(00:00:00) Good afternoon. I'm Ron James vice-president Minnesota for u.s. West and chair of the Minnesota meeting. It's a pleasure to welcome all of you to today's meeting. I'd also like to welcome our radio audience throughout the Upper Midwest who are hearing this program on Minnesota public radio's midday program broadcast of Minnesota meeting or made possible by the law firm of Oppenheimer wolf and Donnelly with offices in Minneapolis. St. Paul and major cities in the United States and Europe. Members of Minnesota meeting represent this communities leaders from business government Academia and the professions. We meet 12 times a year to hear from and question leaders of national and international stature. This is our 14th year in the marketplace of ideas. I am very pleased to introduce today's speaker Jerry Jazz and now ski president of the National Association of Manufacturers and one of the nation's most frequently quoted Authorities on the US economy and on the vital role of Industry on our economy. Under his leadership. The National Association of Manufacturers has become one of Washington's most influential and respected business groups helping shape National policy on exchange rates export policy and many other issues. Mr. Jazz and house key has been a strong advocate for example of the North American Free Trade Agreement and affordable and workable Health Care reform. Mr. Jasmine, the Jasmine house key is widely quoted in the media and as appear on almost every national public affairs program including Good Morning America today Meet the Press Crossfire and money line is that at Orioles have run in the New York Times the Chicago Tribune the Harvard Business review and other major Publications a one-time factory worker. Mr. Jazz a now ski served as intelligence officer in the United States Air Force was an assistant professor at the Air Force Academy and served on the Carter administration's economic transition team. He became president of the National Association of Manufacturers in January of 1990 after serving as the association's Executive Vice President and chief Economist for 10 years. As you all may recall Minnesota meeting is focused this year on Minnesota meets the information age creating a new Society in a world of change. Mr. Jazz and house keys remarks fit that Focus nicely. He will discuss how new technologies and Industrial processes or revolutionising American companies in recent years among the most competitive manufacturers in the world let mr. Jazz and I'll ski is finished his address. He'll take questions from the audience on the subjects that he talks about our he'll be open to talk about other questions that you might have regarding Washington can darling and Jennifer rila will move among you to manage the question and answer session. Let's join together and give a warm Minnesota. Welcome to mr. Jerry Jazz and house key. (00:03:50) Thank you very much, Ron. From what I've learned of you in just the short time. I've been here you obviously are one of the examples of the very successful workers and Executives in American business today moving from one job to another controlling the East Coast for u.s. West and managing all that now going on into the computer application of Human Resources. So in many respects, I'm delighted to have you introduce me because I think a lot of my talk is about people like you and many of the rest of you who are in the room who are manufactures and Hines from the N. Am is here to join me. And I want to thank the in am members who have come out Glenn scovel and several other people here at this table. I also have to tip my hat to Jonathan lazier my agent on the book who was a very creative source of hot. Talk about business and Manufacturing in a way that would be meaningful to people in general. And of course I want to thank the Minnesota meeting for having me. So I'm delighted to be here to see all of my old friends. I'm also delighted because I'm a Midwestern boy who grew up in Indiana and worked for Hubert Humphrey when I was in the Senate and that was an experience that those of you who knew (00:05:15) you were (00:05:15) Humphrey can appreciate I taught him a tiny bit about economics and he taught me an enormous amount about politics and life and I became I was a person who came out at the winter as did anyone who happened to have any relationship with Vice President Humphrey the senator Humphrey and so I'm always reminded about the wonderful times. He and I had together whenever I come back to Minnesota. So there are lots of reasons why I'm delighted to be here. I'm also delighted to be here to talk about success because you know World in which there's so many negatives to talk about success is a mission that I feel particularly strongly about and I feel strongly about it because I think that success in the role model for Success breeds further success, and that's how we meet the challenges we face in the world and deal with the problems and the opportunities that we have but different people look at success differently quote. The greatest success of person can have according to WC Fields is to be shot at and missed. In Washington dealing constantly with Senators the White House. I can certainly testify to that. It's rare that I come to work three or four days in a row that I don't have some Senator a member of Congress who's on the phone saying why did you say that about us or don't you know that I'm for product liability reform or how could you possibly be for NAFTA because of the jobs that will be lost Washington is always been a contentious place and it's become a little more that way or as to the enjoyment of success Mae West said quote too much of a good thing is wonderful. I rather like the Mae West reference better. The degree to which we achieved success depends I would argue on whether or not we're optimistic pot a pessimist. And the reason for that is that the pessimist are there to be critics to tell you how you can't do things and while I appreciate the value of having a pessimistic side to your personality. I don't think it's what leads us forward. The pessimist are too much in suede today in my judgment in America and in the country are the as a whole. These are the people who are on TV each and I telling you what's wrong with America from stem to stern. These are the people who told us that the market economy couldn't beat the communism and these are the people who told us American manufacturing couldn't compete with the Europeans couldn't compete with the Japanese and that we were going to go the way of all things in a post-industrial society in which we were not going to make products anymore. We Were Somehow going to move into a vague. Texas Aya T in which people didn't make products it just all kind of happened. Well, those people were wrong about all three of those views and that's part of what I want to talk about today in the context of what's happened to American manufacturing and how it has become successful and competitive again how it is a role model for success for services for education for the state of Minnesota and how it is a role model in many respects for reforming government and to do that based on the book. I've written with Bob hammer and called making it in America, which is a story about how successful companies and workers have come back and become competitive again and I think by doing that we can talk about the extent to which technology has become so much and embodied as a part of that. Let me take the first part of my assignment which is to talk about the comeback of American manufacturing for those of you. (00:09:10) In the room who are (00:09:11) Skeptics about the notion that there's been a comeback or that we can compete. First of all, most people don't recognize that although we were supposed to go into the post-industrial society and that in 1985 that our quality was low. Our productivity was low in that we were losing the battle since then there has been a revolutionary set of changes in manufacturing which has made us the most dynamic sector of the economy, which has made us number one competitively in the world not by my words, but by what the world economic Forum says and how we're number one is in terms of the quality our products the productivity of the way we produce our products Which is higher than Germany and Japan by the technology, which is embodied in manufacturing, which is greater than any other sector in the American economy. I don't know where most of you think technology comes from but it in fact comes from manufacturing and the way in which we've revolutionized. Lucien eyes the way we run our operations and we involve our employees so that all of those things add up to a way in which the Midwest is come back from being the Rust Belt to now being the place that has the lowest unemployment in the country. If you go to the East Coast or the West Coast, it's nothing like Minnesota in Milwaukee in Ohio and all those places that have had an extraordinary competitive come back rebuilding their manufacturing coming up with new technologies revolutionising the workplace and so forth and you see it in our Industries, even the steel industry is come back and certainly no one can question anymore the extent to which the quality of American Automobiles and the design and the sophistication of them has come back and of course if you look at semiconductors, that's the classic case because it was just a short time ago that the American Semiconductor industry was to go out of business we couldn't compete. We had to go into these consortiums of business and government and universities before we can compete and Now intel is riding on the top of the entire semiconductor environment and many other American companies are competing very successfully as a result of our technology and Ingenuity and Innovation. So the case is clear there are weaknesses in manufacturing. Some companies aren't doing what I'm saying. We got a lot we could further improve but the fact is American manufacturing is the most dynamic part of the American economy and it's making change for the better in the economy in its companies and for its workers more than any other sector of society. Now having attempted to establish that as a clear case. Let me now move on to what has to do with the way in which manufacturing is achieved these changes and highlight from my book five or six of the success paths that companies have followed putting a particular emphasis on the way in which there's been a set of revolutionary changes in the way. We make products. We don't try to make things bigger and larger and use more energy and slower and so forth. We now try to make things smarter better higher use of technology. I mean, the typical example is the American Factory most oline American factories have reduced the amount of space that they use to produce products by 25% to 1/3. They keep the old Shell and they use the 1/3. They don't use for Museum or storage space or whatever, but they've changed the whole internal configuration of the plan in order to produce products that are usually which are not now in an assembly line production, but are now using computer-aided design manufacturing sales networks and most importantly computers and software. So there's been a revolutionary set of changes which have been driven (00:13:28) more (00:13:30) by three things than anything else. And those three things are one a mindset of positive change that says we can be Innovative. We can change we can do things better. We can reach for very high goals. That's item number one for why there's been that success item number two is technology. And the way in which technology is driving productivity and growth changing the way we make products in the processes by which we make products in the third thing is the way we use (00:14:03) people (00:14:05) things are not as easy as they used to be. We are now in a much more competitive world. We all know how downsizing foreign competition. And other factors make our lives more challenging in the workplace and some of us much more challenging than others. But the fact of the matter is that we have now in good companies improve the way in which we deal with our workers empowered them given them the training and the rewards that have changed their whole role in the manufacturing process. Let me spell these out a little bit more by talking about the path of success from the book. The first one I want to stress is this capacity to change innovate and improve which in my judgment is the number one key to success for manufacturing companies. And for all the rest of us too often people are too timid in the path that they'll take and the challenge that they'll Tsum one leader Jack Welch says if your change isn't big (00:15:13) enough or (00:15:14) revolutionary enough the Accuracy can beat you close quotes. That's true. And therefore the first order of business for all the successful companies in my book The successful companies in Minnesota, the successful companies across the country is to have leadership at the CEO level and down through the ranks that says we're prepared to go through radical change to rethink how we do our business to reach for goals that some would say are impossible and to race reach for standards of excellence that are very very high and you see this in terms of the companies profiled in the book. I've already talked about Intel a remarkable turnaround and success story, which I think most people if they had been asked five years ago could Intel make this kind of come back they would have said no chance because they had written off the semiconductor industry in America or take a look at the Chrysler Corporation which came up from its Death bed reduced its cost by four billion dollars moved into a whole new design of cars a whole set of Team operations for its workers. So in my judgment now, although I think all our automobile companies improved a lot Chrysler is really the strongest of the three the three or take a look at Xerox. Another one Xerox was on its deathbed he was losing out to the Japanese. It couldn't compete any longer and Xerox came back and did so by making revolutionary changes focusing first of all on quality, but then going far beyond that and of course, I think the star of all stars in many respects is Motorola who under Bob Galvin had really focused on quality early on enough so that they reduce the cost of making their products by five billion dollars in five years. So you got to think big and you got to accept change and you got to see Is positive and you've got to encourage that that's not easy for any of us but the successful people in the future will be those who will maintaining their reservoir of stability and and sanctuaries of calmness are nevertheless proactive with respect to change the second path to success really is to talk about technology and to talk about how it relates to and is really the principal thing that leads us to Innovation and new product development. But let me say a word about technology more broadly in the context of what it is done to manufacturing productivity and economic growth in the country. Well, most people don't realize it technology accounts for roughly a third of the economic growth in our economy and that technology and its impact on productivity. Occurs in three or four different ways and I don't want to get too far into that. But basically it amounts to new products that changed the whole Paradigm by which we consume and live our lives a whole set of new machines, which create processes that allow us to do things more productive and the R&D process and what the R&D does in terms of creating new machines new products and new ideas all together. That's the way in which technology affects productivity and works its way through the economy. Let's take a look just for a moment at the product side of this which is so profound and which we focus on in the book in one chapter where we talk about Innovative new products and there we cite companies that you would expect one is Rubbermaid a household name that began its success by making a new product every day. Another one, which is important to this state and has always been a leader in Innovation and new products is which is 3 m of course, which is been one of the great innovators in American manufacturing add to that. There are many others Johnson & Johnson Microsoft Thermo electron and others that are mentioned in the books people and companies who focused on new product development as a way of life and by so doing increased productivity. Now, if you think about the products, they're really pretty spectacular think about medical devices and their role here in Minnesota and the extent to which our whole diagnostic process for health care whether or not it's MRIs or the way in which we go through just the examination process in the doctor's office to the to the pacemaker and to the many other products which have revolutionized healthcare for us even before you get into the area of drug. And the enormous changes the drugs are brought through our lives the other new product, which is probably the most important and it's changed every aspect of our life in manufacturing in the country as a whole is of course computers and computers take you to the next successful step in manufacturing, which is what we call Process improvements or the Star Wars environment that you now have on the factory floor now, I don't know how many of you have been in a manufacturing plant recently, but it is like a Star Wars environment. I was meeting a group of students when I came in earlier and said they were in drafting and design and I asked how many of them were using computer-aided design and they all indicated they were and of course that's the way people designed today. And if you go to the typical Manufacturing Company large or small they all use computer aided design and that is just the first step. In the process that leads to computer integrated manufacturing that leads to the use of local networks and Manufacturing cells and that in turn leads to a whole series of soft Technologies such as Justin time, which is most of you know allows you to move through the production process much faster. So that speed is a part of the essence of this new manufacturing process and product cycle time has been reduced by 50 to 60 percent in most successful manufacturing companies. The other thing that you get out of this technology is an enormous increase in the ability to touch the consumer and to create products that the consumers want directly working with them. It's the virtual product phenomena where if you look at Badger meter in the book or Ross controls a customer will come in one day sit down at a computer terminal. Design the product and come back in a few days and be able to pick up the product which is made within a matter of days and then there's the virtual company Kingston technology that have achieved unprecedented speed by not only investing in new technologies, but actually creating a whole network of suppliers and people who helped them make their product that are not actually part of their direct company infrastructure and it goes on and on so that the whole way in which we make products today is radically different than they were before. The last way in which I'll stress these New Paths is to talk about how workers are taking charge being empowered in these successful companies receiving a lot more training than they have historically and getting compensation commensurate with all that and compensation that's making them very well-off individuals. You can't be successful in today's competitive World by following the old command and control hierarchical structure where the boss tells everybody what they should do and and tries to arrogate to himself the decisions of the firm as you all know in today's Wall Street Journal. I think it makes a reference to the fact that successful companies now two-thirds of them use teams as a part of the production process teams for improving quality teams were improving the way in which they sell products teams were all aspects for Improvement and that is part of this revolutionary set of changes going on people. Don't simply do things on their own now, they work very often in teams. They do so in ways in which the bosses said you fellas take care of or you ladies and gentlemen, take care of this assignment in this project and they do other another successful path for these companies is to invest four more and training for their workers. I'm sure that it Blends company and many others to invest four or five percent of payroll in training is what you do because that's what successful companies have to do in order to compete and these successful companies also reward their workers a great deal more than the average company. They have all kinds of new incentive structures bonus plans Scanlon plans that are tied to productivity all sorts of performance incentives workers are not going to get Compensation primarily through hourly wages in the future. They're going to really get much more of their compensation based on performance. And if you look at these successful companies whether or not it's Chrysler in the $10,000 bonus. They gave last year or companies like Lincoln Electric and Nucor where the bonuses and the compensation is as large as the base pay that's the direction in which people are moving as well as stock options and many other means for Creative incentive techniques. Well all of these success paths and others that are mentioned in the book are the key to successfully competing in today's highly competitive global economy and that Global Dimension is very crucial and many of the successful companies themselves are becoming successful primarily because they're focusing on the global market. That's still another success path in the book. I mean if you look at 3M or or Honeywell are many of these other companies their success is because they're now out there competing with people in other countries and and going to markets where the highest level of growth is. Well, I think that those success paths add up to a third point I want to make which is that they've created essentially a new economy an economy that works differently and has the following characteristics more competition Global markets greater technology faster new product development empowered workers a much higher degree of productivity and lower inflation and greater capacity for growth. Now the more competition in some of these other things make our lives more challenging each day, but the positive side here of the fact that we are now able to compete in our number one in terms of many of our competitors and the Screwed activity and the capacity to grow tells me that we can do much better and improve the employment and security of our country better by focusing on greater economic growth. And so what we have done at the N a.m. And we've encouraged others to do so is to say the changes in the economy are such there is a new economy that we can have higher growth without accelerating inflation. So we have argued with the Federal Reserve and others that 2.5 percent growth is really on the low side and that we can grow from three to three and a half percent without accelerating inflation and that higher level of growth will do a lot to increase wages strengthen employment and deal with those who have not gained as much from this competitive come back as others. And so I think the growth imperative which falls out of the competitive Improvement that has come from this comeback of manufacturing is a very high National priority and one which we will pursue vigorously and I would say again that the role of technology in that growth is at the very top of the priorities that we ought to pursue and that is that it contributes Thirty to forty percent of our growth and therefore everything we can do to improve growth and Technology ought to be among our highest national priorities and I will just finish by suggesting a few of the areas that we can move to further improve economic growth in the use of technology in the American society. In both the public and the private sector if you look at the private sector clearly it has to do with increased Education and Training for our workers first and foremost. I think there is no higher priority for successful companies than to further invest in the Education and Training of their workers. The second is to continue to invest in new equipment and our d in order to advance the technological content of our activities. And I think finally continuous Improvement at all levels in terms of our products and efficiency are essential at the at the firm level. Let me turn then to government and suggest that government to has a lot to do in order to improve its own productivity and growth in suggest three or four ways in which that can occur first is to reduce the budget deficit and the amount of resources being taken up by the private by the public sector you can argue for how you do it as the White House and the administration and Congress are doing now, but the fact of the matter is that if manufacturers can reduce their costs by 20% in the last decade which is what they've done then government ought to be able to reduce their cost by roughly the same amount. The second area is regulatory reform reducing the amount of resources that now go into regulatory activities that don't have a payoff that significant in terms of either improving the environment or any of the other goals of Regulation. And the final one is really going back again to Education and Training. I think that there's a public role there and I think that the extent to which we invest more in Education and Training at the public level, we can enhance both the growth and technology. So returning to where I started I think that The path to success has a number of avenues the one which I think is the most positive is the one having to do with the capacity to change improve and positively look at changes a way for us to increase our excellence and compete in the global economy. I know that that's what is going on here in Minnesota. I know that's what your form is about this year technology is a very important part of that because unless you have this concept of being willing to innovate and change you're not going to be able to advance technology, which is Central to growth and Central to our competing in the global economy. I know you will hear I think we can across the country. I'm optimistic about the future and I think that manufacturers and workers and all of us working together. Can continue to improve America and and our future. Thank you. (00:32:15) Thank you very much. Mr. Jazz and house key for our radio audience. You're listening to mr. Jazz and house key who's the president of the National Association of Manufacturers? And I should mention his book is (00:32:25) titled making it in America and it's available everywhere including just outside this door this hotel room with thank you very (00:32:33) much. We're going to start now with the question from Glenn Scoville. You mentioned in your (00:32:39) introductory remarks. He's the (00:32:41) vice president of government Affairs at Honeywell. Jerry I'd like to pick up on one of the three elements you talked about namely the people issue you talked about the capacity of the economy and the private sector to change and you cited a number of examples wonder if in the category of kind of remaining issues to be dealt with it seems to me one of them has to do with the Loyalty that exists between the employer and the employee and the changing contractor relationship. There's a conference going to be held in Minneapolis later this week actually the third in a series called rethinking work in America where those kind of issues are going to be addressed owner. If you could kind of look out and talk about that issue and other issues that you think still need to be addressed in terms of productivity of employees loyalty (00:33:37) between well, I think the biggest negative that you have in the environment right now is the A nation of downsizing people's concern about their future job security and the contract they have with their employer with respect to the Future as I travel around. I've been to 40 States this year even in the good companies while the workers are happy that they are able to compete again and they in many cases love their job. They are anxious about the future security and I think that some of that is Transitional in the sense that the certain amount of downsizing had to be done in order to become competitive. Some of it is permanent in the sense that we're going to face competition on for as far as the eye can see I really believe is I was trying to say with respect to r on that it is much more on the individual to be successful now than it was in the past and I think that people just have to be Our competitors in the workplace and there's no getting around that we ought not to kid people. I think the on that employers have to do more to educate and train their workers first and even more importantly I think they have to pay them or not in terms of hourly wages, but I'm a big believer in sharing the wealth and I think the really successful companies are the ones that are creating stock options that give a hundred percent stock options to everybody and a nice Ops and Scanlon plan. So I think they really are nice success models out there. If you look at a number of the companies in our book their workers are very very successful and pretty secure but it's because all these things are in place and they are taking responsibility themselves to compete in the global economy. I think that's a very important point. Is all to take we're not going to have the paternalistic kind of business environment we've had in the past. So let's not tell people that were going to because it will be there. The good companies will provide a lot of benefits a lot of security a lot of income, but the worker it's got to focus on his own training and education to improve himself. Thank you. Mr. Jazz and I'll scan our next question is by David. Avritt Abramson managing partner of Grant (00:36:10) Thornton. Hi Jerry, I have a question for you, but it just occurred to me that you've got three days left to do those 10 states, right? It's incredible. You mentioned Global competition and we're obviously very concerned about the global competition particularly for Minnesota companies. As you know, Grant Thornton does a survey of American manufacturers. And in this side this year's survey we found that there is about in the invent Information Technology portion of the survey manufacturers are investing about 1/2 to a little over 1% in Information Technology. What's your view of how that compares to the international competitors that we have? (00:36:53) You know, I don't I don't know the numbers for the international competitors across the board. I'm sure the Japanese invested substantially more than that and I'm not sure about the Europeans. I do think that our real competition in the future is Asia. This may shock you a bit. But I think you can almost I don't say can forget about Europe but Europe is so far behind America in terms of its technology and ability to compete in manufacturing that it is hard to see where a in a general sense Europe will ever catch up again. There are some very successful companies in Europe. There may be some representatives in the room from those companies, but there are not a lot of them compared to the enormous number of his successful American companies particularly on a technology level. We if you look at Japan and Asia, it's a whole different ballgame both because of the lower labor costs and because of the greater investment in technology, so I continue to see our great challenge to be Japan Taiwan Singapore China India, not all because of Technology, but certainly the first three because of And you know we go through these technology Cycles where we invest a lot and then we reap enormous amount from that cycle. And the last high technology cycle was 75 to 85 where we invested much more in R&D than we have done historically. I think some of that is the reason we're having these productivity payoffs now, so there's a direct correlation between how much we invest in our D for example, and what happens to our long-term productivity and growth. We need to be investing more because in recent years, we've been cutting out our d as a part of the downsizing process. (00:38:59) Thank you very much. Mr. Jazz, and I'll ski we have a question now from Bob McGregor who directs the Minnesota Center for corporate responsibility. Thank you. Your remarks were very very encouraging and we do have much to shout about today and we do need good news, but on the other hand, how do you respond to the fact that middle-class wages of our citizens have been going down for years and years and years now and this growing Gap that we have between the well-to-do and the poor citizens of our country and now even more the better jobs and even some of the knowledge jobs are going off shore in surveys show that people aren't as optimistic as we'd like them to be that they're stressed and they're very worried about their future. How do you respond to (00:39:50) that? Yeah. I think there are several responses. The first is that I think that this is going to seem harsh and I think it may be a bit harsh and I have some softer parts to my answer but the harsh part of the answer is wake up. We are now in a highly competitive global economy. And if anyone thinks that's our long-term survival is not at stake. They're mistaken. And therefore everything has to be looked at in terms of reducing costs improving productivity and becoming competitive again, if we hadn't done that to begin with we would now be dinosaurs that had passed out of the picture. That's the harsh part. I think the softer part in the part that you'll probably find more acceptable is that you've really got to increase economic growth substantially. If you want to deal with the wage and underclass problem economic growth in this recovery has been half of what it has been historically and so the reason that myself and many others are arguing that we've got a really substantially increase our growth is primarily because the demand for labor in wages and the growing App between the rich and the poor is a problem that has to be addressed in the best way to address it is through greater growth a third answer which I think is very important on an individual basis doesn't have quite the same National implications is I think that there's a Revolution going on in compensation and I don't think hourly wages are any longer very relevant for the new economy and I think that companies should be looking for completely new incentive schemes and workers should be looking for companies where they get those. I have an awful lot of companies in my book where the average Factory worker is making between 50 and 75 thousand dollars a year. A lot of them. It's not rare So if that can happen in a certain number of companies that can happen in others. Thank you our next questions by David orenstein CPA, Minneapolis. (00:42:07) I want to take you back to your days with Hubert Humphrey and ask you a question. There's a constant debate in Washington all about the (00:42:14) need for Commerce department and has been brought up and beaten back and forth whether we even needed at all (00:42:19) and maybe you can give us some insight as to people in Minnesota as we need a Commerce department. And what is it doing for you? (00:42:25) Well, I think that we do need a department of trade and Industry and one that houses a large part of the functions that are now in the Commerce Department. I think that we don't need a Department of Commerce as its presently structured. I mean I used to I was an assistant secretary for policy there and we had everything from NOAA to the economic development Administration the tourism industry that it became sort of the cupboard of the federal government where you put things if you didn't know where else to put them and so I think that if you're serious about restructuring government, and I think you have to be in this global environment. I don't think it has I need to do with ideology. Some people may say well, you know, it's just a republican that we got to reduce the cost of government by about 20% over the long term. If we're going to be successful in this competitive environment. That doesn't mean we got to do in 7 years but we got to do it, you know, we got to be moving at it. So I think the Department of Commerce falls into that category, it's got to be reduced by 20 or 25 percent in terms of its cost. We ought to get rid of a number of these things that were doing that we don't need but having said that I think that those who would eliminate it goes much too far and ignore the kind of global challenges we face which the Department of Commerce or Department of industry and trade are very very crucial for a large part of our opportunities in the future are going to be offshore their Global and you can't deal with those if you don't have a federal agency that's engaged in the negotiations of trade agreements and all the rest of that. (00:44:03) We have a question now from Stephanie Carney who's with Blue Cross Blue Shield of Minnesota. (00:44:08) I thank you for speaking to us today. It's always wonderful to hear about the global aspect of everything. We in Minnesota are not the center of the universe, but I like the center being right here. One of the things I'd like to know since I work with so many unions is what what can we learn from Europe and Asia about how to handle the a Kinder Kinder and gentler transition from the older generation and I'm part of that now to the younger generation and in manufacturing and all other businesses and this is kind of a follow-up to the Honeywell question about, you know, how to how to price loyalty and all that sort of thing. How do you how do you make it worth it to stay with a company for a long time? And then how do you he's people out of that company so that you can bring in the Next Generation, you know, I think that what you see in the successful companies is that it's on an individual company basis and what you find to remarkable degree. Is the extent to which their cultures in each of these companies, I suppose one of my greatest heroes was Bob Galvin who was the driving force behind Motorola and I was fortunate to know Bob when years ago when he was then CEO of Motorola and Bob set a lot of the tone and standards for why Motorola was so competitively successful in so advanced in terms of its treatment of workers. I asked him once how can you spend five percent of your payroll on on workers? It's the cost too much Bob and he said it cost too much not too invested and I can name you another ten or twelve or Twenty companies that have the same kind of leadership and that leadership often goes far down into the ranks. So that a culture is created. I think that notwithstanding all the downsizing everything else. There are a lot of those cultures around You certainly have one with 3m here. A Honeywell is another which have cultures very much like that. And I think that that the decisions to be kinder and gentler have to be made on an individual company basis. And and and that's that's the way to do it and there are a variety of policies for doing it that we all know. It just takes the leadership of the people who are at the top and in Senior Management to infect do that. That's what it takes. (00:46:44) My on here, (00:46:45) our next question is from Jim Campbell who is a corporate Economist for northern states power. (00:46:51) You've given us a fairly glowing view of what's been happening to us, which I'm moderately sympathetic. But how would you answer the skeptic as an economist who might say that if you look at exchange rates the Japanese and their Heyday had a low current value of their currency currently u.s. Enjoys, if you're an exporter and the other does not enjoy if you're buying their goods, but we haven't we have a low value of the dollar with how much confidence can we look ahead if the value of the dollar Rises the the the Outlook will continue to be as strong as what you present. (00:47:25) Well, it's a very good question. And obviously the change in the dollar exchange rate is made a difference for our competitive position. Having said that I remember what I said about Europe. I don't think the Europeans can compete with us over the next couple of decades generally speaking. That's a very very strong statement if that's correct exchange rates are not the principal Factor driving that so well, the exchange rate makes a real difference. The fact is America has again become number one in a wide range of Industries through productivity technology shaking up your organization's and new ways of dealing with people and if you go to Europe the capacity for people to change in Europe is like one-third of the capacity of people to change in America. So what I'm telling you today is much more profound than exchange rates. It has to do with the American culture American people American Manufacturing in the fact that we have again become at least for the for the moment number one in the world in terms of competition whether or not we stay there or not is another matter on exchange rates. The other thing I'd say and again if exchange rates were to change so that the dollar was dramatically raised that could vitiate a lot of even the legitimate changes we've made but what could possibly cause that if in fact t' we have become more competitive fundamentally which everybody in Europe thinks. I'm not telling you what I'm telling you is not my view. It's what the Europeans tell me then that means the American economy is superior and that might raise exchange rate some but not enough to sort of price us out of the market. The other thing is exchange rates, as you know are driven by interest rates and I see interest rates assuming that there is a budget agreement which I do as continuing down over the next several years. So I don't see the risk with respect to exchange rates going up as being terribly High having said that if they were to change by 25 or 30% they could undermine a lot of the gains that we've made. (00:49:37) Thank you very much. Mr. Jazz in ASCII. We've got time for one more question. It's going to come from Clark Johnson who believe it or not works for MIT in Cambridge. So he's an example of a telecommuter enjoyed your talk to her. I'd like to go back to an earlier answer and explored a little further the whole business of R&D. And as you mentioned RDS being downsized in the US industry. Yes, I do you believe that the government has a central role both in basic research and pre-competitive research. And if so, the answer is yes, then what what's your view of the extraordinary slashes that are they're taking place in the current budget considerations are (00:50:19) demons were you know, I've been right in the middle of that issue working with Mary good at the Commerce department and John Young and George Fisher at the Council on competitiveness and at the N am on this whole question of how much do you cut back on our D and you know that the Problem is first of all, I accept the premise that the government has a role in encouraging our D. The problem is nobody knows exactly what that role is. And the reason that the people who are downsizing government are having such sway with respect to cutting technology programs is that those of us like yourself and myself who are arguing that the government ought to be supportive of Technology don't have a very strong case and so as we agreed with Mary good the other day, we have to go back and create a new paradigm for justifying government role with respect to R. D-- There was a while in which the Clinton White House was able to do that based on the grounds of Economic Security and that doesn't seem to be flying anymore. I told Mary that I thought it had to be justified by relating it to growth. I said, I think that most people in America don't know that the number one contributor to the growth of the American economy is a Good place to eat in again is technology its technology in terms of products processes? The idea is created by people. And so I think one of the things that this group needs to do as the N am we have if you're interested in technology as it is affected by government, you've got to come up with new answers for what the government role should be at the federal level for supporting R&D. Thank you.