Sept. 29, 2020

Why Ex-Google CEO Eric Schmidt is working for the government

By the way, Eric has his own [very high quality] podcast. Check out Reimagine here and listen on your favorite platform.


He’s not punching in at the DMV or collecting litter on a roadside. He’s helping the U.S. to develop responsible technology that can both ensure equitable access to the tools that will enable our future and win our government rulemaking rights over high tech like artificial intelligence and facial recognition.

If that sounds a little intense, that’s because it is. But if anyone’s up for the job…?

It’s Eric Schmidt, former CEO and executive chairman of Google. He’s seen the best and worst of both the public and private sectors. Now, he’s talking about the intersection of the two—how they improve one another, accelerate one another...and occasionally butt heads with one another.

There are countless reasons why we’re having this conversation right now, but to name a few:

  • The 2020 presidential election is a few short weeks away, and it’s a huge test for Big Tech’s supposed efforts to protect our democratic process. 
  • Our economy is getting more automated each day—who gets to make the calls as the robots roll out?
  • China. Tech war. Enough said.

Seems like everyone, from Big Tech in Silicon Valley to lawmakers in D.C., has an interest in owning the tools of the next generation. Listen now to understand it all.




Kinsey Grant, Morning Brew business editor and podcast host [00:00:07] Hi, everyone, and welcome to Business Casual. I'm your host, Kinsey Grant, and I cannot wait to get started with today's incredible guest. So without further ado, let's get into it. [sound of a ding]

Kinsey [00:00:18] I know I usually go theme-first in these intros, but with today's guest, it feels a little more appropriate to go guest-first. So our guest today is none other than Eric Schmidt, the former CEO of Google. Eric, welcome to Business Casual. 

Eric Schmidt, chairman of U.S. National Security Commission for Artificial Intelligence [00:00:31] And thank you for having me. I'm excited to be on. 

Kinsey [00:00:34] Well, I am excited to talk to you. We're going to have a great conversation today. I want to run through, before we get into the meat of that conversation, a little bit of your background beyond just Google, you know, included about a decade as a CEO of Google, several years as the executive chairman of Google and then Alphabet, couple after that as an adviser to the company post-Google. [chuckles] 

Kinsey [00:00:51] You have also been the chairman of the Department of Defense's Innovation Board, a member of NASA's National Space Council User Advisory Group. Currently, the chairman of the U.S. National Security Commission for Artificial Intelligence, a celebrated philanthropist, and probably most important of all of these, a fellow podcast host. 

Eric [00:01:09] That's right. You're being too kind. I've just started doing a podcast. 

Kinsey [00:01:13] And how do you like it so far? How's the host life treating you? [laughs] 

Eric [00:01:17] Let's just say that yours is better than mine. But I'm working on it. [laughs] 

Kinsey [00:01:21] Don't worry. We have been at this for a year now. This is our year-celebration episode. So, plenty of room to grow. And the Reimagine is great. Congratulations on starting it. We are really, really amped to just have you here. And we'll give a little background of what we're gonna be focusing on in this conversation today. I want to talk a lot about the, maybe, nexus of some of your career highlights. 

Kinsey [00:01:41] So we're talking about the intersection of the public and the private sectors, how the two interact with one another, improve one another, and accelerate one another, because there, to me, are a lot of things that the public sector could learn from American corporations, from tech to education to defense. And the U.S. government isn't exactly known for being nimble [chuckles] like the private sector companies can be. So that's why we're having this conversation. 

Kinsey [00:02:05] I want to get at the roots of these kind of private sector contracts we who write about business news find so sexy and compelling and dream of. And I haven't gotten formal security clearance, but I feel like the conversation is young. You never know where it could go. So at that, let's get started. 

Kinsey [00:02:22] I want to start by understanding the main differences between the public and private sectors, how each can serve the other. And other than the fact that one is the government and one is not, what are the biggest differences to you, given your experience working with both public and private sectors? 

Eric [00:02:38] You know, what's interesting about government and the private sector is each criticizes the other and each needs each other. And the thing I've come to view the government is that it's got a different risk premium. In business, for all sorts of reasons, you have measurements, you have compensation. The compensation is tied to outcomes. You try to be successful. If you make a mistake, you pull yourself up by your boots and try again. 

Eric [00:03:07] In the government, there's an enormous lack of tolerance for downside. That if you make a mistake—a well-meaning one—you'll be all over the news as some sort of incompetent idiot. And yet business executives make mistakes all the time. So what happens is that this conservatism drives process in government to an extreme that you would never tolerate in business. My attitude is, come on, guys, let's get this done, let's get it done. But not only do people have to dot the i's and cross the t's, but they fundamentally are not going to take the risky decisions because they don't want to have the personal downside. 

Kinsey [00:03:48] Right. And failing in public is almost a badge of honor, especially in tech, the tech side of business. So if you are working in government, failing on a large scale could be the end of your career in some cases. Do you think that is why we consider the government to be so bloated and so bureaucratic? Because there is too much process? 

Eric [00:04:07] I think it's bloated and bureaucratic because it's also a jobs program. In other words, government broadly serves the public by providing jobs. And many of those jobs, to be very direct, could be automated out. But then, what would you do with the people? And so there's a natural bias to have more people and less automation. And in business, the inverse is true. And once you understand that, you can sort of understand what the goals are. 

Eric [00:04:35] So I'll give you an example. NASA is a fantastic institution, which I admire greatly. NASA is organized so that every major program has a supplier in each state. Now, that's not how I would organize my business. I would have some suppliers in California, and maybe another state, and maybe a third state, and maybe I'd launch from Florida. But politically, it makes sense to have a constituent that's all across the nation. 

Eric [00:05:02] The same is true for the military. So they provide an important public service. But one of them is they also provide important employment in the nation. But going back to this question about the incentives. What I believe is true is that the political side and the leadership of the government cannot effectively admit mistakes now. I make mistakes all the time. And I can tell you that privately and, I don't know if you do, but I know I do. 

Kinsey [00:05:35] I most certainly do. [laughs] 

Eric [00:05:36] But if I were a government leader and I said I made a mistake there, my opponents would use that to dagger into me and they would so amplify my tiny mistake—that I didn't show up, or I was late, or had a bad day. And, you know, I'm human after all. So it leads to this behavior where leaders—their doctrine becomes dominant, and they're unable to switch positions. 

Eric [00:06:06] And one of the most important things about leadership is the ability to assess the situation and change. And politicians try to come up with new language. They say they have reexamined their question or they've had a new thing, and then they're pilloried again. Now, again, somebody who had a position 30 years ago, I think it's good that they changed their mind. Maybe they learned something in 30 years. And yet that's not perceived as positive. They say their views have evolved. 

Kinsey [00:06:36] Right. 

Eric [00:06:36] OK. Well, how about they say, I was wrong then and I'm sure I'm right now, and I apologize for the error that I made. But it was with my best intentions and I'm sorry. Now, politicians don't say that, but a business person, a good business person would say, yeah, you know, the buck stops here. I should have pursued that opportunity more strongly. My competitor took it. It's unrecoverable. It was a mistake. My only excuse as I was working on something else. 

Kinsey [00:07:09] So if the risk tolerance is so different for people who are working in industry and people who are working in government, how do the two come together and cooperate? Is that a possibility? 

Eric [00:07:19] Well, of course it is. What I can tell you in my now four decades of doing this with the U.S. government, is that when we started as the tech industry, we thought that we were both immune to the government and also not important to the government. And I remember with some shock when John Sculley, who was the CEO of Apple at the time, invited the president, President Clinton, to come to Silicon Valley and had dinner with him in a restaurant. 

Eric [00:07:48] And I thought, oh, my God, how is this happening? What a waste of time. Why is he not running his company? And, of course, now, more than 28 years later, the tech companies, including Apple, are among the most valued companies in the country. The leadership talks to the government all day because the things they're doing matter. And I think it's ignorant on our side to assume the government wouldn't notice what we're doing and worry about its consequences. 

Eric [00:08:21] I learned this a long time ago. We had a very, very smart employee who explained to me that the reason Google was so controversial is because we were in the information business. And an awful lot of people care about information, especially in Europe. And that was her lesson. 

Kinsey [00:08:43] So what could the U.S. government do for Google or for any other big tech company that they can't find elsewhere? Why is the relationship so important? Why do you need to have the president to dinner in a restaurant? 

Eric [00:08:56] It was Apple, for it to be clear. 

Kinsey [00:08:56] Right, right, yeah. [laughs] 

Eric [00:08:58] Google has not done that. Some of it is managing downside risk. Because if you think about it, there are many laws that govern companies like Google. Those laws are well argued and have been established for a long time. And the application of those laws can differ in their implementation with significant consequences. What I found in my many years of doing this, first in the United States and then for the last decade in Europe, is a lot of it is education. 

Eric [00:09:31] So using Google as an example, its search and advertising systems are very, very complicated. And so you might say, well, I don't like this or I think this is a problem or so forth. And so all conversations start with an education. And that's generally welcomed by the government. And so the press is always obsessed by, oh, this company is talking to the government. All of the tech companies should be talking to the government, not to lobby them or change them, but just to educate them on the power of these tools. 

Kinsey [00:10:02] Right. I do think in, and maybe this is because I consider myself a member of the press, but in some ways it could be construed as, say, the example of Sculley having the president in his back pocket the next time a big anti-trust case comes up. What is the conflict of interest, or is that a concern, for tech leadership right now? 

Eric [00:10:23] There is that reflexive assumption that if a powerful person is talking to the government, they are buying off the government in some way. And I think that that is an unfair reading of how the government works. The fact that people know me did not prevent government action against us. 

Eric [00:10:47] Again, using myself as an example, I spent a great deal of time with the EU competitive commissioners, and yet the European Union still took very radical and very direct action against what they perceived a violation of EU law against Google, which have been, I think, somewhat resolved now. I don't know the exact details. But the fact that I spent an awful lot of time talking to them did not mean that I had any material impact on the outcome, except that they were better educated as to what their choices were. 

Kinsey [00:11:17] OK. 

Eric [00:11:18] So there is a presumption that somehow, when people are having a conversation, that there's some kind of skulduggery going on. I can't imagine having a government which didn't talk to the business. So let's imagine that you had a rule that the tech industry could not speak to the government and the government could not speak at all. They had to read about it. They had to have the press be an intermediary. They had to have consumers. Well, first, that wouldn't be fair to the tech industry, but it would produce some really cockamamie ideas. 

Kinsey [00:11:47] Right. Absolutely. So we understand here a little bit more what government can do for the tech industry, for business. What about vice versa? What can business do for the government that it can't do for itself with 9-plus million people working for the government? 

Eric [00:12:04] In our industry, there's sort of a general view that if you just went to cloud computing and enterprise software in the government, you'd have an enormously better service model. A lot of people interact with the government on a day-to-day basis. They get their driver's license. They get a Social Security check. The government gives all sorts of permissions and certificates and so forth and so on. 

Eric [00:12:27] All of that should be automated, and it should be automated in a way that's very easy for people to use. Can you imagine the amount of savings of American taxpayers if they never had to fill out all those stupid forms which go on and on and on for the healthcare system, where they ask me the same information every day? That's a minor point. 

Eric [00:12:49] But once you get the information into a government cloud system, the ability to provide better service is profound. But let me give you a better argument. OK, so you say, oh, you know, he's selling Google Cloud and he doesn't really understand it. Well, I do. But let me give you the best example. Medicare fraud. We know now that if you just took the Medicare systems and you put everything digitally and used modern cloud computing systems, you would save hundreds of millions of dollars because you would detect Medicare fraud, which would pay for the system in a nanosecond. 

Eric [00:13:23] So we know from business how to make government more efficient. And when I say efficient, I mean in the normal provisioning of services, the normal things, whether it's a benefit or a cost or collecting taxes or so forth. And so you would oppose these improvements if you oppose the administration of the laws in a democracy, which strikes me as a circular argument. 

Kinsey [00:13:47] So, Eric, my question next is just is it realistic to expect that a government as big as, say, the United States could adopt these kind of high- tech solutions to the problems that we face all the time? And we do have to input a ton of information constantly to get what we need out of the government or to interface with the government in any capacity. Is it realistic for these solutions to actually be applied soon? 

Eric [00:14:11] I believe it is. And the reason is that the cost savings is so material. And even if you did it on a per department basis, so you know, the IRS. I'll give you an example, the Immigration and Naturalization Service. Getting passports approved, all of those things. Think of all of the digital forms that you're not filling out. That if you could do all of these things—and I'll set a standard very simply. 

Eric [00:14:37] I want to be able to use all of the legitimate services of our federal and state governments from my mobile device. I want to do it with proper security, with full encryption. I don't want it to be unsafe in any way to myself. And I want there to be limits to the misuse of that information by the government to protect my privacy. That's a straightforward demand. It's a straightforward design. It's relatively easy to implement. 

Kinsey [00:15:05] So two questions. One, how does that affect, I guess, what share of government jobs would be automated away? And number two, who does all of the automation? Who steps in to make this happen? 

Eric [00:15:15] Well, with respect to who the contractors are, there is a large industry in Washington, D.C., of integrators who, if they were given the instruction, could move to this fairly quickly. One of the things that I learned in my various works with the government and the military is that the contractors do what the procurement says. So if you write a procurement that says we're going to allow paper, then the procurement design and the integrator will allow paper. 

Eric [00:15:44] But if you wrote the procurement the way I described—we're going to have it mobile-only, everyone will have to have a guarantee of security, you have to prove it's secure, there have to be limitations on the data, and it has to provide an essential service—the integrators can do it. As to the impact on jobs, this is a broader question about automation. The general rule is that the jobs change, but the aggregate number of jobs don't go down. 

Kinsey [00:16:12] Right. 

Eric [00:16:12] And you say, well, I don't believe you. Well, before the pandemic, we had the lowest unemployment in the history of the country for about 50 years. Less than 3%. So in the year we're in now, we had figured out how to replace the older jobs by newer and probably higher-paying jobs because of technology up until January. So we know how to do this. 

Kinsey [00:16:36] I just have to wonder about where the top talent is going. And I want to talk about that in just a second. But before we get into this perceived talent gap, we're going to take a short break to hear from our partner. —

Eric [00:16:49] And now back to the conversation with Eric Schmidt. Eric, I want to talk more specifically now about the exact ways that public and private sectors and the entities within them work with one another. So what do you think, in the best case scenario, how does the relationship between industry and government look? Do we have any examples to look to of really successful integrations of the two? 

Eric [00:17:11] There have been a number over the years. Perhaps the best one was in the 1980s. There was an alarming shortfall in our semiconductor manufacturing capability. And the government at the time, which I think was largely under President Reagan, organized something called Sematech, which ultimately led to a tremendous leadership in semiconductors, largely based in Austin, Texas. And the boom that's in Austin, Texas, today dates to the decisions made almost 40 years ago. 

Eric [00:17:42] Certainly the decisions that were made in the military in the 1950s and 1960s led to the creation of modern Silicon Valley. So when my friends run around saying, oh, you know, I invented this and I invented that, I say, well, you know, we go back to the 1950s. This was just an orchard. And it took a great deal of foresight by the government—in this particular case, DARPA—and other investments that sometimes were related to security and sometimes related things that really made an enormous difference. So those are a couple. 

Eric [00:18:13] If you look at the funding that the National Science Foundation and the NIH provide to research universities, that's another very good example of such a partnership. The National Science Foundation, for example, is run in such a way that people from their donees, essentially the people who are recipients, serve on the boards with conflict of interest, and then they understand what they're giving money away to. 

Eric [00:18:38] Bob Taylor, who is the manager who had created the internet in 1966 or so, I worked for him years ago, before he died, unfortunately. I interviewed him, and he said that the way he operated was he simply knew everybody. And so when he got into the Pentagon, he just called them up and said, what are you working on? So that kind of good judgment between people who have similar goals works extremely well. 

Kinsey [00:19:04] Right. And it can be a huge payout. We think about one of the more widely covered contracts from the government, the Joint Enterprise Defense Infrastructure contract. A mouthful. JEDI. It's $10 billion. That was a lot of money to build cloud solutions for the Pentagon. We still haven't seen an end to that debacle between Microsoft and Amazon. But it makes sense from the industry perspective, from the business perspective, at least, that you can make money. Right? 

Eric [00:19:33] I'm not sure I completely agree with your description. Google decided not to participate in JEDI. 

Kinsey [00:19:38] Right. 

Eric [00:19:38] And I was not part of the review committee. But if you think about the benefit to moving the military to cloud computing in terms of its efficiency, in terms of building AI systems items for safety security, I think, JEDI will pay for itself many, many times over. And one of the ideas behind JEDI was that having a common stack, technically having everyone working against the same platform, would allow different parts of the government to exchange services. This is a good idea. This is an example of the government trying. 

Eric [00:20:16] I won't comment on Microsoft versus Amazon because I don't know the details. But the fact that the government decided to try to get a common cloud platform is precisely the kind of stuff that they should be doing. And it doesn't have to be just one. You could have multiple of them. I just want everyone to get to the cloud because the cloud gives you all sorts of benefits. 

Kinsey [00:20:35] All right, Eric, let's now talk about artificial intelligence. It is a huge part of the possibility of this intersection between government and business. Why do you think that the government needs artificial intelligence? 

Eric [00:20:49] Well, I start from America needs artificial intelligence. And in my industry, AI has taken over everything. And the way to understand it is, instead of writing down the rules, you learn what the rules are. So it scales faster. And furthermore, you can learn things that you didn't know. 

Eric [00:21:10] So if you take a large enough body of information and a large enough body of language, large enough body of biology, you can really develop insights that you cannot yourself observe because the computers are so incredibly powerful. So think of it as it's millions of patterns being matched. And that's a great use. Why do I care about patterns? Well, let's use an example of optimizing traffic in the city. 

Eric [00:21:39] The patterns are pretty similar every day. So if a computer could make some suggestions, which humans would examine, of course, about changing signal lights and so forth, it would reduce tension and increase capacity. I would welcome that. The real value of AI is going to be in its collaboration with us. I'll give you an example. 

Eric [00:22:00] You're a physicist and physics is really hard and you spend all day thinking about it. You go home, you have dinner, you know, kick the dog, whatever you do, and you go to sleep because you're frustrated. And you get up in the morning and you do more. Well, instead of kicking the dog, wouldn't it be better if you could say to the computer, I have an idea, I'd like you to read all of the papers in physics overnight. 

Eric [00:22:24] And I'd like you to tell me if this idea makes any sense by reading 50,000 papers. In the morning, the physicist wakes up and the computer says, that was a terrible idea. And the guy sits there and says, OK. So my point is, at a simple level, having computers around is going to make decision-making better. 

Eric [00:22:46] There are also cases, and let's use an example where there's some kind of calamity or attack or crisis where the computer may need to be recruited, if you will, to get all the data in front of you faster than the normal procedure. So rather than having 50 sentinels who will all call me, the computer detects it and it tells me anyway. 

Kinsey [00:23:10] I mean, Eric, all of these examples of AI use are good and they almost sound benevolent, but there have been uprisings within the ranks of big tech employees that some of these uses of AI that are contracted to the government aren't so benevolent. They can even be malevolent, in some cases, based on your personal views. 

Kinsey [00:23:31] What do you have to say about some of these big, big tech employees coming out in forces of a thousand-plus boycotting work that their employer is doing with the government because of the way that that tech is being utilized, whether that's through ICE or through the military in general? How do we reconcile with that? 

Eric [00:23:50] I think each company needs to face this question. And one of the things that's new—and not unnecessarily welcome, I mean, I think it's a good thing—is employee activism. Employees believe in the values of their company and they assert them. And it makes the leadership of these companies harder. But I think it's fair to say that any platform provider is going to face the question of my platform is going to be used by people I like and people I don't like. Where is the limit of that? 

Eric [00:24:19] The obvious example is you would never let Hitler use your computer. And thank goodness he's dead, because that's evil. Where is that line? And in my view, that's an appropriate dialog. In the particular example that you gave, some companies, including Google, took one position. 

Eric [00:24:37] Other companies, which include Microsoft and Amazon, took the other position. And one of the other things that happened in that scenario is a large number of startups were started by people who wanted to solve that problem. And I'm not passing judgment. I'm just saying that the market worked in the sense that the people who needed those tools and who were operating in a democracy managed to get them built. 

Kinsey [00:25:01] Right. Where does the obligation lie to you? If you are somebody leading a tech company—and we can keep this hypothetical—if you're somebody leading a tech company and say an evil figure pops up and is using your platform to propagate some message that you don't agree with, but you also want to give that platform to the government. Where does the buck stop? Does it stop with you, and you say, the government can't use this? Whose responsibility is it to keep an evil figure from propagating a message using something that you've created? 

Eric [00:25:35] I'm one of these people who believes in moral leadership as a part of running your company. And once you set those principles, you have to be willing to implement them. So if you say, using ICE an example, we will never work with the Immigration Service. Then you better be ready to take the consequences of that. And if you say that you're willing to do so, then you better be willing to take the consequences of that. 

Eric [00:26:01] My point is, these are predictable conflicts. And from a moral perspective, instead of saying, oh, you know, we're all great people and we deal with evil, it's always on the edge where these decisions are made—what is acceptable and what is not. When I was CEO, I faced these every day. Today, Sundar and his leadership team faces a new set of challenges as do the other executives. But that's their job; it's to make those trade-offs and provide leadership in these difficult times. 

Eric [00:26:33] It's not going to get easier because of the diffuse and pervasive nature of technology in our society. I used to make a joke, did you know that there were criminals on the internet? Oh, my God. We did not invent the internet to have criminals on them. How did they get there? When we built the internet, it was only us. There were no criminals among us. 

Eric [00:26:55] So we didn't need encryption and passwords and so forth. Who let them in? I'm obviously being facetious to make the point. But the internet was built in a trust architecture that was naive relative to its use. Today, the internet is much more robust and people face these choices. 

Kinsey [00:27:15] Do you think that the tech industry has kept up with that increase of the possibility [chuckles] of evil people using what you build? Do you think that they can manage that now? Are they still naive like they were in the early days? 

Eric [00:27:28] I can report that no one is naive like we were way back when. Everyone understands this. Maybe 10 years ago, we were naive. But today, it's well understood that if you have a large commercial operation of any kind, you're going to have to deal with unpleasant things. I remember when we did Google AdWords the first year. Now, this would have been more than 15 years ago. 

Eric [00:27:51] We hired a woman whose unfortunate job was to police bad content. And it never occurred to me, showing you how naive I was, that people would put up bad ads. I mean, ads about really bad stuff, including child pornography misuse, [indistinct], just horrific things. And she became quite the expert on all of this. And I remember speaking to her and just being aghast that this was human behavior. But from that moment on, I was no longer naive. 

Eric [00:28:19] So here's an example. Today there's a big crisis in TikTok because people are uploading, in TikTok, a video that involves somebody's death, which is horrific. So, again, TikTok, a new platform, faces the same problem. And the successor to TikTok, and the successor to the successor to TikTok, will face the same problem. 

Kinsey [00:28:38] I want to talk more about the aspect of the tech sector specifically that is so global and what that means for its work with the government. We're going to do that in just a second. But really quickly, a short break here from our sponsor. —

Kinsey [00:28:52] And now back to the conversation with Eric Schmidt. Eric, do you think that the ways that, at least here in the United States, the industry works with government is typical of other countries that are of the same caliber as United States? Obviously, you think about examples like China. Very different. But what about countries that maybe we're more similar to? Can we equate to the relationship that business and government have here in the U.S. to anywhere else? 

Eric [00:29:17] Where I go through the list, the China model is the most interesting because the Chinese government encourages brutal competition. But as the winners emerge, it becomes very involved in supporting those companies to become national champions, a term in China is called military civil fusion, to the point where they're giving billions of dollar equivalence to the leading firms in China to build their various initiatives. It's unheard of in America. So that is an example of a very tight relationship for the winners. 

Eric [00:29:52] In Europe, it's far more regulated and so probably less. And in the United States, it's probably a combination. I think that there is no question that many of the American firms have benefited from policies of the U.S. government, which allow them, for example, tax deductions around R&D credits, access of immigrant labor, and those sorts of things. And by the way, I should say that everyone wants to talk about what they view as fair. 

Eric [00:30:21] But I think it's far better to understand that we are in a global competition with China and the rules for China are different. And so for those of you who are so upset with Amazon's high quality of service that you want to break it up, or you're so upset with Apple because of its integration between its App Store and its iPhone, remember that China does not have the same rule, and we are competing with them globally. I would be careful with our almost reactive, let's try to, shall we say, limit the bigness of these companies, until you put it in context of who they're competing with. 

Kinsey [00:30:56] So are you saying that we should adopt some of the policies that are being utilized in China? 

Eric [00:31:01] No, I would like us to use more of the ones that have gotten us to where we are now. 

Kinsey [00:31:07] OK. 

Eric [00:31:08] Specifically, I'd like to see far more access to high-skills worker H-1B visas, specifically. I'd like to see far more trade promotion in favor of the tech industry, because I think it helps America. Remember that the five most valuable companies in the United States are tech companies. And so your pension may depend on the success of these corporations. So even if you're not directly involved in the tech industry, you benefit by their success. 

Kinsey [00:31:32] I'd like to get at the root of this narrative of competition between the U.S. and China. Why does it exist? At its core, what makes this such a competitive landscape between these two countries, especially in the tax space? 

Eric [00:31:45] Well, for 30 or 40 years, we viewed China as a rising power, but not a challenging power. We treated them as a developing country, and then what is called a near-peer. And we were perfectly happy to let them into the World Trade Organization and allow them to have access to the markets. And we benefited enormously from that trade, including, frankly, very little inflation. 

Eric [00:32:11] China has served as the great deflater in terms of inflation in our country, which still is not around, and we can still print money, it seems, at a great rate without suffering the inflation that I saw when I was younger in the 1970s. In the last few years, the tone from China and the United States has changed. Part of this is a strong and nationalistic leader in the former President Xi. Strongest leader since Mao [indistinct]

Eric [00:32:41] And the second is that China has been growing at 5% or 6% a year, and naturally wants to have more control over her future. And the president of China has gone so far to say that they will never be dependent on the United States and the West in the way they are now. So they've adopted a developed local industry strategy for some years now. And they have the money and the talent and so forth and essentially the chutzpah, if you will, to do it. And they're trying to build it. 

Eric [00:33:10] It's a race. I'd like America to win that race. But we're in a race and this sort of nativist, you know, U.S. and U.S.-centric thinking, put it in a different context. The U.S. is competing. China is competing. They have strong strengths. We have many strengths. Let's use our strengths to our best. 

Kinsey [00:33:31] So what's at stake if we don't win this race? 

Eric [00:33:34] Well, let's give you an example. Imagine if Facebook had been invented in China. Imagine if YouTube was invented China. Imagine if the internet had been invented in China. Imagine if the operating systems that you used on Apple and Android platforms were China-based. 

Eric [00:33:51] Think about what that would mean in terms of the way the system would work, personal privacy, regulation, security, so forth. OK. So you say, well, I don't really believe him on that one. Well, when you build a platform, the values of your corporation and your company reflect those of your nation and your employees. 

Eric [00:34:16] The openness, the nature of open-source software, the way in which AI works—we have a huge focus at the moment in AI on trying to eliminate bias. Imagine if AI were invented in a country which celebrated bias or was racist in some way. And there are such. It would be really bad. So we want to invent our future and we want it to reflect American values. 

Kinsey [00:34:42] We think about some of the most important technological revolutions of any memory, not just recent memory. Think about maybe the internet didn't stay where it was invented. We live in a globalized world. Do you expect, because of that, that this narrative of the U.S. versus China will last? Or can we expect that whoever creates AI, it will just flourish everywhere? 

Eric [00:35:06] Well, the answer to your question is interesting. It's a very astute question. The answer is both. 

Kinsey [00:35:12] OK. 

Eric [00:35:13] For the simple reason that both China and the United States are simply so large economically in terms of the networks and the tentacles and the cash and so forth, that each of them will be significant players in partnership and competition with each other for the rest of my life and almost certainly yours. So just literally because of size, just literally GDP growth, number of people. China has five times as many, four to five times as many engineers as we do. That sort of thing. 

Eric [00:35:42] In the same way that that competition will play out, we will also collaborate with them in key areas. Climate change being an obvious one. But at the end of the day, this is a fight that we're in. I think we need to be honest about it. Countries that are not aligned with the U.S. or the West, or the West and China, will be forced to choose. It's going to be a mess in that sense. 

Kinsey [00:36:07] Sounds pretty not promising, almost dystopian. If you think about a country that hasn't declared allyship with one or the other will have to eventually in order to benefit from this widespread use of technology. 

Eric [00:36:21] Well, it's possible that the diffusion of this knowledge will ameliorate some of those concerns. You could imagine that the thing to do about AI would be to create the equivalent of a Manhattan Project. Take all the scientists, put them in Los Alamos, lock them there for five years, feed them pizza, you know, let them build something which is extraordinary and that they would have a unique advantage. 

Eric [00:36:46] The reality, of course, is that the knowledge about AI and the mathematics behind it is pretty diffuse. That whatever advantage we would get and which with this, again, comical situation in Los Alamos in today's times, would in me almost immediately disappear. In the case of the Manhattan Project, remember, the Soviets had a bomb by roughly three to four years later. 

Eric [00:37:14] So once a group demonstrates something is possible, human ingenuity is such that an opponent can probably build a something similar, especially if they steal intellectual property, fairly quickly. So I don't think that the competition will produce unitary outcomes. I think what it will do is it will serve to show what is possible. And then the other competitors, whoever they are, will be then forced to catch up. 

Eric [00:37:43] You see that with all sorts of examples. The world's best chip manufacturer is called TSMC. It's the best foundry and it's in Taiwan. The U.S. And Chinese foundries have been trying to compete for years, but these TSMC people just keep moving forward. And so then the other folks try to catch up and TSMC moves forward. That's why your phone is so powerful, uses such little battery, and is really a supercomputer. It's remarkable. 

Kinsey [00:38:12] So if this is the state of play now and we're referencing something like the Manhattan Project, what is the next big thing that we're going to be playing catch up with? Do we have any way of knowing? Is it too far in the future? 

Eric [00:38:23] There are many people who have proposed things which will be the next ones. Synthetic biology is an area where the United States is a genuine leader and innovator. It's important we maintain that. Material science, other aspects of chemistry. All of these are foundational, very important. 

Eric [00:38:41] One group I talked with said that we benefit from the fact that America built what is now the global financial system, and particularly the SWIFT system and the way money moves around. And you could imagine that the advances that China is making in banking and, in particular, in consumer banking, could upset that. I think that's a possible. I don't know that it's likely, but my point is it's a competition. 

Kinsey [00:39:06] Right. 

Eric [00:39:06] And I want it to be a fair competition. I want it to be a competition of ideas. I want us to be able to benefit from the innovation of China. But I want to stay ahead of them. The best way to do that, again, is more money from the government into research universities, more technical people into our government who can understand this stuff better because it's really complicated. More foreign immigration, in particular high-skills immigration, specifically graduate students. 

Eric [00:39:30] The fact that America is a mecca—cultural mecca—for foreigners. People don't wake up one day in Europe and say, hey, I want to go spend years in China. They wake up one day and say, I want to spend three or four years in the United States. Chinese people wake up and say, I'd like to spend a few years in United States. We benefit from that immigration. 

Kinsey [00:39:47] Have you ever considered running for office? 

Eric [00:39:49] I declined. I spent so much time with politicians that now that I understand what they do, I run away. 

Kinsey [00:39:55] All right. Thank you so much for taking the time, Eric. This has been an illuminating conversation. I'm really grateful for your willingness to be so transparent and offer such amazing insight. Thank you so much. 

Kinsey [00:40:21] Thank you so much for listening to this episode of Business Casual. It has been a year of this show, believe it or not, and it's hard to believe that just a year ago, we were talking about big tech. Today, we are literally talking to big tech. We've been through more than I ever thought imaginable. When this show started, we were at the top of a bull market and now we're about six months out from the bottom. But to me, we're stronger for it. 

Kinsey [00:40:43] Thank you for trusting me to tell you about prison labor one day, fertility and the economy the next, and the future of higher education the next. We've been through a lot of episodes, so my number is in the show notes and in my Twitter bio. Text me and I will recommend one of our episodes for you to check out. The next year is going to be even better than the last. So subscribe to Business Casual. Share the show with your friends. There is plenty of room here for everyone. Thank you so much for listening, and I'll see you next time. [sound of a ding]