The Mission-Focused City
This is the first of a series of commentaries that will connect regional policymakers and economic leaders to the emerging defense innovation community.
“The Mission-Focused City” will guide readers in connecting research institutions, laboratories, communities of entrepreneurship, new ventures, corporate employers, and capital investors to recent U.S. Department of Defense efforts to bridge the gap between commercial innovation and national security needs.
This is a newsletter for those supporting American strength through regional economic strength. While the term “American strength” can be open to interpretation, I see it in building domestic and resilient supply chains, collectively asserting American technological leadership, and supporting workers to find careers that provide meaning and serve a purpose greater than oneself. I fundamentally believe that progress flows from stronger economies and, if history is a guide, stronger regional economies are those that serve American might. Put simply, regional economic strength has a way of serving American strength.
Let me add clarity: I see American strength in producing technologies and tangible solutions to challenges confronting the U.S. military. This connectivity between local technology development and national security lies at the core of what entrepreneur and Stanford professor Steve Blank called “The Secret History of Silicon Valley.” I am convinced that those who advocate for progress need to pivot energy, focus, and resources toward building economies that support American strength, no matter who sits in the White House.
In no place is this need to pivot clearer than in Chicago, my home.
Whereas once Chicago’s regional economy thrived in manufacturing, producing goods that built American infrastructure and military strength, flawed economics and naïve assumptions about global markets led American policymakers from both sides of the aisle to facilitate deindustrialization, and one Chicago manufacturing plant after another closed. The human impact was severe.
As manufacturing jobs were sent overseas, Chicago, with reason, pivoted our regional economy toward professional services and the “creative class.” I believe this pivot laid a floor under Chicago that has supported our regional economy for three decades. But that floor will soon crater.
I cannot help but see stark parallels between what automation did to manufacturing and what it could soon do to professional services. ChatGPT was powered by 20 billion parameters at its introduction on November 30, 2022. Just two years later, industry-available AI platforms are now exponentially more powerful, reaching nearly a half-trillion parameters. The advancement of AI will only accelerate from here. For Chicago, the rapid integration of AI into our services-based regional economy will only compound existing challenges.
2025 will be a harrowing year for Chicagoans. We now confront the real possibility of our city and our public schools entering insolvency in the very near future. Our public debts could be manageable with an expanding economic base to generate more tax revenue. Instead, the opposite is happening: more people and businesses are leaving Chicago, and the momentum is building toward a downward spiral.
While Chicago’s public debt crisis is unique among American cities, our economic challenges are not. Cities across the United States, including but not limited to cities that have thrived and flourished in the professional-services-based economy, now face an extraordinarily uncertain future.
This publication is my attempt to provide clarity during this time of economic change, using Chicago as an example of potential regional activity that could be replicated by economic leaders in other regions. I first set national security challenges as a central focus, then chart paths toward updating regional economies to meet the moment and export value in the rapidly evolving defense industry.
Responding to federal industrial policies
I believe the outgoing Biden Administration has done extraordinary work to redefine the American innovation model, disregarding free market absolutism and expanding programs to support research and development and bridge financing gaps, and I suspect the Trump Administration will see wisdom in continuing industrial policies set in motion by their predecessors.
If I’m right, and America’s turn toward industrial policies continues, regional economic leaders will need to proactively respond. Given that Washington’s support for place-based development encompasses far more than simply the defense industry, my focus on national security may seem too narrowly focused. I do so for two reasons: First, it’s clear to me that the Department of Defense is the most influential and least understood actor in the American technology market. Second, when it comes to American technological leadership, the stakes couldn’t be much higher, and the consequences of ceding leadership will invariably manifest in a sharp erosion of our national security.
Nonetheless, if the defense industry just isn’t a personal interest, please consider that the field of national security captures a great deal of economic activity that may not be obvious. While I believe that Americans cannot turn inward in this most unstable world, and that we must reflect on how potential global conflicts could impact our own economic stability, perhaps a discussion of geopolitics isn’t that critical to understand the opportunity in front us. Rather, we simply need to understand that as economic leaders build solutions for the military, commercial “dual uses” will become clear.
Take quantum computing, a field of technology Chicago leaders have rightly set sights on leading. The U.S. military is spending about $700 million annually on quantum-related R&D. The Pentagon’s interest in American leadership in quantum includes encrypting communications, sensing of distant threats, and enabling precision targeting, among many other concerns. One example of the Pentagon’s presence in the quantum market: The Department of Defense in late 2023 awarded a contract to Vector Atomic to produce a quantum-enabled device that uses an atomic clock to provide precise navigation without more error-prone and hacking-prone GPS. Vector’s device could strengthen our ability to defend satellites that drive our global communications, financial markets, and morning weather reports.
Perhaps not surprisingly, Vector Atomic is based in California. I believe that as regional economic leaders orient economic actors toward national security, parallel success stories will emerge with the Department of Defense serving as a critical partner.
Yet let me be clear: success stories alone cannot tell the full story of regional economic strength.
Quantifying regional economic strength
The largest single funder of research and development in the United States is, by far, the U.S. Department of Defense. To state the obvious, technologies are produced by research and often commercialized by firms that operate in geographic proximity.
Economic theory posits that growth is a function of three variables: labor, capital, and technology interacting with labor and capital. Regional economies can grow by adding more people, or building more factories, but sustainable growth is made possible by technology strengthening the production of labor, capital, or both. By theoretically holding constant the number of people you have and the factories in your region, we can best quantify success in strengthening technology development in a region by monitoring its GDP per capita.
Why do I believe GDP per capita is the most insightful measure of success? What we are trying to do here is measure regional economic strength with the people you have. Simple aggregate GDP growth often reflects population increases in a region, which can suggest economic strength but may also be unrelated to actual regional economic activity. For example, regions near the southern border have experienced growth while struggling to establish an economic base capable of employing new residents. True success is demonstrated when existing residents generate greater economic value.
According to the St. Louis Federal Reserve, the Chicago GDP per capita in 2023 was $96,607.93. (I find this figure by dividing the GDP by the MSA population, found here.) Not bad, but notably below the superstar cities:
San Francisco MSA (pop: 4,566,961): $170,546.02
New York MSA (pop: 19,498,249): $117,901.28
So, what’s Austin doing in this rarified category? How did they become a superstar city?
Chicago’s fourth economic generation
Chicago began as an intersection of the Midwest’s agricultural economy, producing and selling mechanical reapers, processing and packing livestock, and derisking agriculture through the commodities market.
As the Industrial Revolution came to America, Chicago’s economy modernized with it, growing into an industrial manufacturing hub that, at its peak, supported more than 600,000 jobs.
I view Chicago’s professional services economy, our city’s third economic generation, as a bridge to the fourth. While I am not the first to recommend that my city modernize its regional economy, I believe Chicago’s fourth economic generation should be characterized by a unified focus on American strength, merging our laboratories and research institutions, entrepreneurs, corporate and civic institutions, manufacturers, and capital investors in a national security-focused lab-to-market chain. This is certainly a reflection of a point stated earlier, that the Pentagon is the largest single funder of R&D, but this belief also reflects a conviction that, in this unstable world, America’s third-largest city is obliged to lead.
Is there precedent for such a regional economy? In fact, one is emerging in Austin right now. With its civic leaders committed to engaging the U.S. military and developing technology solutions, Austin has asserted itself as the premier defense tech regional economy, vividly demonstrated when the Army Futures Command decided to establish its office and station its four-star commanding general in the city.
One quantifiable measure of Austin’s success can be found in the number of Department of Defense Small Business Innovation Research (SBIR) awards sent to Austin companies. In 2023, 33 Austin companies were granted 72 DoD SBIR awards, nearly equaling the number of SBIR awards the Pentagon sent to the Bay Area that same year. In contrast, just seven Chicago companies were awarded 13 SBIR grants in 2023.
To build what they’ve built in Austin, regional policymakers and economic leaders replicate their success by initiating technology transfers from research laboratories to new ventures, connecting product development to Department of Defense challenges, and building iterative relationships with an emerging national security community.
Austin need not stand alone as the U.S. military’s go-to source for innovation. The Department of Defense is fanning the United States in search of new partners to expand the American defense industrial base, deploying historic and unprecedented volumes of resources – largely through novel contracting methods sent to nontraditional suppliers – to assert leadership in mission-essential fields of technology.
Most notably, the Department of Defense and congressional appropriators have dramatically expanded funding for its Defense Innovation Unit (DIU), the Pentagon’s flagship innovation initiative tasked with acquiring technologies from nontraditional suppliers. And as DIU and related efforts have gained more resources, private dollars have followed. Private venture investments now match DIU contracts with 20-to-1 levels of funding.
With bipartisan support, the Department of Defense is likely to see increased funding levels in the Trump Administration. Regional economies will need to answer this new environment with action…or lose.
Finding actionable strategies for regional economic leaders
Historic volumes of capital supported the defense tech sector in 2024. I argued nearly five years ago that the Pentagon had designs on reasserting leadership over the entire American tech sector, a perhaps bizarre suggestion to some, given how large the tech sector is and the multiple multi-trillion-dollar firms in it. And yet, I state again in 2025: The Pentagon is poised to grow its already significant presence in the American innovation economy. Firms like Anduril and ShieldAI have reached unicorn status largely serving defense customers. Others, I predict, will follow in the coming years as the Department of Defense seeks to expand the defense industrial base.
In the coming months, I will address just a few national challenges, assess ongoing solutions, and identify potential strategies for exporting value.
Those challenges include:
Dramatically increasing manufacturing productivity to the point where we no longer rely on overseas partners to produce systems that we need to power our way of life and protect our national security.
Securing the electromagnetic spectrum and mobilizing factories to produce mass quantities of drones.
Protecting economic funnel points – be they satellites or trade routes – where adversaries are threatening to block the passage of critical information and products.
Content will be clearly structured. Each piece will identify a national strategic challenge, explore resources that exist in the Chicago region that could export solutions, and propose specific, actionable strategies to create value. Again, Chicago will serve as an example of what could be achieved by its own economic leaders and by leaders in other regions.
First challenge, to be discussed in a few weeks: The United States continues to rely on supply chains that reach into adversarial sources, including China. Put simply: China is just better at manufacturing than we are right now. I will explore federal programs like the Department of Defense’s “Replicator” initiative, and how regional economic leaders could support production of products and systems at scale domestically.