want to play a little bit of it and then get your response. [video] >> good morning. welcome everyone. we'll go ahead and get started here. my name is tony mills, i am the senior fellow here at the american enterprise institute and director of our center for technology, science and energy. thank you for joining us in person and those of you joining us online for supporting this timely conversation about

federal research and development in the age of global competition. after many years of enjoying great economic success brought in part large -- the united states now faces serious challenges abroad. changing dynamics in the international marketplace as well as deliberate actions by some governments to restrain free trade has combined to diminish the competitiveness of many american goods and services. this challenge to america's competitive standing in the international economy has stimulated a reevaluation of u.s. policies on several fronts. it has prompted a reevaluation of basic questions concerning the role of the public sector itself and fostering economic growth, 10 illogical advance and regional development -- technological advance and regional development. in the preface to a 1986 volume on industrial policy, published by api press and edited by my

colleague who will be joining us on stage this afternoon, history does not repeat of course, but it does rhyme. today we find ourselves at a similar inflection point with fierce global competition and shifting political alignments prompting deep questions about the role of the state in science, innovation and industry. questions that call for careful analysis and thoughtful reflection. perhaps no one today is better positioned to help us think through these questions than dr. arati prabhakar. it is my pleasure and honor to welcome her here this morning. dr. prabhakar is there director --in this capacity, she is the president's chief adviser for science and technology, a member of the cabinet and cochair of the president council of advisors on science and technology. applied physicist by training,

dr. prabhakar has led two different federal r&d agencies prior to taking the lead at ost p, darpa as well as the national institute of standards and technologies. she has also worked at government labs and nonprofits across a wide variety of sectors including a stint in silicon valley. welcome dr. prabhakar, and thank you for being here. joining dr. prabhakar onstage is my colleague, chris miller, associate professor at the fletcher school at tufts university where his research focuses on technology, geopolitics, economics, international fails and -- international affairs and russia. -- which was awarded the 2022 financial times business book of the year award as well as the council on foreign relations

author award. before handing it over to chris, i want to invite everyone here to stick around for the -- stick around after the conversation for a terrific panel that will provide further context and analysis on the role of federal r&d in today's changing landscape. thank you again for joining us. i will turn it over to you chris. prof. miller: thank you tony and arati for joining us. there are a whole lot of topics i would like to cover, but perhaps to start, can you help us understand how you arrived in your current position? tony laid out all the different roles you have played in different parts of the r&d ecosystem. can you layout your career steps that lead you to the office of science and technology policy? dr. prabhakar: it is great to be with you and thank you for the warm welcome. i appreciate, this is such an important topic. my story in washington started 40 years ago this fall.

i came on a congressional fellowship, i had just gotten a phd in applied physics on semiconductors. i came because i wanted to work on things that had more impact than i thought i could just borrowing in on one topic in a lab and i had a chance to go to darpa as a program manager and now i am at a point where i have have public service, private sector, most of that venture capital, and what i saw in that 40 year journey was the fact that this country does enormous things. think about the mrna vaccines, huge things get done and those things get done because the public and private sector each plays their part and that was

the perspective i had when a couple of summers ago, the white house called and asked if i would come to this role in the ostp. i was delighted because it was one of those areas where you can actually work on the entire system and understand how those linkages reinforce each other. we are at a time we had so many huge things that we want to do as a country, i think it is absolutely a time when this phenomenal innovation capacity we have has to be brought to bear. prof. miller: fantastic. you've been watching and playing a role in key aspects. what has changed? how is it different today? dr. prabhakar: that quote from 1986, about 40 years, we've been

admiring some of the hard problems that we have, in the flourishing of the american economy. i'm telling you, i am so proud of what this president and vice president have gotten done because on multiple fronts now, we are finally taking the kind of action that is going to change the trajectory, and a lot of it is about taking huge advances in science and technology and turning them into the impact that changes american lives. that is true whether the -- whether it is the inflation reduction act, rolling out clean energy to reduce the climate crisis, the first real action anyone anywhere has taken that will change the climate trajectory. it is true on semiconductors. we have talked about the fact

that semiconductor technology has globalized and got dangerously concentrated. in this administration we are taking action, and that has taken us from a trajectory where we were going to continue to have 0% of the most leading manufacturing -- i think it is 28% of global manufacturing capacity in the next decade. that is how you start changing what those prospects look like. prof. miller: you noted the importance of having a clear definition of what the job is in the public sector and what the job is of the private sector. how has that balance changed or has it? dr. prabhakar: we are coming through a period where for many years, we had over simple fight assumptions that globalization

solved all problems, the market solves all problems. globalization and market forces, a lot of things happen. many of them were good. they did not solve all of the countries' problems and it led us to a place where we had fragile supply chains, a place where we have a degree of income inequality that is dangerous and hurting our country, driving polarization, a halloween out of many regions of our country. these things matter to our success as a nation but aren't the things that market forces or globalization magically fixed by themselves. the approach in this administration is to recognize that the answer is to not just sweep all of that away, but rather to partner with industry and do together public and private sectors, but we can't do separately.

to stick with the chips example, in summer 2022, congress passed the chips and science act that advocated -- allocated $52 billion toward manufacturing incentives to make sure we brought leading edge manufacturing back to the united states. today, over $400 billion of private capital has stepped up to the table and it is because of this catalytic effect of a public commitment. that exemplifies how a public investment and a clear message that this country cares about an industry that is foundational to our supply chains and to our military capabilities, once you say that is important we are going to invest as a public entity in that area, i think it has a huge effect on how private

capital is allocated. prof. miller: does that represent a shift in our thinking. we are now realizing that manufacturing is really impossible to separate from rnd. dr. prabhakar: it is not just manufacturing but if you think about the purpose of research and development, it is to change the options you have, change the possibilities you have. once he creates those new possibilities, once those advances become within the realm of the feasible, then you have to implement them. that can be manufacturing. it can be other kinds of businesses, all of which feeds into the economy. it can also be about how you make wiser decisions about regulation, the functioning of government, government services. we need to understand the role is broader than just

manufacturing or feeding the economy. ultimately it doesn't matter, if you don't translate it into that impact. just as i think we had an oversimplified model in which the model or globalization was going to solve everything, and we realize we need to refine it, in research we had an oversimplified model that was if we just do the basic research, all the good things will happen. that is not how the world works. with the structural shifts that have happened, the rise of global competition, the internal shifts with corporate r&d declining, much more entrepreneurship, a much more effective and engaged academic community, those shifts mean we have to pay much more deliberate attention, not just to seeding basic research but making sure it doesn't just sit on a shelf. that is reflected in very

tangible ways if we are talking about clean energy, semiconductors, advanced manufacturing. but also the research we are doing today. the national science foundation for example, started the first new directorate in new -- in decades. technology, and ovation and partnerships directorate. one of the goals is to try and catalyze regional economic development, recognizing that we can't simply go on having beautiful university research across the country, but not connecting it, not letting it be harnessed by local economic opportunities that communities can pull together. prof. miller: i would love to get back to the question of corporate to get back to the question of corporate are indeed may be a transition to a question from scientists or labs. what is the right way to do translation? you have worked at darpa.

how should we think about the right kind of models? dr. prabhakar: first of all, it is always hard. people talk about the value of death. they don't work in the real world, so you just have to recognize it is hard. if you are in the rnd business, it is inherent in your world you will come up with things that seem cool but are just breathtaking hard to translate an impact. by the way, the more revolutionary your result is, it will break things for people. actually, some of the biggest advances are some of the hardest to implement. i think back about stop technology, which is completely obvious that you want your aircraft to be, that idea was spot so fiercely by the air force until it worked and it seemed life, and now they cannot imagine not having it, so i

think it really gets to this idea and you have to try for the biggest most disruptive changes and you just have to recognize it changes so many things for those who will use it. that is why it is hard. the places where i think it has actually gotten better in the u.s. you think about universities, a number of decades ago universities were, even engineering departments were much more isolated from the corporate world. they often think they should not get their hands dirty and should remain pure and untouched by what the market should do. that change today i think is dramatic. by the dole legislation, an important factor here. but today, the ability for universities to provide technology and resorts results to get into industry is much better and the ability to start new businesses is something that

is much richer. in my mind, that is something that has gotten better. corporate r&d. many industries that did a lot of corporate r&d have shifted to near-term product development. prof. miller: let's dig into that. because i think you look into the history of r&d, bell labs looms large and for half of a century was producing nobel prizes. why do we not have an equivalent to bell labs today? dr. prabhakar: a monopoly paid for by r&d. bell labs put me through graduate school. that was before divestiture, right before that era. and i remain grateful for that. but also, you can't not be impressed by the goodness that came out of that. it was nobel prizes, but it was also the transistor.

things that really were the beginning of massive changes that happened. i think we also need to recognize the innovation that came after it was broken up was what would happen in the old monopoly. i remember my colleagues at bell labs were all about quality and they could not imagine the world we live in now or we carry around cell phones and a world built on the foundations of the internet. my view is you need a mix. you need organizations that are very, very, very good at further refining what they do today, and there is innovation to be had there, but you also need organizations that are just completely blowing up the current paradigm and feeding things that could be as dramatic a change as the internet was for communications. prof. miller: i guess i would agree with your argument that corporations today tend to do more d than r.

more short-term tweaking products than taking 20 year long bets like bell labs did. there are obviously exceptions to that rule. dr. prabhakar: right. prof. miller: what does that imply about the role of either universities or foundations or government in filling that gap? dr. prabhakar: i think let's take a look at what the innovation system looks like. first of all, i will put it on a global context. we in america still spend more than any other country in the world on research and development. the latest numbers were something like in the vicinity of $800 billion a year. we recently put 3.5% of gdp, which is the largest percentage we ever spent of our gdp. that was driven by phenomenal growth in industry r&d. that has gone much faster than gdp. you can see the intensification of the innovation economy, the information economy in particular. and that is where some of the

interesting new research is coming out of industry, especially in areas like ai today. i think that is part of the good news in america's competitive position. important news in global r&d is china because the people's republic of china in a period in which we doubled r&d spending in the united states, 25 years in which we doubled our spending in real terms, china r&d r&d expanded the group 20 -- china expanded the r&d group 27 fold. now they are only behind us in total spend. 30% more than all of europe altogether spends on r&d. hard to get your head around how massive that is. very strong continued investment by the government in the public r&d. they recently announced they will increase government spending in r&d 10%. notably including a 13% increase in basic research.

this model that china just copies and follows, that is not the whole story at all today. because once you start manufacturing and building your development keep ability, that is what allows you -- capability, that is what allows you to but a robust research-based. so we are very strong but we are no longer alone. that is why r&d has been such a priority for this president. again, big growth in the u.s. has been private sector r&d. federal r&d has bounced around and stayed level. plus or minus gdp a little bit for a while. it has not kept pace, kept up with the scale at which our economy has grown. and much more importantly, it has not kept pace with the scale of our ambitions because we have big things we need to do on health care and creating

opportunities. the president made it an important priority. he was able to get increases in federal r&d that were about 24% in the first couple years of this administration. and of course that ran into the republican budget cap on capitol hill, and that flattened growth. that is a great concern to me because of china's rise, because of how ai is such a disruptive force today. that will require investment to get it right and to use it to do the country's work. but most fundamentally, because american r&d does not thrive unless we have the federal component to lay this foundation of basic research, to educate the students that are going to feed into all of these industries, to do the basic research that feeds the industry but also the public missions the government is responsible for, fully

responsible for national security of course but also critical roles in energy and the energy transition in space in dealing with the environment and agriculture and many other areas. that is the work i think still has to get done. i think it is so powerful and there is so much promise, but we have to get serious again about making sure it keeps up with the scale of the great ambitions we have. prof. miller: the description of the international picture you laid out a striking, especially the role of europe. i have not put that number in context before, but it is quite shocking. i would love to hear how you think about relations with all allies when it comes to r&d like working with japan or korea or taiwan or our european friends. what is the substance there? dr. prabhakar: i think critical. this president and vice president rebuilt our strong alliances around the world thanks to technology engagements

that have been critical to that. that is true that we are addressing a critical sector like semiconductors, where we were clear from the beginning that part of what we wanted to do was to make sure that the critical components we need for supply chains and for the military have a good strong footprint in the united states. but this was never about, you know, rolling up the sidewalks and doing everything here. and all of our allies and partners around the world have been key in the strategy thinking about semiconductors. and i think those have been very good strengthening relationships there. and then it is equally true on the r&d side. so when i meet with my counterpart at the g7, we spend a lot of time on shared issues of climate and health, on how we approach ai to make sure we wrangle it and manage the risks but sees all of the tremendous benefits. prof. miller: you mentioned --

we can segue to national security. in some ways, i think the key r&d programs, since the end of the cold war, there has been less investment across the board. that might be changing as the international picture darkens in a pretty substantial way. what other types of r&d investment today that are necessary for national security, and are we making them? dr. prabhakar: i will reflect on my time when i was leading darpa . that is always the core question when you are the agency responsible for creating breakthroughs for national security. i would tell you that i think by definition the likes of what we invested in had to change. and in the time that i was there, we were focused on what does it mean that christian -- that commercial technology is available around the world?

we focused on how to harness the next generation of the information revolution, including ai. this was a decade ago. most people in the science and tech world -- ai did not just appear a couple years ago. there has been a lot going on for a long time now. we were always looking for new horizons of research that were going to have huge implications for national security. and i will tell you my favorite story about that. i showed up as director of darpa in 2012. i have been gone for 19 years so i had a little catching up to do. i was getting acquainted with my program managers and one of them was a geneticist and air force colonel. this is 2012. he said there is going to be another pandemic. all the conditions are ripe. one of the problems is we do not have the ability to create a vaccine fast enough but there is

research in mrna for a rapid vaccine response platform. in 2024, that seems obvious. in 2012, that was crazy talk. by people who really knew about vaccines. dan persevered. he told me that first meeting i just met this little startup in boston and they are using mrna approaches but going after cancer, which as a former venture capitalist i would go after cancer too. unfortunately, you can always count on that market. you cannot count on the infectious disease market. dan said, i think we might be able to persuade them to work on infectious disease. thankfully we did. because it took a lot of people doing miraculous things for us to have mrna vaccines as quickly and effectively as we did.

but the reason moderna was able to ship vaccines for clinical trials within a few short weeks of nih identifying the stabilized spike protein that the vaccine needed to produce, the reason that happen so quickly was dan in darpa had that kind of foresight. so i think it is a great example of understanding national security in a broader context that reflects today's realities and secondly it gets right back to what government and industry do together that they cannot do separately. prof. miller: every decade of history, darpa has a story like that. dr. prabhakar: that is actually the job description. a former darpa director told me that darpa gets all of its resources and support, which both of those are important, and he said all you have to do is do one to two things per decade. prof. miller: i think darpa is one of probably the few institutions around this town that has almost unanimous support in terms of its

accompaniment because of its track record. it is a better track record that many venture capital firms have to be sure. dr. prabhakar: yeah. prof. miller: what explains that success? if we could learn the key to that success and replicate it, we would have a lot more successful r&d. dr. prabhakar: first of all, there are enormous successes that happen across the federal r&d enterprise. darpa is in the business of going for high-impact and being able to take high risk in order to reach for high-impact. and that is why when it succeeds, its successes are so dramatic. but i think it is important to recognize it is both on top of this foundational base of research funded by nsf, nih, and other parts of the defense department and the basic research it supports. because none of these big breakthroughs happen in isolation. i think you have to recognize that, and you have to recognize the partnerships that darpa itself forms, not just with universities, but with companies

and throughout the defense enterprise, military focused objectives. but core to given the big caveat that exists under the ecosystem, i really felt when i was leading darpa that i had the great privilege of building on six decades of successful history that bought for me the confidence of all of my bosses literally all the way up to the president. they understood how important darpa was. that its mission required that they not meddle, to make sure other people did not meddle, but to make sure we had room to run, and put the onus on us to produce results. i have bosses who pushed me to make sure we were reaching far enough but did not micromanage and did not tell us what their prep projects where, and i think

it is very hard to find any organization public or private, by the way, that gets that kind of rope. but you have to give people that kind of rope if you want to go big. prof. miller: one of the under other interesting things about darpa's success or failure comes after decades. i think that point to another challenge about assessing r&d in general, how do you know when it is working? dr. prabhakar: yes. it is not a business where you get to tell on a quarterly basis if you are making your numbers, and the word that gets used a lot is metrics. if you are in the r&d business, everything you can measure mr. going to not tell you much actually -- measure is not going to tell you much actually. number one, you are aiming for huge impact in the future. whatever you are doing r&d, your ultimate impact will be in a future that is too far out for you to manage on a day-to-day basis. and the art