The Business Of Defence

Stanford University Graduate School of Business 7 May 2026

I gave this speech on the 7 May 2026. This is the second in a series of short posts in which I set out why Britain, and Europe, have still not woken up to the danger we face, after thirty years spent believing the Cold War was won and that peace would last for ever.

In this speech I reveal…

Why wars are won not by the single breakthrough, but by the side that can mass-produce the ‘good-enough’. That is lesson of a black metal box carried to Washington in 1940, and of Ukraine’s world-leading, home-grown drone industry which didn’t even exist a few years ago.

Why our most sophisticated weapons have quietly become our greatest weakness

Why resilience now matters more than sheer size; no country, however global or brilliant, can opt out of geography.

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It’s a real pleasure to be on campus, and thank you very much Rob, it’s a joy to spend more time with you and to be shown this amazing place. It’s a cathedral of knowledge in so many ways and an extraordinary heart of a world that’s changed and changing incredibly fast.

I wanted to come because only a short drive from where we sit here we’re seeing ideas that have forged and connected the world, and a few that have threatened it, being executed in buildings that now have the corporate logos that only a few months, a few years ago were on the notebooks of undergraduates at this very place before they became made real.

But it’s worth remembering that none of these technical empires, none of these corporate empires, were built by the founders alone. And none of them, however global the brand, however weightless the product, was actually built in a vacuum. The companies whose names ring around this valley were built within a Pacific patrolled by a United States Navy fleet, on land shielded by alliances signed before their founders were born, using chips manufactured hundreds of miles away on the coast of a Chinese mainland.

No company can truly opt out of geography, and no company does. The truth has been easy to forget for 30 years, but I’m afraid it is a reality and it’s one that is going to get harder to ignore over the next 30.

That’s why I’m so pleased to see the focus here turning back to the technology that keeps us safe.

The pattern that built Silicon Valley is in fact the pattern that built every empire before it. Business and government driving each other forward. The state takes the long

-term risk, creating the environment that the market then exploits to create production and scale. And that the lesson, half lost in our age of frictionless software, is that the production at scale is fundamentally what wins. It’s not just the breakthrough, it’s the breakthrough multiplied. The genius, if you like, mass-produced. The exceptional, made cheap.

That’s a pattern that has actually had a long history, but, if you’ll forgive me, being English coming back to one moment that really made it real and made it real here in Stanford.

In August 1940, in the dark days when Britain stood alone, a chemist named Sir Henry Tizard sailed for Washington and then crossed all the way here to the West Coast with a small black metal box. Inside lay some of the most sensitive secrets that the British Empire held. The cavity magnetron that made centimetric radar possible. Early designs for the proximity fuse. Frank Whittle’s notes on jet propulsion. And, almost as a footnote, were there the British atomic calculations that then led to the Manhattan Project and of course the nuclear detonations in Japan.

Now, Churchill personally authorised the handover before any agreement was given as to what the United States might give in return. Because he understood something then that so many did not. And that’s that war is not the clash of arms, what it is, is the clash of production. And Britain alone did not have the factories to win. That box, that steel box that Tizard carried was a seed. And of course it could only grow in soil that was deeper than ours. Th

The genius of the magnetron was almost less important than the speed at which the United States could turn it into kit. Because of a factory in Boston the cost of radar dropped so that by 1944, sets that had once filled a room, not dissimilar to this, were small enough to fit into the nose of a fighter, and they were rolling off of the production line in their thousands. The

idea was British. The scale was American. And of course the victory belonged to both. But it required not just the army but the whole of society to turn against that threat.

And that’s why I say it’s not armies that go to war; armies go on operations. It’s nations who go to war. Nations turn their might against each other and decide to act.

To beat tyranny, the whole of American society: its scientists, its industrialists, its capital and its courage, had to be mobilised in the cause of freedom. No company could opt out of that geography. No university either. Tizard’s mission here was the first step for government and business, the public and the private, the capital and the commitment, Americans and Brits to weld together into a single system. Only then could freedom win.

That is fundamentally the argument I want to put to you today. And it leads to two propositions for two different audiences.

The first, is that nations and companies that build systems, win wars and win markets. Heroes matter of course but resilience demands much more than just heroics.

The second, in a world that punishes brittleness, resilience comes from scale and speed, that can’t be done by always making the most exquisite and the most expensive kit.

These matter as much to Britain’s Ministry of Defence, struggling to re-equip after decades of underinvestment, as to boardrooms in a time of turmoil. They matter because the partnership between business and government is not a sentimental preference. It is a recognition that the citizen and the company stand on the same land, depend on the same space, and live or fall in the same world.

And they matter because our competition has changed.

Unlike the enemy we fought in 1940, China is not an energy-starved, encircled dictatorship. It is in fact at the cutting edge of technology and leads in industrial output. We depend on it for raw materials and we helped to build its manufacturing capacity. And it is now shaping our future not with speeches from Beijing but with production lines across the whole country.

In the past year, China has launched more maritime tonnage than the United States has built since the Second World War. Vessels are coming off the slipways at a cost, and at a speed that no one else can match. The markets that America built in Europe and Japan after 1945, China is now trying to replicate but with a global ambition. It dominates, as we know, rare earths. It is making the cars and computers on which every advanced economy depends. It controls roughly 90 percent of the global drone market, and the supply chains for every critical component within it. It now spends more on importing silicon chips than on importing oil. That single line tells you what kind of future Beijing is anticipating.

At the same time, it is a centralising power around the Communist Party, arresting generals and punishing entrepreneurs who challenge the centre. Beijing is right that the public and the private must work together. But it is wrong that one is the slave of the other. Centralised systems do not compound innovation. Free, plural, and competitive ones do. Their system is brittle. Ours need not be.

We should remember a different model, because it is one that we have tried before.

The Royal Navy’s success at sea is celebrated in history. What is forgotten is that it wasn’t the ships alone, it was the industrial base behind it. The investment came from the navy, came from the state. The breakthroughs came from the industrialists building it. One example came in the decades just after 1760. Industrial innovation produced copper in such quantities that it allowed hulls to be launched from Portsmouth plated in this metal, protecting the vessels and keeping them at sea for months longer. The cladding shifted naval power decisively in Britain’s favour. The navy’s geography, our coastline and our trade routes, set the demand and the industrialists’ workshops met it.

A few years later, the next innovation came from the same partnership. This time executed by two engineers, Brunel and Maudslay, who built for the first time the true mass-production line. Ten unskilled men were able to turn out pulley blocks that previously 110 craftsmen had had to make by hand. That was the system that effectively multiplied the fleet and the Royal Navy for a fraction of the cost.

So while we remember Admiral Nelson’s heroic victories at Trafalgar and the Nile, one leader and one battle didn’t win a war. Britain resisted Napoleon’s threat of invasion because we built the system that kept ships at sea and the trade flowing to pay for it.

Today we are seeing the same principles expressed in companies around here and on battlefields across the world.

On 1 June 2025, the Ukrainian Security Service smuggled more than a hundred drones deep into Russia. They struck five airbases at the same time, across three time zones, hundreds of miles behind the lines. Forty-one aircraft were destroyed, including several

strategic bombers worth around $7 billion. The weapons that destroyed them cost about $2,000 each. A cost ratio of 30,000:1.

Behind that strike sat a market the Ukrainian government had initiated. Programmes like Brave1 connect investors directly to start-ups and to the front-line units using their weapons, with feedback running back in days. That is how a country at war fields 2,300 defence companies and runs cycles from sketch to combat in six months. Ukraine plans to produce seven million drones this year, up from about 800,000 three years ago. The body of a Ukrainian drone is redesigned every six months. The engine, every four weeks. The guidance software, to defeat the jammers, is effectively re-done every week. That’s the rapid iteration of simple technology, at scale, delivering a devastating effect.

And look at where the Gulf states, who are now facing a similar threat, are buying their drones. Not from Lockheed Martin, but from Ukraine. Cheaper, more current, and still in active development on the Donbas front.

That is what scale and iteration looks like together.

Now, eight months after all that, in the first 24 hours of Operation Epic Fury, the United States and Israel struck more than a thousand targets inside Iran. When I first went to war, in 2003, the analytical cell required to generate that volume of targeting would have needed hundreds of officers, and taken weeks. Today, Palantir’s Maven Smart System produces prioritised target packages, complete with coordinates, weapons recommendations and automated legal assessments, at a pace that no human cell could possibly match.

All this is possible because companies have turned ideas into processes and processes into products, and government has supported the innovation at moments of risk.

And yet, in the days that followed, the same operation laid bare a different lesson.

The United States has fired more than 1,200 Patriot interceptors against Iranian missiles and drones since February. At Lockheed Martin’s current production rate, replacing them will take more than two years.

Now what’s more, each Patriot interceptor costs around $4 million. Many of the Iranian drones that were shot down cost between $20,000 and $50,000.

That frankly, is the economics of defeat and our enemies know it.

And it gets worse. Because the copper on which every Patriot motor depends is now competing against demand from electric vehicles and AI data centres, and the guidance chips, though made in the US, need helium to produce them, and we know that global supplies of the gas have been badly disrupted by the war in Iran.

So we are running short of the raw material for our exquisite weapons, while our adversaries are able to flood the battlefield with cheap drones. The metal is in someone’s ground, and sadly not ours. That is geography again.

So in fact for us sophistication has become a vulnerability. The quest for the exquisite has left us vulnerable to the everyday.

This is not a new lesson. For those of you who are more English in mind, you will remember that in 1415 at the Battle of Agincourt, the French knights were felled by simple longbowmen

with arrows. Again an example of the cheap and the plentiful beating the expensive and the irreplaceable. It is after all one of the oldest patterns in war.

That should not, of course, be a cause for despair. In Ukraine more than a thousand interceptor drones are now produced every day, at between $1,000 and $3,000 apiece. They have neutralised Russia’s advantages in heavier armour and latest-generation aircraft.

As Kyiv has shown again: armies conduct operations. Nations go to war. And the nation that has turned every part of its society to innovating and producing cheap weapons, networked through software, built in volumes that exquisite systems simply cannot match, is the nation that wins.

That partnership, between state and society, is not only true of battle.

The smartphone is the basic computer most of us use to access information. It was designed in Cupertino. But it didn’t become global on the strength of Apple alone. The gyroscope, the touchscreen, even Siri, are products of US government research. Steve Jobs had the genius to combine technologies the Pentagon and DARPA had spent decades developing. But it did not stop there. It wasn’t just a US project. Tim Cook understood that to turn the idea into a billion devices, he needed a system of iterative design and enormous output, acting at scale and speed. So while Jobs supplied the genius, and Cook built the system, it was the Chinese government that enabled the scale.

This is the part of the story that shows the cost of forgetting geography. Because by materially empowering Apple’s manufacturing in Shenzhen and Henan, Beijing did for the world what Brunel and Maudslay had done for the British fleet two centuries earlier. Apple trained an army of unskilled workers and let the disciplined production line drive output up and costs down. Apple did not transcend geography. It chose China. And that choice has consequences that we are still living with.

Apple wasn’t alone of course. Tesla taught China how to build electric cars at scale. Volkswagen taught them how to engineer. Across 30 years of joint ventures, Western firms have transferred a wealth of manufacturing knowledge that no single government on its own could possibly have bestowed.

So China dominates the drone market, the rare-earth supply chain and shipbuilding tonnage not because Beijing cracked a code we had not, but because they learnt. And they are now applying what they learnt to weapons.

Government and industry together, whether American or Chinese, produce strategic advantage by creating more than a machine. They make a whole system of knowledge and action. That speeds output, improves quality, and allows adaptations.

Now in the military we call this the OODA loop. Observe, orient, decide, act. For business I suppose the equivalent would be something like design, build, scale, improve. Whichever one you chose, they are both cycles and the fastest cycle wins.

Apple in peace and Palantir in war have both shrunk the time between idea and action. And neither company, among the most successful businesses of our time, would exist without the state having played its part first. Because no company, however brilliant, however global, can or will opt out of geography.

Which leads me to my second proposition. Resilience now matters much more than mass. When we talk about competition with China, too many people talk about platforms. We talk about whose carriers are bigger.

Whose missiles fly further.

Whose fighters are more capable.

Those are not the only questions for today because wars aren’t won by the exquisite but by endurance. And endurance demands scale and spread.

What kind of effort can be sustained over time? What are the systems behind the platforms? Those are the questions about the industrial base, the technological depth, the capital architecture and the political culture that make replacing platforms possible, and determine whether indeed they can even be deployed in war.

Over the past decades, the exquisite cost, in both prestige and people, of capital ships has made battle at sea almost impossible to imagine. Even when the enemy’s ships are sunk, as they were in the Falkland Islands in 1982, the shock of seeing a major ship go down can turn victory into the feeling of defeat. Technology is making mass without men possible. We need a new kind of resilience and, with it, a willingness to understand the risk of the concentration of force.

Let me explain.

When I was a boy in Kent, a few years ago, the two ways to hear music were either you went to hear a band in a pub or you listened to a record at home. The singers didn’t have to be very good for them to have a business, they could make a living, there were plenty of pubs and the records weren’t great, they were scratchy, all you needed to be was the best available.

Now today that’s not true, because the reality is the ability to listen to very high quality copies of music at almost zero cost means that you can distribute music and song for extraordinarily low prices and therefore you can concentrate ears around a single voice, of course that means that one single singer gets infinitely more wealthy. But it’s also worth recognising that other forms of technology do exactly the same. Whether it’s to accountants or lawyers, or programmers and, as Clause now demonstrates, AI producers is accelerating the concentration of action into fewer hands, and many of them not so far from here.

But while that concentration creates wealth and in many ways creates opportunity for all of us to share in the best, it also creates a fragility and it’s one that we really should focus on.

Why do we think that we are any more immune from an unforeseen failure in technology if we put all our eggs into the Claude or Chat basket, than we would be if we had grown all our food from a single crop, or we’d put our entire battle plan into the capability of a single carrier? We’re injecting vulnerability into our very system.

A single failure, a single disruption, a single regulatory misstep, and the entire structure could tremble.

That is a lesson for navies and economies, and one we used to understand.

It is easy to forget why the West won the Cold War. Too much credit goes to the military balance, or to the bankruptcy of the Soviet system, when the truth is simpler. The victory came from diversification.

What we created from 1945 was a system that worked together but built resilience from alliance and cooperation within a network. We decentralised power away from any single producer or centre but standardised allowing interoperability.

In war, we call that NATO. We shared risk by standardising requirements, allowing a plurality of suppliers but a standardisation of output. Any soldier today can draw any ammunition from any NATO store; your rifle is either 5.56 or 7.62, they’re all the same. Tanks and trucks can fill up from any base; every country uses the same grades of fuel.

And in trade, what we did was we set up something similar. We called it GATT, the General Agreement on Tariffs and Trade, and it allowed competition by spreading risk across geography and technology.

The Soviets centralised and controlled, we allowed openness between countries without losing the alignment that is essential to making alliances work. So even in the 1970s, when American and Soviet economies briefly looked similar, that parity was actually an illusion.

Centralised, dictated, stagnated economies cannot compound innovation. Free, plural, competitive economies can.

We are watching the same lesson re-learned in Ukraine. Russia’s army, far larger on paper than Kyiv’s, is being held off and bled by a force a fraction of its size. As one Ukrainian defence-tech founder has put it, this is a clash between a closed system better at standardisation and an open one that rewards fast and frequent innovation. Russia produced more drones at one time. But Ukraine quickly took over, and has been winning on price, quality, pace, and innovation ever since.

That is the lesson that should be hanging on the wall of every defence ministry, and every boardroom.

Instead, some companies, like some countries, aspire to monopoly and they call it efficiency. But as we have seen, dependence on one is a risk for all. Resilience, the ability of a society or a company or a fleet to roll with the punches and adapt to events that none had predicted, is built on distributed power and held together by shared purpose.

That’s the system we designed 80 years ago. It is the system that has won our wars and protected our freedoms. But it is also the system that so much of the Valley, from Apple’s manufacturing to the platforms that we see spreading around here, the FANGs as they are called, has been quietly forgetting over the last 20 years.

So the question is: what now?

Now forgive me for speaking as an old soldier, but let me focus on another context. Not strictly business, but the military.

Over the last decade, a lack of investment has allowed too much concentration and exacerbated the risk profile of our defence. Instead of being able to dispatch over 100 ships to respond to crises, as we did when the Falkland Islands were invaded forty years ago, we have been limited to sending one ship at a time.

Effectively we’ve created in our navy the concept of too big to fail, but we’ve done it by having too few to succeed.

Multiplying a fleet simply cannot be done, as the Royal Navy did before, by just adding copper hulls to the ships. But the use of copper is not over. It’s now of course the metal that connects a mother ship to naval drones. That is the next stage of maritime power. The system that lets one captain command not one hull but 100. As Ukraine has shown, you don’t need a navy to sink a navy. You need the connective tissue linking hulls, crews, and the swarms that allow the commander to act as one.

It is also why AUKUS, the alliance between Australia, the United Kingdom and the United States, matters so much.

Because China is launching ships at a pace that means half the world’s merchant ships originate in Chinese dockyards, compared with under five percent when it joined the World Trade Organisation in 2001. We need to encourage allies and friends to play a greater role in defending what we share.

No nation can go it alone. Chinese factories draw on a labour pool of some 300 million industrial workers who travel wherever the work goes. They don’t care if their toil is for Apple, Tesla or Volkswagen. The pace of Beijing’s expansion is distorting its own economy, and even the United States is now falling behind this curve. As every entrepreneur knows, inertia is actually a reverse gear.

Partnership is therefore not a soft option. It is the only option.

For all the talk of AUKUS, the relationship must run much deeper than just submarines. Pillar One, on which the nuclear powered boats is based, needs Pillar Two to share the load not

only of maritime deterrence but of work on quantum computing, cyber, undersea systems, hypersonics, electronic warfare, and AI for the front line.

The point of AUKUS is not the boats. It is the architecture.

For Britain, the answer at sea is deepening the cooperation of the fleets, and rebuilding a partnership akin to having a single Royal Navy again. Australia, Canada, New Zealand and the United Kingdom share a remarkable advantage. A common past means that our various royal navies emerge from the same tradition. Because of a quirk of history and a single commissioning document under one King, our officers and sailors can not only serve on each other’s ships but can legally give each other orders. We can achieve scale and spread through partnership at a fraction of the cost that it would take others.

Along with the United States Navy, perhaps not quite ready yet to be the Royal United States Navy despite the King’s best efforts, those five fleets are backed by every input we need. We have the talent, the energy, the reach, and most importantly the scale, to put a hard ceiling on the ambitions of Beijing, Moscow or Tehran.

If we don’t, just look at what we face. China claims a population of 1.4 billion. The Communist Party will throw all its weight behind the designs it chooses to scale. No Western country can match that combination of mass and technology alone.

So what we need to do is give ourselves the advantage again.

And the secret to that is distribution. A trusted network of like-minded countries that can act in concert without waiting for orders, bound not by central command but by overlapping interests. That was the reality Churchill understood when he sent Tizard to America. It is the world we can invest in today.

Which brings me directly to what I am actually asking of you.

I have come to Stanford with two requests. One is for this room and one for my own country.

From this room, I am not asking for the next exquisite system. I am not asking for the next sixth or seventh or eighth-generation fighter or the next $5 million interceptor. I am asking you to make the best you can for a price that means we can buy it in volume. The quantity will have a quality that we need today.

The companies that can take a Pentagon contract or a DARPA grant and turn it into a 100,000 drones a month. The entrepreneurs and venture firms that can do for defence what they have already done for software and consumer goods. Mass production at the speed of current innovation. That is the type of manufacturer the West really needs. That is the market the world is waiting for. And here in this valley is where it is most likely to be built.

From Britain, I am not asking for another aircraft carrier or for another F-35 squadron. I am asking for the ability to create a resilient defence force at scale. That means making sure we have what we need not just at sea but in the factories to replace them.

In 1940 we were able to convert car factories like Morris, Austin and Vauxhall into Spitfire production lines in a matter of months. The technological equivalent today is what the next decade will demand of us. An industrial base that can take an idea from Cambridge and turn it into a million drones in a year. Civilian production lines that can pivot to defence in a matter of weeks. Capital channelled out of government bonds and into our own world-class firms.

Now both asks rest on the same principle. Anyone who has built a company in this room already knows it . Build the best tool you can. Then build it again, 90 percent as good, at 80 percent of the cost, in 50 percent of the time. Then do it again, and again, and again and again.

The first tool is the breakthrough. The system that produces the next thousand is how you win.

That of course is the new Manhattan project. Not the bomb, but the architecture. A metal box carried by a British scientist, containing the secrets of a kingdom and the seeds of the atomic age, but also the recognition that no nation could win alone, and that no company can win without a nation behind it, or a nation without its industrial base.

Out of the collaboration that followed came the Rad Lab at MIT, the codebreaking partnership that became Five Eyes, the atomic project itself, and the return to Stanford of wartime researchers who would seed Silicon Valley.

The chips that train every frontier AI model are downstream of the choices made in 1940. The companies in this valley that now define the global economy are downstream of choices made in 1945. None of it was an accident. All of it was systematic. And it was all built on resilience.

Eighty years on, that is the seed that needs replanting.

Because armies don’t go to war. Navies don’t go to war. Nations do. And nations are made up of citizens and companies who share a coastline, and a future.

Today the order is clear.

Build the fleet that acts as one, but is made of many.

Build the partnership of the state, industry and entrepreneur that lends mass to ideas. Build the system in which the hero is the last piece, not the first choice.

The capabilities we need are being made in the laboratories and start-ups a short drive from this room. We know the technology will be cutting edge, the question for us is whether we can afford it and replicate it at speed.

If we get that equation right, we will avoid the sophistication trap and create the capability to keep ourselves safe. That’s the job of this generation’s leaders in business and government. It’s a duty we share on both sides of the Atlantic because neither of us can escape geography.