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Is a Manufacturing Revolution on the Horizon?

3D Printing, Manufacturing, and U.S. Competitiveness

Speakers: Hugh Evans, Vice President, Corporate Development and Ventures, 3D Systems, Brad Pietras, Vice President, Technology, Lockheed Martin Corporation, and Cliff Waldman, Council Director and Senior Economist, Manufacturers Alliance for Productivity and Innovation
Presider: Brett B. Lambert, Former Deputy Assistant Secretary, Manufacturing and Industrial Base Policy, U.S. Department of Defense
December 11, 2013
Council on Foreign Relations

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LAMBERT: (OFF-MIKE) for coming. This is a very timely and interesting topic. We have a great panel. I just wanted to remind everyone that this is on-the-record, which is a little different for the Council events, so as long as you all understand that, that whatever you say will be on-the-record.

I won't do much of the introductions because you have them in front of you. I would just say a few things. You know, Brad, coming from Lockheed Martin, one of our heritage defense companies very important to us, and focusing on this issue is very important, started his career at GE Astro, which was one of the first transactions I actually was engaged in there, and then moved from the engineering world to the business development world, will give us a really good, I think, perspective of this new and evolving technology from a large corporation point of view.

And then we have Cliff, who has written some seminal articles about manufacturing innovation and what it means for both national security -- he's also written several interesting articles -- if you care to look at them, I would advise you to -- about Chinese innovation in manufacturing technology, as well. And so he'll give us a very good, I think, overview of the international dimension of this particular area, 3-D printing.

And then we have Hugh, who's in a new role. He has just joined 3D Systems and came from 20-some years at T. Rowe Price, where you invested in companies. So you obviously -- it took you 20 years to find one you wanted to go to work for, now is in the role as vice president for corporate development and ventures at 3D Systems. And 3D Systems is the printer that you see out there. That's the one I bought for my children last year for Christmas. They think Santa Claus bought it, so don't let them know, but we spent yesterday or our snow day designing the ring that is being printed right now that I will have to take home to them.

And 3D Systems is one of those great American success stories that we'll get into in a little bit here, but the CEO was just named, I think, the Forbes top 50 people to examine as they grow, and I think the company itself is now, according to Forbes, ranked number two in technology and number five in overall of the 100 global Fortune magazine's fastest growing companies. Long heritage company, but something that we, at least in my role in the department, we looked at this technology and these companies very, very closely.

Again, there's a 3-D printer out there. You can see some of the things we're doing with it. But I just -- before we get started, I'm going to ask the panel just a couple of questions, and I'll try to hurry up so we can get to your questions. But I do want to talk a little bit about U.S. manufacturing and just how it punches above its weight. And I think a lot of these statistics will not be known to you.

But I had the benefit of working with people both in the department and the White House who really cared about U.S. manufacturing and the manufacturing renaissance that we're experiencing.

So manufacturing still only accounts for about 12 percent of U.S. GDP. But it accounts for 70 percent of all private-sector research and development funding. Sixty percent of all U.S. R&D employees are involved in manufacturing. And over 90 percent of all patents that are filed in the United States deal with manufacturing, not to mention that a majority of our exports from this country come from our manufacturing community.

Also, contrary to popular opinions, manufacturing creates very well-paying jobs, and we're not even here talking about the spillover jobs that are occurred. But the last data we have, which was from 2011, says that new hires in the manufacturing sector on average make 38 percent more money than those in the non-manufacturing sector.

We are truly in an environment where we are trying to have this renaissance of manufacturing in the United States, and I'm pleased -- I was pleased to be part of the president's initiative on the national manufacturing initiative -- the institutes. When we got all of the experts, including many people in this room and around the table, together and said, what was the first pilot project we should fund as part of the president's initiative? There was almost unanimity about additive manufacturing, particularly 3-D printing.

And then we worked closely with the White House for the department to take the lead on that Youngstown effort that was announced just a few -- six months after the president announced his initiative. And that is 3-D printing, and that's what we'll be talking about today. It is truly a revolutionary science. It's a revolutionary technology. But it is fraught with complications, everything from intellectual property to many things you read in the paper every day about what you can print at home and what you can't print at home. And hopefully we'll open that discussion up to try to discuss a lot of those -- of those issues.

So let me start with Cliff. And I'd just ask about manufacturing in general and about how transformation, a revolution -- you've written a lot about this -- a technology like this can be.

WALDMAN: Well, I think in the manufacturing space, technologies are starting to do what they should do, which is to solve problems. And as we've become more globalized, we have both more opportunities and more problems. And I think two of the interesting problems, two of the critical problems that technology and manufacturing technologies in particular can help us with are, one, entrepreneurship.

One of the reasons that we have such a weak job market recovery started even before the Great Recession, years before the Great Recession, when we saw a slide in business start-up activity. And I have to say that, even within manufacturing, business start-up activity has been sliding, and sliding prodigiously.

One of the things that a 3-D printer can do is it can incite, you know, a manufacturing start-up within a house. It's becoming -- it may become the manufacturing equivalent of a fax machine in a basement. That thing over there can fit on somebody's table, and then the imagination and the ambition of the entrepreneur -- we may have a whole new sector that we very much need in manufacturing and in the economy as a whole.

Second of all, a lot of manufacturing -- domestic manufacturing development policies thinking is starting to become regionally based. And I just finished a large project for the Southern Governors' Association thinking about advanced manufacturing within the South. Very interesting analysis, but one of the biggest challenges -- certainly in the South and in other parts of the country -- is, OK, the urban centers, which are gaining in population dramatically, certainly can be areas of dynamism, but how do you allow manufacturing to infiltrate the rural areas? I mean, you can't -- it seems to me, you can't really have an effective regional development strategies, if you think about the urban areas that ignore the rural areas.

So I think small technologies, efficient technologies like 3-D, which is in its early stages, can help with the -- sort of the broad need to include rural areas, to infiltrate rural areas with manufacturing technology. So, again, those two things are examples of how technology, particularly in manufacturing, can be an enabler, a problem-solver, as they should be.

LAMBERT: So with that, Brad, having -- representing a company that has both interest in both large centers and small rural areas, how are you seeing this technology transform the business case for a company like Lockheed?

PIETRAS: Sure, I want to echo what my colleague just said regarding about how it really enables manufacturing across a number of sectors that wouldn't otherwise have access to it. And, you know, as sort of the culmination of the integration of a number of technologies, the same way that paper printing did with the Internet and with your printer, with your inkjet printer at your desktop, bringing together advanced materials with digitizing of the manufacturing process and design enables this sort of renaissance of manufacturing at a very high-tech level, but it also democratizes it. It really makes it available across a diverse set of domains and creativity that does things like -- like the Internet did for information, this could do for manufacturing.

And in a similar way for a large industry, it really impacts everything from something as simple as taking costs out of manufacturing. So rather than taking a multi-ton ingot of titanium and hogging out 99 percent or more to come up with a part, you then instead start with the material in some other form and then build the part in a very efficient, in a very logical way.

Not to mention, it allows you to have access to that third dimension in manufacturing that you might not be able to get when you're trying to actually machine out a solid state of metal. Say you wanted to put something, a structure within a structure, but you could never get the machine tools in, so rather than having a multi-part integration, welding seams, and building a very complicated part, you can actually just print it as one single large part, and that not only enables more sophisticated design and more capability, it also takes a lot of the cost of the manufacturing out.

Not to mention the diversity, as well. If you consider that you no longer have to have collocation of large manufacturing with your design engineers, but you can actually have the parts built from a distance. I think that also enables a lot of both innovation and new ways of doing things that we hadn't considered before.

LAMBERT: So I want to go to you and talk about the stratification of the industry. But before I do, the implications of what you just said, Brad, about intellectual property and the -- and I think this is open for all of the panel -- but we saw that in the department at least as one of the big hurdles there. Who would own the design? And who would be able to print it? And what would the protection of that file, in essence -- I mean, we saw it as a revolutionary ability -- we could print ships -- you know, parts on a ship instead of tendering them.

But what are the implications of a company like Lockheed? How do you -- how are you viewing the intellectual property issue?

PIETRAS: Sure. Like any other intellectual property or trade secret, it brings with it much of the same problems and more, because of what you said. You can have a design where you can have a three-dimensional scan of it now and then just upload a file and recreate the part almost very precisely.

So that -- you have to now consider, how do you assure that the part quality is the same, if it gets into the pipeline in terms of logistics and things of that nature into a supply chain. I still think, though, that much of the know-how, much of the performance of the parts will be in the material used itself. And so the formulas and recipes used for the material to actually create or print the part will have a significant impact as to whether or not you can really reproduce something so easily.

LAMBERT: Truly secret sauce.

PIETRAS: Indeed. Indeed. It's a secret sauce in the part. And I think not just the polymers that you see out in the hallway, which is a fantastic sort of version 1.0 of 3-D printing. But when you consider things like advanced metals and titanium, things of that nature, where you can not only use a single metal or single formulation, you can actually create gradients and have multiple different types of materials in -- mixed in, just the way you change colors in your ink, you could change the material properties at a certain part or a certain location in the part that you're building or the item that you're building. And that type of manufacturing capability I think is yet to be realized in terms of what can we do with that. It's very exciting. It's not yet realized. It's a whole new dimension of the problem.

LAMBERT: Well, now turning to somebody who spent a career investing in companies and finally chose one, I'd be very interested in your point of view of the stratification of the -- how the industry has developed, and particularly how the U.S. industry compared to the global industry. This is a global -- you know, as Brad pointed out, I mean, you can build a file somewhere and have it printed somewhere else. It is a global industry. But we still have a few U.S. players, or maybe just one now...

EVANS: Yeah. Well, OK, so my company is 3D Systems, and it invented 3-D printing 30 years ago, and it's headquartered in Rock Hill, South Carolina, so a good, old-fashioned -- in Chemical Alley, if you will.

But, really, the way to think about the industry is a consumer side to the industry and an industrial side. And on a consumer side, there's a proliferation of start-ups. There's over 100 companies that are doing a consumer machine, like you see out in the hall, under $500 bucks, assemble it yourself. There's no shortage of those companies. There's a lot of them. On the industrial side, so now -- so that's a $500 printer that will do plastic.

(CROSSTALK)

EVANS: And then as you move to an industrial-sized printer, you're up to $1 million in some cases machine as big as the stage that can do aircraft wings and can do lots of really interesting stuff with lots of different materials. And there are really about 10 companies that are -- the German -- there's a number of German companies that are quality and at work. There is -- there's 3D Systems, the inventor of the field, and then there's another U.S. company that's merged with an Israeli company and is more -- looks more like an Israeli company today, so it's really an Israeli-type company in the field. And you can think of maybe 10 companies that are delivering machines that industrial users are evaluating and implementing into their factories.

Now, that's where we stand today. Many governments -- China, Singapore, many other places -- have announced big spending plans to bring 3-D printing to their shores. And so I think we're going to see -- we're going to see the landscape change over time.

LAMBERT: That leads me to my question that I'll ask all three of you before we open it up to questions from the audience, which is, the U.S. government was, frankly, I think, in many ways out in front of trying to -- you know, it was a -- in my opinion, a paltry sum that we did to help industry in this field.

Immediately, it was copied by all of these foreign countries with a much larger number, more zeroes involved at the end of it. What should U.S. government policy be? Should there be a U.S. government policy about this new, exciting emerging technology? I turn to you, first.

WALDMAN: I'd like to sort of phrase it in a broader arena than just 3-D. We're in a time where there's a lot of cutting-edge technologies that are sort of encircling the manufacturing sector -- 3-D, virtual simulation, the Internet of things, many, many things -- and I think we need a policy that will sort of give us the biggest bang for the buck on this. That means that the U.S. should probably invest in education. What's the best way to -- you know, bring our scientists or engineers to work in teaching people how to use these things.

Enable our entrepreneurs -- as I said at the beginning -- who have interesting ideas for using 3-D printers and some of these other things. And then, at the same time, to regulate excesses that are unfortunate and can create intellectual property problems and other sorts of things.

And it's just the -- people always talk about policies in terms of the U.S. government. Again, with regional thinking starting to sort of encircle manufacturing policy, the states have a role to play there. So I can see a federal-state cooperative that would invest in education and help us get the biggest bang for the buck with this whole panoply of manufacturing technologies that are really starting to infiltrate goods production.

LAMBERT: Interesting.

PIETRAS: Yeah, I completely agree. In particular with the strengthening of intellectual property laws and protection will always be very important in this arena, and any new innovation, I think, we need to be as aggressive in creating the right environment for the entrepreneur to get return on investment so the market can work properly.

LAMBERT: Right.

PIETRAS: We spend a lot of money on research and development in the United States both as a government and as private agencies. And if we can't capitalize on that research and development investment, then eventually we'll lose in the long run, for sure.

Education, I think, is also critical. Manufacturing of the future in the United States -- the reason manufacturing is coming back to the United States is because technologies -- like advanced manufacturing, robotics, 3-D printing, and such -- are taking the cheap labor force component out of the equation. And so manufacturing of the future in the United States isn't just going to be folks on the floor bending metal and sweating and, you know, sparks and dirty manufacturing. It's going to be computer science. It's going to be mathematics. It's going to be material science.

And I think I mentioned before, one of the exciting parts about 3-D and additive manufacturing isn't just the fact that you can digitize and press a button and get a product out. But the fact that you now have control of the placement of the material properties all throughout whatever it is you're designing is truly a revolutionary capability that simply just doesn't exist in any other technology.

To really take advantage of that, we need to prepare an engineering and scientific workforce for the future that knows what to do with that. And that's really been the strength of the United States throughout our history. Many people copy us, but the innovation occurs here. And now taking away that sort of manufacturing cost advantage from -- away from our competitors also brings in that -- it keeps that long-term economic benefit of the investment we're making today in manufacturing. I think that's going to be a very important revolutionary change in the future of the country.

EVANS: Great. To me, you guys both hit to me the number-one issue the government can get involved with. If you can push 3-D printing into the schools, I think you set yourself up for the manufacturing platform for the future, all the way down to the fourth grade. It should be in science classrooms. There should be curriculum attached to it.

"And so manufacturing of the future in the United States isn't just going to be folks on the floor bending metal and sweating and, you know, sparks and dirty manufacturing. It's going to be computer science. It's going to be mathematics. It's going to be material science."
—Brad Pietras

And not just the printer, but also the new tools of design, because we're moving away from traditional CAD CAD-ing and software coding to some very intuitive ways to ideate, using your hands, digital playworks, scanning, and teaching the children the ways to use -- to express their creativity through these new tools of design, press the button, print it out. It's extraordinary exciting. And if we teach the kids to do it, they will come through the system, and it will really mean something for America.

LAMBERT: I'll just say that the application I think you all invented, the iPad application, where you can actually design it, my kids use that all the time. I have a 6- and 8-year-old. They use it all the time. But then they actually have to translate it into millimeters, and it truly -- you know, you can draw it, but then you actually have to, you know, design it in a different program. And then they print it out and they get to see the result in, you know, four or five hours. It's really truly amazing.

With that, I'd like to open it up to questions here, please. When I recognize you, state your name and affiliation. And remember, again, this is on-the-record.

QUESTION: Rob Cortel (ph) with Intelix. So I'm hearing all this about protection of IP and the government has to get involved, and blah, blah, blah. It seems to me that, in fact, this has actually created a life of its own. When you think about alternative uses, biotechnology, et cetera, and so I'm kind of posing to you the question, is there an open source strategy equivalent for the industry, where you -- you do own the IP, but somehow you kind of stand back and let all of these other things proliferate.

LAMBERT: That's interesting. I'd point to you first, because I know 3D has wrestled with this...

EVANS: Yeah, the -- well, the...

LAMBERT: ... about a proprietary system...

(CROSSTALK)

EVANS: The open-source community is very active in this field, and a lot of those consumer machines were an outgrowth the effect of RepRap, which was an open-source movement that created a lot of companies. And so open-source is out there.

The sort of second divide in the industry is what we might say is a closed versus an open system, which is -- which is when you sell the machine, do you provide the materials yourself to what goes into the machine? Or do you -- or can any materials go flowing through there? I think -- but I think what you're really referring to is, how do you control the flow of a .STL file -- all these files are .STL -- in stereolithography. How do you control the files that get moved around and printed in different places? And there's no easy answer to that question.

LAMBERT: It just makes, you know, all the problems we've had with cybersecurity, both in my former job in the department, but also just in industry, it just makes this more complicated, because now you do have design engineers who are designing really nice products. And how do you control, to your point, the IP -- I mean, who owns -- who...

QUESTION: Well, I'm actually not talking -- I'm actually not talking about files. I'm actually talking about the use. So what you described was a razor blade strategy, so you give everybody a razor and then -- I mean, the blade -- I mean, the razor, and other people -- you keep providing blades.

But what I'm asking is, the uses -- now, maybe there's a strategy in providing the materials, maybe there's a -- there's a whole category of issues around the IP of the CAD files, or whatever you want to call them, the dot files. The other issue is the uses, so you have scientists out there taking the machine and modifying it for the use in creating biological, you know, organisms or mechanisms or things like that. That's really what I'm talking about.

Do you want to control it? Or do you want to encourage it? Because if you encourage it, then you actually create this industry that, by the way, the government doesn't have to deal with -- I mean, doesn't have to get in the middle of promoting.

WALDMAN: The one thing I'd like to guard against these days is this unfortunate pattern for the United States, where we were are world leaders in disruptive technologies, but less good with incremental technologies, where we create the 3-D printers, but, you know, the changes, the evolutions are sort of -- and the benefits of the evolutions are sort of given away in a less than optimal competitive arena. So...

LAMBERT: BPS.

WALDMAN: BPS is a perfect example. Let's not say that the 3-D printer is here, hooray, we did it, and stop -- you know, we should be constantly innovating even if right now innovations continue on the margin. Those marginal innovations are as valuable, have proven to be as valuable for an economy, for a domestic manufacturing sector as even the initial thrust. And so in a broader sense, your question is asking, you know, let's not stop innovating. Just because the machine is there, you know, it's the first draft of it. We should be, you know, considering how we can benefit from future drafts and getting toward a more and more final product and not giving that away.

LAMBERT: And I'd just -- from, you know, again, my previous life, defense, I was a constant shill for saying, you know, we can two things. We can either build walls around what we have or we can continue to make things people want to steal. I'd rather go with the latter, and I think that's -- this industry is exactly in that position right now.

EVANS: People are hacking these machines all over the place. The bioprinting essentially came around because they could take -- rather than extruding plastic through the nozzle, like you see in the hallway, stem cells go into the top of the funnel and come out the nozzle and get deposit in the place, and the stem cell differentiates, and effectively starting hacking these FEN machines, and all of a sudden we have bioprinting. You don't want to stop that. I want them to hack away.

LAMBERT: Let's go over here. Yes, ma'am?

QUESTION: It seems clear, but correct me...

LAMBERT: I'm sorry. Could you state...

QUESTION: And I'm Julia Moore with the Pew Charitable Trust, but was with the National Science Foundation during the nanotechnology initiative days. But it seems clear to me that this is a less labor-intensive industry and that while you do need an educated STEM workforce, you're going to need fewer people than you did to build the old industries that America is used to.

Is that an accurate perception on my part, that the workforce demand is going to be lower and, if so, what do we do with those employees?

LAMBERT: It's right up your alley.

WALDMAN: This is something I talk about all the time. I mean, workforce issues are probably the number-one issues for MAPI members. I do speeches. We have our council meetings. And I could be talking about one thing, and somehow the issue gravitates over to workforce issues.

As to your question, I would say I'm not sure. I know that's the theory, that these technologies are creating less of a labor-intensive manufacturing sector, and therefore will just need fewer jobs. I think that's a very static view of things. I think it's going to reallocate the kinds of jobs that we need.

And what we're going to have to do is take the lower skilled workers and invest in them. But the number of jobs -- I know that's the prevailing theory now -- but I think that's somewhat of a short-sighted prediction.

LAMBERT: I would agree. That's -- I mean, how many people is Lockheed -- how many engineering talents are you having on this particular area in 3-D?

PIETRAS: Oh, we have many programs going on in 3-D spread out across the whole of the industry, in particular trying to understand how we can create better performance in the products that we make today, in terms of lowering cost, but also what can we do tomorrow with the technology? I mentioned before the advance of the material properties and how we can create different structures and different articles.

"I know that's the theory, that these technologies are creating less of a labor-intensive manufacturing sector, and therefore we'll just need fewer jobs. I think that's a very static view of things."
—Cliff Waldman

You know, there's -- and just one comment to follow-up on what we said about the dynamics of the market -- I think any disruptive technology will cause -- it's a disruption by definition. It's not necessarily a bad thing. It's a shift. And if we remain static, then one could argue, well, did the advent of personal computers and printers obviate the need for anyone to have, you know, anything that was done before at a specialty house? Because now people could do it at home.

But what it did is it -- the technology enables more people to come to the marketplace with more ideas. And that by itself will cause changes in the workforce, but those changes throughout history have always been for the better. It's been a shift towards more improved manufacturing capabilities, lower cost access to manufacturing capabilities to different sectors of society, and then, of course, the globalization of that technology increases the entire market space.

And as you said before, it's really up to the United States to create both the policies and the future, you know, set us on the right path for the future, and that's going to require a lot of thinking today, because we don't want those innovations that we're creating here at home to just enable economies around the world by themselves. We want to make sure that we have the same enabling, the same growth in the United States as it grows worldwide, because it will. It's not going to stay here. And that's not a bad thing, because the diversity of thought and ideas is going to benefit everybody, including the United States, and it keeps us sharp and moving forward.

LAMBERT: Absolutely. It's great. Sir?

QUESTION: Norman Neureiter with the American Association...

LAMBERT: Sorry. Can you wait for the...

QUESTION: Norman Neureiter with the American Association for the Advancement of Science. What's the present market size of 3-D printing? And if you look out 10 years, what do you project it to be? What are your particular most promising sectors in this area? And you say, did you invent it 30 years ago? What took so long? We only have heard about it in the last two years, and it's suddenly the biggest thing going. That's pretty slow. Go back to the integrated circuit in '58, you know, we were in a trade war with Japan within 30 years. I mean...

EVANS: Thirty-year overnight success. It's the way a lot of technologies develop. This one was, in the words of Stephen Jay Gould, maybe, punctuated equilibrium. It was -- forces were building, building, building, and then it just -- and then it broke out. It reached the tipping point.

The industry is $3 billion today. And you said, what is it going to be in 10 years? And my estimate is $30 billion. I think it's a 10X in 10 years. I am an outlier on that. That's my belief. And there aren't many who join me.

QUESTION: Too low or too high?

EVANS: I'm an outlier, in that is no one else that thinks -- that that's a reasonable number. They think it's a lot lower.

(UNKNOWN): I think it's a lot higher.

EVANS: The major use cases are everything. It's a horizontal technology going everywhere. It's going into medical. It's going into aerospace at a very fast rate, because you can 3-D print aircraft engine parts and take weight out, and so they're redesigning aircraft engines to 3-D print a lot of these parts. And once you do the aircraft engine, you can do the car engine, you can do trains, you can do helicopters. Anything that moves in transportation is going to have a 3-D printing input, because you can take weight out of the design with the way the printers work, and weight is gold in transportation, fuel savings.

The proliferation of this technology in medical, it just takes your breath away. We don't have time to go into it. There's so many different ways that surgeons are using it, in the way that radiologists are now using it. Dental has been a very significant use case. It's really everywhere. Consumer goods, your 3-D printing sporting goods, 3-D printing of musical instruments. You're seeing 3-D printing of shoes and clothes. Food is coming. There's no -- I really -- I don't have that -- maybe wicker furniture and helium balloons will not have it.

LAMBERT: Yes, over here?

QUESTION: Rebecca Patterson, National Defense University. I'm wondering if you would talk a bit about any concerns you have on the consumer side, then. Given the proliferation across all these sectors, do you -- are you concerned about flawed designs by copiers or poor use of materials, any of those sorts of issues?

EVANS: Yes, I am.

LAMBERT: I think that's a big issue. And you didn't say guns, but somebody's going to say it, so we might as well start talking about it. I mean, there are -- you know, as every new technology evolves, there are both good and there's evil. And as an industry, that's something that they'll have to wrestle with, and I don't know if you have any thoughts about your worries or concerns about how this advanced technology might be used and from your historic -- for bad uses for society as opposed to good uses.

EVANS: I don't have any revolutionary thoughts, other than to say this is the government I think needs to come up with some good effective regulation that tamps down the use cases that are not in society's interest. And that's not unlike any other technology. And we -- 3D Systems is very supportive of any legislation that uses this technology in a responsible fashion.

WALDMAN: Advancements have risks, and all of them -- and, yes, we can 3-D print a gun. Maybe we can 3-D print a technology that can stop a shooter. You know, so you have to sort of consider the good and the bad points, which is why markets -- while they are doing tremendous amounts here, we need, you know, a little bit of policy into the picture.

To your question, sir, I understand that the first experiments with 3-D printers were done in the 1960s, that there were some initial experiments -- I have -- I have no idea if there's any correlation, but think about -- think about the -- you know, the federal investment in basic science in the 1960s, the Apollo era, and it's been sliding ever since.

I don't know if there's any correlation, but it certainly is at least an interesting morality tale that the initial experiments for this very breakthrough technology started in a period when federal -- you know, federal investment in basic science, the Apollo-era thinking of the government was really at its high and has been sliding ever since.

LAMBERT: Yes? Yes, ma'am, in the back.

QUESTION: So my name is Sara Agarwal. I'm with Hewlett-Packard. And as you know, we've made a lot of announcements about going into this very important sector belatedly, but in a big way. I focus more on emerging markets, and my sort of thinking around this is that there's incredible potential in emerging markets to change their production methods to go from raw materials to more value-added services, right?

I mean, if we think about the fact that Cote D'Ivoire could tomorrow start producing chocolate, instead of just manufacturing cocoa beans, or Botswana could produce high-end diamond jewelry, as opposed to just mining, that has fantastic implications for economic change, which ultimately alters relationships between nations, right? And I think that's why we talk about these things at a place like the Council on Foreign Relations.

So my question is, have you all thought about the implications of not only for the United States, but for other countries how this could potentially change relationships between countries and across regions because of changes in manufacturing capabilities and economic advancements?

WALDMAN: That's interesting. Let me start with you. I'll just say that we -- you know, I think the U.S. has obviously led in this effort, and particularly I give credit to the administration for focusing on it three years ago. But since we've done that, we have seen just an explosion of replication, in essence, from other nations at a much larger scale than the U.S. government has done. I don't know what your experience has been.

WALDMAN: Well, I'll say two things. If you had asked -- if I had -- asked me about China and India, let's, you know, specifically focus on that -- a few years ago, I would be answering your question in the context of the U.S. having to get its act together in response to those competitive threats.

Now I think China and India need to -- we're realizing that they have issues there that they need to think about. China needs to sort of embolden its rural population, its middle -- for its own social stability, and, you know, for the sake of people who are still living in -- you know, in great poverty, in spite of the -- you know, the booming advancement of China.

Now, what you have to think about it in terms of global manufacturing supply chains is that we have a lot of -- the United States is involved in a lot of products that are made in 11 different countries, where you have -- you know, where everybody has some piece of this. And I think 3-D printing could take those -- you know, that 11-country supply chain and turn into a 30-country supply chain that could extend from central China to Canton, Ohio, which would -- which is not a zero-sum game, which would embolden everybody, which would be helpful to manufacturing workers in Ohio and to the standard of living in the poorest parts of China and India.

This technology can, I think, embolden larger and more global manufacturing supply chains to both the benefits of emerging markets and to the advanced economies which for a while are going to, you know, need a shot in the arm themselves.

LAMBERT: Sir?

QUESTION: Excuse me. Edwin Williamson, Sullivan and Cromwell. A little sort of a comment on the question on the -- about the last subject, as well as one that was earlier, the whole issue -- sort of the effect on the manufacturing base, not so much domestically on the U.S. I mean, I recognize that this would not be a zero-sum game.

But back to China, I mean, my -- I've heard one futurist say that 3-D printing will basically put out of jobs the 600 million people that the Chinese government is planning on moving from rural areas into cities. A little more comment on the impact there.

LAMBERT: It is a disruptive technology.

EVANS: It's disruptive. I'd be cautious on any of these grand statements developing. But my -- the way I'm thinking about it is that the paradigm is shifting from design locally, produce globally to design globally, produce locally. And it's an inversion.

And so the way it's really working today is there's perhaps a shoe designer located in Portland, Oregon -- think of that company -- and they make a shoe design, they send it to Asia, and a million shoes get made. It comes back to America and ends up on retail stores and hoping someone walks by and buys one.

"The way I'm thinking about it is that the paradigm is shifting from design locally, produce globally to design globally, produce locally. And it's an inversion."
—Hugh Evans

And when you look at the tools of design today -- I'm thinking of GrabCAD and other type of cloud-based collaborative design houses -- you can throw a design onto a collaborative cloud-based system. Designers from all over the world can contribute to it. Hey, do this, do this, move this, shape it this way, you can get input from designers all over, so a lot of these guys in India that contribute to these designs. So you've got global design, and then we're just going to send that file to a printer in Boston, because there's -- we've got orders for 1,000 of these shoes in Boston, and it has Boston Celtics on -- you know, written into it or something.

So I see it as, you know, design function is going global. Manufacturing is going local, and that's an inversion of where we've been.

LAMBERT: I think that's what we've seen in real examples. And if you think about, if you go to a site like SD (ph) or Shapeways, which some of the jewelry out there is made by, these are designers from all over the world, but they're printed mostly here in the U.S., and those are U.S. jobs that are coming.

Sir?

QUESTION: I'm Bob Perry from the Corporate Council on Africa. My question has to do with supply chain integrity, performance integrity of products. There's a problem with counterfeiting now, so once you start distributing the production process, how do you set and police standards to assure that products that are produced -- and I say it's particularly important in aeronautical, biological sense, to get everyone in the supply chain producing to meet the standards so that you don't have failure.

And this is both a U.S. problem. And then in globalized production, I think, there has to be buy-in from all producers.

LAMBERT: It's an excellent question.

EVANS: That's integral to our strategy at 3D Systems, which is we have an integrated system, and we cannot guarantee the output of that machine if you don't use our materials, because our materials are engineered to go into the machines, and it's all -- and we're like Apple. We deliver you a solution, an outcome. And so if you start salting in all these new things, we can just -- it's going to -- the structural integrity of the part could be compromised.

So our view is that an integrated system and the way that we do it, which is you buy the machine and the materials together as a package, is how we provide that safety and security.

PIETRAS: Yeah, global supply chain is certainly a challenge, and it's -- and it requires really rigorous understanding of where your parts are manufactured, the materials used, the provenance over the components, as well.

I think one of the areas where you're going to find -- we've simplified a little bit the whole process of 3-D printing and expanded it into many things where it isn't ready to go just yet, but it is certainly on its way there, to your comments about the growth.

The materials required to make critical parts are -- it's a very stressful -- in the aerospace industry, weight is critical. Form and function are critical. And so you can't just take any old material and create a part and do a one-for-one replacement. The design of the individual parts on an aircraft, in particular a fighter plane or especially in a satellite or a spacecraft, a manned spacecraft, where weight is a premium, are designed with precise and intricate knowledge of the material properties. And how you've designed those parts is completely coupled to that knowledge and understanding of the scientific application of those, right to the granular structure of a composite.

So it's not so simple as to just say, well, I'm going to set up a 3-D printer and I'm going to start manufacturing parts and slip them into a supply chain. In the future, when 3-D printing expands into metals and other things that are -- that could do that, there's a number of technologies already available today to assure the integrity of the supply chain. Right from just simple things as stamping parts and having visual inspectors following the parts in terms of the shipping and secure shipping, down to nanotechnologies, which can be mixed into the materials themselves, and a simple scan will tell you whether or not the provenance of that part came from the manufacturing. And each individual machine can have its own individual nanotechnology stamp on each part. So you have a built-in provenance and checking system that cannot be forged.

So I'm confident that the technologies are well in place and well utilized in today's supply chain and will be extended to this new technology. And I think that the globalization of the supply chain is something that -- we are all becoming international companies. And to work with selling into a country at a large scale, the country's naturally going to want to look to benefits that will occur from the partnership with U.S. industry. And this is just one incredibly enabling technology that can help us grow as an -- growing our international markets from domestic supply in the United States.

QUESTION: Fred Roggero from -- well, retired Air Force. But one of the things is, given that the technology's advancing at the speed of Moore's Law, yet the bureaucratic policy, as you've discussed, is still rooted in industrial revolution era, a long time ago, where is that change going to come from? When are we going to get those agreed-upon standards for metal materials, for example? Is that leadership for that change going to come from industry, from the manufactures like Lockheed, or from government? And how do you think that happens?

LAMBERT: I'm sure there's going to be three different opinions here, and I'll add a fourth, which is government's not very good at doing this. Industry standards tend to help us. I think it needs to come from industry.

But that means industry has to mobilize, so I'd be interested in your comments, because in a vacuum, the government will find a solution to a problem that may not exist. So...

PIETRAS: I'll just say, there's already a number of standards in place for testing materials. So, for example, any types of aluminum titanium polymers composites, there is -- there are scores of industry standard tests that go on, you know, three-point bend tests and, you know, fracture tests and pull tests.

Any -- and we have developed at Lockheed Martin a number of new materials already that are going into our product lines, and they have had to go through the same rigorous testing before qualification for flight or qualification for space or wherever the application is.

So I think that the mechanisms for creating the new -- for characterizing the materials and the parts already exist and will continue as they have been very successfully in the past. So I'm not too concerned about whether or not the standards organizations can adopt to the new technologies. They've done a pretty -- working with nanotechnology and the insertion of nano-structures into polymers and composites, we've had to go through all the same rigorous testing and worked with NIST and with other agencies in the U.S. government, as well as with NIOSH and OSHA and EPA to assure that any new materials that enter the market are safe and do all those things -- the mechanisms are in place, and they will be exercised.

You can't just put a new material on the market that might not perform properly. The mechanisms are there, I think, to assure that we'll adjust.

LAMBERT: And I'd just add, that's a uniquely American thing. I mean, again...

PIETRAS: We are leaders there, for sure.

LAMBERT: ... a shoutout to NIST and to other organizations that help make these standards a reality and common. And that's why, frankly, the world looks to us to set these standards, because we still have that role in setting those standards.

Sir, in the back?

QUESTION: Hi, I'm Marc Levinson with the Congressional Research Service. A question for Hugh Evans based on your comment a moment ago about how your company is essentially selling solutions that include materials. Could you take us through a little bit how you handle an order, an industrial -- potential industrial user is coming to you looking for a machine for a specific purpose? Does that mean that you're actually custom-designing the material to be used in the 3-D printer for that particular customer and that that's part of the transaction selling the printer?

EVANS: Not exactly, but a little bit. The -- an industrial user who gets started, industrial users effectively do two things. They have their CAD drawings. They have their CAD file. And they will frequently send the file to what we call a service bureau, which is just a -- factories that we have, we have 10 of them, that have legions of these machines in there, and we start doing printing out their parts for them and shipping them to them.

So many industrial customers just get going by essentially outsourcing it to a -- to a service bureau and say make -- start making this. And can we make it in this? It's a low-durometer silicone. Can you get these properties in? There's a lot of black magic that goes into what materials are you going to use, what material batches you're going to do, and what machine? What's the speeds? It's just a lot of learnings that go on.

And once the customer essentially is ordering more than 10s and 20s of something, then they say to themselves, OK, it's time for us to buy that machine, put it inside of our four walls, and just run it 24/7 for ourselves. So many customers just start with sort of the outsourcing -- you see this in the pharmaceutical industry a lot. They outsource it and then, once it gets to a certain critical mass and they have the knowledge of what they want, they bring it inside their walls. I don't know if that helps, but that's what we see.

LAMBERT: And are you -- from a make-buy decision, in terms of -- from a major company, do you -- do you see that you're outsourcing a lot of that capability to firms that can perform for you? Or are you trying to bring that in-house?

PIETRAS: Well, it's a combination. I mean, it really depends on the application. I think right now the exciting thing that we're looking at is the very high-end, high-performance side of this. So much of it's being worked in-house, but with the manufacturers of the machinery themselves. Because as I said before, the real value comes in as, where are the materials that are being printed? And in the aerospace industry for sure, the high performance aspect of that becomes critical, and it's a collaboration.

In order for the suppliers of the machinery that creates the 3-D printers to really understand the market, they need to work in collaboration with us to understand what we're trying to do with it. And so this -- it's not -- no one's working in a vacuum. It's really a collaborative environment. And it goes all the way back to university research, which funds the primary principal material science that enables this technology which allows us to then put it into our programs.

LAMBERT: Having just heard that, how would you compare this to the other manufacturing revolution that you've written about in the U.S.? I mean, the collaboration between designers and users in the U.S.?

WALDMAN: Well, I'll even broaden it, designers, users, all parts of the supply chain, and various parts of government. I think one of the things that these advancements are doing is making this old sort of economic policy paradigm of government versus private sector very, very antiquated. I think the efficiency of these technologies and the fact that, you know, they can only -- they extend the imagination means that they also extend the supply chain.

Collaborations between -- within the private sector, between the private sector and the government are going to become so common that nobody I think eventually is going to -- in this policy area is going to be thinking about, should -- does the government have a role? Does the private sector have a role? It's going to just sort of push that old fight, at least in this area, to the side.

LAMBERT: Interesting. I would ask one question of all of you. Probably won't name names, but in my experience, there were very few people in a policy role on Capitol Hill in particular that really were focused on this revolutionary technology. And Senator Brown, obviously, has been very active in it.

What role do you see, if you see any role, for Capitol Hill to be playing in this debate, whether that be in the protection of IP or whether that be in credits or investment?

WALDMAN: I think they need to learn. I think they need to very much be in a learning phase. I think they -- one of the things about the United States is that we have a lot of very good public resources, both for training people in this new world of technology and for sort of investing in their development.

But we tend to underutilize them. We use them very inefficiently. So I think I would want Capitol Hill to do two things, one, learn as much as they can, and then think about how we can use our existing resources more efficiently to think about standards, to think about bringing back a kind of Apollo-era investment in basic science, which was -- the remarkable -- I think the success of the '60s was collaboration, was the -- not just the dollar investment, but the investment in a collaborative effort. It was a Cold War -- it was a Cold War-motivated thing, but it motivated us in the right way. And I think we have to start thinking like that again.

PIETRAS: Yeah, I agree. I mean, as for what the government can do, one of the great things government can do in any of these types of things is really bring public awareness to what's happening. It can be inspirational and aspirational as the Apollo program was then.

And understanding how this is going to impact the future of the nation, in terms of starting with the educational systems and STEM right at the grade school era. I think about the idea that, you know, when you learn aerospace engineering, it typically is in advanced -- you don't really get into it until you're an advanced undergraduate class, where you have wind tunnels or some things. Imagine in the sixth grade if I could print out -- you know, I could do an aircraft, you know, a small prototype, and I could have three teams, and each team prints out a different structure, and then they go try them out in the playground, and then they can sit down, why did this one work? Why didn't that one work? Go back and -- in a day.

I mean, this is -- the excitement is at the speed at which innovation can occur can also have the same impact on education and inspiring young people to go into science. So if one of the roles that can happen in policy is to really inspire that educational aspect of it and really show how it impacts the nation as a whole.

And one thing that -- as we're sitting here talking about it and thinking of examples of -- you mentioned the Apollo program. Everybody's seen the Apollo 13 movie, I'm sure, with Tom Hanks. It's a great movie. And there's a point where they throw a bunch of stuff on the table and say, "This is what they have to work with, and they need to fix this unit. How are they going to go do it?" And it's the famous duct tape and tubes and wires.

Imagine, instead of that, they called up a bunch of engineers and said, "This is the problem. They need to make a modification." And rather than throw duct tape and tubes on the table, they upload a file to the spacecraft, and they print out the right adapters to fix the machinery. And they didn't have to take any of that stuff with them.

These are the types of inspirational things that I think really have a great impact on future generations. And not to go longwinded, but when you a have a 30-year aircraft program, the people who are going to work on that aircraft in the last third of it are just being born today.

So we need those children to come up through the educational system inspired by science, inspired by technology, and ready to really lead the revolution in manufacturing, because we need them and we know we need them now. And our aircraft are flying knowing we need those people excited and educated in science and technology, math and engineering.

EVANS: It's a great answer. The -- my only little contribution to this discussion would be that, in my world, I'd like to rebrand STEM into STEAM, science, technology, engineering, art, and mathematics, because the people I'm running into who are making the most effective use of this technology are the -- they call the makers. I think it's a social movement. I think it's a profound social movement.

And they don't -- many of these guys do come out of MIT, but many of them come out of FIT and Parsons and Rhode Island School of Design and MICA. And they're makers. And they're artistic, and they're brilliant, and they're a little different. And it's phenomenal. And it's bringing into the design function people, I think, who are a little bit -- who are very creative, and this tool is very liberating to them. So I've really had a recent appreciation for the artistic aspect of integrating this into the traditional engineering function.

LAMBERT: That is another way I think this technology is truly revolutionary, is that you may find an engineer who designed one of your key parts that has green hair. And that is -- you're seeing that more and more of the interchange.

I want to close on time, so I thank everyone for coming. I certainly want to thank you. I want to remind everyone this was on-the-record, but it's -- as we said in a phone call earlier this week, we could spend days on this topic, because it is truly, I think, a revolutionary topic, and it has multiple policy implications. And I thank the Council for hosting the event. Thank you, all.

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