The Exchanges

Q And then I want to just understand a little bit about, is this product-led or production capacity-led? Do we need to make selections and have capital committed to bringing product to market before we start to build out the base, or is there an alternative way to get ready?

A Arsenal One is our, the factory campus that we're building in Columbus. Um, the operating system for that, the Arsenal platform, um, is really intended to reduce the, uh, the cost, the overhead that's required to, uh, automate and, you know, handle these processes in the most efficient way possible. So there's like kind of the software layer that sits behind that. We're actually working with Palantir, uh, the Foundry platform on some of these programs as well. And, uh, the idea behind this is that you want it to be as modular as possible. If we build out the factory campus, and we said, we're just going to build Furies here, or we're just going to build Roadrunners here, we're just going to build Barracudas here, that provides a tremendous limitation in a, in the moment of a conflict to be able to be responsive to the demand for specific things that are relevant to that conflict. And so we're kind of thinking about this more like contract manufacturers think about building assembly capacity, where they say, yeah, we make, you know, This VR headset for Facebook. We make this VR headset for Samsung. We make this VR headset for Apple. Um, we build a skill set around building optic systems, um, but we're going to build a bunch of them, and we're going, we're going to be much more effective at doing that by hitting the network of scale, uh, you know, get lower costs on all the indiv…

AI assessment note: “thinking about this more like contract manufacturers think about building assembly capacity”

Q Was there a view at that time in these years building Palantir where you saw an opportunity in hardware? Is that Kind of the motivation for Anduril, that we've got software, but there's more to do, and hardware could be reinvented, and we could build systems. I mean, help us understand the connection.

A Yeah, in the very early days, actually, I came by to pitch, Sham, uh, before we officially started the company, uh, and I think part of that pitch was we said, uh, we know how hard software is. We don't want to do that again. We believe hardware would be less hard. Um, and I think we ended up being right from, like, a getting going perspective. Um, but yeah, it's just, you know, the government doesn't know how to think about the value that's created by software. Maybe you feel like they're a little bit better now, but it was really hard in the early days of Palantir to convince them to think about it as anything other than lines of code, for example, or some, like, metrics that anyone that works in tech knows doesn't matter. But for hardware, they know. There's a bill of materials. In fact, the government made stuff for a long time. During the Cold War, there were literally ammunition factories that were owned and operated by the United States government. Um, so they can kind of go through a spreadsheet and say, okay, I know how much it costs for you to build this. I know how much margin I'm comfortable paying you. Uh, and it's a much easier, you know, crossing of the Rubicon. With software, it never felt like that.

AI assessment note: “we know how hard software is. We don't want to do that again.”

Q Do you guys think these changes have been institutionalized or are they political party dependent? If the Republicans lose the midterms and there's a Democrat president in 2028, Do you think that there's a reversion to the old way of operating that's gonna have some political influence and change things, or do you think we've really changed how things are running in the government here?

A I don't, I don't think it's political, but I think it's people. So you can go back to, again, Ash Carter, Democratic administration, highly focused on fixing these problems. The current Trump administration, highly focused on fixing these problems. And, you know, there are a lot of people that live, that we're in the middle of that, That didn't prioritize this. It wasn't, you know, it didn't rise to the top of the stack. And so I think we always think of like the bureaucracy as being a political infrastructure or an institution or, you know, bureaucracy. I actually just think at the end of the day, it's about leadership. It's just, do we have the right people that understand the set of the problems that we're, we're facing?

AI assessment note: “I don't think it's political, but I think it's people.”

Q So is there a government contract that supports the production of these facilities? And are multiple companies going to be able afford to, to stand these up to make these investments? Or is this just going to end up being an anduril because you've got most of the capital and you guys are going to roll these facilities out? And how do we make this kind of a national interest?

A Well, our business model is definitely very different from the primes, uh, who are basically responding to things as requirements directly from their customer, so they're not really investing a whole lot forward of the capability. Um, Anderil, on the other hand, we're doing all of this as private R&D investment, and then we're selling the outcome, the output of that as a product. So this is fundamentally a different business model. Um, but I, I do think that there's a tremendous amount of capital that's required to pull this off, uh, as a new entrant to the space. Um, I don't think that The market is going to support a hundred new primes or something like that. Uh, I'm hopeful that it's not just Anderil. I think it would be healthy if there was more competition in the space. Um, but, you know, being able to raise that amount of capital, hire the people that you need to actually pull it off. Uh, this is not, it's not like building a, a, a normal tech company. It's not just the development of a product. It's, you know, there's a lot that goes into this.

AI assessment note: “we're doing all of this as private R&D investment”

Q And then I want to just understand a little bit about, is this product-led or production capacity-led? Do we need to make selections and have capital committed to bringing product to market before we start to build out the base, or is there an alternative way to get ready?

A Arsenal One is our, the factory campus that we're building in Columbus. Um, the operating system for that, the Arsenal platform, um, is really intended to reduce the, uh, the cost, the overhead that's required to, uh, automate and, you know, handle these processes in the most efficient way possible. So there's like kind of the software layer that sits behind that. We're actually working with Palantir, uh, the Foundry platform on some of these programs as well. And, uh, the idea behind this is that you want it to be as modular as possible. If we build out the factory campus, and we said, we're just going to build Furies here, or we're just going to build Roadrunners here, we're just going to build Barracudas here, that provides a tremendous limitation in a, in the moment of a conflict to be able to be responsive to the demand for specific things that are relevant to that conflict. And so we're kind of thinking about this more like contract manufacturers think about building assembly capacity, where they say, yeah, we make, you know, This VR headset for Facebook. We make this VR headset for Samsung. We make this VR headset for Apple. Um, we build a skill set around building optic systems, um, but we're going to build a bunch of them, and we're going, we're going to be much more effective at doing that by hitting the network of scale, uh, you know, get lower costs on all the indiv…

AI assessment note: “thinking about this more like contract manufacturers think about building assembly capacity”

Q So is there a government contract that supports the production of these facilities? And are multiple companies going to be able afford to, to stand these up to make these investments? Or is this just going to end up being an anduril because you've got most of the capital and you guys are going to roll these facilities out? And how do we make this kind of a national interest?

A Well, our business model is definitely very different from the primes, uh, who are basically responding to things as requirements directly from their customer, so they're not really investing a whole lot forward of the capability. Um, Anderil, on the other hand, we're doing all of this as private R&D investment, and then we're selling the outcome, the output of that as a product. So this is fundamentally a different business model. Um, but I, I do think that there's a tremendous amount of capital that's required to pull this off, uh, as a new entrant to the space. Um, I don't think that The market is going to support a hundred new primes or something like that. Uh, I'm hopeful that it's not just Anderil. I think it would be healthy if there was more competition in the space. Um, but, you know, being able to raise that amount of capital, hire the people that you need to actually pull it off. Uh, this is not, it's not like building a, a, a normal tech company. It's not just the development of a product. It's, you know, there's a lot that goes into this.

AI assessment note: “we're doing all of this as private R&D investment, and then we're selling the outcome”

Q But Trey, Shom said in the past, we have eight days of munitions on hand for a major conflict with China versus 800 days needed. How far away do you think we are to having the supply chain built and the production capacity built to meet that objective?

A Well, I mean, one of the other things Sean just said in this conversation is that there's a high-low mix question as well. Like, there are exquisite systems that are like the multi-million dollar interceptor missiles, and then you have, you know, dumb munitions, things like bombs that are being dropped and things like that, and it's not the same across that entire stack. You know, there are some, uh, some munitions that are woefully undersupplied, and we have very low readiness on, and there are others where I actually feel pretty good. Um, from an Anduril perspective, You know, we're looking at ramping as fast as we can. We just opened, uh, Arsenal yesterday, uh, to start producing Furies, um, and, you know, looking out over the next 18 months, we're not taking our, our foot off the gas, and yet there's still a run rate capacity that we're running into as we ramp. Like you, it just takes time to get all these lines stood up. Um, so, you know, if we were to start today with unlimited cash, I think, Over the next 18 months as a country, we could get to the point where we were on track for having a sustainable, uh, industrial base. Uh, but we're not going to do that. We're going to trickle it out over time. And, uh, and I think that unless there's real political leadership that steps up to drive this forward, we will likely be in a similar situation, uh, for a long time. Um, and …

AI assessment note: “we will likely be in a similar situation, uh, for a long time.”

Q But Trey, Shom said in the past, we have eight days of munitions on hand for a major conflict with China versus 800 days needed. How far away do you think we are to having the supply chain built and the production capacity built to meet that objective?

A Well, I mean, one of the other things Sean just said in this conversation is that there's a high-low mix question as well. Like, there are exquisite systems that are like the multi-million dollar interceptor missiles, and then you have, you know, dumb munitions, things like bombs that are being dropped and things like that, and it's not the same across that entire stack. You know, there are some, uh, some munitions that are woefully undersupplied, and we have very low readiness on, and there are others where I actually feel pretty good. Um, from an Anduril perspective, You know, we're looking at ramping as fast as we can. We just opened, uh, Arsenal yesterday, uh, to start producing Furies, um, and, you know, looking out over the next 18 months, we're not taking our, our foot off the gas, and yet there's still a run rate capacity that we're running into as we ramp. Like you, it just takes time to get all these lines stood up. Um, so, you know, if we were to start today with unlimited cash, I think, Over the next 18 months as a country, we could get to the point where we were on track for having a sustainable, uh, industrial base. Uh, but we're not going to do that. We're going to trickle it out over time. And, uh, and I think that unless there's real political leadership that steps up to drive this forward, we will likely be in a similar situation, uh, for a long time. Um, and …

AI assessment note: “we will likely be in a similar situation, uh, for a long time.”

Q said, and the Pentagon labeled them a supply chain risk. Both AI and generally autonomous systems beg the question, what role should humans have and who should have the right to play that role of hitting the kill switch? What's your view on the role of the technology vendor to the Department of War, and where you guys draw your line on what your responsibilities are with respect to ethics?

A Well, my, my view on my responsibility to ethics is a slightly different question than my belief in democracy, which is a different thing. Um, so maybe starting on, on the democracy point, um, I believe that the people of America have elected representatives to make really hard decisions about how we engage in combat. Full stop. Um, fully autonomous weapons are not new. We've had autonomous systems in operation like CWIS, which is deployed on, uh, naval vessels. That shoots down aerial threats fully autonomously. You don't have time to make decisions about, you know, incoming missiles or threats to your ship. You just have to shoot it down. So that's what CWIS does. Now, CWIS has accountability in the system. There's a person on that boat that is responsible for whatever actions that weapon system takes, and I believe that this is the future of autonomous systems, is that just like any other system, whether it's a soldier carrying a gun, they are accountable for what happens with that gun, Or, uh, you know, the captain of a naval vessel. They are responsible for what happens with that CWIS. All of your autonomous systems are going to have accountability baked in. Now, ethically, how do I think about this? You know, I believe that, you know, what Sean was saying about the first offset, the second offset, and the third offset, um, is, you know, we have, we, as a society, we went …

AI assessment note: “All of your autonomous systems are going to have accountability baked in.”

Q this conference that we're at, there's dozens of VCs now. This has clearly become a hot space as defined by your successes. What's going to happen? So these VCs are plowing money into hundreds of defense tech companies from drones to satellites to weapon systems to software tools. How is this going to play out over the next couple of years as a venture investor with your knowledge about Anderil?

A I remember when I first got my offer letter from, from Palantir, um, there, there, we had this kind of high, low mix of salary versus equity compensation, and it gave Three examples of how much your equity at your, that was on your offer would be worth at different valuations. It was, I think it was one, five, and 10, maybe, or one, five, and 20, something like that. And I remember talking to people around the company, they're like, ha, ha, 20. That's ridiculous. We're never going to be worth twenty billion dollars. Um, and, uh, you know, I feel like now it's like people are going out and they're like, our seed round will be priced at twenty billion dollars. Um, so I think there's, there's been a big shift in just like the way that people think about these things. Um, some of that is good, some of it's bad. I think on the good side, they're, you know, they're able to look at companies like Palantir, like SpaceX, like Andrel and say, there is actually a path to success. This isn't like an impossible market to innovate in. But at the same time, um, you know, there's, there's a real tension around amount of capital raised and the valuations that are being applied to these rounds that add a tremendous amount of risk to the company that doesn't have to exist. You know, there's this favorite, uh, there's this famous scene from HBO's Silicon Valley where a CEO gets fired, um, for, uh,…

AI assessment note: “tension around amount of capital raised and the valuations that are being applied”

Q this conference that we're at, there's dozens of VCs now. This has clearly become a hot space as defined by your successes. What's going to happen? So these VCs are plowing money into hundreds of defense tech companies from drones to satellites to weapon systems to software tools. How is this going to play out over the next couple of years as a venture investor with your knowledge about Anderil?

A I remember when I first got my offer letter from, from Palantir, um, there, there, we had this kind of high, low mix of salary versus equity compensation, and it gave Three examples of how much your equity at your, that was on your offer would be worth at different valuations. It was, I think it was one, five, and 10, maybe, or one, five, and 20, something like that. And I remember talking to people around the company, they're like, ha, ha, 20. That's ridiculous. We're never going to be worth twenty billion dollars. Um, and, uh, you know, I feel like now it's like people are going out and they're like, our seed round will be priced at twenty billion dollars. Um, so I think there's, there's been a big shift in just like the way that people think about these things. Um, some of that is good, some of it's bad. I think on the good side, they're, you know, they're able to look at companies like Palantir, like SpaceX, like Andrel and say, there is actually a path to success. This isn't like an impossible market to innovate in. But at the same time, um, you know, there's, there's a real tension around amount of capital raised and the valuations that are being applied to these rounds that add a tremendous amount of risk to the company that doesn't have to exist. You know, there's this favorite, uh, there's this famous scene from HBO's Silicon Valley where a CEO gets fired, um, for, uh,…

AI assessment note: “valuations that are being applied to these rounds that add a tremendous amount of risk”

Q said, and the Pentagon labeled them a supply chain risk. Both AI and generally autonomous systems beg the question, what role should humans have and who should have the right to play that role of hitting the kill switch? What's your view on the role of the technology vendor to the Department of War, and where you guys draw your line on what your responsibilities are with respect to ethics?

A Well, my, my view on my responsibility to ethics is a slightly different question than my belief in democracy, which is a different thing. Um, so maybe starting on, on the democracy point, um, I believe that the people of America have elected representatives to make really hard decisions about how we engage in combat. Full stop. Um, fully autonomous weapons are not new. We've had autonomous systems in operation like CWIS, which is deployed on, uh, naval vessels. That shoots down aerial threats fully autonomously. You don't have time to make decisions about, you know, incoming missiles or threats to your ship. You just have to shoot it down. So that's what CWIS does. Now, CWIS has accountability in the system. There's a person on that boat that is responsible for whatever actions that weapon system takes, and I believe that this is the future of autonomous systems, is that just like any other system, whether it's a soldier carrying a gun, they are accountable for what happens with that gun, Or, uh, you know, the captain of a naval vessel. They are responsible for what happens with that CWIS. All of your autonomous systems are going to have accountability baked in. Now, ethically, how do I think about this? You know, I believe that, you know, what Sean was saying about the first offset, the second offset, and the third offset, um, is, you know, we have, we, as a society, we went …

AI assessment note: “All of your autonomous systems are going to have accountability baked in.”

Q Do you have a view on a technology or product that's developed in the US that we're at risk of getting regulated out and we're, or we kind of go in the right direction at this moment?

A I would say that semiconductors is actually a really interesting one. Back to your, your point about Fairchild is that, you know, we were the, the home of the semiconductor industry for many, many years. And, um, you know, once TSMC got, got, you know, ahead of seam in Taiwan, uh, they kind of ran away with it. And we didn't, rather than investing in a domestic competitor, uh, there are all sorts of reasons for this that we could spend hours talking about. Um, we basically just allowed that to happen somewhere else. And now we're in a position where almost no amount of money is going to fix this problem for us, certainly on a timeline of relevance as it pertains to the risk that Taiwan has, um, uh, in twenty-twenty-seven. So I would say that's like another really big one.

AI assessment note: “semiconductors is actually a really interesting one”

Q Do you have a view on a technology or product that's developed in the US that we're at risk of getting regulated out and we're, or we kind of go in the right direction at this moment?

A I would say that semiconductors is actually a really interesting one. Back to your, your point about Fairchild is that, you know, we were the, the home of the semiconductor industry for many, many years. And, um, you know, once TSMC got, got, you know, ahead of seam in Taiwan, uh, they kind of ran away with it. And we didn't, rather than investing in a domestic competitor, uh, there are all sorts of reasons for this that we could spend hours talking about. Um, we basically just allowed that to happen somewhere else. And now we're in a position where almost no amount of money is going to fix this problem for us, certainly on a timeline of relevance as it pertains to the risk that Taiwan has, um, uh, in twenty-twenty-seven. So I would say that's like another really big one.

AI assessment note: “semiconductors is actually a really interesting one”