The New Space Race & Defense Tech

December 19, 2024

Friends,

We are excited to share the edited excerpts of our Ideas & Networking Conference fireside chat with John Serafini, the CEO of HawkEye 360.  HawkEye 360 operates a collection of low earth orbit satellites that track radio frequency data and deliver mapping and analytic capabilities to its customers.  He is also a Venture Partner at Shield Capital (we interviewed Shield Capital’s founder, Raj Shah, back in 2021: https://ragingcapitalventures.com/an-entrepreneurs-perspective-investing-in-the-battlefield-of-the-future/).

John is also a former Airborne Ranger-qualified U.S. Army infantry officer and a graduate of the U.S. Military Academy, Harvard Business School, and the Harvard Kennedy School of Government.  We very much appreciate John’s service to our country.

Our discussion covered John’s journey from serviceman to graduate school to becoming an entrepreneur and venture investor.  We dig into the ongoing shifts in national security policy and the role of emerging technologies in this new world, including innovations from HawkEye 360, Palantir (NASDAQ: PLTR), and Anduril.  We also talked about the role of legacy defense companies in the market, among other topics.  I am confident you will find value in this interview.

Merry Christmas & Happy New Year.  Enjoy!

Best Regards,

William C. Martin

 

Topics in this Issue of An Entrepreneur’s Perspective:

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Interview with John Serafini, CEO HawkEye 360: The New Space Race & Defense Tech

This fireside chat originally occurred on September 19, 2024.  ChatGPT was used to format and lightly edit the original discussion, using a “formal conversation” prompt. 

Welcome!  Tell us about how you got your start as an Airborne Ranger.

I attended West Point and graduated in the 1998 class.  After graduation, I chose to become an infantry officer.  I spent six years on active duty and a couple more years with a National Guard Special Forces unit.  As an infantry officer, you must complete specific training.  Many of you who have served may be familiar with airborne school, ranger school, air assault, pathfinder, and others—these programs prepare you for the challenges of leading American soldiers.

I was fortunate to lead at both the platoon and company levels before deciding to leave the service in 2004.  My experience was unique in that my class was divided between the three years before 9/11 and three years after.  There were many lessons learned during that time.  It’s important to recognize that the underinvestment during the “peace dividend” of the late 1990s created conditions that contributed to the events of 9/11.  This situation led to a radical transformation of our military — not just within the Army, but across the entire armed forces — almost overnight.

Many of my classmates from West Point are now retiring after 25 years of service, with many having completed ten or more deployments.  Some are on their second families due to the demands and churn of their careers.  I take great pride in having served alongside such remarkable individuals.

Thank you for your service and the service of all your fellow service members.  Tell us about going to Harvard and your transition into venture investing.

I earned a graduate degree from both Harvard Business School and the Kennedy School of Government.  Prior to that, I didn’t know the difference between a rifle and a balance sheet, having spent the previous ten years in the service.  By the time I was 28, I needed to learn quickly.  Business school was an eye-opening experience, but I didn’t quite fit into any of the conventional paths.  I realized it on the first day.  I didn’t want to be a management consultant, didn’t know how to be a financial investor, and certainly didn’t want to be an investment banker.  Harvard Business School seemed uncertain about what to do with me.

I eventually found my passion at the Kennedy School.  Midway through my first year at business school, I applied for a joint degree with the Kennedy School of Government.  It was a phenomenal respite.  There, people genuinely cared about how they could personally contribute to making the world a better place and improving America.  This was enlightening for me.  I came to the conclusion, as many of you might have, that it was possible to make money and provide a comfortable living for my family while still doing good for the country.

I gravitated toward early-stage technology investing, specifically in defense, intelligence, and national security.  However, in 2006-2007, this sector was still in its infancy.  Cybersecurity wasn’t yet a recognized field.  In fact, the venture capital community, particularly on the West Coast, largely dismissed government-centric investment opportunities; it seemed foreign to consider investing in defense applications.  It took me some time to find the right group focused on this area.

Eventually, in 2008, I partnered with a group called Paladin Capital in Washington, D.C., which had a security fund.  They positioned it as the investment community’s response to 9/11, though it was primarily focused on guards, gates, and guns.  This was around the early days of cybersecurity as a viable technology, where companies began developing software they could sell to the NSA, Goldman Sachs, and other enterprises.

That experience sparked my interest in defense tech investing as a legitimate field, and I had the privilege of being at the beginning of that movement.  It has been a phenomenal journey.

Before HawkEye 360, you worked with a firm called Allied Minds.  Give us a little flavor of what you did with them.

Early in my career, I had the opportunity to join a venture capital firm called Allied Minds, a fascinating organization based in Boston.  Their approach was to return to the early days of venture capital, reminiscent of the late 1970s, where they would stand outside some of the world’s best academic and government institutions to seize emerging technologies from the lab.  They targeted places like Mitre, Stanford, and SRI, where truly inspirational capabilities were being developed daily.  Allied Minds aimed to incubate these technologies, extracting them from the lab and launching new companies at scale.

They realized there was also significant work happening within the federal research lab community, including the Department of Defense, the Department of Energy, and federally funded research and development centers, as well as university-affiliated research centers conducting top-secret level research.  In 2014, they invited me to lead this initiative, which took me to some lesser-known locations across the United States—places like Edgewood Chemical Biological Center, Crane Naval Research Lab, and Oak Ridge National Research Lab.  These areas were rich in intellectual property generation.

What I came to appreciate was akin to the ending of Indiana Jones and the Raiders of the Lost Ark.  At the conclusion of the film, an old man is seen pushing a nondescript box through a vast warehouse filled with similar boxes.  For those familiar with the movie, it evokes a feeling of curiosity about what lies within that box — something incredibly powerful.  This sensation was mirrored during my visits to places like Mitre, where I witnessed the remarkable intellectual property that our tax dollars have funded over the past 30 or 40 years, often just sitting there.  Sometimes companies like Lockheed, Boeing, or Raytheon might pick it up, but most of the time, it remains untouched on the shelf.

Our mission at Allied Minds was to transform this extraordinary early-stage intellectual property into new technology companies, which I focused on for about six years.

When did you realize commercial technologies could help on the battlefield?

There’s a common belief when you enter the military that every piece of equipment issued to you must be the best.  As a U.S. Army infantry officer — the tip of the spear — I certainly had that expectation.  I remember receiving a GPS system called a “plugger” in the late 90s.  It was a ruggedized GPS, but it was quite bulky and hardly ever worked as intended.  Despite being designed for durability, it was surprisingly fragile, and they wouldn’t allow us to jump with them out of the aircraft because, in my opinion, they were not reliable.

So, what did we do as resourceful young lieutenants?  We pooled our money and went to a sporting goods store to buy Garmin GPS devices — something few people had heard of back then.  We duct-taped them to our wrists, hidden under our uniforms, so the jumpmaster wouldn’t notice.  Once in the air, as we descended, we would turn them on, and within 30 seconds, we knew exactly where we were.

That was the first time I realized that perhaps the commercial industry could produce technologies that were better, faster, stronger, and cheaper to support the warfighter.  This experience set me on a career path focused on developing commercial technologies for the defense industry.

When did the Pentagon start realizing this potential?

At the Kennedy School, I had the chance to meet a great American named Dr. Ash Carter.  Some of you may remember Ash; he was the Secretary of Defense for several years and sadly passed away recently.

One of Ash’s significant contributions was his foresight regarding the third offset strategy, which aimed to invest in groundbreaking new technologies to create long-term competitive advantages over countries like China and Russia.

Around 2015-2016, Ash initiated a program called the Defense Innovation Unit Experimental, or DIUx for short.  My friend Raj Shah, who is now my partner at Shield Capital, and Mike Brown, also a partner at Shield Capital, were both involved in running it.  The idea was to discover and invest in innovative commercial technologies — think drones, cybersecurity, space, mobility, and artificial intelligence — that could provide a lasting advantage for the United States.  This initiative has sparked about half a decade’s worth of inspiring government funding for commercial technologies, which in turn has created a new investment area for venture capital.

Anduril and a lot of these early companies came through that program, right?

Yes, that is correct.  Companies such as Anduril, Shield AI, and I like to consider Hawkeye 360 as well, represent the forefront of defense technology.  We were all established within a few years of each other, during the 2015-to-2018-time frame.

Please tell us about HawkEye 360.  Perhaps you could start by explaining what the satellite constellation does, some of its applications, and then walk us through how you started the company.  It sounds fascinating.

Certainly.  I had the opportunity to meet Dr. Charles Clancy, who was leading the Hume Center for National Security and Technology at Virginia Tech.  He was involved in significant intellectual property generation on behalf of the National Reconnaissance Office (NRO).  The NRO is the agency within our intelligence community responsible for building, operating, and acquiring space-based data to safeguard American and allied interests. Dr. Clancy was engaged in a lot of classified work focused on new capabilities for the NRO.

One evening, during a dinner conversation, we explored a compelling idea: if commercial companies like Maxar, BlackSky, and Planet Labs (NYSE: PL) can take pictures from space, then why can’t we analyze signals?  Signals intelligence has been a critical field for over 50 years, traditionally dominated by major defense contractors such as Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), and Raytheon (NYSE: RTX), who develop what we refer to as “exquisite systems in space.”  However, this domain has primarily remained classified.

Most of us who do not hold security clearances are unaware of the remarkable capabilities developed in this arena, capabilities that we often describe as “PFM,” or “pure f***ing magic.”  Our proposition was to create a more accessible version, utilizing commercial technology in low earth orbit.  With the emergence of companies like SpaceX, we saw the potential to achieve this at a lower cost than traditionally required.

Thus, we envisioned a satellite constellation capable of providing commercial signals intelligence that would complement the national systems for the NRO, the warfighter, and our allies.  This idea took root in early 2015.

Tell us about the investments you have made to-date and your current satellite constellation.

To date, we have raised a little over $400 million.  We are fortunate to have some exceptional investors, including well-known names such as BlackRock, Insight Partners, GIC, and Lockheed Martin.

We have 31 satellites, which operate in clusters of three, in addition to one free-flying satellite.  As for the satellite operation, they fly in clusters with one satellite at the front, one at the back, and a third that oscillates between them, all separated by hundreds of kilometers.  These satellites orbit at altitudes of approximately 550 to 600 kilometers.  They are equipped with software-defined radios and antennas that enable us to detect signals — essentially, any signal with a power output above one watt.

Our operational range covers frequencies from 30 MHz at the lower end, up to 18 GHz.  We can detect signals from space, process them, geolocate their sources, and analyze the activities of the emitters.  This allows us to ascertain what the emitter is doing and identify the entity it is associated with, whether it be a vessel, military unit, satellite phone, or individual.

Could you share a few examples of how your technology is being applied?  Can you talk about the Galapagos?

One major area of focus for us is maritime domain awareness, specifically tracking vessels that engage in illegal activities.  We’re not talking about cruise liners or commercial ships that are transparent about their locations.  We target vessels that go dark, often involved in activities like oil smuggling, drug trafficking, human smuggling, or other illicit actions — sometimes even operations conducted by nation-state adversaries like China.

A key tool on vessels is AIS, the Automatic Identification System, which is required for ships over a certain size.  Some of these vessels will deliberately switch off their AIS to avoid detection by the U.S. Navy, Coast Guard, or law enforcement agencies when engaging in illegal activities.  One prominent issue we deal with is illegal fishing, which is a significant global problem, with an estimated $50 billion in annual losses.  China, for instance, operates a fleet of about 350 vessels that travels across the globe, depleting other nations’ natural resources like a plague of locusts.

In the case of the Galapagos Islands in Ecuador, we saw this firsthand.  These vessels would position themselves right outside the southern edge of Ecuador’s exclusive economic zone (EEZ) near the Galapagos, turning off their AIS before entering the protected area to fish.  They’d later leave, switch their AIS back on, and continue as if nothing happened.  However, while they are in the protected zone, they are still emitting signals like X-band or S-band radar for navigation, and they’re using communications systems such as push-to-talk radios or satellite phones.

Our satellites can detect these signals from space, allowing us to track these vessels even when they think they’re invisible.  We provide that information to relevant authorities, like Coast Guards, enabling them to carry out interdictions.  Importantly, the data we collect also serves as evidentiary support for prosecutions against those engaged in illegal activity.

That’s just one example of how tracking signals from space can play a critical role in combatting maritime-based crimes.

The same type of intelligence gathering and analysis can be applied in other regions as well, such as in border security, maritime domain awareness, and even in areas of rising tension like the South China Sea.  For example, Chinese aggression in areas like the Philippines is something we can track, monitor, and analyze from space.

I’ll give you a case in point.  Back during the pandemic in June 2020, there were tensions between India and China along the border in the Himalayas.  Some of you may recall that tragic event where 30 Indian soldiers were killed in hand-to-hand combat.  What’s important here is that we saw the build-up in advance.  Months prior, we detected an increasing concentration of Chinese military signals in the region, associated with infantry and artillery units.  We anticipated conflict and published our findings, which caused significant concern in India.  This data triggered a national discussion about the Chinese military build-up and ultimately led to an increase in business for us in India.

Can you walk us through your business model and how you’re positioning the company?

You’ve probably noticed that I refer to HawkEye 360 as a defense tech company, not a space tech company, and that’s very intentional.  The SPAC boom of 2020-2021 was, frankly, disastrous for the space industry.  Companies like Planet Labs, Rocket Lab (NASDAQ: RKLB), and others — roughly 30 companies in our peer group — went public through SPACs, and nearly all of them are now trading below their SPAC price.  Some are no longer around, and the rest are hovering between $1 and $4 per share.  It’s been a rough time for the industry.

When we last went out for funding to carry us to our expected IPO in about a year and a half, I made it very clear that we are not positioning ourselves as a space company, but as a defense company.  This distinction was important because investors would otherwise compare us to those SPAC companies and assign us a lower valuation.  We learned that lesson early on.

Our focus isn’t solely on collecting radio frequency (RF) data, though we are the only company outside the defense industrial base with access to this type of data in the commercial realm.  What really sets us apart is what we do with that data.  We don’t just hand over raw data to our customers — we process it, geolocate it, and turn it into actionable intelligence.  For example, if you’re working with a country like Palau, which has a massive exclusive economic zone (EEZ) the size of Texas but a population the size of Nantucket, you can’t simply provide them with raw signals intelligence.  They need precise, actionable insights.  We tell them, “The bad actors are here, at this time.  Send your one patrol vessel to intercept them.”

Our business model is more akin to a software-as-a-service (SaaS) company that delivers high-margin data analytics products.  In fact, our gross margins are well above 80%, nearing 90%.  So while we do face a $20 to $25 million capital expenditure annually to build and launch satellites, our margins and focus on providing finished intelligence set us apart.  We’re not just a data collection company; we’re providing our customers with critical solutions.

Can you take market share from the traditional satellite providers?  I imagine your distributed fleet would be safer in a conflict than relying on a single, multi-billion-dollar satellite, right?

Absolutely.  The government has adopted a “buy what we can, build what we must” approach.  This means that if a company like HawkEye 360 can provide commercial signals intelligence for organizations like the NRO or combatant commands such as Indo-Pacom, then the government should purchase it from us, rather than allocating $1 billion to Lockheed or another large defense contractor to build what we often refer to as a “big juicy target” in space.  These traditional satellites, while incredibly advanced, are vulnerable.  Space is now a contested, warfighting domain, and it’s increasingly difficult to protect such fragile, high-value systems.

From a resilience and diversification standpoint, to provide a better return on investment for the US taxpayer, it’s much more efficient for agencies like the NRO to purchase capabilities from companies like ours “by the drink” rather than spending taxpayer dollars to build large, fragile systems in space.

Now, those larger systems are undeniably capable of extraordinary feats.  That’s not something we can do with our 35-kilogram spacecraft.  Those are exquisite, high-end capabilities.

Our focus is on handling other critical missions, allowing the national systems to offload certain tasks to us so they can concentrate on the truly difficult, high-priority challenges.  That complementary relationship between us and the national systems has been effective, and the NRO recognizes the value of this partnership.

You don’t track pagers though, right?

No, no, we don’t. But we can geo-locate walkie-talkies.  We analyze push-to-talk radio traffic in regions like Yemen, for instance.  Now, you can’t fly a drone over Yemen or Iranian-controlled airspace, but with overhead systems like HawkEye 360, we can still collect and analyze some really valuable data.  It’s a different approach, but it allows us to do some pretty interesting things.

Guest Q&A: Could you discuss the sales process for a smaller country, particularly one with a population the size of Nantucket?  Is it a matter of sending someone there to spend months discussing your technology capabilities?  I would imagine the sales cycle is quite lengthy.

Interestingly, that specific country, Palau, is actually supported through the Forum Fisheries Agency, which consists of 17 island nations that have pooled their resources to combat illegal Chinese fishing activities.  Their headquarters is located in the Solomon Islands.  I visited the Solomons a few months ago and had a conversation with the ambassador.  I asked how many other American companies were operating there, and he replied, “Well, including you — one.”  I was quite taken aback, but it reflects the reality of doing business in places like the Solomon Islands.

Fortunately, we have an impressive sales organization.  Many of our team members are former military officers who have experience working with countries like the Philippines and Indonesia.  We’ve retrained them as sales professionals, and they typically carry a quota of around $5 to $10 million.  With a small but highly skilled team — around five to seven dedicated salespeople — we can achieve success in these markets.

That said, the sales cycles are long and heavily influenced by political factors.  For instance, I met with the president of Palau last year during U.N. week, where I was able to present our capabilities to him in his suite.  For many of our sales, we need to engage at the national security and cabinet level, as we do in India, where we balance our bottom-up sales efforts with higher-level discussions.

Guest Q&A: Thank you for the insightful talk, John.  And I also want to express my gratitude for your service.  I’m curious about your thoughts on the future growth trajectory of HawkEye 360. 

Absolutely, and thank you for your kind words.  As I prepare for our IPO, my primary challenge is to present a compelling use case that demonstrates the largest Total Addressable Market (TAM) as possible.  Currently, we operate within the commercial radio frequency geolocation and sensing space, which is relatively small.  Over the next phase of our growth, we aim to expand into established sectors such as electronic warfare, signals intelligence, communications intelligence, and tactical intelligence, surveillance, and reconnaissance.  These markets have been around for over 50 years and are measured in the tens of billions of dollars.

While I can outline a $50 billion TAM story, it’s worth noting that these markets have historically been dominated by traditional defense contractors like Boeing (NYSE: BA) and Lockheed Martin — entities that are not exactly known for their innovation.  So, my focus for the next year and a half, as we move towards our growth phase, is to position ourselves as a disruptor in the same way that Anduril has done within the broader defense industry, or how Palantir has transformed the cybersecurity and IT sectors.  We aim to challenge the status quo in the electronic warfare market, which has remained stagnant for too long.

What’s your perspective on companies like Anduril and Palantir?

That’s a great question.  Many innovative companies are still in the private sector and haven’t gone public yet.  Anduril, for instance, is doing fantastic work, and I hold Shield AI in high regard as well.  A number of companies in Shield Capital’s portfolio are also moving towards potential exits.

The challenge, however, is that traditional players like Lockheed and Northrop typically wait for a congressionally appropriated cost-plus contract worth billions before they will invest in new technology development.  That gives them a sense of safety and security to allocate internal R&D funds for building technology from the ground up.

On the other hand, we’re part of a commercial ecosystem where we use private, non-taxpayer capital to develop new functionalities at our own risk.  Then, we present those innovations to the warfighter, who can purchase them as needed.  It’s a fundamentally different market approach, and it’s gaining traction.  Companies like Palantir, Anduril, Shield AI, Hawkeye, and Rebellion have been at the forefront of this shift for a decade or so.

Do you think Lockheed will just pick off the best talent and technology from companies like yours and integrate them into their own model?  Or do you believe Anduril is poised to become the next $100 billion company in the next decade or so?

I definitely see Anduril aiming for independence.  They want to go public and envision themselves as the next Lockheed Martin.  So, I wouldn’t anticipate them being sold in the near term.  However, I do expect some consolidation among exceptional defense technology companies as the legacy defense industrial base starts to recognize that this entrepreneurial model really works.

Any quick thoughts on Elon Musk and SpaceX, particularly regarding Starlink?  Do you have any interesting stories or observations about what they’ve accomplished?

Regardless of his political views or his recent involvement with Twitter, what Musk has achieved with SpaceX is truly remarkable.  Starting a company 20 years ago that’s now valued at around $200 billion, even if it’s just private valuations, is incredible.  The current state of the space industry owes a lot to SpaceX’s innovations.

Do you think he’s the key figure in the United States today?

It’s a bit concerning to think about Musk running a commission on efficiency.  That said, he is a very thoughtful individual when it comes to technological development.  We wouldn’t have the American space industry at the scale we do today without his influence.

Guest Q&A: Your technology is really fascinating.  Have you encountered any use cases where your data is integrated with other satellite data, like hyperspectral or SAR imagery?

Absolutely, this happens quite frequently.  It’s known as tipping and cueing.  For instance, when my satellites detect X-band radar signals in the Galapagos Exclusive Economic Zone (EEZ) where they shouldn’t be, we pinpoint the latitude and longitude of that signal.  We then coordinate with a Planet or Maxar satellite, asking them to capture an image when they pass over those coordinates.  This way, we can correlate the RF pattern we observed with visual evidence, and then we present that combined information to the Ecuadorian authorities, showing them precisely where the Chinese vessels are operating.  It’s a crucial part of our operations and happens all the time.

Can you share a story about your time in the service?

One personal reflection I’d like to share is that when you meet some of these individuals, you realize there exists a class of warrior-citizens among us.  You may never know who they are, but they have the capacity to perform amazing, truly self-sacrificing acts at critical moments in their lives.  I consider myself far from that caliber of person, but I’ve had the honor of knowing some of them.

Let me tell you a quick story from my time at the 82nd Airborne Division, where I served as a lieutenant.  I got to know a young staff sergeant named Jared Monti.  He was from Massachusetts and was an amazing person, though he was not necessarily the best garrison soldier — getting into trouble and doing outrageous things.

The last time I saw him, he had parked his truck — I’ll come back to that in a moment — on my front lawn.  He stumbled out, quite drunk, looked at me and my girlfriend — who was also an officer — and said something to the effect of, “Hey baby, you got some college?”  That was the last time I saw Jared.  When it mattered most, a guy like Jared was capable of extraordinary things on behalf of our country.

On June 21, 2006, while deployed to Afghanistan, Jared was leading a small squad of soldiers in Nuristan.  While at his Listening Observation Post, he and his team, which included forward observers and artillerymen, came under fire from a Taliban force that was about three times their size.  They were ambushed in a horrific attack.  Jared did everything right; he maneuvered his small squad into a defensive position and called for indirect artillery fire, bringing rounds in within 50 feet of his own location to save his men.

When it truly mattered, one of his soldiers was trapped between him and the Taliban, wounded about 50 feet away.  Jared went out to rescue him — not once, not twice, but three times — until he was killed while protecting his fellow soldier.  For his heroic actions, Jared was posthumously awarded the Congressional Medal of Honor.  He was an incredible human being who did something so honorable in service to his country.

Now, about that truck – some of you might have heard the song “I Drive Your Truck” by Lee Brice.  That song is about the truck that Jared left behind, which his father drove until his own death.  Those are the kinds of people I had the honor to work with.

Thank you for your service and for your time today, John.  Good luck!

**

Thoughts on Trump’s Election

I wanted to share some thoughts on the outcome and implications of the recent election.

To start, it is good news that the election was resolved peacefully and with a clear winner.  For all of America’s faults, we get to vote and choose our leaders.  Our elections can be loud and chaotic, but they unleash pent up energy and passion while our system of checks-and-balances provide institutional stability.  It is easy to be a vocal critic, but it is not so easy to govern. Our system periodically allows the dog to catch, and sometimes even drive, the bus.  It is unimaginable how much repressed pressure must exist in authoritarian countries like China or Russia.

The biggest surprise for markets from the election is the prominent role that Elon Musk (the modern-day Howard Hughes) and the DOGE Committee are playing with Trump.  Many market participants, including myself, anticipated continued massive Washington spending and deficits regardless of who won the election.  Indeed, Trump was a big and irresponsible deficit spender in his first term. The rise of Elon, Vivek and DOGE, though, has sparked market optimism that perhaps the Republican party will return to more austere policies, possibly averting future fiscal dominance and higher inflation.  Thus, for the moment, long-term interest rates have held steady, and even declined a bit, while equity markets have moved higher.  It remains to be seen whether Elon can conquer the Washington swamp like he has done with space, but we all are rooting for him.  I think DOGE’s success (or not) is going to be a key factor for markets in 2025.

The second major consideration is tax policy.  The election has clearly given markets comfort that we will see stability in tax policies.  Further, Trump has advocated for cutting taxes further, including reducing corporate taxes to 15%.  I made a mistake back in 2016 in being too skeptical about what Trump could get done on the tax front, so I am hesitant to doubt the potential here.  Furthermore, cutting corporate taxes is probably one of the most elastic cuts the government can make, as it encourages more investment and jobs (income taxes), drives higher asset prices (capital gains), and attracts global companies to base and list in the U.S.  Congress could also probably pay for the corporate tax cut by tightening other corporate loopholes.

Trump has been an unabashed bull on crypto policy.  Ironically, as we’ve written in the past, we don’t necessarily view crypto as a threat to the U.S. Dollar.  To the contrary, we think the dollar-based global economic system could be enhanced by embracing crypto innovation and by providing stable, U.S.-grade regulatory transparency and property rights for crypto.  If done correctly, controlled currencies like the Chinese yuan could even be undermined by U.S. crypto policies.  Indeed, leading stablecoins already rely on U.S. Treasuries as a core reserve asset, and many crypto solutions that are targeted at emerging markets are popular because they offer convertibility into USD.   That said, I am concerned about the proliferation of low-quality tokens, meme coins, and other crypto shenanigans.  These are effectively just wild west penny stocks, which are no good for anyone.  We can have sensical, pro-crypto policy without embracing the Jordan Belfort bucket shops.

As for equities, U.S. stocks are expensive and have now priced in a lot of good news.  On top of that, the U.S. dollar is rich.  Thus, it is a great time to be selling some expensive U.S. dollar denominated equities and looking to buy cheaper assets elsewhere.  But where?  The U.S. clearly looks like the cleanest dirty shirt at the laundry, and it is difficult to fathom buying many European or Asian markets.  However, as Newton’s third law promises, for every action there is a reaction.  Foreign capitals could write off Trump’s first election as an outlier, but no more. Can static economies like Canada, U.K., Germany, or Japan really afford to continue to stand pat and not begin to make the tough decisions on energy, taxes, technology, and deregulation that are necessary to fire up their economies and defenses?  A lot of countries are stuck between a rock and a hard place, and that could be a catalyst for numerous surprises, maybe for the better.  We’ve already seen interesting political developments in Canada and Germany.  Even China’s Xi seems like he has an existential choice between external conflict or internal reform.   It might finally pay to be an international contrarian.

Finally, while Trump‘s chaotic style of leadership personally exhausts me, he has the potential to be an Andrew Jackson-like historical figure, in part due to his ongoing role in re-aligning the political parties.  Importantly, it is a relief that Kamala is not running foreign policy for the next four years.  The Biden Administration was an unmitigated foreign policy disaster, and Kamala looked to stay on the same path.  Progressive lawyers shouldn’t be making foreign policy.  While the current geopolitical risks are enormously high, given the weak position Biden has put the country in, we’ve already begun to see improvement since the election.  I am praying this continues.

Favorite Books & Media

Lex Fridman – Conversation with Argentina’s New President, Javier Milei

In addition to his importance to Argentina (having brought inflation down to 20% from 17,000%+), Milei is one of the most important figures in the world today, with the potential to unleash a wave of free market deregulation and smaller government.  This podcast runs through Milei’s philosophy and his progress and challenges to date, and he shares his strong historical grounding and religious views.  Personally, I was sold when I first heard that he had named his dogs Murray, Milton and Robert after the famous Austrian economists! 

 

Peter Thiel on Trump, Elon, and the Triumph of the Counter-Elites

Thiel is the ultimate out-of-the-box thinker, and he provides a thoughtful analysis of Trump’s win over the liberal establishment “machine”.   He observes that increasingly there no longer is room for individual thought on the left, and argues that, while Rogan and RFJ Jr. may not be entirely right, their skepticism is healthier than the echo chamber of consensus in the media and peer-reviewed science.  He also digs into the troubling foreign policy map, and outlines why Trump has a much more difficult job than in 2016.

https://podcasts.apple.com/us/podcast/peter-thiel-on-trump-elon-and-the-triumph/id1570872415?i=1000676932794

This recent Rick Rubin interview with Peter Thiel, which focuses more on the Thiel backstory, is also interesting: https://podcasts.apple.com/us/podcast/tetragrammaton-with-rick-rubin/id1671669052

 

Tyler Cowen: Christopher Kirchoff on Military Innovation and the Future of War

This podcast provide a great rundown of the founding of the Defense Innovation Unit (DIUx) by Kirchoff and my friend Raj Shah (who we interviewed back in 2021: https://ragingcapitalventures.com/an-entrepreneurs-perspective-investing-in-the-battlefield-of-the-future/).  Kirchoff then dives into the current picture of the battlefield, including the rise of drone warfare, the risks of hypersonic weapons, the AI arms race, and much more.  In a nutshell, the entire tech stack of the U.S. military needs to be reinvented.

https://podcasts.apple.com/us/podcast/christopher-kirchhoff-on-military-innovation-and/id983795625?i=1000675001621

 

GoodFellows: Hope for Peace, Prepare for War – with Walter Russell Mead

A thoughtful rundown of the current geopolitical state of play in the Middle East and Ukraine. 

This is one of my favorite podcasts, which includes General H.R. McMaster and historian Niall Ferguson.

https://podcasts.apple.com/us/podcast/hope-for-peace-prepare-for-war-with-walter-russell/id1505855709?i=1000674922608

 

Andrew Ross Sorkin DealBook Interview of Jeff Bezos

How amazing is it that we get to hear one of the most thoughtful and tenacious entrepreneurs of all-time open up about his ideas and management approach?  This is a great listen with a thoughtful interviewer.

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A Selection of Recent Tweets from @RagingVentures:

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“Envy was once considered to be one of the seven deadly sins before it became one of the most admired virtues under its new name, ‘social justice’.” – Thomas Sowell

 

 

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