Palmer Luckey on Hardware, Building, and the Next Frontiers of Innovation

The very big picture here is in 2017, a lot of people believed we lived at the end of history, that there was no more geopolitical movement of significance to happen, and that United nations could write mean letters to dissuade people from expansionist actions. The cynics were right. The cynics who said, no, war is still a thing of the present. You can't start working on bombs after the war has started and expect to have any deterrent impact. You're just going to be part of fighting wars instead of preventing them.

0:00

All of this stuff that's been talked about my whole life is like suddenly happening. AI is clearly happening. We believe crypto will. Do you think we're entering into this maybe unprecedented 20, 30 year period of expansion?

0:26

Absolutely. I'll give you my thesis for optimism.

0:35

In 2017, most people believed we were living at the end of history. Great power conflict was over. The United nations could write strongly worded letters and that would be enough. Then Russia invaded Ukraine. Palmer Lucky saw it coming. Before the invasion, he tried to sell Anduril surveillance towers to Zelensky, who had read about them in Wired and wanted them on Ukraine's border. The State Department killed the deal. They said Russia wasn't going to invade. Palmer started Anuril in 2017 with 25 people. Bloomberg called it the most controversial company in tech. Wired named him the worst person in Silicon Valley. Today, the company has over 7,000 employees and 25 products. They're the program of record for drone defense across SOCOM and the Marine Corps. Before Andril Palmer founded Oculus as a teenager, sold it to Facebook for 3 billion and watch Meta pour 60 billion into the vision he started. He was also an early Bitcoin holder. He bought a Samsung phone for 8,000 bitcoin and almost became Coinbase's first merchant customer. This conversation was recorded live at a 16z's founder summit. It covers what it takes to build hardware at scale, why the US is spending too much and getting too little on defense, and why Palmer is still optimistic about the next 30 years. Chris Dixon speaks with Palmer Luckey, founder of Anduril and Oculus VR.

0:39

Thanks for being here. I just watched your Joe Rogan interview, which everyone should watch. There's talking parrots, UFOs, China UFOs again. China UFOs in China. Just a lot of interesting stuff. A AR helmet that you built. It's like nerd nirvana at the end of this video. So you guys will have to watch.

1:56

And then UFOs again.

2:13

Yeah, three or four times and there's like alien seed. Joe Rogan has to always talk about the alien seed, human evolution or something. Or the uplift theory was that it.

2:14

Talked about uplift theory, taking non sentient species and bringing them up to or past the point of human consciousness.

2:23

It's a much. It's like old style Joe Rogan of just like deep in every rabbit hole.

2:29

We were going for it.

2:33

It was incredible.

2:34

I recommend going on Joe Rogan if you get the chance. But the one problem is that all of your messaging tools become completely unusable for a period of at least 48 hours. Because a lot of things like inboxes, your SMS, email, it relies to some degree on there being a limited quantity. Yeah. And so if you have over a thousand messages come in from everyone you've ever known saying, bro, so cool on Joe Rogan and everything else in between. And then there's like Palmer, you must finish your security training today or you will lose your clearance. And they're like, palmer, did you get the message? No, no, hang on.

2:35

It's a. On your inbox.

3:10

That's right.

3:13

Joe Rogan. That's awesome. Anyway, so I was lucky enough to meet you back in your Oculus days.

3:13

That's right.

3:18

Which was, I think I remember Mark Andreessa and I flew down and saw. I remember the Dem with the QR codes on the wall. I'm going to turn a little bit. The QR codes on the wall.

3:18

I can't cheat that well. I'm not like a Broadway actor. Yes, Chris, I remember.

3:27

So the demo with the QR codes on the wall.

3:33

Yep, right.

3:36

Obviously. And like for those who don't know, like at the time, like the first developer kit you had tracking, but you had to have the boxes outside.

3:36

Well, what it was is the first development kit didn't have any spatial tracking. You couldn't track movement through space. It was just where you were looking.

3:42

3, 3 degrees, 3 DOF or whatever.

3:49

Exactly. And so then we were developing a 6 DOF system what became the Oculus Rift DK2.

3:51

That's right.

3:56

Like that was the real first modern.

3:56

That was the outside tracking. Is that right?

3:58

We're experimenting with different systems actually. I mean that was an inside out system that you're referring to. We ended up still using an outside in system for the DK2 and then even for the CV1. It took us years to get inside out tracking robust enough that we could take it out of a room that we would show investors and actually get into people's living rooms because we Were talking a little bit about this earlier, but the edge cases are what kills you. It's easy to make it work in a lab. Very, very, very easy. Maybe not really easy, but it's relatively easy. What's hard is when you put it into a real room. Real rooms have glass in them, they have reflections in them, they have other people walk through. Now a large chunk of your scene is moving. You have to reject that. And that sounds easy for the bulk of it, but what about the things on the fringes? What about things like curtains that move a little bit? Or like you scan your scene and then you come back and next time it's moved just a little bit Also fans, ceiling fans, the death of inside out tracking, it's just rejecting all of those things becomes a herculean challenge. And we eventually got it working. That was Oculus Quest.

4:00

And did you do the optics like the lenses?

5:00

That's right.

5:02

The screens were a big issue. That's right. Like for those who don't know, like, I believe only Samsung made. What was it the system?

5:03

Oh, it was even worse. Samsung was the only company that was sort of able to make them. So we were using Samsung displays that were more advanced than was in their smartphones. We were trying to take things that really were engineering samples and prototypes and we were trying to put them into full scale production. And so we had very low yield on those lines. We had to test every display and reject ones that had dead pixels. And in VR you really can't get away with one dead pixel. Forget bright pixels, there's even dead pixels. It's because it's so obviously apparent.

5:08

It's right in your face.

5:37

It's right in your face. It's stretched out in a big way. And then also it's the mismatch between your eyes. One of the schemes we experimented with actually was if you had a dead pixel killing an equivalent pixel in your other eye.

5:37

So at least it's symmetric.

5:47

It actually made it much better. But it was the asymmetry you've ever seen those cross eye puzzles, where you cross your eyes, you can see what's different. That's what it's like having a dead pixel. You're constantly seeing this asymmetric mismatched image. And so those dots stand out so much. Anyway, we ended up not doing that because it turns out customers still disliked dead pixels. But it was a tricky time.

5:48

To me, it was a lesson of I had not invested in hardware and to me it was a lesson of why hardware so hard. There was literally One company, Samsung. And it like, unless it was like, you tell me a couple hundred million dollar order, they weren't even gonna. In fact, isn't that why you did the Samsung deal?

6:07

Samsung Gear VR. Correct.

6:20

Gear VR was successful.

6:21

There was really no amount of money that would to do what we need to make our display, but then we need to deal with them to basically be the software and hardware designers behind the Samsung Gear VR product. So if you bought Gear VR or if you got it for free with your phone, it was Oculus that made that happen. And we sold over 10 million units, which was.

6:23

But they were three DOF. They not six Dolph, right? Correct.

6:42

They were three DOF.

6:44

I always didn't like three DOF because I felt like it wasn't a real thing.

6:45

I agree. It was not the real thing. Look, people forget that I was a hobbyist who started building VR headsets as a 15 year old. And then I got all of you guys to give me a bunch of money to do it. It's a business. And so I knew that 3 DoF was not going to actually work to build this VR revolution. But it got you guys to give us money and like. But like we got from DK1 to DK2 very quickly. And here's the good news. DK1, we sold about 55,000 units, which made it the best selling VR headset in history at the time. By the way, the previous best seller was the Philips Scuba in the us. It was the Takara Dyno Visor in Japan, but combined that same Design sold exactly 50,000 units. So the 55, we specifically sold that much so that the DK1 would be the best seller.

6:47

I'm not.

7:32

And then we sold 250,000 DK2.

7:32

I'm not criticizing you, by the way, I'm just like, you should be criticized. But once you. I just meant once you experience the six dof, you're like, wow, that's the real thing. Because you can like walk around the room. That's right, it was.

7:34

And it was critical to get to that as fast as possible. I mean, I would argue the DK1 days, we knew we were living on borrowed time. We were living in this world where people would see it and they did a five minute demo and they say, oh, this is absolutely incredible. But without six off, tracking it will make them sick and it will make them nauseous. Cyber sickness is caused by a lot of things, but the primary mechanism is that when you have what your inner ear feels mismatch with what your eye sees, your body believes that mismatch must be due to a poison that is interfering with your peripheral nervous system. And so what do you need to do when you're poisoned? Expel the poison. And so we knew that we were on borrowed time. It was a great piece of demo hardware, but we knew we needed to get to really good 6 DOF tracking before too many people figured out what was going on. And we did. And we did.

7:43

Can I tell the selling story we just talked about? Please do. I don't know if it's public. All right, so here's my Palmer crypto story, which is that.

8:28

So I even thought about this.

8:34

Yeah. One was, we had a call once in like 2013. He's like, I wanted to make the store all bitcoin, right? And I was like, I love you, this is awesome. And in fact, you were almost, you said, the first customer of Coinbase.

8:35

So I literally was with Brian Armstrong yesterday and we were going back through my emails to refresh our memory, and I have an email chain of me with Brian Armstrong in late 2012 talking about supporting that. He's like, coinbase is going to be rolling out a payment system. You'll be able to take bitcoin on your website. And we were going to be their very first customer. And I was grilling him. I said, why should I work with you instead of Bitpay? But I did have a. I had a wallet at Coinbase. I was an early bitcoin guy. Like before there were any exchanges on the bitcoin talk forums. Like I told you, I sold banner ads on my website for 400 bitcoin. I bought a Samsung Galaxy S Vibrant, which was the T Mobile's first galaxy phone, for 8,000 bitcoin. Could you imagine if I wouldn't have bought that phone? I could have done so much more bitcoin gambling at the time. But, yeah, and then the lawyers came in. This is the worst part. We got approval and then we got a new coo and he brought in real lawyers. And they stopped us. They said, how do you handle the taxes on this? Is it an asset? Is it a currency? It better not be, or it's illegal.

8:44

And then what happened? This is my story. But I just confirmed with you was true that I'd heard it from Brandon. So Brendan was the CEO and I sort of would talk to him more about some of the stuff. So they got an offer. You got an offer from Zuck, went down to la, saw the demo and was like, this is the greatest Thing ever. And I think maybe on the spot. You tell me on the spot. Offered you a billion dollars or something.

9:45

He was more or less on the spot.

10:02

Yeah, More or less on the spot. Offers him a billion dollars. And then I remember Brendan called me and he's like, we're going to turn down the billion. I'm like, okay, like, why? And he's like, well, Palmer has a lot of bitcoin and doesn't really give a shit about money.

10:03

And this was when Bitcoin was $200.

10:14

Like, literally, that was. I never actually asked Palmer until just now. I was like, was that true? Before I say it on stage?

10:16

It was.

10:21

That was what Brendan told me was a reason.

10:21

I was checking. I was checking. I was checking my wads. Bitcoin at $208. I am set. Yeah.

10:22

But then he came back and offered 3 billion. But the more important thing, when Forbes.

10:29

Gave me the 30 under 30 award in 2014, they had everybody had to give one sentence of advice to young entrepreneurs. And I was on the COVID It said, palmer Luckey, quote, buy more bitcoin. So I was the OG here.

10:34

So then you eventually got to a higher price. But more importantly, just to give context, the real reason for selling was not just, like, personal money. It was the fact that we all saw the writing on the wall, which is going to be billions more R.

10:51

And D. Well, you remember the other side of that. You are the other side of the table on that. So for me, the founder position was I wasn't interested in selling for money. And I also believed that Oculus is going to be worth a lot more than a billion. Why would you sell out for a billion dollars and give up control? The thing that convinced us is Mark came back and said, one, here's why we are aligned in ways that Microsoft and Google is not. Here's why. We want VR and AR to be the next platform, whereas they generally want the status quo to continue. So he gives us. They really did want what we wanted, which was not to sell us for parts or use us to sell more Xbox. No offense to Microsoft. Love those guys. But the real thing that made the difference was that they were willing to put money behind that belief. They said, we will put a billion dollars in R and D behind you every year for the next 10 years, guaranteed.

11:03

I think I was actually in the deal too. As I recall.

11:57

That was the thing that was most important to me, because you start running the numbers, how am I going to get a billion dollars a year to do R and D? Launching a platform takes a lot of money. Xbox spent like 5 billion launching the first Xbox. The content is expensive, the people are expensive, the marketing is expensive. And so we had people like Chris coming and saying, we're going to raise more money than we've ever raised in any company in history. It was $75 million round. The round we did was $75 million, $250 million valuation. It was a big deal back then. And for us to raise billions, I'm not going to have any control of my company. It would have taken years if the market had downturned. And you have a burn rate that relies on a billion a year in VC money. I mean, you're toast.

12:00

I mean, there wasn't a. Back then. There wasn't a billion year. We literally had a Wall Street Journal article that we had a billion dollar fund, and it was like this bubble thing.

12:40

That's right.

12:47

So we put seven and a half percent of our fund, like we could. There's like a limit to it. Yeah.

12:48

And so this offer from Mark, they said that. They said. I actually remember exactly the words. I said. It's in a book called the History of the Future. The author got a bunch of Facebook internal. It's a good book. Bunch of Facebook internal documents. But the email that I sent out to the founders, they're like, oh, yeah, I think zuck might be BSing us. I said, if Zuck is playing us, he's Van Halen. And that was really the thing that convinced us in the end.

12:52

And now they've spent, you said 80 billion.

13:17

The official public number is $60 billion. The way that I look at this and the way that I convince myself that it wasn't so bad that I got fired from my own company that I built as a youth and put my whole adult life into, is that in the end, Facebook didn't really acquire Oculus. Oculus took over Facebook. We became the overwhelming and dominant component of their spend and their R and D and their product. Product creation engine. So that's pretty good. That's pretty good.

13:19

Yeah. No, it's amazing.

13:47

Yeah.

13:48

And it only cost them $3 billion for me to take.

13:49

And it's gotten good. It's gotten good. The meta quest is good. And I think the. You know, it's like I was the.

13:51

Last thing that I worked on before they fired me. Yeah.

13:57

I mean, I still very much believe in VR. It's taken longer than I expected. I mean, as has.

13:59

I'm a true believer.

14:04

And a bunch of stuff can take longer.

14:05

But it is going to work. And there's people who take a kind of glee in its failing. Got to actually look like rationally it is not failing. I think it's not living up to what certain people, myself included, believed that it would be. But when you see these articles, the modern tech press is not the tech press. They're the anti tech press. But when you see modern anti tech press articles, why didn't VR succeed? They're not mentioning that the last version of Quest sold 20 million units.

14:06

They're not mentioning more than the Xbox.

14:36

At least one year, it sold way more than Xbox. Quest 2 sold better for the first three years that it existed than the Nintendo 64. So it's like, ha, what a failure. It only sold better than every game console I owned as a child. Like, it's this. It's because they're comparing it to smartphones. But smartphones are this unparalleled explosion in technological change. Yeah, we're not as good as the biggest change in the way we've used computers in history, but we're like the next. We're only one step down. So by the way, that's just Quest two. You also then had Quest three selling for the same time as a while you had, of course, PlayStation VR, which sold about 2, about 6 million units. We don't have numbers for PlayStation VR 2 yet, but they're definitely selling millions of units. You had HTC Vive, which sold at least 3 or 4 million units. It's like you're looking at a world where there are by any measure low tens of millions of users of this technology. That's pretty good. There weren't that many people using iPhones until the iPhone 3GS. It's like you had to get to the third generation of iPhones.

14:38

2012, that Facebook did their mobile pivot. People forget that it was five years in that it actually was obvious to people that it was the new platform.

15:46

That's right. That's right.

15:53

It's like people have this retrospect, like this retcon kind of of what happened.

15:54

Well, I also, I like to compare it to ipods too. And it's been a while since I did this exercise, but we had some vanity metric where we pointed that the Oculus Rift in the first year outsold the first three years of the ipod. And like it's true, ipod took off in an exponential way later. But by the time it was like those first three years, I mean, it was on the COVID of major magazines, it was winning gadget of the year. All the hottest. Like, like it. It was an it thing to have. And we were, we. And we were, we were outselling it. It used to be that success was enough. That's not enough anymore. It needs to be mega billion success or you're nobody.

15:58

Well, the other thing is that there's.

16:34

You're a failure.

16:35

They're obviously like the ergonomics, the, the visuals, like, they're just obviously going to get better.

16:35

Yep.

16:40

And they're an issue right now. Like, it's kind of. You get sweaty. It's kind of like.

16:40

Right.

16:43

And so, like, I feel like there's hard things to predict, like user behavior, like, but they're easy things. Like, of course they're going to get smaller, lighter, faster, more performant, better graphics, better games.

16:44

There's a great article that's definitely worth reading, very well written on PalmerLuckey.com called Free isn't cheap enough. It's the number one Palmer Lucky blog on the Internet.

16:53

Free isn't Cheap Enough.

17:03

It's written by me, but it's this great piece where I laid out this hypothesis years ago called Free Isn't Cheap Enough. And I argue that the thing holding VR back is not the price per unit. Like, it's not the fact that it's $300 versus $200. It's what you're talking about. It's too heavy, it's too sweaty. The quality and content pipeline is just not there to make an average person, not a gamer, not an early adopter like your mom, to use it. And so when people say, I'm not interested in VR, you can give them an easy hypothetical. Okay, well, wait. What if it was a pair of sunglasses and it was as good as the Matrix and it were $99, would you use it? And. And even unimaginative people are like, yeah, if I could do literally anything that I could imagine in a pair of glasses, of course I would do it. But that's not what VR is. And I say, well, then we're just arguing about when VR is going to take off. It's not if it will. We know the physics allows us to get to something like what I've described. And so I argued that this relentless push on making it cheaper and cheaper is pointless because even if it was free, it wouldn't be good enough for people to keep using. I would posit you could give a VR headset, as they exist today, to every person in America, and upwards of 90% of them would stop using them within a month because it's just the quality's not quite there yet. In other words, free isn't cheap enough to make VR succeed.

17:04

Yeah, maybe even a higher priced better one would be even more successful.

18:25

That was my argument. Unfortunately, people didn't listen to me and they kept going and they launched the oculus go at $99, which went back to being 3 DOF. And that was a whole misadventure. And it ended up. This is one of the things where me and John Carmack were actually at odds. He thought that price. John Karpiska very sharp.

18:28

He always loved the gear, he always loved the.

18:45

He is a very sharp guy and he's a man of the people. He wanted Everybody to have VR. But it turns out that Quest at 399 hugely outsold go at 99. And I think that says something about the shape of it. Now you see Apple and Samsung attacking the high end of the market. I think that has a higher chance of success. I'm praying that it works this gen or we're going to have to go through another bit of a winter.

18:46

Yeah. So you've done. So moving on to Anduril. You've done an amazing job with Anduril. I think some of the things that stand out to me, I mean, first of all, it's just an iconic company and it's. Congratulations. Thank you. Success. But also like you started off, you know, negative press like this, this kind of sense, you know, we won the.

19:07

Wired magazine worst person in Silicon Valley award. Bloomberg called us the most controversial company in tech. So this was back when Anduril was 25 people building drone defense systems. And by the way, this was the Same year that WeWork had be been indicted by the feds.

19:22

Yeah.

19:41

Uber had just ousted all of its senior.

19:41

And you beat them as.

19:44

No. Yeah. The most controversial tech company was Homer lucky and his 24 drone. Drone people.

19:45

Yeah.

19:51

It was incredible.

19:51

So you. So you went from that to now 7,000 people employees.

19:52

You know, depends on how you count it. But if you include contractors. Yeah.

19:57

And sort of, I think an iconic company that is, I assume has gone from maybe having trouble recruiting and you tell me trouble recruiting beginning to now being a talent mag.

20:00

Oh, the opposite. You see our latest recruiting campaign, it was called don't work at don't work.

20:09

Because you don't want the wrong people.

20:14

It is. It has become. So when you're, when you, when you're doing something early and it's really crazy and it's new. This is true with Oculus too. You only get the true believers the people who are there because they want to and they believe in what you're doing, and they could be making more money elsewhere as long as they feel like what they're doing is like, why would you go work at this startup that everyone's laughing about and thinks is a joke, like Oculus was early on to a lot of people in tech? Why would you go there if it's not even gonna pay you well? And the answer is because you really believe in what they're doing. And that's a natural filter for the lily pad jumpers, the thinkfluencers. You know the people I'm talking about. You see them on the LinkedIn. These are the people who. They're AI experts right now. They were AR experts a year ago. They were VR experts a year before that. I guess. Yeah, they were like the social, local, mobile experts before that. Web 2.0, I guarantee they all were Web 2.0 people as well. And Web 3.0, don't forget Web 3.0. 5G.

20:16

Yep.

21:15

People who've been to enough of tech conferences know exactly what I'm talking about.

21:17

That's hilarious.

21:21

And so the problem is, Anduril has now gotten to the point where there's no filter. We are now cool enough to get those people.

21:21

You're too cool now.

21:28

And so it's important to get the right people. It's even more important to repel the wrong people, no matter how well they dress themselves up and hide their true nature.

21:28

How do you discover that?

21:37

So we did a commercial where we showed people how you have to go out in the field and work in the dirt, and your hours are unpredictable and you might see your family, you also might not. And we kind of. There's a guy in the ad and he complains throughout the ad about how awful it is. And then at the end he says, yeah, don't work at Anduril. And the idea was that to a certain type of person who's looking for purpose and mission and adventure, there's a point where he's on a boat with a bunch of special forces guys. They're on a little rubber boat, and he's bouncing around and going off to some forward deployed location, we actually do this. We have a team of hundreds of forward deployed engineers supporting a lot of these missions. And our customers love it for us. But the idea was, to a certain person, they see that and say, oh my gosh, this looks like the coolest thing ever. And to the normal person who wants to play soccer and do yoga, and be home by 5:15. They're going to be repelled by that. And so by the way, same thing with investors. It's important to get investors at a certain point. You become so hot that everyone wants to invest and then you have to figure out how will I repel investors who are not mission aligned. You have to say crazy stuff. You have to really push the limit. You want to generate that conversation in the LP meeting where they're like, why are you investing in this company? And you need them to say we are 100% behind them and here's why. And you can't have the, you can't have the fair weather friends when you're in controversial business and do you think.

21:38

You may manage to do that with 7,000 people? You also must do like in your interviews and your process, you must because they slip through the ads and they.

23:08

Look, you'll never be perfect. But everything you do makes the problem slide this way on the scale towards better and so don't work at Anduril as an ad campaign. Tripled our recruitment on in terms of incoming also we got a lot of more qualified applicants. Mostly it brought in people who are unqualified. But you're trying to move the needle and I think it all adds up. We of course hire people who are bad fits and then we fire them.

23:15

Yeah, yeah.

23:44

They quit themselves sometimes.

23:48

Yeah. The other thing I'll say, and I'm not, I'm only on the out. I mean the firm's an investor but I'm not directly involved. But I'm a fan from the outside and I am just amazed. Like so many startups, like they'll launch a product, especially hardware like every two years and I feel like every three weeks like I just saw you had this new AR helmet and three weeks ago you had I think an autonomous submarine. Like you just launch a lot of stuff. It's kind of incredible.

23:50

Like we have about 25 products. The interesting thing about Anduril is what we're doing, where we're launching many, many, many products and where we are having individual product teams on each of those that are relatively lean is actually easier for me to run as a company than the companies that have to invest in one or two products and grow them to serve everybo. Like the ultimate example of this is these large enterprise software companies where you have thousands of people working on one thing and it has to serve everyone in commercial and consumers and enterprise and government. And like that is a very hard problem to build a product with thousands of cooks in the kitchen. All I have to do is keep making new products and then I keep a small number of cooks in each kitchen. And that, that, that, that, that, that ends up being a pretty self regulating strategy. People are tribal, people work well with a certain number of people. There's only so many people you can have very high trust in where you trust they're truly doing things for the right reason. Where you understand what everyone is doing around you. It's not that much bigger than the size of a home construction crew or a small game development team or you kind of see these natural themes emerge over and over again across societies and across history where it's these groups of a certain size. I mean the founding fathers and I'm trying to keep every business unit as close to that size as I can.

24:11

And they're all sort of engineers and product people, not engineers. I assume you try to eliminate middle management. And there, there was a very brief.

25:34

Period very early in Anduril's history where we had more lawyers and lobbyists than engineers. It was very, very brief. But we had to over invest in that. When you're starting a company in such a compliance heavy regulatory heavy, government interface heavy side. We have never ever had that problem since I'd say we're about 85% engineering. So yeah, we have, we have quite little overhead. We don't have a ton of middle management. We have a lot like we basically have project and team leads that are typically engineers who came up out of other programs. Like one of our program leads is a guy, we call him the king intern because he started, he was Anduril's first intern. So he started when he was 19 years old at Anduril. We were his summer internship and then he quit school, came to Anduril and within 12 months was leading a product. And now he's leading an entire business division. And we've done a pretty good job making a meritocracy where people see the people in leadership roles are themselves engineers who have cut their teeth and proven themselves inside of Anduril. And when you're growing quickly, it's a lot easier. This is a harder strategy for a stable company and I can't recommend it. But when you're introducing products at a sufficiently high rate, there's always a place for you to take these people, to pluck them out and say you're going to be in charge of this new product and you're going to make it work. Using your experience of how to work inside of our organization and the fact that people know you and trust you. Static organizations struggle with this because there just aren't enough roles. It's the how many senior VPs are there problem. It's nice to be growing fast.

25:41

How do you come up. I guess a couple questions on this one. You seem to follow everything in hardware and software. I watch it videos and so like I'm curious how you do that. And then also how do you come with all the ideas for the products? Like is that, is that bottoms up? Is it you? Is it like how do you keep it like an active R and D?

27:12

I used to come up with everything. I now come up with about half of our products. The other half come through a combination of customer demand and people in the teams coming up with solutions to problems. And that's good. Like in the terminal stage, every idea I have should be worse than the ones my employees are generating. I mean that could even be the case today. But I'm the guy in charge. I'm the one guy that can't be fired. So half the ideas are still mine. Hopefully that shrinks over time. Sorry, what was the other bit of that question in terms of what were they?

27:27

Well, I'm just curious how you kind of keep up with this stuff.

27:57

How do I keep up with the weird stuff? I would never admit so in public, but I do actually keep up with the academic literature.

28:00

I'm not of the computer science in.

28:09

Any space that I'm interested in. So like I am reading all the journals that mention synthetic long chain hydrocarbons. I'm a huge believer in that. It's going to change everything and it's going to make this whole battery electric nonsense look like the multi trillion dollar farce that it is. Especially in aviation. This is a long topic, but I'm not saying. And by the way, the best performers in that area are not necessarily academic. But by staying on top of the academic side, you'll never be too far behind. People in academia don't have to create or produce or sell necessarily. Their job is just to be on the front lines of what's new. And they'll never be too far behind that most of the time. Same thing with VR, same thing with optics. Same thing.

28:13

Like there's like good academic stuff in VR in some of these areas.

28:51

No, no, there's nothing good. But they talk about everything. Okay, I think of.

28:53

Yeah, I just don't think.

28:59

Think of it this way. Like suppose that you are going to try to like you want to keep up to date with new curved polarizer materials that are used for making pancake optics where you're folding optical paths on top of themselves. You're like, oh, I want to stay on top of this. What are you going to do? Are you going to read press releases of all the companies that are touting this stuff? The manufacturers don't tout this stuff. How are you going to stay on top of the fact that there even are new advancements? And it turns out a pretty good way is to just follow the academic literature where you have people that are doing research on these things and then their jobs say, oh, such and such group in China is doing this and there's other company that has this approach. What we propose is a novel approach to X, Y and Z. Now they probably can't actually do it and they're never gonna pull off anything of interest, but they've still done the other work. I am basically using them as my outsourced research team on anything. If I need to find out what the state of the art on something is, I can trust the academics somewhat more than the press because the press just hates everything.

29:00

They hate everything.

30:01

And also they're lazy. They're not digging deep. They're basically the press used to regurgitate what was given to them in press releases positively. Now they just regurgitate it. The tenor has changed, but it's the same activity. It's just repeating what's in the press release and the commentary around it is what's changed. So yeah, actually I stay up to date a lot by reading academic papers and journals that are focused on the things that I'm interested in. The academics. I also love when they complain about people in industry like nuclear. If you want to stay on top of what's going on in nuclear and you want kind of the contrarian view, follow what the academics are saying about modern small modular reactors and you'll see them talking about new developments and then complaining about how they don't work. And sometimes their complaints are good and sometimes they make absolutely no sense.

30:02

But like, it tells you what to.

30:49

Look at, it tells you what to look at. And like, I don't have enough time to become a real expert on this stuff. Like, I just. People didn't know. I used to be a journalism major till I dropped out. I was the online editor of the daily 49er at Cal State Long beach, which was the fourth largest student run paper in the country at the time. And it's not the Daily 49er anymore, it's now the Daily Breeze because 49er is a reference to the Gold Rush. And the Gold Rush is racist now. I'm not kidding. That's why they did it. Which is crazy because this team is still the 49ers, so how could that be? Anyway, the paper decided its name was racist and so they would rename it after 100 plus years. But what I realized as a journalist is you can only really follow so many things yourself directly from first sources. You could choose a beat and you could stay on top of it, but you have to outsource at some point the research to other people to consolidate and bring these things together. I'm very bullish on using AI at my direction to do this. I want to be able to sit in AI and say, scrape literally everything, the press releases, the social media chatter, the academic stuff, and then give me a summary that is not contaminated by some profit interest or ideological interest.

30:50

Yeah, you don't have to convince this crowd that the press is anti tech. Crypto has been the most. It's just unbelievable. We've tried for 12 years to have one reasonable article printed about the actual stuff going on.

31:59

Well, and the AI stuff is so hard.

32:13

They're starting to feel it now with all these fake water articles and things, and it's going to just heat up more on the app.

32:15

It's so funny when people, they look at Anduril and say, oh, look at Anduril. Trying to jump onto the AI grift, trying to pretend that all their stuff's about AI.

32:19

Been doing it for eight years.

32:27

The name of my company is literally Anduril Industries. The acronym is literally AI. It is so fr. We didn't talk about it in the early days because AI wasn't cool almost nine years ago. It was like cold fusion or VR nonsense for the future. Never in the present. But yeah, it's so funny to be painted by the media as a. As an AI coattail writer, when in fact I've been there before. LLMs were a glimmer in most people's eye only because John Carmack told me, he told me AI was going to work and that was why I believed him.

32:28

That's a good person to listen to.

33:02

He's a good person to listen to.

33:03

So a big kind of premise, I think of Andrew, tell me if I'm wrong, is the growing rivalry between the US and China. And I've heard you talk about this in podcasts, but you don't think that on the current, current trajectory with the defense contractors and technology industry, that we're well set up for that.

33:04

Right.

33:18

And so maybe you could talk a little bit. I would love to hear your thoughts on that rivalry and then specifically on how you see, kind of handicap the technology race. So AI and Defense Robotics, we're spending.

33:18

Way too much, we're getting way too little, and we're not progressing at the rate that our geopolitical adversaries are. And if it were a perfect. If it were peacetime and there was no inkling of conflict for us or our allies, that that maybe wouldn't be a problem. But that's not the world that we live in. And so the rivalry with China is a big one. It was a little broader than that. I mean, when we started. Andura, if you look back at the first pitch deck, you remember there's this page with a bear and a pair page with a dragon. And we lay out what the Chinese roadmap looks like, and we laid out what the Russian roadmap looked like. And we literally lay out that Russia is going to invade Ukraine. They intend to take it by force. There's a great quote by Putin where he says, the country that wins in the sphere of AI will become the ruler of the entire world. I have a huge amount of respect for that quote. First of all, what an incredible amount of style there. I'm not saying that I like Putin. I super don't. I argue. We started a company to fight Putin. I am personally sanctioned in Russia and Belarus. I literally cannot go there without being arrested by Russia's security forces. So don't take this in the. The. I'm gonna nail Palmer to the wall. He said something good about Putin. But let's like, let's be honest. That's some really good, like, Bond villain level. Yes. They'll become the ruler of the entire world. You gotta respect that.

33:29

Along. Like you said.

34:51

He said that speaking to a bunch of technical students at a technical high school.

34:52

But a long time ago, you're saying.

34:55

Yeah, back in 2007, like, seven. This guy was like, putin must read a lot of science fiction. He was.

34:56

That's really early. I mean, well, remember we were quoting.

35:04

It in an Andrew pitch deck in early 2017, before AI was cool at all. So, like, man, I would kill for a US Leader to be that far ahead. Could you imagine if you had. If you had somebody come out. I won't even name who, but if you had somebody come out in the White House, he says, we have to hold the Lagrange points. Someone has to have the high ground in orbit. The CIS lunar insertion and transfer path must be protected. If we're gonna extract resources from the belt asteroids. Some of you know what I'm talking about. And imagine if that was also. Could you imagine if that was, like, from his own mind and not something that somebody wrote? That is Putin, he's a competent adversary in these ways. And so, yeah, that was very much part of the rivalry. The problem is, of course, that now that rivalry has kind of reached its terminal stage, Right? He's made his move on Ukraine. Everyone's seen that it's happening. And so the remaining one that we can influence is China.

35:06

And you called out all the drone stuff. I mean, you knew that was all going to happen. All the stuff.

36:05

That's right.

36:08

Like the Ukraine drones we were talking about.

36:09

Literally, I mean, our deck laid out exactly what was going to happen. And it said that warfare is going to be about a lot of these proliferated systems, a lot. Like, it's going to move away from exquisite things that you build up capacity over decades to instead lower end systems that you can actually manufacture at a rate that is relevant to an ongoing conflict. And, of course, that's exactly what's happened in Russia. But the very big picture here is we were living in a world in 2017 where a lot of people believed we lived at the end of history, that there was no more geopolitical movement of significance to happen, and that United nations could write mean letters to dissuade people from expansionist actions. And what we're seeing playing out is kind of the more cynical version of. We're seeing the cynical. The cynics were right. The cynics who said, no, war is still a thing of the present, hopefully not the future. And it's a good thing that companies like Anduril, I think, were getting started early on this, because imagine if Anduril was started right as conflict kicked off in Europe, or worse, being started right as conflict kicks off over Taiwan. With China, it's too late. You can't start working on bombs after the war has started and expect to have any deterrent impact. You're just going to be part of fighting wars instead of preventing them.

36:11

How do you handicap. So I always, like with AI, I always hear about China, us I don't hear Russia as much. Maybe they're good at it, I don't know. But then how do you handicap it?

37:31

Well, see, that's true today. Putin didn't say that. Thinking he wasn't saying, I think AI is gonna accrue to the winner, and I bet the US Is gonna beat me. They were investing a Lot. It's just they didn't take the winning path. Right. Like they didn't do some of these, the kind of attention based models, focus based models. That wasn't the path they went on. They didn't get the winning path. And so you're right, it's mostly US and China now. Russia's trying to catch up. But he said this at a time where he thought that was going to be their asymmetric advantage. He thought they were going to figure out all the killer drone stuff way ahead of everybody else and he would have put it to work before anyone else even knew how to respond. Imagine if Putin had made ChatGPT as kind of the simplified version I use for members of Congress.

37:40

Yeah, but the way I sort of America has, we have this sort of decentralized capitalist system. China has decentralized, obviously command and control. They have more people, they're very smart. The deep seq and all these other things show they caught up very quickly. They're ahead of manufacturing. On the flip side, I think the superpower of United States. Right. Is the very fact that every thing everyone's complaining about in the press right now, which is we just like the hyperscalers just invested a trillion dollars in like. And is it a bubble? Maybe, who knows? But it's a good thing because this is what we do, this is what we're good at.

38:27

It's an advantage we have.

38:57

It's the animal, it's the capitalist animal spirits. Right? Like it's like the, you know, it's the, it's like the Internet. It's like building out the fiber. Like you need, you need this excitement. And we have, we need to choose.

38:58

Advantages the United States has like this. This is the one issue with, the one issue with re industrialization is that China has already done a really good job there. I'm not saying we shouldn't. We should. But we need advantages that take advantage of our better financial apparatus. Arguably that take better advantage of our cultural apparatus. Certainly that take advantage of a unique fact which is the US has friends or at least partners all over the world. China doesn't have that. China has not convinced the world to host the Chinese military, to host Chinese culture. The United States needs to lean into the remaining advantages we do have have. We should re industrialize. I'm not saying we can win all on our, we can't win without doing that. But it's not enough on its own.

39:07

And you recently started a stablecoin related crypto bank. Right.

39:51

It's a little more boring than that everyone's calling it Palmer Lucky's crypto bank. It's not so much a crypto bank as a bank that does support stablecoin deposits and transfers. Because of course, any bank is going to need to support these things. If you want 24. 7 liquidity and you want 24. 7 settlement and you want it every day of the year with every country around the world, you're going to have to do it via stablecoins. It's just obvious how that's going to happen. So everyone's seized on. Palmer Luckey is doing all this crypto stuff. It's actually way more boring.

39:57

It's a bank that's a modern bank in a way.

40:26

In many ways, it's the most boring bank there could be. We originally were thinking of calling it the Real bank, but it turns out that the slogan I think of Citibank is the real. It's the real something bank. I can't remember what it was. It's not a good slogan. Anyway, we're going to call it the Real Bank. But it was a very simple thought. Okay, SVB is collapsing. Turns out that there's more risk in the system than people thought. It's potentially more widespread. And yes, SVB did some things that someone could avoid, but there's a lot of things that are inherent to the way that current banking is done. So our idea was, what would a bank look like if its job was to serve companies? Companies who more than every half percent of interest on their deposits actually just really needs their money to be there and not disappear.

40:28

So it's narrow banking, not fractional reserve.

41:13

So I think that there needs to be one to one banking in the United States, not all banking. I'm not saying every bank should be like this, but the product should be available. I started going around talking to banks. I said, all right, I've got this thing. I want you to take my money.

41:15

Money.

41:29

And then you have it when I come to get it. See, it's the only thing you're gonna.

41:30

It's called. It's called, by the way, it's called narrow banking. And like there was a. There was actually a company that tried to do it recently and under the Biden administration and they got shot down.

41:35

And the government doesn't want anyone to do this is part of the crazy scheme. Like. No, like this. There's a reason the banks aren't doing this. And it's not just that nobody's smart. It's that the government doesn't really want it.

41:41

Well, yeah, they claim it's because then you would hurt the credit system and all those other things. But it's to your point, I think, shouldn't you be able to like have at least some people opt out and actually be an option that has your money there? Well, and by the way, you can, you know, you can do it. If you have a T bill, for example, then you have a Q SIP or they're a custodial. It's bankruptcy remote. And so it's effectively available to wealthier people, but not to the retail and.

41:51

Not available to or a lot of these tech companies, including smaller tech. So that was the question. How do we make a bank that would give people the things they need from a bank without the parts that are going to destroy their entire business? I mean, if, like, let's be real. If the federal government would not have bailed out SVB customers far beyond what the law requires, and if the Biden administration would not have more or less spuriously declared that the signature bank deal was actually signs of systemic collapse, which is nonsense. Like if they wouldn't have done that, it would have wiped out a lot of tech companies. And so what we're trying to do with Erebor is actually a lot more boring than many people think. But there is a market for it.

42:12

Imagine a bank that doesn't debank you.

42:50

That's right.

42:52

Has your money when you want it and actually maybe gives you interest would be another radical idea, which, Jennifer, you know this. That's the big debate point in this discussion. Stablecoin Bill, is that they're trying to undo this. Now is this thing where you actually pay interest to customers, I'm very familiar.

42:53

You can pay rewards to customers.

43:07

You can't pay even that. They're trying to ban rewards.

43:09

They're trying. Well, that was like. Yeah, that was the negotiated.

43:11

Yeah. Now they're trying to get.

43:14

They're trying to undo the deal. The way that I look at, look at it is this. There is a lot more risk in the banking system than anyone is willing to admit. It only works if everyone stays in the matrix and doesn't. Doesn't look at how it all works. And I probably cannot build a bank that survives a total financial collapse. But are you guys familiar with the theory of the bear? The bear is chasing you. He's chasing people around you. You don't have to outrun the bear, you have to outrun everyone else. And so I think you might not be able to make it. Where every bank fails and you survive, but you can make it where you're one of the survivors in a world where something really bad happens, something that is beyond what is. Is what the government could feasibly bail out. And by the way, when I say feasibly bail out, I don't just mean financially. I mean politically. I am actually astounded that the Biden administration bailed out a bunch of billionaires like me in the midst of this huge populist shift, right or left, and the fact that they did it for irrational reasons. But, like, I'm surprised they didn't do the thing that would have been popular with their base. And it's not hard to imagine a world where a different White House would do something different. And this is not a right or a left thing. It's a popular. It's a populism argument. Will we live in a world where politicians can make rational risk management, systemic financial collapse risk management? If it's going to make them look like they're in the pockets of the billionaires? I think maybe not. I think you could end up in the world where there's massive economic pain because it's not politically viable to do the right thing for the country. And so that's the world that I'm trying to prepare for. The billionaires, the millionaires were, you know, if Bernie has his way. If Bernie got in the White House and he's not that far away, you know, he's like, at one point, he was a few superdelegates away from winning a general election. It's something to ponder. Bernie can still.

43:15

We have an economic collapse. I think that the. Well, I don't know if we want to get to politics, but I mean, look, I think that the politics.

45:08

We're not into politics.

45:13

Yeah. So, I mean, you know, the Mamdani winning in New York, like, I think what we saw.

45:15

That's a great example. Yeah.

45:21

The Republican Party has shifted to this kind of nationalist populist movement with Trump and Vance.

45:21

That's why I said it's not really.

45:26

Democrats may shift to that and who knows? Like, we're into. I think we're an uncharted. I mean, it's a real realignment, I think, in the sense of maybe since FDR or something, we haven't had such a realignment of the parties. And it makes it very unpredictable. And you have a bad economy and, you know, we're only a few dominoes falling away from some really weird outcomes, in my opinion. Yep. Yep.

45:27

Like in the case of Erebor, the most. The riskiest asset like, the riskiest product we're offering is lending with a 50% loan to deposit ratio, which would make it one of like, that's the riskiest product, is one of the most conservative ratios in the entire country.

45:48

It's smart.

46:05

And luckily this administration is willing to sign off on it. In the past, they've not been a fan of these things.

46:06

Yeah. Yeah, that's awesome. So maybe last question and we'll take questions from the audience. Just since you're such a futuristic thinker, I'd love to hear. I feel like all these things, like sci fi things that I've. I heard you talking about Heinlein on the podcast. I just read Stranger to Strange Land recently.

46:11

It's so funny.

46:30

I love Starship Troopers.

46:31

It's so funny when people call him a fascist because of Starship Troopers and they've clearly never read other Heinlein. Like, Heinlein also wrote basically like, pro worker, pro communist.

46:32

Yeah. He's not.

46:42

Like, there's works where literal communists who seize the means of production from the private companies are the heroes of it.

46:43

Have you read Strangers to Lemon?

46:50

I've read every single line.

46:52

It's crazy. It's like this hippie. It's like electric koolaid acid. It's great. I mean, it's amazing.

46:52

He's just, he's just a great sci fi. It's so funny. People try to boil it down. He must be a fascist because the government has some fascistic tendencies.

46:56

He's critiquing it, I think. Yeah, he's.

47:06

He, he, he, he does it all. He makes fun of every. Anyway, yeah, love, but, but I feel.

47:07

Like, but to my question, I feel like, like all of this stuff that's been talked about my whole life is like suddenly happening. Like, I don't know. I'm not. I know nothing about energy. But my friends tell me fusion may happen. Quantum computing. The experts, some of the experts here say, you know, it may be actually starting to happen. Obviously, crypto, AI AI is clearly happening. We believe crypto will happen.

47:12

Yep.

47:32

It feels like there's all of these things that have just been talked about. I mean, there's stuff in biology, there's stuff, you know, you're doing in, you know, autonomous systems, humanoid robots, like interspecies communication. Feels like all this stuff is happening now. And I'm just curious, like, do you think that's true and what's going to happen, like, in the next 30? Is it, like, is like to your point, about history starting again? It feels like, like we had, you know, Peter Thiel talks about, we had 50 years only digital innovation. And you know, if you, if you were born in 1890, you saw the invention of the airplane and a person, a man on the moon, and then physical world stuff kind of stopped. But it really feels like both history in your sense of like wars restarting land, war in Europe, that obviously terrible things like that. But at the same time, on the tech side, like all this cool shit's happening all at once.

47:33

Oh, it's huge.

48:16

And it feels very real.

48:16

Our understanding of the world is progressing so fast. And there's a lot of things that don't require even technological breakthroughs. The most exciting thing about what's going on right now, in my opinion, is that it's mostly not actually technological progress. It's psychological. Or you could even call it quasi religious progress. Catching up with the science that was figured out decades ago. That's this whole nuclear thing. Thing I have all this nuclear energy stuff. It is just everyone's willingness to do nuclear. Catching up with the technology.

48:17

Political, cultural, will.

48:48

A lot of this bioscience. There's a lot of things that have been proposed for decades that are only just now actually being tested. I mean, here's another example. We've understood oxytocin, which is one of the primary mammalian pair bonding chemicals. We've understood how it works for decades. We've been actively using it to help postpartum depressed mothers bond with their kids. Like, oh, you hate your baby, look at your baby. And we're gonna give you this shot. Well, the fuck you love your baby now. It's incredible. And there's people who are talking about using it in totally novel ways. For example, doing divorce counseling. And we've understood the mechanism of it for 50 years now. And it's literally just a willingness to just do things. That's why I'm excited about the new science. I'm excited about new fusion. There's a lot of just do things that's going on right now.

48:49

And some of its infrastructure, like AI is really about GPUs, right? Like a lot of it's engineering. It's just. Isn't it too. Just the timing of all the stuff came into place.

49:35

You got so lucky. What a crazy coincidence. You basically had all these GPUs for gaming. By the way, Oculus, when we were acquired by Facebook, almost bought Nvidia back when they were worth about $7 billion and we were looking at doing a 51% takeover. No, but here's the. And people say oh man, imagine if we would have gone through with that project, but they never would have done what they did. Right. It was gaming. And then the gaming stuff happened to be useful for all the proof of work and staking stuff in crypto. And then that ended up also being very similar to what we needed for AI. Like man, what an incredible coincidence. We live in that world. There's an interesting argument where Oculus would have gone and got Nvidia and AMD and centralized them and then only focused on gaming and then we wouldn't have any of this stuff. It's a crazy world.

49:42

And do you think we're entering into this sort of maybe unprecedented 20, 30 year period of expansion?

50:31

Absolutely. Look, I'll give you my, my thesis for optimism. People know that I'm a pretty happy guy. It seems like I'm having a good time. It's because I remind myself the oats are like a dollar for some large number of pounds of oats. You can work for one. You can work for one hour of minimum wage at a federal level and earn enough calories to survive an entire week. It's the best it's ever been. Nobody's been able to do that. And it's not just oats, it's agriculture in general. Modern pesticides, controls, roundup machinery. We've figured out how to make food really, really well. We throw away most of it. That's how good we are at making it. And the same has been true, I think, for clothing. How many outfits do you own?

50:36

20 or something, I don't know.

51:18

And how many would have you have owned as a rich guy even, you know, even 50 years ago? How about 100 years ago? How about 200 years ago? We've just made clothes so cheap, people buy clothes and they throw them away after wearing them one time. And you don't even have to be rich to do that. There are people who are in college working part time who do this. And I think that what you're going to see is that same level of automation that has dominated textiles and agriculture start to apply to everything. I think AI is going to make it easier for the resource extraction, processing and manufacturing to like. I really do believe that in our lifetimes you'll be able to go buy something that's like a Ford F150 for $1,000 or the equivalent of the cost of the. The cost of extracting and transforming it will go to near zero. And we're going margins way down. It's just not that crazy. And so if you can do. And I bet you'll be able to recycle it with 90% efficiency at the end of the season. You'll say, what's my summer car gonna be? Let's go down to the mall and buy one and we'll try it out. Same thing. I think for housing. Housing is gonna come extremely cheap. The components are not expensive. It's the transformation and the regulation that have made it really.

51:19

Well, the policy is a bottleneck.

52:24

Correct. And so I think that this is what I mean when I say we don't need technological breakthroughs so much. We just need to just do things. And like the tech to do this is gonna catch up. Like, you know why manufactured housing isn't big in the us it's just anti manufactured housing laws, literally prohibiting housing that is manufactured not on site. It's one of the most anti American sets of laws that there's ever been. I confidently believe that the founding fathers, if they were around, would make this a federal issue and they would say, we are not going to allow, we are not gonna allow local governments to decide. Like if you wanna say a house of a certain appearance is one thing, that's fine, but you cannot, like this is a real interstate commerce issue. You cannot effectively prohibit other states with competing with your housing industry by prohibiting any housing that was created majority outside of your state lines. That's crazy. And we've probably spent, I don't know, $100 trillion on housing that we didn't need to because of that. Anyway. All this stuff is going in a good direction. That's why I'm optimistic about the future. The future of the current present of oats is the future of everything.

52:26

Amazing. This is great. So let's maybe take some questions from the audience.

53:28

Thank you.

53:35

Paramo. Super interesting conversation. I have a question about your structure. You were speaking about how you have a lot of small teams and this feels like it's optimizing for the number of products you can iterate on and figure out what works not for manufacturing very efficiently, making the cost of unit as low as possible. And I'm coming from Ukraine. I have spoken to some people in defense industry there and their criticism for unreal was exactly this, that your products are very expensive. And what they need right now on the front line is something very, very cheap. Just like we had it in the second World War where German engineering was way superior to the Soviet one. But the Soviets just had massive quantities of the tanks, which were stupid, lame, easy to destroy, but the sheer quantities eventually won. How are you Thinking about this?

53:35

Sure.

54:27

Are we in a situation where China has already won the race on cheap manufacturing generally? What are your thoughts on this?

54:28

I'm very curious.

54:36

So they've definitely kind of won by any rational definition. And so we're probably not going to approach Chinese cost. Luckily the US has more money and we make more money per person. And so we can probably afford a little bit of inefficiency on the Ukraine side. Side. That one's really interesting because we've had hardware and people in Ukraine since the second week of the war. I've been to Ukraine during the war myself and we've been a part of US aid packages, European aid packages. We've even sold some things directly to Ukraine. But to your point, mostly higher end stuff. Long range loitering munitions that can get through jamming bubbles. And what they really need is large amounts of industrial levels of firepower. I mean, they need a lot of really small, cheap drones. They also just need a bunch of artillery shells. They need a bunch of mortar shells. The biggest problem for a company like Anduril, and it's a fair criticism that people have made. The thing is, I can't compete with, for example, Eastern European manufactured artillery or mortar rounds. I just can't do that in the U.S. no matter how smart I think about it. I make solid rocket motors. I've wanted to make energetics get into the artillery shell business. The problem is I just cannot compete with what is a quantity, quite powerful arms industry that exists in a lot of the Baltics and Eastern European countries that are supporting Ukraine. The problem is that you to automate everything, you have to get to a sufficient scale. And so one thing I've done is I've approached multiple administrations, said, hey, we need to commit to, for example, supplying 155 artillery shells to not just Ukraine, but all of these allies. We need to build the, you know, the alien dreadnought where the metal goes in and the shells come out. So are you familiar with how artillery shell manufacturing happens in the United States States? Here's the actual problem. The facilities are literally owned by the government and then they actually lease them out to operators who then use them to develop stuff. And so if you try to compete with them, the government explicitly says, but this will, it'll be like, it's a waste of investment because we've already made our investment in these facilities. So like, I want to solve these problems, but in general, Anduril's looked at these things kind of quasi realistically. I'm waging this war of hearts and minds to explain why that is the dumbest thing ever. They need to open it up for competition. I think what, what they should do is say, we're not going to give you welfare to make your artillery line. We're going to say that the first company to build something using private capital and get to sufficient scale, we're going to award them a contract for this much and they have to hit a certain price point and a certain scale and only then are we committed to buying. And they just don't want to do that because they have their own centrally planned scheme. There's a lot of secret communism going on in the United States, a lot of secret Soviet thinking that that is just hidden behind a veneer of the flag. So that's kind of like the artillery issue. When you get to the small drones, it actually gets to. I'm competing like my biggest competitor for building small drones. To be clear, I want to build small attack drones for Ukraine and I want to be cost competitive there. But I'm competing with Ukraine using largely Chinese components, right? Most of these internally assembled drones, they're built using Chinese flight controllers, Chinese sensors, Chinese, Chinese stuff. I'm prohibited from using those. So Anduril is sanctioned by China. Our entire C suite is sanctioned by China. The government in the US prohibits us from making weapons using these Chinese components. And so I can come in and say, hey, I have this thing that is cheap, but instead of it being a $900 drone, it is a $2,000 drone. And people in Ukraine say, well that's fucking expensive and how am I ever gonna do that? And I say, you're right, if you're willing to use Chinese stuff, I literally can't compete. And this has been a smart move by China. While, by the way, this is why China keeps, they do this because it actually cripples my ability to compete. There's other stuff that I do that's just too expensive for Ukraine and I'm trying to make it cheaper. I want our learning munitions to be less expensive. But for example, I'm required to use a certain navigation system that the government has approved for munitions of this category. And they also require us to use it because they want us to sell anti tamper stuff using approved parts where Ukraine can't go in and say, ah, this was able to go, you know, 400 kilometers, but if I just strap on a bigger battery and I can tweak it, I'm going to go to Moscow. Another example of this, like I wanted, I actually wanted to sell surveillance towers to Ukraine before this war even started. And that wasn't something that I came up with. It was something Zelensky came up with it. He read a Wired article about Anduril, talking about how we were securing the US Southern border. And when he was in the US for his first UN meeting after winning his election, he wanted to meet with Anduril to talk about what it would look like to have our towers on his border so they could know how Russia was building things up, how they would cross. And then we ran into this problem where the U.S. state Department basically put the kibosh on the whole thing. They said, no, Russia's not going to invade Ukraine. Zelenskyy's basically just angling for welfare. He's trying to be a saber rattler. And so like the people who made those decisions, they're still in the State Department. They're still making these things. So I think to a certain degree, I've got my hands tied behind my back. I'll say I want to make a $2,000 attack drone. And they say, well, you have to use this approved thing. You can only use this approved warhead. You have to make it anti tamper so the Ukrainians can't make it do things that we don't want them to do. And the net of that is what you're talking about. People in Ukraine saying, anduril stuff is expensive and it's locked down and it doesn't and you can't modify it. And I say, yeah, that sucks. Look, I've been to Kyiv, I've been to Lviv, and I've trained people on how to use our systems. And I've heard that this feedback face to face. And it's really hard to tell a guy who's telling you that people are dying because of it, like, oh, well, sorry, I wish I could do better, but that's the strain of it. One more thing, you're right that we have a lot of these different things, and that is good for figuring out what works, not necessarily for scale. Some of those things are getting to scale. Our towers are very much at scale. We're on 35 bases around the world. We're covering about 30% of the US southern border now, a bunch of the northern border is as well. It's like our towers have scaled really well. Same thing with our counter drone systems. We're the program of record for all of SOCOM's drone defense. We're the program record for all of the Marine Corps drone defense. So some of these things are scaling it's these newer things. I guess if I have a critic who says Palmer, but you have all these things that haven't scaled, I'd say, well, guess what? Every single anduril product that is more than five years old has scaled. It takes time to get the government to scale these things, but we don't have any examples of a product that we did did that didn't scale once. It had enough time. Every product in our We've been around for almost nine years. Every product that was started more than five years ago is in major scaling mode. It's just we have a lot of other things that are newer and they're. There's. I'm sure there'll be some failures, but you know, flipping coins, you don't need to get a heads every time to to beat the house.

54:37

I think you see what I mean when I said the Joe Rogan thing is like the best thing to watch. He just gave us a preview of it. That's amazing. Thank you. Like a million great stories. So thank you so much.

1:01:04

Of course, yeah.

1:01:14

Thanks for listening to this episode of the A16Z podcast. If you like this episode, be sure to like, comment, subscribe, leave us a rating or review and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts and Spotify. Follow us on X16ZZ and subscribe to our substack@a16z.substack.com thanks again for listening and I'll see you in the next episode. As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the company companies discussed in this podcast. For more details, including a link to our investments, please see a16z.com disclosures.

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