The Pentagon’s CTO Explains the Anthropic Rift and Superintelligence Task Force

The second thing is, as a CIO, I care about the full visibility, but most of us, the AI agents are today a blind spot because the traditional endpoint security gives you visibility of what's coming and it doesn't say what exactly is happening. The analogy I've used it, HDR is like you have an X-ray scanner, it scans through. But if you wanted to know every single thing in that box, how it is getting used, you don't have that visibility. That's where the agent endpoint security comes into picture. We spotted this risk because we are a company of, you know, 14,000 engineers. And as a CIO, my job is to really enable innovation, not hold them back.

When we started seeing the power of AI in software engineering, we spotted this as a significant risk, and this is also a supply chain risk for our customers we didn't want to take. So we are scanning the market to see what's going on. And when coil security was even in the stealth mode, we spotted them. In fact, we literally brought them in and we became the first customer of implementing them to say, okay, we really need to get this enabled before we let our, you know, engineers touch the tool to. go and do the software engineering. Right. So today, yeah, go ahead. Let me jump in here because I think you have an interesting perspective here on this being the CIO of a company that effectively is advising other CIOs on their own stack here.

You know, the issue around agents and security is, it's interesting because on one hand, we have these coding agents that help us write code. And, you know, I saw that Bank of America came out and said that they're hiring a thousand contractors now to help them deal with the vulnerabilities that Mythos found in their own code. And, you know, this is additional headcount that they have to bring on. And the question I have for you is, is the problem here that the coding agents and the code that CloudCode and Codex create is a problem that they are creating vulnerabilities in companies' own stacks and in their architecture because maybe it's just, it's a little bit quick and dirty and it's not the most secure code?

Or is the problem more that the code is, it can be attacked from agents that can be used by malicious actors and stuff like that? Which of these two risks is more prevalent right now, from your view? I think, Akash, both are a risk, right? Because when you talk about what Mico's found, take a company like Bank of America or any company that is in existence for a while, right? I mean, they have a lot of software. Today, especially with the digitization, every company, doesn't matter which industry you're talking about, even highly, highly, the legacy or the brick and mortar companies are digital.

So they have software code. And when we talk about vulnerabilities, Mythos and Fabel, all are, you know, for that matter, GPT, 5.6, everything is finding vulnerability in the code that they're using to run their business today. And it is actually a must that they have to address those vulnerabilities because that's an existential crisis, right? Because you don't want that to be exposed to the attackers who are leveraging AI to compromise into their environment. That's one side. Then you talk about, you know, AI producing code. Remember, AI is also producing code by learning from what's out there.

And if you remember what Mythos found, 25 years ago, the Berkeley's Unix kernel, it found, you know, the open source vulnerability that we are all using for so long. So now when you think about the software code is generating, there is a possibility that it may be introducing vulnerability as well. I'm not going to say every time, but it will. So it's really important you start looking at software supply chain, right? So there are two things, right? I mean, like two weeks back, we launched something called Frontier AI Security, which is actually a service we launched because we saw our customers saying, hey, mythos was a moment, but not it's any more mythos because we are finding it.

Forget about Frontier Labs. Even open source, open rate models are as good as the Frontier Labs. And it's only like earlier, it used to be four to five months before they catch up. Now it's four to six weeks. So we launched a service, which is a multi-model harness that can actually continuously scan whether they are producing a new software or they're introducing a new, you know, on their brownfield. We want to make sure the posture of our customers are continuously managed and monitored. Again, also, we introduced something called virtual patching, which is like it's impossible for a company like Bank of America, which has been in existence for so long, to really patch everything within a matter of time.

You need actually something to stop in the fringes, and then you need to really work through this. Both are required, and also, this goes back to basic zero-trust security hygiene. keep talking to, I mean, when I keep talk to CIOs and CISOs, one of the things I emphasize is more than ever, security hygiene is becoming super important today. We have to focus on hygiene. Let me ask you a couple more questions about how you are approaching your own stack internally. So of all the models that you're using, is Palo Alto Networks, are you using open white models from China at all? We actually use multi-model, but we are not using open-way Chinese models at this point. Okay. And why not? I mean, it is a decision we made at this point in time where the things are. We just wanted to be in control of the models that we are using. And that was a more strategic decision. And how are you controlling your own spend on these models internally? Are you giving employees specific caps on their usage? How are you dealing with that?

Yeah, I think, I mean, one thing is, this is nothing different than when cloud came, but it's just that it is so accelerated and much more expensive than cloud, right? I mean, shadow AI is absolutely a concern today. So we have actually a full visibility of the use of AI in the company today, this is one of our critical things that we introduced. So we have full visibility of what AI uses in the company. And we also have a way to continuously monitor our spend. We haven't gone down the pack of quota. Rather, we have gone down because we wanted to make sure we are rewarding outcomes and efficiency rather than just putting an artificial quota. And we also want to make sure people who are doing really good, efficient outcomes, that has to be replicated. So at this point in time, we watch and we stop, you know, behaviors that are not the right behaviors. And we are actually taking the ones where the outcomes are higher or efficiency of use of AI is higher. And we are taking that and replicating as part of our harnesses. So absolutely cost is something we focus on, but not with the artificial, you know, boundaries saying that we are going to give you a quota. At some point in time, we may consider that, but at this

point in time, that's not the baby. Well, yeah, because, you know, I'm sort of curious on how you prevent internally this idea of what Toby Lucky at Shopify has called the slop grenade and people just, employees sort of launching slop at each other and it actually not helping productivity.

Great. Well, Mira, I want to thank you for coming on. That is Mira Rajabal, the CIO at Palo Alto Networks here on TITV. Thank you. AI infrastructure startup Modal announced it raised $750 million at a $15.75 billion valuation. That is more than triple its valuation from just five months ago. I want to welcome back to the show Eric Bernhardsson, co-founder and CEO of the company. Eric, welcome back to the show. It's great to have you here. Thank you. It's great to be here. Okay, so big numbers on the board here. $100 billion. Sorry, $1 billion. I'm sorry. That would be great. That would be great.

$1 billion in annualized revenue. As of now, up from $300 million in May. Where is that growth coming from, Eric? Yeah, I think we just see so much demand coming from all these insanely cool AI applications getting built out there, whether it's Ramp or Cognition doing agent decoding. could be generative media like runway and suno uh could be you know type safe with jav uh many other things there's just so many cool applications getting built and and i think it's really representing kind of a new wave of software like like these things are things that couldn't have been built just a few years ago i mean i've been coding for so long since since the early 90s and and this is the biggest change in how software works and what you can do and how you build software and and and you know it's just kind of amazing seeing all these changes and and the incredible demand that that that's unlocked and a lot of the funds on modal so uh 1 billion uh in annualized revenue i just want to make sure i understand this so is this the like is this 1 billion in revenue that the customers are paying you and then you have to pay out some proportion of that to the model providers like how are you measuring that what's the what's the gross

versus net on this so so this is our run rate revenue right so you We annualize the last 30 days times 12. And we don't pay it to model providers. We rent a lot of compute capacity from various different clouds. In fact, we work with 25 different cloud vendors. A big part of the value prop of modal is don't think about capacity. We kind of manage all that entire, we aggregate a lot of the capacity and present it to the customers in a way where they don't have to think about it and they can move fast and build a lot of cool things, whether it's, you know, inference or training or sandboxes, a lot of other stuff.

And so, yeah, I mean, you know, we have meaningful cogs, like we have to spend, you know, a fair amount of money on the underlying layer. But we have very healthy margins, actually, in fact, like it turns out like building that like very differentiated software layer on top of it means you can have, you know, very healthy gross margins that are actually growing over time. How, what do your margins look like right now? I don't know if I can comment on, you know, latest numbers. I mean, you're the CEO, actually. You can say whatever you want. I can say whatever I want, but some things I don't want to say.

But, okay, so you're right. The main cost is compute. And, look, you guys sit in an interesting spot here because, you know, I'm looking at the NeoCloud route of last week, and, you know, I'm thinking about how they are looking to move up the stack a bit with their own inference-like services, I think, helping people optimize the models that are being used, stuff like that. So what's your view of that story

are still fine and pretty good do you think that i mean i was going to ask if you saw them you know buying their way more into the inference space buying you know some of these inference providers although i don't know that they have a lot of money to do that with right now given they have like if you look at nebios and CoreWeave they made well yeah i just mean i just mean they're using it all to build the facilities i don't know how much cash they have to exactly i think it's a question of like you know retained earnings and how do you reinvest the profit yeah um and i think that's exactly right but but i think they will try and i think that we'll see a lot of attempts to move up in the stack um and you know in some cases like you know it might succeed like i mean we take it very seriously like our all competition and you know like in in certain ways like we we

like to work with neoclots because we get a lot of capacity with them but from them but but i also think there's going to be some interesting you know attempts by the neoclots to move up in the stack so what happens when next year is you guys had uh your your flagship conference if i'm not mistaken a couple run time yeah yeah yeah run time so our reporter cory weinberg was there and he wrote a piece about his experience there. So there were two things that stood out to me, two comments from speakers on stage at the event that I wanted to ask you about. One was from Diogo, who he co-founded TypeSafe, which is the company behind Jav. And then there was another comment from an executive from Anthropic. Both of these comments were around agents and around the extent to which we can automate things i think the the anthropic executive said something to the effect of we're still dealing with the 20 you know human in the loop right now um and the jev uh uh executive you know he said uh where is all the automation i think i'm paraphrasing his comment so my question for you is eric are the models just not good enough enough for agents to fully automate everything? Is full automation even the goal? What needs to

happen here from your perspective? I think the models are incredible. I mean, you know, I use them for writing code every day and they're phenomenal and they're getting better every day. I think full automation, I don't know if it like matters. Like my view is always like people are obsessed with sort of, you know, automating away humans. I think in every era, like the value that gets created is rarely a sort of, you know, getting rid of humans. The value is like creating new use case and new amazing things and building new products right like that to me is like the exciting thing like i'm incredibly excited about ai you know using ai to discover new drugs or or to enable new applications like sooner runway that previously didn't exist like that that to me is like typically where the value is created so but let me let me push back on that here because i mean you're saying it doesn't matter and and the reason i'm asking the question though is because if you think about enterprises and companies spending on ai seeing any kind of return i mean the reality is they are not seeing the return right now and you could argue maybe it's because they still have to have a person in the loop the person is doing different work

they're not doing um you know as much manual work but they're still spending the same amount of time so i mean i'm gonna push back here, I think it does matter. Yeah, I mean, I think so. Like it does matter. I'm not trying to, like, I think if you go back 30 years and you look at word processors or internet and email and things like that, like every time there's like a new technology, you get rid of like 80% of old junk and then you make humans more efficient at the remaining things. And humans are able to move higher up in the value chain and have even more leverage. And that is, I think, what's going on. It's like, I think these agents are incredible at letting humans get more stuff done just as like you know i feel it when i'm writing code i'm able to write way more code and so i don't know if it like really matters like do we really need to add automate away like the last you know the 10 to get rid of me like i'm not sure i think at the end of the day you can have a human controlling a lot of these things and the humans can have way more leverage and i think that's incredible but but isn't automation the only way you can then quantify the the cost savings or at least attach a dollar value to to uh what what productivity it's actually having no i don't

think so. I think you can look at the output. I think you can look at the number of lines of codes being written or the number of PRs being merged. I mean, these metrics are hard. I heard in previous conversations, it's always hard to measure productivity, right? How do you measure output? But I think that's ultimately what matters, right? It's like the output coming out of the factory, right? Great. Well, Eric, I want to thank you for coming on. That is Eric Bernhardsson, the co-founder and CEO of Modal. Thank you so much. from TI-TV. Microsoft pulled out of a data center deal with N-Scale in the UK in the latest data point to a challenging narrative facing neocloud companies right now. To break down where this story is headed, I want to bring on Nick Del Dio, Managing Director at Moffitt Nathanson.

Nick, welcome to the show. It's great to have you back. Yeah. Thanks for having me, Akash. So, Nick, we saw the Microsoft N-Scale news over the weekend. We'll get to the power side of this story in a second here. I think CoreWeave is the name that everyone is watching as a proxy for all this. It was a tough week. I saw Goldman upgraded the company, which gave it a little bit of a pop this morning, although it looks like that was short-lived. So where do you think we are with the CoreWeave story? Where are you on it? Help us walk through the scenarios. Yeah. So I would argue that for me, pure fundamentals-based valuation, it's probably undervalued right now.

But I think we also have to be cognizant of the fact that the financing environment is not necessarily that great for them at the moment. There's sort of this collision taking place where CoreWeave and a lot of the other neoclouds have these immense capital needs over the coming years. But their balance sheets and their internally generated cash flow don't support those ambitions. So they need to rely on external capital to really achieve what they're trying to deploy. You know, at the same time, however, you see this increasing scrutiny on AI linked debt deals, you know, particularly for higher yield issues. The market is anticipating a lot of AI linked high yield issuance over the coming years. So between those two things, you know, you've got a setup where, you know, again, maybe from a pure fundamental perspective, the stock looks interesting.

But on the other hand, if the capital markets don't cooperate, the company could be in a very difficult situation where they are unable to raise the capital they need or fulfill the commitments that they've made to deploy compute for customers. Why are the fundamentals attractive to you? Well, I would argue, and to be clear, we've had a neutral rating on CoreWeave since they came public. So we've been, I think, a more conservative stance than most of our peers. But when you drill down into the project-level economics, how much money do they actually make from a deal? It's reasonably attractive today, and it has gotten somewhat more attractive with the increase in pricing that we've seen for GPU rental.

That's partially offset by higher costs and a higher cost of capital. But for every dollar that they put to work deploying compute, we estimate that they generate 15 or 20 cents in net price. Value. So under those circumstances, the more money that they put to work, the more value it creates for their shareholders, obviously. Again, I have I have concerns longer term that, you know, eventually the market is going to normalize from a supply and demand perspective. We'll see competitors improve the quality of their offering relative to core weave. Again, there'll be just less of the the imbalance that we see in the markets that that's benefiting providers of compute today.

But at least for the foreseeable future, it seems like they're in a decent spot with respect to the pure value creation potential, the deals that they've been consummating. I want to talk about the financing component to this, the second half of this story. So, I mean, we saw inflation was hot last week. You know, the rate hike risk is real for the financing story. Is all of their debt right now, is it fixed? Is it floating? What exactly is the concern here?

Okay. So then, well, let's talk about sort of the, I guess, the other risk that people are scared of, which is just default, which is why these credit default swaps have gotten so much attention. How much of a risk do you think there is at all? Yeah. So, yeah, I think the term loans that they have outstanding, very close to the assets, I think those are fine. The parent company debt, it's really based on the residual value of these GPUs at the end of the day. You could say that Corby's business model, in a sense, is basically buying GPUs and paying for them with a combination of borrowed money and prepayments from customers, where you put in.

So the value to the company comes from, you know, the value of the GPUs and what they can generate from a cash flow perspective after the term loans are paid off. It seems like the economic lives of GPUs are likely to extend beyond the four or five years that a lot of people thought they would be previously. We've seen a lot of evidence in the market to support that. you know in terms of their ability to um to repay based on that you know it would suggest that they're not in a terrible spot i think the bigger risk to core weave is the idea that the capital market sees up and they are unable to procure additional funds um to deploy compute that they've that they've contracted to deploy for customers or again if we look out a few years and they have some of this parent company debt come due that they need to refinance that they're unable to tap the market for that.

So I think if that, you know, this is not just a CoreWeave risk, by the way, we're talking about the whole sector here. Just looking ahead here, if that happens to CoreWeave, if that happens to any other of these NeoCloud companies, who, I mean, do you think NVIDIA steps in and buys one of these companies? What do you think? Yeah, so clearly, you know, one of the options that CoreWeave has, or they have several options, you know. if stuff really hits the fan, they're not going to stand still. You know, yeah, I think that equity is a likely option. There's the NVIDIA put, you know, where NVIDIA might come in and either guarantee, provide allow CoreWeave to get financing on more reasonable terms, maybe a direct investment in the company, maybe eased payment terms, things like that.

You know, we could see additional vendor financing from key suppliers like Dell. We could see them embrace more of a bring-your-own-compute type models, maybe offload some of the capex to other parties yeah i don't think any of those are are very appealing options you know to the extent that NVIDIA stepped in and helped them i think that would sort of shatter the image of of you know these businesses as ones that could stand on their own two feet and you know do some last they're already investing they're already investing in these companies though yes yeah but i think there's you know at least in my mind there's a difference in you know investing to help get them going versus being core weave where you've got you know, multi, a very large enterprise value and you need help from your key supplier to keep it going.

But I view an outright acquisition as less likely simply because if NVIDIA were to do that, it starts to introduce some conflicts between, say, the chips, the pricing, the terms that they would give like their own cloud versus third parties that they're working with. That's one of the challenges that Google is trying to work through as it tries to build out its TPU ecosystem. And so I think NVIDIA would try to avoid that if they could. And let me ask you another question here about falling token prices. This is another discussion that's been going on. How do you think falling token prices affects the economics of these NeoCloud businesses?

Because there's the whole Jevons paradox argument that, well, people will keep using it. I don't know if you have any counter-arguments against that or if you think that is actually a threat. Yeah, I think, you know, to a point, it's arguably helpful. You know, lower prices stimulates more use cases, more demand for the underlying infrastructure. We've seen, you know, despite the rise of open weights models, we've seen prices for GPUs rise this year. You know, so again, there are plenty of factors that go into that, but it's not obvious to me that falling token prices, is, um, uh, you know, completely trash this business model.

Because they'll be able to, uh, sell more, uh, capacity basically. Yeah. Ultimately, you know, the, the customer base may be less profitable. I think it's, I, you know, you think about the different layers of the value chain, that's probably where it has the most impact so long as it. as long as it isn't so detrimental as to impair the customer's ability to pay for the compute, it probably helps infrastructure providers. Right. And if we, let's go full circle to the Microsoft N-Scale story now. That is a story about power. Microsoft reportedly was not able to,

That is Nick Del Dio, Managing Director at Moffitt Nathanson here on TIA-TV. The Trump administration's new super intelligence task force met for the first time late last week. The Information's co-executive editor, Amir Afradi, and tech and politics reporter, Leo Schwartz, got a chance to speak with one of the leaders of the group, Emile Michael, Undersecretary of Defense for Research and Engineering and the Pentagon's Chief Technology Officer.

They talked about the task force's first meeting, the Pentagon's frayed relationship with Anthropic, and the AI race with China. Here is that conversation. Emile, welcome. Good to be here. Good to see you both. All right. Well, you just had the first full meeting of the SI task force yesterday. This was just set up to coordinate a lot of super intelligence policy activity with the executive branch and the private sector. So tell us what was discussed. What are your goals for that group? And anything else that's really a headline from that? Well, this group was formed on the backside of what was really a historic summit that brought the leaders of the superintelligence industry and, you know, the cloud industry, the cybersecurity industry.

I mean, the number of people who were there from Lisa Su to Jensen Wang to Elon Musk and Dario, you name it, it had really quite the roster of leaders from the tech industry writ large. And then specifically, the subject was superintelligence. And what is the government going to do to ensure that Americans get the benefits of superintelligence but are protected against the risks? You know, there's acknowledged risks with cyber and other categories. So Jay Clayton, who's the director of national intelligence, is leading it alongside of me, Scott Kupor, and the head of the FTC, Andrew Ferguson. And so what we're trying to do and what we did as the first meeting yesterday is start to task out how we start to define the relationship between the government and these superintelligence companies.

And I'm in particular responsible for the relationship with the superintelligence companies. I know a lot of these these folks and for the incident response, like how are we going to make it so that when something happens, the government knows about it and has visibility into it and then potentially can can point resources toward that issue. Right. And then Andrew Ferguson from the FTC is going to focus on all the laws and regulations that already exist today that are applied to these companies so that the American people understand that there's like a robust set of protections already have. So and Scott Kupor is going to focus on critical infrastructure, not just government critical infrastructure, but hospitals, wastewater treatment plants, electricity grid, banks, you name it.

And so the meeting yesterday brought all of us together alongside of Susie Wiles and Secretary of Treasury and Secretary of War, among others, to figure out how we're going to split up the tasks, how often we're going to meet, what is the output of this 120-day effort. So it was pretty exciting to be in the room with that kind of set of people who really care about this, these set of issues, along with Secretary of Commerce, Howard Lutnick. And it was a very successful kickoff to what is, I hope, a good 120-day period. Well, we've got a lot to talk about when it comes to security and safety of these models that are coming out.

You testified earlier this year that we're sort of seeing the first kind of cyber weapon, you know, AI models. You've warned that some of these models could be used to develop biological and chemical weapons. And maybe that's coming as soon as next year.

But the doom and gloom that you mentioned has actually gone way up, at least when it comes to the kind of alarm bells that a lot of these AI researchers developing the frontier models are sounding. And so Leo and I are really curious about your response to things like the hugging face incident and other potential risks that we're seeing that appear to be a little bit more tangible than they were even just a few months ago. And then just this question around, you know, are the existing laws sufficient for us to deal with the consequences of, I don't know, runaway AI or AI that's doing something it's not supposed to do?

Yeah, I mean, I remember being in Silicon Valley and I lived in that bubble for a long time. So I'm familiar with how big that bubble could be. And I'm not talking about a financial bubble, just the information bubble. if you will. And so, you know, the researcher who'd hopped between OpenAI and Anthropic and then a few weeks later sort of came out and was talking about humanity ending in three years. You know, I do think, you know, in this kind of information environment, that kind of gets a lot of play. Like, never before have you been able to get 200 million views on something in a short period of time, unless it was so dramatic like that. So I think people may be living in that bubble a little bit. And you can believe that and also believe that there's some risks with the technology that we have to protect against. Like those two things are not inconsistent.

What I think is inconsistent is if these SI megacorps say, hey, you have to stop me because I can be doing something dangerous. I'm, you know, I'm a drunk driver in the car. You've got to pull me over. I can pull over myself, but you have to pull me over so the other guys don't get there first. That kind of thing doesn't make a lot of logical sense to me. So I try to take a balanced approach to this. And that balance is with with all great technologies. I remember when we were launching Uber and people were lamenting the loss of taxis. And now with Uber, people lamenting loss of Uber with driverless cars. Right. So the fear kind of traverses technological advancement, you know, throughout history. So I take a more balanced approach to it.

And when it comes to, are the laws sufficient? I'll leave that to Andrew Ferguson to answer. But based on my understanding from him and my reading, more than sufficient. There's the Computer Misuse Act. And when I say people, what laws govern the Internet? They said, well, there's Section 260 or whatever. I said, well, that exempted the Internet from liability. That was the one law that took liability away from them, didn't impose any new restrictions on them. What laws would have stopped the mobile phone? So people sort of assume that the body of laws for computer misuse, fraud, someone – you have a product that you knowingly know that people might misuse because you haven't built the right guardrails in.

There's a lot of those concepts that are already there. What about the mechanisms that the executive branch currently has against AI companies that aren't adhering to these frameworks? Because one of the biggest questions I know our readers have is a lot of these are voluntary. You had the joint commitment that the Frontier Labs agreed to. Obviously, there's the voluntary framework that came out of the executive order this summer. We saw in reporting yesterday after the first meeting of the task force that a White House official said that export controls like were imposed on Anthropic earlier this year were one potential stick that could be used against AI companies.

Do you think that's an appropriate mechanism for keeping companies in line? Yeah, of course. I mean, there's been something called ITAR for years. If you ask any cybersecurity researcher whether there was a certain amount of encryption for a while, you couldn't export that encryption because we thought it was too dangerous for other countries to have that sort of encryption. So we have lots of tools, whether it's a restriction on a type of technology being export because of the advantage we think it might give an adversary to just straight-up export controls and limitation on foreign nationals' ability to use that software.

That's just a few among many things that the executive branch can do. Then you go to law enforcement, whether it's a bad trade practice, something that violates a law that the DOJ can enforce on. There's just a lot of them. And I guess I'm not the world's expert on this. I think the FTC chairman is. So I think we try to get an interview with him. But we've already proven that when Anthropic refused to pull back their model, and this is the company that said you should have the right to pull back any model at any time for any reason. That's what they said. And they said they wouldn't when we found out it was jailbroken. They were export control within two hours. So I think you can count on this administration, this president to act with urgency should there ever be a real issue.

So speaking of Anthropic, what's your relationship like with them today? When's the last time you spoke to Dario or Tom or any of the other co-founders? And then I have a follow up on kind of what's going on with Anthropic. Yeah, well, Anthropic is out of the Department of War. As we said, six months ago, they would be. With Dario at the White House event a few weeks ago, I talked to all these companies and really have for a long time constantly because my first duty is to or for, you know, to the department and for the American people from a national security standpoint. And if that means I'm talking to someone who's suing me, well, then I'm talking to them.

That's OK. So I talk to them as much as I need to, and I'll probably be more in the coming weeks and months. so do you feel yeah go ahead please let's say quickly what do you expect to be working with anthropic on and do you think that relationship that tense relationship you have with them will impair at all this new responsibility you have as the vice chair of the si task force and and being responsible for interfacing with these companies no they're they're i'm an adult they're adults um you know i've seen tom brown many many times and spoke to him many many times and expect to be dealing with them just as much as I'm dealing with the other SI companies in a fair, even-handed manner. We're trying to get to common frameworks, right? The White House Accord was four common elements that they each agreed to, to implement. And I think the things that we will be doing in the future, whether it's incident response, will be a common framework that they all agree to, hopefully, about how to report incidences and how to rate the severity of incidences so i expect to work with them uh fruitfully through this period and when it comes to to the department of war obviously you have the contract cancellation with anthropic labeling them

How do you know that models being developed by other companies don't have hidden safeguards that prevent you from targeting whoever you want to target or analyze data at the Department of Work? Well, I mean, that's why you have terms of use in a contract and you have a, you have either have a constitution or you don't, or you have, you know, the CEO, you hear what Sam Altman says fairly regularly. It was like, we, you know, we are governed by democratic process. We live in a democratic society. They're an entity in that democratic society. um elon signed the same terms of use um that which were for all lawful use cases we could use his software google signed the same thing so really the outlier are the ones that say they want to impose their views on the department of war not the standard are you expecting are you expecting the the supply chain risk legal battle with anthropic to go to the supreme court you have we've had two cases now with with very different decisions yeah the i mean the the the case in California was at a district court level. Um, the one in DC that we won was at a circuit court level. So that would be the controlling, um, you know, precedent in our view. I'm sure that they

appealed that already. Um, I think we'll win and, you know, but, you know, legal processes are legal processes. And, and I think, you know, I think everyone was, they were surprised that we It was clear to me that we were going to win, but we'll see. There was a lot of discussion after that summit that you mentioned about President Trump complimenting Daria Amadei from Anthropic. Do you think, I mean, is there any disagreement within the administration over how to deal with Anthropic? I mean, I got to tell you that, and I called it historic for a reason, and I don't throw that word around lightly, but not just the amount of market cap, the amount of brains that are in that room, and then the fact that they all came together and agreed on this compact, including Dario, including Elon, including Jensen, including Sundar, was quite awesome, right?

And so if you could get, you know, and I remember I kind of joked to Elon afterwards, I was like, that was great. He's like, what do you think was great about it? I said, the fact that all you guys agreed, you all have your different competitive battles that, in fact, you all came to agree and said, here's a good safety framework start that we all can sign up to was awesome. And so, like, if that ethic and that sort of cooperativeness continues, I think hopefully everyone will be fine. There won't be any divergent views on any one of these companies. What else are you expecting to come out of it after that 120 days?

You mentioned an incident framework. Do you think that will be something set in stone that the companies will agree to? Do you think there will be any legislative calls out of it for potential bills or new statute around what incident reporting looks like or otherwise within your responsibilities there? Yeah, well, the three things out of the SIF are this incident response framework, this, you know, how are we going to make sure critical infrastructure is hardened, and then what laws and regulations we already have that apply to these kinds of companies in this new technology area. Separately, the David Sacks-led advisory board called PCAST, I forget what it stands for at the moment, they're going to do a study on any recommendations that might exist that are necessary for legislation.

You know, there has been legislation proposed by this administration a while back. That was to sort of preempt state rules, have a national framework. It was going to address some of these issues. And I think we're just taking, you know, David Sacks' study is going to take another look at alignment and some of the key technological sort of things that people worry about, study them and see if there's anything more necessary to recommend to the president to do based on that. when you when you talk to some of the most experienced researchers or people at these companies, including Anthropi, a lot of these folks have been talking about the inevitability of kind of government and private industry coming together. I don't want to say merging, but just as the technology becomes more powerful, more capable, important to national security, that there's just going to be all these different entanglements that are just inevitable. The state is just going to be like, this is too important. We have to, I'm not going to say take control of it, but take control of it in some way or have more oversight in some way. How do you think that that will manifest itself? Maybe not right now, but maybe in a couple of years, three years, you know, is the United States going to

take equity states in these companies? Is it going to take control over or have oversight over facilities where critically important workloads are running or being developed? What do you see there i i don't see this this is a very very silicon valley bubble sort of question not not i'm not accusing you of that but just you know government and business merging you're like okay what does that make us like a authoritarian capitalist state or what i don't know what that is but um that's their prediction that's their prediction no i i i understand this i know i've seen interviews where people talk about this merger of government and SI companies. But I think if you see what's come out of Meta in the last few months, you're like, wow, this is now a frontier AI company, SI company. They've picked a certain vector for consumers. It's wildly popular. They delayed it because it wasn't as safe as they wanted to be with your data.

And now it's a great product. You're like, well, that sounds like a great model. And why presuppose that something else is going to be used different? And there's lots of solutions if something is going to be used different. Let's say someone had a bio-capable model to help do biological research, to do disease research, right, or disease cures. You know, maybe you just do a know your customer thing. I don't know. Maybe they want to know who they're selling it to, these companies, right, because they want to want to be misused, just like you know who you're selling a reagent to at a lab, right? You don't sell it to, you know, the guy at the bodega. You sell it to, you know, you sell it to someone who might use it in a way that you think is appropriate.

There's lots of ways this could go, but a big merger between the two will be not only market-destroying, where will the talent go? I mean, there's so many bad implications of that that we've learned throughout history of state-run enterprise. So what are lesser gradations of that? I don't know. I think if I'm one of these companies that's worth a trillion, two trillion, going to $3 trillion, $4 trillion, I'd be spending a lot more on safety and making sure that my products weren't misused and making sure that I was serving the national government in the right way because this government is protecting my interests.

And I think you're more likely than anything to see a shift in their investment toward safety in their training, in their sandboxes, and towards serving the government in a way that's productive. What about equity stakes, though? Because this was something that President Trump had brought up as an option and discussed with OpenAI. Have there been any further discussions on that? That was last place. I don't know. I'm not in the loop on that. This is an aside, but... Oh, go ahead. I do war, not equity. I was going to say, do you think that's a good idea for the government to take equity in the frontier lab specifically?

I mean, we've taken equity in Intel. We've taken equity. Some of the deals, frankly, actually in the Department of War where we're giving a low-cost loan for a critical minerals mine and we're trying to get the taxpayers some potential benefits. So there's lots of places the government has historically taken equity and will in the future. So I don't think it's sort of a crazy notion, but I'll leave that to the president. this is an aside but uh who who came up with the idea to change ai to si there's only one man who came up with that idea and if it's in executive order you can read it i think it was the day after we did the uh the si summit but uh i a lot of way and then elon you know changed spacex ai to spacex si so i think I think there's some goodness in there, you know, in sort of branding it to be closer to what it is, as a superintelligence, you know, relative to artificial intelligence.

the race with china the race with china um i can you articulate for us what exactly are the benefits from a national security or defense standpoint of being ahead of china like do we think that they're going to go to war with us if they're ahead or what's really kind of behind this this notion from your standpoint and where you work um what i think that um a one way to understand this for the for a person who doesn't like live in the war department is um that if intelligence intelligence gives you um able to give you a multiple legs up on your adversary whoever that adversary is um well then you could actually have it as a deterrent to a conflict and let me and there's a reason why we have the intelligence community right the intelligence community takes satellite photos it it uh it you know it does all kinds of different things imagine if you added like super intelligence to that intelligence agency, the things they can understand about what the adversary is doing to protect you from that adversary making a move. You could also potentially

use that intelligence from aerodynamics, physics, mathematics to develop weapons that the enemy can't do anything about. The way the United States would approach that is if we had an overwhelming intelligence advantage on, you know, intelligence, on weaponry, on being able to deploy as few troops as possible and as many robots or drones and counter drones and all these things that made you impervious to attack. Well, then, you know, we would approach it as like we did after World War II as like that would be a great deterrent and we would go on our merry way building our economy and our country. I think the scary part, and I think some of these labs would acknowledge this is if an adversary that's ambitious for territory or economics had that advantage over you and was able to put you in a corner or to sort of coerce you as a nation into doing something you didn't want to do, well, that's a scary world. So because we've been the protector of the free world since World War II, I think us having that intelligence is vital for the entire Western world, and then we would, you know, I believe, keep a safer world.

Whereas certain adversaries, if they had that intelligence advantage over us, you know, would use it in a coercive manner. You mentioned this dynamic before in the context of export controls of foreign nationals. Obviously, foreign national employees were included in those export controls. Do you worry about foreign nationals from adversaries working at U.S. frontier labs? We just had the case of a Saudi employee putting a spying device at OpenAI. How do you think about that? Do you think there should be stricter controls at these companies? Yeah, I do worry about it. I think the example at OpenAI was a reminder that we all have to be vigilant about this.

Obviously, all foreign nationals aren't bad, but foreign nationals that have other loyalties bring with them some risks. And I hope these companies take those risks seriously. I think, you know, the one other thing I don't, you know, we haven't talked about in my job is, you know, I do all the grants to universities for war department research, right? And we just had a case in Michigan University where we had 13 Chinese foreign nationals arrested for espionage effectively. And so this is a problem at universities. It's a problem at companies. We've seen with the North Koreans taking jobs in American companies in subversive ways.

As an open society that welcomes foreign national participation in our universities and our companies, we run that risk. And I think we have to be smart about that risk. You know, it's hard to say that without trying – without, you know, sweeping a broad brush on every foreign national at every company. But how should you be smart about that risk? Do you think the government should take any further steps there, especially when it comes to AI? The FBI literally will vet any potential foreign national employee of any company where that company is worried about them to do a background check and make sure that they're what they say they are, who they say they are, and go as far as they can in legal ways.

So that service exists, but we can't compel companies to do that. Are there any American institutions or universities that are not compliant or not acting in great faith? Or do you think they're just not vigilant and you're going to help them be more vigilant? I think there's two different categories. is some of them, you know, it's potentially a loss of money, you know, from tuition from foreign students who pay full boat. And then for others, they're a university. They don't have like crazy impressive security practices, right? And so for the ones that say, hey, we want to do the right thing, help us design a security practice that works, we'll work with them and do that. And And there's lots of examples of universities that do that.

For the ones that don't want to, they just run the risk of loss of grants because, you know, once an incident happens where there's like a lot of clear that a university doesn't have good security procedures, well, you know, why would you give them sensitive grants that are at the secret or top secret level anymore, right? Because you can't put that national sort of asset at risk. So hopefully I can convince them of the trade-off benefit there. But so far, I will say that, you know, they've generally been very cooperative. Leo, did you want to ask about Project Meridian or the In-Q-Tel news?

I mean, I know that there's the SBIC program of helping jumpstart some venture funds or providing loans to venture funds. Have you considered at all taking LP or GP stakes in venture funds through the Office of Strategic Capital or other funds? Yeah, I think there's a program where we give some leverage to VC funds, and I believe we get some of the upside, some of the carry, if you will. So it's a form of GP, if you will. It's not sort of a stake in the GP per se, but it's a percentage of the upside is my recollection.

is that the the sbic program do you know yeah yeah yeah no it may not be the first set of deals that were done before i showed up but i think the newer form of deal that we showed up has that and and with this new program or this new announcement with inqtel which is the the cia backed venture firm i mean it was a little a little hazy what that would actually look like is any part of that doing co-investments alongside inqtel what are the actual mechanics of that partnership it's not co-investments it's more it's more that you know they've been historic i think they invested in andrew really early and palantir like from a first investors so it's just making sure that we have a forum where we can we communicate the things we're interested in they still are going to do their own investments but we're also then going to look at their investments more closely and see are these companies who serve who have products that we want to buy so it's just tying us close more closely together in terms of knowledge sharing like what are the mechanics of that does that I mean, you're going to have standing meetings with them.

Is that just more information sharing when they invest in a company, you hear about it? You know what, one of my assistant secretaries, Mike Dodd, you know, runs that relationship. So he'd be the right one kind of to ask, but he ran with that deal and made that happen. So, but I don't, I'm not sort of up to speed on like the exact mechanics on it. Speaking of Anderle, I know you've got Project Meridian, which is this initiative to look at the future of warfare. Paul Merlucky involved, Elon Musk, Joe Lonsdale. We were just curious in a nutshell, you know, what you think is not currently working well with the legacy kind of prime kind of contractor companies, maybe like Lockheed Martin.

And do you expect some of these neoprimes like Anderle to displace them? I mean, I think, you know, that if you look at the history of the defense industry, in the 80s, there were 50 defense contractors, 5-0. And now we're down about five primes. And so the lack of competition that that creates, combined with we're the biggest bureaucracy in the world, so we sort of buy the transitive property, like, loan our bureaucratic ways to these companies. And then you have something that's not a healthy ecosystem of competitiveness. So what I'm trying to do in my role is bring in new companies. And it's fortunate in that we've learned so much from the Russia-Ukraine war to know that even if we still need and we do the exquisite submarine, the amazing F-35, the like world-class patriot, that you still need drones, counter drones, undersea drones, you know, boats that can that can sail autonomously and they're cheaper and they're easier to produce and they supplement the existing exquisite capabilities. So I don't think we're at a replacement point. Like we don't need to do this for that. We still need to increase our productivity on those on those other companies. But I think for the new kinds of things we need, the new companies are, by definition,

clean sheet of paper, going to have a better shot at being able to build them at a scale and speed and at a cost that we like. I had one last question on this. All right, last one. Yeah, last question, I promise. On the offensive cyber program that I think was announced in August, we've seen a bit of mixed messaging on that. I know the national cyber director, Sean Carencross, earlier in the year said that he didn't expect private companies to be doing offensive cyber operations on foreign adversaries. This new program seems like there will be industry partners who are gonna be conducting those operations.

What's your current understanding of what that looks like? And do you have a sense of which companies, which private companies might be enlisted in those efforts? I don't really have anything to say about it. okay well that's since um okay then maybe i'll use the last question for this it's a little it's a little bit of a tougher one but i think it's it's it's worth asking because i get a lot of questions about it um so i don't know if you're directly involved in this but but some of the pentagon investigations on the minab school strike in iran have reportedly you know shown that yes there was human error um involved in that um but also that maybe some of the ai or si systems may have accelerated the the kill chain to the point where like you know there was like a rubber stamp on outdated uh uh human intelligence um and so if if is there a lesson from that that maybe in some cases si is being deployed faster than our own kind of safety protocols can can manage um and what does that you know what does does that change anything in your mind around rules of engagement in And...

in war i know you've talked about the need to kind of swing back those rules to be a little bit more relaxed or a lot more relaxed compared to the prior administration but what's your what's your view on this you know i haven't read the report so it would be or i haven't heard i haven't you know i like i'll tell you amir i live in a uh i live in a skiff all day so i don't have my phone so i'm not as online as uh i used to be so i haven't read what you you might have read and i I want to be careful about commenting on that, something I haven't read or have knowledge with, sadly. But I appreciate being here with you guys today, and thanks for the time, and thanks for the ability to just talk through some of these things.

Thank you very, very much. We really appreciate it. That does it for today's show. A reminder, we are on this stream Monday through Friday at 10 a.m. Pacific, 1 p.m. Eastern. If you can't make it then, episodes are available on theinformation.com, on our YouTube channel or wherever you get your podcasts. Make sure to follow us on social media, on X, on Instagram, on TikTok, and on LinkedIn. I am already excited for our next show tomorrow. Have a great rest of your Monday. Bye-bye for now.