Mitch Daniels on Life Lessons from Politics and Academia

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0:17From the opinion pages of The Wall Street Journal, this is Potomac Watch. Mitch Daniels is like that man in the Dos Equis beer commercial. For 30 years, he's been one of the most interesting men in American public life. Former political director in the Reagan White House, former two-term governor of Indiana, former executive of Eli Lilly, and for 10 years, the reforming head of Purdue University. Now he has written a memoir, Impatience is a Virtue, And that member offers a tour of his fascinating career and also lessons he's learned along the way. Welcome to Potomac Watch Today. That's a daily podcast of Wall Street Journal Opinion.

1:02I'm Paul Gigo. And my guest today is the aforementioned Mitch Daniels. Mitch, welcome. Good to have you here. Thanks, Paul. I've consumed a lot of Dos Equis over the years. And, you know, first time I've been described that way. But I like that a lot. Well, you're going to have to grow a beard to really be the same, but that's a different story. But let me ask you first about this title, Impatience is a Virtue. It's one of the things in the back of the book. You've got all these lessons sort of that you have drawn out and you kind of put them into succinct form. The last one is the title of the book, Impatience is a Virtue.

1:38What do you mean by that? I mean that in many cases, not all, obviously, patience is a cardinal virtue. But in many cases that I encountered along the way in jobs of responsibility, I found it important to act with some, as we say, urgency, always on less information than you might like to have. But there were many occasions where in government, in business, and in higher ed, if we had hesitated or procrastinated, something good wouldn't have happened. And so I guess over the course of time, I learned to tilt the needle a little bit toward taking risks when you thought there was the prospect of making some important change.

2:20And you've done that clearly across much of your career. And, you know, it's fascinating. You were in business. You've been in politics in two or three couple of iterations, going first as a Senate staffer, but then you worked in the Reagan White House. And then academia, among all three of those disciplines, if you will, what's been your favorite? The years I would trade away the last and the longest stretch I worked anywhere was in business. I had a small business experience followed by 11 years at a great international company, Eli Lilly and Company. I learned far more there and derived as much fulfillment from that work as anywhere else.

2:58You know, Paul, over and over I said to people during the time I spent in public service that public service is something that men and women of goodwill should do if they get a chance, not for its own sake, but to try to make the rest of life, the important parts of life flourish. That is to say, private enterprise and all the opportunity and upward mobility it creates. And so, you know, I think too many people these days have over politicized life and see government as somehow the center of things. It ought not be that way. And in my working days, I tried never to let it. That's interesting. But I want to talk about this relationship to politics and government, because one of the things you talk about in the book is operate at the speed of business.

3:45Okay. Now, in my experience covering politics, that is not always a good thing. And I think about this in the panic that you frequently get to regulate something in the wake of a scandal or some big catastrophic event. I think we're seeing it now in the literal political panic over regulating artificial intelligence. I'm not so sure that speed in politics is that good a thing. I completely agree. And that's really not what I meant. And on the occasions when I used that phrase, you know, I was really talking about the basic operations of government. It's so sclerotic and dysfunctional in most places.

4:22Where I really began saying that was when I became governor of this state. I gathered the people who were going to work with us. And I said, we have a very clear objective. We're here to raise the disposable income of our fellow citizens. and wherever you're working, I don't care what corner of the government you're in, we're going to ask the same question. What can you do or do better or do faster or maybe stop doing that makes it more likely that the next investment and the next job comes here? So what I was really getting at was the speed of permitting, for instance. How fast can we get a refund check back in the hands of the taxpayer whose money it actually is?

5:02That's what I meant by the speed of business. And we, I think, by bringing a lot of business people into government, we did speed up the clock here in Indiana. You know, if we're only remembered for one thing, it'll be that we reduce the total visit time in our Bureau of Motor Vehicles to less than 10 minutes. Speaking as a man who's waited in long lines at the New York State DMV. Absolutely. And I've often said if there's ever a tombstone, there probably won't be, but it'll say he raised four great daughters and fixed the BMV. But still, I mean, that was what I meant by the speed of business.

5:37And, you know, the economic price we pay, for instance, the slow, slow permitting is very, very real. And that was a point of emphasis from the beginning. Back when I was a reporter in the Chicago Bureau of the Wall Street Journal, I did a piece once, a front page story on the journal on covering John Y. Brown, who was then the governor of Kentucky. And his slogan was, run government like a business. And the more I dug into it, the more I discovered that he couldn't run government like a business, even though he tried and he was a successful businessman. Remember, he ran, I think he ran Kentucky Fried Chicken for a while.

6:13But it's just impossible to run government like a business because the incentives are so different. It's not entirely impossible, but I also resist the analogy. When someone would say that, I always say, no, wait a minute, government is not a business, but it can be much more businesslike. And I think the test is to try to meet the standards of business where it's appropriate. You know, another of the maxims in the book there, I learned doing business with Walmart. First place I heard somebody say, if you're not keeping score, you're just practicing. Now, that's a rule by which Walmart became the preeminent logistics and efficiency and low cost provider they are.

6:50But It was even more important in government, Paul, or in the nonprofit sector where, as I always said to our people in the real world, the market measures you, whether you measure or not. But especially in the absence of competition, it's really important. We measured everything in government and helped people, tried to hold people accountable, reward them when they did something more effectively, efficiently or quickly. I didn't cover your governorship intimately, but I did cover it in certain episodes. And I remember a couple of things that I want to ask you about, just lessons learned there.

7:24First term, you tried to raise taxes and the legislature did not take that well. What was the lesson there? That you can be too impatient. I was, you know, our state was bankrupt and we had campaigned on the basis that's not acceptable and we're going to fix it as fast as we can. We did fix it in a year and a half, but I was a little too impatient. I would protest that I wasn't out to raise taxes. It was proposed as a one-time fixed date, would never have been renewed, way to quickly eliminate the debt that we had. It was a big mistake. I had not campaigned on that. I had campaigned on 70 plus other ideas, but we didn't realize how bad the fiscal situation was.

8:09The mistake was that I hadn't built the necessary constituency for it and surprised people. And so lesson learned. You recovered from that and obviously had a successful first term enough to get reelected comfortably. But another thing, controversy at the time, which I think you succeeded at, but it was very difficult, and that is your toll road success. I mean, you wanted to put tolls on major highways in the state, and that turned out to be much more controversial than certainly I, from a distance, thought it would. And you really took a lot of heat for that, even if you got it done in the end.

8:51Well, big change axiomatically produces major resistance, and that did. You mischaracterize it slightly. What we did was lease an existing toll road. There were already tolls. That's right. You leased it to an Australian company, was it? Yeah. Yeah, we did. We had an auction. They dramatically overbid. Eventually, they had to take a haircut and be refinanced, but that was all to the benefit of the state. I told all my business friends, if anybody ever walks in and offers you 61 times EBITDA for your business, don't say, let me sleep on it. Right? Right. Sign right away. I characterized it later, and I still would, as the best deal since Manhattan for the beads, except this time the natives won.

9:36We got$4 billion for a toll road that in state hands we had valued, even on the most positive assumptions of increased tolls in the future, which they hadn't increased the tolls in 25 years. And so that's when I knew there was trap value there. But anyway, the upshot of all that was we got$4 billion in cash, resurfaced half the state's roads, rebuilt a third of the state's bridges, and built a host of major projects that had been on the books for decades, all without a nickel of tax increase or a nickel of borrowing. It was the best deal I'll ever be associated with. And one of your competitors rates the infrastructure of the states, Indiana comes up number one now and it all traces to that transaction.

10:19Yeah, it's fascinating to see that and really interesting. We're gonna take a break and when we come back, I'll have more with Mitch Daniels on his fascinating career and his new book when we come back. Congress has talked about permitting reform for decades. Now it's time to actually do it and secure our affordable energy future. Pass permitting reform now. Paid for by the American Petroleum Institute.

11:11that button and you'll start getting the world's hardest working newsletter delivered directly to your inbox Monday through Friday. If you aren't a journal subscriber, the newsletter is free, but we are going to need your email address. There's a lot of fun stuff in the newsletter that you can only read in the newsletter, and I don't want you to miss any of it. Sign up for free expression today. We'll see you in your inbox. Welcome back. I'm Paul Gigo here on Potomac Watch with the former two-term governor of Indiana and the president of Purdue University, Mitch Daniels. So many people looking at your record as governor said, you know what, maybe Mitch Daniels should run for president.

11:52And there were more than a few people. Some of them are mutual friends who tried to cajole you into running for president. I think I was probably part of that mix at one point, journalistically. And you decided not to. You talk about that in the book. Any regrets about not doing that, given the state of the country these days? Very sincerely, no, Paul, for more than one reason. Number one, I don't think we'd have been successful. A lot of my friends disagree with that. President Obama and his team, and he was, of course, the incumbent, I think would have been very difficult to beat. I was all over the record about things that I feel strongly about, like the reform of entitlements so that the nation doesn't run on the fiscal rocks.

12:35It would have been easy to demonize or mischaracterize. So that's one thing. The stopper ultimately was that my family was very strongly against it. I've always said that in our family constitution, the women's caucus, there are five of them, has a veto and there's no override provision. And finally, and nobody but me probably cares or remembers about this, but we were not done with our agenda. I told the Indiana public, this is the only office I've ever run for or intend to. And I would have been very reluctant to go back on that statement. Plus, until we won a huge victory in the 2010 elections and captured the legislature, the half we didn't have, some very big things, education reform in all its aspects, including the first universal voucher program in the country, the first right to work bill passed north of basically the Mason-Dixon line since the 50s, repeal of the inheritance tax, things like this.

13:34we could only do after that point. And I really wanted to finish those jobs. Those three things you mentioned, hugely important and have made a huge difference in making Indiana as successful as it is as a state, particularly relative to that neighbor of yours to the West, where people in the great state of Illinois and the nearby counties say, can you annex us, Indiana? We'd like to join your state. The difference in governance is so important. People don't think about that, but just what a difference a few years of different kinds of governance can make. Your matchless newspaper keeps pointing out that people can vote and businesses can vote with their feet.

14:15That's happening here. So Illinois is the gift that keeps on giving in that respect. But yes, as I tell all the Illinois students I meet on the Purdue campus, So refugees, welcome. We have a generous asylum policy here in Indiana for people fleeing political oppression. Let's talk a little bit about Purdue. So you decided to take the job as president of Purdue Great University. I should say that my father went to Purdue. One of my brothers and one of my sisters went to Purdue as well. And so there's a soft spot in my heart for the school. But you took that job at a particularly difficult moment in American educational history with change coming through the Internet, the costs rising, the challenge of student debt and so on.

15:02And yet you decided to take it on and you introduced some very significant reforms. I want to ask you about how you got the faculty in particular and the administration to buy into things like freezing tuition year after year after year and making sure that free speech was a core value in school. Yes, these things were countercultural, you could say, at the time. And each of them, again, like any significant change, always will generate concern or even opposition. One of my military friends taught me a long time ago, no traction without friction. And these were examples. I will say, though, that Purdue adapted rather quickly to them, in my opinion.

15:46First of all, we did freeze tuition and fees, even lowered the total cost of attendance, housing and food and so forth, and the sky did not fall. And then people saw, as we did it a second, third, and fourth year, we were still investing heavily in expanding the university and necessary facilities. We kept teacher pay and faculty pay and staff pay at and above national norms every year. And so people began to see that you could emphasize affordability for students and still grow the quality. We always stressed, Paul, that I always did, that it's not simply the price we're out to optimize here.

16:26It's value, quality over cost, over price. And I think over the first two or three years, people saw that you could achieve both. Plus, it built such a constituency. Our students and their families, of course, our alumni became very proud of it. And so the positive reinforcement, I think, gave it some momentum. On the free speech front, we simply took a stand. We knew it was the right one. But I always tried to emphasize there that freedom of inquiry is not just a matter of that little business of the First Amendment. It's at the heart of the academic enterprise where there's a homogeneity of thought, where dissident voices are excluded or canceled.

17:10You know, we're supposed to be here to advance knowledge, and knowledge only advances through the collision of ideas and differences of opinion. So we always try to define it in that way and say that it's the essence of the mission that we're here for requires absolute fidelity to free speech, diversity of thought, free inquiry. I should say, and I didn't know this until we chatted briefly before the program, But you are back now after having left as president. They pulled you back in here on an interim basis when your successor left abruptly to go to Northwestern. So you're back in the saddle.

17:47I said at the time, I taught our four daughters to always keep a spare tire in the trunk. And unfortunately for me, the board of trustees here practiced the same policy. How long are you committed for? Well, you know, my goal is, and everyone's goal should be, it's as short a hitch as possible. We're out actively searching for a great new leader for Purdue. I don't doubt we'll find one. This is a very desirable job. School's in very strong shape. We're 30 plus percent bigger than we were when I first came. We're the number one producer of engineers and STEM graduates in the country. And so we think we're pursuing a great mission, making a contribution to state and nation.

18:29I don't doubt that we'll find somebody better than I to carry that forward. I want to get you to talk a little bit about the state of American higher education more broadly, because, you know, it does not stand in good repute with the American people. There's no question about that. It's lost a lot of its cachet because of the controversies over what is taught there, the perception of conformity of instruction, the perception that the faculties at the most American universities are strongly to the left, conservative students feeling that they cannot speak up. Now, there are some reform elements, people speaking up.

19:10Daniel Diermeier of Vanderbilt, for example, is very vocal about it and has made Vanderbilt into a real draw as a university. But how much do you think American higher education still has to change? A lot. You describe these as perceptions, but they're very real. They've been obvious a very long time. When I came to Purdue, which is now 13 years ago, there was so much I had to learn. I was green as grass, of course. But a lot of things I did know from 10 years of very direct interaction with people of this very typical state that we live in, I tried to carry the message for a long time that, listen, many of these criticisms were very legitimate.

19:53Higher ed needed to stop practicing denialism, you know, and no problem here attitude, but too many institutions maintained that a very long time. So I think higher ed brought the criticism down on itself, but I am encouraged, as you just said, I do think it took way too long, but we are seeing a more, we call reform from within movement starting and none too soon, really. I'm not among those, Paul, who thinks the whole thing's hopeless. You got to burn it down, let it go, maybe start some brand new institutions. I'm all for that. But I don't think that's going to be the answer. With all its flaws, we do benefit in this country from this strong network of fine institutions.

20:39And the best answer is that the sector shape itself up. So yes, what's happening at Vanderbilt, I would cite the president of Dartmouth, I think, has been very stalwart also. I can name a number of examples, more than were there a few years ago, of leaders who were saying, yes, we have to do some repair work if we want to win back the public confidence. How much needs to be changed when it comes to financing higher education? I mean, there's student loan debt. It's overwhelming for so many people. And Congress just keeps feeding the subsidies. Now, there was a reform bill last year passed by the Republicans, which made an attempt and did succeed to some extent in reducing the burden of the loan subsidies, but still a long way to go on that front.

21:22Absolutely. You know, of course, the starting point I always said, you know, you quit charging so darn much and the students won't have to borrow so darn much. But the subsidy problem, Bill Bennett identified it several decades ago, this was going to propel increased costs or make them easier to impose, and it did. I've been a longtime advocate of the schools being at risk, even for a modest percentage of the defaults. You know, to me, it's a breach of warranty. If a school sends a student out in the world with a diploma and it turns out that that student can't earn his or her own way, that school ought to bear some, at least, of the cost that's being imposed on or being transferred to the taxpayer.

22:04You know, here at Purdue, until the federal government, for ideological reasons, intervened, we began offering income share agreements. It's an old Milton Friedman idea. It's perfectly worthy. It's equity as opposed to debt. The student doesn't borrow. The student contracts to pay after graduation a fixed affordable percentage for a fixed number of years. We were successfully offering those as an alternative to certainly the private expensive debt that some kids would otherwise take. And I still think that innovations like that ought to be welcomed. Did the federal government bar Purdue from doing that?

22:42Well, indirectly, yes. They blindly continued to insist that this was debt when it plainly is not. As I say, what I loved about income share agreements is the risk shifts entirely from the student to the investor or the investing foundation, or maybe it's the school itself. And if the student doesn't get employed, for instance, they don't owe anything. And it's only as a percentage of their success. So what they did was acted to kill the servicing industry, which was growing up to make this market work. So it stalled out. Your government at work. Speaking of which, one of your career stops was director of the Office of Management and Budget in the George W.

23:26Bush administration, and where the president gave you the nickname The Blade. And you were known for being a stickler for fiscal discipline. And of course, the problem of fiscal incontinence has only gotten worse. We now, as everybody knows, have$40 trillion in debt. You referred earlier to having been made statements about entitlements. So let's say that you did have a political future. You thought you were as a candidate or looking at some potential candidate. What advice would you give that candidate about how to put together the coalition to reform these entitlements, which simply has to happen?

24:08Eventually, it has to happen because we can't afford the current path forever. So how do you do it? How do you put together that coalition to be able to do it? I've grappled with this question now for a very long time. And I keep thinking that it shouldn't be that hard to fashion a vocabulary for speaking to our fellow citizens about why we want to do this. This isn't about hurting the safety net. This is about saving the safety net before it implodes. Some of the answers involve concentrating the resources on those who need them most. Why should Warren Buffett get a Social Security check and all of that?

24:42But we've waited so long now that we're going to have to do things that are a little more disruptive than they would have been if we only got started when there was more time. So we're going to have to raise the retirement age or the eligibility age just to really keep in sync with the medical and actuarial reality. Not for current retirees, necessarily. We're talking about for the future. The longer we wait, the harder it'll be. But yes, we should always start with the basis that a deal's a deal. and we'll try to protect the current beneficiaries, hopefully those just approaching retirement age.

25:18But the longer we wait, the less of that we'll be able to do. And that's a terrible default of government, really of our maturity as a self-governing people, that we haven't been able to make a grown-up decision about this. But, you know, every time somebody bravely begins to talk about this, and even in the terms I just tried to do, they get their head chopped off. It's still way too much of an easy, cheap shot. And as you're right, both sides have practiced that. The current administration completely tone deaf about this. And history will not smile on those who fiddled while we burned on this front.

25:58Well, and then the Republican Party now, there's a faction, a significant faction, which says that, in fact, we're now the party of the working class. And the working class favors these entitlements. this bigger role for government and providing security for individuals. And therefore, we should not even begin to reform it. We may even want to expand these entitlements. That's a growing faction in the party, Mitch. Yeah, well, if they want to be at the helm when we hit the iceberg, I guess that they can run that risk. But everybody knows what the arithmetic says. And again, I just think that the opportunity's got to still be there for one side or the other to say in the name of the people for whom we intend these programs to provide security and some peace of mind, we've got to fix them.

26:49There's not enough money to keep doing what we're doing now. Yeah, I think, what was it that the economists said, if something can't continue, it won't? Herb Stein, I think, said that. And that, I think, is the future we're going to be facing. We're going to take another break. And when we come back, I'll talk to Mitch Daniels about what the Republican Party might look like after Donald Trump when we come back. Congress has talked about permitting reform for decades. Now it's time to actually do it and secure our affordable energy future. Pass permitting reform now. Paid for by the American Petroleum Institute.

27:29Don't forget, you can reach the latest episode of Potomac Watch anytime. Just ask your smart speaker, play the Opinion Potomac Watch podcast. That is, play the Opinion Potomac Watch podcast. From the Opinion pages of The Wall Street Journal, this is Potomac Watch. Welcome back. I'm Paul Gigo here on Potomac Watch with Mitch Daniels. I wanted to ask you one more question because it's a question I get asked by audiences most these days, and it goes something like this. What is the future of the Republican Party after Donald Trump? Where do you see the party going? Is it going to be a mega future or is there going to be a bounce back to more traditional Republican policies?

28:18Of course, I don't know the answer, but I will say this. I think that nation needs one pro-freedom party, and that role will be there to be occupied by somebody, a party that stands for individual freedom, autonomy, personal responsibility. When I argued and when we cut taxes substantially in our state, Paul, I always talked about it in those terms. I said we should never confiscate a dollar from a free citizen without a good reason. Then we should spend it well because we have diminished that person's freedom by that dollar every time we do it. And I still think most Americans will respond to a politics which stands on their side in terms of their personal autonomy and liberty.

29:01So whether the Republican Party of today moves back in that direction, I don't know. They may have to lose an election or two and then regroup, which is what happens in our politics. You know, when something's working, it's true in business. This is why higher ed was so stuck in its ways for so long. When something's working, it's harder to get people to change it. And so those politics you referred to as MAGA have won a couple elections, but that's not predictive. As early as this fall, there may be some new message out there. But I still believe at some point a party which speaks to the instincts of freedom-loving Americans will have room and, in fact, will have the biggest space available to it.

29:47All right. That's a hopeful note. I am hoping myself that we can actually have a debate about this in the presidential primary season in 2028. I don't know that we will, but it would be helpful for the country and the party if we could have that debate. I think one of the most unfortunate things about our current situation is how nationalized everything's become. You know, I look forward to a day when we regain a sense of perspective about that. But I will say this, that does mean that a national presidential election, as you just said, can become a place where we turn a big corner, depending on what arguments are made and who wins.

30:26But, you know, yes, if there's going to be a change in many things that are, for the moment, troubling a lot of Americans, that's where it would happen. All right, Mitch Daniels, thank you so much for coming in. He is the author of a new book, a memoir and lessons learned. Impatience is a virtue, a life where the buck stops. Thank you, Mitch. Good to see you and best wishes at Purdue. Thank you, Paul. And thank you all for joining us on Potomac Watch. We are here every day.