Palmer Luckey Cover Photo

Palmer Luckey on Elon Musk and John Carmack, selling Oculus for $2B and starting defense tech company Anduril | Aarthi and Sriram’s Good Time Show

Check out the Good Time Show’s Episode Page & Show Notes

Key Takeaways

  • Virtual Reality (VR) is the final platform because the only step after VR is mind-melding into the Borg; fully-formed VR makes technologies like phones, televisions, and desktop PCs obsolete
  • Palmer Luckey started a national security company because he thought it was the most important problem that he could work on, and one that his peers were not working on
  • Big Tech companies were refusing to work with the military because they were beholden to the US’s strategic adversaries
  • There is a vocal minority in tech who are anti-military, and the tech executives at these companies use this vocal minority as a smoke-screen reason to not do meaningful work with the US military when in reality the executives are just trying to appease China 
  • Most defense companies operate on a cost-plus basis: they are paid for time and materials, and then a fixed percentage of profit on top 
  • Cost-plus contracts warp incentives; defense contractors can make more money by taking longer, designing a more expensive system, and running over on costs because the percentage they make on top is just a percentage of those costs
  • Anduril uses its own money to build the products it sells to the US military and its allies
  • Many countries “Stand with Ukraine” and “Reject Russian Violence” while simultaneously giving Russia billions of dollars to fund its war machine in exchange for oil and natural gas
    • They stand with Ukraine up until the point it inconveniences them
  • The best time to wave the magic wand to resolve the Russia-Ukraine conflict was years or decades ago
  • Palmer Luckey believes China is more likely to launch a blockade around Taiwan than a full-scale invasion 
  • The worst-case scenario for the United States is the CCP gains control over Taiwan’s semiconductor industry and only allows semiconductors to be sent to China
  • Palmer Luckey believes that the next-generation category of power projection technologies (AI, hypersonics, etc.) will make the traditional category (aircraft carriers, Top Gun stuff) obsolete 
  • There is a cultural fetishization of being “the founder”, that is healthy in some ways, but it downplays the importance of other roles at startups like the chief technical officer, lead hardware engineer, etc.
  • Do not start a technology company if you really love technology and programming 

Intro 

  • Palmer Luckey (@PalmerLuckey) is a technology enthusiast, writer, and modder. He is the founder of ModRetro, Oculus VR, and Anduril Industries. 
  • In this conversation, Palmer Luckey discusses what he got done this week, dropping out and starting Oculus, John Carmack, why VR is the final platform, why build a defense technology company, the current state of defense, Russia-Ukraine, China-Taiwan, how manufacturing became dependent on China, dealing with haters, asymmetric bets, and advice for founders
  • Check out these Podcast Notes from Palmer’s recent tech talk in Sydney, Australia 
  • Hosts – Aarthi Ramamurthy (@aarthir) and Sriram Krishnan (@sriramk

What Did You Get Done This Week? 

  • The same person that is energized by Marc Andreessen’s mantra “It’s time to build” is probably energized by Elon’s “What did you get done this week?” meme 
  • A person cutting right to the core of an issue evokes different responses from different types of people: the entrepreneurial founder-type likes it, and the tech-hating journalist does not 

Palmer Luckey’s Childhood, Dropping Out and Starting Oculus 

  • Three things from Palmer’s childhood led him to start Oculus:
    • Made money by fixing phones around the age of 15 
    • Founded ModRetro
    • Interested in Linux-based handheld game consoles like the GP2X
  • Palmer used to buy broken phones in bulk and spend all day fixing them; he would make a couple of hundred dollars a day doing so
  • Palmer’s phone-fixing business funded all of his original VR research
  • He got into VR because he was a PC gamer and a sci-fi fan 
  • He asked himself, “What is the last step of gaming? Not the next step, but the last step?”
    • Solving the next step was not interesting: it was going to be more monitors, pixels, and graphics cards 
    • This question is what led to Oculus VR
  • Almost all of the early hardware employees at Oculus were moderators on the ModRetro forums, an online forum that Palmer had previously founded for people modifying vintage game consoles and updating them with modern components
  • In the early days at Oculus, people gained credibility by doing, not by talking
  • Creating an open, collaborative culture is crucial to a startup’s success
  • Tinkering with the GP2X made Palmer realize the importance of software communities and of releasing good software kits for the hardware
  • Oculus was not only about building the headset, it was about building the community around the technology, which made it easy for anyone to build virtual reality software without being a VR expert 

Oculus’ Breakthrough Tech 

  • Palmer designed the first Oculus headset at the age of 19 living in a camper trailer 
  • Oculus was building headsets for hundreds of dollars that were significantly better than the headsets selling on the market for tens of thousands of dollars 
  • Oculus’ main breakthrough: He designed a headset around doing pre-distortion of the image rather than handling distortion of various kinds in hardware, i.e. replacing expensive optical components with free software running on a graphics card 

Meeting John Carmack  

  • Palmer met John Carmack on another online forum similar to ModRetro, and helped him modify a headset that John was working on 
  • “John Carmack is probably one of the top ten most productive people in tech.” – Palmer Luckey 
  • Everyone talks about how to manage or found a company, but no one talks about how people like John Carmack can redefine a company with productivity 
  • John is an absolutely brilliant person, doesn’t care if he upsets you, and deeply understands the interactions between hardware and software 
  • John is not only the founder of Doom, Quake, and other successful gaming companies, but he also founded a rocket company called Armadillo Aerospace that built a vertical takeoff and landing rocket long before SpaceX did  

VR is the Final Platform

  • Augmented reality (AR) falls into the category of virtual reality (VR), according to Palmer
  • AR and VR are not two different things; they exist on a spectrum of how much of what you see is real and how much of it is not real 
  • VR is the ability to allow a person to see anything and experience anything that a person could experience, or imagine experiencing 
  • Virtual reality is not just about sight, it’s about every sense that you have: touch, taste, scent, and sound 
    • Sight is the low-hanging fruit in VR, and the other senses will come later 
  • Why would you ever need a phone if you could perfectly augment all human perception?
    • Why constrain information, consumption, and input to a cellular device in a world where AR is perfected?
  • Phones, television, and desktop computers are made obsolete by fully-formed VR
  • VR is the final platform because the only step after VR is mind-melding into the Borg
  • Humans may resist brain-to-brain communication for social reasons, but it may not even be technically feasible (we’ll see!) 

Starting Anduril after Oculus 

  • While most founders sell their company and ride off into the sunset, Palmer was fired at the peak of his career at Facebook; his ego, among other motivations, would not allow him to “retire” after being fired from Oculus 
  • After Facebook, he was motivated out of spite to create another successful company to prove his critics wrong 

Why Build a Defense Tech Company 

  • Palmer started a national security company because he thought it was the most important problem that he could work on, and one that he didn’t see any of his peers working on 
  • Defense technology was an unpopular space in Silicon Valley at the time Anduril was founded in 2017 
    • There was a general sentiment in Silicon Valley that working on defense was morally reprehensible  
  • Big Tech companies were refusing to work with the military because they were beholden to the US’s strategic adversaries
    • Example: Apple cannot work with the US military in any meaningful capacity because 95% of its manufacturing is in China 
  • Palmer was first exposed to the technological shortcomings of the US military when he worked at an Army-funded VR research lab before starting Oculus 
    • He worked on a project called Bravemind, which used VR exposure therapy to try and treat veterans with PTSD  
  • Many of Palmer Luckey’s favorite media characters growing up were weapons manufacturers, such as Tony Stark and Seto Kaiba 
  • Palmer knew that a defense technology company would eventually become very important
  • In general, wars happen when one side underestimates the power of the opposing side
  • The weaker nation doesn’t have to be stronger than its potential opponent, but it must be strong enough to deter conflict  

Employees Going Against Defense Tech 

  • The Maven debacle at Google revealed that most tech workers are actually pro-military, even if they aren’t willing to say it
    • Less than 1% of Google employees signed the petition to not work with the military, despite the media making it appear to be the majority 
  • “Nine out of ten tech workers would agree that the United States military should have a stronger military than Russia or China.” – Palmer Luckey 
  • There is a vocal minority in tech who are anti-military, and the tech executives at these companies use this vocal minority as a smoke-screen reason to not do meaningful work with the US military when in reality the executives are just trying to appease China 
  • Most tech workers support the Western world; they might not like what the US or UK does in a given year, but they generally like the idea of democracies leading the world 
  • Historically, the best people in technology and business worked with the US military 
    • Examples: General Electric and Ford
  • The perceived resistance to work in defense is a relatively new phenomenon in the US 

The Current States of Defense Tech and Issues 

  • “The government has become completely incompetent in growing small defense companies into large defense companies.” – Palmer Luckey 
    • The United States used to be very good at this 
    • God made man, but Sam Colt made them equal 
  • Most defense companies operate on a cost-plus basis: they are paid for time and materials, and then a fixed percentage of profit on top 
  • Cost-plus basis contracting incentives a certain type of business that is a low margin, low risk, and low investment on behalf of the contractor  
  • Cost-plus contracts warp incentives; defense contractors can make more money by taking longer, designing a more expensive system, and running over on costs because the percentage they make on top is just a percentage of those costs
  • Cost-plus contracts made sense in WW2 when the military needed the nation’s industrial base to build products (they had no idea how to build) for wartime without the fear of going bankrupt 
  • Anduril uses its own money to build products and then sells them to the US military and its allies
  • Before Anduril, there were only two defense tech unicorns since the end of the Cold War 35 years ago: Palantir and SpaceX
    • Both of these companies were founded by billionaires 
    • There have been four mattress unicorns, dozens of fast-casual dining unicorns, and hundreds of gaming unicorns founded in the same period 
  • The government has allowed massive consolidation and 80% of defense business to go to a handful of companies, a dynamic that does not attract startup founders to the space

How Anduril Solves the Issues 

  • Anduril understood the game that it was playing from the very beginning 
  • Many defense companies are started by irrational people
  • Generally, people that go to work at a defense technology company do so for irrational reasons, not financial reasons 
  • In defense, building a good product is not enough; in the early days at Anduril, the company had more people working on government relations, customer sales, and strategy than it had engineers working on products
  • Today, Palmer estimates the Anduril team is 80% engineers
  • Most of Anduril’s early hires were engineers from Palantir and Oculus

Palmer’s Trip to Ukraine & Where Things Are Headed

  • Anduril has been involved in the Ukraine war since the second week of the conflict 
  • Palmer recently took a trip to Ukraine to deliver more Anduril hardware and train Ukraine operators on how to best use it 
  • Volodymyr Zelenskyy had previously reached out to Palmer in 2017 about Anduril’s border security technology, but the US prohibited Anduril and Ukraine from doing business out of fear that it might provoke Russia 
  • Russia’s most powerful weapon is its full control over the media within its nation 
  • Palmer notices parallels between state media control in Russia and China
  • State media control is a powerful weapon because it turns people into weapons that will do things that no independent, free-thinking person ever would   

Putin, Nuclear Threat, Nuclear Power Plants, and the EU Surviving Winter

  • “I think that Putin is very likely to use a tactical nuke, if only to make an example.” – Palmer Luckey
    • A tactical nuke is used to win a battle, not a war 
  • The United States includes strategic nukes in its warfighting doctrine, but not tactical ones
  • Russia includes both strategic and tactical nukes in its warfighting doctrine 
  • Russia believes that the US and NATO would not respond to a tactical nuke with a strategic nuclear weapon 
  • The European Union (EU) needs Russian oil and natural gas if it’s going to survive the winter
  • Many countries “Stand with Ukraine” and “Reject Russian Violence” while simultaneously giving Russia billions of dollars to fund its war machine in exchange for oil and natural gas
  • Many countries in the EU stand with Ukraine up until the point it inconveniences them or threatens their ability to satisfy their carbon-emission standards   

What Palmer Luckey Would Do To Resolve the Russian-Ukraine Conflict 

  • As the elected leader of his nation, Palmer would be doing what Zelenskyy is doing by trying to get Western nations more involved in the conflict 
  • The American media has normalized the story of the hero swooping in at the last minute to save the day, but in reality, there are few good options after a conflict matures
  • The best time to wave the magic wand to resolve the Russia-Ukraine conflict was years or decades ago
    • There are lessons to be learned here in regard to China and Taiwan

The China and Taiwan Conflict  

  • People assume that Taiwan is preparing as best it can for a Chinese conflict, but that is not necessarily true 
  • The Taiwan government is buying and building the wrong weapons for a conflict with China, such as:
    • Blue-water navy ships that will not make a material difference in an invasion scenario
    • Non-stealth fighters that will be shot down in the first few minutes of war
    • Large submarines that won’t be able to fight in the Taiwan strait  
  • Many Taiwan government officials agree with Palmer’s analysis that the nation is not adequately preparing to deter conflict with China 
  • Taiwanese billionaire Robert Tsao is committing tens of millions of his own fortune to buy small weaponized drones, and other asymmetrical advantages, that he believes the government is underinvesting in
  • Palmer’s personal theory on the China-Taiwan conflict:  
    • China will not do an all-in-one large-scale invasion of Taiwan 
    • It’s likely that China will launch a trade blockade and park ships outside Taiwan’s ports, pretending that it is not a military action
    • The blockade will be framed by the Chinese people and NATO as some type of internal trade dispute
    • Merchant ships that approach the blockade will turn around because they have insurance on their cargo
    • A blockade would effectively starve Taiwan of money, resources, food, and the ability to connect with the broader world 
  • NATO is less likely to get kinetically involved in a blockade scenario that’s framed as a trade dispute compared to if China launched a full-scale invasion
  • The worst-case scenario for the United States is the CCP gains control over Taiwan’s semiconductor industry and only allows semiconductors to be sent to China 
    • China can starve Taiwan will still reap the benefits of its semiconductor industry
  • “China is in the driver seat no matter what scenario you imagine.” – Palmer Luckey on the China and Taiwan conflict (October 15th, 2022)

Traditional vs. Next-Generation Power Projection Technologies

  • Palmer Luckey believes that the next-generation category of power projection technologies (AI, hypersonics, etc.) will make the traditional category (aircraft carriers, Top-Gun stuff) obsolete 
  • “You come at the king, you best not miss.” – Omar Little, The Wire 
  • If China is going to do a toe-to-toe conflict with the United States, they’re not going to send 6 hypersonic missiles, they’re going to send 300 of them 
  • Artificial intelligence and autonomy enable intelligent command and control capabilities over large numbers of munitions in a way that manned systems cannot 
  • Civil-military fusion is mandated in China, whereas it’s optional in the United States
  • While the best technologists and companies in China are mandated to build for the Chinese military, many of the best technologists in the US focus on creating AR mustache emojis for Snapchat filters 

Hardware Manufacturing & Dependence on China 

  • Companies don’t build in China because it’s “cheap”; that is an antiquated notion about Chinese manufacturing
  • Companies build in China because its manufacturing industry is competent, has extraordinarily smart people, leverages an unmatched supply chain, and has a regulatory climate that prioritizes manufacturing above all else
  • Palmer admits that he was part of this problem: the Oculus headset was manufactured in China because that was the only place that it could be manufactured  
  • Companies with strong manufacturing ties in China will move their manufacturing to other countries to the extent that China allows
  • Apple just agreed to invest $275 billion in Chinese manufacturing in exchange for continuing to operate as an independent company rather than a Chinese joint venture  

Dealing with Haters

  • Doing business with the US military is much different than the people Palmer did business with when he was at Oculus
  • There are not that many decision-makers in the US military; Palmer is in “a pretty good place” as long as the decision-makers in the US military do not hate him 
  • In regards to his Oculus firing: people weren’t upset about what he actually did, they were upset about what the media reported he did, which was untrue  
  • The biggest mistake he made was letting the Facebook PR people convince him not to fight the substantively fabricated story about him 
  • Six years later, people still believe the untrue stories that were told about him 

Building Your Audience with Direct Communication 

  • Advice to other founders: you must aggressively push back when people are saying untrue things about you
  • Make the costs of incorrectly reporting on you so high that the media will double and triple-check everything it says before publishing the story  
  • Founders must have an audience, regardless of the size, so they can go directly to the people 

Working on Asymmetrical Bets 

  • There was a time when VR technology was not cool just like there was a time when defense tech was not cool 
  • A16z had actually passed on one of Oculus’ early rounds
  • After Oculus, Palmer wanted to start a company in one of the following areas:
    • Defense
    • Petroleum food products to solve the obesity epidemic
    • Non-profit private prison chain that would only charge governments after the prisoner had served their sentence and remained out of prison for five years

Advice for Founders

  • Don’t trust your friends and family when they tell you that you’re good at XYZ
  • Parents tend to overestimate the abilities of their children
  • Find mentors that can objectively grade you on what your strengths and weaknesses are because you don’t want to pursue things that you like doing, but aren’t necessarily cut out for 
    • If you aren’t great at something you’re passionate about, then work to improve your ability
  • Be careful who you trust, but the job of an executive is to make yourself obsolete
  • As your company matures, you should not be the best person in your company at something
    • You’ve probably been negligent in your hiring process if you’re at 50-100 employees and you’re still the best in your company at something 
  • Do not start a technology company if you really love technology and programming
  • You should definitely start a technology company if you want to work on non-stop bullsh*t 
  • The founder is the final backstop for legal, HR, and interpersonal issues; as the founder, you will be mostly separated from the technology that you love working on so much 
  • There is a fetishization of being “the founder” that is healthy in some ways, but it downplays the importance of other important roles at startups like the CTO, lead hardware engineer, etc.  
  • Many people try to force themselves into the founder role when they’d be better off working in an extremely important leadership role at a startup 
  • Palmer is not the CEO of Anduril, and he offloaded the CEO title at Oculus as early as he could 
    • “I immediately offloaded that sh*tty job.” – Palmer Luckey on prestigious job titles not being all they’re chalked up to be 

Additional Notes

  • Palmer started college when was 15 or 16, but dropped out to pursue VR full time
    • He knew he had to drop out when his friends’ reaction to VR changed from “Oh this cool” to “Oh my God, this is incredible!”
  • Palmer knew that school would always be there for him; he wasn’t dropping out, he was taking a break 
  • Anyone interested in more John Carmack should check out his conversation with Joe Rogan or Lex Fridman 
  • Palmer says that Anduril is already more successful than Oculus by any reasonable metric
  • Katherine Boyle works alongside Aarthi and Sriram at a16z, and is a longtime supporter of Palmer Luckey and Anduril Industries
  • “You gotta know a little about a lot; that is how you succeed.” – Palmer Luckey

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