Because I know that those are really central, actually, to what the Trump administration is doing now. So maybe if you could talk a little bit about that.

Susannah Glickman: Yeah. I mean, before we get there, I, so just in terms of tech's involvement in the Pentagon, this has been a long-term priority of democratic defense thinkers going back to the nineties, maybe even before.

But Bill Perry was like, this is what we want to do. Silicon Valley is producing stuff that we can't produce in the military. Especially off the Gulf War, right? Like a lot of things seem to work. High tech weapons seem to work in a way that, you know, later we realized it's a little bit more complicated.

But it's been a long term democratic priority to switch out defense primes for tech firms. Because, you know, in the nineties they had a very close relationship. Under Obama, they had a very close relationship. You can kind of see the political calculus.

It's not genius, right? Because you have the same structural problems, right? If you have big monopolies controlling defense, you have big monopolies controlling defense and they have a veto power over, you know, whatever.

But, you know, but that actually has a much longer history. But yeah, so there, so, and Bill Perry actually advises Ash Carter under Obama on like how to begin, you know, with the DIU stuff, but also how to begin bringing tech more into Pentagon contracting.

And he says you want to start small and then push outward, and it's like slowly create space for, you know, these sort of Silicon Valley firms in that.

And there's all these initiatives to bring Silicon Valley personnel, like ways of doing business and companies into the defense space. Which yeah, coincides with you know, these very, as I said, these very speculative directions that the tech industry is going, coming out as their sort of zero interest rate period under Obama.

And, you know, under Obama, a lot of these initiatives are pilot programs. There is In-Q-Tel, which is a special, you know, it's so in the nineties all these defense firms are thinking about how to secure industrial policy in some form. Again, they would never use that word, but, In-Q-Tel is one of those.

So it's formed as a nonprofit under the auspices of the CIA. Norm Augustine's actually a big part of how it's founded, or he's one of the founders. And what it does is it acts like a VC firm. It takes equity stakes, it governs, you know, helps govern the companies. And then, you know, connects these companies with long-term lucrative contracts.

So Palantir actually could not succeed on the free market when it tried to. For, well, from 2009 to 2008, it's just In-Q-Tel, it's just the CIA funding Palantir.

Then this the, you know, there's this great Buzzfeed article about Palantir really struggling to be useful to commercial businesses because look, I, my sense from talking to people is that their tech is considerably overhyped, but yeah.

They, that doesn't work for them. They move out commercial business and, you know, stay in the sort of government. Stay on the government, on government benefits for quite some time. And then, you know, only recently with their sort of political affiliation with this rising Trump administration, have they really entered the commercial world in a different way.

But it's a lot of government contracts. Like even what they're giving the NHS here, you know—I'm in the UK right now—like these are government contracts not succeeding on the free market, in and of themselves. So In-Q-Tel, there's like a lot of different conversations about whether it's a success.

So it's a success in the sense that it assures this, the financial wellbeing of the companies in which it invests, right? Because it can both provide guidance, long-term government contracts, all this, all these great things, right? But there's definitely, among the people that I've talked to, there's a lot of skepticism about whether that tech actually ends up in the intelligence community.

And again, this is one of many attempts to try to get stuff that's happening in the private sector in Silicon Valley, in, you know, new tech into, you know, the military and the Intel community.

Under Obama, I think the proclivity, they're more interested in doing ARPA things that look like DARPA, ARPA-H, ARPA-E, some of which seem pretty successful.

I've heard like ARPA-E is very good. It's not really my area of expertise.

But there's also this DIU experiment, which again, I've heard really mixed things about. And you know, I, you can read the article for more details about, you know, how they haven't really been able to produce useful things for, you know, Ukraine.

But I'm sure there's like plenty of other examples. And at the same time, like all of these branches of the military start creating their own venture capital arms or like Silicon Valley-adjacent things. There's all these fellowships to bring Silicon Valley people into government, into defense that build—and actually the Biden administration really doubles down on this. I'm not totally sure why.

I mean, it seems like the Biden Pentagon was kind of left to its own devices. Like Lloyd Austin, from what I've heard, maybe wasn't the most present. And a lot of things just continued, like a lot of people's pet projects just continued.

And then Trump 2, right, these guys decided to, you know, affiliate with Trump. And so now they're sort of, they're in powerful positions in the Pentagon. I have a long list in the article of who from where is in what positions. But you can, there's probably even more that I weren't able, that I wasn't able to find.

But they end up staffing the Pentagon and trying to sort of remake it in their own image. Be that, you know, sort of the Silicon Valley model or as private equity.

You know, I talk a little bit about this new form of state capitalism that is emerging right now with like the MP Materials deal, the Intel deal, the Nvidia deal. That looks a lot like private equity.

Olivia Manes: What you are pointing to here is that there's an importation of Silicon Valley culture, of move fast, break things, into government, especially at the Trump administration, right?

Where it's kind of hollowing out some of the core functions of government and then, you know, outsourcing them to these contractors.

So, can you talk a little bit more about what this looks like in practice? How has the Trump administration, you know, outsourced these core functions? How has it broken things to some, you know, to some degree? I do want to talk about the, like the Nvidia deal and how this differs from sector-wide interventions.

But first maybe just like some general thoughts on this approach, right? Of, of the Trump administration.

Susannah Glickman: Yeah. I mean, there seems to be this idea. It's a little bit counterintuitive coming from all these industries that have relied so, for such a long time on government subsidy planning, providing the research base for a lot of what they do.

Like it's weird coming from them that they want to privatize all those things, all this free stuff that they've been getting. We haven't been seeing the returns from it, but they have. Or you know, we've even getting, I guess the trickle down at best.

Well, first of all, they've been staffing the Pentagon and awarding them and, you know, companies that they're sort of like in their network, like pretty significant contracts or like planning to. So like SpaceX, Anduril, all stand to benefit a lot—Palantir—from a lot of these new—

But they're also breaking stuff like the National Oceanic Atmospheric Administration, a lot of the stuff that NIST does around standard-setting, and kind of making it easier to do things like anything as a service, right? The, software as a service, anything as a service model to which allow private companies, you know, to continually modify the things that they offer.

But that also means that they could theoretically show them, shut them off. You know, like there are contracts, but, right, we, what we've learned in the Trump and Trump era is that written law is only so good as your ability to enforce it.

This has also made U.S. arms exports much less appealing to our European allies who are seeing, especially, right? There's that national defense strategy that came out today that I'm sure they’re even more alarmed about.

But yeah, this idea that like you're hoping that Alex Karp isn't going to shut off whatever service that you—I mean, it's just kind of a, I can understand their position given the things that some of the Trump administration says about Europe or about, you know, other partners.

But yeah, so they're getting tons and tons of government contracts and destroying a lot of the infrastructure, a lot of the research infrastructure. So shutting off all these grants across agencies that—you know, these companies have relied on this kind of research for such a long time. And in my sense, from talking to folks in, in the tech industry, which sometimes they're kind enough to do, is that they think they can have so much money, they can kind of do research on a mercenary basis.

Which doesn't make a ton of sense because a lot of the things that underlie our modern world require decades and decades and decades of continuous investment and continuous research and oversight and evaluation, right? What should we be investing in?

And it's not that the government doesn't take risks, right? But that there is oversight.

But anyway, they think they can do this on a mercenary basis, right? This guy explained it to me like, you know, it used to be that you can have an army or you can have a mercenary service. And that maybe, you know, we're moving toward more research as is sort of a mercenary function of private companies.

There are lots of other ways in which they're sort of undermining the kind of industrial policy stuff. But the big thing is like uncertainty, like business uncertain, like you need to have long-term stability, a reliable business environment, you know, things like, you know, it would've been a long time goal to bring foreign technical know-how manufacturing know-how to the US like with that Hyundai factory in Georgia.

And then, you know, ICE does a raid. These Korean workers are humiliated and, you know, kind of tortured. And, you know, the ability to learn from foreign expertise is greatly curtailed by, by these kinds of, you know—like you, you need to, there need to be some reliable safeguards and this kind of uncertain environment, lack of government planning, government funding of research, all of these infrastructures that all these companies benefit from, like the destruction of it, it makes reviving manufacturing or doing anything innovative, any kind of long-term industrial policy, impossible.

And I think, you know, sometimes we think about artificially separating the defense world and the regular economy. But they’re really, it's really the same thing, right? Like we, there are no real boundaries.

A lot of companies do both, like the people who provide wooden pallets for defense and for groceries or shipping, you know. Anyway, so that's, they're privatizing more and more functions or not replacing them at all.

Olivia Manes: Yeah. So, so sort of like they're doing these case-by-case equity deals as you mentioned, with, you know, the Trump administration announcing it would take a stake in Nvidia and others.

So what do you make of them and how do they differ from sector-wide interventions? Like we saw post-World War II, for example.

Susannah Glickman: Yeah. Or even like the CHIPS Act, right, is quite different. And I, you know, I have my criticisms of that.

You can check out my piece in the American Prospect for like, why I think there were some issues with the chips and its implementation. But at its heart, right, it was like, we're going to revive this sector, these deals. You know, like what Feinberg knows is doing private equity deals. And that is sort of, from what I can tell, that's the model for these new deals.

And they're sort of one-off deals. I've heard—and you know, who knows if this is true that, you know, some of these contacts come through, I mean, some of them are obvious, right?—some of them come through these people's private networks. Some of them, you know, like a lot of these private equity guys, ex-Silicon Valley guys, you know, have these longstanding networks have been sort of investing in defense tech for a while. Or these, you know, these areas that now they're doing so, you know, as a function of government and there's sort of, each one is quite different.

They're taking bets on companies, you know, that look a little bit uncertain, like the MP Materials deal.

You know, this is not my specialty, but I was reading from, you know, someone who is a specialist saying, you know, they really haven't been making these rare earth magnets until like last year.

I don't—I think the, you know, these interesting price floor ideas and production guarantees are interesting. And if they were applied to a wider set of companies, it would make more sense. But in this way it does appear to be more like a patronage network and more of a way to allow the executive branch and the Defense Department to run around Congress.

Because usually, you know, like the Nvidia deal right there, there's certain deals where they're like, okay, we want to make sure you produce X by X date, and we'll guarantee that we'll buy, you know, however many if you're able to do this or you're able to revive this mine. And/or we're taking a X percent stake to make sure you don't like move production abroad.

Which some of them, like the Nvidia dealer, just give us a percentage of your profits, you know, for chips that you sell to China. And that seems to be just creating pots of money that don't require them to go to Congress to ask for.

Which is, you know, if I were in Congress I'd be upset about that. As a citizen I'm upset about that. But it's just this unaccountable, yeah, these unaccountable pots of money. The other thing that I was struck by, and I don't, you know, maybe it's sort of obvious and not that interesting, but like when Trump, well, when they made the Intel, when they bought the Intel stake, Trump also made a personal investment in Intel.

Which makes these things look even more about sort of personal, personal gain, and much more about creating these patronage networks than about really reindustrializing. What I think is at the heart of some of this, or justifies some of this, is some of these guys—and I said this in the New York Review interview—you know, I think a lot of these guys have a misunderstanding.

They look to China and they're like, oh, they're able to build all these very competitive, innovative companies by doing state capitals, and they must be doing something like what I do at my private equity company, which is you know, subsidizing and sort of guiding things when instead, you know, from what I've read, the Chinese economy, the way that these companies have developed have a lot to do with long-term, consistent investment in, sort of, industrial infrastructure, in long-term research and development, but also very fierce competition at the regional and sort of province level.

And at the locality level, there's involved very interesting financial experiments, right? There's localities that have basically figured out how to get around—basically figured out how to print their own money in really interesting ways. It's not my research, but there's some great researchers whose name I can give you later who have been sort of looking at that, and like the competition between companies in China is like incredibly fierce like tech companies.

But the consistent thing is like long-term government investment and guidance and oversight. Like, they are not afraid to discipline capital. Which is not at all what's happening here, right? This is like creating a patchwork network among companies and figures that seem to kind of already have these existing business networks. And if not, you know, are building them now.

And again, the secondary function is as a way to kind of create pots of money to run around Congress.

Olivia Manes: Yeah. So just finding ways around democratic accountability mechanisms essentially.

Yeah. Yeah.

Olivia Manes: So I think I just have one more question for you, which is more so kind of looking to the future and the future of this sort of course that we're kind of on.

You know, I think we talked a little bit earlier about, this is a weird coalition, right? This defense tech coalition is a weird one. And there seem to be these sort of diverging interests between, you know, Silicon Valley, which stands to benefit from globalization, versus, you know, more regional manufacturers.

You know, we, you touch on definitely that this is not—the approach that defense tech is taking right now is not tenable in the sense of it's looking for short-term profits without examining like the long-term sustainability of this model. But I also wonder if you see this being untenable in the sense of this being a really strange collection of interests that kind of conflict with each other.

I wonder how you see that playing into this sort of future success of this model.

It, I guess it depends on how we're measuring success.

Susannah Glickman: Yeah. What is, yeah, I wonder what they would count as success. I mean, they're making tons of money, so they're succeeding in that way. They're consolidating power, they're succeeding in that way.

But yeah, I think you're right. I think it is a weird coalition. I mean, something I pointed to in the New York Review interview was that they're very different in terms of what they want to see out the other side of this state transformation.

And I do think their interests seem to be at odds in certain sort of fundamental ways. And China's like a good example of that, right?

Because yeah, there's a bunch of Silicon Valley interest in China. They talked a big game about it. They seem to be less concerned now about competition with China. But also, yeah, there are these, yeah, sort of regional manufacturers. Or the Christian right who wants something quite different.

But what all of these groups have been very good at is exploiting, exploiting legal loopholes, lack of oversight, unwillingness to enforce laws and regulation, and kind of, you know, Trump himself is, was really great at that as well. You know, how many times did he go bankrupt? How much did he rely on getting bailed out?

You know, and these kinds of, you know, and relying on, you know, sort of government not cracking down on him. Silicon—a lot of these Silicon Valley companies have the same methods and I feel like they have as a result, you know, of cultivating these practices. Maybe they recognize each other in some way.

You know, they see the world in a—they see how to act on the world in a similar way. And that this kind of crony capitalism, these kinds of patronage networks, are something that they all are interested in building, right? This way of reorganizing government to consolidate power, is something they recognize in each other.

And they're able to build a coalition in the short term around that. I have no idea what happens in the future. I find this, I mean, everything just happens so fast ever since. I mean, it feels you know, we haven't barely, we haven't even had the Trump administration for a year. Things feel so different.

Everything changes so fast. I mean, I'm constantly having to update what I'm thinking and reading just because there's so many changes in, in politics at all different levels.

I mean, it's also true of the resistance, right? To this administration. Like, I see pots of money moving around, different regional coalitions being formed, like at the, you know, people on the ground level are getting organized in a very different way. You know, internationally, like there's lots of different—so I have no idea what happens, but I see a lot of different contradictions and I see a lot of potential clashes.

And I mean, you've seen already so many fractures within the MAGA movement. And it's unclear, you know, where those go or what happens. But yeah, I guess the thing that we can say for sure is that things are happening very quickly and it's very uncertain. And we're in a period where, I don't know, maybe we should see this opportunity, like institutions can be remade and the future is open.

So any vision of the future, you know, could exist. Things are, you know—now is the time to, to organize, build coalitions, and, you know, kind of think about what institutions we'd like to see in the future because I believe that those opportunities will present themselves.

Maybe for better, maybe for worse, but it's just a period of intense change. And maybe that's also where some of this latent nostalgia is coming from.

Olivia Manes: That's a great note to end on. So thank you so much Susannah. I think this was a really interesting conversation. Thanks for unpacking a really complex and interesting topic.

Susannah Glickman: Yeah, thanks so much for having me on. And, you know, who knows, my thoughts may be totally different in six months.

I'm really taking in a lot of information and trying to make sense of it. And I appreciate you guys for having me on.

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