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"Building the Base" - an in-depth series of conversations with top entrepreneurs, innovators, and leaders from tech, financial, industrial, and public sectors.
Our special guests provide their unique perspectives on a broad selection of topics such as: shaping our future national security industrial base, the impact of disruptive technologies, how new startups can increasingly contribute to national security, and practical tips on leadership and personal development whether in government or the private sector.
Building the Base is hosted by Lauren Bedula, is Managing Director and National Security Technology Practice Lead at Beacon Global Strategies, and the Honorable Jim "Hondo" Geurts who retired from performing the duties of the Under Secretary of the Navy and was the former Assistant Secretary of the Navy for Research, Development & Acquisition and Acquisition Executive at United States Special Operations Command.
Lauren Bedula 00:00
Welcome back to Building the Base. Lauren Bedula here with Hondo Geurts, and today's guest is Mike Brown. Mike Brown is a successful CEO in the private sector who made the transition to government. He spent some time at the White House examining the threat landscape, particularly regarding China. He later served as the director of DIU (Defense Innovation Unit) for several years, leading crucial efforts. Now he is back in the private sector, involved in investment and advisory work. Mike, thank you for joining us.
Michael Brown 00:30
Thank you, Lauren. It's a pleasure to be here with both you and Hondo. Thank you for having me.
Hondo Geurts 00:33
So Mike, you and I have been through a lot together, battling against bureaucracy in the department from our respective positions. But I'm not familiar with your journey to the department. You appeared as this icon of innovation, suddenly showing up. Could you share a bit about your background and what led you to take the Defense Innovation Unit to the next level?
Michael Brown 01:03
Certainly, as with many things in life, luck or serendipity plays a role. As Lauren mentioned, I spent most of my career in Silicon Valley as a tech executive and CEO. I led two companies: Quantum Corporation, a hardware company, and Symantec, a software company. Towards the end of my time at Symantec, I met my predecessor and now partner, Raj Shah. He was an F-16 pilot and had been asked by Ash Carter to lead the Defense Innovation Unit. At that time, he said he had an assignment from Ash but didn't know what to do with it. The assignment was to understand what the Chinese were doing with their investments in early-stage companies, as they were heavily involved in Silicon Valley. This led to an eye-opening study that revealed China's extensive legal exploitation of our open society, making investments in cutting-edge technology being developed in Silicon Valley and elsewhere. This led to the enactment of legislation called the Foreign Investment Risk Review Modernization Act (FIRRMA), which gave the Committee on Foreign Investment in the US (CFIUS) more authority. This ignited a passion in me. While I had been a CEO focused on growing market share, I realized there was a much bigger problem at hand. China had a serious and systematic approach, with a massive amount of investment, aiming to displace the US as a technology superpower. I couldn't stand idly by and do nothing when I witnessed that happening around me. That's what led me to the Defense Innovation Unit and working with you, Hondo, which I thoroughly enjoyed.
Lauren Bedula 02:48
Mike, since that report, you have remained connected to Silicon Valley. Do you believe the private sector has a good understanding of the threat posed by China, or do we still have a long way to go?
Michael Brown 02:59
I think both are true. We started this work in 2016 during the Obama administration, when China was primarily viewed as a large country and a massive market opportunity. CEOs were primarily focused on how to enter that market, without paying much attention to the unfortunate stories of companies being forced into joint ventures and having their technology end up in China, allowing competitors to emerge. That awareness has increased now. Credit should be given to my friends Matt Pottinger, Matt Turpin, and the National Security Council for raising the alarm during the Trump administration. People's perception of China has changed, as reflected in Pew Research polls. China's standing in the world and whether it is a force for good has declined due to growing awareness of their activities, such as the treatment of Uighurs, the surveillance state, wolf warrior diplomacy, and their mishandling of the COVID-19 pandemic. However, some of the small innovative companies I work with, who are seeking to engage with the Defense Department, still lack awareness and appropriate cybersecurity and insider threat programs. I am glad to see that the FBI, particularly in San Francisco, is doing a better job of educating these companies. But I consider that the "soft underbelly." While larger companies like Intel or Google clearly understand the threat, smaller companies, often lacking sufficient resources, are less aware of how much of a target they really are.
Hondo Geurts 04:46
Mike, you mentioned the changing landscape. You entered the department five years ago and now you're back in the private sector. From my interactions and conversations with guests, it seems that the mood in Silicon Valley has shifted significantly. Previously, national security and national prosperity were seen as separate concerns, with the belief that someone else would take care of national security while companies focused on their own prosperity. Now, it seems that many people understand the intertwined nature of security and prosperity. While some companies may not want to be solely focused on defense, they at least appreciate the need for it. Does this align with your observations since returning to the private sector and reconnecting with those networks?
Michael Brown 05:41
Absolutely. We have benefited from the fact that more commercial technology is being utilized in war fighting. The situation in Ukraine has been a game changer, showcasing different types of technology. For instance, SpaceX Starlink provides the backbone of communications for a country at war. Increasing satellite imagery allows the intelligence community to anticipate and analyze Putin's actions. Drones have been used successfully, and loitering munitions are becoming a staple in modern warfare. We are witnessing the application of a lot more commercial technology to warfare. This has awakened those who may not have been previously aware, both in Silicon Valley and across the country, to the existence of malevolent forces. Unfortunately, the actions of a single person driven by megalomania can create immense havoc for millions of people. It's tragic to witness. However, this has inspired more individuals to join the fight when such events occur.
Lauren Bedula 06:53
It's a great point, and you are in during a very interesting time, you had Google pulling out of project Maven, and almost this division between Silicon Valley and the national security community in the post Snowden world. That's changed a lot today, where I think there are 1000s of companies eager to support people eager to sign up for permission, which is very promising. When we talk about some of the hurdles to strengthen collaboration, we like to dig in. Is this a policy challenge or a cultural challenge? I'm curious to see from the progress we've made since and where we sit today, what's your take on that?
Michael Brown 07:29
Lauren, you hit the nail on the head. It's really both. And we need probably some change in policy and incentives to drive the cultural change that we're all looking for. We need to be moving faster at speed because the threats are coming faster, and the technology is moving so fast. Want one quick example, fielding small drones in the Department of Defense. DIU got a chance to work on an army program of record called Short Range Reconnaissance. How do we get the same kind of commercial drone you buy at a hobby shop in the hands of infantry soldiers because these are great tools to see over the hill. They can do other things too. But unfortunately, we found it took a decade to get fielded something that the soldiers could buy at a hobby shop during that timeframe. And we were working through our requirements and acquisition system built by tanks and aircraft carriers. DJI introduced six successive generations in our process that DOD put requirements on such that the vendor that was selected had to charge 17 times what that soldier could buy something in the hobbies. Yep. So I think the Department really has to rethink how it buys commercial items. The good news is, there's many more commercial items that can be useful in warfare. We just talked about a couple in Ukraine. But we have to rethink that. It can't be the same process to buy a piece of AI software that we use to buy a tanker aircraft carrier.
Hondo Geurts 08:55
Yeah, my heroes, a champion, which I two things I really admired. When we worked together, one was really promoting this idea of being a fast follower. And you don't have to invent everything to make it useful if you can import it and integrate it faster and anybody. Same thing, and then you are also very good at breaking down traditional, I'd say, transactional silos, and you would come to me and as a Navy and say, "Here's what I'm hearing, here's the things I can do to help you do what you're trying to do better." Do you sense we're making that more of a state of practice in the DOD? Have we made progress here, or do we still have a lot that we'd like to reinvent because we're used to being the inventor, not the buyer?
Michael Brown 09:47
Yeah, well, I think both are true. We've made a lot of progress. And I know you would agree we still have so much more to do. For those who haven't heard basketball or strategy is basically out of concept that is the commercial world. If I'm a tech company, either I'm inventing, I'm a first mover, if not a better follow fast, I don't want to be in the slow lane, if I'm not the inventor and get run over. So the department 60 years ago was really a first mover on so many technologies that we take for granted today, like the semiconductor industry or GPS or the internet that came out of DARPA. But we've also got to be good fast followers. It's the other part of the strategy. I think we're beginning to recognize that. And I think people like yourselves who've been really on the cutting edge of integrating commercial technology, you know, getting something on board a ship, getting something on an aircraft, getting something in the hands of soldiers. You've really helped show the way. But we've got a lot more work to do. And one of the things that I really think is a potential game changer is to find a way to work with commercial industry on software. We've got to be careful about what we worry about, for proprietary rights and classified and things like that. But I think we've really got to find a way to take advantage of commercial software and be able to build on it ourselves. And there are new ways to do that today that didn't exist 10 years ago.
Hondo Geurts 12:28
In the digital world, we sometimes get preoccupied with prototyping things, you know, doing one-off things, prototyping new ways to buy things, prototyping new procedures to differentiate the products. We've made some progress on it, but certainly, there's a lot to go. What you did at DIU to help prototype commercial service offerings, okay, now when I'm a service guy, I don't have to invent it. I can just, I'm not that smart. I'm an elbow poacher. I'll just steal what you've done and tailor it. So I think it gets back to this opportunistic mindset where we're uncomfortable with what we can produce at speed and then really look at new things.
Michael Brown 13:16
And I think people think of the prototyping processes, I'm going to do some long experimentation cycle really, I thought about that as testing and making sure it works in military environments. But it wasn't about how do we develop the product. Prototyping sometimes, as you think, "Oh, some product development is happening there?" No, it's allowing the military customer to basically put that in an environment we think is as close to what it's going to face when we're fighting, test it, and see who's the best.
Hondo Geurts 13:44
Or prototype a use case? Well, I work in this huge gauge.
Michael Brown 13:48
The other thing I learned from you, Hondo, is that the department is way overinvested in this discovery experimentation. You know, let's see what's out there from a technology standpoint or develop it ourselves. And we're way underinvested in the deployment. I'd love to see the department budgets split into what capabilities are coming in the next five years and which ones are coming from five to 20 years. And I think we'd see a very lopsided allocation where it's all focused on the long term. I'm not arguing to change the long term, but the balance has to be there. And if we talk to anyone on the front lines, that combatant commander, Admiral Aquilino, ended up PAYCOM, he cares about what's coming in the next two or three years. The threat seems to be accelerating. We certainly don't want to have to fight in the Taiwan Strait South China Seas. But if we were to have to, we have to go to war with what we have now or is immediate on the horizon, talking about a new fighter aircraft or submarine class coming that's so far into the future. So more emphasis on what we can field and deploy.
Lauren Bedula 14:49
So Mike, you're a business person. And so I want to hit on organizational structures and processes while you're at DOD leading DIU. It seems like several innovation hubs were started or popped out. What's your take on that approach? How was it like collaborating with them? Any thoughts on where we should be going?
Michael Brown 15:07
What we've taken is a good idea and now proliferated it to the point where it's confusing. And I remember talking with Ash Carter about this a year or so ago, and he liked the fact that there seemed to be a thousand flowers blooming, Chris. He didn't have to work in this system where you're waiting for the bees to come. But the problem with that is many of these organizations, including DIU until recently, were starved for resources. So now we have more researchers competing, more organizations competing for fewer resources. And now we confuse the commercial world with who should I go to? It's fine to have multiple pathways. But when I see an innovation landscape produced recently, where Pharma had over 100 organizations, I don't think we're really concentrating to tell the commercial world what we need and who we are. So I think we've kind of taken that to the limit. I'd love to see department leadership now make some decisions, what's worked, what hasn't worked. I remember telling my boss, if DIU is not delivering and bringing new capability to warfighters, shut it down and give the resources to somebody who is. So we've not done the hard management decision that you'd see happen with a portfolio in the commercial world, saying, "I prune this every once in a while, and I give more resources to the successful organization."
Hondo Geurts 16:27
I think you're starting to, you know, one of the successes I think in SOCOM was really closing down that distance, like you would in a commercial world, from end-user to buyer and, you know, technical provider. And, and I think some of the recent activities, you know, Task Force 59 and really getting the operational voice closer to that, as you said, oversubscribed and discovery and underperforming in deployment, and getting more stuff all the way down into the actual employment and do the art. There's innovation in operational art that needs to occur at the same time. Do you think there are opportunities in, you know, I think of capabilities, equipment, training, and tactics? Do you sense there's opportunities to bring what I think a lot of commercial tech has brought to how fast a consumer can employ a capability or learn how to use the app? Do you think there's room in the DOD to bring that same thinking to speed up that adoption rate?
Michael Brown 17:36
There's no question. I think your question really spells it out the best. The tech development we see is, I may have an idea at the company, probably informed by talking with customers. But I iterate on that. I make sure I get the designers, the programmers into the field to talk to customers. And the more rapidly that cycle occurs, the more we can improve upon the idea and get something that has the right product-market fit. That's a big concept in the commercial world, and it's called Agile development. And it's changed from when I grew up in the industry, how we think about developing products. So we're less wedded to a very long development cycle, lots of planning and things coming together, to how fast can I iterate, get some feedback, and iterate again? So it's proven in the commercial world. And we now need to apply that more frequently. Task Force 59 is just such a great example of fantastic work happening in the department, where the Navy is saying, "Hey, I see all these autonomous platforms. How can I get some feedback very quickly?" So let's create this task force and get, on a daily basis, feedback from all these different vendors and concepts. Let's see what actually works. My frustration with Task Force 59 is rather than saying, "Great, let's deploy that immediately," now we're going to send it to another fleet, the fourth fleet. I'm sure they're going to do some great things with it. But meanwhile, Admiral Aquilino just asked us for more capability right now. So we could be moving faster to deploy.
Hondo Geurts 19:05
Yeah, I think there is the same risk of overinvesting in the operational innovation. So I had in having too many task forces and getting diluted because you have the same, you have the same risk there.
Michael Brown 19:22
And one of the challenges, I think, you know, I've thought about is we've not yet demonstrated that we can move as fast as the threats. So everybody says, "Well, China's got this technology." Well, in many cases, it's not that China has better technology. They're able to field faster because they have this, the advantage of this top-down, you know, Communist government that can make decisions and field quickly. So it's not that we're being out-innovated. It's just we're being out-fielded. And so how do we compress that, the time it takes to deliver capability to combatant commanders and to our warfighters?
Michael Brown 20:31 So the first question, when you say, "What would resonate for the companies or you as director of DIU? What would stand out if a company came to see you?"
Lauren Bedula 20:36 Well, I think one of the things that I learned very early on in my career at DIU was chopping cool tech to the Pentagon is a complete waste of time. As Hunter well knows, if you don't have a need, sometimes it protocols that requirement. If you don't have that established and money behind it, you are just doing an experiment that is going to go anywhere. So for me, what would resonate is I'm talking to a company, I know there's already a requirement, there's a need. So a lot of our emphasis at DIU was spending time with the folks who were in touch with what the needs are. That's what I was wanting to try and get on Under Secretary Lord's calendar if I could and other leaders in the department so we get better informed. Because if we're solving their problem, now we've got interest both on the department side plus the vendor side. And that's what we need to make something work. So what I would tell companies was the same thing, we need to find a program, something that's defined, a requirement that we can help fill. So if you think about the way DIU worked, we didn't go out and do surveys of what's out there. We started with a problem and then delivered to the market, what we call the commercial solutions, opening an area of interest where the problem was stated and made public. And then companies would respond to that. And over time, now we're probably up to 45-50 companies responding to every question or problem we put out there. But those companies knew when a question went out, there was already a validated demand or need. We weren't just, you know, chopping in the air with an RFI to see what's out there. They knew something was behind that. And then we got to a conversion rate that was over 50% of when we started a project with somebody vendor, we ended up with a production contract. That speaks volumes. And then companies want to participate in something. If it's, "Could you please spend your valuable resources responding to an RFI, and then in a year or two, we'll tell you if that's interesting to us." That's not very interesting to companies, big opportunity costs for companies.
Lauren Bedula 22:44 Yeah, it's a really important point. Don't have meetings for the sake of meetings, take the time to do your homework, know the customer, know what operational value you might be adding. So...
Michael Brown 22:55 Ash Carter found that the first iteration of DIU, I've talked to him about this, he put the IU l does a tech Scout, let's have coffee with companies and venture capitalists and what the first iteration of the IU pen was, if you're not talking about a contract, you're not using the coffee. Any talks, we got to leverage the capitalistic system we're in to drive the interest in these companies to want to support the DOD.
Lauren Bedula 23:19 And I see that from the private sector side with all these innovation hubs, you could just spend so much time talking to people and it's a waste, waste of resources. And we're in a pretty difficult economic time right now, especially in the tech sector, the defense and industrial base is dealing with inflation as well. So what's your take might now, you know, back in the private sector investing in these companies, is there still increasing interest from the financial community to look at companies to go to market with DOD? Or what's the latest?
Michael Brown 23:49 Yes, the good news is the venture community has shown they're very interested. So the numbers tell the story. These are from PitchBook. For 2021 and 2022, there were $7 billion each year invested in companies that were in the category of defense tech. The number is probably higher if you look to companies that are dual-use tech. That's up from $1 billion four years ago. So accelerating at a rapid rate, but it's still a small percentage of all the money these investors are investing, $300 billion a year. So the $7 billion to me is just a beachhead and should be probably 10 times that. What we have to do is figure out how is the department has the flexibility. I was just talking with General Neller upstairs, former Marine Commandant. He had no flexibility, he saw something exciting he wanted to feel, you know, that had to be programmed into a budget that started three years ago. So there needs to be more flexibility in the budget so that the leaders in the department can buy what they want to feel and that's going to drive, you know, the virtuous circle. Here are more entrepreneurs excited about national security applications and more investors interested in funding this company. So we're at a cycle now with increasing interest from the venture community. That's exciting. I'm a part of that. But we have to see the returns from that, which would really be the department buying that, implementing something like the fast follower strategy can make that go a lot faster. And we get a lot more capability in warfighters' hands.
Hondo Geurts 25:21 So Mike, you know, it's often the fruits of your labor occur after you leave. And you were very vocal about your thoughts on how to reshape DIU and continue to build on that experiment, and I'll call operationalize it, get it away from an experiment to operationally at scale. The SecDef recently announced a bunch of changes, which I think we're all things you were really a very vocal proponent for. And thanks for that. Not to be your successor, you know, he'll have his own vision. But what would you say success for DIU and the department looks like five years from now? Like, if, if we really, you know, I think five years ago, we were talking about, "Should we do it?" Now everybody's talking about, "How do we really, we should do it now? How do we do it better?" What's five years from now look like to you if we've really kind of, you know, is it? Is it an exponential jump? I think that's where it's gonna take, what's your view of success? If all of our collective labor startups, the department, your efforts is laid the groundwork where success.
Michael Brown 26:42 So I know, first of all, thanks for the compliments. I couldn't be more enthused about Captain Duckworth being the next director of the Defense Innovation Unit. I can't think of anyone who has a background more suited, already knows the military, which I had to learn, thanks to your help understanding some of that, and also is a very successful tech executive coming from Apple. So he knows large companies. And I can assure you, he's plugged into what's happening in the valley. So that's great. I think even more important, the Secretary's recognition that this really needs to be scaled at a bigger level. And, unfortunately, where you report in the world's largest bureaucracy does matter. And so his decision there, I couldn't be applauding any more loudly. What DIU needs to do is make it less of a one-off and, as you said, more operational. So being more plugged into the PEOs around the department. Good example, I've seen the idea on Capitol Hill that maybe every PEO needs an innovation officer. Why don't we have every PEO just call the DIU and say, "What can you deliver for me?" If we can provide something impartial, great, and if we can't, we have the process we've been using for 60 years to fall back on. But we need to have more connection with the PEOs, with the process to develop the requirements that the joint staff does, I call the JROC. Getting plugged into some of those processes to make sure that we're always seeing what the commercial world has to offer. So the measure of success is really pretty simple. Number one, are we delivering capability to the warfighter faster? And we'll see that both in the kinds of new capabilities we're able to field, in addition to the large platforms. Of course, the department is still developing the next generation of subs and fighter aircraft as we should. But, you know, the Chinese have stolen those aircraft designs, and they've seen us operate in the world for 20 or 30 years, they've studied us pretty carefully. We need to bring an element of surprise to this, which we're seeing in Ukraine. What can we do to augment those capabilities? And if you want to field them quickly, it's got to come from the commercial world. So that's going to be a measure of success, what new capabilities beyond the large platforms can we field, and how much of the department's spending is going to new vendors, in addition to the primes? We've got consolidation from 50 primes in 1950 to six, we should better make sure those six companies are successful. But we need to build the base. That's what this podcast is all about. So we need to be relying on much more of the innovation ecosystem out there: folks from academia, startups, large businesses, large commercial businesses like Google. We now have a federal sector to focus on business. We need to be relying on all that talent, all that creativity, all of what they're developing as new capabilities, so our warfighters have the absolute best.
Hondo Geurts 29:35 So, you know, I often talk about we've lost a middle of the industrial base or network, right? Korea, you know, the big two bigs and a lot of Smalls. And, and, and I think the question has been, can venture-backed commercial companies rapidly scale to fill that middle of the base? Not to supplant necessarily one side or the other but really fill in. So we've got an ability to operate at scale. But namely, do you think that the promise there is real, that venture-backed startups can be an important part of filling in the middle of the industrial network?
Michael Brown 30:14 I definitely do. That's why at CIO Capital, we're focused on dual-use technology. Some of the venture funds are focused on defense only, and I applaud their efforts. But if you have to return value to your limited partners or shareholders at a venture fund, then you're going to need to take advantage of the commercial world. It's more reliable, and you can ramp up more quickly. I would like to see a world in the future, probably not in five years, or maybe in 20, where the Defense Department is moving as fast as commercial companies. Then the dual-use aspect would be less important. But that's not the world we're in today. So what will need to happen is we'll need the Defense Department to make the changes we talked about here, to be able to move more rapidly and create a duality in the system on how we buy. This separate fast follower type system will make more commercial companies successful, and then we can create that middle tier that you're looking for. But in the meantime, we're going to invest in companies that also have a successful commercial market to ensure their success while we explore avenues to get them into the Defense Department.
Lauren Bedula 31:18 I've got one more question, Mike. It's about talent and something I mentioned earlier. Ben's cares a lot about the ability to have cross-pollination between the private sector, public sector, academia, and all the key players. What was your experience like going into government? Is there anything we can learn from it to make it more attractive for folks to maybe step out of the private sector and go in? Are there any lessons learned there?
Michael Brown 31:42 It's hard. I'm disappointed to say we don't make it easy if you want to serve. And that's everything from the massive amount of paperwork to not even having the first clue about how to recruit people. Instead of recruiting, you're basically running a gauntlet to fight your way in and try to serve. And then when you are in a government job, the assumption is that you're doing something wrong, and there will be investigations if you've crossed any lines. So instead of a system that really tries to bring in the most capable people, given the resources they need, and trust them, we need to rethink what those incentives are. We live in a society we've created where the military, the business community, and even academia are stovepiped. So we have to rethink how we can make those more porous so that talent can move across those lines. We need to benefit the military by leveraging what's happening outside and connect more of our society to the military. As we know, less than 1% is connected to the military. That's not the kind of foundational strength we need for our capability, as important as the US military is.
Hondo Geurts 32:56 So, Mike, as we're closing up this fascinating discussion, and I think we could talk here for hours and hours, for all those who are patiently listening, we have a really diverse set of listeners. Anyone who has accomplished what you have had to work through a lot of stresses, struggles, and strengths to remain resilient. I don't think that's tied to age or seniority. Everybody goes through different periods. Any tips or things you would bring to our listeners? I often talk about how to stay fresh. If we're going to be innovative, adaptive, fast-moving, and fast followers, individuals have to be fresh, and teams have to be fresh. Any tips or things you've done over your career or tips you've picked up that have helped you? Because as stressful as things were and going through all the processes, you always remained upbeat, happy, and brought your A game, which was inspiring and attracting to the change you were trying to drive. Any tips you'd give our listeners here?
Michael Brown 34:10 You're ready to say that. I would say persistence. If you're going to do anything in the world's largest bureaucracy and work in the government when we need more talent, persistence is key. You can't get discouraged the first time somebody says no. The other tip would be curiosity. One of the most fascinating and rewarding jobs I've ever had, and I feel lucky to have had some pretty juicy jobs, was a learning experience for me. How does the military work? How is it funded? How does the relationship with Congress work? Having curiosity about that applies everywhere to everyone. If you bring curiosity to what you are engaged in, you'll be a more effective leader. None of us has all the answers, and you learn so much from folks like you, Hondo, that you get a chance to work with. I found it to be one of the most stimulating experiences to be around not only our enlisted men and women but also senior leaders at DOD, hearing about their experiences and learning from them.
Lauren Bedula 35:23 Mike, thank you so much for taking the time to share your story with our listeners. You've set such a great example for so many of us, and thanks for your leadership around these issues.
Michael Brown 35:32 You're very kind. Thanks. It's great to be here with you.