Conversation with Eric Schmidt; Conversation with Larry Kellerman and Peter Corsell - Part 1

CHARLIE-ROSE-SHOW-01

ROSE-SHOW-01

and Peter Corsell - Part 1>

from Silicon Valley startup, to one of the world`s most powerful and

influential companies. He was CEO from 2001 to 2011. He is currently

executive chairman of Alphabet, Google`s parent company which was created

last summer. Alphabet encourages ambitious projects or moonshots, and it

believes it can benefit both for the company and for society. Advances in

artificial intelligence and other ground-breaking technologies have opened

the door for revolutions in medicine, biology, knowledge, and many other

areas. Larry Kellerman and Peter Corsell talk about the future of regulated

utilities. Twenty First Century utilities was founded in 2015 to reinvent

the century-old electric utility business model. The company`s mission is

to drive the mass adoption clean, low cost energy producing and energy

saving technologies. It owns and operates moderate sized regulated

utilities that benefit from access to low-cost capital and have deeper

connections with the local community than its larger peers.>

Economy; Infrastructure; Energy >

(COMMERCIAL BREAK)

CHARLIE ROSE, PBS HOST: Welcome to the program. Tonight, a conversation with Eric Schmidt, the executive chairman of Alphabet, the parent company of Google.

(BEGIN VIDEO CLIP)

ERIC SCHMIDT, EXECUTIVE CHAIRMAN, APLHABET: Think about the information that you have now, that you didn`t have a decade ago. Think about the companies that you -- that we talked about today that didn`t exist ten years ago. Think about the -- find a ten year old, you know, borrow one, get one loaned to you, and watch this ten year old manipulate his or her iPad or iPhone. You will see the future and it is a good future. If all the evidence is that people are getting smarter, by the way, not dumber. All right, the evidence is that educational achievement is getting on up, and a lot of this is due to the interconnectedness, right, and the integration of all of us. It`s going to be a very good world.

(END VIDEO CLIP)

CHARLIE ROSE: We conclude this evening with Larry Kellerman and Peter Corsell of Twenty First Century Utilities.

(BEGIN VIDEO CLIP)

LARRY KELLERMAN, CEO, TWENTY FIRST CENTURY UTILITIES: This began 37 years ago, which started my pilgrimage in the electric utility industry way back when, when I started the Southern California Edison Company, this is an industry that I have grown up with. This is an industry that I believe has been very, very transformational, since its very founding, well over a century ago. And my belief, and my colleague Peter`s belief, is that there are technological changes that are occurring in the ecosystem of electric power generation, production, and use that makes the utility even more relevant in today`s world than it has been in its entire history.

(END VIDEO CLIP)

CHARLIE ROSE: Eric Schmidt on the future of technology. Larry Kellerman and Peter Corsell on the future of regulated utilities, next.

(COMMERCIAL BREAK)

CHARLIE ROSE: Eric Schmidt has been at the center of Google`s transformative rise from Silicon Valley startup, to one of the world`s most powerful and influential companies. He was CEO from 2001 to 2011. He is currently executive chairman of Alphabet, Google`s parent company which was created last summer. Alphabet encourages ambitious projects or moonshots, and it believes it can benefit both for the company and for society. Advances in artificial intelligence and other ground-breaking technologies have opened the door for revolutions in medicine, biology, knowledge, and many other areas. I sat down with Eric Schmidt in New York, at the New York Economic Club for a wide-ranging conversation, and here is that dialogue.

(BEGIN VIDEO CLIP)

CHARLIE ROSE: Let me just begin with a couple of questions. When you went to Google, they said to you we need an adult in the room? Because it was a good day for you.

ERIC SCHMIDT: It was a good day for me. The -- it`s an honor to be here and thank you guys very much for inviting me, Charlie, thank you for doing this as well. Larry and Sergey had decided that they needed someone to sort of run things. And they have spent 16 months interviewing people, and they made them do things. So to become CEO, you had to go skiing with them, or you had to go to burning man with them. And very, very few people met the test, apparently, but I was fortunate enough. I told them I wasn`t going to spend the weekend with them, but we made a long list of things to do and from then on it worked.

CHARLIE ROSE: And ten years as CEO.

ERIC SCHMIDT: Yeah, and we built the company.

CHARLIE ROSE: What was the most important thing that happened in those 10 years for you, for the company, as you see it?

ERIC SCHMIDT: My world is full of brilliant ideas that are not monetizable, in the sense that people have amazing ideas. In order to build a company of sort of success of a Google, or Facebook, or an Uber, you have to have both a technological idea, but you also have to have a significant change in the way the revenue will come in. In our case, we invented targeted advertising which is really much better than untargeted advertising. And that`s what happened, and we road that really, really hard. That gave us this engine. In the same sense that Microsoft was the engine from DOS to Windows, go back in the 80`s we have had this engine that has allowed us to build these systems, not necessarily with a particular revenue plan. We`ve been able to fail at big project without too much of an issue with respect to our shareholders and so forth.

CHARLIE ROSE: So you can risk much.

ERIC SCHMIDT: Because of the underlying engine, we can take risks, invest in ideas, and do crazy ideas, right? Things which I don`t think will work, but they work or they don`t. We`ll cancel things as part of the culture. And I learned that that`s not normal. That most companies, most companies are locked in these quarterly cycles, debt structures, and so forth, which gives them very few degrees of operating freedom. And It`s very tough for them.

CHARLIE ROSE: And today what is the roll that you have?

ERIC SCHMIDT: I`m mostly working on science. I spend a lot of time as you know, on public policy, trying to understand how the world really works, and trying to make sure that, frankly, the governments wouldn`t screw this sort of amazing thing that`s happening up in the form of the internet.

CHARLIE ROSE: Is there risk of that?

ERIC SCHMIDT: Of course. Whenever you are affecting communications and information, governments have a role to play. We had to sort of significant battle if you will with China. The democracies are generally OK, as long as you are on the side of informing people, and you`re reasonably fair and so forth, you can get through that.

CHARLIE ROSE: Will Google be back in China?

ERIC SCHMIDT: I hope so. We left in 2010 because they have these very, very strict rules about censorship, and we just -- were unable to operate morally from our perspective under the censorship rules. So we keep trying. I spend a fair amount of my time trying to get it reopened. It`s really up to the Chinese government at this point.

CHARLIE ROSE: I want to talk about the issue that I touched on which is very strong for you, because we want to talk a lot about the future here. The notion of the moonshot, we`re looking at it in cancer, as an example which Joe Biden is heading up by appointment of the president. But what are the possibilities that a moonshot could do for us?

ERIC SCHMIDT: Maybe I should say I`ve come to a sort of obnoxious view that we`re operating under the sort of zero sum set of assumptions in our society. And I`m including the Western World, not just the U.S. And if we`re not asking enough of our people, and enough of what we can do, and we`re not trying to build things that are transformative. Go back to the interstate highway system, right, which was originally justified, by the way, so they could move missiles around. So the lack of interstate highway system would cause America not to grow at all. And economic growth is the economic club is largely from interconnectedness and innovation.

The interconnectedness comes from making the world closer, and I mean that intellectually, and informationally, and physically, and distribution networks, and all the kinds of things that companies representatives do. And it also, new inventions come along. And every once in a while there are things which we have a consensus, right, and if we would just get behind it. We call these moon shots. As you know, the vice president did a cancer moonshot. Sean Parker just donated $250 million to a set of doctors who have figured out a way to promote white blood cells and against red cells in a complicated new way that might be a very major cancer breakthrough, right? These things come along. But we don`t talk about that.

We spend all of our time arguing about political issues which are largely not that important compared to, how do we solve these massive problems. All right, and they can be solved. So, the two biggest things that are going on, I think in the world that I see, are this incredible revolution in medicine, and this incredible revolution that`s going on in knowledge. And the two of them become the basis, I think, for many of the things that we can do. The cancer moonshot is powered because we`ve had these cancer breakthroughs, and they are occurring because we are being able to essentially marry the analog world of cancer and biology, and the digital world that I live in.

CHARLIE ROSE: Let me talk about revolutions, there was the industrial revolution, then there was the information revolution.

ERIC SCHMIDT: Right.

CHARLIE ROSE: Where are we now and what`s the next revolution?

ERIC SCHMIDT: I mentioned there are two phenomenon that I think are going to be transformative in the next decade. The first is in health, biology, and I`ll talk about that in a second, and knowledge. The health and biology, there`s been a breakthrough of something called, cas crispr 9, which is way of sort of gene editing. At the moment a very, very tough hammer that they use a piece of genes that they didn`t think were useful, that turned out to be very useful to sort of reassemble components. It`s gene editing in its basic form. The combination of that, and then doing databases of genes, and sequencing, and so forth, allows us to really probe into the molecular and biological structure of life. It`s certainly true within the next 10 or 20 years that you`ll be able to get a body part generated out of stem cells that come out of your blood, right. It`s an extraordinary achievement, right, one I think was made in Japan.

CHARLIE ROSE: And removed it from the political controversy that.

ERIC SCHMIDT: Yeah, and politics was just a stupid argument anyway. So the core issue here is, you need a new body part? We can actually regenerate it from your own cells. That`s life-saving for people who need transplants, right? So let`s go through. This is the real combat. Your friend is dying. This stuff fixes it, why are we not doing more of it. I will give you another one. I will get on with drop cars in a sec. But the core point here is the combination of all of that is current. Now, why is it occurring, well, partly because technologist and scientist see this, but also because there`s a great deal of money at stake. Because the health- care industry sees new treatments as new sources of revenue, and new billion dollar drugs, right? So you`ve got a good alignment now of economic interests, venture money, you know, and stuff is risky, right? So venture capital, some of whom are in the room are really going to -- some will make a fortune, some will lose money, that`s how it works, great.

In information, Google is working very, very hard on the concept of an assistant. The way the assistant works -- the assistant is -- and this is all up to Dan with your permission, so forth. It uses all of the knowledge that Google has generated. We have something called the knowledge graph. We understand how language is spoken. We have 17 years of queries, and those sorts of things to sort to try to help you out. So one of the first versions is we built an instant messaging app, which can reply for you. And it sort of learns what your reply is, and knows what to say. Our first for -- last year was an e-mail product which would automatically reply to your e-mail. Now, I assume everyone here want this product, right? So we launched this thing in its most common reply is I love you. Which turned out not to be the correct answer in a corporate setting. So you know, we have bugs, and so forth, and so on. But.

CHARLIE ROSE: Let me stop you there one second. I mean, the idea of a virtual assistant coming out of artificial intelligence is -- everybody is trying to do that.

ERIC SCHMIDT: Yeah.

CHARLIE ROSE: We have Amazon already on the market with Echo. And how many get up and say Alexa what time is it, Alexa what`s the news. You have all of the major companies are there.

ERIC SCHMIDT: Right.

CHARLIE ROSE: I assume that competition will be good for the end product. But is Google behind the curve on that or are you -- because you don`t have a product on the market.

ERIC SCHMIDT: No, I mean we have -- we just announced a product, a different technology. And we`ll see how well it does. This is how our industry works. But we are far more collaborative than competitive. Everyone wants to focus on Apple versus Google, or whatever. But the fact of the matter is the whole ecosystem moves forward, right? And it is building those platforms and building that knowledge. I think it`s reasonable to expect, again, in a decade the vast majority of your computer interaction will be by voice, sort of shocking. I, by the way, ten years ago I predicted this would never happen. But I think -- it shows you how right I am. But you look at the technology and the gains in voice recognition, and Alexa which is now common in everyone`s lives, you see it. Now, I am not particularly interested in the voice recognition part. I`m very interested in the voice recognition with knowledge understanding.

CHARLIE ROSE: And to tap into the data that already Google has, for example.

ERIC SCHMIDT: Well, or the underlying algorithms. Another example is you can use Google -- we have a product now that you can get on your phone, you can speak in your language, it comes out in another phone in another language. Like, oh my God, right? Does this really work? Yes. Is it as good as a human translator? Not yet. OK. Is it good enough to have a casual conversation? Yes. All right. How does it work? Well, it turns out it takes your voice, it digitizes it and puts it into text, right? That`s done using a neuro-network which is an A.I. concept. And then uses a different translation neuro-network which has learned how to translate by looking at good language pairs, right. It translates it, and then it translates it back into voice. So you have three different translations, you go from voice to voice.

CHARLIE ROSE: Back to my question. Is there a name for what the -- industrial, to information, to the age that we are looking at now, the transformative age of all of the technology, and what it`s doing for us?

(CROSSTALK)

ERIC SCHMIDT: There is not a consensus name for it, but I can define it a little bit.

CHARLIE ROSE: Right.

ERIC SCHMIDT: So, another example, we -- there`s a game called, Go, which Americans typically don`t know anything about. And it`s infinitely harder than chess. And a group -- Google -- Alphabet, I guess, I could say, called Deep Mind had been working for a long time to try to develop the concept of intuition. And they developed an ability to take a game in the form of bits, literally, they can watch the bits of the screen, and with enough work they can, and playing enough games, they can figure out what the objects of the game are, how to win it, and then beat all the humans.

CHARLIE ROSE: Well, that`s pretty interesting.

ERIC SCHMIDT: Now, what`s interesting technologically is that you don`t have to tell it what the game is, right? So how does it do this? Well, you know, it sort of watches for a while, and it seems common patterns, and it begins to develop a base of knowledge. And then it learns against that base of knowledge. You know, this is not a human intelligence yet, right? So it`s not -- we`re not making that argument.

CHARLIE ROSE: But carefully you said yes.

ERIC SCHMIDT: Yes. We don`t know how hard it will be to get there. But what we do know is this is something which is never been done before. So then we applied this to the game of, Go, which is thought to be un- computable. And what it did it learned how to only look at certain positions by the same rough training method. And we decided for him to have a game against the best player in the world, in Korea, a perfectly nice human being. And we beat him 4-1. Which was historic.

CHARLIE ROSE: It was historic and huge. I mean, everybody looked at this -- help us understand, we are now talking about Artificial Intelligence.

ERIC SCHMIDT: Right.

CHARLIE ROSE: All of these things we just talked about is Artificial Intelligence. And a friend of yours said to me recently, Eric is thinking a lot about Artificial Intelligence. You know, on the one hand, you have Deep Mind which is able to beat, Go, that`s a huge thing. On the other hand, you have Watson which began with chess and then won jeopardy, and they`re working on -- explain Artificial Intelligence for the folks here because in this audience and elsewhere, everybody hears about it, some people are making deep investments in it, hedge funds and others.

ERIC SCHMIDT: But remember what I said about the biological world, right? It`s happening because there is a confluence of a platform, a set of ideas, and a large amount of money, and a lot of investing, a lot of people coming out of school that are working on it, and a sense that it`s transformative to everyone`s lives. The same thing is going -- the two are symmetric. So, respect to A.I., the current A.I. uses -- I will give you a couple that are simple. If you are familiar with a disease called diabetic retinopathy, because diabetes revolution is a revolution, tragedy, if you will is taking over the world. It causes your eyes to go bad. You become blind. It can be detected by a good ophthalmologist. But we did a test where we take pictures of your retina and we can do it better than an ophthalmologist. Wow. How is that? Well, it turns out we see more eyes, we saw a million eyes, very hard for the ophthalmologist as hard as they work to see a million eyes. So we can just train against.

So in situations -- there is a large number of cases where if you just let the computer, this new technology, see more examples, they can come up with better decisions. Give you another example, there`s some -- we believe that you can apply this to oil & gas distribution networks. There is a great deal of leakage, and sort of decisions that are made about flow and storage, and so on, and so on. And by using that data, we think we can reduce the emissions, right, from that. Again, it`s a good -- by the way, the emissions also are costly to the industry, it could go on. So, the real question is how far does this go? We think we can develop enough intuition, I`ll use that term carefully, that a physicist or a chemist could say, you know how they work, right, they wake up in the morning and they say, oh, I want to combine the I3 chemical with the Z2 chemical, and I`m going to have the following crazy reaction. It`s not going to blow up, but instead, I will produce a new substance which will get me a Nobel Prize and get me a promotion at work. So they do that, right, that`s at 9:00 in the morning, 11:00 AM they do it. They have their senior chemist do it, and at 3:00 in the afternoon it fails. So then they`ll go home and have dinner. And the next morning they come up with another one, OK. That`s how it really works, right. And these are incredibly intelligent people. But that process can be onerous, right? We can ask the computer to go through all the combination and give you a probability. Does that matter? These are trillion dollar industries globally around chemistry, chemicals, synthetics, drugs of one kind or another.

CHARLIE ROSE: With respect to our vision of intelligence, on the one hand, Deep Mind has a different operating idea.

ERIC SCHMIDT: Sure.

CHARLIE ROSE: . than what IBM`s Watson. Explain how they are different, and what they`re trying to accomplish each on their own.

ERIC SCHMIDT: Each of Watson, and Facebook, and Deep Mind are doing, have completely different sort of providences. In the case of Watson, they use a particular kind of inference model, a technical term, which worked particularly well for Jeopardy, and for complicated problem solving. And they`re having a lot of success applying this to complex systems and explaining them. So think of them as there is a complicated system. They can read it, literally, and tell you what is in it, right? So this is sort of lawyers had complexity, you take it away, or whatever model you have, how it all works. So you can take all the contracts, read all of them, and give it an answer.

That`s a generalizable result, a powerful one for them. Facebook just announced this week that they have a breakthrough in language understanding around communications, sort of what they do. And they have said that they have made significant progress in detecting hate speech. So, that`s clearly a good thing. In our case, we took the position that we wanted to build an underlying platform that allowed you to do all this stuff. We built a network, sorry to be -- describe it technically but it`s called Tenser Flow. Tenser is a multidimensional matrix, and the underlying system for them describing are essentially multidimensional matrix algorithms of one kind or another, and we`ve given this framework to all of our competitors. It`s so strategic for us to build the community, all the players, so we literally took this amazing intellectual property and we gave them away, and they`re intact to use again.

CHARLIE ROSE: You bought Deep Mind. Some will say to you that Deep Mind - - what they`re trying to do with Deep Mind, is they`re trying to understand how humans think and build from. While the IBM people and Watson people will say it`s man plus machine.

ERIC SCHMIDT: That`s right. It`s a different -- the Deep Mind people are interesting because the founders came out of neuroscience. So they imagined that you would build computer systems that use the same way we do learning. And I will give you -- I won`t do a good job of this because I`m not a neuroscientist, but think about it when you came into this room. How much cognitive time did you spend figuring out that the floor was where your feet went? The lights were up there. The table was there. You know, and you had a knife and fork, and friends, and there are roughly eight people, and everyone is, you know, dressed properly. Zero time. You had already learned that. You have chunked that, if you will. There is evidence that the way our brains work is we study a scene, and then we subset it to the things that are really important. And the things that are really important we then put into the brain. This is called reinforcement learning in the vernacular. And we believe that reinforcement learning is going to be a core part of this next set of A.I. algorithms.

CHARLIE ROSE: We talked about the future. I know there`s interest in here in business and in terms of the economics and the global economy. Take these five companies, Apple, Amazon, Google, Facebook, Microsoft. Is there a race to do any one thing? Are they all in the same business? We know that Apple has made a fortune on a smartphone. Google has made a fortune on search. Microsoft made a fortune on software. Amazon made a fortune on a whole range of different things. But in these companies are they in pursuit of a holy grail?

ERIC SCHMIDT: The tech companies as a group are highly competitive, seeking new -- I want to say it right. Think of each of these as a platform company driven by innovation that solves a problem and it`s global. In some cases a problem you didn`t know you had, but you discovered they solved very well number. So, if you go back, Microsoft being the eldest of them, solved the problem of inoperable workstation platform, and we all know the history there. Amazon started off as essentially a virtual book store. I didn`t realize that I want a book store bigger than a current book store, but now that I have one, I think it`s fantastic, right? It`s so useful. Each of these has had that. Apple`s transformation, of course, is legendary with Steve`s, sort of, resuscitation of the company. And when Steve`s took over the second time, he clearly wanted to do phones.

CHARLIE ROSE: Right.

ERIC SCHMIDT: And lead the category. Each of these companies -- we`ve never in our industry had and for -- and I would argue that the first four without Microsoft are leading the platform fight. We`ve never had that many companies fighting so brutally against each other, and yet also collaborating. In our industry we always had IBM, and Microsoft, and a few others.

CHARLIE ROSE: Where is the collaboration because you`re also suing each other?

ERIC SCHMIDT: Yeah, but that`s OK. That`s normal. But, there`s a lots of collaboration. Typical example is our apps all run on Microsoft. Our apps all run on Apple.

(CROSSTALK)

CHARLIE ROSE: When Apple last year, they announced a partnership with Microsoft.

ERIC SCHMIDT: And, you know, a traditional model would say, oh, we won`t put anything on that platform. It turns out that Apple is a customer. In our case, we`re also a customer of Apple for things, on, and on, and on. And in fact, everyone sort of argues with each other, but we benefit. We as an industry have benefited from open markets, globalization, a sense that technology is transformative, and the kind of financing market.

CHARLIE ROSE: Should we insist on open sources, in terms of the future, in terms of all that is being discovered so that -- or are we looking at a world in which each organization is going to be jealously guarding not only what it knows and learning, but also trying to hire a way and protect itself from losing the most talented human beings.

ERIC SCHMIDT: But, by the way, this is the genius of competition, this is evidence of real competition. And we fight brutally to hire the top people, to get our products down. Think about the android phone or iPhone that you use today. Think about how powerful it is, right? I figured out it`s a hundred million times more powerful than the computer I used when I was in college.

CHARLIE ROSE: Right.

ERIC SCHMIDT: And by the way, it costs a lot less. Because there was only one of them in college, and I stayed up all night to use it because it`s the only time I could get access to it. So it`s real consumer benefits. So, I think that the competitive structure, the dark of which you describe, the 4 and 5 companies, will continue for a while until another one joins us and one leaves.

CHARLIE ROSE: One we don`t know now.

ERIC SCHMIDT: Of course. And I can tell you that, you know, the current next one is Uber, which has done remarkably well and its disclosure, Google is a large investor in Uber.

CHARLIE ROSE: And so is Saudi Arabia`s -- well fund.

ERIC SCHMIDT: Yeah, I didn`t do that deal. But, so anyway, Uber has done incredibly well, and again, who -- I wish I had invented Uber. What a great idea, right? I use -- at the same time that Travis and his partner were standing -- it was actually invented in Paris at the base of the Eiffel tower according to Travis. So, at the exact time he was there inventing Uber, I was giving a speech about how there will be amazing companies founded based on smartphones, Google maps, and GPS, right?

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