Customers > capital, and other commentary
Commentary on recent pieces on defense innovation from across the ecosystem
The Nexus Newsletter
Welcome back to The Nexus Newsletter. This week, we provide commentary on recent pieces on defense innovation from leading experts in industry, academia, and government.
Innovation needs Customers, not Capital
By Shyam Sankar, CTO, Palantir
Key quote: In this return of great power competition, it is clear that we need to continue to innovate to provide deterrence from conflict. This requires military superiority and continuous technological innovation. When Palantir was founded there was no path to working with the Defense Department. Not a difficult path, no path. And there was exactly one path to working with the Intelligence Community, In-Q-Tel.
In-Q-Tel is a venture capital firm that invests in commercial technologies that are relevant to national security. But this headline confuses that actual value proposition. America has plenty of capital for quality companies. A startup that can’t raise money is probably not a very good startup. It is one of America’s strengths — a deep and wide venture ecosystem. What In-Q-Tel provides that is a game changer is customers. The capital invested is often de minimis to the companies even if it is extremely valuable validation. The customer contracts, clearances, and commitments that In-Q-Tel furnishes are the fuel for innovation.
Not enough is said about the US Govt as Customer and too much has been said and overstated about the US Govt as R&D financier. It is broadly acknowledged that in the present era the USG cannot outspend industry in R&D, acknowledging that it very much did in the early cold war. But perhaps that spending was never the key enabler outside of basic research. [...]
The root problem is that the acquisition system is unintentionally communist (Bill Greenwalt noticed the same). Profits are capped at a very low number on contracts. While the law says the government should favor fixed priced contracts in practice these acquisitions happen cost plus. This means the only way to make more money as a contractor is to find a way to spend more money in your costs. That won’t work. [...]
The problem with defense contracting is not the popular narrative that contractors make too much money, it is actually that they make too little money. The sums are large but the current system only incentivizes spending more money to drive up the fixed percentage of profit the communist procurement policies deem reasonable. [...] The USG should focus on price, not profit. If innovators can provide capability for less money, why does the government care what the profit margin is? Innovators will need outsized profits to motivate progress.
Our take: The beauty of America’s startup ecosystem is that it is open to a wide range of entrants - those startups that succeed do so because, to quote Paul Graham, they “start with good people,” “make something customers actually want,” and “spend as little money as possible.” (They are also usually pretty good at raising money.) Does the DOD know what it wants, though? This varies among services and programs. Warfighters - in theory, the “customer” - are mostly kept far away from the procurement process despite knowing the most about end user needs. In today’s landscape, the end user is actually not the “customer,” the person in charge of the decision to purchase the capability. We agree, also, that contractor profits are not the enemy and are, in fact, the very thing that drives private sector innovation. Ensuring that needed capabilities are delivered to the warfighter at speed, and in the quantities necessary to prevail in conflict, is the only KPI that matters when our national security is on the line. Misconstruing contractor profits with waste disincentivizes innovation, to the detriment of the warfighter.
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News we’re reading
Autonomous systems are gaining momentum in the national security space. Below, we’ve pulled key quotes from recent articles of interest, plus brief commentary from Applied Intuition’s government team:
Defense One | We Don't Have the Missiles to Stop China. Time For Drone Swarms
By Bryan Clark, Senior Fellow, Hudson Institute
Key quote: The defense establishment must not pretend that simply opening the money spigots will provide the missiles that will enable the U.S. military to fight the way it wants to against the People’s Liberation Army. Instead, U.S. forces must adopt new concepts and tactics that can win with the weapons and systems they can field this year and next.
The war in Ukraine, recent operations by Iran, and the war in Nagorno-Karabakh offer some ideas. Faced with shortages in sophisticated PGMs due to sanctions or attrition, combatants in each of these conflicts turned to unmanned systems that help fill the gaps in some innovative ways. [...]
The U.S. military is coming around to the idea of using uncrewed vehicles to protect and enhance smaller long-range missile salvos. Programs like the Air Force’s Skyborg and Army’s Air-Launched Effects are intended in part to build drones that can jam or confuse air defenses or precisely guide missiles to where they can do the most damage. [...]
Or U.S. forces can forgo the missiles entirely. Over the last two years, Ukraine, Russia, Israel, and Iran have all used long-endurance drones to strike enemy bases, infrastructure, and ships. Using everything from DJI quadcopters with hand grenades to Shahed-136 suicide drones carrying 200 pounds of explosives, these militaries have circumvented opponents’ air defenses through a mixture of slow speed, low radar signature, and numbers.
New technologies made these new tactics possible. Commercial automation software and microelectronics from the telecommunications, automobile, and shipping industries contribute. But more important is the emergence of commercial mission-planning and command-and-control software that can orchestrate drone and missile operations to avoid defenses, locate concealed targets, and maximize impact on the enemy.
An added benefit of commercially-derived hardware and software is in mobilization. The inability of the U.S. defense industrial base to surge production for wartime has been analyzed, described, and bemoaned during the last decade. But by shifting more of its force design toward commercially-derived technologies, the U.S. military could create the potential for commercial mobilization on a scale not seen since World War II.
Our take: Great piece by our friend Bryan Clark. The conflict in Ukraine is proving out the value proposition of large numbers of cheap, attritable UAS, particularly when compared to PGMs that often cost north of $1M. Commercial software has an important role to play in enabling UAS, both in their development and post-deployment. Unlike PGMs - which come with long development timelines, complex supply chains, and high costs - commercially-derived technologies would enable the military to take full advantage of the rapid development, production, and deployment timelines that define the software-defined technologies produced for the commercial market. We are excited to see growing support for commercially-derived technologies as a viable and, in some cases, superior, alternative to traditional platforms and capabilities.
POLITICO Digital Future Daily | Killer robot swarms, an update
By Matt Berg, National Security Reporter, POLITICO
Key quote: But AI in warfare doesn’t necessarily mean high-powered brains — it can also be a blizzard of dumb-ish little vehicles overwhelming an enemy. Vladimir Putin, in a speech about AI war several years ago, predicted that “when one party’s drones are destroyed by drones of another, it will have no other choice but to surrender.”
So where’s the Pentagon on this? Developing an effective drone swarm — a group of autonomous drones that can communicate to achieve a goal — is “without a doubt a priority” for the U.S. military, Elke Schwarz, author of Death Machines: The Ethics of Violent Technologies, told Digital Future Daily. [...]
So how about drone-swarm ethics? And limits? In the wrong hands, drone swarms have potential to be weapons of mass destruction, experts warn, because of two things: their potential to inflict harm on lots of people at once, and a lack of control to ensure they don’t harm civilians. Since swarms communicate together, unlike a group of drones that act independently, the risk for catastrophe if something goes wrong is much higher.
The DoD does have some guardrails in place. The department updated its autonomous weapons policy to adhere to its AI Ethical Principles, which outline the design, development, deployment and use of AI. In the case of drone swarms, the policy would ensure that the technology needs to be entirely foolproof — with no risk for deadly miscalculations or unpredicted actions — before being used.
But nations without such safeguards could do irreparable damage. Drones can be cheap and easy to build. Networks can be created by unethical programmers. In short, a drone swarm is a fairly scary technology accessible to many countries — or even insurgent groups.
Our take: The promise of drone swarms is always counterbalanced by the threat they would pose if an adversary without clearly-defined guardrails governing the deployment of lethal autonomous weapons systems (LAWS) successfully developed them. The potential risks and destructive powers of drone swarms means that a rigorous verification and validation process is essential - no corners can be cut when it comes to ensuring their performance and safety.
Read the recently-updated version of 3000.09.
Defense News | The Pentagon must make a culture shift to embrace innovation
By Mac Thornberry, Former Congressman and Chairman of the House Committee on Armed Services
Key quote: An innovative culture is fueled by strong leadership that breeds collaboration and autonomy, embracing failure and learning, and funding curiosity and new ideas. Some organizations have been created to follow those practices, such as the Defense Innovation Unit, AFWERX and the Defense Digital Service. But there are limits to their growth and influence within the broader acquisition system.
We need a culture of collaboration that opens new pathways to work with the private sector, relooks at our approach to interactions with outside organizations and reframes the department as open to sharing research and information rather than one that is uncooperative both internally and externally. Viewing failure and the learning that comes from it as a good thing is crucial in an organization that rapidly innovates. [...]
Lastly, making funds available to support an innovative culture is crucial to success. Budgetary restrictions and regulations hamper DOD’s ability to work with outside partners and foster a culture where the workforce is encouraged to build and adopt new technologies and practices.
I hope the Planning, Programming, Budgeting, and Execution (PPBE) process reform commission makes actionable recommendations that will encourage such practices. In the meantime, Congress can play a crucial role in providing more flexible funding that encourages moving quickly to adapt and to get capability into the hands of the warfighters.
Our take: At last year’s Nexus 22 symposium, Mike Brown, then the outgoing director of DIU, lamented that the incentives are unduly “focused on the downside at DOD, not the upside.” We hear echoes of that comment in this piece. Innovation is built upon the very sort of rigorous experimentation we see with Task Force 59, Project Ridgeway, and we expect from Task Force 99. With rigorous experimentation comes failure. It is imperative that the DOD learns to accept failure (to some extent), so long as it gleans lessons learned when failure does occur.
Defense One | Ukraine Proves U.S. Troops Need Quick Access to Commercial Technology
By Michael R. Bloomberg, Chair of the Defense Innovation Board
Key quote: Historically, the speed and accuracy of information that reaches decision-makers has been an Achilles heel of armies. But Ukraine is showing the world how a smaller force can fend off a larger military foe using a readily available mix of military and commercial technologies, especially for communications. The Russia-Ukraine war is a warning: to ready the U.S. military for future conflicts our nation needs far more public-private collaboration, and fast. [...]
On the battlefield, soldiers with limited weapons use handheld tablets and mobile devices to get real-time data from satellites to target their efforts. Algorithms help Ukrainian troops rapidly determine the most urgent threats and opportunities, from the enemy’s exact location to the weapons most likely to prove effective in a strike.
Traditionally, intelligence about the enemy would be communicated up the chain of command and then down through the military command structure. But Ukrainian troops are accessing this information immediately via an array of drone and satellite imagery, some of it from publicly available sources. Having that data can be the difference between an army’s commanders deciding to advance or retreat from an attack. [...]
As the United States leads the world’s technological revolution, Department of Defense leaders should continue working to bridge the gap between the public and private sectors in ways that will help ensure the spirit of innovation is put to use advancing America’s defense and security. At the same time, the leaders of America’s most innovative companies must also see the department as a potential customer and feel an obligation to assist in the defense of our country regardless of profits. Patriotism requires more than waving a flag.
Our take: Bridging the gap between private sector innovation and public sector customers and, ultimately, end users, is key to deterring and, if necessary, prevailing in a high-end fight with a capable adversary. Bridging that gap for autonomy is the ultimate goal of Nexus 23, our two-day thought leadership symposium focused on the intersection between national security and autonomy that convenes visionaries, builders, leaders, and operators from industry, government, venture capital, and more.
Defense Scoop | Deploying contractor-owned robotic vessels could be a fruitful long-term option for the Navy, Secretary Del Toro says
By Jon Harper, Managing Editor of Defense Scoop
Key quote: “As we try to tackle the challenge of getting over this valley of death [in the acquisition system], and as we look at the rapidly changing pace of technology as it evolves, I think that that’s a model that has to be taken under consideration without question,” he said. [...]
“I think part of the key to success [in leveraging robotic platforms] is building — is the mesh network itself, right. So having it built in an open architecture sort of way where people can feed into that mesh, regardless of what specific technology they use on their unmanned platform. But they can actually feed into it so that can be fully collaborative and integrated with, you know, our Navy, our manned ships and other unmanned technology as well,” he said. [...]
“When it comes to unmanned platforms that actually have weapons on them, the U.S. government will own those and control those unquestionably. So let me make that perfectly clear absolutely. But in the ones that don’t have weapons systems on them, that are just unmanned platforms, then there’s no reason why contractors can’t actually own this — sort of like a software-as-a-service model,” he told DefenseScoop.
Our take: We are excited to see that Secretary Del Toro supports contractor-owned autonomous systems for the Navy. His support makes sense - Task Force 59 has demonstrated how contractor-owned and operated vessels have enabled the Navy to keep pace with the speed of private-sector-led innovation. We are excited to see the other services standing up similar task forces, and are looking forward to seeing similar support for this model at the other services.
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