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tv   2016 National Competitiveness Forum Morning Session Part 1  CSPAN  January 9, 2017 12:08pm-1:19pm EST

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work is expected on repealing the federal health care law. at 5:0030 a vote in the senate from kentucky republican senator rand paul that would link the repeal of the health care act to a balanced budget. watch the house live on cspan and the senate life on cspan two. also on the hill this week confirmation hearing for president-elect donald trump's cabinet get underway. tomorrow senator jeff sessions the nominee for attorney general will be the first to get a nomination hearing it's expected to take two days for a hearing in front of the senate judiciary committee. you can also listen to the hearing on the free cspan radio app. we'll show each hearing again that night in primetime. >> announcer: next a forum on u.s. kpetness at home and abroad. ceos from major companies and leaders in engineering and
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science will outline recommendations on how to spur more innovation and advance americaed trade agenda in a donald trump administration. the u.s. council on kpetness hosted this day long forum. this portion is just over an hour and 20 minutes. >> announcer: ladies and gentlemen, please welcome the honorable debora wince-smith. [ applause ] >> good morning. welcome to the 2016 national competitiveness forum and the u.s. council on competitiveness's 30th anniversary. last night, many of you were with us at the smithsonian's
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national museum of american history. and we were so pleased and delighted to celebrate with so many friends and colleagues from around the country and the world. the council's 30th anniversary and to honor two great leaders of american competitiveness for their contributions, the secretary of energy, ernie moan ease and the president's long standing science adviser john hold rent. today we have a very full and engaging day of conversations, presentations, and recommendations and we hope you all will participate in the conversation. allow me just to share a few thoughts about today's anniversary forum. in some ways when you think of 30 years back and where we are today, it is a little bit of a back to the future story, but not really, because when you look at the threats and the challenges 30 years ago, they were very, very different from today. although we were living in times of turbulence and transition.
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and many americans had tremendous anxiety about their future. and it was really the vision and creativity of our founder, john young, who felt we needed to create a non-partisan group of ceos from all sectors who would join with our university presidents labor leaders and now national lab leaders to develop a road map for american's prosperity and to work very closely about our government policy makers to implement that agenda. our anniversary of course is time of celebration. but very importantly today we are going to focus on the future we have some outstanding, exciting innovators who are going to be with us. and we are going to again look at what will be the path forward to enhanced growth, productivity, and prosperity. we will shortly release the council's flagship claire on-call for competitiveness with our recommendation, which constitutes our strategy to the
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new president-elect of america and the new congress that will take office in january. we're going to hear, as i said, from some top line innovators. but we are also going to have important discussions on new thought leadership from the council on competitiveness. we'll hear from jim clifton the ceo of gol an about the new report that gallop and the council released today. no recovery in the decline of u.s. productivity. we willv a luncheon talk from bran farron, the founder and ceo of the fabulous applied minds center in los angeles. if any you have been there, it is really a journey into the future. and then later in the day we are going to talk about entrepreneurship and have a great discussion with steve case who i believe you all have the book, the third way, that he has
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given all of us today. i want to thank the members of the council for their tremendous support and participation with us on our journey. i want to specifically, again, thank and recognize our very generous sponsors who made last night and today possible, lockheed martin, pepsi co, united association, deer and company, rockwell automation, deloitte, fedex, snap on, arizona state university, the bank of america, ucla, uc san diego, whirlpool, white cap investments. and i want to thank you sara eisen, who will join us shortly, and her great team at cnbc for being our media partner today for this forum. and then finally thank the board and the executive committee of the council on competitiveness for all their time and stewardship and being the hosts of this forum. so welcome. and we look forward to a
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fabulous day. thank you. [ applause ] >> announcer: ladies and gentlemen, joining ms. wince-smith on stage to release the council's claire on-call, competitiveness to the 45th president of the united states of america, please welcome the chairman and ceo of deer and company, and chairman of the u.s. council on competitiveness, mr. samuel allen, the vice chairman and chief scientific officer for global research and development of pepsico -- dr. mehmood khan, dr. michael m. crow, and coanchor of squawk on the street on cnbc, ms. sara eisen. >> hi, welcome, everyone. and thank you to our distinguished panel. i'm very pleased and honored to be here to kick off this exciting day.
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and to introduce the council's claire on-call, which is really a great way to frame the day and the conversation and is going to be their mission that will be sent districtly to president-elect donald trump. here to discuss what's going to go inside is our chairman. kick it off as far as the key priorities that you would like to mention in this claire on-call. >> well, i would start it off by saying the president-elect probably won't like his report card. so there is a lot of fs, ds, not too many as on there. i think the important thing that we're trying to highlight in the claire on-call, that there is -- clairion call call, that there is a way forward. when you look where the economy has been -- and this is really about accelerating gdp growth. and that really gets down into two components.
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and that is how many workers are participating. and what's the productivity that we are driving out of that? and a number of the areas that we are looking at in the clairion call, whether it be education, which gets into really developing the work force of the future, whether it gets to assuring that we do start handling the debt which makes it sustainable, whether it's continuing to invest in basic r and d which is important to the innovation set this which also drives the productivity piece -- there are a number of areas there that we think are very, very important that we set a direction going forward. you can prioritize which ones you work on first, but all these areas are important to assure that the country is growing in a sustainable rate over a long period of time. >> and what i love about the council in general and this panel is we have so many
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different backgrounds and industries and academia represented. mehmood from your perspective, what are you looking to accomplish on behalf of the council and the clairion call? >> well, you know, as i'm sure you have seen in the clairion call when we think about opportunity for growth there is still a lot of exciting opportunity out there. let me just take a technology perspective for a second. let's star with the productivity we've had and we think about what everybody talks about is the moore's law where the computational power of micro processors has gone to be doubling every two years or so. it's been an amazing few decades. that slowed down. one way to look at it is the growth has been done. yet, there is exciting technologies coming just around the corner that can jump start again and give us another s curve. that's exciting because it's another wave of growth. it's not just exciting from an economic point of view, but also
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it's important from a defense point of view. as many people in this room know, the -- our military needs secure state-of-the-art micro electronic. in fact, the last defense bill required the secoretary of defense to make that available by 2020. so it is a whole cluster of capabilities there. if we look beyond there in the more consumer industry, engineering in general we've got the internet of things. everybody's talking about it. everybody's starting to experience -- if you think of the capability of sensors, big data analytics and the ability for communications between devices, we are living that only on the surface right now. it's going to change the way in which businesses operate, businesses use their labor force, the way companies like mine at pepsico ingauge with the consumer. we have an exciting wave of this
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coming, this link between individuals, machines, and machines with other machines. now, another area that is generated from this is we'll now take internet of things, artificial intelligence, and now link that to robotics. look what is happening in manufacturing. we've seen a wave of that in manufacturing. but driverless vehicles. just another example. not only cars and automotives that everybody is talking about, but even the potential around the corner of airplanes. having said that -- and i'll touch on it at the ends, we have to also be conscious that that means a change in our work force. we have a very large work force that is part of transportation. what are we going to do with that as that technology and that growth comes? and the last piece i have left for the enbecause that's my background and i have a lot of passion for it is the opportunities coming in biotechnology. if you really think about what biotechnology has done, you know, it took what, 13 years and
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$3 billion to sequence the first human genome. now you can do it in 24 hours, literally for about $1,000. and it's going to get faster and cheaper. now what's the implications of this? well take a technology like crisper where scientists can go in, very precisely edit a gene sequence in an organism. it has profound implications when used for good. let's take an example. somebody born with an inherited disorder because of a genetic mutation. the ability to go into their bone marrow and change their stem cells or to go in and identify a plant variant that is more brought caught the resistant, has a higher yield, is pest resistant because we can select certain genes. that is revolutionary. remember we have got to feed $2.5 billion more people on this
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planet in the next 20 years. lots of these are just examples. but one thing we have to do, when we are talking about technology we cannot leave large parts of the population behind. technology has to lift everybody. and as multiple stakeholders we have got to engage people, talk, discuss, agree on what's good for society, and then invest behind it. but i'm very excited about the potential for technology and that's who your clairion call. >> michael it's going to be on you to train the generation on all of these technological advances. from your perspective what are you hoping to accomplish this year? >> the first thing to point out is this is a tremendous country. we have been tremendously successful for decade after decade. we've done thing that are unbelievable when you look at the anales of human history. what we have come to is a point where we are having difficulty right now managing the force
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that are required to be as competitive as possible. so there is really three things at work. one is the overwhelming force of creative destruction wherever new idea replace as previous idea. every new configuration, new system replace as previous configuration or system. in that, if the citizenry is not capable of making those adjustments, then more and more of them will fall back. and while we'll have fantastic achievements in some sectors we'll have generally weakening competitive position in our overall economy which is the case now versus the previous decades and we'll have a very negative set of impacts in terms of people being left behind. what is happening now we haven't matured enough. our eye is not on the ball. and what has happened is that these rates of change as we've heard are so fast that rather than taking three generations for a change to be implemented
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there is five major major changes in a single person's life. five transformative things that effect a single individual. what that means is we need to dramatically enhance our focus on the you will about. the focus needs to be on the continued development of ideas. we are underfunding research, underfunding the basis from which these ideas can emerge. lots of other people are stepping up, lots of nation states, other parts of the world. we have been sort of stagnant and not moving at the speed we should be moving. i place that as a secondary issue to the principle issue of people and people development. we have a poorly articulated, poorly developed and very weak immigration policy on every front. the country has been built on the notion of driving ideas forward, driving the force of creative destruction forward through immigration and the education and training of both new immigrants and citizens. that's something that needs to
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be worked in on in our report that gives a very poor grade for all of that. the thing we are not doing that we haven't figured out is we are argue being super silly things right now. we are arguing about the role of government in this and that. the government has always played a role in the preparation of the work force by investing in the next generation through schools and through universities and so forth. we have literally, literally we're so far off the mark right now, we're so far off having our eye on the ball, not through the resources that are being al kate but through the mind-set. we don't realize that everyone has to graduate from high school. if you are not graduating everyone, the entire system is a failure. because those people will not be employable. they will become wards of the state. they will be concentrated in nothing but income tax transfers to those individuals. so we need new schools, new high schools, new ways of thinking, new ways of moving forward, new ways of organizing the universities, et cetera, so that we can find a way to actually
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produce individuals who have the capability of being competitive themselves, competitiveness is not only a function of the national net competitive outcome. it is a funk of the algorithm of the derivative of the individual's competitiveness. so we have far too little focus on the individual and preparing the individual to be competitive. i passed an uber test vehicle in phoenix the other day. there was no one in the front seat. it was driving. there were people in the car. no one was in the front seat. i was at meeting in morocco a couple weeks ago where a guy stood up from a major technology company in the united states and he said what we're going to do is replace between 3 and 12 million jobs in the next 15 years of people that will be displaced by artificial intelligence and addition making
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systems. are wed were r prepared to do that. he said no, we just need a tax system to give them money so they have something to event well, that's nuts. we need competitive individuals, clustered together, and advanced through life long education who can continue to be competitive at higher and higher and faster and faster rates of change. that's the algorithm we need to figure out. and we haven't figured it out. >> debora, how do you tackle some of those challenges and goals and turn them into reality? >> i think one of the most important things about the council's clairion call and we've been issuing this a number of years is that we recognize there is not one silver buchlt this is an integrated system. and if we can really make progress in partnership with our public policy leaders, with congress, but really with the leaders in this room from all these sectors, we can begin to tackle some of these. but we really have to look at this and going forward on all fronts. yes, we can get, you know, our
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corporate tax rate down to a level comparable with our competitors. i think finally a recommendation that we've been calling for for many, many years is to move to a territorial tax and get the $276 trillion that's overseas back into the u.s. with an appropriate tax level. we can make progress also on some of the issues around our regulatory burdens. but the things my colleagues have been talking about, these are our competitive advantages. so i think the message i really want to convey is let's get our house in order on the things we can do that put us right now at a disadvantage to our global competitors around tax and the debt and regulation and just turbo charge on these competitive advantages around the technology transformation and the people in america. >> i wonder, sam f the improved growth outlook that debora was
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referring to and some of the pro growth policies set to come in action, the stock market at a record high helps tack 'em some of these more structural issues. in other words if the growth is the medicine that's been missing over the last few years which has made it so hard to prioritize some of the issues you are talking about. >> i think it certainly will be an enabler of bringing people together. you know, i think some of the stimulus that is being talked about, that does not create long term sustainable growth. but what it certainly does is it turbo charges in the short-term. and when a growth is stimulated in the short-term, that makes it a little easier for everybody to come together and say okay how do we work together on this long-term problem, one of the ones that we've been talking about. i think the important thing for people to recognize, though, is -- i mean, you can change the tax rate. you can do all these things. that will drive a spurt in the economy. but you have got to change the
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productivity equation over the long term if you want long term sustainable growth. so it will be very important -- and that's where the council can help, i think -- in making sure that everyone then is focused. okay, how do we tackle the big problems, things like what michael has talked about, while we are experiencing this near-term stimulus that's brought about by the changes that are sure to come with the next administration. >> mehmood? >> i was just going to emphasize, look, i touched and talked about the exciting opportunities of technology. want to come back to what i ended with. if we don't deploy all of this exciting opportunity in a manner that lifts everybody, then we are going to have a worsening of where we are today. looking at it purely from a food industry perspective there are about 50 to 60 million americans today that live on subsidized food. that's about one in five americans today. if that part of the population
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is not given not just financial means and subsidies but meaningful work -- people don't just want to be given a handout. i don't care if it's from government or the private seconder. they want to be engaged in society, participating in society, having a voice but also contributing. that's part of what we are as human beings in any society. i don't care where you are. and that needs to be focused on. it can't be done by any one sector alone. i think what the council is doing is actually pointing out these gaps and proposing real pathways forward of how multiple stakeholders, everybody in this room working together to change that i think that's an important point that michael is raising and technology is an enabler. it's not a destination. >> so where do you find that countries are out front on this, michael, globally looking around the world as we look to a loss of competitiveness as you described it? who do you think are our chief competitors or rivals that we need to watch and follow?
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>> there is lots of competitors and i think the nature of competition is good. it produces better ideas, better products, better outcomes, economic growth, economic enhancements. we've got the rise of the asian tigers. we've got fantastic competition coming from some of the countries in europe. stabilization going on in some of the markets in south america. whole new conceptualizations. just back from a trip to africa and the middle east things going on there happening there that are unbelievable. all positive, positive, positive. the problem we've got is that we're the rich family in the big house down at the end of the street that everybody now looks at and says what's going on in there? it's -- meaning there is a lot of arguing going on in that house. there is a lot of stuff going on. so the thing that we have lost, i think, perhaps compared to others is that we have been coasting. coasting on the investments of the past. we have been coasting on the systems of the past. we were unbelievably competitive
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launching missions to the moon and doing the things that were going none the 1960 skpz the moon shot mentality and projects and achievements and all kinds of things. and we can do all of that. but what we haven't done is we haven't figured out yet how to help every individual to be competitive. if you live in the united states today and you have only a high school education or less, there are nearly 25% fewer jobs for you than existed just prior to the recession. if you live in the united states today and you are of european decent and you are a woman and you have only a high school education, your lifespan is going down. if you are in the bottom third of the american economy from an income perspective, 110 million people, something on that order, in that bottom third, you have no positive indicators. lifespan is going down. educational attainment is going down. incomes are going down. family stability is going down. there are no positive indicators. if we don't fix that -- and i'm
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not talking about fixing it from a social engineering perspective. i'm talking about fixing it from a competitiveness perspective, therent would be competitive enhancements in the united states. you can't have a third of your population that's not competitive and hope that your country will be competitive and that bottom third will at one point either destroy or kill everyone else of it's something that needs to be fixed. it's not going something that's going to lead to competitiveness. >> how do you do that debora. are you more hopeful as you describe the public/private partnership that at least we are coming out of some years in gridlock in washington, d.c. and theoretically we shouldn't see it as intensely as it has been over the past few years? >> i think we are very optimistic at the council of competitiveness because of the people that we have in our organization and the extended partners that are beginning to tackle the very deep structural problems. but also the tuchblt i think we
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have to always be looking at the opportunity before us. and certainly now. you know, when i look back at the beginning of the council and during my time we've just seen a plethora of very new innovate of public/private partnerships that are not only large scale -- when you think of the energy and manufacturing sectors and what we are doing there to bring together the power of universities and national labs with our large scale investments on the federal side. you know no, country on the world is doing that on the scale we are. mehmood mentions you know the potential with the next generation of electronic. i don't know if we're going to call it sem i tech 2.0 but this is an area where we really need to bring together everyone that has a role in this to ensure that we're developing and deploying the electronics and the sensors that are going to drive all of this new change in industry. and i think in terms of our engagement with policy makers
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this council is very proud that we are non-partisan. we have worked across administrations. you know, we're one of the founders of the senate competitive caucus and we are prepared to be very aggressive to work, you know, across the aisle to really move forward in implementeding the clairion call for competitiveness. it's going to take everybody in this room and really, you know, thet leadership we have in the ill and on competitiveness to to did in a. >> it sounds like the common theme it all comes down to people, our people, training, education, training them for technology. sam as the ceo of deer what would be on your wish list as you try to hire the next generation of folks who work at john deer hopefully as long as you have, right, more than 40 years. >> right. well, when we look at it, our wish list -- there's two sets of skill sets we are look at. we are looking at the technical skill sets that we need to have.
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it gets to a lot of what michael is talking about in terms of developing those individuals. but then we are looking at the human skill set that we want, the ability for people to relate to other people, to work in -- because we are in a very global environment, we are looking for people that can be very inclusive, work across cultural lines, very effective in that environment. both of those are very challenges and there's what we would say right now, both areas we need to do a lot of work on. both in preparing people to work in this diverse environment as well as getting the right set of technical skill sets that we need to continue to move our company forward. >> mehmood if -- we're just about out of time but i wanted to hear from you on this as well from pepsi kro. >> just to build on that, we have heard about stem.
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it isn't just people with ph.d.s. it's about people with quantitative skills. if we are going to fill this gap we have to create a system where young people who may not have the opportunity or aspire to do advanced technical straining can get quantitative skills through our educational system. there is a huge gap. yet we on the industry side have difficulty recruiting and filling jobs that require quantitative skills. >> michael can you leave with us a hopeful note. >> the hopeful thing is all of these things are solvable, understandable, doable. we deployed a math class with 40,000 students from the nation and around the world. it's an intelligent class with tutors, with individualized platforms move at your own pace. if you stay with the class you will master college algebra. if you master college algebra,
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there is very little else on a qualitative side that you can't comprehend or master. we're figuring out how to teach everyone how to move not some people forward, not just great athletes forward but all athletes forward. >> i'm going to take that class, by the way. >> yes. >> i just decided. >> in your spare time. i'm sorry we've gone over but i know debora and the team here at the council and sam will work their very hardest and it sounds like there is a long to-do list. thank you very much for our distinguished panel and thanks to awful you for being here. i know it's going to be a great day. >> thank you sara. >> thank you. [ applause ]
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ladies and gentlemen, releasing key find prosecution the new u.s. council on competitiveness gallop record no recovery, please welcome the chairman and koechlt of gallop, mr. jim clifton.
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-- ceo of gallop, mr. jim clifton. >> debora, congratulations and thank you for having gallop be an important part this 30th anniversary and congratulations on the great on the tricks that you have made not only in buy and industries but also to our country. so we were asked to make a report -- that mike works, doesn't sit in to make a report to talk a lib about productivity. and more specifically about growth. and we are going to hand the report out in just a minute. i don't want to go through the report because you can read it yourself. as a matter of fact we have a slide deck with one slide. i have never done a slide presentation before i've got one slide. so i do refer to it as my deck. but i wanted to ache a little
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bit of a different angle on it, kind of a leadership angle on what we've done. the guy that founded our company was a guy named dr. george gallop who was an academic more than he was a -- i'm going to say entrepreneur. he usually makes that list of 100 most influential -- the good list, not the time magazine list that has chefs and all that kinds of stuff, but the kind with george washington and franklin and that kind of thing. but he had a thing where he loved democracy so much. he said if democracy is about the will of the people should find out what that will is. then he would report that to washington not unlike the council making a clairion call. because what he said is if you are wrong about the will of the people when you make policies and you lead and you are wrong about that premise, the more you lead the worse you make things. but what a wonderful -- what a wonderful mission. what i was thinking about how
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that applied to right now and about growth. bus let because let me just ask you, are we in a recovery? because it's a debate. i don't think i should say this in front of this group, but i didn't actually know what productivity was. i know what gdp is, and i have some opinions about that. i know that 2.5% is a lot better than where we are now at 1.5 or 177, i know we need 2.5 to break even and at 1.7er slowly going broke. i also looked into -- if you said what's the right amount of gdp to have, i don't know what the right number is, can you go up to 8? can you have 9%.
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what do we need? the biggest moment in the history of human development over the last couple thousands years is between 1850 and 1950 in the united states of america and we just kind of overwhelmed the world and now we are 25% of all the money. here's a good question. what was gdp during that time series? do you know what the answer is? 3.75. think how small those differences are. 3.75, if you said how do we boom and dominate the world again, the answer is 3775, offer a time series of three years or something like that. how do you go broke, you have a time series like we do now, 1.5 or 1.7, but you have to be somewhere above 2.5% -- i didn't know that. but the next thing i learned was that gdp is not the best method. and if you take a population of economists, right lean,
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moderate, left lean, whatever it is, they say the best measure is actually gdp per cap tachlt i didn't know that i started thinking maybe it would be gdp per worker would be good. well you can't do that because you have fewer people in the work force. if too many drop out, you have to inflate -- you have to do gdp for the whole population because people at home, good for them, there is a lot of people that should be at home. good for them. but they use the economy, too. so do babies. so the best number you can use -- and so that's the number that gallop and the council and then my team of economists chose to use. and we went back 50 years. we determined that that was the single best metric to determine if we are in a recovery. but now, remember, if we're in a
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recovery -- i looked the word up. i was on a flight back from frankfurt, debora, i was thinking about this. you know they bring you all the newspapers. i had the financial times, the "wall street journal," the international and the "new york times." i found an article in every paper on the front page pa that referred to america's recovery. that seemed like an very important article to me. so i looked up "recovery". it means that you have been sick and you are getting better. you are recovering. that's what it means. you wouldn't think i would have to look that up, but i did. but going back to dr. gallop's point, if we are in a recovery, that suggests totally different activity than if we are not in a recovery. if we are in a recovery, it suggests everything is going well, and it kind of gets your hands off the wheel and tweak it a little bit and keep nudging it in that right direction.
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if we're in decline, that means that you have got to shake everything up. that means you need a turn around. you need turn around -- do you see the difference? but it harkens back to you better get your premises right. because it harkens back to the more we are wrong about that one, the more we are ruining the country. owe here's my deck, my one-slide deck. this is 50 years of gdp per capita in the united states. can you look at that and see a recovery? i wrote down three quotes that i just -- you can fine them anywhere you want. this one is from the wreath journal. the guy's name is eric. i won't say the rest of his
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name. but i read him before. here's what he said. the u.s. economy appears to be growing at its fastest pace in two years. i don't know what he sees. but i guess you can say it. i think you can go through like the radio salesman, you probably can find one blip somewhere, maybe between one quarter and another. i don't know. here's one from -- i won't say his name, from raymond jones, the investment banking company in new york. growth is a lot stronger than it looks. i don't know what that means. but where do you find growth that's stronger than it look on there? this one's interesting. okay. this is my last one. have you heard of confirmation bias? a guy got a nobel prize for this. but when you make a decision and you come to a conclusion, what he figured out is only 30% is
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based on fact and 70% is based on emotion. he is actually a psychologist. a psychologist who got a nobel prize in economy. confirmation bias is you only look for facts that confirm what you want to believe. but you wonder how often we get into that, whether it's -- mario, you and i were talking about most of the media tried to find facts -- not picking on media, i did it, too, why only hillary can one, why brexit will never work. why colombia will never vote for a park treaty. nobody saw arab spring coming. that 70% dominates our thinking. we are always in a fight with that 70%. this one is really an important one. this one was, we are seeing definite evidence -- i don't know if my senior editor is here
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in the room but i don't think there is anything called definite evidence. you either have evidence or don't have evidence. but anyway, we are seeing definite evidence, like convince me, this time i mean it, it's evidence, the economy is expanding more strongly. definite evidence. who do you think said that one? do you know? some of you -- that is janet yellen. she is working on my 70%, too. we're not in a recovery. it helps me when i can reduce things to kinds of their simplest form. but if we were a company and this was a shareholders meeting i would be reporting to you that our sales are $18 trillion. we have $11100 million full tim employees, 50 million part-time
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employees and we have debt of $20 trillion. going to $30 trillion. and we have revenue that's increasing at a at a decreasing rate and our revenue is down to about 1.7 and i can finish the line to where it's zero. do you want some of that stock? the next thing i'd tell you is that i got some good news for you. that is that food's cheaper than it's ever been before. so when i was a kid, it was almost twice as much. that's some good news. transportation and gas. but we have three expenses that are totally out of control -- $18 trillion in sales, $20 trillion in debt, but we've got three line items that are booming out of control. you know what they are? we need to know. education, we all know health care, we all know housing and i see in the clarion call there
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that i think we know those pretty well. remember, there are some real basics that you need to know as shareholders, too. one of them is with health care we spend twice what other comparable countries spend on health care per person. we spend twice as much as england, canada, france, germany. two times as much. next thing you need to know is that they all live longer than we do. you don't like to hear that. that doesn't work well in the confirmation bias. that one doesn't fit neatly in there. the great american health care system. it makes you wonder a little bit. so canadians live three years longer than us, french live three years longer than us, we spend twice as much. it makes me wonder if the more they spend on us the faster they kill us. did you read this? you can hardly believe it. you got to google it to believe
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it. i did but i was wondering how many people were killed in hospitals. we worry about soldiers. i know the general is here. i know the admiral is here. i don't know, i think the single digits or 10 more in the last ten years. you read the "new england journal of medicine," how many people were killed in hospitals last year? put a number in your mind. google it. their answer is 100,000. it's dangerous to be in baghdad, afghanistan. you want to go places where you're really in danger? go to a hospital. they maimed a million. just saying. johns hopkins put their number out and they said 250,000. but you wonder when you have an expense item that's that out of control and has that little success, do you really need lead or do you need total disruption? another one that our analysts found was education.
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i don't need to go on and on about that, but you know it's booming. it has also many other implications to the amount of debt that boomers have. you know, boomers are going to be wonderful workers. they are really different. i saw a conversation on squawk box this morning and they were talking about our millenials different than any other generations. they all -- they said no, they're no different at all, they're just younger. they came to a conclusion. but that fits -- again, there's your confirmation bias, it fits the line they needed. i'm going to tell you and you tell me if this makes them different. one thing is they don't have babies. that seems to make them quite a bit different. you know, this is the first year where the white man is going to be smaller. they're causing the white man to be extinct. that seems like a real big one to me. they also have the lowest
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marriage rate since the history of our company. when i was a kid, the great american dream was owning a house. not so much with them. homeownership is the lowest it's ever been. we've just been wrong about that american dream. but it changes almost everything. they don't buy diapers anymore, they all have pets so they buy expensive dog food. i'm not making a joke. if any of you have stock in pet food, it's going absolutely through the roof. the changes are extraordinary, but yet we're wrong about them. i even -- it kind of bothered me, i was watching squawk box i said, i thought this morning, i wonder if everybody goes away with that confirmation bias and they all go out and do their jobs wrong because they concluded the wrong things there. because they did. i looked up their ratings this morning. they have 100,000 people watching. i don't know if that's a big number or small number but i know it's about the same of a michigan home game, so a crowd about that big. bingo, i can tell that but they're very important people, that's the point. so i don't care if there's a million.
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so they all go out, they've got the wrong thing, they're going to -- but there's one real important thing in there that has to do with education. baby boomers are going to be very good workers. here's one big difference between my generation and the generation before. the generation before baby boomers produced millions of babies, the other thing is they did is started a whole bunch of new companies. the other thing millennials don't do besides not having babies is they don't start companies. and that needs to be fixed somehow. but education is probably not doing that because what we've done is when we ask them where they are right now, they're in a whole different state of mind than my group because, what? saddled with debt. the other thing is when you ask me about, do you think there will be money for your retirement, i say yeah. i say how about your kids? i think there will be some for my kids, how about your grand kids? i know there won't be. now those kids will become aware of that so if you take if you take education, if you take
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housing, if you take health care, it may not be as simple. it's more complicated in how they fit into the decisions we make, the clarion call we make because all of them seem to be tied somehow to growth. i've been trying to stretch my thinking, deborah, since we started this project because i keep getting surprised so much . but if you said what did you figure out and the report will be -- maybe it's coming out now. that's why i'm not doing the report. you can read yourself. i'm trying to make some reckless remarks here. so we know we need to more growth and i can say this to this group because my business is selling innovation but we say how do you fix our gdp and this problem? we know we need to get the pie growing. you know what our answer is?
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we've concluded the same thing, we did it with our own confirmation bias and we're wrong. we think it's just innovation. so we just keep building up innovation, we spend hundreds of billions of dollars on innovation. read the "wall street journal" either yesterday or the day before and we have a record number of patents. i mean, since 2000, it's just boomed. i mean, innovation is, is, we're blowing it through the roof. so how are we doing with new companies? this is the lowest it's ever been. so we keep booming because somebody told us innovation creates companies. and we don't consider it. we don't consider the other side of it. maybe it doesn't. of course it's a big part of it but i'll throw this out to you. what if innovation has no value whatsoever unless it's in the presence of a customer? we don't think of that. what about innovation has no
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value at all until it has a business model that works? it's the story that's kind of unbelievable but you all know who vince serf is? what a great guy. he and bob kahn got the packets to fly through fiber optics and that became the internet. they were the wright brothers or something. he told me this story at dinner. it's got to be true because it's not complimentary to vin and he's one of the most important americans ever. he was doing his job. remember, had he already built that thing at darpa so we could send signals around and a guy came over from the u.s. senate who loved technology and said to him "let me see that thing." he showed it to him and he went "that's the greatest thing i've ever seen in my entire life, can i go back to the senate and pass a bill and throw it out to commerce and see what they can do with it?" what a conversation. you know what vince said back to
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him? "fine with me, but i don't see what value it will have to business." that's a lot bigger conversation than "watson, come here, i need you." or whatever. but you know who the senator was? huh? yeah, it was -- i'm the only guy in the world that tells a nice story about al gore, i think. but think if al gore hadn't come over. maybe he knew that that innovation had no value at all. what about another $100 billion for that darpa piece. but until you have customers, boom, we got an explosion out of it. but maybe when we build institutions of innovations somebody better raise their hand and say it's not making the pie any bigger. it's not fixing that right there. what fixes it is when somebody actually starts a business. there's been about -- you read there's 26 million companies but only six million only four million of them have only 1.4 employees. there's only two million businesses, that's getting smaller. we keep working on innovation while the part that the fires it
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and creates customers and creates gdp per capita, that's getting smaller but we keep working on this because that fits our confirmation bias. i think i'm going to end it with this point. but i think i can -- i think this makes sense. here's where you have hope. if you're an engineer, you look for solutions where you find variation. so these terrible numbers aren't consistent across the country. so you have some states that are doing -- that are probably never turn themselves around. i don't know what you do with illinois. i don't know what you do with california. they're so underwater. but then have you other states that make a profit.
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you know florida's killing it. i was just out in wyoming. they're printing money out there. i don't know what's going on, but see the variation? i get a kick out of tennessee because that's a good one for researchers. obviously, the same country. they got all the same laws, same state so you go the same governor. all the legislation and all that. but you got two cities in there with very different outcomes. one's memphis and one's nashville. memphis is really struggling. nashville's killing it. what it does is gives you hope. but leaders of these commu communeties, especially by cities, i think even more by states can change the outcome of america. i notice, deborah, that somebody turned our story into obama's failure. or something like that. if you look at that line, you know a conclusion you could have that's way outside of confirmation bias? you could ask yourself how much
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does the president really change the country. because obama's line is bad, so is bush's. you go clear back to where there was really a big lift, reagan had a big lift. went down a little bit, get the recession and then clinton came back a little bit. i just throw this out to you. you know, when we say things aren't going well, we say, well, we need to a president. i'm just wondering, there might be more solutions from the leadership of america. maybe 10,000 of us.
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maybe 100,000 of us than there is with the president. but thank you, again, deborah for all that you do. congratulations on the 30 years and thank you very much. presenting his views on u.s. leadership in the global economy and the ways open trade and an improved tax policy will help keep the u.s. competitive while creating opportunity at home and abroad, please welcome our morning keynote speaker, the chairman and ceo of fedex, mr. fred smith. [ applause ] >> good morning, everyone. thank you for having me here today. that was an important presentation by jim clifton a minute ago with a lot of very sobering information. before i get started on my remarks, let me first congratulate president-elect trump and vice president-elect pence.
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i think the caliber of the cabinet nominees to date is quite reassuring given the many economic challenges that the united states faces today. our economy has been growing too slowly, as the presentation just before us certainly underscored. our national debt has increased from 63% to 105% of gdp just since 2007. the u.s. now owes, again, as jim mentioned a moment ago, almost $20 trillion, and this is projected to grow. federal investment is at the lowest level since the late 1940s as a percentage of gdp. net business investment is subdued. infrastructure is deteriorating. protectionist tendencies are increasing here and abroad. and the election results certainly show that too many people feel they are being left behind. some blame these problems on trade, but the facts indicate otherwise.
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history shows clearly people have always wanted to travel in trade. today that desire is stronger than ever. with our constantly growing digital economy, anyone with a mobile phone can reach new markets in nanoseconds, funneling tremendous digital connectivity into more buying power, more economic growth, and a higher standard of living. fedex is at the nexus of global trade. we move 12 million shipments a day, serving 220 countries and territories. so we see the value of trade every day. in fact, although as jim said, we're not up to par with our friends in nashville, the largest clearance point of entry in the united states of america is the memphis airport where our fedex super hub is located. so we at fedex are passionate
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about supporting trade. we consider all fedex jobs to be trade jobs. we have over 450,000 team members around the world who help enable the supply chains of companies from the united states to uganda, from singapore to south africa. we know trade means more markets and greater opportunities for u.s. companies, especially small and medium businesses which comprise about 97% of u.s. exports. based on what we've seen over the past 40 years at fedex and beyond that from 20th century history, we know several things to be true. centrally planned, government directed economies simply don't work. they can't sustain growth, they can't respond quickly to change in market conditions. they innovate more slowly and they don't attract much foreign investment. look what's happened in
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socialist venezuela. when the price of oil, venezuela's main export was at that all-time high, the government used its revenues to fund massive social programs without investing to diversify its economy. when oil prices dropped, the country had to discontinue most of those social programs and could not even afford to import basics such as milk and eggs. grocery store shelves stood empty and citizens stand in lines to get basic food rations. protectionism doesn't work either. a november 25th "wall street journal" article examined the impact of brazil and argentina's protectionist policies based on high tariffs and promotion of domestic production over imports. such policies have, indeed, created factory jobs. but they've come at great cost to consumers who pay higher prices for goods and to
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taxpayers who foot the bill for the subsidies. the article notes taken together these measures essentially transfer wealth from society at large to a smaller group of workers. a december 2nd article in the "new york times" did an excellent job describing global supply chains and u.s. manufacturing's dependence on imported content. the article discussed the reduced competitiveness u.s. manufacturing firms would experience if the prices of their inputs were to rise because of new tariffs. we have the best example of protectionism from our own history. the devastating smoot/hawley act of 1930 raised tariffs on more than 20,000 items. this contributed to a 66% decline in world trade from 1929 to 1934. this misguided act of congress
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ignited the great depression. in 1934 with the leadership of secretary of state kordell hull, good tennessean, franklin roosevelt overturned the smoot/hawley act and established the trade policy the united states has pursued ever since, one of competitive, open markets. history has shown repeatedly that free market economies create human opportunity. the post-war general agreement on trade and tariffs or gatt, which sought to reduce tariffs and other trade barriers was a decisive factor in the post-war growth of the united states, which became the richest country in the world. u.s. trade policy was also a major factor in the recovery of japan, germany, and other devastated countries. now, trade certainly got its fair share of attention in the recent presidential campaign. but much of what was said was
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inaccurate and i'd like to set the record straight. first, trade is good for and absolutely essential to american prosperity. trade is a two-way street in which both imports and exports are vital. keep in mind the u.s. exports goods and services. in 2015, the united states exported more than 750 billion in services. we also import products for other countries, import secure materials needed to create american products and imports give our families more choices and lower prices. from 1960 to 2015, trade rose as a percentage of u.s. economic activity according to the world bank, from 9% to 28%. even though we're the world's largest economy, 80% of the world's purchasing power and 95%
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of its consumers lie outside the united states. our farmers rely on foreign markets to remain financially strong. in fact, one-third of all american farmland is planted for exports. american manufacturers depend on foreign markets with about 25% of all manufacturing jobs in this country being supported by exports. overall, trade supports over 40 million u.s. jobs or more than one in five in our nation. tens of thousands of those jobs are at fedex. trade-related jobs pay an average of about 18% more than nontrade-related jobs. in general, trade has added more than $13,000 a year in purchasing power for the average american household. the second fact about trade.
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market access and ecommerce are changing the nature of trade. thanks to the internet and global logistic services offered by fedex and others, ecommerce is booming. worldwide retail ecommerce sales are approaching $2 trillion and are projected to exceed $4 trillion by 2020. while much of this is domestic trade, cross-border ecommerce will unlock even more growth potential for companies of all sizes, especially small and medium-sized companies. let me just give you one great example of this just up the road. fedex customer ora gene technologies in rockville, maryland. they develop rna, dna clones, antibodies and plasmas used for research. starting with eight employees in 1996, oragean now employs 80 in the united states and
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approximately 500 worldwide. their network of international distributors reaches more than 35 countries. fact number three, the u.s. wins when we enter free trade agreements. the u.s. has free trade agreements in place with only 20 of our trading partners. contrary to public perception, the united states enjoys a surplus with those trading partners in manufacturing and has global surpluses in services and agriculture. according to the department of commerce, our 20 free trade partners buy nearly half of all u.s. exports. on a per capita basis, these 20 countries buy 13 times as many goods and services as other countries. that's because free trade agreements remove barriers to
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our goods and services and make our exports more competitive. these free trade agreements are the solution to trade deficits, not the problem. american workers and businesses need agreements like the transpacific partnership. it's an important step toward achieving free trade agreements between the u.s. and 11 other countries in the pacific realm. we're 100% behind tpp. this recently negotiated agreement will unlock more trade opportunities with these other fast growing tpp countries. tpp represents more than 480 million potential customers for u.s. businesses. the agreement would eliminate 18,000 tariffs on u.s.-made products, thus increasing global demand for american made goods. it will spur greater investment in the united states, which correlates directly to new jobs here. our strong recommendation to the incoming trump administration is not to abandon tpp but to
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improve it towards full free trade, which president-elect trump supports, with these countries. there was also a great deal of negative talk about nafta during the election campaign. but in fact, nafta is the link pin of our current economic competitiveness. here is what nafta does. it eases trade among 450 million people in the united states and our trading partners canada and mexico. nafta trade more than quadrupled in 20 years, which boosted the economies of all three countries. nafta has made the united states the centerpiece of a huge north american production platform. nearly 14 million u.s. jobs depend on trade with canada and mexico. economist gary hoffbauer estimates it nafta makes the united states about $127 billion richer every year. u.s. private sector jobs have
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increased by more than 29 million, a 32% rise since nafta began. of course nafta was written in the 1990s and the nature of trade has changed substantially, mostly due to the internet and the digital economy. modern trade agreements like tpp address 21st century trade issues such as ecommerce, cross board data flows, state-owned enterprises, small businesses and global supply chains. all these improvements, plus others, in areas of labor and environment are included in tpp. if president-elect trump wants to improve nafta, we recommend he start with these types of provisions, many of which have already been agreed to by mexico and canada as part of tpp. the new administration may also
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want to address the advantage that mexican exporters receive through the rebate of value-added taxes or vat on all their exports to the united states. we don't have similar rebates on corporate taxes paid on u.s.-made goods, and this puts our exports at a serious disadvantage. while nafta could be updated and strengthened as noted, withdrawal is another matter entirely. there are myriad reasons why that would be catastrophic for the u.s. economy, but the main one is the nature of american supply chains. few people understand how nafta has woven the productivity capacity of north america into one integrated platform. the united states, canada, mexico makes many things together. 40% of the value of mexico's exports to the united states is u.s. content. the auto industry is a great example. it's been said that the average american car crosses the u.s./canadian border seven times
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during its production. a november 10th "wall street journal" article cited an example of which a seat had parts from four u.s. states and four mexican locations. nafta makes the u.s. one of the most attractive manufacturing locations in the world because of value added productivity of both canada and mexico in one integrated north american supply chain. if we could complete free trade agreements with asia and europe, the u.s. could, in fact, become the undisputed champion in manufacturing once again. withdrawal from nafta would have massive repercussions. thousands of u.s. companies would have to ship their supply chains at great cost and disruption to their businesses. americans should understand that pulling out of nafta does not ensure that production in mexico would come back to the united states. in fact, it's possible that many

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