Renewing American Civilization Class Eight
Creating American Jobs in the Work Market
Reinhardt College February 25, 1995

The following is a special program produced by RCTV, Reinhardt College Television, in Waleska, Georgia. From Reinhardt college in Waleska, Georgia, this is "Renewing American Civilization." In this, the eighth of 10 class presentations, Congressman Newt Gingrich, an adjunct professor at Reinhardt College, will continue his course which presents the foundational principles necessary to the renewal of American Civilization. This week's lesson, the world market, focuses on the world market and an information age third-wave American strategy for being the highest value-added competitor with the most productive jobs, the most market-oriented producers, leading to the highest take-home pay and the highest quality of life.

And this course is based on the premise that there are five pillars of American Civilization. First, the historic lessons of American Civilization. Second, personal strength. Third, entrepreneurial free enterprise. Fourth, the spirit of invention and discovery. And, fifth, quality as defined by Edwards Deming. And in the course of this course, we take two hours with each of those pillars, and then we apply them to four areas. Last week we talked about the Third Wave and American Civilization, the Alvin and Heidi Toffler model of a Third Wave of change. Then we talked today about creating American jobs in the world market. Then next week, we will talk about replacing the culture of violence and poverty with a culture of productivity and safety. And finally, we'll talk about -- we'll end the course with citizenship and community in 21st century America. What does all this change mean and how do we Renew American Civilization, and what's our role in that?

Now, today's class is creating American jobs in the world market. And I think it's very important to see this as a dual edge, creating American jobs, but doing so in the world market. And before we get to that, several of you, in the spirit of a certain amount of current events, it is true that in weekly "World News" cover, "Space Alien Meets with Newt Gingrich." This was not about negotiating for a bigger market than the world market. And national security prevents me from describing exactly what happened. But since one of you brought this today, I couldn't resist starting by -- this is the closest to current events we've gotten in this course so far. Just further proof that this is a diverse and creative society, with people who think up a lot of strange things.

By the way, I also have to say in terms of the concept of the Third Wave and what an extraordinary, diverse civilization we are, you'll remember last week, I talked about the notion that the Chinese word for "crisis" is actually made of the ideograph -- two ideographs for "danger" and "opportunity," and that when we figured this out, we were going to use it -- about 10:00 o'clock Friday night preparing the class -- that we did not have the ideograph, and then a gentleman faxed this to us from San Francisco.

Now, after the class, I learned that the story gets even better. The top character is "danger." The bottom character is "opportunity." And that this was sent to us by Fred Chow, who is an 82-year-old first-generation American who emigrated from China, and he lives in San Francisco. And a friend of ours who knows Fred Chow heard me say -- on camera, heard me say, "gee, we don't have this ideograph," literally picked up the phone, called, and said, "Fred, can you fax it to Reinhardt? " And within that length of time, it got here. So pretty good deal. And again, an example both of how extraordinarily diverse America is and of how the information age works and how rapidly you can get things done.

Now, there's a central premise to this particular session, and one that I think we don't focus enough energy and attention on as the base of much of our public policy, and that is that economic growth is vital to a free society. That it's economic growth that creates jobs, it's economic growth that creates wealth. That you can't redistribute wealth if you don't create it, that you can't have charities if you don't first have income. That you can't take care of your family if you don't have a job, and that jobs come from economic growth. And that the best way to ensure future jobs is to have a growth-oriented pattern, not to have a protective pattern.

I'm going to get into this and spend some time. But it's very important, because the first attitude of people is to say, "boy, I want to protect my current job." And that leads you, as you'll see in a minute, into a past-oriented, defensive attitude.

So let's start with the premise, what this two hours is about is, how do we get economic growth in the 21st century? What does economic growth in jobs and take-home pay mean for Americans?

Now, I want to now go to a second point, which is very controversial, but I want to assert as a fact, and I would be very glad to defend either here or anywhere else, and that is that the world market is an inescapable reality. And that it will define the requirements for economic growth. Now, this is a very central debate that we have to have as a country. My point is that you cannot avoid the world market. I use the term "inescapable reality." It's not about, do you like it or dislike -- this is not about GATT and NAFTA. This is about the objective fact that all over the planet, there are smart people getting up every morning and competing, and that that's just an objective reality, and that they are going to have an impact on your interest rate, they're going to have an impact on your money supply. They're going to have an impact on your products. And that unless you start a design with "let's look at the world market," you are not being realistic economically about who we're competing with.

You can come in and say to me, boy, here we are in North Georgia. We have got a plan that will knock the socks off Tennessee. And if, in fact, it is a plan which will be drowned by Germany and China, it is irrelevant. And so as we design American economic growth, we have to start from a 21st century notion of the world partly driven by technology. You now live on a planet where you can pick up the phone, dial direct and reach virtually every country on the planet in real-time.

Now, this is an enormous change from 100 years ago. It's a big change from 30 years ago, when it was still fairly hard to make a transatlantic call and now it's universal. You can fax worldwide. And we did. During the problems in Russia several years ago, people were faxing back and forth and e-mailing back and forth. A level of openness that was unthinkable. And it was probably unavoidable in the modern world. Somebody told me this morning that they're now talking about taking out dish receivers in Iran, because having your own dish receiver, you know, is a way of getting information.

Of course, this is happening at the very moment, as Kathleen Minnix was saying, when we're now inventing smaller and smaller dish receivers, which means people will have a contraband dish receiver in their attic. I mean, it's that kind of constant effort. You know, the world's getting smaller. We are competing not just with other Americans, we're competing with Mexico and China and Japan and Germany, and we have no choice. You can choose what the terms of the competition are, but you can't choose the competition. You can determine how your government interfaces with the competition, but you will compete somehow. In that framework, I want to suggest that a global economy is important because there is more opportunity in the world than there is in one country. And because competition within a global economy forces us to be more creative and innovative.

Now, there are two points here. First of all, as a consumer, if your choice is to buy bananas grown in a hothouse in North Georgia or to buy bananas grown in Africa or Latin America, it is an economically nutty decision to buy a hothouse banana, because it's just dramatically more expensive. And so the wider the world market, the greater the choices you have. In addition, if you take every good idea on the planet this year and you weave them together into American productivity, you're going to have more good ideas than if you only take the American ideas. So that being open to the world allows you to have both more consumer choice and it allows you to have more understanding of ways of being productive that are good for competition.

In a sense, Arnold Schwarzenegger by coming to the U. S. created a major export industry. I think it was "Terminator II" that made $200 million overseas, which is literally the same as selling textiles or shoes or something else. He had created a product which earned at foreign exchange for the U. S. , And yet he originally, of course, was born in Austria. But whether you're importing a human being or you're importing an idea, I mean, many ideas now come to the U.S. We and the Japanese are the two highest value-added producers of new ideas on the planet. So if somebody in France will invent something, we'll market it. We and the Japanese are basically in competition to see who can market better.

The other part of it is that when you have to compete inside a global economy, it's the same as belonging to a regional football league or belonging to a national football league. When you've got to compete in the highest level of competition on the planet, your factories get better, your managers get better, your inventors get better, and you just have a different level in pace and pressure of creativity. So by being in the world market, you keep your country at the front edge. And to the degree that you withdraw from the world market, you allow your own companies to be less competitive. This is a big problem in Europe now where the more the Europeans protect their industries, the more obsolescent their industries get.

Whereas, Ford, for example, which is a world company, had to go through an excruciating cultural change to compete with Toyota. Volvo, Mercedes, Renault, Fiat, they didn't go through that big a change. The result is Ford is now a generation ahead of any European car company at being competitive. General Motors is in the process of going through the same change. Chrysler is going through the same change. And the result is the two most efficient producers of cars in the world are Ford and Toyota, and they're almost indistinguishable now in terms of how competitive they are. And they play head to head. The really great -- and there are great European car companies, but they're dramatically more inefficient. They have a much longer turnaround time on new models, and they have much less effective use of resources. And over time, that eats you up. It means you're not competitive.

Now, in that setting, let me suggest to you that our goal here -- and I really have to thank my wife Marianne, who came up with this -- is that local jobs through world sales defines the new reality. One of our problems is to get across to people, this is not about overseas jobs. When we talk about the world market, it's not about fancy people overseas. It's about scientific Atlanta, which now has a five-year backlog of orders. So in North Atlanta, scientific Atlanta is employing several thousand people selling all across the planet.

And it's that kind of continuing process of Coca-Cola, which makes money everywhere on the planet, practically. And so there are jobs in Atlanta which come directly out of Coca-Cola. It's interesting, "Georgia Trend" magazine had a 250-page section entitled, "global connections." This is the December 1994 issue. And they have 20 pages of listings of companies in Georgia that have specific relations to the world market. So this is literally about, how do we create local jobs through the world market? Because that's the reality we're now dealing with. To understand how we do that, we have to start with certain societal aspects of competitiveness. That is, compared to other countries what's our taxation, regulation, litigation, education, cultural values, and government structure like?

Let me carry you through. Does our tax code encourage saving and investing, or does it encourage consumption? If it encourages consumption, compared to the German and Japanese tax codes, guess who will have more money available for the next generation of factories? So when you talk to the biotechnology companies, where of the top 15 products of the world, all 15 are American, their major problem in creating new jobs -there are over 100,000 high evaluated jobs now in biotechnology -their major problem in creating new jobs is they can't get enough capital to build new factories. It takes hundreds of millions of dollars because of our next item, which is regulation, to bring a biotechnology product on the American market. So if you can't find the money even if you have the idea, you can't market the product.

And so Japanese and German companies are looking at buying our biotechnology where we have a dominant position, because they have the capital. We don't. Second is regulation. It takes -- it now takes almost as long for the regulations for building a computer chip factory to be processed as the lifetime of the computer chip. So even if you solve taxation and you have the money and you're told, "well, now, you can come to Thailand and break ground Tuesday morning or you can file for an EPA permit and in three years we'll solve it," you may conclude because of the speed of change in computers, that you have to go offshore just because you can't afford to deal with American red tape. The third problem is litigation. You're told, "you could do this in Germany, and there they have a 'loser pays' system, and there are very few lawsuits about this, or you could do it in the U. S. And there are 23 trial lawyers who'd like to meet you Tuesday."

Which system - - and by the way, Edwards Deming said that litigation was one of the two major things, health care being the other, that made America non-competitive. And he singled out litigation and the degree to which this is a litigious society, where you graduate more lawyers than engineers and then you compete with Japan, which graduates more engineers than lawyers. There are more lawyers in Georgia than there are in the country of Japan. Just to give you some sense of scale. Fourth is education. I mean, to do quality right, you have to know math. The average American high school graduate does not know enough math. In fact, the average American college graduate does not know enough math to do the math expected of a typical high school graduate in Japan.

So if you're going to do quantitative analysis, if you're going to set up a systems approach, if you're going to say, "what is" -- you know, "what is a common occurrence and what's a unique occurrence? " Remember when we did Deming? In order to build the statistical model, you have to have a better ability to do math than most Americans have. And so corporations find the education level is not only not acceptable, it's decaying, particularly in the inner cities. So that you're less likely to be able to hire somebody to compete in the world market if your education system collapses.

Fifth is cultural values. If you're competing with somebody who still believes in the work ethic and you're competing with somebody who gets up every morning thinking about, "how can I win this competition," and your culture now has said, "well, don't be a workaholic and don't push it, and after all, you know, you really don't -- you don't want to be a rate breaker." Again, we find, for example, honor students who get beaten up now because in some inner city schools, they're seen as being deviant because they want to study too much. Well, how's that going to compete in the world market? So cultural attitudes matter.

And finally, government structure. I mean, do you have a government -- when you learn that, for example, as was recently reported, there are 27 factories in China that are pirating American products, openly pirating them, and when the Chinese government says to them, "we won't stop them," you have an obligation to have a government which is aggressive enough and competent enough to hit them hard enough economically that they can't afford it. And if you are too slow, too soft, too confused, you can't be competitive. And so you've got to have a government structure which -- because in the world market, governments are like blocking backs in football. I mean, if you don't have a government which is strong enough to protect your interests, the companies can't survive, because they're up against nation states.

And so if the other side says, "my government will help me cheat, your government won't help you at all," guess who wins in the long run? That's a very key part. If you're going to have a free market on a worldwide basis, the government had better be competent enough to be a good referee, because the other side's going to have a government that intervenes on their behalf.

Now, when you look at those larger issues, what I want to do now is come back and I want you to be looking for how the five pillars of American Civilization relate to success in the world market. What are the historical lessons of American Civilization? And we're going to use some examples. What does personal strength mean if you're going to be competitive? How does entrepreneurial free enterprise factor in? What does the spirit of invention and discovery mean? And what is quality as defined by Deming? And how do all five of these begin to relate to competing in the world market?

And what I want to start with is the notion that there are actually two models, and before we put them up -- well, they got excited. They put them up. One is the welfare state, which is -good. They stopped. What I want you to see, we talk a lot about vision, which then leads to strategies, which then leads to projects, which are definable, delegatable achievements, and then, what do you do every day? What are your tactics, okay?

And this is a very important example to show you, which we'll do again next week, that we're talking here about two very, very different models. And that they are literally models. That based on what you believe at a vision level, that you end up with two very different ways of approaching things. But if all you do is come down here -- and this is one of our problems, frankly, with the modern news media and with modern politics. If all you do is you focus on these tactical issues down here, you can't appreciate by studying at this level how enormous the difference in the two systems is. And, in fact, they may look like they're sort of similar. But if they're similar in appearance but relate back to a totally different system of thought, you're making radically different decisions.

And so one of the reasons I take the time to try to teach the course and try to lay out the ideas is until we as a people can get used to talking about vision and strategies, we just drown in tactics. And we don't understand what the core problems are. And this goes back, remember, to Drucker's warning in "the Effective Executive" that good executives always ask of a problem, what is it a symptom of? And this relates back to this whole model. When you find out that the Chinese are getting away with pirating goods, what is that a symptom? What failure led that to happen? And you find out that the failure is, we don't have an aggressive enough customs agency. What is that a symptom of? What does it tell you about the layer above that? So you're constantly trying to go back in and look for the -- it's sort of like imagine you're coughing this morning, and we keep focusing on the cough. But is your cough because you have tuberculosis? Is your cough because you have the flu? Is your cough because you have hay fever? Is your cough because you just have a sore throat? You know, what's going on and why are you coughing? Well, you've got to work your way back up. You've got to understand what's behind the tactical event.

Now, what I'm going to describe in the next few minutes are two very different models of thinking about America in the world market, and I want to -- I'm going to suggest to you that one of them is a welfare state model, and the other is an opportunity society model. That the welfare state basically hides from the world markets, and the opportunity society believes you have to win in the world markets.

Now, there are two important concepts here. One is, gee, if only we could build big enough barriers, we could hide, and then people wouldn't come and compete with us. The other, though, is -- notice the key word I used here, which is a sometimes controversial word, "win" in the world market. That is, you want -- you don't want to design a strategy just to compete. You want to design a strategy to win. And I would argue at the vision level, that you want to design a strategy which creates the highest value-added jobs in the world, so that Americans have the highest take-home pay, so we have the highest standard of living.

Now, if you start thinking about -- and think about the difference you get psychologically if I say to you, "let's compete" or I say to you, "let's win." Because winning justifies the extra weekend of work. Winning justifies the extra focus on quality. Winning justifies the extra effort to be creative. But notice how different the two are. So I don't just want to be in the world market. I think America's goal ought to be to win in the world market. In that framework, there are a couple of key differences. The welfare state is essentially static. The opportunity society is dynamic.

Now, let me give you an example of that that I'm going to come back to later, but that I just can't resist. The president of M. I. T. Visited me this week and was telling me about the marvelous things they're doing there, one of which, by the way, is developing surgical training by virtual reality, where you literally -- huh?

>>I read about that somewhere.

>>Okay. So you literally will have surgeons who will practice, in effect,
>>inside the computer based on virtual reality. Those of you who have been
>>to Dave & buster's have a slight taste of what this is going to be like.
>>This is -- I don't know if the camera can come in and pick it up. This
>>right here, can you see the gray thing? It shows up on the screen pretty
>>good. Okay? Got the gray thing? That has 70 electric motors on it.
>>You will have, early in the next century, in essence, a personal
>>Roto-Rooter, and if your arteries clog, we'll be able to just sort of cut
>>a slice in your leg and put in the Roto-Rooter, it will run up connected
>>by fiber optic, clean out the clogged areas, come back out, and that will
>>be open-heart surgery. Probably be an outpatient procedure. Now, what's
>>it worth to do that instead of going in the hospital for four days or for
>>three days? How good a -- or die. I mean, how good a product does this
>>start getting to be, right? And I'll let you think about everything
>>which could be miniaturized and which would be useful at a miniaturized
>>level, but I'm using this as a tiny example.

The world I think of living in is a world that is dynamic. It is constantly evolving, constantly changing. Whatever happens today doesn't tell you what will happen tomorrow, so we're constantly looking for the flow of things. But in the welfare state, the world's static. So the welfare state sees change as danger, where we see change as opportunity. And we see change as inevitable, where the welfare state thinks it can hide from it. Now, this is compounded by the next layer, because the welfare state is essentially bureaucratic, and the opportunity society is potentially entrepreneurial. One is driven by regulations and rules, the other is driven by a desire for results. Very different models of behavior. In the welfare state, numbers count. In the opportunity society, people count.

Now, what does this mean? It means that where they're saying, "well, we can invest $214 million," we're saying, "let's see if we can find bill gates." Because Bill Gates will ultimately be worth billions. Where they're saying, "let's see if we can have this level of training in this box organized this way," we're saying, "I wonder if Steve Jobs would like to drop out of college and invent Apple Computer." It's a totally different model. It's a model that says we want to liberate every individual, and that the total potential is 260 million creative individuals doing their own thing and being excited. Very different models of structure.

The welfare state tends to prop up the past; whereas, an opportunity society focuses on creating the future. I used to tell the story that if Thomas Edison had invented the electric light in the age of the welfare state, it would have been reported on TV news in a report which began, "the candlemaking industry was threatened today." And the focus would be on what had happened that was negative. And the opening of the transcontinental railroad would be described as "the stagecoach industry in decline."

It's an attitude. It's a way of thinking about things. Do you think about, gee, the past is leaving me? Or do you think about, wow, what an exciting future? And that doesn't mean it's not a difficult future or a slightly scary future. I'm not being Pollyanna. But which way are you oriented in terms of your policies and your behavior? The welfare state ultimately ironically is oriented towards big business and towards unions. Whereas, the opportunity society is focused on small business.

There's a practical reason, by the way. If you're a bureaucrat and you can get three auto companies in the room, you can deal with three. If you're told there are 72,000 silicon valley software companies in America, you can't as a bureaucrat deal with it. The number's impossible. And so bigness makes government feel more secure, because it reduces the number of variables. Whereas, smallness leads to extraordinary creativity, but it's literally unmanageable. You can barely lead it.

>>You maintain a stability, though, in your system if you --

>>no.

>>-- Back to not --

>>you get the stability you get by surfing or by riding a kayak on a wild
>>river. I mean, you stay afloat dynamically -- that's exactly my point
>>earlier. You stay afloat dynamically.

>>but your feet are always wet.

>>That's exactly -- that's a good way to put it. I mean, in an
>>entrepreneurial society, there's always the sense of, this is going to be
>>interesting. Whereas, during the period of decay -- and you see this in
>>Britain after world war ii -- you sort of feel good as you decay. It's
>>like being on a raft that's heading towards a waterfall and the raft is
>>very stable, and you're going, well, this is sort of nice, and I don't
>>have to work too hard and I don't have to change, and why are these
>>people over here in the kayak going nuts, you know, and then you hit the
>>waterfall and the whole thing goes off.

Now, similarly think about the following: the welfare state sees technology as a threat. If you watch the way we operate in the opportunity society, we consistently see technology as an opportunity. It's a very powerful cultural test. The next time you read about new technology, do you think it's an interesting way of improving the future or do you think it's a threat to the present? Now, it's, of course, both. This goes right back to the Chinese word, doesn't it? I mean, every new technology is danger and opportunity. And the question is, which one do you make it?

So, of course, you know, if you are a glassmaker who blows glass and Coca-Cola comes along and invents a system to make bottles automatically, it's an enormous threat. On the other hand, if you're the consumer of bottled coke and they were going to charge you $37 per hand-blown bottle, it's a terrific -- so you've got to constantly be looking in a dynamic way. The welfare state ultimately, because of all this, clings to the Second Wave, and the opportunity society inherently tries to grow the Third Wave faster.

Now, one of the keys to this, which makes it very complicated to talk about public policy, is that creating Third Wave jobs is the role of the entrepreneur. And we don't know how to teach this and we don't know how to create public policy about it, but the fact is jobs are created by entrepreneurial personalities who do not fill out reports very well, do not show up in bureaucracies very well, don't make government employees very comfortable, and can't explain themselves to reporters very articulately.

But almost always you can explain the past better than you can explain the future, and almost always politics is organized around propping up the past, not around creating the future, because by the time you get organized enough to have an interest group, you're already the past. And the people who are inventing the future are too busy inventing to worry about being an interest group.

In that framework, however, people need to learn if you wage class war on employers, you are waging war on employees. It's a very core concept. I mean, if you believe it's an entrepreneurial society and that to get into the Third Wave and to dominate the world market you have to have lots of entrepreneurs, but your attitude is if you're an entrepreneur you must be bad, because after all, you're going to get rich, I mean, look at Bill Gates. It's terrible. I mean, he's created 2200 millionaires in Bremerton, and that's even worse, so it's not just him. It's a whole class of people who are doing bad things. So if you want to punish the entrepreneur, you by definition punish the job that would have been held by the non-entrepreneur.

You can't have it both ways. You can't say, well, let's just target -- we'll do a rifle shot. Let's just shoot the one who is creative. We won't shoot the people who have jobs. Guess what happens to all the jobs? They all disappear. This is one of the most important psychological decisions the country has to make. Do you want jobs enough to create entrepreneurial behaviors, in which case entrepreneurs will behave like entrepreneurs? Or do you dislike people who are successful enough that you'd rather punish them even if the result is other people don't have jobs? Because you can't in a free society break out of that box. It's one of the great formulas, one of the great interesting conundrums of our time.

So you also want to remember that entrepreneurs create baby businesses. It's not small businesses. A baby business is a small business with a big potential. A lot of small businesses that start out small stay small and want to be small. People earning -- remember the McDonald brothers? They didn't want to become McDonald's, because it would have been too busy -- they'd have been too busy being managers. They wanted three restaurants. And so they said to Ray Kroc, you want to create McDonald's? You create it. In fact, they didn't even want to do that until he talked them -- had to literally talk them into it. "please let me make you rich." You -- it took him over a year, if you read his book "Grinding It Out."

So you're looking constantly for the baby business which is going to explode. Microsoft was always a baby business. Federal Express started as a baby business. I mean, Fred Smith knew from the word "go" thiswas going to be a world company. Because it didn't make any sense as a Memphis company. In that framework, there are tremendous virtues of starting small, thinking thoroughly, and combining patience with persistence. I mean, if somebody came to me and said, "how can I get to be truly wealthy or truly successful," I would say literally, "start small, think things through thoroughly and combine patience with persistence." That is, patience is not being inactive. Patience is being very active, but being patiently very active. Not allowing the frustration to stop you. Entrepreneurship is a learned skill.

And again, I recommend -- I go back to Drucker's "Effective Executive." As all of you know, I mention it often enough. If you wanted to be an entrepreneur, I'd start with "the Effective Executive," because the core lessons of effectiveness are absolutely vital if you're going to be an entrepreneur. You combine this with a visionary sense of wanting to get something done, a very strong ego, and a willingness to work very, very hard.

Now let's look at one of the great entrepreneurs of our time, a man who you'll be surprised as you see this how many things you relate to that he's involved in, Norman Brinker. I just want you to just listen to this and maybe make notes about what you learn as you listen to it.

>>Whether it's his beloved game of polo or his magical success in business,
>>Norman Brinker simply does not know how to lose. Since he began running
>>the Chili's restaurant chain in 1983, annual sales have soared from 30
>>million to $500 million. Before that, he turned around Burger King. He
>>ran Bennigan's, and, of course, he founded Steak and Ale.


>>Ron McDougall: Norm is like one of these living legends they have in
>>business. There's very few of them around. One of the things I learned
>>from Norm is that you never stop trying, and you're not afraid to take a
>>risk. You try things. If they don't work, you come back and try it
>>again or you improve it, modify it, and attack again.

>>Ross Perot: you walk into one of his restaurants and you can see
>>everybody's faces just light up, and you realize that he treats people as
>>equals, he treats people with dignity and respect. He gets the very best
>>out of people by treating them fairly.

>>Who are we going to play first? Him first, Uno?

>>though horses have always been Brinker's first love, it was ironically
>>the love of a horse that taught him how to be a good businessman when he
>>was just a boy in Roswell, New Mexico.

>>I can recall in the first grade where my friends were interested in
>>bicycles, I was interested in -- I was interested in horses. And was
>>bound and determined someday to own a horse. And so I went to work, I
>>think, when I was 9 on a paper route in order to make some money to buy a
>>horse.

>>in 1964, after a management stint at Jack in the Box, he left to open his
>>first restaurant, Brink's coffee shop in Dallas.

>>Pete Schenkel: I can remember Norman waiting on tables in there. He was
>>the cashier, he was the cook.

>>I knew Mr. . Brinker. He's nice.

>>Pete Schenkel: he has enthusiasm that's just bubbling from the time he
>>gets up in the morning until the time he goes to bed at night.

>>Norman's enthusiasm led him to bigger things. He started a restaurant
>>chain called Steak and Ale. He taught his waiters and waitresses to
>>introduce themselves in a way that would soon be copied nationwide in the
>>restaurant business.

>>good afternoon. My name is Mike. I'm going to be your waiter today.

>>Hi.

>>How are you doing?

>>Doing fine, thanks.

>>At Steak and Ale, Brinker also created the first salad bar in a
>>restaurant, which again would set a national trend.

>>Norman Brinker: so I said okay, if I have a salad bar, that means as soon
>>as you take an order, the customer can get up and get to a salad bar so
>>he won't have to say, "well, what's happening? " And it avoided getting
>>into the bread and butter appetizer business.

>>Steak and Ale was an amazing success story. It grew to 102 restaurants
>>in 10 years and was worth $102 million when he sold it to the Pillsbury
>>corporation in 1976. As chairman of the Pillsbury restaurant group,
>>Brinker oversaw such chains as Bennigan's and Burger King. In the early
>>'80s, Brinker led Burger King in a burger war against McDonald's, and
>>eventually tripled the chain's profits.

>>Norman Brinker: I learned early on that excitement makes a lot of
>>difference in this business. I'm not in the food business. I'm in the
>>entertainment business. I'm in the fashion business, if you will, and we
>>happen to serve food.

>>despite his hectic schedule, Norman finds the time to meet with young
>>people just beginning their career.

>>Norman, what do you tell that 29-year-old who's worried about life right
>>now? What do you tell him or her is at the end of the entrepreneurial
>>rainbow?

>>Well, well, I tell them that there -- the neat thing about being an
>>entrepreneur, there's no end to the rainbow. It can go on into your 80s.
>>But what I tell them, if you want to get there, you need to do a few
>>things. One is to know who you are, what you are, and what you really do
>>enjoy. You can't go "say, I'm going to do something because it makes a
>>lot of money." You may do something -- if you go do something you are
>>really good at, then the money may come. And then I say, you ought to
>>set a clear-cut set of goals to accomplish what you want and become very
>>-- the very best in that line of business, and then go do something on
>>your own. And also, benchmarks along the way so that you know -- the
>>people know who have accomplished a great deal is step by step by step.
>>I see these people wandering around who are waiting for that big deal.
>>That never happens. It's step by step by step.

>>so what do you all think?

>>I've never heard the name before.

>>Huh?

>>That's wild.

>>Why is it wild?

>>I just had never heard the name before. I didn't realize he was
>>associated with all those things.

>>Sounds like what my dad used to say, work hard. Nothing's free. Just
>>work for it slow and steady.

>>How about the rest of you? What is your reaction?

>>well, he had a vision for a restaurant, and he was willing to take his
>>time, bide his time, and, well, as we said just a second ago,
>>persistence, and persistence paid off. Look at what he's got.

>>Wasn't his real vision to own a horse?

>>yeah. What did he say was the most important -- I mean, I think this one
>>tape could be an entire class.

>>I believe he said the most important thing was to enjoy it.

>> right.

>>Enjoy what you're doing.

>>Notice how this breaks out of all of the regulatory -- I mean, think
>>about how we do first grade, second grade, third grade, you are a child,
>>don't be an adult. I mean, look at Brinker, and we've seen this in a
>>couple of other cases. When does Brinker start growing up? Huh?

>>Never.

>>When there's something he wants.

>>What did you say?

>>I said, "never." I think he's still a kid.

>>that's right. On the one hand he's still a kid, and yet when did he
>>start doing what we think of as an adult thing?

>>9 years old.

>>9. At 9 years of age he gets his first job, so that you can say, "oh,
>>gee, we've sure made him become an adult too early, and I'll bet he's a
>>workaholic and he's terribly repressed." On the other, hand what is he
>>doing in the film? He's running around playing with ponies. I mean, I
>>saw Brinker three weeks ago. He'd hurt his leg again playing polo. But
>>notice how different this is from the regulatory, organized,
>>control-dominated welfare state model. Here is a guy who is a kid in his
>>50s or 60s and was an adult at 9. And that's not right. I mean, you
>>have to choose, because remember, go back to the model. It's static,
>>orderly, planable. And yet why did he do it? For a pony. Can you
>>imagine the adults who will say, "well, that's a silly reason to work."
>>Wasn't. That's what he wanted. In a free society, he was pursuing
>>happiness at 9 years of age. Notice how inventive he is.

Somebody said to me the other day, six million people work in restaurants he helped create ormanage. Now, he wouldn't count as a job creator, of course. He's just some rich guy playing polo. But just think about the notion. And think about the inventions. How much money would you guess we make from Japan out of Burger King? It's a substantial currency earner for us, as is McDonald's and as is the others.

My point here is a couple. I mean, I want to really try to show you how different the model is. One, people ought to work in terms of their own voluntary doing things so they have money, so they get to play games they want when they want to, as early as they want to. I am not calling for the end of child labor laws, okay?

>>Sounds like it.

>>Right. I mean, I just want to make clear, because otherwise they'll be
>>grotesquely distorted. But think about what Brinker's saying here. Two,
>>what should you do? You ought to do what you like doing, so people say,
>>"I need to go see a career counselor." Maybe. Maybe you just need to go
>>get a career. How will you know it's the career you'll want? You'll go
>>try it. Notice his attitude towards innovation. What did the other guy
>>say? Try it. I mean, don't hire 12 consultants, think about it for
>>three and a half years, and maybe do it. You've got a good idea, go try
>>it. If it works, keep it. If it doesn't work, rethink it. Remember the
>>Edison line the other week about the first 4,000 experiments? It was not
>>a failure. What did he say?

>>a good start.

>>And why?

>>Because those were 4,000 things that he knew didn't work.

>>right, 4,000 things you know won't work, so we're beginning to narrow it
>>down. Notice the psychological attitude. Very entrepreneurial. I have
>>a good friend of mine, Tom Kershaw, who owns the Hampshire house, which
>>is the site of "Cheers" in Boston. He was a engineer with an MBA from
>>Harvard doing engineering MBA things, and he wasn't happy, and he went to
>>see a guy and he said, "I'm not happy." And the guy said, "what do you
>>like to do? " And he said, "you mean -- what do you mean? " He said,
>>"tell me, what do you like to do? " He said, "I love hanging out with
>>people, you know, and when I get off work, I go and I hang out with
>>people." And the guy said, "so why aren't you hanging out with people?"
>>He said, "because that's what I do after work." And the guy said, "but is
>>it what you like doing? " He said, "yeah. "I love it. "and I thrive on
>>it. "it's me." He said, "so where might you hang out with people? " So
>>he opened a bar and restaurant. He opened the first discotheque in the
>>United States. I mean, he opened the Hawk and -- or the Bull and Finch,
>>which is the site of "Cheers," and he was doing reasonably well, and then
>>"Cheers" came along and then he was doing disgustingly well. But he's
>>doing well at what he likes doing.

Now, why is that important? Because -- this is, again, one of the things you can't get across in a welfare state -doing anything well is time-consuming and hard. There are no serious things worth doing that you can do easily. That, by the way, is a great speech by Tom Hanks in "a League of Their Own" at the very end of the movie. It's well worth renting the movie just to see that one speech. So if you're going to do something really well, you're going to have to do it a lot. If you're going to have to do it a lot, you'd better like it or you're going to hate your life. And that means you've got to have courage to just go be yourself. Now, being yourself doesn't mean, you know, leaning back and saying, "well, world, take care of me, because after all, I'm me." It means energetically, aggressively live your life out being you in a way which is productive. And "productive" doesn't have to mean you want to get rich.

But you should -- you should make consistent series of deals with yourself where you, as a mature adult, this includes at 9, you want a pony? Work. There ain't nothing wrong with that. Except, of course -- and we'll get into this next week -- if you're in the welfare system and you work and you save for the pony, they take the money because it's illegal. You put your family in the wrong class. This happened in Wisconsin to a woman who'd saved $3,000 for her daughter's education. They forced her to spend the money. So it's a totally -- I cannot overstate it is a totally different world view. The entrepreneurial, world market oriented, dynamic system is a totally different world view from the static, passive, and regulated welfare state. And it's not about little changes down here. It's about a fundamentally different way of doing things.

Let me put it differently, entrepreneurship is a whole range of skills, attitudes, habits, and knowledge. It's a complete package. It's like trying to learn to be a ballerina or trying to learn to be a football quarterback and saying, "okay, practice throwing your arm." That's not what it is. It's a totality of things. Or practicing standing on one leg to be a ballerina. That's not what it is. It's a totality. It's a gestalt. Bureaucrats focus on control and process. Entrepreneurs focus on liberating, creating, solving, they focus on results. It's hard to get more different. Bureaucrats see a static world in which numbers count. Entrepreneurs see a dynamic world in which people count.

So bureaucrats in the static world are very risk averse; whereas, Norman Brinker figures, hey, people are resilient. Go try it out. If it doesn't work, get up off the ground and try it again. You'll survive. It's a totally different mind set. The welfare state's despised low-paying job is the entrepreneur's great learning opportunity, first rung on the ladder of opportunity. It is a beginning, not an ending. It is dynamic, not a trap. And it is hopeful, not depressing.

I mean, you can't get a -- all of you've heard the phrase said with contempt, "oh, that's just a hamburger flipping job." That sentence said that way tells you everything about which world view the person's in. That is a static, welfare state world. Because, in fact, to say, "wow, I got my first job, I'm on my way," doesn't matter what your first job is. It matters where your first job leads.

Now, to prove that, let me give you another example, and that is a really interesting film that McDonald's did. McDonald's is the largest job training system in the world. More people learn how to work at McDonald's than anywhere else in the world. But, I mean, literally when you walk in the door. Let's show the McDonald's thing.

>>Teri Goudie: the day I walked in there to apply for the job, I must have
>>walked by the place six times. I was 15 and a half, very shy. When I
>>went in and I got the job, I think it was the first notch in my
>>self-confidence. It helped me bring it out of it.

>> William Morris: I worked at several McDonald's. I worked as a
>>16-year-old. I had my first job at a McDonald's, and then I worked my
>>way through college at McDonald's, and then after we were married and had
>>our first child, I supplemented my income working in a McDonald's.

>>Michael Perez: if I wasn't in the entertainment field, I would definitely
>>seek a position at McDonald's.

>>Michelle Sarkesian: the manager that I worked with was really nice. He
>>was really flexible for me as far as when I needed to work. "oh, come in
>>when you can. "we'll arrange, you know, the schedule."

>>I learned how to coordinate things, just teamwork, you know. That was
>>very important at McDonald's. Everything was like one, two, three,
>>clockwork. And I learned a lot of responsibility as a person and
>>responsibility as far as coping with others.

>>Brian Welch: McDonald's showed me a lot of responsibility and teamwork,
>>which is important as a firefighter and cooking hamburgers.

>>Tim Wilcox: benefits that I derived from working at McDonald's was
>>primarily a steady income in order to pay my bills so I could eventually
>>become an airline pilot so I could go through flight school and college.
>>Second, it was a flexible working schedule where they worked their
>>schedule around me. And third most, it was fun. I still keep in touch
>>with the people I worked with back then as now, and we're still as good
>>friends after working two years together.

>>I've served in the Illinois Senate, I served as mayor of a major city in
>>Illinois, and I now work as an officer in one of the major banks in the
>>country, and in all of those careers, McDonald's experience is an
>>important part of the fabric of my life. It taught me things that I've
>>been able to use, and obviously, working in government and politics and
>>now in sort of a sales role, it helped me learn how to identify people,
>>see what their interest is, and try to deal with that interest.

>>And no matter what you're going to go into, what career you're going to
>>decide upon, the principles you learn there you can take anywhere. And
>>you can learn a lot by the corporation as a whole, to watch how they do
>>their day-to-day business. And the managers will let you in on that.
>>They'll show you how they do the books. They'll show you how to do
>>inventory. I was exposed to all those things so when I went into the
>>corporate world, I didn't feel like I was a stranger to it.

>>What's the first thing you learn in your first job? What's the most
>>important -- what's the most important first thing?

>>responsibility.

>>Show up for work.

>>To show up. Again, to show up. See, again, this is one of the things
>>that academics and the welfare state don't get. Most of what you have to
>>learn is not preprinted in some neat, orderly program done by a Ph. D. .
>>I say this even though I'm a Ph. D. . Most of it is learned in the
>>richness and depth of life. Number one thing about going to work is
>>going to work. What's the number two thing about going to work?

>>going to work again.

>>No.

>>Carrying out tasks.

>>Huh?

>>Going to work again.

>>Carrying out your tasks.

>>Carrying out your tasks, because -- and this is very important if you've
>>never -- and this is one of the things we don't get, which we'll get into
>>next week, about how do you replace the culture of poverty with the
>>culture of productivity. First you've got to learn, I don't feel good.
>>Go to work. But I'm having a big fight with my girlfriend. Go to work.
>>My boss wasn't nice to me yesterday. Go to work. The customer didn't
>>respect me and appreciate the way I gave them the hamburger. Go to work.
>>Learn. Grow up. Now I'm at work. I don't feel like being at work. I
>>want to go talk to my girlfriend who I am fighting with. Stay at work.


My older daughter went to work for Delta several summers. One of the first -- and it's great. I watched her grow. I watched her go through this. And she had this wonderful guy who probably was totally politically incorrect, although he was probably saved because he was black. But he was physically huge. My daughter's not. She's about five- four. And he said to her the first week, "you show up or I'll kill you." This is clearly a litigatable statement. Kathy said to me, "I'm convinced, I'm showing up." I'm not -- and they had a rule, one of the jobs she had that summer down at the Atlanta airport was she met the 5-year-old who was flying who had to change planes. Losing the 5-year-old was an automatic fireable offense. And it was very -- but think about this, because it's so opposite of the welfare state mentality. They had to get into this college kid's head, we're really serious about this. You can't lose a 5-year-old in the middle of an airport. The child could get killed. They could get kidnapped. Bad things could happen to them. Hold their hand. Don't talk to your girlfriend. Don't think about your boyfriend. Pay attention to the little kid.

Now, when you're 18, 19 years of age or more, you're 16, you've grown up in poverty, nobody near you has ever had a job, you don't know anybody who's been to work every day and stayed all day. There is no one in your personal experience who's done it. The first thing you've got to do is have a job. Any job beats a theoretical academic, let me hold your hand, I hope you'll come most mornings, 70% is a passing grade. I mean, what's a passing grade at McDonald's? It's close to 100%, isn't it? You walk in, you say, "I want an Egg McMuffin." Guess what you want? I mean, what's your reaction if you say, "I want an Egg McMuffin and they give you something else? It's 100% wrong, right? So anything below 100% is a failing grade.

Now, they've been through the school system where if you have 65% but your grandmother's been sick and you've really got a good excuse and, well, we'll give you a "C" because we don't want to make you feel bad. You go into the real world of real business where you're dealing with real money and real customers, it's 100%. And, now, nobody's 100%, so it's 99. 97. But it ain't much slack. Now, when you're on the customer side, you don't give any slack. Isn't that right? I mean, what's your reaction? You want your order and then you give them cash. You want the exact change. You don't want within 5%. Hey, an "A's" within 5%. Why are you mad at me?

I mean, just think about it. The whole academic setting is nuts in terms of teaching people about the real world of interacting in the real marketplace, and so what happens? You create the first hamburger flipping job. The kid shows up. At a McDonald's, they don't start by flipping hamburgers. They start by cleaning the place up. Now you've reduced them to a janitor. How can you have -- how can you lack dignity and be out there pushing a broom? And the answer, of course, is if you're smart, because it is the first step to a career in which you'll know how to go to work, you'll know how to earn a living, you'll know how to work in a team, you'll know how to manage others, you'll know how to deal with customers, and what's the result? You'll have a better future. But unless you have a dynamic view in which you see life taking off, if you have a static view, "we've now trapped this poor person and they're not going to ever have any future at all because you forced them to go to work," and that's sort of the core distinction.

It's a very deep distinction. And when we come back after the break, we're going to look at, how does this apply to America in the world market?

(break)

>>All right. Let me recap for a second the notion of the entrepreneurial
>>dynamic model in which we emphasize growth and learning and focusing on
>>the future. You can summarize it, I think, pretty simply. It's not who
>>you are today, it's who you want to be tomorrow that counts in America.
>>And I, frankly, would argue that when we pick up on welfare next week and
>>on the culture of poverty, that that's the core weakness in the way we
>>deal with the problem today.

We don't emphasize with people, tell us who you want to be. Don't tell us about your problems. Don't tell us about your past. Don't tell us about your weaknesses. Tell us who you want to be, and now let's figure out what strengths and skills you need to get to be that person, and let's go to work on them. It's a very different attitude. It's an attitude of opportunity focus rather than victim. Excuse me.

Now, at the vision level, what we're suggesting is that a successful America will have the highest value-added jobs with the greatest productivity leading to the greatest take-home pay, and the greatest job security. That is, the way you get job security is not by blocking the world market, it's by winning in the world market. Let me put it a little differently. And I think that Morris Schechtman's book "Working Without a Net" -- which I've told him I think is mistitled. I think he's really talking about creating your own net rather than relying on big systems for a net. But his idea's essentially right, and that is that real security is based on real productivity and real economic growth.

So real security is based on real change. It's the security of a kayaker in a white water river who is paying attention and negotiating the changes. It's very different from what people think of. People really say, "gee, can I build a castle where I can stop and rest? " And the answer's no. What you can do is you can think through and you can build assets and you can build resources, and obviously, if you're prudent and careful, you can build a lot of resources for your old age. But during your working years, you have to dynamically interface with a world that is changing.

One of the ways to measure that is to look at how in each generation who is succeeding changes. For example, if you looked at Henry Ford in 1905, or Alfred Sloan in 1922, or Bill Gates today, each of them, in a sense, was a man of the future, but the question is, who's tomorrow's men of the future? Gates is now an established figure. He's been around for 10 or 12 years. He's, in a sense, yesterday's great success story. Not that he's not important, not that he's not powerful, but Microsoft is now in some ways what IBM was 30 years ago.

So what's the next Microsoft? And it may well be in biotechnology, frankly. But it's this concept that what you're always looking for is not some static academic, planned, structured investment. What you're looking for is the dynamic, creative, entrepreneurial energy and drive that meets the marketplace, and what you want to do, in a sense, is given this vision of winning in the world market, creating local jobs through world sales, you need to set up a series of strategies.

Now, what we're trying to do now is build strategies that come out of our vision, which is an entrepreneurial vision, so the strategies will be very different than the strategies that bureaucrats and academics would create in a welfare state vision. It's very important to understand why they're so different. Remember I drew earlier, and I want to go back and remind you. The core theme here, and the same thing will come up next week, is that the vision is dramatically different up here at the top. Therefore, the strategies, even if they look similar, are, in fact, relating to a very different vision. Therefore, the projects, even if they might be identical in form, are inside of different strategies, which relate to a different vision.

And so finally, what you're doing tactically, for example, presumably even in a welfare state restaurant you would be nice when the customer walked in, presumably, although you might take the attitude of a government-run cafeteria and compare it to the attitude of a restaurant where if they're not nice, you don't come back. But presumably, they would try to create the same tactic. Please be nice to the customer. Please wash the plates.

But the whole underlying model of reward and incentive, the whole expectation, is different in the two systems. One of the strategies is to reward success at job creation and keep resources with job creators.

Now, this refers back both to the lessons of American history and to entrepreneurial free enterprise. That what you want to do is you want to reward success at job creation, you want to keep resources with job creators. It also means, in terms of looking back at personal strength as a pillar, what you'll say to people is, if you don't have a job right now, have you considered creating one? Have you considered calling Amway or Tupperware or Mary Kay or beauty control or any one over 100 systems? Have you considered going out and starting your own small business?

But don't say automatically, I can't get a job, there is no job, I'm hopeless. Please let me be a victim for a while. Totally different attitudes. Second, you want to strengthen the family for an economic reason, families create human capital. The most important bankers in development are families. Because somebody comes to you and says, I need a little bit of money to finish college, or I need a little bit of money to open up my store, or I need a little bit of money to do something else.

Why do we see such a rapid rise of Asian families? Because they are extended networks of capital accumulation. You can have 20 or 30 or 40 families that say, cousin, you know, Sam has got a great idea. Let's each of us kick in a little bit. And then cousin Sam does well, and now cousin Sam is part of the extended bank. It's a family bank. And so extended fami lies and strong families are major sources of capital development. And by the way, guess where most learning takes place? Inside the family.

So when you see the collapse of the family and when you see a society which tolerates totally self-centered, destructive parents, I mean, parents who have not got a clue why they're parenting, that haven't got a clue how to educate their child, they haven't got a clue about being responsible and you tolerate that, and you think, "well, that poor victim," who is, of course, now creating new victims, you are cheating yourself of a major capital resource, which is the human beings of the next generation. So when you end up with kids who don't know how to clean up after themselves, don't know how to study, don't know how to be disciplined, don't know how to be nice to anybody, don't know how to interact with other human beings and have had nobody in their immediate family do anything to teach them, the burden you put on the school system is hopeless.

Because most learning doesn't occur in a classroom. Most learning occurs in a family environment and in a neighborhood environment. And until we are honest about that, we're not going to solve it. Now, if you really want loss of jobs -- and this is exactly counter-intuitive to the welfare state. It's the exact opposite of the welfare state. If you really want lots of jobs, what you do is you cut taxes on job creation. You really want to increase the employment factor for the marginally unemployed, for black inner city kids and American Indians on a reservation, and poor whites in west Virginia? Cut out all the taxes. Say, you hire that person, you don't have to pay FICA. You don't have to pay income tax. You don't have to pay unemployment compensation. Just pay them straight. You see, the minimum wage isn't the minimum wage. Minimum wage is gross pay, and it's not real cost, because you have to add all the extra taxes.

Jim Longley told me the other day, the congressman from Maine, that there are nine taxes in Maine when you hire somebody. So you're paying the surface amount plus the other taxes, and the person isn't even getting the surface amount, and so if you really wanted to hire the hard-core unemployed, you'd say, for anybody who fits in this zone, there are no taxes if you hire them. And overnight they become more employable. Because the cost of walking in the door and teaching them what we talked about the last hour -- show up, stay here, serve the customer, work with the rest of the team -- the cost would drop dramatically, and so you could begin to afford to bring them on board. But notice how counter-intuitive it is to say, in terms of the welfare state, let's cut taxes on the very entrepreneurs, who are the people that the welfare state most wants to tax. And yet if you want to create jobs, what you say to people is, go create jobs. If you're a big winner, if you employ 3,000 people, we'll make you a big winner. And suddenly you have an explosion of human energy trying to find a way to have more people at work. Similarly, you want to reward investments and productivity.

I mean, how do you compete in the world market? You have the most productive work force. I recently did a TV show with one of the wealthiest men in Mexico, and I said -- you know, he said he wanted to go into the beeper business, you know, where somebody - - does anybody here have a beeper? Okay, you've got one here, a pager, over there, okay. I said, "so are you going to manufacture them? " He said, "no." He said, "we can't afford to." That the beepers are now made so efficiently in the U. S. -- which is what the Japanese also discovered. It's why Motorola dominates the Japanese market, that we're going to buy American beepers, pagers.

Now, if you reward investments and productivity and you dominate production, if you make it cheap to be productive, you have a whole different attitude, which means you want very low taxes on investment, you want very low taxes on new machinery. You want very low taxes on new computers and new software. So you can have the finest inventory control in the world. It's a totally different attitude than, well, they're making money. Let's raise their taxes. That's a source of money. Sure it's a source of money. What it does is you then slow down the very investments that make you productive that allow you to hire people that create the jobs.

You want to encourage entrepreneurs and job creation by giving self-employed and small business the same tax breaks as big business. We currently do two or three examples that are just -- I mean, you have to wonder how out of touch with reality we could be. Big business, you buy health insurance. You get 100% deductibility. Until last week, you bought insurance as a small business, you got no deductibility. We passed 25% deductibility. It ought to be 100. Big business has all sorts of tax breaks that little businesses can never get to be large enough to take advantage of. The home office deduction.

If you're going into a Third Wave information age, you should be encouraging the home office deduction. Instead, we're piling so much red tape on it, we discourage it. I was told by somebody the other day that it almost guarantees you'll be audited if you list a home office. That's the opposite of sound behavior. So you want to think about, how do you reward the kind of investments, and how do you reward them for the self-employed, for the person who's out there on their own? We probably ought to design a system where the self-employed have an I. R. A. That is their version of unemployment compensation. In other words, you want to literally make it easy to build your own safety net. Which is the opposite of welfare state policies, which is to raise your taxes so the bureaucracy has the money so the bureaucracy decides whether or not you're safe.

Now, you want to encourage entrepreneurial learning. That's why I strongly favor, for summer teenage employment, that they work at real jobs in real businesses. I mean, if my choice is to give the money to the city recreation program to have them come and play basketball or to give the same money and vouchers to small businesses to hire them to do real work, I want them, as teenagers, learning to do real work. I want them in real businesses, dealing with real customers, working for a real boss, learning how to keep -- you know, and it's because it's not a just for me.

And again, I'm not undervaluing. I mean, my son-in-law's a coach, and I believe deeply in the value of sports, and I learned a great number of things playing high school football that helped me get through my whole career. There are lots of things you can learn playing sports. I'm for playing sports. But I'm even more for making summer employment real. And that doesn't mean just, you know, painting down at city hall because your cousin the city councilman got you a cushy job. I'm talking about getting people out there in the real world, dealing with real customers, and learning something that's very, very different.

It also means, I think, reestablishing apprenticeships in a big way. We have taken far too much of learning out of the marketplace and put it into academic environments. There are a tremendous number of things you learn best by being an apprentice because they're too complicated, they're too much a matter of judgment to learn them in a classroom. The classroom breaks things down and makes it artificial. Makes it too easy, for one thing. It makes it too slow, and people like Michelangelo were apprentices. I mean he became a great sculptor and great artist because he was apprentice to one of the great artists of his time. Benjamin Franklin was an apprentice.

And there's a great virtue, I think, to rebonding entrepreneurs to the young by having apprenticeships that may start as early as 16 or 17. If you have somebody who isn't good in an academic setting and they don't like sitting around and they don't want to take notes and they won't do their homework, maybe part of the answer is to figure out an apprenticeship where they go out and they do real work and earn real money, and then at 25 they decide to go to night school or they go to weekend school. But you want to get them into doing things in a structured environment with a master craftsman or a master -- and the master craftsman may just run the dry cleaner, but learning to run a dry cleaner to earn a living is a heck of a lot better than being a dropout sitting on the street corner. So it's a totally different way of seeing things.

Another thing we ought to do absolutely is change unemployment compensation to retraining. We should not give money to people so that they can bass fish and deer hunt. I mean, if you don't have a job and you need unemployment compensation, fine, what are you going to learn during the week that we're paying you? And if you're not willing to learn something, why are we paying you?

I think it's very important conceptually that you've got to have this attitude of saying to people, we're going to have a partnership, but you have to be involved in it. You have to have a responsibility for it. If you look at it from that standpoint, let's look at workmen's comp.

We ought to turn workmen's compensation into assessment, retraining, and investment. Today, all too often, workmen's comp is the lawyer's gravy train to file the suit to get money for the person who then expects to do nothing. You can't have a healthy society where you are -- where you're encouraging litigation and where more money goes to the administrative process than goes to rehabilitation. What you want to say to somebody -- and by the way, very often the lawyer will say, "don't go and get rehabilitated until after we're done with the trial."

Now, I want you to think about how dumb this is. I mean, how dumb is it to say -- if I can draw down here without confusing you for a second -here is an accident right here. What we should do is the next day, we should assess and begin rehabilitation. Instead, in the welfare state model, first you have to go to trial. So we have delayed fixing your problem so that your problem may well get substantially worse or you may harden into it. You've lost all this intermediate income, because after all, you have to prove that you have to be -that you've had this problem.

So even though we live in a computer age where we probably can retrain you and you probably can be back productively at work in a relatively short time, and you probably could get modest compensation, but the primary purpose of workmen's comp was not to get you compensation. It was to get you an ability to get retrained and rehabilitated. So this is exactly the opposite of common sense. I mean, take --

>>excuse me for interrupting, but -- and at the same time, as the employer,
>>I'm being taxed and beaten to death for my insurance company to turn back
>>around and just settle out of court.

>>Right.

>>My rates go up, and nothing has happened. We're still waiting to go to trial.

>>What you should have is immediate rehabilitation. Now, rehabilitation
>>means you pay the doctor, you pay the therapist, you might buy a computer
>>or you might buy whatever equipment they need. Those dollars today go to
>>the bureaucrat and the lawyer.

>>they get paid first.

>>Not in that order either.

>>Not in that order, right. Well, the bureaucrat actually is there all the
>>time, so they get their money.
>>let's go back one, though. Isn't unemployment -- isn't that moneys that
>>have already been paid by the employee?

>>right.

>>And if that is the case, isn't it inherently wrong to make them work
>>twice for the money that they've already earned once?

>>no. Because we compel you to pay a tax collectively. It's not money you
>>personally -- we compel people to pay a tax collectively into an
>>insurance fund for unemployment. And my point to you is, if the goal of
>>that fund is to help you get employment, I mean, it's not called the
>>"vacation fund."

>>Right. No, I understand, that but by the same token, if you've paid into
>>unemployment all your life and you find yourself unemployed and you're
>>going to go bass fishing for three months, collect your unemployment
>>before you're ready to come back into it.

>>You didn't pay it. Your employer paid it.

>>you didn't pay it. And everybody around you paid it. Why should we as a
>>society -- I mean, look, if you want us to set up a bass fishing fund,
>>I'm not against bass fishing. I mean, dick is a close friend of mine,
>>fishes all the time. I'm not personally into bass fishing, but I'm not
>>against it, but we don't have a bass fishing fund.

>>Right. I understand --

>>we have an unemployment compensation -- let me tell you how I got to
>>this. At villa Rica high school about eight, nine years ago, I went to a
>>graduation, a man walked up to me after graduation and he said, "my
>>daughter graduated tonight. "I'm glad your here." He said, "I worked at
>>the General Motors plant at Lakewood. "they laid me off four years ago,
>>and "they paid me supplemental pay, which was 95% for four years. "and I
>>thought that the plant would re-open. "and now it's not going to
>>re-open, and my supplemental pay runs out in two months. "what should I
>>do? " The signal we had sent to him was, wait.

>>Right.

>>Okay, in other words, let me try to draw it differently for a second.
>>Okay, laid off. In the old days, the theory was you got -- and it was
>>actually a game rigged by the unions and by the big manufacturers. You
>>could have unemployment compensation so the government would pay you
>>during the layoff until you were recalled, okay? This assumes a national
>>cyclical model where your company's not downsizing. That is, it assumed,
>>"oh, we'll be off for six weeks. "let's go bass fishing."

>>Right.

>>You don't live in that world anymore. Your job may be gone. And we
>>can't afford to spend money on you unless we get something for the money,
>>and that fund is a government fund. This is a tax. This is not your
>>voluntary vacation fund. This is a compulsory tax.

>>But unemployment still should be discernible from welfare.

>> of course it should.

>>Okay.

>>But my point is, if we're going to give you -- if you need unemployment
>>compensation, you should use the free time you now have, because by
>>definition, you're unemployed --

>>right.

>>-- You should use that time to learn something. If you are not learning
>>something, we are wasting our capital base, because this person comes
>>over to here, there is no recall. Now they turn to you and say, "gee, I
>>just got four" -- in this case it was four years, and most of the time
>>it's 26 weeks -- "I just got 26 weeks of money paid for by a tax fund.
>>"I didn't do anything. "now would you please retrain me? " Well, why are
>>we wasting 26 weeks of your life, and why are we wasting 26 weeks of tax
>>money and not retraining you starting right here? Because our assumption
>>has to be that every adult has to learn their whole life. Which is a
>>totally different model. The old model was, "hey, I've already learned
>>to work in the steel mill. "why are you bothering? "the steel mill will
>>re-open in a couple weeks and I'll go back to work." This was the classic
>>industrial cycle for about 80 years. It died in the '80s. The world
>>market crushed it. And now you're into a totally different model where
>>people -- because of the information age, people are going to have to
>>have some level of learning all the time, and if you took all of the
>>money we're spending on unemployment compensation and made that, in
>>effect, "yes, we'll give you unemployment compensation, and by the way,
>>while you're unemployed, learn something so you're more employable," we
>>would have substantially in the last 10 years increased the intellectual
>>capital base of the society. Yes, sir.

>>the ultimate cost to the consumer, if that were made as part of the cost
>>of an ultimate product or service, is very significant. When people
>>start thinking that the employee is paying, no. The consumer's paying
>>that.

>>Furthermore, the cost to the human being. I mean, I felt terrible for
>>this man. We had sent him a signal as a society to do nothing with his
>>life, to waste his life for four years. And he was terrified. And yet
>>-- common sense cues off the culture. I mean, if the culture says, "why
>>are you being stupid? "this is your time to go on vacation," and again,
>>I have relatives out of heavy industry areas who felt it was unpatriotic
>>to go back to work early. "I've got 13 more weeks left, and deer
>>season's about to open. "why would I go back to work now? " This is not
>>apocryphal. I personally have relatives who have done that.

>>but that obviously -- that obviously won't work. I mean --

>> it did work.

>>You don't have --

>>it worked for 70 years.

>>But it didn't work because we're in the decay that we're in right now, so
>>obviously --

>>no, but it worked for the individual.

>>It's not competitive --

>>huh?

>>It wasn't competitive collectively. I mean --

>>that's right. As a society, it's not competitive. Even if it's okay for
>>an individual and for an individual to carry to the extreme of the guy in
>>villa Rica, it's disastrous.

>>but when we're forced to face the Japanese model, we lose.
>> well, but we're in a more competitive world. So I'm trying -one of the
>>strategic things we're trying to do is find every opportunity to use
>>resources more intensely. So if we pay you for unemployment, we also get
>>you trained. It's a constant matrix so that every time we get a chance,
>>we're doing two or three things at once with the same resource, because
>>you can't compete in the world market if you're sloppy with either your
>>human or your financial or your physical resources. You've got to have
>>all of them working together if you're going to keep up with China and
>>Japan and Germany.

Now, let me also suggest to you that this is why you have to replace welfare with a work requirement. That you absolutely have to establish the assertion that work is the preeminent -- is a preeminent American characteristic, and that we expect people to work, period. If you're able-bodied, if you're under the age of retirement, you should work. And that goes back to Jamestown, 1607.

Now, we also should be -- if we're going to compete in the world market, we should eliminate jobs -- government policies that kill jobs. And one I want to focus on for a minute, because it's so fascinating, is create a common sense legal system through liability reform. Edwards Deming picked on litigation as one of the two major impediments to American competitiveness in the world market, and "U. S. News" last year put together, I thought, a very interesting list. What they did is they took a product you buy, they showed you the retail price, they then showed you the cost to retailer -- or the cost that it would be without the cost of insurance and litigation.

Just look at these, because they're fascinating. Eight-foot aluminum ladder. Retail price, $119. True cost, 95. Litigation tax, $24. On a $119 ladder. Heart pacemaker, $18,000 retail. True cost, 15,000. Litigation tax, 3,000. Two-day maternity stay. Retail price, 3,367. True cost, 2,867. Litigation tax, $500. Tonsillectomy, retail price, 578. True cost, 387. Litigation tax, 191. In that case, it's almost one-third of the total. Motorized wheelchair, $1,000. And these are all "U. S. News'" numbers. True cost, 830. Litigation tax, 170.

>>one-third is going to litigation?

>>For manufactured goods and for health-related goods. It's higher in
>>those areas. But it's -- there's a significant distortion in the system,
>>I mean. And you can tell this when you turn on the TV in the afternoon,
>>and what do you see? You see a lawyer who says, you know, "if you
>>haven't sued somebody recently, why don't you bring your rolodex down to
>>the office and let's go through it together? " I mean, just listen -- if
>>you're thinking about a competitive world versus a self-destructive,
>>decaying welfare state, just think of the psychology of a society which
>>bombards itself all day with messages, "have you sued somebody recently?
>>"

>>I've got a more --

>>okay.

>>Equally amazing. A medical helicopter, about $40,000 a month. My insurance is $16,000 a month. >>So your medical helicopter, getting the -- not counting whatever the
>>litigation cost is, the product liability cost of buying the helicopter,
>>you're actually paying 40,000 for the helicopter and 16,000 for your
>>insurance. And this is for a helicopter which is built to go save lives.
>>

>>and we have a perfect safety record for 18 years, so --

>>this is why they bury you rather than treat you.

>>I'm not getting into that. But anyway. Does that -- does that framework
>>make some sense now, to give you a sense of -- and again, it's not that
>>you shouldn't have litigation when appropriate. It's not that you don't
>>want to have the right to sue when it's absurd, but where is the
>>standard? How -- what -- what percent should the society pay to sustain
>>the right to sue? And because nobody's saying, "don't pay anything," but
>>is there a point where you reach relative justice at rational cost, or
>>you maximize the opportunity to sue but then pay such a large cost that
>>you're actually diverting resources out of competing with Germany and
>>Japan and China into fighting yourself? And that's the sort of question
>>you've got to ask about that kind of reform. You've also got to reform
>>red tape.

I got an interesting letter from Christopher Mcintyre in Woodville, Ohio. He says, "I'm a 29- year-old" -- he takes the course, I think, on Mind Extension University. He says, "I'm a 29-year-old entrepreneur. "I own a small heating business in an area in northwest Ohio. "the business will be three full years old in April. "it's gone from absolutely zero dollars to projected sales of $400,000 in 1995. "it now has four employees, and we pride ourselves in our teamwork, for we understand it is united we stand and divided we fall. "I am now going to list the government agencies which keep my business on the edge of existence, absorb 54% of the 1993 gross profit, and hamper our progress through needless paperwork." He then lists 20 agencies. He says, "1, internal revenue. "2, social security tax. "3, federal income tax. "4, state income tax. "5, local municipal tax. "6, bureau of employment services. "7, auditor of state. "8, auditor of county. "9, treasurer of state. "10, bureau of workers' compensation. "11, state tax collected. "12, state unemployment tax. "13, federal unemployment tax. "14, excise tax in communications. "15, sales tax. "16, gasoline tax. "17, permit fees. "18, license fees. "19, insurance bonds. "and, 20, paying an accountant $40 an hour to figure out the taxes. "one problem I have is when no one collects unemployment or uses the workers' compensation fund for a period of three years, why don't we get a percentage of that back? " See?

Now, this guy -- I mean, this is just one of the letters we get. We get, I guess, 30 to 100 letters every week, and this one's from Christopher Mcintyre in Woodville, Ohio. But it gives you the sense of, here you are, you're a small business, you're an entrepreneur, you're out there for the first time, and as soon as you open the door, here comes the government. And so you have to work your way past the government to be able to get to work.

And it's a very interesting -- how many of you have run a small business? Can you all -- a good number of you. Can you all identify with his -- okay. But you have to ask yourself. I mean, this is not an act of nature. Governments are creations of free will. So if it's a dumb thing to do, we do have the option of not doing it. I mean, this is radical. You have the option of redesigning it so as not to be dumb. Okay? It's a very important part of what we're trying to do here, is say -- one of the lessons of American Civilization is to stop being dumb. That's what pragmatism based -- I mean, if you think about it, I mean, just think about the word "pragmatism." Pragmatism, in a very real sense, was a philosophy that said, "try not to be dumb."

I mean, when you -- you know, and you used to see it in the old movies where you'd have the cowboy and you have the English duke who'd arrive, and the English duke would be wearing all these fancy European clothing and carrying all these books and doing all these European things, and the cowboy would sort of say, "you know, probably riding across the desert in Arizona. "it's just as well not to do those things." And, of course, the Englishman will say, "well, of course we have to do these things. "after all, that's how we aristocrats are." And the cowboy or the Indian scout or whatever would then say, "well, of course you can do those things, but this is not going to be good." And, of course, the whole rest of the movie would be gradually the guy learning how to dress like an American, act like an American, et cetera, so by the end of the movie, when the Englishman who had now been Americanized got back to England, people were going, "why are you doing that? "

Now, true pragmatism would recognize that it is fine to wear wool in Scotland and not as smart to wear it in the Arizona desert, so that, in fact, there's no right. I mean, the right thing in the Arizona desert is the wrong thing in Scotland. I'm not arguing that the deer slayer would do better from "the Last of the Mohicans" if we sent him to Scotland. What I'm arguing is that American pragmatism basically started with the idea, do what works. Don't do what's dumb. I mean, and again, this is so basic that it often sounds -- I feel like, I mean, I almost ought to remind you, you know, that I have a Ph. D. . And I'm Speaker of the House. I'm not just making these things up so that they sound odd. But you now have a high culture, an elite culture, which is so nutty that to wander in and say, "why don't we quit doing the dumb ones," and people go, "well, you can't do that." But of course you can do that. That's what a free society is all about. It's about the right to adapt and change.

>>it's in the declaration.

>>Yeah, it's in the declaration -- where is it in the declaration? What
>>does it say?

>>"That whenever any form of government becomes destructive of these ends,
>>it is the right of the people to alter or abolish it and to institute a
>>new government having its foundations on such principles and
>>organizations, its powers in such form as to them shall seem most likely
>>to effect their safety and happiness."

>>so, in other words, the Founding Fathers would think it was all right to
>>quit being dumb. See? I know this -- but I'm trying to -- okay. I'm
>>just trying to lay out here in very simple English what is really a very
>>radical thought. When you run into something which is destructive, stop
>>doing it. If you applied that across -- Drucker had a way of saying it.
>>He said -- he said -- he said, at least once a year, walk through
>>everything you're doing and ask the question, would you start it? And if
>>the answer's no, why are you still doing it? And you apply that test, it
>>is amazing how much stuff you'd change.

Now, we also want to, frankly, in the current setting, cut the size of government. On every government dollar, we should ask, is it more productive than the same dollar spent in the private sector? It's a very important challenge. Because in an entrepreneurial society, the question is, who is more likely to create the next 1,000 jobs? Norman Brinker, or a department of labor bureaucrat? Very important question. Because guess where the welfare state would tend to spend the money. They would tax Brinker and his investors to transfer the money to the bureaucrat in the department of labor. Or the Department of Commerce. I'm not trying to pick on one department. I'm trying to give you a model. So you want to shrink the size of government to maximize the resources available to entrepreneurial behavior.

Which is why limited government, low taxes, balanced budgets, and stable money -- what I think I'd call honest money -- are the core lessons of Smith, Hayek, Schumpeter, and Friedman. That all of them argued again and again for the last 220 years that you want government to be very limited, not to be weak. To do very well the limited things it does. You want low taxes, so most resources stay with entrepreneurs. You want balanced budgets, because you want to force priorities and force decisions to keep the government limited. And finally, you want money to be stable, or I would describe it as honest money.

That is, if the government gives you a dollar and you save that dollar, then 10 years from now, you should be able to cash that dollar in and it should still be a dollar. Very key idea in the Constitution. The Constitution's a very anti-inflationary document, which is why they literally wrote in you can't repudiate the debt, you have to pay the interest on the debt, because they were very determined to minimize inflation. Remember that money is both the medium of exchange -- I give you a dollar, you give me a goodie -- and it's a store of value. I give you a dollar, you want it to still be a dollar.

And so the idea in the theoretical model was you had very limited government, you had balanced budgets, you kept most resources in the private sector, and most of those resources could be stored in a currency which would not lose value, and that was the core model of the entrepreneurial system under Alexander Hamilton and others. And for the government that does remain, which will still be, frankly, pretty big, you want to apply quality to turn Second Wave bureaucracies into Third Wave citizen-oriented service organizations. That is, again and again, you want to say to people, how can we re-create customer behavior in the bureaucracy so that instead of bureaucrats seeing you as trapped, they see you as a customer to be served? And how do you get the kind of speed and effectiveness in government that you would normally expect in a private sector?

One example of that is you want to reshape our foreign service so that it helps Americans create local jobs through world sales. You want to -- we for 50 years focused our foreign service on defeating the soviet empire. It's gone. I think we now want to say, all right, how do we compete across the planet? What do we do in order to be able to make sure that Americans are selling everywhere? You also want to draw distinction between what government does and what government makes happen. This was the essence of Hamilton's policies.

The thing we can say -- we want something -- building the transcontinental railroads. One way to have built the transcontinental railroads would have been to set up the federal department of transcontinental railroads and have the Corps of Engineers build it. We did that with the Panama canal, which was so big a project and so unusual that we actually had the corps of engineers build the Panama canal. But for the transcontinental railroads, what we said was, "we'll give you land and we'll give you cash if you'll build the railroad." So you had a lot of entrepreneurs rushing around trying to build railroads for about a 35-year period.

We wanted air travel around the world. So we had -- we subsidized Pan Am. Much of the early rise of the domestic airlines industry was paid for by airmail, which subsidized their routes.

So there are a lot of ways that government can shape things. We can change tax laws to shape behavior. You can say, "we want more scientists, so if you can score above 1300 in math and science, we'll give you an automatic four-year scholarship to the school of your choice, and if you'll continue to major in math and science, we'll guarantee you a graduate fellowship," and you'd see a shift. You'd see people responding to the incentives. That's different than government doing it directly. We want to encourage people to buy homes, so we give you a mortgage deduction on your house. The result is people have a propensity to buy homes, and people do - how many of you have thought about tax consequences when you think about your home mortgage?

All right. So a government can shape activities and not just do them. Government actually has three very different roles in the economy. It has police powers. For example, we insist onfood being healthy. It can reshape markets. We can encourage and discourage behavior, and we can operate directly through the bureaucracy.

They're very different ways of doing things. Police power is when we say, we won't tolerate water that would poison you. We won't tolerate food being sold that will poison you. It's literally the government interfering and saying, this is a matter of criminality, this is a matter of law, and we'll use the state to enforce it directly. Second, we can shape the markets. So we have tax deductions. For example, if you have a very long tax deduction which may be perfect for a steel mill and you're in the age of software and it depreciates every 18 months, your depreciation rate which is perfect for a steel mill is five times as long as the software. And so you may literally want to rethink your tax code as you go into that.

Third, you have bureaucratic decisions. We're going to have a brand new program, five bureaucrats will get together and they'll pass out the goodies. That, in my judgment, is the least effective and the most politicized way for a government to function. And is the one we should avoid as often as possible. Which is why I would suggest we want to replace bureaucratic government controls with achievement oriented systems.

And the three examples I'd give you are the occupational safety and health act, or health agency, the environmental protection agency, and the food and drug administration. In each case, I mean, one way to get safety is to hire somebody who becomes a bureaucrat who visits your plant and has a cookbook, and they check off whether or not you're doing what the regulations say. Another way is to say, "if you have no accidents at your plant, we'll lower your taxes. "if you have a lot of accidents at your plant, we're going to dramatically raise your taxes." People would then have a tremendous incentive to avoid accidents. And they would apply their human ingenuity to make sure that it was safe.

And I'm just trying to give you that as a way of thinking about a very -- one approach is to say, we will hire somebody, they'll come inspect you. Now, the way we got to this -- did we talk in here one day about speed limits?

>>yes.

>>Just go back to the speed limit model, because that was really for us the
>>great breakthrough.  That we Americans routinely look at a speed limit
>>and add five or 10 miles an hour to the posted number.  Which means when
>>you have an Osha regulator walk in, your initial instinct is to resent
>>them for being there, and then it is to figure out not "how do I get to
>>safety," but "how do I get around the rules? " And so you become
>>rule-focused rather than safety-focused.

>>A few weeks ago when Frederico Pena announced that in the light of the
>>recent poor period for airline safety that they were going -- there was a
>>new policy whereby -- wherein the aim would be zero accidents, I had two
>>questions.  One was, what was the policy before?  Ten accidents, five?
>>And the second question was, what was the incentive?  There was no
>>incentive.  It was just a blanket announcement that we're going to go for
>>zero accidents.  Did we talk -- did you and I talk about that?

>>no.  But remember, what did we do when we did the red bead experiment?

>>Tried for zero.

>>Tried for zero.  And how did we communicate that to the workers?  There
>>you go.  You see, he still has it.  There's his "I'm a quality worker" --
>>remember?

>>I still have my "quality worker" sticker.

>>see?  You know, once the union steward, always the union steward.  It's a
>>-- and he's ready.  But do you see the model?  That if all you're doing
>>is exhorting, "let's not have any accidents," what does that mean?  Of
>>course, we're not -- let me tell you, I fly often enough, I always think,
>>I hope the mechanic did a good job.  I hope the pilot's really excited
>>about this.  I hope they put the right kind of fuel in the tank.  You
>>know, I hope that the air traffic control system's doing right, and I
>>hope the next airport's not fogged in.  I mean, I'm big on this idea you
>>ought to get down the same way you got up, which is in one piece.  Huh?

>>That's the way I like it.

>>Right.  But the idea that the way you get to that is you set incentives,
>>you encourage the right behavior, you go through Deming's sense of a
>>quality system, it's so totally different than having the next bureaucrat
>>show up.  And, in fact, if you look at the best of the federal aviation
>>administration, it's cooperative, it's not adversarial.  It's just --
>>because the pilots, after all, have an equally big incentive.

>>They're always the first ones to arrive at the scene of the accident.

>>That's right.

>>My father's a pilot, and he said that mothers will come up to him and
>>say, you know, "be careful, my son's on the plane." And then he'll tell
>>them, "well, you know, my mother's son's on the plane too."

>>Yeah.  I mean, if you think about it -- and that's one of the reasons why
>>aviation works so interestingly, because everybody has a vested interest
>>in safety.  And so what you want is you don't want an adversarial role,
>>what do I have to hide from?  How are they going to try to regulate me?
>>You want a team effort, where everybody gets in the same room and says,
>>"let's swap notes honestly and let's find the right way to do this." It's
>>very different than the government as adversary and regulatory
>>bureaucrat.
We also ought to, frankly, reshape incentives to regain a one generation lead in technological products. The examples I just list here are aircraft, space, biotechnology, materials technology, and computing. We should literally have as a national strategy, how do we create the tax incentives and the other incentives so that we are consistently staying a generation ahead of the rest of the country, I mean, of the rest of the planet? So that when you want to buy the best aircraft in the world, you buy American. When you want to buy the best computing or the best software or whatever, you buy American. And I think that's very, very important conceptually.

Now, what I want to suggest to you, and this is what I've been working on for a couple years that I'm trying to get into the national dialogue, because it's so different than the way we normally think of it. I believe that health could be our biggest job creator and foreign exchange earner. Don't think of -- and this goes back to the two models here for a second. Do not think of health as problem. Lost cost. Lots of red tape. Instead, think of it over here as opportunity.

What if the best health on the planet were in America? And everybody in America who got seriously ill decided that they would come to Americans for their health care, and the best products on the planet were American, and therefore you consistently got diagnosed with American tools, you took American medicines. If you had a genetic defect, you used an American system of gene therapy. If you had a serious illness, you had an American do the operation. And they might do it by virtual reality 3,000 -- 12,000 miles away by satellite.

Now, what would happen to cash flow? We would buy Chinese teddy bears. They would buy open-heart surgery. And so you could afford -- and you'd have a huge assemblage in America of very high value-added people, so that having the most specialists in the world wouldn't be a problem, it might well be an opportunity. Depends on how you -- you see, if you think of it only inside the welfare state and you say, "wow, we have too many specialists." How do you know?

One of the things you hear often in the welfare state model is, there are too many cat scans. Do you realize that there are more cat scans in Washington state than there are in Canada? People say that like it's a problem. There are also more microwaves. There are also more cellular telephones. There are also more fax machines. There are also more VCRs. Why aren't the others a problem? Why? Because they're private and the price crashes. The only two places the price doesn't crash in the welfare state, the only two places the technology does not crash in the welfare state are defense and health. These are the only two places the government messes it up totally. In fact, there's an article, it's the cover of this week's "business week," on the fact that, you know, you now get cellular phones as a give-away. You know, what is it, order "time" magazine and we'll send you a phone? I want you to think about that, okay? Why isn't that happening in health technology?

>>People are always going to be sick.

>>No, it's not simply -- people are always going to use the telephone.
>>Because over here, you have an open market in the entrepreneurial model
>>and everybody's out, you know, busting their tail to produce it cheaper
>>and better.  Over here, you have some bureaucracy taking seven years to
>>approve, and over here, you've got a bureaucrat paying for it.  Over
>>here, you have a customer paying for it.  So you want to rethink the
>>entire health system, but your goal should be to make American health and
>>American health care the finest value-added on the planet, because as
>>people get richer, they pay more for health care.  There is today a
>>Boeing 747 that fills up in Japan that flies to Minneapolis in order to
>>go shopping at the mall of the Americas.  Now, if you'll go to the mall
>>of the Americas from Tokyo in order to buy Reeboks, can you imagine what
>>you'll do for open-heart surgery or for a liver transplant?

>>Don't we already see that happening today, I would argue --

>> It's beginning to happen, but in the welfare state model, it happens
>>despite us, not because of us.  And what you want to do is accelerate it
>>and change the whole model from bureaucratic to -- so what I'm suggesting
>>is you want to think vision, strategies, projects, and tactics as it
>>relates to health.  And when you think you've got this aggressive model
>>locked in, you then want to go to doctors and you want to go to
>>pharmacies and you want to go to biotech people and you want to go other
>>places, and you want to go back to listen, learn, help, and lead, and you
>>want to share with people the concept of health within a renewed American
>>Civilization, both better health care at lower cost with greater health
>>for Americans, and the idea that health can lead to tremendous creativity
>>and to a very big market all around the world.

Think of it this way, health is a Third Wave information revolution, which means it should be an explosion of lower costs, higher quality, more choices, and greater access. That should be the model you want. I mean, entrepreneurship, all the things we talk about, if you look at the lessons of American history, personal strength combined with entrepreneurial free enterprise combined with the spirit of invention and discovery implemented through Deming's model of quality should lead you to lower cost, higher quality, more choices, and greater access, and yet in the welfare state model, you can't even quite believe. I mean, you say, "well, that's silly. "nobody can get all those." That is the normal model, isn't it, in the private sector? That is what we expect. And so you want to liberate health from bureaucracy, reestablish this dynamic. Now, we have a pretty neat video that came out of Hewlett-Packard that I'm going to share with you that gives you an example of the kind of dynamic Third Wave world market health system we're thinking about.

>>hi.  This is Tom Miller.

>>Tom, this is Hal.  You wanted a consult on your patient, Emily nelson.

>>Yeah, Hal.  Emily's labs show no infectious etiology, but her liver
>>function continues to deteriorate.

>>well, this berry picking, we can see a fairly high suspicion now for
>>mushroom poisoning.  Now, look at this.  I've asked the nurse to get an
>>ID.  From Emily on these if she can.

>>good.  I'll also order a screen for amatoxins.

>>a word of caution, tom, now, if this is amanita, liver failure can be
>>quick, and the mortality rate among kids is over 50%.

>>I'll be over to the hospital soon, Hal.  I want to thank you.

>>okay.  I'll keep current on her labs.

>>Good.

>>Emily, I've got some pictures of mushrooms that I'd like you to look at.  Do you think it could have been this one?

>>huh-uh.

>>No?  How about this one.

>>Uh-huh.

>>Are you sure?

>>Uh-huh.

>>Okay.

>>Emily's hepatotoxic, and the amanita did test positive.  I've notified
>>the CDC and the state health department.

>>how bad is she?

>>Not good.  The pet scan shows progressive liver damage.  In fact, I've
>>got her listed with the national registry for possible transplant.

>>When would she need it?

>>Soon.  However, here's something interesting.  Two amanita cases in
>>Oregon were treated with forced Diuresis and pulled through.  Of course,
>>Emily's going on 30 hours now, and I'm not sure she'll respond, but then
>>I found this from Jean Leclair in Geneva.  He's the leading expert on
>>toxin mycology, and he's trying a whole new protocol.

>>We should call him.

>>I did.

>>So having studied your patient's pet scan, I think she can be helped by a
>>procedure we have begun to use in Europe.  Here is an article on the
>>treatment protocols we have devised.  Though this is a new therapy, it
>>has proved quite effective in several cases already.

>>I went ahead and started Leclair's treatment.  I hope it works.  There's
>>no telling if we'll find a liver in time.

>>"softer, cleaner hand.  "he sat up and began to groom his whiskers,
>>always a good performance."

>>How's the little girl in 137?

>>Emily?  Her family's had a hard day.  But it looks like she's responding now.

>>Bile support system's working well.  Labs look good.  What's next?

>>A quiet night, I hope.

>>Hi, tom.  We just did a new liver function test on Emily nelson.  And
>>good news, I think we caught this thing in time.  She's doing so well, I
>>canceled her listing for a transplant.  I'll fill you in tomorrow.

>>Hi, sweetheart.

>>Hi, Mommy.

>>Now, I want to say three things very quickly out of this one film.  One,
>>you're going to move into a world where you have worldwide real-time
>>distance medicine.  And that means both job opportunities, it means
>>dramatically different health care costs, it means dramatically different
>>quality of care.  Two, by using this kind of a model, you can literally
>>be current in the smallest community in the world with the most advanced
>>technology wherever it is.  So that you're able to move into saying,
>>"this just happened.  "what do we need to do about your cancer? " And
>>know what the most current treatment is anywhere on the planet in real-
>>time.  Three, there's no reason only doctors have access to it.  I mean,
>>what this is going to mean is -- I have several friends now whose
>>children have problems, and the friends are on the Internet accessing
>>medical libraries.  Because they have a higher passion for solving the
>>problem.  Not that they know as much, but they're willing to focus on
>>getting their child's solution.
So within a decade, I think you're going to start getting user friendly medical systems that allow you to learn about your disease and your protocol, and you to look at all the research being done everywhere on the planet, and for you to access it from your home or from your hospital bed, and it's a totally different model than the model we've had for the last 70 years, and it both creates tremendous revolutions in health care and it creates an enormous opportunity for us, if we lead that revolution, to provide the highest value care on the planet and to create the most high value jobs. And in that kind of world, you have Americans who don't worry at all about China or Mexico or anywhere else. We offer health care, they offer other things.

Next week, our topic is going to be replacing the culture of violence and poverty with a culture of productivity and safety, and we're going to look at next week's reading, which is don Eberly's "building a community of citizens," chapter 16. And I strongly recommend you look at Marvin Olasky's "the tragedy of American compassion" which I have with me and which is a fabulous book.

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