Mr. Steve Forbes
Chairman and CEO
Steve Forbes - Employment- Chairman and CEO, Forbes; editor-in-chief, Forbes magazine, has a circulation of more than 900,000 and is the oldest of the top three U.S. business magazines; chairman, American Heritage Division, Forbes. Special Mention - Four-time Recipient, prestigious Crystal Owl Award, the prize formerly given by U.S. Steel Corporation to the financial journalist whose economic forecasts for the coming year proved most accurate; campaigned for the Republican nomination for the U.S. Presidency with the following key issues in his platform: flat tax, medical savings accounts, a new social security system for working Americans, parental choice of schools for their children, term limits and a strong national defense; former chairman, Board for International Broadcasting (1985-1993), named by President Ronald Reagan and reappointed by President George H.W. Bush; board member, Ronald Reagan Presidential Foundation, The Heritage Foundation and Foundation for the Defense of Democracies; member, Board of Overseers of Memorial Sloan-Kettering Cancer Center and Board of Visitors for the School of Public Policy, Pepperdine University; former member, Princeton University Board of Trustees. Works- Author, How Capitalism Will Save Us (2009), Flat Tax Revolution: Using a Postcard to Abolish the IRS (2005), and A New Birth of Freedom (1999). Education - B.A., History, Princeton University; holds honorary degrees from more than 20 colleges or universities. Personal - Father of five; married to Sabina; they live in New Jersey.
How Capitalism Will Save Us
Thank you very much, Becky. Boy, I love groupies. Where were you when I was in college?
It is great fun to be here tonight, and thank you for having me and recognizing that the weather here, reflecting Al Gore's constant predictions of global warming that things are a little cool as it is with the economy, I will try to keep them mercifully short or shorter than would have been otherwise.
That's the nice thing about when the Obama administration talks about job creation, they can make up the numbers. So, if I end up speaking for two hours, I can say my original plan was three hours, and I've just saved you an hour.
It's wonderful when you can define the terms like that.
But, as Becky indicated, I have done several books, and the most recent one is called "How Capitalism Will Save Us: Why Free People and Free Markets Are the Best Answer in Today's Economy." The reason we wrote this book -- I wrote it with Elizabeth Ames -- is we decided we wanted to do this even before the financial crisis because there is a real lack of knowledge, understanding of what free markets, what capitalism is all about.
Even people who have sympathies for the idea of free markets have never been taught, certainly don't get it in high school. Most colleges don't do it right. It's all Marx and Keynes, and certainly most of the media won't give you a proper education. So even those who have sympathies for it are really disarmed before the battle begins, and so whenever a crisis comes along, the State advances.
One of the things that comes out in this book and other books that have been written about economic crises is that every major economic disaster in the last hundred years has had as its origins not some sudden failure of free enterprise but massive government policy errors.
But the wonderful thing about government is when it messes up, it blames others and gets more power. You know, in the marketplace, if you are not providing a product or service that other people want, you don't move ahead. In government, they move ahead regardless of whether you want the services or not, as we see unfolding today.
So I think we have to become more accustomed to not being defensive about free markets and moving away from this idea that is out there that free markets, capitalism, free enterprise is some sort of Faustian corrupt bargain, that markets, economics, free markets, business is about exploitation, it's about the strong euchring the weak, exploiting the weak, and you have got to regulate these people, but, hey, it gives us a higher standard of living, so we put up with it, all of this immorality or amorality. We put up with it because we do get the goods from it.
But then, of course, if you succeed in business, because it is not a really moral enterprise, you make up for your sins by giving it away.
And you see it in the phrase "giving back." Just think of it. We all use it, "giving back," not giving but giving back. If you think about it, "giving back" implies you took something that wasn't yours in the first place. Now you are giving it back, like in the sandbox, you know, took it from Jerry, your friend, and now you have got to give the toy back you just grabbed from him.
So there is this misunderstanding that the essence of free markets is you succeed only by providing a product or service that somebody else wants. It is a two-part transaction. It is not stealing from somebody, grabbing from somebody. It is offering somebody -- they may not like the fact they may have to buy it, like electricity. It is amazing. People bellyache when electricity prices go up. They don't mind spending $30 on a designer hamburger at a fancy restaurant, but you do get something from the transaction.
You know, Adam Smith described it very well, mutually beneficial transaction or eating food. He talked about the butcher providing the dinner, where you go to a restaurant today. You want the food; restaurant wants your money. They provide you the food; they get the money. You get the food; they get the money. That's how it works, so you each get something out of it.
And that is why our Founders understood, particularly Hamilton and Franklin, that we are in doubt with certain ambitions and energies, and how do you direct those energies and ambitions in a way that not only you come out ahead, but others come out ahead, that it is not zero sum?
So we have this miraculous system, huge circles of cooperation. Talking about food, if you are in the restaurant business, you assume the farmers produce the food. You assume processors process the food. You assume truckers and others will deliver the food. You assume that other equipment makers will make your stoves and refrigerators and tables and utensils and everything else you need, water, and you can go into business.
But just think of all the things that go into these things, and that is what people take for granted. We are like fish in water. The fish do not know they are swimming in water, and so we don't realize the kind of system that we are swimming in, living in.
So it is a moral system. It has to be based on values, but it does bring out, in essence, the best in people. Now, human nature being what it is, you are going to get bad actors everywhere, but it is not unique to business.
You look at the Bible. This has been around for thousands of years, long before Adam Smith, people behaving in ways they shouldn't behave. But the system as a whole, in essence, has people learning to work with other people. You may think of yourself as a Hollywood caricature, loving money, greedy. That means you have to be fat and bloated, just plotting ways to get rich, but you don't get rich unless you provide something that people want, and it is called knowing your customer.
Without you realizing it, it forces you to pay attention to other people, cooperate with other people. It forces you without you knowing it, looking at the future, deferring the present to build for the future. It is not altruism. You may think you are doing it for yourself, but that, in essence, is not immoral either. We are endowed with certain talents, and this system allows you to discover and develop those talents and push those talents in a variety of ways that has never been possible before.
So, if you have some gift, some knack for something, pursue it, and you can pursue it, and others will provide all your other needs and wants. If you want to write poetry, others will supply your food, your clothing assuming people buy your poems, but you can pursue your particular talents. So that is the glory of the system.
About government role, the enemies -- so, in terms of the morality -- I just want to emphasize this point -- we have to learn to use the language of morality when it is hard to deal with money, business. We have to get the essence. This is about serving the needs and wants of others, and it gets to the paradox of the United States. Here we are, the most commercial nation ever invented, but also the most philanthropic nation ever invented, and people wonder how can that be.
Well, they are not polar opposites. They are two sides of the same coin, serving the needs and wants of others, and while the particular skill sets, perhaps in the charity of philanthropy, may be different from a particular business, the end result is the same, which is why often some of the most effective philanthropists -- and some of you are living examples of it -- are those who have succeeded in commerce. Two different spheres but still the same desired result.
So, if we don't learn to occupy the high moral ground, we will continuously be on defense when you get the Madoffs and the disasters and the like. So, even though in terms of government policies being disastrous look at how long it took to reform welfare in the United States even though clearly for decades it was blighting, destroying millions of people. Because the intentions were good, you couldn't touch it. Even though the results were tragic, you couldn't touch it.
So, if we get the high moral ground, start to learn to use the language, it will save us a lot of wear and tear and unnecessary gaining of hard-fought ground in future battles of ideas.
Now, what is the role of government? Advocates of the state always try to portray it as either massive government regulation or absolute anarchy. No, it's not anarchy, free markets laissez-faire, not anarchy, not the law of the jungle since we are here in a zoo.
No, it is none of that.
Hayek talked about rules of the road. You know, we have automobiles, so you have rules. You don't go 100 miles an hour in a school zone. You don't drive when you are drunk. When you turn, let people know you are turning, basic things like that, but that is very different from the government telling you what to drive, where to drive, and when to drive.
So, sensible rules of the road, what is the role of government? To provide obviously for defense, for security, dealing with disasters, perhaps infrastructure, and basic things like that, but then a key role is helping create an environment where free markets can operate.
And how does it do that? Various ways. Rule of law. Becky and others are working very hard on a thing called "property rights," not one of the most glamorous subjects in the world, but you recognize without property rights, you don't get prosperity. It is essential, understood several centuries ago, and that is why things like abuse of eminent domain are wrong.
Rule of law means equality before the law. How else can an entrepreneur challenge an existing power structure or powerful companies in an industry and countries? You know, Russia and others, if you would step on the wrong toes, the law is not going to protect you. In this country, it largely does, so you can do something that upends the existing economic order and not suffer politically for it or criminally for it, even though you are an honest person.
It also means enforcement of contracts. We have seen an abrogation of contract law in recent times. You all know about GM and Chrysler. We have bankruptcy laws precisely to deal with companies that get in trouble, and Chapter 11 is meant to deal with companies that are in trouble but can be salvaged if things are done and redone in a court of law.
But why would you, as a lender, charge a relative low interest rate if you didn't think you were first in line if something went wrong? First mortgage, senior creditor means you have a call on the assets first, so you take a little less in terms of the charge for your capital.
Well, GM and Chrysler, the government uses TARP money and the powers it assumed during the emergency in 2008-2009 to just trash all of that and pay off their unions, the UAW in particular, giving them the companies.
Now, would Chapter 11 have meant the end of GM and Chrysler? No. There is not one major airline, except I think for American Airlines is the only exception. American Airlines, every other major airline, legacy airline has gone through at least one bankruptcy reorganization. Did they cease to fly when they filed? No, it just meant the courts were in charge, the judge was in charge, others were in charge, administrator in charge of redoing existing contracts, so maybe the thing can compete again. Maybe it is salvageable.
The same thing would have been done with GM, huge assets. With Cadillac, they proved they could come up with models that people wanted, and finally the government sort of did it after a payoff to the unions. They shrunk the thing to where it should have been several years ago, down to four basic divisions.
In terms of GM, this wasn't about saving jobs. It was a political payoff. At GM's height in the early '70s, when it was one of these mighty companies, when Government Motors would have meant GM had taken over the government, not the other way around, GM had 395,000 blue collar workers -- 395,000 blue collar workers. By the time this reorganization of GM is done, it will be 38,000 workers. So this isn't about saving jobs. This is all about politics.
Even worse is what is happening in the mortgage market. A big part of the mortgage market is securitization, grossly abused, but like anything, if you take a car and go 130 miles in a 20-mile-an-hour zone, you are going to get in trouble.
Securitization, misapplied, abused, will get us in trouble, but properly used, sensibly used, sensibly employed, what it means is you can take mortgages, find other investors for it, which means you can charge a lower rate of interest by spreading the risk in a normal environment.
Now, securitization is also essential for car loans, credit card debt and the like. If providers know they can package this together and have money funds and others buy this stuff, so they can then have capital to keep deploying, sensible, but it also means you have to have rules of the road.
Now, the mortgages, with the Treasury and the White House entering in earlier last year and saying in the name of saving house owners, we are in effect abrogating the contract law. First mortgage meant if a borrower got in trouble, you are first in line, second mortgage second in line, home equity loan third in line.
Instead, Obama comes in, the President comes in and says everyone takes a haircut. So who is going to buy a mortgage in that environment if you don't know what the rules of the road are? Basic stuff, rule of law, boring as heck, but absolutely a bedrock essential.
Another basis the government should be there to do is, of course, low tax rates, sensible tax rates. I love the flat tax. Becky, my groupie, loves the flat tax, as well. Others may have other ideas, but the whole idea is that taxes just don't raise revenue. This is something the current administration and sometimes Republicans don't quite grasp, is they are a price and a burden as well.
The tax you pay in income, the price you pay for working, tax on profit, the price you pay for success, tax on capital gains, the price you pay for taking risks that work out, the idea sounds simplistic. When you lower the price of good things, like productive work, risk taking success, guess what? Get more of them. Raise the price, you get less of them. So, a sensible tax system, the government does that, you will get more people taking more risks, creating more prosperity.
Then, another one, very basic, sound money. One of things that even some conservatives don't grasp is you need a strong and stable dollar. The dollar should not be a plaything going up and down in value because it means it introduces a whole new element of risk and higher cost of capital.
A weak dollar means weak recovery. So you look at this situation today. The Federal Reserve doesn't give a hoot about the dollar, and that is why we still have a jagged recovery. We will get 3-to-4-percent growth rate this year, but the real question is- is it sustainable?
If you have a weak dollar, the answer is no. You are going to get inflation. You are going to get distortions. Think of it this way -- and I know there is no more boring subject than monetary policy. I can see your heads already getting heavy: "Oh, my God, interest rates, Federal Reserve. Oh, boy, where is that coffee? Serve it up again."
Just to give you a travel tip since, you know, travel is so uncertain these days, do you ever find yourself in a coach, middle seat, on a runway, watching your life pass away? You want a little bit of elbow room? Talk to your seat mates about monetary policy. You will have all the room you want.
If any of you are single or if you have kids or grandkids who are single, on a bad date, just advise them to talk to the date about monetary policy, and you will never see that person again, never again.
Just think of it this way. Think of it as you would, if we are talking about automobiles, you can have a magnificent vehicle, but if you don't have fuel, you stall. Too much fuel, you flood the engine. Just the right amount, you have chance to move forward.
The same is true of monetary policy. If you don't create sufficient money, you are going to have a problem with the economy. Too much, you get the economic equivalent of flooding the engine. The right amount, you have a chance to move ahead.
So, when you think of the dollar, imagine what life would be like if the government came up with this idea about clocks. Let's say the government decides to do to clocks and watches what it has done to the dollar. An hour now has 60 minutes. What if the government got the idea if we increase the number of minutes an hour to 70 and not tell anyone, what would that do to productivity? People would be working longer at the same pay. Boy, this would be great.
Well, guess what would happen? People would finally figure out they were getting shafted, and it's very, very disruptive. Imagine if they floated the clock. You know, 60 minutes an hour one day, 30 the next, 88 the next, 92 the next. You would soon have to have hedges, derivatives, futures to figure out how many hours you are working each week, each day. Keep it simple.
A final basic principle, removing barriers to doing business. Whether it's starting a business, in many countries, you have to go through a whole rigmarole. You look at Haiti, how difficult it is to establish a legal business. Guess what, they are all informal, most of them are informal.
In this country, it is easy to do it. It doesn't guarantee success, but at least we get that right if you want to establish a business, it is a routine. You don't have to pay off 80 people to get the license.
But another thing, removing trade barriers, removing internal barriers. Many of you have written about how licensing laws are used as barriers of entry. We all know you should have licensing for physicians, for pilots, people on real estate, so they know what they are doing, basic things like that.
But as some of you have written about these crazy cases we cite in the book, about like Minnesota, two years of school in cosmetology before you can braid hair. If you want to braid hair, go ahead. If you want to pay somebody to do it for you, God bless you, go ahead and do it, but you don't have to have a formal, elaborate licensing procedure.
Some of you have written about a case like Oklahoma. If you want to sell a casket in Oklahoma, not unless you are an official embalmer are you allowed to do it, so higher prices in Oklahoma than what you find for it in Texas, just basic things like that.
So you put it together, the government creating the environment. Also, though, government has to respond to change. Government has a role in change. When you have innovation, things change, you need new rules of the road.
I mentioned the car. Well, you had to build highways. You had to have insurance. That created a whole new industry, whole new rules and regulations, speed limits and the like, rules about drinking on the road, things like that. That is what government is for, responding to these innovations, or when Xerox, 40 years ago, 45 years ago, invented the copier, well, what did that do to copyright law? You had to invent the Fair Use Doctrine and things like that. Today, we are still grappling with the changes wrought by the Internet in the distribution of music and video. That is where you need government to establish rules of the road when these innovations come along, and one big failure -- this is where I part company from some of my colleagues -- is in the financial system.
Sensible rules of the road weren't applied when innovations like credit default swaps came along. Derivatives are simply another form of futures. We have had futures forever, in soybeans, corn, for decades in interest rates and currencies.
So, when these new derivative kind of futures came along or new forms of insurance came along, it would have been fitting and proper to mandate that they have clearinghouses, so you deal with counter parties, so you have transparency, so you know what the volumes are, so you can set proper margin requirements, so you don't get abuses, so people know what is actually happening and set proper rules.
For example, "credit default swaps," fancy name for ensuring a bond. Well, should you be able to ensure a bond 10 times over in a bankruptcy? Shouldn't the judge know who has CDS's and therefore would gain if you liquidated a company from those who are trying to bring a company, creditors who want to bring a company back to life? Of course, transparency. That wasn't done in this case.
So, when Lehman Brothers went down in 2008, one of the reasons there was such a panic afterwards was what about their counter parties and credit default swaps, and numbers were floating around, up to 400 billion that might be out there, and nobody knew who had what and who was going to be dragged down when they went down. It turns out they had 5 billion, easily handleable, but people didn't know, so emotions took over, so dealing with innovations and change, another role of government.
And let me just close by discussing the current economic crisis. I mentioned we are going to have growth this year. The question is, is it going to be like '70s kind of growth, where it is always followed by a new fall down, or is it going to be like what Reagan ushered in, in the early '80s, where except for two brief recessions, we had almost a quarter of a century of expansion?
The biggest cause of this crisis was the Federal Reserve printing too much money. In the early part of the last decade, you could not have had a housing bubble certainly of the size that we had if the Fed hadn't provided the fuel for it in printing too much money.
Whenever a central bank, especially the Fed, prints too much money, the first theory that gets hit, commodities. As you remember in 2004, commodities all shot up, and we were wondering if it's India, China, greedy oil companies, Wall Street, some villain out there. No, it was a classic commodities bubble.
Then, the money in this case went into housing. In the '70s, it went big time in energy and into agriculture as well as commercial real estate.
Big recipient this time, housing. Everyone knew housing always goes up. It is written in the Constitution, housing must go up each year, and so this wave of money comes in, and they invent a new mortgage. The new mortgage is why we have an income. Why have an income? Because, after all, the house is always going to go up. What's to worry? That was government creation.
Fannie and Freddie, inflating the bubble even more, $1.5 trillion of suspect paper. No private company could have come close to doing that. Fannie and Freddie, with the implicit guarantee of the U.S. Government, could do it, and then finally, when the disaster hit, among other mistakes the government made, was, the most boring subject in the world other than monetary policy, another accounting principle called "mark-to-market accounting."
Long story short, this is how you value, for regulatory purposes, the capital of banks and insurance companies. How do you value it? Normally, if a bank bought a bond for $1,000, it stayed on the books at 1,000, unless the bank either sold the bond or something happened to it, it became impaired. Otherwise, for book purposes, regulatory purposes, it stayed at $1,000. Mark-to-market meant that you treated bank regulatory capital, insurance regulatory capital like a day trading account, marking it up and marking it down.
So it is supposed to be a source of stability and ballast. It became procyclical, creating too much capital, and then destroying it when the markets weren't there.
It would be the equivalent, ladies and gentlemen, what would happen if you were told to sell your house by midnight tonight? You would say that's ridiculous, you wouldn't get any price at all, there is no market. That is what mark-to-market did.
So, if you look at the losses of banks and insurance companies, huge losses, do you realize most of those losses were a result of book losses, artificial losses, not actual cash losses?
So where do we go from here? Thankfully, a year ago, mark-to-market was amended from pressure from Congress. That is why the markets went up; the financial system came back.
So where are we today? Three big things to watch out for. One is, as I mentioned, the dollar. Got to stabilize the dollar, 60 minutes in an hour.
Taxes. You all know what is going to happen at the end of this year. If they pass health care, there will be an array of taxes. They may very well allow capital gains to go up, dividends to go up. That is going to be a dampener on the economy.
The other big thing to look at is bailouts, which gets to government spending. We all know about Greece, Spain, Portugal, Italy. You all know here we have got disasters looming; States and municipalities, California, Michigan, Illinois, New York, New Jersey, and who knows how many cities and municipalities, many of them plagued with derivatives to cover up their deficits. A lot of that is going to explode.
Short term, the Government is going to respond by trying to use TARP money to bail them out again, at least get them through the election. But eventually, the piper is going to have to be paid. Spending has to be restrained, and the sign of the times to come I think, to end on an optimistic note, is what is happening in my home state of New Jersey, a blue State. As you know, we elected a Republican governor.
A couple of weeks ago, the governor went before the legislature, and even though there are only 4-1/2 months remaining in this fiscal year, he announced that he was impounding $2 billion of spending, just not going to spend it. "Municipalities, you are not going to get further aid. We don't have the money. We are not going to go in debt. We have got to tighten our belts."
He made it very clear, big cuts coming next year, major reforms and pensions are going to have to come. He cited two examples. He said one State worker retired, put 124,000 in contributions over the years for a pension and health care, going to draw over his lifetime, expected lifetime, 3.8 million; teachers, 60,000, 2 million. He said this just is not sustainable, has to change.
Now, a year ago, politicians saying that in New Jersey would have been pursuing other opportunities. This one's popularity, even though the unions are starting to run trash ads against him, people are saying, "Thank God. We have to face up to reality."
So, bottom line short time, we will get a brief recovery, but it is not going to be sustainable if we don't deal with the dollar, bailouts and spending, and taxes, but thankfully, thankfully, one thing about this country -- we have seen it with this group, we have seen it more vividly on TV at least with tea parties, town hall meetings, and the like -- people instinctively know something profoundly is going on, and they don't like it. So this is our opportunity. People are open to ideas and concepts in a way they have never been before.
So let's not be defensive about capitalism. Let's not be defensive about the virtues of commerce and enabling people to get ahead, as Lincoln put it, "improve our lot in life." Let's go on moral offense. For a while, it is going to be awkward trying to talk about the virtues of capitalism. When they say about bonuses, you could point out those are abuses. When the Government creates an inflationary environment, you remember excess profits and all that kind of thing, everything gets skewed.
When rules of the road are made and observed, this is the most glorious system possible because it allows each of us to do things, realize things that never could have been done before, and if you fail, you can get up and do it again
MRS. DUNLOP: Isn't it nice to have someone who speaks truth to power?
All right. Steve is going to take a few questions from us tonight, and I see one right over here.
Do we have a mic out there? I see a mic coming.
ATTENDEE: Thank you so much. A lot of very good things.
I wanted to pick up on the specific point you made in terms of people thinking that capitalism is immoral, or to put it more specifically, I know in my generation and I think even more in more recent generations, a lot of people thought successful business is a matter of cheating or tricking people effectively. That is something which is going to be critical to change, and I don't know if you have any more specific thoughts or if you address more in the book, how one might go about that.
MR. FORBES: Well, the thing is if you cheat people and get a reputation for cheating people, you will eventually pay a price for it.
Just look at what has happened to Toyota. Put aside whether this is hyped by the government for its own reasons. The fact that Toyota was seen as not being forthcoming about product defects has been very, very damaging to their sales.
So, even if Toyota is a Hollywood caricature, you know, plotting in Tokyo how can we kill as many people as possible, you know, you can see it coming, but you don't last in business. You don't last in business if your reputation goes down.
Ford helped its reputation by not taking a government handout and also having some product that people like. So, guess what, you buy from Ford. Does that mean Ford is greedy and manipulative? No. You can buy from whomever who want.
And cite some of the heroes. Steve Jobs, multibillionaire, employs thousands of people, has stores all over the place, imports parts in the iPod. Does that make him a bad guy? Well, people understand immediately, iPods can't live without him; iPad may not live without that, iPhone, idiot's delight.
I have an iPhone because you don't even have to use your thumbs. You just whack the thing, and it works, assuming they have the bandwidth. But, if there is Verizon here, I have a little Verizon phone too because it has got great reach. I guess Sprint is the only one that is missing on that on.
But, anyway, so is Bill Gates bad? Well, most people like the idea of having their PCs work, software, Windows working. So, again, that's what it's about.
And are people suddenly virtuous when they work for government bureaucracy? Do you find great virtue when you go to the Department of Motor Vehicles or when you go to the post office? Are you impressed, "My God, all they are missing are wings"? The halos are all about, you know.
Have fun with it, you know, and say what system will allow you, if you want to take a chance, to do it. Where else are you going to have a chance to do it?
400,000 people make their living selling stuff on eBay, for crying out loud, and in this imperfect world, it's about as good as human beings are going to be able to get, and again, you learn.
And it allows you for serendipity. You may think when you get out of college you want to do one thing. Because the market is tight, you may end up somewhere else, and you may discover, by, golly, you know, I like that. It allows for serendipity.
By the way, one other example, Steve Jobs -- they won't kill you for that one, Bill Gates they might. A guy years ago playing football in college and high school noticed his teammates sweated when working out. You have to go through 8 or 10 T-shirts working out for your sport.
He got the bright idea, here, clothes have been around forever since we wore bear skins in cave days, and clothing has been around forever. This guy got the idea why can't we have athletic gear where if you sweated, it absorbs it, you don't have to keep changing it.
So he went and actually tried to find a fabric that would do it and finally discovered one that was used for medical purpose to absorb moisture after a certain kind of an operation or something, very, very narrow focus, and he took it and designed T-shirts, took them to a tailor, had seven or eight of them made up, and took them to his teammates and said, "Why don't you try this out?"
The teammates initially resisted because it felt kind of silky, sissy. Well, he finally got them to try it, and, wow, had some great success. The company is now called Under Armour, Kevin Plank, huge success, truly, in Hollywood-ese, a man who made his money off the sweat of other people.
So, if you cite those kind of examples -- we cite some others in the book, a guy who set up a boating business when the Coast Guard cut back its services from non-emergency, you know, just emergencies on the waterways, huge successful business. The Coast Guard is now using him in emergencies.
So there are all these examples. So why not you? You don't have to be high tech. We have bottled water. Whoever would have thought -- when I was growing up, it came out of a tap -- that you put in a bottle and call it "Fiji" or "Peacock" or something, you would succeed? Or, liquor, you know, vodka is vodka, but Gray Goose? Maybe if you do "Pink Pigeon" or something, you can succeed. "Purple Peacock." I don't know, but it is just wide open if you have a little bit of imagination.
And by the way, if people have an entrepreneurial bent, warn them, be prepared for failure. Saw this in Charleston recently, a guy who is 28, very successful in e-publishing books, doing a very brisk business these days, but he told the kids, he said as an entrepreneur, you are not a real entrepreneur until you have one of your ventures flame and crash.
He said, "When I was 16, I started a business. For several years it went well, and then it just failed." He said you will learn from that, and if you want to get in this thing, just be prepared. You are going to have some crashes along the way if you really want to get in this kind of thing. It is not all lollipops.
Okay. Do we have other questions? Yes.
ATTENDEE: Steve, I may be the only one here who traveled to every highway and byway in Iowa trying to elect you President. I am sorry I didn't succeed. That was one of my failures.
MR. FORBES: I wish we had been able to clone you.
ATTENDEE: But I wanted to ask you, what is your advice to our Republican congressional candidates this year who have to address the question of jobs and how we've lost a couple of million manufacturing jobs?
MR. FORBES: Well, on the whole thing, first, generally about jobs, the best way to create jobs is allow people to create jobs by removing barriers like the huge takeover of health care and the array of taxes among other things that are going to come with that, make punishing people who put their capital at work, basic things like that.
And then in terms of manufacturing, we have the highest corporate tax rate in the world. We are in a race with Japan. Sometimes they are slightly ahead; something we are slightly ahead.
But as somebody told me, he said, "That means if I have my company here in the U.S., I start with a 35-percent rate. My competitors in Europe have 15 or 20. That already means if we make equal products, I am already behind the eight ball. So the pressure is on me to get out of the U.S."
If the French, for crying out loud, and the Germans have lower corporate business taxes than we do, my God, that tells you something.
Then, don't burden manufacturers with forced unionization and the like. As you know, in terms of auto manufacturers, every major manufacturer has facilities here in the U.S. Most of them pay very good wages, 45 bucks an hour, and they turn out product in a normal economy that people want. It was legacy cost that did in Detroit, not some inherent inability.
I will just share with you one story about manufacturing in the U.S. Back in the '70s, Honda decided that it had to set up manufacturing facilities in the U.S., just couldn't continue just to be an importer.
So it first experimented by making motorcycles in the U.S. Then it decided to make the leap to make cars, and when they decided to do it, what they did is for a year they hired people in Marysville, Ohio, and they would make cars, and the workers couldn't understand it, why they were making cars and then tearing them apart, making them and tearing them apart. It was sort of like doing -- why were they doing all that repetition was to learn how to truly make a car and understand it in its entirety.
Then, when Honda announced that it was going to be having a facility first in Ohio, you know who the biggest howls care from? American auto dealers that sold Hondas. They said, "If people learned that Americans are making these, we are out of business. You know, don't do this to us. We have a stinking reputation." Honda went ahead anyway, and now often the cars from Marysville and other places are better than the Japanese make.
So we can do it, but you have to have the right environment, especially for manufacturing where the margins are often very tight. Taxes matter. Rules and regs matter. Unionization matters. But if you remove those impediments, we will do it, and we will do a value-added manufacturing as well.
So, I believe our prowess is there. In the right environment, it will flourish. We will do very well vis-a-vis the rest of the world. We won't compete on commodities, but we will complete on value-added and staying one step ahead in the technology.
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