Why Laser Beams Are the Hottest New Tech in Defense

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1:40Hello, Odd Lods listeners. I'm Joe Weisenthal. And I'm Tracy Alloway. We're the hosts of the Odd Lods podcast, and we've got something exciting for you. That's right. So one of the best parts of hosting our podcast is we get to actually meet and interact with our listeners. And we know we have some listeners over in Los Angeles. That's right. So if you're in L.A., we're going to be recording a live show, some live recordings at the Vermont Theater in Hollywood on September 17th.

2:11We have some really exciting guests lined up, have some really great conversations planned. So go ahead and get your tickets. You can find those over at Bloomberg.com forward slash Odd Lods or click the link below in the show notes and come and say hi when you're there. Bloomberg Audio Studios, podcasts, radio, news.

Introducing Wayne Sanders

2:45Hello and welcome to another episode of the Odd Lods podcast. I'm Tracy Alloway. And I'm Joe Weisenthal. Joe, I got to get something out of the way immediately up top of this episode. You know, normally you and I talk for a couple minutes and then I introduce the guest. Yes. I'm just going to introduce the guest right away and say today we are speaking with Colonel Sanders. I actually I have some sympathy for this issue of people with famous military names because my dad was in the Air Force and his first name is Tom.

3:15Can you guess what the highest rank was that he actually achieved in the Air Force? Oh, major. Yep. And he always claimed he was underpromoted because people found it funny to have Major Tom in the Air Force. Of course, you have to ask the question of whether he was overpromoted to get to Major Tom. I bet he never thought that story, but it's just as plausible. That's right. OK, so we'll have to ask our guest whether he was overpromoted to colonel or underpromoted to a brigadier general. But we're going to be speaking with Wayne Sanders. He's the senior defense research analyst over at Bloomberg Intelligence.

3:48And we're going to be talking about laser beams and microwave weapons. Great. I don't know anything about laser beams or microwave weapons. This is all going to be new to me. I have seen in sci-fi movies that, you know, in theory, you could shoot a laser. Pew, pew, pew. But, like, I don't know if that's a real thing or if that's just, like, a sort of cinematized version of what a visual weapon could be like. I have no idea. But evidently it is real-ish because there is research on laser weapons and energy weapons and so on.

4:19But I don't know anything about how this works. So two things I learned in the course of preparing for this conversation. So, number one, both these things fall under the umbrella of directed energy weapons, which sounds—directed energy sounds like something my yoga instructor would say if I had a yoga instructor, which I don't. But at the same time, people have been talking about these forever. They've been in development for literally decades now. And I think the big question is whether or not we're hitting a moment when they might actually become reality. So we know, for instance, that Israel is getting ready to deploy its Iron Beam project.

4:56I think there's some discussion of whether it should be called Laser Dome instead of Iron Beam, which is kind of funny. But at the same time, we know that the U.S.'s ballistic missile supply has been dwindling because, you know, it doesn't really make a lot of sense to use, like, weapons that cost millions of dollars to shoot down thousands of drones that are made out of styrofoam and plywood in some cases. Yeah, it's clearly a lot of anxiety about just the sheer number of munitions in any context, et cetera. We've been—obviously, the world is exhausting a lot.

5:27You read a lot of stories. If we could replace a bunch of it with lasers, maybe that could be a solution. It's interesting to think, you know, I sort of put this in a category of certain, like, core science technologies that have been the next big thing for a long time. You probably remember—what was it called? Like, nanotech. Remember when, like, nanotech was going to be? I don't know what's going on with nanotech robots. Another one is quantum computing. There does seem to be a lot of progress, but also when I talk to someone in quantum computer, it still seems like we got a ways to go, et cetera.

6:02And so the way you describe this sort of high-energy weaponry, I'm curious whether it's one of these things that definitely works in theory and ambiguously works in practice. Yeah, so we're going to try to disentangle all of those themes. There's also a really interesting supply chain attached to some of these weapons, obviously. So I'm happy to say we do, in fact, have the perfect guest. We're going to be speaking with Wayne Sanders. As I said, he's the senior defense research analyst at Bloomberg Intelligence and formerly a colonel in the U.S. Army.

6:33So, Wayne, thank you so much for coming on All Thoughts. Thanks so much for having me. It's great to be here. Why don't you give us the, I guess, quick overview of your military career? Because you come to us not just with, you know, analytical bona fides, but with some actual operational expertise. No, thank you again. So I graduated from West Point in 2002. I went military intelligence. So I had a background in tactical intelligence early on, and then obviously the war kicked off. I transitioned over to signals intelligence, where I spent a lot of time looking at computer network exploitation was the next best thing that was out there, right?

7:10So signals intelligence, where you're looking at cell phones and other pieces, quickly transitioned into the computer side of the house. I then ended up at the National Security Agency for quite a while with U.S. Cyber Command. And I transitioned over to becoming an offensive cyberspace operations officer, what's known as a 17 Alpha, where I got to spend the rest of my career working on very hard problems for the U.S. military to gain and maintain access to adversary networks. And then, when called upon, deliver those capabilities. My last job in the Army was I was the chief of staff for the Undersecretary of Defense for Research and Engineering, Honorable Heidi Hsu, where I got to spend a lot of time on critical technology areas specifically being developed out.

7:50So that's really where I got a chance to geek out and look at what some of the next research and development areas are in these weapon systems. And that kind of translated right over into coming over to Bloomberg Intelligence, where I work on the defense industrial base, emerging technologies, weapon systems, and who are the companies and the trends that are out there for global funding as well. That was amazing. That was perfect. And I'm extremely riveted and excited about this conversation. Talk to us a little bit about your remit here and, like, the main sort of gist of the work that you do at Bloomberg Intelligence.

The Defense Ecosystem

8:22Yeah, absolutely. One of the areas that we were really, that Bloomberg was really looking forward to moving forward with was going a step further in the aerospace and defense industry area, not just the primes, not just looking specifically at the companies, but looking at the ecosystem as a whole. So not just, OK, we're looking at Lockheed Martin and the Pac-3 interceptors and where some of those margins are, but also then looking at the air defense market as a whole, looking at, as you mentioned earlier, in terms of laser dome versus golden dome. Or, you know, when you start looking at those pieces, it's OK, there's something called integrated air and missile defense.

8:57There's an entire program. There is a big difference between an exquisite munition interceptor like a Pac-3, and there's much difference between that and a high-energy laser that's going to shoot a potential drone or a ballistic missile out of the sky. So when you put all those pieces together, what does the air defense market look like? What does hypersonics look like? What does semiconductors, as part of a supply chain, concern for the defense industrial base? Shipbuilding, you name it. These are some of the areas that we cover down on and be able to focus on everything from budgets, components, supply chain, regional components, really look at the U.S. allies, if you will, adversary considerations that are driving where those markets may be going, and then what's next in the queue.

9:42So when you look at air defense, a lot of the stuff up until now, a lot of the direct energy stuff we're going to talk about today is some of those futures piece. Where is it in the R&D line for research and development, and then where is it going, and when are we transitioning into procurement?

Defining Directed Energy Weapons

9:56All right.

Defining Directed Energy Weapons

9:57So before we talk about the role of directed energy in, I guess, the military-industrial complex and defensive strategy more broadly, let's start really, really simply, and let's just—can you define what this actually is? When we talk about directed energy weapons like laser beams or microwave systems, what exactly are we talking about here? Absolutely. Absolutely. You know, a lot of people call it electronic warfare. That's a name that a lot of times ends up being synonymous as well, because you look at electronic attack platforms.

10:27You are trying to take specific harnessed energy, and you are trying to use it in an offensive way to cause some type of degradation or destruction to something else. And so when you look at a laser, a laser is essentially a precision weapon. It concentrates energy into a narrow beam and typically attacks one target at a time. But when you look at high-powered microwaves, those weapons attack electronics. It's a larger beam that can potentially affect multiple systems simultaneously. So the Government Accountability Office notes that high-powered microwave weapons can generate peak powers up to, like, 100 megawatts.

11:04But comparing that number directly to continuous-wave laser kilowatt ratings is misleading because of the characteristics. They're fundamentally different. What I mean by that is a laser is a sniper rifle, and a microwave is the electronic shotgun. Think about shooting something with bird shots. Because a laser, you're trying to scale that power, and the microwave is trying to scale the effect. So that's why you're looking at drone swarms, and what can you potentially do for that? Right. So the microwave, fire the weapon or whatever, maybe we'll get in the tank, and then suddenly all the drones don't work because their electronics have been fried or something like that.

11:43And then a laser is something that could theoretically be pointed at, I don't know, a tank or something like that, and then disable it. Like, is it sort of—let's just say we're talking about the lasers. Is it what I have in mind only from having watching a movie where it's like there is a beam and then it's bad to be on the other side of the beam? That's pretty accurate. You know, when you start looking at how strong those lasers are, you are trying to direct that energy into a single point that is going to burn a hole. It's trying to degrade, right? And not so much on the tank.

12:16And it's heat. Sorry. Yeah. Just to be clear, it's that heat that's the destructive force there in the laser. Correct. It's the heat, and it's the energy that's being pushed through, right? So if you get that hot enough, you actually can burn through that material specifically for that. But when you look at it, normally you're looking at the difference between a drone swarm and potentially like a ballistic missile. Because a drone swarm perspective, you're going to want a high-powered microwave. You want something that is a wider range. You want something that's going to be able to hit multiple targets at the same time and cause them to degrade.

12:50And it may not—they're not going to blow up, but they might fall out of the sky. Something's not going to work on those. But if you're pointing a laser directly at a single ballistic missile that's coming at you, you want to be able to destroy that thing. You want to be able to knock that out of the sky at that point in time. Where does the energy for these things actually come from? Because when we talk about laser beams, by definition, that's a densely concentrated beam of energy. And I can't imagine that militaries are plugging these things into the grid, although maybe they are.

13:20Or maybe they're rolling around with like giant battery packs or something like that. But where does the energy actually come from? So the answer is yes to both of your questions, actually. And it kind of goes into some of the history of how lasers came to be and to work those out is you normally call that shore power. A lot of the technology behind lasers and all that requires a huge amount of power that's going to create that specific spot beam that you're actually trying to create. That directed beam of energy starts in these diodes, but you have to be able to then power those. There is an awful lot of power in the past that was required in order to create that level of beam that you're trying to be able to push out.

13:57You want to keep it refined small enough so that it is directed in the area that you want. So it's not going out and refracting off and hitting other targets. But you start looking at that is it's one of the reasons why back in the day, some of these lasers were the size of buildings because you required that much energy to be able to create that beam, to be able to create that pulse. And so you're seeing actually the difference really in size, weight and power. You'll hear that quite a bit when you're dealing in this type of environment is the swap characteristics, right?

14:28Size, weight and power, because obviously, if you're trying to create something that's deployable, you can't just plug it into a grid and say, OK, all right, well, because now you're static. And so it's great if you're using something for a base defense. OK, and you have you have clean enough power and everything else to be able to plug that in to be able to use. But the deployability aspect of where a lot of the militaries are going right now is I need to be able to throw something onto a truck. I need to be able to throw something onto a ship and I need to be able to plug that thing into some type of shore power so that I have the ability to have regenerative electronic capabilities to create those beams and increase.

15:05What we normally call is the difference between mass versus magazine, because at that point in time, you want to have additional shots and you want to bring down the cost per shot. And this is one of those areas where you can do that. Did you ever notice how you spend hours shopping online only to pause right before you hit buy now?

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The Physics and History of Lasers

17:59What has gotten us to this point? Yeah, no, absolutely. I think, so, first off, it really started with the physics problem. If you go back even to the 60s, right, when the laser arrived, the military immediately recognized that it had potential. And the early work seemingly, you know, it was a revolutionary idea that you could put energy onto a target and essentially do it at the speed of light. Then you have the Star Wars era where it identifies specifically where they're trying to produce extremely powerful chemical lasers. And this is where you start looking at the difference between the chemical laser problem back then required a lot of energy.

18:34It also required a very large facility because of how big these things were. So if you go back to, like, the 1990s and the 2000s, U.S. Israel had something called the tactical high-energy laser, the FEL. It demonstrated that a laser could actually destroy rockets and artillery rounds in flight. There was also something from DARPA called MIRACLE, the mid-infrared advanced chemical laser. I had to write it down because I didn't remember what it actually stood there. But it destroyed live, short-range rockets as well.

19:04But the chemical laser architecture remained really large and logistically intensive. So the program ended in 2006. I looked this up as soon as you said chemical laser because I went, what the heck is that? It says it gets its light energy directly from a chemical reaction instead of using electricity. Yes. Is that right? Yep. What kind of chemical reaction? Now I'm, like, imagining soldiers with a big, like, vat of chemicals and, like, yeah, mixing them together. And then suddenly it goes, boom, and shoots into the sky. No, not so much like that. But it normally is something in a containerized area.

19:35There's real science. If you remember that movie with Val Kilmer back in the day, being able to kind of create, there's some oxygen, iodine, laser, you know, type reaction where it's something that you can actually control. It's something that you can put inside of a mechanism and you can control it from there. Yeah. So you don't have to actually, it's not like us in chemistry class, you know, putting stuff into a beaker and then pouring it in. So it is something that's oxygen, iodine, laser has been used in the past. Also, they put this thing onto a Boeing 747 at one point in time called the YAL-1.

20:07But the problem there is, once again, you're dealing with now you have a chemical reaction that's taking place on board of a ship. And, oh, they were also, by the way, trying to do this to fly near where you think a ballistic missile launch is going to go so that you can now chase the missile and shoot this thing out of the sky. So you can fire it down from a plane. Absolutely. You know, and, well, it's risky. Yeah, I'm going to ask, like, a sort of dumb question, but that maybe it could lead us to an interesting question. Like, do we have a gun in existence that looks like something where you hold it, like it resembles outside of normal gun and fires a laser beam in a military capacity?

20:50Not in the way that you're thinking. I mean, we have some areas like, you know, there's the Helios platform that's on the USS Preble. So if you want to think of a very large ship gun that has the capability of doing that, you know, the Navy does have that. If you're looking for a handheld rifle, you know, something like a laser or phaser kind of thing that you've seen in science fiction and all that, not so much where you would actually see the directed beam. Yeah, we do have drone guns that can be used for RF and be able to push out to knock drones out of the sky, though.

21:23Well, so I figured that that laser gun that I'm imagining in my head doesn't exist. But what would be the constraints to its existing? So, OK, we can, at least currently as of 2026, what would be the main bottleneck or thing we would need to solve? I imagine the thing we would need to solve would be building an insanely dense battery or something like that. But what would be the thing we would need to solve to have the laser weapons that we see on screen?

21:55Yeah, I would say it's power generation and compression. When you start looking at what you have to be able to do, the reason why it's still existing, really, striker vehicles right now have there are a couple of platforms that are out there specifically for this with a high energy laser on there. But you're talking about 50 kilowatts of power. And so that's something that's being generated based off of the generator power that's already put on a striker vehicle. That's part of that that sure power that's in there. So that like you're talking about, whether it's batteries or whether or not it is some type of power generation mechanism is going to be required in order to create the level of beam that's necessary.

22:33If you only have a five kilowatt laser beam at that point in time, but it requires 15 or 25 kilowatts of energy in that beam to be able to knock a drone down, then at that point in time, it's not going to be effective. So you have to make sure that you are pairing the type of capabilities, the power generation that you can push out versus the threat that you're actually trying to mitigate. You know, Tracy, whenever we talk defense tech in any capacity, there's always this weird thing where we're talking about machines that kill people, right?

23:05And I'm reading, I'm on the Lockheed Martin looking at their Helios integrated weapon system. And it's going through the specs and it's like deep magazine, low cost per kill, speed of light delivery. It's like it's gear, but, you know, these are the these are the metrics. Yes. Yeah, it's creepy for sure.

Layered Air Defense and Costs

23:27So actually, one thing I wanted to ask Joe just touched on this deep magazine idea. And sometimes when you read about the potential for directed energy weapons, people talk about like, oh, they're a more cost effective tactic against things like cheap drones. So instead of firing off a pack three that costs millions of dollars, you fire off a laser beam that is, you know, renewable. You can keep firing or you send off microwave beams and keep doing that. But is comparing directed energy weapons to something like ballistic missiles, is that the right comparison?

24:03Because I also hear about things like Coyote or there's something called Vampire, which I would love to learn more about, or Skynix, like systems that can do a similar thing, but are also cheaper than ballistic missiles. Absolutely. So one of the reasons that you look for high powered microwaves, high energy laser solutions, this directed energy platform is because the cost per shot is very low. As long as you have the stream of energy necessary to be able to use it, it's great. The problem is, is that you're waiting for something that is trying to kill you to get close enough to the target so that you can hit this thing with high powered microwaves or a high energy laser to be able to knock that out.

24:43And oh, by the way, when you have adversary capabilities that are traveling at Mach 5, you're traveling at 4000 miles an hour, you probably don't want to hope that you can put this, this laser beam exactly where you want it to be in order to do that. So what you're really looking for is there's layered air defense, right? I referred to it earlier as integrated air and missile defense. And this is where it's really important because it's, it's, it's super relevant to what we're talking about right now, especially when you look at investment as well.

25:13You have to remain, you have to have exquisite missiles. You have to have your Lockheed Pac-3 interceptors. You have to have your RTX SM3s and SM6s. You cannot get rid of those because you have adversaries who have hypersonic weapons. If a hypersonic weapon is launched, you are going to want to use one of your more exquisite capabilities to make sure that you can knock that thing out of the sky and it doesn't kill your soldiers, your airmen, sailors and Marines and your guardians. You want to make sure that that doesn't take place.

25:43So the exquisite missiles are part of this conversation. But the biggest piece, like you're saying right now, is you're identifying that you can win every engagement. You can win every engagement defensively and still lose economically. And that's what we're seeing a lot in Iran right now is they're just starting to just run us out of some of these exquisite interceptors and munitions. And so the, as you mentioned with Coyote and you mentioned with Vampire and BAE has a system called APKWS, which is the advanced precision kill weapon system.

26:15Ryan Mittal has Skynix and Skyranger. These are cheaper interceptors and guns. So think of these as almost a mid-range solution for those to say, okay, I don't want to use a $4 million. Because you can see the radar systems themselves, if something is launched and coming at you, it will put together a signature. It will say, this is this type of system. It's being shot at us at this type of speed. It's going to have a boost phase, glide phase, you know, terminal phase on some of these capabilities, right?

26:47Depending on what those things are, it's important to be able to say, okay, well, based off of the threat, I want to pair it with a specific type of capability that makes sense. And so if you're being shot at, if a drone swarm is coming at you and it's the Shahid-136 is out of Iran, you don't need to shoot it down with the PAC-3 interceptor. You may be looking for that Vampire-APKWS partnership. You may want to use some of these Coyote Block 2s. You want to go and look at some of these systems and say, that's what I want to use.

27:18If it's going slow enough or you have enough of them, you may want to then partner that with a high-powered microwave to knock them down. So you don't want to give up any ground at all in terms of creation of these different capabilities. So these end up being additive. And Israel does it better than anyone. When you look at Israel, if you have an intercontinental ballistic missile threat that's coming your way, they're going to use their Arrow-2, Arrow-3 systems, which are exo-atmospheric. They're going to try and shoot this thing down as far away from you as possible based off of how serious the threat is.

27:55If it's something else that's a little bit shorter than that, they have a system called David's Sling. And David's Sling goes farther than Iron Dome. Iron Dome is that next layer that you use, and you hear about it all the time between Iran and Israel in the Twelve-Day War, as well as during Epic Fury and into the systems now, is they continue to use Iron Dome. And now they're adding in Iron Beam as well. So what it's done is it gives the commander options so that you don't always have to use your exquisite munitions.

28:26You don't have to bankrupt yourself to do it. If you have this integrated architecture that goes across all these different weapon systems for the reasons you just laid out,

Command Decisions and Targets

28:34who actually makes or owns, I guess, the kill decision? Like, who decides what deployment of all those different things actually looks like against which targets? And I imagine most of the time you're operating under, like, highly pressurized time environments, right? Yes, absolutely. And so normally it's known as the Target Execution Authority, the TEA. And that is the military does a phenomenal job at identifying this well before a conflict when you go forward. And then so depending on what type of threat that is, it's going to say you have the authorities at your level to accomplish the following things.

29:14So if you are an infantry battalion commander, you're a lieutenant colonel, and you have your soldiers out there on the battlefield, you're only going to have a certain amount of authorities. Your rules of engagement are going to stop at a specific level. But then as it goes further and further up, what they call the operational command, the operational command, so if you're looking at the Iran scenario, a lot of those have been delegated down to U.S. CENTCOM. U.S. CENTCOM, U.S. Central Command, delegates quite a bit to Fifth Fleet so that the U.S. Navy can answer those questions.

29:45So if you have a laser on board a U.S. Navy vessel as part of the George Washington or the Abraham Lincoln carrier strike group, then they will know at their level what they're allowed to do and what they're not. And that's going to be determined based off of that. So it changes. I don't want to say that it's always going to be the following. But the military knows at that point in time. They also know that they have the right to self-defense. So that is always priority number one, no matter how you're looking at it. But normally there will be a ship captain.

30:18There will be a carrier strike group, you know, admiral that will have that specific authority. And so when he sees it, right, so part of what they end up doing is they put all this stuff into the Aegis system, and they can see all of those. There will be a common operational picture. And based off of that, that admiral can make that decision. What makes a weapon system exquisite? I hear this term from time to time in these conferences, and I realize I actually don't know the answer to that. So normally it really just comes down to the sophistication and technology that is included in it.

30:50So if you're looking at an interceptor, if it is an exquisite interceptor, it means you have the top-of-the-line seeker technology that is inside the payload, inside the front of that interceptor, because you're trying to shoot a bullet down with a bullet at that point in time, right? The science that's behind that is phenomenal because you have to be able to see exactly where that threat is coming from and whether or not now you're getting into maneuverable systems as well, right? It's not just always a 100% path, I'm flying directly at you, never going to switch path.

31:24So these seekers have to be able to then not only do it, they have to identify and track, but then they also have to then do adjust to whatever changes in those paths also come. So that is an exquisite interceptor type of munition. If you have long-range precision munitions that we are firing offensively, same thing kind of applies. It has to do with how fast it goes, whether or not the tail fins maneuver these and cause it to change course as well, because now we're trying to also then avoid enemy air defense systems as well,

31:55so that we can make sure that we hit the target as well. So the payload that's on it, how fast, how big of an explosion are you trying to achieve? All of those things play into that exquisite munitions perspective. Got it. The other side is the gravity bombs. Gravity bombs are just standard GPS guided munitions, where as long as you can get over the target and you drop that, it's very, very simple maneuvering and all that. It's a lot less because you're not worried so much about the energetics behind it, and you're really just letting it hit the targets.

32:27Aren't all bombs gravity in the end? I mean, they all have to fall back to Earth eventually. Okay, anyway, to what extent do military commanders take into account economic costs when they're making these operational decisions? Like, would someone hesitate to press the button on launching a bunch of ballistic missiles because they're thinking about how much it might cost the U.S. government? And I'm thinking back to—I'm sure we've all seen Top Gun when Maverick crashes the airplane or whatever, and his commander is, like, chewing him out and saying,

32:58that's not your plane, it's not your money, it's the taxpayer's plane and the taxpayer's money. Does that factor into actual operational decisions at all? So I think the best way—you described it perfectly, and I think that that actually shows how great the military system is, is because if you are a tactical commander and you have—if you're in that situation and all that, you are going to use whatever is necessary to protect your force. It doesn't matter. You have the operational command and you have those abilities. As you get farther up the food chain, as you become those flag officers, those general officers, right,

33:35the admirals and the generals, when you start getting to those operational higher level of command decisions, they're the ones who are tied more into than national. So you have tactical, operational, strategic, and national authorities. And so as you get closer into those strategic and national authorities, that's when those leaders are the ones who start looking at that and saying, I need systems where I'm not spending $4.1 million to shoot down a $30,000 drone. But that is not something that your standard lieutenant or captain or major is dealing with at their level.

34:09Right. I would imagine, though, that they're not thinking about, oh, what is this going to cost the taxpayer? But they are still fundamentally having to think about economizing. They have a certain amount of capacity with them at any given moment, and they have to think when are they going to use their more scarce weapons that there probably does cost more, but scarce weapons. So we have this problem. Everyone's talked about it. The war in Iran, this rapid depletion of very expensive stocks.

34:39Where would we have to get to with some of the weapon systems you're talking about such that, or where are we on the path such that these technologies could meaningfully change some of the economics so that we could accomplish some of the same goals that we want while on the very abstract level saving money, but just generally speaking, solve this problem of ours of munitions depletement? Yeah, no, I think we're in the middle of it right now, because when you look at how the military is structured and how the Department of War,

35:14Department of Defense is right now pushing some of these additional, what they call the multi-year framework agreements for these munitions platforms, they're doing that because they're trying to, they're recognizing right now that it has been, I don't want to call it a failure of economies of force, but, you know, the U.S. military has focused so long on looking at the peer-type fight. So this has been a lesson learned for the military to say, hey, look, I right now, as you even mentioned, here is my arsenal. This is what I have available to me right now.

35:44And I'm getting shot at right now. I'm getting attacked by Fatah 110 ballistic missiles. I'm getting shot. I'm getting attacked by Shaheed 136 drones. And, hey, what I have at my fingertips right now are PAC-3 interceptors from the Patriot system. That's what I have. And so, therefore, that's what I'm going to use. The Navy's looking at it, and they're like, well, I've got SM-3s. I've got SM-6s. And so that's what I am using. And so what you're seeing right now is, hey, we don't want to do that.

36:15But that's been the demand signal to industry right now is that low-cost containerized munitions, those low-cost interceptors, the high-powered microwave, high-energy laser, the urgency and demand for some of these systems is because exactly what you're saying is, I want at my level, if I was sitting right now and I was still Colonel Sanders KFC, you know, sitting in, you know, and I'm working with my force, I want to have all of the solutions so that I have more options at my fingertips.

36:45I want to have more arrows in my quiver so that I can make the decision between electronic warfare, high-powered microwave, high-energy laser, guns, cheap interceptors, as well as exquisite missiles. I want to have all of those things at my fingertips. And that's what we're at right now. The thing about AI for business, it may not automatically fit the way your business works.

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Supply Chain and Critical Minerals

39:40How easy or difficult is it to actually produce these things at scale? Because a couple of familiar names kept coming up when I was researching this. Rare earths, including gallium. And this one is unfamiliar to me. Joe, do you know what itterbium is? Itterbium. Itterbium? Why terbium? I think it's itterbium. No, keep going. All right, well, both of them, as is tradition, are, you know, mostly produced by China. So it seems like if you want to ramp up production of these things, there are still,

40:12even if you agree that these are effective weapons and they're going to do a lot for defensive capabilities, scaling up production could still be a challenge. No, it absolutely is. When you look at critical minerals across, there's terbium, like you mentioned, there's dysprosium. Dysprosium is another one that a lot of people use. Military uses a lot of neodymium boron iron magnets. And the fact that I know that off the top of my head just shows how many times we've had to go over this. But, yeah, so critical minerals becomes very, very key.

40:43And so when you start looking at some of the deals that are being made by the Department of War right now is a great example of that. Right. The deal with MP materials to actually, you know, gain a piece of ground specifically inside the U.S. for domestic onshoring of these capabilities. But you're absolutely right. There are quite a few of these critical minerals that China has predominant in the world. They have, you know, sometimes 85, even 90 percent of the supply chain. So how important it is that we're using the ones that we have correctly.

41:13When China last year added 12 critical minerals that they were not going to share with the United States, you know, these are some of the key ones, like you said. And so the nice thing is that a lot of the defense primes have recognized this as a risk for quite a while. And so they've, you know, already been working towards some of these. But the bigger problem now is, is it's not these are not just critical minerals that are used for defense platforms. These are a lot of dual use capabilities with a lot of civilian and commercial needs as well.

41:43And so if you're looking at a brushless motor for a drone, that could be used for a civilian drone or it could be used for a military reaper drone or a global hawk. And and so when you start looking at those, it is a lot of decisions that have to be made by industry. By the way, I have to let listeners know who've been listening for a while. I found my tungsten cube. Thanks to Tracy. I had been missing it. And she suggested a drawer that we store stuff in that it might be in and it was there. So thank you. Turns out you can buy a terbium cube.

42:16Oh, no. No, no, no. It's it's $40 for a little 10 10 millimeter cube. I don't know. Does it look nice? It's just so. Yeah, it's just a it's just a it's just a silvery cube. I'm curious, like when, like, maybe a big picture, when like a sort of new type of like weapons regime, sort of maybe disruptive weapons tech emerges in your seat as an analyst.

Startups Versus Primes

42:43How much of this is coming from the primes and how much of this is coming from defense startups, et cetera. There's like some defense startup is like, you know, we don't have an exquisite missile system that we want to keep selling. And therefore, we are not going to fall captive to the innovators dilemma, unlike a defense prime that may not be as motivated to push on a technology that could, you know, render their existing workhorse sales to be less market competitive.

43:16What do you see in terms of market dynamics here? No, it is a great point because you're hitting on something that the D.O.W. has actually identified now and has started to push towards as well. The defense primes right now are scaling. We've already talked about the exquisite munitions. Right. And so a lot of the multi year framework agreements that have come to them has been to increase the stockpiles of things that we already have. So three interceptors going from six hundred and twenty a year to two thousand per year. Right. That is what they're pushing for. That's a three point three X increase on what they're doing.

43:47The THAAD system, the terminal high altitude air defense system. These are like twelve to fifteen million dollar per interceptor. They're they're trying to increase that four X. And then you've got the precision strike munition, which is a long range offensive system that we've used in Iran successfully. That's very strategic to a, you know, to like a China fight. That is one that's they're trying to increase by up to four X as well. So you start putting those together. That's your exquisite munitions piece. But that middle ground that I was talking about, right, where you're looking for these low cost containerized munitions, you're looking for, OK, I don't have I'm not ready to just do a high power microwave, but I don't want to use a four million dollar interceptor.

44:27There are there are there are contracts that are out right now, specifically five companies, Coaspire, Leidos, Anderol, Zone 5 and Castilian are the five contracting companies right now that the DOD has contracted with and say, I need this middle ground solution. I need tens of thousands of these. Not trying to jump, like I said, from six hundred and twenty to two thousand or ninety six to four hundred for the THAAD system. We're talking about I need thousands, tens of thousands. That's my demand signal. Let's make this happen.

44:59And so the market, these disruptors are the ones who are picking up those contracts. So the law, the short term, the primes are winning because they already have the production lines. They are able to put these contracts directly into place and they're pushing for it. But that mid grade, you know, think about three to five years, the scalability for the Anderols and the Castilians of the world to come in and grab that middle market as well is an area that the primes aren't looking to grab into too much. And they're allowing some of these tech disruptors to do it.

45:31But you're also seeing a lot of joint ventures as well across the board, not only internally to the U.S., but also our partnerships around the world. Lockheed does a great job, so does RTX, partnering with some European companies as well, Ryan Mittal being one of them, so that they can start to increase capacity overseas as well.

AI in Military Operations

45:49Can you talk a little bit more about, I guess, AI and safety issues when it comes to this kind of weaponry? Because Joe and I, we've been having a lot of conversations recently about LLMs and some recent safety incidents, including an open AI model escaping its sandbox during a test and hacking into Hugging Face, which is like bad enough. But then when you think about AI potentially in a military environment and maybe having access to a bunch of ballistic missiles or now laser beams, that seems kind of terrifying.

46:21No, absolutely. And funny enough, when I was at War College, my group did an entire thing about AI and levels of trust, because you really are looking at a lot of the stuff that you're originally seeing partnered into the Pentagon right now is things that are going to help us do our staff jobs better. Let's look at how to be able to optimize processes. How do we do a better job of tagging our capabilities so that we can track them better and so on and so forth? What it hasn't entered into very much is really when you look at identifying friend and foe leading to a command decision for a tactical strike.

46:56Those are things that are still maintained. Those are human in the loop AI problems. And so that's really where you're seeing a lot from the military side right now is I want you to help me clean up the noise. You see a lot of that on the imagery intelligence side of the house and saying, OK, I want AI to be able to look through a lot of my platforms. I want to take all the satellite imagery. I want you to help me normalize this and help me see where the change detections may be. Pickaxe Mountain would be a good example of that. Right. I'm using it as a theoretical.

47:26But, you know, let's say we wanted to focus on everything and anything that's going around Pickaxe Mountain for the nuclear Iran discussion. So I could potentially do that from an imagery perspective to say, all right, I've I've watched the videos for 12 to 16 hours and based off of it, this is what we have. And you can flag an alert. But that alert for something that's going to happen, maybe it's a dump truck driving away and that's what you told it to look for. Great. But there's still going to be a human that's looking at that. But then when that alert comes on, there's an analyst that's sitting there. There's a commander that would make a decision behind that that says, this is what I want to do about that truck that is driving away where we are not at right now.

48:05And where we are quite a ways away based off of, you know, trust models and all that, I think exactly where we should be is we are not at the point where AI is going to go. I see that truck I've been given in order to destroy it, and I am going to take that target execution authority that I mentioned earlier and just drop the bomb.

Procurement and Megawatt Goals

48:23Yeah. So when I'm looking at one of your most recent research notes on the Bloomberg terminal and you talk about the directed energy market growing two to three times from where it's at currently, which is six to eight billion dollars. And that's over the next decade. And I just want to be clear. Is that a forecast for like actual procurement or is that including R&D on the whole? Because it seems like so far, most of the money that's been spent has been on development. Absolutely. I mean, we have spent over 15 billion dollars on on the R&D up until this point, specifically to get to where we're at right now.

49:00And it it is a good news story because it is transitioning to procurement. You are starting to see that as different portions. You know, the army, like I mentioned earlier about like the striker vehicles, the 50 kilowatt laser platforms and all that. You're starting to see that start showing up inside of the multi-domain task forces. You're seeing the Navy continue to push for additional high energy laser solutions. Contracts with Epirus, one of the companies that does some high powered microwave stuff, is tied directly into both the Army and to the Marine Corps because of their capabilities to protect against drone swarms.

49:32And, you know, they've even developed something called the Leonidas H2O system, which helps, you know, disable boat motors. So when you start looking at some of the the tactical problems that you run into in the Black Sea and the Red Sea and all that for just even remote controlled fast boats, you know, trying to go after Blue Water Navy assets that cost, you know, hundreds of millions, if not billions of dollars. Having these types of capabilities are are exactly what you're looking for. So right now is some of the transition from the R&D side into the procurement market.

50:07But you are correct. There still is a lot more R&D, because if you look at the research and engineering department from from the Pentagon, they're looking for a one megawatt laser by 2030. The science continues to go. Right. It's really questions to whether or not the physics and the and the science behind can continue to support and bring down those size, weight and and power requirements necessary to be able to produce it. I have to say, and I've said this on many episodes, I do not have great intuitions for any time we're talking about units of electricity, whether it's megawatt or megawatt hours in the context of a grid.

50:48Can you give me an. When you say they're looking for a one megawatt laser, what are what is that? How should I conceptualize this? What's a metaphor that I could use to understand what that would mean? Yeah. So right now, the 50 kilowatt laser is capable of if a drone is flying at you, you should be able to knock that drone down at one time. Right. From a kilowatt perspective, when you start looking at one megawatt, you're trying to create a beam that is so strong that you can shoot down something that is flying at you at, you know, a thousand miles an hour, potentially up to four to five thousand miles an hour, as is a Mach five hypersonic weapon.

51:27And the gap between getting from 50 kilowatt to one megawatt, is that on the sort of energy side that's on the site of the laser? Is it a technology that exploits that much energy? Like what is need what needs to be solved to make that jump? Yeah, I would say it's it's almost an iterative thing right now. DARPA is looking for, you know, higher level of solutions. They're looking for almost a revolution of military affairs because they want to jump iterations or increments in terms of what that development is.

52:00But I think it's a little bit of all of those. Right. You the part of it is on the physics side of the house to be able to generate one megawatt and keep the beam where you want it to be. And but then also it's also deployability discussion. Having a one megawatt laser that is static because you need to plug it into shore power is is limited in a certain aspect. It is great for self-defense and force protection. So think about it in terms of putting it on a military base in Kuwait. You know, that would be a great opportunity to be able to do it because that is a shore power solution with a fairly unlimited magazine that's attached to it.

52:38But when you start looking at a potential peer adversary threat where you want to be able to move your forces forward and you have to, you know, have to contend with these types of missiles being shot at you, you're not. It's very difficult to carry around a generator that can produce a one megawatt capability that you then use to create these impulse beams. Just going back to Israel's iron beam or laser dome for a second, is that basically a test case for a lot of this technology and how it might be useful in a real world environment?

53:13And then if so, what are you actually looking out for in terms of its operations to prove that it's it's economically scalable or actually useful? Yeah, iron beam, iron beam is kind of leading the way, right? It's about I think if I'm not mistaken, it's about 150 kilowatts compared to our 50 kilowatts. So when you start looking at how they deploy it, how they use it, some lessons learned that come from them. I think it is an operational test bed as they are being shot at in the use operationally to say, OK, I successfully hit a Shaheed 136 drone from this distance.

53:48How far away did I shoot it? How long did it take for me to actually get that thing to stop coming at me? These are all things that a lot of partners with Israel are looking at specifically so that they can identify. All right. I need to make the following changes in my my research and development side of the house. One of the things on lasers I did we didn't even talk about a little bit is some of the the shortcomings of it, because one of the key. Right. Yeah. One of the key things that's there is atmospherics does affect how that system actually works.

54:19You know, you can't a missile doesn't care if you're shooting through fog or through rain. But it does have it. It does have a change to the components, if you will, of of how a laser beam is actually going to go out there. All right. Wayne Sanders, we're going to get kicked out of the studio soon, so we're going to have to leave it there. But thank you so much for coming on All Thoughts. Thank you for having me. It was great.

Miscalculation and Modern Warfare

54:52So, Joe, very interesting conversation. One thing that stands out to me is just that pure adversary miscalculation. Yeah. Like, it is crazy to think how much the U.S. optimized its military for similar militaries. Yeah. We're going to stock up on, like, the best technology, the most exquisite missiles and all of that. And then they find themselves fighting an adversary that is using cheap drones. And suddenly the whole balance is thrown off. This came up, I mean, just this general idea of military planning for types of warfare seems very difficult.

55:27This came up in the recent episode we did with David Fickling about tungsten. And the military concluded, well, future wars, it doesn't look like tungsten is going to be a bigger thing. And then suddenly you get wars, like the war in Ukraine, which more resemble wars in which you just needed a big heavy metal, et cetera. I have an important question. Yeah. Will you donate your tungsten cube to the military effort? We're deleting this. That's a critical mineral. If their drive truly comes and they're like, everyone bring your tungsten or something like that, you know.

56:04So I don't want to be like, sure, take the cube. Imagining all these mostly bros walking down the streets of Manhattan, lugging their tungsten cube. Handing their tungsten cube. But, no, I found that to be really interesting just in general because laser weapons does seem like one of these things that, again, we've been seeing in movies forever. You just shoot the laser beam. But thinking about the actual constraints, he mentioned, you know, these shore power systems, et cetera. Thinking about the actual constraints of firing this, like, incredibly amount of directed energy in certain environments.

56:39Then thinking about weather constraints, et cetera. It gets super interesting. Also, I'm just very jealous of the guys that can rattle off all of these. You're very good at it as well. At what? Rattling off the names of weapon systems and so forth. Oh, no. Well, I'm cheating because I have them all written down on my screen. Yeah, but still, like. No, that's, like, a very impressive skill. Trust me, I don't think about, like, coyote and vampire systems on a daily basis. Well, to even know that those were the comps that we should be asking about, I'm very impressed. Well, the one thing I'm thinking is the cost effectiveness of all of this.

57:15So one way you often see it framed is the laser beams, the microwaves are sort of like the renewable energy of the weapons world in that once you create them, you can continue firing off. It's that deep munition idea versus the sort of fossil fuel ballistic missile stockpiles that are finite. Right, right. But, as we all know, sometimes installing renewable energy systems is extremely expensive to the point where a lot of countries and cities decide not to do it.

57:45So I think we still have to see on that. No, no, no. That's totally. The scarcity moves somewhere else. It may be optimal in some conditions, it may not, but there is still this fundamental scarcity tradeoff of, okay, like, you might have lots of ability to not deplete, but then it might be much harder to install the system. Absolutely. It does not seem like there is a silver bullet, a magic bullet out there for these questions. That's a good pun, Joe. Thank you. All right. Shall we leave it there? Let's leave it there.

58:16This has been another episode of the All Thoughts Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Joe Weisenthal. You can follow me at The Stalwart. Follow our producers, Carmen Rodriguez at Carmen Armand, Dashiell Bennett at Dashbot, Kale Brooks at Kale Brooks, and Kevin Lozano at Kevin Lloyd Lozano. And for more Odd Lots content, go to Bloomberg.com slash Odd Lots. We have a daily newsletter on all of our episodes. And you can chat about all of these topics 24-7 in our Discord, discord.gg slash Odd Lots. And if you enjoy it when we do these military-industrial episodes, then please leave us a positive review on your favorite podcast platform.

58:53And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening. Thanks for listening.

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