By Emeka Alozie, Defense Innovation Unit (DIU)
Few foresaw that offshoring American manufacturing to China would signal not only a shift in global economics, but a permanent transformation in modern warfare. Within today’s national security innovation ecosystem, the repercussions of that pivotal choice still reverberate. Startups offering breakthrough solutions often falter—not because their technology is flawed, but because bureaucratic risk aversion and opaque investment structures undermine their prospects before they even launch.
One such startup, developing advanced autonomy technology, cleared every technical milestone but crumbled during due diligence; its web of hidden, foreign-linked investors unraveled the business almost overnight. Another, with a tool urgently needed by the military, was stymied by byzantine procurement delays and brittle supply chains, forcing its founders to abandon defense entirely. These are not isolated misfortunes, but indicators of a broader systemic pattern.
National security programs have been imperiled by a single misdirected email exposing undisclosed foreign interests, university projects halted simply by students’ citizenship status, and researchers sidelined for international affiliations—even when their expertise could tip the balance between staying ahead or falling behind. Ironically, many of these sidelined experts ultimately find themselves at defense contractors, exposing deep inconsistencies in the system.
These are not abstract policy failures; they are daily consequences of a system defined by risk aversion—aversion not just to foreign ties, but to any form of collaboration or ambiguity, reinforcing a culture that defaults to caution. The optimism of globalization, once championed as the route to shared prosperity, has calcified into a world of chokepoints and control. Interdependence promised strength through openness, but instead bred vulnerabilities—as adversaries increasingly exploit those very levers against us.
The Snowden disclosures, revealing private backdoors into U.S. intelligence, awakened the world to a new kind of conflict. When the U.S. severed Huawei and ZTE from critical technologies, it stunned Beijing and sent a clear message: Everything, from the cloud to logistics software, is now dual-use. War today is waged through data flows, sanctions, supply chains, and semiconductor shortages as much as by traditional armies. The logic of globalization masked these weaknesses; recent shocks have made them plain.
The collapse of trust erodes frictionless trade, exposing a world where strategic value lies in the control of valves and nodes. For two decades, the U.S. manipulated these nodes—SWIFT, semiconductor tooling, cloud infrastructure—as tools of statecraft. But adversaries have since adopted—and adapted—this playbook. Control of the chokepoints is the new high ground; trade still flows, but the autonomy once presumed has been replaced by vulnerability.
America the Platform
Today, the front lines of democracy stretch across supply chains, energy grids, and cyberspace. The line between civilian life and defense has dissolved. As Secretary of Defense, Ash Carter recognized this imperative, establishing the Defense Innovation Unit to directly connect commercial technology with defense needs. In this era, dual-use is the rule—commercial innovation is national security.
Innovation now determines not merely market leadership but national survival. Shareholders, willingly or not, have a stake in global stability. The prosperity of democracies depends on the strategic flow of capital—where it is directed, how quickly it circulates, and what it builds. Unless investments favor resilience, democracies risk sliding into decline.
The COVID-19 pandemic exposed the fragility of global supply chains. Russia has weaponized gas and grain, while China’s rare earth restrictions are explicitly aimed at America’s defense industrial base, threatening vital programs like the F-35, Aegis radar, and Virginia-class submarines. These are not theoretical risks; they are deliberate acts of economic leverage.
Capital—not just armed forces or policies—increasingly determines national outcomes. Yet across the defense and technology landscape, slow procurement cycles and fragmented funding stifle true innovation. America’s industrial base remains anchored by outdated procurement, fragmented responsibility, and a lack of urgency—undermining its ability to respond rapidly or scale breakthroughs across the ecosystem.
Worse, the physical assets critical to national security—advanced fabs, battery plants, mineral refineries—are often relegated to the margins, considered niche or too risky compared to the allure of SaaS startups and consumer-facing platforms. University endowments and public pensions continue to underweight investments in the crucial infrastructure that sustains free societies. We venerate consumer technology, ignoring the mineral and industrial lifelines that make it possible. Without robust defense demand signals, crucial technologies languish.
America must recognize that it is not simply a government but a unique platform—a layered ecosystem of products, networks, talent, and capital markets unmatched in history. The U.S. possesses the world’s most liquid financial markets, deep reserves of intellectual and human capital, and unrivaled power to mobilize innovation. Yet, it lacks strategic intentionality—to align these resources in service of both economic and national security.
America’s strengths are broad: vast natural resources, universities at the cutting edge of research, global standards in chip design and cloud computing, and the “talent app store” of entrepreneurs, engineers, and innovators. These attributes are not just background features; they are the foundation of America’s ability to project power and shape global rules—so long as they are leveraged with vision and discipline.
This means mapping the national portfolio like a founder assessing product-market fit: identifying core strengths, controlling critical infrastructure, and deploying resources deliberately to achieve geopolitical objectives.
Capital as Statecraft
U.S. capital markets are the most dynamic risk engines in the world. As Jeff Bezos said, “We have the best risk-capital system in the world by far.” America pioneered high-yield debt, invented venture capital, and continues to spawn financial tools that reshape global finance. Its true strength lies in the synthesis of government, capital markets, and relentless entrepreneurial drive—a framework, as Mariana Mazzucato observed, that deliberately fuses public investment with private dynamism.
This formula has fueled multiple revolutions: ARPANET evolved into the internet; GPS began as military targeting and became commercial infrastructure; early investments in supercomputers seeded Silicon Valley’s rise. When the Department of Defense was the first customer for jets and supercomputers, it created not just defense solutions, but whole new industries.
This is America’s “risk loop”: audacious founders, risk-ready capital, and a public sector willing to be the initial customer. That loop remains the nation’s competitive moat—if it is reinforced by deliberate action, not nostalgia or bureaucracy. Innovation does not thrive by admiring prototypes or running endless pilot programs. It thrives by urgently scaling what works and investing in the critical nodes of capability and resilience.
Today, adversaries act with clarity and intent. China accelerates entire industries through subsidies and planning; Russia and Iran weaponize energy and biotechnology at scale. America, by contrast, too often clings to outdated playbooks, assuming that organic market forces alone will secure resilience. This is out of sync with present threats.
Yet markets are beginning to respond. In October 2025, JPMorgan Chase launched a $1.5 trillion Security and Resiliency Initiative—directing capital toward minerals, manufacturing, and dual-use infrastructure. Resilience is emerging as a core strategic and financial imperative for Wall Street. Private capital can move rapidly when incentives and clarity exist; Washington must keep pace.
The solution is not to reject markets, but to modernize public procurement and finance. Early-stage defense innovation demands long-term purchase commitments and finance models that draw in pensions and hedge funds, not just Silicon Valley. Underused instruments, such as Prize Authorities, could unlock partnerships, seeding entire ecosystems of dual-use companies and testbeds that form the farms of innovation.
Clear scoreboards, transparent governance, and rigorous investment frameworks will attract—not repel—private capital to critical sectors. The dichotomy of “resilience versus profit” is false. Strategic sectors deliver a double bottom line: safeguarding democratic stability and providing returns. The question is not whether America can afford such investments, but whether it can survive failing to make them.
America stands at a crossroads. Either it seizes its identity as the world’s indispensable platform—coordinating capital, statecraft, and innovation to fortify the arsenal of democracy—or it risks ceding that future to adversaries adept at weaponizing interdependence. The stakes could not be higher: to build and defend the future, or to surrender it to others who would wield markets as a tool of coercion, not freedom.
