Welcome back from the weekend! Up here in Connecticut it was wet and gray. Typical autumn weather. At a local farm, where we buy the produce we don’t grow ourselves, there was a sign next to the pumpkins: “due to heavy rain, the pumpkins won’t last as long this year. We apologize for the inconvenience.”

This made me think about how much knowledge goes into a thing as ostensibly simple and straightforward as farming. Obviously there are levels of knowledge, and a great farmer who can grow a pumpkin the size of a Volkswagon Beetle is a world away from the nine planters of tomatoes, strawberries, basil, lettuce, and eggplants I have out in back (we have three apple trees and a peach tree, too). I knew it was a wet year, because the harvest was great. But it also means wetter pumpkins that won’t last as long on one’s front porch.

Originally my plan was to share an interview I conducted last week. Instead, today, I was thinking about pumpkins: the knowledge and passion that needs to go into making a great business — and I wanted to share thoughts that have been near or at top of mind since summer of 2022.

THE BIG STORY

A Disruptive Artillery Ammunition Startup Doesn't Exist

In an economy characterized by disruption and innovation, one area remains extremely conservative and inflexible.

To buy a round of 155mm howitzer ammunition — a basic round, HE, no bells or whistles — you need between $500 and $3,500. That’s a pretty big spread and not favorable to the manufacturer. On the high end, if one is producing a million 155mm HE shells, you’re not talking about great numbers, from a business perspective. You’d probably rather make three million-dollar missiles. On the low end, it’s difficult to see how a country or company could turn a profit at all.

That’s the first problem with creating new businesses that produce artillery ammunition. And it would be significant if it was the only stumbling block; building a business without a clear path to profitability is not a good game plan (unless of course one happens to be a founding member of Juicero or Theranos) and what we’re describing here is a business where one knows upfront that one will almost certainly not be profitable, not in the beginning, not in the middle, not at the end.

The second problem is that the startup costs for a company that creates ammunition are also significant. On the physical side, it’s expensive to produce or acquire the powder, primers, bullets, and shells for assembly, the devices needed to assemble the ammunition (more sophisticated for artillery and tank rounds, less sophisticated for small arms), and the people to staff that equipment as well as security to keep it safe. Furthermore, one needs land and buildings, which are also not cheap.

Finally there is the problem of politics — the permits needed to run such a factory, permits and clearances to produce munitions, permits to move them safely and securely between states, permits to sell them to one’s government (more to sell them abroad). Permission to do business once one has, at great cost, produced ammunition that (as we saw in the first paragraph) may not even cover the costs that went in to making that ammunition in the first place.

This is a serious problem for the West, and why — when the Biden Administration called for U.S. industry to ramp up production from 14,400 artillery shells per month to 90,000 artillery shells per month by 2023 last year — industry fell so far short of its goals (the U.S. produces 24,000 artillery shells per month now, and hope to reach 80,000 by next year).

When it comes to small arms production, things are a bit looser. One can buy a press, and powder, and shells and bullets and firing pins, and load one’s own bullets by hand, either one at a time or in lots of ten. For competitive marksmen who load their own bullets to fire from specific rifles, there’s a logic to procuring ammunition this way. For avid shooters who burn through ammunition (an expensive hobby), assembling their own ammunition could save them hundreds or thousands of dollars per year.

With small arms, a passionate and energetic ammunition enthusiast could feasibly create their own type of bullet for sale on the market, assemble ammunition according to those standards, and sell it in most of the U.S., as an individual.

But the bar is so high — with understandable reasons! — for artillery ammunition, that it becomes remarkably difficult to innovate and create in the field.

One place where there is some room for investment and innovation is Ukraine — a country fighting for survival against a powerful invading force. Up until last year, most smart people saw Russia as a “near peer” threat to the U.S. Few imagined that it was, instead, competitive with the Iraqi military of 1991 — big, unwieldy, focused more on loyalty and show than competence, and one good shove from collapse. Ukraine dug deep after February, 2022, and has been pulling out all the stops in its effort to keep even with its larger and wealthier foe.

Because of this, it isn’t difficult to put money into Ukrainian companies that are developing or have developed advanced proprietary weapons; companies such as UA Dynamics, which has created a serviceable and reusable drone-bomber, or Ukroboronprom, the state-run company responsible for producing ammunition at a series of factories across the country. Creating quiet partnerships to learn lessons and assist Ukraine in its hour of need may not yield immediate profits, but in a country and culture that prizes loyalty, $10,000 or $100,000 might go much further than even $10,000,000 in the U.S. today.

The arms and armaments industry in the U.S. is not state-owned, but it is heavily regulated (again, for good reason) and cost-intensive to break into. Once one is in, the industry — at least when it comes to artillery shells, a basic staple of any military’s ability to fight modern war — is not profitable, and subject to the whims of politicians and unpredictable global events. A disruptive artillery ammunition startup doesn’t exist in the U.S. But it probably should.

TOP READS IN MONEY & FINANCE

NATO has a new fund that seeks to back and boost European defense-tech startups. There is, alas, a ban on weapons development in the fund.

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TOP READS IN THE MILITARY

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The crises of national security leaks over the last 10-20 years, combined with cyber threats, have helped spur changes at places like the DIA.

TOP READS FOR VETERANS

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TOP READS AROUND THE WORLD

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HUMOR

Passing on one’s college traditions from father to son.