School of War - Rebuilding America’s War Machine

Episode Date: October 9, 2026

America is running low on munitions, its shipyards can’t keep pace, and the materials its weapons depend on too often run through China. Michael Cadenazzi is the Pentagon official charged with turning that around, putting billions of dollars behind the factories, materials, and supply chains that make America’s military power possible. He joins School of War to explain how the Pentagon plans to ramp up weapons production, attract private investment, and break decades of bad habits in how the Pentagon does business. Cadenazzi is confident America can still mobilize its industrial might for a major war, but he warns that waiting until the shooting starts would be “way more expensive in blood and treasure.” The race to rearm is on, and the question is whether America can win it before the next great-power war begins.  03:40 – America's Industrial Decline 06:15 – Dependence on China 09:12 – Pentagon Spending 12:40 – Rare Earth Production 16:59 – Defense Supply Chains 20:41 – Weapons Manufacturing 23:26 – High-End Weapons vs. Mass 28:01 – Blood and Treasure 31:56 – Private Investment 34:58 – Outproducing China 41:29 – Pentagon Equity Stakes 45:00 – Managing Investments This episode of School of War is brought to you by Maven Smart System, the builder platform for the American warfighter, fielded across the force and live on the frontline today. Learn more at palantir.com. This episode of School of War is also brought to you by Stratolaunch, a leading pure-play hypersonics company.  Stratolaunch helps the U.S. and its allies move new hypersonic technologies from concept to capability, faster and cheaper.  Learn more about how Stratolaunch is accelerating the future of hypersonics at Stratolaunch.com. Learn more about your ad choices. Visit megaphone.fm/adchoices

This episode of School of War is brought to you by Maven Smart System, the builder platform for the American warfighter, fielded across the force and live on the front line today. Maven Smart System isn't just software you use. It's the platform you build on. Every day, thousands of uniformed service members use AI coding agents to build their own agentic applications across all warfighting functions on top of the DOW's integrated ontology. What once took a contract in a year, now takes a warfighter and an afternoon. Administered by OSWCDAO, powered by the Palantir platform. One platform deployed everywhere at all classifications. Build at the speed of war.

Stop me if you've heard this before, probably on School of War, but we've got a munition shortage in America. We aren't building enough ships. We need both more high-end platforms to deliver weapons. Also, we need cheap and attritable mass, lots of mass, at scale. Well, if you want to make progress on any of these challenges, they all have one thing in common. America needs to revive its defense industrial base. Today on School of War, I interview the man whose job it is, literally, to make this happen, the Assistant Secretary of War for a Defense Industrial Base policy, Mike Kattanazi.

He's an impressive guy with interesting things to say about how he invests his substantial multi-billion dollar budget to help dig the U.S. out of some of the problems. Years of neglect and strategic apathy have earned us. Let's get into it. It is a restrictive for war. The Lanky invasion of the way. December 7, 1941, a date which will live.

The experience of Vietnam is to end in a state. We continue to face the rain. The beaches, a fight on the landing ground, we'll fight in the fields, and in the streets, but you'll never have no right. Hi, Marion McLean.

Thanks for joining School of War. I am delighted to welcome to the show today. Michael Cadenazi. He is the Assistant Secretary of War for Industrial Base Policy. Prior to that, he was a serial entrepreneur. And prior to that career in business, he served for 10 years as an active duty, U.S. Navy Cryptologic warfare officer. Mr. Secretary, thank you for coming on School of War.

I'm thrilled to be here, Aaron. Truly. You and I connected last summer before I was confirmed, and I was thrilled to see what you were doing with the platform. It's one of my favorite shows, and your growth in the evolution of the product and what you're doing is terrific. So, congrats to you.

Well, those are very kind words. I got a lot of respect and admiration for you as well. My job is to run a good podcast that informs our audience about matters of strategy and military history. You, on the other hand, I believe your job is to fix the American defense industrial base. So if there are, like, challenges here and there for me,

I can only imagine what it is you're dealing with. And I want to start with something really broad for you. Obviously, United States has been directly involved in the conflict with Iran for much of this year. There are other hot wars around the world. Ukraine looms large. Whether you are looking at our conflicts in the Middle East, when you're looking at the war in Ukraine, when you're looking at the state of the battlefield and how we or other nations are leveraging their defense industrial bases to, fight, what are you learning as you look out there at the world?

Yeah. Well, thank you, and I may make a point that it's not just me, thankfully, because that'd be a bit of a big job for one person. Luckily, there's a whole committed Pentagon and whole committed administration that's working on this industrial-based problem. And I run a great team, 500 people, credible scientists, engineers, governments of civilians, contractors, active duty military, who make all this possible. And so I'm thrilled to be leading them and my portion of the work that we're doing. It is a complicated system. And I think you've reflected this here, past discussions on munitions and the evolution of where we are in the current conflict, but in the broader frame of the last 30 years, which is post-Cold War, we made a set of decisions regarding how the economy and we wanted the economy unfold. That is, we decided we're going to live on short, just-in-time supply chains.

We're going to go ahead and engage in globalization. we're going to outsource an incredible amount of fundamental national security industrial capabilities to what were then prospective partners and over time it becomes strategic competitors. And as a result, our national industrial resilience has degraded to the point where, and you can read the GAO reports. And as an American citizen, I highly encourage you to read government accountability office reports whenever you can because they report an incredible set of analysis that we're thankful to have, but also the incredible challenges associated with maintaining the requirements to meet the warfighters' needs.

And so we've been committed. The president's challenged us has been to go ahead and fix this fundamentally to really try and do something different. And I think over the past 20 or 30 years has been many initiatives, I'll go back to better buying power of the Obama administration to go ahead and change the way we buy, sort of set a new approach for the industrial base. However, none of them deliver on the results that were promised. and unfortunately none of them met the requirements of the warfighter. So we're engaged in what is, I think, a more aggressive and perhaps successful endeavor to go ahead and change the way that we're approaching industrial-based issues. And it starts with kind of reframing the problem and a willingness to look at the assumption base for the future.

That is we're trying to be much more aggressive about understanding what the problems were and really tackling them. And not assuming that the way things were five or ten years ago is the way that they have to be. And I think that's the exciting part about that's underpinning this, which is administration's ready to really push and push hard to do things in a different way to achieve the outcomes we need. Well, then let me, that raises some obvious follow-up questions. What are some of the most significant old assumptions that you want to toss out the window? Sure. The idea that you can go ahead and outsource for national security industrial requirements to markets, which always chase lowest cost, which go ahead and chase ease of regulatory environment, and she's different incentives. is probably not the best way to frame your national security.

And so what we needed to do was go ahead and structure markets in a way for national security that reflect our own priorities. And for example, I'll talk to critical minerals, which you've talked about these in the past, they've been very public here. We're 95% dependent upon China for various minerals. That's not a great situation. And so even where we have access to raw materials in the states, of which we do, thankfully, have a lot of raw materials. the refining and production of those materials oftentimes runs through China. And so even where we mine it, we have to ship it over there and then ship it back.

All those globalized supply chains are at the base of every program. And you can dream a lot about fixing industrial capabilities, producing more weapons. If you don't invest fundamentally in minerals at the base of the supply chain, it's very, very difficult to scale. We can get some things from our allies and partners, but many of those allies and partners are similarly positioned in ways where they're either vulnerable to or highly dependent. upon our number one strategic competitor. And so I think this is an example of where we've spent an incredible amount of time. The Congress gave our office industrial-based policy $5 billion alone to invest in minerals-related initiatives this year.

So we're moving that money out the door when you've seen these deals. I've been publicly announced at Sarah Verde for Rare Earth's, Elmet for Tungsten. We're really excited about what those deals are going to mean for the future and our availability to improve our own domestic supply and access to the fundamental pieces of of the industrial base. And you could extend that up and down the supply chain to things like chips, which were worked through the Chips Act, other things like castings and forgings, batteries, microelectronics. We have a tremendous number of challenges where we need to bring home and improve our ability to access those capabilities here in the States. So this is more of a philosophical

question, I think, than anything else. You know, I'm persuaded. I've been persuaded for some years now that the kinds of interventions, broadly speaking, that you just described, a kind of government industrial policy is appropriate for national security goals, not just appropriate, but urgent and necessary. That said, industrial policy has pitfalls that have been written about and documented over the generations. If one comes from a kind of free market background, you start to look for waste, cronyism, all the usual problems in central planning, just plain old inefficiency. taking it as assumed for purposes of argument that this effort is indeed urgent and necessary,

and I think it is, and I commend you for it, how do you think about mitigating the bad stuff that can come from government investments in the manner in which you're making them? Just how do you think about it? That's perfectly fair. I think you can go back to the Truman Commission in World War II and sort of the evolution concerns about fraud and waste at that time when there was way more money sloshing through the system for way more weapons. I think that starts with number one strong governance. That is the idea that, you know, we're all committed doing this under rule of law. They were taking actions

that are responsible. They were trying to operate within the frameworks that were given. The tools were given from the department that are given to the department from the Congress to drive industrial change. I also think it's a shared commitment to outcome. That is part of what we're doing now is we're articulating these priority areas. So we have 21 critical minerals where we're focused. Those minerals, we spent an incredible amount of time. I did not think I was going to spend half my time focused on minerals in this job. It's not the kind of thing they warn you about when you're going through the congressional process. But it really is fundamental because it takes so much time to move money, to assess the quality of the investments, and then to go ahead

and actually find the right companies to partner with and ensure you understand what you're going to get from that investment over time. And there's also an urgency level that, as you reflected, assuming that we're all need to do this, everyone's coming to get. Everyone's coming together across the interagency with Congress and other places to spend time working on these problems. And I'm excited about the partnership, the support, the bipartisan support for the industrial base has truly been incredible. And I've been super gratified by that. We talked to both sides of Congress, both houses, both parties to come and address these requirements. And they often differ, you know, along the way. But it's more in process than outcome. They recognize on both

sides of the aisle that dependence upon our number one strategic competitor is not a great thing. and that we need to go ahead and get much more domestic capacity and more availability. And I spend an incredible amount of time just focused on capacity. We often don't think about just think about the capacity of the United States Army or the United States Marine Corps to achieve things, which you spend an incredible amount of time studying to think about. We're doing that in the industrial side, though, and understanding what is holding back capacity? What are the supply chain bottlenecks? What are the workforce issues that are limiting a company or a sector's ability to scale up and meet?

the warfighters requirements. It's a great job and a lot of fun to be doing it, but also incredibly serious at this time. Well, maybe we can just move sequentially through the supply chain and linger for another question, too, on critical minerals, and then I want to go to the middle of the supply chain. But just give us a little bit more detail on what you're doing on critical minerals. I remember from a few years ago when I was looking into it a little bit more intensively that you have the issue of mining, and this concept of rare earths is, as you know, a misnomer. They're not all that rare. all over the place, actually. But it's a dirty, difficult job to mine them. And so we just kind of gave up on mining them in the United States some time ago. And then there's the refining process,

which China has also cornered the market on. And again, dirty would run afoul to do it cost effectively of all kinds of environmental laws, not only here in the United States, but really sort of in the West more broadly. So all kinds of challenges that have prevented the market from providing its own, as it were, indigenous supply. How are you, as a, uh, the Department of War, navigating these challenges. For example, the questions of regulation, the sort of the dirtiness of this operation. How are you getting communities to accept this stuff? How are you navigating the law? What is your role as an office in questions like that? It's a great question. I think the rarest thing is the most striking example,

because there's a logic to us outsourcing this to China in the 90s. We had all the tech. We were the dominant provider. And we said, does what you want to do? You want to do it? want to do this. And they were very happy to go ahead and take this dirty chemical process, to go ahead and do it cheaper than us and to go ahead and deal with the waste and ways we were not willing to do with this, namely to pollute. And so there is a sort of a dirty logic to that, but it undercut national security. It also undercut what we've always done best in America, which is that over the course of time, we take dirty products and we make them better. We invest in technology, science and technology. And we wind up at the end of like, say, five or

10 years with a much cleaner process. By outsourcing, we've actually undercut all of the enthusiasm and investment that went into that. We've missed three generations of scientists building and doing capabilities, engineers building and deploying capabilities, entrepreneurs launching businesses to do this kind of refining and processing and to do it much cleaner. And as a result, we're largely dependent upon processes that are old and still dirty and are not good for anyone's environment. So what we're excited about, first of all, is unlocking the innovative potential of American ingenuity to go ahead and solve this problem in a fundamentally different way. Now, I'll be honest, like, I've been blown away by, in this role, you go out and you put in

up a request for proposals to industry on something around minerals, and you get hundreds and hundreds of company responses. And I was sort of shocked because you sort of think these companies don't exist, but they do. They existed subscale. They've managed to stay alive. Many of them are starved for capital. They're starved for capital because as soon as they start to grow, they're undercut by the mercantiless behavior of our number one strategic competitor. And as a result, they don't get access to the markets in the same way. So part of what we're doing is innovation. The second thing we're doing is taking action around things like Project Vault, preferential trade zones, the way we're structuring relationships, is to go ahead

and make sure that we develop transparent pricing and the ability for everyone playing in the West, you know, broadly our European allies, our partners in Japan, Korea, Australia, New Zealand, Canada, to go ahead and work with us and to go ahead and find ways to create markets where the incentives for businesses to operate in a transparent and efficient Western way is clear. And that allows us to go ahead and invest in these businesses and set a new business case for why I would go ahead and create domestic sources and a way that five or ten years ago would almost surely have wound up being unsuccessful. So that difference of approach in the minerals thing is really one underpins the difference. And it's an opportunity. that we're shared with our partners. We've invested in Australia with a Japanese entity. We've invested here in the States with a Korean entity. We have many, many discussions underway with our European allies and partners on how to go ahead and solve these critical bottlenecks. It's exciting. So we had your colleague from elsewhere in the building, Travis Metz on recently from over in the Defense Innovation Unit to talk about really, really interesting work he's doing on drones and,

you know, essentially revamping the way in which the Pentagon buys drones and trying to accelerate and catalyze things. He also had a pretty significant budget for that. I think it was $5 billion, but it was also not, it was not nothing. And built into their process for figuring out who was going to get contracts to produce these drones at scale was this competitive angle. And at each stage of the competition, the different, you know, bidders would have to show up and prove that they could meet certain concrete, you know, baselines.

had to show up with X number of drones, for example, for each stage of the competition, the number always got higher. And the point, it was very clever, I thought, as he was explaining, it was to just build early on into the process, hard demonstrations of who was for real and who sounded good on paper, but just was never really going to be able to deliver in a timely fashion. I wonder how you think about that issue. I ask this because you speak of getting all these proposals from all these smaller companies out there. How do you think about who's determining who's real and who's not out there? have a 500-person team. How do you think about due diligence? So Travis and team get to do a lot of exciting stuff.

It's fun. I get minerals, explosive chemicals, and a lot of dirty mental bending. So he definitely is on the cutting edge of the... Well, none of the one way attack drones work without any of the stuff you're providing. Absolutely. And we're happy to be working on it. And that's what makes it exciting is that in many ways, the benefit of not having to choose who that end drone provider is or the end weapons provider, you know, it's, I'm agnostic.

It's ultimately the joint staff and the service. that decide what weapons they need to fight and win. And I go ahead and take that as my cue. Our job then is to go through and figure out what are the best places to invest in the supply chain. That's the mineral stuff, but also that middle of the supply chain that you mentioned, where there are companies that do things for us, oftentimes very bespoke things, that enable us to do the kind of things that our weapons do. That is, American weapons are incredible. They often push the bounds of physics. And as a result, you have very small markets for very high-performing tools that are dependent upon companies that oftentimes have focused on some niche in the sector for a long time.

And so for us, the idea of going through and do this includes a comprehensive approach to understanding, what is the value of this to the warfighter? And that's always our metric is, how is this going to actually help the economy, deliver the things that are needed by the department to get the warfighter, what they require to fight and win. And so we go through, we look at the mechanics of the business, the business case for the investment, what capacity improvements it's going to unlock. And a lot of times, it's not as sexy as you might think.

We've actually bought a diesel generator for a company because they were getting cut off from the power from their landlord. And as a result, they weren't going to be able to produce anymore. But what they did is incredibly important. And so we stepped in and did that. Sometimes a factory will shut down and we'll go through and we'll be part of the sort of recovery team to make sure that those capabilities transitioned for the future. Or if there's a crisis, for example, we'll get in charge to go through if our interagency partners and make sure we manage the department's equity. and the company through the crisis. So there's a whole set of things we look into to make sure that we're using the taxpayer dollars thoughtfully, but also to make sure we're getting where we need to

go relative to the warfighters requirements. And so that's a comprehensive part of what our team does every day. Luckily, we're well-resourced. And we really were given a credit card and the charge to go make the industrial base better in the best way you can. It's quite an opportunity. And I hope the team's delivering on it for the American people. This episode of School of War is brought to you by Maven Smart System, administered by OSW CDAO, powered by the Palantir platform. Maven isn't an app. It's a builder ecosystem. Right now across the joint force, thousands of uniformed service members are pointing AI coding agents at their hardest problems and building the tools they need themselves, targeting workflows, intel products, battle management. No ticket, no vendor, no wait. The warfighter closest to the fight is now the one building for it. That's how you fight at the speed of war.

So moving from the left end of the supply chain into the middle, and maybe the premise is wrong here, and that actually similar challenges apply to both stages. But I'm struck by something you said in another venue, you wouldn't name the weapon or the company, but you said that in one of our weapon systems, there's a circuit board that basically takes 300, hours to make by hand for one circuit board, which is a stunning fact.

And so I highlight that. I'm curious if you want to sort of linger on that and reflect on that example for a minute. But all of these little complexities built into the supply chains for all of these different, whether they're, you know, munitions or platforms, whatever they are, which must be a whole thicket of complications for you guys to think through as you're trying to speed everything up and expand capacity. Speak a little bit to that example and about how you're thinking about solving things like that.

It's a terrible, great example of where we are, I think, and thanks for highlighting it. Because it's endemic of a set of decisions the department is made over time, which is to invest in the research and development for these exquisite weapons, I get production lines to a point. I'm able to produce it, generally in a low rate in initial production sort of prototyping environment. And then I sort of fix the manufacturing model. And I think Palmer Lucky often talks about manufacturability being one of the hallmarks of his company, but also many of the new companies, that they're spending time to think through not just the capabilities of the weapon, but can I manufacture it at scale? That's Newthink. 30, 40 years ago, that was not part of the equation. The thought was, number one, I won't need these in volume, you know, the end of history kind of approach of I'm unlikely to need huge amounts of this.

No matter how many times that's been disproven, and I think you've talked about this in your podcast. podcasts and the four of that, you know, conflicts are often longer, more expensive and harder than you think, that we need more weapons that can be produced faster. And so the decisions were made to not invest in the manufacturability. They didn't even a consideration often because it was more around performance and price. There was more around things around relationship with partners and how we could meet, you know, unique mission requirements. So what we're trying to do now is for the existing legacy systems, we're trying to go through and focus on resolving these manufacturability bottlenecks. That is, re-engineering systems, looking at the assumptions for how

programs were built, looking at the factory floor. In fact, we're paying for hundreds of people to go through and work at the factory floor in a partnership with the business operators for National Defense program, which is taking senior civilian engineering types production factory leadership and putting them at the floor with consultants, with government officials to drive production ramps and break these bottlenecks and really change it. Concurrently, with my program, We have, in addition of $5 billion of investment into minerals, we have $5 billion we're investing into everything else, batteries, castings and forgings, chemicals, to invest into those programs to say, all right, what do you need to go ahead and fundamentally manufacture this

differently? And there are a variety of challenges, as you can imagine, when you're talking about things that go mock two and three and do incredible things in the air. But those are the things that we're trying to work on. And we haven't shied away from the difficulty. In fact, I'd say it's the opposite, is that the teams are going in with our real vigorous commitment to finding problems, surfacing them, and putting them on somebody's shoulders to resolve. And I think that's what this takes, because there's nothing easy about any of this.

There's no, like, low-hanging fruit. Everybody likes the idea of low-hanging fruit and, you know, easy wins, but it's not. It's actually a knife fight at the factory floor to go ahead and fundamentally figure out what will bend the needle, move the needle on capacity. Maybe it's all the same from the perspective of where you sit. But on this question of exquisite weapon systems versus cheaper mass. You know, I take, and not just weapon systems, but things of all kinds. I take the general consensus, which I think I agree, to be something like we will continue to need the exquisite stuff.

We will always need exquisite stuff. But the math simply requires that we balance that out with a fair amount of cheap mass, whether that's a question of interceptors or really anything. The future is going to be some kind of combination of high-end expensive stuff for very particular needs and missions and a bunch of cheap mass. for everything else. How does that, if it all, affect your work? Does it affect investment decisions or priorities? Are there more granular ways in which it affects how you work day-to-day thinking about the defense industrial base? Sure, I think it's a great point. The argument around the,

the argument about the, we used to call it the bifurcation of requirements, right? So high-end, low-end mix. Now we talk about a treatable mass or affordable mass. I think those are those are heavy debates that are going on within the joint staff, within the service leadership, in terms of how we're going to fight and win in the future. Again, luckily, I don't have to make many of those decisions. I get to listen to them. And then when they go ahead and make a decision, we get to draft off it and actually figure out how can we unlock capacity. So for us, in that balance, we're working on the legacy platforms and systems, the aircraft, the munitions, the vehicles that underpin the current force.

And we're also working on enablers for things that are at the cutting edge of sort of your one-way attack drone or your group two drone sort of capability. And that is things like unique batteries, conformal batteries, that are small, that are cost-effective and can fit into a drone. Some of it's around brushless motors. I'm sure Travis talked about these things as he talked about some of the supply chain constraints, but also materials. That is, there's unique composite capabilities, RF sensors, RF comms to go ahead and operate within, you know, contested EW environments.

We get to spend time dealing with the industrial pieces that underpin that. I don't spend a lot of time on end items as a result. So whether drone one or drone two wins is kind of, I'm kind of agnostic. I have opinions, but no one cares. And so I just keep them to myself. And then I just focus on what our teams empower to do, which is go in and figure out what's the best way to ramp up battery manufacturing capacity

to help the entire mix of one-way attack drones. And so it's a great place to be and the team's been super successful. So for us, we could drive things like the battery strategy for the department in partnership with the Department of Energy, the battery strategy for the whole federal government to make sure that we're using

all of the available resources that are at our fingertips to drive those kinds of change. And oftentimes it's a matter of collaboration where we're like, we're going to do these kind of batteries, these thermal batteries, which are inherent to the way we love our traditional munitions, and then these little small pouch batteries that are in use for one-way attack drones. And then other batteries that may be of interest, different chemistries or whatever it might be for future capabilities, say for EVs or whatever the problem set is. It's exciting to go through and find solutions and be empowered in the administration to act, right, and not have to ask for a lot of permission. it's more that there's a lot of problems. So you can sort of pick and choose where you want to have the most impact.

And as long as we're staying aligned with where the generals and admirals are focused, I think we're doing pretty good. Okay, I'm going to ask you a couple questions here that you may find a little doom-laden, but I think it's important that we confront them head on. Crushing morocity is my theme all the time, Aaron. All right, great.

Well, that's what I want you to do. I want you to crush my morosity because the challenges here are very, very significant. Here's one. You have $5 billion. That's a lot of money in one way. And another way, it's actually not that much money, considering the scale of the challenges we face. And it's not the only money devoted to this problem set necessarily throughout the defense enterprise. Nevertheless, we got to where we got because our massive, complex economy and all these powerful market forces took us here. What would you say to the skeptic or maybe the cynic who said, look, I'm sorry. I'm sure you're doing some important work here and there. but given the amounts of money you're likely to get for these problems, given the nature of our democracy and the way that from one administration to the next or one Congress to the next policy can shift, actually using government money to create an industrial base at scale that our national security requirements seems like they need in order to fulfill them.

It's just a fool's errand. Like you're just never going to get the kind of scale you need. What's your response to this person? Call me CISFUS because I think I'd continue to push that rock because it's important. And it's a fair observation. So one, there are a lot of resources. And I want to mention our partnership with DOE, the work we do at the Office of Strategic Capital, where we often co-invest. They have tremendous resources to go ahead and help domestic companies and international

companies succeed. We have partnerships with Export-Import Bank or with the development finance corporation. And so there's a lot of money and resources out there that I think has been out and available for a while. I'm not sure it's been deployed as aggressively and as thoughtfully as we're trying to do. So that's number one is there's plenty of capability. The second is we need to push out the sense of urgency to our private sector colleagues. So we want to bring private capital in the mix. And so I've spent a lot of time talking to investors and going to investor forums.

We talk to private equity firms, VCs, to help them understand what we're trying to do and bridge the understanding for a lot of them that aren't in the second. but even the folks that have been in the sector for a while to understand what we're trying to unlock and what the demand signal is going to be. And that tends to be what it comes down to is a lot of times people just look at the budget books or they look at sort of, you know, the budget's pending on the hill. It's not clear what's happening and they're scared. But if you think longer term about number one, defense budgets have grown 6% steadily per year since 1948. There's tremendous growth in different sectors. We have, you know, periodic ups and downs. But net net, the cost. country is always rallied to the cry when it's needed to go out and fund these capabilities. And so we want to, we recognize, and I recognize more than anyone, that there's not enough money in my little account to go out and deal with all these problems at the national industrial scale. But as we start to catalyze additional investment, as we've done with some of

our other investments, and I'll point to the Korea Zinc deal we did for the first smelter in the country in 50 years, we catalyzed a lot of non-D-O-W, non-USG investment to make sure that this was a well-funded project and met the scale of the moment. And so talking to investors, family offices, all those kind of folks, actually gets them excited. And I've been really, really thrilled by their response to understanding the national security imperative. That is, we've got to do these things. And by the way, I have, I have no doubt that if we got into a scaled fight with anyone, that the country would rally around it, investors would rally around. P. Companies would do the right thing. And we would do it. I have no doubt. But all of that is going to be way more expensive in blood and treasure if we wait

till then. We need to pull as much as we can to that to the left. And that's really the excitement of what we're trying to do is not focus on the resource constraints and limitations. That seems kind of pointless. But rather to go ahead and focus on where can I have the biggest impact today. So our team is trying to do the best we can to find problems where we think we can go in and move it on the heat map from red to green. That is, can I make a measurable difference in industrial capacity or weapons production capacity in this area with these investments in these times? Because Because then whenever the fight comes, whether that's next year or in five years, I'll have a fewer number of problems that are in the red. And so that really allows me to sort of focus. I can make

hard choices. And people sometimes argue they're like, why did you invest here or there? And I'm like, bro, I don't know. We could have done both of those or either of them or one of them. There's plenty of problems for everybody. And so it's exciting to be able to make some choices, get some head nods around the table, and just be able to go and know that you're making a difference. Well, let's talk a little bit about private investment and unlocking private investment because, of course, one of the ways to address the budget scale here is that, as you have pointed out, your job is not just to spend your own money and call today, but to incentivize others to be investing. Maybe we could pick a case study. Maybe we should talk about zinc. I don't know. You choose, Michael, but what is it like to interact with potential sources of capital outside of government? What do these investors want to hear? What do they mean? what can you offer to get the kind of results that you're going for, namely increased industrial capacity on this or that critical issue?

I think in the defense sector where investors have been, there's companies that have been investing in defense for a long time, that you get a sense of the duality of the mission, that is they're committed to national security. That's their mandate. That's their focus. They hire people that focus on these companies or in this sector. They hire former military people that would go off to get their MBAs or finance degrees.

And so they do have a commitment to, to the sector and to the warfighter, very, very intimate connections. However, they also have a fiduciary responsibility of their shareholders. That is, they're not going to lose money, right, in the process of making these investments. And so they have to pick and choose. As a result, there are sectors that naturally attract more capital. So things like high tech, AI, there's bold loads of companies that come through and want to go ahead and sell us or talk about investments into, you know, dashboards and AI and, you know,

SaaS tools and those kind of things, which are all good and contribute to the fight in their own ways. It's far less attractive to look in the supply chain and look at castings and forgings or chemicals companies where the margin profile is certainly less attractive. The actual operating floor, the production line is definitely less attractive. You know, and we've got a thing. And the geography may often mean a place where you don't want to be in the Midwest often or some smaller town with other resource constraints. However, I think that's one of the exciting point, things about being in the administration at this time is that I get to make the case as to why this is important. number one, that it empowers the base of the investments that we're talking about here, actually empower the future growth of your other investments.

That is, we've got to solve these fundamental problems. I may then do with taxpayer dollars and probably do it not as well as the private sector, in which case you're not going to share in the outcomes, or it's not going to get done. So we're going to do it. And it's dependent upon us and our success for you to go ahead and get the returns you want longer term at those higher end, more value-added capabilities. And so we found that argument's resonated. We've had a lot of companies are looking in supply chains.

They're trying to go ahead and find smaller firms that are undercapitalized. They're lending to them. There are firms that have popped up out of nowhere and sectors that have come up that have talked to me about. And Kyle Bass is an online investor. And as a guy that comments often has talked about patriotic capital, which is one of the commitment to basically say, look, I need to invest a certain portion of my portfolio in businesses that are tied to things that are in the national.

space and maybe things that aren't quite as lucrative or as attractive as, you know, going straight into the tech space, but needs to be done. And maybe a balanced portfolio of investments that includes some of that dirty chemical and metal stuff. We're excited about trying to catalyze more energy and investment there. Again, if our money can be put in and we can go be the first tranche of cash and then it can be coupled with other outside investment, fantastic. And you see that from the Office of Strategic Capital, where they're oftentimes the lead lender, but they couple that with a requirement to poor inequity from outside or other investment. And so it's a complicated mess, but I've actually been

really excited and gratified by the number of people who've gone in and have decided that they want to go ahead and make this a part of where they're focused for the future. Okay, so another potentially doom-laden question, but I'm looking forward to your optimistic answer. When you consider the main adversary here, which is China, and you consider the fact that, I mean, to me, the uncomfortable fact, when you look at China's industrial capacities, that they look a lot more like the United States in the middle of the 20th century than the United States today does. They have the capacity to be the arsenal, not obviously of democracy, but of autocracy and communism and everything else that they stand for. But, you know, at least they also give us kind of a measuring stick. Like,

you can see what they can do and you can think through our own war fighting plans and whatever offsets we've gotten stored to sort of deal with the fact that we're never, I think, maybe you'll correct me, but I think we're never going to attempt to sort of match them factory line for factory line. Maybe you're going to tell me we will. But because we can see what they can do to some extent, we can sort of think about what we would need to do in a scenario of protracted warfare. So with all that as preamble, what does Wright look like five to ten years from now? What will you look out there in the land and know that you've succeeded or fallen short? What are the metrics that you look at considering China is out there as a kind of objective measuring stick?

I think it's a clear point that needs to be made is that I had the honor of sitting down and interviewing Arthur Herman, the author of Freedom's Forge not too long. And it's a great discussion. I enjoyed it. And he captures that sentiment. You talked about it well, which is that at the time, we were the sleeping latent industrial power that had to go ahead and that could be motivated into producing way more weapons than everyone else. And that arsenal of democracy, you know, sort of model of the 40s is a very real thing. But it is fragile, because if you go ahead and read this kind of war about the Korean War, by that by not, 1950, the force had atrophy, the amount of capabilities of atrophied, we'd stopped manufacturing.

So it's something that maintained, it requires a lot of maintenance over time. And so I think we're at the whip end of 30 years of neglect of the supply chains, a lot of bad assumptions, and we outsourced a lot of capabilities. And so we're not going to fix this over there. I think more than anything else, what we're trying to do, what our office is trying to do under leadership secretary, Hegseth, and direction from the president, is to start to go ahead and move the needle on this. That is, we need to go ahead and close the gaps we can, but more importantly, embed the structural change that will start to move everyone towards a place of better resilience. It's hard to go ahead and say what specific outcomes, and I think you're right, you know, where, you know, arguably China has 30% of manufacturing capability globally and we're something like 17% or they have 200 times our shipbuilding capacity and we're probably under under a percent of domestic or global shipbuilding production. And you just had a great discussion about that the other day as well.

So arguing those numbers that I need to go ahead and be X percent of this or X percent of that, I think someone else can go ahead and do that. The think tanks have lots of numbers out there. What we're trying to do is reduce dependencies and bottlenecks at every turn because that's the enabler for all the capacity. And so if I can go ahead and say, look, I'm no longer 90 percent, 95 percent dependent upon China for rare earths. I have a domestic source which can meet something less significant percentage of domestic

demand and probably all of DOW manned and opinion. pitch, right? That's the kind of thing we're talking about. If we can start to build more resilient stockpiles and we can come up with models that allow us to accelerate the production of weapons, one of our challenges has been certification and qualification for new capabilities for second sourcing is extortionately expensive and incredibly slow. And there's reasons for that. American weapons are incredibly reliable. They're very precise. They depend upon a very high precision level of engineering. So if you want to qualify a new, you want to require McLean Co. to come and do something on the factory floor,

you need to make sure that that company actually can deliver. And so we put them through very rigorous testing. The question is, how rigorous do those standards need to be relative to the evolution of technology over the past 30 or 40 years? Oftentimes these standards were fixed in the 80s and then sort of like locked in place in the 90s. And we haven't evolved them. We just assumed you wouldn't need it.

And as a result, they don't meet our warfighter requirements. And so we can look at those standards and say, maybe I can adjust. Maybe something doesn't need the ability to sit on the shelf for 30 years, and then I hit fire. Right now, all of our weapons have the ability to sit in the shelf for like 30 years, 20 years, and when I hit the button, it'll launch. There aren't a lot of countries you can go to where you can buy that stuff and have that be the case. Oftentimes, there's high risk in weapons as you start to take testing, sort of flex testing capability. So we need to bound that out. We need to make sure that we're still meeting the warfighters requirements. They're still safe and there's still the

best weapons in the world. And that really comes down to a thoughtful level of analysis with the engineering level, with the right data, the right talent, the right testing. And then ultimately, leaders making a risk-informed equation or decision to assess what is, what am I willing to compromise? Maybe those batteries in that munition only need to be good for 15 years. And then I can do a lot more with it in terms of capacity and cost. And so there's a bunch of unlocks here, which are structurally important to how we're going to think about the future. I'm excited because we're, you know, if you look at the acquisition transformation strategy, which came out in November of 2025, and I was able to spend my first six, seven weeks in the department,

helping to draft that with the team under Honorable Duffy, is that it actually touches on all these. And I think the best thing about that strategy is that it's not really new. There's not a lot new in it. It's a series of really important ideas and thoughtful ideas that everyone is agreed upon forever. The difference is we're doing it. And we've been empowered by the leadership with resources and a commitment to actually structurally embed as much of that stuff as we can in the directives and the requirements and the processes that underpin how we operate. So for me, if I can go ahead and leave whenever I leave at the end of this and we see all that stuff embedded in statute and in policies and directives, I think we've gone a long way towards making sure that we're moving out towards a better future. Judging by their flavor, I'm pretty sure that 30-year shelf-stable standard also applies to MREs based on my experience.

Delicious. I loved your answer. Arthur Herman, former School of War guest, and then this kind of war, which is one of my favorite books, is one of the really favorite books of Mike Gallagher. We did a great episode with him actually on the book. Senator Sullivan as well. Oh, really? Yeah. Yeah.

Yeah. That makes sense. A couple more questions. You're being very generous with your time because you obviously have an extremely important gig. I'm honored to be on the show. I'm psyched. It's an order to have you, man. In terms of taking equity stakes in some of these companies, this is a distinctive approach of the Trump administration. I'm not sure it's totally novel. Maybe you'll tell me that there's some, there's precedent out there for it, but certainly

the scale at which is occurring is novel. Obvious advantages to the companies in some cases, in the sense they've got an influx of capital, potential advantages to the government. To what extent, to the extent this intersects with your work and the kinds of projects that you have visibility on, what is the case for this kind of approach? Because we're seeing a lot of it now. I think it's a great question and something that we spend a lot of time discussing and making the case for, which is under the president's directive, we're working to make sure that where we facilitate companies, we're buying cap-backs, physical equipment as part of programs. We're securing an equity stake for a couple reasons. One, first of all, we think we can pay back the taxpayer over time with that.

and that's important, right? So this company, if they succeed in their endeavor after we give them a grant, let's say there's no equity, they're going to make a lot of money and the taxpayer doesn't get paid back. If there's a grant and they lose, then they lose money and we've lost, we're out the same amount of money is no difference. But if we secure an equity stake, then if the company succeeds, then we succeed as well and we can pay back the taxpayer, and we think that's a reasonable a position to be. The second is all government investment in spending is distortive no matter what. If I give a grant to a company for $100 million, that's going to distort, their position relative to, say, newcomers. One of the things that's fundamentally true is that there is a cost of capital in the market. So if I'm a newbie, and I want to come into the sector, I have to go ahead and borrow money to make equipment. If you go ahead and look at all of the new entrants, new primes, whatever you want to call them, they all have invested, they've spent an incredible amount of time pulling an investment from the private sector. So that comes at a cost. Either comes at an interest rate on a loan or it comes at a percentage of ownership in terms of equity and shares. And therefore, if I give money to a company that's in the defense sector

and don't impose a cost of capital, the companies that are newbies are actually at a disadvantage. And so if you think about it, what we're trying to do is actually level the playing field with the companies that have traditionally received grants and make sure that they're operating each with a cost of capital. And it's not entirely equivalent, but it gets closer when you do it this way so that the new entrants have a more level playing field. And we think that's fair and it's better for them. We've been trying to get new entrance in for a long time. They've finally come in, all these PEVC companies have come in with incredible talent, products, lots of capabilities, and lots of capital. And we want them in the sector, so we want them to succeed. And so this is another

tool for us to go ahead and make sure that we can support them for the future. And the last part of this is this may not be a tool that's equivalent for every problem or appropriate for every problem. We can have a robust debate about that. But there are many places where markets have failed. And I'll say like these minerals markets have failed us as a result of the mercantiless behavior of our number one strategic competitor. And for us, I think this is an opportunity for us to go out and reestablish models and invest in ways that drive change, catalyze investment, make a signal to the market that this company, these capabilities are important. And we're hopeful of that is a set of, that is one of a set of tools we have to go ahead and change the behavior of those markets.

So they're operating more in consonants with our national security requirements. This is a real question in the sense that sometimes I ask questions on the show and I have a strong theory of the case of the answer. In this question, I really don't. I really don't know where to take this or how I would answer it if the tables were turned. But on current trend, the Department of War is assembling quite a portfolio. And I wonder about the challenges of managing that portfolio over the long term, how it gets managed. Are there different portfolio manages, excuse me, portfolio managers. Excuse me, portfolio managers. across the enterprise, how does one deal with the tension between sort of financial incentives and financial needs of the department and the taxpayers ultimately versus obviously what ought to be the primary goal, which is preparing to fight and win the nation's wars and the security of the nation? I don't know. It just seems like a whole complicated thicket of issues, which will not suddenly expire, you know, when the next administration comes along one day. like this is signing up for some long-term stuff.

And unless, you know, the next gang is just going to decide to sell everything, like this is a whole new kind of world that the Pentagon has embarked on. And I don't know how one thinks about the long-term management of this stuff. So it's a great question, a great point, which is that we need to have a strong governance process for this. And I think we've talked about that early on, which is that there needs to be a framework in which we're doing this. And that clearly articulates why we're doing this, what the business case is, that the focus on the outcome, it's not on the financial returns, and that we're not overly indexing on the mechanics of the deal as opposed to the outcome from a, again, from the mineral standpoint,

which is, am I going to go ahead and secure improved access domestically to this critical material, which is an input to the economy? And as a result, therefore, my companies that support the warfighter have better, cheaper, more reliable, however that you want to frame it, access to that material. That's critically important, and that underpins everything that we're doing. The management of the portfolio is something that we're working on. There's a framework in place. We're talking about these things constantly. The office that I'm in is involved with these transactions from a funding standpoint and from the long-term management. And I'm more focused on the long-term implementation of the funding to make sure we achieve the warfighters ends. That is,

as I invest money in a company, and we partner with them to achieve capacity advances, how are they delivering? Are they hitting the milestones? Is there anything we can do to help them? And then critically, How do I make sure that the warfighter is impacted? The other folks in the ecosystem of buyers, whoever that might be, in the Army, Navy, Air Force, Marine Corps, Space Force, whether that's folks in the labs, whether that's folks in the agencies or our industrial partners, our goal is to make sure they know we're making these investments and that it's transparent, and then it's clear that they have access to these companies and their capabilities, and then ultimately our investment should make their lives easier. Because that's really ultimately what it's all about. We don't own anything in industrial-based policy. I truly don't. We have 500 amazing people.

Our whole reason for existence is to solve other people's problems. And so that allows us to go off and work very freely. And my goal is to have the most collaborative office in the history of the Pentagon. I truly want to help partner invest wherever we can, where we can provide the most impact for the system. Michael Cadenasi, Assistant Secretary of War for Industrial Base Policy, I truly think if people really understood the stakes here, they would recognize that your portfolio,

not in the financial sense, but in the sense of what you do day to day, is arguably the most important portfolio in the Pentagon maybe in the government. So I thank you for the energy and commitment you're putting into this. It's incredibly important. And thank you for coming on the show, man.

Thanks, Aaron. We're trying. Pleasure. This episode of School of War is also presented by Strato Launch, a leading pure play hypersonics company. hypersonic weapons systems travel five times faster than the speed of sound, making them difficult to predict, track, and defeat. America's advantage in hypersonics depends on delivering testing, targets, data, and systems at pace. Stratolunch is built for that mission. Stratelunch's reusable and autonomous Talon A testbed exceeds Mach 5 speeds,

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