The State of Modern War: Palantir & Anduril Execs on Drones, AI, and the End of Traditional Warfare

0:00 Trey Stevens, Shyam Sankar,

0:01 welcome to the All-in podcast at the Hill and Valley Forum.

0:04 Thank you guys for being here.

0:05 What's up?

0:06 How are you guys doing?

0:06 having us.

0:07 Doing great.

0:08 to be here, too.

0:08 You guys are friends, right?

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

0:13 Very long time.

0:14 Okay, tell us how you guys know each other.

0:16 Palantir anduril, what's the connection and the history?

0:19 Well, I'll start.

0:20 You can fill in all the gaps.

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

0:58 I was roaming around giving demos to anyone who could possibly want to see them.

1:02 Trey was working in an intel agency and happened to see one of these demos,

1:07 and he should tell you his version of it,

1:09 his side of it, his frustration with bureaucracy.

1:11 But, I think he he realized like, "Hey, this this might be really cool.

1:14 Maybe I should leave the hellhole I'm

1:16 in in the basement of this building getting nothing done,

1:19 talking about sports with other people to to go join this crusade." So,

1:24 Trey reached out and applied.

1:26 Um he he made a big faux pas.

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

1:29 and he he wore a full-on suit, tie, cuff links, CIA cuff links, mind you.

1:36 Coming to interview with I don't know, we probably 20 people,

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

1:44 Um and I you know, he was intercepted

1:46 in the lobby by a receptionist who really cared about him

1:48 and told him to get ditch the tie and try

1:50 to dress down and don't screw it up too bad, but we loved him immediately,

1:54 and he helped us build the uh the government business.

1:57 So, this was at Palantir.

1:58 You were there employee 13, 2006, right?

2:01 So, this is pretty early on.

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

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

2:09 Pretty small.

2:10 And Peter kind of incubated it, was involved at the beginning, right?

2:14 Peter Thiel.

2:14 Maybe you could just recap cuz I know

2:16 a lot of folks know the history of Palantir,

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

2:20 and how things got going during that era with that small group,

2:23 how you guys kind of figured out how to build the business.

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

2:27 It was there was a a real idea amongst the uh the five co-founders,

2:30 including Peter, that um you know, it's kind of insane to live in a world

2:35 post-9/11 where people are arguing about what's more important,

2:38 privacy or security.

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

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

2:45 For any amount of given security,

2:46 you should have more privacy than you had before.

2:49 Or any amount of given privacy, you should have more security.

2:51 Uh and and this sort of changing the dialectic there

2:54 was really the the entire impetus of what we started with.

2:58 And now there's a technical approach that follows from that.

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

3:03 Um but really we started as a business

3:04 that was pretty myopically focused on solving

3:07 a handful of problems in counterterrorism

3:08 for a handful of institutions in the world.

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

3:13 particularly for a broad audience.

3:15 And for the two of you to frame your personal philosophical views.

3:20 Is war good?

3:22 There's a lot of conversation about there are is

3:24 a military industrial complex that has an incentive for war.

3:28 What's your view, your philosophical motivation for why you do what you do,

3:32 what your view is of war and defense

3:34 and and the work that your business has kind of pursued?

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

3:40 War is bad.

3:41 Catorically bad.

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

3:44 And that um you know,

3:45 there will there are people who will want to use might to make right.

3:50 To define a set of rules.

3:52 Um and you have to be in a position

3:54 to protect your people and your interests accordingly.

3:58 At the end of the day, it's all about deterrence.

4:00 You don't want to go to war,

4:01 but you want to be prepared so that if you do have to go to war,

4:04 that you will win decisively and quickly.

4:08 I've never met a general that has said,

4:10 "You know what I really want to do today?

4:12 I want to make phone calls letting parents know

4:13 that their children have died in combat." Nobody wants to do that.

4:17 And and I think that that's really the goal

4:19 of everything we were working on at Palantir.

4:21 That's what we're working on at Anduril,

4:22 which is make it unthinkable to your adversaries

4:25 that they should ever challenge you.

4:26 Why do you think it became taboo and became so negative,

4:29 particularly in Silicon Valley, that building a defense company or company

4:33 building technology to service the defense

4:35 sector was viewed with with such disdain and was untouchable sector for so long?

4:41 I think it's a beautiful consequence, and I mean I mean it unironically,

4:45 of kind of the peaceful world that we lived in.

4:47 The origin story of Silicon Valley is actually defense.

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

4:54 The Corona spy satellites were built there.

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

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

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

5:09 kind of a view of globalism that it's all going

5:11 to be great that we exist beyond the confines of our country,

5:15 these things were viewed much more cynically,

5:16 and the threats didn't seem very real.

5:18 And I think you could even backtest this through the moment

5:21 where Silicon Valley kind of really woke up and realized,

5:23 "Hey, maybe these things are real." were when

5:25 the Russian tanks rolled across the Ukraine border.

5:27 You know, it's when they realized and there

5:29 are a lot of Ukrainian, Eastern European,

5:31 there are a lot of people who were affected

5:32 by that in Silicon Valley who started to realize

5:35 that maybe there's a more nuanced issue here than

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

5:42 I think many of the people who

5:43 were protesting Silicon Valley's involvement in working

5:47 on national security priorities were the exact

5:49 same people that had Ukraine flag in bio.

5:52 Um, so there's clearly just like a policy mismatch,

5:55 uh, or an understanding mismatch.

5:57 The other thing that I would have mentioned is that these large tech companies,

6:00 uh, unlike many epics prior, uh, were global technology companies.

6:05 They didn't necessarily view themselves as American.

6:08 Uh, and so if you go and you look at, you know,

6:09 where these protests came from, you have to keep in mind

6:11 that a lot of the signatures that they had on these, you know,

6:15 protests, uh, were not coming from US citizens.

6:17 And so there there was like a global character to these companies

6:20 that probably was not the case during the Cold War.

6:23 Given that's changed recently?

6:25 I mean, to Sham's point, I think that there's just an increased

6:27 awareness of the complexity of the geopolitical situation.

6:31 Um, and I I I think it's certainly a lot less

6:34 controversial work on these topics than it was in 2017, 2018.

6:38 You know, it's a 20-year overnight success, right?

6:40 And Anduril's now reportedly raising money at a $60 billion valuation,

6:45 just landed a $20 billion army contract.

6:48 Palantir today is worth $400 billion.

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

6:54 people are saying that Silicon Valley is taking over defense,

6:58 and Silicon Valley is the next story of the American war machine.

7:03 This has become sort of a popular narrative.

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

7:09 were coming out of World War II from a defense industry perspective,

7:13 where we find ourselves where Silicon Valley seems

7:16 to be at the center of this today?

7:17 You know, the industrial base that won World War II

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

7:22 It was an American industrial base.

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

7:27 They were the prime contract on it, and they make mini vans.

7:29 So, missiles and mini vans.

7:30 General Mills, the cereal company, had a mechanics division.

7:32 Everything they learned doing R&D to process grains,

7:36 they actually used to build torpedoes and inertial guidance systems.

7:38 Ford built satellites until 1990.

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

7:45 but also underwriting the freedom that allowed us to have economic prosperity.

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

7:50 So, when the Berlin Wall still stood in 1989,

7:54 only 6% of spending on major weapon

7:56 systems went to pure play defense specialists.

7:58 94% of it went to what I call as dual-purpose companies.

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

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

8:05 You're not going to buy it at Walmart.

8:06 But, that actually these companies were invested in both parts of this.

8:09 That figure today is e 6% goes to defense specialists.

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

8:17 And I I think it leads to very perverse narratives.

8:20 So, what would it be like to mobile If things got really bad,

8:23 we'll just flip a switch and our auto factories will

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

8:30 And and I think a cold-eyed look at history is it took 18 months to do that.

8:35 We actually started ramping up to provide this stuff for our allies,

8:38 for the Brits and the Soviets in the context of World War II.

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

8:43 When when Ukraine went through 10 years of production in 10 weeks of fighting,

8:47 that probably should have been a five-alarm fire

8:49 that we got the fundamental calculus on deterrence wrong.

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

8:55 It was always the factory.

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

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

9:01 So, in terms of defense readiness relative to our adversaries,

9:05 10,000 to one drone production gap versus China,

9:08 223x shipbuilding capacity disadvantage.

9:13 And I think you've set a 2027 Taiwan window of danger.

9:17 High level, we spend more than any other nation on defense.

9:22 How ready are we?

9:23 And how long will it take us?

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

9:27 And so, I you know, I I think we have

9:29 to couch the alarmism and commentary in that context here.

9:32 But, I think if you look at like the the rate of change,

9:35 our adversaries are moving very quickly.

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

9:39 you had the annexation of Crimea in 2014,

9:42 the militarization of the Spratly Islands in 15,

9:44 Iran with breakout capability to get the bomb in 17.

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

9:48 You have the Houthis holding trade hostage in the Red Sea,

9:51 not to mention the present conflict.

9:53 So, when you look at that, you how can you not feel that deterrence is eroding?

9:57 To Trey's earlier point of having capabilities that are

9:59 so scary that picking a fight isn't worth it.

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

10:05 Our high end is still unquestionably amazing.

10:08 But, you know, you can't keep shooting $2 million interceptors

10:11 at $20,000 drones and have that math work very long.

10:15 I think the second part,

10:15 like why does it matter that we lost the American industrial

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

10:20 You lose the R&D stimulus to come up with creative ideas like using

10:24 the methodology of building a bathtub to build

10:26 the next generation low-cost cruise missile, right?

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

10:33 but are $2 million a pop.

10:35 And you just can't produce them at the scale

10:36 or at with the speed that you really need to.

10:39 Right.

10:39 And Trey, you've talked about this.

10:41 You wrote an article, "No Solvency, No Security." Just share with us your view

10:44 on the importance of this industrial base and what it takes for us to have

10:48 strong defense requisite in a strong manufacturing industrial base.

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

10:55 of these capabilities away during the last 30 years of globalization,

11:00 and that gutted entire communities in the United States.

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

11:06 like grandparents, aunts, uncles,

11:09 I have family members that worked at GM, at Ford,

11:12 at Frigidaire, at National Cash Register, at Armco Steel.

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

11:19 Not a single one still exists.

11:21 And they all have different places they've gone around the world.

11:24 But, you know, one of the things we're doing with Anduril right now

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

11:31 and we have the benefit of going back

11:33 and tapping into that knowledge base that exists

11:36 that's underemployed at the moment because

11:38 this the factories that kept them busy for many, many years are closed.

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

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

11:50 company started in the this century uh in the 2000s,

11:55 um there's really only one that comes to mind, just Tesla.

11:58 That's it.

11:59 And so we haven't really built any muscle around new manufacturing capacity.

12:04 Um and and I think that as you spin things up to Shawn's point,

12:08 we don't have the ability to do that quickly because

12:10 we've atrophied massively by by turning all this away globally.

12:14 So um I I think readiness is a real problem and uh

12:19 we have to start investing ahead of the the you know,

12:21 conflict being being there cuz you can't just

12:25 start at the moment that it's absolutely needed.

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

12:31 And then I want to just understand a little

12:32 bit about is this product led or production capacity led?

12:36 Do we need to make selections and have

12:37 capital committed to bringing product to market before

12:41 we start to build out the base or is there an alternative way to get ready?

12:45 Arsenal One is our the factory campus that we're building in Columbus.

12:49 Um the operating system for that, the Arsenal platform,

12:52 um is really intended to reduce the uh the cost,

12:56 the overhead that's required to uh automate and uh you know,

13:01 handle these processes in the most efficient way possible.

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

13:06 We're actually working with Palantir, uh the foundry platform,

13:09 on some of these programs as well.

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

13:14 If we build out the factory campus and we said,

13:16 "We're just going to build theories here or we're just going to build

13:19 road runners here or just going

13:20 to build barracudas here." That provides a tremendous

13:23 limitation in a in the moment of a conflict to be able to be

13:27 responsive to the demand for specific things that are relevant to that conflict.

13:32 And so we're kind of thinking about this more like

13:34 contract manufacturers think about building assembly capacity where they say,

13:38 "Yep, we make, you know, this VR headset for Facebook.

13:42 We make this VR headset for Samsung.

13:44 We make this VR headset for Apple.

13:47 We build a skill set around building optic systems,

13:51 but we're going to build a bunch of them.

13:52 And we're going to we're going to be much more

13:54 effective at doing that by hitting the network of scale,

13:58 you know, get lower costs on all the individual parts.

14:01 You're going to build out a supply chain to to work through that.

14:03 That's roughly what we're doing in this case

14:05 is we're saying like a contract manufacturer,

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

14:10 of Roadrunners if we need Roadrunners or ramping

14:12 up production of Barracudas if we need Barracudas.

14:15 The counter example to this, of course,

14:17 is what we saw in the early days of Ukraine

14:19 where what they really wanted was more Stingers and Javelins.

14:22 The problem is is that we once we burned through

14:25 our inventory in the warehouse of the Stingers and Javelins,

14:28 the assembly line to build Stingers and Javelins didn't exist.

14:31 All the people that worked on those assembly lines were retired.

14:34 And so the primes were literally calling people out of retirement

14:38 to come back and teach them how to build Stingers and Javelins again.

14:42 And so these are problems that we're trying to avoid

14:44 by the design of the factory as a as an initial concept.

14:48 Who funds it?

14:48 So is there a government contract

14:50 that supports the production of these facilities?

14:53 And are multiple companies going to be able to afford

14:55 to to stand these up to make these investments or is this just

14:58 going to end up being an Anduril because you've got most

15:00 of the capital and you guys are going to roll these facilities out?

15:03 And how do we make this kind of a national interest?

15:05 Well, our business model is definitely very different from the primes

15:09 who are basically responding to things

15:11 as requirements directly from their customer.

15:12 So they're not really investing a whole lot forward of the capability.

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

15:20 R&D investment and then we're selling the outcome,

15:23 the output of that as a product.

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

15:27 Um, but I I do think that there's a tremendous amount of capital

15:30 that's required to pull this off uh as a new entrant to the space.

15:34 Um, I don't think that the market is going

15:36 to support a hundred new primes or something like that.

15:39 Uh, I'm hopeful that it's not just Anduril.

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

15:44 Um, but, you know, being able to raise that amount of capital,

15:47 hire the people that you need to actually pull it off.

15:49 Uh, this is not It's not like building a a a normal tech company.

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

15:56 It's, you know, there's a lot that goes into this.

15:58 Tracepoint might seem kind of obvious or simple,

16:00 particularly to an audience that's largely coming from tech or Silicon Valley,

16:03 but that's not how defense works.

16:05 People don't build products.

16:06 People build to a spec that the government says,

16:09 "This is what I want to buy." And then you kind of say,

16:11 "Yes." You know, you have to think about defense as a monopsony,

16:14 where there's a single buyer for the thing.

16:15 And that concentrates an enormous amount of power in the buyer,

16:19 whether they're right or wrong.

16:20 And if you look at the history of defense innovation,

16:22 typically the monopsony's wrong.

16:24 You know, it was Churchill as the head

16:26 of the Royal Navy who built the tank because the British

16:28 Army was not smart enough to realize that in the next

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

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

16:35 There There's a founder-like figure who is

16:37 so committed pathologically to a different heretical concept,

16:42 they see it through and only in combat or only

16:45 when it meets the moment is it actually validated.

16:47 Now, a grave threat like the Soviet Union is

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

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

16:55 Today in peacetime, that would be viewed facilely as wasteful.

17:00 Why should you have eight competing things?

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

17:04 you know, spend less or put all your wood behind one arrow.

17:06 And of course, that kind of turns its back

17:08 on our fundamental belief in America on the free market,

17:10 that there's a competition of ideas, there's fundamental uncertainty,

17:13 there's quality like variance in the quality of the execution,

17:16 and that you need this competition.

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

17:22 it's also competition inside of government.

17:25 And there were originally,

17:26 I think or at one point, 51 major defense contractors.

17:30 And just for the audience to understand,

17:32 they reduced down to roughly five or six primes.

17:35 That's That's the term prime.

17:37 It's one of these prime contractors and then they make

17:38 sub contract out to other companies to develop componentry parts.

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

17:46 show up with something that's cheaper,

17:47 better, faster, and actually competes on the merits rather

17:51 than be caught in this kind of prime landscape.

17:53 And that worked clearly.

17:55 But over time, there seems to be

17:56 a lot of capital concentrating into the new primes.

18:00 You guys, you guys, SpaceX, OpenAI, maybe one or two others.

18:05 Is the landscape going to emerge that it We're

18:07 going to just look like the same old way

18:10 of operating where we have a handful of primes

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

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

18:19 innovation and make things affordable for the US

18:22 government and the taxpayer going forward?

18:24 Well, just like uh and and I interview Trey

18:26 in my new book on this, like just like venture,

18:29 there's going to be a power law here.

18:30 You know, so so one of the grave

18:32 mistakes we've made as we think about innovation,

18:34 which has resulted in essentially innovation theater,

18:36 is this idea that you're going to just peanut

18:38 butter spread around the capital you have for innovation.

18:40 That, you know, every company's going to get roughly the same amount.

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

18:45 It doesn't reflect actually the relative

18:46 performance differences cuz there's an authentic

18:48 power law curve like any venture capitalist would would realize that, you know,

18:51 your your biggest winners are going to return your whole fund.

18:54 There's There's something authentic here as well,

18:55 which is like, yeah, you may have 10 bets,

18:58 but you at some point you're going to have to get

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

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

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

19:09 you probably lost money.

19:10 If you're a crypto infrastructure investor and you didn't invest in Coinbase,

19:13 probably lost money.

19:14 If you're a social media investor and you didn't invest in Facebook,

19:17 you probably lost money.

19:18 And yet, for some reason, capital allocators have a very short memory.

19:22 They don't have the ability to go back

19:24 to the the prior boom cycle and say, "Oh, wait.

19:28 I remember what happened that last time.

19:30 We had to concentrate capital down to the winner."

19:32 And I think that this is this isn't any different.

19:35 was the motivator then for change

19:37 in the construction of the landscape of defense contracting?

19:40 Was it software that takes us from the old primes to the new primes?

19:43 Is that really what kind of triggered this cascade evolution?

19:47 So, in '93, having won the Cold War in '91,

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

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

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

20:01 And the department had this famous dinner where they

20:04 brought 15 of the 51 primes together and said, "This is going to happen.

20:08 The budget's going to get slashed.

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

20:11 You have our permission to consolidate.

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

20:13 Some of you should try to make a commercial business,

20:15 which didn't really work." And that's what led down to five.

20:18 It was actually there was going to be we

20:19 were going to go from five to four in '99,

20:22 the Justice Department put their foot down and said,

20:23 "We're not going to let Lockheed and Northrop consolidate." Right.

20:26 And then today, so the change over, what gave you guys the window,

20:30 what gave you guys the window to build the business that you built?

20:33 I mean, what did you see early on 20 years ago

20:36 and continued forward in the hardware side that made you say,

20:40 "This is This is the moment." Is it software that enabled this?

20:42 Well, I'm going to throw you under the bus a little bit on this.

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

20:50 I can't tell you how many meetings even we

20:52 had together where we walk out and be like, "This is not going to work.

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

21:00 Right.

21:00 You know, Early days at Palantir.

21:01 Yeah.

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

21:05 Yeah, yeah.

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

21:09 Uh that that's the strength of the monopsony, right?

21:11 And and really I'd say our our entire

21:14 business was validated from the field backwards, right?

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

21:20 No one wanted to interact with us.

21:21 The like the where the monopsony is strongest.

21:23 At the margin in the field where people are saying like,

21:25 "Well, I'm on this deployment.

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

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

21:31 I'd like to come home.

21:32 How do I like bend the rules,

21:34 figure out how to get the software I need." That allowed us to empirically show,

21:38 you know, create facts on the ground that this stuff worked.

21:40 It was a long road to hoe.

21:41 I think this is part of why it took 20

21:43 years to kind of get to this sort of point here.

21:45 And yeah, I I think that a lot of those lessons

21:47 that were learned were not only like educational for Anduril,

21:50 but it also created a precedence that already existed by the time that we

21:54 showed up where we didn't have to go through all of those same growing pains.

21:57 So, you know, what took Palantir I guess probably about

22:01 5 years to get to 10 million annually in revenue, we did that in 22 months.

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

22:07 I think it was mostly a credit to me,

22:08 Matt, and Brian lived the 5 years of Palantir.

22:12 5 years plus 22 months.

22:14 Yeah, yeah, exactly.

22:15 And so, we kind of had a bit of a cheat code, but yeah,

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

22:20 where it's like actually just easy to do this now.

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

22:25 I think it's just that there's enough people out there

22:27 who have seen it that understand how to make it work.

22:30 Um that you can work within the system rather than

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

22:35 Was there a view at that time in these years

22:37 building Palantir where you saw an opportunity in hardware?

22:40 Is that kind of the motivation for Anduril?

22:42 That we've got software, but there's more to do and hardware

22:46 could be reinvented and we could build systems.

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

22:49 Yeah, in the very early days actually,

22:51 I came by to pitch Sham uh it before we officially started the company.

22:56 Uh and I think part of that pitch was we said, uh "We know how hard software is.

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

23:02 We believe hardware would be less hard.

23:04 Uh And I think we ended up being right from like a getting going perspective.

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

23:12 about the value that's created by software.

23:14 Maybe you feel like they're a little bit better now,

23:16 but it was really hard in the early days of Palantir to convince

23:19 them to think about it as anything other than lines of code,

23:22 for example, or some like metrics that anyone

23:25 that works in tech knows doesn't matter.

23:27 But for hardware, they know there's a bill of materials.

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

23:32 During the Cold War, there were literally ammunition factories that were

23:35 owned and operated by the United States government.

23:38 So they can kind of go through a spreadsheet and say,

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

23:43 I know how much margin I'm comfortable paying you." And it's a much easier,

23:48 you know, crossing over the Rubicon.

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

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

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

23:57 which doesn't make any sense if you think

23:58 about it the R&D that you put into software.

24:01 Like the marginal price you're paying is a small fraction

24:03 of the R&D we're amortizing across commercial and government customers.

24:07 And I think it may maybe Trey it's it's worth

24:08 telling the story of how when you got to Founders Fund,

24:11 you were looking for defense companies to invest in and hitting so

24:14 many dry holes is is part of what led to the idea.

24:18 Yeah.

24:18 Yeah, I mean, I have no I had

24:20 maybe still don't have any interest in venture capital.

24:23 And so when Peter asked me to come over to Founders Fund,

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

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

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

24:36 And so I pulled that list and then at the time I was using Crunchbase.

24:40 And then I just started outbounding

24:42 to companies that were bidding on federal contracts.

24:44 And I met with hundreds of companies in the first

24:47 three years that I was at Founders Fund.

24:49 We may ended up making one investment in KDM,

24:52 which was renamed Expanse and acquired by Palantir Networks.

24:55 But otherwise, that was it.

24:56 There was nothing else.

24:57 And even like looking in retrospect, like we didn't miss anything.

25:00 There was just nothing worth investing in.

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

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

25:09 "Man, I feel like someone should be

25:10 building a next-gen prime that builds hardware,

25:13 but it's software-defined and hardware-enabled rather

25:15 than being hardware-defined and software-enabled." Um, and uh to my surprise,

25:20 the team was like, "Yeah,

25:21 sounds like you're probably the guy that would know that that's the gap.

25:24 And I don't know, maybe you should start a company." And I'm like, "Oh, no,

25:27 you you guys hired me to work on the investment

25:29 team at Founders Fund." They're like, "Yeah, that's fine.

25:32 You can you can do that, too.

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

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

25:42 didn't have the success you had

25:43 building the manufacturing facility you're building.

25:45 And I'm assuming all the R&D cycles are longer

25:48 and require more capital to get to a point of product.

25:51 Does it make sense for venture capital to be

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

25:58 How does the economics and the capital markets I'll

26:00 I'll give a take here and then you So, I think um if you back up a little bit,

26:04 if you look at Fairchild, if you look at integrated circuits in 1968,

26:09 96% of all integrated circuits sold were sold to the Apollo program.

26:13 There was effectively a monopoly.

26:14 There was one buyer for this thing.

26:16 But Bob Noyce, who was at Fairchild

26:17 at the time and co-inventor of the transistor,

26:20 he was so maniacally committed to a future that semiconductors,

26:23 integrated circuits would be in everything that he never let more

26:26 than 4% of his R&D be paid for by the government.

26:29 He was going to be like,

26:30 "Why should I have some PM tell me what my R&D road map?

26:32 I invented the thing." So, he kept executing that.

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

26:38 And that meant in the '80s,

26:39 when the government needed precision-guided munitions

26:41 for Assault Breaker to compete against the Soviets,

26:44 we had the price-performance we needed.

26:46 Uh so, this idea that, you know,

26:48 cuz when you get stuck inside the government loop of what they want,

26:51 you never hit the price-performance.

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

26:55 '93 graphics chips, sold them as an OE almost

26:59 like an OEM type solution until here we are.

27:02 The The one that speaks to my heart as a child

27:03 who grew up in the shadow of the Space Coast is shuttle.

27:06 You know, shuttle is is a It's beautiful,

27:08 but it's $50,000 a kilogram to get to orbit.

27:11 Starship heavy reuse will be under 20 bucks a kilogram.

27:15 You know, and there's no way that you will

27:16 achieve that vision if you're in a cost-plus world.

27:19 Because every day you're actually deleting your costs,

27:21 which means you'd be deleting your profit.

27:23 Instead of deleting your costs,

27:24 turning that into margin that you can provide a better

27:26 price performance on and keep riding that curve down.

27:29 Right.

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

27:34 of the exact same federal procurement law that Palantir did.

27:37 And so, you know, even with that massive costs costing down,

27:42 they were in the same position as Palantir was in the early days.

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

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

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

27:55 What's going to happen?

27:56 So, these VCs are plowing money into hundreds of defense tech

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

28:04 How does this going to play out over the next couple

28:06 of years as a venture investor with your knowledge about Anduril?

28:09 I remember when I first got my offer letter from from Palantir.

28:13 There we had this kind of high-low mix

28:16 of salary versus equity compensation and it gave three

28:20 examples of how much your equity at your was

28:23 on your offer will be worth at different valuations.

28:25 It was I think it was 1, 5, and 10 maybe or 1, 5, and 20, something like that.

28:30 And I remember talking to people around the company, they're like, "20?

28:34 That's ridiculous.

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

28:38 And uh you know, I feel like now

28:40 it's like people are going out and they're like,

28:42 "Our seed round will be priced at $20 billion." So,

28:45 I think there's a been a big shift in just

28:48 like the way that people think about these things.

28:50 Um, some of that is good, some of it's bad.

28:52 I think on the good side there, you know,

28:54 they're able to look at companies like Palantir,

28:56 like SpaceX, like Anduril and say there is actually a path to success.

29:00 This isn't like an impossible market to innovate in.

29:02 But at the same time, um, you know,

29:04 there's there's a real tension around amount of capital

29:07 raised and the valuations that are being applied

29:10 to these rounds that add a tremendous amount

29:13 of risk to the company that doesn't have to exist.

29:16 You know, there's this favorite there's this famous scene

29:18 from HBO's Silicon Valley where a CEO gets fired,

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

29:26 Um, and uh, Richard Hendricks, the main character, says, "You know,

29:28 you could have raised less at a lower price." And he said, "What do you mean?

29:32 Haha.

29:33 No one ever told me I could raise less at a lower price."

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

29:39 "Look, your product might be awesome.

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

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

29:45 but you can also raise less at a lower price.

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

29:53 numbers that frankly don't even make sense." Um,

29:56 one of the things that we've been focused on at Anduril

29:58 that I think maps back to our experience at Palantir,

30:00 actually, is climbing down the multiples tree uh, with every round.

30:06 We never want to go and raise the next

30:07 round at a higher revenue multiple than the prior round.

30:11 Um, and even the Series A that you mentioned before uh,

30:14 is is down pretty significantly from the Series G.

30:17 And we're not doing that because investors

30:19 wouldn't be willing to pay higher multiples.

30:20 We're doing that because I believe the discipline is really,

30:23 really important, especially heading into a a, you know, medium-term IPO.

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

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

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

30:39 if there's a, you know,

30:40 a big market that's growing aggressively,

30:42 you've got a $200 billion TAM to go after now.

30:44 Shouldn't that justify the venture capital coming

30:46 in, maybe even justify going at a higher price?

30:48 Is this Department of War investment activity really going to kind

30:52 of change the landscape and increase more venture capital flow?

30:56 I think it's it's going to help out tremendously.

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

31:01 So, uh you know, I'd be honored to be part of that team.

31:03 Uh but I I think if even if you look

31:04 back at the titanium supply chain in the '50s, '60s,

31:07 it was it was bootstrapped by the Air Force in a similar way where they

31:10 strategically injected capital down the supply chain

31:12 to enable the aerospace industry to be created.

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

31:17 Capital to think about where are the structural bottlenecks in the production.

31:20 You can have a lot of drone companies,

31:22 and they're all going to bottleneck on brushless motors.

31:24 There's going to be certain key parts of the supply chain

31:27 that we don't have enough capacity to produce here in the US,

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

31:32 And just like integrated circuits,

31:33 the first customer is going to be less economical than the end customer.

31:37 So, I think that's one part.

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

31:41 The drone is an American birthright.

31:43 Abe Karem and the Predator, we we built it at General Atomics.

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

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

31:50 This thing needs to be ITAR controlled." Also,

31:52 the FAA got in the way and said, "No beyond line of sight operations." Right?

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

31:58 There's a counterfactual world where General

32:01 Atomics had a consumer subsidiary called DJI,

32:05 and the consumer drone market was entirely owned by the US,

32:09 and it provided for economic prosperity for America,

32:11 and wrote us down the price production curve that we could

32:14 be using these things in innovation for national security as well.

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

32:20 I have a lot of markets.

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

32:25 I'm worried about things that go beyond weapons

32:27 of war that affect our will to fight.

32:28 Uh pharmaceuticals is one that's close to my heart.

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

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

32:35 80% of APIs for generic drugs are produced by China.

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

32:41 when they have to choose between defending the free world,

32:43 defending American sovereignty, and their 5-year-old dying of an ear infection

32:47 that we would have thought of as trivially curable?

32:49 So, I think there are these these things

32:51 where we've just imbibed the globalist vision that hey, we'll do the innovation,

32:55 they'll do the production without realizing

32:57 that innovation is a consequence of productivity.

33:00 Probably to put it in terms

33:01 that the that the tech community would really understand is like

33:03 what motivated Google to do the research in 2017

33:07 behind the paper attention is all you need.

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

33:14 You cannot think of something more

33:15 banal leading to something more revolutionary.

33:18 And we've seeded all of those opportunities

33:20 to realize and harness that innovation.

33:22 Now, if you we stick with pharmaceuticals,

33:23 there's a reason 50% of all clinical trials new clinical

33:26 trials are happening in China and not in the US.

33:28 Do you have a view on a technology or product

33:30 that's developed in the US that we're at risk

33:32 of getting regulated out and we're or we kind

33:35 of going in the right direction at this moment?

33:37 I would say like semiconductors is actually really interesting one

33:40 back to your your point about Fairchild is that you know,

33:43 we were the the home of the semiconductor industry for many, many years.

33:47 And you know, once TSMC got got you know,

33:51 ahead of steam in Taiwan, they kind of ran away with it.

33:54 And we didn't rather than investing in a domestic competitor,

33:58 there are all sorts of reasons for this that we could spend hours talking about,

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

34:04 And now we're in a position where almost no amount

34:06 of money is going to fix this problem for us.

34:08 Certainly on a timeline of relevance as it

34:10 pertains to the risk that Taiwan has in 2027.

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

34:16 Getting back to defense,

34:17 how does the hardware and software fit together in this you know,

34:21 kind of emerging war technology landscape?

34:24 You guys are building software, you're building hardware,

34:26 like help us understand a little bit about what

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

34:31 Well, I I think the the starting premise

34:33 would be where does it give us an advantage?

34:35 And you know, we had the first offset which was nuclear weapons,

34:37 the second offset precision guided munitions and stealth.

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

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

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

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

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

34:53 Like all innovation is messy and chaotic and maybe the department

34:57 suffers at times because it tries to have a a framework-based approach.

35:01 Like we're going to have MOSA,

35:02 modular open standards architecture, something like that.

35:05 You know, it's like we're going to avoid all

35:07 of the pain and messiness by having some sort of process.

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

35:14 And so there there's obviously a very tight thesis where

35:17 these things need to coexist and build off one one another.

35:20 They need to be interoperable.

35:22 But you have to earn that.

35:23 You have to earn that opinion in the exercises and the test

35:26 and the evaluation in combat would be my my humble suggestion.

35:30 Do you think that outside of what Anduril's building,

35:34 there's actions that this administration should be

35:38 taking or that the private market should

35:41 be taking to solve this hardware manufacturing

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

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

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

35:50 but you know, even something as simple

35:52 as reimagining munitions and drones as consumables.

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

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

36:00 you already have an exercise test plan where you plan to expend them,

36:04 which means that you're going to have to replenish them,

36:05 which means there's a demand signal to industry to keep going and and a buying

36:09 cycle that means that you can buy

36:10 the next generation rather than having the old generation.

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

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

36:21 all the portfolio acquisition executives.

36:23 To the point of not believing in process,

36:24 they've moved from a world where you have a very rigid, "Hey,

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

36:31 to a world where there's more autonomy and authority

36:33 for the people who are buying things to say,

36:35 "I told you I was going to buy something that accomplished this goal.

36:38 I can change my mind about how I'm

36:40 going to accomplish this goal." Which, you know,

36:41 can you imagine trying to run any private sector business

36:44 without that degree of autonomy and and flexibility in your decision-making?

36:48 To echo Sham's point about what the administration is doing,

36:50 there are a bunch of swings that they're taking.

36:52 It wasn't that long ago that uh in the Obama

36:55 administration there was kind of the Solyndra failure

36:57 where they invested in this solar panel company and ended

37:00 up being a bad investment for the US taxpayer.

37:03 Um but now the Office of Strategic Capital

37:05 is taking a really hard look at critical minerals.

37:08 They're looking at, you know,

37:09 refining of of minerals and uh they're engaging directly with the private sector

37:14 to come alongside them in doing deals

37:16 to get off-take agreements on these things.

37:17 So, uh I think there is some really clever thinking going on.

37:21 Um and then in addition to that, I think

37:22 the procurement process is sort of up for revision constantly.

37:26 Um and Ash Carter started pulling a lot

37:29 of these threads during the Obama administration.

37:31 That was the third offset initiative.

37:33 Um but, you know, we're in a in a world

37:35 today where there's kind of a renewed vigor around being asked,

37:39 private industry being asked, "What do you need?

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

37:43 do business in order to streamline this and make it go faster." So,

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

37:48 Do you guys think these changes have

37:50 been institutionalized or are they political party dependent?

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

38:01 do you think that there's a reversion to the old

38:03 way of operating that's going to have some political

38:06 influence and change things or do you think we've really

38:08 changed how things are are running in the government here?

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

38:12 So, you can go back to, again, Ash Carter,

38:15 Democratic administration, highly focused on fixing these problems.

38:19 The current Trump administration, highly focused on fixing these problems.

38:24 And that you know, there are a lot of people

38:26 that that were in the middle of that that didn't prioritize this.

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

38:33 And so I think we always think of like the bureaucracy

38:36 as being a political infrastructure

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

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

38:43 It's just do we have the right people that understand

38:45 the set of the problems that we're we're facing.

38:47 I couldn't agree more.

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

38:49 Like you you know, that the entropy

38:51 of the bureaucracy is always towards some sort of sclerosis.

38:54 It doesn't it's not a political statement.

38:55 It's just is what bureaucracy does.

38:57 When David Packard, who's probably the last major

39:00 technology co-founder who served in the Department of Defense,

39:02 when he came up with the 5000 series on acquisition,

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

39:10 Well, he his document was seven pages long.

39:12 In the in the years between when he wrote that and now it's 2000 pages.

39:16 So did he really screw us or did just

39:18 the entropy take hold and there was no strong

39:21 leadership in between to go do the bushwhacking and mow

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

39:25 Now, you know, this this administration's blown up JCS,

39:28 which is kind of one of these insane bureaucratic processes.

39:31 Like can you just take a forget a scalpel,

39:34 take a machete and start clearing the jungle and re-earn

39:37 some of these lessons as you go through it.

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

39:41 he built 41 airframes in his career including the SR-71,

39:44 still the fastest flying manned aircraft, and and the U-2 which we still fly.

39:48 Like what you look at his rules.

39:50 One of his rules was he had to play

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

39:55 And I think you could you know, okay,

39:57 it's not it's not a critique of government.

39:59 You could think of big corporations.

40:00 When the big corporations bureaucracy gets into the innovation folks,

40:03 the innovation stops.

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

40:07 They were founders.

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

40:10 Like the to the Kelly Johnson point,

40:12 the U-2 did not start as a US military aircraft because they didn't want it.

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

40:22 And and it was kind of finding the right

40:24 person that was willing to take the risk

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

40:30 This is the same with Benny Schriever with ICBMs,

40:32 Admiral Rickover with the nuclear navy.

40:35 It used to be about people.

40:36 But today, if you were to go

40:38 to the Pentagon and say who's responsible for the F-35?

40:42 I'm not sure they even know.

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

40:45 We're we're building systems by by committee rather

40:48 than trusting the founders and people of the world.

40:50 like a proclamation.

40:51 It's so great.

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

40:55 Like the objective is it's it's being the money's

40:57 being spread around versus How do you achieve the objective?

41:00 The F-35 has components manufactured in 400 congressional districts.

41:04 Right.

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

41:07 this AB test with SLS and Starship, right?

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

41:13 But this AB test has been played out.

41:15 I do think there's something about the kind of Calvinist

41:17 spirit of America that sometimes gets us to misunderstand.

41:20 You know, we call it the Apollo program,

41:22 but it was probably it's it's really the Gene Kranz program.

41:25 You know, it's the F-16, but it's really John Boyd's plane.

41:28 And and there's like a humility where we never want to call it, you know,

41:32 you wouldn't call it although I maybe the nuclear

41:34 navy we kind of do call it Rickover's navy.

41:36 But there's an element of like it's obviously both things.

41:39 It's bigger than the person,

41:40 but actually the starting conditions require the founder figure.

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

41:47 You know, we highlighted some of the statistics,

41:50 but if you guys were to think about what we need to accomplish,

41:54 the infrastructure we need to stand up to have production lines that can be

41:57 turned on to support munitions capacity

42:00 for conflict in, you know, pick your region.

42:03 Let's say more than one region around the world,

42:06 and the US needs to sustain those conflicts to defend the United States.

42:10 How far are we from being ready based on what's going

42:13 on in the investments that are being made today across the sector?

42:17 I think the the way I think about it is if you thought about this as a spear,

42:20 the tip of the spear is incredibly sharp.

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

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

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

42:33 You know, the the demand side is the real

42:34 world events that happen at the combatant commands.

42:37 The the supply side are what the services and the industrial base built.

42:41 The man train and equipment how you're actually producing that material.

42:44 And the ability to drive consensus,

42:46 which is really the beating heart of any private

42:48 sector company of like how do supply and demand

42:50 come together what's our view of it is is

42:52 kind of managed with with great difficulty in the Pentagon.

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

43:01 That's that's where we can have a lot more

43:02 precision because if you can start changing your mind

43:04 and saying actually I thought I needed X barracudas

43:06 but now I need Y barracudas and Z furies.

43:10 How quickly does that take to percolate through the supply base?

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

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

43:18 And then you start over time the entropy is like hey

43:22 I need to I have an I have an unexpected bill.

43:24 Let's just take a little bit of money away

43:26 from these programs and everything starts getting down to minimum

43:28 rate production which is this idea of what can I

43:30 produce just keep the line open which is not deterrent.

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

43:35 And that this is where my my idea of like you got to tie this into consumption.

43:38 Like everything you're building particularly

43:40 on the munition side needs to be consumable

43:42 such that you know you're going to replenish it such that the primes

43:45 and the neo primes all have the demand signal they need to keep going

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

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

43:55 you have the military industrial complex and they're just in it to make money.

43:58 Well, it's it's kind of a crappy business.

44:00 Like you know, these companies trade at like less than two times revenue.

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

44:05 But Trey, Shawn said in the past, we have 8 days of munitions on hand

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

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

44:17 chain built and the production capacity built to meet that objective?

44:21 Well, I mean, one of the other things Shawn just said

44:23 in this conversation is that there's a high-low mix question as well.

44:26 Like, there are exquisite systems that are like

44:28 the multi-million dollar interceptor missiles, and then you have,

44:31 you know, dumb munitions,

44:33 things like bombs that are being dropped and things like that.

44:35 But, it's not the same across that entire stack.

44:37 You know, there are some some munitions that are woefully under supplied,

44:41 and we have very low readiness on, and there

44:43 are others where I actually feel pretty good.

44:45 From an Anduril perspective, you know,

44:47 we're looking at ramping as fast as we can.

44:49 We just opened our arsenal yesterday to start producing furies.

44:53 And, you know, looking out over the next 18 months,

44:57 we're not taking our our foot off the gas,

44:59 and yet there's still a run rate capacity that we're running into as we ramp.

45:04 Like, you it just takes time to get all these lines stood up.

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

45:11 I think over the next 18 months as a country, we could get to the point where we

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

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

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

45:23 and and I think that unless there's real

45:26 political leadership that steps up to drive this forward,

45:29 we will likely be in a similar situation for a long time.

45:33 And so, I think we really need to to take advantage of this specific

45:36 moment where there's clearly urgency that is

45:39 understood by by leadership across the administration.

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

45:46 Is everything going autonomous?

45:47 Is it just drones, or is there on the ground autonomous?

45:50 Right now.

45:51 Well, I I would actually argue that like the wars

45:54 you were to build for the 18-month out Yeah, I mean,

45:56 the wars of today are fought with the the weapons of yesterday.

46:00 That's like just a fundamental truth.

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

46:05 Like B-2s are incredible.

46:07 Uh the bombs that we dropped last summer in Iran, incredible.

46:12 Like these are very high-tech exquisite systems.

46:15 Patriot missiles, incredible.

46:16 They're very performant.

46:18 Uh they hit their targets almost every time.

46:20 I mean, these are great systems.

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

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

46:28 And so, uh you know, thinking about the wars of the future,

46:31 it means that we need to start building these attritable mass systems

46:34 today so that they're in inventory to be used for those complex.

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

46:41 at a level of deployment that they're active and being used in in combat today,

46:46 but it's still a very small percentage

46:48 of of the way that the wars are being waged.

46:50 Um over, you know, the next 5 to 10 years,

46:53 that high-low mix is going to have to shift massively.

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

46:59 It's clearly evident in Iran.

47:01 Uh and I think the department is making steps to ensuring that they

47:05 have a better divide of low-cost

47:08 attritable systems and those high-cost exquisite systems.

47:11 Um but, uh you know, as I said,

47:13 it's going to take political leadership to get there.

47:16 Uh but we we have the ability to do it.

47:18 The reason I ask is I want to talk

47:19 a little bit about the ethics of technology to war,

47:23 the Anthropic run-in with the Department of War recently.

47:27 And I think you guys have both talked publicly about this.

47:30 But Anthropic refused to let its Claude model

47:33 be used in Maven without human oversight constraints.

47:36 This is what's been reported, what Amiel Michael has said.

47:39 And the Pentagon labeled them a supply chain risk.

47:42 Both AI and generally autonomous systems beg the question,

47:46 what role should humans have and who should have

47:49 the right to play that role of hitting the kill switch?

47:53 What's your view on the role of the technology vendor to the Department of War

47:58 and where you guys draw your line

47:59 on what your responsibilities are with respect to ethics.

48:04 Well, my my view on my responsibility to ethics

48:06 is a slightly different question than my belief in democracy,

48:09 which is a different thing.

48:11 Um so maybe starting on on the democracy point,

48:13 um I believe that the people of America have elected representatives

48:17 to make really hard decisions about how we engage in combat.

48:22 Full stop.

48:23 Um fully autonomous weapons are not new.

48:25 We've had autonomous systems in operation like Sea Whiz,

48:29 which is deployed on uh naval vessels,

48:32 that shoots down aerial threats fully autonomously.

48:34 You don't have time to make decisions about,

48:37 you know, incoming missiles or threats to your ship.

48:39 You just have to shoot it down.

48:40 So that's what Sea Whiz does.

48:42 Now, Sea Whiz has accountability in the system.

48:45 There's a person on that boat that is

48:47 responsible for whatever actions that weapon system takes.

48:51 And I believe that this is the future of autonomous systems.

48:53 Is that just like any other system, whether it's a soldier carrying a gun,

48:57 they are accountable for what happens with that gun,

49:00 or uh you know, the captain of the naval vessel,

49:02 they are responsible for what happens with that Sea Whiz.

49:05 All of your autonomous systems are going to have accountability baked in.

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

49:11 You know, I believe that, you know,

49:13 what Shawn was saying about the first offset,

49:15 the second offset, and the third offset, um is, you know,

49:18 we have we as a society we went from like rocks and sticks to, you know,

49:24 knives to guns to bombs and then in, you know,

49:28 World War we kind of plateaued with nuclear weapons.

49:31 And we all looked around at each other and we said, "Wow, that's pretty crazy.

49:36 I don't think we want to make more and more powerful nuclear weapons

49:39 forever." And so actually our engagement in combat has come back down the chain.

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

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

49:51 avoiding casualties, unintended casualties.

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

49:56 And if you look at AI as the command

49:58 center for making better decisions with better precision,

50:02 with better discrimination, with less less civilian casualties, this is good.

50:08 It's actually ethically far improved from just dropping dumb

50:12 bombs on areas of cities to eliminate military facilities.

50:15 So, I don't think abstention from participating in the building

50:20 of technology for national security is a morally neutral decision.

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

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

50:29 a company in this space that I believe that this is ethically just.

50:33 And I trust in our democracy to deploy those tools

50:36 with the interest of the American people at heart.

50:39 There's a lot that's said about Palantir enabling a surveillance state.

50:42 We had the All In Summit in September.

50:44 Alex Karp, your CEO, spoke.

50:46 And there was a protest group

50:47 outside protesting Palantir powering a surveillance state.

50:52 I just want to give you a chance to respond to that.

50:54 Number one.

50:55 And number two, if you saw that Palantir's

50:57 tools were being used in an illegal way, where's the responsibility for Palantir

51:02 as a technology vendor in addressing those concerns?

51:05 It's almost hard to respond to because it's

51:07 very unclear what surveillance people think we're doing.

51:10 You know, there's just there's like a broad

51:12 almost maybe an outgrowth of Terminator fear around technology.

51:15 to get into that cultural question next.

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

51:18 We don't collect data.

51:18 We don't have any data.

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

51:23 It's like this is a way of bringing your your own

51:26 data that you have lawful authorities to collect together to make decisions.

51:30 Sounds a lot like Excel.

51:31 But it's, you know, because we are

51:34 unabashedly patriotic and serve the US military,

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

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

51:44 With much more security.

51:45 With auditability.

51:47 You know, it'd be as Karp says it it's the most insane platform in the world

51:50 to try to do something illegal in because you are going to be caught.

51:53 You know, like that was part of the idea

51:55 of how do you enhance privacy and security?

51:57 How do you build more civil liberties protections in it?

51:59 How do you have a normative view that enables

52:01 a democracy say these are laws and rules, the system will enforce it.

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

52:08 Uh so that's one piece of it.

52:09 The other piece of it to come back

52:10 to this broader point is the the need for epistemic humility.

52:13 Like one of the Um to the point of we have elected officials,

52:17 um they are accountable for these policy decisions.

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

52:24 a perspective other than lawful use because

52:27 if you are salami slicing the policy, that's actually tyranny by tech bro.

52:31 You know, a small number of people are constraining the maneuver

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

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

52:41 And we've been in this perspective where if you go

52:43 back to how did the Soviets get the nuclear bomb?

52:45 You know, there's really there's two sources of treason.

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

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

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

52:58 His brother Edward Hall built the Minuteman missile.

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

53:03 But Theodore said, you know, I'm one of the best physicists in the world.

53:06 I'm probably also one of the best geopolitical strategists in the world.

53:09 And I think the only way to have world peace is if two countries have the bomb.

53:13 So in 1944 Theodore Hall walked into the Soviet trade mission

53:16 in New York and gave them critical secrets to the bomb.

53:19 Now Theodore thought he was going to deliver world peace.

53:21 Instead, every death from communism since 1949 is actually on his hands.

53:26 And there's no accountability for that.

53:28 Yeah, I think it one of the other things that comes up

53:30 in these these conversations about powering the surveillance

53:34 state is this belief that we have policies,

53:37 but we don't actually want our civil servants

53:39 to have the best technology to enforce those policies.

53:42 And it's almost like a a lack of belief in the institution of democracy.

53:45 It's like, you know, traffic cameras, for example.

53:48 It's like, man, I'm sort of libertarian in some ways.

53:50 I don't love traffic cameras, but if traffic cameras say,

53:53 "I'm going to send a ticket to every single

53:55 person that blows through this red light." I don't know,

53:58 maybe we have to change the policy around red lights if you don't like that.

54:01 Or I've gotten three speeding tickets in San

54:03 Francisco from autonomous cameras in the last month.

54:05 Well, they did ramp it up significantly,

54:07 which is incredible that they're enforcing laws at all,

54:09 if we're being I mean, like here's my ticket.

54:12 And then I'm literally watching the guy while I'm

54:13 doing 3 miles over the speed limit, you know,

54:15 take heroin needles out of his arm and put it

54:18 on the floor next to next to an elementary school.

54:21 But it's the same thing with like, you know,

54:23 using using tech for better enforcement of tax law or something like that.

54:28 Like, do you Is what we're saying by criticizing what Palantir is doing,

54:32 is what we're saying that we don't want

54:34 our civil servants to have the best tools possible?

54:37 Because you can have that position.

54:39 I tend to think that that position is pretty morally bankrupt,

54:42 but I guess you could have that position.

54:43 But ultimately, I think that's what it is.

54:45 So, scenario play this for me because there's a public perception,

54:47 I don't know how far-reaching it is,

54:49 that there's some tied corruption between government

54:51 officials that use technology that's super advanced,

54:54 that's hard for people to understand, and the technology vendors.

54:57 If you saw government agencies using your technology, either of you,

55:00 in illegal way that you knew broke the law, do you report it?

55:04 100%.

55:05 Yeah, to the IG.

55:06 There's an entire mechanism there.

55:07 There is an IG in every agency.

55:09 Right.

55:09 So, can you just just explain that for a second?

55:12 The Inspector General maybe Yeah.

55:13 So, every agency has an Inspector

55:15 General who's an independent organization that you

55:18 can provide anonymous or non-anonymous complaints to that then have the ability,

55:22 the statutory ability to do an investigation

55:24 in unfettered way inside of that organization,

55:27 whether it's the Department of War or Housing and Urban Development,

55:31 like literally every single agency.

55:33 And this mechanism is used.

55:34 I actually, you know, in in it was weaponized against one of my favorite

55:38 heretics and heroes Colonel Drew Cukor who invented Maven,

55:41 the founder of Maven, really.

55:42 But you know, people would file complaints claiming

55:44 that he was hiding illegal immigrants in his basement,

55:49 a basement that he doesn't really have.

55:50 You know, but but all of those things were investigated.

55:52 Naval Criminal Investigative Services went out

55:53 to his house and actually looked into these things.

55:55 So, people take this incredibly seriously.

55:57 Where does the culture come from?

56:00 The anti-defense tech alignment culture?

56:03 Is it because of the peace era that we

56:05 had and folks took for granted national security?

56:09 I think the first schism was really during Vietnam where

56:12 people felt like they were lied to about the war.

56:15 It drove a fundamental schism between academia and defense.

56:18 And that we've never really healed from that schism.

56:20 And so, there's this this this kind of sense,

56:22 this distrust that's that's brewed there and kind of escalates your society.

56:26 The second schism is like the number of people

56:29 who are prior service or or connected to this community

56:32 who actually see these people as humans and have

56:34 a fully informed mental model of how diligent they are,

56:37 how the work actually gets done.

56:38 What do these words actually mean?

56:40 What is the process like?

56:41 Is is is evaporated.

56:42 So then, their own fears fill how they think it happens.

56:47 And it seems like maybe it's happening more in a cowboy way.

56:49 Maybe it's happening in a way without oversight

56:51 that there is no such thing as doctrine.

56:53 Like there is kind of a cartoon version

56:55 of what's actually happening that I think you know, you're unable to reconcile.

56:59 Yeah, I think if you even look back at what happened with Snowden,

57:03 you know, what was that?

57:03 15 years ago now?

57:04 Something like that.

57:05 Um you know, that there was almost no discussion about

57:09 the investigations that went into like was the data collection actually abused?

57:14 And the answer was like basically not at all.

57:15 There were like less than 12 documented cases where

57:18 someone got access to data that they shouldn't have.

57:20 And it was because of like technology errors,

57:23 not because of the policies that were implemented.

57:26 Um and so, you know,

57:27 we can have disagreements about whether or not the intelligence

57:30 community should have collected the data and stored it.

57:34 Uh but that was that policy

57:36 was renewed multiple times by multiple administrations,

57:40 multiple political parties that had the majority in Congress over decades.

57:45 And so apparently our elected representatives thought that it

57:47 was important enough to keep in the system.

57:50 Um so I think it ends up being this kind of weird policy discussion.

57:54 Uh but the second point that you make I completely agree with about like

57:57 the the kind of distrust of the institution

58:01 uh in in creating the stories for themselves.

58:03 Uh I oftentimes go and do uh guest lectures at Stanford and I always try to ask

58:08 like raise your hand if you have

58:09 an immediate family member that serves in the military.

58:12 No one ever raises their hand.

58:14 It's crazy.

58:15 Like at Stanford, there are veterans that come

58:18 in that go to the GSB and things like that.

58:20 But in like the undergrad undergraduate student population,

58:24 it's incredibly rare for anyone to have any

58:26 connection whatsoever in their immediate family to the military.

58:30 And I I think there's like, you know,

58:31 some of this goes back to criticisms that people like J.D.

58:35 Vance uh the vice president has made about,

58:37 you know, elites in America and things like that.

58:39 But there's just this incredible divide that has happened.

58:42 Um and we're kind of losing touch with that kind

58:45 of salt of the earth middle of the country, you know,

58:47 veteran community that I I feel like was way more

58:50 present during the the Cold War uh and and, you know,

58:54 the World War II before that.

58:55 Do you think that there's any external influence that's driving this culture?

58:59 Are there influences on social media, in mainstream media?

59:03 And maybe just talk about destabilization and the attack vectors.

59:08 I've seen it in other areas of science.

59:10 I don't want to spend time on this show talking about it,

59:11 but there have been traces that I found on external

59:16 folks that want to destabilize American science and industry progress.

59:21 And they create fear, and they put out articles, and then they go social,

59:24 and they they become viral,

59:26 and suddenly everyone believes it even though it's not true.

59:28 Do you see that and have you actually kind of seen that in the sense

59:31 of like attacking the tech companies that are now supporting American defense?

59:35 100% even if you go back to let's stick with Vietnam.

59:39 The Soviets spent $7 million in 2026 dollars funding the peace movement,

59:44 the anti-war protest.

59:45 Now there's obviously some there is an organic element to it,

59:48 but this is just dumping gasoline on the fire to sow division and discord.

59:53 I think in the present day I I

59:55 think you know certainly we see it against Palantir

59:57 where there there's CCP money flowing to organizations

1:00:00 that are protesting us for various domestic issues here.

1:00:03 The it's not isolated.

1:00:04 It's it's broadly a successful strategy for adversaries to sow division.

1:00:08 No one will believe it because no

1:00:10 one wants to believe that they're being influenced.

1:00:12 Right but but I I think Shawn's point is exactly right.

1:00:15 It's like it's actually a brilliant strategy.

1:00:17 Like good for them.

1:00:19 They are they are not our friends.

1:00:20 They are adversaries.

1:00:21 What would you do if you were in their shoes?

1:00:23 It makes a ton of sense.

1:00:24 Do we do that?

1:00:25 I mean look we have we have all

1:00:27 sorts of counter-intelligence operations operating around the world.

1:00:29 The modern art movement was really funded by the CIA

1:00:32 to undermine the kind of Soviet control of art.

1:00:36 You know and it was it was broadly

1:00:37 funded and it wasn't it wasn't directed by CIA but you you can see how we have

1:00:41 cultural values that we want to inculcate and spread.

1:00:45 Do you think we have a shot at recasting the defense industry,

1:00:49 the tech industry that's addressing defense

1:00:52 and aligning it with a notion of patriotism?

1:00:55 And what is it going to take to make that happen?

1:00:58 I don't know maybe writing a book.

1:01:01 Oh yeah you have a book.

1:01:02 That's right.

1:01:02 That's right.

1:01:03 I'm trying to do exactly that.

1:01:04 You know look if if we look at it clear-eyed sense of the world

1:01:07 and and how much deterrence we've lost you you could you could

1:01:10 really say like maybe World War III has already started and 10 years

1:01:12 from now we'll look back and and and be able to perceive that.

1:01:15 Right now I I think you don't need literally everyone to view this but if

1:01:19 you can if you can create a more clear-eyed view of what's at stake here,

1:01:22 not only for you but for your children and their future,

1:01:25 I I think you can you can get people to show up and participate.

1:01:27 And this is this has been America's story all the time,

1:01:30 you know, and usually when we start these things, we are the underdog.

1:01:35 All periods of American greatness have started

1:01:36 when we realized that we're the underdog.

1:01:39 We were the 17th largest army in the world at the beginning of World War II.

1:01:42 You know, and what did a ragtag bunch of farmers and random tradesmen

1:01:46 have taking on the world's largest army

1:01:49 in the British during the Revolutionary War,

1:01:51 you know, and and I I think um having some clarity about what's at stake,

1:01:56 what the counterfactual is.

1:01:57 It's so easy when you're successful to kind

1:01:59 of let the nihilism grow and say like,

1:02:01 "Look how imperfect we are." There's like the self-loathing creeps in.

1:02:04 And this is where I take coming back

1:02:05 to your point on the legitimacy of our institutions.

1:02:08 Like, should these institutions work?

1:02:09 Do they deserve the best software?

1:02:11 I mean, look, if they're public or private,

1:02:12 you can't have doors falling off planes.

1:02:14 You you know, our our government organizations need to provide

1:02:16 the basic services they've signed up to do without fraud,

1:02:19 without corruption, in an efficient way.

1:02:21 And the reason is not just an aesthetic.

1:02:22 It's like in the absence of that, it breeds nihilism.

1:02:25 And the younger generations look at that and say, "You know,

1:02:27 we should just tear all this down." And things will

1:02:29 absolutely get worse in a world that looks like that.

1:02:32 So, it's incumbent on us to wake up every day and fight

1:02:35 for the legitimacy of these institutions to make them more functional.

1:02:39 America's story is never written.

1:02:40 It's every chapter seems to be a whole new arc.

1:02:43 And we're in one right now.

1:02:45 There's a rising socialist movement in the United States.

1:02:48 Can you guys just comment on how much you think that that socialist movement,

1:02:52 cast with whatever term they want to use,

1:02:54 is going to affect our capacity for defense

1:02:58 and resiliency going into the next decade,

1:03:01 particularly as our adversaries are rising?

1:03:03 Well, the argument I've always made is I think

1:03:05 our our greatest threat as a nation is not homicide, it's suicide.

1:03:08 And it's it's in this vein.

1:03:10 It's the internal discord, it's the division,

1:03:13 uh it's the it's the self-loathing,

1:03:14 it's uh you know, things like the socialist movement,

1:03:17 which I think are symptomatic of this internal discord and ensuring

1:03:21 opportunity for our people to the point of a functioning elite.

1:03:24 If you were to go backwards and think about the root cause,

1:03:27 like maybe we don't have an elite that cares

1:03:28 enough about the prosperity of the American people.

1:03:31 And we've made decisions through globalization.

1:03:33 We were told NAFTA was going to be a great thing.

1:03:35 That actually if you lost your job in manufacturing,

1:03:38 why don't you just learn how to code?

1:03:39 You know, there's a certain sort of callousness in that and you know,

1:03:42 I'm not an unabashed free market I'm clearly not a communist,

1:03:46 but there's a sense of where the decision on the margin

1:03:48 actually really does matter and that comes down to leadership.

1:03:51 I think one thing that makes me

1:03:52 a little hopeful is that socialism literally doesn't work.

1:03:56 Um and so, you know, you look at, you know,

1:03:59 what happened in San Francisco even where, you know,

1:04:01 we elect Chesa Boudin as the district attorney and then we're like,

1:04:04 oh wow, this is not going well.

1:04:06 Recall him.

1:04:07 Yeah.

1:04:07 We have the board of education Rooted in a selling point of empathy.

1:04:10 Right.

1:04:11 Right fundamentally.

1:04:12 Yeah.

1:04:12 Uh what happened with the board of education getting recalled,

1:04:15 you know, Daniel Lurie coming in as the mayor.

1:04:17 Uh you know, we felt like we kind of went

1:04:19 into this valley and sort of hit rock bottom.

1:04:22 Um but I do think that people eventually

1:04:24 realize that it doesn't it just fundamentally doesn't work.

1:04:27 Seattle and Washington state are likely going

1:04:29 to lose a large number of their biggest

1:04:31 employers and as that happens they'll come through on the other side probably.

1:04:35 Might take them 7 to 10 years to get there.

1:04:37 It might be painful and it might take them a long time,

1:04:39 but I think they'll eventually come to their senses.

1:04:41 What do you two disagree on?

1:04:44 That's a great question.

1:04:45 Yeah.

1:04:45 Um we actually, I'll be honest,

1:04:47 we bickered with each other quite a bit at Palantir.

1:04:50 Um and usually it was Shawn being right about something and me

1:04:53 taking a long time to come come along to his point of view.

1:04:57 Um but uh yeah, I think, you know,

1:04:59 any of these cultures that are like well functioning are rooted in debate.

1:05:04 Um and you know, eventually But you're avoiding my question.

1:05:08 Whether it's whether it's actions or outlooks.

1:05:12 Whether you should show up to your interview at a tech company in a suit.

1:05:16 Yeah, I know.

1:05:16 Well, no, I I will say this because it actually is part of the story of Anduril.

1:05:20 I thought that it was a bad decision at Palantir to be as quiet as we were.

1:05:25 I thought that we needed to get out there and tell the story so that there

1:05:29 would be data that says things like what

1:05:31 Shawn said about like we don't have any data.

1:05:34 We are Excel.

1:05:35 Um and we had a very kind of quiet reserved comms strategy.

1:05:39 Um And we went back and forth on that a lot.

1:05:41 And when I started Anduril, I was like, you know,

1:05:44 all the positive things we learned about

1:05:46 uh doing business with the government from Palantir,

1:05:48 the one lesson that I learned that we didn't implement at Palantir

1:05:51 is we're going to go out there and tell our story.

1:05:53 Um and I think that's worked for us incredibly well.

1:05:55 And I'll be honest, I think Palantir has come along

1:05:57 to to my my side of the of that debate.

1:05:59 And last question, if we don't do things right, what does 2040 look like?

1:06:03 And if we do do things right, what does 2040 look like?

1:06:06 Economic and defense.

1:06:08 Well, the the economic part is I think the the critical

1:06:10 one cuz national security is not an end unto itself.

1:06:13 It's a means to an end.

1:06:14 And that that end is economic prosperity, the prosperity of the American people.

1:06:17 Um I you know, I think no country's done more to develop the world.

1:06:20 Like how did integrated circuits and microelectronics get to Southeast Asia?

1:06:24 We sent them there.

1:06:25 Yeah, we benefited in terms of trade there, but you know,

1:06:27 like which other winner in a war spent

1:06:31 their own capital to rebuild the conquer conquered,

1:06:34 you know, in Japan and Germany.

1:06:35 And and now you have the stability as a result of it.

1:06:37 So when I think about what could go wrong is

1:06:39 you actually have a Chinese century that we never recover from.

1:06:42 That literally everyone in the world is a vassal state to China

1:06:45 and might makes right in their sort of world, you know?

1:06:48 And we we shouldn't forget.

1:06:50 It's like it's very clear even in the present moment that for the CCP,

1:06:53 it's not enough for China to prosper.

1:06:54 America must fall.

1:06:55 That's an explicit part of the strategy.

1:06:57 Look, it is a business decision if

1:06:58 you want to buy American or Brazilian soybeans.

1:07:00 I actually don't begrudge you one iota which decision you make there.

1:07:03 It's an entirely different decision when you're smuggling agricultural

1:07:06 fungicides into the US so that we can't grow soybeans.

1:07:09 That's the sort of zero-sum frame that I think

1:07:12 2040 will look like if we get this wrong.

1:07:14 And if we get it right, I think what we actually see is

1:07:16 a massive re-industrialization of America followed by the West.

1:07:20 Um we see a thriving middle class,

1:07:22 which I define qualitatively as a middle class that believes

1:07:24 their children's future will be better than their future,

1:07:27 which is something that I feel is is a fundamental

1:07:29 promise that's broken down over the last 30 years or so.

1:07:32 Uh and a belief in our institutions once again.

1:07:35 Yeah, no, completely agree with all those points.

1:07:37 Uh I I think there's a big component here

1:07:39 around education that we haven't talked about as well,

1:07:41 where we figured out a way to educate and successfully enter our young

1:07:46 people into a marketplace that uh needs

1:07:49 them and that benefits from their services.

1:07:52 Um and I I think that we we haven't quite nailed that.

1:07:55 Um but I I do think that the re-industrialization point of this is

1:07:59 going to be kind of the the central point of uh making

1:08:03 sure that China's many many decade Belt and Road strategy is not going

1:08:07 to put us in a position where we literally just can't do anything.

1:08:09 Do we need military and industrial primacy or can we operate in a multipolar

1:08:15 world where the US can share influence and economic prosperity with China,

1:08:21 perhaps Russia, perhaps one or two other nation states?

1:08:25 Well, the the challenge with not being the leader is

1:08:27 that you don't get to set the terms of engagement.

1:08:29 And so I think the the benefit that we have had uh since really the end

1:08:33 of World War II is that we've had the primary seat at the table to say,

1:08:37 "This is how we're going to do uh you know, semiconductors.

1:08:40 This is how we're going to do supply chain.

1:08:42 This is how we're going to protect trade lanes." And I think the moment

1:08:45 that you step back from that uh and someone else has all those incentives,

1:08:49 uh you start playing the rules of their game,

1:08:51 and it doesn't stay multipolar for long.

1:08:54 Well, I really appreciate the two of you being here.

1:08:56 Trey, Shawn, thank you guys.

1:08:57 This has been great.

1:08:59 Thank you.

1:08:59 Thank you, guys.

1:09:00 I'm going all in.

1:09:16 I'm going all in.