The following content is provided under, a Creative Commons, license. Your, support will help MIT, OpenCourseWare continue. To, offer high, quality educational, resources, for, free, to, make a donation or to view additional materials, from hundreds, of MIT courses visit, MIT. Opencourseware at. Ocw.mit.edu. All. Right we're gonna do two in a row and. Kevin. Has got these so. First, we're gonna do a snapshot on G could the Defense Department, you. Remember those guys with that connected, model could, they play a role here is there something useful they can do here, and the, second is on this new RPE. Fairly. New RB models, come about so. This is Dorothy roben she was the former deputy undersecretary of Defense for something. Called facilities. And environment. And. She, worked for you know ash Carter. DoD. Had the largest, it's. The largest facilities, owner in the United States. 507. Installations, and bases 300,000. Buildings 2.2. Billion square feet of space that's. Interesting, right maybe, they're a testbed, right. And. You, know they, do consume, more oil than anybody else in the United States 1.7 percent it's not a lot but still it's, a lot of oil and. They spent a lot on energy every year. So. Maybe. They've. Got an interest in some of this so, sure. Enough DoD. Actually, thinks, it's got an energy problem for. Some pretty good reasons they. Understand. That. They have a strategic problem, having to do with worldwide, energy supply. The. United. States is. Profoundly. Dependent. On. Its oil supply, and, that. Is a international. Market. We. Probably spend. 1/3, to 1/2 of, our defense budget, on. Protecting. What the military calls, their. Lines, of communication, around oil ie the oil supply system, so. Cleverly. The oil industry, is managed to get the American taxpayers, to foot, at. Least 250. Billion dollars a year protecting. Their supply system it's pretty clever a. Signal, of a politically, powerful legacy, system. So. There is a deep. Around. Oil supply, and then there's a profound, tactical, set of problems that, you. Know they've. Been engaged in to. Middle Eastern Wars and in, the, past decade, largely, around. Related. To oil supply, and. Their. Own internal. Energy supply, lines. Created. Most of their casualties right. That's why we lose people and these painful. Supply. Convoys, it. Forces, the army in particular into a terrible, tactical, position, of having to defend these. Fixed. Points and concentrate. Forces, to defend these fixed points in an asymmetric, war where, you don't want to F fix points you want to be part of communities, and populations, so. It is essentially. The oil so problem. Is, completely. Counter dict and everything the army knows about how it should fight, asymmetric. Conflicts, it's, forced this and defending long supply chains to fix points which is not the tactical, position who wants to be in and it's, in turn forced. Many casualties, as a result so. The. Army the Marine Corps wants to get out of this box they want more mobile, flexible. Tactically. Free. Forces. To be able to sustain the kind of models they've developed for. Optimizing. Their warfare and capabilities, so they've got a strategic problem a tactical problem and then they've got a big facilities. Problem. DoD. Has lots of aging, old, facilities. On old, long-established. Basis, often built. In the war to time period or they're called wartime period. They. Have been. For. The last since the end of the Cold War a significant, amount of cost pressure, how. Can they get their facilities, cost down, so. That's, where Dorothy row bine who. Has the facilities responsibility, at DoD where, she came in. Interestingly. DoD. Every year gets twenty billion dollars. In. Something, called MILCON. Military. Construction that's, for rehabbing, repairing, upgrading, and building. Undertaking, new construction, for its facilities, and bases that that's. Like a guaranteed, revenue stream right, and you can do a lot of interesting, things with a pretty guaranteed, revenue stream so one of the things that the, Defense Department was attempting, to do is, really take advantage of this revenue stream to do significant. Facilities. Upgrades, in terms of energy uses, so, that was one, of her major. Projects. There. So. DoD. Could be a. Very. Interesting testbed. And. A, very interesting initial. Market. For. A, suite. Of new energy technologies, right so DoD is not going to do carbon capture and sequestration.
Right. That's not its problem. But. It sure is interested, in getting off the grid right, it, believes. It has a terrible cybersecurity. Problem by being on the grid it, wants, off. It, significantly, wants to reduce its energy costs. It's, ready, to experiment. With renewables, partly. Because of a grid strategy partly to. Establish. More mobility and get off fossil. Fuels set of line of supplies, it's, got an. Incredible, number of vehicles both, for military purposes, and on military purposes, that. Again is another testbed, opportunity so you can the, idea here is her testimony laid, out to. One of the Armed Services committee's, is that. DoD. Actually. Could. Be a partner, in an. Energy technology, strategy, as a. Demonstration. And testbed kind, of Center and an opportunity, to introduce certain kinds of new energy, technologies, a huge. Interest in batteries for example. So. RP. Was a gap-filling. Attempt. The. Department of Energy. Innovation. System, it's. Kind of would look like before RP came along right the red stuff is the new stuff. The. Black. And white slides, are boxes, are what was there before so, before. The new stuff arrived the. Department, of Energy you, know had big. Fundamental research organization. Very basic, research in areas like particle, physics and chemistry, famous. Fan, Eva Bush basic research entity DeLoss, assigns. The. Great bulk of the energy laboratories. Reported. Through. The DA office of science they took up about 60%, of the office, of science budget it's about five billion a year the. Energy labs. One. Of the largest armies, of PhDs, in the world right. Incredible. Twelve, thousand, army. Great. Majority physicists. There, may be some engineers, in there. It, was on the wrong problem right, it was on, the. Historical. Nuclear. Weapons problem, right. So of, the. Fourteen energy labs the, nuclear, weapons, laboratories. Had. About, five thousand, of that. Army, of phd's, the. In. Real laboratory Renewable. Energy Laboratory had, three hundred and forty of, the PhDs. Right you can see what the imbalance, here is it's. Not the right line up so, it was kind of a lot of the talent was on the wrong set of issues or at least not the new set of issues. There. Was an energy efficiency, renewable energy, and. He had about a two billion dollar budget there was some other Applied. Energy offices, that, was the landscape, and then a huge. Nuclear. Security kind. Of weapons oriented, part, and a big, clean. Up new. Coat clean up part, of the department that was kind of the department. Something. That happened under Sam bodman and, then Steve Chu and then Ernie Moniz is that, the whole picture of that department got reorganized. One. Of those pieces was. Our PE we'll come back to this slide in a minute.
Our. PE was organized, to bring, a, DARPA like model. Breakthrough. Energy research into. A structure, that didn't do that right, the, applied agencies, work, primarily with established, industry, right, there, was nobody really working on the breakthrough side so, if you happen to think that you need a lot of breakthrough energy technologies, to solve the climate problem. You, probably need something like this so. An. Interesting, process got put together to get that. Assembled. You, know max you asked a very good question earlier, how come it's only 300 million with DARPA 3 billion. Those, of us who are involved in in, advocating. And and, supporting the legislation we. Wanted. You. Know a much larger budget frankly a billion dollar kind, of budget for our PE and. Have never politically, been able to get there but. Nonetheless I, would argue that our PE has actually been. Pretty. Remarkably. Successful, entity. So. Our, PE does all the stuff that we talked about for DARPA it's got that model, down, flat. Non hierarchical, empowered. Program managers they call project directors. Streamline. Approval, process, for both hiring, and for contracting. It's. Right-left, it's challenge, based it. Only wants to do, breakthroughs. It's not going to do incremental work. It, uses island bridge in. Fact the, Arun. Majumdar who was the first head of our P who was one of the most talented, science. Leaders I've ever seen, remarkably. Talented guy. He, had been Steve Chu the energy secretary, had been steve kuzj deputy, at Lawrence Berkeley Laboratory. So. When Arun. Moved. To Washington, he. Lived in Steve choose basement, for the first six months so. There was no island bridge problem, there I you. Know there were only a floor away right. It, was extremely. Good communication. Between the two that's. The best Island Bridge example, I know of so. I try to try. To bring it up but. Interesting. RPE. It. Didn't, have that connected. Energy. System. For. Innovation, right, because. The Department energy doesn't do any procurement they don't buy batteries. They don't buy, electric. Cars you know they don't buy this stuff so. DoD, you know buys the first round of products it's gonna be an initial market creator that's. One of the advantages DARPA, Scott how, do our PE function. When. It doesn't have that follow-on. Capability. Embedded, in the department in which it's located so. It's had to come up with a whole bunch of new approaches, that have, really been quite interesting.
And You know I list some of them in this in, this, piece that I did with a friend. And a DARPA expert, Dick Van Atta they. Did a lot of work on how to sharpen, their research visioning. Process right. They definitely follow, that research visioning, model. It's. Not only. Is. This a cool technology but, is this a technology, that is not only potentially, a breakthrough, but, could it actually scale, up is it plausible to do, we have a plausible pathway. By, which this technology could come into the marketplace and that's definitely part of the, research visioning, that that, are be undertakes, in a way that DARPA doesn't really have to because, it's got military customers, often it's. Done a remarkable, job at building a support community, so RPE just, for one example. It. Does what's. Now become probably. The most important, u.s. energy technology, summit every, year they, get two to three thousand people showing up at this, every. Major energy firm, every venture capital, firm they're all there for like a three-day session they have great speakers and amazing. Technology, that. In. Other words if you do technology, for RP it's gonna get showcased, it's. Gonna get presented. To. This energy, world it's, gonna be shown off they're gonna help you take that next step and interestingly. In the first summit. When. They put out their first you, know offer of, you, know four proposals. Which. Didn't specify areas, they wanted research in they just had an open proposal proposal, high energy, community, out there sent us your best stuff, they. Expected, to get about 400 proposals. Instead they got four thousand. Right. Because there was so much interest in working with a DARPA like thing. So. They were drowning they had to invent a whole review, process, to manage all that but. Interestingly and, they could only approve, a modest number. But. They. Invited. All. The best proposals, a much larger, number to. Show up to. Their first summit and present. Right, which, helped build a. Community. You, know the community felt hey these guys are gonna look out for us right, and, it was it created a whole you, know. Community. Interest, in what this thing was going to be that has been really quite successful. So they've got a strong support, community, in the venture capital, community. They've. Got strong University support, they've got established companies, that are, working. With DARPA supported. Research. And firms. It's. Pretty interesting, the, most interesting, thing they've been doing is on the. Technology. Implementation, side and. Here. They. Created their own commercialization. Team, so. There. Are these project, managers, and. They. You, know they're empowered, DARPA, like project, managers, but. On their team they. Pull in somebody, from our Pease commercialization. Group and, these. Are people with like expertise. In getting venture capital, and commercializing, technology. They, know how large larger, firms do technology. Commercialization, they. Even have somebody who's expert at military contracting. So you might sell it to a DoD, marque market. The. Commercialization. Team. Has. A member, that's part of the Technology, Group right. So. Commercialization. Is thought through from the outset, of a. Rpe, technology. Project because again they don't know this big procurement, budget they've got to find more creative ways around it and the. Greatest compliments, so far to our PE and a success. DARPA. Has now copied, the model, right. So like the parent has now copied the child and. DARPA. DARPA, earlier this year last. Year hired. Barbies. Head of their commercialization. Team to set up a commercialization, team, at DARPA, so. Interesting. Right. So. Those are some of the efforts that our PE has been has.
Been Making and, I say Kevin, and I were talking earlier but. RP, did a very thorough tough-minded, evaluation. Of all. Of its research projects, and it issued reports in August and September and, it's, a pretty fascinating, story you know as we know from this class and Kevin and I were just talking about this technology. Stand, up takes a long time right. 1947. We do the first mainframe, computer. You. Know, 1993. The. Internet and desktop computing or scaling right, that's a long time right. Fracking. Happened, a lot faster than most technology, stand-ups, that. Was a 15-year, project its, paradigm, compatible. With. The legacy sectors so that helped but that was still a 15-year, project so, seven. Years is much too short a timetable to be evaluating. Whether. These energy, technologies, are going to scale but. In terms of technology, advanced and in terms of attracting additional. Funding, from non governmental, sources, RB. Has had a very good track. Record as. Evidenced, in these in, these August, and September reports, and put out. All. Right, ohyou're, sir. Didn't. They announce that. Basically. The companies had attracted, about. As much ads on one thing as they had spent since our feet yes and, that was composed of two sources other federal, Rd or. Financial. Support from allied companies. Or. From, venture capital firms and we're going to talk about the metric capital model in a ditch. No. But it was a good one to make Thank. You Martha. She. Stated that. All, these critical, facilities. That. DoD depends on for running, operations. Across the board. Are. So vulnerable. Why. Did. They let. It get to such point where, you. Know someone needs to like hey you know we shouldn't leave in this, regard, it's prevent all that from happening, and, taking. A lessons learned how, should the. DoD or any department really prioritized. Any. Proposals, that come forward. Yeah, so you. Know she said, these. Critical systems are really vulnerable, here's. My proposal in. The, future or in. Anyone's opinion how should any, department, and purse deal with the, DoD, prioritize. Its. Resources. Based. On these, proposals that they get in order to prevent such. For military. I, can't. Imagine that, this was published, without some, of those vulnerabilities being. Patched. What. Do you mean by patched like, it doesn't occur to me that the government would allow you. Know the deputy. Undersecretary of, Defense to publicly to publicly, and now he's put these, vulnerabilities. Exist within, their system. In their infrastructure. Without, them first being patched right. And. Right. She's testifying, in front of the Armed Services Committee and they. Want to know what's going on and witness. Has got an obligation. To. Come forward with what the state of affairs is and. You. Know I don't, think these were probably classified. I. Know. These weren't classified. Issues. Because this was an open hearing. But. She's got a responsibility. As a. Governmental, official to, tell a congressional. Committee what in fact is going on and what the issues and vulnerabilities, are so, I think, she's doing her job and, the congressional committee is doing his job it's got a probe and find out what the problems are I'm, not sure that's a great answer to your question. We'll. Find ourselves more into if we had mentioned such vulnerable T's any public, setting. Maybe. It's already obvious if it's been in the press etc. Driving. People dies yeah I made me do it particularly. Surprising. I, don't. Disagree but, I think it's different to have some knows a deputy, undersecretary. You. Know it's not supposed to anyone. Why. Are other. Projects. Prioritized. Over preventing.
This, From happening. It's. Like oh well of course the. Vulnerable. Disciples X and we salute following the fire. You. Know we're. Just talking about the dependence. On oil causing. A lot of problems. Why not innovate. Well. I think part of it goes back to the funding graph. Remember. The graph the graph is a funding, and, oil. Prices that there's, all the same trend no. So, like it funny is it really steady. Hargitay. But you said you, said they get a twenty billion dollars they, do have an annual 20 billion on military, construction. Appropriation. That's. Potentially in the Norris ting revenue streams I'm gonna find Ansel off. Right. But DoD, is the monster in the room they're the ones that really had the facilities. Also. I wonder about the distribution of. The. Quality. I guess in facilities, or infrastructure, so. I can imagine like, not, all these 300,000, buildings are really falling apart and. In disrepair but I think like maybe. It's just they don't like that. There are a number of buildings sort of on this liar and, you. Know kind of World War two built more to ask and I haven't really been upgraded from a construction resistance why have you and, I would argue that. Like. The 20 billion, or however they're getting here leads to kind of upgrade these services is. Adequate. Or kind of serving them well. Such. That those, are like that's your patch and. It's, not really an issue, of national. Security, in, a sense because like this is a distributed, problem kind of over the DoD network rather than like alright all of our you, know systems, in you know Virginia in this particular area are subject, to cyber attack are vulnerable, and. It seems like like it's too big of a problem for it to be. Actual. Information or, her, you, know not to be able to testify about it this is a national, security interest in that it has to be protected, to. Your point about the size of the budget I'm looking at the 2017, report on. Infrastructure. Management from the Government Accountability Office and, it says that they, expect, the DoD asked me to replace in the valley to be 880, billion dollars, so. Therefore. The, pretty infrastructure, you need for things.
Just. I guess I was just really as for its is clear okay so good I mean I don't think it's such an issue if they release this there's just a thing called zero days it is actually like things that you can into first rupture systems and that's more serious what, they do is they. They will report, it to the agency, and, because. They know they will get lazy abusing, her anything be saying I'll give you X amount of time so I do report it publicly I. Think. This was an issue that they re noodles, okay to say publicly and so I'm, not too concerned with that on. The issue of actual, oh, this. Is a problem, I think it's just more that it's, a big government there's a lot of problems. And. There is really gonna be you know nothing's, gonna be perfect and, so they're just trying to bring, light to it so they can put funds to it and. Things, do precipitate, special the organization's where I mean, this happens with people all the time right you really don't know what you're gonna feel like a day from now right but a lot of things will add up and they'll get past saturation, points. And. It's also just a big legacy, cemeteries. And vouchers. Didn't. You ask the question how should they prioritize. Do. You think it's hard for kids to like, most people 20 billion seems like it could solve a lot of problems I bet seems like a lot of money but, I guess I'm you spread it across all the. Facilities, that they have like. To, make, a real impact means. Like pick specific things to focus on and then, I think a lot of politics. Can come into like who's getting, the money and how they're allocating. It because it's, not enough for like every base. To get an upgrade and, so I'm sure that's an additional. Report. Five. Not five hundred and sixty two thousand, facilities, worldwide and. Forty, thousand eight hundred sites so. That's, steep. Kevin. How about a closing, thought on Dorothy robots test money. No. I'm curious, to, see how. Surely. Thou have, progressed since. I. Would. Hope. You. Know more. People, freaked intentionally that's like they you know we should. Innovate. And these other things that are just like weapons. Because. The. Development, of other projects, trends on the development, of those as well. Right. And I think it's fair to say that she, and and colleagues, at DoD actually, you know made significant, progress in. Using. These facilities, as in effect test beds and demonstration, centers for new for. New technologies. And. Because. This. Is essentially cost saving and security related issues. There's. Good reason to think that under. The new administration a, lot of this will continue. Let. Me turn to the rpe piece. Questions. For us on that one. So. Since. You something just released a report. Other, projects, on the research and, the, relative success of that and, because we, have. Evidence, file 600 ARPA has been. Why. Do we really care. About any other barber clones you know they mentioned the. Department education could, consider.
Narva EDM IH was considering, there. Like. That. Sort. Of mimic DARPA. Why. Aren't innovation, models like. The ones in darkman arpa-e being. Utilized. In other. It's. Possible. That, maybe. Some of the challenges that are, solved, by DARPA, and our baby. They, don't necessarily translate as well to social problems like, the Department of Education, so. It's, less of a technical problem. More how do we manage people, how do we determine. It what's a, good, versus a bad student good prospective, juror etc, so. I'm. Not sure if it. Is well, okay. I. Think education, in particular would also be considered a legacy secretary and to. Stand up you know into our polenka model for education would, be to completely undermine the education, system in the United States and that, would, require right, the undertaking, of not, only the. Education, system, in terms of national standards but also, reframing. Fundamentally. At the state level right, of the ways in which we conduct education. Policy, and that. I think from. Reframing, the conversation, nationally. It would be immensely, difficult undertaking, out with politically. I mean I don't know if politically, unviable is the right word but it. Seems, to me like it would be politically insurmountable, because, you're now threatening you know states rights, why. Does it why. Is it an undermining of the education, system I mean. So. Let, me just give it a little bit of background because I was involved in some of this but and, it never happened, and Congress is never interested in funding in it and part of it was you know what. Is the Department of Education which is essentially. An entitlement, administration. Organization, what. Do they know about technology. Policy in education. Right but, with the development of online capability. And computer gaming, technologies. A whole. New raft of technology, options has, entered, the education, field so there, was a fair amount of thinking that maybe. There. Was room for a technology breakthrough, entity, in. The education, space the education, space is also notorious. For. Conducting, almost no R&D, right, almost. Zero all. Right it's tragic and, how. Are you gonna transform, a sector without you know undertaking. Technology, development, and research and development on it so, agree, it's threatening right. Online. Education, and blended learning are threatening models, to establish, systems no question about it. But. This. Was actually I think an interesting idea the problem was who's. Gonna find the right technology, crowd. That would really create the kind of breakthroughs, that a DARPA like entity could do I think that was more of the challenge.
That's. Really, a bad thing when, you. Know we see the US Yankees. No. I'm not saying it's a bad thing at all I think the whole system needs to be changed but I agree. With you Kevin and this, would be a tool to try some of that with it's a big disruption it's. Like it's, like uber so, imagine like if you, really affect. The teachers jobs there's all these humans, right so, like now, kids can go and like he doesn't he still needs a teacher but now you kind of made. Them very uncomfortable so. You can get the pushback so when you create the system you have to figure out how, you're gonna make it so that the teacher doesn't. Feel offended I mean kind of Caddy me to do it we could Java this I'm like okay, well now, you can spend your time doing what you do in the classroom but. Even then how are you gonna get a massive for. Not. The kid the teacher because there's Union so this, is especially important, in like the Steve. Case - got you made a well you made a book called the third wave which, is like you, know the Internet entrepreneurs that, will affect physical structures, and not just what 2.0 that is like Facebook, and snapchat the, people that will create systems that interact with people like uber they're, big, they don't just make a technology, they have to focus on the, legacy, history. Of the people in that organization so, when you make a blue bird you have to worry about the technique at drivers who paid a million dollars from medallion and like, this how they're supporting themselves and now you're gonna disrupt it. And. Also what can happen these drivers what about Union problems. How. Do you make unsure safety. So. It's not a these, aren't fertile. I think for DARPA and arpa-e it's. Just, a technology issue let's do the the technology, for. These issues it's more of a this, is very much a people technology. Right like and. Most politicians. Michael, Bloomberg so, gates. But. Martines, there still have been. Look. I mean how many technological. Disruptions, of education, had there been I mean we. Came up with a printing press and what 15, 10 right. That, was a big one way right we books, we figured out books that's about it right, that's, pretty much the change so. Applying, this whole new and from a technology, online world, to. The education, system those are profound. Technology. And I agree social. And. Learning. Challenges, go with those and they are threatening, to establish, communities I agree completely but. I do think, interestingly. Certainly. For the first time in my lifetime, I've. Seen an opportunity, for significant. Technology entry. Into, a classic. Legacy. Sector, and so, the idea of putting a DARPA like thing around that that. Was that was an interesting, idea right, it just hasn't hasn't. Happened, I think, I'm gonna little. Bit believe that, education, doesn't have a dogleg model. Sharpens. Like the rise, of charter schools I think is like really. Disrupted, how, we think about the system of public education you. Should really just have like public versus private but, like private. My quasi, public. Charter. Schools that receive kind. Of federal and state funding but, like do state, testing so don't do some other things and they. Have the. Elements, that you think you get in a public education which is like the group environment, but, they focus their. Classes. And they structure them differently and they do a little bunch of other stuff because they don't have to adhere to kind of all. Of the regulations. That come from the state. And. So I would say that education, has. It's. Like a distributed, its is the distributed system cuz it just like more state-by-state than, really, the federal Department of Education kind, of many things but. Also, in. Charter schools and things like this you have opportunities, for different models that are like, people are already testing out and like you're already seeing this disruption, that, 14, is talking about where you have kind. Of these entrenched, public, education, systems but now you're having this rival, charter, school now, comes in and kind, of districts teachers. Unions and things like that all, right so I'm gonna you know I'm. Gonna halt our education, discussion. Because. We're gonna have a whole class next. Week on. Education, so we can pursue. This you. Know at, length this. Is kind of a breadth of what's to come in. Next, week's experiment but but, Kevin why don't you click. Close. Out our RP discussion, with maybe, summarize, what you thought some of the key points are about RP. But. It's. A good proof, of concept, that the darker, models. I. Could. Change. Especially. In a. Sector. Like energy is. My. Personal opinion I'd like to see, these. Kind of long with elsewhere, you. Know I was reading here the homeland security intelligence. Others. Were we're planning that own Oracle models, you. Know I'm smaller scales I feel like this innovation, box would be really beneficial.
Good. Organization. For manufacturing, because. There. Are these brand new manufacturing. Institutes and there's 14 of these and, they. Are organized, around major, technology. Challenges, in the manufacturing, space, so. 3d. Printing you know what. Technology. Advances, I'm going to get out of that whether it's there's. A Institute. Around. Tissue. Engineering, and regenerative medicine. There's an institute around photonics, there's an institute around, power. Electronics, and wide bandgap semiconductors. There's an institute, around, advanced. Composites. So in 14, different interesting. Technology, areas that could be quite, powerful. Across. A range, of manufacturing, sectors, we are attempting an innovation, model it's a public-private, collaboration. Well. No they're attempting, to do technology. Development, so tra level, TRL, levels 4 through 7 kind. Of you. Know mid to later stage technology development. Efforts tying. That to the communities, that would have to be involved if these models are going to get picked up so. It's in it's an interesting it's the first attempt, really in, the u.s. other than summit tech to. Bring an innovation, model, to, the manufacturing, sector. I'll. Follow one, general innovation, or does each one cater. To whatever each one is. They. Share a lot of similarities they're all cost shared they involve small and large firms they involve university with, strong technology, and engineering programs, they involve community colleges, they have workforce development mostly share those pieces but, then the particular technology, area they're pursuing it means they're gonna be organized somewhat differently so the, one MIT is leading on revolutionary, fibers that's. Got a different approach and a different kind of sector, frankly. Than the composite, sector right. So, it's an interesting attempt, to bring innovation into, a, long-standing. Legacy. Sector where, the federal innovation, system never really played any role except, for SEMATECH so. Let, me turn. It's. You know kind of plan-b idea. The. Idea. Here was. You. Know we're not gonna do a cap and trade proposal, anytime. Soon so what, do we do you. Know what's the menu of options if we actually want to deal with climate change and one. Of the problems. Look I was involved in drafting. The. Original, Senate climate change legislation and, one of the problems in that legislation, was we were attempting an economy-wide. Fix. Based. Upon a neoclassical. Economic. Concept, that you could alter prices, and drive change. And. It turned out to be. More. Complicated than that right. First. Of all it's hard to get an economy wide model, imposed it's, hard to nail everybody, at the same time my political. System tends, to resist this in. Economic, terms it's very interesting to impose an economy-wide, model, but it's hard and then secondly.
Well. I had actually worked on the original. Acid. Rain provisions, in the Clean Air Act of 1990. Legislation. To develop a cap-and-trade system there, it. Worked brilliantly and, it was a stalking, horse for what we knew we were going to do incline it later right, and, cap-and-trade. Worked brilliantly there. It worked brilliantly because, we already had the technology solutions. At hand. They. Could be the scrubbers, that we're going to put on smokestacks, in Midwestern, power plants we, knew the technology was there so. A pricing, system could really drive very quickly the, forced adoption, of that technology. When. We did cap and trade. It. Took us a while to understand, that a lot of the technologies, were not closed there, was still a considerable distance, away we've talked about carbon capture and sequestration, it's. A good example right it's not ready for deployment at, large scale at this point it's. Still experimental. So. It. Wasn't, a great fit so obviously, the industries, that were gonna be affected, by this they didn't know what, their pathways, were gonna be in many cases right. And look, in many sectors, look, at transport we know if it's gonna be biofuels, we don't know if it can be electrics we don't know if it's gonna be hybrids, we, know what it's gonna or maybe just significant, improvements to internal combustion engines that all those pieces are still very much on the table in the, transport, sector obviously, a huge economic, sectors so one, of the problems with, cap-and-trade and neoclassical. Model. Was that it didn't have a sophisticated, understanding of the technology, policy, side and, you know I wish I hadn't understood that, then but. And. Obviously I wasn't the only actor here and, overall, I'm you know I think, a price. Solution. Is gonna be needed here but meanwhile, can we make progress so part of the way in which we can make progress is. By, consuming. More sophisticated, and effective technology, strategy. After. This book was after. This the, the, book that would this chapter, appeared and was written obviously. There was a major political change in United States so, the changes we're gonna have to think about if, we're gonna do a plan B and I just sit on our hands for the next decade I, think. That's a really important task and we're, gonna have to think about who. The actors, are gonna be that, are prepared, to take on climate change because we can't just afford your wipe off, for. A 10. Years of. Progress we've got to figure out what to do so there's, a new menu of actors here that's potential, that's state-level in. In regions, and, in, companies because I do think this innovation, wave is underway and. Martines. Point about niche players, that's, an important, economic point, you can move ahead without a kind of approach in a number of technology, spots so. Arguably. We're, gonna need a plan B and, we're gonna have to think about who the actors, are gonna be in plan B. One. Thing which we did do in the Department of Energy over. The last ten years is make, it a, much. More sophisticated technology. Implementation, organization. Through. Work of Sam bodman and Steve Chu and Ernie Moniz. Over. The past decades, so all these new pieces including. RPE. Energy. Frontier research centers to, kind of turn that focus in the Office of Science on. To new energy technology, advances. There's. 45. Of these centers now in universities, across the country. Office. Of Science is now really focused, on new, technology, advances. EERE. Energy efficiency, and renewable, energy has, developed. A major focus, on advanced manufacturing as, a way of driving down, entry. Costs for new energy technologies. That's really important if they're gonna get in range of price. They've, created something. We'll talk about in the last reading they have created a whole new way of getting. An. Effect substituting, space for capital, at the sight of three. Historic. Energy laboratories.
We'll. Talk about in the last reading they have a much. Stronger technology. Transition office, they. Have innovation, hubs that when your technology is ready to kind of scale up you can actually get. A substantial amount of implementation. And late-stage Reese applied. Research money focused, on areas like batteries, fourth generation, nuclear power. And. A series of other technology, areas so all these new innovation, pieces, have. Been added to the Department of Energy so. It's much more technology ready, than. It was a decade ago it's much more in position, to be able to work, on the energy tasks. That. Was a sign so that's obviously. These could be curtailed, by the current administration that's, a genuine challenge, but at least we've got experience now with what some of these issues. Are there's still big gaps in the system the, front end is much better now at the Department of Energy but there's still big gaps areas, like how, do you do test beds how, are we going to do a technology strategy. That. Cuts. Across public and private sectors for a common strategy across players, we haven't done that yet. We need new financing, mechanisms, for technology, implementation, so, there's a lot of pieces that are still, remain gaps, on. The back end of the system but, we have made progress. And. Look. Let me put the other piece on the table we'll do them both all, right both of these yours Chris okay. So, this is a chapter in. In. A piece that just came out last, month. The. U.s. is very reliant. On. Entrepreneurial. Startups, to bring innovation into its system. That's. It's. Been a key innovation. Organizational, accomplishment. Over the last 25, last, 30 or 40 years actually. So. We developed a 60 billion dollar venture capital, support system to support startups it's. How we do it it's a very, interesting. Part of our system no, other country really has a system, as strong as ours the, legacy sectors, are like protected, castles. VCS. Don't, like to take the castles on, you. Can understand, why they. Like to innovate, in new frontier, areas whether or not incumbents, where they're not going to get opposition, so. Back, in. 2008. When it looked like energy, prices are going to be high and. Cap-and-trade. Was coming along, feces. Began to ramp up their investments, in new. Energy technologies. And, they've. Now walked. So let's, look at venture capital investment. Nationwide. This is what venture capital spent in 2015. Its. Money on its sixty billion right. Software. Right. It's that long and short of it they, did a fair amount of biotech, softwares. About 40 percent that's about 13 percent a, bunch, of services media, entertainment. IT. Services. That was the bulk of the rest now. You look at this little piece down here right this piece that's, five percent, that's. Hard. Technologies, that's, energy, and. Industrial right. This. Has profound, implications. Absolute. Profound implications, the way in which we stand up new innovation, is going to be through this metric capital finance system, and. All. They're gonna do is. Software. And biotech, and a few services. We. Got a serious problem on our hands we're not gonna have an energy technology, revolution. But. We're. Also not, standing. Up innovations, and hard technologies. Software. And biotech, are not particularly, job-creating.
Areas, Software, may be negative, job create right. Now are. We gonna have any jobs in this economy I mean what's gonna happen here these, are really, really, serious problems, okay. We. Tried to do the same chart for 2016, but the, venture capital so changed. The way they collected their numbers because software was so pervasive that, they, couldn't separate them anymore right. It was in every sector so, 15. Is less good set of numbers we're gonna get around software investment. So. Who. Comes to the rescue here so Raphael, comes to the rescue, I didn't. Get this I mean this is his thinking, and, he. You. Know I, had. This conversation with him and this we had been struggling with this in the advanced manufacturing partnership, program the president's, advanced manufacturing innovation, effort, how. Are you gonna get financing. For companies that are gonna manufacture in the United States because, they're not getting venture finance, and, we looked at the other potential sources you know private equity, M&A. In, an, existing company financing. They're just not significant. For innovative, new companies, right, venture. Capital is pretty much the story and. You. Know Raphael, I. Was. Thinking about how could we do some kind of new financing. Or how could Critias. For venture capital to change, all its rules and go after these harder problems. He. Basically, said. Venture. Capital is doing good stuff software, and biotech are important things they're. Gonna do what they can do. Substitute. Space for capital. That. Wasn't quite the way put it but that was the essence of what he was saying and I said not fair what are you talking, about. Never. Dawned on me right, basically. What he said was let's, create. Really. Technology, equipment, know-how, rich, spaces, and. Get. A bunch of very, interesting hard, technology, startups, in. Other words the biotechs are okay and the software companies are okay let's, get some of the rest of the crew in and, create. Places. Where they get really advanced, equipment and Noah right so there's, a lot of technology incubators, out there and we've got probably eight of them right in our Boston.
Neighborhood Here and, some of which are very strong they tend to be earlier stage. Right. They tend to, they. Capture, you when you're new and. You're. Really at the business plan business development, kind of stage there. Don't there isn't really a model to help you when, you've got to start to scale up right. And with that scale up proposition, so. That's. What, his concept. Is. And. It happens to speak I think profoundly, to this energy technology, space. If. We could create some of these the engine, that. He's, now led the creation of is exactly. An. Attempt to solve this problem, in other words his view is, we're. Leaving a lot of science-based, innovation. Developed, in on my tea just sitting on the table, because. We don't have a scale of mechanism, can we. Work. On. I'm trying, to create a space where that could occur so in effect what venture capital with finance. That. Equipment that technology, that know-how, for. The scale-up. Can. We contribute, that create, that and then invite the, startups. In that, are doing hard technology, startups so, there's a bunch of other models deal, we got this big-time RP. Began, running into a wall it had our PE it assumed venture, capital was the way in which it startups, are going to work and then. They realized that startups weren't getting venture money when, venture capital funding and energy collapsed, right went down 80%. So. This. Band of characters. Took. Some. Space right at the Lawrence Berkeley Laboratory, up. On you know top of the hill up above the Berkeley campus, one. Cyclotron, road and. They. Created a technology, equipment. Know-how rich space and. Provided. Salaries. For. A couple years which could be extended for a crew, of startups. They're. Now in their third tranche very. Interesting. Very. Interesting companies. And it's, a whole new technology transition, model from the Department of Energy. So. For proximately, 40 years the department energy has been trying to get these. Big. Famous, energy. Laboratories. That are on mesas behind barbed wire to, transfer. Their technology, out and. The. Folks that work there are paid you know guaranteed. Salaries. For life and they. Get entitlement. Funded research they're guaranteed, interesting, scientific, work and we, want them to walk. Out of there and you know not. Be paid and stand up companies I mean good luck right. It's, not an optimal, technology, transfer, model and look technology. Transfers, with, you. Know people that walk right, technology. Transfer doesn't happen by you know developing. A list or a plan, and handing is someone technology. Transfer works, through people you've, got to really encourage, people to emigrate and move with the ideas because they have the tacit, knowledge to. Make these things happen, well. This may be a much better technology transfer, model for the department energy than the one they've been working on for 40 years so two other labs are gone in Oakridge have, now picked up the same model. Steph. The. Importance of competition, or having that sort of. Truncated. Timeframe, how. Is it that they sort of put pressure on them to do well, all these teams had to compete to get in there so.
It Was a very tough composition, more than a hundred actors. Hundred. Different teams were competing to get to be part of the first date so. That was a highly, competitive process, look, if you've if you've got an interesting startup, idea and you're just out of grad school or you know for that matter just out of undergrad school and, you've got a really interesting. Small. Group and idea and you want to move it the. Fact that somebody would give you space and credible equipment, and technology, incredible, know-how, and pay, you a salary for a couple years what, could be better right. This is really, good news for hard. Technology, startups, in the energy space so it's been very attractive, and there's a lot of competition, to get any of these places, so. The, competition is embedded, you know right at the heart of the model Martha. First. Of all I can't remember how old they are. So. These are all brand new as a brand, new model right, so, they just accepted. Their third round, of teams so that two years old. We'll. See I think, from. The sense I haven't arguing to do eight friends. What's. Wrong with this model I mean you're, an. Effect, repurposing. An established, model at extremely, modest, costs, Lawrence. Berkeley labs an 800 million dollar a year operation, you. Know salaries, for these folks that's not much right, and yet, the opportunities, of standing of new technologies, are really pretty significant, supporting. Entrepreneurs, so I think this one is a viable model, in either political, climate. So. You. Know this guy launderer. Is right out of arpa-e so. He's. Very used to he understands, really well he. Came through a whole startup experience himself he's had start-up experiences. You. Know and has, his PhD in science from. Berkeley. Very. Talented young, technologist. Very sharp able guy he's. Got a whole team there that's also quite able and strong support from the lab right. So, the. Lab likes this this is a way of getting their stuff out, look. It's. A new model right, the model is. Have. A competition, for, in, effect a nerd motorcycle. Gang. Park. Them outside the, barbed wire. Give. Him a home and give. Them the keys to go in and loot the place I mean that's essentially, the model right, that's what.
They're Doing. To. These highly secure facilities. Yeah. This. Is. Lawrence. Berkeley. Is. A very tough - election process you know Elan. Is a real talent, he's, running, process here all, right look, I want to who. Were kind of running out of a time here so let me just get the rest of the story out because part of it Martine speaks to the next issue of God which, is one, of the issues here is these are all early-stage right. These. Are very talented technology, teams right out of university. Laboratories. Here's a different model tech. Bridge right here in Boston is. Part of the Boston, front Harvard system and they. Have a different model but they're a simile. Providing, this. Technology. Equipment know-how rich space as a substitute. For VC, money and the, idea here, is. Cyclotron. Road starts, with the technology, group and then, tries to nurture the technology, tech. Bridge starts with. Large regional, companies and it goes to them and it says what, do you want right, and. Typically they don't want disruptive, stuff that's gonna wreck their business model for obvious reasons and they, don't want to bother with stuff that they're already doing that, they understand, well but, there is a there are substantial. Groups of adjacent, energy technologies, that, fit with their model that would be interesting, to them and, that's. What. Tech bridge tries to find out so it gets a list of what, do you folks want and then. It goes to find talented. Startups in the Boston area of which there's a lot and, connect. The right startup, to. The right industry player for, a collaborative, project, okay. Very, different model very interesting, the. Most interesting, part of it is, that. Those. Folks work together for a little while to come up with kind of the prototype together right. The. Industry, doesn't quite trust the startup the startup doesn't know whether it's gonna get robbed by the big company who knows right, they, bring in the Fraunhofer, Laboratories, right, this famous laboratory, system and, the. Front of our labs do for. The startup, industry combo. What, they do for, German, companies they, do a very. Tough-minded, Technology. Assessment they. Break down the technology, they evaluated, can, this technology be manufactured, how would you manufacture, it can you manufacture, it at a price that would actually, salable, you, know what, is this resilient, technology, all the kind of stuff they do for German companies they're, doing for, the startup it's a very rich sophisticated, technology, evaluation, process. We. Don't really have anything in our system like it so it's pretty intriguing, and in, effect they certified, to the company I mean ice may say this, stuff is worthless throw, it away or they could say this. Is actually very interesting here's how you can make it and here's the components. You ought to use and the materials you ought to think about and here's. A pathway but to a marketplace. The. Company the big company loves this because they realize this startup may not be totally crazy and then the startup likes it because in effect it's certified. Their. Technology. Right. So, this puts both players into a much more informed, space and that's been very it's. Been very intriguing, sort of adding this technology, validation, pistas remember we talked about bio the, role of FDA. And, certifying, technology, right which guarantees, a market, this. Is the first time I've seen this played out in. A u.s. kind of model and it's kind of intriguing and. I'll put one more on the table for you. That's. Green town labs a respected.
Quite. Capable, energy, incubator. Full. Of folks like you you know off the lab bunch out of school with, cool energy technology, ideas. Green. Town began understanding. That. There. Are 60 odd teams. Had. A lot of neat research, ideas. They. Had no idea how to make anything right no, idea. You. Know you weren't taught how to make things here at, MIT although it is changing with a maker movement but. University. Lab originated, technology, teams don't know anything about manufacturing. So. They had a interesting, idea there's, a manufacturing. Extension Program every, state has one sponsored, by the Department of Commerce NIST. Massachusetts. Happens to have a good quite. A good. Manufacturing. Extension Program. Greentown. And the MEP, got. Together an. MEP said that's interesting we've never worked with startups, before we work with small, manufacturers. But. Maybe we could link small manufacturers, and the startups and. Massachusetts. Happens to have that's still a pretty strong dace of small. Manufacturers. They work for the defense sector the growing, robotics, sector in the medical device sector which are big sectors in Massachusetts, and some talented small companies. They. The. MEP, ran a survey, of. Its. Small it's, capable small, manufacturers. And the. Survey results came back. Eighty-three, were. Interested. In talking to startups, why. These. Small manufacturers, are tied to existing. Supply. Chains. They. Don't innovate they don't do orany they don't have access to innovation, how are they going to grow their market significantly they're, kind of locked into a pathway this. Is a route out for some of them in addition, others. Like. The startup culture they thought that's pretty cool let's get my employees, feeling like that right maybe we'll get some stuff done and. Some others thought gee it's, the startup culture is important now in Massachusetts to its future account we're good citizens, we're going to help so. They. Created this complex, process of. How. To arrange these exchanges. Right. Now. The. Startups. They. Communicate, by internet, things, that you all understand, and I have no idea right, I don't know what they are but that's how they communicate. You. Know I'm exaggerating here but you know the startups by and large voted for Bernie and, the. Small. Manufacturers, I'm, exaggerating you, know probably voted for Donald, and they, worked by face-to-face. Meetings things. Like telephones. You, know remember. Landlines, they still exist. These, are completely different cultures, how are they going to fall in love with each other and be. Able to trust each other to do technology, development, together and there were no there. Were no incentives, here there were no subsidies. The. Startup had to come up with money to, fund the. Prototype. For the pilot production than one undertake so.
There Was no giveaways, to incentivize, people this is real money in both sides were at stake so they arranged this you know four step process to. Try and bring about communication. 43. Startups, were, interested. After, a, year of pilot projects, 19 deals. Money. Changed, hands things, were being made pretty. Interesting. So this is another piece, we've. Now collected, a bunch of ideas here. Right, a bunch. Of ideas here they're potentially, relevant from, cyclotron, Road. Repurposing. An existing, source of strong. Technology equipment and know he'll repurpose. These energy labs that's a really interesting idea, that's, fairly cheap right, you, don't have to build all this new equipment right. MIT is doing the same thing with equipment it's got for. The engine. From. Tech. Bridge the. Idea of maybe you could do this maybe you could connect up companies, at the outset, with, startups, that's interesting, and maybe you could do a technology validation. Stuff and then this third piece here then. I'll call it a day is, and. Let Chris lead some questions but this. Third piece here is maybe you could tie small, manufacturers. In startups, because they both have a problem that the other side could solve right, so, you start to see a pretty, interesting model. For. Raphael's, idea, of. Substituting. Space. For. Venture funding this is an interesting model universities. Could do this model MIT is trying to experiment to show of the schools that could be done, federal. Labs are, already. Pursuing this and the, DoD s67, of these and Lincoln lab is extremely. Interested in model for example, sews, Draper just up the street, so, in other words there are ways this thing could scale right. So, between universities, and existing. Laboratory, capabilities, and then I might might ease got the idea of connecting you to companies, and nodes, that. Can help you as you develop a more sophisticated product, line so, there could be a new model here that would really help with this. What's become now a very significant, gap in the u.s. innovation, system over the collapse of venture capital funding for other than. Software. Biotech, concern service sectors. Chris. It's all yours. This. Is a really interesting article because, you often hear about Oh energy. Funding. And the whole system's not really working but it, was kind of hard for me at least to see why and, like the discussion of like, the neoclassical economic. Model and why that doesn't really work out especially. For this kind of industry it, was pretty interesting to me. So the way I saw, it was that so. There's kind of a two-fold problem like we have problems, in, energy. Revolution. And like the technology space and, then also like implementing. Those technologies, and. Right. Presents. This innovation. Partyers its kind of framework which. Is really interesting and as bill mentioned we. Have like a somewhat, robots kind, of model, for early. Maybe like incubator, type, startups. And. Then. We have to somehow bridge that gap to innovation, I'm, just wondering. What are your thoughts on like how we can, kind, of create that smooth, transition, between like. Institutions. That might be providing, some early seed funding and then, my kind of transition, those into later stage whether. Those be connected, to like tech courage or like those other models. That have kind. Of demonstrated. Some pretty good. Ways. To bring that. Implementation. Process, into. Play. I think, two things one. I was pretty. Astonished. At the first piece, particularly. Taking this neoclassical, views like hey should we just cap and trade is a carbon tax network for, curbing emissions and, I. Think it did a pretty good job of saying, that maybe like it's more, complicated than that but also like the. Fact that we were still looking to do, sort. Of a cap-and-trade system even. Like in 2010, which is like relatively, recent and you know it's possible economic decision, for a while now. Made. Me think like his. Economics, are. The solutions, that we think, theoretically. Like in economics, are they effectual. And. Are they just kind of limiting us because we only have this school of economic, thought that says this is sort of our solution subset, this is the answer. And, are there economists, out there who like art through classical, economists, that may have solutions, for. Us that exists outside of that. Probably, would be a lot more palatable and useful if then kind. Of a carbon tax or a cap and trade system so. If you leave bill in that for a second and just and. Just just, to be clear don't, get me wrong I, do think, oppressing mekin there is definitely a place for a pricing mechanism, it can help a lot I think. Part. Of the problem here is the neoclassical, economics since we talked about in the first class.
Kant. Hasn't, been able to develop. An. Outlook, that. Enables. It to treat. Technology. Innovation. As. Endogenous. To. Economic, growth theory, right, so solo announces, it's exogenous because, it's too complex a model for us to track. The variables. And. As, we've talked about in this class involves, history, and culture and organization. Theory and all kinds of other things that. Are kind of outside the, parameters of what economics, is normally and we'll the track and its curves so. That's. A genuine problem so when neoclassical, economic comes up with a fix, to. You. Know climate. It, misses the. Technology. Side because it doesn't have sophisticated handles, to deal with it now obviously economists like Romer and others are, attempting, to make technology, theory. Endogenous. Part of economic, theory but that's still an ongoing project, but, that's where we ran into trouble, was. That that the, technology. Need over an extended period of time didn't, match the, timetable, on. Cap and trade and the solution, there was to push off cap and trade and that's in effect what we've done, I, still. Think we need to come back to it but I think the project at hand is a technology, development project, and really, a state and local government, technology, implementation, alternatives. Where. We could come up with a plan B that, helped up make progress for the next you know executor, self. At. Russia, I think that's what I was getting out last week with my point about nine. Market, solutions. To, market. Proverb. Two problems that we're approaching through. The, lens of, economics. I'm in, the sense that perhaps. If we think about. If. We cut if we come if, we start our. Problem-solving, from a lens of promoting. Social good rather, than. Increasing. Capital gain then. We might be able to come up with alternative, and innovative solutions right. And. So I think that's sort of we're right, reprice. Rightful. What's coming from that. This. Model and I mentioned this on you know our very first day of class very, much is similar to the model that non-governmental organizations. And nonprofits, have been using for a very long time in, sort, of trading are, leveraging. The kindness of individuals, and their willingness to you. Know let them participate in their spaces and you see this happen you know for political campaigns volunteer. Fellows will go and they will live in a supporters, house and, then they will go on and you know knock on people's doors for that candidate and they will do so for very little money or no money at all and, so as, someone who comes from the nonprofit and NGO sector and. You. Know I've been you know volunteering, in politics since I was really little the, ways, in which you can leverage sort, of on. That's. Sort of good and ethics of people it, seems to me a much more interesting, place to start for, research. And development for hardware technologies, and people would think because, if you approach at it if you approach it from a lens of economics, it's very difficult to make the case oftentimes.
That Your technology could be disruptive, and could pay off but, if you approach it from a lens of social good it's possible, that you could appeal to ethos, of a venture capitalist, because for, example someone, like Bill Gates is more likely to say I want to do this because I think it's the right thing to do then, to make the argument that it's a good investment for him, and that the ROI will be greater so, I think that there is a benefit. To sometimes. Prohibiting. Away from market. Oriented, problem. Solving and to view it from a from, a new sort of lens, of I think certain social promotion. Obviously. That won't always work but there, are instances and I think this is one in which that, is where. We are you. Know I will, add stuff. To your point that part, of what has come with the engine is. A bridge, fund available, to those startups, so. Raphael. And colleagues have been able to raise, over. 100 to 150. Million now for a commitments. To a bridge fund because. You know these startups argan needs some funding right it's not going to they, save a huge expenses, buy equipment and technology, and know-how savings, in, this new space but they still are going to need to get funding. And so this bridge fund could really help them that. Money was raised, from. Essentially. Generous, rich people, in. This region who. Were prepared, to. In. Effect make a charitable, donation towards. This thing thinking that it might be helpful to the overall innovation, economy in. The Massachusetts area and. You. Know they
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