From: acquiredfm
Lockheed Martin, the nation’s largest defense contractor, is central to American defense, making “killing machines” primarily used as deterrents for peace [01:36:39] [01:48:47]. The company’s history is marked by daring innovators and hardcore engineering [01:19:19]. A critical piece of Lockheed’s golden era was the famous Skunk Works division [02:59:01].
Origins of Skunk Works
The company that eventually became Lockheed Martin was originally two separate entities: Lockheed and Martin Marietta, which merged in 1995 [04:31:33] [04:37:37]. The first Lockheed company was founded in 1912 by Allan Loughead, who later changed his name to Lockheed to avoid mispronunciations [04:48:00] [05:11:00]. This early venture, based in San Francisco, focused on tourist flights with their Model G plane [05:27:00]. Allan’s brother, Malcolm, later invented the modern hydraulic brake system for automobiles [05:49:00]. John Northrup, a co-founder of the second Lockheed company, went on to establish Northrop, now Northrop Grumman, playing a major role in three of today’s five defense prime contractors [06:02:00] [06:27:00].
The second Lockheed company gained success with the Vega airplane, a favorite of early aviators like Amelia Earhart [06:42:00]. This company was eventually sold to the Detroit Aircraft Corporation (DAC), which included Charles Kettering of Delco and GM [06:55:00]. DAC aimed to create the “General Motors of the air” but failed when aviation didn’t become a consumer industry like automobiles [07:16:00]. After DAC went bankrupt during the Great Depression, the Lockheed division was sold for $40,000 to Robert Gross in 1932 [07:44:00] [08:00:00]. Gross and his brother Cortland transformed Lockheed into a major company, building the iconic Electra airplane, notably featured in the movie Casablanca [08:41:00] [09:02:00].
The crucial turning point came with World War II and the arrival of Clarence “Kelly” Johnson, who founded the famous Lockheed Skunk Works division [09:34:00] [09:40:00]. Before Johnson, the term “Skunk Works” as a fast-paced, secretive development unit didn’t exist [09:51:00]. Johnson, an engineering prodigy who could intuit complex physics problems [12:00:00], joined Lockheed in 1933 at age 23 [12:51:00]. He was the principal engineer behind the Electra [13:04:00] and believed engineers needed to regularly put themselves in dangerous flight situations for proper design perspective [13:30:00].
World War II Innovations and the Birth of Skunk Works
During World War II, Kelly and Lockheed adapted the Electra into the Hudson bombing vehicle, selling 3,000 to the British Royal Air Force before the U.S. entered the war [13:42:00] [14:03:00]. Johnson also designed the P-38 Lightning fighter, the U.S.’s elite, fastest, and most maneuverable aircraft, with over 10,000 produced [14:15:00] [14:23:00].
Towards the end of World War II, a major problem emerged: Germany’s jet-powered fighter planes, like the Messerschmitt Me 262 “Swallow,” which flew over 100 mph faster than any Allied plane [15:50:00] [16:01:00]. The U.S. government tasked Kelly Johnson and Lockheed to develop a jet fighter prototype within 180 days, capable of exceeding 600 mph [18:00:00].
Kelly hand-picked 23 engineers and 30 shop people, housing them in a circus tent in a Burbank parking lot next to a plastics factory [18:52:00]. The strong smell from the factory, combined with a popular comic strip character’s moonshine still called “Skonk Works” (later changed due to a lawsuit), led to the division being named Skunk Works [19:18:00] [19:42:00].
In just 143 days, this elite team built the first prototype U.S. fighter jet, the Lulu Bell, which became the P-80 Shooting Star. This was a “wild” achievement, as the U.S. had struggled to operationalize jet technology [20:01:00] [20:22:00]. To meet the deadline, Skunk Works outsourced non-core competencies, acquiring the Halford H1B Goblin engine from a British company [20:41:00] [21:13:00]. The P-80 became the U.S. military’s first jet fighter plane and was used in the Korean War [21:23:00].
Kelly Johnson’s 14 Rules of Skunk Works
After the war, Kelly Johnson and Lockheed’s management agreed to continue the Skunk Works division [23:06:00]. Its core philosophy revolved around rapid delivery of superior products, driven by existential threats like World War II and the Cold War [28:42:00]. Kelly codified his management principles into 14 rules, some of which include:
- Rule 3: Restricted Personnel [29:43:00]
- “The number of people having any connection with the project must be restricted in an almost vicious manner. Use a small number of good people (10 to 25) compared to the so-called normal systems.” [29:46:00]
- These people should be co-located to facilitate collaboration and quick changes [30:02:00] [24:48:00].
- Rule for Managers: Complete Control [29:56:00]
- “The Skunk Works manager must be delegated practically complete control of his program in all aspects.” [29:58:00]
- This ensures a single vision and accountability, avoiding the “squeezed middle manager” problem [30:08:00].
- Rule for Compensation: Reward Individual Contribution [30:46:00]
- “Only a few people will be used in engineering and most other areas. Ways must be provided to reward good performance by pay not based on number of personnel supervised.” [30:50:00]
- Kelly believed in rewarding those who “supervise the least,” fostering individual responsibility over empire-building [31:02:00].
These principles fostered highly motivated teams, driven by national security missions during the Cold War [31:41:00] [32:08:00].
Cold War Era: The U2 Spy Plane
The Cold War, marked by fear of thermonuclear war (over half of Americans in 1955 feared dying in one [36:00:00]), made intelligence paramount [36:24:00]. The U.S. needed to know Soviet capabilities to maintain mutually assured destruction and deterrence [35:18:00]. In 1955, the CIA contracted Skunk Works to develop a spy plane that could fly stealthily or high/fast enough to avoid detection and being shot down [37:07:00] [38:32:00].
The goal for the U2 was to fly at 70,000 feet, far above the typical 40,000 feet for planes and beyond the estimated 55,000-foot radar range of the Soviets [39:32:00] [40:00:00]. This required new jet fuel (developed with Shell Oil) and a “spacesuit” for pilots [40:07:00]. Skunk Works delivered the U2 prototype by July 1955 for just $3.5 million [41:47:00]. The U2 also required an entirely new camera, developed by Dr. Edwin Land and Polaroid, capable of taking high-resolution photos from 70,000 feet [42:21:00].
Testing of the U2, which had a 100-foot wingspan, required a secret location [43:55:00]. They found a dry lake bed in Nevada, Groom Lake, near former nuclear test sites [45:09:00]. This became Area 51, and rumors of UFOs, fueled by sightings of the unusual plane and pilots in spacesuits (unheard of before moon missions), served as an effective cover [46:48:00] [47:18:00].
The first U2 overflight of the Soviet Union occurred on July 4, 1956 [48:52:00]. The Soviets tracked it on radar but couldn’t shoot it down, confirming U.S. intelligence on Soviet radar capabilities and demonstrating the U2’s effectiveness as a reconnaissance tool [49:11:00] [49:51:00]. The Soviets remained silent to avoid revealing their inability to stop it, making the U2 a crucial chess piece in the Cold War [50:38:00] [51:19:00].
However, on May 1, 1960, a U2 piloted by Francis Gary Powers was shot down over the Soviet Union by a newly developed missile [53:03:00] [53:20:00]. This was the first time a ground-to-air missile downed an airplane [53:29:00]. Powers survived and was captured, leading to the public revelation of the U2 program and ending overflights of Russia [54:40:00] [55:59:00]. This created a huge intelligence gap for the U.S [56:06:00].
Beyond Skunk Works: Lockheed’s Role in Silicon Valley and Space
Filling the intelligence gap fell to a different, equally secretive Lockheed division, the Lockheed Missile Systems Division (LMSC), which later became the Lockheed Missiles and Space Company [56:37:00] [58:50:00]. This division’s story is deeply interwoven with the origins of Silicon Valley.
During World War II, U.S. radar research was concentrated at MIT and Harvard [01:01:40]. Harvard’s lab was headed by Frederick Terman, a Stanford Professor [01:02:47]. After the war, Terman returned to Stanford and became Provost, profoundly shaping Silicon Valley by:
- Recruiting top radar experts from across the country to Stanford with immediate tenure [01:03:55].
- Changing Stanford’s tech transfer policy to be notoriously friendly to spinning out research into companies, contrasting with East Coast universities [01:04:22]. He encouraged professors and students to start companies to serve the nation’s defense needs [01:05:52].
- Developing a large part of the Stanford campus into commercial space for lease, initially called the Stanford Industrial Park (now Stanford Research Park), on Page Mill Road [01:07:00]. This became home to companies like HP, VMware, and Xerox PARC [01:07:40].
Lockheed decided to start the new Missile Systems Division in 1954 [01:09:32]. Building missiles required expertise in radar and computing, areas where Fred Terman and his recruits at Stanford excelled [01:10:49]. In 1955, Lockheed moved the division to Stanford Industrial Park, becoming one of its first and largest tenants [01:11:19]. They also bought 275 acres in Sunnyvale to build a massive campus [01:12:02]. By 1959, LMSC employed nearly 20,000 people, making it by far the largest employer in proto-Silicon Valley, significantly larger than Hewlett-Packard [01:12:31]. Lockheed’s presence was so dominant it effectively “built Sunnyvale” [01:12:20]. Notably, Jerry Wozniak, Steve Wozniak’s father, moved his family to Silicon Valley to become an engineer at Lockheed missiles and space company, directly influencing the origins of Apple [01:15:53].
LMSC took on two historic projects:
- Polaris Missile Program: In 1955, the Navy contracted Lockheed to develop a fleet ballistic missile system [01:20:02]. The audacious goal was to launch intercontinental ballistic missiles from submerged submarines [01:19:21]. This capability, achieved by 1960 with the Polaris A1, transformed strategic deterrence by ensuring a guaranteed second nuclear strike, eliminating the feasibility of a first strike by the Soviets [01:21:40] [01:23:13]. Successor programs included Poseidon and Trident missiles, with ranges up to 5,000 miles [01:26:02].
- Secret U.S. Space Program (Corona and Beyond): While NASA pursued scientific space research, LMSC ran a parallel, secret U.S. space program [01:30:51] [01:31:03]. The first program, Corona, launched in August 1960 under the cover story of animal life-form research [01:31:52]. This system of observational spy satellites provided greater photo coverage of the Soviet Union in one month than all five years of U2 flights combined [01:33:05] [01:34:24]. The satellites captured images with resolutions as low as five feet from space, and the film canisters were literally dropped from orbit and retrieved mid-air by C-130 airplanes with giant claws [01:35:30].
- Gambit (1963): The “see it well” phase, achieving resolutions under two feet (better than the U2) [01:40:39] [01:41:09].
- Hexagon: The “see it all” program, with longer orbit lifespans and more film capacity [01:41:45].
- Kennen (1977): The “see it now” phase, featuring the first real-time space-based surveillance system using digital photography beamed down to ground stations [01:42:24]. Lockheed also developed the digital workstations to process these images [01:43:38].
- LMSC also pioneered weather satellites and contributed to the GPS system [01:44:36]. LMSC also built the Hubble Space Telescope [01:45:53].
LMSC, particularly its software and computing focus, became Lockheed’s most profitable division, accounting for over 100% of the company’s profits during difficult periods in the 1970s [01:49:56]. This technological focus offered better margins than traditional airplane manufacturing [01:50:40].
LM SC’s Seven Tenets
LMSC’s operating philosophy built on Skunk Works’ principles but added a key element:
- Tenant Number One: Focus on a Threat-Based Need [01:52:55]
- This emphasized the importance of market context and external threats in driving innovation, contrasting with Kelly Johnson’s pure focus on product superiority [01:53:22].
Later Innovations: The SR-71 Blackbird and Stealth
Following the U2 incident, Skunk Works pursued a plane that could outrun any missile [01:55:05]. This led to the A-12 Oxcart (CIA contract) and later the SR-71 Blackbird (Air Force version) [01:56:37]. The SR-71 was designed to fly faster than Mach 3 (over 2,000 mph, faster than a rifle bullet) and at altitudes of 84,000 feet [01:57:11]. It remains the highest and fastest humans have ever flown without rocket propulsion [02:00:32].
Developing the Blackbird presented extreme engineering challenges:
- Heat: The skin reached 500°F, areas near engines almost 1,000°F, requiring the entire plane to be built from titanium, a metal never used before for aircraft [02:01:14] [02:01:33]. Amusingly, Lockheed sourced much of this titanium from the Soviet Union via dummy corporations [02:01:42].
- Fuel Leaks: Metal expansion at high speeds meant panels had to fit loosely on the ground, causing fuel to leak from the aircraft’s integrated fuel tanks [02:02:47]. Shell developed a custom, non-flammable fuel for this [02:03:55].
- Engines: The Pratt & Whitney J58 engines could only provide 25% of the needed thrust. Skunk Works engineer Ben Rich designed the “spike inlet system” (the cones on the engines) that supercharged the engines, providing the remaining 75% of thrust [02:05:05] [02:06:19].
The SR-71 never carried guns, only cameras, and was never shot down [02:06:33] [02:09:00]. It was also one of the first stealth airplanes, with a flat bottom and flush rivets to minimize radar signature [02:11:43]. The SR-71’s first flight was in December 1964 [02:08:39].
The F-117 Nighthawk (Stealth Fighter)
In the mid-1970s, mathematician Dennis Overholser at Skunk Works discovered a Russian paper containing equations that could make an aircraft almost invisible on radar, reducing its radar signature to that of a BB or ball bearing [02:21:17] [02:22:19]. This design, however, looked incredibly un-aerodynamic, like a “Hopeless Diamond” [02:23:13]. Kelly Johnson, disillusioned by the changing industry, advised against pursuing it, thinking it wouldn’t fly [02:23:04].
However, Ben Rich, Kelly’s successor as head of Skunk Works, risked his career to pursue the prototype, code-named “Have Blue,” funding it internally without a government contract [02:25:33]. The radar tests confirmed its invisibility [02:27:39]. Skunk Works won the contract and solved the control challenges using early “fly-by-wire” computer systems [02:29:00].
The F-117A Nighthawk, delivered to the Air Force starting in 1983, was the first operational stealth fighter [02:30:00]. Its combat debut in the Gulf War (Operation Desert Storm) in 1991 was a resounding success [02:30:25]. The Nighthawk flew only 1% of air missions but accounted for 40% of all damaged targets, demonstrating the quantum leap in air warfare that stealth and precision weapons offered [02:33:00]. 10,000 people worked on the Nighthawk, keeping its secret for 21 years [02:33:53]. Interestingly, Lockheed Martin partnered with Sega to develop the model 3 arcade board, which used 3D polygonal graphics necessary for modeling stealth aircraft [02:51:08].
Transformation and Consolidation of the Defense Industry
The end of the Cold War and the success of the Gulf War in the early 1990s signaled a massive shrinking of defense budgets [02:34:15]. In 1993, Deputy Defense Secretary William Perry called CEOs of major defense contractors to a “Last Supper” dinner, instructing them to consolidate [02:35:37]. This explicit government directive led to a period of unprecedented mergers:
- In 1993, Lockheed purchased General Dynamics’ F-16 fighter jet business [02:38:52].
- In 1994, Lockheed and Martin Marietta announced a “merger of equals,” completed in 1995, forming Lockheed Martin [02:39:00]. The combined company absorbed 17 previously independent entities, including Xerox Electro Optical Systems and IBM Federal Systems [02:44:22].
- In 1997, Lockheed Martin’s attempt to merge with Northrop Grumman was blocked by the U.S. Department of Justice to preserve competition [02:41:19] [02:42:00] [02:43:33].
This era marked the end of the traditional Skunk Works era. Aircraft are no longer built by small, auteur-driven teams but by vast, piecemeal manufacturing operations involving thousands of subcontractors across many states, ensuring widespread political support [02:47:00] [02:52:53]. This approach, while ensuring jobs and political support, leads to enormous costs and prolonged development timelines [02:51:44]. For example, the F-22 Raptor program, initially projected at 750 planes for 62 billion, making each plane cost $360 million [02:48:11] [02:49:51].
The F-35 Lightning II Joint Strike Fighter program is the largest ever purchase of defense equipment, with an initial order book of 3,000 airplanes potentially worth 30 billion, or $750 million per plane [02:57:04].
Skunk Works Today and Enduring Impact
Today, Lockheed Martin is segmented into Aeronautics (F-35s, F-22s, F-16s, C-130Js), Missiles and Fire Control, Rotary and Mission Systems (including Sikorsky helicopters), and Space (Orion Capsule, ULA joint venture for launches) [02:59:44]. The F-35 program accounts for 20% of all net sales across all segments [03:10:01].
Lockheed Martin operates as a highly protected, insulated business, with approximately 75% of its $66 billion annual revenue coming from the U.S. federal government, making it the single largest federal contractor [03:00:50] [03:01:15]. Their net income margin is typically around 8%, reflecting a “cost-plus” contractual model where the government absorbs development risk [03:01:51].
While the term “Skunk Works” is still used by Lockheed Martin, the division no longer operates with the same autonomy and small-team agility as it did in Kelly Johnson’s era [03:30:51]. The modern military-industrial complex prioritizes job creation and spreading work across states, leading to slower innovation compared to the rapid iteration seen in Silicon Valley [03:22:05].
However, the “Skunk Works” mentality of rapid iteration, internal testing, and embracing risk (like exploding rockets) has influenced the technology industry, particularly in Silicon Valley [03:25:20]. This mindset, originally born from the existential threats of World War II and the Cold War, is now applied to solving problems in the commercial sector [03:31:50]. The ability to “rip down all the barriers and figure out how to do something even if there’s some risk” was exemplified by Operation Warp Speed for COVID-19 vaccines [03:11:00].
Skunk Works, through its direct innovations and the indirect influence of its operating philosophy, played a monumental role in shaping aviation, national security, and the technology industry itself.