Bloomberg Audio Studios, podcasts, radio, news. I've been looking forward to this a lot. You and I talk often, but it's always pretty fast and on a specific piece of news. You are the executive chair of Anduril and then you have this complete even split with being one of the 12 investing partners at Founders Fund. We probably get to talk about the Founders Fund part a little bit less, I'd say. So, we'll try and do an even split with this. You're a busy guy. I think the stated intention of our conversation was to probably talk about defense technology in the current context of the war in Iran. To start with, explaining the basics of what Anduril is, what role has Anduril played to date in that conflict or not, and what is the current role of Anduril as part of the defense apparatus of this nation? I think that's a big question for you to kick us off with. I'll sit back and you take it away. Thank you.
That's really meaty. Yeah, so when we started Anduril 9 years ago, almost exactly, June 6th of 2017, so we're coming up on 9 years, the idea was that we have this defense ecosystem that's dominated by a handful, five or six large defense companies that have been a consolidation of the entire defense industry that existed during the Cold War. The capabilities that we have are really incredible. We have these amazing exquisite defense systems like Nimitz-class aircraft carriers and the Joint Strike Fighter, the F-35, the Patriot missile. These platforms take decades to develop, build, and hundreds and hundreds of billions of dollars to sustain. So for example, a Patriot missile which was initially developed in 1969. This is like the crème de la crème of interceptors for counter-air capabilities. This is a 70-year-old system at this point. Every missile costs millions of dollars. Literally between two and a quarter to 5 million per unit basis. And these were built to shoot down MiG-29s. When you're shooting at an airplane that costs tens of millions of dollars, you can afford to shoot a $3 million missile to do that.
This is not the nature of threats as they exist today. And so Anduril, when we came on the scene, our goal was to figure out ways that we can introduce software autonomy on the production side of the house as well as on the kill chain, the tactical side of the house, to massively reduce the cost of engaging with a modern threat profile. And so when you look at something like the war in Iran, most of the threats that we're seeing are low-flying cruise missiles or Shaheds, which is sort of like a loitering munition. These are generally pretty slow, but they're mobile, dynamically controlled. You don't want to shoot a $3 million cruise missile at a $200,000 weapon. The economic trade-off is bad. And so we originally started working entirely in the surveillance reconnaissance space. And now the plurality of a lot of our work is actually related to air defense, lowering the cost of engaging with threats that are incoming to not only the United States, but also our allies and partners in the regions around the world where these threats are most present.
That's an interesting point on not just the United States because there are deployments of Anduril technology in the Gulf as an example. You yourself, you have been and will go very soon to the Middle East. How does that work? In practice, being an American company that serves the US military and the Department of Defense, but also allies, you must spend a lot of time meeting with the defense apparatus and governments of other nations, right?
Yeah. I would say it's one of the most common questions we get on ethics. These are important questions from new employees, younger people that are talking about joining. They'll lean forward very dramatically and say, 'How do you make decisions about where we sell our capabilities?' And I'm like, 'Well, it turns out there's this whole thing called foreign military sales.' So, actually, the United States government decides where our things get sold. So those are very clear rules. It's not like I'm making a decision about, oh, I really think we shouldn't sell to this country. It's like, yeah, the government has already pre-decided that that's the case. But yes, it is important for US foreign policy in a bipartisan way, this is not a partisan issue. In a bipartisan way, it's important for US foreign policy to provide capabilities to our allies to make sure that they are fully integrated into our joint operations which is really important. But also that they have the capabilities to defend themselves utilizing US production that may or may not exist in many of these countries. Our allies, many of them are not going to fund and build a fifth-generation fighter plane on their own. Nor are they going to develop really complex multi-million dollar counter-air missile systems. And so, this is a role that we play in the ecosystem is to go out and say to countries like Ukraine or the United Arab Emirates or Saudi Arabia or Qatar, hey, the United States has the capability. We want you to have that capability as well. And this is how we're thinking about the cost curve for deploying these capabilities and the layered approach that you can take to reducing the cost per intercept or whatever it is. Now the tricky thing about all this is that there's a big difference between being a startup that is designing and developing a capability, which is great, and there's a lot of really interesting efforts that are happening there, and being a producer of those capabilities. And this has really been the name of the game for Anduril over the last few years is transitioning out of just being a really innovative technology company and focusing almost all of our effort on how do we produce at scale in a way that allows us to not only supply the US customer which is our primary customer but also be supportive of that foreign policy mission and supplying those same capabilities abroad. So this is really about manufacturing and production more than almost anything.
That takes us to Ohio, right? So, in January of 2025, you guys phoned me and said, 'Come to Ohio. This is where our next facility will be, Arsenal 1.' Remind me, there's a reason there's a one next to it. We should get to that in a second. But fast forward, present day, production is underway. You built that place incredibly quickly. What is it doing? And why Ohio, I think why did you settle on that state and that specific location?
Yeah. I mean, again, transitioning from a startup where you're hiring a bunch of very well-compensated software engineers and things like that to build things to a world where we're producing with a very different type of labor force, a very different type of skill set that's required. We recognized that we needed to go to a place where we were going to have the ability to scale our footprint literally. That there was going to be enough workforce, skilled labor, that had manufacturing experience to fill out that footprint. And in a place that we felt like we could get the on-the-ground support from the local government, from the economic development organizations to do this as rapidly as we possibly could.
You know Ohio well as well. I know Ohio well. I want to be clear, I'm from Ohio originally. When we narrowed it down to our last three locations, I sort of recused myself from the process because I'm like, 'Man, if we pick Ohio, everyone's going to think I put my thumb on the scale.' And then at the launch event that you were at, Governor DeWine got up and he said, 'First off, I'd like to thank Trae's mom.' And I was like, 'Oh man, you're blowing the whole narrative here.' But yeah, I think Ohio is this incredible place for manufacturing. It has a long, long history in manufacturing. Just in my family alone, between my uncles and my grandfathers, we have worked at Ford, General Motors, Frigidaire, National Cash Register, Luxor Exotica. I mean, there's a tremendous history of manufacturing, but much of that evaporated. We had a sort of a bipartisan policy around globalization for decades. And it's really easy from sitting on the coast, whether you're in New York or San Francisco, to kind of forget about what happened in the middle of the country during that 20, 30-year run, starting in the early 90s. But every single one of those companies that I just mentioned no longer has factories in Ohio. And there's a lot of people that have been fighting for their lives to find employment. And some of that's coming back now. I think DeWine's administration has done a great job of incentivizing companies like Anduril to come in to build new factory campuses. So it's kind of catching back up. There's some wind in the sails and we're really excited for what we're going to be able to do there.
Anduril has had growth in lots of different ways, right? The valuation that you've grown the company to, but also the footprint. We're short on time, so I want to just address the Arsenal 1 thing. It indicates that there is going to be an Arsenal 2 and an Arsenal 3. Is that in the United States or is it time now where Anduril says, okay, well, if we're serving Western allies, we should maybe manufacture locally to where our technology is deployed?
I think it's both actually. Arsenal 1 is primarily going to be focused on production of Fury, which is our collaborative combat aircraft, basically an autonomous fighter plane. Initial units will be rolling off the line this summer. So, that production is already underway in the first 800,000 square feet that we have up and running. Later this year we're going to start doing Barracuda, which is our low-cost cruise missile, and Roadrunner, which is our reusable interceptor missile. Both of those will start coming out of Arsenal 1 in Ohio as well. But there are other factories that are going to come online. Some of those are domestic shipyards that we're building out. There could be additional production facilities in the United States. Right now we have 16 production facilities across the United States which some of those are being consolidated back into that Ohio footprint. But to your point, internationally, the United States is not the only country that has a national prosperity agenda. Obviously all of these countries want to see increased investment in their local economy. And so we feel very aligned in making sure that as we go in and we do some of these larger deals to bring those capabilities to bear with our allies and partners, we want to build that local production piece to feed back into their economic growth as well.
Final one on Anduril because we probably spent more time on Anduril than I expected, but a lot of people that know Anduril, they know Palmer Luckey, you're the executive chair. Palmer is CTO, a co-founder. There are other co-founders and then Brian is the CEO. And I mean this with massive respect, but I guess Brian until quite recently got less of the limelight. How does it work between the three of you and Matt and others that are running the company? How do you divide responsibility and decisions?
Yeah. You know, Anduril, because of the way that we approach our business, we have many business lines. We have dozens of SKUs, different products that we sell, and almost every single one of those is a scaled startup in its own right. And so there's no way that this company could be run with a very light or thin executive team. We've focused really intentionally on building as deep of a bench as we can. And that has been honestly the most important asset to the company since the very beginning. So across the four co-founders, we've kind of divided the world up into pieces and we each have different chunks of accountability. Palmer is incredibly talented at what Palmer does. The Palmer show, as many people who have interacted with Palmer know. Brian is naturally more introverted, but he is the boss. He is the chief executive officer. His say is the final say, and it is actually required really Palmer and I pushing him out the door a little bit to say, 'Look, you need to be out engaging.' Because his natural tendency as an engineer, he's the most brilliant software engineer I've ever worked with in my career. His personal preference would be I just want to sit back and work with the SVPs that run the product lines. But I think it's really important to get him out there. And Matt Grimm, our other co-founder who's the COO, he runs the entire operational side of the business and that is an incredibly hard job. There's no way I would want to do that. But I think having those really clear swim lanes is really important.
