>> rose: welcome to the program. we begin tonight with bruce riedel of the brookings institution. his new book is called "j.f.k.'s forgotten crisis: tibet, the c.i.a., and the sino-indian war." >> it's no longer just a terrorist issue. it's become part of the failure of the arab state system in the wake of the failure of the arab spring. that's what's permitting it to operate, the chaos that came out of the arab spring. same is true for al quaida. that's what makes this so hard to do. that's where i'm quite sympathetic to the president's problem because if it is true, as i think it is, that i.s.i.s. is embedded in the iraq and syrian civil wars, a classic counterterrorism strategy of decapitating the leadership, gradually squeezing the

territory they own, not likely to really resolve the problem. >> rose: we conclude with sam palmisano, former chairman and c.e.o. of i.b.m. his new group is "growing global, lessons for the new enterprise." >> i sincerely believe business leaders were not being completely prepared. doesn't mean there is not a lot of great professional schools available to them or great programs available to them, but there is so much change in the global world, the economies and technology world between the big data cloud, platform based business models, uber, airbnb, but when i was retiring four years ago, these were ideas and concepts but i personally believed they would have a massive impact on corporate structures. >> rose: bruce riedel and sam palmisano when we continue.

>> rose: bruce riedel is here, director of the intelligence project at the brookings institution and a senior fellow. served in the c.i.a. 30 years and a national security advisor to four presidents in south asia and the middle east. new book is called "j.f.k.'s forgotten crisis: tibet, the c.i.a., and the sino-indian war." the financial times calls it a minor gem of eloquent history writing. pleased to have bruce riedel

back at this table. welcome. >> pleasure to be here. >> rose: i assume you like the idea of "eloquent gem of historical writing" because you sat down and said to me, "this is the most fun i've had." what was it about the experience that so resonated with you? >> the kennedy administration. woe call it camelot. it really was something special. john f. kennedy was a particularly gifted decision-maker as president. you know, we're talking a lot about character of a president because we're in our presidential campaign season. this is a man who demonstrated unusual character in the white house. >> rose: what do you mean by character? >> he faced some of the hardest decisions any president in american history has faced. the book is about one of those, the chinese invasion of india, which comes simultaneously with the soviet adventure in cuba, the cuba missile crisis.

he handled two global crises simultaneously and showed unusual depth in thinking about the problem and thinking it through, not necessarily doing the easy thing, not necessarily doing the thing his advisors told him to do, but in the end coming up with two important victories. >> rose: he, for example, had people urging him to bombs away in cuba. >> virtually his whole cabinet wanted him to go to war in cuba with russians. his brother and the president were the only two who looked at this problem and said, that's crazy. if we do that, we're initiating nuclear apocalypse. in fact, we now know, 50-plus years after the cuban missile crisis, that it was even more dangerous than they thought at the time. at the final, the c.i.a. thought there were $5,000 to 6000 soviet

soldiers on the island, and there were 50,000. at the the time the c.i.a. thought the only nuclear weapons on the island were for the intermediate range ballistic missiles to hit the united states. there were tactical weapons on the island and the russian commander in cuba had already been given authority to use tactical nuclear weapons the minute the american invasion began and he had ringed guantanamo bay with tactical nuclear weapons. >> rose: which would have rained on miami and further north. >> it would have been a nuclear apocalypse. kennedy is right to get a lot of credit for that. but what i argue in the book is that, if you realize at the same time he's also dealing with an invasion by communist china of democratic india, an invasion which the chinese scored victory after victory and were on the brink of breaking through and dismembering india, and he dealt with that crisis exactly the same time and he also helped to

bring that crisis to a good outcome. >> rose: explain the crisis to us. >> the crisis is simple. china and india have to longest disputed border in the world and remains the longest disputed border in the world. they also have an argument overty bet. china regardsty bet as part of historic china. india regardsty bet as part of its cultural spirit, at least, and has supported the idea of autonomy forty bet in a long time. in 1962 mao zedong decided he'd had enough and was going to teach the indians a lesson. >> rose: was there a motivating reason to do that other than just he decided? had they done something he thought went beyond the pale? >> several things. the indians had what they called a forward policy, which is they kept purposing their patrols more and more forward, quite provocative, very stupid thing to do when you recognize the

balance of the power on the battlefield was overwhelmingly in the chinese favor. but prime minister neru of the democratic country was responding to his country hand the media that said we have to stand up to the choose, a disaster to do. secondly, the united states was secretly supporting the tibetan independence movement. we were doing it from a base in what was then east pakistan, today bangladesh. from the chinese perspective, they saw these airplanes flying over tibet and assuming we were part of a plot with the indians. from the chinese perspective, it looked like the indians were pushing all their buttons and

decided enough was enough, they'd invade india and teach a lesson and take the territory they wanted the most permanently which was in the end what they end upped doing. from the president's standpoint, first of all we don't want to see a democratic country defeated by a communist country, this is the height of the cold war -- >> rose: one historical fact, the nation of naru had a policy but the chinese came and he said hello washington. >> he has to come crawling to the united states. kennedy handled that with a lot of finesse. he didn't make naru to grovel or beg for assistance. he waited tore naru to ask for help and was quick to give it. we began an airlift of supplies from the united states immediately after the indians asked for it. within days there was a steady flow of jet transports coming

into india delivering supplies and then smaller american aircraft, c-130 transports were taking those supplies right up to the front line. the other thing kennedy did was made sure that pakistan they did neutral in the war. >> rose: that's a great story. tell the story of the state dinner at mt. verner with the head of pakistan. >> early on in his presidency, the first summer of his presidency, invited pakistani military dictator field marshal yukon to the united states. jackie kennedy wanted to do something special. she didn't want to have just another state dinner at the white house. she had just been with the president to versailles and to vienna. she was looking for the equivalent of versailles. well, we don't have a versailles. what we do have is mount vernon, the first president's mansion overlooking the potomac river. so she persuaded the mount vernon ladies association

which runs mount vernon to let them use the lawn for a dinner. it was a spectacular occasion. everybody who mattered in the kennedy administration was there. bobby kennedy, the whole cabinet and the pakistanis. but there was also business to be done. the pakistanis had cut off our use of the air base in east pakistan which we were using to send supplies to the tibetans. it was a subtle way of indicating they were not happy with what the united states was doing, that we were now about to woo the indians and not pay enough attention to the pakistanis. so as the dinner begins, everyone circulating around, the rpt takes the field marshal for a -- the president takes the field marshal for a walk in the garden, put on the kennedy charm and convinced him to reopen the airport and allow us to continue using it. now, that's a fact that's very hard to find.

it took a lot of research, a lot of talking to people who knew about the c.i.a. operation to find out that it was at that dinner at mount vernon that the president used his personal charm in order to advance a covert operation of the c.i.a. >> rose: what's interesting, too, here is the role of diplomacy. u.s. ambassador to india was kennedy's friend, harvard professor, john kenneth gilbreath and he played a major role. >> he not only was kennedy's number one advisor, he became neru's advisor on what to do. that's extraordinary. that's a diplomat going well beyond the writ he's given by the united states. he's actually now also becoming neru's closest confidant at the height of the crisis.

at the height of the crisis, when it looks like the chinese are going to probably carve up one-fifth of india, wrote two. the second letter he wrote was asking kennedy to send 350 combat american aircraft to india to fight the chinese air force and begin bombing raids into tibet. the next day, the chinese unilaterally stopped. kennedy never had to answer nehru's letter. one of the great "what ifs." >> rose: why did the chinese stop? >> hard to say. the chinese government still doesn't open up its archives to researchers. mao tse tung is a very peculiar

dictator. he didn't confide with anybody else. i think there were two reasons he stopped. number one, he saw the united states was firmly coming in on the side of the indians and he didn't want a direct confrontation with the united states. number two, he probably felt, i've made my point, i've humiliated the indians and nehru, i can stop now. don't let this thing get out of control. >> rose: nehru died a month later? >> about a year later. he's a broken man. he led india to independence, spent literally years in british jails and here at the height of his career, he has to come to the united states and to london and ask for help. >> rose: tell me more about what you feel about kennedy. and vietnam and other things that were part of h his challenge. >> it's another great "what if."

would he have gone into vietnam -- >> rose: would he? i don't think so. part of it is john gilbreath. in addition to ambassador to india, kennedy made him an unofficial back-channel advisor to vietnam and gilbreath went to vietnam several times and his reports to the president were this is a catastrophe, only going to get worse, don't plunge into it. would he have listened to that advice? the thing that strikes me most about john kennedy as president is the learning curve. comes into office, is a disaster in the bay of pigs within weeks, he has a disastrous meeting with kruschov in vienna. in two years, he that' started t

it right. in the fall of 1962, he plays it very calm and smooth not only in cuba but the himalayas. to me that's a learning curve. >> rose: so did his brother have a learning curve. so they can that, everything you said about kennedy and put it together with how you think president obama is performing in the crisis he faces. >> i think president obama has a learning curve, too, but i think, deep down, profoundly, barack obama does not want to get america into another quagmire in the middle east. a lot of people say he has no serious strategy. i don't agree with that. he has a serious strategy. it's to stay the hell out of syria. that's a difficult strategy to air kick late to the american -- to articulate to the american people but he does. >> rose: and he's said that.

you look at his body language when he talks about the whole thick. his body language gives him away all the time. when he talks about the war against the islamic state, the war in syria you can see this is an issue that he is very reluctant to get america too deeply dragged into. >> rose: but do you think it's because of the analysis because that's what he promised to do when he was campaigning -- i'll get us out of afghanistan and i'll get us out of iraq? he did one, some say two terrible circumstances that might have given rise to i.s.i.s., that's iraq, and, two, changed his course and said we will leave some there. >> getting out 100% in afghanistan would have left a mess like getting out 100% of

iraq. i think it goes beyond his campaign promises. i think this look at this problem is susceptible to made in the united states with american combat boots on the grouped. >> rose: do you think he's right? >> i think syria could be a quagmire for the united states and i think he's smart to try to limit the degree of american ground forces. >> rose: by using special forms an and drones and airstris and bringing in a coalition? >> and trying to find a partner who's willing to do more. i think what he could do better is getting rid of assad. we're really not going to build a coalition of si syrians until they believe we're serious about getting rid of bashar al-assad. >> rose: how would he do that, especially when assad's best friend are the russians. >> the russians have complicated this problem enormously. the notion of a "no fly" zone

over syria today, how are you going to have a "no fly" zone? shoot down russian jets? >> rose: do you think that's one to have the reasons he put his air force in there? >> i think that's one of the reasons. i think the bigger reason is to preserve russia's strategic stake in syria. syria is really russia's last ally in the middle east. >> rose: preserve its strategic state and also increase it and enhance its reputation as a player of relevance. >> right and as a player you can depend on. >> rose: right. the argument he wants to make is, you can depend on me. you go with the americans, not so clear you can depend on them. i think we can do more in the covert action realm of not only building up a sunni altern thetive but also -- sunni alternative but also causing troubles for the assad regime.

i think the assad regime has a lot of weaknesses. it lost a great deal of the syrian public and military. we should be playing on the cracks in the regime. if there are other generals thinking about what is my future, we'll never know what a different approach in 2012 could have been. but i don't think it's too late still for effective efforts to divide the regime and break it apart. >> rose: what is putin's

gamut? >> he's a k.g.b. officer. he hasn't changed. he wants to project his own power and personality. that's what this is about. syria is russia's last ally in the arab world. all the others -- iraq, libya -- all gone. this is the last ally as he wants to preserve some russian influence in an area of the world which russians have regarded as strategically important to themselves since catherine the great. >> rose: because of where it sits and it's a listening post. >> a listening post, and they don't want to be out of the game. putin said himself, the dissolution of the soviet union was the greatest geopolitical disaster of history. he's not trying to re-create the soviet union, but he's trying to make russia a great power again.

the question to me, though, is he making the same mistake in syria as his former boss didl in afghanistan back in the 1980s? because if barack obama fears it's a quagmire, putin's actually going in on the weaker side in the long term. >> rose: right. the majority of syrians, 70, 75% are sunnis. >> rose: does this present an opportunity for some relationship between the united states and russia? >> putin wants to be at the table and in the syrian case that ultimately means whatever peace or cease fire or whatever you want to call it, conference, that tries to come up with a proposal and the way out, he wants to be seen as equal to obama at that kind of a deal.

in fact, meaning russia's back. we're back at the big table of diplomacy and high-stakes politics. i think obama is reluctant to give him that. if he's going to give him that, he wants something from putin. that something is to deliver the assad regime. >> rose: i have two questions for you because of the experience you have in the region. how do you get rid of assad, especially now that he is as he is with russia, and is the united states the only course they have available, which is to try to work with the russians and find a way to transition him out? >> there are two ways you can get rid of them. one is a coup within his own regime. i think that's a possibility we ought to be working hard at trying to create. i think there are others in the region who would help us to do that and be prepared to spend a lot of money to make that happen. >> rose: what's a lot of money? >> billions. billions. >> rose: he's worth billions? it's not our money. what do we care?

ththey're good at one thing, bribing. the other alternative is to persuade the russians that as part of an agreement, they have to go to mr. assad and say we have a lovely retirement package for you and give assad, basically, an ultimatum, you've got to do this or else we're pulling out our support. more tha than that, the probleme face with i.s.i.s. is i.s.i.s. is embedded in four civil wars in the middle east, iraq and syria, yemen and libya. >> rose: with numbers of people or just embedded with a small cadre? >> it's become part of those civil wars, part of the problem. it's no longer just a terrorist issue. it's become part of the failure

of the arab state system in the wake of the failure of the arab spring. that's what's permitting it to operate, the chaos that came out of the arab spring. same is true for al quaida. that's what makes this so hard to do. that's where i'm quite sympathetic to the president's problem because, if it is true, as i think it is, that i.s.i.s. is embedded in the iraq and syrian civil wars, a classic counterterrorism strategy of decapitating the leadership, gradually squeezing the territory they own, not likely to really resolve the problem. >> rose: what's the rules of engagement here? do they go and get his permission for any taking out of a high-ranking leader? >> the truth is, this is pretty closely guarded secret. >> rose: right. in the white house and the c.i.a. but my understanding is that a

drone operation, if at all possible, is approved in the white house before it's carried out. now, if they see on imagery from the drone mr. x is not where they thought he was but they've now found him but he's getting ready to move somewhere else, you may not be able to call the president, but the director of central intelligence is going to be called and he's going to make that decision and his strong preference is going to be sure that the president's in the loop either before or as quickly as possible. >> rose: and they minimize collateral damage? >> minimize collateral damage. >> rose: how long do you think the struggle against i.s.i.s. will go? >> i see this as a very long-term problem. i wouldn't call it just i.s.i.s. i would call it al quaida-ism. we have been at war with al quaida, now, since 1998. we've had moments when we were

close, i think, to achieving a significant strategic victory. we're not near that anymore. the problem of the failing of the arab spring and the the fusion of al quaida-ism and the islamic state with these civil wars and the break down of governance in the arab world have now made this a problem that's going to last, i think, for years to come. >> rose: what's going to happen to saudi arabia? >> saudi arabia's in trouble. oil prices at $35 a barrel are way below what the kingdom needs to sustain its welfare state. any economic moves to get away from being a welfare state are going to be very unpopular. saudis are going to ask, we're going to be taxed, for example, don't we have some role in making decisions about the country? secondly, the kingdom is in the midst of the transfer of power, a succession of power from one

generation to at least the next generation and maybe even to the generation beyond that. saudi arabia's been ruled for the last 100 years by either the founder of the modern kingdom or his sons. it was a very stable system for a long time but, sooner or later, you're going to run out of sons and they have literally reached that point, which means the legitimacy of the next king is not based on the legitimacy of the last five, all of whom could say i'm the son of the founder, now we're going to go to the grandson. that's a big deal. to be having that economic problem and the succession issue as well as living in a region filled with problems and chaos, that's an awful lot to try to manage at one time. >> rose: and in terms of wa hawoohaswahabism, is this king

different? >> giving women the right to vote in municipal elections, okay, even in inconsequential positions is a big deal. >> rose: and to run. and some won which means some saudi men actually voted for saudi women. >> rose: right. that's a big deal. >> rose: that's because of. that's all abdullah's work. he set this in train. king salman could have turned it off but he didn't. we don't know why he decided to do that. but by the standards of abdullah, i would say salman is much more of a reformer. >> rose: crown prince? the crown prince is a skilled counterterrorist professional. he's also something of a reactionary like his father was before him.

not a complete reactionary. he only has daughters, so presumably he's a little more interested in gender issues, but he's not a reformer like king abdullah. >> rose: people sit at this table and say within the next ten years from now we'll be closer to iran than saudi arabia. >> a lot of saudis thinks that's what the united states tends to do as well. they can look at the geopolitics and all of this and say there is a more natural relationship between the united states and iran that was interrupted by the shah's downfall but inevitably the united states will go back to being friends with the iranians. i think we need to be very careful how we do this. i don't think the iranians really want to be our friends. i keep a close eye on my pocket every time we deal with the iranians, but we also have to keep a close eye on the saudis.

>> rose: my presentation, everybody i ever met in the c.i.a. is close to the saudis. >> saudi arabia is very important to the united states. >> rose: a lot is intelligence services. >> intelligence services. the saudis, like a lot of arab regimes, are fundamentally police states, at the end of the day. the security services are the most important people. it's no accident that the crown prince was minister of the interior and that he runs the secret police in the country. it's not an accident that he's now been elevated. he's demonstrated he's really good at it. i've called him the prince of counterterrorism. he is one of the best counterterrorists in the world and survived three or four assassination attempts by al quaida on him. it is not likely that you're head of the secret police --

that your head of the secret police is going to be a closet performer who once he becomes king decides, oh, let's change the fundamentals of the system. >> rose: the book, "j.f.k.'s forgotten crisis: tibet, the c.i.a., and the sino-indian war." bruce riedel. thank you. >> thank you. >> rose: we'll be right back. stay with us. >> rose: sam palmisano is here, former chairman and c.e.o. of i.b.m. he spent his entire career at that iconic company. since retiring fro retiring fron 2012, he led the center for global enterprise, a nonprofit research institution devoted to the study of the more modern corporation, globalization, economic trends and their impact on society. a new book explores those areas from a range of unique perspectives called "growing global: lessons for the new enterprise." i am pleased to have him back at this table. welcome. >> great to be here. >> rose: so here you are,

having been a very successful executive. >> thank you. >> rose: at i.b.m. it comes time to leave that job. >> right. >> rose: what did you decide? how did you come from there, that moment, to this moment? >> well, it started with the first thing. i think anyone about to retire, regardless of stature, you need to find something to keep yourself going, you know, intellectually, something to keep your brain going because when you're running i.b.m. or a large company, your plain brain is going all the time, so that's a void and you need to fill the void. so that was a personal need. i thought the business and the societal need was that the world was changing so fast during my tenture, i sincerely believed that future leaders, business leaders -- and we stayed out of public service -- but let's say business leaders were not being completely prepared. it doesn't mean there is not a lot of great professional

schools available to them, that there aren't a lot of great programs available to them, but so much changed in the global world, the emerging economies now engaging the global economy and then the technology world between the -- now it's big data cloud, platform-based business models, uber, airbnb, when i was retiring four years ago these were concepts but i believed they would have a massive impact on corporate structures. but personal need to find something where you can contribute and give back, keeps your brained brain going, complicated subjects without answers, and the other thing is could we come up with a knowledge that we could share and we formed the global scholar's program. so a lot is learning and sharing of knowledge. >> rose: tell me about lessons learned of 100 years. >> yes, yes. well, 100 years of i.b.m., you helped us celebrate our centennial, you might recall. one of the biggest lessons learned is you always have to move to the future and

especially in the technology space. if you get yourself trapped in whatever that could be, it could be the business model, it could be a technology cycle, if you get yourself trapped by that, you won't change quickly enough to continue to be successful. >> rose: and you will be disrupted? >> you will be disrupted. the only time i.b.m. in its 100-year history ever got in financial -- i mean, doesn't mean we haven't had struggles along the way. they're 105 years old, so you're going to have struggles along the way, but the only time we had financial problems is when we missed the shift from mainframes, large computers, to pcs. we invented that shift with microsoft and intel. i.b.m. was the partner in that evolution to have the pc, but we misunderstood it, and because we misunderstood it, we missed it and other people -- >> rose: see, this is a valuable lesson for me. >> okay. >> rose: how did somebody with all the brains that were at i.b.m. miss it?

>> yeah, there is two reasons. >> rose: yes... one was the business model of i.b.m., the financial model of i.b.m. and the fact that, if you think about the profitability of these small things versus big things, it's a lot less. so one is your financial business model continues to push you in a direction of increasing profits, and this was going to be something that would reduce profits if it got big. the other which i thought was much more important than that, because everybody understands that, you might not like it but you understand it. the other pressure, though, which we really misunderstood on our part, we didn't see it as a platform, we saw it as a technology and a device, and we never thought the pcs, which then became client server, which could be a competing platform which could replace mid-size and large computers, we didn't see it that way. we felt to really do the things required in complex computing, you needed what we were offering. however, what happened was there

were many of the applications people used that were good enough so this client server platform was not going to run a bank or an airline but it could do a lot of things we used to do on office computers, like office work, presentations, a lot of things could be done on this technology base. so we missed that shift. you see these disrupters today which really is occurring that, even though they may not have the same robustness of technology as traditional solutionings, you see it in arco, cisco, others, even though it may not have the technical robustness of the previous solution, it's good enough for what it does. it's good enough to get a cab service, to book a room. is it going to move a trillion dollars worth of currency a day? no, it won't, but there are all these other areas the technology can be applied which can be disruptive.

>> rose: talk about the moment about the power in this iphone 6 and the power in a mainframe. >> when i started selling i.b.m., that was more -- there is more power in that device than in the mainframe i was selling 40-some years ago. but there is more in that device and more storage in that device than we had. apollo 13 didn't have nearly what's in -- we had four computers or maybe six computers on apollo 13 that i.b.m. did. not even close to one of those. that's what's happened, both the combination of microprocessors and storage and now battery life because you need batteries to power it. so those technology factors. >> rose: but i'm coming back to the same point, though. microsoft almost missed the internet. be bill woke up, as you said, and tried to turn the ship around. why is it that big companies -- is it simply there is somebody somewhere in a garage is going

to create something that's going to disrupt you? >> well, this is the point we talk about a lot in this current book is what is it, what are these trends. >> rose: and why don't big companies see them? >> well, i mean, they do. >> rose: they can hire the most talented people, they can hire the ability to have the capacity to see everything that's going on. >> as you know, bill is brilliant. the colleague and mine, we competed for years, were partners together, is a brilliant technologist. there aren't a lot of people smarter than bill gates, obviously, in technology. but what happens is you're running a big public company, and you see these trends, you see them immerging, but you have this business model where they were extremely successful, pc and then the software called the productivity suite, word-processing technology and the like, microsof microsoft ou,

word, powerpoint, called their productivity suite, a very large share position, that's why they got sued by the government, and you watch this emerging technology and you look at this and you can't imagine that, now, this -- think about it, that phone is going to do what we did on a pc? or that pc is going to do what we did on the main frame? well, charlie, it doesn't. it doesn't do that we do on mainframes or what you do on your phone, but it does lots of things that you like, and because it does those things, you don't use a pc anymore or a laptop, you use a phone or an ipad because it solves your problems as an individual. that's what happens. here's the business impact to that, you can see that. so what happens is the new stuff grows like crazy and the old stuff slows.

microsoft was never in any risk of going out of business. always extremely popular. stev.the growth problem is becae these things shift and that's what causes that. we talk about it in the book. a lot of the trends we talk about are trends we're seeing today in both technology and on global saismtio -- globalizatio. that's how these connect. the world today is different than when i.b.m. missed pc, and i'll use your statement that maybe microsoft was slow to catch up to the internet. >> rose: that was bill's statement. >> i wldn't want to comment on a exert, that was bill's statement. >> rose: but he turned that around. >> absolutely. but fundamentally, what you see today is you have this -- now technology is on steroids. as fast as it was then, it's even father today in a slow

economic environment. you have a compounding set of factors. you have technology absolutely on steroids, platform business models, mobile technology, big data analysis, technology on steroids as far as technology acceleration is concerned, in a macroeconomic environment which is basically on a good day moderate, most days slow or flat. >> rose: right. so you combine those two business leaders, tremendouss stress. >> rose: it's true all companies are now technology companies. >> at their core, yes, because if you think about what -- forget about airbnb or uber or lyft or those platform business models, but what it is that you are able through the technology to connect and add services to your consumers and customers in a completely different way, and you're able to analyze their needs in a completely different

way. that's what drives this shift. i mean, if you think about it, basically, in uber, you're still getting a ride, right? but it's a higher-level service at a valuable, economic price point to use uber than it is to take a traditional taxi, black cabs in, let's say, london, for example, or yellow taxies here in new york. but it's basically the same service provided but because of technology -- what's happened -- could uber have done this if somebody hadn't invented g.p.s.? of course not. could they do it if there wasn't a g.p.s. tracker that knew your presence? of course not. so all those things had to happen and they happened over decades. >> rose: where did the sharing economy go? >> it's an interesting concept. fundamentally, today you might view it as a small portion of the worldwide economy, the sharing economy. i'm guessing. i know the internet-based commerce is less than double digits, 8 or 9%.

i'm guessing the shared economy less than 1% of the economy today, but what it represents is an alternative, and what i mean by alternative, there is a model that's emerging that if you're a company you can't discount because what's happening now in lodging and in transportation and retail called amazon the category killer, you know, what's happening are alibaba, keep walking ourselves around the world, you always have to ask yourself could that impact me? and the technology example which was the internet is now called cloud computing. so could cloud computing impact i.b.m.s, oracles, systems dell, all these other where you bought the hardware or software versus sharing it or leasing it on the cloud. so the question is all these

shifts what's coming back to my business. what we talk about in the book and other areas is you need to have an understanding of what the shifts are. it doesn't mean that you have to make a major investment to become a platform business, per se, but it does mean you need to understand the implications because you think about digitization and what's happening, it's going to touch all sorts of things. it's going to touch the payment system, it's going to touch -- >> rose: already is. it's going to touch many things you do in your own personal life. >> rose: cash. cash, all those things are going to be touched by it. so, i mean, as a leader in this environment, you have to understand its implication. you also, i believe, you have to understand what's happening in the global economy. what's happening in the global economy is significant right now, and it's more than a reaction to 2008. 2008 was seven years ago, and we still talk about 2008. what's fundamentally happening in the global economy is that these emerging countries that were able to grow like crazy because they decided -- their

leaders decided to end their coups and wars and get into the global economies to improve the state of living -- >> rose: the middle class had nandz and needed consumer products and all that. >> you got it. and why did they do it? because they had access to low cost labor and products. as i was retiring, you could see the things shifting to those economies would have to move to a consumer-based economy. china, the premier is moving down the path and trying to improve 30, 35% of his economy to drive it to 50% of the economy. but to do that you need innovation, you need to create intellectual property. so there is tremendous change.

>> rose: rule of law. ule of law, all those things. there is tremendous change. we talk about climate change in china. i just left china. i have been going to china since 1989, 1990 when i worked at i.b.m. in japan so i flifd tokyo -- i lived in tokyo so it's terrible. is the reason china is serious about climate change and pollution because of external pressure or their own people? i say it's their own population that's driving the change and the government has to respond. every day i was in southeast china and in the newspaper and even in the english paper is called a red alert day in beijing. it used to be typhoons are coming. >> rose: th they are recognizing there is a problem with

pollution and they have to do it and in terms of looking for alternative energy sources and nuclear and everything else. >> exactly. >> rose: and thirdly, they are prepared to take on corruption. some people look at the corruption issue and think it's a way to eliminate political opponents, but you can understand people with certain cynicism would look at it that way but at the same time you could eliminate a problem you have which is if the public doesn't believe it's there, they will not tolerate it. >> and you have a system that was based on equality and fairness. you might want to call it socialism, communism, but that's the premise of the system that's fair for all, and the fact that there is now this disparity, and i think the disparity is people are chinese and entrepreneurs and are extremely successful, that's okay, but if the disparity is they got there through corruption, that is not okay. so this idea that people in

china don't like individuals who have been extremely successful, i have a lot of chinese friends who are very, very successful, and that is not the case. >> rose: of course, i never thought american people hated people for getting rich. they hated the idea there might be an unfairness of how people took advantage of each other. otherwise, why go to the lottery. >> nobody wants to deal with a rigged game. i think that's a little bit of what's going on. so the government's reaction in china is a couple of different -- but the economic shift you articulated extremely well which i'm not going to repeat, but to maintain this bond with society, i mean, they have to convince their society that it's a fair game, everybody has the chance to prosper, and the challenge of a slower economic growth environment. as you think about the number of kids they have coming out of school, they need their economy to grow around 6%, 7%, creating jobs domestically for the kids

coming out of school. they worry about this a lot. they've built all these wonderful universities, so they need an economic model that grows in the mid, single-digit range for them to generate employment for all the people they offered -- >> rose: so what is that, 6%? 6 to 7, about where they are now. >> rose: what should we be at? the world or the u.s.? >> rose: the u.s. economic growth. >> i think the potential in u.s. is somewhere between 3 and 4%. there is some politicals talking about that. michael spence has been on your show. i'm more where michael is than people in the current administration that if you reallocate capital flows and you lessen the inhibiters to growth, lessen -- some are good, i'm not saying they're all bad -- but lessen, this economy should get above 3%. >> rose: inhibitors, what do you mean?

>> overregulation, cost burdens. all these issues around cost burdens. you can't take everybody's cost up and complain that they don't invest enough. you can't -- if you are a company and you, because of healthcare and other kinds of benefits being imposed upon you that aren't necessarily market driven that are driven by government, you can't tell those people, go hire more people because you have to offset the cost burden u.s. just been imposed been you by some regulatory change. it's not just healthcare. it's financial regulations, all these sorts of things. at the same time, capital flows -- i mean, and this is where michael and kevin walsh are, capital flows have been biased to financial services, low interest rates, which have helped h guys like myself, good for us. it hasn't helped the middle class or u.s. society because money is basically free, so, therefore, there is all this speculation or trading or valuation shifts in financial instruments, right, that's

created lots of wealth for a very small portion of the population. capital needs to flow back to the industrial base, the real economy, and you have to address things like tax incentive, you have to address things like interests and all things are capital flows. i know all my friends in financial services will hate me for saying these things. >> rose: you have to abolish interest. >> can't have an incentive system biased to leverage. >> rose: from your mouth to my ear, there is this myth or reality that why did microsoft end up with the operating system. >> for i.b.m.? >> rose: yeah. because of bill's genius and our stupidity. >> rose: that's what i thought. (laughter) >> to be honest, we screwed up. >> rose: he understood the value more? >> we had a joint development relationship. we were going to do windows. that was corporate enterprise. they were going to do consumer. it was called -- i forget now --

windows was the consumer, ours was enterprise. it was os2, was enterprise. and we shared royalties. we merged, an economic relationship. the really mistake on our part, i call it stew bidty, i'm part of the i.b.m. company and i can say it we said we'll take consumer and you take enterprise. and the rest is history. they outexecuted us. we could have executed better on os2, but the fact of the matter is they really did out-execute us. they were good. he's a really smart guy! >> rose: they walked away with the consumer operating system. >> yes. and once you got the big enough base, it was easy to move it into enterprise, which they did. >> rose: the other point i want to ask you about -- the world really changed, in this

book, in the last ten years and i suspect the pace of change is going to accelerate. >> i agree, completely. >> rose: what's going to accelerate? >> i mentioned it more. the technology base will accelerate like crazy. the things we're seeing -- there is a term called platform business models, and basically what it is you create this platform, i'll use the transportation card, like lyft or uber, and all of a sudden because you have this common platform and this new arrangement with your workforce, you can scale 50 countries in three or four years, i think there are 53 countries today, if you go back to i.b.m. scaling, it was probably 50 years to get to 50 countries. so this platform business model is completely different. the the other thing which is different, valuations are different because of platform business models. charlie, if you look at the the intangible assets versus tangible assets in a company valuation, if you go back to the mid 1990s -- it's part of our research, but if you go back to

the mid 1990s, you find a tight correlation between hard assets on your balance sheet and your stock evaluation, your market cap, right? >> rose: right. if you look at it today, the gap is, like, 50% more on the soft assets than it used to be, and people say, well, come on, it's a bubble. >> rose: microsoft -- windows, makes a fortune, and microsoft missed the mobile technology. >> and intel was the chip manufacturer and missed it as well. so together they missed it, right? so i think the reason why they missed it is the reason i.b.m. missed pc. they couldn't conceive that that device that we hold in our hand that's like a large mainframe 20 or 30 years ago could do the functions associated with what they could do in their traditional base. >> rose: and then you have google founded on search engine and advertising principle.

>> yes. >> rose: you have amazon, which was e-commerce. and then jeff uses that as a basis, the stand alone is 60, 70, $80 billion. >> he saw it as a platform. so what was i.b.m.'s mistake? we didn't see the pc as a platform. >> rose: pleasure. thank you for joining us, see you next time. for more about this program and earlier episodes,. visit us online at pbs.org and charlierose.com. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org

>> rose: funding for "charlie rose" has been provided by: >> and by bloomberg, a provider of multimedia news and information services worldwide.

♪ >> announcer: this is "nightly business report" with tyler mathisen and sue herera. reality bites. stocks get slammed. the dow plunges 2% as investors start to wonder how a gradual increase in interestin rates ma impact companies and consumers. protecting your portfolio. our market monitor has a list of stocks he says will do well no matter how the broader market behaves. send in the drones? no. send in the jets. amazon considers leasing its i n aircraft fleet to ensure what you buy gets there when you want it. all that and more tonight on "nightly business report" for friday december 18th. good evening, everyone. and welcome. a momentous weekends with a momentous thud. stocks cratered, falling for the