19:43
well I’d like to illustrate why it’s not
19:45
with a simple a simple analogy or a
19:47
simple story it’s a made-up story but
19:49
not really and it’s about a barrel of
19:51
tobacco now in the 18th century the
19:58
person who owned a plantation on the
20:00
James River and produced that tobacco
20:02
and sold it in barrels and used the
20:07
proceeds of those sales to pay all of
20:10
the expenses associated with the
20:12
plantation Shirley felt that at the end
20:15
of that process the money that he had
20:16
leftover was his just dessert he earned
20:19
it he earned it in a competitive
20:21
marketplace and it was his and anyone
20:25
who would take it away from him would be
20:27
stealing but over time the profits from
20:35
that barrel changed
20:36
they changed when we got rid of slavery
20:40
of course they changed when we passed
20:44
laws that says that sharecroppers had
20:46
certain rights relative to the owners of
20:49
the land they changed again when we
20:52
changed the minimum wage they changed
20:55
when it made possible for the workers on
20:58
that plantation to have unions every
21:01
time we change the rules the marginal
21:04
productivity of the market income of
21:07
both the people who planted and picked
21:10
the tobacco and the guy who owned the
21:12
plantation they changed and we can see
21:17
from that little example that all
21:19
markets operate within a set of rules
21:21
and norms and that those rules and norms
21:24
are highly subjective they are not
21:26
objective they’re political they’re
21:29
socially determined
21:31
and the implication of that is that if
21:34
market incomes are in fact subjective
21:36
and contingent and they can change when
21:40
you change the rules then in fact there
21:43
is nothing objective about what we earn
21:45
I could change the rules and instead of
21:50
earning eight hundred million dollars a
21:51
year Steve Schwarzman could earn you
21:54
know a mere four hundred and twenty five
21:56
million dollars a year and each of the
21:59
three hundred and seventy-five thousand
22:01
employees in the firms that he controls
22:03
could each earn a thousand dollars more
22:06
and that would still be market income so
22:10
it’s pretty clear that markets by
22:12
themselves are not an objective
22:15
determinant of your economic
22:17
contribution if I can monkey around with
22:19
it that much then there’s some there’s
22:22
some some part of that that is
22:25
subjective and not objective and once
22:29
you accept that then from a moral point
22:31
of view there really is no distinction
22:35
between what I’d call pre distribution
22:38
which is monkeying around with the rules
22:41
and the norms that change market incomes
22:44
and redistribution which is let’s leave
22:47
the norms ‘el and the rules of law alone
22:49
and we’ll just redistribute it
22:51
afterwards through taxes and transfers
22:53
morally there’s really no difference you
22:56
might prefer to do it one way or the
22:57
other but neither of them is theft
23:00
they’re both ways that we might want to
23:03
respond to things that we don’t like
23:05
about our system the third pillar is
23:09
that we don’t we shouldn’t care about
23:12
income inequality all that matters is
23:14
equality of opportunity at least from a
23:16
from a moral standpoint and you hear
23:19
that a lot from defenders of markets the
23:24
reality is and I think we all know this
23:27
equality of opportunity is unachievable
23:30
the data from social science it gets
23:34
complicated I read a lot of it and I’m
23:37
going to summarize it really simply at
23:40
least half the difference in the market
23:42
income between you
23:45
and you I picked you randomly cuz that’s
23:51
sort of statistically the way I had to
23:53
place it is explained by the result of
23:56
who your parents were both in terms of
23:59
your jeans and i know that’s
24:01
controversial but also in terms of
24:04
upbringing in terms of nature as well as
24:06
nurture yes we have gone a long way to
24:10
removing legal barriers that determined
24:14
wealth and income based on birth order
24:16
or title or class or race or gender yet
24:20
even the most well-funded and meaning
24:25
and well-meaning institutions can’t
24:27
close this this irreducible gap and I’ll
24:31
give you the example of Harvard
24:33
University which a few years ago had so
24:37
much money in its endowment not so much
24:41
anymore but in those days so much more
24:43
money that they decided to go to needs
24:46
blind admission which means that they
24:49
would admit the best class of students
24:51
that they could irrespective of who
24:53
needed what because they had so much
24:55
money it didn’t matter and in fact if
24:59
you had to if you had income below your
25:01
family had income below $65,000 and that
25:04
was back a few years ago you paid no
25:07
tuition at all and that no family would
25:09
be required to pay tuition of more than
25:11
ten percent of income and what was the
25:14
result of that basically that’s a
25:17
perfect meritocratic set up for the
25:20
arguably the best university in the
25:22
country
25:25
only 5% of those admitted came from the
25:30
bottom quintile the bottom 20% of
25:33
households by income and 21% only 21%
25:37
came from the bottom 60% me and Harvard
25:41
actually is now better than other elite
25:44
schools on that matter typically at
25:45
those other elite schools there are more
25:48
students from the top 1% than there are
25:50
from the bottom 50% despite all that
25:54
scholarship and all that meritocracy
25:57
education once the great equalizer of
26:00
opportunity has in fact now become an
26:04
instrument of inequality indeed and this
26:09
actually is not an original idea of mine
26:13
it’s actually 40 50 year old idea as as
26:19
the economy becomes more meritocratic as
26:23
barriers for race or gender or class
26:28
fall away in a competitive market that
26:31
only increases the importance of the
26:34
distinguishing factors that remain
26:37
factors like natural talent factors like
26:42
personality traits which are often
26:45
inherited or developed early in
26:49
childhood so we need to acknowledge the
26:53
limit of how much we can or even want to
26:56
equalize opportunity maybe some of you
26:59
have heard of Kurt Vonnegut’s dystopic
27:02
satire Harrison Bergeron which I don’t
27:04
think you have on sale here nobody reads
27:08
it anymore but it’s about a society
27:10
that’s fixated on equality of
27:12
opportunity and it’s an equality of
27:16
opportunity is enforced by a handicapper
27:19
general and the handicapper general
27:22
insists that all News announcers who are
27:25
hired have a lisp
27:28
and that smart people all smart people
27:31
have to go around wearing headphones
27:33
with music blaring in their ears to
27:35
distract them which by the way I think
27:37
has happened and people who are athletic
27:45
would have to walk around with backpacks
27:48
with weights on their back what Veronica
27:51
chose is that you know you want to
27:54
equalize opportunity you can get pretty
27:55
absurd of course if we want to try to
27:58
equalize things in terms of upbringing
28:00
we could take all children away from
28:02
their parents at birth and send them to
28:04
state-run boarding schools until they’re
28:07
17 and that would certainly equalize
28:10
that but we probably don’t want to do
28:13
that either
28:13
and so we’re left with a sort of
28:16
unpleasant conclusion which is equality
28:19
of opportunity is is neither possible
28:22
nor in fact desirable and if that’s the
28:24
case and if we are morally uncomfortable
28:27
with the fact that Steve Schwarzman
28:29
earns the same income as 15,000
28:33
elementary school teachers then we can’t
28:36
rely on equal opportunity to solve the
28:39
problem we have to address the problem
28:41
directly the final argument from free
28:44
marketeers is that it’s
28:46
counterproductive to slice the economic
28:49
pie into more equal slices because we’ll
28:52
only get a smaller pie that there’s an
28:56
absolute trade-off between equality and
28:58
economic efficiency and growth so I’m
29:03
going to ask you to think about a
29:04
thought experiment imagine the world in
29:07
imagine an economy closed economy in
29:11
which all the income is divided
29:14
perfectly evenly everyone gets exactly
29:16
the same now imagine another world in
29:22
which all the output all the income of
29:26
the economy goes basically to three guys
29:31
and everyone else has a subsistence
29:34
living
29:35
[Music]
29:37
we know that at either of those extreme
29:41
the
29:42
I gets pretty small you can ask anyone
29:45
from Soviet Russia about that first one
29:48
it’s pretty small but on the other side
29:55
you can imagine that it would be pretty
29:57
small too why would anybody actually
29:58
work harder take risks or share a new
30:04
idea with the owner if they were not
30:07
going to get anything from it if the
30:09
three guys who control everything
30:11
[Music]
30:14
continue to get everything so
30:16
intuitively we understand that at the
30:20
extremes it’s true there’s less growth
30:23
and that as you go away from those
30:25
extremes you probably get more growth
30:28
and there’s probably some sweet spot in
30:30
the middle of this curve at the top
30:33
that’s the nice balance between too much
30:38
and too little
30:39
equality there’s a lot of economic
30:41
literature on this and too much to
30:44
recall here but I wanted to share with
30:45
you a an experiment done by an economist
30:51
named Richard Friedman Freeman he misses
30:53
years ago he divided groups of graduate
30:56
students you for some reason
30:57
experimental economics is always done
30:59
with graduate students for reasons that
31:01
may be self-evident into three groups
31:05
and they were each group was told that
31:08
they were they was supposed to solve
31:09
some puzzles but the only indifferent
31:14
about the groups they were random was
31:15
that how they were going to be
31:16
compensated in terms of the prize money
31:18
and in won the prize money would be
31:22
distributed perfectly evenly everyone
31:24
will get the same to the winning team
31:26
and in the other it would be a
31:29
winner-take-all whoever on the team
31:32
solved the most would get the entire
31:35
prize and the third group was some mix
31:38
of the two everyone would get a minimum
31:40
and then there would be some sort of
31:42
bonuses for those who solved the most
31:45
well I think you probably know where
31:47
this is going hands down the group
31:50
repeatedly they did this experiment
31:52
repeatedly that did the best was the
31:54
group
31:54
that where everyone gets a minimum and
31:57
there were bonuses in other words some
31:59
sort of mixture now why is that the case
32:07
why is it that organizations like the
32:12
IMF which is not exactly known as a
32:15
hotbed of radical economic thinking has
32:18
concluded that the United States and
32:21
Britain are probably on the wrong side
32:24
of the sweet spot that we have much more
32:27
we have more room to be more equal
32:30
without going to the other side of the
32:32
curve and getting a smaller pie there
32:36
are several reasons they give and
32:38
there’s one that they sort of mentioned
32:40
in passing which I think actually is the
32:42
most important and that is that rising
32:46
inequality depletes the trust that we
32:50
have in each other and our willingness
32:52
to cooperate and the trust that we have
32:54
in institutions the willingness to
32:57
sacrifice what’s good for me in the
32:59
short run for what’s good for us
33:01
in the long run what creates and
33:04
sustains trust and cooperation as I said
33:07
before is our moral instincts there
33:10
simply aren’t enough police and courts
33:13
and lawyers although in Washington you
33:16
wouldn’t know that and auditors to
33:19
enforce honesty reliability cooperative
33:23
behavior we need social socially
33:29
enforced norms in order for a system to
33:33
work well we need to know that when we
33:35
stand at an ATM machine that the guy
33:38
behind me is not going to rob me we need
33:40
to know that when you go out in the
33:41
morning to get our newspaper that it’s
33:43
going to be there we need to know that
33:46
people line up at the cash register of
33:50
politics and prose and don’t cut in line
33:53
if there’s a line trust and cooperation
33:59
provides the grease to an increasingly
34:01
complex machinery of capitalism it gives
34:05
us the confidence to make investments
34:07
with people who
34:08
don’t know and don’t control to take
34:12
risks to buy products that we’ve never
34:14
tried before from people that we don’t
34:17
know trust and cooperation also grease
34:20
the increasingly contentious machinery
34:23
of democracy that allows government to
34:26
mediate between competing interests and
34:28
allows government policy to respond to
34:32
rapidly changing economic conditions now
34:35
we don’t have great measures of social
34:38
capital of trust but we have some the
34:43
most famous actually I don’t know
34:44
whether you’ve heard about this is the
34:46
old trick that Reader’s Digest did they
34:49
took wallets and they put some money in
34:51
and along with an address of the so
34:52
called owner of the wallets and they
34:54
left them on the streets in different
34:58
cities and and it had the address and
35:01
the phone number to see how many people
35:03
actually returned them called up and
35:05
returned the money and that’s one
35:07
measure of social capital you can do
35:08
that over time and you can do it over
35:10
and different different distances we
35:12
have another measure which is called the
35:14
General Social Survey this question is
35:16
asked of literally tens of thousands of
35:19
people around the world every year and
35:21
it’s a simple question agree or disagree
35:24
most people can be trusted maybe or
35:28
maybe you won’t be surprised to know
35:30
that in the United States measures of
35:33
social capital have been going down for
35:35
the last 30 years and are among the
35:37
lowest in the advanced countries though
35:40
not as low as they are in Italy I might
35:43
add we know that societies with high
35:47
social capital are healthier they’re
35:49
happier and it turns out they’re also
35:51
wealthier and the erosion of social
35:54
capital now puts us on the wrong side of
35:57
that sweet spot it means that if we want
36:00
to have faster growth we need to move
36:03
toward more equality not less so can
36:07
American capitalism survive it’s a nice
36:10
title wasn’t my choice but anyway
36:15
what was your choice
36:18
why greed is not good opportunity is not
36:21
equal in fairness won’t make us poor but
36:23
I got the smaller type
36:24
I think I’d answer the question this way
36:29
the story of the last three decades is a
36:32
story about a meaning of the moral and
36:35
ethical norms by which we establish
36:38
trust that encourage cooperation and
36:44
we’ve had a serious erosion of social
36:47
capital because of our embrace of this
36:49
kind of market fundamentalism the
36:51
delicate balance between selfish
36:54
individualism and cooperative altruism
36:57
that was identified by Adam Smith and
37:00
Charles Darwin as the key to human
37:02
progress that balance has been lost and
37:06
the result now manifests itself in a
37:09
skewed economy a polarized politics and
37:13
a dysfunctional a dysfunctional
37:15
government and a social fabric that is
37:18
torn and frayed and it’s been bad for
37:21
our economy it’s been bad for our
37:24
politics and it’s been bad for our souls
37:28
Thanks so if you have any questions I
37:37
think I’m supposed to tell you to line
37:39
up at those microphones and and and
37:42
we’re looking for questions not speeches
37:46
do you have an opinion on what senator
37:50
Sanders has proposed I believe he named
37:52
it after one of your employers the besos
37:55
Act yeah that would require certain
37:58
large corporations to reimburse the
38:00
government for public benefits that are
38:03
given to their imprint on their
38:05
employees in general my response to
38:10
things like that is it’s sort of a nice
38:12
instinct it’s a nice idea I don’t think
38:14
it would be very easy to do that and I
38:16
don’t think we have to do that that’s
38:19
sort of a that’s it’s sort of punitive
38:24
and it it it
38:28
you know I’m a market guy you know I
38:30
want capitalism to work I want markets
38:33
to work and that’s a little there are
38:39
better ways to do that we need a safety
38:41
net and we need to pay for that in a
38:43
progressive way and it may be that we
38:47
need to have laws that say you do some
38:49
things or you know a company has to do
38:51
some things or other things but this
38:53
notion of trying to figure out what the
38:56
employee what benefits the employees get
38:58
and then calculate that and then send
39:00
the bill to the to the employer I for
39:04
one thing it discourages people from
39:05
hiring low wage workers so yeah I don’t
39:09
think the incentive structure is a good
39:11
idea is is right for that yes even most
39:15
of your talk has been about individual
39:17
and group methodologies to do natural
39:21
things but what happens how is
39:24
government regulation how is the
39:27
president how is the Congress affecting
39:30
this what things should we well they’re
39:32
affecting it a lot they’re affecting it
39:35
a lot yeah you know you want to talk
39:38
about labor law you want to talk about
39:39
antitrust law you want to want to talk
39:41
about securities law all of those things
39:43
affect all of these things that we’re
39:46
talking about but for those of you who
39:49
will have this instinct that government
39:51
is going to solve this I would tell you
39:54
that it’s much more important that the
39:57
intellectual part of it which is that we
39:59
conceive of this differently and that we
40:02
come up with a set of you know social
40:05
norms where the social norms come from
40:07
they don’t come from the government and
40:09
and in the answers I don’t know where
40:11
they come from that’s sort of magical
40:13
it’s some one of the things that
40:14
actually academics are looking at quite
40:18
quite seriously now which is where does
40:20
social norms come from you know we had a
40:22
social norm that to be to be married you
40:24
had to be heterosexual and then you know
40:26
one day we turned around and that wasn’t
40:29
a social norm that changed very fast but
40:31
there are other social norms that take a
40:32
long time to change so I can’t tell you
40:34
how we change them but it’s much more
40:36
important to change the norms it’s much
40:39
more important for this
40:41
teve Schwartzman’s of the world to be
40:43
embarrassed by their thing because we
40:46
can’t write enough laws to make Steve
40:49
Schwarzman behave the right way and you
40:51
know what as soon as you write them
40:53
they’ll figure out a way around them and
40:55
then we’ll get really be in a
40:56
cat-and-mouse game it’s it’s sort of
40:58
more important to think a little more
41:00
intellectually about you know what this
41:02
thing is called capitalism and what we
41:04
like about it when we don’t and talk
41:06
about it and use social pressure you
41:09
know the me to movement is probably done
41:12
a lot more for protecting women from
41:16
harassment and worse than any laws that
41:20
we pass and and I think it’s more
41:22
important that we not jump to a
41:24
government solution for everything being
41:26
not because I’m against regulation I
41:28
actually am NOT but that’s probably
41:30
those should be the last things we think
41:33
about not the first things I completely
41:37
disagree I figured you would I remember
41:41
I I’m old enough to remember when we had
41:44
norms and we had social democracy and it
41:48
was called the New Deal and it worked
41:50
and we talked about Keynes and the idea
41:54
that to have an economy grow you had to
41:59
have you didn’t give the investors of
42:00
money you made sure that people had
42:02
enough money to buy things I mean they
42:05
had spent ten years in the depression so
42:07
people understood that and what changed
42:12
was government the the New Deal the
42:15
labor laws Social Security so older
42:18
people have money securities regulation
42:22
and with it came norms so that George
42:28
Romney made $300,000 a year running a
42:31
real company that made real stuff and
42:33
Mitt Romney made millions of dollars a
42:36
trading company so what is anything
42:39
that’s your question and I’m gonna
42:41
answer it really succinctly okay which
42:43
is that I’m almost as old as you are
42:52
if if CEOs in the 1950s and 60s had
42:57
wanted to beef jerkey had wanted to pay
42:59
himself more 300 million rather than
43:02
nine three million or whatever three
43:04
hundred thousand he actually had the
43:06
power to do that the boards were more
43:09
captive back then than they are today
43:10
and he couldn’t he could have done that
43:13
toward whatever was equivalent back then
43:15
he didn’t do it and the reason he didn’t
43:18
do it is if he did it he would have felt
43:21
guilty and he would have been socially
43:23
shamed and I’m not saying just socially
43:25
shamed by his workers he would have been
43:28
shamed if he went to this if he went to
43:31
the Country Club in the locker room the
43:35
other CEOs would have said George that’s
43:38
very piggy of you and it makes all the
43:41
rest of us look bad and anyway we’re
43:43
trying to feat fight socialism and
43:46
you’re going off and paying yourself 300
43:48
Millions so it was a social norm that
43:51
prevented George Romney not the New Deal
43:53
from paying himself 300 million dollars
43:55
and his 50% or 60% or ninety percent
43:58
income tax yeah nobody paid that and
44:02
that’s that’s a sort of left-wing sort
44:04
of urban myth that people paid ninety
44:07
percent taxes they didn’t no one was
44:10
that stupid anyone who made that much
44:12
money was not that stupid to pay ninety
44:14
percent taxes but that’s what the
44:16
official tax rate was but that’s not
44:19
what people pay though they they did pay
44:21
more than they do now rich people but
44:23
they didn’t pay ninety percent had you
44:26
asked me my reaction to your first
44:29
example of presumably bad corporate
44:32
behavior a New York life’s decision to
44:35
outsource its IT services to India my
44:38
response would have been that’s
44:40
globalization and I’m surprised that you
44:44
used that example to illustrate the what
44:48
you believe the flaws are in American
44:51
corporate behavior do you in fact think
44:55
we should start slowing the process of
44:58
globalization its impacts on the US
45:00
economy and if so
45:01
don’t you go about it I don’t and and I
45:04
gave that example to emphasize the
45:06
second part of it which is in order to
45:09
get your severance you have to train
45:10
these guys that’s that’s what that’s
45:14
what gets us angry okay it’s not the
45:16
first thing okay it’s the second thing
45:19
that’s not the way you treat a human
45:22
being who has been your loyal employee
45:24
for thirty years now it may be you you
45:27
know you have to you have to you have to
45:29
move your IT operation for competitive
45:32
reasons there so I’m not against that I
45:34
said to you when I started that these
45:36
were useful ideas in the 1980s and one
45:38
of those was rearranging where work was
45:41
done so that it could be done in the
45:42
most cheap and efficient way but there
45:45
are ways to treat people and there are
45:48
other ways to treat people and that was
45:50
my that’s the example and that has to do
45:52
with maximizing shareholder value I
45:55
think if that’s taken things too far
45:58
[Music]
46:00
hello what I what I want to ask you
46:08
about is what you’re saying
46:11
I agree with most of it but nevertheless
46:14
at this point I think we have to make
46:17
like giant steps and what I’m suggesting
46:20
is is that we have to have a public
46:24
discussion on how we want to format what
46:29
we do to move forward in other words
46:31
what are the economic factors we have to
46:34
look at cash flow what it takes to live
46:37
what the distribution is where the
46:39
aggregates are mm-hmm
46:41
and we haven’t in my opinion started as
46:45
a culture either nationally or
46:47
internationally to start to do that
46:49
because if we never get rid of the
46:50
aggregates in our culture that’s power
46:53
the aggregates meaning what aggregates
46:56
of wealth aggregates of power control
47:00
universities I mean look at everything
47:02
that goes through Yale you cannot you
47:05
cannot suggest somebody for anything I
47:08
mean I’m being exaggerating here but it
47:11
comes up over no
47:12
over and over again now what’s the
47:13
reason are the all the smart people
47:15
there I am not sure about that but my
47:19
point is we’re not analyzing it at my in
47:23
my opinion quickly enough to project
47:27
what it might look like where we want to
47:29
go because this is a big big deal I
47:32
guess what I would say to that is we
47:36
first have to have a functional politics
47:40
and in order to do that we have to learn
47:44
to trust each other a little more and
47:46
learn to compromise and learn to
47:48
cooperate and until we can do that you
47:52
really can’t fix anything it’s not that
47:56
we don’t don’t have ideas for how we can
47:59
make things better but we actually now
48:01
have very little process to do that and
48:04
to sort of have the conversation that
48:07
you’re talking about we talk past each
48:09
other now or I don’t know but when we’re
48:13
you know I for the last 30 years have
48:16
been writing about economic policy
48:18
you know that’s my life it’s not worth
48:22
my time to write about economic policy
48:23
anymore Who am I writing it for you know
48:26
who’s who’s gonna do anything it’s a
48:30
waste of time
48:30
so until we fix the plumbing which
48:34
includes sort of having a different
48:37
perspective on these things and talking
48:40
more about virtues and a little less
48:43
about income shares I don’t think we can
48:47
really address this thing we need to fix
48:49
the plumbing first well the guys Dave I
48:54
thought this was the Kate Atkinson talk
48:56
but I guess right so I walked in here
48:59
and here we are in a very high micro
49:01
economic plane I hadn’t expected so yeah
49:04
pardon my question is this guy this guy
49:07
by the way it was my college roommate so
49:11
it wasn’t hard I try to introduce myself
49:13
as Steve Schwarzman but I didn’t think
49:15
that would fly so I’ve been exposed but
49:19
I’m gonna ask you a very specific
49:21
microeconomic question I don’t know if
49:23
it’s discussed in a book of such high on
49:27
such a high philosophical plane but
49:30
where do you where do you come down on
49:32
minimum wage laws especially national
49:35
minimum wage laws as opposed to
49:38
collective bargaining established rates
49:41
of wages
49:42
well I if you can comment also on on how
49:47
you feel about that most recent local
49:49
product of that DC tipped wage Act
49:54
that’s because so the last thing is I
49:56
don’t really understand the tip wait I’m
49:58
not smart enough to understand what that
50:00
bill did so I think we can talk about
50:02
that afterward but minimum wage Earned
50:05
Income Tax Credit and and a greater a
50:09
greater possibility of unionization are
50:14
all part of what we would need to do I
50:17
think to change the rules so that the
50:21
market incomes come out a little more
50:23
equal all of those some people by the
50:25
way I don’t know I’m not going to go too
50:27
much into this think Earned Income Tax
50:28
Credit is all you need to do you don’t
50:30
need to do minimum wage
50:31
some people think $15 minimum wage is
50:34
what you should do and you don’t need to
50:35
spend so much tax dollars on earned
50:37
income tax credits I think actually a
50:39
combination they each have different
50:41
perverse incentives and disincentives
50:42
and so if you had both of them working
50:45
together it would be better and it would
50:47
also be better if the possibility of
50:51
organizing a union were much more
50:53
realistic right now any company that
50:56
wants to prevent a union from being
50:58
organized can do so basically he’s a
51:02
labor lawyer so he knows that you can
51:04
fire all the people who try to unionize
51:05
and they will punish you but that they
51:07
will punish you but that 15 years later
51:09
it’s illegal but they’ll punish you 15
51:11
years later what’s more important and
51:14
what used to be true is that companies
51:16
that treated employees like that were
51:18
shunned in fact one of the most hopeful
51:22
things that I
51:23
see happening in the area of companies
51:27
that sort of ruthless and always trying
51:29
to maximize shareholder value is that
51:31
those companies actually are now having
51:33
trouble attracting young employees who
51:36
won’t tolerate it and they won’t get
51:39
good young employees if you if you
51:41
behave in that ruthless manner and and I
51:44
think that actually is the most hopeful
51:46
thing that I have seen and by the way
51:48
that’s not a law that’s social norm
51:51
whereas employees won’t work for
51:53
companies they think are disloyal and
51:55
ruthless or environmentally
51:58
irresponsible or treat other employees
52:03
you know and in that way so that to me
52:08
is is is a more important way to go and
52:12
to think about how we encourage that
52:14
yeah I I’d submit to you that what we’re
52:16
upset about is that wealthy people in
52:19
our society don’t play by the same rules
52:21
as we do and we’re not as upset about
52:24
Steve Schwarzman making 820 million
52:26
dollars what we’re upset about is that
52:28
he’d lot he likely pays the income tax
52:31
rate at the carried interest rate that’s
52:32
where upset about well that’s something
52:34
that’s obviously a big that is writing
52:36
deal like that but you know I I hate to
52:38
do this but I want to put your employer
52:39
the employer up it as as Exhibit B yeah
52:43
which is you know my employer X okay but
52:46
you’re who owns the company and that is
52:48
here you have a company that’s asking
52:50
for public subsidies and rumor has it
52:52
that one of them is we want to keep the
52:55
withholding tax from the state that
52:57
that’s part of what’s on the block that
52:59
rubs this is on that rubs me is very on
53:02
good that’s good okay right that that’s
53:04
alright so I submit to you that it’s
53:06
really a fairness thing not a not a
53:09
social norm
53:10
well fairness is a social well okay you
53:20
know there are some communities that
53:23
offered him a lot of money or offered
53:25
Amazon a lot of money where the
53:27
politicians had to go back and say I’m
53:28
sorry we were drawing our offer and why
53:31
did they do that well they heard from
53:32
their constituents who were offended by
53:34
it right but what I’m saying is that
53:36
they their men
53:36
populating the laws – for example have
53:38
carried interest tax rates and and so
53:41
therefore what therefore make things
53:44
transparent so that you don’t mind if he
53:46
makes eight hundred and twenty eight
53:47
hundred twenty million dollars as long
53:49
as he pays thirty seven point four
53:51
percent or whatever the tax rate is on
53:52
all amounts above 1.2 million that’s my
53:55
point
53:56
well let me just respond to that by
53:57
saying you’re worried about the carried
53:59
into hit the tax rate that he pays I
54:01
worry more about the fact that his firm
54:04
earned so much profit above what is a
54:09
normal profit that the markets he
54:13
operates in are uncompetitive and that’s
54:15
a bigger thing to be concerned about and
54:17
it does have to do with securities laws
54:19
and other kinds of laws then worrying
54:22
about his carried interest benefit which
54:24
is which is outrageous
54:26
also but the bigger problem is why does
54:30
his firm earn enough to pay him that
54:32
much and that’s the bigger problem for
54:36
not adding that much to the economy I
54:39
mean he’s not like he’s you know it’s
54:41
not like his Bill Gates and he invented
54:42
some great thing that improves all of
54:44
our lives or something like that or
54:45
Facebook if you think that did but um
54:48
but he didn’t do it he didn’t invent
54:50
anything he didn’t improve you know he
54:52
didn’t even write a good book yeah so
54:57
this might be a utopian question or just
55:00
a stupid question but I’ll ask it anyway
55:01
so it seems like the the nature of work
55:06
is evolving that there are factories
55:08
that are being designed with no human
55:09
work at all and so with artificial
55:12
intelligence so given all of those
55:14
trends how does any of that impact on
55:17
what you’re talking about that that work
55:19
will be defined differently or who does
55:21
work will be done differently so there’s
55:25
in economic these days is sort of two
55:28
camps one camp worries a lot about
55:33
artificial intelligence taking all the
55:35
jobs away and there’s not going to be
55:38
anything for the everybody to do and it
55:42
will make inequality worse I am just not
55:45
in that camp the sweep of history and
55:50
economic history
55:51
that we’ve had those kind of advances
55:53
they’re lumpy they do they do it’s not
55:55
like it’s a nice steady curve they do
55:57
come in waves and the transitions can
56:00
sometimes be hard but you know it’s sort
56:03
of what I teach in in economic
56:06
principles if you make the economy more
56:08
productive
56:10
it makes the pie bigger and you might
56:13
have some issues about how you divide
56:15
the pie but you know there won’t be
56:19
people in those in those factories doing
56:21
those things but I’ll give you a little
56:25
example I don’t know 20 years ago if you
56:29
said I had a personal trainer everyone
56:32
was in now
56:36
I don’t know there’s a lot of personal
56:37
trainers around so you know when we have
56:40
more money and when we’re richer we find
56:43
things to do with it and that often
56:44
involves service and that often involves
56:46
people and not robots and you know we go
56:49
out to more restaurant meals so there’s
56:50
gonna be more people working in
56:51
restaurants yeah III just you know is it
56:56
possible that this is this is a sort of
56:58
this this is the one time where it won’t
57:02
work it’s possible but III don’t think
57:04
so
57:06
one more says boss
57:12
I remember reading got the rise of the
57:15
meritocracy by Michael Young yes forty
57:17
years ago forty year he warned about
57:19
meritocracy he was the one any point any
57:22
coined the term meritocracy do you have
57:25
that book I’ve been trying to get my
57:32
book club to read it for 20 years you
57:34
know I I just I just reread it you don’t
57:37
want your book club reading it why not
57:39
it’s really hard to read well yeah but
57:42
it’s cool it’s very dated and easy brick
57:48
right he’s a boozer breathless he’s sir
57:51
Michael yelling well anyway someone
57:53
already asked about my first course it
57:55
was gonna be about Earned Income Tax
57:58
Credit yeah and a basic perhaps a naked
58:01
a negative income tax a guaranteed
58:03
income for everybody
58:05
for that if you in the last chapter I
58:06
talked about my version of the ubi but
58:09
and it’s more like a negative income tax
58:11
and it is the others but which guess who
58:13
came up with that right Brit anyway but
58:23
so suppose you did that yeah do you
58:28
would you agree I think that a large
58:33
part of what’s going wrong for us now is
58:35
that people are self segregating by
58:36
income because our schools are paid for
58:38
by real estate taxes have you read the
58:41
book because you you know that’s exactly
58:44
what I think is a big problem oh I think
58:50
so you know geographic segregation in
58:54
terms of equality of opportunity the
58:56
biggest challenge is this you know sort
58:59
of geographic segregation by class and
59:01
you know it was in 1954 how many years
59:04
ago was that fifty four years ago that
59:07
the Supreme Court said segregation by
59:09
race was unconstitutional and we need
59:13
new law now and you know I don’t think
59:16
we’re moving in that direction this week
59:17
in the Supreme Court but we need a court
59:22
to say segregation by class is also
59:26
unconstitutional
59:31
we didn’t we were a classless society
59:34
remember everybody if you were stinking
59:36
rich you assumed you’re gonna try to do
59:38
something useful well I don’t at least
59:40
that I I don’t I don’t I don’t think
59:43
necessarily rich people are any more
59:46
evil than necessarily they used to but
59:50
anyway but you made a very good point
59:54
which is that that selves first of all
59:57
the big sort there’s a book called the
59:59
big sort that probably is here and you
60:01
should read it it’s a great book but we
60:03
are sorting ourselves by education and
60:05
income and and that gets reflected in
60:08
where we live and that gets reflected in
60:10
where our kids go to school here’s a
60:11
little data point the socio-economic
60:18
the average socioeconomic status of the
60:23
kids in a class is a better predictor of
60:28
the kids educational performance than
60:32
his own or her own economic situation in
60:35
other words if you send rich kids to
60:37
poor schools they don’t do as well if
60:40
you send poor kids to rich schools they
60:43
do better that the class that they’re in
60:46
the socio-economic makeup of the class
60:48
they’re in is a better determinant is a
60:50
more is a better predictor of their
60:53
educational performance than their own
60:55
families and that tells you that you
61:00
know we need to worry about this
61:02
segregation by class and in school rooms
61:04
because it’s having a bad effect
61:07
particularly on poor communities thank
61:11
you very much
61:12
[Applause]
61:25
you