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

Key Takeaway

The future of American defense depends on rebuilding our industrial base—not just buying better weapons, but restoring the capacity to manufacture them at scale. As Trey Stevens warns, when Ukraine burned through 10 years of production in 10 weeks of fighting, it exposed a critical flaw: deterrence isn't the stockpile, it's the factory. The most actionable insight: true national security requires moving beyond the 'defense industrial base' back to an 'American industrial base' where dual-purpose companies invest in both commercial innovation and national defense capabilities.

Episode Overview

This conversation with Trey Stevens (co-founder of Anduril) and Sean Sankar (early Palantir employee) explores the transformation of America's defense industrial base. They discuss how the consolidation from 51 defense contractors to just 5 primes after the Cold War created dangerous vulnerabilities, why Silicon Valley initially resisted defense work but is now re-engaging, and how new companies like Anduril and Palantir are pioneering a product-led approach versus the traditional cost-plus contracting model. Key themes include the erosion of American manufacturing capacity, the importance of software-defined hardware, the challenges of building defense companies as venture-backed startups, and why deterrence depends more on production capacity than stockpiles.

Full Transcript

Transcript of The State of Modern War: Palantir & Anduril Execs on Drones, AI, and the End of Traditional Warfare from All-In Podcast. Auto-generated from episode audio; may contain minor errors.

Trey Stevens, Sean Sankar, welcome to the All-In podcast at the Hill and Valley Forum. Thank you guys for being here. What's up? How are you guys doing? Thanks for having us. Doing great. Good to be here, too. You guys are friends, right? You guys go back like a long time. A really long time. Okay. Tell us how you guys know each other. Palunteer Ander. What's the connection and the history? Well, I'll start. You can fill in all the gaps. the gaps. the gaps. I feel like I know the story you're going to tell and it's going to be very uncomfortable.

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Trey was working in an intel agency and happened to see one of these demos and he should tell you his version of it, his side of it, his frustration with bureaucracy, but I think he he realized like, hey, this this might be really cool. Maybe I should uh leave the hell hole I'm in in the basement of this building getting nothing done, talking about sports with other people to uh to go join this crusade. So Trey reached out and applied. Um he made a big faux paw.

He came all the way to Palto and he he wore a fullon suit tie, cufflings, CIA cufflings, mind you. Coming to interview with I don't know, we were probably 20 people, you know, who wore t-shirts and, you know, second handme-down clothes. Um and I, you know, he was intercepted in the lobby receptionist who really cared about him and told him to get ditch the tie and try to dress down and don't screw it up too bad. But we loved him immediately and he helped us build the uh the government business.

government business. government business. So this was at Palunteer. You were their employee 13 2006, right? So this was pretty early on. Yeah. I came in in early 2008, but there were still, you know, 25 30 people at that point. that point. that point. Pretty small. Pretty small. Pretty small. And Peter kind of incubated it, was involved at the beginning, right? Peter Teal. Maybe you could just recap because I know a lot of folks know the history of Palunteer, but just kind of like the early standup of Palunteer and how things got going during that era with that small group, how you guys kind of figured out how to build the business.

Yeah, it was it was one of these things that was kind of a slow start. It was there was a a real idea amongst the uh the five co-founders, including Peter, that um you know, it's kind of insane to live in a world post 911 where people are arguing about what's more important, privacy or security. Like, aren't they both really important? And who is actually spending time pushing out the efficient frontier? For any amount of given security, you should have more privacy than you had before or any amount of given privacy, you should have more security.

And and this sort of changing the dialectic there was really the the entire impetus of what we started with. And now there's a technical approach that follows from that. There's an approach to privacy and civil liberties that are around that. Uh but really we started as a business that was pretty myopically focused on solving a handful of problems and counterterrorism for a handful of institutions in the world. Let me start by asking a question that I think is important to ask particularly for a broad audience and for the two of you to frame your personal philosophical views.

Is war good? There's a lot of conversation about there is a military-industrial complex that has an incentive for war. What's your view, your philosophical motivation for why you do what you do? What your view is of war and defense and and the work that your businesses kind of pursue? Well, anyone who's been to war would tell you that war is awful. War is bad. Categorically bad. That doesn't mean it's always avoidable and that um you know there will there are people who will want to use might to make right to define a set of rules.

Um and you have to be in a position to protect your people and your interests accordingly. At the end of the day, it's all about deterrence. you don't want to go to war, but you want to be prepared so that if you do have to go to war, that you will win decisively and quickly. Um, I've never met a general that has said, "You know what I really want to do today? I want to make phone calls letting parents know that their children have died in combat." Nobody wants to do that.

Um, and and I think that that's really the goal of everything we were working on at Palanteer. It's what we're working on at Ander, which is make it unthinkable to your adversaries that they should ever challenge you. Why do you think it became taboo and became so negative particularly in Silicon Valley that building a defense company or company building technology to service the defense sector was viewed with with such disdain and was an untouchable sector for so long. I think it's a beautiful consequence and I mean I mean it unironically of kind of the peaceful world that we lived in.

The origin story of Silicon Valley is actually defense. You know Lockheed was the largest employer in in Silicon Valley in the 1950s. The Corona spy satellites were built there. So in a world that was uh gripped by the threat of the Soviet Union, you know, you had a very different posture in Silicon Valley. But in a world post the end of the Cold War, the end of history, um kind of a view of globalism that it's all going to be great that we exist beyond the confines of our country.

Um these things were viewed much more cynically and the threats didn't seem very real. And I think you could even back test this through the moment where Silicon Valley kind of really woke up and realized, hey, maybe these things are real or when the Russian tanks rolled across the Ukraine border, you know, is when they realized and there are a lot of Ukrainian, Eastern Europeans, a lot of people who are affected by that in Silicon Valley who started to realize that um maybe there's a more nuanced issue here than just simple the simple Eisenhower quote of the military-industrial complex.

I think many of the people who were protesting Silicon Valley's involvement in working on national security priorities were the exact same people that had Ukraine flag in bio. Um so there's clearly just like a policy mismatch or an understanding mismatch. The other thing I would mention is that these large tech companies uh unlike many epics prior uh were global technology companies. They didn't necessarily view themselves as American. Uh and so if you go and you look at, you know, where these protests came from, you have to keep in mind that a lot of the signatures that they had on these, you know, protests, uh were not coming from US citizens.

And so there there's like a global character to those companies that probably was not the case during the Cold War. Do you think that's changed recently? I mean, to Sean's point, I think that there's just an increased awareness of the complexity of the geopolitical situation. Um, and I I think it's certainly a lot less controversial work on these topics than it was in 2017, 2018. 2018. 2018. You know, it's a 20-year overnight success, right? And Ander's now reportedly raising money at a $60 billion valuation, just landed a $20 billion army contract.

Palanteer today is worth $400 billion. The flip side of what I just said is that some people are saying that Silicon Valley is taking over defense and Silicon Valley is the next story of the American war machine. This has become sort of a popular narrative. Can you just respond a little bit to kind of where we were coming out of World War II from a defense industry perspective, where we find ourselves, where Silicon Valley seems to be at the center of this today. You know, the industrial base that won World War II and the early Cold War was not a defense industrial base.

It was an American industrial base. You know, Chrysler made the Minute Man ICBM, they were the prime contract on it, and they make minivans, so missiles and minivans. General Mills, the serial company, had a mechanics division. Everything they learned doing R&D to process grains. They actually used to build torpedoes and inertial guidance systems. Ford built satellites until 1990. So the entire economy was invested not only in pro economic prosperity but also underwriting the freedom that allowed us to have economic prosperity. It's really a consequence of the end of the cold war.

So when the Berlin Wall still stood in 1989, only 6% of spending on major weapon systems went to pure play defense specialists. 94% of it went to what I call as dualpurpose companies. You know, yeah, a missile is single use. It's not a dual use product. You're not going to buy it at Walmart. But that actually these companies were invested in both parts of this. That figure today is 86% is 86% is 86% goes to defense specialists. So we have a very different structure of the US economy as a result.

And I I think it leads to very perverse narratives of what would it be like to mobilize if things got really bad. We'll just flip a switch and our auto factories will magically turn into enabling us provide for our defense and security. And and I think a a coldeyed look at history is it took 18 months to do that. we actually started ramping up to provide this stuff for our allies, for the Brits and the Soviets in the context of World War II. And that we've actually missed some of those signals today.

When when Ukraine went through 10 years of production in 10 weeks of fighting, that probably should have been a five alarm fire that we got the fundamental calculus on deterrence wrong. We thought the stockpile was going to deter our adversaries. It was always the factory. It was the ability to generate and regenerate the stockpile. Well, let's look at where we are today. So in terms of defense readiness relative to our adversaries 10,000 to1 drone production gap versus China 223x ship building capacity disadvantage and I think you've said a 2027 Taiwan window of danger high level we spend more than any other nation on defense.

How ready are we and how long will it take us? Well, our joint force is the best in the world. And so, you know, I think we have to couch the alarmism and commentary in that context here. But I think if you look at like the the rate of change, our adversaries are moving very quickly. If you just look at the empirical loss of deterrence, you had the annexation of Crimea in 2014, the militarization of the Spratley Islands in 15, Iran with breakout capability to get the bomb in 17, you've had a pogram in Israel, you have the Houthis holding trade hostage in the Red Sea, not to mention the present conflict.

So when you look at that you how can you not feel that deterrence is eroding to to Trey's earlier point of having capabilities that are so scary that picking a fight isn't worth it and people are investing significantly on the low end of the mix. Our high end is still unquestionably amazing. But you know you can't keep shooting $2 million interceptors at $20,000 drones and have that math work very long. I think the second part like why does it matter that we lost the American industrial base and have a defense industrial base is you lose volume.

you lose the R&D stimulus to come up with creative ideas like using the methodology of building a bathtub to build the next generation lowcost cruise missile, right? And and you get stuck in these platforms that are absolutely eyewateringly amazing but are $2 million a pop and you just can't produce them at the scale or with the speed that you really need to. Right. And Trey, you've talked about this. You wrote an article, no solvency, no security. just share with us your view on the importance of this industrial base and what it takes for us to have strong defense requisite in a strong manufacturing industrial base.

I I mean we really kind of sent most of these capabilities away um during the last 30 years of globalization um and that gutted entire communities in the United States. You know, I mentioned in this article that just in my immediate family, like grandparents, aunts, uncles, uh I have family members that worked at GM, at Ford, at Frigid Air, at National Cash Register, at Armco Steel. Every single one of these factories in Ohio closed. Not a single one still exists. And they all have different places they've gone around the world.

Um but you know, one of the things we're doing with Andrew right now is we're building out a 5 million foot factory campus in Columbus, Ohio. And we have the benefit of going back and tapping into that knowledge base that exists that's undermployed at the moment because those the factories that kept them busy for many many years are are closed. Um and I think this is the story all over America. Like if you think about the atscale manufacturing for a new company started in the this century uh in the 2000s um there's really only one that comes to mind just Tesla.

That's it. And so we haven't really built any muscle around uh new manufacturing capacity. Um and and I think that as you spin things up to Sham's point, we don't have the ability to do that quickly because we've atrophied massively by by turning all this away globally. So um I think readiness is a real problem and uh we have to start investing ahead of the the you know conflict being being there because you can't just start at the moment that it's absolutely needed. Tell us about the Arsenal one and then the manufacturing behind it.

And then I want to just understand a little bit about is this productled or production capacity. Do we need to make selections and have capital committed to bringing product to market before we start to build out the base or is there an alternative way to get ready? get ready? get ready? Arsenal one is our the factory campus that we're building in Columbus. Um the operating system for that the Arsenal platform um is really intended to reduce the uh the cost the overhead that's required to uh automate and you know handle these processes in the most efficient way possible.

So there's like kind of the software layer that sits behind that. We're actually working with Palunteer uh the foundry platform on some of these programs as well. And uh the idea behind this is that you want it to be as modular as possible. If we build out the factory campus and we said we're just going to build furies here or we're just going to build road runners here, we're just going to build barracudas here, that provides a tremendous limitation in a in the moment of a conflict to be able to be responsive to the demand for specific things that are relevant to that conflict.

And so we're kind of thinking about this more like contract manufacturers think about building assembly capacity where they say, "Yep, we make, you know, this VR headset for Facebook. We make this VR headset for Samsung. We make this VR headset for Apple. Um, we build a skill set around building optics systems. Um, but we're going to build a bunch of them and we're going we're going to be much more effective at doing that by hitting the network of scale. Uh, you know, get lower costs on all the individual parts.

You're going to build out a supply chain to to work through that. That's roughly what we're doing in this case is we're saying like a contract manufacturer, we want to be able to pivot on a dime into ramping up production of roadrunners if we need road runners or ramping up production of barracudas if we need barracudas. Um the counter example to this of course is what we saw in the early days of Ukraine where what they really wanted was more stingers and javelins. The problem is is that we once we burned through our inventory in the warehouses the stingers and javelins the assembly line to build stingers and javelins didn't exist.

All the people that worked on those assembly lines were retired. And so the primes were literally calling people out of retirement to come back and teach them how to build stingers and javelins again. Um, and so these are problems that we're trying to avoid by the design of the factory as a as an initial concept. concept. concept. Who funds it? So is there a government contract that supports the production of these facilities? And are multiple companies going to be able to to stand these up to make these investments or is this just going to end up being an anderal because you've got most of the capital and you guys are going to roll these facilities out and how do we make this kind of a national interest?

Well, our business model is definitely very different from the primes uh who are basically responding to things as requirements directly from their customer. So they're not really investing a whole lot forward of the capability. Um, and on the other hand, we're doing all of this as private R&D investment and then we're selling the outcome, the output of that as a product. So, this is fundamentally a different business model. Um, but I I do think that there's a tremendous amount of capital that's required to pull this off as a new entrant to the space.

Um, I don't think that the market is going to support 100 new primes or something like that. Uh, I'm hopeful that it's not just Anderil. I think it would be healthy if there was more competition in the space. Um, but you know, being able to raise that amount of capital, hire the people that you need to actually pull it off. Uh, this is not it's not like building a a a normal tech company. It's not just the development of a product. It's, you know, there's a lot that goes into this.

Trey's point might seem kind of obvious or simple, particularly to an audience that's largely coming from tech or Silicon Valley, but that's not how defense works. People don't build products. People build to a spec that the government says, "This is what I want to buy." And then you kind of say, "Yes." You know, you have to think about defense as a monoponyy where there's a single buyer for the thing and that concentrates an enormous amount of power in the buyer whether they're right or wrong. And if you look at the history of defense innovation, typically the monopsin is wrong.

You know, it was Churchill as the head of the Royal Navy who built the tank because the British army was not smart enough to realize that in the next battle having horses was not going to work. So, every one of these innovations is kind of an act of heresy. There there's a founder-like figure who is so committed pathologically to a different heretical concept. They see it through and only in combat or only when it meets the moment is it actually validated. Now a grave threat like the Soviet Union is a sort of forcing function that allow allows you to innovate.

When we were building ICBMs we had eight competing programs. Today in peace time that would be viewed fastly as wasteful. Why should you have eight competing things? Why can't you just pick the right one and put, you know, spend less or put all your wood behind one arrow? And of course, that kind of turns its back on our fundamental belief in America on the free market that there's a competition of ideas. There's fundamental uncertainty. There's quality like variance in the quality of the execution and that you need this competition.

And it's not just principally competition amongst the primes or new entrance. It's also competition inside of government. And there were originally, I think, or at one point 51 major defense contractors. And just for the audience to understand, they reduce down to roughly five or six primes. That's that's the term prime is one of these prime contractors and then make subcontract out to other companies to develop componentry parts. My understanding in Anderil was to do exactly this build a product, show up with something that's cheaper, better, faster, and actually competes on the merits rather than be caught in this kind of prime landscape.

And that worked clearly. But over time there seems to be a lot of capital concentrating into the new primes. You guys, you guys, SpaceX, OpenAI, maybe one or two others. Is the landscape going to emerge that we're going to just look like the same old way of operating where we have a handful of primes that all have these trusted relationships with the government agencies or how do we kind of create that competitive environment to continue to drive innovation and make things affordable for the US government and the taxpayer going forward?

Well, just like uh and I interviewed Trey in my new book on this like just like venture, there's going to be a power law here, you know. So, so one of the grave mistakes we've made as we think about innovation which has result in essentially innovation theater is this idea that you're going to just peanut butter spread around the capital you have for innovation that you know every company is going to get roughly the same amount. It's not enough to hit scale. It doesn't reflect actually the relative performance differences because there's an authentic power law curve like any venture capitalist would would realize that you know your your biggest winners are going to return your whole fund.

There's there's something authentic here as well, which is like, yeah, you may have 10 bets, but at some point you're going to have to get smart about concentrating down on on the things that are actually working. Yeah. I mean, this is a a kind of a great point about any category. It's like if you're a space tech investor and you didn't invest in SpaceX, you probably lost money. If you're a crypto infrastructure investor and you didn't invest in Coinbase, you probably lost money. If you're a social media investor and you didn't invest in Facebook, you probably lost money.

And yet, for some reason, capital allocators have a very short memory. they don't have the ability to go back to the the prior boom cycle and say, "Oh, wait. I remember what happened that last time we had to concentrate capital down to the winner." Um, and and I think that this is this isn't any different. So, what was the motivator then for change in the construction of the landscape of defense contracting? Was it software that takes us from the old primes to the new primes? Is that really what kind of triggered this consolidation?

So in '93 having won the cold war in '91 or I think more accurately the Soviets lost the cold war you know by 93 we expected as a nation a kind of peace dividend we don't have an adversary now we should be able to spend less on defense and uh the department had this famous dinner where they brought 15 of the 51 primes together and said this is going to happen the budget's going to get slashed we're not going to save you guys you have our permission to consolidate some of you are going to go out of business some of you should try to make a commercial business which didn't really work uh And that's what led down to five.

It was actually there was going to be we were going to go from five to four in 99. The justice department put their foot down and said we're not going to let Lockheed and Northrup consolidate. Right. And then today, so the change over, what gave you guys the window? What gave you guys the window to build the business that you've built? I mean, what did you see early on 20 years ago and continued forward in the hardware side that made you say this is this is the moment?

Is it software that enabled this? this? this? Well, I'm going to throw you under the bus a little bit on this. It was not obvious from the beginning that this is going to work. Um I can't tell you how many meetings even we had together where we walk out and be like this is not going to work. This is very bad. bad. bad. We were not welcome with open arms, right? You know, early days of Palunteer. Yeah. Early days, mid days, maybe even late days. You know, famously we had to sue our customer just for the right to compete.

Uh that that's the strength of the monopsin, right? And and really I'd say our our entire business was validated from the field backwards, right? It was in DC that we the doors were closed to us. No one wanted to interact with us. Like the where the monopsin is strongest at the margin in the field where people are saying like, well, I'm on this deployment. I'm on this rotation and I I there is more free market system like what I'm being given doesn't work. I'd like to come home.

How do I like bend the rules, figure out how to get the software I need? That allowed us to empirically show, you know, create facts on the ground that this stuff worked. It was a long road to hoe. I think this is part of why it took 20 years to kind of get to this sort of point here. point here. point here. And yeah, I think that a lot of those lessons that were learned were not only like educational for and it also created a precedence that already existed by the time that we showed up where we didn't have to go through all of those same growing pains.

So you know what took Palunteer I guess probably about 5 years to get to 10 million annually in revenue. We did that in 22 months. But I don't think that was a credit to Andrew. I think it was mostly a credit to me, Matt, and Brian lived the the 5 years of balance here. balance here. balance here. 5 years plus 22 months. Exactly. Exactly. And so we kind of had a bit of a cheat code, but I don't think it's like culturally shifted to the point where it's like actually just easy to do this now.

It's not like the government has fixed all of their problems. I think it's just that there's enough people out there who have seen it that understand how to make it work. Um that you can work within the system rather than, as Sham said, trying to constantly fight from the outside in. Was there a view at that time in these years building Palunteer where you saw an opportunity in hardware? Is that kind of the motivation for Anderoll that we've got software but there's more to do and hardware could be reinvented and we could build systems.

I mean help us understand the connection. Yeah, in the very early days actually I came by to pitch Sham uh before we officially started the company. Uh and I think part of that pitch was we said uh we know how hard software is. We don't want to do that again. We believe hardware would be less hard. Um, and I think we ended up being right from like a getting going perspective. Um, but yeah, it's just, you know, the government doesn't know how to think about the value that's created by software.

Maybe you feel like they're a little bit better now, but it was really hard in the early days of Palunteer to convince them to think about it as anything other than lines of code, for example, or some like metrics that anyone that works in tech knows doesn't matter. But for hardware, they know there's a bill of materials. In fact, the government made stuff for a long time. During the Cold War, there were literally ammunition factories that were owned and operated by the United States government. Um, so they can kind of go through a spreadsheet and say, "Okay, I know how much it costs for you to build this.

I know how much margin I'm comfortable paying you. Uh, and it's a much easier, you know, crossing of the Rubicon. With software, it never felt like that. like that. like that. Yeah, it's still very hard. I mean, people want to pay for software and government on a cost plus basis, which doesn't make any sense if you think about the R&D that you put into software. Like, the marginal price you're paying is a small fraction of the R&D we're advertising across commercial and government customers. And I think maybe Trey, it's worth telling the story of how when you got to Founders Fund, you were looking for defense companies to invest in and hitting so many dry holes is is part of what led to the idea.

idea. idea. Yeah. I mean I I have no I had maybe still don't have any interest in venture capital. Um and so when Peter asked me to come over to Founders Fund, the only thing I knew to do was just to look at C the category of things I felt like I understood pretty well, which was GVEK. And so I uh incidentally, you can look up who bids on federal contracts. And so I pulled that list and then at the time I was using Crunchb. And then I just started outbounding to companies that were bidding on federal contracts.

And I met with hundreds of companies in the first three years that I was at Founders Fund. We made ended up making one investment in KDM which was renamed Expanse and acquired by Palo Alto Networks. Um but otherwise that was it. There was nothing else. And even like looking in retrospect like we didn't miss anything. There was just nothing worth investing in. It turns out Gnome was building in this category. Um, and so I went back to the founders fund investment team and said, "Man, I feel like someone should be building a next-g prime that builds hardware, but it's software defined and hardware enabled rather than being hardware defined and software enabled." Um, and uh, to my surprise, the team was like, "Yeah, sounds like you're probably the guy that would know that that's the gap.

And I don't know, maybe you should start a company." And I'm like, "Oh, no. You you guys hired me to work on the investment team at Founders Fund." They're like, "Yeah, that's fine. You can you can do that, too. It's all good." So yeah, it was kind of an accidental founding in many ways. many ways. many ways. The capital requirements for hardware business are notably higher if you didn't have the success you had building the manufacturing facility you're building. And I'm assuming all the R&D cycles are longer and require more capital to get to a point of product.

Does it make sense for venture capital to be the funer of the next gen of hardware defense tech companies? How does the economics and the capital markets markets markets I'll give a take here and then so I think um if you back up a little bit if you look at Fairchild if you look at integrated circuits in 1968 96% of all integrated circuits sold were sold to the Apollo program there was effectively a monopsy there's one buyer for this thing but Bob who was at Fairchild at the time and co-inventor of the transistor he was so maniacally committed to a future that semiconductors integrated circuits would be in everything that he never let more than 4% of his R&D be paid for by the government.

he was going to be like why should I have some PM tell me what my R&D road map I invented the thing so he kept executing that and that's he so he chased Moore's law mercilessly and that meant in the 80s when the government needed precision guided munitions for assault breaker to compete against the Soviets we had the price performance we needed uh so this idea that you know because when you get stuck inside the government loop of what they want you never hit the price performance by the way there's a good modern analogy which is Jensen and Nvidia right 93 graphics chips sold them as an OE almost like an OEM type solution until here we are.

are. are. The the one that speaks to my heart as a child who grew up in the shadow of the space coast is shuttle. You know, shuttle is is a it's beautiful, but it's $50,000 a kilogram to get to orbit. Starship heavy reuse will be under 20 bucks a kilogram, you know, and there's no way that you will achieve that vision if you're in a cost plus world because every day you're actually deleting your cost, which means you'd be deleting your profit instead of deleting your cost, turning that into margin that you can provide a better price performance on and keep writing that curve down, right?

right? right? Although to be fair, SpaceX sued their customer in the Air Force on the basis of the exact same federal procurement law um that Palanteer did. And so, you know, even with that massive cost uh costing down, they were in the same position as Palunteer was in the early days. days. days. Yeah. Let's go back to the venture capital at this conference that we're at. There's dozens of VCs now. This is clearly become a hot space as defined by your successes. What's going to happen?

So, these VCs are plowing money into hundreds of defense tech companies from drones to satellites to weapons systems to software tools. How is this going to play out over the next couple of years as a venture investor with your knowledge about Androll? I remember when I first got my offer letter from from Palunteer. Um there there we had this kind of high low mix of salary versus equity compensation and it gave three examples of how much your equity at your that was on your offer would be worth at different valuations.

It was I think it was 15 and 10 maybe or 15 and 20 something like that. And I remember talking to people around the company, they're like, "20? That's ridiculous. We're never going to be worth $20 billion." Um, and uh, you know, I feel like now it's like people are going out and they're like, "Our seed round will be priced at $20 billion." Um, so I think there's there's been a big shift in just like the way that people think about these things. Um, some of that is good, some of it's bad.

I think on the good side they're, you know, they're able to look at companies like Palunteer, like SpaceX, like Andreal and say there is actually a path to success. This isn't like an impossible market to innovate in. But at the same time, um, you know, there's there's a real tension around amount of capital raised and the valuations that are being applied to these rounds that add a tremendous amount of risk to the company that doesn't have to exist. You know, there's this favorite there's this famous scene from HBO's Silicon Valley where a CEO gets fired.

um for uh kind of underperformance on the plan that they had presented. Um and Richard Hendricks, the main character, says, "You know, you could have raised less at a lower price." And he said, "What do you mean? No one ever told me I could have raised less at a lower price." And I think that's ultimately what my advice to these companies is is like, "Look, your product might be awesome. Seems like you're building a good team. I like the vision for what you're doing and the mission, but you can also raise less at a lower price." And I think that avoids, you know, playing chicken ultimately with trying to hit numbers that frankly don't even make sense.

Um, one of the things that we've been focused on at Andrew that I think maps back to our experience at Palenteer actually is climbing down the multiples tree uh with every round. We never want to go and raise the next round at a higher revenue multiple than the prior round. Um, and even the series H that you mentioned before, uh, is is down pretty significantly from the series G. And we're not doing that because investors wouldn't be willing to pay higher multiples. We're doing that because I believe the discipline is really, really important, especially heading into a a, you know, medium-term IPO.

Emil Michael talked about this $200 billion of capital he wants to deploy. It's been reported he's hiring bankers to help him deploy it. To counter your point, if there's a lot of capital flowing from the monopsin, if there's a, you know, a big market that's growing aggressively, you've got a $200 billion TAM to go after now. Shouldn't that justify the venture capital coming in? Maybe even justify going at a higher price. Is this Department of War investment activity really going to kind of change the landscape and increase more venture capital flow?

I think it's it's going to help out tremendously. First of all, I love the nickname that this team has, which is Deal Team Six. So, uh you know, I'd be honored to be part of that team. uh but I I think if even if you look back at the titanium supply chain in the 50s60s it was it was bootstrapped by the air force in a similar way where they strategically injected capital down the supply chain to enable the aerospace industry to be created. So I think there's a tremendous opportunity with the office of strategic capital to think about what are the structural bottlenecks in the production.

You can have a lot of drone companies and they're all going to bottleneck on brushless motors. There's going to be certain key parts of the supply chain that we don't have enough capacity to produce here in the US and they're going to need a bolus of investment and just like integrated circuits, the first customer is going to be less economical than the end customer. So I think that's one part then the other story I love is where we really screwed this up. The drone is an American birthright.

Abe Kareem and the Predator, we we built it General Atomics. But of course then the government got in the way. The government said, "Hey, a drone is a flying missile. This thing needs to be ITAR controlled." Also, the FAA got in the way and said no beyond line of sight operations. Right? So, you basically killed the domestic drone market. There was a counterfactual world where General Atomics had a consumer subsidiary called DJI and the consumer drone market was entirely owned by the US and it provided for economic prosperity for America and wrote us down the price production curve that we could be using these things in innovation for national security as well.

well. well. What's the next market where you're worried that's going to happen? I have a lot of markets. So, I mean, we're talking a lot about um weapons of war here. I'm worried about things that go beyond weapons of war that affect our will to fight. Uh pharmaceuticals is one that's close to my heart. My father was a pharmacist, and it's one of the things he always wanted me to work on was bringing pharmaceutical production back home. 80% of APIs for generic drugs are produced by China.

What do you think the American people are going to think when they have to choose between defending the free world, defending American sovereignty, and their 5-year-old dying of an ear infection that we would have thought of as trivially curable? So I think there are these these things where we've just embibed the globalist vision that hey we'll do the innovation they'll do the production without realizing that innovation is a consequence of productivity probably to put it in terms that the that the tech community would really understand is like what motivated Google to do the research in 2017 be behind the paper attention is all you need a desire for a 3% incremental improvement in Google translate you cannot think of something more bal leading to something more revolutionary and we have seated all of those opportunities to realize and harness that innovation.

Now, if you we stick with pharmaceuticals, there's a reason 50% of all clinical trials, new clinical trials are happening in China and not in the US. the US. the US. Do you have a view on a technology or product that's developed in the US that we're at risk of getting regulated out and we're or we kind of going in the right direction at this moment? I would say that semiconductors is actually a really interesting one. back to your your point about um Fairchild is that you know we were the the home of the semiconductor industry for many many years and um you know once TSMC got got you know ahead of steam in Taiwan uh they kind of ran away with it and we didn't rather than investing in a domestic competitor uh there are all sorts of reasons for this that we could spend hours talking about um we basically just allowed that to happen somewhere else and now we're in a position where almost no amount of money is going to fix this problem for us certainly on a timeline of relev as it pertains to the risk that Taiwan has um in 2027.

So, I would say that's like another really big one. Getting back to defense, how does the hardware and software fit together in this, you know, kind of emerging war technology landscape? You guys are building software, you're building hardware, like help us understand a little bit about what the systems of war look like in the decades ahead. Well, I think the the starting premise would be where does it give us an advantage? And uh you know, we had the first offset which was nuclear weapons. The second offset, precision guided munitions and stealth.

Really, the the third offset is decision advantage. How can we outthink and out execute the adversary? That's where these things fit together. That's like the thesis of even having them to begin with. And I think the reality is that there's kind of a messy overlap of these things. Like all innovation is messy and chaotic and maybe the department suffers at times because it tries to have a framework-based approach like we're going to have MOSA modular open standards architecture something like that. you know, it's like we're going to avoid all of the pain and messiness by having some sort of process, but in reality, the process always destroys all the innovation.

And so there there's obviously a very tight thesis where these things need to coexist and build off one one another. They need to be interoperable, but you have to earn that. You have to earn that opinion in the exercises, in the tests, and the evaluation in combat would be my my humble suggestion. Do you think that outside of what Anderl's building, there's actions that this administration should be taking or that the private market should be taking to solve this hardware manufacturing and capacity gap that we have right now?

My view is they're actually taking a lot of actions. Not all of them have come to see the day of light here, but you know, even something as simple as reimagining munitions and drones as consumables. They're not things that you build and then stock on a shelf. They're things that you at the time of ordering them, you already have an exercise test plan where you plan to expend them, which means that you're going to have to replenish them, which means there's a demand signal to industry to keep going and and a buying cycle that means that you can buy the next generation rather than having the old generation.

Uh, and I think this department sees that in a very cleareyed way and is doing the yman's work of like stitching that through through all the services, all the portfolio acquisition executives to the point of not believing in process. They've moved from a world where you have a very rigid, hey, I said I was going to buy X of Y and I can't change my mind to a world where there's more autonomy and authority for the people who are buying things to say, I told you I was going to buy something that accomplished this goal.

I can change my mind about how I'm going to accomplish this goal, which you know, can you imagine trying to run any private sector business without that degree of autonomy and and flexibility in your decision-m? To echo Sham's point about what the administration is doing, there are a bunch of swings that they're taking. It wasn't that long ago that uh in the Obama administration, there was kind of the Celindra failure where they invested in this solar panel company. It ended up being a bad investment for the US taxpayer.

Um but now the Office of Strategic Capital is taking a really hard look at critical minerals. They're looking at, you know, refining of of minerals and uh they're engaging directly with the private sector to come alongside them in doing deals to get offtake agreements on these things. So I think there is some really clever thinking going on. Um, and then in addition to that, I think the procurement process is sort of up for revision constantly. Um, and Ash Carter started pulling a lot of these threads during the Obama administration.

That was the third offset initiative. Um, but you know, we're in a in a world today where there's kind of a renewed vigor around being asked private industry being asked what do you need like tell us what you need to be changed about the way that we do business in order to streamline this and make it go faster. So I I think there's a lot of positive momentum. Do you guys think these changes have been institutionalized or are they political party dependent? If the Republicans lose the midterms and there's a Democrat president in 2028, do you think that there's a reversion to the old way of operating that's going to have some political influence and change things or do you think we've really changed how things are are running in the government here?

I I don't think it's political, but I think it's people. So you can go back to again Ash Carter, Democratic administration, highly focused on fixing these problems. The current Trump administration highly focused on fixing these problems. And you know, there are a lot of people that live that were in the middle of that that didn't prioritize this. It wasn't, you know, it didn't rise to the top of the stack. And so I think we always think of like the bureaucracy as being a political infrastructure or an institution or, you know, bureaucracy.

I actually just think at the end of the day it's about leadership. It's just do we have the right people that understand the set of the problems that we're we're facing. I couldn't agree more. I mean I I call them heretics and heroes. Like you you know the entropy of the bureaucracy is always towards some sort of sclerosis. It doesn't it's not a political statement. It just is what bureaucracy does. when David Packard, who was probably the last major technology co-founder who served in the Department of Defense, when he came up with the 5,000 series on acquisition, which today we view as just sclerotic BS that's that's tied us down.

Well, he his document was seven pages long in the in the years between when he wrote that and now it's 2,000 pages. So, did he really screw us or did just the entropy take hold and there was no strong leadership in between to go do the bushwhacking and mow the lawn and and and make the right decisions? Now, you know, this this administration's blown up jids, which is kind of one of these insane bureaucratic processes. Like, can you just take a forget a scalpel, take a machete, and start clearing the jungle, and reearn some of these lessons as you go through it?

If you look at Kelly Johnson, who was the founder of Skunk Works, he built 41 airframes in his career, including the SR71, still the fastest flying manned aircraft, and uh and the U2, which we still fly. Like one, if you look at his rules, one of his rules was he had to play defense to keep the government bureaucrats out of his program. And I think you could, you know, okay, it's not it's not a critique of government. You could think of big corporations. When the big corporations bureaucracy gets into the innovation folks, the innovation stops.

And the heretics and heroes were really founders. It's like from a tech perspective, that's exactly what they were. like to the Kelly Johnson point, the U2 did not start as a US military aircraft because they didn't want it. Uh he ended up going through the intelligence community to get his start there. Uh and and it was kind of finding the right person that was willing to take the risk to do the thing rather than relying on the system or the institution to do that. This is the same with Benny Shriber with ICBMs, Admiral Rickover with the nuclear navy.

Um, it used to be about people, but today if you were to go to the the Pentagon and say, "Who's responsible for the F-35?" I'm not sure they even know who is responsible for the F-35. We're we're building systems by by committee rather than trusting the founders and people. There's like a proclamation. It's so great. It's this X Y or Z project is built in all 50 states. Like the objective is it's it's being the money is being spread around versus the F35. How do you achieve the objective?

The F-35 has components manufactured in 400 congressional districts, congressional districts, congressional districts, right? right? right? I mean, that's like that's a political project. project. project. We had this AB test with SLS and Starship, right? Like SLS had to have subs in all 50 states, but this AB test has been played out. I do think there's something about the kind of Calvinist spirit of America that sometimes gets us to misunderstand. You know, we call it the Apollo program, but it was probably it's it's really the Jean CR program.

You know, uh it's the F-16, but it's really John Boyd's plane. And and there's like a humility where we'd never want to call it, you know, you wouldn't call it although maybe the nuclear navy we kind of do call it Rick Over's Navy, but there's an element of like it's obviously both things. It's bigger than the person, but actually the starting conditions require the founder figure. figure. figure. So tell me about where we are in the state of readiness. You know, we highlighted some of the statistics, but if you guys were to think about what we need to accomplish, the infrastructure we need to stand up to have production lines that can be turned on to support munitions capacity for conflict in, you know, pick your region, let's say more than one region around the world, and the US needs to sustain those conflicts to defend the United States.

How far are we from being ready based on what's going on in the investments that are being made today across the sector? I think the way I think about it is if you thought about this as a spear, the tip of the spear is incredibly sharp. The shaft of the spear needs a lot of work here. Um, you know, the Department of Defense such a big organization. It it's it's structurally supply and demand is not integrated. You know, the the demand side is a real world events that happen in the combatant commands.

The the supply side are what the services and the industrial base build. The man, train, and equip and how you're actually producing that material. And the ability to drive consensus, which is really the beating heart of any private sector company of like how does supply and demand come together? What's our review of it? Is is kind of managed with with great difficulty in the Pentagon. And your ability your agility to respond to scenarios is is weak. That's that's where we can have a lot more precision because if you can start changing your mind and saying actually I thought I needed X barracudas, but now I need Y barracudas and Z furies.

How quickly does that take to percolate through the supply base? you know, instead we get locked into these like, hey, we've made a decision. The decision really can't be revisited. Uh, and then you start over time, the entropy is like, hey, I need to I have I have an unexpected bill. Let's just take a little bit of money away from these programs. And everything starts getting down to minimum rate production, which is this idea of what can I produce to just keep the line open, which is not deterrence.

That's how we frog boiled our way here. And that this is where my my idea of like you got to tie this into consumption. Like everything you're building, particularly on the munition side, needs to be consumable, such that you know you're going to replenish it such that the primes and the neopimes all have the demand signal they need to keep going and have a reason to produce them cheaper in order to make more money. My most contrarian idea is like the the cynical view that like you have the military-industrial complex and they're just in it to make money.

Well, this it's kind of a crappy business. Like you know these companies trade at like less than two times revenue. The problem is it's not profitable enough actually. But Trey, Sham said in the past, we have 8 days of munitions on hand for a major conflict with China versus 800 days needed. How far away do you think we are to having the supply chain built and the production capacity built to meet that objective? objective? objective? Well, I mean, one of the other things Sean just said in this conversation is that there's a hyo mix question as well.

like there are exquisite systems that are like the multi-million dollar interceptor missiles and then you have, you know, dumb munitions, things like bombs that are being dropped and things like that. And it's not the same across that entire stack. You know, there are some uh some munitions that are woefully under supplied and we have very low readiness on and there are others where I actually feel pretty good. Um, from an Android perspective, you know, we're looking at ramping as fast as we can. We just opened uh Arsenal yesterday uh to start producing furies.

Um, and you know, looking out over the next 18 months, we're not taking our our foot off the gas and yet there's still a run rate capacity that we're running into as we ramp. Like you it just takes time to get all these lines stood up. Um, so, you know, if we were to start today with unlimited cash, I think over the next 18 months as a country, we could get to the point where we were on track for having a sustainable uh industrial base. Uh, but we're not going to do that.

we're going to trickle it out over time and uh and I think that unless there's real political leadership that steps up to drive this forward, we will likely be in a similar situation uh for a long time. Um and so I think we really need to to take advantage of this specific moment where there's clearly urgency that is understood by by leadership across the administration. administration. administration. How much of the spear is autonomous systems? Is everything going autonomous? Is it just drones or is there on the ground autonomous ground autonomous ground autonomous right now?

Well, I I would actually argue that like the if you were to build for the 18-month out out out Yeah. I mean, the wars of today are fought with the weapons of yesterday. That's like just a fundamental truth. And some of our weapons of yesterday are awesome. Like B2s are incredible. Uh the bombs that we dropped last summer in Iran, incredible. Like these are very high-tech, exquisite systems. Patriot missiles, incredible. They're very performant. Uh they hit their targets almost every time. I mean, these are great systems.

The problem is is that they're incredibly expensive and we can't resupply. Like we're just we're way behind the eight-ball on that. And so, uh, you know, thinking about the wars of the future, it means that we need to start building these attritable mass systems today so that they're in inventory to be used for those conflicts. There are a number of androl systems that are at a readiness level in at a level of deployment that they're active and being used in in combat today, but it's still a very small percentage of of the way that the wars are being waged.

Um over, you know, the next 5 to 10 years, that hyo mix is going to have to shift massively. I mean, this is just like clearly evident in Ukraine. It's clearly evident in Iran. uh and I think the department is making steps to ensuring that they have a better divide of lowcost attra exquisite systems um but uh you know as I said it's going to take political leadership to get there uh but we we have the ability to do it the reason I ask is I want to talk a little bit about the ethics of technology to war the anthropic runin with the department of war recently and I think you guys have both talked publicly about this but Anthropic refused to let its claude model be used in Maven without human oversight constraints.

This is what's been reported what Emil Michael has said and the Pentagon labeled them a supply chain risk. Both AI and generally autonomous systems beg the question what role should humans have and who should have the right to play that role of hitting the kill switch. What's your view on the role of the technology vendor to the department of war and where you guys draw your line on what your responsibilities are with respect to ethics? to ethics? to ethics? Well, my my view on my responsibility to ethics is a slightly different question than my belief in democracy, which is a different thing.

Um, so maybe starting on on the democracy point. Um, I believe that the people of America have elected representatives to make really hard decisions about how we engage in combat. Full stop. Um, fully autonomous weapons are not new. We've had autonomous systems in operation like SeaWiz, which is deployed on uh, naval vessels that shoots down aerial threats fully autonomously. You don't have time to make decisions about, you know, incoming missiles or threats to your ship. You just have to shoot it down. So, that's what Sew does.

Now, Sewiz has accountability in the system. There's a person on that boat that is responsible for whatever actions that weapon system takes. And I believe that this is the future of autonomous systems is that just like any other system, whether it's a soldier carrying a gun, they are accountable for what happens with that gun or uh you know the captain of a naval vessel, they are responsible for what happens with that sea whiz. All of your autonomous systems are going to have accountability baked in. Now, ethically, how do I think about this?

You know, I believe that, you know, what Sean was saying about the first offset, the second offset, and the third offset, um, is, you know, we have we as a society went from like rocks and sticks to, you know, knives to guns to bombs. And then in, you know, World War II, we kind of plateaued with nuclear weapons. And we all looked around at each other and we said, "Wow, that's pretty crazy. I don't think we want to make more and more powerful nuclear weapons forever." And so actually our engagement in combat has come back down the chain.

Uh we're, you know, precisiong guided weapons. We're shooting non-exlosive missiles into windows of apartment buildings, avoiding casualties, unintended casualties. Um and I think that's really the goal. And if you look at AI as the command center uh for making better decisions with better precision, with better discrimination, with uh less less uh civilian casualties, this is good. that's actually ethically far improved from just dropping dumb bombs on areas of cities to eliminate military facilities. So, um I don't think abstension from participating in the building of technology for national security is a morally neutral decision.

You are making a moral decision when you decide to abstain. And I am making a moral decision as a private citizen building a company in this space that I believe that this is ethically just and uh I trust in our democracy to deploy those tools with uh the interests of the American people at heart. There's a lot that's said about Palunteer enabling a surveillance state. We had the all-in summit in September. Alex Karp, your CEO, spoke and there was a protest group outside protesting Palunteer powering a surveillance state.

I just want to give you a chance to respond to that. number one. And number two, if you saw that Palunteer's tools were being used in an illegal way, where's the responsibility for Palunteer as a technology vendor in addressing those concerns? It's almost hard to respond to because it's very unclear what surveillance people think we're doing. You know, there's just like a broad almost maybe an outgrowth of Terminator fear around technology. technology. technology. And I want to get into that cultural question next. I think it's like very important to understand.

We don't collect data. We don't have any data. It'd be like it'd be like accusing Excel of being a surveillance tool, right? It's like this is a way of bringing your your own data that you have lawful authorities to collect together to make decisions. Sounds a lot like Excel. Um, but it's, you know, because we are unabashedly patriotic and serve the US military, I think people have a kind of colored view of these things. things. things. I would argue that it's actually Excel with cellby cell.

You know, it' be as Karp says, it's the most insane platform in the world to try to do something illegal in because you are going to be caught. You know, like that was part of the idea of how do you enhance privacy and security? It's how do you build more civil liberties protections in how do you have a normative view that enables a democracy to say these are laws and rules, the system will enforce it. We're not just relying on people happening to do the correct thing.

Uh so that's one piece of it. The other piece of it to come back to this broader point is the the need for epistemic humility. like one of the um to the point of we have elected officials um they are accountable for these policy decisions I think at the limit it's actually kind of indefensible to have a perspective other than lawful use because if you are salami slicing the policy that's actually tyranny by techb bro you know a small number of people are constraining the maneuver space of a democracy with no accountability to the populace so I I think that's a pretty challenging perspective to be and we've been in this perspective if you go back to How did the Soviets get the nuclear bomb?

You know, there's really there's two sources of treason. One was committed communists like Klaus Fuks who was always a spy. But the other were people like Theodore Hall. He was one of the youngest scientists in the Manhattan Project at 18 years old. Uh his brother Edward Hall built the Minute Man missile. His brother was, you know, kind of a heretic and hero in my terms. But Theodore said, you know, I'm one of the best physicists in the world. I'm probably also one of the best geopolitical strategists in the world.

And I think the only way to have world peace is if two countries have the bomb. So in 1944, Theodore Hull walked into the Soviet trade mission in New York and gave them critical secrets to the bomb. Now Theodore thought he was going to deliver world peace. Instead, every death from communism since 1949 is actually on his hands. And there's no accountability for that. Yeah. I think one of the other things that comes up in these uh these conversations about powering the surveillance state is this belief that we have policies but we don't actually want our civil servants to have the best technology to enforce those policies.

And it's almost like a lack of belief in the institution of democracy. It's like you know traffic cameras for example. It's like man I I'm sort of libertarian in some ways. I don't love traffic cameras but if traffic came say I'm going to send a ticket to every single person that blows through this red light. I don't know, maybe we have to change the policy around red lights if you don't like that. Uh, or I've gotten three speeding tickets in San Francisco from autonomous cameras in the last month.

Well, they did ramp it up significantly, which is incredible that they're enforcing laws at all if we're being honest. honest. honest. I mean, like, here's my ticket. And then I'm literally watching the guy while I'm doing three miles over the speed limit, you know, take heroin needles out of his arm and put it on the floor next to elementary school and I'm like, totally fine. Yeah. fine. Yeah. fine. Yeah. But it's the same thing with like, you know, using t using tech for better enforcement of tax.

uh law or something like that like do you is what we're saying by criticizing what Palantry is doing is what we're saying that we don't want our civil servants to have the best tools possible because you can have that position I tend to think that that position is pretty morally bankrupt but I guess you could have that position but ultimately I think that's what it is so scenario play this for me because there's a public perception I don't know how farreaching it is that there's some tied corruption between government officials that use technology that's super advanced that's hard for people to understand and the technology ology vendors.

If you saw government agencies using your technology, either of you in an illegal way that you knew broke the law, do you report it? 100%. 100%. 100%. I there's an entire mechanism. Absolutely. Absolutely. Absolutely. There is an IG in every agency. Right. So can just just explain that for a second. The inspector general maybe. Yeah. Every agency has an inspector general who's an independent organization that you can provide anonymous or non-anmous complaints to that then have the ability the statutory ability to do an investigation in an unfettered way inside of that organization whether it's the department of war or um housing and urban development like literally every single agency.

Uh, and this mechanism is used. I actually, you know, in this case it was weaponized against one of my favorite heretics and heroes, Colonel Drew Cukor, who invented Maven, the founder of Maven really, but you know, people would file complaints claiming that he was um hiding illegal immigrants in his basement, a basement that he doesn't really have, you know, but but all of those things were investigated. Naval Criminal Investigative Services went out to his house and actually looked into these things. So, people take this incredibly seriously.

Where does the culture come from? The anti-defense tech alignment culture. Is it because of the peace era that we had and folks took for granted national security? security? security? I think the first schism was really during Vietnam where people felt like um they were lied to about the war. It it drove a fundamental schism between academia and defense and that we've never really healed from that schism. And so there's this this this kind of sense this distrust that's that's brewed there and kind of escalates through society.

The second schism is like the number of people who are prior service or are connected to this community who actually see these people as humans and have a fully informed mental model of how diligent they are, how the work actually gets done, what do these words actually mean, what is the process like is is is evaporated. So then their own fears fill how they think it happens and it seems like maybe it's happening more in a cowboy way, maybe it's happening in a way without oversight that there is no such thing as doctrine.

like there it's kind of a cartoon version of what's actually happening that I think you know you're unable to reconcile. Yeah. I think if you even look back at what happened with Snowden uh you know what was that 15 years ago now something like that like that like that um you know that there was almost no discussion about the investigations that went into like was the data collection actually abused and the answer was like basically not at all. there were like less than 12 documented cases where someone got access to data that they shouldn't have.

And it was because of like technology errors, not because of the policies that were implemented. Um, and so, you know, we can have disagreements about whether or not the intelligence community should have collected the data and stored it. Uh, but that was that policy was renewed multiple times by multiple administrations, multiple political parties that had the majority in Congress over decades. And so apparently our elected representatives thought that it was important enough to keep in the system. Um so I think it ends up being this kind of weird policy discussion.

Uh but the second point that you make I completely agree with about like the the kind of distrust of the institution uh in in creating the stories for themselves. Uh I oftentimes go and do guest lectures at Stanford and I always try to ask like raise your hand if you have an immediate family member that serves in the military. No one ever raises their hand. It's crazy. Like at at Stamford, there are veterans that come in that go to the GSB and things like that, but in like the undergraduate undergraduate student population, it's incredibly rare for anyone to have any connection whatsoever in their immediate family to the military.

And I I think there's like, you know, some of this goes back to criticisms that people like JD Vance, uh, the vice president, has made about, you know, elites in America and things like that, but there's just this incredible divide that has happened. Um, and we're kind of losing touch with that kind of salt of the earth, middle of the country, you know, veteran community that I I feel like was way more present during the the Cold War, uh, and and, you know, the World War II before that.

Do you think that there's any external influence that's driving this culture? Are there influences on social media in mainstream media? And maybe just talk about destabilization about destabilization about destabilization and the attack vectors. I've seen it in other areas of science. I don't want to spend time on this show talking about it, but there have been traces that I found on external folks that want to destabilize American science and industry progress and they create fear and they put out articles and then they go social and they they become viral and suddenly everyone believes it even though it's not true.

Do you see that? And have you actually kind of seen that in the sense of like attacking the tech companies that are now supporting American defense? American defense? American defense? 100%. Even if you go back to, let's stick with Vietnam. Uh the Soviets spent $7 billion in 2026 funding the peace movement, the anti-war protest. Now, there's obviously some there is an organic element to it, but this is just dumping gasoline on the fire to sew division and discord. Uh and I think in the present day, you I I think you know certainly we see it against Pounder where there's CCP money flowing to organizations that are protesting us for various domestic issues here that it's not isolated.

It's it's broadly a successful strategy for our adversaries to sew division. No one will believe it because no one wants to believe that they're being influenced, influenced, influenced, right? But but I I think Sean's point is exactly right. It's like it's actually a brilliant strategy. Like good for them. They they are not our friends. They're our adversaries. What would you do if you were in their shoes? It makes a ton of sense. of sense. of sense. Do we do that? I mean, look, we we have all sorts of counter intelligence operations operating around them.

The modern art movement was really funded by the CIA to undermine the kind of Soviet control of art, you know, and it was it was broadly funded and it wasn't it wasn't directed by CIA, but you you can see how we have cultural values that we want to inculcate and spread. Do you think we have a shot at recasting the defense industry, the tech industry that's addressing defense and aligning it with a notion of patriotism? And what is it going to take to make that happen?

I don't know, maybe writing a book, home mobilize. mobilize. mobilize. Oh, yeah. You have a book. That's right. That's right. I'm trying to do exactly that. You know, look, if if we look at a cleareyed sense of the world and and how much deterrence we've lost, you know, you could you could really say like maybe World War II has already started and 10 years from now, we'll look back and and and be able to perceive that, right? And I I I think you don't need literally everyone to view this, but if you can create a more cleareyed view of what's at stake here, not only for you, but for your children and their future, I I think you can you can get people to show up and participate.

And this is this has been America's story all the time, you know, and usually when we start these things, we are the underdog. All periods of American greatness have started when we realize that we're the underdog. We were the 17th largest army in the world at the beginning of World War II, you know, and what did a rag tag bunch of farmers and random tradesmen have taking on the world's largest army in the British during the Revolutionary War, you know, and and I I think um having some clarity about what's at stake, what the counterfactual is.

It's so easy when you're successful to kind of let the nealism grow and say like look how imperfect we are. There's like the self-loathing creeps in. And this is where I take coming back to your point on the legitimacy of our institutions. like should these institutions work? Do they deserve the best software? I mean, look, if they're public or private, you can't have doors falling off planes, you you know, are are government organizations need to provide the basic services they've signed up to do without fraud, without corruption in an efficient way.

And the reason is not just an aesthetic. It's like in the absence of that, it breeds nealism. And the younger generations look at that and say, you know, we should just tear all of this down. And things will absolutely get worse in a world that looks like that. So, it's incumbent on us to wake up every day and fight for the legitimacy of these institutions to make them more functioning. America's story is never written. It's every chapter seems to be a whole new arc and we're in one right now.

There's a rising socialist movement in the United States. Can you guys just comment on how much you think that that socialist movement cast with whatever term they want to use is going to affect our capacity for defense and resiliency going into the next decade particularly as our adversaries are rising? Well, the argument I've always made is I think our our greatest threat as a nation is not homicide, it's suicide. And it's it's in this vein. It's the internal discord. It's the division. Uh it's the it's the self-loathing.

It's um you know things like the socialist movement which I think are symptomatic of this internal discord and ensuring opportunity for our people to the point of a functioning elite it if you were to go backwards and think about the root cause like maybe we don't have an elite that cares enough about the prosperity of the American people and we've made decisions through globalization we were told NAFTA was going to be a great thing that actually if you lost your job in manufacturing why don't you just learn how to code you know there there's a certain sort of callousness in that and you know I'm not an unabashed free market and I'm clearly not a communist, but there's a sense of where the decision on the margin actually really does matter and that comes down to leadership.

leadership. leadership. I think one thing that makes me a little hopeful is that socialism literally doesn't work. Um, and so, you know, you look at, you know, what happened in San Francisco even where, you know, we elected as the district attorney and then we're like, "Oh, wow. This is not going well. Recall him." We have the board of education rooted in a selling point of empathy, right? right? right? Yeah. Uh what happened with the board of education getting recalled, you know, Daniel Lur coming in as the mayor.

Uh you know, we felt like we kind of went into this valley and sort of hit rock bottom. Um but I do think that people eventually realize that it doesn't it just fundamentally doesn't work. Seattle and Washington State are likely going to lose a large number of their biggest employers. And as that happens, they'll come through on the other side. Probably might take them 7 to 10 years to get there. Yeah, it might be painful and it might take them a long time, but I think they'll eventually come to their senses.

senses. senses. What do you two disagree on? That's a great question. Um, we actually, I'll be honest, we bickered with each other quite a bit at Palunteer. Um, and usually it was Sean being right about something and me taking a long time to come come along to his point of view. Um, but uh, yeah, I think you know, any of these cultures that are like well functioning are rooted in debate. Um, and you know, eventually, eventually, eventually, but you're avoiding my question. Well, whether it's whether it's actions or outlooks, or outlooks, or outlooks, whether you should show up to your interview at a tech company in a suit, I don't know.

don't know. don't know. Well, no, I I will say this because it actually is part of the story of Androll. I thought that it was a bad decision at Palunteer to be as quiet as we were. I thought that we needed to get out there and tell the story so that there would be data that says things like what Sham said about like we don't have any data. We are Excel. Um and we had a very kind of quiet reserved comm strategy. Um and we went back and forth on that a lot.

And uh when I started Andrew, I was like, you know, all the positive things we learned about uh doing business with the government from Palunteer, the one lesson that I learned that we didn't implement at Palanteer is we're going to go out there and tell our story. Um and I think that's worked for us incredibly well. And I'll be honest, I think Palanteer has come along to to my my side of the of that debate. And last question, if we don't do things right, what does 2040 look like?

And if we do do things right, what does 2040 look like? Economic and defense. Well, the the economic part is, I think, the critical one because national security is not an end unto itself. It's a means to an end. And that that that end is economic prosperity, the prosperity of the American people. Um, you know, I think no country has done more to develop the world. Like how did integrated circuits and micro electronics get to Southeast Asia? We sent them there. Yeah, we benefited in terms of trade there, but you know, like which other winner in a war spent their own capital to rebuild the conqueror conquered, you know, in Japan and Germany and and now you have the stability as a result of it.

So when I think about what could go wrong is you actually have a Chinese century that we never recover from that literally everyone in the world is a vassal state to China and might makes right in their sort of world you know and we we shouldn't forget it's like it's very clear even in the present moment that for the CCP it's not enough for China to prosper America must fall that's an explicit part of the strategy look it is a business decision if you want to buy American or Brazilian soybeans I actually don't begrudge you one iota which decision you make there it's an entirely different decision when you're smuggling agricultural funguses into the US so that we can't grow soybeans.

That's the sort of zero sum frame that I think 2040 will look like if we get this wrong. And if we get it right, I think what we actually see is a massive re-industrialization of America followed by the West. Um, we see a thriving middle class, which I define qualitatively as a middle class that believes their children's future will be better than their future, which is something that I feel is is a fundamental promise that's broken down over the last 30 years or so. Uh, and a belief in our institutions once again.

Yeah. No, completely agree with all those points. Uh I I think there's a big component here around education that we haven't talked about as well where we figured out a way to educate and successfully enter our young people into a marketplace that uh needs them and that benefits from their services. Um and I I think that we we haven't quite nailed that. Um, but I I do think that the re-industrialization point of this is going to be kind of the the central point of uh making sure that China's many many decade belt and road strategy is not going to put us in a position where we literally just can't do anything.

anything. anything. Do we need military and industrial primacy? or can we operate in a multipolar world where the US can share influence and economic prosperity with China, perhaps Russia, perhaps one or two other nation states? Well, the the challenge with not being the leader is that you don't get to set the terms of engagement. And so I think the the benefit that we have had uh since really the end of World War II is that we've had the primary seat at the table to say this is how we're going to do uh you know semiconductors.

This is how we're going to do supply chain. this is how we're going to protect trade lanes. And I think the moment that you step back from that, uh, and someone else has all those incentives, uh, you start playing the rules of their game and it doesn't stay multipolar for long. Well, I really appreciate the two of you being here, Trey, Sean, thank you guys. This has been great. Thank you. Thank you. Thank you. Thank you guys.