How to turn around America’s tech-industrial decline, now

Danny Crichton:
Hey, it's Danny Crichton and this is the Riskgaming Podcast by Lux Capital. A lot of our friends this week published a very important publication called The Techno-Industrial Policy Playbook. It's a playbook of 27 proposals covering everything from industrial policy and national security to frontier science and technology that asks a major policy question. How can America recapture the glory of its manufacturing and productive years post-war as we enter into a tight competition with China in the 21st century?
Joining me today on the show is Kelvin Yu, the editor of The Playbook. Kelvin is a fellow at the Foundation for American Innovation, was an investor at In-Q-Tel, two-time founding engineer and was an AI fellow on Capitol Hill as well. And the two of us are going to talk about the 27 proposals, how this playbook came together over the last couple of weeks, why it's so important to focus on these issues right now and what the prognosis is for America going forward. Let's dive in.
Kelvin, welcome to the show.

Kelvin Yu:
It's great to be here. Thanks for having me.

Danny Crichton:
So you just launched what has to be one of the most comprehensive policy packages I've seen in quite some time. The Techno-Industrial Policy Playbook, which by my account has more than two dozen proposals, essays, you have your own foreword, and then you had these messages of urgency of which I was one of the... I contributed so much. I contributed almost two full sentences to the production of your report.

Kelvin Yu:
The two most important sentences.

Danny Crichton:
The two most important sentences. Of course. But you have had an immense amount of impact here. You, I believe delivered copies to 535 different offices, I'm guessing also across the executive branch as well. What was the genesis of this whole idea? We focus on this topic obviously, but why this medium? Why this approach with the handbook?

Kelvin Yu:
This was a project that really came together through an entire village of amazing institutions, the Institute for Progress, Foundation for American Innovation, American Compass, and the New American Industrial Alliance. These are four of the institutions that I would say have been on the forefront of thinking about really the question of techno-industrial decline and particularly the fact that the techno-industrial decline has been a policy choice of this country. And that's really what the goal of this playbook is to show, is that actually all these challenges we're facing today, whether it's lack of shipbuilding or lack of critical minerals production or lack of advanced ships production, these are all conscious decisions that we made as a country to allow. But the good news is that this gives us the ability to reverse as well.
We are declining across the board. On a relative basis, that can be measured through numbers like trade. We had $60 billion in advanced technology exports in 1992 that fall into a $191 billion deficit by 2020. We can look at industrial output. Famously, China builds 230x more ship tonnages than the entire US combined. A Single shipyard in Jiangnan surpasses in the entire United States. We can decline in absolute terms compared to our own past. Cost six to 12 times more to construct a nuclear plant in the US today than the 1960s. We build 90% fewer annual transmission lines than 2013. The other aspect here is that policy really matters.
These are not simply problems or solutions that can be solved purely outside the walls of government. The example people in this space love to cite is the Apollo missions for just how much government capacity can really shape the entire country. We sent 400,000 people, 20,000 different organizations and 4.4% of the entire federal budget to propel the Apollo missions. We made conscious, on the flip side, we made the conscious policy decision to allow the defense industrial base to consolidate an atrophy after the DOD had their official last breakfast policy. So these are all circumstances of choice. And as HW Bush's economic policy advisor once said, "Computer chips, potato chips, what's the difference?" We think there's a big difference and these things are able to be reversed through smart policymaking.

Danny Crichton:
Well, I want to talk about the history here a little bit, because I know this is predominantly a policy proposal and we'll talk about the policies in a bit, but one of the terms you used in your foreword that I thought was really interesting, and it's something that I am really obsessed about, was this term fetishization of financialization. A little bit of a mouthful, but this obsession with financialization that began maybe in the seventies, really accelerated in the eighties and has taken over the US economy in the nineties and 2000s. Why so much focus on financialization? And do you see a response back to that today in 2025?

Kelvin Yu:
In some sense, these dynamics were always overdetermined. You had the Chicago School, Milton Freeman School of Economics that said point of a business is to produce profits at all costs. You have a Washington consensus that liberalism had become dominant, and then you just had the rise of the professional managerial class whose sole focus was to grow profits and to reduce costs. And so you see things like Boeing reducing its ability to produce parts in house and shift over to a contract manufacturing model. You see things like the last breakfast policy decision by the DOD to let the defense industry consolidate. There's all these geopolitical drivers around the false belief that geopolitical threats were no longer abound for the United States. There's all these ways in which it was overdetermined, and as we've seen with Ukraine and October 7th, COVID, actually owning the means of production does matter. Supply chains do matter not only for domestic prosperity but also for national security.

Danny Crichton:
A lot of this is structured particularly in the forward, obviously, inside of the complex of the US-China race around manufacturing, means of production, to use your term. And you've described that China has a sense of purpose, a sense of mission, a sense of seriousness around these topics. And then in your own quote, you say, "For too long, many in Washington have lacked the same degree of seriousness." Why is that?

Kelvin Yu:
If you just look at the history of how Chinese political elites have related to technology, in our American affairs piece, we trace intellectual genealogy of this rise of China's obsession with technology. And what we argue is that in the late Qing Dynasty, there was already a sense amongst Chinese elites that technology did matter. To quote one Qing dynasty reformer, "Technology is simply the tools of the barbarians. We must use the tools, but we must not become like the barbarians," that kind of philosophy, we would simply copy Western technology through things like copying and translating scientific documents and importing guns without any sort of systemic reform really completely failed in the 1896 war with Japan where the Chinese navy got completely destroyed, it was an extremely embarrassing loss and the Qing dynasty collapsed.
And so then the next generation of reformers that came along recognized that it was not only western technology that needed to be copied, but also the systems, political systems, the legal systems, the economic systems that produced such technological advances.
And then you have this period where the Chinese Communist Party and the Kuomintang fight these things out. And there's a weird Marxist synthesis with these ideas about technological progress that really took shape during the Deng regime that led to where we are today, where Chinese elites see the world as a story that can be told through the progression of technology through various stages. And they regularly publish internal think tank pieces to the top CCP brass making public pronouncements that we're in the midst of a new technological revolution, that we must seize this opportunity, that manufacturing is the decisive factor for national strength, that technology is the foundation for world power and that this is all in service of achieving the greater rejuvenation of the Chinese nation. And in the US, think it's a function of we've just been winning too much and lost a sense of the urgency.

Danny Crichton:
Well, it's interesting because when you think about the history on the Chinese side, I mean it makes sense to kind of go back and see these patterns to double down on things that, lessons learned. I always think it's fascinating that obviously the Declaration of Independence, 1776, Adam Smith, the Wealth of Nations also 1776, this intertwining of science, technology, capitalism that sort of became the foundation for America. You see this with free trade, you see this with open markets, freedom of inquiry among scientists, those enlightenment values that became the bedrock for American prosperity and success over the last 250 years as we go up to our big anniversary in a little bit here. But then we seem to have lost this and it is actually quite confusing to me over the last 20, 30 years. I can't really identify what went wrong. I agree with you, James Burnham, managerial elites and managerial revolution.
There's this abstraction. You can all it the Excel class if, you will. That said, Boeing may be the most amazing example of this. When McDonnell Douglas executives sort of took over, Boeing engineers were pushed out and finance jockeys were brought in. And so in many of these cases there's an obvious answer, but collectively as a country, I have never grasped... In the totality, I look at your playbook here and the totality of the number of things we have to do. And it's sort of like, well, how did all this happen all at the same time, right? Because you'd expect with, it's such a legacy and lineage that worked for so well for 200 plus years, you'd expect something to have worked. A divergence between different industries. Okay, that one got waylaid by some terrible abstract idea, but the rest all survived. That's just not the case. It seems pretty much like it's pretty bad in almost all contexts. And so I am just amazed that we evaded and lost the edge in all of it all at once.

Kelvin Yu:
Yeah, we are doing well in some things. We're doing quite well in software in AI and attracting the top talent in the world to come here and-

Danny Crichton:
And potato chips.

Kelvin Yu:
Producing potato chips. But I think part of these large macro trends has been a shift away from macroeconomics and macroeconomics where the kind of ways in which DC elites conceived of things like technological progress and economic progress became framed through the lens of what could be reduced down to things like GDP growth, where you say the history of technological progress in the United States, it's like how do you quantify the impact of DARPA, right? How do you quantify the impact of a Lick Lighter or the DARPA program that funded the internet or the GPS or the groundwork for modern computing? These things are really hard to actually be credit for because they're so ineligible. It's like policymaking through empowering individuals. And as we've seen this kind of growth of bureaucracy growth, this managerial class in the private and public sectors, you've had a shift towards the ways by which we measure success became over quantified.

Danny Crichton:
And I want to address one more thing before we went into the policy proposals. You built this playbook. 27 or so proposals written by domain experts. And one of the things I thought was really interesting, I mean, you worked in Capitol Hill and you've collaborated particularly with FAI, the Foundation for American Innovation with IFP Institute for Progress. You have two others, but what you've done is you've created these decentralized networks of highly skilled, I would say, internet literate policy fellows who are doing the hard work of being on the front lines in a lot of these technical areas. Do you feel like your experiences shaped the way you'd designed this playbook?

Kelvin Yu:
Absolutely. Coming from Silicon Valley before moving to DC, the Valley tends have over bias towards shipping fast and then building things. And I think the advantage of at least having that epicenter prior going to DC was really important to gather firsthand evidence and stories from people who are actually on the ground working in these spaces and could see the real problems that stakeholders faced and not just what sounded nice in a policy memo that didn't actually track to the ground truth. And so what I'm really proud of with this playbook is the degree to which we brought in domain experts that have been former founders, former experienced policymakers, former engineers who have studied these problems deeply, not just academically but in the world, and also just the synthesis of the intellectual umbrellas within this whole project. Most of these goals we can all agree are good goals, and then you might disagree with some of the tactics. We do make a strong case for, here's the overlapping set of ends and means by which this broad coalition of parties can get together and enact.

Danny Crichton:
And when I look at this, to your point about the diversity of the talent and the politics that you've brought together around the table here, 27 proposals, walking through them, very detailed, focused on either specific changes to laws that Congress could pass, maybe an executive order to here, more often rulemaking at the department levels and the agencies, so changes to the Department of Labor, around NEPA and EPA, et cetera, et cetera. But one of the interesting things I thought was fascinating is you had a much more decentralized bottoms-up approach to changing the current environment, right? So going to all these different agencies, going through Congress, through a committee passing smaller pieces of legislation, you didn't have that kind of bold piece that always starts with, "Constitutional reform," or "Congress is a more abundant institution and needs to be completely rehauled. Do you think that best way forward is sort of those a thousand bites off the cookie, so to speak, and all those aggregate up. And you did not do this. I'm curious about the strategy here.
Those of us who have the grand strategy, the grand plan, the grand vision that we look at other countries and we're like, "God, there's a ministry of strategy who comes down, writes out the book, people follow it. It works really, really well. How did you design that from that bottoms-up perspective as opposed to the top-down?

Kelvin Yu:
First, there is a recognition that the grand strategic thinking, the high-level ideology is incredibly important work. And most of the people who worked on this wouldn't have a arrived at these issues and spent some time dedicating their lives to working on it. Had it not been for people like Patrick Holocern or Tyler Cohen, leading thinkers that shaped the intellectual discourse to get people indexed on these issues as key drivers of American prosperity. But where we came in was we felt like a lot of the intellectual work had been done. At least the vibes were positive enough on all these issues, especially with the current administration and the current makeup of Congress you have, this combination of a very generational transfer of leadership, this ongoing bipartisan realignment on things like industrial policy, you have an administration that's simultaneously very pro-business and pro-using the tools of state capacity to affect change.
Where we felt like the ingredients for doing a lot of these things were there, but what was missing were concrete ideas. The goal here was simultaneously to inject very concretely, how do we get more advanced semiconductors or build more hypersonic missile testing infrastructure? Let's get these very concrete ideas, elevate their saliency through the platform of these institutions, and then also elevate these trusted voices. There's actually a face behind all these issues that can be called on by policymakers who are interested in working on some of these pieces of legislation.

Danny Crichton:
Let's dive into the playbook itself. So you divided these 27 proposals into three categories, starting with industrial power, going into national security and finalizing with frontier science and technology, Maybe let's just start with industrial power, 11 policies and proposals here. How would you sort of describe holistically what you were looking for in this section?

Kelvin Yu:
The industrial power section really focuses on how do we unlock more of the ability to build or power the critical industries that America needs for broad-based economic growth and also military security? We touch on everything from reforming to unleash American energy, reforming a very specific manufacturing program within NIST called the Advanced Manufacturing Institutes, to promote more effective translation between manufacturing research to commercialization to advancing nuclear power through the Department of Energy's loan programs office.
The broad gist is what are the levers by which we can use legislative reform, subsidies or certain alterations to existing tax incentives or grant incentives and then bureaucratic unlock to advance American industrial power? And that's the same lines by which we also went after national security and frontier innovation. It was this thinking of, what are just the creative ways in which we can use all the tools of state capacity? Not just silver bullets like tariffs or subsidies, but all the different levers to advance these issues. And

Danny Crichton:
I thought what was interesting, exactly on this point on particularly, on particularly the right, I think there's a very limited set of tools that was in the typical discourse in the Washington Consensus, right? There's a way you had to go about doing this. What I thought was interesting in yours is you have from a small, medium, big, you've used a much larger tool set to potentially affect it. So I look at a piece like reforming the advanced manufacturing Institutes first did not know these existed. Maybe I'm thick and not focused enough on the frontiers of NIST and all the interesting stuff that's going on over there. So I apologize to the six people who are still employed there. But nonetheless, 17 US Manufacturing institutes... And I thought this was a good example of here's this organization, it's a body, there's people who are focused on it, you have existing staffs.
And the message to me was not massive disruption, destroy all this. It was really, look, these things were great, but they were also written years ago. The world has changed. So in the piece it talks about, look, this was designed as single technology. You would match an institute to a technology. Today people need integrated, fully unified, basically packages that you can insert into a manufacturing plant or whatever. And so you don't have to blow up the entire system. It's really a change in mentality, change in the rules, change in the law, change in the construction of these agencies to say, "Look, don't just focus on one technology. Think holistically around how do we solve a problem which would include multiple technologies as a group."
And to me, that's a very constructive way to go about solving some of these challenges while at the same time having fiscal benefits, whether those are tax credits, cuts or a mix of both. You have a couple of examples where if you look into nuclear energy, you're both trying to solve this by improving NEPA, the National Environmental Protection Act, as well as through new financing programs through the loan program office at the Department of Energy. And so I like this pragmatism of bringing all these different tools together to solve these kind of challenging problems, but at a very detailed layer as opposed to saying, "Change it all," and make it happen really fast.

Kelvin Yu:
The classic think tank op-ed structures say a lot of things and thereby saying nothing at all. And so the goal here was to-

Danny Crichton:
I feel seen.

Kelvin Yu:
Except you, Danny.

Danny Crichton:
Except me. The one man.

Kelvin Yu:
You're doing great, great strategic work that we need. When I was working in Congress on the House Science Committee, I can't tell you the number of times people asked for meetings and would come to us and say, "Hey, you should fix X." And we would say, "Okay, how do you want us to do that?" And they would have no idea. Or they would come in and present a paper they wrote and we're like, "Okay, if you were giving us one to three recommendations, what would it be?" And they would've no idea. So we really wanted this to be something where if you hand it to a busy staffer on the Hill or a busy office director at some executive branch agency, they would be able to in 30 seconds, skim it, understand the high level problem, and then go straight to the recommendation sections and see the very concrete next steps.

Danny Crichton:
I think you've done a couple of things. One is I always do love the op-ed that is like, we shall solve through magical means this problem in some magical way that both protects the budget but also invests into the future. One of these impossible tension points that you lead in the language itself. But more importantly, I think what you've done, which I think is really interesting, is you've managed to highlight individual changes that these experts know about while connecting them into the patterns of Congress, into these executive branch agencies. Because to me, the biggest challenge for most folks who actually know what the problems are, what is the gap? The gap is you have folks who are think tanks who know and understand Washington, they know the language they need to use to reach certain senators, certain congressmen, these certain agency directors, whatever the case may be, but they don't necessarily know the material.
On the other hand, you have folks who are working in these industries who are in it every single day and know exactly the fixes that need to be taking place. They don't know how to communicate and they don't know how to get into the policy process. They don't know who to talk to, they don't know how to get into the offices. And so there's this mistranslation between the two. And I think this playbook in particular, along with your co-partners in crime here, building it together, have done a really good job of trying to bridge the two together.

Kelvin Yu:
I appreciate that, man. And yeah, that was certainly the goal.

Danny Crichton:
So let's move on to, so two more sections. So that was the industrial power section. Let's move to national security. I think when you framed your foreword, obviously it started with China for the first couple of paragraphs. That's the basis, I think for a lot of your work personally, along with this playbook and the environment and context we find ourselves in. How do you direct on national security? So you cover everything from naval shipbuilding, the medical industrial base to hypersonics. And we're recording this literally a couple hours before we're going to publish it, but we just had a successful announcement, I guess it happened a couple months ago, an announcement from the Pentagon on hypersonics. So quite relevant in the course of news events that are not on the Indian subcontinent. How do you sort of structure the discussion around the proposals you had in the national security section?

Kelvin Yu:
We take a pretty broad view of national security. It doesn't encompass just things like either military technologies, although we certainly have proposals in here for things like developing better testing infrastructure for hypersonic missiles, but it's also process level things that bottleneck our ability to actually see these advanced technologies on the battlefield. So we have proposals on streamlining the way in which defense procurement is done in this country, which the current process can only be described as a Sahara Desert legalese. And we also look at things outside of just immediate defense context, things like reviving the ability to produce critical medical supplies, like you mentioned. It's a pretty wide swath of things in which we would say without these capabilities, you actually can't claim that the United States is secure from existential biological threats, military threats and the such.

Danny Crichton:
Absolutely. And I'll just point out, obviously we all have our favorites, and I'm not going to ask yours because that's obnoxious of the editor, but I really like Jeremy Neufeld's Launching Project Paperclip 2.0, a classic that brought some of those smartest minds to the United States. Redoubling down on that strategy I think is super interesting and he has a lot of great proposals on that. I want to just go to our final section here, Frontier Science Technology. A, proposals covering everything from foreign data flows from AI from Tim Huang to this idea, I think fairly de novo of establishing special compute zones. To me, this was a little bit more of the, I guess I would call it innovative side, right? There were a lot of fresher ideas, and I don't know if that's just from the tech industry or the kinds of folks you're pulling from, but why don't we talk about the Frontier science and technology proposals you have in the playbook?

Kelvin Yu:
The way we thought about playbook design overall. We wanted a lot of proposals where there were clear historical case studies to point to and show things like Project Paperclip to point to as successful historical precedents. But we also wanted to include one to two more moonshot type ideas, like Caleb's idea for launching xLabs, where we use prizes to really change the way we fund the science in this country. There's a strong emphasis on both taking a tried and true method to this playbook, but also we're living in an extraordinary time. We've never had a geopolitical adversary as powerful both militarily and economically as China. And that's coincided with a period in which we have seen both institutional atrophy and also just hard power and industrial atrophy across the board, including some of these more outlandish ideas or ways that at least we want to get the ball rolling on reaching outside the policy toolbox that they're accustomed to.

Danny Crichton:
So that covers all the proposals, and obviously you should read them. They're all at Rebuilding.tech, which is a Fundo name, but Rebuilding.tech. So you've launched us yesterday, we're publishing the episode, so 48 hours ago you've distributed them across Capitol Hill and around DC. What happens next to get these from idea to execution?

Kelvin Yu:
We're going to be hosting various events in DC throughout the coming months where we'll have our contributors and the folks at each of these three think tanks and policymakers discuss winning these ideas in more depth. If you are a policymaker listening to this or have some influence over policy discussions, we invite you to reach out to any of the four organizations involved with the playbook, but also to each of these individual authors. And I want to stress something I should have done earlier, which is that the three categorizations of industrial power, national square and Frontier Innovation, it's a bit misleading in that we're not trying to say these are three distinct categories, but more that we take the view that you actually can't have one without the others.
You can't have national security if you're not a nation that is also progressing at the frontiers of science technology. You can't have national security if you don't have a strong industrial base and vice versa for all these other things. So we would just encourage that whenever people think about these issues, they think of it through this all-encompassing lens of overarching system of these different pillars that need to be addressed in addition to the overarching system of all these different levers of state capacity that can be utilized to advance these problems

Danny Crichton:
Well, and you put that in your foreword, that policymakers must pursue in all the above strategy. And again, this is, to me, the pragmatism of a lot of these proposals, which is to say, look, there are a lot of levers. DC, the government, state, local, federal, are very influential, very impactful. There's a lot of institutions, ones we haven't heard of, or at least ones that I've never heard of, and all of them can play a role in making these issues faster, better for the United States long term. But with that, for everyone listening, definitely do read at rebuilding.tech. And otherwise, Kelvin Yu, thank you so much for joining us.

Kelvin Yu:
Thank you for having me, sir.

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