Full transcript: U.S. Secretary of Commerce Penny Pritzker on Recode Decode

“There is actually a reason for the tech sector to engage with the government.”

On a recent episode of Recode Decode, hosted by Kara Swisher, the United States’ Secretary of Commerce Penny Pritzker talked about how the U.S. does not and should not own the internet and how, while AI may eventually take jobs away from people, there are steps we can take to limit that.

You can read some of the highlights from their discussion at that link, or listen to it in the audio player above. Below, we’ve posted a lightly edited complete transcript of their conversation.

If you like this, be sure to subscribe to Recode Decode on iTunes, Google Play Music, TuneIn and Stitcher.

Transcript by Celia Fogel.

Kara Swisher: Today in the red chair is United States Secretary of Commerce Penny Pritzker. Secretary Pritzker has served in President Obama’s cabinet since June of 2013. Before that she founded Pritzker Realty Group and a private investment firm, PSP Capital. We’re going to talk about cyber security, training workers for the digital era and a lot more. Secretary, welcome to the show.

Penny Pritzker: Thanks for having me.

It’s good to be here in D.C. I get to meet all the secretaries.


So let’s talk a little bit about your background and what you’ve been doing in the past. Because the Obama administration is coming to a close, obviously. I think you just had 100 days, correct?

Yeah, I think we have 93 left.

93 left. So talk a little bit about what you think has happened in the administration and then we’ll talk a little bit about the digital economy and preserving it because obviously it’s a big issue with the next administration.

Absolutely. So when President Obama asked me to take this job, he asked me to come and do a couple of things. First of all, build a bridge with the business community. He was not pleased with where it was at the time. Then to make sure the voice of business was heard in policy making. And then to be the chief commercial advocate for American business, both domestically and around the world.

How that relates to the digital economy was really, if you can imagine, we were post-Snowden, the relationship with the tech community was challenged. And so part of what we at the Department of Commerce have done is to really engage with the tech community and to develop a digital agenda so that we’re working with business leaders on the issues that are most important both to the government and to the private sector.

We’ll get into the recent AI announcements, but when you say it was tense, what does that mean? Was it just that … tech doesn’t really involved itself in government very much to start with. But they’re very excited about the Obama administration because at least he knew how to turn on a computer.

Yeah, I would say that the relationship was post-Snowden, there was concern with the revelations and what’s the relationship between the government and the tech sector. And what we’ve done and worked on very hard over the last three years is to say there is actually a reason for the tech sector to engage with the government. Many reasons. First is, think of all the new technologies, whether it’s autonomous vehicles or it’s unmanned aerial systems or it’s the Internet of Things or it’s artificial intelligence.

Self-driving cars.

Self-driving cars, on and on. There’s a public policy reason for the government to be engaged in these issues and the idea that development or innovation is just going to occur in a vacuum wasn’t going to happen. So there’s importance there. Second — and I think most important — we have a shortage in the federal government of technologists.

So one of the things that I’ve been promoting and others have promoted, is the idea that more and more tech companies should think about having some of their employees come spend time working in the government. Come for a year, come for two years, come help us with some of the challenges that we’re facing as governments. But also help really bring tech thinking into the government and have there be a cross-fertilization.

Why hadn’t that happened? Because you know this internet thing has been kind of big.

It’s been very big.

The kids seem to love it and the government created it, obviously.

Absolutely. And in fact, I don’t know why it hadn’t happened, but let’s just talk of where we’re at. We’ve got 3.2 billion people online. That number’s going to go to five billion by 2020. The mobile internet as an economy is going to be about a trillion dollar market by 2025. For us at the Department of Commerce, this is a big marketplace, a big sector, and we needed to engage.

It’s also one where the U.S. is dominant at this point.


But increasingly not so as the Chinese and other governments — mostly China, I would say, is probably the biggest challenge.

What I would say is we can’t take our dominance for granted. And that’s where a partnership between the tech community and the government really make sense. If you think about it, as the digital economy has grown, you have increased cyber threats, you have increased challenges to privacy, or questions around privacy. Automation is challenging the nature of work. Then we have countries around the world that are embracing policies that they’re using to stifle competition, stifle innovation, and really limit free expression.

So using policies like data localization, content controls, and onerous technical standards that can be used to discourage foreign investors. That’s a place, those are issues where the government should engage. But what we’ve found is we’re more effective at engaging with the private sector, understanding the issues from the point of view of the private sector, and then in some instances, not only engaging government to government but bringing the private sector along with us to explain why their policies are stifling foreign investments in different countries.

In fact, when President Obama hosted the ASEAN (Association of South East Asian Nations) leaders earlier this year, we brought the heads of IBM, Cisco and Microsoft to sit with the government leaders from the ten ASEAN countries and explain to them how their specific policies were impeding those companies from making specific investments in their countries, something those government heads wanted to have happen.

That’s what we call commercial diplomacy where we bring CEOs to talk with government leaders. The other way that we can help with some of these issues is we’ve just expanded our digital attachés in markets around the world. These are folks that we brought in as part of our foreign commercial service and their job is to help American businesses navigate the local policies and regulations that affect digital services or providing digital products. They also help increase e-commerce exports and increase access for U.S. companies.

When you started to do this and you started to engage them, what was the attitude that you hit? Again, they were friendly to President Obama, they gave him more money than any president has gotten.

One of the benefits of being someone who comes from the private sector and having spent 27 years in the private sector, I have a good understanding of, you know, how CEOs think. I’ve been a CEO. And what they’re thinking about is, “Why should I spend my time investing in this relationship? Is this going to work? Is this going to benefit the company or benefit my community or benefit my stakeholders in some way?” And so the way the conversation has gone is, “Let me explain to you what we’re thinking about as a digital agenda. Do you think this is valuable to you?”

What we did is we developed a digital agenda that was focused first on a free and open internet. Something all of us take for granted but is increasingly under threat. Second is to focus on trust online. The issues of privacy and security and encryption. Those are issues that are definitely affecting different businesses. Third issue: Access and a skilled workforce that can both work in the digital economy as well as work with automated machinery. And then fourth is new technologies, like we discussed.

What we found is a very receptive audience by the CEOs and the leaders in the tech community who said, “Yeah, those are important issues to us.” Then the other thing we had to do is prove it’s worth your while.

So for example, if you look at the EU/U.S. privacy shield which was the renegotiation of the former Safe Harbor. We at the Department of Commerce led that. We worked closely with the private sector as well as other parts of our government to really make sure that we could put a privacy shield or Safe Harbor back in place. If you remember that, Safe Harbor was really at risk. And what rides on that Safe Harbor is $260 billion of digital services that go back and forth between the United States and across the Atlantic to the EU.

By delivering, all of a sudden you develop a credibility with the tech community that says, “Oh these people not only are engaging with us, getting our opinion, but they’re actually using it to benefit and strengthen the credibility of American tech companies.”

But let’s go through all the different issues. All that there is. Let’s start with privacy and cyber security. One of the first things that happened very early — I think you were still in place — was the government hacking of the NSA stuff, very difficult situation between the administration and the government.

It was followed by the encryption fight over Apple. Different people at the administration had different points of view. Ash Carter was more pro encryption, which you know, I mean, it’s very different people.

So talk about those two issues. Because at one point, Hillary Clinton, for example, is much less pro encryption. She’s more hard on the idea that these companies have their own powers in this area and they look at it as protecting consumers. So let’s talk about encryption and then the government hacking itself, post-Snowden and all the revelations.

Yeah, so let’s take encryption first and then cyber security in general. So encryption, you know the challenge that we face is one of security versus security. The challenge being, you know, what access does law enforcement with a valid warrant have to get at information that’s either in motion or that’s sitting on devices or sitting in the cloud. And what they’re facing is increasingly more and more services are being offered where it’s not possible to be able to access that information.

Right. That’s the point.

And so this is the tension that exists. And what we are trying to do in the administration is to understand, it won’t work for our society if everything goes, all information goes dark and is not available to the FBI or to law enforcement at all.

And so the question becomes how do you address that and how do you actually work with the private sector? We at the Department of Commerce think we should work with the private sector to try and solve for what is evolving to a not sustainable situation for our security and our national security. So it’s not been resolved.

So what did you do in that situation? Here you are at the Department of Commerce sort of representing business and the FBI’s sort of attacking. So what do you do? What was your role?

So first, we’re part of the conversations with the FBI, with the intelligence committee.

Our role is to represent — in the conversations with law enforcement — what are the implications of the various actions that the law enforcement would like to do on U.S. companies and on innovation, and then likewise with the private sector to sit with business leaders and to say, “Look, the situation is untenable and not sustainable going forward. We need to come together to try and find a solution.” We’re in the middle of those conversations as it is and there’s not a resolution.

Where do you want the resolution? Where do you think the resolution is? Because you know, these things already exist and if they don’t exist here they exist elsewhere.

Exactly. That’s the practical reality. And what you realize is as you dig deeper and understand the technology better, which I’ve gotten the opportunity to do, you can’t just solve for one piece of the problem. You have to really look at it holistically. I’m a believer. I don’t know what the right solution is because I’m not a technologist. What I would say is I believe that to find the right solution, we have to find a safe place where government and the private sector can come together and acknowledge what we as a society have already said.

There are some limits to our privacy. We already do have warrants that allow with a valid warrant you can go into someone’s home.

Right, I don’t think valid was the issue. I think it was unlocking these encryptions. And you know, they do honor most of the valid ones. I think it’s the ones that did not seem …

No, but the conversation we’re having in government is when you do have a valid warrant, what do you do? And so that’s a challenge because there are some places where even with a valid warrant, you can’t get into the device or get access to the information.

Were you surprised by how hard Apple was on this? How stringent they were?

I think that in general people were taken aback by that.

And where is it now?

I think what we’re trying to do is to see if we can find a common place where we can work together on this problem. But it is not resolved.

Not resolved. All right, let’s move on to, in that area, hacking by foreign governments. You know, obviously the U.S. does this, everyone does it, but it’s been a big issue in the election with the Russians hacking voting, the Chinese hacking. It seems like every day there’s something.

Here’s the real challenge, which is obviously as we’ve talked about, the internet’s ubiquitous, but cyber’s the only domain where we ask private companies to defend against nation states.

That’s an excellent point. We’re the only ones that can, actually.

Exactly. And so government has this solemn obligation to protect our people against systemic threats. That’s the construct. But the challenge that we face is, regulations and legislation are not systems. They’re systems that are not designed to be able to address this kind of dynamic challenge of cyber security. Again, we are going to have to find a common place where we have to work together, the government and the private sector. So much of our critical infrastructure is run by the private sector. And all of this is connected, so our ability to defend against these countries is something that requires us to be able, the private sector and the public sector, to work together.

That’s why the cyber legislation was so important to create immunity or to limit liability actually, not create immunity, but limit liability. So when you cooperate with the federal government, which is really important.

The things that we’ve done is at the Department of Commerce we created the cyber security framework. So we’re all talking about common language, the common way of judging where we are in our presentation, either as government or as a private company, in addressing cyber security. We’ve also, the president created a cyber security commission, which we as the Department serve as the secretariat. And then what we at the Department have done also is create something called the National Cyber Center of Excellence where we work with the private sector on solving cyber technology challenges.

So for example, think about how do you keep a police car cyber secure? Or how do I keep a network to IV — you’re in the hospital — cyber secure. Let alone an autonomous vehicle.

Well, given everything is moving now, yeah.

Exactly. So these are challenges where again, the public sector, the government, has come together with the private sector to do research to solve those problems. And then the other thing that we’ve done, you know we as a country are short 200,000 cyber-security workers. And so we need to train more people to be in this field. And with that we’ve worked with the private education organizations to create a standard curriculum.

So we’re going to get into the idea of jobs and where that’s going, but how — as someone who is involved with this business every day — nervous should we be about these attacks?

Well I think that frankly, you know, running the Department of Commerce, I’m nervous.

Yeah, I can’t wait for your emails, Penny, I’m so excited.

[laughs] Exactly. But you know, the reason is because it’s a dynamic challenge, right? This is not something where if you solve for …

No, it’s in real time, happening in this campaign.

As sophisticated as we all get to protect ourselves, the folks who are attacking us get more sophisticated as well.

Absolutely. And they’re run by the governments.

Exactly. We have not solved this problem and so therefore I remain nervous.

And you’re being more careful with your emails, I presume.

We all should be careful with our communication right now.

Oh I’m way past that at this point. I’m in big trouble.

My view is, again, this is where given that structure of the U.S. economy, we’ve got to have the government and the private sector work together, and that’s where commerce comes in.

We’re here with Secretary of Commerce, Penny Pritzker, and we’re talking about all kinds of issues and we just were touching on the idea of jobs. Not enough tech workers, that’s one thing. But I think the more interesting thing, because it’s beyond just the tech workers which we need more of clearly, and other countries are training up their workers in tech rather significantly, and it’s the one place where employment exists.

One of the things that’s been brought up — and we’ll talk a little bit about AI — is the changing nature of the job market. One, the gig economy and how laws should change. And two, the utter replacement of jobs by artificial intelligence. We just had Elon Musk at our Code Conference and he was talking about this. And every now and then everyone in Silicon Valley realizes that AI will eventually replace enormous numbers of jobs. And right now in this election there’s a real worry about jobs, and the rage of a lot of people who were left behind in the last transition, and this could be even more wrenching. First let’s talk about the gig economy. Regulations need to change of how workers work, correct?

I think that yes, we’ve got to think about what is the safety net for somebody who is full time in the gig economy. And how is that going to be structured? And the arbitrage that goes on for where an employer can take advantage — and I don’t mean in a negative sense — of not providing a certain safety net because of the structure of employment. That’s a challenge for the United States because we need everyone to have a certain basic safety net for society to function.

It’s now at 50 million Americans, and mostly millennials. Millennials now are changing their jobs 10, 12 times. And this is how they think of jobs.

But what I also find so interesting, being a user of various services, driving services …

What’s your favorite?

I’m an Uber and Lyft user.


Frankly, I love these services. I always am talking to the folks who are providing the services. “Do you do this full time?” “How do you like it?” I have yet to meet someone who’s providing those services who isn’t happy with the fact they’re doing it. They like it. I met some who do it full time and some who are supplementing their income. And that’s a fabulous thing.

Think about it: I can, with relatively low barrier to entry, if I want to supplement my income, or if I can drive, I can basically bridge from one occupation to another or make this my fulltime occupation. I’ve met couples where this is what they do full time because it allows them time to take care of their kids. You know, this is great.

So all good, but.

All good, but what it’s doing is — the point that you’re raising is — we’re living in a time of change in the nature of work. First is, and I think that’s leading to a lot of the anxiety that we’re experiencing in our country right now. I think the causes of that are multiple, it’s not one thing. First of all, it’s globalization. It’s the fact that with the internet, it’s easier to move. And with logistics companies and with easy transportation, it’s easy to sell your goods or compete globally. That creates uncertainty and that is anxiety-producing for certain workers.

The second thing is automation. We now all work with technology and either it’s you, maybe, if you’re in let’s say advanced manufacturing, you’re working with different machines. Or if you’re in a services job, we’re working with our various phones and pads and computers, etc. So being digitally literate now is sort of a basic thing, a skill that you need. And then we’ve got the rise of new technologies like artificial intelligence that are — last week the White House released two reports on artificial intelligence. One that sort of takes a survey of where’s the current state. Second is looking at what kind of research and development needs to go on. But the third is they’ve asked for an additional report that will come out this fall about what’s the implications of artificial intelligence on work. You know, artificial intelligence is not a good or a bad thing.

Well …

Well, it could advance social goods, it could help you protect people, it can help to make our lives safer.

Decision-making is much better when a computer makes it.

Exactly. On the other hand, it could supplant jobs, and so that’s a challenge that we face.

So talk about that issue, because one of the things that Elon Musk was talking about when we were interviewing him … When Sheryl Sandberg of Facebook or Sundar Pichai of Google came on, it was sort of a happy, shiny future of AI and how it’s going to help us. And you know, I like my Echo like everyone else and I’m very happy with it, but it also creates a situation where jobs are eliminated. Not replaced with new ones, actually eliminated. Like radiology, computers do it better. There’s even AI reporters who probably are better than I am at this point.

What he was talking about is that computers get to the level in the most benign of situations where we are like … they treat us like a house cat. They do everything for us. The second thing is they actually supplant all jobs. It’s almost like shifting from the agricultural economy to the manufacturing economy, and even more wrenching than moving from the manufacturing economy to this economy.

I think that, as the President said, we’re not going to put technology back in a box. And to solve this, what we need to do I believe, or to address this challenge, it’s about education and workforce training. We’ve got to continue to evolve to be able to work with machinery. Elon’s a very, very technology-savvy person, but the question is, are all jobs really going away or does this mean we’re going to have to work differently?

Did you ever imagine an economy where we don’t work? Where computers do most of the things and we do not?

It’s very hard for me to imagine that. I’m a believer in the human being at the end of the day.

[laughs] That’s a big stance, a controversial stance.

Yes, I’m a believer in the human being. I’m going to go out on a limb here. But I think that that’s one of the reasons that President Obama and we at the Department of Commerce have made skills training and workforce training such a fundamental part of what we do. Even though I’m at the Department of Commerce, I have yet to meet a business leader who hasn’t said to me, “I’m struggling to find the talent I need for the jobs that I have open.” You know, we have 5.9 million jobs open in this country and we’re not filling those jobs because we’re not matching the skills that are needed with the talent that’s out there.

What does a job in 20 years look like, if you had to just guess? Neither of us will be working, but 25 years from now.

I hope I’m working. [KS laughs] If I retire it’s really going to be trouble for everyone. Anyway, I think that it’s a lot of working in teams. And I think jobs are working with machinery and working with our digital tools. We’re still going to need …

We have areas of massive underinvestment in our country, infrastructure. We need a trillion dollars of investment in infrastructure. That’s hard for a machine. Machines aide our ability to do that but they don’t do that work. And that’s good work. We have all kinds of … The grid, we need to manage the grid. We have all kinds of great jobs out there that in fact we need more people for.

About 10 days ago we had Manufacturing Day. Advanced manufacturing is growing in our country — 800,000 jobs created over the last five or six years. And that’s a career with great opportunity. As we’re doing more with composite materials, 3-D printing, photonics, etc. And so there’s enormous opportunity. There are jobs today that exist that didn’t exist. When I was growing up there was no such thing as an app developer.

And what is with these YouTube stars?! I don’t get it.

Exactly [laughs]. Exactly, jobs have changed.

So when you imagine a job, do people work all the time? Because the idea in Silicon Valley right now is of universal basic income, that everyone has a universal basic income and then jobs shift, almost continually.

Well I don’t know about you, but I feel like work is constant now because we’re always connected, right? And in fact I think the challenge is the opposite. How do you actually create downtime? Because we’re expected, connected to our digital equipment, we’re expected to be instantly responsive.

That’s because we have a problem, Penny, you and I. Other people don’t.

[laughs] I see, okay.

But again, think about what does a day look like in a job? Is there a place you go anymore? Or not?

Look. At the Department of Commerce, we have people who telecommute and work from wherever they are, and we have people who go to a place to do their job. I’ll tell you, it’s hard for me to imagine doing certainly the work at commerce where we’re not convening. I’m constantly going to convenings, and that’s where the people are coming together after having analyzed all the data and analyzed all the information to say, “What’s the decision that we’re going to pursue. And how are we going to pursue that decision?”

So I think there’s going to be a place for offices where you go to work. Many jobs may not be that and that’s to the benefit of society. Because not everyone wants to have to commute to a job.

One of the things that’s recently been on the table is the control of the internet. Talk a little bit about this because you’ve had some issues with a certain senator named Ted Cruz. Explain the issue for the people.

Yes. So first of all control of the internet, the internet is not controlled by one entity.

For some reason people in the United States think the United States controls it because we created it.

Yes, but that’s not factually accurate.

Right, no, I get that. Wow, you’re kidding! [laughs] Because this entire year has been about actual accuracy, but go ahead.

[laughs] We’re not going there.

No, we’re not. I will not ask you one Trump question. Go ahead.

I appreciate that. Look, the issue that has been raised is that the Department of Commerce plays a role as it relates to the domain name system.

And we are drawing from that role and that function actually exists. Our role has been one of basically oversight. The function exists at ICANN. And ICANN will continue to manage the domain name system as they have for a long time. And it’s been always the intention that the U.S. government would withdraw from this role. In 2012 it became really imperative that we move along and get this done when Russia, China and 89 countries came together and said [so].

The United States plays a role in the internet, and if a government’s going to do that, we should move the management and oversight of the internet to the UN. That would be bad. Our position as a country and as our administration, is that we should have a free and open internet that’s managed by a multi-stakeholder community.

So we have been, you know, with the passage of the continuing resolution, the role we’ve played has changed. And it’s just expired. The contract expired and so now we’re out of that role. And that’s important because as I said earlier, a free and open internet is something all of us rely upon. And it’s under duress.

So talk about the attacks by Senator Cruz and others.

Well there were those who believed that this action would make the internet more vulnerable to government forces. We’ve worked very hard with ICANN on a governance structure that really minimizes the role of all governments and leaves the domain name system and the governance to the internet in a multi-stakeholder diffuse oversight, which is what the internet is and which is what makes it so unique.

Right. Were you surprised by the attacks? Or how do you respond to them? And what can happen? I don’t think he can do much but complain at this point.

Well the transition has occurred so it’s over. We feel as an administration very strongly that this is a way to keep the internet free and open.

Where do you imagine evolving going forward? Just in this same style that it has been, or something else? Given the worries about governments like China and Russia.

I think that the biggest challenge is going to be cyber security and figuring out how do we deal with these governments. The government attacks on the internet come in both policy as well as hacking and cyber security. And so policy is one fight that we’ve got going on, but on cyber security, this is where we’ve got to find ways for the government and the private sector to work together.

I think that the President has created a cyber security commission. That commissioning is due to put out a report December 1st with a blueprint for the next administration as to how to go about dealing with the breadth of cyber security issues. Not just for the government but in general how should we posture ourselves. So I don’t want to get ahead of that, but that’s an important report.

So let’s finish up by talking about [how] here you are at the end of the administration. What are some of the things you think the next administration — I know you don’t like giving advice to the next group, but what do you think the key issues for business, especially given the impact of tech and the need for governments in the private sector to work together and all the issues. Health care, driving, transportation, privacy, digital information, entertainment, everything touches digital now in business.

Absolutely. The economy is digital.

So what would you say is critical if you were sitting down with the next department?

Well in fact I am working on …

Transition documents.

Yes, but also a letter to the next secretary. I would say one of the things in my letter is about engaging with tech leaders and engaging with digital policy agenda. It’s very fertile, there’s a lot going on in the world, and it’s a very big role for the Secretary of Commerce and the commerce team because we run the national telecommunications and information agency, we run the national institute of standards and technology, we run the patent and trademarks office. I keep going on and on. We have lots of equities in the tech world, in the digital economy. And so I think my advice to the next secretary is, you want a strong digital agenda and you want to personally engage in that. There’s enormous action there and a lot of opportunity to work towards addressing some of the challenges.

I think the second area is on data. The Department of Commerce is huge. We produce 20 to 40 terabytes of data a day, between the census and the surveys that we do. The national weather service, the patent and trademark office, our economic statistics data, we’re full of information. We have had a concerted effort over the last 18 to 24 months to really make more of our data available to improve the quality of our data as it relates to GDP.

And third is we’ve created something called the commerce data service to really create products that can be used both within the government and externally. And we have more partnerships now. We’re just announcing 35 partnerships with different private-sector companies on data. So we’ve got a robust agenda but it’s really, if you were to use baseball terms (since I’m a Cubs fan and baseball’s on my mind), we’re in the first or second inning of a data agenda.

That’s another area fertile for engagement and lots to do there. You know, trade and foreign direct investment are really really important. That’s why the trans-Pacific partnership, one of the reasons we’re so focused on this is because of the value between the trans-Pacific partnership to the digital economy. It’s the first trade agreement that has an e-commerce chapter that prohibits data localization. That really addresses a number of the policy issues, 12 countries agreeing to policies that favor technology and e-commerce.

So that’s, you know, a very, very important trade attracting foreign direct investment. The Department of Commerce also is involved in climate science. We run NOA, and that’s an area both fertile for continued scientific exploration but also for I think there’s enormous potential, post the Paris agreement and the recent agreement of countries, to commit to lower carbon emissions.

The U.S. has great technologies. And the Department of Commerce to the international trade administration as well as through our work with NOA has an opportunity to bring those technologies around the world to the benefit of the U.S., not just companies, but workers and creating jobs here.

So last question, what’s your next job? You going to drive an Uber?

[laughs] I’d like to ride in an Uber. I’m not the greatest driver.

What’s your next job?

You know, I don’t know. I’m going back to Chicago and I’ve got to figure out what I’m going to do when I grow up.

All right, we’re here with Secretary of Commerce Penny Pritzker, thank you so much.

Thank you.

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