Monday, April 22, 2002
10:00 am MON 4/22
10:45 am - 6:00 pm MON 4/22
12:05 pm - 1:00 pm MON 4/22
3:00 pm - 10:00 pm MON 4/22
6:00 pm - 7:00 pm MON 4/22
7:00 pm - 9:45 pm MON 4/22
Today′s interdependent world requires that all parties — developed and developing countries; private and public sectors; educators and philanthropists — work together to solve some of the world′s thorniest problems if we are to grow and thrive as a civilization.

That was the consensus at the conference′s opening night discussion — an extraordinary debate between four of the most respected voices on the future of civilized society over how to create prosperity for all the world′s population.

Not only is solving our critical problems — from the spread of communicable diseases to the growing gap between rich and poor — a moral imperative, "it′s a matter of our self interest," said Jared Diamond, winner of the Pulitzer Prize for his book, Guns, Germs and Steel.

David Gordon, who studies the globe′s economic opportunities for America's intelligence agencies, said that Sept. 11 proved that we cannot look the other way at these problems. He described it as a defining moment for the country.

"Since Sept. 11, there is a new sensitivity about the need to do something about the fact that too much of the world economy is focused on too few of its population," he said.

Hernando de Soto, whose work focuses on building prosperity in developing and transitional countries, said the most important thing for nations to do is create a rule of law giving their citizens to title to their assets — land, houses, stock, etc. —and to use those assets to build prosperity.

"When you create ownership, you create the rules that allow people to create value," he said.

According to de Soto, five-sixths of the world′s population has not benefited from capitalism — mainly because they don′t have rights to their own property. These so-called "hidden assets" amount to $10 trillion in poor countries, he said.

"We must focus on the rule of law," he said. "It′s what builds property rights."

Barry Munitz, former head of the Cal State University system, pointed to the crucial role that education will play in the coming years. He pointed to the problem of education in the U.S., where "the higher you go in our education system, the more we are the envy of the world, but the lower you go, the less competitive we become."

Things have improved since the release of the famous report on America′s education system, "A Nation at Risk," but it will take the cooperation of private and public sectors, of for-profits and non-profits, to move us further ahead, he said.

The panelists agreed that globalization has helped improve economic conditions in countries throughout the world, but it has also made the spread of some problems, such as AIDS, easier.

Diamond offered his top 10 biggest challenges facing us in the next 50 years. These include global warming, population growth, a decline of fresh-water sources and deforestation, "any one of which could do us in," he said.

Gordon agreed with some of Diamond′s list of challenges, but emphasized that the world in 2015 "will not be all gloom and doom" In fact, there are many opportunities for human growth in the decades ahead afforded by advances in technology and science, and the spread of the global economy.

"A lot of things push for the optimistic scenario of the world economy," he said.

But, all of the panelists agreed, the world is too interdependent today to look the other way. It requires that we all work together to solve them; ignoring them will only make things worse — for all of us.

As Gordon said: "We have a stake in the world."

Michael Milken, Chairman, Milken Institute; Chairman, CAP Cure; Co-founder, Milken Family Foundation
Hernando de Soto, President, Institute for Liberty and Democracy (Lima, Peru)
Jared Diamond, Professor of Physiology, School of Medicine, University of California, Los Angeles; Pulitzer Prize winner, Guns, Germs, and Steel.
David Gordon, National Intelligence Officer for Economics and Global Issues, National Intelligence Council (Washington, DC)
Barry Munitz, President and Chief Executive Officer, The J. Paul Getty Trust (Los Angeles)
Tuesday, April 23, 2002
6:30 am TUE 4/23
6:30 am - 8:00 am TUE 4/23
6:45 am - 7:45 am TUE 4/23
6:45 am - 7:45 am TUE 4/23
6:45 am - 7:45 am TUE 4/23
8:00 am - 8:15 am TUE 4/23
Michael Klowden, President and CEO, Milken Institute
8:15 am - 9:45 am TUE 4/23
Tuesday morning opened with Michael Milken moderating a discussion among four Nobel laureates in economics — Robert Fogel, Myron Scholes, Gary Becker and Robert Mundell — who addressed the many challenges and opportunities facing the world′s economic establishment.

Milken asked the four Nobel laureates to provide the audience with what they believed to be the two greatest challenges and the two greatest opportunities facing today′s economic order.

Becker believes the world′s two largest challenges to be the increasing gap between rich countries and poor countries, and increasingly low birth rates throughout the developed world. Becker challenged the panel to provide evidence as to whether or not we as a society know enough about what it really takes to raise the standard of living in poor countries. He raised Hernando de Soto′s challenge to Americans to consider the implications of legally enforced ownership rights suggesting the secret to bridging the gap between rich and poor lies embedded in property rights. Becker also stressed the fact that never in the history of the world have we seen 45% of the world′s population reach replaceable standards.

As for opportunities, Becker believes that unprecedented technological advances present us with the chance to do something positive about water treatment and solutions to global warming issues, to mention a few. Becker contends that every challenge creates an opportunity and nowhere is this more evident than in the issues surrounding global poverty. Becker believes that three things — free markets, the ability and willingness to invest in human capital, and the implications and benefits of an open economy — have worked wonders for the United States during its formative years, as well as for late-blooming countries such as Ireland and Australia.

Fogel proffered breakthroughs in physiology, chemistry and biology to be the two grandest opportunities, having allowed people to increase life expectancy and most importantly, its quality. The second opportunity according to Fogel is being at the forefront of further technological opportunities. Only domestic and international sanctions and limitations curtail the opportunities provided by technological breakthroughs, especially when dealing with breakthroughs in genomics and gene therapy. Fogel′s second challenge dealt with privatized healthcare and social security. Fogel argues that we have the resources needed to meet these challenges.

Scholes stated that one of the most important opportunities to us all is the ability to foresee and prepare for events that have the potential to shape our world. Catastrophic events such as disease, the threat of war, and all the benefits provided by a well-informed intelligence community, fall into this category. Equally important is the opportunity technology provides to increase prosperity in the developing world. People with access to computers and the Internet have greater opportunity to earn money and access higher education. The two most important challenges, according to Scholes are the negative multiplier effect created by the supply imbalance throughout the world and the present practice of people trusting governments rather than open markets.

Mundell seconds the notion that every challenge presents an equal opportunity, contending that the most challenging problems facing the world are global governments. He cites the lack of leadership among international bodies and organizations that deal with problems of peace, security, hunger, education, and the environment combined with the lack of an international monetary system in a global economy. With regard to the latter, Mundell said, "any country in the world that has its currency triple in value (Japan) against the dollar is asking for trouble." As for opportunities, Mundell cited the challenging opportunity faced by financial markets switching from a bank-based system to an equity-based system.

Among other topics, Milken and the panelists addressed issues of Mexico, Russia, Japan, job creation, and the over-emphasis on the importance of natural resources.

Michael Milken, Chairman, Milken Institute; Chairman, CAP Cure; Co-founder, Milken Family Foundation
Gary Becker, Nobel Laureate, Economic Sciences, 1992; Professor of Economics and Sociology, University of Chicago.
Robert Fogel, Nobel Laureate, Economic Sciences; Charles R. Walgreen Distinguished Service Professor of American Institutions, University of Chicago, Graduate School of Business
Robert Mundell, Nobel Laureate, Economic Sciences; Professor of Economics, Columbia University (New York)
Myron Scholes, Nobel Laureate in Economic Sciences, 1997; Managing Partner, Oak Hill Capital Management; Frank E. Buck Professor of Finance Emeritus, Stanford University
10:00 am - 11:15 am TUE 4/23
Is Russia finally rising after the painful failures of the 1990s? How fast and, more importantly, how sustainable will the rise be?

This was the central issue of the Russia Rising panel featuring several distinguished experts on Russian business, economy and politics. The participants included William Browder,Lois Dubin, Michael Intriligator and Deborah A. Palmieri.

The participants were unified in their positive assessment of the recent trends in Russian politics and economics. They were also unanimous in ascribing a large share of Russian success to Vladimir Putin′s leadership and policies. However, the panel′s presentations and subsequent discussion also underscored that sustainability of Russian development will ultimately be determined by the Russian leader′s capacity to overcome several acute institutional problems jeopardizing Russia′s successful transition to market economy.

What are the positive trends in Russian development? As Intriligator noted, due to a combination of Putin′s capable administration, the effects of domestic currency devaluation and high international oil prices, Russian GDP registered impressive gains in 1999-2001, growing at 9% in 2000. This is an impressive departure from the record of the rest of the 1990s, when Russian GDP fell by half.

Browder emphasized the positive aspects of new Russian leadership clamping down on oligarchs and paying more attention to the protection of the rights of minority shareholders. He used the example of law prohibiting dilutive share issuance — a widespread practice in Russian business until recently — to illustrate the commitment of the Russian government towards a larger degree of transparency of the domestic market.

Dubin provided concrete examples demonstrating the revival of domestic industries in the wake of 1998 financial crisis. Palmieri emphasized Putin′s commitment to integration into the world economy and the stabilizing effect his leadership brought to society. She also praised the new tax code, executed in accord with the highest international standards.

Yet, the amount of unresolved issues in Russian transition is formidable. As Intriligator pointed out, economic growth is tapering off. Russia′s budgetary surplus remains completely dependent on fluctuations in world economic prices. Russia remains near the bottom of the capital access index due to the opacity of its economy and underdevelopment of market institutions. Moscow and several other cities remain the oases of prosperity while a huge number of regions and a significant share of the population live beneath the officially defined poverty line.

Browder drew attention to the absence of the normal legal system. Dubin lamented the absence of a mechanism for dispute resolution, and the non-enforceability of property rights, making investments in the country′s economy too risky. Palmieri addressed historical and cultural factors acting as obstacles to Russia′s successful transition to a market economy.

Intriligator nicely summarized the main themes of the conference when he pointed out that the formula for success of the Russian economy consisted of three major ingredients: developed market institutions, economic competition and the proper role of the Russian government. Putin′s recent reforms are changing the role of the Russian government, which is a shift in the right direction. However, little has been done so far to achieve breakthrough in the other two spheres. Russian leaders, Russian businesses and society at large are at the beginning of the long road to sustainable growth.

Ian Bremmer, President, Eurasia Group Ltd. (New York)
William Browder, Chief Executive Officer, Hermitage Capital Management (Moscow)
Louis Dubin, President and CEO, Athena Group (New York)
Michael Intriligator, Senior Fellow, Milken Institute,Professor of Economics, Political Science, and Policy Studies at the University of California, Los Angeles and Director of the UCLA Burkle Center for International Relations.
Deborah Palmieri, President and Chief Executive Officer, The Russian-American Chamber of Commerce (Aurora, CO)
10:00 am - 11:15 am TUE 4/23
Recent times have brought key changes in economic development efforts around the country. To create jobs, smart cities are less inclined to chase either smokestacks or sports teams and more inclined, as regions, to attract and retain innovative and entrepreneurial individuals. So said the panelists on regional job creation, moderated by the Institute′s Ross DeVol.

"If you look at job development 101, what you need is retention, attraction and creation," said panelist Robert Scott.

What regional job creation involves, essentially, is people. And a skilled workforce values place. How do cities and regions nurture an environment where those workers want to reside, keeping in mind that in the last decade more people have moved out of cities than into them? Crime, housing and schools are principle issues.

In New York City, "Guiliani took great strides reducing crime and focusing on quality of life issues," said Joel Kotkin. Everyone knows about the successes of that city′s job growth, he quipped, and how young, smart workers are drawn there.

On the opposite coast, California has fared well enough. Housing, however, stymies a larger push forward. "The lack of housing is a large obstacle. People ask where can I live and can I afford it," commented Bruce Karatz.

Jerry Brown added that along with housing, if the good schools aren′t there, then the good workers won′t be either.

Successful regional job creation thus relies on well-managed and nourished social capital — an innovative, productive web of institutions, customs and rules, and opportunities for public/private partnerships. As Scott reminded us, it′s "local… and all about people."

Ross DeVol, Director, Regional Studies, Milken Institute
Jerry Brown, Mayor, City of Oakland
Stephen Goldsmith, Senior Vice President for Strategic Initiatives and e-Government, ACS State and Local Solutions; Chairman of the Corporation for National Service (Washington, D.C.)
Bruce Karatz, Chairman and Chief Executive Officer, KB Home (Los Angeles)
Joel Kotkin, Senior Fellow, Milken Institute
Robert Scott, President and Chief Executive Officer, Greater Colorado Springs Economic Development Corporation
10:00 am - 11:15 am TUE 4/23
Roy Furman, Vice Chairman of Jeffries and Company, opened the panel by identifying four key drivers of change that the media industry has experienced over the last thirty years: globalization, consolidation, regulation and technology. To explore these issues he was joined by Jeffrey Berg, Peter Chernin, Mel Karmazin, Robert Kotick and Terry Semel.

Furman remarked on the great consolidation the industry has seen, the increase in movie grosses and the appearance of new sectors, notably cable television and new technologies such as the VCR and the DVD. At the same time, he noted, the reach of top television programs has fallen with leading shows no longer commanding the audience shares they used to. And as revenues have increased, so too have costs. Turning to the panelists, he questioned whether consolidation in the industry has been a good thing. Is bigger better?

Karmazin suggested that the logic of mergers was a question of specifics. Mergers that were carried out for strategic purposes or to achieve cost savings were working while those that were carried out simply to take advantage of acquirers′ inflated stock prices were not. Bigger is better, he contended and suggested that in fact mergers in other sectors require consolidation in the media industry.

Chernin agreed that bigger firms were needed and stressed that managing these mergers was a crucial challenge. Product quality was the ultimate measure of a firm′s success. Indeed, he noted that firms "are as good as (their) product."

Furman took this point further then, asking whether large firms had the ability to act creatively. Karmazin felt this was possible suggesting that decentralization was needed as "creativity is down at the grassroots level." Berg agreed, noting that media executives served in an editorial role rather than directly in a creative role.

Access to capital was a concern, Berg suggested, as were ways to "allow risk to be hedged." Chernin returned to the decentralization theme, using the example of Fox Searchlight to illustrate how a large firm can remain innovative and creative.

The moderator then raised the sensitive issue of content. Was the media guilty of dumbing down content, he asked. Karmazin felt that the proliferation of channels and media allowed new opportunities for niche marketing. Chernin felt the entire issue of dumbing down was "elitist and politically correct" and that viewers always had the option of simply changing channels.

While competition was fierce in the media industry, Furman suggested that MTV remained dominant and seemed to have a "wall of impenetrability." Panelists, however, felt that MTV was likely to face competition from new technologies such as the Internet as Semel suggested, and from the video game sector as Kotick contended. Kotick contrasted the media and video game industries quipping that "our budgets are their catering costs." While independence might be problematic in other industries, it was not for Activision.

Berg then provided the segue into a discussion of globalization by contrasting the political sensitivity of the media in foreign markets with its domestic commercialization. Chernin felt that an awareness of local politics, customs and mores was needed to successfully operate in foreign markets. Semel noted the global nature of the Internet.

Panelists were then asked to identify the greatest challenges to the industry. Piracy and other violations of intellectual property were common to panelists′ responses. Both Chernin and Kotick agreed that piracy would be the leading challenge and were echoed by Karmazin. There was, he felt, a role for congressional action but noted little taste for it on the Hill. Semel contended that part of the problem was the failure of firms to respond to new technology. Chernin who felt that the "business model" question was not the pressing issue, disputed this. Instead, he insisted, copyright must be sacrosanct. Berg provided a compelling context for this discussion noting that the "leakage" in the business was in fact greater than the industry itself. Piracy took two forms, organized commercial piracy and small scale individual piracy.

Before bringing the panel to a close, the moderator posed the question of regulators′ double standard in dealing with cable and video game content. Furman asked panelists whether they felt that the apparent leniency of regulators in dealing with violence in cable programming and in video games was a problem for other media. Chernin felt that this was not of concern.

The panel ended with a final question to the panelists. What was their greatest concern, risk or opportunity, Furman asked. Kotick, alluding to the previous nights′ presentation, joked that deforestation was his greatest worry while Karmazin replied that the strategic positioning of Viacom as a content, not distribution provider kept him awake. Berg said that accessing new forms of capital and providing value to his clients was his greatest concern while Chernin felt that product quality was key.

Roy Furman, Vice Chairman, Jefferies & Company (New York)
Jeffrey Berg, Chairman and Chief Executive Officer, International Creative Management, Inc. (Los Angeles)
Peter Chernin, President and Chief Operating Officer, News Corporation; Chairman and Chief Executive Officer, Fox Group (Los Angeles)
Mel Karmazin, President and Chief Operating Officer, Viacom Inc. (New York)
Robert Kotick, Chairman and CEO, Activision, Inc. (Santa Monica)
Terry Semel, Chairman and CEO, Yahoo! Inc. (Sunnyvale, CA)
10:00 am - 11:15 am TUE 4/23
Want to lower your healthcare costs? The message from scientists and nutrition industry executives is clear: better nutrition, regular exercise and stress reduction could lower healthcare costs by 70%, with potential savings to the U.S. economy of one trillion dollars. With healthcare costs projected to rise to $150 billion in 2002, companies have a huge stake in promoting better lifestyle choices among employees.

Obesity, a condition affecting 47 million Americans, is linked to more than 40 diseases and is an almost perfect predictor of diabetes, which is directly caused by poor diet and lack of physical activity. The costs of obesity are staggering. U.S. companies spent $5 billion dollars in 2001and these numbers are expected to rise.

A healthier lifestyle not only helps prevent the onset of disease but has also been proven to be effective at reversing the damage of cancer, heart disease, diabetes and obesity. Dr. Dean Ornish, founder and president of Preventive Medicine Research Institute at the University of California, San Francisco, conducted several studies on the subject. "The choices we make everyday will help you prevent and reverse cancer and heart disease," he claimed. Cancer and heart disease combined accounted for almost 47% of the total deaths in the United States in 2000.

In order to lower ballooning healthcare costs, fundamental changes need to take place. The challenge for the future will be figuring out how to convince individuals to alter their lifestyle. Panelists suggested that providing better access to information, easier availability of natural and organic food and the creation of incentives for consumers and producers alike, will be key areas of growth for the nutrition industry.

"Corporations are requiring their healthcare providers to provide access to information that can help people change," said Kathryn Creech, whose company, Miavita, is a provider of wellness programs. Companies are becoming increasingly aware of the role diet and fitness play in the prevention and treatment of common diseases and are beginning to offer incentives and educational opportunities to employees. Once the information is delivered, consumers need to be given greater access to natural and organic foods. The redesigning of the food supply represents a huge area of opportunity for the $500 billion-dollar food industry.

As Irwin Simon noted, until a few years ago "there was really no food company creating the food for the 21st century." Today, consumer demand is driving growth in the natural organic food sector and traditional grocers and mass retailers are finally offering a wider range of products for the health-conscious consumer. Finally, incentives need to be designed for consumers and producers. Ornish noted that companies must "create positive incentives for employees" in order to successfully promote nutrition as a cost saving mechanism.

On the supply side, Michael Milken, who moderated the panel, stressed that "the incentive that exists is litigation." It is not unforeseen that the food industry could be faced with the same type of litigation that plagued tobacco companies over the past decades. The threat of future litigation represents the single largest incentive for the food industry to switch its focus from the current offering of ‘energy dense′ foods to more health conscious ‘nutrient dense′ foods.

Michael Milken, Chairman, Milken Institute; Chairman, CAP Cure; Co-founder, Milken Family Foundation
Bruce Ames, Professor of the Graduate School of Biochemistry and Molecular Biology, University of California, Berkeley and Senior Scientist, Children's Hospital Oakland Research Institute
Kathryn Creech, Chief Executive Officer, Miavita (New York)
David Heber, Director, University of California, Los Angeles Center for Human Nutrition
Dean Ornish, Founder and President, Preventive Medicine Research Institute, University of California, San Francisco
Irwin Simon, Founder, Chairman, President and CEO , The Hain Celestial Group (Melville, NY)
11:30 am - 12:45 pm TUE 4/23
Of the many important themes drawn from this distinguished panel, the reccurring theme was "Who owns the schoolhouse?" Ultimately, they agreed, it is not just the teachers, the students or the parents, but the entire community. This includes leaders in business, government and other societal groups. The panel noted that President Bush′s administration had made it a clearly stated goal that "no child gets left behind," making educational reform a top priority in all 50 states.

Business has stepped up to the plate and developed technology to assist in a child′s learning process. Neil Bush, brother of current President Bush, and founder and CEO of Ignite! Inc., stated that "all kids can learn, they just learn differently." He emphasized that children learn by doing and applying concepts.

How then do we take what systems exist now, and create a more effective educational platform for early education? According to Robert Antonucci, three key components must be implemented: 1) recognition of teacher achievement, 2) teacher accountability and 3) a set of standards or a way to measure best practices for teaching children.

"We must share a vision, a clear purpose, and an ability and courage to lead," said Antonucci, noting that the Milken Family Foundation (MFF) has been integral in developing initiatives for teachers and offering a list of alternatives to better enhance teacher productivity: 1) give teachers multiple career paths within the educational system; 2) implement performance based accountability; 3) promote ongoing self development; 4) provide market-based compensation; and 5) implement an aggressive system to engage young people in a teaching career path.

The Los Angeles Unified School District (LAUSD) is a good example of an educational system that has adopted methods to cater to a highly diverse student body, says Liliam Leis-Castillo. Roughly 87 languages are spoken within the LAUSD, thus requiring different ways to teach younger students how to learn to read and write. They utilize early phonics instruction and expand reading from a minimum of 40 minutes per day to two hours per day on average. The goal is to have children across the board reading by the age of three, she said. Most importantly though, says Castillo, is that you have to be able to reach a student′s heart before you can reach their minds. Castillo also points out that as these breakthroughs are made in early childhood education, they must be documented, added to the ongoing research and proliferated to promote best practices.

Robert Antonucci , President of the School Group, Riverdeep-The Learning Company (Cambridge, MA)
William Bennett, Former U.S. Secretary of Education; Founder and Chairman, K12; CNN Contributor (Washington, DC)
Thomas Boysen, Chief Operating Officer, Los Angeles Unified School District
Neil Bush, Founder, Chairman, and Chief Executive Officer, Ignite!, Inc. (Austin, TX)
Liliam Leis-Castillo, Superintendent, District E, Los Angeles Unified School District
Kevin Murphy, George Pratt Shultz Professor of Economics and Industrial Relations, University of Chicago, Graduate School of Business
11:30 am - 12:45 pm TUE 4/23
This panel, moderated by Simon Ogus, focused on four issues relevant to China′s present state of affairs, especially how they impact its new role as member of the WTO. The issues included the dynamics of China with regard to the institutional reform it has experienced over the past 100 years; the country′s financial center reforms and the impact on Hong Kong′s integration; intellectual property and its legal challenges in a changing market; and China′s advantages, especially with regard to regionalism in the present day context.

Nobel Laureate Robert Fogel discussed China′s dynamics and demographic changes. "I am optimistic for China′s future," Fogel said. "It is likely that China will meet its official growth targets of 6% to 8% per annum in GDP."

However, Fogel cautioned that since China is in the middle of high growth and industrial development, it will most likely encounter challenges. "Every country that has been industrialized has experienced severe difficulties," he said. Fogel addressed the issue that China, unlike Europe in the 19th century, has avoided high rates of infant mortality and other diseases. This is largely due to China applying the lessons learned in Europe, to its public healthcare system. Fogel also expressed concern over keeping the more rural provinces in China up to speed with regions such as the Pearl River Delta.

George Leung discussed China′s export-driven market. "Since policy in China has been primarily driven by exports since 1978, the development of a strong, domestic market is key," he noted. Discussing the role of international banks, Leung was asked whether they were viewed as a threat by China. He argued that they are not; instead, they have offered new, external ways for firms to get access to sources willing to lend. "China is not up to standard in terms of lending practice," he stated.

Stephen Selby discussed Hong Kong′s challenges in IP issues noting that the basic legal infrastructure for IP issues does not really yet exist. "Hong Kong has always been a champion of free trade and was a large contributor to the WTO agreement," Selby said. "China has taken on the obligations of the WTO, recognizing that this creates stability for new Chinese reform."

Perry Wong raised the key question of China′s growth. "It is not whether or not China will grow, it is how it will grow," remarked Wong. The issues China faces include its aging population, which, by 2030, is projected to be nearly 20% of the total population. This will have significant repercussions for the Chinese healthcare system. Wong also discussed the growth of the Pearl River Delta region, which encompasses cities like Hong Kong and Shanghai. These cities are where most of the growth is occurring. GDP per capita in Hong Kong is nearly $26,000, while in less developed provinces, such as Gansu, it is only $400. This disparity needs to be addressed, he insisted. Finally, Wong discussed Hong Kong investment in Mainland China, currently at $181 billion per year.

Simon Ogus, Chief Executive Officer, DSGAsia Limited (Hong Kong)
Robert Fogel, Nobel Laureate, Economic Sciences; Charles R. Walgreen Distinguished Service Professor of American Institutions, University of Chicago, Graduate School of Business
George Leung, Chief Economist, Greater China, HSBC (Hong Kong)
Stephen Selby, Director of Intellectual Property, The Government of the Hong Kong Special Administrative Region
Perry Wong, Senior Research Economist, Milken Institute
11:30 am - 12:45 pm TUE 4/23
Today′s Europe is one facing a number of changes, most of which are due to the monetary reorganization that created the European Monetary Union (EMU)leaving Europe to deal with a number of challenges and opportunities including a struggling currency, shifting demographics, and a new worldwide perception of Europe′s place in the global economy.

The panelists conducted the session in a tone of cautious optimism. In the last few years, the Euro has lagged behind the U.S. dollar, with a continuous downward zigzag. However, the economy has maintained an upward growth trend with unemployment stabilizing from 1995-1997 at 10.75, then decreasing to 1991 levels since 2000. In fact, as a result of a weak Euro, the European economies have remained strong in a global recession. The world is expecting a recovery from the EMU, though Lee Thomas notes that investors are buying into the Euro, not because of confidence, but as a statement of Europe′s place in the global economy.

Andres Drobny notes that a risk does exist for Europe to become a "junkie for a weak currency" and not mirror the rapid growth of the U.S.

Another problem that Europe faces is immigration. In contrast to the U.S., Europe′s immigrants come in large groups from few countries. This makes it difficult to assimilate with the other naturalized Europeans, as there are the immigrant communities are large enough for newcomers to remain segregated within their own groups.

Additionally, many of these new immigrants come from Arabic countries that have a history of conflict with western states. Recent resurgences of anti-Semitic attacks in Western Europe have intensified these feelings. Traditional European xenophobia intensifies the problem of assimilation, jeopardizing the use of tools to deal with the inevitable problem of immigration.

Thomas stated, half-jokingly, that Europeans want prosperity, but, at the same time, they did not want to interrupt the status quo. The euro was intended to be an evolution of the European fiscal and monetary system, rather than a global financial revolution. There was not a massive influx of American business culture, but a slow trickle. Overall, the EMU has faired well in this global recession, sailing through without a disaster, which is positive, with return on equities higher than the U.S. It is yet too early to determine the ultimate success of the Euro, and the panelists again, remain cautious, yet positive.

Abraham Gulkowitz, Chief Global Strategist, Global Corporate Finance, Deutsche Bank Alex Brown (New York)
Andres Drobny, Founder, Drobny Global Advisors, LLC (Santa Monica)
Klas Eklund, Chief Economist, Skandinaviska Enskilda Banken (Stockholm)
Walter Russell Mead, Senior Fellow, U.S. Foreign Policy, Council on Foreign Relations (New York)
Lee Thomas, Managing Director, Pacific Investment Management Company (Newport Beach, CA)
1:00 pm - 2:30 pm TUE 4/23
After almost a decade of robust economic expansion, efforts to correct excessive capital spending and inventory accumulation, briefly led the U.S. into a recession. However, increasing real estate values enabled homeowners to leverage the equity in their properties to finance consumption levels that prevented the economy from falling into a deeper recession.

Donald Straszheim noted that in March 1998, the NASDAQ Index was above 1700, and only two years later, the Index had peaked at above 5000 as a function of the extremely generous valuations that high technology companies, the major component of the index, were obtaining in the market. Now, only two years later, the index is back to the 1700 level. In contrast, and although most major U.S. indices are lower than they were two years ago, six out of 10 broad sectors that compose the S&P 500 index are at new highs.

The excess of capital made available through the markets in the late 1990s, allowed many companies with flawed business models to obtain funds and even challenge conventional valuation models. Furthermore, the dynamics of the market allowed investors to enjoy handsome returns for simply buying almost any stock, without regard for fundamentals. This is no longer the case, and we have returned to what is known as a stock picking market, where research and timing become critical in determining the outcome of your investment.

From an international perspective, the main focus was on the Asian region, where China has been attracting an ever increasing amount of foreign direct investment, mainly from Japan and the U.S. On this issue, the question was raised whether greater inflows of foreign direct investment into China were at the expense of FDI into other Asian countries like Thailand, Malaysia, Singapore and Philippines, with the consensus being that it was not.

In regards to the problems that affect the Japanese economy, most panelists suggested that the main obstacles in solving them are political in nature, and that action must be taken now to solve them. In this context, the Japanese current economic situation was compared to the Argentine situation of 70 and 80 years ago; then, Argentina was one of the ten biggest economies in the world, but because of political unwillingness to correct its economic problems, the country lost its importance in the world economy. In closing, the panelists recalled that in the 1980s, many economists thought that if Japan′s economy stumbled, it would have a tremendous negative impact on the world economy. However, and in reality, although the Japanese economy has failed to recover in the past decade, the rest of the world economy has steadily progressed.

Likewise, they cautioned, though the U.S. is the main driver of world economy, if it were to falter, it would undoubtedly be quickly replaced as the strongest kid on the block.

Donald Straszheim, Vice Chairman, Milken Institute; President, Straszheim Global Advisors (Santa Monica)
R. Glenn Hubbard, Chairman, Council of Economic Advisers (Washington, DC)
John Manley , Managing Director, Equity Strategist, Salomon Smith Barney (New York)
Thomas McManus, Managing Director and Chief Investment Strategist, Banc of America Securities (New York)
Neal Soss, Managing Director-Senior Advisor and Chief Economist, Credit Suisse First Boston (New York)
2:45 pm - 4:00 pm TUE 4/23
Myron Kandel presented the title of the panel — the consumer in the driver′s seat — as a question: is the consumer still fairing well, despite both recession and the events of 9/11? Kandel noted that consumers account for 2/3 of the U.S. economy and, despite these events, the consumer remained resilient. Although consumer confidence did fall, it has begun to blip up again, but, he challenged, can we count on the consumer to maintain a decent rate of spending?

Steven Burd focused his presentation upon the changing environment of retail stores. Burd noted that over the past twenty years, chain grocery stores have moved in the direction of the large supermarket, which includes general merchandise. Burd stressed that in order to be successful in an increasingly competitive U.S. retail market, a chain must differentiate itself and its offering. An example of such is Safeway′s decision to incorporate gas stations into some of its stores. This not only differentiates offering, but helps to build customer loyalty.

David Simon looked at the mall as a marketing medium and what has enabled it to prosper, even in times of recession.

"The mall is the most recession-resistant medium in retail," Simon noted.

This is supported by the fact that malls today generate most of their income from specialty retailers and are less dependent upon larger department stores that are more susceptible to economic downswing. Simon also looked at the fact that the expenditures per consumer per trip to the mall have increased sizably, while the time of each trip is staying about that same as it was five years ago. When asked about where he sees the economic position of the mall over the next year, he added that he was optimistic.

"Thankfully, our consumers are going to shop," he said.

Jose Legaspi, President of the Legaspi Company, is an expert on the Latino consumer market and has spent the past 25 years studying the trends through his company. He looked at the distinguishing demographics of the Latino consumer, noting especially that they are a young population and have experienced 57.9% growth nationwide since 1990. Such growth has had an impact on the retail market, especially in Southern California where large Mexican retail stores, such as Gigante, now have set up shop. Reaction of the local Latino community has been extremely positive and, in response, several U.S.-based retail companies have now been pursuing the Latino market.

"How do you reach the Latino consumer? Through culture," Legaspi remarked.

Arthur Coppola looked at the post-9/11 consumer. After the events of September 11, Coppola helped form a series of "United We Stand" promotions still, during fourth quarter 2001, retail sales remained flat. Now, the consumer has begun to bounce back.

"As to whether the consumer will hold up, the jury is out," remarked Coppola. However, it may not be until mid-2002 that we really know the extent to how much the retail market has really recovered. Tourist area sales in such places as Monterrey Bay and Santa Monica, California are still off. "We′re hopeful, but we′re definitely in a turbulent time," noted Coppola.

Joel Kotkin sees geography, demographic changes and the Internet shaping the consumer over the next decade. Kotkin noted that with the assimilation of minority groups such as Hispanics and Asians, new consumer tastes will emerge.

Kotkin also discussed the way in which e-shopping is affecting traditional shopping districts and whether or not they will continue to prosper.

Myron Kandel, Financial Editor and Anchor, CNNfn (New York)
Steven Burd, Chairman, President and CEO, Safeway Inc. (Pleasanton, CA)
Arthur Coppola, President and Chief Executive Officer, The Macerich Company (Santa Monica)
Joel Kotkin, Senior Fellow, Milken Institute
José de Jesús Legaspi, President, The Legaspi Company (Montebello, CA)
David Simon, Chief Executive Officer, Simon Property Group, Inc., (Indianapolis)
2:45 pm - 4:00 pm TUE 4/23
In the opening remarks, Sebastian Edwards was asked whether "From Despair to Hope" should be renamed "From Hope to Despair." Despite the recent economic and political instability in Argentina and Venezuela, the panelists at today′s conference were surprisingly optimistic about the future of Latin America.

Panelists blamed Argentina′s recent demise on irresponsible government deficit spending, but overwhelming believed that there would be a minimal contagion effect in the region. Sri-Komar cited the stability of Brazilian and Mexican currencies amidst the turmoil in Argentina, yet cautioned that the situation may worsen with social and political instability in the country.

Free trade and hemispheric integration was another theme emphasized. Luis Pazos stressed the importance of both reducing U.S. agricultural subsidies and gradually opening the southern border. Pazos explained that Mexico buys more from the U.S. than Europe and Asia combined, and the free movement of human capital is necessary to the growth of Mexico. He dismissed fears of a mass exodus of Mexicans by citing the recent integration of Europe. As Pazos stated "Spain remains Spain, and Germany remains Germany."

Edwards did not limit discussions of free trade to Mexico. According to the economist, with the exception of Brazil, there are few countries in the region that are not currently in favor of free trade. Edwards blamed the slow advancement in this area on the U.S.′s country by country approach.

However, Hernando de Soto, Robert Mundell, Edwards and Pazos all agreed on one aspect that has been hindering the growth in prosperity in the region: excessive government bureaucracy. As de Soto explained, with the average two years it takes to legally incorporate a business in Mexico, it is not surprising that the informal economy represents $215 billion dollars, or 31 times greater the amount of foreign direct investment. This excessive bureaucracy often leads to corruption. de Soto stated that if these institutional matters were resolved, the region′s biggest challenges — drugs, criminal behavior and terrorism could be erased. The panelists agreed that substantial measures must be taken to reduce the bureaucracy in most Latin American countries, and that this would require great political change.

de Soto closed by noting that Latin America is on the verge of change; it is just a question of how long it will take for that change to take place.

Glenn Yago, Director, Capital Studies, Milken Institute
Hernando de Soto, President, Institute for Liberty and Democracy (Lima, Peru)
Sebastian Edwards , Henry Ford II Chair in International Management, Professor of Business Economics, The Anderson School at UCLA
Robert Mundell, Nobel Laureate, Economic Sciences; Professor of Economics, Columbia University (New York)
Luis Pazos, Congressman (PAN), Republic of Mexico; Director General, Research Center for Free Enterprise (CISLE) (Mexico City)
Komal Sri-Kumar, Managing Director, Chief Global Strategist and Chairman–Comprehensive Asset Allocation Committee, Trust Company of the West (Los Angeles)
3:00 pm - 4:00 pm TUE 4/23
4:15 pm - 5:30 pm TUE 4/23
When it comes to brands, it′s all about the product.

In our daily lives we are surrounded by brands. Strong brands have immense value and companies invest large resources into creating and nourishing them. How do organizations build a brand name and is the current model transferable to the new generation of cyber-consumers?

The panelists at the 2002 Global Conference seem to agree that a superior product and the ability to consistently deliver an excellent customer experience are at the core of branding. "It′s all about the product, a more satisfying experience; it comes down to human resources." said Steve Wynn, founder and CEO of Mirage Resorts, Inc.

Establishing a brand is becoming an even more challenging task when targeting the digital consumer. In this space, the ability to deliver a better product has become even more crucial. According to Robin Richards, the young generation of Internet savvy consumers "does not like to be sold or to be branded. Brand loyalty today does not last after the last purchase if you did not deliver."

Some of the strongest brands on the Internet today have built their position with no or little advertising,, Google, E-bay are just few of the companies that built strong brands solely by consistently providing a superior product.

For Safeway′s Steve Burd the same product-centric strategy has yielded great returns in the very traditional business of food retailing. Safeway′s private label ‘Select′ products have helped differentiate the company from its competitors. "You can find Coca Cola everywhere else but you can get the Select Cola only at Safeway," and given Safeway′s performance, customers are buying into the model.

If the ability to keep the promise is crucial to brand creation, how can an established brand be kept alive and leveraged across businesses and products while avoiding brand proliferation problems? According to Peter Arnell "you need a platform that can keep a lot of ideas." And once you have the idea, Wynn concluded with "you need to figure out how to say the same things over again."

David Jacobs, Managing Director and Head of Global Consumer Group, Deutsche Bank (New York)
Peter Arnell, Chairman and Chief Creative Officer, Arnell Group (New York)
Jeffrey Bell , Vice President, Marketing Communications, DaimlerChrysler Corporation (Auburn Hills, MI)
Steven Burd, Chairman, President and CEO, Safeway Inc. (Pleasanton, CA)
Robin Richards, Chief Executive Officer, Vivendi Universal Net USA (New York)
Denise Benou Stires, Executive Vice President, Global Marketing and Investor Services, The Nasdaq Stock Market, Inc. (New York)
Steve Wynn, President and CEO, Wynn Resorts (Las Vegas)
4:15 pm - 5:30 pm TUE 4/23
This panel was opened by California governor, Gray Davis. Davis reassured the audience that California is still on top despite the recent electricity crisis and economic consequences related to Sept. 11. He pointed out that California′s educational system has made vast improvements in terms of test scores in recent years and is "on the right track." According to Governor Davis, huge investments in research, transportation, housing, and power plants are on the way, serving as essential components of California′s future infrastructure. He concluded by saying that, "California is a good place to invest and with your help, a good place to live."

Phillip Angelides, Treasurer for State of California, also gave his viewpoint on California′s future. He believes that California will continue to face challenges in the areas of education and a growing underclass. According to Angelides, the number of people below the poverty line has grown 18% and is likely to face formidable challenges in the near future. He stressed that "the threshhold question we need to ask ourselves is whether or not California will make the necessary public policies to create those needed infrastructures."

Alfred Mann, reminded us of issues facing social security. He points out that in the past there would be 15 workers for every one person on social security. Now, as the future approaches, there will be only two workers for every one person on social security. This could create many challenges for California in the near future. According to Mann, one way to attack this phenomenon is to foster some sort of venture capital investment in Los Angeles and nearby Orange County.

On the issue of biotechnology, Carol Whiteside confronted the panel with a different view. She believes that the issue must be looked at with a much broader perspective, other than medicine related. Whiteside emphasized that the use of pesticides in the Central Valley′s agricultural fields deserves more attention and research.

Another panelist, Dominic Ng, contributed his thoughts on why universities have not been successful at creating and spinning off firms. Ng comments that although universities are good for research, throwing money into universities may not be the best way to improve businesses.

"Entreprenuership is more important for business and not university spin-offs," Ng says. He believes that most of California′s growth comes from small businesses and more importantly, the entrepreneurial spirit of immigrants. He adds, "the key is for these small businesses is to be sustainable and profitable."

Finally, David Fleming addressed the importance of California′s trade structure and what improvements it would need to improve the state′s transportation system. Fleming said that trade is expanding in California and that the state would need more from the federal government to keep pace with the expansion. This would mean better means of transportation, newer highways, alternative modes of transportation, more ports, etc.

Angelides concluded by saying that California′s competitive advantage lies in its quality of life and its emphasis on education. He believes that maintaining these two elements are essential in improving the state′s workforce and attractiveness.

Whiteside finished her remarks by pointing out that Spanish speaking individuals deserve more attention regarding Spanish language computers. She emphasized that we need to give them skills that will make them more employable and also give their children the high-tech skills necessary to compete in the future.

"We can′t a leave a large portion of the population behind," she said.

Ross DeVol, Director, Regional Studies, Milken Institute
Philip Angelides, Treasurer, State of Calfornia
David Fleming, Former Chairman, Los Angeles County Economic Development Corporation; Counsel, Latham & Watkins
Alfred Mann, Chairman and Chief Executive Officer, MannKind Corporation (Sylmar, CA)
Dominic Ng, Chairman, President and Chief Executive Officer, East West Bank (San Marino)
Carol Whiteside, President, Great Valley Center (Modesto, CA)
4:15 pm - 5:30 pm TUE 4/23
"There is no question in my mind that human capital is the most important ingredient in any activity," asserted Gary Wilson.

Human capital makes the difference in technology, outsourcing resources, and consulting — readily available to most modern companies.

According to Jeremy Eden, human capital is comprised of the insights, ideas, beliefs, knowledge or skills put into action, that generate value for a company. Eden argues that companies are getting bigger, but not necessarily better. One reason for this is the growing gap between CEOs and customers. As a company expands, there are more managerial levels between the chief executive and the consumer. The challenge for large companies to monetize their human capital is growing as fast as their human capital is increasing.

Eden cites eight companies focused on unleashing their human capital, and that have risen an average of 27% versus a return of -1% for the S&P 500.

There are several keys to unlocking human capital, according to Eden. First, a CEO leads execution as the most important strategy; CEOs must lead strategy, not managers. Second, a large number of small ideas is more productive than a small number of large ideas. A small idea executed over all branches of a company increases margins more than focusing on large mergers or management changes.

Eden also supports a system of public conflict. He wants an innovative process, not a suggestion box. He advocates that conflicts be settled peacefully, but contends that they are an essential part of the creative innovating process. Companies need to have "disciplined, institutionalized processes" to avert potential crises. For example, ten of the fifteen top banks in existence in 1989, no longer exist today. Companies, he says, should be "built to change."

Paul Reilly argues that the war over talent will get worse, not better. The decreasing number of people 35-45 will not only create greater competition for viable workers, but will also increase the difficulty of succession planning. The workforce growth rate in all developed countries is less than 1%. In the United States, the growth rate is 0.9%; in Australia/New Zealand and Europe, the growth rates are 0.7% and 0.0% respectively.

Reilly cites declining employee tenure as another challenge to unlocking human capital. He characterizes the majority of the workforce between the 1950s and 1960s as "depression survivors" — workers who primarily sought job stability and remained with a given company for an average of twenty years. He contrasts that with the workers of the 1980s and 1990s, whom he characterizes as "free agents," with an average tenure of only five years.

Barry Sternlicht added that the already high turnover rate of employees is especially high and challenging in the hotel services industry. Forty percent of his employees need to be replaced yearly. Sternlicht argues that a company needs great people systems to get great people. Further, to have a successful workforce in the service industry, a company has "to get ordinary people to do extraordinary things."

The panel provided several examples of companies that successfully unlocked human capital. Eden cited North American Van Lines: the greatest customer complaint North American received was that dining-room tables were being damaged during a move. The company found two causes when it investigated: (1) the tables were examined after the move, not before, so any damage was attributed to the movers, and (2) the movers used the tables as work space. In response, North American Van Lines provided all movers with tarps. "Customer satisfaction went way up," as did revenue. Creative problem-solving and focusing on the needs of the customer is the key to building value for a company.

Wilson believes there are two keys to building human capital: a company must have superior management, and that management must build on a great culture. Wilson loosely defines culture as "the way we do things around here."

The rare company can create great management with great culture. Wilson cites Disney, explaining that upon the death of Walt Disney, the company he founded "hibernated" for twenty years until Michael Eisner became CEO in the 1980s and changed the management structure. He introduced creativity both in the production of their films and the way they treated their customers. Within a few years, the market cap of Disney ballooned from approximately $2 billion dollars to $30 billion dollars. Wilson argues that this proves that "good culture does not die overnight." Conversely, he adds, that a bad culture does not die overnight, but Wilson stresses that a good corporate culture will endure and is an essential component of a successful company. Eisner maintained the old culture, but also added a growth culture.

Reilly says that there is no single formula for finding a new CEO. "Each situation is very, very different." In the case of Disney, he noted that the challenge was to "revive an existing culture." The purpose of management is to bring a company to the next stage.

Wilson believes it is better to promote a company from within than to go outside. Good management should groom people inside the company for a clear succession plan. Bringing in someone from the outside "causes all sorts of turmoil," he says.

All panelists agreed that the basis for a company′s success is its ability to adapt to change and address problems candidly. In the words of Sternlicht, the key to their success was to "focus on the customer." The panel agreed that a bottom-up, not a top-down, approach is harder for a company to achieve, but ultimately, it is both more productive and rewarding.

James Michaels, Editor Emeritus and Group Vice President/Editorial, Forbes (New York)
Jeremy Eden, Managing Director, EHS Partners, LLC (Chicago)
Paul Reilly, Chairman and Chief Executive Officer, Korn/Ferry International (Los Angeles)
Barry Sternlicht, Chairman and Chief Executive Officer, Starwood Hotels & Resorts Worldwide, Inc. (White Plains, NY)
Gary Wilson, Chairman, Northwest Airlines Corporation
5:45 pm - 6:45 pm TUE 4/23
7:00 pm - 9:45 pm TUE 4/23
To fans, sports is a Saturday afternoon in Fenway Park watching the Red Sox pound the Yankees. It′s sitting at home with friends watching the Lakers in the NBA playoffs. It′s not about player salaries, TV rights or which teams are losing money.

But to those involved in the business of sports, the economic problems they face are very real indeed — so real, in fact, that a distinguished group of owners, television executives and an agent agreed that major changes are under way in the industry.

"Sports is in for some real rough times," said Don Ohlmeyer, former executive producer of one of television′s most successful shows — "Monday Night Football" on ABC. "The whole landscape is changing."

The problem, panelists said, is that television networks — one of the prime sources of revenue for major league sports — are no longer willing to pay huge sums of money for the rights to air games. It′s a losing proposition, they said.

"Networks are coming to the understanding that they don′t need to be in the sports business," Ohlmeyer said. "You don′t need sports to be profitable."

Don′t start shedding tears just yet. Sports continue to be a big business. The sports economy is estimated to be nearly $200 billion a year. Attendance is up in most sports. Big events like the Super Bowl continue to draw large audiences. And the number of channels dedicated to sports programming continues to climb.

But the fees demanded by some leagues for TV rights also continue to soar resulting in losses for the networks. That′s why the NBA will have most of its games on cable next year. And why fewer and fewer games will be broadcast by networks in coming years.

"There′s going to be a reevaluation of sports in the marketplace," said James Dolan, head of Madison Square Garden, owner of such teams as the NBA′s New York Knicks.

But the sport in deepest trouble, most agreed, is baseball. Most of the teams are losing money, and there doesn′t appear to be any easy way out. The lack of parity means that most teams enter the season knowing they don′t have a chance to win.

"Unless we correct the problem, we′re going to be in trouble," said Peter Magowan, President of the San Francisco Giants, one of baseball′s few profitable teams. "It′s an unworkable situation."

Agent Leigh Steinberg, who represents some of the biggest names in sports, took a conciliatory approach, saying it′s in the interests of all parties — players and owners — to figure out how to make it work.

"Management and players need to be in a partnership together looking for all revenue sources to bring into the sport," he said.

The new paradigm, some of the panelists argued, is the growth of new sports and new leagues that appeal to a younger audience and have a strong bottom line — not bloated player payrolls and huge TV rights fees. Exhibit No. 1 might be the Los Angeles Avengers of the Arena Football League, which one panelist said would make more money this year than the California Angels. The league appeals to young people at a price they can afford, said Casey Wasserman, the Avengers′ owner.

"The most popular athlete for young people is Tony Hawke," the skateboarder, "not Barry Bonds," he said.

Some sports will continue to thrive, like the NFL and NBA, while new ones, like extreme sports, will find new audiences.

But for those who watch sports on TV, changes are coming — more sports on cable and more costs to those who want to watch them.

Said Ohlmeyer: "The whole landscape is changing."

Michael Wolf, Director and Senior Partner, Global Media and Entertainment Practice, McKinsey & Company (New York)
James Dolan, President and Chief Executive Officer, Cablevision Systems Corporation and Chairman, Madison Square Garden (Bethpage, NY)
Peter Magowan, Managing General Partner and President, San Francisco Giants Baseball Club
Jon Miller, President and Chief Executive Officer, Information and Services, USA Networks (New York)
Donald Ohlmeyer, Former President, NBC West and Former Executive Producer, ABC's "Monday Night Football"
Leigh Steinberg, Chairman and Chief Executive Officer, Steinberg Moorad & Dunn (Newport Beach, CA)
Casey Wasserman, Owner, Los Angeles Avengers (Beverly Hills)
11:30 pm - 12:45 pm TUE 4/23
In 2000, the U.S. travel industry represented 7% of GDP, expenditures of $584 billion, 7.8 million jobs, and $100 billion in tax revenues. From 1997 to 2000, revenues grew dramatically, then fell in 2001 even before events of 9/11. How did 9/11 affect trends in air travel and the leisure trade?

According to Gary Wilson, with the exception of Southwest Air, all carriers lost 15-20% of traffic. Since then, our yield has not improved and business travel is returning very slowly. U.S. carriers lost $2.5-3 billion in the first quarter of 2002, a very sharp loss.

Barry Sternlicht added that his industry mirrored Wilson′s — business travel is not there. Instead, Saturday night is now the biggest night of the week, showing the dominance of the leisure traveler. Group travel increased in the past 60 days since February 2002.

The high end of international business fell 75%, and domestic fell 50% after 9/11, Terrence Lanni noted, but casino markets with drive-in customers were up by as much as 25%. Prior to 9/11, convention business was well ahead of 2001, and after the immediate fall-off, there were no losses since January 1st, 2002. In fact, according to Lanni, more rooms were being booked than previously.

Fred Kleisner added that by year end, they were back to pre-recessionary trends. Curbside to gateside travelers faced few delays in major cities but experienced more problems in secondary and tertiary cities.

Kleisner and Sternlicht agree there is "segment" loyalty if not "brand" loyalty: upscale travelers are staying in 5-star hotels that have not lowered quoted rates, but may throw in a free night for each four or five stayed.

On the issue of international travel, Lanni found that the fall scare stories in the international press (e.g., "anthrax epidemic sweeps U.S.") reinforced the image of the U.S. as a dangerous destination. Wilson added that Asian travelers, particularly the Japanese, were wary of travel to North America, including Hawaii, a major U.S. travel destination.

American air carriers were suffering greatly, much more so than foreign carriers, whose planes were not involved in 9/11. Intra-European travel was also doing better. Sternlicht commented that 30% of its earnings were earned off-shore and its European holdings were doing well with Europeans staying within Europe. Since Europeans are not as discount-conscious as Americans, he added, they were not yet using the Internet as extensively, keeping hotel rates up. But in Asia and Latin America, their rates remain low.

In New York, however, hotels dependent upon international travelers, were suffering post-9/11.

Kleisner noted that their Caribbean properties were benefiting from group cancellations to the Middle East.

How has the Internet changed things? 31% of business travelers and 25% of leisure travelers bought tickets on-line; nearly twice as many plan to.

According to Wilson, the Internet clearly cuts distribution costs and runs much higher load factors as evidenced by its 1st quarter 2001 which had highest load factor ever. The Internet also adds more pricing flexibility and efficiency for the consumer but it′s still unclear whether this is a net gain or loss to airlines.

Sternlicht noted that its web sites were reporting record bookings on a daily basis. 50% of Internet users are seeking travel information. The hotel industry does not yet know how to exploit this as they don′t have reliable estimates of price elasticity in different markets. Consumers comparison shop from web site to web site, inevitably creating a pricing arbitrage as airline agents, travel agents, and web sites seek to compete with each other. Kleisner added that they were trying to be smarter in their use of the Internet.

Commenting on Orbitz, Wilson stated that six airlines formed Orbitz nine months previous and enjoyed a market share equal to that of Travelocity and Expedia. Travel agencies are also consolidating and charging customer fees and they still book over 50% of airline seats.

There is a greater focus on working together, said Kleisner. Hyatt, Bass, Hilton, Marriott, and Starwood are now collaborating.

What about longer-term forecasts?

According to Lanni, the post-9/11 the gaming industry examined overhead and permanently restructured involving major management level layoffs that he says will not be replaced. Kleisner added that Wyndham also downsided.

Wilson said the airlines faced tougher issues since the break-even point for airline load factors has risen higher and if the traffic isn′t there, it is costly to mothball airplanes. With raising revenues the only way to get out of a financial bind, prices would have to go up if volume didn′t return, he stated. Until now, the business traveler had subsidized the leisure traveler by as much as 10 to 1 but Wilson was not optimistic about the return of the business traveler.

Sternlicht however, was more optimistic than Wilson. He sees the hospitality industry stabilizing. The companies that are growing are the small companies, not the Fortune 500s, and they are still traveling. He sees enormous potential in the future Chinese, Indian, even Japanese market. On the development side construction of hotel rooms has not kept up and the supply of new rooms is leveling off, which may raise occupancy rates. The three main forces in the industry today are pricing, the Internet, and scale — how big is big?

All panelists saw consolidation as a necessity and none of the respondents were having financing problems. Sternlicht observed that since the financial problems stemming from 9/11 were so clearly not due to management errors, they had not tightened cup on credit. Kleisner remarked that since companies were not as leveraged as in 1990, they were better able to weather downturns. Sternlicht concluded by saying the problem was bank consolidation; as they merge the result is less banking capacity to finance a major deal.

Jacques Brand, Managing Director and Global Group Head of Real Estate, Gaming and Lodging Investment Banking, Deutsche Bank Securities Inc. (New York)
Fred Kleisner, Chairman and Chief Executive Officer, Wyndham International, Inc. (Dallas)
J. Terrence Lanni, Chairman and Chief Executive Officer, MGM MIRAGE (Las Vegas)
Barry Sternlicht, Chairman and Chief Executive Officer, Starwood Hotels & Resorts Worldwide, Inc. (White Plains, NY)
Gary Wilson, Chairman, Northwest Airlines Corporation
Wednesday, April 24, 2002
6:30 am WED 4/24
6:30 am - 7:30 am WED 4/24
6:45 am - 7:30 am WED 4/24
6:45 am - 7:30 am WED 4/24
7:30 am - 8:50 am WED 4/24
Have the past two years been merely an interruption or the end of the dynamism of the U.S. economy of the 1990s? Diane Swonk and the other panelists agreed that it has only been an interruption. Despite the technology sector′s bubble bursting and the events of September 11, Swonk cited strong consumer confidence, a willingness of people to adapt, and an underlying resilience of the economy to predict a steady re-acceleration of the growth of the mid-1990s.

Robert Bartley attributed the economy′s slow recovery to the relatively mild recession. As Bartley observed, "for a bigger recovery we would have needed a bigger recession." Bartley further stated that the technological infrastructure that has been built in the last few years, while not benefiting the companies that put it in place, will greatly improve the productivity of U.S. companies in the coming years.

Shroer and Silverman took the opportunity to further explain how their respective industries have successfully weathered the recent slowdown. Schroer attributed the American automobile′s industry′s recovery to company′s willingess to "audaciously invest" in innovation. According to Schroer, it is the auto industry that propels the economy through investments in technology and providing jobs.

While Silverman admitted a change in the dynamics of the travel and tourism industry, he, too, was optimistic. Citing greater tourism because of an affluent generation of baby boomers and low airlines prices, Silverman believes his company will succeed. According to Silverman, business travel has declined, and the hotel business is still lagging, but the increased vacationing of Americans is aiding the entire tourism industry and has stabilized the rental car business.

Silverman contends that the strength of Cendant′s real estate services can be attributed to strong government sponsored entities in the U.S. like Freddie Mac and the demographics of increased immigration. According to Silverman, anyone in the U.S. with a reasonable credit history can buy a home, a fact not true in the rest of the world.

Why has Europe seemingly been excluded from the U.S.′s growth? Panelists cited this country′s more flexible labor market and strong work ethic. With France′s recently mandated 35-hour work week, regardless of the size of the company, the panelists believe that the country will continue to be plagued with high unemployement.

Nonetheless, Bartley sees a change emerging in Europe with socialist leaning governments facing the threat of being voted out of office.

While referencing the tragic events of September 11, Swonk′s closing comments described the panelists′ sentiment of the current U.S. economic situation: "We just don′t give up."

Steve Forbes, President and CEO, Forbes; Editor-in-Chief, Forbes magazine (New York)
Robert Bartley, Editor, The Wall Street Journal (New York)
James Schroer, Executive Vice President Global Sales & Marketing, DaimlerChrysler Corporation (Auburn Hills, MI)
Henry Silverman, Chairman, President and CEO, Cendant Corporation (New York)
Diane Swonk , Chief Economist and Senior Vice President, Bank One Corporation (Chicago)
9:00 am - 10:15 am WED 4/24
This panel presented a discussion on key issues affecting the management of pension and retirement assets. True to its theme, financing retirement across longer life spans, the panel's speakers touched upon the different aspects of pensions and the financing of retirement assets. The discussion began with a general description of present pension conditions. It covered the pension industry's main indicators — demographics, the investment environment and corporate governance. Each speaker contributed to the discussion by providing his or her unique perspective and outlook for pensions in upcoming years.

Moderator Patrick Mitchell began the discussion with a brief background on pensions. He covered critical issues central to understanding pensions and their future in terms of the impact of life expectancy on the retirement age and how advances in medicine are likely to elevate both in the future. Panelists expressed concern over demographic trends posing more challenges for pension-managing institutions and their clients. The speakers agreed that the current retirement age of 65 was not sustainable with expected increases in the average life expectancy of Americans. To a certain extent, extending retirement age should assist in financing a worker's retirement compensation but other instruments such as retirements funds will ultimately play a fundamental role in assuring a healthy financial retirement.

With respect to financing retirement, Mark Yusko stated "If you don't rebalance, the market will do it for you," noting the importance in positioning your retirement fund to weather adverse financial market conditions while selecting an appropriate asset allocation. The speakers agreed that the performance of financial markets was critical to the long-term objectives of capital appreciation.

Most speakers stressed concern over the development of an investment strategy that could weather current market conditions. Allan Emkin reminded the audience to focus on the present environment and not rely on historical performance of financial markets as an indicator of the future.

Yusko noted that change in asset allocation is inevitable due to volatility in financial markets as well as the impact of inconsistent business cycles and stressed the importance of reconfiguring a retirement portfolio to adjust to new conditions.

Risk and its impact on a retirement fund was also incorporated into the discussion as an important element critical to sustaining healthy rates of return on retirement funds. Most speakers made historical reference to risk and the difficulties that lie in selecting an asset allocation for a retirement fund. Another issue discussed was the impact of corporate governance on pension funds.

Finally, the discussion covered investment strategies and the importance of selecting quality companies with good management for their retirement funds. Good companies conscious of the environment have historically proven to be concerned not only about performance but also about the company's employees and therefore the company's shareholders. The session ended with speakers presenting their outlook on pensions and advising the public to look for new trends to take place in upcoming years.

Patrick Mitchell, Principal, Managing Director, MetWest Financial (Los Angeles)
Allan Emkin, Managing Director, Pension Consulting Alliance, Inc. (Encino, CA)
Richard Hayes, Senior Investment Officer, CalPERS (Sacramento)
Orin Kramer, General Partner, Kramer Spellman, LP and Investment Committee, State of New Jersey (New York)
Grover McKean, Senior Vice President, Investments, ULLICO Inc. (Washington, DC)
Shelley Smith, President, Los Angeles City Employees' Retirement System
Mark Yusko, Chief Investment Officer, University of North Carolina at Chapel Hill
9:00 am - 10:15 am WED 4/24
The telecommunications and technology panel brought together representatives from telecommunications, finance, and technology to discuss the state of tech, its future, and most importantly, as moderator Dennis Kneale joked, "how we can get our money back." In a series of questions aimed at gathering perspectives from all angles, the panelists discussed their views on the future of telecom, investment strategies, and a lively debate over where the problems lie.

To the chagrin of many hoping for a quick resurgence, the panelists generally agreed that telecom is not going to bounce back in the near future, though panelists did agree that we have not seen the end of telecom, and particularly technology, though the new wave should be more prudent, and more attuned to their market. Spending on telecom and technology will be limited, with spending niches geared toward maintaining connectivity to customers. Afsaneh Naimollah predicted major growth on the wireless technology side.

"By year end," Naimollah cites, "there will be one billion Internet-ready mobile devices in use." She adds that the year 2006 will show the number of data-enabled phones exceeding Internet subscribers.

Describing the market spurred yet another lively debate. "The worst of the news is behind us," according to Mark Weiss, "yet some more bad news may be coming."

Weiss was referring to bankruptcies that will rid the industry of the debt that is clogging up the capital markets. Howard Jonas concurred that debt is a "horrible instrument" meant for companies to put together positive cash flow, which many tech companies notoriously did not.

The future of telecom and technology, panelists agree, lies with the customer and with the industry′s willingness to comply with the demand. Yossi Vardi stressed that the industry needs to cede to audience′s new interests, describing target groups as "swarms" of consumers whose demands need to be met.

Mort Aaronson brought up Ricochet, a product that did not suffer from lack of capital and had a high customer rating but created an artificial impediment by pricing its product higher than the competition and making it difficult for the purchaser to find. Customers complained but Ricochet didn't act. You have to listen to your customers, he said, or you won't have a business.

Panelists also spoke of content sharing and collaboration in the future as an issue that needs to be addressed proactively. The movie and music industries are missing out on the possibilities in this area due to a fear of piracy and limiting the technology they use as a result of this fear.

Howard Jonas bet that content will soon outgrow available bandwidth, causing the death of companies such as cable companies that cannot handle the big transfer of input comprising the future of technology.

Dennis Kneale, Managing Editor, Forbes (New York)
Mort Aaronson , Chief Executive Officer, President and Founder, Aerie Networks (Denver)
Andrew Decker, Senior Managing Director and Chairman, Global Telecom Group, Bear, Stearns & Co. Inc. (New York)
Howard Jonas, Chairman and Treasurer, IDT Corporation (Newark, NJ)
Afsaneh Naimollah, Managing Partner, Chela Technology Partners (New York)
Yossi Vardi, President, International Technologies (Tel Aviv)
Marc Weiss, Senior Next Generation Technology Analyst and Member, Investment Committee, Amerindo Investment Advisors (New York)
9:00 am - 10:15 am WED 4/24
"What will be the cause of your demise," asked moderator Martin Greenberger, Senior Fellow with the Milken Institute. "Flip a coin. If it lands on heads, it is probable that you will die of stroke or heart disease. Flip it again and this is your chance that you may die of cancer."

One in five deaths is smoking-related, putting great stress on the nation′s economy. It is estimated that the economic burden of tobacco use, with both direct and indirect costs accounted for, is $150 billion.

The medical research policy panel focused its attention on prevention, where practitioners will be in the next decade, and what the new paradigm shifts are required with regard to where medical research and treatment for these diseases is heading.

David Kessler discussed his experiences taking on tobacco. "We went where no one else had gone before: inside the tobacco industry." Along the way, Kessler noted the loss in the Supreme Court and Philip Morris′ decision to promote regulation of tobacco stating that he believes that there will eventually be federal legislation regulating tobacco, reducing access to children and the appeal of the products.

On the issue of prevention of cancer and heart disease, Kessler spoke of the importance of medical student training. "At present, the number of actual students that can really take something from bench to bedside is very small."

Andrew von Eschenbach focused on the shift in paradigms with regard to the approaches for treatment and research. "We are embarking on a new era, one filled with hope and opportunity that did not exist before. The challenges of this new era will need to be addressed with us working collectively." With that, he said, we need to tailor treatment to individual disease, whereas before, the medical community treated disease empirically.

Richard Klausner spoke of the inefficient ways the medical community has traditionally treated disease. "It is remarkable how our approach to medicine and public health has been empirical, by trial and error. This is extremely inefficient."

More importantly, Klausner spoke of the need to decrease the gap between public health and medicine. "In the end, it is the linkage between medicine and public health that affect the burden of disease in all communities and individuals. We need to reduce the separation of these two approaches."

Ward Casscells spoke of the need for medical schools to do more to prepare students to be more creative and to generate and test new hypothesis. He believes that medical schools need to look at the next generation and look for ways to attract that future intellectual capital. Speaking on cardiovascular disease, Casscells remarked that it should have disappeared by now.

"Reducing the risk of cardiovascular disease is not just about cholesterol," he said. "For instance, we now know that you can reduce your risk of heart attack by getting the flu vaccine."

Thus, instituting policies that both combat smoking and promote such vaccinations can ultimately lead to a surplus in medical expenses. Casscells suggested that this surplus should be invested back into research.

Martin Greenberger, Professor of Information Systems, IBM Professor, Anderson School of Management, University of California, Los Angeles; Senior Fellow, Milken Institute.
S. Ward Casscells, Interim Vice President for Biotechnology, Chief of Cardiology and Distinguished Professor, University of Texas Health Science Center at Houston
David Kessler, Dean, School of Medicine, Yale University (New Haven, CT)
Richard Klausner, Senior Fellow and Special Advisor to the National Academies of Science; Former Director, National Cancer Institute (Washington, DC)
Andrew von Eschenbach, Director, National Cancer Institute (Bethesda, MD)
10:25 am - 11:40 am WED 4/24
The biotechnology panel tackled an array of issues ranging from basic research to expectations of both the public and investment community. The main theme of the discussion was exploring the possibility of reaching a healthy medium between the investment community, public opinion and the needs of those actually conducting biotechnological, medical, and pharmaceutical research.

The panel opened with a discussion focused on the panelists′ positions on various issues. Susan Desmond-Hellman feels strongly that medical research can be turned into products more often than not. David Kessler stated that it is becoming more and more difficult to perform clinical research due to the lack of quality of clinical trial experts as well as to the inherent inefficiency of the procedures performed today. Richard Klausner believes that cancer research would be far more advanced were it not three to four times underfunded. Gerald Levey feels that in order for many drugs to reach larger markets, healthcare needs to be reevaluated stating, "healthcare in this country is in deep trouble." Robert Topel was primarily concerned with capturing and measuring the economic value of biotechnological advances as well as with extending patent protection in order to create incentives for pharmaceutical companies.

The drug creation process — basic research, development, clinical trials, regulatory approval and commercialization — takes up to fifteen years to be approved by the Food and Drug Administration. The discussion touched upon what can be done by the FDA to expedite this process since over the last few years the time of approval by the FDA has increased while the number of drugs being approved has dropped off slightly.

A popular topic of discussion was the issue of the expectations generated by the completion of the Human Genome Project and the notion that its completion did not automatically lead to a transformation of medicine. At best, they opined, we are at the partial information stage. According to Richard Klausner, we must all understand the clear difference between a scientific versus a medical breakthrough. The significance of the completion of the Human Genome Project is synonymous with the transformation from gathering information to making sense of it. Making sense of the information is going to take much longer than people realize. "It is almost like being handed a book in a completely different language and asked to understand and interpret it," said Klausner.

The second most popular topic of discussion centered on the financial aspect of the biotechnology industry. Jay Moorin, moderating the panel, raised the question of whether or not $43 billion in research and development in the biotechnology industry is enough money. Professor Topel considers it not an issue of whether any given amount is enough but rather how much people are willing to pay for the possibilities and potential of the research being financed. Topel believes that the multiple created between the cost and benefit of medical research is grand. What is to be done about astronomical profits reaching an excess of 75% at times? How and when is this phenomenon going to be regulated? A problem, according to Topel, is the failure of basic medical research to capture any economic benefit. Financial constraints limit the opportunity for creative biotechnological, medical and pharmaceutical research to take place in our universities and research institutions. Much of this potentially groundbreaking research fails to advance from thought to practice.

Among other topics discussed were issues dealing with therapeutics versus diagnostics, the lack of measuring analysis, the role of the FDA, and the troubling trend of the biotech industry to get caught up in political debates.

Jay Moorin, Partner, ProQuest Investments (Princeton, NJ)
Susan Desmond-Hellmann, Executive Vice President, Development and Product Operations, and Chief Medical Officer, Genentech, Inc. (South San Francisco)
David Kessler, Dean, School of Medicine, Yale University (New Haven, CT)
Richard Klausner, Senior Fellow and Special Advisor to the National Academies of Science; Former Director, National Cancer Institute (Washington, DC)
Gerald Levey, Provost and Dean, University of California, Los Angeles School of Medicine
Robert Topel, Isidore Brown & Gladys J. Brown Professor in Urban and Labor Economics, University of Chicago, Graduate School of Business
10:25 am - 11:40 am WED 4/24
This year has been termed by many as the ‘Year of the Demographer.′ With the Census 2000 complete, and the data coming out in waves, researchers, politicians and business leaders alike are looking at the changing face of America. Baby-boomers are getting older, Latino and Asian populations are growing and regional migration patterns are changing.

California is at the forefront of many of these changes. Gubernatorial candidate William Simon was on hand to detail his vision and plan for the dramatic changes occurring now and in the coming years. He mentioned that the Latino population will surpass that of whites, but that many of these Latinos, along with African Americans, are trapped in failing inner-city schools.

"We need more charter schools, more magnet schools, greater accountability and tougher standards," said Simon.

He went on to explain the need to build 200,000 new housing units per year to absorb California's population bulge. Moreover, health care and retirement security will share the spotlight of issues requiring attention in the state. For Simon, the right tax and regulatory policies are those that will spur California forward. Further, investing in public/private partnerships is what Simon sees as a requirement in fulfilling the California dream — a quality education, a good home with water for every citizen, power and roads.

Bill Frey broadened the discussion to national demographic trends. Frey sees an important change. "Local [demographic] distinctions are less important today than region specific demographics," he said. Three regions emerge as distinct, each with their own set of dynamics and issues that require attention. The 'melting pot' region, which California constitutes, is made up largely of immigrant and minority populations. For the first time in a century, California′s foreign-born population is greater than its out-of-state born population. The question remains, in California and other melting pot regions, will the largely minority and immigrant populations find a place in America's post-industrial workforce?

Shifting gears, any discussion about demographics, and more specifically immigration, cannot ignore post-September 11 trends. James Johnson expressed fear that in the U.S., immigrants are coming to be seen more as liabilities than assets. He expressed concern that security rather than economic issues are forming an anti-immigrant national consciousness. Talk of a moratorium on student visas after it was discovered that a large number of the 9/11 terrorist entered the county by those means was cited as an example. Johnson points out, though, that students here on visas contribute $12.3 billion dollars to the U.S. economy. Many security reforms will have potentially adverse effects on the free flow of goods, capital and people from which the U.S. economy has benefited.

"I am convinced that our economy will be like a house of cards," said Johnson, "unless we find alternative approaches to homeland security and continue to value the changing face of American demography."

Paul Ong focused his remarks on residential patterns, commenting that "California is highly segregated, as are our country's largest cities." For Ong, segregation has disproportionate and adverse effects on California's schools and home ownership rates. Furthermore, residential segregation has grave consequences for minority employment and minority business ownership rates. Put simply, "societies that are more integrated seem to offer more opportunities" and California, along with larger cities across the country, are moving away from this model.

Wrapping up the session, Robert Suro posed these questions, "For immigrant children, how do we move away from segregation, and is demography really destiny?" In answer to the latter, Suro didn't think so. In large part, Suro believes that demographic trends are examined only in the short-term. For example, it is commonly cited that some newly arrived immigrants do relatively well in terms of employment rates, income growth, and homeownership rates. The downside is only recognized in the longer-term though, when 2nd and 3rd generation immigrants are faring much worse than their parents. Essentially, this 2nd and 3rd generation must leap into America's post-industrial, information-based economy with inadequate skills and household backgrounds unfamiliar with the social skills that are required of workers in an economy increasingly reliant on human capital rather than physical capital.

For Suro, however, as for his fellow panelists, "if we as a society make a choice to invest now, we will see large returns in 15-20 years."

Joel Kotkin, Senior Fellow, Milken Institute
William Frey, Senior Fellow, Milken Institute
James Johnson, Director, Urban Investment Strategies Center, Frank Hawkins Kenan Institute of Private Enterprise, University of North Carolina at Chapel Hill
Ronald Langston, National Director, Minority Business Development Agency (Washington, DC)
Paul Ong, Professor of Urban Planning and Social Welfare, University of California, Los Angeles
William Simon, Jr. , Republican gubernatorial candidate, State of California; Executive Director, William E. Simon & Sons (Los Angeles)
Roberto Suro, Executive Director, Pew Hispanic Center (Washington, DC)
10:25 am - 11:40 am WED 4/24
The panel addressed topics related to the challenges presented to companies by an inappropriate capital structure. Other issues include the benefits and motivation for going through the processes associated with Chapter 11 bankruptcy in the U.S. Ultimately, that process is more likely to be the end of the beginning, rather than the beginning of the end, for a company with a strong reason to continue operations. It is difficult to successfully restructure the balance sheet of a company that does not have a reason to exist beyond its hard assets, said Bettina Whyte. Robert Klyman concurred that there must a business around which reorganization can occur in order for the process to be successful in the long run.

Klyman took issue with the comment made by Myron Scholes on the Nobel panel that bankruptcy leads to inefficiency. Klyman believes that bankruptcy levels the playing field for creditors and looks at each creditor equally, on the whole, in the process. More recently, with pre-packaged or pre-negotiated bankruptcy filings, firms lose very little time away from operations, making the process of restructuring the upper half of the balance sheet less of a distraction from the business at hand. Klyman points out that "pre-packs," as they are called, are best suited for companies whose bond debt exceeds their trade debt. Otherwise, long term restructuring will be required.

William Derrough points out that Chapter 11, which is not available in most other countries in the world, provides for the preservation of assets and jobs in the U.S. economy even during difficult times. That procedure keeps the operating company intact, even if parts of the company need to be sold as separate going concerns. Equally important though, is for a company to eliminate unnecessary debt before emerging from bankruptcy, says Whyte. If the company is to have a fighting chance of surviving in a troubled economy or a troubled industry, it must be able to redirect cash flow once used to pay principal and interest payments towards accumulating assets again.

From an investor′s point of view, buying a company′s distressed debt is, in essence, equivalent to buying the equity of the firm after it emerges from bankruptcy, says Carl Goldsmith. As a financier, when you enter a restructuring or reorganization situation, you must deal with varying management teams and boards of directors, and so you want to execute a plan quickly. Vital to making a restructuring or reorganization work, is transparency of accounting and trust in the financial statements. If the numbers can′t be validated, then no bankruptcy system will work, says Goldsmith.

Susanne Trimbath posed the question "How useful is the balance sheet in looking for signs of trouble within a company?" Some tell-tale signs can be assets growing at a faster rate than revenues or a company that frequently changes methods of accounting. Goldsmith says that he focuses on what the company′s debt is selling for in the market. For example, if a company′s bonds are selling for 50 cents on the dollar, and their stock price has not fallen by an equivalent amount, then there is a big disconnect, and a bond holder would view the company′s stock as worthless.

Trimbath then asked the question of whether there is an ideal capital structure out there. The consensus of the panel was a tepid no; every situation is different, they said, and it depends upon company and industry specifics. The only way to have an ideal capital structure is to find a way to have an unchanging cost of capital: impossible in the rapidly changing global economy.

Susanne Trimbath, Senior Economist, Milken Institute
William Derrough, Managing Director, Jefferies & Company, Inc. (New York)
Carl Goldsmith , Managing Director, MW Post Advisory Group, LLC (Los Angeles)
Robert Klyman, Partner, Latham & Watkins (Los Angeles)
Bettina Whyte, Principal, Jay Alix & Associates (New York)
11:50 am - 1:05 pm WED 4/24
This session presented a discussion on Japan′s economic future and addressed questions of whether its present state was indicative of its future. Moderator Charles Wolf began the session by a providing a brief overview of the country′s current economic state. He pointed at key issues responsible for Japan′s long-term economic stagnation such as employment′s decreased productivity, the bank sector′s non-performing loans and high public debt. Yet in spite of the negative picture painted by economic data, he cautioned against labeling Japan as a country in crisis. Wolf reassured the audience that the country maintained good vital statistics that were characteristic of a stable developed economy with the potential to grow comfortably even if by the slimmest of margins.

After presenting an overview of the country′s current conditions panelists were asked to provide their perspective and outlook for Japan. There was a diverse scope of views and some of the panelists were split on their outlook for Japan′s future. Some speakers focused their attention on the risks that Japan presented while others made reference to its potential to break free from stagnation and move ahead with high rates of economic growth.

Key issues common amongst the speakers involved the country′s much needed economic reforms and policies. Thomas McLain felt that the challenges currently facing Japan presented solid opportunities for investors willing to take on minimal risk. He mentioned the economy′s strong fundamentals conducive to business operations and briefly touched upon the real estate market and its anticipated decrease in prices in the upcoming years.

"There is a large labor pool of talent available," said McLain as he referred not only to Japan′s talented workforce but also the growing availability of women in Japan′s employment pool. In addition, he pointed at reduced barriers to conducting business in Japan that were previously difficult to overcome.

There were two distinct perspectives voiced by the speakers. Some expressed pessimism while others emphasized cautious optimism. Through today, Japan′s problems reflect those that were prevalent during the early 1990s. There appears a need to enact strong reforms rather quickly to reverse the passive approach previous government administrations have taken in the past.

Charles Wolf, Jr., Senior Economic Adviser and Corporate Fellow in International Economics, RAND (Santa Monica)
Peter Early, Chief Executive Officer, Big Sky Capital (Santa Monica)
Takeshi Kadota, General Manager, Capital Markets Unit, Mitsubishi Corporation (Tokyo)
Thomas McLain, Partner, Sidley Austin Brown & Wood (Los Angeles)
Yoichi Takita, Senior Staff Writer, Economic Research Department, Nihon Keizai Shimbun and Senior Economist, Japan Center of Economic Research (Tokyo)
Ira Wolf, Staff Director, Congressional-Executive Commission on China; Senior Advisor to Senator Max Baucus; Former Assistant U.S. Trade Representative for Japan and China (Washington, DC)
11:50 am - 1:05 pm WED 4/24
Emerging domestic markets — groups traditionally underserved by financial institutions —are vital to the future health of the U.S. economy, according to the panelists. As Penelope Douglas stated, the discussion about emerging domestic markets "is about investing in all of our communities." over the next 20 years, 70% of workforce growth will be in the minority community. Additionally, minority-owned firms are growing faster than mainstream firms: venture-backed companies produce a 40.7% annual growth rate of jobs, compared to an annual decrease of 2.5 percent for Fortune 500 companies. It is essential then to invest in emerging communities to maintain a viable economy.

Francisco Borges claims that if we do not invest in emerging domestic markets, "we risk this country′s ability to compete." These minority groups are the "consumers of the future." The biggest risk in neglecting emerging domestic markets is the long-term effect on U.S. competitiveness. Ethnic groups are the "high growth" sector, states Kaye Koplovitz. "We are definitely going to start sliding" if we don′t invest in these companies; Fortune 500 companies aren′t high growth. She further adds that women cut across all ethnicities and classes, making their representation even more important. Neglecting them also leaves more than one half of our intellectual capital untapped. "Human capital is what we really emphasize" to women entrepreneurs, she says.

The panel attributes the lack of funding to emerging domestic markets largely to a lack of understanding. Scott Syphax sees two great barriers to funding for minority groups: a misperception that there is no return for serving these groups and a simple fear of the unknown. Large institutions are unfamiliar with emerging domestic markets. While institutions have money to invest, developers focusing on inner-city projects are receiving no offers. Further, adds Gregory Craig, bankers typically say "that′s too risky" when what they really mean is that they don′t understand. Bankers need to "see something different," he says. It all boils down to "understanding, knowledge and information."

Koplovitz concurs; because 95% of venture capitalists are men, "venture money didn′t think women would be in high-growth businesses." They didn′t think women would be involved with high-growth technology or service companies, which simply isn′t the case. The connection between investors and entrepreneurs is the key to success.

Still, the panel argues that the arguments in favor of investing in emerging domestic markets are far more compelling than any of the risks or misconceptions. As Donna Gilding states, "small, emerging firms have the ability to move quickly" and to "execute transactions on a faster basis. Most of all, they have a passion for what they′re doing" and want to succeed. Further, according to Koplovitz, 85% of companies that raised money through the Springboard process are still in business, despite the recent recession, and Cook Inlet Energy Supply, the minority owned company run by Craig was Harvard Management Company′s largest percentage return in the past year. Each seems to indicate that emerging domestic markets are both viable and profitable ventures.

Syphax believes there is untold wealth and returns for investors in emerging domestic markets, especially in the nation′s inner cities. As such, there′s both a responsibility and an opportunity for institutional investors to understand EDM. U.S. ethnic buying power ranks favorably among the world′s top ten largest countries by GDP. It was noted that while the median income in Pacific Palisades, CA, a wealthy Los Angeles suburb, is significantly higher than that of central Los Angeles, the purchasing power of residents in central Los Angeles equaled that of the Pacific Palisades, due to population density.

"These markets are already very big," says Craig. What is needed is greater illumination to further expose these markets to investors.

Another compelling aspect of investing in emerging domestic markets is that they are domestic. They share the same language and legal regulations. While institutional investors spend great time and resources trying to understand international markets, they could potentially achieve equal returns with less difficulty by investing at home.

In order to greater serve these markets, Douglas says, it′s going to take "a lot of honesty" and "a lot of courage." There are a lot of "already respectable firms and funds" not getting money. She describes the challenges facing minority communities as "issues long ago resolved in more mainstream communities." Douglas wants to see "more vehicles available" and more creative debt financing. She suggests a secondary market for exits to allow early-stage investors to reclaim their investments sooner. Borges agrees that "secondary markets [are] very much an enabler."

Syphax reminds us that it takes an equal amount of time to evaluate a large or small deal. Aggregating multiple small deals from the EDM sector would be another way to interest large financial institutions.

The panel agrees that emerging domestic markets are critical in the coming decades. Borges reminded everyone that money is made in transitioning markets, not already efficient ones. In order for pension funds and other established financial institutions to maintain their current returns, they will need to tap these growing markets. Further, homeownership is the cornerstone of U.S. wealth, dating back to the Federalist Papers, according to Syphax. However, while this country is currently at a record high of homeownership at 68%, only about 49% of minority groups own their own homes. In order for the United States to maintain its economic prosperity, capital and funding need to be supplied to developing communities. As stated at the beginning of the panel, the United States must invest in all of its communities to invest in itself.

Betsy Zeidman, Center for Emerging Domestic Markets, Milken Institute
Francisco Borges, President and CEO, Landmark Partners (Simsbury, CT)
Gregory Craig, Chief Executive Officer, Cook Inlet Energy Supply (Los Angeles)
Penelope Douglas, President, Silicon Valley Community Ventures (San Francisco)
Donna Gilding, Chief Investment Officer, Progress Investment Management Company (San Francisco)
Kay Koplovitz, Principal, Koplovitz & Company (New York)
Scott Syphax, President and Chief Executive Officer, Nehemiah Corporation of California (Sacramento)
11:50 am - 1:05 pm WED 4/24
Over the last 30 to 40 years, business news evolved from a model serving a very elite sector of the population, to an essential component of almost every news media outlet. Not until the oil shock of the 1970′s, did American households realize the importance of staying informed of the events that affected their economic situation. This lack of interest in business news was also reflected in media outlets across the countries where reporters had to fight with their editors to convince them that a particular business news article was worthy of front-page space.

This heightened interest in business news has spurred the appearance of an ever increasing number of media outlets, solely devoted to business reporting, through a variety of channels, including newspapers, magazines, radio, TV stations and Internet sites. In regards to the proliferation of television-based business-news outlets, Myron Kandel stated that he believed it was beneficial to the business reporting profession. However, Jim Michaels disagreed with Kandel, sustaining that television coverage of business news was over simplistic and factual. He cited the fact that they only mention changes in stock prices, report quarterly earnings and how they differ from expectations, as examples.

The discussion then focused on the challenges in managing news outlets, with one of the main difficulties being sifting through the torrent of information flowing in. In order to manage this flow, and instead of carefully analyzing the news item, reporters often focus on aspects that are getting the most attention amongst most outlets, ignoring other important facts that have not come under the spotlight. Another challenge that news reporters face is their reliance on third parties to analyze information for them, with one example being that many business reporters do not know how to interpret company reports and therefore depend on equity analysts to do that job for them. Asked about whether this meant that accountants would be hired to work as business journalists, Bartley said that: "it is easier to teach journalists accounting, than it is to teach accountants how to write."

To end the discussion, panelists focused on the challenges that emerging technologies, such as the web, pose to the more traditional mediums like daily newspapers and magazines. Interestingly enough, and contrary to the initial predictions that web outlets were going to replace their paper counterparts, the web has actually given them an opportunity to enhance their product offering by providing their subscribers with additional services like searchable news and article archives. However, many paper-based outlets have adapted, or are considering adapting to emerging consumer preferences, primarily replacing the section covering stock quotes with electronic sources.

Thomas Goldstein, Professor of Journalism and Dean, Graduate School of Journalism, Columbia University (New York)
Robert Bartley, Editor, The Wall Street Journal (New York)
James Flanigan, Senior Economics Editor, Los Angeles Times
Myron Kandel, Financial Editor and Anchor, CNNfn (New York)
James Michaels, Editor Emeritus and Group Vice President/Editorial, Forbes (New York)
1:15 pm - 2:45 pm WED 4/24
Some of the world′s toughest scientific and medical problems, from global warming to obesity, will require a considerable research effort — and the public′s understanding and support, a group of Nobel laureates said at the conference′s closing session.

Just as we sent Americans to the moon, so, too, we can cure cancer, heart disease and other ills through a major commitment of funds and resources, panelists said.

But for that to happen, the scientific community must help the public understand the benefits of such research investment. In other words, they must persuade the public it′s worth the money. Each of the Nobel laureates had his own idea of what research can accomplish.

Louis Ignarro talked about the need for research into heart disease. Paul Boyer touched on the possibilities of research on aging. And Walter Kohn and Steven Chu spoke of the need for research into alternative energy sources.

"We should be concerned about using up all the nonrenewable resources we have," said Chu, who won the Nobel Prize in Chemistry in 1997. "Eventually, things will run out."

The important place of research in helping solve the world′s problems — and scientists′ responsibility to communicate that to the public —was a recurring theme of the session.

Boyer, for example, talked about the public′s fear of genetically altered food, which he said is based on misinformation about the benefits of such engineering.

"Genetically altered foods are not harmful per se," he said. "There are some who don′t want to understand the science."

Michael Milken and Ignarro pointed to the issue of obesity and its causes, such as an increase in fast-food consumption, and the need to educate the public on the issue.

"Obesity is increasing not only in this country, but other countries," Ignarro said. "We need to make the public much more aware of dietary problems and the foods we eat."

Other issues touched upon included population growth, energy consumption, cloning and global warming.

Michael Milken, Chairman, Milken Institute; Chairman, CAP Cure; Co-founder, Milken Family Foundation
Paul Boyer, Nobel Laureate, Professor Emeritus, Department of Chemistry and Biochemistry, University of California, Los Angeles
Steven Chu, Nobel Laureate in Physics, Chair, Department of Physics, Stanford University; Theodore and Frances Geballe Professor of Physics and Applied Physics, Stanford University
Louis Ignarro, Nobel Laureate, Physiology or Medicine; Distinguished Professor of Pharmacology, University of California, Los Angeles, School of Medicine
Walter Kohn, Nobel laureate; Professor of Physics, Emeritus and Research Professor, University of California, Santa Barbara
2:45 pm - 4:30 pm WED 4/24
Tuesday, April 23, 2002
2:45 pm - 4:00 pm TUE 4/23
The Lifelong Learning session brought together leading practitioners in the field of corporate and individual lifelong education with the Nobel Prize winning economist whose work on human capital demonstrated the value of education to individuals and societies.

Andrew Rosenfield was joined on the Lifelong Learning panel by Nobel Laureate Gary Becker, Alex Brnilovich, Stephan Hittmann, Jeanne Meister and Steven Rae. Rosenfield opened the session with some introductory remarks that illustrated the importance of human capital to wealth creation and economic growth. Skilled workers have, he argued, become accustomed to what he deemed a steep age-wage gradient. Individuals expect to receive increasingly higher remuneration as they gain experience. In order to maintain this gradient, he suggested, it is necessary for knowledge workers to continue their education throughout their careers.

Rosenfield asked Becker to set the stage for the discussion who stated that human capital is the most important form of capital for the modern economy. Human capital now accounts for more than 75% of the capital stock in the U.S. and the return to education has doubled since the 1960s. Reflecting on countries that have been economically successful, he identified three key factors: openness to trade, ideas and migrants; flexible labor markets, and investment in human capital. Human capital, Becker remarked, depreciates over time and skills become rapidly obsolete and require lifelong learning to update them.

Jeanne Meister compared corporate learning in 1992 with its present day form. In 1992, corporate learning was classroom based and dominated by small scale "mom and pop" businesses. Today, education firms are publicly traded and large scale. At the same time, there has been an explosion in the growth of corporate universities. Corporations are increasingly aware of the benefits of lifelong learning and are entering into strategic partnerships with universities more and more to create learning programs tailored to the needs of their workforce.

The perspective of the NY Fire Department was brought to the discussion by Stephen Hittman who related his experience in rebuilding the Fire Department in the wake of the World Trade Center tragedy in which 343 firemen including 89 senior leaders were lost — a total of 4,400 years of experience. Increasingly, the department seeks to use blended learning solutions to allow its members to learn new and increasingly needed skills without damaging the effectivness and response times of the emergency services.

Alex Brnilovich, a partner of the Fire Department in providing educational services added that a key challenge for corporations is the need to re-skill workers, especially in the wake of major restructuring efforts. e-Learning is an increasingly important market segment with three million students and hundreds of firms offering virtual education. Brnilovich forsaw a future consolidation in the industry that would result in a market of just two or three large providers.

Steve Rae of IBM was the final speaker. For IBM, there are 3 issues of importance: investing in the human capital of its employees and partners, maximising the value to clients of IBM products and providing learning services to customers. He stressed the challenges of e-learning - most notably completion rates. Panelists agreed on the value of collaborative learning and the importance of course content. Andrew Rosenfield echoed the importance of collaborative learning and then gave the audience a practical demonstration of Cardean′s commitment to avoiding passive comunication by turning the rest of the session over to questions from the audience.

Panelists were first asked to predict what corporate learning would look like in five years. Stephen Hittmann remarked that the technology used would be impossible to forecast but forsaw an important role for blended learning solutions. Andrew Rosenfield believed collaboration between e-learning students would be more important while Alex Brnilovich stressed the likely role for wireless media. Another notable question was posed by Gary Becker. Wasn't it possible that the relationship between ability and education made it more likely that the return to ability had increased and not the return to education? Becker reflected on recent research to conclude that high ability individuals in fact have lower earnings than educated high ability individuals.

Andrew Rosenfield, Chief Executive Officer, Cardean University (Deerfield, IL)
Gary Becker, Nobel Laureate, Economic Sciences, 1992; Professor of Economics and Sociology, University of Chicago.
Alex Brnilovich, President and Chief Executive Officer, Thomson Enterprise Learning (Naperville, IL)
Stephan Hittmann, Executive Director, Fire and Life Safety, New York City Fire Department
Jeanne Meister, Founder and President, Corporate University Xchange (New York)
Stephen Rae, Worldwide Executive, IBM Mindspan Services (Atlanta)
Wednesday, April 24, 2002
3:00 pm - 4:00 pm WED 4/24