On "Fareed Zakaria GPS" this week: the global economy, China, the war on terror and a controversial defense of the 1%.
Fareed kicks things off with his Take: How Americans may have won the war on terror, but they don’t look like a people who have won a war.
The Financial Time's Martin Wolf and TIME’s Rana Foroohar help make sense of the U.S. jobs numbers, the recession in Europe and more about the global economy.
Then, exclusive to GPS, an unlikely defense of the 1%. Former Bain Capital Managing Director Ed Conard argues in a new book, “Unintended Consequences," that inequality is not necessarily bad. The rise of the 1% is good for the 99%, he argues.
Finally, the great historian Robert Caro on the years of President Lyndon Johnson, why he mattered and what we have to learn from him now.
All this on GPS Sunday at 10 a.m. and 1 p.m. Eastern. Excerpts below:
Conard defends the 1%:
ZAKARIA: Leaving aside the economics, do you see how the politics or the tone of the book is going to rub people the wrong way? Because it sounds like sometimes you’re saying, look, just let the 1 percent get richer and richer. They’re making investments that good for everybody, and it’s you middle class folk who actually are not pulling your weight in the economy.
CONARD: Well, "The New York Times" article is going to get everybody antagonized, which I suppose is great, because it will sell more books. It hardly says that the middle class is not pulling their weight. If anything, it says that the most talented people are not pulling their weight, because they need to take more risk and find more innovation to accelerate the growth in the economy.
ZAKARIA: How do you do that?
CONARD: I think one of the things you do is you don’t reduce the payoffs for risk taking. How do you get people to take the risk that 99 percent of the time what they’re trying to do is going to get pruned away, and they’ll be set back as a result? And that’s what we want to happen in our economy because the opportunity for innovation has changed dramatically.
We’re not exploiting the value of capitalizing on the value of cars today.
We are 13 guys and a computer can create enormous value. So when it comes to what happens to the distribution of income in the economy, we need a million Steve Jobs.
You know, getting one more of them or two more of them or three more of them in the short run causes some income inequality before we get enough of them where it changes course and goes to the other direction, I would say what’s the priority, getting the economy to grow faster? Getting more innovation to pump up employment and wages? Or dampening down income inequality?
I’d take the first over the second. That would be my priority and I think beneficial to the middle class and the working poor.
Conard on the 1%:
ZAKARIA: Explain to me – Why is the rise of the 1% good for the economy?
CONARD: Sure. It’s not really the central focus of the book, the book is about how to get the economy to grow faster, that growth in the long run is powered by innovation and risk taking, and part of what the book argues is that the payoffs for risking are essential to getting more risk taking and that’s good for the middle class and the working poor
ZAKARIA: So you want people to invest, take risks with their capital so that you spur innovation?
CONARD: Yes, although I think the economy has changed significantly from where it was in the 1950s, when capital investment to build an automotive industry and a highway system were essential growth to once a day where 13 guys on a computer can create Instagram and a billion dollars of value in two years.
It’s now much more powered by risk taking than it is by the funding of investment.
Conard on Romney:
ZAKARIA: What do you think of Mitt Romney as an executive?
CONARD: I thought he was an outstanding executive.
He’s everything that you could expect - and it’s hard to watch the cartoon portrayed on the TV. He’s brilliant. He has a deep understanding of how business works. He’s great at consensus building.
He’s decisive when he needs to be decisive. He’s surrounded himself with the most capable people. He encouraged those people to challenge him and to challenge each other so that there was enormous preparation when you went into the room to talk to him, and he had the highest level of integrity.
Bain Capital statement: "Ed Conard retired from Bain Capital in 2007 as one of over 50 managing directors, and he has no present role with our firm. The views he expresses in his book are his own. The personal views of one former employee do not reflect the views of our 900 Bain Capital team members who work every day to grow companies and build businesses. For example, Bain Capital and our employees are proud of our commitment to the communities in which they live and work, and they support hundreds of charities and serve on over 75 charitable boards."
© 2012 Cable News Network. Turner Broadcasting System, Inc. All Rights Reserved.
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I kissed my way up to VP at a health insurance company. Now I take over $500,000 of your health care dollars for NO VALUE ADDED to your health care. And that’s just me. Now think about how many other VPs, Directors, Managers, etc. are at my company alone. Now multiply that by thousands of others at hundreds of other health insurance companies. From 10 to 25% of your health care dollars go towards administration that adds NO VALUE to your health care. But my company’s PAC dollars will continue to fool you little people into thinking that a single payer system will be bad. Little people like you are so easy to fool. Little people also don’t realize that a single payer system is the ONLY system that would allow little people (as an entire country) to negotiate better health care prices. Little people don’t realize that the Medical Cartels already know that. And that is the reason why the Medical Cartels spend so much PAC money from the hospitals and doctors lobbying against a single payer system. Some little people say that a single payer system would cost you little people more. But if that were true, then wouldn’t the hospitals and doctors WANT that extra money? Yes they would. So why do the Medical Cartels lobby against a single payer system? It’s because the Medical Cartels know it would allow little people to negotiate better health care prices. And that’s what the Medical Cartels are afraid of. Period.
But us big wigs at insurance companies, hospitals, and pharmacy companies don’t ever need to worry about health care no matter what it costs. We get our health care paid for one way or another by you little people. And we get the little people that work at our companies to contribute to our PACs. And us big wigs say it’s to protect the little peoples’ jobs. But in reality it would be in the little peoples’ best interest to NOT contribute to the PAC. Again, little people are so easy to be fooled. I won’t ever have to worry about losing my job with so many little people being brain washed by the Medical Cartels’ PAC money. Not only that, the Medical Cartels’ PAC money is used to elect so many republicans that will never allow a single payer system. Republicans have always fought against any meaningful health care reform. But that’s what our Medical Cartels’ PACs pay them for. Politicians can be bought so easily.
Pretty soon the only people that will be able to afford health care is us big wigs. And that’s the way it should be. We don’t want you little people using up the resources when we need them. And once again, I thank you little people for capping my SS tax at the $106,800 level. Now I only pay 1.3% SS tax and you little people pay 6.2%. Also, thank you for extending my tax breaks. I’m using the extra money on my vacation houses.
Arent you a ranting pathetic lil peon.....good luck with your vitrol and useless ignorance and hatred
The truth hurts don't it.
You are very right, but look at the history and take into consideration, on average an American citizen owns 10 guns....... And you guys are too obvious with your toys...
Timmy,
Thanks for your commentary. I think satire in these matters is admirable.
On a more serious note, I have to criticize Mr. Conard's assertions.
Innovation and capital don't drive the economy; demand does. If sufficient demand for goods and services exist, and consumers have the means to purhase those goods and services, business and investment will follow that demand, and they'll follow it regardless of the prevailing tax rates or the lack of government incentives or tax abatements. If the demand is these, then business will follow it. The problem is getting enough money into the hands of consumers to fuel that demand.
The Republican concept of 'job creators' is nothing more than a fairy tale. The real job creators are the people who have the means and desire to buy things. The real job creators aren't fragile hothouse orchids that will faint and die if they don't get fed a steady stream of tax breaks and concessions. The real job creators are healthy and robust. They just don't have enough money in their hands to meet their needs.
One of the public tv editorial guys had a very good point that applies here. Most if not all these innovation that Conrad talks about are about doing more with less workers. As a result we have a very efficient economy but we don't employ all our people. If we go exclusively Conrads way the problem only gets worse. Not everything fits this mold however. The other thing Conrad doesn't cover is how does the middle class get enough money to buy even less expensive products. The private sector moves money only one way in the form of profits. If we don't get any back the middle class gets poorer. The public sector should do that but without taxing the rich enough the middle class keeps getting poorer.
Risk-taking, innovation, and capital don't drive the economy. DEMAND drives the economy. If Henry Ford had not paid his employees enough money to buy cars; he would have had a nice inventory of great vehicles capable of changing the American way of life and catapulting our economy forward... but they would have rusted on the lot outside the factory. We'd still be horse-and-buggying it.
Ford took a risk, building factories to manufacture something for which there was little demand, at the time. But he was rewarded for creating the demand for that product... not manufacturing it.
Edison was an innovator; but he never invented anything that he couldn't sell... or couldn't create a market for.
You can't tell me that the so-called "Job Creators" are making more money off their cash at money-market rates, than they would if they actually paid that cash out as wages & had more people buying more of their products & services. With more demand, they would actually have pricing power. We would see some healthy inflation, and a healthy rise in interest rates. Higher interest rates are an incentive for companies to take less risk. In the absence of higher interest rates; we need higher taxes.
What none of the demogogues seem to understand about Wealth Redistribution, is that it is INEVITABLE. They treat it as though it's an evil communist plot against rich people. It isn't. Wealth will be redistributed, one way or another, eventually. If the wealthy continuously use their profits to create more jobs (which ultimately creates more profits, and so on...), and they pay their workers fairly, and they provide healthcare and retirement benefits to their employees... then everyone makes out. If they don't; then unions rise up and instigate strikes, which hurt the profitability of the companies... and/or the government steps in and taxes them to fund unemployment benefits, medicare/medicaid, social security, and then taps them more to provide infrastructure (roads, military, etc.) because the masses don't have the capital to pay for daily living needs, healthcare, retirement, AND their share of infrastructure costs, because they're not working or getting paid enough.
AND, if the wealthy manage to buy the government, to avoid unions and the higher taxation that would otherwise redistribute that wealth; then there is insurrection (think French Revolution, among others) that siezes the wealth (and/or the means of production) and redistributes it by force.
The LEAST efficient methods are Revolution and Government interference (taxation). But in the absence of wealthy people who are smart enough to avoid those two alternatives; they are inevitable.
It's not like the rich won't still be richer than everyone else.
Mark,
Henry Ford is precisely the example of enlightened capitalism I was looking for. He paid his employees better than most other employers knowing that the employees might well use the extra income to buy one of the cars they were making. These days, though, ford is a fossil. Employers today are so obsessed with their bottom lines that they don't see the potential benefits of offering better compensation to their employees.
I agree with you that taxation and revolution are far less efficient, but in the face of capitalists that can't see beyond their own profits, What's a country to do?
Yup. That pretty much sums it up. Good Satire Timmy.
love it. lol
Can you spell T-R-O-L-L ?? Timmy isn't pulling 500G's a year – he's just making up all that BS to suit his agenda. Like so many others, he's just looking for someone else to pay his bills.
What agenda would that be? Cheaper healthcare for all!!! What's wrong with that? Idiot!!! Hahahahahahahahahaha
I've worked for an insurance company so I think you work in the industry (I doubt you are a VP or you would not be trying to take money from your family).
What amazed me the most was the amount of our budget that was spent on identifying people who were getting value from their insurance and trying to find ways to deny them coverage or make them pay more. That's why I found it funny when Sarah P came up with 'death panels'. She must not realize that we've always had those and they're called insurance companies.
Insurance is a business and not a charity, so there is nothing wrong with someone who thinks like the fictional person in Timmy's story.
I think Timmy Suckle doesn't work in healthcare. I think this is a bogus thread. Anyone in this field wouldn't talk like this or at that senior level have the time on a workday to write this. I think that Conrad has some valid points in that this type of thinking is endemic to the US and that there is no sense that it will change anytime soon. He is stating a reality that continues to exist and will keep on going. It has been around since the earliest days of modern world and will not change. Communism and socialism are a failure. This system works. The rich may get richer, but so do the rest of us. Unless you (the reader) will do anything to change it then nothing will change. Conrad only states a reality.
"Anyone in this field wouldn't talk like this or at that senior level have the time on a workday to write this." – Boy have you been given a snow job. Wouldn't have time...pfffffffft. Apparently you've never worked in the Insurance business. Hahahahahaahahah
@AI:
You are right, Timmy Suckle is just a troll and not even a bright one. Any intelligent (as in 3-digit IQ) person can see this.
You are also right that communism failed.
But you're entirely wrong to say that socialism failed. The data seems to contradict you: Sweden, Netherlands, Austria, Norway, France, Denmark and even Germany & Switzerland are more on the socialist side. Yet, those are advanced countries with a standard of living comparable (if not better) to the one in US. Their GDP/capita looks better than ours, they have better infrastructure, cheaper education (that's at least as good as the best education you could get in the US) and a much, much better, cheaper & efficient healthcare system, to name just a few.
Capitalism is an economic system. It is not a form of government.
“Perhaps we are at a crossroads. It’s a good thing we have the map keys in hand.”
Experience Life among the Ordinary and learn about map keys at
http://lifeamongtheordinary.blogspot.com/2012/04/map-keys.html
Conard wouldn't last a day in the unemployment line.
Correct, he would either find a job right away or create his own.
Don't think much of Mr. Conard's argument. Then again, with a name like his.... Consult a dictionary of French slang insults and you'll understand my point!
is that the level of intellect you work at?
To take a man's family name and reduce your thinking to that of a Kindergarterner is so looooooooooooowwww.
Get a grip.
Timmy: Most proletariat members are aware of benefits accorded to upper class members. You've got what your ilk paid for in Washington.
Tell me something I don't know?
Conrad enjoys life in the fast lane and focusses on myopic options. Yes, economic growth is important, but not at all costs. He wants economy to grow faster, but would it be sustainable? The financial crisis in 2008 told the story. He lauds Romney's managerial skills in private economy. Well, running an investment firm is not the same as managing a country's economy.
there is no defense for theft, lies, repression. these are not carried out by the non elite and their managers.
and
obama did not have osama bin laden "taken out". OBL died in 2001.
and
let's not forget the idiocy and continued orientalist thinking by eric chaney which is supported by mr zakaria.
The big picture is worrisome. And viable solutions to some of the most important aspects have yet to materialize, nor are being given enough consideration. One of them being the federal debt as a ratio of GDP. Spikes , if not explosions, have occurred in the past. But the US has only exceeded the 100% level once before the 2008 financial meltdown. It is still maintaining a very high level, and the tendancy for it to increase seems more realistic than an expectation for a significant retreat. So, defend, support, fight, debate, analyse, and vote in whomever/whatever you want. But until this ratio declines significantly and stabilizes at an acceptable level, the future will look increasingly Greek.
Conrad demonstrates just how idiotic you can be and still make tons of money. The notion that people need even more incentive to innovate and invest then what they already get is beyond absurd. Maybe for the morally bankrupt such as Conrad and Romney is their a nee to have the lowest tax rate possible and still want even more, but for most people making a decent profit, doing something worthwhile, making your country and the lives of millions of people better is usually more then enough.
Fareed,
You are my favorite commentator on TV. Your insights are intelligent and practical. However, you let Conrad off in your interview with him making statements of fact that are not accurate. The primary goal of private equity is to make private equity general partners enormously rich. The portfolio company is their means to being rich. Seldom will they think about job creation. In fact, jobs are overhead to be slashed so they can reach their liquidity event in 3 to 5 years. The private equity GM's take management fees while not managing. They take 20% of profits for which they pay capital gains rates. Conrad spoke of the $1 billion created by Instagram as an example of powerful job creation. It made some private equity partners richer. It is also an example of the 2000 Nasdaq bubble reappearing. Fareed, you should have called Conrad on this point. The super rich do not stimulate to economy to the level that Conrad proposes. How did $120 million paid to buy the Scream paining create jobs? It was an expenditure made by a super rich person for their personal enrichment.
I agree with Mik. There were all kinds of contradictions in Conard's reasoning tht should have been pointed out, and many assumptions that are completely at odds with provable facts. I thought Fareed's usual insight was missing - and I also thought he seemed oddly hunched over while interviewing the guy. Do you think one of the Koch brothers was under his chair, squeezing his balls?
Personally I think the "job creators" aren't doing their job. They sure haven't done spit for this economy. You could starve to death waiting for them.
Actually, the job creators are people like me, middle class. But I'm not creating any jobs. I called my contractor – the deck won't be replaced this year either, I told him. We need a second vehicle on our family – I go to the used car lot. The bend over the wheel well of the current vehicle from a minor accident – left there, I'm not springing for the body work. The vacation to visit relatives in Wisconsin is put off another year as there are rumblings of layoffs at my job.
All of that means I'm not being a job creator. I would be, but even my high tech engineering job has been seeing only flat compensation over the past several years, starting even before the economic crisis.
The middle class – we're the real job creators.
Based on his interview, Conard thinks he is a risk taking innovator a la Steve Jobs who deserves his billions because of his risk taking. What is the truth? This guy is a banker who is putting OTHER people's money at risk. The last person who is going to lose money is a Bain executive. I wish Zakaria would have asked him to name a single innovation he, Conard, created.
Jeff,
You make a good point that I overlooked. I have managed a private equity owned company. The initial deal had 64% in debt and 36% from the private equity fund. The General Partner (private equity type like Romney) provided 10% of the equity. After you follow the money, this deal was done with 4% from the private equity banker. Banks contributed 64% and the limited partners (aka pension funds and wealthy individuals) contributed 32%. This is a great way to make hundreds of millions for private equity bankers with very little initial money. I regret that I found this model late in my life. I can understand why Conrad wants to protect this play ground.
Jeff,
Your other point on innovations are correct. Steve Jobs and Bill Gates built mega companies over many years and decades. They were not quick flipping the company after forcing some initial gains as many private equity firms do. Apple and Microsoft created 10's of thousands of jobs in their companies and 100's of thousands in their supply chain companies. This is the job creating leadership that we need. I am suspect of a private equity banker running a company on a daily basis, never mind the US.
Steve Jobs although a capitalist and a member of the 0,1% was made of a totally different fabric from the Romney/Bain capital bunch. He was a smart ass with an idealistic bent toward producing products that can change the world, the money just rolled in as a consequence of his genius and success.
That's the kind of risk taking that's needed versus the Romney/Bain financial wizard kind who crunch numbers and learn how to game the system for their own profits without actually providing much added value to society in actual innovation and jobs creation. They do provide some value to the system as scavengers always bring value to any system, but not enough to justify the kind of tax writeoff they can get away with.
They should be paying their fair tax share since they don't qualify as risk takers and don't benefit the middle class as Mr. Conrad claims.
The question I have for Mr. Conard is, if he thinks that those who are wealthy, need to have unfettered returns on their ventures, in order to be incentivized to risk and innovate, what is the incentive for middle class and the working poor to work harder, if their income and wages have been flat, and their other compensation (pensions, benefits) decreasing or missing?
It seems to me that for people like him, they must see unlimited rewards, but for the rest of us, we're to work and produce more because we have a great work ethic. Because the benefits of improving productivity sure haven't gone to us.
good comment.
Mr. Carnard talks nonsense. His argument apaert–risk-taking merits shifting disposable income of the millions to excess captal of the very few–the argument is self-serving.
A simple thought experiment proves his argument nonsense. Bain could function only by shifting tens of thousands to unemployment. At what cost? The cost of 5 million unemployed is something like this: $1 trillion. Lets name an unemployed man "Everett". He earned $60,000 before layoff and brought hs employer a return of fourt times that, but lets assume only his own income. On unemployment he received $2,000 per month, or 2/5 his salary of $60,000. So the economy lost 3/5 of his spending. But it also lost 100% of his productiviy, or $60,000. The total loss to the economty was $36,000 + $60,000 or $100,000 in round numbers. 5 million jobs have been lost during the recession, and for simplicity lets assume all are Everett. Total GDP loss for one year, in round numbers, is 5 mllion times $100,000, or $500 billion. If we assume all job loss lasted two years, the cost to the economy of firing workers en masse is one trllion dollars. Compared with this loss, "rewarding risk-taking" is scant and nonsense.
Mike Kiley, Conifer, CO.
So, you have $10 million, pretty paltry for the top 1%. You can use it to take risks, or you can use it to avoid risks. You can risk $10 million, in hopes of making, say, $100 million. On the other hand, you can spend $1 million to buy enough political influence to assure that you will realize a $100 million return on your $9 million investment. What do you do? Any rational investor would use disproportiionate wealth to buy freedom from risk, rather than to support risk, and that is the fatal flaw in the argument made by Mr. Canard (oops, Conard).
Edward Conrad believes, and wants to convince the rest of the world, that if we would lower taxes on the rich, there would be a renaissance in innovation that will create high paying jobs for all us Americans. Being a member of the rich class, he wants us in the working class to lower his tax rates, which means we're going to either pay higher tax rates or lose government benefits.
This entire theory is built on a fact which he assumes is true without the necessity of proof. That fact is that there are people in America who at this moment are saying "I have a great idea that will make me millions of dollars but I am not going to do anything with my idea unless the government lowers taxes for the rich." In other words, innovation is being stifled because innovators are saying there just isn't enough profit in it for them.
As an example of his theory he describes a group of people who developed an application for Facebook which after only a few years was sold for $1 Billion. How this relates to his thesis that people don't innovate because there is to much taxation is beyond the ability of reason to reach. First, they apparently didn't think they were going to be taxed too much or they wouldn't have done it in the first place. Second, there is no sane human being on earth who wouldn't work a couple of years to make even $10 Million – and that's assuming a tax rate of 99%. Third, I challenge anyone to find me a great innovator who has decided to not work because his future taxes are going to be too high.
Considering the depth of reason and thinking going on in this guy's head, frankly, he has no business being on GPS, which is one of the most intellectual news programs on television. It's like interviewing Barney the Dinosaur about advanced particle physics. Please, do not stoop this low ever again. I have better things to do with my time if this is the kind of stuff you're going to broadcast.
@ Errol; I'm pretty good with all that. Had you said "What a load of utter crap!",..... I'd be ok with that too.
Conrad is just spouting more "trickle down."
Maybe if the bankers had taken an economics class once we wouldn't be in this because, really, this guy is pretty dumb.
His basic belief is this: everyone should stop consuming and saving more so that the richest can invest to shift the supply curve, from the very basic aggregate demand and aggregate supply model, out so that prices are lower. Sure, but it is circular logic, because this man would likely want the rest of America to keep saving when times are good anyways so that the rich can still invest. In that case, why not just have everyone save 90% of their income so that they can reduce their living standards greatly but HEY at least we will have lower prices in the future! What an idiot this man is.
He is trying to justify an untenable position that he has placed himself in, being rich at the expense of others. Quite plainly, real wages have stagnated for almost all economic quintiles except for the top twenty whose income has skyrocketed.
I like his assumption that by creating controversy he will sell more books. So effectively – his innovation has been to write less useless junk and create his wealth by having us buy his "crappy" book.
I think its counter-intuitive to buy a book that is useless (the author is trying to sell as controversial) and then go review it on Amazon.
On a tangent – I find that if you hold shares of a public company and can now go and vote to squeeze the pay and remuneration packages for the CEO – then you should go do it. That is is one way to effectively bring down compensation for people who perhaps don't deserve to earn as much as they do and as a result bring down the pay for the others below him/her at the top. Heck the CFO or CTO cannot be allowed to earn than the CEO – can they now? This I think is probably a more effective way to achieve what the occupy protesters are trying to do indirectly.
I agree that risk takers should be rewarded. Bill Gates, Steve Jobs and others deserve all the wealth they get. But what risk was there for the bankers and traders who sold securitized debt instruments they knew where no good but made lots of money and the risk was borne by the tax payers. Executives of fortune 500 companies think they should make as much money as people who actually take risks. How risky is it to take the CEO job of GM? Their last CEO drove the company into bankruptcy and still came out very rich with a golden parachute. When a main line CEO took over Apple, he damned near put them out of business. There is no risk taken by non founder CEO's. Its all upside. For all the Steve Jobs and Bill Gates there are thousands of people who put their careers on hold and spend years toiling to make a success of their business only to fail and end up with nothing but debt and no career.
I watched Mr. Conard's interview on GPS. He makes certain assumptions in his interview and book that do not take into account fundamental human behavior; i.e. undisputable aspects of behavioral economics and human nature and the “bell curve” of capability, drive and energy. He states that we need more people to take risks to start businesses and that we need less government so that we don’t get in the way of these people that are to be the next Steve Jobs and Bill Gates of the world. Mr. Conard arguments are based in pure theory and only make sense in a purely mathematical sense.
His approach does not take into account the practical aspects of human behavior and capacity. The Steve Jobs and Bill Gates of the world do not exist with the frequency. Much of the population neither has the intellectual capacity nor the energy to create value as these great individuals. Many (95%+) do not have the creativity, the educational background, nor the energy to start the types of business he expect to turn the economy around; most are followers not leaders.
Finally, there is negligible marginal economic expansion when those in the 1% wealthiest class increase their wealth – these individuals have finite bandwidth to create and manage new businesses, and the marginal economic expansion based on their investments is limited and diluted based on the investment and whether or not it is US-centric; this is precisely whey “trickle-down economics” has not been realized.
Mr. Conard’s interview and book aims to generate interest in his economic agenda by dangling hope for the many in an attempt to mobilize them to support an economic agenda that is not in their best interest and only benefits the few wealthy.
Mr Conrad is delusional thinking that he's in the same league as the steve jobs/bill gates of the world. There are plenty of super rich people who would be more in the same league as Bernie Madoff of the world but because of their wealth, suddenly thinks they are risk takers and deserve to be put on a pedestal of very tall order .
Fareed, I think you missed a primary question in this interview - Bain Capital doesn't have the reputation for start-ups, innovation, and risk taking. They do have the reputation for buying companies, spinning off instantly profitable parts, streamlining what is left, leveraging in big big debt and paying itself out within 5 years. The company often goes bankrupt under the debt burden.
This isn't building new industry or taking things to the next level that affects GDP – this is basically scavanging. Credentials in this realm don't tell you how a national economy works, nor does it make you a job creator. It can make you amazingly rich.
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Excellent comprehensive program on our devastating Health Care System. Another fact is that 90% + of the health care dollars that most people spend are done in the last 30 days of their life. The idea of the coalition is a great initiative that must also have a Preventive Medicine arm to address Obesity and other high risk patients with conditions that can be prevented. While the government is getting involved maybe a Revision of other factors that raise medical care costs indirectly ought to be looked at. Examples are the Legal profession and the Pharmaceutical industry. How aboutInsurance companies giving incentives for people to stay healthy and getting price reductions of their medical insurance fees. Just a couple thoughts. Great program overall!
Why is it always one at the exclusion of the other? USA needs both a strong middle class with disposable incomes and job creators who take risks. In the recent past, there is a rapid decline in the middle class numbers as the middle class is increasing overseas (where corporations are actually investing) while the job creators at home are making more money on their investments. True that Google got lot of equity investment (read permanent donation without certainity of growth or assurance of dividends) from pension funds. But before Google reached that stage, the founders were not having fixed income like the way people who choose to become employed do, there is always the threat of the firm going belly up, it is not a joke to run a pay roll and have enough working capital. They do take enormous risks, spend time, money and give up family life to achieve what they do. So, let's not beat up the job creators. On the other hand, it is equally important that there are sufficient number of middle class population with decent living conditions and disposable income to be able to afford the products like smart phones, Disney rides or air travel. What we have now is a shrinking middle class, thanks to heavy automation and advantage of labor arbitrage with the developing countries, neither of which is going to disappear anytime soon.
Ireland has the lowest tax rates, govt. has slashed spending but the economic growth rate is at an all time low and unemployment is at an all time high. While lower taxes do create a conducive environment for doing business, less taxes and no regulation alone cannot solve the current economic malaise. We refuse to believe that we have economic cyles and downturns. We are almost intolerant of slow growth. We are entering the era of deleveraging where consumer in the EU are trying to pay off their debts, so we can't expect economic growth. There is no wealth effect ( bloated home and equity prices) to make folks in EU feel rich and get out and spend more. Also, let's not forget that industries of the future (including Facebook etc.) are NOT LABOR INTENSIVE. Geography has become history with broadband Internet. Labor is the only major cost in a service industry. So, what would a corporation do? Increase revenues (even if it involves selling more stuff to middle class abroad) and cut costs (even if that requires taking jobs to low wage countries where there are no benefits or affordable benefits). The top 1% is doing what they were trained to do – they relocate, downsize, offshore and outsource. The 99% cannot relocate even within the country, thanks to under water mortgages. Thanks to structural unemployment, we are stuck with an aging labor force that is less mobile, not trained to meet the requirements of a modern service job and cannot compete with a hungry- willing-to-do-anything for minimum wage counterpart in developing countries. Globalization has turned tables and put middle class in developed countries at a serious disadvantage. Much of this has to be blamed on lack of a level playing field.
What is the alternative – shut down globalization. Start making everything in the US of A, inflation will rise, but so will income of the middle class. Erect barriers to free trade, open immigration to attract only the best and brightest from around the world. Stop importing stuff from China, they will dump their investments in our treasuries, we will default like the former USSR and tell them to go to hell. Will they wage a war? Let's not forget all the investments made in China are by American and EU companies (the top Chinese exporters are all MNCs). But will increased incomes of 350 million people support all the fortune 500 cos? Before globalization, they did. As we stand today, 50% of revenues come from outside the US, so may be the fortune 500 will shrink by 50%, so what US middle class will be intact and our defecit will be wiped out. All money parked outside the US will come back, due to security or expropriation issues, if not for anything else. We spend more on defense to defend ourselves. USD will cease to be the world's reserve currency. So, what we will be self sufficient with Natural gas from Shale. Can we do all this? Is there a politician out there who is willing to shut down free trade and globalization? The idea is as radical as shutting down Wal-Mart and asking mom and pop stores to resurface. Are we ready for a radical change like this? Please comment
Nah, we don't need to do all that. We only need to get rid of the middlemen. Those 0.1 % thugs who control 20% of the wealth and profit the most from trades with china and globalisation and yet don't want to pay their fair share of taxation. we don't want to take everything that you've worked for, but gosh, you've got to stop being greedy and start thinking about giving back to the system which got you there.
There is a fine distinction between a true pioneer/visionary/innovator like Steve Jobs/Bill Gates and a financial intermediary like a private equity firm. The pioneer businessmen are the creators of great enterprises, while the later facilitate efficient asset allocation, which now-a-days is happening at a very high price. Let's not confuse the job creation done by innovative and creative folks like Jobs/Gates/Ford/Rockefellars with financia intermediaries whose actions sometimes result in job creation but more often in downsizing. Restoration of a firm's profitability is the immediate motive of any private equity firm, job creation that comes from eventual growth is a consequence. For that matter, Steve Jobs also started a company, not to employ thousands of people, but to build a product that will change the way things are done, improve productivity and in the process gain name and fame. No human endeavour is devoid of selfishness. Some businessman are philanthropic but so are some private equity investors...
All businesses need private equity at some point – venture capital or buy out. The arguments above are like who is important – the land owner or the share cropper? Both are important and are essential ingredients to a successful economy...
Where have we become where Conard believes that people even a little like Steve Jobs won't be incentivized by being left with 10s of millions after taxes or if more like Jobs, 100s of millions, or if another Jobs, 10s of billions, not that Jobs even cared about the money.