Palantir CTO talks 'blueprint' to resurrect US defense industry

Palantir (PLTR) CTO and executive vice president Shyam Sankar sits down with Asking for a Trend's Josh Lipton to talk about the company's new defense report titled "The American Reformation," which it says is "a blueprint for the resurrection of the American industrial base."

"I think it first starts with acknowledging that we're in this state of undeclared emergency. We have North Korea firing off ballistic missiles. North Korean soldiers now in the front with Ukraine. We've had a pogrom in Israel. We have the Russians providing targeting information to the Houthis to hold 15% of world trade hostage. What more would we have to see to actually kind of mobilize now?" Sankar tells Yahoo Finance.

One of his theses is the lack of industrial competition within the government and branches of the US military:

"When we were building the ICBM program (intercontinental ballistic missile), it was the Navy, the Army, and the Air Force competing against each other to make the very best product. When we were building the submarine-launched ballistic missiles, we had four competing programs inside the Navy itself. Today, we would find that wasteful [and] duplicative. We grant these monopolies, which actually if you really step back and squint at it, that looks like central planning and communism. We're saying there's just one approved way of doing this.

"I think at a deep, fundamental level, we believe in competition as a country. We believe in the innovation that comes from the free market, and what excites me [and] what catalyzed me to really write this right now is that the founders are back... folks like [Oculus VR and Anduril Industries founder] Palmer Luckey and Elon Musk. It's folks like [Palantir co-founder and CEO] Alex Karp. This is how we're going to resurrect the American industrial base."

Watch the video above for more on the Palantir CTO's perspective on the American defense industry.

To watch more expert insights and analysis on the latest market action, check out more Asking for a Trend here.

This post was written by Naomi Buchanan.

Video Transcript

P and publishing what it calls a blueprint for the resurrection of the American industrial based company detailing how it thinks the government can transform the way it does business with the defense sector.

And joining us now is the Chief technology officer and Executive Vice President of Palantir Shan Sankar Sean.

Good to see you.

Thanks for having me, Josh.

So what, so this is this, this blueprint, right?

For what you say could be the the resurrection of the American industrial base.

Walk us through this blueprint.

Well, I think it first starts with acknowledging that we're in this state of undeclared emergency.

You know, we have North Korea firing off ballistic missiles, North Korean soldiers.

Now in the front with Ukraine, we've had a program in Israel.

We have the Russians providing targeting information to the houthis to hold 15% of world trade hostage.

You know, what more would we have to see to actually kind of mobilize now?

And so looking at that, you know, we have a couple of weeks of weapons on hand for the China fight.

We see that Ukraine expended 10 years of production in 10 weeks.

And so are we ready?

Are we doing everything?

And when I look back at our history, how did we win?

World War Two.

How did we win the Cold War?

We didn't have a defense industrial base.

We had an American industrial base.

94% of spending on major weapon systems did not go to defense companies.

It went to dual purpose companies.

Chrysler made in my lifetime.

Chrysler made cars and missiles.

Ford, made satellites until 1990 General mills.

The serial company made artillery.

The very lay down of our economy was so different.

Every car, camera and serial box you bought, enhanced our national security.

And unfortunately, that's what China is doing to us.

Only 30% of their defense company revenue even comes from the PL A.

The rest comes from us buying cheap knickknacks on Amazon.

So what, what's the, is the way to fix this?

Is it, is it reimagining incentives, Sean?

How do we fix?

I think so.

I think the, the, the, the talk track since the end of the Cold War is really that um you know, we, we consolidate our industrial base.

We don't have enough competition amongst the industrial base.

That may be true.

Certainly not my live experience.

I think the real problem is we gave up on competition with in government when we were building the ICBM program.

It was the Navy, the Army and the Air Force competing against each other to make the very best product.

When we were building the summary launch ballistic missiles.

We had four competing programs inside the Navy itself.

Today, we would find that wasteful duplicative.

We, we grant these monopolies.

We, you know, which actually if you really step back and squint at it, that looks like central planning and communism, we're saying there's just one approved way of doing this.

And I think at a deep fundamental level, we believe in competition as a country, We believe in the innovation that comes from the free market.

You know, and what, what excites me, like what catalyzed me to really write this right now is that the founders are back, you know, I think the consequence of, of the defense last Supper in 1993 where we started this consolidation is that we drove the innovators and the entrepreneurs out of the sector, which is such AAA big part of American defense history, those historic Mavericks innovators, right.

Exactly.

Like we, we think about it today as Northrup Grumman, but it was Leroy Grumman and Jack Northrop.

It wasn't Grumman, it wasn't the institution, it was these, these people.

It's folks like Palmer Lucky and Elon Musk.

It's, it is folks like Alex Karp, this is how we're going to resurrect the American industrial base.

So we are, listen, we have an election.

Do you look at the candidate Sham and say one more than the other Trump or Harris?

It would be more open to reimagining the dod in the way that you're kind of suggesting here.

Well, I, I think broadly both sides, this is very much a bipartisan issue.

People see the problems that we're facing here, but it really starts with leadership, which is, I think, um maybe, you know, not something you'd expect a technologist to say.

I don't think technology is gonna magically save us here.

Uh When Admiral Rickover was building the Nuclear Navy, he was in that seat for 30 years.

John Boyd was the father of the F-16, who's the father of the F-35, the $2 trillion F-35 with 30% availability.

It was designed by committee.

It's run by committee.

It's been, you know, three decades in, in, in design and development, the the there's a mechanism that was really working and I think having become the world superpower, we kind of turned our back on all the mechanisms that we, that we actually used to win.

And I, I, so we have a very clear blueprint that's actually based on our past.

But I think one thing that's very clear is that we have to re industrialize and as a country, we have to reimagine how we're going to industrialize.

And I see that, you know, half of our business is about helping companies build cars, planes, trains ships, bending atoms better with bits.

And to do this, we have to give American workers superpowers.

You know, we can't compete symmetrically with China at the dawn of world war two, we were the best at mass production today.

Our adversary is so what is David Slingshot in doing this?

Well, we are the world's best by a yawning margin at software.

And so we have to use our A I advantage to bring automation and uh let's call it an Iron Man suit for American workers.

Is it sort of like a bringing a Tesla manufacturing blueprint?

Tesla SpaceX?

I mean, we've been working with Panasonic energy to make every battery in the Tesla Gigafactory in Reno.

And they are, they are giving their workers, they're not using exquisite Japanese engineers.

They're making every American as effective as an exquisite Japanese engineer.

I I mentioned Trump and Harrison.

I question about that, Sean is, listen, neither candidate wants to address this country's fiscal challenges which are sir, Bill could come due at some point.

You actually might have to get spending under control any concern that at some point there may be a haircut to defense spending and how that could ripple effect, you know, Palant here and others.

Well, I I don't think this is a spending problem.

I think we are, we are spending, we have plenty of money to go after this.

It's how we're spending it that we need to really look at.

I would say that with the caveat that we are actually spending at historic lows, you know, we are spending, I think roughly 2.7% of GDP if we look back at what is the cost of ensuring our national security, which exists as a means of, of underwriting our economic prosperity, individual liberties.

It is at a historic low.

So I'm not saying it needs to go up.

I'm just saying it would be good for the po because we see this big flagship number and it seems scary, but we have to actually understand it's relatively small relative to GDP.

Right.

Let me ask you, I, I saw this um interesting article you saw too in the journal, this new Dod initiative and the whole idea here, let's recruit top tech talent to join the Reserves.

You're part of that, it sounds like walk me through what's going on there, Sean.

Well, you, you know, in I I'd say in the past, we had a much closer relationship there between let's the the civil and military sectors.

When, when um George Marshall was putting together the Marshall plan, he really called up all of his friends who were the captains of industry.

He had good advice around them.

What I see and what I really learned from the early days of the Israel conflict when they mobilized 360,000 reservists when they went back into the ID F, they were horrified at the state of technology and that is an exceptionally technical country.

So that is an implicit self critique saying, wow, now that I'm 20 years more experience than I was when I was a conscript.

I've learned so much from industry.

I've built these internet scale applications.

I would do this differently.

They modernized more in the four months afterwards than in the 10 years prior.

And so there, there we have this natural resource in this country in spades, not just in the software field, but in hardware manufacturing and in industrials and power.

How do we bring that talent base?

There is a people industrial based aspect of this and creating more fluidity for people to be able to serve in these capacities.

I was also, did you think it sort of reflect this broader trend or shift?

I mean of, of technologist, tech entrepreneurs wanting to and embracing the US, military, wanting work in the military?

Is that a, is that a shift?

That is a, that is a, you know, I've, I've been doing this for 20 years and I, I'd say it's, it's, it wasn't always like that.

It was the opposite of that.

And I, and I think that it's, it's, it's, it's very clear now that people wanna serve, they're not taking this for granted anymore.

It is a sea change from what it was a day.

Why is that sea?

What did change?

I, I think the world changed around us.

Like we, you know, there was a fair amount of I would if you were going to psychoanalyze self loathing in the country of what is going on here, but we see what's happening in Ukraine.

We recognize that, you know, just because we were the global superpower, maybe the end of history didn't really happen and everything that, that we're able to do as technologists that the economic freedom that, that we have uh is earned it.

It's not a birthright.

Let me ask you, I want to get you out of this sham.

So earnings are coming up.

I I know you gotta be careful.

I am interested though.

As you look ahead now, 2024 your stock has roared, right?

As you look to 2025.

What's next for pal here?

What excites you.

What, what really excites me is the continued adoption of A I across the US commercial sector in particular where people are, are, you know, rolling up their sleeves and getting busy implementing it.

And what, what I see as a broad theme is you can kind of think of a is there's two parts of it.

There's the A I supply the model side and people are investing a lot in building these models.

But if you take a step back and look at it while the models are improving, both the closed models and the open models are getting more similar.

So they're getting smarter but more similar to each other.

Uh And if you look at the demand side, we've been uniquely positioned this, this, this technology that we call the ontology, which with other people are starting to notice.

Now, is a prerequisite to being able to harness A I for economic value in the enterprise.

We put into production a 78 A I agent model to automate insurance underwriting.

Uh, and I, you know, that's a very regulated field.

The regulators have to sign off on that.

It changed, changes the process from taking two weeks to three hours.

Now, the first order benefit people mostly think of.

They're like, oh, wow, that's a, that's a significant labor savings.

That's immaterial actually.

Yes, there is labor savings.

The real savings though is a strategic dislocation in the market.

If your competitors still take two weeks to underwrite risk and you're taking three hours, you're gonna go eat the market, Sean.

Great discussion.

Thank you for stopping by.

Appreciate it.

Thank you, Josh.