The transcript from this week’s MIB: Ash Carter, Secretary of Defense, is below.
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VOICE-OVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.
RITHOLTZ: This week on the podcast, what can I say, Secretary of Defense Ash Carter under Barack Obama was in the studio for over an hour and we talked about everything from Iran to North Korea to China to Russia to the procurement process to what we do right with the military and what we get wrong and what we — areas we really need to improve.
This was a tour-de-force conversation from somebody who is not only brilliant, he’s a Rhodes scholar, a PhD in physics, but a historian who focuses on military history in the medieval times and that has colored how he looks at the world, how he looks at the role of government.
I could talk about him for hours but instead, I’m just going to say, with no further ado, my conversation with former Secretary of Defense, Ash Carter.
VOICE-OVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.
RITHOLTZ: My extra special guest this week is Ash Carter. He is the former Secretary of Defense under President Barack Obama. He is the five-time winner of the Department of Defense Distinguished Public Service Medal that is the highest award to a civilian from the Pentagon.
He is a Rhodes scholar with a PhD in theoretical physics from Oxford, the author of almost a dozen books, most recently, “Inside the Five-sided Box: Lessons from a Lifetime of Leadership in the Pentagon.” Ash Carter, welcome to Bloomberg.
ASH CARTER, FORMER SECRETARY OF DEFENSE: Good to be with you, Barry.
RITHOLTZ: So, let start with your rather unusual academic career. You’re a double major, physics and medieval history, how do you end up with that as a double major?
CARTER: That turned out to be useful, more on that in a moment. But for — at that time, it was just a right brain, left brain thing. I was fascinated by history and particularly medieval history because if you think about, the Middle Ages was a thousand years long. So, if you call yourself a medievalist, you’ve just gotten yourself a whole millennium of territory.
And I like the languages, Latin, Greek, French, German to speak and it was the time when the church developed, when the university developed, when the English common law developed, when the nation state developed.
So, a lot of things we live with today and I found later in life, as I started working in the Pentagon in 1981 and all the way until left in 2019 that that was useful training. Physics is totally different.
RITHOLTZ: Is medieval history useful training for the Pentagon?
CARTER: Yes. Of course, the joke is that I have the perfect — my job was the perfect combination of medieval thinking and physics thinking.
CARTER: Physics was totally other side of the brain thing. It’s clean, logical …
CARTER: … and I like that. And then I had to make a choice for further training in the beginning of my career and that was for physics. And then I got into the whole defense business by accident.
RITHOLTZ: But how did that come about?
CARTER: Well, it was — a member of the people who taught me physics and where the seniors and the field that I was starting out in which was elementary particle physics to me. Big accelerators at Fermilab in Brookhaven outside of New York here and so forth. I worked at those big laboratories.
Those guys roll the Manhattan Project generation and they had in their veins the idea, first of all, that when you do — that you should have a relationship with the government that doesn’t mean that you — they always do what you wanted to do but it was natural to try to help out your country.
And second, that with respect to technology and disruptive technology, which the nuclear weapon certainly was, that the people who built it had some responsibility to essentially control the technology so that we got the good out of it, which was ending the war with Japan, winning the war with Japan, and keeping the peace for 50 years with the Soviet Union without blowing ourselves up.
So, they taught me that we had some responsibly. So, one day, two of those seniors said to me, a guy was involved in satellite reconnaissance and other guy who built — designed the first thermonuclear weapon, said to me, Ash, can you …
RITHOLTZ: Wait, wait, wait, let me interrupt you right here because you can’t just mention that and go by. You referred to the Manhattan Project. Are you talking about people like Edward Teller and the like?
CARTER: Yes. I traveled once with — to Europe with Edward Teller. The two particular — the particular I was — people I was speaking of was Richard Garwin who with Edward Teller, but it was really Garwin’s design, designed the — I said the first thermonuclear bomb that is one that combined fission and fusion …
CARTER: … and blew up an island in the Pacific Ocean that was very successful and that …
RITHOLTZ: Much more powerful than the original bombs …
CARTER: Much about a thousand times more …
RITHOLTZ: Right. Yes.
CARTER: … powerful. And the other guy was the person who was very instrumental in putting the first essentially cellphone-type cameras, digital cameras onto our spy satellites.
Our old spy satellites in the old days would take pictures on film, big rolls of film, and then when the film was all exposed, they would separate it from the satellite, put a little rocket on it, the rocket would slow it down, it would fall down to Earth, deploy a parachute and we’d fly an airplane next to the parachute with a hook on it.
CARTER: And the hook would grab the parachute, reel in the film, we’d fly it to with, in those days, the CIA deal, all of the interpretation …
CARTER: … right outside of Washington, in Anacostia, Washington. They’d fly it, they’d develop it and they’d count (ph) how many Russian missiles and so forth. So, that was the guy who was instrumental in turning that film system into a digital system. So, they were the two — that’s the two specific people, Richard Garwin and Ed Teller.
RITHOLTZ: Those are both pretty big technologies.
CARTER: Yes. Yes. And those happened to be the two said to me, well, once you go to Washington for just one year …
CARTER: … it turned out to be 37, just one year and work on a problem that was a big deal at that time, Barry, which was a Cold War problem of where — what to do with the MX missile.
RITHOLTZ: I recall that, that was under Reagan …
RITHOLTZ: … trying to figure out how we could hide and shuttle all these missiles underground …
RITHOLTZ: … to hide them from Russian satellites …
CARTER: So, they couldn’t target them.
RITHOLTZ: Right. So, I think the original plan and I don’t remember how much of this is from your book and how much of this is mill memory that 4,500 silos, we’re going to shuttle 500 missiles around, pretty impossible plan.
CARTER: It was certainly very unpopular because it would have paved over a big part of the great basin area …
CARTER: … the South Western United States. It was actually the Carter administration’s plan, Reagan’s looked at it and said that — looks — said, it looked like Rube Goldberg thing.
CARTER: So, that was, to him, a pretty ugly baby, this idea of digging all these holes and then hiding missiles. And so, he began …
RITHOLTZ: And this is all under the concept of being able to survive a first strike in order to make sure mutual assured destruction was in place.
CARTER: Exactly. Because if we took the MX missile and we put them out where the Soviets could hit him, then in a crisis, they’d say, well, our only way of surviving is to go first.
CARTER: And that would be incentive for them to go first. And we, seeing them thinking that way, would say, well, we better get rid — we better launch these before they destroy them.
So, one of the other of us is going to start a war under those circumstances, we wanted to avoid that situation. So, anyway, that was the project all in the past now …
RITHOLTZ: And that was effectively your first book.
CARTER: Yes. Yes. After I did this, I wrote a — which is essentially a technical book …
CARTER: … on that subject. But two things happened to me there, Barry, which I think is important to anybody who’s choosing a career or at a crossroads in their career. I found that in these Washington conversations, I had something to offer that nobody else in the room had, namely, I understood how it all worked technically and the decisions were very consequential.
So, for a young person, to be able to make a contribution — to feel like they’re able to make actually a contribution, not just watch, but make a contribution, and that the issues they’re dealing with really matter, that’s a — it’s a hugely inspiring contribution.
CARTER: And so, that’s what got me caught the bug of defense and I’ve been devoted to defending our country and making a better world for our children ever since. But it could have gone a different way.
But for those two people who inspired me, it’s a good lesson to all of us to – and now, I teach people at a university, that’s my way of continuing to contribute. But you give them a little nudge in the direction of public purpose and public spirits, good thing.
RITHOLTZ: Let’s talk a little bit about the Iraq war and you go into quite a bit of detail in the new book, “Inside the Five-Sided Box: Lessons from a Lifetime of Leadership in the Pentagon.” What made the Iraq war such a unique fight relative to previous U.S. military history?
CARTER: Well, from a managerial point of view point which is the point of view that the book takes, it was a counterinsurgency war rather than a war of one country with another.
RITHOLTZ: Asymmetrical warfare, is that the right phrase?
CARTER: So, we had to learn — yes. So, the first thing is we had to learn that. By the way, I should back up a little bit, Barry, and say, of course, the invasion of Iraq in 2003 didn’t turn out very well. History says.
I have to say I didn’t have the wisdom to oppose that at that time. I believe …
RITHOLTZ: Many people did not.
CARTER: I’m — I count myself among them and I’m not proud of that. But I can’t say I had better wisdom than anyone else. Anyway, we found ourselves in Iraq and, of course, when I became, first, the number three in the department and the number two then the number one, during all that time, we were still fighting in Iraq.
And here’s what we got out of it that was in a way useful to today’s very different strategic situation. We learned to stop working in the old Cold War mode, which was — yes, that was very slow …
RITHOLTZ: Super power versus super power.
CARTER: Super power versus super power. Moreover, the Soviet Union was a slow, lumbering, very predictable thing. And so, you could have many year programs where you slowly build the perfect thing.
When you’re at war and people are getting killed or kids are coming back with no legs and my wife and I are at the hospitals every weekend meeting with them and talking to them, then you’re working day by day. That’s a very different phase.
CARTER: That’s much better suited to today’s competitive world because now as we turn back to China, Russia as we much do, we have — if we did that and tried to compete with them today in the old mode, that wouldn’t work because people are moving faster today. Technology is moving faster.
So, again, nobody likes to be at the war for that long. Nobody likes to be dealing with issues like the amputations and prostheses, PTS, all the things we had to learn. But we also learned something about agility in the course of Iraq and then, of course, Afghanistan as well.
And I was all in when I was in the Defense Department. I know some people don’t agree with those wars and we can talk about that later. But when you’re there and you’re responsible for them, that was my highest priority every day.
I went to bed thinking about them. I woke up thinking about them. There’s no choice.
RITHOLTZ: So, let’s talk a little bit about some of the adaptations that some took place fast, some took place slow. One of the things you write about are the IEDs and two really interesting issues come up in that.
The first is the concept of drones versus blimps …
RITHOLTZ: … that some people on the ground wanted drones, which really are good at flying in circles for short periods of time, but you wanted full — there aren’t a lot of roads in Iraq, you wanted full coverage of where insurgents are bringing IEDs that could hurt troops.
RITHOLTZ: How did that process go from let’s get these expensive drones that will take two years to get into place to no, no, we could hang blimps, it will take us a really short period of time and have eyes in the sky on everything?
CARTER: So, it began one morning when Bob Gates was secretary, he was the number one, I was the number three at that time, and on the — and we were having a video teleconference, secure video teleconference with Kabul and up on the screen was Stan McChrystal who’s our commander at that time.
CARTER: And Stan says to Bob that he needs — he has only 15 percent of the drone coverage he needs and Bob Gates looks at me with that — I was his top supply weapon’s buyer …
CARTER: … and he said with that — what are you going to do about that, Ash?
CARTER: And I thought to myself, how in Earth am I going to get seven times a number of drones.
RITHOLTZ: In a very short period of time.
CARTER: In a very short period of time. So, I get on the phone and I talked to Stan’s intelligence head at that time who was General Mike Flynn.
RITHOLTZ: Right. This is pre …
CARTER: Away before the whole …
CARTER: … issues with …
CARTER: … he’s getting …
RITHOLTZ: This is pre-politics.
CARTER: Yes. Right. Right. And I …
RITHOLTZ: And he had a good reputation …
CARTER: He did.
RITHOLTZ: … as a military intelligence guy.
CARTER: I enjoyed working with him.
CARTER: I don’t know what happened later. I lost touch with him. But anyway, when I began, I said, geez, where do you need all that coverage for, that drone coverage, and it turned out that it wasn’t to get the kind of film that only a drone could get. Only a drone can fly down along a highway.
CARTER: But they wanted persistent coverage over one base or one town. That’s what they really needed.
RITHOLTZ: And satellites are going by too fast.
CARTER: Yes. Satellites are zipping by and they’re overall Australia when you really need them.
CARTER: Drones, you can do but you have to — they’re much more expensive and you have to fly them around in circles.
RITHOLTZ: Right. And you need a pilot even if they’re remotely …
CARTER: A pilot is back in California as it turns out but, yes, a well-trained pilot and a crew and somebody to make all the decisions. Very different. We came up with the idea of just putting a balloon up and you put a helium-filled balloon over the base, it’s got a camera on it, and the feed goes right down to the captain who was commanding that little outpost.
And the reassurance that those guys had that when they went out on patrol they knew what the local …
RITHOLTZ: This is full video infrared, the whole spectrum.
CARTER: Yes. Exactly.
RITHOLTZ: Now, why couldn’t those just get …
CARTER: The tiny cameras that are on the helicopters that fly around looking at car accident …
CARTER: … and traffic patterns that kind of thing.
RITHOLTZ: So, why couldn’t those just get shot out of the sky?
CARTER: It’s — they tried and here’s — first of all, the pressure of the helium inside is not very much. There’s a lot of helium …
RITHOLTZ: So, it’s not going to pop one.
CARTER: It’s not going to pop. And so, every once in a while, you inch it down and sew up the holes.
RITHOLTZ: That’s it. It’s …
CARTER: That’s it. But the enemy — the bad guys would — when it went up not knowing that take pot shots at it, we begin to put microphones on that could identify …
CARTER: Yes. Triangulate. And so, if you took a shot at one of our balloons, a mortar shell fell on you a few seconds later.
RITHOLTZ: So, the other IED question I have is in the beginning of the war, you mentioned injured troops coming home, lots of the Humvees were really very lightly armored …
RITHOLTZ: … and maybe this is my memory but the recollection of how long it took to get the Humvees up armored and protect seem like it took a long time …
CARTER: It did.
RITHOLTZ: … and then later on the anti-IED, there’s all sorts of interesting technologies to detonate these things from a distance …
RITHOLTZ: … why did that seem to take so long? The process to identify what you want, order it and get it delivered, is it really that long?
CARTER: Part of it was the bureaucracy was still working on that Cold War lumbering enemy mode where we’ll deliver — the perfect thing in five years …
RITHOLTZ: Even in the middle of a hot water.
CARTER: You’d be amazed, I would call people up when I was the so-called acquisition czar and I would say, do you realize that on your desk is a contract that you’re supposed to sign or audit and that it — I need that tomorrow and it would be in the stack, this bureaucrat stack …
CARTER: … of papers and as soon as they became aware that this was a matter of life or death for …
CARTER: Yes. They’d pull it out of the stack. But you’d be amazed at how much of that I had to do every single day even when I was secretary of defense …
CARTER: … to push the system. But we did at least take the MRAP, which is the vehicle you’re talking about.
CARTER: When MRAPs were started to be filled that there was another attitude which was, hey, look, this war is going to be over in a while …
CARTER: … why only buy something that’s going to be good for — the Army will be around for a long time, we need to be thinking about what we’re going to want in 20 and 30 years.
CARTER: And I …
RITHOLTZ: That’s not hot war thinking.
RITHOLTZ: That’s bureaucratic turf….
CARTER: Exactly right. There was a lot of that conscious and unconscious.
RITHOLTZ: And you mentioned the two different types of dogs in the book. You mentioned there are bomb sniffer dogs and then there are attack dogs. It seemed that there weren’t enough breeders to get enough dogs quickly and you guys went out and said, let’s go global and find these dogs that you guys could get very, very quickly.
CARTER: Yes. It turns out that the guy who was usually buying fighter aircraft and aircraft carriers and satellites and so were namely me and drones and balloons and so forth ended up learning how to buy dogs and I learned a lot. And you’re right, in fact, there’s more than one kind of sniffer dog.
CARTER: There’s some sniffer dogs ….
RITHOLTZ: On leash and off leash.
CARTER: On leash and off leash and some that work better in confined areas and some that are comfortable with open areas and different breeds have different predilections. And so, you learn that.
And then you had to source them as you said and the United States has kennels but there weren’t enough kennels to supply.
CARTER: So, we did globally source dogs and they did a great job …
RITHOLTZ: Are we talking thousands of dogs?
RITHOLTZ: Thousands of gods with …
CARTER: Yes. Yes. Yes. Great, great, great and became — and this was the good side and the bad side of this but became really good friends of the troops. They love them as people …
RITHOLTZ: Some were able to take them back home with them at the end of their deployment.
RITHOLTZ: Not enough but many.
CARTER: The sad cases were when the dog died which happened but especially if dogs were wounded or even if they were in the vicinity of an IED, it was impossible to use them anymore. They become very …
CARTER: … nervous at that point and all their training would go out the window.
RITHOLTZ: Right. They had their own PTSD.
CARTER: We either have to sadly put them to sleep or take them and try to find a home for them in the United States.
RITHOLTZ: Well, they certainly served quite well and I think there’s a long history of canine corpse in the military, isn’t there?
CARTER: Yes. I mean, their noses news is — I went DARPA, our high-tech research arm, looking for better noses, electronic noses than a dog’s nose …
CARTER: … and the people who know about electronic noses say, don’t — they’re not …
RITHOLTZ: Years and years away or decades away.
CARTER: Years and years away, you got a war to fight now, just go and buy yourself a dog.
RITHOLTZ: Wow. Amazing. You described working in D.C. as, quote, “being a Christian in the Colosseum, you never know when they’re going to release the lions and have you torn apart for the amusement of onlookers.” How accurate is that description and how frustrating is it to work in a town like D.C.?
CARTER: Well, I got used to it after a while. I was there for 37 years on and off, an associate with the Department uninterruptedly since 1981.
RITHOLTZ: So, they never really released the lions that you did …
CARTER: No. I went through four Senate confirmations which was really what I was talking about in that particular passage and that’s a time of great vulnerability in Washington because anybody who doesn’t like you can take a shot at you.
CARTER: And then they’ll try to persuade some senator to put a hold on …
RITHOLTZ: You came up unanimously for Secretary of Defense.
RITHOLTZ: That’s not many people that’s why …
CARTER: Actually, I think there were two or three votes not personal about me but …
RITHOLTZ: Nobody voted against you.
RITHOLTZ: Either they abstained or they voted for you.
CARTER: Yes. Yes. Yes. Yes.
RITHOLTZ: Not a lot of people in D.C. get that sort of love from the U.S. Senate.
CARTER: No. But there — I mean, I tried to earn it at the old fashion way. I kept my nose clean and all those years, I never had it investigated or …
CARTER: … anything. I never ever …
RITHOLTZ: Now, that’s the normal course. These days, that seems to be a little unusual. But typically, people working in the Defense Department tend to put their head down, do their job and keep their nose clean.
CARTER: Yes. And conduct is really important and the profession of arms, honor and trust matter a lot. And if you can’t trust people in small things, how can you trust them in big things like war.
CARTER: So, for us, it was a big deal and when you’re at the top, you have to show example. And so, it was — yes, I always watched over my conduct and comportment and try to make an example. Let me give you a particular instance to that that I described in the book, Barry.
When I, in many, many, many times, was in Iraq and Afghanistan and it’s hottest, 120, if I were secretary of defense, you’d see foreign leaders talk especially to our commanders about what we’re doing and give them the direction that they needed and that I meet with hundreds and hundreds of troops and you shake their hands and so forth, and I’d wear my suit out in the desert.
RITHOLTZ: Suit and tie, 120 degrees.
CARTER: Suit and tie, 120 degrees, sweating like a wheel of cheese out there. And my staff would say, hey, sir, you can take your jacket off, and the troops would say, hey, it’s just us, Mr. Secretary. You can relax.
And I always get my suit on and here is why. Because every time I shook one of those soldiers’ hands, we had a photographer to take a picture.
CARTER: That picture would be sent home to mom.
CARTER: Mom would frame it and put it by her bedside.
CARTER: Or on the mantle and I wanted to look the part. I wanted to look like the secretary …
RITHOLTZ: You still look the part.
CARTER: Well, I do. I have my suit on and my flag and I wear — and I would wear the same thing out there because I thought it was important that their mother understand that I was the — of course, she had to know, she does know the secretary, she didn’t care, she cares about her son.
But I need to look …
RITHOLTZ: Right. But her son is standing next to someone …
CARTER: I need to look like the guy who …
CARTER: …. deserves to be sending her son to war. That was important to me. And that’s a small example of how behavior, comportment, conduct matter a lot. I think they matter not only in the largest organization in the world, the Pentagon, but in any kind of organization.
And I obviously dismayed at times these days about the conduct I see and I held people to a higher standard and I fired people for things that you see today. We fired people for lying, for having sexual subordinates, all of these things were unfortunately happened.
But there was no doubt, I was harsh on people but they were even harsher on subordinates. Our rules are very strict about that and our ethos is one of where conduct is a sign of character and character is an aspect of leadership and you can’t give somebody a leadership over troops if they don’t have conduct and they don’t have character.
RITHOLTZ: So, let me ask you — I’m going to throw two curveballs at you. The first is we ask our troops to go in harm’s way and we make extraordinary demands of them and they come back home not directly into the Pentagon but under the VA. They haven’t been getting really terrific treatment.
We have a number of veterans in my office and I’ve heard some pretty horrifying tales. What’s going on in the VA and what can we do to give our veterans a sort of care they deserve?
CARTER: Well, the VA is a very, very complicated bureaucracy. It’s separate from the Defense Department …
CARTER: … and in most countries, they would be managed together but they’re managed separately.
RITHOLTZ: Really? That’s interesting.
CARTER: Yes. Yes. And it would be part of the Defense budget but it’s not part of the Defense budget in this country. But it’s a separate cabinet department.
RITHOLTZ: Should it be part of the Pentagon and the Defense budget?
CARTER: It may be that if we could start over again that would have been a better way to manage things. But now, I think mushing to organizations — I remember (ph) we tried that in the Department of Homeland Security …
RITHOLTZ: And it didn’t work.
CARTER: … and it well took 10 years or so …
CARTER: … before it began to show any results. But anyway, so, the VA has a difficult job of taking care of what is largely a geriatric medical population whereas our medical system, which is huge in the Defense Department, it’s the largest in the country and so you run the largest medical center in the — medical care system in the country if you’re the secretary of defense, but it has a lot of the pediatric work, right, because our …
CARTER: And the people have children. So, they’re completely different populations.
RITHOLTZ: That makes sense.
CARTER: What we were doing a bad job of, I discovered when I started to run the place, was the transition from a soldier to a veteran.
RITHOLTZ: Which is a very challenging transition.
CARTER: It is because remember, some of these people have never done anything else but be in the military.
CARTER: Some of them are kids that came out at high school, went in for a few years, they’ve never had a civilian job. I discovered that our separation program, what we did with soldiers, sailors, airmen and marine before they left service was essentially to teach them how to get on welfare.
CARTER: Yes and, of course, that was revolted by that.
RITHOLTZ: Right, I can imagine.
CARTER: It’s not good for them and it’s not good for the public that’s paying for these things. So, we designed a new transition program that had three tracks. One was a get-a-job track. If you never had get a job, let’s tell you how to make a resume, let’s tell you how to get on some of the social media where you can describe what you’re good at, let’s tell you how you can describe your — in civilian terms, the skills you got as a military person.
Second track was entrepreneurship, like how do you run a McDonald’s franchise. And the third was continuing education if you want to get on the GI Bill and some further education.
So, we turned it from your life in the future is one of dependency upon the VA and getting benefits to what you — to you’ve got a life ahead, let us help you prepare. And, of course, they’re still qualified, they get the benefits themselves, they deserve them.
CARTER: But to just teach them right away to get that it’s all about social safety net when they get out, that’s no way to treat somebody.
RITHOLTZ: I will tell you from my personal experience, the veterans who work in my office are our secret weapons, logistics creating, CFO, it’s amazing and every time we look to hire somebody, we try and say, is this a person that a veteran can fill that role.
CARTER: And, Barry, that’s new and I always …
CARTER: Well, it is. It’s only in the last 10 years because I started working on veterans employment (ph) when I was the undersecretary, the number three job, back in 2009 and employers would say, Okay, Ash, we promise to hire 5,000 veterans, it’s a big company.
CARTER: And they put it on their TV ads and everything and they acted as though they were doing us a favor. By now, most employers have the attitude you just described.
RITHOLTZ: Well trained, smart, logical.
RITHOLTZ: Exactly. Honorable.
CARTER: And go back even further to the Vietnam era and I don’t know what I wouldn’t …
RITHOLTZ: Well, different social situation.
CARTER: Yes. And I don’t know what I would have done as a secretary. I couldn’t stand to see our people treated that way.
CARTER: Now, you go to the airport and they’re boarded first on the plane and all.
RITHOLTZ: Right. That’s right.
CARTER: And that kind of thing.
RITHOLTZ: Some of that is making up for the mistakes of the Vietnam era.
CARTER: Yes. One of the most moving things you can do as a current secretary of defense is to talk to Vietnam era veterans and a line that not only I used but others including the president used was just in case nobody said this to you when you came home the first time welcome home and there are tears in the eyes with some of the …
RITHOLTZ: I could imagine.
CARTER: Some of these guys because of the way they were treated. That would have broken my heart at that time. Fortunately, I don’t need to live in that era. I live in near — where most people have the attitude that you do which is these guys deserve a good job.
RITHOLTZ: I think we learn a little bit from our societal mistakes in the past that that war was problematic but then people who were — and that was not a voluntary army, that was a — people were drafted.
RITHOLTZ: They should not have been treated the way they were when they came back but that was a very different time. Let me throw the other curveball at you which is what you just brought up. Some of the issues we’re hearing about people dealing within the military, within the Department of State, just generally, within the government moving away from the concept of honor and responsibility and truthfulness. What does this say about us as a country? How have we gotten so far off track?
CARTER: Well, I think that in part it is a reflection of the attitude that some Americans have had that the government is the thing apart from them. And I’ve obviously been in and out of government my whole life. I don’t have that feeling but I can well imagine if I were somebody who had been outside of the government that idea that that’s a thing apart gaining ground in my mind.
But to me, the government is just us. It is the way we do things that we — that have to be done that can’t be done by individuals or by companies. Who’s going to build the roads? Who’s going to educate people? Who’s going to fight for us and win against enemies unless we do it all together?
Now, I learned that by association with the Defense Department which most Americans really understand, Okay, that’s a part of the government I really …
CARTER: … really get. But the other parts, the regulatory parts and all that, there came to be an attitude that we took all the good for granted and we picked at what was bad. And there’s plenty of things that are bad and I think the government ought to be as high quality as it can be. But there was a little bit of that in our society.
And then some of the people in government today seem to be looking at it as something to pillage at last rather than a sacred trust. That’s hard for me to relate to let alone condone.
But I think it will — it’s enabled in part by people taking for granted what the government does for them and also by government not living up to public expectations. So, both sides of the equation need to change their attitude because we do need a competent government. It’s a competitive world. It’s a dangerous world and we need things that only government can do.
RITHOLTZ: Quite interesting. So, let’s talk about some of the interesting things you go over in the book. I’m fascinated by the future of warfare. Is it just going to be drones and robots? What sort of battles are we going to be fighting and how is the world going to look different from a military perspective than it does today?
CARTER: So, let’s take a few of the pieces.
CARTER: I ran the F-35 joint strike fighter program.
CARTER: I started the new B-21 stealth bomber and I think those are — once you get them under managerial control and important things for Barry, they’re the last man fighter and man bomber will ever build.
RITHOLTZ: Last man aircraft.
CARTER: That’s what I believe.
CARTER: I think that’s the last time …
RITHOLTZ: What about ships, are we going to still have man …
CARTER: Let’s take the aircraft carrier. Now, aircraft carriers are getting harder and harder to defend against countries like China and Russia and people ask me, is the aircraft carrier going to go away and I say, no, because an aircraft carrier is good for different kind of circumstance and aircraft carrier is still good yet with respect to Afghanistan, the counter ISIS campaign, environments in which nobody’s going to sink the ship.
CARTER: They provide America a floating airbase and that’s an important thing. But I don’t think we’ll be trying to use them against China and Russia decades from now.
Soldiers, you just said robots going to be soldier, I think what will happen first is in an infantry squad, there will be one or two robots that carry all the batteries.
CARTER: It weighed down soldiers today. They have so much electronics and they have spare batteries for everything. They carry the electronics and also that if they’re let’s say clearing the house, it’s the first thing through the door of the house.
CARTER: And you see a little of that already because what disarms an IED now compared to 10 years …
RITHOLTZ: Those little shredded …
RITHOLTZ: … small …
CARTER: Yes. Yes.
RITHOLTZ: … room to work.
CARTER: I worked on them because we had people walking out in suits with a pair of wire cutters.
CARTER: Very dangerous thing to be doing. And so, why not have a little robot? And so, you see — now, I think that there will be inch by inch more and more of that taking away some of the more mechanical and more dangerous jobs.
But there will still be a squad commander I think making the decisions about fire and maneuver and when to do things and when not to do things. One thing that’s not going to go away, if we’re talking about things that are going to go away, the ones that’s not going to go away, our nuclear weapons.
CARTER: And let’s think about that a little bit because that is something that because of the wars in Iraq and Afghanistan and the fact that many people, not myself among them, but many people recognized too late that China and Russia were not turning out the way everybody had hoped in 1990s.
We hoped they were going to turn out Okay. They didn’t turn out Okay. And for both those reasons, we stopped improving or really just keeping up our own nuclear arsenal and in the meantime, they kept building, kept building, kept building.
These things aren’t going anywhere. I don’t think we need two types. I don’t — nuclear weapons are just brutally simple.
RITHOLTZ: Right. A bomb in Iraq.
CARTER: Right. But I think we need them to defend ourselves and basically the only way you can defend yourself against nuclear weapon is through deterrence and we haven’t built any for 25 years.
I think I am of strong supporter of recapitalizing our nuclear weapon’s arsenal and anybody who thinks that’s going to start at arm’s race, I would say, well, you don’t have 25 years of history on your side because we haven’t done anything for the last 25 years.
CARTER: And they’ve been raised in any way. So, we can’t be the causer of them.
RITHOLTZ: So, let’s stick with nukes and talk about Korea. You were involved as a very junior person back in ’93, ’94 …
RITHOLTZ: … with the first round of Korea trying to get a nuclear weapon. Why — this is hindsight bias obviously but why didn’t we just stop them back then 25 years ago before they had the chance to retaliate?
CARTER: Well, it’s interesting. I want — I spent about half the year in 1994 as an assistant secretary of defense …
RITHOLTZ: Meaning where is that in the hierarchy?
CARTER: That’s like the third layer down.
CARTER: Working on straight plan against the North Korean reactor, which is all they had.
CARTER: The reactor at a place called Yanbian and it had the fuel rods that had plutonium in them and they had finished their fueling cycle and the North Koreans could, if they wanted to, take those fuel rods out, extract the plutonium and they had enough in there to make one bomb.
CARTER: We thought that was a cause of war.
CARTER: And so, I built that plan to destroy that reactor which I was at that time, Barry, and this is just the pride of the artist I guess, proud of because it would have destroyed an operating nuclear reactor without creating a radioactive plume.
RITHOLTZ: Maybe. Hopefully.
CARTER: I was pretty certain.
CARTER: I was pretty certain. Now, of course, I didn’t want to do that because the certain result of that would be the North Korean army streaming over the DMZ and a war beginning which I was confident we would win but …
RITHOLTZ: But millions would die.
CARTER: A soul would change hands twice.
CARTER: It was an ugly baby.
CARTER: That’s a war to contemplate. But I thought that was going to happen and Clinton was …
CARTER: Yes. And he was threatening that to — who’s the grandfather of the current guy, Kim Jong-un …
CARTER: … that you see meeting with President Trump, his grandfather, Kim I’ll-sung was running the place then …
CARTER: … and Kim I’ll-sung rather unexpectedly said, Okay, I’ll give up this reactor at Yanbian if you build me some real Western reactors …
RITHOLTZ: Power plants.
CARTER: … that can — or power plants and that don’t have all the proliferation problems …
CARTER: … that these reactors …
RITHOLTZ: And did we do that?
CARTER: And we signed that agreement and it was stayed enforced for five, six years. The North Koreans under his son slowly begin cheating …
CARTER: … and the whole thing kind of began to fall apart later and then we bought ourselves sort of five, six years then we had talks again in the late ’90s, I was part of them, then let’s see, Condi Rice and Colin Powell had some more in 2006. So, I’ve seen various cycles of this.
RITHOLTZ: And what about the current cycle?
CARTER: Well, that’s not unfortunately going anywhere. I don’t object to talking to the North Koreans. As I said, we’ve done it in the past. No president that I worked for, going back to Reagan, would meet with the North Korean leader unless and until there was an agreement.
RITHOLTZ: Explain why.
CARTER: Because they knew that to the North Koreans, that was a huge gift, a meeting with the American president. A North Korean propaganda, they can tell their people everything is Okay in our system which is a disaster for the North Korean people.
CARTER: It is actually successful because I got to meet with the American president.
RITHOLTZ: Look at us, we’re the equivalent of a super power/
CARTER: Yes. So, when you’re dealing with a potential enemy, you don’t — in Ash Carter’s book, you don’t give away anything for free. So, I wouldn’t give away a meeting with the president of the United States for free.
RITHOLTZ: Without some exchange of …
CARTER: Now — yes. Now, we gave — now, we’ve given it away. We also stopped or curtailed our exercises in South Korea …
CARTER: … which is a very dangerous move. Remember, the exercises are how we keep us and our South Korean partners sharp to make it the North Koreans absolutely clear that if they start a war, they will be destroyed and that will be the end of the regime.
And that’s what those exercises demonstrate to not keep up that proficiency and not keep demonstrating it, risks of war in the Korean peninsula, which is I said would be a war we would win but would not look like anything our people have seen since the last Korean war. I mean, the intensity of the violence is unbelievable in that war.
RITHOLTZ: Although some people have argued that the North Korean troops once there over the border might not be as aggressive enemy as some people have suggested similar to the Iraqi National Guard.
CARTER: Well, it’s interesting. You don’t have much evidence on your side if you have that view.
RITHOLTZ: Pure speculation.
CARTER: Well, here’s some evidence that goes to it but it all goes the other way. North Korean agents, military agents, captured in South Korea who have been preparing sabotage and other things that they intend to do in the course of the war like that, very few — they’re all so brainwashed …
CARTER: … that they do not turn compliant, they don’t come down into this well-lit wealthy society and changed their views even though all of their propaganda and all of their media and so forth have told them that it’s a poor and backward place.
So, if you think about it, Barry, they’re in the third or fourth generation of Stalinism.
CARTER: No other society had that many generation. What that means is that your parents don’t tell you stories of how things used to be different.
CARTER: Your grandparents don’t tell you stories. There’s nowhere if you’re a child …
RITHOLTZ: That memory is gone.
CARTER: That memory is gone that there’s a different kind of world. So, I think the evidence suggests these people are brainwashed deeply enough that they’ll fight really hard before they get tempted by all the goodies down in South Korea.
RITHOLTZ: Let’s talk about another nuclear program, Iran …
RITHOLTZ: We’ve had a couple of interesting military actions by other countries, namely Israel blew up a reactor, I don’t know how many decades ago that was, and then the whole centrifuge hack set them back quite a bit. How close is Iran to building a nuclear weapon and what should we be doing about that?
We had a treaty. This president decided to overturn it. Where are we with Iran and their program?
CARTER: Well, obviously, the treaty was controversial and the United States has rejected it. In the meantime, however, it bought us some time because while they were abiding by and while it was enforced, the Iranians were obliged to destroy a bunch of centrifuges, send a bunch of plutonium to Russia — I mean, uranium, enriched uranium to Russia and destroy a reactor. And they did all that before we backed out of the treaty.
So, we got some goodies so to speak …
RITHOLTZ: In exchange for us releasing frozen funds that were Iran’s from …
CARTER: That’s right.
RITHOLTZ: What is that, from the late ’80s, is that right?
CARTER: Yes. Which was not to be as much as the Iranians wanted. So, maybe in time, they would have left. Anyway, what’s done is done.
At that time that that agreement was negotiated, I was secretary of defense and as I — I tell the story in the book which is indicative of how we looked at things in the Pentagon. The morning after that agreement was concluded by Secretary of State Kerry, I sat down as I always do with the chairman of the Joint Chiefs of Staff, a little roundtable, and the secretary of defense has been there since George Marshall’s day and I would sit there with Marty or later with Joe Dunford every morning and were both in town and also with the vice chairman and the deputy secretary of defense and we’d say, Okay, what do you need today.
And Marty said to me, Mr. Secretary, about this Iranian agreement, what are your instructions to the Department? And I said, change nothing.
CARTER: I said change nothing. We have a strike plan that will destroy the Iranian nuclear program by force if we have to. Are we going to 65,000 troops in the Gulf as a deterrent against Iran also carrying out the war against ISIS.
We’ll continue — we have to continue to counter Iranian malign influence everywhere else, which is lots of places, Iraq, Syria, Yemen, and so forth. So, I said, don’t change anything. What this does is take off our plate, a headache that we would otherwise have …
CARTER: … which is somewhere down the road, we would have to face in Iran that had nuclear weapons. And that is why I thought I didn’t object to the agreement. I supported the agreement because as a secretary of defense, it took a headache off my plate.
But I had lots of Iran headaches on my plate and I said to Marty, let’s keep working on all the other headaches that Iran has. This is not — could never be a grand bargain.
RITHOLTZ: So, let’s talk a little about Iran and Iraq. I thought the best argument against invading Iraq in ’03 was the enemy of my enemy is my friends. We may not be fans of Saddam Hussein or Iraq but they were the regional counterbalance to Iran. Am I oversimplifying that or is that a fair …
CARTER: No. That was our actually conscious view during the Iran-Iraq war, which is a pox upon both houses. Let them fight each other …
CARTER: … into the ground and that seemed like a good outcome. And looking back now what the Middle East has become, a country that kept order within its borders that was not capable of major aggression against its neighbor which Iraq was, you’d otherwise leave alone as long as it wasn’t doing anything to us, the America.
What we thought might become a threat to us was the whole weapons of mass destruction thing which turned out …
RITHOLTZ: Yes. But we knew that was nonsense from day one, the whole Cheney separate department of it. Any time someone says, yes, yes, the NSA and CIA, those guys don’t know what they’re doing, we’re going to set up a little division in the basement of the White House, you know that’s just a nonsensical approach. You can’t say that but I can say that.
CARTER: Okay. Not only wouldn’t I say that because I didn’t see that at that time.
CARTER: I’m just being honest.
CARTER: I’d like to say I was prescient but I actually bought what Colin Powell said. I thought — in my experience in government …
CARTER: … with that much smoke, there had to be fire somewhere. And so, I was surprised …
RITHOLTZ: Fair stance (ph).
CARTER: … I was disappointed and, of course, it didn’t turn out very well because we did take away the government of Iraq and what was left was no government at all and we’ve been dealing with the consequences of that ever since.
RITHOLTZ: So, let’s do a compare and contrast because the fascinating thing about Iraq is the George H.W. Bush invasion in — is that ’93?
RITHOLTZ: Ninety-one. So, he famously said we’re going to chase Iraq out of Kuwait but we’re not going to tap — we’re not going to keep going to Baghdad as some people had suggested. Hey, keep them going and let’s just topple.
On the theory, I assume that Iran is a problem, let’s let Iraq be there as a counterweight. Why — first of all, am I right in saying the Senior Bush’s approach …
CARTER: That was the right decision.
RITHOLTZ: … was the right approach.
CARTER: … at that time.
RITHOLTZ: So, what was the thinking in ’03, let’s keep going and take Baghdad out as opposed to — because we clearly won the war in the first, I don’t know, six weeks, it was over like that …
CARTER: Because its intention in ’03 was specifically to topple Saddam.
CARTER: Remember, the intention of the war in ’91 was to recapture Kuwait.
CARTER: And then when that was done, President Bush said enough.
CARTER: Now, there were some and Dick Cheney who was the Secretary of Defense, I knew I was on the advisory board to Dick Cheney at that time and I knew him at that time, he wanted to go all the way to Baghdad and said, let’s finish this off once and for all.
The President overruled him …
CARTER: … and that was controversial at that time. Now, fast forward a little bit more than a decade, Dick Cheney is now Vice President pulled off …
RITHOLTZ: With some unfinished business.
CARTER: With some unfinished business. And so, in retrospect, it seems that that was an ingredient of the decision to invade and all the stuff about weapons of mass destruction and so forth, which I think was the ordinary citizen’s reason for supporting …
CARTER: … the ’03 invasion. We turned out not to be a reason at all.
RITHOLTZ: So, let’s roll back to 9/11 and the 2001 attack which came from Afghanistan and Saudi Arabia, not Iraq. You have a really interesting role not only in the creation of Homeland Security but post-9/11. Where were you on September 11, 2001?
CARTER: I landed in Washington. I must have taken off on a aircraft from Boston at 8 o’clock just like some of the aircrafts …
RITHOLTZ: The planes that hit the …
RITHOLTZ: … tower.
CARTER: I must have been in that same line …
CARTER: … waiting to take off. I landed at national airport and I looked out the windows, we taxied and there’s a huge cloud of smoke over the Pentagon, the place I’d worked …
RITHOLTZ: For years.
CARTER: … in and out of for years and years. There’s a huge plumes and you know what else what’s in — that was striking about that, Barry? Guess what else was in there beside smoke. Paper. It was a huge — you hit an office building.
CARTER: That’s what you get, it’s a big plume of paper and so I thought, well, that’s odd but I didn’t know what the reason. Then I walk up the ramp, look at the TV screen in the terminal and I see two towers and then I know — not only did I know what was going on but I …
CARTER: Right away. And I knew it was Bin Laden.
RITHOLTZ: Well, he tried to hit the towers previously.
CARTER: Yes. I mean, so, I’d known that. But remember, for most Americans, this was like the Martians at land.
CARTER: Osama who and where did he come from? Why on earth is he doing this? I knew right away. And so, I began to try to help as best as I could.
One of the issues was Tom Ridge became Homeland Security …
RITHOLTZ: I recall.
CARTER: … Secretary and I tried to help their — get our government better organized.
RITHOLTZ: So, what was your role with the establishment of the Department of Homeland Security? You were pretty involved.
CARTER: Yes. I offered an alternative to that. I was not in favor of setting up a formal department. I thought that the Office of Homeland Security could be improved.
But when you created the Department of Homeland Security, in people’s mind, that brought together all our …
RITHOLTZ: Make sense.
CARTER: Well, it doesn’t because if you still have the problem that DHS doesn’t include the Defense Department …
CARTER: … it doesn’t include the intelligence community, it doesn’t include law enforcement. So, the issue still remains, how do you bring everybody together …
RITHOLTZ: So, instead of …
CARTER: … if they tear us? So, it creates what looks like a little bit of bureaucratic tidiness but it doesn’t get to the core issue.
RITHOLTZ: So, instead of having a coordinated response from all these different resources, it’s just one more …
CARTER: Yes, one more …
RITHOLTZ: … entity.
CARTER: … bureaucracy that tries to pace together some organizations that haven’t worked together in the past and they spend all this time on themselves and not on the enemies.
So, I thought I wouldn’t have done it but we did do it and then I tried to help it make it work and for the Defense Department to begin to play a stronger role in counterterrorism. You got to decide — we thought we needed to decide, is terrorism a crime, a disaster or an attack?
RITHOLTZ: An act of war.
CARTER: If it’s a crime, you send the FBI.
CARTER: If a disaster, you send FEMA and if it was an attack, you send the Department of Defense. But in the real world, they’re all three.
CARTER: And the president — if you think about the president — if I’m the secretary of defense as I was and there’s John Kerry as Secretary of State and there’s these other cabinet members, there are only two people who sit atop us, the President and the Vice President, the only two people that out ranked us.
CARTER: Kerry can’t make me do anything and I can’t make Kerry do anything. Only the president can make us work together. Well, the president is a busy guy and he can’t watch after everything.
So, interagency work is inherently difficult for a president because he’s going to knock together the heads of cabinet members who have their own proud traditions and laws and committees of Congress and all this stuff and he’s a busy guy.
So, I thought there was a better way of doing counterterrorism interagency out of the White House. But the president decided to create a department and off he went to do it. But I did, I opposed that at that time. I also opposed the creation of a director of national intelligence for the same reason.
CARTER: It just created another guy …
CARTER: … in the mix.
RITHOLTZ: On top of six separate departments.
CARTER: Yes. And if the problem is you got a bunch of people who you can’t get rid of any of them, you can’t put any of them on top of each other really because law enforcement really is different from the military.
CARTER: You got to get them to work together. So, the managerial question, I always looked at it as a manager, the managerial question is cooperation not consolidation and so your — and your managerial mind, you say, how do I get different things that I cannot mushed together and it’s not the right approach to mush them together to work together. That’s a different managerial approach.
RITHOLTZ: So, let me throw the question back at you, how do you get the head of the FBI, the head of the NSA, the head of the CIA, the head of the Department of Defense Intelligence Groups, how do you get these disparate groups all from very different institutions to cooperate for a common purpose?
CARTER: There’s a model which is the National Security Council. It’s been in effect since Eisenhower’s days as is worked better and worse in different times but it’s now got kind of — well, I can’t speak to right now but it did, for a number of years and really very, very efficiently in the first Bush administration, work to get all of the people involved in foreign affairs whether it’s economic foreign affairs or military foreign affairs or diplomatic foreign affairs working together every day.
And there are meetings at junior levels, there are cabinet member meetings, and they try to work everything out. And then only when they have met and tried does the president is his precious time used because remember, he’s the only one who can tell everybody what to do.
But there — it needs to — the National Security Council has basically intended to put decisions in management form that are ready for the president to make a decision that the people at the table can’t make because that would involve bossing one another around, which they can’t do. That’s a functional system.
And when Tom Ridge came in as Homeland Security director, he was setting up something that was a replica of that. I think if they’d stuck with it longer, it would have worked out.
RITHOLTZ: It would work.
RITHOLTZ: Can you stick around a bit?
CARTER: Yes. You bet.
RITHOLTZ: I have a few more questions for you. We have been speaking with Ash Carter, former Secretary of Defense and author of a new book, “Inside the Five-Sided Box: Lessons from a Lifetime of Leadership in the Pentagon.”
If you enjoy this conversation, well, be sure and come back for the podcast extras where we keep the tape rolling and continue discussing all things defense-related. You can find that at iTunes, Google Podcast, Stitcher, Spotify, wherever finer podcasts are found.
We love your comments, feedback, and suggestions. Write to us at MIBpodcast@Bloomberg.net. Give us a review on Apple iTunes. You can check out my weekly column on Bloomberg.com. Follow me on Twitter @Ritholtz. I’m Barry Ritholtz, you’re listening to Masters in Business on Bloomberg Radio.
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Welcome to the podcast. Ash, thank you so much for doing this. I don’t spend a lot of time with the former defense secretaries and I have a million questions. I am fascinated by the Department of Defense and if I was born either 10 years earlier or 10 years later, I absolutely would have joined the military.
I was in that …
CARTER: Good for you.
RITHOLTZ: I was in that zone at the tail when I graduated high school. It was still a hangover from …
RITHOLTZ: No. No. The draft was long over.
CARTER: I see.
RITHOLTZ: But there was still a hangover from Vietnam and …
RITHOLTZ: … it — my father would have killed me had I done that. I was fancied myself a fighter pilot which as you described …
CARTER: You would have been great.
RITHOLTZ: … is a — it’s a — this now — manned aircraft is now going to be an antique. It’s not like …
CARTER: Yes, someday.
RITHOLTZ: Even today, you’re firing missiles.
CARTER: It’s a mix. Yes.
RITHOLTZ: It’s not a dogfight like it …
CARTER: Yes. We have mix today that makes — will get maybe even more and more unmanned over time.
RITHOLTZ: I think that’s right. There are a couple of questions I wanted to get to both about the book and some of the more interesting things, some of the more shocking things within the book.
I love the discussion about the joint strike fighter where you’re negotiating with — is this some Northrop?
RITHOLTZ: Lockheed. Lockheed Martin. Not Northrop Grumman which is what I grew up with …
RITHOLTZ: …. next town over as a kid. Grumman was in Bethpage …
RITHOLTZ: … and building the F-14s there.
RITHOLTZ: So, in the middle of negotiations, it’s already — you come in as secretary of defense, it’s already way over budget, way delayed, and in negotiations, the representative from Lockheed asked, well, how many of these — you’re talking about budgets and what have you, how many of these planes can you afford, and your answer is, how about none, and you get up and walk out of the room.
Tells us about that negotiation and, first of all, why was the strike — joint strike fighter so far behind, how important was this as a piece of military hardware and how was this resolved under your leadership?
CARTER: Well, that was a tough moment in that meeting room. That was a Saturday and people do — if I called meetings on Saturday, it was because I was pissed.
CARTER: And I did have the CEO of this company and I want to say I’ve — he as a successor in very good relations with Lockheed Martin and they do a lot of good work for us but business is business. And what I was telling him was that if this management of this program doesn’t improve, it’s going to go down the toilet. It’s going down the reputational toilet.
It’s a joke in the media. What’s the most bloated thing in government? Everybody can say joint strike fighter.
CARTER: You are …
RITHOLTZ: Well, the Osprey V-22 is arguably …
CARTER: Okay. And there are toilet seats and people associated with it.
CARTER: Well, and you can ask for $700 billion from the taxpayer for defense if you’re running things like that. So, I was the weapon’s buyer at that time and I said, I can’t defend this kind of thing …
CARTER: … and you’re going to drag down the whole program with this kind of management. That’s the point I was making to him.
What would we do with the joint strike fighter to get it back on track? There are number of things but one thing I described in the book because it is kind of an executive guide on how to run the place and contracting is critical.
And what I did was shift the early aircraft building contract, one of the steps I took, to an incentive contract rather than a contract where whatever he spent, we gave him.
RITHOLTZ: That was the old method and …
CARTER: That was the old method and you can imagine where that — I mean, human nature being what it is …
CARTER: … you can see where that leads. And that’s Okay if you’re doing an experimental, more development type …
CARTER: … that you don’t really know where it’s going to go and it’s unfair to make the guy give you a price.
CARTER: For once, he’s building aircraft and he’s been doing it for a couple of years.
RITHOLTZ: A couple of decades.
CARTER: He knows what he’s up against. Yes. Well, in this particular model for a couple of years and I said, let’s write a contract like this, we’ll agree on a target price, it seems like — that you think and I think is about what it all cost to build that plane and will put a little profit in — not a little profit but a reasonable profit in there for you.
Every dollar you overrun of that, I’m going to make you pay 50 cents and the taxpayer will pay 50 cents except if it runs up to 20 cents and a dollar. After that, you have to pay for it all.
On the other hand, if you deliver it cheaper than the target, you get to keep 50 cents, I get 50 cents back.
RITHOLTZ: That sounds like a great set of incentives.
CARTER: Yes. That puts the right economic incentives on the contractor. And with that and some other managerial moves we made, these costs of the joint strike fighter stopped rising and eventually turned over and now, we have a joint strike fighter, which I have to tell you, Barry, I said earlier in this conversation that I think is the last man fighter will ever built …
CARTER: … but we do need it now because we need fighter aircraft and it’s the aircraft of the future for our Air Force, our Navy and our Marine Corps. So, without it, we would be in trouble.
On top of which, there are a lot of foreign customers for it and we sell it and it’s actually good for our economy and for our defense industry for us to sell them …
RITHOLTZ: And we look at the old of F-18s and F-15s, these are decades-old planes, right?
CARTER: Yes and they got improved gradually over time and we sold many of them abroad and they were very useful in Iraq and Afghanistan and so forth and also in deterring more formidable enemies than the enemies we found there.
So, we needed the joint strike fighter but this is an example of how, whether it’s aircraft carriers, fighter aircraft, dogs for IEDs, we talked about it, services, do you know that half of the contract spend of the Department of Defense is not for aircraft and satellites, it’s not for things, it’s for services, mowing the lawn at a base, doing high-tech R&D, all these things.
And you have to learn how to be a good buyer there also. So, as the person who ran the acquisition core, I needed to train them to be excellent in acquisition and that I had to back them up because when companies trying to push them around or not companies, it was always the lobbyists of the companies, trying to push them around or members of Congress or the staff tried to push them around, you need to stick up for them if they’re doing the right thing.
And when you do that, that makes everybody in the acquisition core perform to their highest potential and it was really important to me to set that example that the boss backs you up when you do the right thing. And anywhere in the Pentagon and I would say anywhere in leadership in any department, you have to set expectations.
But then when people meet those expectations and they run into trouble, you need to back them up. That means if you’ve asked them to do risky stuff and something fails and it doesn’t work out, you say, fine, you took the risk and I told you to take the risk.
It’s too often we let people take risk in public life and then if it doesn’t work out, well, we …
RITHOLTZ: Throw them under the bus.
CARTER: … cut them loose. Yes. Well, that’s fine. It works once and after that …
RITHOLTZ: Then nobody else wants to …
CARTER: After that, you don’t get anything out of them.
RITHOLTZ: So, you mentioned high tech, my view of — and I think a lot of people’s view of the rise of technology in the American economy, much of that traces back to DARPA and NASA …
RITHOLTZ: … and whether we’re talking semiconductors or software or geosynchronous satellites and GPS, all these things trace back to what we did in the ’50s, ’60s, ’70s. Are we still engaging in that sort of deep research?
I know DARPA still exists …
RITHOLTZ: …and they still run all sorts of interesting contest, self-driving car is another example. Are we as cutting edge in the technology world in defense as we once were? And if not, what should we be doing then?
CARTER: Well, there are two sides to it. We’re still a big dog, Barry. We spend more on R&D than Apple, Microsoft, and Google combined. So, we still do a lot, including a lot of frontier stuff.
But let’s be realistic, when I started my career, everything of consequence in the world of technology and you name things — I remember the birth of GPS. By the way, the Defense Department, the Air Force was supposed to …
CARTER: No. They didn’t want to do it. It had to be overturned by the civilian leadership.
RITHOLTZ: No kidding.
CARTER: And then it was President Reagan who all by himself decided that everybody should be able to use the GPS.
RITHOLTZ: But still it wasn’t as granular and detailed as the military grade GPS at least in the beginning.
CARTER: Yes. That’s sure. That’s true. But the general point is that everything that mattered and that happened of consequence came out of government, came out of the United States and mostly came out of the military within the United States. That was then.
Now, it’s a much bigger mix. A lot of the technology of consequence to the future comes out of the commercial world and the commercial world is inherently global. What does that mean for us as the Defense Departmen?
Managerially, it’s a very different thing. You have to do not only the management within your own house of your own R&D but I had to build I call them bridges to the tech world so that we could stay connected with them and draw the best of what they were doing into us rather than having the flow only be the other direction.
And now, how do you do that when you have Edward Snowden …
CARTER: … and you have a generation of technologists that is kind of suspicious of government or thinks government is inferior or — I had to try to restore that relationship of trust which was the one that launched my career that went back to the Manhattan Project. But all that with all that had been gone.
And Jim Comey who was my colleague in the FBI was picking fights with Tim Cook who was the CEO of Apple and I’m in the middle of all of this. And I tried and I think I had some success in drawing the tech community and we had to kind of them 50-50.
CARTER: So, for example, I tried to get people to come in and serve in what I call the defense digital service, which is — was a way that I — you could — a tech person could come in and just work for one year or on one project and they didn’t have to join the military, they didn’t have to join the civil service …
CARTER: … so they could just — they could come in and I’d go and I try to recruit them and then they have orange hair, rings in their noses and I’d say, I’m not going to ask you to do anything different, you can wear your hoodie, come to the Pentagon and I promise you when you do that, first of all, your respect for the Pentagon, it will be very strong.
And second, this will be what you’ll tell your children about. You’ll be proudest of this, prouder of this than working somewhere where you’re selling advertising or whatever how interesting is that may be.
And they would come and I wouldn’t make then change clothes and they’d be walking around the halls along with all of our people who are button-down and wearing suit like me …
CARTER: … or wearing a uniform and they — and it was true, by the time they left, they tell me, this is the most meaningful thing I’ve ever done and I’m so proud of it, I’m so proud of the people that I was with and could be part of.
But if you didn’t build that bridge at the beginning and you didn’t say, look, we’re going to have to agree to disagree but what Edward has done, you may think he’s hero, I think he’s a traitor. But let’s agree to disagree about that but I want you to come in and give us a try.
And then they would come in, they’d give it a try to be successful and they’d go back out to Silicon Valley route to Boston or down to Austin back to the tech hubs and they take the word that the government isn’t so bad after all and it does need our help and it deserves our help.
RITHOLTZ: So, that’s interesting. You mentioned earlier Iran and North Korea. Let’s talk about two other countries you mentioned in the book, “Inside the Five-Sided Box.” Let’s talk about China and Russia.
China seems to be very good at hacking corporate computer systems and taking pretty much what they want, including military manufacturers and capturing plans for jets and drones and everything else. How dangerous an adversary is China?
CARTER: Well, they’re — I think they’re quite dangerous and I have thought that for quite some time. I came earlier than most people to the view. Even though I worked with the Chinese quite closely in the ’90s and after 2000, knew everybody in the PLATFORM, had good relations with them, it was clear to me that China wasn’t going to turn out the way everybody had hoped in the 1990s.
RITHOLTZ: Meaning a friend …
CARTER: Yes. Yes.
RITHOLTZ: Right. I hate that word.
CARTER: They’d be different. They’d be Chinese. But they wouldn’t challenge the world order. They wouldn’t become an economic — I mean, they wouldn’t become a military competitor and they would become an economic power, kind of one like us, a free-trade type economic …
CARTER: … and be like Canada and Mexico and Europe and that kind of thing.
RITHOLTZ: Wishful thinking?
CARTER: It was. Well, in the 1990s, you may have still held onto that hope. I thought by 2000 when my conversations since I watched Jiang Zemin become Hu Jintao become Xi Jinping and I’ve known all three of them, it became clearer and clearer that they were going down into a path quite deliberately of statism rather than free trade and capitalism, repression rather than an open society and one that was going to use every advantage a dictatorship could have to advantage themselves, including the one you started with which is using their spy agencies to steal information.
The Chinese had copied us for a long time but we used to be flattered by that and then at a certain point, they did good enough at copying you that it stops being flattering, it becomes threatening to you.
CARTER: We’re past that point quite some time ago.
RITHOLTZ: So, let me ask you a question here. I still look at China as more of an economic threat than — and more of a potential military threat. At what point does that balance shift? At what point do they become a legitimate military threat with aims of global domination versus letting their economy, which is quite an industrial engine, drive the development of the country?
CARTER: Well, I think they’re convinced and determined to be militarily superior but that’s not going to happen for a long time. We have comprehensive military power that it’s going to take a long time for the Chinese to overcome.
Think about this, we spent a lot more every year than they do, for starters.
RITHOLTZ: Multiples, right?
CARTER: Secondly — yes. Secondly, we have been doing that for decades which means we have this accumulated capital stock that is much larger than theirs. Third, we have an experienced military. Our people have basically been at war for the last 15 years. Our officers, of course, are extremely proficient. And last, we have all the friends and allies and they have none basically.
RITHOLTZ: Well, they’ve been buying friends with that Belt and Road approach.
CARTER: I’m not — I think the Belt and Road like them overtaking us militarily is exaggerated also. It’s what …
CARTER: Yes. Belt and Road, remember, this is the country that builds cities with no people at them.
CARTER: And so, they’re perfectly capable of having initiatives with nothing going on underneath. And what they did with Belt and Road was gather together a lot of stuff they were doing anyway. Most of the countries that they Belt and Road with …
RITHOLTZ: South America.
CARTER: Yes. Well, go to Africa and ask how — where the Chinese came first and the Chinese weren’t out there, it takes about three years and they were out there.
CARTER: Yes. Because that’s when people realized that it’s all about China and they’re not grants, they’re loans. They’re loans on predatory terms …
CARTER: … and the Chinese bring in all their own workers and then start taking your precious metals at your country. They bring in their own workers and that’s the Belt and Road.
So, it’s sours on people really fast because it’s so exploitative and that’s where China and we I think really differ fundamentally and that is this, if our — at our best and usually and certainly our institutions go back to the enlightenment and it was about the rights of man and the dignity of man, today we’d say people.
For China, it’s all about being Chinese. So, our ideology, yes, we’re American and we stick up for Americans and maybe we’re narrowminded sometime but at the heart, our political values are universal.
At their heart, Chinese political values are about being China. Pretty soon that dawns on everybody around them. Remember also that China’s only half of Asia.
RITHOLTZ: That’s right.
CARTER: So, I want to have a China policy but I was telling people, we don’t have a China policy, we have an Asia policy and I’m going to win the other half. I want to trade with it. I want it to be friendly with me. I want it to work with me militarily and that is both a good in itself and in a hedge against China.
So, we can’t lose those — we’re really had to keep our focus. As a secretary of defense, I spent a lot of time meeting with my counterparts from Vietnam, from Laos, from Cambodia, Indonesia, Malaysia as well as traditional friends like Japan and Korea and Australia and so forth to make sure that we had friends there and that the Chinese saw that we had friends.
RITHOLTZ: So, let’s talk about one other country in Asia which is Russia, not economically the powerhouse that China is but they seem to be very good at sowing dissent and sowing disinformation. Their brands of warfare or pre-warfare is kind of unique.
Their involvement in various — when you’re an open society, you have to knowledge that they’re going to attempt to disrupt our elections and everything else. How does the former secretary of defense look at the former Soviet Union that’s now Russia?
CARTER: Well, when your trendlines are all down like Russia’s rather than up like China’s, you only have one tool and that is to be a spoiler. And the Russians are perfected being a spoiler.
RITHOLTZ: For sure.
CARTER: So, they have NATO which has unity and so they try this — to so discord. They had the United States which is doing fine and powerful and won the Cold War and they resent. And so, their way of trying to get back at us is to try to sow discord within the United States. That’s all they have.
And when dealing with Putin over the years — by the way, I first met Vladimir Putin in 1993. He was a notetaker in meetings between Clinton and Yeltsin and he sat in the back, this guy, and we knew who he was, CIA knew who he was.
CARTER: He’s back there taking notes. His — and my view of him has been if it were only that we disagreed about Syria and Iran …
CARTER: … and NATO expansion and so forth, those are normal geopolitical issues and there with a foreign leader, you go ahead and you agree where you can and you agree to disagree where you can then you’d go on.
The problem with him is as you work down the list, you find he has an item on his list that you can’t build a bridge to and that’s screwing us and that’s on his to-do list and it’s very hard …
RITHOLTZ: I suspect …
CARTER: … to negotiate and say, well, let’s talk about screwing us and maybe we can meet halfway. I’m not going to do that.
RITHOLTZ: I expect we’re going to find out that Russia was much more involved in Brexit than anybody previously imagined.
CARTER: Yes. That’s actually a new documentary out called …
CARTER: … “The Great Hack,” a Netflix documentary which describes exactly that, very deeply involved in trying to sow that. Now, of course, for them, it was — they’re throwing spaghetti at the wall and seeing those stick.
CARTER: They’re fomenting all kinds of discord and every once in a while, one of these goes — one of these longshots goes the distance …
CARTER: … and doesn’t just stir up a cloud of dust but there’s a cowboy at the end of it.
CARTER: And in the case of Brexit, they scored but I don’t think going into it that they knew they were going to win that when they were …
RITHOLTZ: That’s the main …
CARTER: That’s what weak countries do and Russia basically has nuclear weapons and being a spoiler and that’s all it got.
RITHOLTZ: I have a million questions for you but I know I only have you for a short period of time. Let me ask you some of my favorite questions. I asked all my guests sort of our speed rounds and then we’ll get you over to television …
RITHOLTZ: … and have you continue the conversation. What was the first car you ever owned, year make and model?
CARTER: It was a 1968 Impala and the reason I know intimately about that car was I worked for five years at gas station on North Broad Street in Philadelphia, that’s my second job. The first job was at a carwash and I got fired from it.
CARTER: And then I walked up the street and got a job at a golf station there and therefore, I could take that car apart and put it back together again, something I could never do with the car today.
RITHOLTZ: Well, it’s all chips and computers.
CARTER: Yes. You have to replace — you just replace chunks of it. There are no turning of wrenches and stuff.
RITHOLTZ: Tell us about your early mentors. Who influenced your career whether it was academically at MIT and Harvard or professionally in the Pentagon?
CARTER: Two eras. The people who got me from being a physicist to being a public servant were those guys from the generation of the Manhattan Project that I referred to earlier who believes that they had done something of consequence, namely the nuclear weapon but with knowledge came responsibility.
Then later in my — in the time where I slowly got to work my way up from junior ranks in the defense establishment to becoming the secretary of defense, there were people like Jim Schlesinger …
CARTER: … who was Richard Nixon’s secretary.
RITHOLTZ: James Schlesinger. Yes. Absolutely.
CARTER: Great guy. Brent Scowcroft, National Security Advisor ….
RITHOLTZ: And four-star general previous to that.
CARTER: Yes. Three-star general actually.
RITHOLTZ: I gave him a promotion.
CARTER: Okay. He deserves one. Bill Perry who was Secretary of Defense …
RITHOLTZ: Admiral in the Navy, am I remembering the right Perry?
CARTER: No. This is a guy who — there was a Perry long ago who was an admiral.
RITHOLTZ: Right. Different Perry.
CARTER: No. This was a guy who was a scientist like me …
CARTER: … as it turns out but not all three of those were — Bob Gates, these were people who were capable and they always stuck up for a junior person. I got myself into a few tight jams where I thought I was doing the right thing.
One of them was, with respect to President Reagan, Star Wars which I said wasn’t going to work. It was my technical judgment. Well, that flew in the face of a president’s desire …
CARTER: … and I learned what it was like to tell the truth in the real world but …
RITHOLTZ: Wait, presidents don’t like when you grapple over their …
CARTER: Yes. No.
RITHOLTZ: … biggest strategic initiative.
CARTER: But those people that I just named stuck up for me at that time and therefore, stuck up for the truth and that made me feel that there was dignity and honor as well as purpose in public life and I tried to carry that forward with me and I don’t think I would have stuck with it if I hadn’t been able to look up at my — at people who turns out became my predecessors as secretary of defense and say that is not only capable and patriotic person but an admirable and honorable person.
RITHOLTZ: Quite interesting. Let’s talk about some of your favorite books. What do you enjoy reading? You’re a bit of a historian.
CARTER: It’s funny, Barry, I am and I’m all nonfiction because I love to learn about something I’ve never seen, never done, never will do. That’s why I wrote the book I did about the Pentagon. If you’ve never been in the Pentagon and you want to know how all the parts work …
RITHOLTZ: It paints quite a vivid picture.
CARTER: It’s an executive guide or a citizen’s guide to the Pentagon. It’s not about me, it’s about the Pentagon. I like reading books like that that’s why I wrote a book like that.
I read, and this may surprise you, textbooks.
CARTER: That may sound boring but here’s why. A text — if you want to learn something, a textbook is designed, it’s written to teach you.
CARTER: So, from a good textbook, you can learn a lot about a subject you don’t know and second, if you don’t like — if something doesn’t come through to you in the first textbook, get another textbook. I always get three or four of the same subject.
CARTER: I like Mathematics. I like Physics. I like History and Language and so forth, too. Because then you can say, well, I’m going to — this — I didn’t get this guy’s explanation of a certain subject. So, I go to the corresponding chapter in the other one and read that and they’ve got a better explanation and you go back and forth.
I like doing that and it may sound like an odd — it should to people. But if you like to learn, try textbooks.
RITHOLTZ: Okay. These two books I have to ask you about on the off chance you might have read them based on our previous discussion. One is a book on the history of the medieval era with the title, “A World Lit Only by Fire.”
CARTER: I had not read it but I’ve read — I guess I have reviewed on …
RITHOLTZ: It’s kind of fascinating because that thousand-year period is shocking for the lack of technological advancement.
RITHOLTZ: Before and after tons but that …
CARTER: It was dark in every — it wasn’t culturally dark but if you look at human material progress …
RITHOLTZ: Not a lot.
CARTER: … for Western culture, there’s a thousand years when say Islam was going great at that time.
RITHOLTZ: And China as well.
CARTER: Yes. And they were doing mathematics and they were doing all sorts of things with trade and pottery and glass and whatever. We were doing nothing over the Western world.
RITHOLTZ: Right. The other book that you immediately made me think of when you were describing how people often don’t appreciate and understand what the government is doing is the most recent Michael Lewis book called “The Fifth Risk” …
RITHOLTZ: … which is about all these scientists and all these managers that are doing the governance work that is effectively essential and most of us are oblivious to it.
CARTER: Well, that’s in a sense — the theme of that book is the theme of my life of getting into national defense as a technologist and there are lots of other skills as well. I’m a strong believer that the best government is one that people come into and go out of and we’re criticized for that.
RITHOLTZ: For the revolving door.
CARTER: For the — yes. In every administration, things change and here’s how it looks to me about political appointees and government. About half of them are really good, a quarter of them have no idea what they’re doing at first but they learn fast and they’re patriotic and they do well and a a quarter of them are hopeless and never get any better. That’s pretty much the way it is.
But they bring in a freshness every time they come and I think it’s healthy for our government. And so, compared to the British who are horrified, for example, to see all their counterparts change every time a presidential administration change …
CARTER: … it’s pretty helpful. But in a time particularly in the military where we’re — Barry, we’re never going to return to the draft. We will continue to get people to register for the draft because it’s a little reminder that they owe something to their country.
But I don’t want their four million kids who turned 18 every year. I don’t need four million. I need a quarter of a million. And moreover, many of them are not physically or mentally fit to be in our military today.
So, they’ll never be a citizen army. So, there need to be some way of linking the people and government and one way is for those who have something to contribute to find some way of being supportive and there are lots of ways of doing that. So, I think that’s important for citizens to don’t believe you’re self-made even if you’re successful person, none of us is self-made.
RITHOLTZ: Tell us about a time you failed and what you learned from the experience.
CARTER: I — early on in my time in, so to speak, the big leagues of number three, number two, number one, I had to work very hard at dealing with the press and the Congress and just getting good at that. And, first of all, you have to start from the right place and I did, which is you can’t start from a position of disdain.
Congress, for — most of these guys are working so hard. They’re so — they’re trying to understand a much wider range of issues than even the secretary of defense. They have to vote on all these other issues. And so, you have to start with an attitude that they’re very strict and they’re trying.
But what I had to do, Barry, and I described this in the book is practice. I would sit down before a hearing or before I went out and made an announcement or do the press conference, I would go and practice at my staff and I get Joe Dunford as a chairman with me so he could learn, too, from the same — and I’d say, ask me all the hard questions, ask me the things that I might not have thought of.
Because when you’re going real fast, and I was going real fast because there was a lot I wanted to do and I had two years as the top guy and I had all those years to think about what I would like to see done, I was going fast and I wanted them to catch the soft spots in my arguments in the places where I was skipping over everything. So, I wasn’t too proud to practice.
But Chuck Hagel who came before me who was a very, very great guy, he didn’t practice for his confirmation hearing.
RITHOLTZ: And that was a rough confirmation hearing.
CARTER: And that was a very rough confirmation and I asked him to practice. I said, I wasn’t too proud to practice, and he said, I’ve been a member of the Senate for a long time, I know how to handle it. I think in retrospect, he would have done well, done a little bit better if he had practiced.
But that was something I wasn’t good at and I described in the book how I fear that kind of person or you think you might be, don’t be too proud.
RITHOLTZ: What do you most optimistic about the Pentagon and the military procurement process going forward and what do you most pessimistic about?
CARTER: About this procurement process, I think that if the — it continues to kind — have good management at the top but I can’t speak for that, of course, I tried to set that example but I don’t know, I think we can continue to be the finest fighting force the world has ever known technologically as well as in the kind of people we attract.
And generally speaking, I’m optimistic about that for our military overall. It’s a learning organization. It’s very constructive organization. It’s been at the top technologically in terms of human talent and if it continues to draw from the civilian world, the very best tradecraft from them about how to be good, how to compete and how to be the best, I think I’m confident we can be the best.
I also think that it’s a great molder of citizens. Our veterans are wonderful people. They’re morally correct. They know how to behave themselves and conduct themselves. They’re disciplined and determined and they understand that that we all live here and that the government is one of the ways but not the only way that we keep our society and civilization going.
They have that imbued in them. They know that they’re not self-made that they’re part of a wider society. All those good values. So, I’m pretty optimistic.
RITHOLTZ: And our final question, what do you know about the world of politics and diplomacy and the Pentagon today that you wish you knew when you were getting started?
CARTER: I didn’t always — I think I took a lot for granted in the course of my life. When I talked about the Jim Schlesinger and the Brent Scowcroft and the Bill Perry and the Bob Gates, I could always look northward right up to the president and there was a good order and discipline for the most part in the government.
These were admirable people. They made mistakes. They’re …
CARTER: For sure and I didn’t agree with everything they did. But starting with President Reagan, the first president I worked on that I could look up and I say, the President of the United States is someone whom I can work for and kind of emulate what he stands for.
There’s a part of our country and it’s not just the President but it’s — that I now understand how lucky I was to have those people above me and maybe I took that for granted. I mean, I’m a believer in what we’ve been doing in the world all these decades.
I now realize that you really have to keep proving that to the public and make them understand that this is the necessity and you can’t take anything for granted. So, I would take a lot less for granted now than I thought I could when I started my career. But I had around me people like those and you tend to do that.
RITHOLTZ: Quite fascinating. We have been speaking with Ash Carter, former Secretary of Defense and author of a new book, Inside the Five-Sided Box: Lessons from a Lifetime of Leadership in the Pentagon.”
If you enjoy this conversation, well, be sure and look up an inch or down an inch on Apple iTunes and you can see any of the previous 300 or so such conversations we’ve had over the past five years.
We love your comments, feedback and suggestions. Write to us at MIBPodcast@Bloomberg.net. Please give us review on Apple iTunes. I would be remiss if I did not thank the crack staff that helps put these conversations together each week. Michael Boyle is my producer, Carolyn O’Brien is my audio engineer, Atika Valbrun is my project manager, Michael Batnick is my head of research, I’m Barry Ritholtz, you’re listening to Masters in Business on Bloomberg Radio.