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"The average American doesn't realize how much of the laws are written by lobbyists" to protect incumbent interests, Google CEO Eric Schmidt told Atlantic editor James Bennet at the Washington Ideas Forum. "It's shocking how the system actually works."

In a wide-ranging interview that spanned human nature, the future of machines, and how Google could have helped the stimulus, Schmidt said technology could "completely change the way government works."

"Washington is an incumbent protection machine," Schmidt said. "Technology is fundamentally disruptive." Mobile phones and personal technology, for example, could be used to record the bills that members of Congress actually read and then determine what stimulus funds were successfully spent.

Schmidt pushed back on the claim that the White House doesn't understand business. He acknowledged that the American business community distrusts the administration, but he said the criticism are mostly about tone. He also brushed off the idea that the White House needs more business executives as an argument about "symbolism" rather than substance.

On the hot topic of China versus America, he made an pithy distinction between what makes the world's leading powers uniquely successful. America is a bottoms-up entrepreneurial engine, and China is more like "a well-run large business."

"America's research universities are the envy on the world," he said. "We have 90 percent of the top researchers in the world. We also have a bizarre policy to train people and then kick them out by not giving them visas, which makes no sense at all."

China governs like a large industrial company, he added. "It wants to maximize its cash flow. It wants to maximize its internal and external demand. All of the interesting new ideas [for example, doubling down on solar tech] can be understood as a business expansion."

The end of the interview turned to the future of technology. When Bennet asked about the possibility of a Google "implant," Schmidt invoked what the company calls the "creepy line."

"Google policy is to get right up to the creepy line and not cross it," he said. Google implants, he added, probably crosses that line.

At the same time, Schmidt envisions a future where we embrace a larger role for machines and technology. "With your permission you give us more information about you, about your friends, and we can improve the quality of our searches," he said. "We don't need you to type at all. We know where you are. We know where you've been. We can more or less now what you're thinking about."

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