Day three of Fortune Brainstorm Tech in Aspen ended with a mind-blowing interview with Palmer Luckey by Michal Lev-Ram. I confess I haven’t paid much attention to Luckey since, after selling his virtual reality headset company Oculus to Facebook for $2 billion, he featured on this iconic Time magazine cover in 2015. Less than two years later, he was unceremoniously fired.

Luckey now has a new company, Anduril, that is building A.I. systems for the U.S. Defense Department. Dressed in shorts and a Hawaiian shirt, he talked about that work in a very animated interview on the Brainstorm Tech stage. Here’s his explanation of why he started Anduril:

“I went into defense work for three reasons. The first was that the major defense companies were not building the systems that I believed would be important to counter the investments Russia and China were making. The second problem was that major U.S. technology companies had decided they would not work with the military. And the third is startups were not filling the gap. More mattress unicorns have been minted than defense unicorns.”

Luckey noted that Microsoft was working with the Defense Department. But he called out Google and Apple for declining to. Why?

“Some of it is ideological. I think that’s a smoke screen. Nobody wants to lose access to the Chinese market and Chinese capital…We are in a situation where the big defense companies aren’t building the things they need to build, and the big technology companies have opted out of the defense business, and startups are not filling the gap. Palantir and SpaceX have been the only two companies in the defense space.”

Luckey said he had gotten lots of flack from friends in Silicon Valley for working in defense … until Russia invaded Ukraine earlier this year.

“Ukraine has been a game changer for the zeitgeist. All these people who had said, ‘Wow, Palmer is an evil person’ reached out and said, ‘Wow, I understand now I was wrong.’”

He said he was concerned that the Silicon Valley zeitgeist would revert back when attention on Ukraine fades:

“I’m gonna lose my mind if people stop caring about this, and then Taiwan gets invaded and then everyone has ‘I stand with Taiwan’ Twitter profile pictures.”

In response to a question about whether the U.S. had already fallen behind Russia and China on technology in defense, Luckey said:

“We are behind on hypersonics, and we are behind on applying A.I. to existing defense systems. They have done a very good job applying artificial intelligence to their legacy systems. We have better technology in a John Deere tractor than in our defense equipment.”

You can read more from the conference here. Other news below.  

Alan Murray
@alansmurray
alan.murray@fortune.com

Editor’s note: This essay was updated on July 15 to clarify the timeline of Luckey’s Oculus sale and his firing from Facebook. It was also updated on July 16 to amend Luckey’s quote regarding Taiwan.

TOP NEWS

Inflation hits 9.1%

The U.S. consumer price index rose at a 9.1% annual rate in June, making for the biggest annual jump in over four decades. Wall Street only expected 8.8%. Some now think the Fed could institute a 1% rate hike this month in response. However, there are reasons to believe this wave of inflation is approaching its peak. Fortune

Fukushima compensation

Four former Tokyo Electric Power Co. executives have been ordered to pay 48 shareholders an eye-bleeding $97 billion in compensation over the Fukushima nuclear disaster—specifically, TEPCO’s failure to adequately protect the plant against tsunamis. This was a civil case; criminal charges of professional negligence resulted in acquittal. Asahi Shimbun

Paul Ryan

Teneo, the global CEO advisory firm, will announce today that former House Speaker and vice presidential candidate Paul Ryan has joined the firm as vice chairman. Ryan has been a senior adviser at Teneo since October 2020 and also is a partner in the private equity firm Solamere Capital.

AROUND THE WATERCOOLER

A ‘breadth of protection’: Novavax’s newly approved COVID vaccine arms the U.S. with a new weapon against Omicron BA.5 subvariant, by Grady McGregor

Celsius’s Chapter 11 bankruptcy filing dashes hopes that customers barred from withdrawing funds will ever get their money back, by Nicholas Gordon

Bill and Melinda Gates are giving their foundation a record $20 billion in response to ‘the great crises of our time,’ by Tristan Bove

Chipmaking CEOs say they need long-delayed CHIPS Act funding to save U.S. chip manufacturing. But it won’t work, by Rakesh Kumar

Putin’s daughter has a big new job at Russia’s most powerful business lobby, by Bloomberg

This edition of CEO Daily was edited by David Meyer.