Palantir's Mike Gallagher: $448M ShipOS contract will modernize US Navy shipbuilding with AI as fleet shrinks to 279 ships by 2027

Gallagher from Palunteer. He's the head.

I don't know if that one's going to stick, but hopefully he's here. Welcome to the stream. Merry Christmas. How are you doing? Do you have some Christmas music for Mike Gallagher?

Thank you.

How are you doing?

I'm good. How are you guys? What's the nickname? The Gallagghanator.

That didn't stick.

No, that one's not sticking. Have you had any nicknames throughout your career, throughout your life?

Um, mostly just Gallagher. G Money for a while.

G Money.

Uh, yeah. I think that's it. Mixmaster Mike G.

Was that on the hill?

Um, what's that?

Was that on the hill?

G Money. Yeah, that was like high school college.

I imagine it was that sounds like a high school name, not necessarily one in in Congress. But uh anyway, it's great to catch up with you. Uh I hope you've been having a wonderful year. It seems like Palunteer's been on a tear. Uh I'd love for you to take us through the news today uh and uh and kind of get us up to speed on what's happening in ship building specifically and then I'm sure we can zoom out and talk about uh ship building more broadly and and geo uh geo uh just geopolitics and competition.

Well, I wonder if we couldn't reverse it. I I think it's important to make the geopolitical case first. First of all,

yeah,

you guys seem to be crushing it as well. I see you everywhere. I have like merch in my office now. Fantastic. All my friends are constantly on your show. So, congratulations on all your success and taking over the world. It's very cool to see. And

thanks for coming on so early and helping us. It was huge.

Hey, listen. Some call it the Gallagher bump, you know, that you've now you're now a beneficiary of

Galagator bump.

The Gig bump. The Goney bump.

Anyway,

really, you know, Yeah, that's right. my my my entire like eight years in Congress was devoted to this question of how do we enhance deterrence with respect to China and if you look at it like there are things we need to do in the short term you know killer robots a lot of the stuff and building you know long range precision fires but over the long term if you just look at a map of the Pacific we need a bigger navy right we had a force structure assessment that called for a 355 ship navy when I was a freshman member of Congress in 2017 we made it the official policy of the United states to get to a 355 ship navy as quickly as possible. As quickly as practically possible was the language. And then the size of our fleet continued to shrink. It's on track to bottom out at 279 ships in 2027, which happens to be the year that Xiinping has set for having his military ready to invade Taiwan should he make the decision to move. So if for no other reason than if you look at geopolitics in the most fundamental sense, the collision of geography and politics, we need a larger navy to preserve the peace. We need to start cranking out ships. We need the high low mix of ships. Now the reason we haven't been able to do that, I think is a combination of factors, right? We have had an inconsistent demand signal from previous administrations. Uh and that's usually what the shipyards say. It's like we don't know the right mix of ships that the Navy wants to build. You have inconsistent budgeting from Congress, right? I mean, we go from omnibus bills to big beautiful bills to continuing resolutions. Continuing resolutions are particularly destructive for the Navy. A former sector of the Navy said because of continuing resolutions, the Navy put about $5 billion in a trash can and lit it on fire. All of this is to say as we were trying to figure out

why is what are the dynamics that that causes that waste? Yeah, the the biggest issue is under a continuing resolution, you basically agree to fund a previous uh year's levels, you can't have new starts, right? You can't fund new things, whether it's a new ship class or a new innovative AI program or a new, you know, robot that, you know, scares the hell out of Xiinping, right? Uh and then there's just also a lot of uncertainty hanging over a CR. They're usually short-term, hard to do long-term planning. There's this other phenomenon where the military actually because of how messed up congressional budgeting is, the Pentagon fails to spend about $15 billion a year. So think about that. For the last 10ish years, we've lost about $125 billion in defense appropriations. Money that was appropriated for defense that went unspent. It goes back to the Treasury. It sits in obeyance for five years and then it evaporates. Like that's I for $125 billion. like I I I could build you a regional military that could definitively prevent World War II if I was unrestricted in how I could use that money and how quickly I could move.

Certainly it could have prevented the decline in in the Navy's uh you know number of ships like you mentioned just a bit earlier.

Exactly. I think there's another thing right like we obviously went to war in the Middle East after 9/11. I was part of these wars. I deployed twice to Iraq. The Navy was largely the bill pair for these for these wars. We had a large infusion of money into ground forces um and overseas contingency operations. What we didn't spend money on was investing long-term in the future naval fleet and growing the size of that fleet as well as the mix of capabilities on various ship platforms. And then we had cost overruns in key programs whether it's the Ford class carrier, Colombia class submarine, uh you know the the constellation class frigate the latoral combat ship prior to that. So all that is to say for the first time in a long time now in the Trump administration under the leadership of Secretary Failen the Navy is taking advantage of some money that was appropriated by Congress for non-traditional bets uh on leveraging AI and autonomy and applying it to ship building and bringing in Palunteer in this specific case to turbocharge production in key shipyards both public and private yards and 100 key suppliers. So, this is $448 million over two years. It's based on pilot work that we've already done um at various shipyards and suppliers, the results of which have been incredibly promising. Uh at one shipyard, we saved over a 100 or 200 planning days um uh 20 planning days a week. You may ask yourself, there's only seven days in a week, but that's because there's four people whose full-time job it is. They spend 160 hours working on mandrolic processes. Now with our software, it takes 10 minutes. At another supplier, a process that used to take 200 hours for a manufacturing bill of materials is now down to 12 seconds. So just by modernizing the underlying software, leveraging AI, it's our belief that we can maximize production at the shipyards and then link the suppliers to the shipyards and all of that, what's called the maritime industrial base to the Navy itself. So key Navy officials in general and the Secretary of the Navy in particular can look at the maritime industrial base and understand what's going on in real time and make critical allocations decisions because a lot of what's happening at the yards, particularly the public yards, is just simple decisions about what do I buy now, what do I not buy now, and there's really no like there's no there's no source of truth to to make a a a sophisticated judgment on that. And that's what causes us to waste money and time. So, this is all about maximizing production, getting more ships in the water, and ultimately fulfilling that geopolitical need for a bigger and more lethal navy.

Are there sailors that don't have boats right now, or are we going to recruit a bunch more sailors as we build out the physical boats in the Navy? I mean, I'm just wondering because I imagine if you if you are, you know, an American citizen, you join the Navy, your dream is to be on a boat, and then they're like, "Oh, we're all out of them. You got to stay on land." Uh, that's got to be depressing. But, but do you think there'll be a recruiting push for more Navy sailors as we build out our fleets or are these going to be autonomous boats? Like, are these support ships? Like, how do we think about the the the human side of the future of the American Navy?

Sure. It's a great question. I mean, one thing we've seen in recent years was a full-on recruiting crisis that had little to do with the decline or the growth of the fleet and more to do with a lot of at the time it was, in my opinion, a misguided push for diversity, equity, and inclusion initiatives that were based on species political science. Um, that really turned off a lot of people. Uh, we had a a retention crisis as well. The interesting thing is, at least in most services, that's starting to turn around. Um, I was just at the Reagan National Defense Forum. They release a survey every year. And one thing that the survey results reveal is that the the so-called HEGSTH reset is extremely popular among current service members, which is important because that's the big recruiting pipeline. It's usually someone who is serving or recently served who tells someone else, "Yes, you should join the military." and among veterans. Um, so, uh, when it comes to things like genderneutral combat standards, um, you know, and some, and some other changes, uh, this is wildly popular. So, the recruiting crisis has gotten better. I actually think over time it's not going to be a problem if we stay on that trend because, and, this is the second part of your question, yes, more of our ships are going to be autonomous. There's still going to be destroyers that are complex manships. There's still going to be carriers. There's still going to be submarines. Submarines are our biggest asymmetric naval advantage right now, but increasingly I think you're going to start to see a lot more autonomous vessels in the fleet, both autonomous surface vessels and undersea uh robots. And that's where you have I think as we talked about before, I believe what's most exciting about the current moment is you have so many people in your world, right, in the investing world that are that are that are that are willing to put capital into non-traditional defense tech startups that are building really cool capabilities for the Navy. And I think this is a really exciting moment for the nontraditionals. I think the defense industrial base is going to look a lot healthier four years from now where, you know, Palanter shouldn't be the last company uh to enter the S&P 500 as a defense technology company. We'd we need five more companies like that. And so I I actually think the companies that are building autonomous vessels, that are building killer robots, that are building long-range precision fires, you know, hypersonic missiles like Castellion in California, I think it's a great moment for all those companies.

Yeah. I have you I mean it's hard to like pick a favorite branch of the military but it feels like

Well, Marine Corps obviously it's the Marine Corps. I mean it's not hard. So yeah,

hit the gong hit the gong for the Marines.

Let's go. Um

we're not picking favorites, but certainly will. But but but I I am I am super fascinated by this uh this Palmer lucky line that he's been uh delivering a few times about uh he he wants America to be uh the world's not the world's police but the world's arms dealer. And so the idea that that maybe, you know, if if he's if he's building something that can shoot down a drone, that goes in the hands of the Ukrainian service members and maybe America doesn't put boots on the ground in Ukraine, but we do put, you know, equipment that can neutralize an attack for a Ukrainian soldier. Um, and so I'm wondering how that interfaces with the naval strategy in your mind. Um, are there are there do you think that are there already boats that we're going to be supplying to other uh allied navies? We want to build up our own navy, but is there also an incentive to build up allied navies as well? And and and what role do you think the US will ultimately play in that dynamic?

100%. Well, first of all, Palmer is at the leading edge a lot of this stuff. One thing that gives me hope as we look at this new cold war with communist China is like I think our you know our private sector leaders Palmer's a great example of this.

Yeah.

Oh, did we lose you? Oh no.

A nation state again.

What a coincidence. Wow. He starts mouththing off about nearer competition.

Immediately taken down.

They get im immediately taken down. Well, uh

question we're we're we're under cyber attack very clearly. Uh we thank you for bearing with us while we have

the moment I know I know

Chinese Navy.

It's crazy. Okay. Anyway, kick us back off.

Well, let's I'll make it simpler. I think it goes both ways, right? like we are seeing

foreign ship builders worldclass foreign ship builders like HD Hyundai with the Palanteers had a long-standing partnership with uh they represent I think 17% of the global tonnage that's built and a lot of the work that we're now applying to American yards is built on some of the lessons we've learned in applying AI to Korean ship building Hanwa etc are trying to invest in America Hanwa bought the Philly shipyard and that's great we need more shipyards we need that investment uh that sort and they're going to have, you know, American subsidiaries that are doing important work. Um, so that's one thing. And then on the other hand, and I think maybe the AUS agreement, this was the arrangement we had to provide nuclear submarine technology to the Aussies is an example where we can take what we're best at, i.e. building nuclear submarines and share it with our closest allies and get more interoperable vessels west of the international date line to enhance our collective combat power. I think this gets to a broader issue. Really the promise of AUS and a promise of a lot of our alliances in the Indoacific is that we can start to build out something resembling a free world technological industrial base where humans with appropriate clearances technology can float seamlessly among between the borders of countries that we truly trust. And then if you layer on geography and you look at okay Taiwan, the first island chain, the second island chain, we need countries including treaty allies like Japan to invest more in their military. There we have a really positive story in terms of Japan what's happening in terms of their investment in asymmetric capability. It's probably one of the best developments for um deterrence in the last 20 years uh in the region. So the answer is yes, all of the above. We need to be we need to have a more coherent foreign military sale process where we can provide our best technology and our companies can sell around the world and we make it easy for them. But we also want to leverage areas where our allies might have key capabilities either to invest here in America or we can fight as a team and that's where a different sector what Palanteer does with our Maven smart system. You know we are the solution for joint all domain command and control. This is how you see the battlefield, how you see the enemy, how you see yourself. We obviously want us to have a similar, if not identical, picture when we're thinking about how do we fight China with the Aussies, with the Japanese, and with other key allies. We have to fight as a team in order to enhance deterrence on a timeline that's actually relevant.

Yeah, makes sense. Jordy, anything else? Uh, not sure how much you can comment or riff, but what should what should people be paying attention to in regards to Venezuela as a casual geopolitical spectator? I saw that video floating out that that very clear clearly at the top it said unclassified or declassified. it felt uh I didn't want to read too much into why it was immediately you know look like seals uh you know taking over uh but what should people be kind of paying attention to on on that front?

Well, you know, it's it's almost similar in my mind to some of the recent naval operations we saw um relative to the Houthi rebels in in Sentcom. Um you know, I started this conversation off uh laying out the challenges we've had with ship building. That being said, what our recent operations in the Middle East and what our current operations in Southcom and in Western Hemisphere demonstrate is that we are still the world's best military far and away. And we have capabilities that nobody else has. Now, that should not be a cause for complacency. Like, we need to build off that. We need to keep investing more in the military. But like our sailors, our soldiers, our airmen and marines, like when you give them a mission and a difficult job to do, like they will get it done. And if you are an enemy of the United States, like you should be on notice. When we have presidential leadership combined with military professionalism, there's almost no limits to what we can achieve. And so I welcome a renewed focus on our own hemisphere when it particularly uh uh particularly where it intersects with Chinese and Russian influence in our own hemisphere. That being said, what I'm most concerned about over the next 5 years and beyond is what is the conventional balance of power in the Indo-Pacific region because what I've been saying now for a decade is that Xiinping is serious when he talks about taking Taiwan by force. And all these operations, whether in the Middle East or whether they're in, you know, off the shores of Venezuela or in the Caribbean, will look like child's play compared with a major naval war with China over Taiwan. The scale is almost hard for us to imagine because we just haven't fought a war on that scale since World War II. Really since the Battle of Lady Gulf in World War II, we haven't seen something of that scale. And I think one of the disadvantages, I almost hate to call it that that we have is that in a in a republic like ours, in a democracy like ours, we're very sensitive to casualties, rightly so. We have an allv volunteer military. We don't want to spend lives uselessly, right? Right. I mean, the American people won't stand up for that. In a in a dictatorship, in a Marxist Leninist system like that in China, I don't think Xiinping cares if he loses 10,000, 20,000, 50,000 PLA soldiers to achieve his lifelong ambition. This is actually a lesson that endures from the last time we fought the communists on the battlefields of Korea on the Korean peninsula. They were just far less sensitive to casualties. So I only bring that up to say there are certainly lessons that um are relevant across the world, but there are certain things peculiar to the nature of the adversary we face in China that I don't think is uh we that I think makes it a much harder problem to deal with than Venezuela if that makes sense.

Yeah,

completely.

Wild.

What's up with the gong? Can I ask about the gong? Is that I you know

the gong is gong

of course of course

a galagong. There we go.

The gong is usually the the gong is usually a celebration of funding rounds big numbers milestone. Uh yeah I mean there's this is a this is obviously a massive deal and so totally gong worthy. Uh

and the Packers beat the Bears so we have a lot to celebrate. You know there's a lot going on a lot of numbers. and we should ring the gong every day that Cinping doesn't invade Taiwan because that sounds terrible and I don't want that to happen and you just delivered a very chilling uh you know potential sci-fi future where that doesn't happen and it's miserable. Uh but thank you for everything you're doing to stop that from happening because I very much want peace in the world and in the Indopaccom region. Uh and of course you and the rest of the team over at working very hard on that. So, thank you so much for taking the time to come and chat with us.

Thank you guys.

Merry Christmas.

Peace. Peace. Peace on earth.

Peace on earth.

Peace on earth.

See you. Uh, up next, Turbo Puffer, serverless vector and full tech search built from first principles and object storage. Fast, 10x cheaper, and extremely scalable. We have Sager and