Valuetainment - The Industry of Politics Exposed By Michael Porter & Katherine Gehl

00:00:00.000 30 seconds.

00:00:30.000 sold her family-owned business that was doing a quarter billion dollars of revenues per

00:00:33.280 year.

00:00:33.560 And today we're going to talk about the industry, the industry of politics.

00:00:37.900 Michael Porter, Catherine Gill.

00:00:39.540 Thank you so much for being a guest on Valuetainment.

00:00:41.460 Patrick, thank you.

00:00:42.740 So I have a question, you know, Michael, let's start off with you.

00:00:45.200 So you, when I read the preface in the book, to me, you've always been a business guy.

00:00:50.100 You've always been a competition guy.

00:00:51.480 You were a, you played on, I think you played on the championship team of Princeton golf

00:00:57.680 and you were somebody that played a lot of different sports and you've always stuck to

00:01:00.940 your strategy side, that side.

00:01:03.180 And I didn't hear a lot about politics, but it was very interesting for you to want to

00:01:07.120 partner, I'm going to want to write this.

00:01:08.880 What inspired you to want to take the, take a look at competition in the world of politics?

00:01:13.060 Well, what I, what I discovered was, and with the help of Catherine was that actually all

00:01:18.900 the things I cared about, making America more competitive, getting the right policies in

00:01:24.140 place, stimulating the advancement of our business, business sector, all those things were being

00:01:31.160 shackled by the failure of our politics system.

00:01:34.880 We just couldn't get anything done that was going to drive our country to the next level.

00:01:40.640 So really it was that simple.

00:01:42.380 And how many similarities from the moment you guys started working on it competition wise,

00:01:49.120 because to me, uh, I see differences, but I'm curious to know for somebody that like you,

00:01:53.700 you're the expert, you're the godfather of competition and the topic of competition,

00:01:56.960 what differences do you see in the world of business when it comes to competition versus

00:02:01.260 the world of politics when it comes to competition?

00:02:03.560 It's, it's kind of a stunning difference.

00:02:06.160 And, uh, in, in business competition, uh, companies are usually competing, you know, fairly

00:02:11.780 and, uh, uh, to try to succeed and to try to advance.

00:02:15.960 And, uh, in politics, the competition is totally about the competitor's own interests, the

00:02:23.060 politics, the parties, the parties are competing to benefit themselves and to advance their cause

00:02:29.120 really not to advance the public interest, not to make the country better, not to make

00:02:33.120 our business environment better.

00:02:34.440 So it's, it's like a, a stunning disconnect.

00:02:37.640 Yeah.

00:02:37.740 And we'll go, we'll go deeper into that, but Catherine, I want to go to you because the

00:02:42.100 idea of this book came from you and you approach Michael Porter to want to work on this

00:02:45.820 together.

00:02:46.840 Uh, here you are going to Kellogg, you know, you get your, I think you got your MBA from

00:02:51.360 Kellogg, if I'm not mistaken.

00:02:52.660 So you're, you're succeeding in business.

00:02:54.800 You come from a great lineage of business folks.

00:02:56.840 You're doing good for yourself.

00:02:58.020 You're in Wisconsin, you're doing what you're doing.

00:03:01.120 What, what led you and drew into politics?

00:03:03.820 I mean, how did that happen for you?

00:03:05.360 You know, it's actually interesting.

00:03:07.560 It seems like it's a disconnect, but it really is fundamentally my experience as a business

00:03:14.780 person and as a CEO that makes any of this possible.

00:03:18.020 So, uh, like you mentioned before, I was running this food manufacturing company and that experience

00:03:25.360 gave me all the learnings that I needed to do what I'm doing today.

00:03:29.960 I mean, as you know, and so many of your, uh, you know, viewers will know business really

00:03:34.880 teaches innovation results, accountability, and how to deliver those.

00:03:40.540 And those are all the things that we actually don't have in politics.

00:03:45.480 And the lack of that is apparent to everybody.

00:03:47.940 I mean, and people really, they may not say, Oh, we don't have innovation and results and

00:03:51.940 accountability, but they say all the time, Washington is broken.

00:03:55.180 And, and that's what I thought at the same time, I just couldn't figure out why it was

00:04:03.840 broken.

00:04:04.180 Like, why was it so irrational?

00:04:06.920 How can the country that created modern democracy and free market enterprise, you know, do such

00:04:12.700 a poor job, essentially, of both of those that they're becoming almost existentially at

00:04:17.560 risk.

00:04:17.900 And, uh, Michael could talk about more details about our declining fortunes, but I'll just

00:04:24.000 fast forward to light bulb moment for me around this politics work. 0.66

00:04:29.400 I was deeply concerned as a citizen, as a business leader, because I saw the policies that weren't

00:04:36.140 getting implemented, but I didn't fully understand.

00:04:39.140 And in 2013, when I was still running my company, I read this amazing book by Mickey Edwards, a former

00:04:45.840 Republican congressman, and it's called the parties versus the people.

00:04:49.640 And in there, he, he says, Washington isn't broken.

00:04:55.580 It's doing what it's designed to do.

00:04:59.180 So really, as we figured out, and we don't have a politician problem, we don't have a policy

00:05:05.020 problem.

00:05:06.100 We have a political system problem, the rules and the incentives and politics are all screwed

00:05:12.060 up.

00:05:12.360 And we'll talk more about that later.

00:05:14.880 Um, so as I'm realizing this coincidentally, I'm starting a company strategy product project

00:05:22.540 with fortunately for us, the father of modern corporate strategy, Michael Porter, and we're,

00:05:29.440 I'm trying to figure out my food industry business using the five forces.

00:05:35.140 But while I was doing that in the back of my head, I kept having this parallel analysis

00:05:41.900 going on.

00:05:42.880 Oh my goodness.

00:05:44.460 This is exactly how the politics industry works as well.

00:05:49.700 So I was really running two analyses using the five forces at the same time.

00:05:54.320 And I found it to be illuminating and a real clear way to say what's wrong, but much more

00:06:04.420 importantly, a clear way to help diagnose how we could fix it.

00:06:10.240 Because one thing to know why it's wrong, it's another thing to figure out where would

00:06:14.720 we have the leverage to change it?

00:06:17.220 Um, and so that was the turning point.

00:06:20.560 I was all into system, systems, systems, incentives, rules of the game.

00:06:26.540 And I couldn't unsee this.

00:06:29.280 So every time I saw what was going on in Washington, DC, it immediately went back to the analysis

00:06:36.860 and I said, oh, we could predict that this behavior, which seems irrational to those of

00:06:41.840 us in business and is totally counterproductive, certainly for the country is totally rational

00:06:47.040 given the system they're in.

00:06:48.920 So after I sold my company in 2015, I was working on changing this, uh, changing the incentives,

00:06:57.080 but I felt that business people were missing in action.

00:07:01.820 They were MIA from the conversation and from the leadership to make a difference.

00:07:08.320 Essentially, they, I believe, felt that politics was too irrational and they couldn't do anything

00:07:13.400 about it.

00:07:13.920 So I decided that we needed to make the business case for investment of their own leadership,

00:07:21.660 of their own time and resources in this most critical problem.

00:07:27.280 And so we needed to write the theory.

00:07:30.240 We needed to write what's now become, uh, called politics industry theory, because by demystifying

00:07:35.800 it, using this business lens of competition thinking, then we generate an understanding that

00:07:43.360 leads to engagement.

00:07:44.820 So in 2016, I asked Michael to join me to, to write about this because we're using the

00:07:51.820 five forces.

00:07:52.400 It was so fabulous.

00:07:54.180 And we started writing.

00:07:56.360 And then in 2017, we published at Harvard Business School, where Michael is, a report

00:08:02.000 as which you mentioned, we got a great reception.

00:08:04.660 It's really brought this idea of healthy competition versus unhealthy competition to the fore.

00:08:11.920 And people are talking about it.

00:08:14.860 We always need more people talking about it.

00:08:16.980 And that's why now we've turned it into a book, why we're talking to you today.

00:08:20.460 And going forward, it's really all about driving the action.

00:08:25.700 So we believe that we have the right prescription.

00:08:29.980 How can we now take that to scale across the country?

00:08:35.460 And for me, I've sold my company.

00:08:39.720 That gives me the freedom to do this work.

00:08:43.400 And I'm all in.

00:08:45.160 It's my passion project.

00:08:47.140 And I can't think of something that I'd rather be doing because it, politics is the preeminent

00:08:52.880 barrier to solving the issues that are facing us as a country.

00:08:58.520 Very interesting.

00:08:59.040 And you know, uh, when you run business originally, you go in thinking, it's just about, I want to

00:09:03.540 grow a company, I want to make an impact, I want to do this.

00:09:06.180 And then the bigger you get, you realize how much of a role politics plays within a company.

00:09:10.280 And you never thought like you have to deal with politics.

00:09:13.420 Why?

00:09:13.720 I thought it's just competition.

00:09:15.020 And then you notice there's politics there.

00:09:16.900 So, so I see the similarity there, but now, you know, the one thing I do want to talk about

00:09:22.440 before I get into my question with you is you talk about the five stages of political

00:09:26.940 grief you went through.

00:09:28.160 Would you mind sharing that with the audience?

00:09:30.100 Oh, sure.

00:09:32.640 Yeah, that's interesting.

00:09:34.060 So, uh, some of the audience may know there's a, you know, five stages of grief, the Elizabeth

00:09:38.720 Kubler-Ross, when you, uh, grieve the loss of someone or something important in your life.

00:09:43.200 And so for me, as I cared about politics as a citizen and a business leader, because again,

00:09:48.780 as you're noting, the political environment, the U.S. competitiveness matters to business.

00:09:53.520 So I'm deeply caring.

00:09:54.700 I've got my child.

00:09:56.160 I care about her future.

00:09:56.840 And now I think politics is screwed up.

00:09:59.080 So I said, I must get involved.

00:10:02.600 And I did what people often do, which is I chose a candidate.

00:10:07.380 So I, uh, had known state Senator Barack Obama for some number of years in Chicago, and I got

00:10:13.120 deeply involved in his 2008 campaign.

00:10:15.700 I was all in for hope and change.

00:10:17.420 And then after his administration, uh, was in office for a while, I was paying close attention

00:10:23.920 and I served in a role in that administration.

00:10:26.140 And I was disappointed by what we were able to produce out of Washington, D.C.

00:10:33.580 And I said, wow, if we can send this extraordinary candidate to the office, and yet Washington,

00:10:42.200 D.C.

00:10:42.440 is functioning similarly to how it functioned before, gosh, maybe candidates are not the

00:10:49.160 answer.

00:10:49.600 So that's the first stage, not candidates.

00:10:51.360 I said, I know.

00:10:52.620 I'll get involved in policy.

00:10:54.680 So then I get deeply involved in policy and I find out, oh, what do you know?

00:11:00.900 Behind closed doors, there's reasonable agreement across both sides about what are the policies

00:11:07.260 to solve our most pressing issues.

00:11:08.940 There's just no political will.

00:11:10.640 So I go, okay, not policy.

00:11:13.020 I know I'll get involved in culture.

00:11:16.160 So I joined up with a movement, you know, at, at high levels of a movement that was trying

00:11:21.840 to bring everybody together.

00:11:23.280 And, and, and we got a lot of pledges of bipartisanship, um, in the house and the Senate.

00:11:31.140 And yet when it came time to vote, everybody voted the same way.

00:11:34.700 So they say they want bipartisanship, but they don't vote that way.

00:11:39.360 So I say, oh, culture's not enough.

00:11:42.240 And then I said, I know I'll work on candidates again.

00:11:46.160 But now I will try to elect candidates that are independent.

00:11:50.000 So they're not beholden to either side of the duopoly.

00:11:54.100 And guess what?

00:11:55.400 They can't get elected.

00:11:57.680 So that was the fourth stage.

00:11:59.820 And finally, as I noted before, I read Mickey Edwards book in 2013, the light bulb went off.

00:12:05.540 It's a systems problem.

00:12:06.960 I have never looked back.

00:12:09.800 Um, and my grief is all about the system now, but that grief also informs my hope, which

00:12:18.200 is, it's not a mystery.

00:12:20.860 The reasons for our dysfunction are clear.

00:12:25.240 They're in the rules and the incentives of the system.

00:12:28.640 And so we have the power to change them.

00:12:32.640 So now I'm done with grief and I'm full into hope and change yet again.

00:12:37.560 So first stage choosing a candidate, then you realize, okay, that's not the way to go.

00:12:43.500 Number two was policies.

00:12:44.980 Number three was culture.

00:12:46.460 Number one, number four was a independent candidate.

00:12:49.340 And the number five, fifth stage was changing the system.

00:12:53.760 Systems, incentives, rules.

00:12:56.820 Systems, incentives, rules.

00:13:00.060 I like that system.

00:13:00.920 So which, which stage do you think is going to be media?

00:13:03.080 Is there going to be a stage number six, which is media or no?

00:13:06.200 Oh, no, there isn't going to be because what's so interesting about any sort of human endeavor

00:13:17.160 is that systems and culture and communication, there are all kinds of things that drive behavior.

00:13:27.040 But what's really important, and we learn this in business, is not to spend our time

00:13:33.140 bemoaning the things over which we have no control, but rather to focus intently and solely

00:13:41.660 on the things where we have leverage.

00:13:43.760 So as citizens, we have leverage.

00:13:48.140 It's not easy to get this leverage, but we have it on the system.

00:13:51.960 There is no leverage available to, you know, wave a magic wand and change the way media works

00:13:59.520 in our country or the world.

00:14:02.160 So I listened to sage advice from Michael Porter, who is famously known for saying,

00:14:09.080 strategy is about choosing what not to do.

00:14:11.960 And Michael and I keep our work solely in this intersection of what we call powerful and

00:14:21.480 achievable.

00:14:22.400 We want to do things that are powerful enough to make a difference, not just things that

00:14:27.060 feel good.

00:14:28.040 And then we want to do things that we can actually achieve, not just tilt at windmills.

00:14:33.060 I'm very curious to know, as we go into this conversation, the role media plays, because

00:14:38.900 you know, there's an element of that where, you know, like what I've noticed for myself

00:14:44.480 with the pandemic is if you went back 50 years ago, I don't know if we would have responded

00:14:50.160 to it the same way we did today.

00:14:52.000 And how much more of a role local politics plays?

00:14:55.580 Like in LA, you've got a mayor telling them certain things to do that's scaring the hell out

00:14:59.120 of folks in LA and Dallas is handling it in a different way, and as well as the role media

00:15:03.180 plays.

00:15:03.600 So it's interesting your take, but maybe we'll visit that here in a minute.

00:15:07.720 So Michael, question for you.

00:15:10.280 Again, going back to the question about competition in business, competition in politics, the difference

00:15:16.480 between those two.

00:15:17.800 Why should the average person that's watching this, who is kind of sitting there saying,

00:15:22.540 honestly, I really don't know about policies.

00:15:25.760 I keep hearing about this gerrymandering thing.

00:15:27.980 I don't even know what gerrymandering is.

00:15:29.480 I think I watched a video one time where they take the people and they split it.

00:15:32.300 So, you know, the governor back in the days, I think he was from Massachusetts, that he

00:15:36.120 kind of changed this.

00:15:37.760 And his last name was Jerry.

00:15:40.120 And he changed it to be able to beat this other federalist guy.

00:15:43.000 I don't really know what's really going on there.

00:15:45.280 And why should I care?

00:15:46.840 Michael, from your point of view, a business point of view, why should the average person watching

00:15:51.540 this care to want to change politics?

00:15:53.680 Because most of the people I talk to, they're just kind of thrown in the towel saying, I

00:15:57.280 don't trust politicians, and I really don't want to do nothing about it.

00:16:00.100 What would you say to them?

00:16:01.180 Well, it's funny.

00:16:02.440 You know, the journey on my side really reflected that point.

00:16:06.680 Absolutely directly.

00:16:07.720 You know, we at Harvard Business School, and I work a lot on competitiveness and economic

00:16:13.280 development and why countries prosper.

00:16:15.520 And I work with many countries around the world.

00:16:17.120 It's very deeply about moving our society forward and making our collective business

00:16:23.120 environment better.

00:16:24.700 And we noticed about a decade ago that the performance of the American economy was really,

00:16:32.200 really, really bad.

00:16:33.660 We were seeing results, slow growth, slow productivity.

00:16:38.440 Our skills were declining relative to other countries.

00:16:41.920 Our education system was declining relative to other countries.

00:16:44.800 And at the school, we sort of came together and say, it's our responsibility at Harvard

00:16:49.320 Business School.

00:16:50.060 We got to understand what's going on here.

00:16:52.120 You know, why are we not making headway?

00:16:54.820 Why is our economy getting more competitive?

00:16:57.440 Why are American businesses not thriving the way they should around the world?

00:17:02.600 And so we started this big project, collected a lot of data.

00:17:06.740 And we came up with an assessment of the U.S.

00:17:12.000 business environment with a two-by-two matrix, you know, like we always have here at Harvard.

00:17:17.420 And what's, but most of it was things that were not good and things that were getting

00:17:22.040 worse.

00:17:22.880 We, out of that analysis, we came up with what we call the eight-point plan.

00:17:27.640 We came up with the eight things that America has to do.

00:17:30.860 If it's going to ultimately restore the energy and the dynamism of the American economy.

00:17:37.300 And it was all fairly basic things.

00:17:39.480 It was like, we got to fix the tax code so that we're not bankrupting ourselves with deficits

00:17:45.260 and we've got the right incentives so that companies can invest.

00:17:48.780 We got to have a decent policy to allow rational immigration of highly skilled individuals into

00:17:54.520 America.

00:17:54.960 That had been a real strength.

00:17:56.140 We've had tremendous immigration, but we've had this battle over immigration for so many

00:18:01.280 years.

00:18:01.800 And it's a divisive issue and it turns Americans against Americans.

00:18:05.300 We talked about our international trading system that we live in had some disadvantages for

00:18:11.140 America.

00:18:11.640 There were some things that were distortions and kind of getting in the way of a really fair

00:18:16.880 competition.

00:18:17.720 So we had to do something about that.

00:18:20.120 We have crummy infrastructure, you know, in America.

00:18:24.400 Everybody knows this.

00:18:26.140 It's just a catastrophe how bad our infrastructure is on all the metrics.

00:18:30.740 And my favorite example is if you land at Kennedy Airport, and this is no disrespect to New

00:18:36.600 York.

00:18:37.220 If you land at Kennedy Airport and you look around at that airport and you took off in

00:18:42.740 China or Switzerland or almost anywhere else in the world, you land at Kennedy Airport.

00:18:47.920 It's a joke.

00:18:48.900 It's an embarrassment.

00:18:50.680 It doesn't work.

00:18:51.840 And that cuts across a lot of our infrastructure, our railroad system and so forth.

00:18:57.300 We had to deal with a sustainable budget.

00:18:59.360 I mean, our budget was just out of control.

00:19:01.720 And nobody sort of thinks that we'll ever have to pay it back.

00:19:06.160 But we can't reform entitlements.

00:19:09.820 We couldn't do anything to kind of get our house in order.

00:19:11.740 And so what we did was we took this eight-point plan, and I'll never forget this.

00:19:17.880 This is my really first exposure to politics on large scale.

00:19:21.780 And we trooped down to Washington, and we started meeting with members of Congress.

00:19:26.980 And I went with Jan Rifkin, who's my colleague that was co-chair of this project.

00:19:31.780 By the way, what year was this, if you don't mind me asking?

00:19:34.600 This was about 2012 or 2013, okay?

00:19:41.180 And we went down, and it was funny.

00:19:44.200 Every member of Congress and senator that we asked for an appointment, they gave it to us.

00:19:49.800 I mean, we got in.

00:19:51.060 We got through the door.

00:19:51.880 I think that's because they respect Harvard Business School and think it's a fine institution.

00:19:56.600 So we went in there, and we explained the analysis of what was going wrong in the economy

00:20:02.400 and why we weren't progressing and why income inequality was rising

00:20:06.140 and why economic growth was slow.

00:20:08.560 We went in there, and everybody nodded their head, you know, through the whole conversation.

00:20:13.660 And, yeah, that sounds right to me.

00:20:16.120 That's what we think that, too.

00:20:17.500 And then I said, then we talked about the eight-point plan.

00:20:20.780 Here's what we need to do.

00:20:22.500 And as we were describing what we need to do, everybody was nodding their head.

00:20:26.600 Yeah, we need to deal with our infrastructure.

00:20:29.340 Yeah, we need to improve our tax incentives and our tax code. 0.88

00:20:33.520 Yeah, we need to improve our training and education system in America.

00:20:37.440 Everybody nodded their head.

00:20:38.880 We have to have an immigration policy.

00:20:41.160 But then what we discovered, and sometimes they actually told us before we left, they said,

00:20:46.620 look, we agree with all these things, and we think they're great ideas,

00:20:49.640 but it's going to be really, really hard to get anything done.

00:20:54.440 And that created this incredible puzzle that how can we not do rational things that will make our country thrive

00:21:04.060 when the people involved understand that that's what they should do?

00:21:08.900 And that's when, for me, Catherine had already started brainwashing me about politics because she knew something about it.

00:21:18.640 I didn't know anything.

00:21:19.480 I was just doing my work.

00:21:22.000 And it was really that experience that showed how important it is for us to have people understand.

00:21:29.000 We need Americans to understand this.

00:21:31.460 Most Americans have no idea why this happens.

00:21:34.100 They just think it's normal, it's natural, it's the way it's always been, we can't agree, we always have fights on stuff.

00:21:41.480 And we just came to the view that we had a responsibility as Harvard Business School to do something about that.

00:21:48.760 So very fortunately, I knew Catherine.

00:21:51.920 She asked me to join this work, and we developed a way of understanding it.

00:21:56.640 And since then, this has been really one of my passions, because if we can't deal with this issue, our country is in serious trouble.

00:22:05.680 And by the way, I haven't mentioned, it's not just economic policy where we're screwing up.

00:22:12.640 It's also on our social agenda.

00:22:15.180 We have discrimination against minorities and violence that's very high, and we rank very low versus other countries.

00:22:26.620 We rank very low on quality education.

00:22:30.240 You know, we have our maternal mortality in America, maternal mortality.

00:22:35.880 United States of America, of all the countries in the world, we're number 62nd.

00:22:40.920 And among the OECD countries, which is 36 countries, we're number 35.

00:22:49.040 How could the United States of America have maternal mortality like that, child mortality like that, homicide rates off the chart, discrimination against minorities, inequality of political power, even on things like freedom of religion?

00:23:04.880 These were bedrock principles when this country was put together, and somehow we've managed to lose a lot of this.

00:23:14.240 We were the leader in social progress.

00:23:16.480 We were the leader in creating opportunity for people.

00:23:18.900 Now we've just about eradicated the American dream, because it's very hard for most people to, you know, do better than their parents anymore.

00:23:27.760 And so this is, I think people don't understand, politics is not just a sideshow.

00:23:33.800 It's really at the core of what's going on in the United States of America, and it's going to have a huge impact on our future.

00:23:42.820 And as Catherine said, it's, you know, we've tried different kinds of precedents from both parties, and we've tried, you know, all kinds of different things.

00:23:49.860 It isn't working.

00:23:50.480 And that's because we hadn't really understood how it really actually functions as a system.

00:23:55.820 So this is something that has become an obsession for me.

00:24:01.740 I'm obsessed with this.

00:24:03.500 Because I'm obsessed with the success of this country.

00:24:06.120 By the way, I love that you're obsessed with it, because just because of where you're at and your positioning, it gives me a lot of hope knowing a guy like you is obsessed with it.

00:24:15.140 By the way, is this the article, The Economist, that you guys wrote?

00:24:18.320 Yes.

00:24:18.640 Okay, for anybody that's watching this, if you want to read the article, we're going to put it below on the eight points.

00:24:24.380 Going back to it, you know, I'm sure many companies have come up to you and they've said, look, we're kind of experiencing gridlock.

00:24:31.260 AIG is one of the carriers we write the most.

00:24:33.320 I run an insurance company with 15,000 agents, and AIG is a good-sized company.

00:24:38.540 They used to be one of the too-big-to-fail companies.

00:24:41.320 Yep.

00:24:41.460 And if these companies who are behemoth, these are $100 billion companies, $200 billion companies, $300 billion companies, and when you go ask to give change, request for change, there's a couple things I learned.

00:24:56.980 One of the best advice I got was 15 years ago by another man.

00:25:00.140 His name was Jack.

00:25:01.400 I used to call and ask for a lot of requests.

00:25:03.840 And he says, look, pick 50 issues.

00:25:08.060 Out of the 50 issues, which one's your number one?

00:25:10.800 Only ask for one thing per year.

00:25:13.560 Because if you ask for too many things, they're not going to do it for you.

00:25:17.300 So if you're able to put weight behind one thing, what would it be?

00:25:20.340 And that's a corporation we're talking about.

00:25:23.300 If U.S. was a corporation, it's a $3.5 trillion a year, you know, the numbers, you know, the amount of employees, 160 million employees that are currently working, a fort that's right now not working, unemployed due to coronavirus, et cetera, et cetera.

00:25:36.200 If you were to say for someone like you, and someone who came and became your consultant, and they said, Michael, I suggest when you go to these guys at the top, these politicians, you know, you go to them with eight issues.

00:25:47.900 They're not going to pay attention to any of it, but you can only choose one of them to bring to them.

00:25:53.140 What is the one thing above all that you would say we need to start off with out of these eight?

00:25:57.420 Well, we've got to change the incentives and the rules that are guiding what those political leaders are in, what they're stuck in.

00:26:08.520 Right now, and we'll talk about this later.

00:26:11.720 I mean, if we have primary elections the way we have today, we're going to have a hard time ever getting there, because it's impossible to win a primary election unless you appeal to the partisans on your side.

00:26:27.660 And if you want to do bipartisan, you may very well get knocked out in the next primary, or your party might run somebody against you that is more right than you are.

00:26:37.180 So the problem, actually, it's not that there's a rationing of what policy is the most important.

00:26:43.220 They're all important.

00:26:44.680 It's the system has to change if people are going to have even a possibility of solving any problem.

00:26:52.260 Right now, it's a system beautifully intricately designed to sort of freeze the status quo, and we just can't get anything done.

00:27:02.940 And the parties would rather not do something than compromise and go against their base and go against their partisans.

00:27:13.780 So I think what I came to understand, and again, Catherine is way ahead of me here in understanding the reality, but over these months and years as we've been working on this, I think we're starting to understand.

00:27:26.760 The people serving us in Washington are stuck.

00:27:33.580 They are kind of trapped.

00:27:35.600 And no matter how well-meaning they are, and no matter whether they care, they're stuck in a system where they are neutralized from really making real progress.

00:27:46.660 You know, we've had 25,000 discussions of infrastructure in Washington.

00:27:52.760 Everybody knows we've got to build infrastructure.

00:27:54.840 Right now with COVID and all the unemployment, wow, what if we had a big infrastructure program?

00:27:59.420 We can have hundreds of thousands of good jobs out there, and we've been fixing our roads and all that kind of stuff.

00:28:04.240 But every time we have an infrastructure bill, the same thing happens.

00:28:11.080 Can't agree, can't agree, can't agree, can't get it done, can't pass it.

00:28:14.760 So it's a perverse system, and I think most Americans, I found, and most business people don't understand it.

00:28:22.540 They just don't get it.

00:28:23.380 What is this?

00:28:24.580 This goes against everything we're taught in business.

00:28:26.880 We've got to be rational.

00:28:27.800 We've got to be thoughtful.

00:28:28.560 We've got to do the right thing.

00:28:29.540 We've got to move the ball forward.

00:28:31.240 It's not like that.

00:28:32.220 But it's a different system, and Catherine knows more about it than probably anybody else.

00:28:38.680 So fair enough.

00:28:39.840 So what you said is your number one would be system incentive rule, which was kind of Catherine's fifth stage of grief.

00:28:49.460 So you're putting that as the number one thing that we need to work on, and we can build on that.

00:28:54.100 Okay.

00:28:54.220 So before I go to Catherine and kind of have her share with us her ideas and some of the suggestions that she has,

00:29:00.020 let's talk about the industry of politics.

00:29:02.820 How big is the industry of politics?

00:29:07.040 Well, it's a pretty big industry.

00:29:10.000 It's very hard to get numbers because there's a lot of strange rules about disclosure where you can do things without having to disclose it.

00:29:17.940 But that's part of the way the parties kind of retain control is they avoid having to disclose too much.

00:29:25.460 But our best estimate a couple of years ago was it's about a, you know, $16 to $20 billion industry.

00:29:34.660 It employs probably tens of thousands of people.

00:29:37.920 And it's not just the people working in the legislature in Washington and so forth.

00:29:44.160 It's what we've come to call the political industrial complex.

00:29:48.740 There's a whole bunch of actors that live off politics.

00:29:53.400 The lobbying industry lives off politics.

00:29:57.080 Hundreds and hundreds of very well-paid lobbyists that are living off of politics.

00:30:00.700 There's all the people that run campaigns and do polling and campaign managers and all that sort of thing.

00:30:07.300 That's a big industry.

00:30:10.380 There's a substantial, there's a bunch of think tanks now.

00:30:18.600 They're in the politics industry.

00:30:19.880 Their job is to, you know, come up with the ideas and try to, you know, get their legislation passed,

00:30:26.600 the things that they think are the important things to do.

00:30:28.460 So, and you can already see, just thinking about think tanks.

00:30:32.300 Think tanks, you know what think tanks used to be?

00:30:34.280 They used to be neutral and more scholarly.

00:30:38.960 They're not like that anymore.

00:30:40.900 They become sucked in to the partisanship.

00:30:45.000 So, the think tanks are either, you know, more with the left or more with the right.

00:30:48.680 And their job as a think tank is to get the left stuff done or the right stuff done,

00:30:53.300 depending on, you know, what side they're on.

00:30:55.380 And their donors want that.

00:30:57.320 So, we can tell story after story after story.

00:31:02.300 But the problem is that this giant industry is all interconnected.

00:31:10.140 And, again, it's all designed around the left and the right, the Republicans and the Democrats.

00:31:16.160 And, by the way, we haven't said this yet, but we must say it, Patrick.

00:31:19.480 We are not against Republicans and we're not against Democrats.

00:31:22.480 We don't think that these are bad people, but we think what's happened is that it's this competition that's been created.

00:31:33.200 It's this way of competing.

00:31:34.820 It's this way that they've structured the industry that is perverting our democracy.

00:31:40.180 And we've got to change that.

00:31:43.160 And I think a lot of people in Washington would really like to be able to pass legislation that we really need.

00:31:50.300 You think so?

00:31:52.380 I think so.

00:31:53.100 I think a lot of people are frustrated by it.

00:31:55.980 We know that partly from history, and I don't want to get too far afield.

00:32:00.840 But back in about 1890, in the United States of America, we had the same kind of mess that we have today.

00:32:09.800 We had a tremendously partisan, gridlocked, irrational political system.

00:32:16.520 And it was a period of American history called the Gilded Age.

00:32:20.540 The country was still a relatively young country, and it was a mess.

00:32:26.340 But in those days, when you went to the voting bloc, you picked up a ballot.

00:32:35.200 And the ballot, you could tell by the ballot that you picked up whether it was a Republican ballot or a Democratic ballot.

00:32:41.580 And so what happened was these poor citizens would go to the polling place.

00:32:47.480 They'd pick up their whatever ballot.

00:32:49.200 And then as they're walking in to, you know, vote, all these people there would be, you know, hitting on them and trying to convince them to change their ballot.

00:32:58.580 And, oh, you know, I can get you into this whatever if you do this.

00:33:05.000 You know, if you change your ballot, I'll do something.

00:33:06.560 So we had a lot of corruption.

00:33:08.680 The parties owned the newspapers.

00:33:10.520 There was a Republican newspaper and a Democratic newspaper in every city.

00:33:15.120 And the Republican newspaper talked about only about Republican stuff and the Democratic only Democrat.

00:33:19.660 So today we have some polarization in the media, too.

00:33:23.040 And the media sort of aligned with one side or the other in many cases.

00:33:26.540 So we had this back in, you know, in 1890, 1900.

00:33:31.680 And it was so bad that we couldn't get anything done.

00:33:34.640 We had gridlock.

00:33:35.460 We had frustrated people.

00:33:37.180 Our country was struggling.

00:33:38.260 And at that moment in history, citizens, thank goodness, decided this is not acceptable.

00:33:47.960 We have to change this.

00:33:50.180 And so we had something in America called the progressive era.

00:33:53.460 You may have heard that phrase.

00:33:54.660 And literally, our whole political system was changed.

00:33:59.100 The rules were changed.

00:34:01.080 For example, it used to be that the state legislature would determine who the U.S. senator would be from each state.

00:34:07.220 You didn't get to vote for the Senate.

00:34:09.720 The legislators in the system decided who the senator was going to be.

00:34:12.880 There was all kinds of stuff like that.

00:34:14.440 And one by one, these rules were changed.

00:34:17.480 And the rationalization came back into our politics.

00:34:22.120 So we believe that today, restart that movement.

00:34:28.980 And we really need to understand that Americans are going to have to take control. 0.61

00:34:32.640 If we let the parties do it, if we let the politics system do it, not going to change.

00:34:36.780 It's stuck.

00:34:37.340 But if Americans can understand what's really going on, they can understand these kind of things that we're talking about,

00:34:44.600 we think there's a lot of people that are incredibly frustrated with the system,

00:34:48.440 that are incredibly frustrated with what isn't happening in America,

00:34:52.360 that are not, you know, they don't stand for inequality.

00:34:55.440 They don't want that, you know.

00:34:57.220 And yet we haven't known what to do.

00:35:00.000 We've known that you can give money to a candidate, but giving money doesn't matter.

00:35:03.680 The candidate is going to have to run through an election process.

00:35:05.980 This is going to turn them into whatever that turns them into.

00:35:10.480 So we've got to seize an opportunity to move this system in a very different direction.

00:35:19.040 And it's taken a long time and a lot of help and insight and a lot of kind of leadership by Catherine to make this work.

00:35:28.560 And I think we're getting there.

00:35:30.100 And we can talk later if you want about what's happening in different parts of the country,

00:35:34.000 because there's promising things happening.

00:35:37.040 And we're moving now.

00:35:38.580 We're actually starting to move.

00:35:41.240 Whether we can get it over the goal line, I think, is going to depend on how many citizens can actually understand this,

00:35:46.300 how many people will make the investment to kind of get this,

00:35:49.780 because I think most Americans are very dissatisfied.

00:35:52.060 I have a lot of follow-up questions for you, but I'm going to go to Catherine first,

00:35:56.580 and then I'll come back to you.

00:35:57.660 So, Catherine, currently today, I mean, a part of what we were talking about last night,

00:36:03.920 currently today we have a duopoly.

00:36:05.400 We have really two parties, right?

00:36:06.940 You have the Republicans and you have the Democrats.

00:36:08.660 And God forbid somebody on a third party decides to go in, whether a Ross Perot, who got 18.9% in 92,

00:36:17.760 I think he also went in 96 as well.

00:36:19.900 It was Dole himself and Clinton that they went.

00:36:22.940 I think he only got like 8% in 96.

00:36:26.020 But in 92, he got 18.9%, created some momentum.

00:36:29.800 We've seen the Johnson, Gary John.

00:36:31.540 We've seen the Ron Pauls of the world create some momentum.

00:36:33.920 Howard Schultz went in and then boom, hey, you're going to hurt the Democratic Party if you go in.

00:36:39.460 And here's a guy that runs 400,000 employees.

00:36:41.780 He wants to go in.

00:36:43.560 There are a lot of people behind closed doors that sit there and say, look,

00:36:47.880 you don't sound like a Democrat.

00:36:50.000 And the other person says, you don't sound like a Republican.

00:36:53.120 Then what the hell are we?

00:36:54.600 Maybe there is something else out there that we are, because we have a lot of things we agree with.

00:36:59.120 Are we ready for a third party?

00:37:00.720 So what is your suggestion to those of us that don't 100% relate with the Republican Party

00:37:06.920 and don't 100% relate to the Democratic Party?

00:37:10.800 Is it time for us to go to a third party?

00:37:13.100 And if yes, how the hell do we do it?

00:37:15.160 Okay.

00:37:15.800 I love this stuff because the situation is so bad, but the answers are there for us.

00:37:23.660 So let's step back for just a moment and remind ourselves something I said earlier,

00:37:29.360 that in politics, we do not have, we don't get results,

00:37:33.440 and there's no accountability for not getting results.

00:37:37.940 So that means that we have fundamentally unhealthy competition in the politics industry.

00:37:45.100 So we're the customers.

00:37:46.540 The citizens are the customers.

00:37:47.820 The public interest is supposed to be the customer,

00:37:50.300 and that's what the politics system should deliver. 0.97

00:37:53.520 But instead, the customer is not getting at all what they need or want.

00:37:58.860 Now, in any other industry that's this large and thriving,

00:38:04.680 so Michael talked about the size of the political industrial complex.

00:38:07.580 It's $16 to $20 billion.

00:38:08.860 If you had an industry that big and that profitable and the customers hated the industry,

00:38:18.260 essentially, which is we have very low approval rating of Congress,

00:38:22.480 then you would, some entrepreneur, probably you, Patrick,

00:38:26.080 would see this as a phenomenal business opportunity,

00:38:28.760 and you would come in with a new competitor to give the customer what the customer wants.

00:38:34.880 But that doesn't happen in politics, right?

00:38:38.840 We're all dissatisfied and there's no new competition.

00:38:41.800 So that's because the system has actually been constructed in a way where the parties,

00:38:51.120 the two sides, have worked together in one particular way super well behind the scenes,

00:38:56.360 which is to construct a system that protects themselves jointly from new competition.

00:39:00.680 And fundamentally, can you say that one more time?

00:39:03.640 It's very, you said it very subtly.

00:39:05.020 Can you say that one more time?

00:39:06.060 Very powerful what you just said right there.

00:39:07.960 Yes.

00:39:08.320 So we think Republicans and Democrats don't work together.

00:39:13.200 Behind the scenes, they work very well together in one particular way.

00:39:17.780 And that is to rig the rules of the game to protect themselves jointly from any new competition.

00:39:27.080 I agree.

00:39:28.460 And without competition, we will never have results or accountability.

00:39:35.780 Competition is what delivers results to customers in every industry.

00:39:42.320 So let's look at this.

00:39:44.540 So what I can do, it's very interesting because essentially we don't get results and there's no accountability.

00:39:50.880 And when we get into this, I'll be able to show what's the primary reason we don't get results

00:39:56.860 and what's the primary reason there's no accountability for not getting results.

00:40:01.120 So let's start because you asked me about this accountability question.

00:40:05.460 So think about it this way.

00:40:07.400 We have this duopoly and there's no new competition.

00:40:11.820 There's no accountability because the customer only has these two choices.

00:40:15.340 So the only thing that either side needs to do to win is to convince the average voter to choose them

00:40:23.540 as the lesser of two evils or because at least they say, therefore, what that voter believes.

00:40:29.940 But what the parties don't have to do in a duopoly is deliver results.

00:40:35.500 Because no matter how disappointed you are, you still likely prefer what your side says, therefore,

00:40:43.460 than what the one other choice says, therefore.

00:40:46.760 So instead of results in the public interest, we get this gridlock and dysfunctional drama.

00:40:51.300 The lack of new competition comes in large part from one thing that we as a country chose by accident.

00:41:01.020 So back when the founders created this extraordinary system of democracy in our constitution,

00:41:09.700 there weren't great examples of democracies to look to for how we should run things day to day.

00:41:15.380 And so they said, oh, yeah, let's vote this way.

00:41:17.920 Let's have something called plurality voting because Britain uses this for some of their elections.

00:41:23.640 And what plurality voting is, is that whoever has the most votes wins.

00:41:28.020 That sounds super rational, but it turns out to have a little bit of a problem.

00:41:34.120 Well, a big problem.

00:41:35.860 So right now, in any election of more than two candidates, someone can win without having true majority.

00:41:46.620 They don't have to have over 50%.

00:41:48.160 For example, in a three-way race, a candidate could win with 34% of the votes.

00:41:53.460 And the 66% was split between the other two.

00:41:56.180 And plurality voting is the single greatest barrier to new competition in our entire system

00:42:03.600 because it creates this spoiler effect.

00:42:06.700 So what the spoiler effect is that sometimes we don't vote for the candidate we really want to vote for

00:42:12.520 out of fear that will inadvertently contribute to the election of the candidate we like the least.

00:42:17.040 If you think back to 2016, we think of Clinton and Trump, but there were also two other candidates

00:42:25.460 that had reasonable name recognition in the race.

00:42:30.520 One was from the left, Jill Stein, and one was from the right, Gary Johnson.

00:42:35.280 And people who liked Jill Stein on the left were essentially told, you can't vote for her

00:42:42.240 because if you do, you will steal votes away from Hillary Clinton, who would have been your second choice,

00:42:49.560 and you'll spoil the election for her and inadvertently help elect Donald Trump.

00:42:54.100 And for people on the right, if you wanted to vote for Gary Johnson, the libertarian,

00:42:59.740 you were essentially told, our system tells you, oh, you can't vote for Gary Johnson

00:43:04.600 because you'll take that vote away from Trump, and you'll spoil the election for him,

00:43:10.380 and you'll inadvertently help elect Hillary. 0.98

00:43:12.360 Now, the spoiler problem, we see that there, I give that as an example, but the real effect

00:43:18.200 of the spoiler problem is that most new competition never enters the race in the first place

00:43:25.400 because they know they're going to be considered just a spoiler.

00:43:29.920 So you mentioned Patrick Howard Schultz.

00:43:33.220 So some of your viewers may remember that in the spring of 2019,

00:43:38.080 he considered getting in the presidential race as an independent.

00:43:42.360 But people felt that he was much closer to the Democrat, to Democrats, shall we say.

00:43:50.960 And so the Democratic Party was livid

00:43:54.540 because they believed that a Schultz candidacy would never win,

00:43:59.300 but they believed that he would take enough votes away from the eventual Democratic nominee

00:44:04.000 to throw the election to Donald Trump.

00:44:07.040 And the response was really quite vicious.

00:44:09.560 And, you know, Howard Schultz didn't end up pursuing that race.

00:44:15.040 I promise you, the Republicans would be equally outraged

00:44:20.320 if someone of that kind of profile and success wanted to run as a Republican

00:44:28.060 because they'd say, oh, he'll ruin the election for Trump.

00:44:31.080 So that's why we don't get this new competition.

00:44:35.780 Now, I want to also note, you mentioned Perrault.

00:44:40.380 So Perrault actually did win.

00:44:42.460 It did run.

00:44:43.580 He didn't win.

00:44:44.380 He got, you know, close to 19%.

00:44:46.380 And he wasn't a spoiler.

00:44:49.620 People think he was, but he wasn't.

00:44:51.080 Some new analysis, statistical analysis has proven that.

00:44:54.900 But what Perrault did was put healthy competition into the system.

00:45:01.160 And you might remember, he ran very much on these charts about the debt and the deficit,

00:45:06.960 our fiscal situation.

00:45:08.400 So we're spending too much.

00:45:10.880 And guess what?

00:45:12.340 Broden win.

00:45:13.140 But the Republicans and the Democrats in the Clinton administration cooperated to deliver

00:45:20.940 budget surpluses.

00:45:23.520 They got a balanced budget.

00:45:24.920 They actually got a surplus.

00:45:26.320 We've never had one since.

00:45:27.980 And we give credit to that to Clinton and to a lesser degree than to Newt Gingrich and

00:45:31.880 the Republicans.

00:45:32.700 Where does the credit go?

00:45:34.220 The credit goes to competition.

00:45:36.120 Because both parties were afraid that Perrault's nascent, you know, new party was going to

00:45:43.480 do better and better and threaten them.

00:45:46.080 And they didn't want that to happen.

00:45:47.540 So they said, we better solve this issue so that people don't vote for him the next time.

00:45:51.400 That's what competition does.

00:45:52.720 You don't have to win in healthy competition to benefit the customer.

00:45:56.660 So what we have to do is change the way we vote to get rid of the spoiler problem so

00:46:03.080 that we can put the forces of competition in, not because, as Michael said, we're not

00:46:07.400 against Republicans, we're not against Democrats, we're against what, you know, they're producing

00:46:11.460 or relatively not producing right now.

00:46:13.500 But we're not saying it would be better if one wins or the other wins or a third party

00:46:18.740 wins.

00:46:19.140 What we're saying is we need the forces of competition of candidates and ideas to create

00:46:25.220 results.

00:46:25.900 So it's not about changing who wins.

00:46:28.180 It's about changing what whoever wins does.

00:46:31.600 The question is, are they going to let you do this though?

00:46:34.580 I mean, you're going up against some, by the way, Newt Gingrich, I think was the man of

00:46:37.980 the year in 1995 Time magazine, which was pretty insane to see those guys make it work.

00:46:43.260 It was almost like him and Tip O'Neill, Reagan and Tip O'Neill.

00:46:46.100 It was a very interesting dynamic.

00:46:47.820 Competition, competition.

00:46:49.560 The question is, do you really think, you said the Democratic Party, how vicious they were

00:46:55.360 towards Schultz.

00:46:56.740 I can't believe what you're doing.

00:46:58.000 And I remember in the documentary where President Bush Sr., at the end of the documentary, the

00:47:05.940 interviewer asks him, what are your thoughts about Ross Perot?

00:47:09.100 It was the only topic he didn't want to talk about because I don't want to talk about Ross

00:47:12.600 Perot.

00:47:12.820 I don't want to talk about Ross Perot because in his mind, if it wasn't Ross Perot, he

00:47:16.260 would have gotten reelected.

00:47:17.380 Now, obviously, you said a different study that it wouldn't have made a difference anyways

00:47:20.760 because he's still won by 7%, so it doesn't make a difference.

00:47:23.140 But if they're going to be so vicious on both sides, Republican or Democrat, if they're

00:47:28.620 going to be so vicious, who's on your side to even want to support you for this to become

00:47:33.600 a reality?

00:47:34.100 You need some powerful people to be on your side to help you make this happen.

00:47:37.500 Who are those people?

00:47:38.840 Well, believe it or not, the most powerful people are the collective of the American citizens,

00:47:45.780 the voters.

00:47:46.480 So not in every case.

00:47:48.520 Now, here's what I'm going to, this is so interesting.

00:47:51.800 You know how I said earlier that we only do things, we only work on things, Michael and

00:47:55.820 I, that are powerful, but also things that are achievable?

00:47:58.820 Now, that doesn't mean that the things that we say are achievable are easy to get done,

00:48:03.140 but they're possible.

00:48:04.640 So, for example, some reformers think we need to change the system in a way that requires

00:48:09.200 constitutional amendments.

00:48:11.080 Well, nothing we're proposing requires a constitutional amendment because that would be a waste of everybody's

00:48:17.360 time for me to tell you that what it's going to take to change the system is a constitutional

00:48:21.320 amendment, which we're never going to get.

00:48:23.740 I mean, it wouldn't be worth your time or your viewers' time to be listening to us.

00:48:27.020 So what we're talking about are two changes to how we vote that we can get.

00:48:33.560 Here's how we get them.

00:48:34.840 Very interesting.

00:48:36.480 These important rules, like the one that creates plurality voting and the one that creates

00:48:40.220 the party primary problem, they're not in the Constitution.

00:48:43.220 The Constitution is super short, and it turns out that most of the rules that govern day-to-day

00:48:49.900 behavior and incentives are just ones that, you know, have been kind of made up over time.

00:48:56.380 And the Constitution delegates virtually all of the rules about how we vote to the states.

00:49:05.000 So the states get to make those decisions.

00:49:07.520 That's why sometimes when we're watching the presidential primary, we're like, how come it's

00:49:10.880 different in Washington state than it is in Illinois or Wisconsin or something?

00:49:15.420 Well, because the states made different rules.

00:49:17.400 But that means that we can change these rules state by state.

00:49:21.680 And in 26 states, the states long ago gave the people the opportunity to put issues on the ballot

00:49:33.700 if they wanted to bypass the legislature, which in this case would be sort of bypassing the

00:49:39.800 political-industrial complex.

00:49:42.500 So in 26 states, we can put the proposal that we need to talk about called final five voting

00:49:49.280 actually on the ballot.

00:49:51.420 Citizens can vote for it.

00:49:53.780 And if 51% vote for it, it's done.

00:49:56.540 Or 50% plus one vote, it's done.

00:49:59.440 And that's half the states.

00:50:00.420 And let me tell you, that pressure will make a huge difference in the other states because

00:50:05.120 people in the other states will say, hey, we want that system too.

00:50:08.680 Additionally, like Michael said, politicians want to make a difference.

00:50:13.820 They do.

00:50:14.540 Can we find stories where we think there's corruption?

00:50:17.040 Sure.

00:50:17.340 But really, people want to make a difference.

00:50:18.960 People love this country.

00:50:20.080 This system will be so much better to work in that in the states that don't have ballot

00:50:27.340 referendums, I believe a combination of the business leadership, the job creators in those

00:50:33.340 states with the citizens saying, we need you, state legislature, to change these rules for

00:50:38.880 Congress so that our country can function again, along with, you know, Congress's individual

00:50:45.560 politicians' desires to work in a functional system and be able to pass those policies that

00:50:51.880 Michael was talking about earlier, they will eventually see this is actually better for

00:50:56.000 them. 0.53

00:50:56.200 There's actually a small number of losers, the leaders of the political industrial complex, 0.61

00:51:01.020 the ones who have made out in the system.

00:51:02.960 And there's a huge number of winners.

00:51:05.140 So again, in summary, we're going to put it to a vote in 26 states, and or the legislature

00:51:11.900 is going to pass it in any state in the country.

00:51:15.760 And that we can get done.

00:51:16.800 And I hope we'll get to specifically the package of what needs to be passed.

00:51:22.020 Yeah.

00:51:22.340 So what I think about when you're saying this, I'm sitting there saying, okay, how big, and

00:51:28.240 maybe you have an answer to this, how big is the percentage of people?

00:51:31.940 How big are people that would agree for a need of a third party?

00:51:38.300 Is it a 5% number, a 10% number, a 15% number?

00:51:43.440 Because you've heard the number when Romney said 47%, all that video came out, it got viral.

00:51:49.060 It says, well, you know, the 47%, and you know, the 45, 47, let's just say it's 45, 45 on

00:51:53.680 each side.

00:51:54.780 Democrats are going to be Democrats, Republicans are going to be Republicans.

00:51:57.600 What is that number of people that are independent, libertarians, or third party?

00:52:02.760 Do we know that number?

00:52:04.360 Yeah.

00:52:05.100 So I want to answer that question and then tell you why it's less important than we think.

00:52:09.700 So interestingly, in the country, all we hear about in the media is the Democrats think

00:52:15.960 this and the Republicans think this.

00:52:18.260 And you would think that means that half of the people think this and half think the other

00:52:21.620 thing, but it turns out only 27% of the country, less than a third, identify as Democrat and

00:52:29.500 only 26%, so essentially the same number, less than a third on both sides actually identify

00:52:35.700 as Democrats and Republicans.

00:52:38.000 So what does everybody else identify as?

00:52:40.420 Well, they self-identify as independents.

00:52:43.040 Now, that doesn't mean they're a monolithic block of people in the middle.

00:52:47.480 This could include people who are libertarian or people who are a Green Party or people who

00:52:50.880 have a whole different set of ideas.

00:52:52.560 But 46% of people close to half the country says that they're not either one of the two choices

00:52:58.500 we have.

00:52:59.540 So that means that it's not just a question of a third party.

00:53:02.760 It's a question of new ideas, new policies.

00:53:07.440 I mean, the duopoly has so controlled our thoughts that we sort of think, oh, well, we only have

00:53:14.760 two, so maybe three would be better.

00:53:16.620 It's not two, three, or seven.

00:53:20.120 The question is, is there an opportunity for a new competitor to threaten whoever the players

00:53:28.820 are if they don't get things done?

00:53:31.180 So it's fine if we have two if they're delivering, but they're not delivering, so we have to have

00:53:39.620 the threat of a new competitor that's essentially going to take their market share, and then

00:53:45.340 they may just decide to improve their product themselves, or indeed the new competitors will

00:53:51.200 come in.

00:53:51.660 So there's not a magic number of parties.

00:53:54.280 The point is to have the system open to new competitors, new ideas, new candidates who are

00:54:02.760 anywhere along the spectrum.

00:54:06.240 And then that improves the results.

00:54:08.880 The difference, I always talk about political innovation.

00:54:12.340 I don't talk about political reform, because a lot of times there are multiple reasons for

00:54:16.580 that, but one is that political reform can tend to deal with things about fairness and

00:54:25.520 equality and moral issues of democracy, which is super important, or political reform can

00:54:31.060 deal with, can be sort of a Trojan horse for party advantage.

00:54:36.520 When we talk about political innovation, it's solely focused on results, meaning results that

00:54:42.780 the system gives to the American people.

00:54:45.920 So we're not trying to change things because it would feel better.

00:54:50.600 We're trying to change only things that would affect Congress's ability to solve problems,

00:54:56.480 to actually fix things.

00:54:59.460 And that's what political innovation is.

00:55:02.160 So, oh boy, I've talked so long, I'm practically forgetting your question.

00:55:06.360 Let me ask you, let me go back to that, because you said the 45-45, you said they did a study

00:55:11.820 and they noticed that the true Democrat is only 27% of America and true Republicans about

00:55:17.300 26%, and the rest is pretty much everybody else that's kind of in the middle.

00:55:21.040 Who did that study and that research? 0.81

00:55:22.860 Because that's very interesting to me.

00:55:25.540 You know, I actually don't have the attribution right in front of me, but I'm going to send

00:55:29.940 that to you after.

00:55:30.940 If you could, because, and everybody that's watching it, we're going to put it below for

00:55:34.380 you to look through it, because that's very interesting for me to look, I totally want

00:55:38.180 to see that.

00:55:39.560 We'll send you the graph with the attribution.

00:55:41.320 Oh, we'll put it up so everybody else in the audience can see.

00:55:44.020 Matter of fact, a lot of your PowerPoint is going to be in the presentations and post-edit

00:55:47.040 when we go through that.

00:55:48.180 But let's stay on that.

00:55:49.040 So the question I was asking was the following, is, so if we're going to have a third party,

00:55:55.440 someone is going to take a hit for a couple elections.

00:55:58.620 I mean, it's naive to think it's not going to be that way.

00:56:01.600 And here's what I mean by, I'm going to play devil's advocate, and you can push back

00:56:05.840 all you want, because I support the fact that I'd love to have a third party.

00:56:10.280 You know, you go to India, I've been to India, and they'll say, we've got 45 plus political

00:56:13.560 parties, but it's really only three or four political parties.

00:56:16.640 You'll go to Mexico, and they'll say, oh, we've got five different political parties,

00:56:19.480 but it's really only three political parties.

00:56:21.980 The conservatives, the socialists, and the Democrats, and that's kind of what they have

00:56:25.020 going on over there.

00:56:25.640 You can go to a lot of different places, but someone is going to have to take a hit,

00:56:31.480 one of the sides, to agree on having a third party.

00:56:35.680 And why would a party want to do that?

00:56:37.720 So it's almost like Democrats are going to say, okay, you guys go through it first, not

00:56:41.800 us.

00:56:42.160 Or Republicans are going to say, no, no, no.

00:56:43.980 You guys deal with your Howard Schultz first, or your Mark Cuban first.

00:56:47.880 Let him go as an independent, but he's really a Democrat.

00:56:50.640 Oh, no, no, no.

00:56:51.280 Why don't you guys experience your own Republican and a John Kasich?

00:56:55.220 Let him go as an independent, but he's really a Republican.

00:56:58.860 Which party is going to be willing to give up first?

00:57:02.560 That's the challenge I see.

00:57:03.980 It's so vicious.

00:57:04.920 It's so ugly. 0.98

00:57:05.820 It's so dirty.

00:57:06.960 Who's going to want to give up one election, especially since all this money and jobs are

00:57:10.640 on the line?

00:57:12.260 Neither.

00:57:13.320 Neither one is going to want to give it up, but they don't have to.

00:57:16.440 Let me tell you how this works.

00:57:18.500 So I want to just say, what the answer, and it's not the only answer.

00:57:23.800 It's just the most important answer.

00:57:25.660 It's the, without changing this, none of the other answers will have enough power to change

00:57:30.740 how Washington works.

00:57:32.500 We need something called final five voting.

00:57:36.040 That's what our book is all about.

00:57:38.040 So people can learn the details in the book.

00:57:39.820 But in summary, final five voting changes two things in our election system.

00:57:45.700 One is we get rid of party primaries because party primaries create an eye of the needle

00:57:52.900 to which no problem-solving politician from either side can pass, meaning they're pushed

00:57:58.820 to the right and left.

00:57:59.860 Michael talked about that earlier.

00:58:01.280 They can't come together to solve anything because they'll lose their primary.

00:58:05.900 So there you go.

00:58:07.360 We're just done.

00:58:08.080 You can't get anything done because there's no connection between doing the right things

00:58:11.640 for the public, for the public interest, and getting reelected.

00:58:14.660 And we have a great graph on that.

00:58:15.980 There's no connection between those things.

00:58:18.000 That's absolutely crazy if you want to get things done.

00:58:21.700 So we get rid of the party primary.

00:58:23.380 And we have instead a nonpartisan primary where everybody's on the same ballot, and the top

00:58:30.880 five vote-getters will go forward to the general election.

00:58:34.340 Then in the general election, we're going to get rid of that plurality voting system that

00:58:41.840 we sort of chose by accident when the country started.

00:58:45.200 It was just what that seemed fine.

00:58:47.800 But now we know that that system is what keeps out new competition.

00:58:52.940 Third parties, fourth, fifth, sixth, seventh, any, or independents, any kind of new competition.

00:58:58.560 So we replace plurality voting with ranked choice voting.

00:59:03.120 And again, we can learn all about this in our book or on our website.

00:59:06.040 I won't give all the details now, although I'm happy to if you want me to.

00:59:09.380 And in this case, when you use ranked choice voting, it eliminates the spoiler problem.

00:59:17.680 It means that no new competition automatically takes away the ability of, let's say, the current

00:59:26.700 duopoly to win.

00:59:28.140 But it does inject the new ideas and the competition in.

00:59:33.260 And now there's no reason to force a Mark Cuban out of the race, to force a Michael Bloomberg

00:59:40.580 not to run, to say, don't vote for Jill Stein or don't vote for Gary Johnson.

00:59:46.020 With ranked choice voting, that is not a problem because in the end, ranked choice voting means

00:59:51.340 you have to win with a majority.

00:59:52.820 You have to have over 50%.

00:59:54.940 So let me ask a question right there.

00:59:56.720 Let me ask a question right.

00:59:57.400 Because I went through what I was reading in chapter five.

00:59:59.520 I was going through it.

01:00:00.700 And I watched the video as well.

01:00:01.880 Is, do I have to rank everybody?

01:00:05.640 Like, can I leave anything empty?

01:00:07.660 Or I have to vote and rank them?

01:00:10.500 No.

01:00:11.120 So in ranked choice voting, and maybe we'll be able to put the way the ballot looks up.

01:00:18.020 In ranked choice voting, you can rank as many or as few as you want.

01:00:22.900 So if you want to just have one choice the way you already do, this is my favorite.

01:00:26.800 You want to cast your ballot for that person, absolutely no problem.

01:00:30.200 You don't need to know about all the candidates if you don't want to.

01:00:33.820 If you have an opinion on two of them, you can rank them.

01:00:37.100 You can also, you know, you might know who's your favorite and who's your least favorite

01:00:41.200 and not care as much about the people in between.

01:00:45.040 So you can do all of those things.

01:00:47.280 And again, what's so interesting is ranked choice voting, in our theory, is less about

01:00:54.600 changing who wins and more about providing the opportunity in final five voting for

01:01:00.160 five candidates, five sets of ideas to be heard.

01:01:04.300 So you could have a parole running on debt and deficit and bringing that issue to the

01:01:10.400 floor on a regular basis.

01:01:11.780 And even if she or he doesn't win, whoever does win will have seen what the voters had

01:01:20.000 to say about that particular issue.

01:01:22.160 So I want to come back now and answer, you know, how we're going to get this done, because

01:01:27.760 you're saying, well, one party is going to have to give first.

01:01:31.300 And what I'm saying is, first, they don't have to give because they'll be in the hunt in

01:01:35.460 ranked choice voting, just like everybody else.

01:01:37.180 And if they deliver what the public wants, they will absolutely still win.

01:01:43.520 They'll still win.

01:01:44.620 But if they don't, then some entrepreneurial politician will have an opportunity that is

01:01:55.240 not available now.

01:01:57.680 And we will pass this state by state.

01:02:03.740 And so the parties won't have a say, the citizens will do it, or the legislatures will

01:02:08.100 do it.

01:02:08.600 And then the system will be implemented.

01:02:12.320 And what's also really amazing about this, I just love this, is that we don't have to

01:02:17.180 get this done in 50 states before we see the benefits as a country.

01:02:21.340 Think about this, Patrick.

01:02:22.800 If we pass final five voting, which means nonpartisan top five primaries plus ranked choice voting

01:02:31.060 general election, it's a package, final five voting.

01:02:33.840 If we pass final five voting in five states, we would have immediately 10 senators, and

01:02:46.440 we could have anywhere, depending on the states, maybe let's call it 50 representatives, that

01:02:52.840 would be in Washington, D.C., responding to a different set of incentives.

01:02:58.680 Now, they may be, very well may be, Republicans, Democrats, still.

01:03:04.760 But they got elected by a majority in their district.

01:03:08.180 They don't have to go through the eye of the needle that is a party primary, so they can't

01:03:12.740 be pushed further to the left or the right.

01:03:14.760 They can sign bipartisan compromise legislation if they want to and still make it through their

01:03:20.100 primary.

01:03:20.740 That's totally critical.

01:03:21.820 And they serve as a fulcrum, in a sense, which can serve as a bridge between the parties

01:03:31.400 and the people responding to the traditional incentives.

01:03:33.940 Because if you had 10 senators who could be the yes votes on the infrastructure bill or

01:03:40.740 could be the yes votes on a sort of debt deficit reduction where we work on revenues and spending,

01:03:48.620 and they know they can still get reelected, even if they're Republicans or Democrats, we

01:03:53.660 can really change in the existing system, leave the other 45 states the same, we can change

01:03:59.460 how this works.

01:04:00.760 So I am blown away all the time by the fact that when we looked at the system and decided

01:04:07.700 what was the most important thing to change, it turned out that the most important thing

01:04:12.180 to change is also something that we can change.

01:04:15.540 And it also turns out that we don't have to change it everywhere to begin to get results.

01:04:21.860 It's an unbelievable opportunity for the country to pass final five voting.

01:04:27.960 Do we need politicians to pass this? 0.92

01:04:30.600 Do we need any politicians for this to pass?

01:04:34.300 So we need whatever it's going to take to convince the voters to say yes to it in those

01:04:41.340 26 states or five of the 26 states, or we need the legislatures to say yes to it.

01:04:47.220 And, but we don't need one particular politicians.

01:04:50.480 We just need leadership.

01:04:51.960 And this leadership is out there in spades in former elected officials.

01:04:58.360 Okay.

01:04:58.940 So people-

01:04:59.580 And give some names.

01:05:00.080 Like if you were to say, here are five names that would get behind someone like this to

01:05:04.520 help it pass, who would they be?

01:05:06.280 That's so interesting.

01:05:07.120 So I do have a list of names, which shall remain nameless here for the people that I

01:05:12.860 think would be the greatest leaders of this movement, like the greatest spokespeople.

01:05:17.440 And they are people from the left and people from the right.

01:05:22.380 Are they currently in office?

01:05:24.300 Are they currently-

01:05:25.120 No, no.

01:05:25.640 People who used to be in office are the ones that can say it shouldn't be this way.

01:05:30.760 People that used to be in office are the ones that can say that it shouldn't be this

01:05:34.900 way.

01:05:35.400 Yeah, they can tell the truth.

01:05:37.420 Hypothetically, would a guy like Newt be on that list?

01:05:40.940 Oh, I'd love to talk to Newt Gingrich.

01:05:42.920 I still carry around a business card that Newt Gingrich gave me years ago when I sat

01:05:49.320 next to him at a dinner.

01:05:50.480 It's sort of a long story, but I have this business card and he wrote something very funny

01:05:54.480 on the back of it and I still have it in my wallet.

01:05:56.920 So yes, I really-

01:05:57.920 This is a plea to Newt Gingrich.

01:05:59.380 I'd like to talk to you about this, Newt.

01:06:01.460 This is what we need to do the new sort of-

01:06:04.380 What was that, a contract with America that he had, right?

01:06:07.640 And this should be our new contract with the American people, final five voting, so that

01:06:12.280 Washington, D.C. politicians can have great careers and deliver results.

01:06:17.680 I mean, that's what we need.

01:06:18.500 I want you to put this up, one of our slides.

01:06:21.660 The current system, there's no connection between getting results and getting elected.

01:06:26.960 It would be like there's no connection between doing your job well and keeping your job.

01:06:31.160 Nobody would run a company that way, but that's how we run our political system.

01:06:34.800 And then in the new system after final five voting, oh, you're going to illustrate it for

01:06:38.560 me.

01:06:38.740 After final five voting, we create a connection between delivering results and keeping your job.

01:06:45.500 Yeah, that's-

01:06:47.060 In all this, this sounds good.

01:06:48.360 That's extraordinary. 0.98

01:06:49.100 This sounds good, but this is where I'm at with my butt. 0.99

01:06:51.720 It's a big butt, okay? 0.99

01:06:53.220 Yeah. 0.94

01:06:53.640 So if this is a pipeline we're going through, and we want to get final five voting, you have

01:06:59.820 to go through somebody.

01:07:01.720 Who are these people that we need to go through to get this?

01:07:05.380 Because the idea sounds good, but who do you need to go through to get that?

01:07:09.900 We can't just say, here's what we're going to do to change the voting.

01:07:13.340 Some of the people we have to go through, aren't they existing politicians and decision makers?

01:07:19.280 You don't.

01:07:20.780 In the 26 states that have a referendum, how you get to vote on the issue, meaning there

01:07:25.980 would be-

01:07:26.620 Here, let me step back for a moment.

01:07:27.900 So in 26 states, the citizens can vote on an issue when they go in to vote for the president.

01:07:39.640 So let's say they would go in in November, and they're going to choose who they're voting

01:07:43.540 for for president.

01:07:44.440 And at the same time, there will be a line that says, essentially, you vote yes for final

01:07:51.420 five voting, or you vote no for final five voting.

01:07:54.720 And then, if it's 50% plus one voting yes, final five voting is set in that state.

01:08:05.220 The way that that final five voting question gets on that ballot is that citizens collect

01:08:14.160 signatures.

01:08:15.260 The process is a little different in each state, but they collect signatures, and essentially

01:08:20.540 then it's on the ballot.

01:08:22.040 So they do not need the permission of any members of the political industrial complex

01:08:29.360 to get this on the ballot.

01:08:32.680 It takes the question out of the hands of the political industrial complex and gives

01:08:38.980 it to the citizens.

01:08:40.840 Got it.

01:08:41.460 So that's for half the states.

01:08:42.900 And then in the other, there's actually great opportunities in legislative states as well.

01:08:46.880 And I want to come back quickly and say, I want to highlight two particular existing

01:08:54.520 politicians.

01:08:55.380 You already said it's former politicians who can tell the truth.

01:08:58.480 I want to highlight two existing people serving right now in Congress who are already telling

01:09:04.800 the truth.

01:09:05.400 They're particularly courageous.

01:09:07.100 And that is Republican Congressman Mike Gallagher from Wisconsin and Democratic Congressman

01:09:15.140 Chrissy Houlihan.

01:09:16.780 And they wrote the foreword for a book.

01:09:19.960 I believe you saw that.

01:09:21.300 Yep.

01:09:21.880 These two Congress people who were elected, Chrissy in 2018, Mike in 2016, were both served in

01:09:32.020 the armed forces before this.

01:09:33.560 And what they say in the foreword, and I encourage everybody to read the book to see this because

01:09:37.460 it's very eloquent.

01:09:38.240 They say, hey, when we were veterans, when we were serving the armed forces, we were on

01:09:43.080 the same team working for the good of America.

01:09:46.880 And then out of that same desire of public service and serving America that caused us to

01:09:52.260 join the military, we ran for office.

01:09:54.900 And now we're in Washington, D.C.

01:09:56.680 And for some reason, we're automatically on different teams.

01:10:01.240 Why aren't we still on the for America team, even though we have different ideologies, trying

01:10:07.980 to find something that works?

01:10:10.380 And they say it shouldn't have to be this way.

01:10:14.260 And they endorse in this foreword the ideas that we have in the book.

01:10:19.760 So specifically, you know, final five voting.

01:10:22.160 And they're courageously saying that it doesn't work.

01:10:28.900 And it could work and should work.

01:10:32.180 And and we should make that difference.

01:10:35.360 And there will be more and more people like them.

01:10:37.680 And we have already in Wisconsin, again, two courageous legislators, State Senator Dale

01:10:45.420 Kuinga, a Republican, State Representative Danny Reamer, a Democrat.

01:10:49.420 Again, they both serve in the military now in the in the National Guard or the Reserves.

01:10:56.660 Sorry that I'm forgetting.

01:10:57.580 And they came together in Wisconsin to say we need to pass final five voting for our congressional

01:11:02.680 election.

01:11:03.160 So there are examples out there of existing people serving now who are courageous to say

01:11:08.040 what's so.

01:11:09.020 And certainly the formers, they're ready to say what's so.

01:11:12.780 OK, so here's a follow up for you.

01:11:14.100 And then I'm going to go to Michael.

01:11:15.640 I got a follow up for you here and I'll go to Michael.

01:11:18.480 So you know how when you're valuing the company, when you've gone through this before 2015.

01:11:24.540 So the number that buyers want to see is what EBITDA, right?

01:11:28.840 EBITDA, EBITDA, EBITDA.

01:11:29.880 What's the EBITDA?

01:11:30.640 And then they go through the formula.

01:11:31.980 OK, so then you have to go through your audited financials.

01:11:35.660 Then you have to go through quality of earnings.

01:11:37.580 You remember when you had to go through quality of earnings and they want to see Deloitte,

01:11:41.320 which, by the way, I think a company that Michael, you were on a board of a consulting

01:11:47.240 company, I think, was purchased by Deloitte, something like that.

01:11:49.660 You were used to be part of.

01:11:51.200 Yeah.

01:11:51.340 So like right now, we're going through Deloitte or PwC and KPMG.

01:11:55.460 That's kind of the negotiation we're having.

01:11:56.960 So you know what phase I'm at.

01:11:58.380 And if you go through this, the tax implications of ASC 606, which is going to help you with

01:12:03.000 the EBITDA and et cetera, you know what I'm talking about.

01:12:05.200 Like these guys.

01:12:05.900 OK, so I'm speaking.

01:12:07.780 I'm glad it's you and not me today.

01:12:10.380 But I wish you the best.

01:12:13.380 Awesome.

01:12:14.000 You know, but the point I'm trying to make to you is this.

01:12:17.700 So you do the math in one way, EBITDA favors you.

01:12:22.560 You do the math in a different way, the EBITDA doesn't favor you.

01:12:26.100 If you do appraisal in one way, the appraisal of this house is going to be $288,000 less than

01:12:32.500 if you do the appraisal this way.

01:12:33.740 Right?

01:12:33.880 OK, so let's just say we go the route that you're talking about.

01:12:37.520 OK, let's just say we go through the top five and the philosophy that you have.

01:12:45.440 Say we go this route.

01:12:46.560 Great.

01:12:47.840 There's a part where you talk about Paula Page, right?

01:12:50.600 A Tea Party Republican that ran and he won and, you know, 37.6% and becomes the governor

01:12:57.040 and is maybe not the most light governor that they ever have, but he got reelected.

01:13:00.740 And if it wasn't, if it was for this, he wouldn't have gotten reelected, let's just say, right?

01:13:06.100 So if we were to change the voting system that we have to what you're suggesting, who takes

01:13:12.120 a hit?

01:13:12.540 Can you be specific with names?

01:13:13.940 Because these models will show who is going to take a hit, in what areas it doesn't make 0.66

01:13:20.280 a difference, and in what areas, you know, who's going to, you know, take advantage of.

01:13:25.060 Because if this model benefits Republicans, well, Democrats are going to say, I'm not

01:13:29.280 in.

01:13:29.860 And if this model benefits Democrats and Republicans are going to say, we're not in.

01:13:33.820 So have we already modeled it out to know which party this benefits and who it doesn't?

01:13:38.840 You know what I'm asking, right?

01:13:39.940 Yeah, I do know exactly what you're asking.

01:13:41.740 So you notice that we're not proposing gerrymandering reform.

01:13:49.080 Okay, you mentioned that before, Eldridge, Jerry, and everything.

01:13:52.340 So not to get deep into that, but one of the reasons that we don't work on that is, A,

01:13:58.500 it's not necessary because Final Five voting takes care of it, but B, because gerrymandering

01:14:04.460 reform, if you fixed that right now, actually, it would likely, in Congress, accrue more to

01:14:13.280 the benefit of Democrats.

01:14:14.820 And that's the feeling, meaning it's a partisan reform.

01:14:18.420 It's a reform that is a Trojan horse.

01:14:20.980 Now, gerrymandering is awful.

01:14:22.240 We should not have it.

01:14:23.460 Okay, it's terrible.

01:14:25.520 But nothing we propose is like that.

01:14:30.260 In order to be categorized as achievable, we require that it not be a partisan change to

01:14:40.640 the rules.

01:14:41.140 And as proof of this, essentially, members of the political industrial complex on both

01:14:47.420 sides don't want Final Five voting, except for, as I mentioned, these courageous people

01:14:53.500 who are saying it needs to be different.

01:14:56.060 But members on both sides hate this equally, shall we say, because it affects both of them

01:15:03.320 theoretically, you know, equally.

01:15:06.300 And I also want to say that, remember, this whole, oh, who would win, that's as if looking

01:15:17.740 at a past election and saying, who would have won that election if we had these rules?

01:15:23.740 But that's not a good analysis.

01:15:25.660 Because if we had these rules, we wouldn't have had that election because different people 0.91

01:15:36.400 would have been running it.

01:15:37.440 The whole thing would have played out differently.

01:15:39.640 Even the Republicans and Democrats who were running would have been taking perhaps different

01:15:44.380 positions in this race.

01:15:45.740 And remember, yes, everybody's going to ask that, but it's still our job to say that's

01:15:50.100 not the important question.

01:15:51.320 We're not trying to figure out who would have won in the past.

01:15:54.380 We're trying to figure out what's going to happen in the future.

01:15:57.340 And we're less concerned about who's winning and more concerned about what they're doing.

01:16:01.880 I think you would lose me if you approach me like that.

01:16:05.360 And I'm just very transparent with you.

01:16:07.200 Here's why.

01:16:08.300 Because for me, if somebody comes in and says, here's a model, this is what we're running.

01:16:16.080 Both of you guys know what modeling is.

01:16:17.720 You've done it more than I've done it.

01:16:18.940 Like, Michael, you've done billions of these, and you ran a company doing a quarter of a

01:16:23.920 billion dollars per year.

01:16:25.200 And so you've gone through this yourself, and you've gone through a transaction.

01:16:29.720 You know, for someone, and assume the people, because you're saying the powerful people

01:16:34.900 are what?

01:16:35.400 We the people, right?

01:16:36.260 It's not the politicians.

01:16:37.520 We're the powerful ones.

01:16:38.480 Great.

01:16:40.360 Not now, but we can be.

01:16:42.100 Yeah.

01:16:42.300 We can be, and not now.

01:16:43.580 I agree with you.

01:16:44.260 But if you're talking to the people, people need simple stories to simplify, to connect

01:16:51.100 with them.

01:16:51.560 Not the typical, you know, scholarly messages.

01:16:55.640 Because once you're over their head, the message doesn't go, make America again.

01:16:59.580 Easy.

01:17:00.020 It's time for change.

01:17:01.440 Easy.

01:17:01.900 I have a dream.

01:17:03.160 Easy.

01:17:03.920 All of that is easy.

01:17:05.360 Some of this stuff that becomes technical, how do you explain that to the average guy that

01:17:09.420 doesn't follow politics, doesn't care for politics, doesn't trust politicians.

01:17:13.660 So if somebody came and said, okay, cool, can we run some models to see what it looks

01:17:17.960 like?

01:17:18.380 I would be so curious to know in a last, and here's where I'm going with this.

01:17:25.420 You know how they say, well, Barack Obama cost this many seats, and they lost their jobs

01:17:30.880 because of Barack Obama.

01:17:32.080 Or Barack Obama got so many people reelected because he got reelected, and your jobs are

01:17:37.560 secure.

01:17:38.300 Okay?

01:17:39.420 Trump is going to cost the House.

01:17:41.620 They lose the House.

01:17:43.100 But he's got the Senate, and they got the Senate, and he's going around helping people

01:17:46.560 to become the Senate or replace or governor.

01:17:48.320 You know, that game's going to keep happening, right?

01:17:50.440 That's not going away.

01:17:52.180 If this model ran, and it showed that that cannot happen, you know, the voters may sit

01:18:00.880 there and say, you know what?

01:18:01.640 I don't know if I really want to look at it because there's not really a model about it.

01:18:05.220 Versus if there was a model, then I go through 80 names, and I say, there's a 28% chance this

01:18:10.520 person wouldn't have gotten reelected.

01:18:12.180 We don't know who would have, but there's a 93% chance this would have been the same.

01:18:16.900 Is there a way to model this out?

01:18:18.860 And maybe it's a request that's not possible.

01:18:21.400 Is there a way to model this out?

01:18:22.940 It wouldn't be helpful because you would be imposing a model.

01:18:32.420 It wouldn't be valid, is what I should say.

01:18:34.240 It wouldn't be valid or helpful because you'd be modeling something from the past with a 0.99

01:18:40.200 set of new rules when people would have played the game differently.

01:18:43.540 It's like saying, it's like saying, who would have won that basketball game if we didn't have

01:18:48.640 the three-point shot rule?

01:18:51.280 Who would have won it?

01:18:52.100 Like, well, people would have played the game differently.

01:18:55.560 As soon as you put in that three-point rule, I don't know that much about sports, but as

01:19:00.060 soon as you put in that three-point rule, the game changes.

01:19:03.740 The players are different.

01:19:04.860 They play differently.

01:19:06.140 So you can't say who would have won that under different rules because the people would

01:19:10.200 have played it differently if it took something else to win.

01:19:12.920 It's not valid.

01:19:13.800 Now, but you are nonetheless totally right, Patrick, that this conversation is not going to win

01:19:23.360 the day.

01:19:24.600 So this conversation is about people who are interested in the death, and it's about making

01:19:30.400 the case to business leaders and entrepreneurs who thought everything was so irrational.

01:19:34.840 But for people who are going to vote, for example, in these referendums, we really need to be respectful

01:19:42.580 of their time and interest and talk about more choice, more voice, and better results.

01:19:50.800 And if you want to stop being disappointed with the choices you see when you go in the election

01:19:56.620 booth, in the voting booth, this is for you.

01:20:00.840 If you want to stop being disappointed with not feeling represented in Congress, and if you

01:20:07.760 want to stop being disappointed with the results, this is for you.

01:20:11.300 More choice, more voice, better results.

01:20:14.820 So we make it about, you know, people's experience who don't want to spend the time to hear this

01:20:21.400 whole thing.

01:20:22.360 Yeah, no, I mean, I'm just saying because the part I'm talking about is when I'm talking 0.99

01:20:26.120 technical modeling, the other part I'm talking about, keep it simple, stupid, where the whole 0.99

01:20:30.260 world, we're not in your world. 0.98

01:20:31.540 We can sit there and say, oh, I understand what they're saying.

01:20:33.240 It makes sense.

01:20:33.760 But what I can say is I am all for it.

01:20:36.800 Like, I'm a cheerleader.

01:20:38.680 Imagine a 6'5", 240 guy in a miniskirt jumping around and doing the dancing.

01:20:43.280 I would do that for you, even though it wouldn't help much, because I'd love to see a third

01:20:47.920 party come out and get some kind of result.

01:20:50.720 So I appreciate that.

01:20:51.820 I'm going to go to Michael now.

01:20:52.880 You're going to be a, I just, oh, I want to follow up and close the deal here.

01:20:57.640 You're going to be a cheerleader?

01:21:00.000 If you, if you want me to dress up and do, you know, cheering, dancing, I'll even put a

01:21:05.940 chant for you and sing for you.

01:21:07.380 We would, we would definitely consider it.

01:21:09.220 Okay, so somewhere in your viewers, we have some musical talent.

01:21:15.800 So we're asking one of those viewers to make the chant, because that's not my talent.

01:21:20.420 And then we'll put this all together and we'll come back.

01:21:23.460 Because seriously, Patrick, we do need champions.

01:21:27.960 Oh, no, I'm with you.

01:21:29.100 And I'm with you.

01:21:29.840 It's one of the reasons why I got excited about doing this, because this is a topic that

01:21:35.720 it sounds strange.

01:21:36.440 You asked me yesterday, why are you interested in politics?

01:21:38.520 Like, who cares?

01:21:39.460 Why is it, you know, why gets you, why does this get you excited?

01:21:42.820 I think a lot of the politicians right now are bullying the voters, and I'm not happy

01:21:47.440 about that.

01:21:47.920 And I'd like to see the voter who is the product, the customer, who's always right.

01:21:51.460 This is why I trust capitalism.

01:21:53.140 Richard Wolff and I got into a big heated debate, which you saw a couple of clips of it.

01:21:57.120 And he had a perspective of capitalism that I fully disagree with, because when there's

01:22:01.240 competition, good, the only people that win when there's competition is the customer.

01:22:05.240 Customer wins a ton, and I think we need more competition today, and I'd love to see that

01:22:09.160 happen.

01:22:09.940 Let's say we, this is the last thing, and then I know you're, Michael, and I'm going

01:22:14.040 to rest while Michael takes it from here, but we introduce a new term in our book, free

01:22:21.020 market politics.

01:22:24.140 A politics which delivers the, what healthy free markets deliver, innovation, results,

01:22:32.220 accountability.

01:22:33.200 That's catchy.

01:22:34.060 That makes sense to me.

01:22:36.120 Free market politics makes so much sense to me.

01:22:39.340 Oh my gosh, that makes so much sense to me.

01:22:42.140 I love it too.

01:22:43.020 I absolutely love it.

01:22:44.000 The best of what the free markets should deliver.

01:22:47.240 I love it.

01:22:47.880 Awesome.

01:22:48.740 Awesome.

01:22:49.060 Now, if you don't mind, I'd like to go to a very serious question with Michael, which

01:22:53.060 I think the entire audience is thinking about right now.

01:22:55.320 Michael, this is a tough question, so I'm going to go to you with a tough question.

01:22:58.540 I noticed when I was talking to Catherine, you were eating something.

01:23:02.540 Were those jelly beans you were eating?

01:23:06.120 M&M's.

01:23:07.060 M&M's.

01:23:07.680 I thought I had them.

01:23:08.800 I was trying to catch them every time.

01:23:10.460 I said, it looks like it was blue, but what is blue?

01:23:13.420 It wasn't jelly beans.

01:23:14.760 So if the audience is wondering, it's M&M's.

01:23:17.240 We're going to put the link below for those of you guys that want to go buy M&M's.

01:23:20.360 This is not sponsored by M&M, by the way.

01:23:22.100 It just so happens he loves M&M's.

01:23:23.320 Okay, so Michael, let's go to you.

01:23:25.180 Here's one of my challenges, and I think one of the issues, and by the way, we're going

01:23:28.460 to go into a little bit business as well, if you don't mind, because the audience kind

01:23:31.080 of wants to know some of the issues that we're facing today, and you're the best person to

01:23:34.460 talk about this, so we'll spend some of the time on business, and we'll go from there.

01:23:39.420 So Michael, my challenge is when I went to OPM, I went to OPM, and the content, amazing.

01:23:47.560 I learned so much by everybody that was there.

01:23:50.820 I mean, the teachers were so helpful.

01:23:52.720 Everybody was so helpful.

01:23:54.560 Lawrence Culp inspired the hell out of me when I came back, just seeing how he thinks, and

01:23:58.420 what he did with the company, and now he's at a completely different place.

01:24:01.960 I think he's with GE.

01:24:02.920 I don't know if he's with GE or not.

01:24:04.180 I think he left, he's with GE now.

01:24:06.660 And just talking to the other guys that were there as entrepreneurs, one of the days, Hillary

01:24:11.760 Clinton and Trump were debating, so you can kind of see what season I was there.

01:24:15.160 And they had the chow hall, you know where the chow hall is by the OPM, right by the

01:24:18.960 ground, so you go to the chow hall.

01:24:21.020 And so we're in there, there's about four or five hundred of us that were sitting and

01:24:26.100 watching, the teachers came out, a lot of the people came out, and they're watching.

01:24:30.520 I'm sitting on the outside, okay, as a person that's voted on the left and the right, and

01:24:36.240 I went from being a Democrat who was a fan of Clinton, Bill, then I went to Republican

01:24:40.860 because I was a fan of capitalism, then I go to being a registered independent, okay?

01:24:44.840 I'm on the outside, I'm kind of watching everybody.

01:24:46.860 And the first thing on my mind is what?

01:24:48.300 Economy, because that's what affects my kids, my family, my, you know, my businesses, what

01:24:52.620 I do.

01:24:54.720 I was flabbergasted to see how many people, I didn't see one person in that room for Trump.

01:25:04.680 Literally, three, four hundred people, there were 100% of people were all Team Hillary, and

01:25:11.380 they couldn't stand anything Trump said.

01:25:13.640 Now, Trump is obviously a very controversial figure, we can agree, you know, I don't think

01:25:19.660 we've had a person that goes after people the way he does ever in politics, as a president,

01:25:24.420 Twitter, all this other stuff.

01:25:25.460 How does a university like Harvard have so much leanings politically on one side, on

01:25:33.720 the left, where somebody like me, who has three kids, I want to teach these guys well,

01:25:39.100 and I grew up in Iran, and the university I see as Harvard is like the place you want

01:25:43.100 to have your kids go through.

01:25:44.980 And we're talking about the five stages, you know, first it's policies, you know, it's a

01:25:49.460 candidate I got behind, which she got behind Obama, then it was policies, then it was culture,

01:25:55.020 then it was independent candidate, then it was system, you know, all of that stuff.

01:26:00.020 Sometimes the voters and people out there don't trust the kind of influence universities

01:26:07.000 are having over our kids that we trust to send to a school to pay 50 to 70 grand a year

01:26:13.080 for four years, knowing they're going to come out, not liking certain policies and being

01:26:18.360 pushed away from capitalism.

01:26:20.040 What role do you think universities and professors are playing in the current policies and politics

01:26:25.720 that we have in America?

01:26:27.000 Well, I wish we could play a very important role, and I think we could play a positive role.

01:26:33.260 I don't, I think you're right now.

01:26:34.740 I think right now, universities are sort of anti-politics.

01:26:38.620 You don't talk about politics, and if you do, it's very liberal, you know, and that's kind

01:26:44.300 of the, and that's fundamentally because of the faculty and the nature of faculty and

01:26:48.960 the kind of people they are and their seniority and so forth.

01:26:52.960 I think at Harvard Business School, we have a lot of people here that really are very much

01:26:57.040 about markets and very much about capitalism, but in other parts of the university, that's

01:27:01.300 viewed with some suspicion.

01:27:02.220 As you know, capitalism is not, is not really well liked right now in this moment in history,

01:27:12.080 and I think part of that is that there's too much inequality, and there's too many businesses

01:27:18.900 that are prospering, and people are getting paid a lot of money, and they're doing well,

01:27:24.040 but the ordinary citizen isn't doing so well.

01:27:26.040 And I think if we want to get into the COVID situation, we're at a really fundamental inflection

01:27:33.220 point now in capitalism, because a lot of companies, given the COVID situation and given

01:27:39.120 the, all the emotions that that has triggered, companies now believe they have to make a difference.

01:27:46.120 They have to make a positive difference.

01:27:47.900 They have to have a purpose.

01:27:49.440 They have to do good.

01:27:50.760 They have to take care of their employees.

01:27:52.380 So we're right now in the middle of what I hope is a very powerful inflection point around

01:27:58.900 capitalism and how it's viewed and its ability to get support from citizens, and I think that's

01:28:05.400 going to affect our politics as well over time.

01:28:08.840 If I could just take a minute, given the discussion you had with Catherine, I just want to make sure

01:28:13.300 that all of the viewers understand a few additional points that I think will help address some of

01:28:20.180 the questions you asked.

01:28:21.840 So the first thing is, we've already covered, our government is failing on economic policy,

01:28:30.440 on social policy, we're failing.

01:28:33.240 We're not getting anything done.

01:28:34.880 Zero.

01:28:36.600 And we haven't in decades.

01:28:39.800 And with inequalities going up, all kinds of bad outcomes are coming on in this country.

01:28:46.600 So why is this?

01:28:52.040 And I think what we all have to understand is the way the government is structured now, we

01:28:57.580 have these parties, and these parties have leadership, and they have enormous clout and

01:29:05.820 enormous power, the parties.

01:29:07.580 So, for example, if you're a young person wanting to run for office, and say you get elected, and

01:29:18.480 say that you don't follow your party leader's advice on what to vote for, you're gone.

01:29:26.220 The party leaders, with their ideology, see, they think ideology.

01:29:32.880 They're on the right ideology or the left ideology.

01:29:35.720 It's not about solutions.

01:29:37.520 It's not about what gets the best job done.

01:29:41.700 It's literally about these ideological partisan differences.

01:29:47.260 And the rights for all the conservative stuff, extreme or not, and the left is for the progressive

01:29:54.080 stuff, extreme or not.

01:29:55.520 And we've just been through that, you know, in the campaign.

01:29:59.720 And what you've got to understand is this system is not designed around getting things

01:30:05.400 done.

01:30:05.840 It's not designed about being practical, doing common sense stuff, having a rational discussion,

01:30:11.700 making the best choices.

01:30:14.240 It's not about compromise.

01:30:16.100 Today, the parties don't compromise.

01:30:20.180 They will not.

01:30:21.540 That's why we have no infrastructure bill, because there are certain aspects of infrastructure

01:30:26.140 that the Democrats like, and certain aspects that the Republicans like, and they're not going

01:30:29.500 to give in.

01:30:30.600 They don't want the other party to get any benefit.

01:30:33.280 We've had lots of high-skilled immigration bills to make immigration more rational in America.

01:30:39.200 And both sides have put forward those bills.

01:30:42.620 But in either case, we've not passed the bill, because the other side will block it, because

01:30:46.580 they don't like this part of it, because it doesn't fit with their ideology.

01:30:50.320 So we've got to understand now that the people, I'm coming back to your point about the people

01:30:57.120 in the system and how they are going to respond to all this.

01:30:59.800 And right now, the people that are members of Congress and members of the Senate even, they

01:31:06.620 are totally controlled by their party leaders.

01:31:10.460 Do you know that if you put a bill forth in the House or the Senate, your party leader is

01:31:18.160 going to determine whether that bill even gets considered?

01:31:21.900 They're going to determine whether that bill even is voted on.

01:31:27.580 The Speaker of the House can block even a vote on a bill, even if they know that the majority

01:31:34.360 of the House would have passed that bill, because they are controlling the agenda based on ideology.

01:31:41.200 So we have a system now that is really awful if you're a thinking member of Congress or

01:31:48.340 a thinking member of the Senate, and you want to do the right thing, you are living in a

01:31:52.700 torture, a torturous system.

01:31:55.960 And so we believe that if we can get the momentum going on some of these innovations, that a lot

01:32:04.660 of the people in the system, like the two people that members of Congress and Catherine talked

01:32:10.580 about, they're going to actually join in.

01:32:13.160 And they're going to do it carefully because they want to get, you know, excommunication.

01:32:18.340 By their party leaders, you probably know Eric Cantor, who was the Democratic leader, who

01:32:25.960 I happen to know, I've known him for a long time, he's a terrific guy.

01:32:29.600 He got kicked out by his party leaders because he was too friendly, he was too collegial, he

01:32:37.040 was too much compromise, he was talking to the other side, and he got kicked out.

01:32:41.800 So I think there's a pent up demand for the smart, capable people that we do have in government

01:32:48.940 to actually do the right thing.

01:32:50.540 But right now, the system is just like a straitjacket that is holding people from doing the right

01:32:58.000 thing.

01:32:58.320 So I'm more optimistic.

01:33:00.580 Also, be clear, your viewers should know, we have rank choice voting in the state of Maine.

01:33:05.980 The citizens passed it.

01:33:08.560 We have rank choice voting on the ballot in Massachusetts in November.

01:33:13.420 And I'm feeling optimistic that that's going to happen.

01:33:16.240 And it's all across the country, we're starting to see these ballot initiatives.

01:33:20.080 We have in Florida, we're running, there's a nonpartisan primary legislation that's looking

01:33:25.400 good, you know, that we might get around, getting around this partisan primary system.

01:33:29.680 So stuff is happening.

01:33:32.360 And what Catherine is saying is, if we can get this going in even a few states, it starts

01:33:37.000 to have a ripple effect.

01:33:38.380 And so, I mean, I, you know, I totally get your modeling questions, but I think we have

01:33:44.900 to tell, we have to, there's a story to tell here about how we can actually get this thing

01:33:48.840 done, and how the, even the party leaders are going to bitterly fight it.

01:33:53.440 Uh, it can still happen.

01:33:56.900 And, uh, you know, we, we, we, uh, I, so, so that, now let me get back to your, uh, to

01:34:02.840 your, to your, your question, uh, um, about, I think we were really talking more about, about

01:34:09.520 capitalism and about, you know, the right and the left.

01:34:12.600 Let me, let me, let me clear up for you.

01:34:14.740 So it kind of, kind of help you out is, uh, uh, I'm a capitalist.

01:34:19.780 I'm a diehard capitalist.

01:34:20.940 I escaped Iran to come here because I was controlled.

01:34:24.340 I was dictated.

01:34:26.060 I have fear, manipulation, all of that.

01:34:28.500 I didn't have a voice.

01:34:29.680 So I went to Germany, found a way to come out here. 0.79

01:34:31.920 So as somebody who's a capitalist who has three kids that he's raising with certain set

01:34:37.520 of values and principles, and they read all the books that are opposing books as well.

01:34:42.200 I mean, this painting behind me, these are four characters behind me.

01:34:45.500 You may recognize some of the faces sitting in a bank vault, uh, with Milton Friedman right

01:34:50.640 there in this bank vault.

01:34:52.060 And they're debating two books.

01:34:54.180 One is communist manifesto.

01:34:55.920 And the other one is, uh, karma, uh, uh, Ayn Rand's, uh, Atlas Shrugged.

01:35:00.460 I'm a guy that likes capitalism.

01:35:02.720 And I grew up in a family that they were constantly fighting on both sides.

01:35:07.480 But the fear is, you know, when, when you're saying it's not media,

01:35:11.820 and then we're saying, uh, and media is not the concern.

01:35:14.980 Those are not the priority concerns.

01:35:16.760 Our mind is still not mature till about 25, 26 years old.

01:35:21.360 You read this books.

01:35:22.140 There's different ages.

01:35:22.960 Some say 24, some say 28.

01:35:24.680 You know what I'm talking about.

01:35:25.680 So my, while the brain is still being established, I'm sending them to, and I'm saying, Michael,

01:35:29.820 take care of my boys and my girls for four years.

01:35:32.480 Please teach them the right values and principles.

01:35:34.260 And they're coming out slowly, but surely not liking capitalism like they used to.

01:35:40.740 They're coming out slowly, but surely looking at rich people as bad people.

01:35:46.420 They're coming out slowly, but surely saying, I don't know, you know, it's unfair, dad, that

01:35:51.240 they're doing this.

01:35:52.140 And I'm not talking about social issues that matter, that there is unfair, and there is

01:35:55.760 some area of correcting an injustice.

01:35:59.320 I'm purely talking economically.

01:36:01.560 What role is that playing in the way we're voting today?

01:36:04.960 Because as you know, it's easier to persuade the younger audience than it is to persuade

01:36:09.260 a 40-year-old audience that's kind of been around the block.

01:36:11.780 And as younger audience, the largest generation, bigger than baby boomers.

01:36:15.020 So what role do you think college and universities are playing in the way we're voting and in the

01:36:21.240 future of politics in the U.S.?

01:36:22.880 Well, I think the narrative of capitalism and how it's perceived and what is being reinforced

01:36:30.480 in the university and what, you know, professor types are saying, not so much at Harvard Business

01:36:35.720 School, you know, because we're all about capitalism here.

01:36:39.940 But we're about, but we even here now are talking a lot about, well, capitalism isn't just

01:36:44.480 making money.

01:36:45.360 Capitalism is a broader concept.

01:36:47.020 And it's got to be good for society.

01:36:49.900 And we just can't think about benefiting ourselves and our company.

01:36:53.660 We've got to benefit our consumers.

01:36:56.240 We've got to create a good environment for our employees.

01:36:58.580 We've got to make sure that the communities on which we depend for our educated people

01:37:04.360 and the people we hire, we've got to make sure that our community is doing well.

01:37:09.520 You can't succeed as a capitalist in a broken community that's failing, you know?

01:37:15.040 So I think what's happening is the idea of capitalism got too narrowed, it got too extreme,

01:37:22.140 it got too much about, you know, let's just go up and up and up in terms of valuation and

01:37:30.880 salaries and stock options and all these kind of things.

01:37:34.940 And this tremendous gap in wealth between, you know, folks in the business community and

01:37:42.040 many others has created a lot of resentment.

01:37:45.080 But I've got to tell you, I think we have the greatest opportunity right now that I've

01:37:50.760 ever seen in my many years doing this for capitalism to be, is repositioning itself.

01:37:57.100 And I think, you know, you're probably familiar with, you know, Larry Fink and this movement

01:38:04.360 about corporate social purpose.

01:38:06.720 And a lot of people, you know, when that whole idea was starting to get talked about, were

01:38:11.880 just rolling their eyes.

01:38:13.120 Oh, yeah, that sounds, you know, that sounds pretty soft to me.

01:38:16.960 But I think what people are starting to understand is that the way business operates and the way

01:38:22.160 capitalism works can either benefit society and improve communities and have ripple effects

01:38:29.320 that make things better, or capitalism can be very narrow and selfish and self-interested

01:38:35.580 and a few people can win at the expense of everybody else.

01:38:39.380 And so I think we, what we, I think, frankly, we need capitalism.

01:38:44.960 We, as capitalists, we need to do better.

01:38:47.620 We need to, we need to have a different paradigm.

01:38:50.000 We need to broaden our view of what our job is.

01:38:52.460 It's not just about maximizing our income.

01:38:55.060 It's about, it's about a broader understanding that you can't have a successful company if

01:38:59.820 you don't have a successful society.

01:39:01.980 And right now, partly because of our political system, we don't have a successful society.

01:39:07.860 You know, we have a lot of people that don't have good health care.

01:39:09.900 We have a lot of people that, you know, don't get good education.

01:39:13.380 They don't even have a chance.

01:39:15.120 We have a lot of people that get, you know, discriminated against just because of, you

01:39:19.980 know, their race or their background or whatever it is.

01:39:22.420 And, you know, and we in capitalism haven't taken any responsibility for any of that.

01:39:28.360 You don't think so?

01:39:29.620 I don't think we've taken very, very many.

01:39:31.560 How could you say that?

01:39:32.800 How could you say that?

01:39:33.820 You know, 40, 45% of all jobs are by small business owners.

01:39:38.060 These are people that risk their salaries to go create a business and sacrifice, lose them.

01:39:42.900 We forget how many of them filed bankruptcies and lost 10 years of their lives and filed divorces

01:39:47.280 and ended up having bad relations.

01:39:49.080 All we think about is what they do wrong.

01:39:50.880 We don't think about the amount of sacrifices.

01:39:52.580 You see, I was speaking with a Cornell University professor at an event, and he says, the thing

01:39:56.740 with capitalism that gets a black eye is capitalism is about, you know, the collective, but also

01:40:03.180 not forgetting the individual, meaning we need both.

01:40:06.280 I agree with you on the collective side, but I think we're bashing the individuals lately.

01:40:11.740 And I think we have to be very careful because if kids grow up not admiring these guys, they're

01:40:18.660 not going to want to be these guys.

01:40:20.360 If kids grow up just admiring rock stars and superstars and Instagram models and all these

01:40:25.660 people that are out there, they're going to be like, I don't want to go be an entrepreneur

01:40:28.660 because they get hated by everybody.

01:40:30.520 Why would I want to be somebody that's hated?

01:40:31.920 So I think sometimes the element of recognizing the person that took the most risk, we don't

01:40:41.160 tell those stories.

01:40:42.020 We only tell the horror stories, and it's unfortunate.

01:40:44.340 And again, I'm bringing it to you because you may be the most influential person in the

01:40:49.560 world of business when it comes down to professor.

01:40:52.360 I admire you.

01:40:53.860 I study you.

01:40:54.860 I'm a student of yours.

01:40:56.020 So I'm talking to you as a guy that looks at you and the things you write, I read and

01:41:00.900 I devour, and I want to be able to make sure that, you know, when my kids decide to go

01:41:05.660 through a program, I know they're going to get recognition to say, son, it's okay.

01:41:09.200 Go create a good idea.

01:41:10.320 Do a better job.

01:41:11.560 Give back to the community, and it's okay.

01:41:13.420 So sometimes I see that language changing because I also think someone like you, and

01:41:17.320 again, you can say, Pat, you're so full of it, you're wrong.

01:41:20.420 I also think somebody like you, because where you've been, you got your degrees both from

01:41:25.960 Harvard.

01:41:26.340 I think both of them you got from Harvard.

01:41:27.800 Not all three of them.

01:41:29.140 Two of them is from Harvard, right?

01:41:30.900 So you're somebody that's also in that environment for so much that you get pressured, and you

01:41:36.180 eventually are like, man, maybe they're right, and maybe you're getting pressure to, you know,

01:41:41.540 forget about the original Michael Porter that was so inspired because of sports and golf and

01:41:46.460 competition and how much sports and competition can help for business and life and all this

01:41:50.780 other stuff.

01:41:51.240 So I'm just putting it in your ear to not forget the individual.

01:41:55.520 Michael Porter Yeah, well, I get that.

01:41:57.500 But I, and again, I can tell you, I'm the most card carrying capitalist on the face of

01:42:03.820 the earth.

01:42:04.300 You know, that's what I do.

01:42:05.260 I believe in it.

01:42:06.200 I believe in competition.

01:42:07.500 And frankly, I believe in smaller businesses and smaller companies.

01:42:11.300 But what we've had is too many of our big companies have, you know, use their cloud or their power to

01:42:18.860 distort the system and to make things work.

01:42:22.880 I mean, we have companies now that are lobbying for getting their merger deals through the

01:42:30.420 Department of Justice by giving them a lot of money for lobbying, you know.

01:42:34.980 And so I think we have, we've got to recalibrate what good capitalism looks like, and particularly

01:42:42.160 among the bigger companies.

01:42:43.320 The small business people are heroes.

01:42:45.880 There's just no doubt about it.

01:42:47.480 And they, they're almost inherently benefiting their community because they care about the

01:42:54.740 neighbors and the business next door.

01:42:56.380 They care about making sure that the public services are good and they have a tremendous

01:43:00.720 powerful effect.

01:43:01.640 What I worry about is the, you know, kind of at least some subset of the major, major corporations

01:43:08.560 are, have been looking at their role too narrowly and, and we need to open up.

01:43:15.600 And that's all I'm saying.

01:43:16.920 I'm not, I'm not saying anything more than that.

01:43:19.820 I think that's the best transition to ask you a question about what happened with Hertz.

01:43:22.440 I'm sure you saw it where $16.3 million of bonuses they paid to 330 of their executives

01:43:29.320 with $600,000 bonus to the new CEO that just got hired a month ago, right before filing

01:43:34.720 bankruptcy and they're in debt $19.8 billion.

01:43:36.860 How do you process that when you hear something like that taking place?

01:43:41.460 It's, it's, it's, it's a little bit like the party leaders.

01:43:44.420 It's the people at the top are out for themselves and they don't feel that they have a responsibility

01:43:50.120 for their whole workforce and the success of their company and the communities in which

01:43:54.220 they're operating and all the vendors that are supplying them that depend on them.

01:43:57.820 It, it's just a narrow, somewhat, I, you know, very narrow view of, of, of what the goal is

01:44:04.920 and what is success.

01:44:06.720 And I think we have to open that up a little bit.

01:44:09.300 And there's lots of, lots of bad examples like that, that, that I've encountered over the years.

01:44:14.360 And, and, and, but there's nothing that can do more good and benefit more people than capitalism.

01:44:20.980 Because if we get it right, companies are going to have epic effects on society.

01:44:27.020 They can change everything.

01:44:28.320 They can, you know, but, but we have to, I think, broaden a little bit our responsibility

01:44:33.340 because part of it is because government is failing.

01:44:36.420 If we have great schools, if we had good infrastructure, if we had people, good healthcare, that wasn't

01:44:44.180 too expensive, if we didn't have a lot of discrimination, if our government wasn't mistreating

01:44:49.660 minorities, you know, if all that wasn't going on, maybe, you know, we wouldn't.

01:44:54.320 But I think we are in a society now where business has to take more responsibility for

01:44:58.820 some of these things that government is failing to do.

01:45:01.260 Now, Catherine and I believe strongly, we got to fix government.

01:45:04.380 You know, we got to fix the system.

01:45:06.420 And we got to, we got to be honest that the system is not working.

01:45:11.300 And we got to be honest that we can't just play the game the way they've created it.

01:45:15.900 I mean, one of the things that Catherine said that I just want your viewers, everybody to

01:45:20.100 know this, all these rules for how government works and how capital, how the policy, political

01:45:25.440 system works, they're all created by the parties.

01:45:30.600 They're not in the constitution.

01:45:33.200 The constitution didn't say it.

01:45:34.760 The parties said, Oh, this would be good for us, because we do this, it'll be impossible

01:45:38.080 for a new competitor to come in.

01:45:40.280 So, so this system has been, has been perverted.

01:45:43.520 And it was our greatest strength.

01:45:45.300 You know, we had this amazing, effective democracy for so many years.

01:45:48.760 And now we don't.

01:45:49.940 And, but we got to take it on.

01:45:51.640 And to take it on, you have to understand the bitter reality of what it really is and

01:45:56.300 what it's become.

01:45:57.080 And, and, you know, our, our passion in life is to, is to get people to understand what

01:46:04.040 it is.

01:46:04.460 And therefore we think a lot of Americans will want to get on this particular path.

01:46:09.700 So final questions here before we wrap up.

01:46:11.920 So current, a lot of people are asking me questions saying, Pat, what's going to happen

01:46:14.800 with the airline industry?

01:46:16.020 You, you've spoken about the airline many, many times and it's not a big profit margin

01:46:20.220 business.

01:46:20.740 You know, people get into it because it's kind of sexy, but they're getting hammered.

01:46:24.720 The rental car business is getting hammered.

01:46:27.020 Hotels are getting hammered.

01:46:28.480 Entertainment industry is getting hammered.

01:46:30.400 Las Vegas is getting hammered.

01:46:31.940 So many different industries are getting hammered, but some of them also doing very good, you

01:46:36.600 know, really well, what do you see happening over the next three, six, 12 months?

01:46:41.100 And are some industries completely going to have to change the way they do business?

01:46:46.320 Or are we going to go back to business as usual?

01:46:48.680 Well, I don't think, I think, I think we're going to see a change in how we do business.

01:46:53.520 Because what's happening is the nature of competition is changing.

01:46:58.240 Uh, the, uh, nature industry structure is evolving.

01:47:04.880 Um, you know, so companies are, the channels are changing, the suppliers and supply chain

01:47:11.420 is changing.

01:47:12.240 There's a lot going on that is really going to cause a lot of companies to have to modify

01:47:17.680 their strategy.

01:47:19.060 You know, so far, most of the response of business to COVID has been very tactical.

01:47:24.980 You know, we got to follow the rules.

01:47:26.660 We have to work at home.

01:47:27.860 We have to, uh, make sure everybody's safe.

01:47:31.220 Um, um, and that was the place to start.

01:47:34.020 Uh, but, uh, what we're going to see over time is businesses are changing.

01:47:37.660 So, uh, let's take one example of, uh, the kind of lawn and garden business, which I happen

01:47:42.940 to know very well.

01:47:43.820 Okay.

01:47:44.420 That's booming.

01:47:46.220 Why?

01:47:46.820 Because in this world that we're living in now and with people often more at home, they

01:47:52.620 want to, they want to work in their yard.

01:47:54.260 They want to have a vegetable garden.

01:47:55.640 They, they, they're, they want to plant stuff and unify their home.

01:47:59.660 And, and that's one of those industries that's, that's, that's booming.

01:48:03.060 And despite the, uh, the overall crisis, uh, we see, uh, we see other industries like that.

01:48:08.320 So some industries are going to benefit by the needs that are changing.

01:48:12.820 Uh, other industries are, are going to be threatened by it.

01:48:16.220 And, and the question is, so we're going to have a different economy when this is over.

01:48:21.000 Uh, but we're going to go back to transportation.

01:48:23.120 Eventually people are going to travel again.

01:48:25.620 Uh, we're going to, we're, we're, we're, hotels are going to have, have, have a role, but you

01:48:30.120 know, how do you migrate, you know, in this trough, how do they, how do these organizations

01:48:35.640 migrate and, and survive their way through and, and the ones that are lucky enough, how

01:48:40.340 do they take advantage of the opportunity that's been created?

01:48:43.300 And, and, and one of the things that everybody, uh, you know, should know is whatever business

01:48:48.060 you're in, you've got to think about the influence of this digital technology.

01:48:52.560 Okay.

01:48:53.340 So instead of going to a workout studio, now you can just do the workout at home, you

01:48:59.500 know, on video, you know, and there's a lot of products and services that are now being

01:49:05.400 delivered and, and, and take a different form.

01:49:09.100 And this digital revolution has gotten to the point now where it's really starting to

01:49:13.060 change competition and it's got to be part of your strategy.

01:49:16.140 And you can't just say, Oh no, we just do it the traditional way.

01:49:19.360 Uh, so, uh, I, I, I think that, um, we're having a real structural change in the economy.

01:49:27.460 It's not that it's always going to be new and it's never going to go back.

01:49:30.820 A lot of things are going to re are going to, you know, come back, but many things are going

01:49:35.400 to change as well.

01:49:36.940 So the idea that we have a supply chain in China, we're not doing that anymore.

01:49:42.420 You know, uh, people are not sourcing in China because they don't want to get cut off.

01:49:46.800 They don't want to get a subject to, uh, you know, a pandemic.

01:49:51.720 Uh, they, they want their suppliers closer to home.

01:49:54.160 So we're seeing all kinds of interesting trends in terms of the competition.

01:49:58.720 And so every CEO now has to look at a fundamental level at their business.

01:50:04.440 How's my business changing?

01:50:06.300 How do my customers, what do they want now?

01:50:09.360 How are they evolving?

01:50:11.260 What, what are their needs?

01:50:12.640 What can they afford?

01:50:14.740 Um, you know, uh, how, how do I, how do I, uh, you know, construct my supply chain, you

01:50:20.720 know, in, in, in this world, you know, that, that we're, that, that is going to be the world

01:50:24.840 of the future.

01:50:25.320 So I think, uh, uh, this is a, this is a really interesting moment for strategy.

01:50:30.020 And, uh, and we're seeing the companies that are going to do really, really well are the

01:50:35.020 ones that can, you know, that can flip, that can understand that this, this is not just

01:50:40.760 a, uh, uh, you know, a short-term crisis.

01:50:43.160 It's, it's, it's, it's, it's a sign that industry competition is changing and now they

01:50:47.180 have to adjust it.

01:50:48.340 One of the fascinating articles is, uh, examples is Best Buy.

01:50:51.960 I don't know if you know Best Buy, but, you know, they're a company that, um, you know,

01:50:56.500 they sold, uh, you know, electronic goods in, in, in, in, in stores and they figured

01:51:02.300 out that people could buy the same electronics, you know, on Amazon.

01:51:07.060 So they turned themselves into a service company and they were the ones that could actually help

01:51:12.240 you fix the TV, you know, or make sure it was installed properly, you know, we're seeing

01:51:18.440 it's, it's amazing example.

01:51:20.600 And, um, how, if, if you're seeing how the world is changing and if you understand

01:51:26.140 competition, how you can actually pivot to a whole different competitive positioning.

01:51:30.780 So, I mean, I don't know your, your company that well, but, uh, be fascinating to think

01:51:35.040 about, well, what does this mean?

01:51:36.640 How can we take advantage of this, you know, to, to be even better, uh, in, in, in the next,

01:51:42.340 next stage of the economy, you know, capitalism is, is going to find a way, uh, but, uh, it's

01:51:48.380 going to, it's going to test a lot of industries that are so used to the way things are done

01:51:53.040 that they'll have a hard time seeing, oh no, we don't want to deliver this way anymore.

01:51:58.620 You know, we, we, we're going to do it this way.

01:52:00.680 And what's, what's stressful now is you're having to, you're having to take fairly radical

01:52:06.280 changes in how you do business, uh, because of the circumstances.

01:52:10.320 Some of them are short-term, some of them are going to be long-term.

01:52:13.040 You think commercial real estate is over with, like, you think commercial real estate is going

01:52:18.320 to take a massive hit because of, uh, zoom growing from what it was to now 48 billion

01:52:23.040 dollar company.

01:52:23.700 A lot of companies were forced to adjust to zoom.

01:52:26.400 Yeah, I think, I think it's going to take, I think it's going to go, it's going to take

01:52:29.680 a somewhat of a decline, but at least my perception.

01:52:34.160 And I talked to a lot of companies about this is it's actually not that efficient for everybody

01:52:40.320 to work at home and just be, uh, it's frustrating.

01:52:44.400 And, and I think, first of all, it's not a human thing.

01:52:48.060 People, people want to be with other humans and they want to talk and they want to solve

01:52:52.060 problems together and they want to do it collegially.

01:52:54.700 Uh, so I think I, but I do believe that there's a lot of trips and meetings that we don't need

01:52:59.220 to have.

01:52:59.740 And there's a lot of things that we can do sort of more surgically using this technology.

01:53:04.620 But I, so I, I would, if I was in real estate, I'd be rethinking my strategy.

01:53:08.840 I wouldn't think I'm going away.

01:53:10.420 I would be rethinking how to be a real estate company, what kind of real estate, uh, you

01:53:16.940 know, configurations, what kind of services I want to offer.

01:53:20.760 I wouldn't be thinking about, you know, I'm, I'm done.

01:53:23.780 So if you were a startup entrepreneur right now, is there an industry that you would say

01:53:29.380 this looks very sexy?

01:53:30.820 And is there something you would say?

01:53:32.100 I wouldn't touch that at all right now.

01:53:33.900 Well, uh, you know, that's Michael Porter.

01:53:36.580 Everybody wants to know.

01:53:37.660 Yeah, that's, that's a very, a very hard question.

01:53:41.440 Um, I would say that, uh, the whole luxury goods space is, is going to have a cloud over

01:53:49.540 it for some time and we'll see what happens.

01:53:52.280 But I think the idea of, of being conspicuous and spending huge amounts on these things,

01:53:57.660 I think that we're in a different era now.

01:53:59.400 I think people are going to be much more cautious and they're going to be much more, uh, you know,

01:54:04.080 thoughtful and how they spend their money and what they spend it on and things like that.

01:54:07.780 So I would say the luxury goods space has been a real hot space.

01:54:10.760 You know, you could, those are great companies.

01:54:12.600 They have massive valuations, but I think, I think that's going to change.

01:54:16.120 Um, but I think, you know, it's funny stuff related to the home, uh, cooking, uh, gardening,

01:54:23.540 uh, uh, stuff like that I think is, is thriving.

01:54:28.080 Interesting.

01:54:28.440 You know, the Sherwin-Williams company is, is one of the great, the great paint company,

01:54:32.500 you know, it's, the paint is booming.

01:54:34.580 People are painting their rooms, they're painting their houses, they're fixing things up.

01:54:38.680 And, and that's because they've been at home and they've, they've come to really treasure

01:54:44.020 their home.

01:54:44.980 And, uh, that's a different mindset, you know?

01:54:48.000 Um, and so I, I think it, it, there's, this is a fascinating time because this is heaven

01:54:54.000 for me, you know, industry by industry, it's a whole different game.

01:54:56.640 It's changing.

01:54:57.840 What do we do?

01:54:59.480 How do we adjust to this?

01:55:00.660 What's long-term, what's short-term, what's temporary, what's permanent?

01:55:04.080 And every CEO and every leader is going to have to think this through.

01:55:07.940 And, and it varies dramatically across industries.

01:55:10.340 There's still a lot of uncertainty.

01:55:11.700 You know, we still, we still don't know quite when this, you know, COVID thing is going to

01:55:15.520 get under control.

01:55:16.720 So, uh, anyway.

01:55:18.220 Are you optimistic?

01:55:19.700 I'm optimistic.

01:55:20.920 I really am.

01:55:21.740 I, I don't think that, I think in this era of technology that is available,

01:55:26.640 uh, we, we will find medical science solutions to this problem and it's not going to require

01:55:35.100 people wearing a mask for the rest of their life.

01:55:37.560 Um, I, I think we're going to be able to not do that, uh, eventually.

01:55:40.920 But, uh, and, but our, this is an example where our government failed us because we, the response

01:55:49.380 to this crisis has been so inept and so political and so, uh, you know, partisan.

01:55:57.020 And, um, uh, and, uh, I think, I think we've, we've set ourselves back in, in, in how this has

01:56:03.100 been dealt with and that's, you know, I particularly concerned about the federal level where we

01:56:09.140 just weren't organized and we didn't get testing online and we didn't really manage this well.

01:56:13.620 And I think that's partly because of the political system we're in and the fact that too many

01:56:18.540 people in government roles today are party loyalists and that, you know, that, that were,

01:56:24.940 that got a job because they were a trusted party loyalist.

01:56:27.740 So, so I think, I think the political system is partly explaining some of the challenges

01:56:33.360 we've had here, but I think we'll get through it.

01:56:35.400 And I think we've got a lot of medical science.

01:56:38.000 It's just a lot of energy going on now in, in, in medical science.

01:56:41.520 And I think we're going to see some really terrific progress over the next, you know,

01:56:46.140 six months or a year.

01:56:47.600 Uh, so hopefully it'll be sooner.

01:56:49.580 I love it.

01:56:50.480 All good.

01:56:51.080 Well, uh, Catherine, I'll give you a final thoughts here before we wrap up.

01:56:55.280 The audience has listened to you.

01:56:56.600 They've listened to Michael, what are your final thoughts?

01:56:59.760 What should we be thinking about to finish this interview?

01:57:02.760 Yeah.

01:57:03.020 Thanks Pat.

01:57:03.820 First, I'm thinking I love long form interview.

01:57:06.300 That's what I'm thinking.

01:57:07.200 Thank you for spending all this time with us.

01:57:09.400 How are we going to tell this story in five minutes on another media platform?

01:57:14.180 We're going to say free market politics.

01:57:16.700 Uh, this, but what I, what I want to leave the, the viewers with and is, you know, this

01:57:24.460 is our book tour.

01:57:25.720 So you could say we're trying to sell books, but actually we only care about selling books

01:57:33.200 because we want people to buy in to the change that we need.

01:57:37.980 And then we want them to take action.

01:57:39.960 So I definitely invite people to buy the book and I invite people to get in touch with us

01:57:48.600 and to think about being the leaders in their state to make these changes happen.

01:57:57.840 You know, I'll close with this quote.

01:58:00.420 I'm a Wisconsin girl and one of the leaders in the progressive era was from Wisconsin,

01:58:05.180 Bob LaFollette.

01:58:06.240 And he said, America is not made, but is in the making.

01:58:13.520 And that there's an unending struggle to keep government representative.

01:58:17.480 Men must be aggressive for what is right.

01:58:20.780 If government is to be saved from those who are aggressive for what is wrong.

01:58:25.120 And now is the time for the entrepreneurial spirit that has led to so much progress, uh,

01:58:34.340 globally to come back to our politics.

01:58:38.460 And it is time for people who watch your program, who have that kind of spirit to say, we can also

01:58:45.620 make a difference in our politics.

01:58:48.820 So take some part of attention that has been given to business or policy.

01:58:55.120 And focus it like a laser on the system of our politics.

01:59:02.660 And then I join Michael in this optimistic spirit of where we're going to go.

01:59:10.140 So thank you for having us.

01:59:11.680 We're just thrilled.

01:59:12.860 Super fun.

01:59:13.660 It's been a blast.

01:59:14.760 Michael, Catherine, thank you so much for taking the time.

01:59:17.560 Thank you, Patrick.

01:59:18.700 What a pleasure.

01:59:19.460 Thanks everybody for listening.

01:59:20.560 And by the way, if you haven't already subscribed to Valuetainment on iTunes, please do so.

01:59:25.200 Give us a five star, write a review if you haven't already.

01:59:28.180 And if you have any questions for me that you may have, you can always find me on Snapchat,

01:59:32.180 Instagram, Facebook, or YouTube.

01:59:34.140 Just search my name, Patrick Bid David.

01:59:36.060 And I actually do respond back when you snap me or send me a message on Instagram.

01:59:40.880 With that being said, have a great day today.

01:59:42.700 Take care everybody.

01:59:43.440 Bye-bye.

01:59:43.700 Bye-bye.

Valuetainment - September 11, 2020

The Industry of Politics Exposed By Michael Porter & Katherine Gehl

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