Booz Allen CEO on Silicon Valley’s Turn to Defense Tech: ‘We Need Everybody.’

0:00How are the U.S. businesses of Philip Morris International invested in America? We're invested in advancing science, giving adults who smoke better options. We're invested in American manufacturing, helping local economies thrive. We're invested in community, supporting military veterans and their families, disaster relief, and economic empowerment. Because we're proud to be invested in America. See how at USPMI.com. Hey Mims, before we talk to today's guest, did you ever think about how you would unclog a toilet in outer space? Honestly, that is not a question that has kept me up at night. But of course, now I have to know.

0:43Well, me too. But in today's episode, we tackled this difficult challenge and more with the CEO of Booz Allen. And also how the firm is handling cuts with Doge and the Trump administration and competing with AI in China and why it's partnering with big names like Meta and Palantir. There are a lot of surprises in this conversation. You're not going to want to miss it. That's next.

1:11A quick note before we get into the conversation. We recorded this interview prior to Israel and the U.S. strikes on Iranian nuclear facilities. Now, on to the show. The arrival of the Trump administration and emphasis on finding government efficiencies has affected a lot of people's lives. But some have really felt it, like Booz Allen's CEO, Horacio Rozanski. 98 % of the company's revenue comes from the U.S. government. And much of the work it does is so secret that Rozanski can't even talk about it or disclose what those giant contracts are for. The work, as the kids say, is mysterious and important.

1:53And Rozanski tells us he generally agrees with efforts to make the government more efficient. There's so much duplication in the way we are regulated and the way the government does things that a lot of money could be saved. Rozanski calls Booz Allen a tech company that helps government agencies leverage the latest advances in technology used by the private sector. and his role gives him unique insight into the global race to develop AI, especially against China. If we all believe, as I do, that AI is the dominant technology of the next 20, 25 years, we need U.S. leadership to be in front there.

2:31And to me, it goes back to speed. We have the goods. We just need to deliver them faster. From The Wall Street Journal, I'm Tim Higgins. And I'm Christopher Mims. This is Bold Names, where you'll hear from the leaders of the bold-named companies featured in the pages of the Wall Street Journal. Today we ask, how is government consultant Booz Allen navigating the Trump administration's cuts and looking for opportunities in Silicon Valley's turn to defense tech?

3:02Welcome, Horacio. Looking forward to talking about how you see Booz Allen as a tech company and the threat of China's AI development to the US. But first, let's discuss the elephant in the room when it comes to your company and the current situation in Washington, DC. 98 % of the company's revenue comes from US government-related work, and the Trump administration's efficiency efforts have really targeted the likes of your company and others. What's the situation when it comes to government efficiency? I think for a lot of people, the image of Elon Musk waving around a chainsaw comes to mind. Now he's pulled back from Doge.

3:39Is everything better for you now? Yeah. Did you get Doge-ed and then he exited? You know, let me start by saying, I think we all should be in favor of efficiency. Every large institution always has to look for ways to become more efficient. And if you're the federal government, if you want a way to think about it is your board of directors has 535 members, 435 in the House and 100 in the Senate. It is actually quite difficult to be as efficient as possible. And so we've been on the side of change and the side of efficiency from, frankly, long time before. I think we can all argue about, is this particular way of doing it?

4:22Is that particular way of doing it, what's better? And that's, I think, fair game. But I don't think anybody should oppose a government that is large at a time where we have significant deficits looking for efficiencies. Right. Absolutely. And we're a little bit of tongue in cheek there talking about Elon waving around a chainsaw. But this is a real issue for you all having to deal with this. And you have proposed a lot of cuts. The General Service Administration, which is which helps oversee the procurement for federal government, has been pushing the likes of you all to propose cuts and whatnot.

5:00What's your total run for how much you propose cutting? You know, what we propose is different ways of doing our work and the federal government contracting with us to make us more efficient and to be able to pass the savings on to the federal government. There's a significant portion, if you're in an industry that is highly regulated, There's a significant portion of our cost and the cost of everybody in this industry that comes from this regulation. You know, there's so much duplication in the way we are regulated and the way the government does things that a lot of money could be saved. So you're working with GSA, but are you working with Doge?

5:37Are those kind of one and the same now? You know, we're working. Doge is in the agencies working through these issues agency by agency. And we interact with people at all levels in the agencies. including the members of Doge. You know, a lot of our work and our technology has been reviewed. I'm happy to say a lot of it has passed muster with flying colors. And so, you know, I have a personal philosophy, which is I will talk to anybody who will talk to me. And that's Booz Allen's ethos. You know, we want to engage and we want to be part of the solution. I mean, I think it's interesting kind of situation here.

6:17A lot of the stuff that we heard out of Elon Musk and Doge, I think you probably could buy into the idea of looking for ways to do things better and more efficient using technology as a way to improve processes. I mean, listening to Elon Musk talk about some of the horror stories of the things he's found, he's always pointed this old mine in Pennsylvania where government workers are processing retirement paperwork by hand and pencil and whatnot and saying this needs to be more efficient. This needs to be modernized. Yeah. And Tim, I will say this. I mean, I think one of the big value added of all of these processes and what Doge has brought is we are now having this conversation.

7:02You know, a lot of the things that people are finding out and getting interested in, we've known for years, we've argued for change and modernization of these things for years. I didn't get invited in podcasts until now to talk about it. And I think this is a, you know, it's a good process for the American people to know how our government operates. Well, let's lean into that because I think a lot of people think of you as a consulting firm, but you talk about how the company is really a technology company. And I heard you the other day talk about how AI has increasingly become foundational to how the government operates.

7:38And I'm curious to hear more about that, how your company is developing AI and how you're seeing the government actually deploying that technology. So let me give you quickly the sort of the arc of Buzellan in the 21st century. This is a hundred year old company. This is a hundred year old company. And I won't take you all the way back to the beginning. But we are a pioneer in management consulting. I joined the company, by the way, as a summer intern in 1991 in our private sector business as a consultant. And I learned a lot doing that work. And I think I added a lot of value. Wow. So straight out of university.

8:18Straight out of, I was in grad school. Yeah. And I guess I must be not so great at writing resumes or interviewing because I stayed. And I frankly have loved my time at Booz Allen. But, you know, around, you know, post 9-11, we became much more central to some of these national security missions. Counterterrorism, defeating IEDs in Iraq and Afghanistan, a lot of work around cybersecurity. And the closer we got to those missions, the more the equities and the needs of the government and of the national security apparatus tend to conflict with potentially some of the work you're doing in the private sector around the world.

9:04Case in point, you know, I've been sanctioned personally by Iran and by Russia, and there's many places in the world I cannot travel to. A lot of our colleagues had the same dynamic. So in 2008, we actually separated the two businesses, the commercial consulting business that most people knew, the business that we started with in the 1910s, from the business that was doing increasingly more and more mission technology work in the federal government. If you look at our business now, about 75 % of what we do is national security oriented. it. Almost everything that we do is about taking technology, whether it's technology we develop or one of our commercial partners develops, and making sure that that technology gets into these missions.

9:49And Tim, to your point, on that journey, we have been pioneering new technologies, really, as they've come up. I began our investment on AI in 2014. 2014. 2014. I was already just looking at these things. I have a part of my degree in statistics, and I had looked at neural networks and I saw that some of that stuff, I was deeply interested. You know, if I'd been born 20 years later - So you saw the transition to deep learning and its broad applications, especially in national security. Absolutely right. You know, if I'd been born 20 years later, I would have been a data scientist. We didn't have cool names like that when I got through school.

10:27Right, when you got through school, it was just like actuary? Yeah, I didn't want to be that. So I got a degree in business administration instead, but I took all of the coursework that could have made me an actuary. And as I saw this journey, we were really interested in that. One of our scientists tells a story that she spoke at a conference and talked about ChatGPT1 back, and I think it was maybe 2018 or something. And people were looking at her like she had two heads. And then when LLMs finally broke into the public consciousness, we were ready. And if you look at us now, we're working on agentic.

11:09We've been doing that for a while. We're working on physical AI. That's everything from autonomy to humanoid robots to digital twins. And then we're also working on adversarial AI. This is the stuff out of science fiction, right? That we think of science fiction, whether it's robot cars or drones flying through the air having combat or humanoid robots doing human-like things. I mean, this is the cutting edge you're investing in there. We are. And it's going to be really important for these models to understand the physical world in the way we understand it, to be able to interact with it, to be able to become really useful.

11:48If you think about a world where we want to reinvent manufacturer, You think about a world where we want to keep our troops safe in the field and we want to have drone swarms as opposed to individual drones and so forth. We're going to need physical AI capabilities. There's a ton of investment going into that. We're certainly not the only ones. But in the national security space, we really understand it. We just heard how Rozanski sees Booz Allen as a tech company. Next, why people in the tech space are becoming interested in national defense. An area that until recently was definitely not very cool in Silicon Valley.

12:26The fact that a lot of these companies and a lot of these brilliant minds have taken an interest in our national security, we welcome them and we want to work with them because we ultimately need to be faster as a nation. We need to be more successful as a nation against these new technologies. And we need everybody. Stay with us.

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13:33There are a lot of other folks investing here, you know, and you're partnering with some of them, right? So Palantir, Shield, Meta for AI and Space. What role do you play in those partnerships? So on physical, we're partnering with Shield. We're partnering with Scout AI, which is on the ground base. And then we're also partnering with NVIDIA as we bring their capabilities to bear here. In all of these things, we play multiple roles. One of those roles is we actually build our own technology on top of their stacks, as opposed to starting from scratch. I'm sure we're going to talk about this when we talk more about AI, but I'm obsessed with speed.

14:19and reinventing the wheel is not what we're about. So we work with these companies to take what they do and help transform it so that it is more valuable to these missions. You know, Shield is unique because they have a national security first footprint, but a lot of companies are dual use, right? And I think a lot of the investment that the government needs to take advantage of is this dual use investment where something is built for a commercial application. but it can actually be used as a national security application. But help me understand then what's your role? I mean, Shield, right? They started making drones.

14:56They're very national security focused. But Palantir, they're no strangers to national security. Meta obviously is for now. So what's your role? Are you an intermediary? Are you a translator? Are you an integrator? It depends. But by and large, we're a co-developer. A lot of these technologies were not architected to serve in the battlefield as it exists today. So a lot of these amazing technologies and some of the great companies that you talked about, their technology was built thinking of the cloud as it exists in a commercial environment where you're always going to have connectivity, where the thing doesn't have to get wet or dirty, where the thing doesn't have to operate from space.

15:40So we closed those gaps by building technology that actually makes that happen. So I'll give you an example. A lot of edge applications, even today for commercial use, assume constant connectivity. And just to translate for our listeners, edge just means there's a device out there doing the computing as opposed to just like a dumb terminal that's talking to the cloud. Yes, right. And so you have this device and it wants to connect with the cloud. And when it connects with the cloud, it's beautiful. If it loses connectivity, it can take 45 minutes to re-sync. Which is no good if you're a cruise missile or a soldier.

16:18A soldier in the field. Or if you're a commander out there trying to make decisions and trying to make sure that your information is up to speed to what the headquarters has, they can't wait 45 minutes. 45 seconds can get them killed. And so we have built technology that essentially addresses that specific gap. In a recent exercise, one of these great, there were two instances of the technology running in a military exercise. Think of a war game. One was built on our stack and the other one was built on the traditional stack. Well, guess what? When the power went out, when the bandwidth went down, when they simulated an electromagnetic attack, our technology kept working.

17:01The other same underlying system stopped working because it was never been prepared to operate that way. Think about space. We just put LAMA up in the International Space Station working with META. It's very cool. So is that so the astronauts don't get lonely? They have somebody to chat with? So this is on the research side. But what this thing does is it ingested all of the maintenance manuals of everything. And so now you can query them all and say, hey, how do I unclog a toilet in the space station? As opposed to having to go read a big manual. It's the same thing I do at my house, but it's, you know, getting that up in space and making it work.

17:46You're unclogging the toilet with AI at your house? I will ask you at GPT, how do I fix this? How do I do that? I know how to unclog a toilet all by myself. Thank you very much. But, you know, these are the kinds of questions that, so this is really just what we wanted to do is make sure we understood on the compute environment that you're going to have in space, which is by definition always going to be old, right? Because you launch something and chips change on Earth every six months, that's going to be up there for 20 years. How do you make the new technology operate in those environments?

18:22that's what we bring to the table because, you know, the guys at Meta are incredible and what they built with Llama is extraordinary. But they never thought about, okay, how can I make it operate on a 20-year-old computer? Because nobody around here has a 20-year-old computer. So that's the gap that we close to make these things mission-ready in a national security. So just to put a fine point on it, like you got Llama to run on the equivalent of like a Commodore Amiga or something? It's not quite as bad. A 486. But we're working on all of these things so that they can really operate across satellites that have been launched at different points in time.

19:02And therefore, you're going to have completely different computer infrastructures. And at the same time, you need to make sure that it works, that you can patch, that you can update, that you can protect these systems across what is a very varied. You know, again, if I look at Booz Allen as a company and every company is the same, right? I mean, you have some old servers and some new servers, but that stuff could be three, four, five years old, out of sync. When it's 20 years old, 20 years out of sync, you almost have to rebuild this technology to operate differently. And that's, if you think about what do we do, we make sure that these things can run in the environments that our warfighters are going to need so that this is successful in the field.

19:44It's interesting. You have a venture arm, so you're out there scouting startups to invest in. And I'm just curious what the mood is like among these young tech companies when it comes to defense and defense contracts. Because I think a few years ago, that was going to be a tough sell. I mean, you listen to Palmer Luckey, who's the founder of Andrel, really one of the hot tech defense startups out there. And he talks about it like being out in the wilderness and not being loved and kind of being shunned. But now he's getting his picture taken with Mark Zuckerberg and they're partnering up as well.

20:23I mean, this is this seems like it's a hot area right now. What are you finding? It is a hot area and I'm so glad it is. You know, back when I was getting sanctioned by Iran and unfortunately, my kids had to go to school with the security detail. All of these tech companies were saying, well, you know, not for us, not interested. You know, we're happy developing games and all of that. I think the fact that - Ad tech or something. Yeah. The fact that a lot of these companies and a lot of these brilliant minds have taken an interest in our national security. We welcome them and we want to work with them because we ultimately need to be faster as a nation.

21:04We need to be more successful as a nation against these new technologies and we need everybody. But what's changed? I mean, where is this kind of, I don't know if you'd call it new patriotism or kind of new sense of kind of America versus others. What's changed in the minds of these folks, do you think? I think it's come from both sides. I think from the government and from the Department of Defense, you know, when they established the Defense Innovation Unit, They began to demonstrate that they really were interested in working with these companies and that there was an opportunity for them to serve the nation.

21:43And then on the other side, you have a lot of veterans now starting these companies and coming at it with that mindset. They're also looking at what's happening with the large companies. You know, the hyperscalers are also much more interested in national security than they were five, eight, 10 years ago and seeing real opportunity. And I think that the combination of the opportunities there, the mission is so important. And some of the people coming in, come in with this mindset of service. All of that is aggregated into this huge bow wave of tech coming into government that, again, is both excellent and much needed.

22:22so as somebody who is you know clearly a nerd for edge computing are you talking about me or you always talking about him we've definitely brought the minds together here um and and and you know tech for war fighters and everything you must have found the recent attack uh deep inside russia including an attack in siberia orchestrated by Ukraine, publicized really by Ukraine, including the details. You must have found that electrifying because, I mean, it's everything you just talked about. I mean, it's these trucks that opened up and it's drones where it's all edge AI that have been trained to, you know, find and destroy airplanes.

23:11A lot of people like me are saying this feels like a new era in warfare because we've never seen off-the-shelf AI and computer vision used like this before. Do you agree? Did you find it surprising? Is this a new era? Ukraine has demonstrated that necessity, once again, is the mother of invention. And they have brought things together that were meant to be together as commercial technologies to fight a war that is not of their choosing, but is existential. And so what they've done, I think, is, you know, with drones, with autonomy, with coordinated fires and a number of things using all commercial technology, because that's what they have available to them, I think has been impressive.

23:59And as a result, you know, we now are talking about things like a treatable mask, meaning you can put a lot of drones up there and you're going to lose the majority of them. And that's OK. As a new way of thinking about defense. And I think it's going to be very powerful. And the whole world is watching. You know, when I traveled last time I was in Taiwan and in Japan, they're watching so closely from the very beginning about what's happening in Ukraine. They were watching very closely about what was happening in Israel and really trying to understand the lessons of that and how those may apply to them.

24:36And we certainly are, as a nation, need to watch, we need to learn, and we need to lead. In particular, Taiwan is interested because of concerns about China, right, and what issues are going on there. What is the next kind of threat possibly there, I would imagine? Exactly, exactly. Exactly. And so, you know, they are threatened by potential invasion and they're trying to figure out how they would defend themselves, a much smaller country right next to a very large and powerful superpower. And so that's, you know, they've been thinking a lot about that. And then this is, again, I mean, going back to the national security point that I was making before, there's a lot of companies that, because they have large businesses in China, will not serve the national security needs of Taiwan.

25:29And as we configured our company, we wanted to make sure that we would never have that that hesitation of doing something with an ally of the United States because of a different business interest. We reached out to the ministries of foreign affairs for both Japan and Taiwan. They did not respond. Now that more tech companies are interested in national defense, Rozansky sees a need for them to think about how the government will use their products to help speed up deployment, something he suggests is currently more of an afterthought. Instead, the government comes in late once the technology has been proven.

26:05And, you know, again, that minimizes risk, but it also slows us down. That's next.