 Welcome to the get the podcaster enterprise leaders delivering timely insights for today's global economy and tomorrow's competitive advantage. I'm your host Chris Kane, president of the Center for Global Enterprise. And on today's podcast, we'll discuss the global innovation race and how the US, China and other nations are positioning themselves for leadership. The United States has been an innovator and technology leader since the first integrated circuits were invented over 60 years ago. Through a combination of government investment, entrepreneurship, university backed research, available seed funding and eager financial markets, the US has led the world and set standards in a lot of technology categories. For example, computing processors, memory, biotechnology, software, personal computers, supercomputers and platform business models. But no lead is guaranteed and other nations, particularly China, are making rapid advancements and semiconductors, artificial intelligence, quantum sciences, robotics and cybersecurity. Add to that the economic decoupling taking place between China and the US is forcing CEOs, business leaders and national leaders to rethink their investment in operating models. Globally integrated enterprises and supply chains are having to restructure national security planning is undergoing reassessment. And at the same time, a company and countries capacity for innovation has been shown to be a long standing strategic advantage that raises economic growth, national security and living standards for employees and citizens alike. To help us better understand where the innovation race is today and who the leading players are, we sit down with Sam Palmisano, Chairman of the Center for Global Enterprise and Board Chairman of America's Frontier Fund and Gilman Louis, co-founder and CEO of America's Frontier Fund. Sam and Gilman, welcome. Gilman, perhaps we can begin with you. What is the America's Frontier Fund and what's it trying to accomplish and who all is involved? Well, America's Frontier Fund is a nonprofit focusing around the US development of deep technologies. We think it's critical that the US continues its leadership, not only in the science and technology side, but the actual capacity to provide the technologies that the world is going to depend on for the next 20 years. And so we brought together scientists, engineers, investors, government executives, as well as executives from the United States to focus in on what we can do to rethink about how we do innovation in this country and how to unleash the capital markets in a way that's going to support the development of these new ecosystems that our country and the world is going to depend on. It's really fascinating that you've chosen a nonprofit model. I don't know if that's a prevalent approach or not. To me, it seems to be a little bit very unique. But as a nonprofit, can the fund really move the needle in this race to the top and how will the fund manage the returns for its public and private investors? But first of all, for us to be successful in returning investment to the United States, we had to demonstrate, particularly to investors, that investing in the US is more profitable than investing in other countries, particularly authoritarian countries. And in doing so, we have to not only show the path of what the opportunity sets are, but we also have to build out the ecosystems that the US has so enjoyed in the last technology revolution, again, in the next technology revolution. And so as a not-for-profit, we could bring many other kinds of tools to the table. Besides the tool of using venture capital, we can actually work with the US government, state and local governments to actually think through what are the appropriate policies that is going to allow innovation to flourish. Many of the activities that we need to do is to unleash all of the US's capabilities, not just the coastal cities, but the heartland as well. And to do, we need to have the right clusters of support, the legal frameworks, the teams of individuals, not just the science and technologists, but the workforce to be able to use these technologies in ways that that's going to create the new engine of production and manufacturing as well as software and other technical areas that the US wants to lead in. So Sam, as a technology leader all your life and as an active investor now in technologies and national capabilities, is the return issue for a non-profit organization like the Fund unique and harder to explain to people or do they get it? My observation is that people get it. I'll start with the board in the sense that these people are passionately committed to the country in the US's leadership. And they come from a background of how do you get that done? They've also had a wealth of experience in knowing what works in the existing models and where it needs to be enhanced because there are existing models that work. I mean, Gilman's the founder of Incutel before this. There's DARPA. There are other things that work, but they work in a way that tends to be more specifically defined versus broadly defined. And so the reason why we thought this was very important is because some of these research areas go back to our background at IBM. The cycle of time when these things could be 10 to 15 years of quantum sciences, the material science around semiconductors, those sorts of things, the tooling, et cetera, et cetera. So you need the combination of this vision of a fund that can do the technology roadmaps, but at the same time, when these technologies are commercially viable, you need the private sector to do what it does. I mean, we want to get involved as private investors when this stuff's ready to be commercialized, not when it has five or six or maybe 10 years of R&D involved, because you're waiting to see when it becomes more commercially viable. So fundamentally, I think what Gilman's architected here, and he is the genius behind all this, and he just recruited all of us to help him, is this model that basically takes the best of what's required from the long-term research perspective, but also participates with the VC world, the private equity world, so that when these things are commercially viable, they would take over and then the market would do what the market does so well. So Gilman, you've had a long tenure working in the space between the private sector and the public sector, and you've seen lots of successes, and I'm sure you've seen lots of frustrations as well. But this concept of frontier technologies is an interesting one. Can we talk a little bit about what kinds of technologies a fund is considering or will consider as frontier technologies, and maybe what are the top five frontier technologies you both think people should be focusing on? Well, our list is a universal list of every country in the world who wants to innovate has the same focus areas because everybody realizes that these really are the keys to unlocking, not just economic, but environmental as well as national security kinds of requirements all built around these kinds of critical technologies going forward. So the obvious first technology is microelectronics, because from the outside of the art of microelectronics, you can't have advanced communications. You can't do the next generation of computing or cell phones don't work. Our critical infrastructure is brought down to the knees. So leading the next generation of microelectronics is going to be really important, particularly as we approach a Moore's law. The current technology has a logical life. We've enjoyed the fruits of Moore's law for the last 20 years. It's coming to an end. We need a new foundation of technology. Secondary, I think everybody's very excited globally is the opportunities and capabilities and the promise of artificial intelligence. Now today we use narrow artificial intelligence to solve very specific problems. But as this technology matures and becomes much more generalized, the capability of how we'll transform our lives, not just in how we make things or how we solve problems, but every part of our lives from how we learn to how we live, how we take care of our health. All that with the human machine teaming is going to be transformative. The third area is going to be advanced manufacturing. This idea that we will have to move supplies to points of low cost labor overseas and travel thousands of miles of ocean to go seek out the ability to produce and manufacture goods. It's an idea that's coming to that. I think with advanced manufacturing, with robotics and digital design, we can now manufacture very close to the points of consumption, which will again unlock the workforce to actually begin to produce goods. That's just not how do we produce more of the same, but that is specialized and personalized. Advanced materials is critical for all the things that we're going to be building out. And I would also say that two other areas is all areas of biology and energy production and storage. I think particularly as fusion discoveries are taking place on literally a weekly basis, we just recently had the ignition in one of our labs on a fusion reactor. That's the thing that that technology is fastly going to be approaching us and can transform how we think about energy globally. Sam, thoughts on frontier technologies? Well, I mean, I think that the right areas of focus, as Gilman said, I mean, they are the ones that are going to keep the U.S. ahead of the rest of the world and talk about China, but also there's some partners that China has that will try to take advantage of these technologies. But fundamentally the key, and I think in some ways competition is good, Chris, and because it's the wake up call. I mean, if you think about it, Gilman and I were talking about this pre-pandemic piece of supply chain issues all over the board with 6A and chip technology, how it's impacted everything from consumer electronics to automating, not just the computer or the IT world. I think this would be a harder thing to sell. But the U.S. has woken up to the fact that these things are really, really should teach for the importance of the country from national security perspective and the lifestyle of our populations perspective of future employment and standard living perspective. So I think the world has awakened now to this reality, which is the plus. Now the key is how quickly we can respond. And this is where Gilman jumped on this thing. I mean, he put this, he put this together in less than a year, literally less than a year and got this thing funded and going. Now we're off into the China actually build it into the operation we all hope it will be. But my guess is if we went back in time, Chris, pre-pandemic, this would have been a harder sell. So let's talk about the investor side. Sam, you very well articulated who is, what types of investors are interested in the longer term development research? And what types of investors are more interested in the commercialization and going to market activity of an investment? Just in the last nine months, the U.S. government has opened up a huge volume of investment into our country. And just with three pieces of legislation, the infrastructure bill last November, the CHIPS Act in July, the Inflation Reduction Act just a couple of days ago, that amounts to about $1.5 trillion in new investment going into the United States in certain areas of innovation and technology. That's an enormous amount. That's about 6.5% of the U.S.'s GDP. That taken in contrast with China and their approach to investment in public sector economic development, such as their five-year plans. There's been some interesting research from Stanford recently about the impact that China's five-year plans have on the markets and in different segments. Sam, you have worked directly with countries and governments over decades and you've seen the commitment that other governments have made to compete against the United States or partner with the United States. I just talked about the investment that the United States has put into its economy and its technology developed just within the last nine months. The question I really have with both of you is staying power. We live in a society where priorities seem to build up quickly and then fade quickly and the staying power of a government investment sometimes diminishes or at least the commitment to that investment diminishes. Could you just both talk about the competitive differences between the United States and China and other countries for that matter, about after they're done with the inputs, the investment, what their track record is for committing to the execution of the opportunities? Well, the issue isn't the amount of money. You could take the 1.6 and then you could say that China three years ago outspent the United States. You could say, well, gosh, they're already outspending us and they have this five-year plan. However, it's not the amount. It's how you focus the amount. And that gets back to the strategy and Gil and I will call your technology roadmaps, these 10-year, 15-year technology roadmaps. That's where you need to continue to focus. Now, having said that, you also need some successes. You need short-term successes to demonstrate in the United States to your constituency or the taxpayer that this is actually working. My opinion in the past is these big initiatives, they fall apart because there's been short-term issues in the startup phase and then it becomes politicized. And when it becomes politicized, money doesn't get appropriated. Even though they passed these bills, nothing's appropriated yet. I mean, it's got to be put into the budgets and that happens in that next phase of this process here. We should focus on the aggregate amount of money, but I think that can be misleading. If we are clever about how we look at these technology roadmaps, there's a way to differentiate the United States and our Western allies. I'd add to that our complementary partners are very, very important in this game and get some short-term success going. And then, therefore, the society or the taxpayer sees that it makes sense for the amount of money the U.S. is spending. Again, you haven't seen this from the government side, but who knows it quite well. I think we should put $1.6 trillion in context, right? I mean, the $1.6 trillion is a large sum of money, but the amount of money that is necessary just to level the playing field. China is going to put $2 trillion in deep technology, so we're the next five years. It's just on deep deck. Versus our 1.6 is spread across infrastructure and many other technologies as well. The most important thing on the capital side of what is going to take to build out this technology and the staying power. The staying power is going to be much more important for industry and for the markets to support. Government money is a great catalyst. It's great to get things started or to level out playing fields, but at the end of the day, it's the U.S. capital markets. It's $45 trillion that's flowing, and unfortunately, a lot of that capital is flowing to China. We just had a venture fund raise $9 billion for deep technology investment in China, and that's a U.S. venture fund. It's our pension funds and our endowments. It's funding many of the technologies that China is dependent upon this capital to build out. So at one level, the battle, the competition between the two countries is actually competition over capital. Now, there's some advantages of top-down governments, right? They can move very fast. Xi can just think or his team can think about something and they can go off and implement. But top-down isn't always the most effective way to get things done. I mean, we believe in a market economy. We believe that innovators and entrepreneurs and companies should work together and compete with each other to create the best technologies and make it available to the widest possible market that's out there. We don't pick national champions. We don't anoint individuals to lead sectors. You have to earn it here in the U.S. and in the West. And our view is, well, it may feel good to have the short-term plans. The big power of the United States and its allies is that we're vision-driven. There's a reason why innovation happens here at the rate it's been happening over the last 50 years because anybody can be an innovator. And Sam's right about these roadmaps because these are hard technologies. But I would say to U.S. investors, wouldn't you like to have had the portfolio in the late 1990s and we were doing deep-tech investing and had Intel and applied materials and NVIDIA and Apple and Amazon and Google in your portfolio? Those companies were created here. We were willing to have the patience to invest in those technologies in the 80s and the 90s and early 2000. And then we got spoiled because of all of that foundational technology allowed investors to invest on the apps layer, you know, fabulous software-only investments. And they could be productive as long as the foundational technology was still in its leadership position. But as Sam was saying, we're getting our wake-up call. The wake-up call isn't just microelectronics. When Huawei took the lead in 5G, that was not the Chinese only move. It was also because of our neglect to go after in a very aggressive way to invest in 5G infrastructure, even though we led the world in 4G LTE. And now we're trying to figure out a way to get back. We can't allow that to happen again in all these new technologies. As you both are talking, I'm thinking that your business model for the fund is even more important. You have assembled all the different stakeholders who are necessary to go from vision to investment to development into execution. And let's hope it can be as successfully performed. Let's talk about other countries if we could. Are there other countries beyond the US and China that you both consider to be noteworthy and that we should be paying attention to? First, we got to look at the Indo-Pacific region, right? You have countries like Japan who leads the world in manufacturing and has been doing so over the last 30 years and continue on advanced manufacturing to be the engine of those capabilities and those technologies. You have India with immense software resources and great talent. Quite frankly, the engine for many of our software companies come from India. Israel has unbelievable talent in microelectronics and microelectronics design. The UK, if you think about Google's deep mind, but that technology came from the great university systems that came from the United Kingdom, France and its aerospace capabilities. And let's not forget places like Brazil and Chile, which also has great immense technical, particularly on the software capabilities. So this is the area where the whole world gets to work. The US can't do this alone. It's not just because we need the rest of the markets. It's because we believe that if you do innovation in a way that's not designed to support autocracies and is done as a ground swell of where talent and ideas can brew together to create the great recipes for success rather than this top-down approach. I think the rest of the world will gravitate to a much more democratic model of technology development, leadership and trust. Because at the end of the day, these technologies are put into the critical infrastructure of information, how we depend about food production and our energy. And you have to think about whose technology do you really, really trust? Is it technology that's done in an open way like open science and open society and open technologies? Or is it a black box and clothes and held captive to the whims of a particular government's leadership? Those are the choices we get to make. Every country now is participating and I think people are beginning to realize around the world that it does matter where the origin of these technologies come from and whether or not they get to participate as partners or are they simply somebody that they're trying to take advantage of their markets? I think the nonprofit can actually facilitate some of these initiatives. It takes a long time to get governments to come together and collaborate and do specific things, not the initiation phase, but the specific things that mature in these technologies. So that I think there's a role here for AFF, but honestly, to take like-minded partners who believe in what Dylan articulated in the vision of why we think an open society is so important and bring people together. And maybe we can accelerate that because there's a mechanism here when you go through the funded software, it will invest, and then the other side is fun where people in the private sector could also invest, not just the government entities. I believe there could be a mechanism strategically to start to accelerate this connection. We spoke earlier about the decoupling of the U.S. and China economies, in part, not totally, but in part, and with that decoupling it seems to me comes a new imperative, if not opportunity for partnership. We're seeing almost an economic Cold War developing, and with that development, different countries are going to be creating different partnerships with each other. And I think the frontier technologies that you both in the fund are focused on providing real opportunity for new partnerships that are valued based on the future, as opposed to litigating or adjudicating past disputes. But any thoughts about the criticality of partnerships, other than the organizing model that the America's Frontier Fund has used? Are there other models for partnerships that make sense? Well, there are many kinds of partnerships, right? I think for the United States with the critical partnerships between technology companies and the markets, it's actually state and locals, right? I mean, think about it, five cities over the past decade generated 90% of the innovation jobs. There's San Diego, San Francisco, San Jose, Seattle, and Boston. The rest of the country did not participate in that economic benefit. But yet, look across the country, there's at least 30 centers of technology, excellence built around research universities. So one of the things we've got to do is unlock that talent, that capacity, and we need to work with state and local governments to build out these new centers. That's why you're finding CHIP Fab facilities in places like Ohio and in Phoenix, in Taylor, Texas. Because these are the places that we're trying to unlock. I think the other kind of partnerships are international partnerships. The Quad, India, Japan, Australia, the United States, Europe, the EU. These are very important alliances, not just from a national security point of view, but more importantly from an economic point of view. One of the critical things in why U.S. tech has been successful over the decades is when we build a foundational layer of technology, we open it up so that other countries and other companies can build their technologies on top of those foundations. These ecosystems are allowed to flourish globally. And you look at our competitor, China, right? There are technologies. Are those platforms open? Are they transparent? Do they make their code inspectable? Do they encourage other countries to build their technologies on top of their technologies? Do they license their IP so other people can benefit? Our hope is not to contain China, but to help China actually participate in a much more rules-based open ecosystem around technologies. Because this is something that the whole world can benefit on. But if you go down the path of this tight control of who gets to use the technology and what citizens can use their technologies for and whether or not government influences even down at the board levels, that's not a long-term viable model that we think that the rest of the world can actually win off of. Think about the evolution of the tech industry. If you think about the evolution, it started with lockdown to pietary systems. So you're all in that moment. What chains involved innovation? There was an open source. An open source came along and it created a platform where communities of technologists could build, academics could build. There was protection rates for IP, so people were encouraged to innovate and the companies that took advantage of that thrived and those who did not take advantage of it missed out on a lot of those opportunities. But my point being is that this is the model that we think is the most successful model from an economic perspective, from an innovation perspective. The countries will have a choice. They can choose based on the model the government might have described, or they could choose a more proprietary model and they might think that China is a better bet on a proprietary model and that will be the choices that they make. The U.S. needs to make sure that the critical partners choose our model and you can't restrict partners that have great technology from our model. When you understand as the kids are great and the open source open platform wins long term, we need to partner with people to have buy into that and maybe compromise on some of these other issues that we hear a lot in the news these days. More evidence that the nonprofit operating and business model of America's frontier fund probably is more flexible and makes more sense. Congratulations gentlemen. Before we close, we like to use the last minute or so to give our listeners one strategic insight to consider. We call it our emerging critical issues moment. In one word or one phrase, tell us what emerging issue do you see on the horizon that business leaders need to put on their radar? Gilman, why don't we start with you? Risk. Business leaders need to focus on risk. When you invest, is your dollars worth more here than in some place else? Is a real long term value promising to your stakeholders going to yield in a way that has long term benefits economically, not just for your company, but for the ecosystem that you're a part of? If you don't understand risk and you're just focused on short term gains, you'll continue to make bad decisions. And Chris, I was going to use the exact same word. Whether you're a company like IBM or you're an individual investor, it's the same point. You're assessing your risk because you're risking capital in this early stage, technology, so where do you want to partner in that risk? We all understand that in the past the short term funds in China decline well. Given the most recent policies in China, I don't know that I'd make that bet. You say, well, zero COVID is great for society. It may be it is, except it destroyed the economy, which destroyed your companies and destroyed your valuations. Let's take another area, social media companies where they're rage in China five years ago. They've been shutting down government, shutting them down. Do you want to be an investor in those firms that are being shut down because somebody gave an expression of an opinion? These are risk factors that I think people have to take into consideration as they look at the future. Thank you both. It's evident that it's a good thing you two are working together since you answered the critical issues moment in exactly the same way. I want to thank you both for your time and your insights today. We really appreciate when you're coming on to the get. sponsored by the Center for Global Enterprise celebrating 10 years convening global enterprise leaders around the most important business transformation issues.