there a big, new chill in relations between russia and the u.s.? it's all about one man. i'll explain. next up, where does innovation come from? we'll ask the man who totally reinvented a household appliance you use every week or at least you should. then a look at jobs, inequality, and the economy with the nobel prize-winning economist michael spence. finally, think you can solve the euro crisis? we'll tell you how you can try. first, here's my take. this is thanksgiving week in america, and it's a time we're meant to be thankful. except no one is feeling particularly grateful because we are in a deep funk. the united states seems to have stopped working. discussion of dysfunction and decline now dominate the national conversation. so i thought i would try to bring a note of optimism to the thanksgiving table. every time i turn on the tv, i hear some politician talk about how europe's woes should be a warning and that we're next. this is a fundamental mistake. the united states is not greece. countries like greece and even italy have a deep economic problem. they don't produce enough goods and services that the world wants at attractive prices. it is a basic competitiveness problem. greece also has a long history of borrowing too much and being unable to pay its debts. over the past 179 years, it has been in default about 50% of the time. its debts are huge and could not be paid under any plausible scenario. and crucially, because it is part of the euro zone, greece does not have control over its currency, which means it cannot make its goods cheaper on world markets. italy, which is in much better fundamental shape than greece, would actually face no short-term crisis if it had simply kept its currency, the lira. it could devalue the lira and make itself more competitive overnight. the u.s. by contrast has control over its currency, which is the reserve currency of the world. okay, but what about japan? isn't america looking a lot like japan with its lost decade -- actually two decades now almost? at a recent debate, larry summers pointed out that japan's collapse in the 1990s was vastly greater than america's. housing prices dropped not by a third but by 75%. the stock market fell about the same. the dow jones would have to hit 2,600, to be at the equivalent level as japan's stock market went to. and the gdp output gap, the loss of economic growth, was not 5% or 6% as it is in america, but almost 50%. japan has a complex economy with many sclerotic elements and a demographic decline that it cannot solve until it takes on immigrants, which it does not want to do. the united states by contrast remains one of the most competitive economies. it is home to the leading companies in the most advanced industries, houses the largest capital markets, and continues to spawn new companies and, indeed, whole new industries. it exports everything from aircraft to entertainment to health care products around the world. its demographics are strikingly healthy. it will be the only rich country in the world to increase its population over the next 30 years, which means more young workers, producers, entrepreneurs, and taxpayers. america's problems are not economic or demographic or technological. they are political. simple policy measures could change our fate. if we built out and repaired our infrastructure, kept monetary policy pro-growth, reformed our tax code to encourage business investment, we would have strong economic growth, a manageable deficit, and a bright future. so be thankful, americans, that we live in a great country, and then call your congressman and tell him to stop stalling and to start actually doing something. let's get started. walter, thanks for joining me. >> good to be with you, fareed. >> let's first talk about the america that produced steve jobs. what i was struck by is you were describing a california at a time when it was incredibly rich, prosperous, and also full of foment. i looked this up, 1972, the year he graduates from high school, california's public schools are considered the best in the country. this is the golden land. did it feel like that when you were researching the book, that this was kind of the -- the future? >> absolutely. and steve jobs felt this. he kept telling me over and over again that california in the early '70s, the bay area in particular, you had two great cultures erupting, one of which is sort of the counterculture, the free speech movement, the hippie culture, the grateful dead and janice joplin, all the music, that sort of explosion of rebellious art. and then secondly, you had the electronics, technology, geeky culture that had come out of the defense industries but was then being propelled by the invention of the microchip and transistor, you know, the transistors to the microchip. he was at a confluence. he said it was so great to be one of those people who loved the music passionately, tracking down bob dylan and following the grateful dead, but also -- you know, dropping acid, he said that was very important, but also being one of the electronics kids and being able to do that merger of the counterculture and its rebellious spirit, merging that with the geeky technology culture. that's what silicon valley was all about and what steve jobs was all about. he loved to tell that tale. >> you mention in the book in passing that all this was in an interesting way a byproduct. the geeky part, technology, was a byproduct of the defense department because lockheed and all these big defense engineers had been migrating to california to do air force contracts, to do things like that. >> right. and edwin land even told them, they dropped the film from the u2 spy planes and brought them to silicon valley to the grumman and other plants there. people were learning spectography, learning spy satellites. but they were also using how to make use of the microchip. it was -- every person -- steve grew up, his father was just a repo man at a finance company, repossessing cars from people who hadn't paid back their loans. everybody on the block was working for hewlett-packard, northrop grumman, or one of the engineering companies. they would show steve things like carbon microphones and amplifiers and do the heath kit radio sets with him. he said it was just great to grow up in that environment. >> what did he say it his high school? because you point out that he lobbied his parents to go to the better high school. the high school was good enough that it trained him and steve wozniak in technology. you talk about the technology teacher they had. but also give them a grounding in liberal arts. certainly jobs never went to college and still -- clearly was a learned guy about all this stuff. >> yeah. it's such a shame when you look at some of our school systems now and the cutbacks that are happening, to realize what a great education a wozniak or jobs could get, you know, from working-class families. steve was very willful and loved his grade school. then he gets into middle school, and hey, we all remember middle school, not always the best of times. and he hates his middle school. and he insists that his parents, who as i say, you know, car mechanic basically, move to a better school district. they moved to cupertino to be in the better school district. that cost them a lot of money. but they realized that they had this boy who they had adopted who was totally special, totally smart. they'd do anything to try to help him. he gets in to homestead high school. he's a couple years behind wozniak. they both have taken this electronics class. there were two classroom shops -- he walked me by the school and pointed it out. there was the auto mechanic shop. then there was a new thing that had come along which was the electronics class. that was replacing auto mechanics as the trade school part of the school. >> his experience of high school was happy. >> it was happy. he was a bit of a rebel, a bit of a misfit, as he said his whole life. i think he would have been that way in any school. but he found people including wozniak who had graduated a couple years earlier but was still emotionally a high school kid, so they hung out together. he found his people to hang out with. >> then he goes and starts this company, first works for atari, starts this company. do you think there's something that you learned about what it means to be an entrepreneur? because you also wrote a biography of ben franklin. and franklin was also in a sense a great entrepreneur. >> absolutely. franklin is a 17-year-old dropout, runaway, creates a printing shop. and steve jobs is a college dropout, whatever. he wants to start the 21st century of a printing shop. he want to start a company that makes computers. wozniak is at the other extreme. he's the best engineer you can imagine. as steve jobs says, he's 50 times better than any other engineer. he can hold meetings in his head. but when he creates something including the blue box, the first thing they created which ripped off the phone company for long distance, you know, woz wants to give it to their friends. steve says, no, i can make a really cool case, we can package it and sell it for $66 apiece or whatever and make some money. that's the pattern. steve jobs is the entrepreneur. he knows how to make insanely, you know, great products, well packaged, and sell them. and woz is just this engineer who writes wonderful, you know, code and circuit boards. >> what's interesting about that, i remember this in the franklin book, as well, the innovation -- we think of innovation as entirely a scientific idea. but the innovation is often a kind of business innovation. i remember reading -- we did a show on innovation. and the singer sewing machine, the singer innovation was the installment plan, and selling to women. >> really -- >> it was not the better machine. and it seems like all of jobs' innovations are like that. they marry some technological advance but with understanding what the customer wants. >> well, he marries technology and great design, and the beauty of it -- and that emotional content. when you look at the ipod, it's emotional. you say, i want it. you open the box, and it's cradled there. he even took a patent on the box design that he and others did because there's an emotional marketing -- and then you have the silhouette ads. he's a great marketer. which steve jobs is able to do, has pulled together the emotions of everything. the emotions of a great interface, great design, great technology, great marketing, great advertising, great packaging. and that, you know, that was -- you make a good point. what is an entrepreneur? it's not necessarily the guy who writes the code. it's the guy who says, i know how to make people emotions connect with this. >> when we come back, we will talk to walter isaacson about steve jobs, what kind of businessman was he, whether there are business lessons to be learned from steve jobs. stay with us. no problem. you want to save money on rv insurance? no problem. you want to save money on motorcycle insurance? no problem. you want to find a place to park all these things? fuggedaboud it. this is new york. hey little guy, wake up! aw, come off it mate! geico. saving people money on more than just car insurance. we are back with walter isaacson. for those five people who have not seen him on television or looked at the book, the author of steve jobs. this is probably one of the most successful ceos of all time, right? yet he violates all the rules. this is a guy who doesn't believe in committee meetings, doesn't believe in market research, doesn't believe in being nice to people. he yells, he screams, he overrules people, he says, i couldn't care less what the market research shows me. is it just that he's -- he's steve jobs, or is there a lesson there? >> well, there's a lesson of really having a passion for perfection. and knowing what you want to do. and -- you know, he said, at the very first retreat that they take when they're doing the original macintosh, somebody says, we should do some research. he says, how do people know what they want until we've shown them? he quoted henry ford saying, if i used market research, people would tell me when they wanted was a faster horse. he believes in his gut and emotional connection, having, knowing what will really make people feel it's insanely great. secondly, he doesn't have sort of committees and all this structure. he had -- runs a very tightly centralized thing. people have to know how to react to him. he's very rough on people at times. but the people who learn to deal with it become passionately wedded to him, loyal to him, stay with him. they're inspired by him partly because he prevents what he calls -- when i ask him about it -- the explosion. he says if you're in a velvet glove as you and i might be as a leader, you end up indulging people who will be players. and if you really want a team of all a players, you have to be tough about it. and brutally honest. he said brutal honesty is the price of admission. i can tell people they're full of it, but they can tell me i'm full of it. and if you look at the results, even in his first time at apple when he gets kicked out, his team adores him. the people right around him love him. at apple the second time around, the most loyal team of a players of any company in america. he may have bitten their heads off a few times, but they stick with him because they know it's for a particular passion and cause. >> you've met a lot of ceos in your life. how -- how much -- how different is he? how much of an outlier is he? >> he's a bit of an outlier. he is not somebody perfecting the traditional management skills. even though you mention it can be read as a business, i didn't write it as a business. it's a biography about steve jobs and who he was. if people say, well, this lesson in business is you should bite people's heads off if they're b players, i go, no, i'm not an expert in how to run a business. i worked at this network and showed maybe i wasn't an expert at how to run a business. i'm telling the story of a guy who was enormously successful. so this is one way to look at a life where somebody wedded a passion for artistry with technology and built the most valuable company on earth. >> there's an incredible sense of the sheer force of his will. you have this story which i didn't realize. so when he comes back to apple and he's flirting with being the ceo and he then finally decides he's going to be the ceo, within a week or two or a few months, he tells the entire board they have to resign if he's going to do it. >> yeah. >> now i was thinking to myself, i mean, to use a technical term, who has the chutzpah to do that? like you've barely entered the door, and you say, look, the only way i can make this work, to the people who hired you, is if you all resign. >> one of steve's traits was he did not love authority. he was always a rebel, and the board is trying to exercise authority saying, no, you can't reprice stock options, you can't hire this, you can't cut these lines. and he's, like, no, either, you want me to do this, but i'm not going somebody who's going to be easily changed in by authority. >> you mention in the book that 1955, steve jobs and bill gates are born the same year, built two great technology companies, couldn't be two different people. >> yeah, they're very different. but people say, well, do they have a rival? yes. do they like each other? yes. are they friends? yes, off and on. it was that very complex relationship that you've seen in government, you've seen in industry, especially in technology, of people who are both friends and rivals and -- you know, it's very, very tricky. and at the very beginning in the 1970s, they are like this. it's like a binary star system where the gravitational pull of the others doing the orbit of the other because they're both working on this great software for the macintosh. most of what microsoft did was write software for apple computers and then the macintosh. >> i forgot how junior a partner microsoft was. apple's revenues you point out in 1982 were over $1 billion. and microsoft's were $30 odd million. >> right. microsoft was the small player and tiny at that time. but that's also why it becomes a complex relationship because there are many, many cycles. and bill gates and microsoft end up taking the graphical user interface that steve had perfected after seeing it at xerox, perfected it for the macintosh and created windows. steve feels they've copied me. in fact, steve feels even stronger. they've ripped me off, and -- and he's furious. plus, the deep philosophical difference between bill gates and steve jobs is steve has the temperament of an artist. he wants end-to-end control, wants to control the hardware, software, the device, everything so that you have a seamless, beautiful, integrated user experience. bill gates feels we should have more consumer choice. we'll create windows, but we'll license it to h.p. and dell and compaq and ibm and all sorts of computer makers -- >> it's a businessmen's -- there's more volume that way. >> and it works. by the end, microsoft has more than 90% of the market share. people think its model has worked better. then cycles turn. this is why it's a complex relationship. in the end, one of the scenes i love is because he really likes -- bill gates likes him, he likes bill gates. there's sort of a bond that comes from being a competitor. so bill gates visits him a few months ago when steve is sick, on medical leave. and they spend, you know, three, four hours just reminiscing about being the old men of the computer industry. and they're both sort of nice to each other at the end. bill says, you know, your model worked, the integrative model, worked. i never thought it could. and he says, your model worked, as well. steve says, yeah, but he didn't make great product. bill says, it could only have been steve who integrated it. the model doesn't make any sense. you see both respect and understanding and affection but also rivalry they had with each other. >> an mit professor who wrote -- i think it was in a blog or maybe in an article. he noticed you compared him to edison and ford. he says, essentially says, enough already. steve jobs is not thomas edison. let me remind you what thomas edison did. he invented the light bulb. he goes through the series of back-breaking inventions that -- >> a couple things. edison also wasn't a saint. you know, let's not canonize edison. certainly when steve died, everybody's asking, is he leonardo, michelangelo -- it's probably better to look at people who married technology with great art and design and innovation and created good products and transformed industries. you know, edison transforms the music industry with the phonograph. i would suggest itunes and the ipod have transformed the industry fundamentally in the same way the phonograph does. you know, the ipad has transformed publishing. the iphone has totally transformed what our digital devices are. he's transformed the notion that a computer should be friendly and in your home. the home computer revolution is more dependent on the mac than anything else. so, you know, it will be interesting for business professors to probably do case studies, compare the two, and maybe find out edison is, you know -- wins the contest. it's an interesting intellectual contest to have. >> walter isaacson. thank you. >> fareed, good to see you. >> and we will be back. tdd# 1-800-345-2550 let's talk about the personal attention tdd# 1-800-345-2550 you and your money deserve. tdd# 1-800-345-2550 at charles schwab, that means taking a close look at you tdd# 1-800-345-2550 as well as your portfolio. tdd# 1-800-345-2550 we ask the right questions, tdd# 1-800-345-2550 then we actually listen to the answers tdd# 1-800-345-2550 before g