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President, EDventure Holdings

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President, EDventure Holdings

Good afternoon. I have three things I want to do this afternoon, and I would like to do them quite quickly. First, I want to explain the basis of how I look at the questions I am going to address. Second, I want to talk about how important networking and electronic networking information services are for the development of the rest of the world and how that can contribute to our national security. Third, I will give two small pieces of advice to our government.

I will not try to cover the whole world and speak as a statesperson, but rather talk from my own experience and give you some concrete sense of how I see networking changing the world. I am a member of the National Information Infrastructure Advisory Council, which means I am very concerned with what the government is doing about our own information infrastructure and the kind of rules and regulations that will govern its development and health.

I have some of the same concerns in Eastern Europe, but I am not advising any governments over there. I spend about half of my time in the United States. I am very much a part of the computer business. Somehow I feel as if I am in the middle of a family squabble between Microsoft and everybody else. Then I have this other life that most people in the United States do not know about, which is in Eastern Europe where I am trying to foster the Microsofts, Lotuses, and similar companies of the future.

When I heard Bob White talk about the number of scientists in developing countries, I thought about Russia which certainly has a lot of national security concerns. In Russia there is a very large proportion of scientists, higher than in the United States. The problem with these scientists is that they have this notion that being a scientist is a very special career (which indeed it is) and that the government owes them a living because they are scientists. Russia's government does not share this view--and Russia cannot afford them.

People in Russia are going hungry, and not because there is not enough land to produce enough food. It is because there is not enough commercial infrastructure, because the country is in chaos. It is disorganized, and yes, this does matter to us. A disorganized, chaotic, desperate, struggling Russia is a real danger to the rest of the world. A healthy, flourishing, commercially sound Russia would not only not be dangerous to us, but it would be a good market.

People keep looking at international business as if when we win the other guy has to lose. If those other markets become successful, we will lose jobs to them. We will not; we will sell more goods to them. This really is a positive-sum game. If we can turn Russia into a healthy market, it will be healthy for us, too. The goal here is not to beat other countries--it is to help them succeed and then still to stay better.

Now, I would like to talk a little bit about what is happening with networking. The first thing to understand about Russia. . .a lot of people do not know that it actually has a fairly well-established Internet equivalent called Relcom. This is something that began 10 or 15 years ago, much like in our universities and research institutes, and with a fair amount of interest from the KGB. Relcom's first server was fondly called Kremvax. About two or three years ago Relcom became commercialized. Konstantin Borovoi, head of the Russian Commodities and Raw Materials Exchange and a well known political figure, recognized the value of this network and invested in it. In some ways they are even ahead of our Internet. Relcom is now pretty much commercial, but it is still disorganized and unreliable. But it exists, and it has had a fair amount of influence on the development of Russia.

Bob White asked me today, How is it in Moscow? The answer is that there are two Moscows. One is the old Soviet chaos: It is a corrupt government with a lot of disorganization; it is people who do not really know what is going on; it is everything that we fear. It is not a nicely, well-organized Soviet society; it is Soviet society disintegrating.

In the other Moscow I know, people are tapping into Relcom. They are sending messages back and forth to the United States. When I go to Russia, I find that scientists have heard of the Santa Fe Institute, which is more than a lot of Americans have. Russia is connected to the world. They still have the problems of living within Soviet society, but these people are literate; they are contributing; they are writing software programs; they are part of a commercial marketplace.

According to Russian journalists I know, the computer industry is probably the cleanest marketplace in Russia. The computer business in Russia is a real business based on profit, not on bribes. It is the kind of market economy we want to foster in all of Russia, not in just the computer community. Networking is enabling one small sector of Russian society to leapfrog. Many of the scientists I mentioned are becoming programmers. They are designing accounting systems and transportation systems; they are making Russia s economy more efficient.

There is now a business in Russia called Office Club which is very similar to Staples or Office Depot which sells staplers and computers and software and paper; and one of their best sellers is wastepaper baskets. Office Club has changed the life of many businesses in Moscow.

To summarize, networking is bringing to Russia real economic development and transfer not just of science and technology, but of commercial ideas which are so important.

The thing that is so tragic about Russia is how much it has in the way of natural resources and how much they are wasted. They take iron ore out of the ground, and they subtract value from it every step of the way. It is well known. The things that Russia produces cannot be sold at world prices. That is slowly starting to change, but a lot of it is still dependent on better communications and infrastructure.

In other sectors of Russia s economy, you can now order things over Relcom. This is not a well-established marketplace, but there is a lot of electronic communication. If you live in the provinces and you want to get the thing that you ordered, your uncle still has to go to Moscow on a train to pick it up and bring it back to you. What is still missing is a normal distribution system, normal transportation, the ability to make reservations, and the whole market economy which is more and more based on information processing and networking. This is about to be built.

A second thing that networking is bringing to Russia is better communication. To call it a free press is like talking about having a vacation home on Mars: You can imagine it, but the context is so different it is not really relevant. There is more communication; there is more information being passed around. People are beginning to go outside the traditional channels to get real information. It is a slow process, because if you have been fed lies for 50 years, you do not know what to believe. The Russian mindset does not have the same understanding of truth or the same habit of resolving contradictions and trying to figure out logically whether or not something makes sense.

But more that information networks are out there, the more that trust will start to happen. There are honest journalists there. There is a news service that comes over Relcom and now, of course, there are Reuters and CNN. Not only are people getting the news, but they are beginning to talk back and communicate with each other. That is a very important part of a free society in Russia as it is in the United States.

The network is a free market. People are beginning to get less scared of saying what they mean. It is exciting. Frankly that is why I go to Moscow every chance I can get, which is about every other month. It is a new frontier, and it is based on the spread of electronic networking and communication.

Finally, me give two pieces of commentary for those of you in the government who control resources. I sit on the board of the Eurasia Foundation, which receives USAID money. It gives grants to small, nongovernment organizations in Russia and the rest of the CIS. This is a very exciting organization to be part of. They do not invest in huge infrastructure projects, and they do not deal with large corrupt governments. They go out and find small organizations all over Russia and the Republics and give them small grants, like $10,0000 to buy a Macintosh and two printers; $20,000 to buy some textbooks or to go to some course. If you look at them from the format of a traditional charity they spend a huge amount of money on overhead which everybody knows is a bad sign; you should spend all the money on grants to people. The Eurasia Foundation goes out and talks to the people it gives grants to. It advises them. It helps them. It makes sure it is giving the grants to the right people. So there is a huge amount of overhead in giving small grants. It is much more expensive than giving large grants, but those grants are tremendously productive.

For example, they held a contest. The 70 or 80 people who applied for this grant did not just send in application forms. They came to a meeting, and each one presented his idea. They all learned from each other. Three or four people actually got grants, but 70 or 80 people learned a lot from each other and from the Eurasia Foundation people. This communication was taking place where they were able to learn from each other and get new ideas.

It is very important for the government and anybody else who is going to Russia to take the time to spend their money wisely, and take the time to look for people who are not approved . The governments in some of these other countries are not quite as benign as ours, and you cannot look for a seal of approval from the government. You might be steered wrong.

The second piece of advice is to be very careful of the impact of what you do.. Putting a different twist on what Bob White said earlier, we should not just ask what we can do for them, but we should ask what we can gain from them. When an outside organization goes into Russia with a whole lot of money and starts a communication service, it may be providing something of benefit to certain Russians, but it is competing with local efforts. It is important to move carefully and not trample on what is already growing underfoot. This requires not a lot of money, but a lot of manpower. If there is anything our government can do well, it is to provide a communications infrastructure and trained people. This will help much more than huge amounts of money.

These are my comments; I look forward to listening to the others and answering questions. Thank you very much.

William H. White
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