(machine roaring) - [Host] In November, the defense
startup Anduril Industries released its latest autonomous
weapons systems, Roadrunner and Roadrunner-M. (bombs exploding) The Roadrunners join Anduril's suite of AI-powered unmanned products that are shaking up the defense industry. (machine roaring) Since it was launched in 2017, Anduril has found success as a
defense department contractor selling autonomous vehicles and the software that powers them. Today, the startup's
technology is being used across multiple branches of the US Military, and in both the Ukraine-Russia
and Israel-Gaza conflicts. The company was recently
valued at $8.48 billion. Anduril was created to help
build a new type of military to meet the demands of
a changing battlefield. - We are in a position
where over the last decades, we have built the wrong things. - We need a different kind of US military and a different approach
to military power. - Anduril I think, is a healthy revolution for the defense industry. (soft music) - So this is Fury. It's an unmanned combat
aircraft that is able to work in collaboration
with manned fighters, with other manned aircraft
to hugely push out the range that we can engage
targets at without putting people at risk. That's kind of one of the
coolest things about autonomous systems, not necessarily the
fact that they can think faster or do better than a person, but they can also just
throw away their lives. - [Host] Anduril's founder Palmer Luckey is among the more polarizing
figures in the tech industry. - My name is Palmer Luckey and I'm a virtual reality enthusiast, and the designer of the Rift. - [Host] Luckey first found
success when his virtual reality company, Oculus, was acquired by Facebook for more than $2 billion. But in 2017, Luckey was
ousted from Facebook after a tumultuous tenure. (soft music) - Let me just show you very quickly what our software looks like. This is an example of what we think it's a pretty intuitive interface. - [Host] The foundation of Anduril is Lattice a software platform that serves as a command center of sorts, allowing a single human
operator to control and coordinate multiple autonomous
robots, be they a drone, a sub, or a mobile sentry. - What you're gonna see at the
bottom is essentially all the different assets that
are a part of the team, and then you're gonna
see a graphical display that looks very similar
to a lot of the software that we might use in everyday life, where there's a map in the background. You're gonna see multiple
vehicles on that software, and each of them, you kind of know what role they're playing. Engineers are designing our
software, much like the people who design the kinds of software that goes on our cell
phones or on an iPad. It's meant to be very, very user friendly, hardware focused defense companies. That hasn't been the approached. - The US military likes to buy things. The whole contract mechanism
is set up to buy things. And just now, I think
generationally, culturally, they're starting to catch up to the idea that a software package
can be just as powerful as the thing that it comes in. - [Host] But Anduril's
Tech isn't the only thing that sets it apart. The startup is also
pursuing a business model that borrows a lot of
inspiration from the tech world. - The way that the traditional defense, really large defense companies
are set up when they take risk, the market actually frowns
upon that risk being taken. We are designed completely
differently as a company. We are designed like a high-tech company, the set of investors that we have, and ultimately, hopefully,
when we're a public company, it is expected that we take risk on. - [Host] Anduril says
it's taking bigger risks because it's betting that the way we fight
wars is changing rapidly. - What we're dealing with right
now is a disruption created by technology created by the
threats that we're facing. - [Host] Anduril's Chief
Strategy Officer Christian Brose, likens this alternative to the Moneyball system
described in Michael Lewis's book of the same name. - You guys are talking
the same old nonsense. We got to think differently. - [Host] In "Moneyball,"
the Oakland A's attempt to put together a
baseball club on a budget by employing computer-generated analysis to draft its players. - Similar to baseball. You have to come up with a
strategy that is low-cost, that's going to allow you
to build an affordable, sort of scalable approach
that's going to be successful. For military terms, it's not relying upon
traditional military systems, that come in very small quantities, that are rather large, very
expensive, very exquisite, hard to produce, hard
to replace, very manned, going the opposite direction,
and relying on larger and larger quantities
of smaller, lower-cost, more autonomous military systems that you can produce very quickly, you can replace very quickly. - Anduril I think, recognized
that there was a gap in what some of the big primes were doing and sought to fill that gap. Thinking differently about
defense is something that's hard to do if you've been very
successful working in your particular way of thinking about defense. That's part of why
Anduril is so interesting as an alternative mechanism. - [Host] Since the end of the Cold War, America's defense industry has undergone considerable consolidation. In the 1990s, the US relied on 51 primary contractors. Today, that number is just five. Lockheed Martin, Boeing, RTX
Corporation, Northrop Grumman, and General Dynamics. According to a 2022 DOD report, fewer contractors has stifled innovation and undermined price competition. - We live in a world where 80%
of weapons procurement goes to just five companies. - [Host] One of the biggest
issues is cost-plus contracts. - Meaning they're paid for
time, materials, workforce, and then a fixed percentage
of profit on top. Because that profit is a plus, a lot of vendors are incentivized
for the cost portion to be as large as possible as well. They can often make more
money when something takes longer than it was supposed to. They can often make more money
when they sell a solution that's more expensive
rather than a solution that's less expensive. And this wouldn't be a
huge problem if there was real competition. - [Host] Anduril is carving
out an alternative pathway to secure DOD contracts by
buying up smaller startups and small to medium sized businesses. - So when Anduril looks
at buying companies, we typically want to buy companies that are quite far
along building something that is differentiated, that
is far ahead of what we have, and that would be difficult
for us to catch up with. And so what it really comes
down to is do they have something that will become
much more valuable when paired with our core product,
which is Lattice AI, can autonomy make this thing that they're making into a
much more powerful product? And that's been the basis of
all of our acquisitions so far. - [Host] Today, Defense
contractors produce small numbers of large, expensive, heavily manned hard to produce weapons systems. The so-called Moneyball Military that companies like
Anduril are working toward will be made up of large numbers of smaller,
lower cost autonomous systems. - I don't think that
Anduril will ever be able to completely replace one
of the prime contractors. What they do is very
specific and very well honed. We, unfortunately, are
in a very uncertain world where great power
competition is a potential. It's happening right now, and that great power
conflict is a potential that we all have to deal with. And in that kind of world, the prime contractors
are gonna be necessary to build those huge defense systems. - The large primes are struggling to do things the way Anduril does because they're publicly traded companies with an existing investor
class that invested in them to be a certain type of company. At the same time, I
hope they do get there. I think that maybe they're not gonna get quite to where Anduril is. But I think that we could get to a future where defense companies are
spending more on developing their own products than the government is. I think that's a positive world. (upbeat music)
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