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.

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So Trey, I think you know in the early

days of Palunteer, I was roaming around

giving demos to anyone who could

possibly want to see them. 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.

>> 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.

>> 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.

>> 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%

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?

>> 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.

>> 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?

>> 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.

>> 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.

>> 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.

>> 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.

>> 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.

>> 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.

>> 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

>> 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.

>> 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?

>> 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.

>> 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.

>> 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.

>> 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,

>> right?

>> I mean, that's like that's a political

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.

>> 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?

>> 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.

>> How much of the spear is autonomous

systems? Is everything going autonomous?

Is it just drones or is there on the

ground autonomous

>> right now? Well, I I would actually

argue that like the

>> if you were to build for the 18-month

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?

>> 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.

>> 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.

>> 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.

>> 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.

>> 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%.

>> I there's an entire mechanism.

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?

>> 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

>> 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

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?

>> 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,

>> 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.

>> 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.

>> 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 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