Fenixnordic Group

By special correspondent Sam Gustin

On assignment for Wired.com, Sam Gustin is exploring the economic
meltdown’s impact on Silicon Valley, and the prospects of innovating
our way out of the current financial debacle. He caught up
with Google’s chief information evangelist Vint Cerf. Cerf expounds on Google’s role in the recovery, the best use of
stimulus dollars and why we can’t count on private capital or VCs to
float the innovation boat.

WIRED.COM: Google has been tremendously
successful over the last decade with web search. What opportunity do you see for Google to innovate in the future? Energy? Health care? Education?

VINT CERF: You have touched on three areas in which Google
not only has interest but has already begun to express it. Google Apps
for Education is a suite of applications intended to be helpful to
higher level educational institutions but in the long run, I think
Google has a role to play in helping to assemble relevant content for
classroom use. It seems highly likely to me that even in its present
posture, Google’s resources are being used for teaching purposes or to
help students prepare homework. Google Earth is becoming a familiar
tool for exploring global geography and for drawing attention to what
we know about various places in the world. The most recent addition to
Google Earth is Google Ocean allowing users to learn more about the 70 percent
of the Earth’s surface that is not land.

Energy, health care and education are just three examples of areas
in which information and information management are critically
important. How are we using our energy? What appliances in homes or
business are consuming the most energy? When do they consume it? Can
the load be shifted? How efficient are these devices?

On the health-care side, health care is information. Diagnosis,
treatment, patient history, knowledge of pharmaceuticals and surgical
procedures — it’s all information. Our own personal medical records
represent incredibly important information to each of us because it can
be crucial in helping to diagnose or treat a medical condition. It
might be needed in a hurry should there be a need for emergency
treatment, especially at a hospital you have never been to before.

Similar arguments can be made for financial information and
virtually everything else that makes up our daily world. The more we
can organize, find and manage information, the more effectively we can
function in our modern world. You can be sure that Google will be
looking for new ways to be helpful.

WIRED.COM: Some argue that Silicon Valley
has an innovation problem, because venture capitalists have lost their
appetite for taking big risks and are too focused on
short-term returns. Do you agree with this? Or do you think that
concerns about a so-called “innovation crisis” are overblown?

VINT CERF: As you are no doubt aware, Judy Estrin has written a book
on this subject and it is filled with quotes from a wide range of very
knowledgeable people who are concerned about innovation and the
conditions that facilitate and nurture it.

The venture companies were seriously burned by startups who had
ideas but no business model. They should be more careful about what
they fund.

On the other hand, I doubt very much that venture capital is willing
to take high stakes risks. Seed money, yes, but long-period, high-level
funding for risky work is not the normal province of venture capital.
That is one reason it is so important to provide for serious,
long-term, high-risk research and development funding from various
agencies of the U.S. and other governments.

I also think that it is worth looking at ways to extend research
results so they are closer to commercialization, since that’s the place
where the venture world works. My rule of thumb is that if it works in
the lab, you are about 10 percent of the way to a product. If we can develop
policies that permit government support to get closer to product
prototypes, we may be able to leverage venture capital and stimulate
more new businesses and job creation. I don’t know that I would refer
to the current situation as a crisis but it is a serious problem and we
need to take serious steps to re-invigorate American ingenuity and
creativity.

WIRED.COM: What impact will the recession
have on innovation in Silicon Valley? Will the tough times spur real
progress, as only the very best ideas get funded? Or do you think that
cautious VCs will be unwilling to take the risky bets needed for real
innovation to occur?

VINT CERF: The first impact is that it’s a lot easier to navigate
the freeways. There is a direct correlation between traffic jams and
tie-ups and the state of the Silicon Valley economy.

I know it’s really bad right now because I have been able to travel
from San Francisco to San Jose without any congestion during what is
normally rush hour. In times like these, capital is scarce and cautious.

The government can help here, not by removing risk through loan
guarantees but rather by expanding the scope of traditional R&D
programs to include prototyping and perhaps some subsidies for
development in areas of policy interest (e.g. alternative energy).
R&D tax credits don’t work if companies don’t have the capital to
make R&D investments so there has to be some pump priming.

One observation that I have heard from others is that there is a
sort of investment trough between the seed-money environment and
second, third and fourth round major investment. Companies that are
actually in operation, but are small and need capital to grow are often
overlooked by venture capital. Seed money is available because it’s
small amounts despite the high risk. Late round money is available
because the company has an earnings track record. Looking for ways to
facilitate growth of small to medium sized enterprises can have a
beneficial effect on the GDP and job creation.

This is not going to be
a short-term recession. It took about three years to come out of the
dot-bust in April 2000 and the present situation is more severe. It may
take a year before significant effects of the recent stimulus package
are visible in the economy so I will not be surprised to find that
recovery and significant growth takes until 2011.

Source: Wired Staff