Solution to Inequality is Rich Getting Richer – Tom Perkins

In an exclusive interview, Tom Perkins, Co-Founder of Kleiner Perkins Caulfield & Byers, spoke with Bloomberg Television’s Emily Chang. Perkins apologized for using the word “Kristallnacht” and comparing the treatment of wealthy Americans to persecution of Jews in Nazi Germany.

Highlights include:

*Says the creative 1 percent is threatened
*Says solution to inequality is rich getting richer
*Kleiner perkins chose to `throw me under the bus’
*Kleiner perkins has declined since i left
*Kleiner would have agreed with comparison to holocaust
*I have members of my own family in trailer parks
*I certainly have enough arrogance to be royal
*I could buy a six pack of rolexes

EMILY CHANG, HOST, BLOOMBERG NEWS: Tom Perkins, founder of Kleiner Perkins Caufield Byers, joining me now here in the studio. Tom, do you regret this comparison?

TOM PERKINS, CO-FOUNDER, KLEINER PERKINS CAUFIELD BYERS: Yes. I – I talked to the head of the Anti-Defamation League, Abe Foxman, this morning following up on a letter I’d sent over the weekend apologizing for the use of the world Kristallnacht. It was a terrible word to have chosen. I, like many, have tried to understand the 20th century and the incomprehensible evil of the Holocaust. It can’t be explained. Even to try to explain it is questionable. It’s wrong. It’s evil.

Now I used the word because during the occupy of San Francisco by the Occupy Wall Street crowd, they broke the windows in the Wells Fargo Bank. They marched up through our automobile strip on Venice Avenue and broke all the windows in all the luxury car dealerships. And I saw that. I remembered that the police just stood by frozen. And I thought, well, this is how Kristallnacht began. So that word was in my mind, but I did – I don’t necessarily need to read from this letter, but if you’re interested I can.

CHANG: Sure. Go ahead.

PERKINS: Well, I deeply apologize – this is the letter I wrote to the Anti-Defamation League. I deeply apologize to you and any who have mistaken my reference to Kristallnacht as a sign of overt or latent anti-semitism. This is not the case. My late partner Eugene Kleiner fled Hitler from Austria and fought in the US Army. We became the deepest of friends during our long association and he taught me, “Never imagine that the unimaginable cannot become real.”

He was never comfortable with the extreme political currents in America and never took our freedom from demonization for granted. I believe that he would have understood my Wall Street Journal letter and would have agreed with the warning. And then I apologized for using Kristallnacht, as I just said before. And I had a pleasant discussion with Abe Foxman just before I came here. And I hope that at least that part is put to rest.

CHANG: So more than 90 Jews were killed in Kristallnacht, 30,000 people put in concentration camps. What were you going for (inaudible) analogy?

PERKINS: I – the Jews were only 1 percent of the German population. Most Germans had never met a Jew, and yet Hitler was able to demonize the Jews and Kristallnacht was one of the earlier manifestations, but there had been others before it. And then of course we know about the evil of the Holocaust. I guess my point was that when you start to use hatred against a minority, it can get out of control. I think that was my thought. And now that as the messenger I’ve been thoroughly killed by everybody, at least read the message.

CHANG: You mentioned the word hatred. Do you feel threatened?

PERKINS: I don’t feel personally threatened, but I think that a very important part of American, namely the creative 1 percent, are threatened. I’ve – I’m friends with Al Gore, who tells me that the inequality is the number-one problem in America. I’m friends with Jerry Brown. I voted for him. I will vote for him, even though he raised my taxes 30 percent. He tells me the number-one problem in America is inequality, and that’s probably and possibly true. And I think President Obama’s going to make that point tomorrow night. But the 1 percent are not causing the inequality. They are the job creators. Silicon Valley is – I think Kleiner Perkins itself over the years has created pretty close to a million jobs and we’re still doing it. It’s absurd to demonize the rich for being rich and for doing what the rich do, which is get richer by creating opportunity for others.

CHANG: How do you feel threatened?

PERKINS: I said I didn’t feel personally threatened. I feel however that as a class I think we are beginning to engage in class warfare. I think the rich as a class are threatened through higher taxes, higher regulation and so forth. And so that is my message.

CHANG: If this is the kind of persecution that is happening to the 1 percent, what’s happening to the 99 percent?

PERKINS: I think the 99 percent – I – I did not come originally from the 1 percent. I grew up as one of the 99 percenters. And so I’m your classical self-made man, if you will. I think the 99 percent is struggling and really struggling to get along in America. We have ever-increasing regulation, higher costs I think caused by more government than we need. Small businesses – it’s difficult to form and prosper in a small business these days. It’s difficult to hire. And that in my view is what is hurting and causing – hurting the 99 percent and causing the inequality. So I think that the solution is less interference, lower taxes. Let the rich do what the rich do, which is get richer. But along the way, they bring everybody else with them when the system is working.

CHANG: Now you are a multi-millionaire.

PERKINS: No, I’m not a billionaire.

CHANG: You’re not a billionaire. I said multi-millionaire.

PERKINS: I’ve created some billionaires, but I unfortunately am not one.

CHANG: You have owned fancy yachts, fancy cars, an underwater submersible.

PERKINS: Airplane. Underwater airplane.

CHANG: I saw it. It’s basically an airplane that flies under water. Do you worry at all that you are divorced from reality? Are you divorced from reality?

PERKINS: I don’t know if anybody can answer that. Truthfully, I don’t think so. I give and have given and will give millions and millions of dollars to a long list of charities. I have in mind some more chairs at universities (inaudible). I still want to leave my children something that they can have even though upon my death the government will take about 45 percent. So yeah, I think I’m connected to reality. I’ve got lots and lots of friends that are younger and in this whole web-based, Twitter-based world. And I think I know what they’re thinking and talking about, yes.

CHANG: What about Silicon Valley? Is Silicon Valley to a certain extent divorced from reality? You have kids – you mentioned you created billionaires. You have kids making six-figure salaries, getting free perks at technology companies, taking shuttles with wifi access down to the peninsula, which regular residents don’t have access to. Is there something to be said for this idea that Silicon Valley really is living in its own little bubble?

PERKINS: Yeah, I think there’s something in that. On the other hand, it’s a bubble that has created – that has changed the world and has created incredible wealth around America and around the world. And maybe you have to put up with a little techno geek arrogance in other to get the results of those sort of folks’ thinking. So —

CHANG: How do you see this divide playing out?

PERKINS: Well, now that as the messenger I’ve been shot, I think at least read the message.

CHANG: But you just said at the beginning of this that you – you regret the way (inaudible).

PERKINS: I regret the use of that word. It was a terrible misjudgment. I don’t regret the message at all. In fact —

CHANG: What is the message?

PERKINS: The message is any time the majority starts to demonize a minority, no matter what it is, it’s wrong and dangerous. And no good ever comes from it.

CHANG: What’s the solution?

PERKINS: First, to understand the problem. Be aware of it. That’s why I wrote the letter. And I don’t apologize for writing the letter. I should not have used that awful word. But the letter said what I believed. And I believe we have to be careful that we don’t demonize anybody and that we certainly don’t demonize the most creative part of our society.

CHANG: All right. Tom Perkins, founder of Kleiner Perkins Caufield Byers. We’re going to continue this conversation after a quick break.

CHANG: We are speaking with Tom Perkins, co-founder of the venture capital firm Kleiner Perkins Caufield Byers in an exclusive interview. And Tom, you mentioned earlier that you don’t regret the message. You do regret the one word, Kristallnacht —

PERKINS: Absolutely.

CHANG: – which you used. Your venture capital firm, Kleiner Perkins, said in a statement that they were shocked by the words that you used and do not agree and that you haven’t been involved in the firm in many, many years. How do you respond to what they said? Do you understand why there’s been that kind of backlash?

PERKINS: Yeah. I – first of all, my letter was not about Kleiner Perkins. I didn’t mention Kleiner Perkins at all. They didn’t need to say anything, but they chose I guess to sort of throw me under the bus. And I didn’t like that. They – they said they were shocked. And I sort of feel like the guy saying, look, don’t go swimming. There are sharks in that water. And if you get shocked by that, you don’t understand the warning. I was presenting a warning. And I don’t – I don’t think they got that.

And then secondly, they made quite a point of my not having been involved for some years, and that’s true. And I think as I’ve distanced myself from the firm there’s been a corresponding decline in the firm, but I won’t go further than that. In a way, I miss them. I hope they miss me and we will bury the hatchet over this one.

CHANG: Your name is on the door, so when you say something it does reflect on them to a certain extent, or do you worry about it reflecting on them?

PERKINS: I – well, I didn’t – I didn’t have them in mind when I wrote this piece and it wasn’t about them. It had nothing to do with them. But they’re right that their philosophies and strategies have diverged significantly from my own and that my name on the door probably doesn’t mean very much, if anything, anymore.

CHANG: Do you think your name should still be on the door? Some people say it shouldn’t after this op-ed.

PERKINS: I think that’s a real issue for them to decide. I don’t care whether it comes or goes.

CHANG: When you said that there’s been a decline in their performance, do you think if you had still been involved it would be different?

PERKINS: That was implied by what I said, but I’m not going to enlarge (ph) upon that.

CHANG: All right. Well let’s talk a little bit about the solution here. You mentioned your friend Eugene Kleiner, the late Eugene Kleiner, fled Austria, fled Hitler. Do you think he would have agreed with you?

PERKINS: Yes, I think he would have because I – I was not talking about the Nazis. I was talking about the persecution of a minority by the majority. And Kleiner always distrusted those sorts of trends in American politics not in connection with semitism or anti-semitism but just in general. So I think he thoroughly would have understood my message and approved of it. And oddly, I have had – I’ve – there’s been a lot of email, a lot of Twitter. Shortly before I came over here, I got an email from a person I don’t know from New England. And he said, “My Perkins,” – I’m just going to quote part of this.

“Mr. Perkins, I’m a Democrat and consider myself a liberal. I am bewildered by the amount of scapegoating that has been directed toward the American success stories. To blame – to lay blame for society’s ills at the feet of a demographic group, that is irresponsible and dangerous. Please continue to speak out and use this platform you have found to speak against this type of irresponsible finger pointing.” From a liberal. So —

CHANG: You have conservatives out there though like Marc Andreessen calling you leading A-hole in the state.

PERKINS: Yes. It wasn’t a very nice word. And considering that he doesn’t know me and I don’t know him, I don’t think he’s entitled to his opinion. If he knew me, perhaps. Paul Krugman called me crazy in today’s New York Times.

CHANG: Paul Krugman also pointed out that rising income inequality can have very negative economic and financial consequences in the sense that if there is – if it leaves us more economically vulnerable and the people who are rich can’t pay for stuff, then everyone suffers.

PERKINS: Well, just what you said is such a contradiction of intermixed ideas. He won the Nobel prize in economics. I can’t argue economics with him, but to demonize the job creators is crazy and to demonize the rich who spend and buy things and stimulate the economy is crazy. I heard on the news hour with – gosh, name escapes me. Anyway, New York Times, and they got into a discussion about the idiocy of Rolex watches and why does any man need a Rolex watch and it’s a symbol of – of terrible values and it’s – et cetera. Well, I think that’s a little silly. This isn’t a Rolex. I could buy a six pack of Rolexes for this, but so what?

CHANG: I want to continue this conversation after the break and talk to you more about how you think we can heal the problem and what the responsibility is of the rich, of the 1 percent, of the technology companies.

CHANG: We are back with Tom Perkins, co-founder of the venture capital firm Kleiner Perkins Caufield Byers. I want to talk to you about something else that came up in your letter, and that is Danielle Steel. You sounded quite upset about some of – the way that the San Francisco Chronicle in particular has talked about her. I know she is your ex-wife. Is this personal for you?

PERKINS: Yes. I think the inspiration for writing the letter came from the most recent attacks by the San Francisco Chronicle on Danielle Steel. It all started with complaints about the heighth of her hedge around her house, and then got into that she writes potboilers and is a snob and so forth. And Danielle and I are no longer married, but we’re very close. I felt sorry for her. I felt she was being victimized. She is the number-one author in the world, over a billion books in print. Finally outdid Agatha Christie. And she was awarded the French Legion of Honor for both literature and humanitarian activities. None of that was reported in the Chronicle.

So I thought since I’m a knight, I’m a literal knight of the kingdom of Norway, I would get on my horse and charge forth in her defense. So we can see all the blood I’ve spilled in that process.

CHANG: Charge you did. Okay Tom, we’re going to continue this conversation after a quick commercial break.

CHANG: I’m Emily Chang, with Tom Perkins, co-founder of Kleiner Perkins Caufield Byers, joining me here in the studio. You mentioned your watch, Tom, and that it could buy a six pack of Rolexes.

PERKINS: That’s naughty. That was off – off the air.

CHANG: You mentioned before that —

PERKINS: It was a gift, however. It was a gift from the people —

CHANG: What’s the brand of it?

PERKINS: It’s called a Richard Mille.

CHANG: All right.

PERKINS: And it was a gift from the Perini Company because I built this big boat.

CHANG: And you mentioned that you were from the 99 percent. You came from the 99 percent.

PERKINS: I sure did.

CHANG: So this is something that you never in a million years expected that you would one day be able to wear.

PERKINS: Absolutely.

CHANG: Tell me more about where you came from.

PERKINS: Well I – I am a nerd, a geek. I was – went to White Plains High School, which in those days wasn’t a particularly good high school and it was very athletically oriented and I was not an athlete. And then I got a scholarship to MIT where I became captain of the swimming team, so I suddenly went from being a geek in a school of jocks to a jock in a school of nerds. So how quickly your life can change.

Anyway, I got a great education at MIT. I went on to Harvard Business School, and then I came to work for David Packard at Hewlett-Packard, which was a very small company back then. This is in 1957. I think the revenues were under $20 million a year. And everything I learned about venture capital I learned from David Packard. And we became very close friends throughout his life and he was my mentor.

CHANG: So here we are decades later. You’ve made millions. You’ve created billionaires. You’ve helped create billion-dollar companies. What is the responsibility of those companies to the city of San Francisco, to the people who live in the city of San Francisco?

PERKINS: I thin we’re talking about the leadership of the companies. I don’t like the ideas of companies giving money to political campaigns. Even though it’s legal, I don’t like that.

CHANG: But what about the policies that they create? And I’m not talking about CEOs giving millions of dollars away. I’m talking about the companies themselves. These are companies that offer free perks for example for their employees.

PERKINS: Well it’s a competitive industry, and I don’t know what they have to offer to get and keep the employees. But obviously free lunches keep people working during the lunch hour and so forth. So it’s not all just love and honey buns.

CHANG: But someone like Marc Benioff at Sales Force says, look, I don’t – I don’t want to offer too many free things because I want my employees to spend their money on Market Street.

PERKINS: I think that’s a good sentiment. I – I don’t disagree with that. But I think the leadership of these companies should be political and engage in politics. Now John Doerr, my partner, has been very political and deeply engaged with the Obama administration. He’s been on various task forces and committees, and I think that’s great. I think politics is very, very, very important. We can’t ignore it and we can’t ignore the direction it’s going.

Now obviously I’m not a liberal and I’m a conservative in a very liberal community. But nevertheless, I think that the CEOs of Silicon Valley should very much pay attention to where the liberal flag is leading currently. It’s leading to, as I’ve said, demonizing the rich, blaming the lack of job creation on the rich, which is in my opinion simply preposterous. And you just – right or left or in the middle, you can’t ignore the drift in national politics, or if you do ignore it, it will be to your regret.

CHANG: But for the 99 percent, they can’t ignore the rising housing prices. So let me give you some numbers. Housing prices are up 50 percent in the last five years in San Francisco. The city hasn’t released the most recent data, but we know that only 269 new housing units were created in 2011. At the same time, from 2010 to 2012, 25,000 new people moved here. There just isn’t enough room for everyone.

PERKINS: Well, everybody wants to live in San Francisco and I don’t blame them. I – we’re getting into an area that honestly my qualifications are very thin, but rent control and things like that have a lot to do with this. And using capitalism to create more housing is part of the solution. Building the high rises is part of the solution and the Google buses are part of the solution I suppose. So – but this is a – I think the 99 percent across America should pay attention to politics, follow where it’s going, do read the newspapers. Don’t try to get everything over Twitter and Facebook. It’s not there. And worry about the future. Because right now I think America faces a very, very troubled future. I feel that we – I sometimes feel at least that we’ve gone past the point of no return. I hope I’m wrong.

CHANG: Do you at all feel their frustrations though?

PERKINS: Absolutely. Of course I do. I – I have members of my own family that are living in trailer parks. Not my immediate family, but relatives. Sure I do. Of course I do.

CHANG: What about the city of San Francisco?

PERKINS: Well, I think it – it – I believe that it’s always been overpriced and expensive. And after all, it was not called Nob Hill for nothing. The Nobbobs (ph) lived there and the Floods and the Huntingtons and so forth. So it has a long history of being wealthy and extravagant and desirable and a little crazy. It’s San Francisco.

CHANG: Is there an obligation – does the city of San Francisco have an obligation to have a place for everyone? Should everyone be allowed to or able to live here?

PERKINS: Emily, the marketplace if left alone will take care of that. Rents go up. Houses get built. The city should stay out of the economics of capitalism in my opinion.

CHANG: Now you mentioned you give millions to charity.

PERKINS: Yes, and I have for a long time.

CHANG: Why not – why not use your money to – to create an organization to combat some of these issues rather than writing a letter to the editor?

PERKINS: Well first of all, I am doing a bit of that. But I firmly believe in giving most of my money to medical institutions and institutions of higher education, cultural things like the San Francisco Ballet, which I basically ran for one year long ago. I’ve even done philanthropy in Norway. That’s how I wound up being a Norwegian knight. So I’ve – and I’ve been doing this all my life. And when I look back, those 1970 dollars that I was spreading around are now only worth 5 cents. So if we use that multiplier factor, I’ve given away one hell of a lot of money.

CHANG: You were called the king of Silicon Valley I believe at one point. How would you describe yourself?

PERKINS: I certainly have enough arrogance to be royal, but I – I’m an old man. I look back upon my career with great happiness. I think I’ve accomplished a lot. If I had to do it again, I don’t know what I’d change. And I’m at peace with myself. And the fact that everybody now hates me is part of the game. And I’m sorry about that, but that isn’t what I meant to do.

CHANG: Tom Perkins, co-founder of Kleiner Perkins Caufield Byers, thanks so much for joining us today here on “Bloomberg West.”

Bloomberg Television

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