At Leen’s Lodge in August, conversation about the geopolitical situation, war, defense, and budgets was on the record. Jim Bianco gave me permission to share this quote with Kotok Report readers:
Byron sent around his note yesterday (attached for convenience), “Low-Cost Weapons May Not Change Probability of War,” making the “it depends” case on drones and deterrence. Good read, I recommend it. [Kotok note: Byron Callan follows the defense industry at Capital Alpha Partners. The note Jim referenced is not attached in this KR commentary. Jim continues below.]
Wanted to add to this discussion with a WSJ story that was posted this afternoon.
“U.S. and Ukrainian Forces Went Head-to-Head in an Exercise. Ukraine’s Drones Won.” | WSJ
Summary:
Ukrainian drone units easily spotted and defeated U.S. troops and armored vehicles during a training exercise in Germany called Combined Resolve, eliminating a full U.S. armored brigade in the drill.
Paired with U.S. casualties from Iranian drones this year, it points to a real gap between the billions the Pentagon has spent on drone and counter drone tech and what’s actually landing in the field. Not a one-off either. UK, Estonian, and Swedish-led exercises have produced the same result against NATO forces.
That’s my starting point for where I differ a bit from Byron. His point is fair: Drones aren’t magic deterrents; they need fuel, storage, and logistics like anything else, and military adapts.
But I think 21st-century war is becoming distributed and iterative, more like software than hardware. It updates constantly, and it’s cheap so it can be done at volume.
If war gets cheap enough for secondary and tertiary state actors, or non-state groups like terrorists, to wage it, we should expect more of it, not less. Classic Jevons paradox, where falling costs raise consumption. A $150 FPV drone (first-person view: a small drone piloted in real time by an operator wearing a video headset) doesn’t need to deter a peer state. It just needs to make war affordable enough for an actor who never had a credible military option before.
More war, more often, has a cost beyond the battlefield. Every added conflict is another stress test on global shipping lanes, insurance markets, and energy supply. We saw it firsthand with the Strait of Hormuz this year: Freight and war-risk insurance premiums spike, oil gets volatile, and that volatility feeds straight into headline inflation while it squeezes real growth. A world with more frequent, cheaper wars is a world with a structurally higher inflation floor and a lower ceiling on real growth.
The WSJ piece also gets at something I raised on the panel: 20th-century platforms like carriers and F-35s aren’t obsolete, but their utility is narrowing to fights against other 20th-century platforms. Against a $150 drone and an operator with four years of combat reps, they’re the wrong tool.
The part that worries me most: without a credible, cost-effective deterrent in this new mode of war, what’s left when a frustrated president reaches for blunter instruments? This isn’t hypothetical. On Easter Sunday, April 5, Trump posted on Truth Social that “Power Plant Day, and Bridge Day” was coming for Iran that Tuesday if the Strait of Hormuz didn’t reopen. He backed off when a ceasefire came together at the last hour, but the specific tactic he floated, striking civilian bridges and power plants, has since been publicly framed by outlets like Newsweek as potentially crossing into war-crime territory under international law. If we can’t fight cheap wars cheaply and precisely, the choice narrows to doing nothing or reaching for exactly that kind of blunt instrument.
While this is a downbeat outlook, hopefully stories like the WSJ today and experiences in the Strait of Hormuz are shaking up the military establishment that they are vulnerable and don’t have all the tools needed in the 21st century. They have to fix this and fix this ASAP; otherwise, these problems will persist and potentially get worse.
Everything I’ve seen suggests that military planners know this. The problem is the procurement process. It needs to shift from being a public works project, like the F-35, where suppliers in 45 to 46 states each have a stake in keeping it alive, to the military’s original function: getting the best equipment into warfighters’ hands as fast as possible.
General David Petraeus, the retired four-star general who ran U.S. Central Command and later served as CIA Director, made almost the same point this spring after his tenth trip to Ukraine this year. He said Western militaries mistake bolting a handful of drones onto an existing armored battalion for real innovation, when the actual fix is to “scrap the armored battalions and replace them with a drone battalion.” That’s not a procurement tweak. It’s a structural one.
But Congress has too often been more interested in running jobs programs than in buying real protection against bad actors, and that incentive has to change too.
– JB
Thank you to Jim for the summary and views with which many agreed.
Let’s turn to Cuba.
Our conversation about Cuba was conducted under the Chatham House Rule, but Rick Newman wrote his own takeaway here:
“How a US Takeover of Cuba Could Unfold” | Pinpoint Press
The dominant view is that a Trump initiative on Cuba is coming after the midterms. The hope is that Cuba reaches a negotiated arrangement. This is the territory of Secretary of State Marco Rubio. Rubio published a major document recently, outlining his case for an action about Cuba.
“Cuba: The Capital of 21st Century Communism” | United States Department of State
I recommend taking the time to read it. Be sure to read the section (pages 89–96) before the conclusion. Here’s an excerpt:
Just two months after the Yom Kippur War, forty Cuban terrorist experts – accompanied by an East German specialist who had himself been living in Cuba – secretly traveled to the revolutionary Marxist-Leninist state of South Yemen to train Palestinian guerillas at camps run by Nayef Hawatmeh, a founding member of the Popular Front for the Liberation of Palestine (PFLP) and the Democratic Front for the Liberation of Palestine (DFLP). Both popular fronts would later participate in the October 7, 2023, attacks on Israel, with the latter under Hawatmeh’s leadership. Cuban-backed Marxist-Leninist groups like the PFLP have a long history of atrocities and terrorist attacks. Despite this bloody history, ties between Cuban solidarity networks and militant Arab groups persist to the present. In 2017, Cuba organized a major celebration for the PFLP in a government-owned community center in Havana to celebrate the party’s 50th anniversary. The PFLP has maintained an active, official presence in Havana ever since, operating openly alongside the Palestinian ambassador to Cuba. Western governments should not underestimate the convergence of Cuba’s revolutionary solidarity networks and Islamist radicals. Over the years, Cuban ambassadors have frequently met with delegations from Hamas and other Palestinian terrorist groups, including a highly visible meeting between Hamas officials and the Cuban ambassador to Lebanon just eight months before the October 7th attacks.
I have been to Cuba four times. First was a tour when there was a brief thaw. The other three times were with official delegations of the Global Interdependence Center. GIC tries to encourage a dialogue that can lead to productive outcomes. In this case, we failed.
I agree with the vast majority in the gathering at Leen’s Lodge: Cuba is on the radar screen.
Note that Marco Rubio got high marks in the survey of the folks attending the gathering. Three fourths surveyed want him to stay. Treasury Secretary Scott Bessent got nearly the same reviews.
Contrast that with War Secretary Hegseth — only three people wanted him to stay. The overwhelming majority gathered at Leen’s said he should be replaced. Most condemned Hegseth as incompetent.
Recommended Reading
The Trump administration is increasing pressure on Cuba by imposing more economic penalties on industries in the heavily sanctioned socialist country.
“US ramps up Cuba sanctions and detentions of Americans returning from the island” | AP News
“Trump and Rubio allies are vying for control of Cuba’s assets if regime falls” | The Guardian
“Cuban official on Trump’s threats as tensions with U.S. rise” | PBS News Hour
“Trump’s Economic Vise Leaves Cubans Desperate for Food and Medicine” | New York Times
“Is Cuba Trump’s next real estate project?” | NPR
“Cuba’s Point of No Return” | Foreign Affairs
“Cuba’s power grid collapses again, leaving millions without electricity for at least 6th time this year” | CBS News
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