Caroline: Now, without further ado, please help me in welcoming the senior editor-at-large for "Fortune" magazine, Adam Lashinsky, our moderator for this evening.[applause]
Adam Lashinsky: Thank you, Caroline. This truly is my favorite part of the evening.[gavel banging]
[laughter]
Adam: It's never as loud as I'd like it to be. Good evening and welcome to tonight's meeting of the Commonwealth Club's INFORUM, "Connect to your Intellect."You can find INFORUM online at inforumsf.org. I'm Adam Lashinsky, that's @adamlashinsky on Twitter, Senior Editor-at-Large for "Fortune" and your moderator for the evening.
Tonight, we're here for INFORUM's event, Tom Perkin's "The War on the One Percent." Tom Perkins, seated next to me, is co-founder of a venture capital firm Kleiner, Perkins, Caufield & Byers. An alumnus of Harvard and MIT, he's a renowned businessman and, as everyone in this room knows, an outspoken capitalist.
In January of this year, shortly after his 82nd birthday, is that correct, Tom?
Tom Perkins: Yeah.
Adam: He wrote a controversial letter to the editor, which was published in "The Wall Street Journal." The letter has since gained notoriety for the parallels it makes between Jews in Nazi Germany and the current one percent.Here in the Bay Area, Tom's comments on income inequality feel particularly relevant, given the current tensions brewing among San Franciscans and what it is known as the "Techie" community.
Without any further introduction, please join me in welcoming Tom Perkins.
[applause]
Adam: Tom, I want to start at the very top, which is to ask you what the catalyst was for your writing this short letter to "The Wall Street Journal?"
Tom: Well, I think frustrations had been building up for a long time about what I see as the demonization of the rich. It was a particularly nasty attack on my ex-wife, which triggered my response.I thought, being a Norwegian knight, I should ride to her defense. I spilled a little more blood than I had planned, but I'm not sorry I did it.
Adam: I should point up that your ex-wife, Danielle Steel, is in the front row of the auditorium this evening. She came to hear you speak. You refer to an attack on her. Explain. Where was this attack? Whose attack was it? What was the attack?
Tom: I don't want to spend a lot of time on this.
Adam: Nor do I.
Tom: Over the years, the "San Francisco Chronicle" has had a series of attacks on her. I won't go into all of them, but there have been a lot of them. Among one of the attacks is she's number-one bestseller usually on every book. "New York Times," number one. Obviously, her books are being read in San Francisco, but they're never reported in the "Chronicle," ever.Anyway, that is what started it all.
Adam: You decided to write a letter. You were angry about an attack in the "San Francisco Chronicle," so you wanted to write about income inequality. Tell everybody briefly what you said in the letter and what your goal was.
Tom: Well, it turned out to be the most widely read letter in the history of "The Wall Street Journal," which of course is surprising. It's because I used a forbidden word. I used the word Kristallnacht, which shouldn't be used ever, I suppose. You shouldn't compare anything to the Holocaust, for example, because it's incomparable, and the same with Kristallnacht.Anyway, I said, "Is there a progressive war on the one percent that could be like the Kristallnacht?" That got everybody's attention.
I made the point that in Germany, one percent of the population was Jewish. A mad, fiendish dictator used incredible political skills to focus hatred on that one percent and used it as a steppingstone to power.
I saw a parallel between our one percent, here in America, and that one percent. That's the parallel I drew.
Adam: You've subsequently apologized for having used the Nazi reference. You quickly follow that up by saying you are not apologizing for suggesting that victimizing a small minority is a bad idea, period, and that was your point. Correct?
Tom: That was my point. I just would like to talk about this word for a minute. "The Wall Street Journal" on February 4th ran a rather long op-ed piece, which I have extracted to be very short.It's by a professor at Harvard, Ruth Wisse. She's a professor of Yiddish and comparative languages. She has written a couple of books about the Nazis and the Holocaust. The headline is "The Dark Side of the War on the One Percent."
"Two phenomena, anti-Semitism and the American class conflict, is there any connection between them? In a letter to 'The Wall Street Journal,' the noted venture capitalist Tom Perkins called attention to certain parallels, as he saw them, between Nazi Germany Jews and American progressives' war on the one percent."
"For comparing two such historically disparate societies, Mr. Perkins was promptly and heatedly denounced, but there is something to be said for his comparison of the politics at work in the two situations." Then this is, "Are you unemployed? The Jews have your jobs. Is your family mired in poverty? The Rothchilds have your money."
"The parallel that Tom Perkins drew in his letter was especially irksome to his respondents on the left, many of whom are supporters of President Obama's sallies against Wall Street and the one percent. The ranks of those harping on unfairly high earners are playing with fire. Anyone seeking to understand the inner workings of such a campaign will find much food for thought in Mr. Perkins' parallel."
Adam: I think our overall goal for the evening is to explore as much as we can the subject of inequality, and why inequality is such a hot-button issue. On the subject of her academic point, it was written in a very academic way. It's clear that's her profession.You must see the difference between, on the one hand, a one percent, a small minority that was essentially powerless being persecuted by a majority, and on the other hand, a small minority that is extremely powerful. That has all the resources of modern society and wealth being persecuted, I'll grant you, by a majority, namely the other 99 percent.
Although, the group you're actually referring to is, at various times, several hundred protestors who are angry.
Tom: No, I think the parallel holds. The typical German had never met a Jew, but some of the Jews were extremely wealthy. They owned the large department stores, and so forth and so forth. They were very prominent. I think it's a very good parallel and it holds.
Adam: You're saying that the average Occupy Wall Street protester has never met a rich person, or somebody who rides a Google bus. Is that your point?
Tom: Probably, I think so.
Adam: Do you concede the point that...? Now, you've chosen to speak for the one percent. I admire you. Not only do you have the courage of your convictions, but you have them repeatedly. This isn't the first time you've stepped up to defend yourself.The one percent has certain advantages and ways of defending itself that an ethnic group that is being persecuted, that is small, does not. I bring this up to ask you...
Tom: I think I've answered that already. I think if Germany had had American gun laws, there would have never been a Hitler. Now, that's controversial.
Adam: If Nazi Germany had gun laws?
Tom: If Germany had America's gun laws.
Adam: America's gun laws, making guns widely available to the public.
Tom: To anyone who wants them, yes.
Adam: That the Jews then would have been able to defend themselves?
Tom: Hitler would have never come to power.
Adam: Interesting.
Tom: So there.
Adam: [laughs] We're really straying off topic, and we won't dwell on it, but you're a fan of our current gun laws?
Tom: No, not particularly, but it's in our Constitution. I'm a fan of that. I don't have any guns.
Adam: [laughs] OK.[laughter]
Adam: We will agree to disagree. We will agree that we won't illuminate your thinking anymore on the comparison of the rich one percent with the Jews in Nazi Germany.
Tom: I'd like to talk about the nature of the persecution of the one percent, here in America, right now.
Adam: Sure.
Tom: I'd like to start with some facts, which are always useful.
Adam: They may or may not be useful, but go ahead.
Tom: Well, we'll see. First of all, I don't think anybody has any idea what the one percent is actually contributing to America. Let me just get into that very quickly. I've got it here somewhere.Let me talk a little bit, before I do that, about the persecution of the rich. I'd like to take the Koch brothers. There are three of them. I know one of them, Bill, who has nothing to do with the other two that are highly political. They're all big contributors to charities and so forth.
David Koch was on the board of New York Presbyterian Hospital. The hospital was going bankrupt, so David gave $100 million to the hospital. That was interpreted as Koch buying the hospital for the purposes of firing the nurses and destroying the nurses' union.
There was a big rally and all kinds of important people showed up. The nurses said, "The Koch brothers have a plantation mentality, anti-union to the core." Harry Belafonte called them white supremacists.
Then, let's see, Letitia James, who was head of the union, said, "Right-wing, anti-union profiteers like David Koch should not be meddling with health care in New York City. All have to stand together against the Koch brothers coming to New York City."
Adam: Tom, so far, these aren't facts, other than the $100 million.
Tom: The rally and what people said are facts.
Adam: Oh, I see, the facts are what people said, but you wanted to talk about the contribution that rich people make, which I think is an interesting line of discussion.
Tom: Let's just start with simple arithmetic. Let's say you're a successful author. Your income is taxed at a little over 50 percent if you live in California. On your death will be another roughly 50 percent tax.Out of the dollar you originally made, you kept 25 percent, 25 cents. You gave 75 percent of your lifetime's work in the form of taxes, not including property and other taxes. That's on an individual basis.
I just learned something today that I suspect nobody in the audience is familiar with, maybe you are. If you sell your home and you're making more than $250,000 as a family, there is a capital gain on the home. Let's say you sell it. You want to buy a retirement home or something. Obamacare has added a 3.8 percent tax on your gain. How many of you knew that? Oh, quite a few, all right. I didn't know.
Finally, let me get to the actual statistics. I'll make this brief. The top one percent...I got this from the Tax Foundation. These are facts.
The top one percent of taxpayers pays a greater share of the income tax burden than the bottom 90 percent combined, which totals more than 120 million taxpayers. In 2010, the top one percent of taxpayers, which totals roughly 1.4 million taxpayers, paid about 37 percent of all income taxes. This is a big jump from 1985, when the top one percent paid a quarter of all income taxes.
Indeed, the income tax burden on the bottom 90 percent has dropped. The bottom 50 percent pays only 2.4 percent of the total taxes. The top 10 percent of taxpayers, the top 10 percent, pays 70.6 percent.
The argument of the rich are not paying their share, as Obama likes to say, and they could do more, and so forth and so forth...
Adam: Let's be clear about what we're talking about. The argument is that there is a war against the rich and that the rich are being persecuted. We're not having a conversation about whether or not the rich are doing enough. Your argument is that the rich are being persecuted. That's your point. Is this the persecution that you're referring to?
Tom: Well, of course. I think that taxation, I wouldn't say it's a form of persecution, but the extreme progressivity of the tax rate is a form of persecution.
Adam: The extreme progressivity is not new. Secondly, it's...
Tom: It's getting worse.
Adam: First, it got better, to use your terminology. Now, it's getting worse, to use your terminology, but it's not unprecedented. The republic thrived and withstood high taxes before, and likely will again. I'm trying to put this in the scope of history to ask you where is the persecution in that?
Tom: I think if you've paid 75 percent of your life's earnings to the government, you've been persecuted. Let's just sum it up that way.Meanwhile, let's get back to the 99 percent for a minute and talk about them. They are not doing very well. They're doing extremely badly. Their income, I've got data on it. In 1985, the average family making $250,000 a year paid 40 percent income tax. Today, they pay 47 percent income tax. About half of that increase is Obamacare.
Adam: I think we can all agree.
Tom: Nobody is having a wonderful time with taxes.
Adam: Well, it's an interesting point. I think everyone in the room would agree. It's part of the reason why people came out to hear this conversation. The 99 percent, for lack of a better expression, because it's an inelegant and imprecise measure of those who are not super wealthy, are hurting, to make a generalization. There is income inequality. You are agreeing with that.
Tom: I am totally agreeing with that.
Adam: The question is what to do about it, first of all. Secondly, there is a perception that you ought to address. There is a perception in the country, in San Francisco specifically, that the people who are making this great wealth essentially don't give a damn.
Tom: Well, I give a damn and I'm concerned about what's happening to the non-one percent.San Francisco doesn't like the experience of becoming a suburb of the Silicon Valley. That's what's happening.
Adam: Explain. I feel like San Francisco, relatively speaking, especially in the technology community, is thriving as a center of job creation, of wealth creation.
Tom: That isn't what I said.
Adam: How is it becoming a suburb?
Tom: Because the people in Silicon Valley are living in San Francisco, more and more and more. This is a trend that will continue. Why not? It's a great city. It has wonderful restaurants, great culture, a beautiful bay and everything, but an effect of that has been to drive up rents about 30 percent.What to do about that? I don't think there's much you can do about that. That's inevitable. As Silicon Valley thrives, which it is, more and more people will want to live in San Francisco.
Then we have the phenomenon of Google buses, which I just find it almost incomprehensible to get angry about Google buses. We started Google and if they want buses, that's fine with me. To break the windows in them and rough people up, I think is preposterous.
Now, we have Google boats. Are they going to be out there shooting at the boats?
Adam: The specific issue is...I certainly don't mind stating mind my opinion that boorish behavior is boorish behavior. Everyone should say that breaking windows in buses is a bad idea.The question is a philosophical question. Number one, should the city specifically be reimbursed handsomely for the use of its facilities, namely the bus stops? Number two, if we encourage companies like Google -- and Google is not the only one -- if we encourage them and their employees to opt out of the public transit system, is it only going to make the public transit system work?
Again, do we care? Do we care about a good transit system?
Tom: Is there a question in there?
Adam: Yes, do you care about, do you have an opinion on using city resources? Do you agree with a philosophical point that, for example, public transit, public infrastructure is a good thing?
Tom: Of course, of course it is. It's available for everybody. Google is paying a fee for using the bus stops.
Adam: Belatedly.
Tom: Well, [laughs] but they're paying it. Now, is Google responsible for the rising rents in San Francisco? Indirectly, yes. What can they do about it? Nothing.
Adam: Now, we started down the path of what can be done about income inequality.
Tom: I'd like to get on to that point, actually. I think that income inequality has been with us for a while and it's caused by policy failures. I think there's been a huge failure of social policy, fiscal policy, and monetary policy.I hope I don't put you all asleep as I touch on those points. Let's start with social policy. Fifty years ago, Lyndon Johnson did two major things. He did the Civil Rights Act, which is marvelous, magnificent, and I think without criticism. He also did the war on poverty, which had wonderful aspirations, but which has been an absolute and total failure. It has caused all kinds of problems.
First of all, there's more poverty more now than there ever has been. When Johnson started out, the government was spending roughly one percent of its gross domestic product taking care of the poor. Now, that's closer to five percent. That's a huge increase.
There's 77 million Americans on food stamps. I think the biggest problem that Johnson unknowingly created was the destruction of the lower end of families in America.
Now, back in the `60s and early `70s, the divorce between whites, blacks and Hispanics was about equal. It was about 12 percent across all those sectors. The war on poverty made it possible to have single mothers supporting their children without a working man in the household. The numbers have just changed radically.
The divorce rates have skyrocketed. To use a Victorian term, the birthrate out of wedlock has gone from 12 percent, which is pretty much uniform across all races in America, to 40 percent now for whites and over 70 percent for blacks.
Adam: So I'm clear, you're drawing a straight line between the failed war on poverty and income inequality today.
Tom: I'm drawing a straight line between the failed war on poverty and the increase of poverty, yes.
Adam: You started by talking about social spending. I think, as I've read and listened to comments that you've made, you generally would subscribe to the theory that we have more government than we need, that we spend too much on government. First of all, that government spends too much generally, is that a fair point?
Tom: Well, government is a giant beast that has to be fed and the only way to feed it is with taxes. Taxes will just go up, and up, and up. I think Obamacare is probably...
Adam: The question I asked is, in your opinion, does the government generally spend too much?
Tom: Yes, it spends more than it takes in. It takes in $3 trillion a year in taxes and it spends closer to $4 trillion.
Adam: Don't forget, we were talking about a tax policy earlier. You're against higher taxes. Other people are for higher taxes. Presumably, we could raise taxes to pay for these things, which gets me back to the question of do we spend too much?
Tom: Well, we do spend too much. There are so many examples of that. I don't think I need to...Taxes will rise. Now, there's been discussion by Nancy Pelosi. You're familiar with her?
Adam: Our congresswoman.
Tom: Our congresswoman.
Adam: Your congresswoman.
Tom: Of a wealth tax, it would be two percent per year on your wealth. Somebody said, "Well, let's say you're retired and your wealth is in your house and it's worth a million dollars." She said, "Well that's no problem, the government will just take a two percent mortgage per year and that's how we'll get the money." She has also talked about a value-added tax and much higher taxes on the wealthy.The beast will be fed and taxes will go up. I don't know which, maybe perhaps all of these things will happen.
The irony is if you took 100 percent of the 1 percent's income and wealth, we're only talking about a 1,400,000 people. That total would run the government for about a month.
Adam: Other than social spending, where would you cut?
Tom: I think that we're getting into an area where my bona fides are stretched very thin. We really should have a panel of experts but of course, they wouldn't agree with each other. You might as well go with what I have to say.[laughter]
Adam: Well, you are the man of the hour. We have no alternative.
Tom: I don't know, I think entitlements are the obvious place that the cuts have to be made, but they're built into the law so that's extremely difficult. I'd like to skip on.
Adam: Excuse me, before you do, I ask this line of questioning to try to flesh out a point. Which is, for example, one of your greatest successes in your illustrious venture capitalist career was Genentech. Genentech was one of the first and most successful biotech companies.Did Genentech, and does Genentech benefit from basic medical research that the National Institutes of Health does?
Tom: Yes, more at the university research, but yes.
Adam: This is good use of the federal government?
Tom: I'm all for the federal government funding basic research. I'm for a strong military, and so on and so on. We could go down the list. Entitlements are what is eating up the budget.
Adam: So to be clear, companies like Tandem and Compaq, which you invested in and made a lot of money in, and helped and create a lot of jobs, also benefited from military and other basic research by the United States government into the Internet. Without which, none of this industry, none of the Silicon Valley today would exist.
Tom: You're wrong on that. Tandem did no military business, at all.
Adam: No, not directly, but the infrastructure that was established by computing.
Tom: Adam, you're barking up the wrong tree. I'm not going to go there. The squirrel is in a different tree.[laughter]
Tom: I want to get back to the policy problems. It's the social policy, number one problem. Fiscal policy, let's talk about that.
Adam: Well, we spend too much.
Tom: [laughs] Yes, we spend too much. The numbers are just incredible and our debt is astronomical. The official debt is $17.2 trillion today. That includes Social Security. That's roughly 105 percent of our gross national product.Now, if you were an individual and you were earning $100,000 a year and you were spending $105,000, you had no other assets, you'd obviously be in trouble. It's worse than that. The unfunded liabilities of Medicare, Medicaid, Fannie and Freddie, and so forth, adds up to $68 trillion, on top of the $17 trillion.
We really have a debt-to-GDP ratio of pretty close to 400 percent. Now, many European countries have that, but many countries in the world don't have that at all.
Australia has a ratio of 20 percent. Norway has zero. Norway has the largest sovereign wealth fund in the world of over a trillion dollars.
Policy matters, fiscal policy matters. It seems to me that the debt will not be paid back. There's no way to pay the debt...
Wait. Let me finish. Wait, Adam.
Adam: I want to ask you, briefly, how those factors that you're discussing contribute to income inequality?
Tom: [laughs] Well, it contributes to being so far in debt that you can't spend in things you should spend on because you're so hopelessly committed. Inevitably, the taxes will just rise, and rise, and rise, which I don't think does anybody any good, 99 percent, or 1 percent or whatever.My point is, we're, I think, on a knife-edge, with this incredible debt, which can't be paid back. I mean it just can't be. It's supported by faith in the dollar.
Now, Churchill took the UK off the gold standard in his second administration. Do you know who took us off the gold standard?
Adam: Nixon, I assume.
Tom: Yes, Nixon. After that, it was just print money. If you have a recession, print money. Stimulate the economy. Have inflation? Print money. Devalue the dollar. A dollar in 1970 was worth a dollar. Today, it's worth 17 cents.
Adam: Let me make an observation as a way of moving on to other subjects, which is...
Tom: I don't want to move on.
Adam: I have a few more we need to cover before we go to the audience. Is there a dissonance here? This horrible situation you describe is coexisting with this great period of wealth creation and job creation, and the formation of great new companies like Twitter, Facebook, LinkedIn, and Google, that are in turn causing the consternation that we've come here to talk about tonight.
Tom: Yes, and that gets me -- thank you -- directly to monetary policy.
Adam: You're welcome, but briefly on monetary policy, because it's the evening time and nobody wants to hear about monetary policy.
Tom: All right, let's hear about it for a minute. We've had low interest rates for a couple of decades, a little more. Very low. Historically low for a long, long time.Now, investors with capital are seeking return on their capital. These low interest rates, the rate on a 10-year treasury is 2.3 percent, I think, today. Very low, so investors are seeking returns of 7, 8, 10 percent. An incredible amount of money, to get directly to your point, has flowed into venture capital.
Now, when Eugene Kleiner and I, the late Eugene Kleiner, my dear friend...
Adam: Your co-founder of Kleiner Perkins.
Tom: Co-founder. When we started Kleiner Perkins, we tried to raise $10 million and we couldn't. We raised $8 million, and that was the largest venture capital fund in the world. Everybody said, "What are you going to do with it?" Well, it turned out, we had to start our own companies and so forth to make it work, but that's a different story.Now, we have, I don't think anybody knows how many hundreds of billions of dollars in venture capital. The amount is immense, and that is causing the boom in San Francisco. Within a mile of here, there are probably 1,000 startups.
Adam: In your opinion, these are good things.
Tom: No, not necessarily.
Adam: Why not?
Tom: Why not? Because these startups...Students are dropping out of MIT in their junior year to go to San Francisco and do a startup, but they're not starting companies. They're writing software applications, which are products. There's a huge difference between a product and a company.
Their only route to liquidity is to sell it to Google, Apple, whatever. Most of them will fail. That's fine because there's so much money around, they can fail and then fail again. They'll keep getting financed.
It's not good for them. They're not getting the education at MIT they should have gotten. They dropped out. They're not learning how to be entrepreneurs. They're just writing software and applications.
There are so many millions. Somebody probably knows how many millions of applications there are already are, but there's no great shortage of them.
I see the building boom, the housing boom, and all of this as a result of terrible monetary policy for 20 years.
Adam: I grant your point on monetary policy. This situation you described of a flood of venture capital, flooding essentially what, to paraphrase you, are a bunch of bad ideas or insufficient ideas, ideas that won't be real companies. Isn't this the great capitalist free-for-all? Isn't this just the market at work?
Tom: Yes, it is. When the interest rate goes back up to three percent, it will stop. Or, no, seven percent. Excuse me, I misspoke.
Adam: It's a fascinating line of argumentation you're making, I think.
Tom: Some successes will come out of this. It's like a Petri dish. Some of them may bloom and blossom. Kleiner Perkins has been pretty good at picking them.
Adam: Wasn't it like that in your days as an active venture capitalist as well, maybe at a smaller scale? You invested in young companies. Maybe they had a hair-brained idea. Maybe they had a great idea. Maybe they were going to make money. Maybe they were going to have to go get a real job. Right?
Tom: Well, I could give a speech on venture capital in my sleep, which would put you all there, too.
Adam: [laughs]
Tom: I think that the unique thing about Kleiner Perkins, and Sequoia, and I think the other great venture capital firms is the management skills that they brought to the ventures. Typically, they would help the entrepreneur build his team. They wouldn't expect to find a team already built.Who's going to become the vice president of marketing of a startup number 780?
Adam: I understand.
Tom: The venture capitalists can fill that role, provide all that help, and get the thing going. That's the difference between an angel investor, who just sprinkles gold over everything, and a venture capital investor.I'm not slamming around Conway, because I think he's very good, but not all are.
Adam: You've referred to, in this conversation, about the one percent. You've referred to this one percent as the most creative part of our society. Would you explain that? Because the war on the rich as been framed initially as the richest one percent, not the most creative one percent.
Tom: Well, there's a high correlation. Look, I guess Kleiner and I were in the business of creating billionaires. We didn't do so for ourselves. Well, we did all right, but 20, 30 billionaires that I could name that we've created. Look at Google.
Adam: I'm confused. Is there a correlation?
Tom: There is a correlation.
Adam: Couldn't there be a creative poet or a creative artist who is among the most creative one percent in the country? Why would you correlate creativity with wealth?
Tom: You are jumping into a completely different philosophical universe. You're talking about value, not wealth. I am talking strictly about the wealthiest one percent, not the brightest, not the best poets, etc.
Adam: Creative, though, was your word.
Tom: Well, yes. The wealthy one percent creates jobs. That's where they come from, not the government. God, the government can't create a job to save its soul. It spends millions and you get nothing.Or, I must say, the government is right now the biggest venture capitalist. Look at Solyndra, which has been beat to death. Even Kleiner Perkins, we have an automobile company that borrowed money from the government. Not on my watch, but...
Adam: You're talking about Fisker?
Tom: I'm talking about Fisker. Anyway, the government is in the venture capital business. Everybody is in the venture capital business. You're bound to get some good out of all that.
Adam: You mentioned to me earlier that you've been involved in controversy, all your career. In your current controversy, you seemed surprised that the current partners of Kleiner Perkins are not on your side on this debate.
Tom: I don't really want to talk about that. I think basically, they didn't have to say anything. Instead, they threw me under the bus, but I'm a big boy.I have had a lot of controversy in my life. For a long time, I was the world's foremost misogynist for firing Patty Dunn and Carly Fiorina of Hewlett Packard.
Then, when I was involved in Genentech, I was going to destroy the world by releasing Frankenstein bacteria, as new forms of life. There was a journalist in the
"Chronicle" maybe some of you remember, Charles McCabe, who just castigated me every day on that.
When I started my laser company in the `60s, the rioters in Berkeley thought it was a death ray.
[laughter]
Tom: Yeah. The year I ran the San Francisco Valley effectively was a year of extreme controversy. Herb Caen called me, essentially, an idiot in charge, doing something he has no qualifications whatsoever to do, which was true.[laughter]
Tom: The guy I hired, Helgi Tomasson, was still there 27 years later.
Adam: It's almost time for audience questions. You mentioned Herb Caen. You started your comments by mentioning the "San Francisco Chronicle." Are you surprised that the "San Francisco Chronicle" has a populist tone in its pages?[laughter]
Tom: I think there's only one newspaper in the United States that doesn't have a populist tone, and it's the only newspaper in the United States that's making any money. That's "The Wall Street Journal."
Adam: Point of fact, other newspapers make money. It's not the only one. I believe "USA Today" makes money. "The New York Times" makes money.
Tom: That's not a newspaper.[laughter]
Tom: And "The New York Times" does not make money.
Adam: I'm not sure, but it's a public company, so we could go check afterwards.
Tom: We could go check.
Adam: Anyway, the question that I asked is, are you surprised...? You've made comments suggesting that you are surprised, shocked, upset, or something by the "Chronicle's" tone.
Tom: Well, I read the "Chronicle" every day. I want to know what's going on in town. I never read the editorial page. I could predict the editorial page. I don't need to read it.I read "The New York Times" every day, and "The Wall Street Journal." I don't get my information off the Internet, like everybody else does. I think I know a lot more than people who do get it off the Internet, but that's a matter of personal opinion.
Adam: You also mentioned to me earlier that you've noticed a difference in the reaction you've gotten in the last handful of weeks, between people who email you on the one hand and people who comment about you on Twitter on the other hand. Would you share that with everybody?
Tom: It's very interesting. I've received a huge number of letters and emails, all very supportive of my position, 100 percent. The Twitters are all pretty negative, and it's an age difference. Older people use email and younger people Twitter.
Adam: My last question for you Tom. You were asked...
Tom: When they're not playing video games.[laughter]
Adam: You were asked recently in a television interview if you feel you're connected to reality. During that interview, you talked about your expensive watch and the yacht that you used to own. Your response to the question of whether or not you're connected to reality was, I'm paraphrasing, "I give a lot of money to charity."
Tom: Well, I do give a lot of money to charity, but that has nothing to do with my connection to reality. I think, philosophically, probably no one can prove that they are connected to reality.[laughter]
Tom: I'm in the same boat with everybody else. How about you, Adam?[laughter]
Tom: You're a celebrated interviewer. Are you attached to reality?[laughter]
Adam: My guess would be that one of the ways you answered the question was also that, although your immediate family is doing fine, you have relatives who live in trailer parks. I think the point you were making was you know poor people.
Tom: Well, I wasn't born into the one percent. I used to be a paperboy, which is now of course illegal because of child labor and minimum wages.[laughter]
Tom: I used to bag groceries and babysit, etc. That's outlawed, but so it goes.
Adam: We have a wonderful, vibrant audience here with a wonderfully vibrant interview subject tonight. I want to invite you to stand up and go to the microphone to ask questions.I'll remind you that these need to be questions. If they aren't questions, I will apologize in advance for being rude to you, to remind you to ask a question. Sir, please, go ahead.
Man 1: Yeah, thank you for coming tonight. I appreciate you visiting this audience.With socioeconomic disparity or dis-inclusion, however you want to say it, particularly in cities, being really the civil rights issue of our time, and you being so connected, too, you're a Brahmin of financial value creation. You being connected to people like Google founders, not to mention the VC community that you run in.
Would you be willing to be part of, say, a fund in which you give one percent of your money to, and help manage that fund and the use of that fund that harnesses the entrepreneurial talent of San Francisco, to address urban poverty issues that the tech economy or the emerging economy at large is exacerbating?
Tom: I think I heard most of that. I'm not part of such of thing, but such a thing is being organized by Ron Conway and Marc Benowitz.
Adam: Benioff.
Tom: Benioff, excuse me. I'm not familiar with the details of it, but they are trying to do exactly what you have said for the benefit of San Francisco.
Adam: I don't know if you caught it. At the very end of it, the tail end of his question, he injected the premise that the tech community is exacerbating the problems of poverty in San Francisco specifically.
Tom: Well, they're not. They're just making enough to pay higher rents, but I don't see that as exacerbating the problems of poverty.
Adam: Thank you. I wanted to say as a reminder to our radio audience, this program is presented by the Commonwealth Club's INFORUM "Connect Your Intellect." For more about INFORUM and its upcoming events, please visit us on Facebook or follow us @INFORUMsf on Twitter.Tonight, we're hosting Tom Perkins, "The War on the One Percent," and we have another question in the audience. Please.
Man 2: Hi, Mr. Perkins. I'm a student at Stanford Law School, and in my free time from playing video games, two of the things I do are...
Tom: Well, we started Electronic Arts. That's great.[laughter]
Man 2: One of the things I do is work in the community law clinic, mostly with Spanish-speaking people from East Palo Alto. The other thing I do is I teach a class on California's finances. From these different contexts, I've gleaned, first of all...
Adam: We need to have your question. I'm sorry. This is a question for Tom Perkins.
Man 2: What do I tell the people I work with in East Palo Alto? If you could speak to them, what would you say?
Adam: Thank you.
Tom: I feel very sorry for them. I wish that the war on poverty had not been such a fiasco, and then they wouldn't have the problem that they now have. The solution will take a very long time. It depends a lot on education, which is getting worse because of, frankly, the teacher's union. It's making it impossible to have quality schools in the inner cities, and so on and on.There are no quick answers to these kinds of questions, I'm afraid, at least not from me. From Barack Obama, yes, they flow.
Adam: Over here, please.
Woman 1: Hi, hello. Well, good evening. Thank you very much for coming and sharing.You made a lot of statements about pointing fingers, but one of the things you didn't address was the role of financial literacy, the role of access, and the role race plays in a lot of these things. If you could, just highlight maybe your thoughts.
How are you bringing financial literacy to a lot of these communities? What are your thoughts on some of the ways you've contributed to that, or just opportunities to do that?
Tom: Yeah, I think I got most of that. Silicon Valley is a meritocracy. It is simply a meritocracy. Race has nothing whatsoever to do with it, but blacks are underrepresented in Silicon Valley, unfortunately.Now, there's a group here in San Francisco. They're successful black businessmen of all kinds. They've formed something called Wall Street Wizards. What they're trying to do is teach young blacks about business and how to succeed in that.
Last year, during Nation Black Awareness Week -- that may be the wrong title -- I agreed to speak to that group. All of the mentors showed up, and not a single student, not one.
It must come from the individuals. It can't all come from the government or a program. If the individuals don't want to learn, they won't.
Adam: Please?
Man 3: Yes. You cited Johnson's war on poverty as a disaster that led to more poverty and increased the number of children born out of wedlock. What should have been done back then that would have had a different outcome?
Tom: I think the answer to that is very, very long, and I'm not sure I have all those answers. We certainly did the wrong thing. What the right thing would have been, I'm not so sure.
Adam: I would encourage you...I have learned that you are able to form an opinion on almost anything, Tom. It is your opinion that the war on poverty has been a failure, but that is not accepted fact.
Tom: Oh, wait a minute. Now, come on.
Adam: No, you don't know that there are not factors, that things would have been even worse without the things that were done.
Tom: That's conceivable, but...
Adam: I think he's asking a fair question, which is broadly speaking, what would have been the better policy route than the policy route that was taken in the Johnson administration?
Tom: Well, I think Johnson had absolutely no idea that what he was doing was wrong. It looked good and everybody approved it, but it had the result of destroying families. It just did. Then that destroyed the education of the children in those families and so forth, so it had a cascading effect.The rate of poverty is higher now than it ever has been in history. There are 77 million Americans on food stamps. There's no way...I don't know how bad it could have gotten. I don't know.
Adam: I'll take a shot for you. Instead of the programs that the Johnson administration did put into place, if the Johnson administration and the Nixon administration instead had focused on deregulation and making government smaller, that we would have less poverty today.
Tom: That's a trap and I'm not going to go into it. I think if money had been spent on improving the educational standards...Let's face it. We are, I don't know, 64th or something among the nations badly educated. We've totally underinvested in education. We've made it very, very hard to get a good education in the United States. If I had to pick a single thing, that's what I would pick that should have been done differently.
Adam: Please?
Woman 2: Could you comment on the fact that your own example of fiscal responsibility, Norway is a social democracy? Are you advocating social democracy for the United States?
Tom: [laughs] I'm a knight of Norway. I've got to defend it. There are no tall no tall poppies in Norway.
Adam: No tall what?
Tom: No tall poppies. Well, it's the old adage, the tall poppy gets cut first. Everybody is pretty much the same. There's no poverty. There are no rich. They've left Norway because they didn't want to pay the taxes.It's not an ideal example. I just threw it in because they've been so extraordinarily well in husbanding their resources, namely their oil. Norway has been the number-two oil exporter for decades, next to Saudi Arabia. They've saved the money. Some day the oil will be gone, but they've got the money.
Look, if I were 20 years old, of course, I think I'm in my midlife crisis now, anyway.
Adam: [laughs]
Tom: If I were 20 years old, I'd try to go to with Australia. Australia is, to me, I've spent a lot of time there, the way California was, when I came here in 1957. It was upbeat, positive, can do, unaware of all kinds of problems. That's the way Australia is now, and all we do is worry about our problems.
Adam: When you do go down to Mountain View, you don't think of that, or when you walk around Market Street, you don't think of that as an upbeat, can-do environment?
Tom: Well, not Seventh and Market. That's a good place to...
Adam: We're getting too local on this conversation. Go ahead.
Man 4: Hi. I work at Genentech. I'd first like to thank you for creating my job.[laughter]
Man 4: Secondly, knowing a little bit about Genentech, I know a huge chunk of our revenue comes from Medicare payments. You had mentioned earlier cutting entitlements. That would significantly cut our revenue. That's one example of a public-private revenue partnership or whatever. There's also construction, infrastructure, and education you mentioned.If this revenue that is being spent by the government isn't going to create jobs, what is it doing, if it's not helping keeping people employed at Genentech?
Tom: Hang on. I think Medicare is great. Great.
Adam: It's one of the biggest entitlement programs there is.
Tom: It is. It's just underfunded.
Adam: You want to make this entitlement program bigger?
Tom: No, I want to make sure it doesn't go bankrupt. There's a difference.
Adam: I don't understand.
Tom: You don't understand?
Adam: If we need to cut entitlement programs, then we need to cut entitlement programs.
Tom: Adam, Medicare will go bankrupt. It's inevitable, so taxes have to be spent on Medicare. I am for that.
Adam: The entitlements that you're against are?
Tom: I didn't say I was against entitlements. I never said that.
Adam: You said they needed to be cut.
Tom: Yes, because that's the bulk of the budget. There's very little discretionary cutting you can do. The military and a handful of this and that, but entitlements represent most of the budget.If you're going to cut the budget, which we have to do because we're so deeply in debt, you've got to start there. There are good ones and there are bad ones.
Adam: The bad ones are?
Tom: I doubt that 77 million people need to be on food stamps.
Adam: Food stamps, OK. Next question, please?
Man 5: Hi. I have a speech impediment, so in case you don't understand, I'll be happy to repeat myself. I'm part of the 99 percent that aspires to be the 1 percent some day. I work 70, 90 hours a week to make sure that some day, hopefully, I'll become the one percent. Do you think this could be potentially an image problem for the one percent?There are billionaires out there who we love, like Steve Jobs, Musk, Bill Gates. Do you think that instead of calling this "the war on the one percent," if we could actually address it as the race to the one percent, things would be a lot better for everybody?
Tom: I think that's a brilliant re-branding. I totally subscribe to it, but my message is the demonization of the one percent. I think that's true, and it's new. It's, frankly, new with the Obama administration. We never used to have a demonization of the one percent. We wanted to be in the one percent. We admired them.I can remember when I was a little kid, John D. Rockefeller would go around and give dimes to the little children. I thought, "How wonderful. I'd like to be John D. Rockefeller and give dimes."
This whole tone has changed in the last very recent years under this administration, I think.
Man 5: Do you think it's because of Obama or is it because of the one percent not being philanthropic enough?
Adam: Not being philanthropic enough, is that what you're asking?
Man 5: Right.
Tom: I've discussed the taxes. The one percent is carrying the government. At least the top 10 percent is carrying the government. We've talked about that.It's not bad to be in the one percent, obviously. I think people, like yourself, still aspire to it and should. Hard work and so on can get you there, plus the right venture capitalist.
Adam: Over here, please?
Man 6: The president has proposed a lot of commonsense ideas around immigration reform, around infrastructure spending, but at every turn, he's been road blocked by the Republicans in Congress failing to want to agree with him on moving a policy agenda forward. What are your thoughts on simply the politics of no, as opposed to proposing an alternative agenda?
Tom: I'm neither a Republican, nor a Democrat. I've gone both ways. I voted for Jerry Brown, which then he raised my taxes 30 percent.[laughter]
Tom: President Obama made an immense political mistake. He's not a politician. He's a brilliant leader in a certain direction.The mistake was to push through Obamacare without a single Republican vote. No other president would have done that, because it just wiped out any hope of cooperation with the other party.
In spite of all his talk about reaching across the aisle and so forth, nothing has happened. You can blame it on the Republicans, but I blame it on a huge strategic political mistake.
Adam: It's the president's obstinacy in wanting his agenda passed that is to blame for the other party's intransigence?
Tom: I think it's what you get when you elect an amateur president.
Adam: Tom, is that really fair?[applause]
Adam: He's a politician who was elected by the people of the United States, not once, but twice, so why the name-calling?
Tom: I've looked at his resume.[laughter]
Adam: You've never met an entrepreneur who had never been an entrepreneur before, or a venture capitalist who had never made an investment before?
Tom: I wouldn't make him president of the United States.
Adam: [laughs] Over here, please?
Woman 3: Hi. You just said that it's not bad being in the one percent, but you're also talking about the demonization of the one percent. We do know exactly what happened to the Jews in Europe, so I'm actually curious what the fear is. It can't possibly be ghettoization, or deportation or extermination.
Tom: I get your question, but we're almost out...
Woman 3: I do want to understand what the actual fear is?
Tom: The fear is wealth tax, higher taxes, higher death taxes, just more taxes, until there is no more one percent. Then that will creep down to the 5 percent and then the 10 percent.The money is in the middle. That's where the money in America is. To pay for this government, it's going to have to come from the 99 percent, not the 1 percent, in the form of taxes, value-added taxes. I promise you, higher taxes, everybody.
Adam: To be fair, I'm sorry to tell you that this is Tom's penultimate word and he will get the last word. Your point is, to her question, that your concern is a decrease in the overall quality of life in the United States, including for rich people, but not only for rich people.
Tom: No, that's right.
Adam: As opposed to ghettoization, extermination, and other horrible things.
Tom: I'm talking about economic extinction, not physical extinction.Before coming here, I was told that every speaker gets a question on how to save the world.
Adam: The precise question is, and this is the way that INFORUM ends all of its events, "What is your 60-second idea to change the world?"
Tom: I've been thinking about this as I was listening to you ramble on.[laughter]
Tom: I've got it. It's going to make you more angry than my letter to "The Wall Street Journal" did.
Adam: I highly doubt it, but let's hear it.
Tom: You're not ready. Thomas Jefferson, at the beginning of this country, thought that to vote you had to be a landowner. Now, that didn't last very long, and the vote was given to everyone, but the basic idea was you had to be a taxpayer or a person of property to vote. That went by the boards.Margaret Thatcher tried to change that in England, in what became called as the poll tax. The idea was that every single citizen of the UK had to pay something in taxes, even if they got it back in subsidies elsewhere. If you didn't pay something in taxes, you couldn't vote. She was thrown under the bus by her own party for trying to push that through.
The Tom Perkins system is, you don't get to vote unless you pay a dollar of taxes, but what I really think is, it should be like a corporation. If you pay a million dollars in taxes, you could get a million votes. How is that?
[laughter]
[applause]
Adam: You're right that I don't agree with you. You're wrong that I'm angry. I would point out to you the flaw in your argument. Since everybody pays sales tax, and anyone who drives a car pays taxes for that, then we're right back where we started, in the wonderful place where we've evolved since Thomas Jefferson, with everybody having the vote.
Tom: That's not income tax.
Adam: Not income tax or property tax. I, for one, have enjoyed this conversation, immensely, despite my rambling. Tom, thank you. Please, everyone in the room, join me in giving a big round of applause to Tom Perkins.[applause]
Adam: And now this meeting of INFORUM and the Commonwealth Club is adjourned.[gavel banging]
Tom: You did great a great job. You did great a great job.[group adjourns]