Good afternoon, everybody. Meeting ofthe 453rd the Economic Club of new york in our 109th year. I am bill dudley, president of the Federal Reserve bank in new york. The Economic Club is the nations leading Nonpartisan Forum for discussions on social and political issues with more than 1000 speakers appearing before the club in the last century. We have established a tradition of excellence. I want to recognize the 232 members of the centennial society. These club members make an extraordinary contribution to ensure the financial quality of the club in its second century. Their names are in your program. I would like to welcome students hear from columbia university, hunter college, nyu, university of pennsylvania, and Southern Methodist university. This afternoon, we are honored to be able to have as our guest speaker eric schmidt, the executive chairman of alphabet, inc. In this role, he acts as the firms global ambassador with the responsibility for external matters pertaining to all its businesses, including google. His responsibilities have taken him to all corners of the world, including visits to cuba, north korea, and saudi arabia to promote open internet access. He also advises Senior Leadership of alphabet on policy issues. Joining google in 2001, eric helped grow the company from a Silicon Valley startup to a Global Leader in technology. He served as the chief executive officer from 2001 to 2011 and its chairman from 2011 to 2015. Hadr to google, he leadership roles at sun microsystems, and he holds a bachelor of engineering. He is a member of the president ial council of advisors on science and technology. Of the writer, coauthor new digital age and how google works. He serves on the board of the mayo clinic, and he is a gulfstream pilot. His philanthropic efforts family the Schmidt Foundation focus on climate change. Welcome. We are fortunate to have as our interviewer charlie rose, anchor and executive editor of charlie rose, the nightly onehour program. He alsoof you know, coanchors cbs this morning and is a contributor corresponded to 60 minutes. Let the conversation begin. Eric, the floor is yours. [applause] it is an honor to be with my friend, eric schmidt, who i have known for a long time, back when he was the chief technologist at sun microsystems, trying to explain to me what java was about. Remember that . Eric i do. Charlie i just looked at the paper today. There was a story about google and others in europe, a story about its investment in uber. Andcan look at any paper, there are three or four stories about technology affecting our lives. We did a story about Virtual Assistants. Great technology companies. Eric has been central to that revolution. Google has become the second Richest Company in the world. What he and his partners have done is help us understand the power of technology. He feels strongly, and so do i, about how essential it is to this country to make sure he treats with urgency and with a sense of commitment to all that technology can do for us. I know that is a central concern of his. Let me begin with a couple questions. When you went to google, they said to you, we need an adult in the room. [laughter] charlie it was a good day for you. Eric it was a good day for me. It is an honor to be here. Thank you for being here and inviting me and charlie. Larry and sergey needed someone to run things. They spent 16 months interviewing people. They made them do things. To goome ceo, you had skiing with them or go to burning man with them. Test,ew people met the apparently. I was fortunate enough. We made a long list of things to do. Charlie 10 years as ceo . Eric yeah. Charlie what was the most important thing that happened in those 10 years for you, for the company, as you see it . Eric my world is full of Brilliant Ideas that are not monetize of monetizable. To build the success of google or uber, you need a technological idea, but you also need a significant change in the way revenue comes in. We created targeted advertising, which is better than untargeted advertising. That gave us this engine, in the same sense microsoft had the weine from dos or windows, had this engine that allowed us to build these systems not necessarily with a particular revenue plan. We have been able to fail at big projects without much of an issue with shareholders. Charlie you can risk much. Eric because of the underlying engine, we can take risks, invest in ideas, crazy ideas, things that i do not think will work. I have learned that is not normal. Int companies are locked quarterly cycles that give them very few degrees of freedom. It is very tough for them. Charlie today, what is the role you have . Eric i am mostly working on science. I spend a lot of time, as you know, on public policy, trying to understand how the board works and make sure the government would not screw this amazing thing that is happening up. Charlie is there risk in that . Governments have a role to play. We had a significant battle with china. The democracies are generally ok, as long as you are on the side of informing people and you are reasonably fair. Charlie rose will google be back in china . Eric schmidt i hope so. We left in 2010. We were unable to operate morally under the censorship rules. It is really up to the chinese government. Charlie rose i want to talk about the issue which i touched on. We want to talk about the future. The notion of the moonshot. We are looking at it in cancer. Possibilities . I come to an of doctors view that we are operating and up noxious you view and we are not asking enough of our people were building transformative things. Let us go back to the interstate highway system. It was originally justified to move missiles around. The lack of highways would cause in not to grow at all. Interconnectedness comes from making the world closer, intellectually and informationally and physically and distribution networks. And all of the things that Companies Represented in this room do. And new inventions come along. Every once in a while, there are things that we have a consent is. If we could just get behind it, we call these moon shots. The Vice President did a cancer moonshot. Sent to hundred thousand dollars to a set of doctors. These things come along. But we do not talk about them. We spend our time arguing about political issues which are largely not that important do we solvehow these massive problems. And they can be solved. The two biggest things going on in the world that i see is this incredible revolution in medicine and an incredible revolution in knowledge. The two of them become the basis for many of the things that we can do. Empoweredot is because we have had cancer breakthroughs and they are occurring because we can marry the analog in the digital world. Charlie rose do you think there is a consensus in the country to do that . The criticism is that we have gone from an era where we thought about solving problems that were very big and we have now become we now defined them as special interests. Everyone is guilty. I am not making a political point. Everyone has their own issue. But let us dream bigger. Let me give you an example. 3d printing of buildings. We now think we can build whole buildings with 3d printers. Dramatically lowering the cost of housing. Does that matter . No, we all have houses. Of course it matters. It matters enormously to all of the people. Another example synthetic food. We have a lot of food, we dont have to work on that. Of course not. 10 of the Global Warming contributions come out of cows. I call this nerds over cows. Cattle are wonderful animals but they are a significant source of pollution. Even if you do not care about the cost of food, it looks like we could do synthetic food generation out of plants with a positive. I can go on. Charlie rose in terms of the central philosophy is for government to supply an investment in the future by investing in the research and to unleash the private sector to be able to do this or are these problems too big . Eric schmidt it is more of a consensus. The country is full of smart people. Shocking. When you compare to europe and asia where i spend a lot of time, i want to be here. Let us start with that. I want to be here because we had 18 out of the top 20 Research Universities in the world. Our demographics are relative that we are growing and immigration is adding, politics aside. The kind of model that got us through the last 40 years is stronger than ever. Compared to the other models, i will take hours. But we need to focus. We need to agree with the projects are and build a can insist your it does not take a lot more money. There is a lot of money. It is how you apply it. Charlie rose let me talk about revolutions. There was the Industrial Revolution and then the information revolution. Where are we now and what is the next revolution . Eric schmidt there are two phenomena that will be transformative. Andfirst is in Health Biology ended knowledge. In health and biology there has been a breakthrough in a way to gene things. They use pieces of genes that they did not think were useful to reassemble them. It is gene editing in the simplest form. The combination of that allows us to probe into the molecular and biological structure of life. It is true within the next 1020 years that you could get a body part generated out of stem cells that come out of your blood. It is an extraordinary achievement. Charlie rose relative to the political controversies. Eric schmidt the core issue here is that you need a new body part and we can regenerate that from your cells. That is lifesaving for people that need transplants. This is the real combat. Your friend is dying and this fixes it, why are we not doing more . The core point here is the combination of all of that is current. Why is it occurring . Because technology and scientists see this but there is also a great deal of money. The Health Care Industry sees new treatment as new sources of revenue. You have a good alignment of economic interest, venture money, and this is risky so venture capitalists someone will make a fortune and some will lose. Information google is working very hard on the concept of an assistant. The way the system works is that uses all of the knowledge that google has generated. We have a knowledge graph. We understand how knowledge is spoken. How languages ok. First version one of the first version is we can create a messaging app for you and you can reply for you. Our first foray on this was an email project which would automatically reply to your email. I am is assuming i am assuming that everyone here wants this. The common reply is i love you which turned out not to be the correct answer in a corporate setting. We have bugs and so we move on. [laughter] idea of ase the Virtual Assistant coming out of Artificial Intelligence everyone is trying to do that. Amazon already has on the market, echo. Alexa, what time is it . You have all of the Major Companies are there. I assume that will be good for the end product but is google behind the curve on that . You dont have a product on the market. We Just Announced a product with different technology. This is how the industry works. We are far more collaborative than competitive. Everyone wants to focus on apple versus google but the fact of the matter is that the whole itsystem moves forward and is building platforms and knowledge. It is reasonable to expect that in a decade, the vast majority of your computer interaction will be high voice. I predictedke that this would never happen. If you look at the technology in Voice Recognition and alexa, you see it. I am not particularly into the Voice Recognition part, but i am interested in Voice Recognition with knowledge understanding. Underlying algorithms. We have a product that you can get on your phone, and it speaks in your language and it comes out in another language. Does this really work . Yes. Is it as good as a human translator . Not yet. Is it good enough to have a casual conversation . Yes. How does it work . It takes your voice, it digitizes it and put it into text. It then uses a different translation narrow network. Neuro network. You have three different translations. Nameie rose is there a for this revolution that we are in right now . With this Transformative Technology . Eric schmidt there is not a consensus name but i can do find it better. Another example. Go. E is a game called and is and it is infinitely harder than chest. Group at google trying to develop the concept of intuition. They can take a game in the form work, theyth enough can figure out what the objects of the game are, how to win it and then beat all of the humans. Pretty interesting. What is interesting technologically is that you do not have to tell it what the game is. How does it do this . Seestches for a while and common patterns and it begins to develop a base of knowledge. It learns against at that base of knowledge. This is not human intelligence yet. Yet. Rose you said eric schmidt this is something that has never been done before. We applied this to the game toled go. It learned how only look at certain positions by the same rough training method. Decided to have a game against the best player in the world in korea. A nice human being. 41. E beat him, charlie rose it was historic. Help us a desk help us understand. Help us understand. A friend of yours said recently that you are thinking a lot about Artificial Intelligence. On one hand, you have deep mine that beat go. On the other hand, you have watson that beat jeopardy. Explain articles explain Artificial Intelligence. Some people are making deep investments in it. It is happening because there is a confluence of a platform, a set of ideas, and a large amount of money, and a , and a senseing that it is transformative to everyones lives. Current uses i will give you a couple examples. There is a disease called diabetic. Go bades your eyes to and you can go blind. A good ophthalmologist can detect it. We can do better than a good ophthalmologist. We solve a million eyes. It is hard for the ophthalmologist to see a million eyes. Casesis a large number of that if you just let the computers do technology and see more examples, they can come up with better examples. We believe that you can apply this to oil and gas distribution networks. There is a great deal of leakage and decisions are made eye the flow and storage. By using that data, we think we can reduce emissions from that. It is a good goal. The real question is how far does this go . We think we can develop enough intuition that a physicist or a chemist could say they wake up in the morning and they say i want to combine this chemical with this one and i want to have this crazy reaction. If it does not low up i will create a new substance and i will get the nobel prize and get a promotion at work. They do that at 9 00. At 11 00 they do it. And at 3 00 it fails and they go home and have dinner. The next morning, they come up with a new one. That is how that works and they are incredibly intelligent people. Gocan ask the computer to through the combinations and give you a probability. Does that matter . These are trillion Dollar Industries around the world around chemicals, synthetics, drugs. Charlie rose deep mine has a different operating idea then ibms watson. How are they different . Watson andt facebook and deep mind are doing completely different problems. For watson, they use a particular kind of inference works particularly well for jeopardy and complicated problem solving. They are having a lot of success applying this to complex systems and explaining them. There is a complicated system that it can read and tell you what is in it. Lawyers at complexity and you take it away. You can take all of the contracts and read them and give an answer. Facebook Just Announced this week that they have a breakthrough in language understanding around communications. They has said that they have made significant progress in detecting hate speech. In our case, we took the position that we want to build an underlying platform that would allow you to do all of this stuff. Tenser flow. It is a multidimensional matrix. We have given this framework to all of our competitors. It is so strategic for us to build the community with all of the players that we literally took this amazing intellectual property and gave it away. Charlie rose some would say that deep mind is trying to understand how humans inc. And go from there. The ibm people would say it is man plus machine. Eric schmidt the founders came out of neuroscience. They imagine that you would build Computer Systems that use the same way that we do learning. I wont do it good job of this but i will give you an example. When you came into this room, how much cognitive time did you spend figuring out that the floor was where your feet when, the lights were up there, the table was there, and you have a knife and a fork, and your friends and their is roughly a people . Zero time. You are 30 learned that. You already learned that. Things that are not important. The things that are important, we put into this brain. It is called reinforcement learning. We believe that is going to be a core part of this next ai. In terms of economics in the global economy. Take these five companies, apple, amazon, google, face, and microsoft. Is there a race to do any one thing . Is there agreement . Google has made a fortune on search. Microsoft, on software. Amazon on a range of things. In these companies, are they in pursuit of a holy grail are they in pursuit of a holy grail . Eric schmidt think of each of these as a Platform Company driven by innovation that solves a problem that is global, in some cases, a problem you did not know you had. If you go back, microsoft being the eldest, to solve the problem of platforms. Started as a virtual bookstore. Have a virtual bookstore, i think it is fantastic. Each of these have has that have had that. When steve took over, he clearly wanted to do phones. And let the category. Have never in our industry the first four of those companies are leading the platform fight. We have never had that Many Companies fighting so brutally against each other and also collaborating. We always had ibm and microsoft. Charlie rose where is the collaboration because you are also suing each other . [laughter] eric schmidt there is a lot of collaboration. Run on apple and microsoft. A traditional model would say we will not put anything on that platform. It turns out that apple is a customer. In our case, we are a customer of apple for things. And on and on and on. Everyone argues with each other. But we benefit as an industry from open markets, globalization. And the sense that technology is tramped transformative. Should we insist on open sources in terms of the future . Or are we looking at a world in which each organization is going to be jealously guarding not only what it knows in learning but also trying to protect itself from losing its most talented human beings . Eric schmidt this is the genius of competition. We fight rudely to hire the top people to get our products out. Think about the iphone you use today. Think about how powerful it is. It is 100 million times more powerful than the computer i used in college. And by the way, it costs a lot less. There was only one of them in college and i stayed up all night to use it because there was only one. The competitive structure the architecture of that you described with those five companies will continue for a ande until another joins us someone leaves. The next one is uber. Saudi arabia is a large investors. Investor. I wish i had invented number. What a great idea. At the same time that travis and it was invented in paris at the base of the eiffel tower ready to travis. At the exact time that he was inventing over, i was giving a speech about how Amazing Companies would be discovered and apps. Le maps, i can tell you that the next , the one we will be talking about in 510 years will be built from a Machine Intelligence platform. It will use a smartphone, android and iphone. And it will use rapid iteration. Ine rose which raises terms of Artificial Intelligence and how smart machines are becoming, the often expressed fears of people like elon musk and larry, bill gates the idea is that there is some danger from the machines becoming so smart and so human but uncontrollable that they provide a threat to the planet. Eric schmidt these people have been watching a lot of movies. [laughter] charlie rose these are your colleagues. And smart people. And perhaps competitors. And Stephen Hawking also. Eric schmidt elon backed his over this important issue by developing a Million Dollars in a competitive, piedmont. We will see how it plays out. You never say never. But let us go through what is needed to make that scenario happen. The first thing is that we are still learning how to do basic intuition and those kinds of things. Breakthroughs and we will get excited and we will be able to answer russians and onail and make suggestions what Movie Theater you should go to tonight. That is not intelligence. We may be able to and we hope to be able to assist humans in their daily jobs. And who does not want help . We think we can do that. It is real speculation to get to the kind of human level of intelligence that everyone has in the room let alone going past. My own intuition, which is just a guess, is that there is another discovery needed. Oft here is the human level intuition and intelligence. My own intuition is that there is another discovery that is needed to occur. Charlie rose there are also questions of disruptive technologies. Does google fear there may be some disruption so that Search Engines will be obsolete . Eric schmidt in my industry you always worry about the next idea. Inevitably, there is always a in their that is garage. The young professor and two students by the way, that is how we started. Which whatany ways we do could be disrupted over time. We have significant advantages in terms of the engineers. Charlie rose uber is a disruptive technology. Amazon what the was a disruptive technology. That has been the power of technology to disrupt the way things have been. Eric schmidt uber is both a disruptive Business Model and technology. You have to have a pricing model which they do not set for their drivers as well as a pricing model to get enough customers. Charlie rose big picture. Some people worry that there may to 2000 go back you lived through that in terms of some kind of collapse. Technology companies. A bubble bursting. We lived through the bubble. We were so much more handsome and beautiful during the bubble. The bubble makes you feel like you are god. I remember being at this dinner in dallas and i looked around and said these are the leaders of the free world . We got ahead of ourselves and thank goodness that it crashed and we rebuilt it profitably. The market and investors are much savvier now. For the companys that do not have strong profits, they have a strong potential revenue scale solution. I did arose conversation the other night where john malone was being honored, a very successful entrepreneur. Terms inntent in his terms of his vision and access to the internet. Broadband and access to the internet is what these companies will do for him. But he raised the question with and people like google apple have so much money that he worries about the possibility that they have. In addition, they have so much money, can they scoop up all of the best talent . Eric schmidt we are trying to hire the best people, each of us we understandse the economic return of these people. But this is a narrative that is not unique to the five companies. For each of the Companies Represented here in the room, if you had five or 10 of the engineers we are talking about, we could improve the effectiveness of your building. Great many examples where you take what your business is like, you put it in come uphing and you with Customer Insights that drive your bottom line. That is where the races. That is where the race is. The economic value of these people is very high. Charlie rose will it also create problems in terms of people being misplaced displaced from the job market . Eric schmidt if you go back to the 1980s automation concerns, there are was a great concern that there would be a loss of jobs. The American Economy has generated a large number of jobs during this suppose it time when the jobs were to go away. The american model does create jobs but the jobs are different. Everyone has a right to fear for their own future and fear that their jobs will be disrupted but the fact of the matter is, we are the u. S. Today is running at near full employment. That is a testament to the recovery since 20082009. Inryone here was in new york 2008. Try to remember how you felt . Think about how strong the city and what you have done is. A testament. I am not as worried about this. There is a problem with the loss of high paying, middleclass manufacturing jobs. A halloween out of the middle. We need to find ways of the job to soak laois and the job this old dislocation. Is more education, more education, more competitiveness, and more entrepreneurs. You named those five companies every one of those was started by incredible entrepreneurs. Maybe we should thank them periodically. Look at all of the jobs these guys have created and all of the taxes they have paid. In california alone to bail the state out. Charlie rose should there be a change in the tax structure . Eric schmidt we have argued for two decades that the offshore cash, can be used to create jobs at home. We generate a lot of cash. It seems crazy to not let that cash him into the country and be used for capital investment. Here is another sore investment a sore point. We are under investing in our infrastructure. The population is growing and conductivity is growing. A greater demand on fixed services. We need to spend the money on roads, bridges, and airports. We are not doing it and Interest Rates are low. There is a set of things that businesses cannot do. They cannot build roads and bridges across the local river. There is a proper function for government and the government needs to get organized around doing this. That stuff drives Economic Activity which drives wealth creation, happiness, health care, and more voters. Charlie rose how much time do i have . When you look globally, where is the most competition going to calm to the american going to come to the american technological system . [lost audio] eric schmidt the things that the government was doing that we did not know about to survey United States citizens. We had fully encrypted the data in transit. If you want something to be private, keep it in gmail. It is fully encrypted and difficult to break in. We know this because everyone is complaining. Happen rose what would then is the fbi director came and said that we know this person is suspected of something and we think there is an exchange of information through gmail. Please give us access. Eric Schmidt America has a great law. It is called a legal proceeding. The front door. Terrorism is a horrific thing. The fbi director would not call us. To thisld go threejudge panel and the panel would order us to give that information and we would give it. Charlie rose most of the time they have. Than 50,000 less 40 it is a relatively rare event. Now,ie rose 10 years from the world will be dramatically different because of what we are doing . Eric schmidt think about the information that you have now that you did not have a decade ago. Think about the companys that we talked about today that didnt exist 10 years ago. Borrow one,arold, and watch this 10yearold manipulate his or her ipad or iphone. You will see the future. And it is a good future. All of the evidence is that people of our getting smaller. Educational achievement is improving and much of this is due to the interconnectedness of all of us. It will be a very good world. Charlie rose why should a 13yearold working on that because my 10yearold was at play. [laughter] [applause] charlie rose thank you. [applause] the u. S. House will return to work after his july 4 break. Billy house of bloomberg news, you write that speaker ryan plans a houseboat on gun provision after the city and by democrats. What exactly are the main details of that bill . The Speakers Office just eased details and it is that is the spin they are putting on that. The homeland safety and security act. It includes a provision to prevent terrorists from buying guns. It is much like the bill in the ate from senator cornyn but the democrats in the house and the senate rejected that idea as insufficient. Close to whaty the majority whip in the senate had offered and the senate block that. Why do republicans think that is the appropriate measure here . Democrat were a house on the Conference Call early this afternoon, you were saying that it was because youre letting the National Rifle association right to your legislation for you and they want to limit whatever gun aspects that bill as much as possible. Whether that is true or not, who knows but House Republicans are aboutg pressured something with the word guns in it. You talked about what the democrats may be planning and what they are talking about. Nancy pelosi released a statement that reads in part that democrats will continue to push House Republicans to give the American People a vote on meaningful gun violence, prevention measures that will save lives and protect our communities from terrorism. What exactly are you hearing about the plans of House Democrats are for the coming week both off and on the floor . We are talking about the same things that democrats were asking for last week. They want background checks on gun sales and they want to ban firearms sales to those on the governments nofly list. On thebeen stepped up heels of the orlando shooting. , one ofto john larson the organizers with john lewis of georgia, but larson from andecticut tells me that he luis have written to speaker ryan. They would like to have a meeting next week. Other dilatory tactics may be considered. Not so certain that they are going to do another hidden. They seem to think there will not be another act on that. A protest march . What or whether that kind of but that is what they are talking about. Everything seems to hinge on this meeting they hope to have with the speaker and what spills out of that and if anything happens to get their stuff into the republican bill. House Speaker Paul Ryan called the democrat