Jim's interview with Google CEO, Eric Schmidt (cont'd):     

Jim:     First let’s get it out of the way, you have thought about it…

Eric:     Where is your helmet?

Jim:     Oh, I don’t need the helmet for this sector, this is when we are excited, this is when we aren’t as defensive as I should be, because I am very excited about the new administration. And I want to know from you, whether you have thought long and hard, and I believe that you would be the best chief technology officer could have, why not take it? Why not help out?

Eric:     Because I like working at Google.

Jim:     Well we all like where we work, I like it here.

Eric:     I like working at Google, and I am going to stay right there.

Jim:     Okay, has he come back and asked you, President Obama?...

Eric:     Let me just say that I want to stay at Google.

Jim:     Alright, glad to have you there. Now we need to create jobs, we keep hearing about terrific blue collar opportunities… you have been advising the President, I imagine, not just on infrastructure, but on ways to create critical white collar jobs, which are being lost by the thousands. What are the real opportunities to put these people to work?

Eric:     First of all we need to create jobs, and jobs are created by the private sector when they invent and create new businesses. We all understand that. We have argued for a long time that the use of the internet, and particularly the broad band internet, really, really does provide the leverage that everybody is looking for. Get everybody connected, make it possible to do things from where ever you are. Be creative and so forth. In the broad band stimulus package, in the stimulus package that is coming through, which comes through maybe in the middle of February, it is on the order of $10B of infrastructure money to build a broad band internet in the rural area. Where we think there is a lot of talent that does not have access to the kind of stuff that those of us in the city could really use.

Jim:     Now, you know China, for instance, is going to spend $40B upgrading it’s telco infrastructure. Why can’t we mimic the Chinese, we could use all new telco infrastructure?

Eric:     Well, in fact that is happening, right, this infrastructure is part of that. And the good news is that we are going to do that. And I am quite certain that by the time that we get through the horse trading and so forth, people understand the investment that needs to get done here.

Jim:     Okay, now we have spent, the previous administration, has spent hundreds of billions of dollars trying to shore up a bank system, which has not created any jobs… has actually led to tremendous unemployment in banks… and has not stemmed the banking crisis… Do you think that Obama, you are on the economic transition team, understands the flaws of that, and wants to change things?

Eric:     Well, in fact, Tim Geithner talked about this today in his confirmation hearings. But, look, you have got a jobs problem and you have got a credit problem. The jobs problem is solved by stimulus spending, helping people continue to hold onto their homes, and so forth, and making all that happen. The credit problem is a banking crisis, where did the money go? Do you know where it went?

Jim:     Well, I think yes, I do, I am not going to defend a lot of these banks CEO’s… they have made a lot of mistakes and they deserve a lot of the opprobrium… but most of these banks are short of capital… and they need this money, if only to just to be able to take the charges… I feel that they were betrayed, because a lot of the acquiring banks bought bad mortgages thinking they could put them to the government.

Eric:     What they are going to do, in this next round, is make sure that we have transparency of where this money goes. One of the things the government needs to change, is how about it talks about how it makes its decisions. Why don’t we see the earmarks when they come through? Why don’t we see the changes? Why doesn’t the government post, on a website, visible to your favorite search engine. What actually happened, right? You would know where it went. You would see where the special interest really ally. It would be a better government if it were more transparent.

Jim:     Do you think that it would be possible to explain away bad decisions, though, no matter how transparent?

Eric:     You get a better outcome when everybody sees what is going into the soup.

Jim:     Okay, now, one of the things that I am looking to you and to a lot of other smart people, we mentioned Mr. Serf, uh, is something that we haven’t ever heard of. The other day, I was hearing from the critics… listen all day… people are saying that there is no solution to the banking crisis… one of the things that I like, out of the box, to use that cliché.. Obama thinking… Larry Summers’s thinking… how about some out of the box thinking about what would be the great Manhattan project of this year?

Eric:     Well, it’s is obvious that we need to rebuild the energy infrastructure of America. I don’t know about you, but I am tired about the wars, and worrying about the Arab oil. I am tired about all of this stuff. Why don’t we figure out a way to use the resources that America has, America has land and wind and so forth. And I know that oil is cheap, and you know that your model is $30 to $50. Oil is not going to stay that way for ever. Let’s get ourselves organized around export order to jobs, that could really create some new investments and some new economies. And, by the way, the funding that is in the stimulus package, a lot of it is to try to get that going. And that is good long term investment in America.

Jim:     But why aren’t we using our brains to try to make the energy we do have, coal in abundance… natural gas in abundance… cleaner so we don’t set ourselves up for failure?

Eric:     In fact, that is happening. It looks like carbon sequestration, basically the process of putting carbon in the ground, it has some significant scientific breakthroughs. A lot of these industries got no investment in the last 30 years. They were not very sexy. The professors are now retiring. A new generation of people are coming into universities, who want to solve the global energy problem. Partly because of climate change. But also because, there’s job creation, growth, and it has all these issues. We talk about it all the time. It is a much bigger industry, by the way, than my industry. Which is the information technology. So let’s fix that.

Jim:     Okay, now we had a good question about when would solar come back in vogue. Given the fact that we have to spend so much money to shore up the banking system, how will we possibly have enough money left over to subsidize solar in an era where oil is nowhere near where it was a year ago?

Eric:     You have got to look at it from the stand point of the cost of the plants, not the cost of oil. Oil is largely a function of transportation. The basic problem is that you are either going to build this huge expensive coal plant, or this huge expensive wind plant, or this huge expensive natural gas plant. Right now that there is a problem that wind farms are being built right next to brand new natural gas plants, because wind doesn’t blow all the time. Part of the stimulus package, which you are very interested in, includes money to modernize the electric grid, to make it look a lot more like the internet, a lot more flexible as it moves power around. Without a smart grid, we won’t make any of this stuff happen.

Jim:     Do you think that there is something on the horizon, in 89, 90 Intel shrunk the semi-conductors so well but kept the speed and the intelligence of them, that we had an explosion in personal computers. In the mid 90’s we had an explosion first in email, and then the internet took over, and then the search engines. Give me something that no one is seeing, that you are perhaps noticing in Google, you guys have your hands in many different things...

Eric:     We have a couple of bets in the energy sector, which are really interesting. There are people working on very, very aggressive bio-fuel strategies. All of a sudden, we just make all of this stuff. Literally growing it from sunlight, right, and all of a sudden you have a substitute for…

Jim:     But that could be mass, every time I hear about these ideas, I don’t want to share them with my viewers if there is no hope...

Eric:     It is science and research, it’s not this year but it is coming. Another example is photo biotechs, right, all of a sudden the semi-conductor processing are getting so much faster we can get the kind of efficiencies that have been unheard of before. To actually convert sensor. These are in development now, you will not see them this year, maybe two or three years from now. In the shorter term, you are seeing great technology improvements in batteries and hybrids, which will help us a lot in transportation.

Jim:     Why, you are obviously an internet CEO, I tend to look at the internet of somewhat repetitious. I think it has done, uh, it has hurt a lot of producers of content, because it has commoditized it. Why should we think that the internet can put people to work, when it is actually putting, if you are certainly working in a printing publication, a lot of people out of work?

Eric:     Well, there are winners and losers in all of these technologies. And the fact of the matter is, the internet makes the market more efficient. Which often brings prices down, which is benefit to users. So the argument in favor of it, is that it will probably get so much larger. It is a smaller pie, a smaller number of viewers. Now, you have a much larger group of people who make less money, and so forth. But it is such a global business now, that is the solution. Using the internet to build global businesses, that is how you really win.

Jim:     Have you spoken to President Obama in the last week or two about some of these ideas that you are talking about?

Eric:     I have just a little bit, and they are really, really focused on moving very, very quickly. I think that everyone understands that a new president has a honeymoon period, in that honeymoon period they can usually get their most ambitious agendas. In his inauguration speech yesterday, you could hear the same themes as he ran on his campaign. The notion of dealing with the way the country is perceived globally, as well as economic stimulus. They are in a hurry, and they need to be.

Jim:     I know you report tomorrow, not talking about earnings, but in the news today, Google discontinues its print relationship. Is print media dead?

Eric:     No, no, not at all. That particular product did not work particularly well. And we are trying other solutions. Print is a hard one, because they have declining ad revenue and higher print costs. And so we are trying other solutions, ultimately most people will get their information on line.

Jim:     Apple Computer just reported… it reported a monster good quarter… it is moving things up dramatically.. are we at a time when there is tremendous financial chicanery, where whole banks have been destroyed, where people have no transparency… is it right for the SEC to spend all of its time trying to invest or at least a lot of its time trying to investigate whether we knew the truth about the unbelievably great CEO, Steve Jobs’ health?

Eric:     Well, speaking as a board member, we recognize that Steve needed a medical leave, so we announced that. And that, I think, is my only comment on that. The fact of the matter is, Apple is doing really well and it’s products are doing very, very well.

Jim:     One last thought, if there was going to be something that we… where would the most unexpected thing that Obama could do right now to fix this economy… the one that… look we built an atomic bomb in the 1940’s, no one saw that coming… we have had tremendous advances, we put a man on the moon… what is our "man on the moon?"

Eric:     Well, the best way to do this is to do something every month , and track it on a web site. Here is what you do, you say our only job here is to get people back to work. And every month we are going to show how many people, and what worked and what didn’t. And we are going to change. Oh that worked. Oh that didn’t work. Oh my God, the government might actually be flexible...

Jim:     Excellent, Eric Schmidt chairman and CEO of Google, Inc. (GOOG).

[end of interview]

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[verbatim recap]

[end of segment]


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