tv The Dylan Ratigan Show MSNBC February 24, 2012 1:00pm-2:00pm PST
aligned interests if we don't even have capital in our capitalism. we're at the university of chicago school of business talking capitalists. meanwhile back east, this apparently called snow ma ged don. in chicago, they call it an early spring. welcome to the 30 million jobs tour, college edition. ♪ my kind of town, chicago >> good friday afternoon to you. the 30 million jobs tour has blown into the windy city on a friday afternoon and along for the ride on our college edition, students of the university of chicago's school of business. we thank them for welcoming us this afternoon. good afternoon to everyone out there. good afternoon to you. i'm dylan ratigan.
for business school, many young americans, that decision is a first step towards a career of investment and entrepreneurship and problem solving and innovation that not only creates jobs, but does so in a way that solves problems. learning a business model, learning how to assess investment risks. those are the things that teach our entrepreneurs how to spot winning ideas and develop them. capitalism as we have always known it. but business school or capitalism has become an art of learning how to maximize profit by minimizing or eliminating risk rather than collaborating and developing solutions. as we saw with the financial crisis and the ongoing nature of our financial systems, this model can be wildly profitable, the model i'm referring to is risk transfer. potentially, catastrophic for everybody else, which leads us to fundamental questions. why do folks go to business
school? what's the purpose of our business schools? and how do we bring forward a robust culture of experimentation and entrepreneurship? and what business schools be teaching? we have two schools of thought, if you will, from two of the best business schools in our country. chicago and harvard. you might think they don't think much of each other. they tell you the same stuff. capital formation and business development works here at the school of business. back east from harvard, marvin balor, professor of leadership. it's a pleasure to welcome both of you. professor, nice to see you. we're talking beforehand. business and capitalism really took a black eye in the context of the financial crisis. there was the perception that the risk modelling of finance is perceived to be the actual
function of capital formation and entrepreneurship. walk us through what we learned in that 2008 period and how we can do a better job of making a distinction between true capitalism and some of the dare vagss. >> what i would say happened in the crisis was a lot of things happened at once. it wasn't just capitalism went awry. a lot of things did. so we had a capital glut of capital from all over the world coming to look for a home. and that was government that was business. we had regulation that really didn't do its job. both the sec, fannie and freddie telling people to buy houses. the rating agencies didn't work. to some extent, but there was obviously financial engineering
that went awry. and we had the crisis. >> professor, how can we all culturally change the way we view business school, business development, capital formation to move closer to that culture of collaboration and production and further from the culture of extraction? >> i think that's a really important point. we have to separate the difference between creating value and extracting value. i think in recent years in business education, we confounded the two, seeing them as equivalent. so we started seeing what steve jobs did in terms of producing products and services as the same thing as somebody who does a leverage z buyout. they are different types of processes in capitalism. we have to be very careful not to confound both of them. >> so how would you make that distinction to a student in a classroom? >> i think one of the things we
have to look at in our business schools is where exactly are we sending our students? historically, the original purpose of creating business schools was to create leaders who would benefit society. they would do that by creating collaborative enterprises, and producing products and services that advanced a general social welfare. one of the things we have to think about is where are students going? when we have allocation of talent going to financial services or consulting, it's not clear that's going to create the type of value that's going to end up improving the general welfare. if too many people are in that area, or if those areas pay too much so that talent gets misallocated there, if you have too many engineers heading towards wall street to work on esoteric financial services rather than producing products and services or engineering and advancing products and services, that's the kind of distortions we have seen in recent decades.
>> professor, do you agree with that? >> i'm going to take the other position. i think he's looking at the last three years and is ignoring the previous 30 years. from 1980 to 2007, and really 1980 until today, the world economy and the u.s. economy are hugely better off. this was the period where we did have people going it wall street. we had steve jobs. we had people going to china. we had people going to india that we trained. all of this has led to huge technological process. it's led to living standards around the world going up quite a bit. life expectancy in the united states, life expectancy in pretty much every country has gone up. and that has come from the free enterprise system that to some extent has been exploited from the united states and some of those exporters have come from our mba programs. >> i don't feel like you answered his question. if our best and brightest are going into business formation or
into consulting and financial engineering, that has an influence in greater development. >> if consulting is done right, the knowledge from the united states has gone around the world. so consultants, i think, more highly of. and for financial engineers and wall street, some people on wall street private equity is one of them actually do good things. they make companies more productive on the whole. and sometimes that means cutting. sometimes that means growing. but the whole idea of private equity is to make companies more productive. only with more productivity you have a bigger pie. >> do you agree with that? >> i don't want to take issue with respect to the economic growth that we have seen in the last 30 years. i would take issue with whether we want to credit one institution with it.
but i would ask the question that in 30 years ago, would you say that today the united states is more competitive that we have more social mobility, that we have a system that people have more faith in with respect to the economic welfare. my view is we would probably say we're not doing so well on those dimensions. on every dimension, whatever gains that have been created went to a smaller and smaller group and were not widely shared. the median wage has been stagnant for the last three decades. while i agree that we should think about the export around the world, we also have to think about how is the economic system working for our society. our institutions, harvard and university of chicago, they are supported by american taxpayers. through it massive amounts of research and development money that's allocated to our institutions. so i think in some ways, we have to think about how are we doing
on our commons. i'm not so sure that business schools have contributed to the general welfare of the average individual in society. i think partly what they have contributed to, though, is seeing companies as financial assets rather than as institutions that have multiple responsibilities. not just simply to find the lowest cost work around the world. >> an interesting thing that steve was saying to me earlier was here at chicago where finance had been by far the most popular major for a long time, there's been a cultural shift in the nature of the enrollment here where you have an explosion in the number of people enrolling at chicago, which is historically a finance-branded business school, pursuing the entrepreneurship that we're talking about. how much of this is driven gi the professorship of the schools and how much of the students?
>> i'd say it's both. we have developed, what i think, are terrific programs in helping students create businesses. we have a competition that we received 120 entrants just this month. it's roughly 400 students participating. and over the last two years, teams from former competitions have raised almost $150 million from venture capitalists. they have create hundreds of jobs. a couple brand names, bump, which is an iphone app that's one of the most downloaded iphone apps came out of our competition. and grub hub. so part of what happens here is that we have sort of the technology to help students build businesses, but the part that's happening is students have a huge demand for entrepreneurship. that's really changed. i think finance, there may have
been too many people going to wall street. it's hard to tell. but for sure now there are fewer people going to wall street. partially i think there are fewer jobs. there are a number of reasons. and as a result, what the students want to do more and more is start businesses. >> it's the most creative thing you can do. that's the ultimate experiment. to conceive an idea, raise the money, and attempt to deploy. it's the american identity at its core. i thank both of you for having the conversation. thank you so much for your time today. >> thank you. coming up, the 30 million jobs tour rolling along. college e e edition. are your parents or grandparents stealing your job? the surprising new numbers just released concerning young people in the workforce and the mega panel reacts.
then facebook as a 21st century business model. redefining the role of community and cashing in on it. are we all just pawns in their version of capitalism? plus sir william of vanderbilt is back. another dramatic reading from greedy bastards just ahead. this guy might just win the right to record an audio book. and heck, we might nominate him for an emmy. we know america needs 30 million jobs. we also know to create them, we must be vigorous in demanding the debate we deserve. more on that from the school of business in chicago right after this. [ female announcer ] the best things in life are the real things.
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i met kids about ready to graduate from college. they are facing student loans and a bad economy. they are worried they won't be able to get a job. you heard the definition of the american dream. it was dick army who said the american dream is not owning a home. it's getting your kids out of it. >> mitt romney today in detroit addressing how tough it is for college grads to find work, which is an understatement. new data just released by the census department revealing employment among young adults is at its lowest since world war ii. and there's another culprit we may be overlooking. grandma and grandpa. one in four workers by 2020 will be at least 55 years old. baby boomers not just living longer, but working longer as
well. in part because they want to work. skilled workers and are vital and healthy and have the same degrees and 30 years of experience. they are taking a lot of jobs that may historically have gone to graduates or opened up spots for graduates. i want to bring in our fully-accredited mega panel. krystal ball here in chicago. and then ari melber and peter morici. we how do you interpret a piece of research about the baby boomers and their design to remain employed relative to the cultivation of our young workforce? is that a fair comparison or is this nonsense? >> it's a fair comparison. older people don't have enough pensions because of the termination of company pensions and loss of jobs. we're much healthier. we look forward at my age. i'm 63, to perhaps living
another 30 years. i don't want to be retired for 30 years. there's many more things i want to do and contribute. and folks my age feel that way. at the same time, young people, we're not getting out of the way for them. the economy is not growing rapidly enough. but there's a mismatch of what's coming out of the schools and jobs available. even business schools are producing too many finance majors. >> it's interesting to that end, ari, as we heard at the university of chicago, which is one of the most famous and prestigious graduators of finance professionals, as the enrollment in the finance programs have levelled off, from a policy standpoint, what should we be focused on on a national level to reconcile the need to create a much more robust environment for graduates who are euniquely vulnerable for al the reasons we have been over? >> as you said, when you look at the enrollment rates, you see
spikes in law schools and business schools relating to the economy because people think these are safe bets. they are not depending on what school you go to. i didn't know peter was 63. with a bow tie, he's looked 63 for a long time. i had to get that in there. i think at the policy level, what you have to do ultimately is figure out whether we are just talking about education in the broadest strokes as something we fund or whether we have job training and job placement in part of a federal recovery programs. those have been dead on oi rival, but they were part of the jobs package that the president did circulate earlier this year. this stuff has been talked about. it's hard to get done. >> ari, i think he's absolutely right. for the longer perspective, we have to recognize that the world has basically changed. and i think one of the things we
need to do in our education, and i'm glad to hear the university of chicago is pursuing, is to encourage entrepreneurship. we have to get out of the mentality of havigoing to the factory and having a job and career. it's increasingly not way the world is working. if we're going to have a society that works for everyone with enough jobs and enough productivity, we need to be encouraging entrepreneurship and innovation. and i think that has to start not when you get to college. it has to start in k-12. we have to get our kids thinking creatively, solving problems, rather than just memorizing facts. >> no question about that. is that you peter? >> one of the basic problems we have when the students get to us is a lot of them are used to route and following instructions and maximizing test scores and things of that nature. entrepreneurship is not valued in secondary education. it needs to begin when the child
is in their teens. >> which goes to the whole group based problem solving and identifying problems. we have been trying to do this for the past couple days because i have not done a good job of managing time. but it will happen today for the first time this week. as a result, the three of you get to be on the hot seat. the question is very simple. peter, your favorite college memory and why? >> my senior year, every tuesday morning i drove up to champagne high school and we tutored children in reading that were behind. also i went to school with tom chapin. they played every friday night. that's where i took my dates. >> ari, same question. >> i went to the university of michigan, which was the alma mater of my parents. so the best memory is they met on a blind date on the steps of the graduate library.
i always reminisced about that. so it makes you feel how young you are. the best memory that happened when i was there is when michigan won the hockey championship, the president invited everyone to celebrate in his house. thousands of people sort of stormed the grounds of the president's house. nothing was broken. everyone was surprisingly sort of gracious. but it was this great party. i thought what a great school and great attitude. >> and krystal, you get the last word. >> i have to ding peter in my favorite memory. i transferred to the university one of my best moments was beating the university of maryland water polo team by one goal on their home turf and then going ob to be able to play in the national championships. that was my big memory. >> thank you for sharing. if there was an award for sharing, you would have it
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not only by its $5 billion public offering but by its $100 billion estimated value. but what that represents is an interesting concept. facebook is redefining what the community is relative to capi l capitalis capitalists. you might think you're a facebook customer. but if you look at the $100 billion valuation on facebook, you, me, and the other 845 million folks are actually the capital. facebook's ipo is proven maybe for the first time ever that the community of people, any given community, has actual monetary value even if the community doesn't receive the money. let's bring in a tech perspective on this. andrew roshas is a senior teched a virus at the sunlight foundation.
nancy skoal is in technology and politics for the atlantic. and andrew, i was looking at the $100 billion, and you realize how much i am learning and how much new information i get every time i'm in a room with ten people or 100 people, whatever it is. the realization for me is the community is the capital. so what's the community worth? then i looked at the facebook ipo. but the community if it is the capital is not getting any of that money. is there an opportunity here for us to reconsider the capital structure in a way that actually reflects where the enterprise value is to reflect the value of the community itself? >> well, let's look at the fact that facebook is collecting massive amounts of data. and data and privacy are in a mortal death match. the more data that's out there, the better decisions can be made, the better choices can be made, the more efficient our
lives can be. and on the other hand, people are concerned about the privacy. which depending upon the generation you're in, may be different. but as more and more data is being collected, the quality of the data is getting better, but the privacy is getting less and less. there's a growing mean in the public that the fact that their data is being mined may not be to the best benefit or to them financially. >> i guess the reason i wanted to produce this particular television segment was not to have a privacy debate, but it was because of the specific realization that the community is not valued in the capital structure. so right now the community is treated as either the customer or the product. but what facebook is proving -- because facebook has nothing of value other than the contest of the 845 million users they are now selling to wall street for
$100 billion. that's not a moral statement. what i'm saying is if i didn't have a community as an author and host, i would not have capital. and i wonder am i wrong? do you understand what i'm trying to say? do you agree or disagree with that? >> the lead in was the segment of whether we're social pawns in the dynamic. it's an interesting. >> that wasn't the lead in. the lead in was the community the capital? that's the only reason i'm doing this on television. it was my idea. i swear. >> i think the interesting thing is to consider right now is we need to renegotiate the contract between us and facebook. when facebook came around in 2005, it really did solve a problem. you had people distributed on the internet. there was no easy way for us to interact with the people we went to high school with. relatives across the country. it provided a service.
we were very eager to get that service because it was something we didn't have at that time. and we jumped on without thinking about the social contract that exists between us and facebook. now we're looking at it. these are hard numbers coming in and realize how rich people are getting off our data. it's time to step back and rethink the contract. it's worth pointing out we're getting something of value. there's the network aspects. technology they were able to build to net people together in a way that hadn't been done before. >> fair enough. your thoughts on the community as capital? >> nancy is right. there's a new kind of currency that exists which is a contract of facility and trust between the users and facebook. as long as facebook is providing that utility and creating a sense that the value of being connected to it and through it to others is useful, people will use the service and not really necessarily mind the fact that
their data is being collected and turned into financial capital as long as they are getting a value back that in their minds is equal. the question is whether or not that balance can be continued. you can't separate the privacy. because the privacy is like the gold standard that supports the value of that capital that facebook is creating. if you don't look -- >> so elaborate on that. >> again, the -- people's personal data is very important to them. if they get the sense they are being spied on and not getting compensated for it, or if for some reason a sense of trust is broken in their relationship to facebook, they will leave and go elsewhere. it's not like they are locked in and have to use facebook. there are other tools that do similar things. maybe not as well as facebook, but over time, may do it better. so there's going to eventually be a relationship where the internet public will say, we
want to know what data you're collecting on us. we want a right to say which data we'll let you collect. if we want to turn it off, we want to be able to turn it off. one last thing. there's a precedent for this, which is they have been getting information for decades. they get paid for that data collection. so it's not unheard of to see a company collecting data and paying its members. but the question here is not facebook paying cash, it's paying them with a service. >> and i guess from my perspective, the difference between nielsen, and i fully appreciate the privacy issues, that if you do not have a community, then you do not have an asset. and what we're realizing is that the community is the asset. and yet in the capital structure of our current business m
modelling, we assign zero enterprise value to the community. we say that the community is worthless and that the community has no enterprise value and that if i dylan ratigan can get you to watch my tv show and come to my website and read my book, i can take all your money and that community is worthless. i can extract from that. what i'm arguing is there's a need for a new business model that reflects the fact that the robust strength of the community itself is a capital value but they don't reflect any value over it. we'll continue the conversation. i have run the clock. thank you, andrew. thank you, nancy. up next, the ratigan hypothesis.
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welcome back. for the past couple day, none other than than william geist, not referred to as sir william of vanderbilt, has offered us a compelling dramatic version of some of the critical portions of our book gre"greedy bastards." after the last two performances, we thought why not have him finish things up for us as only he can do. a final rendition from sir william of vanderbilt. >> the ratigan hypothesis. whichever country can develop an implemented tool to of its deals will create the visibility it needs to stop rewarding the greedy bastards and to align interests. only the modern tools of digital information make this possible. that country can then do the
hard work of becoming as productive as possible for the 21st century. you see, it would only take four easy steps. all familiar to readers of this text. one, we must update our gauge so we can better tell good deals from bad. makes sense. number two, quite simply get the money of the of politics. number three, restore capital requirements across the finance industry. and number four, cancel debt. i'll say it again. cancel debt based on idol speculati speculation. the ratigan high pol sis is that we are the very first generation to be able to use modern communication tools to fix our debt problem without resorting to war. today debt begets debt and we're stuck in a destructive game of
trade a cup. but where extraction creates debt, capitalism creates value. when we shift from vampire values to the vici code, the trade systems will no longer reward speculation. you see, self-interest will push the bank sters and in fact all greedy bastards to get back to making wise investments, and yes, valuable products. self-interest will guide americans back to make a cup. we will create higher-quality, less expensive products and services in every industry. we will take the forces of short-term greed that are destroying us and harness them for a long-term greedy renaissance.
>> listen. if you think you can do better than him, how could anybody honestly? but even if you don't, it's worth the read. you can pick up a copy of "greedy bastards." we had a blast this morning with the folks at 57th street books here in chicago. thanks to them for having us this morning. and thanks to the folks that came out to talk with us. stay tuned for future book meetups as the months progress. still ahead here, the young gun aspiring on all cylinders. matt seigel is here talking about a growing trend among college students. he's got a plan for everybody. we'll hear what it is right after this. [ male announcer ] this is lawn ranger -- eden prairie, minnesota. in here, the landscaping business grows with snow.
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volunteer applicants are being turned away. it's a trend we're seeing across the board. young folks stepping forward with energy, mission, and conviction, and they are being denied the opportunity to serve whether it's for lack of funding, lack of organization, or lack of purpose. in an uncertain job market, that leaves our debt-burden students even fewer options once they toss their graduation caps. luckily, matt soeigel is on a mission. an admiral cause. how would that work? >> we have a huge demand for these things in the country. nursing, manufacturing, teaching, disaster relief, cyber security, i could go on and on. energy retrofitting. yet we have 30 million people out of work.
a disproportionate amount of young people out of work. so why not get those young people in those jobs. plus on amer corp., you're averaging $14,000 a year on salary. if we are going to take that money, which is by the way so below the poverty level and minimum wage, which we're already using to look up young people. one in three e young people are being incarcerated by the age of 23. we're spending $30,000 a year to keep people locked up. they are ending up on food stamps. we are paying for them one way or another. why not give them the opportunity to work and to serve. a million people have been rejected who want to serve their country. it's insane to me. and we're asking the audience of america to indicate on our facebook page to see if they want to have us push for this. depending on the results, we're really going to launch a robust
advocacy effort. >> it's a sensational idea. it ties in to the core narrative. we have no shortage of people. we have all these things we need to be able to solve. we just seem to not be able to figure out the mechanism to. enroll those people in addressing those problems. if nothing else, it would seem like what you're doing and it receives a positive response, that it drives a great sort of message beyond the mission itself. >> you're 100% right. we're spending so much money just keeping people sustainable so they can live and continue to exist, as i like to say. we have to pay for all these services who are not productive citizens. you have a generation who wants to serve and be productive, and yet congress is letting people sit on the couch.
which is what you have been talking about all day. it's the biggest waste of energy. there's also these internships, which is another issue. you have a whole new class of graduates willing to work for free. they are willing to work for free. and they can't even find work. then there's also trouble with the fact that for-profit companies are exploiting this need. young people right now are willing to work for free. so we don't need to pay them and can get them to do clerical work for us and essentially continue to take their labor profit from it and leave them with no salary deeper in debt and internships, which are becoming a necessity to become employed, are adding on top of student debt. you have to work unpaid. you still have to pay living expenses. so you have thousands of dollars in student loans and then you have to pay apartment and food and all these things to get an internship. we're not even accounting for the amount of debt. this bubble is insane.
>> at the end of the day, as a liability is, the assets are also massive. the number of young people, the amount of horse power they represent intellectually, physically, emotionally, before people get intimidated by the size of the liabilities, it is important to understand that the counterbalancing aspect that is the actual human beings is also remarkably valuable. >> can you speak to that? >> it goes back to entrepreneurship. it's the capital that young people bring to the table. we're the generation who created all these daily deal sites online. and we put new ideas into the marketplace. yet we're not investing in entrepreneurship for young people nearly enough because they struggle to get capital. as you have noticed, the majority of businesses who create jobs are new businesses in their first five years of
operation. yet the tax code rewards big companies who are outsourcing jobs overseas and having profits offshore. we're giving them more incentive under our federal tax code than we are new and young businesses. it's insane. >> it's an interesting dynamic in problem solving. to understand the issues of 60,000 feet, the screwed up tax code, banking system, lack of investment in america, just the trade policies alone are enough to make you want to bury your head in a hole. once you're done at 60,000 feet, you want to work at six inches. what you have talked about is some of the 60,000 feet stuff. what do you recommend young people do that on an individual level to reach out to you and find each other so they can start to feel less disempowered by the things that are stripping them of their power? >> if they are lucky enough to be working right now, they have a good idea. they should begin actually
starting to implement it on the side. because the best way, as i have been taught, the best way to start a business is to go out and start a business. you're going to learn. you're going to learn from mistakes. we have made plenty of them in own organization. we have also had a lot of successes. but you have to get out there and start. you have to, you know, hustle. >> and that goes to the culture of experimentation. >> that's the good thing. you'll find a whole new generation of hustlers who have to use that skill in order to advance the economy. >> no question about it. 60,000 feet and six inches. two good places to work. >> thank you for bring me to chicago. >> it's a pleasure. matt seigel, hometown here. "hardball" is up next. first, the hard choices facing the next generation. we're taking the conversation straight to america's young people right after this. the employee of the month is...
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whatever problem they have me doing. >> whatever problem they tell you. >> i'm inn grid. i'm going into investment banking. >> what about you? >> i'm john. i'm going into finance entrepreneurship, primarily venture capital. >> why venture capital? >> there's a lot of opportunity out there. investment banking and consulting are hard jobs to get, so if you can't get one there, why not create your own. >> if you were to look -- we're on a 30 million jobs tour. the only reason we named it 30 million jobs and the reason we're doing it was mostly to set the delta. how big is the jobs problem? we need 30 million jobs. okay. that's a lot of action. it's going to require a linear solution, but basically a cultural solution. by virtue of the nature of our
problem solving and all the rest of it, i would be interested in your thoughts when you look at investment banking, which is really at the root of capital formation and capital delivery. what do you see in the sort of post apocalyptic banking world as an opportunity from your perative? >> there's a lot of opportunity, which is why it's such a popular area. there's always going to be quite a bit of opportunity raising capital. i think post business school i'll have the opportunity to work with quite a few companies to start up and help them raise that capital. >> you get the last word. how do you feel about the next ten years? >> i feel good actually. it's starting to slowly climb back up. i'm seeing a trend that seems positive all in all. >> thank you for the time. congratulations and all the best to all three of you.
enjoy yourselves. thank you. and as we wrap things up, i just want to tie all of this into one thi thing. i mentioned it to the students. the reason we title d this entie undertaking 30 million jobs was not to think we were that arrogant to create 30 million jobs. that's stupid. but we did know that if we do not properly understand the scale of the problems that we are trying to solve, then we will never solve them. our goal in setting out this winter to do that was to define the scale of the problem and introduce the myriad of ideas. the entrepreneurs in silicon value e lee, the nursing and all the work that's available inside our country and the teaching and all the things we need in that regard. then in places like this or in kentucky or columbus, ohio. we have all this young,