How “Second Source” Requirements Super-Charge New Climate Change Initiatives

I just finished reading Bill Gates’ excellent book titled How to Avoid a Climate Disaster. It is filled with logical, nonpartisan explanations about the real need for both urgent action to reduce climate change today and to prepare for the future with concrete climate change mitigation actions. However, one thread he argues several times is that government policy can be used to force the sharing of ideas and technological breakthroughs as it was with computer chips during their formative years (1960’s-1980’s).

Here is the problem, being born in 1967, I was alive an thinking a-lot about tech in the 1970’s and 1980’s and I don’t recall any notable government programs like President Biden’s 2022:

• CHIPS (Creating Helpful Incentives to Produce Semiconductors) & Science act
• RAMP-C (Rapid Assured Microelectronics Prototypes)

In these programs the Biden Government is providing bill more than $50 Billion of direct investment into computer chip makers like Intel and Qualcomm.

I don’t even recall a Government body coordinating computer chip research and development like Biden’s newly formed $5 billion National Semiconductor Technology Center (NSTC).

So I set out do discover what Bill Gates was referring to and after some extensive research this is what I found.

Governments around the world have always wanted the next generation of computer chips to help them fulfill military and processing (i.e. census, taxes, medical records…) demands, but they guided the development of new chips mostly by:

1. Bring The Market: Having a waiting client like the US Department of Defense was in the 1950’s and 1960’s waiting to buy all the chips a company can make, provides the stable market that businesses need to new plan and build new factories (fabs) with unproven technology
2. Internal Innovation: creating government departments that have the primary goal of developing new technology that will very likely have several very expensive failure iterations before a success is found
3. Education Citizens: governments in the 1960’s and 1970’s were keen to see universities and colleges pump out thousands or bright, innovative, skilled engineers to support the planning of new fab’s and the development of new semiconductor advancements.

What we categorized as Internal Innovation above, definitely did provide modest grants to help private sector firms develop new chip fabricating techniques and they did tolerate some failures knowing that big rewards (leaps in technology), requires big risks.

Most notable of these government sub-departments is DARPA, The Defense Advanced Research Projects Agency. It was and still is a research and development agency within the United States Department of Defense. Its mission is to develop emerging technologies for military use. Originally known as the Advanced Research Projects Agency (ARPA), DARPA was established in 1958 in response to the Soviet launch of Sputnik 1. By collaborating with academia, industry, and government partners, DARPA pushes the boundaries of technology and science, often beyond immediate military requirements. Some of its notable innovations include weather satellites, GPS, drones, stealth technology, voice interfaces, personal computers, and the internet.

To accomplish its goals DARPA supported the private sector with about $2 billion in mostly high-risk / high-reward research dollars in 2023 (out of their total budget of $3.5 billion). Because DARPA is necessarily a secretive agency, exact numbers for grant dollars are not known but we know, it was a fraction of those 2023 numbers in 1960’s and 1970’s.

So if goverment procurement (in primarily military spending) was the primary driver of government intervention in the semiconductor industries formative years, is it safe to say that the Biden Government’s CHIPS act is by far the most important government contributor to the chip industry in history? We don’t think so.

I remember meeting and then formally interviewing the inventor of the Personal Computer, Chuck Peddle, for the first time in 2003 at the worlds largest tradeshow, COMDEX in Las Vegas. If this is the first time you are hearing Chuck Peddle’s name, you are not alone. Like most great inventions, there are several people who can claim some notable part of the innovation, but Chuck stands out as the true father of the PC. For full details read THIS, but the simplfied version if that Chuck:

1. was hired by Motorola to complete the enginering on what is arguably the first real CPU, the Motorola 6800, which was replace with the Motorola 68000
2. became the lead engineer at MOS Technologies, where he cloned the 6800 into a $25 CPU named the Commodore 6502 that was in the vast majority of early home personal computers, including the Apple II
3. invented, demonstrated, and got into production the worlds first PC, the Commodore PET, months before the Apple II (which was using his 6502 chip!) and the Radio Shack TRS80 home computer

The real point is that Chuck lived through the computer chip development of the 1950’s and 1960’s and told me about the requirement for a “second source” for all things tech.

Second source requirements, means that after a company invents something, they are required to share it with at least one other company or the US Government will not buy it. The US Department of Defence, for example, did not want to get into a situation in which they developed a new missle that could have production shut down because one company had problems shipping parts (i.e. labor strike, factory problems, …).

The second source requirement was, according to Chuck, the biggest driver of shared innovation in the the tech world’s early days.

If the Government is to help solve today’s climate problems, it should also require technology transfer through perhaps through second source requirements for its own procurement. This seems to us to be the lowest cost highest return process that a government can enforce invite to a long way to reducing climate change.