Join Patrick Bet-David as he engages with Erik Prince, the founder of Blackwater and former Navy SEAL, on the PBD Podcast. In a profound exploration of the origins and rise of Blackwater, Prince shares how family influence and an untimely personal loss steered him from a career with the SEALs to forming what would become a formidable name in private security. With deep insights into the company's accumulation of government contracts and its remarkable growth, Patrick and Erik delve into the business strategies that propelled Blackwater to a $2 billion industry presence.
Erik Prince divulges the operational strategies and geopolitical expertise behind Blackwater's success. Amidst discussing the company's lean approaches to private military contracting and their cost-effective advantages, Prince also touches on his perspectives on the global stage, including China's technological prowess and the complexities of foreign policy. Additionally, the episode taps into Prince's entrepreneurial innovation in privacy technology, showcasing his latest venture—the Unplugged phone—a device conceived as a bulwark against the mounting concerns of data privacy in the digital age.
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Patrick Bet-David discusses Blackwater’s founding by Erik Prince, a former Navy SEAL, on December 26, 1996. Prince’s family, including a successful automotive parts business built by his father Edgar and his sister Betsy DeVos, later US Secretary of Education, provided a background of robust business principles and work ethic. Despite initial intentions to serve with the SEALs for an extended period, Prince's father’s death changed those plans, leading to Erik's establishment of Blackwater. The company accumulated significant government contracts, amounting to approximately $2 billion, leveraging the wealth and resources of the Prince family to grow into a prominent private security firm.
Blackwater started as a training facility to circumvent inefficiencies in SEAL team preparation. Erik Prince envisioned a top-tier training space, purchasing large acreage and attracting clients like the SEAL teams and Canadian Special Forces. Post-9/11, Blackwater shifted to security contracting, obtaining a major contract from the CIA in Afghanistan. Prince's business model changed considerably as Blackwater adapted to the security needs of the post-9/11 world, experiencing growing revenues that peaked at around $850 million, with an initially even split between training and security contracting duties.
Blackwater’s operational model, inspired by lean manufacturing principles, allowed for cost-effective, efficient processing of personnel for overseas operations. Prince outlines how, through the incorporation of these principles, Blackwater submitted low bids on contracts and took on tasks typically handled by much larger military units. The acquisition of Presidential Airways and contracts with JSOC underscored their diverse operational capacity and a smaller footprint compared to traditional military forces. Despite the company’s efficiency and effectiveness, legal and regulatory pressures, including immense legal fees and state-imposed fines, made Prince exit the business, an experience he discusses in his book "Civilian Warriors."
Erik Prince views China as a strategic threat to the US, citing provocative actions and cyber-attacks as indicators of China’s assertiveness. Prince praises President Trump for confronting China’s tactics. He discusses potential demographic and drug trafficking issues tied to China, advocating for vigilance regarding Communist Party members in the U.S. Regarding the Middle East, Prince criticizes the inaction of the Obama administration during protests in Iran and sees economic struggles as potential sources of instability. He also proposes leveraging Russia away from China’s influence as a strategic move for US foreign policy.
Prince speaks on the challenge of Chinese-dominated telecom infrastructure, endorsing Trump's ban on Huawei and expressing concern over cyber-attack risks. He introduces the Unplugged phone as a solution to privacy concerns related to big tech. The phone features industry-leading hardware with a privacy-centric operating system, VPN, antivirus, and blocks traditional data collection methods. The phone's developer, a highly skilled individual in secure communication, further emphasizes the device’s credibility in privacy protection. Prince’s company intends to remain private, offering a secure alternative to conventional smartphone platforms amidst growing data privacy issues.
1-Page Summary
Lean manufacturing principles focus on minimizing waste and maximizing efficiency in production processes. Blackwater applied these principles to streamline its operations and optimize resource utilization. By adopting lean practices, Blackwater aimed to deliver services more effectively and competitively in the private security industry. This approach helped Blackwater differentiate itself and secure contracts by offering cost-effective solutions.
Patrick Bet-David delves into the origins and expansion of Blackwater, founded by Erik Prince, and the influence of Prince's family background on the company's emergence.
Erik Prince, who earlier served as a Navy SEAL, launched Blackwater on December 26, 1996, and maintained ownership until its sale in 2010. Prince is a member of the Prince family, with his father, Edgar Prince, having established a successful manufacturing business in automotive parts. Erik is also the younger brother of Betsy DeVos, who would go on to serve as the US Secretary of Education.
Within the family, there was a policy that prohibited immediate employment within the family business after education. The family's guiding principle required members to first gain independent experience elsewhere. Erik planned on serving with the SEAL teams for 10 to 12 years, but the unexpected death of his father altered the family's plans for suc ...
Blackwater founding and growth
Erik Prince traces the evolution of Blackwater, offering insights into how the company grew from a training facility and eventually took on a new role as a security contractor following significant global events.
Erik Prince recounts the origins of Blackwater, which began as a training facility designed to address inefficiencies and bureaucratic obstacles encountered by SEAL teams on government bases. Prince sought to provide a streamlined, customer service-like experience with a “country club-like” level of equipment and services ready on time. With a vision of creating an elite training space for tactical learning, Blackwater started by buying 3,100 acres of land. The first customers included a West Coast SEAL team and the Canadian Special Forces.
Blackwater was originally planned to innovate tactics, techniques, and procedures. An expert from L.A. SWAT was even brought in to teach hostage rescue, setting the site up as a crossroads of tactical learning. After the USS Cole was bombed, Blackwater further expanded their services and started training sailors in various protective measures, which reveals the scope of their training operations was considerable.
Prince describes the funding difficulties, underscoring that financial advisors were skeptical of the venture. Despite this, he managed to kickstart the business which saw revenues grow year over year, starting with a $400,000 order from the FBI for target systems and eventually hitting a peak of approximately $850 million. In the early days, Blackwater's business was split, with about 40-50% of work dedicated to training.
After the events of 9/11, Blackwater found itself at an inflection point where it went from solely focusi ...
Private Military Contracting
Erik Prince highlights the operational efficiency, flexibility, and experience of private contracting through the lens of his former company Blackwater, which has completed a significant number of personal security missions with minimal incidents.
Blackwater's operations exhibit a model of lean transformation inspired by the Toyota production system. Prince applied these lean principles to the company, making it the low-cost competitor in security contracting with the ability to efficiently process and recruit personnel for overseas deployment.
Prince shares that Blackwater was able to submit unusually low bids for government contracts due to their cost-effective operations, evident when their bid for a State Department job was initially questioned for being too low. Further demonstrating their efficiency, Blackwater replaced a military unit with far fewer private contractors while undertaking missions typically requiring substantial military personnel with a fraction of that number. Prince points out the advantage of employing seasoned professionals capable of handling various tasks over the traditional military practice of deploying younger, less experienced soldiers.
An example of Blackwater's capabilities expansion includes the purchase and growth of Presidential Airways in 2003, as well as contracts with the Joint Special Operations Command (JSOC), showcasing their diverse operational engagements and ability to maintain a smaller footprint compared to the conventional military. Prince boldly claims that for counterinsurgency efforts, Blackwater offered a more suitable model than the U.S. military.
Despite Blackwater’s operational success, Prince faced a period of intense legal and regulatory pressure, with the company incurring millions in legal fees. Faced with what he perceived as excessive scrutiny, including the highest per capita fine in State Department history im ...
Operations and advantages of private contracting
Erik Prince provides insight into the complexities of geopolitics and emphasizes the multifaceted threats posed by China to U.S. interests, touching upon ramifications for regions like the Middle East.
Prince suggests that the Chinese government’s consistent infringement on international norms poses a series of challenges to U.S. strategic interests. While no information is provided about China as an immediate threat, Prince discusses several instances illustrating China's growing assertiveness.
He suspects that a recent cyber-attack on AT&T was a Chinese cyber-attack, possibly a test for more aggressive future actions against Taiwan. Prince anticipates China might take provocative actions in Taiwan shortly, with potential incidents in the Taiwan Strait, the seizure of islands near the mainland, or constructing accidents to gauge Western responses. This strategy, referred to by Prince as "salami slicing," allows China to incrementally push boundaries and advance its interests.
Prince asserts that during his tenure, President Trump confronted China's strategic moves, likening China's tactics to a neighbor slowly encroaching onto your property. The administration's trade policies and technology controls reportedly spooked China.
Regarding the demographic challenges within China, Prince notes the significant influx of Chinese males into America, a byproduct of the one-child policy and resulting gender imbalance. He views this as a potential security concern and suggests the FBI should exercise more vigilance regarding Communist Party members in the U.S.
Prince also accuses China of sponsoring the fentanyl epidemic in the United States, with precursor drugs claimed to originate from the Wuhan area, allegedly shipped to Latin American countries, synthesized into fentanyl, and then distributed in the U.S.
He references Xi Jinping's statements to the Communist Party about preparing for a significant conflict and remaking the world in the image of the Chinese Communist Party. Prince sees an opportunity in encouraging strategic alignment with Russia to counterbalance China's influence and advocates for a more decentralized and less Beijing-centric China.
Geopolitics and foreign policy
Prince sheds light on the complex relationship between technology and surveillance, including the threats posed by certain telecom infrastructures and innovations aimed at preserving privacy.
Prince addresses the concerns over the threat of Chinese telecom infrastructure within the United States and supports the Trump administration's ban on Huawei. He warns of the risk of cyber attacks and disruptive operations that could, for example, impact phone services during critical moments such as elections.
In a response to perceived overreach by big tech companies, especially after the 2020 elections where apps were canceled and voices silenced, Prince introduces the Unplugged phone. This device, according to Prince, is built with hardware comparable to the latest iPhones, featuring a high-end camera, but with a distinctive privacy-focused operating system owned by Prince's group. The operating system includes a VPN and antivirus, and it notably excludes an advertising ID, which Prince equates to a "mark of the beast" for its role in enabling user tracking and data gathering.
Prince emphasizes the Unplugged phone's ability to obstruct typical data collection and include a firewall which can physically disconnect the Wi-Fi, camera, and microphone to ensure privacy. The phone is designed to be compatible with major service providers and has unique security credentials.
Moreover, the ind ...
Technology and surveillance
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