Inside the Department of Defense and its Vision for the Future
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In real dollars dus twenty twenty four R N D budget request of one hundred and forty five billion dollars is triple what IT was during the cold work. It's more than what alsop t apple, meta and microsoft combined spent on R N D last year. Device is not a small market, likely one reason behind the recent surge in U.

S. Defense tech focus startups, scale ups and private inventory capital, some two thousand deals investing over a hundred billion dollars since twenty twenty one. Her pitch book in the wall street journal.

The issue is, are we able to buy what we need? And are we thinking far enough ahead to what the shape of more fair needs to be what we did in five months? Normally take C O D two to three years. If you're not sure what is more mind blowing, oh, fast. We did IT or how long IT Normally takes, I don't blame you.

The origins of silicon valley are deeply rooted in government and defense, from air defining radar or electronics systems that helped allies in world, world two, to the modern semi ductor emerging from the need for Better missile and satellite capabilities during the cold board. Now in today's epo de, we get the opportunity to revisit that very relationship together with one of the most critical people within the department of defence, that is, the united states deputy secretary of defense, kathline hacks.

Caffeine has spent decades of her career focused on evolving complex topic of defense policy, and today we get the pleasure of hearing her keynote to address from asic tines second annual american dynamism of MIT recorded this january in the heart of washington, D. C. The event was not only a platform to celebrate our national interest, but also a form for engaging in the tough conversations necessary for america's growth.

So in this slightly approach address, you'll get an inside look into the priorities of the D O, D and how IT sees its past, present and future. Make sure to stick around for after her address, where you'll get to hear highlights from deputy secretary virus chat with blustery journal national security and foreign icy editor Cherry wine worthy dive into the numerous issues in our country today, from ukraine to the use of A I on the backfield but first let's go straight to the source and hear from deputy secretary of defense cain hix. As a reminder, the content here is for informational purposes only, should not be taken as legal, business tax or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any a extensive fund. Please note that a six scenes year and a zuhri az may also maintain investments in the companies discussed in this podcast. For more details, including a link term investments, please see a six and set outcome slash disclosure res.

The story of silicon valley in the sector, IT symbolizes shares much with the story of amErica is a story of millions going west to find their fortune, of immigrants pursuing their own american dream, of not all people getting to participate equally, especially at first. It's a story of free entry, SE and entrepreneur spirit, a story of drivers and builders who dare to pioneer new frontiers, reimagine the future and change the status quo.

But it's not just a story of rugged individualist founders and founders, is also a story of the institutions that supported them and the talented communities around them. It's a story of collaboration of teams and teachers, formal and informal. Many are not household names. They may not have been wealthy, but they were indispensable to every disruptive innovation. And is a story of what government of the people, by the people, for the people, can make possible.

Think of NASA and the pentagon buying so many silicon microchips in the one thousand nine hundred and sixty to guide moon rockets and mini man missiles that the Price per chip fell from a thousand dollars to twenty five dollars in just a few years, low enough for commercial applications. Think of vu d, creating GPS decades before smartphone apps and started business models, relied on the geolocation services that provides, or the national science foundation funding the supercomputing center, where mark in jesson worked on his first web browser. Think of darpa funding early AI research at stanford.

The labs s were in surf, and bob han fathered the internet and the grand chAllenges that road testing technologies used in today's self driving cars. Of course, none of that reduces the audacity, that brilliance, the creativity and determination of all the innovators passed in present throughout america's commercial technology sector. The point is our histories are bound up together more deeply than we sometimes admit, and our fates are too.

Over the decades, the ties between the panel gon and the tech community have waxed and wage even after tech minded defense leaders like her old Brown, bill Perry and ash Carter sought to rekindle flames, rebuild bridges and rewire the pentagon to be a Better partner. Some in d od still undervalue non traditional and commercial innovators in silicon valley and beyond, perhaps they longing for when federal money dominated the early nineteen nineteen fifties through the late one thousand and seventies, when government and especially d contributed between one half and two thirds of all american research and development dollars. That same era, bird dods much loved multi year budgeting processes.

In funding such innovation, IT was easy, and washington got comfortable believing our processes and pace could dictate everything that followed with. Since one thousand nine hundred and eighty, the script has been flipped, with companies contributing fifty to seventy percent of america's rnd pie. Yet deos rules of the game have not caught up.

Not only are we selling in innovation pace setters, too often we can struggle just to keep pace with a dynamic U. S. Private sector that continues to out innovate the world.

Of course, it's a much larger pie, and we still invest a lot in real dollars. Dudes, twenty twenty four R N D budget request of one hundred and forty five billion dollars is triple what IT was during the cold war. It's more than what altima, apple, meta and microsoft combined spent on R N D last year and are requested twenty twenty four procurement budget.

What's converted into field and capabilities and services is even more one hundred and seventy billion dollars events is not a small market. Likely one reason behind the recent surge in U. S. Defense tech focus startups, scale ups and private invention capital, some two thousand deals investing over a billion dollars since twenty twenty one per pitch book in the wall street journal.

For three years now, we have taken a comprehensive, iterative, war fighter centric approach to innovation, recognizing we face an accumulation of chAllenges and barriers and there is no silver bullet that will lower them all along the way. We've never waive red from our ultimate objective, delivering safe and reliable combat, credible capabilities at speed and scale to america's war fighters so they can deter greson. And when, if called to fight, why the urgency? Because the P.

R. C has spent decades building a modern military design, primarily to do one thing over match us. But the one advantage they can never out match steel or copy because it's embedded in our people, is american ingenuity.

Our ability to think freely, innovate, changed the game, and in the military sphere to imagine, create and master the future character of warfare. Our starting position is stronger as a free and open society of blue sky inventors, doors and problem solves, we don't see to control innovation or make IT to the party line. Instead, we aim to seed, Spark and stroke the aims of innovation, and was so much happening outside of duty that requires Better adopting innovations whereever they add the most military value.

An important way we do that is by bridging the much discussed valley of death valley, because there are several labs to prototype, prototype to product, product to scale. There are still others, and the valleys can be especially treacherous to cross if you're new to working with dod now, these valleys are necessary for any healthy innovation ecosystem. Not every idea or prototype should scale because not all of them work for the war fighter.

And we need more creative prospects coming in that are likely to make IT out so that we push the innovation edge and avoid group think. It's similar in silicon valley. There's a reason why fail fast in iterate is a montre.

Not every founder who pitches a VC gets funded. Not every company with a series a round makes IT a series b and see and so on. Only some get bought or go public.

We've all met plenty of good idea ferries, but I don't know anyone. That's always right. So our goal isn't for everything to cross the valley of death. Instead, IT is to get the right things across them to the right people at the right time that require a fast moving cycle for identifying key capability needs to effective solutions.

A war fighter defined investment funnel, if you will, comprising novel Operational concepts, prototyping and experimenting x potential acquisition pathways, open doors for news, commerce to enter and a more level plan in field. Every piece should be constantly hit orating, moving rapidly, responsibly and securely. Because if something doesn't work or isn't secure, it's not useful for the war fighter.

IT loses its value. And when something does prove valuable, we need to be able to produce and deploy IT at scale and speed. Let me tell you some of what we've done in the last three years to get this problem, and i'll do IT in three minutes. We've been repeatedly iterating on novel Operational concepts for joint war fighting.

We have new processes to incentivize and accelleration promising joint capabilities and experiments to advance those Operational concepts, shrinking their time, crossing the valley of death by as much as two years to bridge the lab to prototype and prototype to scale values of death, or using more flexible acquisition pathways for rapid prototyping, rapid fielding and software development. Over thirty five billion dollars have gone through these pathways since twenty twenty one. Across early two hundred programs, they've saved up to six years of transition and delivery.

Timely ines for warfighter priorities to work Better with commercial and non traditional firms were embracing innovative contracting tools that can be easier for them to navigate. We also spend how we transition the most promising capabilities to scale by overcoming bureaucratic and cultural barriers that slow us down. We knew all that was necessary because of our work to map and then method ally debug the whole D O D innovation ecosystem, a nose to grind stone effort that, like software development, never end.

As one of the world's largest organizations, we must always look for ways to get out of our own way. Beyond that, we issued data decrease that all dod data must comply with, because data in a Operability access and trustworthiness are critical for A I, for doing command and control across all domains, and for being a modern defense department. No excuses.

We also confirmed ethical AI principles, updated our decade old but still world leading policy on responsible use of autonomous weapons systems, and issued new strategies and implementation plans on data analytics, AI adoption and responsibly AI. Simultaneously, we focused on talent and personnel from the eight initiative that deploys data scientists to every combat and command to continuously up skillings our opposition workforce. We also brought focused leadership to critical organizations and stood up new ones.

We elevated the defense innovation unit to report directly to the secretary so we can help focus and accelerate how we leverage the best of commercially derived tech. Diu is now LED by a former director to apple CEO. We integrated disperate digital AI and data analytics teams under empowered chief digital and artificial intelligence officer who previously ran machine learning.

At left, he also reports to refer to secretary Austin, and we created the office of strategic capital to partner with private capital markets and catalist investment and technologies critical to national security across the board. We're making smart, serious investments in terms of real dollar value. Are twenty twenty for a budget request, would make the second largest investment in defense R N D plus per current since one hundred and fifty two.

We'd send industry clear demand signals with things like multiyear for current for key munitions funding to expand industrial base facilities, workforces, sub tier suppliers and more secure supply chains. Meanwhile, throughout, we're ensuring our defense dollars deliver by providing effective oversight for the taxpayer. Or three minutes are up and I get IT if your eyes glazed over.

Not all of this is headline rapidly, but remember, there are no silver bullets. All of IT is absolutely necessary to drag D, O, D into the moderna. Our efforts are fundamentally resetting behavior for defense innovators, program managers, resource leaders and decision makers.

And even though it's collaborative, that kind of disruption can still be uncomfortable. Take replicator, one of our most recent initiatives. Replicators goal has always been simple and straight forward to feel thousands of a traditional autonomic systems in multiple domains within eighteen to twenty four months and to prove ways to burn down risk and rapidly and safely overcome barriers to scaling.

It's about showing ourselves and our adversary, the dude, can move fast to shape the battle space and equip our war fighters with what they need. What we did in five months, Normally take cod two to three years. If you're not sure what is more mind blowing, how fast we did IT or how long IT Normally takes, I don't blame you honestly.

The length of our nower proceed should blow your mind. It's because our system for buying new capabilities was designed in that one thousand nine hundred and sixty's era of D O D. Innovation, dominance and reinforce after the cold war, when our leading conventional military capability seemed unBeatable.

So most things still start with that inevitable inexorable multiyear budget process and take five to ten years or more to field at scale. To go from start to fielding inside the two years cycle is not Normal. It's disruptive.

But we plan to make IT Normal because more speed is essential. This is not the cold war nor the post cold war era with the PRC, we are in a persistent generational competition for advantage, and we have to double down with urgency and confidence. Thinking differently does not come easy to large organizations, and the panel gon is no exception.

We still have many more pain points to address across the D. S. Innovation ecosystem. Institutional and cultural change takes time, constant tending and consistent leadership.

We've got to keep listening, learning and iterating to continually become Better customers and collaborators with the tech sector. So make no mistake, more deliberate discomfort will be required, more collaborative disruption will be necessary. The future of our nation depends on IT, and IT depends on you, because american dynamism and american democracy are inexorably intertwined.

Enforcing contracts and protecting IP depends on upholding the rule of law. Hiring and talented workforce depends on having good schools, universities and immigration. The flourishing of all americans depends on ensuring equal rights and equal opportunity for all.

And starting a business, investing in others, inventing a product and taking IT to market depends on safeguarding the institutions that provide the blanket of liberty under what you do. So if we want to keep changing in the world, then we have to strengthen the democratic principles that make this nation so worth defending and make changing the world even possible. Our country is not immune from the authoritarian winds that sweep the globe.

We have seen amErica routinely tested, while SHE has withstood, we cannot take that for granted. Institutions can be degraded, belief and institutions can fade, both endanger the health of our nation. And your success.

We want private sector innovation to succeed. We want american dynamism. We need you to feel the same about american democracy, because neither can thrive unless the other succeed.

Many years ago, one of silicon valley's original garage founders day, but spoke about his company's quote, obligation to make some contributions to the defense effort in times of peace as well as in times of war. He said IT was part of, quote, business institutions having a responsibility to the society in which they exist to do something more than simply make a profit. why? Because, in his words, we have freedom of action, which is the direct t of the american type of government.

Packard said that nine months before the soviets launched spot nick, bringing tech competition to the forefront of america's cold war consciousness. And he said at twelve years before he came to washington to serve his deputy secretary of defense, like I said, our histories are bound together more than we sometimes admit, that binding enable to silicon valley to thrive, to drive successive areas of technological evolution and revolution, to change the world again and again. That's worth defending, america's defending and american democracy is worth defending, and both are worth investing again. Thank you.

All right now, as pivot to Kathy hicks fireside chat with sharing wine burker as they discuss collaborator disruption at the duty, including lessons from ukraine, the evolving role of primes, defense, opposition reform and more. But first, let's start with where the .

dollars are flowing.

This tremendous amount of private investment venture capital going into defense, we recently rote about the hundred billion that's got instances two thousand twenty one. But one of the concerns from those companies and from those investors is that it's not being matched yet by acquisition dollars. Is that a concern for you? And how do we actually change that? yes.

So first of all, I think that I really would hit that our procured budget request for twenty four as the second highest and in the peace time area and thirty five years. So it's not that we don't have money going in opposition.

The question is what are we acquiring and are we acquiring what the war fighter needs? And are we acquiring everything we think the world fighter needs? We've always had to make hard choices, surprise that we will continue to have to make trade off.

I think what I would stress as as we innovate and move through the changing nature warfare against shaping that changing nature warfare, we know so much of what is in that shift is software defined. And I also could be produced manufacturer much more rapidly through advanced manufacturing. There are a lot of areas by attack, I could think of others that are driven right now by the commercial sector.

So as we shift in the nature of warfare, there is more and more opportunity for non traditional als and service providers to be a part of that procuring story. So lots of dollars is going in your procuring. That's not the issue. The issue is, are we able to buy what we need? And are we thinking far enough ahead to what the shape of warfare needs today?

What in that view does the defense industrial base look like? And we could say five years, ten years time. Are there more than five primes? Are there a dozen crimes? How does that actually look in terms of a successful change in strategy? I don't think .

there is a predefined tion of number of primes. I think IT is important to have competition and the defense industrial service, no doubt about that. And we know small business is a huge driver.

So we work very hard and trying to drive up the percent of our procurement and investment that is going to those small businesses. I would try to guess here today how many primes there would be. I think the whole nature of what constitutes the defense industrial base, we need to shift that mental model.

The american industrial base is the defense industrial base. We obviously have traditional providers to be greatly value. We need them. We need them to stay at the cutting edge, and we continue to work hard with them. But it's very cleared to everyone, including them that teaming with other parts of the economy, understanding the new areas of innovation compute is incredibly vital, took growing where we need to go in defense.

You talked about this long history of CoOperation that goes back decade between silicon valley, the pentagon. There have also been periods where there's been a rift, most notably after the vietor more period. And then there was a big effort to heal that rift.

We've clearly come a long way. Are there still issues there? I think .

that's a constant reframe for us, and we focus very much on as a department across administrations. I think there has been a strong focus on making sure that companies want to work with us. We know part of that is making sure we represent the values of the nation.

That's always been important for the united days in terms of bringing the commercial sector into work with government. So we continue to do that today. I don't think we are in a crisis space, to use the vietnam analogy.

And I do things that the PRC did a lot of that work by comparison. And both their military activities in the types of covers ve they use working with companies have done a lot to turn others to looking to how you can work with us. I will stress one area that we've been very clear about as our responsibly eye approach and a responsible autonomy approach that decade tes long.

But we continue to evolve IT as the technology evolves. We have project lima right now, which is looking at large language models. So we look at how to adopt innovations in a way that safe for our war fighters, and again, reflective of american values, and will continue to do that.

Actually preempted my next question, which is on on that ask force looking at generate AI. Where's IT add? What do you see coming out of that? What are the issues is looking at?

sure. So they are looking at hundreds of use cases to identify what's the right framework for the department this spring is when that information comes forward to the cdc and then to me and the secretary they are after. So I anticipate getting some feedback on where there are use cases that are ready to go today if there are those and other areas where we need to do more work.

But we work closely with all the major general AI providers and would be providers to make sure we're lashed up. We're very enthusiastic to work with them. We just have to do IT in a way that actually delivers for the word fighter.

There have been a lot of new technologies deployed in ukraine. In some ways, I think some people have compared IT to a task lab for things like U A. These for drones. What are some of the lessons learned out of that from your perspective of the technologies that have .

been deployed there? sure. I think what I would stress for the us. Really has been the ation of space that worth or but satellites in particular and communications that the commercial sector really drove, that's been a clear that ability to communicate and to have mass that's distributed has paid off.

I think when you look at autonomy, it's a more mixed picture in terms of exactly how IT has evolved, where IT has provided benefit and we take all of those lessons away. I think one piece that the united tes has an advantage on is that when innovation happens down at the unit level, we know how to bring that up and scale IT. We also need to make sure we do that exceptionally well and fast.

So that tactical innovations, tdp innovations that happen, software innovations that some very clever sergeant comes up with, for instance, which you see in ukraine all the time, that sort of is lifted up and promote ted quickly across the force as we go through rapid iterations. I think that's another lesson I would add. And then the last is intel. In general, the united states clearly has an advances and intelligence paid off substantially. And to the extent that we can help our partner without, in this case, ukraine, that's an area we know is a strength to build on .

the idea of process that you talked about, particularly coming down from the tactical level. How do you get that into the us. system?

It's at all hands on. Decade comes at all kinds of different levels.

We've really emphasized with the draw more fighting concept, making sure that there is rapid concept to experimenting to fielding our radar initiation as one of those areas where we've really try to highlight how you quickly take a concept, make sure you have the right testing environment, experimental environment, the lab, if you will, the substitute for ukraine for us, the experiment and exercise around for us, out with our cocos. And you see a lot of that innovation going on. Today's comm sent home to pay calm.

Others are doing a lot of that work. That's how we do IT really make sure we're testing IT in the field with the war fighter closely linked to the technologist. So the Operator and the technologists work together to do that rap iteration.

A lot of this too is again, concept of employment. So it's not just technology, it's about how do we use that technology best. And that's where we really can accel.

We have the most incredible military service members, individuals who are incentive to bring forward their best. That is definitely a different model than authority. Italian states.

you talked about american ingenuity is where we have an advantage over china. IT still very much feels like our acquisition processes. The three other pound gilla. Can we get to where we need to be without fundamentally reforming defense department acquisition?

I think we have to fundamentally reform defense acquisition, but we are down that path. We did have the alternative acquisition pathways, for example. We have to prove those out.

We have to show that those pathways software is one. For example, we've already put billions of dollars through that software existing pathway. Now we have to show our oversight committees that we can deliver through those often ate pathways because there is a different oversight model built into those.

And it's really about trust between congress and the executive branch to prove out that we can do good things with these tools that they are given us. So that's why we've been so focused in this administration on taking all those authority changes showing we can advance against that replicators and example of that and then where we can build that trust. I think there's more opportunity to expand our authorities. So yes, we need opposition to farm more in acquisition reform now, and we need to build trust as we go through that.

Are you surprised where we are in out with tech and silicon valley compared to five years ago?

I am I think IT is a marker for what's happened I think can brought to a world events. I think there's more ability to see how you, as an individual innovator or investor, can contribute to the american experience to american dynamicism dari and more concerned about what the alternative might hold. We've seen that in hongkong. We've seen that elsewhere. And I think that more than anything has brought to mind what the risks are for hind.

It's a great way to wrap up. Thank you so much.

right? thanks.

Now if you have made at this far, don't forget that you can get an inside look into A C C american dynastic summer, A C E 点 com flash A D summer。 There you can catch several of the exclusive state talks between policymakers like government was more or plus for founders from companies like andle and point base, and founders like mark, Kevin, all building toward american dynamism. Again, you can find all of the above a six six e outcome sash, eighty summer, and one could a link in the show notes.