Palmer Luckey Wants America to Win

- He wears Hawaiian shirts and tells the Pentagon how to defend the Republic. Palmer Luckey on "Uncommon Knowledge" now. Welcome to "Uncommon Knowledge." Recording today at a Pacific Research event here at the Reagan Library in Simi Valley, California. I'm Peter Robinson. A native of Long Beach, Palmer Luckey was homeschooled by his mother. He attended Long Beach State and then dropped out to develop a virtual reality company. In 2014, Mr. Luckey sold that company, Oculus, to Facebook for $2 billion. He was 21. In 2017, Mr. Luckey founded Anduril. Palmer, thank you for driving up from El Segundo for us.

- It was no problem at all.

- Nope.

- I took my helicopter partway actually, and I had another engagement.

- Palmer Luckey on "60 Minutes" just a year ago. I'm quoting you, Palmer. "I've always said that the United States needs to transition from being the world police to being the world gun store." What do you mean?

- Well, there's a lot packed in there. The first one is the United States has a history of fighting for other countries that maybe aren't very interested in fighting for themselves. And maybe there's times that we wanna go in there for US interests. But generally speaking, it doesn't make sense for us to send our people to go die for a country or a form of government or anything that's not directly aligned with US interests if they're not willing to die for themselves. And I think, for example, you saw our withdrawal from Afghanistan prove this out. You know, the moment that we weren't there, turns out that the people there didn't really care much to maintain what we had been saying was what they wanted the whole time. And so if you're the world police, you're out there trying to fight that battle for these countries. I think we need to transition to a role where we are equipping these countries with what they need to defend themselves. If they wanna fight for themselves, if they want to defend themselves, we should help them do that. And then I think that the gun store analogy works in a few other ways. If you're going to be the world's gun store, you need to do things that a store would generally do to stay in business. You have to deliver on time. You have to keep things in stock. You cannot necessarily pretend that you're the only store in town because we aren't anymore. Countries have options in China, they have options in Russia, and we need to recognize that and not pretend like we're the only store in the entire world that these guys can buy from. And then I'd say the last bit here, in terms of world police versus world gun store, you could disagree with me. You could think my strategy is wrong. You could think that actually we should maintain a tight grip on all these weapons. We shouldn't sell to the Japanese and let them do their own thing. We shouldn't sell to the Germans, let them do their own thing. Look at how it went last time. That's a reasonable critique, but I think the reality is the United States does not have in us, politically, another large-scale boot-on-the-ground war to fight for somebody else. I don't even think we have it in us for a good cause. What I said in that interview actually was I don't think we have another D-Day in us, even for a just cause, because Americans, particularly people of my generation and the generation before, they've seen this play out and they've seen that these things turn into long, multi-trillion dollar slogs, where the benefits are very, very diffuse. And so you could go and say, hey guys, this is a really great cause. And they say, you know, a lot of things start out as a great cause. And pretty soon it's been 20 years and you've spent $5 trillion and your highways are still broken and nobody has the jobs that they wanted. And so I think realistically, we have to take a different approach.

- Anduril, the story of Anduril. When you co-founded Anduril in 2017, you were a 20-something with plenty of cash. You could've enjoyed yourself, you could've gone into consumer electronics. You love video games. Not too far from here is Electronic Arts. It's a very big business. You could've gone into that. You founded Anduril instead. Why?

- There's a lot of reasons, but a lot of people don't necessarily know this, before I started Oculus, when I was a teenager, and because I lied about my age, I was working in an army-funded research center on the Bravemind program, which was using virtual reality exposure therapy to treat veterans with PTSD. And that was where I was first exposed to how big of a difference technology could make to the people that are in our military. It's what exposed me to how bad our procurement system was, how so much was done on a cost-plus basis where you made more money if it took you longer and you used more stuff, and if it was more expensive. And then also exposed me to the fact that nobody, not in academia, not in industry, was interested in figuring out how to cut production times in half or how to cut product prices in half. Because if you cut the production time in half, then well, where's your plus gonna come on all that cost? If you make something that's $6 million into a $3 million thing, you're literally just losing money. And so I realized that was a horrible broken set of incentives. It wasn't until I had money from Oculus that I felt like there's something that I could help do to solve that. And at the same time, I had moved up to Silicon Valley and I had spent several years there running the virtual reality division at Facebook after they acquired my company. And to make a long story short, there was a national divorce going on in the early 2000-teens between our tech industry and our national security apparatus, even in Silicon Valley, which was started by, funded for, Department of Defense projects. And that's a very dangerous experiment. We've never run that experiment in this country where you've had that national divorce. We've always had our most innovative people, our most innovative thinkers, our most creative technologists working on national security problems. What happens when that's not the case? What happens when these companies refuse to work with our military?

- Right.

- And so you have to ask yourself, you got all these companies that are divorced from national security and they don't believe in the basics of what they're actually, they're saying, oh, you know, people deserve a right to have their own identity. Why are you erasing these people by refusing to acknowledge their existence? Oh, unless you're Taiwanese, and then we'll throw you under the rug in a second. I realized that's a really dangerous situation for our country to be in. And so I wanted to start Anduril to save taxpayers hundreds of billions of dollars and to get people out of these advertising companies, these entertainment companies that are controlled by foreign adversaries and put them to work on the tools that are gonna hold those adversaries at bay.

- So, and...

- Thank you.

- Give us just a moment or two on the difference between the way Anduril operates, you've touched on this, but I want to, the difference between the way Anduril operates and the way the so-called primes operate. Lockheed Martin, RTX, Boeing, the others.

- Look, these companies are building some cool products. They have a long history. So I'm not here to say that they're awful and in fact, I work with most of them. But there's a big difference between us. Anduril is not a defense contractor, we're a defense product company. The key word there is product company. We use our own money to decide what products to build, how to build them, and then we build those products and then we sell them to the government. It is a model that exists across more or less the entire United States economy. This is how almost everything you buy is built, and there are very few examples otherwise. One industry where cost-plus is still common outside of defense is residential renovation. And I have to look out in this world, how many people out there who have done a renovation on a cost-plus contract were satisfied with the incentive structure and the outcome? Of course you weren't. Right, you know, it goes longer, the contractor makes more money. The GC is asking all his subs to boost their prices and then, oh, I'm gonna give you a nice little kickback on the side where the money comes back to you. But because, you know, the invoice is bigger, I get to charge the government a bigger 6% on top. It's all the same . It is identical. And so the difference there is we make more money when we make our products cheaper. We make more money when we make it faster. When I deliver a year ahead of time, I don't have to fire half my team because there's no money to pay them. In fact, I've just saved an enormous amount of money. I probably get to promote those people and have them work on some other product. And then the other big difference is we take all of our money and put it back into research and development. Every single penny. So a lot of other defense companies are putting about 1% to 3% of their revenue back into internal research and development, and much of that is cost-matched by the government. We're putting 100% of our revenue back into it. Now, you could say, Palmer, that's not gonna hold up. You won't be able to convince your investors to do that forever. To which I would say, I've pulled it off for eight years in change. I've got a clear roadmap to doing it for about another four or five years. I think I can stretch it out a lot longer than that. And the nice thing about US capital markets, if you're growing fast, if you are growing, people will let you get away with a lot. Look how long Jeff Bezos's investors let him get away with Amazon net not making money. If you have a healthy business and you could turn that switch, people are not going to demand it. So look, someday are we gonna have to start returning money to, you know, things other than R&D? Yes, but for now, our customers like that when they give us money, they know that it's either going to product or into their next product.

- Okay. So I just wanna stay with that point for one moment. A billion in revenues in 2024 up to about 4.3 billion is what I found as I was doing research for this year. That's about the projection for this year. And then evaluation on that four, three- And those are just public projects.

- Okay. Alright. What I'm getting at is-

- We have two showrooms, we have one with our public products, and then we have another one that's government-only.

- Okay, alright, well I haven't been into that showroom, but on 4.3 billion, you seem to be valued at around 60 billion, you're happy with that. And you're not worried about when you're actually going to turn a profit?

- I'm not worried with when we're gonna turn a profit because look, our products are better and faster and cheaper and at any moment I could be making money. It's just like, to be clear, I'm-

- I mean, this is your problem. I'm happy with it all.

- I mean, I'll tell you my numbers. On our most mature products, we're making about a 40% profit margin despite selling for a 10th of what our competition does. And so we're not just, so we are cheaper in absolute terms. We are also making more, because our competition is often doing these single-digit, cost-plus profit contracts. So we're actually making more money in terms of percentage and absolute dollars off of something that is an order of magnitude cheaper. So everybody wins in this case, but I'm taking that 40% and I'm putting it back into other products that are not making money, things that won't even start making money for years to come because they're really, really important.

- So let me list what I take to be the main categories of your products. And because time is limited, you choose one and wax a little bit rhapsodic about it, anti-drone defenses, maritime and subsurface platforms, autonomous aircraft, and then this lattice software that ties it all together. If you had your way, would the Pentagon operate entirely on your systems?

- So, I mean, just to wax rhapsodic about one of those things. And that's about-

- Choose one. Choose one. Go ahead.

- And yeah, that's about a third of the product category. And you didn't mention subterranean warfare, you didn't mention augmented reality systems, you didn't mention exoskeletons, you didn't mention small arms. That's okay. I'll tell you, on the air system side, we build a lot of stuff.

- I didn't mean to hurt your feelings, Palmer.

- It's okay. It's okay.

- [Peter] Truly, I didn't.

- I forgive you.

- Alright. Alright.

- Forgiven.

- Thank you.

- Oh man, no. Trump got in a lot of trouble for pretending to be Jesus. I better not do that. So the, I mean, to talk about one is the FQ-44 Fury, which is the Air Force's first autonomous fighter jet. We were competing with Boeing, Lockheed and Northrop Grumman for that contract, and we beat them. And that was because we put $900 million of our own money into developing that platform, building that factory. And it went from signing that contract with the government to first flight in 556 days. That's the fastest new fighter development program ever. That's not quite true. I found one in the Korean War that might've been as fast. It has been a long time since we developed a new fighter. Like, and people have said, Palmer, that's not true. What about, you know, the stuff in World War II, and I would say it is true they were a fighter of the time, but I think you can draw a distinction between jet age and then prop planes and arguably the fighters that were built that fast were actually derivatives of other designs, not clean sheet. But anyway, we can debate about that another time. That was a huge win for us because it was not only a huge contract, the Air Force intends to buy a lot of CCAs, collaborative combat aircraft, from us and from other companies like General Atomics who are much smaller than the big primes. But it shows that there's a recognition that these new companies can build things that are of critical national importance. They don't have to only bet on it. Now, you asked if everything should be built according to my system. No, you can't build everything according to my system. There are some things where the expenditure is simply too large. For example, nuclear aircraft carriers. I cannot speculatively just scrounge together, spare $14 billion and build a boat and then hope that they buy it. Also, what if they don't buy it? I can't sell- Like what, you know, I can't sell that-

- There's no after market? Secondary market.

- Yeah, there's no real other secondary market. I mean, and we don't want other people to have, even our allies, we're not selling 'em nuclear aircraft carriers. Japanese can't buy it, because Article 9 of their constitution currently prohibits offensive warfare or platforms for offensive use outside of Japan. I'm pretty sure we're not gonna sell it to Russia. Pretty sure the Brits have to fix their aircraft carriers before they get a new one. And so there's certain things like that. Like another example would probably be our nuclear arsenal in general. You cannot speculatively build atomic weapons and then sell them to for as cheap as you can. It probably makes sense to have government involvement there. And then like there's a whole bunch of other interesting ones, but I'll give you one more example on the defensive side. There are programs to build certain bio-weapon defense systems. You probably realistically cannot have a divorced from government, private sector, bio-weapons research lab that just builds bio-weapons and then defenses to them on their own, without supervision, using their own money and then tries to sell to the government. And you wanna talk about bad incentives? Imagine this, you build a system that can protect you from certain set of bio-weapons. If only there was some way to show the government just how bad it would be if it got out into the wild. I'm not saying that I would ever do this, but it's not a way you can run an entire defense industry 'cause someone is gonna follow the incentive. And so, no, there are things where it does actually genuinely make sense to do it the old fashioned way.

- I wanna come to China in some detail in a moment. But first the Pentagon. When I myself first moved to Silicon Valley, I'm slightly older than you, you'd be surprised to hear. David Packard was still around. By the way, everybody called him Mr. Packard. And Bill Hewlett-

- That's incredible. That's really cool.

- Yeah, he was. I had a few conversations with Mr. Packard, as he was called. He'd show up on the Stanford campus. Bill Hewlett was still around. And it was very clear that in their generation, the cultural difference, the understanding of patriotism, the understanding of America's place in the world, the difference between the men, and in those days they were almost exclusively men, who ran the Pentagon and the men, and once again, they were almost exclusively men in those days, who had built our aerospace industry, largely here in California. David Packard was Assistant Secretary of Defense in the Nixon administration. Bill Hewlett had served in the Second World War. There was no difference between them. They were the same kinds of human beings with the same reading on the world. Alright, we now come to today, I'm taking a moment to set this up, to give you plenty of time to respond to it because it strikes me as central. We now come to today, we have all the really interesting actions taking place in the private sector outside this military industrial complex. And the men and women in charge of the Pentagon are still pretty buttoned-up crowd. Those flag officers are pretty disciplined. And the people running the defense tech companies, you know what, some of them even wear Hawaiian shirts. So my question is, how do you deal with the Pentagon? I mean, you have to work together. How's it going?

- I think that people rise to what is expected of them. And if you take a guy who spent his whole college life smoking pot and you know, coding interesting things for, you know, some tech company. And then if you're able to expose them to problems, and sometimes this is done by the Pentagon, where they can give you the briefing and say, here's the threat, here's what's going on. You'd be surprised how when people, when you can get them to comprehend the threat and a lot of smart people, they can, they very much rise to the occasion. I'm not saying they're not gonna wear their hoodie, but you can get 'em to stop smoking pot and you can get them to work on something more important than advertising or video games or something else. I think it does help that the people in the Pentagon, they're pretty tolerant these days of people who are not exactly the mold of a military man.

- So it works.

- I think that they're very practical, right? A lot of the people in the Pentagon, they realize that if you are only willing to work with personalities that look like you and talk like you, you're gonna miss out on a lot of really good talent. In fact, if I really had to be honest, I'd say maybe the pattern-matching has gone a little too far. I think that a person who has a mullet and a Hawaiian shirt and is a bit of a larger-than-life, you know, charismatic guy is probably actually gonna do better than he should in the Pentagon. I'm not just talking about myself, I'm saying there's a lot of other people who realize sometimes it pays to be a caricature and a character and they expect the breakthroughs to come from not the guy with the pocket protector, but the guy with the dreadlocks. And I will say though, you know, one thing hasn't changed. You know, I appreciate your disclaimer, you know, about how the whole aerospace industry back then, you know, it was almost entirely men. And I assure you that has not changed. It is men all the way down and people can say, Palmer, there are women. Yes, of course, women exist, but it is more than gaming, more than tech, more than anything else, there's something about the defense industry in particular that attracts a certain type of person, and the certain type of person, they don't seem to wear a lot of dresses.

- By the way, while we're on that certain type of person. What percentage of your employees, you've got about 7,000 now.

- About 7,000 employees, about 4,400 of which are here in California.

- And how many of those are vets?

- Are feds?

- No, no. Vets, veterans.

- Vets. Oh man. I was like, oh man, yeah, this has just got wild. A number of them are feds, by the way. Now how many of them are veterans? I think somewhere, at one point we were about 30% service veterans. At this point, I think it's down to about 15 or 20%. I think it's hovering around a thousand people out of the 7,000 that are service veterans.

- Okay. But by contrast with Meta...

- Oh yeah. Way above that. And I mean, it's not because we're out there saying let's give welfare to veterans. It's because the people who understand these problems the best are often people who have that real world experience. Sometimes, you know, they use the GI Bill to go and get a degree in something relevant. And now they're coming in with, you know, the technical background and you know, the service background that allows 'em to really understand these customers. There's also people that we have a lot of veterans who are maintaining these systems. One of the things we do that's also different than a lot of our competition is we send people all the way forward to this stuff and we have them even iterating on features in the field on these systems. So we have a bunch of people in the Middle East right now. Like, you know how everyone else was getting on the planes going this way? Our people were getting on the planes going that way. And we have more people out there now than before the conflict started. We had people and weapons in Ukraine the second week of the war. I went to Kyiv in the early days of the war and I helped train people on how to use our systems. And so we've just got a very, very different philosophy. And a lot of the veterans in the company are the ones who are helping drive that culture.

- China, your Ted talk of last year, you described a scenario in which I'm quoting you. "Our fighter jets are shot down one by one and Taiwan falls within weeks." My first question is, we have a Pentagon budget of upwards of $900 billion. As best I can tell, you can't trust Chinese figures, but as best I can tell, the Chinese spend well less than 500 million and most estimates seem to be around 400 million. Why aren't we better than the Chinese right now?

- Well, there's a lot of reasons. So like, let's set aside the whole purchasing power discussion. Like let's assume that purchasing power is the same between countries. Do you believe that the Pentagon could spend its money 50% better? You know, I do. Like, there's just a level of inefficiency that exists where if they're just more efficient with each dollar, then they can do more.

- The Chinese are.

- Yeah. And look, I used to make millions of virtual reality headsets in China. I've been to Shenzhen a bunch of times. If you wanna get stuff done and you wanna build things, it is the place to be. And they don't get 50% more for their dollar, they get like 10 x for their dollar. Things that here would take you a million dollars, you do there for $50,000, $100,000. Like a development program. Labor is not even the cheap thing. That's an outdated concept. They think of China as just having really cheap labor. They automate most of these things. They automate most of the labor-intensive production. Their people are just genuinely extremely good. They have the world's best battery engineers. They have many of the world's best metallurgists, many of the world's best optical engineers. American companies have been hollowed out because our companies and our degrees, which feed these companies, 'cause the companies feed these colleges a whole bill of goods on what they should be teaching people. Basically, we're not teaching engineers how to be engineers anymore. We're not teaching designers how to actually design things to be manufactured. We're teaching them how to be high-level design shops that put together design package that get sent to the real engineers in China and they actually figure out how to do the work. This is true even with our mechanical engineering programs, even with our electrical engineering programs, people are turning into architecture astronauts. They pick components and they put them in a nominal layout. But the real work of how am I actually gonna put this together? How am I gonna build a manufacturing line to make this thing? Well, how am I gonna need to figure out how to do the one, two, three, four, five different revisions of this board to pass radio emissions and interference standards. That's all done in China. So they are the real engineers. We've hollowed out our real engineering capacity and like, I don't wanna put down Apple too much. Apple used to have to figure out how to actually make their stuff. These days, most of the really hard work is being done by Chinese engineers.

- I just wanna bear down on this because you're making what strikes me as a fascinating point here. All your points are fascinating, but what you're saying is you cannot divorce innovation from the active manufacturing. If you make the stuff, that's where the innovation takes place.

- The act of manufacturing your feed stocks as well. Like, if you don't control your raw materials, if you are dependent on your largest strategic adversary for everything that underpins your quality of life, you are fundamentally not in control of your own destiny. And if you would've written our current situation in a Cold War novel, imagine when Reagan was still in office. Imagine if there had been a novel comes out like a Tom Clancy novel and he says in just 20 years all of the Pentagon's most secure command and control terminals, information displays and every other electronic device will be made by the Soviet Union under Kremlin supervision, and we're going to buy them by the millions, it would've been unthinkable. It wouldn't have even been believable as fiction. And yet that's what happens today. The largest laptop manufacturer for the Pentagon is Lenovo, which is owned by China. Their headquarters has a flagpole with the CCP party flag and then the Lenovo logo under it. I mean, it's nuts. I'd say one more thing on this. Why we're not just beating China. China is taking their 400 or 500 billion, whatever you wanna call it-

- [Peter] Right.

- They're building one military with one purpose. They need to build a force that can invade Taiwan, then occupy Taiwan using an amphibious landing strategy. And then if and when that works, use the leftovers to go pick up the leftovers in some Japanese islands, some Philippines islands and some Korean islands, that's their whole military. The United States is trying to build a military that can continuously fight two to two-and-a-half fronts anywhere in the world against a diverse set of enemies across every climate, every bit of terrain, every possible weapon system. We've got a way harder job than they do. We have to solve every problem and everyone else's problems, by the way, and they just have to solve the one. And so I would rather have their problem, to be candid.

- Okay. So if it is correct, the Chinese obviously will always outnumber us. Now they have an economy big enough and they're efficient enough in the way they spend money and they have one problem.

- I don't necessarily agree. We can out-reproduce them, but that's a different topic for a different day.

- That is episode number two, Palmer.

- We cannot beat China with 500 million Americans. It will never happen. We'll become economically irrelevant.

- But if our hope, if our only hope for some kind of systematic advantage population is episode two. I mean, if we just, but with this population, our only hope for a systematic chance against China is innovation, two questions. One, how do we keep them from stealing innovations?

- Stop patenting everything. Patents are Chinese instruction manuals. You're taking your most valuable stuff, you are- Look, so the founding fathers never predicted a world where you would have a globalized economy, where the entire patent office could be downloaded every single morning and then ripped off and then used to fight a war against you. The problem that we have right now is that western companies patent things so that they can trade temporary exclusivity on an idea in exchange for eventually it enters the public domain. And all that really means in practice is that for 20 years or so between when you file for a patent and when somebody could launch a product that is a ripoff, it means China can just rip it off right away and western companies can only rip it off after 20 years. And then you repeat this cycle over and over again for every single generation and it's killing us. And so I hardly get patents anymore. There's a few things here and there, mostly defensively because unfortunately our patent system allows people to sue you when they think that you're infringing. We need to really fundamentally revisit the patent system. And I'm not just complaining here, I've got a possible solution. I think we need to massively expand the national security patent process. You can obtain a classified patent, you can get a patent on something that you are not allowed to disclose to anyone, but you still maintain the exclusivity on those rights. We need to massively expand that program and also massively expand all the categories of things that are covered by mandatory national security disclosure laws. During the Cold War, a lot of sensors and microcomputer technology was covered by this because the government said, oh my God, if the Russians get this, it's over. And we put in all the money, we put in all the time, they're just gonna be able to rip it off. If we let them rip all the stuff without paying any of the money to get there, then all of their money will go way further than us where we're doing the fundamentals of all of this. I think for example, though, a lot of the things Google patents around artificial intelligence, they are of national security importance. They should be allowed to get a patent and it should absolutely not be disclosed publicly. And you should have to be a US citizen to gain access to these patents. Maybe it's not classified, right? We can't require, you know, security clearance for every engineer to run these things. But I'm suggesting something where it's much broader, but the bar is lowered quite a bit. And so you can imagine a world where you kind of maybe have to go to the Library Of Congress to access these things or you have to use a CAT card and people say, but Palmer, the spies will get in and the spies will get some. Okay, fine, maybe we can make it where it's at least a little hard. 'Cause right now, again, they can go to the US Patent office website and download every single patent that Google and Apple and everybody else put in every single morning. We can at least try and do a little better than that. Maybe I can't buy 20 years, but maybe I could buy one, two, three. If I could buy a year, that would be enough, to be worth the effort.

- Okay, so something remarkable has taken- That is the first time I have ever heard a patent discussion illicit applause.

- Chinese instruction manuals. We have to stop 'em.

- So that raises a second question about innovation. It used to be that we could tell ourselves that the Chinese could steal and they could copy and they could manufacture, but they couldn't do zero to one, that we were the innovators and they were not. Is there a Chinese Palmer Luckey?

- We're still kicking their butt on zero to one. We we were way ahead of them. It's not even close. There are a few people that are kind of the Chinese Palmer Luckeys. The interesting thing is I've been able to get to where I am largely because I've become interested in a lot of things and I'm good enough at a lot of things that I can draw connections between different fields in a way that people who are native to those fields might not. The Chinese system doesn't produce people like that. It's a bit like Germany in that pretty early in your education you get tracked off into the gifted kids or the middle kids or the other kids and then they put you into tracks that are pretty well set. And it's very, very difficult to have a mid-career shift. It's very hard to reinvent yourself in modern China. I'm not saying it's impossible. You'll always find examples, but by and large it does not happen. You don't have the guy here who you know, is, you know, doing Hollywood films one day and then he does VFX and then he does a robotics company and then, you know, he burns out for a while and he draws paintings on the street, you know, on Venice Beach. And then he gets back into it and raises a billion dollars. That's not a real thing in China. And there's a few examples though. There's a guy who, like one of the co-founders of DGI, the drone company, he's from a wealthier family, privately tutored, western style-education, learned a lot coming to the United States to be educated, went back to China. And he is a polymath. He understands lasers and engineering and self-driving cars and computers and AI and aerodynamics and batteries, and he does understand this stuff really well. I don't know him well, but I've met him in a number of these kind of global illuminati-type events the Europeans host where everybody's invited and you all smile at each other. And it's very funny because I'm personally sanctioned by China as a radical separatist terrorist on account of arming Taiwan. Yeah, it's a good one. Thank you. I'm also sanctioned in Russia and Belarus. So Belarus just does whatever Russia tells them, I never did anything to Belarus. I forgot they're even a thing. The point is, the founder of DGI-

- [Peter] Right.

- He's the Palmer Luckey of China. They do exist and it's interesting.

- But they're rarer than here?

- They are much rarer than here. It's again, because their educational system just does not generate, I guess one way you could look at it is it doesn't generate very many queen bees and it generates a lot of worker bees.

- And what about our capital markets? Is that a bigger thing? There's no Peter Thiel in China.

- No. Well, I mean, look, I mean, Peter's a great example, you know, where did I get where I got into it? I got into it because of our US capital markets and people complain about all these, I mean, there's a million complaints. Oh you can't get a break in America, blah, blah, blah. Look, I was a 19-year-old kid working a minimum-wage job with no college degree, living in a 19 foot camper trailer and Peter Thiel gave me a million dollars when nobody else would, to start Oculus. And so and I know other people, maybe not quite so extreme situations. That's not happening in China, I'll tell you that. And people say, oh my God. But it's so difficult to, you know, get a warm intro to people. And Mark Andreessen has a really good point on this. He says, "You know, the reason that I want a warm intro for anybody that I'm gonna invest in, because if you can't get anyone in my network," and he knows everybody, "If you can't get any of the 10,000 people with my phone number to say a nice word about you and you can't track down anyone dumb enough to connect you with me, why would I talk to you?" That's part of the test. If you can't get connected to me, you're never gonna be successful at convincing people to work for you. You're never gonna be successful convincing the next round of investors or you're never gonna convince factories to work with you. It's part of the process. In China it's much more centrally planned, right? Like the DGI is successful because the government basically anointed them the chosen drone provider and gave them huge transfers of government technology, free land, free factories and massive subsidies not only on the manufacturing, but also the shipping into the United States market and all of these other markets. And so it's a very fundamental difference. I prefer the, you know, the US capital markets where money can flow sometimes in bizarre ways, but it flows towards the things that have a chance of making a difference.

- All right, from China back to us and how we array our forces, let's take the Navy, the United States navy today, 11 carriers, just under 300 other surface combat ships and about 70 submarines, all of them nuclear. The fleet includes, as best I can could tell from doing the research online, four unmanned ships and a few hundred small drone boats. What should the United States Navy look like, say three years from now?

- Oh, I mean, you can't do much in three years. That's the problem.

- Five years? Okay, what's the window for actually getting something done, for reconfiguring the force?

- Let me think. There's an old saying, you go to war with the-

- With the navy you have.

- The navy you have, not the navy you want.

- [Peter] Yes.

- And in this case, you go to the war with the navy you have, not the one you want to build. I think that if you give it about five years, you could start doing some useful contributions. But it's gonna take about 10 years to do the really interesting things. Here's the reality. We don't need a 300-ship navy. We need about a thousand ships or more. The only way that we're gonna do that-

- Wait a minute, you're talking about small autonomous ships or we need-

- In general. Basically the way that I look at autonomy is it's a thing that enables you to make the right decisions in certain cases. Like, I'll give you an example. There's gonna be ships that are fully-autonomous, no people aboard. What's gonna be much more common are going to be ships that are very lightly-manned because most of the jobs have been automated on them. In other words, an aircraft carrier that doesn't have 5,000 people aboard, it has 120. A destroyer that instead of having a thousand people aboard, has a crew of 50. Automating a lot of these jobs and using a combination of robotics and automation and just materials that don't, for example, require so much constant anti-corrosion treatment.

- [Peter] Right.

- We could build a navy where like, I'm not saying that autonomous ships are the answer, but autonomy integrated everywhere is the only way we'll be able to do it. 'Cause if we have a navy that is, let's say three times as big in terms of ships, we do not have enough people to have three times as many people in the Navy. It's just never going to work. And the worst part is when you build a new ship, you don't just build a ship and then let it sit and wait for war. You have to fill it with people and you basically have to have them play pretend continuously so that they're ready to fight. They know how their ships work. So you need to sail all over the place. You need to do exercises. It costs almost as much to do nothing as it does to fight a war in some cases. With autonomy, you might be able to change that equation. I could build a thousand autonomous ships, mostly autonomous ships, and I could put them in dry dock or I could wrap 'em in a big, giant cellophane wrapper and fill it with argon gas. I call this concept the Twinkie ship concept. You put in a wrapper and it lasts for a thousand years. And if you could do that, you might be able to make, like the cost of building the Navy is not building the ship, it's maintaining and sustaining and then replacing that ship when it wears out. If we can just make the cost of building a ship the cost of building a ship, and then you wait for war to come, it's a game changer. So I think 10 years, we need to be thinking about how we can do automated shipyard production, building a navy that has the same or even fewer personnel, more specialized, higher paid, even more skilled in their particular disciplines. And then we need to have three or four or five times as many ships.

- Okay, let's talk about the question of resources, which is tied to the question of national will with which you began earlier. President Trump just announced a Pentagon budget for the next year with an increase of over 40%. So it goes from about 900 billion today up to 1.5 trillion. Now that sounds staggering, but it only gets us to about 4% of GDP, which is well below the 8 to 10% of GDP we were spending during the first 20 or so years of the Cold War. And since we're at the Reagan Library, checked, when President Reagan took office, defense spending stood at 5%. It peaked during his administration at 7% and by the time he left, it was at 6%. I repeat, this seemingly gigantic increase that President Trump is proposing to 1.5 trillion would still only take us to 4% of GDP. Enough, too much, too little, just right? Can the Pentagon even deploy that big an increase? What do you think?

- Well, I can't say that it's too much money because then I'm liable to get less of it. And that's just a reality. Well, it's worth noting too that like that 4% of GDP, remember that Trump is out there and Marco Rubio is out there demanding that our allies spend 5% of GDP on national security. So, you know, we'd be the lightweights in this percentage calculation. I guess it's like, it's like fair taxes, you know? It means different people pay different fractions and different amounts. Anyway, the way that I look at this is, I honestly, the first page of Anduril's pitch deck said Anduril is gonna save taxpayers hundreds of billions of dollars a year by making tens of billions of dollars a year. That's my goal. I think what we need to do in the long run is figure out how to be more efficient with defense spending. I think we can do as much as we're doing and more than we're currently doing for less than we are currently spending. Not talking about the budget, I'm saying I think we can get to where we're spending less money to do more. But, in the same way you go to war with the Navy you have, you write budgets with the weapons that you can actually fund, right? This hypothetical that I have of like this future Twinkie ship navy, I mean, we need to build stuff right now to stop really major threats. We need to refill our magazines that we've just depleted, firing everything out of them. And would it be awesome to say, well, what if we could build a replacement for the Tomahawk that wasn't designed in the sixties and it was more manufacturable and we're gonna buy a whole- Okay, that's great. But we do also need Tomahawk given that a lot of our doctrine is built around it. Our ship's launchers are built around it. Everyone's trained to use it. Our allies like Japan are also trained to use it. And so when people say things, well, why don't we just replace it with a cheaper system? Okay, well it's gonna take a few years to do that. It's gonna take a few years to get it out there. How long is it gonna take to train people to use them, to find all of the problems, to work out all the bugs? And so I think that Trump is reacting to the world as it exists today. And realistically, if we are gonna continue to have the same war, like when we talk about, you know, 1.5 trillion budget, I mean you could spend that money just basically getting our military back up to standard with the weapons that we already have. We have tons of weapons, they're corroded, they're depleted, they are out of service. Our ammunition stockpiles, not just I'm talking about missiles but probably even just normal small arms ammunition are hugely depleted. The point is, there's a lot of money to spend to overcome a lot of the rot. I hope that we can get a $1.5 trillion budget this year, and I hope that 10 years from now, it's a fraction of that.

- Got it. Alright, very nice. A few last questions. Here's the late Henry Kissinger. He's writing this just a couple of years before his death. "If you imagine a war between China and the United States, you have artificial intelligence weapons. You can't tell exactly what will happen when AI fighter planes on both sides interact. So you are then in a world of potentially total destructiveness." Close quote. Now, you are warm and funny and articulate. You must be a bear to work for. But when you're on a stage, at least, you're warm and funny. You wear Hawaiian shirts. But there is at a minimum, a kind of free-floating anxiety about AI, which is a large part of your enterprise. And here we have Henry Kissinger, he co-wrote this book with Eric Schmidt, former CEO of Google. There are serious people who say we should be scared to death of the likes of Palmer Luckey.

- It's very reasonable. It's very reasonable when you put it that way. Oh, there was a quote I'm trying to remember, what was it? Give me just a second there. You know, it's on the tip of your brain.

- You're too young to have that problem.

- No, I've got too much in my brain to not have that problem. Look, I think that sometimes very, very smart people can also simply be wrong. There are, oh, I remember what I was gonna say. Look, even people in their fields of expertise, the things that they are deeply involved in can say things that don't pan out. Yeah, anyone remember Bill Gates, 32 kilobytes of memory ought to be enough for anybody? And so, you know, imagine if you had asked Kissinger about his opinion of the useful memory limits of a home computer, you know, he would've probably had an answer that was even worse. No offense to him, but when he says, "You have two fighter jets that go up against each other, you don't really know what's gonna happen." You know, I fundamentally disagree with that premise. You can build formally verifiable software that responds in a very consistent and deterministic way. I can make something that responds the exact same way every single time, perfectly, even based on AI systems. And the problem is he's looking at probably large language models. You know, like he's looking at ChatGPT and saying, oh, they're non-deterministic and they do these random weird things. They hallucinate. The types of AI you build for doing large language models are radically different from what is used for flying a fighter jet. Radically different from, for example, determining the difference between a fishing boat and a Chinese destroyer. And people say things to me like this all the time, Palmer, it might not know the difference. What if it makes a mistake? I promise you, when you look at the thermal signature, the visible outline, the electromagnetic emissions, the wave profile, like, the wake profile of a destroyer, you cannot mistake it with anything. I'd be willing to bet my life on every single detection of that destroyer, that it is not a fishing boat. And a lot of people who are not experts in this area, who aren't working with it, they imagine it in the more interesting freeform way that Hollywood has taught them to. They see this thing as a "Terminator" problem. They see AI as a lot more open and sentient and less subservient to man than it actually is. Maybe someday we're gonna have a totally different type of AI. Like imagine, you know, you have the true sentient, thinking, conscious machine that looks out for its own interests. It's capable of self-evolving, self-teaching. You know, as John Connor said, "You don't understand. It'll never stop. It can never die, it never sleeps, it never grows tired and it won't stop until you're dead." We are a long way away from that form of AI. And I'm not saying I'm not afraid it might happen someday, but if you rank the things that I'm afraid of, it's way down the list. I'm afraid of bio-weapons that are tailored to kill particular ethnic lines or even family lines. I'm afraid of people using AI to develop bacteria that will, you know, destroy a lot of our agricultural reserves. There's so many things I'm afraid of. And I'd say, if anyone is really afraid of these things, they should actually talk to the people in the military who are tasked with developing the doctrine around these things, 'cause if you don't believe me and you don't trust me, you should take everything I say with a pound of salt, right? I'm the guy making billions of dollars. I'm the guy with a pitch deck that says I wanna make tens of billions of dollars selling arms for taxpayer money. Don't trust me. You should talk to the people who are actually tasked with deploying these weapon systems and ask them what they think. And if Kissinger went up to the people who are doing this, for example, the experimental operations unit, the EOU and the United States Air Force, which is currently operating our FQ-44 autonomous fighter jets today, and they're flying them, developing doctrine for what a future war might look like. If you asked, Kissinger said, "But if these two fighters meet, you don't even know what's gonna happen, really, do you? It could be total war." I mean, they might be polite to him in the room, but you wouldn't believe what they'd have to say after he walks out of it. I think those are the people you need to listen to.

- Last question, I'm gonna take a moment to set this up because again, it strikes me as basic. In 2004, the late political scientist, Samuel Huntington, wrote an essay about a new class of Americans that he called Davos Men. Huntington, quote, "These transnationalists have little need for national loyalty. They view national boundaries as obstacles that thankfully are vanishing, and see national governments as residues from the past, whose only useful function is to facilitate the global elite's global operations." Close quote. For the first time in history, in other words, the United States of America had produced a class of people who had no use for the country itself. And I have to confess that when I looked around Silicon Valley, I thought at the time that Huntington was correct. Mark Zuckerberg gives a commencement address at Harvard in which he praises quote, "The forces of global community." Close quote.

- Bringing the world closer together.

- There we go. In 2018, Google employees forced the company to drop a contract with the Pentagon. By the way, just last week, Google employees did it again, while we're speaking of Google. I'm quoting a news account from last week. Last week, "More than 600 Google workers signed an open letter to the CEO expressing concerns about negotiations between Google and the Pentagon." Close quote. Davos Men, internationalists, globalists, and along come Peter Thiel and Mark Andreessen, and you, Palmer Luckey. Why are you such a patriot?

- Well, the good news is, you know, that's a really intelligent and articulate way to put it. But you don't have to be that intelligent or that articulate to understand the problem. I think a lot of Americans understand the problem. They're all members of the mono-party or uni-party here in the US and abroad and they buy into a certain set of political values and social values they largely didn't decide for themselves. They're isolated from the consequences of those decisions. You know, I mean, I saw a lot of this when I was in Silicon Valley. I don't wanna beat up too much on Mark Zuckerberg, you know, for, you know, learning Chinese or asking, you know, asking the Chinese to help him with everything. But like, you know, I gotta go back to my time when I was there. There were a bunch of flags that flew on the Facebook campus. You had you pirate flag, an Instagram flag, a gay pride flag, a world peace flag. There was a Black Lives Matter fist for a while. No American flag. And that was because, if you asked them at the time, are you an American company? The official answer, and this is not me making it up, this is what they testified under oath to Congress. They said, we are an international organization that transcends borders. And the main reason for that is that they were headquartered for tax purposes in Dublin, Ireland. And so if you say that you're an American company, the jig is up. But, so it's a little unfair. It was really a tax- But culturally, it was true, right? They thought of themselves as part of, you know, this Davos elite-type person. And even, you know, the individual programmers thought of themselves that way. By the way, half the people at Facebook weren't born in America. And I'm not saying that there's something bad about being an immigrant, but when you have a place where most of the people did not grow up in a country with its values, you're going to end up inherently with a place that much more greatly centers its care outside of the United States and prioritize things outside of the United States. I mean, you might remember the Claude Constitution and Anthropic, it's publicly posted constitution was that it consider all answers from a perspective that does not unduly weigh Western perspectives or values, is explicitly being told to not value these things that the west has decided that are important around, you know, self-governance, freedom of association, freedom of speech that we mostly still have and the Europeans are forgetting about. But anyway, you asked me what I think about this idea. The reality is, we all know who these people are. And I think the first people to figure it out were not the intelligentsia. I think it was actually blue-collar workers working in Detroit, Michigan. They understand way better than the people who go to Davos do.

- Are you a blue-collar worker in your head?

- Look, my dad's a car salesman, growing up. My mom's a homemaker. When I started Oculus, I had a job sweeping a boatyard for minimum wage. And so it's a little hard to think of myself as blue-collar today, I guess. But, you know, I certainly feel like I come from that background.

- Palmer Luckey, thank you.

- Thank you so much,

- For "Uncommon Knowledge," the Hoover Institution and Fox Nation, I'm Peter Robinson.