Letter. He wrote, from the epicenter of progressive thought, San Francisco, i would call attention to the parallels on fascist germany to the progressive war on the american one percent, namely the rich. From the occupy movement, i see a rising tide of hatred of the one percent. There is outrage and public reaction to the google buses and the companies that employ them. We have outrage over the rising real estate prices. We have, for example, libelous attacks on our number one celebrity, the author, danielle steele, where they are calling him a snob, despite the millions she has spent on the mentally ill in the past decade. This is a very dangerous drift in our american again. Isnt progressive radicalism unthinkable now . Tom is joining me now in the studio. Tom . Do you regret this comparison . Yes. I talked to the head of the Antidefamation League this morning, following up on a letter that i sent over the weekend, apologizing. The use of kristellknacht. There were some terrible words chosen. I, like many, have tried to understand the 20th century, and the incomprehensible evil of the holocaust. It it cannot be explained. Even to try to explain it, is questionable. It was evil. I use 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. They broke all of the windows in all of the luxury car dealerships. I saw that. I remember that the police just stood by. I thought, this is how that began. That word was in my mind. But i dont need to read from that letter. If youre interested, i can. Sure, go ahead. I deeply apologized in this letter that i wrote to the Antidefamation League. I deeply apologize to you and anyone who has mistaken my remarks as antisemitism. This is not the case. My late partner was from austria and fought in the u. S. 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. He never took our demonization for granted. He would have understand my letter and would have agreed. And then i apologized for using that reference, as i said before. And i had a discussion with abe before he came here. I hope that, at least that part, is put to rest. 30,000 people put in concentration camps. What were you going for with that analogy . The jewish people were only one percent of the german population. Most germans had never met a jewish person. And yet, hitler was able to demonize the jews. And that was one of the earlier manifestations. And thered been many before. And of course, we know about the evil of the holocaust. I guess my point was that when you start using hatred against the minority, it can get out of control. I think that that was my thought. Now that as the messenger i have been thoroughly killed by everybody, at least read the message. You mentioned the word hatred. Do you feel threatened . I do not feel threatened. But i do believe that the creative one percent are threatened. I am friends with al gore who tells me that inequality is the number one problem in america. I am friends with jerry brown. I voted for him. I will vote for him even though he raised my taxes 30 . He tells me the number one problem in america is inequality. And thats probably and possibly true. And i think president obama is going to make that point tomorrow night. But the one percent are not causing the inequality. They are the job creators. In Silicon Valley, i think our company has created one million jobs. And were still doing it. It is absurd to demonize the rich. And do that for being rich and doing what the rich do, which is by getting richer by grading creating opportunity for others. How do you feel threatened . I said, i do not feel personally threatened. I feel, however, that i feel, as a class, that i believe we are engaged in class warfare. I think that they are threatened through higher taxation and so forth. That is my message. If this is the kind of persecution happening to the one percent, then what is happening to the 99 . I think of the 99 , i mean, i did not originally come from the one percent. I grew up as one of the 99 . I am your classical selfmade man, if you will. I think that the 99 is struggling and really struggling to get along in america. We have everincreasing regulations, higher costs, i think caused by more government than we need. Small business is difficult to form and prosper. It is difficult to hire. That, in my view, is what is hurting and causing the inequality. 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. You are a multimillionaire. I am not a billionaire. I am a multimillionaire. I have created some billionaires, but i am not one of them. You have a yacht. You have fancy cars. You have underwater submersibles. It is basically an airplane that flies underwater. Do you worry that you are divorced from reality . Are you divorced from reality . I do not know if anybody can answer that. Truthfully, i do not 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 universities to give to. I want to leave my children something that they can have, even though, upon my death, the government will take about 45 . I think i am connected to reality. I have got lots and lots of friends both that are younger and in this whole webbased, twitter based, world. And i think i know what they are thinking and talking about, yes. What about Silicon Valley . Is Silicon Valley divorced from reality . You mentioned that you crated billionaires. You have kids making sixfigure salaries and getting perks at companies. They are getting wifi access down to the peninsula, which regular residents do not have access to. Is there something to be said for this idea that Silicon Valley is living in its own little bubble . There is something in that. On the other hand, it is a bubble that has changed the world. It created incredible wealth around america and around the world. Maybe have to put up with a little techno geek arrogance in order to get the results of those sort of folks thinking. How do you see this divide playing out . Well, now that, as the messenger, i have been shot at. At least read the message. You just said at the beginning that you regret the message. I regret the use of that word. It was a terrible misjudgment. I do not regret the message at all. What is the message . Any time the majority starts to demonize any minority, no matter what it is, it is wrong and dangerous. No good ever comes from it. What is the solution . First, to understand the problem. That is why wrote the letter. And i do not apologize for writing the letter. I should not abuse that awful have used that awful word. But the letter said what i believed. And i believe we have to be careful that we do not demonize anybody and that we dont demonize the most creative part of our system. Tom perkins. We will continue this conversation after a quick break. Stay with us. Welcome back to bloomberg west today. I am emily chang. Were speaking with tom perkins. You said that you do not regret the message, but you do regret the one word, kristallnacht. Your firm said that they were shocked by the words that you use and do not agree. You have not been involved with them for many years. How do you respond to what they said . Do understand why there has been a kind of backlash . Yes. First of all, my letter was not about Kleiner Perkins caufield byers. I did not mention them at all. They did not need to say anything. But they chose to throw me under the bus. And i did not like that. They said they were shocked. I sort of feel like the guy saying, look, do not go swimming. There are sharks in the water. You have to understand the warning. I was presenting a warning. And i do not think they got that. Secondly, they made a point of my not having been involved for some years. And that is true. And i think as i have distanced myself from the firm, they have a corresponding decline in the firm. But i will not go further than that. In a way, i miss them. I hope they miss me. Your name is on the door. So when you Say Something it does reflect on them, to a certain extent. Do you worry about it reflecting on them . I did not have them in mind when i wrote this piece. It was not about them. It had nothing to do with them. They are right that there philosophy and strategies have diverged significantly from mine own. My name on the door probably does not mean very much, if anything, anymore. Do you think your name shall be on the door, especially after this oped . I think that is for them to decide. I do not care either way. When you say theres been a decline in performance, do you think that if you were involved it would be different . I dont want to talk about that. Lets talk about the solution here. You mentioned that your friend, eugene kleiner, fled austria and hitler. You think he wouldve agreed with you . He would have. I was not talking about the nazis. I was talking about the persecution of a minority by the majority. Kleiner always distrusted those sorts of trends in american politics, not in connection with, so much, antisemitism, but in general. He certainly would have understood my message and approved of it. Oddly, theres been a lot of email and a lot of twitter. Shortly before i came here, i got an email from a person i do not know from new england, and he said im going to quote part of this. He said, i am a democrat. I consider myself liberal. Im bewildered by the amount of scapegoating that has been directed toward american success stories. To lay blame for societys ills at the feet of them is irresponsible and dangerous. Please continue to speak out and use this platform to speak against this type of irresponsible fingerpointing. That is from a liberal. You have conservatives out there calling you the leading ahole in the state. Well, that is not a very nice word, considering i do not know him, and he doesnt know me. If you knew me, perhaps. Paul called me crazy in the new york times. Paul krugman also pointed out that rising inequality can have negative consequences, in the sense that if it leaves us more economically vulnerable then if the people who are rich cannot pay for stuff, then everyone suffers. A contradiction of intermixed ideas. He received the nobel prize in economics. To demonize the job creators is crazy. To demonize the rich who spend and buy things and stimulate the economy is crazy. I heard on the news hour with oh gosh, the name escapes me they got into the discussion of the idiocy of rolex watches. They talked about it as a symbol of terrible values and etc. Well, i think that is a little silly. So, what . 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 one percent, of the technology companies. Tom perkins, Kleiner Perkins caufield byers, cofounder of returns with us after this quick break. Welcome back to bloomberg west today. I am emily chang. We are back with tom perkins, cofounder of, Kleiner Perkins caufield byers. I want to talk to you about that you felt upset about some things. Lets talk about danielle steele. Shes your exwife. Were those attacks personal to you . I think this came from the recent attacks on her. They started complaining about the height of the hedge around her house. Then they got into the idea that she writes these books, and is a snob. We are no longer married but are very close. I felt she was being victimized. She is the number one author in the world. She has over one billion books in print. She was awarded the french legion of honor for both literature and humanitarian activities. None of that was reported in the chronicle. If i were a night of the kingdom of norway, i would charge to her defense. So this was part of the process. And charge you did. We will continue after a quick commercial break. Well be right back with tom. Welcome back to bloomberg west today. I am emily chang here with tom perkins joining us. You mentioned your watch, tom. And you said you could buy a sixpack of rolexes. That was naughty. That was off the air. It was a gift. It was a gift because i built a big boat. You mention that you were from the 99 and this is something you never thought you would be able to afford. Tell me more about where you came from. I am a nerd, a geek. I went to not a particularly good high school. It was very athletic in orientation. I was not. Then i got a scholarship to m. I. T. And became the captain of the swim team. Then i went from being a geek in a school of jocks and then a jock in a school of nerds. How quickly life can change. I got a great education at m. I. T. I went on to Harvard Business school. Then i went to work for hewlettpackard, which was a very Small Company back then. This is in 1957. I think the revenues were under 20 million a year. Everything i learned about Venture Capital i learned from david packard. We became Close Friends throughout his life. And he was my mentor. Here we are decades later. You have made millions. You helped create billionaires. You created a multimillion dollar company. What is the responsibility of the company to the city of San Francisco and to the people who live in the city of San Francisco . I think were talking about the leadership of the companies. I do not like the idea of Companies Giving money to political campaigns, even though it is legal. I do not like that. But what about policies . I am not talking about ceos giving millions of dollars away. I am talking about these companies, for example. What about these ones that offer free perks for employees . It is a competitive industry. Free lunches keep people working during their launch our. It is not all sweetness and honeybees. But what about when they say, i dont want give too free things because i want them to spend their money on market street. That is fine. My partner has been deeply engaged with the obama administration. He has been on task forces and committees. I think that is great. I think that politics is very, very, very important. We cannot ignore it. And we cannot ignore the direction that it is going. Obviously, i am not a liberal. I am a conservative and a liberal community. Nevertheless, i think that the ceos of Silicon Valley should Pay Attention to where the liberal flag is leading currently. It is leading to demonizing the rich, blaming the lack of job creation on the rich, which is, in my opinion, simply preposterous. Right or left, or in the middle, you cannot ignore the drift in national politics. If you do ignore it, it will be to your regret. For the 99 , they cannot ignore the rising housing prices. Housing prices are up 50 in the last five years in San Francisco. They have not released the most recent data. Only 269 new Housing Units were created in 2011. At the same time, 25,000 new people moved here. There just is not enough room for everyone. Well, everybody wants to live in San Francisco, and i do not blame them. We are getting into an area where my qualifications are very thin. Rent control and things like that have a lot to do at this. Using capitalism to create more housing is part of the solution. Building highrises is part of the solution. And google buses are part of the solution, i suppose. I think that the 99 across america should Pay Attention to politics, follow where it is going. Do read the newspapers. Do not try to get everything over twitter and facebook. It is not all there. And they should worry about the future. Right now, i think that america faces a very troubled future. I sometimes feel, at least, that we have gone past the point of no return. I hope that im wrong. Do you feel their frustrations . I surely do. I have family that lives in trailer parks. Not immediate relatives, but family. What about the city of San Francisco . It has always been overpriced and expensive. The floods and the huntingtons lived there, and so forth. And as a long history of being wealthy, extravagant, and desirable, and a little crazy. Does the city of San Francisco have an obligation to find a place for everyone . Should everyone be able to live here . The marketplace will take care of that. Rents go up. Houses get built. City should stay out of the economics of capitalism, in my opinion. You mentioned that you give millions to charity . Why not use your money to create an organization to combat some of these issues rather than write a letter . First of all, i am doing a bit of that. But i believe in giving most of my money to medical institutions and institutions of higher education. I give to the cultural things, like the San Francisco ballet, which i basically ran for one year a while ago. And i did some work in norway, which is how i became a norwegian knight. Ive been doing this all my life. Some of the dollars i was spreading around now only worth five cents. I have given away one hell of a lot of money. You were called the king of Silicon Valley, at one point. How would you describe yourself . I have enough arrogance to be royal. I am an old man. I look back on my career and think ive accomplished a lot. If i had to do it again, i do not know what i wouldve changed. I am at peace with myself. The fact that everybody now hates me is part of the game. I am sorry about that. That is not what it meant to do. Cofounder of Kleiner Perkins caufield byers. Thank you for joining us today. We will be right back after this quick break. Welcome back to bloomberg west today. Im emily chang. Apple reported earnings. Holiday quarter. They had a record gain. Profit was unchanged. They sold 51 million iphones. It came short of estimates. Gene munster has been covering apple since 1995. Apple broke records in many ways with this quarter. Yet the stock is trading down. What is your take here . The take is that this is a time when investors asked themselves a question about the tradeoff between Revenue Growth and profitability. Apple, back in september, made the bet that they going to focus on making more profits. Gross margins have shown a nice improvement rebound. That came at a cost to unit growth. That is been disappointing. My take is this. I think this will dominate the stock, this debate. I think once you get beyond that, investors have a sense and tend to get excited about apple products. There will be going to a bigger screen iphone in the fall. That is one of the product categories they are going to talk about on the Conference Call tonight. They said they are going to that. I think the stock will go based on that. Go ahead. How confident are you that a bigger screen iphone is coming out this fall . Well, you are starting to hear some of the feedback from asia and the build. There is a 75 chance that is going to happen. Second, if you go back and look at the iphone, the last seven years, they come back with larger form factors and different form factors. This is going to be at different cycle. The bigger wildcard is a, what are the other product categories theyre talking about . Is this too little too late . We have been here before. There could be a chance that they are taking a step back. If you look at the iphone 5 release, or other times this year when the stock was really going, and people were feeling they lost touch. It is easy to get that perspective on a day like today. Alternately, the question is are they going after the right markets . I think that is an exciting opportunity for the stock. There is a broader question, beyond 2014, into 2015 and beyond, and that is about how they continue to grow the business and get bigger and bigger. At least, over the next six to nine months, things are going to be looking well, despite what we are seeing tonight. Is the bigger story the enough . N we have talked about other product categories. Theres not been one since the ipad came out in 2010. We know the demand for iphones is slowing down. The growth is not what it was when it started out. Is this going to be enough to keep apple growing . I think, as far as the company to be a will to grow in the high single to load double digits, i think this is enough. Then the question is, are investors willing to pay for that . There is a clear opportunity. It is more about what is going to happen in the back half of the year, which may seem a long ways away. To answer your question, i think it will be enough. I will be interested to see what the general public is thinking 3 to 6 months from now. It doesnt answer some of the longterm questions you are bringing up. But that is the outlook for now. Thank you so much for joining us here on bloomberg west today. I am emily chang. This is bloomberg west. One of the things that help Companies Like apple is the design of the product. Almost nobody in Silicon Valley has more experience than david kelley. His new book, create confidence, is all about unleashing creativity. Jon ehrlichman has more from los angeles. He is one of the bestknown names in the world of design. He has done that work on behalf of Companies Like apple. He cowrote this book with his brother. David joins us now from stanford to talk little bit more about creative confidence. You say that theres a lot of creativity in us. What gets in the way, if you are an employee, or someone running a business, what is in the way . Sometime around the fourth grade, somebody tells you you are not creative. They mean youre not artistic, but they say youre not creative. Then you opt out of that. What happens is that, as adults, we get to the point that we have that self image. Then we are very afraid of being judged. It is kind of fear of being judged. Instead of coming up with an idea and championing it, you do not want to get your name attached to the idea because it might fail and it would be bad for your career. It is what psychologists call self efficacy, where you are capable of realizing your dreams. We squelch those dreams because we think of ourselves as not creative. Talk about some of the things that change that. Obviously, you worked closely with steve jobs over the years. He wanted what many would position as the impossible. He had a lot of creativity. That spurred a lot of creativity from you and the people that you work with. Is that we you need . A kick in the pants from someone who wants to have something done . A kick in the pants is a good thing. Steve set a high bar, and we all try to make it. Another approach at stanford is what we call guided mastery. We will take you through it. If you do not think of yourself of creative, we will take you through a series of small successes. The way that we do that with companies or individuals, is that we start with a little project. And we have it set up so that you will be successful coming up with new ideas. Then we make the problem harder. We might make it a team project instead of an individual project. We keep going. Then, eventually what happens is something called flip you have just proven to yourself, and you feel it in your body that you are creative. You have gone through a series of projects. You have been successful. You have actually come up with breakthrough ideas. That changes how you feel about yourself or have your team bills about themselves. Feels aboutteam themselves. In the book, you talk about constraints actually fueling creativity. You use the example of the director Francis Ford Coppola saying that when the budget of the film is smaller, it gives you an opportunity to be more creative because i have to do more with less. I think that is absolutely true. We are always hoping for the big unrestrained budget, or unrestrained project. The truth is that is harder. If you can get it smaller, and you know who you are designing for, then you can get out there and build empathy for those people. You can find out the meaning for those people. If the project is scaled to the point where you know who are designing for, that is a big positive, rather than go out and do something good and come back and tell us about it. It is really hard. You founded the school at stanford which is trying to bring the concepts of design to a wider group. Tell us about how this helps to shape ideas and businesses. Just give us a little taste of it, in terms of getting the business further down the road. The school takes students graduate students from all over the university. We put them on teams. And then we believe that we can innovate more routinely by having people from different disciplines. You have a business person. You have a doctor. You have a philosopher and a civil engineer. And you can get them to build on each others ideas then you can come up with something new to the world. We strongly believe in what we call a bias toward action. If you get into some of our classes, you have to release your product into the market five weeks in. You have to have a product to market in five weeks or you are out of the class. Before we go, lets talk about apple. A lot of people ask about the creativity at the Company Since the death of steve jobs. How would you describe the creativity of apple right now . I was involved heavily in the early days. I am not so much now. I would just be speculating. But you have to judge them by their products. As long as their products are wildly creative and endear themselves to be people, and they fit with they really care about, and i think we are waiting to see whats next from them. We are expecting something new from them. You have to judge them by what they actually come up with. That is what steve always did. You can talk a lot. You can be in meetings. What actually goes out to the world is how they want to be judged. In our last 10 seconds. You and steve were both going through cancer at the same time. What kept you creative through that time . He would come over and give me strength. He was ahead of me in the system. What kept me creative was my daughter. She was about 16 years old at the time. I was trying to help her figure out how to get through my treatment. That was an exciting challenge. Helping her see the positive. That kind of mindfulness and how i dealt with problemsolving aspects of the cancer. I think that was the fun that i had doing that. That is, if anything is fun during the treatment. David, thank you for your time. Thank you for watching this edition of bloomberg west. We will see you tomorrow. Before disaster hit, ask . Ourself, are you prepared will you be able to provide for your family . We are one storm away from the unknown. If you want to