then south korea picking up all these tools that i'll just call mercantilist for lack of a better word, export driven business model, the whole purpose of which is to be asymmetric in trade. this first step is hard for americans to get. we talk about free trade and balanced trade and how, you know, win-win situations. well, you're going to have to put a different thinking cap on because that's not the point of view for the countries i'm going to talk about this evening. it is a win-lose situation, that's the whole idea of unbalanced import/export numbers. so if you're going to be a successful america tilist in modern times, the whole ideal of your business model is how can i be unfair? how can i do things where my partner gets hurt and where i do really well? that means i have a lot of exports, and no imports or very few. and they have a lot of imports and i get all the money. so this story has been going on for a long time with smaller

nations. and it is kind of fascinating, i studied japan, some of you are too young to remember this, but i'm not, and there was a time not so long ago when japan was really reaching full flower in the exercise of this model, and they were focused on the united states. and we were a real power then. and we lost about five industries that were major industries overnight. overnight. because they were so efficient at what they did. so another way to look at this mercantilist business model, it is a perfect match for the u.s. business model or the uk business model or the german business model. the things that we do make us very strong in some ways and very vulnerable in other ways. so in that case, japan was able to very quickly not only compete well, but destroy the american presence in the industries of steel, d-ram ships, television

sche sets, and the consumer electronics that are around video. there are other things too. just bang, bang, bang, we lost all those companies and all those industries in a matter of a few years. and finally, intel and some tariff things came along and fought back and the new intel emerged and you probably all know that story. so japan continues in that business model but in a much wiser, i would say, way, nuanced way than before. and this began a long string of stories which then went to south korea. if you watch south korea today, they're doing exactly to japan what japan did to america. and today, if you're voting for tvs, don't vote for japan, vote for south korea. and if you're voting for chips, i think same story, we just watched japan almost go out of the chip business last week and there will be a number of things, lcd screens, flat screens. so clearly samsung and the guys down in south korea have taken two looks at the japanese model

for this and one upped, they're even better than the japanese are. still, these are relatively small countries. then came china. and china has not only a top down government, but they have the ability to be big. and so every number you hear is a big number. and quantity matters in this game. the way to look at this is we were able to tolerate as an inventing nation the experience of the economic -- of having somebody else steal our intellectual property, resale it to us, often dumping it into our markets, destroy the industries in the markets and survive, we're here today. when it was a small problem, even though it made us upset, we survived it. we're now looking at a quantity situation, which is so large, so focused, that i don't believe we can survive it. i don't mean just we america, i think we, the number of nations which invent things is now in

peril. the global economy, which is based on essentially today, technology, and inventing things, based on intellectual property. and we have a level of theft occurring right now, and it is ramping up, not getting worse, not getting smaller, that is so intense, so focused, so clearly planned and so effective, well, richard clark last week said that probably every american corporation which has crown jules of interest that china has already been robbed. and that same information went out from the head of the gchq in britain to 2007 to the top 300 ceos in britain. so in my opinion, it is the first chapter is already over. all the crown jewels have already been taken. just a matter of whether it is a chip design or air frame design. jet engine design or pharmacy recipe, whatever it is, that's gone. and we're now at the stage, i think, where we ask ourselves, if you are a microsoft person, a systems analyst, you would say, with a very cold mind, can this thing run forever?

and i think the answer is no, it can't. with the level of effort we're looking at, and i truly think it is properly called -- with the level of pairsticism going on today, it is not actually likely that we'll continue to be able to enjoy the economic fruits of those inventions in the way we did before. and i go further and say that's already happening. i believe you can look at various markets today and see the destruction of those markets. i'll mention one, telecom equipment and anybody who knows that market knows there are bodies all over the room and more coming from motorola on back to nortel and before them others. so this is a very effective thing if you're wawei, the chosen company from china, which they would like to be champion in that market. and when you bid for a european broadband infrastructure for the entire nation, your bid is 40%

below all the bids, you get the bid. and then nokia fires 30,000 people about six weeks later. so we're seeing this over and over again, solar, probably saw the announcement from the solar industry this week, they're firing 3,000 -- top guys are firing 3,000 employees, 30% of the workforce gone. in every place you look, you might think it is strategic, technically or scientifically same problem. what are we going to do about it? complain, whine? i'll tell you what won't work, whining. whining will not work. threats won't work, i don't think. saying you're upset doesn't work either. matter of fact, it would appear to me that bringing wto actions, though they can be effective, really aren't very effective for a couple of reasons. one is the wto has no enforcement branch, no teeth in it. the other is you cannot bring enough per week. there are so many infringements and it takes several years to go through the appeals process to get one done. so these guys in the photo

company are firing 3,000 employees while we just found china guilty of dumping solar panels. well, i think it was 1.5% penalty. it is not going to save these guys. so the wto, good as it is, isn't the right answer as far as i can tell. this means that as a country, not just this country, but australia and britain and germany and france, anybody who is in the inventing business, has to rethink it. the way we did business before, you caught a little bit more of a gentleman's game, but that's not how it works now. you invent on monday and i'll steal it from you. how do we deal with that? there are two steps here. one step is often discussed. we have always been an inventing nation. always. that's america. that's what we do. germans do it too, but we have always been an inventing nation, and we need to start seeing ourselves, you know, self-image

is an important powerful tool. we don't have that image today. i don't know what we think we are. but we don't say to ourselves every morning when we get up, i come from an inventing nation, but we do. that's the most simple way i can describe the economic history of america. that's what we have to get back to. where you get up, your kids get up and you say i'm from an inventing nation and i'm going to invent something this year that will change everything. we have it in us. we know because we have been doing it for so long, but we don't see ourselves that way. i think step one is we have to reimagine ourselves with that role model in mind. i understand who we really are. i'll tell you what we're not. we're not britney spears. we're not celebrities. we're not drug addicts. we're not fast car drivers. you know. we're not jerks. we're pretty smart. we work pretty hard. often too hard. the rest of the world looks at us, we're working 90 hour weeks some of us. we're not lazy. but we have lost that one understanding of who we are. we don't have to work that hard.

we have to work smart and that kind of smart. not mcdonald's smart, no offense if someone here is from mcdonald's, but not mcdonald's smart. we have to work in the way that advances the whole idea of this nation being an inventing nation. if we do that, great things will happen. i think for many people probably sitting here that touches your own personal agenda, whether it is k-12 education, higher education, tax law, make a list of things that we're concerned about, and investment rules, regulations, all those things, peel back after the original onion of we are an inventing nation. so the positive story here for me is that if we do this, i believe it is possible to re-create the economic lead that we have enjoyed for a long time. now, when people get disheartened and look at, we lost all these jobs or we have been stagnant for 20 years or incomes haven't gone up since 1979, all these different stats you hear, probably all true, but what you're really seeing and

this is the part that i hope i get through to you tonight, this isn't because you had -- just had a president who didn't know about economics. this isn't just because there is some banks that got out of control. this is a bigger story. this is the story of what happens to an inventing nation when all their intellectual property goes to some other country for nothing. that's why we don't have jobs. that's why the jobs aren't going to come right back the minute real estate values go up. that's why there is no old normal there is going to be a new normal and not the one you wanted. so if you want a different one, from mcjobs, you've got to have high value, intellectual property created in a regular way and not being there the wednesday after. which leads to part two of this, and i'm almost done. once you invent something, as beautiful as it might be, if you give it away or if you expose it or if you lose track of it, or if it is stolen from you the day

after, it won't do you much good. it doesn't matter whether you're microsoft making operating systems, or boeing airplanes, bad things are in your future. and the return on investment for those assets will begin to fall. and i'll say it again, i believe it is not in the future that this will happen, this is happening right now. so the return on assets that we may have enjoyed 20 years ago, 30 years ago, we're not enjoying today and that's why. and doesn't matter what you make. if there is a list in china right now, used to be 1 15 things, now 407 different economic segments of interest. you're in it, whatever you do. unless you're, i don't know what you have to do to be on that list, but it is big enough to include everything in the phone book that i can think of. you got to be aware if you're in charge of innovation in your company, this is the primary risk you face. and if you're a national leader, this is the primary risk you

face. the risk isn't to re-create jobs out of, i don't know what, building bridges, that's not the answer. the answer is to re-create jobs out of building ideas, creating high value, high margin, intellectual property, which you can mine for your shareholders and your employees and the towns where you live and that that will go on for a while. per invention. it won't turn to zero on wednesday. and you won't be competing with your own engineering talent on friday when it shows up for half price in a towel. all these things are happening right now. so how do you protect it? a lot of people feel like it is impossible. let me tell you, i've been working on this with accenture and other people who know what they're doing and it is not impossible at all. the military does it all the time. so what is hard is to get ceos focused on this. it is an educational problem. once you convince them that they have to act the way the military acts, because guess what, the teams that are being assigned to

them as targets are military grade teams. and that's why what i said earlier is true. that's why they can cut through normal corporations like a hot knife through butter. it takes them very little effort to get your stuff. doesn't matter who you are. when you saw rsa, one of our top defense and commercial security firms had their master keys lifted, almost effortlessly, it would seem, by china, and then used against lockheed, that should have been the ultimate wake-up call for all of us. even rsa was attacked. matter of fact, i think all of our commercial security firms have been. we know google was. they took the passwords. google was brave enough, by the way to stand up and talk about it. and i give them huge points for this. i think part of the answer to all this is standing up and talking about it. it is just like everything else in life. if everyone keeps this -- their private dirty little secret that

they got hit, nobody will get together in groups and solve the problem. we really need to make sure that people have the nerve to stand up and talk about it. the fcc is beginning to force that, i think when intel talked about it publicly, it is because they filed an fcc notice that they had been hit. i think their lawyers suggested to them that that was what a ceo should do. so whether it is because of the force or because of your own good sense, we have to be open about the things, describe the problem clearly and get on with it. really there is a solution. there are technical ways you turn to your cio and say solve this for me and there are ways to literally identify your crown jewels, give them a very high value internally, put them on to a server, and unplug the server from the internet. which is exactly what the department of defense does. it works great. doesn't even cost anything. pull the plug out. restrict the number of people who have access and review them

about once a year. pay attention to what car they're driving. so these are simple things to do. and the expensive stuff comes in behind that, and it takes years. but the simple things are very effective as we have done in short order. so i think those two things, if america really wants to launch again, which is a good way to put it, we could, we could be high energy, high income, high success, but it is not because we are going to pass some new bridge project. it is going to be because we took this to heart, we identified ourselves internally as inventors, as an inventing nation and learned to protect the stuff we made. that's my ten to 15 minutes and i think now we should open it up to you for conversation and get your own ideas. >> that was fantastic. thank you. >> you're welcome. >> round of applause. [ applause ] right up our wheel house. right up our wheel house. okay. i'll get to you in one second.

i have a question. you mentioned china. and in the spirit of tonight's program, i have a watch that was given to me by a member. and it is chairman mao, just waving at me. and it kind of is a reminder you only have so much time, but also, you know, you got to compete. and there is people who want to compete with you. we had a program with craig barrett, the former chairman and ceo of intel and the one line i totally remember is he said you don't win unless you choose to compete. and so what i'm hearing from you is we haven't chosen to compete, because we don't see ourselves that way. and you run a conference called future in review. which is a really cool name. so imagine the future and we're successful and review it, what was our action plan to get there. >> okay. i think it is a lot like what i described. if people become aware, we're trying to get stories and fortune and that story you probably saw, the front cover of business week, i think we did that, so i'm serious, we brought that story to bloomberg about 12, 14 months ago.

on television. and it took a while to get into print. but we want to have people understand the problem. that's step one. step two is i have leaders stand up, just the way google did. i have some people stand up and go, okay, i get it, here is what we're going to do about it and become role models for everybody else because ceos need to have some idea this is real. it would be great if jeff immelt, our jobs czar who, by the way, gave the blueprint to a jet engine away for nothing to hew jintao for the privilege of bidding off on chinese aircraft, gave it away. it was the only thing holding china back from competing with him and with boeing. gave it away. the day that he was made the jobs czar on the steps of the white house, personally handed them to hu jintao. bad idea, jeff. so i think jeff would be a good example. now he's resourcing some of the jobs, pretty cool. i think he would be the perfect guy to do this.

say i get it, i understand. i honor our engineering talent and i won't put their stuff at risk anymore. i recognize we're a technology -- i know he thinks it this. i recognize we're a technology driven country in every division we have got and we're going to protect that technology and get the highest roi we can for the shareholders. it is a whole new idea. he would be a great guy to do that. if he did that, i think a lot of other people would get the message. >> okay. brian. brian, alex. >> speak up. it is kind of a funny room. >> sure. i was going to ask, i'm an entrepreneur. it seems like the tone of our society has changed. when i was a kid being an entrepreneur, those were the heroes. now you've got occupy wall street kind of attacking success people. you got our president who is out there kind of going and saying it is unfair if you make a lot of money, and going after folks. so how do you change this tone in society where the entrepreneur is now becoming the bad guys as opposed ed td to g guys.

>> i don't think you're right about that. certainly right now the money -- there is a lot of money class conversation. i don't think the entrepreneur is the bad guy today. >> have you seen a movie in the last ten years where business was portrayed positively? >> i'm not talking about business. i'm talking about entrepreneurs. i don't think entrepreneurs are bad guys right now. wall street and occupy, but wall street rightfully got pasty. and probably not enough. nobody is going to jail yet. so, you know, i think there is a lot of anger over wall street and over london -- city of london, let's share the blame. but in the public view, that gets vague, fuzzy, smoothed out. people don't keep track. they're busy. they don't have the time to be specific and recognize the difference between someone on wall street who sold 600 billion in derivatives knowing they were crap and somebody who is starting a new -- if you're rich, that's a problem. right? and the political pundits or the political strategists make hay from this. they love class warfare. both sides, i think.

so you're fighting a machine which is out there doing the wrong thing for the wrong reasons. my advice would be stay with the program. i think we need to have a cultural change, but the more people like you who just be yourself, create a great company, and enjoy it. people around you will see that and go, well, brian's pretty cool. how did that happen? somebody's son is going to say, i want to be like brian. that's what we want. so i don't think you vu to go to washington to make that happen. i think it happens in every community. >> gen next's future is going to be better. >> thanks for coming out to talk to us tonight. great ideas. you didn't say this, but some audiences could infer that government action is more necessary based on your description of world problems and a smart, intelligent, beautiful woman, my wife susie said, when you combine government and cronyism and capitalism, you get crapitalism.

>> interesting word. >> we see that happening right now and the fear is that favored industries, because of this threat of competition, and our need to get urgent about entrepreneurism and innovation will actually result in bad outcomes like slind ra and we continue to fund things without money that we have. my friend alex says we're greasing the skids using the spelling with a c. >> i want to say something. slind ra. just like -- what is the name of the company that just fired 3,000. solar -- you're seeing the american solar industry getting gutted like a fish. it is not because they're stupid. it is not because the slind ra technology didn't work. it is because right in the middle of the plan somebody dumped about 10 trillion tons of silicon into the market after

half price or a third off and destroyed their business plans. now, you can say well, that's life. but it is not really life. it is really a plan. it is a plan that china had to make sure those guys didn't succeed. and it worked. don't blame slind ra. blame china. he's smart. i think -- i want to get that point out. i hear that so often. we are seeing carnage in a lot of places, and look larger. look around. in terms of the government part of this, i'm not trying to espouse any particular program, the only part of this that i really see the government playing is i believe there is a role in trade. governments make trade deals. and my hope is that we actually created a group called invent ip for this purpose. my hope is that one purpose of invent ip is that governments in america and australia and canada and uk and in europe get together and agree that

inventing nations will have as their top trade priority trieding witried i trading with other nations that, guess what, protect ip. if they do that, good things will happen. >> so i encourage you to ask questions because we have time for it and i might just call on you. so start thinking of one. alex, go ahead. >> that lends itself to a couple of questions i had, actually a two-part here for you, okay. first one was what can we do because it sounded like my partner behind me, brian, was mentioning as you were talking about government intervention from the standpoint of made trade tariffs or something of that nature to protect industry. on the flip side, you also mentioned the fact that unplugging the server, keeping kind of the -- >> protecting the ip.

>> so then i want you to talkly a little bit how real is the danger of reverse engineering or being able to take a finalized product and being able to actually work it back so that even unplugging the server wouldn't really mean anything in that case. >> sure, it is real, but it is a small enough problem compared to the problem we're talking about, you can live with it. there is never going to be a perfect world. there will never be a world, a time when ip isn't stolen. there is never going to be a time when it doesn't leak somehow. there is never going to be a time where employees don't walk out the door with the stuff and go to the other side somehow. it is going to keep happening. i think of this not as a white and black or on and off story but one of degree. if we had the appropriate tools here to show this, right now the level of theft as i've expressed it i think is very high. in other words, of those 407 or the number of -- they have all been fulfilled. shopping list is done. that's -- i would call it 100% success or for our perspective, 100% loss. what if we only had 25% or 30%

loss. that would be good. so instead of saying we have to have zero, i can tolerate 30. i think the nation could tolerate 30. we had this always. i don't know what the numbers are. you know what else is interesting, no one knows what the numbers are. part of what we're trying to do is get people to start thinking about the economy and not in terms of balance sheets, or dollars, but in terms of intellectual property. that in terms of the value that is carried today, which is always too small, on the balance sheets of corporations, but rather than, like, what it takes to create it or what did my tax guy tell me to do with that asset, mark it down to zero, rather ask yourself what is the competitive strategic value of that asset that jet engine blueprint, on the international market to the people who want to compete with me in my own business? what is that value of the jet engine? and you know the value of that blueprint he gave away is probably, i'll make it a number, $100 million. some number like that. well, the value of the guys who got it is probably about $10

billion because to be in his market for ten years rather than sit it out, right, that's worth a lot of money. as an example and answer your question further, my understanding from the teal group, the world's best consu consultancy on aerospace, they tried to reengineer a pratt whitney engine. it is not always that easy. if jeff wouldn't just give the stuff away, maybe it would be harder. >> thank you so much. that was really awesome. what caught me was the idea of refinding that energy of being an inventing nation. it made me think of a country, israel where they have more startups per person than any other country. and i'm curious from a pr perspective, from an advertising perspective, how do you recapture that and that energy of where individuals are

encouraged and almost naturally find their way towards inventing an entrepreneurship? >> well, i'll say something that will sound funny to you. i think seattle is already doing it. you know? i've lived here a long time. there are more startups every year it seems like. the venture guys are a little behind. take a little time to get the venture guys going. a lost the good money comes from california. but just look at seattle for a minute. we started out with the boeing thing, microsoft thing. then it is wireless and mobile and games and you start adding all the different segments, we're doing pretty good. that's why google comes up here to shop for employees and everybody else comes up here. we're developing people, somehow, who are -- or coming here to live here. but we're a pretty good answer to what do you do, i think. so i wouldn't say we're doing the wrong thing. i would say how do you accelerate what is already workiwork ing pretty well. you see people trying to do it. there is a lost folks trying to find out new ways of starting up.

startup costs is on the way down. we have a lot of dna from the mccaw days, guys in wireless helping start up mobile companies. it is very cool. so i think there are parts here, you have to look at silicon valley, seattle, say what did we do here that made that happen and how do we make it happen faster. the only idea i've got, which is just different from the way it is working is i love the idea of making -- starting companies really easy. it is pretty easy now. but i would like it to be even easier. i would love to see a program here or anywhere that -- where you have the two-page piece of paper, you walk in and fill it out yourself and say this is my company, i have two years to get this thing right and i'll be back with some very expensive law firm and give you the other 400 pages. right now i want to see if this works. i think you could cut all the red tape and really create a beautiful entrepreneurship program, i bet the legislature would be hot on it, and it wouldn't be that hard.

>> just had a question. you mentioned sort of a relationship here with china where the playing field isn't level in part because you have wto that is broken. now -- >> in part because china hasn't signed all the parts. >> absolutely. i completely agree with you. one thing you didn't mention actually was around the currency manipulation. if you look at the -- and so i would love to get your thoughts around that and also -- do you think the government is doing enough. what is the solution here? >> so one of my little -- when you're a pauper like me you have to find claims to fame and try to market them to people. one of them for me is the use of the word currency wars in modern times and what it means. i've been following the japan, japanese yen dollar story for 20 years, i guess. and as china got involved with this whole peg deal, it became more and more interesting as i learned