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On Monday, July 27, 2020 Eric Schmidt, Princeton Class of ‘76, joined Markus Brunnermeier, Director of Princeton’s Bendheim Center for Finance, for a Q&A on digital innovation, privacy, and cybersecurity. Eric Schmidt is the former chairman and CEO of Google and co-founder of Schmidt Futures.

Watch the full presentation below and download the slides here.  You can also watch all Markus’ Academy webinars on the Markus’ Academy YouTube channel.

Executive Summary

Surveillance technology can create “digital prisons” through surveillance, either directly or as a side effect, if we don’t govern the use of such technology. Schmidt says that a general rule of the internet is that if something is possible, it will happen. Schmidt says there’s no question that China is the global leader in vision-based tech using sophisticated algorithms, and that this is an unwelcome development in technology.

Short-term responses to the virus may become long-lasting threats to globalization—and that’s not a good thing. Schmidt said that when rules are enacted temporarily during crises, they develop constituencies. The ultimate result is that rules implemented during crises tend to stick around long after they should. Schmidt says we’re reversing progress on globalization when we shouldn’t. As an example of this phenomena, he cites the fact that the 55mph speed limit stayed around unnecessarily for 15-plus years after the limits were first put in place to address the fuel crisis in the 1970s.

The ability to manipulate and spread false information will increase, but it can and should be moderated. Things that are alarming spread online at a rate of 8 times more than things that are not. Societies need to create balances of information by ensuring information is accurate without threatening free speech, which is vital. Schmidt’s definition of free speech is “speech I don’t like,” not “speech that is polite or permissible.” He says some speech is being stifled by mob behavior.

The benefits of new technology are too big to want to slow down progress by reversing progress on globalization. Schmidt rejects the argument that technology is developing too fast. Potential benefits in health and engineering are massive, and the virus is slowing down progress by impeding globalization. He notes, however, that public debate around privacy and other issues need to speed up.

The U.S. and the west still lead in AI research, but China is catching up quickly. China has made AI a key national priority and they hope to dominate the field by 2030. The U.S. is poised to make major investments in AI training for government workers. Schmidt says it’s important the government collaborate with private firms, who are now the primary source of AI innovation. He also notes that India may become a powerhouse in the realm of AI due to its university tech programs.

The emergency of large tech firms is similar to what happened in the automobile industry between 1910-1940. In the early 1900s, we had hundreds of car companies that eventually became three main companies. Similarly in tech, we can expect to see the tools in development now produced by a few very large firms in the future.

Data privacy regulations prevent innovation in the health industry. Because regulations around data and privacy are so complex, the type of progress we see in other industries isn’t possible in the health space. We should accelerate the health industry’s adoption of IT and shared data for research because we will be healthier if more is known about people who have a similar condition.

We know central banks will exist in the future, and regulators should allow as much innovation and experimentation in the digital payments space as possible. There are many benefits to these types of experiments—tracking misuse of anonymous money, etc.—and the U.S. is falling behind China in this arena.

We’re in a need of a compromise, spearheaded by an international regulatory body, that reforms international tax rules. Schmidt notes that differential local tax rates don’t make sense. The system should balance the local interests of the players with the security of the system.

Europe’s regulatory system prohibits innovation in the tech sector, which is a loss for people all around the globe. Precise rules are imposed assuming that everything can be predicted. However, the nature of invention is that one cannot foresee various possible contingencies. Hence, flexibility and rules that allow experimentation is important. Europe should do everything it can to create a large number of successful tech companies, and that would require some regulatory adjustments.

When asked what one positive thing could be coming out of the coronavirus pandemic, Schmidt said this has shown that a flexible workplace can be productive. More flexible workplaces would make it possible for mothers and fathers to work in a way that works for them rather than commuting to the office in the previously traditional way.