When I interviewed Steve Forbes, the president and CEO of Forbes Inc., and editor of Forbes magazine, more than four years ago, the war in Iraq had just begun, the country was just coming out of a recession, and many companies were still recovering from the dot.com debacle. Today, we have a different picture, according to Forbes, who ran for the U.S. presidency in 2000. He says, "The global economy has grown at more than 30 percent. There has never been a time in human history when so many people have advanced so quickly, and in many parts of the world as we've seen in the past few years."
Enterpriseleadership.org recently caught up with Forbes to get an update on the pulse of the economy and to access the heartbeat of technology. Here's what he had to say:
EL: Even with the war in Iraq are we still is our economy still going?
SF: What's amazing is that since September 11, the global economy has been booming like never before. India and China both have millions of people striving to get into the middle class. This is an extraordinary global event. We see the same thing happening in Eastern Europe and Central Europe. Since the war in Iraq, the growth of the U.S. economy has exceeded the entire output of the Chinese economy. China grows at a faster rate than the U.S., but China has a smaller base to grow from.
EL: What are some of the problems with the American economy?
SF: When it comes to the American economy, we have to take a hint from comedian Rodney Dangerfield who always talked about getting no respect. Well, the U.S. economy doesn't get much respect. We still have very good fundamentals. Productivity grew twice as much in this decade as it did in the previous decade, even though it fluctuates from quarter to quarter. Thanks to technology, we don't have the inventory gluts that we had in the past. Businesses now respond more rapidly to changing times and circumstances.
Corporate America is flush with cash to the tune of $2 trillion dollars. Despite the smearing of the American consumer as wallowing in massive credit card debt, the net wealth of American consumers now totals about $29 trillion. If you throw in what people have in their 401k plans and what the equity in homes is worth, you get another $25 trillion. The American people have more savings than the rest of the world. Meanwhile, Washington diplomats say we don't save enough.
EL: What's your view of the sub-prime mortgage crisis?
SF: Yes, given human nature, the economy has its weaknesses. The sub-prime mortgage crisis is real. First, you need to realize that we have hundreds of trillions in assets in the country and around the world. To this end, a $300 billion loss should not be an economy killer. Each day, however, the stock market will change its value several hundred billion. The sub-prime mortgage problem happened because a lot of people couldn't tell if what they were getting was good or bad. In fact, even rating agencies didn't know how to rate the stuff. So, they weren't useful in determining what was good and what was bad. The system ceased in August.
EL: Given all of the roller coast reports about the economy, how has the technology sector been doing?
SF: To paraphrase Bill Clinton, I would say it depends on how you define it. Overall, the technology sector has been doing very well. Both Intel and Cisco have gotten new leases on life. New companies are coming along. We see some tech IPOs. There's a feeling that the markets are paying up with prices that you haven't seen in several years. This situation happens because of innovation. The investment side of technology doesn't go in a straight line; you have booms and busts. Those who use the innovations, rather than those who create them, sometimes make the most money. On the large scale, we see something that has been around since canals and railroads.
EL: What technology sectors interest you the most?
SF: I like the whole area of broadband, especially as it gets more real capacity. Broadband, however, is still in the primitive stages. I see it from my industry on the media side. The Web has become a disruptive technology that is changing everything. We're now in the broadcasting business; the Forbes.com Web site gets 15 million visitors a month. When we get better broadband quality, we'll replace traditional TV and cable, and we won't have to worry about broadcast licenses.
I also like the entire area of biotechnology. What scientists have discovered about the brain is mind boggling.
EL: How do you feel about social media?
SF: It's a whole new world. Everyone is going to YouTube and Facebook -- adults are the biggest users of Facebook. It's not a substitute for face-to-face meetings; however, Facebook enables you to get in contact instantly with a large number of people, like you never could before. But kids who use these sites have to be careful what they do; they could be harmed for life. There's no statute of limitations. This dilemma raises a host of privacy issues and accuracy issues.
It also puts a premium on branding because there are zillions of blogs out there now. How can you go to a brand that you know people trust? This is why Forbes.com has an edge in the blog force. People trust where the information comes from.
EL: Are there any startup companies that interest you?
SF: I'm more interested in how you're going to end up using whatever the startup. Who would have thought that Facebook would go from a college thing to something everyone wants to use as a virtual get-together for coffee!
Facebook could have sold out two years ago for one billion dollars. Now this company is talking about $10 billion. Companies rise up and they go back down. Look at all of the causalities in the past five years.
EL: How does innovation play out in American corporations today?
SF: Often times, innovations come from the outside of corporations or the incumbents. For example, Bill Gates didn't see the importance of the rise of the Internet. He thought interactive TV was where the future was going. When he realized he made a mistake, he started to scramble. Take Google. This search engine is not only the dominant player in search, but in online advertising. YAHOO! is struggling, and Microsoft is way behind. Incumbents brought innovation to Google.
EL: Do you see Microsoft getting into life sciences?
SF: Microsoft hasn't had a major breakthrough in years. So this company is trying a little bit of everything now to see what sticks.
EL: Besides offering podcasts and video on Forbes.com, do you plan to phase out your print publications?
SF: We see one feeding the other. Print gives the Web site credibility. The Web site gives print credibility. We see each medium as being a platform aimed at the same constituency -- entrepreneurial capitalism. We've always treated the Web as a different medium. That's why we have very high traffic. About 95 percent of the Web content is original to the site, and does not appear in print. Many publishers have made the mistakes of making one medium subservient to the other. Instead, we've treated them as distinct entities.
EL: Anything you would like to pass along to chief information officers about adopting new technologies?
SF: It's understandable that CIOs are skeptical about adopting new technologies. In 2000, many companies scrambled to have a Web presence. Whether it's WiFi or Starbucks, many of the people who do well often see how to apply something new in a way that hasn't been done before. Ask yourself who made the most money in mainframes and computers? It wasn't IBM. It was Wal-Mart. About 40 years ago, Sam Walton realized that if he managed information -- about his inventories and his competitors -- better than anyone else, he could beat his competitors at their own game. So, how you use technology is the key.
CIOs shouldn't just be looking at the technology. Instead, they should be trying to understand the innards of the business, and then, based on this information, assess what information diagnostic tools they need to get things done. For example, a smart company, such as Toyota, always finds the best way to do things. To develop its great supply chain, Toyota took a practical approach to studying information flows and then deciding what tools it needed.
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Elizabeth M. Ferrarini is a writer from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.
