William Lazonick on How The Stock Market Killed Tech
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And no, a lot of people been asking hundreds.

thousands of people. In fact, I will be submit myself. The next dnc is the left is jo gan. I am two or three inches taller as well. But today i'm joined by professor William alison ic of he's professor amari tiers of economics, several university mass tuts and the coffee the academic industrial research network willing thank you so much for coming.

I should be here.

All right. So if you look at the tech industry right now, it's probably the most was definitely the most profit it's ever been and probably the worst IT feels like the furthest it's been from really innovating and it's move to value extraction, I think. And you you know a great deal about that. How did we get here? And I mean, historically, how did we get here?

Well, first of all, have to understand that the united states as the most formidable development mental state in history. Lot of people think that japan in the eighties invented the developmental state. But actually the united states, with japan, the world, stay from point of view of technology.

So I won't go into the whole history of that, but IT goes back to the nineteen sixth century building of land grant colleges, railroads and going into aviation. The computer industry is that. So tech was provided with all kinds of resources.

Those resources were originally used by large corporations that actually gave people lifetime employment, so that something else, when people discovered japanese competition in the one thousand and eighty, is IT. Oh, a secret to japan's success is they give people permanent employment, lifetime employment. us.

Companies were doing that, particularly post war two iconic company that did that, which has became a totally shareholder, valuable company. And that's where i'm going, was IBM you had a job for life. Do you had to to find them if the pension you had, all your medical compense paid sector.

Those companies were highly innovative. A lot of them are connected to what was called the military industrial complex. And in the early, late fifties, early sixties, some company started setting off, spinning off of that companies that would have been like companies here today that that, and they went public, and they were called glamour stocks, but they were finally traded.

So the security exchange commission, which was set up in the mid thirties to get rid of manipulation and fraud on markets, right? They had what was called the special study that created nasdaq, which you've all know about, but you probably don't know the origins of IT. So nazzal was really backed by the U.

S. Government to create a liquid market in a speak, highly specular stocks. And so the national association dealers automated quotation system came online in April one thousand nine hundred and seventy one.

And IT wasn't actually a trading market. IT was just a quotation system. So the security dealers, we are all working on their phones and roll adexe in isolation and never knowing what the Price of the stock could be of a sudden.

This is really the first use of internetworking, right? Because computers, main friends are just come in in the sixties. So you now have naznai.

One of the first companies that listen on nasdaq was in tel, right, three years after was founded. That would never have been possible with the new ork stocking exchange. They could have gone the over counter market because the york stocks exchange had listing requirements in terms of capitalization, profitability.

That would require ten, fifteen years at least, right? okay. But now you could get companies going public.

Did you even have a product that really was the thing that brought venture capital into the picture? There was no where to find venture capital industry until one thousand nine hundred seventy two, a year after naznai was created. And they came out of silicon valley, which, by the way, was dumb. Silver valley, in one nine hundred and seventy, won by a journalist, is because there were so many startups producing silly country .

before this point. Going public required you to be a good company.

You had to yeah so often you went over the counter and then graduated to what they call the big board, the new york's stock, by being a yeah, and you have to have a lot of different .

shareholders said.

yeah so well, those companies tended to pay dividends, but they didn't do something which i'm going to talk about today, which is the way the predatory value extraction is working in the us. Economy, particularly in the tech sector. And that's the phenomenon of companies buying back they're stock, right? okay.

But before we get to that, we basically have to see that in the nineteen seventies, there was a change in the institutions of the stock market, particularly as the and venture capital that made IT possible of the sun to get funding from from, for for start up step couldn't get funding before. Right now. A big change was, and I was really under the radar, was in one thousand nine hundred and seventy nine, july of one thousand nine hundred and seventy nine, when the department of labor in the us.

Said that pension funds could put some of their money into risky assets. There had been some legislation earlier in the decade which said that if pension fund managers put their money into companies like the companies won't show here that they're trying to go public, that they could get into trouble or complete to compact immediately. From that point of point time on, there was no shortage of money in the us. Economy for venture capital, for new firms. That was that really always since then has been the shortage of good firms and a lot of money chasing.

But but back on that work here, you agreeing, but isn't the problem also, the venture capital no longer really works. IT isn't really taking risks OK in mobile.

And now that venture capital at that point, IT was really dominated by people who came out of the industries in which they were invested, right? So there are individuals who decided to be like don valentine, who back to go, and mother companies he he came out of national semiconductor had been in the semiconductor industry. They're in a whole number of them.

And so they understood the industries in which they were investing, some of were Better than someone worse, right? But really, what what put IT venture capital made IT something that people would now say, hey, let's go after this stuff where two ipos in one thousand and eighty, one was apple and the other was genentech. One attack and one of biotech, right? And from then on there was, well, in the early eighties, there was a whole bunch of investing in venture capital.

Here's your point comes up. There was a very good book written in one thousand and five by a business week journalist and john Wilson called the new ventures. IT was the first real good book out there on ventures capital.

And the last chapter was vulture a capital. So IT was basically the bad venture. Capital is coming in and just hyping companies and and the whole thing following apart. And then so you always you have these cycles of of good venture capital and then you know the dot com period, you have the moment bus etra. I think I think .

what i'm thinking is the wave venture capital is today is strange because of twenty twenty one, the collapse of the zero, just three era, you're kind of seeing a lot of venture capitals did not exactly know how to invest in companies at all. They knew how to invest in concepts in things that they could take public or things that they could flog to another company. And that venture capital is falling off quite a lot now.

Is that something that reflects the larger market conditions of the tech industry? Because IT feels like the same problem and that matter makes their facebook up. Now if you i'm sure you all use in grammer facebook, if you don't think it's bad, please go on the help.

Take a look. IT feels like they're all following the same thing of they have all following into jack welch. Shareholder value system of bigger, more money as much as we can squeeze as possible, which only appears to work in the public market. So how did how did we really get here? Like how how how did we get to the .

shareholders? You okay so so now what you had uh with venture capital, uh with nazi of being part part of IT with with a shift action of wall street sell, from investing in in these older companies and doing their bond issues to trading and stocks that also occurred in the one thousand nine hundred and seventy, you when the stock market actually was not doing very well, right? But you then had a whole situation where uh you had, I mean, this really did unleash innovation.

The older economy companies, they were good at doing some things, but a lot of them became conglomerate ze became gorod at seta. There is a demand coming of basically conservative economics that beginning Michael jenson, the discord, the free cash flow, as they call IT, have actually invented the term free cash flow, which every company used. Now free cash flow, by the way, that means that if you got to stay off five thousand workers to a free cash flow, well, that's fine as long as anything that that isn't nailed down is free cash flow.

And this prioritized a shareholder value ideology that I witness first ten, when I was at harvard business school in the midnight thousand nine hundred and eighties. And they hired his die, Michael jensen, and not if you've heard of him, but he was died recently, the girl of that, a maximized and shareholder of them value. And and once he did that, you start getting hits in the wall street journal financial times at your shareholder value.

okay? Then they start with executive pay, stock base pay. That was already the longer history of that, but that comes in, in the thousand nine hundred and eighty that's aligning the top executives with shareholder value.

And then how do you how do you create, use, create and quotes value for shareholders? Not only do you pay diversion, but you buy back the company stock, stock by back. You tell your broker, go into the market, buy back our stock, your giving their money away to get the stock Price up.

And you're actually not benefiting shareholders who get dividends. You're benefiting chair sellers who are using the opportunity to sell their shares, including the top executives who pay is stock base stock options. Now it's more stock awards, but also corporate readers who want to come in and they get the stock Price up, do the buybacks, then we'll sell the shares.

So this becomes a massive of phenomenon. Now this was enabled by a in one thousand nine hundred and eighty two, again, the security exchange change commission, which has said was set up to get rid of manipulation and fraud in the market. IT went from being a regulator of the stock market to being a promoter of the stock market.

And to this day, that's what the scarring exchange commission is. IT is not a regulator of the stock markets, a promoter of the stock market, right? And what they did is IT was really under the radar.

Usually in us, you have public comment. On these issues, they said any company on any single trading day can buy back twenty five percent of their average daily trading volume over the previous four weeks without being charged with manipulation. That was a safe harbor. So I didn't say if you went over that you would be charged and just said if you want to be sure that you won't be charged with manipulation, that's how much you can you can do. And by that.

now so how does this lead to where we aren't today, which is a death .

of innovation? yes. okay. So what that means is that company like apple, I looked at the figures, they change a bit from year to year, sometimes quite a bit.

They could do about four billion a day in buybacks, day after day after day. The apple just came out with this twenty twenty four annual report. They did ninety five billion in buyback ks. They had ninety four billion of profits, usually profitable, but ninety five billion in bilbao.

Apple has done seven hundred and twenty six billion dollars and staff buybacks over the previous twelve years, plus about one hundred, about two hundred billion in dividends, right? The buybacks are about ninety three percent of its profits. Now apple is hugely profitable, but there are cost of doing that.

Now, by the way, when if you look on apple's website, they call this program of paying out dividends and doing buybacks, which really only god go, is longer history to this. When jet Steve jobs left in one thousand hundred and eighty five, or kid was pushed out of apple, the executives there start doing given and video, almost rove the company into bankrupcy. Jobs came back in one thousand nine hundred and ninety seven, said, we're not doing that.

We're doing what I call retaining and reinvesting. And we know the history of that. They have the ipod, iphone, ipad, eeta. Steve jobs died in two thousand eleven. Shortly before he did, he died.

He gave the CEO position to tim cook, who claim to fame there was outsourcing their manufacturing to china and the the Operation guy. And he got pressured by the heat on activist, starting in two thousand and twelve, two thousand and thirteen, including Carol icon. And they started doing the byblus.

And once they started doing, and they just kept doing more and more of them, as they say, an average of sixty billion a year over over the last twelve year, they call IT their capital return program. But the only time apple ever got money from the stock market was in one thousand nine hundred eighty, in its ibo. So, so who is that returning capital too?

But I understand this is bad, because that makes IT is basically just money going into the corporations mouth from my hand, its hands. But how does this fuck up the innovation economy? How does this stop people actually building more cool stuff, right? Or useful things, I guess? Or at least how .

does IT enable the bad habits? yeah. okay. So first of all, again, seeking us as a company like apple, they could be paying people in the apple stores maybe twenty percent more, maybe twenty five percent more, making those even though they can might be able to substitute a lot of those people fairly easily, but they may could have made those the best jobs that anybody could have in the economy. That wouldn't just be in the us.

And that would have pulled up wages for the kinds of people who work in the apple stories in by other competitors, right? And of the is not just apple because I hope all the big companies are doing this stuff, okay? Ah they could have invested in innovation that was not immediately profitable or commercially profitable but for public good, like for disabilities, things like this, they did hardly any of that OK.

They serve a ninety billion.

When did try to move into new technology? And I use all the apple products you know out there, but the ones they didn't produce that, you know AI self driving cars at that they spend billions and failed. But it's worse than that.

The the us. Is now engage what some people called the chip war with samsung and t sm c. intel. Turn down the contract for the apple s. Processors after the iphone was launched in two thousand and seven.

That's because intel was doing massive by bags at the time, and they had a financial guy running the company, but then they gave the contract to samsung. Samsung became a high and producer fabricator of chips, the highest stand, by doing the products for, for, for, for apple. Then they became a competitor.

So they switched the tsf c right? And so basically the us, from a us point of view, does not have a leading edge producer, a fabricator of chips now because, in fact, IT was outsource by one of the leading companies that could have actually sixty billion dollars would build a state of the art plan. That's that's what T.

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Maybe I wanted take a step yet further out because while stock buybacks are a major problem, there is a much larger one as well with the growth, all cost economies that all the idea, every single company I mentioned matter earlier. The reason I background matter is because the averages, the gram facebook experience is horrible, interviewed with its full of AI slop.

In fact mark arko literally just said he wants to have a channel just for a ice lab makes one a channel gone in my mouth. And the thing is we are seeing tech getting worse. And it's not just these buybacks.

If they had that money to spend, they probably wouldn't spend IT on innovation. If we're honest, they are not incentives yeah to innovate. So how do we change this? How do we actually unfold this system? Because right now, if you look at google, you look at microsoft, these products are getting worse. They get more profitable. How do you write this? And what can be done to them to change them?

okay. Well, yeah. So first. Companies that prioritize getting the stock Price up over investing in innovation. And by the way, that doesn't mean just spending money on our a IT means employing people, integrating them, getting the learning going and actually maintaining a stable labor force so that you can actually produce those products, service those products once in the market.

But companies that that prioritize shareholder value get involved in other kinds of all kinds of this. A Price scouts the tax, avoid taxes, the lay off lots of workers when they're profitable. They are basically shareholder value, takes over everything. okay.

So how do you deal with that? Yes, okay. Here is part of the problem that the a lot of people understand that this is a problem at this with the work i've done in this on stock buybacks.

S, I had an article in harvard business review ten years ago, which was just an article I wrote, but because of where IT appeared, and because I had was called profits without prosperity, the subtitle was the best part I stocked by backs, manipulate the market. And these most americans worse off IT shocked me that harder business review actually published an article. And I usually, yeah, roc does.

yeah. okay. So but the fact is that I did get a lot of attention, right? But if you are empower, as the democrats were for the last four years, they gave me a lot of attention when trump h was in power. But I gonna push back on that.

I'm sorry, did they?

Because of, yeah, they did, pal. Okay, around the trump tax cuts they had were called hashtag p tax cap is all about stock byblus, I know.

But here's the thing OK. The larger economic conditions of the problem here, the tax think, sure, it's a part of IT. But the problem is that the incentive is that your company grows and continues providing shareholder value, which, as my listeners will know into the audience here, literally just means what will increase stock Price and increase dividends.

Very basic jack wells shape. How do you change those incentives? Because I don't think that the truth, and this is not even a political statement, I don't think there's any movement to stop that either. The maybe lina han and R I P very soon, probably sadly, and attempt to move away from them. And up, please, you actually breaking this machine because the machine is breaking everything else.

There is actually legislation, or influenced by the work first introduced by senator Tammy baldwin, who won by a whisker and that was constant, was reelected, called the reward work act. And IT would ban by back that would get rid of this rule from one thousand nine hundred eighty two that allows company is to doing with helping charged with my pulau.

And so in effect, IT would say that if you do buy backs on the scale that you're doing them now the man is also the other side of IT um which is that you would put worker representatives on boards. I think you have to put representatives on boards. I think they actually I want to be as a taxpayer represented on boards. If they're using my money, if you elon mosque is using .

my money of low level work, I mean.

boards, boards, boards are a joke. I mean, the notion of independent board members and given given the money that board members are making, went from shareholder value. Yeah we just rote an article on elon must two thousand and eighteen pay package.

The so called independent directors made hundreds of millions of dollars giving him that paypal, being around, giving them and staying on the board. Interesting enough, there was one board member. Her name was lda.

Johnson rice, who actually made one hundred and thirty five thousand dollars from her stock base pay because they didn't renew her her board seat. After two thousand and fifty and SHE left, we calculate a one hundred and seventy three million dollars of options on the table. So that's what happened. Then IT came out that he had spoken out against us anyway. That's part of the problem is you have A A totally corrupt governance system.

It's that but it's also bigger. The market is incentives for growth. You can these are pieces of the puzzle, but how do I realized that what I am suggesting, we destroy the markets, which is the markets are focused on growth. They have buybacks are just one part of this machine. And as long as that happens, innovation is going to be timing because yeah, if you just just running, make more money and or not even more proof, just trying to grow the stock value.

you're not trying to make yeah Better things. A company is successful by producing a higher quality, lower cost product.

I'm sorry, look at me and I have to hate to disagree there. Look at matter. Look at microsoft and microsoft three sixty five as a product that really was going into this year. It's become a worst product.

Oh, I not saying that I said that becomes IT gets into that position. Now what you call a higher quality product, you know different people can have.

Oh, do you mean this in a higher quality selling product that makes more money?

It's one that can get customers. okay. All right, all right. And now there is a problem I call IT. okay?

Companies retain and reinvest when they, when they are doing this, they retain their money. They reinvest in the company. The other side of that is that what I called downsize and distribute.

They downsize the labor force and distribute cash channel. Most tech that are doing the big bang bus there in between, I call dominant distribute. That's where microsoft comes in.

yes. So they have a dominant product no one can get in there now that where there's an element of monopoly there. And but basically, they're pulling in the cash from that product from their soft sweet and they're using IT to pump up the stock Price and .

the crush competition .

and so and not investing in things like apple, not investing in fab. Apple outstart college is rechargeable batteries to to china and just running because .

apple one of their best booth was when they invested in their own. Yeah not only one of the bit.

not this moves. Well, course they put tim cook, that was the guy they put in charge he he out sorry, the fox can sector. And okay now, but I think the bigger issue maybe that you're getting yet is where did this whole idea of shareholder value come from, right? And you know people often cite an article by milk and freeman uh chicago economist uh who uh in one thousand nine hundred and seventy road an article in the new york times called the the only responsibility of social responsibility our company is to increase its profits this man .

is one of the most evil people a lot. He's dead now. He's burning in hell. But just to be clear, he is like.

now great. Now okay. What's interesting about that, and often overlooked when people read the articles, is two things ah one is he wrote that in the context of A I was called campaign gm against general motors to put three public interest people on the board, right? Okay, they wanted one person to be, they wanted to deal with pollution, they want to deal with safety and they wanted in african american on the board.

They okay okay um that came out of the consumer movement that was launched in thousand nine hundred and sixty five by routh later book unsafe at any speed around later still around with this podcast going okay, that actually many corporate executives at top level, they wanted to do some of those things, but people like multon freedom that came along and said, this is what he called that is po unadulterated socialism? Okay, to put those people on the board. Now we know the history of what's happened in the auto industry incident, right? Okay, if you didn't produce safer cars, you lost market a chair.

If you didn't produce more fuel efficient cars, you might market share. Actually, what happened in the U. S.

Automobiles industry that african americans became a very important source of semi skilled and skilled blue collar workers during the sixties and seventies when immigration was slow. So that was important for them in terms of being competitive, having blue to approve ce. They shouted, put those people on the board, absolutely.

And and they might have done Better. So you get back to this notion that its shareholders, who basically owned the company, all those profits belonged to them. And that was what shareholder value kind of legitimize.

And a out of academia, I mean, built freeman one socon obel prize and economies, really swedish central bank prize and economies. But basically, and IT was also in many ways, the that whole movement was, uh, racist, sexist insect. why? Because the world of that I described of secure employment that existed up to that time, and I think that was had a lot to do with that, was a White man's worth.

yeah. And what happened is the labor force was changing. Women were getting into labor force, african americans, both because of demand and equal opportunity here. okay. And this was a backlash against IT. There was a backlash against nature and a backlash against the civil rights movement um so he has to be seen in that context, although was often disguised as mainstream economic the little economy yes yes .

and .

and by the way, course it's called liberal conservative in the us. The liberal counter part of that was dining paul a amusin. There is no difference really ultimately between paul amel zon and the freemen terms to their fundamental economic, say, thought, just let the market work in, everything will be fine.

If IT fails in poland. Okay, the government should intervene a little bit. But basically what they missed was the role of the corporation, for Better, for worse, in the economy.

Basically, right now, there is about two thousand companies in the us. That employ five thousand and more people to average about twenty twenty two thousand. That account for about thirty five percent of total cept employment in the us.

And those are the most profitable companies. They pay higher wages. The investment decisions that they may drive the economy, they determine what kind of jobs are available in the economy, they determine what kind of education we get, they determine what kind of .

resources is if they decided to not be able.

And and so once those companies changed their purpose, they became A A big problem. And and so freeman was successful .

in influencing yeah IT took time.

but he was successful in he was successful. Now here's where the tech industry comes in, right? Because the tech industry was much more dependent on the stock market than those old economy companies.

okay? The old economy companies, there's five functions of the stock market for a company, what to call creation, which is inducing capital come in. You create companies because you can exit on the stock market.

There's control, that is separating otherness of control, which lot of the shareholder value people see is the original scene of american industry. But it's actually necessary because once you have owner entrepreneurs want to pass on the company what they did in the nine states, they pass on entrepreneurial managers. yes. And and this actually opened up the growth .

of the when did happening .

that was a to power that that was.

Already by the nine hundred tweneboa, how do we get rid of them is the thing because if you look at most major tech companies, apple included mbs, these these .

people are right right now. Yeah, but that's the problem. That's the way nbs are are educated. Now, basically, the people who are running companies in the twenties, authorities were based engineers. The thirties, even though, is a great depression that was incredible.

important that the value multiples was so much .

smaller that of these companies for the s and this is true globally, these large companies and critical industries dominated, and you had to be they had to be run professionally. And yeah, basically you got this separation. So that's the second thing, control.

The third is what call combination. You can use your stock to acquire other companies, right? me.

The fourth is compensation. You can use your stock to pay people. And the fifth is cash. Most people think that the role is not where is raise ed cash for a companies that is not necessarily true, and that certainly wasn't true historically. okay.

Now what happened with the rise of these? What I call the new economy companies coming up basically out of silicon valley is they started using cash at the stock market to induce venture capital. They started using IT to acquire other companies. They started using IT to compensate people deep down in terms of stock options and particularly in the biotech industry, where IT companies go public with a product, they raised tons of money on the study.

effectively tied everything to start value down to how they pay people on both.

So once they start within that model, are you basically are looking at your stock Price all the time. And and so it's hard to resist the shareholder value arguments, particularly when they're self serving now.

And once those companies became big, they all started saying, or we got to keep our stock Price up so I can craze when company have a intel, apple, microsoft sea started going from just saying all that money we're bringing in, we're got to just put IT back in the company to know that that that money can go out and just boost our star Price. And then you get a whole system of what a club results in predatory value extraction, which have to do with corporate raters, institutional shareholders, pension funds. Everybody's trying to get their yields out of companies and basically support this.

And this is base for for the economy as a whole. This means a huge increase in in common quality and driven by the stock market making money in the stock market and then looking for other ways to make that money through private equity. Eeta a one figure, the top one tenth of one percent of households in terms of net worth in the united states, about fifteen percent of their assets were in the stock market in one nine hundred and ninety.

Now it's about forty five percent of their assets. So their wealth is very much tied up with the stock market, the stock market and is very hard to crash now because there's so many people are making so much money out of money that they have to put IT somewhere. And actually, this number of this is dog. The companies are shrinking and through buybacks, the shares out there.

some point this has to fall apart though, because surely if everything is based on the value of the stock, every single large company is effectively at the will of the stock market, which will mean the companies will eventually stop making things with the purpose of doing anything other than raising shareholder. You is not this, okay? Death of .

innovation. okay. Yes, IT does. And but IT doesn't have IT overnight.

We're watching you up.

And so um you started in china has a different model. They started out competing united states and you try to block china, right? This is a big problem for the united states because tech companies are so and then they're so integrally related with trade with china and manufacturing and importing from china.

This is a total disaster. And but basically what has happened is companies, and like the name, whole bunch of them, I have fAllen behind global competitors in the us. Because they stuck with this shareholders value model.

So the us. Is falling behind in a whole range of critical technologies. So a reason there's no major E V battery producing in the states. The problem of of of faces of dry mention, uh the problem of bowing, uh h they did forty three billion dollars and buybacks from two thousand and thirteen to the week before the second crack.

Jack, well.

yeah, and they had bowing, bowing. Stock Price was at a record level in much march first, twenty two thousand and nine ten days before the second crash. And there was no doubt I wrote an article on this in uh in may of uh two thousand nineteen um that that the boeing crashes were the result of top management ignoring issues of safety because I would hurt the stock right right?

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Hi, i'm danny super o post of the hit podcast family secrets.

How would you feel if when you met your biological father for the first time, he didn't even say hello? And how would you feel if your doctor advised you to keep your life altering medical procedure a secret from everyone? And what if your past itself was a secret and the time had suddenly come to share that past with your child? These are just a few of the powerful and profound questions will be asking on our family season of family secrets.

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So I have a theory and love to run IT by just sort the rock com bubble that right now I think the tech industries record with the fact that there are no big ideas. Sure, the ordinance will love this. I do not think generally I is the future.

I think IT is gene up software product based on desperation. But what happens if the taking industry stops coming up with hyper growth markets because they haven't had one for a while? What happens like what happens to these companies stop having new things?

Well, first of all, we were reliant on on these things still, yes. So so even though they're not new things, we're still using the whole ecosystem. You again, I use apple products into apple is going to make money off .

me because what if this is I have the new iphone with me, some a little pig, and I going for a apple every time. What happens if this is about as good as IT gets, if each version is more in, is just more and more incremental if it's faster, but not that faster because we're hitting a wall on sep use as well. Most lawyers falling apart.

Well, we don't really have I mean IT easy answer that question. We get donal trump mean.

basically we have Donald trump.

But what happens that OK will find out? Because you know this? Sorry, perhaps like me will back.

Are you saying that the death of innovation .

LED to truck? No, i'm saying the financialization .

the economy.

No, yes. Even here is the problem. Even when I put more stress on, even when there is innovation, the wrong people are going to grab IT OK. The economy is gone to become more financially.

Zed, you the people who actually should be sharing in in the first sense of the employees of those companies, they can be laid off and an incident iron mask, one hundred and forty thousand people. A tesla, the end of last year, just like that, late off twenty thousand people. Yeah yeah. But my point is .

what if they have no other vehicles for growth? Because you look at microsoft example, they are able to they've had I think you're over your growth of over ten percent. You these companies are slowing .

down at first of I don't think that, that the companies themselves don't need to grow bigger and bigger. They could spin off other companies. okay. And I think that, that's a model that, that works very well because you create a sentence for people in those companies to become their own bosses, to become what if that's not .

their culture though?

The reason push the reason .

pushing on this is i'm thinking microsoft, i'm thinking matter especially i'm thinking, I mean, this go as well, even oracle, I mean, these companies don't have new innovations. Oracles doing a rape smokestack became the large customer. Mic dis set is fine, but what if they stop being able to grow revenue every year? Like that is the real question. What happens?

Well, they'll lay off some of the workers that that .

they what if that is not enough?

Well, then might you they might got of existence. I mean, this has happened to to to some companies, sun microsystems, right? yeah. okay. So know there are companies that, that just don't make IT and you know but when you have made IT, it's very hard to disappear in ten years or twenty years course because you have that that, that demand base and you have the capabilities, you have, uh, basically the various entry, you have a whole lot of advantages that allow you to dominate. And the question is, and then if you take the global competitors and tried to just shut them out, then and you have a problem.

I mean, I think my bigger point is that in the last ten years, the tech industry has category ally failed to find any hyper growth movement that matches smart t phones, that matches cloud software. They've not had any of them that create the level of value that those did, and they are freezing everything. And my concern is what happens if they don't have anything left to school eze? Because they all microsoft matter.

All these companies, they've yed of ten of thousands of people. We've try that they could lay off more and now they're putting billions into a to want to billions capex into that to lose money. I just feel like we're in the corporate psychosis. Well.

the another way to answer this question is ultimately, what is the economy run for? The economy actually is enormous, in my view, should be run to provide services to people that are not profitable, like health care, education, you know, Carry all the people, whatever there's. That's what A, A, A prosperous economy should do.

Now these good producing companies, these innovative companies have a lot of capability produced through those markets, but that means the government becomes a big source or it's either governments or your well paid employees, right, become sources of of of demand for those products, right? And that's the opportunity that's been missed. Now we yeah, yeah.

And and what you have now is with all this financialization of the whole economy, with all this money being funded out of these highly successful, good producing, coming successful and turn to profits, you have money, money looking to make more money. And you have the whole, which has been written about a lot recently, private equity moving into health care, for example, moving into areas which will not be for profit at all, buying up dockers office, this is its office. Yeah basically nursing labor supplied what what have you a lot of stuff being written about that now and a lot of IT is kind of under the radar because you don't even know who owns these various companies.

The corporate structures are so py. But basically what what should have been happening all along was that when you became prosperous, this was really taking some of that those profits, not just paying your workers Better, create more stable employment, upward social economic city, we have downward. So to economic ability for a lot of a lot of a big portion of the population into more education, into more producing things that people need, but aren't necessarily a the next big profitable product.

Actually, some of those would become profitable products if, in fact, you have enough government demand for them and you are the companies as as as in the military. So that's what should have been happening. That's what not been happening.

So how would do we make that happen? How do we force them? Well.

okay, so you have to change the whole way in which companies, resources. So how do you do that? Well, so I if you wanted talk practically, you say you cannot do buybacks anymore in the market.

You should be needs. This is a phenomenon. Buybacks are passed dividend as a distort of distribution shareholder in one thousand hundred and ninety seven. There are much more volatile but way bigger than dividends.

but it's bigger than just yes.

well, okay, but that's to start right. okay. Uh, you stop trying executive paid to the stock market.

You tie exactly pay to the success of the company in terms of employing people, keeping people, employing innovative of products. yes. Are you change corporate boards are okay.

Um you put people on corporate boards to have a real interest in that company's position in the economy, right? okay? You change the tax system. The tax system rewards value extraction with and value creation. And you basically in this, I think is the the most important thing, uh, you figure out how to mobilize all the resources in the economy. The human resources is particular, or what I call the collective and cube of learning, when you get out of its innovation, is about people getting together collectively and learn intuitively.

That is what you learned yesterday, determines what you can learn today, right? And um what happens is when these companies stop retaining investing, you just have all kinds of people with capabilities who are not living up using those capability or in the end, never even get those capabilities because money doesn't go back with the education. I mean, the us.

At a point in time in the one thousand nine hundred eighties when I was necessary, everybody knew you had a really up the educational system, and the us. Was absolutely still is ideally situated for that because of the history of higher education in the united states, which goes back to something coal anger and colleges, which really came out in the late one thousand nine hundred th century, and were the bedrock of innovation in the us. economy.

At that point in time, the huge investments that should have been made were not made public. Education was virtually in every state free. Before then I became expensive student loans.

The interest rates are extortionate in the us. From the government basically IT was White people not wanting to fund other people to for up our mobility for definitely. Yeah and that's that when you enough how was that resolved? IT was resolved through the fact that asia, in particular in the tech industry, was educating people.

And those people were violent in the united states, and I think, to the benefit of them and benefit of the united states. So i'm not saying that agents and some took any jobs away from anybody, but they became an available labor, thought supplies. Who was l one visas, h one b visas, permanent visas, employment preference visas? I've got all the data on this.

This was all encapsulated in the immigration act of one thousand hundred and ninety. And for detect industry, they were now off the hook in terms of the the us. Economy for saying, or we have to ensure that higher education is available for african americans, are available for White families who are coming out of low income, that we have to be sure that this this system is available to in for up for mobility.

They took a walk on that, yeah. And they were to take a walk on that because they were part of the global system as well. I mean, that is very ironic now that the states is in this conflict with feels .

like we've gone yeah socially regressive.

Absolutely, absolutely. And what you see is concentration of the home of the top downward social economic mobility for people particularly who have no more than high school education. And that's why I say that's why you leave the trump. Basically, it's no big mystery once you understand the concentration on the type of money that and .

I imagine to some extent, even if you don't understand IT, you look at the system, you look at the current political narratives, why would you trust authority even if trump is, he's obviously not going to do a whole bunch of stuff and he he's going to do much worse.

It's almost like I feel like people need to realize everything you've discuss today is just describing how the system fucked regular people, how the system has somehow we will more progressive in amErica in the seventies. corporate. It's just it's very worrying. So i'm going to end on a nice what actually should give people hope. Where can people .

find that right now on your own opinion? Well, that's hard to say right now. I mean because because I mean the you know there was a notion that with all the opposition.

Before the election and before before biden had that disaster debate, okay, you know, he had trying to push policies in a much more progressive way. And I think it's true. Yeah, they were trying.

They couldn't get any the family stuff pass, but they were trying to do IT. They got the infrared frames cure bills pass at such a inflation reduction act, starting finally to to try to negotiate health care Prices. Basically, they were trying to do some things that got a rezoning, no from the electors.

And in fact, that part of the progressive policy was not part of the the campaign. And certainly joe biden was a big fan of this stuff on mining buybacks back when he was vice president. right? I'll tell a little story about that.

We can end on this, which is not basically a in in two thousand sixteen, when he was still vice present, he wrote an a bit in the new york was journal about stock buyback, executive pay and said, we have to run all this stuff and this is really screw up the economy. The future of economy depends on IT. In that article, he named one person that was me.

He said, according to economic illian s is on a comma. And then he had data from the article I mentioned in two thousand and fourteen. I looked at in a couple years ago for a journalist contact to me, and I said all biden, when he was vice president, was really thought this was a problem.

Now he's not saying anything about IT. I said, look at the article. I looked at the article again. I said, according to economist blank space comma, someone had actually hacked up my name.

Well, that's but IT feels like we need a populist movement then.

like a great up pro basic. Basically the when the democrats got in to power, and this happened under obama, IT happened IT was happened under clinton. They have just closed IT up to wall street, closed IT up to read people.

Basically, they do not have a critique of shareholder value. There is nothing coming out of from the democrats when they are empower in particular and that that that is confronting this. And I think it's now basically the full circle in terms of people being affected by the lack of important mobility, the lack of job security, living people living paycheck to paycheck.

Well, other people are getting richer and richer, finding okay, we'll just take someone who you with a hope that they're going to do something different, of course, or not. So yeah, so what's where's the optimize? Of course, we need we need a progress of movement. But yeah.

I feel like you can find hoping that fact these ideas will become more problem because at some point we need to review these systems. We need to also realize that worker power will make cooler sheet, will make more innovation. William, thank you so much for joining me and everyone. Thank you so much for joining us today for the first live episode Better offline from the beautiful country of portugal web summer. Thank you, everyone.

Thank you for listening to Better roof line. The editor ROM composer of the matter offline theme song is matter sales cape.

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your podcast hi, i'm danish po. Host of the hit podcast family secrets how do you feel if when you've met your biological father for the first time, he didn't even say hello? And what if your past itself was the secret and the time had suddenly come to share that past with your child? These are just a few of the powerful and profound questions will be asking on our family season of family secrets. Listen to see some eleven of family secrets on the I heart radio APP apple podcasts, or wherever you get your podcasts.

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