Palmer Luckey on Building for the Future: Oculus, Anduril, and The Future of American Power

Opening: end of history debate

00:00The very big picture here is in 2017 a lot of people believed we lived at the end of history that there was no more geopolitical movement of significance to happen and that the United Nations could write mean letters to dissuade people from expansionist actions. The cynics were right. The cynics who said no war is still a thing of the present. You can't start working on bombs after the war has started and expect to have any deterrent impact. You're just going to be part of fighting wars instead of preventing them. All of this stuff that's been talked about my whole life um is like suddenly happening. AI is clearly happening. We believe crypto will happen. Do you think we're entering into this maybe unprecedented 20 30 year

Joe Rogan interview and Oculus origins

00:35period of experience? >> Absolutely. I'll give you my my thesis for optimism. >> Thanks for being here. I just watched your um your uh Joe Rogan interview which everyone should watch. There's talking parrots, >> UFOs, uh China uh >> UFOs again. China UFOs and China. Just a lot of interesting stuff. Um, a AR helmet that you built. I mean, it's like it's like nerd like Nirvana this video. So, you guys will have to watch. >> And then UFOs again. >> It's like three or four times. >> And there's like the alien seed. Joe Rogan has to always talk about the alien seed seed human evolution or some or the uplift theory. Was that it? >> Talked about uplift theory taking non-sensient species and bringing them

01:19up to or past the point of human consciousness. It's a much it's a much it's like old style Joe Rogan of like just like deep in every rabbit hole. We were going for it. >> It was incredible. >> The one problem I I I recommend going on Joe Rogan if you get the chance, but >> the one problem is that all of your messaging tools become completely unusable for a period of at least 48 hours because a lot of things like inboxes and your SMS, email, it relies to some degree on there being a limited quantity. >> Yeah. Yeah. And so if you have over a thousand messages come in from everyone you've ever known saying, "Bro, so cool on Joe Rogan." Then everything else in between. And then they're like, "Palmer, you must finish your security

01:57training today or you will lose your clearance." And and they're like, "Did Palmer, did you get the message?" [laughter] No. No. Hang on. Bro on your on your inbox. >> That's right, >> Joe Rogan. That's awesome. >> Um anyway, so uh so I I was lucky enough to meet you back in your Oculus days. That's right. >> Um, which was I think the cool I remember Mark Andre and I flew down and saw I remember the demo with the QR codes on the wall. You want to turn turn a little bit? Um, the QR codes on the wall. >> I can't I can't cheat that well. I'm not like a Broadway actor. [laughter] Yes, Chris. I remember. >> So, so uh the the demo with the QR codes on the wall. Yep. Right. Obviously, you know, and like it was so for those who

VR tracking, displays, and dead pixels

02:38don't know like the time like the first developer kit you had tracking but you had to have uh the boxes outside. Well, what it was is the first development kit didn't have any spatial tracking. You couldn't track movement through space. It was just where you were looking. >> So, three three degrees off. >> Exactly. And so then we we were developing a six off system and that was what became the Oculus Rift DK2. That's right. That was I think we like that was the real first modern >> that was the outside tracking. Is that right? >> We're experimenting with different systems actually, you know. I mean that was an inside out system that you're referring to. We ended up still using an outside in system for the DK2 and then

03:12even for the CV1. It took us years to get inside out tracking robust enough that we could take it out of a room that we would show investors and actually get it into people's people's living rooms because we were talking a little bit about this earlier, but the edge cases are what kills you. It's easy to make it work in a lab. Very very very easy. >> Not maybe not really easy, but it it's relatively easy. What's hard is when you put it into a real room. Real rooms have glass in them. They have reflections in them. They have other people walk through. Now a a large chunk of your scene is moving. You have to reject that. And that sounds easy for the bulk of it, but what about the things on the fringes? What about what about um things

03:45like curtains that move a little bit? What about or like you you scan your scene and then you come back and next time it's moved a just a little bit. Uh also fans, ceiling fans, the death of inside out tracking. Uh it's just rejecting all of those things >> becomes uh uh a hercilian challenge and we we eventually got it working >> and and you had to fix that Oculus Quest. I need to do the optics like the lenses, the screens were a big issue. You can talk about like for those who don't know like the the only I believe only Samsung made what was it the system? >> Oh, it was even worse. Samsung was the only company that was sort of able to make them. So, we were using Samsung displays that were more advanced than

04:26was in their smartphones. We were trying to take things that really were engineering samples and prototypes and we were trying to put them into full-scale production. And uh so we had very low yield on those lines. We had to calc we we had to we had to test every display and reject ones that had dead pixels. And in VR, you really can't get away with one dead pixel. Forget bright pixels. There's even dead pixels. It's because you have uh it's so obviously apparent. It's right in your face. It's a very large large, you know, it's stretched out a big in a big way. And then also it's the mismatch between your eyes. One of the are the schemes we experimented with actually was if you had a dead pixel

05:02>> killing an an equivalent pixel in your other eye. >> At least it's symmetric. It actually made it much better. But it was the asymmetry. You've ever seen those cross eye puzzles where you can, you know, you cross your eyes, you can see what's different. That's what it's like having a dead pixel. You're constantly seeing this asymmetric mismatched image and so those dots stand out so much. Anyway, we ended up not doing that because it turns out customers still like disliked dead pixels. But uh it was a tricky time. >> To me, it was a lesson of I had not invested in hardware and like to me it was a lesson of why hardware is so hard. Like there was literally one company Samsung and it like unless it was like

05:35you tell me couple hundred million dollar order they weren't even going to in fact that's why isn't that why you did the Samsung dealer VR was to get the screen there was really no amount of money that would convince them to do what we need to make our display but then we did a deal with them to basically be the software and hardware designers behind the Samsung Gear VR product. So, if you bought V Gear VR or if you got it for free with your phone, uh it was it was Oculus that made made that happen. And we sold over 10 million units, which was >> But they were three off. They not six off, right? They were >> correct. They were three off. >> I always didn't like three off because I felt like it wasn't the real thing.

06:08>> I agree. It was not the real thing. I look people people forget that uh I was a hobbyist who started building VR headsets as a 15-year-old and then I got all of you guys to give me a bunch of money to do it. Yeah, >> it's a business. And so, uh, I like I I I knew that threedolf was not going to actually work to build this VR revolution, but it got you guys to give us money and like but like we got from DK1 to DK2 very quickly. And here's the good news. DK1, we sold about 55,000 units, which made it the best selling VR headset in history at the time. Um, by the way, I spec I the previous bestseller was the Philips Scuba in the US. It was the Takara Dino Visor in Japan. But combined those that same design sold exactly

06:5550,000 units. So the 55 was I I want I we we we specifically sold that much so that the DK1 would be the best selling. And then we sold 250,000 DK2s. >> I'm not criticizing you, by the way. I'm just like No, but once you I just meant once you experience the six off, you're like, "Wow, that's the real thing." Cuz you can like walk around the room all the people >> and it was critical to get to that as fast as possible. I mean I I would argue the DK1 days what like we knew we were living on borrowed time. We were living in this world where people would see it and they'd get a fiveminute demo and they say oh this is absolutely incredible but without six off tracking it will make them sick and it will make

07:27them nauseous. Cyber sickness is caused by a lot of things but the primary mechanism is that when you have what your inner ear feels mismatch with what your eye sees. Your body believes that that mismatch must be due to a poison that is interfering with your peripheral nervous system. And so what do you need to do when you're poison? Expel the poison. >> And so we we we knew that we were on borrowed time. It was a great demo piece of demo hardware, but we knew we needed to get to really good six off tracking before too many people figured out what was going on. And we did. And we did. >> Can I tell the the the selling story we just talked about? Okay. I don't know if it's public. All right. So here's my

Bitcoin, Coinbase, and the Facebook acquisition

08:04Palmer crypto story, which is um uh so >> I had even thought about this for so many years. Well, one was we had a we had a call once where in like 2013 he's like I wanted to make the store all Bitcoin, right? And I was like, I love you. You know, this is awesome. Um and and in fact, you were almost you said the first customer of Coinbase. >> I So I literally was with Brian Armstrong yesterday and we were going back through my emails to refresh our memory and I have an email chain of me with Brian Armstrong in uh late 2012 talking about supporting that he's like Coinbase is going to be rolling out a payments system. you'll be able to take Bitcoin on your website and we were going to be their very first their very

08:43first customer and I was grilling him. I said, "Why should I work with you instead of Bit Pay?" Um, and [laughter] uh and uh but I I did have a I had a wallet at Coinbase. I was an early Bitcoin guy like before there were any exchanges on the Bitcoin Talk forums. Like I told you, I sold banner ads on my website for 400 Bitcoin. I bought a Samsung Galaxy S Vibrant, which was the T-Mobile's first Galaxy phone for 8,000 Bitcoin. Could you imagine if I wouldn't have bought that phone? Um I could have done so much more Bitcoin gambling at the time and uh but uh but yeah like yeah we we I mean we were we we almost made it happen. Then the lawyers came in. This is the worst part. We got approval and then we got a new COO and

09:20he brought in real lawyers and they stopped us. >> They stopped. They said how do you handle the taxes on this? Is it an asset? Is it a currency? It better not be or it's illegal. >> And then what happened? This is my story but I just confirmed with you was true that I'd heard it from Brandon. So Brendan's the CEO and uh and I sort of would talk to him more about some of this stuff. Um so they got an offer. You got an offer from Zuck went down to LA, saw the demo and was like this is the greatest thing ever. And I think maybe on the you tell me on the spot offered you a billion dollars or something. >> It was more or less on the spot. >> Yeah. More or less on the spot offers him a billion dollars. And then I

09:52remember Brendan called me and he's like we're going to turn down the billion. I'm like okay. You know like why? And he's like well Palmer has a lot of Bitcoin and doesn't really give a about money. >> And this was when Bitcoin was $200. Like literally [laughter] that was I I never actually asked Palmer until just now. I was like, "Was that true before I say it on stage, but that was what Brendon told me was the reason." >> I was checking I was [laughter] checking I was checking my witcoin at $28. I am set. >> Yeah. And then but then he came back and offered three billion. But but but the more important thing >> when I when when Forbes gave me the 30 under 30 uh award in 2014, they they they they had everybody had to give one

10:28sentence of advice to young entrepreneurs. And I was on the cover. It said Palmer Lucky. quote, "Buy more Bitcoin." [laughter] So, I was I was the OG here. >> So, so then then you eventually got to got to a higher price. But more importantly, just just to give context, right, the real reason for selling was not just like personal money. It was the fact that we we all saw the writing on the wall, which was going to be billions more >> R&D. >> Well, you remember the other side of this. I you are the other side of the table on this. So, like for me, the founder position was uh I I wasn't interested in selling for money. Uh, and I also believed that Oculus was going to be worth a lot more than a billion. Why

11:06would you sell out for a billion dollars and give up control? Uh, the thing that convinced us is Mark came back and said, "One, here's why we are aligned in ways that Microsoft and Google is not. Here's why we want VR and AR to be the next platform, whereas they generally want the status quo to continue." So, it convinced us that they really did want what we wanted. Yeah. >> Which was not to sell us for parts or use us to sell more Xbox. >> Yeah. >> No offense to Microsoft. love those guys. But uh >> yeah, >> the the the real thing that made the difference was that they were willing to put money behind that belief. They said, "We will put a billion dollars in R&D behind you every year for the next 10

11:43years, guaranteed." >> I think that was actually in the deal, too, as I recall. >> It was it was it was that was the thing that was most important to me because you start running the numbers. How am I going to get a billion dollars a year to do uh R&D? You launching a platform takes a lot of money. Xbox spent like five billion launching the first Xbox. You you it just it's the content is expensive, the people are expensive, the marketing is expensive. And so we had people like Chris coming and saying, "We're going to raise more money than we've ever raised in any company in history." You you was a $75 million round about we did was 75 million >> $250 million valuation. It was a big deal back then.

12:17>> And uh for us to raise billions, I'm not going to have any control of my company. It would have taken years if the market had downturned and you have a burn rate that relies on a billion a year in VC money. I mean, you're toast. >> I mean, there wasn't a back then there wasn't a billion. Like we we literally had a Wall Street Journal article that we had a billion dollar fund and it was like this bubble bubble thing. That's right. >> So, we put 7 and a half% of our fund like we could there's like a limit. Yeah. >> And so this this offer from Mark, they said they would say they were committed. I I actually remember exactly the words I said. It's it's in a book called The History of the Future. The author got a

12:47bunch of Facebook internal. It's a good book. bunch of Facebook internal documents, but uh the email that I sent out to the founders, they're like, "Oh, you know, I think Zuck might be might be BSing us." I said, "If Zuck is playing us, he's Van Halen." Uh [laughter] and uh and that that was really the thing that that convinced us in the end. >> And now they've spent you said 80 billion. >> The official public number is $60 billion. The way that I look at this and the way that I the way that I convinced myself that it wasn't so bad that I got fired from my own company that I I built as a youth and put my whole adult life into uh is that in the end uh Facebook didn't really acquire Oculus. Uh Oculus

13:24took over Facebook. We became the overwhelming and dominant component of their spend and their R&D and their product product creation engine. That's pretty good. That's pretty good. >> Yeah. No, it's amazing. >> Yeah. Um, >> and it only cost them $3 billion for me to take over. >> It's gotten good. It's gotten good. The MetaQuest is good and I think the, you know, it's like I I believe >> Quest was the last thing that I worked on before they fired me. >> Is that right? >> Yeah. >> I mean, I I still very much believe in VR. It's it's taken longer than I expected. I mean, as has, you know, crypto and a bunch of stuff can take longer, but >> it it is going to work. And there's there's people who take a kind of glee

Is VR failing? Sales numbers and 'free isn't cheap enough'

13:57in it failing. You got to actually look like like rationally it is not failing. I think it's not living up to what certain people, myself included, believed that it would be. But when you see these articles uh from from like the modern tech press is not the tech press. They're the anti-tech press. But when you see modern anti-tech press articles, you know, why didn't VR succeed? They're not mentioning that the last version of Quest sold 20 million units. They're not mentioning >> more than Xbox at least one year. >> It sold way more than Xbox. It's and like Quest 2 sold better for the first three years that it existed than the Nintendo 64. Like, and so it's like, huh, what a failure. It only sold better

14:40than every game console I owned as a child. Like, it's it's it's this it's it's because they're comparing it to smartphones, which but smartphones are this unparalleled explosion in technological change. Yeah. We're not as good as the biggest change in the way we've used computers in history, but we're we're we're we're like the next we're only one step down. So I I I'm like, by the way, that's just Quest 2. You also then had Quest 3 selling for the same time as a while. Like you had, of course, PlayStation VR, which sold about about 6 million units. We don't have numbers for PlayStation VR 2 yet, but like they're definitely selling millions of units. You had HTC Vive, which sold at least three or four

15:18million units. Like you're looking at a world where there are by any measure low tens of millions of users of this technology. That's that's pretty good. There weren't that many people using iPhones until the iPhone 3GS. >> Like like like it's like like you had to get to the third generation of iPhones. >> 2012 that Facebook did their mobile pivot. People forget that it was 5 years in that it actually was obvious to people that it was like the new platform. >> That's right. That's right. >> Like it's like people have this retrospect like this retcon kind of what happened. >> Well, I also I I like to compare it to iPods, too. Um, and it's been a while since I did this exercise, but we had some vanity metric where we pointed that

15:53the Oculus Rift in the first year outsold the first three years of the iPod. And like it's true, iPod took off in an exponential way later. But by the time it like those first three years, I mean, it was on the cover of major magazines. It was winning gadget of the year. All the hottest like it was it was an it thing to have and we were we were we were out selling it. It used to be that success was enough. Yeah, >> that's not enough anymore. It needs to be mega billion success or you're nobody. >> Well, the other thing is that there's there obviously like the ergonomics, the the visuals, like they're just obviously going to get better and they're an issue right now. Like it's kind of you get sweaty. It's kind of like right and so

16:31like I feel like there's hard things to predict like user behavior like but they're easy things like of course they're going to get smaller, lighter, faster, more performant, better graphics, better games. There's a there's a great article that's definitely worth reading, very well written, um on palmerlucky.com called free isn't cheap enough. It's the number one Palmer Lucky blog on the internet. >> Free isn't cheap enough. >> It's written by me. Um but it's this great piece where I laid out this hypothesis years ago um called free isn't cheap enough. And I argue that the thing holding VR back is not the price per unit. Like it's it's not the fact that it's $300 versus $200. It's the it's what you're talking about. It's too

17:09heavy. It's too sweaty. quality and content pipeline is just not there to make an average person, not a gamer, not an early adopter like your mom >> to use it. And so when people say, "I'm not interested in VR," you can give them an easy hypothetical. Okay, well wait, what if it was a pair of like sunglasses and it was as good as The Matrix and it were $99? Would you use it? And it doesn't even unimaginative people are like, "Yeah, I like if I could do literally anything that I could imagine in a pair of glasses, of course I would do it, but that's not what VR is." And I say, "Well, then then we're just arguing about when VR is going to take off. It's not if it will. We know the physics allows us to get to something like what

17:47I've described." Um, and so I argued that this relentless push on making it cheaper and cheaper is pointless because even if it was free, it wouldn't be good enough for people to keep using. I would posit you could give a VR headset as they exist today to every person in America and upwards of 90% of them would stop using them within a month because it's just the quality is not quite there yet. In other words, free isn't cheap enough to make VR succeed. >> Yeah, maybe even a higher price better one would be even more successful. >> That was one of that was my argument. Unfortunately, people didn't listen to me and they kept going and they launched the Oculus Go at $99 which went back to being three off and that was a whole

18:23misadventure and uh [snorts] uh it it ended up This is one of the things where me and John Carmarmac were actually at odds. He thought that the price >> John Car very love the gear. He always loved that. >> He is a he is a very sharp guy and he's a man of the people. He wanted everybody to have VR but it turns out that Quest at 399 hugely outsold Go at 99 and I think that says something about the shape of it. Now you see Apple and Samsung attacking the high end of the market. I think that has a higher chance of success. I'm I'm I'm praying that it works this gen or we're going to have to go through another bit of a winter. >> Yeah. So you've done so moving on to Andre. You've done an amazing job with

Anduril: recruiting, culture, and product strategy

18:58Andre. I think some of the things that stand out to me. I mean first of all it's just an iconic company and congratulations success. Um but also like you started off you know negative press like this this kind of sense you know >> we won the Wired magazine worst person in Silicon Valley award. Uh Bloomberg called us the most controversial company in tech. So this was back when Andre was 25 people building drone defense systems. Um and and by the way this was the same year that uh we work had be been indicted by the feds. Uh Uber had just ousted all of its senior leaders and you beat them as >> No. Yeah. The most controversial tech company was Homer Lucky and his 24 drone drone [laughter] people. Uh yeah it was

19:39incredible. So you so you went from that to now 7,000 people employees. Um you know >> depends on how you count it, but if you include contractors. Yeah. >> And and sort of I think an iconic company that is I assume has gone from maybe having trouble recruiting in the tell me trouble recruit in the beginning to now being a talent magnet. >> Oh the opposite. Did you see our latest recruiting campaign? >> It was called don't work at >> work because you don't want the wrong people to work. >> It is it has become so when you're when you when you're doing something early and it's really crazy and it's new. This is true with Oculus, too. >> You only get the true believers, the people who are there because they want

20:14to and they believe in what you're doing and they could be making more money elsewhere. As long as they feel like what they're doing is like, why would you go work at this startup that everyone's laughing about and thinks is a joke like Oculus was early on to a lot of people in tech, why would you go there if uh if if it's not even going to pay you well? And the answer is because you really believe in what they're doing. And that's a natural filter for the lily pad jumpers, the thinkfluencers. You know the people [clears throat] I'm talking about. You see them on the LinkedIn. You these are the people who they're they're AI experts right now. They were AR experts a year ago. They were VR experts a year before that. Um

20:50what I guess they Yeah, they were like, you know, the social local mobile experts before that. Web 2.0. Yeah, I guarantee they all were web 2.0 people as well. And web 3.0. Don't forget web 3.0. 5G. >> Yep. [laughter] >> You people who have been to enough of tech conferences know exactly what I'm talking about. >> That's hilarious. >> And so, uh, the problem is Androl has now gotten to the point where there's no filter. We are now cool enough to get those people. >> You're too cool now. >> And so, it's important to get the right people. It's even more important to repel the wrong people. No matter how well they dress themselves up and and hide their true nature. >> How do you discover that? So, we did a

21:26commercial where we showed people how you have to go out in the field and work in the dirt and you and your hours are unpredictable and you might see your family, you also might not. Um, and we kind of and the ad there's a guy in the ad and he he complains throughout the ad about how awful it is. And then at the end he says, "Yeah, don't work at Ander." And uh and the idea was that to a certain type of person who's looking for purpose and mission and adventure, like there's a point where he's like on a boat with a bunch of special forces guys. They're on a little rubber boat and he's bouncing around and you know and and going off to some, you know, on some forward deployed location. We actually do this. We have a team of

22:03hundreds of forward deployed engineers supporting a lot of these these missions >> and uh our customers love it for us. But the idea was to a certain person, they see that and say, "Oh my gosh, this looks like the coolest thing ever." And to the normal person who wants to play soccer and do yoga and and be home by 55, they're going to be repelled by that. And so I I by the way, same thing with investors. It's important to get investors. At a certain point, you become so hot that everyone wants to invest. And then you've have to figure out how will I repel investors who are not mission aligned. So you have to say crazy stuff. You have to you have to really push the limit. You have to you want to generate that conversation in

22:40the LP meeting where they're like, are why are why are you investing in this company? And you need them to to to to say we are 100% behind them and here's why and you can't you can't have the you can't have the fairweather friends when you're in in controversial business. >> And do you think you may manage to do that with 7,000 people? You also must do like like in your interviews and your process you must because they slip through the ads and they >> look it's it it you'll never be perfect but everything you do makes the problem slide this way on the scale towards better and so like like don't work at and as an ad campaign tripled our recruitment on like in terms of incoming >> and and also we got a lot of more

23:18qualified applicants mostly it brought in people who are unqualified but you you're trying to move the move the needle and I I think it all it all it all adds up we of course hire people who are bad fits and then uh and then we fire them. >> Yeah. >> Yeah. >> Um the um >> they quit themselves sometimes. >> Yeah. The other thing I'll say and I'm I'm not I'm only on the out I mean the firm's an investor but I'm not directly involved but I I'm a fan from the outside and I am just amazed like so many startups like they'll launch a product especially hardware like every two years and I feel like every 3 weeks like I just saw you you had this new AR helmet and three weeks ago you had I think an autonomous submarine like you

23:57just launch a lot of stuff it's kind of incredible like >> about 25 products the interesting thing about Anderol is what we're doing where we're launching many many many products and where we are having indiv individual product teams on each of those that are relatively lean is actually easier for me to run as a company than the companies that have to invest in one or two products and grow them to serve everybody. Like the ultimate example of this is these large enterprise software companies where you have thousands of people working on one thing and it has to serve everyone in you know commercial and consumers and enterprise and government and it like that is a very hard problem to build a product with

24:33thousands of cooks in the kitchen. All I have to do is keep making new products and then I keep a small number of cooks in each kitchen. And uh that that that that that ends up being a pretty self-regulating strategy. People are tribal. People work well with a certain number of people. Like there's only so many people you can have very high trust in where you trust they're truly doing things for the right reason. You and where you understand what everyone is doing around you. It's not that much bigger than the size of a home construction crew or a small game development team or that you kind of see these natural themes emerge over and over again across societies and across history where it's it's these groups of

25:13a certain size. you I mean the founding fathers and uh I'm trying to keep every business unit as close to that size as I can >> and they're all sort of engineers and product people not I assume you try to eliminate middle management and lay >> there there was a very brief period very early in Andreal's history where we had more lawyers and lobbyists than engineers it was very very brief but you had we had to overinvest in that when you're starting a company in such a complianceheavy regulatoryheavy government interfaceheavy side we have never ever had that problem since. I'd say we're about 85% engineering. So, yeah, we we have we have quite little overhead. We don't have a ton of middle management. We have a lot like we

25:54basically have project and team leads that are typically engineers who came up out of other programs. Like one of our program leads is a guy um we call him the king intern because he started he was Andre's first intern. So, he started when he was 19 years old at Anderl. We were his summer internship and then he quit school, came to Anderl and uh within 12 months was leading a product and now he's leading an entire business division. Uh and like we've done a pretty good job of making a meritocracy where people see the people in leadership roles are themselves engineers who have cut their teeth and proven themselves inside of Anderol. >> Yeah. Um >> and when you're growing quickly, it's a lot easier. Like this is a harder

26:32strategy for a stable company and I can't recommend it. But when you're introducing products at a sufficiently high rate, there's always a place for you to take these people to to pluck them out and say, "You're going to be in charge of this new product and you're going to make it work using your experience of how to work inside of our organization and the fact that people know you and trust you." Uh, static organizations struggle with this because like there just aren't enough roles. It's the it's the how many senior VPs are there problem. Um, it's uh it's it's nice to be growing fast. And how do you come up like I guess a couple questions on this like one how do you you seem to follow like everything in hardware and

27:05software [laughter] I watch your videos and so like I'm curious how you do that and also how do you come up with all the ideas for the products like is that is that bottoms up is it you is it like how do you keep it like an active R&D >> I used to come up with everything I now come up with about half of our products the other half come through a combination of customer demand and people in the teams coming up with solutions to problems and that's good like that the the term in the terminal stage every idea I have should worse than the ones my employees are generating. Um, >> I mean, that could even be the case today, but I'm the guy in charge. I'm the one guy that can't be fired. So, half the ideas are still mine.

27:40Hopefully, that shrinks over time. Um, sorry, what was the other bit of that question that was in terms >> Well, just like I'm just curious like how you kind of keep up with the stuff. >> How do I keep up with weird stuff? I would never admit so in uh in public, but I do actually keep up with the academic literature. Oh, >> um I'm not I >> like which like of the the computer science >> in any space that I'm interested in. So like I I am reading all the journals that mention synthetic longchain hydrocarbons. I'm a huge believer in that. It's going to change everything and it's going to make this whole battery electric nonsense look like the multi- trillion dollar farce that it is, especially in aviation. Um this is a

28:17long topic, but like I'm not saying, by the way, the best performers in that area are not necessarily academic, but by staying on top of the academic side, you'll never be too far behind. People people in academia don't have to create or produce or sell necessarily. Their job is just to be on the front lines of what's new and so they'll never be too far behind that most of the time. Same thing with VR. Same thing with optics. Same thing like >> there's like good academic stuff in VR in some of these areas. >> No, no, there's nothing good but but they talk about everything. Okay. Um it's it's it's what it's >> I think of Yeah. I just don't think >> think think of it this way. Like suppose that you were going to try to like you

28:51want to keep up to date with new curved polarizer materials that are used for making pancake optics where you're folding optical paths on top of themselves. You're like I want to stay on top of this. What are you going to do? Are you going to read press releases that of all the companies that are uh you know touting this stuff uh that the company that the manufacturers don't tout this stuff? Like how are you going to stay on top of the fact that there even are new advancements? And it turns out a pretty good way is to just follow the academic literature where you have people that are doing research on these things and then they'll like their jobs say you know oh and you know s such and such group in in China is doing this and

29:26there's other company that has this approach. What we propose is a novel approach to X Y and Z. Now they probably can't actually do it and they're never going to pull off anything of interest but they've still done like the the the other work. I I am basically using them as my outsource research team on anything. If I need to find out what the state of the art on something is, I can trust the academics somewhat more than the press because the press just hates everything. And so, and also they're lazy. They don't they they they're not they're not digging deep. They they are they're basically re the press used to regurgitate what was given to them in press releases positively. Now they just regurgitate it and and the and the the

30:02tenor has changed, but it's the same it's the same activity. It's just repeating what's in the press release and the commentary around it is what's changed. >> Uh so yeah, actually I stay up to date a lot by reading academic academic papers and journals that are focused on the things that I'm interested in. The academics I also love when they complain about people in industry like nuclear. If you want to stay on top of what's what's what's going on in nuclear and you want kind of the contrarian view, follow what the academics are saying about modern small modular reactors and you'll see them talking about new developments and then complaining about how they don't work. And sometimes their complaints are good and sometimes they

30:35make absolutely no sense. But like >> it tells you what to look at. >> It tells you what to look at and and like I I I don't have enough time to become a real expert [clears throat] on this stuff. Like I I just people didn't know I used to be a journalism major till I dropped out. I was the online editor of the Daily 49er at Cal State Long Beach, which was the fourth largest student run paper in the country at the time. >> And it's not the Daily 49er anymore. It's now the Daily Breeze because 49er is a reference to the Gold Rush. And the gold rush is racist racist now. Um that's I'm not kidding. that's why they did it, which is crazy cuz this team is still the 49ers. So, how could that be? Anyway, um the the the the the the paper

31:11decided its name was racist and so they would rename it after a hundred plus years. >> Um but you I what I realized as a journalist is you can only really follow so many things yourself directly from first sources. like if you you could choose a beat and you could stay on top of it, but you have to outsource at some point the research to other people to consolidate and and bring these things together. I'm very bullish on using AI at my direction to do this. I want to be able to send an AI and say scrape literally everything, the press releases, the social media chatter, the academic stuff, and then give me give me a summary that is not contaminated by some profit interest or ideological interest.

31:47>> Yeah, you don't have to convince this crowd that the press is anti-tech. Crypto has been the most tra like it's just unbelievable like for we've tried for 12 years to have like one reasonable like article printed about like the actual stuff going on. >> Well, and the AI stuff is so hard. >> The AI start they're starting to feel it now with all these like fake water articles and things and it's going to just heat up more on the >> It's so funny when people they look at and say, "Oh, look at Anderl trying to jump onto the AI grift trying to pretend that all their stuff's about AI. >> Been doing it for eight years. >> The name of my company is literally Anderil Industries. The acronym is literally AI. Like [laughter] it's it is

32:23so we we didn't talk about it in the early days because AI wasn't cool almost nine years ago. It was like cold fusion or VR nonsense for the future. Never in the present. Uh but yeah, it's so funny to be painted by the media as a as as an AI uh you know coattail writer when in fact I've I've been been there before LLMs were were were were a glimmer in most people's eye. Yeah. only because John Carmarmac told me he told me AI was going to work and that was why I believed him. >> That's a good person to listen to. >> He's a good person to listen to. >> So a big like kind of premise I think of Andrew, tell me if I'm wrong is is the ri growing rivalry between the US and China and I've heard you talk about this

US-China rivalry and defense tech

32:58in podcast, but you don't think that on the current trajectory with the defense contractors and technology industry that were well set up for that, right? >> And so maybe you could talk a little bit I I would love to hear your thoughts on that rivalry and then specifically on uh how you see kind of handicap the technology race. So AI and you know robotics >> we're spending way too much we're getting way too little and we're not progressing at the rate that our geopolitical adversaries are >> and if it were a perfect if it were peace time and there was no inkling of conflict for us or our allies that maybe wouldn't be a problem. Um but that's not the world that we live in >> and so uh the rivalry with China is is a

33:37big one. It was a little broader than that. I mean, when we started Anderal, if you look back at the first first pitch deck, you remember there's a page with a bear and a pair with a page with a dragon. And we lay out what the Chinese road map looks like. And we laid out what the Russian road map looked like. And we literally lay out that Russia is going to invade Ukraine. They intend to take it by force. We there's a great quote by Putin where he says, uh, the country that wins in the sphere of AI will become the ruler of the entire world. I have a huge amount of respect for that quote. First of all, like what an incredible amount of of style there. Um, I'm not saying that I like Putin. I super don't. I

34:14arguably started a company to fight Putin. I'm personally sanctioned in Russia and Bellarus. I literally cannot go there without being arrested by Russian security forces. So, don't take this in like the I'm going to nail Palmer to the wall. He said something good about Putin. But let's like let's be honest, that's some really good like Bond villain level. Yes. they will become the ruler of THE ENTIRE WORLD. >> YOU GOT to understand. >> And he said that along like you said it was >> he said that speaking to a bunch of technical students at a technical high school. >> But a long time ago you're saying >> yeah back in 2007 like >> seven. Okay. >> This this guy was way like Putin must read a lot of science fiction. He was

34:51>> that's really early. I mean >> well remember we were quoting it in an Andal pitch deck in early 2017 before AI was cool at all. So put like man I would kill for a US leader to be that far ahead. Could you imagine if you had if you had somebody come out I won't even name who but if you had somebody come out in the White House he says we have to hold the Lraange points. Someone has to have the high ground in orbit. The cis lunar insertion and transfer pads must be protected if we're going to extract resources from [laughter] the belt. Asteroids. Some of you know what I'm talking about. And imagine if that was also [applause] >> could you imagine if that was like from his own mind and not not something that

35:34somebody wrote that that is Putin. He's a competent adversary in these ways. And so >> um I I yeah like that was that was very much part of the rivalry. The problem is of course that now that rivalry is kind of reached its terminal stage, right? He's made his move on Ukraine. Everyone's seen that it's happening. And so the remaining one that we can influence is China. >> And you called out all the drone stuff. I mean you knew that was all going to h all the stuff. That's right. Like the Ukraine drone. >> We we were talking about literally I mean our deck laid out exactly what was going to happen. And it said that warfare is going to be about a lot of these proliferated systems. A lot like it's going to move away from exquisite

36:08things that you build up capacity over decades to and said lower-end systems that you can actually manufacture at a rate that is relevant to an ongoing conflict. And of course that's exactly what's what what what's what's exactly what's happened in Russia. You the very big picture here is we were living in a world in 2017 where a lot of people believed we lived at the end of history that there was no more geopolitical movement of significance to happen and that the United Nations could write >> mean letters to dissuade people from expansionist actions. And now what we're seeing playing out is uh kind of the more cynical version of of of we're seeing the cynics the cynics were right. The cynics who said no war is still a

36:48thing of the present. hopefully not the future. Uh, and it's a it's a good thing that companies like Anderrol, I think, were were getting started early on this because imagine if Andre was started right as conflict kicked off in Europe or worse, being started right as conflict kicks off over Taiwan uh, with China. It's it's too late. You you can't start working on bombs after the war has started and expect to have any deterrent impact. you're just going to be part of fighting wars instead of preventing them. >> How do you like handicap? So I always I like with AI I always hear about China US. Now I don't hear Russia as much. Maybe they're good at I don't know. >> But but then like how do you handicap

37:27it? Like >> well see that's that that that's true today. >> It's Putin didn't say that thinking they he wasn't saying I think AI is going to acrue to the winner and I bet the US is going to beat me. They were investing a lot. It's just they they didn't take the winning path, right? like they they didn't do some of these like the kind of attentionbased models, focus based models like it just that wasn't the path they went on. They didn't get the winning path. >> And so you're right, it's mostly US and China now. Russia's trying to catch up. But he he he said this at a time where he thought that was going to be their asymmetric advantage. He thought they were going to figure out all the all the

38:02killer drone stuff way ahead of everybody else and he would have put it to work before anyone else even knew how to respond. Imagine if Putin had made chat GPT is kind of the the simplified version I use for members of Congress. >> Yeah. But like with the way I sort of like America has we have this sort of decentralized capitalist system. China has a centralized obviously command and control. >> They have more people. They're very smart. The deepseek and all these other things show they caught up very quickly. They're ahead of manufacturing. Yep. Like you we you know on the flip side like I think this superpower of the United States right is the very fact that every thing everyone's complaining

38:36about in the press right now which is we just like the hyperscalers just invested a trillion dollars in like and is it a bubble maybe? Who knows? But it's a good thing because this is what we do. This is what we're good at. >> It's an advantage we have. >> It's the animal it's the capitalist animal spirits, right? Like it's like the you know it's like the internet. It's like building out the fiber. Like you need you need this excitement and capitalism. >> We need to choose advantages that the United States has. Like this. This is the one issue with the one issue with re-industrialization is that China has already done a really good job there. I'm not saying we shouldn't. We should. But we need advantages that take

39:07advantage of our better financial apparatus. Arguably that take better advantage of our cultural apparatus. Certainly that take advantage of a unique fact which is the US has friends or at least partners all over the world. China doesn't have that. China has not convinced the world to host the Chinese military, to host Chinese culture. The United States needs to lean into the remaining advantages we do have. We should re-industrialize. I'm not saying we can win, you know, all all on our on, you know, we can't win without doing that, but there it's it's not enough on its own. >> Um, and you you recently started a like a stable coin related um crypto like bank, right? >> It's a little more boring than that.

Narrow bank and stablecoins

39:46Everyone's calling it Palmer Ly's crypto bank. It's it's not so much a crypto bank as a bank that does support stable coin deposits and transfers because of course any bank is going to need to support these things. If you want 24/7 liquidity and you want 247 settlement and you want it every day of the year with every country around the world, you're going to have to do it via stable coins like and like reg. >> It's just obvious how that's going to happen. So everyone's seized on Palmer Lucky is doing all this crypto stuff. It's actually way more boring. It's it's a bank that's a modern bank in a way. Like >> in in in many ways it's the most boring bank there could be. We originally were thinking of calling it the real bank,

40:20but it turns out that the slogan I think of City Bank is uh the real the it's the real something bank. I can't remember what it was. It's not a good slogan. Okay. >> Um anyway, we're going to call it the real bank, but it was a very simple thought. Okay, SVB is collapsing. >> Yeah. >> Turns out that there's more risk in the system than people thought. uh it's potentially more widespread and like like yes SVB did some things that someone could avoid but there's a lot of things that are inherent to the way that current banking is done. So our idea was what would a bank look like if its job was to serve companies who more than every half percent of interest on their deposits actually just really needs

40:57their money to be there and not disappear like that. So, so it's narrow banking, not fractional reserve. >> I I So, >> yeah, [snorts] >> I think that there needs to be onetoone banking in the United States. Not all banking. I'm not saying every bank should be like this, but the product should be available. I started going around talking to banks. I said, "All right, I've got this thing. I want you to take my money >> and then you have it when I come to get it. [laughter] It's the It's the only thing you're going to do." >> It's called It's called, by the way, it's called narrow banking. And like there was a there was actually a company that tried to do it recently and under the B administration and they got shot

41:29down >> and the government doesn't want anyone to do this is part of the crazy scheme. I know like no like like this there's a reason the banks aren't doing this and it's not just that nobody's smart. It's that the government doesn't really want it to happen. >> Well yeah they claim it's because then you would hurt the credit system and all those other things. But it's to your point I think shouldn't you be able to like have at least some people opt out and actually have that has your put your money there. Well, and by the way, you can, you know, you can do it if you have a T- bill, for example, then you have a QIP or there custodial. It's bankruptcy remote. And so, it's effectively available to wealthier people, but not

41:58to the retail >> and and not available or a lot of these tech companies, including smaller tech. So, that was the question. How do we make a bank that would give people the things they need from a bank without the parts that are going to destroy their entire business? I mean, if if the like let's be real, if the federal government would not have bailed out SVB customers far beyond what the law required, and if the Biden administration would not have more or less spuriously declared that the Signature Bank deal was actually signs of systemic collapse, which is nonsense. Like, if they wouldn't have done that, it would have wiped out a lot of tech companies. And so, that that what what we're trying to do with

42:32Arabore is is actually a lot more boring than many people think, but there is there is a market for it. Imagine a bank that doesn't debank you and has your money when you want it and actually maybe gives you interest would be another radical idea which you know Jennif that's the big debate point in the stable coin bill >> is that they're trying to undo this now is this thing where you actually pay interest to customers >> I'm very famili you can pay rewards to customers but you can't pay >> so even that they're trying to ban rewards >> they're trying well that that was like yeah that was the negotiated now they're trying to get they're trying to undo the deal the way that I look at look at it

43:05is this there is a lot more risk in banking system than anyone is willing to admit. It only works if everyone stays in the matrix and doesn't doesn't look at the at how it all works. >> And I probably cannot build a bank that survives a total financial collapse. But if you guys familiar with the theory of of of the bear, uh the bear is chasing you. He's chasing people around you. You don't have to outrun the bear. You have to outrun everyone else. And so I think you might you might not be able to make it where every bank fails. uh and and you survive, but you can make it where you're one of the survivors in a world where something really bad happens, something that is beyond what is what the government could feasibly bail out.

43:45And by the way, when I say feasibly bail out, I don't just mean financially. I mean politically. I am actually astounded that the Biden administration bailed out a bunch of billionaires like me in the midst of this huge populist shift, right or left. and they the fact that they did it for rational reasons, but like I'm surprised they didn't do the thing that would have been popular with their base. And it's not hard to imagine a world where a different White House would do something different. And this is not a right or a left thing. It's a popular, it's a populism argument. Uh we will we live in a world where politicians can make rational risk management, systemic, you know, financial collapse risk management if

44:22it's going to make them look like they're in the pockets of the billionaires. I think maybe not. I think you could end up a war of the world where there's massive economic pain because it's not politically uh viable to do the right thing for the country. And so that that's that's the world that I'm trying to prepare for. >> The billionaires, the millionaires were, you know, if if Bernie has his way, if Bernie got in the White House and he's he's not that far away, you know, he's he's he's like at one point he was a he was a few superdelegates away from winning winning a general election. Uh it's it's something to ponder. Bernie can still >> if we have an economic collapse, I think that the well, I don't know if we want

44:57to get to politics, but the I I mean I look I think I think that the politics >> we're not into politics. >> Yeah. So, um, so I mean, you know, the Mandami winning in New York like I think we what we saw that's a great example. >> Yeah. The Republican party has shifted to this kind of nationalist populist movement with Trump and Vance. That's why I said it's not really Democrats may shift to that and who knows like we're into I think we're an uncharted I mean it's a real realignment I think in the sense of maybe since FDR or something we haven't had such a realignment of the parties and it makes it very unpredictable and you have a bad economy and you know a there were only a few dominoes falling away from some really

45:32weird outcomes in my opinion. >> Yep. >> Yep. But but like in the case of Arabore, the most >> the riskiest asset like the riskiest product we're offering is lending with a 50% uh loan to deposit ratio which would make it one of like like that's the riskiest product is one of the most conservative ratios in the entire country. So >> it's smart. I mean >> and luckily this administration is willing to sign off on it which in the past they've not been a fan of these things. >> Yeah. Yeah. Um that's awesome. Um so maybe last question then we'll take a question from the audience. Um, just since you're like such a futuristic thinker, I'd love to hear like I I I feel like all these things like sci-fi

Sci-fi, Heinlein, and the age of 'just do things'

46:11things that I've I heard you talking about Robert Heinland on the podcast. I just I just read Stranger to Strange Land recently. I love I love Starship Trooper. >> It's so funny when people call him a fascist because of Starship Troopers and they've clearly never read other Heinland. Like Heinland also wrote basically like proworker pro-communist where like there's works where literal communists who seize the means of production from the private companies are the heroes of it. >> Have you read stranger stream? I just read it's I've read every single line. >> It's crazy. It's like this hippie it's like electric cool assets. It's great. I mean it's amazing. >> He's just he's just a great sci-fi

46:45author. It's so funny when people try to blow it down. He must be a fascist because the government has some fascistic attendancies. >> Starship he's critiquing it I think. Yeah. He's he he he he does it all. He makes fun of everyway. Yeah. Love. >> But but I feel like to my question, I feel like all of this stuff that's [clears throat] been talked about my whole life um is like suddenly happening. Like I don't know. I'm not I know nothing about energy, but my friends tell me fusion may happen. Quantum computing, the experts, some of the experts here say, you know, it may be actually starting to happen. >> Obviously, crypto AI AI is clearly happening. We believe crypto will happen. Yep. >> Um it feels like there's all of these

47:23things that have just been talked about. I mean, there's stuff in biology, there's stuff, you know, you're doing in, you know, autonomous systems, humanoid robots, like >> inter species communication. >> Feels like all this stuff is happening now. And I'm just curious like, do you think that's true? And what's going to h like in the next 30 is it like is like to your point about history starting again. It feels like >> like we had, you know, Peter Teal talks about we had 50 years only digital innovation. And >> you know, if you if you were born in 1890, you saw the invention of the airplane and and a person a man on the moon and then it physical world stuff kind of stopped. But it really feels

47:53like both history and your sense of like wars restarting, land war in Europe, bad obviously terrible things like that. But at the same time on the tech side, like all this cool shit's happening all at once and it feels very real. >> Our understanding of the world is progressing so fast and there's a lot of things that don't require even technological breakthroughs. Like I the most exciting thing about what's going on right now in my opinion is that it's mostly not actually technological progress. It's psychological or you could even call it quasi religious progress catching up with the science that was figured out decades ago. That's this whole nuclear thing. All this nuclear energy stuff, it is just

48:33everyone's willingness to do nuclear catching up with the technology, >> political cultural will. >> A lot of this bioscience, there's a lot of things that have been proposed for decades that are only just now actually being tested. I mean, here's another example. We've understood oxytocin, which is one of the primary mamleian pair bonding chemicals. We've understood how it works for decades. We've been like actively using it to help uh like postpartum depressed mothers bond with their kids. It's like, "Oh, you hate your baby. Look at your baby and we're going to give you this shot. What the You love your baby now. It's incredible." And there's people who are talking about using it in totally novel

49:06ways. For example, doing divorce counseling and we've understood the mechanism of it for 50 years now. And it's literally just a willingness to just do things. And so I'm excited about the new science. I'm excited about new fusion. There's a lot of just do things that's going on right now. >> And some of it's infrastructure. Like AI is really about GPUs, right? Like a lot of it engineer. It's just like isn't it too? Like just the timing of like all the stuff came into place. >> We got so lucky. What a crazy coincidence. You basically had all these GPUs for gaming. By the way, >> Oculus when we were acquired by Facebook almost bought Nvidia back when they were worth about $7 billion and we were

49:41looking at doing a 51% takeover now. But here's the and you people say, "Oh man, imagine if we would have gone through with that project." >> But they never would have done what they did, right? It was gaming and then the gaming stuff happened to be useful for all the proof of work and staking stuff in crypto. And then that ended up also being very similar to what we needed for AI. Like man, what an incredible coincidence we live in in in in that world. uh of there's there's an interesting argument where uh where uh Oculus would have gone and got Nvidia and AMD and centralized them and then only focused on gaming and then we wouldn't have any of this stuff. >> Um >> it's a it's a crazy world.

50:18>> Um and do you think so do you think we're entering into this sort of unpre like maybe unprecedented 20 30 year period of experience? >> Absolutely. I I'll look I'll give you my my thesis for optimism. People know that I I'm I'm a pretty I'm a pretty happy guy. It seems like I'm having a good time. It's because I remind myself the oats are like a dollar for some large number of pounds of oats. Uh you you can you can you can work for one you can work for one hour of minimum wage at a federal level and earn enough calories to survive an entire week. It's the best it's ever been. Nobody's been able to do that. And it's not just oats. It's agriculture in general. Modern pesticides controls Roundup machinery.

Optimism thesis: cheap everything

50:56We've figured out how to make food really, really well. We throw away most of it. That's how good we are at making it. And the same has been true I think for clothing. How many outfits do you own? >> 20 or something. I don't know. >> And how many would have you have owned as a rich guy even you know even 50 years ago. How about 100 years ago? How about 200 years ago? We've just made clothes so cheap. People buy clothes and they throw them away after wearing them one time. And you don't even have to be rich to do that. Like that there there are people who are in college working part-time who do this. Yeah. >> And I think that what you're going to see is that same level of automation that has dominated textiles and

51:31agriculture start to apply to everything. I think AI is going to make it easier for the resource extraction, processing, and manufacturing to like I really do believe that in our lifetimes, you'll be able to go buy something that's like a Ford F-150 for $1,000 or the equivalent >> cost of cost of the >> the cost of extracting and transforming it will go to near zero and we're going to compete the margins way down. It's it's just not that crazy. And so if you can do and I bet you'll be able to recycle it with 90% efficiency at the end of the season. You'll say what what's what's my summer car going to be? Let's go down to the mall and buy one and and and and we'll try it out. Same thing I think for housing. Housing is

52:07going to come extremely cheap. The components are not expensive. It's the transformation and the regulation that have made it really hard. >> The policy is is a bottleneck. >> Correct. And so I think that this is what I mean when I say we don't need technological breakthrough so much as we just need to just do things and like the the tech to do this is going to catch up. Like, you know why manufactured housing isn't big in the US? It's just anti-manufactured housing laws. Literally prohibiting housing that is manufactured not on site. It's one of the most anti-American sets of laws that there's ever been. I confidently believe that the founding fathers, if they were around, would make this a federal issue.

52:38And they would say, "We are not going to allow we are not going to allow local governments to decide." Like, if you want to say a house of a certain appearance is one thing, that's fine, but you cannot like this is a real interstate commerce issue. You cannot effectively prohibit other states with competing with your housing industry by prohibiting any housing that was created majority outside of your state lines. That's that's that's crazy. And we've probably spent I don't know a hundred trillion dollars on housing that we didn't need to because of that. Anyway, there's all this stuff is is is going in a good direction. That's why I'm optimistic about the future. The future of the current present of oats is the

53:15future of everything. >> Amazing. Um [applause] the uh this is great. So uh let's maybe take some questions from the from the audience. >> Thank you Pro. Super interesting conversation. Uh I uh have a question about your structures. You you you you were speaking about how you have a lot of small teams and this feels like it's optimizing for the number of products you can iterate on and figure out what works not for manufacturing uh very efficiently making the the cost of unit uh uh as low as possible. And I'm coming from Ukraine. I have spoken to some people in defense industry there and their criticism for Unreal was exactly this that your products are very expensive and what they need right now

Audience Q&A: Ukraine and cheap manufacturing

53:53on the front front line is like something very very cheap just like we had it in the second world war where like German engineering was way superior to the Soviet one but the Soviets just had massive quantities of the tanks which were stupid uh lame easy to to destroy but the the sheer quantities uh uh eventually won uh how are you thinking about this sure is are we in a situation where the China has already won the race on uh on cheap manufacturing are like are you are you like generally what are your thoughts on this very curious >> so they've definitely kind of won by any rational definition and so we're probably not going to approach Chinese cost luckily the US has more money and we're more you know we make more money

54:35per person and so we can probably afford a little bit of an efficiency on the Ukraine side that one's really interesting because we've had hardware and people in Ukraine since the second week of the or I've been to Ukraine during the war myself and we we we've been a part of US aid packages, European aid packages. We've even sold some things directly to Ukraine, but to your point, mostly higherend stuff, long range loitering munitions that can get through jamming bubbles. And what they really need is large amounts of industrial industrial levels of firepower. I mean, like they need a lot of really small, cheap drones. They also just need a bunch of artillery shells. They need a bunch of mortar shells. The

55:10biggest problem for a company like Anderl and and and it's a fair criticism that people have made. The thing is I can't compete with for example Eastern European manufactured artillery or mortar rounds. I I just can't do that in the US no matter how smart I think about it. And I've I make solid rocket motors. I've wanted to make Energetics get into the artillery shell business. The problem is I just cannot compete with what is a quite powerful arms industry that exists in a lot of of the Baltics and Eastern European countries that are that are supporting Ukraine. The problem is that you to automate everything you have to get to a sufficient scale. And so one thing I've done is I've approached multiple administrations said

55:46hey we need to commit to for example supplying 155 you know artillery shells to not just Ukraine but all of these allies. We need to build the you know the alien dreadnot where the metal goes in and the shells come out. So are you are you familiar with how artillery shell manufacturing happens in the United States? Here's the actual problem. the facilities are literally owned by the government and then they actually lease them out to operators who then use them to develop stuff. And so if you try to compete with them, the government explicitly says, "But this will it'll be like it's it's a waste of investment because we've already made our investment in these facilities." So like I I'm I'm I I want to solve these

56:20problems, but in general, Andre's looked at these things kind of quasi realistically. I'm waging this this war of hearts and minds to explain why that is the dumbest thing ever. They need to open it up for competition. I think what they should do is say we're not going to give you welfare to make your artillery line. We're going to say that the first company to build something using private capital and be get to sufficiency. Oh, we're going to award them a contract for this much and they have to hit a certain price point and a certain scale and only then are we committed to buying and they just don't want to do that because they have their own centrally planned scheme. There's a lot of there's a lot of secret

56:53communism going on in the United States. A lot of secret Soviet thinking uh that is just hidden behind a veneer of the flag. Um the other so that that's kind of like the artillery issue. When you get to the small drones, it actually gets to I'm competing like my biggest competitor for building small drones. Like I to be clear, I want to build small attack drones for Ukraine and I want to be cost competitive there. But I'm competing with Ukraine using largely Chinese components, right? Most of these internally assembled drones, they're built using Chinese flight controllers, Chinese sensors, Chinese stuff. I'm prohibited from using those. So Andre is sanctioned by China. Our entire seauite is sanctioned by China. The government

57:30in the US prohibits us from making weapons using these Chinese components. And so I can come in and say, "Hey, I have this thing that is cheap, but you know, instead of it being a $900 drone, it is it is a $2,000 drone." And people in Ukraine say, "Well, that's expensive, and how am I ever going to do that?" And I say, "You're right. If you're willing to use Chinese stuff, I I I literally can't compete." Um, and this has been a smart move by China, by the way. This is why China keeps, you know, they they they they do this because it actually cripples my ability to compete. Um, there's other stuff that I do that's just too expensive for Ukraine. And I'm trying to make it I'm trying to make it cheaper. I want our learning munitions

58:04to be more less expensive. But, for example, I'm required to use a certain navigation system that the government has approved for munitions of this category. And they also require us to use it because they want us to sell anti-tamper stuff using approved parts where Ukraine can't go in and say, "Ah, this was able to go, you know, 400 kilometers." But if I just strap on a bigger battery and I can tweak it, I'm going to go to Moscow. Another example of this, like I wanted uh I actually wanted to sell surveillance towers to Ukraine before this war even started. And that wasn't something that I came up with. It was something Zalinsky came up with it. He read a wired article about Anderl talking about how we were

58:41securing the US southern border. And when he was in the US for his first UN meeting after winning his election, he wanted to meet with Anderl to talk about what it would look like to have our towers on his border so they could know how Russia was building things up, how they would cross. And then we ran into this problem where the US State Department basically put the kibos on the whole thing. They said, "No, Russia's not going to invade Ukraine. Uh Zalinski is basically just angling for welfare. He's trying to be a saber rattler." And so like the people who made those decisions, they're still in the State Department. They're still making these the these things. So I've to a certain degree I've got my hands

59:14tied behind my back. I'll say, "I want to make a $2,000 attack drone." They say, "Well, you have to use this approved thing. You can only use this approved warhead. You have to make it anti-tamper so the Ukrainians can't make it do things that we don't want them to do." And [snorts] the net of that is what you're talking about. People in Ukraine saying, "And stuff is expensive and it's locked down and it doesn't and you can't modify it." And and I say, "Yeah, that sucks. Look, I like I've been to Kev. I've been to Lviv and I've I've trained people on how to use our systems and I've heard this feedback face to face and it's really hard to tell a guy who's telling you that people are dying because of it like oh well

59:45sorry I'm I you know I wish I could do better but that's the that's the short one more thing you're right that we have a lot of these different things and that is good for figuring out what works not necessarily for scale some of those things are getting to scale like our towers are very much at scale we're on 35 bases around the world we're covering about 30% of the US southern border now a bunch of the northern border as well. It's like our towers have scaled really well. Um, same thing with our counter drone systems. Like we're the program of record for all of SOCOM's drone defense. We're the program of record for all of the Marine Corps's drone defense. So, some of these things are scaling. It's

1:00:16these newer things like I guess my my my if I have a critic who says Palmer, but you have all these things that haven't scaled. I say, well, guess what? Every single Android product that is more than 5 years old has scaled. It takes time to get the government to scale these things, but we don't have any examples of a product that we did that didn't scale once it had enough time. Every product in our we've been around for almost nine years. Every product that was started more than 5 years ago is in major scaling mode. It's just we have a lot of other things that are newer and they're there I'm sure there will be some failures, but uh you know it's flipping coins. You don't need to get a heads every time to to beat the house. I

1:00:52think you see what I mean when I said the Joe Rogan thing is like the best thing to watch because he just gave us a preview of it. Um, that's amazing. Thank you. There's like you have like a million great stories. So, thank you so much. >> Of course. >> Yeah. [applause]