J.P. Morgan Making Sense · November 1, 2026 · 10 min

Closing the defense production gap

With General Chris Cavoli

Summary

General Chris Cavoli, a Valor partner, argues that the West's defense production gap is now the binding constraint on NATO's spending plans. Allies have the budget increases agreed under the Vilnius framework but lack the industrial capacity to convert that money into equipment, and political work is needed to justify the higher spending to domestic audiences. He points to affordable, attritable munitions as the missing piece, citing the unsustainable cost gap in which a roughly $40,000 drone is countered by a roughly $4 million missile, and holds up Ukraine's rapid, large-scale build-out of inexpensive weapons as a model. He also contends that defense technology firms reverse the traditional procurement sequence by identifying warfighting problems first and offering solutions to the military, and that electromagnetic warfare will become central to combat over the next decade or so. Separately, he describes Valor's scale group of operators and manufacturing specialists that works inside portfolio companies once conviction is high.

Key takeaways

General Chris Cavoli on Defense: Western defense production capacity, not budget, is the binding constraint on both sides of the Atlantic.
General Chris Cavoli on Defense: Western arsenals lack cheap, attritable munitions; expensive interceptors against cheap drones is unsustainable.
General Chris Cavoli on Defense: Electromagnetic warfare will become a very important part of warfare over the next ten to fifteen years.
General Chris Cavoli on Defense: Defense tech firms start from military problems and offer novel solutions, reversing the requirements-first procurement model.

What was said, by company and theme

4 views from 1 speaker. Every quote is checked against the episode's transcript (how).

Defense

General Chris Cavoli · Valor Equity Partners
Western defense production capacity, not budget, is the binding constraint on both sides of the Atlantic.
NATO's collective defense plans, approved at the Vilnius summit in 2023, have made clear what must be built. Two challenges remain. The first is the political work of explaining to populations why spending will rise and on what. The second is that defense production capacity is short on both sides of the Atlantic. Allies have the money to spend but not enough equipment to spend it on, so industrial output limits what the budget increases can buy.
“there's a problem with the defense production capacity on both sides of the Atlantic. We're all working hard on it, but we've got money to spend, and we need more stuff to spend it on.”at 1:53
General Chris Cavoli · Valor Equity Partners
Western arsenals lack cheap, attritable munitions; expensive interceptors against cheap drones is unsustainable.
The missing piece in Western arsenals is affordable, capable, attritable mass: weapons good enough for the job, easy to manufacture, and cheap enough to build a deep magazine. The cost exchange ratio currently works against the West. A $40,000 drone shot down by a $4,000,000 missile is a trade nobody can sustain for long. Ukraine is showing the rapid build-out of adequate, inexpensive munitions at massive scale, and that is the model the West needs.
“There's sort of a missing part to Western arsenals, and that part is affordable, capable, attritable mass. ... If a $40,000 drone has to be shot down with a $4,000,000 missile, the cost exchange ratio is working against us, and nobody can afford to do that for a a long time.”at 2:35
General Chris Cavoli · Valor Equity Partners
Electromagnetic warfare will become a very important part of warfare over the next ten to fifteen years.
Modern battlefields are transparent: adversaries can see almost everything, and so can the US. That makes maneuver harder. The things that matter most are often things you cannot see, which makes electromagnetic warfare central. He expects it to be a very important part of how war is waged over the next ten to fifteen years.
“electromagnetic warfare is gonna be a very, very important part of how war is waged in the next ten to fifteen years.”at 3:55
General Chris Cavoli · Valor Equity Partners
Defense tech firms start from military problems and offer novel solutions, reversing the requirements-first procurement model.
Traditionally the military wrote requirements and industry answered with how it would meet them. The defense tech world works the other way. It looks for warfighting problems, develops disruptive solutions, and then offers them to the military. For investors, the thing to watch is which firms are identifying the principal future warfighting problems and who is building novel answers to them, rather than waiting for requirements to be issued.
“the defense tech world right now has sort of reversed the traditional way we did business. ... they're looking and they're trying to see a problem. And when they see a problem out there that the military has, they come up with novel solutions to it and then offer them.”at 4:17

Topics

defense procurement model
defense production capacity
electromagnetic warfare
low-cost munitions
operational support for portfolio companies

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