Last week, White House chief technology officer Michael Kratsios was named acting head of research and engineering for the Pentagon. Kratsios started his tenure as CTO in August 2019 after serving two years as deputy CTO. Before working in government, he was chief of staff for tech investor Peter Thiel.
By most accounts, Kratsios’s background in venture capital has enabled him to strengthen ties between the government and the tech industry. He has launched initiatives to bolster research in artificial intelligence, quantum computing, 5G communications, and autonomous vehicles, among other frontier technologies, and was unanimously confirmed as CTO after receiving endorsements from a wide range of government officials and business executives.
But some observers are skeptical of Kratsios’s ability to fill the new role. A writer for Defense One argues that Kratsios, who holds a bachelor’s in political science from Princeton, is not sufficiently credentialed to hold the position, which is typically held by Ph.Ds. A Politico story quotes a professor at the Naval War College as saying that “the criterion that seems to be getting these particular young, inexperienced people in is personal loyalty to the president.”
These criticisms highlight the growing gulf between Washington and Silicon Valley — a disconnect that undermines the U.S.’s defense capabilities and hinders technological progress.
In the defense establishment, experience and credentials play a major role in determining rank. Not so in the tech industry, whose most celebrated founders are college dropouts. But government agencies look to experience as the key factor in both hiring and procurement decisions. The government’s Requests for Proposal for software projects treat engineers as undifferentiated inputs, compensating contractors based on the number of developers on a given project and paying more for those with more experience. This cost structure punishes efficient, lean startups and rewards bloated firms with large numbers of mediocre employees. As tech investor Trae Stephens put it in a blog post, “the difference between a bad developer with no experience and a bad developer with a lot of experience is not much more than just the amount of years they’ve been bad.”
This outmoded approach to personnel is one reason government software projects so often go awry. Who could forget the disastrous rollout of healthcare.gov? Built by a legacy IT contractor, the Obamacare website ran five times over budget and collapsed on the day of its rollout. Three 20-year-old coders built a working version in just days. (They did not have Ph.D.s.)
The credentialism on display in the response to Kratsios’s appointment is part and parcel of the broader ossification of defense tech. The Byzantine procurement process, coupled with an entrenched lobbying system, makes it nearly impossible for startups to win government contracts.
A report by the Government Accountability Office found that 70 percent of defense contracts are awarded without a competitive bidding process, and 72 percent of the funds allocated to defense go to the five largest firms. The GAO attributes this concentration to “the government’s preference for a specific vendor, inadequate acquisition planning, and overly restrictive government requirements.”
Because they can rely on a steady stream of income from the government, the defense primes don’t bother to innovate or cut costs. Even in their traditional areas of advantage, such as fixed-wing aircraft, large defense contractors have at times proven incapable of meeting the Pentagon’s needs. To take one example, Lockheed Martin’s F-35 fighter jet — the most expensive DoD weapons program ever — continues to experience major technical glitches years after its rollout. Such conspicuous failures partially explain why no defense contractor ranks among the top 30 choices of places to work for computer-science majors.
As artificial intelligence and autonomous-weapons systems grow increasingly vital to national defense, the DoD’s inability to engage with innovative firms threatens to weaken national security. In contrast, China has piled money into companies such as HikVision, a producer of video-surveillance equipment, and DJI, a drone maker. Both are now suppliers of the People’s Liberation Army. While China’s top engineers develop next-generation weapons of war, America’s talent is perfecting ad-targeting algorithms for consumer Internet companies.
Only three defense-related U.S. startups — SpaceX, Palantir, and Anduril — have achieved $1 billion valuations in the past 30 years. All three required years of massive upfront investment from billionaires before they were positioned to compete for government contracts — the “Howard Hughes model,” as a defense entrepreneur put it to National Review. The fact that one of the billionaires behind those firms is Peter Thiel, Kratsios’s former boss, should work in favor of Kratsios, not against him. His experience positions him to understand the obstacles that prevent innovative companies from commercializing their products.
As CTO, Kratsios has emphasized cutting burdensome regulations and increasing funding for basic research. He has demonstrated a keen awareness of the need to nurture startups. A similar approach to research and engineering at the Pentagon could spur innovation and better position the U.S. to compete with China on strategically vital technologies. Kratsios may be a “weird pick,” as an unnamed defense official told Defense One, but Washington could use some of the Bay Area’s weirdness.
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