Silicon Valley and the Future of Warfare, With Christopher Kirchhoff and Raj M. Shah

LINDSAY:
Welcome to The President's Inbox, a CFR podcast about the foreign policy challenges facing the United States. I'm Jim Lindsay, director of Studies at the Council on Foreign Relations. This week's topic is Silicon Valley and the future of warfare.

With me to discuss the efforts by the U.S. Defense Department to incorporate cutting-edge technology into U.S. military readiness, Raj M. Shah, and Christopher Kirchhoff. Raj is currently the managing partner of Shield Capital, which invests in technologies at the nexus of commercial and national security applications. He was the former managing director of the Pentagon's Defense Innovation Unit. Chris is an expert in emerging technology. He held several positions in the Obama administration, including senior civilian aide to the chairman of the Joint Chiefs of Staff. Raj and Chris are the authors of the new book, Unit X: How the Pentagon and Silicon Valley Are Transforming the Future of War. Raj and Chris, thank you very much for joining me.

SHAH:
Great to be here, James.

LINDSAY:
Raj, if I may, I want to begin with you. You and Chris both worked at and ran the Defense Innovation Unit Experiment or Unit X, as it went by in the short form. What exactly was it?

SHAH:
James, the purpose of the Defense Innovation Unit, and we had been called experimental at the time, was to really mend the ties between the Pentagon and Silicon Valley and places like Silicon Valley of innovation from both a contractual and cultural standpoint. Secretary Carter who asked Chris and I to take on this job alongside two of our other partners, had been a visionary. In 2001, he had written a paper at Harvard stating how important commercial technology will be or would be to deter and prevail in conflict. Unfortunately, these two worlds had really diverged over the last few decades. So he built this office and put us in charge to say, how do we get innovation into the hands of war fighters?

LINDSAY:
So let me ask you, Chris, as we look at this, why is it that that had become a challenge? Why is it that Pentagon hadn't kept up with technological developments as they were occurring in Silicon Valley and elsewhere around the United States? After all, the Pentagon has a long history of helping pioneer breakthrough technologies. We have the internet today in part because of investments made by the Defense Advanced Research Projects Agency a long time ago.

KIRCHHOFF:
Indeed, Jim, there's a historical irony here where military funding did indeed seed many of the early companies in Silicon Valley, the companies that gave Silicon Valley its name in fact. But at the end of the Cold War, there are two trends that began to diverge in really meaningful ways. The first trend is that federal research from development, which have been such a driver of innovation, peace dividend of the Cold War, began to fall flat at the same time that the consumer technology market exploded.

So fast-forward from the end of the Cold War to just fifteen or twenty years later, you have a situation where the private companies that were growing up and really coming to dominate the tech sector, so companies like Google, Amazon, Microsoft, themselves, each had a larger market capitalization than the entire U.S. defense industry combined. So that trend, which Ash Carter pointed out in his 2001 article meant that the locus of innovation, which had once firmly sat in government hands and government R&D labs, had now essentially migrated into the private sector. That in many respects, the private sector was pulling ahead. It was no longer the case that the government automatically had technology generation several ahead of the commercial sector.

LINDSAY:
I want to actually try to make this challenge that the Defense Department faces feel more tangible. So Raj, can you tell me your story about being in an F-16, you were a captain in the United States Air Force, you were in Iraq, you were flying a mission, you discovered you had a problem and your very expensive F-16 Viper didn't have an immediate solution. Tell me about that.

SHAH:
So in 2006, I found myself on my first combat deployment. Our mission there in Iraq was to support ground troops as they executed their missions across the country. We spent a lot of time on the border, including the border of Iran and Iraq. When you're supporting these ground troops, you're basically doing an orbit over them at 500 miles an hour, helping them with their mission. But at that speed, I had no way to look down on a screen and see a moving map to know exactly where I was. If you went too far into Iran, you could create an international incident or, God forbid, the general find out and send you home from the war. But that same year, I could rent a Cessna, I could get the predecessor to an iPAQ made by Compaq, download a hundred dollar piece of software and have a moving map. So it really struck me as to why one of the world's frontline most advanced fighters was being left behind the commercial world from a software perspective.

LINDSAY:
But you actually went out and rigged your own temporary solution to the problem you had of not being sure where the heck you were. Tell me about it.

SHAH:
Well, one of the advantages of flying in a single seat airplane is that you can bring with you what you want. So there was several of us in the squadron that downloaded that software, put it on these iPAQ that we had used back in our trailers and flew with them. This was actually common throughout the military where people were using cheaper commercial solutions to enhance their core military hardware.

LINDSAY:
So that was essentially your own personal hack?

SHAH:
It was and it worked.

LINDSAY:
What did your commanding officers think about your ingenuity?

SHAH:
The former deputy secretary of defense, Bob Work once said, the Pentagon doesn't have an innovation problem. It has an innovation adoption problem. If you go out into the front lines, our troops are some of the most innovative people you'll meet. They'll do whatever it takes to get the mission done. I think that mentality pervaded everyone out there. We were doing whatever it took to give the best support we could to our fellow ground troops.

LINDSAY:
So Chris, Raj tells a story about what it was like in 2006. My sense is that when you were asked to set up Unit X in 2015, that the problem had only gotten worse. I wonder how much of that is a function of the fact that the Defense Department had become dependent upon the, so-called primes, the major defense contractors like Raytheon, Northrop Grumman, Lockheed Martin, and weren't used to working with companies largely in Northern California, but not only which had different cultures and which weren't set up to work with government procurement regulations.

KIRCHHOFF:
That's exactly right. There's a whole history and structure that had developed in the years of the Cold War to fund large weapon systems. The economies of defense production are really different than the economies of the consumer technology market. So you can't just go on Amazon and comparison shop for an aircraft carrier or an advanced fighter. You have to let a contract to one or two or three companies that are capable of producing them. Then once you do to ensure the taxpayers money is well spent, you have a whole system of cost accounting set up to enforce accountability in a situation. Again, that is not a classic free market. So the whole system and culture of procurement had become very fixated on that way of procuring technology, even as the consumer technology market itself grew much larger.

Not only did this hamstring, the Pentagon's own line of vision and sense of imagination and possibility, but it actually created a disincentive for young startups to do business with the government. Why? Well, the federal acquisition regulations, a sort of dictionary tome of rules imposed a heck of a barrier of entry to those firms. Most FAR-based contracts are led in between eighteen and twenty-four months. If you're a young startup, you simply can't wait that long to determine profitability. More than that, to be competitive for one of these contracts, you have to set up your own system of cost accounting that interfaces with the Pentagon auditing system. What that led in Silicon Valley to happen is investors, and Raj experience this personally, to tell a young company they were funding not to do business with the government because it just wasn't worth it.

LINDSAY:
So essentially when a company decides to or seeks to contract with the Pentagon, it is going to have a mass of paperwork to do, or as you might say, somewhat critically, a lot of red tape to cut through?

KIRCHHOFF:
So much red tape that it simply wasn't worth the risk, the financial risk of trying. When you think too, the Pentagon imagines its research and development and its weapons budget to be a colossal, monumental, and it is. I mean, we're talking about hundreds of billions of dollars.

LINDSAY:
$840 billion in 2024.

KIRCHHOFF:
Exactly. The total budget of the Pentagon is enormous, but the consumer technology market is $25 trillion. So if you think about writing a business plan, if your business plan focuses on the $280 billion weapons spend of the Pentagon and you come in to see a venture capitalist and the next guy through the door says, I'm actually focusing on a $25 trillion market, which one is the venture capitalist going to fund? Especially if one comes with a lot of red tape.

LINDSAY:
Fish where the fish are as the saying goes. Raj, I want to ask you a question about the charge that Ash Carter gave you in setting up Unit X. It strikes me that it wasn't simply about getting more or better or different weapons or other sorts of materiel for the U.S. military. It was about rethinking how the U.S. military thinks about innovation. Tell me about that.

SHAH:
He gave us a charge to try to reform the Pentagon on several levels. So one level which we've discussed is just getting technology to men and women in uniform. The second level was how do you reform the processes of how we think about acquiring and building technology? Then the third one, which was more fundamental and still continues, is how do we just rethink war fighting and what the impact of commercial tech like drones and AI will be on the future. But for that second one was actually pretty interesting. I always said that if DIUx was really successful, you could sunset the organization because the Pentagon would've picked up its processes.

One of the challenges of getting young companies to work with the Department of Defense was a time mismatch. A young startup needs to prove its worth every eighteen months to raise additional capital to keep going, right? Because it's spending more money that makes in the early days. Well, if the average Pentagon acquisition process is three to four years, it just doesn't work for a younger company to serve the Pentagon. So on the first week of the job that Chris and I were walking around the office and meeting folks, we met a young woman named Lauren Daly who was the head of the acquisition program there at DIU. Her father was a tank commander and she served in the civilian corps of the Army. She came to us and said, "Hey, I found a particular clause in the latest National Defense Authority Act," which is the budget bill, which is a dictionary-sized book. She said, "In one section, 815, there's something that might let us move substantially faster." So we said, great, can you write us up a report? She's like, well, I already have. Hands us this twenty page paper on how to do it.

So Chris and her fly to DC the next week, they meet with the head acquisition lawyers, the general counsel, and ultimately get Secretary Carter to sign off on this new way of going outside the traditional acquisition process, which allowed us to move in sixty days, months, not years. Because of that, it unleashed a whole new approach to technology acquisition in the building. To date, I think some $70 billion, which you're purchasing has come through, through a multiple of organizations. So all that to say is the mission was much more than just simply technology, but it was changing how people think about technology and how they interface with companies.

LINDSAY:
Let me draw you out on that a bit, Chris. It seems to me that you are a new organization at the very tradition, maybe tradition-bound Pentagon. While Raj had served in the United States Air Force, you were a civilian. Many people who work for you were civilians. How did the uniformed military receive this new entity, which was supposed to be there in some sense to hack their culture?

KIRCHHOFF:
Well, the senior military leaders as well as people further down the ranks are well aware of the technology crisis they faced. In fact, one of the most amazing experiences I had as a civilian aide to the Pentagon during the Obama administration working for the chairman of the Joint Chiefs, Martin Dempsey, was bringing him to Silicon Valley on his first large domestic trip as chairman. We met with venture capitalists. We went to Google. He saw Google X's self-driving car. It began to dawn on him just how much further the private sector had leapt ahead.

So there was actually quite a consensus among senior leaders in the military to move forward with Defense Innovation Unit. They were some of our biggest backers. Actually not only supported the creation of the unit, but then made sure some of the most innovative commanders in the military got plugged in with our organization in the early days. Some of our most impactful early projects came from that chain of military interest that had been building up for years, waiting for an outlet for it to finally go be able to access commercial technology.

LINDSAY:
So my understanding, Raj, is that you not only had to deal with the military and have them buy into what you were trying to do, but you had to get buy-in from Silicon Valley. My understanding is that you had your first offices in Mountain View, California, across the way from where Google has its shop. When you showed up and started talking to people in Silicon Valley about, "Hey, we want you to help us with America's military position," did you get a rousing reception, a cold reception, something in between?

SHAH:
You have to think back. This is the era where we're just after the Snowden revelations. There's a lot of distrust between those sectors. But really the issue wasn't philosophical, it was business. There are a lot of patriots, were and are in the valley. They care about national security. They full of immigrants, they came to America for a better life and they wanted to support, but it's just too hard to do business with the government. In fact, venture firms oftentimes would recommend to their startups not to work with the government early in their life. My very first startup, I received the same advice, but I think they were open to it.

It was most importantly for us was to just demonstrate our ability to execute. So with Chris and the team, we started doing dozens of contracts a quarter, and I think we ended up doing a couple hundred million in the first two years. So people realized, boy, if DIU is going to run a contest, somebody's actually going to win and get a real contract at the other end. So it was a massive sea change of interest. Candidly, most of our battles were in the Pentagon and on Capitol Hill, not out here. I ended up taking sixty red eyes to DC in pursuit of those battles.

LINDSAY:
Well, what sort of challenges did you run into Raj on Capitol Hill?

SHAH:
Man, it was such a range. It ranged from the petty of staffers that were unhappy with Secretary Carter's decision on some unrelated matter such as airlift or congressional delegations were holding us hostage to people that just didn't believe that the valley could do anything—they view them as a bunch of long-haired hippies that weren't really interested in national defense—to folks that had entrenched interests, both in the government as well as defense contractors that had spent a decade on a large program that may have cost billions of dollars. For some young startup to say, "I can disrupt you," was challenging. So I guess there's no shortage of antibodies that came about and we had to constantly battle them from all flanks.

KIRCHHOFF:
In fact, Jim, there was a hilarious moment where Raj and I, after some red eye were walking bleary-eyed around the E-ring. Secretary Carter would often take breaks between meetings and himself, go walk around the E-ring. So he bumped into us constantly. We were in Washington, and at some point he said, "Hey guys," when he saw us for I think the third time in three weeks, "I'm paying you to work out West, not here." We had to say, "Sir, we have to come back here and beat up your own bureaucrats." That's the big challenge.

LINDSAY:
Just point out people who aren't familiar with the Pentagon, the E-Ring is where the secretary has his office and the Pentagon remains, I guess the world's largest office building. So I'm just, I think you guys are fortunate not to get lost in that huge place. I'm sort of curious, Raj, to what extent did the flap over Project Maven create challenges for your, Project Maven being where employees at Google, bristled at the news that Google was participating in a project with the U.S. military.

SHAH:
In the short run, it caused some noise. Obviously Google decided to back out. It fed the narrative in the Pentagon that you can't trust these folks. Interestingly, I would get to attend some of those Maven meetings. It'd be really interesting in the team room, it was very clear who are the government people because they'd all have short haircuts and tucked-in shirts. But the engineers were all Indian and Chinese immigrants and they loved it. They were not part of the protesters. The protesters were people that were totally unrelated. So I'd call them a vocal minority. But then I think that's all passed. Google is, along with Microsoft and Amazon are very focused on government. I think attitudes here, particularly after the Ukraine invasion by Putin, has totally changed. People realized you can't take democracy and borders for granted, and there's been a wellspring of interest.

LINDSAY:
So Chris, as you look back on what you started up with Unit X, how would you assess its pluses and minuses? How far did you go in achieving the mission that Secretary of Defense Ash Carter laid out for you?

KIRCHHOFF:
Jim, it's a story that's continuing even today. We started off with fairly modest goals of being a small experimental unit that wanted to first of all demonstrate a new way of contracting that could be adopted by others. On that, I'm really proud of our success. I mean, to imagine that with Lauren's insight in the beginning, we've created this new way of contracting that's responsible for $70 billion worth of acquisition. I think we've also been broadly successful in that the model of Defense Innovation Unit of contracting directly with young startup firms has now spread to the services and to many other parts of the military, such that in the innovation steering group, as it's called in the Pentagon, there are fifty-four separate entities now participating.

I do think at the same time that there has been all this progress, you still have to notice how fast war itself is changing. Ukraine being a prime example of the attacks of October 7th in Israel and what we're seeing in the broader Middle East being other important data points. If you take a hard look, for instance, at just what's happened in the last two months in Ukraine, I mean, we've had, the Ukrainians have had to pull back from the front lines, all thirty-one of the U.S. M1A1 Abrams tanks, the battle tanks that we've provided them. This is the most advanced tank in the world, but a quarter of them were destroyed or disabled by Russian kamikaze drones.
So it could be that we are right now witnessing the end of a century of manned mechanized warfare. If we are seeing these fundamental paradigm shifts, and I think you do have to ask the question of even today with defense innovation, you didn't having a billion dollar budget leading the secretary of defense's highest priority technology initiative called replicator. Is that enough or does the Pentagon need to be making even more fundamental shifts beyond the paradigms of the past to the glimpses of the future of war that I think are definitively seen in places like Ukraine in the Middle East?

LINDSAY:
Well, I have to ask you, Chris, how would you answer the question you just posed?

KIRCHHOFF:
Well, at one level, people are very focused on drone warfare in Ukraine, they're focused on how Israel is defending itself from loitering munitions. They're noticing that the Houthi rebels are now using autonomous sea drones to threaten the 12 percent of shipping going through the Red Sea. But are we, for instance, beginning in the U.S. to make major decisions about, for instance, unwinding feature buys of aircraft carriers. Which are presently by most observers, indefensible against a hypersonic weapon and deciding to rededicate the funds that would've gone to a future aircraft carrier buy to more experimental as systems of technology? Are we willing to really move the needle? A billion dollar budget for Defense Innovation Unit is not nothing, but I think the replicator initiative is something like seven tenths of a percent of the overall weapons buy of the Pentagon. That may not be enough given how quickly battlefield conditions seem to be changing.

LINDSAY:
Raj, how do you think about the question that Chris posed?

SHAH:
I really think it's one of scale. So as with Chris's view, we've got a glimpse of the future. We're seeing it today in drones, seeing land in Israel and Ukraine. We're seeing some progress with replicator. But is seven tenths of a budget enough? Should it be 1 percent, should be 5 percent. If we really truly believe this is the future, how do we bet on it? I think the challenge is everyone's in favor of this innovation, but the real challenge is when you have to make trade-off decisions, what are we going to buy less of? How many less troops are we going to have? How many less fighter jets? How many less aircraft carriers?

Those decisions are really, really hard, particularly given Congress's role in and of itself. So I think the next president and his or her secretary of defense is going to be faced with some serious challenges on how to upgrade our military might, deter war. James, last thing I would say, and you would know this well. This is not a new problem. We had this in the interwar period. We had this in the Cold War. Whenever there's a new generation of technology and change, the balance between the status quo and the future is a tough one. Some people such as General Billy Mitchell were court-martialed for it.

LINDSAY:
The whole shift from battleships to aircraft carriers was a painful one. Indeed, the fact the United States built the aircraft carriers and saw a lot of its battleships destroyed at Pearl Harbor in many ways helped the United States later on because it was a transition that needed to be made. But I have to ask you, Raj, you were in the Air Force, you flew F-16s. I've met a lot of fighter pilots in my life, in other pilots of other aircraft. They're very proud of flying those planes. But I see a lot of speculation that we are removing is to a world in which you're going to have unmanned planes, that you're going to rely on drones, that the F-16 or F-35 cost too much. It's too vulnerable, and you better go smaller and have swarms that the premium is going to be placed on, things that can be replaced at relatively low cost. What does that do for let's say the Air Force and how the pilot community thinks about itself and its service?

SHAH:
Yeah, Jim, I wholeheartedly agree with you. When you have a service that has historically been run and managed by pilots, it's a cultural shift. It's not to say that manned aviation is going to go away forever. There's definitely a need for it, and it's going to take time. But we have to recognize that the future is coming and prepare for it because our adversaries who may not have the same installed base that we do, right? It's the innovator's dilemma on the business side. We've had something that has created such dominance and such peace relative in the world, but we have to disrupt ourselves in order to keep that going.

LINDSAY:
So Chris, let me ask you a question. It may be an unfair one, but as you are working, and you and Raj have worked to try to get the United States military to take greater advantage of commercial technology to break out of old thinking, to try new things, to be, in the parlance of Silicon Valley, disruptive, don't we face the challenge that the Russians, the Chinese, are also doing similar things? Could they be better at it than we are?

KIRCHHOFF:
Well, there's a sort of double challenge strategically that the United States faces here. So the Russians and the Chinese rewinding the tape back to the first Gulf War, when the precision strike complex that had been so perfected by the United States and the late Cold War made itself visible to the whole world, dropping bombs down chimneys. That was a remarkable thing for other military analysts to watch. They decided to single-handedly work to create their own precision strike complexes in ways that would disrupt ours. In other words, to come up with asymmetric military advantages to defeat our own military. So that's the first challenge.
But the double challenge within the first challenge is that each major country has its own approach to involving commercial technology. By far the most advanced outside of ours is China, who under Xi announced even before DIU was in existence, a new doctrine called Civil-Military Fusion, which is his vision for opening the successes of China's, very impressive and growing technology sector to the People's Liberation Army.

Of course, the political economy in China is very different than in a capitalist state system. So the way this happens on the ground is if you're a technology startup and you might have a software or hardware product that could be used militarily, you might suddenly find a PLA officer being added to your board. So that's PLA's way of doing commercial technology acquisition, and they're getting very good at it, and they're focusing at things that are very potentially damaging to our own military systems like hypersonic weapons, like quantum sensing. Indeed, our adversaries have not been standing still. This is part of the reason why even today in the Middle East, right? I mean, should a Iranian drones. So many components inside those drones are U.S.--made or U.S.-designed, and yet they're devastating to even countries like Israel that have advanced air defenses. So Jim, we are seeing this play out in real time.

LINDSAY:
So Raj, as you survey the environment right now at home and abroad, how worried are you about the ability of the United States to meet the challenge it faces?

SHAH:
Well, we are certainly faced with an immense amount of challenge. You've got authoritarian regimes ascendant, challenging us in the Middle East, in Europe, in Asia. You're seeing a lot of internal turmoil here in the U.S. You're seeing the continued acceleration of technology and AI, and it's unclear if those will remain with U.S. and its allies. But I guess in the end, I'm still pretty optimistic as I think about innovation, which I think will indeed be the determinant of who is victorious in this conflict between democracy and autocracy. We have, we being U.S. and our democratic allies have free flow of capital, free flow of talent, human talent, and a willingness to take some risk.

So you look at large language models, latest advance in artificial intelligence, all the tier ones are here in the US, not in China or Russia, though they may have a data advantage or even a funding advantage. So I think we just have to double down on what's made America and democracy strong. For that, I am optimistic, and I always referred back to the Churchill quote that you can trust America do the right thing after it's done everything else. I think hopefully we're past the everything else phase.

LINDSAY:
Chris, I want to ask you the flip side of that question. Do you at times worry that we might get too good at taking advantage of advances in commercial technology and end up with a war fighting process that we don't control very well?

KIRCHHOFF:
The world really is flat in a new way to borrow, of course, the title of Tom Friedman's classic book on globalization in that the microelectronics market is truly global. So if you look at our most advanced, for instance, a GS destroyer, 90-some percent of the technology in that system is available globally. So what that tells me and other national security strategies is that our margins are always going to be thin because of the diffusion of technology. That advantage is going to be temporary. It's unlikely that like the advent of nuclear weapons, which really was a profound shift, that somebody's going to capture a sort of permanent and towering military advantage.

But the other aspect that you mentioned about are we going to be able to effectively and safely harness these new systems is very much an open question. It could be that there are decisive military advantages to increasing the way that we use autonomous systems, to increasing the way we deploy autonomous systems in denied environments, in terms of communications. Where we have to pre-plan and advance how they're going to behave and how they're going to act. This is a new frontier that we're going to have to face and be careful in because as has been demonstrated by the Gulf of Tonkin and many other military crises, it's sometimes too easy to accidentally start a war that should never have occurred, and we never want to put ourselves in that position.

LINDSAY:
On that note, I'll close up the President's Inbox for this week. My guests have been Raj Shah and Christopher Kirchhoff. They are the authors of the new book, Unit X: How the Pentagon and Silicon Valley Are Transforming the Future of War. Raj and Chris, thank you for joining me.

SHAH:
Thanks, James.

KIRCHHOFF:
Thanks.

LINDSAY:
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