Here is the transcript of PodTech’s exclusive podcast with Steve Forbes in his first ever podcast. Steve Forbes’ first ever podcast in a PodTech exclusive. I travelled to New York City to sit down with Steve in his office to talk about politics, world economics, blogs, podcasts, and social media. This interview is timely given the recent cover story by Forbes and the blog response from many prominent bloggers. Shel Israel sends an open letter to the author of the post Daniel Lyons. However some think that bloggers are being “playedâ€?.
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John Furrier sits down with Steve Forbes – Transcript of the Podcast
John Furrier – Founder, PodTech
Welcome to the PodTech.net info series here with an exclusive podcast with Steve Forbes, his first podcast. Welcome to the podcast.
Steve Forbes – President and CEO of Forbes Inc
It’s good to be with you. Thank you.
John Furrier – Founder, PodTech
You’re the Editor-in-Chief, President and CEO of Forbes Inc. You’re known for running a media conglomerate and running for President. You’re views on the flat tax which pretty much everyone knows if they haven’t been living in a closet. You just came out with a book you wrote to explain more about that and it’s called the Flat Tax Revolution. I would love to have a conversation with you about a couple of things. I talk a lot about the impact of technology in a global marketplace or Web 2.0, but you’re traveling around the world. You have a view from so many different perspectives: global social, global economic, global technology. You meet with people so you have a world view, you have a country view and you have an individual view. So talk about what you’re seeing on a global basis. Everyone’s connected with technology. From a big picture, what’s happening out there and how do you see things?
Steve Forbes – President and CEO of Forbes Inc
Actually on a global basis the world is doing better than most people seem to think. I think, John, we’re in one of those periods where perceptions are lagging reality. We’ve had that before in the early 1990’s. For example, for Forbes Magazine’s 75th Anniversary we did a special and the theme was, “Why do we feel so bad when we have it so good?� So this is not the first time, but in terms of economic growth, the world has never had as much as it’s been having in the last two years. You have over 2.5 billion people trying to join the global market place. India and China are starting to make some impressive strides. You have Eastern and Central Europe now on the right economic track which I think is going to influence the economic policies of Western Europe which has been stagnant for twenty plus years. I think they’re going to begin to change under pressure from Central and Eastern Europe. So given the imperfect world we live in, and given human nature, it’s still a very unsafe world (it always is) we are making progress and things are moving in the right direction. Now there are challenges. The Federal Reserve is still printing too much money and raising interest rates. That’s going to hurt us next year. We need real tax reform, which you alluded to earlier, which is why I wrote the book Flat Tax Revolution using a postcard to abolish the IRS. But that’s what we’re here for. When we see needed changes we promote them.
John Furrier – Founder, PodTech
You talk about economic impact, especially in Europe. Everyone has been talking about China. I live in California in the heart of Silicon Valley in Palo Alto where everyone says, “Invest in China,�.  I reach a lot of bloggers and people who are connected with technology. There’s a massive democratization happening with blogs and podcasting and just technology in general. We’re seeing countries that were in poverty in the past, like China, and in Asia where they’re now leading the charge. The U.S. is shifting…and investments going out over there and that’s impacting the rest of the world. Do you see the technology being an enabler of that? Other countries like China have an enablement model. Where’s the U.S. relative to all of this? Actually, we have broadband problems everyone talks about. This enablement view, talk about that. You do talk about it in your book, but specifically economic and technical impacts.
Steve Forbes – President and CEO of Forbes Inc
Well, we’re still, despite our lagging on broadband, which is now getting to be very serious, I think we’re about fifteenth or sixteenth in the world in terms of penetration and probably about 116th in terms of what a typical household can get. You look at countries such as South Korea or Japan or Iceland. But we’re still the largest growing and fastest growing economy among large economies in the world. That doesn’t mean that we can rest on our oars, quite the opposite. We do need to make substantial tax changes we do need deregulation. Probably one of the best things we could do is take the Federal Communications Commission and the congressional comities that oversee it and send them to North Korea and let them just sit there so they don’t do any harm here at home. In terms of the Federal Reserve, I mentioned that it’s still printing too much money which is giving us a mild inflation which hurts economic growth, hurts innovation because investment gets distorted. People come to protect their money instead of investing their money and putting it to work. Here in the United Stated we are still moving forward in terms of technology but the bottom line is we still have a lot to do to get our own act together.
John Furrier – Founder, PodTech
We could lose that leadership position. In fact, we’re losing some. Just recently in the Wall Street Journal, I think it was today or yesterday, there was an article about how now the networks want to stop things like skype, where in Europe the infostructure is actually part of the utility and things are being enabled. New entrepreneurs are being developed…new technology. Here in the U.S. they look at it as a problem. How do you tell the FCC, if the FCC… does it go away?  How do we reform that, how do we deal with that? It’s stifling innovation.
Steve Forbes – President and CEO of Forbes Inc
Part of it is the executive branch has to take more leadership. To be blunt, the Bush Administration has fallen down on telecommunications and the whole area of broadband deregulation. But it’s something then that various congressional leaders can deal with. There’s a presidential election coming up. If people are interested they should go to Iowa, go to New Hampshire, and question the candidates. Put the question to them, “What are we doing to catch up to Iceland, to Denmark, to South Korea (which is now the world leader in terms of broadband deregulation/ broadband penetration? What are you doing to encourage that kind of environment? Why do we still have a Capital Gains Tax which gets in the way of innovation?�
John Furrier – Founder, PodTech
So I read your book and last night I was going through it to make some notes for our conversation, but what was really inspiring, reading through it and you just mentioned it, is that our own processes and our own stuff is holding us back. You mentioned in the book transparency, credibility and trust. That’s gone! A lot of people feel that that doesn’t exist. And your Flat Tax that you’re proposing in your book will increase more innervation. Talk about some of those three things—transparency, credibility, and trust within the Flat Tax and technology and advancement in general.
Steve Forbes – President and CEO of Forbes Inc
In terms of transparency you can go to the broader topic of corporate governance.  Flat Tax would be helpful in the sense that is does away with double taxation of dividends. We have already seen what the cut in personal dividend rates from 38% to 15% has done in encouraging companies like Microsoft to pay out more in dividends. There is no excuse for companies clutching there cash as they’ve done in the past. When they had profits in the past they could say, “Hey, we pay it out it just gets taxed, much of it. So we’ll leave it in our hands and that’s an effective tax shelter.� Well, the flat tax you wouldn’t have that excuse anymore. So if you want to keep the money that you have made you have to justify it to the share holders. That’s all to the good in terms of balance sheet manipulation. Federal Income Tax Code today is 9 million words and rising. When you shear away those 9 million words and have a simple code it’s a lot harder to play those games, those off-shore games. We’re about the only country in the world that taxes overseas profits in what they call Extra Territorial Taxation. A company in Ireland if they make a profit here in the United States they pay the IRS but they don’t pay Dublin. We should do the same thing. This past year Congress put in an amnesty, Companies could bring back their overseas profits and pay only 5.5% tax instead of a 35% tax.  And guess what? Over 200 billion dollars has come home. That begs the question; why not make that low tax rate permanent, which the flat tax does? The flat tax also helps and it cuts the profits tax from 35% down to 17% and it also allows you to write off your investments in the year in which you make them.  So you buy a piece of machinery, software or whatever you expense it when you buy it and if you have a loss you carry it forward. What could be simpler, what could be more potent in terms of encouraging people focusing on getting there businesses to move ahead instead of worrying about the shoals of the tax code?
John Furrier – Founder, PodTech
A lot of people don’t know about the Flat Tax. They think it is confusing, but the bottom line is it’s actually simpler. A lot of people are saying that it hurts the poor and helps the rich. I think the current system is the worst. The rich can have loop holes and it is just so complicated. You call it in your book, an actual chapter called “Nightmare on Main Street�. The average person’s affected at so many levels. Your point about innovation being stifled by it, people aren’t doing more, they aren’t motivated. Really tell the young folks out there and the people and the listeners that are connected on the internet who will hear this on their iPod about that particular point, about innovation, about credibility and about the reality of how simple it really is.
Steve Forbes – President and CEO of Forbes Inc
The nice think about the Flat Tax is you have a single rate. You have generous deductions for adults and for children. A family of four for example would pay no federal income tax on their first $46,000 of income and above that you’d only pay 17 cents on the dollar, no tax on savings, no death tax by the way. You’ve already paid enough taxes during your working life. On the business side, as we mentioned, have the corporate profits taxed and allow instant write off, instant expensing for the investments you make. This way it helps, especially young people starting off in life, because it allows you to keep far more of what you earn and it doesn’t punish you for success. By creating a more vibrant economy, because you’re going to have more capital, more incentive for people to take risks, start new business, and come up with new products and services. So you have a more vibrant stronger economy which means that your prospects as a young person have vastly improved in terms of pursuing your own careers, or if you wish to change your career. It is very hard now under the current code to put together any real assets because it goes out in taxes. Then you have to spend the rest of it to keep your head above water. It punishes people who try to save, create capital, start a business, much less buying a car or buying a house. So it’s good all around. Especially for people who want to get ahead in life. Â
John Furrier – Founder, PodTech
I thing the key thing that you mention in the book, the misconception is that it doesn’t do away with deductions. All it does is it eliminates other deductions that are part of the complex code. The Flat Tax is a postcard with basic deductions…
Steve Forbes – President and CEO of Forbes Inc
You can do it…exactly. You can do it on a sheet of paper, a postcard instead of having hundreds of different exemptions, big and small. Just give people one big exemption roll it all up, bundle it up, take it, your on your way. This way you can do your tax return, if you’re slow in five minuets, if you’re fast you could probable do it in five seconds. Right now five minuets you’re just starting to put your records together. The average American today, John, spends twenty six hours a year just compiling the records they need to prepare their tax return. Talking about people starting out in life, even if you have a low income you still have to pay hard earned money to have somebody prepare your tax return. It’s ridiculous.
John Furrier – Founder, PodTech
It’s a pain in the butt. And quite frankly it’s not inspirational. It breeds distrust.   But let’s talk about that point about really transparency and trust. Young people look at this. They think the governments up to something. Corporations are always finagling the books, Sarbanes-Oxley, and that world we live in with people getting arrested for cooking books and everything. Young people just don’t like that, but more importantly is that really as a country we’re behind. You mention in your book quite clearly that other countries have been quite successful. This ties into my technology talks about global economy. Talk about the other examples of successes just recently of other countries.
Steve Forbes – President and CEO of Forbes Inc
A number of countries have done it, especially in Central and Eastern Europe. Formerly communist countries who what to get a head, want rapid growth, know that they’re behind, want to catch up and move forward.  What they did was to throw out their old tax codes, convoluted, complicated, like ours full of corruption, open to special interest and put in simple flat taxes. Lithuania, Latvia, Estonia, Russia, Ukraine, Slovakia, Romania, Georgia, Serbia, other counties that are looking at it, every country that has tired it, it has worked. In Russia for example, they did it a little over four years ago, put in a 13% rate and guess what? In four years, their revenues in real terms take out the inflation; their revenues have more than doubled. The economy is growing again. When you get off the backs of people so they can focus on product activities to develop their talents or let them take entrepreneurial risks, guess what, they do it. Yet here in our country we spend last year, John, 6.5 billion hours filling out tax forms. We spent the equivalent of $200 billion just complying with the tax code. Imaging if that brain power, those resources could be devoted just to taking a vacation much less something more productive. The economy would literally blossom.
John Furrier – Founder, PodTech
Then there is the cost of the IRS. Then compound that with the back end costs. Most people look at this as a complex piece of machinery. Every year a new thing gets added.  What you’re proposing basically is a simple machine. People can understand it. There is no confusion, breeds trust, transparency and more productivity.Â
Steve Forbes – President and CEO of Forbes Inc
Yes, the current system. You hit on the word trust. The current system brings outs the worst in us. You get a bonus. Do you take it in January or December? You work at home. Do I deduct it as an office? You have old socks.  Do I give that away as a charitable gift and try to take a deduction? You travel you want to go on vacation. You tie it to some business convention, get a tax write off. It brings out the worst in us.
John Furrier – Founder, PodTech
People are gaming it for their own person accounting when they could spend those hours helping people, working harder, taking a vacation. That’s a great point. Everyone’s got to get this book The Flat Tax. A question on technology, because this brings up the global economy that we live in.  People are now connected. People work on virtual teams and technology has been a big impact recently.  I want to talk to you about some of the world disasters. We had the tsunami, which was basically captured by amateur videos. I am in the user production business myself being a Podcaster. Your first Podcast. People saw images of that. We had our Katrina there were not many images, but some reporting and obviously the networks did a good job of covering it, which brought out huge support. But recently we had the earthquake, the response, no one really knows, there’s no images. Is technology really driving that point and how do you see the world responding to these disasters?
Steve Forbes – President and CEO of Forbes Inc
Technology makes everything more immediate, makes it more real, rather than abstract. You hear earthquake, “Oh, to bad!â€? But it’s hard to conjure up in your mind what it actually means. When there was the tsunami, when you see video, when you see photographs instantly, guess what, it becomes very real. It also means our response times have to be faster. In times past, it would be days, weeks before any relief got there and no one would even know about it, or really care about it. Today everyone says, “It happened a minute ago, where’s the relief? Why aren’t you there?â€? So I think that you get a much better, faster response time. Even though, Pakistan and parts of India, there has been massive suffering because literally, the roads were closed.Â
John Furrier – Founder, PodTech
Twenty-something thousand people died.Â
Steve Forbes – President and CEO of Forbes Inc
Thousands died. But many more would have died in the world we lived in thirty or forty years ago because there wouldn’t have been those images because there wouldn’t have been that instant information that could direct precisely where the aid needs to go. We didn’t have the technology to deliver that aid via sophisticated air ships, the helicopters, so it’s all to the good. Expectations go up, but the demand for performance goes up, very uncomfortable, human nature being what it is we are never satisfied, it’s never fast enough, but by golly but it is much more responsive when you see it instantly then it was just a few years ago.
John Furrier – Founder, PodTech
Technology is great enabler of that. I talked with Ray Kurzweil on the program, we talked about democratization.  Talk about your views, and how you see the world in terms of a virtual world. My ten year old plays massive multiplayer online game and they are doing stuff that is amazing. We’re soon going to live in that world. What is you social view and economic impact of this socialization where people are connected but never met each other?
Steve Forbes – President and CEO of Forbes Inc
Well, we all know the down side of the internet or the web, bad web sights, corrupting websites, people trying to seduce other people and do them real hard.   Not to mention identity theft and everything else. One of the things that the web is doing is overcoming, in kind of a perverse way,  the huge short fall in the American Education System. Yes we have the finest colleges and universities in the world, but in K-12 a lot of districts aren’t doing there job. Kids come out of school not knowing how to write, not knowing how to read at the level they should, they’re exposure to maths and sciences is ridiculously low. China now graduates more English speaking engineers than the United States does. That is how bad it is. A couple of years ago the president of Harvard got in a kafuffle about making comments about how women may lack the boys’ knack for science or math. Heck it’s not women; it’s both men and women. We have a shortage in the United States. But what the web has done, precisely with a lot of these games, the fact that you can now talk at the same time with four or five people means your mental skills are developed in a way that hasn’t been really developed before.Â
John Furrier – Founder, PodTech
There’s no sealant. People can accelerate based upon what they consume, how they interact. People are sharing more with media and information. People are blogging and reporting. My son went to Google the other day and actually did a research report and actually got something out of the New York Law School on a project he was doing on the Mewoc Indians. This is amazing! He’s actually reading it. He was interested in it.
Steve Forbes – President and CEO of Forbes Inc
Well there you go. When the mind is stimulated, curiosity is aroused. Instead of being a couch potato watching some sitcom, kids just have as much fun sitting down and scouring the world.
John Furrier – Founder, PodTech
A lot of parents hold them back and you’re right there is an underbelly on the web. A lot of people are working on some cool technologies. Let’s talk about the future. You’re known as a global guy. You’re known as someone who really promotes simplicity with the Flat Tax and you write in your book about that. In the next five to ten years where do you see the key things happening? What profound change in our world will be in five years that no one will see that you see?
Steve Forbes – President and CEO of Forbes Inc
I’m sure others see far more than I possibly could. I think as broadband becomes a common place, full broadband, not what we have now. Maybe the equivalent of a thousand T1 lines in the next ten years that everyone will have. The possibility of delivery of services. What it means in terms of communication around the world. In terms of creating things we hadn’t even thought of before is going to be profound. iPod. Where was iPod five years ago? Non existent. That is what’s going to gin the thing up and it’s not just going to be new industries, new services, new products. Existing companies are going to figure out how to use this technology. They are going to transform themselves and be able to provide what we think of as traditional services in ways we can’t imagine today. So yes, politically we’ve got real challenge. The Federal Reserve, as mentioned earlier, is printing too much money which means we’re going to be hurt next year with a mild inflation, we already see at the gas pump. I think we get over those things in what economists call the “trend line� is profoundly positive. We’re living in an era that should be one of the most innovative, inventive eras.  An era where some of human liberty is going to expand in profoundly positive ways. People are going to look back and say, “That was a golden age!� You never know it is a golden age when you live through it, but looking back it’s going to be a good era, I think.
John Furrier – Founder, PodTech
A lot of people are not as optimistic as you, and I’m with you.  I really do believe it is going to happen. You mentioned the enablement and the massive change. How is our government going to have to respond to that to enable things you talk about: the web and the internet and the economy?
Steve Forbes – President and CEO of Forbes Inc
The government has to realize what it’s good for and what its limitations are. We saw in the disaster relief it got in its own way. Why is management in the future? Yes, government will obviously play a role but use more of the private sector which can respond quickly to emergencies. New Orleans should have made much more use of FedEx and UPS facilities. So I think that government is going to realize that it’s got to be much looser, much more flexible in terms of these things in the future. Massive centralized bureaucracies can’t cut it the way they did in the past.
John Furrier – Founder, PodTech
We’re here with the exclusive first time podcast with Steve Forbes the President and CEO of Forbes Inc. who wrote a great book that everyone needs to get. He actually put his words down in writing to prove to everyone that there is actually some substance behind it, it’s real. In his book he actually mentions how to get involved and he mentions start a blog. Well, I started a podcast so you’re on here. Talk about people, some of the resources that they can get involved with, it’s in the book but there’s blogs out there. Anything on forbes.com or do you know of any websites off the top of your head?Â
Steve Forbes – President and CEO of Forbes Inc
Well we have a website, chooseflattax.com which does Q&A, you can register there, you can get a free chapter of the book and you can do a calculator. Punch in the numbers for yourself and see how good this thing is, you don’t have to take my word for it, see how it would work for you. You’re right; there is a chapter in Flat Tax Revolution that shows how you can get involved: either being part of a blog, starting a blog, participating in talk shows, writing letters to the editor of your local daily or weekly newspapers, calling your representatives. Simple stuff. We show you how to do it. If enough people start to do it, guess what?  Things start to happen and one of the great things about this whole electronic era we’re in is you can create communities much faster than you could before.
John Furrier – Founder, PodTech
No barriers to entry. The blogging has proven that.
Steve Forbes – President and CEO of Forbes Inc
No barriers to entry and you can find like minded folk, persuade other people and start to put pressure in a way that was just inconceivable a few years ago.
John Furrier – Founder, PodTech
Well, I’m really excited to have this conversation with you and push it out to the blogosphere and the rest of the world and all the iPod and MP3 player folks out there and all the directories iTunes and Yahoo. But I have to ask final question which is: Are you going to run for president again?Â
Steve Forbes – President and CEO of Forbes Inc
I’m an agitator now, not a candidate. I want to hold the candidates feet to the fire.
John Furrier – Founder, PodTech
Okay, but if you do, you’ll come on PodTech, get the exclusive scoop.
Steve Forbes – President and CEO of Forbes Inc
Terrific!
John Furrier – Founder, PodTech
Thanks for the podcast. Steve Forbes, the President and CEO of Forbes Inc. Editor-and-Chief. Thank you.
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