A Deep Dive Into US Navy’s Epic Shipbuilding Failure
by Joaquin Sapien (ProPublica) In July 2016, warships from more than two dozen nations gathered off the coasts of Hawaii and Southern California to join the United States in the...
What is the common denominator in the recent port congestion crisis and current Taiwan security crisis, global food crisis, global energy crisis, US military PACOM logistics crisis, the Silicon Valley Bank Crisis, and Ukraine War? What’s at the core of China’s strength and power? Ships! In this raw, unedited (we apologize for the grammar and spelling) emergency editorial Captain John Konrad explains an immediate solution to all these seemingly unrelated problems: returning Silicon Valley (SV) to its shipbuilding and naval research roots.
By John Konrad (gCaptain) In recent discussions led by prominent Venture Capitalists (VCs) and influencers like David Sachs, there has been talk of Silicon Valley Bank’s (SVB) failure creating a financial contagion that could spread across the entire financial system. While some argue that SV startups are essential in America’s competition with China, others believe that these claims are being used to strengthen their case for a government bailout. However, it’s important to note that the nation doesn’t need another TikTok clone to compete with China, we need innovation in defense and logistics. Moreover, the possibility of a bailout engineered by tech billionaires seems likely, given their wealth and power. While this may seem cynical, there is a solution that can benefit the nation and public good: returning the valley to its roots. By doing so, we can engineer a bailout that benefits not just the tech elite, but strengthen the nation as a whole.
Silicon Valley, a name synonymous with innovation and technological advancement, has a rich history that dates back to World War II. During the war, the US government established numerous shipyards and naval installations in the San Francisco Bay Area to augment the research being done at the Navy Postgraduate School and early maritime innovation centers including Naval Air Station Sunnyvale (now Moffett Field). As a result, a small farming community called Santa Clara Valley was transformed into a bustling defense industry town that supported these facilities. Naval facilities. Maritime facilities.
In the 1950s and 60s, the defense industry continued to thrive in Silicon Valley. Companies like Lockheed Martin and IBM established offices in the area, and it was during this time that the region began to attract top engineering and scientific talent. However, it wasn’t until the 1970s that Silicon Valley truly began to take shape as we know it today.
The rise of the semiconductor industry, led by companies like Fairchild Semiconductor and Intel, transformed Silicon Valley into a hub for innovation and entrepreneurship. These companies pioneered the development of microchips and other technologies that would ultimately power the digital revolution of the late 20th century.
As the semiconductor industry grew, so did the number of startups and venture capital firms in the area. The region became known for its culture of innovation and risk-taking, and it wasn’t long before Silicon Valley became synonymous with the tech industry.
The level of risk-taking however distressed Navy Leadership so contracts were moved elsewhere. At the same time the deregulation of shipping, the collapse of domestic shipbuilding, and – with the invention of containerization – the movement of cargo across the bay caused maritime technology jobs to move overseas and to oil and gas hubs like Houston. Valley entrepreneurs did not fight the valley’s naval and maritime exodus because the computer opened new profit models more lucrative than government contracts.
Today, Silicon Valley is home to some of the world’s largest and most influential technology companies, including Apple, Google, and Facebook. The region continues to attract top talent from around the world and remains a hotbed of innovation and entrepreneurship. However, with the exception of a small number of highly successful maritime startups like Flexport, SV has mostly turned its back on the maritime and logistical world.
This is highly problematic because, as history has repeatedly taught us and Ukraine is reinforcing, logistics wins wars. It’s easy to blame VC’s for investing in entertainment and social media apps that, in hindsight, have torn a divide across our nation but… gCaptain was born in SV during the halcyon days of the early century. In fact, I personally was among the first group of people called “super users” for the pioneering social media app Digg.com. The term would later be changed by the media to “influencer”.
That small group of social media’s first influencers (there were about a dozen of us led by a guy who posted under the alias “Mr.BabyMan”) shared plenty of dumb cat videos with Digg’s massive audience but also serious articles about poverty, education and even defense. We were not there to be famous (we all posted under aliases… mine was JAKV5) or make history, no, we each spent thousands of hours of free time to help grow social media because of its ability to spread important ideas.
Then Facebook came and many of the big ideas went behind a paywall. Digg made mistakes that resulted in the birth and growth of Reddit which had less editorial oversight and favored fun over importance.
I would like to blast Facebook for the harm it did and Reddit for steamrolling Digg with dumber and dumber cat memes but that is not fair. Despite everything you read about historically low interest rates, globalization and “lean” startup innovations the real thing that drove Silicone Valley was its ability to attract the world’s best and brightest talent.
The Maverick of military innovation, Col John Boyd said “People, then ideas, then technology” drives growth. This was certainly the case in California. The best and brightest (at least early on) were not driven by the hope of making billions. I know because when gCaptian launched in California you could chat with Zuckerberg at the local coffee shop or bump into Sergey Brin at the bookstore and glance at what he was reading. These were not (at least not at first) attracted by massive wealth, they wanted to change the world. They wanted to make an impact. They wanted to make a “dent in the universe”.
They certainly did make a dent, but social media could not be contained to just good ideas, it also spread evil and destructive ones. How the ideals of my generation, GenX, were corrupted and turned to massive profits is beyond the scope of this article – and maybe the financial corruption is now too deeply embedded to change – but at the core of SV still lies hearts and minds with ideals. Ideals and a lot of guilt.
At the same time, Silicon Valley became perverted by billions and billions in profits the rest of the world peered in looking for want made the valley tick. Interviews were made and biographies were written, top business schools hit delete on their “Jack Welch way of management” class and asked technology influencers like Timothy Ferris, Guy Kawasaki and Robert Scoble to create classes around what really made SV tick.
And those guys told the truth: to make the world a better place. With business schools, podcasts, books and business leaders all looking to SV for the keys to success money poured into Environmental Social Governance goals and, Equity & Inclusion initiatives. And money poured into growing influence.
Then the 2008 financial collapse happened and people shunned the mecca of success – Wall Street – and turned to SV en mass. At the same time – frankly sick of riches (hard to imagine but true) and looking to maximize their global impact – the valley turned to the country that needed its help most of all: China. The best and the brightest worked helping them and, when China soared, they turned to other nations where they could maximize social impact. Nations like India and Eastern Europe.
Meanwhile, nobody was watching the front door. Elections were influenced and foreign actors were allowed to manipulate powerful tools to cause strife within America itself. National intelligence agencies should have stepped in but Julian Assange and Edward Snowden waged influence campaigns against the establishment destroying the NSA and CIA’s reputation in the valley. Nobody would work with them.
But there was still one last stopgap. Neither the CIA – nor the Army or Air Force – is the last line of defense. They often get the sticky problems nobody else can handle but we are an island nation and geography are important so the true last line of defense are the US Navy and US Coast Guard.
And where were the Navy and USCG as elections were stolen, wars on terror were being lost, as banks poured trillions into China and SV swamped it with tools and technology?
This left America’s last line of defense against all threats foreign and domestic: the US Military. And step in they did. USAF opened up technology hubs, DARPA funded projects and the US Navy-funded Naval Research hubs to “test the waters”. It was too little too late and could not be a priority while the Army, Air Force and Special Intelligence were overwhelmed in the middle east. The Navy, unencumbered by a naval war, should have stepped in but instead issued its best and brightest – people like naval intelligence officer Pete Buttigieg – guns and told them to go help the army and marines on the front line.
Compounding the problem is both SV and the US Military still believed they had solutions to these problems. They military leaders didn’t retreat to bunkers and SV founders did not hide in their mansions, they did what smart people motivated by strong moral beliefs always do: they rolled up their sleeves and worked harder.
Hard work and intelligence is critical to success and is an absolute necessity for “making dents in the universe” but without situational awareness working harder creates more problems, not less.
Oil rigs like the Deepwater Horizon exploded, cruise ships like the Costa Concordia crashed into the rocks, Fukushima leaked nuclear waste and mines collapsed in Chile. I, as the author of “Fire on the Horizon: The Untold Story of the Gulf Oil Disaster” was asked to enter a speaking competition at SONY Picture Studios and won the grand prize of speaking TED but my slot was given to the runner-up because SV did not like my message.
The message I gave was that the best and brightest were once attracted to difficult engineering challenges like deepwater oil drilling, nuclear energy and naval shipbuilding, but now the best and the brightest go make filters for Instagram.
Notice I did not say “go make filters for profit” and this is not a mistake. Profit was not the prime motive. Making the world a better place was. Giving a young man a filter to improve his self-confidence or a young lady a way to remove pimples was. Why? Because if we give the youth of America the tools to succeed the brilliant member of the next generation can use their success and influence to push BIG ideas.
It worked too. Technology gave Greta Thunberg a platform and it gave Andrew Tate one too.
Today many believe the good Greta is doing outweighs the bad of Andrew Tate but the truth is, the world is not listening. The tools of social media do not advance all the admirable of ideas of youth like Greta, they only advance the ideas that resonate with her audience.
For example, Great continuously pushes the need to curb air travel and get back to sailing people and cargo upon the sea. She famously sailed to New York on a zero-emission sailboat boat. Had she used a ship she still would have reduced her emissions by a factor of ten. But, despite her still yelling about the benefits of ships over aviation, that critical message has died.
The failure of Silicon Valley is not because of the failure of technology. It is because SV forgot it’s roots in the wake of the Second World War. It forgot that freedom and speech and big ideas are important but they are protected by ships with warships and, as Marc Levinson explains in his book The Box, the single innovation that has pulled more people from poverty and provided the most opportunity for today’s youth to get an education and succeed was not giving them a computer box. It was shipping them shoes, and food, and computers in a box.
The greatest innovation in the last 100 years is heavy industry. It is shipbuilding. It is ports and cranes and AND the warships and submarines to protect them.
Shipbuilding and naval security is the industry that put SV on the map and shipbuilding is what has fulfilled Maslow’s most fundamental needs that make the technology possible.
And it is shipbuilding that’s in crisis. While China has accepted SV and Wall Street’s money to fuel tremendous growth in technology and innovation it continuously funned large portions of that growth into ships and ports and warships. Today it’s got the largest fleet of commercial ships, the largest number of mariners, the largest number of major ports, and the largest number of warships of any country in the world. Not just within its borders, it also provides the technology essential for port cranes to work around the globe.
It’s not the “economy stupid” it’s ships!
While silicone valley was rolling up its sleeves to help China, while the US Navy was dressing up naval officers in camouflage and sending them to the desert, China was investing in SHIPS.
Today ships are all that matter. The combined capacity of the US Military’s spectacular airlift fleet is less than the capacity of just one Chinese-built large containership today. The amazing feet of the technology-driven skylink space network require a fleet of rocket recovery ships. Teslas require ships to be shipped overseas and built with parts shipped into tesla factories. Ships ship the giant wind turbines and massive amounts of solar panels for the green transition along with the lithium and copper and rare earth metals delivered to electric gigafactories. Ships.
Ships – not airlift – deliver the vast majority of most powerful fighting force in the world overseas. Ships delivered the tank, the HIMRAS, the ammo, the food, the guns, the artillery, the helicopters and even the fighter jets. Ships – not air-to-air refueling tankers – deliver the jet fuel to USAF forward air bases. Ships resupply and rearm the mighty aircraft carrier and her entire battle fleet. Ships land Marines on foreign beaches. Ships and watercraft ferry Army supplies. Ships blockade enemy ports. Ships – or rather submarine boats – bring invisible and silent nuclear deterrence to enemy doorsteps and they are resupplied and repaired by large submarine tender ships. Ships go out and rescue downed planes and damaged warships and merchant ships hit by enemy missiles and spilling oil. Ships – or rather cutters – of the USCG hunt the submarines near or shore and protect our homes and children when the Navy is forward deployed. Ships. Ships Ships.
Ships that were once built at the most important industrial facility of the Second World War: The Bay area’s Kaiser Shipyard and Permanente Metalworks.
Nothing works without ships. Ships were the secret to the success of every major empire from the Greeks to the British and the United States. Why? Ships move things. Great things. Great and heavy things in massive quantity.
Ships – and the boxes they carry – are the most important innovation of the last hundred years and ships will be the most important objects in the world throughout the next hundred. Mars travel may become important but NASA can not move fuel to Cape Canaveral without ships.
And the physics that makes ships so important is never, ever, changing.
Ships are not important. Ships are the most important.
But Silicone Valley doesn’t care. It does not care because it has lost its foundation as a maritime and naval innovation center. More importantly, it does not care because it has lost situational awareness. The laser focus of Stanford engineers is a bug, not a feature.
And Silicon Valley is distrustful of people like Peter Zeihan who tell them that spreading ideas and giving platforms to big ideas is important, but not as important as ships.
But today SV, the United States, and the World is in crisis because China builds, repairs, finances and controls the greatest number of ships. And, because China is now controlled by a single man, it is making huge mistakes that are rippling across supply chains, the mouths of starving children overseas, and the balance sheet of Silicon Valley Bank.
What SV VCs, Navy Admirals and even our Secretary of Transportation do not understand is every crisis today is because of ships.
The Port Congestion crisis came and went and SV mostly shrugged its shoulders. No startups (besides Flexport) have even attempted to fix the underlying problems.
Putin invaded Ukraine, not for political power, but because ships docked in Ukraine feed the world and because Mairupol controls the entrance to Russia’s massive inland waterway system.
The global food crisis is not a crisis in supply, it’s a crisis in our ability to ship food out of Ukraine and ship fertilizer around the world.
The global energy crisis is not due to a lack of oil, it’s due to a lack of ships capable of transporting oil.
The Taiwan crisis in not because China has become more agressive towards that state, but because it now has the ships needed to invade it.
The failure in Afgnaistan was not due to a failure military strategy, it was due to the fact it’s a land locked nation, and America’s inability to ship military supplies and goods for citizens cheap enough to make them effective.
The ability of Ukraine to hold back the Russian army is not because of it’s air force but because of the will of it’s people – a maritime people with tens of thousands of seafarers working at sea – combined with the US’ ability to ship vast amounts of munitions and weapons via ship.
Our inability to monitoring and mitigating the national security and environmental concerns in the artic or chase Russian warships hiding up north is not a national security issue, it’s a lack of icebreaker problem.
The militarization of Chinese seafarers now capable of bringing javelin and sparrow missiles into every port in the world is not a national intelligence issues, it’s a ship issue.
And in every single honest wargame against China in the Pacific the United States and our Allies lose because – with less than 90 commercial ships left flying the american flag – we do not have enough ships to transport fuel and ammunition to our troops.
And what about the failure of Silicon Valley Bank itself? Well, that was caused because of rapidly increasing interest rates, which were the results of the federal reserves fight against inflation. Inflation was caused by the increase in prices of everything from energy to food to materials. Why did the cost of everything go up all at once? Well, it started with a poor congestion crisis causing companies to change from highly efficient just-in-time ordering two less efficient inventory management problems. Then the war broke out in Ukraine, and the price of energy and food and basic materials increased rapidly. Why did it increase rapidly? Because the ships providing those materials had to sail further around the war-zone. So it was ships that contributed to higher interest rates which took down Silicon Valley Bank.
Ships matter. They matter a great deal yet I cannot think of a single ship captain or marine superintendent employed by any other major tech companies. The ones smart enough to hire some Maritime expertise usually think that naval skills crossover to the commercial world (some skills do, and some don’t).
The silver lining, at least for an optimist like me, is that at the core of almost every SV billionaire VC, senior engineer, developer, and founder is someone who cares but does not know. And the ultimate irony is that all it takes for them to understand the importance of ships is for today’s top influencers to interview the world’s first social media influencer on what we need to do to fix these problems now: invest in ships.
The problem – and the reason I furiously typed this out at an airport Starbucks and published it without checking grammar or spelling – is the failure of Silicon Valley Bank is a true crisis but also a true opportunity to join with our allies and provide the bailouts to startups willing to help grain ships sail to Africa, American oil flow to Europe, containerships cloth young children, and warships protect Taiwan (along with fisheries, and ocean wildlife parks, and south pacific nations drowning).
The opportunity is there are only a small handful of people who fully understand the four elements to bail out SV in a way that assures SV’s future success:
The number of people dwindles significantly further once you realize that we do not have the domestic knowledgebase necessary to ramp up fast but allies in Japan, South Korea, Singapore, the UK and several European do.
If SVB is truly a systemic failure we must not only find a deal that works for them but we must include large banks (e.g. Softbank) and shipyards (e.g. Huntington Ingalls and Samsung HI) both domestically and overseas. The people with all four areas of expertise and both domestic and international relationships is even smaller.
However, I’m confident that if people on the forefront of pushing a solid strategy to solve the technology, shipping, and naval crises today (e.g. Flexport’s Ryan Peterson, Hertage’s Brent Sadler, former Supreme Allied Commander Admiral Stavridis, Shipbuilding advocate Admiral Foggo, Peter Zeihan, Marine Money’s Matt McCleary, InterTanko Chairman Richard DuMoulin, Bloomberg’s Joe Weisenthal and Tracy Alloway, FreightWaves’s Craig Fuller, gCaptain’s Sal Mercogliano, Blake Herzinger, Ross Kennedy to name a few) are summoned by the White House’s ship czar – General Lyons – a plan could be quickly worked out that congress would accept.
And that plan would be simple: startups, VCs and laid-off tech workers get emergency funds if they promise to pivot from entertainment and social media to rebuilding the foundation of Silicone Valley: logistics, naval security and shipbuilding.
They do not need to pivot today, but they need to promise to pivot within the next year or at least do the Google model of spending 20% of their time on critical national security and logistics problems. . They do not need to pivot today, but they need to start thinking about the problem and to start that process we need to act now. As in TODAY. As Greta Thunberg proved with her sail to the UN and the port crises confirmed: if you don’t take immediate action on maritime problems they will be fast forgotten. You can not debate. You can not delay. You can’t study the problem.
You must act because, while we wait, the SV and Wall Street-funded shipyards in China are pumping out warships, submarines and aircraft carriers at an incredible rate.
We can’t wait because bank failures spread too quickly.
We can’t wait because the motto of our maritime industrial base is “Acta Non Verba” – Action Not Word
All that’s needed is one Jet to send Lyons, Sadler, Stavridis, and Peterson to either the White House or San Francisco.
Captain John Konrad
NOTE: Because we can’t wait this article was written and published quickly. So quickly we didn’t have time to quickly to quickly. I apologize and I hope to find time to update the article throughout the day with edits and refinement of the ideas.
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