>> rose: welcome to the program. tonight a conversation with eric schmidt, the executive chairman of alphabet, the parent company of google. >> think about the information that you have you now that you didn't have a decade ago. think about the companies that you-- that we talked about today that didn't exist ten years ago. think abouted-- find a ten year old, borrow one, get one loaned to you, and watch this ten year old manipulate his or her i pad or iphone-- ipad or iphone. you will see the future and it is a good future. if all the evidence is that people are getting smarter, by the way, not dumber. all right, the evidence is that achievement is going on up and a lot of this is due to the interconnectedness, right, and the intergraition of all of us. it's going to be a very good

world. >> rose: we conclude with larry kellerman and peter corsell of twenty first centuryh started my pill grammage in the electric utility industry way back when when i started edison company, a industry i have grown up with, an industry i believe has been very transformational since its very founding, well over a century ago. and my belief and my colleague peter's belief is that there are technological changes that are occurring in the ecosystem of electric power generation, production and use that makes the utility even more relevant in today's world than it has been in its entire history. >> rose: eric schmidt on the future of technology, larry kellerman and peter corsell on the future of regulated utilities, next. >> funding for charlie rose is provided by the following:

>> and by bloomberg, a provider of multimedia news and information services worldwide. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> rose: eric schmidt has been at the center of google's transform hiv rise from silicon valley startup to one of the world's most powerful and influential companies. he was c.e.o. from 2001 to 2011. he is currently executive chairman of alphabet, google's parent company which was created last summer. alphabet encourages ambitious projects or moon shots and believes it can benefit both for the company and for society. advances in artificial intelligence and other ground-breaking technologies

have opened the door for revolution in medicine, biology, knowledge and many other areas. i sat down with eric schrid-- schmidt in new york at the new york economic club for a wide-ranging conversation, here is that dialogue. >> let me just begin with a up could elf questions. when you went to google, they said to you we need an adult in the room? because it was a good day for you. >> it was a good day for me. the-- it's an honor to be here and thank you guys very much for inviting me, charlie, thank you for doing this as well. larry and certificate gay decided that they-- sergei decided they needed someone to run things. they spent 16 months interviewing people. and they made them do things. to become c.e.o. you had to go skiing with them am or you had to go to burning man with them. and very, very few people met the test, apparently.

but i was fortunate enough, i told them i wasn't going to spend the weekend with them but we made a long list of things to do. >> and ten years as c.e.o. what was the most important thing that happened in those then years for you for the company. the sense that people have amazing ideas. in order to build a company of sort of success of a google or facebook or uber, you have to have both a technological idea but you also have to have a significant change in the way the rev you-- revenue will come in. in our case we invented targeted advertising which is really much better than untargetted advertising. and that's what happened. and we road that really, really hard. that gave us this engine. in the same sense that microsoft was the engine from dos, windows, go back in the '80s, we have had this engine that allowed us to build these systems not necessarily with a particular revenue plan.

we have been able to fail at big project was too much of an issue with respect to our shareholders and so forth. >> rose: so you can risk much. >> because of the underlying engine, we can take risks, invest in ideas and do crazy ideas, right. things which i don't think will work. but they work or they don't, will cancel things as part of the culture. i learned this that is not normal. that most companies, most companies are locked in these quarterly cycles, debt structures and so forth which gives them very few degrees of operating freedom. it's very tough for them. >> rose: and today what is the roll that you have? >> i'm mostly working on science. i spend a lot of time as you know, on public policy, trying to understand how the world really works and trying to make sure that frankly the governments wouldn't screw this sort of amazing thing that is happening up in the form of the internet. >> rose: is there risk of that? >> of course. whenever you are affecting communications and information, governments have a role to play.

we had to sort of significant battle if you will with china. the democracies are generally okay, as long as you are on the side of informing people and you are reasonably fair and so forth, you can get through that. >> will google be back in china? >> i hope so. we left in 2010 because they have these very, very strict rules about censorship and we just were unable to operate morally from our perspective under the censorship rules. so we keep trying. i spend a fair amount of my time trying to get it reopened. it's really up to the chinese government at this point. >> rose: i want to talk about the issue that i touched on which is very strong for you. because we want to talk a lot about the future here. the notion of the moonshot. we're looking at it in cancer, as an exam pel which joe biden is heading up by appointment of the president. but what are the possibilities that a moon shot could do for us? >> maybe i should say have i come to a sort of obnoxious view that we're operating under the sort of zero sum set of

assumptions in our society. and i'm including the western world, not just the u.s and if we're not asking enough of our people and enough of what we can do and not trying to build things that are transform tiff. go back to the interstate highway system which was originally justified by the way so they could move missiles around. so the lack of interstate highway system would cause america not to grow at all. and economic growth, is largely from interconnectedness and innovation. the interinterconnectedness comes from making the world closer, and i mean that intellectually and nrvetionally, physically and distribution networks and all the kinds of things that companies represented do. and it also, new inventions come along. and every once in a while there are things which we have a consensus, right. and if we would just get behind it. we call these moon shots. as you know, the vice president did a cancer moon shot. sean parker just donated $250 million to a set of doctors who have figured out a way to

promote white blood cells and against red cells in a complicated new way that might be a very major cancer breakthrough, right? these things come along. but we don't talk about that. we spend all of our time arguing about political issues which are largely not that important compared to how do we solve these massive problems. all right, and they can be solved. so the two biggest things that are going on, i think in the world that i see are this incredible revolution in medicine and this incredible revolution that's going on in knowledge. and the two of them become the basis, i think, for many of the things that we request do the cancer moon shot is powered because we've had these cancer breakthroughs and they are occurring because we are being able to essentially marry the analog world of cancer and biology and the digital world that i live in. >> rose: let me talk about revolutions, there was the industrial revolution, then there was the information revolution. >> right. >> rose: where are we now and what's the next revolution? >> i mentioned there are two phenomenon that i think are going to be transform tiff in the next dekate-- decade.

the first is in health, biology. i will talk about that in a second, and knowledge. the health and biologies there has been a break through of something called cass ddz crisper nine which is way of gene editing. at the moment a very, very tough hammer. they use a piece of genes that they didn't think were useful, that turned out to be very useful to sort of reassemble components. it's gene editing in its basic form. the combination of that, and then doing databases of genes and is he quenszing and so forth, allows us to really probe into the molecular and biological structure of life. it is certainly true within the next ten or 20 years that you will be able to get a body part generated out of stem cells that come out of your blood, right. it is an extraordinary achievement, right, one i think made in japan. >> rose: an removes it from the political controversy. >> yeah, and politics t was a stupid argument anyway. so the core issue here is, you need a new body part, we can regenerate it from your own

cells. that's life-saving for people who need transplants, right? so let's go through. this is the real combat. your friend is dying. this stuff fixes it, why are we not doing more of it. i will give you another one, i will get on with cars in a section. but the core point here is the combination of all of that is current. now why is it occurring, partly because technology from sciences but also there say great deal of money at stake. because the health-care industry sees new treatments as new sources of revenue, and new billion dollar drugs, right? so you've got a good alignment now of economic interests, veb ture money, and stuff is risky right, so venture capital, some in the room are really going to-- some will make a fortune, some will make money, that is how it works. that google has

generated. we have something called the knowledge graph. we understand how language is spoken. we have 17 years of quer-- queries and those sorts of things to help you out. so one of the first versions is we built an instant messaging app. which can reply for you. and it sort of learns what your-- what and knows what to say. our first for rea on this last year was an e-mail product which would automatically reply to your e-mail. i assume everyone here want this product, right? so we launched this thing in its most common reply is i love you. which turned out not to be the correct answer in a corporate setting. so you know, we have bucks and so forth and so on. but-- . >> rose: let me stop you there one second. the idea of a virtual assistant coming out of artificial intelligence is-- everybody is trying to do that. >> yeah. >> rose: we have amazon already on the market with eco. and how many get up and say alexa what time is it, alexa what is the news.

you have all of the major companies are there. i assume that competition will be good for the end product but is google behind the curve on that or are you-- because you don't have a product on the market. >> no, i mean we have-- we just announced a product, a different technology. and we'll see how well idoes. this is how our industry works. but we are far more collaborative than competitive. everyone wants to focus on apple versus google or whatever. but the fact of the matter is the whole ecosystem moves forward, right. and it is building those platforms and building that knowledge, i think the vast majority of your computer interaction will be by voice, sort of shocking. i by the way, ten years ago i predicted this would never happen. but i think-- it shows you how right i am. but you look at the technology and the gains in voice recognition and alexa which is now common in everyone's lives, you see it. now i am not particularly interested in the voice

recognition part. i'm very interested in the voice recognition with knowledge understanding. >> rose: and to tap into the data that already google has, for example. >> or the underlying algorithms. another example su can use google. we have a product you can get on your phone, speak in your language, it comes out in another phone in another language. like oh my god. right? does this really work? yes. is it as good as a human translator. not yet. okay. is it good enough to have a casual conversation, yes. all right. how does it work? well, it turns out it takes your voice, it digitizes it and puts it into text, that is done using a neuronetwork such which san ai concept t uses a different translation neuronetwork which learned how to translate by looking at good language pairs. it translates it and then translates it back into voice. you have three different translations, you go from voice to voice. >> rose: back to my question. is there a name for what

the-- sphr industrial to information to the age that we are looking at now, the transform tiff age of all of the technology and what it is doing for us? r it but i can define it aname little bit. so another example, there is a game called "go" which americans typically don't know anything about. and it's infinitely harder than chess. and a group-- of alphabet, called deep mind had been working for a long time to try to develop the con september intuition am and they developed an able to take a game in the form of bits, literally they can watch the bits of the screen and with enough work they request, can, and playing enough games they can figure out what the objects of the game are, how to win it and then beat all the humans. that's pretty interesting. now what is interesting technologically is that you don't have tell to tell it what

the game is. right? so how does this do this? well, you know, it sort of watches for awhile and it seems common patterns and it begins to develop a base of knowledge. and then it learns against that base of knowledge. you know, this is not a human intelligence yet, right, so we're not making that argument. >> rose: but carefully you said yes. >> yes. >> we don't know how hard it will be to get there. but what we do know is this is something which has never been done before. so then we applied this to the game of "go" which is thought to be unexeultable. and what it did was it learned-- uncomputable. it learned how to look at only certain positions by the same rough training method. and we decided to have a game against the best player in the world, in korea, a perfectly nice human being. and we beat him 4-1. which was historic. >> rose: historic and huge. everybody looked at that. help us understand, we are now talking about artificial intelligence. all of these things we just talked about. artificial intelligence.

and a friend of yours said to me recently, eric is thinking a lot about artificial intelligence. on the one hand you have deep mind which is able to beat "go" that say huge thing. on the other hand you have watson which began with chess and then won jeopardy and they are working on it explain artificial intelligence for the folks here because in this audience and elsewhere, everybody, hears about it, some people are making deep investments in it. hedge funds and others. >> but remember what i said about the biological world, it's happening cause there is a confluence of a platform, a set of ideas and a large amount of money and a lot of investing, a lot of people coming out of school that are working on it. and a sense that it's transform tiff to everyone's lives. the same thing, the two are sim et rick. so can respect to, ai, the current ai use, i will give you a coup theal are simple. if you are familiar with a disease called diabetic retino

pathy. but the diabetes tragedy is taking over the world. it causes your eyes to go bad. you become blind. it can be detected by a good ophthalmologist. we did a test where we take pictures of your retina and we can do it better than an ophthalmologist. it turns out we see more eyes, we saw a million eyes, very hard for the ophthalmologist as hard as they work to see a million eyes. so in situations, there is a large number of cases where if you just let the computer and technology see more examples, they can am could up with better decisions. another example there is some, we believe that you can apply this to oil & gas distribution networks. there is a great deal of leakage and sort of decisions that are made about flow and storage and so forth and so on. by using that data, we think we can reduce the emissions, from this that.

by the way the emissions are costly to the industry. you have the real question is how far does this go? we think we can develop enough intuition, will use that term carefully, that a physicist or a chemist could say you know how they work, right, they wake up in the morning and they say i want to combine the i3 chemical with the z2 chemical and i will have the following crazy react. it's not going to blow up, instead i will produce a new substance which will get me a nobel prize and get me a promotion at work. so they do that, right that is at 9:00 in the morning. 11:00 they do it. they have their chemist do it and at 3:00 it fails socker they go home and have dinner. the negotiation morning they come up with anher one. that show it really works, right. and these are incredibly intelligent people. but that process can be onerous. we can is the computer to go through all the imingszs and give you a probability. does that matter? these are trillion dollar industries globally around chemistry, chemicals, synthetics, drugs of one kind or another. >> rose: with respect to our vision of intelligence, on the

one hand deep mind has a different operating idea than what ibm's watson. explain how they are different and what they're trying to accomplish each on their own. >> each of watson and facebook and deep mind are doing, have completely different sort of providences, in the case of watson, they use a particular kind of nrches model, a technical term, which worked particularly well for jeopardy and for complicated problem solving. and they're having a lot of success applying this to complex systems and explaining them. so think of them as there is a complicated system. they can read it, literally and tell you what is in it, right? so this is sort of lawyers had complexity, you take it away or whatever model you have, how it all works. you take all the contracts, read all of them and give it an answer. >> that is a generalizable result, a powerful one for them. facebook just announced this

week that they vay breakthrough in language understanding around communications, sort of what they do. and they have said that they have made significant progress in detecting hate speech. so that's clearly a good thing. in our case we took the position that we wanted to build an underlying platform that allowed you to do all this stuff. we built a network, sorry to describe it technically but it's called tenser flow. tense certificate a multidimensional matrix and the underlying system for them describing are essentially multidimensional matrix algorithms of one kind or another, and we've given this framework to all of our competitors. it's so strategic for us to build the community and all the players that we literally took this amazing intellectual property and. >> you bought deep mind. >> some will say to you that deep mind what they are trying ople will say it's man plusonre machine. >> that's right. >> it's a different-- the deep mind people are interesting because the founders came out of

neuroscience. so they imagined that you would build computer systems that use the same way we do learning. and i will give you-- i won't do a good job of this because i'm not a neuroscientist but think about it when you came into this room. how much cognitive time did you spend figuring out that the floor was where your feet went. the lights were up there. the table was there. you know, and you had a knife and fork and friends and there are roughly eight people and everyone is dressed properly. you had already learned that. you have chunked that, if you will. there is evidence that the way our brains work is we study a theme and then we subset it to the things that are really important. and the things that are really important we then put into the brain. this is called reinforcement learning in the vern ak lar. and we believe that reinforcement learning is going to be a core part of this next set of ai algorithms.

>> we talked about the future. i know there is interest in business and in terms of the economics and the global economy. take these five companies, apple, amazon, google, facebook, microsoft. is there a race to do any one thing? are they all in the same business? we know that apple has made a fortune on a smartphone. google has made a fortune on search. microsoft made a fortune on software. amazon made a fortune on a whole range of different things. >> but in these companies are they in pursuit of a holy grail? >> the tech companies as a group are highly competitive, seeks new-- i want to say it right. think of each of these as a platform company drifen by own vacation that solves a problem that's global. in some cases a problem you didn't know you had but you

discovered they solved very well number you go back, microsoft being the eldest of them, solve of the the problem of inoperable workstation platform. amazon started off as sta essentially a virtual book store. i didn't realize i want a book store bigger than a current book store but now that i have one, it is fantastic. it is so useful. even of them had that. apple's transformation is legendary with the resuscitation of the company. and when steve took over the second time, he clearly wanted to do phones. >> right. >> and lead the category. each of these companies, we have never in our industry had and i would argue that the first four without microsoft are leading the platform fight. we have never had that mean companies fighting so brutally against each other and yet also could lab rating. in our industry we always had ibm and microsoft and a few others. >> rose: where is the collaboration because are you also suing each other.

>> yeah, but that's okay. that's normal. there are lots of collaboration. typical example is our-- run on apps all run on apple products, on microsoft products. >> rose: when apple announced a partnership with microsoft. >> a traditional model would say we won't put anything on that platform. it turns out that apple is a customer. in our case we're also a customer of apple for things. on and on and on. and in fact, everyone sort of argues with each other but we benefit, we as an industry have benefited from open markets, global situation, a sense that technology is transform tiff, and the kind of financing market. >> rose: should we insist on open sources in terms of the future, in terms of all that is being discovered so that-- or are we looking at a world in which each organization is going to be jealously guarding not

only what it knows and learning but also try to fine a way and protect itself from losing the most talented human beings. >> but by the way, this is the genius of competition, this selfed of real competition. and we fight brutally to hire the top people, to get our products down, think about the android phone or iphone you use today. think about how powerful it. is i figured out it is a hundred million times more powerful than the computer i used when i was in college. and by the way, it costs a lot less. because there was only one of them in college and i stayed up all night to use it because the only time i could get access to it. so it's real consumer benefits. so i think that the competitive structure will continue for awhile until another one joins us an one leaves. >> one we don't know now. >> of course.

can i tell you that the current next one is uber which has done remarkably well and its disclosure, google is a large investor in ube. >> rose: and so is saudi arabia's-- well fund. >> i didn't do that deal. but so anyway uber has done incredibly well and again, who-- i wish i had invented uber. what a great idea, right. at the same time that travis and his partner were standing basically, it was actually invented in paris at the base of the eiffel tower according to travis. at the exact time he was there invents uker i was giving a speech about how there will be amazing companies founded based on smartphones, google pap maps and gps, right. >> but i didn't figure out what the app was. so i can tell you that the next, the next uber, the one that is a new one, the one we'll be talking about in five or ten years will be built on a machine intelligence platform of the kind i defined. very fast network it will use a d it will use very rapidityone

raise. i just don't know what the app. is i don't know what problem we can solve. >> rose: which raises, all of you read this, it raises in terms of artificial intelligence and how smart machines are coming, often expressed fear of people like elan musq and larry in some cases but not as strong, bill gates, the idea is there some danger from machines becoming so smart so human, but uncontrollable that they provide a threat to the planet? >> these people have been wamping a lot of movies. >> rose: these are your colleagues and smart people. >> my colleagues and perhaps competitors in elan's case. he backed up his case. >> rose: and stephen hawking too. >> elan backed up his concern by creating du b-- z he backed up his concern over this very important issue by investing a billion dollars in a

competitor's deep mind. so we'll see howe that plays out. you never say never. >> rose: right. >> but let's go through what is needed to make that scenario happen. so the first thing is we're still learning how to do basic intrueician and those kind of things. there will be break thrus and we'll get excited about it and be able to answer questions and answer your e-mail and make suggestions for how you should-- what movie theater you will go to tonight. that is not intelligence. we may be able and we hope to be able to assist humans in their daily jobs. and who doesn't want help, right. think about all the professionals and so forth and so on. we think we can do that. it's real speculation to get to the kind of human level of intelligence that everyone here has in the room, let alone going past. my own intuition which is just a guess, is that there is another discovery needed, right that this is, the human level of

intelligence is a very hard problem. hard to define what it actually is. but my own intuition is it is probably another discovery to which it might occur and then the concerns over oh my god, the robot has let loose in the lab and basically decided to kill its owners and so forth. i saw that movie t was really good. >> rose: there are also questions of disruptive technologies. there does google fear that there may be some disruption so that search engines will be obsolete? >> in my industry you always worry about the next idea. and inevitably there's always a new team, the conoco garage, the young profer certificate and two graduate students, that's how we started. you always worry about that. and there are many, many ways in which what we currently do could be disrupted over time. this is why we invest so much.

>> big picture. some people worry that there may be show a-- go back to the 200016789 you lived through that in terms of some kind of collapse. of technology companies. a bubble bursting. >> we live through the bubble. the bubble, we were so much more handsome and beautiful during the bubble, i must say. the level sort of makes you feel like you're god, right. and i remember being at this dinner in dafos where you were. and i looked around. i said these are the leaders of the free world. so we sort of got ahead of ourselves. and thank goodness that it got, that it crashed and we rebuilt it properly. the market and investors are much saffier now, so for the companies that don't have strong profits, they have a strong

potential revenue. >> people worry, they know the technology will bring productivity. will it also create problems in terms of people being displaced from the job market. >> we have had this for a long time. if you go back to the 19 '80s automation concern and 1990st there is a great deal of concern that there will be a loss of jobs. but in fact the american economy has generated throughout all of the tre vails and ups and downs a very large number of jobs during the supposed time when all the jobs would go away. i think the evidence is that the american model does create jobs but the jobs are different. and everyone has a right to fear for their own future and fear that their jobs will be disrupted. but the fact of the matter is we're running-- the u.s. today is running at near what economists call full employment. and thases' a testament to the recovery since 2008, 2009. everybody here was in new york i assume in 2008, 2009.

try to remember how you felt. only seven years ago. think about how strong this city and what you all have done is. that is a testament. i am not as worried about. this i want to be clear that i think there is a problem with the loss of high-paying middle class manufacturing jobs, this is called the hollowing out of the middle. and we need to find ways to address the job dislocation, the lifestyle issues with service workers and so forth. and there are many economic solutions for that. but the ultimate answer to this stuff is more education, more education, more education, more competitiveness and more entrepreneurs. what is interesting is you named the five companies. every one of them was started by incredibly brilliant entrepreneurs, maybe we should thank them occasionally. think about the number of jobs, i'm not the founder. think about all the jobs these guys created. think of all the taxes they paid to the state in our case in california, to bail the state out. you get the idea.

>> speaking of taxes, should there be a change in the tax structure so they can bring that money they make overseas home? >> we have argued for two decades that the off-shore cash should be brought into america. >> rose: create jobs at home. >> of course. in google's case we generate a lot of cash from our own operations, thank goodness. but it seems crazy to not let that cash come into the country and used for capital. here is another sore point. we're underinvesting in our e country's population is growing, the interconnectivity is increasing, right, so you have greater demand on fixed services. we need to spend the money on roads, bridges, airports, you name it. >> rose: when you look at globally, where is the most competition going to come to the american technological economic engine. is it china, is it south korea, is it somewhere else. >> the history in this was that

america would invent it, korea would perfect it and china would make it in huge volumes. that is sort of the pattern. and many people believe that china is now going to jump one level higher. and they're following our play boong. they're incredibly intelligence, and very focused on emphasizing universities and so forth. there are critics who believe that their educational model and lack of political speech and a bunch of other things will not allow them to get to our level that is sort of the great debate. there are other arguments that china's economy is low slowing down, that their numbers are overstating. i can't really tell. so china is clearly going to be a player. the most interesting country to spend any time in isician real. on a pound for pound or person for person or whatever metaphor you want, their productivity and innovation is the highest i think in the world, just literally for the small size. part of this is because they haves are toed military service, they are very aggressive in

their culture with respect to innovation and they tolerate risk. so that is a repeatable mod knell other countries. >> rose: one of the last time i saw you was at tech anycom, which is a partner with cornell. >> that's right. >> trying to create a silicon valley in new york. >> of the many great things mayor bloomberg did was he wanted this huge campus with a combination of cornell, tech neon conditioned-- attempting to kreat a sl con shall a competitor for silicon valley it needs a competitor. it is a great thing. i love this project but if you go through where the innovation will occur, beijing comes to mind, tel aviv comes to mind, london is having a huge renaissance. and it's largely because king's cross has a train line that goes to cambridge. and that train line is about an hour and a half. i'm serious. >> is it more important to go to cambridge than oxford. >> all can i tell su that the people in cambridge had a lot of free land around the university.

>> right. >> and they allowed the construction of business parks. and it's relatively rare in europe which doesn't like to build anything. excuse the comment but i think it's roughly true. so they were clever enough, they owned a lot of land t was unoccupied. and the university was able to entitle it. they had on the order of a thousand startups, most of which didn't work and they were small and so forth. but those startups at some point have to move to a city and of course they move to london. so that's a pretty good model, right. >> what about the model that stanford has with silicon valley. take the two founders of google. >> both were in graduate school. >> yes. >> and the relationship between the university allowing them to do whatever they wanted to do, does it create opportunity? >> you can argue the cornell tech anycon is the same thing here. >> stanford is the best example of this. but this is a copyable model there is no secret here.

not like some intellectual property. stanford is organized around graduate students. they have a lot of funding. they're encouraged to write interesting things. the moment they have something interesting, they have lunch with the venture capitalists, they get funded to a couple of millions of dollars which to theme seems like an enormous amount of money. and for me too at the time. and they move into some dumpy little house in palo alto that costs too much. and off they go. and it's a cycle that has happened now six or seven cycles. so it's highly repeatable and copyable. >> rose: if you were starting over today, would you more likely go into if biology rather than computer science and engineering? >> both are having a renaissance. and i don't know. i spent a fair amount of time with the computer scientists that are working in biology because they are right at that intersection. and all of the interesting

computesser science problems that scale are true in biology. the number of proteins and protein folding. figured that genetic was a problem there say area called epi disz genetics which is around the behavior and modifications. i didn't know this but in fact your genes change as a result of environmental factors and in complicated ways involving proteins. this is just a gold miej for the kind of problems that people like myself are interested in the clinic. -- in their 20s. that work today will become the foundation of nobel prizes ten years from now, 20 years from now, 30 years from now. >> rose: have i been asked to come down to washington to interview james combi, he has been at the forefront at the loggerheads between the fbi on the one hand and national security issues, and at the same time, encryption where do you come down in terms of show in the national interests on both

sides, finding a solution. >> we need a solution to it. the industry is united in saying that the government is forcing us to weaken encryption, is a bad idea. if we are forced by law to weaken encryption and there are people promoasessing that t won't be just the government that has access to your information on your phone it will lbs the bad guys because the computer can't tell the dirchesz between the good guys and bad guys. and it's even more important in i krs like china where the laws are not so favorable to human rights. so we've taken a position that there need to be other solutions that rather than forcing a weakening or back door, if you will. and it is a hard issue because encryption is getting stronger. in fairness to our industry, it's important to understand what happened. when snowden revealed all of the activities that he did which is an illegal act on his part, we read of the things that the government was doing that we didn't know about to survey among other things the united

states citizens. and we have fully, fully encrypted the data that google, in rest and in transit so i can tell that you if you have something that is, if you want to be private, the best place to keep it is in gmail, right. seriously. fully encrypted, very strong, very, very difficult to break in. and we know this because everyone is complaining. so what would happen ifed fbi director said we know in this person is suspected of some something serious and we think there is an exchange of information through gmail. please give us access. >> you know, america has a great law in that regard. it is called the-- . >> rose: it is illegal. >> it is called a legal proceeding, it is called the front door. all of the-- terrorism say horrific thing, obviously. at least democracies have legal processes to follow. so the fbi director would not call us. they would go to the three judge

panel and the three judge panel would order us to give that information. and we would give it just like that. >> rose: and most of the time they have. >> in fact, something like, it say public number. less than 50,000 times, maybe 40,000 times per year we are asked this. and we have billions of users, so it say relatively rare event. and that is for all national security matters. >> rose: two quick questions. one, ten years from nowed world will be dramically different because waf we are doing? >> think about the information that you have now that you didn't have a decade ago. think about the companies that you, we talked about today that didn't exist ten years ago. think about the-- find a ten year old, borrow one, get one loaned to you. and watch this ten year old manipulate his or her ipad or iphone. will you see the future. and it say good future.

all the evidence is that people are getting smarter, by the way, not dumberred evidence is the educational achievement is going you know. and a lot of it is do to the interconnectedness and all of us it will be a good world. >> rose: the old joke y is your 13 year old working on that. because my ten year old was at play. >> thank you, eric. >> thank you, chartie. thank you all. >> rose: twenty first century utilities was founded in 2015 to reinvent the century old electric utility business model. the company's mission is to drive clean, low cost energy producing and energy saving technologies. it owns and operates moderate sized regulatessed utilities that benefit from access to low-cost capitol and have deeper connections with the local community than its larger peers. larry kellerman and peter corsell are the founders and

managing partners of 2 1s century utilities and i'm pleased to have them both at this table. so tell me where this began. >> for me this began 37 years ago which started my pilgrimage in the electric utility industry way back when when i started with southern california edison company. this is an industry that i have grown up with. this is an industry that i believe has been very, very transformational since its very founding, well over a century ago. and my belief and my colleague peter's belief is that there are tech no logical changes that are occurring in the ecosystem of electric power generation, production and use that makes the you-- utility even more relevant in today's world than it has been in its entire history. >> not withstanding everything that has changed in history. your belief is you can take the regulated utilities today and make them energy efficient. >> we believe that that is the charter, mission and on jiskt of a well-functioning utility in

today's world, yes. >> how are you going to do that. >> so much of the technological innovation that is o you are curing today is on the customer side of the metering, in the homes and biseses, net therp stat, rooftop solar, tesla cars and power walls. so much of what is going on today requires that the utility move beyond the meter and embrace the customer, the true customer, and give that customer choice. to embrace these new energy efficiency and clean energy technologies, that is part of the integrated system. >> rose: how does it do that? >> we have what we call the million rate base model which is a little wonky but that's because all utility investments go into what is called the rate base, substations, power plant, transmission line, one sing you lar rate base. just like getting millions of cell phone customers their own sort of cell phone plans. our you tills will give our customers their own individual rate base plans. so each customer can choose to continue to buy plucked power from the grid or can buy rooftop

solar, even electric cars themselves, could be in their industry rate base. >> what part of that are you providing. >> so the utility there has been so much talk in recent years about the need for a green bank. to finance the growth of clean energy. the utility is nothing if not a bank. it is first and fore most a bank it is a stewart and a system planner and a finance year of infrastructure assets some of we are offering our customers the chance to buy these technologies at the lowest conceivable cost at no extra profit margin to the utility and have the ability to have on-bill financing. so they can pay for these technologies over time. >> is it more of a business model then it is technological changes other than technological change outside of the regulated utility? >> are you right it is. there is an emerging landscape. a great ecosystem of technologies that are either efficiency technologies or clean power technologies. and we're agnostic.

we want to open up that whole chinese menu of options to our customers so they can choose what they want. >> rose: you are a ci analyst at one point in your career. >> originally for the first few years. >> rose: political analyst. >> i was. >> rose: you had experience in the utility business. who said to whom let's do. this because this is is a possibility to do things with existing structure that will make a difference for the consumer. >> really, the market in a major sense of the term spoke to us. what we saw is that these emerging technologies were being very, very constructive to society, but they existed in a part of the environment that was foreign to most utilities. the utilities boundary, the utilities sphere has historically ended at the meter. and everything that exists on the other side of the meter, on the customer side of the meter was something where most utilities have been, i wouldn't say willfully ignorant on but

effectively said this isn't our business. our business is to focus on the grid, generation, transmission and contribution down to the customers meter, down to the edge of the customer's premises. our view really has been informed by the market place. the market place has been creating essentially some of the most, some of the coolest and most transformational assets, products and services on the customer's side of the meter. and for the utility to remain relevant, we felt that it was important for the utility to directly engage with the assets. >> where is your competition coming from? >> status quo is the. >> but do you worry about people who have tons of money disposable money who have it sitting in their banks? people like silicon valley companies will say why done we go here. and we have huge amount of funds to continues finance the most modern of utilities. >> they do.

but in order to embrace that business model and business edic one has to be grounded in the industry. we believe that the silicon valley companies are going to look at the utility business model and say gee, it's regulated. we don't like being regulated. we on the other hand like being regulated. >> because? >> because regulation allows us to partner with government, to partner with our consumers, to partner with environmental and consumer advocacy groups in a way that other industries does not exist. and the quid pro quo. >> because those groups are interested in regulation. >> because those groups are interested and are partnered in the evolution of a public service. utilities provide a public service. silicon valley technology companies do not view themselves as public service companies. they view themselves as technology companies, as entrepreneurial ventures. utilities have always been and continue to be public service

enterprises. >> where are the best-- i was going to say it's interesting that you raised silicon valley. i was around at this time after i left the cia i started a smart roof company. and the silicon valley spent a lot of money and had a number of companies trying to change the electric power system from the outside in. some really smart people, really great companies. and what we have concluded, once of the lessons we learned from that period which was really 2006 do 2011 from that period was you really need to change the industry from the inside out. these utilities have a charter. they vay mandate to charge you quick witus reliable power to everyone, rich and poor alike. and so while silicon valley has a huge roll to play in inventing and creating this new technology, the utility industry has its roll to play as a con duity to get this technology deployed at scale in the homes of wealthy people, poor people alike. >> where are the best run utilities and effective utilities and those that represent the future. >> there are some very well run utilities in different parts of

the country. they're not concentrated in one place or another. but in vermont, green mountain energy, green mountain power in vermont in my view is a small utility. i think they're doing the best job in any in really pushing the envelope and embracing. >> how were they doing that. >> they're doing many of the things that we are going to do. and we want our utility to be cities on the hill and be emulated by others. because you're not really competing for customers, you have a territory and someone next door has a territory. they're embracing energy efficiency. their team is doing a really brilliant forward looking job for the people of vermont. >> what do you think of bill gates suggestion and in his most recent letter, the dramatic need for an energy miracle. >> you know, we all have tremendous respect for bill gates. and i think we need an energy revolution. i think that in some sense the miracle is already happening. and to some large extent has already happened.

if you look at the price of solar power for example it sch less expensive than other conventional means so the market signals are there. >> to play off of the solar example. the most recent long-term contract for solar power which was actually entered into by the dubai electricity and water authority was an 800 mega watt contract at 2.99 centss per kill o watt hour that is cheaper than coal. that is cheaper than natural gas, that is cheaper than wind t cheaper than any other resource. yes, it is dubai but there is no 30% itc in dubai either that is the all in price of solar power. so the energy mir ak knell our view, not only has already taken place, but is continuing to evolve and continuing to drive down the cost of these transformational technologies. >> rose: so what is dramically needed is market conditions so that you can create solar energy and alternative energy sources

that are price competitive. >> we want to put our foot on the accelerator of market conditions that are already taking place. we believe we can create not only a cleaner but most cost effective environment for energy to be utilized throughout all semghts is of society. >> does there country have an energy policy. >> i don't believe so no, to be blunt and sim police particular, no. >> i don't believe we've had an energy policy past the carter administration, when james schlesinger was the first head of the department of energy there was a coherent and actionable energy policy back in the late 70st and early '80s. since then, we in our opinion have not had an energy policy in our view all of the above is not an energy policy. you have to make choices is. all of the above means you don't have to make choices. we believe you do have to make choices to consciencely evolve

the system in a thoughtful manner from where it is today, to where you want it to be. >> what is the role of coal, and new clear. >> in 2001, coal was king. coal produced 51% of all of the electrons generated in this industry. -- country. the most recent data out of eia, energy information administration were march of 2016 showed coal at less than half of the percentagethat they were in 2001. only 24%. made up by natural gas and made up significantly by shale gas and also maids up significantly by renewables, booth hydro and nonhydro renewables, as time goes on we believe coal from an economic perspective, the mass is going to result in coal being phased out over a period of time, as we have seen already during this century, coal's

share of the market has been cut roughly in half. >> rose: nuclear. >> nuclear, one of the interesting observations and data points in the last week is one of the largest nuclear operatedders in the country operates two nuclear plants in illinois, one is called the clinton plant, one is called quad cities. these are existing plants that are operating quite well. , exelon said they are the two of the best plans in their system, they are voluntarily shutting them down one in 2017, an one in 2018. the reason is in this exphek environment even an existing plant that has had all of its capital completely paid for up until this point in time, is no longer cost effective that is-- that underscores the chajing dynamics of the nature of competition in the generation industry. >> when do you expect to be operational. when do you expect to have plants online to demonstrate what are you selling i would

think within a year. >> within a year to a year and a half. i think we will have acquired and been able to demonstrate a shift in our first electric utility. >> there's a whole regulatory approval process. it takes. >> within a year you think you will be operational with a plan in place? >> yes. >> rose: good luck. >> thank you. >> rose: thank you for coming, pleasure to you have here. >> thank you. >> rose: company is called twenty first century utility, larry kellerman, peter corsell. thank you. >> rose: for more, visit us online at pbs.org and charlie rose.com. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org

>> rose: funding for "charlie rose" has been provided by the following: >> and by bloomberg, a provider of multimedia news and of multimedia news and information services worldwide.

♪ man: it is extremely rare to have a planet where there is soil. as this living crust that is smeared over the surface of our planet. most of the planet is not living. it's mineral. it's never known life, it's just this rock. and yet soil starts forming on it and creates this crust, this very thin layer where life is possible. ♪ [footsteps crackling on ice]