Palmer Luckey on Hardware, Building, and the Next Frontiers of Innovation

23:02And you can't have the fair weather friends when you're in controversial business. And do you think you managed to do that with 7 ,000 people? You also must do like in your interviews and your process, you must, because they slip through the ads and they - Look, you'll never be perfect, but everything you do makes the problem slide this way on the scale towards better. And so like, don't work at Andrel as an ad campaign. Tripled our recruitment on like in terms of incoming. and also we got a lot of more qualified applicants. Mostly it brought in people who are unqualified. But you're trying to move the needle and I think it all adds up.

23:38We, of course, hire people who are bad fits and then we fire them. Yeah. Yeah.

23:48They quit themselves sometimes. Yeah. The other thing I'll say, and I'm not, I'm only on the outside. I mean, the firm's an investor, but I'm not directly involved, but I'm a fan from the outside and I am just amazed, like, so many startups, like, they'll launch a product, especially hardware, like, every two years. I mean, I feel like every three weeks, like, I just saw you, you had this new AR helmet, and three weeks ago you had, I think, an autonomous submarine. Like, you just launch a lot of stuff. It's kind of incredible. We've got about 25 products. The interesting thing about Anderil is what we're doing, where we're launching many, many, many products, and where we are having individual product teams on each of those that are relatively lean, is actually easier for me to run as a company than the companies that have to invest in one or two products and grow them to serve everybody.

24:30The ultimate example of this is these large enterprise software companies where you have thousands of people working on one thing and it has to serve everyone in commercial and consumers and enterprise and government. And that is a very hard problem to build a product with thousands of cooks in the kitchen. All I have to do is keep making new products. And then I keep a small number of cooks in each kitchen. and that ends up being a pretty self-regulating strategy. People are tribal. People work well with a certain number of people. There's only so many people you can have very high trust in where you trust they're truly doing things for the right reason and where you understand what everyone is doing around you.

25:10It's not that much bigger than the size of a home construction crew or a small game development team or you kind of see these natural themes emerge over and over again across societies and across history, where it's these groups of a certain size. I mean, the founding fathers. And I'm trying to keep every business unit as close to that size as I can. And they're all sort of engineers and product people, not like, I assume you try to eliminate middle management and layers. There was a very brief period, very early in Anderle's history, where we had more lawyers and lobbyists than engineers. It was very, very brief, but we had to over-invest in that when you're starting a company in such a compliance-heavy, regulatory-heavy, government-interface-heavy side.

25:55We have never, ever had that problem since. I'd say we're about 85 % engineering. That's correct. Yeah, we have quite little overhead. We don't have a ton of middle management. We basically have project and team leads that are typically engineers who came up out of other programs. One of our program leads is a guy, we call him the king intern, because he was Andrew's first intern. So he started when he was 19 years old at Anderil. We were his summer internship. And then he quit school, came to Anderil, and within 12 months was leading a product. And now he's leading an entire business division.

26:32And like we've done a pretty good job of making a meritocracy where people see the people in leadership roles are themselves engineers who have cut their teeth and proven themselves inside of Anderil. Yeah. And when you're growing quickly, it's a lot easier. Like this is a harder strategy for a stable company and I can't recommend it. But when you're introducing products at a sufficiently high rate, there's always a place for you to take these people, to pluck them out and say, you're going to be in charge of this new product and you're going to make it work using your experience of how to work inside of our organization and the fact that people know you and trust you.

27:02Static organizations struggle with this because there just aren't enough roles. It's the how many senior VPs are their problem. It's nice to be growing fast. How do you come up, like, I guess a couple of questions on this. Like one, how do you, you seem to follow like everything in hardware and software. I try. I watch your videos. And so like, I'm curious how you do that. And then also how do you come up with all the ideas for the products? Like, is that bottoms up? Is it you? Is it like, how do you keep it like an active R &D? I used to come up with everything. I now come up with about half of our products.

27:31The other half come through a combination of customer demand and people in the teams coming up with solutions to problems. And that's good. Like in the terminal stage, every idea I have should be worse than the ones my employees are generating. I mean, that could even be the case today. But I'm the guy in charge. I'm the one guy that can't be fired. So half the ideas are still mine. Hopefully that shrinks over time. Sorry, what was the other bit of that question in terms of what I think? Well, I'm just curious how you kind of keep up with the stuff. How do I keep up with the weird stuff? I would never admit so in public, but I do actually keep up with the academic literature.

28:09I'm not... Like of the computer science? in any space that I'm interested in. So like I am reading all the journals that mention synthetic long chain hydrocarbons. I'm a huge believer in that. It's going to change everything and it's going to make this whole battery electric nonsense look like the multi-trillion dollar farce that it is, especially in aviation. This is a long topic, but I'm not saying, by the way, the best performers in that area are not necessarily academic, but by staying on top of the academic side, you'll never be too far behind. People in academia don't have to create or produce or sell necessarily.

28:42their job is just to be on the front lines of what's new. And so they'll never be too far behind that most of the time. Same thing with VR, same thing with optics, same thing. There's like good academic stuff in VR on some of these areas? No, no, there's nothing good, but they talk about everything. Okay. It's what, it's what. I think of, yeah, I just don't think of it. Think of it this way. Like suppose that you are going to try to, like you want to keep up to date with new curved polarizer materials that are used for making pancaked optics where you're folding optical paths on top of themselves.

29:13You're like, oh, I want to stay on top of this. Well, what are you going to do? Are you going to read press releases of all the companies that are touting this stuff? The manufacturers don't tout this stuff. How are you going to stay on top of the fact that there even are new advancements? And it turns out a pretty good way is to just follow the academic literature where you have people that are doing research on these things. And then their job is to say, oh, and such and such group in China is doing this. And there's other company that has this approach. What we propose is a novel approach to X, Y, and Z.

29:43Now, they probably can't actually do it, and they're never going to pull off anything of interest, but they've still done the other work. I am basically using them as my outsourced research team on anything. If I need to find out what the state of the art on something is, I can trust the academics somewhat more than the press. Because the press just hates everything. And also, they're lazy. They're not digging deep. They are basically, the press used to regurgitate what was given to them in press releases positively. Now they just regurgitate it and the tenor has changed. But it's the same activity.

30:18It's just repeating what's in the press release and the commentary around it is what's changed. So yeah, actually I stay up to date a lot by reading academic papers and journals that are focused on the things that I'm interested in. The academics, I also love when they complain about people in industry, like nuclear. If you want to stay on top of what's going on in nuclear and you want kind of the contrarian view, follow what the academics are saying about modern, small, modular reactors. And you'll see them talking about new developments and then complaining about how they don't work. And sometimes their complaints are good and sometimes they make absolutely no sense.

30:49But like - It tells you what to look at. It tells you what to look at. And like, I don't have enough time to become a real expert on this stuff. Like, I just, people didn't know, I used to be a journalism major until I dropped out. I was the online editor of the Daily 49er at Cal State Long Beach, which was the fourth largest student-run paper in the country at the time. and it's not the Daily 49er anymore. It's now the Daily Breeze because 49er is a reference to the gold rush, and the gold rush is racist now. I'm not kidding. That's why they did it, which is crazy because the team is still the 49ers.

31:18So how could that be? Anyway, the paper decided its name was racist, and so they would rename it after 100-plus years. But what I realized as a journalist is you can only really follow so many things yourself yourself directly from first sources. Like if you, you could choose a beat and you could stay on top of it, but you have to outsource at some point the research to other people to consolidate and bring these things together. I'm very bullish on using AI at my direction to do this. I want to be able to sit in AI and say, scrape literally everything, the press releases, the social media chatter, the academic stuff, and then give me, give me a summary that is not contaminated by some profit interest or ideological interest.

31:59Yeah. You don't have to convince this crowd that the press is anti-tech. Crypto has been the most, I guess it's unbelievable. We've tried for 12 years to have one reasonable article printed about the actual stuff going on. The AI stuff is so hard. They're starting to feel it now with all these fake water articles and things, and it's going to just heat up more on the ad. It's so funny when people, they look at Anderil and say, oh, look at Anderil, trying to jump onto the AI grift, trying to pretend that all their stuff's about AI. The name of my company is literally Andrel Industries. The acronym is literally AI.

32:33Like it's, it is so, we didn't talk about it in the early days because AI wasn't cool almost nine years ago. It was like cold fusion or VR, nonsense for the future, never in the present. But yeah, it's so funny to be painted by the media as an AI, you know, a coattail writer when in fact I've been there before LLMs were a glimmer in most people's eye. Only because John Carmack told me. He told me AI was going to work, and that was why I believed him. That's a good person to listen to. He's a good person to listen to. A big premise, I think, of Andrew, Tell Me If I'm Wrong, is the growing rivalry between the U.S.

33:09and China. I've heard you talk about this on podcasts, but you don't think that on the current trajectory with the defense contractors and technology industry that we're well set up for that. Maybe you could talk a little bit. I would love to hear your thoughts on that rivalry, and then specifically on how you see kind of handicap the technology race. So AI and, you know, defense, robotics. We're spending way too much. We're getting way too little. And we're not progressing at the rate that our geopolitical adversaries are. And if it were a perfect, if it were peacetime and there was no inkling of conflict for us or our allies, that maybe wouldn't be a problem.

33:43But that's not the world that we live in. And so the rivalry with China is a big one. It was a little broader than that. I mean, when we started Anderall, If you look back at the first pitch deck, you remember there's a page with a bear and a page with a dragon. And we lay out what the Chinese roadmap looks like. And we laid out what the Russian roadmap looked like. And we literally lay out that Russia is going to invade Ukraine. They intend to take it by force. There's a great quote by Putin where he says, the country that wins in the sphere of AI will become the ruler of the entire world. I have a huge amount of respect for that quote.

34:19First of all, like what an incredible amount of style there. I'm not saying that I like Putin. I super don't. I arguably started a company to fight Putin. I'm personally sanctioned in Russia and Belarus. I literally cannot go there without being arrested by Russian security forces. So don't take this in like the, I'm going to nail palm under the wall. He said something good about Putin, but let's like, let's be honest. That's some really good, like bond villain level. Yes. They'll become the ruler of the entire world. You got to respect that. And he said that along, like you said, he said that speaking to a bunch of technical students at a technical high school.

34:56But a long time ago, you're saying? Yeah, back in 2007. Like seven, this guy was, like Putin must read a lot of science fiction. He was, that's really early. I mean, well, remember we were quoting it in an Andrew Pitch Deck in early 2017 before AI was cool at all. So like, man, I would kill for a US leader to be that far ahead. Could you imagine if you had, if you had somebody come out, I won't even name who, but if you had somebody come out in the White House, he says, we have to hold the LaGrange points. Someone has to have the high ground in orbit. The cislunar insertion and transfer pads must be protected if we're going to extract resources from the belt, asteroids.

35:37So you know what I'm talking about. And imagine if that was also, could you imagine if that was like from his own mind and not something that somebody wrote? That is Putin. He's a competent adversary in these ways. And so, yeah, that was very much part of the rivalry. The problem is, of course, that now that rivalry has kind of reached its terminal stage, right? He's made his move on Ukraine. Everyone's seen that it's happening. And so the remaining one that we can influence is China. And you called out all the drone stuff. I mean, you knew that was all going to happen, all the stuff like the Ukraine drone.

36:10We were talking about literally, I mean, our deck laid out exactly what was going to happen. And it said that warfare is going to be about a lot of these proliferated systems. A lot, like it's going to move away from exquisite things that you build up capacity over decades to instead lower end systems that you can actually manufacture at a rate that is relevant to an ongoing conflict. And of course, that's exactly what's happened in Russia. But the very big picture here is we were living in a world in 2017 where a lot of people believed we lived at the end of history, that there was no more geopolitical movement of significance to happen and that United Nations could write mean letters to dissuade people from expansionist actions.

36:49And that what we're seeing playing out is kind of the more cynical version of, we're seeing the cynics, the cynics were right. The cynics who said, no, war is still a thing of the present, hopefully not the future. And it's a good thing that companies like Andrel, I think, were getting started early on this. Because imagine if Andrel was started right as conflict kicked off in Europe, or worse, being started right as conflict kicks off over Taiwan with China. It's too late. You can't start working on bombs after the war has started and expect to have any deterrent impact. You're just going to be part of fighting wars instead of preventing them.

37:31How do you handicap? So I always, like with AI, I always hear about China, US. I don't hear Russia as much. Maybe they're good at it. I don't know. But then like, how do you handicap it? Well, see, that's true today. Yeah. Putin didn't say that thinking they, he wasn't saying, I think AI is going to accrue to the winner and I bet the US is going to beat me. They were investing a lot. It's just, they didn't take the winning path, right? Like they didn't do some of these, like the kind of attention-based models, focus-based models. It just, that wasn't the path they went on. They didn't get the winning path.

38:03And so you're right. It's mostly US and China now. Russia's trying to catch up. But he said this at a time where he thought that was going to be their asymmetric advantage. He thought they were going to figure out all the killer drone stuff way ahead of everybody else, and he would have put it to work before anyone else even knew how to respond. Imagine if Putin had made chat GPT as kind of the simplified version I use for members of Congress. Yeah. But like the way I sort of, like America has, we have this sort of decentralized capitalist system. China has the centralized, obviously, command and control.

38:36They have more people. They're very smart. The deep seek and all these other things show they caught up very quickly. They're ahead of manufacturing. Yep. But like, yeah, we, you know, on the flip side, like I think the superpower of the United States, right, is the very fact that every thing everyone's complaining about in the press right now, which is we just, like the hyperscalers just invested a trillion dollars and like, and is it a bubble? Maybe, who knows, but it's a good thing because this is what we do. This is what we're good at. It's an advantage we have. It's the animals, it's the capitalist animal spirits, right?

39:00Like it's like the, you know, it's the, it's like the internet. It's like building out the fiber. Like you need, you need this excitement and capitalism. We need to choose advantages that United States has. Like this, this is the one issue with, the one issue with re-industrialization is that China has already done a really good job there. I'm not saying we shouldn't, we should. But we need advantages that take advantage of our better financial apparatus, arguably that take better advantage of our cultural apparatus, certainly that take advantage of a unique fact, which is the U.S. has friends or at least partners all over the world.

39:32China doesn't have that. China has not convinced the world to host the Chinese military, to host Chinese culture. The United States needs to lean into the remaining advantages we do have. We should re-industrialize. I'm not saying we can win all on our own. We can't win without doing that, but it's not enough on its own. And you recently started a stablecoin-related crypto bank, right? It's a little more boring than that. Everyone's calling it Palmer Luckey's Crypto Bank. It's not so much a crypto bank as a bank that does support stablecoin deposits and transfers because of course any bank is going to need to support these things.

40:08If you want 24-7 liquidity and you want 24-7 settlement and you want it every day of the year with every country around the world, you're going to have to do it via stablecoins. It's just obvious how that's going to happen. So everyone's seized on Palmer Luckey is doing all this crypto stuff. It's actually way more boring. It's a bank that's a modern bank in a way. In many ways, it's the most boring bank there could be. We originally were thinking of calling it the real bank, but it turns out that the slogan, I think, of Citibank is the real something bank. I can't remember what it was. It's not a good slogan.

40:42Anyway, we're going to call it the real bank, but it was a very simple thought. Okay, SVB is collapsing. Turns out that there's more risk in the system than people thought. It's potentially more widespread. And like, yes, SVB did some things that someone could avoid, but there's a lot of things that are inherent to the way that current banking is done. So our idea was, what would a bank look like if its job was to serve companies who more than every half percent of interest on their deposits actually just really needs their money to be there and not disappear. So it's narrow banking, not fractional reserve?

41:15So I think that there needs to be one-to-one banking in the United States. Not all banking. I'm not saying every bank should be like this. But the product should be available. I started going around talking to banks. I said, all right, I've got this thing. I want you to take my money and then you have it when I come to get it. it's the only thing you're going to do by the way it's called narrow banking and like there was actually a company that tried to do it recently and under the Biden administration and they got shot down and the government doesn't want anyone to do this as part of the crazy scheme I know I know like there's a reason the banks aren't doing this and it's not just that nobody's smart it's that the government doesn't really want it to happen well yeah they claim it's because then you would hurt the credit system and all those other things but it's to your point I think shouldn't you be able to like have at least some people opt out and actually have a bank that has your money there Well, and by the way, you can do it if you have a T-bill, for example.

42:05Then you have a Q-sip, or a custodial. It's bankruptcy remote. And so it's effectively available to wealthier people, but not to the retail. And not available to a lot of these tech companies, smaller tech companies. So that was the question. How do we make a bank that would give people the things they need from a bank without the parts that are going to destroy their entire business? I mean, let's be real. If the federal government would not have bailed out SVB customers far beyond what the law required, And if the Biden administration would not have more or less spuriously declared that the signature bank deal was actually signs of systemic collapse, which is nonsense.

42:39Like if they wouldn't have done that, it would have wiped out a lot of tech companies. And so what we're trying to do with Erebor is actually a lot more boring than many people think. But there is a market for it. Imagine a bank that doesn't debank you. That's right. Has your money when you want it and actually maybe gives you interest would be another radical idea. Yeah. Which, you know, if you know this, that's the big debate point in the stablecoin bill, is that they're trying to undo this now. Is this thing where you actually pay interest to customers? I'm very familiar. You can pay rewards to customers.

43:09You can't pay. No, even that they're trying to ban rewards. That was like, yeah, that was the negotiated. Now they're trying to get, they're trying to undo the deal. The way that I look at it is this. There is a lot more risk in the banking system than anyone is willing to admit. it only works if everyone stays in the matrix and doesn't look at how it all works. And I probably cannot build a bank that survives a total financial collapse. But are you guys familiar with the theory of the bear? The bear is chasing you. He's chasing people around you. You don't have to outrun the bear. You have to outrun everyone else.

43:44And so I think you might not be able to make it where every bank fails and you survive. but you can make it where you're one of the survivors in a world where something really bad happens, something that is beyond what the government could feasibly bail out. And by the way, when I say feasibly bail out, I don't just mean financially, I mean politically. I am actually astounded that the Biden administration bailed out a bunch of billionaires like me in the midst of this huge populist shift, right or left. And the fact that they did it for rational reasons, but I'm surprised they didn't do the thing that would have been popular with their base.

44:18And it's not hard to imagine a world where a different White House would do something different. And this is not a right or a left thing. It's a populism argument. Will we live in a world where politicians can make rational risk management, systemic financial collapse risk management, if it's going to make them look like they're in the pockets of the billionaires? I think maybe not. I think you could end up in a world where there's massive economic pain because it's not politically viable to do the right thing for the country. And so that's the world that I'm trying to prepare for. The billionaires, the millionaires.

44:53You know, if Bernie has his way, if Bernie got in the White House, and he's not that far away, you know, he's like a— at one point, he was a few superdelegates away from winning a general election. It's something to ponder. Bernie can still win. If we have an economic collapse, I think that— well, I don't know if we want to get into politics, but I mean, look, I think that— We're not into politics? Yeah, so, I mean, you know, the Mamdami winning in New York, like, I think what we saw— That's a great example. Yeah, the Republican Party has shifted to this kind of nationalist populist movement with Trump and Vance.

45:26That's why I said it's not really right or left. And the Democrats may shift to that, and who knows? Like, we're into—I think we're an uncharted— I mean, it's a real realignment, I think, in the sense of maybe since FDR or something, we haven't had such a realignment of the parties, and it makes it very unpredictable, and you have a bad economy, and, you know, there were only a few dominoes falling away from some really weird outcomes, in my opinion. Yep, yep. But like in the case of Erebor, the most, the riskiest asset, like the riskiest product we're offering is lending with a 50 % loan to deposit ratio, which would make it one of like, like that's the riskiest product is one of the most conservative ratios in the entire country.

46:04So it's smart. I mean, and luckily this administration was willing to sign off on it, which in the past, they've not been a fan of these things. Yeah, yeah. That's awesome. So maybe last question, and then we'll take questions from the audience. Just since you're, like, such a futuristic thinker, I'd love to hear, like, I feel like all these things, like sci-fi things, that I've, I heard you talk about Robert Heinlein on the podcast. I just read Stranger to Strange Land recently. It's so funny. I love Starship Troopers. It's so funny when people call him a fascist because of Starship Troopers.

46:35Yeah. And they've clearly never read other Heinlein. Like, Heinlein also wrote basically like pro-worker, pro-communist. Yeah, he's not. Like, there's works where literal communists who seize the means of production from the private companies are the heroes of it. Have you read Stranger of Strainland? Yes. I've read every single Heinlein. It's crazy. It's like this hippie, it's like electric coolant acid. It's great. I mean, it's amazing. He's just a great sci-fi author. It's so funny when people try to boil it down. He must be a fascist because the government has some fascistic tendencies. In Starship Truth.

47:06He's critiquing it, I think, yeah. He does it all. He makes fun of every... Anyway, yeah. But I feel like, to my question, I feel like all of this stuff that's been talked about my whole life is like suddenly happening. Like, I don't know. I know nothing about energy, but my friends tell me fusion may happen. Quantum computing, the experts, some of the experts here say, you know, it may be actually starting to happen. Obviously, crypto, AI, AI is clearly happening. We believe crypto will happen. Yep. It feels like there's all of these things that have just been talked about. I mean, there's stuff in biology.

47:38There's stuff, you know, you're doing in, you know, autonomous systems, humanoid robots. Like - Interspecies communication. Feels like all this stuff is happening now. And I'm just curious, like, do you think that's true? And what's going to happen? Like, in the next 30, is it like, to your point about history starting again, it feels like, like we had, you know, Peter Thiel talks about we had 50 years, only digital innovation. And, you know, if you were born in 1890, you saw the invention of the airplane and a man on the moon. And then physical world stuff kind of stopped. but it really feels like both history in your sense of like wars restarting, land war in Europe, obviously terrible things like that.

48:11But at the same time on the tech side, like all this cool shit's happening all at once. And it feels very real. Our understanding of the world is progressing so fast. And there's a lot of things that don't require even technological breakthroughs. Like the most exciting thing about what's going on right now, in my opinion, is that it's mostly not actually technological progress. It's psychological, or you could even call it quasi-religious progress, catching up with the science that was figured out decades ago. That's this whole nuclear thing. I have all this nuclear energy stuff. It is just everyone's willingness to do nuclear, catching up with the technology.

48:49Political, cultural will. A lot of this bioscience. There's a lot of things that have been proposed for decades that are only just now actually being tested. I mean, here's another example. We've understood oxytocin, which is one of the primary mammalian pair bonding chemicals. We've understood how it works for decades. We've been like actively using it to help like postpartum depressed mothers bond with their kids. Like, oh, you hate your baby? Look at your baby and we're gonna give you this shot. Well, the fuck you love your baby now. It's incredible. And there's people who are talking about using it in totally novel ways.

49:19For example, doing divorce counseling. And we've understood the mechanism of it for 50 years now. And it's literally just a willingness to just do things. And so I'm excited about the new science. I'm excited about new fusion. There's a lot of just do things that's going on right now. And some of it's infrastructure, like AI is really about GPUs, right? Like a lot of it's engineering. It's just like, isn't it too? Like just the timing of like all the stuff came into place. We got so lucky. What a crazy coincidence. You basically had all these GPUs for gaming. By the way, Oculus, when we were acquired by Facebook, almost bought Nvidia back when they were worth about$7 billion.

49:53And we were looking at doing a 51 % takeover. No, but here's the, and people say, oh man, imagine if we would have gone through with that project. But they never would have done what they did, right? It was gaming. And then the gaming stuff happened to be useful for all the proof of work and staking stuff in crypto. And then that ended up also being very similar to what we needed for AI. Like, man, what an incredible coincidence we live in that world. There's an interesting argument where Oculus would have gone and got NVIDIA and AMD and centralized them and then only focused on gaming and then we wouldn't have any of this stuff.

50:28Bay High. It's a crazy world. And do you think we're entering into this sort of like maybe unprecedented 20, 30-year period of exploration? Absolutely. Look, I'll give you my thesis for optimism. People know that I'm a pretty happy guy. It seems like I'm having a good time. It's because I remind myself that oats are like a dollar for some large number of pounds of oats. You can work for one hour of minimum wage at a federal level and earn enough calories to survive an entire week. It's the best it's ever been. Nobody's been able to do that. And it's not just oats. It's agriculture in general. Modern pesticides, controls, Roundup, machinery.

51:09We've figured out how to make food really, really well. We throw away most of it. That's how good we are at making it. And the same has been true, I think, for clothing. How many outfits do you own? 20 or something, I don't know. And how many would have you have owned as a rich guy even, you know, even 50 years ago? How about 100 years ago? How about 200 years ago? We've just made clothes so cheap. People buy clothes and they throw them away after wearing them one time. And you don't even have to be rich to do that. Like there are people who are in college working part-time who do this. And I think that what you're going to see is that same level of automation that has dominated textiles and agriculture start to apply to everything.

51:46I think AI is going to make it easier for the resource extraction, processing, and manufacturing. I really do believe that in our lifetimes, you'll be able to go buy something that's like a Ford F-150 for$1 ,000 or the equivalent of a thousand. The cost of the ROM minerals. The cost of extracting and transforming it will go to near zero and we're going to compete the margins way down. It's just not that crazy. And so if you can, and I bet you'll be able to recycle it with 90 % efficiency at the end of the season. You'll say, what's my summer car going to be? Let's go down to the mall and buy one and we'll try it out.

52:17Same thing, I think, for housing. Housing is going to come extremely cheap. The components are not expensive. It's the transformation and the regulation that have made it really hard. Policy is a bottleneck. Correct. And so I think that this is what I mean when I say we don't need technological breakthroughs so much so we just do things. And like the tech to do this is going to catch up. Like, you know why manufactured housing isn't big in the US? It's just anti-manufactured housing laws, literally prohibiting housing that is manufactured not on site. It's one of the most anti-American sets of laws that there's ever been.

52:46I confidently believe that the founding fathers, if they were around, would make this a federal issue. And they would say, we are not going to allow, we're not going to allow local governments to decide. Like if you want to say a house of a certain appearance is one thing, that's fine. But you cannot, like this is a real interstate commerce issue. You cannot effectively prohibit other states with competing with your housing industry by prohibiting any housing that was created majority outside of your state lines. That's crazy. And we've probably spent, I don't know, $100 trillion on housing that we didn't need to because of that.

53:19Anyway, all this stuff is going in a good direction. That's why I'm optimistic about the future. The current present of Oats is the future of everything. Amazing.

53:31This is great. So let's maybe take some questions from the audience. Thank you, Parma. Super interesting conversation. I have a question about your structures. You were speaking about how you have a lot of small teams, and this feels like it's optimizing for the number of products you can iterate on and figure out what works, not for manufacturing very efficiently and making the cost of unit as low as possible. And I'm coming from Ukraine. I have spoken to some people in defense industry there and their criticism for Unreal was exactly this, that your products are very expensive and what they need right now on the front line is like something very, very cheap, just like we had it in the Second World War where like German engineering was way superior to the Soviet one, but the Soviets just had massive quantities of the tanks which were stupid, lame, easy to destroy, but the sheer quantities eventually won.

54:26How are you thinking about this? Are we in a situation where China has already won the race on cheap manufacturing? Generally, what are your thoughts on this? I'm very curious. So they've definitely kind of won by any rational definition, and so we're probably not going to approach Chinese cost. Luckily, the U.S. has more money, and we make more money per person. And so we can probably afford a little bit of inefficiency. On the Ukraine side, that one's really interesting because we've had hardware and people in Ukraine since the second week of the war. I've been to Ukraine during the war myself.

54:59And we've been a part of USAID packages, European aid packages. We even sold some things directly to Ukraine. But to your point, mostly higher end stuff, long range loitering munitions that can get through jamming bubbles. And what they really need is large amounts of industrial levels of firepower. I mean, like they need a lot of really small, cheap drones. They also just need a bunch of artillery shells. They need a bunch of mortar shells. The biggest problem for a company like Anderil, and it's a fair criticism that people have made. The thing is I can't compete with, for example, Eastern European manufactured artillery or mortar rounds.

55:32I just can't do that in the US, no matter how smart I think about it. I make solid rocket motors. I've wanted to make energetics, get into the artillery shell business. The problem is I just cannot compete with what is a quite powerful arms industry that exists in a lot of the Baltics and Eastern European countries that are supporting Ukraine. The problem is that to automate everything, you have to get to a sufficient scale. And so one thing I've done is I've approached multiple administrations and said, hey, we need to commit to, for example, supplying 155 artillery shells to not just Ukraine, but all of these allies.

56:04We need to build the alien dreadnought where the metal goes in and the shells come out. So are you familiar with how artillery shell manufacturing happens in the United States? Here's the actual problem. The facilities are literally owned by the government. And then they actually lease them out to operators who then use them to develop stuff. And so if you try to compete with them, the government explicitly says, but this will, it'll be like, it's a waste of investment because we've already made our investment in these facilities. So like, I want to solve these problems, but in general, Anderle's looked at these things kind of quasi-realistically.

56:36I'm waging this war of hearts and minds to explain why that is the dumbest thing ever. They need to open it up for competition. I think what they should do is say, we're not going to give you welfare to make your artillery line. We're going to say that the first company to build something using private capital and get to sufficient scale, we're going to award them a contract for this much. And they have to hit a certain price point and a certain scale. And only then are we committed to buying. And they just don't want to do that because they have their own centrally planned scheme. There's a lot of secret communism going on in the United States.

57:07A lot of secret Soviet thinking that is just hidden behind a veneer of the flag. The other, so that's kind of like the artillery issue. When you get to the small drones, it actually gets to, I'm competing, like my biggest competitor for building small drones, like I, to be clear, I want to build small attack drones for Ukraine and I want to be cost competitive there. But I'm competing with Ukraine using largely Chinese components, right? Most of these internally assembled drones, they're built using Chinese flight controllers, Chinese sensors, Chinese stuff. I'm prohibited from using those. So Andrel is sanctioned by China.

57:40Our entire C-suite is sanctioned by China. The government in the U.S. prohibits us from making weapons using these Chinese components. And so I can come in and say, hey, I have this thing that is cheap, but instead of it being a$900 drone, it is a$2 ,000 drone. And people in Ukraine say, well, that's fucking expensive and how am I ever going to do that? And I say, you're right. If you're willing to use Chinese stuff, I literally can't compete. And this has been a smart move by China, by the way. This is why China keeps, you know, They do this because it actually cripples my ability to compete.

58:11There's other stuff that I do that's just too expensive for Ukraine, and I'm trying to make it cheaper. I want our loading munitions to be less expensive. But for example, I'm required to use a certain navigation system that the government has approved for munitions of this category. And they also require us to use it because they want us to sell anti-tamper stuff using approved parts where Ukraine can't go in and say, ah, this was able to go, you know, 400 kilometers. But if I just strap on a bigger battery and I can tweak it, I'm going to go to Moscow. Another example of this, like I wanted, I actually wanted to sell surveillance towers to Ukraine before this war even started.

58:47And that wasn't something that I came up with. It was something Zelensky came up with. He read a Wired article about Anderil talking about how we were securing the U.S. southern border. And when he was in the U.S. for his first UN meeting after winning his election, he wanted to meet with Anderil to talk about what it would look like to have our towers on his border so they could know how Russia was building things up, how they would cross. And then we ran into this problem where the US State Department basically put the kibosh on the whole thing. They said, no, Russia's not going to invade Ukraine.

59:14Zelensky's basically just angling for welfare. He's trying to be a saber rattler. And so like the people who made those decisions, they're still in the State Department. They're still making these things. So I've, to a certain degree, I've got my hands tied behind my back. I'll say, I want to make a$2 ,000 attack drone. They say, well, you have to use this approved thing. You can only use this approved warhead. You have to make it anti-tamper so the Ukrainians can't make it do things that we don't want them to do. And the net of that is what you're talking about. People in Ukraine saying, Anderil's stuff is expensive and it's locked down and it doesn't, and you can't modify it.

59:44And I say, yeah, that sucks. Look, I like, I've been to Kiev, I've been to Lviv and I've trained people on how to use our systems. And I've heard this feedback face-to-face and it's really hard to tell a guy who's telling you that people are dying because of it. Like, oh, well, sorry, I wish I could do better, but that's the, that's the show. One more thing. You're right that we have a lot of these different things and that is good for figuring out what works, not necessarily for scale. Some of those things are getting to scale. Like our towers are very much at scale. We're on 35 bases around the world.

1:00:13We're covering about 30 % of the U.S. southern border now, a bunch of the northern border as well. It's like our towers have scaled really well. Same thing with our counter drone systems. Like we're the program of record for all of SOCOM's drone defense. We're the program of record for all of the Marine Corps' drone defense. So some of these things are scaling. It's these newer things. I guess if I have a critic who says, Palmer, but you have all these things that haven't scaled. I'd say, well, guess what? Every single Android product that is more than five years old has scaled. It takes time to get the government to scale these things.

1:00:42But we don't have any examples of a product that we did that didn't scale once it had enough time. Every product in our, we've been around for almost nine years. Every product that was started more than five years ago is in major scaling mode. It's just we have a lot of other things that are newer and I'm sure there will be some failures. But it's flipping coins. You don't need to get a heads every time to beat the house. I think you see what I mean when I said the Joe Rogan thing is like the best thing to watch because he just gave us a preview of it. That's amazing. Thank you guys. You have like a million great stories.

1:01:13So thank you so much. Of course.

1:01:19Thanks for listening to this episode of the A16Z podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating or review and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts, and Spotify. Follow us on X at A16Z and subscribe to our sub stack at a16z.substack.com. Thanks again for listening and I'll see you in the next episode. As a reminder, the content here is for informational purposes only. It should not be taken as legal business, tax, or investment advice, or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund.

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