Eric Schmidt’s profitable war with China

Eric Schmidt: Pentagon whisperer and anti-China AI hypemaster

Eric Schmidt says the U.S. is losing a battle against China for AI supremacy. Now the AI tech investor and former Google CEO has cultivated a cadre of Washington insiders to help urge government decision-makers to spend billions to procure AI software, bolster AI research, and build the country’s computer science talent pool.

But Schmidt’s anti-China mission could bolster his own commercial AI interests. He’s already invested in AI companies that scored federal contracts while he led government groups.

• Schmidt has taken part in investing more than $2 billion in AI-focused companies, according to data provided to Protocol from analyst firm CB Insights and presented in detail today, in Protocol, for the first time.
• Schmidt’s VC firm Innovation Endeavors has invested in military AI software provider Rebellion Defense and chemicals and materials AI company Citrine Informatics.
• While Schmidt led the National Security Commission on Artificial Intelligence, Rebellion was chosen to receive up to $950 million in contracts from the U.S. Air Force. Citrine Informatics scored Department of Energy contracts in 2015 and earlier this year amounting to $3.6 million.
• Schmidt sits on the board at AI and quantum computing company SandboxAQ, which recently acquired cryptographic security company Cryptosense; both are vendors working on a National Institute of Standards and Technology project.
• He also has financial ties to encryption AI company Duality Technologies, which was awarded contracts from the Defense Advanced Research Projects Agency while he chaired the NSCAI.

Now Schmidt is also looking to the Cold War, Nelson Rockefeller, and Henry Kissinger for inspiration.

• The think tank Schmidt bankrolls, Special Competitive Studies Project, is directly modeled on a 1950s project funded by the Rockefeller brothers and organized by Kissinger to increase U.S. investment in defense science and tech research.
• Ylli Bajraktari, who leads Schmidt’s SCSP and also sits on a White House AI committee, told me why Schmidt sees a China-themed version of the Rockefeller project as fitting: “Towards the end of the [NSCAI] commission, Eric was like, ‘Hey, Kissinger really liked that model because he thought it brought together a bipartisan focus on a competitor in the ’50s.’”

Schmidt has cultivated a large group of influential insiders to assist in disseminating his ideas in Washington.

• “When I hear people who know, like Eric, talking about the race with China on the technological side, we’d better get our act together,” former Secretary of State and frequent media commentator Condoleezza Rice said at a D.C. event held in September by SCSP.
• Schmidt’s tech talent nonprofit Schmidt Futures has served as a direct pipeline into the halls of government, including into the Defense Department’s new Chief Digital and Artificial Intelligence Office (CDAO), which oversees its adoption of AI and data analytics.
• Schmidt Futures served as a de facto headhunter, bringing Craig Martell to the CDAO chief role, according to a story Martell told at a recent AI industry event.

The first in a multipart Protocol series, Schmidt’s story is about more than just conflict of interest. It is an exploration of how one of the world’s wealthiest and most prominent private sector tech moguls has planted the seeds of urgent concern that the U.S. is losing a battle against China for AI supremacy, and helping lay the groundwork for an expanding government mission predicated on misconceptions and misaligned incentives.

• Stay tuned for more stories in Protocol this week analyzing the realities and misconceptions of the so-called AI race between the U.S. and China.

Read today’s full story here.

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Adobe has no equal

For decades Adobe has completely dominated the creative software industry. The company’s impressive community of designers, communications, developers, and artists have propelled the company to becoming a $14.6 billion giant with no clear rival.

One emerging competitor was Figma, the web-based product design startup, that Adobe acquired in September. Although Adobe paid an astronomical $20 billion for the startup, the company believed it had no choice because Figma was a serious competitive threat.

“We were hearing on some occasions that customers were curbing the amount of growth in Adobe licenses and funneling more of their budget towards Figma,” Mizuho analyst Gregg Moskowitz told me.

But once the Figma deal closes, Adobe will have no true competition aside from startup Canva, which isn’t used much by professional designers.

Although Adobe has a history of making these types of defensive acquisitions, the company is actually pretty good at M&A, industry analysts told me. And as chief product officer Scott Belsky pointed out, his startup Behance grew 30-fold since joining the software giant.

For Adobe’s next act, the company will be focused on integrating Figma and other acquisitions, accelerating collaboration between designers and developers, and advancing emerging technologies such as generative design.

Although Adobe has struggled with organic innovation in the past, the company has the cash position, talent, resources, and ambition to define the next generation of design. Adobe will just have to stay out of its own way.

Read the full story here.

Financial corner

Bright Machines raised $132 million for its manufacturing automation software.

HealthJoy raised $60 million for its HR benefits software.

Merge raised $55 million to help businesses build customer-facing integrations.

Resilia raised $35 million to build software for nonprofit organizations.

Around the enterprise

Despite the economic headwinds that freaked out the stock market last week following cloud earnings results, Gartner predicted Monday that cloud spending will jump 20.7% to $591.8 billion, which would be faster than spending grew from 2021 to 2022.

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