Defense, AI, and tech investors — the SOF Week edition

✰ Welcome to [our digital disco] ✰

This week I’m writing to you from Tampa, Florida. Tampa is, among other things, the city that hosts SOF Week. This annual conference supports the U.S. Special Operations Forces (SOF), a defense entity comprised of elite military units like the Navy SEALs and Special Forces—teams who complete operations such as unconventional warfare and counter-terrorism.

SOF Week is massive, drawing 15,000+ attendees and comprised of four days of extensive tech demonstrations, networking, and speaker series, all focused on public-private partnerships and solutions for less-than-conventional military missions. (Picture a convention center swimming with combat fatigues, gov’t leaders, salesmen gusto, Allbirds-wearing software engineers, and the occasional hedge fund suit.)

The event is a fantastic way to learn more about the goals and struggles of the defense sector, and how the Pentagon is embracing technology and innovation in novel ways. I’ve been sharing daily takeaways on X, but I wanted to focus this newsletter release on two of SOF Week’s key themes… and why they matter us as everyday digital citizens.

Without further ado — let’s dive in.

Notable Themes — SOF Week Edition

☞ The U.S. government is hungry for faster innovation… and getting friendly with investors.

One theme resurfacing this week is the U.S. government’s increasing interest in collaborating with private sector investors—most notably, venture capital (VC) and private equity (PE) firms. The concept isn’t completely new; In-Q-Tel, for example, is a VC firm that sprung out of the CIA and invests in tech that supports intelligence and national security.

Over the last decade, In-Q-Tel has been joined by number of government-backed investment vehicles and partnerships. Most recently, the Pentagon created its Office of Strategic Capital (OSC) in late 2022 to collaborate with major investors, as well as Silicon Valley’s Defense Innovation Unit (DIU) in 2015 to help startups break into the defense market. The phenomenon is not only in the States, either. NATO created a €1B fund last August to invest in startups that support the security of its member nations.

Why does it matter?

Global governments have taken a keen interest in teaming up with VC/PE firms—investors in early-stage and more mature companies, respectively—to break free from the shackles of government procurement. This process has long been criticized for stifling innovation and creating a monopolistic moat around the defense primes. (Stay tuned for next week, when I’ll explore this theme further.)

Innovation within government is absolutely crucial. Yet many fear a widening gap between public and private sector capabilities, which threatens the government's ability to regulate emerging industries, address critical issues, and provide essential services. This concern is legitimate because if government agencies fall behind, they risk becoming unable to meet society’s needs. It's not just about staying competitive, but moreover ensuring that governments remain agile, responsive, and capable of driving positive change in the modern world.

To prevent this scenario, U.S. agencies are creating teams focused on fostering innovation and collaborating closely with private sector pioneers. Events co-hosted by investors and these gov’t teams are becoming increasingly common. By doing so, agencies hope to stay ahead of the curve, adapting to technological advancements rather than falling behind a faster-moving private sector.

Why should I care?

Overall, partnering with the private sector through VC/PE channels has the possibility of empowering the government to move faster, capitalize on emerging opportunities, and better support society. A stronger collaboration between government procurement and private sector investors promises to inject a dose of dynamism into the system, facilitating quicker access to state-of-the-art technologies and creating a more vibrant, competitive ecosystem. For us, this could mean smoother interactions with government agencies, quicker access to information or resources, and potentially more tailored and effective services. (In my dream world, every sluggish DMV would be re-vamped by tech-savvy designers. Imagine the difference…)

Ultimately, these partnerships hold the potential to bolster national security and drive economic progress in exciting new directions… but only time will tell the extent to which the model works. While it holds promise for efficiency, the effectiveness will vary—and might also prove that slow government procurement is necessary in preventing safety issues and ethical consequences. I’m going to pay particular attention to how the Pentagon (incl. Office of Strategic Capital and U.S. Special Operations Command) adjusts to this lens. It’s definitely something to keep an eye on.

☞ AI is big. And scary. (A shocker, I know.)

Since the release of GPT-3 in late 2022, AI remains a hot topic across global industries. The U.S. government is no exception. In just the last week, both the Pentagon and intelligence community announced they’re deploying the infamous GPT-4 in their secret clouds (digital spaces for sensitive information). This move is a significant step forward, showcasing the increasing importance of AI in government operations.

Why does it matter? 

For the defense sector, this deployment isn't just about following a trend; it's about staying ahead of technological advancements and national security threats. By harnessing emerging technologies such as AI large language models (LLMs, such as Chat-GPT), they can fine-tune solutions to meet their unique needs with fewer security trade-offs. This move signifies a strategic shift towards more efficient data management and decision-making within the government. It's also a testament to the transformative impact AI can have in enhancing national security measures and driving progress in critical areas.

Over the last few years, the risks and consequences of AI have been well-documented… and continue to grow. Privacy issues have also come to the forefront due to the extensive data collection and analysis performed by AI systems, prompting discussions about data security and confidentiality. The U.S. government appears to have a strong focus on ensuring responsible AI, such as fighting bias and highlighting accountability and transparency; speakers at SOF Week continue to highlight a strong focus on this responsibility. A commitment to responsible AI is essential to balance progress with ethics and to safeguard national security, ensuring technology is used wisely.

Snacktime

📓 Reading: Intended Consequences: How to Build Market-Leading Companies with Responsible Innovation. Author Hemant Taneja is a pioneer in the field of “doing well while doing good,” e.g., investing in companies that benefit society and generate cash. I love the idea of recentering technology as a force for good… albeit, I find some of his arguments vague and quite ungeneralizable. Regardless, it’s an interesting take on the ethical investing and the future of capitalism.

♬ Listening to: Iced Coffee by Arthur Hill. Thank you, Discover Weekly. 

✰ Thinking about: Our perceptions of change (or lack thereof)…. how much things can feel quite the same, perhaps terribly so… and yet one day, you look around, and realize that everything is absolutely different. (Is there a word for this?)

✿ As always — any and all feedback is welcome! You can also check out last week’s newsletter here.