00:51:24 · Olaf Hichwa, Ty Morse
[00:51:24] S1: It's such an important and complex relationship. There's a lot of really, really impressive, impactful work being done in that domain. If we wanna build this factory that credibly deters conflict, it needs to be profitable. It can't be like a charity item, you know. Our drones are $2,000 each. A million drones are $2,000,000,000 worth of drones. And that's just the drones. Like, what about the production, the engineers? There's a lot of stuff that goes into that. That's not like something that happens without a profitable enterprise around it. And the government really wants this too. Like, our incentives are super aligned. Right? Like, we exist to serve the American warfighter and to provide travel deterrence. And most of the people that are in the government, they they have dedicated their lives to this. Right? Like, they could get way better pay outside the government. Often, they served in the armed forces. They care so much deeply, deeply about making sure that America has credible deterrence. So the the, like, incentives are often aligned. It's just the government is a big organization. You know, it's a really, really big organization, largest employer. [00:52:39] S0: It's like the ultimate aircraft carrier. It takes Yeah. Know, 200 miles to turn.
00:52:43 · Olaf Hichwa
[00:52:43] S1: Every return. And and a lot a lot of details that go into, like, writing a company a $2,000,000,000 contract to build a million drones. Right? It's it's not, like, something that happens overnight. So that relationship, it's often, it's a lot of strategizing together. It's a lot of, like, you know, working with the customer. It's explaining the customer. Like I mentioned in the beginning, it's explaining to the customer what the warfighter needs. Explaining to the government what the warfighter needs. It's also explaining to the government how to contract, you know, a million drones and what they need to do. And these, like, very, very well meaning folks in the government, we sometimes have to explain to them, like, what we need. And and they also explain to us, like what their blockers are, what makes it hard to actually like buy these things or field these things. Like, you know, they tell us as an example, listen, marines wanna fly this drone, but they can't without crazy sign offs, very very very senior, you know, exception to policies because of spectrum regulation. So we go, great. The answer is a JF 12. That is like a approval to use the drone on any military base. And then we work, we figure out how does the JF 12 process work? Who do we need to talk to to move through that quickly? What engineering resources can we give? We start doing a bunch of testing ourselves to to make it so at the end of the day, the marine can fly the drone, and they don't have to stress about it. But it's very much a symbiotic relationship, and it's a partnership that goes very deeply. We really appreciate government partners that understand the importance of explaining the what but not the how. I think government is very good at, like... They they told us, you know, the marine can't fly can't fly the drone or we need to strike a target, you know, far away, x x kilometers far away. Those kinds of, like, high level capabilities are something great... Well described by the government, and then we work on how that's done. Like, we own the implementation, and we work best with customers that understand that really well.
00:54:59 · Ty Morse
[00:54:59] S0: You had to fast forward a couple years, and you guys do have this thing fully operational and is making a million drones a year. What does that business look like structurally versus the one that you have today?
00:55:12 · Olaf Hichwa
[00:55:12] S1: To build a million drones a year, you basically have to build a city. You have to build an entire ecosystem of components. And each little detail in that drone has a massive impact. You know, let's say you choose to use a chip in the drone and that chip is just $10. All of a sudden you have a $10,000,000 PO for just one year that you're waving around. You probably wanna do a few years of this. So there's a 30,000... $30,000,000 contract to be won for one chip in this drone. And there are hundreds of electronic components, probably thousands if you include all the SMT components in this system, you have to build a city of suppliers. I mean, lot of it should be vertical, but eventually, you know, someone's gotta sell you the sell you the raw materials probably, unless you're gonna open a mine. So you're building a massive ecosystem. And then internally, the kind of level of intention that has to be put into every part of the design at a million units per year, you assign, like, everything becomes a a challenge. Like just this, you know, this this this cable becomes a massive challenge. Like how do we how do we design this cable to be, you know, really compatible with a million unit per year run rate? How do we make sure that the motors are compatible? Each one of these almost becomes like its own little company with its own, you know, responsible individuals and folks that control the destiny of that part. So you you build a massive ecosystem with, like, areas, more specific areas of extreme ownership. I think that's the that's the best way to think about how to structure a million drone per year company.
00:56:56 · Ty Morse, Olaf Hichwa
[00:56:56] S0: Are there any lessons that you can take from a company like BYD in China? Where this is the only... This is the best example that I can think of of an entire city factory. [00:57:06] S1: Yeah. I mean, DJI's done it. [00:57:08] S0: Sky Factory. How big is their factory? [00:57:10] S1: It's it's this massive skyscraper and a bunch of buildings around it. There's an insane tour that I've probably watched 20 times on YouTube of a drone flying through their campus. It is it is mind boggling. But that's what it takes to, you know, build a million units per year. And it it took them over a decade. [00:57:32] S0: When you think of, like, Chinese production lines and factories versus the thing that you you guys have right here and in general, just United States factories, what are the biggest differences? Like, what enables them to be that much more efficient? [00:57:47] S1: So, you know, one one of the first things I did after getting back from Ukraine was going to China. [00:57:53] S0: You went to China? [00:57:54] S1: I went to China. [00:57:55] S0: Was this before getting blacklisted?
00:57:56 · Olaf Hichwa
[00:57:56] S1: This was before getting blacklisted, before getting sanctioned. But, yeah, I mean, I wanted to build drones. I was a professional drone racing pilot before this. And I wanted to see where the the drones were made. I had friends in China, I mean, sponsors that would send me free stuff. That's kind of the extent of the professionalism, but they would send me free parts. And I knew them. And I knew that they got into building drones for war. They didn't know that I was gonna get into this, but but I knew that. And I I DM'd them. And I was like, hey, I'm gonna be in Shenzhen. Do you think I could see your factory? And they were like, sure. They knew, you know, Sorin had a consumer business selling Chinese drone parts. I also sold Chinese drone parts. And they thought I was a customer. So they showed me around in detail. And they told me where every step of the process had quality checks and what the tolerances were. They were so happy to brag about their specific tolerances on their quality checks and the names of the high end machines they use to build these various parts and the different, you know, steps in the process for ensuring the best quality drone. And, you know, they were showing me drones that were destined to Russia. They showed me these production lines making 2,000 Russian kamikaze drones a day. And, honestly, insanely impactful trip. Right? Like like that... That's the end state. Or not the end state, but that's a... That's where we're going. One of the biggest takeaways there was that their manufacturing is pretty simple. It's a lot of people at desks doing pretty simple labor. And I think it's not exactly how we're gonna run our labor. I think we're gonna care a lot more about the workers. Like, you know, I'm sure you've seen the the images of the Foxconn suicide nets and the, like, you know, dorm rooms for only men or only women, seven days a week. Dorm room factory. Dorm room factory. The the production, you know, obviously the number of people and the scale was impressive, But I think we can do much better here. I think we have, you know, much smarter automation. And I'm sure that's changing in China, like it's moving away from manual labor and and towards automation. But I think we we can beat it by far. What I wanna copy from China and what I was most impressed with is actually not the production side.