The head of the nra from colorado, thank you, ive got a book ive got to read. At least you have a legitimate, kindly way to say, dont bother me. You can watch this and other programs online at booktv. Org. [inaudible conversations] good afternoon, ladies and gentlemen, my name is heidi young, and im the director of Corporate Partnerships here at World Affairs. It is my pleasure to welcome you all here today. This program is part of the Global Business forum which is an initiative of World Affairs that focuses on topics at the nexus of commerce, technology, policy and society. We will be exploring topics along the lines of financial inclusion, future of medicine and the future of transportation in the fall, so i hope you will join us more those program for those programs as well. Today to learn more about the Global Business forum, please see us at worldaffairs. Org. Were pleased to have with us rana foroohar, author of the new book, makers and takers the rise of finance and the fall of american business. A bit of housekeeping first before we get started. Please take a few minutes or a moment to silence your cell phones and other noisemaking devices. Towards the end of the program, the last 1015 minutes of the program, we will be inviting audience members to ask questions. You can do this in two ways. There are blue question cards on your table. Please feel free to write your question on those cards, and well be World Affairs staff will be collecting them throughout the program. And as an alternative or in addition to, we will have this, we have the standing mic right in front of me, and so you are invite to ask your questions live at the mic. And we ask that you, to make your way to the mic, please walk around the back of the room given the camera setup that we have. We are recording for radio, for our future broadcast at World Affairs on kqed which airs on monday nights at 8 p. M. Cspan is also recording this program, and well be video recording for posting on our web site, worldaffairs. Org. Its my great pleasure to introduce tim oreilly, our moderator this afternoon, a partner of the Early Stage Venture FirmOreilly Alpha tech ventures. Hes also on the boards of maker media which was spun out from oreilly media in 2012, code for america, peer j. Tim has a history of convening conversations that reshape the technology industry. If youve heard the term open Source Software or web 2. 0 or the Maker Movement or government as a platform or next economy, hes had a hand in framing each of these big ideas. His next economy summit which will be held here in San Francisco on october 10th and 13 19th covered 11th, covers many of the same themes well be discussing this afternoon. Please join me in welcoming tim oreilly who will introduce our speaker. [applause] good afternoon. Thanks for joining us. Im delighted to see you all here. And its now my pleasure to introduce todays guest. As heidi mentioned, ranas an assistant managing editor at time and is also cnns Global Economic analyst. Before joining time and cnn, she spent 13 years at newsweek as a Foreign Correspondent covering europe and the middle east. You can see her full bio in todays program flier. But shes also the author of this remarkable new book called makers and takers. I got a galley of this book, and i immediately contacted the publicist and said send me a box full of these things, because i want to spread them around to other people. I proceeded to pass it along to many of the leading lights of Silicon Valley. Its a really, really important book. And the subtitle, i think, really says a lot, the rise of finance and the decline of american business. Its very provocative but something that i think all of us need to be thinking about. Anyway, thank you for joining us, ra, this a. Rana. I just want to say thanks to tim, thanks to World Affairs. Being on the stage is quite an honor. Well, i like to say my reputation exceeds me. [laughter] so, rana, i had a line of questioning prepared, but brexit has really kind of which is very rell havent to this discussion relevant to this discussion has come to the forefront of the news. Brexit, donald trump, how are these things related to the rise of finance and the decline of business and, effect live effectively, the decline of the middle class . Yeah. Well, i think in some ways both the leave vote and Donald Trumps popularity are protest votes. Its not so much that the leave contingency in the u. K. , in my opinion, has the answers for how to deal with some of the economic challenges that are facing advanced economy like the u. K. , like the u. S. , many industrial countries in europe as well, but they are representing an antiestablishment movement in some ways. And one of the things i cover in my book is how the development of financial capitalism in our cup over 40 in our country over 40 years has been in some ways a closed conversation. Theres been rules that have been crafted, you know, by both parties, republicans and democrats, that have worked for some people, and i would argue a smaller and Smaller Group of people, but not for creating a kind of inclusive, sustainable Economic Growth and capitalism across the board. And to me, thats what brexit is all about. Im actually personally very sad about brexit. I was a Foreign Correspondent in europe for a number of years. Both my kids were born there. You know, i covered the beginning of the euro, and it was such an optimistic time. There was a feeling of coming together in economic unity, but there was always this sort of political hole at the center of europe. Europeans decided to not do the political integration that i think was necessary to to make the e. U. Sustainable and then when bad times came and you have the slow growth economy, i think that that tide pulls out, and you sort of get this feeling of people hunkering down and wanting to be a little bit more tribal. And i think thats what youre seeing there, and i think thats what youreing here in some youre seeing here in some cases. Lets unpack this a little bit for people who havent read your book. So lets talk a little bit about your fundamental notion about how financialization has changed the the shape of business. And, actually, lets start where you start your book. It opens with a fairly blistering indictment of apple under tim cook. Yep. And, you know, because we think of apple as this great, innovative company, to have them play a starring role in a book about whats gone wrong [laughter] is, perhaps, you know a little edgy . A little edgy. Right. Maybe talk a little bit, whats your beef there . [laughter] funny, my editor said that too. You sure you want to start with americas mostloved company . [laughter] im like, yeah, you know, why not . The reason i actually started with apple, id actually done a profile for time a few years ago on carl icahn, the big corporate raider activist investor. Thats a rebranding which i get into a little bit in the book as well, and he was, until quite recently, holding a fair bit of apple stock. And he was tweeting every few weeks telling tim cook, telling the the board of apple to do more Share Buybacks which many of you probably know when companies do Share Buybacks, it artificially decreasing decreases the number of shares on the market, but it doesnt actually change anything in the underlying corporate story. And its interesting because not just apple, but Many American companies historically tend to do Share Buybacks at the very top of the market. So when a stock has risen, when growth has happened and the company is at a turning point and they dont really have anything else in terms of their growth story to share to the public or to wall street, Share Buybacks are good to get a little more stock price hit. The problem was apple was issuing debt to do these Share Buybacks, and that in itself is a little bit ironic. Because you look at apple, one of the richest if not the Richest Companies in the world right now. Theyve got about 200 billion worth of cash sitting in Bank Accounts, many of them overseas in tax havens because they dont want to bring back the money to the u. S. And pay the higherthanaverage u. S. Corporate tax rate on it. We could go off on a tangent about whether thats really fair given that so much of what makes the iphone smart was actually adopted by the federal government, but ill leave that for another question or another panel. But it was a deep irony to me that heres this company that doesnt need any capital and yet is more involved in the Capital Markets than ever before. So over the last few years, apple has made promises to give back to investors in the form of Share Buyback and dividends am as much as it has sitting in Bank Accounts abroad. And thats because it can do these very low interest bond offerings, its very happy right now to do that in the u. S. Well, why is it is so cheap . Because we had a financial crisis in 2008, and because we had no real fiscal policy, and politicians were gridlocked and unable to come up with a real way to bolster the main street economy, the fed, the central bank, parachuted in, dumped a lot of money in the economy, kept rates very low, so corporations are can take on a lot of debt. Youve got the Richest Company in the World Holding more debt than ever before, paying out the wealthiest 10 of the pop laughs which owns population which owns about 80 of the stock rather than investing, as i think steve jobs might have done, in the big r d investment, in the blue sky invention thats really going to change the economy. And that, to me, is a good place to start exploring this trend of financialization. Well, theres another aspect of that which is, of course, you know, the apple devices are made in low wage countries as opposed to being made here with the argument that you have to do that in order to, you know, be competitive. And yet heres apple, you know, most Profitable Company in the world saying, well, if we, you know, dont lose low wage employers, if we actually did this in america, you know, we wouldnt be competitive. You know, youre starting to dissect the scene of a problem here which is that corporate profit is made sacrosanct above all else. Yes. And that goes back to something law professor lynn stout has called the shareholder value myth. You know, if you scratch, you know, any business person, theyll basically repeat this idea that boards have a fiduciary duty to enrich their shareholders. Turns out theres very little Legal Support for that, and boards and Company Officials have wide discretion to pursue social goals and to do to other things, you know, longterm strategy, and yet this doesnt happen. And really thats a lot of what you talk about in your book. Why. Can you kind of tell us why is it that people have kind of bought into this . So lynn stout is amazing. Shes a professor at cornell, and she actually did a big interview for the book and had some great stuff to say about this. Chapter three and four actually look at this issue, and this myth of shareholder value was part and parcel of whats called the Chicago School of economic thinking. It was sort of a markets know best, just focus on the share price and Everything Else will sort of follow, social good will follow from that kind of thinking. Im generalizing a little bit, but thats basically where Corporate America was over the last 40 years. And, you know, its not like there was one change point. Weve had a number of decades of small legislative, legal, regulatory changes that have created a system of incentives which now pushes any Public Corporation in these very, i think, shortterm directions towards outsourcing, towards job displacement, towards Financial Engineering rather than the real kind. And, you know, one of the reasons i wanted to write this book is ive been a business and economic journalist for 24 years now, and i would meet these really smart ceos and many times really good people, you know . They were doing philanthropy, and they were involved in their communities and, you know, i recognized them to be good people, but theyd be making these terrible shortterm Business Decisions that were basically all about maximizing share price and, you know, often times were devaluing Everything Else. They were devaluing their own workers, were not necessarily making decisions that were right for their Customer Base even and so were eroding the longterm potential market share of the company. And it was all down to shareholder value. And then i also had the perspective of having lived and worked a abroad and seen some of the molds in europe models in europe. I knew this was not the only way to do things. Until quite recently, i mean, this is a very nascent conversation still, people just thought this is how capitalism works. Shareholder capitalism, thats what you do. But its not what they do in germany, for example. Theres a model of stakeholder capitalism thats much more based around local ecosystems in which workers have a seat at the table, Civic Society and government officials have a seat at the table. Theres a shared conversation which, as i explain in my book, can really actually help corporations. One of the examples i get into is after the financial crisis the u. S. Manufacturing sector laid off a huge number of workers immediately. And germans did this a little differently. A lot of the german Manufacturing Companies near substitute guard had a different model. They put workers on furloughs, used the extra time to do retraining, upgrading of factories, basically pushing forward their own processes and upgrading them when there wasnt a lot of work to be had so that by the time the Global Economy started to recover in 2010 and china was coming back, the germans were ready to go. They were all up and running, and they grabbed a lot of market share from American Companies who had taken this much more short term, were just going to cut our capital costs, martial our capital at the expense of all else, and that turned out to be a bad decision in the long run. So lets bring this back around to brexit because, of course, part of what the brits were saying thiess the 50 of the at least the 50 of the brits or 50 president of those who voted, keep that in mind that we dont have enough people voting on these important issues [laughter] gotcha, yeah. But of this large poll effectively, 50 , slight majority said we want out from under this european model because we actually dont, you know, believe that the benefits of that model have been sufficient. And theres a couple of things there. One is the role of government perhaps overregulating. But theres also a real distrust of globalization. Yeah. Globalization is another piece of this story. And im really always of two minds about globalization because there is this very powerful narrative about Companies Using the cheapest labor they can find anywhere, and if they cant find cheap labor, their going to out theyre going to outsource to machines x. Effectively, people are a cost to be disposed of whenever possible. And thats clearly driving this populism. And yet theres another side of globalism which i see pointedly in our world many data, if youve ever seen the wonderful series of visualizationses out of oxford visualizations, you know, basically changes in world health and world poverty over time. Globalization clearly has brought up large segments of the world. And at the same time, it has actually depressed, you know, the incomes of many former people in middle incomes. And so it looks like we have a zero sum game, you know . Some people are getting worse so that others can get better. And yet, and yet i think the story is more complex than that. And what youve brought to it with this notion of, well, how much is going to corporate profits versus how much is going to workers is another piece of that narrative. Yeah. And how do we tell the story correctly so that we make the right economic prescriptions for our society . So its such a great question, and its such a a complicated topic. The thing that comes to mind is i had a conversation once with Howard Schultz who is one of the interestingly founderleaders, it tends to be founders, i think, that think more about or perhaps have more leeway to pursue goals beyond just share price. But we had a conversation about this very topic, and he kind of summed it in an interesting and pithy way. He said, look, were becoming a nation of latte makers and latte buyers, and i have to make sure theres more latte buyers because otherwise the math starts to not work. You know . And what hes saying is that in a economy like ours which is similar to most advanced economies where Consumer Spending makes up 70 of what happens, when people havent gotten a raise in real terms since the early 1990s and many working people aka, the trump voters, you know, particularly laidoff white men in the rust belt havent gotten a real raisins the 70s youve got a problem not just economically, but prettily as wer