Philip Kotler is the S. C. Johnson Distinguished Professor of International Marketing at the Kellog School of Management. He is a trained economist and the author of 55 books, including his most recent book titled Confronting Capitalism. His latest book hopes to give real solutions to the troubled economic system. Philip talks to Jason today on capitalism and how he thinks it can be better.

Key Takeaways:

[3:20] Jason recommends reading Sapiens by Yuval Noah Harari.

[5:00] On the fence about joining Venture Alliance? Come as a guest and check it out.

[11:15] Jason introduces Philip.

[12:50] Capitalism is a great system, but we should also try to improve it.

[19:10] Tax payers are paying for what McDonald’s/Walmart is not paying.

[23:30] Consumers want it cheap, but they also want jobs. Can we have both?

[28:20] Public education is so bad that Philip is glad we have immigrants coming in with the skills we need.

[34:44] There’s a group of people who want to be taxed more, but they don’t want that money going into another battleship.

[40:00] Governments should be more localized, because then they’d be more responsive.

[48:11] The reason why Philip decided to become an economist was because he wanted to understand how income is generated and distributed.

Mentioned In This Episode:

Sapiens: A Brief History of Humankind by Yuval Noah Harari

VentureAllianceMastermind.com

http://www.kotlermarketing.com/

Confronting Capitalism by Philip Kotler

Tweetables:

It turns out that at McDonald’s a good number of workers are on food stamps.

People will agree that government is inefficient and there’s lots of corruption in government

If selfishness is bad, how do you fix that?

Transcript

Jason Hartman:

Welcome to the Creating Wealth show. This is your host Jason Hartman. This is episode number 521. Sometimes I can’t believe how many episodes we have. 521 already. Is it really that many? Yeah, I guess it is. And today our guest will be Philip Kotler, he’s a professor, he’s written many, many books, and today we are going to debate a little bit about his book.

Don’t say, folks. Don’t say, listeners, I never have anyone on the show that disagree with me, because you know I do and I didn’t know that he would to start with, but you know, I really have a lot of guests with very divergent view points. Divergent from my own and divergent from each other, so we’re going to talk mostly about his book Confronting Capitalism: Real Solutions for a Troubled Economic System. I would say, gosh, I don’t know, well, you’ll hear what I have to say here in a moment. But it’s just kind of a little bit indicative of the university system where there’s just a lot of thinking, a lot of theory and just very little practice.

So many of these things back to Marxism, they sound so good in theory, they make so much sense. Plato’s Republic and the whole idea I remember from highschool and studying that of how we should have – everybody’s job should be kind designated for them by the power structure, by the government, although that’s not what this book is about, but just these concepts. I don’t know. Practice is much different than theory, I’ll just leave it at that.

I’ll tell you, I did just finish a fantastic book toward the end of my European trip and I am back home now, back in Phoenix, but this won’t be home for long, because I will soon be living in San Diego, actually La Jolla to be specific. Beautiful La Jolla, California. Again, the only person in human history I may be setting a record, a world record here folks for the only person in history to move to California to save on taxes, yes, as amazing as that may sound. I am probably the first, but anyway I finished a fantastic book towards the end of my European journey while I was in Ireland and England.

I maybe have started this one actually in Croatia, before I left Croatia, but it’s called Sapiens: A Brief History of Humankind by Yuval Noah Harari and that book is fantastic. It was so good. I need to go through it again. There’s so much there. It just covers every area from government to commerce to evolution, biology. It’s just, wow, what unbelievably comprehensive and interesting book. So, I highly recommend that one. We are also, of course, going to jump in to Comforting Capitalism with our guest today. We will try to get you Yuval Harari on an up coming show.

You know, I think we have him booked here. I haven’t looked at my calender, but I know he’s booked and that is Dr. Warren Farrell, author of many books as well. One of them that I recently finished entitled The Myth of Male Power, which is pretty mind blowing for me. So, gosh, a lot of great books. I just love getting through all of these books. They are so good and so fascinating and so interesting.

What else, gosh, Venture Alliance. Our first Venture Alliance Mastermind weekend is coming up and we’ve got an awesome, awesome weekend planned for everybody in San Diego. That’s the second weekend in June. It’s the weekend of the 12,13, and 14. If you are on the fence and I know some of you are about joining the Venture Alliance. A couple of things to know, first of all, number one, you can come as a guest for that weekend. No commitment other than that weekend and your guest fee will be applied toward your membership if you decide to join.

So, that’s a great deal. Also, as you know, I haven’t really marketed this at all yet. I plan to start doing that, because I’m really excited about the Venture Alliance. I think it’s going to be one of the best things I have done. The introductory prices only apply to the first 10 people to join. The first ten members. So, you know, we are not terribly far away from that now and as soon as I start really marketing it other than just kind of casually mentioning it here on my show with nothing planned, we’re going to be passed that ten member market and the price is going to increase. The first ten members are kind of the, you know, those are the founding members, if you will, of the group. We’re just going to do all kinds of amazing things.

4I was talking to Fernando today about our new software. We’re going to be unveiling kind of the prototypes of that to the Venture Alliance members. We’re going to be looking at deals we can do together. This may well be the only mastermind group out there that is founded on the idea of doing deals together. Getting together with a group of people, not a fund manager, not a pool where some general partner runs the pool and skims all the profit off the top, but more, on a more egalitarian – gosh. I can believe I’m actually using that word, because I usually don’t like what it implies, but in this case, it’s a good thing. A more egalitarian system of doing deals together where we all go in and we are potentially equal partners, we don’t have that person skimming all the money off the top.

So, you know what I think about pools. They are for fools. When it’s this type of pool when you’re doing deals with partners and people you know and people that are on equal footing to you, that is a different deal. I think that kind of deal is okay. I’ve done many of them in various real estate transactions over the many years I’ve been doing this. Really, they’ve all worked out great with only one exception that was working out great until the end, maybe I’ll tell you that story sometime. It wasn’t even that bad, but it wasn’t great. I’ll put it that way.

So, there we go, come and join us for the Venture Alliance. Go to our little temporary website, VentureAllianceMastermind.com and we do have a little brochure that we’re developing again. I haven’t really done any marketing on this, but if you want a brochure and application, send me an email. Most of you listening know my email address, so I don’t need to say it on the air. I don’t want to, because then all the spam bots, they spider the transcript and I get a bunch of span. My email address is fairly easy. It’s my name, actually, I could say this, it’s my name at my website, JasonHartman.com. So, that’s pretty easy. It’s just my first name.

Anyway, I know a lot of you know it. So, shoot me an email if you want an application and a brochure for the Venture Alliance. We’ll send you one out when it’s finished, but you don’t have time to wait or that if you want to come to San Diego for our first inaugural event, just go to Venture Alliance mastermind and sign up or go to JasonHartman.com and in the store you can sign up as well in the store section.

Anyway, that’s pretty much it. I got a lot of stuff to discuss. A lot of articles, a lot of things. My new home when I re-establish residency there in California. I really kind of hate to do it. I’m looking at a really interesting article that is one of the things that really kind of, made me leave when my mother got this traffic ticket and it went up to $600. California now has $10 billion dollars in traffic fine debt that people can not pay. Just one of the symptoms of a hunger, greedy, mismanagement state that is trying to take advantage of its own citizen.

You never want to live in a place where your government is really hungry, because then the government goes into business against the citizens, but given my big, huge $738,000 tax write-off that I have to re-establish residency to get, gosh, it’s going to be worth living there and living in La Jolla, California is not exactly torture anyway. So, more on that. I know I talked about that in the past. I know some of you have been asking about it thinking I’ve moved already, I haven’t moved yet, but I will soon be a resident again of California. So, that’s the news.

I’ve got another interesting article I want to talk to you about on an upcoming episode about properties that are underwater and how its not always such a bad thing. Want to talk about Elizabeth Warren, her calling for hearings on the banks, which I think is awesome. How these cartels in our government basically prey on the citizens.

So, we got a whole bunch of big stuff coming up. Self-driving trucks and how that’s going to change the economy. Of course, lots to talk about in terms of real estate investing. We had our Jason Hartman university monthly call this evening. It was pretty interesting, you know, we had an expert and attorney on talking about Dodd Frank, all of that, and I don’t know if it was really the most exciting call, you know, most attorneys are not Mark Collier, they’re not known for their speaking ability, but there was some really good technical information on that. So, anyway, more on all of that stuff later. Let’s get to our guest without further adieu and hear what Philip Kotler has to say about Confronting Capitalism. Here we go.

It’s my pleasure to welcome Philip Kotler to the show. He is a S. C. Johnson Distinguished Professor of International Marketing at the Kellogg School of Management at Northwestern University. He is the author of over 55, did you get that? 55 best selling books. Marketing and economic books, including the new book Confronting Capitalism: Real Solutions for a Troubled Economic System. Philip, welcome, how are you?

Philip Kotler:

Jason, I’m doing fine and looking forward to our discussion.

Jason:

Well, it’s great to have you on the phone and just to give our listeners a sense of geography, we were talking about this a little bit, where are you located today?

Philip:

I’m in Glencoe, Illinois, which is really a suburb of Chicago. That’s where my home is.

Jason:

The title is interesting and it’s sort of, when I first saw your book, it made me think of the quote and forgive me if my attribution is wrong here, but maybe Winston Churchill possibly, capitalism is a terrible system, it’s just better than everything else. It just made me think of that for some reason. Do we need to confront capitalism?

Philip:

Yes. Let me say by the way the Winston Churchill quote was about democracy, not capitalism, but others, including myself, is that he could have also said that about capitalism.

Jason:

I think someone has sort of ridden on his coattails and taken that quote and rephrased it, because I’ve definitely heard that one before, but go ahead, yeah, please.

Philip:

Right, right. It’s very interesting. Americans live under two systems. The economic system is called capitalism and the political system is called demography. Both are great systems. They are better than the alternatives. However, that doesn’t mean we shouldn’t try to improve it. Let’s take capitalism and notice some things about its performance. By the way, I will say that it’s great at creating goods and services. Go into any shopping mall and you’ll see a 140 stores and they are just piled up with Levi jeans and no one is going to go out with goods and services. We call that supply side capitalism.

So, the supply side of capitalism is very strong. The demand side is not so strong, because as it was, those goods would have turned over faster. Even in car lots, we wouldn’t have cars sitting around for 30-50 days and then sold. So, capitalism has great supply capacity, but the question is can we grow of it bought by people.

Now, the answer is either that everyone in this country has all the things they need so that’s why that’s not buying more or they’re buying it on the internet and we don’t see it in the shopping centers because there is a shift from retail stores to online or there’s a lot of people who would love to have a pair of jeans and more things like that, but they don’t have the money.

So, one thing about the situation is capitalism is creating a growing income gap between the wealthy and even the middle class and the working class and the poor and, by the way, when that happens, two other things happens. It slows down the rate of economic growth, because if people can not – have enough money to buy things, we don’t grow at 4% a year GDP, Gross Domestic Product, we grow at half of 1% or something and then the other thing is people being paid low incomes in many places just about the middle wage in many places, the result of that is high indebtedness, because people don’t want to just not have things they need or want, so they buy it with credit cards and so the gap in income causes a slow rate of economic growth and a high level of growing indebtedness and I think all of us should figure out what we can do to make capitalism work better.

Jason:

It just makes me think when you were talking or saying where capitalism isn’t working quite right and there are certainty many problems and one that concerns me greatly, greatly is the diminishing middle class. That has always been, in my opinion, something that has really helped make America a very stable country and if you look at this Banana Republics all over the world where you’ve got the rich and you’ve got the dirt poor. Those are just terrible places to live. You know, even if I were one of the elite and the rich in one of those countries, I wouldn’t want to live there, because..

Philip:

You’d be with a gated community. You would have even a little militia of you’re own.

Jason:

Oh, I hate that idea. You know, I go to – even Costa Rica, which many people think is a great place, you know, you see the razor barb wire, the bars on all the windows, the problem with the squatters. I mean, that’s no way to live. Who wants to live like that?

Philip:

Well, when a country has poor people, there’s a lot of problems, because some of them have to live and they’ll turn criminal. Some of them won’t go to the hospital, they have no money, they’ll turn sick and diseases will spread. There’s every reason why the rich should help reduce poverty and so on and yet the way its going, Jason, it’s like, they ignore what is and their interests. It’s in their interests to not take 30 million dollars home that year, which CEOs are doing. About 600 times what a worker gets. It’s in their interest to make their society work so that they can sell more goods.

Jason:

Of course it is. So, that brings me to an interesting thing that I have really never gotten my head around and I do consider myself an economist for better or worse, but the concept of Henry Ford back in the day, increasing the wages of his workers so that they could afford to become his customers.

Philip:

Brilliant move by him.

Jason:

Does that really work? I mean, I don’t know. That just seems like – it increased the cost of the product. If you pay the workers more, you gotta raise the price, or at least there’s pressure to raise prices. What I see is that, you know, feel free to comment on all of this, but I want to dump one more concept on you.

Is that, people complain about the greedy CEOS and, I agree, you know, Lou Dobbs book ten years ago, War on the Middle Class when I read it it influenced me a lot and, you know, he talked about the CEO pay gap is just increased exponentially over the years and it certainty has, there’s no question about that, but these corporations are really just pass through entities, aren’t they? I mean, these greedy boards of directors and C-class executives, they’re not going to take a pay cut.

You know, when you levy regulations on them and taxes on them and re-distributionist policies and increase the wages and more OCA regulations, all they do is raise the prices. You know, does it really cut their pay?

Philip:

Yeah, here’s the thing. I understand many, I know some wealthy people and I know they say they work hard and they’ve built jobs. They are job builders, not job killers. Yes, but here’s the thing, there are several steps that can be done to adjust things better before going to real sharp re-distribution or wealth taxation.

For example, the minimum wage. It turns out that at McDonald’s about a good number of workers at McDonald’s are on food stamps. Mainly, they are getting their, they are paid a little more than $7.45. That was the minimum wage for a long time. They are on food stamps. Now, the argument I would make is, hey, McDonald’s. You’re not paying enough and the tax payers are paying what you should be paying for the workers.

Jason:

You know what. That is an excellent point, because that has been argued about Walmart that the public sector is really supporting Walmart, because they are paying for the aid. Listen, I’m really no believe in government programs. If those went away than those companies would have to pay more, because the workers would just pressure them to and that would be the way the system works out in my opinion, but these externalities as they’re known, that’s commonly – that term is commonly used when it comes to the environment.

The externalities cost of capitalism and I’m sure you’ll comment on that, but if McDonald’s raises their wages or, even worse, if they’re forced to raise it, you know like Seattle $15 an hour minimum wage, they’re just going to move toward automation and robotics. I just read an article about the McDonald’s burger flipper that can prepare and it’s not just a flipper, it can prepare 300 burgers, what, per hour or something like that? It never gets sick, it never sues you for sexual harassment. It never complains.

Philip:

Well, that’s my chapter three in the book and four. My chapters having to do with will the US be able to produce enough jobs for all of the people in the United States or will many be lost through automation of the kind you just described, but digitization and atomization are even hurting the lawyers, doctors, and others too.

So, it is a fundamental question, but here’s the thing, let’s say that every company that makes something is causing some damage to the environment, because they are dumping some chemical in water. If we [#21:13?] that or they are smoking. Smoke goes in the air and we’re getting that effect of pollution, whatever. Now, should they be covering that cost or should the public cover the cost. Those are what you mean by externalities.

So, what we say is, the GDP is not quite an accurate measure. It shows the value of the goods and services produced, but we really should subtract from the GDP the cost of the damage done that they’re not carrying for. Now, here’s the thing. Let’s say we do, even require McDonald’s to pay more, because let’s say, minimum law.

Jason:

Minimum wage. Yeah.

Philip:

Okay, minimum wage. Now, here’s the thing, then McDonald’s will go to more automation possibly and that would be a job killer, you’re right, or they will go to raising their prices. Well, that’s fine. Raising the prices so that they at least cover the costs that they are creating and if people buy fewer hamburgers, that’s a judgment that it isn’t worth. Some of the value has gone from the fast food industry, but that’s what companies have to do. Their prices should really reflect – not only what they produce, but the damage they’ve produced. So, therefore in the end, I’m not concerned about McDonald’s raising their prices. That’s what they ought to do to cover more of the costs.

Jason:

But then the con – see, this is such a difficult thing and I wrestle with it. I don’t know what to think about it, I really don’t and just so you know where I’m coming from, I’m pretty much a libertarian. I don’t believe in government. I don’t believe in giant corporations either, because they are just like government. They are in bed with government and that whole thing gets so corrupt, but it’s like the trade issue. International trade issue. Okay, so, Americans lose their jobs because the company has outsourced to China, Philippines, India, etc, right. Let’s just take the Walmart example and use China.

Philip:

They killed the middle class, basically.

Jason:

They do. You’re right. No question! But the consumers are those same people that go to Walmart and shop and they love the low prices. How do you reconcile this? Can you have it both ways?

Philip:

No, we got a tough problem there. We could always prevent companies from going abroad, but not only go abroad and destroy, and therefore the factories are not here. By the way, the middle class was built by factories basically and by the existence of unions. Unions, which ave disappeared virtually were there to insist on health benefits, higher wages, and so on, and those workers had middle class incomes. They had their home and the wife didn’t even have to work.

So, now the factories are abroad. Alright, so can we get back – can we recreate a middle class? Well, it’s not going – the factories are not going to come back here and we understand the corporations for doing that, but we also understand the fact that there’s sitting on trillions of dollars abroad, which they won’t bring home. You may say, why don’t they bring them home?

Jason:

Right, but they would have if there was an amnesty, yeah, if there was a tax amnesty.

Philip:

Well, the thing is it brings them home. It’s 35% corporation taxes. So, now the question is what is corporate taxes about? Why are corporations taxed? Well, if you believe in what happened with Citizens United, the the corporation that’s a person, that alone should argue that they have to pay their taxes.

Jason:

Then the corporation should be able to go to jail just like a person. That’s the Citizens United thing, they can’t have it both ways, okay. They should be subjected to criminal penalties and you just can’t have it both ways. Citizen United.

Philip:

Well, I’m against the fact that they’re [#25:17?] myself, because in any corporations there are so many people with so many political views of difference that they can’t have that boss, the CEO, decide what is the view of that company and spend all the money to get the view done politically.

Jason:

Very good. I agree.

Philip:

So, here’s the thing. Now, maybe 35% is not a just corporate rate. I have check on other countries and they charge, a number of them, the European ones, something like 20% corporate tax and a corporate tax is to help pay for the benefits that the corporations have enjoyed from roads that were built and ports and airlines and so on and sometimes they don’t feel – government to me, me and you can argue about this, is very positive force in principle to adjust differences that occur.

The libertarian view, I understand this idea of freedom, but let me you a funny thing, when I talked to republicans who keep saying liberty, freedom, and so on, and I say what about the women who wants to have an abortion. Well, she can’t. What about the – several other things. They are not libertarian, they don’t want to let people make choices about they..

Jason:

But that’s the republicans, that’s not the libertarians. They don’t –

Philip:

They are not libertarians, but they keep talking about freedom and liberty as what the republicans stand for and yet they are not letting women do what they want with their bodies. They are not – I’m just not.

Jason:

I don’t want to digress too much, but you do have to admit that it’s not just the women’s body that is a life. You know, Steve Jobs was almost an abortion.

Philip:

That’s a religious point of view.

Jason:

Well, it’s a scientific point of view. I mean, you know.

Philip:

Look, look, so is an egg when I crack an egg. I’m destroy a chicken.

Jason:

But that egg isn’t fertilized.

Philip:

Uhh, sometimes it looks like it is. Okay.

Jason:

I had eggs for breakfast today.

Philip:

Okay, let’s go back to what you said.

Jason:

But we eat animals anyway. So, that’s a whole different discussion and I did a show on that yesterday, interestingly, but you know, okay, go ahead.

Philip:

Right, okay, so here’s the thing when I look at the situation in the United States and it’s the performance of capitalism. Here are some things to notice. I see a lousy infrastructure in the United States that the civil engineers who rate ports, roads, bridges and so on, give it, on the average a C minus or D rating for the state of our infrastructure and this is particularly bothersome, because we want to create more jobs and we have the workers who can fix the infrastructure.

Secondly, I see very poor public schools. The kids are so weak in math, science, and English, that what can we do about that? And then, by the way, they are our future. Building human capital is our future. In fact, thank God Chinese people and Indian students are coming into this country, because they are coming with all the things that we’re lacking.

And then the college students, listen, let’s just take one more. The college students owe collectively $1.2 trillion dollars. The average one owing $30,000, so where – we have 15% poverty in the country and we have a lot of people still without health insurance. So, that’s what we have to itemize as a set of problems that my book addresses and we want to work on.

Jason:

Tell us about some of the solutions to those.

Philip:

Okay. We talked about raising minimum wage. I’ll talk about closing tax loop holes and the particular one that I will close capital gains. We have become not a manufacturing nation, we are a nation that is, that makes money on money by playing with money. The stock market. So, people have even suggested, how about a tax of, a very small tax, on every financial transaction where you’re just buying stocks, selling stocks, buying bonds, whatever.

That would be money that we could put into reducing the debt of college students and by the way, if those student to ours had gone to Germany for school or to Sweden, there would be no tuition and then the capital gains tax is 15%. It ought to be the normal income they own. In fact, Warren Buffett has said, I am ashamed that I’m paying only 15% income tax, Mitt Romney should be ashamed and, frankly, I want to be taxed at my income level, which would be 39.5% and that’s another thing. Why is it that way? We used to charge 90%, then 70%, then 50% as the highest tax rate. Now, it’s 39% and that was forced down.

Jason:

Well, I gotta comment on that. That’s not really the way it was even though the marginal tax bracket was higher, there were many more loop holes and there was much more encouragement back then to do silly, stupid investment. I remember all the windmill investments in the 70s and the doctor who had a big income buying the windmill that made no sense, because you’d get a tax break and with those high tax rates as a marginal rate, malinvestment was encouraged. So, it’s not just about the marginal tax rate, it’s about the number of loop holes and our tax code is ridiculous.

Philip:

Don’t you think the billionaire at 39% that’s the marginal rate. Does that make sense to you? I’m not talking about 70 or 90, how about 45% , how about 45%?

Jason:

Well, if they live in California, they’re going to pay 45% combined state and fed.

Philip:

Okay, okay good. Here’s the thing. How do you feel about the wealth concentration in the world with 85 people owning so much wealth that it could be what 3 or 4 billion are getting.

Jason:

That concerns me greatly. I just think our answers to that our different, because…

Philip:

Well, then just do an estate tax. Make sure that the guys who pass away, they – as Warren Buffett says, I’m going to leave enough for my kids to make out as kids, but not more to spoil them.

Jason:

Yeah, he’s sort of back tracked on that a little bit, but that is the Warren Buffett concept. He originally said he agreed with a 100% estate tax so that everybody would start even, each new generation. You know, that might be kind of good, because these rich spoiled kids are usually do nothings. I mean, maybe not always, but a lot of times they are, but anyway, the thing you don’t seem to be asking yourself, and just correct me if I’m wrong, is that where does that capital formation come from? If you tax the capital formation, then you disincentivize people to form capital and capital formation is what creates the wealth of every society and economy. People have got to be encouraged.

Philip:

Oh, I’m for innovation and entrepreneurship, but let me ask you, are you telling me that Steve Jobs would not have done what he did if he was doubled taxed?

Jason:

That’s not the question.

Philip:

Are you telling me Walt Disney would never started Walt Disney? Are you telling me that Southwest Airlines guy, Herb Kelleher would not have created the Southwest Airlines. It’s crap, really. These guys love doing what they’re doing. Richard Branson would do it if he were taxed double. He said that.

Jason:

It’s not that simple. Listen, I was just with Richard Branson on his private Necker Island, okay. So, here’s the thing, all of those guys probably would have done what they love if they were taxed higher, but they could have never scaled it up the way they did, okay. I mean, it’s easy for Richard Branson to sit back and talk about correcting the environment when he owns a freaking airline. Why doesn’t Richard Branson close his airline? That would be the best thing he could ever do for the environment, it would seem.

I mean, c’mon. Are you serious? The hypocrisy among these wealthy leftist is mind blogging to me. I mean, Warren Buffett says my security pays more tax than I do, right, well, no one is stopping him from giving more money to the IRS. In fact, he’s in litigation with the IRS, fighting over an audit, saying that he – because he doesn’t want to pay as much tax. Okay.

Philip:

Well, it’s a question of rules, law, he disagree with.

Jason:

Right, but why doesn’t he put his money where his mouth is? If he says the government needs more money, give them more money! They’ll take it. There’s a charity. It’s a different thing, but we can talk about the Gates foundation as long as you want.

Philip:

I have an answer to that. Here’s what I would do. I would say to a group, for example, that just got visible. It’s called the patriotic rich people. I forget the full name. They want to be taxed more. Patriotic Americans or something for higher taxes. They want to pay more taxes, now the problem they have is they don’t want the move to go into the feds, because why build another battleship when the navy doesn’t even want it? So, they said, we want to be paying more taxes, but it goes right into an education fund, to improve our education or a health fund. So, I want to pay more taxes, so it goes to those purposes and we’d all be better off, but we don’t have a system like that yet.

Jason:

Well, look. The reason I am not in favor of higher taxes because I think Steve Jobs and Herb Kelleher and Richard Branson. They would have remained much smaller. They would be running small businesses now.

Philip:

Oh now, they could always borrow money. When it’s a great idea, they don’t need to have the money.

Jason:

Well, they have to borrow the money from someone..

Philip:

But they don’t have to, but they don’t have their own money, all they have to do is find a venture capital firm or go on the market. Look it, there’s no money that these guys who are coming out with no products is they –

Jason:

So, these venture capital firms would never have the capital or as much capital, of course they’d have some capital. They’d never have as much capital to loan to Steve Jobs and Herb Kelleher and Richard Branson, your examples, if they were taxed at a higher rate, because people like you would be saying well, these rich venture capitalists, they should be paying higher taxes. So, you know, the argue just trickles right down. See, I think taxes are just trickle up poverty. It’s, you know, no big government is ever good for society. Okay, and I think everybody on the left and the right, and I’ve had these debates hundreds of times with people, okay. I take a middle ground on a lot of this stuff, okay, but people will agree that government is inefficient and there’s lots of corruption in government and, you would agree with that, wouldn’t you?

Philip:

I would say big businesses inefficient. I would say anything big is inefficient.

Jason:
We will agree there, my friend.

Philip:

We have very, look, and then they go to the IRS and they give it so little money to go after the guys who are not paying even the taxes they should. There’s a lot of corruption. I am not the judge all of government is.

Jason:

Bigness is bad, but all I am saying is, look, if big is the enemy. I mean, we gotta have some big companies, because we’ll never have airlines, we’ll never have Intel, we’ll never have Apple. You can’t do that stuff in a small business. You gotta get big, okay. The problem is that the lobbyists all work for these big companies and they are part of the government. I mean, the corporatocracy is the government nowadays. It’s disgusting. You know? You know, whether it’s democrat or republican, it doesn’t matter, they’re in bed with the giant companies, okay.

So, we’ll probably agree on that too, but all I’m saying is on the government side, if you make government smaller, then there will be less efficiently and less corruption. It’s going to be there, because inside any human organization, you’re going to have people who are on the take. It’s just part of our fallen nature, okay? So, you know. Make it smaller and the corruption will be smaller and the inefficiency will be smaller, that’s my contention. Go ahead.

Philip:

The question I want to ask you is we’re living in an interconnected world where all kinds of problems come up and they need strong government to figure, we can’t go back to everyone can operate in his own self interest. I think the two deadliest structures that people have brought into is Milton Friedman’s argument and also Ayn Rand’s argument that selfishness is good and they confuse self-interest with selfishness and greed. That’s good and Milton Friedman said the only thing that counts is profit. Well, that thank God is failing apart because we now say that companies that are going to be successful are looking at the stake holders, not just the share holders and they are judging companies by whether they have purpose and passion and performance.

So, you got to have state governments, you have to have city governments. You know, Chicago itself for ten years or 15 years has been aiming at Japan and working with Japan. Every big city is a city state and our big cities grow faster than the states they’re in. The states keep them back and in another book called Wining Global Markets. I developed a thesis that basically we’ve got to unharness our cities to act in our own interests. Look at how Chicago got Boeing to move from Seattle to Chicago. They can also find a European company and get it to come over here. So, cities are the engine of growth now, not states and cities are governments. You may say, well, cities have corrupt government, but look, you can’t go back to the prairies.

Jason:

I would generally agree that it should be pushed down to the more local level. I like that. I like state rights. I like city rights, if that’s even a term, but I would agree. I think government should be more localized, because it’s much more responsive.

Philip:

Yeah. I’m in favor of that very much.

Jason:

We agree on a lot of things, okay, there’s no need for us to argue. I mean, you know, we agree that there’s a problem, for sure. The only question is maybe we disagree on how to solve it a little bit, but I don’t know. So, if selfishness is bad and Ayn Rand, by the way, her book called The Virtual of Selfishness is really mistitled, has some really interesting essays in it, by the way. If selfishness is bad, how do you fix that? Do you make, do you tell the government to go and force the person or company who is being selfish to hand their money over to somebody who is in need or not selfish or what do you do?

Philip:

No, I don’t want a police state, no. I’m not in favor of that either. I think that laws are passed in principle by high consensus. They get passed only if there’s – you know, democracy itself is suppose to be there to protect the interests of minorities as well as the wealthy and the others and so we, that itself is my next book will probably be about the problems of democracy in this country and in every country as a matter fact because of Jerry Mandering that’s going on and the primaries and all that. There’s some real problems. You mentioned the lobbyists. The lobbyists are terrible.

Jason:

Oh, lobbyists are the worst problem we got. If we just got rid of lobbying, you know, but people need to address what we gotta do with the political system is just get the money out of it. I mean, it’s just a disgusting money pit and it’s big business! No body can compete. You were donating $100 bucks to a candidate doesn’t matter to them, you know? It just doesn’t even matter. It’s a little blip on the radar. It’s nothing and that’s where the rights of the people have been taken away, because we’re not big enough to do anything.

The government has been hi-jacked by Wall Street. It’s been hi-jacked by lobbyists. Lobbying should be allowed, because people need to access their government. That’s the original idea of lobbyists, okay, but when those lobbyists walked in there with, maybe literally, I don’t know, probably literally too, but suitcases full of cash, you know. My voice isn’t heard, okay, your voice isn’t heard, only the suit case full of cash is heard, right?

Philip:

Yes. We don’t even have a union movement that would at least be the voice of some workers or some people who are, but we don’t have that anymore.

Jason:

Well, unions can exist. They are allowed to exist, right?

Philip:

That’s right. There the whole issue is open or close shop.

Jason:

But see, should someone be forced to join a union? To get a job you have to, it’s mandatory? I mean, why can’t you have a choice?

Philip:

Well, the idea is that if there are benefits, why should the free riders get them too? But as a matter of fact, maybe that’s the answer. Let’s have open shop and those that don’t want to join the union, the benefits don’t go to them.

Jason:

Yeah, I agree, because these unions are so corrupt. That’s the problem. They get big too just like the big companies, just like the big government. These union bosses, they are on the take and they’re taking all the money.

You know, I mean, government looks out for itself first, the union leadership looks out for itself first. This selfishness is just part of the human deal and I think we gotta let the market just regulate it out of the system and now thank God for the internet, because companies, you know, their deeds get out there, their dirty deeds are exposed in minutes around the world now. I think that’s really the future is the market place and freedom of communication and let’s hope that lasts forever, because if your boss does something bad to you, you can go online and write about him.

Philip:

I’ve heard of a good market solution. I guess it was a guy on TED talk and he said, I think he is a – he’s a billionaire, I can’t remember his name, he says trying to put together a new index for rating companies that he calls the ‘just index’, which is for justice and he says, one thing in the index would be how sustainable is that company’s practices. In other words, the really care about using the best materials. They are not creating pollution and all that, how sustainable. Secondly, how fair is their compensation? He is going to have a rating for that too.

So, you know, if they, the workers should get – here’s what he’s saying. Productivity has been shooting up in this country, because capitalism is a very good system, but the sharing of the income generated has been so distorted, okay, so he wants to rate them on how fair the compensation is, including the CEOs compensation, then he says, when you see my index and you’re choosing to buy jeans and you look at the two companies you’re trying to decide between, the one that has the higher just rating is the one, since the jeans are pretty much the same – it’s a market solution.

In other words, he wants consumers to be looking at who they are buying their food from and their restaurants, their McDonald’s and so on and then just decide if they want to be voting for those who are paying outrageous, paying minimum to the workers, and outrageous to the boards and the CEOs. That’s a market solution, by the way.

Jason:

Yeah, you know, from 2000 to 2002, Larry Ellison, CEO of Oracle. We all know him, okay. His personal take from that company was $781 million dollars in two years. In two years he took almost a billion dollars out of that company, according Lou Dobbs book and at the same, in the same two years, his share holders lost 61% on their investment. I mean, that’s just unbelievable. That’s legal. It goes on everyday. Wall Street is the modern version of organization crime. It is just completely unaligned with the interest of the share holders and it’s a terrible thing, but thank God the word gets out, you know?

Philip:

I wish the stake holders, which are often big, wealthy people and also big companies, if they would sort of raise these questions. Why are they so share about, in other words, the income and wealth of a company is shared or not shared very much and when we find out how good the company is with making the workers better off, making the share holders better off. You know, Larry Ellison should not have taken that much and let the share holders take more.

Jason:

Of course not! Yeah. It’s ridiculous.

Philip:

So anyways, I wanted to just say this, Jason, because your questions are wonderful and provocative. I wrote the book, Confronting Capitalism, because I am a capitalists. As a matter of fact, I think we would be better off as a country if we had more capitalists. I would like every worker to own stock in a company, but I grew up with knowing – seeing a lot of poverty.

My own family was working class. I saw very poor people and as an economist, the reason why I got a master degree and PhD in economics was that I wanted to understand how income is generated and how income is distributed. Now, I didn’t go into that with my training initially. I went into a part of the question, which is how does the engine work, the economic engine and it occurred to me that marketing was the force that counter balanced the big supply side of the economy where we can create so many goods and services marketing it as how we try to get the stuff purchased.

So, the leading text book, it’s used around the whole world. It’s called Marketing Management, but I wanted to come back to the original question that bothered me as a trained economist and so the 14 chapters, each one takes another aspect and it doesn’t only analyze why that has been happening, but what has been purposed to improve the situation.

So, in chapter two which is on the income gap growing, I have a list of seven or eight very smaller steps and the biggest step may be progressive income tax or an estate tax that is a little higher against the people who are trying to get the estate tax to not exist. I mean, they want wealth to even get bigger in its concentration. They want more co-families to exist and so I have had good luck with this book. It’s getting a lot of attention and it’s very nice of you to be willing to speak to me about it, but I only ask your readers to go to Amazon and see the reviews. It’s very excellent.

Jason:

Yeah, the reviews are great, you’ve got 14 reviews, you got 4.5 stars. I mean, my gosh, you’ve got over 55 books. I click on your name on Amazon and it just goes on and on. You’ve got more books than anybody I have ever known, so congratulations on that. You know, this has been a really provocative discussion, but do you want to give out your own website? KotlerMarketing.com.

Philip:

Well, Kotler Marketing is my brother’s marketing web page and yes, I am on it too, but it’s his firm, I help him out and so on. The other way to reach me is with my email which is Pkotler(at)AOL.com

Jason:

Philip, thank you so much for joining us and engaging in this debate. Very, very interesting and I hardly think in the 40 minutes we spent together we did go over, so thanks for staying on that we’re going to solve any of these problems, but I think we’ve given some people something to think about. You’ve given me something to think about. I hope I’ve given you something to think about.

Philip:

Absolutely.

Jason:

I just appreciate the spirited discussion, so thanks for joining us.

Philip:

Thank you, thank you.

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This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email [email protected] Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.

Episode: 521

Guest: Philip Kotler

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