Invest Like the Best with Patrick O'Shaughnessy
· Darren Farber
[00:00:00] S1: This concept of when you're in the four walls of the country, there's the general expectation of a freedom of speech. That creates the freedom for disinformation. Now that you can amplify disinformation through the concept of freedom of speech, do you create this alternative world where people are disconnected from reality? Think about where people get their news from. There are no gates on any of this anymore. It's not something the Founders could have ever contemplated. They are true geniuses in that the gridlock is super intentional. Compare us to every other parliamentary democracy in the West. Every parliamentary democracy in the West has a ceremonial senate. In the UK, it's the House of Lords. They don't have real power. House of Commons has the power, and then when the party of power is in power, it is a monopoly of power because they also choose the prime minister. You don't vote for the prime minister in a parliamentary democracy. In the United States, our upper body is completely separate with a different term that's longer by design. Right there you have a separation of powers, and then the executive is technically voted on by the people. It is the purest expression of democracy. You vote for the president directly, and the vice president. You put them down. You have an executive branch that is separated from the party. This president and previous presidents do things that the parties don't like, and you do not get that in parliamentary democracies. Parliamentary democracies are more susceptible to being overtaken in these mass hysteria moments into things like fascism — these directions where the gridlock was designed to prevent someone from co-opting the activity, and it makes us slow to respond. But the overarching architecture is we are fundamentally legitimate, and these guys are not legitimate. When people talk about, "Their society's eclipsing ours," I'm like, "Dude, are you high? You are not free there. You can't say what you want."
· Patrick O'Shaughnessy
[00:00:00] S0: A very popular book these days, and justifiably so, is Freedom's Forge, about the mobilization around World War II — the story of how our industrial base moved so fast to arm companies retooling themselves. It's a great book. The history of peacetime mobilizations in democratic societies is mixed or bad. I guess we're not in peacetime right now, but we're not in some global-scale war. What are the things that you hope happen from here for the US to be the best overall positioned in the world?
· Darren Farber
[00:00:00] S1: We clearly need a change in how we fund the department so we can have longer visibility for capitalism to answer the call and build the stockpiles we need for that depth of whatever instrument of projecting force. A 10-year contract but subject to the availability of funds is scary. We have on average four or five continuing resolutions a year. The peccadillo of CRs is no new starts are allowed. If you think the iteration of new technology is going faster and faster — technically, if you have a new start, you can't do it. We're going to have to change some of the laws and the rules of procurement, and we're going to need these multi-year authorities in order to be able to build this stuff. There are these things that happen when we design the joint structure where we say, "Okay, we're going to make a joint strike fighter between these branches of service. We elevate it to this catalog of joint weapons." So the manufacturer has a reasonable expectation that you're going to keep on ordering, even if it's one year. We know there's going to be a multi-year authority here at some point. We need to do it for the stockpiles that we believe are critical for projecting force. We need to do it across the board to include ordnance and all these other things — the Tomahawks, 155s, all of these kinetic articles of warfare. It's politics. You need a fundamental change in how we appropriate, and then we need to create billets that lessen the political influence over the things that we all agree on as a country are non-negotiable.
· Patrick O'Shaughnessy
[00:00:00] S0: If you look back at the entire Ukraine story now, what are the main things that you've observed or learned — your main takeaways from watching the whole thing unfold?
· Darren Farber, Patrick O'Shaughnessy
[00:00:00] S1: The rate of technological change in the commercial world becomes this direct input into the capabilities that you can project for mass. Drones have been used since the Vietnam War, but you wouldn't think that. Drones became commercially viable and cheap, and by virtue of that became a new article of war because they were so inexpensive. The cost of losing one is low. They gave you a lot of signals intelligence at the end of the day. You could deliver some lethality through the weakness of some of these systems, but it was the commercial viability and the commercial pervasiveness of that product that made it a great input into a military for mass. The commercial world has so much influence on the rate of change that will happen in warfare because it's about your ability to produce and your ability to sustain and withstand. These wars work faster than markets sometimes. The evolution of a Ukrainian drone from three years ago to today is unbelievable. There's 50 iterations. There's all these new capabilities, and that's because you can sit in your garage through commercial supply chains and build the capability. We think of war in this Top Gun style way, and you don't think about something that you could buy at Best Buy as being important into the projection of force. But things that become permissive and inexpensive in a commercial world have these enormously valuable inputs into fighting asymmetric war. [00:00:00] S0: What does this whole last six months do to the likelihood or impact of something happening in Taiwan, do you think?
· Darren Farber
[00:00:00] S1: The likes of Kevin Rudd and the scholars of the area — Kevin Rudd used to be the Australian prime minister, is fluent in Mandarin by the way, has a PhD in Mandarin, is really a Xi watcher. He said that Xi's a risk-taker. If you've gotten to a certain age and you view it as the apotheosis of your life's achievement in order to complete the journey, which is to say imperial China is what Taiwan is, and the takeover by the CCP is not complete until Taiwan falls, until that counter-narrative of how a Chinese society can be run. I don't think Xi needs to go if KMT wins the election coming up. KMT almost won last time, and that is a rapprochement party to the CCP. It's clearly like, "We don't want war, we want peace." It's an accommodation party. I believe a bullet may never need to be fired in order for China to get what they want. That's the more likely outcome. It keeps with their strategy. Why go? That terrain is hard. It will ostracize them in the world. I don't see it strategically. If they were running out of options and they felt they had to do it and Xi was near the end of his life, the likelihood would increase, but the appetite grows with the eating. If Taiwan is overtaken in a military exercise, is there any doubt that these other countries that have real historical beefs will be next? That's why Japan has been so vociferous at advocating for strong defense now under this new prime minister. She's a tough lady. She knows what happens. There's a real historical beef between China and Japan. I think that would be exercised. It would not stop at Taiwan, most likely.