Shyam Sankar - Celebrating Heretics - [Invest Like the Best, EP.462]

Heretics built American power and must rebuild its industry

Sankar argues American strength has always come from heretics who beat institutions, and that the institutions now need rebuilding. Consolidation and outsourcing hollowed out defense and drug manufacturing, while China plays a long game of mapping US dependencies. Fixing it takes new incentives, new entrants and a culture that rewards disagreeable founders.

Takeaways

• Heretics are the founder figures of American strength. Sankar says heretics pursue goals that seem pointless, often at the cost of their careers. Hyman Rickover built the first nuclear submarine in seven years while the Navy resisted him, even giving his project a women's restroom as an office.
• Consolidation hollowed out the US industrial base. After the 1993 Last Supper dinner, 51 defense primes consolidated into five. Defense specialists went from 6% to 86% of major weapons spending. Sankar says outsourcing manufacturing then cost the country its innovation edge.
• Drug supply chains depend on China. WuXi is involved in drugs behind 50% of clinical trials, and 80% of US generic drugs come from China as APIs or finished products. Sankar also cites Apple's spending in China as further evidence of outsourcing.
• Deterrence has eroded over the past decade. Sankar argues the US lost deterrence, pointing to Crimea in 2014 and to Chinese and Russian weapons he says failed in Venezuela. He calls the Midnight Hammer operation massively deterring.
• China plays long, America relies on unpredictability. Sankar says Beijing practices deception and systematically maps US dependencies, and that it cheated throughout after joining the World Trade Organization. The US asymmetric advantage is unpredictability, shown by how quickly its economy pivoted to AI.
• Forward deployed engineers validate software with real users. Palantir embeds engineers with end users instead of relying only on sales. The seam between forward deployed and product engineers needs a decisive leader. Sankar's disagreeableness began in early government deployments, where operators needed software that worked despite what IT buyers wanted.
• Palantir runs like an artist colony. Karp modelled the company as an artist colony that unlocks potential. Sankar says Palantir resembles a Hollywood talent agency, puts people on problems they are not qualified for, and so acts as a founder factory.

Sankar's proposed incentives

• Reform cost-plus contracting.
• Extend drug patent length so companies recover 2x their capital expenditure if they make their worldwide branded supply in the US.
• Support new defense entrants such as Anduril.