Eric Schmidt invested in AI startups, pushed fear of China

Eric Schmidt has prodded the Pentagon for years to hurry along its software-buying process.

Today the AI tech investor and former Google CEO is more determined than ever to urge government decision-makers to pick up the pace, but not just when it comes to buying more software for the Defense Department.

Schmidt wants the government to implement his sweeping blueprint to fight what he considers an existential threat to democracy posed by China’s AI plans, an effort that could also bolster his own commercial AI interests.

He says the U.S.’s national security and economic leadership are dependent upon spending billions to procure smarter software, bolster AI research, and build the country’s computer science talent pool. And he says he knows better than the Pentagon itself how to remove the bureaucratic blockades preventing more agile use of AI by the government.

But at the same time, Schmidt’s venture capital firm Innovation Endeavors has invested in companies that have received multimillion-dollar contracts from federal agencies. Some of those investments and contracts — reported here for the first time — were granted between 2016 and 2021 while Schmidt chaired two influential government initiatives, the Pentagon’s Defense Innovation Board and the National Security Commission on Artificial Intelligence.

Work that Schmidt carried out at the NSCAI has made its way into hugely influential legislation: The 2023 National Defense Authorization Act, which determines government defense spending, contains amendments that reference specific recommendations of the final NSCAI report. If passed, it would authorize $95 million more than requested (and a total of $368.3 million) to fund the activities of the new chief digital and artificial intelligence officer, Craig Martell, who has publicly said Schmidt all but hand-picked him for the role.

Today Schmidt is among the most influential private-sector voices sowing a sense of urgent concern that the U.S. is losing a battle against China for AI supremacy, and helping lay the groundwork for a windfall of government funding for AI software. He also happens to be one of the most prominent investors in the AI sector.

“Dr. Schmidt has worked across many presidential administrations and with members of congress on both sides of the aisle – his work has and remains bipartisan and focused on supporting the country,” said Tara Rigler, a spokesperson for Schmidt’s new think tank, Special Competitive Studies Project. “He has been asked to serve on federal advisory boards to provide his advice on pressing technology issues before the country. In line with every other private citizen who has, and does serve on these federally appointed boards, he is an advisor, not a federal decision maker.”

The threats posed by an AI-dominant China — from AI-supercharged cyberattacks and disinformation campaigns to invasive surveillance tech deployed to monitor marginalized populations and development of fully autonomous weapons — should not be ignored. However, Schmidt’s proposed solution hinges on allocating massive government spending to unregulated AI, some of which could benefit companies he has connections to or directly invests in.

“Conflict of interest [concerns are] right at the center of this — not only with his venture investments,” said Merve Hickok, senior research director and chairwoman of the board for the Center for AI and Digital Policy, a nonprofit AI policy and human rights watchdog.

In response, Rigler said that Schmidt had “complied with all Federal ethics requirements during his service on the DIB and NSCAI.”

To assist in disseminating his ideas in Washington, Schmidt has cultivated a cadre of influential insiders. “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 has spread his message for years among people with direct influence over national security policy and spending.

“Without some type of unified, broad adoption of an AI foundation for the entire department, DOD will soon reach a tipping point after which it will be unable to catch up to its competitors,” Schmidt said in 2018 while testifying before the House Armed Services Committee. Schmidt spoke in a personal capacity, but was chair of the Pentagon’s Defense Innovation Board and on Alphabet’s board at the time.

A key influencer in Schmidt’s inner circle, Ylli Bajraktari, believes China has told the world exactly how much time its adversaries have to win the AI race. A member of the White House National Artificial Intelligence Advisory Committee and the CEO of SCSP, he cites a 2017 policy document that stated the Chinese government’s goal of achieving major AI breakthroughs by 2025 and leading AI by 2030.

“We only have one budget cycle to get this right between now and 2025,” Bajraktari told Protocol. SCSP, which got underway in October 2021, is designed to sunset in March 2025 in the hopes of compelling time-sensitive results.

People like Rep. Ro Khanna, a Democrat representing Silicon Valley, are listening. “Now, the problem is that China, as Eric Schmidt says, does one of these Chips Acts every year,” Khanna, who sits on the Armed Services Committee, said in a Washington Post Live talk in October, suggesting the recently passed Chips Act may not do enough to counteract China’s tech investments.

Influencing policy and funding companies with government contracts

Schmidt stands to benefit from the dissemination of his message. He 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 here for the first time.

To combat China’s AI prowess, the NSCAI called on the federal government to prioritize AI and other emerging technologies at the Defense Department, and double annual non-defense funding for AI research and development to $32 billion per year by 2026.

Eric Schmidt, the former CEO of Google — seen here at the White House in 2009 — still owns stock in Google parent company Alphabet and has invested in its AI-related spinoffs. Google Cloud stands to benefit from federal investments propping up AI.

Photo: Brendan Smialowski/Bloomberg via Getty Images

Schmidt’s VC firm, Innovation Endeavors, joined funding rounds in 2019 and 2021 worth at least $150 million for military AI software provider Rebellion Defense, CB Insights data shows. While Schmidt led the NSCAI in 2020, Rebellion was chosen to receive up to $950 million in contracts from the U.S. Air Force to help construct its Advanced Battle Management System, a system that incorporates cloud AI and advanced data analytics to deliver tailored information to forces on the battlefield.

Innovation Endeavors also participated in funding rounds totaling nearly $40 million in 2016, 2019, and 2020 for Citrine Informatics, a company that uses AI to pursue the discovery of new chemicals and materials. Citrine scored Department of Energy contracts in 2015 and earlier this year amounting to $3.6 million to develop safe storage materials for waste from nuclear energy production.

Schmidt also sits on the board at AI and quantum computing company SandboxAQ, an Alphabet spinoff that has received funding from the CIA’s tech investment arm, In-Q-Tel. Sandbox and cryptographic security company Cryptosense, a company it recently acquired, are both on a short list of vendors working on a National Institute of Standards and Technology project.

Innovation Endeavors also has ties to encryption AI company Duality Technologies, which was awarded contracts from the Defense Advanced Research Projects Agency while Schmidt chaired the now-defunct National Security Commission on Artificial Intelligence — including one worth $14.5 million in 2021. Team8, a cybersecurity tech incubator partially funded by Innovation Endeavors, joined a funding round in Duality Technologies worth $16 million in 2019.“We have a national, bipartisan priority to win in establishing technology platforms for the globe that we invent, that we drive, that we make money from,” Schmidt, whose representatives declined requests for him to be interviewed for this story, said at the September SCSP event.

Schmidt still owns stock in Google parent company Alphabet and has invested in its AI-related spinoffs. As a major provider of cloud computing power and AI tools, Google Cloud stands to benefit from federal investments propping up AI.

Bajraktari, who served as the NSCAI’s executive director while Schmidt chaired the commission, which sunsetted in 2021, suggested Schmidt’s investments are an acceptable, even necessary part of the U.S. government’s integration with the private tech sector — which must happen if America is to prevail in its competition with China.

“I understand the optics of how this looks, but let’s be realistic,” Bajraktari said. “How do we stay ahead and compete against China if we’re not able to utilize our private sector’s expertise and knowledge and advantages in this space?”

Bajraktari added that the NSCAI’s recommendations to Congress were “all high-level recommendations,” rather than suggestions promoting particular companies, products, or services. “None of them advocate for anything in particular, let alone telling DOD you should use this cloud or that algorithm or that thing,” he said.

While keynoting the SCSP event in September, national security adviser Jake Sullivan said he wanted advice from Schmidt’s tech industry cohort. “What we also need from the private sector is to tell us, ‘Hey, you guys are missing things we’re seeing and you’re behind the curve, and here’s how we can help you get ahead of the curve,’” Sullivan said during his speech.

Schmidt also has the ears of top executive and legislative branch officials controlling federal policy and purse strings. Deputy Secretary of Defense Kathleen Hicks, Deputy Secretary of State Wendy Sherman, Speaker of the House Nancy Pelosi, and Senate Majority Leader Chuck Schumer — all Democrats — spoke at the SCSP event.

This year alone, Schmidt gave $1.15 million to Democratic candidates and party organizations, including $365,000 to the Democratic National Committee, $250,000 to the Senate Majority PAC, and $50,000 to the Nancy Pelosi Victory Fund, according to Federal Election Commission data analyzed by Protocol. Some of Schmidt’s political donations this year came in the form of data and analytics technology and services rather than cash.

A Cold War template for an AI future

While pushing his AI agenda, Schmidt visited Ukraine in September, and perceived the country’s rapid wartime repatriation of government data to the cloud as a model in tech agility the U.S. should adopt.

“Within two days [of Russia’s invasion], every piece of information in the [Ukraine] government was in the cloud out of the country. Boom — shows you how quickly you can move when you’re at war,” Schmidt told the audience at the SCSP summit.

Schmidt has admitted fear can be a motivating factor in convincing government leaders to invest in AI research and talent to maintain dominance of U.S. tech businesses. “Whether it’s from a position of fear, or people are afraid of something, or whether it’s a position of leadership, I don’t really care how we get there,” he told an audience at the Center for a New American Security’s Artificial Intelligence and Global Security Summit in 2017.

He’s also looking to the Cold War for inspiration. The think tank Schmidt bankrolls, SCSP, is directly modeled on an initiative funded by the Rockefeller brothers. Launched in 1956, the Rockefeller Special Studies Project buoyed efforts to increase U.S. investment in defense science and technology research by reinforcing a key message it defined bluntly: “The United States is rapidly losing its lead in the race of military technology.”

We have a national, bipartisan priority to win in establishing technology platforms for the globe that we invent, that we drive, that we make money from.

On Jan. 6, 1958, a front-page New York Times article sounded a dire warning: “Unless the United States acts immediately, military superiority — and with it the world balance of power — will shift within two years to the Soviet bloc, a Rockefeller Fund report warned yesterday.”

The cure to preventing further Soviet advancement, the article stated, was a $3 billion annual increase in defense spending recommended in the Rockefeller report.

Schmidt’s SCSP is guided by the same playbook employed last century: convincing government decision-makers to move faster by amplifying fears of the U.S. losing a tech war with national security implications. A 501(c)(3) private foundation, SCSP is a subsidiary of Schmidt’s Innovation Fund, which is funded by Eric and Wendy Schmidt and the Schmidt Investment Fund.

“The Rockefeller Special Studies Project has a cold war objective to it as does the Special Competitive Studies Project. How can the U.S. stay on top, how can the U.S. protect itself and lead globally — that’s an undercurrent,” said Barbara Shubinski, a historian who directs the Division of Research and Education at the Rockefeller Archive Center.

On behalf of oil tycoon and presidential hopeful Nelson Rockefeller, the Rockefeller project assembled a wide range of panelists tasked with addressing the foreign policy, economic, social, and civic challenges that the U.S. would face in coming years.

The message of the Rockefeller Special Studies Project reached the coffee tables and nightstands of a curious American public. Content from its six panel reports was compiled for “Prospect for America,” a 1961 book that sold over 400,000 copies, according to the Rockefeller Brothers Fund.

“The organization of the Special Studies Project represents a really classic Rockefeller approach going back to the earliest days of Rockefeller philanthropy,” Shubinski said. “There was always a survey, always a committee, always a panel of experts. This was the way that influencers worked at that time.”

Reviving Cold War tropes gives Schmidt’s goal of garnering more government AI investment gravity it may not otherwise have.

Photo: Brendan Smialowski/AFP via Getty Images

A foreign policy academic by the name of Henry Kissinger, who was serving as associate director of Harvard’s Center for International Affairs, brought those influencers together in 1956. The Rockefeller project launched Kissinger’s political career, and he went on to serve as national security adviser and secretary of state under Presidents Richard Nixon and Gerald Ford.

Kissinger, a polarizing figure both honored by the Pentagon and reviled as a war criminal, will turn 100 in May. He is a living thread tying the Rockefeller project to Schmidt’s SCSP. Kissinger and Schmidt collaborated on a book, published last year, praising the power of AI.

Kissinger recalled the project’s origin story while speaking via video conference at the SCSP summit, explaining that it came about because “[Nelson Rockefeller] could not convince the president to undertake the expenditures that the panel sought to be taken.”

The 60-year-old Rockefeller project was “a “fitting model” for SCSP, said Bajraktari, who told Protocol, “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.’”

The SCSP is molded in the shape of the Rockefeller project, featuring six panels of experts dedicated to foreign policy, intelligence, defense, economy, society, and future tech platforms. And many of the NSCAI’s cast of characters are now working at SCSP. Along with NSCAI veteran Bajraktari, Schmidt serves as SCSP chair. Robert Work, former NSCAI vice chair and deputy defense secretary under Presidents Barack Obama and Donald Trump, is on the SCSP’s board of advisers. Several other ex-NSCAI staffers are now at SCSP.

Reviving Cold War tropes gives Schmidt’s goal of garnering more government AI investment gravity it may not have otherwise.

“Any time you create a new body, you want to think you’re fighting a greater fight,” said Jeffrey Ding, a China AI expert and associate professor of political science at George Washington University, who has spoken to SCSP staff about his research.

“The Cold War analogy is just so present in national security discourse,” Ding said, “that it’s easy to just attach a hook there. It’s more compelling than saying, ‘Keep the U.S. ahead even though it’s already in a good position even if none of us did anything.’ That’s my stance, but it’s hard to get people rallied around that.”

‘We can’t depend on government’

Wealthy industrialists like Rockefeller and Big Tech execs like Schmidt have dabbled in government policy influence-peddling for as long as they’ve had the money and power to do it. But Schmidt’s SCSP group also serves a special purpose: to sustain the efforts of the NSCAI, the short-lived government initiative he chaired.

The NSCAI’s final report, issued in 2021, put China in the crosshairs. “China’s plans, resources, and progress should concern all Americans,” it noted. The report depicted an epic AI battle for individual liberty in the face of a “chilling precedent” created by China’s use of “AI as a tool of repression and surveillance.”

In addition to boosting annual non-defense funding for AI, NSCAI wanted Congress to fund a giant AI research hub, establish new government agencies to cultivate computer science talent, and — of special interest to Schmidt — boost integration with the private sector to accelerate procurement of commercial AI software.

“I would like to take credit that we started building the urgency with NSCAI. Our mission — it didn’t end,” Bajraktari said.

Even though it influenced legislation, Schmidt and others worried some of the NSCAI’s recommendations would sit on the proverbial congressional shelf.

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.’

Thomas Creely, an associate professor of ethics and director of the Ethics and the Emerging Military Technology graduate program at the U.S. Naval War College, who sits on SCSP’s defense panel, supports Schmidt’s approach.

“Eric, through his foundation, decided to fund [SCSP] because it’s too important not to do this,” Creely told Protocol. “We have to come up with ideas and put these before the leaders and thinkers of DOD and the White House and Congress to get their attention that there has to be changes.”

“We can’t depend on government to make the investment. You’ve got to have people who have a sense of patriotism or preserving democracy and national security,” Creely said.

Language of conflict

In Schmidt’s story of the showdown with China, the U.S. is portrayed as a white hat AI hero and China as the AI bad guy.

Earlier this year during a panel discussion at the Aspen Institute’s Security Forum, Schmidt referenced Microsoft software that automatically writes programming code, implying it would be inherently nefarious had it been built in China: “Now imagine if all of that was being developed in China and not here. What would it mean?” Schmidt said.

“If you’re going to play the game of policy opiner, it’s very difficult to take a measured stance on China,” said Nathan Myhrvold, who helped launch Microsoft Research — including its celebrated lab in Beijing, whose researchers have contributed to AI advancements for decades.

At the same time that Schmidt questions the ethics of AI made in China, he hopes to woo the people making it.

He co-authored an opinion piece in Foreign Policy in July calling for the Biden administration to build “Team USA” by creating a “million talents program” — a direct allusion to China’s Thousand Talents Program. Schmidt’s idea would eliminate a cap on immigration that he argued disadvantages the U.S. because it blocks entry to skilled scientists and engineers from countries such as India and China.

And he wants computer engineers from China to stay in the U.S. “If we’re busy educating graduate students from any country, and in particular China, unless there’s some massive national security concern, we need to keep them in our country,” he said during a Defense Innovation Unit talk last year.

We can’t depend on government to make the investment. You’ve got to have people who have a sense of patriotism or preserving democracy and national security.

But Schmidt’s nationalistic warnings against AI made in China risk fomenting negative attitudes toward the very AI researchers in China he says the U.S. needs.

Myhrvold questions the logic. “I’m totally in favor of U.S. support for this stuff, but the problem is when you obtain that by scaring people with warmongering and fear and the language of conflict, you have this real problem that you might shoot yourself in the foot,” he said.

Meanwhile, even as Schmidt has implied that AI developed in China is ethically flawed, he’s argued that regulatory guardrails for AI in the U.S. would impede progress in the face of China’s competition.

“Why don’t we wait until something bad happens and then we can figure out how to regulate it — otherwise, you’re going to slow everybody down. Trust me, China is not busy stopping things because of regulation. They’re starting new things,” he said during an interview last year. Schmidt reiterated his antiregulation stance in October when the White House unveiled a nonbinding “Blueprint for an AI Bill of Rights.”

Eric Schmidt, government headhunter

Schmidt’s frustration with what he sees as bureaucratic ineptitude blocking AI advancement in the U.S. has propelled his aggressive efforts to facilitate staffing and financial support for key government agencies he believes need his assistance.

His 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 chief role, according to Martell.

Martell shared the story while onstage at an October AI tech event, recalling his volunteer work collaborating with people from Google and Amazon at Schmidt Futures.

“The one and only thing I did for Schmidt Futures was help them evaluate the kind of person they want for this job,” Martell said, referring to his current job leading the CDAO. “We were talking about what this job should look like, and then about two weeks later I got an email from the deputy secretary of defense asking me to apply. So I’m pretty sure the whole thing was set up to be a covert interview.”

“Schmidt Futures’ mission is to find and connect talented people to solve hard problems in science and society,” a representative for the nonprofit said in response. “Dr. Craig Martell has participated in our programming but has never been an employee of any Schmidt organization nor received any compensation. Schmidt Futures did not make or participate in any of the DOD’s hiring decisions, was not privy to any of their deliberations, and we learned of his hire from public sources.”