Pirate Wires - Military Defense Has Taken Over The Tech Industry | PIRATE WIRES EP#9

Episode Date: August 11, 2023

EPISODE NINE: In this episode, Mike is joined by John Coogan and the Founder of Anduril Trae Stephens. We discuss the history of defense companies, how the tech startup Anduril became a player in the defense industry, the shift in opinion working with the government, and what the future of tech defense holds. Featuring Mike Solana , John Coogan, Trae Stephens. Subscribe to Pirate Wires: https://www.piratewires.com/ Topics Discussed: https://www.youtube.com/watch?v=UI4l-o4AcHs&t=1s&ab_channel=JohnCoogan Pirate Wires Twitter: https://twitter.com/PirateWires Mike Twitter: https://twitter.com/micsolana John Twitter: https://twitter.com/johncoogan Trae Twitter: https://twitter.com/traestephens TIMESTAMPS: 0:00 - Intro 0:25 - Welcome John & Trae to the show! Preview of John's documentary on YT - Link in Description 2:55 - History Of Defense Companies 8:35 - What Does The Defense Industry Look Like Today? 12:40 - Competing With The Big Companies As A Startup 21:15 - Talking To Congress 23:20 - Will There Be New Players In The Space? 26:30 - Changes At Founders Fund To Accommodate Anduril 28:30 - Project Maven 37:15 - Tech Industry Has Zero Power In San Francisco 40:15 - The Dream Team Needed To Make Anduril A Success 45:45 - What's Next For Defense Industry? 51:30 - Go Watch John's Documentary on YouTube! And Follow John & Trae On Twitter (X) 51:50 - See You Next Week! Pirate Wires Podcast Every Friday!! #defense #tech #defenseindustry #lockheedmartin #boeing #war #anduril

To be honest, I don't think that there was ever like a real opposition at any scale to working on defense programs. As I mentioned earlier, Silicon Valley was built on defense contracts. And I think tech people at their core just want to work on hard problems. And it turns out that a lot of the most interesting hard problems have strategic relevance to our national security apparatus. Let's talk about defense technology. Welcome back to the pod. I've got my two good friends from Founders Fund here. We've got John Coogan, who just produced a documentary on his podcast on Onderol, which is the leading defense technology company in Silicon Valley. Silicon Valley has always been the global hub of innovation, but the real action is actually happening 400 miles south in a nondescript Costa Mesa industrial district.

The tech coming out of this tiny warehouse will impact the food you can buy or how much gas you can put in your car. And if they're successful, they may prevent the USA from going to war. And the craziest part is that it was all started by the guy who founded Oculus VR. This is the story of Anduril. Back on the pod after his incredible takes on Oppenheimer, just, I mean, we've been getting emails for weeks now. Trey Stephens, partner at Founders Fund and co-founder of Anduril. We kind of got into it when we were talking through the Oppenheimer stuff. It was you, me, it was Trey, it was you, me, and Camille, kind of our review of that movie. And we danced around, I think, a very interesting topic, especially right now in Silicon Valley,

which is just the state of defense technology. This is now a space in tech, and it wasn't that way 10 years ago. John, you just did a documentary on it as I sort of opened up at the top of this show. And I just want to have that conversation. I want to talk about the state of defense generally in America. I want to talk about the state of defense technology. And I want to talk about, honestly, Trey, you and a bit of your background. I think it's central to all of this. It's really exciting. I think it's a story that's not really been told yet. As someone who's been in tech for all of us now, it's been like 10 plus years. I think one of the more interesting things that has been happening, I guess one of

the more interesting things that exists right now in tech is this sort of new defense thing, this new defense technology thing. You can say, I'm working in defense within the tech industry. And it used to be like defense technology meant Lockheed or something. It didn't mean you went to Silicon Valley and joined a startup. Maybe you were working on something that would be used by the government with the defense industry, but not like this. It was not a part of... You're not going to like a Y Combinator company and starting a defense technology. That's new. It's interesting. I think a lot of people listening probably have no idea what I'm talking about. Maybe they've

heard about it. Maybe they have friends who are working in defense in some capacity in tech. They're investing in that. You hear that a lot. People are investing in that. What is it? Paint this corner of the industry. Just paint a picture of that for us. Who are the major investors? What are the major companies? Who are the major players? And how do they interact with the government today? Yeah. Let me start with doing a little bit of history. So going back to that, again, the end of the Cold War, you had this massive consolidation of industry. You ended up with effectively five really big defense companies, Lockheed Martin, Raytheon, General Dynamics, Northrop Grumman, and Boeing. Boeing is the only one of those five that has like a massive commercial industry as well. Obviously, they sell airl you know, commercial jets and stuff like that. Um, and so if you think about all the

platforms that we built from the, you know, fall of the Berlin wall until, um, let's say like the early two thousands, um, you had things like, uh, the F 35, which we, that program started in 1994. Um, and it like didn't fly in the rain until like a couple of years ago. So like that took almost 30 years. And then you have like tanks and missiles, many of which were developed during the Cold War. The Patriot was originally released in the 1960s. Javelin stingers also came from the Cold War. So really not a whole lot happened. But we had tremendous dominance coming out of the Cold War. So really not a whole lot happened. But we had tremendous dominance coming out of the Cold War. And so when we roll into, you know, the first Gulf War or

Bosnia-Herzegovina or, you know, the war on terror, like we already had established a massive kind of like backlog of dominance from the Cold War. And there really wasn't a whole lot of new technology that our adversaries had access to that challenged that dominance in any real way. But fast forward to today, we're talking about conflict with Russia. We're talking about conflict with Ukraine, in Ukraine. We're talking about geopolitical conflict with China. We're talking about the risk of nuclear war with North Korea, the rise of kamikaze drones that are being provided by Iran. Our adversaries are introducing new technologies to the battlefield that didn't exist in the 1980s, the last time we had like a real spin. And the first two companies, like modern companies that were pushing to do work with the U.S. Department of Defense were SpaceX to do reusable launch vehicles,

again, directly competing with the United Launch Alliance, which is an alliance of the big primes to compete for launch, and Palantir, which was doing data analytics before that was like a cool thing, dealing with big data, artificial intelligence, machine learning, things like that. Both of those companies had to sue the United States government to get access to contracts because the primes had built this like defensive wall around themselves to say,

yes, DoD, we're doing what you said. We're consolidating. We're limiting our margins. We're living in a world of reduced budgets. But the agreement that we have with you tacitly is that you won't let any new players come into the ecosystem to cannibalize our profits and our access to these contracts. And so both Palantir and SpaceX had to sue the United States government to even get access to bid on those contracts. I remember the SpaceX suit. It just is so an Elon thing to do, you know, to just be like, well, then I will sue the government and force you to work with us. But I don't remember the Palantir one. I did not remember that that happened. Yeah. I mean, there was a huge lawsuit with the army where the army had basically decided that

they were going to build their own intelligence infrastructure. And it was like very like directly, we're going to rebuild Palantir from scratch on the taxpayer's dime. So basically, after years of this oligopoly defense tech thing, very mature, totally outside of the realm of what happens in Silicon Valley, California type investing and that tech ecosystem, you have these two entrants. Is it those lawsuits that blow open a path for for new companies, for new players? Yeah, I mean, there is existing law in the federal acquisition in federal acquisition law called Title 10 U.S. 2377. It's a commercial preference authority that says if something exists commercially, you cannot build it from scratch. And so SpaceX sued the Air Force on the basis of this law.

And so SpaceX sued the Air Force on the basis of this law. They said, you can't compete this out to U to build Anderle's stuff from scratch. We can't hire Northrop Grumman to build Palantir's stuff from scratch, things like that. And so there's obviously still a lot of cultural challenges, but the law is not the problem here. The preference in the law exists. We have the legal precedence to actually enforce, you know, doing the right thing when it comes to buying products rather than services from contractors. Right. It doesn't, it hasn't existed. The law hasn't been in the way for, but still it's not been that long. We're talking like five years about. Yeah. It's mostly, it's mostly just a cultural thing. Like they just decided not to enforce that aspect of acquisition law until Palantir and SpaceX took them to court and said,

this is a law, it exists. You must comply. So now before we get into this sort of a more detailed history of Onderil, which I consider the central company in the space today, what is the space today? So now you have SpaceX and Palantir who have kind of helped pave the way to working with the government in this manner, not only culturally or not only legally, but I do think culturally. I mean, there's a lot of excitement around both of those companies. Palantir, I remember first because it seemed like less of a moonshot 10 years, even 10 years ago. I mean, it was like people were walking around with Save the Shire t-shirts at the airport, right? You saw that everywhere. walking around with Save the Shire t-shirts at the airport, right? You saw that everywhere.

SpaceX was always exciting, but it seemed like, you know, oh yeah, we're going to go to Mars, Elon, sure. And now it's like, you know, you have Starlink and it's like, he's setting up rockets constantly, manned missions. It happened. So both of those companies have changed the culture as well as the law, but we're still not quite in the realm of like pure defense technology. That brings us to, I think, Anduril and a whole other, like a pantheon of those companies. What is that? Paint that picture for us. Kind of in the wake of that movement that Palantir and SpaceX started, it became clear to the Department of Defense and to, you know, federal law enforcement, national security, homeland security type stuff that they needed. There needed to be more of a focus on innovation to get things right moving forward. of innovation organizations, organizations like In-Q-Tel, which is like the CIA's venture capital firm, essentially, the Defense Innovation Unit, AFWERX, Softworks, like Naval X, they're all of these like little innovation offices that exist. And when I started poking around in the early,

my early years at Founders Fund, I found that there was a lot of money going out the door to non-standard defense companies. The problem was, is that found that there was a lot of money going out the door to non-standard defense companies. The problem was, is that all that money was being directed towards research and development. It was, you know, pilots and prototypes and the primes, the big primes, they love this because it's basically like a great distractor. Like when someone comes and they're like, oh, no, no, no, we're giving a ton of money to small businesses. And as long as to the prize, as long as businesses stayed small businesses, that's great. Give them all the small business funding you want. Just don't transition them to anything meaningful. And so in 2016, I started having conversations with with a few folks in our network.

Obviously, I had no Palmer lucky. We were the first institutional investor in Oculus. He and I had been hanging out at Founders Fund events talking about the difficulties of operating in national security environment. It was something he had been interested in for a long time. And I kind of came to this point where I'm like, look, I've met with all of these companies that are doing federal contracts. And they're not making any progress. They're not like breaking through this glass ceiling. And I think what we really need is a 21st century defense prime. We need like a next generation defense contractor that isn't competing for research and development contracts. It's a company whose entire purpose is to go and win long-term platforms head-to-head

against Northrop, Lockheed, Raytheon, GD, Boeing. And that conceptually is super different than all of these very single product kind of companies that had existed until then. Notably, though, this is incredibly hard. The idea that you can pull together like a head to head competitor for, you know, $100 billion defense company is kind of crazy. And, you know, we're still kind of like playing through that right now, even though the company has done quite well. It's like, you know, nothing's guaranteed. Well, there's a core... I want to get to... John just did... He has this entire documentary that he just did on the company. And I want to tell the story of... I want to give him a chance to do that. And for us to pick it apart, Trey can sit here and be like the fact checker and make sure that John's not lying to us. But before we get into all that, you're talking about competing head on with major defense primes. They're hundred billion plus market cap. They do things differently though, right? Fundamentally, this is the, I remember when you were first getting Underworld

off the ground, it was like, this is a layman when it comes to defense, but do they not, they get like a contract to build like a jet or something and then they all bid on it or whatever and they build this thing, right? Can you explain the difference there between that and then what, what honor roll does? Yeah, there's this concept of a cost plus contract, which means that the government hands you, you know, a thousand page requirements document. And then your job is to go and build every single requirement into that product. And then you get reimbursed for your cost plus some agreed upon fixed margin ahead of time. That's usually somewhere between 7% and 12%. And so really, there's no incentive to go faster. There's no incentive to spend less because you only make money when you spend money.

And so you might as well spend as much money as you can to unlock additional margin at the end of the program timeline. And so this process hasn't worked particularly well for the US taxpayer. The F-35 is a great example of this. There's no shortage of content out on the internet about how poorly that program has been managed over the last 29 years now. And I think our approach was, look, we're going to self fund our own research and development. We're going to build products that we believe, uh, meet the demands of our customers and the, you know, federal law enforcement, uh, department of defense, international partners and allies space. And if they want to buy it, they can buy it. And we're not doing that by a list of requirements. They can just buy the thing that we built or they can not. So it involves you sort of sitting there.

I mean, maybe it's like, I actually imagine it's like Palmer sitting there being like, what would be like a cool thing that would help us win wars? And he's like, it would be like this crazy drone that does X, Y, and Z. And then you guys just spin it up and then you take it to the government and you're like, Hey, are you interested in this like crazy drone that does X, Y, Z? And they're like, yeah,

that's the, that's the like Stark industries from Ironman version of the story. I'm not sure that's actually how it plays out. Really more how it plays out is like, we know what the needs are going to be for the next five years that the DOD tells you through what's called the palm, like all of the stuff that they're going to acquire and that they've like kind of slotted into the budget for the next five years. And like what we're doing is we're picking the

programs that we think we can add a bunch of advantage through tech superiority, things like artificial intelligence, things like autonomy, things like next generation sensors, where we can show up with a product when that thing is when that specific platform demand exists. And we can show up with a product when that thing is, when that specific platform demand exists. And we can say, look, you could go and buy this from the primes and give them a bunch of requirements, but we've built it. It exists today. And oh, by the way, there's like all these additional capabilities that are built into this platform that you might not have even conceptualized

from a requirements perspective. But you have to have that starting point of like, even conceptualized from a requirements perspective. But you have to have that starting point of like, you know that they're going to buy this specific like, you know, requirement set. Because if you just like walk to them with an Ironman suit, it's like, where are they going to buy the Ironman suit out of that's not in their budget? Like it's much more difficult to make that work.

John, Trey sort of danced around it for a minute. Can you give me the ecosystem. Who are the players in the space right now? And what does that look like today? Yeah, I mean, I think this is something that we talked about when I was joining Founders Fund a couple months ago, that it would be interesting to focus on defense tech for the first couple months of me working there. And it was something that obviously was top of mind because of Anderle, but once I got inside of Founders Fund and really put the pieces together, I didn't realize it from the outside, but Founders Fund has just had a profound impact on defense tech.

Like Founders Fund is defense tech when you trace the only major venture successes in the space, have all come very directly from Founders Fund activity at a very, very early stage, that being Palantir, then SpaceX, and then Anderle. And people often don't think of SpaceX as like a defense tech company because it's space exploration. But when you look at the effects that Starlink and Star Shield are having. Right. I mean, it's getting so big. We went from SpaceX being not thought of as defense to now there's a New York Times hit piece on Elon. It's just too much power. It's too big.

Yeah. It's too big and one man shouldn't be able to decide our industrial policy internationally. And it's like, okay, well, we can solve that with a DOD contract here, which is probably where this will go. But regardless, you look at the lineage of these companies and there's founders funds, you know, fingerprints are all over these companies. And so with Anderle, I think the, I wanted to know, I wanted to go a layer deeper into the company because most of the content around the company is centered on Palmer. And two years ago, I had actually made a video telling the story of Palmer's entire journey through Palantir or through Oculus. And then at the end, it kind of goes into, oh, and he's also starting this new company,

Anduril. It's cool. It's kind of a footnote. And when I started talking to people internal to Founders Fund about the story of Anderle, it kind of unlocked this concept that maybe the company wouldn't work unless you had this incredible founding team. And so my goal with the documentary was to highlight all of the founders and also some of the key leaders of the company and tell kind of a broader story. But that creates kind of a little bit of cognitive dissonance with the traditional narrative of, I love Palmer, he's amazing. But the fact of the matter is that he doesn't build everything in his garage. And there is... Defense technology is so complex that you do need to have a presence in Washington,

D.C. You do need to have experience, you know, working with the military. And that's why the Palantir side of the Anduril team, it seems so critical to that. And we can kind of go into a little bit more about. I want to talk about the connection with the government specifically. And that's an interesting point. It is weird. No one ever thinks about it.

The importance of talk. In fact, I remember reading, I think it was Atlas Shrugged. It is weird. No one ever thinks about it. The importance of talk. In fact, I remember reading I think it was Atlas Shrugged. It was. It was Atlas Shrugged. So cliche. Here I am working for Peter and reading

Atlas Shrugged and bringing it up. What's up, but never heard of it, Michael. Obviously, the industrialists are all vanishing and um you don't know where they're going uh they're off the gulch and there are a couple remaining and and they're realizing like they've been like um aggressively persuaded to get these washington men uh to go and like do stuff in washington for them to keep them alive or whatever and ayn rand is just like extremely suspicious of. And she thinks just it's all bullshit. And if you have a man, a quote man in Washington, they're just like going

in there, they're drinking martinis on company money, and they're quietly selling you down the river. And I just kind of absorbed that and believed it because I mean, Ayn Rand's been right about everything else. And then I got to know a little bit of the history of, not even the history, just I got to watch Trey. I got to watch you work with the honorable stuff. And I saw how important that was. Just the actual relationship between a company and the government or, and just maybe like an industry in the government. When did those talks begin for you in the process of building this company? When did you guys start talking to the government. When did those talks begin for you? In the process of building this company, when did you guys start talking to the government? What was the strategy there?

Why was that important? I think it's a part of the story that maybe people are a little bit in the dark on. Really early. There's really no alternative to incorporating that into your initial discussions even. So we started the company on the anniversary of D-Day on June 6th. And so that was a Monday, 2017. And then on Tuesday of that same year, of that same week, we met with our first customer. And then on Wednesday we were lobbying on Capitol Hill. That was like the first three days of the company. So I'm not saying it has to be that

intensely programmed. Usually lobbying, it's like it's you and a colleague of yours in DC, just talking to congressmen and saying, you need this. What does that look like? Yeah. I mean, we had retained a firm to help us with like going in and doing these meetings, kind of chatting with people about what we were thinking about building and how they would think about funding that and things like that. So you're meeting with members of Congress and their staff. And it was me, Palmer and Brian. So we were, you know, just trying to figure this out on the customer side, on the government relations side, and then on the company building side as well, all in that first week.

What about, I mean, is that standard? What are the other companies out there? Are they doing the same thing? Have you noticed an increase in, I guess, new tech lobbyists there? Or is it, it's like not just you guys anymore, right? Totally. I think people are starting to grok how complicated this is. There's obviously a lot of people that have been involved

in the Palantir story, both from the like contractor consultant lobbyist side of the house, but also from Palantir that have gone on to do, do things that are relevant to the sector. So the infrastructure has certainly built out. We probably took too long at Palantir to really ramp our GR, our government relations engine internally. And that contributed to how slow it took to ramp revenue to a meaningful place. And so I think that the new lessons that have come out of that experience at Palantir and SpaceX is you got to do it early. Like there are people that know the story, that understand the complications in the acquisition process, the culture, how to push budget through to get things approved. All that stuff is like you can hire help to do that now that you could not have hired even when we first started the company in 2017.

I've noticed a lot of different companies building this or that piece of technology that's ostensibly defense. It's like within the sort of defense tech realm. Is it really a new part of the ecosystem or is it a little bit of a mirage? Is Anduril just perhaps very exciting right now and you see a lot of things that are sort of like that? Is it going to be something where there are many players in the space like consumer, like enterprise software or something, or is it kind of like a one company wins all situation? I hope that there are more. I hope that there's a whole set of companies that end up doing important work for the DoD. We can't do all of it, obviously. We're nowhere near that. We're one one those putters over there building, I don't know, a billion dollar tank or something. Don't need them.

It's over. We're going to use Anduril Drone. Mike, there is an interesting, you talked about the ecosystem. With Palantir, it wasn't as much of a who's who of Silicon Valley investors that made a lot of money off of Palantir. But certainly with Anduril, they've done a great job of bringing different funds at different stages. So Lux Capital, Andreessen Horowitz, a lot of different firms have built positions in Anduril.

And then now that I think everyone's seeing like, oh, we can make money in this industry, they're starting to flow more into other concepts and other smaller companies. There is a big question. other concepts and other smaller companies. There is a big question. As digging into Anderle, I had a couple of people ask me, oh, would you ever start a defense tech company? I was like, after seeing what it took to get that company off the ground and the dream team that had to assemble to make that work, it feels like it's incredibly difficult to start something at that scale. But maybe there's a different way to attack the problem. You raise an interesting point, John, or I guess an interesting topic. When you talk about all the different investors that are involved in Andral at this point,

that would have been very strange 10 years ago. In fact, even at Founders Fund, I remember, Trey, one of the earliest things, I guess not that we did because it was was like, you know, years after you and I started working together, but I remember working with you or at least talking to you about like language potentially, because we didn't, we had to change something like structurally, there had to be structural changes to Founders Fund for us to do this. It was a very, it was a very new kind of thing. And now it's just default. And in fact, there was criticism. People don't remember this now, but early on, there was criticism of the company. There was criticism of this kind of thing. The culture of Silicon Valley was so different back then. And in fact, it's so different. I think it's easy for us to just forget what it was like. But

maybe, John, can you talk a little bit about Project Maven and Google? Because I think that's a really important part of the journey of tech to defense. Because right now, it's like you're saying, every major investor is involved. Every young kid wants to get involved in defense tech. Working for the military seems cool, or at least acceptable. And how could it not when there, as we talked about earlier, just so many new threats that we're facing. But just a few years ago, it's like there was basically a mutiny at Google for us to not do this kind of thing. Before John does that, and I do want him to do it, but to the question about changing things at Founders Fund, there was a kind of slight complication, not only for Founders Fund, but for many of our investors, in that the limited partner agreements that govern the relationship between the investors and a venture fund and the venture fund have these things called vice clauses that say there are certain things that you're not allowed to invest in. Founders Fund had one of these vice clauses that said that we wouldn't invest in lethal weapons, essentially. And so as I was kind of noodling over this idea of starting Anderol

and have been talking to a lot of other defense companies, I basically went and told Lauren Gross, our COO at Founders Fund, like, hey, if there's any reason that it would be challenging to invest in a company that builds defense technology that could include weapons, we should maybe take a look at revising that as we raise our next fund. And so she was out raising capital for fund six, Founders Fund six, and basically redlined the limited partner agreement. The only red line on the LPA was this one vice clause. And so she had to have these conversations with like every single one of our

LPs about why we had this one random red line on our LPA. And so she was pulling me into the calls and I'm like, oh yeah, no real plans, but you know, I'm spending a lot of time in national security. Just want to make sure that we have the ability to do something if we're to find something interesting. And you know, they had questions, didn't really push back that hard, but they were like, okay, fine. Yeah, we'll accept it. We raised the fund. The first investor out of fund six was Anderle. So it was like, yeah, no plans. We're just... Was that a pretty standard... Is that a standard clause at a lot of firms? I'm not sure how standard it is. It wasn't non-standard, but yeah, it was a thing that I think there were other firms that had to deal with some variation of that for their annual investment.

Yeah. John, you were about to get into Project Maven. Yeah. Yeah. So Trey... It's around this time, right? It's like around the time that this is going on at Founders Fund, like Maven is... I mean, Google has like a sort of staff rebellion.

Yeah, exactly. So Trey mentioned the dual use technology that goes on at a lot of the big tech companies, Microsoft selling Windows licenses. And that was basically what Project Maven was. It was a pathfinding initiative by the DoD to bring artificial intelligence tools to the military. And it sounds like killer robots and crazy stuff, but it was extremely mundane. It was essentially just using computer vision to tag drone imagery. So the drones that go up from the Air Force, they pull down terabytes of data, gigs and gigs of video files. We need to

understand what's a building, what's a road, what's a car. It's a perfect problem for machine learning. And Google obviously has some great machine learning software and hardware. So the initial Google commitment to Project Maven was just to allow the DoD and the other contractors on the project to use their TensorFlow APIs, which is a machine learning framework that allows you to train kind of a custom model. So they'd feed it some data, say this is what a car is, this is a machine learning framework that allows you to train kind of a custom model. So they'd feed it some data, say, this is what a car is, this is what a building is. And then they'd run that on Google's cloud. So it was really just a Google cloud enterprise contract. Google was not really developing even that much new code that was being handled by other partners in the Project

Maven team. But nevertheless, the Google employees revolted. And it's interesting because all the press says it was a massive revolt. But I think less than 10 people quit over this. There were a few thousand signatures. And I think Google had 100,000 employees at the time. So we're talking about maybe 1% of the company really being upset about this. So we're talking about maybe 1% of the company really being upset about this. And the number of employees that quit because of the work of Project Maven was less than just the average number of employees that quit Google every single day because they

have average churn on a daily basis of dozens of employees quitting because they're such a large company. So it was really, really blown up by the media. But it shut it down. Yeah. And they did actually pull out. It was very poorly handled. They wound up creating some new guidance for how they would work with the military. And then eventually they brought in a new head of cloud, Thomas Kurian, and he has started to work with the military a little bit more. So I think there's cause for optimism that things are looking up and hopefully we'll see, you know, the war in Ukraine has been a big catalyst for a lot of tech workers to start taking great power competition more seriously.

So I'm optimistic about this, but I'd love to hear how Trey feels about it. Yeah. To be honest, I don't think that there was ever like a real opposition at any scale to working on defense programs. As I mentioned earlier, Silicon Valley was built on defense contracts. And I think tech people at their core just want to work on hard problems. And it turns out that a lot of the most interesting hard problems have strategic relevance to our national security apparatus. And so, you know, if you think about like the talent distribution as a traditional distribution, a Gaussian bell curve, you have like the people on the on one end that are like super patriotic, that like they're probably already working for Palantir or SpaceX. Like they they want to work on these problems.

Not a huge number of people. It's that trail on the, on the far right of the curve. You know, people on the far left of the curve that are like Meredith Whitaker at Google, that's like, they're just never going to work on these things. And you know, there's, you shouldn't waste your trying to convince them. But the vast majority of people are in the bulk of that curve and they could be convinced. You might have to try to convince them, but you could get them to alignment pretty easily if you had a compelling argument. And Anderle, for the first year, we just crushed on the right side of that curve. It was very, very easy to get the initial set of people to come work because they were banging down the door trying to get access to the company. Now we're like, we've shifted somewhat into that middle of the bell curve. Like we, we have to go and tell our story. We have to be really good at telling the narrative and convincing people of the importance of what it is that we're working on.

And that doesn't, I wouldn't say that creates recruiting problems because there's still tons of people out there that even at, you know, we're at 2000 people, that's one 10th of the size of Google. We have a lot of headspace to go from here. So yeah, the size of Google, not one 10th. And also just the culture of the technology industry in general, I think has changed significantly since the Project Maven stuff. You see, at that time, I mean, that came out and they had support online. It was like every tech outlet, every tech influencer. I mean, the idea of working for the government was still seen as really... Not just working for the government. I don't want to say that because I don't want to seem hyperbolic, but it does feel to me like the problem was working with America, not just the government, but America itself was seen as this instrument of chaos. And that was

just a normal standard belief. There were a lot of crazy standard beliefs at that time. I think we're not paying attention to just how dramatically tech culture has shifted in the last few years throughout COVID and in the fallout of COVID. And now I think probably just there's, and correct me if I'm wrong here or tell me what you guys think about this, but it seems like there's just a knee jerk, like we don't want politics at work. And we just want to, I guess, try sort of like what you were saying. It's like, we want to work on sort of like meaningful, cool stuff, I think, broadly. Yeah. I mean, but that was not the case in 2016. Like, I mean, let's be honest, like a lot of it was just Trump. And a lot of it was that

people didn't want to sell a fax machine to the Trump administration. And now that Biden's in, it's like, yeah, we'll sell them a nuclear weapon if we want. Like, it doesn't matter because it's like the good guys in and that's kind of- That is interesting and very interesting. What do you guys think about, I mean, what happens? Trump is running for election right now. I don't see how he loses the nomination on the Republican side. I'm looking at these polling numbers. It looks really bad for DeSantis and obviously Vivek's not winning. So it's like, not winning. So it's like he wins. If he wins the presidency, what does that mean for the companies in tech that are working with the government? I mean, is there another culture shift? Like, how do you guys see that playing out? Well, defense is super bipartisan. Like

the National Defense Authorization Act is like the one bill that passes. Nationally. But what about the industry? What about the tech? So the industry is maybe a separate question. I think recruiting probably becomes harder, but not like meaningfully. Like, I don't think that it will be impossible for Android to grow at a pace that it needs to grow. But, you know, anecdotally, I was like doing this lecture at Stanford early in the Trump administration. And I, there were like, I don't know, 150 kids or something. I think there were like freshmen and sophomores. And I asked them like, would you work for a government agency that was responsible for enforcing policies that

you didn't agree with? And only like one or two kids raised their hand. And so the vast, vast majority of people were like, if there was a policy I didn't agree with, I would not work for that organization. The reality is there are thousands and thousands of policies that every federal agency is required to or responsible for enforcing. And the chances are is like at any given point, we probably disagree with a double digit percentage of those policies. But that's not what civic duty is. Civic duty isn't like activist, you know, employment, where you just like do the regardless of what Congress says, you just do what you want. It's, you know, making sure that you have a functioning democracy. And having a functioning democracy sometimes means that you

don't get what you want. And I think that there is something really concerning about the culture in the tech community of not feeling any sense of civic responsibility or duty as like a core part of their career aspiration. Or in general, you see this in local politics and how that plays out in San Francisco, right? Like, right. People often ask why the tech industry has no power. It's like every other city that has one in Hollywood. I mean, imagine Los Angeles with no... Imagine a version of Los Angeles where the entertainment industry doesn't have power. Or like we're in New York where bankers don't have power.

Like actually in Boston, colleges don't have, they all have power. They're all industry towns. The industry has power. In San Francisco, the industry is just relentlessly shat on. And it's like, whose fault is that? That's tech's fault. They have, there's not, there's not much of a civic. There's not much of a sense of civics there.

There's not much of a sense of like permanence there. It's like a pretty transient group of people there. They float through, they work on stuff, they float out. Um, I mean, what do you think costs? I mean, that's a huge question. Like what causes that? But I mean, is that even right? Do you guys, am I, am I like misdiagnosing tech workers or. First off, I refuse to call them tech workers. It makes it, it's like a very marks term to apply to like people with a tremendous amount of agency. The idea that a tech worker doesn't have agency is just like total absurdity. Like go back to your massage and your free lunch, stop complaining. So I refuse to use that term, but really privileged people who work at tech

companies and make a tremendous amount of money. Okay. What, what motivates them? I think part of it is having like a really homogenous political identity. You know, most places where you get a sense of robust civic duty are places where debate is encouraged, where you have like a bipartisan tension. I think it's no wonder that like some of the most well-functioning cities in America are red cities and blue states or blue cities and red states where there's like a necessary tension that happens. That doesn't happen in San Francisco. And so when there's no political dialogue to be had, what's the point of engagement? Like, why would you even bother? It's just going to it's it's going to go one way every time. And I think that is really demotivating for both people who might disagree. The rare, you know, one of the 30,000 Republicans or whatever in the city of San Francisco, but even more so maybe on the on the left where they just don't feel particularly motivated to engage because what are they going to do? But separate from left, right, separate from left, right, like the tech industry,

even if it was the left wing side of the tech industry, should have had more political control of the city than it does today. It doesn't make any sense. All the money, I mean, the city budget, you know, more than doubles in 10 years because of tech money.

Where is the political power there? And I wonder if it's like, there's just something about working in technology that is, that's like more cerebral and I don't know, internal than it is externally motivated or even just like engaging in the real world or something is it just doesn't make sense to me that you would have this many smart people, regardless of politics, who have money, who don't have power at this point. Well, I mean, you're the billionaire mayor of San Francisco. Why don't you tell us? Well, I fled to Miami. I'm part of the problem. I mean, speaking of fleeing, it seems like a lot of the more successful, older tech,

elite or tech, I don't know what we're using the term now, not tech workers, but tech folks, they move to suburbs or they move outside of San Francisco and they don't have as much of an impact there. And when I think of the median techie in San Francisco, I think of somebody who's like 22, 23, and they're there and maybe they're commuting to Google or Facebook or something, but they're not really politically active at all. And then by the time that they've made some money and they become politically active, they can afford to live in the suburb. And so then they're not having an impact on San Francisco.

That seems like the biggest problem to me. People don't stay. Well, back to defense tech, we had a conversation two podcasts ago when Trey and Camila joined us on the great man theory. And John, you had an interesting question for Trey. Yeah. I want you to kind of phrase it out now here. Yeah. So my question for Trey is that when I dug into Anderle, I found that everyone I talked to was like, the company is successful because they built a dream team. And when I talked to you, you said that individually, any one of the founders could go off and build a great,

just, you know, vanilla tech business, SaaS, or some sort of lifestyle business or something, and be fabulously successful. But only with everyone coming together, could you actually go and take on the defense industry because it was such a difficult industry to break through and build that new defense brand. And so as we tell the story of Anderle, how much focus should we be putting on Palmer as the great man? Or should we be more realistic and kind of tell the story of the whole team? I thought it was interesting to hear from all the voices and that's kind of my reality and what I experienced, but there is a world where maybe we want to just elevate just a single person

because that, you know, helps kind of upregulate or breed individualism. Yeah, we talked about responsibility and it was like, who's taking responsibility for this? Oppenheimer took responsibility. Who's taking responsibility for Anderle? I think the founder narrative is really important. I think having Palmer there as the front man for what we're doing and putting his brand to work, putting his money to work, you know, taking his prior success at Oculus and bringing that to breathe new industry and breathe new life into an industry. That is really important. And so I won't for a second downplay Palmer's

contribution to this and think that like that is the story that we've been telling from the beginning. And that's the story that we will continue telling moving forward. One of the unique things about the Dream Team is that we don't have two Palmers, right? That's like kind of a key. If you had, you know, Jack Dorsey or Elon or someone else that was coming in and you had like a dream team of Palmers, well, then it doesn't work because everyone's trying to posture for attention and things like that. Chris Brose, Matt Stechman, Bhavik Siavashi, like, we're not attention-seeking.

Like, we're operating in our lanes to make sure that the company can be successful. And I honestly think if you, like, had a ticker tape parade for Brian Schimpf, he would be so cringed that it would be awful. Like, he would be hiding in the wagon or in the car that, you know, is going down the ticker tape parade. He doesn't want that.

And I think that's leaving the flag at the ticker tape. Oh yeah. We should throw Palmer a ticker tape parade. That's the next event. But I think, I think like, I think Palmer would agree with this. It's like the most unique thing about our dream team is that everybody knows how they fit. And this is one of the places where I think a lot of these other defense tech companies get things wrong. You have this sole technical founder or something that's like, I have this vision for a product that I want to build.

And it's like, all right, who is your like hotshot general counsel that knows contracting? Who is your like brilliant COO that knows how to build like an org that has a facility security clearance and like manages like complex government requirements for their internal operating systems? Like, do you have an, like an organizational manager that can like build and manage multiple product teams at the same time? Do you have someone that's really good at fundraising? Do you have someone that's really good at corporate development? And it's not one of these industries where like, you can build that over time. Like you just, you just kind of have to be good at that from the beginning. And that's, I think that's the secret behind why we've been able to make this work at Anduril is that you have that singular founder, and then you have a team

of people who aren't looking for the spotlight that are working around that. So as we wind down towards the end of the conversation here, I want to speculate on what's to come. I want to get your sense of this. Over the last, let's say, five, seven years, it feels like it's been the stark difference. You've seen a legal change by way of SpaceX and Palantir. You've seen a cultural change in two ways. One, you've seen the culture change because of the success of companies like SpaceX and Palantir. But then two, you've seen a broad tech cultural shift. Partly, perhaps that is because of just the difference in politics right now. Things are different now, obviously, today than they were four years ago. But it has all

brought us to this one singular point where you guys have been at Anoril, you've been building like relentlessly over the last five years. You've got this great company. There is a new defense technology sort of, I don't know, like almost like an industry within the tech industry right now that people are talking about that young people are excited about. Um, five years out, where do you see that? Where do you see new defense? What does that look like? Is it a bunch of companies? They're still working with the government. Do you think the tech industry generally is still on board? Is Google on board? Is Microsoft on board? Obviously, AI is on the horizon. What does the future look like? I'm cautiously optimistic. I would love to see two or three Andurals that are all working on core platforms that are going to be relevant to the DoD moving forward.

And by the way, that might involve just close ties with SpaceX, Palantir, and Anduril as well. There are contracts that we're working on with both of those companies in partnership. So we're building our own alliance. Shyam Sankar, the president at Palantir, just tweeted out that we are the coalition of the competent, which I thought was a really funny way to phrase it. So there could be combinations of these companies that are working in partnership with each other in order to build some of these really core platforms. At the same time, the cautious part of that optimism is that like the crypto space a couple of years ago, like the AI space

maybe today, the hype is running out ahead of traction in a pretty real way. And some of these companies have gone and raised enormous amounts of capital at really high prices. And you can cobble together research and development contracts in the small single digit million range, maybe even like the low double digit million range. But at some point you have to convert into like a major program. And when that doesn't happen, these companies find themselves way out over the skis. over the skis. And I think another kind of thing we'll see over the next five years is that there's going to be a paring back of these companies that got way too aggressive on fundraising in the midst of the hype. And they're either going to collapse and cease to exist, or they're going to have to do down rounds and recaps and all sorts of stuff. And so for any VC that's out there, you really can't think of these research and development contracts as revenue.

So you should price the companies accordingly. And I think that's not only good for you and the economics of your fund, but it's also really good for the company to make sure that they're not getting themselves into a position that they won't be able to recover from due to the slowness of production transition. There is one other area that I think might be interesting is if I think about Palantir, if I think that Palantir really was responsive to Department of Homeland Security and then SpaceX obviously had a big impact on NASA and with Anduril, it's a big impact on DOD. And with Anduril, it's a big impact on DoD. There's a question if we zoom out from defense tech, just is there another company of that scale

that could work alongside a different department? Like what would a SpaceX of the Department of Energy look like? I don't know that we've seen that yet or anyone's even really tried that, but I'm kind of maybe more optimistic about someone running that style of playbook for an entirely different industry in a different department, as opposed to just run the Andoril

playbook again and compete with Andoril to service the DOD, maybe. I wonder if it has to be just a really essential department. Like I was just imagining what would that look like for the Department of Education? And it's like, well, that couldn't happen because the Department of Education is not real, right? It's like they don't need to exist. And if they vanish tomorrow, it wouldn't matter. And it's run by labor anyway. And so probably the incentives aren't aligned. But for whatever reason, and obviously I'm cutting you off here, Trey, but it seems like there's just a lot of alignment on the defense side. They actually do want to improve things and keep America safe. I think there are real opportunities that exist. I mean, imagine if you built a massively scalable portable nuclear reactor company. That would have implications across

a bunch of these different sectors. The DoD has been looking for that for a while as well. Instead of trucking a bunch of diesel across the Khyber pass, like what if you just had a shipping container that had a nuclear reactor in it and you could power an entire forward operating base indefinitely? Like that would be, that'd be really cool. Um, I think there, there are a bunch of shots on goal in space as well, like new technologies that, um, are deploying new types of satellites or new types of national security technologies, reconnaissance tech, whatever. There's a huge opportunity there for a space prime to come up. Cybersecurity in some ways, like if you could build something that had like a major application for national security on the cyber side,

like that's a potential area. So it's all about figuring out what that domain is and then building a dream team of people that can go and tackle that specific domain. Cool. I've met a pretty much wraps it up guys. Thank you both for joining me. Um, Coogan, where can people find your documentary on Andral? Uh, you can search Andral John Coogan on YouTube. That's the easiest way to find it. And Trey Stevens on Twitter. And also just John Coogan on Twitter, right? Yep. And he's raising the sword.

We love it. Thank you, guys. We love it, not for the sharpness of its blade, but for that which it protects, right? Isn't that a quote? That's beautiful. We'll take it. Thanks, guys. Have a we'll take it. Thanks guys.

Have a good one. Later.