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Bill Gates on the importance of energy research for the future

Bill Gates, chairman of Microsoft, attends the Allen & Company Sun Valley Conference on July 7, 2011 in Sun Valley, Idaho.

Jeremy Hobson: A group of corporate leaders, including General Electric CEO Jeffrey Immelt and Microsoft Chairman Bill Gates, has a message for politicians in Washington: We're not spending nearly enough money researching new energy technology.

The group is called the American Energy Innovation Council, and its members met with lawmakers from both parties on Capitol Hill yesterday.

We're pleased to be joined now by a member of the council. Bill Gates,Welcome to Marketplace.

Bill Gates: Great to be here.

Hobson: Well what exactly are you asking Washington to do?

Gates: A group of business leaders came together to say that the investment in energy research is much lower than it needs to be. Whether it's for getting low-cost energy or securing our energy supply or reducing environmental damage, we need breakthroughs. And the government funds research in a lot of areas, but in the case of energy, it's very low. So we said that playing their key role, that that's got to be increased by about $8 billion a year.

Hobson: But that's a pretty big thing to ask for at a time when they're facing big trillion-dollar budget deficits.

Gates: Well, if you look at the country's challenges in terms of the trade deficit and the impact that has on the economy, energy spending is a big factor there. I do think investing in the future is important at all times. The U.S. is by far the best at doing this type of innovation; it's the support of our universities and startups, national laboratories, that really put us in a position to make breakthroughs that will help meet the world's energy needs, but also create great companies and great jobs here.

Hobson: When I think of the philanthropic work that you do and your foundation does, I think of things like education and health care. What got you so interested in energy research?

Gates: Energy's very important no matter where you live on the planet. The long-term implications of not making changes are very dire, but the poorest people are the ones who are the most hurt by the high costs of energy. They want to buy fertilizer, they want to have lights at night, they want to have a stove to cook their food, they want to be able to get to their job. And so if we can make innovations in this space, the best impact goes to the people our foundation thinks about all the time. And yet it needs to be done using the kind of scientific research backing that's been used to create the IT industry and medical breakthroughs -- places the U.S. has really led the way.

Hobson: But a lot of the ideas that involve investment right now involve public-private partnerships. How do you get the private sector onboard for something like this?

Gates: The energy research includes a basic research component that would need to be government-funded. But as soon as you get past the conceptual level, as you're starting to pilot things, then both venture capital and other private capital come in. And so there's a part of this energy budget called ARPA-E where they look at really top technologies -- they have contests -- and then they require that private money come in to match their money. And that's a very well-run program; in fact, there's a debate about what level that should be. In our report, we say that alone should go up to $1 billion, but the current budget debate is between $180 million and $250 million.

Hobson: Now you're calling for all this increase in energy research funding here in the United States. You travel all over the world -- how do we rank at this point when it comes to our funding of research for energy?

Gates: The quality of research in the U.S. is absolutely the best. The research funding we give to other areas, like medicine and information technologies, is the best in the world. In energy, we're not the leader in funding, because it's less than half a percent of the overall market. In fact, compared to every other area, it's funded at quite a low level, which given the important issues that it touches on -- including overall competitiveness of all kinds of products because they use electricity in their manufacturer -- it's just short-sighted not to be doing more.

Hobson: Give us a sense of what you think is possible if the kind of investment in energy research that you would like actually takes place. Ten, 15 years from now -- what do we have?

Gates: Well the goal is not to pick a particular technology, but there's no doubt that in the solar area, with a variety of different approaches, there should be breakthroughs to make that quite economic; in the wind area. Even using today's energy sources, making them less expensive and finding ways to take the pollution and the CO2 out of those and make sure it's not causing a problem. These are the kind of tough challenges that researchers absolutely can solve if they get the right level of backing.

Hobson: If President Obama is replaced next year by one of his Republican rivals -- let's say Rick Perry or Mitt Romney -- do you think that you can convince them to go along with something like this?

Gates: The hope is that investment and research is not a partisan issue, that believing we have the best scientists that that helps create leading companies, because we've backed those scientists. We've seen it play out in the personal computer and software field, we've seen it play out in the medical industries. The one that there's a real question on is in the energy business, so I hope that we can get broad consensus even though the budget is more of a challenge today than it's ever been.

Hobson: Finally, since so much of Washington's ability to make these kinds of investments hinge on the state of the economy, how would you rate Washington's handling of the economy?

Gates: I'm not an economist. All of us wish that more jobs were being created and there's a lot of talk about how best to do that. Certainly innovation, if you take the right timeframe, is the reason why I'm optimistic that we will see improvements, both in the economy and the types of goods that get made. It's easy to underestimate innovation and what it means, but in the near-term, we're in the hands of what the economists and the politicians can do. As you move out in time, if you fund innovation, then you can very optimistic about where things go.

Hobson: Bill Gates, who is in a push for more investment in energy research. Mr. Gates, thanks so much for joining us.

Gates: Thank you.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.
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I totally agree with Mr gates opinion on the role of government in initiating a thorough research into the future on energy,most especially a clean one that will be cost effective and nest to zero health hazard. Private partnership is ideal,yes,but the function of government should not be negotiated so they can remain on top of development.

I agree with Jeffery Techentin. If Mr. Gates thinks it this is such a great investment he should make it himself. One might suspect he that if he really thought it was such a great investment he would make it himself. As for Mr. Immelt, GE stands to benefit greatly from this tax payer investment. GE is thick into the energy business. They could benefit greatly from seed money in the next energy break through funded by we tax payers.

What a disappointing interview both by the reporter and Mr. Gates. If Mr. Gates stongly supports government investment in clean evergy, then he should have the courage to stand up to not only his fellow CEO's but members of congress who are so invested in their own fortunes they undermine effective governance. These programs will cost money but I do not see him or any of his class proposing to make the scrifices to enable government investment in anything. Until people like him and Jeffery Immelt recognize that the diminished role of government must be replaced by more coroporate responsibility and using their vast profits for research and job creation, there is no hope for the US to recover. I must add that Immelt, like Welch before him, age great business people who have created alot of wealth for themselves and GE, the wealth they created has stayped primarily in their hands.

The interview brings to light an interesting relationship between private industry and public industry, namely that it would seem that the public/government research is what yielded the technology platforms that allowed people like Mr. Gates to make ghastly sums of money. It is proof that the private industry is not necessarily the great innovator or the best at making new and innovative things, that the government is actually quite good at innovating itself, and that people with idiotic sums of money owe their success as much to the government that created the platforms that launched them to success as their own business savvy.

The long held mythos of private vs. government industry should be put to rest.

Man, what a terrible interview. Why not ask gates directly if the oil and gas industry has affected why the US doesn't invest more in energy research.

I do not always agree with Mr Gates' perspectives. But, on this point, he is dead center on target.

An actual examination of every significant market platform for this country in the past century will show every single platform had a significant government investment required to create infrastructure to reduce the technology to practice in order to meet a national imperative. Private industry does fund R&D which creates the technology. But, they never spend the money to create the required commercial infrastructure to form the basis for a market. TV's actually came about from investments to create radio for the first world war. The automotive industry was bootstrapped by the second world war investments. The IT industry, which Mr. Gates has participated in, came from the race for space starting when John Kennedy stepped to the mic and proclaimed that we would go to the moon. We didn't get a whole lot shorter term from those moon expeditions; but, look what we got from the IT industry it created. I am sad and surprised that Washington doesn't seem to understand this role. It is right there in the history books. Mr. Gates is dead on. Want to reinvigorate our economy? Proclaim that we will run the country on solar energy as an imperative. Fund it the way we funded NASA. And then, watch good things happen.

I'm very disappointed that no one at Marketplace thought it worth asking Mr. Gates why the CEOs' proposal should be government financed. Reviewing their report, it appears that they have sharp criticisms about the way in which the private industry prioritizes R&D funding and look to the government to transcend those shortcomings. But Mr. Gates could finance this initiative himself, from his personal funds, even leaving aside the enormous financial backing that might be available from the GEs of the world. Their claim is that the R&D will pay off, with enormous dividends. If they want to see R&D done better and differently, why shouldn't they put their money where their mouths are, and finance the projects themselves? After all, Mr. Gates didn't amass a $52 billion fortune by winning an innovation prize, but by spending Microsoft money to develop the products that he thought would sell. It's a proven model. Marketplace knows that, and should have asked him about this.

Government financing would give people like Mr. Gates the freedom to pursue their own political and economic agendas at little or no cost to themselves. Freed from the burden of investing in research that Mr. Gates assures us is essential for the nation's economic future, Mr. Gates is able to use his own wealth to foster his other agendas, largely social, through his charitable foundations.

I see no reason why I should have to foot that bill.

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