Convergence Conversation: Exploring Global R&D with Melissa Flagg

Melissa Flagg has a view of global R&D that is unique among even the most accomplished leaders. She has spent her career dedicated to the advancement of our nation’s research and science. She has served as the Deputy Assistant Secretary of Defense for Research (DDRE) where she was responsible for policy and oversight of the Department of Defense (DoD) science and technology programs including basic research through advanced technology development and the DoD laboratory enterprise. Melissa also has performed a range of public and private sector roles including the U.S. Department of State, the Office of Naval Research, the Office of the Secretary of Defense for Research and Engineering, the John D. and Catherine T. MacArthur Foundation, and the Army Research Laboratory. She is currently a senior research fellow at the Center for Security and Emerging Technology at Georgetown University. 

We met while I was supporting an effort at DDR&E. We were trying to map out the global conditions converging to create new innovations the DoD may be interested in. Our efforts were intended to position the organization to be able to anticipate the rapid changes happening in global R&D. During our working sessions, I came to appreciate and respect Melissa’s view of the world. She engages an incredible mixture of pragmatism, curiosity, challenge, and empathy.

In this Convergence Conversation, Melissa and I discuss the reasons for her passionate call to action for disruption of how the federal government views and supports our nation’s R&D.

National Primacy and Global R&D

Deb: Let’s start by defining the national research and development ecosystem.

Melissa: Often when people talk about research, they think of universities and the federal government. That’s kind of where it ends in our heads. Most of us have heard of the National Science Foundation, National Institutes of Health, and research happening at universities. However, in the U.S. over 75% 8%, of R&D funding comes from sources outside of the federal government. It’s sourced from industry, philanthropy, academic endowments at the state and local level, and peer-to-peer funding. An incredible breadth of people are investing in research and development – 90% of research is performed outside of the federal government. Our federal government does play a critical role, but it’s not the full story. 

There’s an incredibly diverse tapestry of research going on. We have a rich startup ecosystem in the U.S. that straddles the university and industry ecosystems. Small companies are being spun out of universities that continue to have connections back to those research centers. There’s a very fluid back and forth in this space. What’s even more interesting is the fact that in the seventies, this was almost reversed. The federal government was almost 70% of R&D funding in the U.S.

Things started to shift in the post-World War Two era. We began creating organizations such as the Office of Naval Research and the National Science Foundation. Soon after we got NASA, DARPA and the Department of Energy, and the National Institutes of Health. By the seventies, we had this incredibly rich environment where the federal government was leaning into R&D. We were investing in our future.

We were a young country. People returning from the war needed jobs. Investments in R&D were a great way to fuel an engine to create them. Our infrastructure was still intact because the war was fought on foreign lands, so we didn’t have to spend federal dollars there. At the same time, the cold war was heating up and the space race was happening.

The nation was motivated. It was an exciting period and the U.S. was almost70% of global R&D. But many global leaders in R&D had been destroyed by two successive world wars and the U.S. rose quickly. Fast-forward to today, the U.S. is no longer the majority of the global R&D ecosystem. It’s only roughly 25%. Yet, what is fascinating is that annual global investment in R&D has more than tripled since 2002 from approximately $890 billion to over $2.2 trillion. The world saw the value of R&D and they doubled down.

The U.S. makes incredible investments in R&D but global commitments have grown for economic reasons, so our uniqueness and dominance is complicated. Many people are worried about the rise of China’s R&D, but, like ours, it only makes up roughly 25% of global R&D investment. 

Half of global research and development is not funded by the U.S. or China. It’s coming from the rest of the world. A trillion dollars of R&D funding is floating around the rest of the world – more than the entire global investment in 2000. This breadth means there are lots of people out there thinking about creative, new ways to do interesting things with science. It means we need to be thoughtful about the idea of the uniqueness of U.S. R&D. Just because other countries don’t take as comprehensive an approach to their ecosystem as we do doesn’t mean they aren’t doing very specific things extremely well. So, when we talk about our ecosystem, we need to get beyond just describing what is going on in the federal government. We need to consider the full American R&D ecosystem and its many relationships across the global ecosystem.

Roles Within the Global R&D Funding Ecosystem

Deb: What are the different roles that government, private, nonprofit, and others play in this ecosystem?

Melissa: Traditionally, our federal government was the big customer. Let’s use DoD as an example. It grew in the sixties and seventies during the space race and the Cold War. So that’s where the money was. Today, the DoD is still an important customer, but things are changing fast. The department must fund a lot of legacy equipment. It is engaging a large, equipped force instead of fielding a military from scratch. Any new equipment must integrate with what’s already there. The DoD also has significant human-related expenses like salaries and healthcare benefits. But DoD also has a massive budget, so it absorbs a lot of focus but has simultaneously become a minority customer (or even an absent customer) among growing areas such as the digital technology sector.

Many examples exist where private industry benefited from long-term government investment, but no longer makes its money through the government. For example, digital tech sectors have created their own funding ecosystems because they’re on a rapid development timescale. It’s why venture capital tends to be a more effective source of funding for technology that needs to move quickly from science to application.

Then we have land grant universities that were funded by the states to focus on educational and technical needs in the state. But as universities have become more focused on getting federal funding, their roles have shifted from focusing on local communities to federal research questions. It’s an interesting challenge because universities are turning to the federal government because they are struggling but that means they are less focused on solving local problems which exacerbate the situation.

Few people are asking questions about social impact for Americans. This is where philanthropy comes in. The tech boom has fueled philanthropic funding for science and technology because a lot of people became incredibly wealthy overnight. Science philanthropy grew because high-net-worth individuals emerging from the tech sector wanted to give back to science. We also have this weird situation where industry is trying to serve product lines but finds that it must invest in the community because it needs an educated workforce. They are working on talent development and talent acquisition, but this requires investments in STEM education. It’s great recruitment – for industry.

The federal government does a lot of funding through the National Science Foundation and other science agencies that support graduate students and postdocs. But the federal government is now less than 50% of all basic science funding in the U.S. Universities are now augmenting this federal research funding with funding from industry and philanthropies. This combination gives top-tier researchers more choice because they’re not dependent on any one source. It’s important for the government to realize there is actual competition now for ideas and talent. It would do well to start to reconsider its posture in a more competitive environment. 

Shifting Responsibilities

Deb: Many believe the federal government is the steward of our future, but given these shifts, it doesn’t seem to be so.

Melissa: The historian A. Hunter Dupree wrote about the history of American science and the federal government between the 1700s and 1940. He describes this messy, hilarious, beautiful, chaotic system that really doesn’t like the federal government to get involved in science or research. As a nation, it’s in our cultural DNA to distrust strong top-down centralized government. It wasn’t until World War Two that we had a radical shift toward believing that the federal government drove R&D. It’s really an anomaly in our entire history as a nation. We think it is normal because it’s our living history.

I don’t think we need to freak out because things are shifting. It’s a very different world. We are a lot more connected. And while the federal government is important, it needs to understand that the landscape has changed. I’m concerned about keeping the federal government in the primary role of the funder and assuming its role is to choose what questions will be funded, what science will matter. We have raised an entire generation of federal science workers who are accountants. They only know how to take money from their leadership and give it to other people.

While accounting is incredibly important because it defines and implements priorities, especially for the mission agencies, it is also an incredible gatekeeper, and sometimes suppressor. This new landscape, one that is much more decentralized, requires that the federal government develop skilled individuals who can work as partners, a member of the board, or participant in the larger R&D ecosystem, rather than the commander of the ecosystem. Otherwise, we will have a bifurcation of those who are willing to work with the government to get funding and those who are unwilling to deal with the government because of the many challenges it brings. And if this continues to happen, the government loses sight of the capability of the ecosystem. 

It will no longer be able to draw easily and effectively on our full American capability. 

If we are competing globally for our economic security and the wellbeing of our people, we need to bring the full American capability to bear on this competition. Not just what the federal government can control through grants and contracts. The government has roles that others can’t or won’t play. Such as supporting education and giving direct funding to graduate students and postdocs that will grow the programs and the people that underpin all of our R&D.  Invest in the future by investing in our people.

The federal government also has a large megaphone. It can reach every state, locality, university, and company. It has this incredible ability to really reach out and touch communities. Start convening forums for developing characteristic-based models of the different types of problems that people want solved. Look across regions to determine where communities have similar issues. Facilitate the connection and collaboration. Map out the ecosystem of problems to be solved and the science and technical capability for solutions. Strengthen the American bottom-up approach and cement its role in strengthening our nation’s R&D.

Incentivizing Global R&D From the Bottom Up

Deb: That’s interesting. What are the incentives in this model?

Melissa: This is the challenge. We got out of the business of solving problems, and into the business of managing a budget. Using a command and control structure in an ecosystem already decentralized is not serving our nation’s needs. Top-down drives efficiency in administrative and oversight processes, such as distribution of funding, but will mostly miss achieving needed solutions– it leads to regulations based on practices that are not totally aligned with what a specific community needs. The more things we solve at the bottom, the closer we are to solving it at the top.

George Strawn talks about how this idea of bottom-up isn’t as crazy as it may sound. Ideally, the government would watch this bottom-up process and let competition for ideas play out. As useful approaches bubble up, government can grab them and start to make those more of a top-down opportunity rather than a top-down dictate. This switch in mindset requires different skills of the people involved in these processes and different rewards.

Our current structures are not built for this sort of nuance. Getting this approach going will require letting a seemingly chaotic system play out for a little while but it plays to our strengths as a nation. We’re street fighters, right? We’re people who were thrown in debtors’ prisons or run out of countries for our religious beliefs. We were willing to come over on boats because things were so bad in our home countries. We’re tough. And we love to be the engineers that tinker, invent, and innovate. We like to have a better idea that beats everyone else. This kind of competition is healthy and necessary for securing the future of our citizens. But it needs to be encouraged, leveraged – not forced into some top-down mandate.

Deb: Instead of process dominant restructure to dominate outcomes.

Melissa: The current process is not leading to the outcome. The R&D ecosystem marches on. The beautiful thing about it being decentralized is no matter what the government decides, the ecosystem will keep finding ways to reorient itself, solve problems, and create outcomes. It would be so much better if it focused on our people and really focused on getting to outcomes of economic security and the well-being of our citizens, not just profit.

The Making of a Scientist

Deb: You were a young scientist when you went into the government. Have you gone through a mindset shift?

Melissa: It’s actually a funny story. It was a bit of an epiphany. I was on a stage in Dayton, Ohio giving a talk to hundreds of industry and government researchers and academics for an Air Force event. In the middle of my talk, I looked at my slides and said, “I don’t think I agree with that.” I’m the Deputy Assistant Secretary of Defense Research. This is not a normal thing to say. These are the approved slides and I’m having this moment. I’m a political appointee and it’s October at the end of an administration. I’m going to be fired anyway so I might as well pull on this thread. I was reacting to the statement on the slide that said we’re going to have technological dominance globally – and in every area. “I don’t really know how that slide goes with those thoughts I just shared with you earlier.”

Instead of seeking alternative employment at the change of administrations, I decided to take a year off. I put all my stuff in storage and on Christmas Eve, I drove out of the Pentagon parking lot and headed West. I lived in friends’ basements and out of my car for about 10 months. Wherever I went, I talked to others in science and research, asking questions about things that had been posed to me as fact – like federal funding of science is good. I came out of that time with some of my beliefs intact, strengthened, but realizing that many ideas I had been taught as fact were actually beliefs. As a scientist, that was really important to me to be able to separate my beliefs, my “faith-based” initiatives, from the facts and understand where I was actually being objective. This led to a critical assessment about what was going on in the national R&D ecosystem, and I do certainly have a different point of view than I did 5 years ago.

Some of my findings made me emotionally uncomfortable. I’m very open-minded to being proven wrong, but not for the sake of theory, we need to implement real change. My view of the world is when you see something isn’t likely to work, then you should start generating new ideas. That’s what I’m trying to do now.

Looking Forward

Deb: What’s your greatest hope for the future?

Melissa: My greatest hope is that we will redefine national security through what we’re securing. It’s not about securing a big military, it’s not about securing dominance for the sake of dominance. It’s about securing the well-being of our people. If that’s our goal, we need to listen to the problems our population has and understand how those can be solved with all the resources we have, inside and outside the government. I think we’ve lost sight of this. My greatest hope is that we will demand some refocusing on securing the wellbeing of our citizens.

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Melissa challenges those that lead our federal government R&D to reset their mindset. Mapping out where government fits and adds the greatest value in the U.S. and global R&D ecosystems is the first step. There also needs to be a shedding of old biases and beliefs that are no longer useful for the future. Solving problems from the bottom up instead of strictly from the top down will require the government to adjust its view from being on the top of a pyramid to being a collaborator and facilitator amongst the ‘stacks of pancakes’ that exist in the R&D ecosystem. It will need to embrace chaos and competition to let innovation bloom by letting the broad portfolio of funders seed science, technology, and research. When enough innovations rise to the top, the federal government can do what it does better than anyone else – scale. And if necessary, at breakneck speed. 

Invest in people that are doing the research and science for our future. Ensure they have livable wages so they can focus on what they are good at which is advancements for all of our futures. And take a lesson from Melissa by challenging what has been taught, learned, and drilled into our thinking about the role of the federal government truly is for our national and global R&D.