How Palantir Is Modernizing the Military With AI

0:00Our software dominates and I appreciate you using that tagline because we focus so much on outcomes.

0:34Greg Little, Senior Counsel to Palantir. Welcome to Sorcery. Excited to be here. Thanks, Molly. I'm so pumped to have you here. We're at Reindustrialize, and Palantir is a big name here. So could you share more about your presence at Reindustrialize this year? Yeah. First, Molly, super excited to be here. I feel like I've really made it in the world by being in your podcast. My first big public speaking engagement 15 years ago was at Golden Corral, which is the buffet chain restaurant. And so you having me here today is like the ultimate honor. And so I really appreciate it. We're super excited about this re-industrialized conference because in a lot of ways, we think the best way to make America great again is that we need to be able to build again.

1:15And while we're incredible at software and AI, we have lost our competitive advantage in building things. And if we think of what's happening in Russia, Ukraine, while people often talk about AI and autonomy, the real narrative is about quantity. And so for us, having a strong manufacturing base that can build a lot of things, that is the best way to be able to lead to deterrence. And if we need to ultimately use that manufacturing capability to deter deny and ultimately defeat our adversaries, we also think there's a huge opportunity for economic prosperity by America building again. And so we're super excited, as you heard in Shom's keynote, to be seeing the success of Warp Speed, which is our manufacturing OS, where we're taking AI and then allowing folks for the first time to be able to build wildly successful products, whether that's with SailDrone and Sironic, building autonomy vessels, or that's L3Harris taking traditional businesses and making them more efficient and effective and getting to build more things for America.

2:16Another thing that Shom noted in his keynote was national sovereignty and how reindustrialization plays a role in that? 100%. I mean, like we are so dependent on other countries for our supply chain. So whether you look at rare earth minerals that we're so dependent on with China, if you look at a lot of the capabilities, like chips is a perfect example with Taiwan, we are at immense risk of not having the capacity and more importantly, the capability to be able to build on our own. And so if we see risks within our supply chain and our adversaries control some really important parts of that supply chain, especially China, it puts America at tremendous risk.

2:56And so in order to de-risk, one, any risk to our economic prosperity, but also to our national security, we have to bring manufacturing back into America. And it's really nice to see whether it's these small mom and pop shops that we're working with or these large companies, them embracing software and AI. And it's really nice to see the tech side, too, come to this and realize that we need to be builders together, both the hardware and the software. AI has become a huge component of that. And it probably leapfrogged us into this whole situation where we have a new race with other countries. There's geopolitical pressure for America to dominate like software that dominates.

3:37Yes. Yes. And so could you explain more about how Palantir is using AI and your new product, AIP, within the system? Yeah, absolutely. So one of the things that we always pride ourselves on Palantir is we really sell outcomes. And when you heard Sean today, that was his real message with AI. It's not just about the models, the infrastructure, all the cool stuff we talk about. Our software dominates, and I appreciate you using that tagline, because we focus so much on outcomes. So I work on our U.S. Navy business quite a bit. And so I'll lay out the four major areas that we focus on. One is how do we use software and AI to have the most lethal fleet in the world?

4:14And what's interesting about the U.S. Navy, and one thing when I talked to admirals, is they'll take the Russia-Ukraine example, which is fascinating. Russia actually has a pretty formidable Navy, but they've been completely ineffective in the Black Sea because the Ukrainians are using new technology and new methods to, in essence, neutralize the Russian Navy. And so we're working with Maven Smart System to deploy across the Navy and afloat with ships to be able to have incredible battle space awareness and time sensitive targeting. So not only can I identify the target, but how do I make sure that I'm using the right effect or weapon system to destroy that target, whether that's in a cloud environment or on the edge on a ship?

4:53The other area that we're looking at for software and AI is how do I make the fleet more ready? So many of our ships and subs right now are sitting in a dry dock waiting on repair. And so how do I actually use AI to look at predictive maintenance? How do I make sure that the right equipment and right supplies are at the right place at the right time? So these ships can get off of dry dock and actually be operational in the fleet. The third area is that we need to build more things. We're getting destroyed by China in shipbuilding. They can outproduce us 200 to 1. They have about 370 warships. We have about 290.

5:27They can produce almost 20 to 30 a year. We produce six to eight. And so we need to be able to increase that. So we're super excited about what the president is doing in the maritime industrial base. And there's a huge part of the reconciliation bill, about 450 million, that recognizes that we need to be able to use software and AI to be able to accelerate that journey. And then the last area, and the one that I get super excited about, is how do you use AI to be more efficient and effective? How do you make sure that we are good stewards of those taxpayer dollars and we're using them for the things that are going to win?

6:03And that we're making sure that we're taking any waste, fraud, abuse out of the system. And AI is incredible at identifying those patterns and then helping us go to the government and say, hey, if you made these type of changes, you could free up this money to be able to make your force more ready and lethal. So given the conversations that are having today at the conference and things that you, a Palantir, are talking about, what exactly is the current state of defense tech today? OK, so I'm going to give you my best analogy and we're going to hopefully geek out a little bit. Are you a Game of Thrones fan?

6:35Yeah, I've gotten I've gotten a lot of comments that I look like Aria. OK, I don't know if I I don't know if I see that. but you but you've read you've read the books or the I've watched the series okay and then I stopped watching after that comment okay I don't know if I if I see that um but I uh I'll kind of give you my take on on uh the Game of Thrones and I'll kind of go through a little bit for your listeners who might not be familiar then I'll go through how I I see the world and maybe see if you get the same take. So as you're familiar, Game of Thrones is this, I think it's really entertaining and hopefully you continue watching because you look nothing like her.

7:18But it's these competing houses really trying to be able to have power and sit on the Iron Throne. And while all of these houses are infighting in Westeros, the real enemy is the White Walkers from the north. and ultimately the houses have to unite to be able to fight the real enemy. And so in a lot of ways, I think that's the way we're seeing the defense tech ecosystem and defense ecosystem at large is we have these infighting houses and at some level they have to unite to be able to actually fight our real adversary, the White Walkers, which in this case is China, Russia, Iran, and North Korea.

7:55And so I'll go through the different houses and see how right you think I am. Okay, so you have the Iron Throne. In my mind, this is the Pentagon, right? The one that is dictating laws and policies are the ones that are allocating resources. You have House Stark, the most noble and gritty. This is the tech disruptors, the andrels, the sironics, the sail drones, the ones that recognize that AI and autonomy are the future, the one that recognize speed and scale is what will ultimately win. You have House Lannister, which are the people that are ruthless and rich. This is the primes, the Lockheed Marns, the BAEs that build exquisite things, but it takes too long.

8:35So GAO just did a report on them that takes almost 11 years for them to go from requirements to actual deployment of capability. And we need more of those exquisite capabilities, but they have to be faster and higher quantity. And then you have House Tyrell, which is like shrewd and sort of is whispering into the king's ears. These are the consultants and SIs that mostly sell PowerPoints, mostly can be replaced by a subscription to GBT for 20 bucks a month, but need to move more to outcomes and firm fixed price. And so if they can use their domain knowledge and apply that with AI, you can get immense outcomes at a better price point.

9:09And then you have the masters, which are like the third party knowledgeable people that are supposed to be neutral. These in our land are like the FFRDCs, the war fighting labs that often take sides and actually start building things and competing with other houses versus staying in their lane. And then you have the Iron Bank, the VCs and PEs that we know and love where they apply the private capital into, but they expect a return and they're kind of ruthless about it. And what's been fascinating to see is like almost of the private capital, almost$150 billion has been invested in defense over the last three years.

9:43That's as much as the previous 10 years. And then you have the White Walkers, which I mentioned are Russia, China, Iran, North Korea. And ultimately, what we need to do is to be able to unite. In my mind, we need to be changing the business models in a way that allow all of us to come together to build more things. Because we're going to need all of those things and more and faster if we're going to build the capacity to deter China and be ready for 2027. That is so accurate. And I have a couple points on this. Okay. Where do you think Jon Snow should sit? I don't know, but I just... You're not really a true fan, are you?

10:19You did stop watching after like... I really did stop. I was so offended. Got it. Got it. My brother even started giving me a nickname because she had a little sword called Needle. They started calling me Needle. But one thing, it sounds like Game of Thrones actually wrote this about the U.S. Yeah. It's so accurate. Yes. Two, why hasn't Ileano made a meme out of this? so it takes so like eliano is just at a different level of popularity and clout than i am that it took me a long time to get him to even post on x the game of thrones um that's a great question i don't know why eliano why didn't you do it sorcery is brought to you by brex the financial stack trusted by more than 30 000 companies including one in three venture-backed startups in the u.s nearly 40 percent of startups fail because they run out of cash rex is literally built to help founders avoid that.

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12:39That's Turing.com slash sorcery. Wow. Wow. Not a very good friend. That's a harsh answer. Yeah, not a very good friend or colleague. I don't think the mics picked that up, but we'll leave that out. Yeah, not a good very friend or colleague. I mean, third. Okay, so third, I've gone through your writing. How come you haven't broken this down? The Game of Thrones? Yeah, have you? Yeah. Did I miss it? You must have missed it. I missed it. Wow. That's. But I appreciate that out of our six readers. I really appreciate that you became the seventh. So this will be something that you get to look forward to on your plane ride back.

13:14I can't wait. Of the Game of Thrones article on First Breakfast. I can't wait. Let's talk about First Breakfast. OK. So you started writing and you're writing alongside your CTO, Sean. Yes. So how did this begin and why is it called First Breakfast? Yeah, I think in a lot of ways, I'll kind of give the headline version and decompose it a little bit. But in my mind, what we're really trying to get at is First Breakfast is a playoff, the famous 1993 Last Supper after the Cold War that led to mass consolidation of our defense industrial base. And in our minds, we need to have this first breakfast moment where we will win in many ways by our best competitive advantage, which is our American industrial base.

13:56We need to be able to weaponize capitalism. And so we want as many players in the field coming from our American industrial base and participating in national security. And so if you double click kind of on the background of that, and you mentioned some of this already, you know, we live in a pretty crazy world right now. You know, U.S. bases are being attacked hundreds of times by Iran and the Middle East. We had the horrific event of October 7th with Hamas killing almost 1 ,400 Israelis. The Russia-Ukraine war, hundreds of thousands have died on each side. The CCP is running aggressive phase zero operations in the Indo-Pacific.

14:32The 12-day war against Israel and Iran just finished. The U.S. just attacked Iran nuclear sites. And so to some extent, it's not hard to imagine that we live in a pretty hot, cold war. I don't think it's hard to imagine that we're at the brink of World War III. But unlike World War II, where our biggest competitive advantage was our capacity to build things, we have lost that, like we talked about earlier. And we've given that up to China, who can outproduce us in many things. They have more people than we do. They have more capacity. Again, I mentioned the shipbuilding, 200 to 1. But that wasn't always the case.

15:10So before the Berlin Wall fell, what was really interesting is that 86 % of defense spending was with companies that both had a government business and a commercial business. So General Motors built cars and missiles. Ford built satellites. General Mills, the cereal company, built artillery parts. All of that changed after the Cold War, where America demanded a peace dividend and the DOD budget shrank by 67%. Secretary Aspen at the time brought the 51 primes together to the Pentagon at this dinner and said, hey, you'll either consolidate or die. And that led to the five primes we know all in love today.

15:53And so the story really here is that American innovation didn't leave, but it left national security. And with the crazy world that we live in, if we want to protect our economic prosperity, if we want to protect our way of life, we have to be able to bring that American industrial capacity as well as our allies and partners back into national security. And so our attempt to do this is through this first breakfast initiative, which in my mind is two parts. One is Palantir, we have this program called FedStart. Palantir has been building capability and defense for 20 years. We build on classified environments, air-gapped environments, top-secret environments.

16:30While we deliver those outcomes, we've also built amazing infrastructure. So how do we share that infrastructure with startup companies to be able to easily access data if the government approves it, but also to be able to ride on our infrastructure backbone to deploy their software in our DevSecOps-like environment? and that's been wildly successful. We've helped almost 45 companies in that. The other part is what we mentioned earlier is that warp speed manufacturing OS is how do we bring software to American manufacturing for them to be able to produce more at a very cost-effective price. One thing that you mentioned in that answer was one of the pieces I wanted to talk about.

17:10So weaponizing capitalism. In this piece, you mentioned the Pentagon and constraints around that, whether it's regulation or other government hurdles, the dynamics are changing now. Could you explain this piece and what you mean by it? Yeah, I think if you've been in the department or you've been in government, there's a mismatch between how people think about costs and think about value. So when you buy your, I don't know, what kind of phone do you have today? iPhone. So do I. iPhone's the best. Twins. Twins. Twins. We bonded just on that and your soon-to-be like of Game of Thrones. So when I buy an iPhone, I view the value of it, right?

17:52And I believe that that value is commensurate with the cost. But I don't care if Apple makes 80 % margin on me or 20 % margin. I want the thing and I want it to work. The Department of Defense is obsessed with cost and has no concept of value. And so I'll take a hypothetical that I write about in the article, which is actually often true is, you know, you can, I can bid something for$100 and I will take a 80 % margin. My competitor can bid something for$200 and take a 10 % margin. And the government feels more comfortable with the $200 bid that's twice as much as my bid for the 10 % margin than the$100 bid with an 80 % margin.

18:34And because there's a mismatch of that, they need to explain cost. That's how they're incentivized. that's how they're judged, not to be able to explain value, and then allow the vendor to take the risk and be more efficient and innovate to be able to get the right margin, but also deliver for that end customer. In my mind, the culture needs to fundamentally shift. We do need to move to more firm fixed price outcome-based contracts, but we also need to pull people accountable. And that accountability is a really missing piece within the government. And so why oftentimes you're at conferences like this, they'll talk about closing the kill chain.

19:10I think we should be closing the cash chain. And the reason for that is we need to be able to rapidly allocate resources to things that are winning, the things that are going to have big bets, but we also need to kill things that are not working. Because if we don't kill things that are not working, we are not freeing up those dollars to invest in things that our warfighters actually need. And so I think for the first time, even these concepts are not new, we're seeing really impactful executive orders to be able to focus on outcomes, to focus on firm fixed price, to focus on use of commercial capabilities, which I think is fundamentally changing how we do business, which is going to make it more successful for new entrants to get into the department, but also for private capital to get the corresponding return because the department allows for flexibility as long as they deliver value.

19:59They don't care as much about what margin those companies are are making in the commercial industry the private sector does move at rapid pace and they can with unlock this capital you mentioned a couple examples there do you can you share some some ways in which the private sector has outpaced and and actually well there's there's many even yeah i don't i kind of think almost an example of when defense in the last 20 years has ever outpaced industry. And I think to some extent that's fine. That is sort of the American capitalistic way. And you want companies to be able to have a large customer base because as we're learning from Tyson's food on their supply chain, I'm applying that same learning to how we think about logistics and IndoPaycom, right?

20:49And so they're feeding each other constantly all of this R &D money that's from our commercial business is greatly helping the taxpayer on our other side. To some extent, to your point, it's like the economics don't work in anything. Take AI as a perfect example. Department of Defense had a budget for AI in 2024 of$1.8 billion. You just saw the announcement with Oracle, OpenAI, and SoftBank for$500 billion. And that's only part of their investment for only three companies. And so you're just never going to compete at scale with these level of technologies. And we don't need to. And the beauty of it is we can tap into the open AIs or the XAIs or the Oracles or the Microsofts or the Azures or the Palantir or the Andrels.

21:40The part that worries me the most is I want the Andrels, Sironics, and Sail Drones, though to do well because if they don't do well private capital will recognize like they they did previously that this isn't a good market to be in and so i want those companies to be successful so more private capital so more people can be successful which is a benefit to palantir and more importantly a benefit to our nation this is critical for national interests and like we're seeing this part of the point was that this is kind of a gift to our adversaries if we're stagnating because our government and maybe public entities are causing roadblocks for this innovation, for expansion of technology, tools, rapid advancements, puts us in a bad place.

22:24Yeah, I think we're giving every single time we add something in the process that doesn't give us capabilities or scale with the world that we live in today is a gift to our adversaries. And this is why I think your questions and your points around, you know, how do I fix the procurement process to be able to go at speed? How do I get new entrants in the field? How do I make sure those new entrants prosper so they want to continue to do well in the Department of Defense, but also the other folks are watching, commercial folks are watching those companies come into defense now and saying, is there a market for me too?

22:59And if there is, then they should be wildly successful. The reason why the VCs and PE firms are so important is they're incredible matchmakers they understand what's happening in commercial they understand what's happening in defense we want those defense businesses to also do extremely well in commercial too so if you take SpaceX as an example you know they started out in government with government contracts but they now have a robust commercial business with space the more we can see those type of examples the better it is for America the better is for those companies how do we make that shift like how do we unlock this then and make it so that public sector is on our side?

23:42I think to some extent, unfortunately in every narrative, there's a sense of urgency that drives this. And so I think there's a couple of things why I'm hopeful. One reason I'm hopeful is I think we have the exact right messaging and team right now in this administration. And I think leadership gets this. And I think it will be a prolonged thing. I think Americans are understanding the need. I also think, you know, sometimes there's a silver lining to a tragedy. Russia, Ukraine, I think woke up America, woke up our industry to realize that I need to actually have a national security business to protect my economics.

24:21I also think China being more aggressive has made it American companies realize that it is a risk to do business with China economically. And so now they need to figure out and actually start building and doing more here with our allies and partners to be able to protect their economics. So I think all of those things have sort of led, and I think the revolution of AI that allows them to be able to scale in a way that they could not dream of before at a cost point that they could not dream of before. It actually makes what you're saying a reality. So let's unpack Palantir a little bit more. You're a software AI company.

24:56What problems are you solving? It ranges tremendously. On the warfighting side, as I mentioned with Maven, we're using things like computer vision to be able to identify the battle space. So how do I be able to see in these swarm of threats? Is that a T-90 or T-80 Russian tank? Am I seeing different patterns within the battlefield that are identifying a particular risk to our allied forces? We're doing things like time-sensitive targeting. So as I'm deploying and seeing a target, what are the right weapon systems I have there? Which one is best to use based on fuel munitions consumption with the next mission and the next mission?

25:39We're doing things around logistics optimization. So as I'm expending munitions and fuel, how do I best reorder that into my supply chain and then make sure that that's stocked with the right place at the right time? We also do really interesting use cases around basic things like how do I be able to track a dollar through the life of the entire labyrinth of the Pentagon. And that's where the financial statement audit comes in. We're looking for fraud, waste, and abuse efficiencies as well. We work on different vaccines with HHS and CDC. But then we're also doing some really cool use cases in commercial.

26:18For AIG, we're using AI to be able to dramatically improve their claims process, for example. We're working with General Hospital to be able to identify and prevent sepsis. So it's a wide range of use case. Fundamentally, everything comes down to, can I get the data in order and prevent data fragmentation? And then can I build an analytic or a workflow that allows me to save time or money? You mentioned something shocking. Okay. You mentioned financial audits. Yes. This doesn't sound like warfighting. Why should the warfighter care about it? Okay. I'm glad you asked this question. Pressing. So I think the financial statement audit does three things.