Admiral Thad Allen, SF ’89, and Frank Finelli, SM ’86

In this episode of Sloanies Talking with Sloanies, Christopher Reichert, MOT ’04, interviewed Admiral Thad Allen, SF ’89, former Commandant of the United States Coast Guard, and Frank Finelli, SM ’86, a senior advisor at The Carlyle Group and founder of the MIT Sloan Veterans Fund.

Key points from the discussion include:

• MIT Sloan Veterans Fund: Finelli created this fund to attract veterans, especially those with technical backgrounds, to MIT Sloan, encouraging them to engage in MIT's innovation ecosystem.
• Career Highlights: Both guests share insights from their distinguished military and civilian careers. Admiral Allen discussed his roles in national crises like Hurricane Katrina and the Deepwater Horizon oil spill, emphasizing the challenges of communication and unity of effort in complex situations. Finelli described his work on the Quadrennial Defense Review, which restructured the U.S. military to respond to diverse global threats post-Cold War.
• Technology and Defense: Both emphasized the importance of technology, with Allen noting the "technology achievement gap" in government adoption processes, and Finelli discussing U.S. competitiveness with China.
• Leadership and Complexity: They shared how the education at MIT Sloan helped them manage complexity, emphasizing the importance of mental models, flexibility, and decision-making in fast-paced, high-stakes environments.

The episode closed with a tribute to veterans and an encouragement to support the military and its members globally.

Sloanies Talking with Sloanies is a conversational podcast with alumni and faculty about the MIT Sloan experience and how it influences what they’re doing today. Subscribe and listen on Apple Podcasts, Google, and Spotify.

Episode Transcript

Frank Finelli: There are amazing veterans attending MIT Sloan right now, and we wanted to try to set up a program that would help incentivize the best veterans, particularly ones with technical backgrounds, to try to go to MIT Sloan, hoping that they would get involved in the innovation ecosystem.

Christopher Reichert: Welcome to Sloanies talking with Sloanies, a candid conversation with alumni and faculty about the MIT Sloan experience and how it influences what they’re doing today. So, what does it mean to be a Sloanie? Over the course of this podcast, you’ll hear from guests who are making a difference in their community, including our own very important one here at Sloan.

Christopher Reichert: Hi. I’m your host, Christopher Reichert, and welcome to Sloanies talking with Sloanies. This is a special podcast because my guests today are Admiral Thad Allen, former commandant of the United States Coast Guard, and Mr. Frank Finelli, former managing director and a partner at the Carlyle Group.

Before we begin our conversation, let me give our listeners a bit of a background on you both. Given your extremely distinguished careers, there’s no way that I can really be comprehensive, but let me just try to cover some of the highlights. So retired Admiral Allen served as the 23rd Commandant of the US Coast Guard, retired in 2010 after 39 years of distinguished service, and during his career, Admiral Allen played a pivotal leadership role during some of our country’s most urgent national challenges.

We just go back 25 years. The headlines. Admiral Allen was in the thick of it. Starting in 2001, he was commander of the US Coast Guard and the Atlantic area, and he oversaw all of the Coast Guard operations on the US East Coast, Gulf Coast and Great Lakes in the aftermath of September 11th attacks in 2005, Admiral Allen was given full command of the Hurricane Katrina on site relief efforts and what I think can be called a whole of government response given the devastation that occurred there. We can cover what that means and what was involved in that shortly.

In 2006, he assumed the duties of Commandant, and in 2010 he was the National Incident Commander during the Deepwater Horizon oil spill. If anyone remembers that horrifying footage of the oil just spewing out into the Gulf after that, he retired, probably with good, with good cause, he joined the Rand Corporation, Booz Allen Hamilton, among many other board seats and activities, and currently is a chair of the space-based positioning, Navigation and Timing Advisory Board at NASA.

So, with that, also, by the way, is a 1989 MIT Sloan Fellow. So welcome, Admiral Allen.

Admiral Allen: Thank you.

Christopher Reichert: My second guest is Frank Finelli is a former managing director and now a senior advisor at the Carlyle Group, a global private equity firm, which he joined in 1998. He served as a legislative assistant to then Senator Dan Coats, and prior to his work on Capitol Hill, he served in the US Army for 18 years and served four years as a field artillery commander in the 82nd Airborne Division, which is the elite of the Army, if anyone knows anything about the Army. He also taught economics at the United States Military Academy, best known as West Point, where he graduated, by the way, in the top ten of his class.

He served as the director of operations research and Systems Analysis for the Joint Chiefs and the Joint Chiefs, is the eight-member body of the most senior uniformed leaders within the Department of Defense, which advises the president, among others. Among other senior government officials on, I assume, are really only the easiest challenges facing our nation, right?

He holds a master’s in military arts and sciences strategy from the US Army Command and General Staff College. And finally in 19 he’s a 1986 graduate, MIT Sloan, where he and his wife established the MIT Sloan Veterans Fund to support military veterans attending Sloan, and want to hear more about that shortly.

So welcome, gentlemen. Welcome, Frank.

Frank Finelli: Thank you so much, Chris.

Christopher Reichert: It is an honor and a pleasure to have both of you on Sloanies talking with Sloanies. So where should we begin? I mean, there’s so much to cover between your careers, but why don’t we start on the topic of strategic evolution and preparedness? I think between your careers in active duty, in the Coast Guard and the Army and your studies at Sloan and your and your careers afterward, one of the things, Frank, you were involved with was the first Quadrennial Defense Review in 1997, where you played, that was when you were at the Joint Chiefs, right?

Frank Finelli: Yes.

Christopher Reichert: And that was, as I understand it, in response to the dramatic changes following the end of the Cold War and a much more distributed threat profile or analysis.

So, and instead of the Army, I think was faced with the military, I guess in general was faced with a strategy to that wasn’t focused on containing a single global threat from, say, an ideological foe like the Soviet Union, with a force readiness posture that that focused on that singular foe. But it needed to kind of evolve to respond to a more regional conflict at a moment’s notice, which I think was one of the key phrases in there. And you were in the 82nd airborne. So that was a moment’s notice. Division in the Army. Right. So, can you tell us more about that? And after, Admiral, I’d like to hear your thoughts on that.

Frank Finelli: Well, thank you so much, Chris. And I have to say that I’m really honored for this opportunity to be on the podcast with Admiral Thad Allen, a truly great American patriot who has made such an impact on our nation’s security over decades. Um, and again, coming back to this Quadrennial Defense Review, it was the first time it was ever legislated. This was back in 1996 and 1997.

And essentially it was to do a bottom-up full shakeout of the military. How we were structured, how we were resourced, and what capabilities we brought. Previously, as you mentioned, there was tremendous focus on just figuring out how we could defeat the Soviet Union and deal with whatever North Korea might do, kind of simultaneously. But it was clear at that time that American forces were being engaged all over the world, sometimes in over 40 different nations. And so, we had to figure out how to incorporate that demand, the impact of that demand on the way we structured and resourced our military. And thankfully, because I was an MIT Sloan guy who studied operations research, I got the task to figure out how to expand our warfighting assessment models to incorporate these different aspects of the demand for military capability. And that was a fascinating assignment that really leveraged the multidisciplinary technical background that I gained at Sloan to find, you know, some of the best analytical shops across the country that could bring together a suite of models to help us sort out this very difficult equation.

And I think that was a very worthwhile and novel approach that we adopted. And it was really because of that experience that I was asked to retire from the military and transition over to the Armed Services Committee in the Senate, working for Senator Dan Coats, uh, on that committee and the Intelligence Committee to try to work the legislative aspect of transforming our military. But boy, were it not for the background that I had academically from MIT, I would have never been given that assignment. Yeah.

Christopher Reichert: Admiral Allen, I’d love to hear your thoughts on, you know, that you’re 39 years. So, you’ve seen you’ve been involved with the armed forces over, I guess, a variety of conflicts and a variety of stressors and conflicts. And I’d love to hear your thoughts on how it’s evolved over the time that you were serving.

Admiral Allen: When I was 25 years old, I was a commanding officer of what was called a Loran transmitting station, which was an Earth based aids to navigation that assisted the air mission over Vietnam.

That original sin got me to be the chair of the current space-based position Navigation and Timing Advisory Board, because Loran was succeeded by Global Positioning System for the United States. But that arc there, if you think about it, the technology arc as it relates to the business of national defense in the country over that time period. What we have seen is a co-mingling of what used to be separate spheres of influence. And this really relates to my experience at MIT. You know, for a long time, all the basic research and all the money into research was done at defense through the defense establishment, but through the organic capability, you see, that was created in the various labs at MIT and the various economic models and things they did at the Sloan School. There now has been a diffusion of that capability between the public and the private sector. So, in one way, it is really enhanced the ability to bring technology forward. On the other hand, it creates a challenge in how you actually ingest that technology and deploy it to any kind of mission effect.

There’s a governance issue associated with it. And then from the government standpoint, they have a regulatory role, and you have to be competent in a technology to be able to regulate it. Those are all huge issues that have sprung up over that 30-year arc, if you will, that we’re facing today. And we see them every day because there’s not a single point to fix all these problems right now. It takes a horizontal and vertical integration to actually deal with these challenges. And frankly, the content of the curriculum at the Sloan School, not just the Sloan School itself, but our ability to take electives, you know, into other general areas, and especially in my class where we’re looking at also the Master of Technology to see how the interface works between governing and deployment and use of technology was very, very critical. And probably one of the key things I took away from the Sloan school.

Christopher Reichert: You know, one of the things that you mentioned in one of our prior conversations that you were concerned about the widening technology achievement and adoption gap and efforts to overcome this. And so, one of the things that that mentioned actually starting in 97, and it seems to me is still a challenge, right, is how to embrace technology. And I guess I have two questions in there. So, one of the challenges I was going to talk about Katrina for a moment. In the context of communications, there is the actual challenge of solving for the hurricane, but there was also the huge other challenge of communicating the efforts to solve for the hurricane. And I think it’s it would be no stretch to say that you had excellent communication skills. And I’m curious about how you think that those skills can be applied to explaining the technology challenges that the defense forces face in adopting, but also in explaining to people the friction in adoption.

Admiral Allen: Yeah. First of all, I’d like to make a little baseline comment. The Quadrennial Defense Review is just what it’s supposed to be every four years. But the way we resource the Department of Defense, Homeland Security, or anything else is in a rolling budget process.

And especially the Department of Defense is called the Future Years Defense Program, or the FYDP. And what you have to do is you have to guess 5 to 6 years out what your resource requirements are going to be, not only related to risk management, but technology, your force structure, and actually how you’re going to achieve the goals that are developed in the process of something like the shooter. So, the real issue is how can you anticipate five years ahead of time where technology is going to be in the light of Moore’s Law and everything else that’s going on? And so, then when you have to go in and as I did in Katrina, uh, you have to see what’s available to solve a problem. What’s the government owned, what they don’t own. How do you bring that together? How do you integrate the various pieces of government, both horizontally and vertically, and create the one thing you have to have when you’re dealing with a complex problem, and that’s unity of effort, which really moves at the speed of trust.

And all this stuff is kind of co-mingled together. But I can tell you one thing, because I’m a former budget director of the Coast Guard at a lower rank, the budget lags behind the challenges in mission execution. It always requires you to have to adjust in the current year. And because of that, you have to get involved in the appropriations process in Congress.

And lately the term I’ve used is there that body that engages in random acts of after-sight!

Frank Finelli: Well, I think I think you got it spot on. I mean, there is this FYDP or we kind of try to lay out those budgets for five years in advance and life changes. I mean, the world is just not constant. And so, ironically, during that first quarter in the late 90s, we were addressing a more multipolar world. Now we’re coming back to a more unipolar world where we confront, in some cases, a superpower in China that we have to deal with from an economic security and a national security perspective. So, they’re kind of working exactly the opposite.

Now we’re looking at the convergence on a more focused threat profile. Yeah. And I would just add this at the high end, you’re looking at really advanced technology. And like we’re moving into AI and unmanned systems and so forth. But you know what the real threat to budgeting because I’ve lived this dream several tours. The biggest unknown that you have to deal with can cause all kinds of problems. When you get to the current budget year, or after you’ve appropriated money that you tried to guess on three years before, you know what it is. It’s the price of fuel. Price of fuel. It can vary. And then you have to you have to move all of the equipment. You have to provide the energy for it. And you had to guess what the fuel price was going to be for years ahead of time. And I can tell you, having to actively manage resources. We’re worried about acquisition and what we’re going to do with space technologies and all that. When the actual operations of the military agency in that department in that particular year is radically impacted by changes in fuel price.

Christopher Reichert: And I imagine that in Afghanistan, for example, there aren’t many gas stations where you just kind of roll up in a convoy and top up and keep moving, right.

Admiral Allen: Well, it’s interesting you should say that. And again, Frank may have a comment here. They have this knife and fork school they send to all flag officers to. It’s called Capstone, and a couple of my classmates ended up being service chiefs. We were all one stars at the time, but one of them ended up being the commander at Transcom, and he had the challenge of getting fuel to Afghanistan extraordinarily difficult, because the most effective way to move fuel on land is a pipeline. Other than that, it’s a tanker for to move large quantities. But in various places in Afghanistan, they had to move this stuff via aircraft, if you can imagine that.

Christopher Reichert: That’s a heavy cargo.

Admiral Allen: Right. And then how do you get it there? And how do you how do you negotiate airspace and all that kind of stuff? Extraordinarily difficult. So, I’m curious, you touched on this.

Christopher Reichert: What was the term not oversight, but after-sight!

Admiral Allen: Random acts of after site.

Christopher Reichert: Random acts of after site. So, you know, one of the one of the fundamental components of our system set up by the Constitution is the separation of powers. And I think it’s no accident that the great seal has in the talons of the eagle. Olive branches on one side and arrows on the other side. And there’s a tension between and. So that might be an outward facing, ready for war at a moment’s notice. Engage with the world diplomatically, economically and militarily. Given the complexity of the challenges that are that we’re facing. So, you mentioned Frank, a super peer, but also in context of this, I guess I would say a dysfunction that you are alluding to with your random acts of after sight, again, sort of communications and explaining the role of our armed forces in democracy is, I think is a is a challenge. And how’s that going for us?

Admiral Allen: I’ll nod to Frank for the opener on this one.

Frank Finelli: Well, I come back to our national security is a function of both our economic security and our defense security. The strength of our military is a huge deterrent capability which enables global commerce and hopefully the growth of nations all around the world. And I think this is something that we all gain an appreciation for at MIT, where we had a chance to study with students from all over the world, brilliant students from all over the world. And so, I think technology and academia have somewhat of a leveling effect that is quite helpful.

But I would come back to the point that the United States has had a differentiator in technology. MIT plays a very, very important role in that. MIT gets more national security research funding than any other university in the United States. And this development of capability and the transition of much of this technology to commercial means has also been, I think, a real force for enabling growth and providing some deterrent capability in areas. And having an understanding of this was very important as I transitioned into the investing world, because we have to project what’s going to happen to the growth prospects for companies in certain areas and where they can make an impact.

And I think this multidisciplinary background that we achieved at MIT Sloan was just very, very helpful in providing me a lens to think through those investment processes, if you will.

Christopher Reichert: Yeah. Alan, you referenced the learning organization from Peter Senge.

Admiral Allen: Yeah. I must have read his book, The Fifth Discipline, at least six times in the last 40 years. And I taught a course at George Washington University for a couple of years as an adjunct faculty leadership in large, complex organizations in crisis, and the concept of mental models and flexibility. And some of the way you think on how to handle this stuff is embodied in a lot of the work that Peter did in the Fifth Discipline, and a lot of the approaches we have to take.

Now, the real issue, in my view, that we’re dealing with right now is complexity. It’s not a single thing. It’s how it all comes together and how you sort all that out and try and figure what’s going on, whether it’s a risk related to peer competitors and what’s going on in the in the rest of the world or overlapping jurisdictions and laws and everything else.

What leaders have to do today is manage complexity, and you got to figure out some way to reduce the equation and get it down to something that’s understandable, that’s translatable, communicable and then become the basis to make decisions. And I think the basic approach to learning and how they handle the Sloan Fellow program at MIT was basic to that, to me. In fact, I think if you went back and talked to some of my classmates who I’m still in touch with, we had a course called Readings in Power and Responsibility, and it was a book list. And you read one book a week and everybody met for three hours on Friday morning and discussed the nature of the book. And it started out with Greek tragedies, Billy Budd and you name it. And it was like, these are complex emotional situations, but what does that what does that put on a leader, and how do they have to consider that? And what do they have to work through to make decisions? There’s no change in that. But what’s happened now is we have to make decisions many times in compressed timeframes with incomplete information and complexity makes that worse.

And those are the kind of skills, at least, that I was thankful for, that I was able to, if I didn’t already have them, acquire them, or if I did have them to make them a little sharper during my year.

Christopher Reichert: Yeah, I think that the grace under pressure that you showed, particularly EQ. I remember, I understand the story of you standing up in a gym with 4000 people around you with a megaphone. I’d love to have you tell us that story of taking command at Katrina.

Admiral Allen: After I had met with Secretary Chertoff, and basically, he sent Mike Brown home and put me in charge of the entire response. I’d already been down there a week trying to stabilize operations in New Orleans, which was mostly affected. I needed a way to kind of mobilize the folks that had been working very hard, but saw their agency and leaders vilified on TV every night because, uh, the work was being graded by CNN that was seeing a body on a street corner. And it was there the next day when they came back, and you got to kind of grab everybody together and get a basis to create unity of effort.

And what I told everybody that day was that what I wanted them to focus on was to treat everybody that was involved, had been impacted by the storm as if they were their mother, their brother, their father or sister or a relative. Because if they did that, two things would happen. If they made a mistake, they would err on the side of doing too much. And at that point in the response, everybody was okay with that, including me. And the second thing was, if somebody had a problem with what they were doing, their problem was with me because I gave them the guidance and two simple things telling them what was important that they could rally around and then somebody had their back.

Christopher Reichert: Interesting. And Frank, we talked earlier about how you described yourself as the luckiest man in the world. And I’d love to hear you tell us why you think you’re the luckiest man in the world, and also about the veterans fund that you’ve started as a way of paying it forward.

Frank Finelli: Yeah. Well, thank you very much for that, Chris.

And, you know, again, I went to West Point to swim on the swim team. Boy, it opened up tremendous opportunities. And one of those was to go to two years of fully funded graduate school. And so, I was your taxpayer dollars at work. And I was able to go study at MIT Sloan, where the Operations Research Center was co-located with Sloan. And I could study finance and operations research at the same time, which was really what my objective was. You know, I did that as my job as a military officer. So, I mean, I kind of saw the opportunity set that I had not worried about paying for that education, not worry about having to sustain Cathy and me and Boston at the time, compared to what some of my veteran friends were going through that had transitioned from the military and trying to swing tuition, living costs and everything else and then having to find a job on the back end. You know, I had the opportunity to go back in and serve in the military, which was a tremendous opportunity to lead American soldiers then wound up in the Pentagon, as we discussed earlier, where I had that amazing assignment that led to my retirement from the military and transition to Capitol Hill.

And then, ironically, when Senator Dan Coats retired, I got fired, as is the custom on Capitol Hill. And that’s when I went to the Carlyle Group to become an investor and was there for over 25 years. So, call it serendipitous luck, whatever, I don’t care. But I’m I consider myself a lucky guy, and I’m just grateful to have had the experiences that I have had. But it leverages not only the opportunity as a veteran, but also the opportunity provided by MIT and the academic and technical background. Just the way you can think about complex problems. And that was hugely important in the investing world.

So as Cathy and I took a step back to think about areas where we could have an impact, this was one of the things that we really thought about. And there are amazing veterans attending MIT Sloan right now, and we wanted to try to set up a program that would help incentivize the best veterans, particularly ones with technical backgrounds, to try to go to MIT Sloan, hoping that they would get involved in the innovation ecosystem supported by the Lincoln Labs, the Draper Labs, and the other almost 20 laboratories across MIT that are really critical to the development of technology for the national security ecosystem.

And so, this is why we set up the Sloan Veterans Fund, and we’re hoping that it will attract others to come alongside with us so that we can support more veterans and trying to come to MIT Sloan.

Christopher Reichert: And Admiral Allen, you were active duty. Were you also seconded by the Coast Guard into Sloan?

Admiral Allen: I was, and I can agree with everything that Frank has said. There was little asymmetry between us and the corporate people that went there on per diem for an entire year, and we were stationed there as our permanent duty assignment. The good thing about it was you went to work every day as your job to go there, but that didn’t change your salary. We had to come up with novel methods of entertaining because we weren’t on the same level as our classmates. What we did was the military guys all got together, and we decided we’d just throw a party that we hosted and like, good people in the military, went out to the commissary at Hanscom Air Force Base, to the liquor store and everything else. And we bought everything using our military privileges.

We put on a hell of a party, but we did it at a at a cost that would really impress even the Carlyle Group. You figure out a way to work it moving forward. On the other hand, it was fun to go to their places down in back Bay and everything else and kind of see how the other half lived. One of the problems maybe Frank wants to comment on… it’s not a problem… but trying to reenter back to government or the military service. After you’ve been there a year with the people you’ve been in, how energizing it is. When you’re ready to change the world, you think you can move boulders and all that kind of stuff, and they may want you to do something you may think is not commensurate with the talents and the expertise and the education you’ve just gained. And you got to kind of reconcile that. I will say this, I don’t I don’t think the guys will mind me telling the story because it’s important. Actually, it was it ended up being important to the country, in my view. But one of my classmates at Sloan was Bob Malone.

He ultimately retired as the CEO of BP America. He and I got together, and he brought his relief in to see me. And ultimately that exchange we had and the personal rapport we established helped me immensely because a year later, we had the Deepwater Horizon oil spill, and I was dealing directly with the CEO of BP America. So, you never know how these things are going to turn out, I mean.

Frank Finelli: You know, Admiral, that’s a really important point for veterans. And anyone who is listening to this podcast is really the power of the MIT network and the ability to start developing and broadening your network while you’re at MIT Sloan, and then continuing to nurture those relationships across a career. I mean, it’s amazing that, you know, through the 25 years I had as an investor, the ability to reach out to folks all across different sectors who I was able to interface with from MIT Sloan. And then also don’t forget your veteran networks, because you know, that knucklehead that was next to you in the foxhole might be the chief of staff of the Army now.

And so, you want to make sure that you keep those relationships, because they can be just so important for what you may be doing professionally and in causes that you’re passionate about. But also, you can be a source of resource or a source of support for that.

Admiral Allen: Couldn’t agree more.

Christopher Reichert: We talked about the technology adoption and the process that public institutions need to follow to adopt and absorb new technologies as nimbly as possible, spending the taxpayers’ dollars wisely. Related to that, I think, is also having the right personnel, the human component to the armed forces, trained and ready. And I’d be curious to hear from the private sector perspective, Frank, I suppose some of the work that you’ve done has been engaging with Defense Department on various investments and how you’ve seen that adoption friction.

Frank Finelli: Well, it’s a very good question, Chris. And actually, I serve on the Defense Science Board, which is an elite group of people who are assessing various issues for the Secretary of Defense and the chief Procurement officer or chief acquisition executive for the Department of Defense and the head of research and development.

So essentially, the CTO and the COO and we have some real issues across the industrial base. And so, I would broaden it to be. Not only how do you find the right leadership for the military itself? The Department of Defense is an $850 billion a year organization. I mean, it’s the largest corporate entity in the world. It’s got all the business functions that any other company does. Its accounting is a lot different. But again, finding the right people that have the expertise in defense matters. Plus, the experience in corporate matters is really difficult. And you want to grow those people in both the military and in the civilian structures. And that’s why it was such a blessing to be able to have Admiral Allen come in to be commandant of the Coast Guard. It’s just rare that you can find senior leaders with the background that he brought to that role. Similarly, in companies, we need to have chief executives of these companies that are respectful of the mission to support America’s national security.

And you just don’t create those folks overnight. We need to grow them over decades. And this is where we really need to encourage our policymakers to be thoughtful about the incentives to keep the right people in the right place so that they can serve at the highest levels.

Admiral Allen: I would agree completely. I’ll go back to what I said earlier, because I think it continues to be the driving force. And that’s this notion of complexity and how you create leaders that can deal with complexity. And how do you create workforces and how do you make resource decisions and allocate, you know, capital to the proper places, and how do you do all of that? The overriding issue is this country was built on a military structure where people are paid lower than what the market rate is, but there’s a psychological income related to serving that they’re willing to accept, because the aggregate of all of that allows them a standard of living that allows them not to be rich, but to be comfortable with their families.

But then they’ve got the psychological income of serving. And then there’s the growing part that didn’t used to be there when we started out. And that’s families, work, life and how you deal with all of that as well spousal employment transfers and all that. While we’re depending on a human resource system in the military that’s constrained by appropriation law and what we do. You talked earlier about the pay of people in the military. At the same time, we need to learn how to integrate that. And one of the problems is because of the rules and regulations and how we run government, especially in acquisition. It’s very difficult to do something that’s innovative, agile and fast because, as I told people, the Federal Acquisition Regulations and the Code of Federal Regulations and the Defense Acquisition Regulations are the sum of all market failures that we don’t intend to repeat. And so, along the line, we’re looking not to step on a landmine that we’ve already passed, but we can’t go forward until we’ve dealt with the checks that have been created as a result of those failures.

There’s going to have to be a reckoning moving forward on how we’re going to reconcile this, because there’s always been a stern chase with technology you need and how you apply that to defend the country and security wise and the means by which you get it. And that stern chase, in my view, is widening. And this is an opportunity, in my view, maybe for MIT Sloan to take a look at that interface. And we had talked about this, I think, earlier on how we need to rethink the process of how we reconcile risk security and the acquisition and the distribution of resources that support that. The basis of our Constitution is domestic tranquility, common defense, common welfare. Those are still the standards. The way we have to do it has to change.

Frank Finelli: I think we have to acknowledge that China has industrialized to a much greater degree than the United States has, and that goes also into their defense industrial base and their strategy for what is called military civil fusion. The Chinese companies that produce equipment are much, much larger than the US companies. US equipment may be a little bit more advanced, but again, it’s being produced at a far lesser rate. And when you put everything on a purchasing power adjusted basis, if you look in the CIA World Factbook, the Chinese economy is 30% larger than the US economy. I just think we need to be mindful of that, for starters. But as we look at this comparison, the really two advantages that I keep coming back to are the technology development and innovation cycles in America and our capital markets. These are two of the areas that we need to bring to bear, to create a more advanced capability to support our military. And in addition, we have huge vulnerabilities in our supply chains. And this is where we do have to assess those vulnerabilities, and we have to figure out how to develop redundant sources. The Chinese have virtually assured their supply chains for their industry through Belt and Road, and their strategic decisions to focus on the processing of critical materials, the United States needs to come up with a response for that.

Admiral Allen: Yeah. Excellent point Frank. When we think of Belt and Road, we think of land and sea, and it’s also space and underwater. There’s a huge issue going on right now, and I’m working with some other retired senior officers and the Congress to try and put some visibility on it. The modern technologies that we rely on, and a lot of this has to do with battery technology and some of the other critical elements that are developed as part of systems depend on something called rare earths, or elements that are not common everywhere. There’s a shift between, you know, there was a gold rush in the United States, and then there was silver. The new rush is to find out where these things are at, like lithium, to make batteries and who has those raw resources, because in the old days, after the revolution, you know, we had timber, we had we had mines and everything else. Right now, one of the most potential, greatest deposits of rare earths sit at the bottom of the ocean and the international regime to manage that was created under the Law of the Sea Treaty that we failed to ratify.

And there’s a huge issue sovereignty issue about whether or not we should sacrifice our sovereignty to an international structure. And I will tell you right now, there are plots in the Central Pacific to carry huge deposits that the US has access to, but cannot exploit, because we have not acceded to the law of the Sea Treaty.

And guess who’s there? China.

Because they need those critical minerals to sustain what they’re trying to do. And in terms of these new technologies and working very, very hard with a group of retired senior officers and government officials right now to try and put a focus on getting accession to this treaty. The problem is, and Frank will appreciate this, in radio, sometimes you can’t get through because of the static. And we have a term you’re trying to break squelch. There are so many important things that are going on right now that are not being listened to because of the political dynamics that are going on that are really, really significant. But I would tell you in relation to China, there are a couple of them. The other one is space-based technology, GPS versus BeiDou, which is their satellite system. That’s the reason I’m saying it’s not Belt and Road. It’s space and under the water. We’ve got a long way to go and we’re not moving, in my view, in a very informed way. But I have to tell you, international shipping and international aviation are managed under the International Maritime Organization and the International Civil Aviation Organization, and that is how we run the world transportation system for decades. So, it can be done. And it’s not a threat to us, but it’s a political argument that people use because they think somehow that creating a sovereignty issue is somehow to their political advantage.

Christopher Reichert: Well, you know, I normally have a question about what you most recently geeked out about, but I think, Admiral Allen, you’ve probably answered that question in the last few minutes. But I have another question for you both, having had very successful careers, what is two questions?

What is your definition of success and do you have any advice for prospective Sloanies.

Frank Finelli: I would say my definition of success is having fun doing stuff that makes an impact. And I think you define what that impact is. I have been so blessed to, you know, have had a full career in the Army where I was honored to lead American soldiers and then to transition into the investment circles or the investment sector where, you know, I was able to work with high performing teams that you could hardly imagine doing really fascinating stuff. But again, the thing I loved with private equity is you’re buying companies to own them. And so, you’re rolling up your sleeves and you’re working with the management teams to try to make companies better. And when that works, that benefits not only your investors, but the employees and their families. This is the type of thing that is that is really rewarding. But in addition to that, it’s the balance of faith and just other causes like veterans supporting our veteran networks that we’re passionate about and where we can make an impact.

And again, that’s what I fall back on in terms of success.

Admiral Allen: I would totally subscribe to Frank’s remarks. I guess I would just add in shorthand, uh, when I’m talking to folks about their future and what they want to do, the shorthand metric I use is the ultimate measure of anything is happiness. You know, are you happy where you’re at? And that takes a lot of different forms based on who you are, what your background is, what you aspire to do. What is the gap between what do you aspire to do that makes you happy and your ability to achieve that? And those are all challenges we deal with in life, and that’s how we manage and move forward. But it also allows us to establish a goal and work towards something. But when it boils down to it, and I’ve got a lieutenant in the Coast Guard that’s trying to make career decisions and start a family, and his wife’s working, and they’re trying to balance out the spousal employment versus where they want to go in their life. I tell them, the best thing you can do is have a discussion about happiness over the dinner table with a glass of wine.

Frank Finelli: Thad, would you talk about frustrations after leaving Sloan was stuff. You see, that’s all screwed up. I got a great story that goes back to Rob Freund. So, I was blessed at MIT Sloan to have Professor Rob Freund as my thesis advisor. He was one of the really thought leading professors in the Operations Research Center at the time. And I studied energy shortage planning, which unfortunately, is as relevant today as it was back in the mid 1980s.

And as Admiral Allen mentioned, so I graduated and I went to West Point to be on the faculty there, and I was teaching econometrics, which was not exactly a crowd pleaser for the cadets, as you could imagine. And I saw, just as he mentioned, I saw all these things that I thought were kind of messed up and could be fixed and oh my gosh, if I could only bring my MIT buddies to deal with some of this stuff, we could really make a difference. And so, I captured some of these things on what I call my “whining letter,” and I sent it to Professor Freund. This was kind of in the fall after graduation, and I’ve had the opportunity to come back and lecture at Sloan in the finance classes for several years. And last year I saw Professor Freund, Rob and it had been several, you know, probably a couple of decades since we’d really had a chance to, to spend any time together. And sure enough, he pulled that letter out of his files 40 years, almost 40 years later. And he said, do you remember writing this thing to me? And he was so struck by it. But again, it’s special professors like Rob Freund that just really make a difference at MIT Sloan.

Admiral Allen: I guess I’ll make two comments. And I again, I agree completely. Let me tell you about my exit from Sloan. When I went to Sloan, I was pretty much assured that I when I left, I wouldn’t, I moved my family up there for one year. A lot of people don’t do that, but I did it under the assumption that there were three Coast Guard cutters moored in the Coast Guard station in Boston, and I was sure there would be room enough for me to command one of them, because I’d already been commander of a smaller vessel before and up until the night before the assignment message came out, which was in the spring of 1989,I was under the assumption I would take command of one of the ships in Boston, and my family would stay there. And in fact, my wife had got a job, and she was actually in the engineering school at MIT.

Three days before the message came out, the commandant was testifying on the Hill about a ship building project that was in trouble, and we were being raked over the coals by the committees in the House and the Senate. And he said in a hearing he was going to take the next graduate of the Sloan School and make him the business manager of the shipbuilding program. And so, when the message came out the next morning, I found out that I was going to D.C. after moving my entire family to Boston for a year. Obviously, it didn’t hurt my career, but there was some reconciliation to deal with moving forward. But getting to Frank’s comments, I have this kind of a model that I talk about with folks, too. And I call I call it “The Invisible Suitcase”. And it starts out when you’re in, like when I was an ensign or a JG02, you know, whatever, somebody would say something or there’d be a message come in and you would go, what were they thinking? Who wrote this? Does somebody in headquarters really understand what we’re supposed to do?

And then somewhere along the line, I started creating this mythological suitcase that I started throwing those things in. And I made a promise that if I ever got senior enough, I would unpack that sucker.

When I became a captain. And then I became a one star, people would come in and talk to me about, what’s your agenda? And I said, I got plenty of stuff. I got a backlog I’ve been building, you know, for over 20 years, and we’re going to attack this stuff and ultimately became the basis for the letter I wrote to Secretary Chertoff, before he interviewed me to be the commandant. But basically, I unpacked the suitcase. Stuff that I’d been pissed about was bugging me, or examples of somebody not understanding how the organization ran. and I never got the chance to drive. This is where I was going to go, and I built it over 30 years. I recommend everybody else do that.

Frank Finelli: Well, Chris, maybe I could just make a closing comment. Again, it’s been such an honor to participate on this podcast with Admiral Thad Allen, who really is an American hero. And also, Chris, for you and the MIT community. And I would just like to thank all our veterans as we celebrate Veterans Day this November 14th. Thank them for their service and would ask all of you to think about those service members that are deployed in all corners of the globe and in harm’s way and keep them in your thoughts and prayers.

Admiral Allen: Well said, Frank.

Christopher Reichert: There’s so many more questions I have, but we’ve run out of time, and I’ll have to go through a back channel to get those from you, particularly the Katrina stories.

Admiral Allen: I’m always available for a couple of hours and a quart of Jack Daniels.

Christopher Reichert: There you go. On that note, I want to thank Admiral Thad Allen, former Commandant of the United States Coast Guard, and Mr. Frank Finelli, a senior advisor at the Carlyle Group and founder of the MIT Sloan Veterans Fund, for joining us on this episode of, this special episode, of Sloanies Talking with Sloanies.

Thank you both.

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