History tv on cspan3, working with our cable affiliates as we explore america. Deputy defense secretary Patrick Shanahan delivered keynote remarks at the Reagan National defense forum. He discussed National Security threats, Defense Innovation and military readiness. Following remarks, mr. Shanahan was interviewed by cnn pentagon correspondent barbara starr. This is a half hour. [applause] how are you . Good. I say those 30 years were a good warmup act. John, thank you, and im going to make sure to get a copy of your book on the way out of town here. So thank you for that warm introduction. Distinguished guests, ladies and gentlemen,gu in todays Dynamic World strong leadership is more critical than ever. I can not picture a crowd more in tuned with the importance of good leadership than this one. It is my first time here but many of you have been coming to this event for years. The beauty of the forum is its ability to draw together such invested, y knowledgeable and diverse leaders from the executive branch, military services, congress, industry, our allies and partners and the media. It is a privilege to speak with you on a topic as vital as National Security. And i am mindful that it has been a long and productive day, roger, not exhaustive, so i aim to keep my remarks brief. In my time at dod i already interacted with many of you. Youre not a passive bunch. The phrase, full contact sport, is definitely not lost on you. Ive had the good fortune to interact with president trump. He has been clear on his expectations. Build a stronger military, take care of our men and women in uniform, and excel in the management of our business operations. Secretary mattis and i appreciate your endeavors to address a critical facet of our National Security. Military readiness. This bipartisan effort bridges the political spectrum. In one ear i hear senator reed asserting our need for properlytrained, military force serve on a moment as notice. In my other ear i hear general thornberry, to meet the military challenge. It is today aspiring to join this large team of sharp mind working to confront reality and identify opportunities. I look forward to the actions todays discussions will foster. In my role as deputy secretary of defense for four 1 2 months now. The transition from more than 30 years in the private sector has been surprisingly smooth and seamless. The environmentnt is similar. But with higher stakes. It is a Large Organization tasked with serious decisions on safety and security. I will say, a couple of the departmentspl behaviors strike e as abnormal. First, operating without a budget is not normal. [laughter] doing so every year for, for nine years is really not normal. Next, airplanes are meant to fly. A service with significant number of its airplanes grounded and awaiting maintenance is not normal. Part of my job as a leader is guarding against the normalization of abnormal behaviors withinn the departmen. A high level of performance is not only expected of our military itnc is essential for americas security, no matter th constraints. As secretary mattis often says, there is nothing new under the sun and which do not have to look far into the past to find another time when our military faced serious obstacles to readiness and modernization. 80 years ago we faced rapidlyevolving threats from across the pacific and the atlantic. While military leaders sought stable funding, political tensions and budgetary pressures stymied readiness efforts until the Second World War arrived on our doorstep. Inin 1938 general George Marshal captured the dangers of unpreparedness in a way that still strikes a chord. War is sudden and a terrible business. We must be prepared to defend ourselves, almost every War Department problem involves consideration of dollars and cents. Today artificial constraints still hold our National Defense hostage. From budget stresses like continuing resolutions and budget control act caps to disagreements in congress that affect timely digsmaking. Decision making. Right now we have time. One of our most pressures resources, but we lack the stable budget needed to prepare for future fights. In a crisis congress will undoubtedly fund us for conflict but we will lack the time to prepare. Lets heed general marshalls warning. We can not rely on a crisis to be the catalyst for solutions. The cost of global conflict is simply too high and we value our men and women in uniform far too much. Ani rapidlychanging Global Security environment and budgetary instability have forced our department into a riskmanagement posture. The consequences of which are hard to calculate. For any fellow engineers in the room, let me draw a physics analogy. According to hooks law elastic materials bounce back to their original shape after stresses are removed from their environment. But if stress exceeds a certain limit, the materials will fail to regain their original shape. They become permanently deformed. The department of defense has its limits to elasticity. Excessive pressure in the form of budgetary instability has the potential to permanently distort our departments character and lessen the lethality. I know from my experience in industry justt how long it can take to build a culture of excellence. Therefore as a department we must shift our focus from Risk Management to seizing opportunities in order to remain competitive. A risk balanced opportunitydriven approach will Spark Innovation and help protect our hardearned culture of excellence from the unintended distortion of budgetary instability. To address these challenges our forthcoming National Defense strategygy nested under the National Security strategy, and ourr fiscal year 19 budget are designed to sustain longterm readiness and modernization. We are building alignment across the department, the inner agency, with industry and other partners and allies. We all view these efforts through the critical lenses of lethality and affordability. After all, we must remember departments primary purpose is to be as lethal as possible, insuring that our diplomats continue to speak from a position of strength. This is only possible when our enemies know with certainty that our, that we are ready to fight and win our wars and our allies know that america stands steady along side them. A stable budget is essential for this. As i alluded to earlier, im struck by the talent in this room. As individuals you possess no shortage of skills and resources our challenge horn harnessing our talent. Out of our nations guiding principle. E pluribus unum. Out of many one. If we stay focused on our goal, winning against any adversary to keep america safe. I close with general washingtons wisdom. To be prepared for war is one of the most effect wall means of preserving peace. This belief drives us and it will continue to drive us in all that weue do. Thank you. [applause] thank you, mr. Deputy secretary. Lets welcome cnn pentagon correspondent, barbara starr, for a discussion with the secretary. Barbara . [applause] thank you, gentlemen. I want to take two seconds to say this is my fifth time here and youre not live yet. Not miced up. Probably started pushing some of thosese buttons. Sorry. Im on tv. Supposed to know how to do that. I always enjoy coming out here, i have to say my very first newspaper job way too many years ago i will not admit to, was down the road at the thousand objection news chronicle. I was the City Planning Commission reporter. [laughter]. And for about 8600 a year. And my big goal was to be promoted to be city council reporter. Never happened. [laughter]. So you see, you see what happened to me. I also briefly say because senator reed is in the audience, thank everyone at this forum. I was privilege ad couple years ago to host a panel with senator mccain. We always want to make sure we send all of us our very best wishes to senator mccain. [applause] and now let the interrogation begin. Hi. [laughter]. So, face it a not a lot of people, you know, know everything about you yet. Thats good. [laughter] surprise us, right . So talk to us a little bit how you got here in terms of what now. Talk to us about being the chief operating officer essentially. Talk to us essentially how you and secretary mattis divide up the pentagon, divide up the world, priorities, what he wants you to accomplish. No, absolutely. So it is probably last february i get a phone call and it is kevin sweeney. The chief of staff for secretary mattis. Think its fraternity friend of my son. Why would secretary of defenses chief of staff be calling me . And this for a job interview. And i went to the pentagon. I went to the secretarys office, and he has this round desk and it was general shermans desk. And we were doing a job interview. And, we were going back and forth and i asked him in the job interview, what is it that you would like to accomplish in your time as secretary of defense so i understand if you have the skillset too accomplish what i want tors achieve . The first thing he said i want towa make a more lethal force ad i think you have the background developing major Weapons Systems to help lead the department. And he said we cant be the policeman to the world, i need to have a partner who understands, who worked with a global company, that has those kinds of perspectives and understands the value of international relationships. And the third one was the, one that surprised me the most. He said, one of my goals is that when i leave the department, that people will want to come and benchmark the department of defense because it has best practices. And when h he described it that way i said, i think i possess the skillset. It was never intended i would be his policy deputy. It was always help me restructure the pentagon. Your job is down and in and his is up and out. You got right to it because in the press corps we hear secretary mattis talk a lot about how he feels his job is making sure the u. S. Military is the most lethal force in the world. Lethality takes us right to the very perhaps key question. Does that necessarily mean a bigger military . Is a bigger military the only route to lethality . Let me just say, you know, help people understand, is the thinking yes, we need more nuclear weapons, we knee more aircraft, more ships, planes, satellites, is that the route to increased lethality . Well. I think the way, at least ive been thinking about increased lethality it is size and capability, its both. How you use your force structure, how you use the capability can be a multiplier. There is all sorts of ways to create different types of effects, so there is not a magic answer as to what the mix is. You can generate more capability from what we already have today. Things that we can do with innovation and technology can really enable those forces to do even more. So if a Service Comes to you, if a major contractor comes to you, somebody comes to you with an idea, and they say, its innovative and it just means im just hypothesizing here. Ju yeah. We need another 200 fighter jets. Just mor may not be the answer. Well, more of the same means more of the same. We need more better. Tie lethality and innovation together because i know thats where youre looking. Ge yeah. The, really neat part about this job is we get to set future and it will be much different than, than what weve done for the last severalal decades. Go back to the conversation when john was doing his introduction, we are looking at one of the biggest changes since the reagan years. I worked on the chinook. That came into introduction the same year i was born. Apache. We have a lot of really great legacyga equipment. The b52, think of the missions weve been able to enable there. I think what an interesting period of history where innovations like computing, we always talk about things like Machine Learning or artificial intelligence, it will fundamentally change decisionmaking. So the systems we have in thee future will take advantage of that. Autonomy, i think you will see that to much greater degree, very few people in this predicted Automotive Companies would be getting out of combustion engines at turn of the next decade or people would want to own cars that will drive themselves. Well be at a same point where we usher in a new age of technology. It is not about a company or person coming forward with a new idea. We have to harness the Industrial Base so that iterating on those ideas and scaling those ideas become as natural act, and making that shift right now will be difficult. And why is that in your view . Because many of these technologies are at their infancy. You see that in cars. You see thathe in, you know, autonomous aircraft, but this will change very, very rapidly. Youre seeing it with roboticses and additive manufacturing. What isad hard for people today, because we havent had experience using these technologies isd to envision how we might do things differently. So the, the trick with innovation is, to use it, and then to fail 1000 times quickly. That is where human beings struggle. The desire to fail is uncomfortable. Do you see more opportunity in commercial technology for the department . I,me so i think about commercial technology this way. Before the commercial market leveraged government investment. Now because the commercial segment is investing in, so much money, it is time for the government to do the opposite. I call it, the new form of r d. Ripoff and deploy. [laughter] so lets leverage somebody elses investment. Our real challenge that we have created a really neat acquisition system that says we have to go through a whole bunch of extra hoops to prove something already works works under our standards. That is, the the big opportunity to take all of that, shelf a good portion of it, and then leverage somebodyf elses mone. You and i talked about this, this whole issue of risk and elasticity. Let me come at it from the very opposite side. Yeah, it takes the pentagon a long time to develop anything. Is too long to decide . It is too long. Where is your thinking about where risk crosses the line into being too risky, not appropriate risk, maybe its a waste of the money. Help people understand where your thinking is on this. Maybe just a couple of examples come to mind. The easy one is this, like on autonomous aircraft, right . So how comfortable, how much risk would you be willing to take on a autonomous aircraft that would haul material for logistics, that wouldnt have a person in it . You take a lot more risk than if there was a person you know, in that vehicle. I think where peoples lives are at stake is probably where you have a greater degree of concern, conservatism. When i think about risk there is like three dimensions to it. There is technical risks, there is cost risks and schedule risks. So you have to understand which piece of this youre trying to exploit. The real danger is when you do all three and, you know, technology risk, i mean, the, this is, this is the one that excites me the most is, that, we have some, some of the smartest people in the world in our, in our country and in our Industrial Base and in the department of defense. We talk about why things take too long, its because of the way we hand things over. It is much like if, we were a Baseball Team and we had this farm league and people would from single a to double a, to aaa, i know you love all the sports analogies, but we would find a person who is in high can throw 100 mileanhour curveball with each hand and get to the big leagues when they were 40. [laughter]te our challenge isnt that we dont have good ideas. Challenge is our process makes it go really slow. This gets back to the notion of innovation and risk. Nobody wants to make a mistake in public. So, when the services, either, the secretaries or the chiefs come to you, as you work through the next budget cycle, as you work through various efforts what do you want to hear from them when they come talk to you about their program, what theyre trying to achieve what funding theyred looking for . What are the priority things you want to hear from the services and the chiefs . We have already had those discussions. So theyre on going all the time. Tell everyone else. We all want to know. It is pretty exciting. Youre obviously not willing to look at some piece of paper with a spreadsheet and a bunch of numbers on it. You want to hear what do you think . Not yet. [inaudible]. Looking at chief of staff of the army. Yeah, yeah. Yeah. No, no. Do we need to explain this . What do you want to hear from them, as the services pitch to you and the secretary about where they want to go . Well it is not so much what i want to hear from them, it is how were going to partner together to achieve these results. Okay. Whether it is general gold fine or general milley. This notion we take all these authorities, say, general milley, go develop the next combat vehicle. You spent your whole life doing military operations. Now we want you to spend rest of your life designing future vehicles for the department of n defense. My role is not to be so insular, take all those ideas, i think what im looking for, not just the ideas. They have the authority in their position, to change how people think about the future. And if they possessed, were going to extend the status quo, then those meetings will be uncomfortable. If the meeting is, here is how well fundamental change, then we get into this discussion of experimentation. No onent is reckless. I think it gets down to how do we get the right people in the room and do the right level of experimentation . And to begin to wrap up none much this is done at a vacuum because you plan against a essentially a threat. You plan against the fact that somebody out there may do something bad. So how do you view right now the threat, but not getting so caught up in the daytoday threat that it hinders the innovation which is the longer view . How do you view we talked about it all day here, north korea, russia . What concerns do you havee that you can get positioned for those kind of threats, and the threats that nobody of course sees coming . Right,ts right. So if youre in the department of defense, you live in duality. So you have you know, you have one eyeball in front of you and one down the road. The reasonon i mentioned about time, if we develop new capabilities well not do them in two or three are or four years. It will take more tha