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Google Billionaire Warns U.S. Technology Edge Over China Slipping

Eric Schmidt’s philanthropic arm has some recommendations on how Washington could reshape its policies. 

Google Billionaire Warns U.S. Technology Edge Over China Slipping

Eric Schmidt wants to reshape Washington’s industrial policy to combat an intensifying US-China tech rivalry.

The former Google chief executive officer’s philanthropic arm issued recommendations aimed at encouraging US politicians to counter China’s rising technological ambitions by ramping up regulatory scrutiny, encouraging more private investment and offering tax credits to train workers.

Schmidt, 67, stepped down in 2011 as CEO of Google — now known as Alphabet Inc. — but remains the company’s third-largest individual shareholder after founders Larry Page and Sergey Brin. His stake makes up the bulk of his $18.9 billion fortune, according to the Bloomberg Billionaires Index, but he also invests or has leadership roles in artificial intelligence and quantum computing firms.

Eric SchmidtPhotographer: Eva Marie Uzcategui/Bloomberg
Eric SchmidtPhotographer: Eva Marie Uzcategui/Bloomberg

China surprised the US on key “battleground” technologies — including wireless 5G, microelectronics and AI — as the Asian nation’s industrial policy enabled it to dominate markets for drones, high-capacity batteries, critical minerals, solar panels, turbines and shipbuilding, the Schmidt-backed Special Competitive Studies Project said Tuesday in a report.

“The US has some immense economic advantages, but there are some warning lights flashing,” Liza Tobin, the project’s senior director and a former China director for the US National Security Council, said on a call with reporters. “The US needs an America-style industrial strategy that leverages competition in our dynamic private sector and has carefully targeted incentives in sectors where we need to lead.”

The report calls on the US government to boost microelectronic production with the help of a large fund to unlock private capital, create an open-source security center to assist investments in digital infrastructure, establish a national security commission on digital finance and give regulators more power to screen investment flows to China that could threaten US national security.

Schmidt created the project last year and named Ylli Bajraktari as CEO. Bajraktari is a former chief of staff to National Security Adviser H.R. McMaster and served with Schmidt on the National Security Commission on Artificial Intelligence.

Deep Tech

The project draws inspiration from a Cold War-era initiative by Nelson Rockefeller that came in response to the Soviet Union’s Sputnik launch. Schmidt has joined fellow tech billionaire Peter Thiel in backing another non-profit called America’s Frontier Fund, which aims to raise $1 billion in venture capital to target so-called deep tech industries — those not necessarily focused on end-user services — that may be overlooked by Wall Street.

“We’ve been pleasantly surprised at reactions from Silicon Valley,” Tobin said. “We’ve seen a sea change where a lot of investors, venture capitalists, technologists, are eager to engage in this American project, interested in national security. Wall Street is a bit behind Silicon Valley, but we see the turn happening.”

The 75-page SCSP report calls for the government to create an independent development bank to provide “patient capital” to help “de-risk” private investment in deep tech and increase the H-1B visa cap to help plug the estimated 90,000-worker talent gap in the microeletronics industry. 

Gilman Louie, CEO and co-founder of America's Frontier Fund, said Beijing's technological advances under its Made in China 2025 strategy, with its timelines and clear standards, made it obvious that “America didn’t have a business plan.”

“It’s critical you bring together forces of government, academia, research and the market," Louie said in a recent interview. “Without the market, you can’t actually take these technologies and put them into the economy in a very productive way.”

Schmidt’s growing role in shaping policy in Washington could potentially conflict with some of his private-sector interests, said Jack Poulson, executive director of Tech Inquiry, which tracks the industry’s role in government. Those include providing backing for startups such as SandboxAQ, a quantum-computing and AI company that was spun off from Google in 2016.

“SCSP is organized as a charitable entity, and has no relationship to any personal investment activities of Dr. Schmidt,” said Tara Rigler, a spokesperson for the group.  

(Updates with additional comments starting in 11th paragraph.)

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