5 Minues with Pete Peterson

Five Minutes With Pete Peterson, ’51

Launching a Foundation After a career that ranged from serving as Richard Nixon’s Commerce Secretary to launching private equity giant The Blackstone Group, Pete Peterson, ’51, pledged $1 billion last year to form the Peter G. Peterson Foundation to spur public action on long-term economic problems in the United States. Its first major initiative was a documentary called I.O.U.S.A., which debuted at Sundance and was later nominated for a Critics’ Choice Award. He recently spoke with Chicago Booth Magazine about the financial crisis, YouTube, and what MBAs can do to help the economy. Interviewed by Patricia Houlihan

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What made you launch the foundation?

Doing Well, Doing Good: Pete Peterson, ’51, has launched a foundation to address “undeniable, unsustainable, but politically untouchable” longterm fiscal and economic challenges facing the United States.

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I had a windfall from Blackstone going public, and suddenly I was confronted with the possibility that I would be an instant billionaire. I thought I certainly already had more than enough money. I’m 82. My Greek immigrant father, who donated a lot to good causes here and in Greece, said giving not only makes the recipient happy, it can also make the giver happy. I was in the final stages of retiring from Blackstone after 24 years and I had just retired from the Council on Foreign Relations, where I’d been chairman for 22 years. The transition from having a rather hectic life to having little to do I found almost depressing. I decided to commit $1 billion to create a foundation to deal with the issues I’ve been railing about for 25 years—long-term fiscal and economic challenges facing the United States. And I call them undeniable, unsustainable, but politically untouchable. I decided there was room for a foundation—different from certain other think tanks—that

would focus on the long-term, and focus on trying to do something about these problems.

What are the first projects you funded, and what do you hope they achieve?

The first big project was funding a movie called I.O.U.S.A., which explains the melancholy fiscal future.

It ran in about 400 theaters. CNN ran a shorter version. Now we’re doing it in even smaller bits for YouTube. We have a major number of efforts aimed at young people because they’re largely uninvolved, yet it’s their future that’s imperiled. We’re steadily increasing our online presence through sites like YouTube, MySpace, Facebook and Twitter. We’ve given money to mtvU, which partnered with us to create the InDebtEd campaign aimed at college students. InDebtEd has a great website and is currently developing a video game centered on personal financial responsibility.

We are working with the Committee for Economic Development to

energize business leaders. If we don’t do anything about these long-term challenges—Social Security and Medicare, current account and savings deficits, foreign lending that may soon reach dangerous levels, along with health care costs that are out of control—and try to borrow those extraordinary amounts or to tax our way out of them, it’ll have a major negating macro effect on the economy. And, shorter term of course, the unprecedented trillions of dollars of additional budget deficits in the various stimulus and bailout effort simply add to my concerns.

What do you think it will take for individuals to change? Or politicians?

What makes a difference?

We’re doing something that I understand is quite rare in foundations—getting involved in citizen engagement and awareness. We’ve run double-page ads in the New York Times and major ads in the Washington DC–area. We’ve run TV commercials. We have to inform the public because they have been anesthetized by a political process that does not want to tell them the hard truths. For example, Washington has concocted something called Social Security Trust Funds that I call an oxymoron; they shouldn’t be trusted and they’re not funded. The money’s already been spent and there’s nothing in them but liabilities. The public does not know that. We don’t think young people understand their payroll taxes would have to double to cover the current promises that have been made. In my opinion, that is unthinkable.

Once people are educated, they also have to be motivated to act. There are

huge special interest groups urging politicians to pay out more benefits with more programs. We now have a political system where, unlike what the founders of the country had in mind, politicians consider the position a

I think most executives know these long-term issues are unsustainable and undeniable, but many are preoccupied with running far more global, competitive businesses, and they probably feel they don’t have the time

“ Once people are educated, they have to be motivated to act.”

—Pete Peterson, ’51 career and don’t want to lose their jobs.

If they peddle the hard truths, they fear they’ll lose elections and lose their jobs. Their focus is not on the next generation, it’s on the next election.

We want to build a movement of young people. I realize it’s a fantasy, but I’d love to see 50,000 to 100,000 young people and their parents in Washington shouting, “I’m madder than hell, and I’m not going to take it anymore.” In other words, it ultimately has to get expressed in Washington, and we understand that. But first there has to be increased awareness.

Do you think there is something that the business community—including MBAs from Chicago Booth—can do?

Business can be a huge force in Washington when it gets focused and energized. It just has not been focused on these longer term issues. If the business community were to decide these long-term challenges were dangerous to our economic health and to the health of their businesses, they could be a much bigger force than they are now. Tom Friedman calls us MIAs, missing in action, on these longer term issues.

to get involved in what may turn out to be controversial crusades that deal with these longer range issues.

Which of the professors you had at Chicago still stand out in your mind?

Milton Friedman, George Stigler, James Lorie, and John Jeuck. I visited Milton

before I accepted the job in the Nixon administration as assistant to the president for international economic affairs and asked if I should take the job. He said, “Absolutely not. With floating exchange rates, the job is unnecessary. And without them it’s impossible. A young man your age shouldn’t be taking a job that’s either unnecessary or impossible.”

George Stigler used to say, “If you have no alternative, you have no problem.” Remembering that, however daunting these long-term fiscal challenges, I decided I had no alternative but to try to do something about these problems. It’s amazing how that Stigler principle has stuck with me in life. n

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