Invest Like the Best with Patrick O'Shaughnessy
· Palmer Luckey, Patrick O'Shaughnessy
There's been massive consolidation in the defense industry. 80% of the money goes to just 5 companies, 30% of major weapon systems contracts have literally one bidder, meaning no competition even on the private side. How can you have good outcomes in a world like that? [00:00:00] S0: Just trying to think about a framework to discuss the state of weapons technology or the history of weapons technology with you. And the cleanest I could come up with a stupid consultant 2x2, where on one axis, you have offensive versus defensive technologies dominating. And on another, you have democratic versus very non-democratic. Musket's on one end, everyone has the same amount of power. And on nuclear weapons on the other, one person has a gazillion times as much as the Musket guy or something. Is that a good way to think about where we might pop through history and weapons technology? Is there some other way that you would approach thinking about an era and weapons technology?
· Palmer Luckey
[00:00:00] S1: Offensive and defensive is definitely the right scale. Distributed or not distributed, I'm not sure. That I actually think matters less by weapon system and more by the power dynamic of the nation. There's a question here, are the people aligned with the government or are they opposed to the government and to what degree? If you have them where there are neutral parties that accept each other's existence, that's one thing. Let's say you have a country like Ukraine where implausibly to the Russians, they had formed a strong national identity, and there were people who were willing to die in large numbers for their country. That's a case where there's people who are very much aligned with the broader goals of their nation. On the other hand, if you look at a lot of African nations, even a lot of Middle Eastern nations, you have a huge mismatch between what the political class wants and what the every man wants. And so I think a better access is actually more like democratic versus autocratic technologies. In that, there are a lot of technologies that are much more useful for controlling your own population than for preserving their rights against hostile actors. There's a lot of countries whose military effectively is an internal peacekeeping force to crush dissent. That's actually what it's for. And there's a lot of tools made by companies like SenseTime in China that are fundamentally -- they are not useful for going to other countries and preserving our rights. They're not useful for defending yourself from an invader. They are only useful for controlling people in your nation. This is one of the reasons that China is exporting these technologies in the same way that the Soviet Union exported AK-47s, which you could say are on this distributed and offensive side, if you were to look at it that way. But the reason they were actually doing that is they wanted to arm nations with the tools that they needed to keep their civilian population in check and keep them in power and they wanted to threaten them and say, "Hey, if you ever get out of line, we're going to stop providing you with these arms and systems you need, and then you're going to immediately get a violent revolution and you're probably going to get killed." It was a great motivation for people to stay stuck to the Soviet Union.
· Palmer Luckey
This idea that, "We are the thing that allows you to keep your people in check, and without us, that is over." China is pursuing a similar strategy. They're going to African nations and saying, "Hey, we're going to help build out this infrastructure in your ports, on your roads, in your police force, in your military. We're going to build AI camera systems that track dissidents for you. They track where they're shopping, where they're going, where they're riding trains. We're going to allow you to monitor all their communications on the telecommunications side. So let us sell you telecommunications gear, and you get all these back doors that allow you to control people who're trying to come after you." But a bargain with the devil that they're making is, "Oh, and by the way, if you ever do anything that's counter to Chinese interests, we're going to pull all of this and you're going to lose all your tools for controlling your population and you're going to be dead inside of a week." And say SenseTime is on the autocratic, authoritarian side of that scale because it has almost no application in preserving freedom or in deterring an invasion. It's only for controlling your own people.
· Patrick O'Shaughnessy
[00:00:00] S0: How would you describe what is important for America, through as many lenses as you want to take? It just seems like such an interesting time where we were the world police force for so long, and that maybe seems to be waning. We still seem like we can project power more than anybody else by a lot. But what matters in your estimation? What are the dimensions or the variables that matter most for America and its interest today from the defense perspective?
· Palmer Luckey
[00:00:00] S1: I think we've had two really good outcomes from a few decades in the Middle East. One of them has been that we need to be very, very strategic about which things we're going to get involved in at a large level, then I think that's a very productive development. I think it's led to a lot of real politic thinking that is good. For example, I personally support democracy in Taiwan. I like the idea that Taiwan is able to self-determine and self-govern. But let's be real, the reason that the United States is interested in Taiwan is because they are critical to our economy and they are critical to the economy of all of our allies. If it were not for their semiconductor industry and if it were not for a few other aligned industries, I think the United States would probably not be nearly as inclined to spend a lot of money to take on the risk of going to war with a nuclear superpower. That's a very productive thing. I'm glad the United States is not spreading resources thinly across the entire world to achieve nebulous aims. I'm glad that the focus is on what would a war in the Pacific over Taiwan look like. It's a strong alignment of our plan with our interests. I think another really important factor for the U.S. to be considering and that we are considering is that the days of U.S. boots on the ground being the primary component of our aid, they're gone and over. Politically, people don't want it. Economically, people don't want it. Globally, I think people don't really want it. I think that the role of the United States in the future is going to be less being the world police and more like being the world gun store. We're going to build all the things that turn our allies into really prickly porcupines that nobody wants to screw with. We're going to sell them the tools that they use to defend their homes. And if they're not willing to use their own manpower and their own resources to defend themselves, the United States probably shouldn't be going out of the way to do that. I think we've learned a lesson, "Don't try to defend countries that aren't willing to defend themselves." But I think that giving arms to people, I mean that's good economically for us, it's good strategically for us. It maintains that level of shared interest where they still really want to make sure that they're in the good graces of the United States.
· Palmer Luckey, Patrick O'Shaughnessy
I think that that's a really big factor. We don't need to be sending people. We need to be sending arms that they can use to defend themselves and deter invasion. And then, if they do get into a fight, win very swiftly. And of all the things I've criticized the government on, I think actually this is one where The Pentagon is pretty aligned, the politicians are pretty aligned. Everyone buys into this idea. [00:00:00] S0: If you think about the capital allocation or resource allocation or call it an Anduril. I saw a joke on Twitter the other day that people need to understand that Anduril for access is just going to be Anduril. You started with one thing, and now you're doing many things. And you said earlier that listen to problems, but not then come up with your own solutions. How do you prosecute that? How do you know which problems to prioritize and tackle first when you started the business, tackle next when you're thinking about it today? What's your framework for deciding on how to allocate resource?