Monday, March 19, 2001
7:30 pm - 9:30 pm
They are richer and more powerful than ever. Yet today′s philanthropic institutions continue to play the same vital role they′ve played for centuries: helping where others can′t, taking risks when others won′t, and changing government policy because others don′t.

That was the message from Monday′s special opening session on philanthropy that included leaders of three of the world′s major philanthropic foundations: Michael Milken, Akira Iriyama, and Barry Munitz.

"Foundations have served an essential purpose," said Milken. From fighting AIDS in Africa to pushing for more government research to fight cancer, American foundations are making important inroads in improving the lives of people around the world.

The numbers are huge. Philanthropy in the United States is 2 percent of the country′s GDP — about $180 billion. And a big distribution of wealth is coming as baby boomers inherit their parents′ wealth, some of which will end up in philanthropic efforts.

"$180 billion can make a difference if properly directed," Milken said.

Several panelists made the point that philanthropy involves more than just dollars. It involves human capital — people willing to take their time and energy to make a difference.

"More people volunteer in this country than vote," said Munitz.

"The largest part of philanthropy is giving of one′s time," Milken added. He said the fact that volunteerism is high in the developed world is proof that philanthropic organizations are an invaluable resource — whether it′s helping to cure prostate cancer, as his CaP CURE foundation does, or teaching inner-city children the value of art, as the J. Paul Getty Trust does.

Iriyama talked about how philanthropy is changing around the world. He said he believes it will be less nation-state oriented in the future. "Philanthropy in the 21st century will become more international," he said.

Panelists were asked what they think of President Bush′s plan to eliminate the inheritance tax, and they offered little support. Most agreed that some kind of tax — perhaps at a higher level — was necessary.

For large donors, a tax deduction is not much of incentive, Munitz said. It′s just not a critical issue for them.

Concluded moderator Ben Wattenberg: "Maybe this is not a bad way to take people′s wealth and redistribute it. Maybe this is a pretty good system after all."

Moderators
Ben J. Wattenberg, Senior Fellow, American Enterprise Institute, and host of 'Think Tank' on PBS Television (Washington, D.C.)
Speakers
Akira Iriyama, President, The Sasakawa Peace Foundation (Tokyo)
Michael Milken, Chairman, Milken Institute
Barry Munitz, President and Chief Executive Officer, The J. Paul Getty Trust (Los Angeles)
Tuesday, March 20, 2001
8:00 am - 9:30 am
"Well, it′s March 2001, and what a difference a year makes," remarked Michael Milken at the opening session of the Milken Institute′s 2001 Global Conference.

Milken′s comparison between the 60 percent drop in the share value of Cisco, a technology company, and the 40 percent increase in shares of food distributor Sysco, highIn light of the recent drops in U.S. stock markets, Milken asked, "Where are we in the economy?"

The four Nobel Laureates were careful to point out that stock market declines do not necessarily point to economic decline.

Gary Becker called the U.S.′s current situation a "growth recession," predicting a sharp but short recession. Jim Heckman hesitated to even use the word "recession," preferring to speak of a "growth slowdown."

Heckman emphasized that markets were still up 50 percent since the period of "rational exuberance" saying, "I don′t see a substantial impairment of the fundamentals." The panelists seemed to agree that the growth in productivity in the last two decades could outweigh the current stock market corrections.

In comparing the United States to the world′s second-largest economy, Japan, panelists highlighted differences in human capital, employment structures, savings′ rates and government debt. Lawrence Klein suggested supplementing Japan′s good K-12 education with improvements in higher learning, but other panelists saw this as a more long-term solution. Douglass North and Gary Becker identified the need for capital market restructuring, political system adjustments and an opening of the economy in the short run.

World demographics also have an influence on where we are in the economy. To Becker, the most striking change in the last decade has been the "population divide between the population haves′ and the population have nots.′ About half the world′s countries, typically in wealthier regions such as Europe and Asia, face below-replacement fertility rates and an aging populace, while poorer areas such as Latin America and Africa, maintain growing — and increasingly younger — populations.

This trend has major implications in terms of social security systems in developed countries, introducing what Becker considers a healthy pressure to reduce social security tax and allow people to work to a more advanced age. Residents of increasingly populous developing countries, on the other hand, will naturally want to move to richer countries, furthering the "brain drain" in the developing world and challenging opponents to immigration in developed countries.

Overall, panelists seemed optimistic — some guarded, some robust — about the future of the economy. North, the least optimistic of the four Nobel Laureates, cautioned that "We are going into a world we′ve never been before...novel on many different dimensions." Klein summarized, "You cannot resist globalization. You cannot resist technological progress. You have to learn to adjust to it." Becker justified optimism in the future.

The panel also took a moment to remember Merton Miller, Nobel Laureate and friend, who passed away this past year. Dr. Miller participated in past Milken Institute panel discussions.

Moderators
Michael Milken, Chairman, Milken Institute
Speakers
Gary Becker, Nobel Laureate, Professor of Economics and Sociology, University of Chicago, Department of Economics
James J. Heckman, Professor, University of Chicago, Department of Economics
Lawrence Klein, Nobel Laureate, Professor, Emeritus, University of Pennsylvania, Department of Economics (Philadelphia)
Douglass North, Nobel Laureate, Professor, Washington University at St. Louis, Department of Economics
9:45 am - 11:15 am
The landmark Microsoft antitrust case has set off unprecedented discussion regarding the application of current unfair competition laws to companies in the New Economy. According to the panelists, sometimes it′s more important to apply the right theory of economics rather than right the theory of law.

One panelist, a proponent of the Chicago school of economics which follows in the tradition of its founder, John D. Rockefeller, was in favor of self-regulating market factors as opposed to pre-emptive governmental regulator factors. Proponents of the Chicago school of economics believe that self-regulating market factors may be more applicable to the New Economy due to the delicate act of balancing innovation and fair-play. Proponents of the current unfair practice laws point to Microsoft as an example of a company that abused its free market powers through its tying and bundling agreements and needed to be constrained by the government regulation.

One consensus was that technology has definitely changed things. Are these changes dramatic enough to induce modifications to our current monopoly laws? That is yet to be determined. However, with more mergers sure to come in the current low-growth technology economy, as companies consolidate and streamline their resources, the impact of the Microsoft case will be soon found out.

Moderators
Hal Varian, Dean, School of Information Management and Systems, Professor, Haas School of Business, University of California, Berkeley
Speakers
Dennis W. Carlton, President, Lexecon (Chicago)
John Heilemann, Special Correspondent, Wired (San Francisco)
Daniel Rubinfeld, Robert L. Bridges Professor of Law and Professor of Economics, UC Berkeley
Steve Salop, Professor of Economics and Law, Georgetown University Law Center and Senior Consultant, Charles River Associates (Washington, D.C.)
William Wiberg, General Partner, Bowman Capital and formerly Lucent (New York)
9:45 am - 11:15 am
The general consensus among these panelists was that Europe as a whole continues to exhibit a conservative nature across a number of areas including venture capital markets, cultural practices, and policy formulation, among others.

Many of the panelists agreed that Europe′s conservative capital markets reflect its overall conservative culture. The panelists referred to statistics showing that externally focused European countries enjoy greater economic success than those that are more internally focused. The more a country′s people depend upon the state, they argued, the higher the cultural rigidities against change.

Panelist Nick Sargen noted that in addition to a cultural barrier to new business start-ups in Europe, the cost of starting a new business was among the highest in the world. The reasons for inhibited technological change, said Sargen, are embedded in the philosophy that entrepreneurship in Europe is not "natural."

Europe′s low level of venture capital investment is the result of the slow transfer rate of bank assets into the equity market. Europe′s "welfare state" mentality holds that high taxes yield high benefits. This, in turn, fosters conservatism amongst people who are not only used to the system, but also like it the way it is. A direct effect of this conservatism is the large outflow of European capital into the United States, most of which is coming into the American technology sector.

Demographically, Europe faces the challenge of a populace that generally dislikes moving across borders. According to Ross DeVol, the issue of changing populations is of particular interest because Europe exhibits a relatively strong relationship between population growth and economic growth.

Europe also faces two other major challenges: a very small immigrant labor force combined with a quickly declining workforce that is approaching middle age.

Moderator Joseph Quinlan, placing heavy emphasis upon a sophisticated and creative educational system, asked, "Are we seeing change?" Panelist Jon Chait took the position "you have to be very technologically oriented and accept change." Two clear examples of changed European nations were Ireland and Sweden. Sweden underwent major structural reform while maintaining a strongly unionized labor force. An explosion of entrepreneurial activity has vastly accelerated Sweden′s success. Both Sweden and Ireland′s success have been strongly driven by a less risk-adverse way of doing business. A large and willing workforce fed by a high birth rate in the 1970s has also driven Ireland′s success. Business wise, Ireland has benefited from successful importation of technology firms and a revolutionized corporate tax structure. The result of these changes has driven Ireland to become the world′s largest exporter of software.

What does the future hold for Europe? Panelists raised more questions than provided answers. Why has Germany struggled to stimulate its economy by repeatedly cutting interest rates? Why is unemployment at around 25 percent amongst college graduates in Spain? What will the European Union′s reaction be to emerging capital and labor markets in Eastern Europe? How important is the U.S. economic slowdown to Europe? How quickly is Europe, the world′s largest economy, going to change? How should the privatization of traditionally state-held enterprises be structured? DeVol believes that there is more of a "European economy" than there used to be. Answers to these and other questions will become clearer as the "European economy" works towards solidarity.

Other topics discussed:

(1) Enlarging Europe by incorporating Eastern European countries into the mix.
(2) Monetary policy and the Euro.
(3) Europe′s view of the new Bush Administration.

Moderators
Joseph Quinlan, Vice President and Senior International Economist, Morgan Stanley Dean Witter (New York)
Speakers
Jon Chait, Chief Executive Officer, Spring Group plc (London)
Ross DeVol, Director, Regional and Demographic Studies, Milken Institute
Kai Hammerich, Director General, Invest in Sweden Agency (Stockholm)
Nick Sargen, Managing Director and Global Markets Strategist, J.P. Morgan Private Bank (New York)
9:45 am - 11:45 am
The wave of consolidations in the financial services industry over the past few years, supported by the introduction of new technologies, has forced financial services firms to reassess their business models. Many trends that affected the banking sector - including the decreasing role that banking institutions play in the intermediation of funds between the lenders and the borrowers — have been some of the principal catalysts into the increasing merger and acquisition activity.

James Barth pointed out that the size of the banking systems in many developed countries, measured as a percentage of its gross domestic product (GDP), has had little variation. Conversely, the size of the stock and bond markets, also relative to the country′s GDP, has grown exponentially and surpassed the banking sector as the primary source of funds for corporations. Combined with softening regulations that now allow banks to engage in and provide a wider array of financial services, these trends have created opportunities for firms traditionally engaged in banking to acquire or merge with other organizations that provide different types of services, such as insurance and brokerage.

Abraham Gulkowitz added that one of the main drivers of the changing global financial landscape has been the introduction of new technologies, which continues to be leveraged as the consolidation in the financial industry continues. These technologies have affected everything from the way customers interact with financial institutions (i.e., the advent of ATM′s, e-banking, and online trading), to the way financial institutions transact amongst themselves. John Kim mentioned that start-up companies leveraging the Internet to divert business from traditional firms, have encouraged the latter to cooperate amongst themselves to create electronic exchanges that allowed them to conduct their business more efficiently and to better compete against newcomers.

Another driver of consolidation in the industry has been the desire to obtain efficiencies of scale. As financial products become commodities, firms recognize that pricing is increasingly becoming one of the main, if not the main, selling point.

However, many panelists acknowledged that far from becoming more efficient, some merged banks seem to have achieved quite the opposite - diseconomies of scale contending that the integration of legacy systems and corporate cultures is not an easy task. To demonstrate this, Thomas Theurkauf pointed out that an index composed of the four largest financial institutions has consistently under performed a broader index composed of the largest 25. On the other hand, Jeremy Eden contended that instead of trying to increase efficiencies through M&A activity, he encourages firms to analyze the utilization of their internal resources to find inefficiencies. Once they are corrected and tied-up resources freed, the firm′s efficiency level will increase, resulting in a growth of the bottom line. Then, the resources that are freed can be redeployed to increase top line growth.

Rather than identifying definite changes, panelist agreed that this is just the beginning of an evolving process that constantly challenges regulators, both in the US and abroad. For instance, many countries whose bank assets were government controlled have opened their banking systems to private investors paving the way for foreign banks to enter through the acquisition of privatized banks.

Moderators
James Barth, Senior Fellow, Milken Institute
Speakers
Gerard Caprio, Director, Financial Economics and Manager, Financial Sector Research, The World Bank (Washington, D.C.)
Jeremy Eden, Managing Director, EHS Partners, LLC (Chicago)
Joseph Gauches, Executive Vice President, eBusiness & Technology, Hartford Financial Services (Hartford, CT)
John Kim, Chief Executive Officer, BondBook LLC (New York)
Thomas Theurkauf, Senior Vice President, Keefe, Bruyette & Woods, Inc. (New York)
Ted Virtue, President, Deutsche Bank Capital Partners and Deutsche Banc Securities, Inc. (New York)
11:25 am - 12:55 pm
This panel discussion dealt with three main themes:

  • Privacy: What is it and what are the issues?
  • Cyberworld: How has the cyberworld affected privacy?
  • Potential solutions: how should this problem be addressed?

The panelists defined three types of privacy: territorial privacy, decisional privacy and information privacy. Information privacy was the focus of today′s discussion. According to Jason Catlett, " individuals have space into which others can′t intrude."

Why do we care about privacy? People want to preserve their space. "How do you maintain this space when you are not anonymous anymore?" asked Jay Gellert. We are moving from a two dimensional to a three dimensional privacy. People can′t control information that institutions have on them so the accuracy of the information is also an issue.

What is the right balance between information that should be disclosed and information that should be kept private? Some panelists felt that too much privacy will allow people to get away with things that society condemns.

How are concerns about privacy in the cyber world changing? What are the new privacy threats?

"The Internet is a super-recorder," says John McCarthy. Technology allows more accurate information gathering. There is a powerful debate around the fears we have. According to McCarthy, "We are getting a very clear picture of who you are." Nowadays, the more information a company has, the more valuable it is.

With the evolution of technology, our concerns have changed. In the past it was nearly impossible to record any information about people. Nowadays we can retrace every web site a customer has visited. According to David Sobel, the Internet acts like a massive deregulator. "Government has become a seller of information to the private sector," he said.

Is there a solution? One solution would be the self-regulating market approach. According to Jerry Kang "If the personal information is valuable, then the market has a price for it." For example, if Amazon.com values information, they can buy it by giving customer a coupon with a dollar value.

The issue of privacy in the cyber world also depends on the level of knowledge of the customer. Many Internet users are not aware of the amount of data institutions have on them. It was suggested that a potential solution would be encryption, already used for credit card transactions. A legal framework is also needed, the panelists noted. No one solution is the answer because of cyber crime.

Catlett would like to see more rights for individuals. People should have the right to stop institutions from selling personal information to other parties, he argued. People should also have the right to sue parties for improper use of personal information, although this would lead to an increase in lawsuits.

Moderators
Jerry Kang, Professor of Law, University of California, Los Angeles
Speakers
Jason Catlett, President and Founder, Junkbusters Corporation (Green Brook, NJ)
Jay Gellert, President and Chief Executive Officer, Health Net, Inc. (Woodland Hills, CA)
John McCarthy, Group Director, Research, Forrester Research, Inc. (Cambridge)
David Sobel, General Counsel, Electronic Privacy Information Center (Washington, D.C.)
11:25 am - 12:55 pm
The panelists gave a cautiously optimistic response to the question of whether Japan can return to prominence. The answer appeared to be yes — if it shifts gears.

In Jesper Koll′s view, fundamental restructuring in Japan has begun. Since Japan has skill and labor shortages, it has started to contract out manufacturing of products to Taiwan, Korea and other neighboring countries. The "state is bankrupt," he said, running a primary surplus of 2 percent and a deficit of 6 percent. Basically, the country needs 8 percent of its GDP to stabilize debt to GDP ratio.

Shimada said that "Japan is still enjoying the phenomenon of the past, and enjoying it too much and somehow failed to change its own system." He was optimistic that if Japan shifts its gears, it will restore itself to prominence. He stated that Japan′s three building blocks to success were the monetary system, the financial system and the industrial system. He believes that "decentralization has created moral hazard that led to huge debt." In his view, consumption is declining because Japan cannot find the right channels to spend its savings.

Jesper Koll pointed out that "American style capitalism actually works." He emphasized that the bank lending rate has declined due to closing out of loans and has affected small- and medium-sized firms that are dependent on the banking system. Kimura added that foreign pressure, especially from the U.S. will help accelerate the process of restructuring. Koll observed that from an economist′s point of view, Bank of Japan′s printing of money is not the answer to its problem but will lead to yen devaluation rather than changing the direction of the economy.

Barry Keehn highlighted the dual economy that is engaging in Japan - world class, globally competitive firms with a Western style of doing business like Sony, on the one hand versus firms that produce for the far less competitive domestic economy on the other. He opined that due to deflation, commodities in Japan have become cheaper. As a result "Japan remains a massive exporter." He also pointed out that Japan has been redefining trade policies in Asia through bilateral trade agreements that would link Asian economies more directly with Japan.

Aging Population and Savings:

William Frey added that Japan lies at the extreme among industrial nations in the aging of its population. This will eventually lead to a decline in labor force and reduce consumption. Another factor that caused this is the zero immigration level. Jesper Koll agrees that the aging labor force will require medical care and believes that presents women with their greatest opportunities, in the educational sector and elder-care. Seventy percent of Japan′s savings come from 65-year-olds and it is in the health care industry that they may eventually spend their savings.

Corporate Sector:

Hajime Kimura pointed out that Japan′s corporate sector has 3 to 4 million companies, dominated by small and medium-sized firms. He divided Japan′s corporate sector into three categories: heavily protected, traditionally protected and the non-protected, non-regulated. The construction industry falls into the heavily protected category and is surviving thanks to huge government assistance, while the unregulated, unprotected firms are faced with global competition. Kimura emphasized that mergers and acquisitions have been occurring and lay-offs have taken place as part of the restructuring process.

Moderators
Thomas Plate, Founder, Asia Pacific Media Network and Professor, Policy and Communications Studies, University of California, Los Angeles and Internationally Syndicated Newspaper Columnist
Speakers
William Frey, Senior Fellow, Milken Institute
Barry Keehn, Executive Director, Japan America Society (Los Angeles)
Hajime Kimura, Chief Operating Officer, e-Commerce Division, Mitsubishi Corporation (Tokyo)
Jesper Koll, Managing Director and Chief Economist Japan, Research Department, Merrill Lynch Japan Incorporated (Tokyo)
Haruo Shimada, Professor, Economics Department, Keio University (Tokyo)
11:25 am - 12:55 pm
Moderator K. Robert Turner opened the panel on Emerging Domestic Markets with a private disclosure: Like "the only kid in town who has discovered the local candy store is open on Sunday," Turner would like to keep the opportunity of the emerging domestic markets a secret to himself. This market opportunity, however, is even too great for Turner′s sweet tooth. According to Glenn Yago, minority businesses are growing at six times the national rate of business formation and account for $1.3 trillion, or twenty percent of the U.S. total $6.5 trillion purchasing power.

Ironically, despite the glaring opportunities presented, this "buyer′s market" is seriously undervalued by investors. Victor Maruri and Kay Koplovitz both cited the lack of a network for these emerging domestic market groups as a hindrance to their capital flow. Yago cites the lack of investment into education, health and pension programs, which ties into the labor supply constraint that threatens our economy — a declining workforce hitting near replacement level, in a market that by 2020, will be a 70 percent constituency in the workforce.

Panelists concurred that opportunities abound in the emerging domestic markets and offered a number of approaches to encourage capital flow into this heavily under-invested opportunity. Linking technology with capital access, Gail Snowden hopes to breach the "digital divide" existing among minority groups with Fleet′s Community LINK program. This program provides access to technology for adults in the under-valued emerging domestic market groups.

As Kay Koplovitz puts it, "Minorities and women currently operate under capital starvation." Without capital to take advantage of the technology there is not much reason to take interest in its access. Business incentives rather than social incentives must be created for institutional investors. In the past they have taken the form of Community Reinvestment Act (CRA) and empowerment zones. Washingon, D.C.′s Mayor Anthony Williams of discussed a unity between the public and private sector that fosters less government regulation, thus promoting a greater climate for investment.

Finally, the initiative was placed in the hands of the minority groups. Koplovitz′s Springboard 2000 and Springboard 2001 puts women-owned businesses through presentation boot camp, assisting in the funding process and opening up a network for them.

Turner′s Washburn Wire manufacturing site, located in Harlem, New York, a famously under-invested community, is expected to generate 1500 jobs, $30 million dollars for New York, and an Internal Rate of Return of 30 percent per annum for the site′s investors, thus creating a much needed track record and a paragon for future investments into emerging domestic markets.

Moderators
K. Robert Turner, Managing Partner, Canyon Capital Advisors LLC (Beverly Hills)
Speakers
Richard J. Hayes, Senior Principal Investment Officer, CalPERS (Sacramento)
Kay Koplovitz, Chair, National Women's Business Council (Washington, D.C.) and Chief Executive Officer, Working Women Network (New York)
Victor L. Maruri, Managing Partner, USHCC Investment Management Group (White Plains, NY)
Gail Snowden, Executive Vice President, Fleet Community Banking & CRA (Boston)
Anthony Williams, Mayor, Washington, DC
Glenn Yago, Director, Capital Studies, Milken Institute
1:00 pm - 2:30 pm
"What a difference a year makes," started Donald Straszheim, President of the Milken Institute. A year ago the Federal Reserve was on mission to tighten interest rates, today the Fed lowered rates 50 basis points making it 150 basis points the Fed has eased overall since it began its rate easing campaign. It remains to be seen if the Fed can successfully stave off the threat of a U.S. recession. Meanwhile, overseas in Europe the continent is experiencing an increase in GDP, lower unemployment and a stable inflationary environment. Conversely, Asia continues to battle its economic and financial woes in the wake of deep seeded economic and financial infrastructure problems.

Straszheim summoned each of the panelists to give a quick overview from their perspective of the global economy. To begin, Robert Hormats, Vice Chairman of Goldman Sachs International, summarized in two points the following: First, the new global economy is about more than technology; equally as important are governance, productivity, and education. Secondly, the economy is experiencing what is a "financial crisis" and not necessarily an "economic crisis".

Moises Naim, Editor of Foreign Policy publication, began his remarks with a question, "Will America′s economic policies and conditions be replicated overseas?" He sees more and more convergence between the U.S. and European economies, but overall the global economy, he stated, is difficult to make predictions about. Nick Sargan of J.P. Morgan Chase retorted by saying, "Goldilocks Beware", we are in a bear market and will be for some time to come." He believes that this market is more about investment spending and capital flows and depending on where you are, you will benefit more by where the money gets invested. Barry Sternlicht, CEO of Starwood Hotels and Resorts, candidly stated "It′s very simple what is going on, it′s a return on capital phenomena, it′s a global problem, it′s an energy problem." As a result, he sees that there is a risk and reward disconnect leading to a long recessionary process making it more and more difficult for companies to raise capital.

Alvin Toffler, author and futurist, stated, "We have something going on here greater than the Industrial Revolution." Global power, family life and structure, the U.S. influence on the rest of the world, specialization or "niche-ization" pervading the global economy, are all areas being greatly affected. Toffler believes we are moving into the next phase where information and biological technologies are forging a new revolution. "You do not get major changes without conflict, and we are going through it," stated Toffler.

The group concluded the session with a discussion on "young vs old" trends in demographics worldwide. Over the next few years, the world will see more young people inhabiting developed countries compared to older people dominating the more developing countries. This poses direct economic implications, brought out by Straszheim, that unless the aging trends reverse themselves in developing countries, these countries will fall further behind the rest of the world which will have the infrastructure in place supported by its younger populations to advance in the new millennium.

Finally, keys to growth in the global economy will be education, training, and immigration. Hormats added, "The future is here it is just unevenly distributed."

Moderators
Donald Straszheim, President, Milken Institute
Speakers
Robert Hormats, Vice Chairman, Goldman Sachs (International) and Managing Director, Goldman, Sachs & Co. (New York)
Moises Naim, Editor, Foreign Policy, Carnegie Endowment for International Peace (Washington, D.C.)
Nick Sargen, Managing Director and Global Markets Strategist, J.P. Morgan Private Bank (New York)
Barry Sternlicht, Chairman and Chief Executive Officer, Starwood Hotels & Resorts (Greenwich, CT)
Alvin Toffler, Author, Futurist (Los Angeles)
2:24 pm - 4:15 pm
It is year ten of the "Internet revolution" and while a relatively calm skepticism has replaced the initial irrational exuberance, the search for a clear definition of the viability of the Internet as a business vehicle continues. Such was the topic of the day for a knowledgeable and diverse panel that tended to agree that the primary asset of the Internet rested within its inherent ability to provide a means of communication and information dissemination. Most on the panel concluded that while the many of the early Internet pioneers may have faltered or failed, those that have learned how to create value in their business through the Internet will lead the next round of growth. As Timothy Koogle summarized it, "It′s the early bird that catches the worm, but the second mouse that gets the cheese."

The group discussed the importance of the Internet as a marketing tool and whether a company could add value through branding on the Web. Michael Mandel was skeptical about the ability of a company to add value simply by marketing on the Internet, indicating instead that value is created by providing a top quality product. As a counterpoint, Lucas Donat related that the Internet provides an extremely unique opportunity to listen to and communicate with one′s consumers facilitating a relationship that helps to ensure the customer will continue to purchase the particular product.

Another issue that was addressed was whether Internet based retailers such as Amazon and Webvan would be able to develop as profitable and stable companies. Adam Schoenfeld felt that such companies would have great difficulty doing so because the demand for their products would likely never grow to the point where they were able to support the expansive infrastructure necessary to operate such a niche business. Others felt that while the current Internet businesses may not solve the online retail riddle, someone will bring a solution to light.

Moderators
Matthew Toledo, President and Publisher, Los Angeles Business Journal (Los Angeles)
Speakers
Lucas Donat, Chief Marketing Officer, MatchCraft (Santa Monica)
Timothy Koogle, Chairman and Chief Executive Officer, Yahoo (Santa Clara)
Michael Mandel, Economics Editor, Business Week (New York)
Mark Resch, Chief Executive Officer, CommerceNet (Cupertino, CA)
Adam Schoenfeld, Vice President and Senior Analyst, Jupiter Research (New York)
George T. Shaheen, Chairman and Chief Executive Officer, Webvan Group, Inc. (Foster City, CA)
Gerald Storch, Vice Chairman, Target Corporation (Minneapolis)
2:45 pm - 4:15 pm
What are the elements of post-crisis reform in East Asia? Can regional institutions like ASEAN, APEC and the Asian Development Bank assist in this reform? Will China be a competitor or an engine of growth? Is India too self-reliant to compete with China? With these questions, moderator Paul Keating launched this discussion about the character of Asia in the age of globalization.

Hilton Root addressed the topic of chaebols — family ownership concentration of firms — a phenomenon found in much of East Asia that is strongly correlated with inefficient judicial systems, diminished rule of law and increased corruption. Keating suggested that, if these families were able to trade at arm′s length, they would not need to rely as strongly on the protection offered by their personal networks. Thus, Root continued, the changes necessary to bring about corporate governance reforms will have to be supported by more fundamental societal transformations, and we have to be prepared for increased social conflict as a result.

Yu-Kyung Kim described how, in Korea, civic groups are becoming vocal about minority shareholder rights, demanding bigger dividends, increased transparency and outside membership of boards. "We have to follow the global standard, the American way. But we cannot do this overnight." Panelists representing varied countries in Asia agreed that anti-Western sentiment is surprisingly low throughout the region.

Speaking about Asia as a whole, Root declared that "What is going to drive the changes is the thirst for funds." With bank lending down, Asia will need more equity-based and investor-friendly policies. This trend is already beginning to take shape in Korea, where new firms are being created which are, according to Kim, different from the chaebols in that they are concerned with equity rather than size.

Turning to China, Keating described a model based on individuality and consumption. Root added that this will foster a much stronger focus on capital markets in China than in India, which still maintains a highly state-centered system.

China′s role as Asia′s center of gravity will bring with it increased regional integration, Root continued, but the result will depend on China′s stance in economic diplomacy. If it chooses a model of economic freedom, this is a good thing. But if China′s leadership takes on an anti-Western and anti-liberal character, these sentiments will ripple through the region as a whole.

Bipin Shah turned the panel′s attention to India, admitting that its manufacturing sector fears competition from a more open China but expressing optimism in terms of India′s comparative potential in the service and high-tech sectors. "I had given up on India...," Shah confessed, "but now I think it is looking really good."

The panel tied its discussion together with a look at the role of multilateral trade agreements in the region. As expressed by Simon Ogus, "Mulitlateralism is extremely important with regard to China." He described two groups in China that have no interest in it: the workers who will lose their jobs as the economy opens up and the state bosses and bureaucrats who would prefer to steal state assets for themselves.

Sharing insights gained during a recent trip to Washington, D.C., James Castle described the new Bush administration′s frame of mind with the phrase, "now we can have an Asia policy and not just a China policy." But the U.S.′s strong tendency toward bilateralism will only be surmounted by strong multilateral institutions. Root added that the Bush administration must still learn the importance of multilateral agreements if it is to accomplish its goals with regard to Asia in general, and China specifically.

Moderators
Paul Keating, Former Prime Minister, Australia (Sydney)
Speakers
James Castle, Chairman, CastleAsia (Jakarta)
Yu-Kyung Kim, Director, Research and International Relations, Korea Stock Exchange (Seoul)
Simon Ogus, Chief Executive Officer and Founder, DSGAsia Limited and formerly Warburg Dillon Read (Hong Kong)
Hilton L. Root, Director of Global Studies, Milken Institute
Bipin Shah, Managing Partner, INC3 Ventures (India, San Jose)
2:45 pm - 4:15 pm
Moderated by Scott Appleby, Senior eFinance Research Analyst for Robertson Stephens, this session focused on present challenges faced by firms competing internationally in global digital financial markets. The panelists identified and discussed several challenges, including the real-time dilemma, impediments facing a global trading platform, and the problem of distributing compatible technology globally.

The common issue that permeated all of the identified challenges was the human element and how it affects decision-making in the global financial market.

"In this world of technology, the human element is still a major factor," argued Louis Eccleston, Managing Director of Global Transactions and Data Services for Bloomberg.

It was agreed that consumer preferences is key to a firm′s success. One noted consumer preference was the ability to access information in real time.

"In a world where you can find real time, your world will never be the same again," said Edo Segal, Chief Executive Officer for eNow, Inc. "Companies on the forefront face challenges with this."

An obstacle that firms face when tapping into international markets is making sure their consumers can access information. It was argued that basic automation is considered the number one thing that consumers realize they need to stay in business. With this in mind, the building of technology toolsets was identified as a solution. Open architecture and integration were also suggested as ways to assist.

"Integrating may be important, but you need to maintain the integrity of your product," noted Eccleston.

The session concluded with the panelists providing both positive catalysts that drive their firms, as well as challenges they worry about with respect to continued success. Among those positive catalysts noted were the promise of technology in the years ahead, and its transparency. Challenges included were the issue of timing and whether or not employees would be able to keep up and be flexible.

Moderators
Scott Appleby, Senior eFinance Research Analyst, Robertson Stephens (San Francisco)
Speakers
Louis Eccleston, Managing Director of Global Transactions and Data Services, Bloomberg L.P. (New York)
Robert J. McGrail, Managing Director, New Business Ventures, Depository Trust & Clearing Corporation (New York)
Edo Segal, Chief Executive Officer and Founder, eNow, Inc. (Los Angeles)
J. Spencer Williams, Founder and Chief Executive Officer, Persumma Financial (Auburndale, MA)
Clay Womack, Chairman and Chief Executive Officer, Direct Capital Markets (Santa Monica, CA)
4:30 pm - 6:00 pm
The economic success of Silicon Valley in the 1990s has been the envy of many. How can other areas of the country, and the world, replicate its success? The panelists of the Milken Institute′s High-Tech Clusters and Economic Growth panel attempted to answer that question.

First of all, it′s important to define exactly what a high-tech cluster is. "Many areas of the country have large amounts of high-tech production, but are not tech clusters, " claims Ross DeVol, Director of Regional and Demographic Studies at the Milken Institute. What differentiates a tech cluster is its ability to move to a second phase of economic development where entrepreneurs mobilize local labor talent and venture capital to start new firms. Many of these firms are formed as spin-offs by employees of existing companies, labs, or educational institutions in the area. "Silicon Valley does this, and so does Boston," claimed DeVol.

Regions don′t have to be at the leading edge, however, to be successful in high-tech. In recent years, the logistical needs of high-tech service industries have led to tech growth in smaller metros like Tulsa and Omaha, which have become a resource for existing tech clusters. Known as the "Blue Collar Internet," local government can encourage tech growth by developing transportation infrastructure such as roads and airports, associate′s degree programs at local community colleges, and building fiber optic networks. Such was the case with Washington D.C. Led by Mayor Anthony Williams, D.C. has embarked on a long-term construction project to install a fiber optic backbone throughout the city, and has promoted education. The city′s proximity to the nearby tech centers in Fairfax County, Virginia have also led to spillovers, particularly among younger high-tech workers attracted to the city′s urban amenities.

Outside the United States, high-tech clusters have formed in a number of countries around the world. How do firms determine in what cluster to locate? Richard DeMillo, Vice President and CTO for Hewlett Packard looks for areas that his company believes will experience significant economic development 10-15 years into the future, citing labs and production facilities designed to suit the local climate, both culturally and economically. For HP, this includes Bangalore, India and Beijing, China. In Europe, DeMillo looks to the UK in areas such as Bristol and Cambridge, but also Ireland, and Grenoble, Switzerland for its strong telecomm cluster. "Real estate prices are also a concern."

Like Silicon Valley, many overseas tech clusters are beginning to show the signs of second phase, autonomous high-tech growth. Experienced entrepreneurs with education and work experience in the United States who have returned home to invest in their native countries are starting new firms there. This "Reverse Brain Drain" phenomenon runs counter to the rush of well-trained immigrants leaving their countries to work in the U.S. Many of these overseas clusters, such as Bangalore, or the Hsinchu Science Park in Taiwan are beginning to suffer from those same growth and quality of life issues, such as high rents and traffic congestion, that plague Silicon Valley.

Moderators
Jonathan Rabinovitz, Senior Writer, The Industry Standard (San Francisco)
Speakers
Richard DeMillo, Chief Technology Officer, Hewlett-Packard Company (Palo Alto, CA)
Ross DeVol, Director, Regional and Demographic Studies, Milken Institute
Carl Guardino, President and Chief Executive Officer, Silicon Valley Manufacturing Group (Palo Alto, CA)
Ta-lin Hsu, Founding Partner, Chairman and President, H&Q Asia Pacific (Palo Alto, CA)
Anthony Williams, Mayor, Washington, DC
4:30 pm - 6:00 pm
There is still a lot to be done in terms of privatization concludes the panel. With approximately 6 percent of world GDP produced by state-owned enterprise and potential productivity gains from privatization in excess of 20 percent, privatization offers developing and transition nations the opportunity both to raise budgetary capital and create a viable free-market system.

The panelists offered several cautions to any government considering privatization. "Don′t sell too soon," warns Joel Stern. If a government tries to privatize a money-losing company without first changing the management structure or boosting performance, investors and bargain-hunters will use past performance to buy the company at a greatly deflated price.

"The resulting owner, [namely] who gets the assets, really matters," stated Cheryl Gray. Outside managers in a newly privatized company often bring the skills and capital necessary to revitalize a failing company. Privatizing a company and placing it in the hands of its pre-existing management team, however, usually yields the company to those who were initially promoted for social or political reasons and who have no incentive system to increase efficiency.

Privatization is also hardest when public structures are weak. "Ownership matters, institutions matter," states William Megginson. Without a system of contract enforcement or a well-defined rule of law, newly privatized companies do not have a system in which they can thrive and establish honest business practices. "Privatization without the framework to protect investors is pointless," claims Mark Breedon. And Cheryl Gray adds that often "minority shareholders are cheated."

There are three main forms of privatization according to Peter Passell: (1) voucher (or mass) privatization, where all citizens get a "piece of the action," (2) asset sales, where all or part of a plant or company is sold to another company, and (3) share-issue privatization, which is similar to the IPO system and is the most common form of privatization in westernized states. There is also a fourth form of privatization, termed "quasi privatization," which seeks to gain the benefits of privatization without surrendering control of the government-owned industries, usually through practices such as "contracting out" and fostering competition in the given industry.

The method of privatization and the success rate thereof can vary, dependent upon the circumstances of the country seeking privatization. Hungry, Estonia, and East Germany all thrived on asset-sales privatization. East Germany received helped from West German during its process of privatization. Hungry and Estonia were small countries with relatively small numbers of industries needing privatization. The Russian government, however, ultimately abandoned any plans for asset-sales privatization, as the sheer number of public companies would have extended such a plan for generations.

The philosophical commitment to the idea of privatization is also a key factor in determining the success of privatization efforts. The are two governmental standpoints regarding privatization: the committed and the populist view. Governments embracing the populist view seek privatization only for the capital that can be raised, regardless of the social or ideological implications. Such efforts are far less successful than those of committed governments, who believe in the philosophical implication of privatization. Committed governments believe that private ownership of governmental bodies inherently increases productivity and efficiency and are more effective in furthering privatization than those who do not.

With the total value of privatization estimated around 1.2 trillion dollars, there are obvious gains to be had from the privatization of state-owned industries. Such gains are most dramatic in developing and transition countries and are most evident in the latter, where large government-owned industries predominate. Studies show that in post- privatized countries performance increased "significantly," sometimes "dramatically," and the panel concludes that privatization and incentives are necessary in non-privatized countries to boost productivity and efficiency.

Moderators
Peter Passell, Senior Fellow, Milken Institute, Editor, The Milken Institute Review
Speakers
Mark Breedon, Senior Vice President, Alliance Capital Management L.P. and Director, Alliance Capital Limited (London)
Cheryl Gray, Director, The World Bank, Public Sector Reform, Poverty Reduction and Management Network (Washington, D.C.)
William Megginson, Professor and Rainbolt Chair in Finance, University of Oklahoma, Price College of Business (Norman)
Joel Stern, Managing Partner, Stern Stewart & Company (New York)
4:30 pm - 6:00 pm
The retail sector is a huge part of the U.S. economy, accumulating over three trillion dollars in retail sales per annum. Millions depend on this sector for employment as it stimulates job growth on a yearly basis. It has continued to be viewed as a good source of entry-level employment. Over the past few years, technology has begun to play a major role in this industry and will continue to do so. It appears that the next trend in retail will be geared towards online shopping, but some experts in the industry are not so optimistic. Despite this optimism, many continue to recognize retail as an industry with the potential to create new ventures of commerce.

Some of these new ventures include online shopping. "Business models need to be substantially changed," said Steven Burd of Safeway, when confronted on the issue of online grocery shopping. He believes that an "Internet pick up" strategy could be more beneficial and convenient for consumers. "Internet pick-up" is interpreted as a means of placing an order online and retrieving it at your convenience. As far as grocery shopping is concerned, new companies such as Webvan are operating at a product cost disadvantage and therefore, may not be able to compete with the big retailers.

On the other hand, Leonard Riggio, CEO of Barnes and Noble, stated that "the Internet is enabling retail" as it transfers businesses to stores. Riggio also agrees with Burd in that " to be a great retailer, you have to be a low cost producer." Analysts have stated that the fall of many online grocery retailers was not necessarily correlated to those of other online retailers but instead was an issue of the profit margin from which the industry benefits. Yet others believe it′s a temporary setback and remain somewhat optimistic about the return of online grocery retailing.

Another important issued addressed was human capital, and its contribution to sustaining a productive management system. The retail industry is a low-paying one and companies must find ways to retain their employees. Charles Conaway declared that in order to compete for human capital, "K-Mart uses an incentive system" to keep employees satisfied with their positions and refrain them from transferring to competitors. Safeway, on the other hand, incorporates a system that rewards its branch managers in hopes of better branch management that can, in essence, retain its own employees.

Burd stated that employees with a bachelor′s degree have better growth opportunities after accumulating a couple of years of employment at Safeway than anywhere else.

Finally, the issue of real estate was said to play a major role in the future success of retail. "Anything built on good real estate will be successful," said Arthur Coppola. He added that "people are looking for high barriers for entry." Although urban settings may allow for certain constraints, such as parking difficulty, enough space indoors should be sufficient to attract consumers and in turn capture a great portion of market share.

Moderators
Joel Kotkin, Senior Fellow, Milken Institute
Speakers
Steven A. Burd, Chairman, President and Chief Executive Officer, Safeway Inc. (Pleasanton, CA)
Stephen Chick, Vice President, J. P. Morgan Chase & Co. (New York)
Charles C. Conaway, Chairman and Chief Executive Officer, Kmart Corporation (Troy, MI)
Arthur M. Coppola, President and Chief Executive Officer, The Macerich Company (Santa Monica)
Leonard Riggio, Chairman and Chief Executive Officer, Barnes and Noble, Inc. (New York)
7:00 pm - 9:30 pm
The entertainment and new media industries are entering exciting but uncharted waters in the next few years. It is a world in which content, delivery systems and digitization converge to offer consumers unbelievable choices in how they get their news, information and entertainment.

But one thing remains the same: Content is still king.

"In the end, it′s going to be about who has the best stuff," said Terry Semel, former Co-CEO of Warner Bros.

"At the end of the day, people will be driven by content," George Vradenburg III agreed.

Fueling the explosion in this industry is a growing demand for entertainment and information, coupled with technological advances that allow cross-breeding of all kinds of information: music on your computer, television shows on your cell phone, and the latest movie on your hand-held device.

Added to this competition is globalization — and the search for billions of new customers to sell to this stuff to.

Entertainment and media industries have moved to center stage in the battle over who will control our multi-media, multi-device world. And at this point, there is no foreseeable winner.

"It′s not so clear who′s going to control these," said Frank Biondi, former CEO of Univeral Studios, Viacom and HBO.

Will it be AOL Time Warner? Fox? Will Nokia be a big player? Microsoft? Or will it be a mixture of all the many different players?

"I don′t know how this is going to play out," Vradenburg admitted.

One thing is clear: These rapid changes are being driven by consumers, who want fast, easy-to-use devices that will provide them with all of their entertainment and information needs.

"These businesses are undergoing rapid change, driven by consumers," said Vradenburg. And by technological advances that give consumers what they want — fast, easy all-encompassing access

Peter Chernin said that globalization will be a major factor in what happens in the next few years, citing his company′s purchase of networks in India as a good example of what they are doing.

And whatever happens, it certainly won′t be dull.

"The next few years will be some of the most exciting in the entertainment business," said Semel.

Moderators
Christopher Dixon, Managing Director and Entertainment Analyst, UBS Warburg (New York)
Speakers
Frank J. Biondi, Jr, Senior Managing Director, Waterview Advisors (Santa Monica)
Peter Chernin, President and Chief Operating Officer, News Corporation (Los Angeles)
Lee Masters, President and Chief Executive Officer, Liberty Digital (Los Angeles)
Terry Semel, Chairman and Chief Executive Officer, Windsor Media (Los Angeles)
George Vradenburg III, Executive Vice President, Global and Strategic Policy, AOL Time Warner, Inc. (Washington, D.C.)
Wednesday, March 21, 2001
8:00 am - 9:30 am
"What a difference a year makes." Donald Straszheim chose to emphasize this point in his opening remarks about the U.S. economy. Pointing to the year-to-date differences in various economic indicators, including the NASDAQ which was at 5,048 points last year and 1,890 points today, Straszheim asked fellow panelists what they thought these changes meant for the U.S. in the months and years to come.

Byron Wien addressed the drop-offs in the stock market and other indicators by taking the position that we are only at the very beginning of a longer and deeper recession than believed by most Americans. Wien and Douglas Cliggott both suggested that the cause of the recession is Americans′ insistence on spending more than they earn over the last several years, both as consumers and as businesses. This kind of behavior, Cliggott pointed out, is what gave us the extraordinary growth that we have been experiencing and will be a central cause of a tremendous slow down of the U.S. economy in the coming years. Cliggott commented that "maybe we need to save a little the old fashioned way" instead of spending money that we do not have.

In stark contrast to Wien and Cliggott, Ronald Hill said that we are not in a recession. He pointed to the fact that the money supply is growing three times faster than nominal GDP as an indicator that the U.S. economy is not in trouble. Hill went on to say that we need to look at the key indicators not compared to what they were a year ago, but how they are relative to U.S. economic history. When taking this approach, Hill said, we can see that things are not as bad as they seem.

Shifting to the role of the "New Economy" and technology, Steven Milunovich said that the country was caught up in the belief that the "dot-com" companies were going to change the entire economy when that was not truly the case. John Beck had a different take on the economic situation in the U.S. entirely. He suggested that the driving forces behind the economic slowdown are not the "dot-com" busts or "over spending Americans," but rather the demographic changes occurring in the U.S. Beck said that as more young Americans are getting married and starting to save money for their future families, they will not be providing companies with the same amount of revenue that they have collected in the past.

Ultimately there was no clear consensus on why the U.S. economy is struggling or whether it is even struggling enough to be termed a "recession."

In the closing minutes of the panel, Straszheim asked Thomas Higgins of Edison to describe what happened in California that brought us to the current power crisis. Higgins said that the reason for the crisis was not deregulation, but rather "poor regulation and bad politics." The regulators and policymakers, according to Higgins, expected the utilities to somehow be able to bear the brunt of increased prices from suppliers of energy without increasing the costs to consumers. Cliggott commented that California had neglected to invest in the building of new infrastructure (e.g. power plants, oil refineries). Higgins summed up the California power crisis by noting that it is a clear case of why "politics shouldn′t commandeer markets," which was greeted with nods of assent from his fellow panelists.

Moderators
Donald Straszheim, President, Milken Institute
Speakers
John C. Beck, Associate Partner and Senior Research Fellow, Accenture Institute for Strategic Change (Phoenix,AZ)
Douglas Cliggott, Managing Director and Chief Investment Strategist, J. P. Morgan, Chase & Co. (New York)
Thomas Higgins, Senior Vice President for Communications, Edison International (Rosemead)
Ronald J. Hill, Partner and Chief Investment Strategist, Brown Brothers Harriman & Company (New York)
Steven Milunovich, Global Technology Strategist, Merrill Lynch (New York)
Byron Wien, Managing Director and Chief Investment Strategist, Morgan Stanley Dean Witter (New York)
9:45 am - 11:15 am
There are about 300 million people with wireless phones around the world. The so-called technology "mania" has taken over and the three biggest factors contributing to this are fiber bandwidth, the wireless technology and the World Wide Web. According to Erik Gustafson this mania is "nothing we′ve ever seen before." It took the market and all of us by storm.

Over the past six months, economic growth, driven mainly by technological developments, has slowed down dramatically. In spite of this decline in the economy, data traffic has not slowed down. Internet and cell phone usage has been steady and traffic growth is still strong. What we need is an infrastructure that will be able to handle the amount of data flowing through this traffic. William Wiberg brought up the issue of how to bring content to the user in the proper form. He said that people tend to compare mobile to DSL but they are not satisfied with mobile just yet.

One of the main issues of concern is how to make money on the Internet. Corporations are still looking for the most effective business model to generate positive income. Greg Geiling said that out of about 320 service providers, only 14 are well funded. As soon as the mania is over, the strongest ones will emerge from the rubble.

The U.S. is lagging behind Europe in wireless communication due to lack of standards. The U.S. telecommunications industry has four competing standards as compared to Europe′s single GSM standard. Competition stimulates this business but capital markets funded too many unsound businesses. Panelists agreed that the market needs a telecom service provider that is actually profitable.

Dennis Kneale raised the possibility of U.S. service providers penetrating the Asian and European markets. Geiling pointed out that from the technological perspective, Europe is still three years behind the U.S. and struggling to handle the capacity of the Internet. He didn′t think that the U.S. could infiltrate that market since European telecommunication companies are more bureaucratic and are completely tied into old school mechanics.

Moderators
Dennis Kneale, Managing Editor, Forbes (New York)
Speakers
Greg Geiling, Vice President, Senior Communications Equipment Analyst, J. P. Morgan H&Q (New York)
Erik Gustafson, Senior Portfolio Manager, Stein Roe Mutual Funds (Chicago)
William Wiberg, General Partner, Bowman Capital and formerly Lucent (New York)
9:45 am - 11:15 am
Moderator Carlos Asilis began the session with a simple, urgent question: "Should we be optimistic about the future in Latin America?" While Latin America has taken encouraging steps toward democratization, much of the region has funded its accompanying economic growth through mounting external debt. Debt and currency exchange problems continue to plague many of the region′s major economies and threaten further growth. These challenges are not new ones for Latin America.

"Globalization is producing trends that the region has seen many times before," asserted Michael Pettis. Technological advances and massive capital inflows from richer countries are spurring a huge increase in international trade, a trend that has occurred in Latin America six times in the previous 180 years. While the common assumption is that political reform in less-developed countries leads to capital inflows from outside investors, Pettis asserted the opposite: that the investment capital comes first, and makes the ensuing political reform sustainable.

Latin America can be divided into three distinct regions. The primary Southern Cone countries of Argentina, Brazil, and Chile enjoy political cultures that take place under well-established laws and procedures, but Argentina currently faces a number of economic woes. In fact, Buenos Aires may be forced to rely on assistance from Brazil, the largest of the Mercosur economies. As a result of a lagging Argentina, Brazil′s future growth will be hampered. The Andean countries suffer from chronically weak civil institutions, and are subject to unrestrained conflict and erratic behavior. The well-known Colombian conflict shows few signs of being resolved, and President Chavez allows the high price of oil to substitute for good governance in Venezuela. The outlook for the countries in the region is grim. In Mexico, new rules and institutions are being tested. The economic reforms of the 1980′s allowed political reforms to happen a decade later. Now it is likely that a wave of "second generation" economic growth will occur. "Mexico has bet its political and economic future on the United States," said Dr. Abraham Lowenthal, and its future stability will be largely intertwined with its northern neighbor.

Lowenthal cited the central challenge of Latin America as no different from other developing areas of the world: building institutions that can produce consensus for sustainable policies. In the disputed 2000 U.S. election, disagreements were mediated and resolved through civil channels. In Latin America, Chile is most advanced in achieving this goal. Mexico is making rapid progress, but still has a long way to go. The current climate of high global liquidity and commodity prices will continue in the era of globalization, and recurring economic crises will be a permanent feature of the future financial landscape. The Latin American countries that can sustain reforms through the inevitable crises and periodic contractions in the U.S. economy are the ones that will prosper in the future.

Moderators
Carlos Asilis, Chief Emerging Markets Equity Strategist, JP Morgan Chase & Company (New York)
Speakers
Abel Beltran-del-Rio, President and Founder, CIEMEX-WEFA (Eddystone, PA)
Ernani Hickmann, Professor of Economics, Fundao Getulio Vargas, Graduate School of Economics (Porto Alegre, Brazil)
Abraham F. Lowenthal, Professor of International Relations, University of Southern California and President, Pacific Council on International Policy (Los Angeles)
Michael Pettis, Managing Director, Head of Capital Markets Strategy Group, Bear Stearns & Co. Inc. (New York)
Olman Segura-Bonilla, Director of Research Program, International Center for Economic Policies for Sustainable Development, National University of Costa Rica
9:45 am - 11:15 am
History doesn′t repeat itself but it definitely rhymes, stated John Hagel, making reference to the euphoria that led venture capitalists to invest in all sorts of ideas that promised big, fat and fast returns. Several factors that converged in the market in the late 90′s are mostly to blame.

First and foremost, with the advent of the Internet and the introduction of new and better technologies by the day, stories of how it would revolutionize the way business was being conducted would lead to massive restructuring which in turn would lead to increased efficiencies and productivity gains, proliferated. These promises of newer and better business models drove investors to rapidly increase the influx of money going into venture funds, with this amount growing by a factor of 2.5 times in the 1998-1999 period. Quite conversely to what people would believe, this increasing inflow of funds created new challenges for the venture capital industry; now it needed to recruit new talent that it could dedicate to finding new deals and screen through them to identify those that were promising. Unfortunately for venture capitalists, talent, and especially good talent was not easy to find, let alone retain, creating a bottleneck in the investment decision process.

These circumstances - coupled with the increasing appetite on Wall Street for new hot technology firm IPO′s - led venture capitalists to shift from investing in sound business ideas to funding any type of "business plan" that could potentially be taken to market in no more than nine months after being funded. However, the rapid decline of the stock market since March 2000 and the "dry-up" of the market for IPO′s, has forced venture capitalist to retool their strategy and readopt more traditional ways of evaluating investment decisions, that is, using metrics that make sense.

The panelists later discussed what they predicted could be the next "hot sector." Albert Waxman argued that one of the sectors that is ripe for taking advantage of new ideas is healthcare. As private companies, who pay for or subsidize the cost of insuring over 150 million Americans, continue to face rising insurance costs, pressure continues to grow on healthcare plan managers to reduce their prices. Waxman further explains that reducing the costs associated with the highly inefficient reimbursement processing system is one of the best ways to accomplish these cost reductions. Here is where an opportunity for new entrepreneurs lie, and where he believes venture capital will make funding available. On the other hand, Sanford Climan sees opportunities for entrepreneurs in the creation of delivery platforms for content. He sustains that those who are able to provide consumers with the right combination of content, and more importantly, able to create a revenue stream from paying consumers, will be able to capitalize on the available technology. He further sustains that the key driver for success for these new content providers will be the creation of the right partnerships with content owners that will allow entrepreneurs to deliver a content mix for which consumers are willing to pay.

Regardless of the product or wave of the future, one of the underlying points that was continuously reinforced was the need to create revenues streams directly from the consumer. As many of the dot.coms have already proven, a business model that can′t extract value from the consumer is not sustainable in the long run, and therefore fundamentally flawed. Wall Street has once again opened its eyes to this reality and cut financing off to business models that seem to be designed for socialist economies, not a capitalist one. Investors demand returns.

Moderators
Joan Hamilton, Columnist, Business Week (San Mateo, CA)
Speakers
Robert Buderi, Editor-at-Large, Technology Review, MIT (Cambridge)
Sanford Climan, Managing Director, Entertainment Media Ventures, LLC (Los Angeles)
John Hagel III, Chief Strategy Officer, 12 Entrepreneuring (San Francisco)
Yossi Vardi, President, International Technologies (Tel Aviv)
Albert S. Waxman, Founder and Senior Managing Member, Psilos Group Managers, LLC (New York)
11:25 am - 1:00 pm
Andrew M. Rosenfield, C.E.O. of Unext.com, a distance learning company, kicked off the human capital seminar by reciting a quote from Benjamin Franklin, stating, "Investment in knowledge, makes the best return."

Indeed, many organizations are seeing the wisdom of Franklin′s vision. Continuous learning, classified as everything from post-high school education to distance learning, is viewed by many organizations as one of their critical success factors and has grown into a $2 billion industry. Continuous learning makes workers more productive and provides organizations with a surplus of educated people.

The panel members were in agreement that the current educational system has simply too much demand and not enough supply. In order to meet this supply, traditional and new academic institutions have to revisit the way they service students.

Bruce G. Willison, Dean of UCLA′s Anderson School, faces a unique problem. Dean Willison must find a balance between access to UCLA′s academic programs for everyone while retaining the integrity of the program that the alumni have fought so hard to build. One of the strategies he proposed is a versioning strategy. This strategy would weight different degrees depending upon which degree was earned: off-line, on-line, etc. However, even with a versioning strategy many people will still be unable to afford a degree from a traditional academic institution. This is where the new forms of schools are coming in.

Anthony Digiovanni, President of the University of Phoenix Online, believes that the traditional 18 to 22 year-old student is the exception to the rule. Digiovanni believes today′s students are full-time workers too busy to commit to inflexible programs. His company has led the way in providing people who want to continue to learn with flexible education options.

The costs of recruiting and training talent have become so cumbersome that retaining and retooling in-house workforce is the wave of the future. The panel was in agreement that in the future, corporate universities would outnumber traditional universities. In addition, traditional universities and new distance learning programs will form partnerships and alliances with companies to help them overcome their workforce′s "learning gap."

Moderators
Michael Moe, Partner, ThinkEquity Partners (San Francisco)
Speakers
Anthony Digiovanni, President, University of Phoenix Online
Terry Hueneke, Executive Vice President, Manpower Inc. (Milwaukee, WI)
Andrew M. Rosenfield, Chairman, Founder and Chief Executive Officer, UNext.com (Deerfield, IL)
David M. Schneider, President and Chief Executive Officer, Nextera Enterprises (Los Angeles)
David Shaffer, Executive Vice President and Chief Operating Officer, The Thompson Corporation (Toronto)
Bruce G. Willison, Dean, The Anderson School at University of California, Los Angeles
11:25 am - 1:00 pm
The world is changing as we speak. One of the key topics that must be faced is the changing global environment. There are numerous discussions on the catastrophic effects of global warming, climate change, increasing environmental pollutants, etc. The discussion of this panel focused on the dramatic decline in the world′s global ecosystem, how we can use financial markets and instruments to advance environmental goals, the need to internalize the environmental costs, and government′s role in implementing policies to reduce environmental pollutants. It′s implications on the social, environmental, and economic aspects of our lives could be profound.

Michael Walsh started the panel emphasizing the increasing trend of bringing market- based solutions to address environmental problems. He notes that the convergence of environment and capital markets is becoming predominant. For example, a trend highlighted was the fact that in the past 30 to 40 years there has been greater commoditization of the environment, using market wise solutions to bring down environmental pollutants. In addition, there has been massive increase in social awareness of environmental issues bringing forth government policies for cutting and trading greenhouse gas reduction.

With that, Walsh addressed Timothy Wirth to give a global view of this topic in general. Wirth opened with a quote from a Nobel Laureate, Henry Kendall, saying that "human beings and the natural world are on a collision course." Political issues should focus more on how the world′s global ecosystem is on a dramatic slide down in terms of climate change and environmental pollutants, he says. There is a misallocation of policy and funds. He points out that "governments can′t do it themselves." There is a need to strengthen institutions and seek ways to better finance the solutions, bringing capital to save the ecosystem and incentives to those investors, because the global ecosystem effects the global economy.

Brian McLean added the issue of internalizing environmental cost. He spoke of the transaction costs of enhancing the environmental integrity of a system, i.e., trying to reduce environmental emissions while at the same time bringing economic growth to the area. The cost of mitigating greenhouse gases is inexpensive compared to a savings of $50 billion in health benefits, referring to the case of acid rain in the United States.

Robert Ballentine turned the focus to global warming. We have not been able to solve the problem. The fact that more than 25 percent of our coral reefs are gone or dead is alarming. There is a new mindset being applied to finding value in environmental performance by promoting the idea of harnessing the market and utilizing capital to solve the issue of climate change and other environmental issues. The prospect of a steady transformation in commoditizing of environmental value (e.g. carbon trading) is a positive step to socially responsible investing. A combination of education and awareness will reduce many of the catastrophic effects and promote interest from investors to bring greater funds into the environmental spotlight. All the distinguished panelists agreed the increasing problems of the environment effect the global economy. Using financial markets and instruments to advance environmental goals is pertinent. Governments play an important role in effective policy and regulatory standards.

Moderators
Michael Walsh, Senior Vice President, Environmental Finance Products (Chicago)
Speakers
Geeta B. Aiyer, President, Walden Asset Management (Boston)
Roger Ballentine, Consultant, Green Strategies and Former Chairman, White House Climate Change Task Force and Senior Advisor to President Clinton (Washington, DC)
Brian McLean, Director, Clean Air Markets Division, U.S. Environmental Protection Agency (Washington, D.C.)
David Moran, President, Dow Jones Indexes (New York)
Timothy E. Wirth, President, The United Nations Foundation (Washington, DC)
11:25 am - 1:00 pm
Moderated by William F. Achtmeyer, Chairman and Managing Partner of the Parthenon Group, the panelists looked at the challenges facing firms wishing to rebuild their balance sheets. Firms involved are usually in distress which begs the question of how they got there.

Skip Victor, Senior Managing Director of Chanin Capital Partners noted that, "more often than not, when a company is going into distress, it is usually the company′s first time."

Secondly, the panel considered the affected firm′s options and fears. One of the fears is the notion that Distress Investors are "vultures" just waiting for the opportunity to come in and pick the firm apart for any remaining profits. The panelists worked to dispel that myth, adding that Distress Investors may actually help the firm.

In an effort to figure out how the firm may have gotten itself into the situation, the panelists looked internally at the key players, management and the CEO.

"The nexus of the problem is bad management," argued Paul A. Street, Member of Impala Partners.

Although there was general consensus on the point, the panel took the problem a step further by asking how to effectively train management to deal with the situation of distress. What came out of the discourse was looking at the role of the CEO and the myth that many subscribe to in terms of being able to lead a firm in all types of economic situations.

"There is no such thing as a plug-in-place CEO," noted Joe Colonnetta, Principle of Hicks, Muse, Tate & Furst, Inc.

Other lessons observed by the panel included: early recognition and action are key, many solutions exist for each type of situation, there should be a focus on value creation above all, and to choose a partner with the same mindset. Some key questions posed by the group included: if we don′t learn from history, are we destined to repeat it? Can too much capital impair the profitability of even the best businesses? And, in bankruptcy, are companies "worthless" or simply "worth less?"

Moderators
William F. Achtmeyer, Chairman and Managing Partner, The Parthenon Group (Boston)
Speakers
Martin J. Bienenstock, Partner, Weil, Gotshal and Manges LLP (New York)
Joe Colonnetta, Principal, Hicks, Muse, Tate and Furst Incorporated (Dallas)
David Sabath, Vice President, Goldman Sachs (New York)
Paul A. Street, Member, Impala Partners LLC (Stamford, CT)
Nicholas Tell, Jr., Managing Director, Trust Company of The West (Los Angeles)
Skip Victor, Senior Managing Director, Chanin Capital Partners (Los Angeles)
11:45 am - 1:00 pm
1:00 pm - 2:30 pm
What do you get when you gather five extremely smart guys in one panel discussion? An engaging, light-hearted chat in an effort to outline very serious issues affecting science as we know it today, as well as possible solutions that could potentially revolutionize it in the near and far future. The discussion revolved around the acceleration of science, funding challenges, and America′s health.

Michael Milken raised the question of whether science be accelerated. According to David Baltimore, there is no question that it can. Baltimore believes that there is a vast amount of ideas and hypotheses that would be carried out if it were not for a lack of funds. Technology today allows us to move, discover, and cure a lot faster than it ever had. The difference between science in the 1960s and today is like night and day, according to the panelists. As an example, they pointed to the economic value of the reduction in cancer and heart disease-related deaths, which currently runs a little short of $100 trillion. Despite general agreement, the panelists could not reach unanimity in concluding that increased funding automatically leads to scientific breakthroughs.

There was a clear disagreement amongst the panelists as to what ultimately challenges science most, funding or a large knowledge gap. Paul Berg is not ready to agree that money is what science needs to solve its problems. According to Berg, data gathering and analysis is facilitated by an increase in funding. However, data gathering and analysis do not necessarily mean that the knowledge gap is guaranteed to be filled. Berg commented that scientists believed they would immediately find the cure to many diseases including cancer once they decoded the human genome, however, such has evidently not been the case. Mapping a given gene results in potential drugs and potential clinical trials, however, this formula does not guarantee the generation of a successful drug, stated Berg.

Michael Bishop disagreed with Berg and expressed the belief that there isn′t enough money to go around. He joined James Watson in his belief that money is the ultimate catalyst to monumental scientific breakthroughs. Watson and Bishop opined that two keys to "speedy science" are an improvement in current biotech microchips and a facilitation of funding to young, innovative scientists who are currently having major problems in initiating their research efforts. This is regarded as the biggest gap in the funding system. Bishop believes that the funding system is a "momentum killer." Of all fund petitions only one third of all submitted proposals are approved; tough funding can be disappointing to a young scientist. "Most committees are against something new...the cancer world needs adventure," said Watson. Reactions to the possibility of the theory of the Manhattan Project being applied to science and being successful were mixed amongst the panelists.

Michael Milken raised the question of America′s health and allowed the panel to analyze our current health situation. We live in a time in which per capita smoking is greatest among developed nations. America has a weight problem that results in higher rates of cancer, heart disease, and diabetes. Why is America in trouble in this regard? The panelists believe that smoking is conceived to be cool amongst young people, as well as a convenient way of controlling weight gain, and that it is ultimately an addiction that is hard to control. America′s weight problem can be explained by many factors including the "more is better" belief, the convenience of fast foods, and our affinity to fats and sugars.

The panelists all agreed that our government is not ready to accept what science can potentially offer. David Baltimore believes that five years from now that we′ll be very close to finding a cure to heart disease and that we will still be looking for an AIDS vaccine while facing disaster in Africa, in India, and among the gay community. Paul Berg foresees the development of individualized treatments tailored to an individual′s genetic makeup. Michael Bishop believes that the next five years will bring about changes in disease prevention, awareness, and education. James Watson believes that the next five years will allow scientists to discover one-third of all possible genetic diseases.

Other topics discussed were stem cells research, gene therapy and the human genome.

Moderators
Michael Milken, Chairman, Milken Institute
Speakers
David Baltimore, President, California Institute of Technology (Pasadena)
Paul Berg, Nobel Laureate, Director, Beckman Center for Molecular and Genetic Medicine, Stanford University, School of Medicine (Palo Alto, CA)
J. Michael Bishop, Nobel Laureate, Chancellor, UC San Francisco
James Watson, Nobel Laureate, President, Cold Spring Harbor Laboratory (New York)
2:45 pm - 4:00 pm
Biotechnology and related life science research is the technological revolution that will shape the beginning of the twenty first century. In this session, the moderator, Martin Greenberger, led the panel in a discussion of the recent history, the current state of the art, and the potential benefits and challenges posed by these technologies. Mark Simon described the recent financial performance of the biotechnology industry, which he characterized as having "terrific top line growth."

Joshua Boger characterized the biotechnology industry as producing an order of magnitude increase in new therapeutic opportunities, however, in order to take advantage of these opportunities, a new paradigm for drug discovery and development is necessary. This is due to the immense costs currently expended by pharmaceutical companies in bringing new products to market. Sean Lance pointed out some of the short-term socio-economic impacts of the new therapeutic technologies, specifically, the challenge of pricing and availability of these new products across socio-economic levels throughout the world. Francis Fukuyama highlighted the longer-term political implications of biotechnology such as increased understanding of causation relationships between genomic and higher level behaviors, life extension, and genetic engineering.

The entire panel predicted future developments and challenges for the industry. These issues included price controls on future therapeutic products, high costs of drug development, and the importance of protecting intellectual property and patents. Fukuyama proposed the need for a stronger regulatory structure in order to guide developments and insure the commercial viability of life science technologies and products. While both the opportunities and potential risks of biotechnology were discussed, Stephen Fodor suggested that biotechnology was similar to any new technology in that society must ultimately decide the pace and direction at which development of new products and technologies should proceed.

Moderators
Martin Greenberger, Senior Fellow, Milken Institute, and IBM Professor, The Anderson School at University of California, Los Angeles
Speakers
Joshua Boger, Chairman and Chief Executive Officer, Vertex Pharmaceuticals (Cambridge, MA)
Stephen P. A. Fodor, Chairman and Chief Executive Officer, Affymetrix, Inc. (Santa Clara CA)
Francis Fukuyama, Professor of Public Policy, George Mason University (Fairfax, VA)
Seán P. Lance, Chairman and Chief Executive Officer, Chiron Corporation (Emeryville, CA)
Mark Simon, Managing Director and Head, Life Sciences Investment Banking, Robertson Stephens (San Francisco)
2:45 pm - 4:00 pm
The panel agrees that China is a nation in the process of dramatic change, economic, demographic, and political. "The country is moving forward," says K.C. Kwok, and while not indicative of the country as a whole, some provinces even are "taking off."

"Expect major changes" in 2002, says Jaime FlorCruz. China′s new generation of leaders are most likely young technocrats and engineers who grew up during a cultural revolution. They have never fought in a war and will be more concerned with the economy than were previous generations of leaders. Kwok agrees that the focus of China′s government in the coming years will be the improvement of corporate governance and business structure. Despite the impressive 7% estimate of annual GDP growth, which he believes is a conservative figure, and the radical changes that will imply, he argues that the underlying changes will be more significant, as the government focuses more on the regulatory framework and fostering business services, such as banking and insurance.

Kwok cautions, however, that China is a big country and that the difference between regions could be substantial. Robert Kapp says that "opportunities are not going to be uniform." James Murdoch adds that the real market in China is comprised of "coastal areas" and "a few inland cities," both of which are comprised largely of "disproportionate earners." There are business opportunities in China, but the panel stresses that one cannot merely view China as a nation of 1.3 billion consumers.

Even though foreign investment has increased and even though China is the second-largest destination of direct foreign investment, Murdoch describes it as still only the "tip of the iceberg." China is also only in the nascent stages of building an equity culture, which will help drive returns as it matures. The Chinese equity market has also produced one of the best returns over the past five years. Hughes cautions that transparency is key; and Murdoch makes the qualification, "One has to have an extremely strong stomach to invest in China," as the media often misrepresents events in China and portrays the country as a mysterious unknown.

Hughes suggests investors keep an open mind when looking for opportunities in or relating to China: "The Internet is not the only place where things happen," she says. "The real action is cable television." Hughes also predicts that while India will become the software capital of the world, China will become the hardware capital. She also notes that Mastercard′s biggest market outside of the United States is China.

The economic changes in China are creating significant pressures on the government. FlorCruz reminds us that it "takes hubris to govern 1.3 billion" people. Kapp says that authority in China is a "work in progress" and that social problems arise as a result of their progressive agenda. With the privatization of some state-owned enterprises, some parts of China face massive layoffs, creating widening income gaps that lead to "very substantial corruption" and pursuit of personal gain at another′s expense. One of the challenges facing China′s political system is holding the various social tensions in check. "China is not a monolith," says Hughes. There is internal conflict and disagreement.

The leadership in China is not the old kind of leadership. There is no one charismatic to unite or lead the people. "Very few Chinese believe in Communism," says Kwok. There are challenges facing the leadership of China. However, Murdoch says the government is "taking their knocks on the international stage to get the job done." And Kapp is optimistic regarding China′s future, saying, "There is a great deal of ferment in China," and "a lot of it is very positive."

The main focus of China′s government presently is stemming corruption. The central government wants to change, but many local officials and citizens worry more about corruption than democracy. It is too early for China′s government to focus on democracy. Such priorities will arise later.

Hughes says that the corruption campaign in China is "absolutely real." From watching the Chinese media internally, she concludes that the Chinese people are genuinely concerned with identifying and eliminating corruption. If the young people cannot trust the government, then the govern will lose whatever control it has. Thus, the fight against corruption serves both a real and pragmatic purpose.

"The Chinese press itself has started to change," says FlorCruz, driven by both the market and by advertising. Hughes adds that more media outlets have arisen in China, weakening government control. As these new outlets pursue profit and viability, they increasing turn towards advertising dollars and in turn seek to cater to such a market. Advertising dollars and the consumer market at large demonstrate an increasing influence upon print and television media.

Despite the positive changes, there is a spiritual crisis in China, a "crisis of faith," according to FlorCruz. The country needs religion, rules, and social norms. There is a breakdown of the healthcare system in China, turning people towards evangelical Christianity, and their belief system as a whole has radically changed. Their beliefs cannot center around money or the economy: there has to be something more.

With 630 million people in China under 24 years of age, the country is obviously at a time of great change. Chinese society "cannot avoid becoming more pluralized," says Kapp. He believes this is one of the most fundamental changes that will occur in China and will help transform China into a viable business partner.

As Murdoch warns, the time is ripe for building relationships and business alliances with China, but the time for reducing problems to entry is dwindling. There is plenty of opportunity for the US to be a part of China′s transition, both through public policy and the number of students coming to the United States to learn. Murdoch warns that China will inevitably find its own way, with or without the US. The Taiwan issue, for example, is important to China and is a matter of "when, not if," he cautions. The best course of action for the United States is helping China to become a productive nation integrated with the rest of the world.

Kwok: "Government took a major step forward in the last few years." Gov. still needs state-owned enterprises in small cities, where one or two government enterprises might account for most of the employment in those cities.

Murdoch describes the new leadership as "absolutely capitalists" and "absolutely statists."

Kapp: as a market mentality replaces a planned-economy mentality, "the institutions struggle to keep up." Training of financial regulators is lagging. Each co. is doing its best to get "through the maze."

Hughes: new generation in China every 10 years. Important in terms of succession politics.

Moderators
Joshua Ramo, World Editor, Time Magazine (New York)
Speakers
Jaime FlorCruz, Edward R. Murrow Press Fellow, Council on Foreign Relations (New York)
Lyric Hughes, Founder and Chief Executive Officer, ChinaOnline, Inc. (Chicago)
Robert Kapp, President, U.S.-China Business Council (Washington, D.C.)
K.C. Kwok, Regional Chief Economist, Northeast Asia, Standard Chartered Bank (Hong Kong)
James Murdoch, Chairman and Chief Executive Officer, Satellite Television Asian Region Ltd. (STAR TV) (Hong Kong)
2:45 pm - 4:00 pm
Assessing the dynamics of market risk requires solid risk management criteria. The need for measuring and monitoring the risk of portfolios as well as the need for manipulating large amounts of data are vital elements in establishing a stable risk management system.

What is an emerging market? According to Carl Adams, Global Manager Country Risk and Director at Merrill Lynch, "Identifying your business activity, making your own assessment as opposed to relying on others" are essential steps in establishing the initial elements of an emerging market. On the topic of risk management, Adams stated that understanding the risks and the returns one will receive are important factors in being a step ahead of everyone else.

Erwin Martens, managing director and head of Risk Management at Putnam Investments, addressed the factors that go into the thinking process of risk management. Among them were market risk and market credit, operational risk, and compliance, which involves the search for criteria. He said that we must question the depth of equity and determine the strength of the credit system when it comes to assessing the validity of risk. A strong banking system was said to be another important factor in measuring risk.

Wilfred Horie, president and CEO of Korea First Bank (KFB), has literally restricted the bank to functional organizations. He stated that "the infrastructure of Korea is a copy of Japan — it′s going nowhere." However, he mentioned that Korea realized this and knows that it must revitalize its infrastructure. In doing so, Korea First Bank created a new credit process, installed world-class credit standards, received government protection and established a financial discipline. "We use our parking lot as a training ground for potential CFO′s and CPA′s at KFB," he added. Horie, along with the other panelists, agreed that the ultimate result is to make banks profitable.

Much talk about a decision-oriented balance sheet was said to contribute to a successful management process.

Finally, the panel discussed why certain countries may not be susceptible to emerging markets. Political risk is a major issue in the world today and an important factor in making investment-related decisions. Paul Tucker, Deputy Director for the Bank of England, added, "countries with severe political instability don′t attract firms." On the other hand, Martens warned that more developed countries such as Canada, are still faced with a level of susceptibility as demonstrated by recent trends in the Canadian dollar.

Moderators
Maureen Miskovic, Managing Director and Head of Global Risk, Lehman Brothers, Inc. (New York)
Speakers
Carl F Adams, Global Manager Country Risk and Director, Portfolio Risk, Merrill Lynch (New York)
Wilfred Horie, President and Chief Executive Officer, Korea First Bank, (Seoul)
Erwin Martens, Managing Director, Head of Risk Management, Putnam Investment Management (Boston)
Paul Tucker, Deputy Director, Financial Stability Division, Bank of England (London)
James Vinci, Partner, PricewaterhouseCoopers (New York)