YouSaid · the spoken record

Darren Farber

lines on the record: 83
first: 2025-04-01
most recent: 2025-04-01
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“On the professional side, there are two people. So one is my former boss at the Pentagon, Paul Brinkley, and I mean, he was Doge Part 1, this guy. He just wanted to modernize his place and he didn't care about how much China he broke in order to improve it. And there are very few people like that in a bureaucracy. He accumulated energy off of it. And he wrote a book about it. It was published by Wiley a number of years ago. And then also Tom Pritzker, who really put me in business. I'd never bought a company before when I left the Pentagon. I don't have an MBA. I never worked at a private equity firm. I never worked as an investor in any kind of capacity. So here's a guy sitting across from you going, okay, you're smart. You can figure out business. He's like, we'll help you along. And if it wasn't for meeting him in that environment that he creates, and they're really builders of companies, they've incubated so many businesses, you have to have someone to believe in you before you embark on it. And so I can tell you when I started asking people for money, many people did not believe it. It's that they have someone.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Level of energy investment that's going into it. I view my job as being a good steward of capital for the inputs into a lot of these systems and that we can continue to leverage the capitalistic system to make good returns and to create continuity of supply for the system.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“My entire experience is an acquisition. I don't come from the policy and planning world. I don't come from strategy and plans. And there are people in the building that's been their life thinking about these things. I come to it with the merchant's nose of like, what do you need in order to prosecute the mission? I think about it in terms of the long-term impact to our business. But what's amazing is how wrong the capabilities we impute into an adversary. Look, no one thought the result of the Ukrainian contingency would be this. No one. I forget who attributed the quote, but it says something to the effect of surprise attacks are so common they shouldn't be a surprise. It's kind of like man makes plans in God laughs. So I feel like there's so much probability distribution in the way a lot of this happens. And the best insurance policy to wrap around all this is technological superiority. And that's why I'm so happy to see that.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“The march of technology as inevitable. And so we're going to have to go back to the physics of it and how we govern it. Like the molecule, that's why these things around it will have to be so important and controlled. Because if the substrates exist in the system, there'll be enough technology in order to build a capability.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“The worst is the march of technology puts more and more power and fewer and fewer people's hands. There are a lot of stories of we run these nuclear drills and then the missileer won't turn the key or something like that. There's a human. And so technology is removing people in a lot of these steps. And then it's also putting these capabilities and things that were exclusively the provenance of nation states. And now it's like it could be a company of hundred people. And so There is a very credible path towards something extremely dangerous happening and it kicks off a chain reaction that brings us to the precipice. Why are some nations that have resources, nuclear and some others not? So ultimately, if you have enough smart people and you have resources, you get the capability. So I really worry about something like that. And I almost view something like that to a certain extent.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Because the human temptation, war is a human endeavor. And by the way, I should say, I trust the United States, a democracy to be more measured than any other end user of something. And my hope is that we pull away in that creates the new opportunity for Dayton, because I think in an alternative scenario, it would be a lot more dangerous.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“My greatest hope is that their symmetry and the development of these technologies that functionally make them moot for adversaries and us to use is that we end up in a new form of Cold War. So it's an arms race. It's mutually assured destruction. I think the amazing thing about the Ukrainian contingency is Putin has threatened nuclear activity how many times and he hasn't used it. And so I say to myself, wow, he has this arsenal of nuclear capability and he is not prepared to cross it. Even though he almost went through a coup, which Bellingcat accurately predicted, my hope is that if we can develop symmetrical capabilities over time, and if one person pulls out too far ahead, then there will be this enormous temptation to flex. And so that's the challenge in a race to the future is you just can't be second. You just can't. You just can't allow.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Just the ability to pump in an end goal for something to go prosecute it is kind of spectacular. I view it very similar to the paradigm of when we're going to let the Waymos drive us 100% kind of thing. Like there's going to be this push and pull of who's going to grab the yoke on all these activities. And I think something that doesn't have well-defined joint doctrine is actually going to do much better with AI because they're more likely to just give it over to them. Just tell me what to do. As opposed to us where we have well-defined protocol and paradigms and we're not going to give over the steering wheel as easily. That's harder. The fighter pilot union, if you will, is going to fight pretty hard about what they do or don't give up. But I wouldn't give up on human ingenuity to hack a system to screw up a system, to trick a system. I'm not saying we should exclusively rely on that. We should have every kind of capability.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, look at the contingency in the Ukraine. They wouldn't dream of criticizing Elon because what's their network? It's Starlink. Starlink is the unsung hero of the Ukrainian contingency. For whatever you think about the proprietor, that contingency would have been lost already without Starlink. And that's a hardened network that they can't crack. It's all their comms. It's all of their ability to navigate all of these different new UASs. At its simplest form, it's just the ability for all these things to what we would call C4ISR or C5 ISR. It's this command to control of these connected things. And we've designed everything to be connected. And I think the next iteration is going to be these things actually have to be autonomous and have to have inertial navigation and these other things that assuming it's flying in the dark, it's not connected to GPS. It's not connected to something else in the ground. It's not connected to a mesh network. It's going to have to have its own situational awareness individually when”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's just really everything connected for the purposes of situational awareness. So the drone knows what the ship and the soldier is doing. Everyone has full situational awareness of all of these connected devices. Most expensive war game in U.S. history showed that if you knock out the network, everything turns into nothing. I think it was called MCO2. And the actor they had on the opposite side was the retired flag officer who's like, I'm just going to knock out the network and I'm going to win this war game. I'm going to use smoke signals and I'm going to use all these things. And this guy just won the war game over and over and over again because his goal is I just knock out the network. And so in a network denied environment, think about how important connectivity is for all of these systems and how dumb some of them may become in the absence of connectivity. And so get ready. The network denial will be the first fulcrum of a full scale near pure war.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“It was running out And so I was like, okay, that's very interesting to me. There's no other source of pink diamonds. What is the cost of trying to find another resource of pink diamonds? Well, forget it. It's impossibly expensive. And that's the way I think about all these businesses is can we own a very important business to a market? And can I expand the moat by reinvesting in the enterprise?”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Hundred thousand rounds, and they just stop the test because they ran out of ammo. And so if you can make a series of investments where you can ultimately become the sole source supplier in the activity, then you can actually deliver a better value proposition to the government and you can have a wonderful annuity like business. So pink diamonds, why was I even talking about pink diamonds? Well, the only source of pink diamonds.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“I still remain the chairman of the largest manufacturer of firearm accessories to Western militaries based here in the United States. Wonderful business. That business can produce 100,000 magazines for military weapons a day. Its scale is so enormous. So by us reinvesting in the enterprise and taking market share and defending its patents worldwide all over Europe, all these historical European vendors that would push their products into the U.S. Defense Department, we've taken all that market share from them. And what have we done? We've lowered the price point. So we went from 60% market share to 90% market share. And we verticalized the business. We're the largest consumer of a certain kind of nylon in the United States for that business now. And what we were able to deliver to the Department of Western Allies is this wonderful, very capable product where the previous generation product would jam after 3,000 rounds. Ours went for three.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“My top of the mountain is to be as close to the molecule as possible. There may be new molecules, but the reality is it's usually engineering. It's usually engineering downstream. And so if I can be close to the molecule and have some value-added engineering around it, especially if I'm in the front office of the department, there's tons of money that's been made in the back office in the business machine area. Tons of money. There are private equity firms that focus on that complex, that have aggregated 100 billion of AUM. It's amazing to me and that are doing the non-kinetic activities. I understand that if you view yourself as an asset gather, you won't do anything that will infringe on your ability to gather assets. And so there was a whole host of pension plans and endowments and all these things all over the world, especially in Europe, that will not give you money if you make anything that ultimately kills someone. But we've never been confused about the front office for the back office, and I want to be as close to the front office as possible because the back office at some point.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“That purchase looked like an LBO from nineteen seventy five. It looked like American greetings LBO. It's like very little equity put up relative to the total quantum of leverage. So, I think it's really recognizing replacement cost, how important it is to a downstream system, how we train and equip the forces, right? How important is it to the projection of force? And my goal is I want to be a supplier to everyone. We own a set of businesses right now where Andrew's a customer, Northrop's a customer. I want to get as close to the physics that won't change. That way I'm not choosing size. I'm not making a value judgment on the future because it's hard to change the physics.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“That. But that's actually a huge benefit to us because look, the world is dangerous. We know something like that will happen. And we don't model it in, but we tell ourselves we're getting an option value in here that we know exists. But you can't logically price it. And so seller can expect you to pay for it. But you know if you have duration, no, world's pretty dangerous place. Seems like every couple of years something happens. You're going to get paid for that as well. And so that coupled with things like commercial off the shelf, we made sure when we bought that business, we started selling commercially. To what? To commercial space launch, to next generation suppliers. What happened there? Ultimately, the value was recognized. And we sold it probably too early. We always sell too early is my refrain. You're going to do really well owning a one-of-one business that costs 20 times your purchase price to replace. That can, by the way, hold nearly infinite less.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“One of one suppliers to the department by virtue of who the customer is. And so our analysis of the factory is there's no alternative. There are ways for us to improve it. Technologically, the business is unbelievable. It's a national asset because of the quality of what it produces. If the Pentagon's own number was between 2 and 2.5 billion, so I'm saying to myself, I can buy it for a very small fraction of that value. It is guaranteed to make money as an annuity. It can hold an enormous quantum of leverage because it's a tenure set of taker pay contracts. Getting paid no matter what. And oh, by the way, there's an embedded option value in this in that if all of a sudden it gets more dangerous, consumption goes way up. You can't build a financial model that has a toggle in it called war. Base case, upside, war. No one does.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“And the department's like, yeah, we're going to move this factory to the Utah desert. And so, our view is we want to own the defense annuities, but when we analyzed the factory and the cost to replace that, we said, oh, it's $2 billion. That was our number. Now, there's a group in Pentagon that does this for a living, cost assessment and program evaluation. This is a good use of taxpayer money, and those should not cut this because this is an analysis of our industrial capability to produce at scale, to fight contingencies globally. So there's a real thinking that happens in the Pentagon there about this thing blows up. How much do we need to invest in order to create another source of supply? And by the way, the defense establishment is litter with monopolies because the defense market is the opposite of a monopoly. It's a monopsony. It's one customer many suppliers. And so if you have one customer in a business, how much capital are you going to deploy into your factory? You're going to try and just mirror match it. So there are a lot of natural...”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“It was more complicated than maybe it could justify my existence a little bit better. So, what I want to see are structural impediments for you getting into my business. Why was I able to buy the nation's only maker missile fuel? Think about it. We're like eight people on a house plant in an office park in suburban Washington, D.C. Why do I get to buy that capability? Why does the prime buy it? Why don't they verticalize? On the cover, that business was very low growth. It didn't seem terribly interesting to someone. The margins weren't translated margins, let's just say. And so business has imputed growth of 100 basis points. It has huge contingent risk, the largest non-nuclear explosion in U.S. history was the former plant. There's a discovery channel episode on this thing, the blast through planes off the tarmac at McCarran.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Market is Jupiter, it works. I just don't know how long it works for. And if Boeing continues to get smaller and that quantum of profit gets more and more meaningful, I think it's going to be harder.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Two and a half times the margin. Tell me how that works. And so look, at some point you kick the bear long enough or you pick the elephant's food off long enough and the paradigm will change. And so what's that number? Is it five billion of EBITDA? I don't know, but you're seeing competitors already. And so that quantum of profit is also attracting competitors into the system. And that's meaningful. And so when you make that much money for that long and look, Loren Public obviously in a pretty spectacular way that used to sit inside of jail to private equity firm. And so it went up public at about 130 some odd million of EBITDA and it trades at 50 times because there's a general expectation that off of a smaller basis, it's easier to run the Transylvan playbook over again and just I think it's going to be harder at a certain size. But when you're Pluto in the”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Would be amazing for them. You're not going to requalify that thing. It's craziness. So I just think there's a limit to how big you can do that. And look, the institutional shareholders in the primes, like the Boeings of the World and the T-Rows that own Boeing and stuff like that, or capital or whoever, they're going to management at these primes and going, you guys do all the design. And these guys make”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“then it's going to incentivize a verticalization in certain areas. And by the way, before Dennis Mollenberg was fired, that was his plan. He had two things. He had Boeing business services, which was to control some of the activity in the aftermarket. And then also what he called partnering for success, which was you're not going to make this margin on me anymore, the supply chain. I'm not going to design you into the next generation. You're going to be off the list if the toilet seat goes to $800. You're not going to be in that fulcrum. I think the business model works beautifully when the downstream customer is so immense they almost don't notice the difference. I always joke the optimal business for Transdime is owning the cup holder and the joint strike fighter.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Some of their big customers hate these guys. And so that's a very tough paradigm to grow from. And actually, I think it's evidenced by the kinds of businesses that they're buying today. Like they bought Cal Spanish, which it's not really an aftermarket product. It's like a wind tunnel testing activity. Boeing and Airbus. Boeing was so big at one point, it moved 2% of GDP by itself. And so if you're the elephant walking around the jungle and there's a bunch of peanuts on your back and some birds are eating it, okay, it's fine. It's de minimis relative to my share. I think the challenge now is the law of large numbers that they're getting big enough. And think about their business. Who owns the type certificate of these aircraft? It's the designers. It's the Boeings and the Airbuses. They own the design. And so if it becomes so expensive to move through the supply.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“These are broadly diversified conglomerates, and there are things inside of both of them that I want to own, and I think highly of those management teams. The margin tells the story a lot in these businesses in that transline probably has what, a $3 billion of EBITDA, give or take right now, and it's 50% EBITDA margins, very sporty. And so when you look at it and say to yourself, good grief. How do they do this? And if you talk downstream, not to all their customers, but let's say”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Is they are taking huge bets based on their taste. They are betting that their taste is greater than the requirements process of the Pentagon. And in some cases, that's true. And in some cases, it isn't. And I would say the second there's an incentive for these primes to comport with just give me your best. Someone says, go ahead and give me your best whatever you think it is. Screw the requirement. I think they can produce enormous technological stuff. Look, Lockheed is like a top five patent owner on earth, on the whole earth. There's enormous technology in these businesses, and we have 50 years of the world's best scientists working in these businesses, and there's still a tradition of that engineering talent and capability. These guys can do a lot, man.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Some of these primes are very impressive to me. Northrop Crummanet's business is remarkably impressive, and the executives know their business. So I don't know the nations only make her a missile fuel for a number of years. It's the only maker of the intermediate chemicals too, which is actually very important. I've seen some business plans that they're going to make. I'm like, yeah, but where are you getting the derivative chemical India here? So it's like the concept falls down. It's the whole concept of Fortress America is that your self-contained. And so the counterparty sitting across from me in these negotiations knew 100% of what my margin was, knew exactly the technology. These were brutal negotiations of them managing cost because they're managed almost in a public markets way quarter to quarter and their incentive structure right now is to make sure that they are passing along costs that they bump into in the development of a program. They really can't take this multi-quarter bet without the government showing up. And what you see these next generation guys doing.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“I never say never because maybe there's someone so brilliant that's figured out how to turn apple juice into rocket fuel or something like that. There's a huge technological phase shift. But if I'm betting defense venture dollars, I'm going to the largest rounds, the largest races, the largest balance sheets, almost separate from the technology. I think the balance sheet of these businesses is so important and how big they get because they will be able to survive and then hopefully some of them will be able to thrive. That's it. There's a ballooning effect to the big firms that can write these big checks and be there to support them.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“That's part of aggregating lots of resources is becoming so important from an industrial standpoint that we got to keep it alive. And there's a lot of businesses like that that have existed for 50, 70, 5, 100 years within the country that support the department. So you can see those guys win and the ones that aren't well capitalized irrespective of their technology won't survive because it's not about making one new widget. It's about making millions of widgets at scale. And so I see what Andrew's doing. I'm like, okay, I think they're thinking about this correctly. You've aggregated these resources. You must build the industrial capacity. Because when push comes to shove, it's going to be the ability to produce X number of whatever. At scale.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“In the venture side is that if you were to draw it as a tree diagram, it's like we were talking about a large institutional LP that we both know. And I thought, I bet they have more GP relationships in defense venture than they actually have defense venture investments because they're all flowing back into the same deals. And so I actually believe that to be true. It seems like the capital aggregators, the ones that are getting the enormous capital will probably be able to live out any design or economic cycle here to be able to ultimately come out the other end and be okay. And so I think resources really matters. And I think that's what you see happen in these valuations is that accumulating more resources is a form of industrial power. I don't think it's surprise that after Andrew's latest raise, they announced a million square foot facility. They're building industrial capacity.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Have to change the paradigm of the way we've done it in the past. And we can do that. We've changed it before. We'll change it again.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Of it is so much of this is history of the way we've set up the rotation of how we train people. All of these things come from good places, by the way. I should say that there are very intelligent and motivated people in the armed services, and everyone goes into that building wanting to do the right thing. And so this came from the concept of a well-rounded leader is going to do a lot of jobs. Think about it in a corporation. Okay, you can do finance, you can do operations, you know, be in marketing. You're going to understand the enterprise that you manage. And so in a limited life, can't leave someone in the gig for eight years or 10 years or something like that. But in these engineering disciplines and where the hybrid of science and engineering is extremely important to build technological superiority, it's clear we need more responsible parties in the nuclear navy shows it. It absolutely shows it. So I think we're going to have to recognize that our only chance is technological superiority.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes. And the Senate and Scoop Jackson said, no, you're going to make him an ad roll. Now you're going to make him a two star. You make him a three star, you make him a four star. And so the institution fought back tooth and nail to stop this, but that's a wonderful gift he gave the Navy to create. We've never had an incident in our nuclear navy running reactors that move with tons of kinetic stuff around it all over the world. It's an amazing statement of we have to create responsible parties. These billets have to be responsible for the delivery of the program. If we take someone and say, you're responsible for drones ten year job, well, I think we'll see some major change. And so if it's a way station along the way, then the current system will crowd out ability for these new businesses to be successful.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“To own what and how responsible they are. And that's because what we call ripto and the transfer of authority, you're typically in a job for 24 months when you wear a uniform. You don't get to see the fruition. The guy that started on Joint Strike Fighter didn't deliver Joint Strike Fighter. We've gone through a slew of flag officers. And so Admiral Rickover, who invented the nuclear navy, this is a guy from World War II and is the longest serving flag officer in American military history, served until his late 70s or even his 80s and never wore a uniform, by the way, was total iconoclast, is that he's like, we have to have a responsible party. So the job is going to be eight years for the guy running the nuclear navy. We don't have that anywhere else in the service. And by the way, the Navy declined to promote this guy over and over again.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“To say you're wrong and my taste is better than your requirement. By the way, I don't view that as necessarily a bad setup. I think this is a whole separate line of a conversation, this concept of a responsible party. And we have that in the nuclear navy. And we should talk about that. But the net net is in terms of capital allocation, the manner in which the market behaves and the fact that we have these pre-existing capabilities that we're still connected to is going to require a major change in acquisition, a major change in requirement activity. And I believe the big change that should happen should be quote unquote, the responsible party. Who gets to own all the fame and the blame for an activity in order of move it forward and to loop it back to the first part of your question? So I think there'll be lots of pain in the investing side of it where the revenues won't show up until we do wholesale reform of who gets.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Appropriations in it. And that's my damn. I'm like, whoa, whoa, whoa. These programs are accounted for. It goes on this multi-year contract or this or this or this. And so to grab market share takes much longer than a conventional market. And I think the investors in this ecosystem have to understand that. You're not going to take over a market in 24 months unless it's fundamentally a brand new requirement and we haven't run the competition yet. So that's where I think these next generation defense businesses are uniquely set up because if the requirement's new, there's no incumbency advantage. You don't have to dislodge an existing program. It's not gerrymandered into a district. All these kinds of things. So if it's fundamentally new and novel, then there's a much greater opportunity, obviously. But if it's trying to display something existing and the Pentagon's built the requirement, they're saying this is what I need. Well, it's going to be an enormous capital lift for someone to spend investment.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Is not built 3G styled and zero-based budgeting. We look at the previous requirements for the year. We look at these different colors of money that Congress appropriates to the Pentagon. So in a synthetic attempt to control the way the Pentagon spends, we give it types of money, operations and maintenance, research, development, and technological evaluation. For many years there was something called GWAT, Global War on Terror Money, Commander's Emergency Response Program, which Dave Petreus was very important in creating a form of money that allowed him a more permissive environment for a theater of war. He co-authored a manual called Money as a Weapon System, how they would use it in a theater. So those colors of money drive to dictate spending to a certain extent. And so when you set up the budget, it's largely allocated. You know who's going to get the money. It's not like people look at the last year's NDAA and say 858 billion without any Black Ops or special.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“You would call next generation defense. I think it's going to be very challenging. And I worry about that too. I worry about capital leaving the system. I'm old enough, 99, 2000 is not an ancient memory for me. And so the technologies that came out of that push were absolutely meritorious. And the capital structure for a lot of these businesses didn't work. I think at the limit, maybe a global crossing or something like that. But global crossing built was so important and we still use it every day. the recognition by capital markets that this was extremely important and that it would fundamentally change our life was right it was a good directional view it was a very bad weighing machine in terms of rate of return of capital how much needed to be deployed how much you would get back there was a lot of carnage on the back end of that so i worry about that in these next generation defense rounds because you have to understand how the budget is built the budget”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, the fact that there's this interest going back to that conversation with the Chinese industrialists, oh no, no, we're going to this thing. Well, I remember no one wanted to go into this. I remember protests in Mountain View at Google's campus that they shouldn't be doing work for the Department of Defense. And I feel like that is wholesale gone.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think when you're clearly outmatched, you're going to revert to this form of insurgent behavior where you can embed in the population if they want to take over the population and not kill the population. We're going to need to move to some hybrid of old and new. Look, the Israelis have tons of technology. And don't get me wrong, the drones and the technology were very important. I don't know if you saw the Sinwar video of that drone just hovering super important. Tanks and bulldozers and troops and gods that were pretty damn important too. And so I just think the phase of the warfare will ultimately lead to using some old stuff at some point. I just don't think it'll kick off in the same way anymore.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Here comes the old stock. We're going to need some of the old stuff. We're not thinking much about the Gaza contingency as a place to learn stuff. There's tons of stuff to learn of what's happening there. One is how to hide from a vastly superior force is clearly go subterranean. There's a whole tactic there. And the other thing is some of”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Accurate. I think it could be accurate and fall down. I actually think it's a false choice. So in the opening skirmish of the drone swarms fighting each other, okay, one drone swarm wins. Let's just say the casualties are 75%. What's next? Do you want to kill everyone in that theater of operation? Should everyone be dead, or do you need to take it over? The second you need to take over an environment with people? Well,”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Lots of technological capability. You have to remember before the wall fell, two-thirds of the world scientists worked in defense. Everyone was working on these problems. Jim Simon's a renaissance worked at the Institute for Defense Analysis, which is around the corner from the Pentagon. So it was actually pretty difficult to have a huge preponderance of scientists working in these technology capabilities. Wall comes down, last supper at the Pentagon merging all these defense businesses. And it's no coincidence that you get an internet revolution on the back end of this, a biotech revolution on the back end of this, because we let loose this technical ability all over the country and really all over the world. And so now there's a little bit of, we're going to suck some of this capability back in here, and it's going to manifest itself in some new businesses, which is wonderful. But I think the lesson learned is going forward, it's going to be a combination of old and new.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“But they didn't work because the nature of that theater was evolving so fast. And of course, now the fact that Ukrainian drone is this little printed thing that they do themselves and they're running the software and they just need to shape charge and they're printing it. I think what it shows is that when you're on the leading or bleeding edge, the franchise isn't that secure, even if you're the first there or even if you've done something new and novel. And that's the analog to deep seek is that I think that was a shot across the bow. Hey, maybe there's a different way to do this thing is that new technologies, the phase shift or the sigmoid curve can be really, really quick in a war. It can be much faster than a commercial environment. And so we're seeing that too. I also think that it's a love letter to some of the old stuff. And these missile systems get cooperatively upgraded. It's not like the Patriot missile from 91 is not the Patriot Missile of today, and we've cooperatively upgraded it with the manufacturers a hundred times. So I think there's.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Of the Russians talking to each other on the battlefield is they have American stuff down there. Be careful. They have the American stuff. And the Taiwanese just got a delivery of Himars, which is our mobile rocket launching system. And so ATACM goes inside of it. Gimmlers goes inside of it. And these are medium and long range ground-to-air or surface-to-surface medium-range missile systems. These things work, man. I get it. They're expensive. Let's get some more mass into it so we can drive the cost down. Let's sell a whole bunch of more to everyone that wants them. Run out the production. Let's create a series of incentives for these primes with these industrial bases to blow up production. They'll respond to the incentives. You just change the incentives. I think that's part of it. I think two, I see this parallel to deep seek and what's happened there in the Ukrainian contingency. There's a lot of new fangled drones that we introduced into those theaters that were completely unsuccessful. And they were coming from next generation companies.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“That war is always a combination of old and new. John's clearly right in that token, and that I think the Ukrainian contingency is a love letter to the American defense industrial base. For all of its faults, when we make something, it works well. I mentioned to you some of those, I'm going to be in the Baltics in about two weeks. And I know what those meetings are going to be. Get me more javelins. Can you get me more javelins? And every time I sit down, how come I can't get more javelins? So javelins and an anti-tank missile at the end of the fire, forget, anti-tank missile. And how do the Baltics want it so badly? Because they have this vision of Russian TU tanks storming across their border and taking positive control in places like Lithuania and Latvia and Estonia in particular really feel that sensation. And so for them, it's given me javelins. The transcripts that have been captured in signal intelligence”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the question is what's left? As it gets hotter and hotter, and could the political structure be co-opted with a combination of a carrot and a stick? And that branch of thinking seems to be gaining more popularity. It may not even be shot fired. It may be Hong Kong-esque. They've agreed we're a separate system. It's no problem. And then it's a slow degradation of whatever system that was previously there. And so it ultimately comports with Beijing.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't think in terms of binary outcomes, obviously there's the one outcome where it's some combination of a false flag activity. It's saying, oh, Taiwan through an inadvertent exercise sunk a frigate of ours, and we're bringing in a cooperative peacekeeping force to ensure that this doesn't get out of hand. And then surreptitiously take over the government or something like that. I think they're much more inclined for an activity like this where it's ambiguous as to what's happening. I think that really works in their favor. I think something that's just overt command to control war wouldn't be in keeping with their strategy. I mean, they could do that probability distribution as well. I don't think it's as likely. And then there's one theory that's gaining more traction is that the Taiwanese government can be co-opted successfully. And so a bullet doesn't need to be fired. A lot of Taiwanese have second passports and places to go.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“They can liquefy the island and they can roll in after the nuclear fallout, and they can figure it out. But if they want to take it over and the Taiwanese are prepared to fight, I think it's a perfect setup for insurgency. We spent 20 years getting ground down with enormous military capability against a completely underfunded insurgency. And so if the population is prepared, how are you going to separate someone that's for the PRC from someone that isn't in Taiwan? Forget it. And if the population supports the activity, I think you could see something very interesting. Obviously, supply lines would become a big challenge and there's a ring that you can create around the island over time or starve it out.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source
“Small groups, exactly how the Taliban ground us down, hiding in plain sight. And that terrain, by the way, is just as hard. It's very mountainous, it's very lush. So if the Chinese are committed to killing everyone on the island, well, then something to defend.”
2025-04-01 · Invest Like the Best · Darren Farber - The Business of Defense - [Invest Like the Best, EP.417] · IDENTIFIED FROM THE TRANSCRIPT · source