For the first time, this year’s SXSW featured a “Defense Innovation Lounge” venue at the Capital Factory. The venue hosted seven official panels, 15 talks, and technology demonstrations. Business executives, government leaders, and policy experts gathered in Austin to discuss the importance of lowering barriers to entry and other topics of interest for startups keen on working with the Department of Defense (DoD).
The Changing Innovation Landscape
On a panel titled “Answering the Call: Tech for Public Purpose,” former Secretary of Defense Ash Carter stated “Everything of consequence in those days in technology came from the United States...and government. Those two things are no longer true...We have to find a way to do what is necessary to have excellence in...defending ourselves and our values.” Carter founded DIU in 2015 to leverage commercial investment for defense purposes, which he described at SXSW as “a wildly successful experiment…We [have] to lift our heads up out of the usual way of doing things.” Today, DIU continues to foster interest in working in defense-related technology.
On a separate panel titled “Safeguarding the Crown Jewels of U.S. Innovation” Mike Brown, Director of DIU, echoed Carter’s remarks: “In 1960, one-third of global R&D was U.S. defense-related…[now it’s] 3 percent. That points to how important it is for us to be out working with the entrepreneurs, the investors who are investing in those technologies we just talked about- AI, autonomy, etc.” He went on to highlight a key reason for the need for DIU, which is declining private investment in hardware. “In Silicon Valley, investment in software has gone from 50 percent to 92 percent of the total since it’s easier to make money there,” he stated. “Most of our hardware [manufacturing] has gone to China. We need to make sure we have a supply chain for the future, and that the supply chain is secure.”
Katherine Boyle, Principal at General Catalyst, a leading Boston-based venture capital firm, discussed the importance of large production contracts for startups. “We’re investing out of a $1.4 billion fund… [and] we have to return multiples of that number to our investors...It makes it really difficult to invest in things that aren’t going to be massive, massive companies, and makes us also want to try to find the winners very early,” she pointed out. “If you were trying to create a... ‘unicorn,’ a billion-dollar company, you would have had maybe 3-5 years five years ago...those companies are [now] being created in 18 months.” The more active DoD is in the commercial sector, whether through production contracts or other forms of early investment, the more opportunities it has to send market signals to venture firms like General Catalyst that could spark new rounds of funding in critical dual-use technologies.
Relations Between Silicon Valley and DoD
The panelists had positive assessments of the attitude of Silicon Valley towards DoD. Brown pointed out that DIU has seen increasing numbers of submissions for solicitations, now averaging 20 per solicitation. “Most of the companies we’re working with are young companies…[and] those employees...know the government is going to be a big customer,” said Brown.
Boyle discussed how most of the supposed ethical concerns tech companies have with working with DoD are actually business ones. “There isn’t any sort of moral quandary in the minds of 99% of people in Silicon Valley...If the government was willing to ‘king-make’ [issue large contracts], I guarantee there will be companies knocking down the door trying to get contracts.” She went on to describe how interested the engineers she has met are in working on defense problems. “The vast majority of engineers I’ve encountered just want to work on really interesting projects,” she asserted. “They are very willing to work on...national security...The vast majority...will work for less money...to work on something they care about.”
The Importance of U.S. Leadership in AI
Artificial intelligence (AI), one of DIU’s five portfolio areas, was a popular topic at SXSW defense panels. Mike Kratsios, Deputy Assistant to the President of the United States for Technology Policy, discussed the Administration’s focus on the issue. “This President is the first in history to prioritize artificial intelligence in a budget...What’s exciting for us to think about is how can we apply American values to artificial intelligence in a safe, robust, ethical, and secure way.”
On a panel titled “The Future of AI: Accelerating Innovation,” Lieutenant General Kwast of the U.S. Air Force stated that the power of AI can be used to uplift all people so they can live free. Brigadier General Easley of the U.S. Army on that panel said that there is a series of revolutions in military affairs happening right now, and AI is the glue between all of them.
Regarding any concerns Silicon Valley may have about working with DoD on AI initiatives, Mike Brown stated “we think people can be more influential if they are part of that conversation, rather than not.” Carter put it more bluntly: “How do you like working for China? That’s a Communist dictatorship...they’re using AI to clamp down on Uighurs [an ethnic minority] in the West [of China].” Elsa Kania, a China expert at the Center for New American Security, discussed China’s advances in AI on a panel titled “Who Will Lead in the Race for AI in Defense?” Although she said it is hard to qualify overall leadership in AI, she stated that China leads by certain metrics, including number of patents, publications, and level of funding (estimated to be in the tens of billions of dollars).
Conclusion
SXSW’s newfound emphasis on defense technology jibes well with current trends in Austin and beyond. Austin’s profile as a defense hub has risen rapidly in the past year with the arrival of Army Futures Command in August 2018, an organization that could grow to 500 people. DIU, for its part, has awarded approximately $340 million in prototype contracts to 100 companies nationwide. To learn how to work with DIU, please visit our website.