The Arsenal Beneath the Arsenal

**Ryan Evans** (0:11)
You are listening to the War on the Rocks podcast on strategy, defense, and foreign affairs. My name is Ryan Evans. I'm the founder of War on the Rocks. Few weeks back, we sat down with Michael Cadenazzi, the Assistant Secretary of Defense for Industrial Base Policy, and an event sponsored by Altana. And we spoke about the direction the department is going on, you guessed it, the Industrial Base. It was really a good conversation. It was great to see Michael for the first time in years. Enjoy the show. So, Mike and I actually go back, we were catching up a little bit. We first connected about 10, 11 years ago.

**Michael Cadenazzi** (0:46)
2015, I think it was.

**Ryan Evans** (0:48)
And he's just gone onward and upward. So, Mike, thanks for making the time to join us to have this conversation.

**Michael Cadenazzi** (0:53)
My pleasure, I'm a huge fan of the product and the organization. It's an incredible forum for the industry, and thank you for hosting me.

**Ryan Evans** (0:59)
Thanks. So, you have a pretty big job, Industrial Base. You've been hard at work for, since what, September now?

**Michael Cadenazzi** (1:08)
About four months.

**Ryan Evans** (1:09)
Yeah. And have you solved critical minerals yet?

**Michael Cadenazzi** (1:11)
So solved it. They're no longer critical. We are working on a whole host of things, as you've seen. We've done some really transformational things. I actually, I've told everybody, I've spent more time on chemistry than I have since 10th grade. I have periodic table of the elements. It's taped to the wall, right near my desk, because people are calling me about one unumtanium or another every single day. Truly, gallium, germanium, yttrium, the entire actinide and lanthanide series. You start to learn these things. You talk about atomic numbers and weights and metals and salts. It's an incredible education. And I have a bunch of brilliant chemists that work for me in a whole bunch of places, all of them who could make more money and hedge funds. And I'm so thrilled that they are part of our team.

**Ryan Evans** (1:49)
Allow people to look behind the curtain a little bit. How does an office like yours work? Like, what's the day to day? How many people you got? What do you do it every day? How does this defense industrial policy making work in practice?

**Michael Cadenazzi** (2:00)
So it's an incredible organization I inherited, and I truly have inherited it from some great stewards over the past. So it's been a long list. In fact, last summer, I guess September time frame, we had a dinner with about 14 of the previous industrial-based policyholders going all the way back to the end of the Bush administration, which is incredible to see the evolution and the scale of it. All of them were blown away by how big the office has become. We're probably about 100 government service employees, maybe 350 contractors and growing. OMB won't give me all the people I want, but we'll work on it. The issues are essentially four big spreads. One is small businesses, so new entrants. Huge pressure around that to go ahead and bring in and constantly meet the requirements for new firms. We do the entire CFIUS and mergers and acquisition portfolio. So we have teams responsible for managing inbound and outbound transactions, as well as the 1260H list, which I think we'll talk about a little bit more, of Chinese military affiliated companies, and then a whole bunch of other sort of like competitive capital issues. The industrial-based resilience team, which is responsible for investing upwards of $11 billion this year between the DPA and the IBAS fund. And then finally, what is the department's newest secretary, it was the Assistant Secretary of War for International Armaments Cooperation, which was separated out in the NDAA. I am PT doing, perform the duties of the Assistant Secretary of that role while we find someone to run it. It essentially was part of the organization and will be a major player in FMS and DCS sales going forward. So it's big, it's dynamic, there's a lot of things going on, and it does feel like if you rid the NDS last week, industrial policy was the fourth line of effort in it. And it's an incredible thing to see what we're a part of every day at the core of the department strategy going forward.

**Ryan Evans** (3:45)
And who are the other officials, political appointees side that you work the closest with?

**Michael Cadenazzi** (3:49)
The Honorable Mike Duffy is the Undersecretary of War for Acquisition and Sustainment is my prime, he's my boss. Dale Marks is the Deputy, he actually was selected for energy installations and environment, but he's acting as the Deputy right now. He's doing a great job. So those are my two primary folks, and we work directly with Honorable Steve Feinberg every day, the Deputy Secretary of War, and then Secretary Hegseth as well. So that's kind of my core chain of command, and we coordinate with Emile Michael's team, Undersecretary of Emile Michael's team within R&E and some other folks in that space as well. It's fantastic, we have a really collaborative team, we're working really hard and really fast. We've brought in some amazing folks from industry, some amazing people from private equity, some really talented folks from across the government have come in. In fact, I hired one from off your podcast, Bonnie Evangelista, who joined after I heard her.