War with Iran + Pentagon vs Anthropic with Under Secretary of War Emil Michael

Summary

In this emergency episode of the All-In Podcast (Episode 263), Jason Calacanis, Chamath Palihapitiya, David Friedberg, and guest Emil Michael — the Under Secretary of War for Research and Engineering — discuss two major topics: the U.S.-Israel joint military operation against Iran (Operation Epic Fury, day six) and the Pentagon’s unprecedented decision to designate Anthropic as a supply chain risk.

On Iran, Emil Michael explains that President Trump described this as a “weeks, not months” operation aimed at disarming Iran’s ability to supply terrorist groups like Hezbollah and Hamas, as well as eliminating nuclear and ICBM capabilities. Chamath presents a geopolitical thesis that the real strategic purpose is creating leverage with China ahead of April negotiations, since Iran and Venezuela supply approximately 20% of China’s oil. Friedberg adds that a “grand bargain” with China could be the administration’s crowning achievement. The discussion covers the revolutionary impact of drone warfare, AI-controlled autonomous systems, the discombobulator (a classified weapon used in Venezuela), and Israel’s Iron Beam laser defense system. Emil emphasizes that new rules of engagement and a well-trained military — combined with modern technology — allow for swift, decisive operations without boots on the ground.

The second major segment covers the Pentagon’s formal designation of Anthropic as a supply chain risk — the first time this has happened to an American company. Emil reveals the inside story: after discovering that Anthropic’s contract included a 20-page list of restrictions preventing the DoD from using Claude to plan kinetic strikes or move satellites, he spent three months negotiating for “all lawful use” terms. The breaking point came when an Anthropic executive called Palantir (the prime contractor) after the Venezuela raid to ask if their software was used — raising alarms about reliability. All other major AI companies (OpenAI, Google, Grok) have agreed to “all lawful use” terms. Chamath warns that this episode reveals a broader risk for any organization relying on a single AI model, calling it “deplatforming times a thousand.” The hosts debate Anthropic’s valuation, with Friedberg arguing it could still be worth $1.5 trillion despite the controversy, while Emil suggests the supply chain risk designation has reduced its value.

Highlights

”100 guys goes into the most fortified compound in Venezuela and are out with no KIAs”

“Imagine 100 guys goes into the most fortified compound in Venezuela where the President is, take him and his wife out safely and are out with no KIAs. I mean, it’s just incredible, right?” — Emil Michael, 15:00

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”Taking out Maduro and Iranian leadership created enormous leverage with China”

“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 with China. About a fifth of their oil comes exclusively from Iran and Venezuela. And now all of that is off the table.” — Chamath Palihapitiya, 9:00

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”Just call me if you need another exception — but what if the balloon’s going up?”

“He’s like, ‘Just call me if you need another exception.’ And I’m like, but what if the balloon’s going up at that moment and it’s like a decisive action we have to take? Like, I’m not going to call you to do something. That’s not rational.” — Emil Michael, 1:00:27

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”This is deplatforming times a thousand”

“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.” — Chamath Palihapitiya, 49:00

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”I fought for the alien portfolio. I didn’t get it.”

“I fought for the alien portfolio. I didn’t get it. All the guys on my team were like, ‘Dude, you got to get this for us, please talk to the Secretary.’ But as long as I had 100% access to everything, I would do it because that would be amazing.” — Emil Michael, 1:19:52

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”Dario, you shouldn’t be selling to the Department of War. It’s in the name.”

“If you don’t want your stuff to be used for the Department of War, so be it. Dario, you shouldn’t be selling to the Department of War. Pretty straightforward.” — Emil Michael, 1:00:00

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Key Points

• Operation Epic Fury, Day 6 (2:30) - US and Israel launched joint attack on Iran; Supreme Leader Khamenei killed; 40 senior officials killed; first US torpedo kill since WWII; six US soldiers killed in drone strike on Kuwait base
• Weeks not months (4:15) - Emil says the operation aims to disarm Iran of ability to supply Hezbollah/Hamas and eliminate nuclear/ICBM capability; no scenario for protracted boots on the ground
• China grand bargain thesis (6:03) - Friedberg argues Iran and Venezuela actions create maximal leverage for April China negotiations; a deal with China could be the crowning achievement of the administration
• China oil dependency (8:38) - Chamath shows that Iran and Venezuela supply ~20% of China’s oil, and with Russia that rises to ~40%; cutting this creates enormous geopolitical leverage
• China’s lowest GDP growth in 30 years (9:26) - Chinese bureaucracy guided 4.5-5% GDP growth, the lowest since before joining WTO; Chamath argues slowing growth increases risk of Taiwan invasion
• The discombobulator is real (15:42) - Emil confirms the classified weapon used in the Venezuela raid is real but cannot discuss details
• Rules of engagement reformed (16:23) - Emil explains old rules required “parity” with enemy weapons; new approach pushes responsibility to field commanders with clear objectives and red lines
• AI drone swarms are the future (20:53) - Emil believes sophisticated drone warfare will be AI-controlled drone swarms; discusses automatic target recognition and edge AI applications
• LUCAS drone program (19:06) - Low-cost unmanned combat attack systems that can go 500-700 miles at airplane speed, costing $50-80K each; small drones cost far less
• Golden Dome AI defense (23:12) - Emil argues AI is essential for intercepting Chinese hypersonic missiles where humans don’t have the 90-second reaction time needed
• Israel’s Iron Beam laser (30:57) - Emil confirms the Israeli laser defense system is real and operational, though still early; US and Israel collaborate on directed energy technologies
• Oil to $84/barrel, Strait of Hormuz standstill (37:21) - 3.3 million barrels of daily production at risk; supertanker traffic dropped 94% in 48 hours; insurance companies canceled war risk coverage
• US maritime insurance play (37:59) - Trump uses old USAID agency (DFC) to provide political risk insurance for Gulf shipping; could reshore maritime insurance industry from European syndicates to US
• Anthropic designated supply chain risk (41:22) - First time an American company has received this designation; previously only applied to Russian and Chinese companies like Huawei
• Anthropic’s 20-page restriction list (43:31) - Emil discovered Anthropic contracts prohibited using AI for kinetic strike planning, satellite operations, and other core military functions
• Three months of failed negotiations (44:24) - Emil tried to negotiate “all lawful use” terms; Anthropic offered exception-by-exception approach which Emil rejected as impractical for unknowable future scenarios
• Post-Venezuela trigger (46:46) - An Anthropic exec called Palantir after the Maduro raid asking if their software was used (classified info); this raised existential concerns about reliability
• Anthropic controls model in GovCloud (48:27) - Anthropic holds the “control plane” for their model in AWS GovCloud; they can change model weights, which creates real insider threat risk
• All other AI companies agreed to terms (52:15) - Grok: all lawful use across classified/unclassified; Google: all lawful use on unclassified, building classified infrastructure; OpenAI: cooperative, Sam tried to mediate
• Anthropic’s $20B run rate (56:15) - Chamath notes Anthropic’s costs tripling every three months; Friedberg says Anthropic added $6B ARR in one month; everyone attributing growth to Claude Code and co-work
• Supply chain risk rationale (57:43) - Emil explains the designation prevents defense contractors like Lockheed and Boeing from using Anthropic models to design weapons; commercial use is unaffected
• Office of Strategic Capital (1:11:34) - $200B lending authority to help companies domesticate defense supply chain components currently outsourced to China: batteries, fiberglass, solid rocket motors
• DARPA using biology for critical minerals (1:18:00) - DARPA working on using biology to synthesize critical minerals, bypassing dirty refining processes; could leapfrog Chinese dominance
• China’s military buildup (1:20:16) - China has had the greatest military buildup in world history over 15 years; US was “asleep at the wheel” due to focus on global war on terror

Mentions

Companies

• Anthropic (41:22) - Designated supply chain risk by Pentagon; first American company to receive this designation; lost $200M DoW contract
• Palantir (43:05) - Prime contractor serving Anthropic’s AI to the DoD; alerted Emil about Anthropic’s post-Venezuela inquiry
• OpenAI (52:57) - Cooperative with DoW; Sam Altman tried to mediate the Anthropic dispute while maintaining competitive independence
• xAI/Grok (52:15) - Agreed to all lawful use across classified and unclassified networks
• Google (52:31) - Agreed to all lawful use on unclassified networks; building out classified infrastructure
• Anduril (18:21) - Referenced as key defense tech company making unmanned systems
• Saronic (1:14:30) - Defense tech company Emil wants to see win big contracts
• Uber (0:17) - Emil Michael was Travis Kalanick’s right-hand man at Uber before joining DoW
• Lloyd’s of London (38:22) - Friedberg traces maritime insurance history from 17th century coffee shop to modern reinsurance market
• Boeing (58:10) - Can use Anthropic for commercial jets but not fighter jets under supply chain risk designation
• Lockheed Martin (57:43) - Emil doesn’t want Lockheed using Anthropic models to design weapons due to insider threat risk

Products & Technologies

• Claude / Claude Code (53:35) - Anthropic’s AI model; acknowledged as ahead with Claude Code; deeply embedded in DoD workflows
• Co-work (1:04:15) - Anthropic’s product driving massive revenue growth; described as potentially “fulfilling the promise of AI”
• Golden Dome (23:12) - US missile defense system requiring AI for 90-second intercept decisions against hypersonic missiles
• Iron Beam (30:57) - Israeli laser defense system; confirmed operational though early-stage
• Discombobulator (14:09) - Classified weapon confirmed real; used in Venezuela raid
• LUCAS drones (19:06) - Low-cost unmanned combat attack systems; $50-80K each
• Predator drone (18:21) - Referenced as the first big drone program 10-15 years ago
• PolyMarket (3:00) - Prediction market showing 40% chance of US boots on ground in Iran by end of March

People

• Emil Michael (0:00) - Under Secretary of War for Research and Engineering; former Uber executive; oversees AI portfolio, Office of Strategic Capital, and DARPA
• Dario Amodei (41:22) - Anthropic CEO; called Trump a “wannabe dictator” in 5,000-word essay; told Emil to “just call me” for exceptions
• Pete Hegseth (0:00) - Secretary of War; Emil’s boss; authored a book about Afghanistan rules of engagement
• Sam Altman (52:57) - OpenAI CEO; tried to protect Anthropic while cooperating with DoW; called a “real patriot” by Emil
• Ali Khamenei (2:30) - Iran’s Supreme Leader; killed within hours of Operation Epic Fury
• Qasem Soleimani (18:21) - Referenced as Trump’s drone strike target near his car
• Steve Witkoff (11:45) - Trump envoy working on Russia deal; part of the broader geopolitical strategy
• Jared Kushner (11:45) - Working on Russia deal alongside Witkoff
• Elon Musk (52:15) - Referenced for Grok’s “truth-seeking” approach and full cooperation with DoW
• Tim Cook (1:09:24) - Referenced as showing up for the Melania premiere as example of cooperating with administration
• Colin Powell (17:08) - Referenced for the doctrine of overwhelming force and clear objectives

Surprising Quotes

“The rules of engagement were so punishing that we were at risk all the time because you had to have a legal understanding of what was happening in every minute on the battlefield.” — Emil Michael, 17:08

“Your models are getting stolen by the Chinese. They’re going to un-guardrail them and use them against us, and then you want our models to be less capable against your models?” — Emil Michael, 27:00

“So every war doesn’t have to be three decades and trillions of dollars to your friends in Virginia, Maryland, and DC.” — Chamath Palihapitiya, 35:27

“Anthropic has its own constitution. It has its own soul. It’s not the US constitution.” — Emil Michael, 51:00

“I’m a Jew, no one’s gonna care what I have to say. They’re either gonna be like totally like, or they’re gonna say this guy’s a fucking Jew, we shouldn’t listen to him. So let’s move on.” — David Friedberg, 30:33

Transcript

Jason Calacanis: 0:00 All right everybody, emergency podcast time, episode 263 of All In. We have Emil Michael, the Undersecretary 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.

Jason Calacanis: 0:17 One of my old besties, Emil Michael is here. Emil and I 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 Undersecretary 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 are you doing, brother?

Emil Michael: 0:39 I’m doing good. I hope it was more than a fixer, but you know, raising $20 billion is, you know…

Jason Calacanis: 0:46 He’ll be a fixer. I mean, you got it done. You got it done. The hardest — he would give you the hardest things. If it was hard, and that’s what a fixer is.

Jason Calacanis: 1:06 With us again, Chamath Palihapitiya. How are you, brother?

Chamath Palihapitiya: 1:10 Great.

Jason Calacanis: 1:12 Yeah, look at that smile. What do you got going on? You got some pokers in the fire. In the coming weeks, I think some news is going to drop. That’s my prediction. Are you loving Chamath’s tweet-mogging that’s been going on this week?

Emil Michael: 1:27 So good. So good.

Jason Calacanis: 2:07 All right, piling on is your Sultan of Science, everybody’s favorite. Friedberg, how are you doing?

David Friedberg: 2:18 I’ve been traveling this week. Back at home.

Jason Calacanis: 2:22 Sacks is out today. He’s very busy on Capitol Hill. We’ll talk about what he’s up to next week. Let’s go.

Jason Calacanis: 2:30 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 a thousand 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.

Jason Calacanis: 3:00 This is the first torpedo kill since World War II. Why we’re at war? It’s been a bit of a moving target and a debate. Trump made it clear this is not a regime change effort, but we’re doing this to stop terrorism and the development of ICBMs. Trump also mentioned the people of Iran should “seize the moment and take their country back.” Hegseth said, “this is not a so-called regime change war, but the regime sure did change and the world is better off for it.” PolyMarket: US forces enter Iran, boots on the ground, by end of March 40% chance. By end of year 59% chance. Will the Iranian regime fall? By June 30th 39% chance, by end of year 51% chance. So Emil, how long is this going to take and are we going to have boots on the ground?

Emil Michael: 4:15 The president talked about this is a weeks, not months, kind of operation and it’s aimed at essentially disarming the regime in such a way that they can’t supply Hezbollah, Hamas, Muslim Brotherhood, all the terror groups that get sponsored by weapons and money from Iran, not to mention the nuclear bit. That’s why you see from the reporting they’re going after the depots, nuclear sites, drone factories — these huge one-way attack drones that can go hundreds of miles. Lots of ballistic missiles aimed at every country in the Middle East. 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.

Jason Calacanis: 5:41 Friedberg, your thoughts on this war. Obviously, a lot of people voted for Trump in order to have the peace dividend. 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.

David Friedberg: 6:03 I think the president and the administration have probably the biggest meetings of the term coming up in China in April. Finding a grand bargain or a deal with China is probably one of his top priorities. I think you could look at Maduro and the actions in Iran as creating maximal leverage going into those negotiations. 90% of the oil that comes out of Iran goes to China, and there’s been a long developing relationship between Maduro’s government and China. Creating leverage by having significant influence or destruction to those supply chains gives the United States footing to negotiate a better deal for America. A deal with China could be the crowning achievement of this administration, particularly going into the midterms.

Jason Calacanis: 8:07 Chamath, your thoughts on this action and why we’re doing it.

Chamath Palihapitiya: 8:38 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. 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 with China. Last night, the official Chinese bureaucracy posted their GDP targets and it was shocking — they guided to 4.5 to 5%, the lowest in about 30 years. When a country growing at 8-10% starts to grow at half that rate with double the people and double the GDP, you already have incredibly high domestic unemployment, especially youth unemployment. If you have that as a starting point, what is in China’s best interest? I think it becomes obvious that the right thing to do would be to invade Taiwan, because you create a sinkhole that occupies your people, occupies resources, and generates a war machine.

Chamath Palihapitiya: 10:45 If your goal is to prevent war with China, which is a massive global conflict that could be nuclear, how would you do it? China is enormously dependent on imported oil — about 20% of their economy, but it’s 100% of critical things: logistics, transportation, aviation, feedstock inputs. About a fifth of that comes exclusively from Iran and Venezuela. And now all of that is off the table. If you add Russia into that mix, it’s about 40% of China’s oil. Not only do you re-dollarize, not only do you stop the funneling of illicit oil funds, but you hem in China going into a massive moment at the end of March, beginning of April, where there is the potential for a grand bargain. And I think that secures global safety.

Jason Calacanis: 12:20 Emil, how much does this have to do with China?

Emil Michael: 12:24 I think that’s a second-order benefit. We inherited Gaza, we inherited Russia-Ukraine, Venezuela was its own operation, the Houthis was just Biden ignoring them shooting at our ships. Iran is the one material conflict outside of Venezuela. And how long did Venezuela last? It was one raid, one night, a few hours.

Jason Calacanis: 13:25 There’s a new approach here: no boots on the ground. Explain to us what you know that makes these operations go so smoothly. There’s obviously some new technology here.

Emil Michael: 14:09 Besides the discombobulator, what we’ve got is a very well-trained military. The Global War on Terror was a disaster in so many respects, but the people who were fighting that are generals now. They’ve learned a lot of lessons. Compare that to the Chinese military — they don’t have a lot of experience. And then you have incredible technology: space, air, land, sea, cyber, all kinds of effects you could bring together.

Emil Michael: 15:00 Imagine 100 guys goes into the most fortified compound in Venezuela where the President is, take him and his wife out safely, and are out with no KIAs. I mean, it’s just incredible. These war games have been on the shelf for a long time. Midnight Hammer in Iran was planned years ahead of time.

David Friedberg: 15:42 Is the discombobulator real? Like what can you say about the discombobulator?

Emil Michael: 15:50 It’s real. Can’t talk about it.

Jason Calacanis: 16:06 Do you think we would have been able to pull off that mission as successfully five years ago, ten years ago? Has the technology improved that quickly?

Emil Michael: 16:23 I’d say no. It wasn’t only a technology maturation, it’s the rules of engagement. The rules of engagement we used to have — in Afghanistan if the guy had a small gun, you had to have a small gun. There was this parity in weird ways. Well, is the objective to have a fair fight or an unfair fight? If you’re on our side, you want it to be unfair. The rules of engagement were relaxed to be more of a Colin Powell approach: go all in, have a clear objective, use overwhelming force.

Jason Calacanis: 18:06 My understanding is that there have been more drones deployed by the United States this past week than in the history of military activity. How does that change things going forward?

Emil Michael: 18:21 It changes it big time. The Predator drone was the first big drone program. Then Trump took out Soleimani with a drone. Then the Russia-Ukraine war: drone on drone, 70% of casualties from drones. Drone on drone warfare, robot on robot warfare, those things are the future. That’s why companies like Anduril are making unmanned systems.

Jason Calacanis: 19:06 Explain the LUCAS program — low-cost unmanned combat attack systems. What do these drones cost?

Emil Michael: 19:38 Small drones are way cheaper than $35,000. The LUCAS one-way attack drone, which can go 500-700 miles at the speed of an airplane with a big warhead, those are $50-80K. We have a drone dominance program. Long one-way attack drones are important for major conflict. But also to protect military bases, America 250, World Cup, Olympics in ‘28 — there are lots of uses for drones for surveillance, not just combat.

Jason Calacanis: 20:34 How much of this should basically be AI?

Emil Michael: 20:53 I believe a sophisticated drone war is going to be drone swarms controlled by AI. Drones have decoys they could spit out, they could dazzle. How do you discriminate what’s a drone? You use AI for automatic target recognition. Could it identify a person and make it safer, going after actually someone you want and not someone you don’t? The Ukrainians and Russians do something called a kill box where they lose comms because it’s jammed and then the drone just starts going in a box looking for the person using AI.

Jason Calacanis: 22:22 How confident are you that AI isn’t going to make a mistake?

Emil Michael: 23:12 We need AI for things like Golden Dome. Chinese hypersonic missile comes up, you’ve got 90 seconds before it separates and all kinds of decoys. A human can’t, doesn’t have the reaction time. That’s a low-risk thing because it’s in space and you’re just trying to hit something that’s trying to hit you. In the next 10 years, you’re going to see a lot of these applications develop AI, as long as we think it’s safe.

Chamath Palihapitiya: 24:58 Not enough people understand that the American military has had to fight with one hand tied behind their back. The men and women that sign up for the American military, they’re doing this to fight on behalf of this country. They deserve a lot more than being sent there and given this rulebook.

Emil Michael: 25:31 The frustration for those soldiers was, number one, “What are we doing here?” And number two, “While I’m here, why can’t I do my job?”

David Friedberg: 25:52 Is there much of a debate internally regarding full autonomy in military action? When you press the button and hand over complete autonomy and there’s a kill action you’re giving to a robot, do we have a moral issue at hand?

Emil Michael: 26:22 We’re not even close to there yet. We’re just trying to get basic autonomy in drones, basic autonomy in underwater unmanned vehicles, collaborative aircraft that fly along with a jet. We’re at the very beginning of this stuff. The Skynet thing is so not realistic at this moment.

Emil Michael: 27:00 One thing I did tell the Anthropic guys: your models are getting stolen by the Chinese. They’re going to un-guardrail them and use them against us, and then you want our models to be less capable against your models? It’s sort of insane.

Jason Calacanis: 28:40 One piece we haven’t addressed: the Israeli government and their desire to take out this regime. Does Israel have too much influence over the United States with regard to these actions in the Middle East?

Emil Michael: 29:31 I don’t think the president is captured by Israel in the least. He decides what is in the best interest of the United States. Israel is incredibly capable. Incorporating the intelligence of Mossad — we’re four days in, Iran has been 90% depleted of all of their munitions. What was the UK doing? Why was Europe taking the weekend off before they could even issue a statement?

David Friedberg: 30:33 No, I’m a Jew, no one’s gonna care what I have to say. Let’s move on.

Jason Calacanis: 30:44 Emil, is the Iron Beam working? Is this laser system operational?

Emil Michael: 30:57 Iron Beam was the first generation of the Israeli air defense. It’s still early but yeah, it works. They’re a technologically sophisticated country that has reason to invest in these things.

Emil Michael: 31:53 The harder but more valuable problem to solve would be space-based interceptors. You still need a ground layer for cruise missiles and drones. Multi-layer defense. As lasers get more powerful you can take on a bigger weapon farther away.

Jason Calacanis: 33:41 I am pro-regime change if it can be done thoughtfully. If there’s a moment to free the people of Iran after 50 years, I’m all for it. I actually trust President Trump to make that decision.

Chamath Palihapitiya: 34:37 We have enormous learnings from Iraq, the Iran-Iraq war, and 1953 when the US and British deposed Mossadegh. There is a way to affect what we need to do without creating a 20-year forever war. Somebody tweeted, “So every war doesn’t have to be three decades and trillions of dollars to your friends in Virginia, Maryland, and DC.”

Jason Calacanis: 35:27 If President Trump succeeds here, the people of Venezuela and Iran being free represent about 5% of people living under autocracy. If those both flipped back to democracy, he’ll have done more for the spread of democracy than any president for many decades, perhaps in our lifetime. This would be incredibly noble, incredibly just.

Emil Michael: 36:11 Would you and the human rights set want him to get the Nobel then?

Jason Calacanis: 36:15 Absolutely. I’ll give him all the Nobels. Give him an Oscar, a Grammy, Chemistry, Economy, Literature, Philosophy.

Jason Calacanis: 37:21 Oil has risen to $84 a barrel. The Strait of Hormuz is basically at a standstill. Unless the strait opens, 3.3 million barrels of daily production would be lost. Insurance companies have all canceled war risk coverage. Supertanker traffic dropped 94% within the first 48 hours. Trump said the US would provide political risk insurance for all maritime trade through the Gulf.

David Friedberg: 38:22 The modern insurance market emerged specifically to solve the risks of maritime trade. Lloyd’s of London started as a coffee shop in London where maritime traders would talk about safe routes. Today, Lloyd’s has 78 syndicate members underwriting risks like maritime insurance for oil tankers through the Strait of Hormuz. When the IRGC announced they were shutting down the strait, insurance premiums spiked from 0.25% to 1.25% — a 5X increase. The US government stepped in using the DFC, which was an output of USAID, to provide insurance to shipping companies. This could reshore maritime insurance back to the United States and create an entirely new insurance industry here.

Jason Calacanis: 41:22 Breaking news 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. The Department of War canceled Anthropic’s $200 million contract on Friday. The dispute came down to two clauses: fully autonomous weapons and mass surveillance of Americans.

Jason Calacanis: 42:33 Emil, your thoughts. Explain to us what happened here and how this broke down.

Emil Michael: 42:38 A little history. The Biden executive order on AI limited compute and grandfathered in a few small AI companies. Anthropic was one of those winners. They sold into the most sensitive parts of the US government — CENTCOM, INDOPACOM, intelligence agencies. They did forward-deployed engineers Palantir-style, got very sticky to workflows. I came in and got the AI portfolio in August and said I just want to see the contracts. Holy cow. They say you can’t use them to plan a kinetic strike. You can’t use their AI model to move a satellite. There was a 20-page restriction list.

David Friedberg: 43:54 You can’t do a war game scenario with it?

Emil Michael: 43:57 You could do a scenario, but if it might involve a kinetic strike which causes harm to humans — well, what do you think these folks do? This is the Department of War. This is what we do.

Emil Michael: 44:24 We started negotiations and it took three months. I had to give them scenarios like the Chinese hypersonic missile example. They’d say, “Okay, we’ll give you an exception for that.” “How about this drone swarm?” “We’ll give you an exception for that.” And I was like, “The exceptions don’t work. I can’t predict for the next 20 years what all the things we might use AI for.” “All lawful use” seems like a good thing.

Emil Michael: 45:14 At some point it turned into a PR game for them. They were not going to win this intellectual battle. It became about finding the most inflammatory issues: robot weapons and mass surveillance. We’re the Department of War, not the FBI, not Homeland Security.

Emil Michael: 45:45 What it came down to: they didn’t want us to bulk collect public information using their AI system. If someone types in Chamath’s LinkedIn — that’s publicly available information — I would be violating their terms of service? It was months of this interminable stuff.

Emil Michael: 46:46 The trigger point was after the Maduro raid. One of their execs called Palantir and asked, “Was our software used in that raid?” — which is classified information. They were implying that if it was used, that might violate their terms of service. Palantir told me, and I’m like, holy shit, what if this software went down, some guardrail kicked up, some refusal happened for the next fight and we left our people at risk?

Emil Michael: 48:00 That culminated in the Tuesday meeting with Hegseth, me, and Dario, with the Friday deadline that got blown.

Emil Michael: 48:27 They put their model in AWS GovCloud. Palantir serves it from there. They hold the control plane for the model. They can change the model weights if they want.

Chamath Palihapitiya: 48:45 The insight into this is unbelievable. What Anthropic showed is that they are going to have a political perspective and terms that reflect their philosophy and that philosophy can change on a dime. But what the government did was also completely reasonable: we can’t rely on you if you’re going to be completely unreliable. If you’re not figuring out how to be multi-model and agnostic, you’re taking on enormous business risk after Friday. This is deplatforming all over again, 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 Michael: 50:31 The leaders of these companies say they’re going to cause 50% white-collar unemployment. This is as powerful as a nuclear bomb. It’s like 50,000 geniuses in a data center. It’s a general substrate of intelligence applicable to a lot of things. Anthropic has its own constitution. It has its own soul. It’s not the US constitution.

Jason Calacanis: 51:52 Take us through OpenAI, Gemini, and Grok. Have they pushed back on any use?

Emil Michael: 52:15 Grok’s all in for all lawful use cases across all classified and unclassified networks, as you’d expect. Elon’s truth-seeking. We want truth in the Department of War. We don’t want ideology because ideology will mess with operational decisions.

Emil Michael: 52:31 Google is in for all lawful use on unclassified networks and we’re trying to move them to classified.

Emil Michael: 52:57 OpenAI — Sam called me and said, “What can I do for the country?” He was trying to protect Anthropic to his credit. “Don’t call them a supply chain risk, that’s bad for the industry.” But he’s in the middle because they compete for the same researchers — about a thousand researchers like baseball players that get traded between companies.

Chamath Palihapitiya: 54:00 I want to give them all the same exact terms because I need redundancy and I want to see if they diverge or converge. Maybe I only need two over time, but it’s too early.

Chamath Palihapitiya: 54:33 The number one reason we were having this conversation at all was because Anthropic was deeply embedded. Now I have to disentangle them. The other companies have not gone as heavy on enterprise sales, forward-deployed engineers, government business. Anthropic was way ahead on that.

Chamath Palihapitiya: 55:03 The models are asymptoting. If you look at the confidence interval on how overperformant or underperformant some of the leading models are, the error bars are shrinking. These things are all kind of becoming the same.

David Friedberg: 55:54 Anthropic’s revenue ramp is insane. I have a small software company called 80/90 and our costs have more than tripled since November ‘23 between inference costs, Cursor, and Anthropic. Token use is very addictive. Everyone’s gone infatuated with these “Ralph Wiggum loops” — just send the thing off and it’ll figure something out. It never figures anything out and you just get a ginormous bill.

Jason Calacanis: 57:24 Why designate them as supply chain risk? Why not just abandon them and move on?

Emil Michael: 57:43 If their model has this policy bias, I don’t want Lockheed Martin using their model to design weapons for me. I don’t want the people designing componentry to come to me if the risk of poisoning is an insider threat — it can enter into any part of the defense enterprise. But it’s just the defense enterprise. Boeing wants to use Anthropic to build commercial jets, have at it.

Emil Michael: 58:46 They have a very good, sophisticated press operation. Painting us as doing mass surveillance — their issue was some commercial database thing. The real fears were them shutting off our system at a moment of need or messing with our system in a moment of need.

Emil Michael: 1:00:00 If you don’t want your stuff to be used for Department of War, so be it. Dario, you shouldn’t be selling to the Department of War. Pretty straightforward.

David Friedberg: 1:00:03 It’s in the name.

Jason Calacanis: 1:00:07 And when you said you don’t know how we’re going to use this thing — immediately 9/11 came to mind. You have to go check with them if you find out there’s another 9/11 unique Black Swan event?

Emil Michael: 1:00:26 That was literally the comment. I was giving these scenarios, these Golden Dome scenarios, and Dario said, “Just call me if you need another exception.” And I’m like, but what if the balloon’s going up at that moment and it’s a decisive action we have to take? I’m not going to call you. That’s not rational.

Chamath Palihapitiya: 1:01:03 That just means what he wants to be is the Secretary of War. He wants to be the god-king.

David Friedberg: 1:01:48 If you don’t want to be involved in war, that’s your right. But you can’t sell bullets and then dictate how they’re used. What the hell was the senior management and the board talking about?

Jason Calacanis: 1:02:16 Friedberg, if you’re an investor on the board, what do you say to Dario?

David Friedberg: 1:02:30 It’s a very unusual circumstance because I don’t think any business in history has grown as fast as they have in the last 90 days. They’ve added six billion of ARR in a month. That’s absurd.

Chamath Palihapitiya: 1:03:02 You’re shutting the fuck up. Something’s working.

Emil Michael: 1:03:07 I don’t think that company’s worth $350 billion anymore.

David Friedberg: 1:03:20 You have to pick between OpenAI at their current mark, Anthropic at their current mark, or Google. Google’s already worth $3 trillion. I think Google is the market value creator bet, but I think Anthropic is the multiple bet. I think Anthropic is a trillion-five market cap at the end of the day, unless this blows them up.

David Friedberg: 1:04:15 Everyone I talk to is on co-work, everyone’s amazed and shocked. Everyone’s saying Anthropic may actually be fulfilling the promise of AI. But it’s only going to take 90 days for Google to flip on a virtual version of co-work integrated with G-Suite. When that happens, I think Google sweeps the market.

Jason Calacanis: 1:04:54 Elon said he expects Grok to exceed all coding models probably in May, for sure by June. What happens when all the models asymptote?

Emil Michael: 1:05:35 I would love to be indifferent because then I could compete on price. I’d need at least two. Anthropic’s not going to be one of them if they continue with their posture.

Jason Calacanis: 1:07:58 Dario says the real reason the Pentagon doesn’t like them is that they haven’t donated to Trump, while OpenAI and Grok have donated a lot. Is Anthropic being singled out because they’re not paying the cover charge?

Emil Michael: 1:07:58 It’s truly one of the dumbest things I’ve ever heard. I’m in Department of War, I need to win wars. It’s not like President Trump dipped in and was like, “Hey Emil, those guys didn’t give me any money, you can’t use them anymore.” Why would I spend three months trying to negotiate if I would have just said, “Okay guys, you’re out, bye”? I think it’s just some internal psychosis. That’s the only way I can explain that.

Chamath Palihapitiya: 1:08:57 I have a different theory. I think they have a massive instance of co-work running internally that helps them come up with business strategy. And I bet there’s some element of AI that says, “Yeah, you should do it. Zig where they zag and get more press.”

Jason Calacanis: 1:09:13 And so now there’s some clodbot telling them to tell the Department of War to pound sand? It’s going to turn out to be the stupidest decision.

David Friedberg: 1:09:24 If I was chairman of the board, I’d pull Dario aside and say, “You’re obviously a genius. We obviously have the best tool in town. This is not a battle you can win. You’re going to come across as not being patriotic. Tim Cook is showing up for the Melania premiere. Would it kill you to support the president? Show up for America and be a patriot.”

Chamath Palihapitiya: 1:09:57 That’s terrible advice. Here’s my advice. Hey Dario, call Emil back right now and say, “Sorry, we fucked up. We’re going to own this. We support our customers’ use of our models to do everything and anything that’s lawful. Our terms of service are written in stone. You can expect solidity and reliability from us. This was just a misstep.”

Emil Michael: 1:10:31 That’s what I’ve always wanted. A reliable, steady partner. But then, you know, you called President Trump in your 5,000-word essay on Friday a “wannabe dictator.” You’re going to have to apologize to more people than just me.

Emil Michael: 1:11:34 We are early days on the supply chain. I have the Office of Strategic Capital which has $200 billion in lending authority. We’re trying to loan to companies — Treasuries plus 100 bps — show them the department needs their solid rocket motors, batteries, fiberglass, all the things completely outsourced to China and domesticate them here. Batteries are totally outsourced both technologically and from lithium to China.

Emil Michael: 1:13:06 We don’t have a munitions risk, but we need to plus up. Our nuclear missiles are 50 years old, some planes are 40 years old. All has to be renewed.

Jason Calacanis: 1:13:51 Are we in the early stages of a defense tech boom?

Emil Michael: 1:14:13 There’s more defense tech venture capital than ever, 3X more than last year. What I need is to have some of these companies win big contracts quick — Anduril, Saronic — so more money flows in. Warfare is going from big carrier ships that cost $20 billion and a decade and a half to build to mass attritable low-cost things. That’s what the new entrants can do.

Emil Michael: 1:15:22 One of the reasons the primes are such a small number is they learned how to contract with the government. That bureaucracy became a competitive advantage. I’m trying to take that advantage away. We’re changing to: I tell you my operational problem, come to me with solutions. And trying to get to commercial contracts — startups will do fixed-cost pricing, pay less if late, pay more if early.

Jason Calacanis: 1:17:55 You also oversee DARPA.

Emil Michael: 1:18:00 DARPA is probably my favorite part. It’s still a very honored profession. The most creative ideas happen there. One thing they’re working on that’s public: using biology to synthesize critical minerals so you don’t need dirty refining. That would change the game on our ability to leapfrog the Chinese. They’re deep in cyber — cyber attacks with AI are the next huge threat.

Jason Calacanis: 1:19:17 Two quick questions: are there aliens and when are you going to tell us? And what have you learned about China and our ability to counter it?

Emil Michael: 1:19:52 I fought for the alien portfolio. I didn’t get it. All the guys on my team were like, “Dude, you got to get this for us.” But as long as I had 100% access to everything, I would do it because it would be amazing.

Emil Michael: 1:20:16 On the second one, it is true that the Chinese have had the greatest military buildup in world history in the last 15 years and we were asleep at the wheel because we were focused on global war on terror. That said, our operational expertise, our subs, our space layer — we still have the best stuff in the world. But we have to make sure that gap doesn’t narrow.

David Friedberg: 1:21:05 This week was a true reminder of how fortunate we are to have the defense that we have. When you look at what happened in Dubai and Doha and Tel Aviv and you see people in their residential homes getting attacked, you realize how fortunate we are. I’m a libertarian at heart, small government, but the one thing I’ve realized is so critical for us to have the freedom to do all the things we want to do is defense.

Jason Calacanis: 1:21:48 Really appreciate you coming on and being so candid and thoughtful and insightful. This has been an amazing episode. We’ll see you next time. Bye-bye.

Emil Michael: 1:21:52 Love you boys. Bye-bye.