From a venture capitalist, a volume on how government can use innovation out there in the economy

A venture capitalist-turned-professor and business manager outlines the case for a new approach to how a fast-moving sector of the economy can help the government. Federal Drive Host Tom Temin is joined by Arun Gupta, the CEO of the non-profit NobleReach.

Interview Transcript: 

Tom Temin And you’ve outlined these ideas in a book Venture Meets Mission. Tell us why this is just not another recitation of the kind of old idea of, yeah, we need public private partnerships.

Arun Gupta In Venture Meets Mission, we’re really trying to take our theory on the case is twofold. One, in great power competition, we need to attract better innovation around government. And we need to get better talent around government. And in Venture Meets Mission we lay out how we do that primarily in addressing where we think the innovation really reside, which is our entrepreneurial community. If you look at our tech entrepreneurial community specifically, it’s probably our greatest superpower in our democracy. And we lay out that if we are going to, as we move forward, maintain our global leadership, we need to really think about how we harness that venture community around government missions. Traditionally, public private partnerships have been around big government with big companies. And so really what we post here is the notion of focusing on those nimble, innovative companies and how they collaborate with larger government.

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Tom Temin Now, the one thing about nimble companies, and sometimes companies are forced into nimbleness because as they age, they have to change and morph. I mean, look at the old Hewlett-Packard. There’s still a company by that name, but it’s been atomized and scattered to the winds and pieces of grown up into new companies of their own. Total transformation of what those of us who are around 40 years ago, remember Hewlett-Packard. But then look at a other ancient program like, say, Social Security, which is not fiscally sustainable. Everybody knows it, everybody in Congress knows it, everybody in the Congressional Budget Office, all the actuaries know it. And yet, somehow you need a venture style way of not getting rid of the benefits, but looking at the whole program from the ground up and see how can we do this better? Is that the kind of thing that we can help with here?

Arun Gupta I think more we’re looking at trying to help with this, not on the policy side itself, but is bringing the enabling innovation, the support, whatever policy decisions are made. The Social Security example is obviously much more of a policy makers issue. Having said that, once a policy is laid out, we still need access to the innovation that is the superpower of our country. To be able to go execute. What we’re laying out there is that we need to create the pathways and scaffolding to support how government can interact with the entrepreneurial community in a more meaningful way. And that includes the entrepreneurs, the organizations, but also the VC or financial backers that are supporting them.

Tom Temin So maybe a better example is, a couple of weeks ago, the announcement from the Defense Department of the need for a program they’re calling Replication, which is the devising of swarms or squadrons or clouds of small, inexpensive, yet interconnected and lethal drones or aerial vehicles that could somehow be used in a conflict situation, a capability that the military simply doesn’t have now, and it’s not something they can wait to develop.

Arun Gupta That’s exactly right, Tom. There’s a lot of these capabilities, and it’s not only on the military side,  it’s on the healthy side. You look at economic security, you look at climate security right now across the board, a lot of the innovation is really happening again in the entrepreneurial community. And laying out those ambitions to how you connect those ventures in a seamless way, in a timely way, and understanding, most importantly, that, look, there will be some level of risk that needs to be taken on. Nothing is 100% guaranteed, but that the risk reward tradeoff, it’s better to be getting the velocity of innovation into government so that we can get to addressing these larger societal challenges.

Tom Temin We’re speaking with Arun Gupta. He is a CEO of the nonprofit NobleReach and a long time venture capitalist. And I think in your book, there’s a page that is a chart of the different organizing principles between public sector organizations and private companies. And that’s really the crux here, because the motivations, the organizing principles, what is rewarded and what is punished in the private sector and in government are almost at diametric opposites sometimes. That seems to be the crux of the issue that you’re trying to bridge here.

Arun Gupta That is the crux of the issue. If you look at what we have that creates the difficulty in collaboration. It starts with a cultural difference, obviously. Amy Zegart writes about how you’ve got the hoodie versus suits culture, but we need to create kind of a shared language of how do we collaborate. In addition, the notion of risk is very different in the private sector. We are encouraged to take risk available quickly so you can learn and innovate. That’s harder to do in government. Good friend Dan Tangherlini has a notion of like in government, we have an IG, which is an inspector general. So every agency is worried about making a mistake because they’re going to have to go in front of a congressional hearing. What if we had a second IG, which is an innovation general. Which is if the agency isn’t innovating fast enough, you could also be put in front of a congressional hearing. So creating the right incentives so that there are reasons to be innovating and taking risk are what we need. In absence of that, understanding what that collaboration could look like and how you can shift that risk into the private sector in the entrepreneurial community is what we talk about in the book. And so how we collaborate across this innovation national innovation stack is kind of the thoughts that we lay out.

Tom Temin And I wonder if some of this type of innovation can happen in a heartbeat to save programs where the policy has been determined. I’m thinking of the various spending fountains that really opened up in the advent of the pandemic. And we were trying to help individuals, and the nation was trying to help companies and so forth. And now we’re learning that pretty much, at least a third of all that money, and we’re talking trillions of appropriations are all debt went to fraudulent claims or was misspent in one form or another. Sometimes what they call improper payments, which can be fraud is a big part of it. Yet if the industry is really good at detecting that kind of thing, maybe some overlay of industrial knowhow of fraud prevention and spending controls and so forth, it’s very technical how they do that, could have overlaid these programs early on then everyone might have benefited more. That is the people that were deserving of the help from the pandemic would have gotten it in those that weren’t like foreign people signing up and the money went right out of the country, could have been prevented with the right kind of partnership.

Arun Gupta No, I think that’s right, Tom. I think and this is where we go into using ventures as enabling technologies to support government actions as opposed to driving policy. The technologies exist to be able to do what you’re talking about, but they needed to be rapid on ramps for them to be embedded and included. We don’t have that today. It’s still a very slow process. Having said that, it’s getting much better. And you’re seeing leaders in different agencies wanting to be very proactive with leaning into how do we tap into not only the innovation, but also the talent on the universities and thinking about inspiring youth to kind of come in for two or three years, and not necessarily selling careers in government, but providing them great experiences and government. Knowing that if they even leave, that they’re still going to be ambassadors. And that’s how we rebuild trust. A lot of where we are today, because the trust is broken down between government and the private sector. But that’s primarily because people go into their silos and they stay there. We need more of that cross collaboration. That’s what we talk about.

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Tom Temin Right. So there needs to be, I guess it sounds like a balance of career civil service. It’s an honorable career and people can do it for 30 years. And I’ve met dozens, hundreds of people over the past number of years that are career and stay flexible and stay in a contributing mode over that period of time. But there’s also a place for people to come in, do some good, help the government, help the public purpose, and then take that knowledge back out.

Arun Gupta And I think what it does is it creates a more of a civic minded in those individuals. There’s a greater appreciation of government. Actually, at the end of the day, there is a group of well-intentioned individuals trying to do the right thing, easy when you’re not part of it, to just think of it as one monolithic institution. But it’s a collection of people. Once you’re inside and you know who those people are, what their motives are, what the intent is, I think you leave with a much more favorable impression of how you can interact and how you support the mission, whether you’re on the inside of government or on the outside.

Tom Temin And do you have a prescription for fixing our politicians?

Arun Gupta I don’t. I mean, we intentionally in the book, stay away from the politics. We actually believe the venture and mission piece is a hopefully is viewed. And we have found it to be the very apolitical issue with a lot of bipartisan support in that. I think two things that people do across the aisle agree on is that we need to get better innovation around government, we need to get better talent around government. And we serve ourselves well by trying to inspire the next generation, which I think is looking to serve. I see it on the college campuses that I’m on in teaching from pre-COVID to where they are now. In their mind they’ve had multiple existential threats between the health care pandemic and a Democratic scare, a geopolitical scare in Ukraine. You overlay on top of that and environmental threat and the ongoing great power competition that we have with our adversaries. I think students realize this is a time for them to be able to serve. And what we are trying to do is rebuild those pathways to enable them to do so, while also having them maintain that it can be a career enhancer for them. They don’t have to be signing up for a 30 year career in government, but they can start their career. This should be the place they start their career, and then launch and decide if they want to go to a big tech company, a consulting banking or graduate school program afterwards. And I think that we were overwhelmed just this summer with our internship program where we’re looking for five students. We had over 600 with the applicant. It was all around this notion, around mission, tech and entrepreneurship. Students are kind of craving that notion of mission, meaning purpose, tech, meaning innovation and entrepreneurship around creation and in building again.

Tom Temin Well, maybe a good place to close is the resulting virtuous cycle of venture meets mission ecosystem, something you’ve devised this idea of. Just briefly, tell us what that is.

Arun Gupta What we talk about at the end there, this is, I think what gives me the most optimism and excitement and I think we’re at the early stages, so we have a multi-decade run here. We’re starting to see the first examples of companies really doing well that are venture companies that are serving the mission. When I got into this business 20 years ago, you were always told, don’t invest anything in of government. But with success stories now like Palantir, like Android, like Ginkgo Bioworks and others across different domains, resilient, that VC’s are starting to see real success stories. When you see real success stories that brings more capital wanting to come into the ecosystem. And so you’re starting to see a lot more capital formation to support mission oriented activities. And this isn’t just around defense tech, this includes climate, obviously, health care, agro tech. And as you see more capital coming into that ecosystem, you’re seeing better talent come into the ecosystem. And once you start seeing better talent come into the ecosystem, the ecosystem partners start to become more sophisticated, which then leads to more success stories. And so, I mean, at the end of the day, this is the story of Silicon Valley. What people do forget is Silicon Valley started with an investment from our national defense infrastructure. And then they had successes. And those successes led to more capital and better people and more companies getting formed. And that is the cycle. And I think we’re at the early stages of that cycle now with Mission and Ventures. I do also believe that these larger opportunities can only be solved with for profit ventures. Not for profits can only go so far, but at some point you need to be able to create that muscle memory whereby you become a self-sustaining entity. And that’s where these for profit ventures come in.

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