William Perry's Smart Weapons
Perry laid the groundwork for the modern defense tech ecosystem
The Cold War was the cause of many nightmares for military planners. A common one was the Soviet Red Army rolling across Europe with an overwhelming number of conventional weapons — think Nazi Germany’s Operation Barbarossa but in the opposite direction. This didn’t happen, and we have William Perry to thank for rendering the Soviet Union’s numerical advantage ineffective. During a single term as Undersecretary of Defense for Research and Engineering (USD(R&E)) from 1977 to 1981, Perry introduced guided munitions or “smart weapons,” a technology variously supported by computer networking, GPS, and stealth. He provided a clear and enduring vision of how digital technology would change warfare, a vision that remains even more relevant today with AI.
Perry worked at a leading technology company, left to found an electronics startup, and only then entered the public sector as the USD(R&E). He then went back to the private sector before returning for a second act as Secretary of Defense. The dynamic interplay between the public sector and technology companies feels anachronistic. Today, career moves tend to be limited to musical chairs between the Pentagon, think tanks, primes, and the national labs. This is not the same, and Perry’s career reveals why.
Silicon Valley Startup CEO
Amidst a Cold War atmosphere of imminent nuclear Armageddon, many believed there was nothing more important than helping the U.S. government develop an accurate understanding of Soviet Intercontinental Ballistic Missiles (ICBMs). Perry was one of those people. In the 1950s, equipped with a math PhD, he worked for Electronic Defense Laboratories (EDL), which made ground receivers to intercept and analyze telemetry signals from the Soviets’ ICBM tests. These tests were a prime opportunity to determine how effective Soviet missiles were. EDL used the telemetry signals to characterize the performance capabilities of the missiles.
At EDL, signals intelligence (SIGINT) was done with analog receivers, but Perry knew the future was digital. He also knew that EDL, whose parent company was the world leader in vacuum tubes, would not lead the digital revolution. So Perry left and started his own company.
Perry remains the only Secretary of Defense to have first been a successful technology entrepreneur. He founded Electromagnetic Systems Laboratory (ESL) in 1964 in Palo Alto and served as CEO for thirteen years. Like EDL before it, ESL was located in Silicon Valley before it was the Valley. Perry had conviction that HP’s computers and Intel’s semiconductors would help ESL disrupt how SIGINT was analyzed. ESL quickly became the best at what it did, building a successful book of business with three letter agencies. It was the first organization — public or private — to use digital computers for SIGINT.
Many an American Dynamism founder today would identify with Perry’s motivation for starting ESL: “We were undertaking a business; but more deeply, we were embarked on a mission, and that mission was the overriding factor.” Perry’s employees felt the same way he did. At the time, there was no venture capital available for companies that couldn’t say who their customers were. So ESL was entirely capitalized by its employees and founders who bought equity in the company. Many used their life savings to do so. They believed in the mission that strongly.
Giving equity to rank and file employees was yet another first that Perry and ESL can claim. Per
, himself an early ESL employee, Perry modeled ESL culture after Hewlett Packard with one key difference: “Unlike HP, which had restricted stock ownership to the founders and top management, Perry made sure everyone at ESL had stock.” Perry was a prophet before his time. It would be a recurring theme in his career.Pentagon Act 1: Undersecretary of Defense for Research and Engineering
Although Perry would go on to be the Secretary of Defense and lead the denuclearization of much of the former Soviet Union, his work as USD(R&E) was at least as important. By 1977, nuclear weapons weren’t a unique advantage of the United States, so we couldn’t rely on them as a substitute for conventional forces. Meanwhile, the Soviets had an advantage in the sheer mass they could throw into a fight rapidly in Europe. Much like Perry had realized that computers would transform SIGINT analysis, so he understood this changing balance of power would revolutionize warfare. In just three months, Perry generated the highly influential Offset Strategy, which detailed how the United States would offset the loss of its nuclear advantage without having to fight the Soviet Union “tank for tank, missile for missile.”
Perry’s background at a cutting-edge electronics firm clearly influenced his ability to move fast in the right direction on day one. Perry identified that stealth, GPS, and precision munitions would together provide the asymmetric advantage to achieve dominance over the Soviets. If successful, the Offset Strategy should allow the United States “to be able to see all high-value targets on the battlefield at any time, to be able to make a direct hit on any target we can see, and to be able to destroy any target we can hit.” Sound familiar? Today, CJADC2 is the Department of Defense’s priority warfighting concept. The goal of this concept is to connect every sensor to every shooter, creating an AI-powered integrated battle network. CJADC2’s goals aren’t much different from Perry’s crisp articulation of the Offset Strategy almost fifty years ago.
The Silicon Valley entrepreneur was everywhere reflected in Perry’s actions. He wasn’t the first to identify the new technologies that would form the Offset Strategy; however, he transitioned these technologies from disparate science projects to a fully funded defense strategy that could be operationalized at scale. This was the public sector equivalent of building a profitable business.
Perhaps the Silicon Valley quality that Perry most embodied was what we call the primacy of winning. With limited time as USD(R&E), Perry could either attempt a top-to-bottom reform of defense acquisition, or he could implement the Offset Strategy on a timeline that mattered. Having multiple top priorities is an oxymoron, and Perry understood that winning required hard choices: “Rather than giving my time and energy to reforming the entire acquisition system, I chose to work around it for the most urgent programs: the Stealth programs, the cruise missile programs, GPS, and several of the smart weapons programs.”
(A quick aside on how Perry’s mindset relates to today: The ongoing Planning, Programming, Budgeting, and Execution (PPBE) Reform Commission — a top-to-bottom reform of defense budgeting — is very important work. It’s also very important that in parallel, senior Pentagon leaders work around the system for their top priorities, just like Perry did. The current system cannot be managed to an exceptional outcome, and China doesn’t care when the PPBE Commission publishes its recommendations or when Congress gets around to implementing them.)
Lockheed’s Ben Rich may have overseen the first stealth aircraft, but it’s Perry who is known as the Father of Stealth. After witnessing an incredible demonstration of the DARPA-financed Lockheed stealth prototype in 1977, Perry did whatever was necessary to get a stealthy fighter-bomber operational as quickly as possible. The Air Force wasn’t interested in stealth because it represented a funding rival to its existing efforts on electronic counter measures. Perry didn’t care. He made the Air Force service acquisition executives raid funds from other programs to get the resources necessary. In circumventing the normal and slow PPBE, Perry admits he “knew this special management process must be used sparingly.” But it got results. Within five years, the F-117 was operational. It secured its spot in the history books during the Gulf War.
It was a similar story with GPS, which started as an experimental program led by the Aerospace Corporation in partnership with the Air Force. After launching four satellites, GPS was excluded from the Fiscal Year 1980 budget and was set to be terminated. At the direct intervention of Perry, funding was restored for an expanded constellation of 16 and eventually 24 satellites.
And with cruise missiles, Perry forced the Air Force to get on board the Joint Cruise Missile Project Office (JCMPO) with the Navy. He made the Air Force and Navy allocate their entire cruise missile program funds directly to the JCMPO. Finally, Perry established an executive committee (EXCOM) to mediate Air Force and Navy squabbling over programmatics and budget. To ensure there was no room for shenanigans, he named himself the head of the EXCOM. As the authors of The Politics of Naval Innovation conclude: “Without Dr. Perry’s direct intervention, expeditious and fiscally efficient development of the cruise missile would not have occurred.”
Assault Breaker was a Perry-supported DARPA program and early instantiation of the Offset Strategy. It was a systems-of-systems integration for finding and destroying targets on the battlefield under a variety of conditions. Assault Breaker’s integration of missiles, radars, precision-guided submunitions, and ground-based sensor fusion was an inherently joint service concept that transcended any single domain. The fact that today’s CJADC2 is so similar to a warfighting vision from the 70s is a testament to Perry’s foresight and strategic mind.
It’s worth highlighting that Perry designated many of the Offset Strategy initiatives as secret “black” programs, which more or less hid their acquisition behind classified doors. This was necessary to cut out the gatekeepers, particularly the money-movers in Congress, who would otherwise ensure the Offset Strategy was never implemented. Classification with a cudgel wasn’t the most elegant strategy, but it was extremely effective. The lesson we should take away isn’t that more programs should be classified, but that more process should be removed.
Pentagon Act 2: Deputy Secretary of Defense and Secretary of Defense
For those looking to find fault in Perry’s illustrious career, the Last Supper is an irresistible target. In 1993, Perry, then Deputy Secretary of Defense, convened a dinner with the leading defense executives for the now legendary Last Supper. (This publication’s name, First Breakfast, is in fact a riff on that event). Dinner guests were informed that lower defense spending was the new normal and that the Pentagon didn’t plan to fund the surge capacity and overhead needed to support all of the companies present. As a result, Perry predicted that “half of the companies represented at the meeting would not exist in five years.” Norm Augustine, at the time CEO of Martin Marietta, offers one of the only first-hand accounts of the dinner. In Augustine’s words, companies could either “integrate, disintegrate, or disappear.” Indeed, Martin Marietta would go on to merge with Lockheed Corporation to survive the Last Supper as Lockheed Martin.
The tidy narrative around the Last Supper goes like this: The Cold War ended, and with it, the Reagan defense buildup. Presidents Bush and then Clinton ushered in the Peace Dividend as reflected in declining defense budgets. Perry’s misguided Last Supper caused mass consolidation from dozens of prime contractors to only five. Our atrophied Defense Industrial Base is now ill equipped to fight and win one war, let alone multiple.
But this narrative is incomplete.
The truth is that the Pentagon had ceased to be an attractive customer long before the Last Supper and even before the collapse of the Soviet Union. From the excellent report, The U.S. Defense Industrial Base: Past, Present and Future: “During 1985-1988, ten of DoD’s top sixty prime defense contractors either acquired, or were acquired by, others in the industry.” The Department of Defense implemented a series of damaging policies during the 1980s, such as limiting companies’ ownership of data rights, reducing profit percentages, and requiring companies to invest in special tooling.
It would become increasingly difficult for “dual use” companies (previously just thought of as companies) to exist; firms like Eaton and Goodyear divested of their defense operations. The wheels were in motion for the transformation of an American Industrial Base to a Defense Industrial Base. For all the caricatures of greedy defense companies making too much money, the reality was that most firms couldn’t make enough money in defense to satisfy their fiduciary responsibilities to shareholders. With this additional context, we can see that Perry’s Last Supper was a formalization and perhaps acceleration of an existing trend rather than a causal event.
Industry consolidation was accompanied by five rounds of base closures from 1988 to 2005 via the Base Realignment and Closure Commission. Perry supported this process while Secretary of Defense. Reflecting on these events, Mike Lofgren recently wrote, “Altogether, more than 350 closures of major bases and facilities were undertaken; while many, perhaps the great majority, could be justified, the Defense Department let too many valuable facilities go while consistently underestimating costs and overestimating savings.” With hindsight 20/20, it’s easy to lay blame at Perry’s feet, but the perception of the threat environment could not have been more different from today. Defense budgets were declining one way or another. The Soviet Union was gone. China’s liberalization was right around the corner; the Internet, after all, would make online speech suppression like “trying to nail Jello to the wall.”
In the opinion of these authors, Perry more than redeemed himself by leading what is arguably the most substantive acquisition reform in modern history. The 1994 Federal Acquisition Streamlining Act (FASA) implemented a stringent three-part test that sought to reverse the bifurcation of defense and commercial procurement. FASA requires the government to use commercial technology to the maximum extent practicable if that commercial technology:
Meets the agency's requirements;
Could be modified to meet the agency's requirements; or
Could meet the agency's requirements if those requirements were modified to a reasonable extent.
This was the legislation Palantir relied on when it sued the government after the Army excluded commercial companies from bidding on the re-compete for the Distributed Common Ground Systems (DCGS-A). Palantir won the lawsuit (Thank you, Bill!). Winning didn’t require any laws to be changed; it simply required the laws on the books to be enforced.
It’s not a coincidence that the individual who spearheaded legislation for commercial end item preference was a successful entrepreneur who built a business around rapidly changing commercial technology. Perry wasn’t just sympathetic to the private sector. He was shaped by it. His firsthand experience formed a deep conviction that tearing down the “Chinese firewall” between commercial and defense procurement processes was essential: “[My] passion for this goal was my principal reason for returning to DoD.”
Today, Perry is 96 years old and a professor emeritus at Stanford. He remains an underrated figure who laid much of the groundwork for the modern defense tech ecosystem. Now we just need to strengthen the Founder → SecDef pipeline and build on his legacy.
Further Reading
My Journey at the Nuclear Brink by William J. Perry
The U.S. Defense Industrial Base: Past, Present and Future by Barry D. Watts (2008)
Interview with William Perry (2004)
The Secret History Part III: The Most Important Company You Never Heard of by Steve Blank
Defense Acquisition Reform: An Elusive Goal (1960-2009) by J. Ronald Fox