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  • There's a great big elephant in the room called the economy.

  • So let's start talking about that.

  • I wanted to give you current picture of the economy.

  • That's what I have behind myself.

  • (Laughter)

  • But of course what we have to remember is this.

  • And what you have to think about is,

  • when you're dancing in the flames, what's next?

  • So what I'm going to try to do in the next 17 and a half minutes

  • is I'm going to talk first about the flames --

  • where we are in the economy --

  • and then I'm going to take three trends

  • that have taken place at TED over the last 25 years

  • and that will take place in this conference

  • and I will try and bring them together.

  • And I will try and give you a sense of what the ultimate reboot looks like.

  • Those three trends are

  • the ability to engineer cells,

  • the ability to engineer tissues

  • and robots.

  • And somehow it will all make sense.

  • But anyway, let's start with the economy.

  • There's a couple of really big problems that are still sitting there.

  • One is leverage.

  • And the problem with leverage is

  • it makes the U.S. financial system look like this.

  • (Laughter)

  • So, a normal commercial bank has nine to 10 times leverage.

  • That means for every dollar you deposit it loans out about nine or 10.

  • A normal investment bank is not a deposit bank,

  • it's an investment bank;

  • it has 15 to 20 times.

  • It turns out that B of A in September had 32 times.

  • And your friendly Citibank had 47 times.

  • Oops.

  • That means every bad loan goes bad 47 times over.

  • And that, of course, is the reason why all of you

  • are making such generous and wonderful donations

  • to these nice folks.

  • And as you think about that,

  • You've got to wonder: so what do banks have in store for you now?

  • (Laughter)

  • It ain't pretty.

  • The government, meanwhile, has been acting like Santa Claus.

  • We all love Santa Claus, right?

  • But the problem with Santa Clause is,

  • if you look at the mandatory spending of what these folks have been doing,

  • and promising folks,

  • it turned out that in 1967, 38 percent was mandatory spending

  • on what we call "entitlements."

  • And then by 2007 it was 68 percent.

  • And we weren't supposed to run into 100 percent until about 2030.

  • Except we've been so busy giving away a trillion here, a trillion there,

  • that we've brought that date of reckoning forward

  • to about 2017.

  • And we thought we were going to be able to lay these debts off on our kids,

  • but, guess what?

  • We're going to start to pay them.

  • And the problem with this stuff is, now that the bill's come due,

  • it turns out Santa isn't quite as cute when it's summertime.

  • Right?

  • (Laughter)

  • Here's some advice from one of the largest investors in the United States.

  • This guy runs the China Investment Corporation.

  • He is the main buyer of U.S. Treasury bonds.

  • And he gave an interview in December.

  • Here's his first bit of advice.

  • And here's his second bit of advice.

  • And, by the way,

  • the Chinese Prime Minister reiterated this at Davos last Sunday.

  • This stuff is getting serious enough

  • that if we don't start paying attention to the deficit,

  • we're going to end up losing the dollar.

  • And then all bets are off.

  • Let me show you what it looks like.

  • I think I can safely say

  • that I'm the only trillionaire in this room.

  • This is an actual bill.

  • And it's 10 trilliion dollars.

  • The only problem with this bill is it's not really worth very much.

  • That was eight bucks last week, four bucks this week,

  • a buck next week.

  • And that's what happens to currencies when you don't stand behind them.

  • So the next time somebody as cute as this shows up on your doorstep,

  • and sometimes this creature's called Chrysler and sometimes Ford and sometimes ... whatever you want --

  • you've just got to say no.

  • And you've got to start banishing a word that's called "entitlement."

  • And there reason we have to do that in the short term

  • is because we have just run out of cash.

  • If you look at the federal budget, this is what it looks like.

  • The orange slice is what's discretionary.

  • Everything else is mandated.

  • It makes no difference if we cut out the bridges to Alaska in the overall scheme of things.

  • So what we have to start thinking about doing

  • is capping our medical spending

  • because that's a monster that's simply going to eat the entire budget.

  • We've got to start thinking about asking people

  • to retire a little bit later.

  • If you're 60 to 65 you retire on time.

  • Your 401(k) just got nailed.

  • If you're 50 to 60 we want you to work two years more.

  • If you're under 50 we want you to work four more years.

  • The reason why that's reasonable is,

  • when your grandparents were given Social Security,

  • they got it at 65 and were expected to check out at 68.

  • 68 is young today.

  • We've also got to cut the military about three percent a year.

  • We've got to limit other mandatory spending.

  • We've got to quit borrowing as much

  • because otherwise the interest is going to eat that whole pie.

  • And we've got to end up with a smaller government.

  • And if we don't start changing this trend line,

  • we are going to lose the dollar

  • and start to look like Iceland.

  • I got what you're thinking.

  • This is going to happen when hell freezes over.

  • But let me remind you this December it did snow in Vegas.

  • (Laughter)

  • Here's what happens if you don't address this stuff.

  • So, Japan had a fiscal real estate crisis

  • back in the late '80s.

  • And its 225 largest companies today

  • are worth one quarter of what they were 18 years ago.

  • We don't fix this now,

  • how would you like to see a Dow 3,500 in 2026?

  • Because that's the consequence of not dealing with this stuff.

  • And unless you want this person

  • to not just become the CFO of Florida, but the United States,

  • we'd better deal with this stuff.

  • That's the short term. That's the flame part.

  • That's the financial crisis.

  • Now, right behind the financial crisis there's a second and bigger wave

  • that we need to talk about.

  • That wave is much larger, much more powerful,

  • and that's of course the wave of technology.

  • And what's really important in this stuff is,

  • as we cut, we also have to grow.

  • Among other things, because startup companies

  • are .02 percent of U.S. GDP investment

  • and they're about 17.8 percent of output.

  • It's groups like that in this room that generate the future of the U.S. economy.

  • And that's what we've got to keep growing.

  • We don't have to keep growing this bridges to nowhere.

  • So let's bring a romance novelist into this conversation.

  • And that's where these three trends come together.

  • That's where the ability to engineer microbes,

  • the ability to engineer tissues,

  • and the ability to engineer robots

  • begin to lead to a reboot.

  • And let me recap some of the stuff you've seen.

  • Craig Venter showed up last year

  • and showed you the first fully programmable cell that acts like hardware

  • where you can insert DNA and have it boot up as a different species.

  • In parallel, the folks at MIT

  • have been building a standard registry of biological parts.

  • So think of it as a Radio Shack for biology.

  • You can go out and get your proteins, your RNA, your DNA, whatever.

  • And start building stuff.

  • In 2006 they brought together high school students and college students

  • and started to build these little odd creatures.

  • They just happened to be alive instead of circuit boards.

  • Here was one of the first things they built.

  • So, cells have this cycle.

  • First they don't grow.

  • Then they grow exponentially.

  • Then they stop growing.

  • Graduate students wanted a way of telling which stage they were in.

  • So they engineered these cells

  • so that when they're growing in the exponential phase,

  • they would smell like wintergreen.

  • And when they stopped growing they would smell like bananas.

  • And you could tell very easily when your experiment was working

  • and wasn't, and where it was in the phase.

  • This got a bit more complicated two years later.

  • 21 countries came together. Dozens of teams.

  • They started competing.

  • The team from Rice University started to engineer the substance in red wine

  • that makes red wine good for you

  • into beer.

  • So you take resveratrol and you put it into beer.

  • Of course, one of the judges is wandering by, and he goes,

  • "Wow! Cancer-fighting beer! There is a God."

  • (Laughter)

  • The team from Taiwan was a little bit more ambitious.

  • They tried to engineer bacterias in such a way

  • that they would act as your kidneys.

  • Four years ago, I showed you this picture.

  • And people oohed and ahhed,

  • because Cliff Tabin had been able to grow an extra wing on a chicken.

  • And that was very cool stuff back then.

  • But now moving from bacterial engineering to tissue engineering,

  • let me show you what's happened in that period of time.

  • Two years ago, you saw this creature.

  • An almost-extinct animal from Xochimilco, Mexico

  • called an axolotl

  • that can re-generate its limbs.

  • You can freeze half its heart. It regrows.

  • You can freeze half the brain. It regrows.

  • It's almost like leaving Congress.

  • (Laughter)

  • But now, you don't have to have the animal itself to regenerate,

  • because you can build cloned mice molars in petri dishes.

  • And, of course if you can build mice molars in petri dishes,

  • you can grow human molars in petri dishes.

  • This should not surprise you, right?

  • I mean, you're born with no teeth.

  • You give away all your teeth to the tooth fairy.

  • You regrow a set of teeth.

  • But then if you lose one of those second set of teeth, they don't regrow,

  • unless, if you're a lawyer.

  • (Laughter)

  • But, of course, for most of us,

  • we know how to grow teeth, and therefore we can take adult stem teeth,

  • put them on a biodegradable mold, regrow a tooth,

  • and simply implant it.

  • And we can do it with other things.

  • So, a Spanish woman who was dying of TB had a donor trachea,

  • they took all the cells off the trachea,

  • they spraypainted her stem cells on to that cartilage.

  • She regrew her own trachea,

  • and 72 hours later it was implanted.

  • She's now running around with her kids.

  • This is going on in Tony Atala's lab in Wake Forest

  • where he is regrowing ears for injured soldiers,

  • and he's also regrowing bladders.

  • So there are now nine women walking around Boston

  • with regrown bladders,

  • which is much more pleasant than walking around with a whole bunch of plastic bags

  • for the rest of your life.

  • This is kind of getting boring, right?

  • I mean, you understand where this story's going.

  • But, I mean it gets more interesting.

  • Last year, this group was able to take all the cells off a heart,

  • leaving just the cartilage.

  • Then, they sprayed stem cells on to that heart, from a mouse.

  • Those stem cells self-organized, and that heart started to beat.

  • Life happens.

  • This may be one of the ultimate papers.

  • This was done in Japan and in the U.S., published at the same time,

  • and it rebooted skin cells into stem cells, last year.

  • That meant that you can take the stuff right here,

  • and turn it into almost anything in your body.

  • And this is becoming common, it's moving very quickly,

  • it's moving in a whole series of places.

  • Third trend: robots.

  • Those of us of a certain age grew up expecting that by now

  • we would have Rosie the Robot from "The Jetsons" in our house.

  • And all we've got is a Roomba.

  • (Laughter)

  • We also thought we'd have this robot to warn us of danger.

  • Didn't happen.

  • And these were robots engineered for a flat world, right?

  • So, Rosie runs around on skates