Inside Anduril: Exclusive HQ Tour w/ Palmer Luckey, Brian Schimpf, Matt Grimm & Trae Stephens

0:00Welcome to Sorcery. Perfect.

0:14We are here in what we call our building A. This is our research and development building. It's a 200 ,000 square foot building, 50 foot clear high ceilings here. We have a machine shop, we have a composites lab, we have a development test lab, all of these different environments where we can prototype things quickly, test them quickly, find the fractures, find where they break to get products built and shipped faster. Thinking back to when we started Anvil in 2017 as kind of the pariah of Silicon Valley. It was not something people were doing, it was incredibly unpopular, and now all of a sudden it's a much cooler place than most places in Silicon Valley.

0:50When we started the company the idea was how do you build you know an apple for defense rather than the traditional model. With Andro we are constantly inventing new products we're moving into like totally gnarly hard political and geopolitical questions and like how do we thread these different strategies and that just requires constant creativity. Artistry and meritocracy. Artistry and meritocracy. I'm really curious to hear from you what would war look like on the moon? what would war look like on the moon

1:29Brian welcome to Sorcery thank you thanks for having me thanks for having me at Anderle yeah it's a pretty cool campus it's like tons of energy old LA Times printing press it's like it's a very awesome space when you look at the industrial base the ability to produce and the ability to get new capabilities out quickly is one of the most the determinative aspects you can have as a defense department, right? It's a war department. And that's not where we're at, right? We've had a strategy for generations, which has been the decades long technological edge is how we went, right? And the US invested more, had better engineers, and capitalized it more efficiently to get to that massive technological edge.

2:17And there is still a dimension of that for sure. But increasingly, the ability to produce at scale in a way you can afford, the ability to innovate fast on the software to rapidly adapt these capabilities, that's going to be the determinative characteristic, right? We see this in Ukraine, kind of see this across the board. So everything he's trying to align around is this idea of how do we get capabilities out faster to the force in a way that is affordable and effective, right? And companies that can work in that world, great. Companies that can't, you're going to die. And I think that's a healthy view.

2:52What he's not saying, and I think because the reality is, is there is a mix, is some of this stuff is going to look like autonomous systems, but it's not all going to be, right? There's still going to be a place for, you know, aircraft carriers and all these things, but the balance is going to shift. And there's these new class of capabilities that are really relevant, that can be more cost effective, that you can produce at scale. And that's going to be a key aspect of what we do in the future. And so the focus is really on industry that can perform, setting up incentives for performance and setting up the whole acquisition system around speed, where prior it was entirely set up around, we just need the most expensive capabilities at any time, at any cost.

3:31And that's not the world we're in anymore. Do you think the nearly trillion dollar budget is reasonable or unreasonable given the amount of efficiencies and technological advancements that we have. And maybe for people that don't understand how it's being allocated, could you also share that? So there's borderline trillion dollar defense budget. And everyone thinks it's like we're buying a billion dollars of kit every year. Well, that's not true, right? Forget the actual percentages, but it's, you know, more than half goes to personnel costs, to facilities, to military construction. So you just have an outrageous percentage going to these fixed costs that you have that are not next generation technology.

4:16And then there's an outrageous cost as well then to sustaining the legacy technologies you have bought. So maintaining aircraft, maintaining ships. These are huge bills, right? That is significantly higher than the amount that's spent on procurement. And when you look at this in terms of historic terms, the procurement budget as a percentage of GDP, for example, is I think the lowest it's ever been. And so we're not spending money on the new technology. We're spending money on sustaining the old technology. We're spending money on all the infrastructure that we have to have a global military. And that is very expensive.

4:54So now you're really talking about how do I get efficiency out of, you know, call it the 30 % of the budget that I, you know, you're actually maneuvering around. And in that world, you know, there's a good argument, which is we could be spending that money a lot more efficiently. I think that is true. It's hard to argue we couldn't. How much more efficiently? I don't know. But, you know, I tend to think we can get a lot more bang for our buck on weapons, on aircraft, you know, probably 2x from where we are. by just looking at a different mix of these things. But the hard part is we got to transition to that world, right?

5:27So we can't just jump to that and say, all of a sudden we're going to abandon all of our, you know, man's surface combatants and move to this autonomous future or something like that. Like that's just not believable. So we're going to have to go through this transition, which is sort of always true of how do we responsibly cycle out the old, think about what's still fit for purpose or not, and then get the new systems in place. that will cost more for a period of time. Right. And that is a hard world to live in. And so I don't see a world where like the defense budgets could magically shrink and we still have the military that we need to have.

6:02But I do think these things can be done wildly more efficiently than they ever have in the past. I want to talk about Anderle's expansion. You have a global expansion, whether it's the facility in Australia or the new deal with Edge and the UAE. Yeah. Let's maybe start with Australia and building out Ghost Shark there. Yeah. Australia is a great example. So setting the context maybe a little broadly, we're in a period where things are just geopolitically more unstable. People like to talk about this, that we're in this time of peace, but it doesn't seem all that peaceful to me. We've got a land war in Europe.

6:36The Red Sea is still intermittently shut down. Israel and Iran going at it. You've got China doing constant aggression on the Philippines and the South China Sea. Cambodia and Thailand are sparring all the time right now. India, Pakistan doing air wars and doing air combat. I'm probably forgetting several of these going on right now. And so we're not in a time of peace, right? Like this is not a stable time. And so something has changed, right? Like there's this sense that a lot of the historic grievances, the political opportunism to use violence to get to your ends that has changed. And every nation's reflecting it where they're increasing defense spending.

7:17They're ramping up their own defense. And I think the view of what the U.S. is going to do or not do on everyone's behalf has shifted. The U.S. reasonably is saying we're not going to go fight everyone else's wars. We're going to expect every nation to provide for their own defense. But that also does not imply the U.S. is backing away as the sort of security guarantor for the world, right? Like we still have the only Blue Water Navy at scale that is able to project force anywhere in sort of multiple parts of the globe all the time, can guarantee international shipping and stability of the seas.

7:50There's all these things we're still going to do as America that are very aligned to our interests and aligned to the system that we have. So that's the whole backdrop that's going on. There's a whole lot of other pieces to this. And on top of it, the backlogs on like, you want to order Patriot missiles. I'm hearing right now, the latest number someone told me over the weekend was 15 years to get a new Patriot system. Like, what does that even mean? Like, I have no idea what that means, right? But it's like, call it even five to seven for a backlog. Like, this is crazy. So the U.S. isn't a dependable producer anymore.

8:24Can't get the weapons in time. This has resulted in basically every country looking a little bit differently in how they're going to think about when they are ramping spending, what does that mean and what do they want to be true? They're all going to look at a question of, if we're going to spend a lot of money, we should get some economic benefit. But probably more importantly, we need to have assured supply. We need to know that if we order this, this shows up. And that we want to shape our military for what we need it to be for our regional challenges. Australia is a great example of this.

8:59They shut down their French submarine program. They're going all in on the U.S. nuclear submarine programs. that's not going to show up until 2035. So this major gap of about a decade where their old technology was phasing out and they were waiting on this next generation capability to come in. We went and pitched them on this idea of you could build these extra large autonomous underwater vehicles. You can build them fast. And we did this model of splitting the development 50-50. They had skin of the game. We did too. And we ended up executing that program incredibly quickly. And to their credit, they saw the opportunity and said yes, basically immediately.

9:36They said yes in just a couple of months, and we were signed and under contract. And we were able to deliver at pace. We built out an Australian engineering team. We built out an Australian production facility. We have our first production GoShark already came off the production line. Then I think 30 days of signing the production contract. So just an incredibly fast pace that shows what you can actually do if you just hit go on this. And we want to replicate that model in a number of other countries. It's not going to look all the same, right? There's not that many places that will do, you know, fully ground up capabilities.

10:09But this idea of integrating into their military, helping them think about ways they can use technology to modernize, do warfare differently, and understanding a more nuanced approach to how they're going to get local engineering and local production that fits while still being aligned with the U.S., which is still, again, the backstop of world security. Everyone needs that U.S. alliance. And so this is just a very nuanced, complicated thing to actually solve for. But the numbers are pretty clear. Europe is going to spend something like four times the amount of procurement that the U.S. is over the next five years.

10:48Like it's a massive buildup. Japan's going to substantially increase their budget. Taiwan's increasing their budget. Australia. Like everyone is ramping. So that problem I talked about with the U.S. having so much in sustainment and keeping the legacy going. so their countries won't have that problem as much. They have an opportunity to build new and build efficiently and something we very much want to help them with. 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 % of startups fail because they run out of cash.

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12:27From expert guidance to tailored projects, Turing helps top companies realize AI that's more capable, more adaptable, and more effective. With Turing, discover how AI can accelerate your business growth. To learn more, visit Turing.com slash sorcery, spelt S-O-U-R-C-E-R-Y. That's Turing.com slash sorcery. Trace Evans. Good to be here. How's it going? Welcome to Sorcery. Thank you. Thanks for having me at Anderil. It's a much cooler place than most places in Silicon Valley. You wrote, the factory is really the weapon. Yeah. You know, for decades and decades, the United States was the global manufacturing powerhouse.

13:06I mean, we had the ability during World War II to outproduce our adversaries. And, you know, you had companies like Ford that turned over their production lines to build bombers for the Allied war effort. Fast forward to the last 30 years, the fall of the Soviet Union, we've atrophied massively in our manufacturing chops. We offshored a lot of manufacturing work to lower cost labor locations like China. And not only did they soak up a lot of that manufacturing capacity, but they also developed advanced tooling and know-how to build the things that we use every day. whether it's, you know, the microphones that we're wearing today or the iPhones that are in our pockets.

13:48And so at this point, even if there was complete labor cost parity, we still don't have the ability to just magically reshore a lot of these critical components that are going to be important to the next 50 or 100 years. And so, you know, we're in this place where we really need to re-industrialize. It's incredibly important. It's incredibly important culturally, geopolitically, strategically. and you know this is what andrew is really focused on right now is bringing back our ability to not build hundreds of things or thousands of things but tens of thousands of things or hundreds of thousands of things efficiently scalably uh and to do it in a way that uh enables us to retain that like magazine inventory advantage against our adversary and so i think that's that's really what i was saying with the factory is the weapon because without the factory you have no weapons Are you also outsourcing and finding different ways to manufacture?

14:40We have a lot of manufacturing partners. Obviously, we're not building every subcomponent of everything that we're building. So we're working with other vendors. We're working with other machine shops. We're working with other manufacturers. And then we're pulling it all together, generally in our own facilities. But in the first quarter of next year, we'll be opening our soon-to-be 5 million square foot factory campus called Arsenal One, just outside of Columbus, Ohio, which is where we'll start ramping up our collaborative combat aircraft to the autonomous fighter plane production. And we have other facilities around the country.

15:12We have, you know, shipyards. We have a loitering munition assembly that's happening in Atlanta, Georgia. You know, we do some stuff right here in Costa Mesa at our headquarters. So I imagine that there will be multiple factories across not just the United States, but across allied and partner nations as well, where we're ramping that manufacturing muscle at the same time. What was it like to open up Arsenal One? I know it's under development, but choosing Ohio, where you're from, what was that like? Yeah, at some point when we got down to like the final three states, I realized that the bias was going to look really bad to the company.

15:48So I just kind of sat back and I'm like, you know what, I don't want to push this. I think Ohio is great. Obviously, as a native Ohioan, I thought it would be awesome to land there. Opening something so large like that, does this feel real? I mean, primes have existed for a very long time, but you're known as the new prime. So how does that physicality feel? Well, I'm certainly experiencing the realness of it with all the LinkedIn messages from my high school classmates that I haven't heard from in 20 years that are now looking for jobs. Yeah. So it feels pretty real. Now, I mean, one of the cool things to remember is that Ohio is the birthplace of aviation.

16:24And so in some ways, it's like you're starting with the Wright Flyer and then coming back with fully autonomous fighter plans to be built, you know, less than an hour drive away from where the Wright Brothers were building the first airplane. And so there's a tremendous history. GE Aviation, GE Aircraft, where they build the jet engines is also right down the street, about an hour away from where we're setting up the factory. So it's a cool kind of cultural moment, I think, not only for us and what we're trying to deliver to the department, but also to the state of Ohio. One thing that was kind of the central focus of our interview with Alex Carr was like moral and ethics around this.

17:02Christian Garrett, he's a big fan of you. We've done so many interviews with him at this point. He's great. But one of his questions he wanted me to ask you was about the just war theory and St. Augustine. So how does that play into all of this? I mean, since the very beginning, this was always a big part of the conversation that I was drawing the rest of the team into is Just War Theory, which was developed, you know, over a thousand years ago by St. Augustine, talks about like how you engage in lethal defense activity in the most ethical way possible. and if you look back at like the course of all human civilization you had this massive ramp up in lethality so we started with like hitting each other with rocks and then it was like you know at some point somebody's building and making a knife and then someone makes bow and arrow and then you have catapults that could do like one-to-many destruction trebuchets and then you have the advent of gunpowder so you have guns and simple bombs and that just kept going up and up and up until the atomic bomb in 1945.

18:06And at that moment, I think humanity looked around at each other and they said, I don't think we want to do this. Like global nuclear war is a pretty bad bet. And so from then until modern day, you see the climb back down the ladder. And so you had precision guided munitions. You see like some of the counterterrorism work we were doing was literally shooting non-explosive AIM-9X missiles into windows to take out individual targets without blowing up buildings, no collateral damage. We've become really, really good at being accurate. And so people are constantly talking about kind of the freak out of the intersection of AI and defense and autonomy.

18:45And what does that do from an ethics perspective? The goal is take humans out of dull, dirty, dangerous jobs. So we're not putting our men and women, brothers and sisters in horribly dangerous situations and become as accurate and precise as possible. And that's really what just war theory is all about. Principles of discrimination, principles of just cause, like how good is the information? Do we know for sure that this action that we're going to take is actually going to address the problem that needs to be solved? So this is very, it's a big part of andrewal culture. We talk about these things internally a lot.

19:22And I think we would only do something that we fundamentally believed would be better, more just for humanity. Where do you get pushback on that? I mean, there's a lot of pushback from, you know, people who don't necessarily understand why defense is important. You know, pacifism as an idea is only possible inside of a governing system with a monopoly on violence. Like you can't be a pacifist without a government monopoly on violence. That's just like not possible for humanity. And so I'm glad that people get to have these positions, these kind of anti-national security positions where they can sink down into their comfy couch with their hot chocolate and talk about pacifism because it means that someone out there is willing to risk their lives to protect their ability to be pacifists.

20:11So I'm all for it. Do you have any cultural commentary on what's going on in America right now? I think culture is really hard to predict. I mean, we've seen big shifts even in the last 10 years that I don't think I would have expected. You know, there's a lot of surveys that show that for the first time in modern civilization, more men in the most recent generation in Gen Z going to church than women. It's like that has never happened before. Ten years ago, if you had asked me, like, do you think Gen Z will have a rising church attendance and it will be more men than women? I would have gotten that answer totally wrong.

20:45So I'm not sure that I would be able to predict this stuff necessarily. But I think, you know, you've probably seen the meme like, you know, hard times create serious men, serious men create easy. I think that's kind of the moment we're in as people realize that, man, being serious is very important. And there's more important stuff out there than monkey JPEGs and, you know, AI slop. And I think it's an opportunity for people to step into a good quest. And so I'm hopeful, at least, that we're in a moment of a transition from slop to good questing. Sorcery is proudly sponsored by Carta. Carta is transforming the private marketplace, connecting founders, investors, and limited partners through software purpose-built for private capital.

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23:01Full disclosures in the description. Paul Wirth, lucky. Welcome to Sorcery. Thank you for coming to Andrel HQ, former Los Angeles Times printing press. So it's a lot of fun. I mean, you can see where we cut all of their machines out of the floor even. So, you know, we didn't actually rebuild the floor. We just went in with a grinder and cut out all of their machines. And you're building something similar, right? Oh, yeah. Very similar. All kinds of cool stuff. So I'd love for you to just maybe walk through one or two of your favorite things here. Sure. So this is our public showroom. We have another one that's full of stuff that I can't show to anybody without permission from the government.

23:37But of the things that are in this showroom, one of the things we're most proud of lately is Fury, also known as the FQ-44. This is the first autonomous fighter that the United States Air Force has ever procured. we recently just flew it for the first time we went from signing a contract with the air force to first flight in 556 days which is as far as i know the fastest new fighter development program since the end of the korean war uh the really exciting thing about this program is we were competing against a lot of the big guys so we were competing with boeing north grumman lockheed martin and in the end andrew beat all of them which was really uh really gratifying to you go from starting this company to going toe-to-toe with the guys who are legends of the fighter community and actually get selected to build something, build something to fly.

24:28So it's an AI-powered fighter jet that flies alongside manned fighters. So imagine if I had an F-35 pilot, he might fly with two or three or four or five of these alongside with him, extending his weapons webs forward, his sensors forward, and allowing them to engage in risks that you would never want a person to do. You know, there's a lot of ways to win a fight and live to see another day. There's a lot of ways to win a fight and sacrifice pawns on the board. And autonomy means that you can do that without the ethical problems of, you know, just throwing away human lives. And what do you think this costs you compared to what the government would cost them?

25:09I think that we're, in general, much more efficient than the government. We've done a pretty good job. We like to think of our approach as being a defense product company, not a defense contractor. That is, we're not getting paid to engage in contracted work where they say, go and do this many hours of work to build exactly this thing. Instead, we're investing our own money in building what we think the right products are, and then we sell them to the government. So we want to be going to the government generally with a product rather than a PowerPoint or at least a prototype instead of a presentation.

25:43And that's gone really, really well for us. It leads to way better incentive structures. We make more money when we move faster rather than more money when we move more slowly. We make more money when things work the first time rather than more money when it takes 10 tries. And you can imagine which of those leads to better outcomes. How far do you think we are from invisibility cloaks and masking? And I don't mean by radar. Sure. You mean like visible spectrum. Visible, yes. Yeah. That's actually a lot easier. You think so? Oh, yeah, way easier. Really? It's a lot harder to hide from synthetic systems.