GOLDMAN SACHS HAS GAINED LESS THAN 4% THIS YEAR VERSUS THE S&P'S 7% INCREASE, AND WITH NATIONAL SECURITY BY FAR THE BIGGEST CATEGORY OF DISCRETIONARY SPENDING, $858 BILLION IS WHAT WAS IN THE NDAA FOR 2023, DEFENSE STOCKS HAVE BEEN HIT ESPECIALLY HARD. CONTRACTORS LIKE GENERAL DYNAMICS AND HII WHICH IS A MILITARY SHIPBUILDER ARE ALL DOWN THIS YEAR, ACCELERATING OVER THE PAST MONTH. SOME STOCKS HAVE FALLEN SINCE BEFORE THE UKRAINE WAR IF DEFAULTS WERE REALIZED GOVERNMENT CONTRACTORS WOULD FEEL IT SWIFTLY AND DEEPLY, BUT EVEN IF THAT DOESN'T HAPPEN, AND MANY BELIEVE IT WON'T, AT LEAST RIGHT NOW, THEY'VE INTRODUCED THE BROADER BUDGET IMPLICATIONS. MILITARY SPENDING GETS CUT THE BEST CASE OR AT LEAST A BASE CASE, NEXT YEAR'S BUDGET GETS DELAYED. BUT THE GOVERNMENT AGAIN OPERATING ON A CONTINUED SOLUTION WHICH COULD INFLATE PROGRAM COSTS, DELAY NEW ONES AND PREVENT PRODUCTION INCREASES. JUST THIS WEEK, THE HOUSE POSTPONED CONSIDERATION OF THE DEFENSE POLICY BILL AS LAWMAKERS FOCUS ON THIS DEBT CEILING DRAMA. SO WE CONTINUE TO MONITOR THAT, BUT SPEAKING OF DEFENSE, OWE NEXT GUEST IS THE FOUNDER OF AN $8.4 BILLION DEFENSE TECH STARTUP. IT'S ANDURIL INDUSTRIES, THE SECOND YEAR IN A ROW IT'S MADE THIS LIST. IT SPECIALIZES IN DEVELOPING SOFTWARE AND HARDWARE FOR U.S. MILITARY AGENCIES AND OTHER GOVERNMENT AGENCIES. OTHER CLIENTS INCLUDE THE AUSTRALIAN DEFENSE FORCE, THE UK OF DEFENSE THIS COMPANY HAS BEEN WELL RECEIVED BY INVESTORS SUCH JASON HOROWITZ WHO TALKED ABOUT THIS YESTERDAY, LIGHT SPEED SECURING $1.5 BILLION LAST YEAR IN DECEMBER DESPITE A DOWN MARKET IN ITS LATEST FUNDING ROUND. JOINING US NOW IS THE FOUNDER PALMER LUCKEY. GREAT TO HAVE YOU ON THE SHOW. >> IT'S GREAT TO BE HERE AND IT'S ALSO GREAT TO BE SEVENTH PLACE ON THE DISRUPTER LIST. WE'RE GOING TO BE FIRST PLACE NEXT YEAR I HOPE. >> IT'S DEFINITELY -- WHAT YOU HAVE BEEN DOING HAS BEEN NOTICED. I DO WANT TO GET INTO, YOU GOT SOME NEWS FOR THE COMPANY SPECIFICALLY, BUT I WANT TO START WITH SOME OF THIS D.C. DRAMA WE'RE SEEING PLAY OUT, AND SPECIFICALLY DEBT CEILING AND THE BROADER READ THROUGH IN IMPLICATIONS FOR OUR SPENDING AND THE TRAJECTORY IN THE U.S. FOR THAT HOW YOU'RE THINKING ABOUT THAT, AND WHAT IT MEANS FOR MBROADLY FOR THIS INDUSTRY, ESPECIALLY STARTUPS. >> LET ME TALK ABOUT THE NEAR TERM I DON'T THINK WE'RE GOING TO DEFAULT ON THE DEBT. I THINK WE'RE GOING TO FIGURE THIS OUT EVERYONE SAYS THAT THEY WANT TO FIGURE IT OUT WITH THE HANDFUL OF EXCEPTIONS. IF THINGS DO GO IN THAT DIRECTION, THEN I THINK WE'VE GOT EVEN BIGGER PROBLEMS THAN THE NEAR TERM DEFENSE BUDGET MUCH BIGGER STRUCTURAL PROBLEMS, AND AS FAR AS THE LONG RUN, YOU KNOW, I SAW YOU MENTIONED SOMETHING EARLIER, SOMETHING BAD THAT COULD HAPPEN IS PERHAPS A CUT IN DEFENSE SPENDING. MY PHILOSOPHY, DESPITE BEING IN THE DEFENSE INDUSTRY THE THAT WE SHOULD FIGURE OUT A WAY TO SPEND LESS ON DEFENSE WHILE GETTING MORE THAT'S WHY I GOT INTO AUTONOMOUS SYSTEMS FOR DEFENSE. THE FIRST PAGE OF THE FIRST PITCH DECK SAID THAT THEY WOULD SAVE TAXPAYERS HUNDREDS OF BILLIONS OF DOLLARS A YEAR BY MAKING TENS OF BILLIONS OF DOLLARS A YEAR WE'RE ON A PATH TO DOING SO, AND WITH THE RIGHT TECHNOLOGY, WE CAN SPEND LESS AND STILL DO MORE, BE SAFER, AND KEEP OUR PARTNERS AND ALLIES AROUND THE WORLD SAFER AS WELL. >> I WANT TO GET INTO WHAT THAT TECHNOLOGY ACTUALLY LOOKS LIKE, BUT FIRST, JUST IN TERMS OF THE POSSIBILITY TO CONTINUING RESOLUTION, YOU HAVE HAD PENTAGON OFFICIALS WHO HAVE EVEN FLOATED REAL CONCERN I THINK THAT YOU COULD SEE SOMETHING LIKE A POTENTIALLY A ONE-YEAR COM CONTINUING RESOLUTION. HOW DETRIMENTAL WOULD THAT BE TO DEFENSE COMPANIES TRYING TO CUT DOWN ON THE COST ASSOCIATED WITH THIS NEW WAY OF WARFARE? >> WELL, CONTINUING RESOLUTION SEEMS LIKE IT'S THE NEW NORMAL SO ACTUALLY JUST SPEAKING CANDIDLY, WE MODEL CR INTO OUR BUDGET PLANNING ASSUMING THAT IT'S GOING TO HAPPEN EVERY SINGLE YEAR. WE JUST ASSUME THAT THAT'S WHAT'S GOING TO HAPPEN, BUT WE'RE IN A LITTLE BIT OF A DIFFERENT PLACE. WE HAVE BEEN AROUND FOR SIX YEARS. WE'RE WELL-FUNDED AND WE HAVE A LOT OF PROGRAMS AND WE'RE DOING VERY WELL. WHERE THIS IS REALLY GOING TO BE VERY BAD IS FOR DEFENSE STARTUPS WHO ARE NOT IN THE POSITION THAT MINE IS TODAY. I STARTED MY FIRST COMPANY, OCULUS VR WHEN I WAS LIVING IN A CAMPER TRAILER WHAT ARE THE STARTUPS THAT ARE RELYING ON FUNDING TO CONTINUE WHAT ABOUT PEOPLE WHO ARE A COUPLE OF YEARS DOWN FROM THAT WHERE THEY HAVE A SMALL TEAM OF PEOPLE, WHERE THEY HAVE A FEW CONTRACTS THAT THEY'RE RELIYING ON THOSE ARE THE PEOPLE THAT ARE GOING TO GET SCREWED THE MOST BY A CR IT'S NOT MY COMPANY AND IT'S CERTAINLY NOT THE MAJOR DEFENSE PRIMES LIKE THE NORTHROP, ALTHOUGH ALL OF US WILL BE HAVING A NOT GREAT TIME. >> LET'S TALK ABOUT THIS NEW TECHNOLOGY OR CAPABILITY MISSION AUTONOMY, WHAT IS IT >> WE JUST ANNOUNCED OUR NEW PROKT. LATTICE IS OUR ENGINE FUSION ENGINE THAT MAKES OUR ANDURIL SYSTEMS WORK AND WORKS FOR A LOT OF SYSTEMS WE JUST RECENTLY ANNOUNCED A LOT OF NEW CAPABILITIES THAT ALLOW YOU TO USE LATTICE FOR MISSION AUTONOMY TO PLAN, SIMULATE, AND EXECUTE MISSIONS WITH SMALL NUMBERS OF PEOPLE CONTROLLING LARGE, EXTREMELY LARGE NUMBERS OF AUTONOMOUS SYSTEMS INCLUDING LETHAL AUTONOMOUS SYSTEMS, AND THIS IS A REALLY BIG CAPABILITY THAT HASN'T BILLIONREALLY EXIST THE PAST THIS ISN'T LIKE A CAR SELF-DRIVING OR SELF-NAVIGATING. THAT'S WHAT PEOPLE THINK ABOUT AUTONOMY THIS IS ALLOWING VEHICLES TO MAKE DECISIONS BASED ON THE COMMANDS THEY HAVE BEEN GIVEN BY THEIR HUMAN OPERATORS TO ACTUALLY MANAGE MISSION DECISIONS. SO, YOU KNOW, WHAT TO DO WITH CERTAIN TYPES OF TARGETS WHEN TO COMMUNICATE, WHEN NOT TO COMMUNICATE, WHEN TO RIERE-ALLOE RESO RESOURCES, WHEN TO STRIKE SOMETHING AND LAUNCH WARFARE ATTACK UNDER THE CONTROL OF THAT PERSON, BUT THAT PERSON IS GIVING HIGH-LEVEL COMMANDS, AND NOT TO THE SECOND COMMANDS THAT UNFORTUNATELY IN THE MODERN ERA ARE EASILY DISRUPTED AND EASILY JAMMED AT LEAST TEMPORARILY BY OUR STRATEGIC ADVERSARIES. >> SO PEOPLE ARE STILL INVOLVED, BUT MAYBE FEWER PEOPLE HOW DOES THIS SPEAK TO A TIME WHEN INVESTORS ARE FOCUSED ON ARTIFICIAL INTELLIGENCE AND REGENERATIVE AI. HOW DOES THIS RULE OUT IN THE REAL WORLD >> THIS IS THE PAULMER LUCKEY I TOLD YOU SO TOUR I STARTED AN AI COMPANY WHEN IT WASN'T HOT TO START AN AI COMPANY AND NOW EVERYONE IS AGREEING EVERYONE IS RECOGNIZING THAT AUTONOMY CAN BE APPLIED NOT JUST TO, YOU KNOW, RESEARCH OR SCIENCE, BUT ALSO TO REAL PROBLEMS, DEFENSE PROBLEMS, EDUCATION PROBLEMS, FINANCE PROBLEMS EVEN, YOU KNOW, LARGE LANGUAGE MODELS HAVE DEMONSTRATED AND THE PROBLEMS OF JUST WRITING STUFF THAT SOUNDS GOODS, AND I WOULD SAY THAT'S ON TOP OF THE FACT THAT WHEN I STARTED ANDURIL, THERE WERE A LOT OF PEOPLE THAT INSISTED WE LIVED AT THE END OF HISTORY, THAT CONFLICT WAS OVER. THERE'S NOT GOING TO BE ANY MORE CONFLICT THE WAR IN UKRAINE HAS SHOWN THAT'S NOT THE CASE. CHINA'S AGGRESSION IN TAIWAN SHOWS THAT'S NOT THE CASE. THAT'S WEHAT WE'RE FOCUSED ON EVERY DAY. HOW DO WE BUILD THE TOOLS THAT OUR NATION AND OUR AL LICLIES A PARTNERS NEED USING THE POWER OF AUTONOMOUS SYSTEMS >> YOU ALREADY HAVE PRODUCTS AND LAST TIME WE SPOKE, EVEN PEOPLE ON THE GROUND IN UKRAINE INVOLVED IN THE WAR THERE AND PROTECTING UKRAINE FROM RUSSIAN AGGRESSION THERE THE UNINTENDED CONSEQUENCES OF SOME OF THESE NEW TECHNOLOGIES AS THEY ARE DEPLOYED -- THAT WAS A VERY DRAMATIC ANALYST NOTE JUST TODAY FROM BCA, AND THERE'S A LOT OF QUALIFIERS, BUT IT BASICALLY SAYS THAT WE'RE GOING TO BE BLIND SIDED BY HOW QUICKLY AI TRANSFORMS SOCIETY AND THE ECONOMY, AND ASSUMING HUMANITY SURVIVES THE TRANSITION, THE IMPACT ON GROWTH CAN BE COMPARABLE TO WHAT FIRST OCCURRED DURING AGRICULTURAL AND THE INDUSTRIAL REVOLUTION. HOW DO YOU SEE THIS EVOLVING WHEN WE'RE TALKING ABOUT WAR FIGHTING, AND WHAT ARE THE TYPES OF GUARDRAILS OR TYPES OF RULES OF THE ROAD THAT YOU OR EVEN REGULATORS NEED TO PUT IN PLACE BECAUSE OF POSSIBLE, UNINTENDED CONSEQUENCES >> I THINK THERE'S A LOT OF PEOPLE WHO IMAGINE THAT THE MILITARY HAS SOME OF THE LOOSEST RULES AROUND AI OR THEY HAVEN'T GOTTEN THEIR HEAD AROUND IT. THERE ARE PEOPLE WHO HAVE BEEN THINKING ABOUT THESE ETHICAL IMPLICATIONS FOR DECADES, AND SO WHILE A LOT OF PEOPLE ARE STRUGGLING WITH THESE FOR THE FIRST TIME -- THEY'RE FIRST NOW LEARNING ABOUT THESE ETHICAL CHALLENGES, THE PEOPLE WHO HAVE BEEN THINKING ABOUT THE ETHICS OF AUTONOMOUS SYSTEMS EVEN GOING BACK TO THE VIETNAM WAR. WE HAVE THINGS LIKE SYSTEMS THAT PROTECT OUR MILITARY BASES AND OUR SHIPS, THAT AUTONOMOUSLY FIRE ON THINGS THAT ARE INCOMING THE ETHICAL IMPLICATION OF THIS HAVE BEEN THOUGHT OUT AND TURNED INTO REAL DOCTRINE DECADES AGO, AND SO THE MILITARY'S ACTUALLY AN AREA WHERE WE DON'T NEED TO WORRY SO MUCH ABOUT, YOU KNOW, FIGURING THIS OUT AS IF IT'S PANDORA'S BOX OPENING FOR THE FIRST TIME IF SOCIETY WERE AT LARGE, THAT'S WHERE I THINK THINGS GET INTERESTING. I DON'T THINK THE ECONOMISTS -- I DON'T THINK THAT THE WRITERS -- I DON'T THINK THAT THE ENTERTAINMENT INDUSTRY HAVE BEEN PREPARING FOR AI THE WAY THE MILITARY HAS WITH THAT SAID, THERE ARE PEOPLE WHO WANT TO PAUSE AI DEVELOPMENT FOR SIX MONTHS I THINK THAT'S EXTREMELY DANGEROUS BECAUSE THERE ARE CERTAIN COUNTRIES THAT ARE NOT GOING TO GO ALONG WITH THAT. ANY KIND OF PAUSE WE DO RIGHT NOW IS GOING TO ENSURE THAT WE ARE SIX MONTHS BEHIND THOSE ADVERSARIES AT A MINIMUM, AND IN A WORLD WHERE CHINA IS RAMPING UP TO INVADE TAIWAN, DESTROY OUR SUPPLY CHAIN OF INTEGRATED CIRCUITS AND END OUR TIE-TECHNOLOGY WAY OF LIFE WE NEED TO TAKE THAT SERIOUSLY AND REALIZE THAT THIS IS NOT SOMETHING THE UNITED STATES CAN AFFORD TO GIVE UP. >> I WANT TO SHIFT GEARS HERE, FINALLY WITH YOU AND JUST TOUCH ON THE EXPIRATION OF TITLE 42. I DON'T WANT TO GET INTO THE POLITICS ON THAT THAT'S NOT WHAT CNBC IS FOR, BUT WE ARE SEEING A REPORTED SURGE IN MIGRANTS AT THE SOUTHERN BORDER WE'VE SEEN TROOPS DEPLOYED ANDURIL'S A CONTRACTOR AT THE SOUTHERN BORDER. YOU HAVE BEEN BUILDING WHAT'S ESSENTIALLY A VIRTUAL WALL HOW DOES TECHNOLOGY, AND HOW CAN TECHNOLOGY HELP TO ADDRESS AND MITIGATE WHAT HAS BEEN A CRISIS AT THE BORDER LITERALLY FOR YEARS? >> WELL, THE THING ABOUT WHAT THE SYSTEMS WE BUILD IS THEY PROVIDE AWARENESS OF WHAT'S CROSSING THE BORDER IN BOTH DIRECTIONS AND PEOPLE OFTEN CONFLATE THESE TWO THINGS. THEY THINK THAT IMMIGRATION POLICY AND BORDER SECURITY ARE INHERENTLY THE SAME THING, BUT THEY'RE NOT. EVEN IF YOU CHANGE IMMIGRATION POLICY IN AN EXTREME WAY IMAGINE THAT ANYONE WHO CROSSES THE BORDER IS IMMEDIATELY GIVEN FULL CITIZENSHIP IN THE UNITED STATES I'M NOT SAYING THAT ANYONE'S SERIOUSLY SUGGESTING SUCH A THING, BUT, YOU KNOW, EVEN IF THAT WERE TO BE YOUR POLICY, YOU STILL WANT BORDER SECURITY YOU WANT AWARENESS OF WEAPONS MOVING BACK AND FORTH ACROSS THE BORDER, CASH MOVING BACK AND FORTH ACROSS THE BUORDER, NARCOTICS, PEOPLE WHO ARE BEING TRAFFICKED BACK AND FORTH ACROSS THE BORDER YOU WANT TO BE AWARE OF THESE THINGS, AND SO I THINK THE KEY IS WE NEED BETTER TECHNOLOGY ON THE BORDER NOT TO ENFORCE ANY PARTICULAR IMMIGRATION POLICY OR DECISION, BUT BECAUSE WE WANT PEOPLE TO BE SAFE. WE DON'T WANT CRIMINALS TO OPERATE WITH IMPUNITY. WE DON'T WANT DRUGS AND WEAPONS AND CASH AND WORSE TO BE GOING BACK AND FORTH ACROSS OUR BORDER WITHOUT US KNOWING ABOUT IT, AND SO YEAH. I MEAN, LOOK THE POLICY SIDE OF THIS IS VERY COMPLICATED ON THE IMMIGRATION SIDE, BUT ON THE BORDER SECURITY SIDE, THERE'S A REASON YOU SEE BIPARTISAN SUPPORT FOR
