Manufacturing 1 million drones a year | Olaf Hichwa, Neros

24:09But during the first few trips, it was like, it was like, it's like Paris, but, in Eastern Europe. I'd say the war has intensified a lot. The strikes on civilian infrastructure by Russia, it's awful. It's an act of terror. And they're really, they're not pulling the punches, right? They're purposely targeting apartment complexes of civilians. And you hear shahids up in the sky just buzzing by, and that's just like a thing that people have had to live with. What is a Shaqib? It's a Group 3, which is DOD speak for big drone. It's kind of like the size of like a minivan, and it's just packed full of explosives.

24:57Just packed. And they're super cheap. They're like tens of thousands of dollars. They have little rocket motors, so they launch up. And they're little deltas. They're not little, big deltas. It was actually an Iranian or a German design initially a long time ago. And the Iranians perfected it. That's why the name. And then there was this like crazy deal where Russia shipped bars of gold, literal physical bars of gold to Iran for the design. And then Russia started producing them. And now they send, you know, hundreds of these things every night to Ukrainian cities to blow up Ukrainian civilians.

25:33And worse than just hitting the apartment buildings often, they're really they're not holding any punches. They're blowing up power, which if you like if your power station goes down, people freeze. They're really just trying to blow up anything that makes the lives of ordinary Ukrainians trying to defend themselves hell. And those impacts are more clear in Kiev now. On one of the one of the nights I was in Ukraine last time, I actually went out with a military unit that was hunting shahids. And that was a really impactful experience, kind of hanging out with the guys. It's a much less official operation than you might think.

26:12It's like four guys that know each other really well. You know, two guys, they're nerdy. They sit back. They build the drones. I remember at the time they had like a fleet of five Interceptor drones that they were very proud of. And, you know, like talking about maybe soon they'll get a sixth. But these are like really prized possessions. And they've got a van. And they pack the van full of Starlink, a few of these interceptors, some really cool software, some radio tech they've been experimenting with. And they go park in the middle of the field. And our shift was like 8 p.m. to 5 a.m. And we were stationed basically just looking for Shahids.

26:49And, of course, like, you know, it's a lot of waiting, a lot of fucking with each other and maybe, you know, rotating, sleeping a little bit. But I remember, like, there were, you know, a few false alarms. there was a Shaheed headed towards us. Often these anti-aircraft or air defense positions, like you want to take them out, right? You want to blow them up so that way you can break a hole in the air defense and go through. So we got on high alert, but another unit went and killed the Shaheed before we could go and take it out ourselves. So like a few false alarms. The Shaheeds, they, like we saw them on a map and they would take the most non-trivial routes.

27:25Like the goal is to hit Kiev usually, most of them, is to hit civilian infrastructure in Kiev. It depends, but a lot of them are trying to get there. And you'll see a Shahid. It'll go like two-thirds of the way to Kiev, and then it'll turn around. And the reason for that is it just learned that there's a gap in the air defense, and it's going to send the rest of the Shahids to go exploit that gap. Or it's trying to find another gap from the inside. That way they can send more. So sometimes it doesn't make sense to just go strike directly, even if you're close. It makes more sense to gather information on where the air defense units are and where they can be taken down.

27:57I remember close to the end of the shift, one was getting closer and closer and it actually got in our bubble. And so we launched. We launched the interceptor to try and blow up the shock heat and we got close. But another unit actually blew it up right before and we were able to hear the boom. That was terrifying. But just the kind of realness of like, it's kind of like a video game in that you just have a map with like all these birds or drones flying over Ukrainian airspace. like, you know, hunting and it feels very, you know, fake. Like, it's just like you're looking through a screen until you hear the bang and you're like, oh shit, it's very, very real.

28:35Like there is a, there is a real world on the other side of this, you know, camera lens. Um, but I think it's the future of conflict. Like, I think people are going to be, uh, you know, more and more just fighting through screens. It's really obvious, but it's more and more going to be, you know, drone on drone and drones are like, you know, this kind of like apex predator of the weapon ecosystem it's like you know rock over scissors drone all the way at the top because

28:57Olaf Hichwa:it costs almost nothing and it's super like precise and able to deliver a lot of force yep yep i think people will soon realize that like basically you know the only way to defeat a drone is another drone and then there's going to be this drone war where you know one side is going to deplete all of their drones and then the other side is probably just going to surrender uh there's no point in fighting a like man on drone war you'll lose and when people know they lose like they generally don't fight that's one thing that i saw earlier today you collect some footage when the operators like send it back and i saw something that i just like i don't know never even occurred to me is like a soldier getting targeted by a drone turning around and then trying to shoot at it before it blew him up and you said that like 40 of drones get taken out this way or something like that something like that how is kind of like warfare evolved and the way that like people because i imagine like being that guy i'm like what the fuck am i doing out in this field you know getting targeted by a drone i think this is a good lesson in like contact with reality like i'm sure if like before ukraine you sat down like a weapons expert they would tell you about like oh we're gonna do laser laser defense the lasers are gonna work you're gonna um you're gonna use you know directed energy weapons to take out the drones you're gonna uh hack the drones or something um you're going to use ai to take out the drone somehow um i'm sure there would have been like a really really complex like plan of what defeats the drone um when you look at you know reality like i saw this shotgun that came out landed like a drone buster ai or something like that ai stands for advanced impact it's just a regular shotgun uh with anti-drone rounds um because that is the most effective weapon system in taking out fpvs close range um and in war you have to kind of make do with what you have and kind of the non-optimal solution is is often what you have to work with and and so now ukrainians have uh mastered the art of like anti-drone schools like these you know infantry members they'll go to these schools and they'll learn how to shoot down a drone with uh with a you know an assault rifle that they have or a they're just their their main rifle that they have um and yeah it's it's you got to make do with what you have i watch a lot of like youtube about how these weapon systems are used and it's it's really heavy stuff right like behind these videos there's lives that are lost it's it's really impactful like heavy heavy content um but you learn a lot about the tactics and obviously i have you know tremendous respect for the people that actually fight they learn so much more but you can learn a lot via uh just like watching youtube and and these these you know highly trained Ukrainian operators.

31:39They're insane. They'll hear an FPV, five bullets later, the drone's taken down.

31:43Olaf Hichwa:Is there anything that you've taken or learned because you watched that footage that you just would never have figured out if you hadn't? 100%. I mean, like, half the features of our product are based on those videos. I think, like, watching users, like, put their rucksack down and get in position quickly to deploy the drone, that was one of the reasons we came up with like it sounds simple but color coding the antenna mounts uh like it's very important you get the antenna on in the right place you don't want to be like ah which one goes to where reading some code like low goes to low screw that orange to orange white to white i think that was made very clear via like one of these videos things like how the the ground station displacement kit works like being able to just super quickly plug in these connectors and making sure that they're keyed to work very carefully comes from video inspirations and then also um watching how like the you know usually it's not just like one dude with the drone it's a team so like two three guys um watching how the navigator talks over the shoulder of the pilot we set up this like secondary screen there's a port on our ground station so that you can just do usb video you can plug in your iphone and use that or your atac device um like details like that have been absolutely uncovered via these YouTube videos.

33:02Olaf Hichwa:What other things are you guys making tweaks on, making iterations on to just improve the operator experience? We recently redid the ground station software interface. There's like six different radios in the system you got to configure just right. There's different modes for these radios. We try and automate it as much as possible, but there's a lot of systems that go into... People are manually configuring six different radios every single time they launch? There are auto modes. But, yeah, like if you're an expert operator, you got to mess with these different radios. And we work very hard. Is it like mission specific?

33:40Yeah. They'll find out there's jamming in certain areas and then pick a certain mode. There are manual modes to things that you want to use sometimes. You might want to change your car to manually shift gears, as an example. Or really, you should have a stick by default. But anyway, just how those menus work out, they're so important. Like someone's life is in the balance on whether this menu is a good user experience or not. So we care so much about every page. And that's just like one tiny example, how the drone interfaces with various other systems, like what battlefield management softwares we interface with make all the difference in the user experience.

34:19And we care a lot about it.

34:21Olaf Hichwa:Is there anything that you can see is a product or project that you're definitely going to want to tackle in the future, but are not going to tackle today because you just don't have the bandwidth or the necessarily technical know-how yet? Yes. Consumer photography drones. Okay. Right now, most of American weapon systems, like obviously, it's going to sound obvious, but they're funded by taxpayers. Thank you, Ty, for your support of Bandit and Archer. You know, it is your dollars. I actually don't make money, so I don't pay taxes. Okay, fair enough. Well, thank you, my other friends, for paying taxes.

35:00That sounds very obvious. Like, weapon systems are funded by the government. China has kind of, like, transcended this to a certain degree. I, as a DJI customer, am funding China's military industrial base. You know, they make, in China, cargo ships. They're required to meet the PLAN, People's Liberation Army, Navy standards for military vessels. So when I buy that thing from China, I'm actually funding their Navy. So it's crazy that they have obviously not their entire military budget, but a good chunk of their military budget is actually funded by like American and other Western taxpayers. That is that is smart.

35:42We should start doing that. We've fallen so far behind that it's it's almost impossible. competing with dji uh the world's largest drone producer is nearly impossible um they own 70 plus percent of the world consumer drone market and i don't know of another consumer company with a bigger advantage on all the competition than dji like you look at an iphone and i don't know a samsung and like you can see the difference in quality of product is like this much to dji it's dji is the next competitor it's insane they're just so far ahead and kind of building an american competitor to that takes time um we're not ready for that yet i think it's going to take a million drone factory first to get to the unit economics where that makes sense um but yeah my answer to that is consumer drone products that will uh that will be a challenge one day it's a great way to have credible deterrence china will start buying them they'll start putting cameras pointing at their critical infrastructure, and that'll be a really interesting data source.

36:46Maybe I'm dreaming there, but having a consumer product is critical to maintaining credible deterrence.

36:51Olaf Hichwa:One of the other things I heard you talk about today was the different suppliers that you guys are going to work with. And I was kind of thinking to myself, there's enough of them where clearly you have a strategy versus just fully vertically integrating every single thing that you're going to do. Why not vertically integrate everything? You can never be 100 % vertical, right? We're not designing our own screws. We should probably use the same screws that SpaceX uses and everyone else. So there's a big strategy. The make versus buy strategy is very important. The way we think about vertical integration, it's first about, well, if nothing exists, like when we started, we wanted a drone radio for 50 bucks.

37:33we reached out to the existing players and we heard like$2 ,000,$3 ,000,$5 ,000. So, okay, go vertical. Easy, easy answer. Next, it's about like, does this have a massive impact on the quality of your product? For example, like if we were using someone else's fly computer and their fly computer was a little worse, it had a little bug, like all of a sudden our drone flies like crap and our user's life is at risk, we should make that ourself we want to control every variation of that thing we want to make sure every defect is like directly reported and not hidden because contract you know and also it's like on you if you know it's on us yeah if someone fucks up it's on our team and they get let you know they they get to see what happened to the production line and you know they don't get to say oh well we'll just work with other people like it's their job to be full-time so when it's important to have control that's important um it's also like there's a there's a financial aspect behind it.

38:32Like, um, let's say the radio example. Um, if there's one very low cost piece of a radio and that has a really long lead time that needs to be stockpiled, it's much more efficient to just stockpile that one, two or three small parts of the radio instead of stockpiling a ton of fully assembled radios. When there's some sort of like supply chain advantage you can do there, that's another great reason to vertically integrate. So like, uh, On our radio, there's a few chips that are long lead that we care a lot about making sure we have a lot of. So we'll stockpile those couple dollar chips in massive, massive volumes.

39:11And then the other super common parts, we won't stockpile in such large volumes. If we were buying off-the-shelf radios, we'd have to stockpile entire radio assemblies. It's really expensive. There's a bunch of reasons to vertically integrate. If you don't tick any of these boxes or others, that's when you get to like, just don't worry about it and focus on their stuff.

39:33Olaf Hichwa:When you think about like the first version of the Archer or the first version of your drone versus the one today, and you also think about like the amount of time. I think I saw the statistic that most of the like drone competitors that are selling a similar product take like 12 hours to make one unit. And then you're taking something like 45 minutes. And I imagine that a huge part of that is literally just ringing out a bunch of like just deleting parts. you know just making it a simpler thing reality forces the elon algorithm it's crazy how much like more efficient have you been been able to make the production of drones through just constant iteration of the course of the last three years oh man we spent like the better part of a month or maybe more in soren's parents basement building the first 30 um and those were like those were long days um not much day per drone yeah minimum and there were a bunch of people there um so like many man days per drone and i thought that design that first design was like i thought at the time that was a really design for manufacturing design as a you know engineer that thought they knew what they were doing um but nothing teaches you how to make a design manufacturable except having a production line that you can test it on so you know production techs here go up to engineers are like why is this painful engineers come to the production line they watch oh my gosh a technician has to route this cable underneath because it's more comfortable that's ridiculous we should have designed it differently there's just this like constant um back and forth that needs to happen domestically like we need to have the line here right next to the engineers to really keep that loop tight.

41:16And I think that is what gives us the kind of hope to get to a million drones per year. Like we have learned so much by producing 37 ,000 archers and every lesson is captured and is going to go towards that million drone design.

41:32Olaf Hichwa:There's different levels of scale. And so certain techniques for building the drones at, you know, 5 ,000 drones a year won't scale to like 50 ,000 drones a year, won't scale to 500 ,000 drones a year. What things have you guys had to stop doing or massively improve efficiency on in order to actually scale production? So when we were making like hundreds of drones a month, we got to just not use connectors and direct solder. You just take a wire and a board and melt the two together, essentially. That was a huge, like it just makes everything simpler and tighter. you now have to train users very carefully, and they have to get lucky to make sure that solder joint is up to quality, et cetera, et cetera.

42:17Obviously, that doesn't scale. So we were like, okay, must not have any manual solder joints. That was a big step forward. Most FPVs, even today in Ukraine, have manual solder joints. So we avoided that. When you get up to, I'd say, high hundreds to thousands of units a month, that's where you have to get really worried about things like Pokeyoke. You have to make sure that if you can, like, there's no way to install a part wrong. You know, you'll notice the two camera slots don't have the same interface because you could flip them and then things would be messed up. Little details like that are really important.

42:51Like, the two sides of a connector, they either have to be reversible or they have to use a different connector on each side. There's all these, like, little extra gotchas. when you get up to like the thousands of drones per month like you know five ten thousand this is where you have to be really smart about your supply chain like we could buy every chip in america of a certain part number that goes in archer and then not have enough to sustain a month or two of production because it's just like all the distributors combined only have you know 5 ,000, 10 ,000 chips. So now you have to design around the manufacturer, the like, you know, TSMC's lead time in Taiwan, or better, you have to design two different boards.

43:40You have to design board A, do all the work to design board A, and you have to start again with board B, and it has all the same requirements as board A. It must behave exactly the same, but you have the simple dacha of you can't use any parts from board A. You have to figure it all out again with different engineering strategies, a different microprocessor, that kind of thing. That's the kind of like hidden gotchas. And the product seems the same. Hey, my iPhone seems the same as every other iPhone, but there's actually a bunch of different variants of iPhones that use different memory chips and that kind of thing.

44:11That way you can have stable supply chains.

44:14Olaf Hichwa:Exactly the same performance and stuff. Yeah. And they look identical. You don't even see the work that that entire team of engineers put through to redo all the work of design a have it function exactly the same and not use any of the same parts um and these are like just a few of the kind of like really hidden gotchas that it takes to get to a million a year of something and i think that's why like you know no other defense company in america makes a million of anything that isn't ammunition like we make a million a year of bullets name another product that is made in a million units per year starlink terminals i think starlink terminals totally yeah five million a year yeah i mean starlink is is is breaking records there i wouldn't well they don't make a million star shields per year i wouldn't consider that a defense item um the starlink terminal production is insane um it's it's a consumer product um but it's probably the only really full-fledged example of china beating consumer electronics production like consumer electronics production that would beat china here in America.

45:20That team is incredible. We're very lucky to have engineers that have worked on that production line. The Starlink user terminal line is an incredible, incredible feat for America.

45:31Olaf Hichwa:For the people that come from that line and come work at Nero's, how do they think differently than everyone else from everywhere else? I've been told, like Elon always said, we're going to make this line run so fast that we're going to have to consider the aerodynamic drag on units as they whiz through the production line. That's how fast this thing is going to run. Like, you know, they'll be in design reviews and, you know, we'll talk about, uh, you know, manually aligning a connector to plug in. It's like, no, like this is completely unserious. This needs to have, you know, alignment tools or, or just not exist at all.

46:06The kind of bar for like when a design is done and ready is just so high. And like, also the understanding of like getting the thing to work once is one-tenth of the work. Like it is so simple to build the drone in the basement and get it to fly. The challenge is in the iterations to get it manufacturable. Those learnings are really, they come with time. And we're really lucky to have great people that have had that time.

46:33Olaf Hichwa:One of the things I think I asked you last time was this idea of, you know kind of where the puck is going, and you want to be able to ship the best thing that you can ship at any given time. but obviously you can't like immediately make an improvement and then scale that across you know your units is it improving with scale like are you getting better at shortening the the time between making an improvement and having it in users hands or is that getting longer like how does that change in some ways it's getting shorter in some ways it's getting longer I'd say we're engineering faster at this point like one of the things I really love about engineering near us is that is a bunch of like really small teams that are all behaving like an early startup.

47:15You know, we're only three years old, so we have a lot of that DNA in us. But also we're like perpetually terrified of big company bullshit. So we keep teams that are super, super tight that, you know, iterate quickly and are able to ship quickly. With that being said, big production lines, they don't transition overnight. It is a big ship to steer when you're making these kinds of quantities. Starlink doesn't come out with 10 ,000 variants, and it builds one thing, and it builds one thing well. So I'd say we are faster at iterating on new designs and kind of making, adding features when you're in engineering land.

47:52Like prototyping. Exactly. Faster prototyping, but slower mass production changes. The line is fixed.

47:59Olaf Hichwa:In your mind, when you're kind of doing these two different modes of, like, mass production or prototyping, which one's more fun? well i'm a masochist so mass production is more fun for sure it's just the the weight of the problem is much bigger like you see you know a station go down on the line and then literally like a drone comes out of the building every two minutes so you just like drones just start stacking and stacking you're like we gotta fix it we gotta fix it and the thing with production is that we pay for materials to come into the factory obviously and we only get paid when materials go out of the factory.

48:34But generally, the materials coming in don't stop. So you just start piling up and you just see like the inventory piling, piling, piling and getting perpetually closer and closer to bankruptcy as the company's balance sheet just gets converted into parts. It's a stressful, it's a crazy stressful activity, but it's so fun. Like the magnitude of the challenge is so real. And you have to be so worried about like every little part of the design that can get you. You know, there's so much, ah, yeah, it'll fly. Uh, like, ah, we'll take the risk on, in, in prototyping, but in, in production, you gotta be a lot more careful.

49:08It's like a game of 3d chess. You gotta, you know, anything that can bite you will buy you. Of course they both have their fun. Uh, you know, some engineers much prefer this stage of development where you, you have more freedom to mess around and we have both. Um, but if I had to pick one, it is production for sure.

49:24Olaf Hichwa:I know that Elon has this idea of like walk to the red when he was going through production hell in 2018 for the Model 3 production ramp. I think there'd effectively be screens all over the factory of whatever was like slow on the line. Yeah. And he would just go to one of the red screens and then just unfuck the bottleneck and then go to the next red screen and unfuck that bottleneck and just continue doing that until the line worked. When you like go on the line and you see some bottleneck, how often are you like figuring out there's some part or process that you don't even need to be doing?

49:58I mean, all the time, like you'd be really surprised how simple the solutions are, uh, to some of these problems, right? Like, especially as the, as the company grows, like there are, there's a lot of juice to squeeze in, in simple solutions. Um, you know, you got to try the, the idiot checks. Do we even need this part? Can we delete this uh like you know who qualified this part uh show me the test data did we make sure this part works um but walking to the red i'm a big fan of it like uh soren and i we both try very very very hard to put incredible people in charge of basically every responsibility we have by default and then we spend a lot of our time just unfucking um like in theory if the company's running well our calendar should be free and we're able to just pick the most fucked area and dig there.

50:52That's, of course, not always possible. There's some things you want high touch on, but that's generally our philosophy.

50:58Olaf Hichwa:One of the biggest challenges with scaling this type of business is you have an almost single customer and that customer has to scale with you or else, again, just like you'd have inventory piling up or parts and stuff piling up, you can't scale without people buying the drones. So how does that relationship with the U.S. government and other governments work? And are they kind of moving ahead of where you can scale or are they not? It's such an important and complex relationship. There's a lot of really, really impressive, impactful work being done in that domain. If we want to build this factory that credibly deters conflict, it needs to be profitable.

51:42It can't be like a charity item. You know, our drones are$2 ,000 each. A million drones are$2 billion worth of drones. And that's just the drones. Like, what about the production, the engineers? There's a lot of stuff that goes into that. That's not like something that happens without a profitable enterprise around it. And the government really wants this too. Like, our incentives are super aligned, right? Like we exist to serve the American warfighter and to provide credible deterrence. And most of the people that are in the government, they have dedicated their lives to this, right? Like they could get way better pay outside the government.

52:21Often they served in the armed forces. They care so much, deeply, deeply about making sure that America has credible deterrence. So the like incentives are often aligned. It's just the government is a big organization.

52:35Olaf Hichwa:You know, it's a really, really big organization, largest employer. It's like the ultimate aircraft carrier. It takes 200 miles to turn. Forever to turn. And a lot of details that go into like writing a company, a$2 billion contract to build a million drones, right? It's not like something that happens overnight. So that relationship, it's often it's a lot of strategizing together. It's a lot of like, you know, working with the customer. It's explaining the customer, like I mentioned in the beginning, it's explaining to the customer what the warfighter needs. Explaining to the government what the warfighter needs.

53:11It's also explaining to the government how to contract a million drones and what they need to do. And these very, very well-meaning folks in the government, we sometimes have to explain to them what we need. And they also explain to us what their blockers are, what makes it hard to actually buy these things or field these things. They tell us, as an example, listen, Marines want to fly this drone, but they can't without crazy sign-offs, very, very, very senior exception to policies because of spectrum regulation. So we go, great, the answer is a JF-12. that is like a approval to use the drone on any military base and then we work we figure out how does the jf-12 process work who do we need to talk to to move through that quickly what engineering resources can we give we start doing a bunch of testing ourselves to to make it so at the end of the day the marine can fly the drone and they don't have to stress about it but it's very much a symbiotic relationship and it's a partnership that goes very deeply we really appreciate government partners that understand the importance of explaining the what, but not the how.

54:33I think government is very good at, like, they told us, you know, the Marine can't fly, can't fly the drone, or we need to strike a target, you know, far away, x kilometers far away. Those kinds of, like, high-level capabilities are something great, well-described by the government. And then we, work on how that's done. Like we own the implementation and we work best with customers that understand that really well.

54:59Olaf Hichwa:You had to fast forward a couple of years and you guys do have this thing fully operational and it's making a million drones a year. What does that business look like structurally versus the one that you have today? To build a million drones a year, you basically have to build a city. you have to build an entire ecosystem of components and each little detail in that drone has a massive impact you know let's say you choose to use a chip uh in the drone and that chip is just 10 bucks all of a sudden you have a 10 million dollar po for just one year that you're waving around you probably want to do a few years of this so there's a 30 000 30 million dollar contract to be one for one chip in this drone.

55:43And there are hundreds of electronic components, probably thousands if you include all the SMT components in this system. You have to build a city of suppliers. I mean, a lot of it should be vertical, but eventually, you know, someone's got to sell you the raw materials probably, unless you're going to open a mine. So you're building a massive ecosystem and then internally the kind of level of intention that has to be put into every part of the design at a million units per year you assign like everything becomes a challenge like just this you know this this this cable becomes a massive challenge like how do we how do we design this cable to be you know really compatible with a million unit per year run rate How do we make sure that the motors are compatible?

56:32Each one of these almost becomes like its own little company with its own responsible individuals and folks that control the destiny of that part. So you build a massive ecosystem with more specific areas of extreme ownership. I think that's the best way to think about how to structure a million drone per year company.

56:55Olaf Hichwa:Are there any lessons that you can take from a company like BYD in China? This is the best example that I can think of of an entire city factory. Yeah. I mean, DJI's done it. How big is their factory? It's this massive skyscraper and a bunch of buildings around it. There's an insane tour that I've probably watched 20 times on YouTube of a drone flying through their campus. It is mind-boggling. but that's what it takes to build a million units per year, and it took them over a decade. When you think of Chinese production lines and factories versus the thing that you guys have right here, and in general, just United States factories, what are the biggest differences?

57:44Olaf Hichwa:What enables them to be that much more efficient? One of the first things I did after getting back from Ukraine was going to China. You went to China? I went to China. Was this before getting blacklisted? This was before getting blacklisted, before getting sanctioned. But, yeah, I mean, I wanted to build drones. I was a professional drone racing pilot before this, and I wanted to see where the drones were made. I had friends in China, I mean, sponsors that would send me free stuff. That's kind of the extent of the professionalism, but they would send me free parts, and I knew them. And I knew that they got into building drones for war.

58:27They didn't know that I was going to get into this, but I knew that. And I DM'd them. I was like, hey, I'm going to be in Shenzhen. Do you think I could see your factory? And they were like, sure. They knew, you know, Soarin' had a consumer business selling Chinese drone parts. I also sold Chinese drone parts. And they thought I was a customer. So they showed me around in detail. They told me where every step of the process had quality checks and what the tolerances were. They were so happy to brag about their specific tolerances on their quality checks and the names of the high-end machines they used to build these various parts and the different steps in the process for ensuring the best quality drone.

59:10And they were showing me drones that were destined to Russia. They showed me these production lines making 2 ,000 Russian tamikaze drones a day. and honestly insanely impactful trip right like like that that's the end state uh or not the end state but that's a that's where we're going um one of the biggest takeaways there was that their manufacturing is pretty simple it's a lot of people at desks doing pretty simple labor um and i think it's not exactly how we're gonna run our labor i think we're gonna care a lot more about the workers um like you know i'm sure you've seen the the images of the foxconn suicide nets and the like you know dorm rooms for only men or only women seven days a week dorm room factory dorm room factory the the production you know obviously the number of people on the scale was impressive um but i think we can do much better here i think we have you know much smarter automation and i'm sure that's changing in china like it's moving away from uh manual labor and and towards automation but i think we we can beat it by far um what i want to copy from china and what i was most impressed with is actually not the production side i don't think china is that advanced they're advanced in the design side you could literally go to this hua shangbei it's like a bazaar like a street market for electronics and you can buy chips like a a dude will sell you a watermelon and a chip and a FTV drone jammer but we'll we'll set that to the side and you could prototype with that and then you could buy a new chip same day and you can go to a different guy down the street and he will in his like sketchy like you know thousand square foot building build you a printed circuit board with that chip and you can go to another guy that will build you a CNC enclosure same day.

1:01:10And you have this like massive ecosystem. It's all down the street from itself that allows you to iterate on products. And this is how they come out with an iPhone every year. This is how they kind of make super rapid progress on designs so that they're manufacturable. And I think that's the secret sauce. It is this industrial base, this city, this ecosystem that allows engineers to iterate at ridiculous speed. Like, you know, we spend six weeks waiting for boards, generally, for our radius. In China, that is one day. You get one day board spins. It is wild.

1:01:52Olaf Hichwa:How are they that much faster? Well, it's just volume. Zha Lisheng, JLC, it's a large printed circuit board vendor. They rib through boards. They make so, so, so many boards. And it's a light-out, lights-out, they're winning in automation. It's a lights-out automated production line. I tried very hard to go. They would not show me that part. But the engineering infrastructure, being an engineer in China, you have a lot of luxuries. You know, maybe you have to deal with Big Brother, but you do have a lot of luxuries in how fast your design works. I think that is what is needed to build the million-driven ecosystem.

1:02:33You need this city of industrial services, almost, where you can go down the street and get your board made the same day, get your camera made the same day, get your lens for your camera cut the same day, get your injected molded part done. That ecosystem is so powerful. And I think that's what the kind of million drone company looks like to a certain degree. It's an ecosystem.

1:02:58Olaf Hichwa:I don't think it's fair to say that the U.S. has like credible deterrence against a war against China trying to take Taiwan right now. And so if you had to fast forward a few years and say we actually are in a state where the U.S. can credibly deter China trying to do that. What does that look like? Like, what does that require? I really like to think we do currently, and here's why. World leaders generally are pretty good at games of chess, so to speak. They don't get to be president or chair or whatever they want to call it by not being sly. When an opportunity opens, world leaders take it, like 99.9 % of the time.

1:03:50If there is a strategic opportunity for a country to win, to get more territory, to get more influence, they're going to take it. I mean, maybe there are some exceptions of extreme incompetence, but it is very rare. if america loses its credible deterrence if america cannot defend taiwan 30 seconds china's gonna do it that intelligence memo hits the desk of xi jinping he's gonna do it um so i think we still have credible deterrence it's just the rate at which it is going away is terrifying and i think she knows that as well right like she has spies in ukraine they're a lot smarter than me and that go to Ukrainian drone vendors or drone users and hear the same thing.

1:04:37They hear, you know, quotes like, um, silly Americans. They think we speak English here in Ukraine. We speak Chinese. We like the Chinese drones, not the American drones. Cause they actually work. Like they hear these same things that I hear. And those quotes are going up to the highest levels, I'm sure. Um, and basically there's just this like ticking time bomb. So I think at At the moment, we do have critical deterrence. It is just a credible deterrence. It is just going away very, very quickly. And I think what reversing course looks like is a return to building. It's a return to El Segundo being the aerospace capital of the world, not of America, because right now it is just the aerospace capital of America, in my opinion.

1:05:22The real capital is probably Shenzhen, China, especially for electronics. but it is a return to being a country of builders a country of people that make physical things and it's also a return of a country of patriots it is so easy to to kind of listen to the group think almost and just ignore weapons say i'm too good to build weapons you know It's just not my problem. Someone else can take care of it. I think that that view, like I said, comes from just a misunderstanding of the world. And it's an easy mistake to make. But I think the return to a time where we, you know, really put a lot of effort into being the world's police and being the people that maintain the most peaceful era in human history, which has been the past hundred years, is going to look like a return to folks building systems like Archer.