Everybody we talking about Gap of Stability for the past two years for Paler and you guys hit the mark well in advance. Yeah, years in advance. Tell me what it means for you guys to hit Gap of Stability, stay there consistently, and uh, prove everybody wrong. Well, I I Think a big part of it is.

um, you know, zoom out and think about it over 20 years. So yes, it's okay. We got there, we got there early, but it's really about continuing to earn the right to execute on the vision. We've always had the role that we hope to play as the most important enterprise software company in the world and being in a position to make those Investments for the long term.

Being in a position where we have the confidence of not only our investors but our employees uh and and the stewardship it's going to take to tackle the next range of hard problems that are coming at us very hard and by us I mean the world. So that's a great segue to what I want to talk about. We as a Paler Community fell in love with the company because of the things that uh Alex and the team were saying for the past 10 years. As far as this uh, fairy tale of a globalized coexistence is coming to an end and uh, you know it will get better, but it's going to be very dark times ahead.

Uh, and now we're seeing that kind of Prophecy play out. Yeah, there, there's a lot to it. I Mean there's there's a consistent narrative thread for the last 20 years about not just the consequences of globalization maybe the consequences of of believing in the end of History Um, but but geopolitically, what's really going to continue to happen here? You know what do we find ourselves in? We find ourselves in the midst of essentially a three-r series of conflicts I Don't want to say War yet, but obviously the tensions in the Taiwan Straits the tensions in the Middle East that that are kinetic at this point U massive disruption for commercial shipping uh I Think we have yet to see even the full consequences of that and what can happen in that region and and it spillover effects into into Europe and into the West broadly. Uh, and the ongoing conflict in Ukraine which I think is much more Dynamic than people are even really giving it credit.

Um, you know it's it's It's not quite a stalemate there. There's a lot that could happen one way or another, and these are the moments that matter. How do we deliver asymmetric technical capability? um, to deter conflict from escalating and ensure that liberal Western democracies continue to, uh, create the world we all want to live in. Can you elaborate a little bit more about the role that Paler had and has in Ukraine Because I Think uh, people don't fully understand uh, the scope of work that's being done there and the importance of uh supporting Ukraine in that war because there's a lot of voices you heard in the US People are starting to get a little bit iffy about it, so can you talk a little bit more about that? Yeah, you know.

Alex was the first CEO of any company to go and visit Ke to see President Lazinski and we've been providing support to them for better part of two years now really helping them with Aid driven targeting uh and War fighting functions uh, and so working with the general staff working with battalions on the front line. Um, really, we've enabled them as Builders They have green suitors in the platform building capabilities themselves. They are a wildly technical society and through their conscription as I've written about, they they took product managers, software engineers and they deployed them for the front line. So I'm not just talking about software Engineers sitting in the rear writing code supporting their friends.

their friends were also software. Engineers You think about the nature of the collaboration that's happening when the engineer knows how long is this feature going to take. They know what to ask for and what to get and that's provided a wildly Dynamic cycle of innovation that I think we all need to be paying a lot of attention to. Uh, One of the things I found fascinating from a recent Uh meeting I had on the state of the Battlefront There is that essentially the Drone obsolescence cycle in Ukraine right now is 6 weeks.

That means you know from the time you come up with a new drone that might be resistant to certain sorts of El Iic. Warfare it's it's You're going to have to reinvent that drone in 6 weeks. And you think about the pace you know. Uh, Colonel Boyd Air Force Officer of a past generation, He really pioneered the UDA Loop.

You know, observe Orient decide act. It's all built around the decision. It's all built around what Pounder talks about. You know, not data, but decisions.

How are we empowering that decision-making Loop The winner is the person who can go through that Udal Loop The fastest. And so now you have this this kind of like meta construct where what matters is not simply how quickly can you make a decision, but how quickly can you learn how to make more decisions? Can you get in that Loop faster than your adversary can and whether it's what we do with Airbus or BMW or what we're doing with Warf Fighters this is exactly what we're focused on. Uh, and so I think we should really be looking at Ukraine as the West's Len lease moment heading into this conflict across three fronts here. Uh, you know if we, if we go back to the dawn of World War II the West Was the world's best.

The US in particular had just figured out mass production and uh, we talk about the arsenal of democracy and but what we need to really study is that it took us 18 months to mobilize. You know we took one of the top Executives bill nutson from Ford and GM and we put them in charge of War mobilization before there was a war and we forget that at that point in time it was not the defense industrial base. There was no defense industrial base. it was the American industrial base.

There's a reason we went to electronics companies and automobile manufacturers first. That's where the competency was and we mobilized all of us industry around that and we did that to provide equipment to our allies in their fight here to for what we've largely done is taken equipment that has been sitting on the shelf that's really 80s 90s era Cold War technology and collectively the West has been providing that uh I Think we're squandering the Lend Lease opportunity here where we could be uh, iterating on New Concepts new technologies at the pace of the fight to provide ourselves capabilities that matter in the Middle East that matter in the Taiwan Straits Do you think uh, there's a little lag in the strategy that's being deployed by decision makers in the West in understanding the the new front cuz uh, it seems like the everybody is starting to show the cards. You're starting to see the formation of this uh access of Iran China R And we can't leave off North Korea I Mean they have a kind of a do they matter though? they matter? They? they they are providing um, equipment and support. Um, it's easy to leave them off, but we shouldn't I Never considered them as a serious player just because of a um, just sheer technological lag.

Let's put it this way, but I I'm guessing that what you mean that they still have a lot of uh, nuts and Bol so to speak. Simple Weaponry right? They they have equipment that they've been providing. They have production capacity. You know they're certainly not sitting this one out so we shouldn't discount them.

Okay, so that's a good. That's a good point. Uh, but as as we can see this whole new map kind of unraveling right, you have Iran pushing in the Middle East with the Hui Rebels pushing to the Sus Canal trying to hurt Egypt Hamas and Hezb is trying to hurt Israelis we have China pushing Taiwan Russia is pushing Ukraine So does it feel a little bit like we're in the late 30s here and prepping for this uh, new conflict? And the do you think that the global leaders on the West are fully aware of this or there? Still people who don't fully understand that? I think um Douglas MacArthur You know the American General said that almost all failure and warfare can be summarized in two words: Too late. Too late to comprehend the the Mortal threat presented by your enemies? Too late to start being prepared, too late to unite all forces of resistance against this.

And so I I Think a big part of it applicable to October 7th Literally What you just said right now. Yeah, I mean every Dimension So so I I My My, my view, talking to world Leaders is that they realize this is coming. Everyone is constrained in different ways by um, where is the current political consensus? We do live in democracies. You know we need to all come to this place together, but there's an important role for advocacy.

I Think there's a huge amount that we we really got through aggressive disclosure of classified information in the lead up to the invasion of Ukraine that that gained a lot of trust. and I I think the polit. The situation is only less stable since then. Um, there's a a big question of how do you.

How do you deter conflict Because that's the goal. The goal is to deter the conflict, not to fight the conflict. And so how do you take actions that defer the conflict without escalating or increasing the probability of conflict? And I don't envy the position a lot of the policy makers are in right now. Yeah, because that's what in my opinion.

I Think the problem starts. It's like the bouncer. example, right? Good bouncers don't fight. Yeah, that's that's the rule, right? Not that I have experience.

As a bouncer. You look like you do a Good job. No. I've I've been known to get hit by bouncers, but mostly like the ones you don't want to mess with that.

that that is the good bouncer, right? So I feel like ever since the United States a little bit uh, pulled out out of the Middle East uh, that projection of strength went away. That gave a huge boost to these other chaotic forces in the region. And I think that, uh, now it's changing obviously. Uh, but U The question I have for you is uh, where do you see the the state of the Middle East the state of Ukraine the state of Taiwan Uh, let's say five years from now.

where do you think we're headed well I I think look I I I Spent a lot of time thinking about how do I minimize my own counterfactual regret. You know I have a family I have children I think about okay. if conflict is coming, let's say conflict happens in 25. What will I regret not having done in 24 to give the forces of the West the most capability they possibly could.

And how do I plan my road map backwards against that? So it's hard for me to think five years out because I think the the greatest risks are actually near-term You know I think there are deep structural problems with the Chinese economy I Think they are getting weaker, not stronger. And that means that the near term is the most dangerous. uh. and and how do we deter issues that might be arising in that context here.

Now, one of the the key lessons from Ukraine is that you can get a lot done if you're able to preposition data software and Hardware ahead of the fight and you have many more limited degrees of freedom if you're responding after the fact, so that that's both definitely true for deterrence value, but it's also true from a perspective of how capable are you of winning and what what is the nature of the fight if if you haven't prepositioned so that that's certainly a lesson that we're thinking about, how do we get enough of our own Mass west of the International Date Line now our own Mass being paler to help preposition ourselves um to provide the most to to Allied Forces and and US forces In that context, the other lesson that I'm starting to learn uh from the events after October 7th, which kind of unexpected actually is the degree to which you you think about the Uh Israeli Force structure. Highly technical Society Um, very very competent. Historically have really built a lot of Their Own technology. As a consequence of October 7th, they mobilized 300,000 or so reservists.

Many of those reservists are software Engineers product managers, data scientists from industry. They have one or two decades of experience. They're now plugging back in and they're saying oh, I realize all the things I built when I was 18 and I did I lacked the experience to understand there were other ways of solving this problem. There are you know I've learned so much in Industry that I can bring back and it's providing a step change in capability to the IDF here.

and I I Think there's a broader takeaway that we should really be having. You know you can. You can integrate that with my lessons of having product managers and and software Engineers on the front lines with Ukraine Then you think about okay, what is the force structure in the US or with Allied Forces You know we have a reserve structure that's really geared towards how do I get young people combat ready into reserves? What we really need to be thinking about is how do I create an elite technical reserve of you know, the 2000 best engineers in Silicon Valley who can help uplevel and upskill what we can bring to the fight. You think about the capabilities that we can deploy between now and a potential conflict in 25.

There are no new Exquisite systems that you're going to be deploying on that timeline, but there is an immense amount of software capability that's going to radically matter. It's not 10% Improvement it's 10x Improvement that is going to require that caliber of talent to to get out there when you guys uh, checked out of the Silicon Valley culture so to speak and you unplugged, you move out out of Silicon Valley you move to Denver you completely ride off China right off Russia Right off what was back when you guys did? It was the hot spot for every single tech company in the world. The Chinese market the you know everybody sold out so to speak and you guys went against the grain and you took a lot of heat for that. Uh one of the main criticisms we heard is like people saying well it's US based business where's the rest of the world right and you guys said no, there's a bigger thing coming, there's something bigger than dollars right now.

Do you feel Vindicated right now having seen the pandemic and from China then you having seen what's going on in Taiwan and Ukraine and the Middle East do you feel now that U kind of this Vindication sense of we told you guys and you thought we were kidding I I don't know I Would you know what I would I feel trying to I'm struggling for the right I guess Do you Would you wish to be wrong about this and are are you I wish we lived in a different world I Wish we had this polanish world where everything just got better and we could all get along. but you know the history the lessons of History suggest otherwise. What? I What? I feel happy about is that everyone else is starting to see this too. Uh, you know, because for us to actually unite the forces of resistance, it means that we have to be driving to towards a consensus here.

If you think about, you know Silicon Valley Four years ago, absolutely thought we were that crazy that this was not the world that we lived in. When you look at the the consensus now, people are investing in defense Tech You know very conventional players who would otherwise have stayed away from. By the way, a lot of people are pulling out out of Tesla which is one of my favorite companies because of the Chinese exposure which used to be a huge plus. It's only been four years and the narrative completely flipped.

We're going to have to figure this: I mean I I don't There are no easy answers here, but you know, at what point does it become a breach of fiduciary duty to invest in incrementally in China as an American company understanding the complexity of the geopolitical landscape? Certainly, that would be a simp. You know that didn't work out well in the context of Russia and if you look at where things are going, you could say well, the legacy is the Legacy I have opinion I I'd probably be more extreme than people than most people there, but then there's certainly a go going forward question. So at this point I think boards need to be thinking about is this asset allocation even right? Does this open me up to shareholder lawsuits? What sort of behavior change the financial markets bring about? And when I used to talk about that four years ago, it was, you know there was no resonance to those Concepts Now it's almost like, well, obviously this is a risk So I'm not even saying anything novel now. and I think that shows how far the consensus has moved, seeing that the valley, which I think was largely one of the most pro-china places imaginable.

you know, even five years ago, uh, it, it's changed dramatically and I think there's a deep alignment to the National interest and you you kind of see some aspect of this even I'd say in in Israel pretty divided Society leading up to the events October 7th immense National Unity Coming out of it and as as we kind of see the four players in the axis of Evil here are closing ranks, it's becoming more obvious that we have real issues to contend with. Again, going back to we talked about one criticism which came up uh, during the DPO people saying, well, what's going on with Paler and they anti-china like that was one one point that people talked about um, you mentioned earlier Airbus and the I think that was the inflection point for a lot of people to understand that P is a two-headed monster. It's not just the government business, there's a lot of value in the commercial sector And can you talk a little bit about what you can say I don't know about the how the Airbus project happened and uh, what you're able to do for that company I think it's super important now. Yeah, having seen what's going on with Boeing cuz boing are not having.

you know how they say a shooter is not having a good game? Boing is not having good career like they're not having a good career. Uh 730 78 Max Now with this new plane their business is completely going to and and they're losing trust. Mainly I think because they went from engineering hardcore to to this NBA culture, let's assemble just uh yeah I Just wrote a blog post about something similar there on processing. They completely abandoned the this engineering hardcore backbone and they Chang the culture I think it stems from the McDonald Douglas emerger.

that's where everything started go to. But with Boing having their turbulences so to speak, the Excellence of Airbus is very, um, it's very evident right? So can you talk a little bit? What? H how the project happened and what you guys were able to learn from it. It's some of the most exciting work that we've been a part of. So we started working with Airbus in the initial A350 ramp.

so they had just built this new plane. they had just released it to the market. Uh, Tom Enders The CEO at the time had told Wall Street told the markets look we expect to build 50 planes in the first year and this is a really important launch because the A380 is an Exquisite and beautiful plane but it is structurally unprofitable right? So the 747 it's the same thing they don't work so then with with the you know they need this launch to go well. So in the first year of production they had said we're going to build 50 of these they were on track to build 16 uh and so they started working with us to say look what can you do to fix the production ramp and I think this is another really important aspect to it which is like we're not going in there with some tiny Point solution saying we do this little aspect of quality or this little aspect of Erp It's really they had a problem to solve which is I need to ship 50 planes and now how do we help them decomp that problem to a series of things that we can help help do and we spent a bunch of time on the final assembly line in too and subassemblies and Lex and nir and we started understanding what are the things that are slowing down the ability to prod produce these planes.

So in when you're first building something you're going to have these non-conformities things don't go exactly according to plan. The question is is this something that's part of the learning curve? Like yeah, I didn't do it, you know I didn't put the bolt on right this time. But next time I know what to do. That problem goes away versus it's an issue.

It's a recurring non-conformity that's going to happen on every plane because it's a design challenge. It's a tooling challenge. There's something more structural to go figure out. And and these are highly complex machines that are made across many factories.

Uh, and so we were able. Countries: Many countries, Exactly thousands of employees. It's and it's complex coordination problem. Like, you can work on certain parts of the plane, but if you're working on this part of the plane, then you actually can't work on that part of the plane.

Uh, then you have a complex supply chain to manage because all these parts exist in all these different places. So we we tackled two problems in the beginning. One was quality. How do we address this issue of identifying root causes, figuring out what's a recurring non-conformity versus what is just part of the learning curve, and the second is then production optimization.

So what work should I be doing today? Based on my view of the inventory that exists and the future production plan and the resources I have available. Sometimes people are coming from other factories to do this work, so we got them to 49. We didn't get them to 50, but we took them from a run rate of 16 to 49 and that's when they felt like wow, we might have something in this technology and actually I'd say uh, credit to Mark Fontaine and Tom Enders They really had the vision of what to do with this so the very next thing they came up with is Wow! Look, we've built this asset for our aircrafts that really can live from cradle to grave. We have the Cradle part we built them in Foundry Now how do we extend this data asset into service? So like now, we're shipping these A350s to our customers.

They're operating them. You know who knows how to operate A50 A350 is better than anyone Us: Airbus How do we extend our knowledge so that this asset the customers the C Yeah How do we extend our knowledge into the customers so that they're getting the best uptime the most Revenue they they possibly can from the assets they're buying from us and use that to drive more growth in in the services businesses that we provide them to take care of these planes and use that to drive growth and selling more planes. And that was the birth of Skywise, you know? So we just started working with a few Airlines here or there the first folks they had delivered the A350s to, but then we quickly scaled that to I don't know on the order of 160 180 Airlines Now it manages about two-thirds of the world's air fleet and then everybody who works with the airline is also on Skywise. All the suppliers and I've been getting calls from people who are in the third and fourth year and they're like yo.

I I'm a I'm a subcontractor of this and that Airline And never since I've been known Skywise I've become a paler investor because this thing blew my mind. Well, that? that's one of the cool things you know we've always talked about. Okay, we you know Foundry is this amazing platform to integrate your operations from the hand of your supplier to the hand of your customer. But why stop there? Why don't you go into your suppliers? Why don't you extend Foundry into their Erp into their supplier? Erp And what that does? it takes out a lot of the inefficiency of a lack of visibility and coordination problems.

Where someone says something's going to show up, it doesn't show up. you know? Yes, it's annoying that they didn't tell, but actually it's not. It's more than annoying. You had planned your production schedule assuming their parts were going to show up, but it's perfectly knowable.

It was never going to show up. And so how do we remove that? human communication? Make it machine communication and everyone can be. You're kind of getting rid of some of the political drag of like o I Don't want to tell them it's late or something. I'll fix it and it's just it's just flowing.

You get the Ka and then extending that into your customers is how you differentiate your service if you really think about it. Of course, when when when a plane door blows out, there is a difference between the two airplanes, but you wouldn't say that. Um, you know how if you're Airbus and you want to differentiate over time, how do I build a better plane? It's not by doing one or two things better, it's by doing a thousand things better. How are you going to do a thousand things better? Well, that's going to really come.

It's data intensive. It's I have 50,000 sensors on these planes. They're generating data between 1 Herz and a th000 Hertz You know, one data point per second to a th000 data points a second 2 million data points per flight per average flight? That's right. So how do you absorb all of that to say look okay in these sorts of conditions? We're doing really well and these humidities like this, and we're doing this sort of ascent and this sort of environment.

We want to work with our suppliers to make a more reliable part, and so it's It's organizing yourselves around that problem so you can actually have a fundamentally transformative, better experience. And I think in part, Airbus's Relentless focus on this kind of Kaizen of improving the experience is what's what's bearing out and how much of an impact that success story had on the in my theory is like this thing was a gateway to other commercial projects because uh, if it can work for a massive Mega project like that, Yeah, well. I I Think one of the the greatest Testament to it is that it's not software that's purely internal to Aabus. it's software that they gave their suppliers and their customers.

There's a pretty high bar for that stuff. You know your your, your suppliers and your customers expect that stuff to work. You can't really hide anything being substandard. and so the fact that it works and they're proud of it and it's scaling.

it's transforming their business. That really opened up a lot of folks to wow this and it worked very quickly. You know you're not, you're and it's quantifiable. because you can see Aogs coming down, you can see scheduling getting a lot better.

You can see fuel savings. Yeah, preventative maintenance has gotten a lot better. Air Airlines were trying to move their boing craft into the platform so they could manage their Boeing assets with this and that's another place where the the security the Privacy protections we have in the system because while that happens, Airbus never has access to any of the Boeing data right? So having an environment where Airlines could protect their own data, protect certain pieces of it. collaborate with Airlines without sharing with Airbus, then also share with Airbus when they needed service and support.

That's actually paradoxically. we've always felt that very strict privacy controls is how you maximize collaboration. It can't be an all or nothing proposition. You need to give people the levers to decide in this moment.

What do we need to collaborate on? What can we collaborate on? Well, you touched on the very important topic and you know what I'm going to bring up right now. If we're going to talk about data privacy and data security. there's a F very famous investor from, uh, that's known in other communities that uh, that spoke about Paler a few times. I'm talking of course about Ross Gerber He talked about Paler and he said that well, this company sells your data and it's p of to you Etc ET it's evil.

So uh, I think that's one fud I'm going to let you dismantle quite easily I think in about yeah seconds I mean in some sense I don't know how easy it is. dismantle because we've we. We've been so transparent about this since the very beginning. You know we don't own data.

We don't have access to our customers data. We're not. We're not. You know, we're not collecting data.

We're not selling data. We we provide software to our customers that our customers use to analyze their data. and they're in control of the rules that govern how the data can be used, how it can be shared. We build the protections to ensure those rules are followed.

We build the auditing to make sure that there's complete visibility into to that. And we're always pushing the envelope in terms of the capabilities of how do you secure the data Can I have cell level security column level security How do I label my data so that I can ensure mistakes are not made? How do I go beyond simple role-based Access Control classification based Access Control to purpose-based access control, particularly in healthcare. You think about it. People have consented to this data being analyzed for a clinical trial For a purpose.

You cannot repurpose the data they've consented without going back and getting their consent. So how do you track this higher level concept so you know you think about there. There's a huge opportunity to actually build these Concepts into the software to prevent people from from accidentally doing the wrong thing. And we've taken the time to do that largely as an outgrowth of our core philosophy, right? So where we started in counterterrorism, We always believed the obvious thing which is stopping terrorism is good, but not simply because terrorism is bad, but also because even worse than that is the reaction to terrorism.

the sort of push to the right extreme right where you you. You essentially end up in a world where you have no privacy, where everything's taken away. So if we want to live in a world where we're managing privacy and security together as Core Concepts that are fundamental to democratic existence, then our technology needs to support that and give policy maker more lever to have the Nuance policy that democracies want enforced in software. So from what I hear from Paler customers, the few that I spoke, the main thing that entices them to work with you is the DAT of security is the DAT of safety.

And I even had a conversation with a guy who was a middle management with the shipping company and he said that they had an incident and basically all the data was gone and you guys help them restore the entire set of data. Otherwise I don't you probably know what I'm talking about but we can't say but that's how you know I'm Legit I'm not I'm not making things some due diligence here. Yeah, I've done my D So the guy explained to me we went to Paler, they restore everything and like that would have never happened without without Paler. So to me that's ridiculous.

When I hear these these talks he clearly doesn't know uh the software uh I think uh this is part of the thing you've been guys been doing with countering that you know when um Michigan just won the Natti the national championship and they interviewed Jim Harbor the coach and they said look when people talk about you don't get bitter get better right? and I love that because you guys are not getting went down the path of oh this annoying you've started to re-educate the community and you've started to do like the the boot camps and the Aips. Can you talk a little bit more about that? because I think that was huge for you guys? No that that's been hugely exciting. I mean there's kind of a macro thing that we should get to at some point, which is just like the expectation people have of software how that's translating into their view of SAS Maybe some of the recent comments David Friedberg made on the all-in podcast. but the really? the I love that show? Yeah, it's it's a ton of fun.

Those guys are very smart. D David Sa One of the early product mentors for for many of us at Paler. So the the core thing with AIP is I I think you know I've talked extensively about how I think about Llms this sort of Middle Ground Between human thought and aloric reasoning and the nature, you know it's this stochastic technology. So how do you integrate this stochastic technology into a tool chain that was otherwise pretty deterministic? Well, that leads you to a place where you say you got to play with it.

That's number one thing is you got to get human beings to sit down and actually use this and use it. I for some meaningful period of time because when you first use it, you can kind of overe, extrapolate and maybe misunderstand what this thing is capable of than not. And so we have just found it immensely clarifying to to get our own Engineers to sit down play with this stuff. As an outgrowth of that, we realize, oh, we should be externalizing this.

We should take this boot camp Camp concept from something that captivates our internal imagination to something that's going to help everyone understand what is this cap this technology capable of. And then I think it allowed us to to stand on the shoulders of essentially the 10 years of Investments we've made around Technologies like Foundry build AIP on top of that and deliver use cases in really a day or two. And and having people see that I mean one of my favorite examples was a customer who've been working with us for a while. They had a four-month project with very bigname software companies on Generative AI They had a board meeting coming up.

um, the customer very reluctantly came to our boot camp and after a few hours at the boot camp, he did you a favor. He's like, okay, I'll Yeah, exactly. Uh, after a few hours, pivoted their entire board meeting to be about what they were building in the boot Cam and threw away the four four months of work because largely they've gotten nothing done in four months. And so I think having this integrated tool chain so this is where it goes back to the macro Fame frame which is you know we have this disease in in software.

Broadly speaking. Uh, which is. It's so optimized for what is easy to sell And so that means well. who's your buyer? Your buyer's it.

Okay, how do I sell a box that has some perception of white space that has some incremental differentiation over the over the prior boxes. You know? I'm going to design everything around that. It's really about a oneandone sale instead of I Think the more authentically valuable thing which we've often got critique for is is working backwards from the customer's problem. Understand what is going to matter to this business, you know, Like, why should I be proud of the work I'm going to do? Hey, I got to help with the A350 ramp.

right? Like that is the nature. that's the gnarly, complex, irreducible problem that's in front of you. We haven't said the number that 33% Yeah, that's that's Improvement 33% in in production speed and the same quality? Yeah. Improved Quality Impr quality.

Yeah, uh. and I mean and there's so many second order benefits to that too. It's like you have reduced cost of supply chain. you're able to put your instead of overnighting Parts You're able to put them on the slow booat more efficiently.

manage all of that. Uh, it leads to more aircraft sales which is really what moves the needle on on the business there. But so by solving the complex problem, um, you're actually able to to generate true value for the businesses. which is what gets them to invest more.

And and so we're kind of. You know when I when I hear David Friedberg talk about look. I had an engineer rebuild this thing. You know you have all these consequences of of you know this.

This kind of SAS drives you to something that's all beta, makes you look like everyone else doesn't really fit you and then is essentially extraction in terms of how the pricing sort of works instead of thinking about it more authentically like I need to own the problem, be a partner to my customer, deliver on that. The the other benefit for us is it elucidates what's next. like okay, I'm able to solve all of this stuff today. How should I be thinking about my road map instead of sitting in Palo Alto and eating strawberries and thinking about you know Big Ideas My road map is forged in the fires of the pain on the final assembly line of too The things that I can see are within grasp that we can't do today, but we'll be able to do tomorrow and getting into that continuous product development cycle around these things.

Yeah not to knock on strawberry shakes I like strawberries but yeah there's a there's a disconnect between the the food soldiers and the guys are writing the code and some most and this there's actually even more I have this, you know I'm kind of stealing this from one of my colleagues. Molina Von Brentano who's a genius but you know to build on one of her ideas here. It's like you know Tyler Cohen has talked about the the great stagnation that kind of happened in the mid 70s. There's this separation between wage growth and GDP growth.

Peter Teal has has talked about like we wanted flying cars. We got 140 characters. um and and I think one of the deeper root. That's a great sentence.

Yeah, it's the motto of founder cuz we we grew up watching. Doc Brown Mar McFly where's where's my fly DeLorean ex. where's myly DeLorean Star Trek You know what I mean like where is this technology I want I want Mr Fusion and the banana and where is this I think one of the more that was 2015 in the movie yeah, the flying car was 2015. sorry that was 2015.

That was in the timeline of back Back future Yeah, so we're past these dates. Like where is all this right? You know you think about Total Recall We're getting closer to those timelines God Forbid One of the big issues is is some sort of Disconnect between like the steering wheel doesn't work. You know, between strategy and operations at these companies and I actually think perversely, it is the consequence of poor technology implementations. Like essentially, we have presupposed that merely having the technology makes things better.

But I think that the Paradox that I'm observing whether it's in government or in commercial is that the better your technology is, the more important excellent leadership becomes. Actually, if you have really great technology in mediocre leadership, it's very likely to lead to bad outcomes. and this sort of Um coupling of outcomes is is is is something we're not like modeling completely and and I think that that comes to this idea that the technology needs to serve serve the business and the institution. You create the accountability function by actually asking whether the tech is solving the whole problem rather than simply saying by buying this Tech I've solved the problem and I think that that kind of summarizes the current disease that we have in the software industry and look at the leadership and how it changes and it can have these long lasting effects if you go back in history it was the French and the the the British were mocking around with this nonsense project.

Beautiful plane. The Concord amazing plane made no no sense complete Fiasco They couldn't get wait to get rid of it the first chance they got. On the other hand, Boing came up with this brilliant project with the 747, the jumbo jumbo jet which made so much buckets of money and changed Aviation forever made it accessible and uh, then you see the quality of management and how the British and the French completely switched it around. Now Boing is stuck in the past because of bad leadership.

because of bad management. Now they're lagging behind the French Mentioned the British they're coming at day 350 is an exponentially better plane than anything that know that that Boing has. It's like we could talk hours about it. But 7 737, 8 Max The whole original sin was the improved engine on the A350 which they try to to fit on the 737 that didn't fit the Mcast and that.

All stuff. yeah. bad leadership. A good CEO says no, we're not going to do that.

We're going to do the right way. We're not going to our way into this right? Well, and I think this is a that's right I mean I I Think there's a broader kind of human bias towards Um seeking comfort in repeatable processes. What is going to be repeatable process is my Safe Harbor and you know there's this great job Steve Jobs interview where someone's asking him about the failure of the Apple Lisa and he's like look we got confused at Apple You know we thought like everyone wants to replicate the prior success. You know how do I replicate the success of Macintosh Well what was the process we used We we went to HP and we bought.

We got some of the best processed people in the business, but at the end of the day for these 0o to1 problems, content is what matters. Absolutely content. You know the cont and then and then process is valuable when it serves the content. That's how you achieve scale of the impact.

But it is a total disaster when the process seeks to become and usurp the content. And I think there's a lot. When when we we've taken our corporations, we've divided them up very functionally. You could say that that very functional division of how we've have we've broken up the complexity of an organization is itself a form of process that we've imposed.

Now, when can you evaluate when the process is not fit for purpose? When can you evaluate that? The the way you've organized yourself is part of the problem. Now one of the things that we focus on with Foundry The whole point of the ontology is to have a representation of the business that is actually integrated and independent of how the business happens to be organized. At this point in time. it's an enduring and everlasting representation and that allows you to connect the dot.

You know. one of my favorite examples from a US manufacturer relates to procurement versus production. So the procurement job. you know the the Kpi.

There is cost of raw materials so this person is buying discount product 30% off. Market They're really excited they're hitting their Kpi. The procurement guy I'm sorry the production person is is pissed off because this discount raw material has 40% less yield. So the net effect on the business is value destruction.

One person is torturing their Kpi because the other person hit their Kpi. They're pulling in different directions. Yeah, and so you could say, well, how do we? How do we Bis, Bis and risk? Yeah, pulling in different directions all the time so you can see how how we slice these things up is a is a matter of convenience. It's an imperfect representation of what's happening.

In the end, there is A There is an indivisible actual outcome that you have to manage, and that means you can't ever be so reliant on process. You actually have to have your finger you know on on the joystick. so to speak to manage the thing and we want to make that tractable for the human beings who are running these organizations. To me, what got me excited about Paler is this analogy that I used for for my for myself.

I was like look, if I'm running a business right I'm the little ant and I'm trying to walk through a football field right? and every piece of grass seems like a tall building to me I don't know where the entrance I don't know where the exit I'm just kind of trying to get somewhere. but if I'm the same ant and I'm situated in the bleachers I can I can see the road map where I need to go a lot better right? if if that ant had camera into the bleaches Yeah, and that's what I think Foundry is for a lot of these companies. Yeah, I I think so. It allows you to see yourself if you can't actually see yourself and where you are on the map of the terrain, how do you know where you're going And then that's other part to the analogy to mix metaphors here is connecting that steering wheel.

So many times when you know companies see themselves like oh, I have the perfect reports I have the perfect data but then they have no ability to translate what they're trying to do to action because it's it's not one decision, right? You're trying to now inform how 20 interrelated decisions get made to achieve the direction of travel. So how do I how do I make that seamless? Now this goes back to where we started when we're talking about Ukraine and the UDA Loop and the whole point of this is not to make a Time bound set of decisions. Hey, we made our 20 decisions. let's go.

you know, to vacation or something. it's like, well now you're trying to make the next 20 decisions better. So everything is about that meta aspect of how am I not only doing better today, but learning to do better tomorrow I Had this very interesting conversation with a guy who used to work at for Tesla for bi and I was like all this all this I can do with this and that and this and I said okay, hold on a second. So I bring a Cod strap Dorian into the conversation said talk to him after about 20 minutes it's like my mind is blown.

I completely misunderstood this like this is next level stuff I think a lot of people haven't gone through this process. they they just they just don't understand the little intricacies. And by the way, speaking of Tesla and this is another point I want to make here if you you mentioned comfort and repeatability right? So if you look at the auto industry and why Tesla had so much success because they came in and said guys, you've been doing the same thing for the past 40 years, you haven't changed Jack So they came up as the as the newcomer. They changed everything.

the process. They threw everything out the way they assemble Vehicles the way they they build everything right. No sometimes they got a lot of things wrong but they broke the mold. yeah.

I Think you guys can you talk about how you've done it for software? How we Chang Enterprise software in that sense Yeah, well. I we really focus focused on look most people when they're trying to build software. The number one constraint is how financeable is my dream, right? because if I can't raise money, it it seems completely academic And so the most financeable thing, particularly at this point in time in the valley, was some sort of Point solution all SAS It's all multi-tenant It's It's just you know, targeting commercial. it's all sales-driven very low on the engineering SES and we flipped that around and we said actually I don't know how to sell this, but I'm I have this Vision It's going to be engineering driven.

We're going to solve the breath of the problem at every turn. When there's a chance to make something simpler and suitable for a more narrow Market or more complex and double down on the ambition, we're going to double down. Uh, and certainly we have metabolized a huge amount of pain and continue to like. that is not a it's not an easy path to take, but ultimately you know you end up inventing the future.

You end up going after the problems everyone else is structurally afraid of either because they don't think they can raise money after it or more more likely it just seems too hard. Uh, and you know you're not solving for so I think some of the critiques people have like okay, well talk about your sales. Talk about the process IP Like well, we're not solving for that. First, we're solving for making this thing truly valuable.

And that means when Airbus needs you to fundamentally inflect production in less than six months, you can do that. You, You know it's it I think a more honest Accounting In some sense of when we started working with Airbus it was more like 10 years of Rd plus 6 months. But then I think we were the only company in the world that could have done that. You know? and then you build on that that mode.

You know when Co comes around and you're trying to build operational warp speed from a dead start? You know we can build a biomanufacturing supply chain that spans clinical trials all the way to the pharmacy in five weeks, you know? And so you just think about the scale of problem that you can have access to, the amount of societal impact that can have, and that's what what's been driving the business. Um, and I think it drives Elite Talent acquisition. Why do people 100% Why do people want to keep working at Paler? Because the problems are the most interesting in the world and the ability to infl the direction of the world is is very high accordingly. Yeah, the world has changed.

I I Think that the back in in the day of parents they used to come in work for 25 years at the same place and these days every Tech guy I know changes. you know jobs year here, half half a year there, another two years there. it's normal so people are looking for new excitement, new challenges. I Think a talent acquisition by the way.

again going back to Tesla Which I I See a lot of equivalencies between you guys and Tesas. They have the best talent in the othero industry. You have the best talent in the Enterprise softw industry. but um, um, talking about that.

Do do you hear a lot of this uh chatter about okay A is great. massive interest. but how you guys going to monetize this? Like have you seen this chatter going around? Yeah? I've definitely. I I I I Felt it a few quarters ago more prominently as we were just releasing it.

I Think as customer acquisition has picked up and people pied up is very gentle uh way of describing it. You guys had insane growth. We we are just focused on. this is something Ted's been talking a lot about.

Like you know. Screw the first derivative. We're focused on the second derivative. It isn't just about the rate of change, it's about how fast are we inflecting the rate of change.

Uh, and so the the: the maniacal focus on boot camps. The maniacal focus on getting customers to actually get hands on keyboard solving more Pro problems extensively doing more boot camps even within the same customer to expand the breath across the functions and how people can connect these things up together. It's it's been. It's been wildly momentum and creative, not only for our customers and our our good to Market but also for our road map.

How we think about the features, what are the most valuable things to solve? Um, so yeah, it's created a huge amount of energy and you're agnostic to who's ever going to win the Llm wars? Yeah, completely agnostic, you know. And we've kind of had our own view that there's going to be a proliferation of models. You know, we think an approach like KLM is is really quite important I Think that's become more obvious to people. Um, just both for kind of leadership reasons at certain institutions, but also the proliferation of models and how much people want to be experimenting with these things.

We've been talking a lot about the the limits of the parametric knowledge of the models. You know, if you're really trying to get this model to be a subject matter expert, I'm not so sure I'm not so sure it's going to get there, but instead, if you thought about these models as infinite on demand intern capacity, you're definitely going to. maybe they can do more. I I'm I'm structurally skeptical they'll be a subject matter expert, but that is a great use case and we've really put that into practice.

We've launched a co-pilot with Panasonic Energy in the Gigafactory that's co-located with Tesla that helps them do really sophisticated maintenance of this very high-end battery manufacturing equipment. Uh, that you know the head of Maintenance there? her name's Tara so it's called the Tabot, but it essentially has brought all this subject matter expertise to Bear to the front line. So the level one, level two, uh, maintenance Texs can much more efficiently improve the uptime of these very Exquisite machines. You just gave me the headline for the podcast Sham confirms Tesla works.

It's a very Twisted way. There you go. No, we are in the business of headlines. You know you've seen it happen there, obviously.

but I I think that's one of the things that I wanted to ask you. U you've managed to stay so long outside of the circle of of sales, right? You didn't even have a sales for a few years ago. Talk to me about about the pain that you went through in building the sales. Obviously that was a tough process.

I Had a chance to speak to a few guys who went through the system no long longer and still all love Paler by the way. I Never I never had a guy who I spoke to who no longer paler that said anything bad. but I've heard firsthand about the pain of making that happen. Can you talk from your perspective about it? Obviously now it's a Well old machine but can talk about the first couple of years.

Well, I think anytime you're doing something zero to one, you know you're trying to. you're trying to Fig figure out the balance between content and process. I Think one of the the things that that's always been true for us, where we've made the greatest mistakes, is where we've tried to import some outside structure. You know, when someone says, look, this is just how it's done.

Just take this. Playbook and do it. You know And and sometimes there's there's kind that's appealing. It's appealing to just be able to go grab this thing and use it.

Here's a template. Yeah here. and and in reality you accumulate all these errors in in ways in which even in the best case, it slightly doesn't fit you and then that that accumulates over time. Uh, and you actually are much better served by by going slow at first and figuring out how to build something that fits you well from first principles and scaling that.

Uh, and I think we've we've kind of done the hard work to to both see where we've used a template and it doesn't work and where we've done it ourselves from first principles and it does work that that's that. That's the journey that that we were on. What's more difficult? Uh, and I It's not an intuitive question. CU When I came into this company in my mind as an investor, I was like if they can handle government politics, commercial is easy.

But now that I know, like can you break that uh, that assumption for me because I've learned the opposite I Think it's all hard is probably is probably the most. Uh, and they're hard in different ways. Um, you know with government you just have a lot of different stakeholders. You have the person you're serving, the users who are distinct from the folks who do the acquisition, distinct from the folks who have the resource or the the money to spend on this acquisition.

How do you get all this to line up up? How do you do so in a place that is structurally very process intensive? So it's like how do you compress timelines. How do you find the places that have the excellent leadership and the vision to move quickly? Um, that's one aspect of it. I I Think you could say the problem is actually the same, but just at different scales at different points of those triangles in commercial. Uh, and the shortcut that we've always used historically is to find the place where there is an urgent burning platform that eliminates that.

you know Mi mitigates the politics. Look, if you can deliver an empirical result. I Think the presupposition that most Executives really have is software doesn't matter, it doesn't work. and that's because that's what they've seen historically.

I Spent a billion dollars on this Erp thing and you know when I go to the factory floor people are still using Excel So what's going on here but isn't it? Also, one of your biggest problems is is like the point of contact has already spent ton of money on something that particularly in it. Yeah yeah and he doesn't want to get embarrassed. Yeah so you you have to or she it doesn't matter. it's not a guy for or a horse.

That's where when you have this earn this Burning problem. It kind of aligns the in institution around like okay we all agree, we need this solved like we we all you know. If we thought that the existing investment solved it, then it's not solved like that's not the debate in that moment. Now you have to generalize that and I think a bunch of the Investments we've been making have been.

How do we help accommodate the parts of the technology that people feel they've already acquired? So Virtual Table is a great example of this. Okay, you're happy with your modern data stack. Great, You know. just register those tables in Foundry right into the ontology.

Use this for everything ontology. North Don't use this for the data platforming data pipelining side of this because you you feel like those Investments work for you and if they work for you that's that's great. We want to go on to solve the business problems and and so like that. There are probably like 10 examples where we've carved up the white space that everyone can agree on, the business user can agree on, it can agree on, and the business executive gets their problem solved which is ultimately what they care about.

So final question: where are we going to get the flying DeLorean I I've been I've been wanting one since I was a kid since I've seen dog brown with the sunglasses I got to have me a flying DeLorean when you guys are going to help that make that happen well and it needs to run on bananas. and yeah, bananas that part I Don't know if I can help with, but well. I'm structurally optimistic that we're we're getting back to hard Tech as a society. you know, like we're getting back to Hard Tech.

We're investing in the Deep Tech problems. There's much more. There's a whole new generation of entrepreneurs out there that are going after these things that's going to also Force the incumbent institutions to innovate too. and um, you know, I I do Wonder with the benefit of hindsight.

If turning our back on the atom and nuclear power is one one of the gravest mistakes we kind of structurally made. We kind of. We bought into this, uh, kind of indefinite pessimistic view of the future instead of what was before then, like how much we thought the power of the Atom was going to enable for us all. and you look at so many of the challenges we have here, clearly, we're going to need to get back to investing in the things that give us not 10% more, but 10 times more I Think humanity is still looking the wounds of 1986.

Yeah, no, absolutely I've seen it firstand I was a kid I remember myself I was five or six years old and I was watching TV and you know that clip they show of the lady on the news that I've I've seen it life Yeah and it was such a traumatic experience as a kid I remember that stuff if you take away You're no and you look at the the the Pennsylvania accident I think the world still today is high on nuclear energy because that one is a huge so scarring so far outside of our the Pennsylvania one was was such a good example how to handle properly like containment structure, cleanups. everything was perfect. Then you look at Chernobyl the world almost wents to and I think that's part of the reason that Germany fell into the Honey Trap of selling out and shutting down their entire nukes for for that Russian cheap by Russian energy I Think you're right. there's something cultural about I mean the Valley's always had it.

You could say it's been naively optimistic about the future, but I I guess if I had to pick a perspective of being completely cynical about the future, naively optimistic I'd skew naively optimistic I think you know I grew up in the shadow of the the Florida Space Coast and we could watch the shuttle launches as kids in elementary school, we'd file out into the courtyard and you could see the show we still watch it in Russia the cape can ones they would show it I mean it's so inspiring. Itang is how you think about the future. and I I think you know it's important for us. You know for those of us who are parents to to think about like what are we imparting to our kids is what is their relationship to technology.

Hopefully it's more than a tiny screen that they're they're watching cartoons on and um, it's really a tool for them to to to make the world better, the the world that they want to live in. I'll tell you a story final thing before I let you go. That's going to prove what what you're saying is right? So my youngest is 5 years old walking down down the street and he asks me hey, Dad what is this logo on this car I didn't know I said I don't know he said well Google lenss it what is Google Lens so he's showing me on my phone what is Google Lens that's incredible so that's that's a 5-year-old today Yeah! so I think I I'm up I'm I think I'm more than mildly optimistic I think there's Dark Times ahead in the short term. but I think long-term humanity is going to prosper absolutely well.

Good enough for me. All right done. Thank you. You're the expert We did the garbage can set up.

Yeah I forgot about the garbage. Good.