Walker & Dunlop, Inc. (WD) Earnings Call Transcript & Summary

Good afternoon, and welcome to today's Walker Webcast. I'm Susan Weber. And joining Walker & Dunlop's CEO, Willy Walker on today's webcast is Booz Allen Hamilton's CEO, Horacio Rozanski to discuss how technologies like AI, cyber and 5G are shaping the world around us. Why DE&I is crucial for cultivating a culture of innovation and whether the pandemic has permanently changed the role of the consultant? Before I turn it over to Willie, I'd like to remind our listeners that past episodes are now available on our podcast. Just search Driven By Insight where we listen to podcasts. Thank you for joining us today. And now over to Willy.

Thank you, Susan, and good morning, everyone, on a gorgeous spring morning in Denver. I spoke to a colleague this morning in Washington, who said the trade blossoms are blooming, but that the pollen is brutal. So spring is clearly in the air, both figuratively and literally. It's a great pleasure to have my friend, Horacio Rozanski join me today. I've been on the Children's National Hospital board for many years. And when Jeff Zients was asked by President Biden to spearhead the administration's COVID response, Horacio took over as Chairman of the Board and has provided wonderful leadership for the hospital. I'm very excited to dive into my discussion with Horacio about Booz Allen Hamilton in just a moment. We continue to see the economy gain momentum as the vaccine gets deployed at an accelerating rate. The number of people in our office here in Denver is increasing by the week. People are starting to travel again for work. I'm actually flying today to our headquarters in Bethesda, Maryland for my first visit in over 14 months, and then I'm flying to the West Coast next week for client meeting and recruiting meetings. And I think it's fair to say that things are coming back online quite quickly. I'm in the middle of Wharton professor Adam Grant's book, Think Again. And to any of you looking for a great read, I'd strongly recommend it. One thing that does not seem to be changing in 2021 is virtual speaking. Our team reached out to Adam Grant's Speakers Bureau to see if he could come speak at our summer conference in Sun Valley in July, and we were told that Adam plants to do no in-person speaking in 2021 and due to doing several highly paid Zoom meetings every day from the luxury of his home or office in Philadelphia. This is the same feedback we received from former Secretary of State Condoleezza Rice's team. So I have 2 thoughts about this. First, lucky you if you're Adam Grant or Condoleezza Rice and can charge terrific speaking fees for an hour of Zoom from your living room; and second, milk it while you can because once other speakers are willing to travel and give speeches live, the value of that Zoom call from your living room will collapse. I had the honor of being interviewed by Will Ahmed on the WHOOP podcast this week. If any of you are interested in listening to our discussion on leadership, athletics and performance data, you can listen to the WHOOP podcast on the same platform you listen to the Walker & Dunlop, Driven By Insight Podcast. I hope to have Will on the Walker webcast at some point to talk about his incredible company and the technology that is being used by so many professional and everyday athletes around the globe. Will and I had a wonderful discussion, and I said it was a real honor to be invited and participated in that podcast. Final thought before I dive into my discussion with Horacio. Next week, I have my quarterly discussion with Peter Linneman to discuss all the data on commercial real estate from Q1 2021 and what Peter see is coming ahead. This will be the fifth discussion I've had with Peter on the Walker webcast. And given the number of both live listeners and replays on my past discussions with Peter, I would think next week will be a blowout webcast. I've just received my advanced copy of the Linneman letter and can't wait to start formulating my questions for next week's discussion. Feel free to join us live, listen on replay and also to invite colleagues and friends to the discussion. It should be a great one and with lots of insightful data. So okay, on to today, a little background on Booz Allen and then an intro of Horacio and we'll dive into discussion. Booz Allen Hamilton is a technology and management consulting firm that was founded in 1914. Booz Allen has 27,000 employees in 80 global offices, and 66% of its workforce hold security clearances to work for the federal government. Booz Allen had 2020 revenue of $7.5 billion, has a market capital of over $11 billion and has had a 2x return to the S&P over the past 5 years. Horacio Rozanski is President and CEO of Booz Allen. Horacio was born in Argentina, came to the United States to attend the University of Wisconsin, where he earned a Bachelor of Business Administration degree with honors. He then attended the University of Chicago Booth, School of Business, where he earned a Masters in Business Administration with high honors. Horacio is Chairman of the Board of Directors of Children's National Medical Center and a member of the Board of Directors of CARE and Marriott International. He is also a member of the Business Roundtable, United States Holocaust Memorial Museum's Committee on Conscience and the Kennedy Center Corporate Fund Board.

So Horacio, as I was putting together my thoughts for this discussion, I sort of said where to start because there's so much I want to dive into with you, and we haven't even started our conversation. Let's start here. How does a guy from Argentina end up going to the University of Wisconsin? And how did you endure those long winners in Wisconsin, given that all of my friends who went to business school with me in Boston used to incessantly complain about how cold it was in Boston?

Well, Willie, first of all, thank you for having me. It's a great pleasure to do this with you. I knew you as a great successful insightful business person. I knew you as a philanthropist. I did not know you as a media personality. So I'm learning a whole new aspect of you. It's a very long story. But to make a long story short, you spent time in Argentina. And so you know that Argentina is a great place to visit, but a challenging place to live in. It was a challenging place to grow up in. And it went through multiple convulsions over my first 18, 19 years of life. I was entering college and it was clear to my then girlfriend, who's now my wife and me that this was just not the place for us. And we wanted to be in the U.S. We wanted the opportunity to learn. We wanted the opportunity to be part of something bigger. That word opportunity kept coming back, not as financial opportunity, but really as an opportunity to be part of a different type of society. I went to the library. This is honest-to-good. This is before the Internet, right? We're talking mid-80s. I went to the library. I got that big book with all the colleges. I was looking for 3 stars on a 4-star system, meaning that was quality and no more than [ 2 $ signs or 4 $ signs ] because it's hard to get a scholarship as a foreign student. And the University of Wisconsin-Eau Claire offered us that, offered us a scholarship and the rest is history. And I have to tell you that in the better lucky than smart category, we were incredibly lucky. People coming into the U.S., in the upper Midwest, with upper Midwestern values, with people who are really out there to help you, who want to see you succeed, who embrace you no matter where you come from, made all the difference. That was the beginning of a life here that I wouldn't trade for anything. As for the winters, it's cold. It was miserable. The day I left Argentina, I think it was January. So it was about 100 degrees because it was summer there. I landed in Minneapolis. I think the wind chill was minus 30. And none of the clothes that I owned were useful in that context. So what doesn't kill you makes you stronger, it was great. Loved it, but I don't miss those winters.

And did you have any other family in the U.S.? Or was it really the idea to come to the U.S. just you wanted to come here from an education standpoint? Had there been an uncle or a family member who was already here that gave you some connection into the U.S.? Or was it really just coming here and enrolling in college?

So my dad had been here to do a masters, paid for -- who's a full bright scholar. And so he had that connection. He went back to Argentina, and he kept talking about what that experience was like. And that was etched in my conscience from a young age. He made sure that we took English lessons from when we were little kids. And my wife also has an aunt who now -- since passed, but who lived in Brownsville, Texas. And she was our connection, our family connection. In fact, every spring break, we would take 44-hour trip on Greyhound each way to go from a Eau Claire, Wisconsin to Brownsville, Texas. And we got to see a lot of the country that way. But -- so that was part of the journey. But it really was -- all of that is true, but what we really motivated us the most, in addition to those connections, really was this notion of opportunity and what this country could offer to somebody who wanted to work hard, who wasn't afraid to take chances. I sometimes tell the story, I had left the turmoil of Argentina. In the first month I was in the U.S. turned on the television, and this was not to get political. Ronald Reagan's last State of the Union address, the one about the shining city on the hill. And I want -- that's what I wanted. I wanted that shining city on the hill, and it's -- I wanted to live that American Dream, and I've been fortunate enough to have that chance.

Well, you clearly have. So you've been a lifer at Booz Allen. Talk for a moment about what has changed and what hasn't changed at Booz over the last 30 to 40 years?

So almost everything has changed. In fact, the business that I started in is no longer part of Booz Allen. I think we now have business units that are larger than the combined entire entity was. When I joined -- I was a summer intern in 1991. We're really a very different firm. We're a stronger, better firm. But I will tell you what has not changed, and I believe it has not changed from the very beginning, it's been a commitment to working on our clients' real problems; to really try and understand the issues, not at the surface level, not what do they want us to do, but what do they really need and to focus on that relentlessly for over 100 years. Our founders have that point of view, it was taught to me as a summer intern. I now preach it from my chair. And I think that's been the secret to everything else is that -- especially now with our work in the government, these missions are so important than having a real commitment to the mission and a real commitment to solving the problems and removing the obstacles that allow people to succeed. That has not changed. If anything, it's gotten better.

And Horacio, how do you figure that out? So I mean, it's Walker & Dunlop, for instance, doesn't work with you all today. How is it that you figure out what our issues are and make it so that we know what our issues are? And so in other words, is there a way that you all are reaching out to show people how you can help them? Or is it pretty much a pull from clients who are thinking, I need help on this or that, and they reach out to you and you then hone in on their problems?

It's both. It's really both. I'd like to think that we'll live at the intersection of 3 things as a successful company these days. One is a deep understanding of whether the industry or the mission or the environment in which our clients operate. We try to not moonlight and just show up because we can. We try to work in places where we really can get to an in-depth understanding. As you know, about 50% of our work is with the Department of Defense, more than 1/3 of our people are military connected. They're either veterans or veteran spouses or active military spouses or reservice, people who have lived that life and who bring the passion of understanding that, but the real insight. And that is one, the understanding of the mission, the commitment to the mission is one. Two is a real understanding of technology and the power that these new technologies have to create real change. Now just to do a demonstration. Let me show you that I can do something cool with AI, and it'll look good for 10 minutes, but it can really affect and change the way your organization runs. And then the third one is a more than 100-year-old constantly evolving consulting process. As a process for how to guide clients from where they are to where they want to be. And a real commitment to asking the tough questions, speaking truth to power, living a set of values in those interactions. It's the intersection of those 3 things, that I believe success happens both for us and for our clients. And frankly, it's the intersection of those 3 things that more and more attracts the talent that we need.

And before you became CEO, you spearheaded the a 10-year strategic plan development inside a Booz called Vision 2020 to set out where you all were headed. And you came up with 5 main areas, which were engineering, systems delivery, strategic innovation, commercial and international business and cyber. Why those 5 areas? And almost more importantly than why those 5, why not other things like e-commerce and other areas at that time that were growing so fast?

That's a great question, Willy. And it ties back to what I was just saying just a minute ago is we were looking for areas where those 3 things had real lasting power. So the real understanding of the mission. We didn't want to -- we didn't know anything about e-commerce. We do it, we learn it, could we be part of it? Yes. But we're really going to be uniquely insightful. What technologies for really changing the world and we're going to continue to change the world. We started with cyber in the mid-90s. That's -- it wasn't even called cyber back then. And then what can we do that is truly transformative, especially as it relates to the government. We started with innovation before innovation was cool. Our perspective was that you needed to transform -- as you know, the majority of our work these days is for different parts of the U.S. government. And when you think of the challenge that government officials and the government at large have is no matter your political persuasion, everybody wants more from our government. Everybody wants to limit the resources to some degree that a government has for all good and bad reasons and the threats are growing exponentially. And so we were looking for the places where we could make a difference to that, move those constraints around, remove/change those obstacles into opportunities for our clients and help them drive real change in the way they did things. A lot of our work we can't talk about, as you mentioned, a lot of our work is classified. But a lot of our work isn't. We do some great work for the IRS helping fraud detection. And you have to bring all the new technology to make sure that the tax fraud is managed and contained. I don't know if I ever told you the story, my own tax return was hacked a few years ago. And it was a system. I don't know if it was our system, but it was a system that there -- and it was very sophisticated. I mean when I saw what they submitted, it looked a lot like my tax return.

Did it make you an instantaneous billionaire? I'm wondering whether they just added zeros to it.

What they did is it was almost the same, but instead of -- they changed a couple of things. So instead of me having to pay taxes, I was going to get a refund. And of course, it wasn't going to go to my bank account. It was going to go to some channel that it would never be seen again. And it was systems like ours that prevented that from happening. And that level of sophistication by the bad actors continues to increase. And the government has to stay step ahead. And we need to bring the best thinking from the commercial sector. We need to bring our own best thinking. We need to leverage our clients' best thinking to stay one step ahead of the adversary. It's that simple across everything that we do.

When you think about that Horacio and you're looking at all the data that you look at and you obviously see lots of stuff that many of us never will even know happen, much less, have a real active role in combating against it. But as you look at those threats today, what's the biggest concern? I mean, obviously, cyber is huge. We just had the hack that is -- and I want to talk about that in a moment that has made -- had a huge impact on our country and on our government and the hack got into the government institutions. But as you sit there and look at it, if you said, if I -- I mean, you do run a very, very large company, what's your biggest concern in running Booz Allen Hamilton from a CEO perspective out of all the things that you all are working on and see around you?

So as I look at the challenges our clients are -- if we look at the challenges we're facing, our biggest challenge is a national challenge, which is that there's a talent shortage for the type of people that we need to do the work that we're doing that is going to extend over the next decade. This -- whether it's a cyber professional, a digital professional, AI professionals, our -- we cannot train and educate enough people into those fields to meet even a fraction of the demand that is in front of us. That's true for Booz Allen. That's true for you. It's true for everybody. I think that is going to be the -- and we've had talent shortages before. A decade long, 2 decade-long talent shortages are a new thing that we're going to have to figure out how to contend with. When I look at the challenges our clients are facing is you put on top of that, the reality that we are in nation-state competition. The last national defense strategy talked about great power competition, think China, think Russia as competitors, not necessarily enemies, but competitors, adversaries in some cases. And competition with well-funded, powerful nation states is very different and very challenging. As you know, some of these very sophisticated hacks, to pick out one example of many, are actually done by nation states or by entities that are funded and helped by nation states. And whether it's Walker & Dunlop or Booz Allen Hamilton or anybody else, no matter how good you are, having to go up against an entire country that is trying to breach your defenses, that is trying to get into your systems, that is a whole different level of challenge compared to what we might have faced 10, 15, 20 years ago. And that is one that as a nation, we're not fully prepared for.

So when you think about talent and recruiting talent, Booz Allen's won award after award after award, Great Place to Work, Most Diverse Employer, Top Military Employer, Best Employer For Vets, Most Ethical Company. When you think about those various awards, Horacio, what's the most important to you as it relates to what makes Booz such a special place to work?

The awards are great. But the awards are great only if they're validation for what you're doing. It's the underlying what you're doing and the people that know you the best that give you the real feedback. And so when you strip all that out, what I care about the most is what do our people think? What are they telling us? Do they believe we are as ethical as we believe we need to be? Do they believe that our value proposition is compelling? Are we living our purpose and our values every day? We began a process a couple of years ago where all of our evaluations include a survey of the people that work for us on specific questions about our purpose and about our values. Am I living those values? Am I representing them? Am I -- we talk at Booz Allen about things like ferocious integrity and unflinching courage. How often do I really show that? How often do we, as an organization, show that? Do people understand and agree when we walk away from certain type of work because we don't believe we should be doing it? Do people believe and agree with our decisions? Those are the kinds of things that at the end of the day, to me, matter the most, make the most difference, and it's that feedback that ultimately propels us. And when we do it really well, it spills out into the outside and we get recognized for it. That's nice, too. But it's really the internal recognition that matters to me the most.

So given the amount of business that you do with the federal government and the amount of security clearance that 60 -- over 60% of your employee base has, when the pandemic hit, if I think about -- if there was a consulting team working with us at Walker & Dunlop, it's like, go get on a Zoom call, keep working, keep studying, pull the data down. I'm assuming that it's very distinct for you where many of your consultants are embedded into government facilities that have significant security clearance around them to control data, control access, et cetera, et cetera. How did you adapt when we went to this remote work to make it so that you could continue to do the work that Booz Allen has as over 50% of its business?

So we went from about 10% of our work being done remotely to about 90% of our work being done remotely over a weekend. I did not think that could be done. And I think credit goes to our people for figuring out a way. But credit really goes to our clients. Our government clients, by and large, have been exceptional. Allowing us to work with them in partnership to figure this out, trying to figure out how much of the work that was traditionally being done one way needed to continue to be done what way or we flex them all in some way so that we could let at least some of the people not be there all the time and create more social distance. Some of our work that had to be done on-site went to shift work so that not everybody was in the office at the same time. And our clients were great. They took care of their people. They took care of our people. And we held hands and we figured that -- we've held hands virtually, and we figured it out. I'm hopeful that some of those lessons will endure. I believe that, especially for the work that we do, we cannot offshore any of our work, as you can imagine. But there's places, I'm looking at beautiful Denver behind you. We have a significant presence in Denver. We really have a lot of people that would love to come work for Booz Allen if we let them work from Denver. That may not want to come to Booz Allen if we force them to work from Bethesda. And so we want our clients to continue on this path of allowing us to do that or helping us figure out ways to do that. And frankly, when it cannot be done that way, people are smart, they understand it, and we figure that out too. But I think that coming out of this, there's a lot of lessons. I think we owe it to ourselves, and we owe it to all the pain that people have endured to capture those lessons and create more opportunity to work differently.

So you're on the Marriott Board, and I had Stephanie Linnartz on the Walker webcast back in early January talking about sort of travel coming back in and what the future looks like for Marriott. And as you know, much better than I do, given your 2 roles of being on the Marriott Board as well as running Booz Allen, the consulting firms are some of the largest users of hotel rooms. And the old model used to be, get up Monday morning, fly to the site where you're going to provide your consulting services, stay there until Thursday, fly home and be back in the home office, back on a Friday and then go back and do it again until you're done with that project. Do you think that, that old model endures and comes back, Horacio? Or do you think that that's forever changed given to exactly what you just said, where you used to have 10% remote, and now you're at 90% remote, is it going to flip back to the 10%? Or do you think it finds something in the middle?

I think it will find something in the middle. I think we all have in our careers, crazy things that we've done. I went to Sydney for the day once. I can't tell you the number of times that I went for -- flew into London, took a shower at the airport, went to a meeting at the airport and flew back. That's crazy. It was crazy then. We just didn't have an alternative. That doesn't come back. And it shouldn't. At the same time, and I'd be curious about your views, but I'm finding that there are certain elements of our work that require the in-person touch. And frankly, there are certain elements of building and sustaining a culture that require people to know each other, to have empathy for each other, to feel a bond and a kinship for each other that you can sustain over Zoom, but I'm not sure that you can build it over Zoom. And so I think we'll get, hopefully, more intentional travel. When I go somewhere now, it won't be just because it's the only way I can do this. I'll go because I have a reason to go because otherwise, I'll just do it over Zoom and save a ton of time and money. I know you said earlier, you're flying East. How many days did you go into your office before to lock yourself in your office and take calls all day. I know I used to do that. If I'm going to do that, I can do that from home. So I think that there's -- we're going to see -- and I hope we're going to see an evolution. I think that evolution will be healthy. It's good for the environment, it's good for people. It creates more flexibility. But I also think that in some ways, because you have broader reach, somebody at Marriott made this point to me, and I believe it, when you have broader reach because you can touch more people the way we're doing it now, it will create more reasons to actually want to meet with people and want to see people and want to build that relationship in person. So I think travel is going to change. I don't think it's going to go away.

Yes. I have one of my colleagues who runs our asset management platform and I have been doing a number of calls with Asian investors over the past couple of weeks on Zoom, and they're typically in the evening here in Denver and early in the morning over in Asia, and we had a couple of calls that went really well. And yesterday, he turned to me and he said, we're probably getting on a plane to South Korea in the next couple of weeks. And I kind of looked through to him and say, "Oh, I'm up for it, let's do it." But I mean, it is one of those things where you think you might be able to actually close the deal via Zoom. And at the end of the day, to raise a couple of hundred million dollars by all these different investors, you're getting on an airplane and you're meeting with them face-to-face.

I think that's exactly right. But before, this might have been 3 trips, and now it's one. The other thing, I know the leaders of public companies, right? You do investor conferences. And the typical investor conference, you go into some kind of hotel room where they took the bed out, they put a table in there, you're eating a Turbo Sandwich and doing these meetings, it's almost like speed dating. I don't need to be in-person for that. But for a key investor, for a real conversation, where they really want to begin and we will need to look each other in the eye, there's only so much you can do virtually.

Yes, exactly. So let's talk for a moment about a couple of things you've been working on because it's just fascinating. You've set the stage here about a number of the things that you're doing with the federal government. And obviously, there are areas where we can't talk about some of the really cutting-edge things. As you and I did our precall yesterday, and I was talking through a number of these questions with you. You kind of looked at me, and you said, "good homework, but you're actually a couple of quarters behind where we actually are, maybe even a couple of years behind where we actually are." And so understanding that you are on the bleeding edge of technological innovation and implementation and particularly in the defense area in national security. Let's talk about a couple of the things that you're doing. One of the things that fascinating me is the team at Booz that's working on robotics. And not only developing robots to work with the Department of Defense, but then, almost equally as challenging, integrating those robotics into operating teams. Can you talk about not only the development of artificial intelligence and robotics, but then also the challenges of getting those types of tools integrated into operation teams out in the field?

I think you're hitting on exactly what is the biggest challenge right now. And what I -- I guess I didn't even appreciate until I started doing this work is just the scale and the diversity of these missions is what makes this all really hard. It's very easy to imagine, okay, I can make A robot that does one thing in one context, and it works one way. Well, now the same mission has to be done at 20 degrees below 0 and at 120 degrees. So it's in Buenos Aires and in Wisconsin. And those requirements are very different. And the people that are doing the job are very different. And the unique situations that they face are very different. And creating these technologies in a way that they can adapt across this multitude of mission sets, is what's really, really hard about this. And so it's that integration, you used the word integration, I think that's exactly the right thing. There's a lot of amazing technology out there. We don't have to invent that much of it, to tell you the truth. The private sector, frankly, has been leading the way on AI, has been leading the way on robotics. They're beginning to lead the way on drones. And it's all fantastic. But when you need to apply that to a different context, especially a military context, the requirements for the technology change dramatically. So a good example is AI, and we do a lot of work on AI. And without getting too much into the math, one of the biggest challenges is you actually -- it's very hard to trace inside one of these algorithms, why the decision was x versus y? You can't -- there's thousands of inputs that go into it. They get massage and in a nanosecond, the car is supposed to go left instead of go right. And now you say, well, okay, tell me why the car went left versus right? And it's -- that is actually not that -- that is very, very hard to do. And in a traditional application at home, every time I ask Siri to do something and my accent gets in the way and it does something completely different than we all laugh. That's perhaps fine. In the context of lives being at stake, whether it's a cyber issue or something happening in space, a drone moving in one direction versus another, you have to be able to explain it. And so a lot of the work that we're doing is how do you make sure that the decisions are ethical? How do you make sure that they're traceable? How do they make sure they're explainable? And how do you embed them with the actual users? The people who are actually going to operate these technologies in the field to make sure that this answers their problem as opposed to some perceived problem that those of us who've never been in the field have. Bridging those gaps is, I think where Booz Allen shines, where we're at our best. Because as I was telling you before, we're at this intersection of the mission, the technology and the consulting process that brings these things together. We invent some of the technology that we use, but we mostly integrate technologies that are out there that are proven that are powerful into these missions.

So talk about that for a moment though, Horacio, because back in December, you all put the first AI into, I believe it was a reconnaissance plane where there was a pilot flying the plane, but you used artificial intelligence for all of the radar and all of the guidance systems on the plane. So you basically, from my layman's thinking, you basically took a copilot out, who typically would do that, and you had a computer do all of that work. And it was the first time that's happened. Something would tell me that there is an argument to be made that actually the pilot ought to be taken out as well because if you integrated all the technology, you wouldn't have the human technology interface, and it would be easier to just have the whole thing be a drone and go on its own rather than having the human involved in it. And it sounds like we're in this -- you are very much in the middle of this somewhat of a kind of a push-pull or a conflict where you want to keep the humans in there, both from a, first of all, we have huge investments in the human infrastructure that is in our armed services. The second thing is you mentioned ethics that when we have humans there, humans get the ability to reason and think, whereas to your point, if it's just an algorithm, that's someone who programs ahead what the computer is supposed to do, and we have real ethical debates about that. But wouldn't it just be easier, honestly, in many of these instances, to just say, give it all to the technology and pull the human out of it?

There's a big debate, and there has been, for the last decade Secretary Carter, when he was Secretary of Defense pushed for the argument of a human in the loop and making sure that in applications where lives were at stake, the human stayed in the loop, and ultimately, the human made a judgment. And there's a lot of reasons why that makes a ton of sense. As you said, ethically, morally, do you really want the technology to make this decision on its own and on what basis will it make it? There's -- so that's one issue. The second issue is, frankly, the technology is not as far ahead as the human brain. There are certain things that machines can do much faster than we can. They can't do it better. They can just do it faster and better and faster are not the same thing. And sometimes better, equals faster, but not always. And then even if you just had machine-to-machine connections, you're still going to have the issue of integration. Integrating new systems with old systems, integrate -- we have -- we're programming AI into some missions, but the data sits in repositories from long ago, where there's still some COBOL Programming in there. So the issue of integration doesn't go away, whether you're integrating with a human, whether you're integrating machine to machine or human to human. It's still going to be there. The key for me is to make sure that when you're building one of these things, you're building something that can scale. It's not just a good-looking prototype, but it's something that can work in the field. And it's bringing something that is going to have a real change and a real benefit. Again, not onetime, but many times and over time.

So you mentioned Ash Carter, former Defense Secretary, and I'm just curious as it relates to how -- from administration to administration, how difficult or not it is for you all to adapt to the new policy directives? Because in many of these programs, there's billions of dollars being put to them. But if I sit there and say, well, Ash Carter may have a distinct view on the future of the digital soldier than the existing Defense Secretary, how much would -- how much does the strategy change sort of administration to administration versus in the DoD that's spending $750 billion a year? Most of these things are long term, 5-, 10-, 15-year plans and a change in administration doesn't knock those off the rails.

So super complex question, and there isn't one answer because no 2 administrations are ever alike and no 2 transitions are ever alike. To simplify it, I would say this, most of the missions that we support that really matter are enduring. Keeping our soldiers safe and bringing them home safe. Making sure they have the right training, making sure they have the right tools, making sure that they have the right information to accomplish their missions. That will never change or probably not change in my lifetime. How that gets accomplished? That's changed because technology evolves and the requirements evolve. What does change more from administration to administration, it's not the missions, but it's the priorities amongst those missions. One administration may prioritize the environmental sustainability inside -- take the Department of Defense, I mean, again, this is one of the things when you start working with DoD that is fascinating is the biggest everything, right? They're the biggest transportation company in the world. They're the biggest employer in the world. They're the biggest consumer of popcorn in the -- I'm making this up. But just the sheer size, makes them a big everything. And so you could say, well, how do you balance the environmental sustainability and the energy usage of the Department of Defense versus the lethality and the deterrence power of the Department of Defense. That is a policy decision. And that is the decision that changes from administration to administration at the margin and that has real impact in what we do and how we think about it. But the underlying missions ultimately don't change that much.

So one of the innovative things that came out of the Trump administration that was new was the Space Command. And I know that Booz Allen is doing a bunch on the Space Command. Talk for a moment to the degree you can about sort of, if you will, warfare going to space and all the work that's being done on the Space Command?

So typically, for -- since World War II to about, call it, 20 years ago, really most of warfare was thought about in 3 domains: land, sea and air. And then 2 domains, 2 additional warfare domains, whether we like it or not, are there now that need to be integrated into this picture. One is space and the other one is cyber. And all of these things are tightly integrated and tightly connected. So you're now, if you will, defending or fighting in 5 dimensional space. Space is critical because for the longest time, the U.S. had uncontested space superiority. You put up satellites. The satellites were there. They did what you asked him to do and so forth. Now there's adversaries that have the capacity to blind the satellite, to hurt a satellite, to bring down a satellite and things like that. And so you need to think of space as a war fighting domain, with all of the same characteristics as you would think as the Navy. The Air Force was tasked with that mission. This is not a new mission. There's a big argument as to whether separating it between Space Command and the Air Force makes that focus better or worse and all of that, and I'll leave that to the experts. I am not a military expert. But the reality is space is a contested domain. Space is vital to the safety of the country. Space is vital to the national well-being. I mean, we don't think about GPS all that much. In our context, people talk about PNT, Positioning, Navigation and Timing. And you don't think about the fact that the T in timing actually travels through the GPS network. So when you go to an ATM machine and you take money out, they want to make sure that if you -- precisely what time you took that money out. Because somebody -- they don't want you to go to another ATM right next to it and take money -- you don't want that confusion. So all of that is fundamental. And think about the damage that could be done if somebody hampered our GPS capability as a country. So we need to think about space as a war fighting domain that we defend, and when necessary, that we are willing to fight in.

I was going to say, I heard an incredible story about the GPS network and about the timing on the banking system and about trades and that if all of a sudden, that fell out of kilter, the amount of wires that are going, I mean, you just used the example of an ATM. Well, yes, if I went to the ATM and took out $300 here and went across the street and took another [indiscernible], no big deal. But there are massive trades going on around the globe that are all based off of that system. And if that system went out of kilter, you'd have billions of dollars going back and forth, with the computers not being able to tell that the trade actually happened. And so it's fascinating for people to hear you say things like that because I think all of us take all that for granted and don't understand how: a, important; but b, susceptible that whole infrastructure is.

No, that's exactly right. I mean this is all what people talk about as critical infrastructure. And the information infrastructure, and this information backbone is now critical infrastructure to our economy, just as important as the electrical grid, as important as the water system, as important as the health care system, which has been so stressed over the last 15 months. The information infrastructure, whether it's in space or on the ground, whether it's 5G or plain old wires running between houses, it's all absolutely critical to our well-being and to us being able to function as an ordinary society at levels that we don't fully understand. Like you were saying, right, well, the GPS goes out on my phone. I still know how to read a map. But that's only true if that's the only usage for that signal. If that signal is now controlling everything that's happening in the air, air traffic control is moving in that direction, these are critical infrastructure items. And as I was saying before, our government has an obligation, and that's a great job of protecting but the threats are increasing exponentially. The adversaries are much more sophisticated than they used to be. We don't have -- we are outstanding on cyber, outstanding on 5G, we're outstanding on AI as a country, but we're not -- we don't have a 50-year head start, right? I mean, we built the first aircraft carriers and how long did it take for the adversaries to build their aircraft carriers. We're -- we may be slightly ahead of the adversary in many areas, but near parity is our reality, either already or soon coming.

So you mentioned 5G, Horacio. And I think many of us think about 5G of just a number and a letter on the corner of our iPhone, that's all of a sudden changed and just the iPhone might run a little bit faster or there might be a download of a picture a little bit quicker. But the change to 5G actually has massive sort of ramifications, and particularly in the work that you're doing with the government and the way that you're working with the federal government to incorporate not only training and AI into 5G networks, but then also allow the government to share 5G networks from a security standpoint. Can you give a little bit of background on all that? Because I think many of us who just see those -- that letter in that number just sort of say, okay, that's all there is to it. And it's so much more complex and so much more sort of a transformation, if you will, that many of us don't know about.

So I was in this boat that you're describing until very recently myself, right? I mean, my view of 5G, if you had asked me 18 months ago, 2 years ago, would have been more along the lines of millimeter wave and the fact that now they communicate, the up and down links are much faster. So cool now I can get Netflix, 4K on my phone without having to wait. But behind that or in addition to that, 5G is about the ability to change the reliability and the speed in ways that couldn't be done before to meet a specific application. It's about being able to reconfigure networks on the fly, using technology, using AI without actually having to move the wires or the fibers around. It's about being able to move cloud computing to the edge, which for the tech folks out there, right, it's all about latency. And so it enables a plethora of new things that we haven't even begun to scratch the surface of. So it's not just Netflix. Is -- would you be willing with the current technology to let somebody do surgery on you remotely? I probably wouldn't because if it's anything like my iPhone right now, yes, it's works great when it works. But what happens when the doctor loses the link in the middle of my heart surgery. Would you let some -- that actually can be resolved to the -- and you say, well, I still want my doctor to be in the room with me. And I think, well, that's great, if you live in Denver, or if you live in D.C. But what if you're in Central Africa, and you wouldn't have access to a specialist, unless it can be done remotely. The possibilities in every field are extraordinary because of what these technologies are allowing. And the combination of these technologies create tremendous power, tremendous opportunity. Again, for us, it's not about, well, the technologies cool, and we're excited by it. For us, it's understanding each one of these missions, how can this mission be transformed through 5G? And where will our clients need us? And what will they need us to know? And how do we learn it quickly to be able to be of help to them? And in a world that is moving at the speed, right, you talked about your favorite book or the one you're reading now. One of my favorite books is, Thank You for Being Late, which is Tom Friedman's book. And he talks about the acceleration of technology, that's one of the main thesis of the book. And that is -- that has shaped our thinking, especially, over the last decade in terms of what we need to do to be in front of these technology waves to help our clients.

So Booz Allen has a big group that does war games. And this is sort of the segue from the military world back to the corporate world and all the consulting work you do. And as I read about your war games, I'd call it even a war games institute, where companies come to you and say, let's identify what our risks are, let's have you create scenarios and let's war game it and let's see how we both either compete against a competitor, protect ourselves from a threat, et cetera, et cetera. My mind went to, Horacio, how big does the company need to be? Because all of us deal with various either competitor scenarios or cyber threats or whatever else. And yet I think there's got to be some threshold to which it's worth the while of Booz Allen as well as a company like Walker & Dunlop to actually engage in something like that. But I can only imagine that more and more corporations, particularly the biggest, are coming to you and saying, if we don't war game out this scenario or that scenario, and we're caught flat footed, that could not only be hugely costly to our company, it could be my job?

Right. No, I think you have it right on. I think you're framing it exactly right, which is not -- war gaming is not a predictor. Give me a forecast for how this battle will happen or how this price war will happen or how this cyber attack will happen. It is a powerful technique to help you think through what might happen and how might you respond, that then prepares you to respond when something either identical or not identical takes place. And I think that companies of all sizes can benefit from that. We do a lot of it in the private sector around cyber. And the thing about cyber is seconds matter, minutes matter. And most of our companies, most of us are not actually prepared to respond as quickly. Who has the decision rights on turning off your network and blinding the entire company to protect it from a cyber attack? How would you respond to ransomware? It doesn't matter if your scenario, the scenario where war gaming is exactly what then happens to you or not. It allows you to really rethink your processes and rethink your mindset around some of these issues. We used to do, we do less of it now, a lot of this work, and I used to love this work, especially around competitive dynamics because that used to be the type of work that I did when I was growing up in this business. What will the new entrant do? How will the pandemic change real estate? After 9/11, we did a fair amount of war gaming work with different government agencies. How does the transportation network, the global transportation network, get impacted now? And what would happen if, God forbid, there was another terrorist attack? Those are the questions that just so powerfully have helped leaders shape and think what they do. And we're proud of that work. It's -- like I said, it's fascinating work, but it's really rooted in this notion of the mission. You really have to understand the industry, the mission, that's why we don't do it everywhere and for everyone. It's not a question of size, it's a question if you really need a deep understanding to create a meaningful war game.

Do you -- you mentioned ransomware. Do you advise other companies to have a crypto account to be able to pay off ransomware requests through crypto? Or is that -- do you say no -- I mean, some has paid that way, but people get held up and they can pay in cash, they can pay in crypto?

We leave most of that, honestly, to the law firms because there's a lot of issues associated with how you respond to those attacks from the standpoint of what you need to disclose, where and whether and how you should do that? Who the money is going to and what they're going to do with that money? I mean, so we're not advising so much on that. What we're advising on is how do you: a, if you're in the middle of an incident, how do you respond to the incident? How do you find the bad guys in your network and take them out? How do you restore your ability to continue to operate in light of an attack? And then perhaps more importantly, once the crisis is passed, how are you better prepared the next time? We often tell clients, look, there's 2 types of companies, the companies that have been breached, and the companies that don't know that they've been breached. And I think all of us who have leadership roles in corporations need to understand that there's bad people in our networks probably all the time at any point in time. And you have to think about, okay, how am I creating resiliency around that reality for my company, for my organization.

Is there anything on that Horacio as it relates to size and scale on -- so the SolarWind's hack clearly has impacted, I think the number was 18,000 organizations is what they have identified so far, it got into the Department of Treasury, Department of Homeland Security, I mean, it's broad and wide. As a company that's enough size that we have a brand, but at the same time, not clearly a JPMorgan or Wells who have their own huge protection. But when I think about things like Amazon Web Services and putting everything up in the cloud, I can't help but asked the question to my own CTO, should we just hold it on our own servers because invariably, these hacks are going to get into the cloud and we'll be impacted along with everybody else versus trying to just keep it to ourselves and kind of stay off the radar screen. Is there anything in today's world of being off the radar screen?

I don't think so. I mean I think the reality -- this is true for corporation. It's true for all of us as individuals. If somebody wants to get to your digital presence, and if that somebody is sufficiently well funded, they will. They can and they will. And you can make it easier, you can make it harder. The cyber industry is moving towards the notion of what they describe as a Zero Trust framework. And what Zero Trust means, assume that the bad guys are already in your network. And whether you are putting a lot of it on-premise, whether you're putting it off-premise, whether you have a hybrid network, whether you have a private cloud, don't assume that, that protects you. Assume that they're there. And so then create the protections that you need for that. And then be very smart about it. There's another reality, which is we all think of cyber as purely cyber, purely digital. But there's the insider threat issue. So you can have all of your best, most important information in your office, disconnected from the Internet, in a computer that only you can access, except somebody can actually come in the middle of night and get into your computer. And if that somebody is somebody that happens to work at your company or it's a vendor that has access to your building, so it's questions of how do you encrypt the information? How do you segment your network in a way that if they can get to one thing, they can't get to everything? How do you make sure that you actually have the ability to figure out where they are, if they're there? The thing that cyber people talk about is exfiltration as opposed to infiltration, meaning people can get into your network, that's relatively easier than getting stopped from you. Think of somebody coming into your house is one thing, somebody stealing your bed, that takes 2 people and a truck. So taking significant amounts of information out of your network is much harder than just finding a way in. And so that's -- that, to me, is that -- at least just the advice we follow is assume that they can get in. Just try and make sure that if they get in, they're going to be able to do as little damage as possible and that you can catch them before they get out.

So my final question to you, and I loved everything we've talked about, and I've got about 3 more pages of notes, as you well know, to go through, but we're not going to have time today. But you've been a great leader on ESG and DE&I. And I mentioned previously a number of the awards that Booz Allen Hamilton has won as it relates to being a great place to work, being an incredibly diverse workforce, your Board is incredibly diverse. Talk for a moment about why that issue is so important to you?

So let me end where I started because this is personal to me. I never thought, when I came to this country in 1988, that somebody with my accent and with my background would ever be allowed the opportunity to do what I do every day. And I'm here because I worked hard and I had a fair amount of luck. But I'm also here because people allowed me the opportunity to prove myself, to demonstrate what I could do, to pick myself up when I fell. People taught me, people saw something in me that at times, I didn't see myself. And I wouldn't be here if none of that were true. And I think that it's my responsibility as it relates to Booz Allen, it's our responsibility as it relates to the 27,000 people that work with us to pay that forward. It's good business. We could talk for hours about why it's good business and why it makes sense? But it's deeper than that. It's about values. Its about valuing others. And it's about -- when the time comes to walk away and go do something else, be able to look back and say, I was part of something bigger than me. I was -- I helped other people achieve their full potential. And I leave an organization that I love, and that has been great for me for over 3 decades, hopefully, a little better than I found it. And that, to me, is this journey, and that's why it's personal.

Yes. Well, it's obviously benefited from your leadership. I value our friendship tremendously, and I'm deeply thankful of you taking the time today to share your insights. Thank you very much. Thank you, everyone, for joining us today. As I said, I'll be back next week with Peter Linneman to do our quarterly update on the commercial real estate industry. Hope you can join us then. And Horacio, again, thank you very much, and have a wonderful day.

Thank you, Willy. Thank you for hosting me.

Take care.

You too.