Defense chief's Stanford speech, decoded: More funding for Silicon Valley

A new cycle of military spending in Silicon Valley is about to begin

When Defense Secretary Ashton Carter asked Silicon Valley for help in a heavily publicized speech at Stanford University on Thursday morning, he didn't say what he'd offer in return.

He didn't have to.

Allusions to patriotism were made, of course, and nods to everyone's desire to make the world a better place. Left undiscussed was the billions of dollars the Defense Department and other agencies are ready to shower on the technology industry as the federal government amps up spending on cybersecurity and electronic warfare.

President Obama's budget aims $14 billion at cybersecurity, with $5.5 billion of that going to the Department of Defense. That doesn't count billions more to be spent on electronic warfare and other defense systems dependent on the intellectual property manufactured in Silicon Valley.

The millennial-era media played Carter's trip west as a way to make nice with tech executives who were furious at the National Security Agency for spying on their (customer) data, as revealed by leaker Edward Snowden.

Carter touched on that. But the fact is Silicon Valley and the Defense Department have been joined at the hip from the valley's beginning. Billions of defense dollars have washed through in cycles, decade by decade. Pique over spying and leaks will prove a blip in history. A new cycle is about to begin.

"The intellectual structure of the whole defense industry is going through profound changes," said Paul Bracken, a professor at the Yale School of Management who studies the relationship between the military and Silicon Valley. "Korea is going to have dozens of nuclear weapons. China, India and Pakistan are rising."

Last year's attack on Sony, attributed to North Korea, highlighted the problem for civilians, but the military has been under attack for years and the volume is growing.

A Senate Armed Services Committee report last year said, for instance, that hackers "associated with the Chinese government" got inside the military's Transportation Command computers at least 20 times in a single year.

Officials fear far worse. Michael S. Rogers, director of the NSA and the U.S. Cyber Command, told the U.S. House Intelligence Committee last November that China is capable of shutting down crucial systems, such as major parts of the U.S. electrical grid.

Unlike previous defense spending cycles, which funded planes, bombs, tanks and other big hardware, this one will focus on innovative software, which smaller and medium-size companies are especially good at developing. While defense spending as a whole is flattening, the increase in spending on cybersecurity, electronics and big data systems favors Silicon Valley.

The fact that executives at Google, Facebook and other huge data repositories might have been ticked at the government is practically irrelevant, Bracken said. "The idea that somehow 'don't be evil' and 'do no harm' is going to tame the military industrial complex, well, to say I'm skeptical underestimates it."

It's easy to imagine that Silicon Valley is all about smartphones and social networks. But the valley is populated with hundreds of companies working on technologies relevant to the military. Bracken says it's a sure bet that some of them helped the NSA do its spying on Google, Facebook and others.

No one, apparently, tracks exactly how much military money is spent in Silicon Valley. But the scale is clear: $47.6 billion in federal contracts went to California in 2013, 71% of that from the Defense Department, according to Chmura Economics & Analytics. Southern California dominates, with about $21 billion. But partly because so many defense sub-systems count on electronics and software, Silicon Valley accounts for $13 billion.

The legend of Silicon Valley is a tale of fruit orchards covered over with computer chip factories in the 1960s, but the actual history goes back to the late 1940s, when the U.S. military funded vacuum tube research at Stanford, the site of Carter's speech. That led to systems for radar, radar jamming and signals intelligence — all directed at the rising threat posed by the Soviet Union.

Subsequently, every major technology sector — computers, semiconductors, wireless systems, GPS, mobile communications — was developed with heavy infusions of defense dollars. When people today talk about the government's role in building Silicon Valley, they usually mention the Internet, which grew from a military-funded project. That short-changes the long-term role played by the military in developing U.S. technology.

Now that the cycle is swinging toward innovative code to stop cyber bad guys and give U.S. forces a battlefield advantage, Silicon Valley is set to benefit again. Carter talked about the importance of start-ups, and entrepreneurs and their financiers will be happy to provide. On Friday, Carter will travel to the venture capital mecca known as Sand Hill Road in Menlo Park. He'll be meeting with Marc Andreessen, the most celebrated venture capitalist in the valley right now, and with heads of start-up companies financed by venture capital firm Andreessen Horowitz.

Andreessen is often called a libertarian, but he's really more of a traditional Republican. He backed Mitt Romney and supports a strong defense. Did he require any peacemaking with the Pentagon? No.

The truth is, when you dangle billions of dollars and wave the old red, white and blue, you can count on Silicon Valley to stand up and salute.

Twitter: @russ1mitchell

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