Strategic Technology and Government Investment in Innovation (Essay 2)

Disclaimer: The following set of essays represent the views, opinions, and research of the author only and in no way reflect the policies or opinions of the United States Government.

Emerging Strategic Technology Ecosystem:

To begin, it is important to understand the full breadth of the emerging strategic technology ecosystem to determine where in the ecosystem the U.S. Government drove technological advancement in the past. This understanding should inform where the U.S. Government should potentially shift resources to better take advantage of modern-day market forces to effectively ascertain where in the ecosystem it should spot, fund, and develop new technologies that might impact national security in the future. Additionally, the U.S. Government must determine an acquisition process that more closely mirrors that of the free market.

This essay defines the emerging strategic technology ecosystem as a set of laws, policies, intellectual property (IP), new technology, and financial capital that function through government organizations, academic institutions, commercial technology firms, law firms, and venture capital (VC) firms that alone or in combination with another element of the ecosystem have the potential to significantly alter strategic capabilities that impact U.S. national security interests. Such an ecosystem sits at the very foundation of the U.S. national security apparatus and is much more than strategic acquisitions, Small Business Innovation Research (SBIR) programs, classic R&D, and prototyping. It represents a strategic context in which to understand DOD participation in the modern marketplace to efficiently and effectively identify, develop, test, acquire, field, and maintain the technologies required to preserve advantage over competitors. Far more than a plan to buy new things from U.S. corporations, the U.S. Government must become an integral part of the evolved ecosystem under current market conditions. This new reality requires influence across the breadth of this ecosystem that can be garnered through additional capital investment and political/social influence.

Emerging Strategic Technology Ecosystem (Pictogram)[1]

The diagram above depicts the strategic technology ecosystem as an integrated system of governmental interests and resources networked with industry interests and resources. The power nodes within the system have always included academic research universities, research labs (federal and private), government, and industry participants; however, the relative power of each node within the system has shifted since the mid-20th century.[2] The government labs and federal Research Development Test and Evaluation (RDT&E) funding that once drove technology innovation, do so no longer. They have ceded their positions to new multinational technology companies, start-ups, Venture Capital (VC), and Private Equity (PE) firms that have become the new power nodes of the emerging strategic technology ecosystem. This new paradigm within the ecosystem has seen governmental interests diverge from industry interests, as industry looks to separate itself from the specter of U.S. Government control in an ever-increasing globalized marketplace.

[1] “(20) Media Tweets by Deloitte MFG (@DeloitteMFG) / Twitter,” Twitter, accessed November 8, 2019, https://twitter.com/deloittemfg/media.

[2] John F Sargent Jr, Marcy E Gallo, and Moshe Schwartz, “The Global Research and Development Landscape and Implications for the Department of Defense,” n.d., 35.

Historical - How and why we got to this point:

The slow decline of government R&D and S&T?investment versus the increase in corporate research and development (R&D) and science and technology (S&T)?investment since the 1960’s has created an inflection point regarding national security technology. "In the early 1960s, the federal government funded approximately twice as much R&D as U.S. business and thus played a substantial role in driving the direction of U.S. and global technology development."[1] This historically significant fact demonstrates the lengths that the United States was willing to go in 1957, after the USSR’s launch of Sputnik highlighted the need for a massive increase in government spending to compete in the space race.[2]?

Since the 1960’s, this investment has flipped with US industry spending ten times that of the USG on R&D/S&T.[3] ?This change took place gradually over a period of five decades, with the most pronounced changes occurring between 1980 and 2000. In the 1980’s, President Reagan executed policies to reduce federal spending in areas he believed better suited to the commercial sector. These new policies forced industry to begin investing heavily in energy R&D, medical R&D, and TELCOM R&D.[4] Then in 1992, the internet went live and venture capital flew into thousands of new internet start-ups that drove technology R&D investment across the commercial sector.[5] This model, although much more refined today, set the foundations for today’s global technology companies executing R&D at almost ten times the rate of the Federal Government.[6]

[7]

During this time frame the U.S. Government took several different management approaches to technology advancement that drove the current innovation paradigm defined by the mismatch of government investment when compared with industry investment. As depicted in the graph below, this was because hard choices were made by government officials about how the State should manage sectors like nuclear, aerospace, cyber, and biotech from a national security investment perspective. These choices required politicians and bureaucrats alike to weigh equally important policy goals of “liberalizing” key national security sectors like cyber and aerospace so they could grow, make money, and create jobs within US industry. Conversely, wanting to keep a much closer hold on the nuclear and biotech sectors, the government maintained a lead role in the advancement of these potential “Weapons of Mass Destruction” sectors.[8]

Historical Government Technology Management Approach

[9]

Each of these strategic decisions created unintended consequences that helped to define the modern global technological landscape. As discussed previously, the decision by the government to support industry in the advancement of cyber technology, led to the following. First, a gradual decline and loss of Federal expertise in information technology from both a hardware and software standpoint that has left the United States government scrambling to compete with China in the race to 5G and its global adoption.[10] Additionally, because industry’s operational security lacks many of the safeguards utilized by the government, technologies like transistors, microchips, and algorithms have either been stolen by spies, reverse engineered, or copied, by strategic competitors like Russia and China.[11] Finally, federal procurement processes, in order to ensure proper oversight by lawmakers through Federal Acquisition Regulations (FAR), have become burdensome and difficult to understand by the newest most innovative companies.[12] These unintended consequences led to the current modern day market difficulties faced by industry professionals and national security professionals alike.

"This transformation has had and continues to have implications for federal R&D strategy and national security."[13] The most pronounced repercussion is that the U.S. technology industry will likely be responsible for future breakthroughs in the most important dual use national security and commercial technologies. It is all but inevitable that these new technologies will define the economic viability and market success within industry as well as the future of national security for nations around the globe.

Unfortunately, the federal government has fallen strategically behind industry when it comes to bringing new dual-use technologies to market. ?Dual use describes technologies that provide benefit to both commercial industry and government. This new normal will challenge both law makers and governmental departments to focus U.S. Government spending in new, unique, and sometimes risky ways to ensure the government does not become beholden to corporate interests when it comes to national security technology.

[1] Jr, Gallo, and Schwartz.

[2] “The Global Race to Space,” US News & World Report, accessed December 30, 2019, https://www.usnews.com/news/best-countries/articles/2018-08-27/60-years-after-nasa-a-global-space-race.

[3] Jr, Gallo, and Schwartz, “The Global Research and Development Landscape and Implications for the Department of Defense.”

[4] Richard Rowberg, “Federal R&D Funding: A Concise History,” n.d., 20.

[5] Paul A Gompers, “The Rise and Fall of Venture Capital,” n.d., 26.

[6] Jr, Gallo, and Schwartz, “The Global Research and Development Landscape and Implications for the Department of Defense.”

[7] Jr, Gallo, and Schwartz.

[8] Greg Allen and Taniel Chan, “Artificial Intelligence and National Security” (Harvard Kennedy School, Belfer Center for Science and International Affairs, July 2017).

[9] Allen and Chan.

[10] Jill C Gallagher and Michael E DeVine, “Fifth-Generation (5G) Telecommunications Technologies: Issues for Congress,” n.d., 39.

[11] “How America Risks Losing Its Innovation Edge,” Time, accessed February 14, 2020, https://time.com/longform/america-innovation/.

[12] Jr, Gallo, and Schwartz, “The Global Research and Development Landscape and Implications for the Department of Defense.”

[13] Jr, Gallo, and Schwartz.