Eric Schmidt Tells Charlie Rose Google Is "Unlikely" To Buy Twitter And Wants To Turn Phones Into TVs

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http://video.google.com/googleplayer.swf?docid=8240499345320964787&hl=en&fs=true

It must be Google Week on Charlie Rose. Thursday, Rose interviewed product chief Marissa Mayer, and last night he had an hour-long conversation with CEO Eric Schmidt (embedded here, with a full transcript below). The wide-ranging interview touches upon everything from Google’s origins and how it fell upon its advertising business model by accident to how search and other technologies will change society over the next twenty years.

Asked if Google wants to buy Twitter, Schmdit responded: “We’re unlikely to buy anything in the short term partly because I think prices are still high.”

And echoing Mayer’s earlier enthusiasm for all things mobile, Schmidt painted a picture of Android-powered devices turning into TVs (and disrupting the current TV model):

It’s worth noting, by the way, that if you imagine the power of these mobile devices over a five or 10 year period, they must be possible to do almost everything that we do today with other means . . . . It should be possible to watch television and watch your show routinely on these devices, in very high quality. The technology is just getting there. And when that occurs, it’s a different experience because it’s a personal experience. When I turn on the television, it shows the same shows that I saw yesterday and I watch them and it doesn’t know that I watched them yesterday. What a foolish television. Why is it not smarter?

Below is the full transcript, with sections bolded for emphasis (I particularly love the story about how Bill Joy uses search to find new investment opportunities)


Transcript:

Charlie Rose:
Let’s just go back and do a quick history of Google. 1995, Sergey and Larry started, and they create this search engine working at Stanford. How did they get you involved in 2001?

Eric Schmidt:
Well, Larry and Sergey invented the algorithms, the lessons, if you will, the way our search works today when they were very young and in graduate school. And they founded Google and eventually needed some additional management help, and there was a search that ultimately I got connected to them through one of our board members, John Doar [spelled phonetically]. From my perspective, most of what you see at Google today was invented at Stanford by graduate students. And a lot of the culture, the way we operate is really derived from that culture.

Charlie Rose:
Your background, though, was as a technologist.

Eric Schmidt:
That’s correct.

Charlie Rose:
You’ve been head of technology for Sun Microsystems, you’ve been a CEO.

Eric Schmidt:
Yeah, and I see myself mostly as a technologist who happens to run a business.

Charlie Rose:
What was the original mission for Google?

Eric Schmidt:
All the world’s information universally accessible and useful.

Charlie Rose:
And how are we doing on that?

Eric Schmidt:
Well, we have just started. And I will tell you that when you’re 23 years old, and you state that’s your mission, you’ve got a lot of years ahead of you. And Larry and Sergey still have a long way to go on that.

Charlie Rose:
This is what I’ve always wanted to wonder. I’m told this is true that in the beginning, what you were going to do was sell to people the search technology. We’ll sell this to you, and then you can do search.

Eric Schmidt:
The first model was just this is an amazing new invention, this ability to search information. And at the time, the web was not so complicated. It wasn’t as obvious that search would be needed because it wasn’t that big. You could sort of look and find things, and you knew people. So Larry and Sergey went around to all of the then powerful internet companies. And every one of them turned them down.

Charlie Rose:
Saying what?

Eric Schmidt:
We have a better solution. We don’t know how to work with you. You’re too young, that sort of thing.

Charlie Rose:
Entrepreneurs have gone through this — there’s not an entrepreneur alive who hasn’t gone to somebody and say good luck, not for me.

Eric Schmidt:
There’s a rule in –

Charlie Rose:
Including bankers.

Eric Schmidt:
The rules in social [spelled phonetically] value that the great entrepreneurs break out early. And I think you see that. And I think part of the reason that occurs is because of the educational system in America with graduate students and young faculty, it’s very, very productive. So you get people right out of college, you get them into a graduate program, and they invent something, and they — all the world is in front of them, and they go for it. It’s one of the greatest aspects of America.

Charlie Rose:
Well, who decided — what smart person decided that rather than selling the technology we’ll just sell advertising?

Eric Schmidt:
Well, the initial attempts didn’t work because they heard no, no and no. Meanwhile the money is kind of running out and they’re getting kind of nervous. So they came up with a simple advertising model which one of the engineers invented that worked pretty well. And the small team at the time managed to get a couple of deals. When I showed up, that product was fixed in price and the — Google had invented a dynamic system that ultimately became our product called AdWords. And I remember walking to the very young program manager whose name is Salar [spelled phonetically], who looked to me to be about 21 years old. I had just joined, and I said, promise me our revenues are not going to go down by a factor of ten when your brilliant new product comes out. He said, it’s going to go up by a factor of ten. And I said, no, you know. And indeed he was right.

Charlie Rose:
And advertising is now, what, 90 percent of the revenue?

Eric Schmidt:
98 percent.

Charlie Rose:
98 percent. So advertising –
[talking simultaneously]

Charlie Rose:
[unintelligible] been very, very good to Google.

Eric Schmidt:
We are an advertising company. And you can think of Google as two parts of the company. You can think of it as a user phenomenon and our prime area focus by the way is on end users and solving their needs. And you can also think of it as a business in which case it’s an advertising business.

Charlie Rose:
Today Google does many things. I mean searches is its primary thing, but you — you created e-mail, Google news.

Eric Schmidt:
We started off with search. And the early founding team, Larry and Sergey and the initial team invented the advertising model which has done so we will for us. On April 1 of 2004, we introduced our first application which was called Gmail. And at the time, people thought it was an April fool’s joke. We sort of played with that, but it was part of our character. And today we say our strategy is search, ads and apps.

Charlie Rose:
Search, ads and apps.

Eric Schmidt:
Ads and apps. And applications they’d make your life better. And we have the ability now because we have so many people using Google to really change the way they use computers and the way this material — the term of art is now called cloud computer. And the idea is to let the computer take care of all the details. All you do is just use it. It’s always there. Google or someone else keeps the information. We don’t lose it, we don’t break it. It doesn’t get viruses, that sort of thing.

Charlie Rose:
Applications. You have this thing at Google where you can take a day off of each week or 20 percent of your time, say, out of 100 percent, five days, one day, and you can work on anything you want to. How much of that has led to interesting, productive profitable applications?

Eric Schmidt:
We think the 20 percent time is really the only way we’ve been able to maintain our innovation as we have gotten larger. What normally happens with technology companies is the initial founding team gets older, you bring in traditional management, and although it becomes a better managed company, much of the creativity and the flair and the joy did get lost in the process. By establishing the principal that engineers could spend 20 percent of their time working on whatever they found interesting, we created a culture where there’s this constant flow of innovation. Literally every day there’s another fun surprise. Now, before we get too excited about the 20 percent time, these are engineers. They don’t vary that far from their area of interest. But it gives them an opportunity –

Charlie Rose:
They’re not finding a cure for cancer. They’re looking at –

Eric Schmidt:
By the way, if they did, we’d be very excited about it. But what there really doing is they’re saying, in my space, I see all of these new technologies. And there’s a new problem that I see that I want to apply this stuff to. And that’s how the innovation works.

Charlie Rose:
You also bought YouTube. You have Google news. We’re in a time now, and we’re going to talk a lot about the economy in this conversation because of the roles you have. Acquisitions come up. People are excited these days, the lost several months about Twitter. Does Google want to buy Twitter.

Eric Schmidt:
I shouldn’t talk about specific acquisitions. We’re unlikely to buy anything in the short term partly because I think prices are still high. And it’s unfortunate I think we’re in the middle of a cycle. Google is generating a lot of cash. And so we keep that cash in extremely secure banks.

Charlie Rose:
Right.

Eric Schmidt:
And we’ll wait that out. From our perspective, I think the YouTube application and the DoubleClick acquisition which are the two large ones we did last year and the year before, have been phenomenally successful.

Charlie Rose:
YouTube has been fueled by user generated. People did it with their cameras. How much of a phenomenon is that going to be in the future of the internet?

Eric Schmidt:
We think it will be one of the most defining aspects of the internet. Because if you think about it, everybody has phones and every phone has a still camera, and every one of those phones is going to have a movie camera pretty soon. And indeed if you think about it, a lot of the news that you see you’ll see some phone camera video of low quality. Well, five years from now, those will be very high quality videos as the technology gets better. And the joke is that the vast majority of photographs now taken are kept in people’s phones because they can’t get them out of them.

Charlie Rose:
They can take the picture, but they don’t know what to do with it.

Eric Schmidt:
So we’re working to solve all those problems. The important thing here is that the phenomenon of user generated content of which YouTube is an example is I think the defining expression of humanity over the next 10 to 20 years. We had no idea that all these things were going on because there was no way to see them. And now if you have someone who is being taken advantage of or abused or put into an inappropriate position, what have you, they can take a picture. They can record what the police are doing in an –
[talking simultaneously]

Eric Schmidt:
There’s a lot of implications.

Charlie Rose:
Speak to that.

Eric Schmidt:
Well, the most interesting thing to me is that transparency is how you keep societies honest. And we’ve now because of the internet and because of the digital revolution given people — we’ve essentially given them the ability to see everything. So you can now take photographs, take videos of everything you see in your world and people discover it. And there are whole communities of people who are interested in these kinds of aspects. And they serve as a form of check and balance on the powerful, the rich, the people who might exploit others. It doesn’t necessarily mean for a different outcome, but it means that everybody can’t hide. They have to actually tell the truth. To me, that’s a great step forward.

Charlie Rose:
And how would it affect politics?

Eric Schmidt:
Well, there are many ways. Today, if you talk to politicians, a simple story is that in 2006, the house went Democratic. The senate went to Democratic because of a race in Virginia which involves an unfortunate video on YouTube of a Republican candidate losing to a Democratic candidate and on the Democratic side there was another example, there was a video of one of the congressional people in the Abscan [spelled phonetically] scandal, which many people have forgotten. Yet the video brought back those memories and affected the outcome of a Democratic race, an equal opportunity technology. The important point here is that politicians today are well aware of YouTube and its phenomena and they’re more careful. And being more careful is probably good. Indeed, if they are going off and saying things to small audiences, and they go to other audiences saying something very different, I want to know that as a viewer. There are many things as you can imagine in the future. The one I like the most is the politicians BS detector, where basically the — Google is sitting there, and the politician says something, and you can type it in, that’s true or false.

Charlie Rose:
Yeah.

Eric Schmidt:
You can decide if you want to leave or cheer.

Charlie Rose:
It also has this ramification too. People on the Internet now who may have information, if they know something is going on, an investigation by an journalistic organization, it can hold them accountable too. Somebody may have information that some facts used in the journalists report were not true because they have better information or they have information that contradicts. What happens as a result is it’s very difficult now to use completely false statements to inflame the public. You can take the facts you can twist them in the way you see fit, but your facts have to be right. That’s probably a big improvement in governance.

Charlie Rose:
It also helped then Senator Obama had a difficult moment during the Pennsylvania primary when he went to San Francisco to raise some money. Somebody was in there with a phone and recorded some [inaudible]. Mobile devices will play what role in the future sort of evolution have technology?

Eric Schmidt:
They’re probably the most important of all. Today, everyone here in the audience has a mobile phone. It’s the last thing you would leave anywhere, head phone, has a GPS, knows where it is. The powerful mobile phones have powerful browsers. They have cameras, as we’ve discussed before. You can do a lot with them. Fast forward a few years from now with the content and the capability of that with a new generation of applications. We expect eventually that the important of uses of the Internet will be on mobile phones. Mobile phone usage is growing faster than personal computers. There are many more of them, on the order of 4 billion in the world. In our lifetime, the majority of people, at least 5 billion, maybe 5 1/2 billion will have mobile phones.

Charlie Rose:
The exponential growth in countries like China and India and emerging markets as they’re called, even though they pretty much emerge rather well, is extraordinary.

Eric Schmidt:
In our lifetimes we’re going from almost no one being able to communicate to almost everyone be able to communicate. We’re also going from almost no one having any kind of information and access to libraries to virtually everyone having access to every piece of information in the world. That is a enormous accomplishment to humanity.

Charlie Rose:
It is brings me to some of the issues that might be relevant here. Number one, in terms of copyright and all of that. You guys would like to have every author of every book every published, make it available through Google. Fair enough?

Eric Schmidt:
That’s right. And furthermore, we want them compensated. We’ve entered into an agreement that we hope will be approved by a core of book publishers and authors where essentially rights holders will register. And they will get essentially a commission and a payment for the use of their work, if it’s printed on an electronic basis. We hope that in this model, people will be comfortable, if people find the book, they’ll buy it on line either in text form or they’ll go to Amazon or something like that and purchase the book, in which case the author will also be happy.

Charlie Rose:
Or they’ll put it on their Kindle –

Eric Schmidt:
Kindle, what have you. It’s worth noting, by the way, that if you imagine the power of these mobile devices over a five or 10 year period, they must be possible to do almost everything that we do today with other means. It should be possible to read books very well on those devices. Make it as fast as reading a magazine. It should be possible to watch television and watch your show routinely on these devices, in very high quality. The technology is just getting there. And when that occurs, it’s a different experience because it’s a personal experience. When I turn on the television, it shows the same shows that I saw yesterday and I watch them and it doesn’t know that I watched them yesterday. What a foolish television. Why is it not smarter?

Charlie Rose:
What are you going to do about that?

Eric Schmidt:
Well, in our case we’re building the platform that will allow the content people to do more targeted content. So you can imagine the mobile device will say, well, Eric, you watched this episode of this television show, we’ll offer you this other one. Or didn’t you forget that you already watched that episode of Charlie Rose? You should watch this other one because it’s related to the one you liked. This personal viewing experience is a fundamental thing that the Internet can do, and companies like Google can do.

Charlie Rose:
But that’s all key to the advertising, too?

Eric Schmidt:
Of course.

Charlie Rose:
In other words, that’s why you guys are rich, is that when people — whatever you were searching for, gave a link to what you’re interested in, you could, therefore, pin point products that might appeal to you.

Eric Schmidt:
That’s right.

Charlie Rose:
How much of it is text rather than video?

Eric Schmidt:
Well, today the vast majority of it is text. 95%. There is text as you see near search results are very, very lucrative. It’s a great business to be in. You probably say that’s an understatement.

Charlie Rose:
Yes, I do.

Eric Schmidt:
The — but the same model works for other things. So we’re busy building, for example, in if display ads which are the picture and so forth. We’re building much more sophisticated powerful ads that are immersive. It’s all about narrative. When you look at your show and I look at what you do, I see a narrative that has evolved.

Charlie Rose:
Sir Martin Sorrell, a man you know, head of WPP, sort of created through acquisition, made, I think, the second largest advertising in the world. He has a term for you guys called — I think it’s a combination of friend or enemy, frenemy. Frenemy. Which he says are these guys our friends or are they our enemy?

Eric Schmidt:
When I talk to Martin, he’s our friend.
[laughter]
And we actually have a very close partner with WPP, which has worked very well. The advertising industry and the agencies are learning how to work with these new models. There is a great need for creativity, because as part of — advertising is about stories, advertising is about images, the narrative and the tools are coming. So over the next few years, you’ll see very sophisticated visual advertisements. Think of them as YouTube videos in one form or another that are immersive, that get you excited about buying the product. And maybe at the end, you’ll be so compelled, you will buy the product. And we will sell those products and make a lot of money.

Charlie Rose:
Here is the question that everybody asks in technology today, not anybody at Google. But if you do what I do, and if you do what people who have content do, and if you do what YouTube does, how do you monetize it? It’s a huge problem — not a problem, challenge. Challenge. As Rahm Emanuel says, we see every crisis as an opportunity. Is this a — is it a challenge to find ways to monetize it. You produce content. If you make it free, you don’t generate a lot of revenue. So what’s the answer few monetization, because it affects YouTube, one of your companies.

Eric Schmidt:
On user generated content, a lot of it is very hard to monetize, very hard to show an ad next to some of the stuff. And many advertisers wouldn’t want to be near that stuff.

Charlie Rose:
That’s a problem, isn’t it?

Eric Schmidt:
That’s a problem. So there is a total market of monetizable things. Here is a model for you. For things which are going to be viewed by 2 billion people, you’re going to use advertisements. And you’ll use, in the case of YouTube, you’ll use videos around the sides, you’ll use ads at the bottom, you’ll do 15 second pre roll or post roll. And all of those experiments are being tried at YouTube. I would say YouTube’s monetization of that is halfway. We’re not where we need to be, but we’re much farther along than we were last year.
year.

Charlie Rose:
Okay. Take social networks like Facebook and MySpace. They have the same problem.

Eric Schmidt:
Absolutely.

Charlie Rose:
The argument is made that nobody — the people who on Facebook are interested in what their friends are doing. They’re not interested in ads because they’re not searching for products.

Eric Schmidt:
But that — but that denies the fundamental progress of innovation. There absolutely will be solutions for that. We just haven’t invented them yet. We’re still waiting for the 20% timers to come up with these insights. But it’s obvious –

Charlie Rose:
Got some Google boys and girls out there working on this as we speak.

Eric Schmidt:
You can’t sort of tell them. It has to occur naturally through the bottoms up process. So we’re waiting. But we know it will come because the amount of final being spent on that is so significant that we know we can use that time for some form of entertainment, advertising some kind of [inaudible] experience. Another way to think about content, I said 2 billion. At least it’s 2 billion who will use advertising. But –

Charlie Rose:
Mine is a little less than that.
[laughter]

Eric Schmidt:
In a smaller audience, say, you know, some number — 20 million audience, 2 million audience, you can imagine that you’ll have micropayments, not advertising, where I pay a one cent, three cents, five cents for a view. Those tools and techniques are being developed now in the industry and I think are likely to be successful. And then for highly, highly specialized, that is, knowledge workers who are highly paid and they have to have this very special report, they’ll pay big bucks and they’ll use the traditional –

Charlie Rose:
Before we talk about five years from now, then 25 years from now, let me just raise a couple of points. One: Google Earth. How is it being used, and are people that we don’t like using it? [laughter]

Eric Schmidt:
Well, I’m sure there are people we don’t like using it. The general answer –

Charlie Rose:
Because remember, there was a famous incident of Dick Cheney sort of wanted it wiped off because of the vice-presidential residence. Isn’t that right?

Eric Schmidt:
Mm-hmm.

Charlie Rose:
Can you guys at Google do something?

Eric Schmidt:
Well, in fact, our supplier did it. But in any case, we have pictures back of where the residence is.

Charlie Rose:
What did you get, a little blank space or –

Eric Schmidt:
It was a little covered up. The problem I have with these arguments is that every one knows where the vice president’s residence is.

Charlie Rose:
Yeah.

Eric Schmidt:
So what are we –

Charlie Rose:
If you don’t know, you can find out.

Eric Schmidt:
It’s on the maps when you buy them in Washington. Vice-president’s residence, called the naval observatory.

Charlie Rose:
Right.

Eric Schmidt:
Look it up.

Charlie Rose:
Okay
[laughter]

Eric Schmidt:
Where is it CIA? There is the address in the phone book.

Charlie Rose:
In Langley, yes.

Eric Schmidt:
It’s in the movies. There is a nice picture of driving into it. So the real question is what information is broadly available to evil people? And the answer unfortunately is that virtually all of the information — any information we have has already available to the evil people as best we can tell. And we’re obviously not trying to encourage that. But the fact of the matter is that physical maps are available to evil people and so forth and so on. So we try very hard not to show stuff that’s not generally available –

Charlie Rose:
Okay, but speaking of stuff that’s generally availability — go ahead.

Eric Schmidt:
Just on the maps. I do want to emphasize that we’ve seen an explosion in the use of Google maps and Google Earth for education. The earth is a special place. It is our home and it’s why we’re all here. And the ability to see what’s really going on the earth, the good stuff and the bad stuff, at the level that you can, is phenomenal. Not only do we have Google Earth, we can see changes from — climate change is the obvious one. People are finding things like meteorite impact craters and things like that. We — last year we introduced something called Google Sky which will show from the point you are on the Google Earth, what the sky looks like. It’s a tremendous teaching tool. A few weeks ago we announced Google Ocean, and you can actually start from any of the coasts and go right under the water and see what the –

Charlie Rose:
The topography is?

Eric Schmidt:
It’s unbelievable. And you need Google Earth version 5 data.

Charlie Rose:
Wait a minute. Can you see the fish?

Eric Schmidt:
Yes. We have fake fish.
[laughter]
We’ve drawn them in. And, in fact, you can find ship wrecks and so forth. And we got information, as an example, where we got back [?] metric information from the U.S. Navy. They were happy to give it to help people understand –

Charlie Rose:
Okay. Now speak to GPS in terms of what is going on, because — and what you guys at Google are thinking about because there is this idea that you want us to know where everybody is all the time. So you can — not you, but you know what I mean.

Eric Schmidt:
The next generation, I’m not sure about my generation, but the next generation is infinitely more social online.

Charlie Rose:
Right. And infinitely less private.

Eric Schmidt:
Yes, as evidenced by their FaceBook pictures.

Charlie Rose:
Right.

Eric Schmidt:
And by the way, those pictures will be around when they’re running for president years from now.

Charlie Rose:
[unintelligible] and we haven’t quite settled who owns them either, have we, even though –

Eric Schmidt:
It won’t matter who owns them. Trust me, when they get out, it’s going to be a problem when they’re running for office.

Charlie Rose:
Right, and not to speak of your emails.

Eric Schmidt:
That’s right. And the fact of the matter is that we’ve given up something in terms of privacy in return for these other things. And I think that is a societal change that we have to admit is occurring at least among younger generations. The utility –

Charlie Rose:
Any problem about this? Could it go too far? Where is –

Eric Schmidt:
Of course it can go too far. And the trick is that people should have control over what they choose to — people should have control over what they — what information they publish. As long as the answer is that I chose to make a mess of myself with this picture.

Charlie Rose:
Right, right.

Eric Schmidt:
Then it’s fine. The issue is when somebody else does it.

Charlie Rose:
It stuns me what people will do for 15 minutes of fame.

Eric Schmidt:
Well, but that’s their choice, and they have to live with it.

Charlie Rose:
Oh, I agree.
[talking simultaneously]

Eric Schmidt:
But the fact of the matter it’s now possible, for example, we have a product called Google latitude which runs on any of your mobile routers using GPS that will — which will essentially tell everyone you wish where you are. And you can decide the level of accuracy and also how far do you publish it. So you can say it only to three people, and you can tell them accurately. You can also say only to these three people, and you can tell them, oh, I’m in the state of New Jersey, or whatever.

Charlie Rose:
I got you.

Eric Schmidt:
And that notion, that notion of control is fundamental to the evolution of these privacy based solutions.

Charlie Rose:
Tease me about what’s on the edge, what’s exciting about where we are going in terms of what Google and other technology companies will be able to do for us or enable us.

Eric Schmidt:
Google is first and foremost a search engine. And we like to think of the person as the search.

Charlie Rose:
Right, so when somebody types something today, they’re really typing in the context of their history, their background, what they know, their belief systems and so forth. And if they give us permission, we can give some of that to give them more accurate information. So now let’s imagine for purposes of argument a situation where you’re walking down the street, and it’s with your emotional device and your GPS. So why can’t my phone generate the searches that I should have been asking. It knows what I care about. I’m a fan of history. When I walk down the streets of New York, why doesn’t it tell me the history of every building so that I don’t have to bother to type, I can just see it.

Charlie Rose:
Imagine the situation where the person, the GPS, the phone and this constant searching creates a narrative stream. It’s highly personal and highly entertaining. Entertain me.

Charlie Rose:
But can you imagine circumstances in which I would somehow be able to connect to the idea that I was going to be talking to Eric Schmidt, and so they would provide me with lots of interesting questions.

Eric Schmidt:
Well, yes. And in fact, we can almost do that –

Charlie Rose:
Like where were you –

Eric Schmidt:
We can do that almost now with your calendar.

Charlie Rose:
Yeah.

Eric Schmidt:
Because we know who you are meeting. And if your calendar is inside of Google, it should eventually be possible for us to generate the questions for each of your meetings.

Charlie Rose:
Should be and will be, when?

Eric Schmidt:
Should be? You know, engineers are working on –

Charlie Rose:
So Gmail. Suppose I use Gmail. You guys can see all of any Gmail.

Eric Schmidt:
But we don’t by practice.

Charlie Rose:
Well, yeah, but you know what the argument is about that?

Eric Schmidt:
We have rules, Charlie.

Charlie Rose:
Suppose you didn’t like me.

Eric Schmidt:
Even if we don’t like you, we won’t violate our rules.

Charlie Rose:
Yeah? So what? So you’re saying –
[laughter]
You’re saying trust us? Trust us?

Eric Schmidt:
Yes.

Charlie Rose:
That’s it? We’re not going to sneak a look?

Eric Schmidt:
We do not sneak a look.

Charlie Rose:
So when Barack Obama was running for President, and had a Gmail account, I don’t know whether he did or not, nobody was saying –

Eric Schmidt:
To your knowledge no one did it, and if they had, they would have been fired immediately. And it’s also possible that they would have been guilty of federal laws, had they broken into that account using a false password. The laws are very strict about that.

Charlie Rose:
So if somebody gets into an account without using the password, they may be guilty of a crime.

Eric Schmidt:
They’re likely to be guilty.

Charlie Rose:
Before we leave the notion of the time today — a contemporary time — the digital divide. Where are we and where should we be and why weren’t we there now?

Eric Schmidt:
The good news is that we work in a technology where prices are improving. Prices — it’s a constant price reduction business. I have no idea, by the way, how these hard earned companies make any money at all. Prices are so low now. But the corollary benefit is the explosion in digital devices where people never could have imagined having access to these things 10 or 20 years ago, the obvious example being in the gaming industry where the game devices are as powerful as the personal computers today. The real story is going to be on the mobile phones to get back to that. Everyone has a mobile phone. And even in the third world, and that’s the worst example, the Israel divide, you can build networks where people use SMS which are these short messages, the 160 character messages to actually do searches and queries, and we do that in those markets. And if you’re a farmer who’s depending on the price, the weather forecast, that query may determine whether you go bankrupt or not –

Charlie Rose:
Okay, but where is that, though? Do they have access to that? If they have a mobile phone and most people have a mobile phone, so therefore, more farmers know when it’s going to rain.

Eric Schmidt:
There are roughly a billion more mobile phones coming online in the next three to three and a half years, that extra billion voices are voices we have never heard in languages we don’t speak. We have no idea what they’re going to tell us, but they’re going to be heard. And I think it’s great.

Charlie Rose:
Okay. But that raises an interesting question about what language we use. I mean does it depend — is there a — is English the standard for — is Chinese going to be the standard in 2050?

Eric Schmidt:
Well, English appears to be the global language, certainly of commerce –

Charlie Rose:
Today.

Eric Schmidt:
On the Internet, Chinese is growing more quickly as a language than — Chinese and Mandarin, specifically –

Charlie Rose:
And why is that? Just because –

Eric Schmidt:
The number, there are many Chinese and lots more to go.

Charlie Rose:
And increasingly, they are more the middle class to has access to technology.

Eric Schmidt:
There are on the order of 250 million users in China of the Internet which is more than the number of users that we have in the United States today. And that’s an important milestone. And they have many, many hundreds of millions to go. There are about 500 million mobile phone users in China.

Charlie Rose:
Right.

Eric Schmidt:
With, again, many more Chinese people to come.

Charlie Rose:
And the rate of growth is extraordinary.

Eric Schmidt:
Yes.

Charlie Rose:
In this audience of people who are involved in the process of education and learning, where — is technology doing all it can to help us? Is technology on the cutting edge? Is technology delivering its promise?

Eric Schmidt:
Let me give you the simple –

Charlie Rose:
Isn’t that what we want?
[applause]

Eric Schmidt:
Let me give you if simple case and the — I think the challenging case. The simple case is that all of these new technologies allow you to organize your classroom around community learning. So the — children can do this today. Build a small website, build — we have a product called Sites that does this. There are others where you basically build a knowledge domain. Everybody can contribute. You have a document everyone can connectively edit it and so forth. And you figure out who did all the work. A lot of learning today and watching teachers teach is they try to do it in groups. We don’t really see it as individuals anymore. And that starts literally in first grade. So that’s likely the majority of use today is really community based, using images, searches, and so forth, all of which we’re happy to do at Google. To me the real question is how does the ability to have all the world’s information in front of you, all the time, change education? When I was 13, and I group up in Virginia, I was required to memorize the 52 cities that were the capital cities of each county of the state of Virginia, which I mastered after a lot of work. Today, of course, there is a nice table in Google that tells me all that. I don’t know why I’d have to memorize that.

Charlie Rose:
I could give you a test on this.
[laughter]

Eric Schmidt:
So why did I have to memorize all that. Because instead what they should have done is they should have taught me how to search for it.

Charlie Rose:
Exactly.

Eric Schmidt:
So I have friends — I have a friend who is a venture capitalist, Bill Joy, who described how he does venture capital. He uses Google to search for all the new ideas. He reads the papers so he figures out what the search query is. He reads the paper, and then he calls the people to say what’s new? What’s innovative?

Charlie Rose:
Wait, this is important to me. He looks at the papers, then — he goes online and looks at newspapers or he reads them –

Eric Schmidt:
He starts off — he starts off with a search. I’m interested in hydrodynamics. And he learns by digging — by repetitive searching until he finds the papers that are authoritative. He looks for who the authors are, and he calls the authors. These are people no one ever calls. So they return his call.
[laughter]
Right? And that’s how he learns. So rather than having a textbook, he starts with a search on an idea. The combination of Wikipedia, which is a remarkable achievement of humanity, just phenomenal, and search engines like Google, mean that you can literally get it all if you’re willing to be motivated. So my idea about school would be that you would sit there with however many students you have and you’d say students, I’m going to give you a set of search terms to get started with. And we’re going to see which of you learn the most. And what would happen, of course, is about a third, the ones in the back row that are asleep are going to wait for the other two-thirds. And out of the other two-thirds, some of them will do great, some will do poorly. Then you have a conversation among all of them. It’s a complete inversion of the textbook model. And, of course, you could supplement it for the textbook for the people who are uncomfortable or not creative in that regard.

Charlie Rose:
What you said is you could. Are these kinds of things being translated to the people on the front line of education, the teachers and the principles and the schools?

Eric Schmidt:
I’ve met educators who are doing this. I was giving you the extreme example. If most important accomplishment I’ve seen in education has been the development of these community sites around topic areas. Some of the best teachers in physics, chemistry, and so forth, get together and they put together lessons, ostensibly as an online lesson plan. But it’s really to get a compendium of information. And we have a lot of evidence that committed people, professionals like people here in the audience who work collaboratively across all the United States, produce an enormously valuable product. And that product can serve as the basis for the next revision of textbooks, the next revision of certification. And I think so it’s wonderful.

Charlie Rose:
Let’s look five years from now. I mean all the things we have been talking about today are mostly here today. Where is it all going? What’s exciting about where we will be?

Eric Schmidt:
Let’s do a little math.

Charlie Rose:
Okay.

Eric Schmidt:
Five years from now, Moore’s law, doubling every 18 months, means a factor of 10 in everything you have –

Charlie Rose:
You need to explain that a little bit more. Gordon More created this law.

Eric Schmidt:
There is a law called Moore’s law, which is true today, that –

Charlie Rose:
It’s been true since he originated the idea –

Eric Schmidt:
In 19 –

Charlie Rose:
We thought — a new calculation might step forward, but it didn’t –

Eric Schmidt:
Not today. It has to do with the physics of transistors and semi conductors and basically, Moore’s law says that you can double the density or number of things that are on a computer chip every 18 months. So a rough rule means that a computer either gets twice as fast or half the price over an 18 month period. Usually the vendors prefer that it gets twice as fast and not fall half the price because of the revenue implication of that. But that’s why these phones that you have more computer power than the entire NASA space program used in launching us to the moon, all of the computers that they had. It’s a phenomenal achievement. It’s not slowing down. All of the evidence about Moore’s law says it will go on for another 10 to 15 years. Eventually, we run into problems with photo lithography, an literally the speed of light but we’re not quite there yet. So for the next 10 or 15 years, you’ll see this kind of compound benefit. I like to think of it this way. You figure that out. That means in that five years, it will be 10 times cheaper or faster. In 10 years, by the way, that’s 100 times cheaper or faster. And in 15 years, it’s a thousand times cheaper and faster. So unless something changes in 15 years, I have a grandson, he’ll be 18 in 15 years. He will have all of the world’s information, every video, every movie and so forth on a single hard drive. If he started watching it, he cannot finish watching it in 85 years. He’ll always be frustrated.
[laughter]

Charlie Rose:
Amazing. What else is happening in five years? This has to do with the field that you’re really in, which is all of the world’s information.

Eric Schmidt:
There are many things that we can do with the corpus of information that’s being gathered. We were talking about latitude and privacy and so forth, but there are many positive things we can do. The most interesting thing we’ve recently done is called flu trends. We looked at –

Charlie Rose:
Trends in terms of worldwide flu –

Eric Schmidt:
— there’s a lot.
[talking simultaneously]

Eric Schmidt:
There’s a lot of evidence, concern about a pandemic –

Charlie Rose:
Right.

Eric Schmidt:
— that might occur, similar to the 1918 bird flu epidemic that killed –

Charlie Rose:
50 million.

Eric Schmidt:
— a proportionately huge number if it were today. And because people, when they have a problem, search for something, we can detect uncommon searches as a blip. We can note that. In our case, we built a system which took anonymized searches so you couldn’t figure out exactly who it was, and that’s important. And we get six months ahead of the other reporting mechanisms so we could identify the outbreak. Many people believe that this device can save 10, 20, 30,000 lives every year just because the healthcare providers could get earlier and contain the outbreak. It’s an example of collective intelligence of which will are many, many more.

Charlie Rose:
Well, I mean just think about this mapping the human genome. You know, they’ve sort of got mostly thereby I think it was 2,000 — right around 2000, 2001, it may have been or 19 — Clinton had it at the White House, and he left in 2000, so it may have been 1999, but right around there. And but they are just beginning to have it pay off because they’ve been mapping it. But that was done because technology enabled them to compress the amount of time to do it. And now they are doing remarkable stuff in terms of technology. And companies, A, can personalize it. So rather than spending — you know, that’s a place where it’s been compressed, so you can pay a thousand dollars soon and know everything you may want to know and may not want to know. But if you want to know it, it will inform you about those diseases that you have a genetic predisposition to. And maybe there are things that you can to, even though you are a predisposition to, that will either make your lifelonger or not. Other people say I worry about that because in the hands of insurance companies, it might not be so fine.

Eric Schmidt:
But everyone’s worried about everything. Why don’t we get optimistic for a change.

Charlie Rose:
Right.

Eric Schmidt:
Let’s try to figure out a way — right?
[applause]
Why don’t we try to figure out a way to use this to solve some problem. Let me give you an example.

Charlie Rose:
Right.

Eric Schmidt:
The Wikipedia model has been so successful. Why don’t we have all the smartest doctors organize a corpus, a public corpus of medical information.

Charlie Rose:
Right.

Eric Schmidt:
That combines everything everybody knows about medical practice in one place, a place where you can — again, this would have to be a public database where you keep pouring more experiential data, and then you can build computer systems –

Charlie Rose:
So you have all your cases, everything you ever knew.

Eric Schmidt:
Again, anonymized so it’s appropriately legal and all of that, and get it in one place so that people can begin to mine the data. They can actually begin to figure out what the disease trends are. What are the real health trends? And this is not a knock on the existing providers to do it. They just don’t have the scale. We are strong when we have thousands of people working in parallel to solve a really important problem. I would tell you, by the way, that if you look at the problems that society has hit over the last thousand years, start with the plague, right all of the things that really hit us that nearly destroyed society, we overcame them through technology and innovation. People figured out new ways whether it was in medicine or governance to overcome them. So let’s be positive about it. We can work those issues. There’s always a way to handle the objections if it’s important.

Charlie Rose:
Okay. Do we need anything in terms of presidential initiative, presidential leadership, a czar or anything in order that we get on with it?

Eric Schmidt:
Well, we needed the stimulus package because the stimulus package had, among other things, $20 billion of science funding.

Charlie Rose:
Right.

Eric Schmidt:
Science and education funding and essentially to move the ball forward. One of the things about economics is everyone assumes the economics are static. Real wealth is created by businesses, not by financial engineering. And by businesses that build new products that solve new problems. In American jobs, and this is primarily in American — obviously American stimulus package — need to be high paying for a reason. We’re losing out to low-cost manufacturing economies when we have the best scientists, the best innovators, the best educational system, and it should pay off. And what it pays off is innovation, new products that pay well.

Charlie Rose:
The present — [applause]
How is all this changing us? I mean, you know, I would moderate at a seminar or a panel at the world science summit last year. The topic was what it means to be human, you know. Some say, you know, that the human genome has made us understand more what it means to be human. And it’s also made us understand that in terms of so many things that people might have cited as differences that our genetic code was essentially the same. But we are in quest of what it is that means to be human. How is all this helping understand that?

Eric Schmidt:
It’s certainly made me understand why life is so precious. The computers and the things that we do not replicate the feeling, the emotion, the excitement, the images, you know, the smell of bread on a Paris morning sort of thing.

Charlie Rose:
Yes.

Eric Schmidt:
All of those things are uniquely human and uniquely special. The technology has made us closer together. It has also made us more stressed. If you look at the history of technology over a couple hundred years, it’s all about time compression and making the globe smaller. It’s had positive effects, all the ones that we know. So we’re much less likely to have the kind of terrible misunderstandings that led to World War I, for example. Think about it in the Cuban missile crisis. There was literally a red phone that they actually installed over miscommunication over a nuclear weapon. And it was one that one submarine in the Cuban missile crisis that they couldn’t find, and they were worried was about to launch a nuclear weapon. Think about the damage that that would have done to humanity. Today, that’s not going to happen because of, among other things, cell phones. So we benefit from this inter-connectiveness. We have to learn as a society what it means to be interconnected all the time. It means, for example, that not everything is as important as everything else. Since I have access to every, every crisis in the world because it’s always blaring at me on cable television, that doesn’t mean I have to worry about every one of them. This is also known as knowing where the off button is.

Charlie Rose:
You know where the off button is?

Eric Schmidt:
You have to.
[applause]

Charlie Rose:
Do you have any advice for us in parenting?

Eric Schmidt:
Children are different from adult in a lot of ways. And the most important — the thing I worry today about children, and we all know how much quicker they grow up is that as young lives –

Charlie Rose:
And how quickly adjust to technology.

Eric Schmidt:
Adjust to technology. I worry that the level of interrupt, right, this sort of overwhelming rapidity of information — and especially of stressful information — is in fact affecting cognition. It is in fact affecting deeper thinking. I still believe that sitting down and reading a book is the best way to really learn something.
[applause]

Eric Schmidt:
And I worry that we’re losing that. And I think that with an educating — with an educator audience, it’s important that we start with reading. If you look at all of the IQ testing and all of the tracking testing, it’s early reading with young parents literally, you know, with small children that really make the difference.

Charlie Rose:
Okay. But I mean I would add to that also the ability to write. You know, has technology made us read less but write more because of emails and all that kind of stuff?

Eric Schmidt:
Remember, there’s quality versus quantity.

Charlie Rose:
Yeah.

Eric Schmidt:
The good news is that all the evidence is that the symbolic reasoning that comes from playing computer games, the kind of navigational queries, you know, the example where I used go search for something.

Charlie Rose:
Right.

Eric Schmidt:
Really does develop the cognitive abilities.

Charlie Rose:
Cognitive ability.

Eric Schmidt:
Literally the ability to think in more abstract terms. And that’s going to be more important as the world gets more complicated. Think about the challenges that someone being born today will face. Literally their birth date is this calendar year. Think about the kind of issues they’ll face in a world where it’s a thousand times faster, thousand times more interconnected when they’re 15. Or at 20 years [unintelligible]

Charlie Rose:
That makes me leap to this thing. I’m fascinated by what the world will look like in 2025. It’s one quarter of this century that we’re in now. If you go to the CI [spelled phonetically] website, you can get a whole series, and they’ll talk about it on television interviews with people like me in terms of looking forward. And they say a lot of interesting things. I mean, they say, for example, it is more likely in the next 25 years that in the 16 we’ll have some kind of nuclear exchange. It is more likely that there will be a water shortage, a water scarcity that will cause territorial battles. It is more likely that there will be a food scarcity. I mean, these are all things that we’re not even talking about in the budget.

Eric Schmidt:
That’s because the budget was organized around the next two years.

Charlie Rose:
Yes, exactly.

Eric Schmidt:
Not the next 20 years.

Charlie Rose:
Right.

Eric Schmidt:
If you look at the threats of to humanity, the two significant threats –

Charlie Rose:
We didn’t even mention nuclear proliferation.

Eric Schmidt:
What are the things that could kill a million people? 10 million people. 100 million people. Well, the nuclear issue, some form of nuclear conflict or nuclear accident is one. And the other one is climate change. And climate change, of course, is many things including rising sea levels. The shift in where rain falls and the associated water sheds, the loss of the Himalayan glacier and so on, all effect a number of people that is staggering. As a person involved in information, what can we do to help? We can get this message out. We can get the human society to understand how serious the threat — when you fly over those glaciers, remember, someone drinks that water. And if they don’t get it, they will riot or they will die or there will be a war. And similarly, for the predecessors who work for hard for nuclear proliferation. I would think twice when I hear somebody in this testosterone range saying, you know, I’m going to do this and I’m going to do that. Let’s have some nuance here. It’s possible to really destroy the great things that we’ve built here on earth relatively quickly in these two areas. The good news is that those are — that’s the bad news. The good news is from are so many other areas where things will be so much better. In medicine, the deployments that they’ve made of artificial limps and eventually naturally grown through stem cells and others, replacement parts will allow a much better life or at least certainly a longer life compared to what we have today. In terms of knowledge, I said before, they’ll have every piece of information in front of you. And by the way, it will be in every language, because in that time period, we’ll have automatic translation. It will be possible for you to text to your friend and not be able to speak to them in possible, because we’ll be able to automatically translate the text from your language to their language. We’ll be able to take all of your shows and automatically translate them, but they will all be searchable, so we can do it in historical time as well. Google recently brought out a history search and also on Google Earth, a view of history, so you can go back to your favorite places and watch the pictures of how they evolved. It’s amazing what we can do with all of this new information.

Charlie Rose:
So here’s the question. Many people write books now in which they talk about with the economic crisis, the changing world order, a flat world, that America will not have the same place it did in the 20th century. A, you got a degree at Princeton, went out to Berkley, got a Ph.D. in computer scientists, I think, mathematics or something. That we are not necessarily going to lead the revolution that will deliver these things. Is that of concern to you or do you accept the premise?

Eric Schmidt:
If you’re a person who believes that America is the only country and America is always right, I have news for you. It’s not going to be true in the future. Because the Chinese and the Indians and the sum of the Europeans will have their own stake on what’s right and what they think the future is.

Charlie Rose:
So we’re looking to a shared world.

Eric Schmidt:
We’re moving into a world where you actually talk to them.
[laughter]
In the case of –
[applause]
In the case of a sole superpower model, it’s easy to say American values, we’re right, you’re wrong, and take over other people’s — other people’s culture. That’s not going to be possible. Where America will be strongest, and where I think we should be, we will be, and it matters the most, will be in innovation.

Charlie Rose:
How do you know that?

Eric Schmidt:
I know it because I talk to the people who are running our universities. I talk to the students. We hire the best students. They are going to go off around do these amazing things that you and I –

Charlie Rose:
Why do you assume that the best students are going to be American? Why — or why do you assume that the Chinese or the Indians or Russians or wherever they come from, necessarily want to come here?

Eric Schmidt:
Because they choose to come here right now.

Charlie Rose:
Ah, but –

Eric Schmidt:
They’re voting with –

Charlie Rose:
But — no, no, no, no. Because of immigration policies and other things, they’re all not, A, being allowed to stay here. And –

Eric Schmidt:
That’s another issue. Take the best people, hire them in American universities, and kick them out of our country.

Charlie Rose:
It happens.

Eric Schmidt:
It’s shocking.

Charlie Rose:
It happens.

Eric Schmidt:
I know. We’re fighting against it.

Charlie Rose:
But it’s an issue in the Congress. It’s a priority. But my point is, is that we can’t assume necessarily — or can we, you know, that we have some lock on this –

Eric Schmidt:
It turns out it’s harder to think, to replicate the American –

Charlie Rose:
That’s where I’m going.

Eric Schmidt:
The innovation — the model that we have about faculty, graduate students, all the things that we talk about is — many countries are trying. It takes 50 years to replicate that, and maybe a different culture. So we remain, we America, remain by far the place of choice for education, in particular higher education.

Charlie Rose:
So you’re optimistic about –
[applause]

Eric Schmidt:
And we should give some credit not just to the educators and the students, but also the government who has a historic role and maybe a third of the funding for American universities comes from one form or another of federal and state grants. We also have the history of state colleges, state universities, so forth and so on, which is very, very powerful.

Charlie Rose:
And I said earlier in introducing you, that there is — your economic advisory, whatever it is down there, council, bunch of businessmen and other people, women in finance who are advising the president; right? What is it you do?
[laughter]
What’s your advice?

Eric Schmidt:
This president is — and I’m a public supporter of President Obama, as you know is very, very good at listening. He organizes groups. He sort of gets everybody to talk. He synthesizes very, very quickly. So I and others have campaigned hard for quick action to deal with the economic crisis, with a bias in favor of renewable energy, technology, innovation, investing in the infrastructure of America which is largely unfocused, and of course in education.

Charlie Rose:
Healthcare, too.

Eric Schmidt:
Healthcare, of course. I’m pleased to say that is stimulus package, about two-thirds of the money in the stimulus package went for those kind of areas, along with the states and local governments, which were in terrible situation. And one-third to tax cuts which is about the right balance. So we’re now running that experiment. That’s in place, and we need confidence quickly. I would tell you that the business situation in America right now is really quite dire. You see increasing bad news, even today bad news. There is no end in sight.

Charlie Rose:
Unemployment is up.

Eric Schmidt:
Unemployment is up. We’re not at the bottom here. The quicker we can get through this, the quicker we can get to the other side. I do believe that the recovery, when it occurs, will be led by the kind of businesses that we’re highlighting new, ones that solve a new problem. I, for example, believe that green energy, sort of rebuilding the energy infrastructure of America, is a great project. It’s a great project for this president who can then use that to reduce our dependence upon foreign oil, increase American jobs –
[applause] and build a whole set of export oriented industries. And, oh, by the way, help materially solve the climate change issue which is very serious.

Charlie Rose:
So we’ll come through this?

Eric Schmidt:
Absolutely. One of the things is if you have a choice between being in America and being in the other countries in a global slowdown, you’d much rather be here, although it’s more painful, you’ll get out faster.
[applause]

Charlie Rose:
I have a question.
[laughter]
It is this notion of — I was just thinking about this. Technology — are people in technology different?
[laughter]

Eric Schmidt:
Yes.

Charlie Rose:
They are? What is it?

Eric Schmidt:
Technologists as a group tend to be more analytical, more data driven, more personally liberal, more willing to tolerate the differences between people.

Charlie Rose:
Right.

Eric Schmidt:
More global in their focus. And I think that’s across all political parties. People in technology believe that you can create whole new businesses. In my dealings with other businesses, they often seem to be locked in a paradigm that was given to them by their grandfather. You know, this is the economic structure. This is the industrial structure. This is how it’s always been done. Technology as a group, I believe that you can literally change the world from technology.

Charlie Rose:
It’s a pleasure to have you here in New York. Thank you very much.

Eric Schmidt:
Thank you very much.
[applause]

Charlie Rose:
Eric Schmidt, the CEO of Google.
[applause]cn

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