This week, Qualcomm held an event in Washington, D.C. to raise concerns about intellectual property creation, control and protection – and specifically against the rise of China as a technological powerhouse that could displace U.S. leadership.
The opening keynote by Susan C. Schwab, an expert in negotiating trade disputes at the University of Maryland’s School of Public Policy, spoke of a troubling future where trade is a weapon and control over global markets is the goal.
She was followed by Paul Michel, an ex-federal judge focused on IP protection, John J. Hamre, Chair of American Leadership at the Center for Strategic and International Studies, Katherine McFarland, Chair of the National Academies of Science Board of Army Research and Development, Ellen Lord, former undersecretary of defense for acquisition and sustainment, and Robert Atkinson, President of the Information Technology and Innovation Foundation.
In essence, the panelists argued that the U.S. process of procurement, which is cost-focused, is badly broken. It doesn’t collaborate well with other, more strategic government functions, and its excess focus on cost is restricting U.S. innovation severely and unnecessarily, particularly in cutting-edge defense projects.
Let’s talk about Qualcomm’s efforts to focus the government on protecting U.S. technical leadership – and the companies driving that leadership.
China Prioritizes Standards, Startup Innovation
The panelists said China has heavily funded its efforts to take technology leadership and control of standards bodies by fielding hundreds of people to attend standards body meetings in order to dominate the effort.
China also aggressively funds development efforts and doesn’t seem to care if the companies they are funding gain profitability. As long as those companies demonstrate progress, they have a pool of money and resources they can pull from to keep operating.
This is in sharp contrast to the U.S., where only the Defense Advanced Research Projects Agency (DARPA) gets what amounts to a nearly blank check and isn’t punished for mistakes. One of the agency’s larger initiatives across a variety of large U.S. companies enables innovation and doesn’t punish executives if they shoot for the stars and miss.
This ability to take reasonable chances is one of the advantages companies have that the U.S. government, DARPA aside, does not. If you screw up any place else, politicians will punish you, leading to reduced risk-taking. Since risk-taking fuels innovation, the rate of strong innovation is arguably going into decline.
One of the big differences is that when it comes to antitrust issues, China is more circumspect and appears more surgical in its approach, while the U.S. has often been more draconian. For instance, when the U.S, broke up Standard Oil, control over world oil production moved out of the U.S. When they crippled RCA, Japan gained domination in consumer electronics. And when they broke up AT&T, many of the beneficiaries would eventually become companies like China’s Huawei.
The panel argued that antitrust efforts should be focused on maintaining any market advantages the U.S. has instead of crippling U.S. companies if such moves send the related revenue offshore.
Government Needs to Allow for Profit
The panel wasn’t fond of how defense projects are funded and managed. Panelists argued that the people managing the bids were so focused on denying companies profit, the firms weren’t incentivized to find better ways to do things or even use more advanced technologies that would be far better once the defense system was put into production.
They argued that this process made sense when the government funded R&D, but now the companies tend to fund those efforts. If there’s no financial upside to otherwise massive risks, companies will become overly conservative, and new companies will be discouraged from entering the segment. For consumers, this means we are paying more for solutions that are obsolete as soon as they’re released, as opposed to being ahead of the curve.
While panelists argued for more businesspeople in the mix, I think that would be problematic unless they had a critical mass of people trained in both business and government to ensure the business folks didn’t burn out on governmental processes and political dynamics. But according to the panelists, businesspeople are financially discouraged from learning government processes, making it very hard to train people for those positions. As a result, people who are good at both roles are effectively non-existent in government today.
U.S. Competitiveness is On the Line
While this was a Qualcomm-sponsored event and clearly backed by Qualcomm’s powerful and well-run licensing division, there was virtually no Qualcomm content. The entire event was focused on making the U.S. a better place to innovate, with a particular focus on military innovation so the U.S. can be prepared for the next war, which is especially prescient given what’s happening with Russia’s invasion of Ukraine (and the tangential cyber risks too).
The keynote speaker and other panel members made a strong argument that the U.S. government not only fails to support U.S. innovation aggressively enough, but it’s also making moves that appear to force innovation to follow oil and consumer electronics to other countries, especially China.
The biggest point was that politicians and government organizations, DARPA being the standout exception, fail to focus hard enough on U.S. success, and that needs to change before China is looking at the U.S. in its rear-view mirror, with respect to technology in general and defense in particular.
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