On Thursday, January 15, 2015, Northrop Grumman Chairman, Chief Executive Officer and President Wes Bush addressed the Greater Washington Economic Conference in Tysons Corner, Virginia. Below are his remarks.


Optimism, Innovation and Partnerships During Uncertain Times

As 2015 commences, we see tremendous changes in many areas relevant to the economic future of this region. However, uncertainty is still the name of the game.

On one hand, the party now controlling congress reflects the nation’s support of a strong national defense. On the other hand, that same party includes a large component of budget hawks known for their support of continued fiscal austerity.

On one hand we see signs that our sluggish recovery has turned the corner and that better times lie before us. On the other hand, ours is a global economy and many economists foretell challenging economic days ahead for Europe and China.

On one hand, the defense department has called for more high technology. On the other hand, its R&D funding as a fraction of GDP is at historic lows.

On one hand, our government has declared a strategic repositioning toward Asia and the Western Pacific. On the other hand, many of the same terrorist threats that some had considered subdued in the Middle East and in Afghanistan are growing once again.

As is Russian hegemony, I might add.

And interest rates are yet another study in uncertainty. Just this week we broke through the all-time low in yield on the 30 Year U.S. Treasuries.

Clearly, many of these issues are outside the scope of this conference. But they do provide an important context for a discussion of our region’s economic future.

I will say at the outset: Despite this backdrop of uncertainty, I am optimistic about our future – economic, national, and regional.

I am optimistic because we as a nation possess several key assets in greater abundance than any other nation:

  • An innovative spirit that leverages what I believe continues to be the best higher education system in the world;
  • The property rights that incentivize innovative endeavors;
  • The rule of law that makes possible those property rights; and
  • Capital markets that support our innovative culture.

Here’s a current example of the impact of innovation: It is now possible to purchase a gallon of gasoline for less than two dollars. That is quite a departure from the $3 and $4 per gallon that many of us presumed was here to stay.

Energy analysts credit the fracking revolution with contributing to this recent drop in energy costs. That technology was the invention of private citizens who had the technical expertise and vision to innovate it.

I am not saying that American innovators are necessarily smarter than those of other nations. But I do believe they are more incentivized.

Those same energy analysts also point out the unlikelihood of a fracking revolution in Europe. Here, this technology revolution has found success almost exclusively on private lands. In Europe, that would be highly unlikely because the notion of private mineral rights is virtually unknown.

In addition, many other countries might produce superb engineers, but a weak or unreliable rule of law makes it difficult for the innovator to realize a gain from the investment he makes in his innovation.

Innovators in other countries are too often unable to realize a reward for the risks they take or the efforts they make.

But in the U.S., we enjoy a perfect storm: Innovators with the incentive to work their magic, supported by great research institutions and vibrant capital markets that provide innovators the confidence that they will be rewarded if their innovations succeed.

Now, I’m not here to talk about property rights or the rule of law. That is for a different day, a different conference, and frankly, a different speaker.

I simply invoke the fracking revolution as validation of something many have been saying for years; that America’s future – our future economy, our future security, our future standard of living and our way of life – rests on a foundation of technology and innovation.

Technology and innovation have been important foundations of our nation for many years. They were instrumental in our success in the Cold War; they are generating astonishing advances in biomedical and life sciences; and their importance to our future is beyond dispute.

This technological future has huge implications for this region. The company I lead is a case in point.

A few years ago, Northrop Grumman moved its corporate offices from Los Angeles, where we had been headquartered since the company’s founding in the late thirties. We chose the Washington DC region for our new home.

There were several reasons:

  • Proximity to our primary customer, but also;
  • State and local governments that understood the needs of business and that had a clear strategy to develop and attract businesses, companies and industries;
  • A reasonable tax structure and regulatory frameworks. This is a relative statement, not absolute;
  • Training programs designed to spur the growth of both small and large businesses;
  • Quality K-12 schools;
  • Quality research universities;
  • A high-tech industrial base;
  • Good roads, health care systems, airports, mass transit, etc.; and
  • An excellent cultural infrastructure to attract and keep a good workforce: The arts; sports teams; music; museums; entertainment, restaurants and the like.

We chose the right place here in Virginia. Our company has prospered and our employees have become integral parts of their communities.

Other technology companies are located in our region for many of the same reasons. The relationship between the regional technology community and the state governments is symbiotic.

But this symbiotic relationship must be sustained. It cannot be taken for granted because any advantage can be squandered through neglect.

The best way to ensure the advantages of a strong and growing community of high tech companies is through partnerships.

Real partnerships – the kind that are sometimes difficult and complicated. The kind that require commitment at all levels.

This conference represents what we need to be doing.

These partnerships have to be government-to-government; industry-to-industry; industry to government. And both government and industry must maintain strong relationships with the great research universities that abound in this area.

And because the foundation of technological superiority is intellectual capital, the partnership with educational institutions is among the most important.

The goal of that partnership must be the creation and delivery of world-class intellectual capital able to drive technological superiority.

But the old patterns and paradigms are no longer sufficient. Industry’s role in that partnership has changed.

Northrop Grumman, and other technology companies, are partnering with colleges and universities in very innovative ways. We are establishing relationships with universities and colleges in this region that go to the heart of developing the talent we need to build our future.

Those partnerships seek to recruit and retain more of our top students into the science, technology, engineering and mathematics fields, starting with early education and extending through college.

And they support the innovative research work being done in partnership with industry.

I would encourage all the business leaders in our community to re-examine their partnerships with higher-education to assess how business can be more proactive and engaged. I know our university leaders are eager to enable this greater engagement.

These partnerships – industry, government, and academia – will be key to leveraging the numerous drivers of our regional economy.

The Department of Defense recently called for more spending on research and development to address security threats around the globe.

This will require that we drive more innovation and leverage a breadth of technologies from across U.S. industry to enhance our national security edge.

And our region is well positioned to play a key role.

This new focus on reviving R&D in defense could mean tremendous opportunity for many regional companies – including some that might never have considered defense work before.

And it would certainly place an even higher premium on the kinds of partnerships I’m talking about.

Our technological superiority is the underpinning of our economy – both national and regional. And innovation is what drives it.

For generations we have led the world in technology, built on our investment in technological leadership. But as with any kind of investment, past performance is no guarantee of future success.

The "perfect storm" of innovation, great education, property rights, the rule of law and strong capital markets can be squandered like any other advantage.

Our foremost place in the world is not ours by tenure or birthright. It must constantly be cultivated, worked at, and argued for.

Some commentators have spoken of America’s national decline. I absolutely reject this. As I said, I’m optimistic about our future.

First, because national decline is a choice not a fate.

And second, because we are in the enviable position of not having to invent or create any new advantages. We have but to maintain and polish the advantages that are already ours.

We are fortunate to be based here in the Washington DC region. I look forward to continuing to work with our industry, government and academic leadership to build more regional partnerships.

The impact of those partnerships will only intensify – and if we do it right – drive tremendous growth for our region.

I look forward to witnessing the amazing results those partnerships will produce – results that will further our region’s economic success and its contributions to our national and economic security.

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