Skunk Works: How the U.S. Achieved the Technological Innovation that Helped Win the Cold War

In the last year, the annual number of international patents filed from China has surpassed those filed from the U.S. Not only that, but Chinese institutions filed 29,853 patents related to AI in 2022 — almost 80% more than the U.S. 

The numbers lie behind an awkward correlation. At the same time as the U.S. has begun to identify China as the “only competitor with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military, and technological power to advance that objective [emphasis added],” it has become common for both the left and right to lament the lack of technological innovation in the U.S. 

In response, policy makers like National Security Advisor Jake Sullivan have begun to champion industrial policy — government “picking winners,” supporting certain key sectors with finances and limited direction. But while this might be necessary, it’s not a sufficient condition for innovation.

In search of a more complete model for a course correction, one place to look is the past — and one particular location in history stands out.

During the Cold War, weapons manufacturer Lockheed (later Lockheed Martin) produced a number of the innovations that helped give the U.S. a technological advantage over the Soviet Union, and they came through a secretive department known as Skunk Works.

Whether you agree with its aims or not — they included giving regular consideration to nuking the Soviet Union back to the Stone Age — Skunk Works designed the U-2 spy plane and stealth technology, and is thus a practical example of how strategically important innovation actually occurs. What’s more, detailed accounts of how it was done are still available.

The book “Skunk Works: A Personal Memoir of My Years at Lockheed,” co-written by the second director of Skunk Works, Ben Rich, details both Rich’s version of what it was like to work for the department through the 1960s, 1970s and 1980s, and those of various other colleagues, including engineers and test pilots.

Within those accounts, a number of broad takeaways come through: 

• The department operated in the context of frequent, government-led competitions to supply key technology, between a diverse array of defense contractors. (The U.S. defense industry subsequently experienced major consolidation through the 1990s, with the number of aerospace and defense prime contractors, for example, falling from 51 to five.)
• The department was kept small and separate from the rest of the company. Its work was so secretive that Rich notes that initially the U.S. Air Force had not asked it to take part in a competition involving stealth technology because its previous success in the area had been for the CIA and they were not aware of it. (Again this can be contrasted with an era of consolidation or monopolization in many industries, where Silicon Valley companies simply buy up smaller companies to acquire their intellectual property.
• It was allowed to take risks, fail repeatedly and ignore outside wisdom in favor of taking large leaps. The upside of this was that when the U.S. government was focused on the seemingly more attainable goal of building defense penetrating missiles rather than planes that could dodge radar, Skunk Works pursued stealth technology regardless and was emphatically proven correct. The downside was that an early attempt to use hydrogen fuel in planes “wasted” millions of dollars before being abandoned.
• The department frequently bent health and safety regulations. (The book contains many accounts of accidents in workshops, and frequently fatal test flights.)
• It worked within clear financial limits. Re-using parts from older models on its new designs to keep costs down outside of the main areas it was trying to innovate on was codified in a set of principles written out by its first director, Kelly Johnson. 
• It used extreme integration between different teams within the department, with contributors working in close physical proximity. (An obvious contrast to the post-COVID expansion of remote working and the longer term proliferation of subcontracting.)
• It frequently used young designers and older, experienced engineers, all with deep expertise and love of the work. (This is reflective of a wider trend at the time: The average age of the engineers inside NASA’s Mission Control during the first moon landing was 28. By way of rough comparison, in 2021 the average age of NASA’s civil service employees was 48 years old, with 23% of its federal workforce eligible for retirement.) 
• Finally, those involved in these projects read and procured from a wide variety of sources, including “the enemy.” The key calculation behind radar-dodging stealth technology came from a Russian scientist, and the titanium used to build early SR-71 “Blackbird” spy planes came from the Soviet Union (via shell companies set up by the CIA.)

These arrangements created technology which helped bend the Cold War in the U.S.’s favor.

The U-2 spy plane, able to fly over 21,000 meters up in the air, took detailed photographs inside the Soviet Union which convinced U.S. President Dwight Eisenhower that U.S. intelligence about Soviet bomber aircraft technology and production rates being better than those of the U.S. was not accurate. It also supplied photographs of Soviet missiles being supplied to Cuba.

Vast advances in stealth technology had similarly large impacts. F-117 fighters were virtually impossible for radars to pick up, and while not used until 1991, in Operation Desert Storm in Iraq, they were seen by the U.S. as key elements in providing “deterrence stability,” in which a perceived military advantage disincentivized a Soviet attack.

Obviously looking at Skunk Works’ Cold War success isn’t an instruction manual for running an economy. Those working on these projects were working 12-hour days, six days a week. And when they expanded production on the F-117, the lack of bureaucratic oversight created serious and costly accidents, according to Rich’s account. But what Rich really makes a case for is the strategic benefits of a controlled, cordoned-off space for experimentation or blue sky thinking that can go against the grain and be allowed to take risks and get things wrong.

The Current Situation

Some of this approach still exists. Skunk Works itself recently collaborated with NASA on a “quiet supersonic aircraft.” But more often than not lip service is paid to it. As the anthropologist David Graeber outlined in “Of Flying Cars and the Declining Rate of Profit,” there has been an explosion in micro management and short-term target setting, aimed at short-term efficiency through the elimination of risk. (The documentary maker Adam Curtis has pointed out that if you use word frequency software, the actual use of the word “risk” explodes from the 1970s onwards.) And this mentality stretches across public and private endeavors.

Now, Silicon Valley CEOs market themselves as risk-takers, but what they’re really doing is focusing on refining consumer applications and setting up platforms that take existing services and allow them to be accessed at larger, maximum-profit scale. On the other hand, Skunk Works profits were formally limited by government regulations, and they regularly gave back large chunks of money to the U.S. government.

A final element crucially lacking now is time. Skunk Works occasionally does turn up as a buzzword for short-lived innovation projects within governments, but the real thing operated on the terms set out above over decades, not weeks and months. Within that there were tight deadlines for individual projects, but space created for innovation wasn’t a fashionable one-off policy.

Other Lessons

Beyond this, there are also other lessons from reading Rich’s historical account of the Cold War up close. Notably, the value of humility when making foreign policy decisions.

The U-2’s value was emphasized in part by highlighting that U.S. estimates of Russia having 100 “Bison” bomber planes based on a 1954 May Day parade were completely wrong. The Russians “appeared to have flown the same twenty or so bombers over the Kremlin in a big circle,” Rich cheerfully summarized.

Later on, the failed attempt to use hydrogen fuel in planes was partly informed by the belief that the Soviets were doing it, so it came as a major surprise that what they were actually doing was preparing to launch the Sputnik satellite. In other words, confident people can be confidently wrong.

For anyone doubting the relevance of this historical knowledge now, particularly in relation to China, it should be kept in mind that Skunk Works has already been directly relevant in the Taiwan Strait. When Chiang Kai-shek (蔣介石) bought U-2 planes from the U.S., he signed the contract himself, and on the American side Kelly Johnson, the first director of Skunk Works, signed it. Rich noted that the CIA was directly in charge of the operation as Taiwanese pilots, trained in the U.S., flew over China and collected information on its nuclear and missile development.