There's a great big elephant in the room called the economy. So let's start talking about that. I wanted to give you a current picture of the economy. That's what I have behind myself.
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.
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?
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 triliion 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 the 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. Sixty-eight 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.
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 investmentm 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 these 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. Twenty-one 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."
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 re-grow 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.
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, re-grow a tooth, and simply implant it. And we can do it with other things. So, a Spanish woman who was dying of T.B. had a donor trachea, they took all the cells off the trachea, they spraypainted her stem cells onto 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 re-growing ears for injured soldiers, and he's also re-growing bladders. So there are now nine women walking around Boston with re-grown 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 onto 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 and the other one ran on flat threads. If you don't have a flat world, that's not good, which is why the robot's we're designing today are a little different.
This is Boston Dynamics' "BigDog." And this is about as close as you can get to a physical Turing test. O.K., so let me remind you, a Turing test is where you've got a wall, you're talking to somebody on the other side of the wall, and when you don't know if that thing is human or animal — that's when computers have reached human intelligence. This is not an intelligence Turing rest, but this is as close as you can get to a physical Turing test. And this stuff is moving very quickly, and by the way, that thing can carry about 350 pounds of weight. These are not the only interesting robots. You've also got flies, the size of flies, that are being made by Robert Wood at Harvard. You've got Stickybots that are being made at Stanford. And as you bring these things together, as you bring cells, biological tissue engineering and mechanics together, you begin to get some really odd questions.
In the last Olympics, this gentleman, who had several world records in the Special Olympics, tried to run in the normal Olympics. The only issue with Oscar Pistorius is he was born without bones in the lower part of his legs. He came within about a second of qualifying. He sued to be allowed to run, and he won the suit, but didn't qualify by time. Next Olympics, you can bet that Oscar, or one of Oscar's successors, is going to make the time. And two or three Olympics after that, they are going to be unbeatable.
And as you bring these trends together, and as you think of what it means to take people who are profoundly deaf, who can now begin to hear — I mean, remember the evolution of hearing aids, right? I mean, your grandparents had these great big cones, and then your parents had these odd boxes that would squawk at odd times during dinner, and now we have these little buds that nobody sees. And now you have cochlear implants that go into people's heads and allow the deaf to begin to hear. Now, they can't hear as well as you and I can. But, in 10 or 15 machine generations they will, and these are machine generations, not human generations. And about two or three years after they can hear as well as you and I can, they'll be able to hear maybe how bats sing, or how whales talk, or how dogs talk, and other types of tonal scales. They'll be able to focus their hearing, they'll be able to increase the sensitivity, decrease the sensitivity, do a series of things that we can't do.
And the same thing is happening in eyes. This is a group in Germany that's beginning to engineer eyes so that people who are blind can begin to see light and dark. Very primitive. And then they'll be able to see shape. And then they'll be able to see color, and then they'll be able to see in definition, and one day, they'll see as well as you and I can. And a couple of years after that, they'll be able to see in ultraviolet, they'll be able to see in infrared, they'll be able to focus their eyes, they'll be able to come into a microfocus. They'll do stuff you and I can't do. All of these things are coming together, and it's a particularly important thing to understand, as we worry about the flames of the present, to keep an eye on the future.
And, of course, the future is looking back 200 years, because next week is the 200th anniversary of Darwin's birth. And it's the 150th anniversary of the publication of "The Origin of Species." And Darwin, of course, argued that evolution is a natural state. It is a natural state in everything that is alive, including hominids. There have actually been 22 species of hominids that have been around, have evolved, have wandered in different places, have gone extinct. It is common for hominids to evolve. And that's the reason why, as you look at the hominid fossil record, erectus, and heidelbergensis, and floresiensis, and Neanderthals, and Homo sapiens, all overlap. The common state of affairs is to have overlapping versions of hominids, not one.
And as you think of the implications of that, here's a brief history of the universe. The universe was created 13.7 billion years ago, and then you created all the stars, and all the planets, and all the galaxies, and all the Milky Ways. And then you created Earth about 4.5 billion years ago, and then you got life about four billion years ago, and then you got hominids about 0.006 billion years ago, and then you got our version of hominids about 0.0015 billion years ago. Ta-dah! Maybe the reason for thr creation of the universe, and all the galaxies, and all the planets, and all the energy, and all the dark energy, and all the rest of stuff is to create what's in this room. Maybe not. That would be a mildly arrogant viewpoint. (Laughter) So, if that's not the purpose of the universe, then what's next? (Laughter)
I think what we're going to see is we're going to see a different species of hominid. I think we're going to move from a Homo sapiens into a Homo evolutis. And I think this isn't 1,000 years out. I think most of us are going to glance at it, and our grandchildren are going to begin to live it. And a Homo evolutis brings together these three trends into a hominid that takes direct and deliberate control over the evolution of his species, her species and other species. And that, of course, would be the ultimate reboot.
Thank you very much. (Applause)