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Vice Chairman, Alliance Gaming

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Vice Chairman, Alliance Gaming
Thank you. A colleague called me yesterday to give me his summation of the meeting, because I was not able to be here for the first day. He termed the activities " New Age National Security," and proceeded to make some humorous remarks about some of the presentations. I actually thought that this was a compliment because, in fact, we are in a new age. We cannot quite tell the difference between peace and war. It is not now black and white, it is shades of gray. It is not so clear who are friends and who are foes; again not black and white, but shades of gray.

There are lots of different kinds of aggression other than direct military aggression indirect, trade, and so on. It is not so clear what a country is anymore, and companies are more and more global. All of those concerns are the focus of this panel. We want to talk about what I will term "New Age National Security" from a technology point of view.

I have been in industry for about five years, and these issues have been on the edge of my consciousness but not in the center; so re-engaging a bit in anticipation of this meeting, I have to observe that there does not seem to be anything new. The exact same arguments are coming to the surface again, just as they did in the late Eighties and did periodically before that. It is not really surprising. There have been about 2,500 years of known debate on the proper role of government, and there is no reason why we should start coming to agreement now.

Nevertheless, I would like to pursue some general remarks, and then one concrete suggestion about how we might change the nature of the debate that might be a little more productive.

There are three arenas of argumentation and discussion: One is politics, and Bow addressed that. Another is practice how well things are going. The third is principle what we should be doing.

A personal observation is that it is about 50-50 between politics and principle, and about 0 on practice. I do not have anything to say about politics here, because it is pretty straightforward. I do want to make some remarks on principle, the first being that we can constrain the argument on principle by just noting what is not going on. I do not see much effort from this Administration perhaps none to subsidize failing companies selected by politicians. I do not see effort to pay for developing and advertising actual products of companies. I do not see this Administration paying for land to be given to companies for their factories or paying for the factories. Yet there are cases, more than one, of all those things going on elsewhere around the world in the past. The debate can be focused just on technology, which should be a much more innocuous part of the discussion.

I want to start with DOD, but later branch out into issues concerned with Commerce, and reflect a little on some of the things I have learned in industry in the last few years.

The most important thing I have learned is that quality companies, the Fords, the Motorolas, and many others, attend to the health and the fitness of their supplier base. They are realistic; they realize that things are not just going to come out all right if they sit back and wait and hope for the best. They spend money to assure that products are affordable from their suppliers. They spend money to assure that quality is high. And they spend money to assure that there are suppliers, that they are not faced with monopoly supply, and that there is not egregious supplier conflict of interest, namely, suppliers that have loyalties to their competitors or might even be their competitors too much and too often.

These are balancing acts. Again, it is not never black and white. You have to attend to these issues. You have to manage your supplier base. With that said, why should not DOD?

The focus for this panel is on technology, and I want to talk about technology and the DOD supplier base only. The other issues may or may not come up later.

The fact is that for many decades DOD has wanted things that no supplier knows how to build or how to just supply. You simply did not find stealth aircraft a number of years ago as catalog items. You did not find tanks with reactive armor as catalog items. It is good to have these challenges, because the fact is that the best technology comes from practical challenges, not from working what I call "in the abstract."

If any of you remember your high school Russian, "povtoreniye - mat' ucheniya." Necessity is the mother of invention. I really believe in that.

DOD in fact needs things that people cannot build, and let me assert that a sensible CEO is not going to invest to produce those catalog items on Spec, because DOD is an unpredictable customer; Congressional funding is unpredictable; it just is not a good business investment. Hence, there is a long history of DOD investing in technology development in order to mitigate that risk to make things possible, available, that otherwise would not be possible, would not be available.

Within that context, it seems to make absolutely perfect sense that if you can you should invest in technology that is not unique to the military: It is simply better for the Defense Department. It leads to lower-cost things and better-quality things than if you invest in technology that is unique to Defense. That will not always be possible, but it is frequently possible; it is commonly possible; and it is relevant and important for Defense good for Defense quite irrespective of whether that dual-use technology also helps the civilian economy.

Frequently, commonly, often it does. We should be very careful about what is advertised. The basic thrust should be, and is, in the vast majority of Defense technology investments I know the dual-use ones do in fact help Defense. So this debate on the funding of dual-use technology seems to me to be a little strange from the Defense perspective.

I want to branch out and talk about some issues that relate to both Defense and Commerce, and say that for both customers, funding technology is only one way to get it. There are a lot of other ways to get it. Mary, you alluded to some others. And let me assert that I actually think some of these others may be more productive and fruitful than directly funding technology, notwithstanding the value of funding technology. [End of Tape]

One way is through international technology cooperation.

We have to get over the view that we will be 100 percent independent in everything. In fact, every company knows that you manage mutual dependence; you are not independent in everything. We can manage that mutual dependence. We have to get over the view that we can stop things happening elsewhere. The fact is, it is a lot better for us to run faster than to try to get others to run slower. These are attitudinal issues. I think they are widely shared at the moment within the Administration. And there is a lot of opportunity in the international arena for getting technology, other than just funding it.

I would say that, as always, there are dangers. I have alluded to some. If we really are going to engage in dual-use activities in a widespread way and if there is essentially instantaneous dissemination of everything everywhere it is pretty hard to keep up the principles and philosophies that we have pursued for the last few decades, namely, achieving military superiority by technological superiority. You have to deal with other issues. Speed is one issue, and another is to be very thoughtful about where you are going to have strategic necessities and where you are going to have strategic differentiators.

For strategic necessities, you know you absolutely have to have it but you expect others to have it too. For strategic differentiators, you know you absolutely are going to have to have it and you really do try to stay ahead. Every company has to make those investment decisions. So does the Government.

The second area that I wanted to highlight, in addition to international technology cooperation as a means of getting technology above and beyond just funding it, is infrastructure. There are so many things that are in infrastructure. One is the national or global information infrastructure, which I think really promotes the development and dissemination of technology.

Some people seem to think that promoting the NII is really a code word for promoting the electronics industry. To me, that makes as much sense as believing that promoting the Interstate Highway System is a code for promoting the concrete industry. The fact is, that really is not the case. NII or GII helps all industries in a fairly even-handed manner, and it helps industries develop and employ technology.

A second aspect of infrastructure that is incredibly strong in this country, almost uniquely so is the venture capital industry. The government's role is to make sure it stays that way by keeping out of the way.

The venture capital industry is a tremendous asset in this country. It means that people can get a start, by and large. I might add that there is a social sort of halo around the venture capital industry, which is also important. In other words, people can have a failure and keep going. You do not find that in many other countries.

The last aspect of infrastructure that I wanted to highlight is the area of standards. Standards actually can advance technology. We have a smart community in this country that knows how to deal with standards, both formally and informally, ad hoc common specs, and I want to separate the standards issues into two categories just for simplicity. One is inter- operability. When there are standard interfaces, things explode. We see that in the computer industry. The other is issues of quality and performance. I am really impressed with the emphasis on quality that came from the Baldrige Award, the ISO 9000. I believe restaurants are better because of the Michelin Guides. In fact, the government can play a real facilitating role in dealing with quality, performance, and awards. Public relations motivate people, just to bring it down to the basest level.

With all that I have said, let me emphasize that there is nothing new in my remarks. I am the penultimate speaker. There are few crumbs left on the table, but had I been the first speaker it would have been impossible, I think, to say much new in the area of principle. So I would like to make a suggestion and to shift the debate a little away from principle to practice: Namely, is anything actually working, and how well is it working?

With the TRP, ATP, and other ARPA programs, there is a tacit assumption that things are fully working well. Actually, I have a good basis to believe they are. You cannot argue so well with success. What are the expectations set by these programs? What are the incentives for achieving success? How are we assessing performance? How well are they working? I think these are the right concerns; they are the concerns of most companies. If the company I work at now spent 100 percent of its time discussing the principles of its operation and zero percent discussing whether it was succeeding, that would not lead to a good outcome. For both the Congress and the Administration, I think this would be a very healthy shift in emphasis. If there is any spin-in from the industrial sector, I would like to say it is this business practice, not any particular technology. Thank you very much.

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Forum - Session Four

Under Secretary for Technology, United States Department of Commerce

Seventh Panel Discussion Questions and Answers

Deputy Assistant to the President for Economic Policy

Vice Chairman, Alliance Gaming

Under Secretary for Acquisition and Technology, U.S. DOD