Breaking down the military-industrial complex
- So if our government is funding technology from 1996, and China is funding technology for 2030, that creates a problem. - In a world where global tensions are escalating, technology is now at the center of the race for supremacy. Will a longstanding military industrial complex put the United States at a disadvantage in the pursuit of national security? - There is not a huge financial incentive to go and innovate on defense tech because of the entrenched incumbents. What is best for the country is an ability to use the free market to innovate. - My guest today is Gabe Dominocielo, co-founder of Umbra, a company building space systems that can observe the Earth in unprecedented fidelity, and will help us stay ahead of things like natural disasters, wildlife protection, and other high-stakes issues of national security. Later, we'll visit Umbra's Santa Barbara office where we'll meet and talk with Umbra co-founder and CEO David Langan, and get a hands-on look at some of their groundbreaking technology.
- And certainly I believe it's the highest resolution commercial imagery that's available from a spacecraft today. - Stay tuned as we tackle a variety of topics, from what's possible with Umbra's one-of-a-kind satellite technology, to how a free market approach may be the best way to create defense solutions of the future. The only way to solve our biggest problems is to have the audacity to try. Welcome to "In the Arena" with Evan Baehr. Gabe, you might be newer to satellites, which we're gonna talk about a lot in today's conversation, but you're certainly not new to entrepreneurship.
When does the Umbra story begin? - So it was like my wedding day, and my now co-founder comes to me and he is like, "I've got an idea for a satellite that can see through clouds." And I was like, "Okay, but there's no clouds on Google Maps." And he is like, "No, no, no, no. First of all, satellite imagery that everyone thinks is satellite imagery is really just airborne imagery. And it's like six months to like a year and a half old." So a satellite that can see through clouds, and he kind of explains the technology.
And I was, you know, I had spent a lot of time learning and trying to understand businesses, right, as being an entrepreneur. So I was like, "Okay, what does NASA have?" He's like, "Well, NASA's building a satellite called NISAR." NISAR, at the time, had overrun its budget by $800 million, putting it at $1.8 billion. So, most expensive NASA satellite probably in history. $1.8 billion is a lot of money. Like what can that satellite see? He's like, "It can see like four to seven meters."
Four to seven meters is like a giant cargo container is a single pixel. And I was like, "Okay, what can your satellite see?" He's like, "Well if we do it right, we could probably see like a soda can." And I was like, "Okay, does your satellite cost a trillion dollars?" And he is like, "No, no, no, no. There's like been massive changes in technology, it'll cost single-digit millions."
And I was like, "So you can produce a product that is 1,000x better at a hundredth the cost? We should start a company." - What was diving into Umbra like? - The best advice a VC will give you is go as long as possible without raising venture capital because what that does is it reduces risk. So essentially what the two of us did is we scrapped for two years pushing the technology forward. Of course this technology didn't really exist. We had to invent the antenna, we had to invent the radar, we had to invent all these things.
So all these individual components which gave the satellite this great capability and every part of it was risky. So we spent two years building intellectual property. We built this like very unique radar, plugged it in, I texted a few VCs and then our seed round was on the way.
- So you have these two years of operating really lean, you do raise venture capital- what is the state of Umbra today? What's the product that you make? - We have eight satellites in space. We tend to launch like two to four per year. Our product is a high-resolution image a customer would task dynamically.
So traditionally, in the satellite industry, in order to get access to satellite imagery it's really difficult. We used to hire people and say, "You have one objective, here's a credit card. Buy a satellite image." No one could do it. It requires multimillion dollar deposits, NDAs, you gotta go have a steak dinner with some sales rep. The way we sell data is very simple.
It is you log onto our website and you order an image for the price, and the price is on the website. Anywhere from $500 to $3,000. - So you have a network of these now single digits but growing satellites that orbit the Earth. And so you are able to generate sort of daily, updated, super high-res imagery from your network of satellites that give you the sort of resolution of recognizing about the size of a soda can. - So optical sensors can be on and they're on when they fly over Earth.
We're like buy by the drink where it's, "I need these 10 areas of interest, please take a picture when you fly over it." On average we can see any point on Earth twice daily per unit. But the real difference for us is over a high demand area, we'll call it the Middle East, we can take 10 to 15 times more pictures because of the technology.
We're able to see much, much further away. - Just as a lay consumer on the news, I see things that look like real-time, satellite imagery over high demand areas- like in Gaza for example right now- what's the role of satellites in a high conflict area? Don't we have drones and aircraft flying over doing that work anyway? - And drones are great if you don't mind having them shot. - So what about aircraft? - Also gets shot at. Here's a battle: you have a, what's called a very contested environment.
Space is not contested. It is dark 50% of the time, it is cloudy as much as 75% of the time. And in many areas of the Earth it's really cloudy all the time. So if you need persistent data over long time scales, over large areas, you need it from space. - So the satellite itself and the images that it produce sound truly remarkable.
Help me understand a little bit about what are the customers, who do you sell to? How is this shaping the world on the consumer side? - I would say that this is a somewhat immature market in the sense that the vast majority of data is sold to the United States government, right? And then the second most amount of data is sold to U.S. allies. You know, we obviously don't work with China, Russia or you know, anyone who is not allied with the United States. But a now heavily growing portion of the market is oil and gas, insurance, critical infrastructure, and then of course like market analytics, like understanding economies. - What are some of the craziest things you've seen? - I mean, so Earth is really beautiful.
I see a lot of nature, like natural formations of rocks and water and that sort of thing that you would never imagine, especially because it's radar imagery. So it's black and white. It's an impulse response. What we do is we fly the satellite and we send down impulses as we fly and then measure the distance between the satellite and the Earth- and then we turn that into a picture.
And with that, you can see things that vibrate, like you can see if a oil pipeline's vibrating, you can see the moisture in soil. You can see all kinds of things that you would not see through normal optical sensors. It's a really incredible technology.
But I wouldn't say that there's one thing, it's more cumulative where it's, we wear for our open data imaging a mine, it was like I think a cobalt mine in Australia. And there was a giant mine collapse. And no one would've known if we weren't taking pictures of it globally.
You know, of course the people of the mine knew, but the people of the mine didn't wanna tell anyone because it'll affect the price of cobalt. But one of the people who uses our open data was able to to break the news publicly. - You mentioned one of the technologies that the sensors have, I believe, is that it can detect vibrations and movements. What are some of the implications of the kinds of things you can know about given that? - So that that goes into millimeter-scale changes, and the best thing I can do is an anecdote. So we were actually approached by a law firm and the law firm had a big class action, and it was against a golf course and like all these homes around the golf course. And I'm like, "What do you need satellite data for?" And he's like, "The foundation of every single house has broken and we don't know why.
What's around this big golf course in Palm Springs?" We're like, "Okay, well, let's take some pictures." And what they were able to do is they noticed that whenever the sprinklers were running, the clay under the grass was expanding. So if you have regular dirt, it's gonna expand to a certain level, but clay will expand a lot, and it was expanding up in a big bubble, and it was breaking all the concrete foundations. And then when the sprinklers went off, it would contract.
So being able to see maybe surface-level deformation. So for fracking or pumping oil or pumping water, there is deformation in the land. The land actually goes down and subsides. So if you're trying to understand a oil derivative of a fracking site, let's say, and you can actually see the land deform, or like the pools of fracking water, you can determine exactly how much water went into the fracking site and exactly how much came out, and then trade derivatives and probably make a lot of money.
There's a lot of really interesting use cases. - I thought of some scene of someone stuck on a deserted island where they like lay out coconuts. It's like, "Help me!" You ever like rescue people or like find people stranded? Are there any crazy stories like that? - Well, they're crazy, but they're sad. I mean, so like we had, we worked with SkyFi, there was some missing climbers on Mount Everest, and we said, "We will open source and allow anyone to task the satellites to find the missing hikers, and I'll give a reward for it." And we had everyone from the internet go and identify where those hikers could be. They actually found them. Unfortunately, they were deceased,
but something like that, I don't think it had ever been done before. - The founding story of Palantir, which I'm sure you know quite well, is a lot about some of the patriotic elements among the founders to build technology solutions that are sort of Team America and allies. How did some of those themes resonate with you and your co-founder of building Umbra and deciding who to serve and how to serve them? - If we're able to produce a system that can provide great intelligence for the war fighter, for our government, we're gonna be able to make better decisions and hopefully deter and prevent conflict. And what we want is what's best for America. Like, I think that anyone that you talk to wants a better world and society for their children.
- So much is said about the military industrial complex, often in a way to malign what that thing is. Help me follow that: What is the military industrial complex? - I think that what people are referring to is these prime contractors, Boeing, Lockheed, Raytheon, you know, these prime contractors who have more lobbyists than I have employees at my company, right? Who go in and they lobby the government to go and build systems that have already existed. A battleship from 1996 is a sunk cost. They know how to do it. So if my congressman is building some battleship, that congressman is highly incentivized to ensure that his district is continuing to get money for the battleship from 1996. The issue is our adversaries do not have the same kind of lobbying.
They do not have the same kind of incentives. What their incentivized to do is to move very, very quickly and catch up with us. Umbra is very much outside of this military industrial complex.
The only reason why we exist is we have a better product that costs less money and for the government that can use it in a really efficient way. A massive competitive advantage for us is the cost of the satellites- so single-digit millions- which means we can fly them together. So we started launching all of our satellites in pairs, and if you have two radar satellites and you fly them together, you can get all kinds of really, really unique things in the data. Like you could have a single pass, 3D image, or you could even see millimeter-scale changes, which means like human footsteps in grass.
- How would you assess how bad our military industrial complex is in terms of allocating money to keep the United States safe? - What is best for the country is an ability to use the free market to innovate, and this defense industrial complex, because it is essentially a government market, you're not able to incentivize entrepreneurs financially. You're able to incentivize, you know, the fat cat smoking a cigar on their gazillion-dollar yacht or whatever. But you want the smartest guy in the room working on stuff that protects you and makes you safe. - Let's take a break from our conversation with Gabe to visit Umbra's Santa Barbara office. Here we'll talk with Umbra's co-founder and CEO David Langan and learn more about Umbra's satellites and the impact they're making today.
- Here we are on the manufacturing floor in our Santa Barbara, California facility. We have a number of lab spaces on this floor where we build our electronics, our satellite components. - David spent over a decade working on advanced space programs at major aerospace companies before shifting his focus to craft the technology that enables Umbra's satellites to capture images at 25-centimeter resolution, setting a new standard in commercial satellite imagery. - It's a very broad suite of different things that we do from building the subsystems of satellites, antennas, radars, electrical power systems, to the integration, launch, and operation of those satellites. We get them to space in what is called a 'rideshare.' So we, along with many other customers, all place our satellites onto separation systems on a single rocket.
- One, zero, ignition. And liftoff! - That rocket is launched into space and then the vendor fires our satellites off. - Taking advantage of SpaceX's rideshare program, Umbra has launched eight satellites in the last three years. Umbra 07 and 08 were aboard the latest of these rockets, Transporter-9, which went to space on November 11th, 2023. - We develop all the ground software that controls and maintains the satellites and utilizes them to deliver products to our end customers.
I've seen our satellites used to monitor animals in rugged conditions, parts of the Earth where people can't go. We have seen them used to look at deforestation and deforestation patterns, very high temporal frequency, certainly that's one of the more current applications. We think very deeply about how our data could be used, how we think it is being used, and we feel a sense of responsibility for managing that end use in a way that's not gonna be detrimental to the nation and to the rest of the world. - Umbra was selected by NASA as a provider for its Commercial Satellite Data Acquisition program. Umbra's work will compliment NASA's Earth observation data by providing assured, all-weather, day or night intelligence collection.
- Looking back a few years, there's effectively no commercial radar industry whatsoever in the United States, but we've got the best space talent in the world, so we're able to couple that talent with many advances in microelectronics components. We learned how to take the smallest elements, the smallest individual chips, resistors, capacitors, copper, and piece it all together into functional systems that are elegantly packaged and extremely efficient with very high performance. - Let's head back to the studio, where we'll dive deeper into Umbra's position on national security matters, and how they approach deciding who to do business with.
What do you see happening right now among your peers interested in innovation on defense national security technology? Are we getting a significant growth in companies in the category getting founded and then getting funded? - Defense tech has become extremely hot. I think investors are looking at it like, "Hey, you have a TAN that's a trillion dollars just from the United States government." You have slow-moving legacy incumbents that are not innovating as quickly as they could.
And you are seeing wide adoption of technology from the United States government. And particularly in these conflicts that we've seen in Eastern Europe and the Middle East, where new tech can be battle-tested like, immediately. Where you can be a startup and you can go and you can work with an American ally and start putting your stuff in theater like very quickly and actually start, you know, changing the direction of, you know, warfare- that didn't really exist before. And I think that everyone is kind of seeing the opportunity. - There must be some cases where you think, 'Why hasn't someone created a business by, for example, emergency natural disaster response networks, or something like that?' Do you ever think about what business should be built based on the data that you're just not seeing get built? - So, that's a lot of what I think about.
The issue though is price. If you were to go to our European competitor and get a one-meter image, their list price is $7,500. We charge $750 for a 50-centimeter image. So 100% better quality for one-tenth the cost.
But if you're spending $750 every day for a picture, you're spending almost a million dollars for one picture a day. It's too high. So, what we have is an abundance of supply. Our satellites take more pictures of high-demand areas than anybody else, by far.
So, that is part of our strategic advantage. So with an abundance of supply, you have to increase demand. The way you increase demand is by lowering prices.
We lower prices by, you know, 90%, and we still have excess supply. If we reduce the cost of a satellite image to $75, then that barrier to entry goes up exponentially because then a college student can use our data to go and solve the world's biggest problem- and it's not gonna cost a lot of money at all. And I mean, but the world's biggest problem could be something simple.
It could be like measuring a bridge. So like right now if we wanted to measure a bridge, you gotta pay a guy $200 an hour to drive out with his truck and fly a drone and understand and then go do a report, could cost 10, 20 grand. If I can automate that from space, for $75 for the whole data, then you've just disrupted a hundred billion dollar, you know, terrestrial drone surveying market; like that's the kind of thing that we need to be doing. - It relates a little bit to how you think about innovation and your thesis is that by decreasing by another 90% the cost per image, it certainly changes the economics for people that might be building businesses based on what you guys make available. But the example that comes to mind might be something like the people that invented the MRI machine. Early on, super expensive; I'm guessing that the history partially included lowering the cost of people being able to get images from the MRI, but probably also included lots of training and development and working with professionals to help give them an imagination for ways that this imaging could improve their craft.
Do you think about taking some key industries or key segments and speaking some inspiration into those sectors? Like what you just laid out sounds like a really big and interesting business- it also sounds like one that no one is building right now. - I think that the way that you do it is organic. So this open data set that we've put out, essentially no one, like you've got billions and billions of dollars put into the Earth observation industry. No one since the early '90s has released a massive open data set. And the reason why was this constrained supply. So if you can only take two pictures over a high demand area, you're going to treat the data very, very differently than if you can take 20 pictures.
The other thing is, if you are using your own imagery, and then analyzing it for your own analytics, and competing with like, let's say a Palantir, then you're gonna be really, really constrained on how that imagery or data gets onto the internet. But because we're trying to empower our customers, we're trying to incentivize as many people to do it and the best way to do it is to give them free stuff. - China is often the presumed counterparty in the race on building critical technologies, areas of AI/ML, of 5G wireless, of quantum computing: Tell me a little bit about how you see the competition between the United States and China in building these critical technologies.
You're obviously Team America, and in your category it sounds like your technology is dramatically more advanced than what China has. How do you see that battle playing out? - So I've seen the Chinese evolve technology very fast. So if our government is funding technology from 1996 and China is funding technology for 2030, that creates a problem. But that's not to say that the United States government isn't the best at anything. Where you can have super-advanced programs done at a fairly low cost, very, very quickly, done in an exquisite way by the United States government- but the idea is allocating more resources towards that.
If we allocate more resources to the best people building the best products for the lowest price in the most competitive way, we will win. There's no doubt. - You mentioned customers being the United States and potentially allies: Who makes that decision which government entities or maybe even which companies you're able to sell to? - Our license allows us to sell to anyone. However, we've put restrictions on ourself and that really comes from the founders on who we will not sell data to. - So hypothetically, if a Chinese communist party or Hamas, showed up to your website with a credit card, they could buy images? - Not from me. I wouldn't sell it to them.
- Have you and your co-founder had any tough calls about a client that wanted to work with you? - There is no amount of money from like China or Russia that we would ever take in order to sell data to them. We are not incentivized by money, right? The company's very valuable. We're very valuable doing things that we're ethically aligned with, right? And like an extra $10 or $20 million or whatever it is, you can't ever take any amount of money to sacrifice your values. - How big of a deal are the images that you make available? What are use cases? What are things in our, for example in our military, that work dramatically better because of the quality or frequency of the images that you produce? - Having an ability to collect data that is high quality and unclassified is really useful.
And it's mainly because you can share it. So if there's a hurricane or a flood and you use an Umbra image, you can take that picture and you can share it with FEMA, you can share it with anyone, you can give it to the public, you can give it to the news, you can run analytics on it. You could say these houses are destroyed and this area is safe. If that image was classified, it could be shared with no one. So commercial imagery is really useful because it's shareable, and sometimes you have allies that you wanna share stuff with, and sometimes you have allies who you don't wanna share stuff with.
So the real utility is the licensing more than anything is like the real revolution, is an ability to share. - I'm curious about other use cases. I know some hedge funds, for example, pursued some strategies of looking at satellite data to look at how many automobiles park at a manufacturing facility to guess sort of what's happening on the supply side.
Are there some interesting use cases that you guys are seeing? - So we have one hedge fund came up to me, he's like, "Look, there's this manufacturing plant. I need to know what's happening Saturday night at 2:00 a.m. That's the only images I need, is Saturday night at 2:00 a.m. Give me every Saturday at 2:00 a.m." And I'm like, "That's like 50 images at three grand a pop; like that's not insignificant amounts of money."
I was like, "Well, why?" He's like, "Well, it's a factory, right? So during the day you've got people getting paid minimum wage, but the night shift is getting paid more. The night shift on a Saturday is getting paid way more. So if this factory is like doing manufacturing Saturday nights in the middle of the night, it means that their production is much higher, which means their stock's probably gonna go up."
So this actually played out. The company beat earnings and the stock went up like a lot, by like 50%. - I'm assuming you have sort of total access, you can sort of like pick any part of the world as the CEO of this company- you've also mentioned that you sort of consume less news and you are not on Twitter super frequently- how do you personally learn from the images that you're looking at? When you're bored at the office, what are you looking at? - I confirm a lot of things with the satellite.
There was just a terrible tornado in Tennessee and so on the weekend we're on Slack and it's like 'Snap as many pictures as you can of that area, we'll give it to everybody for free,' obviously, and 'I'll learn exactly what the wreckage and what the damage is.' And depending on how the news was covered, it was like pretty wildly different. So I mean, I guess that could kind of be a hobby, is that I do consume many news using my extremely expensive satellite. - Talk about the economic motivation. I think earlier in our conversation you mentioned some feature of the military industrial complex is that it doesn't always have the right alignment of a hungry entrepreneur that wants to quickly build a business. You guys found one.
How do you think about making a lot of money and owning a company that becomes worth a ton of money? Is that a big motivator for you? - I think it's a nice to have. What motivates, I think both David and I, is evolving technology in this sector and I think that that is also what, you know, motivates Alex at Palantir or Palmer, is we are meaningfully making a big change. Whereas if you look at a lot of companies in tech, like if it went away, it wouldn't have a huge impact outside of like maybe the shareholders and the founder. If Umbra went away, the world would be a much, much worse place.
- Do you think people developing nuclear technology are aware enough of what your satellites can do so that they actually design and run their nuclear programs in different ways? - I would definitely say that the enemy is always adapting, but we also will adapt. So, it is a constant movement of technology. - With this level of depth of the imagery, there must be some privacy concerns. How do you work through that? - Well, I am asked this question a lot.
I would say that if I wanted to track you, probably the last way that I would do it is with a super expensive radar satellite; I'd probably just track your cell phone. And oh, I hate to be the guy that pops the bubble for everybody, but if you go into your car and you see traffic in your car, and there's like a red line and a yellow line, like that information doesn't just come- it comes from people's individual handheld devices. And the red line is "churching it up," that's what they call it. So it looks like a red line, but you can then identify individual devices.
That data is sold by every single app on your phone for like, thousands of dollars. Not hundreds of thousands of dollars where people can go and buy individual locations for basically nothing. I'm not the bad guy. It is definitely the people in your pocket.
- When you guys become a many tens or hundreds of billions of dollars company, do you think about what you would do vis-a-vis lobbying? Would you not put an Umbra office in every congressional district and just become like Boeing because the Boeing actor is actually doing the thing that probably maximizes the shareholder value- how will you guys behave as a half-trillion dollar company? - So I mean obviously we have lobbyists, like we have our second biggest office is in D.C. next to where we build the satellites. But I'd much rather be the guy in the Hill working on squirrelly technology. So we're probably not gonna go and get a contract to go and build, you know, the first version of our satellite.
So like I said in the interviews, there are big programs and then there's much like, squirrelier programs, because the government can innovate, don't let anyone tell you different. The government can move fast and they can innovate. And what we will continue to do is work with those offices that want to innovate and wanna move really quickly because we can do it. That's kind of our DNA.
And the reality is I think that we can become a half-trillion dollar company without becoming the same size as Boeing because you know, I like margin. - As an American, as a lover of the West, I am personally very thankful that this world-changing technology is developed by and in the hands of people that love those things also. And what you're building is super inspiring, congrats on that, and really appreciate you being in the conversation, Gabe. - Thank you.
2024-11-01 21:39
