My intuition for the coming decades is that technology-intensive sectors (like Defense, Space, or Energy) will change drastically. They used to work with state-sponsored dinosaurs and still operate like so:

1. Governments establish the needs and requirements for Defense that are aligned with the current political vision. That sometimes requires strategic planning and decades of foresight.

2. Then, a budget must be approved by various political bodies.

3. The government (sometimes) issues a request to vendors.

4. Vendors bid and propose solutions.

5. The government assesses the offers, negotiates, and selects the best one.

6. Once the vendor is selected and the contract is signed, the big work starts and can span over years, even decades.

That’s the old-school way of doing things.

And it will soon disappear, giving way to a more product-led approach.

The reasons why:

• The world is becoming more volatile and unstable. Seeing decades in the future is increasingly difficult; hence, decades of vendor lock-in are becoming unbearably risky.

• Technology is evolving extremely rapidly now. While we faced a plateau from the '60s to the early 2000s, we’re now seeing new technology reshaping sectors. Drones + AI are reshaping how wars are waged (see what’s happening in Ukraine). Nuclear is coming back with many actors working on SMRs (Small Modular Reactors) that will soon be portable enough to embark on a truck, a plane, or even rockets. And speaking about rockets, the Space Race is back with multiple new actors with SpaceX, Blue Origin, of course, but smaller ones are entering the game, like Firefly.

• Technology compounds and different techs can now be bundled together. For instance, progress in the energy density of batteries, small electric motors, and AI has given drones superpowers.

• Contractors have misaligned incentives with the government. The government usually covers the cost + an extra to the vendor's benefit. That means that the vendor has no real incentive to reduce the cost of production.

TLDR: The world is more volatile than ever with rapid tech evolution, while the government contracting model suffers from both outdated long-term planning approaches and misaligned vendor incentives that don't reward cost reduction or innovation.

At the same time, new actors are popping up here and there, challenging multi-decade incumbents.

Good examples in the US are Anduril or Shield AI in the sector of Defense and Rebellion, challenging Palantir. Or NuScale challenging actor like Westinghouse, Moltex Energy challenging Candu reactors, etc.

Check for yourself on the Anduril website.

What do you see?

You see products, it’s product first — not contract first.

and then “Start Building with Lattice SDK”.

It’s not a Silicon Valley B2B SaaS startup’s website.

It’s a Defense company.

What's unique about these challengers is that they don't wait for government requests before developing solutions. Instead of reacting to policy requirements, they design and build in anticipation of emerging demands, positioning themselves ahead of market trends.

Those products have not been asked for, but they are on the shelf, ready to be manufactured by the enterprise.

It’s a pretty big shift in mentality.

This leaves governments with two choices:

• Commission a company to design, conceptualize, and manufacture a custom solution—with all the misaligned incentives mentioned earlier and on top of that the government still bears the risk of failure.

• Select from ready-made, off-the-shelf products that can be produced immediately and externalize the risk of failure to the vendor.

From a incentives perspective choice (2) makes much more sense.

On the vendor side, the bet of course, is that the products being built will prove helpful in the future. If a product fails, the damage is limited to that specific product or vendor—it doesn't escalate into multi-decade, billion-dollar disasters (a prime example is the F-35, which cost over $1.7 trillion over its lifetime—yes, trillions, not billions. The original estimate was less than $300B). If it succeeds, then the vendor will make tons of revenue since governments usually buy in size.

Hence, Anduril's tag line that appeals to the general public:

Making billions to save hundreds of billions to tax payers.

Anduril is the best example of that trend, but we will see it with many more companies in critical sectors.

This will take time, of course, as there are many roadblocks ahead:

• Decision makers are boomers who are used to these lengthy processes and do not know anything about the new ways of building projects.

• They don’t trust younger people, which is fair because they have less experience. That means we’ll have to wait until younger people become older and gain trust…

• Smaller projects are less shiny than bigger ones; you prefer to have your name attached to a multi-billion-dollar project rather than tiny drone experimentations, right?

It will take decades, but the productization of vendors has already started.