Re-imagining the economy: A Radical Talk with Eric Schmidt
Eric Schmidt was the Executive Chairman of Google and then Alphabet from 2011 to 2017, as well as Google’s CEO from 2001 to 2011. Prior to Google, Eric was the CEO of Novell and served as Chief Technology Officer at Sun Microsystems. Eric founded Schmidt Futures, a philanthropic venture facility for public benefit. He is an investor in Radical Ventures.
Eric recently spoke with Jordan Jacobs, Co-founder and Managing Partner of Radical Ventures, to discuss the macro impacts of the pandemic, how companies can navigate these challenging times and how technology and society might look vastly different coming out the other side of this crisis. Their conversation occurred before widespread protests swept the globe after the death of George Floyd at the hands of police in Minneapolis.
The following questions and answers have been edited for length and clarity.
Jordan Jacobs (JJ)
First, let me start off by asking how are you and your family?
Eric Schmidt (ES)
Everyone’s fine. We’ve been practicing the four tools, which are the same tools people had in 1918: wearing a mask, social distancing, washing our hands excessively, and spending as much time outside as we can.
JJ
In much of the Western world we’re coming out of differing degrees of lockdown. What should be the priority of governments now going forward?
ES
A naive liberal like myself would have assumed that when the globe faced its first unified enemy that touches young and old, every race, and every conceivable kind of person, that somehow the world would unify against a common enemy. Unfortunately, the reverse has occurred. And we find the process of de-globalization and polarization in many countries getting much worse as a result of the pandemic.
I’m incredibly disappointed at the global response and in our leaders. I’m concerned that we’ve had excess deaths and terrible suffering because we didn’t move fast enough and because people can’t do math.
We have to solve two problems simultaneously. One is a health problem. The other problem is economics. In all the literature about pandemics, no one quite put the two together. The United States woke up collectively as a government in early March. It was a month too late. In the early stages, the R0 (R-naught) of this disease was around four to five in dense cities. That is a wave of infection and death and it’s extremely difficult to fight.
You’ll notice that the tech industry — who can do math — almost immediately shut down and went remote. In the United States, we’ve had about a hundred thousand deaths, with 1200 added each day. Any other scenario where a thousand people were dying a day would cause an enormous reaction. It shouldn’t be okay.
JJ
Government has done some things well as they stepped in very early with stimulus. What needs to be done in order to get the economy working again, to get people back into their jobs?
ES
This is a disease of the elderly and a disease of people who serve us. It impacts the people who don’t have the flexibility to work from home and who are victims of the economics associated with that reality.
So the US government has done a good job of putting liquidity into the markets — more than $3 trillion plus additional financing mechanisms, which got us through the first wave. The problem is that money runs out in the next month. Many businesses have two to three months of working capital, but they don’t have six months’ worth.
My own view is that this is going to take a couple of years. This summer will be better because people will be outside, but in the fall, we’re going to have another slow down because people will be back inside. It’s going to be rough.
JJ
Should government let businesses go through the bankruptcy process? Is this the moment to consider universal basic income?
ES
Well, the first political question is: will there be further stimulus in the system? Remember that before this, the United States had the lowest unemployment rate in 50 years. And now it has the highest rate of unemployment in the last 70 or 80 years. But the American economy, broadly speaking, was able to employ all of these people. The problem is that solutions such as loan forgiveness are very difficult programs to implement in a fair way.
JJ
Stepping back from that, you have additional complications on the global front. China announced $1.4 trillion of stimulus which is being put into technology. China’s approach is that they’re not just going to rebuild the economy the way it was, they’re going to rebuild an economy for the future. Looking back on this pandemic in 10 or 20 years, will this be the inflection point where China becomes the world’s economic and technological superpower?
ES
A possible outcome may be an even bigger change. This is the beginning of a new epoch — a new way in which people live and work. In two months you’ve seen an acceleration in digital trends that you would have expected over a 5 to 10 year period. And what China has said is that they wish to be leaders in the following: AI, quantum, high energy, transportation, software engineering, and a number of other technologies. Collectively, we do not have a coherent answer to China.
Furthermore, China appears to me to be reentering the world economy more aggressively after the extremely aggressive steps it took during the pandemic. So we’re in a situation where China is likely to emerge quicker and stronger, partly because of the steps they took, and partly because of the manufacturing industries that the state controls.
JJ
Does this leave us in a situation where we’ll see a bifurcation of technology? You’ll have a Chinese stack and a Western stack — possibly led by the US — and countries will have to choose which stack they’re going to use?
ES
I’m extremely worried about the cost of decoupling. I prefer to view China as a competitor, not an adversary to the death. It’s important to understand the difference. A competitor is somebody who you talk to. A competitor is somebody who you might collaborate with in certain areas, say on safety and so forth. An adversary that you fight to the death with — you don’t talk with them. You view them as an entity trying to hurt you. And you, in turn, try to harm them. The difference between adversary and competitor is profound. The current language on both sides — China and the US — is leading towards this adversarial relationship.
There are many Western technologies that China is currently trying to duplicate. The more you cut off access to China for those technologies, the more likely they are to build these technologies. And when there are two Internets — a Chinese Internet and a Western Internet — they won’t reunite. We’ve really benefited by having a common interchange platform, and I worry very much that the cost of decoupling is not worth the price.
JJ
The way I think about competition is you’re playing the same game by the same rules. So there’s a framework there in which to have this interchange. How do we go back to that?
ES
This is the area for diplomacy. Great leaders understand that they have to do things which are politically expedient, but they don’t do things which undermine or break the underlying fabric of global success. And we need great leaders now.
JJ
We clearly cannot build our entire supply chain from start to finish in this country. How does a relatively small middle power like Canada deal with the backlash to globalization?
ES
Canada is the United States’ largest trading partner on many, many different levels. And so, I am satisfied that Canada will re-emerge as America’s greatest friend and vice-versa.
JJ
Staying with Canada, let’s talk about Sidewalk Labs, an Alphabet subsidiary that was focused on building smart cities and technologies that support smart cities. The first partnership was in Toronto to build an undeveloped parcel of land just off of downtown. It generated a lot of excitement and some criticism around privacy and IP (intellectual property). Last month Sidewalk pulled out of the partnership citing the pandemic. You were there at the beginning, could you talk about how you feel about this outcome?
ES
I cannot speak for Google as I’m not there anymore. I can tell you that I am extremely disappointed with this outcome. I don’t understand what happened, but I do know there were concerns expressed about Google’s use of data. Google gave a series of statements that could not have been clearer about how data was going to be used. There was organized opposition, and I don’t understand what else happened. The cost of this is not small.
Part of the way society moves forward is by building infrastructure: more airports, more trains, faster trains from Waterloo to Toronto, that sort of thing. We benefit from that connectivity. However long it now takes that land to be developed in a different way is lost economics. Lost economics in terms of jobs, development, and well-being that would have benefited Canada as a whole. I’m sure that Toronto will recover, but it’s a real loss and I want to express my disappointment.
JJ
Let’s talk about AI for a moment. You were an early proponent of this technology…
ES
Toronto, Montreal, and Waterloo are the world’s leading cities for this activity. There are more AI startups in these cities than anywhere in the world. I’ve told Prime Minister Trudeau that Canada is now a world leader in AI because of its early investments, which includes its investment in the Vector Institute which, as you know well, was created as a public-private partnership.
JJ
So one of the criticisms Canada has faced historically is that we’re great at creating technology, but not necessarily commercializing and building big companies. What do we need to do differently, to take those ideas and the research that comes out of a place like the Vector Institute and turn them into a world leading company that is based here?
ES
We’re very early on in terms of AI innovation and I’m sure that there’s something new that will soon be invented by the young men and women who are coming out of your universities in Montreal, Toronto and Waterloo. So let’s imagine you build a 500 person company that’s really distinctive and they’re all Canadian-based. You then have to come up with a globalization strategy.
When you start building really big enterprises in a place like Canada or Israel, there’s often not enough executives in-country that can run these large companies. Whereas you can find them in larger markets, such as the United States. And the reason you do that is not because Canadians aren’t smart, but you need a cohort of hundreds of managers who have lots of experience. Israel has adopted this growth strategy and now more than half of their exports are software and technology based. So it gives you a sense of how powerful this model can be.
JJ
Twitter and Shopify just announced long term plans for a remote workforce. Now that everyone’s a remote worker, does that change the opportunity for companies outside the Valley?
ES
I famously banned work from home when I was running Google. I wanted people to be in the hallways talking to each other. I think those casual interactions are extremely valuable. Now, clearly my prejudice about working from home is not correct for now. But I’m still one of these people who believes that companies are not just going to dissipate into everyone sitting at home. My guess is that work from home will allow individual contributors to develop greatly. It’s perfectly possible that well-motivated, very focused individuals can work even more productively at home because they have fewer interruptions.
But for an awful lot of people, and especially managers, the distance of people will ultimately reduce their productivity. So work from home is probably good for software productivity. It’s probably bad for developing the next generation of leaders to lead all those people.
JJ
In the healthcare space Canada has a competitive advantage. It’s a happy by-product of a single-payer system where we have all the data on a diverse population that is theoretically owned by one organization. In looking at the applications of AI to healthcare, does a country like Canada have the potential to punch above our weight?
ES
If you have that kind of data, you should be able to do early detection of diseases. And when people go into hospitals, you should have much better monitoring and prediction of disease as a result. And yet no country has that.
But I think that is the greatest opportunity for Canada and many countries where you have access to single payer data. So perhaps people haven’t quite figured it out, because the single largest opportunity for AI is its potential impact on health. And this should be Canada’s largest export.
— R —
