Famous son, bill gates, who according to forbes is the richest man in the world. In an exclusive interview, ill talk to him about the strengths and weaknesses of the u. S. Economy, education reform, innovation, and why he recently drank wastewater. With a smile on his face. Its water. Also, the inventor, dinosaur hunter, chef and polymath extraordinaire nathan murfold on using technology to help the poor. This might be the coolest keg on earth. Literally. Then the youngest female selfmade billionaire in the world. She got there with blood, sweat and tears. Well, just one drop of blood. Ill explain. And what the worlds oldest democracy, the United States of america, can learn from some young upstarts about elections. But first, heres my take. Here in seattle, you can really sense the importance of the two most powerful forces that have transformed the world in recent decades. Globalization and the information revolution. These two great engines have been chugging away, integrating a share into the global system and ushering in a digital age that is now invading every corner of life. Countries or cities that could adapt like seattle have benefited dramatically. Those that could not like detroit have been crippled. But either way, the train has kept on rolling. Ive been very clear, mr. President , im not a fan of fast track. Democratic opposition to fasttrack trade authority for president obama is blind to the fundamental reality of this era. You cant turn off the machine. You cant stop china from growing and trading. You cant prevent africa from deepening its integration into the global system. These forces are already at work, powerfully entrenched and will keep moving. The potential trade deal with asia, the transpacific partnership, could, however, shape these trends in a direction that is compatible with american interests and ideas. Thats why congressional, mainly democratic, opposition has been so misguided. For those who worry that after tpp america would have to compete against lowwage countries, its too late. Its been too late for decades. As Zachary Karabell notes, we are already living in a free trade world. The average tariff in the developed world is now about 3 . Thats it. And in the past three decades, developing countries have cut their tariffs substantially as well. Chinas average tariff is less than 10 today. Down from around 40 in 1985. The United States has one of the worlds most open economies. Any trade deal like the tpp is going to open other economies like those of japan or vietnam far more than it will america. And the nature of the opening and the new rules will reflect american interests and ideas. In an essay in Foreign Affairs in 1993 on nafta, a young and then relatively obscure economist, paul krugman, explained that nafta wasnt going to have much of an impact on the vast American Economy one way or the other, it was really about Foreign Policy. The economic effects of nafta have been heavily debated, but the Foreign Policy consequences are clear. And clearly positive. Re antiamerican countries in the world. Today, mexico is a country transformed. Unambiguously allied with the United States. Its president is totally comfortable being described as a close ally of the United States. Mexico has become a core component of a closely intertwined north American Economy that is the worlds most vibrant regional bloc. Many factors led to this transformations, but nafta was chief among them. If something similar were to happen with tpp in asia, the effects would be global. The world we live in is one of rising nations but declining global norms. The struggle is on to write new norms, new rules for trade, cybersecurity, intellectual property and much more. Lets hope we dont look back 20 years from now when new rules have been written by china and wish we had been more active and assertive when we had a chance. For more, go to cnn. Com fareed and read my Washington Post column this week. And lets get started. Joining me now, bill gates. Bill, a pleasure to have you on. Great to be here. So give me your sense of where the American Economy is these days. A lot of people say yes, we do have a recovery. Yes, compared to the rest of the world, the United States is doing well. But were just not getting the kind of growth we used to and that something has changed. That this is the new normal. Youre not going to get back to 3 , 4 , 4. 5 . Well, gdp growth doesnt capture mass improvements that take place, particularly digital innovation. Its not quite as negative a picture as it appeared gdp look will give you. Explain that. You think theres stuff going on thats improving quality of life that isnt being measured properly. Thats right. When you use wikipedia, it is contributing zero dollars to gdp whereas when you used to buy the world book or Encyclopedia Britannica that used to show up in gdp. So the fact that those services, listening to music, finding videos, the price deflator doesnt capture the quality of these services. Particularly ones where the price goes down so quickly that it essentially doesnt get seen by that measurement. So you wouldnt trade places if you made, you know, inflation adjusted the same amount 50 years ago, your life would be way worse than it is at the current level. But lets take that and just be very specific because a lot of people say middleclass wages have stagnated for the last 15 or 20 years depending on how you measure it. But youre saying, well, a middleclass person shouldnt trade places with somebody 20 years ago because his life or her life has immeasurably improved. Thats right. We dont capture in the numbers that the youd much rather choose, say, 40,000 a year now than the equivalent 20 years ago or 30 years ago or 40 years ago. Your ability to read books, to find information, to stay in touch with your friends, thats not at all reflected in that income level. Now, theres a few things that have gotten more expensive the privacy a college education, which most people you should look at the State University tuition. The cost of medical coverage, either paying for it or insuring against it, thats gone up. But overall, it understates how much things have improved. It doesnt mean we shouldnt worry about middleclass incomes, but the comparisons overstate the lack of progress. The American Economy is basically very strong. Ironically here, the position of our currency as a reserve currency means that the dollars relatively stronger than it should be which holds back export growth, that would be even more robust. But even despite that drag from our unique position, its basically a fairly positive story. What do you think about those who say, look, the economy is overtaxed, overregulated, you need big structural reform, that thats whats going to unleash productivity in this economy . Well, the most highest Economic Growth decade was the 1960s. Income tax rates were 90 . I mean, the idea that theres some direct connection that all these innovators are on strike because tax rates are at 35 and on corporations, thats just such nonsense. Corporate profit as a percent of u. S. Gdp, the tax, corporate profit tax, is 2 . It used to be 4 . Thats at a time where corporate profits are at an alltime high. So yes, your nominal rate is very high, but for a variety of reasons, including overseas deferments, accelerated depreciation, whats actually being paid is way less. So the notion that changing that nominal rate will unlock something, you know, overstates how you improve things. Right now the president ial campaign has sort of begun, and one of the big issues that youre seeing on the republican side is the issue of the common core. These standards in the tests. And jeb bush has reiterated his support for them. Your Foundation Gives an enormous amount of money and i know youve spent a lot of time looking at this issue. What do you think of the common core . Well, the common core is a fantastic piece of work. And if you really just take that issue and say is the way they define the math progression through the grades and what the basic knowledge should be is that well done, the answer is absolutely. Its fantastically better than what came before where things were out of order. Some states didnt teach you enough to be able to take the College Entrance exam. And so you were disadvantaged there. Some states had things that were done in a different form than they appear on the College Entrance exam. So you get lower scores just because the notation and the way it was taught was different. In the past, the u. S. Designed math textbooks by committee. And our textbooks are twice as big as other countries textbooks. And what it led to is we try to teach too much every year and we dont teach it well. And so other systems are just blowing us away in math. As we switch, like in kentucky, which was the first to adopt the common core, theyve seen substantial gains in their math learning. So its a very good design. It means you can go up to websites and look at their material and then have it match what youre learning. If your kids move, like say military families, what theyll be learning in sixth grade will be aligned so it wont be confused and different. So common core is an amazing piece of work. When we come back, more with bill gates. Im going to ask him why he drank water that was made from human waste. When we come back. 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Its very important for health. Its very important for quality of living. And the way sanitation is done in richer countries is very expensive. We have piping of water in, we make it dirty and then pipe it back out and we do complex processing. Thats not likely to be affordable, say, in all of india. And so if we could take some process and take human waste and get rid of its smell and make sure that it couldnt cause disease, then it would be just like normal garbage. And for very low cost, in fact, that could be moved out of the household. Or we could just burn it as some part of reinvented toilet. So the r d to figure out how do you get caltech, m. I. T. , all these top universities to look at the chemistry, the physics and build this reinvented toilet the foundation has funded that type of advanced research. And were seeing really good progress. And the way it worked, as i understand it, is that the waste is taken, its essentially heated to a high level. The water evaporates. You can then separate the liquids from the solid. That water is then distilled and purified. And then you drank it. Exactly. All the water we drink has been in lots and lots of different places. The key is its been purified right before we have to drink it. And in this plant, it is a very, very pure output. In fact, you know, its a valuable output. Did you could you tell anything different from the taste . No. Once water is boiled and filtered very effectively, its nice, wonderful water. I had a bottle of this stuff in my car, and my kids would pick it up and say, really, dad . So they found it fascinating. But in fact, what we have to think about is that most people dont have sanitation. In fact, mody in india has a Great Campaign to say lets get toilets, lets clean up the ganges. So a lot of energy has been brought to this area that really isnt often discussed. And it can be improved. When you look at this issue of water, does this have an applicability to rich countries . We are reading all about droughts in california. Is there a way we have lots of water on earth. Is that the solution . Is that going to be the technological fix to the problem of drought in california . Yeah, over time, youll use energy to do desalinization. So water shortage is about the cost of energy. Because the problem with desalination is its just very expensive and very energy intensive. It just uses energy. Like many of the things of modern life energy is a prime input. So if we could have breakthroughs in energy, that would help us a lot to both desalinate the water and transport it to where we need it. Where do you think we are in the sort of green revolution . Solar costs have plummeted, but the price of oil has also plummeted. Where does that leave us . Well, solar prices are still not competitive with, say, natural gas, electricity production. Now, in a narrow sense, they will be competitive. That is, during the middle of the day when the sun is shining. But when you buy power, what youre really buying is reliability. You want 24houraday, even if its been cloudy for four or five days, you want your hospital to have electricity. You want somebody in an Apartment Building not to freeze to death. And so taking these intermittent sources and adding them in means that we either need peakers, things that come in supplementing, or we need massive storage. And so we do not have an economic way of converting the Energy System to a zero co2 system. Only through big innovation in storage and so getting the costs down will we have that. Thats what we need. And it could come from solar. It could come from nuclear. Theres a variety of technologies that might provide that solution. We need to fund thousands of entrepreneurs to drive those costs down. Because otherwise, middleincome countries arent going to pay some huge premium for their energy. And do you feel like we are at the cusp of an Energy Revolution . Well, im hopeful. I keep encouraging governments to raise their energy r d budgets. And its disappointing, given the importance of energy for the poorest in the world and this imperative that we get zero co2 emission, that the r d budgets havent gone up more. Im funding some new work in nuclear. Theres a lot being funded in storage. Im involved in some of those. The solar space has gotten lots and lots of funding. So theres good things happening, but i think we should be trying to accelerate that because rather than subsidize this stuff when its not economic, funding the r d to get it to be economic, that is the only real solution. Bill gates, always a pleasure. Next on gps, from seattle, how great would it be if u. S. Election campaigns were shorter, had no negative tv ads, and didnt require a billion dollars to win . Well show you some global lessons on elections next. Wim better. Like a custom screener on your desktop, that updates to all your devices. And you can share it with one click. Wow. 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