The Silicon Valley Leadership Group

A transcript for The Silicon Valley Leadership Group GAME CHANGERS 2012 Panel Discussion #3 of 3 (out of 5) B “Silicon Valley’s Changing Economic Engine” Rachael Myrow and Carl Guardino, Moderators Santa Clara Convention Center September 13, 2011

Panel members in the order in which they were introduced: Nancy Pfund, Managing Partner, DBL Investors Stephen Levy, Director and Senior Economist of the Center for Continuing Study of the California Economy Bill Watkins, CEO, Bridgelux Godfrey Sullivan, CEO, Splunk

Mr. Guardino: … We are now going to move on to our second panel of the day…This panel, we are proud to say, is sponsored by Marvell. It’s on “Silicon Valley’s Changing Economic Engine.” Our moderator is Rachael Myrow, whom you hear on the California Report of KQED. But how’s this for a game changer? She just texted that she’s stuck in traffic in Palo Alto. So I may be Rachael Myrow for at least a few moments; but we’re flexible in Silicon Valley. That’s part of disruptive technology.

Let me introduce our panel, if I may. We have the managing partner of DBL Investors, Nancy Pfund. We have the director and senior economist of the Center for Continuing Study of the California Economy, Stephen Levy. We’re also joined by the CEO of Bridgelux, Bill Watkins. And, to round out our panel, the CEO of Splunk in San Francisco, Godfrey Sullivan…

Q: Panelists, you’re all Silicon Valley veterans. Some believe the valley is undergoing another seismic transformation. Why do you think that is true? Either yes or no. Godfrey Sullivan, you made the mistake of making eye contact with me first. (applause)

Mr. Sullivan: Everybody knows Carl just finished a triathlon, an Iron Man. Everybody knows that? Congratulations, Carl. (applause) It takes…work and perseverance. Nice work.

Mr. Guardino: And really bad judgment!

A: (Mr. Sullivan) Yes. Big transformation. Splunk has offices in San Francisco and Silicon Valley, so we kind of see it from both ends of the peninsula, and that is that, in the technology sector, the [unemployment] rate is effectively zero. We’re growing.…We’ve doubled every year for the last three years. We’re hiring like crazy, and the competition

SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 1 for technical talent is as strong as it’s ever been. I would say that the effective unemployment rate is zero.

On the other hand, there’s a big bifurcation between the technology sector, which is thriving, and the rest of the economy, which seems to be in the ditch, and I think that’s back to [Shai Agassi]’s point about, you have to have a manufacturing economy if you want to have a broad-based middle class, and wealth that’s spread widely. Tech is great, but its trickle-down effect can only go so far. You have to have a broad-based manufacturing economy, and I would say that’s…the seismic shift…Remember when this group used to be called the Silicon Valley Manufacturing Group, Carl? So we’d better bring that back.

Q: Excellent!…Nancy Pfund. Is Silicon Valley undergoing another seismic transformation?

A: (Ms. Pfund) Well, I would say absolutely; and, having worked in Silicon Valley for several decades now, it’s nothing new. I mean we’ve seen all kinds of reinvention over… the past several decades in Silicon Valley, and so now we’re witnessing yet another one. Certainly, as we heard in the first panel this morning, the cleantech revolution is changing the profile of…our region in very significant ways, and most of them positive.

I think if you’re…from Richmond, where SunPower, PowerLight is, you’ve got the Tesla factory. You’ve got Soladigm, Solaria – a whole row of companies that are now occupying that corridor in a way that the tech boom did in previous decades. And even notwithstanding the enormous disappoint of Solyndra, this is a real transition, and this is…a transition that can create jobs, not only for R&D and technically-trained people, but also, as we’ve been talking about, offers some hope in terms of either manufacturing,… and I guess Tesla would be the best example of that, but not the only one; but also some of the installation and financing of cleantech that we’re leading in this area…You see the SolarCitys, the SunRuns, the Sungevities, that are making solar accessible to people by taking away the upfront cost, and giving jobs to people that perhaps don’t have as much education – good jobs that are installing solar, or helping to transition homes away from nonrenewable sources. So I think that it’s good news…We certainly have our threats in terms of stability of the industry, but no doubt that there’s a transformation under way.

Q: Bill Watkins, is Silicon Valley undergoing another seismic transformation?

A: (Mr. Watkins) I mean, look. This is a very unique place. I’m not sure we’re going through a major transition or transformation as much as that we’re just evolving. I mean there is no place like this in the world. There’s no place where you can come, and I came here in ’78, and people give you money for a wild idea, and you get a chance. I mean there’s just no place like it. And I just look at what’s happening now. It’s an evolution. We’ve gone through all these technologies. We continue to broaden our technology base. But we have an environment here. We have an investment community. We have people who want to take risks, and I tell you: If we don’t have things like Solyndra happening, we won’t have this valley. We’ve got to be able to take those risks. We’ve got to put massive capital at risk, and we’ve got to go for it. And the fact that we can’t be scared of SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 2 failure, I think, is very unique to America, in a lot of ways, but mostly unique to this valley. And so I’m note sure we’re “transitioning,” or changing, except we’re just growing from what I think is just the most phenomenal base. People do it here.

Q: Bill, thank you. Stephen Levy?

A: (Mr. Levy) It’s a good question. I think there’s a better question. But first, I want to thank Carl and Emmet for inviting me here, although you never want to invite an economist where there is supposed to be optimism. Look, 10 years ago, there was no iPad, no iPhone. There was no job search through LinkedIn. There were none of the incredible social media, Facebook. Google hadn’t bought thousands of acres of land in Mountain View. There was a tax cut 10 years ago that was supposed to revolutionize the world. Ten years ago, the unemployment rate here was 3 percent. It’s now 10 percent. There will undoubtedly be—although it’s hard to match what we did over the past 10 years, there will undoubtedly be—a new round of “innoventions” and innovations by these folks.

But the game changer isn’t that, because that has bought us higher poverty, greater inequality, 10 percent unemployment, no trickle-down outside the sector, and a country divided. You’re the only game changer. The only one. This valley can’t prosper without the country prospering. The country can’t move forward without breaking the gridlock. The people in Washington and Sacramento can’t break the gridlock unless you help them do it. Carl’s Leadership Group has one platform. I don’t agree with every piece. He’s trying to break the gridlock. You’re the game changer. You’re the only ones that can do it.

Mr. Guardino: Steve Levy, excellent, as always. And I loved that. That was a good question. Here’s a better question, and I’m going to answer that. I’m going to remember that. Excellent job, Steve.

Q: Steve, let’s start with you, and we’ll work right back down the panel. The Internet was government-funded, courtesy of the Department of Defense in Washington. Stem-cell research is in the midst of an R&D boom courtesy of California voters putting bond money behind that. If you—any of the four of you—would like to comment, could suggest the next big thing we, as Californians, or U. S. citizens, should collectively invest in, other than your company’s product, please, what would it be?

A: (Mr. Levy) Well, in terms of a field, I think green. I think all the kinds of alternative- energy investment, new batteries, transmission lines, I think it’s the right field; not because it’s going to create millions of jobs. I think that’s a little hyped. But because it is going to save us – residents, business, and government – tons of money, and help the environment.

But the basic thing that Carl started with, the federal government, seed investment in basic research and development, not necessarily picking winners. We need massive SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 3 investment in this country, like China, in fields, in people to replace all of us baby boomers who are going to retire, and in our communities, to keep this a great place to live and work. Remember, during that decade of massive innovation and success here, all of our local governments are struggling. That will come back and haunt us.

In our research that we’ve done in two tech studies in Silicon Valley, people say, one, they’re here because the talent is here. And Carl’s report had just a wonderful quote in your CEO survey, saying the fear is not about the companies or the innovators. The fear is that, unless you’re very rich, you’re taking potluck on a school district. Unless you’re very lucky, you’re taking potluck on a community. Unless we invest more, you’re taking potluck on your energy and your water and commute. The valley needs investment in our communities, in our people, and I would go for energy as the national investment.

Q: Steve Levy, thank you for letting me go to you first. Other panelists who’d like to comment: The next big thing that we as Californians, or American citizens, should collectively invest in. Bill, you’re looking up.

A: (Mr. Watkins) Sure. I think we should invest in the public-school education system. (applause) I don’t know how we could keep doing what we’re doing here.…It just blows me away, guys. We can find billions for war. We can find billions for the (unintelligible). We can’t find billions for kids, our future. If we don’t start making real, long-term investments to the point, in the real asset this country has, which is our people, we’re going to have a big issue; and…that’s what I’d like to see.

I think I’d have one look at a product. Storing energy, people. We’ve got to find better ways to store energy; but, right now, I think…we have a bunch of kids who are being short-changed by us.

Q: Bill, thank you. Nancy Pfund.

A: (Ms. Pfund) I totally agree on education. That’s a priority. Another thing that we need to do is really pay attention to how to help our companies manufacture here. We have a portfolio of many cleantech companies, some of which do manufacture here. And the tragedy is that…there is a very defined playbook if your company wants to get government money to go build a facility in India, or another developing country. It’s arduous. It’s high-stakes, and there’s a high bar; but there’s a playbook. There’s also a playbook for getting your company to have Chinese investors, or develop a manufacturing presence in China. That’s very – While it’s still evolving, the rules are clear, and the players are known. When it comes to putting a manufacturing facility in Milpitas, or in the Central Valley, where we have double-digit unemployment, there is no playbook, and…those localities that do have some investment funds, or low-interest loans, or whatever it is, you make it up as you go along…It’s piecemeal…There’s no cookie-cutter approach.

And so it’s much harder for our companies to focus on growing here than it is in other parts of the world, and part of that is the policy, and part of that is the lack of attention to SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 4 developing a playbook for manufacturing in the U. S. And this notion that all of California is too expensive for manufacturing, we see examples where that’s not true, and…Tesla is an example of that, right in our own back yard. However, what we need to do is help these companies reduce the labor hours in the creation of their products to a manageable level, where we can be competitive. And that’s doable. We have companies that are working it, but it’s way too hard, and it…should be first on our priority list as opposed to giving them every incentive to go anywhere else in the world but here.

Q: Godfrey Sullivan, CEO, Splunk.

A: (Mr. Sullivan) I will pile on the energy, but maybe from a more Draconian view. I think we have to start looking at China as a competitor, and nothing else. They, in the long run, will…take our jobs away, and treat the U. S. as a big yard sale. Then we have to ask ourselves, how do we get ready for competition in the future, when they are one of our most, our strongest business competitor? And that will be to have access to energy, and not be held hostage to an ever-growing reliance on foreign sources of energy. So…if I could wish for one thing, I would wish that we would declare a war on energy, have a goal that, over the next five years, we would stop importing any type of foreign oil. We are shipping $40 billion in cash – that would be a half a trillion a year in cash—offshore, to people who don’t like us. Look at the list of people we import oil from. It would be people like Saudi Arabia and Venezuela (What about Canada?). We need to bring that cash back onshore. We need to invest it in local manufacturing. That would be every possible answer. It’s wind. It’s solar. It’s cars. It’s whatever. I don’t think the government needs to be proscriptive in what we do. There are a thousand points of light about what to do; but we have to take a dramatic action that starts the wheels of innovation in motion, and I think the first thing, the easiest way we could do that, is just to stop importing foreign oil.

Q: We have a great panel. Anyone who’d like to answer this? Don’t feel that you have to. But Silicon Valley keeps putting shiny new gizmos in our hands every six to 18 months. We buy ‘em. We toss ‘em. We buy a new one. Should we move past this paradigm?

A: (Mr. Watkins) No!

A: (Mr. Sullivan) No?

A: (Mr. Watkins) I mean, guys --

A: (Mr. Sullivan) We love our gizmos.

A: (Mr. Watkins) Hey, really, guys! We’re selling – Like I’ve made this comment before, but we’re selling gadgets, information, and porn like no one’s business here, and, guys, this is what we do, and we should be proud of that, and I think this is how our innovation drives.

SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 5 A: (Ms. Pfund) I think we’re in the heart of innovation, and we…should celebrate that, rather than be embarrassed by it. Having said that, it’s not the only thing we do well, and…as a venture capitalist, I see all kinds of entrepreneurs every day, and an area that I feel that this region is excelling at is really coming up with products and services that do have more meaning, that are…not the gadgets and the throwaways.

There are people that are really concerned, for example, that the plastic jugs our laundry soap comes in, or that our milk cartons of laminated cardboard, are contributing a huge amount to environmental problems, because most of them don’t get recycled.

There’s a company in Oakland called Ecologic [Brands] that’s…turning that around and making a compostable molded paper-fiber carton on the outside with a thin plastic pouch on the inside, getting all kinds of awards, and,…you know, the Safeways, the Wal-Marts, the Seventh Generations of the world, wanting to change their packaging. This is a trillion-dollar business that no one pays any attention to, and the idea started here, just from a frustrated mother who didn’t like buying all of this plastic. We could go on and on about entrepreneurs that want to not only do well for themselves, create jobs, but also change the world in a more positive way. I think we’re good at that.

Q: And we want this interactive, so, Bill Watkins, jump back in, and then we’ll go to Steve Levy.

A: (Mr. Watkins) …I think Nancy makes a great point, because I’ll tell you, you know, I came out here in the late ‘70s, and, in the early computer business, there were a lot of people who felt like they were changing the world. And we sort of lost some of that as the ‘80s and ‘90s rolled by. But I’ll tell you about the greentech, and I got back into LEDs, is where I’m at now.

But the most amazing thing about this job, and why I kind of came back to work, was being around a bunch of young people who really believe they are changing the world. I mean there’s a lot of people in this valley, what I would call the sort of “under-30 engineers,” who actually believe again, and being around [that] sort of people, guys, is pretty exciting. But there are people out in this valley who think they are changing the world around energy.

Q: Bill, great point! Steve Levy?

A: (Mr. Levy) I’ll respond as a consumer, because I don’t make any of this stuff. I find that the gadgets enrich my life. I’m a pretty responsible consumer, but I find that the iPad I bought, or the new phone that I bought, helps me. It’s productivity-enhancing. It improves my work. I think we can all be responsible consumers, but I find that most of these products aren’t fancy or wasteful or gadgetry. They’re productivity-, cost-saving-, enjoyment-enhancing, and I’ll buy a new one if it’s really, really better than the one that I have.

Q: Godfrey, is there anything you wanted to add? SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 6 A: (Mr. Sullivan) New toys are good!

Mr. Guardino: For those watching on television, he held up his iPad! Godfrey, we’re going to come back to you.

Q: Do you worry about the markets’ being so dominated by algorithmic programming as opposed to the old way of assessing a company’s value based on its performance,… people, and game plan for the future? What would be a game changer for investors and Wall Street and companies?

A: (Mr. Sullivan) So I have to admit that I do not play in the stock market in that way…If I buy a stock, I buy it, and I hold it. I don’t play all the algorithmic games, and so I really don’t – I’m probably not the person to ask about that. But I’d like to give you a parallel example, and it probably applies well.

In my life before tech, I worked in the banking system, and we made mortgages, and we owned them. That is, the person who originated the loan actually held it and owned it. You could sell a piece of it, but you still had to own a piece of it, and service it, and hold it, and if…the loan went bad, your bank had to absorb the loss. Somewhere along the line, regulations began to allow people who don’t hold a piece of the mortgage to originate those, and so it’s in your interest to originate as many as you possibly can, and sell them to some other, unsuspecting investor, which is how this whole thing collapsed. So if I were to…were to suggest a simple remedy to the mortgage market, which probably also applies to the stock market, it would be, if you’re going to create a paper instrument, you have to be an owner of it. You can’t just pawn it off on someone else. I think that very simple rule would make a huge difference.

Q: Fascinating! Fascinating game-changer suggestion. Anyone else like to respond to that, as well? You don’t have to. Nancy? Bill?

A: (Ms. Pfund) Well, I would just, being in the financial industry, I mean, you have to pick your battles, and I don’t think there’s – You know, I certainly don’t have…any great ideas for how to move people away from sitting in front of their screens all day, and making transactions based on fractions of a cent;…however, I don’t think that that stops us from doing our jobs well. It makes it more volatile. It certainly changes the way our companies are able to enter the public markets; but it doesn’t change the fundamentals of our business, which is to find great, disruptive technologies, and management teams to scale those.

Q: Excellent. Bill?

A: (Mr. Watkins) Just maybe add on to – It’s funny about…stockholders, and things like that, but you spend a lot of time in business trying to get everybody’s self interests aligned, and when you get people’s self-interests aligned, you tend to do a lot of good SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 7 things. And we’ve lost a relationship here, and it’s less about, I think, companies than it is about America, which is, “What’s good for an American stockholder is no longer good for America.” And somehow, we’ve got to get that relationship back in line. I don’t have a good answer for it, how you do it, but we’ve lost that relationship, and when you talk about jobs, and manufacturing, and things like that, middle class, the first part, we’ve got to get alignment for American stockholders. And I’m an American stockholder,…so we’ve got to get that alignment – “What’s good for America is good for American stockholders.”

Q: Steve Levy, would you like to add to that, or wait for another question?

A: (Mr. Levy) Wait.

Q: Great. That goes back to Nancy’s comment about picking your battles. We’ll move on to the next one. Godfrey, I’m going to pick on you again. Despite all the packaging and technology, many would argue that software innovation has been Silicon Valley’s main (audio feed cuts out). You’re a software guy, and a technology veteran. What’s the next really big thing for software?

A: (Mr. Sullivan) We’re not allowed to talk about our own companies now, but…to Bill’s point,…being able to work with all the young innovators is really the most fun you can have in Silicon Valley, and I have that great pleasure. And part of the game-changing is, every time you think it’s about to settle down, a new thing comes,…whether it was the browser and the Internet, whether it was the next…age of software, whether it was now social networks. Really, I think mobile is probably the thing that will have the most impact on us over the next 10 years…We will no longer be able to live without mobile. All of a sudden, we have the ability to do things that make us highly productive. We may not even have to use Windows! But what will happen is you’ll have an unexpected outcome from this next game-changing thing called mobile technology, Internet, all that, social networks, and that is higher productivity; and the corollary, the flip side of the coin of higher productivity is higher unemployment, because it takes fewer people to do things than it used to do. So I think we really have to be asking ourselves, where do we also invest to get broad-scale job creation? And, really, it’s in the things that can’t be outsourced, can’t be off-shored, and we’re back to the energy equation, and all the things that can be done at the local level, because they have a local benefit in your home, with what you drive, what you carry. I think is a – I think…mobile and energy together have an enormous corollary effect.

Mr. Guardino: I have great news. Traffic has parted, along with the seas, and Rachael Myrow is now with us. Will you join me in welcoming, from KQED’s California Report, Rachael Myrow, who will pick up with a question to Nancy and Stephen…

Ms. Myrow: …Thank you all so much for your patience and understanding. I guess public radio still has an economic model that continues working if traffic is that bad. SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 8 Q: Well, let me put this next question to Nancy. We’ll never be cheaper than China. That’s true for manufacturing. It’s true for programming. How long do you think we have before California loses its edge on the design-and-development side?

A: (Ms. Pfund) I think we’ve been—all of us have been—talking about the inspiration we get from young, technical entrepreneurs, and that’s been going on for several decades. I don’t think we’re in danger of…losing that. Certainly, if we don’t build our public- education system, and educate our kids, there is a long-term threat; but I think that we have withstood, in this valley, enough cycles,…and emerged again to fight another day, that…we own that. We don’t want to squander it, but you don’t see that kind of innovation…at the R&D level in China, and other parts of the world. So it’s ours to lose. And I do think that, if you can…preserve that, you are preserving some possibility for manufacturing; because always, in the early days, you’d like to be as close as you can be to your headquarters, to make that an efficient scaling process.

Q: Stephen, do you share her sense of optimism there?

A: (Mr. Levy) With one exception. China has been an investment society. They do it a different way as a non-democratic country. We can only compete by being an investment society in our kids, as Bill and everyone said; in our workers, who aren’t going to work in tech, all of those carpenters and plumbers and truck drivers and nurses and teachers and fire fighters who aren’t in our industry, but make a community vital in Silicon Valley. But the one thing we have that no one else has, if we keep it, is that Silicon Valley is the premier welcoming society. That will get into issues about immigration, but we’ve been leaders in welcoming people on merit, without regard to where they were born, what religious practice they have, their sexual orientation – almost anything. And if we remain a welcoming society, and that means good schools, and communities where people and families want to live, we have something that no one else can top, and we can maintain our leadership.

Q: Stephen, you’ve been studying the state’s economy for years. Is it your impression that the unique culture Silicon Valley has is its own game changer? You know, generates new ideas on such a regular basis, that the change comes from within?

A: (Mr. Levy) We’re great. So let me end on the point that I started with. We’ve been great for a decade, and yet we have higher poverty, higher unemployment, schools that are dis- enrolling kids, colleges that are cutting back, workforce programs like the one that I and Bruce Paddleman from Nova work on, being decimated; so that the game changers that our innovation produces, and will produce, aren’t the game changer we need now.

End where I began. You’re the game changer. All of us together have to change this culture in Sacramento and in Washington that we are indirectly or directly a part of, or we will never do the things that these other three talented people have suggested. We won’t get there unless we change our culture of working together.

SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 9 Q: Bill, in the article you wrote [for] Game Changers, you lay out some specific things you think are going to be game changers for the U. S., in general, and California, specifically, in particular, to regain its manufacturing prowess. What are those game changers? And what’s in the way of them moving forward?

A: (Mr. Watkins) I think, what I talked about, you know, obviously, [was] a built-in- America plan, and the consequence of that. But we have an open trade. You can get a very good worker in China for $2.30 an hour. A very competent, hard-working person. We’re not going to compete on labor costs, because no one here wants to make $2.30 an hour! We’re just not going to do that.

That said, I actually believe different today than I did 10 years ago, when I didn’t think we ever could compete on labor costs. We can compete on labor costs. What we need to do is start having partnerships around government and corporations, and, again, I…want (unintelligible). If you want to have jobs, LEDs, in [these] United States, have all the governments convert to LEDs. Put a “60-percent Content Made in America.” Doesn’t have to be an American company, but made in America, that product, you’ll have a massive job program around LEDs and energy, changing those light bulbs;…because that’s what China is doing. That’s what Asia is doing. That’s what Russia is doing. Eastern Europe.

But we need to use our markets, our new markets, to scale the new industries. You know, the first LED I make costs me a million zillion dollars. The next one is a little bit less. The next one, less. Use that scale to grow our production here. Use our government, especially around energy, to drive that innovation and that scale, because that’s exactly what China is doing. It’s exactly what Malaysia is doing. It’s exactly what India is starting to do. And if we can’t do that, if we can’t find a way to do that, then we’re not going to have those middle-class manufacturing jobs, guys.

Q: Nancy, you look like you might want to weigh in there.

A: (Ms. Pfund) I agree. I mean other countries are investing in these new technologies, but they’re also creating policies that require some kind of local content. And when you talk about “local content,” in a lot of circles in this country, you know, you’re accused of, you know, the 20th-century protectionism, and…I mean it just has the stigma attached to it.

Let’s get real. We’re smarter now. We’re more sophisticated. We can do this. There are policies. There’s an Assembly, or a bill in California now that would put, what, a 5- percent local content on…solar, or other products here.

We need to start experimenting. We need to recognize that other countries…have already started this, and are deriving the benefits in terms of employing their people, and moving people up the wealth-creation curve. And for us to hang onto outmoded 20th-century notions about incentives to keep manufacturing domestic is really not enough. We need to enter the 21st century, and figure out [how] to do it in a way that is smart.

SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 10 Q: Now Godfrey, I don’t mean to ignore you here. Any thoughts come to mind as you’re listening to this?

A: (Mr. Sullivan) I’m so tempted to talk about tax rates, and…trade, and all that; but it all points to something someone else should do. So I’d like to maybe turn the (audio feed cuts out) we all do, you know,…because there’s a lot we could do without waiting for someone else.

A few years ago, at the company that I was running, we started a program where we gave our employees a $5,000 cash bonus if they bought a car that got 45 miles per gallon or better. And, over a three-year period, half of the new-car purchases across the entire company, across the entire globe, were [by] people who traded in their SUVs or other types of things and bought Priuses and all kinds of things. You’d have thought our corporate parking lot looked like a Prius dealership, okay? It was very simple. It was so motivating to our workforce, because everybody felt like they were taking part, they were taking charge, they were taking a positive step to make this thing better. I would really challenge all the folks who run the companies out here: Go ask [yourselves], what can you do with your company, with your employees, to help take a step; because my biggest fear is that, with the political gridlock we have, for us to take a position waiting for someone else is waiting too long.

Q: (Mr. Watkins) Let me ask a question…Would you ever, at a company, give $5,000 for them to go buy a car that was made in America?

A: (Mr. Sullivan) Absolutely! None of those high-efficiency cars that met that…met that [criterion] were made in America, sorry to say.

A: (Ms. Pfund) There’s actually a $7,500 tax credit for EVs, so you could do that, and buy an American EV.

A: (Mr. Sullivan) I mean it may be the case now. At that time [it wasn’t]…

Mr. Guardino: Excellent! Excellent! We’re going to now, once again, engage you. You have your green and your red paddles. Rachael, we’re so glad that you were able to make it for a portion of our morning. We hope you’ll stay, as well, and participate. Each of our panelists, Bill Watkins or Steve, if you could pass out the…paddles to your colleague panelists.

Q: We’re going to start with Godfrey Sullivan. Godfrey, in 30 seconds or less, name the number-one game changer you’re driving, or want to see driven, in…2012, and why.

A: (Mr. Sullivan) I’ll go back to the earlier point. I’d like to see a…mandate from the Presidential Office that we will stop importing oil over the next five years.

Mr. Guardino:

SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 11 It’s clean. It’s quick. It’s right out there. If you agree, green; if you disagree, red. That includes our panelists…There’s about 20 who disagree. We’re going to ask you quickly, if you disagree and want to be that representative, step up to the mic. You have 30 seconds to tell us why you disagree…And, again, it’s a community conversation. If you wouldn’t mind giving us your name and then 30 seconds.

A: (Mr. Dean) My name is Matthew Dean, and the reason I disagree is, I don’t want to hear any more damn proclamations from the oval office. This is not a dictatorship, okay, number one. Two, I think it takes a lot more than that. It takes the will of the people to actually make an effective change. So when the economics dictate the change, in a capitalist system, it actually will occur…if you believe in our system.

Mr. Guardino: …Matthew Dean, thank you. Economics. Capitalism. Godfrey, I’ve always known you to be a pretty strong capitalist. You have 30 seconds to respond, and then we’re going to revote.

A: (Mr. Sullivan) I agree with the point made. I just believe that, with the right spiritual leadership on that topic, I think the country would come together to do the right thing. I think it’s a man-on-the-moon type of thing. We’re all in it together. This is not a – I agree with his point.

Mr. Guardino: Great! We’re going to revote. Matthew, again, thanks for stepping up, representing the 15 or so who disagreed. We’re going to revote…Great. We’re at about the same number. Godfrey, thank you. Nancy, 30 seconds: Your game changer for 2012.

A: (Ms. Pfund) A game changer would be to create,…or to continue and enrich the incentives for transitioning our economy away from fossil fuels to renewables, and that has to do with more visibility and predictability in those incentives, like the ITC and the cash grants; but also, as we’ve been talking about, extending our incentives to promote local manufacturing of renewables, and make that a part of our future, and not cede that to the rest of the world.

Ms. Myrow: All right. You’ve heard the suggestion. Now we’re voting. What do you think of Nancy’s idea? Looks like once again we’ve got a lot of people on board with that concept. Anybody who’s got a red flag who wants to present a contrarian viewpoint? I see somebody back there in the corner. This is your opportunity to make the case in 30 seconds.

Mr. Guardino: There were seven or eight reds. Please, step forward and make the case.

Ms. Myrow: We won’t think any less of you! It’s all about a robust discussion. SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 12 Mr. Guardino: And we have someone coming forward. Again, if you could just give us your name and jump right in.

A: (Scott) I’m Scott, and I agree with you in the fact that we need to promote local production; but I think it’s financially driven, and we can promote as much as we want; but unless it’s financially driven and viable, I don’t think it’s going to work.

Ms. Myrow: Nancy?

Mr. Guardino: Scott, thank you.

A: (Ms. Pfund)…I agree with that, and, as a venture capitalist, if I didn’t believe that, I’d be in trouble. However, having been an investor in Tesla, we had many choices of where to put that plant. People were asking us from all over the world – Mexico, China – and it’s…on 880 in Fremont for a reason. And…it’s certainly economic, and it took a public- private partnership to make it happen; but there was no sacrifice in terms of the financial returns to investors, or to customers, in terms of the value created by that product. So we can do this.

Ms. Myrow: And with that, another show of green and red cards. What do you think? Is it a go?

Mr. Guardino: And please hold them high. We want to be able to get a sense and a count!

Ms. Myrow: All right! Let’s see if we can get this winning streak all the way down the line. Bill, do you want to share your idea?

Q: (Mr. Watkins) I think, in general, what I want to do, and what we—I—think we need to do, is create a sort of incentive plan for manufacturing in the United States. And whether that is – The previous panel talked about expatriating funds from offshore back in here for jobs. You know, I obviously want to create a fund that converts all the government buildings to LEDs. Then it pays it back, and have a 60-percent content made [in America].

What we’ve got to start doing, if we’re going to have a manufacturing base, if we’re going to have those jobs, we’ve got to start acting and doing the things that are real. Having a 5-percent content made in America is not going to get it done, guys! You know, having a 60-percent is going to get it done; but we’re in an economic battle, and probably a little bit different, and China is not our enemy. They’re actually one of our great opportunities. But we’ve got to recognize that we’ve got to create those opportunities SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 13 here, and that we do have, as Nancy said, a lot of countries want our jobs, and we’ve got to wake up the American government to start helping us keep them here.

Ms. Myrow: And, with that, let’s get your take on the proposal…

Mr. Guardino: And the proposal is 60 percent manufacturing made in America.

Ms. Myrow: Sixty percent manufacturing. All right. I see a few red cards. Anybody want to step up, perhaps, and give us your name and your argument as to why that’s not the best idea?

Mr. Watkins: And don’t tell me we don’t like to have our government pick the companies that win, or we’re going to let the other countries pick our companies.

Ms. Myrow: Anyone?

Mr. Guardino: Someone step forward? We had about a half-dozen red cards.

Ms. Myrow: I know I saw some in that area.

Mr. Guardino: Silicon Valley is not known for its shyness!

Ms. Myrow: Well, here we go! That’s right.

A: (Ms. Davis) Paula Davis. I don’t disagree with what you said, but I’m sad to see that you changed your original game changer away from improving of public education.

Mr. Watkins: That’s a long-term bet! (applause)

Ms. Myrow: Bill, do you want to expand on that a little bit? A “long-term bet”?

Mr. Watkins: Well, no, I do. I really do. I mean I believe that it’s kind of part of the whole competitiveness of America, is the public-education system; because I’ll tell you guys. We have a great 1-12 education system in California. A phenomenal one. It’s just a private school. And we’ve got to get our public schools – And be honest! With the people SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 14 here, you guys are the ones to determine public schools. You vote for the money. We spent 48th to 50th in the nation, and that’s what the kind of public schools says we have.

Ms. Myrow: And with that thought, what do we think about the idea of putting in government mandates for a certain percentage of the manufacturing to be made here in the United States? One more go-round.

Q: And that leaves us with Stephen. What’s your game changer?

A: (Mr. Levy) These are really hard times. People that run schools need to advocate to keep their schools open. People that run safety-net or anti-poverty programs, they’re under pressure. Local governments are under pressure. Some companies are under pressure. I think the game changer [is that] you spend as much time advocating to help solve someone else’s problems this year as you do to solve your own problems. That will bring us together. That’s my game changer.

Ms. Myrow: Seeing your own good in someone else’s. Do we have a vote?…

Mr. Guardino: And we have at least a couple of red cards, so someone step up to the mic. Chris, your red card was the highest! Chris Stampoulis?

Mr. Watkins: How do you disagree with that?!

Mr. Guardino: We’re about to find out!

A: (Mr. Stampoulis) Sure. Thank you. Chris Stampoulis, West Valley / Mission College District. In concept, I think that’s good, but I think it’s actually the opposite, because it comes down to who is “ours” and who is “theirs”? I actually suggest that maybe the focus needs to be taking more ownership of the local agencies that represent us. So if it’s your own school district that, you know, you’re voting for your school board, or your own community college district, your own small agency, that we need to be much more aware of what’s happening, day-to-day, within our own local government, so that we can shape what’s happening in our neighborhoods, rather than letting that be, and focusing farther away.

Ms. Myrow: Stephen, a response to that?

A: (Mr. Levy) You know, I think we’re really close to agreement. My example came from our workforce board, who has plenty of things that we could advocate for ourselves, and do; but our board wrote a letter in support of the community colleges and public SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 15 education because we know our success depends on the success of our partners. That’s what I had in mind.

Mr. Guardino: Shall we revote, Rachael?

Ms. Myrow: Let’s do it! What do you all say?

Mr. Guardino: Let’s see if we changed Chris’ or anyone else’s mind.

Ms. Myrow: Seems like a lot of people in the audience are on board with our panelists today.

Mr. Guardino: Will you join me in thanking Rachael Myrow, along with Godfrey Sullivan (applause), Nancy Pfund, Bill Watkins, and Steve Levy…

# # # /WPP September 18-19, 2011

SVLG Game Changers 2012 Panel #3 of 3 – September 13, 2011 Page 16