This is a, it's a real privilege, first of all, to say thank you to U.S. and to Arati. Thank you for coming today. This is really going to be a dialogue on a very important subject that doesn't get enough attention in America. The series that we're having is an effort to try to look at the deep underlying plumbing of the Defense Department. It's the topics that don't get the grand attention, especially in Washington these days, but they are fundamental to how we do as a department. And this is about research and development, where's it going? Now, I will tell you that I've spoken to, I will not blame this on Wes. He can either accept this or not, he can reject it, but I've spoken to a lot of guys in business who are really fed up with making charitable contributions to the Defense Department by doing projects they think the government wants and then only to try to get canceled. There's only so many times you can do a six or seven hundred million dollar project thinking the government's going to go ahead with your own research and development money and then find out the government's, well, just kidding. We're not going to do that. We need to really start having a different kind of a dialogue between our industry and our laboratories and our government over what we're trying to do. We're drifting and we just can't throw up goals to say we're going to be innovative and I agree with this. I want us to be innovative, but it really means something tangibly about how we implement it. That's what this is going to be about. So that's what we're going to get into today and I'm very glad to have Wes here to kick this off and Arati to come up here and join us because I think it's going to be a very dynamic and important conversation we're going to have with them, with all of you. Wes, of course, heads up Northrop, Ben started off with TRW, I believe, as an engineer. When I look at his age, it doesn't fit with his physical appearance. He's just, I don't know, this is one of those things I can't get over. Age has not done well for me, but it's done pretty good for you, Wes. You're holding up pretty good. He's been, of course, with TRW and then has been the CEO and chairman at Northrop, I think, since 2010 and has done a phenomenal job. We're delighted to have him here. So I would ask you with your applause to please welcome Wes Bush and we'll get this thing started. Thank you. Thank you very much, Sean. I'm really delighted to be here this morning and appreciate the great interest in this topic, actually. In terms of the process this morning, I thought what would be most helpful for me to use my remarks really to set the context for the importance of what we're discussing. And I know as we get into the panel discussion, we'll be able to hit some of the meat of the particular issues that John mentioned. From my perspective, one would be hard pressed to identify a more important security topic than innovation and by direct connection, research and development. And I think we all understand that, understand why it's so important. But John, just from a defense perspective, ours is clearly now an innovation-based world. And we clearly in our country and in so many economies around the globe, we have an innovation-based economy. But further to the topic of this morning, I think we all recognize that our national security fundamentally rests on a foundation of innovation and continuing innovation. And we know we have a lot of challenges facing us today that are impacting our ability to do this. We have to deal with fiscal austerity. We're going through a sluggish recovery. We have a resurgence of terrorism. Seems every day there's a new front that we're dealing with in that regard. Russia is posing all sorts of new challenges in and of itself. We have an expansive China. We have a somewhat erratic North Korea, an ambitious and expansive Iran. And every day, particularly for those of us in the security community, we get to see up close and personal what's happening on the cyber front with the continuous attacks that we're all addressing. I think innovation and by close association R&D is a core enabler for the solutions that we're going to need to address all of these challenges and new challenges that we can't anticipate today but that we should certainly expect to be on the horizon. And I think that's broadly recognized. We know that innovation has served us well in decades past and it will be core to our ability to address challenges going forward. And it's the president's national security strategy that was published back in February states. Innovation, quote, empowers American leadership with a competitive edge that secures our military advantage, end quote. But innovation doesn't simply happen. It isn't like error that's all around us that we oftentimes just take for granted. We know that our efforts at R&D must be carefully managed and cultivated, particularly in today's very tight fiscal constraints. And part, I think, of that careful management and cultivation is the recognition that when it comes to national security, not all R&D, not all innovation is created equal. And to explain that a little bit, let me offer my view of what might be called the innovation ecosystem from which we all benefit so greatly. And as with everything else that goes on here in this city, let me start with funding. On the funding front, it's a pretty bleak picture that we're dealing with. Federal support for R&D funding comes primarily from the discretionary part of the budget, which is now at its lowest point as a fraction of GDP since the 1950s. If you just look at the R&D component of discretionary spending, in the 1960s, the U.S. spent about 1% of GDP on defense-related R&D. Defense R&D spending declined to about 0.7% of GDP during the 1980s and stood at right around 1.5% of GDP during the past decade. But by the end of this decade, under our current forecast, we expect it to drop to about 1.3% of 1% of GDP. I think those levels are frightening. They're simply insufficient to support the advances in technology that our future military will need and some will argue with everything going on around the world that our current military actually needs today. And this resourcing deficit comes at a time when the pace of technology, I think, has never been faster. And we can come up with lots of illustrations. Let me give you just a very simple one in the context of fighter aircraft. In 1974, the first model of the F-16 included about 135,000 lines of code, 135,000 lines of code. I'm sure there were really efficient lines of code back then, 135,000 of them. In 2006, the first model of the F-35 included 6.8 million lines of code. And today, the latest model of the F-35 includes 24 million lines of code. The complexity is compounding. And we see it constantly, but it is a reflection of this pace of innovation and capability. There's an old test pilot's axiom that says, you've never been lost until you've been lost at Mach 5. And the pace of technology really is moving at Mach 5 and I think accelerating. And we sure better make sure that we don't get lost. In fact, the pace of technology has been much in our favor really since World War II. And this is why we must be careful to embrace and leverage that pace. Because I think that is an advantage to us. And we need to seriously avoid some of those instincts that we see creeping up from time to time that says, we're better off if we try and constrain it. I think that is exactly the wrong response to what's going on around the world. All through the Cold War, our defense RDT&E was adequate to the task of keeping us ahead of our adversaries. And that investment paid huge dividends. As an example, no other nation could have created the B-2 Bomber, a program that we at North Government are particularly proud about. New materials and technologies needed to be developed. Computers and software needed to be created just to design the complex shape that was necessary to make it stealthy. Originally, the B-2 could hit eight independent targets on a single mission, invisibly and with precision, and today the current model can hit 80. It's a tenfold increase in its capability. That was an effort that only defense R&D could have brought forth, which brings me back to what I said a moment ago. All R&D is not created equal when it comes to national security. And why am I making that point? Well, in today's framework of very tight budgets, that ugly word sequester and austerity that we're all dealing with, there is a very understandable desire to find something that feels like a cheaper alternative to defense R&D. And because the commercial world is just as innovation dependent as the defense world, it is natural that appropriators in the acquisition community would look there for innovations to somehow transform what we're doing in defense. But I'll submit to you that commercial solutions, while an important ingredient in much of what gets done, in and of themselves are not the answer to our national security need for technological superiority and therefore should not be used as an excuse for further reductions in R&D. Commercial technology being inherently broadly available offers no national security advantages by definition. Many national security needs simply cannot be met with the commercial technologies. For example, the automobile industry has no interest in stealth, last I checked, nor does the commercial world have any interest in developing technologies for advanced hypersonics, electronic jamming, offensive cyber, although if you keep getting hit one day you might have an interest in developing offensive cyber, or advanced missiles. It's a very, very different environment, very different business model, and there are just too many differences between the commercial world and the national security community for their R&D efforts to be somehow interchangeable. But perhaps the biggest difference between those two worlds is the basic business models that each operate within. Commercial technology, very correctly, follows the money wherever it leads. If the numbers say that a technology is no longer profitable, it's simply discontinued. I think most of us have had that experience when we go online or make a phone call looking for support on some product that we bought quite a while ago, and we discover that, guess what, quote, no longer supported is that product. But as I said, that's very understandable when you think about the fundamentals of the commercial business model. But the defense industry business model requires it to stand by the customer, regardless of the intrinsic value of the technology. The youngest of the B-52s is half a century old, but guess what? We still support it. All this is not to say that the commercial world has no utility to the defense community. Of course it does. But I think that utility is as leverage, not as a substitute, and I think it's important for us to have that clarity of thought when we discuss it and when we talk about it, particularly in the context of investment. And clearly, the defense community can learn a thing or two from the commercial world, such as the negatives of risk aversion and drawn out acquisition and development timelines. So I think our nation needs to value and enable innovation in a very broad way to help drive our economy and to support our security. Now I'm going to give a list of things I think we need to really work on and do. There will be nothing, there should be nothing in this list that surprises any of you in this room who have been paying attention to the issues around innovation. It will all sound very familiar. They are quite obvious, but I think it's important that we frame them. First, there is clearly the need to renew our government's commitment to scientific discovery and innovation. There needs to be an end to the sequester's deep cuts to the discretionary spending caps, and I will say on both the defense and the non-defense side. And if I just think about innovation, we are hurting it on the defense side, and we are also really hurting it on the non-defense side, and I think both have to get addressed. There must be sustained real meaningful growth in funding for basic research, and we need to make permanent a strengthened Federal R&D tax credit to encourage more innovation investment here in America, in our country. We need to continue to focus our efforts, of course, in addressing the workforce needs, in particular the STEM workforce needs. And I think a lot of that effort needs to get focused through science and math, teacher recruitment, and the support for those teachers. And clearly, there's a lot that can be done not only in K through 12 education, but also in higher education, and most of us in this room being involved in the fields that we're in are highly involved in that. Our national visa program needs to be reformed to keep the thousands of international amazingly brilliant STEM students that we educate here in America following their graduation, keep them here instead of forcing them to return to their home nations. Costly, burdensome, and unnecessary regulations need to be reformed to free up researchers to do what they do best, which is to innovate. And we need to reaffirm merit-based peer review as the primary mechanism for major Federal Agency use in how they make their decisions in competitive research grants. There's a lot we need to be doing. Clearly, we need to be focusing on the affordability side of innovation when it comes to national security. There's a long list of actions here. But I'm encouraged, actually, went through all these negatives about the environment we're in and all this stuff we have to get done.  And I'm encouraged because I see something happening in our innovation communities that, quite frankly, I think we took for granted for too long. And that's the reemergence of the recognition of the power of partnerships and what we're doing in innovation. Partnerships we all know are vital between all the parties that comprise the innovation infrastructure of our defense community, but more broadly, our innovation community. Partnerships between academia, industry, and government. Partnerships that are committed to basic research and the inherent risks that comes with investment in basic research, but also committed to the applied research fields and to product development. And partnerships that work together to address roadblocks that we create for ourselves, either in government or in industry. We know that those partnerships were instrumental during the R&D production and deployment of the second offset phase when we benefited from technologies such as GPS, satellites, computer networking, stealth, the list goes on and on. And ultimately, many of those technologies spilled over into the commercial world, creating or expanding entire industries and generating astonishing human benefit. The relationship between the commercial world and the defense community has long been symbiotic. But between the two, clearly, the defense community is the biggest of the net exporters in those relationships, but it is an important relationship. Now as we stand on the cusp of a new effort with a third offset and we're looking at things like new unmanned technologies and robotics and miniaturization, new levels of advancements and manufacturing, many other exciting innovations, we know that just as it was with the second offset, this next effort stands to create great benefits for our citizens even in addition to greater national security. And if we manage it carefully, it could revitalize the defense community's aging workforce with a new generation of eager, young, bright, committed talent. And as with the second offset, this next effort will thrive or stumble on the strength of the partnerships between the parties that have come to work together on it. Part of the good news, the DOD recognizes this. Frank Kendall, the Pentagon's chief and of acquisition, Alavino Frank, said in a recent interview that he is particularly worried, quote, about the industrial base and what deep cuts in production and R&D are going to do. To me, R&D is a partnership issue, and it's clear that Frank embraces the partnership model. My co-panelist this morning, Arati, clearly embraces the partnership model. In fact, just last week, she brought her entire team to the Aerospace Industries Association meeting to enable a broader discussion, not just with the larger companies, but with all the companies in our industry, many hundreds of companies were there, and a great outcome. But it's that type of partnership approach and that inherent view of the importance of the partnerships that I think is going to make a big difference as we go forward. Marrying the tried and true to the truly exotic is what American innovators do best. And translating those efforts into solutions to support our security and to address those tough challenges, as I mentioned earlier, that's the reason that we have the Defense Industrial Base. It's the reason that we have our defense community partnerships. No other community can do it better. And this is what makes this community of partners such a true national asset. And like all important assets, we have to look out for it. We have to nurture it and take care of it. The United States is still the leader in overall R&D spending and competitiveness, but that is changing fast. Technology innovation is not a birthright that we somehow received here in the United States. It's going on all over the globe and it's accelerating. The 2014 Global Innovation Index ranked the U.S. sixth behind countries like Switzerland and the U.K. And while China ranked what seems like a distant 29th, if you don't just look at position, but if you look at velocity and acceleration, you can see that they're closing fast. Measured in purchasing power parity, the teleforecast that China's total R&D funding will surpass the U.S. by 2022. It has already surpassed Japan as number two back in 2011. Furthermore, we can no longer dismiss Chinese research as somehow inferior in quality. Chinese researchers are increasingly publishing in the top-rated journals, and I think most of us see that they're going to be dominating research in a number of fields very quickly. And China's R&D budget has grown faster than its GDP growth, whereas the economy grew at an average of 9% in 2009 through 2013. It's R&D spending grew twice that rate, 18% in the same period. In contrast over the same period, total U.S. R&D spending grew annually by an average of only 1%, while defense R&D declined by an average of 7% each year.  But I think we all know that national decline is a choice, it is not a fate. And if we're in decline, it's within our power to arrest that slide through making different choices. In this, the age of innovation, technology, and human intellectual capital, one of the most important choices we can make is to do those things that support and enhance R&D and innovation. The great technological advances of the past, the present, and I'm confident, our future are expressions in metal, circuitry, and oftentimes in bits and bytes of human ingenuity, human perseverance, and human vision. They are not so much credits to engineering or science as they are credits to scientists and engineers and the mathematicians and the public policy makers, to those we elect, to business people, to all who take accountability for the future. As such, technological and scientific innovation is founded upon distinctly human characteristics, vision, inspiration, hope, yes, sometimes ego, moral impulses, even love of country. These are the qualities that move free nations, industries, and companies forward. And because these are human qualities, they cannot be mandated, directed, or imposed. They can, however, be cultivated and incentivized. And perhaps that's the most important way to support research, development, and the freedom to innovate. It's in all of our best interests to cultivate these talents and skills and to ensure the continuing strength of our great research institutions, private and public, commercial and non-commercial. And to continue supporting these strengths by valuing our innovation ecosystem that is built on the partnerships that I mentioned earlier. I'm excited about our future. I'm excited about the trends that I see. There's a lot of work that we need to do to move from excitement to changing the vector that we're on, but I'm confident that we can do it working together. Thanks, everyone. Well, thank you, Wes. That was a great speech, and you've done me the great service of covering a lot of things I thought I might have to cover. Now I don't have to. So we can hear more from you and more from Dr. Prabhakar. So thanks to you both for joining us this morning. I do need to mention, since we had let everyone know we were gonna have John Burrow today as well as a panelist. John had an unavoidable conflict come up right over the holiday weekend. So unfortunately, he's not able to join us, but he's promised to come another time at another event. And we've got several lined up in this general topic area the next few months. So we will have him again. But thanks, everyone, for coming today. And Dr. Hammer did a great job of framing the topic and then Wes did a great job of elaborating on that and framing it further. So I'll keep my introduction of the panel a little bit brief. But as was mentioned, there is quite a change. It has gone on long-term trends in R&D that have been going on for a couple of decades, which mean that R&D is more global in nature, particularly with the rise of China's investment in R&D. And also that it's more commercial. So, and that's not a case so much of the government disinvesting, although sequestration has caused a certain amount of disinvestment in the last three years. But the longer-term trend is that the federal government is still investing in R&D and somewhat expanding that investment, but the private sector investment has simply taken off. And in the 1960s, the federal government investment in R&D was about two-thirds of the total. The private sector investment was about one-third, and that's now roughly reversed. And that's ultimately a good thing for that innovation economy that was mentioned. It's not a point for criticism, but it does mean that the nature of what's happening in the technology space is a little different today than it was in the past. But not necessarily different in a simplistic way, as Wes mentioned, it doesn't mean that commercial is the answer to all problems, but it does mean that there's a lot going on that space, that DOD and those of us who look at national security have to be paying attention to. And in fact, today about, only about, well, I say only, only about 4% to 5% of global R&D spending is focused on DOD requirements. 95% of it is on other requirements, primarily commercial. And as mentioned, the R&D budget has come down. And Wes had to figure about an average of about 7%. So the defense budget in total has come down about 28% from its peak, depending on what you think is gonna happen with overseas contingency operations account and the great guessing game of Washington and where sequestration is headed. But it appears that it'll probably bottom out at around 25% reduction. R&D has come down a little bit more than that because the personnel accounts have been protected and mostly rightly so. And that takes longer to get funding out of the personnel accounts as you draw down force structure. So R&D has come down a little more than the budget as a whole, but the dollars that are actually contracted to industry for R&D have come down significantly more. They're down about 40% from the peak year of R&D spending in 2009. And that tells me a couple of things. One is 40% is an awfully huge amount, an awfully huge percentage. It's a devastating reduction. The second thing is that a little bit less of our R&D dollars are getting out the door. And so the fact that the money going to industry for R&D has come down significantly more than the total R&D budget means that more of that budget is being absorbed within essentially the department's own internal mechanisms. And that's an issue that we wanna try and think about in our discussion today. There's a pretty thriving DOD research and development enterprise that is all of which is worth thinking about in today's discussion. We have obviously the DOD labs and warfare centers and also the National Security Labs, the Department of Energy and others in federal government who contribute to the cause that are directly part of the department. There's S&T dollars that goes out to academia and the research establishment that does amazing work in the S&T space. We have the federally funded research and development centers which do a little bit more applied work for the department where they have unique expertise. There's funded development with industry, some of which Wes referenced and which is a critical piece and will always will be a critical piece of the enterprise. And then there's also the independent research and development dollars that industry spends that are reimbursed by the department of defense. Not all of their independent research and development is reimbursed, but some of it is. And so how do we leverage all of these elements of the R&D enterprise to get the innovation and the progress and the advancement and to maintain the technological superiority that has been so vital to national security and remains a key element of the strategy. And as Wes mentioned, Frank Kendall has been pretty vocal recently that that technological edge is being challenged. It's not gone and it's not a sure thing that it will be gone by any stretch of the imagination but it is being aggressively challenged. And that's something we need to think about and the department is thinking about it. Secretary Hagel announced Defense Innovation Initiative last fall. And as part of that, the long range R&D plan that is in work and I think to be brought to a head fairly soon and then Secretary Carter one of his initial forays out to Silicon Valley to focus on all of the outside innovation that isn't gonna replace DOD's internal investment but which can be leveraged hopefully to quite good effect and isn't fact leveraged by many of the folks in the defense sector to make their systems better. And then the in-q-tell investment that Dr. Carter announced to also try to access some of that commercial innovation. So all of that is in the mix and needs to be hopefully coming together in a coordinated way towards a third offset strategy or however you'd like to think about it. Everyone has I think their own way of thinking about how do we maintain and possibly even extend that technological superiority edge and that's what I hope this panel will get at. And so I wanna start, Arthi, with you. We got a chance here from Wes and the view from industry and a very insightful one. If you would like to take a few minutes and just talk about what is the view from DARPA and within government about how to address these challenges. I'd be very pleased to thank you, Andrew, for the chance to join today. Thanks, Wes, for that really eloquent speech about the issues that I think about all the time. I think you just really, it was very resonant for me and I thought you really just hit the nail on the head. And, Andrew, your opening comments, absolutely. We've got all these pieces, all these parts of the ecosystem and I think that's the interesting challenge is how does all that get rallied to solve the problems that we have. So just to share with all of you where I'm coming from a little bit of context about DARPA, I think in this crowd probably everyone knows that DARPA's origins traced back to Sputnik. We were created specifically to prevent that kind of technological surprise. My predecessors very quickly realized that the way you do that is to create a few surprises of your own and that's what DARPA has been doing for nearly 60 years now. So, and that of course means that our colleagues in uniform here and around the world think of us as a place that helped start what became precision guided munitions and battle networks and stealth aircraft, the technologies shape how we fight today. I spent about half of my professional life in Silicon Valley and I found that actually that technology community also knows DARPA but they know us for a very different set of things. They tend to think of us in terms of the advanced materials, new microelectronics, artificial intelligence and of course most iconically for ARPA net which became internet. And those are all technologies that we invested in for national security purposes but after many, many, many billions of private dollars got poured into them, those technologies not only changed how we fight but they've also changed how we live and work. And I think to me is a great example of exactly that kind of that back and forth flow that Wes you were talking about in the ecosystem. You know DARPA those of us who have the privilege of serving today are very cognizant that none of those big accomplishments happened just because of us. We are actually only about 200 government employees and a lovely office building in Arlington, Virginia. Thank you very much. And we get our work done by being able to tap the entire country and the world in fact in some cases and so our dollars about three billion a year at DARPA flow out to universities but mostly to companies and that means defense contractors tiny to massive. It means commercial companies from startups to big established firms. It's really the full range wherever we can find the technology and the talents that we need. Some of our funding also flows to other parts of DOD the DOD labs, other labs around government and in the private sector. That entire ecosystem is why we're able to do these big things. And so we are very much part of these much larger communities. Within those communities DARPA continues to have one very specific role and that is to make these pivotal early investments in breakthrough technologies to show what's possible so that we can take these big strides forward in our national security capabilities. And that again that mission of breakthrough technologies for national security is unchanged over these six decades when we reflect today at DARPA about what shapes how we execute our mission in today's world. Our list looks a lot like Wes's list. Number one we start with an understanding that the national security challenges on our plate today are not just the actions of nation states. Those matter deeply and in fact the advances that have been made by nation states while we've been busy with two ground wars are quite significant and figuring out how we deter and defeat if necessary. Those advanced capabilities is one part of the national security challenge that we face. But of course every single day when you open the newspaper what you see is what's happening with ISIS and other flare ups of violent extremism. It's sometimes exacerbated by natural disasters like earthquakes or tsunamis.  So these are the things that are going on in the world. We think those are gonna be long term challenges but we're gonna have to continue to deal with in order to maintain stability and reduce the threats to our nation here at home. So we don't actually have the luxury of picking one of those. A lot of times people say to me, well you know it's like what problem are you gonna solve? And the answer is we don't get to pick, we have to deal with that whole range. So that's number one. Number two, we're a technology agency. We think a lot about what's happening with global technology and again Wes summarized it perfectly, pace. It is globally available technology, globally developed technology. It sets the pace. We don't get to slow things down because the other side gets to play and they get to play with technologies that are moving at quite a rapid clip. And that is a very different world in which the United States controlled the pace and things were moving in this beautiful gradual ballet. That's what our systems are designed to handle. That's not the reality that we get to deal with anymore. The third factor that we think is critical today in national security technology is something that I think has not been part of the mix before. And that is an understanding that today the cost, the pace, and the inflexibility of our military systems is actually limiting our operational capabilities. We've talked about this for decades as a, gee it's gonna be a problem. It's a problem today. We set out to build 750 F-22s. I think we ended up with 183. So one in this room surely knows the exact number. We do that over and over again. We see others fielding electronic warfare capabilities based on commercially available technology that our incredible, powerful, best in the world EW systems simply can't move quickly enough to counter. These are real examples. This is not some hypothetical future problem. It's now. And I believe these problems today are no longer problems that we can solve by tweaking our way. It's not about shaving 5% off the cost or moving a little bit faster. These are problems that require, I believe, some deep technology rethinking at the architecture level. And so you'll see attempts at DARPA today to try recognizing that we're gonna have to continue to build very, very complex systems for the kinds of challenges that we face ahead. How do we find new approaches, new architectures that allow us to wrangle that complexity and inflict it on the adversary rather than drowning in it as it sometimes feels like we are today? So those are some of the things that shape our thinking. You know, you've both talked a little bit about what's happening with commercial technology. We find, because of our long history of just working quite seamlessly across the technology community, we've actually found many examples in the things that we're doing that start getting at exactly this idea of leverage, how do you draw on commercial technology and solve real national security military problems? I completely agree with Wes that it's not gonna be a substitute. In my 15 years in Silicon Valley, I spent time with some dazzling, amazing, wonderful people, but zero of them laid awake at night trying to figure out how to defeat a Chinese IADS. They don't know what IADS are, right? I mean, they just live in a different world and to pretend that that's gonna magically solve the national security problems that we have, I think, is really short-sighted. But I think it's really up to us to figure out how to elevate that conversation and find the ways that are really gonna be productive. And I think we're starting to see some real examples of that. So I'll just stop with that and say I'm looking forward to the conversation. Well, let me kick off with a, oh, thank you very much, Arthi. Let me kick off with a question. I think both of you, I would really welcome your response, but I mentioned that we have an R&D enterprise that has many parts, both of your representing critical parts. And I'm curious how you see those parts working together. And otherwise, in other words, where is it best for the government to invest its own internal R&D efforts? How does that coordinate with industries efforts? How does that coordinate with the cutting edge, leading edge work that DARPA does, and that then hopefully leverages some of that outside commercial technology for military applications? I would love to hear from both of you on that. Wes, if you'd like to start. Sure, I really do like this analogy of an ecosystem because I think that is a very appropriate way of thinking about the way we have so successfully created an innovation machine within our country and others are working really hard to model what we have, which ought to be some clue to us that we've got something that's actually working well for us and that doesn't suggest we can't continue to improve it. But a core part of what works so well is the connection and relationship between the DOD's internal capacity for R&D and leveraging industry. And I think we need to make sure that we continue to preserve both from an industry perspective. Those activities that originate in government labs can be absolutely critical for the ability to advance new systems. And what we have to keep working on as you have to work in any partnership is a clear definition of okay, when's the right time to transition it? When's the place where you can get the most return, if you will, on investment that's going into both. But I think it's important that we continue to nurture those and continue to work on partnerships. One thing that does concern me, and I noted a little bit of reference to it in some of your introductory remarks, Andrew, was I do hear a little bit of this testing the boundaries if you will, the partnership of, gee, in a time of fiscal austerity, shouldn't X be doing more, shouldn't Y be doing more, and the other side doing less. And I think we have to be careful about that. Using the analogy of the ecosystem, this is what we observe in the animal kingdom when resources become scarce, they start feeding on each other. And I think we gotta be a little bit careful of that having in our ecosystem that we need to manage that very carefully because there are critical roles for all of the parties involved here. And if we get it out of balance, it won't work right. We know that. We took us a long time to get it into balance and to create, there was just a huge amount of energy that went into the development and the creation of the partnership of who does what and how it works well. And again, we ought to keep working to make it better and we ought to always be open to asking the questions, but to suggest somehow that there's not room as we go forward for a core part of this ecosystem. I think it's bad. I think it doesn't serve us well. So the question ought to be, how do we improve what we have? And there are very good questions to be asked in that regard. And we ought to all be very open to that dialogue, but I really push back on the view that in a time of austerity, we ought to fundamentally restructure the way we're doing our approach to R&D and somehow disrupt these partnerships. You also mentioned academia, and I think that's a really important part of it. And if there's one place I think we may have gone too hard over in reducing our investment, is the investment in terms of a total proportion, is the investment that we're leveraging through higher education. And I know that certainly in our company, and I would give credit to most of the companies in the defense industry, we're all re-looking at that in terms of the investments that we're making, recognizing that in a period of a downturn in budgets, we probably took it too far in terms of reducing the investments we're making in higher education. I know that DARPA's been looking at this carefully as well, because that's a tremendous resource for us. And I know there are certain areas, obviously, where we have to be very thoughtful about security and what we can do with higher education. But I think we also recognize if we're going to achieve our objectives for developing the workforce we're gonna need for the long term, if we're not making appropriate defense R&D investments in higher education, we're not gonna be creating the hooks that the bright, talented young folks that we wanna draw into our industry are seeing as, hey, that's a great place to be. So that's one place I think we probably, in this struggle for resources over the last few years, we've detuned too far that we need to go work on. Yes, Ditto, I agree with everything you said, Wes. Maybe I'll just add an example to illustrate one example that I think has worked really well. When I left DARPA after my first tour in the early 90s, about that time, there was a crazy program manager over at the Office of Naval Research, Max Schroeder, if anyone remembers Max. He was running around, he was talking about this thing called gallium nitride, and he was really sure that it was the next big thing, we needed it for our advanced radar and communication systems.  How are you gonna build devices, et cetera? So what a pleasure to come back into the national security world 20 years later and to find that good old Max was exactly right, and O&R kicked off some very important basic research, starting in universities. DARPA carried the ball for a long time, working with our service colleagues, but funding a lot of the work in companies to start building gallium arsenide materials, devices, you know, eventually, the components that you could start building phased arrays out of. The Mantec program got involved, it involved the DOD labs, you know, really, everyone had to come to that party, but today, when you look at our major systems, if you look at AMDR, if you look at SpaceFence, if you look at Next Gen Jammer, all of those are examples of systems that have phenomenal advanced capabilities, traces right back to that gallium nitride technology, and that's an example, I think, of the ecosystem working. We're proud of the role we play, but we know it took a lot of others, and you know, today, when those big new systems are bid, it's because that industrial capacity exists in the defense industrial base, advanced, reasonably well protected at this point, we won't have, you know, the world's, this huge advantage over the rest of the world forever, but today, we do have this very differentiated advantage position because of that long-term investment, so I think it can work, but you know, you do have to nurture the whole system to make it work. And one other point I would make in that regard too is as the R&D funding sources have been contracting over the last number of years, I think we're also in a place where we need to recognize that for certain areas of research, we've contracted down to the point where there are only one or two of those, and sometimes that one or two are in national labs, sometimes they're in industry, and I think we need to be very thoughtful about really identifying and protecting some of these core skill sets and centers of excellence that historically we may have had four or five or six, and we really don't, and so we need to be very thoughtful about that as part of the process too. Well, that's a great point, and I feel like having an R&D event discussion, you can't avoid the fact that it's also true within the department that the services have taken different paths when it comes to how they've thought about their R&D, and of course, if John had been able to make it with us, we would have heard about the Navy perspective, I actually talked him into coming initially after hearing Sean Stackley speak at a forum out in Monterey, in which he was talking quite a bit about these themes, and I actually asked him about research and development, and whether he thought the various parts of the system were working together in a coordinated fashion, and Sean is always reluctant to take a stand, so his immediate response is, no, they're not working with the way I want them to right yet, and he said, and John borrows the guy who's gonna fix it, so we would have found the answer if John had only been able to make it with us, but an example that he raised was the unmanned systems, and he said that he had asked for kind of a survey, what was, where was the Navy investing in this, where was it happening, and the answer was it was happening everywhere, it was across the board, almost every place he looked, there was an investment being made in unmanned, and there's nothing wrong with that by any stretch of imagination, it's the kind of technology that probably should be everywhere, but on the other hand, he wasn't convinced necessarily that these things were being coordinated in a way that made sense, so John is gonna go fix that. Can I jump in? Sure. So I wanna ask if we can ask a higher quality question than are you coordinating? Why don't we ask the question, are you delivering on your mission? Because, you know, having, making sure that the pieces are actually not duplicative, inappropriately duplicative or overlap, that's good, but that doesn't actually tell you that you're accomplishing something that's gonna change national security outcomes. We need to get to the question of are you changing national security outcomes, and oh, by the way, making sure there's good communication among the pieces is like a small, to me it's a very small element of it.  Are you making sure we're gonna get onto a new trajectory of capability rather than, you know, a new point where the adversary's gonna race by you the next time there's a turn in technology? I don't think we're yet asking a high enough quality question about what we need to be doing. That's a great point. Thank you for correcting me. You know, it always, when my time, no, I appreciate it. In my time doing rapid acquisition, I was always frustrated by what I think was a similar dynamic, which is you'd come in with a requirement from the warfighter and folks say, well, we looked at that two years ago, decided not to do it. It's like, well, that's great. I was probably the right answer two years ago. It's not two years ago anymore. That's not really a reason not to do something. I think you make a great point that just coordinating isn't necessarily gonna accomplish something. I think that takes me into my next question, which is, and building on that theme and on the theme of partnership that Wes raised, how do we, how does or how should the department and the government kind of communicate its priorities to all of these stakeholders, academia, industry, the commercial industry to the extent that they're willing to pay attention, which may be limited, but maybe there's some there. How do we, how does it, how can you effectively communicate those priorities, particularly when a lot of it may be in the classified realm in a way that actually helps guide investment? So we don't necessarily need to control all of this investment, but we do wanna guide it towards certain objectives. And I would love to hear from both of you on that. Wes mentioned a meeting that we did last week with the Aerospace Industries Association. That actually arose directly out of, at DARPA we were asking ourselves exactly your question, Andrew, is we're doing all these cool things. We think they're really gonna make a difference. How do we make sure that not just R&D people in the defense industrial base know what we're trying to do in specific programs. How can they see the bigger picture of what we're trying to accomplish? And beyond that, how do we get people who are making P&L decisions in these businesses to understand that bigger picture? And AIA graciously hosted us for that and it was a terrific afternoon that we just had a very good exchange. The quality of the questions in the dialogue, I thought was really, really terrific. But that's just one part of it. I mean, for us to do our job, we do have to get out, tell people what it is we're trying to accomplish with programs and in order simply to get them to participate in the funding announcements that we put out. We recently published a document called Breakthrough Technologies for National Security. It's our biennial report that we do. If you just Google Breakthrough Technologies for National Security, it pops up and please take a look. That's an attempt again to tell sort of the whole story. I think a lot of that is business as usual but maybe just to say a word about the commercial community. When I think about how we reach out to commercial companies who aren't thinking about the national security business but who are working, people who are working on technologies that we think really matter, that's a retail business. The way we do it is people get on an airplane and they go visit folks in their companies or in their startups or whatever size company it might be. And what I find is what works is you show people a problem that is so dazzling, so hard that they get excited about it and they see how their technologies apply to it. I mean, I really don't know a better technique than Tom Sawyer and them into helping us think about it and either directly participating in our programs or often simply being part of the community, having an open discussion with people who are directly funded by DARPA. There are a lot of commercial companies that don't need or want our money but they're perfectly happy to talk to us about the way they're approaching technology and to share tools and be beta customers for some of the things we're developing. And I think all of those mechanisms are good. I'll tell you what doesn't work is if you show up and you say, we're really pathetic and you're awesome, could you please help us? Are you kidding, right? I mean, that's just a non-starter but we have the world's hardest problems and if you're a technologist who cares about making an impact on the world, I think that is a story that we can compellingly make to the commercial sector. Yeah, I'll just, first off, I love what DARPA's doing. I think it was just fabulous. And I think it is inherently a reaction to helping us to reset the place and the scale that we've ended up on some of this discussion. For years, our defense community had constant, very open discussion about issues and there was a, I would say a more natural engagement around laying out the concerns and the opportunities, if you will. And over the course of time, and some of this comes with the small isolated incidents, I suspect, that cause big reactions. And the concern about sharing too narrowly began, I think to shape a lot of concern and develop into a risk aversion that I often still see in some agencies of only speaking with some limited number of parties about something and then inherently giving someone an advantage by doing that. And it's caused a lot of times this aversion to actually having the type of dialogues that DARPA is having. So I think DARPA, the model that you're employing, as you said, it's hard work. It takes a lot of focused effort. It takes a strategy to actually make it happen. But we need to see this used more expansively because I think it has been too easy to kind of move the needle in the direction of, all right, we'll always be safe. No one will ever criticize us for giving someone an advantage. And we forget that it's the US we're trying to give an advantage to. And we've got to push it back over, continuously to push it back over. Frank has been working hard at this as well as have many of the service acquisition executives. So I see the right vector of discussion underway, but I think we need to push harder on the accelerator because as you observe very directly, businesses want to be engaged in that dialogue. We make huge investments in R&D every year. And the fundamental question is always, all right, how does this support either an express desire or a desire? Because sometimes folks do have extraordinary vision, desire that hasn't been expressed, but that we can forecast on the horizon. And oftentimes there is a response, well, we can't quite get that level of discussion. So I think it's fabulous, the model that you're employing. And I would commend it for much broader use across the department because I think we can get a lot more out of the investments that are being made, much, much better connectivity into ultimately achieving the objective that you talked about, which is executing on the mission. So I think there's room for improvement here. And I'm delighted to see the personal commitment to that by so many senior folks in the department now. Let me just tag on and say, I think the equity issue is very real and our approach is to think in terms of telling everyone as opposed to telling no one. I think you just have to work hard to drive it that direction. Well, I have a quite intimidating list of cards here. Questions that I've been submitted, I'm gonna ask one more question off of my list and then turn to the bevy of interest that's here. We do have some more time, so that's the good news. But Wes, I think specifically for you, we talked about the path of the government investment in R&D, which has not been positive in the last few years. And that decline in revenues, that money going out the door, decline in revenues to industry, you've managed to maintain profitability. A number of companies have managed to maintain profitability, including yours, which is I think kind of an untold success story. I think people think that somehow because of that, that means the cuts never really happened. No, they happened, but there was a tremendous amount of effort in industry to cut costs so that things stayed in balance. But as part of that, there's also a lot of funding from industry that's gone into dividends and share buybacks and no doubt there are strong market incentives that are leading to that. What does it take for you to have a powerful incentive to maybe shift some of that into R&D? And I know you're doing a lot in R&D, but there's always more that can be done. It's almost by definition an infinite space. So what does it take for there to be that payback that you see to increase that investment? Yeah, so let me give a little perspective because I think it's important to understand the basic financial model that's driving a lot of the outcomes that we're seeing in the defense industry today because I think there's a lot of misunderstanding about it, quite frankly. In fact, the perception that you mentioned that somehow the last few years haven't been tough on the industry because the industry has held its margin rates up, that's about as disconnected a view from financial reality as I could imagine. I'm sure given some time I could imagine a more disconnected view, but. So here's the math, right? Most of our companies, we are about 20% smaller in terms of headcount than we were back at the peak, depending on how you wanna measure that. 2010 to 2012 was kind of the timeframe you had measured that against. So we've taken about 20% of our headcount out of our industry. That is not something any of us want to do. It is devastating within a company when you have such incredible talent in an enterprise to have to take those types of actions, but that's what we've had to do. We've taken a huge amount of footprint out as well. And yes, there is some goodness in that relative to efficiency, but ultimately, and we all know our industry goes in cycles when we gotta come back up the other side of it, then we're gonna be struggling on that part of it. So we've taken the difficult actions we needed to take to ensure that our industry maintains its attractiveness in the capital markets. And why is that important? Because we derive our capital from the capital markets. And if you look at the flows of capital over time, we go through periods of time where the capital market is investing in us and periods of time when we were returning cash into the capital markets. And it's usually counter-cyclical. So we've been through a very tough period of time and quite frankly, it's kind of difficult to go to the capital markets and say, sales are gonna be down again next year, why don't you invest some more? But they're doing it because they see us as being responsible in how we're treating our shareholders so that when we come back in into the other side of the cycle and we need to go out and we need to take on additional capacity in the marketplace, they're gonna view our industry as a responsible industry and they're gonna be happy to do that. So it's a matter of managing for the long term the way it is in most industries. So we're looking out for all of our stakeholders, we're looking out clearly for our customers and what we're doing, we're looking out for our shareholders and despite the difficult decisions we've had to make across our industry, we're working hard to continue to make the industry a great place for people to come to work. So that's kind of the big picture on it. As we've gone through this cycle, this down cycle, one of the things that we've done in our company because when you take your base down then you also have to take your rate structure with it otherwise you become instantly unaffordable and you have no future. So as we've done that we've looked at every discretionary component of spending that we've had and the one thing we put the big red circle around to maintain is R&D and we're not alone. Many of the companies in our industry have done that and I think it's a reflection of this understanding that we are a long cycle business and if you are short-sighted in a long cycle business it'll get you on the other end. So we've held the R&D expenditures but we've done it by taking more out of the other discretionary components of the investments that we make and I think that will serve us all well over the longer term. It's really been painful in the process but it's made us even more intensely focused on where are we actually spending that R&D and that goes back to your earlier question. We really wanna make sure we're put in the right places because it is such a precious resource for us as we go through a very difficult time and we know that the effectiveness with which we do this is really gonna leverage how well we come out the other end. There have been some innovative ideas to help make this worthwhile and I'll give a good example and that's the blueprint for affordability on the Joint Strike Fighter program and this is a case where the partners on the program came together, came together with the seniors in the department with oversight on F-35 and put forward kind of a different idea. How about we invest on in this case affordability but really innovations developments and put ourselves in a position to get a return as production increases over time. So it was a very different model than sort of the classic R&D model but here was in itself an innovation, right? A different idea, driven by the fact that we're in a rather austere environment and Joint Strike Fighter program itself didn't have the capacity to go and make some of these investments. So I think it's gonna require, and so your question really is, was it take for us to do it? It takes a willingness to have the discussion about how you get the return and I think that was a really good case study on Virginia class is another example of that although that was more production oriented in its nature but it was another ability to have a very open mind to working with industry to recognize that yes we have some standard mechanisms for R&D but we can create other alternative approaches that really do incentivize additional layers of investment upon which you can get a return and are we taking some risk in that? Of course we are but that's the way you get a return. You take some risk. I'm gonna turn now to an audience question but I think it builds on very nicely to that discussion which is about intellectual property and DARPA has really I think, well I would say has a reputation and is known for the fact that in some ways compared to other parts of the department you are less threatening. I hate to use the word threatening because it makes it all sound so ominous and I don't truly feel like it is or should be that ominous but DARPA has been able to work with a lot of companies who have managed to have confidence that in doing so their intellectual property would be protective and in fact as your opening remarks indicated actually a lot of companies have benefited from the interchange with DARPA and they've been able to take technologies that may have developed in government labs and then extend them into the commercial world with great success. So could you talk a little bit about an importance of intellectual property? How you go about sharing it in a way that is beneficial to all sides? Sure, I, you know, when I look at our portfolio at DARPA at any moment in time we typically have a couple hundred programs and they range from demonstrations of integrated military systems that we hope will, you know, move into a procurement into an actual acquisition program all the way to the other end of the spectrum where we're doing quite foundational basic research because we're looking for insights that are gonna lead to the next technological surprise and so when actually my program especially when I showed up my program managers would say well how do you like to do intellectual property or how do you like to do milestones or whatever it is and my answer to them is always well I'm not gonna tell you tell me what the objective of your program is and then from that we'll figure out, you know, you'll figure out what you need to do. So what that means for intellectual property is that we have programs in our portfolio where the intellectual property is tightly protected owned by the government. There are places where it's tightly protected owned by the performers. There are places where by design the program is open source because what we're trying to do is put out components and tools in our open catalog that lots of other people are gonna be able to build on and the value is not gonna come from that particular component it's gonna be the integrated solution that you build on top of it. So, you know, that to us is the starting point and that I think perhaps coupled with the fact that we're working with a very wide array of different kinds of performers from universities who actually do care about intellectual property as well, right, to different kinds of companies. So I think the mix is perhaps a little bit different but it's something we continue to talk about we're trying to get smarter among my program managers we're all trying to get everyone smarter about business factors that affect how our technology proceeds after we're done with it and intellectual property is a part of that. So it's a live discussion but the starting point is to be clear about what specific objective you have for your program. West we got no less than three questions about how a company like yours, a big integrator, a big contractor that works with smaller firms with maybe non-traditional suppliers not unrelated to this intellectual property question. How do you, since as we mentioned commercial technology isn't just gonna magically turn into military capability all of its own so how do you do that? How do you take and leverage it outside technology and work it into a system that a company like yours is building? I would say that there really isn't much mystery to that because when you get into those types of business discussions they're exactly that. They are business discussions and the question on the table is how do both parties get a good return? And in some cases you're wanting to leverage what a commercial company has done and they see quite frankly most of the opportunities to deploy their technology into the commercial space as very limited market space. You know, we together think of our market space here as really big but this little thing compared to most commercial markets so they see this as a small market space that usually doesn't merit large investment and they see it as a market space with a lot of volatility and they can't quite predict what the opportunity will be. So in general our approach is we want to take the uncertainty off the table for them and so we basically take the risk because we're the party that knows how to deal with the defense marketplace and they will oftentimes look for some assurance on return to get into a transactional approach. So we become essentially a risk translator in the process but I think that's okay. I think that's part of the business model, it's part of what we can do to help leverage some of the capabilities that we see out there that can be useful but at the end of the day we have to be very thoughtful about that as well because when you're the risk translator you really want to make sure that the other party is actually going to be there when you need them and that part I will say in our organization, we're an organization of about 65,000 employees, half a degree, scientists, engineers, mathematicians, it's easy to get excited about something on a technical basis and we always have to make sure that the business basis is right there with the technical basis to ensure that if we're going to make a commitment to one of our customers that is reliant on another party that we have assurance that we're really going to be able to deliver on that and that I would say is oftentimes the hardest part of any of those types of discussions. Now if we're talking about part of the broad set of companies that are accustomed to dealing with the defense industrial base with the big primes, they're well worked through business models and that usually is not an issue but if we're going to another party who really is not in the business of dealing with either department of defense or more broadly the US government, you have to work through the question of uncertainty, the question of return and from our perspective, the perspective of assurance, assured supply and those are usually the crux of the discussions. Well let me change gears a little bit here. We have a question about cyber and I think the question essentially is, is cyber different? Is there something different here about how because of pace or because of the nature of it that makes cyber different as an R&D space as a challenge than the traditional areas that we're all maybe a little more familiar with and Art, do you want to start on this? Sure, yes, I think it is different and I have to say, my deputy director, Steve Walker, many of you know is an aerospace engineer in my background semiconductor technology and when we sat together, when we initially came in at DARPA and we looked at the portfolio and we looked at what we thought was really going to change the world in the years ahead, we looked at each other and said, great, so we got a semiconductor person and aerospace engineer and the future looks like cyber and biology so how's this going to work? But then I remembered when I was young and semiconductors were hot and it seemed like the world was populated with high energy physicists so in fact, I think it's just a natural progression of technologies. The software domain is mind boggling and different because it does not actually have to adhere to the laws of physics and it's sort of an amazing thing to see what kind of unbounded capabilities but then also vulnerabilities come with that. The thing that I've been really enjoying the last couple of years is watching how areas of math that have felt very theoretical and really just sort of this almost as fairy land where you would go think deep thoughts and they were never going to be useful for anything. Some of those areas of math are now starting to have huge implications for how we operate in the cyber domain whether it's understanding your vulnerabilities and sealing them up through formal methods, for example, or new math techniques that allow you to digest these volumes of data and actually find the insights that are meaningful in it. I think the potential is huge and the technologies, we're just starting to learn how to harness those technologies. I think what concerns us and everyone else I know that's dealing with cyber is this sense that the pace at which the threat is growing. You build these more, many tens of millions of lines of code that means all that exposure surface for attacks to come and we need these complex systems but when we build them that means the attack surface is greater. I think there's a sense that the vulnerability grows at this phenomenal pace and so a lot of the thinking in our work at cyber at DARPA, we're asking the question what are the foundational cyber security technologies that would let you get ahead of that pace at which the threat is growing and I think that there are some answers but we'll never be invulnerable, right? I think this is gonna be something that's just a matter of managing and trying to reduce our attack surfaces. You know, if I could add to that, I would say as well because I agree with all of that, the problem is really complex and it's gonna require an enormous number of disciplines to help us address it but one of the fundamental differences I see in cyber today is the different perspective on risk aversion. If you think back to the imperative, you talk about the founding of DARPA with Sputnik, it was perfectly okay for the first in, I don't know how large in a number it was, of our attempted rocket launches to fail, to absolutely fail because we felt the need to move fast and we felt a real threat and a real risk and we feel that risk many of us do and I think most of us do that are really involved in the cyber community, we feel that degree of threat and risk today in cyber and because of that we are moving really, really fast but we're taking a lot of risk in doing it and it's acceptable risk, it's risk that we need to be taking in order to address the threat profile and when I look at the pace of development and the pace of change that we're seeing in the cyber community and the engineering and development work that's being done there, for me it's reminiscent of the early stage of the space industry and remiss in reading about the early stages of aerospace in aircraft but it is a reflection of a very different perspective on risk and managing risk and the imperative for speed and that part makes it really exciting actually, you know, while it's not scary, it's exciting and I think a little bit more of that in some of our other disciplines would be really helpful to help drive the pace of adopting new concepts and to take a little bit more risk in what we're doing. Obviously we need to be very thoughtful any time the lives or our safety of our servicemen and women are involved and we are as a community that's always a priority but given that, I think there's a lot of lessons we can learn each time we take on something new and see that we actually can move fast and get things done effectively by moving fast, there's some real lessons for us with what's going on in cyber. We have a question here because it's something that you addressed in your remarks about education and given where the US tends to rank on measures of STEM, science and math education, you know, you mentioned being optimistic, sometimes when you look at these scores, it can be hard to maintain that optimism so how do you respond to that? Do you think it's a fundamental problem? Is there things that we can be doing about it more than we are? So here's the remarkable contrast that I think most of us see. I think we are without too much argument, although many nations are moving aggressively to catch up, but we are without argument still in a place where our higher education system is the best in the world and we're still working hard to make sure that that's understood and nurtured but higher education in the US, we're a magnet, people from around the globe continue to wanna come here and yes, there are great universities in other countries and clearly big investments being made. We've got to make sure that we value that asset of higher education in the US and protect it and nurture it in a way that's gonna enable it to continue to be the very best in the globe or we're gonna end up, and I'll say this very directly without trying to say it too negatively, we're gonna end up in higher education where we are in K through 12 because at one point we had it on K through 12 and we lost it and now we're working to get it back and we're working hard to get it back and I think there is a broad commitment and it takes lots of different forms whether it's the work the government is doing, the work that industry is doing, the work the states are doing, local school districts in part, we all know part of our challenge is that it is so distributed that it is difficult to get it back but there is a lot of national energy underway to rebuild K through 12. I would say while we're doing that we need to make sure we protect higher education and the impact of the sequester on higher education I don't think is well enough understood. It is having a devastating impact on R and D on our research universities and consequently is having a big impact on faculty in higher education and we are at risk of doing to higher education what we collectively have done to K through 12. So I think we have a national imperative to number one make sure we don't do that and number two to go and really, really be serious about working on K through 12. And I've been delighted to see how there's been a growing recognition across the business community that while we label education as a responsibility of government that business has accountability as well and that we have to step forward. We have to be a part of engaging in all dimensions K through 12 and with higher education to provide the additional support, the additional capacity that's needed to help move things forward because ultimately at the end of the day if we don't succeed at that we won't have the workforce that we need and it will impact our economy of course it will impact business but this to me is probably one of the most serious national issues that we have to face and I am very, very worried about the enduring impacts of the sequester on education. We just had a sort of a related question that comes in about the next generation of talent coming into companies like yours. And do you find that, and you mentioned higher education is still sort of top notch but do you find that when you go out to recruit that the skills, the talents you need, they're out there, they're abundant, is it hard to find what you're looking for out there or is it hard to attract what you're looking for? You both face that problem. Number one, I think there is great talent out there. I'm blown away with the talent that comes out of universities and yes there are a lot of things that business is taking on and we have a number of programs where we're working closely with universities to help actually develop curriculum that aligns better with our more immediate needs but when I stand back and look at the product that is coming out of higher education in the US it's fabulous. So I'm absolutely delighted about that. That's a measure of quality, that's not a measure of quantity. We are still in a place and if you just look at the forecast we're gonna be in a place for some period of time where nationally we're gonna have a shortage, we're gonna have a severe shortage of the number of people that we need across these disciplines to address it. In our collective defense community both on the industrial side and on the government side we have an unfavorable distribution of talent when it comes to if you just look at the age demographics and over the next decade we're gonna be losing a heck of a lot of talent just to retirement and the ability to backfill is gonna be tough. I'll give you our own statistic. I mentioned that over the last number of years we've unfortunately had to take our overall headcount down by about 20%. While we've been doing that we've been hiring, we've been hiring aggressively. Last year we hired 5,000 people in our company as our headcount was dropping. It's, but it's a reflection of the fact that we have a very large replacement wave ahead of us still and we need to be able to access a lot more of the talent. So quality is great. Gotta work on quantity. I'll just add, I think one of the challenges we all face is when we watch the really brilliant driven young people who do successfully come through the education system there are so many things that they're excited about doing and very rarely do I hear working on national security on their list. And in stark contrast to 30 years ago when I was coming out of graduate school and everyone I went to school with understood that we had been funded by DOD typically in the engineering community and we had at least some link to something that mattered for national security. We thought of it as just integral to the engineering discipline really. And with that in mind one of the things that DARPA is doing later this year is a conference called Wait What? A Future Technology Forum. It's a meeting we're doing in St. Louis we wanted to get it out of Washington and not send the signal that you have to come inside the Beltway to talk to everyone in DARPA. But the real reason we are doing this we're, this is a meeting that is aimed at amazing technologists across the country. I wanted to create a place where we could have a national technology conference about what the exciting new areas are that just make your brain hurt because they're so cool. We're gonna have people talk about big data and neuro technologies and what's happening at the forefront of biology and how do you manage complexity in these amazingly hard systems we're trying to build and what is AI's future really all about? And we'll get people across all of those areas together. My hope is that we're gonna make it a place where people get so energized again about technology, theirs and other fields but that they then start linking that to the call for a national objective and for national security. And I think if we're gonna have 14 or 1500 people there if 10 of them say I'm gonna go do something that matters to national security I will consider it a home run because I think we have to make it the kind of exciting attractive place that it has been historically. Great and there's sort of a theme here today on these human capital questions which I think is appropriate because I know it's obviously something that Secretary Carter mentioned quite a bit in some of his early speeches about how do you attract the next generation of talent to the Department of Defense and the problems that he and that you both have are fundamentally the same and the question that was submitted was about regulation of research and the question of how much time does a researcher have to spend doing the paperwork, the grant processing stuff if they're a grant recipient or a contractor and obviously that imposes costs on industry that goes into those overhead rates, Wes, that you mentioned. And so the question then is is this burden at a level that you would say is out of balance and if it were, what could we do about it? Well, Wes can tell you about the burden because he's on that side of it. You know, something that we keep experimenting with at DARPA is how do we make it work smoother and faster for the communities that we already work with and then how do we create mechanisms that reduce that barrier for companies that don't already know and have all the processes in place to do business with the government. A recent example of that is a new easy BAA process that we put out. It's been done in our biology office specifically because they wanted to be able to reach small biotech firms, for example, who don't at all think about doing business with the government, especially with DOD, but who actually have a lot to offer for some of the things we're trying to do, for example, in synthetic biology. That particular program works within the FAR, but essentially just says for awards under 700K, we can go to this hugely simplified process and it's made it possible for companies to very quickly put a proposal together, have it considered rapidly and really reduces a lot of the complexity of the contracting process. You know, it doesn't scale to 700, beyond 700,000 appropriately, but I think that kind of experimentation is actually very important on these issues. You know, I do think we run the risk of just accepting the as is in the regulatory environment and end up degrading over time our innovative capacity. And let me just give you a few perspectives. One, oftentimes there's a view, you know, okay, large companies, you're set up to deal with it. You've got all the whole mechanics to make it work. Yeah, we do, but here's the reality, that's money, that costs money to do that. And if we weren't spending the money there, we could put it on R&D. So there's a trade we've made. There's a value equation that is implicit in the as is condition. And I think we ought to question it. And that value equation says we're willing to forego a certain amount of innovation for this amount of regulatory oversight. And I think we would all argue there is some necessary amount of regulatory oversight because clearly whenever we're spending the taxpayers' money, there needs to be accountability. There need to be standards. And that requires some regulatory oversight. But over time, I believe the place we found ourselves is every time we found a little problem someplace, even if it only occurred one time, we were gonna fix it all everywhere for all of time. And we can't afford that approach. So I'm delighted to see that there is kind of a renewed focus on let's retest this balance in the regulatory approach and see if there isn't a more efficient way of achieving appropriate oversight to free up money because it is money. It's not just money within companies. It costs the government a huge amount of money to do this. And if we could free up those resources in government, it would enable the investments to be made by DARPA and other parts of government. And this extends to other federal agencies as well. So I think retesting the implicit value proposition that we're all today just assuming is somehow right, I think it could actually create a lot of opportunity for us. The second thing, and it goes back to the human capital part of it, and I hear this routinely from younger researchers who are thinking about which way they go.  Most young researchers don't accept that at all. In fact, see, it is absolutely ridiculous that anyone would even suggest that that's the way that they would spend their time. And so it tends to discourage many that we would want to be participating in all forms of government R&D, whether we're talking about national security or we're talking about NIH or Department of Energy, you name it. So I think we're both costing ourselves something in current currency by having a little bit of a lopsided approach in how we're spending our money. And we are discouraging those that we really want to attract with the way we've got the system set. So I do think it is a real problem in one that needs addressed. Hey, West, you need to send me some of those rabble rousers because- Good. Because when we get one of those, usually when we hire someone young who has not suffered through these processes, they're the ones who are crazed by it, and then they go figure out how to do something about it. So there's hope. Good. That's good to hear. So I have a question on IRAD, and of course there's changes on IRAD and better buying power 3.0, trying to turn up the gain of the return on the government funded IRAD, I think is what this is focused on. And so West, I appreciate your view on how do you have an interaction, a positive interaction between industry and government so that the IRAD is, as you said, it's focusing on the right areas that precious investment is focused on the critical areas. I think this is a really important topic and one where I really give a lot of credit to Frank Kendall for engaging with industry on this to make sure he's got all of our input, and he does, he's created a very open discussion around this. And I think the challenge here is to preserve the eye and IRAD to ensure that we really do maintain independence, but also enhance this flow of discussion and communication around it. And simply writing an IRAD report and sending it into the bin somewhere is unacceptable. And we all buy into Frank's concerns about that, that that is completely unacceptable. I think we have to be careful about the fix, you know, as I was talking about earlier, oftentimes when we fix something, we actually impose new cost and that has a lot of oftentimes unintended consequences. And I worry about this one a little bit with IRAD in that having worked in innovation is essentially my entire career. One of the things that rings really true to me is the benefit of independent thinking. And it's independent thinking sometimes by individuals, but more oftentimes it's independent thinking by teams and teams who have a lot of very independent and diverse folks and then tend to actually make more progress more quickly. And there are a lot of academic studies to support it. You know, many of you probably read The Innovator's Dilemma. If you can have the stamina to make it all the way through the book, it is a really good book because it has some, I think some really important principles about how innovation actually works. And one of the most important principles is don't always just listen to the customer. You have to be thinking differently sometimes. And so if the fix to the problem that I think we all recognize that we have, which is there isn't the right amount and form for communication of the outcomes of IRAD, if the fix is to try and put some controls into the front end of it, I think we end up in the wrong place on this. So it's gotta be someplace in the middle. It's gotta be where we enhance the dialogue, enhance the communications and enhance the engagement. And I think a lot of it goes back to the, this is hard work kind of discussion that we were having earlier, but that's what we have to do. So I'm optimistic that we'll find the right outcome in working with the department on this because we all recognize the issue. I think there's a lot of debate about what the solution is. We need to be careful. The solution doesn't actually impair what we're trying to achieve with R&D, which is innovation that keeps us out in front. Right, I think we have time for one last question. And, Earthi, I think this is right up your lane because you mentioned earlier that you've been doing some work thinking about how the technologies that you're working on get commercialized or how they make it up to the next step. And the question is about the Valley of Death. And what are them, do we have the mechanisms we need within the defense R&D enterprise? I mean, I think maybe just to the question, probably suggest that we don't. And it mentions particularly the NIST ATP effort as a possible model. So if you could maybe take us out with a... That used to be my baby too in another life. Let's see, I think if you talk to anyone who works in R&D the business of getting successful results out into the world and used is always, there's always a Valley of Death. It's become this overused term because you just see it over and over again. In the work that we're doing at DARPA, I think structurally our problem is designed to be worse because our job is to work on things that people aren't already thinking about that are so disruptive that they're gonna be incredibly painful to adopt. And our history shows that in fact, the things that we are the proudest of having contributed to, where each one was greeted with hostility, rejected, completely dumped on until the moment it became the Air Force's idea if it was stealth or whoever's idea, because it is very, very hard to make major changes of that sort happen. So number one, my expectation going in is that this is just structural, that we're always gonna be dealing with this problem of transition of our successful results. Number two, that means you just have to work that much harder at it. The things that we do at DARPA, number one, even for our far out research programs, program managers at the very beginning think through, well, if I'm successful, then what's the next step? Who might be able to carry the ball beyond DARPA? So it's something that we build into the conversation from the beginning. For the things that we're doing that have direct transitions to the services, we have an entire office, mostly staffed by people who are former military and actually know the services, know how they operate, have an operational perspective from their own personal experiences. They become an incredible resource to our program managers. On my staff, I have four O6 operational liaisons from each of the services. Again, we don't bring them in because they're technologists or because they're acquisition experts. We bring them because they were flying helicopters or flying airplanes or moving troops across the Saudi desert. They actually know what life is like on the ground and they become an incredible resource for our program managers. So I think we do everything we can think of to keep pushing. We try to rally our industry colleagues to help in that process of trying to show what's possible and make the changes on the services side to receive that. But I have to say when I step back, one of my greatest concerns for the entire science and technology enterprise for us and our S&T colleagues in the services is exactly this issue because I think one of the things that has atrophied post-cult war and with the two ground wars that have absorbed our attention in recent years is this ability to take successful technology results and start doing the kind of experimentation, the operationally relevant work, getting the technology in the hands of the warfighter. And I think that there is a great deal of interest and effort now. I see bubbling across the services to try to put more emphasis on that. Certainly Frank Kendall has been a champion of that. I think that's probably the thing that would help us the most as we're trying to push novel technologies out is to have someone who's ready to grab them and start playing with them and figuring out really how they're gonna change strategic outcomes. Well, thank you so much for that answer and for both of you for this session. As Dr. Hamry mentioned, this series of which this is one element, next generation dialogue on industry and defense is ongoing. We'll have more events coming up soon about issues like sequestration again, competition for capital, the mix of the public, private, industrial base, and bid protest issues that are in events yet to come. So keep your eyes out for those coming fairly soon. And I want to thank United Technologies Corporation for sponsoring the series and making these events possible. And thank you again to our panelists. It was great and let's give them a round of applause. Thank you.


Hello and welcome to NewsClick. This week we again talk about Anil Ambani because he has been in the news. A couple of days ago, 20th February to be precise, the Supreme Court held him guilty of contempt of court and willful disobedience of his orders. Now that was a bombshell because for the first time ever the highest court in the country had indicted an Ambani and asked him to pay 253 crores to Ericsson India which dragged him to court for failure to pay. With interest, not only that, if that money is not paid in four weeks, then Mr Ambani, that is Anil Ambani and a couple of other directors stand to face at least a few months in jail. This hasn't happened before. It sent shock waves through industry, through investors, through big news for the day and it has triggered a whole bunch of issues which we had taken up in the week before. So let's look at what happened. So one of the first things that happened of course was the inevitable fall in reliance group share prices and do you remember that a week ago I talked about how nine lenders had got together to enter into what they call a standstill agreement where they irregularly agreed not to sell the shares until September 2019. Now we'll discuss that a little later but clearly after the Supreme Court order things had changed for reliance at least the Anil Ambani, Anil Derubai Ambani group or what is called ADAG. Now ADAG has been in trouble several times before. Each time it has got away by paying some kind of penalty without admitting or denying guilt. It had paid 50 crores to Sebi in the past. It has recently settled another case for 65 lakhs and this is not the only one. There have been problems with insurance. There have been other settlements with RBI but the message to the world was that Ambani's don't get punished. The Supreme Court changed all of it. To his credit Mr. Anil Ambani who had been on a suing spree and trying to stop people from writing about him has got cracking. So one of the first announcements that he made is that he is going to sell his 42 percent plus stake in the asset management company which is one of its biggest assets. So reliance capital will sell over 42 percent to Nippon insurance asset management. Now this sale the news of this sale caused all Ambani group ADAG group prices to soar. In fact the asset management company hit the upper circuit and rose 20 percent two days in a row. This in itself is a very sad indictment of Mr. Anil Ambani and his business prowess. But the good news to a whole lot of people one of them be these nine lenders who entered into a standstill agreement. Now you may remember that we discussed last year last week about how Adelweiss had sold shares and Anil Ambani had dragged them to the Bombay High Court. The Bombay High Court also had refused to listen and said that the lender did well in selling the shares when it needed to. The case still goes on. What has happened here is that the Reserve Bank of India seems to have woken up. So what we learn from the newspapers today is that the RBI has written to the lenders asking questions. At the moment it's only questions. But it also seems to be clear that standstill agreements are irregular and are seemingly a violation of the RBI's policy on loan against shares. Because it's very clear that when you lend to a company against shares you have a collateral. You have a bit of margin. If the stock price falls you're supposed to sell and you're supposed to protect yourself. Each of these finance companies and mutual funds to be nine of them who had lent to the ADAG group have a whole bunch of investors that they are countable to. So it's not their choice. They cannot enter into agreements. They cannot claim that this is being done to protect investors because it goes against the rules. But they have gotten away with it by pretending both in the Anil Ambani case or ADAG case as well as the Z Group that it is to help investors and prevent a fall in prices. Now they've got really lucky with the Supreme Court judgment and the decision to sell the asset management company because all stock prices have soared. So they don't have to worry anymore about collateral. But the standstill agreements remain a question. Not only is the RBI looking at it but the securities and exchange board of India has also woken up A to the realization that people have not even been disclosing, mutual funds have not even been disclosing what kind of loans they have given. And this is maybe as high industry wise is 50,000 crore. And what SEBI has discovered is that they structured instruments in a manner that disclosures were not required. And the fact that there was a pledge of shares was hidden and did not have to be reported to the stock exchanges. One of the things again one hears is that SEBI intends to make this a direct pledge. Mutual funds will be told that they can no longer come up with fancy little instruments that help hide things from the public domain and go completely against the disclosure based policy or regulation that India has opted for. Unfortunately everything that RBI and SEBI are doing is coming out in the public domain in the form of media leaks. This hardly instills confidence. Luckily the media is still credible and we believe that there is truth behind it. But actually the regulators should have led from the front, should have come out in the open and should have talked about it. Because the extent of pledge in the Ambani case is really serious. I have got some numbers over here but it shows that the ADAG group has pledged anywhere between 85 to 95 percent of its shares in every valuable company that it holds and some of them not even very valuable. Which means that you have a very fundamental question here. Do they even have the right to be in charge of management? That brings me to an issue that I took up with the SEBI chairman, which is this whole business of what is fit, who is fit and proper. Now ironically the person who is fit and proper issue is Anil Ambani's ADAG group itself. So they wrote a letter, I think it was on 11th February to SEBI. This was done when Adelweiss group sold its Reliance Power shares. So ADAG was so livid that they wrote to SEBI and said that this group should be declared. Not only should there be an investigation, they have gone to court saying that Adelweiss needs to buy back the shares that was sold but it wanted SEBI to declare the whole Adelweiss group which is big in finance as not being fit and proper. So now my question is quite simple. After Supreme Court indictment based on the past history is the ADAG management fit and proper?  Most of these companies are listed. The regulators, RBI and SEBI have a clear rule and criteria which they have used in the past to throw out some other people from the capital market. So why will that not be invoked here and again like I said ironically this is an issue that has been raised by the ADAG group itself. Our problem in India is that our regulators are allowed to remain mute and not speak out even though it is a matter that affects lakhs of investors. So we will wait and watch.  But there is one piece of good news. The Supreme Court case and the indictment of Mr. Anil Ambani has ensured, probably ensured I should say let me not be so sure that it has ensured. It has probably ensured that our regulators will be a lot bolder in dealing with this group in the days to come. Thank you.