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FOIA Number: 2006-0462-F
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administrative marker by the William J. Clinton
Presidential Library Staff.
Collection/Record Group:
Clinton Presidential Records
Subgroup/Office of Origin:
Speechwriting
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Terry Edmonds
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10987
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Seattle CEO Summit
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�Dan Pink @ OVP
05/12/97 04:21 :37 PM
Record Type:
To:
Record
Michael Waldman/WHO/EOP, James T. Edmonds/WHO/EOP
cc:
Subject: Ooompa Loompa
Fast your seatbelts, gentlemen. Here's the Microsoft speech.
Let me know if you have questions.
Prepared Remarks of
Vice President AI Gore
Microsoft CEO Summit
Seattle, Washington
May 8, 1997
This afternoon, I want to talk to you about the new economy and the limited but
critical role that I think government should play in the 21st century.
So here goes: Gore on the New Economy-- Version l.O. You'll be notified
about upgrades.
;
You have been discussing the future of the corporation in this era of
technologically-driven change. In joining your conversation, I would like to discuss
how the very same forces are influencing government, forcing the transformation of
government, and reshaping the relationship between government and corporations.
There are actually two changes that frame our conversation. The first you've
described explicitly as the technology revolution, which is, of course, only the latest
manifestation of the larger scientific revolution that began reshaping the economy and
society more than three and a half centuries ago. In many fields -- the life sciences, the
earth sciences, brain research and materials development, to cite but a few examples,
knowledge is increasing at an unbelievably rapid pace. But the one field in which it's
having the biggest impact is the revolution in information technology.
It is important to recognize that the information revolution is coupled with a
�second change that is implicit in the framing of today's conversation: the globalization
of the marketplace. This change has also been in the making for quite some time. As
soon as communication became electrified, it was inevitable that the marketplace would
become global. In 1851, inspired by the telegraph invented 16 years earlier, Nathaniel
Hawthorne wrote these words: "By means of electricity, the world of matter has
become a great nerve, vibrating thousands of miles in a breathless point of time ... the
round globe is a vast ... brain, instinct with intelligence!"
Much as Jules Verne foresaw submarines and moon landings, Hawthorne
foresaw the "digital nervous system" that Bill Gates discussed this morning.
�These two changes -- globalization and the revolution in information technology
-- have combined to create a new age with an entirely new business reality and entirely
new challenges and opportunities.
�The place to begin is by asking about the impact-- not on business or on
government-- but on people. What is the human impact of these changes?
�Well, for starters, most of us feel we have a lot more information than we can
possibly deal with. How many times have you heard the metaphorical question: how
can you drink out of a firehose? A friend of mine in the computer industry once made
this point by saying that if you described our human brains in computer terms, you'd
have to say we have a low bit-rate but high resolution. And what he meant by that,
was that when we try to absorb information bit by bit, it takes a long time-- and we're
not really very good at it. For example, years ago, the telephone industry conducted
research to determine that seven digits was the most we could hold in our memories -and then they added four more digits.
�We do, however, have very high resolution, which means we can quickly absorb
the meaning of patterns containing huge quantities of data at a single gulp, and infer the
meaning of each bit by reference to its context. There are two hundred billion stars in
the Milky Way. We recognize the pattern instantly. Bill and Melinda's daughter;
Jennifer, recognized their faces within two weeks of her birth-- a task no computer
can yet replicate with speed or accuracy.
�This capacity for high resolution served us well. But the problem is this: most
of the information now becoming available to humankind about the world around us
comes to us not arrayed in recognizable patterns, but in huge sand dunes of data. Our
satellites, for example, take a complete photograph of the earth's surface every 18
days, but 99 percent of the information collected never fires a single neuron in a single
human brain. The Clementine mission to explore the surface of the moon contains 20
terabytes of data that no human eyes have ever seen.
�High-performing computers help us master this challenge. But there was a
mismatch between the incredible speed with which processing power expands and the
snail's pace with which new advances in transmission capability have been made
available.
�I once used the old cliche with a college audience that if a car had made the
same exponential advances as the computer, a Cadillac would get 100,000 miles to the
gallon
�and cost only 50 cents.
And then one of the students in the front row said, "Sure, Mr.
it'd be only this big."
Vice President, but
�The challenge was similar to the challenge we confronted after World War II and
every family bought a car, and the two-lane roads could no longer handle the traffic.
Indeed, just as in earlier eras nations gained competitive advantage by improving the
infrastructure of deep water ports, railroads and superhighways, comparative advantage
now can be enhanced by a superior national information infrastructure built by sensible
deregulation and competition policy.
�But the point remains: what is the human impact? And how do we adapt our
organizations, both in business and in government, to deal with this sweeping change?
Many of you in this room have been pioneers in the transformation of business to adapt
to these new realities. Your presence here confirms our shared view that this is a work
in progress. And the underlying change which requires adaptation is not only
continuing, but accelerating in its pace and intensity.
�Businesses in the industrial age organized themselves according to the model of
the factory. So did government. Most employees were valued primarily for their
physical ability to perforni repetitive tasks according to instructions from management
that rarely changed. Indeed, any communication from the CEO to the people actually
producing goods and services had to travel through multiple layers of middle
management that existed primarily for passing information from one level to the next.
�As public education empowered a larger fraction of the American population, a
few pioneering managers recognized that the most valuable asset in the corporation was
the unused brainpower of the men and women performing repetitive physical tasks. A
new theory of corporate management emerged -- and the publication of books /
describing it became a major new cottage industry. Theory Z. Participative
management. In Search of Excellence. Quality circles. A hundred different labels
were fastened onto the same basic insight: employees can think. If you can convince
them to pay attention to what they're doing in context, and share with them the larger
objectives of the organization of which they're a part, respectfully harvest their ideas
about how to improve and fine-tune the collective endeavor, and invite them to help
implement the innovations they've come up with, companies can boost the bottom line.
They can creatively encounter change at its edge, where change is first experienced,
and not wait for news of that change to wend its way through multiple, redundant,
obsolete layers of middle management to a CEO, who is insulated and isolated at the
top of the proverbial pyramid.
�This morning I met with the team at Boeing producing the new 777 aircraft.
Listen to the way this world leader describes its work. The people I met with are part
of an "integrated design build team system." Grouped into small teams of 8 to 10
people, they have been assigned to refine and mesh all aspects of the aircraft from top
to bottom. The idea is to have each team consider the aircraft as a whole, and to
empower each team to act quickly on ideas free from chain of command
second-guessing.
The new information technologies make it easier for more companies to take the
Boeing approach--: to empower their employees and eliminate the barriers between
employees' ideas and corporate innovation. This wave of change has already had an
enormous impact. Many of you have led this change. All of you have adapted to it.
And now, several of you -- along with other pioneers -- are creating yet another
new wave of change in corporate management. You're moving from an appreciation of
physicality and intellect to an appreciation of emotions, creativity -- or if you will,
heart. Perhaps the greatest challenge facing you is attracting and retaining talented
people. CEO's who have found ways to honor and respect their employees' loyalties to
their spouses and families and communities have reduced turnover and absenteeism and
have increased creativity and productivity. Family-friendly workplaces, family and
medical leave, flex-time, and other measures to bolster employees' emotional
satisfaction are proving to be extremely valuable to earnings, revenues, and profits.
Companies like the First Ten·nessee National Bank have reconfigured their corporate
missions to take emotion into account -- and this soft-hearted approach is showing
hard-headed results. Another way to describe this phenomenon is to say that they are
getting more from their employees by focusing more on their core capacity, and with
their help, understanding their customers' needs and desires.
In the business world, there is a new appreciation for the value of focusing on
core capacities. The so-called virtual corporation uses new information technology to
combine the core capacities of different companies for a mutually beneficial endeavor.
But what is our core capacity as human beings? In 1872, the steam hammer has
defeated John Henry. At the conclusion of this century, at the end of four games in a
six game series, Deep Blue is tied with Gary Kasparov. Physical health and fitness
C<?ntinue to matter somewhat. A well-educated mind is our key strategic asset. But in
the 21st Century, as the information revolution continues to accelerate, I am convinced
that it will become ever more apparent that our core capacity is spirit, creativity, heart.
For example, how did the electronic communication revolution begin? Samuel
Morse was a portrait painter. In fact, his painting of James Monroe hangs in the White
�House today. While Morse was working on a portrait of General Lafayette in
Washington, his .wife --who lived about 300 miles away -- grew ill and died. But it
took seven days for the news to reach him. In his grief and remorse, he began to
wonder whether it was possible to erase barriers of time and space-- so no one would
be able to reach a loved one in time of need. Pursuing this thought, he came to
discover how to use electricity to convey messages -- and so he invented the telegraph.
Emotion led to innovation.
Over the past 50 years, technological innovation has been responsible for more
than half of the nation's growth in productivity. Our approach to the new economy
must include a new appreciation for the key role of innovation and those factors which
tend to promote it In the old economy, growth depended largely on capital and labor.
The task of policy makers was to keep those factor_s of production in sync. When the
phasing was poor, we got a downturn in growth or an upturn in inflation, which
continued until capital and labor were restored to their proper balance. The new
economy is different. As the economist Paul Romer has argued, the true engines of
growth may be ideas and the technologies those ideas create. The only way to produce
more economic value -- and thereby boost economic growth -- is to find ever more "
valuable ways to use the objects available to us. We first used sand in an hourglass to
measure time. Now we use it to form the silicon chip that powers personal computers.
Same object, more creative use. Paul Romer and others are teaching us that
innovation is not something that happens outside the economy, as traditional economic
theory had held. Innovation occurs inside the economy -- and it is essential for
economies to grow.
Innovation is reshaping the very way we think about the economy -- the
vocabulary we use to describe it. To discuss the econoniy, we once employed the
metaphor of a machine. Policy makers slowed things down, br sped them up -stepped on the gas, hit the brakes, shifted gears. But the new economy is more like an
ecosystem -- which depends for its health on diversity, nutrients, and its ability to
change and evolve. In the old economy, the key to growth was in individual sectors.
In the new economy, the key to growth may be in economic webs and the diversity
those webs both require and create. Invent the personal computer, and you inevitably
spawn a web of products and services that move outward from that advance.
Mousepads. Computer repair shops. Windows 95. And so it goes. The economic
web is itself the generator of the next novel growth opportunities. Innovation sparks
innovation. And establishing the proper conditions for innovation to flourish is the
policy maker's highest obligation.
But the larger move from hard to soft is affecting every one of your companies.
In the old economy, the value of a company was mostly in its hard assets -- its
�buildings, machines, and physical equipment. In the new economy, the value of a
company derives
�more from its intangibles--
its htnnan capital, intellectual property, brainpower, and heart.
In a market economy, it's no surprise that markets themselves have begun to
recognize the potent power of intangibles. It's one reason net asset values of
companies are often well below their market capitalization. Baruch Lev, an accounting
professor at the NYU Business School, says that nearly 40 percent of the market
valuation of the average company was 11 missing from the balance sheet. II For high tech
firms, the percentage was more than 50 percent. And recent research by Ernst &
Young's Center for Business Innovation suggests that securities analysts are basing
about 35 percent of their portfolio decisions on intangibles -- and that the more an
analyst relies on these factors, the more accurate her predictions are.
The importance of intangibles underscores the importance of the question I posed
earlier: what about people? What kinds of policies should we follow to promote our
success in the new economy in ways that enhance the quality of our lives? Just as the
process of corporate transformation has moved from a focus on muscle power to brain
power and is now beginning to move to a focus on innovation, creativity and heart, our
approach to national policy is doing the same .. But not without controversy. We have
an ongoing national debate that sometimes features arguments that sound like they
originated in Land of Oz. You remember the famous Frank Baum story and then the
Judy Garland movie about Dorothy and her companions who went off to see the
Wizard.
Incidentally, speaking of magic kingdoms, I'm looking forward to boarding the
Emerald Star right after this session and going to see your house, Bill.
In any event, there are many in this period of technological change and
globalization who feel like Dorothy -- suddenly placed in an unfamiliar landscape-unable to go back home. And they are tempted to listen to advisors whose economic
philosophies mirror the personal attributes of Dorothy's companions.
For instance, there is a group that makes up what we might call the Scarecrows.
They have hearts and sweet disposition, but they don't always make good use of their
brains. The scarecrows are frightened of imports, fearful of more open trade, scared of
competition and the challenge it represents. They are resentful of immigrants, and want
to punish them. And they are extremely apprehensive about new technology. But they
fail to analyze the true nature of our condition.
The Scarecrows believe that the forces of the new economy are destructive, and
that government's job is to throw up walls, slow down the pace of change, and keep
�intact the jobs and industries of today. They call for protecting corporate welfare -and, similarly, for propping up companies that can't compete.
Now, in many ways, the Scarecrows have a point. Take international trade. On
any trade agreement, the terms must be fair. The United States cannot harmonize
downward on labor and the environment. Or take immigration. Illegal immigration
has to be stopped, and we need an orderly process for admitting legal immigrants.
And, of course, middle-income families must have the opportunities to acquire the
tools and the education to make the most of all these changes.
·But ultimately, the Scarecrows' good intentions lead them to unwise conclusions.
On trade, scarecrows ignore the fact that America's tariffs are relatively small
compared to other nations, and that most trade agreements therefore reduce our entry
into other markets -- not the reverse. And jobs dependent on exports pay well better
than average. Besides, history teaches us that isolation -- holing up behind
impenetrable barriers -- is not the way economies grow. We've tried this approach and
it's been a dismal failure. And if you don't believe me, I have two words for you:
Smoot-Hawley.
The Scarecrows are also dangerously pessimistic. Their philosophy assumes that
Atnerican workers and American companies can't compete, that they aren't as good as
the rest of the world. And that's just plain wrong.
Holding back change may reduce anxieties in the short-term, but it stifles
progress in the long-term. We know that prosperity in the new economy depends on
innovation. The Scarecrows offer only a prescription for stagnation. You have to
have a heart, but you also have to use your head.
If you don't like that straw man, here's another one: the Tinman. The Tinmen
have a cold, calculating bead on the facts and figures and theories that measure the rise
and fall of markets and the latest currency exchange rates. It is intimately familiar with
the metal and plastic and silicon from which our new technologies are made. Like
Oscar Wilde's cynic, they know the price of everything, but the value of nothing.
These Tinmen appear to have a well-developed intellect. But their ideas are squeaky
and rusty. Metallic standards provide the answer to every social problem. They have a
brain, but like the Tinman of the tale, they lack a heart.
Their philosophy holds that the way to get the most out of the new economy is to
slash taxes, and get the government out of the way. Cut taxes in half-- no, cut taxes
by a factor of four, some say -- and just sit back and watch the results wash in. The
central
�plank of this platform is that America would enjoy unimaginable prosperity if government
merely packed up
and went home.
But this approach is flawed for at least two reasons. First, we tried it and it
didn't work. And much of the President's economic policies have been directed at
repairing the damage this approach unleashed -- in particular, the massive budget
deficit. Second, and more important for our purposes, this philosophy ignores what's
new about the new economy. After all, Bill Gates didn't start Microsoft because
Congress cut the capital gains tax. He did it because he had an idea and he worked
very hard.
The Tinmen offer no prescription for upgrading the skills of workers or for
sparking innovation. It preserves the status quo by draining funds from public
investments and widening the gap between the rich and poor. And it threatens to
worsen the prospects of working people through its resistance to worker protections and
hostility toward collective bargaining. Some people may benefit from the heartless
policies of the Tinmen. But many would not. Some would suffer. That result is
morally unacceptable, of course. But it is also economically unwise. A rising tide that
lifts only some boats will eventually capsize every boat.
Some of you, I know, are drawn to the Tin men Party. And I know who you
are. But every time you feel lured by their siren call -- no more government, no more
government-- take a walk around your companies. Look at the people who are writing
code or developing drugs or figuring a way to improve just-in-time deliveries, and ask
yourself: how many of these talented people went to college on a student loan -- a
government initiative? And then ask yourself where your company would be if these
people didn't have a college education? It's not a pretty thot1ght.
The Tinmen appear to have brains. But their brains could actually use a little oil
--to get rid of yesterday's squeaks. They ignore what's new about the new economy,
and offers a prescription that's been tried and failed. And what's worse, they don't
seem to care about the consequences. You've got to use your head. But you've also
got to have a heart.
There is a more sensible approach: accept change and its many benefits, but
recognize the disruption this change brings forth, and give people the tools to thrive and
prosper. But the question has been raised: is there yet another party in this Land of
Oz, the Lion Party, whose members know what to do but lack the courage to move
forward.
�This past week, not in Oz but in America, we got the answer. Yes, we have the
courage. We completed a budget deal that eliminates -- eliminates -- the federal budget
deficit by the year 2002. It is the first balanced budget since 1969.
And it will help keep alive the best economy in a generation. Unemployment at
a 24-year low. Low inflation. A booming stock market that has doubled in the last
four years. Growth last quarter of a whopping 5. 6 percent.
Getting rid of the deficit is only the first piece of our new policy for the new
economy. We also need open markets -- not protectionism -- but the free and fair flow
of goods, ideas, and information. And we need flexible regulation and an open
competition policy that respects the new realities of the new economy.
We must invest in the physical infrastructure of the Information Age-- connect
every classroom and library to the information superhighway. Just yesterday, we took
a big step in that direction with a discounted rate for schools and libraries -- an e-rate, a
more than $2 billion investment in our information future. And we must create the
next generation of the Internet, with a thousand times the capacity of the current
Internet. And then magnify another thousandfold. And we should ensure that the
Internet is a duty-free zone.
In an economy powered by innovation, we must invest in education. And our
budget makes the largest increase in education investment in a long, long time. Head
Start, educational standards, charter schools, Hope Scholarships, Pell grants, a tax
credit for college tuition, Head Start -- the ideas of Bill Clinton, the Education
President and Patty Murray, the Education Senator.
We need a re-invented government -- aligned with the principles of the
information age -- a government transformation that works better and costs less.
And we must maintain military adequate to meet America's unique global leadership
role.
We have to protect our environment, make the investment to keep our air and
water clean and safe. In the new economy, protecting the environment is not a
sacrifice we make by slowing the economy. It is a pre-condition for a growing
economy.
And we must reject those who take the low road of bashing immigrants and
trafficking in intolerance. In the new economy, we must provide open opportunities for
every American, because in the new economy-- a global economy-- America's racial
�and ethnic diversity will be a powerful economic strength.
And we have to listen to America's heart, strengthen our families, nurture and
respect our values, encourage and facilitate corporate responsibility with
family-friendly policies, health care coverage for workers and their families.
And protect our values against attacks from those forces that undermine our
values -- like crime, drugs, broken homes, teen pregnancy, and barriers of prejudice,
intolerance, and discrimination. Economic growth depends on a foundation of values.
One of the untold stories of America's extraordinary post-war economic growth was
that at every layer of society, people shared a pre-existing set of values -- in particular,
a work ethic based on the Judea-Christian tradition. People were ready for work on
day one with a certain constellation of values and shared beliefs.
That is equally important in the new economy. Indeed, it may be one of the
more crucial intangibles on which prosperity depends. Smart people are not enough.
We need people with good brains and open hearts. Measures like character education
and community policing are not only the right thing to do. They're the smart thing to
do to ensure the new economy develops.
This is an exhilarating time. Government must transform in order to aid the
transformation of the new economy. It must understand the potency of the information
revolution and comprehend the globalization of just about everything we do. It must
understand the potent force of innovation in economic growth, and the degree to which
the new economy depends on intangibles. And it must resist the temptation to throw up
walls-- or to throw up its hands-- to declare either that we can't compete or that we
shouldn't care.·
In the new economy, we need brains. We need heart. We need each other.
###
�
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Terry Edmonds
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Office of Speechwriting
James (Terry) Edmonds
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1995-2001
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<a href="http://clinton.presidentiallibraries.us/items/show/36090" target="_blank">Collection Finding Aid</a>
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Terry Edmonds worked as a speechwriter from 1995-2001. He became the Assistant to the President and Director of Speechwriting in 1999. His speechwriting focused on domestic topics such as race relations, veterans issues, education, paralympics, gun control, youth, and senior citizens. He also contributed to the President’s State of the Union speeches, radio addresses, commencement speeches, and special dinners and events. The records include speeches, letters, memorandum, schedules, reports, articles, and clippings.
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Seattle CEO Summit
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