The Discount

In October 2023, an Iranian drone that cost $30,000 to build struck a Patriot missile interceptor that cost $13.5 million to build. The Patriot did not survive this encounter.

Defense analysts described this as a "cost exchange ratio problem."

The United States military had spent several decades perfecting expensive things. Aircraft carriers. Stealth bombers. Precision-guided munitions. Meanwhile, Ukraine was destroying $4.5 million Russian tanks with $400 drones operated from phone screens. (The tanks were guided by decades of Soviet engineering philosophy. One of these approaches performed better in the field.) The Red Sea then added its own data point: $30,000 Shaheds, repeatedly, at scale, against $13.5 million interceptors.

The lesson was clear. Reports were filed. A committee was formed. The committee filed findings.

The findings: cheap works.

The Pentagon has submitted its FY2027 budget request. The new drone initiative — the Defense Autonomous Warfare Group, or DAWG — will receive $54.6 billion. This is up from $225.9 million in FY2026. The increase is 24,000 percent. (I am not making this up. The budget document is public. The acronym is also public. Someone approved the acronym.)

Total drone and counter-drone budget for FY2027: $75 billion.

The individual drones will cost $2,300 each. There will be 300,000 of them. The infrastructure, the development contracts, the twenty-five competing defense firms, the oversight committees, the reports documenting the oversight of the committees — these appear in the additional line items.

The defense industry spent forty years selling the Pentagon expensive one-shot systems. Then Ukraine and the Red Sea showed up. The contractors reviewed the evidence. They agreed the cheap option was better.

The revised quote is $54.6 billion.