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Economics of War

The war in Ukraine was one of the first public appearances of cheap, disposable drone systems serving as the blade in guerrilla tactics against a larger adversary. Yet the history of developing crude countermeasures against Goliath goes back centuries: from caltrops scattering Roman cavalry, to punji sticks in Vietnam, to IEDs in Iraq. What's different now is that advances in camera technology let us, the public, watch warfare economics play out in real time, one $500 drone at a time.

War has always been about attrition, draining lives, munitions, food, morale. But no form of attrition is more visible today than cost.

Consider:

  • M1 Abrams tank: ~$10-20 million
  • Russian T-90: ~$4.5 million
  • An MRAP armored vehicle: ~$1 million
  • A Patriot missile interceptor: ~$4 million

Now consider a DIY FPV kamikaze drone with fiber optic wire and a shaped charge: ~$400-500.

Let's also consider Shahed kamikaze drones: ~$20,000.

The math doesn't work. You cannot defend $10 million assets with $4 million interceptors against $20,000 attacks. You definitely can't against $500 ones.

I write this with recent events in mind: IRGC exchanges, Houthi drone swarms forcing naval responses, and the bloodbath on the Ukrainian front. Many many months ago on Twitter, I was talking about the need for cheap, mass-produced swarm systems as the future of warfare. I wrote this after seeing drone manufacturing and synchronization capabilities in China and DJI. Those capabilities now exist in many other countries.

Seemingly, only our adversaries.

Our closest comparable is Anduril's $40k FPV drones, still undergoing testing. $40k against $500. We still need to do better.

The question isn't whether we need to adapt… that's obvious. The question is why the country with the most engineering talent and the largest military budget is falling behind. The answer is the same bloat and bureaucratic rot that plagues every government contract: cost-plus incentives that reward expensive solutions, procurement cycles measured in decades, and a defense industry that profits from complexity rather than effectiveness. And, in this nascent industry, a system that profits tremendously when there are no real competitors.

Iran, somehow, builds $20k drones that do the job description. We still build $4M interceptors, that while worked against billion-dollar fighter jets, drain our pockets endlessly against their cheap-ass modern counterparts.

The economics don't lie.