It was code-named “PURPLE.”
In the early days of World War II, the Japanese developed a secret machine.
They wanted a secure way to transmit their most sensitive diplomatic messages.
Unlike the more famous German Enigma machine, it did not use rotors.
Instead, Japanese engineers used stepper switches – devices that switch an input signal to one of several possible output paths.
That made it nearly impossible to decode. So the U.S. Army brought in the one man they believed could break it: William Friedman.
Friedman wasn’t just any code breaker. He was the code breaker.
The son of Russian immigrants, Friedman got interested in code-breaking at a young age.
After graduating from college, he started working for wealthy landowner George Fabyan to find ways to improve crop growth.
At the same time, he developed a crush on fellow colleague Elizabeth Smith.
Smith was working with Fabyan on trying to prove that William Shakespeare was actually Sir Francis Bacon.
Fabyan believed there was a secret code in the works of Shakespeare – leading to his true identity.
Fortunately for America, Friedman’s crush changed the course of his career… and his life. So much so that Friedman and Smith married not long after they started working together.
Eventually, he became one of the top cryptologists in the U.S. war effort during World War I.
After the war, he started a new job as the chief of the Signal Intelligence Service. Today, we know it as the National Security Agency (NSA).
But by far, Friedman’s biggest achievement was breaking PURPLE.
I’m telling you this because today, we’re at the dawn of a new age of defense. And at the center of it is a just-announced $826 billion spending spree for the Pentagon.
If you understand where that money is flowing, you can position yourself to capture a slice of the profit potential to come. And that’s where Friedman’s genius comes in.
Ahead of the Game
Unlike the British – who had a copy of the Enigma machine – Friedman had nothing. He only knew the machine existed.
After months of trying to figure out the code, Friedman and his team had a breakthrough. They realized PURPLE used stepper switches instead of rotors. And they did it with nothing but their intellect.
In fact, Friedman’s effort was so complete, he was able to anticipate how the machine’s codes would change over time. It gave U.S. intelligence real-time analysis of top-secret Japanese communications, including troop movements.
It was a huge advantage. And it helped bring an end to the war in the Pacific.
Today, we have all sorts of devices and programs that can do the job William Friedman did with his brilliant mind. Those programs continue to evolve more and more every day.
Programs that can save companies millions of dollars. Programs that can help hospitals function better. And programs that can mean the difference between winning – or losing – a war.
Many of these users are tapping into advanced technology like machine learning (ML) to make that happen.
Now, the U.S. is zeroing in on that technology to stay ahead of the game.
It’s why the government and the military are going all-in on artificial intelligence (AI).
Open for Business
When it comes to the government, there’s one thing we can always count on: spending. That’s especially true when it comes to defense spending.
Even with some pullbacks every so often, defense spending is always on the rise. That’s what the chart below shows…
Within a few years, it will probably eclipse the $1 trillion mark.
Some of that has to do with the massive upkeep for existing operations. And some of it has to do with new spending to keep up with the times.
Today, keeping up means a greater focus on AI.
In fact, Marine Lt. Gen. Michael Groen – head of the Joint Artificial Intelligence Center (JAIC) – said:
If we want AI to be our future, then AI has to be our present.
That was around the time, two years ago, when the National Security Commission on AI released its final report to lawmakers.
The report recommended federal research spending on AI to double each year, eventually reaching $32 billion by fiscal 2026.
According to Vantage Market Research, the “AI in Military” market was just $6.6 billion in 2021. Vantage expects that market to grow at 12.9% through 2028 to $12.7 billion.
We think that figure is on the low side. That’s because Congress is looking to expand AI research in order to make sure the U.S. remains ahead of China. And in June, Senate Majority Leader Chuck Schumer vowed to make AI a priority.
That was on the heels of a bipartisan group of senators introducing the Global Technology Leadership Act.
The goal of the act is to “better synchronize our national security community to ensure America wins the technological race against the Chinese Communist Party,” according to Senator Todd Young (R-IN).
This $826 Billion Trail Leads From Congress to AI
In our experience, when the Department of Defense (DoD) and Congress latch onto a trend, speculating on that trend is usually a great bet.
It’s why Inside Wall Street editor Nomi Prins spends so much time on Capitol Hill – to stay ahead of Washington’s money trail.
And today, that trail leads to AI.
That’s why Nomi put out an urgent briefing last week, The AI Ultimatum. She shared details on her favorite AI company today.
This tiny AI company is trading for only $0.26. And a major announcement could send it soaring at any point.
See, the U.S. government missed the AI frenzy. And now, it’s scrambling to catch up… to the tune of a just-announced $826 billion spending spree.
Click here to watch Nomi’s briefing while it’s still online and learn more about this tiny company.
Regards,
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John Pangere
Analyst, Rogue Economics