Welcome back America. I'm Hugh Hewitt. I'm so pleased to welcome to the program this morning Shyam Sankar. He is the chief technology officer of Palantir. Good morning, Shyam. Welcome to the program. Thank you for getting up early for talking to me. Where are you today?
I happen to be in DC, so no problem at all. Thank you so much to you for having me. I'm honored to be here.
Well, I have been pitching the Defense Reformation, which people can find at the number 18thesis.com. I read a lot of it in the first hour of the program, so I want to cut right to the chase. We talked about the Last Supper, we talked about cost-plus. I want you to explain for the Steelers fans and me, because I'm just as slow as a Steelers fan when we get to this line: 'The great schism has created a religion in government that is unaware or dismissive of power law outcomes.' From power law talent in Silicon Valley, we call them 10x or 100x engineers, meaning they are 10x or 100x as valuable and productive as normal engineers. What is the great schism? Why doesn't DC know those people?
Well, if we go back to the industrial base that won World War II and won the Cold War, we would realize it looks very different than our defense industrial base today. When the Berlin Wall was just falling, only 6% of our spend on major weapon systems went to defense specialists, to defense primes. The vast majority of the spend went to what I call dual-purpose companies. We forget that Chrysler built cars and missiles, Ford built satellites until 1990, General Mills the cereal company built torpedoes. We had a very different structure of the US economy. What that really meant is that everything they were learning commercially, all that R&D, was subsidizing the lethality of our US service members. Every car, camera, and cereal box that Americans bought actually enhanced our national security. Today, we've gone from 6% spent on defense specialists to 86%. So we have really invested in and doubled down on a defense industrial base that lives on the Galapagos Islands, very far away from all the commercial innovation that's happening. That commercial innovation, by the way, is what powers our prosperity. Just look at what the US commercial sector has delivered for the country. I think we need to get back to a place where we can leverage that and the talent that we have in that base to enhance our national security.
Now, Shyam, how do we disambiguate a situation that pathway evolution has taken to the six big primes? How do we get out of that in a hurry? My friend Dr. Jerry Hendricks, I'm sure you've read some of his stuff, we've just got to get back to the pre-1989 competition in the private sector. A variety of PR, we just got to do it. How do we do that?
That's the most important question. I think when people look at the Last Supper, the conventional analysis suggests what we really lost was competition in the industrial base. Undoubtedly, that consolidation led to less competition, but I think the high-order bit, the real consequence, is that consolidation bred conformity. It pushed out the innovative founders, it pushed out the crazy engineers. This is a country that understands the importance of founders; we call them the founding fathers for a reason. You don't get SpaceX without Elon, you don't get the U-2 without Kelly Johnson, you don't get the Apollo program without Gene Kranz. We have somehow washed over all these efforts as if they're just faceless institutional efforts. The dichotomy of public versus private is not the right dichotomy; it's really founder mode versus manager mode. I think you can solve this problem very quickly because hundreds of billions of dollars of private capital has been invested to build companies in the national interest. You have a plethora of founders who have shown up: Palmer Luckey building Anduril, the Sang brothers building Shield AI, Palantir. The founders are back. We just need to organize around this problem.
Now, Shyam, there are five dominant elite cultures in the United States. One of them is irrelevant to this, that's the religious faith culture, and it really doesn't have much to do with the other four. The other four are Beltway elites, Manhattan elites, Wall Street, Hollywood elites (creativity), and Silicon Valley elites (productivity and innovation). When Donald Trump won the first time, he turned to Wall Street elites and they got some done, but they also got hijacked and cut off by Beltway elites. Do you think the Silicon Valley elites are better or worse prepared to fend off the Beltway elites' inevitable attack upon their arrival?
Time will tell, but I'm quite optimistic. To really execute a vision for the future, you need a definite and optimistic view of the future, that things can be better. You need a group of people that aren't preoccupied with self-loathing and believing that the country is not a great place, that aren't cynical about it, that have fundamentally a positive-sum mindset. One of the secrets of Silicon Valley that I think even most Americans don't recognize: we kind of feel like we have this elite tech culture, where did it come from? Maybe we imported it from Israel or India? No, we imported it to Silicon Valley for sure, but we imported it from Iowa. It is a culture deeply rooted in Midwestern sensibilities, a willingness to play positive-sum games. It came to the Valley from Bob Noyce, a great Iowan who was the co-founder of Intel, the co-inventor of the transistor. He coined the term 'open door policy,' and that whole culture of innovation we have is actually descended from Noyce. I think that's very powerful. It's why America has the best tech culture in the world by a yawning margin.
So when we go through the 18 theses, and I already read them to the whole audience, they know what it is. Cost-plus contracting makes the nation dumber, slower, and poorer, that's number two. I read all 18 of them. 'National Security as Economic Prosperity' is the easiest one to understand. How soon, if Donald Trump looked at this and said 'do that,' how soon could it be done at the DoD?
The place you start is that you increase the amount of competition inside the department. When Admiral Rickover was building the submarine-launched ballistic missile, he actually had four competing programs running simultaneously. When we were building ICBMs, we didn't actually give the Air Force a monopoly; they had to compete and win with Minuteman. Every service threw their hat in the ring. This explains why space is such an innovative area right now, because it is frankly a food fight between NGA, NRO, Space Force, SpaceCom, and that is actually productive. We need to get away from the sort of unitary effort, communist aesthetic that we should have one singular effort, this avoids duplication. We have to embrace the reality, the very American reality, that innovation is messy and chaotic, and lean into that rather than circumscribing the whole process in so many rules that you make sure nothing goes wrong, but you also have all the rules that make sure nothing can go right. The most obvious example of this is drone technology, which is being developed not just by a dozen different big companies in the United States, but by hundreds of companies worldwide. As a result, we've got stuff flying around in New Jersey that we have no idea what it is.
By the way, what do you think of that story?
I think it's terrifying. I think it shows, you know, I have an expression inside of Palantir: the orcs in The Lord of the Rings sense, they spawn in the seams between teams. I think a large part of this effort is not a tech problem really; it's really we have a division of responsibility between FAA, DoD, and Homeland Security. We need to reorganize ourselves around the problem, not be so victim to these arbitrary boundaries that we put up there. I think this is again manager mode versus founder mode.
When you say terrifying, what could it be? I want to pick up on this, it'll be the headline obviously, so be careful what you say. But when you say terrifying, why?
Because it shows a lack of domain awareness. We should be able to know everything that's happening in the homeland airspace and we should be able to defend against it. Whether you shoot it down or not is a different decision, but we need absolute control and we need to be able to know with precision where this is coming from and what our options to deal with it are.
Play this forward: where you go from overflight surveillance of bases to the protection of the homeland, the stadiums that we have. How are you going to protect the people from these assets if you can't protect the bases? Well said. Now I want to go to another part of the thesis. 18thesis.com is where you go to read this yourself. 'The problem with Goldwater-Nichols is it didn't go far enough. You can't have a joint department if services have monopolies on their Title 10 equipping responsibility.' That's profound. It's interesting, it was foreshadowed. I sat down with a Marine Corps field officer who had just come back from Israel where he was studying the Gaza war and said they're so far ahead of us in how they do things and how quickly they learn. The key question: we were very far behind the Japanese and the Germans when World War II broke out, we caught up in a hurry. Do you think we can catch up in a hurry?
I would never bet against American innovation. At the end of the day, and I mean this in the most positive way, we're crazy. When push comes to shove, we will throw all the rules out and organize around the problem. The question is how do we do that left of bang? How can we look at what's happening in the world and get a head start on doing exactly that? I'm confident that the things I'm saying, when we were in a conflict, people would just intuitively be executing.
Now, the thing we need the most are submersibles, submarines, and unmanned vehicles under the water. That's what we need the most. Hypersonic, some people argue, other people argue satellite, but we definitely need submarines. We don't have enough capacity to build our own, much less what we promised the Australians and the Brits have promised the Australians. What would you recommend Congress do in this CR and the first budget and in the NDAA, which is getting close to pass, to remedy that problem of capacity?
I have a bold vision here. There are no half measures that are really going to work. It starts with understanding that there's never been a military sea power that was not also a dominant commercial shipping power. We need to recognize that. The half measure is saying we have to prioritize one or the other, how do we just double down on building more and more military capacity? The reality is you can't get down the cost curve fast enough if you only are building military equipment. This is what you see at the Hyundai HD Hyundai shipyards in Korea, a whole town in Busan built around building both commercial and military ships. We still have a massive asymmetric advantage with our nuclear reactors. I think we should build the first commercial nuclear-powered cargo ship fleet in the world that are American-flagged, American-made, leveraging our military's greatest technology, driving the lowest cost of shipping in the world, bringing down inflation and input costs, and use that to bootstrap and rebuild a massive bulwark of investment into shipyards.
That's crazy talk, that's Rickover talking. But you're right. I read a bio of Rickover last summer, I could not believe how much control he exercised. Thank God he was there or we would be way behind everyone right now. But we're still way ahead. If the priorities are submersibles, satellites, and cyber, what does a deputy secretary of defense need to know before they become a deputy secretary of defense? Because Pete Hegseth was going to be the outward-facing guy, the public-facing recruitment guy. The deputy secretary is going to have to do the procurement. What do they need to know?
