by Lee Iacocca
But whose bright idea was it to build a three-hundred-mile wall to secure our border with Mexico? The border is two thousand miles long. That’s like triple-locking the front door and leaving the back door open. But even if we built a wall that stretched the entire length of the border, it would not solve the problem.
I’ll go one step further. Even if everybody agreed that a wall was a workable solution, what the hell are we doing building walls? America doesn’t build walls. It tears them down. One of the most inspirational moments of the last twenty years was when Ronald Reagan stood up and said, “Mr. Gorbachev, tear down that wall.” And the Berlin Wall came tumbling down.
Countries build walls when they lack the creativity to solve complex problems. And there is nothing more complex than figuring out how we’re going to relate to the world outside our borders. While we’re at it, we have to have a plan for dealing with the eleven million illegal immigrants that are already here.
My immigrant father taught me that there is only one reason why people leave the country of their birth to go somewhere else: jobs. Every immigrant, legal or illegal, comes to America because he wants to improve his lot in life. Most immigrants work hard and make great sacrifices to create better futures for their children. It’s the American dream.
I’ve often wondered where the United States would be today if we hadn’t opened our arms so wide during the great immigration wave of the last century. The seventeen million people, like my parents, who passed through Ellis Island gave birth to one hundred million offspring, and those offspring have made this country what it is today.
In 1982, when President Reagan asked me to serve as chairman of the Statue of Liberty–Ellis Island Centennial Commission, how could I refuse? I had plenty on my plate running Chrysler, but I knew I had to accept as a tribute to my parents—in memory of my father, who’d died in 1973, and for my mother, who was still alive. And we accomplished a miracle that would have made my father proud. We raised half a billion dollars and by July, 4, 1986, the Statue of Liberty was ready for unveiling.
Liberty Weekend dawned with the Great Lady standing tall in New York Harbor, and Ellis Island on its way to being fully restored. In ceremonies that weekend many inspirational words were spoken. I can still remember my feelings of pride and hope. I think we need to be reminded every once in a while of who we are, and what kind of nation we’ve promised to be. Not a nation that builds walls, but a nation that lifts a lamp to light the way.
EMBRACING THE GLOBE
Today, more than twenty years later, we have a rare opportunity to once again demonstrate our commitment to being a global leader. But the challenges have changed. Now leadership involves not just lending a hand, but also lending an ear—respecting the cultures and insights of other nations. There is a lot of enthusiasm for the idea of globalization, but the reality was that people tended to stay in their own corners.
You can lead nations to the global marketplace, but you can’t make them think globally or behave globally. And if this age of globalization is going to be a force for good on the planet, that has to happen.
Around the time the Statue of Liberty and Ellis Island were being refurbished, I began to think about what I could do to improve the spirit of global understanding and cooperation.
The idea for the Iacocca Institute at Lehigh University emerged from the question, How do you go about building global leadership? How do you demonstrate to people from different worlds that their commonalities are greater than their differences?
Thanks to the receptivity of my alma mater, Lehigh University, a course was established to teach students how to be competitive in the global marketplace. Then, about eleven years ago, a guy named Dick Brandt came along with a vision for a global leadership school, called the Global Village for Future Leaders of Business and Industry. Dick sold me and Lehigh University on the idea of globalizing the world one young mind at a time.
Dick’s concept was to create a summer training course for promising young businesspeople and entrepreneurs from around the world. We ran a pilot program in the summer of 1996 with representatives from twenty-five countries. There were a lot of kinks to iron out, but I was sold. This was an investment worth making.
Dick’s an interesting guy. Before he took on the program he was a vice president at AT&T, running its international division. In his work Dick became increasingly convinced that the biggest barrier to cooperation, whether in business or government, was that we didn’t understand each other. Dick always says, “We’re doing our piece for world peace,” and I think that’s true. But the funny thing is, there isn’t much talk about war and peace in the Global Village. The spirit of understanding seems to happen automatically through immersion. It’s awfully hard to dismiss someone who’s living, eating, and working side by side with you in an intense setting.
The diversity of the students is impressive. If you visit the Global Village you might find an engineer from Singapore, a Pakistani fashion designer, a Peruvian banker, a shipper from Ghana, a farmer from Mexico, a lawyer from Slovenia, and a doctor from Italy. They all want to succeed.
In the early years of the Global Village, we learned our cultural lessons right along with the students. Here’s an example. In the beginning we provided students with three meals a day of old-fashioned Pennsylvania Dutch cooking. But we started to see that the students were getting fat. Most of these kids weren’t used to eating so much food—especially all the meat and potatoes. We were a little embarrassed about it. Dick realized that food was a core concept. How you eat, where you eat, and what you eat has a lot to do with your identity. Dick thought if we could provide a place for students to cook their own meals, we could solve the problem, plus cut the price of tuition by a thousand dollars. We took over a sorority house at Lehigh and set up a kitchen where students could prepare foods from their own lands. The cooking experiment became so successful that Dick incorporated it into the curriculum. Certain nights were set aside for students to showcase their ethnic cooking for the entire group—often served in traditional garb. It became a highlight of the course.
The most powerful part of the Global Village program is the business project. We put teams together and send them out to cooperating businesses in the Lehigh Valley, with the task of solving a real business problem. In these cross-cultural teams, the students are under pressure to perform by working through their cultural differences. As Dick tells them, “Your competitive edge in a global society will be your ability to transcend differences and collaborate.”
The graduation ceremony at the Global Village is an elaborate black-tie dinner dance. Every time I attend the event, I’m blown away. Last year, the 2006 graduating class consisted of eighty-seven students, and many of them arrived at the dinner wearing beautiful traditional garb. It was a bittersweet moment for them, because they would soon be returning to their countries and saying goodbye to some of the best friends they’d ever made. It was touching to watch them interact. Some of them had been taught their whole lives to hate the very people they were now embracing.
I saw a young guy ask an Arab girl who was wearing a veil to dance, and I thought, “Wow! This is globalization.” I saw two students, one from Beirut and one from Tel Aviv, hugging each other and crying. When they’d left their homes for Pennsylvania, there had been no fighting between their countries. Now there were bombings every day. They didn’t know what they would face when they returned home, but they knew one thing: They were not enemies. This is America’s greatest advantage. People can come here from all over the world and live together in peace.
I said a few words at the dinner. I told the graduates I was writing a book about leadership, and I asked them to help me out. “Write to me,” I said, “and tell me what globalization means to you. Is it a good thing? Who are the global leaders today?”
They took me seriously. Their responses came from all corners of the world, filled with optimism and passion. Yes to globalization. Yes to cooperation. Their enthusiasm was inf
ectious, and I like to think it will infect the world.
PART THREE
IS CAPITALISM LETTING US DOWN?
XI
Where does all the money go?
Dick Brandt shared an interesting insight about the Global Village students recently. He said, “The international kids are struck by how much we have here in America, how much time we spend watching TV commercials, and especially how much time we spend shopping and spending. They don’t get the concept of shopping as entertainment. For them shopping is what you do when you need something.”
Dick added that he doesn’t see much envy of American consumerism. I guess the kids are smart enough to know that having a lot of stuff is not a measure of real success. We preach the capitalist way like it’s a religion, but you have to wonder if it’s letting us down. When advertising slogans are better known than the Ten Commandments or the Bill of Rights, when shopping malls are our places of worship, when bad behavior is justified as long as it leads to profit, when debt is justified as long as it leads to a plasma TV, and when the measure of a person is the kind of car he drives, maybe it’s time to ask whether we’ve corrupted the very notion of capitalism.
Believe it or not, capitalism originated as a system for the little guy. It replaced feudalism, in which a few wealthy owners had all the power and money and the common person had nothing. It was a noble ideal.
The great economist Milton Friedman, who died in 2006 at the age of ninety-four, once said, “The problem of social organization is how to set up an arrangement under which greed will do the least harm. Capitalism is that kind of a system.” Friedman believed that you couldn’t have freedom without capitalism. The problem is that any system, even a good one, can get rusty over time if we’re not vigilant. And we’ve become pretty lazy about our system. Money has stopped meaning anything to us.
When I was growing up in the 1940s, a million seemed like infinity. All those zeroes! If someone was a millionaire, that meant they had more money than God. I never heard anyone say, “You’re one in a billion.” A million was plenty good enough.
I was just getting the hang of a billion, when people started talking about a trillion. Today our country casually spends a trillion dollars the way we once spent a billion. Where does it end? What’s the next level? I guess it’s quadrillion. Then zillion? I’m not sure. Let’s just say it’s a lot.
WHERE DOES ALL THE MONEY COME FROM?
So where does the government get all this money to spend? The short answer is we borrow it.
If you have a credit card, you can understand what’s happening with our government today. It’s the same thing. Not that you’re running up the big numbers—even if you have teenagers. But the concept is no different. When you borrow money on a credit card, and you don’t pay it back within thirty days, there’s a penalty called “interest.” And if you keep borrowing, your debt grows and so does your interest. When you get your credit card bill, the minimum payment only covers the interest. It doesn’t touch the principal. The more debt you have, the harder it is to pay anything off on the principal. (The average American household has twelve credit cards, so if you’re like most Americans, you’re probably feeling the pinch.)
Now, apply that same idea to government spending. If we spend less in a year than we collect, we have a surplus. If we spend more than we collect, we have a deficit. That’s when we get out the credit cards and start borrowing.
Where do we go to borrow money? To other countries. Almost 50 percent of U.S. debt is held by foreign banks. We go to China, Japan, Saudi Arabia, or one of our other lenders, and we say, “Listen, we need $300 billion to pay for the war in Iraq. That’ll get us started. And we need $600 billion for a permanent tax cut. Our kids will pay you back.”
Our national debt is a record $8.5 trillion. The interest on that alone is $406 billion. We can scrape together enough money to pay the interest, but we’re not even touching the principal. That means the money we shell out in taxes doesn’t buy one new cop or one new schoolteacher. It just pays the interest on what we already owe. When we actually want to do something, we borrow more.
You know what a drag it is when you’re in so much debt that you’re just paying interest on your credit cards. All that money and nothing to show for it. Not a new sofa or a winter coat or a vacation. It’s the same with our government. When we make our $406 billion annual interest payment, we get a big fat nothing for it.
Shouldn’t we be just a little bit pissed off? You’d think if we were going to go into debt on such a grand scale, we’d at least have something to show for it. Like better health care. Or roads that aren’t falling apart. Or cheaper gas. But the government seems to have run up our credit cards without buying anything we can use.
In 1989, when the national debt was considered a real crisis, the big National Debt Clock went up in Times Square. This was during Bush senior’s administration when a national debt of $2.7 trillion actually shocked the nation. There were pictures of people standing on the sidewalk gaping up at the clock as the numbers raced up. It was pretty mesmerizing—especially since it also included the share every family in America owed. Then one day, when the total had reached $5 trillion, the National Debt Clock disappeared. Well, today it’s back, and now the numbers are racing up toward $9 trillion. But the crowds aren’t gathering. Nobody’s gaping. We’re used to it. We’ve lost our ability to be shocked.
But we’d better open our eyes. Like that old curmudgeon Senator Everett Dirksen used to say, “A billion here, a billion there, and pretty soon you’re talking about real money.”
That’s the thing you have to remember. The money is real. How popular do you think Bush’s tax cuts would be if people understood we’re borrowing from China to pay for them? Is that fiscal responsibility? It wouldn’t pass muster in most households.
Wouldn’t you like to see our government show a little budgeting discipline—just like you have to do at home? Maybe if the citizens got a statement every year, they’d demand it. Based on the current national debt, your statement would read something like this:
Dear Mr. and Mrs. America,
Your family’s share of the national debt is currently $115,000. Would you like that amount deferred to your grandchildren?
Too bad we didn’t listen to Thomas Jefferson. He said, “To preserve our independence, we must not let our rulers load us with perpetual debt.”
SPENDING GONE WILD
When you think of it, isn’t the President really just the CEO of America? Under George Bush’s leadership, we’ve spent half a trillion (and counting) on Iraq, and the people there don’t even have dependable electricity yet. Then we topped off our spending spree with the huge tax cut, which mostly went to the wealthiest Americans. They like to say that the tax-cut windfall is going to “trickle down” to average Americans. I’ll tell you what’s trickling down: the debt. Because for every dollar our government doesn’t take in from taxes, that’s one less dollar going to pay off the debt, and the interest keeps building. This trickle-down business is more like water torture.
It bears mentioning that Bill Clinton, one of those so-called tax-and-spend liberals, had a $559 billion surplus his last four years in office. I’ve coined a new phrase for the current administration: tax-cut-and-spend conservatives.
Now, I’ve heard Dick Cheney say repeatedly, “Reagan proved deficits don’t matter,” and I just have to shake my head. What is he talking about? Maybe he means they don’t matter to him, since he’s worth between $30 and $100 million. But I think most Americans would feel pretty nervous about having half the country’s debt owned by foreigners. Twenty-five years ago we were the largest creditor nation in the world. Now we’re the largest debtor nation.
We are in danger of becoming a colony—of not owning our own country. How did that happen to the richest nation in the world?
A SIMPLE BUSINESS LESSON
In business, the budget-cutting process is pretty simple. You get your key people in a room and you s
ay, “Sales are down, and costs are up. We’ve got to cut ten percent out of the budget. Come back tomorrow and tell me what you’re going to give up.” And everyone looks miserable, but no one says, “Boss, we can’t do it. We need to spend ten percent more than we’re taking in.”
In business, people get it. If a company spends more than it earns, it goes belly-up. In government, it’s all smoke and mirrors. It’s Alice in Wonderland down the rabbit hole.
I’ll tell you one thing. Any businessperson who has to meet a payroll every week learns the value of money pretty fast. I’ll never forget how I learned that lesson the hard way at Chrysler. It was shortly after I’d joined the company, and I was beginning to get a terrible feeling in my gut that we were in big trouble. One Friday morning I asked my CFO, Jerry Greenwald, how much real cash he could lay on my desk by five o’clock that afternoon. He said, “About a million, give or take.”
Only a million? Then I asked him, “What’s our payroll every Friday?” He said, “About two hundred million, give or take.”
That’s when I knew we were bankrupt. When you’re responsible for meeting a weekly payroll, money gets real pretty fast. Unfortunately, the government seems to have lost all sight of this. I learned that, too, when I tried to pay back Chrysler’s government loan.
I went to the White House to deliver the $1.2 billion check to President Reagan. In the Oval Office, I explained to the President that the check was a fake. “No one has ever paid back the government before,” I explained. “They said it would take about thirty days to figure out who it should be written out to.”