Friday, December 23, 2016

knee high boots


kai ryssdal: if you don't knowwho eric schmidt is, you're in the wrong room. this morning as i startedthinking about how to begin this, i of course wentto google, and i googled economic recovery. and i got 47, 500,000 answersin 48/100 of a second. and i said, well, that's aninteresting little statistic, but i'm going to have the manhimself here later on, so why don't i just ask him?

and i think that'swhat i'll do. in all seriousness, eric schmidtis the leader of arguably one of the mostpowerful and well-known companies on the planet. we all use his productsevery single day, multiple times a day. and as such, i think he'sprobably got something of a unique perspective on thiseconomy, how to steer a company through it, how to steerpolicy in that economy.

and that's what we'regoing to talk about. we'll go a little bit, eric andi, and then we are going to open it up for questions. a little bit of housekeeping,there are two microphones in the aisles. we're going to alternateback and forth. we need to be out of here, i'mtold, by 2:15, so we're going to keep it on time. so line yourselves up when weget there and we'll just go

back and forth. sound like a plan? obviously a lot to talk about ina short period of time, but i want to sort of lay a littlebit of a groundwork here and get a sense of where you werementally back in september, when ben bernanke and henrypaulson, the chairmen of the federal reserve, when upto capitol hill and said, this is it. we're done.

we need $700 billion dollars. ready, go. eric schmidt: well,i was scared. let me start by sayingcongratulations to walter and to david and the teams that haveput this amazing ideas festival together. it's really one of the greatevents in america, and i think you all should be proud to bepart of it [unintelligible]. [applause]

eric schmidt: in september,the worst day was the wednesday when the money marketfunds broke the buck, if you remember that day. and that night, tuesday nightovernight, the financial clearing system of the countryalmost failed. and the federal reserve had togo in and hand money to the clearinghouses to essentiallymake sure that the money, the dollar, if you will, that wasclearing overnight was cleared properly the next day.

and i said to myself,how did we get ourselves into this situation? and i still don't know theanswer to that question. kai ryssdal: assuming, though,that google keeps its cash in very safe banks-- eric schmidt: in fact, what wedid is we took it out of the banks, and we put it intosovereign denominated currencies, because we figuredthat the countries would not go bankrupt.

kai ryssdal: this country'scurrency too, yes? just checking. eric schmidt: we dida basket, yes. kai ryssdal: assumingall that's true-- eric schmidt: it is. trust me, it's true. i'm a ceo, i can't lie. it's like a real problem. kai ryssdal: it's my job.

i have to ask those questions. how are you feeling, then,about where we are in terms of fixing it? eric schmidt: well, again, withthe caveat that i don't understand how the learned andsmart people who were running all this could have gotten usinto the situation in the first place, with thatas a caveat, right? and i think we should have adiscussion as to how that happened and not just so muchfrom a regulatory perspective,

but what was the failure ininformation that got us to the point where we were in a reallygood bubble and having a good time and the currencyalmost failed. that's a serious error. it's not a small error. with that as a caveat, we'reroughly on schedule. if you look at the sequence ofevents, that once the crisis occurred everyone realizedthat asset values were too high.

you had first a real estatecrisis, and then you had a credit and finance bubble. the credit and finance bubblewas largely because of unregulated credit instrumentswhich were shut down. with the bankruptcy of lehman,everything sort of collapsed. and then we had october,november, december, where everyone's all panicked. the fed comes in with trillionsof dollars in guarantees.

people forget that there wereabout $2.5 trillion of additional guarantees of bondsand bond debts, most of which will not need to be deliveredon, by the way. the total indebtedness that wasguaranteed by the western world and the united stateswas on the order of $8 trillion to $9 trillion,if you add it all up. these are enormousamounts of money. remember, the us gdpis $14 trillion. so we created all of that.

then we had the stimuluspackage, which was designed as a short term, which i wasstrongly in favor of. and then you have the time thatit takes for the system to work, and we're inthat period now. market low, roughly,in the spring. business cycle low,roughly now. jobless high, roughlyearly 2010. we're on schedule. how do i know this?

because the people who got usinto this have told us that. [laughter] eric schmidt: what'sa better answer? what's a better-- sorry. if you look at the history, oneof the things to learn, as we manage young people, is toexplain to them that things have occurred inhistory before. and young people don't oftenknow that, or ignore it,

because they didn't takethose classes. and in our case, we're in aclassic deep recession, and recessions recover. and i've just outlaid theexact math around a traditional deep recession. kai ryssdal: but hold on asecond, because if you take all of the smarts of google'scomputers and pile it into one-- eric schmidt: we were notpart of that september--

kai ryssdal: no, you'renot, but let's take-- eric schmidt: we were not-- in fact, had we been doing it,we might have actually been measuring where allthe money was. kai ryssdal: you guys, as asymbol of all the world's knowledge, which are out thereto collate and make useful, if you take that and you combineit with these really smart people and rising asset values,how did so many smart people running the companiesand the economy do so many

stupid things? eric schmidt: well, partlybecause everybody, it was in their self-interestto believe it. people have studiedbubbles for years. remember, high tech, we alreadyhad our own bubble. you had a bigger bubble. we've already-- kai ryssdal: been there,done that? eric schmidt: we've been throughone bubble, which was

2000, the y2k phenomenon. and we had a great time. next time i'm going tosell at the peak. i mean, i'm just waiting forthe next one of these market-induced bubbles. i could have made a lotof money at the time. it's much better to sell atthe high in these bubbles. trust me. kai ryssdal: thereis, though--

yes, we should sellat the high. eric schmidt: thisis about ideas. there's an idea for you. sell at the top. kai ryssdal: so let's haveanother idea about how we can get ourselves outof this mess. do we just sit here and waitfor it to happen, or can companies and the economydo something smart? eric schmidt: in the firstplace, let's go back to what's

really going to happen. i think the us will recoverfirst. the european economy is slower to recover. the conventional wisdom issix months off-cycle. that's about right. the interesting insight aboutthe europeans is that their central bank, which is calledthe european central bank, has one mission, which isfighting inflation. and ours has two missions,fighting inflation and

promoting growth. and there's a technical namefor this among all the economists. but what's interesting about theeuropean central bank is that they have been givingenormously friendly loans to all of these countries to helpout, which looks awfully stimulative. so the european central bank,will within the charter that it has, is doing somethingsimilar to

what the us is doing. and i think europe willrecover as well. and they're not going to give uptheir vacations or anything like that in the meantime. kai ryssdal: heaven forbid. eric schmidt: so the fact of thematter is i think that's going to happen. in china, you had thestimulus package. and in china they had aninfrastructure stimulus

package, not unlikewhat we did. the difference is theyjust did it. they didn't debate it, somebenefits to a command and control economy or whateveryou want to call china. and it looks like the thirdworld, and in particular the smaller countries, are veryseverely hurt by what happened, because they were inan asset bubble in terms of minerals and so forth. and they also have hugetrade imbalances.

so we're going to go back to astructure where, if you will, the strongest, china, to somedegree india, the united states, and europe, will leadus through this over the next few years. kai ryssdal: why? why is the united states goingto get out first and not china drag us along? eric schmidt: well, i personallythink it has to do with our university systems.ultimately, the reason these

things occur in americahas a lot to do with the culture of america. and americans are optimists. americans believein innovation. 90%, 95% of the top universitiesin the world are in the united states. many people have tried toreplicate these systems. they're very hardto replicate. if you look at venture capital,which i've obviously

benefited from, the financialstructure combined with new young people trying to createnew jobs is phenomenal. we have the fastest growth cyclein terms of new jobs. a typical example is there's aclaim that 15% percent of the jobs every year eliminated andanother 15% percent of course are created. and that's no solace to you ifyou are working in an area where the only kinds of jobs,typical example being the traditional american automobileindustry, those are

the only kinds. the other ones aren'tbeing created. but if you look at the economyas an aggregate, there are other jobs being created. they're just not in your town. and that's difficult, but that'sultimately the genius of the american system. kai ryssdal: can you innovateyour way out of a recession, though?

google is a company that's madeits name with innovation. you give your engineerstime off to innovate, or on company time. eric schmidt: well, it turnsout recessions end on their own, and politicians love totake credit for the recovery. but one of the simplest rules isthe business cycle has not been eliminated, and there isevidence that the business cycle is going to get worse. and the reason it's going toget worse is things have

gotten more interlinked. so we're going to go uptogether more and down together faster. and by the way, in informationmarkets, the cycles are shorter. it's up, down, up, down, up,down, because there's more information. now it may be possible todampen some of these by conversations and regulations.

my favorite examplehere is iceland. and iceland, which has 300,000people and a lot of fish, at the height of the bubble, 3/4 ofits stock market value were the three banks that failed. kai ryssdal: bigger thanthe whole economy. eric schmidt: and they're notknown as a banking center. and of course what was happeningwas they were arbitraging their currencyagainst the euro. they were essentially lendingin one currency and taking

money in another. and there was clearlya regulatory failure at some point. i don't fully understand it. but at what point-- why didn'tsomebody raise their hand and say, by the way, it's an errorto have 3/4 of your entire market tied up in thesebanks, given that that's not your economy. and so, to me, what i hope willhappen as a result of

this terrible thing-- i'm not trying to minimize it,because a lot of people have been hurt by what i consider tobe the errors of the global elite, and hurt very severely. what i hope is people will say,hey, that doesn't make sense anymore. my house went up 20% ayear for 10 years. by the way, that'sa sell signal. it doesn't make any sense.

the math doesn't work. kai ryssdal: well, what kindsof companies then? wait a minute, let me back upand pick up on a thread you keep mentioning, regulatoryoversight. are you confident that thepresident's regulatory reform plan, that he announced a coupleof weeks ago, is going to go far enough, is going tocurb some of these excesses? eric schmidt: i don'tthink anybody knows. the regulations arelong and deep, and

there's a lot of anger. and one of the things to know,and our politicians will, at least privately, explain to you,they are inundated by the anger of the average americanat what they perceive as the bailout of the financial elite,the business elite, people like myself and so on. and that anger is palpable. so they're going to regulate. they're going toget regulated.

and you do not want the government to own your company. you could see this with generalmotors and so forth. the automobile industry globallyis largely now owned, large chunks of it areowned by governments. that's true in europe as wellas in the united states. that's always been true tosome degree in china. and so in many cases they'reultimately going to turn out to be jobs programs. thisis sort of a horrendous

structural issue that we face,because, frankly, the demand for cars is not as high as ourability to build them. kai ryssdal: with the banksgetting better, though, some showing profits, some sort ofbottoming signal out there, whether we're bumping alongthe muddy bottom or-- eric schmidt: those bankingprofits, guess where that money came from? kai ryssdal: yes. raise your hands.

there you go. how do you feel about thisproposition, that maybe what we've done in not steppingmore quickly into the regulatory realm iswasted a crisis. let the banks fester for awhile, given the money, and now they're goingto be through to the business as usual. eric schmidt: my personal viewwould have been to not allow the write-offs that occurredin the banks.

it was explained to me that theproblem with that is that the banks are actually adifferent kind of animal than other businesses. if you look at aig, for example,and again, how quickly we forget. remember it was $20 billion,then it was $40 billion, then it was $65 billion, then it was$85 billion, then it was $185 billion. these are large amountsof money.

how do you lose thatamount of money? if i lost that kind of money,i'd lose my job. i don't have that kind of moneyin my company to lose. kai ryssdal: which is sayingsomething, actually. eric schmidt: thank you. how do you make thatkind of mistake? and so my argument was that youshould allow all of these structures to fail, because thecollective memory, that is the structure, all those losseswill still be around to

remind them not to makethose mistakes again. the problem with that isit's not in fact-- i was just wrong. it's not how banks reallywork, because they lend against an asset base. and if you can't fix the assetbase, which is indeed what the fed in my view correctlydid, you don't get credit going again. and if you don't have credit,you don't have your economy,

because we americanslove credit. kai ryssdal: if it's not goingto be the banks that lead us out of the recovery, i meanthey're stabilizing, but they're not going tolead the way-- eric schmidt: it's theconsumers in america. it's always the consumers. kai ryssdal: my question,though, is what kind of company is going to do it. it won't be the financials.

it's not going to be manufacturing, look at detroit. what kind of company is goingto help us get going? eric schmidt: well, obviouslymy own bias would be to do whatever we can to get the nextgeneration of very smart companies in everyfield going. in the stimulus package therewas a lot of work done to make sure that there's a lotof money to create a green tech sector.

and many of us, the peoplehere in the room who are pioneers in this area, believethat the secret to american manufacturing success is theirability to take the knowledge that comes out of[unintelligible] so quickly and turn those into very highlyprofitable businesses, and move very quickly, theclassic example being the michigan-area manufacturingplant that can be converted to build automobile batteriesfor electric cars. there are example afterexample after example.

and i believe that. the reality is that the problemis so significant that you need to do more than that. you need to look at all thebarriers to business. so for example, people who arearguing against free trade, don't realize how many americanbusinesses are global in nature, and arguing againstfree trade hurts american businesses, thatkind of thing. kai ryssdal: let me askyou specifically

about google, then. i mean, you guysare everywhere. i think it is in your phrase-- eric schmidt: thatis our goal. kai ryssdal: that's right. and you're meeting it. it is, as you called it, theeconomics of ubiquity. how does that help this countryget going again? eric schmidt: well, we believethat information is power.

and because you wereasking about the financial things, i wonder-- i learned a little while agothat the right way to run human systems is transparency,and that almost all of the sort of structural mistakes thatwe're seeing have been caused by information hidingor by poorly integrated systems. and it's true at everylevel of politics and government and howsystems work. so from our perspective, moreinformation is power and that

the internet is this enormouslypowerful platform for very, very rapidinformation flow. you see this in the politicaldynamic, what's going on in iran, and that story is repeatedover and over again. we all understand thatintuitively. it's also true in business. it means that businessescan be more efficient. it means that startups canbe formed more quickly. one way to say it is that thebarrier to entry for a new

company has never been as low,because of the ability to get mass distribution, quick accessto new information, get your perfect out, get itdistributed and so forth. kai ryssdal: exceptfor the fact that nobody can get credit. nobody is hiring. eric schmidt: well, in fact,people are beginning to hire in certain sectors, startingwith the ones that are benefiting from thestimulus package.

so there's some of that. and as long as you have areasonable credit rating, the banks will hire you. the issue with credit in thelast six months is there were an awful lot of non-standardcredit. so think about all thesedevelopers that were busy building these hugeluxury resorts. they didn't use traditionalcredit mechanisms. they used complex credit equity swaps andother kinds of things that

i didn't fully understandthat essentially have all gone away. and their problem is theycan't refinance. one of the issues, by the way,is that there's a significant crisis in commercial creditcoming, because all those buildings were refinanced atvery high debt ratios. and those things roll over,because they don't work like mortgages like we havein our homes. and when they roll over, theywon't be able to refinance.

kai ryssdal: what about thething you were talking about a moment ago, the consumers? there are consumercredit problems coming and there's still-- i'd be curious to getyour take on this-- a trepidation on the part of theconsumer who still fears for his job. eric schmidt: in fact, in marchwe had net savings in this country.

it was historic. we should have had a party. and so what's interesting is,of course, we'll quickly go back to net credit, becausethat's how our economic structure is. kai ryssdal: but do you believe consumers are ready to-- eric schmidt: i do. kai ryssdal: really?

kai ryssdal: even in the faceof rising unemployment? eric schmidt: because what willhappen is, as we bottom through the recession-- we're in the bottomingprocess now. one of the signs of recoveryfrom recessions is that inventories get worked off. there's new demandsfor product. a typical example is cars. they did an analysis of thenumber of cars that you sell

per year, and the numberof cars that get older. and there's an unmet need fornew cars, because people have not been able to get thefinancing and so forth for new cars. well, as financing gets better,as consumer confidence grows, people willbuy those cars. and that's obviously good. kai ryssdal: start gettingyour questions ready. go ahead and line up atthose microphones.

we'll open it up herein just a second. what kinds of conversations,shall we say, have you had with members of theadministration about getting the government back outof the marketplace? eric schmidt: the answer thatthey give is that we're in and we'll get out. kai ryssdal: oh. eric schmidt: and when ilook at the criticism-- and i think it's known i wasa strong supporter of the

president and his program-- the one really legitimate, inmy view, criticism from the other side was that once thisspending and once these tentacles get in from thegovernment into the private sector, and in particular thespecial interests that depend on the temporary spending, itbecomes permanent spending. i think that's a very legitimatecriticism. and the administration has saidthat they're going to answer that question by verystrong steps in favor of

transparency. they're going to show wherethe money went, what it went for. they're using the web in cleverways, and they're good at this stuff. so i think that as citizens weshould hold them to that commitment. and we should see after thestimulus bill, more than $800 billion, let's make sure thatthat part ends and we get back

to our normal business, becausethat's ultimately the secret of america. kai ryssdal: do you thinkthey've met commitment to transparency yet or do theystill have a ways to go? eric schmidt: they have donetheir initial filings. kai ryssdal: so kind of? eric schmidt: well, no, but-- they're on schedule, but it'sa two year program. so so far they've doneit, but again you can

imagine they say it. they meant it. they did it the firsttime, and then they forget about it later. and that would not be ok. so we need to hold themaccountable for the commitments that they make aspart of taking our money, if you will, and make sure thatthey really follow through, using the tools that areavailable on the internet.

and what's great about it isthat, although most of us don't have time to study thesethings in detail, for every program in the government ifyou basically publish what they're up to, there are groupsthat will monitor. they will keep them honest.they will check their commitments and what they say. that's one of the great thingsabout governance in the internet age. kai ryssdal: again, microphonesright there for

those of you whohave questions. there was a panel here thismorning in this room, maria bartiromo, and douglasholtz-eakin from the mccain campaign, and austan goolsbeefrom the white house, and david wessel from thewall street journal. and one of the big themes intheir discussion was business investment. in an economy where consumersare afraid, how do you convince businesses that theyhave to step up and take a

leadership role? eric schmidt: well, businessesare run, american businesses are run pretty rationally. they look at demand andthey make their investments based on that. and the fact of the matteris most companies have-- many companies have actuallyfairly strong cash positions. kai ryssdal: most,in fact, right? i mean even today, most.

eric schmidt: surprisinglyso, and some of that is regulatory in nature. some of it is the way ouraccounting system works. but the fact of thematter is-- again, this is unsung. we always focus on thebusinesses that are credit-sensitive. many businesses, google beingone, have lots and lots of cash, many of the high techbusinesses and so forth so

we're waiting, if you will, forconfidence to come back, for the markets to come back. and we know that they will. kai ryssdal: you'rewaiting for us. we're waiting for you. eric schmidt: but that's whythese things take two years, rather than one week. that's why there isa business cycle. and the funny thing is i cantell you that we're in a

business cycle, and you'll say,no, we're not, because it's like all a disaster. but in fact, a month from now,things will be better. if you look at unemployment,for example, in the most recent report the loss of unemployment has gotten better. kai ryssdal: the rate at whichthe economy is losing jobs. eric schmidt: again, thesigns are there. kai ryssdal: yes, sir?

audience: hi. brian lehrer from wnycradio in new york. eric, i use google all day,every day, like a lot of people in this room, but isthere ever a point at which google becomes so big that it'skind of scary and needs to be regulated asa public utility? we kind of reached that withmicrosoft in the '90s, some of the same discussion. when you're aggregating all thecontents of books, when

google news is the place thatpeople go for news content, instead of the sites, new yorktimes and everything else that you're aggregating and you knowsome traditional media are upset with you for that,seriously, literally, is there a point where you need to beregulated as a public utility? and if you can, please addressthe news content question in particular. eric schmidt: you'llbe surprised that my answer is no.

and i would offer as a scenario,would you prefer to have the government runninginnovative companies, or would you rather have the privatesector running it? and there are models, and thereare countries, where, in fact, the government doestry to do that. and i think the americanmodel works better. audience: but eric, if i couldjump in, i would expect a more sophisticated answer from you,because as we saw with the banks, it's not a question ofsoviet-style communism or free

market capitalism. the banks needed smartregulation that they didn't have, as i think youwere just saying. is it possible that information is in the same boat? eric schmidt: well, again,my answer would be no. and perhaps i should expandon my answer. google plays an importantrole in information. and the reason you're askingthat question is because

information is importantto all of us. we run google based on a set ofvalues and principles, and we work very, very hardto make sure people know what they are. so for example, for you as anend user, if you become dissatisfied with google, we'llmake it easy for you to switch to a competitoror another choice. in fact, we have a group whichis called the data liberation front, which works forus, that actually--

sorry-- which basically works very hardto make sure that there are no ways in whichwe trap data. so there's a long listof things like that. and companies are defined bythe values that they were founded with and that theyoperate with today. and so if you're concerned aboutthe need for regulation of google's role, part of myanswer would be that the company is, independent of myleadership and the founders'

leadership and so forth,the company is formed in a certain way. a thing that you should beworried about is it that a combination of special interestplus unintended regulation could in fact preventthe kind of consumer benefits that we pushso very hard to do. and part of the other pushbacki would offer is that the things that we do areavailable to others. there's nothing particularlysecret, in the sense that

we've just invented stuff, butwe haven't largely prevented people from doingtheir own thing. it's pretty easy for peopleto try other things. i'd like to see some other folkstrying to lay out an agenda for innovation. with respect to the newsquestion, which i think is what you're reallytalking about, there's a couple of comments. the internet arrived, and asit arrives, it displaces

industries in reallyprofound ways. and it's not necessarilythe players' fault. it's really about how consumersbehave. in the case of news content, news readers,that is the customer, if you will, are busy readingnews online. and we have not yet figuredout the perfect ad model for that. but one of the things that ishappening is it's affecting, for example, the newspapereconomics, along with the loss

of classifieds, cost ofprint, et cetera. i don't know how to solve thegeneric newspaper problems. and we talked a lot about thisto them, because it's a shared interest. it's, from myperspective, a huge tragedy that we would lose investigativereporting in our country, which has driven somuch of what we really know and really driven transparencyin lots of fundamental ways, both in the us and globally. we're working on a whole bunchof products in that area, to

try to do it. there is a tension here, becausethe newspapers give us access to their content, andthen they complain that we don't pay them out of ourother businesses. when we tried that, there's notenough revenue that we can yet get from their content, andso we would essentially be subsidizing them. that's roughly the answer. kai ryssdal: this company's mostfamous value is don't be

evil, right? it became iconic when youguys went public. does don't be evil alsomean always be good? eric schmidt: i didn't majorin that philosophical question, so that's a reallyhard question. a simpler answer mightbe that don't be evil is a way of operating. unfortunately, if there werebook that said what's evil and what's not evil, then wecould just consult it.

what don't be evil says is whenyou face a question, ask the question. and it's almost like a ripcordwithin the company. and when i first ran thecompany, i thought, this is crap, right? this is young peoplehaving a good time. so i'm sitting in the room andwe're having a conversation about a particular ad product. and one of the engineers,whose name is ron, says,

that's evil. and it was like a bomb goingoff in the room, and i felt like hiding under the chair,because all of a sudden the whole conversation stopped. and there was this lengthyconversation as to whether the decision was based onour principles. and the principles of google arebasically about end users. so to answer the earlierfellow's question even more deeply, we try to makeour decisions

based on end user benefit. many industries, whether welike it or not, are not as organized around enduser benefit. they're often organized aroundthe supplier benefit or the shareholder benefit. we try to focus on end users. kai ryssdal: one more spin offof brian's question and then we'll get to this side ofthe room, i promise. a lot of your answer sounded alittle bit like what you said

in the beginning. how do we know that theeconomy's getting better? because the people who gotus here told us so. it was a little bitof, trust us. eric schmidt: well, what'syour alternative? don't trust us? kai ryssdal: not buy yourstock, i guess. i don't know. eric schmidt: but thegood news is--

kai ryssdal: i can't not useyour products, right? eric schmidt: sure you can. we have competitors. kai ryssdal: yes, but come on. i mean, i'm on reader. i'm on mail. i'm on this. i'm on docs. eric schmidt: i'm glad to haveyou, but every one of those

has an able competitor. they really do. kai ryssdal: yes, ma'am. audience: thank you. shelly porges fromwashington, dc. google has obviouslydone phenomenal-- has promoted the democratizationof information in a great way, and has, infact, promoted the development of a lot of innovation in smallbusinesses, or large

businesses, for that matter. what role can you play goingforward to help us get out of this, or do you envisionyourself playing an active role other than what younormally do as part of your day-to-day business,number one? eric schmidt: democratizationof the society or-- audience: no, democratizationof the information. i'm sorry. information distribution andaccess to information.

and then, related to that, thequestion before came up, where is the turnaround goingto come from? and one thing that has seemedto be not commented much, other than the broad topicof innovation, is small businesses. small businesses created halfa million more jobs in the last recession than they didin this recession, yet you hear all the talk going around,the stimulus package, big companies, big sectors,that sort of thing.

so how do you see google playinga role in all that. eric schmidt: for the secondpart, it's pretty easy. the internet is such a greatfriend of small businesses that much of our partnerships,much of our advertising revenue, is driven by smallbusinesses, because of our self-service advertising. and furthermore, our auction inour business is designed to not favor the big guys, whichis of constant annoyance to the big guys.

and the little people nevercomplain about this, because they know that in traditionalaccounting structures, they're the ones that are disfavored. so we think we make a goodstep forward on that. so with respect todemocratization of information, it first getsback to whether the information is publiclyavailable. and one of the things thatwe've learned is that governments are not asinterested in transparency as

you might think. if you're a governmentbureaucracy, if you're a government bureaucrat,then google shows up. and we're sort of a pain in theass, is a way to describe it, because all that canhappen is you can get embarrassed by access toall this information. it's oversight, andmany organizations don't really have that. so we've argued, for example,that all of the hearings that

happen in the government, in theus and elsewhere, should be webcast raw. and it's easy to do. it's inexpensive. many companies can do it. and that way, you couldliterally see what all the public meetings are doing, andnot have to attend them. audience: so like govtubeinstead of youtube. eric schmidt: yes.

so there's lots ofthings like that. and the technology is veryinexpensive to do this. it's not a big thing. and i think it would helpa lot with oversight. kai ryssdal: yes, over there. audience: eric, sam perryfrom menlo park. eric, you've shared with us inthe past-- one of the other previous panels in this tentthis morning was on energy policy in the future.

and you've been very open insharing what google has been doing the last couple ofyears in that area. to segue off of the lastquestion, what can google do and is it doing to help smallbusinesses, but also individuals-- i know some of the individualstuff is coming to the front now-- to conserve energy,that aspect of the next part of the agenda.

eric schmidt: so you'd have tobe living in a cave to not understand how serious theclimate change threat is at this point. and the people who spend theirtime saying it's not true must not notice the change inseasons, the fact that it gets warmer earlier, the increasedvariability of weather, the loss of biodiversity, the many,many things that are going on that everyone sees. so we're in a situation, as weknow, where climate change is,

with the possible exceptionof a true nuclear war, the greatest threat affectingmankind and our children and grandchildren and so forth. so from our perspective, ourcontribution is, first and foremost, to work on ourown use of energy. so we have the most efficientdata centers and so forth. we use a lot of power. but we've also decided to putour money where our mouth is and begin to invest inthe supply chain.

so we put together a seriesof-- we studied this for a while, and the most promisingthings are, for example, with wind technology, the solarthermal, solar photovoltaic, enhanced geothermal, thosesorts of things. we've been putting money intothose investments to try to build the demand structure,because we have good cash and we're obviously a good customerof this, and we know we're going to need it. we also authored a plan calledthe google energy 2030 plan,

and the thing that was botheringus was, why doesn't somebody just add all the moneyup and figure out how much it's going to costto fix this problem. this is a classic big scalesystems engineering problem. and we were shocked to discoverthat we made a trillion dollarsby doing this. and you sit there and you go,this guy must be mad. well, we work at google. it's sort of a crazy place.

but it turns out that if yousave the capital to build the excess plants, if you save allof the downstream expenses for these enormous capital expenses,and instead you take the equivalent amount of moneyand put it into renewable over, in our case, a22 year period, you actually make money. another example is that if youmove to higher efficiency cars through hybrids and betterefficiencies, better car designs, and get to the 50,60, 70 mile per hour car,

which is clearly technologicallyfeasible, you save so much money in terms ofliterally the gas prices, which drives everybody crazy,that you really can make a dent in this. so i would offer inthe climate change area a note of optimism. i don't know whether thecopenhagen protocols and that are going to be successful ornot, but i do know that in our own country we can, asindividual actors, take the

necessary steps to, by the way,do the most boring thing first, which is to insulateyour house and insulate your building. at google, we were having ameeting and i said, well, ok, how much is it going to cost? and he said, oh, a millionand a half. that's a lot of money. i thought, ok, what'sthe payback? and they said, oh,it's 18 months.

and i said, it's an 18 monthpayback for a million and a half, and you haven'talready done it? and he said, no oneasked us to do it. do it. all you have to do is do it. it's so obvious. kai ryssdal: do you ever getsick and tired of the, what can google do about thehigh cost of milk or health care or--

i mean, with this ubiquitycomes a certain responsibility, no? eric schmidt: in the audience wehave an author of a book on that subject. kai ryssdal: standing rightthere, in fact. eric schmidt: i guess we'llget to jeff shortly. if google is a metaphor forthinking differently about problems, then i'mhappy to be it. and it clearly helps us froma branding perspective.

there are limits to whatgoogle can do. we are a relatively simplecompany, built around information and serversand the web. many of the problems that peopletalk about are much more complicated. so as i've looked, for example,at the health care bill and so forth, thecomplexity of that system is well beyond what any companyor any architecture could really attack, i think,right now.

kai ryssdal: do you thinkconsumers really buy the fact that you guys are asimple company? eric schmidt: compared to theother companies, believe it or not, google's prettystraightforward. daniel casse. the first questioner asked youa question about microsoft. i wanted to follow up on that,since microsoft was the company that everyone used totalk about in technology, before you came along.

in five years, what businessdo you think microsoft will be in? what business would youadvise them to be in? and in what ways are you goingto compete with them? eric schmidt: sure. these are extraordinarilydangerous questions. we have trouble predicting thenext 12 months at google. you're asking me a fiveyear question in a different company?

kai ryssdal: butyou're google. eric schmidt: you setme up for this one. kai ryssdal: not a plant. eric schmidt: microsoft's corebusiness comes from two products, windows and office. they have very, veryhigh market share. they were found to be a monopolyin one of them. they are clearly a monopolyin the other. they're under variouslegal restraints by

virtue of that behavior. so the first and most obviousanswer is that they're going to continue focusingon those things. the issue that microsoft andmany other companies are facing is that there'sa shift to different architectural model. and sorry to be so technicalhere from a minute, but it's called cloud computing. and basically, it means thatthe network is now reliable

enough that you keep allyour information there. and the idea is that you pickup any kind of computing device and the information isthere, even if somebody just hands you a device. you just say who you areand off it goes. and this is a very, very bigdeal in the computer industry. and it's one which companieslike microsoft need to figure out a way to makethat transition. google is organized aroundmaking what's called cloud

computing a core part ofthe next generation of architecture. kai ryssdal: yes, sir. audience: thanks. my name is randall kempner. i run something called the aspennetwork of development entrepreneurs. it's a group that promotesentrepreneurship as a means to promote sustainable

development in emerging markets. so with that background, myquestion to you is how do you, or how does google, viewinformation technology as a weapon, as a mechanism tosupport sustainable development? and in particular, is googledoing anything to make sure that it's not doing evil inemerging markets like africa and latin america? eric schmidt: weare doing some.

and i would argue we arenot doing enough. africa is a very good example,because this is a continent of people largely trapped withoutvery much information. a curious statistic is that theinternet connections to africa cost more than they doin the united states, even though the country is infinitelypoorer, which has to do with a regulatory failure,a governance failure, and so forth and so on. so we've been working very, veryhard to build what are

called proxy caches, that youcan put in the countries, accelerate the local access. we're also doing things-- mostpeople who are in very, very poor situations have mobilephones, which is a great accomplishment. the rough number is somewherebetween three and three and a half billion mobile phonesin use today. by the time, maybe 10 yearsfrom now, it looks like 5 billion to 5 1/2 billion peoplewill have either a

mobile phone or access to one. and they can use those to dothings like sms texting, where they can get a lotof information. so with respect to sustainabledevelopment, there's this conflict between rapid evolutionof the economics and the sustainable development. we can help market it. my fear is that most of thesecountries, the fundamental problem is a corruption problem,that the industrial

structure and economic andpolitical structure are not mature enough that when you makethe investment that it goes to the right placeand achieves the right regulatory outcome. kai ryssdal: jeff. audience: i'm jeff jarvis. i wrote a book called whatwould google do? and i won't ask you. since doing that, a notionclarified in my mind that i

wanted to try out on you, isthat what we're going through right now is much more thana recession or a financial crisis, that it is a fundamentalrestructuring of the economy and society, goingpast the industrial age of mass production, distribution,marketing media, into something based on knowledge andabundance and the things that i did write thatyou're about. and when we see what's happeningto automotive, and banking, and newspapers andother parts of media, soon

probably advertising, bigswathes of retail, real estate, we're seeing a huge andfundamental restructuring that i don't think is going togo back, and that a lot of new companies, one hopes like yours,are going to start creating new versionsof these industries. am i going too far? eric schmidt: i think so. of course, you're good at it,because your book was about taking some ideas and reallytalking about them in a global

context, and very successful,i might add. i think the evidence right nowis that while i'd like what you said to be true, it'snot today yet true. i'd like us to make it true. and the reason is that almostall of the money, and almost all the people, and almost allof the capital is not going to where you described it. it's going into traditionalbusinesses and traditional industrial and serviceoperations.

i think one of the ideasaround the aspen ideas festival is to talk about newideas, like the one you proposed, is how could youaccelerate that transition. what happens is that you get ayoung entrepreneur in the kind of industries that are difficultto transform, and when you talk to them, they'vehit so many regulatory barriers, so many barriers toentry, so many other ways, that we need to find waysto make it easier. so as a young engineer, i wasvery interested in trying to

make the internet moresuccessful, and i ran into the regulatory structureof the telcos. so, for example, there wassomething called a t1 line, and what happened is everyonefigured out how to build a business beneath the regulatorypricing for a 1.5 megabit t1 line. so an artifact of regulationwas that a whole business was created. had the regulation not beenthere, we would have been five

years farther along. and i think if you look at everyone of these businesses, you'll discover that theincumbents, typically large companies working withregulators, have ended up making a cozy structurefor themselves. and when the truly discontinuousidea comes along, it's not in anyone'sinterest to take it on. and that's why the marketpressure is so fundamental. so getting back to our earlierconversation about the

government and its role,governments are not particularly good at dealingwith change. one executive told me that hightech works three times faster than traditional businessand government works three times slower thantraditional business. so that may be anextreme case. we designed our government notto change very quickly, and yet we are asking forvery rapid change. it has to occur fromthe private sector.

it has to occur from enlightenedleadership. and it has to occur in areaswhere money is being made. audience: so could google onlybe google because you were doing something new? eric schmidt: i would argue thatgoogle is as successful as it is primarily because ofthe openness of the internet, that had you had brilliantfounders such as larry and sergey in a difficult, regulatedindustry, the progress would havebeen much slower.

and people always give us somuch credit, but let's give credit to the people who foresawthe internet, opened it up, designed it in a waythat it did not have significant choke points, madeit be possible for random people, including 24 year oldsin a dorm to enter and create something new. that's a story of innovationthat's very, very precious. and we need to make sure thatwe preserve it for the next competitor, by theway, of google.

kai ryssdal: let mejust zero in for a second on that question. do you not then believe thatthis economy has been, through the past two years and thechanges we've seen, fundamentally reset, that we'rejust going to proceed from here apace? eric schmidt: well, i wouldlike it to be true. my question to you iswhere is the data? when i look at most of where themoney went in the economy,

when i look at all the politicsand all the bills and so forth-- and i've supportedmuch of this-- most of it's going to the incumbents. now, with a counterexample thatthere's now-- we doubled our national science foundationfunding from $3 billion to $6 billion, whichis a drop in the bucket. there's more money forappropriate medical research and those kinds of things, butfundamentally, if you look at it mathematically, the majorityof the power and

control is still not aroundreal innovation. and that needs to change. kai ryssdal: is googlestill a new company? well, hopefully. you guys have been aroundforever, it seems. right? our collective experience is,oh, yes, it's google. eric schmidt: well one of thethings to say about brands is that brands can be createdvery quickly. had anyone heard about twittertwo years ago?

and yet twitter is aphenomenally successful company and brand. who here knew about facebookthree or four years ago? phenomenally successful. so one of the things that's neatabout being in our world is that new companies and newbrands can come along. in google's case, we believethe way we run the company, which is rather unusual,keeps it sort of young. in particular, our engineers areencouraged to spend 20% of

their time working on whateverthey want to work on. and before you get too excited,these are engineers, so they don't move toofar from a field. but virtually everything we'vedone that has been creative has really, reallycome from that. and top down, centralizedcontrol from people like me is not going to drivethe creativity. i've read about google's, say,tracking epidemics by using search information.

and i'm wondering how else youplan on using the search information in the future. and if it will be regulated, ifyou think you'll be able to keep control of that kindof information. eric schmidt: a verygood question. so everybody knows we puttogether a flu trends program and we used anonymized data. that is, we took the searches,but we took away the information about the person.

and we discovered that becausewhen you get a symptom like a disease, the first thing youdo is you type the symptom into google, we could see monthsbefore the official reporting agencies could seethe emergence of a new horrific disease. and the estimates are thatthis will save tens of thousands of lives. that's a huge, huge thingfrom our perspective. we're very excited toparticipate in that.

we don't take that too far. and the reason is that thereis a very fine line between anonymizing information to makepeople healthier and then the sort of spookiness andprivacy issues that we're so concerned about. in the european commission,there are a series of laws, called the european data privacyinitiative, which regulate this to aboutan 18 month period. and so it looks like historicallogs, literally the

things that you've done fiveyears ago, will be deleted both by policy andalso by law. there's a very legitimatetension between the state interests in, for example,police action, and then your interest in privacy. and each country sorts thatout differently, and we're subject to all of those laws. my own guess is that we'll endup with about an 18 month period for search logs and we'llbe very careful about

using much of that beyondthings like flu trends. kai ryssdal: again though,it comes down to trust us with this data. eric schmidt: well, in thiscase, it's also trust the government. and depending on your point ofview of the patriot act, that's a good or a bad thing. so again, this tension-- we made a decision that we don'tknow how to make the

decision about that trade-off,that the political process, that the governments thatdebate this fundamental tension between civil liberty,state interests, safety, and so forth, is not one that weshould have an opinion about. and that was a difficulttransaction, but how could we decide whether it's 18 monthsor 12 months and so forth? kai ryssdal: just a coupleof more, i think. yes, over there. audience: yes.

hi. david [? kunin ?] from new york. can you elaborate-- it's a follow up to jeff'squestion about the old economy, new economy debate. can you expand on the-- so many of what you've donehas been so successful but froogle was a project thatreally wasn't that successful

and has to do-- eric schmidt: why do youhave to remind me? audience: well, can youelaborate a little bit on your view of what didn't happenthere, in terms of being able to use the power of informationon the internet to find low pricing, and to beable, in this economy, where you've got so many stores andtraditional retailers shutting down, what it is about-- so many of the models and somuch of this conversation has

been about advertising modelsor monetization using information, whereas retailabout pricing and the ability to really move the economyinto more of a different distribution model, can youtalk a little bit about pricing and distribution? kai ryssdal: remind us whatfroogle was, and then explain why it didn't work. eric schmidt: so frooglewas our first attempt at product search.

and it didn't work becauseit just didn't work. and we celebrate our failuresinside the company, because we want people to take risks. so we replaced froogle by whatis now google product search, which has been doingpretty well. and froogle was a destinationsite. it had the wronguser interface. it didn't have all theright products. it did not have enoughinventory, that kind of thing,

a long list of thingsthat we did wrong. so one way of stating yourquestion a little differently is to say, how will the commerceworld change now? i think that's roughlywhat you're asking. audience: yes, instead ofadvertising models, commerce. and you have product searchand so forth, and we're exploring that now. let me give you an exampleof a product that we've just released.

it's a product for your mobilephone, and you take a picture with your mobile phone of a upcbar code, and it tells you whether the productis cheaper online. ok, well you can imagine who'sin favor of this product. you can also imagine who'sopposed to this product. but that's an example. and one of the discussions foryou all to think about is what are things that are neat thatwe could do with the collective intelligenceof what people do.

people are smart. and within reason and respectingtheir privacy, could we in fact get betterbargains, better delivery, those sorts of things. and that's just anexample of it. we have, again, googleproduct search, which is doing very well. we have more and more peopleusing product purchasing. you can imagine things likesubscription businesses and so

forth eventually. if you look at the success ofamazon, amazon, i think, proves that this modelworks well. audience: but are you surprisedat how fast or how slow things are moving online,in terms of the growth of online commerce? eric schmidt: i'm prettyhappy with it. i think that most people nowknow that when you buy things for christmas, by far the bestway to do it is to do it

online and then just shipit to the person. and there was a point at whiche-commerce became reliable enough that you wouldn'tbe embarrassed at the christmas party. and so i think e-commerce is notonly here to stay, but now people are arguing over the taxexemption that it has for sales tax and thosesorts of things. so you know that you've arrivedwhen that's happening. kai ryssdal: how hard are youguys working at getting away

from ad revenue as-- eric schmidt: by the way,we love ad revenue. kai ryssdal: absolutely. eric schmidt: we love it. do you know what percentageof our revenue it is? kai ryssdal: over 90%. eric schmidt: 97%. or is it 98%. we love ad revenue.

kai ryssdal: doesn't that numberscare you, though? eric schmidt: no. the serious answer is weare diversified across advertising. we would like, our board memberscall it more legs of the stool, please. and we have a pretty successfulbusiness in the enterprise, which we think isgoing to be pretty exciting. and we've got a number of othersort of subscription,

non-advertising businessesunderway. this one is probably a softball,so it's more of an invitation for your perspectiveon i think what is a reasonably hot topic, andparticularly in your industry. so, talk about immigrationpolicy, outsourcing of jobs, h-1bs, the balance of humancapital trade, how many people are we sending overseas anddoing the same thing yet at the same time trying to shutdown the reciprocal. i'd just be curious aboutyour thoughts.

eric schmidt: again, i don'tknow if this is a softball, but it's like, ok, let'sgo through this. audience: i think i knowwhich direction you want on this one. eric schmidt: let's take thesmartest people the world. let's bring them tothe united states. let's educate them and give themthe top universities, and then let's kick themout of the country. now that makes a lot of sense.

furthermore, they can go tothe other country, create using all of our americanideas, take all of our intellectual property, andcreate businesses to compete with the american firmsand pay taxes to those governments. how am i doing so far? audience: it's a very big swing,so it suggests that-- eric schmidt: do i haveyour vote yet? audience: yes, exactly.

eric schmidt: i've been tryingto figure out what is the intellectual basis foropposing my argument? and there must be-- audience: well, you're engagedwith the administration. you are ubiquitous. so what is-- eric schmidt: i've giventhis speech. i've just been blunterthan i just was. and it seems to me that thereis an intellectually correct

view, which is that everyone isexactly the same and that there's no difference inintelligence or ability between every human being. and if you believe that, thenyou don't live in the same educational system that i do. i just don't understand. we have this amazing, amazingasset in america. the smartest people in theworld want to come to the united states, and thenwe kick them out.

kai ryssdal: do you get anytraction with this discussion in washington? eric schmidt: i justget louder. kai ryssdal: so how doyou really feel? howard, i think this is thelast one right over here. audience: ok. you haven't talked at allabout cyberterrorism, or cybercrime, or just manipulationof data, which is untraceable, and what dangerswe really have as consumers.

kai ryssdal: and it's worthpointing out that people were talking about you as the firstchief technology officer of the united states. eric schmidt: right. better to work for aprivate company. kai ryssdal: you keepsaying that. eric schmidt: we likeprivate companies. innovation is where it occurs. the internet is full--

it's shocking, butthere is actually criminals on the internet. and when i used to talk aboutthis 10 years ago, people would say, oh, howdo you know that? i said, because there are humanbeings on the internet, and not everyone is perfect. and so the internet has had justgeneration and generation of the kinds of attacks thatyou're talking about. a typical example is peoplewill find 5,000

computers that are idle. they'll exploit some bug,often in one of our competitors' products. and they will exploit thatbug, and they will do a systematic attack on a website,called a distributed denial of service attack. and the significant players thatare in the industry are all well insulated for that. so we face this all thetime at google.

so the kind of attacks that youworry about are the ones that are not like that. so you could imagine astate-sponsored attack where they used, for example, the nameservers to spoof you and say this isn't google, this issomebody else, which would require sort of an incorrectbehavior by a government. and we worry about that. we worry about the financialsystem, and in particular the money transfer systems, and thechecks and balances for

moving money around. and that's been a problem. i'm not as worried overall,because the problems that we face, we face not just fromcyberterrorism, if you will, from states and horrific peoplelike terrorists, we face them from 16 yearold idiots as well. and so we're sortof used to it. so i'm not as worriedabout it as others. i think we should-- it's a priceof being interconnected

that you're also interconnectedwith the people who are going to donasty things. and we need to make sure thatour systems are designed to prevent it. the internet grew out of thisnotion of communal sharing, and all of us who've been partof it have had a rude awakening when we discoveredthat the internet could be misused. and again, i think we'veaddressed it, largely.

kai ryssdal: and with that, ithink we are done for the day. eric schmidt: well, thankyou very much. kai ryssdal: thankyou for your--

grey suede boots


>>davis: okay, i think we are going to tryand get started. if i could get everybody's name is larry davis, and i am the chair of the computer sciencedepartment, and it's my pleasure and honor to introducethis afternoon's colloquium speaker, vint i can only tell you a little bit about vint, because if i told you about all hisaccomplishments, you'd never hear from vint. i'd be up here for an currently he's vice president and he has the interesting title of chief internet evangelistfor google. google is an internet search company [laughter]--forthose of you who don't know.

and the reason for this is back about 20--25years ago vint and his colleague, bob conn, essentially invented the of the tcp/ip protocols and the architecture of the internet.and he's been widely recognized for this really incredible contribution.a large part of our economy is depends on the internet these 1997, president clinton presented the us national medal of technology to vint and bobconn for founding and developing the internet. all right.and then they also won what's called the--turing computer science that is the highest award given to anybody for truly fundamental contributionsto computer science.

and then in november of 2005, george bushawarded cert and conn the presidential medal of freedom, which is the highest civilianaward for scientists in the united states. now in today's rapidly expanding government,i am sure that barack obama will invent an even more prestigious award, and you can becertain that the first winner of that award will be vint cerf.and so, it's my pleasure to introduce vint, and welcome to the university of maryland. >>cerf: thank you very much, larry. [applause]thank you for not introducing me as al gore. [laughter]okay. are we in?good.

all right.well first of all, i appreciate the warm welcome. i'm just sort of stunned.the room was empty when we walked in about 20 minutes ago, and so--wow. i hope that i have something useful to say.i have to tell you that this interesting title, chief internet evangelist, was not one thati chose. in fact, when they asked me what title didi want at google, i said "how about archduke?" [laughter]that sounded pretty good to me, but somebody pointed out that the previous archduke wasferdinand, and he was assassinated in 1914, and it caused world war one.maybe it's not a good title to have, so i

was happy to settle for internet evangelist.well, let me start by going back into history a little bit.this is what the predecessor to the internet looked like in 1969.around december four nodes had been installed, and i was lucky to be a graduate student atucla at that time and wrote the software that connected this thing called the sigma 7 upto the first node of the arpanet. the sigma 7 is in a museum now.some people think that i should be there along with it. [laughter]but this system was the beginning of experimenting with packet switching, with which i am sureyou're all very familiar. at the time it was considered a really crazyidea.

if you were part of the telecommunicationsworld, you knew that the way to do telecom was circuit switching.and so, at&t had absolutely no interest whatsoever in this technology, but they were willingto sell us--lease lines that we could build our own packet switch.around 1977, after i went from stanford to the defense department to lead the program,we experimented with getting three different packet switch nets the way, that's why it's called the internet. we had the arpanet, and when bob conn cameout to stanford in the spring of '73 and said, "i have two other's a mobile radio net. one is a multi-access packet satellite net."and, of course, there is the arpanet, which

bob also worked on.and he said, "the problem is how do i get them all interconnected in a way that looksmore or less uniform?" they were different data rates, differentdelays, different error rates, different packet sizes, and so on.the consequence of all that is that bob and i spent about six months trying to figureout a way to do that, and that is where the tcp/ip protocols came from and the ideas ofgateway. so, we built this 3-network system and, forthe first time, did a demonstration that we could get all three of them to work usingthese new tcp/ip protocols. this was a particularly interesting test.there was a van that was built by sri international

and was driving up and down the bay shorefreeway radiating packets in this mobile packet radio network.the packets were artificially forced to go through a gateway--we didn't know they weresupposed to be called routers then--so we called them gateways--between the packet radionet and the arpanet, and the routing for these internet packets was forced to go throughan internal satellite hop inside the arpanet all the way to norway and then down by landlineto university college london. then hopped out of that international extensionof the arpanet, went into another gateway between the arpanet in england, and the packetsatellite net over the atlantic went through the packet satellite net down to a groundstation in _____(??), west virginia, through

another gateway back into the arpanet andthen all the way across the country down to usc, information sciences institute in marinadel rey. well, if you measure the distance betweenmenlopark--which is where sri was--and isi--it's about 440 miles.but if you measure the path of the packet, it was about 100,000 miles--is it went upand down twice to a synchronous altitude all the way back and forth across the atlanticocean and the united states twice. so, it worked.and i have to tell you, we were leaping around saying, "it works, it works!"if you have anything to do with software you know it's a miracle when it works. [laughter]so the chief internet evangelist not only

believes in miracles, but he relies on them.[laughter] so it was pretty exciting to get three differentnetworks inter-operating with the same set of protocols, because you could do almostanything to get two networks to interact by doing all kinds of conversions and whatnot--butthree or more was a big deal. so if you fast-forward to 1999, the internetlooked kind of like this-- bill cheswick, who at the time was--bell labs--didthis automatic mapping program to take the backbone routing tables from bgp protocoland show what the various autonomous systems were in the network and what their connectivitywas. so each color is a different autonomous system.if you look at 10 years later, in 2009, it

looks just like's just bigger. there are more autonomous systems and morecolorful and a larger number of users. speaking of which, the statistics of the netare very interesting. there are 625 million machines that are visiblepublicly on the internet. and i emphasize "visible publicly," becauseover time, more and more machines have come on the net that we can't see in the publicdomain name system. and the reason for that is that people haveput up firewalls to isolate--enterprise systems or university systems and the like--so thatnot everyone can see and interact directly with all the machines on the net.but of the ones that we can see publicly,

there are more than 500 million of them.the number of users on the net is estimated at about 1 ã‚â½ billion--almost 1.6 billion.and the other phenomenon, which has taken place during the last 10 years, is an incrediblyrapid growth of mobiles. 3 ã‚â½ billion are estimated to be in use,and another billion may go into use this year. some of them will be replacements, and somewill be new additions. what is important to us at google and anyonewho is thinking of offering internet services is that an awful lot of people will firsthave their interaction with the internet through a mobile and not a laptop.and so anyone who is thinking seriously about offering internet services has to start thinkingabout the different avenues by which this

interaction will take place and the, this is a blackberry. i have a g1 in my bag.this thing has a display the size of a 1928 television set and a keyboard that is suitablefor people that are 3 inches tall--and varying data rates, depending on where you happento be--so it is a very constrained environment, but a very important one for all of us whoare trying to treat, as well as we can, the full range of users on the net.speaking of which, where are they? this is another very interesting statistic.if you look, of course, you can see that asia is now the largest single grouping of userson the internet. that shouldn't be too big a surprise.more than half the world's population is what

we would call asia.and certainly china and india are part of that--malaysia, indonesia, and so on.but they are only at 17.1 percent penetration right now.europe is almost 400 million people, but i've given up making any projections about europebecause they keep adding countries. [laughter] so i don't know what to predict about europe.but they're at about 50 percent penetration. north america, which used to be the largestsingle grouping of users, is now at almost 75 percent penetration.there isn't going to be a lot of growth in north america with regard to absolute numberof users. so if you're thinking business on the internet,you really need to pay attention to these

numbers because the business growth is goingto come from asia and europe and some of the other parts of the world where the penetrationrates are as you see them on the right hand side of the this has implications for the languages that are needed, the styles and cultures ofinteractions, which vary from one country and one culture to another.if you don't pay attention to that, your business model may not work.and google has learned this very, very clearly. we've opened up engineering offices aroundthe world, in part, to take advantage of people's native knowledge of language and of stylesand customs. people don't interact the same way with searchengines everywhere in the world.

and there are some parts of the world wherethe google homepage is thought to be incomplete because there is almost nothing there andthere's this empty box. and it doesn't occur to them that they shouldtype something in it. they are expecting to see things to choosefrom. and so we've had to vary the appearance ofthe google homepage for some parts of the world in order to accommodate their expectations.if you look here--this is just some other statistical picture of the heavy penetrationof-- i'm sorry--the white penetration but heavyabsolute population in asia and some of why these are the penetration rates as you seeit.

the world on the average is about 23 or 24percent penetrated, which means that the chief internet evangelist at google has about 78percent of the world to convert still. so if you guys want to help, let me, this is a very important chart, and there will be a final exam on this at 5 o'clock.this picture has only one really important graph on's the thing that's going down. and that is the remaining available ipv4 addressspace that the internet assigned numbers authority can hand out to the regional internet's going to run out somewhere around 2010 or so.and i blushingly admit it's my fault. around 1977, when i was at darpa, about ayear's worth of debate had occurred among

the engineers helping to develop and testand implement the internet as to what the address space should group wanted variable length addressing, and that went away very quickly because theprogrammers hated variable lengths, as it chewed up extra cycles to find the fieldsin the header. and they said that sucked, so that went the only other options were 32 bits and 128 bits, and they couldn't come to any conclusion,so there've been a year of arguments. so finally i had to get this program moving.i said, "it's 32 bits, that's it. it ought to be enough to do an experiment."it's 4.3 billion terminations. i figured even the defense department didn'tneed more than 4.3 billion terminations to

do an experiment, right?now, the problem is the experiment never ended. so here we are, at 2009--we're going to runout. so in order to correct for that, there isipv6, and i hope that the university is preparing itself to implement v4 and v6 in parallel.i'm proud to tell you that google is doing that.we've spent the last 18 months--a little more than that--almost 21 months--implementingipv6, so most of our services are accessible on both the v4 and v6 platforms.the problem, however, is that the v6 environment is not evolving in the same way that the v4environment did. in ipv4 there was a connected core.there was the nsfnet backbone, the arpanet

backbone, and if you connected to any of them,you were implicitly connected to everyone else with the v4 protocol, because that'show it grew. in the ipv6 world, people were implementingit, but it's spotty. and so just because you implement ipv6 doesn'tmean you're necessarily connected to someone else who's implementing ipv6.yes, you can tunnel through the ipv4 backbone, but tunneling is a very fragile way of buildinga system. and so one of the policy arguments that ihad been putting forth is that isps should relax their interconnection and peer sharingpolicies for ipv6, because it's in their best interest to have a fully connected v6 backbone.ultimately, and in the long run, some of the

metrics that are used to decide whether youshould peer as opposed to buying transit will reemerge.but in the early stages of ipv6 deployment, i think it's smart for everybody to be asconnected as possible. 128 bits of address space gives you 340 times10 to the 36th unique addresses. that's a number only the congress can appreciate.[laughter] now, i used to go around saying that thatmeant that every electron in the universe could have it's own webpage if it wanted to,until i got an email from somebody at cal tech:"dear dr. cerf. you jerk, there are 10 to the 88th electrons in the universe, and you'reoff by 50 orders of magnitude." [laughter]

so i don't say that anymore.there are a few other features of ipv6 that are of them is that if you want to go into ndm encrypted mode using the ip sect protocol,you're required to enter that mode, whereas before it's optional.and there are some other little features of the ipv6 address structure, including somethingcalled the flow id, which, i would say, has not been experimented around with very much.but anyway, those are some of the important features.the most important thing about ipv6, though, is that it just has a lot more address space,and it will allow the network to continue to grow.

[pause] i mentioned mobility before and the largenumber of mobiles. not all of them are internet enabled, butsome are. maybe 15-20 percent now, but that percentageis bound to go up over time as more and more people choose to use their mobiles as informationwindows or as devices that allow you to authorize payments or to get access to the internetfor its information value. one thing which i find an interesting potentialis not to treat the mobile as a device, which is the sole thing that you use to interactwith the net. i had mentioned earlier that it's a limitedresource ã¢â‚¬â€œ small display, small keyboard.

imagine, though, a mobile which has the abilityto detect other devices that are nearby. for example, if my mobile could detect thatthere are projection units up there and could interact with it, then the small display areaon the mobile could be replaced by something much bigger.or when you walk into a hotel room, if the large screen--flat screen--high res [sic]display were detectable to the mobile, it would be possible to display things that what i'm thinking here is that mobiles should become more aware of their surroundings.we could invent protocols for that, we could use bluetooth, we could use 802.11, or 802.15.4--6lowpan--orsome of the other standards for allowing these devices to interact with each fact, imagine sitting in a car that is

not yet internet enabled, but it has a localarea network--maybe it's got gps receiving and a gps could imagine the mobile participating in that local area network and giving to thecar the ability to access the public internet, so suddenly the automobile becomes internetenabled. i think there are a lot of possibilities fact, another one is that if you're like me, you have entertainment systems at home,and each one of the boxes in the entertainment system has a remote controller.and i usually wind up fumbling around trying to figure out which controller goes with whichbox, and when i finally figure that out, that's the one with a dead what i propose is that we get rid of all

those remotes, we internet-enable all of theentertainment equipment, put it on the house network, and then the mobile becomes a the interesting thing about choosing that architecture is that you don't have to bein the same room in order to interact with these fact, you could have a device on the internet--which you go to through a webpage--at which youdebate and discuss and negotiate what music and video you want to have on the entertainmentdevices, and then let that service figure out how to configure everything and get thematerials downloaded to your entertainment you could be managing this thing from anywhere in the world.of course, so could everybody else.

and so it's pretty clear you need to do somethingabout strong authentication and strong access control, but that's a good thing.i mean, we want to see strong access control--strong authentication--become a part of the normalframework of the internet, because otherwise there are very significant vulnerabilitiesthat we can't protect against. so i am a big fan of forcing ourselves tointroduce very strong access control mechanisms throughout the internet, including these kindsof applications. what we have noticed is that many of the mobiles--youhave access to gps--or in some cases they can at least estimate where they are basedon triangulation and measuring the radio energy level among the various base stations thatthey might be interacting with.

so these devices know where they are, andthe consequence of that has been interesting to see.we watch people making queries. [cough] what we've noticed is that if they are carryinga mobile, they often make queries that are related to where they are.the consequence of that is that geographically indexed information has become increasinglyvaluable. so people who build databases that have informationabout where things are, what's going on there, what used to go on there, what might go onthere in the future--those kinds of information packages have turned out to be increasinglyvaluable. this thing is trying to tell me that i amsupposed to be lecturing now., i sort of intellectually understood the value of this geographically indexed information,but i didn't really viscerally understand it until my family went on a holiday.we went to lake powell in arizona. it's near a little town called we were driving into page, arizona, we planned to rent a houseboat and go out onlake powell for a few days, and somebody pointed out that there weren't any grocery storeson the lake, and that we were going to have to get all of our provisions before we goton the houseboat. so we started talking about what kind of mealswe were going to prepare, and somebody said, "why don't we make paella?"and i remember thinking, oh, i love paella.

that's great, but you have to have saffronto make a good paella. where the hell am i going to find saffron in page, arizona?well, i was getting a good gprs signal, so i flipped out the blackberry, and i went tothe google homepage, and i typed saffron, page, arizona, grocery store.and i got back three choices with telephone numbers and a little map showing how to getto each one. so i clicked on one of the phone numbers,the phone rings, a voice answers, and i said, "hello, may i speak to the spice department,please?" now, this is probably a little store, andit's probably the owner of the store. "this is the spice department." [laughter]and i said, "do you have any saffron?"

and he said, "i don't know, but i'll go check."so he goes off and he comes back and he says, "yeah, i've got some saffron."so we followed the map to get to the store, and i ran in and i bought $12.99 worth ofsaffron--that's .06 ounces, in case you care. [laughter]and we made a great paella. but as i was walking out of the store, i realizedthat i had just, in real time, gotten exactly the information i needed when i needed it.i didn't get the answer, "you can get saffron new york city 1,500 miles away."so what was important to me is that this ability to carry your information window on your hipor in your purse and to get information that's useful right now is really stunningly valuable.and more and more people are discovering that

as time goes on.well, there are more and more devices showing up on the internet, some of which i neverin my wildest dreams imagined, like refrigerators or picture frames.i remember--somebody ran into my office about 10 years ago and said, "vint, vint, did yousee the internet-enabled picture frame?" and my first thought was, "boy that soundsabout as useful as an electric fork." [audience laughter]it turns out it's actually a very nice gadget, because you don't have to boot up windowsor log in or do anything. you just plug it in to the telephone system or an ethernetjack or some of them, i guess, have 802.11 wi-fi.and it just--every 24 hours--goes and logs

into a website which has been accumulatinguploaded imagery which you put on there from your digital we have people around our family with these little automated picture frames--and we allhave digital cameras--so we upload pictures of the nieces and the nephews and the grandchildren.and you get up in the morning, and you get some sense for what everybody is doing, becauseit just cycles through the imagery. now, you can appreciate that if the websitethat these picture frames log into gets hacked, the grandparents may see pictures that theyhope are none of the grandchildren. so suddenly security and access control, onceagain, become an important element of the utility of some of these things.and that theme, i think, is going to recur

more and more as we rely on and make moreuse of this connectivity that the internet confers.there are things that look like telephones that are actually voice-over ip devices.of course, your laptop is doing skype and ichat and some of the other google talk thingsalready. and then there's this guy in the middle whoinvented internet-enabled surfboards. he's in the netherlands, and i guess one day--hemust have been out waiting on the water for the next wave--thinking, "you know, if i hada laptop in my surfboard, i could be surfing the internet while i'm waiting--" [laughter]so he built this laptop into his surfboard, and then he put a wi-fi server on the rescueshack, [laughter] and now he's got a product--an

internet-enabled my prediction is that there are going to be billions of devices on the net--more devicesthan there are people. and many of them you see when you walk intoa hotel room. you see web tv, and a little--radio connected--orir connected keyboard. everybody's pda--here anyway--is probablyinternet-enabled. video games are internet-enabled--people talkto each other while they're shooting at each other--makes for a great video conference.and they're washing machines-- ibm apparently partnered with a company calledmela (??), which makes very high-end washing machines for use in academic settings.students love it, right?

you throw your clothes in the washing machines,start it up, and then it sends you an sms when it is time to move the clothes into thedryer. and that's go to the bar and have a beer and then your clothes tell you when it's time to comeand pick it up. it's very convenient.this internet-enabled refrigerator, when i heard about it, i wondered, "so what do youdo with an internet-enabled refrigerator?" and one thought is that it has a nice liquidcrystal display with a touch-sensitive thing, and it's a way--for americans anyway--to augmentthe family communication system, which typically consists of magnets and paper on the frontof the refrigerator.

now you can augment the family communicationswith blogs and webpages and emails and things of that sort--instant messaging.then i got to thinking about the possibility that you could put rfid chips on the thingsyou put inside the refrigerator so that the refrigerator could know what it has while you're at school or working, it's surfing the net, looking for recipes thatit could make, and when you come home, you see a nice list of things you could do fordinner. which i thought sounded pretty cool.then the japanese came along and built an internet-enabled bathroom step on the scale and it figures out which family member you are based on your weight,and it sends that information to the doctor

to become part of your medical seems perfectly okay except for one problem--your refrigerator is on the same you come home, and you see diet recipes coming up on the display, or maybe it justrefuses to open because it knows you're on a diet. [laughter]this is bad! now a lot of you may be in the computer scienceand electrical engineering field. now i have bad news to tell you that you can'tget the nobel prize. and the reason for that is that mr. nobelrefused to allow any branch of mathematics to be given a prize.then you could say, "well what about the economics prize?"and that doesn't use nobel's money--it's somebody

else's money.and it's usually like--john nash and the nash equilibrium--is clearly mathematical.but you don't get nobel prizes for anything in computer i remember thinking, "well we have to do something about this."so i got to thinking about quantum theory and the fact that quantum particles have thisunique property that they can be in more than one state at the same time.then i got to thinking about wine, and it occurred to be that wine in a wine bottleis like a giant quantum particle, because it could be in multiple states at the sametime--it could be absolutely awful, or it could be absolutely spectacular or everythingin between.

but you don't know until you pull the cork.this is like schrodinger's cat. remember the verschrankung experiment, wherehe had the cat inside the box with a little capsule of cyanide and a little piece of radium?if the radium emitted an alpha particle and broke the capsule, the cyanide is released,and the cat would die. so you close the system up and you ask, "what'sthe state of the cat?" and the answer is you have to treat it asboth alive and dead until you open up the box to look inside.if there are any cat lovers in the audience, no cats were harmed. this is a verschrankungexperiment. so i thought about writing up my theory ofquantum wine bottles and sending it to the

nobel prize committee to see if i can getsome credit for that. somebody--well, i'll come back to some other stories about wine in a minute.i don't have time to go through all the rest of these, but sensory networks are turningout to be an important part of our environment on the internet more and more.i have an example of that. i have a commercial sensory network that'srunning ipv6 on 6lowpan, 802.15.4 radio net, and it's sampling every five minutes the temperatureand humidity and light levels in every room in the house and then delivering that to aserver, and the server accumulates that over i had an engineering reason for doing the end of the year i wanted to be able to go to the engineering people who were lookingat my ventilation and air conditioning and heating system and say it was either too hotor too cold or look what the distribution was.and i didn't want anecdotal stuff. i wanted real data to show these guys, sothat's why i did it. but one of the rooms is the wine cellar, andit's very important that the wine cellar stay below 60ã‚⺠fahrenheit and above about 50or 60 percent humidity. so it's been alarmed, and in case the winetemperature goes up above 60 degrees, i get an sms on my mobile.and that actually happened to me.

i was at argon national laboratory last year,and as i walked in the door, my mobile went was the wine cellar calling [laughter]. "your wine is warming up."so every five minutes for the next three days i kept getting this little message sayingyour wine is getting warmer. my wife was away for two weeks on a holidayand couldn't reset the cooling system. so by the time i got back home, it was at70 degrees, which is not the end of the world, but not a good i called up the arch rock people and i said, "do you make actuators as well as sensors?"and they said yes, so there's a vacation project to go install the actuator system.another example why access control is important,

because i didn't want the 15 year-old nextdoor to turn my wine cooler off for me. now it gets interesting when you start thinkingabout what else could you do with this instrumentation. the fact that it detects light levels andreports every five minutes means that if somebody goes into the wine cellar and turns the lighton, i may be able to detect that because i'll see a big jump in the lumens in the that might mean i could tell if somebody has gotten into the wine cellar when i'm notthere. but it doesn't necessarily tell me that theytook any wine out. so the next step is to put rfid chips on thewine bottles. [laughter] that way i might be able to tell if any bottlesleave the wine cellar without my permission.

but somebody pointed out to me you could gointo the wine cellar and drink the wine and leave the bottle there. [laughter]okay, so this has got to get a little more elaborate.we got to put sensors in the cork that can tell whether there's any wine left in thebottle. [chuckles] and as long as we're doing that, we probablyought to start sampling the esters that make the wine tastes--the strawberry flavors andthe blueberry or blackberry and whatnot. so after a while, you get to the point whereyou have a fully instrumented wine cellar, and you interrogate the cork before you openthe bottle. and of course, if you discover that bottlereached 90 degrees fahrenheit because the

cooling system failed, you give that bottleto somebody who won't know the difference. [laughter]a very useful capability. you are going to see more and more sensornetworks becoming a part of the internet environment. part of the reason for this is that thereis an opportunity for you and me to get a better sense for how we use our energy google recently announced a power meter program that could allow you to put an instrumentin the house that could tell you about which devices are consuming how much electricity.we don't have a very good feedback loop right now.we sort of know what our electric bill is per month, but we don't know what made itup.

and so it's my sense, anyway, that feedbackabout how you're using energy--how efficiently or inefficiently--is a way of helping peopledecide how to be more careful and a bit more green about the energy that they this year, 2009, is turning out to be probably one of the most dramatic years for the internetin its entire history. not only is ipv6 starting to roll out, finally--wehope before its absolutely needed--but the domain name system, which also has numbervulnerabilities, is starting to be modified so that you can get digital signed answersback when you make a query to translate a domain name into an ip there's no guarantee that there hasn't been some interference--some modificationsand cash poisoning in the resolvers--that

give you the wrong address and send you toa fake site. but if you could get a digitally signed answerback which tells you that the integrity of that binding of the domain name, and the ipaddress has not changed since it was put in by the holder of that domain name, then you'dhave more confidence that the data you got back was this is a hierarchical structure. each zone file either is digitally signedor points down to and provides signed records for the next level big issue right now is who signs the root zone file of the domain name system, and thereare recent developments at the department of commerce which oversees both verisign andthe internet corporation for sign names and

numbers.and there's some continuing discussion about exactly who should sign the top level rootzone that hasn't been fully resolved yet. the other big change that's happening is thatfor many, many years domain names were mostly written in ascii characters--a very limitedset: 0-9, a-z, and a hyphen. but, there are--those statistics that i showed you showing people all over the world using the internet--formany of them--their languages are not naturally written in ascii there is great, understandable pressure to augment the domain name system with theability to write domain names in syrillic or arabic or hebrew or urdu or korean or japanese,and so on.

well to do that, the internet engineeringtask force has chosen to use a system called unicode, which encodes the glyphs of about100,000 different characters. the problem is that as soon as you introducesuch a broad range of symbols into the domain name expression, you run into the problemthat some symbols look the same. for example, in greek, latin and syrillic,a lot of the letters look very similar, and it's even worse when you start looking atsome of the more elaborate languages. like paypal, for example, could be writtenwith a syrillic "a," and the computer thinks it's different because a syrillic "a" is encodeddifferently from a latin "a." and so if you innocently click on somethingthat looks like paypal, you may end up at

the wrong site, which invites you to log inand--which you do--and then it says, "oh, there is a little problem," and it sends youover to the real paypal, and you log in again. meanwhile, it's draining the account usingyou username and password. so there are issues associated with the useof this extended character set, which requires some careful attention.i am presently chairing the working group, in fact, on what's called idnabis to try tofinalize what the specs are for which character sets can be used.we cannot guarantee safety here. it's just not's just like one and zero and "o" and lowercase "l" are confusable in ascii, and there arelots of other cases that we cannot find simple

rules to rule we'll try to rule out as much as we can, like punctuation and things like that.but the registries are going to have to also suppress inappropriate use of domain might say i'm not going to allow you to mix scripts inside of a label in a domainname as a way of resisting some forms of abuse. so that's a big set of changes for the internet--yeah--inthis year. i want to spend a little time here on cloudcomputing. and the reason that i want to is that it isan interesting paradigm that people are addressing. if you read any history of computing, youwill recall that in the 1960s there was a common notion called the computing utility.this is usually shown as a gigantic building

somewhere, with smoke coming out on the topand a huge computer inside, which everybody got to by way of the telephone system.well, 40 years later we have huge computing resources in big buildings with steam comingout the top, and everybody gets access to it through the internet.well--except that the thing inside the building is not a single mainframe--it's actually--inthe case of google anyway--it's literally a classified number of computers in each datacenter, and the data centers are interconnected with each other.the cloud has some very interesting features. one of them is that you get to dynamicallyallocate the resources of the cloud to computation, so as computation demand varies for each user,you get to expand and contract the available

resources for that particular user, ratherthan having a fixed load--fixed assignment--for tasking for each one of the machines.there are a lot of interesting side effects of trying to do computing this google, for example, because we want you to be able to get access to your informationunder all circumstances, we actually replicate a lot of data at multiple data centers.the consequence of that is there's a huge amount of information flowing back and forthbetween the data centers, so we had to build a special, private network, basically, tolink all the data centers together. there are a lot of other interesting questionsabout how to make these data centers work well.moore's law is broken, as i think you've all

noticed.the problem is that the clock speeds are not going up, so the lazy programmers, who gotthe benefit of increasing clock speeds so that their algorithms just ran faster becausethe clock went up, don't have that benefit anymore.and the--let's say the alternative to moore's law--which instead of increasing clock speedis simply increasing total number of cycles available per chip--is achieving that goalby having multiple cores on each chip. but the clock speeds are not going up.the side effect of that is that if you have algorithms running that don't happen to beeasily parallelized, you have a problem. you have to go figure out how to take a serialalgorithm and parallelize it.

you can't even necessarily get a pipelineout of that multi-core chip. it depends on how the chip interconnectionsare done and what kind of access you have to the common, there's another problem associated with multi-core has to do with how much data you can push in and out of the chip itself.can you push data back and forth fast enough to keep all the cores running on a set ofproblems? those are issues that have not been fullyresolved, and for people who are looking around for dissertation topics, i can tell you thatlooking at cloud computing and multi-core chips and things of that kind could be a richterritory to do that.

finally, there's this question of--well, actually,let me go one more here. all now, i want you to think back for a minute about what the world was like around 1969when the arpanet was being built. there were networks out there that alreadyexisted. it was not the first computer network.but most of those nets were proprietary, so ibm had sna, digital equipment corporationhad decnet, hewlett-packard had ds, which i think stood for distributed systems.they didn't either [sic] work with each other. occasionally, people would build gadgets.they would let you translate back and forth, but it was not a uniform they were all proprietary, and, in fact,

those networks didn't know that there existedany other nets. they couldn't even express the idea of gofrom this net to that net, particularly from the sna network to a the internet was designed to overcome the problem of expressing the idea of moving datafrom one net to another. people are going to build clouds for verygood economic reasons--but they're going to build multiple clouds.the clouds don't have any vocabulary right now for referring to another cloud.we're back in the 1960s and the days when networks didn't know about each i believe that there are some really interesting dissertation topics waiting to be writtento talk about inter-cloud interactions.

example, i've got data sitting in cloud a,and let's even imagine the data is protected--it's access-controlled.there's meta data associated with it that cloud a is responsible for controlling accessto. and you decide you want to either replicatethe data in another cloud or move it to another the first problem is how do i say that? the first cloud needs to have a way of sayingsend this to this other cloud. the second problem is how do i convey themeta information that controls access to the data as it goes into cloud b?is that--does that mean i should stop or--? [laughter]or is that just--?

oh, you leaned against the light have a free _____ ?? butt. [laughter] okay. [laughter]so anyway, the problem here is that we don't have vocabulary for talking about inter-cloudinteraction. so if you're looking for an interesting areato research, you're at the same stage in the cloud world as we were in the internet worldin the early 1970s. and i believe that there's some really interestingtechnical problems and some interesting design problems and invention opportunities thatlie ahead. let's see.gib, i want to make sure that there's some time for a q and a here, so i want to be careful.i think i've already hinted at some of the

access control issues here, but remember imentioned strong authentication repeatedly. we tend not to use authentication very well.a lot of us still use re-useable passwords, which is really a bad idea.if you've ever dealt with online services, and you try to log in, and it doesn't work,and then it says, "if you forgot your password, click here," and then it asks you these secretquestions. well, as some of you will remember, governorpalin had a little problem because the secret answers to the secret questions were discoverableon the internet, so they weren't really very fact, banks and securities companies often suggest that you should have these secretquestions that nobody else but you should

know the answer to.i believe if you're going to use this kind of technique--i'm not a big fan of it--butif you use that technique, you ought to have the secret questions, and you ought to havesecret answers, but you better have the secret answer plus random numbers that is not goingto be easily guessed or found on the internet by someone else.i would prefer to see strong authentication mechanisms where you'll use non-reusable passwords.public-key crypto gives you an opportunity for some kinds of things like that.i even like the idea of having a device that has multiple keys in it, which can be yourproxy to represent yourself in a variety of different systems.and during the public-key exchanges and the

like, this little device could plug into yourlaptop, and when it needs--when the application needs--a new strongly identified identifier,you let that little device generate the appropriate keys and send the data back and need to access control that little device so that somebody can't pick it up and becomeyou in the virtual world. you might do that with a fingerprint reader.we aren't quite at the point where we can put an iris reader in these little devices.although, this macintosh here as a little camera that's mounted at exactly the rightplace to do an iris scan, and you can do that from two or three feet, whether this has enough resolution to do it, i don't know.maybe not.

but the notion of being able to do iris scansis an attractive way of authenticating. it's better than doing a retinal scan, whereyou have to get right up close to the thing or sticking your finger into a hole somewhereand hoping that it will be there when you pull it out again. [laughter]so my sense is that we should be able to build strong authentication devices that allow youto authenticate yourself based on what you know and something that you have.and if you lose it, that someone else isn't able to abuse it by representing themselvesas you. so i've actually touched on most of thesepoints here, but the thing i want to emphasize is that i honestly believe there's a lot ofopportunity for people to explore issues associated

with cloud computing that haven't been analyzedyet. let me skip over that.oh, there's another interesting situation's one thing--you just move data back and forth between clouds--and something else ifyou wanted to get multiple clouds to actually cooperate with each other.i'm imagining sitting here with my mobile. it becomes my little cloudlet, right?it's a little access controller. one question is if it's connected to two clouds,does it become an inadvertent channel between the two clouds that was unintentional?this is sometimes known as a covert channel, which was unintended.or can i use it as a controller and essentially

cause things to happen in between the twoclouds? you need a vocabulary for that, includingstrong authentication and other things associated with this list of questions, i hope, will stimulate some of your thinking about research.let me switch gears for just a second and talk a bit about semantic, i'm no authority here. tim berners-lee would be a good guy to bringhere, if you can persuade him to come down from mit to talk about that.and i have to admit i was very skeptical about this whole notion of semantic web, and i stillhave some skepticism, but i think i understood an idea that tim had that i didn't understandbefore.

let me illustrate it by--i may not use the right vocabulary, but let me try anyway.imagine for a moment that we have a way of expressing in our web pages the semantic ambiguitiesthat we're faced with. so let's take the word "jaguar."we know it could mean the animal, could mean the car, could mean the operating system.suppose that you are creating a web page, and you notice that there's this ambiguity,so you actually write into the web page something that says "jaguar" is is a web page where it's used as the car, here's where it's used as the animal,and here's where it's used as the operating system.and you just imbed that in your web page.

along comes the google crawler, the yahoocrawler, the microsoft crawler, and it stumbles over this piece of semantic information.and it says, "oh, that's an interesting fact. i didn't know that."so i incorporate that into my knowledge base. now someone types in a query with the word"jaguar," and the search engine, which happened to have stumbled over the semantic hit, says,"well did you mean the car or the animal or the operating system?"suddenly we are--you and i--are allowed to contribute semantic knowledge into the system,which is regularized by having a standard way of expressing i get more excited about the fact that the people might be able to contribute tothe growth of semantic knowledge in the internet.

we've all contributed, in one way or another,to the content of the net--increasingly so. and at google--at youtube--we're getting 15hours of video per minute being uploaded. now, who could argue over the value of the15 hours of video, but the idea that people are generating a lot of information and puttingit into the net is indisputable. second thing i'm worried about, every timeyou use a program to produce a file--for example, it's a word file or it's a microsoft spreadsheetor power point or any of the other things that we commonly use--maybe it's a photographprogram or an emulation or simulation--these are complex objects.these complex digital objects are not understandable or interpretable unless you have the softwarethat knows what the format means and how to

interpret it.if we ever loose the software that knows how to interpret the files, all we will have isa pile of rotten bytes, because they won't be meaningful.and what i'm worried about, quite honestly, is that we don't have a regular process ofpreserving enough information to assure that our complex digital files will be meaningfulover a period of time. and here i'm not talking about five yearsor 10 years. i'm talking about hundreds of, i have a picture over here, which i--you may or may not be able to see this very well.this is a manuscript that was written in 1200 a.d., and it's still readable today--800 yearslater.

when you pull out a polycarbonate cd-rom,and somebody says how long is this going to last, you'll be damn lucky if it lasts 10to 15 years. and even if the cd-rom lasts as a physicalmedium, will the software that knows how to interpret the bytes on that cd-rom last?and some people have pooh-poohed this as an irrelevant issue.of course, people will translate the important stuff into the new versions of software, andyou shouldn't worry about it. and the stuff that didn't get translated wasn'timportant anyway. that statement was made in the presence ofabout 50 librarians. it took us half an hour to get the librariansoff the ceiling, because they pointed out

that sometimes the importance of informationisn't known for 100 or 200 years. so i am very concerned that we have a practiceand a process for preserving the software that knows how to interpret these complexdigital files. there is an intellectual property issue hidingin all of this. suppose that you're company a, and you decidethat for good and sundry business reasons you're not going to support this piece ofsoftware anymore. and so you stop.and the next version of something that you make isn't compatible with it.but we have hundreds of gazillions of bytes of data that's based on this thing that you'renot supporting anymore.

so we might come to you and say, "well, you'renot supporting it. will you put that up on the net--put the sourcecode up there?" and you'll say, "no, of course i won't dothat, because i'm using a lot of that source code for another product."so we might say, "well, would you let us run that program so that it's accessible on thenet remotely?" and you may or may not agree to do that.but then you might point out this thing only works on that operating system version, andso you better get the operating system up there too.and say, "oh, we have to go talk to that guy, right?"okay.

so now we have to go talk to you about youroperating system, and you say, "well, actually, i'm using a lot of that code over again in--youcan't have the source code." so we have a question, in my mind, is howdo you create the incentives for preserving the ability to interpret these data files?and worse you may have to emulate the machine that the operating system ran on that theapplication ran on that knows how to interpret the this is not a solved problem. and some people will say, "well, open sourcewill solve the problem." i would argue that--not clear that open sourcewill solve the problem. and it certainly isn't clear that everyonewill continue to evolve the open source to

map into--newer versions mapping into olderversions of software. so byte rot is a big issue.all right. final report here is on the interplanetaryextension of the internet. this is not a google project.i get time from google to work on it, but i don't want you to run out of the room sayingyou just figured out that google's business model is to take over the solar system.that's not what this is about. [laughter] basically, this project got started around1998. some of us--when i was actually at mci atthe time--and i met with some people at the jet propulsion laboratory, and we were talkingabout exploring space with man and robotic

systems using the deep space network, whichhas three big 70-meter dishes in madrid, spain; canberra, australia; and goldstone, californiatalking to spacecraft that are in orbit around the planets or flying past the asteroids orlanding on the surface of mars. what you see on the top portion of the screenthere are two of the four mars orbiters--mars express and mars reconnaissance observatory.and on the bottom part you see the rovers on the left--there are two still operatingon mars--and the phoenix lander, which landed and ceased operation after about a month anda half or so at the north pole of mars. what you might not know, though, is that onthe rovers, the long distance radio--the one that was supposed to report results all theway back to earth directly--didn't work.

i mean, it did, but it overheated, and theyhad to reduce the duty cycle. so somebody--first the scientists were upset because the data rate of that radio was only 28.5 kilobytesa second as it was, and so reducing the data rate meant less data came they were all very upset. the engineers at jpl said, "well, we haveanother x-band radio. it's on the rover, and it's on the orbiters,but it can--" and it goes 128 kilobytes a second, but itcan only reach orbital altitude. it can't go all the way back to they reprogrammed the rovers and the orbiters so that they would pull the data up from therover and hold on to it until they got to

the right place in their orbit, then transmitthe data back directly to the deep space network at 128 kilobytes a second because the orbiterhad better power supplies if it wasn't down on the dusty surface.well, speaking of that, the rovers lasted a lot longer than they expected.the original mission was, like, 90 days. it's now over five years.and one of the reasons it's continued to work is that the solar panels have been cleaner--remainedcleaner--than we expected. we thought they were going to get very dustyvery quickly and then stop converting sunlight to power.and eventually, the batteries wouldn't charge up enough.personally, i think there's somebody up there

dusting them off, [laughter] though we haven'tgot them on the video camera. so the real answer, it turns out, is thereare little dust storms on the surface of mars, and they blow the dust off the solar can actually see it in the--when you're down in the operation station, and a littledust storm comes along, you watch the voltage level go up coming from the solar anyway, we started talking about how to improve the networking capacity--not justthe data rate--but the richness of networking that could be done.i'm going to skip over google mars, except to tell you go to google or switch to googlemars. the imagery is spectacular--the three-dimensionalviews of where the rovers have been--all stitched you can search around there and see what it looked like.we started out saying, "why don't we build an interplanetary internet?"and we thought why don't we use tcp/ip to do that?it seemed to work okay on earth. it ought to work on mars.and it does. the problem is it doesn't work between theplanets. and the reason is obvious, right?the planets have a-- well, the distance between the planets isliterally astronomical. [laughter] and at the speed of light, the distance betweenearth and mars varies from 35 million to 235

million miles, which translates into 3 ã‚â½minutes to 20 minutes one way. so try to do flow control with tcp with a40-minute, round-trip time. it's a real simple flow control algorithm,right? you say, "i ran out of room.stop!" and if the other guy hears you in about 20or 30 or 60 or 100 milliseconds, that's okay. but what if it's 20 minutes later, and allthis stuff is coming at you full speed, packets are falling on the floor.flow control doesn't work. and there's the other's called celestial motion. planets rotate, and we haven't figured outhow to stop that. [laughter]

so the problem here is that you're talkingto something on the surface, and if the thing rotates, and you can't talk to it anymoreuntil it comes back around--same problem with the orbiters--it's a very disrupted system,and the delays are: a. inescapable and b. variable.this is not a happy environment for tcp/ip. so we ended up inventing a new set of protocolscalled delay-and-disruption-tolerant networking. and--to make a long story short so we canhave some q and a--we have tested it on the surface of the earth in a lot of differentconfigurations. but we just started the deep space testinglast november. nasa gave us permission to upload our newprotocols to the deep-impact spacecraft, which

had gone up to rendezvous with a comet andlaunched a probe in it. the probe is gone, but the platform is stillin orbit around the sun. it's a very eccentric it was on its way back towards earth. we uploaded it in october, and we spent amonth transmitting data back and forth between earth and that spacecraft--didn't drop a byte.i mean, it was a really impressive, even when we had power failures and other kinds of thingsthat were not planned. we tested it.that way, we are going to upload to the international space station this summer, and we're goingto re-load the protocols on board the--what will be re-named--epoxy platform--same one--it'sjust going to a different comet--we're going

to upload the protocols in the we'll have a 3-node, interplanetary test going on before the end of this year.if those are all successful, then nasa will award us what's called technology readinesslevel 8, which means this technology is ready to deploy in live systems.we've already started talking to the consultative committee on space data systems about standardizingusing the dtm protocols for all the space missions that are launched by the differentspace faring countries. the whole idea here is--and what we hope,frankly--let me just skip through this part--what we hope is that over time, every time a newmission gets launched and then completes its primary responsibilities, it can be convertedinto part of an interplanetary backbone network,

because everything will be compatible.just like when you plug into the internet today, you can talk to the 600 million machinesthat are out there. so we're not trying to build an interplanetarynetwork and hope somebody comes. that's not what we're trying to do.we want to build the capability to allow it to emerge from all the missions that are launchedfor scientific reasons. that's up to the minute on interplanetary internet.let me stop here and ask if you have questions. [applause]thank you. we have a question here.yes sir.

>> cardiologists--[inaudible] >>cerfabsolutely. and, in fact, one of the things that we wouldlike to do is to get the dtm protocols into mobiles so that we have resilience in thepresence of noise and disconnectivity and everything else, unless you were thinkingof real time transmission. yes.well, if you want to have real time transmission, then you need to have better connectivitythan you get with a mobile. but the point is'd like to do it so you don't have to be tied to the hospital bed.okay.

>> ekgs--[inaudible] >>cerf: i'm sorry? >> ekgs-- >>cerf: ekgs, for example.yes. well--[inaudible]when you're in the emergency vehicles, they'll transmit ekg information back to the emergencyroom. but it would be nice to do that from home,for example, and to be able to get more other kinds of sensors about the state of health. >> [inaudible]

>>cerf: say it again. >> blood sugars. >>cerf: blood sugars. oh, there are a wholeseries of-- >> [inaudible]--possibilities ??-- >>cerf: yeah.there are a whole bunch of things that one would _____ ??that's true. >> there's one other--real quick ?? >>cerf: yeah. >> the only time i've ever emailed you inmy life was--[inaudible]--guys missed an opportunity.

>>cerf: yes. the only one? >> [inaudible]--a very important one. wayback when e-mail wasn't--[inaudible]--calling up other computers on the long distance phonelines at medifax ?? >>cerf: yes. >> back when you and i were grad studentsat ucla. and so it happens that they could never figureout a way of charging for the e-mail because so many people were--[inaudible] >>cerf: well-- >> and then the arpanet had a chance to chargefor e-mail, and if you only had--[laughter]

>>cerf: hey-- no-- actually, let me tell yousomething. i did try to charge for e-mail because i don't_____ ?? mail. if it was a commercial system, i charge adollar for each e-mail message, and it got paid for in 1983.then i made the mistake of connecting it to the internet in 1989, and everybody said,"hey, it's free over there. how come you're charging for it?"and, of course, now here we are. nobody pays for e-mail.what people pay for now is to not deliver e-mail, right? [laughter]it's spam. yes, sir.

>> thanks for a delightful, informative talk.i went to see-- you're focus has been largely on the technologyand devices. >> but arguably, the biggest change in thelast two years is the social aspects of newly generated mentioned youtube, but it's phenomena-- it makes it number three on the web.and twitter has 14 million users, and the number of social applications is--seems arguablythe largest change. how is that affecting the internet? >>cerf: well, it certainly affects in oneway. people use it more and more for various things,and they use it in real time.

twitter is not necessarily--i've seen it create the flash crowd phenomenon. if any of you read david brin, you know aboutflash crowds. and what twitter and instant messaging dois create the moral equivalent of mobs in the virtual space.i'm quite serious about that. if you know anything about mob behavior, youknow how people will assume things and then act on them without really understanding what'sgoing on, because they just see everybody else doing something.we should actually be attentive to the social effects of some of these online, i just came back from yale university yesterday, where we debated in the yale politicalunion the question whether the virtual social

environments were real or not. yeah.and it was an interesting, very lively debate. the people who believe that the social networkingis as real as the face-to-face interactions--they're different--but they involved real people,real feelings, real concerns--you are--can be as swayed by an online interaction as youcan by a face-to-face interaction. i think we--the vote came 43 to 7 or something like that. there were a few diehards who believe thatthe virtual environment wasn't real. but for most of us, it has a lot of realityto it. it also has some negative form to it. >> [inaudible]--and terrorists--[inaudible]--areequally efficient and empowered by such social

technologies. >>cerf: that's right.although, you know what esther dyson says--i think she's right about--she says that the antidote for bad information is not suppression but more information.but it does put an obligation on each one of us who uses these systems to distinguishgood quality information from bad quality suddenly critical thinking is a very important always was, right? you could get bad information from radio,television, newspapers, magazines, or friends and your parents.and you had to distinguish what was useful

and what information you're going to use.the internet just sort of highlights that even more because of the huge quantity ofinformation and misinformation that's available. >> we have a question, maybe, further back-- >>cerf: way in the back. i don't know if i'll be able to hear you from there, because i'm hearing impaired. >> i'll try to one of the things we basically know now is about net neutrality, right, and the-- >> so my question is do you think that there'sany room in the future of ip, in any conceivable timeframe, to maybe re-look at things like--[inaudible]--preservationsite--[inaudible]--kind of make the discussion

more of a technical one, rather than--[inaudible]--apolitical one. >>cerf: okay. so net neutrality has been abig debate, as you know--and especially here in this part of the fact, time warner just did a little unscheduled experiment [laughter] on didn't work out too well for them. let me start out by saying that i adoptedthe phrase "nondiscriminatory access" to the internet as an alternative to net neutrality.and the only reason for that is that the-- the term net neutrality has been so badlydistorted that people who were against it were claiming that those who were for it believedthat every package should be treated exactly the same way.there should be no priority, you couldn't

charge anybody more for using more capacity,and that's not true. my view is that you want to just assure thateach user is able to reach every supplier of service--or every other user on p2p--fairlyand equitably. if you use more capacity, more bandwidth thati do, it's not unreasonable for the isp to charge you more.but the metrics should not be how many bytes did you transmit, but at what rate did youtransmit them, because the resource crunch is not the total number of bytes's how quickly you move the bytes. so if i move a terabyte in a month, that'snot nearly the stress on the net as moving a terabyte in two seconds.and so i don't mind being told if you want

higher data rate, that you have to pay that's a tiered structure which i think is reasonable.i don't like the idea of an isp saying to an application provider, "we're not goingto allow your traffic to go over the high-speed lanes unless you pay us."i think it's the-- first of all, i'm already paying to get onto the net in the first place with whatever capacity i can afford and believe is needed.the consumer is the one that wants to be able to say, "if i buy broadband network access,i want to use all of that capacity to get to that service over there, and you can'tinterfere--or shouldn't interfere with that." so first of all, the metric should be datarate, not total data transferred.

and second, i think we should be alert toanti-competitive abuses. but i do accept the idea that you can havetiered pricing, and that you can have--pre-packaged differently--some of them may need low delayor low latency. and some of them are going to be--controltraffic--which you clearly don't want to inhibit. but when the system becomes congested, i thinkit's fair to allocate the capacity in accordance with what the users are willing to pay.i also think users would like to have fixed i would much rather know what my cost is going to be for the month and have my trafficrate capped, rather than having a surprise bill at the end of the month.and if i don't like the service i'm getting,

then i should be able to buy more if they'rewilling sell more. the other thing i think is important is transparencyfrom the supplier. the consumer should know what they're actuallygetting, and they should be able to measure we should have tools that let people validate that they're getting what their contract saysthey should get. that--? that may be all the time we've got. >> i think that there's a reception--that was the last question--[inaudible]--reception're welcome to--[inaudible]

>>cerf: i'll be happy to chat as long as myvoice holds up >> [inaudible]--we have this plaque to commemorateyour lecture in this ?? university. >>cerf: thank you. >> [inaudible]--cover on that and get thatback in there--[inaudible] [applause] >>cerf: all right. i appreciate that. [applause]