I'll suspend judgement. Full transcript.
Update: [link|http://www.globaltechsummit.net/press/GTS_AndyGrove.pdf|Corrected transcript] and [link|http://www.globaltechsummit.net/press/AndyGrove.pdf|slides].
\r\n\r\nFirst off, he came here frome elsewhere. And crawled out of a pit to do it. He \r\nknows how much of a journey he made personally.
\r\n\r\nIntel's been a ruthless competitor, but also scrupulously fair. Their goal has been market domination, but by several reports, not "by any means". Keeping out of the line of fire of the DoJ is a major corporate value. I've heard this from several sources. Was re-reading Ed Cury's posts the other day (archived on Peter's box) and even he made the same comment. Despite having got the short end of a couple of deals, he still spoke up for them.
\r\n\r\nOne of the facts of a free market (I'm talking about one where price, supply, and demand are allowed to move freely, not one in which there is no government regulation) is that the law of the market itself is pretty inexorable. If the regulatory and tax environment makes it profitable to move labor offshore, then you're going to do that if you plan to stay in business, regardless of how you feel about the decision personally.
\r\n\r\nWhat Grove is pitching for is mutual coercion, mutually agreed on. Or in another formulation: government. Unless all parties are required to play by the same rules, and without an effective referee in the form of government enforcement, Intel has no choice. I've heard similar stories from IBMers who commented on the fact that IBM was one of the last major manufacturerers to leave Silicon Valley and their other US plants.
\r\n\r\nThe Merc story was rather short on the specific text of Grove's comments. I'd prefer seeing his remarks directly rather than filtered through a reporter.... Ah, [link|http://www.globaltechsummit.org/|here] we go. Converted from MS Word document. Note it's a raw transcript with some glitches.
\r\n\r\n\r\n\r\nThank you, very much. Both Robert and the audience, and I am\r\ntold that you had a vigorous and positive morning, and I'm here to\r\nbe the skunk at your garden party.
\r\n\r\nWe set a appropriate date for that because you probably realize\r\nthat today is national depression screening day. I'm not making\r\nthis up. This is actually true.
\r\n\r\nOne of the aspects of national depression screening day is that\r\nno one need to suffer in violence. So that is kind of my motto in\r\ncheck telling you some somebodiering possibilities and hopefully\r\nstart a discussion this afternoon and beyond what's being do about\r\nthe issues that are raised.
\r\n\r\nNot to put too fine a point on it, everybody basically in this\r\nroom and everybody in the hi-tech industry knows from a job\r\nstandpoint there has been a terrible toll of the recision and/or\r\nthe variety of changes in this industry, a large number of people,\r\nwell trained diligent people are out of work, and one cannot help\r\nbut ask the question, is this psych calquestion or TKOSZ this\r\nrepresent some fundamental long-term change in the industry.
\r\n\r\nAnd this chart that you are looking at, that indicates the\r\nrecovery, the job recovery of various previous cycles and the\r\nabsence of recovery in the current cycle suggests that something is\r\nbasically different here and reinforces that the question to ask\r\nwhether this is a circumstancecle phenomenon or longer term\r\nsociable calstructural change is an important one to deal with,\r\nimportant one to ask and answer and with particular attention to\r\nhigher jobs which sufficient sever and many service jobs\r\ninformation technology service jobs fit into.
\r\n\r\nI want to go back a little bit and give you a little bit of\r\nhistory of what is happened in a variety of industry segments\r\nbecause there is instructive listeners to be learned. In the\r\nparameter that I want to use to discuss is the worldwide market\r\nshare of you haves based U.S. domiciled companies vis-a-vis the\r\nforeign based competitors, and look at basically see generations --\r\nindustries.
\r\n\r\nSteel is my prox was it, my representative for the industrial\r\nage in relative short period of time, matter of few decades the\r\nU.S. based market share, U.S. based company share of the world\r\nmarket went from 50% to 10% where it resides today. And as you\r\nundoubtedly realize it is the subject of a variety of controversial\r\nprotectionist measures of resent vintage.
\r\n\r\nSemiconductors I have had the pleasure or privilege or challenge\r\nof living through the change over a couple of decades from 90%\r\nworldwide market share by U.S. based companies down to 40 and even\r\nsinking below that predominantly due to loses to Japanese\r\ncompetitors. Our industry in the mid 80's was practically given up\r\nfor good, for dead. We measured our resources check, U.S. trade\r\npolicy, U.S. investment policy as government investment policy\r\nbecame partners of us in this battle and we managed to regain our\r\nworldwide market share, and have been holding it for the last 10 or\r\n15 years at about 50%.
\r\n\r\nAnd the question that I would like to pose is software next? And\r\nI think it's a very valid question. When you look at the industry,\r\nthis market share trend of U.S. based companies is heading down and\r\nmarket share trend of the leading foreign competitive country\r\nheading up representatives an KP*E curve and that X curve chairss\r\nthe development and evolution of so many industries that it is a\r\nmiracle, it would be a miracle if it didn't happen in the some of\r\nthat where and service industry.
\r\n\r\nThe chart that follows indicate that that miracle may not be\r\nthere. What I'm using here as a matrix since software developed\r\nabroad and software developed by U.S. companies is if you\r\nunderstandable is employment. Heads employed there this software\r\nand IT service industry in the United States which representatives\r\nabout half of the world's employees, and in India which\r\nrepresentatives the most competitive foreign country.
\r\n\r\nAnd what you see is the beginning of the same kind of X curve\r\nthat I described earlier. Extrapolating the trends of the last\r\ncouple of years and comparing *EURT with the stated goal of the\r\nIndian government in terms of employment in this industry suggests\r\na crossover of the formation of the X curve in the year 2010.
\r\n\r\nFrom a public policy standpoint this is bad enough. This is a\r\nbig industry and strategic industry, an TPHEUPBD on which a lot of\r\nother industries depend on. So it is a significant phenomenon in\r\nhand of itself. But what is even more interesting is that this\r\nphenomenon is much broader than the software industry that this\r\nmeeting representatives. It is something that has been chronicled\r\nin yesterday's Wall Street Journal as an example and spreading into\r\nthe financial services industry in a fairly major way. It is the\r\nfootprints in the snow if you wish indicate it's spreading into\r\nhealthcare, and I can tell you two examples of it, U.S. TPRAEUPBLD\r\nradiologists examining and analyzing the RA*EULG data in India is\r\none example of it. And a personal one that I encountered a friend\r\nof mine who is involved with a regional outpatient surgery center\r\nusing Indian based transcription services for fast turn around,\r\naccurate transaction of the surgical records.
\r\n\r\nSo the phenomenon is broader than the software industry, but the\r\nunderlying mechanisms are very much the same. And the factors that\r\ndrive it can probably be summed up in these three categories,\r\ncapacity, cost and productivity.
\r\n\r\nCapacity in the context that we are talking about\r\nrepresentatives the opt of the education institutions of relevant\r\nskill levels, the cost associated with, it's a labor intensive\r\nindustry, PRAOEPLDly determined by labor rates the cost is\r\npredominantly determined by labor rates and the change in design\r\nproductivity has to do with woc proximity of people employed in the\r\nlines that I scribed.
\r\n\r\nLet me take these one at a time and say a few words about them\r\nin terms of capacity, the educational output. It is well recorded\r\nand well-known that U.S. based university violates enrollment in\r\nscience and engineering has been trending downward over the last\r\ndecade, and compounding this is that the tragedy levels drivers of\r\ninnovation industry are 50% or greater than 50% for TPHARLS, the\r\nSTAOEUPBLD a TPOURPB factors former nationals. Increasing foreign\r\nanalysis ruin either because they want to or SPWAEF to.
\r\n\r\nWhen it comes to cost to give you some data both on the basis of\r\nIntel's own experience and industrial data you see approximately\r\nthree followed advantage for company between professional people in\r\nIndia versus the U.S. counterparts.
\r\n\r\nIt is particular interesting to look at the issue of design\r\nproductivity and the impact of virtual proximity. And what has\r\nhappened there is the much chronicled and described telecom\r\ninvestment bubble has allowed everything that I mention to become\r\npossible. So much telecom capacity has been put in place\r\ncircumstancing the globe, so much capacity KHAEFG after utilization\r\nthat the combination of large capacity and price wars have led to a\r\nhuge price war that allowed the deployment of this high bend\r\nconnectivity around the world. And basically created a situation\r\nwhere from a technical and productivity standpoint the engineer\r\nsitting 6,000 miles away might as well as be sitting in the next\r\ncubicle and be as it were on the local area network because that\r\ncapacity that the global area network provides very cheaply is\r\ncomparable to local area network capacity.
\r\n\r\nTo illustrate that, this is the gross of band when I have had\r\nexhibit connect -BG United States with India and this is the trends\r\nin cost of this bandwidth. For comparison sake the green line\r\ndemonstrates an illustration of more's law at work in Mike\r\nprocessor price performance characteristic notice we are dealing\r\nwith charge here so the changes here are logarithmic mic and what\r\nis interesting is that in the last several years telecom cost\r\nreduction was steeper than more's law which is much, very broadly\r\nregarded as the epitome of cost reTK*URBGS through technology.
\r\n\r\nThe attitudes to this have been relatively responses of the\r\nobservers on the scene have been relatively benign. I submit are\r\ntainted with a measure of rationalization.
\r\n\r\nAn example, again, from the Wall Street Journal just a couple of\r\ndays ago is an article dealing with this phenomenon prom TPHAPBLT\r\nU.S. software entrepreneur who now is works for an Indian soft\r\nwhere company says that very matter of factually that bottom\r\nsoftware workers will disappear, but somehow the article suggests\r\nthat all officer is going to be okay because all we are going to\r\ngive upare the low end software work, the drudge work if you will\r\nand U.S. workers will have the SRAO*EUF and high end productivity\r\nwork associated with them.
\r\n\r\nI think it is worthwhile to refer back to very important study\r\nby prove KHRAOEU ton Christianson from the hardware business school\r\nunder the heading of destructive technologies where he studied how\r\nthe phenomenon of new technologies which I submit offers virtual\r\nproximity software is one how they play out. The way they tend to\r\nplay out is at first this capabilities is only able to deal with\r\nthe low end segment of any market. But dealing with that market\r\nfuels the capability of the disrupter finally as well as skills\r\nlevel, leading it to encroach higher and higher markets. If\r\nexecuted correctly, even though it starts at the low end, always\r\nstart there, they work their way, the new capability, the new\r\ntechnology, the new phenomena nap works it way up from the\r\nbottom.
\r\n\r\nI don't see anything particularly different in this instance. So\r\nI think it's germane to this description to ask, what is the\r\nSKWRAO*EUS public policy advice via this subject.
\r\n\r\nAnd I am heart put to find a documented statement policy policy\r\nseries the global psychs that is enabled by the virtual proximity\r\nTPAO*UPL.Isms the good for the U.S. economy, bad for the U.S.\r\neconomy. What it would we do about it in any event.
\r\n\r\nI can't find a statement I will have to do the next best thing\r\nand reconstruct the de facto P*P out of relevant actual actions\r\nNorth America that we can observe.
\r\n\r\nThe P*P involves educational, performance, funding,\r\ninfrastructure and what I call industrial business friction.\r\nScience and engineering, the performance of our K to 12\r\ninstitutions has been documented to be poor by worldwide\r\ncomparison. I mention probably as a result or partially as a result\r\nof the graduate students are made up very heavily out of foreign\r\nTPHA*LS. Academic R&D funding is heading downward. Our\r\ninfrastructure is nothing to write home about. And the friction\r\nissues as I will show you by some illustration are growing.
\r\n\r\nSo let me take these and give you kind of a hint of illustration\r\nof the future of the first one is the R&D funding which as a\r\npercentage of the gross domestic product has been less and less and\r\nless.
\r\n\r\nThis in the face of clear articulation, recognition by society\r\nat large that we expect technology to be the answer to our economic\r\nissues as well as our employment issues.
\r\n\r\nWhen it comes to infrastructure I use one measure of that\r\ndomestic broadband pension in the United States as compared to\r\nleading example which is Korea, and while I'm very happy to be one\r\nof those 20% of the population that had broadband WEUFPD in my\r\nhome, I enjoy the benefits of it looking at the population as a\r\nwhole it is certainly not a leading performance.
\r\n\r\nWhen it wasn't to friction, the first thing to address is\r\nincentives to get the best and brightest to work in this industry\r\nand work hard. And it is encouraging to read a governmental\r\nstatement that said it is our intention to train and bring into the\r\ncountry technical and managerial professionals and introduce bonus\r\nand share operations to renumeration.
\r\n\r\nIf I was present in your audience I would use your electronic\r\nresponse mechanism to poll you with a have simple question. What\r\n\r\ngovernment do you think stated its incentive policy in this\r\nfashion?
\r\n\r\nAnd I dairy say, I venture to guess that very few of you would\r\npick the People's Republic of China as being the one for stock\r\noptions check and recruitments incentives are part of stated\r\nnational policy.
\r\n\r\nThere's another friction issue which has to do with intellectual\r\nproperty that we talk a great deal about. And the trends here are\r\nnot particularly favorable to our increased productivity.
\r\n\r\nThe number of software patents issued have skyrocketed in recent\r\nyears. The number of patent software patents in the backlog\r\naccording to the head of the patent office are expected to reach a\r\nmillion items. This leads to terribly increased litigation, let me\r\ncall your attention that this chart shows the judgment, actual\r\njudgments rendered in software intellectual software cases over a\r\n15 or so year period of time on a log rhythm mic scale. So what you\r\nsee is 5 million to four billion dollars change over the 15 year\r\nperiod of time flee orders of magnitude increase, a large portion\r\nof the software talent and managerial talent in this country is\r\nassociated with issues of this sort representing another element of\r\nfriction.
\r\n\r\nInevitably the question has to be, as soon as you buy into this\r\nproblem, what could and what it would be done about it. And I have\r\nthought a fair amount on this issue, and I have talked to a lot of\r\npeople who are equally concerned and smarter than I am. And the\r\nconclusions come in two categories.
\r\n\r\nOne is, by all means fight any friends towards protectionism\r\ndomestically and abroad. Protectionism defeats the whole purpose\r\nand in the case of electrons traversing wires and fiberoptic waves,\r\noptical waves travelling in if I remember optics it's impossible to\r\nenforce anyway.
\r\n\r\nSecondly, I would like to see us rally around the goal of\r\ndoubling U.S. based software and service productivity. Because it\r\nis only through more productive workforce can we create jobs in the\r\nface of the cost disadvantage an various other STKRAEPBLGTS that I\r\ndescribed earlier.
\r\n\r\nWhich then begins the question how did you go about that. I can\r\nonly provide you with a deposit of some thoughts. Let me say right\r\nin the outset that if we did everything that was coming on this one\r\nand next fall which are the last two slides of my presentation, it\r\nwould only make additions on the margin. There aren't revolution\r\nchange. At least I would like to put them in there as a starting\r\npoint of the discussion.
\r\n\r\nI identified the issues involved with it. UnSRAOERTS need to do\r\nresearch on productivity related technology in the software and\r\nservice industries which are the higher evaluated industries that\r\nwe are ping our HOEPGS on need to generate STPRAOUPBDZ and faculty,\r\nmoney into unitease is the fuel of the technical education\r\nsystem.
\r\n\r\nThis in the face of the declining investment in unitee science\r\nand engineering education is a daunting challenge in and of\r\nitself.
\r\n\r\nI would like to see as the semito the best of your ability\r\nindustry has collaboration in the software industries. I would like\r\nto see us rally around a policy similar to what the government of\r\nChina has articulated, attract the best and brighters with\r\nincentives and appropriate immigration policy. When it comes to\r\nfriction, raise the hurled for litigation so that we don't get\r\ninvolved in a litigation wave as STREUTen the patent of their more\r\ndiscriminating and more expeditious in evaluating filed cases.
\r\n\r\nAnd, of course, at a time of very major Federal Government, the\r\nquestion comes can we afford it. And I guess the only way I can\r\nanswer it is cursory look at what our government has spent and is\r\nspending on supporting industries that can reasonably argue\r\nrepresent past performance of the U.S. economy, past performance of\r\nthe U.S. economy at very small percentage, 1 to 2% diversion of\r\nindustry support spending will make at very, very monumental\r\ndifference in the areas that I described on the previous chart.
\r\n\r\nA question for all of us in this room, and for people in the\r\nbeltway and for people outside the beltway, people whose jobs are\r\nat stake is, do we have the national goal to take purpose FM\r\naction. Experience shows that action of this sort can only work if\r\nit's taken before the phenomenon that it's supposed to cure are\r\nobvious because when they are obvious they are too late.
\r\n\r\nI have to tell you, given this national depression part\r\ndepresses me most is not that we haven't done these things. But\r\nthat we haven't even articulated the problem, haven't recognized\r\nit. And even though the P*L campaign election campaign is upon us,\r\nI haven't even picked up streams of problem recognition and a\r\ndebate on this issue and what could be and should be done about it.\r\nAnd even if that debate started today, I think time is not our\r\nhelp. Time is our enemy. If it doesn't start I think the notion\r\nthat our actions will be too little too late are too depressing\r\neven for me. So thank you, very much for bearing with me.
\r\n\r\n(Applause).
\r\n\r\nMR. HOLLEYMAN: Dr. Grove thank you so much for being with us\r\ntoday for that presentation. I think we have time for a couple of\r\nquestions from our audience.
\r\n\r\nLet me ask the audience for their questions.
\r\n\r\nMR. SNAT: Dr. Grove John grim with the Washington Post. You\r\ntalked about the exodus of jobs in the IT and particularly software\r\nand services sector. You did not talk about the software and\r\nhardware and IT companies that are steadily moving jobs\r\noffshore.
\r\n\r\nI assume that's a major contributing factor so in effect you\r\nhave our own industry participating in this trend. I know Intel\r\nincluded. I would like to know where the balance is there.
\r\n\r\nI completely agree with what you are asking and the implication\r\nof the comment. Those of us in business have two obligations in my\r\nopinion. The one that's undebatable is we have a fiduciary\r\nresponsible to run our business for the shareholders who put us in\r\nour place, gave us the decision making power.
\r\n\r\nWe are expected to and legally required to do the best job we\r\ncan for them provided we stay inside the law. There is another\r\nobligation that I feel personally given that everything that I have\r\nachieved in my career, and a lot of what Intel has acleveland in\r\nits career, the two are somewhat intertwined, were made possible by\r\na climate, democracy and economic climate and investment climate\r\nprovided by our domiciled United States.
\r\n\r\nI feel a responsibility for doing the right thing for the\r\ncountry that has allowed us to be in a position where you can ask\r\nthis question. These too are pulling us in different directions.\r\nThat is where I'm looking for public policy to help guide us,\r\nreinforce the relationship between the two, reconcile the conflict.\r\nIn the absence of a P*P that tells me what to do I have no choice\r\nas corporate manager, nor do my colleagues at Intel and outside of\r\nIntel, we have to work to that very often involved moves of jobs\r\nand moves of capabilities into other countries.
\r\n\r\nMR. HOLLEYMAN: Other questions.
\r\n\r\nMR. SNAT: Dr. Grove, you described two of the possible responses\r\nto the -- I can hear you I would love in you introduced\r\nyourself.
\r\n\r\nMR. SNAT: Marsha sterling. I'm general counsel for Autodesk. You\r\ndescribed two of the possible responses to this problem as\r\nimproving our educational system in the science and math areas, and\r\nalso tracking the best talent in the world to U.S. companies.
\r\n\r\nHow does the risk of stock option expensing impact our ability\r\nin those two areas. My position of actually single stock options as\r\nbeing somehow associated with corporate scandals has been pretty\r\nwell established. I don't want to repeat myself. But I think\r\nexactly as your question implies, we need that problem like we need\r\na hole in our head.
\r\n\r\nMR. SNAT: You talked about the friction stemming from litigation\r\nof patents and intellectual property. Could you speak a little bit\r\nmore about how to stop this. Your graph of software patents sky\r\nrocketing led one to wonder is more patenting or less patenting or\r\nsomething else entirely part of this reducing friction\r\nsolution.
\r\n\r\nMR. HOLLEYMAN: I think there are basically two reasons check\r\ncheck check where software patents may have psych rocketed. One is\r\nthat the evasiveness of our software industry has suddenly turned\r\nextremely good factor of 10, 20 better than it has been before over\r\na two year period of time. The other one is that the patent office\r\nis overworked, flooded with patent application. And doesn't affect\r\nthe patents as author there any and with a hurdle as high as it\r\nmight.
\r\n\r\nI am unfortunately believing that the second one is a case. A\r\nlot of these patents have according to people who are reasonably\r\nfamiliar with many, quite a bit of prior art that has not been\r\ndiscovered, there are arguments that one can make that some of them\r\nare trifle rather than reflecting true intention. Nevertheless,\r\nTWHRUPBS issued form the basis of litigation, can form the basis of\r\nlitigation.
\r\n\r\nThat's not what we need as of P*P. That is not what we need in\r\nso forth as face of challenges that I mentioned.
\r\n\r\nMR. HOLLEYMAN: We have time for one more question. Someone\r\nstanding at the mikephobe.
\r\n\r\nMR. SNAT: List today decar low TPOEBS.com. One of the\r\ncertificate where CEO's this morning described off shoring as a\r\ntrain that can't be stomped they were PHRAEPBG on jumping on it.\r\nHow can the industry rally around what you cereal see as oncoming\r\ncries when there's such a division of opinion about what the whole\r\nissue means off shoring Grove Grove how can we deal with a complex\r\nissue that involves trade policy, intellectual property policy,\r\nlitigation policy, government spending policy without having\r\ndiversion of opinions.
\r\n\r\nThat is how democracy works. I'm putting this issue on the table\r\nbecause the trends of this industry are very reminiscent to me in\r\nwhat I have lived through in the semito the best of your ability\r\nindustry.
\r\n\r\nWe took check pretty serious action in the mid 80's in terms of\r\ngovernment policy, in terms of spending levels, in terms of unisee\r\neducation, and in terms of internal restructure -BG the industry\r\nand have managed to arrest the trend toward an X curve.
\r\n\r\nWe haven't referred it really. We have stabilized it. It took a\r\nlot of debate. There was a lot of disagreement between members of\r\nthis industry for while. As a result of debate and consideration\r\nthe disagreement converging to a platform add SROE indicated\r\npolicy. Then there was quite a bit of debate within the industry\r\nand the Federal Government. But at the end we got our act together\r\nand the action was better than in many other instances.
\r\n\r\nThat experience leads me to believe that something similar could\r\nand should happen in case of the software and service industries\r\nand sooner is better than later.
\r\n\r\nMR. HOLLEYMAN: I would like to thank, again, Dr. Grove for\r\njoining us today. I believe he's done a superb job in setting the\r\nstage for the afternoon session about transforming today's\r\nchallenges into tomorrow's.
\r\n
