You know how the U.S. (and its Allies) beat Russia in the Cold War because they gradually developed a stronger electronics and high-tech sector, which became more and more important as e.g. precision weapons showed their worth? And as we started testing nukes in computers rather than in underground tests? The Russians’ state-dominated model simply couldn’t produce the kinds of innovations made by the Western commercial sector. It’s a similar thing with Silicon Valley and the US govt.

The days where the govt seeded tech in the US are long gone. This is not to say there’s no contribution, but when was the last time someone cared about govt or defense contractor involvement? Not many who are alive and still working in the Bay Area today.

The article is correct and there is a fear of being co-opted by the state. There is a question whether there is some middle ground. Traditionally that middle ground was held by defense contractors. Today there are tech-like companies that are increasingly filling that niche. Examples of such companies are Pivotal (which recently filed its S-1) and Palantir (which might never file its S-1). I would argue that Amazon and Google are getting into these DoD contracts because Pivotal, Redhat, etc. failed to build a compelling-enough PAAS solution that the government can deploy on its own. The government would love to own its own datacenters, but apparently that isn’t working out, or there’s still some need for agility that’s not being fulfilled.

Given how much space Palantir leases in downtown Palo Alto (and the fact that they seem to have no need or responsibility to ever exit or behave like any other tech company), I think the fear of being consumed by the government is not at all unfounded. Now you can argue that Pivotal and Palantir are nice companies (for vastly different reasons) but when you really take stock of it, no one can say they’re really tech companies (and, that is fine). To Silicon Valley, they represent something else, something bureaucratic.

On one hand Silicon Valley needs to be a bit more realistic about geopolitics. The government isn’t going away. In practice, it's just the simple fact that we are more beholden to political stability than we think, and we tend to take it for granted. On the other hand, the government represents that side of society that forces things and pretty much can’t get free-spirited commercial innovation right. And again, in practice, it's like trying to do anything interesting when you have your nanny mother (who has no real fiscal or creative responsibility) watching over your shoulder. The reality is more boring than people realize, but the tension is there and the problem is real.