The 4th Revolution in Warfare is Here

Dear Reader,

This is Dylan Jovine with Behind the Markets.

Happy Tuesday. Today is Tuesday, March 17th.

I know we talk about warfare a lot on this channel. But I want to put what's happening right now in Iran into a context that I think will really click for you.

Over the past hundred years, there have been three major revolutions in warfare. The first was the tank, invented in 1915. The second was the atomic bomb in 1945. The third was the smart bomb in 1991.

We are now living through the fourth.

This one is networked warfare, powered by AI. And it's playing out right before our eyes in Iran.

Here's a little history that most people get wrong. When Germany overran France in weeks during World War II, most people assume it was because Germany had better tanks or more of them. 

That's actually not true. 

France had tanks that were considered the equal of their German counterparts. What Germany did differently was network all their tanks together with two-way radio communication. When one tank spotted something, every other tank knew instantly. They moved like a swarm. That was the blitzkrieg. Not better hardware — better networking.

Now software is making that same concept possible on an entirely different scale. And we're watching it unfold in real time.

On 60 Minutes, Lesley Stahl interviewed the CEO of AeroVironment — a company we've had in our model portfolio for years, recommended around $100 to $120 a share. It's been as high as $300 and is currently around $200. It's one of those businesses I don't overthink. I look at it every year, the business is doing well, the CEO has his finger on the pulse, and I hold it.

The interview got into something that cuts right to the heart of the fourth revolution in warfare.

Iran's Shahed drones cost between $20,000 and $40,000 each. Every time we shoot one down with a missile, it costs us roughly $4 million. That math makes us go broke in a hurry. It's not a sustainable strategy.

So what's the answer? AeroVironment demonstrated their Locust Laser system on 60 Minutes — what the military calls directed energy weapons. A laser weapon that can shoot down drones for about a dollar or two per shot. Not a typo. A dollar or two.

Think about what that does to Iran's strategy. Their entire calculation has been: keep sending cheap drones, bleed America dry. Force us to spend $4 million every time we knock down a $30,000 drone. With directed energy weapons on the battlefield, that cost advantage evaporates. Completely.

The great thing about lasers, beyond the cost, is that you don't run out of ammo. That changes the entire calculus of this kind of warfare.

If you own AeroVironment, the 60 Minutes segment is worth watching. It's a moment of pride — this is exactly the kind of company and technology we've been talking about for years. If you don't own it yet, the stock has pulled back from $300 to around $200. I think that's an attractive entry point.

We're watching the fourth revolution in warfare happen right now. A lot of the companies we cover are right in the middle of it.

Anyway, that's all I have for today. Have a wonderful day. I'll see you tomorrow.

“The Buck Stops Here,”