From Facebook to defence industry – Q&A with Palmer Luckey and David Goodrich OAM

Liam Garman, editor of Defence Connect: Thank you both so much for your time today – and welcome to Australia, Palmer! You became a household name in the tech industry after designing and developing the Oculus Rift and founding Oculus VR, which was later acquired by Facebook. You’ve since founded defence technology company Anduril Industries. What prompted your move into defence and the defence industry?

Palmer Luckey, founder of Anduril Industries: So, most people only know about my career as starting at Oculus. What not a lot of people know is that I actually had a job before Oculus, at an army-affiliated research centre working on a project called BraveMind, which used virtual reality exposure therapy to treat veterans with post-traumatic stress disorder. So that was when I first got exposed to defence technology, the defence industry, and government procurement. There were some parts of that experience that were really great. I got in touch with a lot of people that I remained friends with for a very long time in the defence industry. But it also allowed me to see a lot of how things were broken.

I became much more aware of how the defence industry was so slow, how the industry often had the wrong incentive structures and how the government developed those incentives. That stuck with me my whole time through Oculus, where I became really concerned that the United States defence apparatus was falling behind and that our major technology companies were refusing to work with the military primarily because they don’t want to upset China. I also noticed that new start-ups were not being founded at a pace that would or a scale that would allow them to make a difference and compete with these big defence brands.

So that’s why I started Anduril, because out of all the things I could do, it was by far the most important. It was also one of the things that I knew none of my peers were going to do if I didn’t do it. All the other people I knew that were making lots of money and starting new companies were doing things they liked to do, like building video games, making race cars or designing rockets. So I decided to do something that was going to be more important.

Liam Garman: So, where did Anduril begin and what was its vision?

Palmer Luckey: I had a specific vision of what I wanted to achieve before I started Anduril. At the time, I was actually looking for defence start-ups that I can invest in. I was looking for defence companies that were using their own money to develop technology quickly, rather than companies that rely on very, very slowly allocated taxpayer-funded grants. I was looking at companies who were building technologies that were going to be relevant to the future and address those problems we’re behind on.

These included artificial intelligence, robotics, sensor and fusion networking. Originally, I was actually looking at other companies and I got in touch with Trae Stevens, who’s one of our other co-founders. At the time, he was at Founders Fund and his assignment was to find the next Palantir or SpaceX that’s doing work with the government. Interestingly, we couldn’t find any companies that we felt were worth investing in.

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So we thought, “Wouldn’t it be great if there was a company that could use its own money to build defence products, and then sell them when they’re done?” After all, that’s the way every other industry works, but not defence.

Having finished up at Facebook in April 2017, I knew exactly what I want to do. I said, “Well, I've definitely got to go and do this myself, I’m now a free agent. I have the time, I have the money, I certainly have the idea.”

Liam Garman: So you had the time and the idea and started to build Anduril Industries with Trae. What capabilities are you looking to develop and market to enhance Australian and US defence capabilities?

Palmer Luckey: Our core product is Lattice OS, which is our artificial intelligence operating system that ties together all of our different hardware products. The operating system enables the platforms to operate autonomously. It allows one person to control multiple systems, and Lattice integrates both Anduril and non-Anduril sensors to build a large, networked mesh. At Anduril, we actually have more software engineers than hardware engineers.

We've invested hundreds of millions of dollars into Lattice, and we’re going to continue investing hundreds of millions of dollars into it.  It is at the core of everything we do.

While it’s very expensive to develop, the good thing about software is that once you’ve developed it, it’s free to keep manufacturing. This is an ethos I brought across from Oculus VR.

The reason the Oculus Rift was so affordable is because I was able to take several functions that had traditionally been done using very expensive hardware, and instead have them running in software on a graphics card. So for example, instead of correcting the distortion of the optics, using very expensive high-end multi-step optical elements, or optical stacks, I was able to use a very simple stack with lots of distortion, and then pre-distort the image in real time using a shader on a graphics card. That’s how we were selling headsets for $300 that were better than ones previously selling for over $30,000. We're doing a similar thing at Anduril, as we lead with the software capability, and then build the hardware around that.

Liam Garman: Why did you pick Australia to expand into?

Palmer Luckey: A few reasons. One, I think you've got a strong technology industry that is full of people who understand that defence is important. There’s not that many countries that have both of those. Europe is a great example. Yes, they have a tech industry, but I’ve seen a lot of people who don’t really understand the importance of defence. Maybe the Ukraine conflict has changed things very recently, but we’ve planned this Australia expansion long before that.

Also, Australia’s a great place for us to manufacture things for Australian domestic use and for export to the rest of the world. I love the United States, but one thing we are not good at is rapidly approving new defence exports. We have a very strong export control system as the United States wants to keep cutting-edge technology from getting into the wrong hands. I understand why, but the system was designed for companies that might only produce new hardware every 10 years.

Take the Anduril Ghost, for example. That system is in its fourth major variant in five years. We’re onto mark five of our Sentry Tower CUAS system. That’s more than one revision every year, and the government is not used to needing to approve things that quickly. I’m not saying that Australia has no red tape, but we think Australia is going to be a great partner for manufacturing things that we can export to, for example, Taiwan, or to Korea, or to European allies, and do it much more quickly than we would be able to get down to in the United States.

Liam Garman: You’re already started pulling together a strong team in Australia. Can you give a glimpse into Anduril Australia and how you’re attracting talent?

Palmer Luckey: Big companies can be slow and bureaucratic like governments. We’re attracting world-leading talent by saying, “Look, if you work with us, you’re going to be working on important technology – but we're also going to give you more resources, more freedom, more ability to build what you want as an engineer.” So we’re being agile and aiming to get tech out into the field very quickly without waiting for the government to trickle out funds for a white paper and then an initial design review and then a prototype. Before you know it, you can spend 10 years building something for the government that you can build on your own in a year.

When I meet people working in tech teams within large companies, I ask, “Is that really what you want to die having done?” Do you want to throw your life away and say, “Well, I made a small optimisation for a large company?” Or do you want to work on something that can help protect your way of life that can help protect your allies?

In short, we want people to know that if you make the decision to work at Anduril, you’re a better person having done it. That resonates with younger people coming out of college who want to make a difference.

I got acquired by Facebook and I’ve worked in a social media company. Let me tell you, it’s a soul-sucking experience. You’re going to make a lot of money but you’re going to feel gross. Would you rather do that? Or would you rather work somewhere that pays you just as well, that also gives you cool problems to work on. And you will be doing more for your country and for the world than any of your classmates.

Liam Garman: You’ve entered the Australian market and made a splash. What are your core offerings to Defence?

David Goodrich OAM, Exec. Chairman and Chief Executive Officer of Anduril Australia: Lots of the coverage has been about the XL-UAV (extra large undersea autonomous vehicle), but we offer so much more. The XL-UAV is a co-development with the Royal Australian Navy (RAN) and the Defence Science and Technology Group (DSTG), with Anduril committing $70 million and Commonwealth $70 million in a true partnership. At the end of three years, we will have delivered three prototypes, each one getting better and better and better as they roll forward. Following this, subject to government approval, there’ll be a manufacturing at scale contract for significant numbers of XL-UAVs to be deployed in teams or in swarms to create a disruptive asymmetric undersea effect. Considering 50 per cent of the world’s submarines will be operating in the Indo-Pacific in the next 10 years, this asymmetric effect is going to be a significant deterrent for those who wish to harm us.

We will be looking to market our entire suite of products in Australia. Our counter UAS program, which we have deployed as part of a US$1.0 billion-dollar system integration partner (SIP) program of record in the United States, is being trialled by defence alongside other companies. We are trialling the Anduril Ghost UAS, our counter UAS tower and electronic warfare package with Special Operations Command (SOCOMD) this year.  We also have a really, really exciting maritime border proposal for the northern approaches of the Australian continent using our suite of autonomous capabilities, just to name a few and with many more capabilities under development.

Liam Garman: You mentioned that unlike a lot of other defence businesses, you are self-funded. Can you describe why this is so important?

Palmer Luckey: Fundamentally, we don’t want to be talking to a government customer about getting money from them until we already have working technology that proves that we’ve done all of the hard work. This method has allowed us to move so much faster.

If you approached the government with a technology idea, there’s a high likelihood no one would want to fund it. But if they did, first they would want you to put together a white paper, and then you’d be funding a design review. Money trickles out so slowly that it takes a considerable time to build a platform. At Anduril, we know what is going to work – so we just build it in a shorter period. This way we approach governments with a finished product.

This is why we have been able to go from starting a process to having a $250 million program of record with our autonomous surveillance program in the US in less than two years. Anduril is the youngest company to win a federal program of record of any size since the end of the Korean War because we skipped the part where they spent five or 10 years funding all the R&D. The XL-UAV is no different. We’ve already built the durability. We’ve already built a vehicle that proves we can build something that goes to significant depths. We’ve proven that we have the power systems worked out. We have the propulsion and navigation systems too.

This approach allows us to go to the ADF and say, “Look, we already have this proven technology that we can adapt for you”, whereas other companies offer science projects or experiments, and not real products. This shows how serious Anduril is about being a partner to the ADF.

Liam Garman: As you know, collaborating with Australian defence SMEs and Australian industrial content is fundamental to building a resilient defence ecosystem. How is Anduril partnering with local industry to build a stronger Australia?

David Goodrich: We are currently engaged with over 41 Australian SMEs from right around the country for our XL-AUV program. Our intention has always been to include as much Australian Industry Capability (AIC) as possible into our programs, and we've been really happy by the depth of knowledge that [we] have found here.

We’ve just had our manufacturing team touring Australia and had some fantastic meetings. It’s a super exciting time for the Australian defence industry.  We are looking forward to working with many of these SMEs who are located all over the country. It’s not just in one state, but it’s the length and breadth of the country.

Some of the companies we are talking to at the moment are great, but just subscale. This creates a problem for purchasers like the government, but not Anduril. We can provide certainty about quantities of product needed, allowing them to invest into their own businesses and enhance their own IP.

Unlike some other primes, we do not seek to own SMEs’ IP. We know our IP is the most important thing to our business, as it is for every business. And so the thing we want to do is to be an enabler of S’s moving to become Ms, and Ms growing to become Primes. This is something that too rarely happens in Australia.

Anduril is going to be a facilitator of a strengthening Australian ecosystem for the defence industry players.

Liam Garman: What have you seen so far of regulatory hurdles in the Australian defence industry?

David Goodrich: The first thing to appreciate is that Anduril is a defence products company that has a software-first approach. The founders of Anduril come from a variety of different amazing companies, but [the] thing that Palmer particularly brings is this ethos of speed from product idea to market.

The commercial product development timeframe stands in stark contrast to typical defence product development timeframes, which can take a decade or more to produce. This is the kind of energy that is in the DNA of Anduril, and is how we’ve been able to navigate regulatory complexities in Australia.

This being said, we are confronted by the same frustrations as everybody in the defence space in Australia. However, the fact that we are bringing significant quantities of our own capital, with our own intellectual property, and our own products to the country as a starting point, has given us an ability to go from conversation to contract in a very, very short timeframe.

Palmer Luckey: The flip side is that if we were a traditional defence company, where the US government was paying for all of our R&D and by extension owning huge chunks of our IP, we would never be able to expand so rapidly. It’s only possible because of the business model and because we’re willing to take on that risk ourselves.

If we fail, we lose the money and not the taxpayers.

David Goodrich: We’re really a commercial products-style of company, that is solely focussed on the defence market. We have very sensitive tech which gets caught up in the ITAR regime in the US, but we have super smart ITAR experts inside the company, who know how to manage that complex export licensing process.

We are excited to bring the entire Anduril product suite here, and we are conscious and aware that there’s going to be some restrictions from the US export perspective for some of these products, but not all of them.

Liam Garman: So what’s your long-term goal for Australia?

Palmer Luckey: I like to take a science fiction approach as if I were writing a novel set in the future, and the biggest defence company is called Anduril. In that timeline, what would they have been working on today? They wouldn't have started by building like manned fighter aircraft, it would be to start with autonomy. First, swarming systems start with distributed systems. What would you be doing today if you wanted to be in that dominant position 50 years from now?

David Goodrich: From the Australian perspective, we are not just focused on the Australian market though, even if that is a really important market for us.  Anduril Australia will be designing, developing, manufacturing, and then exporting everything we do to the rest of the world. That means we need the smartest software engineers, smartest hardware engineers, smartest manufacturing folks, smartest international relations and marketing, folks. And we'll be leveraging off what we already have at scale in the US, whilst growing our own skills and strengths here in Australia, to serve our own needs and those important customers in the Asia-Pacific region. And I think together, we're going to be a phenomenal force for good.

Liam Garman: Thank you both so much for your time, it was greatly appreciated. Palmer, I wish you the best for the rest of your stay in Australia!