NEWSOURCE21

COLD WAR 2.0 & The Economics of Warfare : Iran, Autonomy and the Collapse of the Cost Curve

Private Capital is not just Financing Defense Companies ; It is helping Restructure how Military Capability is Invented, Produced, Scaled, and Ultimately Fielded

Hamlet Yousef

The Iran conflict is giving us a preview of something much bigger: a world where autonomy, AI, private-sector innovation, commercial intelligence and inexpensive mass are challenging the economics of traditional military power.

BLUF (Bottom Line Up Front): The biggest lesson coming out of the Iran conflict may not actually be about Iran. It is about the changing economics of warfare and what happens when emerging technology begins democratizing military capabilities that were once reserved almost exclusively for major powers.

In many ways, this is a continuation of what we have already watched unfold in Ukraine. An underpowered “David” has used drones, software, commercial technology, rapid battlefield innovation and private-sector ingenuity to impose extraordinary costs on a much larger Russian military. Ukraine has not eliminated Russia’s advantages in manpower, missiles, aircraft or industrial capacity, but it has repeatedly demonstrated that technology and innovation can narrow the gap between a smaller military and a much larger conventional power.

For most of the modern era, advanced military power belonged overwhelmingly to countries capable of spending billions of dollars building sophisticated aircraft, warships, missiles, sensors and command-and-control infrastructure. That advantage is not disappearing, nor are aircraft carriers, submarines, bombers or advanced fighters suddenly obsolete. But autonomy, artificial intelligence, inexpensive sensors, commercial communications, advanced manufacturing and widely available components are rapidly lowering the cost of creating meaningful military effects.

Countries such as Iran, smaller states, proxies and increasingly sophisticated non-state actors can now threaten platforms costing hundreds of millions or billions of dollars with systems costing a tiny fraction of that amount. The United States and its allies simply cannot build a sustainable long-term strategy around answering every inexpensive drone with a multimillion-dollar interceptor or every maritime threat with another billion-dollar warship.

The answer is not abandoning exquisite platforms. We will still need submarines, advanced fighters, bombers, missile defense, aircraft carriers and traditional naval combatants. The real opportunity is building a much broader force architecture around them that incorporates autonomous mass, distributed sensors, commercial intelligence, private-sector innovation, resilient manufacturing and systems capable of evolving at software speed rather than traditional procurement speed.

That last point is especially important. Almost a decade ago, when I helped launch IronGate Capital Advisors (www.irongatevc.com), defense technology was still a relatively unfashionable corner of venture capital. Our thesis was fairly straightforward: we believed a new era of great-power competition was coming, explicitly calling it Cold War 2.0 when docile DC held onto the less triggering phrase “Great Power Competition”. Private technology would play a far greater role in national security, and government alone would not be able to finance or innovate its way through the challenge. I think the events of the last several years, particularly Ukraine and now Iran, have largely validated that thesis.

Iran is simply giving us the latest preview of where all of this is heading.

Iran Is a Case Study, Not the Whole Story

In a recent Irregular Warfare Initiative discussion on the geoeconomics of the Iran conflict, we kept coming back to something I have written about for a while: the wars and geopolitical competitions we tend to treat as separate increasingly are not separate. Iran, Russia, Ukraine, China, the Red Sea, the Persian Gulf, global supply chains, energy markets, cyber operations and information warfare are increasingly overlapping pieces of a much larger competition.

I have referred to this broader environment as Cold War 2.0, but the analogy only goes so far. The next Cold War will not simply look like the previous one with newer weapons. It is becoming a comprehensive battle of systems in which military power remains enormously important, but kinetic warfare represents only one element of a much wider struggle.

Economic pressure, sanctions, technology, private capital, commercial intelligence, supply chains, critical minerals, information operations, cyber capabilities, proxies and control of global infrastructure increasingly matter alongside traditional military force. That is also why irregular warfare has moved back toward the center of national security.

Ukraine has been one of the clearest demonstrations of this shift. Russia entered the war with enormous conventional advantages, yet Ukraine has repeatedly leveraged commercial drones, digital networks, open-source intelligence, software and rapid innovation to attack Russian forces in ways that would have been extraordinarily difficult for a smaller military only a generation ago. It is a modern version of David trying to neutralize Goliath’s advantages not by matching him weapon for weapon, but by changing the economics and character of the contest.

Our adversaries understand they do not necessarily have to defeat the United States conventionally. They can instead impose costs, create political friction, exploit economic vulnerabilities, fracture alliances and make the exercise of traditional U.S. military superiority progressively more expensive.

Iran has spent decades refining versions of this model. Tehran cannot economically match the United States carrier for carrier, fighter for fighter or missile-defense battery for missile-defense battery, so it has invested heavily in drones, missiles, proxies, cyber operations, information warfare, maritime harassment and strategic geography.

The objective is also not necessarily to win a battle in the way Americans traditionally define victory. For the Iranian regime, preserving the regime, surviving another round of escalation and remaining capable of imposing additional costs can itself become a strategic objective. That distinction came up repeatedly in our discussion: Iran views this as a struggle for regime survival, while the United States is often operating with narrower and sometimes changing objectives.

That asymmetry in objectives matters. Increasingly, so does the asymmetry in cost.

The Economics of Warfare Are Changing

This is the element of the current conflict that deserves far more attention. The economics of warfare are becoming just as consequential as the technology itself.

An inexpensive autonomous aircraft does not have to outperform an F-35. A small unmanned surface vessel does not have to defeat a destroyer in a traditional naval engagement, and a cheap loitering munition does not need the sophistication of a cruise missile. It simply needs to create enough risk that the defender is forced to respond.

Ukraine has already demonstrated this dynamic on a massive scale. A country fighting a much larger conventional military has used relatively inexpensive drones and commercially derived technologies to destroy or threaten tanks, artillery, aircraft, logistics nodes, warships and strategic infrastructure. Ukraine did not invent asymmetric warfare, but it has dramatically accelerated the marriage between irregular warfare and low-cost autonomous technology.

When one side can repeatedly spend thousands or tens of thousands of dollars and compel the other side to spend hundreds of thousands or millions of dollars in response, that exchange ratio eventually becomes strategically important. During our podcast discussion, I made the point that Iran and Ukraine are obviously very different cases, but both demonstrate the same technological trend: relatively inexpensive autonomous systems can allow a materially weaker actor to impose enormous costs on a much larger military.

This does not mean cheap drones suddenly make advanced military systems irrelevant. A Shahed cannot perform the missions of a stealth bomber. A small USV does not replace a Virginia-class submarine, and a quadcopter cannot provide air superiority.

But that is also the wrong comparison.

The disruption occurs when inexpensive platforms begin taking over specific missions that previously required much more expensive systems. Surveillance, reconnaissance, communications relay, target detection, electronic sensing, mine detection, logistics, persistent maritime presence and increasingly strike missions can all migrate toward lower-cost autonomous systems.

That is how technology frequently disrupts mature industries. The new product does not replace the incumbent platform in one shot. It starts stripping away individual functions until the economic rationale for the old architecture begins to change.

Some twentieth-century military platforms will remain indispensable for decades. But certain twentieth-century force structures may become economically obsolete much sooner, because missions once concentrated aboard a handful of exquisite platforms can increasingly be distributed across hundreds or thousands of cheaper systems.

Instead of asking whether one autonomous vessel can replace a destroyer, the better question is whether 50 or 100 autonomous vessels operating around a destroyer can dramatically extend its sensing range, increase its survivability, complicate enemy targeting and allow it to remain farther away from danger. That is a much more consequential question for future force design.

The Collision of AI and Autonomy Changes the Equation Again

There is another technological shift layered on top of the falling cost of hardware: the collision between artificial intelligence and autonomy.

Autonomy by itself is already transformative because it allows machines to perform tasks without placing a human operator physically inside the platform. AI makes autonomy far more powerful by improving how those systems perceive their environment, process information, prioritize data and coordinate with other systems.

Again, Ukraine has been a laboratory for much of this change. The war has demonstrated how quickly commercially derived technologies can move from experimentation to battlefield use, how rapidly operators can iterate on platforms, and how software can increasingly become as important as the airframe or vehicle carrying it. The cycle of innovation, countermeasure and adaptation is happening far faster than traditional defense procurement systems were designed to accommodate.

The real disruption comes when inexpensive autonomous hardware, AI-enabled software and large amounts of commercial data begin operating together. Instead of a human operator controlling every individual drone, the long-term trend is toward humans supervising networks of increasingly capable systems. One operator may eventually manage dozens of assets performing surveillance, communications, logistics, electronic warfare or other missions across air, surface and subsurface domains.

This is where the economics become particularly disruptive. The cost of adding another sailor, pilot or crew is significant and recurring. Software can scale very differently. If autonomy allows us to distribute capability across more platforms while AI helps manage the resulting complexity, the relationship between military capability, manpower and cost starts changing fundamentally.

Task Force 59 (Defense Scoop Article - May ‘24) Task Force 59, launched in 2021, is the U.S. Navy’s first dedicated unit for unmanned systems and artificial intelligence.

That is one reason the U.S. Navy’s Task Force 59 is so important. It was established specifically to integrate unmanned systems and AI into Fifth Fleet operations, with maritime domain awareness and deterrence among its stated objectives. The Navy has since demonstrated extended unmanned operations, weapons employment from unmanned vessels and autonomous launch and recovery of aerial systems from unmanned surface platforms.

What we are watching is not simply the introduction of another class of weapon. It is the early construction of a different military architecture.

The West Cannot Win a Cost-Imposition Contest This Way

One of our biggest vulnerabilities is that the United States still has a tendency to solve military problems with exquisite military solutions. That approach works brilliantly when the economics are in our favor. It becomes much less attractive when an adversary deliberately engineers the exchange ratio against us.

The current generation of Iranian drone warfare illustrates the problem. Tehran has spent years developing relatively inexpensive UAV capabilities while exploiting commercially available components and international supply chains. United Against Nuclear Iran has documented how commercially available engines, electronics and other dual-use technologies have appeared in Iranian UAV programs, including components marketed originally for civilian or hobbyist uses.

Ukraine has exposed the same economic vulnerability from the other side of the battlefield. Kyiv’s ability to impose disproportionate costs on Russia should be viewed as a strategic success for Ukraine, but also as a warning for Western militaries. If relatively inexpensive technologies can create these kinds of effects against Russia, there is no reason to assume future adversaries will not use the same logic against us.

That matters because warfare is increasingly benefiting from many of the same forces that transformed the commercial technology industry. Sensors are becoming cheaper, computing power continues to improve, software allows rapid iteration, advanced manufacturing is increasingly accessible, commercial satellite communications and imagery are broadly available, and AI is lowering the barriers to increasingly sophisticated autonomy.

Those same trends obviously create security problems because they provide new capabilities to adversaries and non-state actors. But they also represent one of America’s greatest strategic advantages if we can properly harness them.

During the podcast, Lt. Gen. Dick Newton made an important distinction. Advanced bombers, fighters and submarines remain vital to American military power, but we also have to adapt to drones, AI-enabled software, autonomous systems and the industrial base needed to manufacture them at scale. A defense acquisition process measured in years becomes increasingly mismatched against battlefield technology cycles measured in months.

This is as much an economic problem as it is a military one.

Venture Capital Saw the Gap Before Washington Could Fully Fill It

This is where the venture capital community becomes increasingly important.

When we helped launch IronGate Capital Advisors nearly a decade ago, “defense tech” did not carry the excitement it does today. Many institutional investors wanted little to do with defense. Silicon Valley had largely moved away from national security, while government procurement remained concentrated around a relatively small group of traditional contractors.

Our view was different. We believed great-power competition was returning, the lines between commercial and defense technology were breaking down, and many of the next strategically important technologies would originate in the private sector rather than government laboratories. While policymakers described China as a “near-peer competitor,” and later adopted the more politically palatable “Great Power Competition,” I have bluntly called it Cold War 2.0 since 2018.

We also believed competing in this new environment would require private capital.

Ukraine became one of the first major wartime validations of that thesis. Commercial satellite networks, venture-backed technology companies, autonomous systems, software, AI, advanced manufacturing and private-sector logistics became increasingly important to Ukraine’s ability to resist a much larger adversary. The lesson is not that private companies can replace the military. It is that modern militaries increasingly fight within an ecosystem of private technology, innovation and capital that barely existed during the last Cold War.

That thesis was never simply about building better missiles or drones. It was about developing the broader innovation ecosystem required to compete in Cold War 2.0. IronGate’s investment focus has included dual-use technologies spanning autonomy, underwater robotics, secure communications, resilient navigation, space, advanced manufacturing, critical materials, cybersecurity and supply-chain resilience.

The importance of the venture community is not that VCs suddenly know more about warfare than military commanders. We don’t. It is that private capital can assume technological and business risk in ways government frequently cannot. Venture capital can fund five competing approaches knowing four may fail. Startups can redesign a system in 12 months. Government procurement, understandably, was never designed to operate that way, and traditional programs of record can take years to make comparable architectural changes.

Those differences become enormously important as the pace of technological change accelerates. Ukraine has demonstrated what happens when a smaller military, facing a much larger adversary, is forced by necessity to innovate at wartime speed.

The larger question for the United States is whether we can learn those lessons before we find ourselves in an existential war of our own.

Private Capital Is Not Replacing the Defense Industrial Base

There is sometimes a tendency to frame this as a competition between startups and traditional defense primes. I think that framing misses the point.

The traditional defense companies build extraordinarily sophisticated systems and possess engineering, manufacturing and integration capabilities that startups often cannot replicate. We need them. The United States is not going to venture-capital its way into building a nuclear submarine fleet.

But the old model cannot remain the only model.

The future defense industrial base should look more like an ecosystem than a pyramid. Traditional primes, emerging defense companies, software firms, commercial manufacturers, venture-backed startups, universities, private equity, venture capital and government laboratories all have complementary roles.

The Ukraine war has made this especially visible. Innovation on the battlefield now sometimes occurs in weeks. Operators identify a problem, engineers build a solution, adversaries develop a countermeasure, and the cycle begins again.

That is much closer to the iterative model of the technology industry than to twentieth-century weapons procurement.

IronGate was built around the belief that private capital could help bridge these worlds. The objective was never simply to write checks into defense companies. It was to identify technologies with legitimate commercial economics that also solved real national-security problems and then connect capital, entrepreneurs, technology and government requirements.

That “dual-use” model becomes even more important in an era where advances in AI, robotics, cybersecurity, communications, space, manufacturing and energy may simultaneously transform commercial industries and military operations.

The Maritime Battlefield May Be Where This Gets Really Interesting

Most public attention understandably focuses on aerial drones because they provide dramatic footage and immediate battlefield results. I suspect, however, that maritime autonomy could ultimately prove just as disruptive, if not more consequential, to global security.

Ukraine again provides an early warning. A country that began the war without anything approaching Russia’s conventional naval power has used unmanned maritime systems and other asymmetric capabilities to challenge a much larger fleet. Whatever one thinks about the specific platforms involved, the strategic lesson is difficult to ignore: a smaller actor no longer necessarily needs a traditional navy to create meaningful naval effects.

That should have enormous implications for how we think about Iran.

Look at the geography of today’s competition: the Strait of Hormuz, Bab el-Mandeb, the Red Sea, Gulf of Oman, Arabian Sea, Eastern Mediterranean and increasingly the Caspian. These are enormous maritime spaces containing some of the most strategically important commercial shipping lanes, energy infrastructure and military operating areas in the world.

Unlike a land border, you cannot simply place a checkpoint every few miles. Persistent maritime awareness has historically required ships, aircraft, satellites, sailors and enormous amounts of money. Autonomy changes that equation.

The U.S. Navy has spent years experimenting with unmanned systems in the Middle East. Task Force 59 has integrated autonomous platforms and AI into Fifth Fleet operations, with the Navy explicitly describing the objective as a distributed network that expands how far maritime forces can see. Some unmanned vessels have already demonstrated extended operations at sea.

The real opportunity, however, extends well beyond the small explosive drone boats dominating today’s headlines.

Think Autonomous Warships, Not Just Drone Boats

Imagine a larger autonomous maritime platform capable of remaining at sea for extended periods without the personnel and operating costs associated with a conventional warship. Instead of carrying hundreds of sailors, it might carry sophisticated sensors, communications equipment, modular mission packages and potentially weapons depending on its mission.

Such a vessel could operate as a persistent maritime picket hundreds of miles forward of traditional naval forces. It could provide radar, optical, acoustic or electronic surveillance while simultaneously functioning as a communications node or data relay.

The concept becomes even more interesting when larger platforms begin supporting smaller autonomous systems. A future autonomous maritime platform might launch aerial drones, deploy smaller unmanned surface vessels, recharge or recover autonomous systems and coordinate subsurface platforms. In effect, we begin moving from the concept of a disposable drone boat toward something closer to a distributed autonomous warship or mothership.

Different platforms could eventually perform missions such as persistent ISR, communications relay, logistics, mine detection, electronic warfare, drone servicing, distributed weapons carriage or simply acting as inexpensive decoys that complicate adversary targeting.

These platforms would not necessarily replace destroyers, submarines or aircraft carriers. They would change what those expensive platforms need to do and where they need to operate.

Instead of concentrating sensors, weapons and sailors aboard a handful of extraordinarily valuable vessels, a hybrid fleet could distribute many of those functions across a much larger network. A destroyer may increasingly become less of a solitary multimission platform and more of a quarterback operating inside a constellation of autonomous systems spread across hundreds of miles of ocean.

Ukraine has already shown what happens when maritime autonomy is used asymmetrically against a larger fleet. The lesson for the United States should not simply be that we need better defenses against small USVs. The larger lesson is that autonomous maritime mass is likely to become a major component of future naval power.

That architecture is particularly relevant in places such as Hormuz.

Hormuz Demonstrates Why Maritime Mass Matters

Iran does not need to defeat the U.S. Navy in a traditional fleet engagement to create a strategic crisis. It merely needs to threaten commerce, raise insurance costs, create uncertainty, attack shipping, disrupt port activity or force Western militaries to protect thousands of commercial vessels across enormous maritime areas.

That is irregular warfare expressed through economics.

Ukraine has demonstrated a version of the same concept in the Black Sea: a smaller actor can impose disproportionate costs on a conventionally superior adversary by exploiting technology, geography and asymmetric tactics rather than trying to mirror the larger force. Iran’s geography provides a different operating environment, but the underlying economic logic is remarkably similar.

UANI’s recent maritime reporting demonstrates how important this domain has become. Its shipping analysis tracks Iranian energy exports, sanctioned vessels, commercial networks, ownership changes, flags and other characteristics associated with sanctions evasion.

The important point is broader than the precise numbers. Maritime commerce is not a side issue in the Iran conflict. It is part of the battlefield.

The sea lanes carry energy, components, sanctioned commodities, military-related materials and the money that finances everything else. Maritime security therefore cannot simply mean destroying the platform that launches the missile or drone. It also requires understanding the commercial networks financing, transporting and replenishing the adversary’s war machine.

That leads directly into another transformation receiving far less public attention than autonomous warfare.

OSINT Is Becoming Part of the Modern Arsenal

(OSINT - Open Source Intelligence) Twenty years ago, mapping an international network of tankers, shell companies, beneficial owners, flags, cargo transfers and suspicious shipping activity was largely the domain of governments and intelligence services. Today, meaningful portions of that picture can increasingly be assembled commercially.

Satellite imagery, AIS data, corporate registries, trade records, customs databases, sanctions lists, port activity, shipping histories, commercial intelligence platforms and social media now provide enormous amounts of information outside traditional intelligence channels. Artificial intelligence will increasingly help connect these disparate datasets at a scale that would have required armies of analysts only a decade ago.

Ukraine again offers an important precedent. Commercial satellite imagery, open-source geolocation, social media analysis and privately developed intelligence tools have all played meaningful roles in understanding battlefield activity. The same democratization of intelligence increasingly applies to sanctions enforcement, maritime tracking and economic warfare against Iran.

This is a major development for irregular and economic warfare.

The Ghost Armada - Special Report from United Against Nuclear Iran

UANI’s Ghost Armada work provides a useful example. The organization has spent years identifying vessels it believes participate in sanctions evasion involving Iranian petroleum, documenting practices such as flag hopping, shell-company creation, ownership changes, vessel renaming and manipulation of shipping identities.

More importantly, this is not OSINT for academic curiosity. Open-source analysis can create actual economic effects when the information reaches governments, banks, insurers, port operators, shipping registries and corporate compliance departments.

That demonstrates something strategically important: open-source intelligence can move from observation to economic effect.

The basic model is increasingly powerful. Identify the tanker, map the beneficial owner, identify the insurer, flag registry, port, front company and financial intermediary, and then provide those relationships to governments, financial institutions, insurers and commercial entities capable of acting against them.

That is commercial intelligence meeting economic warfare.

Follow the Component, Not Just the Missile

The same logic applies to Iran’s autonomous weapons supply chain. Iran may manufacture a drone domestically, but that does not mean every component inside that drone originated domestically.

That distinction matters enormously.

UANI has documented commercially available technology appearing in Iranian UAV programs, including engines and electronic components. This is precisely where OSINT, commercial intelligence and economic warfare begin converging.

The Drone Swarm Debate UANI Warned About in 2023 - Special Report from United Against Nuclear Iran

You do not necessarily need to destroy every drone factory if you can make it substantially harder and more expensive to obtain the motors, electronics, machine tools, sensors and other components required to keep that factory operating. Likewise, you do not need to seize every sanctioned tanker if banks, ports, insurers and registries understand the commercial and legal exposure created by servicing the network.

This is another lesson that Ukraine has reinforced from the opposite direction. Modern warfare does not begin and end at the front line. Semiconductors, navigation components, communications hardware, machine tools, motors, batteries and software all become part of the contest. Supply chains are now battlefields.

None of this replaces traditional intelligence collection, covert capabilities or military power. It dramatically widens the aperture available to policymakers and, perhaps more importantly, allows the private sector to become an active participant in national security.

The Private Sector Is Now Part of the Battlefield

This brings the argument full circle.

When people hear “defense innovation,” they often picture the next drone startup. That is part of the equation, but it is a relatively narrow way to think about the role of private industry in national security.

Private capital can finance autonomy, AI, shipbuilding, advanced manufacturing, critical minerals, energy resilience, cybersecurity, space infrastructure, semiconductors, supply-chain technologies, logistics and commercial intelligence. Nearly all of these increasingly sit somewhere inside the national security stack.

Ukraine should have removed any lingering doubt about that. Commercial technology firms, startups, satellite companies, software developers, drone manufacturers, communications providers and private investors have all become part of the larger ecosystem supporting national resilience and military effectiveness. A modern war may still be fought by soldiers, sailors and airmen, but increasingly they are fighting with technologies developed and financed far outside the traditional defense establishment.

During our podcast discussion, I argued that private capital and private industry will play a central role in Cold War 2.0, but not simply because venture capital can fund another weapon. The larger requirement is bringing the entire private-sector ecosystem into the competition: technology, manufacturing, materials, logistics, infrastructure and capital.

That represents a significant departure from the industrial model that dominated much of the twentieth century. National power is increasingly shaped not simply by what governments own, but by the health of the innovation ecosystems around them.

This is ultimately what we believed when we started IronGate. The venture community’s role is not to replace government or the military. It is to help ensure that America’s best technology, entrepreneurs and capital remain strategic advantages rather than disconnected commercial assets.

The countries that figure out how to connect those pieces most effectively will have an enormous advantage in the competition ahead.

We Also Have to Win the Cognitive War

Technology alone will not solve the problem, because some of the most consequential technology in this conflict is not being used to destroy physical targets. It is being used to shape what people see, believe, fear and ultimately demand from their governments. One of the themes I have repeatedly returned to in writing about Iran is cognitive warfare, and the collision of AI, social media and information operations is making that battlefield larger, faster and far cheaper to exploit.

Iran, Russia and China have spent decades studying Western societies, including our media, elections, political divisions, economic sensitivities and increasingly the algorithms shaping what millions of people see every day. During our podcast discussion, we talked about Iran’s information operations not as something ancillary to its military strategy, but as part of the strategy itself. Tehran understands that an image of a burning tanker, a spike in gasoline prices, a viral claim of American military failure or another narrative about an endless Middle East war can create political effects thousands of miles from the battlefield.

AI has supercharged that capability. The Iranian-linked LEGO-style videos that went viral during the conflict are a good example. Generative AI allowed creators to produce polished, English-language content specifically designed for TikTok, Instagram, X and other platforms, while state-linked media helped amplify it. Canadian government analysis found that engagement increased sharply after the campaign shifted toward English-language generative-AI LEGO content aimed at Western audiences.

What makes the LEGO example important is that audiences do not necessarily experience the content as propaganda. It arrives as a meme, a joke or an entertaining animation that people willingly share. The political message rides inside content engineered for social distribution. AI dramatically lowers the cost and time required to produce sophisticated propaganda, while social-media algorithms can distribute it globally at almost no marginal cost.

This is where information warfare becomes cognitive warfare. The goal is not simply to persuade someone that Iran won a particular engagement. It is to shape the emotional environment around the conflict: America is reckless, the war is unwinnable, Western military power is failing, another endless war is coming, or the economic cost simply is not worth it. Those narratives can also be tailored simultaneously to very different audiences, from antiwar progressives and isolationist conservatives to younger audiences consuming politics primarily through memes and short-form video.

This changes the economics of warfare as well. An inexpensive drone does not need to sink an aircraft carrier to generate a strategic return, and an AI-generated video does not need to persuade an entire country. If the drone forces naval forces to reposition, raises insurance rates and consumes expensive interceptors while an information campaign magnifies those effects online, the physical and cognitive attacks reinforce one another. The drone creates the image; AI packages the narrative; social media distributes it; cognitive warfare seeks to convert it into political and economic pressure.

Ukraine provides the mirror image of the same technological revolution. A smaller country has used commercial technology, social media, open-source intelligence and digital storytelling to mobilize international support and raise the political cost of Russian aggression. Iran demonstrates that many of those same tools can be turned against the West. The technology itself is agnostic; the advantage belongs to whoever combines physical action, information, AI and distribution most effectively.

That is why simply counting destroyed targets tells us little about whether we are actually winning. In modern irregular warfare, the physical and information battlefields increasingly operate as one system. We can win the missile exchange and still lose the narrative. We can destroy the drone and still allow the image of the drone to achieve its intended cognitive effect. Winning Cold War 2.0 therefore requires more than superior weapons. It requires recognizing AI, social media and information warfare as instruments of national power.

Escalation Without Strategy Is Just Expensive Violence

I have repeatedly used the phrase escalate to deescalate to describe the dynamics we have watched unfold around Iran. One useful challenge raised during our recent discussion was whether the phrase might be better understood as escalate to coerce.

I think that is fair.

The larger point remains the same: escalation is a tool, not a strategy. Military force makes sense when it changes an adversary’s calculus toward a clearly defined political objective. Problems begin when we measure success by the number of targets destroyed rather than whether those strikes moved us meaningfully closer to the outcome we actually wanted.

As one of my colleagues put it during the podcast, after every round of escalation we need to ask a very basic question: to what end?

That question becomes even more important as warfare gets cheaper. Lower-cost weapons may paradoxically make escalation easier because more actors will possess precision strike, autonomous systems, cyber tools and the ability to threaten critical infrastructure or commercial shipping.

The technological barrier to entering the battlefield is falling. The strategic discipline required to manage that battlefield therefore needs to increase.

From Peace Through Strength to Strength Through Innovation

Ronald Reagan famously framed deterrence around Peace Through Strength. That principle remains valid, but the definition of strength itself is changing.

In the twentieth century, strength was measured largely by divisions, aircraft, ships, nuclear weapons and industrial capacity. Those still matter enormously. But twenty-first-century military strength increasingly depends on how quickly a country can innovate, how cheaply it can manufacture capability, how resilient its supply chains are, how quickly software can be improved and how effectively private companies can work alongside government.

Ukraine has provided perhaps the clearest modern example of why this matters. Faced with a conventionally larger and better-resourced adversary, Ukraine has repeatedly been forced to innovate simply to survive. Its experience is a reminder that a modern-day David can use technology to challenge Goliath—but also that innovation born from desperation is not a strategy the United States should want to replicate. We have the capital, technology and industrial capacity to prepare before the crisis.

It also depends on whether the country can marshal its capital markets behind strategically important technologies. How quickly can money move toward critical minerals, autonomy, manufacturing, AI, cyber, space and maritime systems? How effectively can startups transition from demonstrations into scaled production? Can we generate affordable autonomous mass rather than relying solely on exquisite scarcity?

Those questions are increasingly measures of national power.

The United States still possesses extraordinary advantages: our universities, entrepreneurs, capital markets, technology companies, defense industrial base, research institutions, alliances and military capabilities. The rise of the American defense-technology venture community over the past decade has added another strategic asset to that list.

But possessing those assets is not the same as integrating them.

That integration is the real challenge of Cold War 2.0.

We will not win simply by spending more money than our adversaries. We will win by making our capital, technology, manufacturing base, military and private sector work together faster and more effectively than theirs.

The answer is not abandoning billion-dollar platforms. It is making sure a billion-dollar platform operates alongside hundreds or thousands of cheaper systems that extend its reach, protect it, provide intelligence, absorb risk and impose costs on the enemy.

It is not choosing between the Navy and autonomous maritime systems. It is building a Navy where autonomous maritime systems become a central component of the fleet.

It is not choosing between intelligence agencies and OSINT. It is recognizing that commercial intelligence can dramatically expand what governments can see and act upon.

And it is not choosing between government and private capital. It is recognizing that private capital itself has become part of the national security ecosystem.

Ukraine has shown how an underpowered David can use innovation, autonomy and commercial technology to resist a much larger Goliath. Iran is demonstrating that the same technological revolution can work in the opposite direction, allowing an asymmetric adversary to impose disproportionate costs on the United States and its allies. Taiwan could someday test these concepts at a scale none of us wants to experience.

IronGate’s thesis nearly a decade ago was that the geopolitical environment was moving in this direction and that private capital and emerging technology would become increasingly central to national security. I think that thesis has aged well. But being early only matters if we take advantage of the head start.

The future of warfare will not simply belong to the country with the most expensive weapons. It will increasingly belong to the country that can innovate faster, manufacture cheaper, distribute capability more widely, understand its adversary more clearly and sustain the fight economically longer.

That is the new economics of warfare.

For the United States, Peace Through Strength increasingly requires one additional ingredient:

Strength Through Innovation.