Palmer Luckey - Inventing the Future of Defense - [Invest Like the Best, CLASSICS]

Welcome to this classic episode. Classics are my favorite episodes from the past 10 years, published once a month. These are N of 1 conversations with N of 1 people. Palmer Luckey is a relentless builder and original thinker. He founded Oculus, bringing virtual reality to the mainstream, and is now reshaping the future of defense and technology with Anduril. I hope you enjoy this conversation. Palmer is the founder of Anduril, which makes next-generation military technology for the US and its allies. Since bringing the company to life in 2017, Palmer and Anduril have disrupted the established order in the Defense industry. Prior to Anduril, Palmer founded Oculus VR, a virtual reality business that he sold to Facebook for $2 billion. Palmer is only in his early 30s, but he has already experienced more than most people will in a 40-year career. We talk about innovation, invention, differentiated thinking, and so much more. Please enjoy this great discussion with Palmer Luckey. Listen to Patrick's Business Breakdowns with Anduril CEO. For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by WorkOS. WorkOS is a developer platform that enables SaaS companies to quickly add enterprise features to their applications. With a single API, developers can implement essential enterprise capabilities that typically require months of engineering work. By handling the complex infrastructure of enterprise features, WorkOS allows developers to focus on their core product while meeting the security and compliance requirements of Fortune 500 companies. Visit WorkOS to Transform your application into an enterprise-ready solution in minutes, not months. ----- Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @patrick_oshag | @joincolossus Show Notes (00:00:00) Welcome to Invest Like the Best (00:01:15) Meet Palmer Luckey (00:02:03) The importance of synthetic long-chain hydrocarbon fuel (00:08:12) Ranking America's potential for innovation (00:11:18) Why there aren't more ⁠Thiel Fellowships⁠ (00:13:31) The principles that motivate and drive him (00:16:56) What it has been like working in the world of defense after the attack on Israel (00:19:09) Surprising lessons learned when building a large company (00:22:37) How to approach a new field initially (00:27:20) Meeting other out-of-the-box thinkers (00:31:46) Inventors working backward from existing systems versus forward from their ideals (00:33:26) The most pressing issue in national security (00:39:36) What matters most for America from a defense perspective (00:42:33) How to determine which problems to prioritize (00:48:59) Lessons learned from working with AI (00:55:56) How Apple is shaping the future of VR (01:00:11) Which videogame a prospective employee should excel at (01:02:41) Why ⁠Oculus⁠ was so successful in marketing (01:09:48) The kindest thing

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Patrick O'Shaughnessy?

  Welcome to this classic episode. Classics are my favorite episodes from the past 10 years, published once a month. These are N of one conversations with N of one people. Palmer Lucky is a relentless builder and original thinker. He founded Oculus, bringing virtual reality to the mainstream and is now reshaping the future of defense and technology with Anduril. I hope you enjoy this conversation. Vanta automates compliance so your team can spend less time on security reviews and more time getting customers. Vanta cuts audit prep by 82% and gives you instant up-to-date proof of trust without all the manual work, so you can close deals faster and with less friction. Customers report a 526% return on investment and more than 16,000 companies use Vanta, including Ramp, Harvey, and Snowflake.

• 0:44Patrick O'Shaughnessy?

  Get started with $1,000 off at vanta.com/invest. RidgeLine is the first end-to-end system of record with embedded AI for investment management firms running portfolio accounting, reconciliation, reporting, trading, and compliance on one unified platform. Firms are moving off legacy technology and onto RidgeLine because of how far ahead RidgeLine's AI features are compared to anything else in investment management software. I've been hearing from a lot of investment managers about AI, and they fall roughly into two camps, with some unsure where to even start and others convinced that they can build their own order management system over a weekend. The reality is that running an investment firm will always require governance, controls, and a single source of truth for your data, and no amount of AI enthusiasm changes that

• 1:29Patrick O'Shaughnessy?

  requirement. RidgeLine is built on exactly that foundation, which is why I believe that the firms that come out ahead in the AI era will be the ones running on RidgeLine's unified platform. If you're serious about your firm's AI strategy, RidgeLine should be part of that conversation, and you can request a demo at ridgeline.ai. Hello and welcome, everyone. I'm Patrick O'Neal, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus Review, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus Review, along with all of our podcasts, at joincolossus.com.

• 2:15Speaker 01

  Patrick O'Shaughnessy is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc.

• 2:44Patrick O'Shaughnessy?

  My guest today is Palmer Lucky. Palmer is the founder of defense company Anduril Industries, which makes next-generation military technologies for the US and its allies. Since bringing the company to life in 2017, Palmer and Anduril have disrupted the established order in the defense industry. Prior to Anduril, Palmer founded Oculus VR, a virtual reality business that he sold to Facebook for $2 billion. This was one of my favorite interviews in a long time. Palmer is only in his early 30s, but he's already experienced more than most people will in a 40-year career. We talk about innovation, invention, differentiated thinking, and so much more. Please enjoy this great discussion with Palmer Lucky, and if you're interested in learning more about Anduril, you can listen to my business breakdown from last year with the company's CEO.

• 3:28Patrick O'Shaughnessy?

  You'll find the link in the show notes.

• 3:32Patrick O'Shaughnessy?

  Palmer, I always liked starting somewhere of recent passion, and you started to give me some amazing material, so we stopped and we restarted the recording here. And maybe we'll just begin with this idea that you were telling me about. I'm always interested by major changes that might happen in the world that nobody is really talking about. And until you said the word synthetic long-chain hydrocarbon fuel to me five minutes ago, I'd never heard that combination of words before. So maybe you can start there and explain why that topic is of interest to you today.

• 4:01Speaker 02

  Well, it's of interest because there's a lot of money being bet by companies, but also governments, on a handful of specific technological paths for electrifying vehicles, battery electric vehicles, hydrogen electric vehicles. If you can make synthetic long-chain hydrocarbon fuels, in other words, synthetic gasoline, synthetic diesel, synthetic jet fuel, using carbon from the atmosphere in particular, there's a lot of ways to do it. Down one of the ways to do it, you take water, you crack it into hydrogen and oxygen using some kind of energy source like a nuclear power plant. And then you bond it with carbon to make hydrocarbons. And now you've got artificial gasoline coming out the other end. If someone can figure out how to do that cheaply enough. First of all, it's an incredible carbon capture mechanism.

• 4:43Speaker 02

  Two, if you can do it cheaply enough, let's say a dollar per gallon, then all of these trillions of dollars in investment into battery electric vehicles and hydrogen electric vehicles become really a waste of money and a waste of time. There are, of course, some advantages to battery electric vehicles and hydrogen electric vehicles that wouldn't apply. But for the most part, especially on the aviation side, the ability to make fuels that just plug into existing, fully known, fully optimized, fully understood, and even fully certified systems that are better than the ones that cost hundreds of billions of dollars to develop that also aren't as good. Electric planes spend most of their energy hauling around their energy storage, not people or payload, which of course means you need to put more energy into them in the first place than even synthetic fuels with a pretty low conversion efficiency.

• 5:28Speaker 02

  The reason it's so interesting to me is that the bet seems so misapportioned. You have so much money going into battery electric vehicles and electrification of electrical infrastructure that's not moving. And almost nobody betting that you can build systems that make dollar per gallon hydrocarbon fuels using either biological processes like algae farms or mechanical processes. However, you're making the synthetic fuels. And of course, if someone figures it out, they're going to really knock a whole bunch of stuff sideways. And we talked about this before, but it's especially interesting because lots of companies make poor technical decisions and they decide to go down a product path that doesn't make sense. I personally feel like this is a case where you have dozens of governments around the world have decided to commit to a particular product path that isn't optimal.

• 6:12Speaker 02

  It's not the optimal end state or the optimal near term. And they're dumping hundreds of billions, maybe trillions of dollars into that bet. It's something that I'm worried about.

• 6:22Patrick O'Shaughnessy?

  When you find an idea like this, first of all, I'm curious how you found this one in particular, but the world's just gone through this superconductor craze, which for a hot week there was like, well, if this is real, it changes everything. And then very quickly realized, oh, it's not real. And it seems like, again, a remote possibility and not terribly likely. So maybe there won't be floods of dollars trying to create superconductors. With something like this, how do you weigh the potential against the odds of us being able to do it with your own time and investigation?

• 6:49Speaker 02

  Well, in this case, it's 1950s era Department of Energy documents regarding potential energy futures for the United States, accounting for what they assumed would be a nuclear future. I always find it interesting when I go into an area that I don't understand to try and understand it better. Even I want to understand what's going on in the modern day. You want to go back to the future and say, what were people saying back then? What are the ideas that people aren't even discussing right now? Because I don't want to be too pessimistic on present, but if you look through a lot of the academic literature and government literature today on energy solutions for the United States, they're really, really narrow minded. They are really, really politically driven. It's all about what is aligned with

• 7:30Speaker 02

  the current debates going on between political parties. The people in these agencies are largely tied to the things that have already been deemed important. And if you go back, on the other hand, to let's say, post-World War II America, where we were really thinking from first principles, what do we want the world to look like? What do we want the United States to look like? And what are all of the ways we could get there? They were thinking very expansively. And so this idea of extremely cheap synthetically manufactured biofuels that would get rid of strategic dependence on limited oil supply, or allow us to sell off our oil supply to make money in the near term, while still having a robust renewable base of energy to power our industrial machine, our war machine, you name it. That was an

• 8:11Speaker 02

  idea that was of interest to people in the 40s, the 50s, the 60s. I think mostly all of this fell apart when it became clear that we were not going to be a nuclear economy, mostly again, for political reasons, not practical or technological reasons. So this was a case where I didn't actually have to be a big thinker. I just had to go say, what were people thinking when they were allowed to think whatever they wanted and when they could think? Really, really big things and it's not even just on fuel. There's other interesting things they were thinking about back then. Like today, if you say, what's the best way to help the environment in the United States? It's actually very calcified. There's very little consideration for things that are better than what currently exists. So you kind of preserving the status quo is the ultimate good.

• 8:52Speaker 02

  There's very little consideration for what is better for people, what would be better for more animals? And if you look back again, the earlier parts of the United States history, there were serious proposals by the Department of Interior to say, what should the United States ecosystem look like if we could make it whatever we wanted? What animals would we have? Would we have hippos? Would we have rhinos? Why not? Why don't we put hippos in Louisiana? There was just this endless possibility, big thinking. But what's crazy is it's not even big thinking in the way that we would think of today. When people think of big thinking, they immediately jump to really hard ideas. Fusion power and what if we could bioengineer ourselves? The ideas they were having, they would have a big impact, but they're actually easy ideas. It's just what if we brought some hippos, put them over there in that swamp?

• 9:37Speaker 02

  The big idea is what could we do economically? Would that be a good meat source? Could we use that as a better protein source that is less damaging to environments that we're trying to preserve than what we're currently doing with cows? And those types of ideas, they're not taken seriously today. People treat you like a crank if you step outside the orthodoxy.

• 9:54Patrick O'Shaughnessy?

  We think about, I'll call it the soil of, let's just use the United States to keep it local. The soil and the quality of the soil for potential innovation. And you had to rank that today, one through 10. What score would you give our soil today?

• 10:10Speaker 02

  Probably give us a solid six. It's one of those things when it comes to the talent, we've got really, really good talent. On the volume of talent, we have a lot fewer engineers graduating than our strategic adversaries like China. That's definitely counting against us. I've heard this idea pushed forward that we'll still stay ahead because there's something great about American engineers and American ingenuity. We're going to stay ahead no matter how many people we have in these areas because we're just so much better. Which I feel like, I don't say this lightly, it feels like a soft form of racism to say, hey, we're going to just be way better than. Than them to the point where an American engineer is going to have to generate 10x the value on average of this other highly developed advanced nation that graduates people from advanced schools. I don't really buy into it in the long run. This is another

• 10:54Speaker 02

  reason I think the United States needs at least a billion people. The idea that we're going to compete with China geopolitically, that we're going to remain relevant when we only have a few hundred million people and they're climbing to billions of people. You have to believe that every American is going to be so much more relevant on a global basis. Is it really true? Is an American 10 times more influential and impactful than an average Chinese person? I think that that's true right now, today, because of our head start and how we've positioned ourselves over the last 100 years. But I don't think that continues to be the case. So.

• 11:26Patrick O'Shaughnessy?

  What's the additional list of things it would take to get us from a six to a 10?

• 11:31Speaker 02

  A lot of it unfortunately is on the government policy side. I say unfortunately because free markets can often move faster than governments can adjust. But one example of something I think would make a difference is to stop incentivizing people to do things that are not good for the country on a larger basis. So one example of this, and there's people who are going to light me on fire for this, but I don't think the United States should be subsidizing all educational pursuits equally with no regard for whether or not they are of national interest. The United States should not be saying, we will give you equal student loans and allow you to put yourself equally in debt on the taxpayer

• 12:12Speaker 02

  dime to get a degree in studying ancient French theater versus being a mechanical engineer. The need is so obviously disparate that the position seems crazy. And there are other countries that have been doing this. Japan has been saying, hey, in our government-run schools, we are going to provide for free education in certain areas of national interest. And if you want to pursue that ancient French theater degree, by all means do so, but we're not going to rob taxpayers to pay for it. We're not going to subsidize the decisions of teenagers who don't understand what it means to serve your country and really don't even understand how to serve themselves. I think that's a really big thing. We could say, you know what? If we're going to make this a nation that rewards innovation and

• 12:57Speaker 02

  that promotes innovation, we need to be steering people in that direction. And we need to be conscious about the fact that not every degree is equal, not every pursuit is equal when it comes to accomplishing those aims.

• 13:11Patrick O'Shaughnessy?

  Why aren't there two orders of magnitude more Thiel fellowships?

• 13:16Speaker 02

  I mean, part of it is, it would be great if we had two orders of magnitude more Peter Thiel's. People have tried to weaponize it against him. Maybe this is just totally the wrong way to look at it. This is a very low conviction approach at it, but it's the first thing that pops into my mind. When you do something like a Thiel fellowship, you create a lot of surface area for people to come after you. You have all these people who are now affiliated with you, tied to you, trading on your name. And that's true whether it goes well or goes poorly. And there's an asymmetry of value in that probably if it goes poorly, it is going to blow back a lot more than the benefit of it going well. Like, I'll give you a hypothetical. What if SBF was a Thiel fellow? Do we even need to talk about what the media coverage would look like? The idea speaks for itself. Imagine if, not even at that level, where it's going to federal court.

• 14:01Speaker 02

  By the way, I've been to federal court to a jury verdict twice in my short career already. I won both times at the end, but it's not that being in court is the end of a career, but it could be. People would be saying, how did Peter Thiel's ideals influence the criminal mind of Sam? And isn't this really a reflection of modern conservatism? Blah, blah, blah. That's probably why a lot of people who are in a position to sponsor something like a Thiel fellowship are not necessarily incentivized to do so. They are more likely to, let's say, give an endowment or make some kind of scholarship at a school where the school is the one taking the heat. People don't give schools shit when they subsidize students that then go south. I don't think Stanford got that much heat for Elizabeth Holmes. People are okay with that idea.

• 14:46Speaker 02

  If you could imagine, though, whatever scholarships may have helped her had come directly from some individual of wealth, I think that you probably would have had it covered very differently. So that's my initial idea. Rich people say, juice ain't worth the squeeze.

• 15:00Patrick O'Shaughnessy?

  Just this morning, in my calendar every year, I re-watch the same video, which for me was the most impactful video I've ever seen from this technologist named Brett Victor. And the name of the video is "Inventing on Principle." He's basically convincing you, you need a principle on which you're going to devote yourself to becoming an inventor. Obviously, you're an inventor. You seem like a very principled inventor to me. If I was trying to understand you and your motivations and what drives you, is there one or more principles that you feel like lie at the root of things that you spend your time on?

• 15:28Speaker 02

  It was so much easier in the Oculus days because I felt it was more singular. I was trying to bring VR to the masses, which had never been done. There'd never been a successful VR company in history. Started when I was a VR hobbyist. There wasn't even really much of a VR hobbyist scene. The whole VR community was a small collection of military research labs and scientific research labs. There wasn't really any action. In that case, the clarity of purpose was pretty obvious. We are trying to bring VR back from the dead and use it to the fullest extent to allow anyone to experience anything. The idea being anything that a person is capable of experiencing, any joy, any experience, any beautiful sight, any educational thing,

• 16:10Speaker 02

  anything that the human mind can benefit from experiencing in reality. We want to make that possible for people to experience in VR. That was the end game, to make the height of human experience accessible.

• 16:21Patrick O'Shaughnessy?

  Fully immersive, haptic, vision, smell, everything.

• 16:24Speaker 02

  Eventually, everything. You start with the easier senses and then, yeah, you work your way down the chain. And the idea was, it was kind of egalitarian and that the idea was that no human experience should be limited to only a few people. Anything that is worth experiencing should be something that can be universally experienced. That was kind of the ideal. Of course, got fired from Oculus and I'm not a part of that vision anymore. And I feel like the vision has diluted from there to maybe more commercially oriented ideals, which I can't blame them for. Facebook bought my company for billions of dollars. They get to do whatever they want with it. When it comes to ideals now, it's probably a little bit broader. I'm trying to do things that are in the US interest. I'm trying to do things that are in the interest of our allies. I want to do things that are material and large. And this is one of the reasons that I set out to make Andor specifically a large company.

• 17:08Speaker 02

  Some people say, oh, you know, we'll do good things, we'll be a good small part of the world. I'm not here to do that. I'm here to grow a very large company with huge impact because I think that at the end of the day, large companies struggle to not have an impact. Maybe it's negative, but you're going to make a difference on the world if you're an enormous company that is interacting with other entities to the tune of hundreds of billions of dollars. It's just, you can't not leave a footprint when you're doing that. Whereas it's very hard to make a footprint when you're a small cottage company, when you're a small lifestyle business. So that was one of the things that attracted me to Andorl. Actually, maybe if I could boil it down to one principle. I know my Facebook about page has said for over 10 years, making the world a different place. The point there is, obviously, I want the world to be better.

• 17:52Speaker 02

  I don't want to make changes that are for the worse, but I'd say more than setting out to say, I want to make the world somewhat better. It's that I want to have big impact on the world. And of course, I try to orient that in a way that I think is to positive ends. But I don't want to do something that doesn't matter. Part of that was also with Oculus. I got addicted to the sense of purpose. And when I was booted, I don't think that I could have just gone to something that would have been small. Like I could have found joy in running a local restaurant or in retiring or in running a golf course or a resort. I had become addicted to a sense of purpose and working to deter expansionist dictatorships that want to destroy democracy around the world.

• 18:36Speaker 02

  Pretty easy to feel like you're making a difference.

• 18:38Patrick O'Shaughnessy?

  What has it been like for you in this period? We're recording this in the middle of October after the attack on Israel. What's it been like operating in an environment like this when your company obviously is facing the military? You're sort of in the world of defense. Just talk me through what it's been like.

• 18:54Speaker 02

  I don't mean this in a way to make it sound like it's not impactful here. People here understand the impact. We have a lot of people who are very involved. But I'd say actually, it's very positive in that everyone who's at Andorl is someone who believed in our mission of building advanced technology for the US and our allies that is intended to deter exactly this kind of conflict. And when we get into these kinds of conflicts, to win them decisively. I've seen a lot of other companies having strife where internally you have people on all sides of the issue and what really should be done? Is it even right to use weapons in the first place? And everyone here, I'm not saying that there's universal political agreement on every aspect of the conflict, but everyone at least agrees on the fundamentals. They agree that Israel is the victim in this attack.

• 19:39Speaker 02

  They agree that Hamas is absolutely in the wrong. And they agree that there are some evils in this world that can only be met or stopped with violence. That's pretty universal. You don't go to work for a weapons company unless you're able to align with those ideas. For example, we're not getting people saying, oh, man, really, this is just a matter of diplomacy. I think people have a pretty realistic view of the problem, which is that there are people in the world who want to kill large numbers of other people in the world to accomplish their religious or political or strategic aims. That has been the positive side of this, as I think everyone in Andorol, they feel like they are at a place that is making a difference on these issues. I can't get into the specifics of what we are or aren't doing as it pertains to Israel specifically,

• 20:22Speaker 02

  but it's kind of the same with Ukraine. This is a company full of people who really believed in what we're doing and believed that other people out there in the world did not have a clear view. We came here, a lot of us, including myself, because we perceived that the world's tech companies were not going to solve these problems that were of huge national importance, not just to the United States, but to just democracy writ large.

• 20:46Patrick O'Shaughnessy?

  If you're in a classroom, big seminar, lecture room, full of, let's say, 1,000 people, who all shared your interest in building something big, in the way you articulated, but they had not yet done it, you wanted to make the most impact on them that would benefit the odds of their success. What would you teach them about? What are the surprising things you've learned about effectively building something very big?

• 21:06Speaker 02

  One thing I would tell people is to care more about what other people think of you, which I know is a little bit counter to the usual advice. We've gone too far as a culture in this direction of thinking about what's best for you, me, me, me, what makes you happy. You can be whatever you want to be. I think that's actually a pretty negative message that leads to people not being impactful. You said auditorium of 1,000 people who agree with me on these things. So maybe they already agree with that. Maybe they really want to be impactful and they're thinking in terms of what other people will look on their work having meant, rather than just what felt good to them. One piece of advice I always give people is to be very cognizant of your weaknesses and to focus on hiring people around you who can cover those weaknesses. There's a lot of people

• 21:49Speaker 02

  who want to be, I wouldn't even say Steve Jobs, they want to be the mythological version of Steve Jobs, where he was hyper competent in every way and it was really His show and he did absolutely everything, not recognizing that a key part of his success was having deputies that covered his weaknesses and did the things that he was not good at. And there were also a check on his worst impulses. I think that people would be better served by thinking of it that way. You have to think of yourself as a deeply flawed person and be very honest with yourselves and try to surround yourself with people who understand what those deep flaws are so that you can build a well-rounded company of people who cover each other's strengths and weaknesses.

• 22:27Patrick O'Shaughnessy?

  Has there been a most surprising thing about building now two things and more that are very big?

• 22:33Speaker 02

  The biggest surprise was that Oculus became big. When I set out to build Oculus, I didn't have any of this perspective. That was big by chance. Obviously, I believed that VR was going to take over the world. I believed that it was going to become the dominant form of computing. But if you had asked me to honestly bet the odds that Oculus was going to be the one that managed to pull it off, that was a tougher bet. I started working on VR as a hobby and I was able to turn it into a job and able to turn it into a company. That was a crazy bet. And so I guess my other advice to people would be, don't look at things like Oculus and think that that is the optimal way to make an impact in the world. It's not to say, what am I passionate about and what do I like doing? I'm going to turn that into a business and I'm sure it goes well. It's actually to completely separate the impact you have from what you want to be doing.

• 23:17Speaker 02

  Put another way, I don't want to be doing Andorol, not really. I would rather be making virtual reality headsets. I'd be rather be making video games and toys, fast cars, spaceships. That's what I want to be doing. I'm doing what I'm doing with Andorol because I think that it's important and I think that it's going to be more impactful. When I was starting Andorol, I specifically said, I want to do something big. I want to do something impactful. And I don't know if you've ever heard me talk about this, but there are three things I was considering. One was solving obesity, which is the biggest killer in growing that I think we can feasibly solve. The other is private prison reform. I think there's ways we could eliminate the private prison system by outcompeting them with better incentives and align those incentives towards resuscitation.

• 23:59Patrick O'Shaughnessy?

  Resuscitation?

• 24:00Speaker 02

  Yes, resuscitation. I'm sorry, I'm destroying myself. And then the other was trying to fix national security. And so this is the one I ended up in, but none of those three things sound like fun things to work on. But they're important things.

• 24:11Patrick O'Shaughnessy?

  When you approach those problems, I have heard you talk about those other two, which is totally fascinating how you approach things. Maybe even before I ask this question, I'm just curious what your method of invention is. So you find an interesting problem, either that you want to, or in this case, don't want to work on necessarily. Is your method iterative? Is it more theoretical? Describe the way that you start to invent in a field when you approach something for the first time.

• 24:35Speaker 02

  Well, it depends on if it's a field that I know a lot about or don't know a lot about. If you know a lot about something, it's easier to get right into the iterative side of things and know that you're probably on a pretty reasonable path. In that case, iteration is a valuable tool to move very quickly, find out what works, find out what doesn't, and then continuously make it better. The risk with going with a strongly iterative approach in areas that you maybe don't understand, and you might even think you do, but let's say you truly don't, is that there might be much better approaches that you should have started iterating on or that you should have examined before you committed to one particular path. I talked about this earlier, but it's really about going back to the future. I love to go and see what everyone else who solved this problem thinks about it, not in the recent times. I don't want to know what my competition looks like because when I started Oculus,

• 25:18Speaker 02

  I wasn't looking at what existing companies were doing in VR because clearly they were all doing it wrong. Whatever they were doing was not working. I was not going to look around at the handful of VR companies that existed in that time and learn anything except how to fail. So I wanted to look into the past. What were people thinking when they were thinking bigger? When they were willing to look at wackier paths? When they were willing to consider things that have been eliminated, often because technologies just weren't ready? There's a lot of technologies that have been discarded because they weren't practical at the time and nobody ever revisited them and said, hey, I actually think the time has come. A good example is with the RIF. Doing real-time distortion correction is not a new idea. It existed in the 1980s and 1990s in the virtual reality community. It had been discarded even by NASA.

• 26:01Speaker 02

  There's a fascinating NASA paper where they talk about doing real-time geometry distortion correction on a virtual reality headset that made the optics lower distortion and allowed them to therefore use wider field of view, lighter weight optics than would have otherwise been required to have an optically perfect image. And the conclusion was, yeah, this is a really good way to save money and to save weight, but it's too computationally Expensive. We're using most of our processing power to warp the image in real time rather than render this wireframe image. And so this is not a good approach. You should just do it optically and then you don't have to have a more expensive computer. But back then, compute was the expensive part and the optical transform used up a lot of your compute. Nobody reexamined this idea, even as computers got better. Nobody went back until me and said, wait a sec.

• 26:45Speaker 02

  You can do real time transforms on a modern graphics card for like one or 2% of your render horsepower. And also your graphics card doesn't cost a hundred thousand dollars anymore. It costs a few hundred dollars. And so if you're worried about that one or 2% impact, just buy a graphics card that costs a few dollars more. So you can save hundreds or thousands of dollars on the VR headset itself by using optics that have geometric distortion or in chromatic aberration, for example. That was an idea that had been discarded and nobody ever came back to it. And most of the things that made the rift successful were ideas like that. There's a few others where I was just going back to the future and realizing, wait a sec, these ideas, they were actually pretty good. They were just a little too early.

• 27:27Patrick O'Shaughnessy?

  Makes me think of the Nintendo lateral thinking with withered technologies idea. You can always recombine stuff.

• 27:33Speaker 02

  We talked about that a lot at Oculus. It's true. And sometimes it's also combining new technology with old technology. I actually had a background of thinking this way before I started Oculus. I don't know if you know, but I ran an internet game console modification forum called Mod Retro. The whole purpose of Mod Retro was to combine modern technology with retro game consoles. So the primary focus was taking old game consoles, cutting them up, removing a lot of the old legacy components that could be replaced with better modern versions, like the power regulation side, the audio management side, and then building them into handheld portable devices that were much smaller than the original consoles, but provided full functionality. So like, for example, building portable Nintendo 64s that could fit in a cargo pocket.

• 28:14Speaker 02

  I started that forum, I think when I was 14 or 15. And actually, if you look at my Twitter bio, even today, I listed as the founder of Mod Retro, Oculus and Anduril. Working on projects in that forum was actually what gave me this mindset originally, where we were very much looking at what these old consoles Were, how they worked, what they had done, and then speculating what modern technology would they be using today to solve the problem if it had been accessible to them? It's usually quite clear. And so taking old ideas and combining them with the latest implementations of modern components, Nintendo has done that very successfully. They waited until motion tracking got just good enough and were able to use pretty limited compute and pretty basic ideas to do things that of course have been talked about

• 28:58Speaker 02

  for many years. But Nintendo, they were like right on that edge, right as MEMS-based motion controls and image sensors that were appropriate became possible, they immediately turned that into something that was a lot better than the sum of its parts.

• 29:11Patrick O'Shaughnessy?

  How often do you meet somebody that is as or more an original or out of the box thinker as you?

• 29:17Speaker 02

  That's gonna be a self-serving answer, right? Not often. Peter's obviously as out of the box as it gets. I don't know if you know, Founders Fund was the first institutional investor in Oculus. So there was a time when nobody believed Oculus could succeed because there had never been a successful VR company in history. And so that was pretty unconventional belief. Not only that my company would succeed, but that in doing so, it would become the first company to ever succeed in an industry littered with corpses. That's pretty out of the box. I'd also say there's a lot of people who, when you say, who's the most out of the box thinker? I mean, there's Jaron Lanyard. He basically invented the term virtual reality and he's the epitome of out of the box. But I also think that he has a different perspective on the world that doesn't necessarily

• 29:59Speaker 02

  align with my own. Being outside of the box, I meet outside of the box people quite frequently. Very rarely do I meet ones who are outside of the box thinkers who want to engage with very conventional systems like the US Department of Defense or electronics retailers. There's a lot of outside of the box people who they almost divorced themselves from the timeline of the boring corporations and the large government agencies. Where I've done well is being willing to interface with those things and live my life on the terms of inside the box thinkers as an out of the box person.

• 30:34Patrick O'Shaughnessy?

  What do you attribute that to? Why are you wired that way, do you think?

• 30:37Speaker 02

  Probably practicality. It comes back to what I talked about earlier. I want to make a big impact on the world. There's not that many people who have made an impact divorcing themselves from the establishment, just doing their own thing. And almost all the ones you can come up with are artists. And I am unfortunately, no artist. I could do a lot of interesting things. I know a lot of people in the maker community that are like this, the hacker community, and they go off and they follow their little passion or their interests, they're building cool, wacky things, they're pursuing some novel technique for making a new programming language. But they're kind of a purity test that dictates who they're willing to work with and how they're willing to slow themselves down. I think actually limits their ability to impact the world. You can have a lot more impact as a person who says, I have out of the box

• 31:20Speaker 02

  ideas and I am going to force myself to engage in the unpleasant task of trying to push these ideas onto conventional people and conventional institutions than if you say, I'm just going to go and I'm going to do this on my own in my garage. I'm going to put it on the internet as an open source project and we're all going to circle jerk about how novel and cool and high performance this technique is. Because at the end of the day, that's not how you have a large impact. Having a large impact means engaging with the people who are going to be able to get that into schools, the large software and hardware systems, into policy. Think if you're driven more by wanting to make an impact than wanting to be outside of the box, you will naturally end up where I am. There's a lot of people like me. I don't think that's all that unique to me.

• 31:59Patrick O'Shaughnessy?

  He reminds me of, can never pronounce his last name. His first name is Mikhail, last name starts with a C. The guy that wrote about creativity and flow. His study said that the great creatives, the thing that they did that no one talks about, Picasso is a good example, they cultivated the field that was going to be receiving the work. And they put a lot of work into the conventional critics, the field. And that's basically, it sounds like what you're saying.

• 32:20Speaker 02

  That's actually a really good analog for what we did with Oculus too. I mean, we spent a ton of time engaging with the press, engaging with game developers, engaging with computing companies because we were trying to shape the way that this technology would be received. And we were trying to tell them, here's what we think the world should look like. And it wasn't always easy. And roll's been doing a lot of the same things. I mean, I hate to admit this. But Androl, when we started, in the first few months, we hired more lawyers and lobbyists than engineers. That's not the case anymore, obviously. That was, I think, because we were actually more concerned about the shaping of the institutions side

• 33:00Speaker 02

  and compliance of the institution side than the building of technology side. We felt good on the engineering side. We're gonna be fine. We knew we were gonna build Lattice. We knew we were gonna build these products on top of it. What we were most concerned about was getting people in DoD and the political side to believe in what we were doing, to believe that cost plus contracting was broken, to believe that a small player could be a large player in the space if given the chance. Obviously, it's worked out pretty well, but I think Androl probably has done just as much on the government relations and institutional engagement side as we have on the tech side in terms of what contributed to our success.

• 33:36Patrick O'Shaughnessy?

  Is it oversimplifying it to say that more inventors should work backward from existing systems rather than forward from like their ideals about how things should be?

• 33:44Speaker 02

  I think you need to think about existing systems in terms of the institutions and the people and the traditions and the politics, yes. The technology? Probably no. Obviously, you can learn from existing technology, but in my experience, it's good to trust people when they tell you what their problems are, but don't trust what they think the solution is. There's so many companies that look at the solution space that exists and then say, ah, I can do that somewhat better. I can do that somewhat cheaper. And the reality is, is that rarely are impactful businesses built on doing something a little better, a little cheaper. If you're not that different from those guys, it means they're going to have an easy time adapting from you, whatever you come up with. Because you're not competing with what they have today. You're competing with what they're going to have after they look at what you're doing

• 34:29Speaker 02

  and then cross implement it or learn from what you're doing. That's a thing that a lot of startups miss. They say, oh, look at this, like Oracle Division doing this thing. The small side of Oracle, I think I can do better than that service. And I have to remind them, well, first of all, guys, let's say it takes you two years to build that. You're not competing with what they have today. You're competing with what they have in two years. And then what you're really competing with is what they have in three years after they look at what you've built as you start to eat some of their customers. And then they're going to build something in response. So you gotta kind of think two or three steps ahead with these things. And if you've built something that's totally different, they're gonna have a very hard time adapting to it. Maybe one good way to look at it is a lot like bacterial infection. If you build something that is the same shape as existing things, it's gonna be a lot easier to get infected.

• 35:12Speaker 02

  If you can build something that is a radically different structure, it's much harder for people to copy what you're doing or attack what you're doing.

• 35:19Patrick O'Shaughnessy?

  When you first approached the problem, what was most broken about national security?

• 35:24Speaker 02

  It mostly comes down to an incentives problem. Everyone has the wrong incentives and organizations and people and organisms usually do what they are incentivized to do. So government bureaucrats don't get fired for doing things the way that their predecessor did them, even if that's the wrong way to be doing them. There's not competition in many of these government agencies. So it's not like they're worried about a more efficient competitor. There's no FDA two and Pentagon two that's competing with them and trying to drive down costs and accelerate schedule. The incentive on the government side are out of whack. The incentives on the private contractor side have been created by government, which largely is awarding cost plus contracts, which incentivize contractors then to have high costs,

• 36:06Speaker 02

  to build the most expensive systems they can justify, to never reuse work. Because if you reuse something you've already built in the past, you're not getting the plus on the cost of building a brand new thing. And so I'm not saying that people wake up saying, ah, I'm screwing taxpayers today. But you naturally build an entire organization that is incentivizing people to spend as much as possible and to do work over and over again, as many times as can be justified. That combination of things was really the problem. It was government giving private companies the wrong incentives and then bureaucrats not being willing to do things that are outside of that existing set of incentives because they're worried it's gonna be bad for their career. Why would you take a bet on a small company? If you bet on Boeing and then they spend hundreds of billions of dollars and fail, that's how it goes. Sometimes you fail.

• 36:52Speaker 02

  If you bet a thousandth of that on a small company that has never delivered a product, but has a very promising path to making something that is much better, and then that fails, everyone's gonna say, wow, that was a really stupid bet. Why did you ever even think about doing that? Of course, that was never going to work. They have no proof of performance. This is a problem that is self reinforcing. The United States used to be very good, taking small companies that were building powerful things and turning them into large companies that could do those good things at scale. But since the end of the Cold War, we've lost that muscle. There's been massive consolidation in the defense industry. Eighty percent of the money goes to just five companies. Thirty percent of major weapons systems contracts have literally one bidder, meaning no competition even on the private side.

• 37:36Speaker 02

  How can you have good outcomes in a world like that?

• 37:39Patrick O'Shaughnessy?

  I was trying to think about a framework to discuss the state of weapons technology or the history of weapons technology with you. And the cleanest I could come up with is a stupid consultant two by two, where on one axis, you have offensive versus defensive technologies dominating. And on another, you have democratic versus very non democratic. Muskets on one end, everyone has the same amount of power. And on nuclear weapons on the other, one person has a gazillion times much as the musket guy or something. Is that a good way to think about where we might plot through history and weapons technology? Is there some other way that you would approach thinking about an era and weapons technology?

• 38:14Speaker 02

  Offensive and defensive is definitely the right scale. Distributed or not distributed, I'm not sure. That I actually think matters less by weapon system and more by the power dynamic of the nation. There's a question here. Are the people aligned with the government or are they opposed to the government? And to what degree? If you have them where they're neutral parties that accept each other's existence, that's one thing. Let's say you have a country like Ukraine, where implausibly to the Russians, they had formed a strong national identity and there were people who were willing to die in large numbers for their country. That's a case where there's people who are very much aligned with the broader goals of their nation. On the other hand, if you look at a lot of African nations, even a lot of Middle Eastern nations,

• 38:55Speaker 02

  you have a huge mismatch between what the political class wants and what the everyman wants. And so I think a better axis is actually more like democratic versus autocratic technologies in that there are a lot of technologies that are much more useful for controlling your own population than for preserving their Rights against hostile actors. There's a lot of countries whose military effectively is an internal peacekeeping force to crush dissent. That's actually what it's for. And there's a lot of tools made by companies like Sense Time in China that are fundamentally, they are not useful for going to other countries and preserving our rights. They're not useful for defending yourself from an invader. They are only useful for controlling people in your nation.

• 39:39Speaker 02

  This is one of the reasons that China is exporting these technologies. In the same way that the Soviet Union exported AK-47s, which you could say are on this distributed and offensive side if you were to look at it that way. But the reason they were actually doing that is they wanted to arm nations with the tools that they needed to keep their civilian population in check and keep them in power. And they wanted to threaten them and say, hey, if you ever get out of line, we're going to stop providing you with these arms and systems you need. And then you're going to immediately get a violent revolution and you're probably going to get killed. It was a great motivation for people to stay stuck to the Soviet Union. This idea that we are the thing that allows you to keep your people in check. And without us, that is over. China's pursuing a similar strategy.

• 40:21Speaker 02

  They're going to African nations and saying, hey, we're going to help build out this infrastructure in your ports, in your roads, in your police force, in your military. We're going to build AI camera systems that track dissidents for you, that track where they're shopping, where they're going, where they're riding trains. We're going to allow you to monitor all their communications on the telecommunications side. So let us sell you telecommunications gear and you get all these backdoors that allow you to control people who are trying to come after you. But the bargain with the devil that they're making is, oh, and by the way, if you ever do anything that's counter to Chinese interests, we're going to pull all of this and you're going to lose all your tools for controlling your population. And you're going to be dead inside of a week. It's a sense time is on the autocratic authoritarian side of that scale

• 41:03Speaker 02

  because it has almost no application in preserving freedom or in deterring an invasion. It's only for controlling your own people.

• 41:11Patrick O'Shaughnessy?

  How would you describe what is important for America? Through as many lenses as you want to take it, it just seems like such an interesting time where we were the world police force for so long and that maybe seems to be waning. We still seem like we can project power more than anybody else by a lot. But what matters in your estimation? What are the dimensions or the variables that matter most for America and its interests today from the defense perspective?

• 41:34Speaker 02

  I think we've had two really good outcomes from a few decades in the Middle East. One of them has been that we need to be very, very strategic about which things we're going to get involved in at a large level. And I think that's a very productive development. I think it's led to a lot of real politic thinking that is good. For example, I personally support democracy in Taiwan. I like the idea that Taiwan is able to self-determine and self-govern. But let's be real, the reason that the United States is interested in Taiwan is because they are critical to our economy and they are critical to the economy of all of our allies. If it were not for their semiconductor industry and if it were not for a few other aligned

• 42:15Speaker 02

  industries, I think the United States would probably not be nearly as inclined to spend a lot of money to take on the risk of going to war with a nuclear superpower. That's a very productive thing. I'm glad the United States is not spreading resources thinly across the entire world to achieve nebulous aims. I'm glad that the focus is on what would a war in the Pacific over Taiwan look like? It's a strong alignment of our plan with our interests. I think another really important factor for the US to be considering and that we are considering is that the days of US boots on the ground being the primary component of our aid, they're gone and over. Politically, people don't want it. Economically, people don't want it. Globally, I think people don't really want it.

• 43:00Speaker 02

  I think that the role of the United States in the future is going to be less being the world police and more like being the world gun store. We're going to build all the things that turn our allies into really prickly porcupines that nobody wants to screw with. We're going to sell them the tools that they use to defend their homes. And if they're not willing to use their own Manpower and their own resources to defend themselves. The United States probably shouldn't be going out of the way to do that. I think we've learned a lesson. Don't try to defend countries that aren't willing to defend themselves. But I think that giving arms to people, I mean, that's good economically for us. It's good strategically for us. It maintains that level of shared interest where they still really want to make sure that they're in the good graces of the United States. I think that that's a really big factor.

• 43:45Speaker 02

  We don't even be sending people. We need to be sending arms that they can use to defend themselves and deter invasion. And then if they do get into a fight, win very swiftly. And of all the things I've criticized the government on, I think actually this is one where the Pentagon is pretty aligned, the politicians are pretty aligned. Everyone buys into this idea.

• 44:03Patrick O'Shaughnessy?

  If you think about the capital allocation or resource allocation, I'll call it at Anduril. I saw a joke on Twitter the other day that was people need to understand that Anduril for X is just going to be Anduril. You started with one thing and now you're doing many things. And you said earlier that problems, listen to problems, but not to then come up with your own solutions. How do you prosecute that? How do you know which problems to prioritize and tackle first? When you started the business, tackle next when you're thinking about it today? What's your framework for deciding on how to allocate resource?

• 44:31Speaker 02

  Oh, this one's actually pretty easy. We decided to build Lattice, the AI core that powers all our hardware systems and a bunch of systems that other companies make now, because that was a foundational platform technology that could be reused over and over again. Unlike, let's say, investing a billion dollars into one hardware platform where the value largely stays locked up in that hardware platform. Putting a billion dollars into something that is inherently cross-applicable means you're basically multiplying the effect of that money. It means I get to now use it in 20 products. In a way, it's almost as if I spent $20 billion. Or at least in the current incentive structure of the DOD, that's what other people would have to do to make it happen, because they don't want to reuse things where they can justify doing otherwise. Product wise, that was an easy decision.

• 45:14Speaker 02

  In terms of the things we build on top of that now and what areas we decide to go into. So how do we prioritize? The first step is actually just, we actually don't have to make the decision is actually the great thing. These priorities are laid out. The Joint Chiefs have a list of priorities, things that are of utmost importance for the United States to Get better at. This is one of the reasons we got into the rocket motor business. It's because there's been huge consolidation. There's only two vendors. Neither are very good. There are no independent vendors that are not owned by an existing prime, which is really bad for startups, really, really bad for the primes that don't own their own rocket motor vendors. And even the ones who do own rocket motor production capacity are not stoked with their ability to produce all of the different things that they need. So that was an area where we didn't have to come up with that thesis from the beginning.

• 45:57Speaker 02

  You had Congress saying, we desperately need more rocket motor vendors. You had the Pentagon saying, we desperately need more rocket motor vendors. Please, won't somebody do something? And they'd been doing so with minimal effect for many years. So when we do something, I think there's four things that need to be true. First, it has to be something that the Pentagon cares about. It has to be something they think is a priority, because if they don't think it's a priority, it doesn't even matter if it should be a priority. If they're not convinced it should be a priority, it's probably not something that is going to get fixed in the near term. If I think something is a priority and the Pentagon disagrees, that's not an engineering effort I need to deploy. That's probably a persuasion effort that I need to deploy. Don't start the engineering on something when you haven't successfully persuaded them. Most of the time, they know what their problems are.

• 46:42Speaker 02

  Two, has to be something that Congress cares about. They have the power of the purse. They decide what is going to get funded. They decide what programs are going to get allocation. They decide which ones are going to get killed. And so if Congress believes that something is important, you're probably going to do better than if it's something that they think is a waste of time or the pet project of some billionaire. That's just the way that it is. This is one of those things where perception is reality. If they think it's not important, I have to act as if it isn't or try to persuade them otherwise. I can't just go out and build a Batmobile and say, hey, I built the Batmobile. Check out how sick it is. You guys should fund this. That happens from time to time, but those are the exceptions that prove the rule. And then the third thing is, it has to be something we can do well.

• 47:26Speaker 02

  Now, I know that sounds obvious, but doing well often means can we reuse things we already have? Can we move fast? Is this something we can do without totally reorienting our whole business? Those are going to be the most attractive things. And then finally, the last category is other people have to be doing a bad Job. I don't want to spend our money rebuilding things that other companies are already doing well, just because I think that I could do slightly better, or that I could just make money in that area in a vacuum. This is probably the least rational part of the process. Could Andro make a lot of money making small tactical quadcopters for surveillance? Things like the short range reconnaissance drone going on US infantry? The answer is yeah, we could definitely make a lot of money doing that. I think we'd be very successful at it. But there's a lot of great companies in the US that are already doing this.

• 48:12Speaker 02

  Skydio is a great small drone company. Brink, great company. Teal, great company. So why would I spend my VC dollars, venture capital dollars, fighting their venture capital dollars, trying to solve the same niche that has already been pretty well solved by other good US companies? I don't want to do that. I could use the opposite of the strategy that I have. What if I only went after areas where there are other good companies already doing that? Maybe that means that those are good markets. But how shitty would I feel if the net result of spending a billion dollars in R and D is that I've just killed off 10 other companies that could have otherwise done a good job? And the DOD ends up with the same capability anyway? It's not what I want to do. So building things that other people are doing poorly is actually very important to me.

• 48:54Speaker 02

  I want to be entering areas where the existing people are not doing a good job. They're charging too much, they're working too slowly, their systems are not highly functional. Beating them is something I can feel good about in the morning. Beating competent players, not so much.

• 49:09Patrick O'Shaughnessy?

  Make the world a different place.

• 49:11Speaker 02

  There are people who are not looking at it that way. I think there's been some defense startups where they are getting into the really crowded areas of the market. Or worse, they're working on things that they think are important, but the Pentagon disagrees. I won't name any names specifically, but I'd say like the entire category of defense startups building things that are for door kickers to better clear buildings. Yes, there is a need for door kickers to clear buildings, but the Pentagon doesn't see that as their biggest problem. They don't even see it as on the list of their top 50 biggest problem. They feel like we got really good at that. We have the tools, we have the tactics, we're the best in the world at clearing buildings with door kicking soldiers, and we don't need to get

• 49:50Speaker 02

  Marginally better at that. Same thing with Congress. Congress does not have an appetite to spend a lot of taxpayer money getting slightly better at something that they believe is irrelevant to a fight in the Pacific. That is irrelevant to a great power conflict with China across long ranges. And so I've seen people who say, I'm a Navy SEAL and I know that we can do way better at this. The other people out there aren't making great stuff and I know that this could be a powerful technology. Ideologically, I am aligned with them. I think that they're right. We could be building much better things for that group of people. They have historically gotten much worse gear than they should have, but as a practical person who wants to have impact, I know that's not where I'm going to have it.

• 50:27Speaker 02

  I know that I'm not going to have a huge, many billion dollar impact on that industry, given that the people in charge of running that side of things are not going to agree that it's worth investing in.

• 50:37Patrick O'Shaughnessy?

  So you built Lattice. Now the world is catching up. Everyone wants to build an AI platform system. What have you learned about building one? What are the components of it? What do you think about AI writ large, the costs associated with compute and AI? All of these big things you've been working in for a while and now it matters to everybody. So what would you contribute as the lessons that you've learned there so far?

• 50:56Speaker 02

  It's been a double edged sword. I think we've been working on AI for defense since literally day one. That was the whole pitch. The second page of our pitch deck was a quote from Vladimir Putin. He was talking about artificial intelligence and he said, "The country that wins in this sphere will become the ruler of the entire world," which I love. It's a very James Bond villain-esque quote. On the one hand, it sounded crazier at the time because AI wasn't hot seven years ago. There are people who were interested in it, but it's obviously not even a hundredth of the attention that's being dedicated to it today. The flip side of that is now that everyone is saying they're AI, all of a sudden our message is getting diluted. It's, hey, we've actually been doing AI for defense for almost seven years now. And now everyone is changing to say, yes, our systems are all powered by AI. It's all AI driven.

• 51:41Speaker 02

  Some of that's true, some of it's not. Now it actually is less differentiated than we were. You have to now get very clear about what the difference between a real usable, fieldable AI system looks like versus strapping together ChatGPT with whatever your quadcopter thing is and saying that it's going to change the world. I do think- What's been helpful to us, though, with members of Congress, people in the Pentagon, even investors, has been the explosion of firsthand understanding of how powerful AI can be. That's been driven by these large language models. Obviously, the things that we are building that fuse data from thermal vision and radar and signals intelligence processors that then calculate optimal weapons pairing against that target.

• 52:25Speaker 02

  Very different use of AI than a thing that you tell to write a poem about your car. But the fact that every member of Congress has been able to use ChatGPT, the fact that all these people in the Pentagon have seen and used systems doing things that they never believed a computer could do, has, I think, expanded people's minds in general towards the possibility that maybe people can be replaced by AI in certain use cases. Maybe there are areas where computers really can do a job as well or better than a person. A lot of skeptics, I think, have changed their minds because they typed something into ChatGPT. It did something for them. They said, wow, computers sure are amazing these days. What has AI most unlocked?

• 53:07Speaker 02

  The most important thing that it has unlocked for us is ability to scale. People focus on use cases where AI can do better than a person or even better than a team of 100 or 1,000 people at some one specific task. I think a lot of the more interesting use cases are where you can do as good of a person, but without a person having to do it. Let's use an example. Let's say that I'm going to deploy 1,000 autonomous cruise missiles. Those are going to be a lot more impactful than they would be if I had to have 1,000 people trying to remotely pilot 1,000 systems and tell them what to do, how to do it, have all those data links active. I guess it's using AI to do things that would be impossible to do otherwise,

• 53:52Speaker 02

  either for real technical reasons like bandwidth or just for practical reasons. We don't have thousands of pilots that we could dedicate to such a task. For me, I think that's the biggest thing AI enables. I'm less focused on the superhuman, superintelligent side of things and more, hey, this AI that's running my autonomous Helicopter. Is he about as good as a pretty good helicopter pilot? Okay, that means that I can have one soldier managing a fleet of 25 airframes himself and just telling them, hey, I need you to clear this area. I need you to find this target I'm looking for. I need you to fly ahead of my convoy and watch for anything. Now he doesn't need 25 pilots and 25 helicopters to do that. That's what I'm most excited about. And it's

• 54:35Speaker 02

  really important in a world where I think quantity is going to have a quality all of its own in these types of weapon systems. The best way to defeat a lot of our adversaries' defenses is not through building a small number of exquisite systems, but quantities that are so large that they can't possibly stop them. And it's especially important in a world where militaries are struggling to recruit. They're trying to be more cost effective. They're trying to put less money into salaries and disability payments and more into systems that are going to be fighting the adversary directly, robotic systems. For example, the United Kingdom has said that they want to, over the next few years, reduce the size of their navy by 30%, 30% personnel reduction. And because of that, they're doing

• 55:19Speaker 02

  things like dedicating one of their two aircraft carriers to being an autonomous aircraft launch system. In other words, they want one of their carriers to only launch autonomous systems. You don't have to have huge numbers of people to run and maintain these traditional manned systems. If that's the world we're going to live in, where we need to ramp up the number of systems, but also ramp down the number of people, the only thing that can fill the gap is automation.

• 55:44Patrick O'Shaughnessy?

  What do you want Andorl to become? I mean, you've come a long way. This answer would have been interesting seven years ago, but-

• 55:51Speaker 02

  I can tell you what the answer is. It's the same one. Our pitch deck, page one, says that Andorl will save Western civilization by saving taxpayers hundreds of billions of dollars a year as we make tens of billions of dollars a year. The reason that's important is our goal is not just to make money, and it's not just to beat the incumbents. It is to be much more efficient than them, so that when people buy our systems, it allows them to get rid of systems and programs that are- Much more expensive, that are very wasteful. I want to be doing that 10 to one ratio. If I am making a billion dollars, I hope that it is by saving taxpayers $10 billion or $50 billion, killing a legacy program that didn't need to be around anymore.

• 56:35Speaker 02

  And I don't think we've gotten close to that, tens of billions of dollars yet. We're going to be hitting a billion dollars in revenue pretty fast. We're not there yet. But I do think that we are already saving taxpayers billions of dollars. We're making hundreds of millions of dollars a year. We're saving taxpayers billions of dollars. That's only two orders of magnitude. Just got to jump to saving them tens of billions and then jump to saving them hundreds of billions. Two orders of magnitude isn't all that much in a industry where the US defense budget alone is over $800 billion. One of those areas where it is truly a multi-trillion dollar a year opportunity. And there are not that many credible players to compete with the big primes. Anduril is positioned to be the company that does this.

• 57:16Speaker 02

  I don't see anybody else who's across all the domains and all the arenas that we're competing in, even close to having the impact that we are. Maybe I'm wrong and maybe I'm being too arrogant. But if there's going to be a new defense prime, and I don't know how to define it exactly, but let's say if there's going to be a new company in that top five that get 80% of the spending, I think Anduril is by far the most reasonable bet. And I don't know if we're going to get to number one in my lifetime, but I am certain that we are going to get to the top five in the next decade.

• 57:48Patrick O'Shaughnessy?

  What do you think of Apple's vision and the state of VR? Back to your original love.

• 57:53Speaker 02

  I love it. I'm a big fan of what Apple is doing. It's not going to lead to mainstream adoption of VR, but that's not the point. That's not what they're trying to do. I'm so pissed off by all the analysts who are talking about how few headsets they're going to sell with the Vision Pro. But you got to look at the name. It's the Vision Pro. They are not trying to make a mass market product. What they are doing is trying to make a VR headset that everybody wants, even if it's not one that they can afford. They want to make VR something that everyone understands, that they want in their lives. They see people using it and say, wow, I want that for myself. But I'm too poor. If that is what Apple can accomplish, they will have no problem down the road. When they make a lower cost version of that headset, it's $3,500. They have a very clear path to making that headset for hundreds of dollars.

• 58:37Speaker 02

  There is nothing in there that is not going to be very commodity in just a few years. The displays in it are extraordinarily expensive because they're practically engineering samples from the display provider, but those displays are going to come down in cost to under $100. That'll only take a few years. I'm a big fan of this approach. I think it makes more sense than running at the wall over and over and saying, "Oh, we just need to make it cheaper and then people will buy it." No, no, that's not the case. You have to make VR something people want before you can make it something that they will buy. I wrote a blog post about this on my blog, PalmerLucky.com, titled, "Free Isn't Cheap Enough." And I wrote this years ago. I think I wrote it four years ago, five years ago. I laid out this thesis. You need to make VR something people care about before you can make them buy it.

• 59:22Speaker 02

  And that cost actually is not the dominant factor in making people want to buy a VR system. In other words, if you took existing VR technology as it exists today, or at least back then, and you literally gave it away for free to every person in America, the vast majority would not continue using it, even if it was literally free. Because the quality is not there. It's just not at that bar that makes a person want to engage with it every day. The content was not at a level where people can engage with it every day across a wide range of different audiences. And so if people wouldn't use it at large scale, even if it was free, why even bother trying to lower the cost and achieve scale that way? That's clearly not the problem. You might get them to buy it, but they're not going to keep using it,

• 1:00:07Speaker 02

  which means that you don't actually have an ecosystem. So I'm a huge fan of what Apple is doing there. I'm also a big fan of the fact that they are doing mixed reality or augmented reality, or whatever you want to call it, using full reprojection. Meaning they're using sensors to take in a view of the real world, merging that with a digital model of what you want to put in it, and then projecting all new photons into the eye from displays. This is contrasted with, let's say, the hololens approach of having an optically transparent system where you have real photons from real things mixed with new real photons, but representing virtual aspects of the space blended together. The problem is that all the systems that are good at adding photons to the view of the real world also totally screw up your view of the real world. And they're very, very limited in what they can do. They can only add light. They can't subtract it.

• 1:00:52Speaker 02

  So you can't match dynamic range. You can't match brightness. You can't draw black. You can't erase things. You can just add glowy things in the environment. But that's not what people actually want. Apple started trying to do optical transparency. And the Vision Pro was supposed to be basically a development kit for the toolset for developers to use that system. It's now become the product they're actually going to ship. There are people in Apple who think they're someday going to get back to optical transparency. There's another camp that thinks that the long-term win is full reprojection. Every photon that hits your eyes is coming from a mediated system that's making them synthetically. That's where I fall on this. That's where the really cool applications come. That's how we're going to fuse many spectrums of imaging. That's how we're going to fuse the real world and the virtual world seamlessly in useful

• 1:01:37Speaker 02

  ways, in compelling ways. It's actually also going to be good for your eyesight, too. It's going to keep all those UV rays out of your eye holes. So I'm a big fan of it technologically, marketing-wise, the way that they're doing everything. They're not going to sell that many of them, but that's not the point. The Vision Pro is the thing that is trying to prime the audience to be ready for a VR revolution, not the VR revolution itself.

• 1:01:57Patrick O'Shaughnessy?

  A few quick hits for you before we wrap up. The first is if you had to hire everyone based only on you knowing how good they are at a certain video game, what video game would you pick?

• 1:02:09Speaker 02

  I'm immediately actually jumping to wanting to rig the competition. I would want it to be, I would want it to be something that John Carmack has made, like Quake 3, so that then John Carmack would come work for me again. He left In Software to be our CTO at Oculus a year after we started Oculus, and that was the strongest hire I've ever made. I wasn't able to get John to come over to Anduril. He loves what we're doing. We're still buddies, but he's working on AGI. That's been his push. The immediate thought is I want to just rig your competition. It's actually just about hiring John and nothing else matters. If I couldn't do that, I think I would pick Kerbal Space Program. The people who are really good at Kerbal Space Program are displaying a really useful skill. Yes, Kerbal Space Program doesn't have real physics,

• 1:02:53Speaker 02

  but to do really powerful things, you have to understand what the limits of that world are, how they've set up the physics and the gravity and the mechanics and the things that exist. And you have to be very, very good at doing systems level trades of which direction you're going to pursue. How are you best going to put together these components? How are you then best going to come up with a plan that uses them in the optimal way? People who are very good at Kerbal Space Program have to be good at a lot of systems level and strategic thinking that I think is not that common. I think if someone's really, really good at Kerbal Space Program, if they're the people who are building a low part count, cheap system in that game that is able to go to the farthest reaches of the solar system, pick up samples and come back and do so with margin to spare,

• 1:03:38Speaker 02

  that is a person who, even if they have no engineering capability, if they were to become an engineer and were able to develop the engineering skills, which I think is totally doable. I think you can learn to be an engineer. But if you're the type of person who can do that systems level thinking, you're probably going to be unstoppable once you're also a good engineer. I will say, I'm not very good at Kerbal Space Program. I like it. I like Kerbal Space Program, but the things that I build are certainly not optimized.

• 1:04:04Patrick O'Shaughnessy?

  You said higher for your weaknesses, so.

• 1:04:06Speaker 02

  And I think that that's probably, for example, I'm thinking, what's the counter example? What's the game I would least want people to be playing? And it would be like, other games that I do like, but probably are not useful is probably Quake 3 or Unreal Tournament or maybe Call of Duty. Ones where it's primarily based on repetition of twitch muscle reflexes. And I'm all about that. I think it's really fun. But someone having really good hand-eye coordination, probably not going to be the thing you need to succeed at Andorol. Probably. Maybe I'm missing something.

• 1:04:36Patrick O'Shaughnessy?

  Final two. What have you learned about marketing?

• 1:04:38Speaker 02

  If you want to take a really cynical view of my career, it's that I have primarily accomplished marketing better than anything else. With Oculus, I know we did a lot of great technical stuff, but I think that the biggest thing we did differently was just figured out how to make VR seem appealing to people. That was the real win and that was enabled by technology, being able to make a thing that was good. Enough. It was small and lightweight and low cost enough that it seemed reasonable. But we did so much work making it cool and making it desirable and making it something that people wanted to be involved with, both on the customer side and also the game developer side. Marketing is not just about your end user. It's about all the people you need to work with. We marketed at Andorall, we're doing something very different. At Oculus, we were marketing

• 1:05:22Speaker 02

  primarily to game developers we needed to partner with and then to end users. And the thing about end users, you have to convince them one by one, individually, by the millions, that they need this thing in their lives. In the defense space, you really are marketing to a very small group of people. You're marketing to people that you need to recruit. That's the number one audience. People that you need to convince that Andorall is the place to be. Your other audience is politicians who pay for your stuff. And the third is your actual customers. They're going to be buying your things. But with the DOD, I don't have to convince the end user. I'm not convincing the guy who is setting up the system in the field that this should be bought necessarily. I'm convincing the people who are more at the strategic level. Put it another way, every person in the US who gets to decide what rocket motors get

• 1:06:07Speaker 02

  purchased, you could fit them in a conference room. It's not millions of people that I need to reach. It's actually a very small group of people. And so it's a very different kind of marketing that we have to do. I think that's probably the toughest lesson for me to learn coming into this from Oculus, where it was a one to all marketing as opposed to what we've done in Andor, which is one to few and being hyper, hyper targeted. It's really fun to make TV ads and do big trade show presences and to do a press tour where you meet with 50 press outlets over the course of four days. That's what I would do when I was, for example, at Oculus, going to CES. I would go to CES and we would give people 30 minute meetings, each press outlet, and they would be 15 minutes of talking with me and then 15 minutes of getting

• 1:06:50Speaker 02

  a demo of the latest Oculus Rift hardware and software. I would rotate through four press outlets an hour doing this 15 minute spiel. And we would start at about 9:00 AM and we would go till 5:00 PM. So you'd have about 32 outlets a day. You do that for four days and you say, wow, I met with almost 200 people in the last few days. That was really fun. And of course, now you're reaching the millions of people that read those 150 or 200 outlets. But as fun as that was, it's not something that makes sense for Andorall. What do you think of AGI? I love it. I'll be honest, I've been less focused on AGI because I think it's a very hard problem and I don't think that Anduril is in a position to be the company that figures

• 1:07:32Speaker 02

  it out. There's so many people trying so many different approaches, unlike VR headsets, where I think there's a clear, tractable roadmap to solving the problem. It's very clear what you need to do to make it work really well. You can roadmap today a technical plan that gets you to a headset that is indistinguishable from reality, on the visual side at least, in some environments. It's very hard to reflect, some things are harder. Sun glaring off of snow, very, very difficult. I'd say there's a clear technical roadmap to a headset that provides you with an experience of sitting in a fluorescent lit office room that is indistinguishable from the real deal. We know what we need to do. That is not the case for AGI. There is not a clear path and I suspect that whatever ends up working is

• 1:08:15Speaker 02

  going to be a bit different than what people are betting it is today. I am going to let everybody else work on that and I want to be in a position where the second someone figures it out, I can jump on it and integrate that capability into my system. So that means building systems that are optimized around autonomy in the first place, building systems that can be well-controlled by a computer, building systems that are made more useful by more computational intelligence, things that can take advantage of advances in autonomy. And Anduril's in a really good place. If someone came up with a perfect AGI that was as smart as the smartest person in the world at anything, Anduril would be able to make great use of that. And I am looking forward to it. I hope John Carmack figures it out. If he does, then it means we get to work together directly again. That's the Palmer

• 1:08:57Speaker 02

  Lucky fantasy, is that John Carmack is the one who figures out AGI with his Carmack-led crack team of geniuses. But whoever it ends up being, we're in a pretty good place to take advantage of it. The only other thing I'll say is, I am not scared of AGI, the way that a lot of people are. I think that AGI is a technology where the benefits do accrue more to the defender than on the offensive side. Obviously, people can pick examples here and there, "Ah, but here's this horrible thing that it could be used for." I still think the benefits actually accrue more to the defender. People will say, Assuming that we get AGI, first of all, I think it's likely, especially in the near term, that it's going to require computationally models that are extremely heavy, that are

• 1:09:42Speaker 02

  going to be easier to run in basically just better off nations that have strong regulatory environments and a general desire to do good than out of someone's garage. It could be someone figures out how to do it in their garage and they use it to bioengineer the next super weapon. But let's assume that AGI just exists in the more likely sense. And I think for a while, it's likely to remain the domain of the people that you would want to have it. I think the better way to look at it is, yes, AGI could be used to engineer really terrifying bioweapons. But that's already the case today. There's already really good bioweapons you can make without AI. We struggle to defend against things like that. I think AI would be very helpful in being able to defend against. In other words,

• 1:10:22Speaker 02

  if AGI is so good, then it can come up with Anthrax 2. And it's just this incredibly powerful thing. I would hope that AGI can also come up with the thing that immunizes people against it, or that builds nanobots that are in our bloodstream at all times that are able to on the fly, compute exactly what they're going to do to stop any biological threat, natural or manmade. It's a case where the defensive uses like that are actually going to outweigh the offensive uses in the long run. The thing to worry about is you have, let's say, North Korea or Iran figures out how to do it with a relatively small number of people. They have the brilliant insight that nobody else does, and then they use it to create super weapons. But at the end of the day, I think that actually comes

• 1:11:02Speaker 02

  down less to an AI problem and more of a people problem. I'm way more scared of really evil people with existing weapons than the possibility that they get slightly better weapons. If they were to do something, the only thing stopping some of these nations is the threat of massive retaliation. I'm not sure that a nuclear-equipped Iran is less spooky than a AI bioweapon-equipped Iran, mostly because the way you stop them from deploying either of those capabilities isn't actually tied to the technology itself. It's tied to everything around it.

• 1:11:36Patrick O'Shaughnessy?

  I sincerely wish I had two more hours with you. This has been so much fun. But I'm forced to ask my traditional closing question. What is the kindest thing that anyone's ever done for you?

• 1:11:45Speaker 02

  I'm going to split it into two areas. There are a lot of people who have very directly given me access to the resources I have today. And where it's very clear that without them believing in me, that I would not be anywhere. This is one of the reasons I like Peter so much. Founder's Fund was really critical for Oculus. And if they had not been an investor, I don't know exactly how things would have gone. Is that kindness? No, that's what I'm struggling with. Is it kindness to invest in something that seems like an unlikely thing? From their perspective, maybe it's just pure craven capitalism. But from the perspective of me, 19 year old kid, starting his first company, meeting with people who knew they were going way out on a limb. It sure seemed quite kind.

• 1:12:28Speaker 02

  And then I guess the only other thing is my wife put up with me not proposing to her for over 10 years. My wife and I met when we were teenagers. We met at a debate camp in Maryland, policy debate. The first time that we met, she actually cried because it was my debate team versus her debate team. And I'll be candid, they did a very poor job. We beat them so soundly that they started crying during the debate. It's funny how that then turned into now we're getting married. There was a lot of kindness in her putting up with me not proposing and getting married. Because like, hey, I've got too much going on with Oculus. It's just absolutely crazy. And then I'd say the worst part was some people, they take a break. They end one company, spend some time with their family, maybe get a marriage out of the way and then start something.

• 1:13:12Speaker 02

  But because I had been fired from Oculus, I was just enraged. I had 100 chips on my shoulder. I was waking up with my fist clenched every day. I said, I am going to prove to them that I'm somebody. I am not a one hit wonder. They haven't seen the last of me. One of the kindest things that I think anyone's done has been my wife, who I had told, hey, when I'm done with Oculus and we get through the consumer launch of the Rift, then that's going to be the right time. Her saying, you are clearly not in a good headspace to get married. You are on the warpath. And her being willing to let me start Andoril, do that for a few years. And then finally, we started dating when she's 15. So to say, oh wait, 15 years, that's a pretty kind thing to do.

• 1:13:54Speaker 02

  Now that stacks up against all the other kindnesses in my life, but that's one that sure seems pretty kind to me. Beyond reasonable, I would say. Is there anything kinder than someone doing something for you and doing it very much against what they want? Because they know that it's what you need to do? I don't think so.

• 1:14:10Patrick O'Shaughnessy?

  I've asked this 400 times or something now. It's now rare that I get a unique answer. That's an amazing and unique answer. This has been so fun and interesting.

• 1:14:18Speaker 02

  Well, if it wasn't for that, Andrel wouldn't be where it is today. I think there was a power to Andrel being started in a fire of passion. And I feel like if I would have done what she originally wanted, which was take off a year, relax a little bit, two things would be different. First of all, Andrel would not have started with that passion. And two, Andrel today would be a year behind where we are now. And with the situation in Taiwan being so critical with countries like Israel and Ukraine going through what they're going through, I can't imagine being a year behind where we are now. I would feel really bad about it. I wish I'd started a year earlier.

• 1:14:54Patrick O'Shaughnessy?

  Omar, I've loved our time together. Thank you so much for the time.

• 1:14:57Speaker 02

  Thank you. This has been a blast.

• 1:14:59Patrick O'Shaughnessy?

  If you enjoyed this episode, visit joincolossus.com where you'll find every episode of this podcast complete with hand-edited transcripts. You can also subscribe to Colossus Review, our quarterly print, digital and private audio publication featuring in-depth profiles of the founders, investors and companies that we admire most. Learn more at joincolossus.com/subscribe.