How the Pentagon cut Anthropic over terms-of-service clauses

1. 0:00 – 2:30

   The Besties welcome Under Secretary of War Emil Michael

   1. JCJason Calacanis0:00

      All right, everybody. Emergency podcast time, episode 263 of All-In. We have Emil Michael, the Under Secretary of War for Research and Engineering, working directly for Pete Hegseth. We had to get this out to you on Thursday night because it is an emergency pod. One of my old besties, Emil Michael, is here. Emil and I, uh, were part of Team Uber back in the day. He was Travis's right-hand man, some might say fixer, and Emil Michael is now the Under Secretary for War here in the United States, serving his country like our bestie, David Sacks. Welcome to the program for the first time, Emil Michael. How you doing, brother?

   2. EMEmil Michael0:41

      I'm doing good. Uh, I hope it was more than a fixer, but, you know-

   3. JCJason Calacanis0:46

      Well, deal maker-

   4. EMEmil Michael0:46

      ... raising twenty billion dollars is, uh, you know.

   5. JCJason Calacanis0:48

      Fixer. I mean, you, you got it done.

   6. EMEmil Michael0:49

      Yeah.

   7. JCJason Calacanis0:49

      You got it done. The hard- He would give you the hardest things. Yeah? Just to-

   8. EMEmil Michael0:52

      That's right. Fair enough.

   9. JCJason Calacanis0:53

      If it was hard, and that's what a fixer is.

   10. CPChamath Palihapitiya0:55

       An operational ax. That's what they call them.

   11. JCJason Calacanis0:58

       All right. Sure.

   12. EMEmil Michael0:59

       [laughs]

   13. JCJason Calacanis0:59

       Uh, in Brooklyn, we call them fixers. With us again-

   14. CPChamath Palihapitiya1:02

       A rainmaker.

   15. JCJason Calacanis1:03

       There's that, too. There's that, too. Making it happen. With us again, Chamath Palihapitiya. How are you, brother?

   16. CPChamath Palihapitiya1:11

       Great.

   17. JCJason Calacanis1:11

       Yeah. Look at that smile. What do you got going on? [laughs] You got some pokers in the fire.

   18. CPChamath Palihapitiya1:18

       Local.

   19. JCJason Calacanis1:19

       I'm not gonna say. In the coming weeks, I think some news is gonna drop. That's my prediction. I don't have any inside information.

   20. DFDavid Friedberg1:23

       Are you loving Chamath's tweet mogging that's been going on this week?

   21. CPChamath Palihapitiya1:26

       So good.

   22. EMEmil Michael1:27

       So good.

   23. CPChamath Palihapitiya1:27

       So good.

   24. JCJason Calacanis1:28

       But he's, he's-

   25. CPChamath Palihapitiya1:29

       So good.

   26. JCJason Calacanis1:30

       He's looks maxing-

   27. CPChamath Palihapitiya1:31

       It's just so good

   28. JCJason Calacanis1:31

       ... by default, but he's been mogging-

   29. EMEmil Michael1:33

       Yeah

   30. JCJason Calacanis1:33

       ... the gooners.
2. 2:30 – 13:16

   US war with Iran: Bigger picture and why now?

   1. JCJason Calacanis2:30

      All right. The US and Israel launched a joint attack on Iran on Saturday. Today is day six of Operation Epic Fury. Iran's supreme leader, Ali Khamenei, was killed within hours of the operation. 40 senior officials have also been killed. Death toll so far, about 1,000 people according to reports. Tragically, six US Army Reserve soldiers were killed following a drone strike on a base in Kuwait. A US submarine sank an Iranian ship off the coast of Sri Lanka. This is the first torpedo kill since World War II. Why we're at war? Been a bit of a moving target and a debate. First explanation from Rubio, he said Israel was gonna attack and the US had no choice but to participate. Later walked that back. Trump made it clear this is not a regime change effort, but we're doing this to stop terrorism and the development of ICBMs by obviously a pretty crazy group of individuals, and obviously nuclear bombs, which we blew up a couple weeks ago. Trump also mentioned the people of Iran should seize the moment, quote, "and take their country back." Hegseth, who I believe is your boss, Emil, said, quote, "This is not a so-called regime change war, but the regime sure did change, and the world is better off for it." So here's an interesting Polymarket. Right now, US forces enter Iran, this is boots on the ground, by the end of March, 40% chance. By the end of the year, 59% chance. So the idea that we're not gonna have boots on the ground, the sharps on Polymarket believe we will. Will the Iranian regime fall? By June 30th, 39% chance according to Polymarket, and by the end of the year, 51% chance. So Emil, I guess there are two questions people really wanna know. I'll leave off why we're doing this. I think President Trump has been pretty clear now. But how long is this gonna take is the one question, and are we gonna have to have boots on the ground? And maybe what is success here?

   2. EMEmil Michael4:35

      Um, I think the, the president talked about this is a weeks not months kinda operation, and it's aimed at the, essentially disarming the, the regime, uh, or the country from, uh, i- in such a way that they can't supply Hezbollah, Hamas, um, Muslim Brotherhood, all the kinda terror groups that get sponsored by weapons and money from Iran, not to mention the nuclear bit. And that's why you see from the reporting they're going after the depots. The, the, you know, we went after nuclear sites before. They're a prodigious drone maker, these, like, h- huge one-way attack drones that can go hun- you know, hundreds and hundreds of miles. Um, lots of ballistic missiles, uh, that are aimed at every country in the Middle East, as you've seen, they've attacked them. So I think that's one. In terms of boots on the ground, there's no scenario where we have some protracted boots on the ground, Afghanistan, Iraq two-like scenario.

   3. JCJason Calacanis5:40

      Friedberg, your thoughts on this war. Obviously, a lot of people voted for Trump in order to have the peace dividend, that he was, in his first term, absolutely the peace president, and now here we are, eight countries have been bombed, and we've had two leaders deposed, and one of those two have been killed.Your thoughts, Friedberg

   4. DFDavid Friedberg6:03

      I think the president and the administration have probably the biggest meetings of the term coming up in China in April. My estimation, based on the conversations and the comments made by the president before he came into office and since he's been in office, is that finding a grand bargain or a deal with China is probably one of his top priorities. And if you think about the importance of that, is the US gonna wade into a giant global conflict led by a US-China rift, or is the US gonna find some grand bargain? I think he would probably have a preference for the grand bargain. And that being the case, I think you could look at the, in the context of Maduro and the actions in Iran as creating maximal leverage going into those negotiations that would-

   5. JCJason Calacanis6:51

      The reason for that, Friedberg?

   6. DFDavid Friedberg6:53

      Ninety percent of the oil that comes out of Iran goes to China, and there's been a long-developing and developed relationship between Maduro's government and China, and these are big economic drivers or support the economic driving in China. So creating leverage by having significant influence or damage or destruction to those supply chains for China gives the United States footing to be able to negotiate a better deal for America. I would imagine that the president's intention here isn't to go and decide who should be in charge and drive regime change and end in a multiyear conflict with Iran. But ultimately, if there's some transaction with China that gets everyone out of this and puts the US on a strong footing where American businesses can sell into China, which is very challenging, as everyone knows today, and there's parity, regulatory parity, economic and trade parity between the US and China. There's a point of view on what happens with Taiwan and availability of key technologies like semiconductors. I think it could be a win-win, and I think that a deal with China could be the crowning achievement of this administration, particularly going into the midterms. So the timing is right, and I think that's probably a, a core part of the motivation here.

   7. JCJason Calacanis8:07

      Chamath, your thoughts on this action and why we're doing it. You've heard obviously the president has his position. We're not doing regime change. It's a secondary effect, obviously, but we wanna stop those ICBMs and nuclear bombs from being developed, and we wanna stop terrorism. Additionally, Friedberg says, "Hey, we're framing this great, you know, discussion we're gonna have with Xi and China, and oil is part of that." Where do, where, where do you think you stand on all this?

   8. SPSpeaker8:38

      I'll build on both what Emil said and what Friedberg said. I don't think this is about regime change, and I don't think it's about a local regional conflict. I think if you take a step back and zoom out, the most important thing that we did in the last three months was by taking out Maduro and by taking out the Iranian leadership, we have created enormous leverage, as Friedberg said, with China. Now, why is that important? Because I think all of this centers around that geopolitical discussion. Last night, something important happened, which is that the official Chinese bureaucracy posted what their GDP targets were, and it was shocking to anybody reading it because what we saw was that they guided to a range of four and a half to five percent, which if you look at the historical context of that growth, is the lowest that it has ever been in about thirty years, so three decades, so before they entered the WTO. And the question that one should ask yourself is, when a country that's growing at eight, nine, and ten percent start to grow at half that rate, yet have double the number of people and double the GDP, what happens? You already have incredibly high domestic unemployment, especially youth unemployment. Does it become more or less chaotic? And I think the historical artifacts of every other country would show that it will become more chaotic. If you have that as a starting point, what is it in China's best interest to do? And I think it becomes obvious that the right thing to do would be to invade Taiwan. Why? Because you start to create a sinkhole that occupies your people, that occupies resources, that can get domestic production up and running, that can start to generate a war machine, and you see the economic impact of war machines in any country during any conflict. And if I had to guess, just to build on what Emil said, the president saw that, and I think what they did can be summarized in this chart which I sent to Nick. So if your goal is to prevent war with China, which is a massive global conflict, which could be nuclear, which could be cataclysmic, how would you do it? And this chart paints one way to do it. If you look at the conditions inside of the Chinese economy, the most interesting takeaway is that they are enormously dependent on imported oil, so about twenty percent of their economy. But it's not twenty percent of their economy because it's a hundred percent of these critical things that create GDP: logistics, transportation, aviation, feedstock inputs. And of that nineteen percent, about a fifth of it comes exclusively from Iran and Venezuela, and now all of that is off the table. So if you take that and then you see what Steve Witkoff and Jared Kushner and Josh Greenblatt have been doing, which is trying to get a deal done in Russia, and you put all of these things together, because by the way, if you add Russia into that mix, it's about forty percent of China's oil. Not only do you re-dollarize, not only do you stop the funneling of all of these illicit oil funds to creating chaos all around the world, but you hem in China going into a massive moment at the end of March, beginning of AprilWhere as Friedberg said really astutely, there is the potential for a grand bargain, and I think that secures global safety. In that, that is a huge thing for America

   9. JCJason Calacanis12:20

      Emil, how much does this have to do with China?

   10. EMEmil Michael12:24

       I think, you know, my instinct is, and I'm not speaking for the administration on this, is that's a second-order benefit to some of these things. Like the, um, you know... And you said eight, eight conflicts. Every- They have not been eight conflicts. There was, like we inherited Gaza, we inherited Russia, Ukraine, um, Venezuela was its own operation, and then you could sort of attach to it the drug boats that were coming out of that as like one big operation. Um, and then the Houthis was just Biden was ignoring the Houthis. They were just shooting at our ships, so that was like very limited in terms of like, "Stop shooting our ships. We need freedom of the seas." And that wasn't sort of a, you know, so that's something any president should be doing generally, I think.

   11. SPSpeaker13:10

       Sure.

   12. EMEmil Michael13:10

       Um, Iran being the one, you know, material conflict outside of Venezuela, so

3. 13:16 – 28:39

   Trump's new approach to warfare, AI, drones, rules of engagement

   1. EMEmil Michael13:16

      it's not, it's not that many. And, and how long did Venezuela last? It was one raid, one night.

   2. JCJason Calacanis13:21

      I guess that's a really important-

   3. SPSpeaker13:23

      A few hours.

   4. EMEmil Michael13:24

      Yeah. [laughs]

   5. JCJason Calacanis13:24

      This is important. This is an important note, I think, for you, Emil, to sort of, uh-

   6. SPSpeaker13:28

      Five minutes would have been longer than that

   7. JCJason Calacanis13:28

      ... explain to us there's a new-

   8. SPSpeaker13:30

      [laughs]

   9. JCJason Calacanis13:31

      ... approach here with regard to the, these actions, which is no boots on the ground, and we seem to, uh... And, and you of course have better information than anybody else does. I don't think anybody would have known Venezuela would have gone as well as it did, and so far, and, and listen, we got a long way to go with Iran, this has gone very well as, as well. So explain to us what you know a- and what you, the President, and Hegseth know that we don't that makes these two operations go so smoothly. What, what is it? There, and there's obviously some new technology here in, in the case of what happened in Venezuela.

   10. EMEmil Michael14:08

       Yeah. Besi- besides the discombobulator, what we've got is-

   11. SPSpeaker14:12

       [laughs]

   12. EMEmil Michael14:13

       ... a very well-trained military. Like the, the global war on terror was dis- disaster in so many respects, but the people now who are fighting that are generals now, and so they've learned a lot of lessons. And you compare that to the Chinese military, they don't have a lot of experience. In fact, the, the decapitation they did in the Chinese military, the one guy they took out was the one guy who had experience in Vietnam, so they don't have, uh, conflict experience. And that matters because you understand going in what are the things that could go wrong. Um, and then you, you have incredible technology, space, air, land, sea, cyber, um, all kinds of effects that you could bring together. And so you imagine, uh, 100 guys goes into the most fortified compound in Venezuela where the president is, you know, take him and his wife out safely and are out with no KIAs. Um-

   13. JCJason Calacanis15:11

       Incredible

   14. EMEmil Michael15:12

       ... I mean, it's, it's incredible, right? You, so you-

   15. JCJason Calacanis15:14

       Stunning.

   16. EMEmil Michael15:14

       Yeah, so... A- and they, they, these things, these war games have been on the, on the shelf for a long time. Every, every scenario has been planned for years ahead of time. Midnight Hammer in Iran was planned years ahead of time in terms of, how would you do it if you were going to do it?

   17. SPSpeaker15:30

       Mm.

   18. EMEmil Michael15:30

       Um, and then you keep refreshing the tactics, tactics, techniques, and procedures, and you're updating them. So we have a very sophisticated way of, of doing these things to minimize loss of life and maximize success.

   19. SPSpeaker15:42

       Can I ask a question?

   20. JCJason Calacanis15:42

       Of course you can.

   21. SPSpeaker15:43

       I, I don't wanna, I don't wanna derail this conversation, but is the discombobulator real? Like, what can you say about the discombobulator?

   22. EMEmil Michael15:49

       I can't say a word about it.

   23. JCJason Calacanis15:49

       It's real.

   24. SPSpeaker15:50

       I completely f- I was like obsessed with this when I saw it on X. I was like, "What is this thing?" I mean, I need it in my house. Like can you just [laughs] push a button and all these mosquitoes-

   25. JCJason Calacanis15:59

       And that's just for when Hellmuth shows up

   26. SPSpeaker16:01

       ... Oh my God.

   27. EMEmil Michael16:02

       Not meant for your kids. I don't know if they're behaving badly. No, it's, can't talk about it.

   28. JCJason Calacanis16:06

       Emil, do you think we would've been able to pull off that mission as successfully as we did five years ago, 10 years ago? Has the technology improved that quickly that this is not something that's been possible historically, and how does that change the, the pacing and the face of war for the next couple of years?

   29. EMEmil Michael16:22

       I'd say no. It wasn't only a technology maturation from five years ago. It's the, uh, rules of engagement. The rules of engagement that we used to have, uh, there were so- There, I mean, if you read about them, some of them are insane. Like if, in Afghanistan, if the guy had a small gun, you had to have a small gun, and, you know, there was this parity-

   30. SPSpeaker16:45

       Oh, yeah
4. 28:39 – 37:24

   Israel's role in the conflict, relationship with the US, Iron Beam

   1. JCJason Calacanis28:39

      All right, before we move on to the Dario thing and Anthropic and that ruhaha, there was one piece that we haven't addressed with this interaction, Friedberg, Chamath, which is, uh, the Israeli government and their desire to take out this regime and, uh, us, according to Tucker Carlson and a large contingent of the MAGA base, they feel that we are captured by this group. Does Israel have too much influence over the United States with regard to these actions in the Middle East? This is, you know, a, a big debate within the party, within the Republican Party, within the MAGA constituent. Hey, we, number one, we don't want these wars. Number two, is Israel driving this thing to the point of Rubio's quotes that, "Hey, we're doing this because Israel's going anyway"? I think we should address it here. Not that I have a personal stake in this. I'll give my personal opinion at the end.

   2. SPSpeaker29:30

      I don't think the president is captured by Israel in the least. I think he decides what is in the best interest of the United States, and if Israel can be a part of that, then they're a part of it. And look, let's be clear, they're incredibly capable. And so in something like this, to be able to incorporate the intelligence of Mossad, what you're seeing today in this Operation Epic Fury, we're four days in, Iran has been ninety percent depleted of all of their munitions it looks like. They're just firing no more missiles out from Iran to anywhere else. There's fleets of drones and planes just waiting. Everybody knew where the Iranians were. It's great that when we make a decision on something that we need to do, we can rely on our allies. I think the opposite question should also be asked, like what was the UK doing? Why is Spain pontificating? Why was Europe taking the weekend off before they could even issue a statement? Why don't you ask that question?

   3. JCJason Calacanis30:27

      Yeah, no, it's an equally valid question. You know, uh, and, and Friedberg, do you wanna get in on this or no?

   4. SPSpeaker30:34

      I'm a Jew, no one's gonna care what I have to say.

   5. JCJason Calacanis30:36

      [laughs]

   6. SPSpeaker30:36

      'Cause they're either gonna, they're either gonna be like, totally, like-

   7. JCJason Calacanis30:39

      Or they're gonna-

   8. SPSpeaker30:40

      Or they're gonna say, "This guy's a [beep] Jew. We shouldn't listen to him."

   9. JCJason Calacanis30:42

      [laughs]

   10. SPSpeaker30:42

       So, like, let's move on. Go ahead.

   11. JCJason Calacanis30:43

       Yeah, yeah.

   12. SPSpeaker30:44

       Yeah.

   13. JCJason Calacanis30:44

       Emil, any thoughts on, on this, uh, kerfuffle?

   14. SPSpeaker30:46

       I mean, I do, I do wanna know from Emil, though, like-

   15. JCJason Calacanis30:48

       Yeah

   16. SPSpeaker30:49

       ... d- you know, is this Iron Dome working, this laser in Israel system? Is this operational, and if so, is there any success metrics you can share around it?

   17. EMEmil Michael30:58

       I mean, I think the, the golden... Sorry, the golden dome. Iron Beam was the first generation-

   18. SPSpeaker31:02

       Iron Beam

   19. EMEmil Michael31:02

       ... of, of the Israeli air, air defense thing, and then they're build- building Iron Beam and, and I think it's still early-ish, but yeah, it works. They, they're g- they're a technologically sophisticated country that's very small that has, like, a reason to invest in these things, and they have a lot of smart people to do them. So I think, I think it's good, but-

   20. SPSpeaker31:23

       Does it primarily work on rockets? And I guess I just wanna understand the logical evolution of this because in the '80s and '90s there was a lot of conversation about space-based lasers that could shoot ICBMs out of the sky to avoid, you know, global nuclear war, and we could always take out every nuclear warhead delivered on an ICBM. Is that technology feasible? Is there a place in the near future where we could see basically maximal global deterrence using these systems, either ground-based or space-based, to take out hypersonic missiles?

   21. EMEmil Michael31:53

       I think, I think the, the harder but more valuable problem to solve would be the space-based way of doing it because then, um, you could get at any kind of, almost any kind of threat that hits space, but you still need a ground layer because there's cruise missiles that could come at you, there's drones, and so on. So, so we called it multi-layers, like, how do you, how do you get every kind of weapon at every layer? But, you know, directed energy, lasers, uh, as they get more powerful, you could take on a bigger weapon farther away, right? So those, uh, so those technologies as, that as they improve, it gets more and more capable, and I think all these defense systems, uh, are gonna get more and more capable to get more and more of a variety of weapons at farther and f- farther standoff, which is what you want. You want it to t- you don't wanna shoot it when it's right over Tel Aviv. You wanna shoot it, you know, when it's still over their, their land ideally.

   22. JCJason Calacanis32:48

       Are, are the laser interceptors in the field today? There's reports that they are.

   23. EMEmil Michael32:53

       I, I think there's some. I think they've demonstrated some of them.

   24. JCJason Calacanis32:56

       Got it. And, and is this our technology or Israel's technology? 'Cause President Trump said, "Hey, that's actually our technology." I- is there any insight there?

   25. EMEmil Michael33:04

       We, we, we have collaborations with Israel on some of the stuff. They have their own, we have our own. Um, so it's not, this is, uh... But they're good at tech. We're good at tech. There's certain, there's certain ways you get part of our system and part of their system because it's like a he- it's a f- quickly evolving part of, of science right now. How do you cohere beams of light to, like, get distance? How do you use high-powered microwave to, like, just drop drones in their tracks? Um, there's lots of different ways to get at some of these things. Um, and, and yeah, a lot of it's ours, uh, and a lot of, and some of it's theirs.

   26. JCJason Calacanis33:41

       Yeah, and, uh, to, to the earlier question, you know, I, I am pro regime change if it can be done thoughtfully, and obviously isolating a dictator, that's the best thing you can do. We've done that successfully with, you know, Putin, Kim Jong Un, et cetera, keep diplomacy up. But if there is a moment in time where you could free the people of Iran after 50 years of being subjugated by these lunatics and dictators, I'm all for it, and I actually trust President Trump to make that decision. I know this may sound crazy. People think, like, I'm a, a libtard or something because of the way my besties frame me on this program-

   27. SPSpeaker34:18

       [laughs]

   28. JCJason Calacanis34:18

       ... which is completely inaccurate. I'm an independent.

   29. SPSpeaker34:20

       You are.

   30. JCJason Calacanis34:21

       I actually-
5. 37:24 – 41:19

   Oil prices, Trump's maritime insurance play

   1. JCJason Calacanis37:24

      All right, let's talk about the economics impact of oil and insurance. Oil has rose to eighty-four dollars a barrel Wednesday. Strait of Hormuz, here's a video, is, uh, basically a standstill at this point. Here's the clip. You can see the traffic slowing down, and then, hey, some of the dots are even going away. That could be, uh, ships were taking out. Unless the strait opens, three point three million barrels of daily production would be lost early next week. And then there's insurance companies, they've all canceled the war risk coverage of vessels in the Gulf, effective March fifth. Supertanker traffic dropped ninety-four percent within the first forty-eight hours. Trump said the U.S. would provide political risk insurance for all maritime trade through the Gulf, especially energy. Friedberg, your thoughts on the economic second-order effects that we're starting to experience here, and over the next four weeks could be, um, you know, intense and acute.

   2. DFDavid Friedberg38:21

      The modern insurance market emerged specifically to solve the risks of maritime trade. So in the seventeenth century, Lloyd's of London, which was a coffee shop in London where all the maritime traders would get together and they'd talk about, "Hey, what's the safest route so pirates don't get our ship, and so you don't run into weather?" That's where they would kind of have these conversations, and eventually they started underwriting the risks of the shipping, uh, routes and giving each other guarantees. They said, "Hey, if you make this route, great, you pay me a certain amount. And if you don't make the route, I'll pay you the lost value." And that's how Lloyd's of London, which is the kind of world's biggest reinsurance market, started. Today, Lloyd's of London has seventy-eight what are called syndicate members. And these are kind of these pools of reinsurance that underwrite big, crazy risks like maritime insurance for folks that are moving oil tankers through the Strait of Hormuz, which the IRGC just announced they're shutting down. When the IRGC announced that they were shutting down the Strait of Hormuz, there's a significant risk of all the mines going in the strait and the ships getting attacked and blown up, so loss of value. The insurance premium spiked initially from a quarter percent, so point two five percent of the value of the ship, to one point two five percent. So it went up by like five X. And so folks had to pay a lot more of the value of their ship in order to continue the routes and get guarantees that they'll make it through. And then all of the markets started to shut down. So once the conflict got heavier, everyone said, "Let's shut this thing down." And that's, uh, obviously a massive risk to energy prices globally, which drives inflation and puts U.S. economic security at risk. And so this is a brilliant move, I would say. The U.S. government stepped in with the U.S. International Development Finance Corporation, which was actually, funny enough, started a couple of years ago, like in twenty nineteen or something like that, as a kind of output of one of the agencies that provided credit from USAID. Much talked about USAID. [laughs]

   3. JCJason Calacanis40:14

      [laughs]

   4. DFDavid Friedberg40:14

      And so they're, they're leveraging the credit capacity of this old USAID agency to go out and say to all the shipping companies, "Hey, we'll give you insurance on your routes." And the reason they need it is the shipping companies are levered. They take on debt to buy the ships, and the debtors require that they have insurance or else they're not allowed to take the routes because the debtors are ultimately gonna be out the money. And so the shipping companies themselves need to have insurance, and so this provides a market that has now gone away. Very smart, and ultimately, a lot of people are saying this could actually reshore or onshore maritime insurance back to the United States-

   5. JCJason Calacanis40:54

      Mm.

   6. DFDavid Friedberg40:54

      -and create an entirely new insurance industry here in the U.S. that has historically been served almost exclusively by European syndicates and European partners, and it actually creates a big economic opportunity as this war dies down for American insurance companies and American brokers to basically be the underwriters and the guarantors of this sort of insurance and create a new industry. So-

   7. JCJason Calacanis41:16

      That's good.

   8. DFDavid Friedberg41:16

      -uh, super, super interesting kind of side story on what's

6. 41:19 – 1:02:03

   Pentagon vs Anthropic: Why Anthropic was labeled a supply-chain risk

   1. DFDavid Friedberg41:19

      going on here.

   2. JCJason Calacanis41:19

      All right, some breaking news here, folks, via Bloomberg. The Pentagon has formally notified Anthropic that it's been deemed a supply chain risk. This has never happened to an American company. It has happened to Russian companies, uh, and Chinese companies, Huawei. And for background, the Department of War canceled Anthropic's two hundred million dollar contract on Friday and said they would do this. The dispute came down to two clauses, according to sources, and we have one of the principals here, so we will hear directly from him in a moment. Anthropic had two concerns. Number one, fully autonomous weapons, AKA murder bots, as we previously discussed. Dario didn't feel that their technology was reliable yet and wanted some assurances. The second thing Anthropic said was, uh, they were concerned about mass surveillance of Americans because they believe this technology is uniquely powerful and, uh, it's... can do things beyond what a series of webcams or a network of 7-Eleven cameras can do. The Pentagon said they want it all lawful use. Dario, you're welcome to come on the program next week or any time to give your side of the story, but this week we have Emil. Emil, your thoughts, and explain to us what happened here and how this broke down.

   3. EMEmil Michael42:40

      It's worth a little history, short history. SoIf you remember the Biden executive order on AI, which was this crazy executive order that limited the amount of compute any model company could do, and was essentially grandfathered in a few sm- a small number of AI companies that they were gonna designate the winners, and everyone else was out, so they could have more control on what they did. Um, Anthropic was one of those winners. Um, and then they were smart. Actually, it was a good sales strategy to sell into the most sensitive parts of the US government, like s- all of our combatant commands, CENTCOM, Cen-Central Command, that's doing the Iran fight now, the INDOPACOM command, which is sort of responsible for China, several of the intelligence agencies, and they did forward deployed engineers, Palantir style. So they were very, got very sticky, um, to the workflows and all that. And so I came in and I got the AI portfolio for department in August, and I said, "I just wanna see the contracts," you know, the old lawyer in me. And I looked at the contracts, I was like, "Holy cow." They say you can't use them for t- you can't use them to plan atta- a kinetic strike. You can't use their AI model to move a satellite. You can't... There was a, a twenty-page-

   4. DFDavid Friedberg43:58

      You can't do a war game scenario with it?

   5. EMEmil Michael44:00

      You could do a scenario, but you can't, like, let's suppose you're writing a plan saying, like, "If this happens, here's what we would do." And it might involve a kinetic strike which causes harm to a human. So you're like, "Well, what do you think these folks do?" You know, this is the Department of War. This is what we do. And so I said, "Okay, well I, I've gotta, number one, have direct relationships with these companies, not just through Palantir, 'cause I wanna use it more broadly. And then number two, I need to have the terms of service be rational relative to our mission set." So we started these negotiations and, and it took three months, and I had to sort of give them scenarios about, like, this Chinese hypersonic missile example. They're like, "Okay, we'll give you an exception for that." "Well, how about this drone swarm?" "We'll give you an exception for that." And I was like, "The exceptions doesn't work. I, I can't predict for the next twenty years what all the things we might do, use AI for." Um, and so, so all lawful use seems like a good thing. If Congress wants to act, great. We have our own internal policies, like, we'll follow them. We're not knuckle draggers here. We want [chuckles] , we don't wanna hurt people unnecessarily. So, you know, it's our province to decide how we fight and win wars, um, so long as they're lawful. And I think at some point it turned into a PR game for them because they were not gonna win this, the intellectual battle of, well, we're gonna stop you. We're gonna use our judgment 'cause we think Congress is behind and impose it on the US military. And it became this, like, let's find the issues that are most inflammatory, robot weapons and mass surveillance. And you're like, we're the Department of War. We're not the FBI. We're not Homeland Security. We're not ICE.

   6. DFDavid Friedberg45:43

      You're not allowed to legally spy on Americans.

   7. EMEmil Michael45:45

      Yeah. You're not, you're not. So it's-

   8. DFDavid Friedberg45:47

      Yeah.

   9. EMEmil Michael45:48

      So [chuckles] so you're like, w- and then what it came down to on that issue, just as an anecdote, is they didn't want us to bulk collect public information on people using their I-I or AI system, and they wrote it in a way that I was like, "So you're telling me before we got to bulk collect, if someone types in, you know, Chamath's, uh, LinkedIn, it's pre-- I, I'm using public um, available information that I'd be violating your terms of service?" They're like, "Yeah, well, okay, let's rewrite it." So it was months of this, like, stuff, um, which, which was sort of interminable, and then the trigger point was after the Maduro raid. One of their execs called Palantir, who we buy their selves through, and asked them, uh, "Was our software used in that raid?" Which is by the way, classified information, anyway, so we're trying to get classified information and implying that if there was use in that raid, that that might violate their terms of service. So-

   10. DFDavid Friedberg46:45

       So they wanted to enforce, this is very important here.

   11. EMEmil Michael46:48

       Yeah.

   12. DFDavid Friedberg46:48

       They wanted to enforce their terms of service. They went behind your back to try to collect information to then maybe pull your license for their technology.

   13. EMEmil Michael46:58

       M- I, you know, it wasn't by, behind my back. I, I don't wanna accuse them of that. Palantir is the prime contractor, their sub. Um, but it raised enough alarm with Palantir, who's got a trusted relationship with the department, to tell me, and I'm like, "Holy [beep] what if this software went down, some guardrail kicked up, some refusal happened for the next fight like this one, and we left our people at risk?" And I had-- So I went to Secretary Hegseth. I said, "This would happen," and that was like a woe moment for the whole leadership at the Pentagon, that we're s- potentially so dependent on a software provider without another alternative that has the right or ability to do, to not only shut it off, maybe it's a rogue developer who could poison the model to make it not do what you want, uh, at the time or sort of trick you because you have to trick it. I mean, all these things that we know are, we, we worry about models or hallucinate purposefully or do s- or not follow instructions, like some insider threat stuff. So then that culminated in the Tuesday kind of dramatic meeting with Hegseth and Secretary Hegseth and me and, and Dario, um, with the Friday deadline that, that got blown, and I, I never thought they really wanted to make it.

   14. DFDavid Friedberg48:09

       Emil, is, is the model entirely hosted by Anthropic? Or just explain to us technically, does this sit in a cloud that Palantir runs for you guys? Um, i- is there really technically a way that employees at Anthropic could kind of interfere or intervene in the use of the model-

   15. EMEmil Michael48:26

       Yeah. So they-

   16. DFDavid Friedberg48:27

       ... functionally?

   17. EMEmil Michael48:27

       They put their model in AWS GovCloud.

   18. DFDavid Friedberg48:31

       At GovCloud, yeah.

   19. EMEmil Michael48:32

       And then Palantir serves it from there, and they refresh it. They held the control plane for the model. So, so yeah.

   20. DFDavid Friedberg48:41

       They can change the model weights if they want. They can do whatever they want.

   21. EMEmil Michael48:45

       Yeah.

   22. DFDavid Friedberg48:45

       The insight into this thing is unbelievable. Not just governments

   23. SPSpeaker48:49

       But now if you're running a company, the reality is that what Anthropic showed, which by the way is their right at some level, is that they are going to have a political perspective and a set of terms that reflect their philosophy, and that that philosophy can change on a dime. But what the government did was also completely reasonable, which is we can't rely on you if you're going to be completely unreliable and disallow things that are reasonable. I'll give you a different example to make the point. There's a state that wants to run some healthcare program, but they're a pro-life state. You can't conduct abortions in that state. Does that mean that the Anthropic engineers can decide, you know what, we're pro-choice, so we're gonna change the access model and the capability of that model inside of that state? Is that allowed? Should that be allowed? At one level, you'd say this is a private company, they're allowed to choose. But what that really means is for the government, for all the states, for any city, for every company, you cannot choose to only use one of these things, because it is just a matter of time until some person inside of one of these companies goes on some lunatic moral tirade and then jeopardizes your business against something that is nothing about law, but is everything about subjectivity. That is the huge thing that this thing tore open this weekend. So if you're not figuring out how to be multi-model and agnostic across these models, you're taking on enormous business risk after Friday because you can't tolerate that these folks will do that. It's too critical of a technology. By the way, this is deplatforming all over again. Remember what happened when you didn't like what was said, now all of a sudden you were deplatformed. This is that times a thousand, because this is not about posting on social media. This is about using fundamental technology to either advantage or disadvantage your business. Emil?

   24. EMEmil Michael50:50

       Yeah. I mean, I think I described it the other way the other day as these co-- the leaders of these companies say they're gonna cause fifty percent white-collar unemployment. This is as powerful as a nuclear bomb. Y- it's like fifty thousand geniuses in a data center, so you could have a small country coerce the world into its whatever. So you're like, "Holy cow." All right, so this is a general substrate of intelligence, of te- of technology that's applicable to a lot of things. Very generalized. It's not like Workday so-- like HR software where you could just use a competitor. This is going to be part of our everyday life in so many different ways, and the controlling, the mora-- like what, whether it has a moral conscience, I mean, Anthropic has its own constitution. It has its own soul. It's not the US Constitution. So you're subject to that, plus whatever whims and how that changes, and that's a scary thought for, for Americans generally. Um, and I think that did come through a little bit today, and in the coming years it's gonna be a bigger and bigger deal.

   25. JCJason Calacanis51:51

       So take us through OpenAI software, Gemini software, and Groq software. Have they pushed back on any use, or are they like Dell or Apple, they sell you a computer and you have the computer, and you can use it as you will? Have any of those given you any pushback?

   26. EMEmil Michael52:09

       So Groq's all in for all lawful use cases across all-

   27. JCJason Calacanis52:13

       Okay

   28. EMEmil Michael52:13

       ... classified and unclassified networks, as you'd expect because, and, you know, Elon's truth-seeking. We want truth in Department of War. We don't want ideology-

   29. JCJason Calacanis52:21

       Great

   30. EMEmil Michael52:21

       ... because ideology will mess with operational decisions. Like, you, you don't want anyone to, anything to be fake or tilted.
7. 1:02:03 – 1:11:14

   How to value Anthropic after its supply chain risk designation

   1. JCJason Calacanis1:02:03

      say, "Can I-

   2. SPSpeaker1:02:04

      The other thing is, what the hell was the senior management and the board talking about over these last few days? Because to me, it would have sounded insane. So then the question is, were people just so breathless to buy this revenue curve? What is the board doing? What is the senior management really doing? What do you change, guys? What do you think you would tell them if you were sitting inside of the board of Anthropic right now?

   3. JCJason Calacanis1:02:25

      Freberg, w- if you're an investor, you're on the board, what do you say to Dario when he says, "Hey, I, I need to dictate to Emil and Hegseth how they use my tool," and everybody else is just saying lawful use as the standard? What's your coaching advice?

   4. DFDavid Friedberg1:02:39

      Well, it's also a very unusual circumstance because I don't think any business in history has grown as fast as they have in the last ninety days. So they've added, what was it, six billion of ARR-

   5. SPSpeaker1:02:51

      Yeah

   6. DFDavid Friedberg1:02:51

      ... in a month or something. I mean, that's-

   7. SPSpeaker1:02:53

      Yeah

   8. DFDavid Friedberg1:02:53

      ... absurd. Like, I mean-

   9. SPSpeaker1:02:54

      It's absurd. It's absurd.

   10. DFDavid Friedberg1:02:56

       It's absurd.

   11. JCJason Calacanis1:02:56

       It's a great product.

   12. SPSpeaker1:02:57

       It's absurd.

   13. JCJason Calacanis1:02:57

       OpenClaw has driven a lot of this.

   14. SPSpeaker1:02:59

       It's absurd.

   15. DFDavid Friedberg1:02:59

       If you're on the board-

   16. SPSpeaker1:03:00

       You're closing your eyes. Yeah. [laughs]

   17. DFDavid Friedberg1:03:01

       You're shutting the [beep] up.

   18. SPSpeaker1:03:02

       Yeah.

   19. DFDavid Friedberg1:03:02

       You're just shutting the [beep] up 'cause something's working.

   20. SPSpeaker1:03:04

       Yeah.

   21. JCJason Calacanis1:03:05

       You're selling a secondary? [laughs]

   22. DFDavid Friedberg1:03:07

       But I actually think, I think he's off doing his thing, and they're gonna let him do it, and I don't think that company's worth three hundred fifty billion anymore. God knows what it's worth.

   23. SPSpeaker1:03:14

       Oh, w- oh, that's interesting. Where do you, if you get put a block of stock right now, where do you put a bid in? I'll tell you where I put a bid in.

   24. DFDavid Friedberg1:03:20

       Oh my God. I had, I had this conversation at dinner two nights ago. It's like you have to pick between OpenAI at their current mark, Anthropic at their current mark, or Google, and it's either multiple from here or net market value creation from here 'cause those are actually two very dis- different conversations.

   25. JCJason Calacanis1:03:38

       Explain the difference.

   26. DFDavid Friedberg1:03:39

       I think the net market valuation 'cause Google's already worth three trillion, so if they double, they've added three trillion. But I think Google is the bet. I think Google is the market value creator bet.

   27. JCJason Calacanis1:03:50

       Okay.

   28. DFDavid Friedberg1:03:50

       But I think Anthropic is the multiple bet. I think Anthropic is a trillion five market cap at the end of the day u- unless this blows them up.

   29. SPSpeaker1:03:58

       You're still buying the five X versus the three X kinda thing.

   30. DFDavid Friedberg1:04:01

       You'd buy the five X instead of the two X.
8. 1:11:14 – 1:22:58

   State of the US defense supply chain, the defense tech industry, DARPA, and China's military

   1. JCJason Calacanis1:11:14

      here.

   2. DFDavid Friedberg1:11:14

      What's your view on how the industrial supply chain for hardware components and systems is coming along in the United States? Because my understanding is we're trying to reduce dependency on Chinese-manufactured components. Where are we with respect to where we need to get to in the US manufacturing supply chain?

   3. EMEmil Michael1:11:33

      We are early days. Um, critical minerals, you see, you've seen the action around that. Um, you'll start to see, so I have the Office of Strategic Capital, which has 200 billion in lending authority, and what we're trying to do is, is it's like a Treasuries plus 100 bips, loan to companies, show them that the department needs their solid rocket motors, their batteries, their fiberglass, like all the things that we, that we're heavily dependent on for ind- our defense industrial base that are completely outsourced to China and domesticate them here. Um, and we've got, uh, a bunch of great people running it, so I- but, but it's early days. It's gonna take for the rest of the term to get, um... I think we'll get critical minerals done before the rest of the term, where, where we have access to what we need to from us or allied countries. Um, uh, but from batteries, it's like the next problem I'm trying to solve, for example. Batteries are totally outsourced, both technologically and from lithium to China. Um, and there's like, you know, kinda call it 20 critical things. If I could get to all of them at some level, but then it'll take a few years for them to, like, build plants and do that stuff, but they're, they're, it's, it's very important. I hope whatever administration comes next continues it because I'm all free market, but, but we outsourced ch- so much that, um, you know, it, it crippled sort of the, the kind of com- the assembly part of putting all these things together.

   4. DFDavid Friedberg1:13:04

      Hmm. Do we have a munitions risk right now, given the conflicts that we're involved in?

   5. EMEmil Michael1:13:08

      We, we don't have a munitions risk, but, um, we do need to plus up because-The Europeans are taking a long time to contribute. Like Ukraine, Russia has consumed a lot of munitions from, like, all over the world. And then, uh, obviously these conflicts we've been in and, um, we need to have, like, the next generation. We're still-- There's still a large degree we're fighting with nineteen-eighty Cold War weapons, right? And not modern weapons.

   6. SPSpeaker1:13:37

      Right.

   7. EMEmil Michael1:13:37

      And so we need to plus up those things that, uh, to, to regenerate them. I mean, our nuclear missiles are fifty years old. Some of the planes are forty years old, so all that has to be renewed.

   8. SPSpeaker1:13:49

      Hmm.

   9. DFDavid Friedberg1:13:50

      Do you think, um-- Just speak to the venture capitalists in the audience. Are we in the early stages of this kind of defense tech boom? Is defense tech well-funded at this point, or is it kind of too hypey and bubbly, and that's not really the issue? It's not about funding the companies, it's about funding some of the further upstream, uh, issues that we're facing. What's, what's your view on where we are there?

   10. EMEmil Michael1:14:10

       There's more defense tech venture capital than ever by, you know, three X more than last year. So, you know, the, it, it's growing. What I need to do and what the department needs to do is have some of these companies win big contracts quick, like whether, you know, Anduril, sure, um, uh, Sirona, sure, like bunch of these companies, so that more money flows in, more entrepreneurs do it, and I could buy more. Because generally, I do think warfare is going from big car-carrier ships that cost twenty billion dollars and a decade and a half to build to mass, attritable, low cost, um, uh, things, and that's what these new pro-- these new entrants can do. So we need those to succeed so that the flywheel goes with venture capital money, entrepreneurs, capabilities.

   11. DFDavid Friedberg1:15:00

       In that sense, it-- and what I've heard as kind of the explainer for this is we're moving from the old primes to the new primes, that there's gonna be a small set of big winners and then obviously lots of seconds and, and subs and whatnot. Is that really how this market's gonna evolve? So are we gonna end up with Anduril, Palantir, and maybe three or four others, and that's where most of the value is gonna accrue from a market perspective?

   12. EMEmil Michael1:15:22

       I mean, Anduril and Palantir want that, and I joke with them all the time about it, but I, I want... I definitely want at least a second layer that's innovative and trying to disrupt the first layer all the time. I met a, a mom-and-pop, like, wholly owned company that, that makes these missiles called ERAMs that are-- we really sell and send to Ukraine, and they do it with, like, thirty people, and they can do a thousand a year 'cause they've designed a manufacturer and it's awesome. So I want companies like that to continue innovating. Maybe Anduril then buy, buys them. But the, the one of the reasons the primes are such a small number, it's not the only, but it's one, is they learn how to contract with the government. They learn how to go through the bureaucracy, and that became a competitive advantage. I'm trying to take that competitive advantage away.

   13. SPSpeaker1:16:07

       That's a really important point. How do you disassemble all that bureaucracy so that product innovation can actually get to you?

   14. EMEmil Michael1:16:15

       Yeah. So we, we did a big req... So part of it comes down to requirements reform. What used to happen is people are like, "Oh, we need a new fighter jet." So Army, Navy, Air Force put into the requirements and were, you know, it would-- we needed to be stealthy, to hold a missile, to hold four humans. And, you know, it became this un-buildable thing, but the contractor didn't care 'cause they're getting paid cost-plus. So like, "Sure, I'll fulfill your requirements." Two years from now, you're like, "Oh, that was never engineered properly." It'll be another few years late and a couple more billion dollars. So we're trying to change that to, I tell you my common operational problem. I need a bunch of missiles that can go five hundred miles or more that have this kind of blast. Come to me with solutions. As little requirements as possible on that side. And then on the contract piece, trying to get to as close to commercial contracts as possible. And this is gonna ta-- And this is where the startups are so good. They'll do fixed cost pricing. They'll do be-- you know, pa-- you don't pay me as much if I deliver late. You pay me more if I deliver early. Um-

   15. JCJason Calacanis1:17:20

       It's very disruptive to the existing system, yeah?

   16. EMEmil Michael1:17:22

       Super disruptive.

   17. JCJason Calacanis1:17:23

       [laughs]

   18. EMEmil Michael1:17:23

       But that's, that's what I'm, I'm, like, waking up every day trying to do.

   19. JCJason Calacanis1:17:28

       So you could put out something saying, "Hey, the Strait of Hormuz is super important. We need to keep it open. We need these type of devices to keep it open, but come to us with your ideas."

   20. EMEmil Michael1:17:37

       Yeah.

   21. JCJason Calacanis1:17:37

       And let them be creative entrepreneurs as opposed to, you know, just trying to goose the profits. Yeah.

   22. EMEmil Michael1:17:43

       Yeah.

   23. JCJason Calacanis1:17:43

       It's really brilliant. Yeah.

   24. SPSpeaker1:17:45

       Emil, you also oversee DARPA, yeah?

   25. EMEmil Michael1:17:47

       Yeah.

   26. SPSpeaker1:17:48

       DARPA's the father of the modern internet, and it's created a lot of really critical technologies. Can you talk about what's going on in there? Are there interesting things that you think our audience should know about that you're trying to push forward?

   27. EMEmil Michael1:18:00

       I mean, there's so much. Probably my favorite part of, [chuckles] of my, my office is like... Because there, that's where you-- it's sort of the, it's still a very honored profession to be part of DARPA. Like, you know, being up, being in government service for a long time has sort of reduced in its stature since the Manhattan Project. Now, because now, now if you're a great ass, you know, uh, someone who wants to do rockets and stuff, you go to SpaceX. DARPA still has the best of the best, and so the most creative ideas happen there. One of the things that they're working on that's public is they're trying to use biology to synthesize critical minerals. So, so how do you, so how can you just pull them out of ground, use biology to do it, so you don't need to do all this crazy, messy, dirty refining? That would, like, change the game big time on our ability to get the critical minerals we need faster and leapfrog the Chinese in terms of tech. Um, so they're doing a lot of that kind of stuff. They're deep in cyber. Cyberattacks are, are the next huge threat with AI, right? The, what, what we saw with the creating all these agents to attack systems, that Anthropic act- happened to them. Um, so they're, they're, they're working on... That's, it's not a ton I can talk about kind of DARPA because it's so, it's so-

   28. SPSpeaker1:19:14

       Yeah

   29. EMEmil Michael1:19:14

       ... classified, but those are a couple of examples for you.

   30. JCJason Calacanis1:19:18

       All right, speaking of classified, uh, just two quick questions before we wrap here. Are there aliens, and when are you going to tell us? [laughs] As in number two, uh, in all seriousness, I, I'm curious, what have you learned about China and where they're at and the threat there and our ability to counter it? Like, give us some idea of where we're at as a country, 'cause we hear a lot of hyperbolic stuff. They're building this incredible mobile small navy. They've got hypersonics. They're just way ahead of us. You know, we hear these things, but realistically, are we competitive?

Episode duration: 1:22:58