Modernizing Warfare and Beyond

Commercial technology is advancing at breakneck speed across numerous industries, and the Department of Defense cannot afford to be left behind. In this discussion, Liz McNally, deputy director of commercial operations for the Defense Innovation Unit, and Qasar Younis, Co-Founder and CEO of Applied Intuition join a16z General Partner Erin Price-Wright to talk about accelerating the adoption of dual-use technologies — from autonomous vehicles to energy infrastructure — as well as investing in the companies that build them.

• 0:08Speaker 2

  So Liz, maybe you started with you. So a lot of people in this audience are familiar with DIU and how it works, but maybe to kick us off, can you talk a little bit about your organization's mission and where it fits broader more broadly into the defense modernization procurement process today.

• 0:24Speaker 1

  Absolutely. And thanks so much for having us and for this great summit. It's so wonderful to be here with all of you. DIU Defense Innovation Unit is the organization in the department whose job is to bring commercial dual-use technology into the department with speed and scale for strategic effect for the warfighter. What that practically means is we work hand in hand with the combatant commands to really understand what are the war fighting needs that they have that commercial technology can help to address. We also have portfolios, technology portfolios in multiple different areas that are constantly out there scouting, talking to folks like like all of you in the audience to really understand what types of commercial technology are out there, both to address the needs that we're hearing and also to inform needs that quite frankly, you know, the military might not even be thinking about that it's able to address, and then work in partnership with the services and other innovation organizations in the department to bring that technology and we prototype it and then you know field it uh at scale is is how we try to work and do that.

• 1:27Speaker 1

  That's the core of what we're doing. Um we're also helping, I think by doing that to pathfind how we can modernize more broadly. We heard about you heard the vice president and how much excitement there is to do even more of this. And so I think that how we're working and how we're doing that, how we're you know, Congress is giving us more flexibility to do all of that is also part of what uh we're doing. Happy to go into more of that in detail if you'd like. Cool. Um

• 1:53Speaker 2

  and maybe then quick quickly, uh, Cazar as a starting point. Would love to your experience working with uh DIU. You launched Applied Intuition in 2017, and you started your defense business pretty soon thereafter, around you know, 2019 or so. So maybe tell us a bit more about when you started partnering with DIU and how it's applied to help you scale.

• 2:14Speaker 0

  Yeah, just as a context setting about the company, uh we're a vehicle intelligence company, so we build software and autonomy that ultimately vehicle manufacturers use. So uh, and then the way that we work in defense is we work both with the primes and we work directly with uh with the DOD. Uh we're a Silicon Valley based company, and uh we're truly falling into that dual use category uh in the sense of most of our businesses on the commercial side and then some of our business on the defense side rather than the other way uh around. Uh why uh I think this is you know, DIU specifically was kind of the our path into this world and was extremely, I would say critical. Uh, before we had a big DC presence and before we kind of knew what we were doing here, uh that was really our gateway, and I think for lots of companies, I think in many ways we're like a poster child in that, like we have a real uh defense business now.

• 3:04Speaker 0

  I think broadly speaking, um, this concept of dual use, uh we're we're in a very special time with the current administration because we finally have folks who are really focused on efficiency, and what dual use really brings is you know what we're fundamentally doing applied is we build this technology on the commercial side, and it's essentially subsidizes the work we do on the defense side. And so you, you know, as both as taxpayers, uh just from a practical perspective, but also as uh in terms of procuring technology, you want the best and you want it the cheapest. And uh especially when we can when you think about our adversaries, uh, you know, if you're a Chinese company, you don't get the choice if we're due use or not. And uh so we we I think you know building up this muscle inside the inside of our procurement organizations is critical.

• 3:50Speaker 0

  Uh and I think allowing companies like us to really get into that slipstream has been has been quite, I would say, fundamental. Uh but yeah, it's been it's been a fantastic experience. I I can't speak uh highly enough about it.

• 4:02Speaker 2

  So maybe just to get a little bit more specific, maybe we can chat about Epicci applied in DIU. Um so we heard you know the news a few weeks ago, you acquired a company called Epic, uh, it's a defense autonomy company, and it's a company that DIU was already already working with. So let's talk a little bit about that journey. Um, how did that come together? What types of hurdles did you did you need to overcome? How did your organizations kind of work together on this? Maybe I'll start with you, Kazar.

• 4:32Speaker 0

  Yeah, so uh in terms of uh the you know, Epic was a standalone company that started as kind of uh, you know, doing SIBRS and you know, early teens of last year and ultimately built up uh a pretty significant uh research arm and uh technology arm, applied intuition. We're mostly focused on land vehicle, land systems and land vehicles uh over the let's say eight years of the company's history. Um and I think it was a very natural partnership. We had known the company just as companies know each other, and so uh when there was an opportunity to acquire the company is a you know is a fantastic acquisition. We've we've we've brought them in-house. Uh but it shared a similar kind of path. Uh Epic shared a similar path to us.

• 5:12Speaker 1

  Yeah. And I would just add, I mean, I think when you think about applied and episode in particular, it's it also shows just how much we have to work across domains. And so it so that's obviously huge for applied, but it also is one of the themes that we're really thinking about in terms of you know, how are we uh how how are we fielding capabilities that when you think about space, air, land, sea, undersea. Um, but then more broadly, I think the acquisition is also exciting as we continue to think about strengthening the defense industrial base, right? Seeing more mergers and acquisitions like this, we're also seeing, I mean, every day I feel like I open, you know, the news feed and there's a new partnership as well. There's lots of different partnerships happening. So it just adds to the dynamic time and how we're seeing, you know, just a strengthening uh of all of these different types of newer entrants into uh into the department.

• 6:02Speaker 1

  Uh love it.

• 6:02Speaker 2

  So I mean, we're here focused on bridging gaps between technology and Washington. You're talking about sort of partnerships of all these companies working together. Um you know, DIU is responsible for bridging the gap between technology and DOD buyers. So how do you navigate those two very different groups? They don't, you know, they don't speak the same language, they don't think about things the same way. How do you navigate that at DIU? Yeah.

• 6:25Speaker 1

  Well, I would start by saying, you know, I think that we're we're all we're all working to bridge the gap. DIU plays a critical role, but we're grateful to the American dynamism movement and many others that are that are helping to bridge that gap too. It truly takes a village. Um the first thing is we've made a tremendous amount of progress as David and Catherine were saying from three years ago, but if you fast if you rewind the clock a decade, two decades. So we're we're building from, I think, a much stronger foundation in terms of how we can do that, but there is still a ways, a ways to go. Um, you know, one one critical element, like it always is, is about talent, right? How do you find what we call dual fluency talent? And it has to exist within the department, it has to exist in companies, it has to exist in funders, you know, lots of different places that can speak both both languages and really understand the different culture incentives, you know, types of risk, all of those things.

• 7:19Speaker 1

  Um when we further think about bridging that gap. I mean, to me, there's there's sort of three big communities. One is the actual war fighters themselves, who are the ones who need this technology. One thing I think will be really interesting over the coming years is the new generation of soldiers, sailors, airmen, marine guardians coming up, they have grown up with this technology. I think of like my son who's in high school, you know, when he's 18, 19 years old or 21 years old and and and could be out there doing that, they they don't know any different. And so if the military doesn't have that, like yeah, we're gonna be able to do that. They're like, and they're gonna go find it some way or another, right? So I think that that is part of a profound shift on that level. Then you've got like the military buyers, right? And and and again, I think we're gonna see even more disruptive change coming.

• 8:08Speaker 1

  But but there is a lot that has to happen. We have proven through the CSO model, the commercial solutions opening that you can move a lot faster and do things competitively, do it in a way that is easy. You know, 40% of the companies that that win our solutions every year are first time to DOD, right? So you can do that. And Secretary Heggseth just uh, you know, in the last few weeks authored a memo saying that we're gonna use that approach for all software acquisition. And again, I think that's a harbinger of of more to come. Um and then there's obviously the work of great partners on the company side, and and we have to again try to make the department one thing that I'm really focused on is how do we lower those barriers and make it easier to navigate the department work with us.

• 8:51Speaker 0

  Yeah, I'm and just uh just to add to this uh what Liz was saying on this kind of software pathway initiative. Um if you were building, let's say a procurement system today, you're building the DOD system today from scratch, uh, you'd probably, first of all, it would be based probably in Silicon Valley in a very fundamental way, and you wouldn't procure purely from a hardware perspective. And the way you can think about this is as a consumer. When you go out to the market and you procure technology for yourself, is the first thing that do you think is just the hardware. No, if you're buying a car, you think about hey, Tesla has this great software as FSD on my phone. I think about the software. I don't only think about hardware and what's really happened in the kind of commercial industries. There's an abstraction from hardware and software. And it allows companies who do hardware really well to really drive that cost down and to be the best in that business and to take companies who really do software well to drive that cost down and do that part of the uh stack really well.

• 9:46Speaker 0

  And I think the faster we get to that reality, which is the reality that exists already in the commercial uh market, the you know, the the better our procurement uh will be and the more efficient it'll be, and the better products our warfighters will have. I think it's Kind of crazy when you think about uh how sometimes how much the technology lacks that our warfighters have versus what's actually commercially available cheaper and and uh I think that's like you know should give everyone pause and again I think we're in a very specific kind of opportunity that exists right now uh with the current administration to really fundamentally look at this uh you know in a new way in a kind of almost like a venture first way you know we're here at a venture uh funds uh uh event at a venture first way and it doesn't look at it through this what boxes are we gonna buy and how do those boxes look like the boxes we've bought in the past um and that is that's a sure way of failure and that's not the way by the way the way our adversaries are doing it and that's the name of the game here you know what we're talking about

• 10:43Speaker 2

  so how do we get commercial tech into the department faster big question

• 10:50Speaker 1

  um you know part of it is that we we do know how to do this we have approaches for how to start getting it in like if I think again the the commercial solution opening we have a way in just a few months time to to launch a solicitation out there and and start start the prototype I think the harder work is not that and so we have to scale that and and how we do that more quickly but then we have to really think about okay but how are we going to take this successful prototype that works and then move it to actual production and and fielding and that unfortunately as we all know or many of the the folks in the audience know the department works on two year cycles right technology works on the cycles of days weeks you know maybe months but probably more more days and weeks and how do we bridge that gap the good news is that last year in the budget that that we got Congress actually gave us what we called agile fielding colorless money that allowed us to help bridge that gap so there's pathfinders and we need to to expand that but but the bigger challenge I think is really about how are we going to move that part of the system even faster and then in the near term you know one of my old bosses uh used to call him you know when he was doing really hard things when we were deployed in Iraq he called himself being a four star action officer and unfortunately we're still in the moment where we need a lot of four star three star you know secretary level action officers to drive this in and as they as they do that you know there there is a base of people that want to change as well and it's gonna have to change from from the ground up and there's gonna have to be that that top cover to enable to enable that change to happen.

• 12:24Speaker 1

  But we know how to do it. We've changed the military before I think back to when I was in uniform in the 2000s and you know we were able to to change when when we had to and we just have to bring that that mentality again but it's not easy.

• 12:38Speaker 0

  Yeah I think uh you know when you're hammer everything's nail if you look at the commercial side how does uh like a big company like uh General Motors or uh or a Toyota or something like this acquire very similar technologies for their vehicles and it's uh the it starts fundamentally and when we kind of interface uh with the let's say automotive sector or with uh construction and mining um it starts with the people the the if the folks on the buy side are technical they quickly understand what products they're actually trying to procure and uh inside applied we have this saying which is like the more senior the software people in an organization the faster that acquisition happens because then they're they're not actually uh kind of delegating that work and so I think there's something to be taken there as well whereas with our subject matter experts that exist within uh kind of the commercial industry also need to exist within the procurement kind of uh you know channels yeah and uh DIU is a great first step but really you need that that uh expertise in the services directly and you need those people to be quite senior I think it's not controversial to say that the conflicts of the future are gonna be software defined there it's not going to be very traditional conflicts where you have you know uh uh uh aircraft carriers lining up or or you have uh tank columns and so then our kind of you know uh debate that we need to have internally is okay from you know from the secretary all the way down who's the first person who really understands software in a very very deep way as in they were a software developer themselves they spent a significant port portion of their career uh you know in in that commercial space because they can actually help procure much much much faster so I think you know you we talk often about processes and bureaucracies you know the bureaucracy is not gonna beat Beijing right it's not it's not we're just gonna process our way to a great solution it's going to be individual people who know this subject area so I think if I had a magic wand it's like the most we need to take folks who really understand technology and ideally software development that's the area that's that that's where most of the interesting stuff is happening uh and make them very very senior and let them actually drive procurement and I think I think uh and and make some of these decisions I think you'd have a much much different answer we again let's look at our adversaries here you know in China this is you know this is the reality engineers uh software engineers are very senior within the party and within the defense apparatus and they are making these decisions and that's an issue for us we we we we can't be fighting with one you know arm tied behind our backs because we think about the the the the world as a hardware uh reality so

• 15:22Speaker 1

  if I could sorry if I could just add one more you know if we could all wave our magic wands we just have to get this in the hands of the warfighter right because seeing is believing right we can talk about it all we want but once people actually start using it and realize how it doesn't create incremental change it creates fundamental change in terms of how we can fight and then when it's in the hands of the warfighter you know they can start developing the doctrine all of the other different pieces we quickly figure out what works what doesn't work we iterate much more quickly I think once people actually start really seeing and working with it they're just going to demand it. So if if if there was ways I mean that's why like the army's transforming and contact brigades I mean there's different elements like that we're just trying to do more of that and and that will be huge as well and that will also help.

• 16:08Speaker 0

  Very specific example that's uh that's just happening domestic OEM car company uh that is you know trying to essentially softwareze their their their vehicles and uh bring kind of vehicles we we bring vehicle intelligence to the companies the way they did it they had a similar procurement issue in these large multi hundred thousand employee companies they're technical but they have these very very slow processes so in this company specifically the CTO says hey I'm just gonna send you two vehicles to your office and then you're gonna you know put your OS on there and you're gonna put your autonomy on there and then I'm gonna be there in a month and I'm gonna see it. Yeah. And I think that mentality where you're talking about you know seeing is believing is something that we need to embrace on the uh on the public sector side as well.

• 16:51Speaker 2

  Yeah we we should get a a contingent of folks out to to San Francisco to write in some some way most

• 16:57Speaker 0

  yeah absolutely or even

• 16:59Speaker 2

  DC

• 16:59Speaker 0

  or bring them to DC or

• 17:00Speaker 2

  bring them to DC even better. You you talked a little bit about future threats both DAU and applied to some degree are engaged in the Indo-PayCom region. So maybe Liz, how is DAU approaching AI for national security in this context both tactically operationally how are you thinking about the the region and and how tech can support

• 17:20Speaker 1

  yeah um AI is involved in every we have a specific AI portfolio. AI is also just you know in everything that we're working on like everywhere else in the world I mean the first great news is we have a fantastic partner that we're working with and quite frankly serving in Admiral Paparo you know the the commander out there who fundamentally gets it as well and is moving as hard and as fast as as he can to bring AI you know into how we we do things in the Indo-Pacific. I think about it in a few different levels at the at the more tactical level how is AI fundamentally I mean as an example when you think about collaborative autonomy and swarms of drones across multiple domains able able to interact with each other you know given given the human direction that it has I mean that's one example at the at the tactical level I think more at the at the operational headquarters level how is AI able to help enable faster better data driven decision making you know all of that and how are we really just infusing that into how a headquarters operates and and makes decisions then if you think about the complexity of the Indo-Pacific half the world surface a hundred uh a hundred million square miles I may have gotten that wrong but you know of of ocean um and and how are we also doing this and thinking about how we're gonna do it on the edge in a contested environment do we have the energy the data all of those different pieces um so we're we're working really hard at at doing that in in partnership with with him and we're incredibly excited about it.

• 18:53Speaker 1

  And and fundamentally as well how is it all based on a foundation of AI assurance right? How are we doing this with the appropriate data with the guardrails that we have put in place so the humans are still doing the pieces the humans need to do which is making data informed decisions. But we're we're we're working really hand in hand with him to get after it as best we can

• 19:16Speaker 2

  and I know you you your team has spent a lot of time doing kind of looking at the advanced capabilities that exist in China and you know where are they tech wise and what are we going to be coming up against. I'd love to hear a little bit about some of that work and and how you think the the US what what the that you think the US needs to do to remain competitive with what they're building.

• 19:36Speaker 0

  Yeah so um just a context set uh we're a global company in the sense of applied his offices everywhere in the world except China. We don't we don't work in China and so but uh the automotive industry specifically the amount of innovation uh that's happening in China is is definitely notable uh I do want to put some like context on it uh sometimes people you know especially in the Bay Area you have in these late stage investors who almost Like fawn at the Chinese capabilities, but having never actually seen a Chinese vehicle. And then other folks on the other end of the spectrum who are like, no, no, they're just copying everything. And both of those are not true. The Chinese are innovating. And the way that they've kind of the way that they're doing it before I tell you, you know, what what we've actually seen is it's just an intensely competitive domestic market for automotive.

• 20:23Speaker 0

  It's the largest automotive market in the world. There's about a dozen competent OEMs, maybe two dozen uh total OEMs that are fighting it out. And the party has made it very clear, the comments are very very clear that they're going to intentionally consolidate that industry. So everybody, every company in that industry is fighting tooth and nail for that annual. So every year they do an auto automotive uh show, which is Beijing in Shanghai, alternating years, this year it's in Shanghai. And uh if anyone's interested in autonomy, you should spend some time in the Shanghai Automotive uh show, which is coming up here in a month. We went there last year, we we as the company benched mark basically every uh every major player uh, you know, uh tens of hours of videos, thousands of pages of notes, and the short version of it is they've essentially found somewhere between a Tesla and a WAMO in terms of autonomy.

• 21:12Speaker 0

  Uh but what you're seeing is like true innovation. They're copying initially and now they're kind of uh go going to the to the next level. It's scary or it's concerning in a way that these are actually quite mature. These technologies are not, you know, there you can go to the dealership and try, you know, assisted parking in a way that does not exist anywhere in the West. And you're like, this is pretty good. Now, simultaneously, it's not beyond the comprehension of Silicon Valley engineers or companies, you know, broadly in the West of how it's done. In many ways, even within our own companies, bureaucracy gets in the way, and this is a larger conversation, not only in the government, but on the commercial side, that these mature industries and mature companies, how do they get out of their own way in order to field technologies?

• 21:57Speaker 0

  And and

• 21:58Speaker 2

  how do they?

• 21:59Speaker 0

  I think I mean the way the Chinese have done it is uh partly is uh I think intense pressure. It's amazing what uh happens when the government tells you you're not gonna exist as a company unless you move forward. So there is some advantages of centrally controlled planning there. Uh the downside though, uh is obviously that can work for so long. Uh and and I think we've seen that open and free economies actually do produce better results in the long term. Uh and so I think for to answer that question directly on our kind of commercial uh uh you know side in the in the United States, it's just like what we're talking about the DOD. The most senior people need to be technical. We've gone from this era where, you know, even if you go back 30 or 40 years ago, you know, I was an engineer, but I did my MBA at HBS and HBS, all the outgoing people used to be 20, 30 years, they wanted to be at McKinsey.

• 22:47Speaker 0

  They wanted to be at you know, Goldman. That's not the case anymore. Now lots of folks who are coming out of school want to be at technology companies. That's a fantastic change, right? Because our lead our STEM strength or strength our strengths in sciences, technology, and engineering are gonna be what defines our ability to compete with our adversaries, both on the commercial side and on uh you know on the uh on the defense side.

• 23:10Speaker 2

  Amazing. So I know we only have uh a couple minutes. Yes, go ahead.

• 23:15Speaker 0

  Take a chance and go to China. Just just fly there and go to the dealership. Don't bring any

• 23:20Speaker 2

  of your devices together. Don't bring

• 23:21Speaker 0

  any of your devices. And and don't stop like just reading the blog post or just hearing, you know, talking heads. If you go there, you get a very real sense of what's happening. And that we are in a competitive, we're in a drag-out fight. We need to understand what the what what's happening on the other side, and not from this like abstract, far away uh, you know, let's say analogies.

• 23:42Speaker 2

  I love that advice. Um be careful. Maybe zooming out. We'll read your notes. Yeah, watch your videos. Um, maybe zooming out in our last um minute or two. Um we have lots of founders in the room. As we wrap, what advice do you both have uh for them about working with with DIU? Liz, you know, how and when should what should startups reach out to you, engage with you? Any advice?

• 24:05Speaker 1

  You should absolutely reach out. Um we want to know what what everyone is working on, what the technology is. You know, we often know about and and follow companies long before they they apply and and then come on work with us in terms of a prototype. Uh so we have a whole team of commercial engagement executives that that we exist in order to do that and and work with all of you and and help answer your questions in terms of how to work with the Department of Defense. Number of us are here. You can always email info at DIU.mil and we will we will get back to you as well. Um so that's that's one piece. Um the the other big thing I would just sort of say to the founders is thank you, right? Is as we're all here to to to rebuild the American defense industrial sector. This is really hard work, right? No one starts a defense tech startup uh either.

• 24:52Speaker 1

  And and if if they're not up for hard work as well, it's hard on all of our sides. So just I would also just sort of leave with a huge thank you to all of you for being part of this movement too.

• 25:03Speaker 0

  On the uh yeah, for for me to sp talking to the founders out there, I really want talking to the dual use founders, obviously, if you're working in defense you're you already know the mission. Uh on the dual-use companies, I think let's say 10 years ago there was more controversy on should you do defense or not. I think that's all basically gone in Silicon Valley. But let me just say if small and large commercial software companies don't support our government and specifically the Department of Defense, we're screwed. So if you're a founder in the audience and you're wondering, should I engage in this? The answer is yes, it's a great business decision, but beyond that, it's kind of your responsibility as a citizen of this country in order to kind of uh lend your technical uh uh uh both products and and uh an acumen to to this you know fight that we're in.

• 25:51Speaker 0

  And it it really is a fight. Let's let's not be uh let's not beat around the bush about that. So the founders out there, it's absolutely doable. I didn't work in the defense ecosystem before, I didn't serve, uh, but it's been you know, with DIU and and and others, it's been a fantastic experience. And these this infrastructure exists. We're here. You can literally just find us and we will tell you how to do this. So it's uh so it's a very direct ask.

• 26:16Speaker 2

  Awesome. On that note, thank you both so much. Thank you for listening.