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Eric Schmidt on Technology, National Infrastructure and Public Policy

BY Sarah Granger | Tuesday, November 18 2008

The following are notes from Eric Schmidt's talk at the New America Foundation today in Washington, D.C., as taken via webcast. Schmidt is largely known as the Chairman and CEO of Google, but he is also the Chairman of the Board of the New America Foundation, and he is a member of President-Elect Barack Obama's Transition Economic Advisory Board. He has been named frequently as a top candidate for the position of CTO in the new administration. In the introduction, it was noted that he has a background in electrical engineering and a PhD. He was not speaking in the context as an advisor to Obama but rather in his role as the Chairman of the New America Foundation. This is a long transcript as it was a long talk, but it's worth reading throughout, including near the end, where he goes into what Obama achieved by using the Internet in his campaign and how that can be transferred to his administration.

Schmidt opened the talk by saying he disagrees with some of the ideas from New America Foundation which means they're challenging and innovative, something he likes. He laid out that his talk would cover topics included within and the relationship between tech, policy, economic growth and restoring trust in government. "This may be the toughest economic time most of us will face in our lifetimes."

"Dependence on foreign oil is this huge drain. How many wars, how much of our infrastructure has this been driving?" "America is a remarkable place... we have the intellectual foundation, the leadership, the people in the room to solve these problems and build an even better place..."

"One hundred years ago, nobody had information, and now all of us [in the room] are significant users of the Internet." In almost 100 years, all the people will have access to all the information in the world. Think about what the arrival of information will do - via mobile phones - to improving standard of living across the globe. Schmidt goes on to explain that 98% of ideas are good; 2% are "wacko," and that's okay.

The power of communication in everyone's hands. People do not understand how powerful this is. Schmidt doesn't feel the government understands this or the people, mostly because of the enormity of the concept in terms of information, transparency, etc. He indicated that there are still science & technology advances that are unheard of that can happen. The amount of money being put into university research programs is important. "The best and the brightest are going into this because they believe they can make a difference in the future." "We have an opportunity, for example, to become the most energy efficient economy in the world."

"Technology makes a difference." Technology always follows these curves... we have to balance from a regulatory perspective, free market, and innovation. "Balance is achievable by people with judgment." The objective is to win as a country. What's happened now is we're finding this balance point again as we study what's happened the last few years... fundamentally we have to agree with the free market and what is the proper role of government.

Small startups with funny names - the next generation of Googles - must be funded because that's where the wealth will be created, and where the new innovation will occur. The Internet was founded through DARPA and Schmidt was one of the recipients of that grant. "Look at all of the things that people have connected. It's that openness, the ability that anyone can play..." that's a characteristic of dynamic, scalable networks. It's been highly successful.

"Why don't we do the same thing with the energy grid?" Smart grids and the ability to use the battery in your car to provide peak power in the middle of the afternoon and then charge it at night. Why can't we do it? It's just a design problem - every aspect has been shown in labs - it's just a matter of will.

If you're going to spur economic growth, most focus on infrastructure, innovation, and energy. Infrastructure is the foundation upon which wealth - societal capital - is created. "If you don't fundamentally build that infrastructure, you won't get the effects I'm talking about." (Schmidt later noted, "I'm a big fan of infrastructure.") We need new networks that can put tools of the communication in everyone's hands. We invented this stuff, but we're now 15th in the world. Lots of Americans still don't have high speed networks. Most areas have only 1-2 suppliers; 4-5 should exist; competition helps in setting prices.

"If you look, current FCC has done tremendously good work on this... Against tremendous political pressure, they opened up the spectrum because they read their charter... This is an act of remarkable courage." The decision to open up the white spaces for development was good. Spectrum is everything in what we do because we're mobile and it's all around of us and most of it is not being used at all. "Let's open it up."

You never know where innovation comes from, but an innovative model, we welcome it. These open platforms really drive choices. If we go back to the wisdom of crowds argument, an open system means more voices which means more discussion, more choices, and better outcomes. The alternative is the case of Ma Bell.

There's a shift to cloud computing - the cloud (the network) is where all of the computation/innovation happens. Everything you care about is already on the network and is brought to you in a safe and secure way. Most organizations are moving toward cloud computing because regulatory decisions of the last 10-20 years have enabled us to get the information to everyone. The massive shift to cloud computing now allows small businesses to compete with big businesses. "On the Internet, you really can compete fairly; it doesn't matter how big you are, but what service you offer."

"You also have to focus on R&D." The situation in R&D the last few years has not been good; it seems obvious, but we [the government/the people] fund research and development because no one else does. Businesses by law have to serve their shareholders; they're not going to fundamentally invest at the level of pure research. It takes government policy to take advantage of this.

Much of the work Schmidt participated in in the 70's came out of this. "If you take a look, most of the innovations have occurred not in large corporate labs but at universities..." where funding has come from NIH, NSF and other groups. The budget for basic scientific research went down last year. President-elect Obama has proposed to double the basic funding. This is "long, long overdue." We should focus on science & math, especially in education context as well... We're falling behind other countries in this regard.

Regarding other countries taking the lead on innovation, Schmidt posed the question: "Do you think ultimately you'll be dealing with innovations they come up with where you'll be the captive consumer?" "I welcome what they're doing, but it seems to me we should get our act together right now."

It's another problem that we kick these researchers out of our country if they don't have the right visa. "What do we have to do to extend these? "We have the best university system in the world... we kick these people out after they graduate so they can't be useful in our society and pay our taxes." "Why wouldn't we want the best and the brightest in America to solve these problems? Wouldn't you rather have them here? It's bizarre. It's disgusting." (He noted his strong feelings on this particular topic.)

"Then of course we have patent reform, which has got to be on the agenda." There have been a series of very good patent reform bills that have not made it. "From my perspective, patent reform litigation and good IP laws are fundamental to this."
Google thinks they can sense flu trends by looking at what people are doing in an anonymous way and let people know. "How many lives will that save? is it worth doing? if it's one person, great; more, you bet."

On universal language translation, Google has invented technology that uses statistics that can translate from language to language so you can figure out roughly what people are saying. This is important because language causes war. People don't understand, they try to mediate... Don't you think it would be better off if we could translate books from Arabic to English and vice versa?

Re: the environment and energy predicament, Schmidt stated, "we're at one of those points where we've got to get this right." "Oil is finite, but information is infinite, so how can you take information and the structures in that and apply it to something which is the lifeblood of what we do?" These challenges are very hard and they're certainly as hard as the science topics... We understand that energy is everything that we do - a $1.5 Trillion U.S. industry.

"You have a situation where you have climate change, which can be argued as the other threats against the world" (along with the threat of nuclear proliferation). You have issues going on now with respect to pricing, pricing stability, incentives, etc.
There are no silver bullets in life, but Google thinkers were hoping to come up with a solution that solves the climate change problem, causes oil prices to go down, gets people to go to work, creates an industry, and that we can afford. The average person will say no, we can't do that, but Google produced such a plan - the Google 2030 energy plan.

The plan addresses the need to have the same level of efficiency now through the next 20 years. Per capita energy consumption has gone up per citizen except in states where the regulatory environment has decoupled utility profits to utility efficiency. In California, for example, energy companies get paid based on the energy they save, not the revenue they make. Two-thirds of states in America now have a variant of that. If you make that assumption assuming $3/gallon of gas, you get energy efficiency over time so you can build more plants. We need to rebuild plants anyway so why not focus on cleaner, like solar.

"Solar is enormously powerful" esp. in the U.S. where we have vast deserts. New technologies help with that. Wind is almost approaching as a solid solution now with these huge, slow turbines (not to hurt birds). The cost is slowly approaching that of coal but there's a transport issue. The problem with this is that there's no grid in these areas - deserts, etc.. It takes 15 years to build these grids because of government issues, etc. It's tough to get the infrastructure approved. We need good public policy and incentives between players could make a big difference.

The other part of the equation is cars. "Plug-in hybrids is the solution." New batteries are getting better. We can charge these batteries for long drives of like 40 miles. With cars like the Chevy Volt, short trips can be charged from your house, but if you need more, the gas engine charges the battery and you move forward. You save half the fuel. The Prius would go from 50mpg to 100mpg. And it could work for all cars."

Avi Levin has done work to get power usage way down. We need to create other choices and let the market sort them out, so the government needs to do bail outs.
"Assume we're in a pretty severe recession." As a result, the government should do a stimulus program. Why not use that money to get this started? Build the infrastructure as part of the economic stimulus.

Maybe we could decarbonize our economy, maybe we could actually get started on a multi-year, multi-decade program to make this happen. Many contractors have no work from housing industry, so we can transfer these people to fix insulation or other problems in homes re: energy efficiency. People are unwilling to improve their homes because they think they'll sell it in 3-5 years, but realistically it's longer. A county in California figured out a type of bond to take loans to do home green improvements and the loan goes onto your title so when you sell the house, that rate continues at a friendly rate so the city gets its money back. We should also fund auto companies with bonuses when they beat the CAFE standards.

These ideas have been around for a while. Matching the smart grid... [we need] federal pre-emption to get this moving quickly. Another thing you have to do is get money going - tax credits, solar, wind, geothermal. "How much tax credits should they get to offset what the fossil fuels industry has endured in the past?" They calculated $10 Billion would work.

Another idea: create a Federal energy lending authority modeled on the Farm Lending Act of 1916. The government
could make low interest long term loans to people to build these green businesses - with matching money, private sector help, etc. We could also tie that to the energy buying authority. There's a CO2 eating rock that turns to marble when it eats CO2. We need to find more of that. The government could also buy the polluting cars possibly. (He admitted not knowing the numbers for that, but noted it as an interesting idea.)

These are jobs programs and jobs programs matter politically to Congress and citizens. 1-5Million new jobs can be created by these kinds of programs. Putting all of that together, it's time to restore trust in how our government works and how it makes decisions.

Returning to the model of the Internet and how people use it, the Internet was a big winner in 2008. There's no question the president-elect used it very skillfully especially very early. Over the weekend, Obama used YouTube to communicate him giving his radio address and "as a result of that, people are now debating it; it's causing engagement."

The notion of engagement is fundamental to how they get through this. The notion of politics done in corners and then unveiled legislation is old school. "We need to move to a more open model. A lot of people want to participate." We always have 1% of crazies online, but that's OK. Why did we not have the tremendous political scandals this year? Because many were based on falsehoods and they were corrected quickly by the police of the Internet. People tracked everything everybody said. "That level of engagement is a permanent change in our political thinking."

"As a political leader, you know this matters because you've seen your fellow members get changed by this." "How can we take that and move it forward?" We want to encourage debate - more debate, more voices.

Basic information the government uses is not available for public searches. A series of Acts have tried to open us up, but the vast majority of information is on sites which no one can index. These are easily solved by legislation or by getting it out. It's better to have the information with you than to shut them out. "You embrace them; you don't shut them out."

We can stream almost all of the meetings, so why don't we get them more involved?
Our government has not embraced the tools we use every day - blogs, video, other info sources. Other countries are doing this better - Britain, for example. Arizona has a good one where Real Estate agents can figure out what rules are, etc.

"Waiting until the eleventh hour to solicit input on the bills is crazy; why not start early?" The USPTO is running an experiment where they publish patents early for public comment and the players go after it because there's no way their patent examiners can get all the insight that the wisdom of crowds can do. "Why is that not true of every branch of government?"

Use the people who care passionately and who have free time to help you. (Schmidt says this directed to those in government.) "I am very much an optimist about this... the country has faced many many more significant challenges." "Let's take the crisis, let's take this huge set of issues that we face, and let's deal with it as an opportunity to get the structure right."

The aspects of this have to do with communication, policy and the proper regulation.
These choices are not easy, but this will force people to deal with them. There's a recognition among Americans that you have to have private and public sector together. This framework gave rise to the Internet. The government funded it, it was designed by scientists, it created business openness, huge corporations, changed telecommunications and modern life and to a much better understanding of each other.

"My optimism comes from a rock solid view of the genius of the people and modern technology." We can get our country back to work, we can get really outstanding solutions over the long term, we can face these challenges and we can face them head on. He paraphrased de Toqueville who essentially said that "America will do well because of the optimism of its people, its abundance of land, and its absence of a king."

Q&A followed, and most of that is not included here, but the first question was interesting, asking how Google employs some of these ideas and how they develop ideas. Schmidt replied that employees every week say things they're doing in "snippets" sent around the whole company. They try to never have single meetings - try to have big discussions where they come around to the best idea. "People often based consensus based cultures with getting to the best idea."

Please note that this was all typed in real time during the talk, so not everything will be 100% accurate - a few words may be off and some statements did not make it in here, but probably 90-95% of the talk is included.