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Numbers can tell the whole story, or miss it entirely

June 2, 2015 Leave a comment

Several of the Defense Department’s top brass have said it in recent speeches. With the cash it has on hand, Apple could acquire the stock in Lockheed-Martin, Raytheon, Northrop Grumman and General Dynamics outright. I checked the numbers myself. It’s true. This week, the market cap of the four defense contractors was roughly $170 billion. Apple’s cash hoard was just shy of $200 billion. Apple’s own market capitalization is somewhere in the $772 billion range.

Almost in the same  breath, military leaders note that with a market capitalization of around $225 billion, Facebook is more valuable than the same four companies combined.

Air Force chief of staff Gen. Mark Welsh III and former Defense Deputy Secretary Bill Lynn both cited them within the last few weeks because of the scale of research and development going on in consumer and commercial electronics and computer science, versus R&D investments benefitting the defense sector. Unsaid is how surprising hard-headed military leaders must find it, that something as seemingly trivial as Facebook could command such value in comparison to companies that make sophisticated hardware like Patriot Missiles or F-35 fighters or nuclear submarines. The comparisons come in the context of the DOD wanting to re-establish the technology offset that produced so much U.S. military superiority in recent decades.

Numbers startle. They provoke thought. But they only tell part of the story. Apple may be worth three quarters of a trillion dollars, but it can’t build bombers or ships or submarines. It’s entirely capable of building sensor networks and software underpinnings for weapons, but it won’t.  Numbers don’t tell what’s in a company’s DNA.  SpaceX, essentially a start-up with 3,000 employees but no public shares or even statement of revenue, snared $1 billion in private financing in January. And now it’s on the very short list of exactly two companies certified by the Air Force to launch rockets putting military satellites into space. It competes with a partnership of giants Boeing and Lockheed. Boeing built the first modern airliner — in 1933.

Few remember the mini-computer wars of the 1970s and 1980s. But like the PC business in the 90s, the minicomputer business had a large number of fierce competitors — Apollo, Digital Equipment Corp, Data General, Hewlett-Packard, Honeywell, IBM, Nixdorf, Prime, Wang. So fierce was the competition, it spawned the 1981 Pulitzer Prize-winning non-fiction account by Tracy Kidder. Soul of a New Machine chronicled the late Tom West, an engineer at Data General, as he coaxed out an inexperienced team a new 32-bit processor to compete with the mighty DEC.

Nearly all of the companies and people involved in the minicomputer wars are gone, but the title of that book persists. One reason is that so often, objects defined by numbers do take on a sort of soul or presence, because people made them. “Soul” might be a troubling word to some people, connected as it may be to something the deity conferred only on human beings. But the idea that numbers add up to more than numbers — that’s universally valid.

Over the recent Memorial Day weekend the Rolling Thunder rumbled through Washington for its annual Memorial Day observance. My wife was bicycling right by where the motorcyclists were rolling onto the course. She stopped and took a 90-second video of the endlessly varied bikes and riders chugging past. Most rode Harley-Davidson machines. We watched the video over and over. What is a motorcycle but a chassis, a pair of wheels, a V-twin engine, and tear-drop shaped gas tank? (Gold Wing riders, spare me.) Ah, but of course a Harley-Davidson or any motorcycle is more, much more, than the sum of its parts. Gear heads know the meaning of the stoke-bore ratio, horsepower, torque, and the myriad other numerically-expressed specifications that describe motors. But they don’t explain that sound.

Computers, motorcycles, musical instruments, whatever your passion, are more than the sum of their parts and specifications. That’s why automobile junk yards and airplane boneyards look so sad. Or reading about a theatre or defunct church junking its pipe organ.

But what about human endeavors? They, too, are more than the sum of their parts. This came to mind recently when reading an analysis of federal inspectors general based on research at the Brookings Center for Effective Public Management. I also interviewed John Hudak, one of the study’s co-authors along with Grace Wallack. Their research quantifies the work of IGs using a return-on-investment metric. It proceeds from the postulate, correct I believe, that in general IGs return many dollars to the government for every dollar spent operating the IG office, and that this is quantifiable. The authors acknowledge that the pure dollar ROI metric is less useful in agencies where the mission isn’t primarily disbursement of money. So, for example, the IG with the highest ROI is that of the Social Security Administration, where the return is $43.60 for every dollar the office costs. The lowest financial return belongs to the Justice Department, where the IG produces a net cost. It’s ROI is about 43 cents for every dollar spent on the IG operation.

As Hudak points out in the interview, that the ROI looks weak is not a reflection on the Justice IG operation, just that the particular ROI number doesn’t really capture the essence of the office and how it goes about its work. The Justice IG shop is looking at programs mostly. The department doesn’t exist to disburse hundreds of billions of dollars, as Social Security expressly does.

No metric can really capture the essence of any object or program, or the people’s dedication to it.

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Government innovation? It gets an A for effort

January 26, 2015 1 comment

You know you’ve been covering technology for a long time when your friends’ kids – whom you remember as toddlers – start showing up at conferences you’re wandering through, panels you’re moderating. But that’s what happened to me the other day at a conference on collaboration in Washington. It was designed to match innovative companies with potential federal customers.

For me, it was an unusual event if only because of the mix of casualness and neck-ties – which, by the way, does not correlate with age.

I did run into a few guys I’ve known since my days at Government Computer News in the early 1990s. We joked, this sure isn’t FOSE with the latest copiers on display. It was bracing to see so much earnest brainpower – on both the government and fledgling industry side – talking across traditional boundaries. And a jolting reminder at how much the economy has changed from when I used to cover industries like steel and engineered metal products.

I’m not sure what innovation means exactly. But one of the government people had a pretty good, down-to-earth definition. Dan Doney, the chief innovation officer at the Defense Intelligence Agency, said it’s finding ways to deal with the new problems you have when the old tools don’t work. Or trying new tools on persistent problems. You can’t put it in a bottle. And you can’t conjure it up at will by shoving people into open workspaces. But you know it when you see it.

Or when you know where to look. The government is learning where to look. That’s why you see so many agencies launching challenges and contests. They’re looking for ideas the bureaucracy can’t solve with the usual ways it does things.

At collaboration, the Energy Department had a table lined with one-page brochures listing challenges it has open. It’s preparing to spend a million dollars on prizes. There’s the Collegiate Wind Competition, for example. They’re not looking for a socialist professor to hold a faculty lounge gabfest, but rather teams of students to design and test a marketable wind turbine. Reading the material, I sense a subtext in this contest. Namely, the current wind turbine industry has problems with reliability, cost, and the fact that without the government forcing it, no sane utility would bother with them.

Another DOE contests has to do with lighting. In conjunction with Ford Motor Company, one seeks ideas for new automotive lighting systems. Another, in partnership with RecoveryPark, is looking for ideas for more efficient agricultural lighting for greenhouses.

I saw an impressive piece of unmanned aerial vehicle innovation. The problem with those whiny quadricopters is battery life. Flying a payload like a GoPro camera or something of similar weight, they just don’t go far enough. And the devices could be a lot more productive if they could operate in swarms. But operation doesn’t scale – one operator, one drone.

That’s according to Brandon Borko and Christopher Vo. They look like my kids age. They are my kids ages. But they’re the CEO and chief technologist, respectively, of a startup called Sentien Robotics. I couldn’t help but ask them how come they weren’t in school that day. But they’re both George Mason University engineering grads. They’ve developed software that can operate, they say, hundreds of drones autonomously, launching fresh machines as the batteries on flying ones fade. Their video showed a sort of drone rack concept, mounted on the back of an F-250. It launches charged drones while the expiring ones fly into a space on the rack. Imagine operating 100 drones with only your driver’s license.

Could you have thought of this? I don’t know what the Sentien system costs, but I’m willing to bet it’s less than the billion dollars the Defense Department would spend to have a systems integrator do it.

I spoke to one 20-something who says he started a company that creates branding narratives. I’m not sure what that even is. But it sounds like something a few government agencies could use.

A young woman from BraveUX described this chic company’s approach to app development, which its web site describes as “clever, clean, gutsy, art-meets-science, polished, , original, avant garde, modern, smart, bold, simplified, definitely not boring, full-bodied, fun, delightful, original, stylish, refined & Brave.” Hardly something you’ll find on the web site of the average federal contractor.

Elephants also exhibited at the conference, hoping to show they, too, can innovate. Booz Allen Hamilton talked about its use of crowd-sourcing platforms like Innocentive and IdeaScale to help agencies get into the innovation groove.

The event itself had one innovation you don’t see much in Washington. It ran on a Friday and Saturday. All those kids innovating don’t think in terms of a 9-5 M-F workweek. My entrée came from Jonathan Aberman, a northern Virginia venture capitalist who specializes in national security market startups locally. I moderated a discussion with him and Doney, but it was on a Friday afternoon. Our theme was that technology innovators have avenues to get their ideas in front of government, even with the procurement process in place.

And the neighbor’s kid? A shout-out to Ben Center, recent grad, now working as investor relations associate at Onevest.