Darren Farber
speaker
722 appearances
2 recordings
1 series
first heard Apr 2025
last heard 26 May
Darren Farber’s voice in public audio — every appearance, attributed to the second.
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recordings per month · last 12 monthsRecordings per month over the last 12 months — 1 in all, peaking in May 2026 with 1.
Appearances
I'm like, yeah, but where are you getting the derivative chemical? India here. So it's like the concept falls down. the whole concept of Fortress America is that you're self-contained. And so the counterparty sitting across from me in these negotiations knew 100% of what my margin was, knew exactly the technology. These were brutal negotiations of them managing costs.
Because they're managed almost in a public markets way quarter to quarter, and their incentive structure right now is to make sure that they are passing along costs to that they bump into in the development of a program. They really can't take this multi-quarter bet without the government showing up.
And what you see these next generation guys doing is they're taking huge bets based on their taste. They're betting that their taste is greater than the requirements process of the Pentagon. And in some cases, that's true. And in some cases, it isn't. And I would say, the second there's an incentive for these primes to comport with, just give me your best.
Someone says, go ahead and give me your best bet whatever you think it is, screw the requirement. I think they can produce enormous technological stuff. Look, Lockheed is like a top five patent owner on earth, on the whole earth. There's enormous technology in these businesses. And we have 50 years of the world's best scientists working in these businesses.
And there's still a tradition of that engineering talent and capability. These guys can do a lot, man.
They've been compounding at 50% for 25 years.
These are broadly diversified conglomerates. And there are things inside of both of them that I want to own. And I think highly of those management teams. The margin tells the story a lot in these businesses in that Transline probably has, what, $3 billion of EBITDA, give or take, right now. And it's 50% EBITDA margins. Very sporty. And so when you look at it and say to yourself, good grief.
How do they do this? And if you talk downstream, not to all their customers, but let's say some, some of their big customers, they hate these guys. And so that's a very tough paradigm to grow from. And actually, I think it's evidenced by the kinds of businesses that they're buying today. Like they bought CalSpan, which it's not really an aftermarket product.
It's like a wind tunnel testing activity. Boeing and Airbus. Boeing was so big at one point, it moved 2% of GDP by itself. And so if you're the elephant walking around the jungle and there's a bunch of peanuts on your back and some birds are eating it, okay, it's fine. It's de minimis relative to my share. I think the challenge now is the law of large numbers, that they're getting big enough.
And think about their business. Who owns the type certificate of these aircrafts? It's the designers. It's the Boeings and the Airbuses. They own the design. And so if it becomes so expensive to move through the supply chain, then it's going to incentivize a verticalization in certain areas. And by the way, before Dennis Mullenberg was fired, that was his plan. He had two things. He had...
Boeing Business Services, which was to control some of the activity in the aftermarket. And then also what he called partnering for success, which was, you're not going to make this margin on me anymore, the supply chain. I'm not going to design you into the next generation. You're going to be off the list if the toilet seat goes to $800. you're not going to be in that fulcrum.
I think the business model works beautifully when the downstream customer is so immense, they almost don't notice the difference. I always joke, the optimal business for Transdime is owning the cup holder in the Joint Strike Fighter. It's like, that would be amazing for them. You're not going to requalify that thing. It's craziness. So I just think there's a limit to how big you can do that.
And look, the institutional shareholders are In the primes, like the Boeings of the world and the T-Rows that own Boeing and stuff like that or Capital or whoever, they're going to management at these primes and going, you guys do all the design and these guys make all the money, two and a half times the margin. Tell me how that works.
And so, look, at some point you kick the bear long enough or you pick the elephant's food off long enough and the paradigm will change. And so what's that number? Yeah. Is it $5 billion of EBITDA? I don't know, but you're seeing competitors already. And so that quantum of profit is also attracting competitors into the system. And that's meaningful.
And so when you make that much money for that long, and look, Laura went public, obviously, in a pretty spectacular way. That used to sit inside of JLL. It's a private equity firm. And so it went public at about $150. 30 some odd million of EBITDA. And it trades at 50 times because there's a general expectation that off of a smaller basis, it's easier to run the TransLine playbook over again.
And just, I think it's going to be harder at a certain size, but when you're Pluto and the market is Jupiter, it works. I just don't know how long it works for. And if Boeing continues to get smaller and that quantum of profit gets more and more meaningful, I think it's going to be harder.
I remember this conversation.
I wish it was more complicated. Then maybe it could justify my existence a little bit better. So what I want to see are structural impediments for you getting into my business. Why was I able to buy the nation's only maker of missile fuel? Think about it. We're like eight people in a house plant in an office park in suburban Washington, D.C. Why do I get to buy that capability?
Why does the prime buy it? Why don't they verticalize? On the cover, that business was very low growth. It didn't seem terribly interesting to someone. The margins weren't transline margins, let's just say. And so business has imputed growth of 100 basis points. It has huge contingent risk. The largest non-nuclear explosion in U.S. history was the former plant.
There's a Discovery Channel episode on this thing. The blast threw planes off the tarmac at McCarran. And the department's like, yeah, we're going to move this factory to the Utah desert. And so our view is we want to own the defense annuities. But when we analyzed the factory and the cost to replace it, we said, oh, it's $2 billion. That was our number.
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