Inside Palantir: Building Software That Matters | Shyam Sankar on a16z

World events remind us that there is actually evil out there. Just horrendous barbarism is still possible. When a country goes to war, it's not enough to just have the department of war fight these wars. It is actually the whole country. The idea that somehow the American people are not capable of this, it beggars belief. I think our biggest risk as a country is suicide, not homicide.

The things that we did to win in the past, we accidentally turned our back on. And there's an opportunity to reclaim that with vigor. In the moment right now, you could say we need to build more weapons. We need to do this. We have Yes. But the most important thing we need to do is...

It was kind of equal parts an act of desperation and act of optimism. You know, I felt like after years of just seeing the building, the Pentagon from the inside, seeing how defense was operating, I felt this frog boil that continued to happen set in a historical context. But the reason to say something is actually I thought this was the moment that it could all be fixed. That alongside of that happening, seeing what was happening outside of the building that the founders were reemerging, there was a huge amount of energy, people wanted to build in the national interest, and it was a moment to kind of crystallize what at least put forth what I thought the fundamental diagnosis was that really the things that we did to win in the past, we accidentally turned our back on. And there's an opportunity to reclaim that with vigor. And we needed to do so quickly. That time was running out. There was a shot clock here that we have frogboiled our way to a place where we've lost deterrence. You know, it's any one of these items in isolation you can write off. You could say, okay, the Russians annexed Crimea in 2014. That's just one thing. Then you have the militarization of the Spratly Islands in '15. You have the failure of the JCPOA to keep the Iranians from getting a bomb. You have a pogrom in Israel. And certainly after October 7th, it was kind of a radicalizing moment that like what is going on here? We need to act. And I think we've only had more things since then. Now, I think the good news is in the last year, more has changed in the department than I've seen change in the prior 19 years. And people are seizing that moment for reformation. And it's been rewarding to kind of get it out there, get people to rally behind it, and all of us building in the national interest.

Well, maybe unsurprising for my worldview, it all comes down to leadership. You know, we call them the founding fathers for a reason. There is something special about the American spirit. That is, you know, every founding story is equal parts heresy and heroism. And we had the right people who kind of saw like, hey, this is not working and the shot clock is running out and we have to do something. And we had those people both inside the building and outside the building. So, it's kind of a conspiracy, coalition of the willing, coalition of the capable to go do that. So, it's hard to point to any one single moment. I think the kind of the election is a big part of it. Not to make it political, but just being able to get in leadership that viewed it with clarity and set the conditions to make this change happen.

Yeah. Well, they're all, there is a cogent kind of thread through that, which is like how do we mobilize to prevent a bigger conflict? And if you're really paying attention, it's hard not to think that we're kind of in the late '30s here. That things are brewing. They've been brewing for a while. People talk about great power competition. And I think we're kind of coming out of the malaise of having won the Cold War or the Soviets having lost it perhaps more accurately and that kind of led to a lot of bad behaviors. It allowed us to believe a lot of lies about the future that were kind of now working to market. And so part, we will not have the luxury that we really had in World War II of letting the adversary attack us first and then deciding to mobilize. And I think a more clear-eyed view of what actually happened in World War II is that's not it. It's not this thing that we just flipped a switch and the automotive industry decided, okay, after Pearl Harbor, we're going to make all this war material. What really happened is that leadership from FDR realized in the late '30s that we needed to mobilize but there was not yet a national will or popular mandate to do so. And Lend-Lease provided the mechanism to do that. It took us 18 months to build factories and retool them and we were able to create capability deterrence that we sold to the Brits and to the Soviets such that when World War II really kicked off for us when Pearl Harbor happened we were at full rate production. And the way that we mobilize, you know, when a country goes to war it's the whole country that goes to war. It's not enough, I think part of the legacy of having won the Cold War is thinking like it's enough to just have a defense industrial base, it's enough to just have the department of war fight these wars. It is actually the whole country. And I think that's the most stark thing. It's like we all as American citizens need to be invested in both the prosperity the country gives us but also the freedom that underwrites that prosperity. And we have come a very far away from that world. You know, in 1989 only 6% of spending on major weapon systems went to defense specialists, i.e. companies that were exclusively in the business of defense. That's not that long ago. That's when the Berlin Wall still stood.

Now that number is 86%. So really what we think of as normal is an aberration from the past and Mobilize seeks to set that story in context of one, hey this is the industrial base, what I like to call the American industrial base that won World War II. Chrysler built Minuteman missiles and minivans and every camera car cereal box that an American consumer bought was actually also subsidizing our national security. And that's really important. We see this with the hyperscalers. We see this with technology. The amount that our private sector spends on R&D dwarfs what the government is capable of spending. And you want to get on that price performance curve as a way of delivering capabilities to our brave men and women in uniform.

So how do we get back to that? And so the second part of it, yeah, so we had the American industrial base but who was the American industrial base today? We think of it as Northrop Grumman. We think of it as Lockheed Martin, but actually it was Glenn Martin, it was Jack Northrop, it was Leroy Grumman. They were people. They were founders. They were kind of not thinking about, hey, what's the performance going to be next quarter? They were building something way bigger than themselves, way bigger than their companies. And those founders weren't just outside of government. They were inside of government. It was the Hyman Rickovers, you know, against the will of the Navy building the nuclear navy. And I love that story, too, because it takes a lot of chutzpah. Oppenheimer, the father of the bomb, said the nuclear navy wasn't going to work. He told Oppenheimer, he told Hyman he was going to fail and he still proceeded. And that's something I think in the valley we recognize as the classic founder personality.

That's not, yeah okay maybe at the margin but first of all it's always been a monopsony, you know the nature of the competition is not what people think. It's not these companies competing against each other. The competition's always been the services competing. It's been competition inside of government that drove innovation not competition from industry. What really happened from the last supper is that consolidation bred conformity. It was the beginning of true financialization of defense. These companies really could no longer think about growth. They thought about financial metrics, dividends, buybacks, cash flow. And it kind of became very narrow and that conformity is not an environment that founders can thrive in. You know, the heretics were expelled. They left. They went to other parts of the American economy like tech.

But those heretics are required. In fact, if you look at part of the book, we catalog all these amazing defense innovations almost to a tee. Every single one of them was a heretical idea. You know, the institution was against it. The bureaucracy was against it. The process tried to kill it. And these determinative outcomes, you can think about the Higgins boat, the boat that won World War II. The Navy didn't want to buy the boat. The Navy tried to steal the designs for the boat. In the end, 92% of all boats in World War II were Higgins boats. Think about where we'd be if this Scots-Irishman wasn't just willing to just almost pathologically commit himself to making this happen. The boys that would not have landed at Normandy.

Yeah. Exactly. And then we compounded on that problem by, you know, the nature of the monopsony. So unlike a monopoly where you have one seller over a thing, a monopsony is where you have one buyer over a thing, the department of war is a monopsony. The nature of the monopsony is it forgets, it starts imposing all sorts of constraints on its suppliers and how they behave and what they need to look like. And that led to, it's like we put all of these companies on the Galapagos Islands. They're not on the mainland anymore. And so what do you get on the Galapagos? You get these exquisite giant tortoises. They're really amazing. Like it's like alien life. It's very cool. Except when you take the tortoise back to the mainland, they're not competitive. They're going to get eaten alive by the wolves.

And so we started creating a huge number of barriers for these people who even when they had ideas that could, those ideas come back into defense. I like to say like when we started Palantir there was no front door in the department of defense. You know, you had to, the only front door, there was exactly one. It was in the intelligence community. It was In-Q-Tel. If you were an outsider there was no other way in. The only people that worked here were insiders. Of course now that is, that's part of the sea change that happened starting really in 2015. But that means putting forth the '18 thesis and the defense reformation in 2024 makes a lot of sense because we have 10 years of heretics who have been knocking at the gate ready to come help the department.

Well, I think it's hard to pick only one. The new profile that we put out there, which is, so some of these figures are historical figures. Bernard Schriever, Edward Hall, Hyman Rickover, John Boyd, sorry, but the one that's new is Colonel Drew Cukor. And Cukor is the father of Maven. And here you have this Marine Colonel, you know, born raised by a single mother, Southern California, very modest background. Found his only way of going to college was ROTC, joined the Marines. Lots of incredible experiences there, but he had a seminal experience where he was trying to evacuate Yazidi refugees who were fleeing ISIS and a young Marine looking at ISR made a call that he thought he saw RPGs and that would make it unsafe for the Marines to land and exfil these people. And there actually wasn't one. As a consequence, you have order of thousands of people who were tortured, enslaved, and raped because of this failure of operation. And it just changed this man. And so when he had an opportunity in the basement of the Pentagon on a project with no resources to go after bringing AI to the department, he leaned all the way in. And you can see the journey of the heretic here where everyone hated him. Everyone tried to kill him. Every service thought they were doing AI. People tried to throw IG investigations and like one of the details we document is that someone said that Colonel Cukor is housing Iranians in his basement. So they actually sent out criminal investigators to his house to look at this. And here's a devout Mormon, four daughters, 1400 square foot home that doesn't have a basement by the way. And you know the investigators were just completely dumbfounded. It shows you sometimes that what you know, are you willing to put it all on the line? Are you so committed, so incorruptible in what you're trying to deliver or is this just a career? And that's one of the things I think I draw a lot of inspiration from these folks is just seeing, you know, if they can do this we can too. Seeing that these people exist inside of government they exist outside of government. And I think that's in the moment right now you could say we need to build more weapons. We need to do this. We need Yes. But most the most important thing we need to do is inspire the latent heretics to actually step up. This is the moment your country really needs you. What's been exciting over the last year or so is I'm seeing those people. I'm seeing them inside the building. I'm seeing outside the building. And that is, you know, what is driving the change is the leadership is setting the conditions to empower the heretics. They're protecting them. John Boyd who was a famously difficult fighter pilot. His own service the Air Force hated him. But the Marines learned everything they could from him and all of his heresy. He was really the father of the F-16. All of his heresy was proven correct in Gulf War I where we destroyed the fourth largest army in the world in days. It just everything came to bear. His high-low mix, his OODA loop. But you know John Boyd said to be or to do. You can be somebody or you can do something and but you can't have both and you know how committed are you to this? But he was so difficult he gets a lot of credit. I think the other person who deserves credit who I don't even know the name of is a three-star Air Force general who protected him because people like that do not survive in these bureaucracies on their own. It's not like hey he's difficult and we somehow tolerated him. It's no someone realized there's something special here and despite that we tolerate him. You see that with the dynamic between Bernard Schriever who built our intercontinental ballistic missiles and Edward Hall who specifically built the Minuteman. Schriever fired Hall once and then hired him back realizing there was no way we were going to get to solid-fueled intercontinental ballistic missiles without this notoriously difficult human. And I think that's great leadership.

Well, the origin story of this is really, so I've worked with the Israelis in some capacity since roughly 2014. This is a very technical country. And they're proud of how technical they are. After October 7th, you know, October 8th, they mobilized roughly 360,000 reservists. By definition, all these reservists are prior service through national conscription. And most of them had now had 20 years of experience in industry. And when they got back to the IDF, they were horrified at the state of technology in the IDF, which is actually an implicit self-critique, which is, hey, when I was 20, I was really good at coding, but I didn't know what I was doing. Now I have 20 years of experience building internet scaled things and I actually know how to do these things correctly. So I saw them modernize more in the four months after October 7th than I did in the prior 10 years of working with them. And that was just, I couldn't unsee that. So of all countries in the world we are drowning with that talent. You know, the skills we have at building things in the valley, the companies that a16z backs, like we know how to do this as a nation. The 20-year-old version of our green suitors maybe did it. You know, there's the will, there's the intelligence, the capability, but there's also then the tradecraft, the knowhow, the experience, all the dead ends that I've run into in my career, the mistakes I've made. If you're going to make mistakes, please make new ones. Don't make the same ones I already have done. You know, how can you stand on the shoulders of American industry to go faster and do this? And so I'm not sure I really had a lot to give the army at, you know, 24, but I think at 44, there's a lot I can do to accelerate certain things. And that's not just a narrow statement about me. I think that's a whole statement about the valley. There's a whole statement about American manufacturing, everyone in El Segundo, you know, how do we make sure if the Chinese make civil-military fusion compulsory, why do we make voluntary civil-military fusion impossible? And when I look back at history, we didn't used to make it impossible. In World War II, we direct commissioned 100,000 people that look like what we now consider Detachment 2011 into the military and we should be doing that again. The authorities exist. They're just laying there dormant and we're basically underutilized. So, I was proud to join the army with three other colleagues. We have Bob McGrew, former chief research officer at OpenAI, Bos, the CTO of Meta, and Andrew Weil, the former chief product officer of OpenAI, head of science now. And I think we've been able to work on different projects that really we act as senior advisers to army senior leaders and there's different projects that we kind of get our hands dirty in and help. But I think it's been a really, I've learned a lot by doing it. Hopefully the army's benefiting from it. But I think more broadly we would like to catalyze this across all the services and a broader call for folks who are listening to this now in industry.

In my, so my focus is really two things. I'm helping them think through how to plan force structure over long periods of time so how do I generate the force I want for all the different military occupation specialties. So that's been one but the second part of it is thinking through how do we want to employ software as almost like a malleable weapon system as something that our commanders can wield to drive advancement and they call these the operational data teams. What's been hugely impressive to me is the quality of talent in our green suitors. People who are not formally trained computer scientists, people who have just learned these things. The most compelling AI applications I'm seeing across commercial or private sector or public sector are being built by these green suitors. And I think there's something about the existential stakes. You know, you're not doing this for fun. You're not doing this for 10% efficiency. It's a binary outcome, win or lose. The other thing about this moment that I think is really interesting with AI is it's massively empowering to people with specific skills. So, you know, it is the intel warrant officer who really knows their domain. And I was wondering, you know, as someone who's been doing this for 20 years, like where was this person 10 years ago? And the conclusion I came to is they were always there. 10 years ago, what would they have done though with their idea? Make a PowerPoint slide, brief some program bureaucrat who would tell them how bad their idea is. No, because they're smarter than that. They wouldn't have wasted their time. Now they spend two weeks, they build it themselves. Now they're having an empirical conversation about how what they've built actually drives the army forward and everyone is quick to adopt it because everyone wants to win. So it's been really exciting to see that. The other part of it I think is big institutions, it's conserved across private sector as well, struggle with zero to one. Everyone wants to get, you know, if you have some sort of innovation they almost want to rush to get to N as quickly as possible. How do I scale this across the formation? Well the army is a very big place and thinking very critically about the pathing of what is the journey and cycle of getting an innovative idea to scale. That's literally what we do as an industry all day long, right? And how do they take and imbibe those lessons rather than cargo culting their way there, which is frankly what I think the private sector, you know, large Fortune 100s do as well. So they have more to learn from startups in this capacity than they do from, you know, big Fortune 100 companies.

Which plays to the American military strengths of bottoms-up innovation, mission command type control. It's really something that our military can uniquely do that no one else can.