Buybacks, Boeing, and Broken Promises There are a lot of social influences on what companies do and how they act and what the norms are. But those norms change and then they changed dramatically in the 1980s. So that's when things went from having stable and equitable growth coming out of the practice of these companies to contributing to unstable employment, inequitable incomes and actually in the end, in many industries sagging productivity growth loss of international competitiveness. Once the Security Exchange Commission changed under Reagan, they adopted Rule 10b-18 of license to loot. Basically it now said you could do massive amounts of stock buybacks, with a safe harbor against being charged with manipulation even if you exceed that safe harbor, and this ideology is not an ideology that's being put forward, what's being put forward as an ideology of value-creation. But it's actually an ideology of value-extraction. Hello, everybody? Welcome to Real Visions interviews. I'm Max Wiethe, sitting down with Dr. Bill Lazonick of the Academic Industry Research Network as well, Bill has been an economics professor at many different academic institutions over the course of his career, and we're here today, to talk about your recent book that you're publishing, Predatory Value Extraction and to understand how stock buybacks and the warping of the stock market has really disrupted what is actually driving stock gains over the past three to four decades. So thanks for coming in today Bill. Okay. Pleasure. So why don't we just start out with the what you do at the at this, it's a non-profit organization which focuses mostly on economic research if I'm not mistaken. That's right. Yeah. So basically I've had a career as academic, being a professor at various universities as you mentioned, and I set this non-profit up as 501(c)(3) non-profit up almost 10 years ago, to do research outside the university for a variety of reasons. I've been working with a number of people. Now it's about 15 people who I'm working with regularly who are in various parts of the world who have worked with me, some for as long as 20 years to do research on how companies become innovative, how they create products that people want to buy at prices that they are willing to pay, and can compete on national and global markets, and what happens once they actually become successful to the profits they make. So the profits are really an outcome of some value creation process that makes these companies successful which I can get into how that works. But basically once they are successful, there is a huge pot of gold there in these companies, and if someone can say, "That's mine," and take that money, they can become very rich. If it's not theirs, someone's got to talk about, and that's what I do. So a lot of the changes that I"ll talk about going from companies, retaining their profits and reinvesting them in their organizations to what I later in the '90s called downsizing the companies and distributing cash to shareholders, not just as dividends or stock buybacks, a lot of that transition took place in the 1980s, when companies started articulating and imbibing this idea that companies should be run for shareholders. I was at Harvard Business School in the mid 1980s when that ideology came in. In 1984, no one was talking about that at Harvard Business School. In 1986 they were, I mean there was an easy explanation for that. 1985, Harvard went out of its way to hire the guru of maximizing shareholder value, a guy named Michael Jensen, and I came out of economics. By that time I had been in the Harvard Economics Department for over a decade and a half. I was now at Harvard Business School. I saw that, no, those aren't the people that are creating value. Shareholders are just buying and selling shares on the market. People have gone to work for these companies often for decades, they're the ones who create the value. We as taxpayers have supported these companies with the infrastructure and knowledge, we should get a decent tax rate back. This ideology is not ideology that's being put forward as an ideology of value creation, but it's actually an ideology of value extraction. So I started researching that and learning about how that was going on and did that within the university structure often with collaborations and people not just looking at the United States but places like Japan, Korea, various countries in Europe then got into looking closely at China, India and trying to understand basically, what we're talking about is capitalism. How countries get rich and what happens when they get rich and whether there is a way in which we can explain particularly what's gone on in the United States of this extreme concentration of income at the top and the loss of middle-class jobs, extreme income inequality. So I started this organization outside the university for various reasons in, I think it was 2010. There is an organization that started up which has its offices probably about 10-minute walk from here, called the Institute for New Economic Thinking which started up. Then I've gotten through this organization, the Academic Industry Research Network, various grants from them to do research. They'd been one of the main funders of the research and I pulled together this group of people, many of them who were doing PhDs, now have academic jobs, some of them are mid-career, who were in touch with. Basically all the time it's almost a virtual organization but we can write about things that are going on historically, you can write about things like let's say the Boeing crashes that have occurred more recently. We have a certain level of expertise that I don't think actually I think it's quite unique in terms of academics and really digging critically into business, and saying not just the dark side but the bright side and how do business would become successful, and that's what we're mainly interested in, is how you can understand the way the central institution in our economy, the business enterprise some which grow to be bigger than whole countries small countries, how they actually can create value, share the value with their employees not just because they want to show the value with employees because it helps to those employees, give some incentives to be more productive. It's the result of them being poor productive, how you get this positive dynamic going on in these companies which we call retain-and reinvest and how we can all be better off as a result, and then critiquing a lot of what's going on in the last, particularly last 30, 40 years, and people have often very little role if any to play in these companies claiming those profits are theirs, and even more being able to lay off 5,000, 10,000 people and claim. The stock price goes up and they gain. How that can happen, and so the book that just came out this past week which with a colleague of mine Jang-Sup Shin who was a professor of economics in Singapore is originally from Korea is called Predatory Value Extraction as you mentioned. But the subtitle summarizes the book. It's how the looting of the business corporation became the US norm and how sustainable prosperity can be restored and by sustainable prosperity it's a shorthand for stable and equitable growth that we want. Growth that's stable employment, equitable distribution of income which we have neither of those, and we want to get productivity growth which can support those things, and right now we have sagging productivity growth, real problems of many US companies competing in global competition partly because of what I call the predatory value extraction that's looting out the business corporations. So that has been something that we've been doing a lot on this group of mine and getting a lot of the visibility for that research through various outlets because it strikes a chord with a lot of people who are saying, "Where is all this inequality coming from?" Well, the visibility, I came across your New Yorker profile and I got to read about some of the research you had done and it really sounded something that I felt would resonate with a lot of our viewers here at Real Vision, we've covered buybacks, and we're very interested in what's driving the stock market. You mentioned briefly before that, you're not just looking at the bad, looking at the predatory value extraction, you are also looking at what makes these companies good and that's really how you started out your book. Was looking at the theory of the innovative enterprise as you call it. I think that's a great place for us to start. Yeah. I'll try to summarize in about 30 seconds, something that's going to be another book. Because there actually is a real problem if you're trained as an economist as I was, I'm a PhD economist, got my PhD at Harvard early 1970s. Things have basically, in this regard have gotten worse since then. Economists, generally PhD economists did not understand how business enterprise operates. They see the states, they see the markets, and in fact what is being taught in introductory economic courses every year and it's been taught to millions and millions of people since a guy named Paul Samuelson wrote his introductory textbook in 1948, and I'm not going to get into this other than just state it because if I state it it'll sound totally absurd. It's actually being taught that the most unproductive possible firm is the foundation of the most efficient economy. They call that perfect competition of course and they say, "Well that doesn't really exist." But then the whole mindset of economists is that, "Competition is imperfect," so we have to move through policy, through what business does to make it more perfect so that we get rid of monopoly is that we just have lots of competitors out there who are all competing in the same way producing commodities. Now, if we actually had that state of affairs we'd be living in poverty. So the reality is that, well first of all that building even a small business enterprise is in many ways a heroic feat. So I would tell students when I'm teaching students, if you can start a company and can keep people productively employed, pay them a decent wage, I would say for 10 years. That must mean you have something that people is buying. Some product that people out there are buying, and you're probably going to do quite well. You're going to do quite well for you and you're going to do quite well for the employee. But how do you get to that point that actually you can be around for 10 years? You can't do it by doing what everybody else is doing, and you can't do it just by saying, "Well, here is what the market says you should do in terms of technology and prices." You have to make an investment in learning. Now obviously in some companies, we can see that on their financial statements, it's called R&D. But that's not the only type of learning that goes on. In fact, if you take the S&P 500, and you look at how many of those companies is one of the 500 largest companies in the United States, only about 210 of those do any R&D at all. About, I think it's something like 38 of those companies do about 75 percent of all the R&D. So it's some pharma companies, aerospace companies like Boeing, companies in technology like Apple. Okay. But any organization including your little organization here, people are learning how to make the product, how to do it better. If you're going to survive, it's because you have, it might be a niche or it might be a mass production market, but you're going to be able to produce a higher quality product and you're going to get a larger market share, you're going to then cover the cost of the people which are often the fixed cost that you're investing in, not just the buildings and get a competitive advantage. So that's what I basically study how companies do that. When you are talking about companies that grow to be 10,000, 20,000, 30,000, 100,000 people, you're talking about credibly complex social organizations. When they work well, when they're actually over a sustained period of time generating a high-quality product, that they can get economies of scale and get the low unit costs, even as they're paying their employees more and they're giving them employment stability, you're getting productivity growth. It has a big impact on the economy, particularly if lots of companies are doing that. If we look at a time historically, when American companies were really very good at this kind of value creation innovative enterprise, it was a post World War II decades, when there was much more of set of norms that prevailed that once you hired people, you kept them employed over their career. It wasn't a contract, but it was basically in practice, you could see it by defined benefit pensions that were non-portable that had to do with how long you stayed with the company. You can see it at the blue collar level with collective bargaining and sometimes reinforced by unions, but this was so that you would get a labor force that showed up every day and cooperated in mass production. But you also saw that the white collar level without any unions, that companies train people and they want to retain them. So we had that kind of system which actually made the US the world leader in the international economy. The US got challenged by that in the '70s and '80s by the Japanese, but the Japanese actually perfected that system. Now that system doesn't work quite as well anymore in any case because we live in a much more open system environment, much more global value chains. China is not really competing with the same thing as the Japanese system, but this way in which you understand innovative enterprise, not just for the level of the enterprise but the whole ecosystem that supports it is changing all the time. So we're talking about a moving target. So just that part of the research, and that part of the documentation, and that part of the argument, that's a real challenge for anybody who is looking at these things seriously. We look at them seriously because we're academics. We look at it seriously as I do, coming out of a training on economics where I know that most economists actually don't have the slightest idea how to do the kind of research work. They're doing because they think the market should just be allocating resources. I'll just stop at this point, and just by making one more comment, because one of the markets that of course is looked to to allocate resources to alternative uses is the stock market. The fact is that historically, the stock market, that's not been the role of the stock market in the United States. The stock market has been the way for private firms to allow their owner entrepreneurs, or their venture backers, their capitalist backers, or private equity backers to exit from having the money tied up in the company. You do that by going public on the stock exchange. If the stock exchange is liquid enough, then you have no problem capitalizing your investments, and that's the main function of the stock market. The other side of that historically, is that you can then use the stock market to separate ownership control. You can break the link between the original owners who built up a business and the ongoing management of the business. Here, I'm very highly influenced by a business historian who I got to know after I had done my PhD. He was at Harvard Business School named Alfred Chandler. Wrote a book called, The Visible Hand. The Managerial Revolution in American Business which was published in 1977, won the Pulitzer Prize at history, and really ended at 1920. It's a historical book and said, by 1920 or in the 1920s, you had people who were not the founders of business running companies, they were managers, and what made those companies strong is that those people came up through the business, through the stock market, the owner entrepreneurs got out of the way. Now, you could move up to the company, to the top of the company being an employee, which is basically the situation today. Except now some companies go public much quicker and the founders stay around. But basically, the stock market's role is really fundamentally historically to separate ownership control, not to fund companies. So that's one of the implications, a big implication of the research we've done. There was one exception that you mentioned in your book, which I thought was just too interesting not to bring up here, which is in the late '20s where the companies that realized that the stock market had gone too far actually sold stock and was one of the only occurrences ever that a company had a secondary issue of stock on the market and they had a cash surplus that they were able to weather the Great Depression with, and it actually worked. But since then, you don't see it at all. Because we don't get into much of the details of some of the research we do. You see them in biotech. Certainly companies are going public on the stock market around where I live in Cambridge, Massachusetts, there's a lot of them, we call them product-less IPOs. They do an IPO, they are a research entity. They might have some investment from big pharma. What happens there is people make lots of money in those companies even they never produce a product. So it's not that you can't use the stock market that way, although and we saw it also in the Internet boom of the late '90s, the dot coms. Often, it's very speculative. If companies are sound companies, they can generally grow organically, not be exposed to the stock market until they actually have that growth secured through their own profits, and then can control their own growth because they have as long as they can control the profits and reinvest them a significant amount. They can then leverage that with debt. By the way, this view of the world, I won't get into this, but it also totally says, throw out Modigliani-Miller because debt and equity are not substitutes. Debt is a complement to the equity that you retain in a a company. But what you're referring to there is probably the biggest period or a period of 28-29 when companies actually sold shares on the market, is that all the speculators are out there. The companies that had become dominant on the New York Stock Exchange in the 1920s, now had a lot of profits, they were paying their workers better. But they were just awash with cash. They actually started lending that money out on the New York call market for 10-15 percent. But people who buy their stocks on margin speculating it up, and then they sold the shares at the higher prices and paid off their debt. The Japanese did the same thing in the 1980s. So it's financial engineering, but it's actually to solidify the corporate treasury to pay down debt or to just put money in the corporate treasurer, which then became very useful once you get slow demand in the Great Depression. Just to say, right now we have an article, I don't know if it's published yet. But it's on debt financed buybacks, is just the opposite. You're actually using debt to finance buybacks that don't. So now not only do you not have productive investment that is going to generate return to relate it to the buybacks, but you have debt on your books that you have to pay off. There was actually a very good article in CNBC yesterday on Oracle and Larry Ellison, and them getting into trouble. Actually is an article that fits everything. We say about companies getting into trouble by just trying to boost their stock through out the place, through buybacks and not investing in the products of the future. Yeah. Well, you mentioned a period of time when we did have innovative enterprise which was that the post-World War II era, the decades following that, we as America grew at an astronomical rate. What was different about that time that allowed that innovation to occur that we haven't seen today? Yeah. Well, so first of all, I think the financial sector was highly regulated. They used to talk about 3-6-3 banking. Three percent was what you got if you put your money in the bank and lend that out to its prime customers, corporations is six percent, and the other three was the time of day when the bankers went to play golf. That's actually what prevailed into the 1970s, '70s changed a lot of this in terms of the financial sector. In terms of the companies themselves, there was a norm that set in that once you employed people, if you started laying those people off, you're not going to get good people to join your company, that you're building this company by investing a lot of vertically integrated activities and it could take decades to build the company. You would invest in research, if you're a research-oriented company not just in research and development, corporate research labs, very long term research that could result in products in the future, but no one really knew when they were doing the research even what those products would result in. But in companies, more generally you just treated your workers better because you wanted those workers to show up every day, give the customers good service, and that became the norm. So companies that didn't do that were not companies who at all people would want to work for. Unfortunately, that was mainly a white man's worlds. Even up until the Civil Rights Act, companies had marriage bars where they could tell women to leave quite legally from the company if they got married. Harvard Business School didn't admit women to the MBA until 1964 when they saw the writing on the wall with the Civil Rights Act. That's now over 50 years old, but that's not that long ago. Also, we have a book coming out on what's happened to African American employment over the last 50 years. One of the things that happened in the 1960s and 1970s is there's still a big demand for blue-collar labor in the US. This is just before the Japanese impact started to occur. So there was expansion particularly in the automobile industry or blue-collar work. If you could get a semi-skilled blue-collar job, that meant you were on assembly line and you were represented by union, you would have very good pay. Well, the children of blue-collar whites were going to university, often free tuition or very low tuition and moving into white-collar work. Blacks who had been, of course, in a less privileged position in the United States were in a much more disadvantaged position. There was a big push helped also by the setting up of Equal Employment Opportunity Commission to move those people up in the companies from unskilled job to semi-skilled jobs, and that started to work. Unfortunately, I think one of the reasons why the system was not maintained in the 1980s was because, in fact, as those jobs got challenged, I think if it had been more still a white male society, there might have been more of a consensus what we need to retain and reinvest. So it fed into it. Well, no, why take responsibility for people we don't care about? I think in the end, we can see what's happened to the white blue-collar worker. Now, downward mobility, lower life expectancy, opioid crisis, it hurt everybody. But I think that fed into it. What I'm trying to get at here is there are a lot of social influences on what companies do, and how they act, and what the norms are. But those norms change and then they changed dramatically in the 1980s. As I said, when I saw at Harvard Business School, that Harvard Business School went away from this notion, which they really had retained and reinvested in call of that to, yeah, it's good to downsize and distribute, and that's what they started teaching the students, and that's when the students started getting jobs on Wall Street and be able to make a lot of money by participating in that as if it's all about value creation. That's when things really changed, that's when you went from having stable and equitable growth coming out of the practice of these companies to contributing to unstable employment, inequitable incomes and actually in the end, in many industries, sagging productivity growth, loss of international competitiveness. You talk about the maximizing shareholder value, but also it was coupled with changing regulations. Do you really think it was more of the changing regulations or this new economic theory, which really was the driver or obviously it was a combination of both, but they're both major factors. So there was a lot of changes in the institutional environment, which are often regulatory that fed into the creation of Nasdaq in 1971 based within National Association of Securities Dealers Automated system. You had all these security dealers around the country trying to sell shares in small companies. There was no national market, no liquid market. The Securities and Exchange Commission in 1963 had a special study of the potential of companies being able to go public more quickly if there was a national market for more speculative companies. The impetus to that was that there were a number of companies which were called glamour stocks, which they gained on the market in the late '50s and '60s coming out of military technology that started catching people's attention that you could use this for commercial purposes. Of course, then you had the rise of Silicon Valley, and Silicon Valley actually got named that name the same year that Nasdaq was started, 1971, where you had all these startups going and taking a lot of the technology that had been done in corporate research labs and developing, in this case, semiconductor chips, and people leaving one company to another,and then being able to get listed on the stock market. Intel, which was founded in 1968 was listed in 1971. By comparison, Hewlett-Packard, which was founded in 1938 in the heart of Silicon Valley was really an old economy company. Right until the '90s, the HP way was you never laid people off. That's how you got innovation. They didn't go public, I think it was in 1957. I think that one of the reasons they went public in 1957 was precisely Hewlett-Packard were now looking at not just being the only people who control that company, had brought managers up. It wasn't so much finance at that point. They were still a very careful company in terms of growth. So you started getting this market where you could put companies on stock market much more easily. So that then meant that you could get things like the dot-com boom, you could get things like this biotech startups that I've talked about. They changed the reason that people own stocks? People stopped owning stocks for dividends. Now, the other thing was that if you held stocks in the 1970s, you had a problem because of the inflation. Also, there was global competition. So there was a question, "Can you pay dividends?" Stock market was not doing very well throughout the 1970s. So there was the change, end of fixed commissions, which was actually forced upon the New York Stock Exchange in 1975 by Nasdaq. Very important was the Employee Retirement Income Security Act, ERISA which was in 1974. Now, the impetus to that was a bankruptcy in a particular case. Studebaker, the auto company had gone bankrupt in the '60s. Their employees were left without their defined benefit pension. So there was a movement for defined benefit pensions to have some backup by the government. So that was the impetus behind ERISA. But however, you had the other side of that, how were the fund managers, in this case, mainly the companies that ran the pensions like GE's pension. How were they going to get enough yield to fund the pension when you have all this inflation? So there was lobbying basically to clarify under what was called the prudent man rule, which was part of ERISA, what a fund manager could invest in without being liable if they lost money for being too risky. On July 23rd, 1979, the Department of Labor, which was overseeing ERISA clarified that you could put a certain proportion of your pension fund into risky assets like venture capital, and not violate the prudent man rule and not be held liable for taking undue risk with other people's money. So from that moment, there has never been a shortage of money for venture capital in the United States. It's always been a question of what are good companies to invest in? We always find things like the dot-com boom. It happened actually in the mid 1980s. They call it vulture capitalism, venture capital just setting up companies just to go public and them not being worth much. You had a lot of that going on. The problem really has not been any lack of money. So the institutions made the money flow more easily through the system. There's certain amount of that that you want money to be able to flow through the system, but how it flows through the system is another question. Now, on the particular issue because what happened at that point, buybacks were not being done. So if you were a company, you were paying out dividends. The last speech by a guy named Harold Williams who was the head of the SEC when Ronald Reagan got elected and then he resigned, he had some time to go on as the chair of the SEC, was to security dealers, it was called the Corporation as a Continuing Enterprise. It was the 1981. He said, "Corporations are paying out too much dividends after we reinvest more." That was before stock buybacks became a problem. Now, companies have been doing stock buybacks, which is something I spent a lot of time researching over the last decades. So there was a major regulation that actually just led to what I call the looting of the company. Companies often try to do stock buybacks. Sometimes they do it through tender offers, I'm not talking about, but sometimes they just went to the open market and did repurchases. The Securities and Exchange Commission, their lawyers would say, well, is that manipulation of the market? It looks like a manipulation of the market to me. So there was a rule proposed that would have tried to limit, not ban them, they were never really illegal, but limit them. It was proposed three times, but never adopted. But then once the Securities and Exchange Commission changed under Reagan, they put a guy named John Shad from Wall Street as the head of the commission. He believed in Chicago economics, efficient markets. The more market sloshing around through this system, the better off what has he still says that a capital formation, that's not capital formation, that's a money sloshing around through the system. They adopted really under the radar without public comment in 1982, November 1982 a rule called Rule 10b-18 which was totally obscure until the academics are written about it but until the research that we did saying, "This is when you allowed buybacks to occur on a massive level," and we call Rule 10b-18 a license to loot. Basically, it now said, "You can do massive amounts of stock buybacks, but the safe harbor against being charged the manipulation mean if you exceed that safe harbor, you won't necessarily be charged manipulation and it turns out, right to this day, the Security Exchange Commission doesn't know whether you're ever exceeding it because they don't collect the data on the days of your buybacks, but some people do. So then, that was a regulation which basically created a whole new instrument on top of dividends, not instead of dividends, because they haven't been instead of dividends but on top of dividends, our data shows this to take money out of companies. It's one that's favored by people who want to go into the company, get the stock price up, and then cash in because if they can time the buying and selling of shares, they can make more money than they would otherwise. In the book, we have a framework for looking at this looting which sorts the core of the book after we get through the theory of innovative enterprise, a critique of shareholder value ideology, the role of the stock market, not what people think it as we get into how is this predatory value extraction occurring, we have a framework where we talk about one chapter is the value extracting insiders. So they're the CEOs at top executives who are motivated by the way they're paid, stock-based pays, stock option, stock awards, which are structured in a way that the stock price goes up you cash in. There's a long history of stock-based pay, it goes back really to 1950 in the United States that we've gone through that history, I won't go into it now but when we talked about it a bit in the book, where basically, it was a capital gains, tax dodge up until it was eliminated in 1976. But it really came back in the 1980s stock-based pay actually not because of the large corporations but because of Silicon Valley startups, that we're now using stock not simply to separate ownership control, but also to pay people. There is a mode of compensation and not just people at the top, they were paying people down through the organization. Actually, what the reason they are often paying people in stock was because they wanted to lure them away from the '80s and even in the '90s from secure employment in the old economy companies. But the HPs and the IBM- Yeah, if you think the big pharma, one of the reasons Big Pharma started having problems with their corporate research labs and doing their original research in new drug development. There's not just shareholder value ideology but a lot of their best people now but there was an institutional framework for startups, for products that take billions of dollars in 10, 20 years route. It wasn't really appropriate but there is a way of just going to a startup, getting lots of money, and making a lot of money, much more money that you can make as a research scientist in the pharma or at Lewis Center HP or IBM, etc. So these companies started themselves trying to change to that new model of stock-based pay. This then, at the old economy, companies often when they weren't pay stock-based paid down through the organization, this then lead them to adopt that as the main way in what they were paying top executives. Then one by one, these companies changed their own internal ideology. I think, later, we're going to talk a little bit about Boeing. Boeing did that in 1997 when it merged with McDonnell Douglas and brought in a lot of people who were much more imbued with shareholder value ideology as as a way of running a company than the existing management of Boeing. So it changed different ways, different places. Hewlett-Packard, it lasted the old economy model into the late 1990s, and even though Hewlett and Packard who had founded the companies, were no longer active in managing it in the 1990s, David Packard, I think a year before he died, published a book called the HP Way which said, we don't fire people here, we keep them employed, we'd find other work that do. Then, at the back of the book, he had hooked at all the innovations we did over the decades with this model so that then gave it some legitimacy until they brought in a new CEO, her name was Carly Fiorina in 1999, and she went with the flow and turned it into a hire or fire company, company that shareholder value oriented. So you had this changes going on. If they hadn't had that change in the regulation at the Securities and Exchange Commission in 1982, well, you would have had to have at some point, but that's when it occurred. What happened then is that the agency itself turned from being a regulator of the stock market in this case to being a promoter of the stock market. It started being a promoter of the stock market by allowing companies to do something that was contrary to the original mandate, and supposedly, the current mandate of this SEC and that is to eliminate fraud and manipulation of the stock market. So pre-market repurchases, I would argue, are nothing but a manipulation of the market, and they're illegal. So hence, the license alluded, legalized looting of business corporation and their mass at which I could go into. Yeah. Oh yeah. We'll get into that with an example of a Boeing later, I think it's a fantastic example, it's really visceral, especially with what's happened recently. Yeah. But I wanted to get into some of the accomplices that these value extracting insiders have. You bring up two which are the value extracting enablers, and then also the value extracting outsiders. I think, both of them are equally implicit in this process. Why don't we start with the enablers? Yeah. Yeah, so beyond the value extracting insiders in the framework of the book, we then look at the enablers. So we put our money into securities to a certain extent. Increasingly not as individuals but indirectly through pension and mutual funds, and they hold about 60 or 65 percent of all the stocks outstanding. Stocks are still tend to be concentrated among the top 10 percent of income earners in the population, not everybody hold stock but a lot of our stock is controlled by pension funds and mutual funds. Let's say, the case of pension funds. I would argue, if you're running a pension fund, just from the point of view of those 2,000, 4,000 stocks or whatever you have in your portfolio. First of all, you're not going to know what's going on with those shares, you can't possibly know. But what you should want in general is a set of rules that say, "Okay, when companies can afford to pay dividends, they should pay dividends, and then under the rules for savings that we have, they'll accrue tax deferred until people want to make use of that money, pull the money out. If you have a pension, that's accumulating through dividend payments coming into the pension." But we don't want buybacks because buybacks are people who are timing the buying and selling of shares now. What we want is then to pay a reasonable amount of dividends and reinvest in the company so that if and when we sell the shares in the company at some future date, change our portfolio, those shares are likely to be worth more rather than less. From an individual point of view, that should be the same. If I have $100,000 and I'm putting it in the stock market, unless I think I have some particular insights from when companies are manipulating the market, I should put it into dividends stocks and I should look at companies that are reinvesting, and I should have a notion of what an innovative enterprise looks like which I'm not going to get from studying economics generally, but from understanding fact historically how business has become successful, and put it into those companies. Now, we could make mistakes but I would say, if you had a portfolio of those shares, you would do better. Now of course, one of the reasons we don't do it ourselves is because we can get diversification and expertise, etc. from the fund managers. But that's upon managers should be behaving but in fact, what turns them into enablers is the fact that they're being judged by the yields that they can get. In here, you can say quarter to quarter, I don't think everything is quarter to quarter but it often is in this world and that if someone else is getting a higher yield and you're not getting it, you might not be the fund manager for long. So everybody is looking to get those higher yields so they start trying to figure out: What are the companies that are going to get this price boost? They stop thinking or even trying to understand because of the way they're trained not just now in economics part, but particularly, business schools, they're just going to be thinking about how you diversify, get a high yield, etc.? They'll just go with the flow, so they become enablers. Now here's again regulation that made them more powerful enablers is that in the 1980s there was a movement in the name of shareholder democracy for shareholders to not only have votes but exercise more power in companies. Now in some level you might think that's a good idea but if shareholders are just people who buy and sell shares, it's not such a good idea from my point of view. In fact at the time the push really came not because more and more people were holding shares, but because shareholding was becoming concentrated among a few big asset managers which has become quite extreme now. You then have the question, what do those asset managers do with the proxy votes of those shares? Now an argument can be made that they're just holding the shares for you, why should they get the vote to share? Well, it was ruled basically they get the vote to share but in 2003 the SEC sanctioned a rule that says, "Not only do they vote the shares, they have to vote the shares." That gave rise to two companies, one existed ISS, it's for shareholder services, another Glass Lewis that divide up the market in proxy advising, and have very small number of people working for them and advising on massive numbers of proxy votes and then shareholder proposals. So they then became part of a system where if you could get them to advise in a particular way, then you could actually with a very small percentage of the shares of a company have an outside influence on the shares, and that's where the outsiders come in. They're the shareholder activists, the one we write about in the book is Carl Icahn has been around since the late 1970s, people like Paul Singer, Nelson Peltz, William Ackman, there's about a dozen of them. I wouldn't say in every case they go in and do damage, there are a few of them who try to get into companies and cooperate with the companies and invest for the future. But in general the way they're going to make their money is by getting them to pump money out of the company and figure out when to sell their shares, it doesn't mean they're going to hold up just for a month or two, they might hold it as we show with the case of Icahn and Apple for 30 months and took out $2 billion and $3.6 billion in just buying shares on the market. But in that period of time Apple did the highest amounts of buybacks of any company in history, this was in 2014, 2015 while Icahn was holding shares 45 billion in one year, 36 billion the next year, Apple actually this far outstrip that since then. But that was a game changer because now you take an iconic company that actually we document and stuff we wrote when Apple had previously gone to this kind of shareholder value mode which was between 1985 and 1997 when Steve Jobs wasn't there, they almost drove themselves into bankruptcies, jobs came back, it was retainer reinvest, we know the story, now they have lots of money. He died and Tim Cook became the CEO and since 2013 they've done 288 billion on buybacks, and just in case anybody thought that Warren Buffett who built up Berkshire Hathaway by protecting all those companies from the stock market is a patient capitalist, well he's not. He's now by far the biggest about 10 times the stake that Icahn has, and he's just a rabid cheerleader for stock buybacks to increase his stake. What that means is you're not going to replace in Apple, it means that Apple is not taking money, there's 288 billion just in buybacks since 2013 and investing in the Teslas and other companies of the future that it could be investing. This is even with someone like Al Gore on the board one of the longest standing board members since 2003 who is of course we all know him not just as the former vice president but one of the main advocates for climate change. What could Apple have done with $288 billion in saying we have a company that can hire the best people, that has iconic brand name, that can compete globally, can move into new technologies if it had gone into green technology, if it had gone in that direction which it hasn't? So that's a lost opportunity and you don't just recreate those companies to be in that position, to have all this money, they have the ability to track people, all that learning that's available. So we then get to these outsiders who have become much more powerful and were made much more powerful by this rule in 2003, this proxy voting system where you can hold a very tiny fraction of the shares, still a couple billion dollars maybe of a company like Nelson peltz at GE was never more than 0.8 of 1 percent of the shares. But get that company to just pump all kinds of money out of the company for the sake of shareholder value and cease to have any potential that it had to be the innovative company in the case of GE, we rely on GE, in the US is the big company wind energy. So what damage does that do to its ability to compete? Actually it's losing markets even in the United States with Danish company investors. So that's the kind of thing we look at and we see it again and again but we see that there's now this whole configuration of the insiders, the enablers, the outsiders, all focused on getting stock price up and buybacks [inaudible] in which they do that. We're saying, "Hey, let's stop letting them do this. Let's change the rules so that we have a system that doesn't allow this predatory value extraction, it allows the value creation, sharing the gains with the employees, paying us as taxpayers who help support this infrastructure, acknowledge decent tax rates so we can not only get a return on that but invest in the next round of innovation without the government going more into debt to support the companies in innovation." So that's the model we have and it's not the model we put forward, but it's not the model we have, we have this model which is really deeply entrenched now in what we call predatory value extraction. Well, and I thought also a really interesting transition you did was from Carl Icahn as the corporate raider where he's taking 25 percent stakes, and now he only has to take less than one percent stake. People would suppose maybe that that's because they're afraid of him becoming the corporate raider, but really all the incentives are aligned. He doesn't have to, it's really that he doesn't have to, not that they're afraid. So it was because of him that the term greenmail got coined. It actually only got used from [inaudible] and he went after a small number of relatively small companies that were locally based, and he started getting control and or threatening control. All he had to do was threaten and then they would buy him out greenmail, so they were doing that even before it got turned to greenmail. What you'd find is we've looked at a few of these cases is that within those companies there were some people, should we try to fight them off, should we let them in? There are some people who said, "Okay, let's do this, we'll get our stock price up," and often they had their own stock. So you start getting this aligning but sometimes it was called hostile takeover at that time because often it was seen as hostile, the people who are running the company do not want these outsiders like you can always say, "Well, they're incumbent, they'll just protect their own interests." It could be that those companies are not being run properly but it's not going to help to have someone come in whose only purpose is to get the stock price up, and using the ideology of shareholder value as to legitimize this. You have to understand the principles of innovative enterprise, and I think good executives do understand that. One case that occurred relatively recently was everybody probably knows about is Whole Foods, so Whole Foods is of course now owned by Amazon, but known as being a really good employer, charging high prices. Before buying it still? Yeah. People kept going, they're shopping there and in the fall of 2015 I was asked actually by someone in the democratic presidential of Bernie Sanders campaign actually, someone asked me. Why is Whole Foods because I've been saying Sanders should talk about buybacks. Why is Whole Food, they done about a billion of buybacks. Why did they do that? I looked at it, I saw that in fact in September of 2015 Whole Foods had laid off about seven percent of its labor force, about 1,400 people, and the stated purpose was that so they could charge somewhat lower prices to compete with Trader Joe's other premium brand. So I thought which are okay. That means the other 93 percent of the people are going to have to work harder, and then I did a calculation of what they did in terms of buybacks per laid off employee. It turned out $727,000 per employee. So if they hadn't done the buybacks, they could have kept those people employed with their benefits even if there are 60,000, which is probably high. They could've kept those people employed, and they would have had plenty of money to lower prices, and they wouldn't have force people to work harder who were the remaining people. That would have been much more rational thing to do. The reason they didn't do that was because they were being attacked by hedge funds. Now when just before or just after they sold to Whole Foods, the CEO of Whole Foods who was on the record of saying and it's one of the few times I've ever seen this calling those activists bunch of ********. Hardly anybody will speak out against, he actually did, but the reason he sold to the Amazon, what they used to call a white knight. There was someone there who could at least protect the company. Yeah. Then there was a logic in their business model. We see that going on still to some extent. Now the other thing that changed with someone like Carl Icahn. So although he was making lots of money. He'd actually want to end up having to take a run TWA because the green male didn't work, and he lost a lot of money in that. So the notion is you get in and you get out. The other thing that changed as he became wealthier, he didn't have to rely on other people's money. So in 2011, he, Icahn Enterprise is just his own money basically, and that gives him even more power because he doesn't need to keep his own investors aligned with the rate or whatever he's doing, and he always write from the late '70s when he started doing this, called this money his war chest. So the more he has the more value stack, the more of a war chest he has, the more power he has. I think the other thing that's going on is that on the boards of companies first at the all, I think there are a lot of people just believe in shareholder value. A lot of people on boards who don't have the slightest idea of what those companies are really doing in many cases, and you often can without a proxy fight just influence people on the board to say, yeah, back doing more buybacks, back pumping more money out, back things, do a merger, or do an acquisition, but through the acquisition so we can get control of the money in that company and pump the money out rather than do the acquisition so we can spend a lot of money to build that company up, and you don't really know what's going on. Another very important point is I can talk about an era back then when it was more retain with that. That's still going on in some companies now. I think this conflict is still going on now. So we talked about a tension between innovation and financialization, and you don't really know how it's being played out until you look at these companies, but there's much more forces are aligned for being played out on the financialization side than on the innovation side. So we touched on a few examples of places where stock buybacks and insiders, outsiders, enablers have allowed predatory value extraction to take over the place of re-invest and innovation. But I think the best examples right now that you can see because it's one thing to say the company isn't innovating anymore or they're not making as much money as they could be, but Boeing people are actually dying because of this process of the financialization of what was really an engineering company for so long, and I actually in a conversation with my father, he said they kicked the engineers out of the boardroom. Yeah. You brought it up earlier, I think it was 1997, they had that merger with what was the company? McDonnell Douglas. McDonnell Douglas and I think really just starting with that and moving forward, what happened at Boeing and how did we get where we are today? Yeah. So for Boeing was founded in 1916. It was the beneficiary of a lot of government subsidy, including a couple of acts from the Postmaster General Office in 1925 and 1930 that created subsidies for airlines to buy more advanced planes. I've written about this and Boeing emerged along with Douglas as the innovators, integrated wing, all metal fuselage planes, in the depths of the Depression between 1930 and 1932, and actually Douglas ended up doing better as a commercial company in the 1930s, and beyond Boeing was much more oriented toward the military side, but Boeing then with with the jumbo jets was able to emerge as a stronger company. There was Lockheed, there's a few other companies, and was able to then consolidate as the main, really the only big aircraft manufacturer in 1997 when it acquired McDonnell Douglas, and at that point you had Airbus which had been created from a consortium of European companies to be a competitor to Boeing which was rise as a competitor. It's well documented that there were a lot of financially oriented people who came into Boeing with the merger. Some of them had come from General Electric, and they started pushing shareholder value. That year actually in 1997, significant to other ways. That was the year in which the Business Roundtable declared that shareholder value would be the primary purpose of companies. This is an organization of which CEOs are members of major companies, and people might know recently this few months ago, they changed the tune on that. They said now we're run for stakeholders, but Boeing at that point actually turned to being a shareholder value company. The other thing that happened in 1997, it was the first year that buybacks surpassed dividends in the form of distribution of shareholders, and you had this stock market boom going on, and many companies trying to keep up with companies that had high-flying stocks by doing buybacks. So let's say Cisco, which ended up having the highest market capitalization in the world in March of 2000, didn't do buybacks. But other companies tried to keep up like Microsoft and Intel by doing lots of buybacks. So this was increasing. Now at Boeing by 2001, the top executives said we don't want to be too close to the engineers here in Seattle which was the original birthplace of Boeing and there have been for since 1916. So they moved their headquarters to Chicago, specifically to be away from the engineers. Now you started having, I mean, what's their business? Their business is producing major aircraft, the large aircraft and that time, they're still is the case. There are two companies capable of doing it. The Chinese are on the horizon, maybe the Japanese in the future. They needed a new long-haul plane, they had a new mid-range plane, and partly is because of advanced materials, avionics, and fuel-efficient engines. So they built the Dreamliner, which was what they call a clean sheet, well, it was a wholly new plane really. It wasn't even a replacement, was just a new plane. They had a number of problems with that in terms of the outsourcing of staff, they were doing a lot of outsourcing of capabilities. But they were doing that from the early 2000s. Then they knew they had to have a replacement for the 737NG and the 737 series was a single-aisle narrow-body planes for mid-range flights, which they call the workhorse. So this is the one it would often be the biggest selling plane and it would be one where they would be used for a lot of longer domestic flights, some shorter international flights. They had this architecture from the 1960s for the 737. It had been re-engined I think two or three times. The last one was 1993, which was called the 737NG re-engined. This mean they kept the same architecture and put a new engine on it. Already with the NG, which meant new-generation, which was a big-selling plane and their main competitor product in terms of these narrow body mid-range plane, they had a problem because of the wing being too close to the ground which Airbus did not have because their series, the 320 originated in the 1980s when you were using a loading equipment and you built the wing higher up from the ground, so you could put more of an engine, a bigger engine underneath. The fact is that the bigger the engine, the longer the fan diameter, the higher the bypass ratio, the more fuel efficiency, generally, other things equal. So this had already become a problem with the NG, it's actually doesn't have a purely round shape, it's flat at the bottom to give a bit of extra space between the wing and the tarmac. The fact is when they were thinking of what to do probably about 2003, 2004, 2005, they actually had a project called the Yellowstone project one to think about what they will really do to replace the 737NG. What they should've done, there's not a single doubt in my mind, what they should have done is what they call a clean-sheet replacement. They would have been able to take advantage of all the modern avionics, all the modern materials, and have plenty of space for the most fuel-efficient engine. That was on the books. Apparently, it was still a possibility even up until the spring of 2000 or summer of 2011 when they announced that they would do a re-engined plane, the 737 MAX. They did that also in reaction to the fact that in December of 2010, Airbus had put out the 320Neo using their company CFM, which is a joint venture between GE and Safran, the French company, LEAP engines which were much more fuel-efficient. Actually, the fan diameter on the LEAP engines that Airbus uses are 78 inches. So now this was a problem for Boeing because they're already had reached the limits. So there was then a debate at Boeing which I've been able to find a little information about of how big those engines could be. There was never even an issue that they could possibly be 78 inches, so it was a question on the NG. They had been 61 inches, the fan diameter, they may be up to 68 inches. In the end, they put some extra height on the front landing gear and they got it up to, was supposed 68 inches actually, 69 inches, so they reached the limit. If they hadn't done that, they would have been subject to a critique as they were, in fact, quite vocal from Airbus is that you weren't going to get the fuel efficiency on the MAX to compete with the Neo, and so that would have been a big problem. So they were trying to figure out how to get these fuel-efficient engines on there, given an architecture where you had to reposition them more forward, more upward. Okay. Now, here's something where a lot of people have opinions, but the investigations really haven't been done to really say what's going on and that is that the opinion, there seem to be widespread opinion that repositioning of the engines created a tendency of the nose to pitch up during takeoff when you're at on manual before you get up to your cruising speed, and if it went picked up too much, the plane could enter a stall and so you often, you want to get back to a safe, what they call angle of attack. This is something that pilots would be aware of and will be looking at readings from two sensors that are on the exterior of the fuselage. If they agree, then they just see what the angle of attack is. If they disagree, they would get a "light is on" the NG and say disagree, and then they would just shut the system off. They would just figure out how to get the angle of attack. They would Fly manual. Yeah. But what was happening here was that they put on a system which later became known as MCAS, Maneuvering Characteristics Augmentation System, that was doing this for them and they didn't even know about it until after the Lion Air crash which happened in October of 2018. So the timeline is the planes launched in 2011, at the end of 2012, they have 2,500 orders, just before the second crash of the Ethiopian Airlines plane that was in March 10th of this year, 2019. They had just over 5,000 orders, 387 delivered. The plane had been certified in March of 2017, the first delivery in 2018. Now a year and a half later, you have this crash and immediately, well, suspected that it was a faulty sensor. Then Boeing was forced to reveal when American Airlines pilots went after them, what's going on here that they had this MCAS system on there. They didn't call it that at first, but then they came known as that and they hadn't put it into the flight manuals, and there's all kinds of issues that have been written about whether they let the FAA, the Federal Aviation Administration know about the system or know how more powerful the system had become. There's a whole lot of issues of concealment that they're still being investigated in the Congress and the issue right now because as of today, what's today? December 6, 2019, those planes have not flown since last March 13th, none around the world, and nobody knows when they're going to fly. The issue is, are they going to fly? I wouldn't know whether I should bet on this because I don't bet. But I'd say the odds are in my view that they won't ever fly again, and that would be true if they have the structural defect, and there has been more evidence that there is this defect, that it's not just a software fix that it's going to deal with it, it is not a software fix that now pilots know about it in training. If it was, you will think the plane would be up in the air again. The other thing is you will think that Boeing would have come and rebutted the notion that it had this structural design flaw. Because obviously, that's out there, everybody is talking about it. You just see on the chats, in article people say, "It has a structural design." If that's not the case, they'll come out and say, "No, that's not the case." Now obviously, here, let's get to the crux of it, if they had built a plane they shouldn't have or should have built back in Well, when they had the choice in 2011, when they launched the MAX and they could have gone to the clean sheet replacement, by some estimates, it would have cost them $7 billion more, maybe $8 billion more to do that rather than the re-engine plane. It might have taken a year or two longer. But this was one of the greatest engineering companies in the world and there is every reason to do it in terms of material avionics, fuel efficiency to the plane. They actually still have it on their books that they're going to do it, that they should have done it then. They didn't. Why didn't they do it? Well, we don't know for sure. We have some possibilities, we do know that Southwest Airlines which was the biggest purchaser of 737 planes wanted a plane that would fly just like its previous plane so it didn't have to retrain the pilots, so the pilots were in an airport. They were going from an NG to a MAX that would be not going to a different type of plane. That might be in part of it, but they could have paid a million dollars per pilot to retrain them or they could have figured that out financially. It may be it is more speculative that they already are having problems with the Dreamliner, with all the outsourcing they had done which was part of their business model, and they didn't want to start that whole process anew at the same time with the mid-range planes, so that possible. Then there's also a possibility that's where the financialization comes in, but it's not the only reason. The fact is, the period when they've should have been thinking, how do we mobilize all our resources to build the planes of the future between 2004-2011? On top of paying very ample dividends, they paid $11 billion out in buybacks. So when you come to 2011, most companies stopped doing buybacks and a lot of them in 2009, in particular, at the financial crisis or a little reticent in 2010. When you actually should've done them- Yeah [inaudible] buying stock with the high prices. But that money would have come in handy, that money plus interest, that if they had had that. We don't know the reason. I think there really should be an investigation into why they didn't build the clean sheet replacement at that point. Once they went the route of the re-engine plane, if it's true and we don't really know, but there are congressional investigations that could find out that, that this plane had a design flaw that made it inherently unsafe and they didn't want their customers to know about this. So they tried to fix it with the MCAS and they didn't tell any about it. Well, that's pretty serious. Now, where does financialization come in beyond that? They didn't do much in the way buybacks. I didn't do buybacks between up through 2012. But in 2013, right at the beginning of 2013, they started doing them. By that time, it was clear that in terms of sales, that the MAX was a success. It's the fastest selling plane they've had in history. I think the NG might have sold more than they've sold so far. But in any case, the fastest selling plane, and this was looked pretty good. I mean Airbus was doing very well with its plane. So it wasn't just that it was a huge demand for planes which also particularly Lion Air was one of the biggest purchasers. It means that you're also getting huge demand for pilots. You're not going to have every pilot being trained as a military pilot. So we need planes. We need competent people, pilots. But when we get on a plane, we can't assume that Sully is on there, Sullenberger. Any case, at that point, we don't really know what they knew or they didn't know, but we do know that they started propping up their stock price. So between January of 2013 and the week before the Ethiopian air crash, they did 43 billion in buybacks, including about a little over 9 billion in 2017, 9 billion in 2018. Less than two months after the Lion Air crash, they increased the dividend by 20 percent. They authorized a new $20 billion buyback program. If it hadn't been for the Ethiopian air crash in March, they probably would still be doing buybacks and pick another plane that didn't crash. We're not sure. But I would have said, they probably would have done 12 billion this year or something like that. March first 2019 which is when the new dividend went into effect, they hit their all-time peak for stock price. The Ethiopian air plane crash, 10 days later. Now, here's the thing, that this might have occurred even if they hadn't been focused on their stock price. You might have had, I used the example of Volkswagen with the diesel emissions, not a particularly financialized company coming out of Germany. But if you're at the top of the company and you're trying to sell, meet regulations and you can fake the data and you can sell your cars, there might be some executives who are tempted to do that. Actually, I think, there are some in jail now because of that. Yeah. So it's not that it's only going to happen in a company that where you have all these buybacks going on and you're focused on your stock price, but it's certainly super charges, the incentive to do this. If the public is buying into the notion that a high stock price means a company is doing fine, then it creates a certain aura of success of that company. That it's got its high stock price, it must be okay. What's the frightening thing is that even after the Lion Air crash, when they knew that this may have been, they started discovering why this may have occurred, there is still an attempt by Boeing to blame it on the pilots to say that one particular plane was not air worthy and they doubled down, in a sense, on trying to get their stock price up. Meanwhile, the executives are doing very well. McNerney who had been the CEO from 2005-2015. I think we had something like $257 million went into his pocket as actual pay, a large percentage of its stock-based and other related to the higher profits which, of course, comes from having all the order for the plane. For Muilenburg, the current CEO, then now stepped down as chairman, but he was between summer 2015 when he became CEO and in the end of 2018 for which you have the data, it was about $2 million a month flowing into his pocket. Now that's a lot of money, even if you are successful in producing a safe plane because it's really the engineers, the whole. But if in fact you're not doing what you basically should do, is produce a safe plane, then it's a big problem. Well, the last thing I'll say about this is that a lot of the, and we have this in article in The American Prospect who published last May which talks about this. A lot of the notion, the ideology behind shareholder value is traced back to an article by Milton Friedman, a well known conservative economist for Chicago School in 1970 in the New York Times Magazine where he said, "The only social responsibility of a company increase is profit." This has actually came out in direct response to nativism and Ralph Nader and the push for more fuel efficient and safer cars. In fact, the context was that there are something called Campaign GM that wanted to put three public interest people on the board of General Motors to push for more fuel efficient and safer cars. Friedman publishes articles listed that by an editor at The New York Times and called this and it was repeated in some editorializing at the beginning the article by the editor, pure known and delta rated socialism just to be put. No, we know the future of the auto industry. Yes. They should have had people on there who were pushing for producing safer and more illustrated cards because that's what one out in the auto industry. So the only social responsibility of a company is, you could say is to produce fuel efficient safe car, which in fact, it's not a social responsibility, it's an innovative strategy. So he was basically telling people, saying that this pure knowledge [inaudible] socialism don't be an innovative company. So it comes full circle back to what the start of the book is about what a value-creating company is, what innovation is, where it comes from. It doesn't come from saying, "We're going to increase our profits." It comes from producing a high-quality product that people want, in this case, fuel-efficient cars, safe cars in the case of Boeing plane, for it and far most obviously a safe plane, and then getting a large market share to spread out the fixed cost and get economies of scale and make it more affordable and that's where we got productivity growth. That's where we get a basis for paying people higher wages, paying higher taxes. That's where we get deposit of some scenario in the economy as a whole. So Milton Friedman article was really putting the cart before the horse. Somebody saying, you want the profits? No. If you want the profits, produce the product that the market needs. They actually want. Yeah. Well, I think you make a very strong case, and I was hoping today we'd be able to get into your last five points. I don't think we have the time, so we'll leave it to everybody. If you want to hear Bill does lay out, he doesn't just lay out the problem, he also does give five points as to what he thinks will be the way to fix this problem of the lack of innovation in major corporations in America, but also across the globe. So Bill, I just want to say thank you for coming in today. It was really fascinating. My pleasure. Thanks. Did you know that some of our shows including the one that you just watched are available on Real Vision Free? As the name suggest, this is a free channel that is distributed via cable networks, Apple, YouTube, and most importantly, the biggest finance websites. This aggregation means that Real Vision Free is one of the biggest finance channels in the world. In fact, it gets in front of 50 million active traders and investors. You know what? 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