We Need a Clearer Path for Startups to Government Billions.

The ocean economy, and the rest of the economy, is at stake.

Photo by Arno Senoner on Unsplash

Earlier this week, a friend sent me one of those articles that made me shake my head and mutter, "This can't be the way the world works." Then I ran to the nearest ATM and took out some extra cash. 

The article highlighted how we (in this case, "we" globally) maintain the infrastructure that keeps the internet running, global communications intact, and the financial system humming along—undersea fiber optic cables.

It was this article from The Verge titled, The Cloud Under the Sea: The invisible seafaring industry that keeps the internet afloat.

Until yesterday, I gave zero thought to undersea cables. And that’s part of the problem. They just work.

However, it seems this is a mistake. 

The 800,000 miles of cables beneath the seas break with surprising regularity. There are about 200 incidents a year due to everything from fishing trawlers and anchor dragging to undersea earthquakes and mudslides. 

As you can imagine, repairing these cables that sit miles beneath the ocean surface is tricky. This extremely specialized, technical capability rests in the hands of (wait for it) 22 vessels. This aging fleet, staffed by a generally aging workforce, is underfunded and under-appreciated. 

The vulnerability of this infrastructure is scarily apparent. 

My thoughts immediately went to the ongoing war in Ukraine and how a mysterious undersea pipeline explosion was one of the first and utterly unsurprising events to unfold. And while the article highlights some pretty unbelievable stories of entire countries going offline, I don't remember reading anything about them happening. 

These cases represent the ongoing, natural risks of operating in this environment.

In case you also missed them, here are some examples (quoted from the article):

• Four of Vietnam's five subsea cables went down, slowing the internet to a crawl. The cables hadn't fallen victim to some catastrophic event. It was just the usual entropy of fishing, shipping, and technical failure. But with nearby ships already busy on other repairs, the cables didn't get fixed for six months. 

• An earthquake dislodged sediment on Taiwan's southern coast and sent it rushing 160 miles into the Luzon Strait, one of several global cable chokepoints. Nine cables were severed and Taiwan was knocked almost entirely offline. Banking, airlines, and communications were disrupted throughout the region. Trading of the Korean won was halted. The cables, buried under mountains of debris, were nearly impossible to find. It took 11 ships (half the fleet! emphasis mine) nearly two months to finish repairs.

• Chinese fishing vessels severed cables to one of Taiwan's outlying islands, triggering an international incident. (Severing Taiwan's cables is one of the first moves in war games of a Chinese siege.) 

• Trawlers cut multiple cables off the coast of Scotland, knocking several islands offline. 

• An improperly moored mega yacht knocked out all communication for the Caribbean island of Anguilla.

Scared yet?

Getting back to the war in Ukraine and our ongoing recognition that outsourcing everything to China and gutting domestic manufacturing capability has been a mistake, you can see where this is going.

For our purposes, let’s focus on that part where 22 aging, second-life workhorses are keeping this whole house of cards afloat.

I've written before about how the nature of conflict at sea is evolving before our eyes. American shipbuilding capabilities, or lack thereof, are beginning to gain attention in the press and national debate. 

And it isn't just military capabilities; our inability to build ships, combined with that pesky Jones Act that requires ships operating port-to-port in U.S. waters be built in the U.S., is hampering everything from the offshore wind industry to our ability to respond to disasters events (see Puerto Rico).

https://emergingoceans.substack.com/p/a-political-ocean-economy-conflict

https://emergingoceans.substack.com/p/we-need-more-icebreakers

As an economist and writer Noah Smith points out in his recent article, "This has to change, and fast. By "fast" I mean "within the next three years," not "within the next decade."

What America needs to do now on national security

Smith highlights what he thinks are the five top priorities of national defense, and the first is "Rebuilding the U.S. defense-industrial base." Within this highest-priority category rests shipbuilding. 

The shipbuilding problem is especially acute, and people are starting to wake up.

It hasn't always been this way. 

In 1975, the U.S. shipbuilding industry was ranked number one in terms of global capacity, producing more than 70 commercial ships a year. Nearly fifty years later, the U.S. now produces less than 1 percent of the world's commercial vessels, falling to 19th place globally.

China meanwhile has tripled its production relative to the U.S. over the past two decades, producing over 1,000 ocean-going vessels last year, versus America's 10.

+Shipbuilding: the new battleground in the US-China trade war - F.T.

Yes, that's a 100 to 1 advantage for our greatest geopolitical rival in yet another critical industry.

Silicon Valley is beginning to take notice, but that’s only half of the solution.

The opportunity is not lost on technologists. However, despite the large contracts at stake, dealing with the government isn't the easiest path for a startup. 

The appetite has changed significantly since we started in 2015," said Brandon Tseng, co-founder and president of Shield AI, a start-up worth $2.7bn that makes artificial intelligence-powered fighter pilots and drones.

That year we pitched to 30 seed investors and got 30 'no's'. Then Russia invades Ukraine and suddenly everyone is taking a look. The funds who thought it was taboo no longer do.

+Silicon Valley V.C.s rush into defence technology start-ups - F.T.

YCombinator's latest Request for Startups listed new defense technology and bringing manufacturing back to America as two of its 20 categories of specific note. 

It's important not to skip that second element. We're great on the tech side, but a 100x growth in shipbuilding will take more than A.I.  

Palmer Luckey is a 31-year-old entrepreneur whose first company, the virtual reality company Oculus, was acquired by Facebook for $2 billion. In his second act, Luckey has turned to defense technology with his company, Anduril Industries.  

In an interview with the FT, Luckey notes:

The first page of our first pitch deck said that Anduril will save western civilisation and save taxpayers hundreds of billions of dollars a year as we make tens and tens of billions of dollars a year.

Regarding Noah Smith's thoughts that we need a three-year solution, not a ten-year one, Luckey highlights how much of an outlier Andruil is. He sums up the barriers of government and the web of lobbyists and established players protecting the status quo (from Forbes):

The Pentagon doesn't need to fret over Palmer Luckey; it needs to fret over finding the next Palmer Luckey. "They need to be worried about how to make people like I was when I was 19—with good tech and good ideas—into successful vendors. Because right now there's just no path at all.