Steve Blank is co-creator of the Lean Startup movement and has been part of, or co-founded, eight Silicon Valley startups in fields such as semiconductors, video games, personal computers and supercomputers. In this discussion, hosts Hondo Geurts and Lauren Bedula explore the role universities play in the national security industrial base, Stanford’s Gordian Knot Center for National Security Innovation, forward-looking trends of the semiconductor market, and impacts of globalization.
Welcome to building the base. A unique discussion focused on shaping our future national security industrial base during this pivotal time in our nation’s history. for over 40 years, the nonprofit organization business executives for national security or Benz for short, has brought senior executives and best business practices from across our country together to address our nation’s most pressing security challenges. The band’s mission is more important now than ever before. BENS is embarking on a historic project gathering the best ideas and minds together to define the future industrial base that the United States will need to remain secure and prosperous for our future. And now you have the chance to be a part of it. It’s a daunting task, a task the United States has not had to do at this scale since World War Two. But it’s also a historic opportunity and opportunity to leverage new technologies, new business models, new ideas and new voices to improve our country for the decades to come. Hear from top entrepreneurs and leaders from high tech, financial, industrial and public sectors as they share their ideas and perspectives about how we can all work better together to ensure our national security and prosperity. We are excited to have you here with us here to begin today’s episode your hosts longtime bands member and leader of the band’s Technology and Innovation Council, Lauren Badulla and former chief weapons buyer and Innovator for a special operators’ sailors and marines. And now Ben’s Distinguished Fellow, Hondo Gertz.
Lauren Bedula 01:33
Welcome back to building the base Podcast. I’m Lauren Badulla. And I’m here with my co-host Hondo Geurts. We’re excited to be recording our fourth episode and have an extremely interesting guest here today with us, Steve Blank, who is a Vietnam veteran, a serial entrepreneur, and educator and author and across the board extremely passionate and influential in the national security space. So, Steve, thank you so much for joining us today.
Steve Blank 02:03
Thanks for having me, at least one out of the three things you said are probably true.
Hondo Geurts 02:07
He’s actually also a pretty good dude, hopefully, and not afraid to say, say what he what he needs to say and provoke some good thoughts here. And so, he and I have spent a lot of time over the years thinking about these hard problems and trying to make some progress at getting the organization to move at speed. And so, it’s awesome to have you here with us today. And as usual, I expect nothing other than your good friend thoughts and interesting perspectives as we take on these challenging things facing our country. Yeah. So, Steve, let’s start with your story.
Lauren Bedula 02:44
Thanks, Steve. Let’s start with your story. And, you know, everyone has an interesting story of what got them to this point where they are today. And Bedula 02:44 yours is really particularly interesting. So, could you give our listeners a sense of your journey and what brought you here today?
Steve Blank 03:03
Yeah, you know, I’ll try to make it as short as I can. You know, my parents were immigrants to the United States they got both kind of escaped the Holocaust and in World War Two came over, only survivors of their family.
Steve Blank 03:19
And I grew up in New York City, went to school for a while in Michigan, but then dropped out joined the Air Force when I was 18. I spent a year and a half in Southeast Asia and worked on electronic warfare and electronic intelligence points. As a technician, not a not a pilot and enlisted guy worked on Wild Weasels and Airforce and navy sevens, and then got stationed on a B 52. Base, and worked on that. And then after my Ford got out and eventually found my way to Silicon Valley, and there I did eight startups in 21 years, but more interesting, which I didn’t understand until decades later was my first startup was a halfway house between my military career and entrepreneurship career because the startup was run by a PhD mathematician named Bill Perry. And Bill at the time, had started the first company to use computers in National Reconnaissance and signals intelligence was company called DSL, eventually acquired by TRW. And then Bill went off in the 80s to head red and you know, the father of the second Offset Strategy with stealth semiconductors and software for ISR and, and other things. And so, I got involved in my first startup, actually, in national means a technical verification when I thought I got out of the business now I was I actually had tickets and was really in the business. But what’s really interesting for me is here I was working on systems that were national efforts that not only involved this company, but you know things basin under the sea and in other places. And I realized that, while incredibly black programs are, as some of your listeners know, incredibly, technically enticing, and, you know, you get sucked in, and it’s the most exciting thing you could do. But I was in a part of the world where like, I had roommates who were excited that they could have bet the time, make a speaker go beep, and we’re gonna make a company out. And here I am going, oh, you don’t understand what I’m working on. Like, but what they were gonna start a company.
And I realized, and back then I didn’t have a college degree that, you know, maybe at the pinnacle of my career, I might be a junior program manager and one of these things and let alone being able to run something and, and so the, the idea of being able to start something from a napkin sketch, at least for that part of my career was more of a pull the national security or the technical sophistication of the things we were working on in the midst of the Cold War when we’re throwing infinite capital at some of these sophisticated problems. And so, I did two semiconductor startups, supercomputers, enterprise software, even video games. And then retired after my eighth startup, when I got lucky enough to retire and see my kids grow up when I was 45. And then I’ve spent the last couple of decades thinking about the nature of innovation, entrepreneurship, and actually had time to reflect about my journey and others in startups. And then later, large companies, and then later in government agencies, and CO created something called the Lean Startup method, which is the way that we now recognize that new ventures are very different than existing organizations or existing companies or existing processes instead of government agencies, that we need different tools, different techniques, different whatever, and just, you know, to point to Hondo it, it wasn’t that smart people weren’t already doing this, the thing we did was gave it a language and a methodology. And then you could draw it as a picture, rather than oh, gee, it’s a set of practices, these extraordinary people do, but wasn’t repeatable. And then we basically made these innovation processes repeatable. And so
Steve Blank 07:06
I co created that, and then I started turning it into classes. First class ended up being adopted by the National Science Foundation is now called the ICORE Innovation Corps. It’s how the US government commercializes all science, it gets a SBIR grant in the US, then the NIH adopted it, and RPE adopted it. And then I taught a version inside the NSA, which became a core. And so, I began to say, which put more people through that program than the NSF. And then Pete Newell and Joe filter, and I stood up something called Hacking for defense, which is basically that same lean methodology, but this time taking problem sets from the DOD, IC. And then, at the end of 2021, Joe filter was the ex DASDI for Southeast Asia and Raj Shah, who was the first head of DIU x and I stood up a center at Stanford called the Gordian knot center for national security innovation, with the observation that said, look, for the first time ever, and we’ll get into this hopefully, in part of the talk, the DOD, now has to rely on Tiger technologies, it no longer owns commercial technologies, AI, machine learning, commercial access to space quantum, I mean, we can make the whole list the only thing that DOD still owns is maybe nukes, directed energy and hypersonics. And hopefully, at least one of them will still stay with the DOD. And yet, they didn’t have an ecosystem that knows how to actually deal with those things. Second, is we happening at Stanford to be sitting at the middle of the middle of one of those ecosystems that develop that. But happening equally interesting, we have faculty in both the Hoover Institute with Condoleezza Rice and the Freeman Spogli Institute, headed up by Mike McFaul who have great researchers who know what to think about this stuff and world class students in both engineering and policy. But what if we just did that, we would have ended up with a great another think tank that did white papers. But what we know how to do in Silicon Valley is deliver minimum viable products at speed and scale. And so, all our student classes are oriented to No, no, no. We know you could come up with a great paper, you need to deliver something at the end of this quarter, or else you fail the class. And by deliver, I mean, turn the paper into either software or a demo of hardware or a narco sub, I don’t care, but you’re gonna put something in the hands of a warfighter as a set of iterative designs. That’s a pretty radical different idea for Think Tank. And not everything turns out to be interesting or useful, but I guarantee you, they’re all interesting. So that’s kind of what I’m doing at the current time.
Hondo Geurts 09:42
Just a few small things, you know for
Steve Blank 09:47
now, but I know if you think about it, you guys have been doing it as a profession. And, you know, here I am, at the end of my career, going back to some of the things I started with early in my career. You know, it’s the same DoD but bigger and you know, the systems are more complicated. And but the but what’s really interesting and you’ve lived this and you were part of the change, and hopefully do the change is that we’ve yet to wake up that the fact that the world is no longer ours, and that the processes we built for that world are no longer relevant. And that’s the disconnect that I’m trying to get into the fight here that said, no, no, no, you’re not all idiots. But the world’s you built this for as much as you want to wish isn’t but here anymore, and we need to do different things. So that’s my background, that’s the long answer to a short question of, you know, how I got here.
Hondo Geurts 10:43
That’s awesome. Steve, you know, one of the things I spend a lot of time with, is what I call framing assumptions. And most of the time, I screwed up big, when there was a framing assumption had changed, and I didn’t catch it. IE, like we own technology, or our industrial base we had 70 years ago is still the one that you know, plus 4%, what we need now. So, you know, DOD is a big beast, biggest employer in the world, you know, giant scale, how would you suggest we start thinking, or can you think of a big bureaucracy? In a lean startup model? How would you apply that very effective model to, you know, a large collection of small problems, big problems and medium problems? So that’s what you know, if you’re out there in the audience, and you’re somewhere in a big machine, you know, what’s the first thing you know, it’s a minimal viable product to apply that model to a big bureaucracy.
Steve Blank 11:41
Yeah, I’m gonna say something. So stupidly obvious, but Blank 11:41 it will create a lot of embarrassment to your listeners, one of the core tenants of lean, one of the things I invented is this customer discovery methodology. And its fundamental tenet is pretty simple. It says, there are no facts inside the building. So, get the hell outside. And so, think about what that means. If you’re a requirements writer, and you’re writing a requirement for x, and you haven’t been living out in the field or on a deck of a carrier, or sitting in a said Boomer or something, or whatever it is, or operated that weapon, get the hell outside and do that, because and by the way, you know, make sure and when I say get outside the building, all you have on day one, here’s the Colori that when you’re thinking about what problem you’re solving, is really an untested set of hypotheses. And I use the word hypotheses at Stanford because those students are paying 50 grand a year, but outside in the DOD, they’re actually effing guesses, right? So, so most of the most of the problems you think you’re solving whether there, you know, here, here’s the adversary, here’s the weapon system, or here’s the tool. They’re built on a set of guesses. So why don’t you get outside and validate those guesses and those guesses could be everything from the features we’re delivering, or more importantly, the timeframe that this thing is needed? Because you could get it right, but not at the right time. It doesn’t matter that you deliver something 15 years Wait, the problem set has changed. So, number one, it’s not only about the user needs, it’s also trying to understand in our case, we never had for the last 25 years, we never had to worry about a set of pacing ABA certs, you know, we maybe had to worry about CODA and IEDs. And you know, Pete Newell and his predecessors at the ref, you know, we’re there but never as a national priority. Well, the other part of getting out of the building and, and I’ve been kind of harping on this, is I want all the acquisition people from the Secretary on down, so go up to the whiteboard and draw me How the heck can North Korea did generate two generations of ICBM a generation of submarine launched ballistic missiles, three medium range ballistic missiles, and a set of you know, rocket artillery with a gross national product of 30 billion a year when our new Minuteman replacement system is going to cost $100 billion, and not even be fielded to 2029. And if it’s today, that probably means 2035. So, something is broken here. So, number one is don’t even have to draw China’s system, throw me out a heck, a third rate or fourth rate country is able to actually generate this stuff from research, to development, to acquisition to deployment, and compare. And literally, as you do that, I want all of you to stand up in front of assume you’re in front of Congress, draw that diagram for me, and now draw ours underneath and tell me not that we really need to reform PPE, but tell me what’s different here. So, number one is gotten out of the building. Right? And by the way, hiding shoe, I want you to do the same thing. Go up to the whiteboard and draw me How does Silicon Valley actually deploy things in 18 months, not just social media but we actually have built something called SpaceX and other things that actually have real hardware? Or how do we build wafer fab equipment, manufacturing machines that make semiconductor. And these things are the size of rooms? So how do we do that? Within 18-month cycles? And tell me how venture capital and private equity make money? And don’t tell me about six months, six to 6364 monies? Tell me how these other folks do it? And then draw your process? And then tell me what’s broken here. Does that make sense at all? I mean,
Hondo Geurts 15:31
yeah, I think, you know, I’ve spoken often, Steve, even in previous podcasts, but, you know, two great traits to have three great traits, right, curiosity, humility, and boldness. And you know, before you can be bold, you actually need to be curious to figure out what’s actually going on and be humble enough to learn before you before you supersede with your ideas. So, I think, I think those are all great ideas. You know, a lot of folks didn’t think so calm speed is purely because of less regulation, or all that kind of thing. Most of it’s because of relationships, and you do things in parallel, you discover and field almost simultaneously, you don’t, you know, go through large transactional processes, were used get disconnected between the buyer and end user.
Steve Blank 16:20
But Blank 16:20 what I think is going on, though, right now on though is, is that these organizations need to do DoD are starting to hear they need to do something different. And to be honest, they’re throwing stuff at the wall. What I just suggested, really is no, no, no, no dancing, go up to the whiteboard, and I will embarrass you until you’re able to do that. And you’re gonna, then when I force you to do that, you will force your staff to do that. And once you force your staff to do that, you’re going to realize that we have built a system and we have people that actually have no knowledge of how the system we need to emulate actually works. And senior leadership is going to look around and say, well, wait a minute, we’ve just appointed the same people, but he would have appointed 10 years ago, well, that world no longer exists. I mean, my line is that DOD has, and I really mean this world class people and world class organization. Unfortunately, it’s for a world that no longer exists. Yet, we don’t have the people from the world that does exist in places of authority. And if we did, we would kind of understand, oh, we not only need to think differently, we need to operate a different speed, different culture that you know, different rules. And we will ask Congress for the authorities, we need not try to shoehorn stuff into the ones we have, this is not going to happen with kind of like a PBE committee saying, maybe we’ll machine it around the edges. This is going to happen when, you know, reform. You know, this reform happens for the DoD three different ways. It either happens internally, rarely, but it happens. It happens through presidential directives when Roosevelt stood up the precursor of the Joint Chiefs and in 44, or Eisenhower reorganized and 58. Or more importantly, when Congress reorganizes, the DoD National Security Act of 47, or more importantly, relevant for us the Goldwater Nichols act, and it was a DD five, it might be that this is serious enough and crosses so many lines, right? Because it’s a zero-sum game with the existing primes, there is no way some private is going to tell their well shareholders, hey, you know what, we’re really not going to get 100% of what we’ve been getting before. Why don’t we go quietly in the night, there’s no effing way they’re going to do that the primes are probably more interested in the China and making sure we don’t do these reforms. And I say this not just to be clear, it’s not that we don’t need primes. Of course, we do. They know how to do things that no startup or scale up will learn in the next couple of decades. But at the same time, startups could do things that Prime’s can’t do, simply because they’re paying baseball salaries, this star salaries to people with AI degrees and machine learning degrees and whatever. And of course, it’s not like, Gee, the people you pay the most money to are always the smartest, but boy, I’d probably been on the, you know, on the team with that has the higher payroll. Yep, they went all the contracts. So, so there is kind of a reconfiguration that needs to go on here. Which never needed to happen when we were competing with either the Soviet Union who had their version of our bureaucratic mess, or non-nation states, but that’s not who was pacing us anymore. So anyway, that’s, I’m just telling you everything. I think your audience already knows. This idea that in fact, the technologies we need are no longer in the DL DS purview. One and two is are adversaries, not Just China, others are showing us that the system we have in place, just fundamentally is broken from top to bottom.
Lauren Bedula 20:09
So, Steve, I think you’ve done a great job defining what we really see as the national security threat landscape of today. And I think that there is a sense of urgency now. And understanding that this is a problem, right? We can’t just depend on the primes, there needs to be collaboration or really a shift in the industrial base to respond or maintain our position in the world. And there’s also a sense from some that this is new collaboration between DOD and Silicon Valley, but your history really suggests otherwise, right and experience. So wanted to see if you can comment about that shift. And what you saw early in your career and what you’re seeing today? And is the pendulum shift shifting back towards that historical collaboration?
Steve Blank 20:54
Sure, and that’s a great question, because I knew none of this history. I mean, obviously, I had a career in EW and UNT and, you know, national means a technical verification, but I didn’t understand its history. And nor did I understand the history of commercial technology universities in the DOD. And, and here’s the, here’s the short version, then, if anybody’s interested in the longer version, on my blog is a tab called The Secret History of Silicon Valley. And basically, the shorthand is Silicon Valley was started by the DOD, and the intelligence community. And what happened is in World War Two, for the first time, the US government decided by the work of one individual vetiver Bush, who went to Roosevelt and said, look, this war is going to be won by technology, not just traditional weapons. And of course, the service chiefs said, well, that might be true, but we have these great weapons labs, and we’ll, we’ll take it from here. And he said, no, I’ve had experience in World War One trying to give you guys’ advanced technology. He was doing work for the Navy, and that didn’t work. And he said, no, we should have civilians, building advanced weapon systems, you could imagine what the service chief said, said to that. And in fact, Roosevelt agreed. And so we basically short version stood up something called the voice red Office of Science and Research and Development, and basically funded it with $150 million, who equivalent of about five to $10 billion today, and stood up 19 divisions that gave us radar, electronic warfare, basically, the precursor, the NIH rocketry out of JPL, and started a small physics project, which actually spun out because it became so large, that had its result over ever shown, Hiroshima and Nagasaki began the Manhattan Project. But these 19 groups were set up in universities run by civilians, including if you remember the Manhattan Project, working on military programs, and they develop not just prototypes, but basically ended up they were the ones who picked the vendors to make these systems at scale. Turns out the Stanford professor Fred Therman, was responsible for building electronic warfare electronic intelligence at Harvard, quietly in a cover organization, called the Harvard radio research lab that basically put 24,000 jammers on every bomber over Europe, you know, within the span of nine months, copied a lot of what the British did in their tree organization. But this was multiplied, like, you know, 19 separate groups, what happened when the war ended, and the Cold War kicked up over Korea, is that all this all this civilian military collaboration scaled up once again, and during the Cold War in the 50s, and 60s, every US research university, every one of them, had a major weapon systems program, inside the civilian research universities duplicating what we did in World War Two. So that military civil collaboration I I’m familiar with a Stanford one, but it was going on at Stanford and MIT at University of Michigan, University of Wisconsin, Georgia Tech, I mean, you’d go through the list of the best research universities, and they were all specializing in one particular area. Stanford’s happened to be electronic warfare and electronic intelligence, microwaves and electronics, and that one professor at Stanford happened to do something different than any other professor who was working on military work. And that is he turned Stanford into an outward facing University. He told those professors working on and that was grad students working on military equipment, something heretical, he said, why don’t you take what you’re doing in our lab and start companies? In the 50s? That was insane. No, no professor told you to do that, how you get your PhD, nor go to work for not start your own. And so, Fred Therman, basically, and there was no venture capital. So, he said, I didn’t I’ll introduce you to some of the prime contractors to us and to everybody else who was thinking about how to put traveling wave tubes and radar inside of fighter planes. For the first time, how to put jammers on big bombers and whatever, and basically started that innovation culture in Silicon Valley that ended in 1968, and 69. With the Vietnam War, there were riots at MIT and Wisconsin, and certainly at Stanford, to through classified research off the university campuses, and broke that broke that bond between the DOD and the academia and to the commercial world still continued. But oh, that moves more into the black world as the commercial innovation activity started to dominate, that.
Steve Blank 25:38
That intersection crossed again, post 911, when people understood that there was value in working with the military, and we were attacked, and let’s collaborate. And then that was broken again, when Snowden revelations came out, and the DOD, probably, I couldn’t have devised a worse script, if China had given it to us, basically put their head in the sand and let other people capture that narrative, rather than saying we were trying to avoid another 911. Or saying, we can’t confirm or deny, but wouldn’t you like to work for an organization that could do this stuff, we ran the other way. In the last 10 years, though, or nine years, it’s, it’s slowly come back. And that certainly in the universities I talked to, students are understanding what’s happened at Tibet, and to the Uyghurs, and to Hong Kong, and now to the Ukraine. And so, there’s huge interest in a way I haven’t seen since 911, in students understanding that national security is the reason we get to sleep peacefully in our beds. And that other people, you know, other people serve and die for the rest of us. That’s starting to percolate. And that there is a difference between a democracy and a dystopian nightmare that that could happen, again, being practiced on the Uyghurs if you know, if you want to see what social media can do on the, on the dark side, you know, there’s, there’s active programs that going on. So that’s the long story of, of the University collaboration.
Hondo Geurts 27:14
Yeah, I want to applaud you for bringing that history back. Because I think you know, everybody to kind of get a, you know, history file that starts at some time, they sometimes don’t realize the history that came before him. And you’re, you know, I would say, you’re hacking for defense program, which you guys are doing a Gordian knot, and you just being out there is really started to forge back that, you know, you can help your country and it’s okay, and it’s kind of cool. And there’s hard problems. And, you know, one thing the DOD has plenty of is really hard, complex problems. How do you How should the department, I mean, we kind of have this fear of revolving door and actually like a revolving door, because you start, you can’t get respect, if there’s not knowledge. And folks don’t understand both sides of the equation. You know, we’ve done it, I would say, you know, one, Z, two z’s, and maybe your Ichor is a good start, what’s, how do we scale this, breaking down these kinds of perceived barriers, and really leveraging the full talent base that’s available to the country. And in making these problems, the Duty has more transparent for folks to you know, wade into and bring their talents to bear?
Steve Blank 28:33
You know, on those are great questions. And we could spend the just the hour just on that, but let me start with the last one. You know, the DOD has world class problems. And, and it’s very funny, you know, if you’re in a building with no windows, and you see some of those problems that are classified, and then you read them in the Washington Post, you kind of go, but Blank 28:33 I understand okay, but Blank 28:33 we do a very bad job of providing a central location of scrub problems, or proxy problems that we could allocate to university. So, guess why we had to create our own pereton at BMT stood up the common mission project to actually work with the DoD Nic, get the problems in, and then allocate them out hacking for defenses in 60 Plus universities. And so, they correlate along with the national security innovation network. But, but again, it’s a nonprofit, we set up to do this, you would think that DOD would by now say, hey, maybe we ought to actually do this at scale. So that’s number one is that and of course we’re so you know, we’re so security minded. We managed to tie ourselves in knots and we won’t look that’s another but that’s a maybe a subset, it’s probably worth going there is obviously to get a security clearance and at least a TSS CI we know what a nightmare that is to get people cleared in any reasonable amount of time. Now, the irony is if somebody wants to accelerate a clearance, we know it could get done in 90 days, right? And we know that could happen. But in fact, no most stuff takes, you know, a year, a year or more. I mean, it’s just insane. So, we need to figure out, what type of risks are we willing to take to accelerate getting the workforce engaged. The third part is, and this one, you know, there have been lots of papers and lots of great stuff on it, our personnel system just needs to catch up to the fact that there is domain x. And this goes back to, you know, Washington Crossing the Delaware with, you know, with cannons, rather than guys who know how to row. I mean, we got the wrong people assigned to the boat.
Steve Blank 30:39
We, we still, were doing that now. 300 years later, we still haven’t figured out how to match talent with interest with whatever to no not only get the right people on task, but to retain the right people. So big idea, right? I mean, you saw this and when services, you know, it’s why I left is like, no, I don’t want to do this. I’m really interested in this. I could have probably spent my 20 in if somebody would have said, well, you’re really good at that. Why don’t we like have you work on this some more? That wasn’t in the as they said, not in the service’s needs? Well, okay, so I was no longer in the service, you know, thank God constrained, conscription only lasted and a finite number of years. So, the whole personnel system, which by the way, people acknowledge this, but it’s another one of like, hey, guys, you know, we should probably figure out how to have different tracks, different interests, and also different tours. One of the things you seen when you were running, acquisition at SOCOM and your other roles, is that sometimes the tours are actually too short when you’re running an organization is you’re just about up to speed putting your fingerprint on it when, okay, my two or three years are up. Well, what the heck is I mean, like, wait a minute, you know, you know, Rickover, like, it’s probably a good motto, I’m sure a lot of people go, oh, no, we’ll never do that again. But there was value having somebody who had continuity, that actually did take an act of Congress to also get rid of, but oh it’s why we had a nuclear power program that didn’t whiplash or thrash as the next guy came in. And here’s the other problem. And this is around innovation. And Pete Newell, and I’ve been beating this drum, you know, we have doctrine and every service, which basically is our best practices, of how do we go to war with the training we have the equipment we have in the people we have. And so, whether people read it or not, there’s doctrine for NATO and the army for fires and for sustainment and for intelligence, and whatever, here’s what we’re supposed to do. And the doctrine goes all the way from theory all the way to infinite practice on TVs, and ADPs. And whatever. I set that up as there’s absolutely no doctrine for innovation. That is a you know, everybody who comes in and creates a new innovation program, and agency X or Y leaves, and the next guy or woman comes in and says, well, that wasn’t my idea, and then close it out. And in fact, that that, you know, the Rapid Equipping Force was one example that Jake is another example. The most visible one was, you know, Ash Carter’s gravestone, which is called diu, which was a brilliant observation about how to connect Silicon Valley to end by saying, Silicon Valley, I mean, all the innovation clusters to the DoD started in January 2015, abandoned in place by the next sec, Depp’s who didn’t understand what he was thinking, guess who adopted it, you know, adopted diu, in the fall of 2015, China, that’s the year they set up civil military fusion, they took a look at diu and have now spent the last seven years actually implementing it. We’ve spent the last seven years strong arming commercial technology, outside of the DL D. You know, the line in Silicon Valley is the way you become a millionaire, supplying the DoD is you start by becoming a billionaire, because you’re gonna lose a ton of money before someone will buy something from you. So anyway, I die even forgot what your question was, I think it was about personnel and training.
Hondo Geurts 34:06
What are you seeing, I guess, Steve, since you get the view of the talent coming in? Yes, I have, I am perceiving that that there is interest in counting, you know, talent coming in to help the country you know, drive back that integration we had, as you said episodically. I think Ukraine maybe is accelerated, that they’re recognizing you can’t, you can’t just separate national security and prosperity. So, I think the big idea we need to capture we need to figure out how to leverage that and not lose it for another decade.
Lauren Bedula 34:41
Can I pile on Stephen say, you mentioned the Gordian knot center? So, I’m curious, too. You talked about the role universities play in stimulating this talent. So, if with Honda’s question, you could also talk about your vision for the Gordian knot center and anything that surprised you so far.
Steve Blank 34:58
Well, you know, let me tidy a couple of these pieces together. When we started hacking for defense, my goal and I started with Pete Newell, who used to run the Rapid Equipping Force and Joe filter, who was the daddy for Southeast Asia, is the Senior Military Fellow at let Stanford. You know, it always My view was I wanted students to get an understanding of what’s at stake and national security. That was, you know, like, that was it, you know, I wasn’t recruiting, I wasn’t whatever. And I wanted some of the national security folks who were sponsoring some of these problems to understand what was possible and innovate at speed. That was if what I didn’t understand is what happened. What happened, at least at Stanford is, on average, we have a 60, post class connect rate of the students who continue to work with their DOD and IC sponsors. In fact, for the last three years, it’s 100%. And they, they’re still working on the problems, whether as a contractor, and a couple of them have joined the services. And that was the last thing that I would have happened. And that wasn’t the intent, which just proved to me that once the DoD actually exposes not only the tough problems, but what’s at stake, and students get to see, no, these are just not, you know, people who shoot rifles and whatever. I mean, these are people who are thoughtful, who are trying to solve some serious problems. And it’s why we have the rest of our democracy and, and this is why we get to go drink and party at Stanford because that because there were other people who were doing something else. The Gordian knot Senator came from, you know, once we started hacking for defense, Joe and I and Rasha started brainstorming about the impact that commercial technology and whether the DoD actually understood it. And so, we stood up a class called technology, innovation and modern war. And we had a whole bunch of speakers general Raman and General Mattis and Ash Carter, and, and then we started again, technology, innovation, and this time great power competition. And we realized that no one had started articulating about why this was strategically important. And so, as I said, that’s what the Center was founded around is like, hey, guys, over here, we ought to pay attention to this is not like one company trying to do this, or G F works, or navel x being great, or software, it’s been great on figuring out how to use OTAs and beat the system. It’s not that those are wrong, but they were trying to tell us a much bigger story. The much bigger story is everybody is trying to hack a system that no longer works. Every service has some rapid capability office to kind of, you know, go around the existing system, or people paint the project black and hack the system that way. I mean, right? Every smart acquisition guy could tell you the way or woman could tell you the way to hack the system, without anybody looking all the way up and saying, well, why is the system broken? Oh, there’s more stuff. That’s no longer there’s more.
Hondo Geurts 38:04
Passing on the main highway?
Steve Blank 38:06
Well, that’s the big idea. But no one had articulated that of like, as I said, my job is to be mastered the obvious. And the obvious. If that’s the case, why don’t we just step back and admit that the system we have in place is not going to be fixed by putting a patch on the tire, and that’s gone flat?
Hondo Geurts 38:26
So Geurts 38:26 Steve, speaking of Master of the obvious, your background in semiconductors, right, we, we, over the last two to three decades of you know, seemingly completely lost our organic micro electronics kind of industry? What’s your sense of where that sector is going? And, and microelectronics what’s the right balance of bringing that back? I mean, I can’t imagine, you know, a system where we outsource all that completely and create huge vulnerabilities to use, how do you see that? That kind of market coming back? You know, again, too many, it was obvious. We were losing capability every year, but seemingly doing nothing about it. How do we look at that now?
Steve Blank 39:16
So, you know, what seems simple is actually even more complicated than it seems on the surface. I mean, you know, number one, all the way back to the top is that semiconductors chips are now used in everything they’re used in your iPhone or Android phone. But more importantly, every weapon system we build, including advanced rifles, you know, have some chip in them, right? So, so if you think about it, silicon is kind of like oil was for the 20th century, the economies and the militaries run on them. Alright, so let’s just start there. Well, remember the wars we fought over oil and Kuwait and Iraq? Well, because they were important. That’s where we’re kind of at. And so now you kind of ask, well, where’s the oil? Have a 21st century where is it made? Well, turns out that while the design that is figuring out what should go into chip can happen anywhere, anywhere, and there are lots of companies that design chips, they’re called fabulous semiconductor companies. But think of this as the as the factory that makes the chips. The most advanced factories. Oh, where are they? Are they in Chicago? Are they in Silicon Valley? No, they’re in Taiwan. They’re in where they’re in Taiwan. There’s a company called TSMC. That Taiwan semiconductor manufacturing company that started out as kind of a small little company and now makes the most vanship. Well, where’s the second largest factory that makes chips for other people? Is that in Silicon Valley, or New York or Chicago? Oh, no, that’s in South Korea. That’s Samsung. Okay, how does that work? Well, who else is making the chips in factories? Well, China has decided this is important. And so, there are more fabs being built. These factories are called fabs or fabrication facility. They’re being built in China, and their biggest one is called the SMI C. And they make chips now known for their consumer devices. But for companies like Huawei, and also for their ICBMs, and their aircraft, and known whatever, oops, well, when where did these guys buy the equipment that goes in these factories? Oh, that’s kind of good news. There are three American companies, and one Japanese company and one company from the Netherlands of five companies that make the machines, Applied Materials, Kla, Lam, sml, that makes the small optical things that puts the pattern on the chips, and Tokyo electron and Japan. So now we kind of got this kind of global mess of we’re all interconnected, which by the way, when globalization was a great idea, and we were had an interest in China, if they just became commercial, they would be democratic, and our friends, this was a great idea. All right, and now all of a sudden, we’re essentially decoupling. China understands that they need to have their own national security industrial base. And we realize we’re worse off than China, because China has reminded us that Taiwan isn’t the country, that it’s a province. But in fact, the most valuable asset Taiwan has now is not its people, but its semiconductor fabs, because of China takes those fabs, the Western world will be set back five to 10 years, even if they even if they don’t seize them, move them, they simply destroy them. They have tabs, and we have few, we have Intel, which makes chips for itself. And we have micron which makes memory, but there are very few fabs in the United States that can match what TSMC has, did I make a complicated thing more complicated? Or?
Hondo Geurts 42:52
No, I mean, it just, it’s just one of those, you know, framing assumptions, like chips, always be there, don’t worry about it, that you know, you don’t pay attention to a will Geurts 42:52 erode from you. So, Steve, you know, you and I have known each other for a long time. When and I’m gonna go back to one of your earlier comments about curiosity. And, you know, you’re one that you’re by far one of the smartest guys I know. And you’re by far one of the most curious people I know who doesn’t come believing they know all the answers when they come to the conversation. Can you just kind of share from your experience life experiences for you know, those coming up through the ranks? You know, how did how do you kind of, was there something that tripped you or is it or mentor you had or I mean, some of it’s just think how were brought up but how has that served you well through your you know, incredible career, again, for a guy who started eight companies and done about everything you can think of doing, you get in a room with four operators, and you’re, you’re back to being you know, low man on the totem pole, and just telling me rolling up your sleeves. How, you know, what, what advice would you give to folks along those lines, especially those coming up through the ranks, but even some old dogs like as
Steve Blank 44:07
so, you know, one of the things is, I taught my kids, and I’ll talk about me for a second, but I taught my kids is when you don’t know something, even though you’re afraid of being stupid. Raise your hand and ask all the time. I mean, just dinner, and I’ll still do this. Now I’ll hear a word I don’t understand. Well, what does that mean? And by the way, when a civilian walks into the DOD, that’s every other sentence.
Steve Blank 44:36
Well, that’s a five-day conversation. I mean, just start asking. And by the way, same with the DoD folks going out to civilian world now, which is, well, women, you know, how do VCs make money? How does that work? You know, what? How do you guys actually ship things so fast? So, number two, though, is to ask questions implicitly. You have to be curious. And if you don’t have curious acidly, it’s okay, but get the hell out of my way you’re on the execution standard. And it doesn’t mean you’re wrong or bad. But so, the people who are innovators are the people who are always curious about not only how things work, but why do they work that way? And the conversations we’ve been talking about so the DOD and the processes we have people believe that the PBE was written, you know, on so the tablet somewhere that Moses brought down, or at least, you know, the pharaohs Drew and the pyramids for the org chart, it maybe goes back almost that far to McNamara. And they know, and then that means 61, and two, but so just assuming that because we have a process, it’s the process. I know, this is what why you succeeded is no, no innovators go human beings made these rules. Yeah, you know, and we could go to jail, then let’s go change the rule. Let’s go to Congress, or let’s explain why we need different rules for different circumstances. I remember by in my short career in the military, I was always asking questions, and people were saying, that’s not for your paygrade, or that’s classified. Military. But actually, that’s why I ended up doing I have to tell you, that you’ll appreciate this and some of your audience. You know, the rule in the military is you never volunteer for anything. I volunteered for everything, everything. And yeah, half the time I was doing with train duty or peeling potatoes. But man, I got a couple of assignments where people went, you didn’t we were flying on watts here. Now he’s not an aircraft you get over there. Because I rose garden raise my hand and my whole career, I learned that 80% was showing up. When other people were just going off, and volunteering and being curious and sticking my nose in places that people go, Well, that’s not your job. Well, I don’t care. God didn’t write that job spec. You know, like, so. So, number one, I guess I would say to folks coming up, you know, if you’re not curious, ask yourself, why is it because you’ve been beaten down or you know, or you’re just simply not curious. And if you’re not, then then this will be an uncomfortable spot for you. The second thing is, and again, this was kind of learned, and you can learn how to do this. But this is differentiating folks who survive in combat. And the equivalent thing is, if you can operate in chaos and uncertainty, then you’re going to be comfortable with innovation and entrepreneurship, and figuring out how to redesign a system. If you’re confident and comfortable in process, and repeatable stuff, then you’re going to end up driving process. And there are few people who are just comfortable with uncertainty. But you could train yourself for operating and uncertainty because what you try to do when you’re in that world, is to look for patterns that do exist. And that is a skill that can be trained, is look for the patterns and the signals and the noise. So, I’ve been in an analyst, what are you looking for, but you’re doing that constantly. And when combined with curiosity, and when combined with a fact that human beings made some rules are there some other rules that might be more optimum, then in fact, you can move the world forward or your organization forward, and you’re going to be running into uncomfortable situations, because 99% of the world are people who are comfortable with status quo and execution. And that’s why most people come to work and want to do their job. Put the world moves forward, and the DOD and militaries when, when the unconventional thinkers actually start at the edge and move in. And you know, the one we used to quote all the time was Boyd, right, we loop him and the rest, then AI is gonna give us new OODA Loops and whatever. But so, those were unconventional thoughts that eventually became mainstream then. And if you look at how history happens, that’s, that’s what happened. So that’s my long answer to your question.
Hondo Geurts 48:51
Yeah, I think, you know, as we wrap up today’s session, you know, I go back to the three traits of folks that really move the needle. And its curiosity, humility, and then boldness to act. And, and certainly, Steve, you’ve done all three, and you continue to do all three, on behalf of the country. So, thanks for your time with us today. Thanks for all you’re doing. And thanks for continuing to make us all uncomfortable at the pace removing but trying to be a part of the solution, not just admiring the problem. And for that we’re all grateful.
Steve Blank 49:25
Thanks for having me, guys. Really appreciate it.
Lauren Bedula 49:27
Thanks so much, Steve, some great ideas here. And I think we should look into hosting a brainstorming session, maybe get you out or go out to you and get some of the folks together to walk through this. So, thank you so much. And I think you really painted a clear picture of the national security threat landscape that is really stimulating this sense of urgency, but also had some productive ideas about how we can strengthen collaboration. And most importantly, it’s just sharing this with future talent. And I think the work you’re doing at Stanford is really important. So, thanks so much, Dave.
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