Lifestream. Im University Professor at the university of toronto. Before we get started, the land by which university out operates for thousands of years, most recently, the river. Today from his home to clinic and people and we are grateful for the opportunity to work on this land. The University Stands in solidarity with the ongoing protests against systemic racism and discrimination. I have the pleasure of introducing catherine and michael, a business leader, entrepreneur and speaker, founder of the institute for political innovation and ceo of innovations, catherine was formerly president and ceo of get foods, to 50 million food manufacture, she hold degrees from notre dame, Catholic University and Northwestern School of management. She lives in wisconsin, thats where she is coming in from today. Its a special honor to host Michael Porter, University Professors at harvard university, we met a long time ago when i was a student in his industry and Competitive Analysis and Harvard Business school, not long after publication of the foundational book on competitive strategy. Not only has it been collaborative defensively but ive worked deeply and widely with the framework in my own work over the years. This is part and stuttered bar strategy course which is popular in all programs. Welcome to catherine and mike. Theyve just written a book called politics industry, political innovation can break partisan gridlock and save our democracy which was published earlier this week by harvard it is review press, congratulations on that. Many of you watching this live stream have prepaid for your copy when you register, your copies will ship tomorrow. I wanted to ask an opening question, im wondering how the project got started. But the idea of using the framework to understand politics industry come from . Thank you. It is interesting, the idea came along before the idea to gethsemane, i want to go beyond that. In 2015, i pulled my company and i did it in part so i could work on these political change issues because we are so deeply concerned. I was basically trying to get the Business Community involved because i thought they were mia and i was clearly striking out. I would be in new york and have a meeting with in italy mayor life that was in the system, and having a great meeting and im thinking oh my gosh, its going so well, i should ask for 5 million instead of 1 million that i was going to. Then somebody said this is fantastic, count me in for 25000. I realized, i am not making the case so i said, they dont see the investment will give a good return and if they have been successful in business, they want to know what they were get and how it will work. I thought, we need to make the business case. Fortunately, i already had the answer, which is to say the Gold Standard forces that they created, back in 2013, we were doing the Company Strategy, is already deeply involved in politics. Politics is explained by these same factors so i was basically running food Company Analysis on the one side and politics analysis on the right side. It is all fascinating, it was so clear and detailed. I never intended to write about it but now i thought, we can take this language, it is so familiar to the people and we can create this investment in political innovation so i went ahead then and thought having the right ideas is really important, no question but having people think they are the right idea, getting the right idea in front of enough people, that is another challenge so once again, it is serendipitous, Michael Porter had done the Company Strategy with me, invented the forces so i asked Michael Michael to come and be my coauthor. It is a whole new lens instead of me, im not a fortune 100 c ceo, we teamed up together and put our report out in 2017 and now the book and that partnership has been amazing because we been able to have this fabulous analysis and also have the interest people have in looking at it and most importantly, we were able to use this analysis to create a strategy for change because we didnt want to just do an analysis, you need a prescription. We dont want to be interesting and illuminative, we want to be action oriented. It is exciting and we are excited about the book so we can get this message out. Im sure well talk about the solutions later. Can i ask you one quick followup question, it is interesting you say there how to apply this in a situation but for me, look, its very counterintuitive. The political system in the u. S. Is not broken, you say but it is working the way it was designed to work with . Can you convey a little bit on the intuition for how you come to the conclusion. Yes. We always have to come to look at the problem from the right angle. Confusion, for so many decades has been the assumption that the political system was designed to work for the citizens, work to solve problems because we think it comes from the constitution but it turns out, the u. S. Constitution is tiny so its in your pocket so basically, the design of the system, a rules that guides the incentives, the behavior and it comes from the political Industrial Complex, so that is the name we give to the two parties and industry actors in the policy industry and the system has been designed and optimized by and for the benefit of these private game seeking organizations that make up the political Industrial Complex. They designed a perfect trend, it is working for them, there is more power, more money, more growth than ever, citizens have never been more satisfied. I will say, let me just say two things. The system is a duopoly, the most important customers are not voters they are special interest, holders and primaries and the duopoly operates the huge entry so the one thing that Neither Party has to do is deliver results. They have to say what they are for but they dont actually need to deliver because the voter, when it comes to his, they will still choose them because it says with that voter believes so when you have this correct protective duopoly, you dont get results in the system, we dont have that system, it is all by design because of that, we know where to go into that designed to break apart and alter the competition. I cant wait to talk with you a bit about your proposals, just to track this argument for our listeners, i wanted to ask about how we got on the constitution to this problem you discuss in the book and i wanted to ask about this and welcome you to the conversation. Give us the sense of one or two of the most historical developments in the system that has led to this duopoly, when we teach about this, we talk about the competition of 1984 and i trust exemption so are there events like that that led us to this situation that katherine described . First of all, let me say how much of a pleasure it is to meet with you, coauthor, colleague, who have worked together on so many things for having us had a chance to do this lightly do this more. In terms of how created, one thing we need to make clear is the people running these parties over the years very smart and sophisticated and they think competition thinking, they understand the principles, they act like they do now. When you think about history, you have to go back, when democracy started, it was very well structured by our founders, they had a lot of great ideas and it was very successful and a lot of cooperation and wanted good legislation passed and there was a culture of making progress in solving problems. What happened after some years, in the 1880s and 90s, the parties that had grown up by that time started optimizing the system for that and they did that in the right way. For example, the parties, he went to the ballot box and got a republican ballot if you ask for or democratic if you asked for it. Are you going to do your vote, if you had the ballot, they would talk to you and try to persuade you to change your ballot. There was a lot of corruption in the system. Control over various entry to keep people out. Also to kind of separate themselves and have his partisan competition which actually was overtime got worse and worse. As the years went by, during this gilded age, ours kind of shutdown, was captured by the parties was no longer progress. Theyre fighting with each othe other. And i was the first phase. There is a whole chapter on this its unbelievable reading most of us do not know anything abou about. But citizens are getting really upset that nothing is getting done, its grid Party Control over everything. And the citizens of america, decided that it was not working. And so they rose up, collectively. Not any Single Movement but something called the progressive reform. America rose up and a lot of innovative people, a lot of smart people, a lot of various leaders in parts of the country put forward new policies. And so it is during that period, a lot of good part of the democracy was put in place. And they started collaborating and cooperating. They brought down the money and politics, big business started taking over and could control the agenda of the two parties that were trying to maximize the revenue. And so on. This very broken system that was even as broken, was even more partisan than it is today. It started getting torn down by citizens. This was a very organic movemen movement. If you see it shows you in the gilded age on the lefthand side, the ideological partisanship and polarization was high or higher than it is today. You can see what happened, the gilded age in response to the gilded age started driving down partisanship. And started to build bridges so people started working together and institutions were crating healthy competition. Not this broken competition that we are so used to today. You can see that ideological differences go down, the gap goes down, and this whole. In the middle, was a tremendous heir of congress for america. Lots of innovation, lots of good things happen. We truly putter country on the track it is today. Then you see around 1960, you see things or into in the wrong direction here. You see partisanship grow in grow and grow. That is in the current generation of the parties started taking back the control behind the scenes, quietly of the structure of the industry. And that is when we saw, a whole variety of things happen that sort of broke down our democrac democracy. And is legibly partisanship we see today. And so the progressive era works, we fixed it works. Then we sort of stepped back and ignored it. And the parties and their allies and political western complex, the business of the time, other allies started gaining control of the industry structure again. So the got made worse and worse and worse. Turned into it kathleen describe briefly you can read further in the book. What we have seen is that this structure has been driven over a long period of time, by the parties. Let me just give you one example. It used to be in america that we have president ial debates. In the president ial debates were historically run by the league of womens voters, a neutral organization, very much of a social organization. And then at some point the parties figured out the league of women voters control the president ial debates, we can decide hes getting in. They got very uncomfortable about that. What they did as he found a very clever way and again i dont time to tie the whole story. They found a clever way to kick out the league of women voters and take control of the president ial debates. The parties decide who is on the debate stage, who is in who is out. Theres no independent. If you are not a democrat or republican you do not get to speak, theres very few exception prep to that, ross perot was an exception. This has been a systematic, thoughtful, highly sophisticated effort to restructure the industry better and better, over and over in the favor of the parties when they can both be very successful and not actually have to be accountable for results. It has been an unbelievable journey that i think most americans, particularly me, i did not have any idea how this all happened. I thought it was in the constitution. None of it, it is been totally created in most cases. Host thank you for that with so many ideas. Its incredibly impressive. Makes me remember what a great teacher you are, thank you for that as well as your former student. Want to ask about the political Industrial Complex. Where are we now . It makes me think of lots of different organizations of different types in the parties, but also company that are making money as a result of this polarization and lack of moderation, acrimony and dysfunction, that you write about in the book. If i could just ask you, how should we think about this industry . Who are the two players . The parties . What does their p l look like . How much money are they making . Guest , our best work. And by the way theres not a lot of disclosure here. There been pressured to disclose but since the parties are in charge of legislation, they dont allow or eliminate disclosures. So nobody really knows the pil. I can give you the gist of it. The parties are at the center here. The republican and democrats are a private organization that seek to gain, they are out for themselves, they are not in any way accountable to citizens for money or anything else. Okay, they do what they want to do. But surrounding them are a variety of other actors. Catherine is already mentioned the customers. And who should be the customers in this industry . Us. The voters, the citizens, this should be about public interest. But what happened is the political Industrial Complexes been constructed so the average voter does not act. The people that really matter on the customer side art people who have some passion is something they deeply what may be regulatory change that benefits our industry, might be ideological maybe passion about prolife, thats an issue they care about more than anything else. And we got all the special interest in business who have their interest based on their industry. So the customer side is very substantial. In a huge part of the economic model of this industry. Because the money comes in, and it comes from business, it comes from donors, it comes from all kinds of organizations. Our best guess is total revenue and election cycle for this industry is at about 16 billion every two year election cycle which comes across every so often. There is a lot of money here. And a lot of the money spent on the elections themselves, a lot of monies actually spent by business on lobbying to try to influence what the parties do. And so we have a pn l here, where money is pouring in. There are thousands of jobs that have been created. Staff jobs, election jobs, polling jobs, lobbying jobs, the gigantic industry. Also the media, booktv networks and other media, money just pours into those because theres political advertising, that money spent partly by the parties but the donors on the outside. There is money pouring in from a variety of sources. The media, from some of the key customers where the partisans of special interest. Theres also the media itself, we talked about theres also the suppliers in the industry , all the people who run elections, the people do the polling, the people who make the system work. Many of them, money pours in the very good jobs and get paid really, really well. And so this is a machine. It is very profitable. We dont really know the total net p l of the parties. I wish we did. But we know they are prospering, they are growing, they have more money every year, they have enormous clout to deploy that money anyway they want. The p and l is very good. Although we dont how many billions of dollars each party actually takes home, and pays out to each other and all of their members, not members of the sense of republican but youre part of the team, part of the complex. That is what we know about that question. I wish we knew more. Theres rules about the money and how much you can give and it used to be much better. Now theres a limit on money. There is very poor reporting of money. It is a major issue we have to address. Host it is so different than the system we have in canada or in the uk, or in other countries that have large systems. I recommend the book to anyone who is interested. Understanding those differences here. As a five forces scholar, someone with that industry issues. As i read the book i was thinking well, there is special interest. Also seem to create a role of the party at some level. And theres a News Organization its clearly channeled for there also suppliers because theyre been paid for advertising services. One of the questions that came up for me, and he wanted to see if you had an insight because i know even thinking about it for so long. What are the owners actually buying here . Should we think of these buyers is biting the services of legislation . Is this just so corrupt that what is being sold here by the industry is instrumentally being purchased by special interest . With money to staffers and politicians . Wonderful question, an important one. Lets step back, to this industry. This is an industry of politics has two currencies. Some buyers pay with money, that is a special interest in donors which is putting revenue into the system, the lobbyists et cetera. Some customers pay with both. So that is the citizens meeting the votes are the proxy for what they need. What has happened in the industry is that the value of each vote is worth so little that essentially the valuable currency. The only kind of vote that has value and has a lot, is the Party Primary vote. And the Party Primary that guaranteed to win that district. Its a small proportion of voters that have any power. The answer, people think it may be takes down the amount of money in politics. But actually thats not the way to go at it. Because first you cannot get at that. Second was far more powerful is to increase the value of the vote. And to get, who is buying what , with the votes are supposed to buy representation for our interest. Fight voting for people who are going to deliver that to us. With the money, for people with pay with that or buy representation of their interest, both in favorable legislation in favorable regulation. So i am not saying everything is an exact quid pro quo. Saying the reason that can be so valuable is a cat favorable outcomes from government is at the value of votes has been dramatically diminished. T