Penny Pritzker on Manufacturing, Big Data, and the State of American Business
A full transcript of her interview with The Atlantic's James Fallows.
It's been six months since Penny Pritzker started her job as Secretary of Commerce. On Wednesday, Atlantic National Correspondent James Fallows spoke with her about the president's economic priorities, which include promoting better data use, building a stronger manufacturing sector, and facilitating higher levels of trade and exporting. You can read the full transcript of the conversation below.
FALLOWS: I thank you all for joining us. Our great thanks to Secretary of Commerce, Penny Pritzker, who you all know from her background and her work. She's now spent about six months in this job. I think you're the 38th ...
PRITZKER: ... Why yes, that's close.
FALLOWS: And you managed to get confirmed ...
PRITZKER: .... Yes.
FALLOWS: And I think you all know the business background that Secretary Pritzker brings to this job coming from one of America's leading business families, but yourself, the founder of five startup companies, Harvard College Degree; Stanford JD and MBA; and I think maybe the most impressive of your many achievements may have been this Woodrow Wilson Award you won last year for public service which is really, really a big deal.
And we're going to talk about—the—you may have noticed, those of you with sharp eyesight can see the sign on the secretary's lapel saying, 'Open for Business'. This is part of a new Commerce Department motto. We're going to get to that. But first, I just wanted to ask you an introductory question.
You have a career of running businesses and observing how public life—public policy affects them. What's been different about seeing it from the inside these past, nearly six months? What didn't you know before you got here?
PRITZKER: Well there are a lot of things I didn't know. The most interesting thing for me as coming from the business world, having run businesses, knowing how business works has been really trying to understand how does government work? And who does what? And we were just talking about China.
And I said, you know, one of the things that I've learned coming into this job is what does it mean to be a deputy? What does it mean to be a Chief of Staff? What does it mean to be an Under Secretary and Assistant? And what do those folks actually do? And how does it work? And that's been a big learning curve.
Whereas I know what a CEO does. I know what a Chairman of the Board does. I know what a CFO does. And so learning these things has helped—it's taken me a little bit to understand, and frankly I have to live it a little bit to get the feeling and to better understand how to be effective.
FALLOWS: And so turning now to your areas of effectiveness. I've been reading a number of your speeches and policy papers over the last few months about the whole 'open for business' approach. Will you—I know what this involves. So would you explain to some of our audience why—especially for small business, what 'open for business' program means and how it affects small businesses?
PRITZKER: Well Jim, I appreciate your asking. So let me tell you a little bit of this story. When I came—when I was sworn in, I brought with me to the Department of Commerce a sign that said—and I put it on the door and the office—the secretary has quite a history to it and it's sort of a grand space. Far grander than anything I've ever worked in.
And so -but there was nail on the door. I did not nail—put a nail on the door. And I hung a sign that said, 'Open for Business'. And the reason for that was really came from the president—the conversation the president and I had about the role that he wanted me to play and he wanted the Department of Commerce to play which is really to be a bridge between the business community and the Administration-a two-way bridge.
In other words, to not only to hear what's going on in the business community and to bring those ideas back to the Administration and to take thoughts and ideas that are emanating from the administration to the business community to understand, you know, their reactions. So that there's not this miscommunication or disconnect going on. And frankly, our 'open for business' agenda which we have rolled out a couple of weeks ago is a distillation of something you all would appreciate as business people in this room, which is we went about a process of developing a strategic plan for the Department of Commerce.
And this is the summary of the strategic plan, which really falls into three categories and three areas of focus. One is around trade and investment. One is around innovation. And one is around data. And really—and that all sits upon a platform of operational excellence and operational management and execution.
And this is a way to take a very large organization that has nine different agencies under it and say, "What are we going to focus on?& And what are the things that are important to us?" So trade and investment, for example. We're very committed to exports, imports, re-shoring, and what are the things the federal government can be doing and I can go into detail about them.
But I'll just give you kind of a broad overview now. Innovation really has three components to it. One is around advanced manufacturing. And what do we do—what's the role of the federal government to support advanced manufacturing. And that really falls into a lot around pre-competitive research and things like that.
Skills. What I heard—I went on a listening tour. One of the things that I did during my first hundred days in my position was I went around the country 13 different cities meeting with hundreds of CEOs, folks who are starting businesses, who have small businesses, who have large businesses. And talk to them about what's on their mind.
One thing I heard—I heard many things—lot about trade, but also and obviously, our strategy reflects a lot of what I heard. But also around skilled labor and skilled workforce and how do we make sure that we have the labor force we need for companies, such as yours, who are—want to grow, to be able to grow.
And that was a big issue. So under innovation, advance manufacturing, skilled labor, and then really the digital enterprise, which I'm sure is for many people in this room, extremely important to your businesses, either to what you're building right now or just to running your business.
The digital enterprise is, in my mind, is—needs—is under some stress. What do I mean by that? I mean that the governance of the internet today is run by I-CAN. And there's a lot of pressure globally for it not to be this kind of independent governance. But rather for it to be run by maybe the UN or somebody, or some other kind of organization which we do not support.
We believe that we should leave the internet as fluid and flexible and free as it has been. Now maybe the governance needs some adjustment but it—these kinds of issues are an area for us to focus around privacy. That's a place for the Commerce Department. Third area of our 'open for business' agenda is data.
We sit at the Department of Commerce on what I call a treasure trove of data. And I'll give you one example. Noah has—we produce at Noah 19 terabytes of data a day. We only make two terabytes of data a day available to be used by the private sector. That's just Noah. That's not the census information that we have.
That's not the economic data that we have. That's not the other data that we have. And what is our responsibility as a steward for the taxpayer? To make sure that—what do we do with that data? And how do we make it available? That will be a long-term process. Anyway, those are the three big initiatives, trade and investment, innovation, and data.
FALLOWS: And I have—those are important and interesting. I'm going to ask you some follow-ups on each of those. I wanted to then—but pick on—you said right in the beginning when the president said he wanted you to be part of the two-way communication system between business and the government.
My observation is that the business world is not—seems less and less appreciative of the Administration's intentions as time goes on. Have you been affected in that part of the communications—did they seem in a more attractable hearing from you what the government's trying to do then they might otherwise.
I'm not going to say this is about the message. What I'm going to say is I think what one of the jobs that I see that's very important for us to do and that I take very seriously as part of my job, is the agenda-the president's economic agency is a great growth agenda and a great agenda for business.
And the—the business—there seems to be a lack of recognition of the absolute and forgive me—I'll put this down for minute, overlap that exists between what the business community wants to see as an economic agenda, and the president's economic agenda. There's enormous similarity and so what do I mean by that?
Trade and investment. Number one issue I heard when I went on my listening tour. I need trade agreements. Help with trade agreements. I want to sell my product, not just in the United State. I want to sell it all over the world. I recognize that 95 percent of customers are outside the United States and I don't want to be just limited to the United States being the largest economy in the world.
But obviously, it's a big wide world out there. So trade and investment, big issue to immigration reform. Business community wants to see education reform. It was—it's both an economic benefit. There's about $1.4 trillion of economic growth if we pass Immigration Reform. But it's also on the skilled labor front, enormous opportunity could come from Immigration Reform in terms of increased Stage 1 BVs as EB 5 fees in terms of families being able to be over here.
So more opportunity around skilled labor. So the president's economic agenda being Immigration Reform, innovation and other area, advanced manufacturing. What we're doing in the Administration and what we at the Commerce Department are doing around supporting what we call pre-competitive research with the National Network of Manufacturing Innovation - we have a pilot in 3D printing and we have three more pilots that are hopefully will be announced in the first quarter of next year.
Huge interest around the country in participating in the areas of pre-competitive research. And that really requires a government role. So, you know, infrastructure investment another one. Business wants infrastructure investment and needs it first and foremost maybe for your supply chain.
And this is everything from bridges to broadband. So when you take—and then I get to corporate tax reform which the president has come out of in favor of corporate tax reform and put a proposal on the table that is very similar to what groups like the BRT and the Chamber want to see.
So by a bridge, it's really highlighting and emphasizing and it's not just—it's both bringing information back and forth, but also, making sure that people really understand how much similarity there is between the agenda. So.
FALLOWS: So on your three big pillars which are, you know, trade, export, et cetera, and innovation and then data. On the first one, the president got a lot of attention, what? Two years ago or so for promising to double U.S. exports. How should we think about that effort? Is it a plausible goal? What is Commerce doing towards that end? And how can they involve small business toward that end?
PRITZKER: So then, Jim is talking about the National Export Initiative which is really the president's recognition that 95 percent of customers are outside of the United States. Ten million jobs in the United States are supported by exports; 1.3 million of those 10 million jobs have been created since 2009.
So it is good for the American worker and it's good for American business. So the National Export Initiative has been reduced to a concept of just a number. And that's—and I'm blowing that up. And in fact, we have an interagency effort to really say, "No, no. This needs to be about precisely what all of you are in this room."
Which is we need to change the DNA of the way business thinks about their marketplace. You need to think more globally sooner because if you have a great idea, it's easy for somebody to replicate in another part of the world with technology and with communication. So what we want, you know, what we want to encourage and help businesses do is get your ideas—not just to market in the U.S., but also we, at the Commerce Department, have a gold key program, for example, where we will help you understand where in the world your product is competitive.
And then we will introduce you in those countries to maybe distributors or to customers or to financing, and things like that. We will help you. It's a program that we run with our foreign commercial service and our USIACs which are here domestically helping companies.
So we're very much a part of the apparatus to help companies export. We also have the advocacy center which is—if you're doing—if you have product that you want to sell to another government, we will help you. We will help advocate. We have a whole of government approach to supporting your bids to foreign countries.
So it's a really active part of what we're doing. And my view is, this is about changing the DNA of the way we think. And we have to think more globally. And we as business people, have to be more globally fluent earlier in our process, in our business plans.
FALLOWS: And I'll say before your testimonial, I've seen a lot of your foreign commercial service officers around the world and I'm really impressed on what they do to try to move the ball. To be clear on something you said earlier. When you said are blowing up this number, you didn't mean you're blowing off that number? You're expanding it in ...
PRITZKER: ... No, I guess, I guess. I'm sorry. I mean I'm expanding it. Of course, I'm not always the best with language. I appreciate you correcting me. But thank you.
FALLOWS: My journalistic years were attune to this. Let's talk now about the innovation part of this triad. There's been a lot of controversy over the decades about the ways in which the government can and cannot properly support this precompetitive work. And it's obvious to me in the semi-conductor industry and the internet and others where there government has played a crucial role.
What is the case you make? If this was an audience, say from Cato, or someplace saying the government by definition cannot help industries do this. What's the case you make for why it's important now?
PRITZKER: So what—the first thing I would do is I wouldn't make it a loan. I would make it with the—we have something called the advance manufacturing amp which is a group that I was with yesterday for a period. And run by Andrew Liveris, of Dow and the part—and also run by Rafael Reif, of MIT.
And the group about 25 of corporate leaders, including Honeywell, ALCOA, you know, major companies around the country who are committed to innovation. And it's small businesses as well, as well as community college because we have to train people, as well as universities.
And number one on their list is they have five things that they want to accomplish. But number one on the list is really taking—they did a study about what technologies they think will keep the United States on the cutting edge of innovation over the next decade. They broke it down and said they picked four.
And they said, "But the federal government has to help us here. We need like in the (inaudible)." For those of you-I don't know if you know what we did in the semi-conductor industry. But the federal government stepped in and said, "We cannot afford." This was in the 1980s I believe. "We cannot afford to lose the semi-conductor industry."
So the Department of Defense put up money and brought companies together with academics to really make sure—and this now resides in something called Semitech in Albany, New York. It originally was in Austin, Texas. And we need to do the same thing. So we started a pilot. We have one pilot out there in 3D printing right now in Youngstown, Ohio.
Massively successful. Sixty companies working together on twenty different products—projects around 3D printing and how to use 3D printing. It's the part before you, as a business person, are—can invest money in a way where you say, "OK, I know I'm going to get a return on that invested dollar."
That's the place for the federal government to do it. But what were—it's not us doing that research. It's—we're a catalyst with the taxpayer dollars and what we —we the Obama Administration have done is said, "OK, we're going to make it competitive. You come together with a plan."
So we're doing three more of them. One in digital manufacturing, one in composite materials. And it's a competition where regions are coming together with universities, with community colleges, with industry representatives, that may be local or may be national and saying, "Here's how we're going to take your federal dollars. We're going to match them and we're going to leverage your money so that we can really own these technologies for the future."
And that's a really good role for the federal government to play. The return on investment for our taxpayer dollars is huge.
FALLOWS: And you're saying from actual industrialists, you don't get pushed back on that. It's more just from sort of external ideologues, who oppose it ideologically, but industrials themselves do not oppose this.
PRITZKER: The industrials do not oppose it. And frankly there's, right now bipartisan - bi-camera legislation that's been proposed for the federal government to put up $6 million which could probably do it's called 10 to 20 institutes around the country that small business, large business can come together and work together on before you get to the point where you're competing with one another.
FALLOWS: And one more question on this front. If your counterpart from the Health Sciences or Life Sciences were here, he or she would be saying that for amount of money that are trivial on the national scale but crucial on the research scale were sort of eviscerating and impoverishing the biological research establishment.
In your sort of manufacturing research establishment, is the trend up, down, flat? What is the trend of federal research money in this field?
PRITZKER: It's modest at best. I mean in the context of a federal budget. From your mortals, it feels like a lot of money. But what—and—and—but what is so critical about it is the leverage. So we put up, for example, $30 million. We, the federal government, your taxpayer dollars—$30 million.
It was matched by $40 million from industry and universities. Now, just one company—Siemens has come in and donated $400 million worth of software to support training people around 3D printing. I mean it's—we've gone from 60 companies involved to 100 companies. And we're not a year old.
It is an unbelievably positive catalytic affect. And this is the kind of thing we would love such a return on investment.
FALLOWS: So let me now ask you about the third one of your triad about data and the ways in which Commerce (inaudible) which is a huge source of data. I know about the whole weather establishment from my piloting life, from many analogues of that. Could you tell me—tells us first, some of the business applications you imagine being possible here?
And second, there's been a lot of controversy in the last three or four months about the way National Security Policy, the whole NSA issue, has affected the rest of the world's trust of U.S., especially government-provided data. And has that been any—has that been a shadow on what you're doing?
PRITZKER: So I put the National Security issue is what I call protecting the digital flexibility, right? And really a question around making sure that we restore trust. And the president has called together—there's both a national security approach to this, as well as an economic approach to the how do we restore trust question.
And he—that is a very robust process, both in government. He put together a separate external panel and then there's a third party—a self-created panel called P club, P-c-l-u-b. And there's the review board and then there's the internal processes within government. And that's very robust and a stay tuned for the outcomes of that.& But taken very, very, very seriously.
In terms of data, I use the—I have to be honest. The potential is very large as I understand. But not my area of expertise. So what we are doing is first to set up and say one of the questions is, how do we make data available? What should we make? These are—first we're trying to set the table.
It's like a beginning of a business plan. We see an asset sitting on a shelf. It's like inventory. All of this information. And the question is what do we do with it? And what we're trying to do is now get the right people in place and ask ourselves a lot of questions about what and how we should do this? As responsible stewards of this is an asset of the taxpayer, right?
That's one. What we know is—so lots of questions. But what we know is from the two terabytes of weather data that we make available, a multi-billion dollar industry sits atop that foundation. (Inaudible) foundational information, they then use it to either create apps or to add data to it to create additional information.
So you've got everything from The Weather Channel to all your apps on your phones of weather, et cetera and other things. And now there's all kinds of information we're putting out around flubbing and it can be used by cities and by developers. This is valuable information for decisioning across many different industries.
So the question is its census. We do the American Community survey every year. We survey 3.5 million Americans in depth about, you know, what's going on in their lives and their businesses. This is very important information for making—for companies, for mayors, for governors, for the federal government to make informed decisions.
What should we do with that information? How do we make it available? And that's not even touching the economic information. So we're at the beginning of figuring out what's the right plan. I believe this is a decades-long process. I don't think this is something, wave a magic wand and this will all be figured out.
Because we're evolving as a society in terms of we're just now recognizing. Remember storage used to be really expensive 15 years ago. Storage is not expensive today. So we've got a lot of information. Now we have to make it usable and flexible so that you all can create businesses around it.
FALLOWS: I have just one or two other questions I would like to ask before I turn it over to the audience here. Once is I've been fascinated reading the accounts of your listening tour, going around the country to manufacturing installations and others. Could you tell two or three stories of the most interesting things that you saw when you were taking this trip? Things that will affect the way you make policies—things you hadn't known before.
PRITZKER: I'll tell you a couple of stories about companies that I went to visit. So I—as I like to say, I went—I did everything from semi-conductors to song writers. So, you know, tried to really and all over the country. We were in 13 different cities, where from Orlando to Missoula to Seattle if you will. And a lot in between.
A couple of stories. There's a company that makes the sensing equipment that we use in oil, drilling, and fracking, et cetera. It's a gentleman who founded the company 20 years ago. And I love this story. He was working for a large company. The company got bought. He was on like a one-year contract. At the end, they didn't renew his contact.
And he didn't, you know, he was an expert in sensing, right? And he's been an innovator. So he went off, started a small business. And today, he is like the leader and his—the leader in this field. His team is an innovator. It's not a huge company by the number of people. But they own this niche and 85 percent of his marketplace is outside the United States. Fascinating.
I, you know, and then, to see, you know, and what he's interested in helped, you know, trade agreements. Really important to what he does. Bicycle manufacturers. So I was in Portland, Oregon. And I met with about 15 bicycle manufacturers. Everybody from small to large and I will tell you the song—the countries music business market (inaudible) is a $7 billion industry.
The bicycle industry, I'm told, is a $7 billion industry in the United States. And so, you know, or it's to me, you know, you begin to realize that our economy is made up of lots of different, you know, sectors that we tend not to break down. But a bicycle manufacturers were fabulous. So everybody from the high-end—I make 10 bicycles or 15 bicycles a year to someone doing mass bicycles.
What was fascinating to me is some of these were very, you know, modest-sized businesses in terms of the numbers of employees. The sophistication that they understood about the supply chain of parts coming from all over different parts of the world was really interesting. So, you know, we think about supply chain as relating to, you know, massive businesses like GE, or Boeing, et cetera.
But to hear from the bicycle manufacturers and their level of issues around, you know, supply chains and tariffs or border issues was really fabulous. Because it made it very real for me.
FALLOWS: A short question for (inaudible), a short response and then I'll turn it over to you all. The general view of federal government now is simply that it can't do anything. Six months in, are you depressed, optimistic? What's your frustration level?
PRITZKER: Oh, I'm not frustrated at all. You know, first of all, I have a terrific team of people. And we're all only as good as the people who work for us. And what I've been really amazed at are the people that I get to work with and the people that, at frankly have left their (inaudible) service jobs and are willing to come into government to help serve.
The second thing I will tell you is, you know, we at the Commerce Department are trying to be far more—we recognize our number one customer and number one (inaudible) the business community. We're trying to be extremely responsive. We'll provide services that you want—so we run the patent and trade office and I would suspect that most of you in this room have dealt with the patent and trade office.
It's extremely important to our country that we run a good patent and trade office. I have some very big frustrations there because we—we're have fee for service operation. You all pay us to do our job and yet, we're subject to sequester.
So $120 million of money that we take in is sitting in a bank account that we can't use to make our systems better or be more efficient and be more effective. And we have a backlog that we're trying—we're very focused on running the right amount of inventory.
So to me, you know, what I will tell you, the people who run the various whether it's the census something very important information for you—the Weather Service. Well you've got 5,500 people plus around the world, you know, who are running the Weather Service which I will submit everyone of you in this room depends upon—all of us do. For life—protection of life, for property, for moving your goods and services around. Very important.
You know these are things that we take for granted that the government does for us. And the people get up every day and do it. They are—they want to do a good job for all of you.
FALLOWS: So who has a question? And please wait for a microphone come to you. I'll let the microphone bearers seek out people. Why don't you just choose a question and then—there's another microphone, right? So, if you will, sort of go proactively of who will be the next questioner, yes, and identify yourself, Emma.
QUESTION: Sure, I'm Emma Green, from The Atlantic. So with the rollout of the new healthcare exchanges, there's been a lot of concerns from insurance companies, hospitals, medical device providers about what this will mean for the future of their businesses. As the bridge from the business community to the White House, how are you helping to soothe these concerns and communicating these to the president?
PRITZKER: Well the things that I'm aware of. These are—let's take small business, since I think that's most of the people in the room is to-date the healthcare has not affected employment and is—no, let's look at what is the Healthcare Bill trying to accomplish. It's trying to accomplish a couple of things—several things.
First, is get coverage for people. Two, is affordability. And one of the things that I know is running a business and certainly most of you in this room know, running a business is the volatility of your healthcare costs for your employees is a significant issue, regardless of what kind of coverage you offer. It can be a big swing in how you're offering.
So a second objective is to deal with affordability. And it appears from the data, at this point that, you know, the inflation rate of healthcare cost is moderating. So that will be very, very important. And the third thing would be to hope that some of the pilot aspects of the Healthcare Bill will deal with quality and improvement in quality too.
So my attitude about the Bill is at this point, is we've got to take the long view and stay focused on what is it trying to accomplish. For any of us who have been in a major technical rollout, they're always difficult.
FALLOWS: And then someone over here, where's the microphone? Yes. Here.
QUESTION: Good morning, Madame Secretary. Javier Palomarez, with the United States Hispanic Chamber. So strange to call you Madame now but good to see you ...
PRITZKER: ... I know, it's good to see you.
QUESTION: I mean that in a good way. I know absolutely and let me begin by saying that American Business is thrilled that you accepted this role...
PRITZKER: ... Thank you.
QUESTION: It's the right thing. And we're very happy. You mentioned comprehensive Immigration Reform. And I know that you and I had an opportunity to talk about this. I have spoken to the president about, to Joe Biden. And I think we all agreed kind of to paraphrase that Immigration Reform is an economic imperative for our nation.
It goes beyond the politics and the rhetoric and the emotion even—it's got commercial and economic implications that are really important. After having been in your role now for a while, has your view changed? What are your thoughts as it relates to whether we do or don't pass something? And what are the implications after having been on the job for a while? Can you share a little bit about what your thoughts are?
PRITZKER: Yes, well we had the pleasure just by way of background I was speaking before I was sworn in about this. I'm only more convinced the importance of Immigration Reform. First of all, my listening tour. It was—actually the business community supports Immigration Reform and recognizes it.
;As you said, it's, you know, there are many ways to think about Immigration Reform but let me just talk about it from an economic standpoint. That's not the only way to think about it. But from an economic standpoint, as I said, $1.4 trillion of economic benefit to this country over the next 20 years, if we pass Immigration Reform.
In the short-term, very big benefits, in terms of skilled labor; in terms of supporting businesses and frankly, I have had direct conversations with a number of companies who are watching whether we're going to pass this law or not. And if we don't, they say I can't afford to only have a-my operations here.
I'm going to have to go other places because I can't get the workforce that I need. And that is chilling to me. And it seems—so I've been all around the country, you know, almost every stop that I've had I have, you know, I have talked about Immigration Reform and the importance of it. First talking—a lot of my conversations with the business communities are round tables.
It's not me talking. It's me listening. But I ask questions. And I'm interested in what people think and, you know, this is a very important part of legislation and it's a moment now for us to try and get this done. And if it's something that you all support, please do make your voices heard.
We need help.
FALLOWS: We have about two and a half minutes more minutes of the Secretary's time, so I fear this will be our last question.
QUESTION: Alright, Secretary Pritzker, thank you very much. Earlier, the CEO of Gallup said that he was surprised in interviewing small business owners that access to capital wasn't the reason they were not growing. They focused on regulations and environmental issues. However, I think that's a red herring. I think that small business owners have been so frustrated in the last 10 years with their—even before the recession but especially after 2007, with their ability to get access to capital.
When a small business that actually employs people in their community unlike...
FALLOWS: ... Can you draw this towards this question part?
QUESTION: Yes, I apologize...
FALLOWS: ... Great, thanks.
QUESTION: When (inaudible) capital, it's gambling. There's a high return on that investment if it works. If you look at VC numbers you know, because you've had experience. But small businesses—owners are being asked to put their houses on their lines when they go to get these small business loans that is guaranteed by the FBA.
;And I would implore you and I have implored people in the Administration to look at this issue because it is hurting, as earlier said. So I'm just asking you if you're familiar with that issue. And if you would ...
PRITZKER: ... I am very familiar with the challenge of access to capital and particular the implications on smaller banks of, you know, different types of capital requirements. So it's a very big issue and one we're very focused on.
FALLOWS: So with that, there's many more things I'm sure we'd like to discuss, but we have to (inaudible—we promised to send the secretary off. Now please join me in thanking Secretary of Commerce, Penny Pritzker.
PRITZKER: Thank you.