tv Makers and Takers CSPAN September 25, 2016 7:45pm-9:01pm EDT
political divide in america. she was recently named a finalist for the national book award for nonfiction. on tuesday at powell's bookstore in portland oregon, to mark the annual band book week, a panel of authors will discuss books i have been challenged due to their content. wednesday as part of george mason university, former newsweek senior writer will provide a history of mental health. thursday, susan quinn will examine the 30 year relationship between first lady eleanor roosevelt and llerena. saturday in philadelphia, bradley bursar will receive this year's book award which recognizes the best book that advances conservative principles for his recent biography of russell kirk. next sunday we were live with author on in-depth and we will
take your questions and comments including his life on paul robertson. that's a look at some of the author programs book tv is covering this week. many of these events are open to the public. look at them to air in the near future on book tv on c-span2. [inaudible conversation] >> good afternoon ladies and gentlemen. i am heidi young and i am the director of corporate
partnership here at world affair. it is my pleasure to welcome you here today. this program is part of the global business form, an initiative of world affairs that focuses on topics of commerce, technology, and society. we will be exploring topics along the line of financial inclusion, future of medicine, and the future of transportation. i hope you will join us for those programs as well. today, to learn more about the forum, please please csi world affairs.org. today we are pleased to have with us rana, assisting managing editor of time and author of new bookmakers and takers, the rise of finance in the fall of american business. a bit of housekeeping first before we get started, please take a few minutes to silence your cell phones and other noisemaking devices. toward the end of the program, during the last ten or 15 minutes of the program, we will be inviting audience members to ask questions. you can do this in two ways.
there are blue question cards on your table, please feel free to write your? those cards and it we will collect them throughout the program. as an alternative or addition to, we will have this microphone in front of me so you are invited to ask your questions live at the mike and we ask to make your way to the mike, please walk around to the back of the room given the camera set up that we have. we are recording for radio, furor our future broadcast which airs on monday nights at 8:00 p.m. c-span is also recording this program and will be video recording for posting on our website. now it is my great pleasure to introduce tim riley. tim arrival he is our moderator this afternoon. he is founder and ceo of o'reilly media inc. and a partner of the early stage venture firm.
he is also on the board from or riley media, code for america, pr j and pop fox. he has a history of convening conversations that reshape the technology industry. if you've heard the term open source software or the maker movement or government as a platform or next economy, he has had a hand in framing each of these big ideas. his next economy summit will be held here in san francisco on october 10 and 11th covers many of the same themes that we will be discussing this afternoon. please join me in welcoming tim o'reilly who will introduce our speaker. [applause] >> in afternoon. thank you for joining us. i am delighted to see you all here. it is now my pleasure to introduce today's guest. ron has been the assisting
manager of time capitalist column and cnn's global economic analyst. before joining time and cnn she spent 13 years for foreign news editor. you can see her full bio in today's programs fire. she is the author of this remarkable new book called makers and takers. i had a galley of this book and i immediately contacted the publicist and said send me a box full of these things because they wanted to spread them around to other people and i proceeded to pass them along to many of the leading likes of silicon valley. it's really an important book. the subtitle really says a lot, the rise of finance and the decline of american business. it is very proactive, but it is something that i think all of us need to be thinking about. thank you for joining us. >> thank you for being here.
>> thank you to world affair. being on the stage with you is quite an honor. >> like to say that my reputation exceeds me. >> rana, i have a line of questioning prepared but bricks it which is very relevant to this discussion has really come to the forefront. breck sick, donald trump, how are these things related to this topic of the rise of finance and the decline of business and the middle class? >> i think they are related. in some ways, both the leave vote and donald trump is protest. it's not so much that the leave contingency in the uk, in my opinion had the answers for how to deal with some of the economic challenges that are racing advanced economies like the uk and the u.s., many industrial countries in europe
as well, but they are representing an antiestablishment movement in some ways. one of the things i cover in my book is how the development of financial capitalism in our country over 40 years has been, in some way, a closed a closed conversation. there have been rules that have been crafted that, by both parties, republican and democrat that have worked for some people and i would argue a smaller and smaller group of people, but not for creating a kind of inclusive, sustainable economic growth and capitalism across the board. to me that is what breck says all about. i personally very sad about breck's appeared i was was a foreign correspondent in europe for a number of years and both my kids were born there and i covered the beginning of the euro and it was such an optimistic time, it was a feeling of coming together in economic unity but there was always the sort of political
hole at the center of europe. the europeans decided to not do the political that was necessary to make the unit eu sustainable and then when the bad times came , the tide pulls out and you sort of get this feeling of people hunkering down and wanting to be a little bit more tribal and i think that's what you're seeing there anything that's what you're seeing here in some cases. >> so let's unpack this a little bit for people who haven't read your book. let's talk a little bit about your fundamental notion of how financial his age and has changed the shape of business. >> let's actually start where you start your book. it opens with a fairly blistering indictment of apple under tim cook. >> yes. >> because we think of apple as this great innovative company, to have them play a starring
role in a book about what's gone wrong is a little edgy. >> what's your beef there? >> it's funny my editor said that two. >> are you sure you want to start with america's most loved company. >> i was like yeah, why not not. the reason i actually started with apple, had actually done a profile for time a few years ago on the big activist investor that is a rebranding which i get into a little bit in the book. he was, until quite recently holding a lot of apple stock and he was tweeting every few weeks telling tim cook in the board of apple to do more share buybacks which many of you probably no, when companies do share buybacks it artificially decreases the number of shares on the market and generally has the effect of bolstering the share price that doesn't actually really change everything in the underlying
corporate story. it's interesting because not just apple but many american companies do share buybacks at the very top of the market. when a stock has risen, when growth has happened in the company is at a turning point and they don't really have anything else in terms of their growth to sell to the public or wall street, it's a way to to get more stock price hit. the problem is, apple was issuing debt to do these share buybacks and that in itself is a little ironic. you look at apple, one of the richest if not the richest company in the world that got about $200 billion were worth of cash sitting in bank accounts, and many of them overseas because they don't want to bring back the money to the u.s. and pay the higher than average tax rate on it. we could go off on a tangent about whether or not that is really fair given that so much
of what makes the iphone smart was actually developed by the federal government, but i will leave leave that for another? another panel. it was a deep irony to me, here's this company that doesn't need any capital and yet is more involved in the capital market than ever before. over the past few years, apple has made promises to give back to investors in the form of share buyback and dividends almost as much as it has sitting in bank accounts abroad. that's because it can do these very low interest bond offerings. it's very cheap right now to do that in u.s. why is it so cheap? because we had a financial crisis in 2008 and we had no real fiscal policy and politicians were gridlocked and unable to come up with a real way to bolster the main street economy.
the fed, the central bank. should it in, dumped money in the economy, kept rates low and corporations can now take on a lot of debt. this is a long-winded way to say you have the richest company in the world holding more debt than ever before, paying out the wealthiest 10% of population which owns about 80% of the stock rather than investing, as i think steve jobs might have done in the new thing, in the big are indeed investment, in the blue sky investment that will really change the economy. that to me as a good place to start exploring this trend. >> there's another aspect to that which is of course the apple devices are made in low-wage countries as opposed to being made here with the argument that you have to do that in order to be competitive and yet here's apple with the most profitable company in the world saying well, if we don't use low-wage employers, if we
actually do this in america, we wouldn't be competitive. you're starting to dissect the stain of a problem here which is that corporate profit is made sacrosanct above all else. >> that goes back to something that law professor lynn stout has called the shareholder value, if you scratch any business person, they will basically repeat this idea that they have a fiduciary duty. their primary duty is to manage their shelled holders. turns out that there is very little legal requirements for this prayer they want to pursue social goals along term strategy and yet this doesn't happen. that's a lot of what you talk about your book, why. can you tell us why is it that people have kinda bought into this? >> so lynn stout is amazing, she
did a big interview for the book and had some great stuff to say on this. chapter four of my book actually look at this issue and this shareholder value was part and parcel of what's called the chicago school of economic thinking. it was sort of a market, just focus on the share price and everything else will sort of follow, social good good will follow from that kind of thinking. :
note >> >> we are not making decisions rate for the customer base so we are in eroding the long-term potential market share of the company that is all about shareholder value. with after having lived edward tried to seize some of the models in europe by do this as not deal the way to do takes so misses a very recent conversation but people thought this is how capitalism works shareholders that is what
you do but that is not what they do and germany of the stakeholder capitalism based around the ecosystems matt workers have a seat at the table civic society and government officials, there is a shared conversation which as i explained, can help corporations while the of the examples i get into absence of the financial crisis the financial sector laid-off the huge number of workers immediately. the germans did this a little differently. one had a different model some went on for lotis the extra time u2 do retrainee and upgrade the factories to upgrade when there was not a lot of work to be had some with the global economy started to recover and china
was coming back with china was ready to go so they grab a lot of market share who had taken a short-term to cut capital cost. >> let's break this back around one to brexit. , and because it not have this much on these issues. so to go out from the underneath this european model. so perhaps with government
over regulating bill also would distrust of globalization. that is another piece of the story i am of two minds because there is a powerful narrative about companies using the cheapest labor they can find. effectively people are a cost to be disposed of whenever possible that is clearly driving up populism by yet there is another side which i see pointedly if you ever see the visualizations. basically stages of world health or poverty over time clearly it has bought up our section of the world at the same time has suppressed the
incomes of many former people. soleil looks like we have a zero sum game so well looks like others can't get better but yet it is more complex. with the notion of profits to workers this another piece of the narrative. how do we tell the story correctly so we make the right economic prescriptions >> that is such a complicated topic. i had a conversation with howard schultz that was a founder leader that seek more about this a war with more leeway want to pursue the price that we had a conversation about this topic and said we are
becoming a nation of makers sandpiper's i have to make sure there are more buyers otherwise the math does not work. so what he says his the economy like ours where consumers spent. >> host: day%, would people have not gotten a raise since the 1990's and many working people particularly those that were laid off one that haven't gotten a real raise in real terms since the '70s to have a real problem. not just economically but even politically so this is wage share how to get that up because of the last 40 years that is what is marketed. if you divide the economic pie into public kent corporate and the labor share keeps shrinking the corporate sector keeps
getting bigger because of globalization which. >> but because of those choices which is partly that short-term profit. >> that's true and i am glad you rephrase that for me but it enables capital to flow to go to where it is with cheap this with those low-wage countries but we are added to pinpoint because a lot of those countries like china are having their own problems with jobs leaving their countries. chinese factory jobs are now going to lower wage asian countries. if there is a day supply chain re-evaluation of kuwait on. but to be to what will be sustainable to support local ecosystems? that is the action.
>> this image is barely central to the buyers and the makers is to the short-term thank you effectively when you take money and it goes to carl icahn it comes at of the real economy. he is able to venture capitalists and amazon. i am rich i am clear that customers create jobs. and if we don't pay people enough they cannot be customers. i can only sleep and in one bed or use one palo. i can take a surgeon number of vacations but not will it -- not 1 billion times as money -- many but the self-interest review really put your figure is you have written the rules a beloved by the way of book his
called rewriting the rules say prize-winning economist and says the economy is not like the law of gravity but colada that is tilted it cruelly they favor financial interest of the incentive structure for the corporate cio. so talk about the the trade-offs that we make when we reward for angeles station over productive investment over hiring people this is the trade-offs. >> his book is amazing and a
plan that he has developed that is at backbone of the book in the pivot points but so the way that the tax code incentivizes behavior's that are not necessarily from the mainstream economy. it is not necessarily a productive at the corporate above all. with the mortgage interest tax deduction i am a huge beneficiary and i get to write a lot of that off of my taxes but if you look at who led benefits it is large middle and upper class. and also other perverse effects. hooper so that has affected
so allows people to get into a house he bracket where most keep the majority of their wealth. the same of the corporate level it is much easier to write off debt from taxes than to say do something productive with your capital than be rewarded for that investment i could go on. >> so who are the of members of the footage to class? is starkly the argument is the firefighters if you looked at that but the pressures that time that the to short-term kiki you
talked about jack fogel and the vanguard index funds but they don't have the same pressures to outperform the of market. if you are the active front you are trying to maximize short-term profits. so the mutual-fund industry is fighting and fighting est interest. >> jack google it is also a and is one of my primary sources of the book when we talked about one of the things that was fascinating snaky to people in the financial industry believe
baker's and spoke to be a bridge arrested tended to be older in their seventies or eighties and they had seen the way the industry had changed at a time when they were still words of people's money but when they cast the managers took their money. did then was led out to business. that is how they imagine a recapitalization should do. e. last 40 years that model has a tireless change. and now goes to business investment.
did all of which creates the bubbles we have seen over the last decade. did to have a sustainable economy. like anybody has see very quickly that hardly any actively managed funds outperformed the market. so because we're in the forward k. wheeler and the actively vintage runs so asset manager is the fastest-growing part of the financial industry. we talked about too big to fail but it asset management is where a lot of visitors in is colleague with the largest pool of money. to put the ability of the index fund and forget about
it they started to courage the numbers the average person has a retirement age in the active set of fund pays higher than average fees and it deals with the lower than average return will eat between 30th and 60 percent over lifetime. it is a scandal like big. that policy-makers are starting to talk about. for those that don't have access. there's also a point to be made that private retirement system would is not working so well. has aspects that the head of
the state is beginning to eat the tail as the asset managers themselves are becoming panicked because they know we are into a period of lower than average returns. said no deaths one pretended growth so returns will be lower-than-expected in the province of dash do those promised of 8 percent they will be lucky to get for and there will be political backlash. >> i remember larry summers recent. want want so with all these
people love of work but to take those low interest rates to inflate the of bubble of the trade the economy. with the original role of the financial sector to support the real economy roared dash economy. where there is a giant concede our there is more ready to be made to give the spread and the financial markets rather than investing on the real business. so what do we do? wobble so what are those recommendations by. >> i do have a solution chapter in my book but it is a broader way below dash
broad array. one i do start to the first biggest to change the narrative. of the east coast policy-making circles was that the financial markets are at the center of everything. so you have to save the banks. with the argument in dyewood flip that the financial markets are services phone -- are meant to serve other industries. so what has happened and only the financial sector and in many cases by one of
the chapters of about with how volatile they have become with the physical commodities that could be illegal to own half of the world's aluminum. you may have read the wonderful front-page year times story to quarter the world of limited market that are out there to prevent people for basic businesses to create products the it machines to feed ourselves. did that is to help us pet news just putting in on a forklift moving from one
side of the route to the other. but then to drive up the price of aluminum wildly that hurts anybody who has to make aluminum cans and also we were paying for industry gears for your six-pack. that is fairly mild. i have the conversation and used to go to places to talk about this with the little red cap and and it held one day's worth of trade delivered by the program to reach children. she will stand in front of people ride around 2009 this is not much greater i can give every day then pour out
half of it. now this is a much i can give because of the cost of wheat and rice. it is said just led the but actively not supporting and degrading society sector changed that. >> >> that has better hostile to the real economy and then it was suisse some financial regulations and with changes of the tax cow.
i will continue with this example. that is a low heat for it. you have no reason to be in the aluminum market. for data. so why haven't they done that? and it doesn't need uncomplicated to rules let in some cases to look at all activities that has social value and that doesn't. but the tax code is low fruits as well. it is politically contentious one but one of
the reasons that i wrote the book i was stunned at how much in they were throwing at slicing up the tools. walker but it was so perverse not only make it difficult to implement but also a lot of complexity that is started to be onerous. so i had a conversation in 2013 so with that lobbied power of the big banks
doesn't make difficult to work properly? he said the cut demo we needed. and lydia saad public records that 93 percent of all weeks of the most part part sard done with the largest banks themselves. facility love to be with real confusion and who else are we talking to? [laughter] oh my god and this is one of the non-financial people in the rio was but the media has been a part of this. it did not get reported well into talk to treasury officials.
>> so with the different political environment comedy is the first of all, with birdies theaters sorrel is with foreign or donald trump and his intelligence? so actually to come not in the opposite way with brexit expected. and then to say we dodged a bullet? so even those people like one johnson as a conservative bid the u.k.
suddenly maybe it is in such a good idea. it is possible to have a cruelly out .. with a clear urd democratic mandate so then you may have another vote. >> but the question that i try to get to a is brexit was very crude to get across a message that the economy baby working for you but not for ordinary people.
as well. did elizabeth ward aboard is interesting. we need people to speak clearly cannot authentically to those who were hurt by the process. wobble. >> what about your up? bonds that depends of whether the continent takes the message. to have a currency union without a political union because it works in good times but what if they devalue or different fiscal policies it starts to fall
revolution that they would say you don't order to suits. so then becomes a fashion or creative economy but these things were impossible to speak to the industrial revolution and we will dig a tunnel over to france. [laughter] what ought the phase we should be working on? do you have any prognostications? >> udall much more than i do but definitely until recently have was worried whether or not silicon valley would pick up pecans
now they are able to act like banks in addition to borrowing huge sums of money they underwrite corporate bonds. there is a lease so much cash that isn't invested there is footage all copper and operate with the top firms but that is comparatively to the of market share is certainly much purer with the big industrials of the past. but i am interested recently by a british author one that was a little bit about for a vigil as asian but a
relatively optimistic view of the possibility of technology to win power labor to make it possible to have it possible with the benefits of capital. i just did a piece of the platform cooperative has been big as a business model in the agricultural sector with some of farmers coming to gather like ocean spray is not a typical, but the but cooperative of those who have they could be that lays on top that refreshers that seoul's their product so they get a much greater wealth share than were taken on their own and can charge $45 vs the going price
because of the economies of scale. you already see in many cities the disgruntled buber drivers going down with their own platform or health care cooperatives. the atm back to the labor share to empower labor to take a child of wealth kid be quite profound we the government to create a framework that is doable. >> now we are ready to time to have questions from the audience but we also have opened up for that microphone if you could to the microphone go around to the back but esso non-bank
want to get to the question. >> 1/2 been interested but in election year to focus on a conversation the reason why want with the pastor resolution to set a commission. or to let national service. to pass the resolution of the registration of process but the chairman reed moved that from the bill went out in july they will have a joint committee decide all of those. helping them to resolve
those issues with. >> id is a cover issue of national service. >> with copies of the commission. said to be big bond national service and a rigidly briefly of priorities but my book is an excerpt in the peace questioning the future of capitalism. did with the next government should take on. so people who are working
this as part of the of market commission producing a book called america's moments with do america. it is clearly a big part of the discussion but part of a national service it is a really good question. but i spoke with a man who was a former french oil trader clearly x military talking you out the competitive spirit of french illustrators -- competitive traders like a big league sports somebody else tries to take all your money. as they are very competitive with clearly x military is there any connection?
that led me down the path of there it is a class of activities that we really don't have a channel and our society. with us competitiveness of business. but i wonder if they're in is a connection and the old jeopardy real culture to find a way to take that energy to marry with discipline so there could be some real benefits that was universal or compulsory. so you are shaking your head. >> but it is interesting i take your point. but the brain drain to wall
street has been a profound. because i had a friend who was a french mathematician who did high-frequency trading. so that talent and that drive going into more productive areas. >> but that counter story was one from wall street who lost that job with energy startup. did they do high-altitude energy. but the math is harder. but for example, there is a big driver for those who
want to do seeds that our hard. but with the of leadership that is missing from political discourse in should be more about those the is that our hard and necessary we do have inspirational moments to say we will tackle malaria. or we will go to bars. we will we seek transportation. s some of the big eight this across-the-board how do we take all of the reservoir talent? as the cost and as an asset that we can deploy?
bed that to me is a big part of it. so we stop putting so much money into the casino because that will require those that hicksite people to say we will put a canal through the business of panama i get would make the of world richard that is a big part of what we needed as a vision of how else he could spend the money with the financial-services casino. >> i agree. civic we should keep going. >> but i did and did to rio and he had a statement to make that he cannot find him he needs for business schools because they tell
them to ignore human talent but daddy's to be shifted to the asset part and use spend more on that and business leaders feel that way. >> but to what extent has austerity and supply-side of the poster session stagnation play a factor as well? sussex get questioned so how do c. bowman deals shape the the future price so quickly it was of mistake we can see that hour but the european crisis was a crisis and they
needed to get their issues in order that is what '01 and you don't do that but i was reading the papers during the debate there was a strong sense that the germans have to get on board. otherwise it would not have been. there was a strong feeling in germany they had done the hard left the white should anybody else do the same? but the problem is everybody cannot be german in is almost a moral issue but it does dovetail of stakeholder verses shareholder capitalism with those that are models but is as a macro
level? not everybody can bv exporter. to have political integration with wealth transfer the same way california supports mississippi to resolve the debt crisis. but i don't know how you can take forever out of europe with the entire bois population is a future with then europe. but in spade low dash spade double-digit complainant will dash of employment disenfranchised young people. i don't know how that will play out. stake than the company start to realize that just is optimizing.
>> here at world affairs this has been inspiring. shaping the future economy i am specifically interested in economics satis the kid is possible to restructure the economy to a channel of problems you are talking about? and as well as handle the environmental challenges greg. >> this something that comes to mind is the cooperatives with this march energy grid there must be people like california that i am not aware but if everybody is paying into the energy grid
with the cooperative companies where weber was owed by the child of the firm said that is the fastest way to deal with climate change but what of the issues is that chided is on board with this. so that environmental degradation of the economic threat i am optimistic about the possibility. >> i had the same thought that rescues from the wtf economy. so that will soak up the flagrant catalyst --
address the problems that we think about but it would trickle down on steroids with tax cuts soros spending cuts to cut the loopholes that to please the of voter base as the establishment candidate i'm hoping will continue to press for word a vision that connects the dots to talk about the labor share with the importance the stakeholder capitalism she made the announcement today to make college debt free. that is an interesting way to connect uh dots and more that is what i am hoping to
that was a huge deal with the next biggest commodity tobacco that is less than a 10% to. so i believe in a long and that codependent relationship. so the explosive growth strayed across the deep south was largely funded because that is read the bankers were. the at the york merchants supplied from the panels to the parlors so they not only shifted a significant portion of, and but where those came back and that maybe your compartment to washington d.c.. and had a big impact on the
federal government because it is large portions of revenues their results . retired federal budget of the york city and just of baker's two profited. but thousands and thousands word directly or indirectly profited. but the people and the shops and the of hotels and the gambling houses. those plantation owners would treat you york city as their home away from paul. put in various ways to maintain that, and trade that remains of their best interest for the plantation system antislavery. theosophy eared those people
enslaved in and the south were set free would take the jobs away but the big irony there is an 12,000 blacks to do your city the exact opposite is going on. so there wasn't really going to be a problem. for the jobs against black workers. but because of cotton with that tight the majority of yorkers were pro south end anti-abolition. northerners that were sympathetic to the south as a major return hub of the trans-atlantic slave trade. because they are prodded to the united states by that
point but there is a huge international transatlantic slave trade that ships out of the york to take them to brazil can places like that. congress declared this piracy and then everybody turns a blind guy. they were in vesey and slave ships and many were fitted out nd york harbor under the eye of the harbour masters. if they were caught the captain's, which didn't happen very often by the way. but if they sleep -- a slave ship captain got caught and brought back for trial it was very very rare to get convicted. more than half of the time ever made it to the trial