Palmer Luckey, founder of Oculus and Anduril, joins Sam and Shaan to trace his path from flipping broken iPhones as a teenager to selling Oculus to Facebook for billions and then building a defense tech company now valued at $8B+. He shares his early Bitcoin story, two business ideas he seriously considered before Anduril (non-profit prisons and petroleum-based zero-calorie food), and his views on geopolitics, media trust, and why he still flies coach.
Speakers: Sam Parr (host), Shaan Puri (host), Palmer Luckey (guest, founder of Oculus and Anduril)
Cold Open [00:00:00]
Palmer: I remember there were times where the thing I needed would cost like fifty dollars, and it was just inconceivable that I could afford it. Honestly, Oculus owes more to the iPhone than anything else. If the iPhone hadn’t existed, there wouldn’t have been broken iPhones for me to buy, unlock, repair, and sell on eBay. I made tens of thousands of dollars as a teenager on that side hustle. If that hadn’t happened, Oculus probably wouldn’t exist today.
Episode Intro and Preview [00:00:25]
Shaan: What’s up — we’ve got Palmer Luckey on the podcast. Palmer is a billionaire. He created Oculus, which he sold to Facebook. He created Anduril, which is now one of the biggest defense tech companies — they make weapons for the government. Super interesting guy. I’m going to call it right now: I think this is an all-timer episode. You guys know I don’t hype it up like that unless it’s legit.
Shaan: Sam, what are some of the things we talked about?
Sam: So early on we asked him basically what he did with his money. He made hundreds of millions of dollars at the age of like 23, and we asked where he put it. He was very clear on what he did. He talked about some of his early crypto investments — he bought crypto way, way early, like in 2010. He talked about how he was making minimum wage and then became a billionaire four or five years later.
Sam: We also talked about where he likes to hang out on the internet. We asked, “Where do you learn all this stuff? What are your subreddits, what are you reading?” He actually named a specific Facebook group he liked. And then he talked about geopolitics — is World War III going to happen? His company builds tech for the Department of Defense, so the question of whether Russia drops a nuclear bomb — he had an interesting perspective on that.
Sam: And then the best part: we said, “You sold Oculus, then you created Anduril, which is even bigger. But there were years in between — did you consider other ideas?” And he opened up. He had an idea about creating a new kind of prison. He had an idea to solve obesity. We go into depth brainstorming those with him.
Sam: Then he also argued with us about why he flies coach even though he’s a billionaire. This episode had it all — fighting, ideas, success stories. Enjoy this episode with Palmer Luckey.
Introducing Palmer and Why Sam Wanted Him On [00:02:00]
Shaan: Palmer Luckey is here — created Oculus, created Anduril. Really interesting dude. We have a bunch of topics so I’m not going to belabor the intro. Sam, you’ve been itching to get Palmer on. You probably can’t say the DM you sent to try to get him on here. Why did you want him so badly?
Sam: Palmer, I am like the king of left-handed compliments — at least that’s what they say about me — but I mean them as full compliments. I love freaks. I love weirdos. I love extremists — not in the political sense, but people who go all in on stuff and are just passionate about maybe nerdy or unconventional things. You go all in on things. I love that, even if I don’t necessarily love what they’re going all in on. I’m crazy fascinated by it. You’re one of those guys who just goes all in. You’ve done a lot at a young age. I like weirdos, and I put you in that category.
Palmer: Thank you. I’m happy to be a weirdo. I’d rather be a person that people think ill or well of than somebody nobody thinks of at all.
Shaan: By the way, Sam had a poster at his office — for his employees — that said “Let your freak flag fly.” That was like a corporate value. Companies usually have things like integrity and determination. His was “Be a freak.”
Starting Oculus: Money, Mission, and the Facebook Sale [00:03:10]
Shaan: Let’s start somewhere unexpected. This podcast is called My First Million because we’re interested in money, and we think it’s funny that people in Silicon Valley have to pretend they don’t like money.
Palmer: Yeah, I actually tell my own employees in onboarding that if you work at a place where your boss is saying that — you should be worried. It’s one thing to say it to the press or in your marketing materials, but if your employees don’t believe that at the end of the day you’re trying to make their job a fiscally responsible decision — if you’re effectively telling them “your financial success is not my priority” — they should be concerned.
Shaan: And you kind of did the best of both. For all the people who say “we’re trying to change the world” with their HR onboarding software — you actually kind of did change the world and still made a bunch of money. It’s not an either-or.
Palmer: A hundred percent. When I started Oculus, it wasn’t because I thought it would make the most money — there had never been a successful VR company in history. I did it because I was really passionate about it. That said, one of the things I’m most proud of in my career is that everyone who worked at Oculus achieved financial independence. We were able to build something incredible, and I feel great that everyone who supported me early on was able to make a bunch of money. A lot of them have gone on to do incredible things.
Palmer: Anduril was a little different. That one wasn’t just “oh, this will be fun.” Anduril was like — I felt I had to do it or things were going to go really poorly. More of a stick than a carrot on that one.
Shaan: How much did you make off the Oculus sale?
Palmer: I probably shouldn’t say, because it’s complicated. There was the merger consideration — the acquisition price — and then they cut an employment deal. I was locked up on a five-year vesting schedule. Typical was four years; most of our employees were on four. I got locked up for five because I was a key guy. And technically, that compensation isn’t for the acquisition — it’s just employment comp.
Palmer: Then there were the bonuses. We had an earn-out — hundreds of millions of dollars for the founders if we could hit certain sales targets and user-hours targets. We had four years to hit them and did it in less than two. It’s kind of funny — people assume the acquisition must not have gone well, but we actually maxed out the top bracket of our earn-out. So — it was in the healthy hundreds of millions of dollars.
The Decision to Sell — and Turning Down a Billion Dollars [00:05:40]
Shaan: A lot of people who listen to this are founders who want to sell someday. I just closed on another sale — small-scale compared to yours. You sold for two or three billion dollars. How does that even happen? Does Zuck just come to your house and go “I’ll give you three billion for this”?
Palmer: It’s a long story. The interesting thing about the acquisition is we had no intention of selling initially. The first time we talked to Facebook, I think we were offered a billion dollars — and we said no. We’re not interested. We think this company will easily surpass that value.
Sam: Was it easy to say no to a billion dollars? You started this on Kickstarter, man.
Palmer: It wasn’t an issue for me. Look, if you look over my career, I’ve made a lot of similar decisions. When I was deciding whether to do a Kickstarter or work for someone else, I had a job offer on the table from Sony to run a PlayStation VR lab. They doubled the offer when I turned them down, and I turned them down again. And looking back, I’m not sure I could have done anything else. Could I have stayed in school instead of starting Oculus once I had this breakthrough? I think I could not have. Could I have gone and worked for Sony? I don’t think so. And I think it was the same thing with that billion-dollar offer. Narratively, it makes no sense for a free-thinking iconoclast to say yes to the first offer.
Palmer: But a few things changed after that initial offer. It became clear our competition was serious and was putting massive dollars in. Actually — the day we finalized the Facebook acquisition was the same day Sony announced PlayStation VR. We had known it was coming, but it reinforced this was serious. The biggest games companies in the world were going to be putting hundreds of millions into competing with us.
Palmer: Facebook came back with a different pitch: “Maybe you could make more money as an independent company — but if you’re with us, we’re going to make VR happen much faster. You might make more money, but you’ll go much slower than if we artificially supercharge your growth.” They were willing to commit billions of dollars a year for a decade or more. When you really believe in something, that’s a tough thing to turn down.
Sam: Is this literally Zuck coming to your house? Or an army of lawyers?
Palmer: It was a very small number of people. The lawyers and accountants are more involved when the deal is contingent on revenue and multiples and P&Ls. But this was such a high-level bet — it’s not like “you have this margin on your headset and sold this many dev kits.” The real bet is: do you believe in the metaverse? Do you believe there’s going to be a virtual world parallel to our own where you’re living, working, playing? And do you believe this is the best team in the world to do it?
Palmer: I found out later that Mark had been going around talking to university research labs, government research labs, other companies — and their conclusion was we were way ahead of everyone else. If this shift to immersive computing was going to happen, we were the people best positioned to do it. A lawyer can’t give an opinion on that. An accountant can’t put a value on it.
Palmer’s Financial Situation When He Turned Down $1B [00:09:00]
Shaan: What was your personal financial situation when you turned down that billion-dollar offer?
Palmer: I was 19. I had almost no money — literally a few hundred dollars in my bank account. I’d spent everything I made putting myself through school and working on virtual reality. I was working a minimum wage job. I was also fixing computers on the side. I’d been buying broken iPhones, fixing them, unlocking them, selling them for spare cash. So I had burned a lot of money on my nutty hobby.
Palmer: When we started Oculus, we didn’t pay ourselves very much. By the time of the acquisition, I had given myself a raise — but we decided nobody in the company was going to make over a hundred thousand dollars. We called it the 100K Club. I was getting paid a hundred thousand dollars. To me, that actually felt incredible. I was like, “Wow — a hundred thousand dollars. How many iPhones would I have to fix to make a hundred thousand?”
Sam: Yeah, because you were fixing iPhones and scrubbing boats or something?
Palmer: Yeah. When I started working on VR stuff, I worked for a few years in a boatyard — scrubbing boats, repainting the bottom paint, sweeping the boatyard. That type of stuff.
Palmer: So the money wasn’t a huge motivating factor. Also — maybe too optimistically — I believed Oculus was going to be worth tens or hundreds of billions of dollars. And it wasn’t the acquisition price that motivated me to make the sale. It was the pitch: “We’re going to give your organization billions of dollars a year to make virtual reality actually happen.” That’s what we were going to need to compete with Google, Sony, Microsoft — all of which had seen what we were doing and were going to try to kill us over it.
Palmer: Facebook was one of the very few companies with a strong incentive to make VR come about as quickly as possible. Unlike Google or Microsoft, they didn’t benefit from the status quo in hardware. If we kept using mobile phones and normal computers for another twenty or thirty years, Google and Microsoft would do just fine — they’re already the winners. If you can shake everything up and force a reset with immersive computing, it could be that Microsoft is a top player, Apple and Google are top players — but it’s unlikely all of them remain dominant. That’s an opening for Facebook to come in and reach at least second or third place instead of being totally subservient to OS vendors and hardware vendors.
Palmer: You can see what happened with the other companies. Google killed their VR program. Microsoft is winding down their internal efforts. It’s a tough business. I’m not convinced Oculus would still be around if we hadn’t had those resources.
What Palmer Did With the Money [00:12:30]
Sam: What did you do with your money? I know you bought a marina. What does someone like you do with that kind of liquidity?
Palmer: Most of it I did what you’re describing. I generally don’t believe in trying to beat the market through market transactions. You build wealth by building companies — that’s where you should focus your effort, not trying to be smarter than all the finance guys who are using every tool at their disposal to game the market. So yeah — Vanguard funds, Vanguard 500, total index funds.
Palmer: My grandpa taught me a lot about investing and how you shouldn’t try to beat the market. My investment philosophy is mostly informed by John Bogle’s little black book on investing — keep your fees low, keep your costs low, go with the market. If the market goes so poorly that I become poorer, the United States has bigger problems than the market.
Palmer: The marina — that wasn’t a financial investment. In California, almost all marinas: the water is owned by the state or the feds, and they do long-term leases, like 30 or 40 years, to operators. The operator might own the parking lot but does not own the water or the docks. There’s only a small handful of marinas in the entire state of California where the underlying land and water is deeded to a private title. The marina I bought was one of those.
Palmer: Without getting into my whole seasteading situation — if you want to operate ferries from land out to international waters someday, you don’t want to be totally dependent on state government bureaucrats choosing to renew your lease. So it’ll pay off someday. You’ll see.
Sam: I bought my house because the walk-in closet was nice. I didn’t need to get into international waters to justify it.
Palmer: As soon as I had money, I immediately started learning to fly helicopters for real, because I’d always wanted to be a helicopter pilot since I was a little kid. It was literally two weeks after the wire completed and I was flying helicopters. I bought a ‘69 Mustang convertible. I bought a first-generation Tesla Model S. I bought a house for my parents — the basketball player contract move. And then I bought a house for myself that was close to my grandpa. Unfortunately we had to move up to Silicon Valley because of the acquisition, and he passed away while I was up there. One of my regrets.
Bitcoin: Early Days and the Mount Gox Hack [00:15:30]
Sam: I saw that you bought Bitcoin in 2013?
Palmer: No, much earlier. 2013 is when I was on Forbes 30 Under 30 and they asked everyone for a quote. The theme was advice to young founders and my quote was “buy more Bitcoin.” But I’ve been involved in Bitcoin since before there were any exchanges. I was on the bitcointalk.org forums when you could only do direct transactions for goods — no exchanges.
Palmer: I actually sold a banner ad on my game console modification forum — a one-week banner ad on this forum with almost no traffic — and I sold it for 400 Bitcoin. And then I bought someone’s Samsung Galaxy Vibrant, the T-Mobile variant of the first Galaxy phone, for 800 Bitcoin. At the time, that was well under a dollar per Bitcoin.
Shaan: So you had 16 million dollars’ worth of early Bitcoin?
Palmer: Yeah. Sixteen million. Early days.
Sam: Okay, you’re kind of like the biologist we had on the pod — he’d give an analogy and I’d need an analogy for his analogy. You just casually mention a gaming forum you ran, and this marina thing, and you’ve got deep opinions on everything. How are you becoming so well-versed and opinionated on such a broad set of topics?
Palmer: Most of the best things I’ve done in my career have not come from going super deep in one vertical and grinding out hard gains at the end of a long fight everyone else has already made. My best ideas have come from knowing things in totally different fields that have nothing to do with the field — or at least people don’t think they do — and pulling ideas from those fields and applying them in a new way.
Palmer: The key thing that made the Oculus Rift work is a good example. Everyone was focused on expensive optical stacks that cost thousands of dollars and weighed a lot. I figured out that you could just render a distorted image on the graphics card — distort it inversely to how the lens distorted it. You’d render an image that looks terrible on the screen, but after viewing it through the lens, which was optimized for high field-of-view, low weight, low cost — it came out looking perfect. An optical engineer wouldn’t think of that. It’s very much a software idea. But software people aren’t necessarily thinking about how to obsolesce expensive optics either.
Palmer: Some of the best entrepreneurs are people who understand enough areas to pull from one and solve the biggest problems of another. So I make it a priority to know a little about a lot.
Shaan: So back to the Bitcoin thing — what caught your eye in 2010, and where do you stand on it today?
Palmer: I got into Bitcoin in mid to late 2010. I was fascinated because — I’m a guy who was into virtual reality and the metaverse — this was just adjacent to that. Another super cool cyberpunk concept. The idea of untraceable internet currency, based only on the consensus of all the cyberpunks using it, cryptographically verified, no nation-state controlling or issuing or diluting it. What a cool thing when you’re an anti-authority teenager who loves cyberpunk science fiction.
Palmer: My initial thinking was not that it was a good store of value. That’s actually been the most contentious thing about crypto. After it started skyrocketing, I didn’t buy it because I was speculating — nobody was thinking about that back then. To me it was always valuable as a means of moving wealth around without being beholden to any centralized authority. And I think today, even for all its issues, it’s still a good way to move value around.
Palmer: My prediction in 2013 was that Bitcoin would go to about a hundred thousand dollars and then stabilize. I’m sticking with it. I’m not sure it has the appropriate utility to go much higher as a store of value.
Sam: Did you lose coins in the Mount Gox hack?
Palmer: Oh man, I got Goxed good. I had most of my coins in my own wallet, but I had a significant amount on Gox because people were transferring coins to my account there. And now everyone’s like “of course you’d never keep your coins on an exchange” — but I was 16 years old. There was no idiot’s guide to Bitcoin back then. You only used it if you were a crazy internet nutter.
Forums, Hiring, and the Mod Retro Community [00:21:00]
Sam: You mentioned forums, and I’m a big forum guy. I went and read a bunch of your early posts on the mod retro forum — I went and like stalked them, because I like to see the origin. You were posting “hey, I’m trying to build this thing,” doing a bunch of cool crowdsource stuff. And I thought about it: when you were doing this stuff 15 years ago, you were way early — same thing with Bitcoin. What do you think are the interesting forums today that someone like you would be hanging out in?
Palmer: I love forums too. I think they’re more or less the pinnacle of asynchronous communication. Your currency on a forum is attention, but you can only get attention by getting people to come back and engage with you. So there’s a strong incentive to update people on what you’re doing, to write really interesting things, to get people regularly returning. That’s the dopamine high — other people care about what I’m doing.
Palmer: Today’s social media is so algorithmically driven that you don’t have the same incentives for long-term sustained engagement and collaboration. There’s a lot more incentive to do things on your own, do one big push in a format that causes ordinary people to watch for at least three minutes.
Palmer: The pockets are still there. There are great pockets on YouTube, great pockets on Reddit, actually a lot of private Facebook groups. Like — I’m a member of a night vision group where people build their own night vision goggles. It’s a couple thousand people, it’s private, very much not virally driven. Not the TikTok techno heads or the YouTube techno heads. But I really miss forums.
Palmer: Mod Retro had a core group of a few thousand active members in its heyday. We were doing a few million pageviews a month. You’d never see those ratios today — engagers to watchers.
Shaan: And you hired from that forum?
Palmer: A huge fraction of the people I hired for Oculus in the early days were volunteer moderators on Mod Retro. You hire your network — people you know are competent, people you trust. That was my network when I was a teenager: other loser gamer teenagers on the internet.
Palmer: The first person I hired for Oculus was one of the other moderators. I sent him a message: “Hey, what are you doing this fall?” He said he was starting college. I said, “No you’re not — you’re going to come work for me.” I told him on a Friday and literally drove out in my minivan to pick him up from his mom’s house on Monday. He had all his stuff in four boxes. We got in my van and drove to the condemned motel I was living in.
Palmer: It’s funny when people say “your network is your net worth.” All the Stanford kids and the Ivy kids — we were just a bunch of internet losers. And we did better than any of them.
Sam: Like hiring HMD alumni — “Is that Harvard Medical?” No, Head Mounted Display Forum alumni.
Palmer: Actually the guy I was hiring — Chris Dycus — had never built a head-mounted display, but he was very accomplished at modifying consoles. I knew he was competent. You talk about a job interview where you meet someone for an hour, but I had been seeing this guy’s work published on the forum over the course of years. I knew he had skills. I knew he had the work ethic.
Shaan: Me and Sam have hired so many people off Twitter. I tell people: if you want to get a job, just post your thoughts. People want to understand your texture, your tastes, your character. And that’s harder to fake. If someone has a history of building things for themselves, for no money — you can’t fake that the way you can fake an interview.
Palmer: Exactly. We still hire a lot of people like that at Anduril. One of our benefits is that we’ll buy anyone in the company any tool they want for their personal projects as well as work projects. People who just show up to the wage machine, clock in, clock out — they’re not attracted by that. But the types of people who want to create for the sake of creation — to those people, that’s a golden ticket.
Sam: My co-founder is a lot like you. At 15, started working at a dot-com. Always doing his own thing. He used to buy 3D printers and robotics — we didn’t need any of this stuff. I’d ask what he was doing and he’d say, “I want to come in after work and build a drone or shove a Raspberry Pi into something.” And he said: this is also how we’ll get great people. I want to work with other hackers who like to tinker.
Sam: And he knew that struggle. When he was 16 or 18 or 21, the thousand-dollar thing you’d need — he just couldn’t afford it. So he made it free: anybody can come in and use this stuff.
Palmer: And it doesn’t even have to be a thousand dollars. I remember there were times where the thing I needed would cost fifty dollars, and it was just inconceivable that I could afford it. Oculus owes more to the iPhone than anything else. If the iPhone hadn’t existed, there wouldn’t have been broken iPhones for me to buy, unlock, repair, and sell on eBay. I made tens of thousands of dollars as a teenager on that side hustle. If that hadn’t happened, Oculus probably wouldn’t exist today.
Ideas Before Anduril: Prison Reform and Petroleum Food [00:28:00]
Sam: Before you started Anduril — what was on your list? I heard something about a prison thing. What else were you considering?
Shaan: Wait, what was the prison thing? Let’s start there.
Palmer: There were two things I was seriously considering, and then one thing I’m going to do someday — seasteading is off the table right now, too long-term. But the two short-term things were: fix national security, or solve obesity, or solve incarceration.
Palmer: The prison one: I wanted to start a private prison company that would run as a non-profit, and use the tax advantages of that to out-compete private prison companies. Right now, private prison companies are publicly traded, and they have a strong incentive to lobby for laws that incarcerate people for the longest period of time for the least serious crime. They don’t want murderers and terrorists — they want non-violent drug offenders who will be in prison for a long time and come back. Good occupancy, good tenants.
Palmer: And the incentives they’ve set up with the government — where the government pre-pays for beds — means that if those beds aren’t full, someone isn’t locking up enough people. Very bad incentives.
Palmer: My idea: go to the government and say, “I’ll lock up your prisoners, but you can’t pay me up front. You pay me after the person serves their term and then stays out of prison for five years.” Now all of a sudden my entire organization is motivated to get people through as quickly as possible, release them as quickly as possible, and keep them from returning to crime. That would have been a game-changer — and a very attractive model to governments that are always looking to delay expenditures.
Palmer: The biggest problem I ran into was that it wasn’t a technological problem — it was a lobbying and marketing and government affairs problem. And not at a federal level where you can convince a handful of people. It was going to be this locale-by-locale thing, with a lot of people who depend on prisons for jobs, a lot of politicians deeply involved. And the deals aren’t recompeted very often — this isn’t enterprise software. “We’re going to recompete this in 35 years.” I couldn’t make an impact fast enough.
Sam: You couldn’t just have some Silicon Valley guy in tight jeans sit down like, “So we’d like to have a conversation about your prisoners. We’d like your business.”
Palmer: Unfortunately not. And the people who make the decisions don’t benefit from us succeeding. With private individuals and businesses, you just have to convince them it’ll be good for them. But with government procurement, the person in charge often doesn’t benefit from saving money or reducing manpower. In many cases, their political power and earning power are directly tied to their ability to keep costs high and headcount up. That was the big problem. Some things are kind of self-reinforcing — very hard to fix through disruption.
Sam: What about the obesity one?
Palmer: Obesity is one of if not the leading preventable cause of death in the United States — there are so many other health problems that result from it. Some people say make exercise more popular, some say stop normalizing obesity, some say medical treatment.
Palmer: I took a pretty cynical view. I said: obesity is not going away unless you let American people eat whatever they want, whenever they want, as much as they want, with no lifestyle changes, no exercise, and absolutely no effort on their part. So within that constraint — what could you do?
Palmer: The idea I came up with: long-chain hydrocarbon-based synthetic food. Oil-based foods. You guys are familiar with Impossible Burger, Beyond Burger?
Shaan: Yeah.
Palmer: It’s probably better than the worst beef burger you’ve ever had, right? But certainly not up to the level of the best beef burger you’ve ever had.
Sam: Yeah — “whatever, I’ll eat this.”
Palmer: Right. And all these people trying to make fake food are building fake food out of food. I said, wait — let’s think about this from first principles. If I’m a materials engineer and I’m trying to solve these problems — how it feels in your mouth, how it comes apart, how it sears, how it changes texture when cooked — what am I going to use? Beans? Chickpeas? No. I’m going to use oil. Mankind is a master of oil. We can make it into waxes, gels, solids, anything in between. We can make it into truly anything with almost any material properties we want.
Palmer: So: leverage everything we know about making inert hydrocarbons that are non-toxic, and use that to make fake food that tastes and feels like real food but has zero caloric value. It goes right through you, just like fiber.
Sam: So it’s like the diet Coke cheeseburger.
Palmer: Diet Coke cheeseburger. The diet Coke dairy products. I started making prototypes — frying foods in mineral oil, which also has no calories. I made some paraffin-based fake cheese. Basically paraffin wax-based cheese product — you could still make grilled cheese sandwiches with it. Tasted great but almost no calories.
Palmer: I also built a device that injected soda syrup through a stream onto your tongue directly as carbonated water flowed over it. There’s a weird perceptual thing — if you put pudding in your mouth, your body assumes the full mass of the pudding is comprised of whatever is touching your tongue. If you can create a physically structured food where the part touching your tongue is different from the bulk of the rest, your body still thinks the entire bulk is whatever’s on your tongue.
Shaan: For a while, what does your house look like?
Palmer: A little more boring now. But when I was acquired by Facebook and moved to the Bay Area, we had about ten people living in a 13,000 square-foot home built in the 1930s on six acres. We turned the dining room into a machine shop, the ballroom into an assembly and welding room. We had a soft goods room in a sunny area.
Shaan: What’s a soft goods room?
Palmer: A soft goods engineer does things like tennis shoes, bras — things incorporating fabrics. In our case it was for head-mounted display stuff: HMD straps, the fabric on the headset. We were also cosplayers, so we were building anime costumes in there too.
Why Palmer Started Anduril [00:38:00]
Shaan: The more you talk, the more I realize you do the thing we celebrate most on this podcast — people who define winning on their terms and then actualize it. Whether it’s a Chrome extension guy in Bali making 20K a month or you and Elon going huge. It seems like you were living your best life in that house with the machine shop and the soft goods room.
Palmer: A hundred percent. And the weird thing is — all these things sound like fun, but I’m still getting to do them. The tough part is the coolest things we’re doing at Anduril, I can’t talk about, because the most successful projects are the ones we have to keep under wraps.
Shaan: What made you realize you had to start Anduril specifically?
Palmer: Very big picture: Anduril is trying to build the next major defense prime — we’re the prime contract holder, not a subcontractor to Lockheed Martin or Raytheon or Northrop Grumman or Boeing. About 80 percent of the US defense budget goes to just a handful of companies. Those big primes get paid on a Cost Plus basis — they get paid for their time, materials, and a fixed percentage of profit on top. So they’re incentivized to move slowly, come up with more expensive systems, sell more of something, have things break more often so they can sell more parts.
Palmer: We created that system in World War II to take over the industrial machine — companies like Ford saying “I can’t even quote you what it’ll cost to make a tank because I’ve never really done this.” The government said, “Fine, we’ll pay you whatever it costs plus a fixed margin.” Then unfortunately we just kept doing that, even though we were no longer in an existential war.
Palmer: In the last 35 years since the end of the Cold War, the government has completely lost its ability to grow small defense companies into large ones. Samuel Colt went from his tiny garage workshop to arming the entire western world — that’s what we used to be able to do. Since the Cold War ended? There were only two unicorns before Anduril in 35 years: Palantir and SpaceX, both founded by billionaires. Nobody else.
Palmer: So founders say, “I have no idea how I could possibly start a defense company” — and they don’t. VCs say, “There are no examples of success in 35 years” — and they don’t invest. Smart employees look at the landscape and say, “This might be a cool lifestyle business but it’ll never grow to a scale where the equity means something for my family” — so they don’t join.
Palmer: I said, if it really does take lots of money and lots of influence and really smart people — I’m in a position to start this. Very few founders have experience running a multi-billion-dollar company with thousands of employees and mass manufacturing millions of pieces of hardware. And I was willing to give up the adoration of my peers. If I had just retired from Oculus on my own, it would have been much harder to go into building weapons. I had friends who didn’t want to talk to me anymore. Investors who said what we were doing was morally reprehensible.
Palmer: But I was trying to explain: we live in a world where our major strategic adversaries are rapidly building advanced technology that has no peer in the US war machine. Major conflict is imminent in Asia and Europe. We need to be ready — not just to win wars, but to deter them. If we don’t have the tools to deter, war is inevitable.
Palmer: And we’re living in the first time in US history where the most innovative, powerful, and large technology companies in our country refuse to work with the military. Our most powerful companies have always understood that responsibility. Apple has 95% of their manufacturing in China. They’ve agreed to invest hundreds of billions there and committed a further 275 billion in Chinese manufacturing in exchange for being allowed to operate as an independent company in China rather than being nationalized into a joint venture majority-owned by China. A single person in China could sign one piece of paper that would wipe out the most powerful company in the entire world instantly — a two-trillion-dollar company. They are not masters of their own destiny, not by any means.
Palmer: Five years ago I could see we were on the precipice of war with advanced powers who had fully suppressed our most advanced technology companies through economic tools. I felt like I couldn’t do anything more important than starting Anduril.
Anduril’s Business Model and the Billion-Dollar Contract [00:46:00]
Sam: You kind of looked at all three of those ideas — prisons, food, defense — from another angle. You flipped the incentives.
Palmer: Yeah. It sounds simple, but it’s not easy.
Sam: And what you ran into with the prison idea was that the local official who decides on these things was incentivized to have a bigger budget, not a smaller one. He doesn’t have to say “my incentives are wrong” — he just says “we’ve assessed the vendors and this one has more experience, we don’t want to take a risk on a new vendor.” That simple.
Palmer: Exactly. And the same dynamic exists in defense. What’s the business model with Anduril?
Sam: Yeah — Cost Plus, you said you’re not doing that. What are you doing?
Palmer: It’s not even a revolutionary model. It’s the way every tech company works. You use your own money, build a product, make it work, then go to customers and sell it. That’s a very hard thing to do in defense, but we’ve bet that we can pick the right things to work on, find the right partners in government to help tell us what we should be investing in ahead of time, and then sell to the government most of the time when it works.
Palmer: We’re incentivized to be efficient. We don’t want things to drag out into a 10-year R&D program on Cost Plus when we can get it done in six months with really smart ideas. We’re basically trying to convince the Department of Defense and politicians that this is the way all defense companies should work — everyone should live in fear knowing that if they fail, they’re the ones who get screwed, not taxpayers.
Sam: So when you get a contract — like a 900-million-dollar contract — that’s after you’ve already produced the product? You’re basically saying “here’s the finished goods, now agree to buy them”?
Palmer: Yeah. We recently won a billion-dollar contract with SOCOM — Special Operations Command — to do all of their counter-drone work. Protecting their installations and positions from attacking drones. We started working on our counter-drone system using all our own money years before we had any customer. We built the hardware, the software, the interceptors, the jammers.
Palmer: Then after we’d invested a ton of our own money and proved this was the right way to solve the problem, there was a full competition. A shoot-off between all these different companies. Some of the companies we beat were actually getting paid by the government to develop their systems — using government money. But we had invested quite a bit more money and moved much faster. And there were literally contractors complaining: “This isn’t fair — we have to compete with Anduril and they’ve been investing their own money for years. How can we compete when the government’s only given us tens of millions over the last two years?”
Palmer: And I’m like — guys, you could have won. If you had spent your own money for five years, you could probably compete with us on an even playing field. But you can’t take no risk and expect all the reward.
Hawaiian Shirts, Flip-Flops, and Selling to the Government [00:52:00]
Sam: You’re 30 years old, sitting there in a Hawaiian T-shirt with a goatee — probably barefoot half the time — talking about Cosplay. And you just said you won a billion-dollar contract from the government. How do you work up the confidence to think, “I’m going to go in against all these gray-haired suits and the government is eventually going to take me seriously”?
Palmer: Some people think I should dress differently. Wear a suit, be very straight-laced, very serious. But one of the most important things Anduril is doing is not just building technology — it’s inspiring other companies to work in defense. Inspiring companies that aren’t in defense to pivot into defense, and inspiring people to start new defense companies. If they see me become a boring guy who has to make himself lame to sell to the government — that’s not a lifestyle they’ll want to lead.
Palmer: We need to show that you can be successful and that it’s going to be fun. Now, I also want to keep wearing flip-flops and Hawaiian shirts. So maybe this is just post-facto justification.
Sam: No, I’m on board. Everyone would be doing society a disservice if you were to change.
Geopolitics: Will Russia Use a Tactical Nuclear Weapon? [00:54:00]
Shaan: The podcast is always about the future and brainstorming ideas. But none of that matters if World War III breaks out and nukes are flying. You’re a lot more in the loop than any guest we’ve had on. What are the odds this Ukraine-Russia conflict breaks out into something a lot more serious? Is there going to be a nuclear weapon in our near future?
Palmer: It’s very hard to predict. I always tell people: our role is to build the tools, and you have to trust in democracy to deploy them correctly. If you believe in democracy, you should not want US foreign policy to be dictated by the ever-changing whims of technology executives. What a dangerous precedent — you’ll build weapons for the people you’re politically aligned with and suddenly drop it. Really what it means is: I sell to the people the US State Department and DoD want me to sell to. They have intelligence and information I don’t have. I can’t second-guess that.
Palmer: With that out of the way: I think we are going to see a tactical nuclear weapon get used. Tactical nuclear weapons are designed for tactical use as part of a battle — blowing up an armored division, taking out a wing of bombers, destroying an airfield. Strategic nuclear weapons are for deterring mass nuclear exchange and engaging in strategic-level annihilation of cities.
Palmer: The United States disassembled all of our tactical nuclear weapons a long time ago. We decided our war doctrine does not allow for tactical nukes — nukes are only for strategic deterrence. That is not the case for Russia. Russia has tactical nuclear weapons, they train to use them, and it is part of their doctrine that they will use them in conventional conflict.
Palmer: Some people say even mentioning this is akin to supporting Russia. But I’d argue the opposite. If you show the world that even the threat of small-scale tactical nuclear weapons is enough to deter any intervention in any conventional warfare, you hugely incentivize nations to obtain their own tactical nukes. You don’t want the calculus to tip that way.
Palmer: For that reason — and this is a little contrarian — I think the odds of a tactical nuclear weapon being used are very high. It will not be used on the United States or a NATO ally. It’ll probably strike an inarguably military target — a port, an airfield. And I want people to get comfortable with this, because there’s this idea that if you use a nuclear weapon, you’re automatically in World War III. I think that’s probably the wrong way to look at it. If you accept that, you’re tacitly admitting that tactical nukes deserve a strategic nuclear response. If you set that up as the path we all slide down — yeah, things are really bad.
Sam: This sounds selfish, but what does that mean for me? A wealthy American with money in the stock market. Does that mean inflation goes huge? My investments go down? People I know get hurt?
Palmer: Fair question. The broader geopolitical question is: is the United States the world police? Are we going to help our allies, and to what extent?
Palmer: I’ll throw out one scenario that’s popular with certain politicians: completely pull out, not our problem, let the ex-Soviet guys duke it out. First issue: our European allies are in pretty bad shape if Russia is right on their border with no buffer. More importantly: what do you think China is going to do if they see that’s the United States attitude? “There’s a price they will not pay. There’s a level they won’t engage at.” If we raise the cost above that level, they’ll make the short-term decision not to engage. That’s very dangerous for Taiwan, which is in turn very dangerous for semiconductors and our entire economy.
Palmer: If Taiwan actually gets invaded by China, you could see a 30 or 40 percent drop in the stock market beyond what we’ve already seen. That’s not even a crazy assumption — that’s a pretty well-backed prediction from boring establishment economists. The way I see it: if we want to maintain credibility as a player that can deter wars, not just win them, we have to take actions that maintain our credibility. There’s something between zero engagement and D-Day 2.0 that we have to do.
Where to Find Palmer [01:03:30]
Shaan: Palmer, where can people find you if they want to go work at Anduril or read more of your stuff?
Palmer: My handle across social media is PalmerTech. On Twitter specifically, you can find me under the handle PalmerLuckey. And there’s my website, palmerlucky.com — the number one Palmer Luckey blog on the internet. I’m coming for the press sites.
Sam: Someone just told me about palmerlucky69.com — is that a new project?
Palmer: Got a lot of promise. I’ve gotta check that out.
The Jason Calacanis Beef [01:04:00]
Sam: Do you want to rip a WWE-style promo at Jason Calacanis? He’s challenging you to a fight. Why would you challenge a guy who builds weapons for a living?
Palmer: I mean, I don’t know if you can tell, but I’m actually a pretty big guy. About 250 pounds, six feet tall. I understand the mechanics of fighting well enough and have done enough recreationally to understand that it’s unlikely someone who’s five foot five and 140 pounds is going to have a good shot.
Palmer: But I’m not a physical violence kind of guy. I think it’s weird to say, “You don’t like me — well, I could beat you in hand-to-hand combat.” Maybe. But your ideas are still bad. One doesn’t solve the other.
Sam: Is this the most Silicon Valley callout ever? “I know the mechanics of fighting. Physics is on my side.”
Palmer: For people who don’t know the short version: Jason Calacanis said a bunch of really awful stuff about me for years starting in 2016. He said I was a terrible person, I didn’t care about my family or employees, I was a useless waste of space, Zuckerberg should fire me. Then when I did get fired, he celebrated it. Then he just didn’t talk to me for years — never reached out — and then invited me to go speak at his podcast and his conference.
Palmer: So I went and basically told people: “I can’t believe Jason invited me — it’s only because I’ve clawed my way back to having a second unicorn before the age of 30. This guy treated me like garbage for years, he’s never apologized, he spread lies about me.” At the conference he said he was sorry if he said anything that offended me. But then when he put my video up, he said, “Actually, I take it back. Everything I said was accurate and I don’t regret it.”
Palmer: And so now people keep saying, “You guys need to bury the hatchet, meet in the middle.” I’m like — I didn’t do anything. You can’t “meet in the middle” from “Palmer doesn’t care about his family” to — maybe I care a little? No.
Sam: I remember when I first heard about it. I looked it up and thought, “Palmer must have done something really messed up.” And then I saw the coverage and realized he donated $9,000 to something and Jason is out there saying “He’s paying Trump supporters, it was close to violent, he’s posting anti-Semitic memes and misogynistic hate attacks.” And I’m like — dude, it was nine thousand dollars to a billboard. You’ve given a lot more to spicier political stuff than that.
Palmer: That’s one of the big hypocrisies of Silicon Valley — it’s all about open-mindedness, unless you disagree with us. How dare you support that candidate. Half the country votes for whatever, and that’s fine, but the moment someone gives money to something they don’t like…
Palmer: It’s so foreign to me because one of my best friends is a socialist. We strongly disagree politically, but running Oculus, my political beliefs were like one percent of my time. Ninety-nine percent was on VR and my company. There was a story recently saying “Palmer Luckey, very outspoken Republican.” I’ve literally tweeted about politics two times in eight years. I’m not outspoken by any means. But to them, because there was this story years ago where he privately donated — without using his name — that means he’s an outspoken Republican.
Palmer: Imagine if people were like, “Mark Zuckerberg, outspoken Democrat, does X.” Autocorrect would say you made a mistake.
Palmer: But that’s the best part about Anduril — our CEO Brian Schimpf is very much a Democrat, and we have a huge mix of people across the entire political spectrum. What we’ve said is: we might not agree on everything, but we agree on the importance of national security. We agree the United States needs the tools to deter Russia, China, and other aggressors. We agree we can save taxpayers hundreds of billions of dollars a year while making tens of billions a year. If we agree on those things, let’s put aside the differences.
Palmer: A lot of other companies pick a political side. We’ve been very clear: we’re a mission-oriented company. If a Republican does something bad for our mission, we’ll push back. If a Democrat does something bad for our mission, we’ll push back. And I highly encourage founders to set that tone when starting companies. If you want to attract people from all over the country, all over the world, of all political persuasions — if you pick a side, you alienate huge swaths of people. Not just people who disagree, but people who don’t want to be at a partisan company at all.
Why Palmer Flies Coach — and the Security Argument [01:12:00]
Sam: I have to bring up one more thing. The tweet you made where you said there’s no way any billionaire actually flies coach.
Palmer: Yes. Good.
Sam: You do fly coach?
Palmer: I do fly coach. It’s a reasoning thing. With exceptions for long international travel, we only cover coach for our employees. It’s only a few hours. It’s a very bad use of company money to buy business or first class for people — we have so much travel at the company we could easily spend a serious fraction of our resources on people sitting in slightly better seats. And it’s especially bad when it’s like, “Am I really going to pay business class for three hours to a place where you’re going to sweat it out in the desert for a week?”
Palmer: And even when I use my own money, I fly coach. People say, “Why don’t you fly first class?” Because I expect my employees to fly coach. If I don’t also do it, I’m out of touch — or I would literally be out of touch. It sets an example: it’s not actually that bad. I’m willing to do it even when I pay my own way.
Sam: But don’t you have people who want to hurt you? The anti-Trump crowd, Lockheed Martin wanting to kneecap you, Jason — surely there’s some security risk where you need to think beyond “hey guys, I’m in coach with you.”
Palmer: You’re totally right. It depends on the trip and what I’m doing, and I make sure to keep myself safe. I probably don’t want to get into the specifics — but you mentioned Jason Calacanis and certain political groups. What about the Mexican cartels that we’ve cost hundreds of millions of dollars in drug trade? What about the people who’ve been foiled in attacks on US military forces because of our stuff? There’s actually a long list of people scarier than Jason Calacanis, if you can believe it.
Palmer: But in general, if someone’s going to come after me, it’s probably going to be a place where they know I’m going to be. The high-risk place is actually not on a flight in the secure zone. It’s probably the restaurants I go to too much.
Sam: You are crazy. I’ve agreed with everything you’ve said except for this.
Palmer: Maybe one day coach gets so bad that I tell everyone, “We’re all going business now.” But I think today is not that day.
Palmer: I also grew up around commercial airlines — my grandpa was a pilot for United Airlines for over 40 years. To me there’s a certain romanticism to mass-market, mass-available air travel. What an incredible thing. We figured out how to make it economically viable, and we build everyone else’s airplanes. It’s an American thing. When you’re on everyone else’s planes, they’re mostly made by Americans. Even the ones made by Europeans were made with American technology.
Sam: Well — I disagree with that opinion but I respect it. You’re the best, man. I would love for you to come on again.
Palmer: This has been a lot of fun. We covered some good ground today.
Shaan: Maybe we’ve suckered you into becoming friends with us. If you ever want, you can DM us on Twitter — compare hobbies, who knows. Maybe we’ll invite each other over. You can show us a thing or two. Come down anytime.
Palmer: All right. Thank you so much. See you guys later.