You may have noticed that there was no newsletter yesterday. Military Media is paring back from a daily newsletter to a tri-weekly (Monday, Wednesday, Friday) to give its chief author, yours truly, more time to dedicate to useful, original reporting, synthesis, and analysis. Which means that in theory, each newsletter should be better and more useful.

Yesterday, Tuesday, I toured a small factory in New England that’s been around for decades. Founded by a gentleman who worked for an arms manufacturer many years ago, this small business has remained in the family ever since. Now, it specializes in refining certain compounds that are used for a variety of purposes, some defense-related. It’s possible to be a small business owner and produce or refine chemicals that serve a niche purpose that is, nevertheless, critical to the effective functioning of the country’s defenses.

THE BIG STORY

Big Things Come in Small Packages

Critical components of American defense industry rely on small businesses that operate in a feast-and-famine paradigm

When investors think of the defense industry, it’s likely for one of two reasons: to get in early on a company developing a promising new platform or system, or to buy stock in the giant custodian of a complex multi-decade procurement plan to produce some key component of combined-arms warfare such as Boeing, General Dynamics, or RTX.

What many probably don’t realize or understand is that the bigger companies depend on a fragile web of subcontractors and suppliers, many of which have existed for decades or generations. 

RTX owns Pratt & Whitney, an aerospace company headquartered in Connecticut. Lockheed Martin owns Sikorsky, another aerospace company headquartered in Connecticut. For decades, both of those defense industry subsidiaries have bought bespoke components for engines from a small New England business operated by its founder. Business is down this year, way down.

Nationwide, small businesses (businesses employing fewer than 500 workers, as defined by the U.S. Small Business Association or SBA) make up 99.9% of all U.S. businesses. 

Near the aircraft engine component manufacturer is another small business, this one owned by a descendant its founder. This business refines chemical compounds from naturally-occurring minerals. There are many uses for the refined compounds. Processed to one level, one can be used in household goods including sandpaper. Processed to another, it can be used in gunpowder. 

The other compound produced by this business, when processed correctly, is used in modern ammunition. It can be further refined to serve as an ingredient in even more elaborate and precise explosives.

The factory, which I toured yesterday, is in a building the size of a small house; I must have passed it hundreds of times over the course of my life traveling in New England without ever having known what was there. The methods used therein are not terribly sophisticated and likely quite straightforward to replicate given training and the proper equipment. Nevertheless, it’s the little things that differentiate between a high quality product and a product that is slightly but noticeably inferior; this business, which aims for the highest quality, depends in part on the generations of knowledge and organically-developed systems possessed by its owners and workers; systems that would be difficult and costly (perhaps in the aggregate impossible) to rebuild from scratch.

The owner’s office (to which I was invited after the tour) was a small concrete space occupied by a desk packed with books, pamphlets, and papers, two similarly-jammed bookshelves, and walls hung with mementos of trips and plaques of thanks and appreciation from arms manufacturers and the Department of Defense. One shelf held copies of books that appeared decades old, including a copy of Stockhardt’s Principles of Chemistry. 

If a house is a map of the mind, a man’s office is a reflection of his cerebral activities — and this one was a far-ranging repository of knowledge, experience, and expertise. Souvenirs from abroad testified to countries that supplied him with raw materials for processing.

How to place a value on this small mineral refining business or the one next door? Not only the sum of its parts and assets, but the synergies created between the two (each owner has spent time working in the other’s business doing tasks as prosaic and menial as “moving boxes for shipment”), and the generations-deep understanding of business currents. 

The Center for a New American Security (CNAS) published a report earlier this month titled “Rolling the Iron Dice” about America’s ability to sustain a protracted war with China (though this could just as easily apply to any major rival). The gist of the piece, to which I’ve linked above (or at least its EXSUM) is that the U.S. military has invested so much effort and energy into a system designed to win a war quickly — in weeks or months — that the odds of its succeeding in a war where a swift victory is not possible have decreased to the point that we can no longer confidently predict success, even in a war of defense. 

Walking around the factory yesterday and its stockpile of raw materials and pallets of finished goods, I couldn’t help but think — not only should this business be better assured, but we ought to have more redundancies in place. If we want to be able to win wars in the 21st century, there ought to be a very deep bench of small businesses with the experience and expertise needed to produce what the Pentagon needs. While billion dollar tech companies chase small software upgrades to ensure the F-35 can rely on the over-the-horizon system it requires to maintain a competitive advantage, we still can’t make the artillery ammunition we need to fight a modern war; a war that will likely last years, and not months.

TOP READS IN MONEY & FINANCE

Binance beginning again but this time with U.S. oversight will test the concept that cryptocurrency can coexist with a strong regulatory mechanism. For years, the pitch for cryptocurrency over normal currencies was that it was a self-regulating system that did not require oversight.

GM plans to buy back $10 billion in stock, partly to assuage investor fears that the mishaps of self-driving Cruise automobiles have imperiled its future.

Veteran and visionary investor Charlie Munger, dead at 99. One of a class of businessmen who came to power and influence slowly — part of a different era.

TOP READS IN THE MILITARY & FOR VETERANS

A V-22 Osprey crashed in the sea near Japan, killing one, and spurring a search for the others.

There is a growing sense that troops and veterans would benefit from psychedelic therapy. While I am supportive of this trend, I also think the best therapy of all is friendship and the support and good esteem of one’s comrades.

The USMC’s 3-year campaign to redesign its physical fitness uniform has ended in a rare failure for the Corps. They should have just gotten that fashion guy on Twitter to do it, I bet if you gave him $1 million he’d make an amazing fitness uniform.

TOP READS AROUND THE WORLD

Big news —  major mining associations and companies are moving to create their first ever minimum global standard for mining operations, in an effort to self-regulate one of history’s most widely and pervasively exploited sectors. 

Saudi Arabia is getting set to learn the lesson the U.S. did with China recently, which is that one cannot invest or buy one’s way out of a religious or ideological conflict. It may prevent some killing in the short term, which is good.

There are no laws prevent Deepfake pornography from proliferating online; one of the many ways moving fast and breaking things is actually causing a great deal more misery than gets properly acknowledged. 

Weather calamities set records in damage caused this year — $55 billion worth — and much of that came from thunderstorms, rather than hurricanes or other extreme weather events. The insurance industry won’t be able to sustain many more years of this, nor will the infrastructure dedicated to producing food.

WSJ came out with its “best airports of the year” edition — an interesting look at which airports really are doing it better for travelers looking to make plans. LGA beats out JFK!

HUMOR

The USMC discovers that water is even better than blood at making grass grow.