The Manosphere Report

0:00Trey Stephens, Sean Sankar, welcome to the All In Podcast at the Hill and Valley

0:04Forum. Thank you guys for being here.

0:05What's up? How are you guys doing?

0:06Thanks for having us. Doing great.

0:08Good to be here too.

0:08You guys are friends, right?

0:10You guys go back like a long time?

0:12A really long time. Okay, tell us how you guys know each other.

0:17Palantir, Anderle, what's the connection and the history?

0:19Well, I'll start. You can fill in all the gaps.

0:21I feel like I know the story you're going to tell and it's going to

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0:55So, Trey, I think, you know, in the early days of Palantir, I was roaming

0:59around giving demos to anyone who could possibly want to see them.

1:03Trey was working in an Intel agency and happened to see one of these demos.

1:07And he should tell you his version of it, his side of it, his frustration

1:10with bureaucracy. But I think he realized, like, hey, this might be really cool.

1:14Maybe I should leave the hellhole I'm in, in the basement of this building, getting

1:18nothing done, talking about sports with other people.

1:21To go join this crusade.

1:23So, Trey reached out and applied.

1:26He made a big faux pas.

1:27He came all the way to Palo Alto.

1:29And he wore a full -on suit, tie, cufflinks, CIA cufflinks, mind you.

1:35CIA cufflinks. Coming to interview with, I don't know, we were probably 20 people, you

1:39know, who wore t -shirts and, you know, second hand -me -down clothes.

1:43He was, you know, he was intercepted in the lobby by a receptionist who really

1:48cared about him and told him to ditch the tie and try to dress down

1:51and don't screw it up too bad.

1:53But we loved him immediately and he helped us build the government business.

1:57So, this was at Palantir.

1:59You were there employee 13, 2006, right?

2:01So, this was pretty early on.

2:03Yeah, I came in in early 2008.

2:06But there were still, you know, 25, 30 people at that point.

2:09Pretty small. And Peter kind of incubated it, was involved at the beginning, right, Peter

2:14Thiel? Maybe you could just recap because I know a lot of folks know the

2:17history of Palantir, but just kind of like the early stand -up of Palantir and

2:20how things got going during that era with that small group, how you guys kind

2:24of figured out how to build the business.

2:25Yeah, it was one of these things that was kind of a slow start.

2:27There was a real idea amongst the five co -founders, including Peter, that, you know,

2:33it's kind of insane to live in a world post -911 where people are arguing

2:36about what's more important, privacy or security.

2:39Like, aren't they both really important?

2:41And who is actually spending time pushing out the efficient frontier?

2:45For any amount of given security, you should have more privacy than you had before.

2:48Or any amount of given privacy, you should have more security.

2:51And this sort of changing the dialectic there was really the entire impetus of what

2:56we started with. And now there's a technical approach that follows from that.

3:00There's an approach to privacy and celebrities that are around that.

3:02But really, we started as a business that was pretty myopically focused on solving a

3:07handful of problems and counterterrorism for a handful of institutions in the world.

3:10Let me start by asking a question that I think is important to ask, particularly

3:14for a broad audience and for the two of you to frame your personal philosophical

3:19views. Is war good? There's a lot of conversation about there is a military -industrial

3:25complex that has an incentive for war.

3:27What's your view, your philosophical motivation for why you do what you do, what your

3:32view is of war and defense and the work that your businesses kind of pursue?

3:37Well, any... Anyone who's been to war would tell you that war is awful.

3:40War is bad. Categorically bad.

3:42That doesn't mean it's always avoidable.

3:44And that, you know, there are people who will want to use might to make

3:49right, to define a set of rules.

3:53And you have to be in a position to protect your people and your interests

3:56accordingly. At the end of the day, it's all about deterrence.

4:00You don't want to go to war, but you want to be prepared so that

4:03if you do have to go to war, that you will win decisively and quickly.

4:08I've never met a general that has said, you know what I really want to

4:11do today? I want to make phone calls, letting parents know that their children have

4:14died in combat. Nobody wants to do that.

4:17And I think that that's really the goal of everything we were working on at

4:20Palantir is what we're working on at Anderil, which is make it unthinkable to your

4:24adversaries that they should ever challenge you.

4:26Why do you think it became taboo and became so negative, particularly in Silicon Valley,

4:31that building a defense company or a company building technology to service the defense sector

4:36was viewed with such disdain and was an untouchable sector for so long?

4:41I think it's a beautiful consequence.

4:43And I mean, I mean, ironically, of kind of the peaceful world that we lived

4:46in. The origin story of Silicon Valley is actually defense.

4:50You know, Lockheed was the largest employer in Silicon Valley in the 1950s.

4:54The Corona spy satellites were built there.

4:56So in a world that was gripped by the threat of the Soviet Union, you

5:01know, you had a very different posture in Silicon Valley.

5:03But in a world post the end of the Cold War, the end of history,

5:09kind of a view of globalism, that it's all going to be great that we

5:12exist beyond the confines of our country.

5:15These things were viewed much more cynically, and the threats didn't seem very real.

5:18And I think you could even backtest this through the moment where Silicon Valley kind

5:22of really woke up and realized, hey, maybe these things are real or when the

5:25Russian tanks rolled across the Ukraine border, you know, is when they realize there are

5:29a lot of Ukrainian, Eastern Europeans, a lot of people who are affected by that

5:32in Silicon Valley, who started to realize that maybe there's a more nuanced issue here

5:38than just simple, the simple Eisenhower quote of the military industrial complex.

5:42I think many of the people who were protesting Silicon Valley's involvement in working on

5:47national security priorities were the exact same people that had Ukraine flag in bio.

5:52So there's clearly just like a policy mismatch, or an understanding mismatch.

5:57The other thing that I would mention is that these large tech companies, unlike many

6:01epics prior, were global technology companies, they didn't necessarily view themselves as American.

6:07And so if you go and you look at, you know, where these protests came

6:11from, you have to keep in mind that a lot of the signatures that they

6:13had on these, you know, protests, were not coming from US citizens.

6:17And so there's like a global character to those companies that probably was not the

6:22case during the Cold War.

6:23Do you think that's changed recently?

6:25I mean, to Shams' point, I think that there's just an increased awareness of the

6:28complexity of the geopolitical situation.

6:31And I think it's certainly a lot less controversial work on these topics than it

6:36was in 2017, 2018. You know, it's a 20 -year overnight success, right?

6:40And Anderle's now reportedly raising money at a $60 billion valuation, just landed a $20

6:46billion army contract. Palantir today is worth $400 billion.

6:51The flip side of what I just said is that some people are saying that

6:55Silicon Valley is taking over defense and Silicon Valley is the next story of the

7:02American war machine. This has become sort of a popular narrative.

7:06Can you just respond a little bit to kind of where we were coming out

7:10of World War Two, from a defense industry perspective, where we find ourselves, where Silicon

7:15Valley seems to be at the center?

7:16of this today? You know, the industrial base that won World War II and the

7:20early Cold War was not a defense industrial base.

7:22It was an American industrial base.

7:24You know, Chrysler made the Minuteman ICBM.

7:27They were the prime contract on it and they make minivans.

7:29So missiles and minivans. General Mills, the cereal company, had a mechanics division.

7:33Everything they learned doing R &D to process grains, they actually used to build torpedoes

7:37and inertial guidance systems. Ford built satellites until 1990.

7:40So the entire economy was invested not only in economic prosperity, but also underwriting the

7:46freedom that allowed us to have economic prosperity.

7:48It's really a consequence of the end of the Cold War.

7:50So when the Berlin Wall still stood in 1989, only 6 % of spending on

7:55major weapon systems went to pure play defense specialists.

7:5994 % of it went to what I call as dual purpose companies.

8:02You know, yeah, a missile is single use.

8:04It's not a dual use product.

8:05You're not going to buy it at Walmart, but that actually these companies were invested

8:08in both parts of this.

8:09That figure today is 86 % goes to defense specialists.

8:14So we have a very different structure of the US economy as a result.

8:17And I think it leads to very perverse narratives of what would it be like

8:21to mobile? If things got really bad, we'll just flip a switch and our auto

8:25factories will magically turn into enabling us provide for our defense and security.

8:30And I think a cold eyed look at history is it took 18 months to

8:34do that. We actually started ramping up to provide this stuff for our allies, for

8:39the Brits and the Soviets in the context of World War II.

8:41And that we've actually missed some of those signals today.

8:43When Ukraine went through 10 years of production and 10 weeks of fighting, that probably

8:48should have been a five alarm fire that we got the fundamental calculus on deterrence

8:52wrong. We thought the stockpile was going to deter our adversaries.

8:55It was always the factory.

8:56It was the ability to generate and regenerate the stockpile.

8:59Well, let's look at where we are today.

9:01So in terms of defense readiness relative to our adversaries, 10 ,000 to one drone

9:07production gap versus China, 223 x shipbuilding capacity disadvantage.

9:12And I think you've said a 2027 Taiwan window of danger, high level, we spend

9:18more than any other nation on defense.

9:21How ready are we? And how long will it take us?

9:25Well, our joint force is the best in the world.

9:27And so, you know, I think we have to couch the alarmism and commentary in

9:31that context here. But I think if you look at like the rate of change,

9:35our adversaries are moving very quickly.

9:37If you just look at the empirical loss of deterrence, you had the annexation of

9:41Crimea in 2014, the militarization of the Spratly Islands in 15, Iran with breakout capability

9:46to get the bomb in 17.

9:47You've had a pogrom in Israel.

9:48You have the Houthis holding trade hostage in the Red Sea, not to mention the

9:52present conflict. So when you look at that, how can you not feel that deterrence

9:56is eroding? To Trey's earlier point of having capabilities that are so scary that picking

10:01a fight isn't worth it.

10:02And people are investing significantly on the low end of the mix.

10:05Our high end is still unquestionably amazing.

10:08But, you know, you can't keep shooting $2 million interceptors at $20 ,000 drones and

10:13have that math work very long.

10:14I think the second part, like why does it matter that we lost the American

10:18industrial base and have a defense industrial base is you lose volume, you lose the

10:21R &D stimulus to come up with creative ideas like using the methodology of building

10:25a bathtub to build the next generation low cost cruise missile.

10:29Right. And you get stuck in these platforms that are absolutely eye -wateringly amazing, but

10:33are $2 million a pop.

10:35And you just can't produce them at the scale, right, with the speed that you

10:38really need to. Right. And Trey, you've talked about this.

10:41You wrote an article, No Solvency, No Security.

10:43Just share with us your view on the importance of this industrial base and what

10:47it takes for us to have strong defense requisite in a strong manufacturing industrial base.

10:53I mean, we really kind of sent - I mean, we really kind of sent

10:55- most of these capabilities away during the last 30 years of globalization, and that

11:00gutted entire communities in the United States.

11:03You know, I mentioned in this article that just in my immediate family, like grandparents,

11:07aunts, uncles, I have family members that worked at GM, at Ford, at Frigidaire, at

11:13National Cash Register, at Armco Steel.

11:16Every single one of these factories in Ohio closed.

11:19Not a single one still exists, and they all have different places they've gone around

11:23the world. But, you know, one of the things we're doing with Andrill right now

11:27is we're building out a 5 million square foot factory campus in Columbus, Ohio.

11:31And we have the benefit of going back and tapping into that knowledge base that

11:35exists, that's underemployed at the moment, because those the factories that kept them busy for

11:41many, many years are closed.

11:44And I think this is the story all over America.

11:46Like if you think about the at scale manufacturing for a new company started in

11:52this century, in the 2000s, there's really only one that comes to mind, just Tesla.

11:58That's it. And so we haven't really built any muscle around new manufacturing capacity.

12:04And I think that as you spin things up, to Sham's point, we don't have

12:09the ability to do that quickly, because we've atrophied massively by turning all this away

12:14globally. So I think readiness is a real problem.

12:17And we have to start investing ahead of the, you know, conflict being there, because

12:24you can't just start at the moment that it's absolutely needed.

12:27Tell us about the Arsenal one, and then the manufacturing behind it.

12:31And then I want to just understand a little bit about is this product led,

12:34or production capacity led? Do we need to make selections and have capital committed to

12:39bringing product to market before we start to build out the base?

12:42Or is there an alternative way to get ready?

12:44Arsenal one is our the factory campus that we're building in Columbus, the operating system

12:50for that the Arsenal platform is really intended to reduce the the cost, the overhead

12:56that's required to automate and, you know, handle these processes in the most efficient way

13:03possible. So there's like kind of the software layer that sits behind that.

13:06We're actually working with Palantir, the foundry platform on some of these programs as well.

13:10And the idea behind this is that you want it to be as modular as

13:13possible. If we build out the factory campus, and when we said, we're just going

13:17to build Furies here, or we're just going to build Roadrunners here, we're just going

13:20to build Barracudas here, that provides a tremendous limitation in the moment of a conflict

13:26to be able to be responsive to the demand for specific things that are relevant

13:31to that conflict. And so we're kind of thinking about this more like contract manufacturers

13:35think about building assembly capacity, where they say, yeah, we make, you know, this VR

13:41headset for Facebook, we make this VR headset for Samsung, we make this VR headset

13:46for Apple, we build a skill set around building optic systems, but we're going to

13:51build a bunch of them.

13:52And we're going to be much more effective at doing that by hitting the network

13:57of scale, you know, get lower costs on all the individual parts, you're going to

14:01build out a supply chain to work through that.

14:03That's roughly what we're doing in this case is we're saying like a contract manufacturer,

14:07we want to be able to pivot on a dime into ramping up production of

14:10Roadrunners if we need Roadrunners or ramping up production of Barracudas if we need Barracudas.

14:15The counter example to this, of course, is what we saw in the early days

14:19of Ukraine, where what they really wanted was more stingers and javelins.

14:22The problem is, is that we once we burned through our inventory in the warehouses,

14:27the stingers and javelins, the assembly line to build stingers and javelins didn't exist.

14:31All the people that worked on those assembly lines It doesn't seem like the end

14:33of the tunnel to do.

14:33So that we've got our insurance of this.

14:33It's been a pretty intense I think that it's been a very important one.

14:33We're retired. And so, the primes were literally calling people out of retirement to come

14:38back and teach them how to build stingers and javelins again.

14:42And so, these are problems that we're trying to avoid by the design of the

14:45factory as an initial concept.

14:48Who funds it? So, is there a government contract that supports the production of these

14:52facilities? And are multiple companies going to be able to afford to stand these up

14:56to make these investments? Or is this just going to end up being an anduril

14:59because you've got most of the capital and you guys are going to roll these

15:02facilities out? How do we make this kind of a national interest?

15:05Well, our business model is definitely very different from the primes, who are basically responding

15:10to things as requirements directly from their customers.

15:13So, they're not really investing a whole lot forward of the capability.

15:17Anduril, on the other hand, we're doing all of this as private R &D investment,

15:20and then we're selling the outcome, the output of that as a product.

15:24So, this is fundamentally a different business model.

15:27But I do think that there's a tremendous amount of capital that's required to pull

15:31this off as a new entrant to the space.

15:33I don't think that the market is going to support 100 new primes or something

15:38like that. I'm hopeful that it's not just anduril.

15:41I think it would be healthy if there was more competition in the space.

15:44But being able to raise that amount of capital, hire the people that you need

15:48to actually pull it off.

15:49It's not like building a normal tech company.

15:53It's not just the development of a product.

15:56There's a lot that goes into this.

15:58Trey's point might seem kind of obvious or simple, particularly to an audience that's largely

16:02coming from tech or Silicon Valley, but that's not how defense works.

16:05People don't build products. People build to a spec that the government says, this is

16:09what I want to buy.

16:10And then you kind of say, yes.

16:12You have to think about defense as a monopsony, where there's a single buyer for

16:15the thing. And that concentrates an enormous amount of power in the buyer, whether they're

16:19right or wrong. If you look at the history of defense innovation, typically the monopsony

16:23is wrong. It was Churchill as the head of the Royal Navy who built the

16:27tank because the British army was not smart enough to realize that in the next

16:30battle, having horses was not going to work.

16:32So every one of these innovations is kind of an act of heresy.

16:35There's a founder -like figure who is so committed pathologically to a different heretical concept,

16:41they see it through and only in combat or only when it meets the moment

16:46is it actually validated. Now, a grave threat like the Soviet Union is a sort

16:50of forcing function that allows you to innovate.

16:52When we were building ICBMs, we had eight competing programs.

16:56Today in peace time, that would be viewed fastly as wasteful.

17:00Why should you have eight competing things?

17:02Why can't you just pick the right one and put, you know, spend less or

17:05put all your wood behind one arrow?

17:06And of course, that kind of turns its back on our fundamental belief in America

17:09on the free market, that there's a competition of ideas, there's fundamental uncertainty, there's quality,

17:14like variance in the quality of the execution, and that you need this competition.

17:18And it's not just principally competition amongst the primes or new entrants, it's also competition

17:23inside of government. And there were originally, I think, or at one point, 51 major

17:28defense contractors. And just for the audience to understand, they reduced down to roughly five

17:34or six primes, that's the term prime, is one of these prime contractors, and then

17:38make subcontract out to other companies to develop componentry parts.

17:42My understanding in Anduril was to do exactly this, build a product, show up with

17:46something that's cheaper, better, faster, and actually competes on the merits, rather than be caught

17:51in this kind of prime landscape.

17:53And that worked clearly. But over time, there seems to be a lot of capital

17:57concentrating into the new primes.

18:00You guys, you guys, SpaceX, OpenAI, maybe one or two others, is the landscape going

18:06to emerge that we're going to just look like the same old way of operating

18:10where we have a handful of primes.

18:12crimes that all have these trusted relationships with the government agencies?

18:15Or how do we kind of create that competitive environment to continue to drive innovation

18:20and make things affordable for the US government and the taxpayer going forward?

18:24Well, just like, and I interviewed Trey in my new book on this, like just

18:28like venture, there's going to be a power law here.

18:30So one of the grave mistakes we've made as we think about innovation, which has

18:34resulted in essentially innovation theater, is this idea that you're going to just peanut butter

18:38spread around the capital you have for innovation that, you know, every company is going

18:42to get roughly the same amount.

18:43It's not enough to hit scale.

18:45It doesn't reflect actually the relative performance differences, because there's an authentic power law curve,

18:49like any venture capitalist would realize that, you know, your biggest winners are going to

18:53return your whole fund. There's something authentic here as well, which is like, yeah, you

18:56may have 10 bets, but at some point, you're going to have to get smart

18:59about concentrating down on the things that are actually working.

19:02Yeah, I mean, this is a kind of a great point about any category.

19:05It's like, if you're a space tech investor, and you didn't invest in SpaceX, you

19:09probably lost money. If you're a crypto infrastructure investor, you didn't invest in Coinbase, probably

19:13lost money. If you're a social media investor, and you didn't invest in Facebook, you

19:17probably lost money. And yet, for some reason, capital allocators have a very short memory.

19:22They don't have the ability to go back to the prior boom cycle and say,

19:28oh, wait, I remember what happened that last time we had to concentrate capital down

19:31to the winter. And I think that this isn't any different.

19:35So what was the motivator then for change in the construction of the landscape of

19:38defense contracting? Was it software that takes us from the old primes to the new

19:42primes? Is that really what kind of triggered this?

19:46The consolidation. So in 93, having won the Cold War in 91, or I think

19:50more accurately, the Soviets lost the Cold War.

19:52You know, by 93, we expected as a nation, a kind of peace dividend, we

19:57don't have an adversary. Now we should be able to spend less on defense.

20:01And the department had this famous dinner where they brought 15 of the 51 primes

20:06together and said, this is going to happen.

20:08The budget is going to get slashed.

20:09We're not going to save you guys.

20:10You have our permission to consolidate.

20:12Some of you are going to go out of business.

20:13Some of you should try to make a commercial business, which didn't really work.

20:17And that's what led down to five.

20:18It was actually, there was going to be, we were going to go from five

20:20to four in 99. The Justice Department put their foot down and said, we're not

20:23going to let Lockheed and Northrop consolidate.

20:26Right. And then today, so the changeover, what gave you guys the window?

20:30What gave you guys the window to build the business that you've built?

20:33I mean, what did you see early on 20 years ago and continued forward in

20:37the hardware side that made you say, this is the moment?

20:41Is it software that enabled this?

20:43Well, I'm going to throw you under the bus a little bit on this.

20:45It was not obvious in the beginning that this is going to work.

20:49I can't tell you how many meetings even we had together where we walk out

20:53and be like, this is not going to work.

20:56This is very bad. We were not welcome with open arms.

21:00Early days of Palantir. Yeah.

21:02Early days, mid days, maybe even late days.

21:05Famously, we had to sue our customer just for the right to compete.

21:10That's the strength of the monopsony, right?

21:11And really, I'd say our entire business was validated from the field backwards, right?

21:17It was in DC that the doors were closed to us.

21:20No one want to interact with us.

21:21We're the monopsony strongest at the margin in the field where people are saying like,

21:25well, I'm on this deployment.

21:26I'm on this rotation. And there is more free market system.

21:30Like what I'm being given doesn't work.

21:31I'd like to come home.

21:32How do I like bend the rules, figure out how to get the software I

21:35need? That allowed us to empirically show, you know, create facts on the ground that

21:39this stuff worked. It was a long road to hoe.

21:41I think this is part of why it took 20 years to kind of get

21:44to this sort of point here.

21:45And yeah, I think that a lot of those lessons that were learned were not

21:48only like educational for Anderil, but it also created a precedence that already existed by

21:54the time that we showed up where we didn't have to go through all of

21:56those same growing pains. So, you know, what took Palantir, I guess, probably about five

22:01years to get to 10 million annually in revenue.

22:03We did that in 22 months.

22:05But I don't think that was a credit to Anderil.

22:07I think it was mostly a credit to me, Matt, and Brian lived the five

22:11years of Palantir. Five years plus 22 months.

22:14Yeah, exactly. And so we kind of had a bit of a cheat code, but

22:17I don't think it's like culturally shifted to the point where it's like actually just

22:21easy to do this now.

22:22It's not like the government has fixed all of their problems.

22:24I think it's just that there's enough people out there who have seen it that

22:28understand how to make it work, that you can work within the system rather than,

22:32as Sham said, trying to constantly fight from the outside in.

22:35Was there a view at that time in these years building Palantir where you saw

22:39an opportunity in hardware? Is that kind of the motivation for Anderil that we've got

22:43software, but there's more to do and hardware could be reinvented and we could build

22:47systems. I mean, help us understand the connection.

22:49Yeah. In the very early days, actually, I came by to pitch, Sham, before we

22:54officially started the company. And I think part of that pitch was we said, we

22:59know how hard software is.

23:01We don't want to do that again.

23:02We believe hardware would be less hard.

23:05And I think we ended up being right from like a getting going perspective.

23:09But yeah, it's just, you know, the government doesn't know how to think about the

23:12value that's created by software.

23:14Maybe you feel like they're a little bit better now, but it was really hard

23:17in the early days of Palantir to convince them to think about it as anything

23:21other than lines of code, for example, or some like metrics that anyone that works

23:25in tech knows doesn't matter.

23:26But for hardware, they know there's a bill of materials.

23:30In fact, the government made stuff for a long time.

23:32During the Cold War, there were literally ammunition factories that were owned and operated by

23:36the United States government. So they can kind of go through a spreadsheet and say,

23:40okay, I know how much it costs for you to build this.

23:43I know how much margin I'm comfortable paying you.

23:46And it's a much easier, you know, crossing of the Rubicon.

23:49With software, it never felt like that.

23:52Yeah, it's still very hard.

23:53I mean, people want to pay for software and government on a cost plus basis,

23:57which doesn't make any sense.

23:58If you think about the R &D that you put into software, like the marginal

24:01price you're paying is a small fraction of the R &D we're amortizing across commercial

24:05and government customers. And I think maybe, Trey, it's worth telling the story of how

24:09when you got to Founders Fund, you were looking for defense companies to invest in

24:13and hitting so many dry holes is part of what led to the idea.

24:18Yeah. I mean, I have no, I had, maybe still don't have any interest in

24:22venture capital. And so when Peter asked me to come over to Founders Fund, the

24:25only thing I knew to do was just to look at the category of things

24:29I felt like I understood pretty well, which was GovTech.

24:32And so I, incidentally, you can look up who bids on federal contracts.

24:36And so I pulled that list.

24:38And then at the time I was using Crunchbase.

24:40And then I just started outbounding to companies that were bidding on federal contracts.

24:44And I met with hundreds of companies in the first three years that I was

24:48at Founders Fund. We ended up making one investment in KDM, which was renamed Expanse

24:53and acquired by Palo Alto Networks.

24:55But otherwise, that was it.

24:56There was nothing else. And even like looking in retrospect, like we didn't miss anything.

25:00There was just nothing worth investing in.

25:02It turns out no one was building in this category.

25:05And so I went back to the Founders Fund investment team and said, man, I

25:09feel like someone should be building a next gen prime that builds hardware, but it's

25:13software defined and hardware enabled rather than being hardware defined and software enabled.

25:19And to my surprise, the team was like, yeah, sounds like you're probably the guy

25:22that would know that that's the gap.

25:24And I don't know, maybe you should start a company.

25:26And I'm like, oh, no, you guys hire me.

25:29to work on the investment team at Founders Fund.

25:31Like, yeah, that's fine. You can do that too.

25:34It's all good. So yeah, it was kind of an accidental founding in many ways.

25:38The capital requirements for hardware business are notably higher.

25:41If you didn't have the success you had building the manufacturing facility you're building, and

25:46I'm assuming all the R &D cycles are longer and require more capital to get

25:49to a point of product, does it make sense for venture capital to be the

25:54funder of the next gen of hardware defense tech companies?

25:57How does the economics and the capital markets kind of work?

26:00I'll give a take here.

26:01So I think if you back up a little bit, if you look at Fairchild,

26:06if you look at integrated circuits in 1968, 96 % of all integrated circuits sold

26:11were sold to the Apollo program.

26:13There was effectively a monopsy.

26:14There was one buyer for this thing.

26:16But Bob Noyce, who was at Fairchild at the time and co -inventor of the

26:19transistor, he was so maniacally committed to a future that semiconductors, integrated circuits would be

26:24in everything that he never let more than 4 % of his R &D be

26:27paid for by the government.

26:29He was going to be like, why should I have some PM tell me what

26:31my R &D roadmap, I invented the thing.

26:33So he kept executing that.

26:35And that's, so he chased Moore's law mercilessly.

26:38And that meant in the 80s, when the government needed precision guided munitions for a

26:42salt breaker to compete against the Soviets, we had the price performance we needed.

26:46So this idea that, you know, because when you get stuck inside the government loop

26:50of what they want, you never hit the price performance.

26:52By the way, there's a good modern analogy, which is Jensen and NVIDIA, right?

26:5593 graphics chips, sold them as an OEM, almost like an OEM type solution until

27:00here we are. The one that speaks to my heart as a child who grew

27:04up in the shadow of the space coast is shuttle.

27:06You know, shuttle is, it's beautiful, but it's $50 ,000 a kilogram to get to

27:10orbit. Starship heavy reuse will be under 20 bucks a kilogram.

27:14You know, and there's no way that you will achieve that vision if you're in

27:18a cost plus world, because every day you're actually deleting your costs, which means you'd

27:22be deleting your profit instead of deleting your costs, turning that into margin that you

27:26can provide a better price performance on and keep writing that curve down.

27:29Right. Although to be fair, SpaceX sued their customer in the Air Force on the

27:33basis of the exact same federal procurement law that Palantir did.

27:37And so, you know, even with that massive costs costing down, they were in the

27:43same position as Palantir was in the early days.

27:45Let's go back to the venture capital.

27:47At this conference that we're at, there's dozens of VCs now.

27:50This has clearly become a hot space as defined by your successes.

27:55What's going to happen? So these VCs are plowing money into hundreds of defense tech

27:59companies from drones to satellites, to weapon systems, to software tools.

28:04How is this going to play out over the next couple of years as a

28:06venture investor with your knowledge about Anderil?

28:08I remember when I first got my offer letter from Palantir, we had this kind

28:15of high -low mix of salary versus equity compensation.

28:19And it gave three examples of how much your equity that was on your offer

28:24would be worth at different valuations.

28:25It was, I think it was one, five, and 10, maybe, or one, five, and

28:2920, something like that. And I remember talking to people around the company.

28:32They're like, 20, that's ridiculous.

28:35We're never going to be worth $20 billion.

28:39And, you know, I feel like now it's like people are going out and they're

28:42like, our seed round will be priced at $20 billion.

28:45So I think there's been a big shift in just like the way that people

28:49think about these things. Some of that is good.

28:52Some of it's bad. I think on the good side, they're, you know, they're able

28:55to look at companies like Palantir, like SpaceX, like Anderil, and say, there is actually

28:59a path to success. This isn't like an impossible market to innovate in.

29:02But at the same time, you know, there's a real tension around amount.

29:07capital raised and the valuations that are being applied to these rounds that add a

29:12tremendous amount of risk to the company that doesn't have to exist.

29:16You know, there's this famous scene from HBO's Silicon Valley where a CEO gets fired

29:21for kind of underperformance on the plan that they had presented.

29:26And Richard Hendricks, the main character, says, you know, you could have raised less at

29:30a lower price. And he said, what do you mean?

29:32No one ever told me I could raise less at a lower price.

29:35And I think that's ultimately what my advice to these companies is, is like, look,

29:39your product might be awesome.

29:41Seems like you're building a good team.

29:42I like the vision for what you're doing and the mission, but you can also

29:46raise less at a lower price.

29:47And I think that avoids, you know, playing chicken ultimately with trying to hit numbers

29:53that frankly don't even make sense.

29:56One of the things that we've been focused on at Anderil that I think maps

29:59back to our experience of Palantir actually is climbing down the multiples tree with every

30:05round. We never want to go and raise the next round at a higher revenue

30:09multiple than the prior round.

30:11And even the Series H that you mentioned before is down pretty significantly from the

30:17Series G. And we're not doing that because investors wouldn't be willing to pay higher

30:20multiples. We're doing that because I believe the discipline is really, really important, especially heading

30:25into a, you know, medium term IPO.

30:27Emil Michael talked about this $200 billion of capital he wants to deploy.

30:32It's been reported he's hiring bankers to help him deploy it.

30:35To counter your point, if there's a lot of capital flowing from the monopsony, if

30:39there's a, you know, a big market that's growing aggressively, you've got a $200 billion

30:42TAM to go after now.

30:44Shouldn't that justify the venture capital coming in, maybe even justify going at a higher

30:48price? Is this department of war investment activity really going to kind of change the

30:53landscape and increase more venture capital flow?

30:55I think it's going to help out tremendously.

30:57First of all, I love the nickname that this team has, which is Deal Team

31:006. So, you know, I'd be honored to be part of that team.

31:03But I think even if you look back at the titanium supply chain in the

31:0650s, 60s, it was bootstrapped by the Air Force in a similar way where they

31:10strategically injected capital down the supply chain to enable the aerospace industry to be created.

31:14So I think there's a tremendous opportunity with the Office of Strategic Capital to think

31:18about what are the structural bottlenecks in the production.

31:20You can have a lot of drone companies and they're all going to bottleneck on

31:23brushless motors. There's going to be certain key parts of the supply chain that we

31:27don't have enough capacity to produce here in the U .S.

31:29and they're going to need a bolus of investment.

31:32And just like integrated circuits, the first customer is going to be less economical than

31:36the end customer. So I think that's one part.

31:38Then the other story I love is where we really screwed this up.

31:41The drone is an American birthright.

31:43Abe Kareem and the Predator.

31:44We built it, General Atomics.

31:46But of course, then the government got in the way.

31:48The government said, hey, a drone is a flying missile.

31:50This thing needs to be ITAR controlled.

31:51Also, the FAA got in the way and said, no beyond line of sight operations.

31:55So you basically killed the domestic drone market.

31:58There is a counterfactual world where General Atomics had a consumer subsidiary called DJI.

32:05And the consumer drone market was entirely owned by the U .S.

32:09and it provided for economic prosperity for America and wrote us down the price production

32:13curve that we could be using these things and innovation for national security as well.

32:18What's the next market where you're worried that's going to happen?

32:20I have a lot of markets.

32:21So, I mean, we're talking a lot about weapons of war here.

32:25I'm worried about things that go beyond weapons of war that affect our will to

32:28fight. Pharmaceuticals is one that's close to my heart.

32:30My father was a pharmacist and one of the things he always wanted me to

32:33work on was bringing pharmaceutical production back home.

32:3580 % of APIs for generic drugs are produced by China.

32:39What do you think the American people are going to think when they have to

32:41choose between defending the free world, defending American sovereignty, and their...

32:45year old dying of an ear infection that we would have thought of as trivially

32:49curable. So I think there are these things where we've just imbibed the globalist vision

32:54that, hey, we'll do the innovation, they'll do the production without realizing that innovation is

32:59a consequence of productivity. Probably to put it in terms that the tech community would

33:03really understand is like, what motivated Google to do the research in 2017 behind the

33:07paper attention is all you need?

33:09A desire for a 3 % incremental improvement in Google Translate.

33:14You cannot think of something more banal leading to something more revolutionary.

33:17And we've seeded all of those opportunities to realize and harness that innovation.

33:22Now, if we stick with pharmaceuticals, there's a reason 50 % of all clinical trials,

33:26new clinical trials are happening in China and not in the U .S.

33:28Do you have a view on a technology or product that's developed in the U

33:31.S. that we're at risk of getting regulated out and we're, or we kind of

33:36go in the right direction at this moment?

33:37I would say that semiconductors is actually a really interesting one.

33:40Back to your point about Fairchild is that, you know, we were the home of

33:45the semiconductor industry for many, many years.

33:47And, you know, once TSMC got, you know, ahead of steam in Taiwan, they kind

33:53of ran away with it.

33:54And we didn't, rather than investing in a domestic competitor, there are all sorts of

33:59reasons for this that we could spend hours talking about.

34:01We basically just allowed that to happen somewhere else.

34:04And now we're in a position where almost no amount of money is going to

34:07fix this problem for us, certainly on a timeline of relevance as it pertains to

34:11the risk that Taiwan has in 2027.

34:14So I would say that's like another really big one.

34:16Getting back to defense, how does the hardware and software fit together in this, you

34:21know, kind of emerging war technology landscape?

34:24You guys are building software, you're building hardware, like help us understand a little bit

34:28about what the systems of war look like in the decades ahead.

34:31Well, I think the starting premise would be where does it give us an advantage?

34:34And, you know, we had the first offset, which was nuclear weapons, the second offset,

34:38precision guided munitions and stealth.

34:40Really, the third offset is decision advantage.

34:42How can we outthink and out execute the adversary?

34:45That's where these things fit together.

34:46That's like the thesis of even having them to begin with.

34:49And I think the reality is that there's kind of a messy overlap of these

34:53things, like all innovation is messy and chaotic.

34:55And maybe the department suffers at times because it tries to have a framework based

35:00approach, like we're going to have MOSA, modular open standards architecture, something like that.

35:05You know, it's like, we're going to avoid all of the pain and messiness by

35:09having some sort of process.

35:10But in reality, the process always destroys all of the innovation.

35:14And so, there's obviously a very tight thesis where these things need to coexist and

35:18build off one another, they need to be interoperable.

35:22But you have to earn that, you have to earn that opinion in the exercises

35:25and the tests and the evaluation and combat would be my humble suggestion.

35:30Do you think that outside of what Andurl's building, there's actions that this administration should

35:38be taking, or that the private market should be taking, to solve this hardware manufacturing

35:44and capacity gap that we have right now?

35:46My view is they're actually taking a lot of actions.

35:48Not all of them have come to see the day of light here.

35:50But you know, even something as simple as reimagining munitions and drones as consumables.

35:55They're not things that you build and then stock on a shelf.

35:58They're things that you, at the time of ordering them, you already have an exercise

36:02test plan where you plan to expend them, which means that you're going to have

36:05to replenish them, which means there's a demand signal to industry to keep going.

36:08And in a buying cycle, that means that you can buy the next generation rather

36:12than having the old generation.

36:13And I think this department sees that in a very clear -eyed way and is

36:16doing the yeoman's work of like stitching that through, through all the services, all the

36:21portfolio acquisition executives, to the point of not believing in...

36:24process. They've moved from a world where you have a very rigid, hey, I said

36:28I was going to buy X of Y and I can't change my mind to

36:31a world where there's more autonomy and authority for the people who are buying things

36:34to say, I told you I was going to buy something that accomplished this goal.

36:38I can change my mind about how I'm going to accomplish this goal, which, you

36:41know, can you imagine trying to run any private sector business without that degree of

36:45autonomy and flexibility in your decision making?

36:48To echo Shams' point about what the administration is doing, there are a bunch of

36:51swings that they're taking. It wasn't that long ago that in the Obama administration, there

36:56was kind of the Solyndra failure where they invested in this solar panel company.

37:00It ended up being a bad investment for the U .S.

37:02taxpayer. But now the Office of Strategic Capital is taking a really hard look at

37:07critical minerals. They're looking at, you know, refining of minerals and they're engaging directly with

37:13the private sector to come alongside them in doing deals to get offtake agreements on

37:17these things. So I think there is some really clever thinking going on.

37:21And then in addition to that, I think the procurement process is sort of up

37:24for revision constantly. And Ash Carter started pulling a lot of these threads during the

37:30Obama administration. That was the third offset initiative.

37:33But, you know, we're in a world today where there's kind of a renewed vigor

37:37around being asked, private industry being asked, what do you need?

37:41Like, tell us what you need to be changed about the way that we do

37:44business in order to streamline this and make it go faster.

37:46So I think there's a lot of positive momentum.

37:48Do you guys think these changes have been institutionalized or are they political party dependent?

37:54If the Republicans lose the midterms and there's a Democrat president in 2028, do you

38:01think that there's a reversion to the old way of operating that's going to have

38:05some political influence and change things?

38:07Or do you think we've really changed how things are running in the government here?

38:10I don't think it's political, but I think it's people.

38:12So you can go back to, again, Ash Carter, Democratic administration, highly focused on fixing

38:17these problems. The current Trump administration, highly focused on fixing these problems.

38:23And, you know, there are a lot of people that live, that were in the

38:27middle of that, that didn't prioritize this.

38:30It wasn't, you know, it didn't rise to the top of the stack.

38:32And so I think we always think of like the bureaucracy as being a political

38:37infrastructure or an institution or, you know, bureaucracy.

38:40I actually just think at the end of the day, it's about leadership.

38:43It's just, do we have the right people that understand the set of the problems

38:46that we're facing? I couldn't agree more.

38:48I mean, I call them heretics and heroes.

38:49Like you, you know, the entropy of the bureaucracy is always towards some sort of

38:53sclerosis. It doesn't, it's not a political statement.

38:55It just is what bureaucracy does.

38:57When David Packard, who's probably the last major technology co -founder who served in the

39:02Department of Defense, when he came up with the 5 ,000 series on acquisition, which

39:05today we view as just sclerotic BS that's, that's tied us down.

39:10Well, he, his document was seven pages long in the, in the years between when

39:13he wrote that. And now it's 2000 pages.

39:16So did he really screw us or did just the entropy take hold?

39:20And there was no strong leadership in between to go do the bushwhacking and mow

39:23the lawn and, and, and make the right decisions.

39:25Now, you know, this, this administration's blown up J -CIDs, which is kind of one

39:29of these insane bureaucratic processes.

39:31Like, can you just take a, forget a scalpel, take a machete and start clearing

39:35the jungle and re -earn some of these lessons as you go through it.

39:38If you look at Kelly Johnson, who was the founder of Skunk Works, he built

39:4141 airframes in his career, including the SR -71, still the fastest buying manned aircraft

39:46and, and the U -2, which we still fly.

39:48Like one, if you look at his rules, one of his rules was he had

39:52to play defense to keep the government bureaucrats out of his program.

39:55And I think you could, you know, okay, it's not, it's not a critique of

39:58government. You could think of big corporations when the big corporations bureaucracy gets into the

40:02inner. Innovation, folks, the innovation stops.

40:04And the heretics and heroes were really founders.

40:07They were founders. It's like from a tech perspective, that's exactly what they were.

40:10Like to the Kelly Johnson point, the U -2 did not start as a U

40:15.S. military aircraft because they didn't want it.

40:18He ended up going through the intelligence community to get his start there.

40:22And it was kind of finding the right person that was willing to take the

40:26risk to do the thing rather than relying on the system or the institution to

40:29do that. This is the same with Benny Shriver with ICBMs.

40:32Admiral Rickover with the nuclear Navy.

40:35It used to be about people.

40:36But today, if you were to go to the Pentagon and say, who's responsible for

40:41the F -35? I'm not sure they even know.

40:43Who is responsible for the F -35?

40:45We're building systems by committee rather than trusting the founders and people.

40:50There's like a proclamation. It's so great.

40:52It's this X, Y, or Z project is built in all 50 states.

40:55Like the objective is, it's being, the money's being spread around versus like, how do

40:59you achieve the objective? The F -35 has components manufactured in 400 congressional districts.

41:04Right. I mean, that's like, that's a political project.

41:07We had this A -B test with SLS and Starship, right?

41:10Like SLS, they had to have subs in all 50 states.

41:13But this A -B test has been played out.

41:15I do think there's something about the kind of Calvinist spirit of America that sometimes

41:19gets us to misunderstand. You know, we call it the Apollo program, but it was

41:22probably, it's really the Gene Kranz program, you know, it's the F -16, but it's

41:27really John Boyd's plane. And, and there's like a humility where we'd never want to

41:31call it, you know, you wouldn't call it, although maybe the nuclear Navy, we kind

41:35of do call it Rickover's Navy, but there's an element of like, it's obviously both

41:38things. It's bigger than the person, but actually the starting conditions require the founder figure.

41:43So, tell me about where we are in the state of readiness.

41:48You know, we highlighted some of the statistics, but if you guys were to think

41:51about what we need to accomplish, the infrastructure we need to stand up to have

41:56production lines that can be turned on to support munitions capacity for conflict in, you

42:02know, pick your region, let's say more than one region around the world, and the

42:06U .S. needs to sustain those conflicts to defend the United States, how far are

42:10we from being ready based on what's going on in the investments that are being

42:14made today across the sector?

42:16I think the way I think about it is, if you thought about this as

42:19a spear, the tip of the spear is incredibly sharp.

42:22The shaft of the spear needs a lot of work here.

42:26You know, the Department of Defense is such a big organization.

42:29It's structurally supply and demand is not integrated.

42:33You know, the demand side is the real world events that happen in the combatant

42:36commands. The supply side are what the services and the industrial base build, the man

42:41train and equip and how you're actually producing that material.

42:44And the ability to drive consensus, which is really the beating heart of any private

42:48sector company of like how to supply and demand come together, what's our view of

42:51it, is kind of managed with great difficulty in the Pentagon.

42:56And your ability, your agility to respond to scenarios is weak.

43:01That's where we can have a lot more precision, because if you can start changing

43:03your mind and saying, actually, I thought I needed X barracudas, but now I need

43:07Y barracudas and Z furies, how quickly does that take to percolate through the supply

43:13base? You know, instead, we get locked into these like, hey, we've made a decision.

43:16The decision really can't be revisited.

43:18And then you start over time.

43:21The entropy is like, hey, I need to I have it.

43:23I have an unexpected bill.

43:24Let's just take a little bit of money away from these programs.

43:26And everything starts getting down to minimum rate production, which is this idea of what

43:30can I produce to just keep the line open, which is not deterrence.

43:33That's how we frog boiled our way here.

43:35And this is where my idea of like, you've got to tie this into consumption,

43:38like everything you're building, particularly on the munition side.

43:41needs to be consumable such that you know you're going to replenish it, such that

43:44the primes and the neoprimes all have the demand signal and they need to keep

43:49going and have a reason to produce them cheaper in order to make more money.

43:52My most contrarian idea is like the cynical view that like you have the military

43:56industrial complex and they're just in it to make money, well, it's kind of a

43:59crappy business. These companies trade at like less than two times revenue.

44:03The problem is it's not profitable enough, actually.

44:05But Trey, Shom said in the past we have eight days of munitions on hand

44:10for a major conflict with China versus 800 days needed.

44:14How far away do you think we are to having the supply chain built and

44:18the production capacity built to meet that objective?

44:21Well, I mean, one of the other things Shom just said in this conversation is

44:24that there's a high -low mix question as well, like there are exquisite systems that

44:27are like the multi million dollar interceptor missiles.

44:30And then you have, you know, dumb munitions, things like bombs that are being dropped

44:34and things like that. And it's not the same across that entire stack.

44:37You know, there are some munitions that are woefully undersupplied and we have very low

44:42readiness on and there are others where I actually feel pretty good.

44:45From an Anduril perspective, you know, we're looking at ramping as fast as we can.

44:49We just opened Arsenal yesterday to start producing Furies.

44:54And you know, looking out over the next 18 months, we're not taking our foot

44:58off the gas. And yet, there's still a run rate capacity that we're running into

45:03as we ramp. Like, it just takes time to get all these lines stood up.

45:07So, you know, if we were to start today with unlimited cash, I think over

45:12the next 18 months as a country, we could get to the point where we

45:16were on track for having a sustainable industrial base.

45:20But we're not going to do that.

45:21We're going to trickle it out over time.

45:23And I think that unless there's real political leadership that steps up to drive this

45:28forward, we will likely be in a similar situation for a long time.

45:32And so, I think we really need to take advantage of this specific moment where

45:37there's clearly urgency that is understood by leadership across the administration.

45:42How much of the spear is autonomous systems?

45:46Is everything going autonomous? Is it just drones?

45:48Or is there on the ground autonomous?

45:50Right now? Well, I would actually argue that like… If you were to build for

45:55the 18 month out. I mean, the wars of today are fought with the weapons

45:59of yesterday. That's like just a fundamental truth.

46:02And some of our weapons of yesterday are awesome.

46:05Like, B2s are incredible. The bombs that we dropped last summer in Iran.

46:11Incredible. Like, these are very high -tech, exquisite systems.

46:15Patriot missiles. Incredible. They're very performant.

46:18They hit their targets almost every time.

46:20I mean, these are great systems.

46:22The problem is that they're incredibly expensive and we can't resupply.

46:25Like, we're just… We're way behind the eight ball on that.

46:27And so, you know, thinking about the wars of the future, it means that we

46:31need to start building these attritable mass systems today so that they're in inventory to

46:36be used for those conflicts.

46:38There are a number of andrel systems that are at a readiness level, at a

46:42level of deployment, that they're active and being used in combat today.

46:46But it's still a very small percentage of the way that the wars are being

46:50waged. Over, you know, the next five to ten years, that HILO mix is going

46:54to have to shift massively.

46:56I mean, this is just like clearly evident in Ukraine.

46:59It's clearly evident in Iran.

47:01And I think the department is making steps to ensuring that they have a better

47:06divide of low cost attritable systems and those high cost exquisite systems.

47:11But, you know, as I said, it's going to take political leadership to get there.

47:16But we have the ability to do it.

47:18The reason I ask is I want to talk… A little bit about the ethics

47:20of technology to war, the Anthropic run -in with the Department of War recently, and

47:27I think you guys have both talked publicly about this, but Anthropic refused to let

47:32its Claude model be used in Maven without human oversight constraints.

47:36This is what's been reported, what Emil Michael has said, and the Pentagon labeled them

47:40a supply chain risk. Both AI and generally autonomous systems beg the question, what role

47:47should humans have and who should have the right to play that role of hitting

47:51the kill switch? What's your view on the role of the technology vendor to the

47:56Department of War and where you guys draw your line on what your responsibilities are

48:01with respect to ethics? Well, my view on my responsibility to ethics is a slightly

48:07different question than my belief in democracy, which is a different thing.

48:11So maybe starting on the democracy point, I believe that the people of America have

48:16elected representatives to make really hard decisions about how we engage in combat, full stop.

48:23Fully autonomous weapons are not new.

48:25We've had autonomous systems in operation like CWIS, which is deployed on naval vessels that

48:32shoots down aerial threats fully autonomously.

48:34You don't have time to make decisions about incoming missiles or threats to your ship.

48:39You just have to shoot it down.

48:40So that's what CWIS does.

48:41Now, CWIS has accountability in the system.

48:45There's a person on that boat that is responsible for whatever actions that weapon system

48:50takes. And I believe that this is the future of autonomous systems is that just

48:54like any other system, whether it's a soldier carrying a gun, they are accountable for

48:58what happens with that gun or, you know, the captain of a naval vessel.

49:02They are responsible for what happens with that CWIS.

49:04All of your autonomous systems are going to have accountability baked in.

49:08Now, ethically, how do I think about this?

49:10You know, I believe that, you know, what Sean was saying about the first offset,

49:15the second offset and the third offset is, you know, we have we as a

49:20society, we went from like rocks and sticks to, you know, knives to guns to

49:26bombs. And then in, you know, World War Two, we kind of plateaued with nuclear

49:31weapons and we all looked around at each other and we said, wow, that's pretty

49:35crazy. I don't think we want to make more and more powerful nuclear weapons forever.

49:40And so actually, our engagement in combat has come back down the chain.

49:44We're, you know, precision guided weapons.

49:46We're shooting non -explosive missiles into windows of apartment buildings, avoiding casualties, unintended casualties.

49:54And I think that's really the goal.

49:56And if you look at AI as the command center for making better decisions with

50:01better precision, with better discrimination, with less civilian casualties, this is good.

50:08It's actually ethically far improved from just dropping dumb bombs on areas of cities to

50:14eliminate military facilities. So I don't think abstention from participating in the building of technology

50:21for national security is a morally neutral decision.

50:23You are making a moral decision when you decide to abstain.

50:26And I am making a moral decision as a private citizen building a company in

50:30this space that I believe that this is ethically just.

50:33And I trust in our democracy to deploy those tools with the interests of the

50:37American people at heart. There's a lot that said about Palantir enabling a surveillance state.

50:42We had the all -in summit in September.

50:44Alex Karp, your CEO, spoke.

50:46And there was a protest group outside protesting Palantir powering a surveillance state.

50:51I just want to give you a chance to respond to that, number one.

50:54And number two, if you saw that Palantir's tools...

50:58were being used in an illegal way, where's the responsibility for Palantir as a technology

51:03vendor in addressing those concerns?

51:05It's almost hard to respond to because it's very unclear what surveillance people think we're

51:09doing. You know, there's just like a broad, almost maybe an outgrowth of Terminator fear

51:14around technology. And I want to get into that cultural question next.

51:16I think it's like very important to understand.

51:17We don't collect data. We don't have any data.

51:19It'd be like accusing Excel of being a surveillance tool, right?

51:23It's like, this is a way of bringing your own data that you have lawful

51:27authorities to collect together to make decisions.

51:30Sounds a lot like Excel.

51:31But it's, you know, because we are unabashedly patriotic and serve the US military, I

51:37think people have a kind of colored view of these things.

51:40I would argue that it's actually Excel with cell by cell security.

51:47As Karp says, it's the most insane platform in the world to try to do

51:51something illegal in because you are going to be caught.

51:53You know, like that was part of the idea of how do you enhance privacy

51:56and security? It's how do you build more civil liberties protections?

51:59And how do you have a normative view that enables a democracy to say, these

52:02are laws and rules, the system will enforce it.

52:04We're not just relying on people happening to do the correct thing.

52:08So that's one piece of it.

52:09The other piece of it to come back to this broader point is that the

52:12need for epistemic humility, like one of the, to the point of we have elected

52:16officials, they are accountable for these policy decisions.

52:20I think at the limit, it's actually kind of indefensible to have a perspective other

52:25than lawful use, because if you are salami slicing the policy, that's actually tyranny by

52:30tech bro. You know, a small number of people are constraining the maneuver space of

52:35a democracy with no accountability to the populace.

52:39So I think that's a pretty challenging perspective to be in.

52:41And we've been in this perspective, if you go back to how did the Soviets

52:44get the nuclear bomb? You know, there's really, there's two sources of treason.

52:48One was committed communists like Klaus Fuchs, who was, he's always a spy.

52:52But the other were people like Theodore Hall.

52:54He was one of the youngest scientists in the Manhattan Project at 18 years old.

52:58His brother, Edward Hall, built the Minuteman missiles.

53:00His brother was, you know, kind of a heretic and hero in my terms.

53:03But Theodore said, you know, I'm one of the best physicists in the world.

53:06I'm probably also one of the best geopolitical strategists in the world.

53:09And I think the only way to have world peace is if two countries have

53:12the bomb. So in 1944, Theodore Hall walked into the Soviet trade mission in New

53:16York and gave them critical secrets to the bomb.

53:19Now, Theodore thought he was going to deliver world peace.

53:21Instead, every death from communism since 1949 is actually on his hands.

53:25And there's no accountability for that.

53:27Yeah, I think one of the other things that comes up in these, these conversations

53:32about powering the surveillance state is this belief that we have policies, but we don't

53:37actually want our civil servants to have the best technology to enforce those policies.

53:42And it's almost like a lack of belief in the institution of democracy.

53:45It's like, you know, traffic cameras, for example.

53:48It's like, man, I'm sort of libertarian in some ways.

53:50I don't love traffic cameras.

53:52But if traffic cameras say, I'm going to send a ticket to every single person

53:55that blows through this red light.

53:57I don't know, maybe we have to change the policy around red lights if you

54:00don't like that. I've gotten three speeding tickets in San Francisco from autonomous cameras in

54:04the last month. Well, they did ramp it up significantly, which is incredible that they're

54:08enforcing laws at all, if we're being honest.

54:10I mean, like, here's my ticket.

54:12And then I'm literally watching the guy while I'm doing three miles over the speed

54:14limit, you know, take heroin needles out of his arm and put it on the

54:18floor next to elementary school.

54:20And I'm like, probably fine.

54:21Yeah. But it's the same thing with like, you know, using tech for better enforcement

54:26of tax law or something like that.

54:28Like, do you, is what we're saying by criticizing what Palantir is doing, is what

54:32we're saying that we don't want our civil servants to have the best tools.

54:36possible because you can have that position.

54:39I tend to think that that position is pretty morally bankrupt, but I guess you

54:43could have that position. But ultimately, I think that's what it is.

54:45So scenario play this for me because there's a public perception.

54:47I don't know how far reaching it is that there's some tide corruption between government

54:51officials that use technology that's super advanced, that's hard for people to understand, and the

54:56technology vendors. If you saw government agencies using your technology, either of you, in an

55:01illegal way that you knew broke the law, do you report it?

55:04100%. Yeah, of course. There's an entire mechanism for that.

55:07There is an IG in every agency.

55:09Right. So just explain that for a second.

55:12The inspector general, maybe. So every agency has an inspector general who's an independent organization

55:17that you can provide anonymous or non -anonymous complaints to that then have the ability,

55:22the statutory ability to do an investigation in an unfettered way inside of that organization,

55:27whether it's the Department of War or housing and urban development, like literally every single

55:32agency. And this mechanism is used.

55:34I actually, you know, in this case, it was weaponized against one of my favorite

55:38heretics and heroes, Colonel Drew Cukor, who invented Maven, the founder of Maven, really.

55:42But, you know, people would file complaints claiming that he was hiding illegal immigrants in

55:48his basement, a basement that he doesn't really have, you know, but all of those

55:51things were investigated. Naval Criminal Investigative Services went out to his house and actually looked

55:54into these things. So people take this incredibly seriously.

55:57Where does the culture come from?

56:00The anti -defense tech alignment culture?

56:03Is it because of the peace era that we had and folks took for granted

56:07national security? I think the first schism was really during Vietnam, where people felt like

56:12they were lied to about the war.

56:15It drove a fundamental schism between academia and defense.

56:18And that we've never really healed from that schism.

56:20And so there's this this this kind of sense, this distrust that's that's brewed there

56:24and kind of escalates through society.

56:26The second schism is like the number of people who are prior service or are

56:31connected to this community who actually see these people as humans and have a fully

56:35informed mental model of how diligent they are, how the work actually gets done.

56:38What do these words actually mean?

56:40What is the process like?

56:41Is evaporated? So then their own fears fill how they think it happens.

56:47And it seems like maybe it's happening more in a cowboy way.

56:49Maybe it's happening in a way without oversight, that there is no such thing as

56:52doctrine. Like there is kind of a cartoon version of what's actually happening that I

56:56think you're unable to reconcile.

56:59Yeah, I think if you even look back at what happened with Snowden, you know,

57:03what was that 15 years ago now?

57:05Something like that. You know, that there was almost no discussion about the investigations that

57:10went into like, was the data collection actually abused?

57:13And the answer was like, basically not at all.

57:15There were like less than 12 documented cases where someone got access to data that

57:19they shouldn't have. And it was because of like technology errors, not because of the

57:24policies that were implemented. And so, you know, we can have disagreements about whether or

57:29not the intelligence community should have collected the data and stored it.

57:34But that was that policy was renewed multiple times by multiple administrations, multiple political parties

57:41that had the majority in Congress over decades.

57:45And so apparently our elected representatives thought that it was important enough to keep in

57:49the system. So I think it ends up being this kind of weird policy discussion.

57:53But the second point that you make, I completely agree with about like the the

57:58kind of distrust of the institution in creating the stories for themselves.

58:03I oftentimes go and do guest lectures at Stanford.

58:07And I always try to ask, like, raise your hand if you have an immediate

58:10family member that serves in the military.

58:12No one ever raises their hand.

58:14It's crazy. Like at Stanford, there are veterans that come in that go to the

58:19GSB and things like that.

58:20But in like the undergraduate student population, it's incredibly rare for anyone to have any

58:26connection whatsoever in their immediate family to the military.

58:29And I think there's like, you know, some of this goes back to criticisms that

58:33people like J .D. Vance, the vice president, has made about, you know, elites in

58:38America and things like that.

58:39But there's just this incredible divide that has happened.

58:42And we're kind of losing touch with that kind of salt of the earth, middle

58:46of the country, you know, veteran community that I feel like was way more present

58:50during the Cold War and, you know, World War II before that.

58:55Do you think that there's any external influence that's driving this culture?

58:59Are there influences on social media, in mainstream media?

59:03And maybe just talk about destabilization and the attack vectors.

59:08I've seen it in other areas of science.

59:10I don't want to spend time on this show talking about it, but there have

59:12been traces that I found on external folks that want to destabilize American science and

59:19industry progress. And they create fear and they put out articles and then they go

59:24social and they become viral.

59:26And suddenly everyone believes it, even though it's not true.

59:28Do you see that? And have you actually kind of seen that in the sense

59:31of like attacking the tech companies that are now supporting American defense?

59:35A hundred percent. Even if you go back to it, let's stick with Vietnam.

59:38The Soviets spent seven billion dollars in twenty, twenty six dollars funding the peace movement,

59:44the anti -war protests. Now, there's obviously some there is an organic element to it,

59:48but this is just dumping gasoline on the fire to sow division and discord.

59:52And I think in the present day, I think, you know, certainly we see it

59:56against Palantir where there's CCP money flowing to organizations that are protesting us for various

1:00:02domestic issues here. That it's not isolated.

1:00:04It's broadly a successful strategy for our adversaries to sow division.

1:00:08No one will believe it because no one wants to believe that they're being influenced.

1:00:12Right. But I think Sean's point is exactly right.

1:00:15It's like it's actually a brilliant strategy, like good for them.

1:00:19They are not our friends.

1:00:21They're our adversaries. What would you do if you were in their shoes?

1:00:23It makes a ton of sense.

1:00:24Do we do that? I mean, look, we have all sorts of counterintelligence operations operating

1:00:29around the modern art movement was really funded by the CIA to undermine the kind

1:00:34of Soviet control of art, you know, and it was it was broadly funded and

1:00:38it wasn't it wasn't directed by CIA.

1:00:40But you can see how we have cultural values that we want to inculcate and

1:00:44spread. Do you think we have a shot at recasting the defense industry, the tech

1:00:50industry that's addressing defense and aligning it with a notion of patriotism?

1:00:55And what is it going to take to make that happen?

1:00:57I don't know. Maybe writing a book.

1:01:00Mobilize. Oh, yeah. You have a book.

1:01:02That's right. That's right. I'm trying to do exactly that.

1:01:04You know, look, if we look at a clear eyed sense of the world and

1:01:08how much deterrence we've lost, you know, you could you could really say, like, maybe

1:01:11World War Three is already started.

1:01:12And 10 years from now, we'll look back and be able to perceive that.

1:01:15Right. And I think you don't need literally everyone to view this.

1:01:19But if you can if you can create a more clear eyed view of what's

1:01:22at stake here, not only for you, but for your children and their future, I

1:01:25think you can you can get people to show up and participate.

1:01:27And this is this has been America's story all the time.

1:01:30You know, and usually when we start these things, we are the underdog.

1:01:35All periods of American greatness have started when we realize that we're the underdog.

1:01:39We were the 17th largest army in the world at the beginning of World War

1:01:41Two, you know, and what did a ragtag bunch of farmers and random tradesmen have

1:01:46taking on the world's largest army in the British during the Revolutionary War?

1:01:51You know, and I think.

1:01:54having some clarity about what's at stake, what the counterfactual is.

1:01:57It's so easy when you're successful to kind of let the nihilism grow and say,

1:02:01like, look how imperfect we are.

1:02:03There's like the self -loathing creeps in.

1:02:04And this is where I take coming back to your point on the legitimacy of

1:02:07our institutions. Like, should these institutions work?

1:02:09Do they deserve the best software?

1:02:10I mean, look, if they're public or private, you can't have doors falling off planes.

1:02:14You know, our government organizations need to provide the basic services they've signed up to

1:02:18do without fraud, without corruption in an efficient way.

1:02:20And the reason is not just an aesthetic.

1:02:22It's like in the absence of that, it breeds nihilism.

1:02:25And the younger generations look at that and say, you know, we should just tear

1:02:28all this down. And things will absolutely get worse in a world that looks like

1:02:31that. So it's incumbent on us to wake up every day and fight for the

1:02:36legitimacy of these institutions to make them more functioning.

1:02:39America's story is never written.

1:02:40Every chapter seems to be a whole new arc.

1:02:43And we're in one right now.

1:02:44There's a rising socialist movement in the United States.

1:02:48Can you guys just comment on how much you think that that socialist movement cast

1:02:52with whatever term they want to use is going to affect our capacity for defense

1:02:58and resiliency going into the next decade, particularly as our adversaries are rising?

1:03:03Well, the argument I've always made is I think our greatest threat as a nation

1:03:06is not homicide, it's suicide.

1:03:08And it's in this vein.

1:03:10It's the internal discord. It's the division.

1:03:12It's the self -loathing. It's, you know, things like the socialist movement, which I think

1:03:17are symptomatic of this internal discord and ensuring opportunity for our people to the point

1:03:23of a functioning elite. If you were to go backwards and think about the root

1:03:27cause, like maybe we don't have an elite that cares enough about the prosperity of

1:03:30the American people. And we've made decisions through globalization.

1:03:33We were told NAFTA was going to be a great thing that actually, if you

1:03:36lost your job in manufacturing, why don't you just learn how to code?

1:03:39You know, there's a certain sort of callousness in that.

1:03:42And, you know, I'm not an unabashed free market.

1:03:44I'm clearly not a communist, but there's a sense of where the decision on the

1:03:48margin actually really does matter.

1:03:50And that comes down to leadership.

1:03:51I think one thing that makes me a little hopeful is that socialism literally doesn't

1:03:55work. And so, you know, you look at, you know, what happened in San Francisco,

1:04:00even where, you know, we elect Chesa Bidine as the district attorney, and then we're

1:04:04like, oh, wow, this is not going well.

1:04:06Recall him. We have the Board of Education.

1:04:08Rooted in a selling point of empathy.

1:04:10Yeah, exactly. Fundamentally. Yeah. What happened with the Board of Education getting recalled, you know,

1:04:15Daniel Lurie coming in as the mayor.

1:04:18You know, we felt like we kind of went into this valley and sort of

1:04:20hit rock bottom. But I do think that people eventually realize that it doesn't, it

1:04:25just fundamentally doesn't work. Seattle and Washington State are likely going to lose a large

1:04:31number of their biggest employers.

1:04:32And as that happens, they'll come through on the other side, probably might take them

1:04:36seven to 10 years to get there.

1:04:37Yeah. It might be painful and it might take them a long time, but I

1:04:40think they'll eventually come to their senses.

1:04:41What do you two disagree on?

1:04:43That's a great question. Yeah.

1:04:45We actually, I'll be honest, we bickered with each other quite a bit at Palantir.

1:04:50And usually it was Sean being right about something and me taking a long time

1:04:54to come along to his point of view.

1:04:57But yeah, I think, you know, any of these cultures that are like well -functioning

1:05:02are rooted in debate. And, you know, eventually...

1:05:06But you're avoiding my question.

1:05:09Whether it's actions or outlooks.

1:05:12Whether you should show up to your interview at a tech company in a suit.

1:05:16Yeah. Well, no, I will say this because it actually is part of the story

1:05:19of Anderil. I thought that it was a bad decision at Palantir to be as

1:05:24quiet as we were. I thought that we needed to get out there and tell

1:05:27the story so that there would be data that says things like what Sean said

1:05:32about like, we don't have any data.

1:05:33We are Excel. And we had a very kind of quiet, reserved comms strategy.

1:05:39And we went back and forth on that a lot.

1:05:41And when I started Andrill, I was like, you know, all the positive things we

1:05:45learned about doing business with the government from Palantir, the one lesson that I learned

1:05:49that we didn't implement at Palantir is we're going to go out there and tell

1:05:52our story. And I think that's worked for us incredibly well.

1:05:55And I'll be honest, I think Palantir has come along to my side of that

1:05:59debate. And last question, if we don't do things right, what does 2040 look like?

1:06:03And if we do do things right, what does 2040 look like?

1:06:06Economic and defense. Well, the economic part is I think the critical one because national

1:06:11security is not an end unto itself.

1:06:13It's a means to an end.

1:06:14And that at end is economic prosperity, the prosperity of the American people.

1:06:18You know, I think no country has done more to develop the world.

1:06:20Like how did integrated circuits and microelectronics get to Southeast Asia?

1:06:24We sent them there. Yeah, we benefited in terms of trade there.

1:06:27But, you know, like which other winner in a war spent their own capital to

1:06:32rebuild the conquered, you know, in Japan and Germany?

1:06:35And now you have this stability as a result of it.

1:06:37So when I think about what could go wrong is you actually have a Chinese

1:06:41century that we never recover from, that literally everyone in the world is a vassal

1:06:44state to China and might makes right in their sort of world, you know?

1:06:49And we shouldn't forget, it's like it's very clear, even in the present moment, that

1:06:52for the CCP, it's not enough for China to prosper.

1:06:54America must fall. That's an explicit part of the strategy.

1:06:57Look, it is a business decision.

1:06:58If you want to buy American or Brazilian soybeans, I actually don't begrudge you one

1:07:02iota which decision you make there.

1:07:03It's an entirely different decision when you're smuggling agricultural funguses into the US so that

1:07:08we can't grow soybeans. That's the sort of zero sum frame that I think 2040

1:07:12will look like if we get this wrong.

1:07:14And if we get it right, I think what we actually see is a massive

1:07:17re -industrialization of America followed by the West.

1:07:20We see a thriving middle class, which I define qualitatively as a middle class that

1:07:24believes their children's future will be better than their future, which is something that I

1:07:28feel is a fundamental promise that's broken down over the last 30 years or so,

1:07:32and a belief in our institutions once again.

1:07:35Yeah, no, completely agree with all those points.

1:07:37I think there's a big component here around education that we haven't talked about as

1:07:41well, where we figured out a way to educate and successfully enter our young people

1:07:47into a marketplace that needs them and that benefits from their services.

1:07:52And I think that we haven't quite nailed that.

1:07:55But I do think that the re -industrialization point of this is going to be

1:07:59kind of the central point of making sure that China's many, many decade belt and

1:08:06road strategy is not going to put us in a position where we literally just

1:08:09can't do anything. Do we need military and industrial primacy?

1:08:13Or can we operate in a multipolar world where the US can share influence and

1:08:19economic prosperity with China, perhaps Russia, perhaps one or two other nation states?

1:08:25Well, the challenge with not being the leader is that you don't get to set

1:08:28the terms of engagement. And so I think the benefit that we have had since

1:08:33really the end of World War Two is that we've had the primary seat at

1:08:36the table to say, this is how we're going to do, you know, semiconductors, this

1:08:40is how we're going to do supply chain, this is how we're going to protect

1:08:43trade lanes. And I think the moment that you step back from that, and someone

1:08:47else has all those incentives, you start playing the rules of their game.

1:08:51And it doesn't stay multipolar for long.

1:08:54Well, I really appreciate the two of you being here, Trey, Sean, thank you guys.

1:08:58This has been great. Thank you.

1:08:59Thank you guys. I'm going all in

The Companies Changing Warfare Forever: Palantir & Anduril Execs on Drones, AI & the Future of War