Lee Iacocca (Chrysler) - 1985 MIT Commencement Address

[MUSIC PLAYING] I am pleased to welcome to this platform Mr. Lee A. Iacocca, chairman of the board of directors and chief executive officer of the Chrysler Corporation. Mr. Iacocca will now give the commencement address. [APPLAUSE] LEE A. IACOCCA: Thank you, Dr. Saxon. And a good morning. I've only been here about an hour, and I've already had a little bit of pressure put on me. No less than six trustees have reminded me that Winston Churchill spoke to the commencement class 36 years ago. They said it was the biggest crowd that they ever had at a commencement, that he gave his usual rousing speech. But most important, the audience was upbeat and enthusiastic. You have to remember now that he had one huge advantage over me. The Celtics were not down 2 to 1 in the championship series that year. But if you'll just hang in there, trust me, they're going to win it in seven, the hard way. [APPLAUSE] President Gray, members of the MIT Corporation, members of the faculty, distinguished guests and parents and members of the class of 1985, thank you for asking me to share this very special day with all of you. And it is a special day. It's a day for all of you graduates to thank your teachers for their hard work, and your parents for all their sacrifices. And by the way, don't forget to pat yourselves on the back too. You deserve it. And my hat is off to every one of you. I asked one of your alumni at Chrysler to tell me a little bit about MIT students. He said quickly, they're all brilliant, but they're too intense, and they're too competitive. He said, the only thing they can't seem to learn is how to relax. Well, let me tell you-- relax today. It's your day. Enjoy it. Relax, but don't go to sleep. Because tomorrow, the real final exams start, and they'll go on for the rest of your lives. I'm going to try to give you a little peek at the test, but I won't be able to help you with the answers. They'll have to come from you. But in case you want to take a nap for the next 20 minutes or so, I'll give you the ending to this speech right now. I'm going to tell you to go out and change the world. That's my duty, right? That's what every commencement speaker says. And every graduating class just sits there hoping he'll be brief so they can go uncork the champagne, but musing to themselves, if the world had to be changed, why in the hell didn't he do it? Well, my generation tried pretty hard at times, and with some success I might add. I sat in your place in those happy days at the end of World War II. That was the good war, you know, the one in all those old Ronald Reagan movies. Our future couldn't have been brighter then. America was flush with victory. We were king of the hill, the undisputed leaders of the whole world. Russia soon got some funny ideas about that, however. But believe it or not, back in those innocent days, a lot of people really thought we had a chance to build a perfect world. I wasn't too sure. I graduated from Lehigh. But I kept my mouth shut because I didn't want to spoil it for the rest of them. Well, a few things went wrong. There were a couple more wars. There were eight recessions. There was Watergate and a dozen other man-made disasters along the way. But in spite of all that, we did manage to wipe out a few diseases. We put a man on the moon. And we produced more technological change than all of those who came before us, and I mean combined. And we made America, I think, a little more just, a little more fair, and maybe a little bit more humane. All in all, we really haven't done a bad job. And if you believe everything you read in the papers, the country must be in terrific shape. The stock market just went over 1,300. Companies are spending billions of dollars just buying each other up. And the public is on a buying binge too. They're buying lots of expensive cars and houses. Things are so good, even Chrysler made $2.4 billion last year. And we were broke five years ago. And you-- [APPLAUSE] And you, how about you? Well, you've got the world by the tail. You're all going to make a bundle of money next year, at least. Some of you will be yuppies sooner than you think. We call anybody a yuppie who is around 40 and makes 40 grand a year. Hell, we're hiring some 20-year-olds at almost $40,000. $33,000 to start, by the way, for engineers, to be exact. I guess you'd call them baby yuppies or guppies, or I say yuppies 20 years ahead of their time. But to be honest with you, we're handing you more than anybody has ever passed on to their kids. Generations ahead of you were lucky if they inherited a little shack on the back 40. You're getting a big beautiful mansion on a hill. That's what we're leaving you. Now, before you get all choked up with gratitude, I should tell you one more thing. We haven't paid for all this yet. We're leaving you the mansion, all right. But it's got a little mortgage on it, about $1.7 trillion, in fact, go on to $2 trillion, whatever that is, in just a couple of years. That's the public debt we're going to hand this class. And if you don't like the deal, if you don't want the mansion, I'm sorry because it's yours along with the note. You can't give it back, but you can get mad about it. In fact, I hope you do. I'm mad too. I think the mortgage you're picking up is a national scandal. Right now, we're paying $150 billion a year in interest alone on our national debt, and adding almost $200 billion a year on the principle. For a long time, we fought a battle with inflation in this country. We beat it, but we paid a heavy price. We paid a price in unemployment, in high interest rates, and in bigger federal deficits. And we did weaken many of our basic industries, especially housing and autos. Now, inflation is bad enough. It's an economic evil. Let's hope it stays in its own little hole. But at least inflation is a penalty we pay now. It takes money out of your pockets every day. It's sort of a pay-as-you-go penalty. But these huge deficits are a penalty that we keep deferring. We're going to leave them for you. It's not pay-as-you-go anymore. It's more like pass the plastic. It's a credit card approach. And it's your credit card we're using. What makes this debt so insidious is that so much of it is invisible. I often say that the government ought to be forced to follow the Truth in Lending law. Every year at tax time, it should have to send out a statement to you just like your bank does. And that statement would tell every American family where he or she stands. This year, for the average family, it would go something like this-- "Dear Mr. And Mrs. Taxpayer, this year, your family's share of the national debt stands at $27,950. In the past 12 months, your shares increased by $3,980. Your share of the interest bill this year is $2,127. Have a nice day." Now, maybe you noticed that one line is missing from that statement, the one that says "Please remit." We aren't remitting. We aren't paying our own way. Because there are no free lunches in this life. That bill has to be paid someday. And I guess you'll get the honor, unless by the way, you want to float it long enough to give it to your kids. But I sure hope you don't. I understand you have something here at MIT called hacking. Well, somebody is pulling a hack on your future. Piling up debt to create the illusion of prosperity is a cruel hoax. And the joke, my young friends, is on you. Now let me pause. Let me ask you, how am I doing so far? Is anybody mad yet? Well, if you're not-- thank you, one guy here. If you're not, let me go one step further. Let me tell you about our second national scandal, one that will put another dark cloud over your futures. I'm talking about a trade deficit that's gone right off the charts. Our trade deficit in goods last year was $123 billion. That's 1980, just 48 months ago, we had a $40 billion surplus. So we had a negative swing of $163 billion in less than four years. And we're on a toboggan ride right now. We will probably go to $150 billion in the hole this year alone. These two scandals, of course, are related by the way. The trade imbalance is the bastard child of those huge deficits that raise interest rates and throw the dollar out of whack. The high dollar makes American goods cost more and give foreign products a big leg up. American companies, I'm part of one, can work night and day to get more productive. Three years ago, we built 10 cars per employee at Chrysler per year. Now we build 20 cars per employee per year. But the currency problem just throws all that effort right out the window. That's one side of the problem. Our own fiscal irresponsibility creates that high dollar, and we can't blame anybody else for it. We have to fix that ourselves. But there's another side of the problem. Even when we are competitive, we're facing a crazy festival of trade barriers all over the place that keeps our products out of other countries. Consider Japan. Last year, the Japanese sold us $37 billion worth of products more than we sold them. That's a $37 billion deficit with just one country in one year. If you disregard oil imports, 62% of our total grade deficit worldwide comes from trade with Japan alone. Now the high dollar counts for a lot of that, but so does the fact that Japan protects its home markets. It does so rather openly and without much apology. Japan is a free and sovereign nation. And it has a right to act in its own self-interest. But guess what. So do we. We've got a right to go to the Japanese as close friends and trading partners and say, look, we've got us a $37 billion problem here. We can't handle that. It has to come down. For internal political reasons, you can't buy American rice or oranges, even though they're much cheaper than your own. That's OK with this. But then you'll have to cut back on some of the heavy traffic coming the other way across the Pacific. You see, that imbalance isn't just an American problem. It's Japan's problem too. It's a mutual problem because if it isn't solved soon, your Congress will be forced to take drastic action. The Senate, god love them, has already fired a shot across their bow by voting 92 to 0 to retaliate because of Japan's closed markets. Now that's pretty significant when you consider that Congress can't even get a unanimous vote to go home for Christmas. So we'll probably see a lot of finger pointing for a while. And that could hurt everybody. Now, consenting adults just shouldn't act like that. We should sit down and reason this out-- no threats, no talk of trade war, just an absolutely firm understanding that America has something to protect too, and that we intend to protect it. We intend to protect our ability to compete. But we aren't doing that. Last March, we took all import restrictions off of Japanese cars. We said to them, look how generous we are. Now what are you going to do for us? And the Japanese said, thank you very much. We're going to send 24% more cars in this year than we did last year. We got nothing in return. We got some promises, but we get a list of promises every year. Our guys who go to negotiate are supposed to bring home the bacon for America once in a while. I don't blame the Japanese for a minute. They are very good businessmen. They are managing their trade according to the unwritten rules used by almost every other country in the world. And those rules are simple-- devise trade policies that help your own companies compete. We, on the other hand, are worshipping at the altar of free trade. We're blindly wedded to a set of lofty principles that everybody else in the world ignores. We've got this silly notion that it's a mortal sin to play by the rules everybody else is using. We're the ones who are out of step today, not the Japanese. They're in step with the rest of the world. We're not. I always say we're like those few crazy hockey players who still refuse to wear their helmets, and we're getting our brains beat out. Now, don't get me wrong. I believe in free trade. Who doesn't? I think it's a beautiful ideal. It's right up there with goodness and mercy and charity for all. But it is not one of the 10 commandments. It's not the way the world works, and we aren't going to change that all by ourselves. Maybe someday we'll achieve that ideal. I really hope so. But I'm not willing to risk your futures waiting for that blessed occasion. You see, one impact of these twin scandals may be the deindustrialization of America. In fact, the process is really well underway. Go to Pittsburgh or to Akron or Detroit. You'll see it all around you. American heavy industry, old smokestack America is slowly dying. Many of the companies that helped build the industrial middle class, the backbone of the country in this century, are boarded up. Why? They can't compete anymore. They can't compete because our currency and trade policies have tilted the international playing field against them, and they're getting short of breath from running uphill. Maybe they could use a breather. We got one at Chrysler six years ago with the federal loan guarantees, and it saved us. I've suggested some kind if you'll ignore the term industrial policy-- I've suggested some kind of policy to help other companies in trouble. But the purists say it would wreck free enterprise forever. I don't know why. Chrysler is a bastion of free enterprise today. We're making lots and lots of money. We're paying lots of taxes. A quarter billion in 90 days, that ain't bad for guys who were broke. 600,000 people have jobs who would have been on the street. The government never put up a cent and not only got its $1.2 billion of guarantees back seven years early, but it made $350 million on the deal to boot. Pure profit. The Chrysler loan guarantee board wasn't a welfare office. It was a profit center. They don't have any idea what that means done in Washington, by the way. Let me be blunt. Until we fix the currency problem and write a trade policy and an industrial policy for America to compete, it's going to make less and less sense for companies to build plants and put people to work in America. Our trade deficit has already cost us three million jobs, and more going overseas every day. The economics, when you think of it, are pretty simple. You build it in yen, and you sell it in dollars. And you don't need a degree from MIT to figure that out. Hell, they probably understand that even over at Harvard. Well-- [LAUGHTER] --maybe some of you-- [APPLAUSE] Right about this point, maybe some of you feel that maybe we should deindustrialize America, get rid of all those dirty smokestacks, and put everybody to work in service industries. Or hey, maybe even better, high tech. I have to admit that the weather's nicer in Silicon Valley than it is in Detroit. But let me tell you. If America gives up its industrial base, there is no future for high tech either because we smokestack guys are your best customers for all the wizardry that comes from Silicon Valley or from up here on Route 28. We put high tech to work. We put it to work in our plants. We've got robots and laser cameras all over the joint now. We've got some of the world's finest CAD/CAM facilities. Of course, we put it to work everyday in our cars too. Our new Laser and Daytona sports cars have seven-- this is as commercial as I get today. [LAUGHTER] --have seven mini microprocessors, or mini computers, in each car. And unless you put it to work, unless you use to compete, high tech is really just a toy. How much do you think a bag of silicon chips would bring you in a supermarket anyway? Your future depends on an America that can hook and jab in the international marketplace. Never forget that. And right now, we're falling behind, and fast. Right now, America is getting whipped. Right now, our three largest exports to Japan-- you've heard this before-- are corn-- in this order-- soybeans, coal. Japan's largest exports to us are cars, trucks, video recorders. Raw materials and foodstuffs traded for manufactured goods. Does a pattern sound a little familiar? It's the classic definition of a colony. That's what deindustrialization and weak-kneed trade policies are doing to America. They're making us a colony again. We were a colony once before. And we got so mad, we threw the tea into the harbor, and not very far from where I'm standing, by the way. Well, here we are becoming a colony again. And I mean that. And I hope it really makes you mad. So get mad. Don't burn the place down or start dumping things into the river here. But get mad. Get mad because some people are saying that you're going to be the first generation of Americans who will have to settle for less than their parents had. I hope to God you aren't listening to them. I hope you don't believe that because it does not have to be true. It doesn't have to be true because even though we've taken our eye off the ball, this is still America. And your birthright as Americans is to change things. And America, when people get mad enough, they can change anything. Righteous anger intelligently directed has made this the greatest democracy in the world. I hope every cancer researcher in the country goes to work every morning mad, and every engineer and economist even, and teacher, and congressmen. Satisfied people change nothing. Only angry people change things. I got mad six years ago, really mad, when the Wall Street Journal said a little prayer over Chrysler in one of their editorials and told us in big bold type, please die with dignity. A lot of people at Chrysler got mad as hell at that kind of advice. They got so mad, they scratched, and they clawed, and they survived. So you get mad too. Get mad at the people in Washington who are burying you under a dung heap of public debt. Tell them no more. Get mad at the free lunchers of the world and tell them no more. It's time for sacrifice. Get mad at the ideologues who want to make you martyrs to some 18th century trade principles, who want you to live in a colony. Tell them no more. We want to compete. And get mad at anybody who tells you that you have to settle for less. Tell them get the hell out of my way. You owe that to yourselves. Your education is as good as anybody can get anywhere. Remember that. You're smart enough to compete with anybody in the world. And you deserve the chance to be the best. You owe it to yourselves and to those who follow you too. Now you're not getting a perfect world. But I hope you all appreciate what has been given to you. I hope you feel a deep appreciation for what other people have done so that you could be here today. But I also hope you understand how you pay that debt. Doesn't get paid to me or my generation or to your teachers or even to your parents. You know, there's a scene in the movie Guess Who's Coming To Dinner. A father is very angry with his son. And he says, I carried that mailbag for 40 years so you could go to college and to medical school. You own me for that. And the son says, hey, I owe you nothing. If you carried that mailbag a million miles, you did what you were supposed to do. You owed me everything you could ever do for me, just as I will owe my kids. The son wasn't ungrateful. He loved and respected his father. But he also understood how civilization is supposed to work-- one generation making things a little better for the next. Fathers and mothers sacrificing everything for their kids. That's how we got where we are today. That's the way civilization is supposed to work. Now my generation is leaving you with too much debt. And we're a little blind to some of the new economic realities in the world. We're leaving you with a lot of problems to solve. Big deal. But that's the way civilization works too. Every generation inherits the unfulfilled dreams of the one that came before it. And every generation inherits its own set of challenges. We were naive 40 years ago thinking we had a shot making a perfect world. But in many ways, we made it a lot better for you. And by the way, we're not through yet. Almost, but not yet. You, more than most, have been given the tools to meet your own set of challenges. A degree from MIT just about guarantees you at least a shot at molding the future. It's a prestigious ticket, and it puts you right up in front of the pack. But let me tell you. It may also be a bit of a burden to you. People are going to expect more of you. They're expecting it to be leaders and to be winners. Your MIT degree puts you in a pole position, as they say. And the green flag is about to go up. So now let's see if you're mad enough to make this imperfect world just a little better for your kids. Let's see what you're made of. So class of '85, start your engines. [APPLAUSE]