>> rose: welcome to the program. to want, the j.p. morgan story with steve rattner, former "new york times" reporter who worked on wall street for 30 years and worked with the obama administration in the auto bailout. and gillian tett, u.s. managing editor of the "financial times" and a columnist in for the "financial times." >> this is not a life-threatening event for j.p. morgan, it's not systemic, it doesn't involve counterparty risk or meltdowns or the other things that are scary. this is like making a bad loan which j.p. morgan and other banks have made many times. >> anybody inside j.p. morgan should have said "hang on a second, do we want to become the entire market? we've become so big we're swamping everything else." it distorts prices and creates risks.

you have to ask why did no one spot that. >> rose: we continue with clay christensen. a harvard business school professor and author of a new book called "how will you measure your life." >> what you really need to understand is what causes these things to happen. what causes that company to be successful and if you are in a different situation will the same or different result happen? and so trying to understand what causes happiness just as what causes success in the business world that's what we're about. >> rose: we conclude this evening with charles simonyi. he is a software programmer who helped develop word, became a philanthropist and a space traveler. >> i don't think any of us would have thought that in the first decade of the 21st century private individuals could go to space and participate in space missions. people... not people who have

the right stuff but the rest of us, if you will. and this door was open. >> rose: steve rattner, gillian tett, clay christensen and charles sonyiim sonyi when we continue.

>> rose: j.p. morgan, one of the world's most powerful and influential financial institutions, is under fire, its reputation is being questioned following estimated $2 billion loss last week. the announcement comes as authorities worldwide tighten restrictions on financial institutions and ask new questions about the need for regulations. according to a statement released today, the chief investment officer who presided over the trading loss has resigned from the bank. jamie dimon, j.p. morgan's c.e.o., acknowledged the bank's

shortcoming in an appearance on "meet the press" yesterday. >> i do want to put in perspective the company is going to earn a lot of money this quarter so it's a very strong company. we made a terrible egregious mistake, there's almost no execute for it. if you read my chairman letters we always talk about what we did wrong. always what we did wrong, how we can get better. no one in business doesn't make mistakes so this is a terrible mistake, i'm not making excuses for that. >> rose: joining me now is steve rattner. he spent 30 years on wall street before that wrote for the "new york times" as a reporter. he was also in the obama administration, a counselor to the treasury secretary and was instrumental in the auto bailout. also here, gillian tett, the u.s. managing editor of the "financial times" and this, in full disclosure, jamie dimon is a friend of mine as are other employees at j.p. morgan and i have worked with them at conferences where i've interviewed interesting financial figures. i'm pleased to have them here to talk about this very important story. i begin with several questions of which one, and the most important one, is to ask gillian

and then steve: what questions does this story arise for you? >> i think to my mind it raises at least three questions. one, why on earth did jamie dimon go out five weeks ago and tell the analysts that frankly there wasn't a big problem in this particular unit? i mean, was he completely stupid? did he not know what was going on? or was he tries to bluff his way out? that for me is the first question. out of that rises a bigger question about what is the leadership of j.p. morgan today... what is the leadership around jamie dimon at j.p. morgan is anyone exerting checks and balances on how he's running the bank? secondly there's questions about the actual nature of the trades that were made and whether these markets do actually need more disclosure, more regulation or not. and thirdly there's a bigger question about reform in general and the fight that's going on between the banks and the government in terms of how far and how quickly they're to try and clamp down on the banks. >> rose: steve? >> i think those are all the right questions. i think question one is

interesting. i would also engage the full disclosure and say jamie is a friend of mine as well so i tend to him him at his word but i agree with gillian. more transparency the better. so far i don't think they have been able to find full transparency because they still have these positions so it's hard to tell everybody what you did until you're done doing what you did. the really important questions are the second and third one. what should the structure of our banking system look like and what are the implications of this for regulation of the banks which i think is going to change dramatically as a result of this disclosure. >> rose: explain to us what is the issue here? >> we don't exactly know because as i said, j.p. morgan has not been able to come open kimono because... i assume because they have a position but the gist as i understand it is this: they initially took a position in what's called the credit default swap or the insurance market where you can buy insurance or sell insurance on corporate debt to hedge against their fears about the situation in europe. this is a unit that had made a lot of money for j.p. morgan

over the years. it was giving an increasing amount of leash and capital to work with. over time i think that the unit decided that a better and perhaps more interesting bet would be to bet on the u.s. economic recovery. in effect, to sell insurance on u.s. corporate debt. and instead of the u.s. getting better, the u.s. hit this air pocket that we are in at the moment so it went the wrong way and they had a $2 billion so-called mark to market loss on their position. >> rose: and to have a $2 billion loss what would you have had to have at risk? >> well, people say they had $100 billion at risk and there was roughly a 2% move. but let me say two other things about this. first, if i'm right in terms of what they did, this is not a hedge, this was a speculation. this was essentially a bet that the u.s. was going to get a little bit better. this is the kind of thing the volcker rule would prevent. >> rose: because it was proprietary trading? >> because it was a bet, not a hedge. a hedge is where you're trying to offset a risk in one place with something else somewhere else. this was simply a bet that the

u.s. economy was going to get better, i think. but the second point that i think you have to put this in perspective is that this is a unit that has $8 billion at the moment of unrealized profit for the bank, made a billion dollars in this quarter so it's not a $2 billion loss, it's a $1 billion loss. this is a bank that made $9.2 billion in the first quarter pretax. and so had has a market capitalization of $140 billion as we sit here. this is not a life threatening event for j.p. morgan. it's not systemic. it doesn't involve counterparty risk or meltdowns or the other things we're scared about. this is like making a bad loan which j.p. morgan and other bank have made many times. >> rose: does this suggest basically what you just said? that because j.p. morgan was so big that this is not the case to say... or is the case to say too big to fail should be a part or not a part of the kind of regulations we have in play covering the financial sector? >> i think too big to fail is

definitely a part of what we should be thinking about. i think that we are on a path to having every institution-- including j.p. morgan-- able to fail, whether systemic way to resolve a problem if there's a life threatening problem. jamie dimon said that on "meet the press," i agree with him. no institution should be too big to fail. but that's not what this problem is. this is a $2 billion problem for a bank with $150 billion of equity value. >> rose: what would you add to what happened here and one of the questions about what happened? >> one of the peculiar things about this story is that actually there's a lot of knowledge out there in the rest of the banks in the market five or six weeks ago about what was going on in terms of this particular problem in the trading book yet for some reason j.p. morgan didn't step in and shut it down. jamie dimon did come out and say there wasn't a problem and if nothing else it raises questions about the management style inside j.p. morgan at the moment and what's happening there. at the same time steve is right. $2 billion is not a big deal in the wider scheme of things as

far as aback like j.p. morgan is concerned and thank heavens we're not talking about systemic risk here as such. but it does point to the fact that sitting inside these big banks are vast derivative books that are pretty opaque, very hard to see whether they contain risks or not as far as regulators and shareholders are concerned. so it raises questions about yes on this particular occasion it was small. what would happen, though, if somehow there'd been a $20 billion slipup instead? >> rose: i think there are two questions here. one is about what regulations ought to be in place and not. and the other interesting question here, because j.p. morgan stood almost unique in terms of its integrity and in terms of the competence of jamie dimon, has that suffered much more than any question of $2 billion? >> that, to me, is the biggest piece of fallout from this things which that jamie dimon was the only c.e.o. on wall street who still had the credibility to take a position on a lot of these regulatory issues and have credibility

behind it. and now for better or for worse, rightly or wrongly he's been emasculated for lack of a better word in that regard. so there's really nobody in a position to present the other side of the argument when carl levin or barney frank or elizabeth warren stand up and say "off with their heads, let's put them a straight jacket, let's not let them do anything." that to me is scarier because hedging is a part of the banking business. banking is not a risk free business it never has been; it never will be. if you tell banks they cannot hedge period end of discussion one of two things happens. either they take too much risk, oddly enough, or they stop making loans because they can't hedge them. so we have to be careful here that we don't throw the baby out with the proverbial bath water as we deal with the fallout of this thing. >> i was in washington on friday and i can tell you there's been a complete sea change in the political debate because before thursday there was real concern amongst the democrats and regulators that a lot of the dodd-frank volcker stuff could be gutted because you had

republicans and bank lobbyists preparing all kinds of schemes to water down the rules. >> rose: because they thought regulations would thwart growth. >> that's what they were arguing. as of today because of what happened on thursday a lot of that argument and initiative has been severely undermined as steve says. so whether you love dodd-frank and volcker or hate it the climate has changed. >> rose: so you both believe that somehow the climate about regulation has moved from some skepticism about what is the appropriate thing to do in terms of rule making coming out of dodd-frank to a more sense of we have to do more because that's where the public mood is. >> it's moved from two giant armies doing battle to one giant army and a bunch of wounded and injured on the other side who can't hold up their side of it. so we don't know yet where this is going to lead. i agree completely with gillian's assessment of the political dynamic. it was very interesting today i was at lunch with rob portman, a republican rumored to be on romney's short list and listening to him try to defend the republicans' argument for

why there should not be more regulation is just... there's no teeth to it anymore. >> there's been a lot of discussion about too big to fail. to my mind the equally important issue is whether it's too big to manage or not when you look at banks. >> rose: you make that point in your column. >> absolutely. because these are vast, extremely complex institutions. let's all agree if we like to that jamie dimon is a total genius and will always be a genius. there's always a problem that when someone's been successful for a period they believe their own hype. whether it's a individual trader or c.e.o., that's a big risk shareholders should watch out for. if you do think jamie dimon is a complete genius, maybe he can control j.p. morgan in a way that avoids risk to the system. what about the other banks that are almost as big and almost adds complex? >> this is one place gillian and i maybe slightly disagree which is the following: if you go back to 2007/2008, the institutions that nearly brought down our financial system were not the biggest institutions.

they were bear stearns and lehman brothers which were a little ways down... >> rose: they were not goldman sachs and j.p. morgan. >> if you go back to 1998 when long-term capital management happened, a hedge fund that did implode, it would not have been on anybody's list of the 25 institutions you would be worried about. there are other countries like canada and the u.k. that have more concentrated banking systems than we do in terms of percentage of assets under the control of one bank. i understand what gillian is saying and i think it's an important point but i don't think breaking up the banks is necessarily a cure-all for this either. >> i would disagree. i think you want to have more diverse institutions, you want to have more competition because apart from anything else that's how you create proper free market forces when you have institutions small enough to fail and when you have a variety of institutions out there. it's noteble that we've had lots of hedge funds fail in the last few years and they've not created a threat this time around because they're smaller. >> rose: my answer to this is that we have always had people in the country who say the presidency is too big for one person and then somebody comes

along and knows how to delegate and run the country and that argument fades away. and running the country is much bigger than running j.p. morgan. i rest my case. (laughter) >> but you have four-year limits. you have two-term limits, don't you? unfortunately, classically with c.e.o.s, never mind in the banking sector, in many sectors you have a brilliant c.e.o. come on who does a good job for a number of years, the rest of the company becomes cowed, the board becomes very weak and the question that shareholders should always be asking is are there enough checks and balances in place to make sure that that c.e.o. is having a debate with people. i have huge respect for jamie dimon. iy book in which he was a key character and i have a lot of respect but these are certainly questions the board of j.p. morgan should look at closely right now. >> i agree. both the board and the public. it's a quasi-public institution even though it has private shareholders and all of us are entitled in the fullness of time for a complex explanation of

what happened but put it in perspective. jamie is a friend. that is guy who has had a career of extraordinary success who went through this financial crisis, navigated j.p. morgan through it better than any other bank with the possible exception of goldman sachs, loses $2 billion, really $1 billion from a group that had had great success on a balance sheet of $2.5 trillion and a market capital of $150 billion. i don't think we should run him out of town and tar him feather him just yet. >> rose: when he says "something failed within, we made an egregious mistake" what is he talking about? >> what he's talking about-- and i agree with gillian, or at least i think i do-- there was a lack of control and oversight. this group had been very successful doing real hedging and doing other kinds of less risky trades in the past. the bank gave them more and more capital as you would with anybody successful. more and more leash, more and more runway and then they lost track of them, i believe. now gillian has a less benign view, maybe, but it was a failure to supervise basically. >> i mean, i'll give you an

example. one of the key instruments they were involved with was a series of derivatives known as c.d.x.i.g.-9. it sounds like "star trek" finance, i know. by this spring, j.p. morgan had amassed such a position that it effectively countered much of the activity in this particular sector. and that wasn't a mystery because those figures were published. you can get them on the internet. anybody inside j.p. morgan should have said "hang on a second, do we at the bank want to be the entire market? we've become so big we're swamping everything else." it distorts prices and creates risks and you have to ask why did no one spot that? there were other people on the street-- steve knows having watched wall street for years-- once a bunch of hedge funds see something like that happening they start ganging up on a bank and there's all kinds of games being played and stuff. but why was no one at j.p. morgan saying "this looks

dangerous"? >> we don't know that nobody was saying that, in all fairness. another plausible explanation is people were saying that and people in london who had a great record for a long period of time said "we think it's going to work and here's why, a, b, c, d." and the people they were who they were talking to said okay and they shouldn't have. >> rose: >> perhaps the real moral is the worst time to be a bank is when you have a streak of success and hubris comes into play. >> rose: should we ask this question: who knew what when? >> absolutely. >> rose: all the way to the top? >> i think absolutely that should be asked, yes. >> rose: if i were jamie dimon i would create a committee, maybe... i would create some group of people to do a full colonoscopy, for lack of a bert word. because as i said, i think it's a quasi-public institution. the world wants to know and deserves to know in the fullness of time including who knew what when. >> rose: part of the problem is if, in fact, a bank that has enormous respect before this happened and worked its way back toer than again, i'm sure, but has enormous respect, that kind of bank could misunderstand risk

might other banks without the same level of competence misunderstand risk? is that right or not? >> well, one of the interesting things that's come up which jamie had said several times is that there were problems apparently in some of the correlation techniques being used in terms of how you measure the value of these positions the bank was trading in. this is very technical stuff. this is really "star trek" finance and at the end of the day people are putting a lot of faith in these commuter models and wiz kids and having additional pairs of eyes check then out and make sure they work is very important indeed. >> there's no question this could happen or something like it or something worse could happen in banks. as i've said repeatedly, banking is a business of risk. in the wake of the financial crisis there have been a number of steps taken, specifically the amount of capital requirements, what jamie likes to call his fortress balance sheet where the amount of capital banks have to retain will go up in future years which provides you with a

buffer against these... when you have a problem like this you can absorb it. i want to say in the wake of the 2000 dot-com and the recession that followed in the financial crisis and recession all these banks lost far more money on conventional plain vanilla loans exactly the kinds of loans you think they should be making, than what we're talking about here. banking does involve losses periodically. >> rose: do you believe that dodd-frank was strong enough? >> i think dodd-frank has within it all the teeth that the regulators need to effectively regulate the industry. the question we've been debating now for many months-- and now the terms will change, as we discuss-- is whether regulators will implement in a way that's effective. >> or whether there enough regulators to implement. >> i think there's too many regulators. one of the failures of dot frank is it didn't consolidate the regulators. it was a classic washington turf battle. >> rose: so what's going to happen next and what are the demands of this story? >> people are going to watch

very closely what happens tomorrow in fapl where j.p. morgan has a key meeting. they'll look to see what jamie dimon does next and whether or not he comes clean on the details. >> rose: has he not come clean in your mind? >> no. we still don't know what has caused the loss. the speculation on the street is that a lot of these losses are linking to this derivatives index called c.d.x.i.g.-9 but j.p. morgan has never confirmed that in public and most people involved in the trade say that's not big enough to account for the scale of losses that j.p. morgan has been talking about so we don't know exactly what caused it. >> rose: there's a lot we don't know. that's why the story has room to grow. >> in fairnessty think part of the reason they haven't come clean-- and they haven't-- is because they still have these large positions and the last thing you want to do is have everybody on the other side of the trades know everything you're doing and why. so i don't like the situation but they have to get the

business sorted out first. i don't think we'll learn more in tampa but i believe in the fullness of time jamie will understand the wisdom of coming completely clean as to what happened and when. >> one of the great things about jamie dimon is he does have a very open, gun-slinging approach. he wears his heart on his sleeve and that's been on display in the last week, certainly. so i'm sure that at some point he will try and come forth and i very much look forward to his version of event. but it does raise questions about some of the ways he's handled public relations of this whole story for the last week or two. >> rose: i think it was henry kissinger giving public relations advice who said "whatever bad will come out will come out so you better get ahead of it." >> i think that's what he's been trying to do. it may yet backfire on him. >> rose: thank you, gillian, thank you, steve. >> thank you. >> rose: back in a moment. stay with us. >> rose: clay christensen is here. he's the kim b. clark professor at harvard business school. on the last day of class each year he asks his students to apply the business theories and

models they've studied to their own lives. specifically he tells them to consider three questions: how can i be sure that i'll be happy in my career? how can i be sure that my relationships with my spouse and my family become an enduring source ofap hssnepi? happiness? how can i be sure i'll stay out of jail? those questions form the heart of his new book "how will you measure your life?" i'm pleased to have clay christensen back at this table. welcome. >> thanks, charlie. >>. >> rose: before you wrote the book and while you were thinking about this we went to harvard and said let's talk about this. at the same time you were also living with a series of physical challenges. a stroke, a heart attack and a bout with cancer. how are you doing? >> well, knock on wood, doing better on each. the stroke has been the hardest one to come back with because it... a clot just lodged itself in my brain and killed the portion of my brain where you formulate speech so i've really

had to learn to speak one word at a time. i'm not there yet but i'm doing better. >> rose: you're much better the last time... than the last time i saw you. >> you're kind. >> rose: that's true. there's only one way to go. you say how do we rebuild the capacity. i want to read what you say on the back because it's interesting and it's from you. "this book doesn't offer an easy answer, instead it will prompt you to consider the most important questions you'll ever face. it won't tell you what to think, instead it aims to teach you how to think about your life and your purpose by sharing powerful research and theories about success and failure. it won't prescribe a set path of happiness. it will equip you to lead the type of life to which you truly aspire. contained within this book are the same tools that have allowed managers to lead companies. think of it as a guidebook for your future. the theories and situations summarized here will help you understand the critical decisions that can bring happiness and success and life instead after sadness and

disappoiment." and you go on to say that you hope the insights will make you better. what's at the core of this? >> you see over and over in business those who aspire to greatness will have idols. an idol in the form of a company like aing today or a generation ago as a different kind of a company. you idolized them and you imagine that, gosh, if you want to be like them i need to do exactly what they did. it turns out you do that and you don't get the same success. as we try to improve ourselves, many of us have idols and we'll look at... i will just love to be rich and famous and... like them i do everything that they do and i get a different result. and there might be a correlation between these characteristics of what happened but real what you

really need to understand is what causes these things to happen. what causes that company to be successful and if you are in a different situation will the same or different result happen? and so trying to understand what causes happiness, just as what causes success in the business world, that's what we're about. >> rose: and it's different for everybody. >> rose: it's different for everybody. the causal mechanism is the same but the way it manifests itself will be very different. sflaup how do you find the answers to these questions? by rigorous examination of your life or your desire? >> it's interesting for me. the paradigm in academia is to get massive amounts of data from surveys and so on and then correlate this from that and

they can develop correlations between this and that. if you're really trying to understand what causes something to happen, generally the sample size is one. and you have to study that company or that person deeply over a very long period of time to understand what causes these things to happen. so that's the way we have been going about it is the understanding what causes things to happen as a result of actions. in other words, i understand that if this happens in this situation you have to do that situation, you can be that, make those predictions if you understand causality. so we tried to... that's the generation of the theory is these deep individual studies and then we try to communicate it with stories back in the time

of the new testament christ would explain... illustrate these things with what we called parables. we use stories in this book and a lot of them are from my own life. >> rose: tell me story of jeff skilling, he was a classmate of yours at enron. what do we learn from observation of him? >> well, i knew him when we were at h.b.s. as students together. he's a good guy. you never would have imagined that he would take the wrong turn. nor did he imagine he would take the wrong turn. >> rose: for reference, this was the man who was the principal executive at enron and was convicted and sent to prison and then there was some question about the judgment. where is he now? >> still in jail. >> rose: still jail. 25 year sentence or something like that? >> yes. just a... >> rose: pick up your story. i just wanted to add something to it. >> what's important to learn from him as well as for everything is he never intended

to end up where he ended up. you can't teach ethics at a place like the harvard business school, but what you can teach is why is it so important to hold to your standards 100% of the time? and i described in the book how i learned that lesson. i got a rhodes scholarship, went off to oxford, i was tall so i could play basketball there. we had a great team. we worked our guts out. went the whole season without a loss. went into what we would call here the n.c.a.a. tournament, continue to just kill the competitors until we came to the final four. and for the first time i looked at oh, when is it scheduled? to my horror the championship game was scheduled on a sunday. and i had made a decision when i

was 16 years old because of my religious beliefs that i would never play ball on sunday. >> rose: you're a mormon. >> yeah. and so i went to the coach and i said "i've got a big problem. i made this commitment and i don't know what to do." and the coach was just incredulous and he said "look, i don't know anything about the mormon church but i'll tell you what you do in my church is that we just do it and then we just... we need to find a priest and confess that we did something wrong, promise never to do it again and you're off the t hook." >> rose: very convenient. >> and i thought maybe that's what i should do because the logic in my head was, you know, you made this commitment and almost all the time i ought to keep that commitment. that in this particular extenuating circumstance just this once it's okay. and so we won the semi final game so we were in the finals

and every member of my team came to me and said "clay, you've just got to play." and i decided i should. went back to the hotel and knelt in prayer to tell god i'm going to do this, just this once. >> rose: (laughs) >> and before i could even begin the prayer i heard an answer in my mind. in a complete sentence and it said "clayton christensen, you know what the answer is, why are you asking the question?" and i sat up in the chair and i said "i know the answer." and so i told the coach i couldn't play. and i looked back on that and, you know, it was one sunday in thousands of sundays in my life and surely just that once it would have been all right. it turns out that my whole life has been an unending stream of

extenuating circumstances. and if i had gone over that once the next time it comes up i have to make the decision again and then again and then again. and if we make our decisions about whether we'll hold to our standards on a case-by-case basis there will always be a time when we say "just this once" about i do it. i suspect in jeff skillings' case that happened to him. and the big lesson that i got from that is it's easier to keep your standards 100% of the time than it is 98% of the time. if you make a decision at the beginning "this is my standard" then when these once by once in this particular extenuating circumstance you can say "already made the decision." >> rose: you don't have to agonize over it. >> that's right.

and i think we can teach that kind of discipline at a business school. the content of ethics doesn't get you there. >> rose: what do you think the most powerful motivator in our lives is? >> i... i can't choose between two. one is personal achievement. that you can put your hands on your hips and step back and say "i really accomplished something." the most important achievements are our children and the relationship with our spouses which is a great achievement. the other one is helping individual people become better people. >> rose: and where do you put the idea of the innovateive that you have been so observant of? the innovator's dilemma?

>> this one was a... it took me a long time to figure this out but the innovator's dilemma is that doing the right thing gets you what you don't want to have and just for an example general motors and ford were making big cars for big people. toyota came into the american market not with lexuses but with a rusty little subcompact called a corona. then they went from corona to tercel, corolla, camry, avalon, four runner and then a lexus. and general motors and ford would look at toyota coming at them and they'd say "you know, we ought to go compete against those buggers." and they'd send down a chef vet or pinto. but then they would compare the profitability of these little subcompacts with the profitability of making even bigger cars for even bigger people and it made no sense to defend the least profitable part of the business. >> rose: but you know what that

is? that is for me the difference in a short-term vision and a long-term vision. >> that's right. that's right. it's exactly right. so on a short-term basis they made decisions that made consummate sense. but... and that's because they did everything right. there was never a decision made by the general motors board or the senior management of general motors where they pulled everybody around and said, you know, ladies and gentlemen let's implement a plan for driving this corporation into bankruptcy. they never decided that. and yet that's exactly what they did. and in the same way, in our family, we have the same bias on short-term versus long-term investments and so my family pays off in the long term. on a day to day basis the

children misbehave everyday and it's really not until 20 or 25 years into it... >> rose: that you can see the impact. >> that's right. but on the day to day basis it's our careers that provide that most tangible evidence that you've achieved something. you ship a product, finish a product, get promoted, get paid. and so when we want to achieve... you have a sense of achievement it's our careers that provide the evidence of achievement. so the reason why corporations have such a short-term orientation is it's run by people like you and me. >> rose: this book is called "how will you measure your life?" clayton m. christensen, also jim allworth and karen dillon. >> thank you for letting me come charlie. >> rose: charles simonyi is here. he was born in hungary and educated at the university of california at berkeley and

stanford university. he oversaw the creation of seminal applications like microsoft word and microsoft excel. the "new york times" has called him arguably the most successful pure programmer in the world. he's also a man of many interests including piloting jets, helicopters and space exploration. in 2007 and 2009 he traveled on missions to the international space station. his most recent project is a book written by his late father, the scientist called "cultural history of physics." i'm pleased to have charles sigh moan yi at this table for the first time. tell me about your father and what he meant to you and why you felt like this is the book you should be publishing. >> well, my father was a wonderful scientist but he was he considered himself a teacher first of all. he was a professor of electrical engineering, so it's almost like physics and generations of hungarian engineers grew up

under his tutelage. he basically taught them the most fundamental parts of electrical engineering. >> rose: did you become a computer scientist because of the influence he had on you? >> actually, probably despite of that. >> rose: in spite of the fact you became what you did? >> well, it's computers not really engineering and my dad did theory. i was a minor in hungary when i learned computers and at that time minors, 15-year-old kids, didn't work with computers, computeers were big boxes. it had the cards and the giant brains. so the... there was a rumor in hungary that it was my father who wrote the programs that i was writing to further my career

kind the way t way things used to work with pull in a socialist economy. >> rose: he sounds like a brilliant man >> he certainly is in a way that... in terms of his teaching and his approach was great. he was also a humanist so he loved the human subjects and we kept a wonderful library at home of thousands of books on many different languages and i caught him in my reminiscing the google of the 1960s because every time he asked me a... we asked him a question he told us that we can look it up. "i don't know the answer but i can look it up. i can find in the five different places and in several different languages." >> rose: so he was the google...

he was his own search engine. >> absolutely. and the library was his internet. >> rose: so he was a man who loved the life of the mind. >> absolutely. >> rose: that's probably what he gave you, isn't it? >> well, he gave me many things. probably one of the most important thing he is gave me was my freedom when i decided to leave hungary still as a minor even though it hurt my family. he agreed that i would have to continue my studies where it's the best for me and not necessarily for him. he actually lost his job, his teaching job, except that he turned his energies toward writing this particular book, the culture of history... >> rose: when did he finish this book? >> the first edition of the book was in 1978. he probably started in' 7, '72. i left hungary in '66. losing his job took a while and

then create a lecture series. and it went to five hungarian editions. 60,000 copies were sold in hungary, which translated into the u.s. market it will be two million copies. >> rose: and he... is he alive today? >> no, he departed in 2001. >> and buried where? hungary? >> yes, he spent his life in hungary. >> rose: but he wanted you go find freedom. >> absolutely. despite of the difficulties that it might... for for him? >> for him and to myself. so he trusted me and so did my mom who is still alive. >> rose: you have always said the most important thick in your life was being able to live free >> absolutely. that means so much. it's not only what you do and

what you can do but also where you can go and people you can associate with. it's not... not everything you do by yourself but it... i've been extremely lucky in traveling first to denmark then to berkeley and teaming up with the most outstanding people. so weaving my way to those connections to xerox palo alto research center and where, of course, the personal computer revolution... >> rose: gave birth to it. >> started and then from microsoft which was technology. >> rose: tell me the truth. when you see where it's become is that what you ever imagined back then he? >> absolutely! >> rose: you did? >> we have a written bisphosphonate plan to prove that. we thought that... well, the scale, the availability, the

price, the richness is probably exceeded our expectations. >> rose: bill gates is always his great mission statement about a computer in every home... >> on every desk. that's right. that's the dream i'm talking about. but the... >> rose: but then you see facebook and now you see all the applications and then you see... >> astounding. >> rose: and the power of computers compared to >> and it's continuing. charlie, it's continuing. even though the hardware doesn't grow at the same rate as it did before, it's hard to maintain that incredible clip but there's an incredible amount of room in software and turning more and more activities that should be autoautomated into software. >> rose: if you were 17 years old landing on american shores

today, what would you do? >> i would come in and try to join intentional software. >> rose: what would be the attraction of intentional software? your company? >> what's the next step? if it's not in the hardware there are many, many opportunities and i'm not saying that this is the only one but but in terms of here is size the growth is continuing in acquiring knowledge and processing knowledge and recording knowledge and creating some other work products from knowledge. so go to your client and ask them what do you know, what is your knowledge base? and put that into the computer and then create all kinds of results from that stored and processable knowledge. >> rose: your dad got to see all that. >> yes. he has seen the internet. he has seen... of course he has

seen word. he started to use word probably his last book, which was on the history of science in hungary that he did on word. he was coming along. he was very very proud of what the industry accomplished. >> rose: when you went to microsoft and you met bill gates what was that like? and what was he like? >> i met him in september of 1980 and i was astounded. you know there were pictures of bill, he was always very young looking. but i don't think it was linear, his youth, and especially when he didn't wear glasses it was... his youthfulness was exaggerated. >> looked like a teenager. >> your words, not mine. you know, when you looked in his eyes and listened to his words it was an amazing experience. it was a transformational

experience. i knew that if evolution is going to succeed it's going to succeed there. >> if he knew he was riding the crest of the wave... >> not only that, but he is the excellent surfer, if you will. he's incredible with his skills, his energy, his dynamism. >> rose: it would not have happened as fast as it did without rehabilitate. >> no doubt it could have been slower, it could very more fragmented. and look at, for example, consumer electronics today. how much easier it is to use to complex computer and you know you can use the computer. you try to turn on the t.v., i think it will have more problems because of that fragmented nature. >> rose: because steve jobs

hadn't gotten to do what he wanted to do. >> steve was an incredible person i listened to his speeches in 1980 and from 8 to 86 we worked very closely together, microsoft and apple, on the software for the macintosh especially. >> rose: in fact which was an interesting story because steve needed to work with bill. >> oh, totally but we needed the hardware. it wasn't a one sided relationship. >> rose: it was interdependent. >> and we were... there were times when microsoft had more software people working on a macintosh than apple did. >> rose: is that right? >> yes. apple was an incredibly successful company by that time but their success was based on apple 2 and apple iii to a much less extent. but apple ii and apple iii was

their bread and butter and the group that was doing macintosh was flying a pirate flag on their building and the bad guys with the pirate flag, that was the rest of apple. >> rose: great story. compare and contrast the two of them: bill and steve. >> well, i think that they are both very intense people. i think bill is more on the rational side of the grain. i mean, i don't remember if it's left or right. >> rose: i don't either. >> whatever side it is. and maybe steve is a little bit on the other side. >> rose: more instinctive. >> yes, artistic and... >> rose: i want to think that's

the left side of the brain but i'm not sure. >> maybe it's only if you're left-handed. so i think that's probably the chief difference. brill is an excellent technical person:. >> rose: as a programer? >> yes. he understands the technical details. he understands the relationships he understands the consequences, the difficulties. i think there's a great difference. now, mind you, steve has been... what steve has been doing is incredible when the time was right and finding out the new market segments and exploiting them. >> rose: exploiting is the word. exploiting is the word. >> in a positive sense, of course. >> rose: (laughs) yes. they both were extraordinary business people and drove a very hard bargain and enabled them to have the success that they did.

>> i think bill was a better business person but that's just my opinion. >> rose: why do you say that? >> well, they... i think that bill understands the figures, he understands the risks. i think he's more prudent. i think that he has a long-term view. it's not bill who had to go for emergency loans. >> rose: it was steve. >> yes. >> rose: and bill had all that money. >> but it's a little bit like gambling. anybody can make a lot of money by doubling down and putting in on red each time. some people will lose. it's not good business. if you have the long-term view you're not doing that. i think steve was more likely to do that. >> rose: to take bigger risks?

>> yes. >> rose: you left microsoft, though. why did you do that? >> well, life changes all the time and i had this particular dream of knowledge processing and knowledge acquisition and i wanted to pursue that dream and it was probably best done on my own. also i was able to take time... >> rose: you had plenty of money so you could do what you wanted to. >> yes. >> rose: tell me how you measure your passion for space exploration. >> i think it was an opportunity that was open, completely unexpected. i don't think any of us would have naught the first decade of the 21st century could go to space and participate in space missions. people... not people who have the right stuff but the rest of us if you will.

and this door was open and i did have the qualifications. >> rose: what were the qualifications? >> well, there were really none to be sure. but as such... certainly not those that are required by the national space organization but you have to be, of course, paid to get... >> rose: how much does it cost? a million dollars or something? >> it was in that range it was quite a bit less for the first flight and in that range for the second flight. the prices are going up dramatically because everybody knew that the space shuttle wouldn't be flying so nasa now has all the seats. nasa has been paying over $50 million per seat. >> rose: for the space station. >> to go to the space station and nasa, of course, has been using the soyuz as their vehicle in the past as well and i had the privilege of flying with a

number of nasa astronauts on board of russian spacecraft not to mention the space station itself. >> rose: what were the physical demands of this? >> the physical demands weren't that bad. you cannot be claustrophobic and you have to be able to do the... go through the acceleration profile that's normal for a face flight, especially far russian space flight. these are very easily measured. you have to be able to tolerate weightlessness. >> rose: is it hard to tolerate weightlessness? >> i didn't find it hard. there are several issues about it. there's a... long-term weightlessness has lots of medical issues. there's also a problem in the first couple days, there's space adaptation syndrome, s.a.s.. >> rose: what does it do to you? >> a horrible car sick.

the worst car sickness. you would throw up, you cannot participate, you basically have to rest. >> rose: that happens to everybody? >> no, the numbers i've seen that it happens to 50% of the people. that's not what i've observed but i've seen crew mates being uneasy at times despite a fairly strenuous streaming. by the way, there's no standard schedule of how to train for this space adaptation sickness. russians do it differently and nasa does it differently. i think it's good, too, because we get more medical data. the interesting thing is that by the participation of individuals like myself, civilians, we find out how the body responds for a larger... really for as large a scale of bodies, not necessarily somebody who's not necessarily completely healthy, who's not selected for perfect health.

in fact, a number of the space stories had minor medical procedures that they had to take care of before the flight and this is well documented in the literature and this has never happened in the past because anybody with those ailments, if you will, or disabilities, if you will, would have never been selected for space flight. >> rose: now will... you've been twice. >> yes. >> rose: do you want to go again? >> no, it's... i think it's... it's too... it's been perfectly enough and i promised my wife... >> rose: she said no more? >> well, she said don't do it, yes. but i would have to ask. it's not in the books. >> rose: this book that brought you here, homage to your father, written by him, a culture history of physics. i thank you for coming. >> thank you very much. great to be here. >> thank you for joining us. see you next time.