 The CSIS Technology and Public Policy Program just wrapped up a discussion with Michael Dell and Samuel Palmezano, the CEOs of Dell and IBM respectively. Dr. John Hamry moderated a discussion about how innovative practices from the IT sector can help the United States become more competitive. In addition to the full video here, you can see a highlight package from this event on csis.org. Good morning, John Hamry, the president of CSIS, and we're delighted to have you here today. I'm sorry that we're running just a little short because both of these gents had important meetings in town up on the hill, and then they are going to have to leave fairly quickly at two. So we're going to really dive into this very quickly, and I'm going to therefore not waste our time with introducing them to you. I mean, you know, that's why you're here, Jesus, you know who they are, and so I don't need to do that. I do want to say I am so glad to see a little gray on Michael Dell's hair. I mean, for somebody, you know, that's a good thing for a guy like me. I can't believe it. I think it ought to look a little more distinct to help with me. Okay, well, I do appreciate that. So let me start, if I could, you guys. I know that yesterday you spent a fair amount of time with the president. He gave his State of the Union speech and emphasized the need for a more efficient government, a more effective government. Now, I know that these are private conversations, but what can you share with us about this conversation you had? What is it that he told you? We need to get your mic. He usually has people that do this, okay? It's a technology thing. Where are my handlers when I meet them? They're leaving me out here alone. But seriously, so we're part of a group called the TCC Tech CEO group that we kind of meet with the government a couple of times a year. So it's roughly eight CEOs of large tech companies. I just frame it, John, because I think that sort of sets the tone for the meeting and as well as the president was phenomenally gracious with his time, his key staff members were there, OMB, Treasury, Valerie, and all the other folks. So it was a good group. And so we basically, if I could frame it at the highest level, we talked about competitiveness. So it was much like what you heard in the State of the Union and what are the elements of competitiveness and what's necessary from a competitiveness perspective. We found that it was a very good dialogue. There's a lot of interaction. We had a lot of different points of view. We expressed ours, he and his staff were very responsive. I think Michael will agree, I'll let Michael comment as well. We hit three big points, as you might expect, tax, competitive corporate tax structure, trade, which is in our industry, more than 70% of our industry is outside the United States and most of the growth is outside the United States. So we really need to be able to participate in global economies that continue to be successful. And then we got into ways, if you say okay, the President was very supportive of addressing the corporate tax rate as long as it was deficit and neutral. So again, a lot of this was in the State of the Union. And then Michael articulated the proposal whereby they could address a trillion dollars of productivity or inefficiency that exists within the government, which is just basically using what we've all done for the past really like 10 years and just applying it to government. It wasn't any invention or rocket science, it was just basic business practice that we've all kind of now done to improve the competitiveness of our own companies, just applied to government. I just think if I could leave John in the room with a little bit of a comment or a thought, most of us have been in here a lot the past couple of years. And there was, I think, a sincere and keen interest in addressing why the U.S. is not more competitive. And now we might disagree on the details, but at least from the importance of the country's agenda, at least my observation, it's moved the way up from where it was two years ago. But Michael, please. Yeah, I agree with that. I mean, it was great to see competitiveness on the agenda. And as Sam said, a genuine interest in addressing some of the short-term and long-term issues that have been standing in the way. And we had a kind of a frank discussion about what that really means in terms of the other countries out there, what it means for tax, what it means for trade, what it means for government efficiency and productivity, and certainly education. And there's a lot to be done, the world's changing very quickly, and partisan activities while other nations are advancing rapidly doesn't really help our causes, Americans. So while we're global companies, we do things all over the world, we're still Americans. And we want our country to succeed. And so we're interested in seeing real action taken against how does America stay competitive and stay relevant, and maintain or grow the standard of living that we have here in this country. I was in government and several times was called over to meetings with big guys like you in the White House, and we have a wonderful meeting, there's a warm glow, and the world is different now and all that. And two days later, you don't remember the meeting. Why is this going to be different? I mean, what are you prepared to do to make this different? Michael, let's start with you. Well, I think what I see is different is I think the magnitude of the challenge, it sort of made it onto the agenda. I mean, you have this enormous debt that we've accumulated as a country. I think the competitive pressures that are all showing up relative to competing nations are much more obvious. I think there is a real crisis in a number of states and various geographies where there are particular challenges. And so we can't afford to ignore these issues. We also don't believe that it's too late. We think if we take decisive action that a lot of progress can be made. But boy, we've got to jump into action here pretty quickly. But to follow up on that point, I think that, and you're right, we've all been to a lot of these, John, for many, many years. But I think what came out of the meeting different than others was not that two groups talked to each other. We actually agreed in certain areas to go do work together in tax. We agreed to work with Secretary Geithner on establishing a set of principles. He's met with our CFOs beyond just tax, but other CFOs. They're back again. The tax guys are coming in. So there's a schedule. There's a work plan in place. And when we met with some of the people on the hill, again, they agreed that we should get the principles established. And of course, it's going to be a negotiation. But you have to start someplace. And so this is the first time, at least in the past two years, when it comes to tax, corporate taxes, being competitive on a worldwide basis. There is, I would argue, real work underway. I mean, teams at the table negotiating and trying to put something together. So to me, that's a sign of progress. First, as you're right, we give a report and we go. We had lots of statistics on why we're not competitive. But we had the statistics two years ago as well. I think the other thing that came up on trade, and this was, I think, a very fair ask of the administration. They asked us to help them make the case. I mean, they get it. I mean, every time you look at where we have an existing FTA, our business services is better, manufacturing is better, agriculture is better. That's the data, right? These are the facts. Nobody understands the facts. And so we're just saying, we make the argument, just open up, let us compete. We're fine. We can compete. And the data says that the US is better off based on these facts. Now we have to sell the case. I mean, clearly that is not the perception of the average American, especially it's very, very difficult in a high unemployment environment. So it's a complicated task. On the ways to save money or make government smarter, they used the President's term in the State of the Union. Fundamentally, he told us that in the cabinet meeting that morning, as Michael knows, he instructed, I don't think this is confidential, he instructed the cabinet to go work on these elements to drive a smarter government. And Venetia was there, the government CTO, and he got a whole long list of to-dos, a very long list of to-dos. In fact, it was pushed a little bit about why he wasn't moving faster, which is appropriate, I think, for all of us. There he's smiling in the audience, but that's okay. That's the nature of getting things done. And so, and so, and I'm kind of where you are. I mean, we both have a little more gray hair than Michael. In fact, we both got out of the same school about a year apart, so we're probably close in age. But nonetheless, having been through these things so many times, there is real work underway. I mean, people doing work, making recommendations, negotiating, give or take. Now, I mean, that doesn't deal with the political environment. And so, it's hard for us, I think, as business people to underestimate what's necessary politically to get anything done. And that would be an area which we don't have a lot of expertise in. We can only help people with the analysis, the facts, the case, the things that we do for a living. But what we do know is that here in Washington, people talk about things being scored, and it has to be scored. And what I know is return on investment. And return on investment in our business and our customers see return on investment. And the kinds of things that when we talk about this trillion dollars of savings, these are things that have 30, 40% return on investment. And so, scoring, I'll be the first to admit, I don't understand it. But I do understand very high ROI. And those are things that, whether it's a company or government, ought to be done. And the way you drive it is you say, okay, this is gonna save $100 million, $150 million. We're gonna take the $150 million out of your budget in the future period. And we're gonna go get the savings. And we're gonna have accountability to go make it happen. Well, of course, that's part of the dilemma. I used to be the comptroller at DoD, and of course, everybody knows that Judas Iscariot's the patron saint of all comptrollers. And so it makes it really hard, because you say, I'm gonna take money away from you as long as you do the right thing now. But you're right. Now, let's get into this report. You guys were instrumental in pulling together this report, one trillion reasons, and by the way, folks, you really ought to read it. It's really quite a good piece. Let me just take you to a few things. Because I think the audience needs to get a little bit of familiarity with what it is that you're concretely saying can be done. For example, consolidating information technology. Now, you've each had experiences with this. Maybe you want to share what you've done with your company, a few things like that. Sam, let me start with you. I'll start. I mean, fundamentally, I mean, if you think about all we're talking about, I know a lot of times people think, well, these are very complicated technical projects, right? And we got into this discussion yesterday. All we're talking about is, think about it, putting things together and sharing them. So this isn't, we're not working on another, this isn't IBM working on the Apollo 13 or the Space Shuttle. This is just taking what exists, putting it together and share it. In IBM, we had 84 data centers, we went down to 14. We saved $3 billion. I mean, you virtualize the environment, in our case, a 40% return. Plus, reduce energy consumption. So this is just, it's months of work, it's not years of work. It's just planning and literally just putting things together. And so it's extremely straightforward. The report says the government has 2,000 data centers. Since Michael and I are in all the data centers, we might think there's more. But we'll go with the public data since we're in all of them, we might have a different view of the 2,000. And so, but if you would just take that, and let's think about this, does the government need 2,000 data centers? There's 50 states, how about two per state? Let's go to 100. I mean, everybody got their fair share, everybody got two. I mean, that's, as you can see, I mean that's, I just share them. I mean, I know it's incredible the concept of kind of use them together and share them. They share electricity, they share water and all that kind of stuff. They share the phone systems, well, share this too. And you saw the report, it's a couple hundred million dollars of savings. But the real life, which we've all done, in our case, the first way, which we took 84 to 14 was 3 billion. I was the guy in IBM and happened to do it. And then the ways now as we virtualize these environments, as Michael, our case, it's 40% return. And the paybacks are 15 months. You can almost get it in a budget cycle. So it's very real and very doable with Michael. So in about the size of this stage, something about the size of half a container, we can put 2500 compute nodes. Each compute node can have, let's say, 30 to 40 virtual servers. And in that same space, we can put about 14 petabytes of storage. Now, this is an enormous level of efficiency, 7, 8, 10x better than what exists in historical commercial environments. And we've already seen the kind of, you've heard about cloud computing. The cloud computing companies have already done this. And they use this and we supply the infrastructure for 21 of the top 25. Large commercial organizations are doing this as well. The government can do it as well. And there's enormous savings in this kind of consolidation and really holding on to the stuff that's four, five, six years old, when the rate of improvement is so fast is actually incredibly expensive. Not to mention enormous power saving. So when you do these consolidations and virtualization and using the new power efficient technologies, you actually reduce power consumption by like 95%. So it's incredible savings and productivity and efficiency and scale. So you don't need all these small outputs. I remember during Y2K, we actually moved card punch readers in the Defense Department. Well, thank you for being such a loyal customer. We're very loyal, let me tell you. Tom Watson, senior, would be proud of you. I'd probably say that when I learned computer science, they didn't have those. They didn't even have that. That's right, Michael. That's why I got ready here early, I'll just tell you that. And IBM Centennial, which is this year, that product was introduced I believe like 1916 or something like that, so anyway. Well, I think we're still years and a half. One of the other major recommendations was on supply chain management. You guys have written the book on this. Michael, what are your thoughts about what can be done with supply chain? I think what we see is that there are an enormous number of different supply chains and collapsing, consolidating those, using pull technology, using information to replace physical assets. There are all the things that have occurred in the world's best company. So applying best practices to that and saying, hey, do we really need hundreds or thousands of supply chains? That could be simplified and streamlined tremendously. But I'm pretty sure I'm going from memory John, but the report says that the government spends about $550 billion a year through these kinds of supply chains and procurement. This is only a 10% improvement. All the numbers are a 10-year case, right? So it's a 10% improvement. When we went to one supply chain and globalized at IBM, we saved $25 billion on a lot smaller spend base. So, I mean, 10% is very, very conservative is our only point. And again, why you need these hundreds of supply chains to procure for the government when you could pick 10 again? I mean, we get the one, ours is probably a little simpler, running 170 countries around the world. But there's real savings. I just make the point of the $25 billion to say that the estimates in this report are quite conservative when you look at a 10% improvement. Well, the problem Washington is a town of 15 goldies and no puck. And so how do you get- Yeah, yeah, yeah. I think you just had to deal with this. You've had to deal with it. You take a big bureaucracy and you've had it. But do you have tools that the government doesn't have? Well, we have management and I mean, no, I'm not being flipped. I mean, Michael would have the same thing. We actually can assign somebody and I have a person dedicated to driving productivity and globalization at IBM. Full time senior executive that used to work for me but now she reports to our CFOs, Linda Sanford. And Linda, we say to Linda, between 2006 and 2010, we want $5 billion of productivity. Go sharing, right? And we said by 2015, we want $8 billion and she goes to work. She's an engineer and she goes to work. But there is somebody. But all by the way, so that can't happen in government. They're states. If you look at what states are doing today, they're actually assigning somebody that we would call an operations person. They don't give them a title, I'm sure, of Chief Operating Officer. But it's that type of a person. They have these huge issues between deficits and pensions and tax receipts. They're assigning individuals to go work these cases. And by the way, guess where they start? Sharing things. And what are they sharing? Like data centers in procurement and all those kinds of things is where they begin. So I know it's, when you think about the private sector analogy, so it can't apply, my only point is it can apply. I mean at the state level it can't apply, you know, right? So if it can apply at the state level, why can't it apply at the federal level? Yeah, I mean Sam raised a very interesting point. We're seeing this with the large university systems in the United States where the budget pressures have forced them to do things that they previously would not have done, like the consolidation of the data center infrastructures. We're seeing it at the state level. Now in a company like ours, you know, we will sit down and say, okay, we're going to drive a 10% productivity improvement every single year. How are we going to do that? We're going to do it with collaboration, with tools, technology, we're going to invest, we're going to put those tools in and then we're going to take the money out of the budget. And, you know, that's going to allow us to invest and grow and continue to, you know, provide value for our customers so they can grow and thrive with the technologies that we provide. Let me, you earlier raised the issue of cloud computing. And let me tell you, every CIO in Washington is going to say to their secretary, well, that cloud thing, you know, that's a little dangerous. It's a lot of cybersecurity things there. Tell us what it is that we should be telling Washington about cloud computing and its safety. Yeah, I think there's, I mean, look, to be clear about it, there are multiple ways to implement a cloud, right? And there are secure ways to do it, but they are different than what I'll say, just going out and use a consumer cloud. And so, if I was running national defense, well, I'm only, as you know, I'm on the task force with NSA, you know, so all that good stuff. If you would have to look at it differently, then if you're just sharing office work in a civilian agency. So, not all clouds are the same, but let me give you a kind of a definition. All, what I really was a cloud is, is a virtualized environment that Michael was describing. So everybody says it's cloud, okay, fine. When I was trained at IBM 38 years ago, it was called virtual machine. And now it's called VMware from EMC. So 35, 38 years ago, that's how I was trained. Not on a key punch, but we still like key punches too, but on virtual machines. So, you know, it hasn't changed all that much. It's just been moved from mainframes and large servers down to the Intel infrastructure. But fundamentally, it's sharing of resources. Now there's multiple ways to do it. And the way you have to do it is based upon your environment. And if you're DOD or if you're NSA, these are very, very real issues, very real issues. Yes, but they can be architected and designed. And oh, by the way, if they won't, we have software that will secure the environment, if they would like, if they can write it themselves. On the other side of the house, I mean, I'm gonna argue that a lot of the civilian work that lends itself naturally to the cloud, which is the office environment, very, very productive environment. In the civilian agencies, I mean, I don't think they're saying that same level. So you should have some security and some protection of passwords, but it's not the same level of concern. I'll give you another one. It's very, very simple. We're getting like 50% improvement in productivity. There's a thing in every IT shop called development and test. And so in the way it works in development and test, you have to take capacity and you set up the sides when they write new applications, it can run in this environment. Which you can do if you use this virtualized architecture cloud. You can just share of your production environments to do it. And instead of taking two weeks to provision these things, set these systems up, we do it now and we do it in four hours. And it's 50% less expensive. So the developers get it done faster. There is no security risk in the government to do those kinds of things because it's behind the firewall. It's in their secure environment. So I think what I would tell them really is that they stand back from it. Not all things are the same. So to make everything sort of national security or huge privacy concerns is not appropriate. It is, it varies in certain areas and we need to be extremely sensitive given. And we did all this analysis in IBM and it's very, very true. And not all that lends itself to the cloud. That's probably about 40% of what we do. But 60% of what we do is very much legitimate work that could run in that environment. That's true productivity. So I guess where I think, John, what I would say is that I just think things can't go unchallenged. And the reason I say they can't go unchallenged is we are in a very difficult situation. If it was normal times and life was moving on and things were great, you'd say, fine, it's states, right Michael? Business is usual. But we're not in that kind of a set of circumstances. We are at great risk on productivity. We have a financial debt structure that if it wasn't the government, it was non-sustainable. None of us could run those levels of debts and keep our jobs, only in a political environment can that be the case. So to sit there and not ask ourselves honest, detailed, factual questions about solving the problem, I think it's not appropriate for any organization. I'll say that about my own and I don't wanna pontificate too much about others. It's just not appropriate. We are in a financial crisis. So let's wake up and act like it. Yeah, so we're often talking about secure private clouds. Just to be clear and draw the distinction from the public cloud, that's quite different. I think the other collective experience in our industry is that if you stand in the way of the enormous improvements in technology that continue to come, you do it at your own peril. And you just lose relevance and you fall behind. And so there've been enormous advances in our industry and this is where, if you sort of add up, what are the basic opportunities that are kind of pretty easily accessible? That's your trillion dollars. Both of you have remarkable experiences as business leaders. Michael, you invented a new model. Obviously you had to convince an industry of something profoundly different, but you did that. You led the way. Sam, you re-engineered IBM, took it from an old, stodgy company into a very dynamic new company now. So both of you have been very proven leaders. Now let me ask you to step back with some detachment. Look at Washington, where the average political appointee is in office for 26 months. And you know, when you have to change an organization, people gotta think that you're gonna be there a long time and you're gonna be on them like ugly on an ape, you know? And yet we've got political appointees that disappear. I mean, how do we get that sense of leadership mandate and direction and urgency in a government environment that has this turbulence with senior leaders? You undoubtedly thought about this. I realize you haven't been in this in a while. I would say one is we're actually elected every year. By our shareholders. But I think- We've made that point a lot the past two days. Some have four year cycles and some in six. We have a 12 month cycle. I think we're sort of reaching the point where this is a national crisis where the planning horizon of the competitive landscape is much, much longer and proving itself to be far more effective. So China is in its 12th, fifth year plan, 12th, you know, five year plan and they have it for each industry sector. And you know, meanwhile, we have the partisan discussions et cetera, you know, how do we deal with this? How do we deal with that? That's a formula for disaster. And so we need to get real serious about addressing the systemic issues in productivity and education and competitiveness and you know, how we as a nation, so remember, we have 4% of the world's population. We have, you know, roughly half the wealth and you know, that's a great thing but you know, the world's changing out there pretty quickly and we have to kind of get in gear. The things that worked, you know, two, three decades ago don't nearly work as well with this competitive landscape really shifted. John, let me come out of that different way and I was thinking Michael was giving me the benefit of some time, you know, to think about it a little bit, so thank you Michael. And by that I mean is what we would do in a business which I just, is we would actually go establish the process that is, you know, I mean, we're talking about 2015 for the next $8 billion, a process and the metrics for the next five years, right? And that is now hardwired into the business. So you know, in every year, it's every quarter, every month. 10% productivity per year. Well, whatever it is, right, adds up to $8 billion. So all the projects are identified, some short term meals, some time long term yield. I do believe that if you actually would look at the things that we're talking about, say the trillion dollars, you know, just take that and just basically establish the process, put the metrics in place, put somebody in charge, make them a civil servant, maybe not necessarily a political appointee, you know, maybe give it some permanence, right? And then we would have a reward system, so you reward people for doing well, you know, but I guess there's more risk in the private sector because if you don't do well, the system also adjusts to the negative. But fundamentally, you know, right, I mean, I would think about a way, how do you establish the metrics, define the process and have someone responsible to kind of drive this initiative over a multi-year period of time? I mean, that's right. I'd like to nominate Sam. No, no, no, no, no, no, no, no, no, no, no, no, no, no, no. I'm, that's Baltimore guys, you know, we gotta get back to Baltimore at some point tonight. I mean, yes, both of you have referred to the competitive landscape. I think most Americans don't realize how far behind we're falling. You know, if you leave Beijing International Airport and you fly onto LAX, it's embarrassing. It's like going back 30 years in time when you get here. And yet we have this vision that we are ahead. Share with us a little bit more your international business plan. You've got operations globally. You interact with people on a global basis. I mean, how do we make this tangible and real to Americans to understand what's happening? Well, I think the thing that got tangible and real, I think the thing that comes to mind to me that people can relate to and what's happening is, measure the emergence of the middle class, John. This is what I don't think people get in the United States. They assume that China or India or Brazil is, everything is correlated because they're exports oriented, natural resources in some countries, manufacturing in others, you know, there's a mix of these things. But fundamentally, so therefore it's all tied to the US and maybe Germany, right? That's the, you know, go around this room, you pull people, you say that is the model. You've lost track of a little statistic I'll share with you, like 500 million people entering the middle class in the next few years. Those 500 million people want cars, houses, cell phones, banking accounts, air conditioners, all those things. They expect transportation to work. They expect secure, safe cities. They want quality healthcare. Guess what, all those things. So the point of it is that, and you say, well, okay, so how do those countries that are emerging, so therefore they're like the third world, right? The third world, how do they address it? They skip everything that we've done. Just go right to the future. Well, everything's, there's no landline. It's all wireless. We talked about 3G, 4G, forget it. They've been doing music and entertainment in India for like 10 cents for, we wrote the software three or four years ago. You know, right? So a simple thing, you go through these things. You look at the highway systems of Shanghai. You go to all these places, right? You know, they built a loop around Shanghai in a year. A year, the entire city in a year. Incredible. At one point in time there were, the entire, the largest share of the crane capacity in the world was in Shanghai. All the cranes, 70% of the crane capacity was in Shanghai. You know, one other example, rail. We talk about rail and innovation for the country. China has decided they're gonna build the largest high-speed rail network in the world. Appropriate to $2 billion, and off you go. So, I mean, I think to Michael's point, and you can take the education statistics, which you know the engineers, scientists, and math. China's here, we're here. Number of graduates, et cetera, et cetera. So a lot of these fields. But I think the thing is that, I think the first thing that needs to be understood is these are not developing countries. These countries have a huge amount of well-educated middle-class people that are entering into their societies, right? That are gonna drive massive economic transformation. And now, that sounds a little bit intimidating, I understand, but it makes the point, go to the other side, so what are our inherent advantages? Now, I've said, oh my gosh, you know, right? And they don't have a lot of that. No, there's no 15 trillion, they're trying to get an authorization for it. They're just writing checks, $2 billion here, $1 billion for a smart grid, a couple billion there. So you stand- They're the lender. They're the lender of last resort. Fortunately, the lender has a long-term horizon. For the time being. But, what if they pulled their line of credit? But so, not to make it too negative. But I think the other way to look at it, when you say, okay, so what are the inherent advantages? What are the inherent advantages? If you did this in the old traditional competitive advantage, just shot Petter economics point of view, right, like you would have studied. Basically, you would say, what are the inherent advantages of the United States that we have? Well, guess what we have? We have an incredible university system, right? Incredible university system. We have the ability to innovate and create research and electrical property more than any other country in the world. We have rural law, therefore, there's a right for the individual to create and invent and be protected, which drives innovation in the future. We have, we had had and will have again a very transparent capital market system so you can become a Michael Dell, right? The total transparency. We have had and we will have again. This period will pass, right? So basically you say, okay, we have this inherent advantage, right? We have this, yes, we have education problems and yes, we would like our railroad systems to work and they don't and I'd like to get to the airport on time but I can't put all that aside, you know? We have all these other things, you know, right? And we have all those other things and then what is, so what is missing? What is missing is somebody saying, you know what? Just like they do elsewhere. These places in Brazil and India and China, Michael and I sit in the meetings. You know what it's saying? We're gonna take this country from here to there. I'm not talking about Sputnik, you know, right? Okay, we're gonna go from here to there. We're gonna set up an innovation agenda. We're gonna drive innovation. These are the elements to create that kind of a society. Here's our inherent advantage and go out and sell the case. Go out and sell the case. And if you can't sell it and people say that's not what they want, then, you know, we have what we have today. And it has to be a national priority. You know, if you take things that people are familiar with as a proxy for this, you know, there are about five billion people in the world with cell phones, let's say seven billion. About a billion and a half people connected, you know, on the internet. So, you know, much, much larger obviously than U.S. population. And the fastest growth is in these emerging nations. So you got 1.3 billion of those cell phone users are in China, adding roughly, sorry, China and India together. Yeah, adding about 15 million new subscribers a month between the two of them. So, you know, enormous, you know, industrialization, modernization and, as Sam said, sort of skipping past all the legacy kinds of problems and saying, okay, what should this thing look like in five years, 10 years? And let's, you know, leap ahead to that. Okay, let me ask a, you know, a Washington question. You know, we're snotty people here. So let me ask a snotty question. You know, you guys say that we need to improve productivity, increase productivity, and of course that's getting the tax code down, yet the industry's sitting on the biggest pile of cash in history. So why would we think this is a problem? This is a Washington question, okay? I haven't agreed with you, but what do we say to the broader public on this? What is the problem? Well, the problem is I don't think it's the fact that business has over the past couple of years short up their balance sheets because of the economic uncertainty. I mean, most households have tried to do the same thing. So they sit there and say that that's inappropriate behavior in a very difficult environment, sort of silly. Because at the end of the day, IBM's been around 100 years. I don't want to be the guy who took it down because I got a little drunk. You get right? I mean, you know, I got it, but think 100 years and Sam crashed it because he got drunk one night at a party and spent the 10 billion he's got in house. But it was a wonderful event. You should have been there. It was unbelievable. So, you know, I mean, it's just a little bit of sober up guys that's going to diet. Let's be like adults here. The question really is, why aren't you investing more? That's the question. It's not the balance sheets. It's why aren't you investing more? That gets back to competitors because we do invest where there's opportunity for growth. Every case gets invested with this opportunity for growth. And we spent two days, and Michael laughs when I do this, trying to explain that people have never worked in the private sector that the only thing we have to invest is what's left over. Now you all know this at home because you take home your paychecks. Some portion goes to governments, depending upon where you are, somewhere between 30 and 50%, and you spend what you have left over. We do the same thing. Numbers are bigger, right John? I mean, numbers are bigger, but we take whatever's left over and we reinvest it into growth opportunities. And so very simple, straightforward approach. So if you take more from us, there is less to invest. And all the way you say, well, that's okay, but if you compare the US to the rest of the world, we're taking dramatically more on effective tax rate, 10% above the average than the rest of the world. It's the OECD nation. So we are taking out 10% more. So there's 10% less to invest. Now on the other side of it, you go back and not to turn this into an IBM commercial, but last year we opened centers all across the United States. We invested all across the United States. So we spent $6 billion in R&D. We spent another, gosh, I think $6 or $7 billion in acquisitions gave $15 billion back to the shareholder, something like that. I could be off by 500 million or so in round numbers. And all by the way, we opened centers in DC and New York and data centers in Charlotte and Boulder, Columbus, East Lansing, Dubuque, probably there's some more. Throw a couple on the West Coast too, you know, right? So, you know, it's not a question of that. I think the question becomes, you know, what you need to do if you're in Washington and you're the people that make these statements, obviously you don't, you want the Johns Hopkins, you never would say things like this. But if you, you have to ask yourself this and I'd turn it around and I'd say, look, people can go anywhere in the world. They can't. People can go to any city in the world. People, businesses can go anywhere in the world. Work flows anywhere in the world and so does capital. So the question is why would they come here? That's the question. Not, you're not spending enough. Why would they come here? Why would you come and invest in the United States of America when you can events elsewhere instead of giving 30% to the government 10? Why would you invest here when you can instead of competing for 100,000 graduates in math and science, you can compete for 600,000 in that same equivalent country, right? Why would you come here when you could go to environments that are very green oriented but don't have requirements that force us to close facilities because I have a plant that has the same admissions as a church, as a church. So my manufacturing facility, the benchmark is a church. Are you gonna close your churches too? So seriously John, ask this question of ourselves. And I think if you ask yourself the question when people have ultimate choice, money can flow, people will invest, they all need fair returns. We're not acting like greedy business guys. Why would they come to IBM? We have to answer that question every day. Why would they go to Dell? If you're a government today, state, city or federal government, you need to have a value proposition that attracts the smartest people in the world and the best flow of capital so that you can continue to be competitive. And if you do not do that, if you do not do that, there's too much choice today, Michael's point, and it moves too fast and it doesn't have a happy ending. It just goes right back to competitiveness. And so we have to address the competitiveness issues or else the capital doesn't get invested. Whether it's foreign companies or domestic companies or new businesses forming, they'll go where the talent is, they'll go where the infrastructure is and where the environment is a friendly one towards growth and business formation. Let me ask you, this is a pet rock of mine, but I can't figure out why the most prosperous and successful country in the world wants to limit the number of talented people that want to come here. We have half as many H1B visas today that we had 10, 15 years ago. It doesn't make any sense. I mean, I would think we'd be craving to get talent. Tell me how you look at this talent issue, international, American. Michael? Why don't you go for it? Yeah, I mean, I think both of us have a lot of open positions in the United States that we're trying to hire for. Thousands. Exactly. Unfortunately, we can't find all those folks. They're pretty highly skilled jobs, often software programmers, engineers, and totally agree with you, John. I mean, we ought to be stamping green cards to the PhD certificates. We want those folks to come here and stay here. And certainly, if you look at the history and the tech sector, that very talented group of immigrants have continued to contribute for many, many years to not only the growth of many great companies, but the creation of many great companies. I mean, Michael Bloomberg, another plug for Johns Hopkins University, thank you very much. Michael Bloomberg has a proposal. You're ready for president? No, no, no, Ron Daniels is doing a great job. But I heard all this yesterday because I was over there giving our centennial speech, but Mayor Mike has a proposal which basically is give them all green cards and let them come to New York because they're all taxpayers. Well, let's see this the point. Imagine if you were a mayor of any city in America and you said, hey, how'd you like to have a bunch of smart, well-educated, reasonably well-financed people come to your city and develop businesses? I don't think you find a lot of mayors that would say, well, that's a really bad idea. We don't want to, you know, these are job creators. You know, to have people employ, you need employers. Now, John, let me get the other side of the argument. I think there's a statistic here that we really need to focus on a bit because you could understand, and I'm sensitive to the fact that politically, you say, well, look, unemployment's 9.4%. Obviously, if you measure real unemployment, we all know it's higher, but let's use the public data, right? And then therefore, how can you encourage all these other people, right? But let's look at the unemployment. Again, let's peel it back a little bit. College graduates and advanced degrees, it's between, I think, two months ago, and I did this stuff with Bernanke, it was 4.8 to 5.2% unemployment. So you could argue close to full employment. People with high school education's 15.6%. So do we have an unemployment problem or do we have an education problem? What is it? Because if you have a college degree or you have an advanced degree, 90, statistically, 95 to 96% of the time, you're probably gonna get a pretty good job and we all have openings, so you probably will. So what is the real problem? So when they talk about you can't bring in PhDs or we can't bring in master's in electrical engineering, it's called a double E in my world too, right? I mean, it's not, those people have plenty of jobs here. And we need those skills to go build these businesses. And the story that Sam and I can tell over and over again are teams of engineers that we have, we bought a little company in New Hampshire a couple of years ago, had 200 engineers, now it has 650 engineers. The fastest growth for the product and technology that that group of engineers is creating is in China, and it's in India, it's in Brazil, it's all over the world, and fortunately, we're able to find enough talent there, but if we wanna go to 1,000 engineers, we can't quite find them, what do you think we're gonna, we'll go wherever they are? Well, and as you said, it's an education issue here, not one or the other. And I think the administration is doing, I think a very, very good job of trying to tackle a very, very tough problem, but and that's at the federal level, so I mean, Arnie deserves a lot of credit and he's really doing his perfect job. These are tough problems, there have been a lot of forward progress in the right direction, and I think back to the reception we got at the White House, it was a very constructive meeting, and you know, I think. We're down to the wire here, and your handlers have been giving me the, we gotta get out of here. So let me, some questions for the audience. We have assembled here the most influential and mighty audience you could possibly want. Yeah, I don't recognize many of you employees out there, so actually it's a real audience. It's a real audience. It's a real audience. Michael, they might all be Dell people, I don't know, I don't know. With his, with his leading something, I don't know. So the thing here is we gotta, what is it that you need them to do with this mission? You came to town, you talked to the President, you talked, what do you need them to be doing here to help with this? And then we'll wrap up with that. You know, what I would say is, go take that report and take a good look at that, and familiarize yourself with this whole competitiveness agenda. So I think it really has to get on the consciousness of the planners and the intelligentsia here in Washington because this is a national priority and it's gotta be addressed in a big comprehensive way. And I think I would just compliment what Michael was saying because it's the same thing we've said in all the meetings. I mean, when everyone asks us, what are the two or three biggest inhibitors to the competitiveness? It's tax, trade, and education. It is the, and you'd like to make it more complicated than that, but it really isn't. Because that is a bet on if you have a level playing field, tax and trade, and you create and invest in human intellectual capital that we have great faith that the best system in the world, the best system in the world to, and look, we're invested in 170 countries. So I have a benchmark for those of you that haven't been to 170 countries, and you might follow me around this year, at least you get to 60 or so, but anyway, because it's our centennial. But seriously, if you look at that, right, and you say you have this inherent in strength, right, then why wouldn't we capitalize that and deal with these issues and move to the future? Deal with the issues and move to the future. A business, there is a correlation here. A business can never survive by dwelling on the past. And people ask, Michael's done it for 26 years, IBM's done it for 100 years, and you say, how could IBM exist in tech for 100 years? I mean, Tom Watson Jr. in 1962 gave a speech at a prestigious university. He said, of the people that were in the top 25 industrial companies in 900, they're only two left. And then if I look back to 1962 to now, when I gave the speech yesterday, they're four. That's it, because you gotta go to the future. Whether you're a business or whether you're a society, you gotta go to the future. And yes, we have a responsibility to transition from the past, that's very, very fair and balanced, but you can't trade off and dwell in the past. You've got to transition from the past. And you don't solve the problem by creating a housing boom so you can give people hammers and nails and say that's a wonderful aspirational state. Thank you very much. You know, one of the real problems that we've had in Washington in the last 30 years is most CEOs have stopped coming to Washington to help with systemic problems. They come to town to deal really with transactional company issues. So it's rare to see two CEOs that are willing to devote their time and energy to broad national purposes. So we, all of us here should thank these two gentlemen for this remarkable service. Thank you. Thank you. Thank you all for coming. Thank you John. You're the best. Thanks.