Innovation and National Security Keeping Our Edge
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Independent Task Force Report No. 77 Innovation and National Security Keeping Our Edge James Manyika and William H. McRaven, Chairs Adam Segal, Project Director Independent Task Force Report No. 77 Innovation and National Security Keeping Our Edge James Manyika and William H. McRaven, Chairs Adam Segal, Project Director The Council on Foreign Relations (CFR) is an independent, nonpartisan membership organization, think tank, and publisher dedicated to being a resource for its members, government officials, business executives, journalists, educators and students, civic and religious leaders, and other interested citizens in order to help them better understand the world and the foreign policy choices facing the United States and other countries. Founded in 1921, CFR carries out its mission by maintaining a diverse membership, with special programs to promote interest and develop expertise in the next generation of foreign policy leaders; convening meetings at its headquarters in New York and in Washington, DC, and other cities where senior government officials, members of Congress, global leaders, and prominent thinkers come together with Council members to discuss and debate major international issues; supporting a Studies Program that fosters independent research, enabling CFR scholars to produce articles, reports, and books and hold roundtables that analyze foreign policy issues and make concrete policy recommendations; publishing Foreign Affairs, the preeminent journal on international affairs and U.S. foreign policy; sponsoring Independent Task Forces that produce reports with both findings and policy prescriptions on the most important foreign policy topics; and providing up-to- date information and analysis about world events and American foreign policy on its website, CFR.org. 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TASK FORCE MEMBERS Task Force members are asked to join a consensus signifying that they endorse “the general policy thrust and judgments reached by the group, though not necessarily every finding and recommendation.” They par- ticipate in the Task Force in their individual, not their institutional, capacities. Alana Ackerson* William H. McRaven Figure Lyndon B. Johnson School of Public Affairs, University Doug Beck of Texas, Austin Apple Mira Patel Nicholas F. Beim Facebook Venrock DJ Patil* Jim Breyer Devoted Health Breyer Capital L. Rafael Reif Steven A. Denning* Massachusetts Institute General Atlantic of Technology Regina E. Dugan Eric Schmidt Independent Consultant Alphabet Reid Hoffman Adam Segal Greylock Partners Council on Foreign Relations Amir Husain Raj M. Shah* SparkCognition Arceo.ai Nicole Y. Lamb-Hale Laura D’Andrea Tyson* Kroll, a Division of Duff & Phelps Haas School of Business, University of California, Berkeley Eric S. Lander Broad Institute Jerry Yang* AME Cloud Ventures James Manyika McKinsey & Company *The individual has endorsed the report and signed an additional or dissenting view. iii CONTENTS vi Foreword ix Acknowledgments 2 EXECUTIVE SUMMARY 10 INTRODUCTION 13 FINDINGS 13 Speed, Disruption, and Scale 16 The U.S. Innovation System 27 The National Innovation Security Base 36 China and the Rise of the Rest 45 The Trump Administration’s Innovation Agenda 53 RECOMMENDATIONS 53 Restore Federal Funding for Research and Development 60 Attract and Educate a Science and Technology Workforce 64 Support Technology Adoption in the Defense Sector 69 Bolster and Scale Technology Alliances and Ecosystems 75 CONCLUSION 76 Additional and Dissenting Views 81 Endnotes 94 Acronyms 96 Glossary 101 Task Force Members 110 Task Force Observers 113 Contributing CFR Staff v FOREWORD For the past three-quarters of a century, the United States has led the world in technological innovation and development. Catalyzed by the Sputnik satellite launch and the need to compete with the Soviet Union, the United States invested heavily in scientific research and develop- ment (R&D). Technologies integral to our daily lives, including the internet, Global Positioning System (GPS), touch screens, solar panels, and LED technology, are in part or in whole the result of research spon- sored by U.S. federal agencies. These investments helped propel the United States to become the richest nation on earth and ensure that its military enjoyed a qualitative edge over rivals’. Today, however, the United States risks falling behind its compet- itors, principally China. U.S. federal R&D as a percentage of gross domestic product (GDP) peaked at above 2 percent in the 1970s and has declined since, from a little over 1 percent in 2001 to 0.7 percent in 2018. In 2015, for the first time since World War II, the federal govern- ment provided less than half of all funding for basic research. China, meanwhile, is catching up, having increased its R&D expenditures by an average of 18 percent annually since 2000. Indeed, the Task Force concludes that China is closing the gap with the United States and will soon be one of the leading powers in emerging technologies. In addition to the challenge posed by China, the accelerating pace of innovation, which is increasingly disruptive and transformative to soci- eties, makes finding policy responses more difficult. Many advanced technologies necessary for national security are developed in the pri- vate sector and built via complex supply chains that span the globe, making it harder for the U.S. government to use traditional policy levers to shape the manufacturing base. Further, the strained relation- ship between the Department of Defense and elements of the private vi Foreword sector means that adopting new technologies to strengthen national security can be tough. The Task Force argues the United States needs to respond urgently and comprehensively over the next five years and put forward a national security innovation strategy to ensure it is the predominant power in a range of emerging technologies such as AI and data science, advanced battery storage, advanced semiconductor technologies, genomics and synthetic biology, fifth-generation cellular networks (5G), quantum information systems, and robotics. Such a strategy, the Task Force concludes, should be based on four pillars: restoring federal funding for R&D, attracting and educating a science and technology workforce, supporting technology adoption in the defense sector, and bolstering and scaling technology alliances. Given that many new technologies now used in the military sphere are first developed in the civilian sector, public-private partnerships will be needed. The Task Force report puts forward an array of thought- ful policy prescriptions for the federal government, industry, and aca- demia to achieve the goal of maintaining U.S. leadership. In concrete terms, federal support for basic R&D will need to increase. Although private-sector investment has risen over the past three decades, it is no substitute for federally funded R&D that targets national strategic concerns. The report argues that “only the govern- ment can make the type of investments in basic science that ignite dis- coveries; such investments are too big and risky for any single private enterprise to undertake.” The Task Force recommends the United States introduce additional scholarships and modify immigration policies to enable its world-class universities to attract and educate a science and technology workforce. Foreword vii U.S. federal agencies and military services should also devote a greater share of their budgets to supporting technology integration and reform their institutional cultures to allow for better integration of new technologies.