Why Does First Breakfast Make Sense for Palantir?
To win, the Department of Defense must spend more than 1% on software
We’ve laid out the arguments on why First Breakfast matters. Winning matters. M-day was yesterday. We have very little time to scale the Defense Tech Ecosystem to deter and defeat our adversaries.
At the dawn of WWII, the U.S. was the inventor of and leader in mass production. We leveraged this unique capability to arm our allies and ourselves. We are no longer the best at mass production, but we are the world leader in software. If we need to fight between now and 2027, we will not have time to field new, exquisite systems. But we can rapidly field and improve software: software-defined autonomous drones, software-defined CJADC2, software in every form. To achieve this, we need to create a wormhole to bend the vast space-time distance between modern Defense Tech and the Department. That’s the objective of First Breakfast.
But we often get questions about why First Breakfast makes sense for Palantir as a business (e.g., “What’s in it for you?”)
Scaling the Ecosystem, Scaling Impact
To answer this question, let us first rewind the clock. Over 20 years, Palantir built the wormhole required to deliver modern software to the frontlines. From the outside perhaps Palantir looks like “one company,” but my lived reality as the CTO is that I'm managing hundreds of distinct software teams who are independently releasing ~2,500 unique microservices to nearly 1,000 production environments, including nearly 100 air-gapped environments. Palantir's customers expect a cohesive product, namely, invisible interoperability across these thousands of products, services, and interfaces. It should just work. Additionally, I need the governance mechanisms to ensure compliance, supply chain security, data interoperability across all these teams, and the ability to manage the switching costs/lock-in from the technical decisions these teams are making. I can't do that with butts-in-seats, human-mediated processes. I can only achieve this with robots — with automation. This is Software Integration-as-code as opposed to Systems Integration-as-billable-hours.
By virtue of our pathing, Palantir has unique capability that we built for ourselves to help run and operate more than $2.2 billion dollars of annual revenue. This is our Amazon.com to AWS moment:1 We’re taking our unique and leading technologies initially developed for internal use and opening them to the market to empower a whole generation of builders. In the case of Palantir Government Web Services (PGWS), this includes builders inside government programs and outside in Defense Tech. AWS became Amazon's most profitable business even while its main focus was shopping. Similarly, we see PGWS achieving widespread adoption beyond the current customer base.
To Win, the DoD Must Spend More than 1% on Software
Even beyond PGWS, First Breakfast is a solution to a deeper challenge that only Defense Tech as a community can solve together. America is the world’s best at software by a yawning gap, but hardly any of the defense budget is spent on software. As an example, the Army program of record for command and control (C2) has $27 million (out of $173,000 million) budgeted for software in FY’24. That’s 0.015% of the budget. The Department is spending $1.8 billion out of $880 billon on AI, or 0.2%.
These tiny percentages represent the software that our brave soldiers will rely on to fight in conflict. This is the software that we need to deter that conflict. We are not operating as if M-Day was yesterday.
DoD and Congress have slowly but surely frog boiled themselves to the current software/hardware asset allocation, trapped in a local optima where the percentage spent on software often rounds down to zero for a given program.
What is needed is a top-down asset re-allocation where the DoD starts spending dramatically more on software. The actual number is not that important. It could be 10% or 20%, but it shouldn’t be 1%. The collective voice of American Defense Tech - First Breakfast - is the only possible catalyst to realize this magnitude of change, short of another Pearl Harbor.
Disruption is painful. The automotive industry is a good example of what it looked like when software upended traditional business models to deliver outsized value. Historically, automotive OEMs (e.g., Ford, General Motors), like the DoD, only valued buying things - hardware - from their suppliers. The traditional OEMs didn’t invest in software or value it, in the literal sense that they spent no money on it. They let their hardware suppliers build it and manage it, and the software was included in the price of component. This led to a proliferation of distinct software systems in a car. Ford CEO Jim Farley talks about 150 modules from different suppliers written in different programming languages with millions lines of code. This is a consequence of a hardware-first approach.
At the opposite end of the spectrum, Tesla makes software-defined vehicles, and they spend more on their software R&D than their hardware. Many OEMs talk about how depressing it was to realize Tesla used commoditized, undifferentiated hardware, while they had spent the last thirty years since the advent of the software revolution competing on the wrong dimension. The OEMs only woke up once they were disrupted. Tesla’s financials clearly showed the incredible margin premium for winning with software, causing Tesla to be more valuable than the big ten OEMs combined! The entire Chinese EV industry is built around full recognition of the primacy of software. America cannot afford for the DoD to be as slow as Auto OEMs to respond to this threat.
Douglas MacArthur says all failure in war can be summed up in two words: Too Late. One of those Too Late facets is too late in uniting all possible forces for resistance. The First Breakfast seeks to ensure Defense Tech is not too late.