Today, millions of drones are battling in the Ukrainian sky, while unmanned naval variants stalk Russian ships. Cheap unmanned kinetic systems have changed the 21st-Century face of war. This surprised the intelligence community, the Pentagon, and its major defense contractors. Every Ukrainian infantry platoon employs drones to kill any single Russian soldier venturing into the open. Unmanned seaborne drones sank so many warships that Russia pulled its fleet out of most of the Black Sea, enabling Ukraine to resume grain exports deemed impossible when the war began. President Biden, intimidated by Putin, has forbidden Ukraine from employing U.S.-provided weapons to strike inside Russia. Nonetheless, Ukraine is employing its own patchwork drones to hit deep inside enemy territory.

Over the past three years, the face of war in the 21st Century has been forever altered by the commoditization of digital technologies. This has enabled unmanned systems to wreak destruction at a fraction of the previous costs. These cheap economies of scale are advantaging Iran, Russia, and China, because the American military procurement system has not adapted.

The economist Joseph Schumpeter coined the memorable phrase “creative destruction” to summarize how upstart companies, decade after decade, have introduced manufacturing innovations that destroyed more established companies. Cars bankrupted buggy whip companies, digital photography doomed Kodak, etc. In the free marketplace, millions of consumers choose what to buy. If a company does not keep pace, its products fail to sell, and bankruptcy follows.

Over the past three decades, the number of large defense contractors has plummeted from 51 to the current “Big Five” consisting of Lockheed Martin, Raytheon, Boeing, General Dynamics, and Northrop Grumman. Because the military was the sole customer that decided what products it wanted, the shrewder corporations developed unique skills and bureaucratic acumen, accumulating comparative advantages that blocked out competitors. These mega corporations subcontract to hundreds of small companies to manufacture parts for weapons like an aircraft carrier. Scattering these subcontracts ensures jobs for the politicians in their home districts.

For decades this closed-system oligopoly produced fearsome weapons, albeit also fearsomely expensive. This business model worked well when defense budgets received five percent of GDP (a bargain for the world’s superpower), and when our enemies were second-rate armies or terrorists equipped with rudimentary technology. In our wars in Iraq and Afghanistan, there were ample funds for high price tag items. Between 1980 and 2020, we possessed a monopoly on air power, overhead surveillance, and precision strike. The Pentagon oligopoly didn’t do cheap. The famous Global Hawk drone by Northrop Grumman, for instance, was projected to cost $10 million in 1994. Two decades later, the cost had inflated to $131 million.

Congress paid that high sticker price because we were fighting in Iraq and Afghanistan. The White House released photos of top officials mesmerized by precision drone strikes, and bragging about killing any terrorist anytime, anywhere, with no collateral damage. That was remarkable. Left unspoken were the millions of dollars spent on each strike package. When those wars ended badly, it left a sour taste in the Biden administration and in Congress. We abandoned Afghanistan and our remaining troops in Iraq are shot at by Iranian-controlled militias.

Consequently, the U.S. defense budget has plummeted to three percent of GDP, driving out any tolerance for error in procurement, and China has emerged as our technological peer. At the same time, the low-priced commoditization of digital military-applicable technologies has left the Pentagon with a losing business model. Our exquisitely engineered surveillance drones are too pricey; our offensive strike missiles are too few; and we lack a streamlined manufacturing process to produce cheap unmanned weapons. Just as embarrassing, our anti-drone defensive missiles cost ten to fifty times more than the drones they intercept, as the 9th-Century Houthi tribe demonstrates by persisting in drone attacks at ships in the Red Sea.

To date, the Pentagon’s efforts to adjust have been embarrassing. In FY 2022, unmanned systems (drones) were included in 140 Procurement Line Items, mainly for highly expensive, sophisticated surveillance platforms. To remedy that, this year the Pentagon’s Defense Innovation Unit (DIU) invested a billion dollars in “cheap drones” intended to be attritable on the battlefield, as bullets and shells are attritable.

But DIU then selected an established contractor that is to deliver those drones at more than $50,000 per unit, pricing DoD out of the warfighting market. Impoverished Ukraine is producing a million drones at $500 per unit, while Russia keeps pace with its own one million drones. China, controlling 70% of the worldwide commercial drone market, is quite capable of annually producing well over a million attack drones. The Pentagon’s oligopoly, with layers of executives, is producing several thousand exquisite Lamborghinis instead of a million cheap but solid Mustangs.

The Pentagon’s procurement system is too onerous and expensive to keep pace. The consequence is foreboding. According to the Wall Street Journal, America can’t build drones fast and cheap enough, or with better defenses against electronic warfare. “We are further behind today than we were 2½ years ago,” said a project manager at the DIU.

The potential consequences are perilous. “We are at an absolute pivot point in maritime warfare,” retired Admiral James Stavridis, former Supreme Allied Commander in NATO, said. “Big surface ships are highly at risk to air, surface, and sub-surface drones. The sooner great-power navies like that of the United States understand that, the more likely they are to survive in major combat in this turbulent 21st century. Like the battleship row destroyed at Pearl Harbor, carriers are at the twilight of their days. It is absolutely time to move the rheostat away from manned warships and toward more numerous and far less expensive unmanned vessels.”

During the Civil War, the Union navy constructed an original coal-fired steamship named USS Wampanoag. When the war ended, the navy reverted to sailing ships. Two more decades passed before sailing ships were replaced by steamships. Admiral Stavridis is alarmed that today’s navy is repeating that mistake. Unmanned drones guarantee that surface warships must stand farther and farther from the conflict zone in order to survive, rendering them less effective.

The proven effectiveness of drones renders vestigial the ritualistic declaration that America needs more warships. Why build more targets? A classic example is the Marine Corps. A few years ago, the Commandant decided Marines should be ready to sink Chinese warships by shooting missiles from atolls in the South China Sea. At $2 million per unit, 64 missiles with a hundred-mile range were purchased. To get within that hundred-mile range, the Commandant then requested 35 small amphibious ships, each costing $350 million to transport four missiles.

At the same time, the Navy was designing a new, cheaper missile with a 350-mile range, to be launched from an aircraft without endangering the crew. Oops. Now there was no need for Marines, at exponentially higher dollar costs, to risk ships and crews venturing into well-defended Chinese waters. But instead of treating the short-range missiles already purchased as a sunk cost and getting back to winning land battles, the Marines have persisted in requesting those 35 vulnerable ships, at a total estimated cost of $11.9 billion and $15 billion. The new Marine mission confounds the U.S. Navy; why spend so much for a mission already obsolete?

The tenacity of Marine leaders in denying the laws of physics reflects the obduracy besetting the leaders in all four services. Professionally, they know cheap, AI-equipped unmanned systems armed with missiles, have changed warfare; but emotionally, they resist the divesting of their pricey, vulnerable legacy systems to free up money to invest in upgrades. It’s not just the naval service (Navy and Marines) that rejects change. In land battle, drones now reduce the threat of a successful surprise blitzkrieg and hold vulnerable all supply depots in the rear. All Army (and Marine) platoons, like Ukrainian platoons, should be equipped with disposable attack drones, just as they are equipped with bullets. Yet our ground forces are not adapting to what is the daily reality of the land battles in Ukraine.

On balance, unmanned systems advantage the defense over the offense. This should make a mockery of Chairman Xi Jinping’s pledge to seize Taiwan, a vow that constitutes the most dangerous near-term military challenge to the United States. To invade, China must mass a thousand ships or more. Currently on a shoestring budget, Ukraine is producing a million drones a year. If wealthy Taiwan did the same, each Chinese ship would face a swarm of five hundred to a thousand attack drones. By immediately exploiting drone technology, for several billions of dollars Taiwan can mount an impregnable defense. But instead of building drones at low cost in its own factories, Taiwan is spending $360 million to purchase a paltry thousand U.S.-made drones. Unfortunately, Taiwan, like the Pentagon, is resisting the cheap drone revolution, a mortal act of military malpractice. Americans will not die for a nation that heedlessly refuses to defend itself.

In sum, the commoditization of digital military technologies cannot be ignored. The defense budget will not increase to accommodate the Pentagon’s oligopolistic production of expensive weapons. The Gordian Knot of the ossified Pentagon procurement process prevents the production of cheap AI-enhanced unmanned systems. That knot cannot be unraveled, but it can be cut. Embrace the killer digital app of cheap AI unmanned systems—land, air, and naval drones and missiles. Do not repeat the Wampanoag.

overlay image