Should Uncle Sam Get Involved in Technology as a Venture Capitalist? : Policy: A shake-up at a federal agency has fanned the debate over whether the federal government’s links to industry should be expanded.
Little Lanxide Corp. was barely a spot on the map of the vast chemical and materials industry dominated by the likes of Dow and Du Pont until, less than a year after its birth in 1983, Lanxide was tapped on the shoulder by an obscure Pentagon agency.
Getting anointed with a mere $1 million from the government gave Lanxide the credibility it needed to attract $250 million more from private investors and big corporate partners, including its Delaware neighbor Du Pont Co.
Today Lanxide employs 350 people and is on the verge of seeing its versatile ceramic materials incorporated into protective shields for soldiers and tanks as well as industrial uses ranging from airplane parts to mining equipment.
Stories like Lanxide’s, of how a little money from the small Defense Advanced Research Projects Agency has made a big difference, are likely to be told with growing passion around Washington these days as the debate resumes over the role of government in sustaining certain industries.
Ignited by the abrupt removal late last month of the Pentagon agency’s earnest director, Craig Fields, the squabble threatens to drag once-obscure DARPA into a messy political bout that insiders fear could irreparably damage what is widely acclaimed to be among the most effective of all federal agencies.
Although he probably never meant to play the role, Fields, in his year as DARPA’s outspoken chief, had come to symbolize the view that the nation must make a dramatic shift away from the arm’s-length government-business relationship that has seen it through four decades of stunning industrial growth.
Popular on Capitol Hill, but anathema to the Bush Administration, is the notion that government should somehow help shore up certain key industries--not specific companies, but underlying commercial technologies such as the making of computer chips and advanced materials--in the same way that it played a role in building a national transportation system of highways and railroads.
“There is a turning point,” said Bell Laboratories President Ian Ross. “The government should not just be supporting basic research but it also should be supporting generic, precompetitive technology that does have an impact on our industrial strength.”
With the worldwide easing of military tensions, the simmering debate over whether government should play a larger role in key areas of the private sector--so-called industrial policy--is growing more complex. More than ever, economic competitiveness is an important factor in the global balance of power, blurring the lines between what is good for the military and what is good for the economy.
The Bush Administration would generally prefer that the government stick to weapons, period. But beyond that is an assortment of positions, ranging from those who want a stronger industrial base because it’s good for the Pentagon to those who say government involvement can be justified, much like in Japan, on purely economic grounds.
But instead of closing the book on this nagging debate, as the Administration apparently had hoped, the mysterious transfer of Fields by Pentagon higher-ups would seem to throw it wide open, offering a window of opportunity to business and political leaders who back a variety of proposals for expanding government’s links with industry.
How did DARPA land in the center of the dispute?
The reason is that the maverick agency has been remarkably successful at doing just what Administration ideology abhors: meddling in the private sector as a sort of high-tech venture capitalist.
“The record of DARPA is spectacular,” said C. Gordon Bell, a noted computer designer and the former assistant director of the National Science Foundation. “It’s the only part of the government that is producing anything that is keeping the country afloat.”
Founded in reaction to the 1957 Soviet launch of Sputnik, DARPA has shown considerable skill at fulfilling its charter to pursue “high-risk” technologies with potentially high payoffs. Sheltered from the whipsaw of partisan politics, its clubby, sometimes cocky technologists, many armed with Ph.D.s and a nonstop sense of excitement, are given considerable latitude to put money into projects at both universities and companies.
Operating out of shabby quarters in a Rosslyn, Va., office building, the staff of 140 oversees a budget of $1.2 billion, just 3% of the Pentagon’s research and development funding and slightly more than 1% of total federal R&D; spending.
All along, the thrust of DARPA’s efforts has been to strengthen the military--not industry. It backed some of the early research leading to the Stealth aircraft, for example. It funded work on a type of acoustic sensor, shunned at first by the Navy but later adopted for submarine tracking. It developed techniques for simulating combat now used by the Army to train soldiers. And the agency, having funded research in seismic detection of nuclear blasts, advises U.S. participants in disarmament talks.
The unit has also had its share of flops. After spending $200 million, it closed the books two years ago on an experimental combination helicopter-airplane. Another project that has fallen short was a scheme to use so-called artificial intelligence to guide a combat vehicle over rough terrain.
While most of its money goes to specialized Pentagon projects, the agency is better known for its uncanny ability, proven long before the buzzword “dual use” came into vogue, to delicately finesse research results with both civilian and military payoffs.
Sometimes, as in the case of Lanxide, the projects begin with purely military intentions. Acting quickly, after only two months of talks, DARPA seeded Lanxide with the initial $1 million in the hopes of spawning a ceramic material that could be used for armor.
“One of the things that was important to the company was finding somebody outside that was technically qualified that could say, yes, this is significant, or it isn’t,” said President Marc Newkirk, who was an unemployed materials scientist before founding Lanxide. DARPA’s nod, he said, helped the fledgling firm attract private funding to leverage its research into commercial products.
Other DARPA projects begin with less specific targets but only a sense that the generic technologies would somehow benefit national defense. So it was with DARPA’s backing of research that proved seminal in the advancement of computer science, including the design of fast microprocessor chips and techniques for sending data over telephone lines.
Some say he’s wildly exaggerating, but Michael Dertouzos, director of the Laboratory for Computer Science at the Massachusetts Institute of Technology, figures that $1 billion funneled out by DARPA over 25 years spawned half of a $400-billion computer and computer-related industry.
In perhaps the most dramatic example, a clutch of Stanford University computer scientists working a decade ago under DARPA contracts acted on the agency’s encouragement to set up private companies. Three of the resulting firms--Sun Microsystems, MIPS Computer Systems and Silicon Graphics--today employ 12,000 people and have combined annual sales of roughly $2.5 billion.
“The developments we did on DARPA budgets were things other companies were ignoring,” said Andreas Bechtolsheim, a Sun co-founder and vice president of technology. “Without DARPA, it might never have happened this way.”
To those who believe in an expanded role for the government as an industrial godfather, DARPA’s Fields had emerged as an unlikely hero. Seeming to worry about commercial competitiveness, he has expressed concern, for instance, over the increasing number of U.S. high-tech firms falling into Japanese hands.
Among 151 firms that control the U.S. industry producing semiconductor equipment, for example, more than 30 have been acquired or received funding from Japanese firms in the past three years.
Fields, who declined to comment for this story, has been a firm proponent of Sematech, the novel semiconductor-manufacturing research center funded by both DARPA and private industry.
He strongly advocated--but backed with a relatively meager $30 million--efforts to revive a large-scale consumer electronics industry by fostering research in high-definition television displays. And most recently, in a move that may have led to his transfer, Fields authorized funding of a small Silicon Valley chip firm under a new program that allows DARPA to share financially in the company’s success.
But none of these efforts actually represents radical departures from some of DARPA’s earlier activities. “What (Fields) was doing could have been justified in terms of just building the defense technology base,” said William Perry, a former undersecretary of defense and now a matchmaker for high-tech firms. “He seems to have been caught in a semantics war of whether it was industrial policy or whether it was doing just well-conceived defense technology programs.”
What did rankle Pentagon bosses, according to Administration sources, is that Fields and DARPA were swept into the limelight. Bright and articulate, 43-year-old Fields played well with high-tech industrialists and on Capitol Hill, where he appeared at least to ally with Democrats who have “economic competitiveness” high on their political agenda.
The official word from the Pentagon is that nothing will change at DARPA except the person at the top. Many outsiders, however, think the agency will be expected to tie its funding more closely to specific military projects, shunting aside anything that might smell of bolstering industry, even in the interests of defense.
