 Yeah, are we good great? Hi, good morning from a overcast Feels like it's raining an overcast Washington, DC. Thanks for coming here for those of you in person As well as those of you watching the live stream We have a great great panel lined up here. We have Congress and Mike Gallagher from Wisconsin 8 Go pack Unless the planet Cowboys Jerry McGinn from the The office of the deputy assistant secretary defense for manufacturing and industrial based policy where he's the print principal deputy And Ashley Lawson, who's a vice president at revolution growth. It's a billion and a half Venture capital firm here in DC and really the intent of this discussion is to Talk about this concept that was outlined in the national security Strategy and then additionally highlighted in the national defense strategy something called the national security Innovation base. It's a concept kind of like innovation and venture capital that is often cited and rarely understood In fact, I saw a great a great quote from The recent Air Force event, I think it was Milo Yet, and is that his name on the defense innovation board who he was talking about in this case the far and he Concerned it to the Bible saying that it's often cited and rarely understood or rarely opened and I think I think something like the national security strategy and even the National skate national security innovation base Is in that category as well. So I think to level set What I'd like to do is read a Brief floor from the national security strategy and then turn it over to Our panel here. So in the national security strategy. It said that I guess the basis for the document was that Every year competitors such as China steal US intellectual property valued at hundreds of billions of dollars Stealing proprietary technology and early-stage ideas Allows competitors to unfairly tap into the innovation of free societies over the years rivals have used sophisticated means to weaken our businesses and our economy as facets of cyber-enabled economic warfare and other malicious activities In addition to these legal means some actors use largely legitimate legal transfers and relationships To gain access to fields experts trusted boundaries that fill their capability gaps and a road This is key America's long-term competitive advantages And within the NSS it describe it describes several priority actions. So one understanding the challenges It says the US government will develop a capability to integrate monitor and better understand the national security implications of unfair industry trends and actions of Arrivals it says that we will protect intellectual property Tighten visa procedures and protect data and underline infrastructure Which I think is self-explanatory So I think kicking things off Mike is a congressman from Wisconsin What are some of the problems that you see with the industrial base as a whole? Both here in Congress as well as back in your home district. Well, I think it's fair to say first of all Thank you for having me today. It's great to be here. I thank you and everyone at New America for you know It's a new congressman you and someone who's new to politics you you spend a lot of time in your first year figuring out Where you can have the most impact and while this is not an area of past expertise for me It's an area where Steven and others here have spent a lot of time trying to get me up to speed and in this area Where I think we need to spend a far greater degree of time thinking about in Congress It's hard to convince Congress to stop and think at any time In Wisconsin in my district were the six largest manufacturing district per capita. So while we don't have a huge military base We make a lot of things that go into military equipment and obviously we've been suffering as has everybody under the Uncertainty surrounding the defense budgetary picture, which is particularly difficult for the sub component suppliers the big primes can actually weather that storm, but if your Fox Valley metal in in Green Bay, Wisconsin It's harder to deal with that level of Unpredictability and the second thing I'd say is that even small companies completely unrelated to the defense industry or having anything to do with National Security are finding themselves victims to cyber attack in even in Green Bay, Wisconsin So I think you appropriately led with the national security strategy Which clearly states that long-term strategic competition with great powers is our foremost security challenge That requires us to rethink a lot of our assumptions and China's technology transfer and investment strategy is a perfect Example of that and it has ramifications. Not just, you know You know abroad but in places like northeast, Wisconsin And I think obviously All of us in the now security community are starting to rethink a lot of assumptions foremost among them for the last few decades We assume that integrating our economies would Would would moderate Chinese behavior induce them to become a responsible stakeholder the evidence vitiates that hypothesis I think very strongly So I think it's fair to look at past interactions and see where we can change how we do business China is aggressively sort of using their investment to gain access to information Technology intellectual property to advance their economic political military power They have a much more integrated vision of that power than we do from 2006 to the 16 invested 35 billion in tech 25% of that came in 2016 alone. They were 10% of all venture deals In 2015 they're particularly aggressive with early-stage investments And I won't surprise anyone in this room to know that a lot of those have military applications be it augmented or virtual reality AI robotics you have I think you have an Eric Schmidt lab here or room Eric Schmidt sort of famously said that by 2020 they'll match us in AI by 2025. They'll overtake us and by 2030 They will completely dominate the market space and it's not just their investments that I think should worry all of us It's also the people that they send here to the United States 330,000 Students last year one third of the foreign total 25 percent of STEM graduate students And then the 440,000 experts that they attract each year through things like the thousand talents program So I'd be lying to you if I said that that's often what I get asked about at town halls back in Green Bay We've probably spent more time thinking about Aaron Rodgers dating life than we do about Chinese You know made it made in China 2025 plans He's dating Danica Patrick. Not that I know or pay attention But I think you have to know that But I think it's fair to say that it's a it should be a source of concern for all of us And I think it's fair to say that China is pursuing a grand strategy right now, and we are not Jerry in the national defense strategy, right which Attempts to address how the Pentagon will execute the national security strategy, right? It says that the department's technological advantage depends on a healthy and secure national security innovation base Hope that's the last time I have to say that out loud that includes both traditional and non-traditional defense partners the department with the support of Congress Will provide the defense industry with sufficient predictability to inform Their long-term investments in critical critical skills infrastructure and R&D We will continue to streamline processes so that new entrants and small-scale vendors can provide cutting edge technologies We will also leverage international Partnerships and protect partner investments in military capabilities. So your offices responding to and handling the Executive order on the industrial base the defense industrial base that came out last August or July How's that going and more importantly? how How can DOD deliver I think the term that we've used before is at the speed of relevance How can they kind of respond to these statements in the NSS and the NDS? Steve well, thanks very much to you for the invitation and to new America, and it's great to be here My colleague here Ashley So it's a very timely topic, and I really kudos to new America for identifying The national security innovation base was sort of not slipped into the national security strategy But it's a new term and to really kind of It's a real opportunity and the reason why it's in there is because some of the reasons that you outline the quote from the NDS Is that rapid technology changes are changing the character of war and we've seen that in Iraq and Afghanistan over the past decade plus but that continues and The with the spread of AI and machine learning and other kinds of technologies, you know We're you know the innovation is changing fundamentally How you know how we look at warfare so to maintain our technological about? Advantage we have to maintain a secure robust innovative and resilient National security innovation base and by that we mean, you know the defense industrial base is when you think of that you think of the traditional metal benders you think of the shipbuilders the folks in Oshkosh in Wisconsin that make Ground vehicles for our forces But there's an important aspect you've seen increasingly Department is looking at commercial technologies. That's where the innovation is happening You've seen that with the stand-up of the IE wax the treaty capabilities office Even a program in my office the MD5 national security technology accelerator is really about how bring new entrants into the Into the defense marketplace, so it's a recognition that not all ideas are you know vetted through DoD investment You know investment dollars or we need to use do the investment dollars to incentivize industry to Not traditional industries and that's what we mean by the national security innovation base now to answer your question directly about this The president did hand us a task in July of last year to do a comprehensive assessment of the manufacturing and defense industrial base and that is due to the president our set of recommendations policy Regulatory and legislative recommendations is due in April 17th That has been our principal focus for the last since July and We're fortunate We've been working very hard on that effort and we have a series of working groups that are looking at some of the industrial sectors from like a shipbuilding ground vehicles Radars and the like as well as some cross-cutting capabilities such as a workforce cybersecurity and Electronics, so what we've done to date is we've we had an interim readout with the at the executive offices the old executive office building with Our inter-agency senior task force about 10 days ago and in that we presented our draft initial interim findings for from the working groups and with where we identified risks in the manufacturing industrial base From our analysis And then how we're taking that those those findings and turning them into recommendations for addressing these risks and we're so in the process of that and I'll schedule to deliver to the president in Almost next month kind of mid mid-April that's what we are in the executive order awesome great Ashley see you have a deep background in venture investing currently with revolution and They've recently launched their rise of the rest seed fund with a number of individual investors around the country designed it to kind of drive that innovation into You know places that aren't on the coast so to speak places like like Wisconsin So interestingly in the national security strategy. I wanted to read off a brief blur from that But I think might might be of interest to people here. It says that the National security innovation base is the American network of knowledge capabilities and people including academia the national labs and the private sector Protecting the national security innovation base requires a domestic and international response beyond the scope of any individual company Industry University or government agency the landscape of innovation does not divide neatly in the sectors Technologies that are part of most weapon systems often originate in diverse businesses as well as universities Colleges So from your perspective From a technology and a venture investing perspective How can the private sector work with the US government to bolster our innovation base? Both here in DC as well as Across the country Absolutely. Well, thanks so much for having me here today And I think that this type of conversation is exactly what we need to really start to foster the right types of Conversations and collaborations among public and private sectors Particularly within security and it's a cyber security especially public right private partnerships are the only way that we're going to make any progress As you heard and as you saw with the NSS report We lose hundreds of billions of dollars due to IP theft predominantly through cyber attack now There's 16 critical verticals of infrastructure that we have to protect and that's everything from the national security base Which we're talking about here today to financial health care and other sectors So the scary thing is when you think about protecting those critical infrastructure vectors is the fact that not only are we losing money and resource to theft of IP, but now we're starting to see an increased proliferance of Attacks that are disruptive or destructive so The issue really becomes that the government has the best insight into the data That's that's showing us where nation-state actors in particular are starting to attack and that isn't getting back into the hands of the Innovative startups in the nation who have the talent and the private capital behind them in order to continue to innovate So what do we need to do about that? I think there's a few things number one I think that we need to start getting better about sharing that data such that the private sector can Commercialize technologies that can then be sold back into the government for a lower cost and with higher effectiveness In addition to that the government already has programs who are non-dilutive financing for startups such as Incutel and DARPA Which some of you are probably very familiar with we need to improve and enhance on those projects Such that we are investing in products and technologies that are commercially viable So for my standpoint in venture capital as you all know Incutel for example They will they're the venture capital arm of the the intelligence community So the intelligence community customers will come to them with a problem Incutel will find the best company and partner with the private sector in order to fund that But the trouble is that a lot of times those technologies aren't broadly commercially viable Which means that I have a problem bringing that back to my limited partners and putting resource in it So I think that to the extent that we can start thinking about broader commercial viability and dual Track investments will be very well served Great. So Mike you touched me follow up on a couple of things you guys said you touched on What China is doing to us what is Congress doing to address this this threat from China in Particular but you're really from many sophisticated nation-state actors sure and also I mean if you can leave that more broadly and I think a fundamental question is which is What do we what do we really need to do to change and how much of that originates in Congress interesting? Yeah, definitely. I'll try So first of all, I do think that the budget deal that we we struck a few weeks ago is a significant achievement I think it begins the process of getting us out from under the damaging effects of The BCA of defense sequester now that being said it's a two-year deal We still have two more years of the BCA on the back end and we still need to sort of learn how to flex these muscles again of actually Strategizing first and then having a budget conversation Afterwards rather than allowing budgetary constraints to affect all of your strategic decisions So that's one thing we're doing in Congress, which it's been a hard fight over the last year, but I think it's headed in the right direction But to that point, I mean, it's not enough right? I mean, I think since 2010 we've cut in real terms our defense spending by 22% China's increased by at least 65% The world hasn't gotten 22% safer. It's actually an even bigger disparity if you sort of go back to 2000 they have 300 ships the largest fleet in Asia right now some of the counting gets tricky depending on what of our ships you Classify but these are advanced ships, right? These are I think they put they equaled like half the displacement of the entire British Navy what they put in the water last year So we're just going to like build more stuff and and keep the defense Industrial base healthy some other things Congress is doing in the space. I think you'll see movement this year on cipus reform The foreign investment risk review modernization act. I think I got that right firma. These acronyms are ridiculous You got a better way to do a business. I think that's a good thing I mean, obviously there's a lot of things that might evolve as that legislation works that way Do that works its way through the house in the Senate? But the idea is to get at this weaponization of capital by the Chinese by expanding the scope of transactions that sypheus can review So for example, they could now take a look at foreign real estate investments in areas that are close to sensitive government facilities they can take a look at Chinese stakes in joint ventures Taking a minority position as opposed to traditional Mergers and acquisitions how they go right now and it just gives them more authority to look at Critical technology and critical infrastructure. I think that will be positive. I think it's long overdue But the amount of cases that sypheus is looking at it's just growing exponentially They're gonna need more human beings to do that work They're probably gonna need actual stable funding from Congress to do it as well The other thing I have a small bill with the representative Conway called the the defending US government communications act with basically prohibits the government from using Technology buying or using technology from Huawei or ZTE. Obviously, there's a 2012 house Intelligence committee report that detailed the problems with both of those companies. So those are some small things Your bigger question was, you know, what role does Congress have to play? Well, I do think there's an element of Public diplomacy or education that we should be playing that we're not right now particularly in the cyber domain, you know, I had thought when I got my My notification from OPM, you know saying thanks for your service your military records have been hacked But that would have been sort of our Sputnik moment But for whatever reason all of these things happen and perhaps because it's not yet at the intersection of physical destruction or loss of life It hasn't provided that national wake-up call for the country and I sit here reading, you know Your guys documents the OCEA reports It's the work that DIUX has done Michael Brown's work is phenomenal in the space and I'm like we're We need a wake-up call right now And I think that's an area where Congress needs to take the lead and I think we need to claw back some of the Authority when it comes to foreign policy that we've systematically Surrendered to the executive branch over the last few decades No, I I agree it from my perspective. I see alarm bells ringing all over the place Yeah, and but unfortunately none of them are located here in DC Especially with regard to AI, but also it's not just software hardware displacement as you mentioned It's happening on a increasingly prolific basis and not just in China, unfortunately for us Jerry Have so you're familiar with SIFI us Can you talk about? Can you offer kind of the department's perspective on where the SIFI us backlog is right now and then also you know In the end he has it talks about shedding processes or streamlining processes, you know So that it makes it easier for new entrants and small-scale vendors to come into the department from places like Ashley's portfolio Like how was it? How is that actually going to happen? Is that something that you mentioned MD5 will help with or what's your perspective on? Let me handle the SIFI us for investment one question first So just to piggyback on representative Gallagher's comments I mean the my office is the DOD representative on the on the committee on foreign investment in the United States So we represent the department in the interagency group that is chaired by the Department of Treasury that looks at foreign investment Transactions, so foreign investment is good. You know the US government supports it You know, but they will we look we are trying to look at the national security implications of transactions That cover interagency equities, so And in that as representative Gallagher was talking about the we have not reformed SIFI us since 2007 which was when Finza was was drafted and that was in response to a Different threat factor. It was infrastructure critical infrastructure protection what we've seen in the past decade and Particularly last several years is the nature of foreign investment is changing and it's it can have impacts on national security But not be quote-unquote a covered transaction under SIFI us So that is what the firm of bills trying to get trying to get at it I think representatives outlines from the major proponent components of it Department is very very strongly supportive. I'm gonna what I was trying to find was a quote from Secretary Mattis he sent a letter to Senator Cornyn who's the original author of the bill And I have just quote from it that the Secretary said that do depends on critical foundational and emerging technologies to maintain military readiness and preserve our technological advantage over potential adversaries Firm it would help close related gaps and quote So it is important for us to be able to protect technology to maintain our Technological edge and so SIFI is an important tool of that export controls another set of tools both You know do use technologies in the Department of Commerce as well as military technologies under the authority of the Department of State So these these are important ways to take now technologies, but they're also defensive measures So SIFI is sort of on the five-yard line. I like to say we also need to get more proactive in terms of how we How we shape our national innovation base and this gets to the points that you were talking about about How we how we incentivize industry non-traditional industry or the the new entrance to be able to enter the You know the defense marketplace and one of the things which I want to piggyback on with you is that It is going to happen through public private partnerships You know these are the one of the programs that we have in our under our portfolio are these Manufacturing USA institutes, which are public private partnerships in advanced technology areas 3d printing aim photonics digital digital manufacturing Advanced fibers and textiles and these are public partner partnerships They're in technologies that have both commercial and defense applications. And so we're trying to seed and Projects in these areas that are going to they're going to benefit for the department Ultimately, but also have commercial applications. So we need to do more of that when you do You know look at the ink you tell model and see what's appropriate for the you know in the defense space and see those kind of proactive investments will help Will help us maintain technological heads help educate companies about the dangers of taking Chinese money at the early stages, you know And as well as you know understanding, you know, you know helping build that ecosystem that's going to benefit our national security In the coming years, so that's a that's a perfect segue to Actually, I'd like to kind of draw you out a little bit more Jerry's comments. I think are very very valid and yet the From a private sector perspective From my perspective trying to work with companies to get them to both come into the US government to work with them And candidly to stay the data is clear. We don't really have a Evangelism problem here in DC. We have a latency problem in that we're great at getting people to come here But then they leave just as quickly as they they showed up Yeah, you know such a such a big market And and it's interesting because in the in the venture world, you know venture funding rounds, you know Range between 12 and 24 months, you know, the average DoD procurement timeline is between like 12 and 18 months So which also roughly equates with more as law which faces says you know technology in this case processing speed Devils every 18 months. So basically you're you're literally running against time And so from a private sector perspective As well as a venture perspective You know the tendency is to kind of dive into dive into live these recommendations Say, you know, they'd be great to do like a coordinate a coordinating group or maybe have a brief to Congress But the challenge is number one, you know venture investing the last time I checked is not a not an eight to five job The start of life is certainly not an eight to five job These men and women are doing their best to create value for themselves and others So how how can the private sector, but specifically the tech industry and Venture the venture capital industry were at large engage on a lot of the points that Mike and Jerry have been making I think that's the question of the day, right? You know as as an investor I am You know my job is to invest in businesses that are growing very fast and a lot of times I actually shy away from companies that have a lot of government customers specifically for the reasons that you talked about so You know that and that's not specific to me That's an industry-wide kind of paradigm which needs to shift So you think about, you know shortening that the procurement time periods you think about, you know Getting in front of commercial businesses more quickly and really explaining where your your your issue is and how you can work together to Commercialize I think you know to the point about data, you know as I mentioned before it just as a statistic here So the average cost of a hacking attempt is zero dollars for a hacker The revenue to that hacker is a hundred and fifty six dollars on average per record There are hundreds of thousands if not millions of records stolen and at any particular attack, you know Which means that the the demand is there for hacking, right? And we the government alone can't you know come in and protect, you know these critical Verticals 90% of those critical verticals 90% of critical infrastructure and generally is privately owned So I think you know it really becomes Inherent on us to to come up with some better skills of the communication I think it's right on I think it made me think about something that we in Congress should also be thinking about which is Okay, so how do I explain this? All right? There's certain things we we can't do that for example the Chinese Ken, right? The Chinese has devoted 250 to 300,000 PLA soldiers to cyber that's far bigger than the Marine Corps So we just don't we can't do that But and we can't really adopt sort of their model of military civilian fusion But I do think we need to think creatively about how do we allow Some of the most talented people in the private sector to perhaps serve for a period of time in your building or in uniform You look at all the services right now are trying to sort of grow their own organic cyber warriors Which is all well and good right you'll talk to the common on the Marine Corps say you know I'm thinking about a guy a marine wants to become a cyber marine We're gonna have a specialized career track for him or her kind of like if you were to do marsock be a special operator You can be away from the flagpole you can do your own thing That's good, but I still think we're not gonna get like the world-class coder to you know Join the Marine Corps at 19 get a high and tight do a bunch of pull-ups all the time I mean that could be uncharitable to our coders out there, but I think we need a more Creative model and we're thinking about that will herd has some good ideas Earlier and you know as maybe an unpopular comment as the private sector guy in the room here But I actually really believe that a big part of the cyber challenge gets solved through insurance. So cyber security insurance You know not regulation. So, you know, here's your policy, you know company ABC Well, here's a few things that you must have in place, you know, it's like a doctor's visit You know, this is your your your well-visit. These are the things that you have to do In order for me to ensure you which is a requirement You know, we look at companies a lot of one of our companies in the portfolio is called tempus completely not related to anything here but they use machine learning and data to help on Colleges better predict treatment courses for their patients and we were talking to Eric Levkovsky the founder there And we said we know why why haven't you left this to government? Why are you doing this? Why are you investing these hundreds of millions of dollars in solving this problem? And he said well because the government's not moving fast enough because you know in order for the problem to get solved People got to make money off of it. I know that I can make money through private investment So I think there's a lot of areas where we can certainly coordinate better But I think your your analysis really points to something critical Which is the paradigm shift I think we need is to understand that in this in the cyber arena at least The private sector is often the main effort not the supporting effort and DOD needs to think about what that means Yeah, I was wondering if I go back to one of your questions that I didn't quite address But I want to circle back to it about the operating the speed of relevant So what we're talking the discussion here on the panel is that you know that the department has got a long way to go To be become a more dynamic customer We know how to write quest for proposals. We know how to post, you know Solicitations, but that doesn't really help us operate at the speed of relevance in a lot of areas So so we really need to make kind of some fundamental changes and that's where why the secretary has outlined three priorities For his tenure and one of them is business reform And so and that is very much charged with our under secretary Miss Ellen Lord has taken that and we really are pursuing that aggressively and there's three dimensions to that One is a process to mention Second is organizational and third is cultural so on the process side this gets to how do we get more? get better partnerships with With industry across the spec up and down the spectrum and this goes for You know our our traditional prime contractors and subs as well as the not nontraditionals or You know innovators and VC funds and the like and so that is you know Very much part parcel of you know using other transactions or stories or OTA is other kind of vehicles public fire partnerships We've talked about we just got to be able to do that more so we can cycle better at the speed of business organizationally Congress has directed us to do every organization What used to be acquisition technology and logistics we are now 200 secretaries acquisition is in statement and as well as resource engineering and the idea for that ship was to help us focus more on the research and engineering side on innovation and not be encumbered by you know the importance but distinct work of overseeing programs and the execution of Delivery of timely systems and that is As a secretary Lord said in her testimony last December 18 L needs to be the strategic body With focus across the board on driving affordability and accountability reducing timelines and equipping the services That's the military departments to execute their program So we become with the function of shifting from where we're directly overseeing to where we're enabling the military departments to fight organized training equip their warfighter So that's an important effort and we're we've started the we've now been reflagged and we have under secretary Griffin as a new R&E and we're working through the the Reorganization and in cultural you know the what we're the theme here is what do you need to be able to take more risk and be able to we're very good at being compliant and and Developing you know processes, but we need to move to a culture where we can innovate more rapidly taste risk and reward risk Instead of just rewarding the you know program continuing on time and on budget, so so that there was a let me Slightly shift gears here. I think in June of last year. There's a greater article and won rocks by Mark Cancey and a colleague over at CSIS and Mark wrote this basically it was an article about existential warfare. I mean it's very you know Very cool topic unless you're in the middle of an existential war Basically what he said is there's a sentiment right now that if we get in a another kind of World war situation His conclusion was that we're not gonna basically American our way out of this right? This is not something where we're gonna just ships are just gonna start rolling off the assembly line and we're gonna engage the you know this you know Mythical industrial base. It's not just gonna click in the action. He gave a very telling anecdote. He said in the The run-up and the first desperate year after You know America was drawn in the world war two You had you know suddenly all these all these jeeps rolling off these assembly lines And they said that was that was able to happen because the difference between a Jeep and a Ford pickup truck Who was making the Jeep or whoever you know was minimal, right? Similar drivetrain similar tires similar everything now you have the JLTV right which has what? 2000 plus mill spec parts This is this is not something that yeah, so I mean unless you know unless Mike and start creating some more factories and You know there's a I'm kind of walking you down a path here Unless you can start creating more factories or some kind of latent Specialized and that's the key specialized military capability to produce the hardware and also the cyber force if you will Then you're not gonna this is not gonna be something that in six or nine months all of sudden we come roaring back into action So I think having kind of thrown that out there Would love to get your thoughts on How can we begin to address this both from a hardware perspective? As well as from a we talked about cyber Ashley You know from a cyber force perspective and really and honestly from a cyber force perspective Is that something that that DOD even needs to do do we do we even eat a 3000 men and women you know Do the cyber force or is that something that comes comes from the club? Well, you know, I think they were all very fortunate in that the talent pool here in the DC region is Unparalleled from a cyber security standpoint You know what we lack is the ability to this is just from my views on the sort of cyber security workforce as it is in DC So we have no shortage of the technical talent because we've got the amazing folks coming out of agencies and other governmental Institutions, so you know, I think that that training ground has been really critical for building DC into a world power house in Cyber security the challenge that we face is that we're not able to attract the right sales and marketing talent a lot of times The right operational talent to DC because the the base just isn't large enough There's not enough companies to really attract, you know that outside talent. It wasn't necessarily technical fortunately, we're kind of in a paradigm where There have been a number of big exits in the space and continue to be big exits in the space So fire I am and the intonable to name a few and now we're starting to see folks that are leaders within those Organizations go out and start their own companies see the existing companies, etc. So, you know I think that from a talent perspective We're in we're in, you know, good shape, but You know some work remains to be done to make DC into a more attractive You know region I Would just say a few things one you and can't see on our right And we I tried to write something basically as a thought experiment if we found ourselves Drugging into a great power conflict. Could we even gear up for it? And I think there are serious questions I think the answer might be no right now Which is very troubling and as you know, the Marine Corps is dealing with right now. Sorry. I'm a Marine. That's my bias You know, we've never had to think about fighting to get to the fight We just we've always been able to sail our ships with Marines on them everywhere We wanted to go we had air superiority. We had superiority across every domain now. We don't So a conflict breaks out. I mean that's going to be very ugly. So what do we do about it? Well to go back to what I think I said initially I do think that consistent Budgetary picture is critical and that's what we should be doing in Congress, right? I mean you sort of look at defense spending since World War two. It looks like a sine wave huge Peaks very low valleys. That's because we always do this to ourselves We sort of believe this idea that we can Disinvest in defense during during times of peace We have some sort of peace dividend and then we find ourselves dragged into conflict on someone else's terms And then it cost us more we have to ramp back up So avoiding that and learning the lessons of history I think are important I do think we need to think about are there ways in which We can incentivize More investment in hardware, which you mentioned before, right? I was with a top, you know when the top type cyber security companies in Silicon Valley their CEO was talking to him And we haven't used like his very siskit analysis everything But it basically came to this point was like listen, I could boil us all down into one thing Which is we need to stop buying Chinese stuff like it's just vulnerable I mean we had the zombie zero attack in 2013 where there's a Chinese scanner Manufacturer that preloaded malware onto it they shipped it around the world and infected all these companies and sort of beaming it back To the mothership at the company located right next to a university in China that had been implicated in attacks on Google So could we create some sort of and I know I think this was in the OSEA report I know you guys are thinking about it, you know, just do d put 500 million dollars in some sort of account And with matching private sector funds for hardware investment The final thing I it's but still I know I'm a I'm a skeptic of Third offset thinking to the extent that you have to choose between capability and capacity. I find myself on the Capacity oh, I get confused We need more perhaps DoD provides the exquisite platform upon which we can put Cots commercial off-the-shelf stuff and sort of fail quickly and understand what works and what doesn't So Steve You posed interesting question and I did read the article From last last year and I have a little more optimistic take I guess I mean I've read Freedom's Forge Which I highly recommend it's a story of kind of how they built the investor base that won World War two And that was not done overnight. I mean it was done over time to And it created the you know many of the capabilities we still have today in our industrial base But I think to get no we would not be able to respond today You know immediately so one of the things we've uncovered in our industrial base Analysis for the executive order is sort of five what we call systematic causes That many of them have been alluded to today, you know First of all is sort of the impact of sequestration is the uncertainty of defense funding, you know of government spending, you know being on continued resolution all the time creates all kinds of uncertainty makes it hard for companies to plan makes it Unattract less attractive for companies and in the marketplace. The second is this competitor Industrial policies of competitor nations that we're talking about China's the pacing challenge But you know, there are other countries that have industrial policies as well But we see that very explicitly in the case of China that they were very public about the Where they're investing and and how much they're investing so that you know, they and that has impacts Third would be impact of our workforce. I mean we even during the high of the recession We had significant shortages on stem talent across the workforce I mean, but it's not just high-tech It's not just down, but it's also high-tech welders for in our nuclear engineers and As well as for shipbuilders, you know Those capabilities are We have made some improvements the companies are investing a lot in stem, but it's still we're still way behind Where we need to go for the workforce of the future Fourth is on manufacturing Our manufacturing base has eroded which you know gets to why Why the representatives maybe a little more pessimistic on this is that you know our base of Is smaller just a pessimist by nature I'm catholic. I always feel like Exactly my fault But you know, but the it is a fact that you know, we've lost over six I forget exactly how many I've got it here We've lost Tremendous amounts of many since 2000. We've lost five million manufacturing jobs. So Again, we've made some improvements that is leveled off a bit as we focused In recent years on advanced manufacturing, but you know, it's still a systematic challenge And then the last one is is we've also been talking about it us government practice buying practices how we do business is Struggles to to be at the speed of relevance. So we need to improve how we do that. So these systematic Causes lead to different risks that come up in the industrial base And we have to attack the each of those in order to really, you know, get at Where we need to go for the future and that comes through policy changes that comes through regulatory changes that comes through authority changes And some investment changes and I would add education to that as well So, you know, specifically within cyber security a full 50 percent of the required workforce Is needed to do the jobs in america is Not there So we don't have people with the right backgrounds to fill those jobs Which creates gaps which creates holes, which you know leads to vulnerabilities So, you know, we need to start educating our youth and you know, maybe even mandating certain courses within college curriculum You know that will help prepare our next generation it's interesting uh, and I'm going to open it up just a couple questions a couple questions. Uh, we're almost at time, but uh while you're queuing up your questions that um Your point actually is very interesting, especially now that we're I saw a report late last week that um, they think that we're like nearing full employment So it's not like we're at 10 10 or 12 percent unemployment. I mean we're nearing full employment and we have these huge huge gaps The argument before was oh, well, there's all these jobs out there There's people that in theory could fill these jobs, right? And it extends will be on cyber security, right? Like so if you think about this new model of shared economy and machine learning and AI and all of these new technologies that are coming up There are sure going to be some jobs that may be displaced by that not as many as I think people worry about But we need to start developing a more nimble workforce and a workforce that you know Can rat readily switch and understand and engage with these new technologies We are we are at uh, at least in wisconsin Near full or full employment But labor force participation is still at a 30 year low So and you talk to any business. It doesn't really matter what it is They'll say this I literally hear this every single day when I'm back home It's uh, you know, we had I had you guys talk about jobs. We got a ton of jobs We just can't find human beings to do the job We had 20 people come out for a job 10 had the basic skills Three passed the drug test and only one of the three is showing up today I've heard a version of that more times than I can count. That's a huge challenge. So you could say well This uh, we don't have the requisite skilled workforce. So that might be an educational Problem that might require us to invest more vocational technical training Uh, you an alternative theory would be they just don't want to do that type of work I don't know. I mean, it's a very complex thing. It's over determined. Um, you could say you could criticize some of our Uh, our social safety net programs as incentivizing people to stay out of the workforce Uh, but we got to figure that out. I tend to think we're going to be stuck at The best we can do is three to 3.5 growth until we figure that issue out So in the interest of time, uh, let me take a couple questions in a row like you three and please introduce yourself And uh, keep your question brief and make sure it's a question Please Matt Thank you. I have a question for mr. McGinn on the competition in the dod industrial base Um, when you look at programs like the next generation icbm You see now that one of the key suppliers orbital is about to complete the Merger with north of gremans. So that's a seems like a major loss in competition in that sector and This is the nuclear triad that dod considers one of the top priorities. So what concerns do you have now as Potentially we may have more of these types of transactions and specifically, you know in this situation You will have to deal with the impact of that. So any thoughts you have on that? Thanks Okay, hold that question sir real quick My name is serene peter from the russian embassy Um Today you are covering The issue mostly from the internal perspective, but uh, as we all know internet is a kind of global phenomenon In this regard, uh, I just curious Don't you think that it would be or will be in the interest of the united states to work out some kind of international norms of behavior in internet for example, russian federation has uh Suggested to Even proposed draft united nation convention on cooperation and combatant information crimes So don't you think that having established obligatory norms of behavior in internet Will be in it will be in the international in Will be in the interest of securing United states here. Thanks And the last question right there, please Hi there. I'm john funge with data tribe and um I was curious for ashley when you're sizing markets, uh, you're looking at perspective investments How do you think about expansion beyond the united states if it's some really interesting advanced cyber tech thing like like When you're making assumptions around how those businesses will proceed outside the us and what limits they might have on them And how well they can penetrate those markets. What assumptions do you make when you're sizing those markets? They'll actually want you to lead off and then feel free to wrap up any closing thoughts down the line Great Yeah, so well the challenge with the cyber security market in general has been that in the us market between 2014 and 16 all of this money went into the sector chopping up these necessarily Already segregated bubbles, right? So the the profile of a hacker is different Some hackers are going to do a phishing email and the hacker that's hacking into an erp system Is completely different from a skillset perspective. So as a result Technologies have developed to protect each particular risk Now all of this money flowed into the space in 2014 to 2016 And that chopped up already small total addressable markets So you rather than having three funded competitors in a particular market now you have 20 And none of them can get beyond the requisite size that they need to really scale domestically or internationally We're starting to see some shakeout of that happening in the venture community here So a lot of times an a round or a b round might have been wildly mispriced and those firms are having trouble Getting their next round of capital. I think we're starting to see some right sizing there Um to more directly address your question though on international expansion when I'm looking at markets I'm looking to see how already You know divided, you know the the TAM is for a particular segment And how likely it is that one or two or maybe three of those companies can break through to when the us market And then I look at international expansion as an icing on the cake on top of that So that's kind of my perspective and then in terms of the your question related to internet Use and protocols the internet was designed with with banana anonymity in mind, right? And so that's a really hard thing to change and I think that you're right You know, we we do need to see some you know controls placed over internet and trusted parties and things of that nature But the the challenge has just been the the vastness of how you do that without stepping on a number of different toes Sure, uh, yeah, I'll address the competition issue. Um, yeah So one of the things my office does is we view uh mergers acquisitions that um for department of defense and that's under department of justice or federal commission lead as again interagency effort and that is yeah, so The guiding principle under that is is competition. So when we look at a transaction, you look for the impact that it has in that marketplace and you want to you know Ensure as much competition as you can You know, but they're when you look at a transaction they're reviewed on a case by case basis In the in the case of or belated k actually they're the the specific program you cite the ground-based strategic deterrent actually the primes are bowing and north of rumin for for those for that the current phase of the effort so And there are two launch providers Or belated k energy at rock and dine and you know that those those are the two rocket two launch providers and Even if the the transaction goes through then you still have two launch providers So it um, well, that's how we look at it as we focus on competition And you ideally you want to have multiple, you know three four competitors in their space But it's a balance of how how healthy is the marketplace and You know that you don't want to as a department. You don't want to get in the middle of business But it's what you do want to make sure as much as possible you can maintain competition Um on the the internet question, you know, I think what the the national defense strategy and the national security strategy make clear in my mind is that while the u.s. Certainly has an interest in Strengthening and extending the us led global rules based international order Neither china nor russia shares our conception of what that order should look like and so I think there would be significant disagreement about what those norms Are and I think this is particularly pronounced in the cyber domain So yes, while I agree that we should lead and set the rules of engagement It appears to me that it's sort of the wild west right now. Actually I mentioned earlier Obviously chinese intellectual property theft costing on the order of 300 billion a year 100 billion sales 2.1 million jobs similar albeit less dramatic skill with the sort of russian cyber crime national cyber security awareness month in october I believe began with the revelation that an NSA contractor went home plugged his stuff into a kaspersky Antivirus software and it beamed it right back to the mothership in russia So I think we have a lot of disagreements. We're probably working through right now. That's not to say that we're destined to Come into conflict But I think we can be open and honest about those disagreements and hopefully work towards a norm that everyone can agree upon It's great. What we need to have you guys back is there are a number of things that we left on the table So real quick. I wanted to thank the great work From David Sturman setting this up as well as amory slaughter and peter bergans leadership here Thank you very much for coming and this will be one of many discussions. We have on this topic So please join me in thanking our panelists