BEAM ME DOWN SCOTTY

“Game changer” is a buzz word thrown around far too often these days. Yet those are the words that came to mind when I read a recent Wall Street Journal article. “Elon Musk’s revolutionary Starship aims to reach Mars, but it may sooner redraw the map of earth by fundamentally changing the geography of war.”

While SpaceX is known for its Starlink satellite network and catching skyscraper size rocket boosters with giant robotic chopsticks, using the Starship heavy rocket to launch and store military equipment into orbit was more than a novel concept. Imagine troops being able to call down what they need, anywhere in the world and at incredible speed. A shipment from the stars would never be more than 1 hour away at any point on the globe. With reusable rockets, the cost of sending equipment to space has plummeted. While it was once $10,000 per kg, it is now about $700. Musk predicts it will be a paltry $10, thereby completely changing the space economy and making this sci-fi theory closer to reality than ever before.

This is the new paradigm in which we find ourselves. A paradigm where more technological change has happened in the past 24 months, than in the previous three decades. Innovation is moving at hypersonic speed (quite literally) and the western world must undergo a re-tooling of every aspect of space and defense technology.

THROWING FERRARIS AT FRISBEES

In February of 2022, Russia and Ukraine began a war that has forever changed the dynamics of warfare and brough into light the shortcomings of legacy systems at work in the modern era. Sophisticated air defense systems began firing multimillion dollar missiles to shoot down swarms of inexpensive suicide drones. Powered by small propeller engines, the drones can carry 200lbs of explosives, operate autonomously for hundreds of miles and cost less than $30k. The lopsided economics was captured in the quote “We can’t keep throwing Ferraris at frisbees.”

As the war dragged on well beyond people’s expectations, another challenge surfaced. Ukraine was running low on munitions. The US and its’s allies simply couldn’t manufacture them quickly enough. Supply chain bottle necks and a hollowed out industrial core revealed a serious weakness in the west’s ability to be effectively supply a prolonged hot conflict.

For decades, military dominance was measured in size, complexity, sophistication and the accompanying cost. The result was extraordinary and overwhelming capability. But the math of war and the emergence of artificial intelligence, autonomous systems, small and inexpensive air and sea drones and countless other emerging technologies, has brought to light the simple truth that we are fighting today’s wars, with yesterday’s systems.

The velocity of change in Defense Tech is flipping previous conventional thinking on its head. A new generation of founder-led companies are bringing Silicon Valley like speed and innovation into a stale and antiquated system.

Despite some preconceptions, defense spending has always been a bi-partisan affair marked by consistent increases. In 2025, the global spend on military was $2.63 trillion. According to Spherical Insights, that number could grow to $6.4 trillion by 2035. And it’s not just the U.S. who is committed to increased spending. NATO allies agreed to spending 5% of their GDP on defense which is more than double their previous commitments. These sustained tailwinds, along with extremely low correlation to other markets, are what makes this unique asset class a strong addition to a Holy Grail portfolio.

THE LAST SUPPER

In order to understand the scale of the reformation ahead of us, it would do us well to understand just how we got here. One might ask, how does the U.S. and our allies spend trillions on defense, each and every year, only to find ourselves on our heels when it comes to innovation and manufacturing. One of the main reasons we won World War II was our incredible manufacturing base. U.S. companies pivoted their operations to build the tools we need to win. Ford built B-24 bombers, jeeps, and tanks. GM produced machine guns. General Mills made food rations for soldiers. Dupont made parachutes and ropes. Major American companies were able to step up, produce at scale and with extraordinary speed.

In the 1960s, we constructed a 440-foot Liberty Ship in 4 days, 15 hours and 29 minutes. Today, we take years to build a single ship while China is producing a naval fleet at breakneck pace. They recently surpassed the U.S. as the largest Navy in the world by ship count.

Fast forward to the early ’90s, we had over 51 major defense contractors. In 1993, Deputy Secretary of Defense William Perry hosted what became known as “The Last Supper,” a Pentagon dinner that he later regretted. He told the defense industry CEOs that Cold War-era budgets were ending and the industry needed to consolidate.

Between 1993 and 2000, the number of major “prime” contractors dropped from 51 to just 5. This handful of slow-moving behemoths now has zero competition and “cost plus” contracts that incentivize the highest price possible. Cost overruns and program delays have forever plagued us since. From $10,000 toilet seats to $485 dollar hammers, the consolidation had resulted in a bloated system of bureaucracy, red tape and ridiculous procurement processes.

THE RISE OF THE NEO PRIME

Since around 2015, the pace of innovation and the manufacturing capabilities of our adversaries, has forced the U.S. and its allies to wake up to the reality of modern-day conflict. The convergence of AI breakthroughs, autonomous air and sea drones, 3D printing, hypersonic missiles, material science advances and space/satellite launch technologies, have all given rise to founder led companies that are now spearheading unprecedented change. While the traditional defense companies are still critical for their foundational roles like building fighter jets and aircraft carriers, it’s the new generation of companies, often led by brash t-shirt wearing founders, that are pressing us forward in hopes to maintain our global dominance. Here is what defines this generation of neo-prime companies…

• Software-defined architecture rather than hardware-first engineering
• Rapid iteration cycles (12–18 months from concept to production)
• Vertically integrated manufacturing using readily available commercial supply chains
• Dual-use platforms serving both military and commercial customers
• Retained IP ownership enabling commercial pricing rather than cost-plus structures

These characteristics not only apply to the physical manufacturing of machines like autonomous but also to other often overlooked segments such as cyber security, edge computing in remote parts of the battlefield, transportation, logistics, communications and energy systems.

DEAL TEAM SIX

The current Department of War has launched a team of over 200 very successful private sector businessmen and women that are tasked with negotiating and funding defense contractors. Dubbed “Deal Team Six,” a play on the highly revered Seal Team Six, they are a breath of fresh air for a Department previously plagued with decades of back scratching bureaucracy. Their goal is to modernize incentives and free up the contractors to do what they do best. The Defense Secretary has made it clear that “we’re not tolerating delays in production or cost overruns anymore.” They will let companies compete on merit and reward them with long term contracts so they will be willing to invest their own money in R&D, produce quickly and at scale. Hegseth continued “we’ve pushed out the bureaucrats who have made these deals in the past and replaced them with the most talented negotiators in the private sector.”

This new direction in tone is best illustrated by Anduril, one of the most innovative neo-prime companies and one in which we are an early-stage investor. Anduril set out to compete against the world’s largest aerospace manufacturers to build the Air Force’s first autonomous fighter jet coined “Fury.” Quite a tall order against the likes of Boeing and Lockheed Martin. In just 553 days, Fury went from an idea on a clean sheet of paper to its first flight and Anduril prevailed. About half the size of a typical fighter jet, Fury can reach altitude of 50,000 feet and reach speeds near Mach 1 (760 mph). Anduril founder Palmer Lucky, a student of history, set out to build Fury without requiring specialized manufacturing facilities or equipment. He specifically wanted to ensure that any major car manufacturer could build Fury in the event we needed rapidly scalable manufacturing. This is the thought process that will ultimately pave the way for American (and Western) dominance. While we are ahead of the rest of the world when it comes to technology and sophistication, we are dreadfully behind when it comes to manufacturing. This dynamic is slowly, but surely, shifting in favor of the “neo-prime” contractors who have the unique authorization to sell to the world’s largest customer … the U.S. Government.

In addition to what we need on the ground and in the sea, we must also control the loftiest battlefield of all … space.

Excerpted from THE HOLY GRAIL OF INVESTING. Copyright 2024 by Tony Robbins. Reprinted by permission of Simon & Schuster, an imprint of Simon & Schuster, LLC.