No president has, upon leaving office, launched himself as vigorously into supporting entrepreneurship as Bill Clinton. Both the Clinton Foundation and the Clinton Global Initiative have created programs to fund and mentor hundreds of entrepreneurs at home and abroad. In a wide-ranging interview--on everything from electric-car charging stations to the proper role of banking regulation--the 42nd president shares with Inc. his vision and priorities for business leaders in the 21st century.

--As told to Jim Ledbetter

Inc.: Let's start by talking about the Clinton Global Initiative. Where does support for entrepreneurship fit into the broader CGI mission, and how has that role changed since the beginning?

Bill Clinton: When we started, we had this simple idea that people went to a lot of these meetings, and talked about solving a lot of these problems, and nobody ever did anything. So we were going to be different: If you wanted to come back next year, you had to commit to do something. For the first two or three years, about two-thirds of the commitments were made by foundations or standalones or NGOs. By 2008, and since then, more than 90 percent have been partnerships. And the success rate in terms of their stated goals basically went from about 86 percent [for standalones] to 101 percent [for partnerships]. They exceeded their goals because they were working together.

So the first thing about entrepreneurship in the context of CGI is that diverse partnerships make better decisions on new problems and challenges, and all these collaborations have really worked. And now it's sort of our routine deal, and it's made a big difference.

At CGI America, I remember several years ago President Obama said that the country needed 100,000 new STEM teachers in high schools. And it was obvious once the Republicans won the House of Representatives that he wasn't going to get any more money. So the Carnegie Corporation came together to form 100Kin10--and we work with them--and they wound up with more than 200 other partners. To date, they have raised more than $80 million with no government money.

A lot of this stuff is very small, but the bottom line is, the first thing we learned is that partnerships have more success, so we try to promote collaboration. And we then try to make sure you have access to technology and finance.

The partnership that CGI has made with Kiva is very interesting. Can you explain the thinking behind it, and describe what has been accomplished so far? made its bones basically by providing socially conscious people an opportunity to invest as little as $25 in a business in a developing country.

I remember the first Kiva example I ever read about was a guy who repaired radios in Kabul, Afghanistan. He wanted to raise $150 to double the size of his business, and six people gave him 25 bucks apiece. And he paid them all back. When you get paid back, you can either roll over the loan or take your money back. Then they doubled the size of an automobile repair shop in Kabul for, I think, $400, and the guy paid them all back and they're all doing very well.

So they decided to get active in America. When we got involved with them they had put out $1.7 million worth of loans in America, and they wanted to double that, and now they're at $10 million in loans for very small businesses in America. I was really interested in that, because in the early '80s, I met Muhammad Yunus, and he had inspired Chicago to have America's first urban microcredit bank, South Shore Bank, later called ShoreBank. They basically made loans to Croatian electricians and African-American carpenters to fix dying buildings on the South Side to keep them from being torn down. It was a runaway success for years.

In '83 or '84, I met with Yunus, and Hillary's best friend from college was with ShoreBank, and we decided to establish a rural microcredit bank in Arkansas. We went to International Paper and all of our big companies, they gave us money, and we set it up. And that bank is still doing well today.

Can you explain the Kiva City initiatives?

They went into 11 cities, that's how they got to $10 million. They helped a guy in Little Rock who started making cheese in a vat in his church and he wanted to expand. They gave him a loan, and now he's the largest cheesemaker in the state. His name is Kent Walker. It's called Kent Walker Artisan Cheese. He was hilarious, because he was making fun of me since I went on my vegan diet and I couldn't eat cheese anymore. It's an amazing story, and the guy's got a thriving cheese business.

"If we could combine Kiva lending with really affordable rapid broadband, entrepreneurs could make a huge difference."

Church To Cheese
A Kiva City loan has bolstered Kent Walker's Arkansas cheese business.

There was a woman we helped in Washington, D.C., or that Kiva helped, and frankly, I didn't think this would work. She noted that in America, one of the big disincentives to buying an all-electric car is the absence of charging stations. So she tried to figure out what the most economically efficient way to set them up was. She decided that instead of trying to join a filling station or pay for a separate plot, she would rent parking spaces at retail or commercial office buildings that have a parking lot. She would just rent a parking space, put a little sign up. Kiva gave her a $5,000 loan and she could recharge cars for reasonable prices, and she put these things up all over the D.C. area. She's making out like a bandit.

So the Kiva concept will work in America. That brings me to another point. I think we shouldn't have preconceptions about who entrepreneurs are. You know, there's a women's veterans entrepreneur program; and the Appalachian Regional Commission now is trying to set up entrepreneurs in places like eastern Kentucky and West Virginia, in coal country.

I think that if we could combine Kiva lending with an effort to get really affordable rapid broadband in those areas, entrepreneurs could make a huge difference in shaping the whole future there.
We went on to discuss the relationship between government, the marketplace, and access to technology. President Clinton offered his opening of GPS technology to civilian use as a model.
With South Korea's broadband, their download speed on average is at least twice the speed of ours. They're first in the world. In this country, we just had this fascinating debate on net neutrality and how to handle it. The only reason we had that debate is because of the way we chose to finance the infrastructure. That is, we let AT&T and Verizon and whoever build the infrastructure so they have a right to recover their investment. South Korea had the government build it, and then they just opened it to the public market. That's like what I did with GPS. You've seen what happened with GPS--it was a fabulous idea, and there was no access. And so all the entrepreneurs had low barriers to entry, and they did unbelievable things with it. Google helped us enormously after the earthquake in Haiti.

I'm for net neutrality, and I think it's really important, and it's also important for entrepreneurial access. And then you could listen to the providers who paid for the infrastructure tell you horror stories: Should you stop an emergency communication because some slug is downloading his fifth movie?

The point is, the problem shouldn't exist. Now we've got a lot going on. Knoxville had the local leaders invest on their own, and what happened? They, almost overnight, got a health care and tech economy that was the envy of America. Now Google did this thing in Kansas City, and I think they're going to do it in 45 other cities. We need to find a way to drastically accelerate that. That would do an enormous amount for entrepreneurs.

You've got counties in Kentucky and West Virginia where the main source of income for working-age, non-college-educated people is a disability check. And it's just because they're physically isolated. In the Indian reservations out West that don't have the population density to support casinos, their per capita income is still some of the lowest in America. One of our most exciting CGI commitments is one involving--it started out with six, I think there are now eight--Indian tribes that are building a power authority. They're going to have windmills and build their own transmission lines, and sell the power.

I think small businesses will benefit more than big businesses, frankly, from having really universal rapid broadband. And most big businesses pay to install it for themselves, if they need it.
"Entrepreneurs, and would-be entrepreneurs, have got to be part of our finding a 21st-century sweet spot."

Looking back at the 1990s, when you were president, there was an absolute burst in entrepreneurial activity. More recently, there have been a number of studies showing that firm formation has been in decline for a while, and that startups as a percentage of overall businesses have been pretty much falling for a quarter century. What do you see as the necessary macroeconomic conditions for maximum firm creation and job creation?

Typically, you want low interest rates, but when they're below inflation, that signifies a demand problem, which makes it harder for small businesses and startups to get the initial capital. So I think the Small Business Administration should become more aggressive. I think there should be some sort of tax holiday for small-business investors, for the first five years, or whatever it is--you've got to work the numbers, but just conceptually.

Regulation Backfire
The number of community banks has declined since Dodd-Frank was passed in 2010.

And I believe there should be a serious look at the impact of Dodd-Frank on legitimate community banks. I think we ought to look at the way the Canadians regulated their banks. The Canadians had no financial crisis, you know. They always had unified banking--investment and commercial banking under one roof. But they had different rules for them.

I'd be remiss to not note that your wife is pushing small business as an issue in her presidential campaign. But on the regulation question, almost every elected official pays lip service to small business. And yet these changes don't happen. I'm curious, leaving Hillary out of it, just from a political point of view, why do you think that happens? Where does the resistance to what seems to be common sense change come from?

I'll tell you exactly why. I think that politicians--particularly now, in the aftermath of this crash--fear that anything they do will be held against them later if anything bad happens. Look at all the grief I got for signing the bill that ended Glass-Steagall. There's not a single, solitary example that it had anything to do with the financial crash. And in fact, a study done afterward said that the unified banks were actually slightly less likely to fail than either the commercial banks that overloaded on subprime mortgages, or the investment banks, like Bear Stearns, Lehman Brothers, and others. Given the polarized nature of our politics, I think they're afraid that if they do this, which they ought to, the counterpressure will be too great. And I think that's a big mistake. You just can't be afraid to be second-guessed. If you're in politics, it's part of your business to be second-guessed.

We moved on to one of the most widely discussed economic issues in recent years. President Clinton offered a historical explanation for how increases in economic inequality have come about; defended his administration's economic record; and offered a vision and a challenge for entrepreneurs to tackle the problem that many large companies have abandoned or even exacerbated. He held out Nucor Steel, under longtime president Ken Iverson, as a model for helping employees share in a company's profits.

There are basically three huge problems. The obvious one is, there haven't been enough jobs created, in any size business, to have tight enough labor markets to keep raising the pay.

The second is, workers in general have been relatively weaker, so the minimum wage hasn't kept up with inflation. And the minimum wage bumps up a lot of other wages. That's being taken care of by these referendums around the country, and the movement to raise that.

The third is that, starting in the mid- to late-'70s, corporate law and practice changed. From roughly the 1930s to the 1970s, corporate law was taught in law schools and business schools in the same way and practiced in the same way--that is, corporations are a creature of the state. They get certain privileges, including limited liability, in return for which they have more or less equal obligations to their customers, their employees, their shareholders, and the communities of which they're a part.
With the globalization of finance, and the changing of politics in America, we got into this shareholders-über-alles mentality. And then as a result of that, corporate executives began to be rewarded basically on the stock price, rather than on the underlying growth or profitability of the company. And with the merger mania of the '80s, you had more and more executives being put in charge of companies whose core mission they didn't know much about. They were hired because they knew how to get the stock price up.

Or fire people. Or both.

Yeah, which was very often a way to do that. It's led to unbelievable distortions.

Nobody will ever accuse George W. Bush of being a liberal. But we were having a discussion once about how to repatriate some of this corporate cash that's been overseas and how it might be directed to growing the U.S. economy. He said, "I hope you can figure it out. I'd never fool with it again. They gave me all these promises about, we'd sign a one-time, 5 3/4 percent repatriation tax, they'd put the rest of it into jobs and pay raises." And all it went into was management pay and stock buybacks. And he said, "I'm done with it." It was really a touching conversation. He really felt personally burned by his constituents.

If you look at the past 40 years and the relationship between productivity increases and wage increases, they used to pretty much be in tandem. And then this huge gap broke out.

(Un)funding Productivity
Wages and productivity grew in tandem for 30 years until 1979. Since then, productivity has increased eight times as much as pay for hourly workers.

We did a lot of things to try to reverse that. We had very tight labor markets. And I had the good fortune that information technology exploded into every aspect of the American economy, which helped us a lot. We did a hundred other things: the telecommunications bill, the GPS thing, finishing the genome.

But the '90s is essentially the only period since the 1960s when all quintiles of the American economy more or less grew together. Now you can say inequality increased when I was in office because if a millionaire's income goes up 5 percent and a minimum-wage worker's income goes up 5 percent, the dollar gap is greater. But the fact is that the bottom 20 percent's income went up the same as the top 5 percent's when I was president: 23.5 percent.

And would you say there's a direct correlation with entrepreneurship?

Uh-huh. Sure. Because all the people in the middle did better. The next 20th percentile, the middle 20th percentile, and the 80th percentile, they're the ones where a lot of these entrepreneurs start, and they did really well. About 60 percent of the jobs that were created in the 1980s [and since] were in smaller firms. Now, smaller is defined as like 100 or 150 employees or fewer, which to a lot of people is not that small, but it's smaller compared with others.

"There should be a serious look at the impact of Dodd-Frank on legitimate community banks."

Is there any final thing you'd like to say to America's fastest-growing companies?

I think that the entrepreneurs, and the would-be entrepreneurs, have got to be part of our finding a 21st-century sweet spot. That is, what we have to do, consistent with our character and our aspirations, is find a way to be a place where it's good to be an entrepreneur, where you can have new ideas, new technology, significant growth, but where there's also enough distribution of the economic gains 1) to support a consumer economy, because 66 to 70 percent of our GDP every year is in consumption, so if the consumers are going flat they're in trouble, and 2) to keep the American dream alive. What we found, I think, in the 1990s, was the ability to have dynamism and creativity and flexibility, kind of the right balance of regulation and freedom.

That's what we're struggling for, that's what the debate ought to be. I understand the resentment of people on the right toward the government, and the resentment of people on the left toward inequality, but you've got to rise above resentment to answers. In the end, the only thing that matters is: Do you get results?

Ken Iverson of Nucor Steel said, "My business is 40 percent technology and 60 percent people. The role of managers is to create opportunities for the people to succeed. That's all we do. So it would be stupid of me not to take care of them." And he didn't want the government to tell him to do it--he thought he was a conservative Republican. But he ran Nucor like a socialist nirvana. And nobody ever got laid off.

What we have to do is re-create in America a more communitarian society. That is, you can be liberal, you can be conservative, you can have debates about how to do this, but we have to remember that we are going up or down together, whether we like it or not. Yes, you can have international financial markets, and yes, you can have international sales markets, but in the end where you live determines how you live. And if the GDP of the nation depends 66 to 70 percent on consumer spending, you'd better figure out a way for the productivity gains that the people create to be properly shared.