Bullets & Beans

Jake Chapman and Matt Ocko discuss China’s push in AI, drones, and autonomy — and what it means for U.S. defense. 

In this inaugural episode of Bullets & Beans, host Jake Chapman sits down with Matt Ocko of DCVC to examine how China’s civil-military fusion strategy, massive investments in autonomy, and breakthroughs in AI and drones are reshaping the global balance of power. 

Ocko shares insights from decades in deep tech and venture capital, highlighting the risks of U.S. underinvestment, the challenges of supply chain dependence, and the urgent need to reshore critical defense technologies. From drone swarms to AI chips, this conversation dives into the innovations — and obstacles — that will define future battlefields. 

----
Created by Marque Ventures, Bullets & Beans seeks to accelerate innovation in national security and defense with engaging podcasts and regional networking events.

Creators and Guests

Host
Jake Chapman
Managing Director at Marque Ventures

What is Bullets & Beans?

Conversations with investors, entrepreneurs, and leaders on topics ranging from challenges facing new entrants and opportunities for existing players to technology on the battlefield and government policy.

Speaker 1:

Everybody is obsessed with drone swarms. What happens when the bad guys weaponized drone swarms? And I could still put together a lethal drone swarm that would kill most of the people in an open area in any location in The United States and be able to do it completely deniably. And I can do that with COTS today.

Speaker 2:

I'm Jake Chapman, managing director of Mark Ventures,

Speaker 3:

and this is the Bullets

Speaker 2:

and Beans podcast, where we talk to allocators, investors, founders, active duty, and government civilians who are interested in investing their time, their capital, and their resources in national security. I'm here with Matt Conko, the founder and managing general partner of DCVC. They started as spam.

Speaker 1:

Really happy to be here. I think you guys are literally doing God's work.

Speaker 2:

We are. We are doing our best. We're trying. But you well, first, tell us a little bit about yourself, but you've been doing the Lord's work for a long time,

Speaker 3:

sort of OG in the space.

Speaker 1:

My first contract with the Department of Defense for solving a difficult problem was when I was 14 years old, and I'm sliding towards my late fifties, so it's been more than four decades.

Speaker 3:

Okay. So your first project for the government, national security, was at 14. I feel like most stories that involve teenagers working for national security it is because they have hacked a government system and the FBI shows up and you basically get a choice of you could work for us or you could work in a, you know, padded cell somewhere or behind bars. What was what was actually your?

Speaker 1:

It it wasn't it it it was it was neither that illegal.

Speaker 3:

So you were not the inspiration for the movie War Games is what you're saying?

Speaker 1:

I did my work before War Games, so I watched the movie with a a faint degree of amusement given how unrealistic it was. I can't really, I still can't really talk about what I worked on, but I can share a funny story about the negotiation of the contract. My dad, who was a law professor but not a practicing lawyer, asked a friend of his, a very slick, capable southern gentleman lawyer who were living in North Carolina at the time to review the contract and he looked it over and turns to my dad and he goes, well John it seems imposing, but at the end of the day, you can really rely on two things. First is in a strict legal sense, as a minor, your son can't really accede to the terms of this contract in a binding way no matter what the government says and second of all if he screws up there will be no government or anybody else left to sue him.

Speaker 3:

Nice. Yeah. I love the accent too. So maybe you were the inspiration for the movie War Games.

Speaker 1:

I seriously doubt it. But I had a lot of fun, and I was it began lifelong obsession with figuring out how our country can do more for less, faster and better in the service of not only its own defense, but the preservation of of the West and western values.

Speaker 2:

So, I mean, let's let's take that ethos and then fast forward to this this phase of your career where you launch DCBC, and you really pioneered were one of the pioneers for the push for deep tech or frontier tech. Taking venture capital really back to its roots, right, investing in hard things and not just dating apps for dogs and enterprise ass. And so what what made you decide to to get into the space? I'm sure it was a tough pitch for LPs. How

Speaker 1:

I've been doing the same thing in my venture career and my entrepreneurial career for literally forty years. Deep tech is in fact the only thing in my view worth doing in venture capital. And it really actually wasn't a tough pitch for LPs. We like to say that solving the impossible to address the existential is in fact very profitable. So in the ballpark the last year between direct cash distributions and liquid securities piled up for distribution, we're on the happy side with our LPs for about a billion dollars, which not a lot of people have done.

Speaker 1:

And in the last couple of years, plus or minus, closer to $2,000,000,000 of net distributions to LPs. The dirty little secret, and I share this secret because I want more people solving hard problems in the service of a better life for folks on this planet. Solving a problem that has an absolutely essential market is in fact lower risk than vomiting 700 or 800,000,000 or a billion dollars into a SaaS app, whether it's AI infused or not, that can be thrown away by a disgruntled chief information officer at the drop of a hat. And not only that, but because the stuff that we do and our deep tech brethren do, we're not the only group doing this, and by far from singular view or singular capability here, is backing into an investment that is relatively uncontested because it does something or addresses something that's scary and poorly understood or seems in an innovation resistant industry, gets you a better entry price, gets you the ability to control your capital allocation across stages of capital formation, and lets you double down in accordance with progress, not because there are 17 other feral startups all marketing the same thing.

Speaker 1:

The cool kids sectors exhibit downward spirals. The entry prices are too high. The companies are overfunded. They spend all of their money too quickly on trying to kill each other to deliver relatively undifferentiated products to typically unhappy customers. In terms of a US fund, you asked about, I don't have a good answer.

Speaker 1:

I don't have an axe to grind one way or the other. What I can tell you is that the great mistake with some of our adversaries that we're making is to fail to understand that they are pursuing, like, a a, you know, dark and evil incarnation of an improv night. Yes. And so there's a lot of worry about China catching up to our exquisite systems. Look, they're building their own aircraft carriers.

Speaker 1:

Oh, they've got their own stealth aircraft. They're modernizing their nuclear forces. Sure. They're doing that, but also not even very much under the waterline. They're investing insane amounts of money on cheap, cunning, substantially autonomous, attritable, highly effective offset capabilities to f up our giant exquisite systems.

Speaker 1:

In fact, they just published a study on how a Type 55 destroyer with a couple of support ships and a whole bunch of autonomous swarm capabilities could stand off an entire US naval task force.

Speaker 3:

Yeah. I read read the study. Was like, if we fired 50 missiles and they had their counter to it, and it was one destroyer with autonomous systems against the Right. Aegis.

Speaker 1:

Right. And and it was attacked for not, you know, for not being truly apples to apples and showing what would happen if we used our full missile compliment. That's, that's noise. The point is it's 10, a 100 times cheaper, easier, physically denser and more compact for them to have those standoff capabilities versus any number of missiles that we could fit in in our in our naval arsenals. So the Chinese investment in, their whole of nation civil military fusion investment in just that chunk of autonomy.

Speaker 1:

So surface, submarine, and airborne drones useful for naval and land warfare, which sounds like a big, I'm peanut buttering it, but it's really not. It's relatively small effort, three pillars of attritable autonomous systems that share a lot of control and navigation issues and perception issues in common have similar payload restrictions. That's 47,000,000,000 US a year is the last number I saw.

Speaker 3:

Is what China is spending on that?

Speaker 1:

China is spending on that area of innovation. And last time I checked, our Grand Replicator program is a billion, billion and a half, over three years maybe if it's deployed effectively. So the point for me is not whether we need a US sovereign wealth fund to support our defense and supply chain rehoming and compute advantage, including quantum efforts. It's that one, the bad guys are outspending us in the same way that we outspent the Soviets into irrelevance and humiliation. And two, we need to stop sending them our hard currency to forge the tools to cut our throat with.

Speaker 1:

We're literally paying for the rope that's being placed around our neck. And so I've been an advocate for more than a decade of term, I think I coined, it may have emerged in parallel, called reverse CFIUS. There shouldn't be a single dollar of US money going in any way to the PRC under any circumstances. And so for me, that's a way higher priority than a sovereign wealth fund.

Speaker 3:

Yeah. All about reverse CFIUS. Could not be more.

Speaker 1:

Did I answer your question?

Speaker 3:

You you did. And it it irks the hell out of me that people can invest in China and then get carried interest tax treatment for the returns they generate. Like, why are we giving them a tax benefit for what is clearly antisocial behavior?

Speaker 1:

Look, I've suggested to everybody that will listen that if we're going to tinker with the tax code and we have an administration that's willing to run some daring experiments here, what we should do is say any US enterprise that engages in being completely free of any economic traffic and any economic dependence on China whatsoever will be tax free at every level down to the individual employees for a decade. Not not $1 of tax and maybe some tax credits on top of it. I don't know. And by contrast, if you do not make a reasonable good faith effort to get the China supply chain heroin needle out of your arm, there are going to be civil and criminal consequences from the sea staff on down.

Speaker 3:

I mean, I I like it. I'll take the I'll take the tax break.

Speaker 1:

Yeah. But what you want is you want, you know, not just us, but Western European, everyone else. You want Boeing and GM and VW and, by the way, Microsoft and Google and others to stop conducting any economic activity of any kind in China. And instead of this kind of learned helplessness where we say, oh, well, you know, they control this or that. They control some of the precursor chemical inputs for essential medicines, basic antibiotics.

Speaker 1:

They control some of the flexible plastic tubing inputs and processes for our dialysis processes. Stop whining. Figure out how to bring it home. And I'm not a radical greenie, but yeah, bring it home without dumping hydrofluoric acid or, you know, uranium tailings in, Salt Lake City or San Jose's water supply, the way the Chinese have been willing to do. But there are solutions for that.

Speaker 1:

So instead of wringing our hands, we need to get engaged because as important as the kind of defense things you invest in are, the number one thing we can do in our own interest is to stop paying our adversaries the money they're spending on planning to kill and subjugate us.

Speaker 3:

Yeah, in violent agreement. Violent agreement. All right, so let's take it down to the more tactical level, since we've been talking kind of the high policy level. Where do you think we need to be investing more? So put aside the fact that we need to decouple from China.

Speaker 3:

100% we need to decouple from China. But where should we be putting more resources here in this country?

Speaker 1:

I mean, we need to have a whole of nation view about defense the same way The PRC does. The PRC doesn't look at a Type 55 destroyer or a J dash XYZ stealth fighter as a point solution. They try to optimize and are optimizing their supply chain for independence for every single component that goes into that platforms down to, you know, if they can't, you know, mine every bit of ore that goes into those final outputs, they're busy subverting entire countries in Africa and South America. So they control critical metal supply. They are thinking about what are the quote unquote consumer, non military outputs of that supply chain that they can achieve an economic benefit while they're investing in their military platforms.

Speaker 1:

So we need to be doing more of that to the point that I made earlier. We need to be figuring out how to make everything in The US again. And yes, through the lens of having, pun not intended, autonomy, independence in the manufacture of our critical military systems. Our investment in autonomous systems, and when I say ours, I mean as a nation, is 100x lower than it needs to be. And again, it's not just outcomes.

Speaker 1:

So does Shield AI deserve more money? Absolutely. Does Ceronica deserve more money? Do the five promising companies coming up the curve beneath them deserve more money to try to power up this autonomy curve as quickly as possible? Absolutely, yes.

Speaker 1:

But there are things, again, in the supply chain, there are enablers that we're being completely moronic about. About. And you've noticed in this conversation that I've tried not to talk my own book.

Speaker 2:

Sure, but please feel free.

Speaker 1:

The most egregious example of of this for me is a company of ours called Mythic Semiconductor. Mythic Semiconductor. Mythic has demonstrated that they can deliver NVIDIA class compute in a chip the size of your fingernail that can run on a couple of watch batteries. You can put full blown AI models, object recognition, pose estimation, you name it, straight from TensorFlow in something that you can put for a small amount of money on the tip of a 155 millimeter artillery shell or and make it essentially self steering or, octuple the dwell time of a drone that you wanna use for loitering munitions and

Speaker 3:

Just by dropping power and weight requirements?

Speaker 1:

Not just power and weight, but you can provide massive amounts of intelligence coupled with very cheap sensors. So you don't need a $10,000 four kilogram hyperspectral sensor when you can integrate 73 pinhole, you know, CMOS cameras around the rim of a drone in real time because you have disruptive compute. This is one, two, 3,000 times better compute per watt per dollar. And by the way, this is manufactured on US or Japanese or German fabs. So there's no Taiwan dependence.

Speaker 1:

So we're doing insane stuff like saying, yeah, we've got super cool AI. Well, where the AI chips coming from? Taiwan. So we need to conduct a successful defense of Taiwan in order to have a supply chain for the autonomous systems that will conduct help us conduct this. Okay.

Speaker 1:

That seems a little broken. So mythic demonstrated all their capabilities to the Biden Defense Department and was awarded a $70,000,000 grant over a year ago, and they still have not gotten that award. So this is a capability that is close to drop in for any autonomous system that we want to build. Undersea, surface, aerial, know, ground based down to literally individual munitions. And the bureaucracy, after proving that it worked to itself, could not get out of the way in time to fund this company appropriately.

Speaker 1:

We're going to continue to support the company. The other investors are supporting the company. But again, to your core question, what should we be doing? I don't know whether it's a sovereign wealth fund. I don't know whether it's the DOD not stabbing itself in a sensitive part of the anatomy anymore over and over again.

Speaker 1:

I don't know if it's a reallocation of venture capital dollars, but we have to go toe to toe with the PRC in the entire stack. So, and this is again just with respect to autonomy. We gotta make everything. We have to make the rotors, the magnets, the the engines, the sensors, the AI chips, whether it comes from mythic or not, it all needs to get made here. And then we need to be able to produce thousands of these systems in every potential field of deployment a day and be able to sustain that.

Speaker 1:

You look at a company like our company Fordham Technologies, which protected the president and the White House during the inauguration, protected the entirety of the Japan Olympics, the entirety of the soccer World Cup, is operational in ways I can't talk about on the southern border to defeat terrorist and criminal and enemy drones. So this is a company that makes fully autonomous, no human in the loop, flocks of hunter killer drones. They take out other drones all the way up to, you know, a shaw head, maybe beyond, can do so at night in the middle of a storm using AI powered radars that they've designed and built that are directly on the drones. They can capture the enemy drones or theoretically a fleeing terrorist in a net. Now, do they have different effectors that they can apply?

Speaker 1:

Sure. But they are substantially a nonlethal solution that protects entire communities, entire cities, and massively empowers both our armed forces and our homeland security and public security entities. So that seems like the kind of company that LPs should be comfortable with. There are surveillance and intelligence companies that help prevent mass casualties. One of our companies, now a public company called Evolve Technology, makes something that looks like and is no bulkier than the anti theft bollards at a Forever twenty one store.

Speaker 1:

And they happen to detect bombs, guns, and knives with four to six nines of accuracy while you move through at walking speed wearing your winter coat, carrying your Starbucks coffee with your, you know, laptop in your backpack and can differentiate between you doing that as a law abiding citizen and someone trying to hide a nearly fully plastic lock or C4 in their undershorts. Now this is a company that's prevented something like 5,000 mass casualty attempts in the last twelve to fourteen months. They protected multiple cabinet events in DC. They protected the Super Bowl. They make Americans' quality of lives better and safer at schools, hospitals, houses of worship, major sports stadiums, museums, public fora, there's not one bit of, you know, upsetting kineticness involved there.

Speaker 3:

Sure.

Speaker 1:

The opportunity to do more of that, to have the nation's back, is, I think, large enough that anxious LPs can be offered the opportunity to elect in or out of these different classes of investment.

Speaker 3:

That's an interesting take. So there's enough space for the conscientious objectors to still make a positive impact. They're not necessarily taking themselves out of the game.

Speaker 1:

Absolutely.

Speaker 3:

Yeah. Fair point. We've hit on a lot of reshoring, investing more in America, Chinese supply chains. How autarkic should we be? How engaged should we be in the rest of the world?

Speaker 3:

So should we be engaged in South America to push China out or should we just try and focus inward? I think current administration probably has a wide range of opinions on how engaged we should be overall.

Speaker 1:

I think the great tension and the thing that the you know, I can speak from the uncomfortable middle. The thing that the Dems failed to do is justify the ROI, the costs of being frenetically engaged all over the world, of being the world's policeman, of being the world's security guarantor. And there's some arguments that the strength of the the US dollars, the world's, you know, reserve currency and and folks bringing talent and manufacturing capacity and investment dollars here as a result of that more than justified all of the expense. There's some argument there, but it's too loose for somebody struggling with their grocery bill in in Sandusky.

Speaker 3:

Well, it's also you have a you had a generation that grew up under the threat of nuclear annihilation and then got to experience the glory of the nineties. And you have a generation that never had the threat of nuclear annihilation. No. Just got to live through the nineties and the February.

Speaker 1:

Oh, well, and then another generation that's lived through forever wars. So so the Dems didn't make a muscular linear case for the cost in people and focus and dollars of being the world's policeman. But on the flip side, there are some folks who I like and respect, some who've spent considerable time service and have more than earned the right to their views on the red meat eating side, whose reaction to those horrible mistakes, I think, is an overreaction. And I think they fail to appreciate that if you're cost effective, you can have your cake and eat it too. And so, you know, my plea would be for us not to withdraw from the world, not to hand pretty much the the the worst political and societal actor on the planet, the the PRC, free reign by presuming that our engagement with the world has to be business as usual.

Speaker 1:

And so that comes back to my focus on autonomy, on attritable, effective, disruptive, massively offset systems, not just kinetic, but again, clever, defensive, things that defeat and frustrate terrorists and asymmetric warfare attempts. Things that, you know, like our company, Capella Space, which delivers extraordinarily high resolution synthetic aperture radar images night and day through any weather of anything on the surface down to, you know, the rigging on, you know, a Chinese amphibious landing boat or the the barrel of a tank hiding in the woods in Ukraine. The ability to surveil the bad guys and for some of our companies down to a single mounted 50 cal in the back of a technical and to preclude their activities, even non lethally, is an opportunity for very inexpensive deterrents. Being able to provide small communities throughout the world the means to defend themselves with, again, highly effective, highly autonomous, highly inexpensive offset systems changes our financing and our security.

Speaker 3:

Spicy flock safety.

Speaker 1:

Calculus. Yeah. If all of the innocent Christian families being attacked all over Africa and now horrifically in Syria, even as we're filming this, had the opportunity to defend themselves for less than the cost of building a new bodega, our security calculus would change. The world would be a better place.

Speaker 3:

Yep. I like it. Don't pull back, just do it cheaper. Matt, this has been a great conversation. Thanks

Speaker 1:

for coming. Yeah. Likewise. Thanks for having me.