The Software Crisis Behind America's Infrastructure

0:00We have a software crisis. There's just no time to wait. If you don't have a sense of urgency, we're not going to help you, we need to do. You can build the most advanced equipment. You can produce it at the largest scale possible. But if you can't get it, where it's needed, when it's needed, it doesn't exist. There's always been collective defense, but not necessary collective logistics. Anyone nation can't do it alone. Whatever we're modernizing now, this is not going to be the last update. Software is never complete. Software is moving incredibly fast. The best type of worry fight is when you don't have to fight at all.

0:33The largest companies in the world today are software companies. And many of these companies have become household names for developing fun software. Software that powers the games we play, the apps we scroll, software that helps run our lives and manage our work. But the world also needs serious software, the kind of software that runs the autonomous vehicles in San Francisco, the software that ensures planes take off and land safely, the software that ensures critical supplies make it to our shores, and equally the frontlines of our military, even in contested environments. The challenge, across the commercial sector, and the public sector, much of this serious software is built on legacy technology.

1:14And with the world moving at the speed of software, our infrastructure gets more brittle with each passing year. When it breaks, it causes inconveniences at best and tragedies at worst. But here is the good news. Software continues to eat the world, and the brightest minds are increasingly interested in solving these serious problems. So in today's episode, recorded live at our American Dynamism Summit in the heart of Washington DC, we sit down with Philip Buckendorf and recently retired Lieutenant General Leonard J. Kaczynski. Philip is the co -founder and CEO of Airspace Intelligence, a company working to address the software crisis across some of the country's most critical public and private sector institutions from air traffic to defense.

2:00Lieutenant General Kaczynski is ASI's chief strategy officer and the former director of logistics for the joint staff, spending over three decades of leadership in air mobility and logistics seeing firsthand what consequences we face if logistics are overlooked. It's just like oxygen. It's fine up until you don't have it and it becomes a concern. Together with our very own Leila Hay, A16Z's Go To Market Partner focused on American dynamism, the group explores the challenge of hardening America's logistical network. But also how the public and private sectors can join forces via dual -use software and the modernization and risk posture that we need from governing agencies.

2:41So what's at stake if we don't get this right? Listen in to find out. As a reminder, the content here is for informational purposes only. Should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16z fund. Please note that A16z and its affiliates may also maintain investments in the company's discussed in this podcast. For more details, including a link to our investments, please see a16c .com slash Disclosures.

3:17Philip, I'd love to start things off with your story. On your ASI company page, and I quote, it says 12 years ago, you were frustrated by Germany's stagnant approach to national security and its economic degrowth mindset. Tell us about that moment in your life and why you came to America. grew up in Germany, spent some time in the UK, and then pretty much offered college. So this is about 2011, 2012. We're basically figuring out like, hey, what am I going to do in my 20s? I knew I want to be in a fast -paced demanding environment, but what I found in Europe was most of my friends just wanted to party.

3:53Germany just decided to pull out a nuclear energy to become fully dependent on cheap Russian gas, and then the top 5 % in my friends and social network glorified consulting to go into consulting at the same time. The government made it as hard as possible to build anything from starting a company to venture capital. At the same time, while all that kind of happened and while I observed that and internalized it, I heard about Silicon Valley. And I was like, that sounds like an interesting place. It sounds like everyone is just obsessed with building and technology. And so a friend of mine and I, we basically traveled to Palo Alto, stayed in a hacker house.

4:34For the first three years, I slept on bunk beds and ate frozen food from Trader Joe's, but it was the most exciting environment to be in. Everyone was building in that hacker house. Everyone was thinking startups and technology. And fast forward, I now probably spend nearly as much time or even more time in the US up then I did in Germany. Our second daughter was just born here in DC last week. And in many ways, a lift the American dream. Everything that I did, everything that I learned, none of this could have been built. I would say somewhere else. I was the ecosystem, the esoth, the energy, the people that enabled that.

5:09And I'm very, very grateful, but also determined that that was very much the right decision on where to go. I love that. You actually started your career in the world of autonomy and autonomous vehicles. Can you talk about your career journey there and what brought you to ASI? Yeah, I mean, when KD Lucas and I started ASI, I would say we were kind of the ultimate outsiders. We weren't pilots. We were not in defense before. We were not musicians. We worked on autonomous driving. And so this is around 2017, 2018. Autonomous driving was very popular, very hot. And while many liked that, we didn't.

5:44It felt overly crowded. And we started this company with a simple question, which is what are other modes of transportation that require better software. And the first six months of ASI, we went to Operation Centers and wanted to understand what's the state of software, what's the state of technology, no matter if that is in maritime or in air operation centers. And I would say to some extent, we expected or hoped to see science fiction, what we saw was like the most ancient software possible. And that very much made it very, very obvious to start this company with submission to enable the kind of world's most critical operations and optimize the most valuable assets and infrastructure that we have as a country.

6:24And that's how we got started. Fascinating. Leo, I'd love to hear about you. I know that recently in the Joint Chiefs serving as the Director of Logistics, three -star general, you just retired. What brought you to ASI? I spent over 30 years in the military starting with air mobility operations and then last seven years really logistic. So, after a retirement, I got the advice to kind of give yourself about six months to figure out what's next after doing something for that long. Although I knew what I was passionate about, national security, logistics optimization type things, and I had a chance over that six months to meet different companies, see different technologies and see a lot of things going on there.

7:01but I met Philip and the team ASI. Something unique and something, I guess compelling to me. One was, well, distribution platforms and planes and ships are all quite important. It really comes down to the data. We'll be able to access that data to be able to optimize and figure out what we need to do. That was something I'd say struggled with in the Department of Defense to be able to just access and then to understand and be able to really optimize the things we need to do now in the future. So the combination of that piece being exciting start up, of being exciting, not just support the military, but also the whole commercial sector, which is hugely important for both.

7:37Absolutely. And can you tell us a little bit more about your career prior to ASI? Sure, that started off actually was initially going to be an engineer. I went to graduate school for industrial engineering, optimization type things, neural networks, back 30 plus years ago before we really had processing power to do that. Then quickly went into pilot training and then flew mobility planes for many years. But last, really, seven years or eight years ago, my first real foray until I really brought her logistics. I was a director of logistics for US Africa Command out of Stuttgart, Germany. And that was also during the pandemic, but just working with Department of Defense logistics and infrastructure trying to move around Africa, just the size and scope.

8:15And then you had on the pandemic. And then went to Japan for command assignment, then came back to the joint staff as a director for logistics with Ukraine going on, support for Israel, everything else, and just realizing challenges with our defense industrial -based challenges with what we have. And really, one of the main efforts, it was really that data's software piece, which we just weren't very good at trying hard, but had a lot of catching up to do in the department defense. It makes a lot of sense. So you've been all over the world, and we're just seeing these common core challenges across everywhere you were.

8:48A lot of it is around data and software. Well, I'd love to kick off and first talk about the air domain. So obviously ASI got it's start in the aviation space. It's an area where we've seen a lot of challenges. On the one hand, we as consumers are told that flying is the safest mode of transport and statistically that's correct. On the other hand, we're seeing headlines every day. We're seeing news about air traffic control shortages, staffing challenges. Can you just help us paint a picture of the aviation industry and what this data play is? First of all, it is definitely by far still the safest domain, right?

9:22in mode of transportation, but we're fundamentally looking at three different problems. First one is staffing. So there's a significant staffing shortage right now in the industry. Why is that? You've seen a lot of retirements throughout the COVID pandemic. Training was not happening at the same speed during the COVID pandemic. I would say in general, more broadly beyond air traffic control, the industry might have also lost the ability to attract the very, very best talent. And we can talk more about what that also meant for software. So we have a staffing shortage on one hand, then we equally have a software crisis.

9:57We got legacy software that is faltering, that is falling apart. Whenever it happens, you have these massive outages that are incredibly consequential to the entire industry. And then you got very outdated infrastructure. I would say what is not talked about enough is how they are actually all interconnected. it. Let me give you an example, like staffing on software, go hand in hand. If you have better software that is much more intuitive, you can train people much faster. Even more if you have software that is supporting the operator, that operator is a lot more productive. You're minimizing workload.

10:35If you don't have to do 10 ,000 clicks, but just a few or you have AI that is assisting you in your decision making, you can be much, much more productive. And then, And even more, that is leading to second order consequence. If you're increasing productivity, that means you can actually pay people more, right? And that means more people want to operate or work in the field. And so I think what is not considered enough is like how staffing and infrastructure are fundamentally actually software problems. You can't separate these three areas and look at them in an kind of an isolated way. Software is eating the world.

11:08And that is very much true for this domain. and I think internalizing that, and as there's a mandate to modernize now and pulls this sector in this industry forward, like looking at it through the soft -brellence is absolutely critical, and I think somewhat that is happening. And it sounds like there are all of these challenges, but they're sort of being looked at in silos. It's like people are trying to say there's a people problem here, there's an infrastructure problem here, there's a tech problem here, but actually, these things are all connected, and if we can modernize them, that's how we're going to be able to and move faster.

11:39Absolutely. And you're training a new generation, right? If you're training a 25 year old ad traffic controller, like that individual grew up with iPads, Snapchat, et cetera, right? Google is using Google Maps when they drive a car, right? The generation that has retired or is about to retire, they grew up with IBM Green screens. Like they are familiar on how to use that technology. They use that technology for the last 30 years. But the new generation that is being trained now, they're not familiar with those legacy tools and I think it's absolutely essential that software is being modernized and it's being brought up to speed what people are used to use from a software quality perspective.

12:17And actually, I'd love to double click on that. We're here at the American Dynamism Summit in Washington, D .C. We all are grappling with the fact that there was a tragic accident here in our city just a couple months ago, a commercial airline collided with a military copter. Philip, I believe you were at Reagan National Airport at the moment that that happened. and people assume that good safety records equate with good technology, but it sounds like we're actually dealing with a lot of legacy technology. Can you help us understand what that looks like today? The way I would frame it is is very much a philosophy problem.

12:49The philosophy on what software should look like might be a bit broken. And I think it boils down to three issues. So the first one is software and compute are very much connected. So what does that mean? If you have software systems that are deeply coupled with the compute power, it's very hard to modernize anything. Specifically, if you're dealing with an industry where you have facilities all over the country. So you cannot just launch an update over the year and like all the software is updated. That doesn't work. No, you would literally have to go from facility to update the software or patch things if that is needed.

13:27And then every single time you're running at risk it's like, okay, can the computer actually handle that new software update? So the first part that really has to happen is when we think about modernization is like how do we separate software and compute? Essential because again, whatever we're modernizing now, this is not gonna be the last update. Software is never complete. Software is moving incredibly fast. So the separation of software and compute absolutely essential. The second part is historically Software in this domain has been built as if it would be hardware. While the entire world is moving towards a direction where even the hardware companies build hardware as if it would be software.

14:00So it's in many ways the inverse, all right? So whenever there's some modernization effort and no matter if this is with the government or on the commercial side and the operations, there's usually a need, a program is started, it's being funded. The first thing that happens is like, 1 ,000 -page documentation is written, already tens of millions of dollars are spent on just writing the documentation. No software bill yet, nothing shipped, nothing works, yet it's just a documentation, all right? So now we're already tens of millions of dollars into just documentation. And then over the next 10 years, for hundreds of millions of dollars, like software is being written from scratch for that particular problem area against those requirements.

14:37And then like 10 years later, all that is magically considered working and finished and it's being rolled out. Obviously by that time, it's already out of date and antiquated because this date of technology has changed a lot over those 10 years. And then it's somewhat maintained for the next 20 years, right? But I mean, we all know this. This is not how software is built, given how fast that's changing how fast it's moving. And then the third one is that the companies that historically participated in the space can no longer track the very best software engineers. Like the very best software engineers do not want to work in that ecosystem and with those structures.

15:13They want to build rapidly, right? They want to build close to the user. They don't want to be handed a list of like 10 ,000 requirements and just write code against that. The combination of what all these things meant is like you are basically in the setup that does not produce the software that should be produced. And then if you wrap all of that into an acquisition framework that is incentivizing those philosophies, you've got a really big problem at hand. And that is where we are right now, but I think things are about to change. We may talk about this later, but I just think about the Department of Defense, the way you describe that ecosystem and our challenges exactly the same, especially in the logistics business within each service, like the Army and Marine Corps Air Force, within each sub -unit as you go down, legacy systems are programmed by great people decades ago, but weren't designed to be able to connect and to do that.

16:00And we spend so much time trying to add Hock systems to put together where really should be thinking forward to have that clean sheet type of software that can be iterative. There's just no time to wait. I mean, you have to move fast. And even moving fast, it still takes some time. But if you don't have that sense of urgency, We're not going to help us what we need to do. On that point around urgency, we have to fix the status quo. It's exciting that this administration seems very committed to moving fast. We'd love your perspective on how fast we can solve some of these big challenges. Yeah, I think things will only change if the momentum kind of stays what it is right now.

16:35If there's a real urgency for change, I think President Trump, Secretary Duffy set the direction of the mandate. I think the next step is for Congress to fund the modernization efforts at the FAA. I would argue there are many ways it's one of those areas where there's strong bipartisan support for this. It's very hard to argue why not to modernize at traffic control systems and why the US should not have the very best software in that field. I think everyone agrees that it's the very best what we should have, right? But then I would say at the same time, it's important that the guidelines are put in place on how to spend that money and how to not repeat the same mistakes from the past.

17:15We don't need to spend 10 years on custom development if we can actually purchase software that already works in the private sector that is already commercially deployed, that we can literally just purchase and use as is, maybe make few modifications, but it's already stuff that is available. That is a lot more efficient that allows for much faster modernization and it's also the safest because it's already proven. Right? So I think the next two steps here is like making sure the resources are there. I think it's fair to say the FA has historically not had or more recently has not had the resources that they need to modernize.

17:49But then making sure the structures are done the right way so we're not repeating the same mistakes over again. Absolutely. And when you say proven software, we'd love to understand what exactly mean by that. How has ASI worked with the commercial sector and the DOD are ready to help provide these capabilities. Absolutely. I mean, to give you some examples, right? So when it comes to some of the modernization efforts that the FAA will pursue around, for example, at traffic management, like a lot of that software that is needed and a lot of the capabilities, we already have commercially deployed with the airlines, right?

18:23In many ways, a lot of the airlines are advocating, they would love the FAA to use this type of software. So instead of building that capability from scratch for hundreds of millions of dollars. And that has historically been the idea, right? Why not use something that already is deployed, that already is used by some of the largest airlines in the country? Like, why not use that? Because it already works. And the same has been true when we started working with the US Air Force. The reason why we were able to deploy was in month and have seen our software being used in live operations was simply because it already worked in the commercial sector.

18:55It was already deployed there in kind of 24, 7, 365 days a year type of fashion. I think there are certain areas where dual use is a good idea and there are certain areas where dual use is not a good idea But when it comes to some of these industries where the private sector and the public sector have to collaborate very closely together Dual use is a phenomenally good idea not just because it's more efficient But it also enables more collaboration and when it comes to the national aerospace system It's a system that is managed by the government But it's used by the private sector meaning bear lines Yeah, the risk of really bringing a Silicon Valley term to the table, like there's a network effect here, right?

19:33100%. You want everybody's singing to the same tune. And if you have a platform where everyone has access to the same data, then everything can be more efficient. Yeah. Just having my experience in the department defense aspect, and maybe if people don't realize, but day to day, that US military uses commercial transport, whether it's trucking, rail, air, see and then in kind of contingent or disaster type of escalation we would have to actually use more. So it's really the same resources, the same need for that collaboration and when we need to be able to really work well together on the same system and platforms.

20:08Absolutely. And that brings me to the next thing I wanted to double click on with how ASI has been expanding into areas like logistics. Can you maybe just walk us through what exactly that looks like with the DOD? Feels like a black box for many folks, then when we say contestable logistics, what does that exactly mean? So contestable logistics, it's actually a military term. Every military term, we have to like definitions and doctrine and even secret stuff that we discuss, but just to understand the concept of it. And most of us order things online. I'm sure you may have done that with them last week.

20:40So when you ordered, you worry about the price, maybe when it might get there, but most people have no concern about where it's built or the supply chain when it gets there unless it's going to be delayed or you realize there's some weather system in that. Any given day, you have contested logistics. It's just that the consumer and actually, even the CEOs of some companies or even senior four -star generals may not think about logistics day to day because it hasn't been a problem in the past. The idea of contested logistics is whether it's weather, whether it's maintenance, whether it's other situations, you're going to have challenges and how do you understand that predict and optimize.

21:14And that's what ASI, that type software. But on the other side, from the military perspective, is that the contested logistics from adversaries will look for your vulnerabilities, which would be in our supply chain and logistics pieces. So that's where you really to be able to outdo them and to maintain to be able to do what you need to do is to be able to understand where your vulnerabilities might be, have that resiliency in there and predictive to go around. Another one we, in the military move, an aircraft carrier or a group of soldiers somewhere, you make that decision, but people don't often think about the whole supply chain, the tail, I guess, of that you'd call it, the food supply, munitions, everything else to get them there and get them back, but that's hugely important, because no matter what great weapon system you have, if you can't supply and sustain it and move it where you need to, it's not effective.

22:01And I really think logistics and experts do think of it, as a weapon system itself. I mean, it's your competitive advantage if you can leverage it. If you can't and you don't see it, it becomes your greatest weakness and vulnerability. So we want it to be your competitive advantage by providing this capability. It's almost like electricity or water. You don't think about it working or not working until you flip the switch and your light doesn't come on or you turn the faucet and the water doesn't run. So it's really the backbone of everything. We've seen that from, I think, day -to -day, the pandemic when face masks or toilet paper, things like that, but for the military, I saw that with support to Ukraine.

22:35where there's just munitions and things we are moving and just the resources to do that, the supply chain to be able to replenish those. And as you start thinking through and potential crises as things escalate, you want to be able to predict that and to understand that better. It's just like oxygen. It's fine up until you don't have it and then it becomes a concern. Yeah. Philip, what's your perspective? To echo very much what Leo shared, we talked about at traffic control and air operations before same there. You just assume things are working until they don't. Right. That's why I think sometimes those sectors are a little harder together.

23:08Everyone's interest for it or to make sure the funding is there. Right. It's very easy to spend money on the fancy weapons system, the autonomous drone, the new kind of high tech equipment, whatever it is, because it's like physical, it's like visible, etc. But when it comes to the, I would say quote unquote, the silent software that runs in the background that enables all of this to work that allows the most advanced equipment to go where it's needed, when it's needed. I think that's sometimes too much of an afterthought. And I think in many ways you could argue, you can build the most advanced equipment, you can produce it at the largest scale possible, but if you can't get it, where it's needed, when it's needed, it doesn't exist.

23:46Why has that been such an underserved topic? Because to your exact point, when we think about defense and some of these new capabilities, we're talking about autonomous drones and counter UIS capabilities and electronic warfare. We haven't been talking nearly enough about logistics, but we have just been through the pandemic. Like, we've seen the disruption in our personal lives. Why do we still have this disconnect? I think human nature is wanting to go back to the status quo. I mean, you have all this stress, and you just want to take a deep breath and go back to what seems comfortable. But we've been able to be comfortable for the last few decades, because we haven't had a global worth, fortunately.